10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          

Commission file number 001-14141

L3 TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware	13-3937436
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

600 Third Avenue, New York, NY	10016
(Address of principal executive offices)	(Zip Code)

(212) 697-1111
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered:
Common stock, par value $0.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	☒  Yes o  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	o  Yes ☒  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes o  No

Indicate by check mark whether the registrant has submitted electronically and posted on the corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒  Yes o  No

Indicate by check mark if disclosure of the delinquent filer pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ☒	Accelerated filer  o	Non-accelerated filer  o	Smaller reporting company  o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o  Yes ☒  No

The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 24, 2016 was approximately $10.8 billion. For purposes of this calculation, the registrant has assumed that the directors and executive officers are affiliates.

There were 77,798,844 shares of the registrant’s common stock with a par value of $0.01 outstanding as of the close of business on February 17, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission (“SEC”) pursuant to Regulation 14A relating to the registrant’s Annual Meeting of Shareholders, to be held on May 9, 2017, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC no later than 120 days after the registrant’s fiscal year ended December 31, 2016.

L3 TECHNOLOGIES, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2016

PART I
Item 1:	Business	1
Item 1A:	Risk Factors	16
Item 1B:	Unresolved Staff Comments	23
Item 2:	Properties	23
Item 3:	Legal Proceedings	23
Item 4:	Mine Safety Disclosures	23
PART II
Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6:	Selected Financial Data	26
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	60
Item 8:	Financial Statements and Supplementary Data	60
Item 9:	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	60
Item 9A:	Controls and Procedures	60
Item 9B:	Other Information	61
PART III
Item 10:	Directors, Executive Officers and Corporate Governance	62
Item 11:	Executive Compensation	62
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62
Item 13:	Certain Relationships and Related Transactions, and Director Independence	62
Item 14:	Principal Accountant Fees and Services	62
PART IV
Item 15:	Exhibits, Financial Statement Schedules	63
Item 16:	Form 10-K Summary	63
Signatures

PART I

Effective December 31, 2016, L-3 Communications Holdings, Inc. merged into L-3 Communications Corporation and then L-3 Communications Corporation changed its name to L3 Technologies, Inc. References to “L3”, “Company”, “we”, “us” and “our” in this filing on Form 10-K refer to L3 Technologies, Inc.

Item 1. Business

Overview

L-3 Communications Holdings, Inc. (L-3 Holdings), a Delaware corporation organized in April 1997, derived all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications Corporation (L-3 Corp). On December 31, 2016, we completed an internal reorganization to eliminate our holding company structure. Pursuant to the reorganization, L-3 Holdings was merged (the Merger) with and into L-3 Corp, with the subsidiary 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. (the Name Change).

As a result of the Merger and the Name Change, all outstanding shares of L-3 Holdings’ common stock were automatically converted into the same number of shares of common stock of L3 Technologies, Inc., with economic, voting and other rights that are substantially identical. The common stock of L3 Technologies, Inc. commenced trading effective January 3, 2017 (the first trading day of 2017) on the New York Stock Exchange under the ticker symbol “LLL”, the same ticker symbol previously used by us.

L3 is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment and security and detection systems. L3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. Our customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

We have the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Effective March 1, 2017, we will realign our Electronic Systems segment in connection with the retirement of the segment’s president in the second quarter of 2017. The current Electronic Systems segment will be split into two separate segments named (1) Electronic Systems and (2) Sensor Systems. Accordingly, our structure will consist of the following four segments: (1) Aerospace Systems, (2) Communication Systems, (3) Electronic Systems and (4) Sensor Systems. We will report our results under the realigned business segments commencing in the first quarter of 2017 at which time we will restate the corresponding information for prior periods. Financial information for our segments, including sales by geographic area, is included in “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 21 to our audited consolidated financial statements.

On December 7, 2015, we entered into a definitive agreement to sell our National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS provided cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to L3’s continuing operations, unless otherwise specifically noted.

1

For the year ended December 31, 2016, we generated sales of $10,511 million, consolidated and segment operating income of $1,008 million and net cash from operating activities from continuing operations of $1,097 million. The table below presents a summary of our 2016 sales by major category of end customer. For a more detailed presentation of our sales by end customer, see “Major Customers” within this Business section.

	2016 Sales		% of Total Sales
	(in millions)
DoD	$	7,299		70	%
Other U.S. Government		350		3
Total U.S. Government		7,649		73
International (foreign governments)		1,580		15
Commercial — international		732		7
Commercial — domestic		550		5
Total sales	$	10,511		100	%

Business Strategy

The goal of our strategy is to build disciplined growth. The key elements of this strategy are summarized in the paragraphs below. Our business strategy is customer-focused and aims to increase shareholder value by strengthening our market positions in aerospace systems, electronic systems, sensor systems and communication systems by leveraging our excellent customer relationships and pursuing adjacent market opportunities, including international sales. We intend to gain market share with innovative and affordable solutions, collaboration across L3’s business units and demonstrated past performance that address customer imperatives. We expect that we will continue to focus our business portfolio to emphasize products and systems in our core defense electronics, ISR and Communication businesses. Financially, our emphasis is on growing sales, operating income, earnings per share and cash flow, as well as increasing operating margin. Our goal of disciplined growth involves a flexible and balanced combination of organic growth, cost reductions, and select business acquisitions and divestitures, enabling us to grow the company and also return cash to our shareholders in a balanced and disciplined manner. Our strategy includes the elements discussed below.

Maintain an Agile Culture of Excellence, Integrity and Accountability.   A key part of L3’s strategy is our agile, accountable, and results-driven culture that focuses on meeting our customers’ needs and on achieving L3’s strategic goals and growth objectives. L3’s culture is made up of diverse people providing creative, innovative and affordable solutions and ideas in an environment that fosters teamwork and collaboration across our business units. Operating with integrity and a commitment to the highest standards of ethical conduct and maintaining strong internal controls are foundational elements of our strategy to build and maintain the trust of our customers, shareholders, employees, suppliers and communities where we live and work.

Strengthen and Expand Our Market Positions and Unique Capabilities.   We intend to use our existing prime contractor and supplier positions and internal investments to increase our market share, grow our sales organically and continue to build strong businesses with durable discriminators that have a number one or number two market position. We intend to expand our prime contractor roles in select business areas where we have domain expertise, including special operations forces and U.S. Government classified business. We expect to benefit from and expand our supplier positions to multiple bidders by leveraging our customer relationships, pursuing adjacent market opportunities and expanding our content on Original Equipment Manufacturers (OEMs) platforms. As an independent supplier of a broad range of products, subsystems and systems in several key business areas, our growth will partially be driven by expanding our share of existing programs and participating in new programs. Teaming arrangements with other prime contractors and platform OEMs is one way we intend to pursue select new business opportunities and expand our content on select platforms. We plan to maintain our diversified and broad business mix with limited reliance on any single contract, follow-on or new business opportunity. While sales to the U.S. Government, especially the DoD, will remain an integral part of L3’s business, we also intend to continue to increase our sales to foreign governments and domestic and international commercial businesses. We expect to continue to supplement our organic sales growth by acquiring, on a select basis, businesses that provide attractive returns on investment and add new products, technologies, programs and contracts, or provide access to select DoD, other U.S. Government, international and/or commercial customers.

2

Collaborate to Increase Growth Opportunities through Innovation.   We intend to deepen the collaboration among our diversified businesses to develop new business opportunities, combine our leading technologies and deliver the right solutions to our customers quickly. We expect that our core strengths of agility, responsiveness and cost-effectiveness will allow us to continue to provide exceptional performance to our customers. We intend to continue to focus on innovation and research and development, which will allow us to enhance our existing products and to create new and more affordable solutions and products for our customers.

