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

6 Months Ended

Jun. 29, 2018

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

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.



	L3		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
Condensed Combining Balance Sheets:
At June 29, 2018
Current assets:
Cash and cash equivalents	$	1,055	$	19	$	307	$	(15	)	$	1,366
Billed receivables, net	285		315		263		—			863
Contract assets	616		810		185		—			1,611
Inventories	393		315		226		—			934
Prepaid expenses and other current assets	112		150		70		—			332
Total current assets	2,461		1,609		1,051		(15		)	5,106
Goodwill	2,273		2,828		1,550		—			6,651
Other assets	707		712		354		—			1,773
Investment in and amounts due from consolidated subsidiaries	5,668		6,614		—		(12,282		)	—
Total assets	$	11,109	$	11,763	$	2,955	$	(12,297	)	$	13,530
Current portion of long-term debt	$	581	$	—	$	—	$	—		$	581
Current liabilities	774		864		599		(15		)	2,222
Amounts due to consolidated subsidiaries	—		—		426		(426		)	—
Other long-term liabilities	991		757		148		—			1,896
Long-term debt	3,319		—		—		—			3,319
Total liabilities	5,665		1,621		1,173		(441		)	8,018
L3 shareholders’ equity	5,444		10,142		1,782		(11,924		)	5,444
Noncontrolling interests	—		—		—		68			68
Total equity	5,444		10,142		1,782		(11,856		)	5,512
Total liabilities and equity	$	11,109	$	11,763	$	2,955	$	(12,297	)	$	13,530



	L3		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
At December 31, 2017
Current assets:
Cash and cash equivalents	$	432	$	16	$	285	$	(71	)	$	662
Billed receivables, net	266		244		213		—			723
Contracts in process	706		912		315		—			1,933
Prepaid expenses and other current assets	330		235		124		—			689
Assets held for sale	—		135		—		—			135
Assets of discontinued operations	306		—		—		—			306
Total current assets	2,040		1,542		937		(71		)	4,448
Goodwill	2,248		2,844		1,523		—			6,615
Other assets	658		687		321		—			1,666
Investment in and amounts due from consolidated subsidiaries	5,513		6,398		—		(11,911		)	—
Total assets	$	10,459	$	11,471	$	2,781	$	(11,982	)	$	12,729
Current liabilities	$	811	$	832	$	564	$	(71	)	$	2,136
Liabilities held for sale	—		17		—		—			17
Liabilities of discontinued operations	226		—		—		—			226
Amounts due to consolidated subsidiaries	—		—		330		(330		)	—
Other long-term liabilities	1,009		729		131		—			1,869
Long-term debt	3,330		—		—		—			3,330
Total liabilities	5,376		1,578		1,025		(401		)	7,578
L3 shareholders’ equity	5,083		9,893		1,756		(11,649		)	5,083
Noncontrolling interests	—		—		—		68			68
Total equity	5,083		9,893		1,756		(11,581		)	5,151
Total liabilities and equity	$	10,459	$	11,471	$	2,781	$	(11,982	)	$	12,729

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 June 29, 2018:
Total net sales	$	919		$	1,328		$	431		$	(95	)	$	2,583
Total operating costs and expenses	(819		)	(1,239		)	(347		)	95			(2,310		)
Gain on sale of the Crestview & TCS Businesses	—			48			—			—			48
Operating income	100			137			84			—			321
Interest expense	(43		)	—			(1		)	—			(44		)
Interest and other income, net	6			1			1			—			8
Debt retirement charge	(48		)	—			—			—			(48		)
Income from continuing operations before income taxes	15			138			84			—			237
Provision for income taxes	(4		)	(26		)	(18		)	—			(48		)
Equity in net income of consolidated subsidiaries	174			47			—			(221		)	—
Income from continuing operations	185			159			66			(221		)	189
Income from discontinued operations, net of income taxes	190			—			—			—			190
Net income	375			159			66			(221		)	379
Net income attributable to noncontrolling interests	—			—			—			(4		)	(4		)
Net income attributable to L3	$	375		$	159		$	66		$	(225	)	$	375
Comprehensive income attributable to L3	$	306		$	85		$	(11	)	$	(74	)	$	306

For the quarter ended June 30, 2017:
Total net sales	$	894		$	1,193		$	399		$	(101	)	$	2,385
Total operating costs and expenses	(810		)	(1,049		)	(333		)	101			(2,091		)
Operating income	84			144			66			—			294
Interest expense	(42		)	—			—			—			(42		)
Interest and other income, net	2			—			—			—			2
Income from continuing operations before income taxes	44			144			66			—			254
Provision for income taxes	(10		)	(34		)	(15		)	—			(59		)
Equity in net income of consolidated subsidiaries	156			35			—			(191		)	—
Income from continuing operations	190			145			51			(191		)	195
Income from discontinued operations, net of income taxes	12			—			—			—			12
Net income	202			145			51			(191		)	207
Net income attributable to noncontrolling interests	—			—			—			(5		)	(5		)
Net income attributable to L3	$	202		$	145		$	51		$	(196	)	$	202
Comprehensive income attributable to L3	$	264		$	192		$	104		$	(296	)	$	264

