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

9 Months Ended

Sep. 29, 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 millions)
Condensed Combining Balance Sheets:
At September 29, 2017:
Current assets:
Cash and cash equivalents	$	197	$	11	$	254	$	(23	)	$	439
Billed receivables, net		249		337		190		—			776
Contracts in process		768		1,182		323		—			2,273
Other current assets		263		227		121		—			611
Total current assets		1,477		1,757		888		(23	)		4,099
Goodwill		2,221		3,225		1,206		—			6,652
Other assets		695		605		417		—			1,717
Investment in and amounts due from consolidated subsidiaries		6,284		5,087		—		(11,366	)		—
Total assets	$	10,672	$	10,674	$	2,511	$	(11,389	)	$	12,468
Current liabilities	$	7788	$	953	$	565	$	(23	)	$	2,283
Amounts due to consolidated subsidiaries		—		—		416		(416	)		—
Other long-term liabilities		1,556		203		28		—			1,787
Long-term debt		3,329		—		—		—			3,329
Total liabilities		5,673		1,156		1,009		(439	)		7,399
L3 shareholders’ equity		4,999		9,518		1,502		(11,020	)		4,999
Noncontrolling interests		—		—		—		70			70
Total equity		4,999		9,518		1,502		(10,950	)		5,069
Total liabilities and equity	$	10,672	$	10,674	$	2,511	$	(11,389	)	$	12,468

	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		2,231		3,321		1,008		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,798		5,336		—		(11,134	)		—
Total assets	$	10,216	$	10,846	$	2,073	$	(11,270	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		119		(119	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325

Total liabilities		5,663		1,222		611		(255	)		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	$	2,073	$	(11,270	)	$	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 September 29, 2017:
Total net sales	$	840		$	1,481		$	408		$	(83	)	$	2,646
Total cost of sales		(746	)		(1,390	)		(343	)		83			(2,396	)
Goodwill impairment charge		—			(187	)		—			—			(187	)
Operating income (loss)		94			(96	)		65			—			63
Interest expense		(42	)		—			(1	)		—			(43	)
Interest and other income, net		7			—			(1	)		—			6
Income (loss) from continuing operations before income taxes		59			(96	)		63			—			26
Provision (benefit) for income taxes		(12	)		24			(12	)		—			—
Equity in net income of consolidated subsidiaries		(24	)		—			—			24			—
Income (loss) from continuing operations		23			(72	)		51			24			26
Loss from discontinued operations, net of income tax		(1	)		—			—			—			(1	)
Net income (loss)		22			(72	)		51			24			25
Net income attributable to noncontrolling interests		—			—			—			(3	)		(3	)
Net income (loss) attributable to L3	$	22		$	(72	)	$	51		$	21		$	22
Comprehensive income (loss) attributable to L3	$	85		$	(67	)	$	100		$	(33	)	$	85

For the quarter ended September 23, 2016:
Total net sales	$	877		$	1,258		$	444		$	(74	)	$	2,505
Total cost of sales		(801	)		(1,182	)		(381	)		74			(2,290	)
Operating income		76			76			63			—			215
Interest expense		(40	)		—			(1	)		—			(41	)
Interest and other income, net		4			—			2			—			6
Income before income taxes		40			76			64			—			180

Provision for income taxes		(7	)		(12	)		(10	)		—			(29	)
Equity in net income of consolidated subsidiaries		115			—			—			(115	)		—
Net income		148			64			54			(115	)		151
Net income attributable to noncontrolling interests		—			—			—			(3	)		(3	)
Net income attributable to L3	$	148		$	64		$	54		$	(118	)	$	148
Comprehensive income attributable to L3	$	125		$	64		$	24		$	(88	)	$	125

