24. Condensed Combining Financial Information of L3 and Its Subsidiaries

The debt of L3, including the Senior Notes and borrowings under amounts drawn against the Credit Facility, are guaranteed, on a joint and several, full and unconditional basis, by certain of its domestic subsidiaries (the “Guarantor Subsidiaries”). See Note 9 to the audited consolidated financial statements for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K for additional information. The foreign subsidiaries and certain domestic subsidiaries of L3 (the “Non-Guarantor Subsidiaries”) do not guarantee the debt of L3. None of the debt of L3 has been issued by its subsidiaries.

Under the terms of the indentures governing the Senior Notes, the guarantees of the Senior Notes will automatically and unconditionally be released and discharged: (1) upon the release of all guarantees of all other outstanding indebtedness of L3, or (2) upon the determination that such guarantor is no longer a “domestic subsidiary.” In addition, the guarantees of the Senior Notes will be automatically and unconditionally released and discharged in the event of a sale or other disposition of all of the assets of any guarantor, by way of merger, consolidation or otherwise, or a sale of all of the capital stock of such guarantor. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L3.

On December 31, 2016, the Company completed an internal reorganization to eliminate its holding company structure. Pursuant to the reorganization, L-3 Communications Holdings, Inc. was merged (the Merger) with and into L-3 Communications Corporation (L-3 Corp), with L-3 Corp being the surviving entity in the Merger (the Surviving Entity). Immediately following the completion of the Merger, the name of the Surviving Entity was changed to L3 Technologies, Inc. For more information on the Merger, see Note 1 in the Company’s annual report on Form 10-K for the year ended December 31, 2016.

The following unaudited condensed combining financial information presents the results of operations, financial position and cash flows of: (1) L3 excluding its consolidated subsidiaries (the Parent), (2) the Guarantor Subsidiaries, (3) the Non-Guarantor Subsidiaries and (4) the eliminations to arrive at the information for L3 on a consolidated basis. As a result of the Merger, prior year amounts have been recast to conform to the current year presentation.

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in miilions)
Condensed Combining Balance Sheets:
At March 31, 2017:
Current assets:
Cash and cash equivalents	$	58	$	1	$	195	$	(24	)	$	230
Billed receivables, net		247		353		202		—			802
Contracts in process		733		1,260		261		—			2,254
Other current assets		246		227		113		—			586
Total current assets		1,284		1,841		771		(24	)		3,872
Goodwill		2,385		3,099		1,195		—			6,679
Other assets		695		611		307		—			1,613
Investment in and amounts due from consolidated subsidiaries		6,074		4,741		—		(10,815	)		—
Total assets	$	10,438	$	10,292	$	2,273	$	(10,839	)	$	12,164
Current liabilities	$	811	$	934	$	508	$	(24	)	$	2,229
Amounts due to consolidated subsidiaries		—		—		289		(289	)		—
Other long-term liabilities		1,570		204		33		—			1,807
Long-term debt		3,326		—		—		—			3,326
Total liabilities		5,707		1,138		830		(313	)		7,362
L3 shareholders’ equity		4,731		9,154		1,443		(10,597	)		4,731
Noncontrolling interests		—		—		—		71			71
Total equity		4,731		9,154		1,443		(10,526	)		4,802
Total liabilities and equity	$	10,438	$	10,292	$	2,273	$	(10,839	)	$	12,164

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
At December 31, 2016:
Current assets:
Cash and cash equivalents	$	291	$	1	$	207	$	(136	)	$	363
Billed receivables, net		261		285		185		—			731
Contracts in process		694		1,125		236		—			2,055
Other current assets		236		187		125		—			548
Total current assets		1,482		1,598		753		(136	)		3,697
Goodwill		2,380		3,007		1,173		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,649		5,650		—		(11,299	)		—
Total assets	$	10,216	$	10,846	$	2,238	$	(11,435	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		284		(284	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325
Total liabilities		5,663		1,222		776		(420	)		7,241
L3 shareholders’ equity		4,553		9,624		1,462		(11,086	)		4,553
Noncontrolling interests		—		—		—		71			71
Total equity		4,553		9,624		1,462		(11,015	)		4,624
Total liabilities and equity	$	10,216	$	10,846	$	2,238	$	(11,435	)	$	11,865