Leverage Our Excellent Customer Relationships.   We intend to maintain and expand our excellent customer relationships. We also intend to continue to leverage our customer relationships and our capabilities, including proprietary technologies, to expand the scope of our products to existing and new customers. We also intend to continue to align our products, services, investments in research and development and business acquisitions to proactively address customer priorities and requirements and invest in growth areas such as aerospace systems, sensor systems, U.S. Government classified business and special operations.

Increase Margins by Proactively Managing Our Cost Structure and Optimizing Our Business Portfolio.   We intend to increase our operating margin by improving productivity and reducing direct contract costs and overhead costs, including general and administrative costs. Our effective management of labor, material, subcontractor and other direct costs is also an important element of cost control and favorable contract performance. We believe that proactively re-sizing our businesses to their anticipated sales, combined with continuous cost improvement, will enable us to increase our cost competitiveness and operating margin and to also selectively invest in new product development, business acquisitions, bids and proposals and other business development activities to win new business. We intend to continue to evaluate our portfolio of businesses to address the needs of a dynamic and demanding market place and to strengthen our core business through select business acquisitions or divestitures.

Achieve Outstanding Program Performance.   We believe that outstanding performance on our existing programs and contracts, in terms of on-budget, on-schedule and satisfying and exceeding technical and other contractual performance requirements, is the foundation for expanding L3’s prime contractor and supplier positions and winning new business. We believe that a prerequisite for growing and winning new business is to retain our existing business by successfully meeting the performance criteria included in our contracts. We will continue to focus on delivering superior contract performance with affordable prices to our customers in order to maintain our reputation as an agile and responsive contractor and to differentiate ourselves from our competitors.

Attract and Retain Skilled Personnel.   The success of our businesses is, to a large extent, dependent upon the knowledge and skills of our employees. We intend to continue to attract and retain employees who have management, contracting, engineering and technical skills and who have U.S. Government security clearances, particularly those with clearances of top-secret and above.

Business Acquisitions and Divestitures

During the years ended December 31, 2016, 2015 and 2014, we used net cash of $388 million, $320 million and $57 million for business acquisitions, respectively. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Acquisitions and Divestitures” for additional information regarding our business acquisitions and divestitures, including the sale of NSS on February 1, 2016 for a sale price of $547 million.

Products and Services

Our three reportable segments provide a wide range of products and services to various customers and are described below. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Reportable Segment Results of Operations” and Note 21 to our audited consolidated financial statements for financial information about each segment.

3

Electronic Systems Reportable Segment

In 2016, Electronic Systems had net sales of $4,219 million, representing 40% of our total net sales. The businesses in this reportable segment provide a broad range of products and services, including components, products, subsystems, systems and related services to military and commercial customers in several niche markets. The table below provides a summary of the segment’s business areas and the percentage that each contributed to Electronic Systems’ net sales in 2016.

Business Area	% of 2016 Segment Sales
Precision Engagement & Training		26	%
Aviation Products & Security		22
Power & Propulsion Systems		21
Sensor Systems		18
Warrior Systems		10
Advanced Programs		3
Total Electronic Systems		100	%

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Electronic Systems reportable segment.

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
Precision Engagement & Training
•	Military and commercial aircraft flight simulators, reconfigurable training devices, distributed mission training suites	•	Advanced simulation technologies and training for pilots, navigators, flight engineers, gunners and operators	•	Fixed and rotary winged aircraft and ground vehicles for U.S. Air Force (USAF), U.S. Navy (USN), U.S. Army, foreign militaries, commercial airlines and aircraft OEMs
•	Training services, courseware integrated logistics support and maintenance	•	Systems management, operations and maintenance	•	Various DoD and foreign military customers
•	Global airline pilot training and crew resourcing	•	Commercial flight training for pilots	•	Commercial airlines and flight training companies
•	Fuzing and ordnance systems	•	Precision munitions, fuzes, and electronic and electro safety arming devices (ESADs)	•	Various DoD and foreign military customers
•	Unmanned systems and components	•	Tactical unmanned air systems (UAS), medium altitude long endurance (MALE) UAS, small expendable UAS, flight controls, sensors and remote viewing systems	•	U.S. DoD and foreign ministries of defense
•	Radar-based sensors and systems	•	Electronic warfare, unmanned systems, ISR and precision-guided munitions	•	U.S. DoD and DHS
•	Global Positioning System (GPS) receivers	•	Location tracking	•	Guided projectiles and precision munitions
•	Navigation systems and positioning navigation units	•	Satellite launch and orbiting navigation and navigation for ground vehicles and fire control systems	•	USAF, U.S. Army, U.S. Marine Corps (USMC) and National Aeronautics Space Administration (NASA)

4

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
Aviation Products & Security
•	Cockpit and mission displays	•	High performance, ruggedized flat panel and cathode ray tube displays and processors	•	Various military aircraft
•	Airborne traffic and collision avoidance systems, terrain awareness warning systems	•	Reduce the potential for midair aircraft collisions and crashes into terrain by providing visual and audible warnings and maneuvering instructions to pilots	•	Commercial transport, business, regional and military aircraft
•	Advanced cockpit avionics	•	Pilot safety, navigation and situation awareness products	•	Commercial transport, business, regional and military aircraft
•	Solid state crash protected cockpit voice and flight data recorders	•	Aircraft voice and flight data recorders that continuously record voice and sounds from cockpit and aircraft intercommunications	•	Commercial transport, business, regional and military aircraft
•	Airport security screening solutions, explosives detection systems and whole body scanning systems	•	Rapid scanning of passengers and their checked baggage and carry-on luggage, scanning of air cargo	•	U.S. Transportation Security Administration (TSA), Canadian TSA, domestic and international airports
•	Non-intrusive inspection systems for threat and contraband detection	•	Protection of critical infrastructure including ports, borders, power generators, government buildings, public transportation, petro-chemical facilities	•	U.S. Customs and Border Protection and international equivalents, domestic and international Port Operators, private enterprises
Power & Propulsion Systems
•	Naval power delivery, conversion and switching products, and hybrid electric drives	•	Switching, distribution and protection, frequency and voltage conversion, propulsion motors and drive units	•	Naval submarines, surface ships and aircraft carriers
•	Military combat vehicle and unmanned aerial vehicle propulsion systems, electrical power generation systems and mobile electric power generators	•	Ground and aerial platforms and portable prime power units	•	U.S. Army, USMC, USAF, USN and foreign ministries of defense, manned/unmanned military platforms
•	Airborne dipping sonars, submarine and surface ship towed arrays	•	Submarine and surface ship detection and localization	•	USN and foreign navies
•	Underwater sensor ranges	•	Monitor nuclear testing, track submarines and surface vessels	•	U.S. and foreign military and commercial customers
•	Service life extensions	•	Landing craft air cushion amphibious vehicle	•	USN

5

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
•	In-service engineering, ship repair, overhaul, upgrades and maintenance, and battle force tactical training	•	Embedded shipboard training systems, towed arrays, navigation systems, radar systems and electronic warfare systems	•	USN, U.S. Coast Guard (USCG), U.S. Army and commercial ship owners
•	Power plant simulation modeling, computer systems and training services	•	Submarines, nuclear and other power plants	•	Foreign navies, nuclear and other power plant companies
•	Automation, navigation, communications, and sensors and integrated Command, Control, Communications, Computers and Navigation (C4N) solutions	•	Vessel bridge and machinery plant platform management systems, and C4N systems	•	USN, USCG and foreign navies
•	High power microwave sources, systems & effects, pulse power systems and electromagnetics hardened construction	•	Forensic analysis of weapons of mass destruction, and active detection of special nuclear material.	•	U.K. Ministry of Defence (MoD), U.S. Defense Threat Reduction Agency, U.S. Army and USAF
•	Ballistic missile targets	•	Targets for ground based ballistic missile intercept systems	•	U.S. Missile Defense Agency (MDA)
Sensor Systems
•	Targeted stabilized camera systems with integrated sensors and wireless communication systems	•	ISR data collection and surveillance and reconnaissance	•	DoD, foreign ministries of defense, intelligence and security agencies, law enforcement, manned/unmanned platforms (air, land and sea)
•	Airborne and ground based high energy laser beam directors, laser designators and high tracking rate telescopes	•	Directed energy systems, space surveillance, satellite laser ranging and laser communications, airborne and ground target designation/illumination	•	USAF and NASA
•	Submarine photonic systems and periscopes	•	ISR for undersea platforms	•	All classes of USN and allied submarines
•	Naval surface imaging systems	•	Situational awareness and precision long-range targeting and tracking of surface targets	•	USN DDG and cruisers, international AEGIS weapons system operators
•	Force protection, electronic warfare and satellite monitoring	•	Counter Improvised Explosive Device (IED) systems, jamming and satellite monitoring	•	U.K. MoD and other foreign security agencies and ministries of defense
•	ISR mission management software and geospatial application technology programs	•	Cueing system software, hardware and video algorithms and wide-area sensor integration solutions and software	•	USAF, U.S. Special Operations Command (USSOCOM), Naval Surface Warfare Center and various other DoD agencies