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the year-to-date period ended September 29, 2017:
Total net sales	$	2,603		$	4,500		$	1,201		$	(257	)	$	8,047
Total cost of sales		(2,334	)		(4,146	)		(1,009	)		257			(7,232	)
Goodwill impairment charge		—			(187	)		—			—			(187	)
Operating income		269			167			192			—			628
Interest expense		(126	)		(1	)		(1	)		—			(128	)
Interest and other income, net		12			—			3			—			15
Income from continuing operations before income taxes		155			166			194			—			515
Provision for income taxes		(34	)		(37	)		(43	)		—			(114	)
Equity in net income of consolidated subsidiaries		268			—			—			(268	)		—
Income from continuing operations		389			129			151			(268	)		401
Loss from discontinued operations, net of income tax		(1	)		—			—			—			(1	)
Net income		388			129			151			(268	)		400
Net income attributable to noncontrolling interests		—			—			—			(12	)		(12	)
Net income attributable to L3	$	388		$	129		$	151		$	(280	)	$	388
Comprehensive income attributable to L3	$	541		$	134		$	273		$	(407	)	$	541
For the year-to-date period ended September 23, 2016:
Total net sales	$	2,602		$	3,817		$	1,307		$	(204	)	$	7,522
Total cost of sales		(2,343	)		(3,545	)		(1,124	)		204			(6,808	)
Operating income		259			272			183			—			714
Interest expense		(124	)		—			(1	)		—			(125	)
Interest and other income, net		10			—			5			—			15

Debt retirement charge		(5	)		—			—			—			(5	)
Income from continuing operations before income taxes		140			272			187			—			599
Provision for income taxes		(31	)		(59	)		(40	)		—			(130	)
Equity in net income of consolidated subsidiaries		413			—			—			(413	)		—
Income from continuing operations		522			213			147			(413	)		469
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		522			276			147			(413	)		532
Net income attributable to noncontrolling interests		—			—			—			(10	)		(10	)
Net income attributable to L3	$	522		$	276		$	147		$	(423	)	$	522
Comprehensive income attributable to L3	$	529		$	287		$	120		$	(407	)	$	529

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 year-to-date period ended September 29, 2017:
Operating activities:
Net cash from operating activities fromcontinuing operations	$	240		$	275		$	193		$	(41	)	$	667
Investing activities:
Business acquisitions, net of cash acquired		(291	)		—			—			—			(291	)
Proceeds from sale of businesses, net of closing date cash balances		17			—			1			—			18
Other investing activities		(59	)		(12	)		(22	)		—			(93	)
Net cash (used in) from investing activities from continuing operations		(333	)		(12	)		(21	)		—			(366	)
Financing activities:
Common stock repurchased		(91	)		—			—			—			(91	)
Dividends paid on L3's common stock		(178	)		—			—			—			(178	)
Other financing activities		270			(253	)		(141	)		154			30
Net cash from (used in) financing activities from continuing operations		1			(253	)		(141	)		154			(239	)
Effect of foreign currency exchange rate changes on cash		—			—			16			—			16
Net decrease in cash and cash equivalents of discontinued operations		(2	)		—			—			—			(2	)
Net (decrease) increase in cash		(94	)		10			47			113			76
Cash and cash equivalents, beginning of the period		291			1			207			(136	)		363
Cash and cash equivalents, end of the period	$	197		$	11		$	254		$	(23	)	$	439

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
							(in millions)
For the year-to-date period ended September 23, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	203		$	301		$	159		$	(77	)	$	586
Investing activities:
Business acquisitions, net of cash acquired		(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balances		563			—			(2	)		—			561
Other investing activities		(27	)		(47	)		(30	)		—			(104	)
Net cash from (used in) investing activities from continuing operations		509			(47	)		(32	)		—			430
Financing activities:
Redemption of senior notes		(305	)		—			—			—			(305	)
Common stock repurchased		(326	)		—			—			—			(326	)
Dividends paid on L3's common stock		(166	)		—			—			—			(166	)
Other financing activities		136			(198	)		(50	)		156			44
Net cash used in financing activities from continuing operations		(661	)		(198	)		(50	)		156			(753	)
Effect of foreign currency exchange rate changes on cash		—			—			(3	)		—			(3	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		51			—			74			79			204
Cash and cash equivalents, beginning of the period		137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	188		$	—		$	239		$	(16	)	$	411