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the quarter ended March 31, 2017:
Total net sales	$	862		$	1,507		$	373		$	(73	)	$	2,669
Total cost of sales		(777	)		(1,399	)		(313	)		73			(2,416	)
Operating income		85			108			60			—			253
Interest expense		(42	)		—			—			—			(42	)
Interest and other income, net		3			—			2			—			5
Income from continuing operations before income taxes		46			108			62			—			216
Provision for income taxes		(10	)		(24	)		(14	)		—			(48	)
Equity in net income of consolidated subsidiaries		128			—			—			(128	)		—
Net income		164			84			48			(128	)		168
Net income attributable to noncontrolling interests		—			—			—			(4	)		(4	)
Net income attributable to L3	$	164		$	84		$	48		$	(132	)	$	164
Comprehensive income attributable to L3	$	192		$	84		$	68		$	(152	)	$	192

For the quarter ended March 25, 2016:
Total net sales	$	822		$	1,185		$	409		$	(63	)	$	2,353
Total cost of sales		(739	)		(1,068	)		(357	)		63			(2,101	)
Operating income		83			117			52			—			252
Interest expense		(41	)		—			—			—			(41	)
Interest and other income, net		3			—			1			—			4
Income from continuing operations before income taxes		45			117			53			—			215
Provision for income taxes		(10	)		(26	)		(12	)		—			(48	)
Equity in net income of consolidated subsidiaries		192			—			—			(192	)		—
Income from continuing operations		227			91			41			(192	)		167
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		227			154			41			(192	)		230
Net income attributable to noncontrolling interests		—			—			—			(3	)		(3	)
Net income attributable to L3	$	227		$	154		$	41		$	(195	)	$	227
Comprehensive income attributable to L3	$	243		$	162		$	41		$	(203	)	$	243

L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows
For the quarterly period ended March 31, 2017:
Operating activities:
Net cash from (used in) operating activities from continuing operations	$	144		$	(85	)		67		$	(41	)	$	85
Investing activities:
Business acquisitions, net of cash acquired		(139	)		—			—			—			(139	)
Proceeds from sale of businesses, net of closing date cash balances		15			—			1			—			16
Other investing activities		(16	)		(17	)		(3	)		—			(36	)
Net cash used in investing activities from continuing operations		(140	)		(17	)		(2	)		—			(159	)
Financing activities:
Dividends paid on L3's common stock		(61	)		—			—			—			(61	)
Other financing activities		(176	)		102			(81	)		153			(2	)
Net cash (used in) from financing activities from continuing operations		(237	)		102			(81	)		153			(63	)
Effect of foreign currency exchange rate changes on cash		—			—			4			—			4
Net decrease in cash		(233	)		—			(12	)		112			(133	)
Cash and cash equivalents, beginning of the period		291			1			207			(136	)		363
Cash and cash equivalents, end of the period	$	58		$	1		$	195		$	(24	)	$	230

For the quarterly period ended March 25, 2016:
Operating activities:
Net cash from (used in) operating activities from continuing operations	$	46		$	117		$	(32	)	$	(19	)	$	112
Investing activities:
Business acquisitions, net of cash acquired		(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balance		576			—			—			—			576
Other investing activities		3			(12	)		(10	)		—			(19	)
Net cash from (used in) investing activities from continuing operations		552			(12	)		(10	)		—			530
Financing activities:
Common stock repurchased		(198	)		—			—			—			(198	)
Dividends paid on L3's common stock		(58	)		—			—			—			(58	)
Other financing activities		(130	)		(46	)		66			107			(3	)
Net cash (used in) from financing activities from continuing operations		(386	)		(46	)		66			107			(259	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		212			3			24			88			327
Cash and cash equivalents, beginning of the period		137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	349		$	3		$	189		$	(7	)	$	534