6

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
Warrior Systems
•	Enhanced vision, weapon sights products, laser designation and range finder systems	•	Image intensified night vision goggles/sights, holographic weapon sights, thermal sights and imagers for special forces, pilots and aircrews, soldiers, marines, sailors and law enforcement personnel and airborne and ground target designation/illumination	•	U.S. DoD, U.S. federal agencies, U.S. law enforcement agencies, and foreign militaries
Advanced Programs
•	Optics, telescopes and precision optical subsystems	•	Airborne pointing and scanning mirrors and stabilized lightweight multi-spectral telescopes	•	NASA, DoD and commercial space
•	Electronic systems and software development	•	Defense and intelligence capabilities	•	DoD and intelligence community

Aerospace Systems Reportable Segment

In 2016, Aerospace Systems had net sales of $4,240 million, representing 40% of our total net sales. The businesses in this reportable segment provide products and services for the global ISR and Command, Control and Communications (C³) markets, specializing in signals intelligence (SIGINT) and multi-intelligence platforms, to include full motion video, electro-optical, infrared, and synthetic aperture radars, along with other types of information gathering systems. These strategic and tactical products and services provide the warfighter with the ability to detect, collect, identify, analyze and disseminate information from command centers, communication nodes and air defense systems for real-time situational awareness and response. These products and services also include highly specialized fleet management sustainment and support services, including procurement, systems integration, sensor development, modifications and periodic depot maintenance for ISR and special mission aircraft and airborne systems. We believe that these products and services are critical elements for a substantial number of major C³ and intelligence gathering systems. The businesses in this reportable segment also provide engineering, modernization, upgrades and sustainment, maintenance and logistics support solutions for military and various government aircraft, ground vehicles, personnel equipment and other platforms. These solutions include aerospace and other technical services related to large fleet support, such as repair and overhaul, logistics and supply chain management, primarily for military training, tactical, transport cargo and utility aircraft. We sell these products and services primarily to the DoD and select foreign governments.

The table below provides a summary of the segment’s business areas and the percentage that each contributed to Aerospace Systems’ net sales in 2016.

Business Area	% of 2016 Segment Sales
ISR Systems		51	%
Vertex Aerospace		31
Aircraft Systems		18
Total Aerospace Systems		100	%

7

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Aerospace Systems reportable segment.

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
ISR Systems
•	Prime mission systems integration, sensor development and operations and support	•	Signal processing and exploitation, airborne ISR applications, antenna technology, real-time process control and software development	•	DoD, USAF, U.K. MoD, and other select foreign military ISR aircraft platforms and ground systems
•	Fleet management of special mission aircraft, including avionics and mission system upgrades and logistics support	•	Measurement collection and signal intelligence, special missions	•	DoD and classified customers within the U.S. Government
•	ISR operations and support	•	Data link support and services, special applications, classified projects, spares and repairs	•	USAF and U.S. Army ISR aircraft platforms and ground systems
Vertex Aerospace
•	Logistics support and maintenance	•	Aircraft maintenance and repair, flight operations support for training, transport/cargo and special mission aircraft	•	U.S. Army, USAF, USN and select foreign militaries
•	Contract Field Teams (CFT)	•	Deployment of highly mobile, quick response field teams to customer locations to supplement the customer’s resources for various ground vehicles and aircraft	•	U.S. Army, USAF, USN and USMC
•	Contractor Operated and Managed Base Supply (COMBS)	•	Inventory management activities relating to flight support and maintenance, including procurement and field distribution	•	Military training and transport/cargo aircraft for USN, USAF and U.S. Army
Aircraft Systems
•	Modernization and life extension maintenance upgrades and support	•	Aircraft structural modifications and inspections, installation of mission equipment, navigation and avionics products and interior modifications	•	USN, USAF, select foreign governments, OEMs, VIP and Head-of-State (HOS) aircraft, and various military fixed and rotary wing aircraft
•	Fabrication and assembly of fixed and rotary wing aerostructures	•	Rotary wing cabin assemblies, new and modified wings and subassemblies, structure and parts fabrication for OEMs	•	U.S. Army, USN, USMC and OEMs

8

Communication Systems Reportable Segment

In 2016, Communication Systems had net sales of $2,052 million, representing 20% of our total net sales. The businesses in this reportable segment provide network and communication systems, secure communications products, radio frequency components, satellite communication terminals and space, microwave and telemetry products. These products include secure data links that are used to connect a variety of space, airborne, ground and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems.

The table below provides a summary of the segment’s business areas and the percentage that each contributed to Communication Systems’ net sales in 2016.

Business Area	% of 2016 Segment Sales
Broadband Communication Systems		55	%
Advanced Communications		21
Space & Power Systems		15
Tactical Satellite Communication Products		9
Total Communication Systems		100	%

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Communication Systems reportable segment.

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
Broadband Communication Systems
•	Airborne, space and surface data link terminals, ground stations, and transportable tactical satellite communications (SATCOM) systems	•	High performance, wideband secure communication links for relaying of intelligence and reconnaissance information	•	Manned aircraft, unmanned aerial vehicles (UAVs), naval ships, ground vehicles and satellites for the DoD
•	Multi-band Manpack Receivers	•	Portable, ruggedized terminals used for receiving reconnaissance video and sensor data from multiple airborne platforms	•	USSOCOM, USAF and other DoD customers
•	Multi-frequency time division multiple access modems and high dynamic small aperture band terminals that support SATCOM on the move using X, Ku, and Ka bands	•	On the move SATCOM and other tactical communications systems utilizing small aperture terminals; off road use on military vehicles, watercraft, and airborne platforms to provide two-way broadband connectivity while on the move	•	U.S. Army, USMC and select foreign allies
•	Tactical ground based signal intercept and direction finding systems	•	Man portable and military vehicle mounted tactical signal intercept/exploitation and direction finding systems	•	U.S. Army and other DoD/U.S. intelligence agencies

