Condensed Combining Financial Information of L3 and Its Subsidiaries (Tables)

3 Months Ended

Mar. 31, 2017

Condensed Combining Financial Information of L3 and Its Subsidiaries

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

Condensed Combining Statements of Operations

	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

Condensed Combining Statements of Cash Flows

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