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 first half period ended June 29, 2018:
Operating activities:
Net cash from (used in) operating activities from continuing operations	$	195		$	(100	)	$	88		$	(5	)	$	178
Investing activities:
Business acquisitions, net of cash acquired	(69		)	—			—			—			(69		)
Proceeds from sale of businesses, net of closing date cash balances	360			175			—			—			535
Other investing activities	(79		)	(38		)	(19		)	—			(136		)
Net cash from (used in) investing activities from continuing operations	212			137			(19		)	—			330
Financing activities:
Proceeds from sale of senior notes	1,798			—			—			—			1,798
Repurchases and redemptions of senior notes	(1,263		)	—			—			—			(1,263		)
Common stock repurchased	(287		)	—			—			—			(287		)
Dividends paid	(128		)	—			—			—			(128		)
Other financing activities	89			(34		)	(39		)	61			77
Net cash from (used in) financing activities from continuing operations	209			(34		)	(39		)	61			197
Effect of foreign currency exchange rate changes on cash	—			—			(8		)	—			(8		)
Net increase in cash and cash equivalents of discontinued operations	7			—			—			—			7
Net increase in cash	623			3			22			56			704
Cash and cash equivalents, beginning of the period	432			16			285			(71		)	662
Cash and cash equivalents, end of the period	$	1,055		$	19		$	307		$	(15	)	$	1,366



For the first half period ended June 30, 2017:
Operating activities:
Net cash from operating activities from continuing operations	$	137		$	101		$	118		$	(41	)	$	315
Investing activities:
Business acquisitions, net of cash acquired	(191		)	—			—			—			(191		)
Proceeds from sale of businesses, net of closing date cash balances	15			—			1			—			16
Other investing activities	(33		)	11			(10		)	—			(32		)
Net cash (used in) from investing activities from continuing operations	(209		)	11			(9		)	—			(207		)
Financing activities:
Common stock repurchased	(26		)	—			—			—			(26		)
Dividends paid	(119		)	—			—			—			(119		)
Other financing activities	164			(117		)	(124		)	92			15
Net cash from (used in) financing activities from continuing operations	19			(117		)	(124		)	92			(130		)
Effect of foreign currency exchange rate changes on cash	—			—			10			—			10
Net increase in cash and cash equivalents of discontinued operations	34			—			—			—			34
Net decrease in cash	(19		)	(5		)	(5		)	51			22
Cash and cash equivalents, beginning of the period	291			5			203			(136		)	363
Cash and cash equivalents, end of the period	$	272		$	—		$	198		$	(85	)	$	385

Revised Amounts for Guarantor Subsidiaries, Non-Guarantor Subsidiaries and Eliminations

The Company has revised the reported amounts for Guarantor Subsidiaries, Non-Guarantor Subsidiaries and Eliminations in the December 31, 2017 Condensed Combining Balance Sheet, and the Condensed Combining Statements of Operations for the quarterly period ended June 30, 2017 and for the first half period ended June 30, 2017, to correct for these errors as enumerated below. Additionally, the effect of changes in the guarantor subsidiaries resulting from the sale of Vertex Aerospace which occurred on June 29, 2018 are being retrospectively reflected in the below guarantor adjustment column.

Condensed Combining Balance Sheet (at December 31, 2017)



	As Reported							Adjustment									As Adjusted
	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination
	(in millions)
Total assets	$	10,270	$	3,156	$	(10,930	)	$	1,201		$	(375	)	$	(1,052	)	$	11,471	$	2,781	$	(11,982	)
Total liabilities	$	1,756	$	1,091	$	(419	)	$	(178	)	$	(66	)	$	18		$	1,578	$	1,025	$	(401	)
Total equity	$	8,514	$	2,065	$	(10,511	)	$	1,379		$	(309	)	$	(1,070	)	$	9,893	$	1,756	$	(11,581	)

Condensed Combining Statement of Operations (Second Quarter Ended June 30, 2017)



	As Reported							Adjustment								As Adjusted
	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Elimination			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination
	(in millions)
Net income	$	117	$	52	$	(164	)	$	28	$	(1	)	$	(27	)	$	145	$	51	$	(191	)

Condensed Combining Statement of Operations (First Half Ended June 30, 2017)



	As Reported							Adjustment								As Adjusted
	Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Elimination			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Elimination
	(in millions)
Net Income	$	201	$	100	$	(292	)	$	47	$	(3	)	$	(44	)	$	248	$	97	$	(336	)