9

Systems/Products/Services		Selected Applications		Selected Platforms/End Users
Advanced Communications
•	Passive and active microwave components and subsystems, microwave waveguides and specialized coaxial components and non-ionizing radiation monitoring equipment	•	Radio transmission, switching and conditioning, transponder control, channel and frequency separation, ground vehicles, aircraft and satellites	•	DoD and OEMs, SATCOM for DoD and various government agencies
•	Secure communications terminals and equipment, and secure network encryption products	•	Secure and non-secure voice, data and video communication for office, battlefield and secure internet protocol (IP) network applications	•	DoD and U.S. Government intelligence agencies
•	Shipboard communications systems	•	Internal and external communications (radio rooms and workstations)	•	USN, USCG and foreign navies
•	Ultra-wide frequency and advanced radar antennas and radomes	•	Surveillance and radar detection	•	Military fixed and rotary winged aircraft, SATCOM
•	Low-power SATCOM products	•	Low-noise and low-power amplifiers, solid-state switch assemblies, uplink power control products and frequency converters	•	U.S. Army, other government agencies and commercial customers
Space & Power Systems
•	Traveling wave tube amplifiers (TWTA’s), power modules, klystrons and digital broadcast	•	Microwave vacuum electron devices and power modules	•	DoD and foreign military manned/unmanned platforms, including satellites, radar systems, communication systems, UAVs, missile defense systems, various missile programs and commercial broadcast
•	Telemetry and instrumentation systems	•	Spacecraft telemetry tracking and control, encryption and high data rate transmitters, satellite command and control software, airborne and ground test telemetry systems, and tactical intelligence receivers	•	Aircraft, missiles and satellites
Tactical Satellite Communications Products
•	Quick-deploy flyaway very small aperture terminals (VSAT) and vehicular satellite systems	•	Satellite communications	•	U.S. Army, USAF, USSOCOM and other DoD agencies, and commercial customers
•	Managed communications security (COMSEC) satellite networks and integrated remote VSAT satellite systems	•	Deployment and support of global communication networks for tactical and enterprise applications	•	U.S. Army, DoD/U.S. intelligence agencies, allied forces and commercial contractors

10

Funded Backlog and Orders

We define funded backlog as the value of funded orders received from customers, less the cumulative amount of sales recognized on such orders. We define funded orders as the value of contract awards received from the U.S. Government, for which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government. The table below presents our funded backlog, percentage of funded backlog at December 31, 2016, expected to be recorded as sales in 2017 and funded orders for each of our reportable segments and on a consolidated basis.

	Funded Backlog at December 31,				Percentage of Funded Backlog at December 31, 2016 Expected to be Recorded as Sales in 2017	Funded Orders
	2016		2015			2016		2015
	(in millions)					(in millions)
Reportable Segment:
Electronic Systems	$	4,230	$	3,688	61%	$	4,784	$	4,137
Aerospace Systems		2,735		2,741	77%		4,243		3,569
Communication Systems		1,931		1,994	76%		1,965		2,156
Consolidated	$	8,896	$	8,423	69%	$	10,992	$	9,862

Our funded backlog does not include the full potential value of our contract awards, including those pertaining to multi-year, cost-plus type contracts, which are generally funded on an annual basis. Funded backlog also excludes the potential future orders and related sales from unexercised priced contract options that may be exercised by customers under existing contracts and the potential future orders and related sales of purchase orders that we may receive in the future under indefinite quantity contracts or basic ordering agreements during the term of such agreements.

Major Customers

The table below presents a summary of our sales by end customer and the percent contributed by each to our total sales. For additional information regarding domestic and international sales, see Note 21 to our audited consolidated financial statements.

	2016					2015
	Sales		% of Total Sales			Sales		% of Total Sales
	(in millions)					(in millions)
Air Force	$	3,079		30	%	$	3,166		30	%
Army		1,787		17			1,715		17
Navy/Marines		1,610		15			1,447		14
Other Defense		823		8			621		6
Total DoD		7,299		70			6,949		67
Other U.S. Government		350		3			342		3
Total U.S. Government		7,649		73			7,291		70
International (foreign governments)		1,580		15			1,799		17
Commercial — international		732		7			759		7
Commercial — domestic		550		5			617		6
Total sales	$	10,511		100	%	$	10,466		100	%

Direct sales to the end customer represented approximately 67% of our consolidated 2016 sales, and sales as a subcontractor or supplier represented the remaining 33%.

Our sales are predominantly derived from contracts with agencies of, and prime system contractors to, the U.S. Government. Various U.S. Government agencies and contracting entities exercise independent and individual purchasing decisions, subject to annual appropriations by the U.S. Congress. For the year ended December 31, 2016, our five largest contracts (revenue arrangements) generated 15% of our consolidated sales and our largest contract

11

(revenue arrangement) in terms of annual sales was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment. Under this contract, which generated approximately 4% of our 2016 sales, we provide maintenance, logistics and other related sustainment support services for rotary wing aircraft assigned to Fort Rucker and satellite units in Alabama. Our period of performance under this contract continues through September 30, 2017. We are one of several contractors expected to bid on the re-competition of this contract and expect an award decision in the second half of 2017.

Research and Development

We conduct research and development activities that consist of projects involving applied research, new product and systems development and select concept studies. We employ scientific, engineering and other personnel to improve our existing product lines and systems and develop new products, technologies and systems. At December 31, 2016, we employed approximately 8,000 engineers, substantially all of whom hold advanced degrees, who work on company-sponsored research and development efforts and customer funded research and development contracts.

Company-sponsored (Independent) research and development costs for our businesses that are U.S. Government contractors are allocated to U.S. Government contracts and are charged to cost of sales when the related sales are recognized as revenue. Research and development costs for our commercial businesses are expensed as incurred and are also charged to cost of sales. The table below presents company-sponsored (Independent) research and development expenses incurred for our U.S. Government businesses and our commercial businesses.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Company-Sponsored Research and Development Costs:
U.S. Government Contractor Businesses	$	204	$	176	$	166
Commercial Businesses		54		52		63
Total	$	258	$	228	$	229

Customer-funded research and development costs pursuant to contracts (revenue arrangements) are not included in the table above because they are direct contract costs and are charged to cost of sales when the corresponding revenue is recognized. See Note 2 to our audited consolidated financial statements for additional information regarding our research and development efforts.

Competition

While we believe that we are a major provider for many of the products and services we offer to our DoD, government and commercial customers, our businesses generally encounter significant competition.

Our ability to compete for existing and new business depends on a variety of factors, including:

• the effectiveness and innovation of our technologies, systems and research and development programs;

• our ability to offer superior program performance at an affordable and competitive cost;

• historical, technical, cost and schedule performance;

• our ability to attain supplier positions on contracts;

• our ability to maintain an effective supplier and vendor base;

• our ability to retain our employees and hire new ones, particularly those who have U.S. Government security clearances;

• the capabilities of our facilities, equipment and personnel to undertake the business for which we compete; and

• our ability to quickly and flexibly meet customer requirements and priorities.

L3 is an aerospace and defense contractor with a broad and diverse portfolio of products and services. We have prime contractor and subcontractor positions. We supply our products and services to other prime system contractors.

12

However, we also compete directly with other large prime system contractors for: (1) certain products, subsystems and systems, where they have vertically integrated businesses, and (2) niche areas where we are a prime contractor. We also compete with numerous other aerospace and defense contractors, which generally provide similar products, subsystems, systems or services.

In addition, our ability to compete for select contracts may require us to “team” with one or more of the other prime system contractors that bid and compete for major platform programs, and our ability to “team” with them is often dependent upon the outcome of a competition for subcontracts they award.

Patents and Licenses

Generally, we do not believe that our patents, trademarks and licenses are material to our operations. Furthermore, most of our U.S. Government contracts generally permit us to use patents owned by other U.S. Government contractors. Similar provisions in U.S. Government contracts awarded to other companies prohibit us from preventing the use of our patents in most DoD work performed by other companies for the U.S. Government.

Raw Materials

Although we generated 61% of our 2016 sales from products and systems, our businesses are generally engaged in limited manufacturing activities and have minimal exposure to fluctuations in the supply of raw materials. For those businesses that manufacture and sell products and systems, most of the value that we provide is labor oriented, such as design, engineering, assembly and test activities. In manufacturing our products, we use our own production capabilities as well as a diverse base of third party suppliers and subcontractors. Although certain aspects of our manufacturing activities require relatively scarce raw materials, we have not experienced difficulty in our ability to procure raw materials, components, sub-assemblies and other supplies required in our manufacturing processes.

Contracts

Generally, the sales price arrangements for our contracts are either fixed-price, cost-plus or time-and-material type. Generally, a fixed-price type contract offers higher profit margin potential than a cost-plus type or time-and-material type contract due to the greater levels of risk we assume on a fixed-price type contract.

On a fixed-price type contract (revenue arrangement), we agree to perform the contractual statement of work for a predetermined sales price. Although a fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Accounting for the sales on a fixed-price type contract that is covered by contract accounting standards requires the preparation of estimates for: (1) the total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work, and (3) the measurement of progress towards completion. Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated total profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change.

On a cost-plus type contract (revenue arrangement), we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels determined by our customers. Cost-plus type contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship which total allowable costs bear to target cost. Award and incentive fees earned were not material to our results of operations for 2016, 2015 and 2014.

On a time-and-material type contract (revenue arrangement), we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. Therefore, on cost-plus type and time-and-material type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.

Substantially all of our cost-plus type contracts and time-and-material type contracts are with U.S. Government customers, while sales to commercial customers are transacted under fixed-price sales arrangements and are included in our fixed-price contract type sales. The table below presents the percentage of our total sales generated from each contract type.

13

	Year Ended December 31,
Contract Type	2016			2015			2014
Fixed-price(1)		73	%		74	%		76	%
Cost-plus(2)		23			21			19
Time-and-material		4			5			5
Total sales		100	%		100	%		100	%

⁽¹⁾ Includes fixed-price incentive fee type contracts, which contributed approximately 1% to our total sales for the years ended December 31, 2016, 2015 and 2014.

⁽²⁾ Includes cost-plus award and incentive fee type contracts, which contributed approximately 8% to our total sales for the year ended December 31, 2016 and 7% for the years ended 2015 and 2014.

Regulatory Environment

Most of our revenue arrangements with agencies of the U.S. Government, including the DoD, are subject to unique procurement and administrative rules. These rules are based on both laws and regulations, including the U.S. Federal Acquisition Regulation, that: (1) impose various profit and cost controls, (2) regulate the allocations of costs, both direct and indirect, to contracts and (3) provide for the non-reimbursement of unallowable costs. Unallowable costs include, but are not limited to, lobbying expenses, interest expenses and certain costs related to business acquisitions, including, for example, the incremental depreciation and amortization expenses arising from fair value increases to the historical carrying values of acquired assets. Our contract administration and cost accounting policies and practices are also subject to oversight by government inspectors, technical specialists and auditors. See “Part I — Item 1A — Risk Factors” for a discussion of certain additional business risks specific to our government contracts.

Our U.S. Government contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. Government investigate whether our operations are being conducted in accordance with these requirements. Investigations could result in administrative, civil or criminal liabilities, including repayments, disallowance of certain costs, or fines and penalties. As is common in the U.S. defense industry, we are subject to business risks, including changes in the U.S. Government’s procurement policies (such as greater emphasis on competitive procurement), governmental appropriations, national defense policies or regulations, service modernization plans and availability of funds. A reduction in expenditures by the U.S. Government for products and services of the type we manufacture and provide, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts or subcontracts awarded to us or the incurrence of substantial contract cost overruns could materially adversely affect our business.

In 2016, sales under foreign military sales (FMS) agreements, which are included in the international (foreign governments) category in the “Major Customers” table above, were $547 million, or 5% of our total consolidated sales. FMS agreements are made directly between the U.S. Government and foreign governments. In such cases, because we serve only as the supplier, we do not have unilateral control over the terms of the agreements. Certain of our sales are direct commercial sales to foreign governments. These sales are subject to U.S. Government approval and licensing under the Arms Export Control Act. Legal restrictions on sales of sensitive U.S. technology also limit the extent to which we can sell our products to foreign governments or private parties.

All of our U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. Our contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.

Environmental Matters

Our operations are subject to various environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations. We continually assess our obligations and compliance with respect to these requirements.

We have also assessed the risk of environmental contamination for our various manufacturing facilities, including our acquired businesses and, where appropriate, have obtained indemnification, either from the sellers of

14

those acquired businesses or through pollution liability insurance. We believe that our current operations are in substantial compliance with all existing applicable environmental laws and permits. We believe our current expenditures will allow us to continue to be in compliance with applicable environmental laws and regulations. While it is difficult to determine the timing and ultimate cost to be incurred in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations, financial position or cash flows.

Employees

At December 31, 2016, we employed approximately 38,000 full-time and part-time employees, 84% of whom were located in the United States. Of these employees, approximately 22% are covered by approximately 85 separate collective bargaining agreements with various labor unions. The success of our business is, to a large extent, dependent upon the knowledge of our employees and on the management, contracting, engineering and technical skills of our employees. In addition, our ability to grow our businesses, obtain additional orders for our products and services and to satisfy contractual obligations under certain of our existing revenue arrangements is largely dependent upon our ability to attract and retain employees who have U.S. Government security clearances, particularly those with clearances of top-secret and above. Historically, we have renegotiated labor agreements without significant disruptions to operating activities, and we believe that relations with our employees are positive.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file reports, including annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission the (“SEC”). Such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at 100 F Street, NE, Washington, DC 20549. Copies of such material can be obtained from the Public Reference Room of the SEC at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Such material may also be accessed electronically by means of the SEC’s home page on the Internet at http://www.sec.gov.

You may also obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement for the annual shareholders’ meeting, as well as any amendments to those reports as soon as reasonably practicable after electronic filing with the SEC through our website on the Internet at http://www.L3T.com.

We also have a Corporate Governance webpage. You can access our Corporate Governance Guidelines and charters for the audit, compensation and nominating/corporate governance committees of our Board of Directors through our website, http://www.L3T.com, by clicking on the “Corporate Governance” link under the heading “Investor Relations.” You can access our Code of Ethics and Business Conduct by clicking on the “Code of Ethics and Business Conduct” link under the heading “Code of Ethics.” Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our chairman and chief executive officer, our senior vice president and chief financial officer, and our vice president, controller and principal accounting officer. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, Inc. (NYSE), on our website within the required periods. The information on or accessible through our website is not incorporated by reference into this report.

To learn more about L3, please visit our website at http://www.L3T.com. From time to time, we use our website as a channel of distribution of material company information. Financial and other material information regarding L3 is routinely posted on our website and is readily accessible.

15

Item 1A. Risk Factors

You should carefully consider the following risk factors and other information contained in this Form 10-K, including “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any of these risks could materially affect our business and our financial condition, results of operations and cash flows, which could in turn materially affect the price of our common stock.

Our contracts (revenue arrangements) with U.S. Government customers entail certain risks.

A decline in or a redirection of the U.S. defense budget could result in a material decrease in our sales, results of operations and cash flows.

Our government contracts and sales are highly correlated and dependent upon the U.S. defense budget which is subject to the congressional budget authorization and appropriations process. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress in future fiscal years. DoD budgets are determined by factors beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, changing national security and defense requirements, geopolitical developments and actual fiscal year congressional appropriations for defense budgets. Any of these factors could result in a significant decline in, or redirection of, current and future DoD budgets and impact our future results of operations, including our sales and operating income growth rates.

The total DoD budget for FY 2015 was $560 billion, a decline of 4% as compared to the FY 2014 budget due to a decrease in the Overseas Contingency Operations (OCO) budget. The FY 2015 base budget remained substantially unchanged from FY 2014 at $497 billion, while the OCO budget decreased by $22 billion. The total DoD budget for FY 2016 is $581 billion, an increase of 4% compared to FY 2015. The increase is due to a base budget of $522 billion, higher by $25 billion compared to FY 2015. The FY 2016 OCO budget declined slightly to $59 billion compared to $63 billion for FY 2015.

On February 9, 2016, the Obama Administration submitted its FY 2017 DoD Budget Request. The total FY 2017 DoD budget request is $583 billion ($524 billion base budget, $59 billion OCO), which is substantially unchanged compared to the appropriated FY 2016 DoD budget. However, the FY 2017 DoD budget was not approved or appropriated by Congress before October 1, 2016, and FY 2017 began with a Continuing Resolution (CR) to fund the government, which expires on April 28, 2017. The CR maintains funding at the current FY 2016 appropriated level resulting in a prohibition on new program starts and multi-year contract awards. On December 23, 2016, President Obama signed the FY 2017 National Defense Authorization Act (NDAA), which includes defense spending priorities and guidelines but does not appropriate money for those items. The NDAA largely supports the FY17 DoD Budget Request.

Furthermore, the Bipartisan Budget Act of 2015 (BBA), which suspended the debt ceiling through March 15, 2017 and raised spending caps previously enacted by Congress under the Budget Control Act of 2011 (BCA), places spending caps on defense programs. The BBA target for the DoD base budget is $551 billion for FY 2017 and $59 billion for the FY 2017 OCO funding. The BBA, however, does not change the previously enacted BCA sequestration cuts after FY 2017. The BCA specifies base budget spending caps and can only be changed through law enacted by Congress. Consequently, the U.S. Government’s overall fiscal challenges remain, including uncertainties regarding BCA sequestration cuts scheduled to resume in FY 2018 and therefore, future DoD budgets and spending levels are difficult to predict. A significant decline in or redirection of U.S. military expenditures in the future, or the loss or significant reduction in U.S. Government funding of a large program in which we participate, could have a material adverse effect on our financial position, results of operations and cash flows.

We rely predominantly on sales to U.S. Government entities, and the loss or delay of a significant number of our contracts would have a material adverse effect on our results of operations and cash flows.

Our sales are predominantly derived from contracts (revenue arrangements) with agencies of, and prime system contractors to, the U.S. Government. The loss or delay of all or a substantial portion of our sales to the U.S. Government would have a material adverse effect on our results of operations and cash flows. Approximately 73%, or $7.6 billion, of our sales for the year ended December 31, 2016 were made directly or indirectly to U.S.

16

Government agencies, including 70% to the DoD. Aggregate sales for our five largest contracts (revenue arrangements) amounted to approximately $1.5 billion, or 15% of our consolidated sales for the year ended December 31, 2016. Our largest contract (revenue arrangement) in terms of annual sales for the year ended December 31, 2016, was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment and generated approximately 4% of our 2016 sales. Our period of performance under this contract continues through September 30, 2017. We are one of several contractors expected to bid on the re-competition of this contract and expect an award decision in the second half of 2017.

A substantial majority of our total sales are for products and services under contracts with various agencies and procurement offices of the DoD or with prime contractors to the DoD. Although these various agencies, procurement offices and prime contractors are subject to common budgetary pressures and other factors, our customers exercise independent purchasing decisions. Because of this concentration of contracts, if a significant number of our DoD contracts and subcontracts are simultaneously delayed or cancelled for budgetary, performance or other reasons, it would have a material adverse effect on our results of operations and cash flows.

In addition to contract cancellations and declines in agency budgets, our backlog and future financial results may be adversely affected by:

• curtailment of the U.S. Government’s use of technology or other services and product providers, including curtailment due to government budget reductions and related fiscal matters;

• geopolitical developments that affect demand for our products and services;

• our ability to hire and retain personnel to meet demand for our services; and

• technological developments that impact purchasing decisions or our competitive position.

The DoD’s wide-ranging efficiency and better buying power initiatives, which target affordability and cost growth, could have a material effect on the procurement process and may adversely affect our existing contracts and the award of new contracts.

Since 2010, the DoD has implemented efficiency initiatives and other best practices for procurement that are intended to reduce prices, ensure adequate competition and control costs throughout the acquisition cycle. In addition, under the Better Buying Power 3.0 (BBP) initiative, the DoD has focused on technology innovation, incentive-based cost-plus and fixed-price contracts and Company sponsored Independent research and development efforts. The U.S. Government may continue to implement changes to its procurement practices that change the way contracts are solicited, negotiated and managed and may impact our future sales, earnings and cash flows, and could affect whether, and how we pursue opportunities to provide our products and services to the U.S. Government, including the terms and conditions under which we do so.

Our government contracts contain unfavorable termination provisions and are subject to audit and modification. If a termination right is exercised by the government, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Companies engaged primarily in supplying defense-related equipment and services to U.S. Government agencies are subject to certain business risks peculiar to the defense industry. These risks include the ability of the U.S. Government to unilaterally:

• suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

• terminate existing contracts;

• reduce the value of existing contracts; and

• audit our contract-related costs and fees, including allocated indirect costs.

All of our U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S.

17

Government in procuring undelivered items from another source. Our contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.

U.S. Government agencies, including the Defense Contract Audit Agency and various agency Inspectors General, routinely audit and investigate our costs and performance on contracts, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government have adjusted, and may in the future adjust, our contract related costs and fees, including allocated indirect costs. In addition, under U.S. Government purchasing regulations, some of our costs, including certain business acquisition costs, most financing costs, portions of research and development costs and certain marketing expenses, may not be reimbursable under U.S. Government contracts.

As of December 31, 2016, we had a backlog of funded orders, primarily under contracts with the U.S. Government, totaling $8,896 million. As described above, the U.S. Government may unilaterally modify or terminate its contracts with us. Accordingly, most of our backlog could be modified or terminated by the U.S. Government, which would have a material adverse effect on our future sales, results of operations and cash flows.

We may not be able to win competitively awarded contracts or receive required licenses to export our products, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

Our government contracts are subject to competitive bidding. We obtain many of our U.S. Government contracts through a competitive bidding process. We may not be able to continue to win competitively awarded contracts, such as the Fort Rucker Maintenance Support contract re-competition. In addition, awarded contracts may not generate sales sufficient to result in our profitability. We are also subject to risks associated with the following:

• the frequent need to bid on programs in advance of the completion of their design, which may result in unforeseen technological difficulties and/or cost overruns;

• the substantial time, effort and experience required to prepare bids and proposals for competitively awarded contracts that may not be awarded to us;

• design complexity and rapid technological obsolescence; and

• the constant need for design improvement.

In addition to these risks, we are not permitted to export some of our products, and we are required to obtain licenses from U.S. Government agencies to export many of our other products and systems. Failure to receive required licenses would eliminate our ability to sell our products and systems outside the United States.

Intense competition and bid protests may adversely affect our sales, results of operations and cash flows.

The defense and commercial industries in which our businesses operate are highly competitive. We expect that the DoD’s increased use of commercial off-the-shelf products and components in military equipment will continue to encourage new competitors to enter the market. We also expect increased competition for our products and services from other providers due to the uncertainty of future U.S. defense budgets. Furthermore, the current competitive environment has resulted in an increase of bid protests from unsuccessful bidders, which typically extends the time until work on a contract can begin. For more information concerning the factors that affect our ability to compete, see “Part I — Item 1 — Business — Competition.”

We are subject to government investigations, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

U.S. Government contracts are subject to extensive legal and regulatory requirements, and from time to time agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. As discussed in Note 18 to our audited consolidated financial statements, we are currently cooperating with the U.S. Government on several investigations. Under U.S. Government regulations, an indictment of L3 by a federal grand jury, or an administrative finding against us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in us being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges, which could have a material adverse effect on our results of operations and cash flows. A conviction, or an administrative finding against us that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specific term, which could have a material adverse effect on our results of operations and cash flows.

18

Our commercial aviation products and services businesses are affected by global demand and economic factors that could negatively impact our financial results.

The operating results of our commercial aviation products and services businesses may be adversely affected by downturns in the global demand for air travel which impacts new aircraft production and orders, and global flying hours, which impacts air transport, regional and business aircraft utilization rates and pilot training needs. The aviation industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and international economies and is impacted by long-term trends in airline passenger and cargo traffic. The results of our commercial aviation business also depend on other factors, including general economic growth, political stability in both developed and emerging markets, pricing pressures, trends in capital goods markets and changes in OEM production rates.

Our sales to certain international customers expose us to risks associated with operating internationally.

For the year ended December 31, 2016, sales to international customers, excluding our international sales made under FMS agreements directly between the U.S. Government and foreign governments, represented approximately 17% of our consolidated sales. Consequently, our businesses are subject to a variety of risks that are specific to international operations, including the following:

• export regulations that could erode profit margins or restrict exports;

• compliance with the U.S. Foreign Corrupt Practices Act and similar non-U.S. regulations;

• the burden and cost of compliance with foreign laws, treaties and technical standards and changes in those regulations;

• contract award and funding delays;

• potential restrictions on transfers of funds;

• currency fluctuations;

• import and export duties and value added taxes;

• transportation delays and interruptions;

• uncertainties arising from international local business practices and cultural considerations;

• sovereign government credit risk; and

• potential military conflicts and political risks.

Our international contracts may include industrial cooperation agreements requiring specific local purchases, manufacturing agreements or financial support obligations, known as offset obligations, and provide for penalties if we fail to meet such requirements. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” for further discussion. While we have and will continue to adopt measures to reduce the potential impact of losses resulting from the risks of our international business, these measures may not be adequate.

We are subject to the risks of legal proceedings, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

At any given time, we are a defendant in various material legal proceedings and litigation matters arising in the ordinary course of business, including litigation, claims and assessments that have been asserted against acquired businesses, which we have assumed. Although we maintain insurance policies, these policies may not be adequate to protect us from all material judgments and expenses related to current or future claims and may not cover the conduct that is the subject of the litigation. Desired levels of insurance may not be available in the future at economical prices or at all. In addition, we believe that while we have valid defenses with respect to legal matters pending against us, the results of litigation can be difficult to predict, including those involving jury trials. Accordingly, our current judgment as to the likelihood of our loss (or our current estimate as to the potential range of loss, if applicable) with respect to any particular litigation matter may be wrong. A significant judgment against us, arising out of any of our current or future legal proceedings and litigation, could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects. For a discussion of material litigation to which we are currently a party, see Note 18 to our audited consolidated financial statements.

19

If we are unable to keep pace with rapidly evolving products and service offerings and technological change, there could be a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

The rapid change of technology is a key feature of most of the markets in which our products, services and systems oriented businesses operate. To succeed in the future, we will need to continue to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. Historically, our technology has been developed through customer-funded and internally funded research and development and through certain business acquisitions. We may not be able to continue to maintain comparable levels of research and development or successfully complete such acquisitions. In the past, we have allocated substantial funds to capital expenditures, programs and other investments. This practice will continue to be required in the future. Even so, we may not be able to successfully identify new opportunities and may not have the necessary financial resources to develop new products and systems in a timely or cost-effective manner. At the same time, products and technologies developed by others may render our products, services and systems obsolete or non-competitive.

Goodwill represents a significant asset on our balance sheet and may become impaired.

Goodwill represents the largest asset on our balance sheet, with an aggregate balance of $6,560 million at December 31, 2016. We review goodwill and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and also review goodwill annually in accordance with the accounting standards for goodwill and intangible assets. The annual impairment test requires us to determine the fair value of our reporting units in comparison to their carrying values. A decline in the estimated fair value of a reporting unit could result in a goodwill impairment and a related non-cash impairment charge against earnings if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill.

Our annual impairment test at November 30, 2016, did not result in impairments to goodwill. The fair value of all of our reporting units exceeded the carrying value of the net assets of those reporting units by more than 20% at November 30, 2016, the date of our most recent annual impairment assessment. A decline in the estimated fair value of one or more of our reporting units could potentially trigger goodwill impairment charges and a material adverse effect on our results of operations. Our annual impairment test at November 30, 2015, resulted in goodwill impairment charges of $955 million ($384 million in continuing operations and $571 million in discontinued operations). See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Goodwill and Identifiable Intangible Assets” for further discussion.

Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

Our sales are transacted using written revenue arrangements, or contracts, which are generally fixed-price, cost-plus or time-and-material. For a description of our revenue recognition policies, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.” For information on the percentage of our total sales generated from each contract type, see “Item 1 —Business — Contracts.”

Substantially all of our cost-plus and time-and-material type contracts are with the U.S. Government, primarily the DoD. Substantially all of our sales to commercial customers are transacted under fixed-price sales arrangements and are included in our fixed-price type contract sales.

On a fixed-price type contract (revenue arrangement), we agree to perform the contractual statement of work for a predetermined sales price. Although a fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract.

On a cost-plus type contract (revenue arrangement), we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels established by our customers. On a time-and-material type contract (revenue arrangement), we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. Therefore, on cost-plus and time-and-material type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.

20

Additionally, the impact of revisions in profit or loss estimates for all types of contracts subject to percentage of completion accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as reduce the valuations of receivables and inventories; and in some cases, result in liabilities to complete contracts in a loss position.

Pension expense and funding may fluctuate significantly because of changes in key estimates and assumptions, including discount rates and the assumed long-term rate of return on plan assets, as well as our actual investment returns and regulatory actions, which could negatively impact our results of operations, cash flows and financial condition.

Determining our pension expense requires significant judgment, particularly with respect to our discount rates, the assumed long-term rates of return on plan assets and other actuarial assumptions. If our assumptions change significantly due to changes in economic, legislative, demographic experience and/or circumstances, our pension expense, the funded status of our plans and our cash contributions to such plans would be impacted, which could negatively affect our results of operations, cash flows and financial condition. In addition, differences between our actual investment returns and our assumed long-term rate of return on plan assets could also impact our pension expense, the funded status of our plans and our required cash contributions to the plans. Further, our pension expense and the funded status of our plans, including required cash contributions to the plans, may be impacted by regulatory actions in any given year.

Additionally, pension plan cost recoveries under Cost Accounting Standards (CAS) for our U.S. Government contracts occur in different periods from when pension expense is recognized under accounting principles generally accepted in the U.S. or when cash contributions are made. Although CAS has been revised to better align the minimum required contributions under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006, with pension plan cost recoveries under CAS, timing differences could have a material adverse effect on our cash flow.

Our business could be negatively impacted by cybersecurity threats and other disruptions.

As a U.S. defense contractor, we have faced, and continue to face, various security threats, including, but not limited to, threats to the physical security of our facilities and employees, cybersecurity threats to our information technology infrastructure and attempts to gain access to our proprietary or classified information as well as the proprietary or classified information of our customers.

Although we utilize various procedures and controls to monitor, deter and mitigate these threats, these procedures and controls may not be sufficient to prevent disruptions in mission critical systems, the unauthorized release of confidential, sensitive or classified information and the corruption of data, systems or networks. Any significant operational delays, or any destruction, manipulation or improper use of our or our customers’ data, information systems or networks, could materially and adversely affect our financial results, damage the reputation of our products and services and require significant management attention and expense. In addition, our insurance coverage and/or indemnification arrangements that we enter into, if any, may not be adequate to cover all of the costs related to cybersecurity attacks or disruptions resulting from such events.

To date, cyber attacks directed at us have not had a material impact on our financial results. Due to the evolving nature and increased frequency of security threats, however, the impact of any future incident cannot be predicted. The threats we face vary from those common to most industries to more advanced and persistent, highly organized adversaries who target us because we operate in the defense industry and protect national security information. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures, which could result in us having to spend a significant amount of money to upgrade our networks and systems and could otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.

In the current environment, there are also numerous and evolving risks to cybersecurity and privacy, including the use of viruses, worms or other malicious software programs and threats involving criminal hackers, state-sponsored intrusions, terrorist attacks, industrial espionage, employee malfeasance, and human or technological error. As these risks develop and these attacks become more frequent and sophisticated, we may find it necessary to make significant further investments to protect data and infrastructure from cyber and other security attacks.

21

We must also rely on the safeguards put in place by customers, suppliers, vendors, subcontractors, venture partners or other third parties to minimize the impact of cyber threats, other security threats or business disruptions. These third parties may have varying levels of cybersecurity expertise and safeguards and their relationships with government contractors, such as L3, may increase the likelihood that they are targeted by the same cyber threats we face. In the event of a breach affecting these third parties, our business and financial results could suffer materially. With respect to our commercial arrangements with these third parties, we have processes designed to require that the third parties and their employees and agents agree to maintain certain standards for the storage, protection and transfer of confidential, personal and proprietary information. However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a third party’s employee or agent, the breakdown of a third party’s data protection processes, which may not be as sophisticated as ours, or a cyber attack on a third party’s information network and systems.

If we are unable to attract and retain key management and personnel, we may become unable to operate our business effectively.

Our future success depends to a significant degree upon the continued contributions of our management, and our ability to attract and retain highly qualified management and technical personnel, including employees who have U.S. Government security clearances, particularly clearances of top-secret and above. We do not maintain any key person life insurance policies for members of our management. We face competition for management and technical personnel from other companies and organizations. Failure to attract and retain such personnel would damage our future prospects.

Environmental laws and regulations may subject us to significant liability.

Our operations are subject to various U.S. federal, state and local as well as certain foreign environmental laws and regulations within the countries in which we operate relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require us to incur a significant amount of additional costs in the future and could decrease the amount of cash flow available to us for other purposes, including capital expenditures, research and development and other investments and could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

Our business acquisition strategy involves risks, and we may not successfully implement our strategy.

We opportunistically seek to acquire businesses that enhance our capabilities and add new technologies, products, services, programs, contracts and customers to our existing businesses. We may not be able to continue to identify acquisition candidates on commercially reasonable terms or at all. If we make additional business acquisitions, we may not realize the benefits anticipated from these acquisitions, including sales growth, cost synergies and margin improvement. Furthermore, we may not be able to obtain additional financing for business acquisitions, since such additional financing could be restricted or limited by the terms of our debt agreements or due to unfavorable capital market conditions.

The process of integrating the operations of acquired businesses into our existing operations may result in unforeseen difficulties and may require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations. Possible future business acquisitions could result in the incurrence of additional debt and related interest expense and contingent liabilities, each of which could result in an increase to our already significant level of outstanding debt, as well as more restrictive covenants. Furthermore, in certain of our business acquisitions we have assumed all claims against and liabilities of the acquired business, including both asserted and unasserted claims and liabilities.

Our spin-off of Engility could result in substantial tax liability to us and our shareholders.

In connection with our spin-off of Engility in 2012, we received an Internal Revenue Service (IRS) Ruling stating that L3 and its shareholders would not recognize any taxable income, gain or loss for U.S. federal income tax purposes as a result of the transaction. In addition, we received an opinion of counsel that the spin-off satisfied certain requirements for tax-free treatment that are not covered in the IRS Ruling; however, an opinion of counsel is not binding on the IRS. Accordingly, the IRS or the courts may reach conclusions with respect to the spin-off that are

22

different from the conclusions reached in the opinion of counsel. Moreover, both the IRS Ruling and the opinion of counsel are based on certain factual statements and representations made by us, which, if incomplete or untrue in any material respect, could invalidate the IRS Ruling or opinion of counsel.

If, notwithstanding receipt of the IRS Ruling and opinion of counsel, the spin-off and certain related transactions were determined to be taxable, then we would be subject to a substantial tax liability. In addition, if the spin-off were taxable, each holder of our common stock who received shares of Engility would generally be treated as having received a taxable distribution of property in an amount equal to the fair market value of the shares of Engility received.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

At December 31, 2016, we operated in 273 locations consisting of manufacturing facilities, administration, research and development and other properties throughout the United States and internationally. Of these, we owned 32 locations consisting of approximately 5.2 million square feet and leased space at 241 locations consisting of approximately 9.4 million square feet. Additionally, our Aerospace Systems segment utilized a facility consisting of approximately 3.3 million square feet through a land lease expiring in 2031 with the city of Greenville, Texas.

A summary of square footage by reportable segment at December 31, 2016, is presented below.

	Leased		Owned		Government- Owned		Total
	(Square feet in millions)
Electronic Systems		4.9		3.0		—		7.9
Aerospace Systems		1.3		1.6		3.3		6.2
Communication Systems		3.0		0.6		—		3.6
Total		9.2		5.2		3.3		17.7

Our reportable segments have major operations at the following locations:

• Electronic Systems — Phoenix and Tempe, Arizona; Anaheim, San Diego, San Leandro and Sylmar, California; Orlando, Sarasota and St. Petersburg, Florida; Northampton and Wilmington, Massachusetts; Grand Rapids and Muskegon, Michigan; Londonderry, New Hampshire; Mount Olive, New Jersey; Kirkwood, New York; Cincinnati and Mason, Ohio; Tulsa, Oklahoma; Philadelphia and Pittsburgh, Pennsylvania; Arlington, Garland, Grand Prairie and Plano, Texas; Ontario, Canada; Bologna, Italy; Hamilton, New Zealand; and Crawley, Droitwich, Luton and Tewkesbury, U.K.

• Aerospace Systems — Huntsville, Alabama; Crestview, Florida; Madison, Mississippi; Greenville, Rockwall and Waco, Texas; and Quebec, Canada.

• Communication Systems — San Carlos, San Diego, Simi Valley and Torrance, California; Ayer, Massachusetts; Camden, New Jersey; Hauppauge, New York; Williamsport, Pennsylvania; and Salt Lake City, Utah.

Additionally, our Corporate staff occupies a total of 0.2 million square feet of office space in New York, New York and Arlington, Virginia. Management believes all of our properties have been well maintained, are in good condition and are adequate and suitable for our business as presently conducted.

Item 3. Legal Proceedings

The information required with respect to this item can be found in Note 18 to our audited consolidated financial statements and is incorporated by reference into this Item 3.

Item 4. Mine Safety Disclosures

None.

23

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of L3 is traded on the New York Stock Exchange (NYSE) under the symbol “LLL.” On February 17, 2017, the number of holders of L3’s common stock was 176,555. On February 17, 2017, the closing price of L3’s stock, as reported by the NYSE, was $168.23 per share.

The table below sets forth the amount of dividends paid per share and the high and low closing price of L3’s common stock as reported on the NYSE during the past two calendar years.

	Dividends Paid				Closing Price (High-Low)
	2016		2015		2016	2015
Common Stock — Dividends Paid and Market Prices
First Quarter	$	0.70	$	0.65	$120.55 — 108.05	$132.87 — 123.06
Second Quarter		0.70		0.65	147.90 — 118.50	126.69 — 113.38
Third Quarter		0.70		0.65	151.63 — 140.11	124.04 — 103.07
Fourth Quarter		0.70		0.65	161.56 — 134.05	128.40 — 101.90
Year Ended December 31	$	2.80	$	2.60	$161.56 — 108.05	$132.87 — 101.90

On February 13, 2017, L3 announced that its Board of Directors increased L3’s regular quarterly cash dividend by 7% to $0.75 per share, payable on March 15, 2017, to shareholders of record at the close of business on March 1, 2017.

Issuer Purchases of Equity Securities

The following table provides information about repurchases of L3’s common stock made in the quarterly period ended December 31, 2016. Repurchases are made from time to time at management’s discretion in accordance with applicable federal securities laws. All share repurchases of L3’ common stock have been recorded as treasury shares.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program(1)
							(in millions)
September 24 — October 31, 2016		133,190	$	150.14		133,190	$	460
November 1 — 30, 2016		198,982		138.31		198,982	$	433
December 1 — 31, 2016		—		—		—	$	433
Total		332,172	$	143.05		332,172

⁽¹⁾ The share repurchases described in the table above were made pursuant to the $1.5 billion share repurchase program authorized by L3’s Board of Directors on December 4, 2014, which authorization expires on June 30, 2017.

24

The graph below compares the cumulative total returns of our common stock with the cumulative total return of the Standard & Poor’s 500 Composite Stock Index and the Standard & Poor’s 1500 Aerospace & Defense Index, for the period from December 31, 2011 to December 31, 2016. These figures assume that all dividends paid over the performance period were reinvested. On July 17, 2012, we completed the Engility spin-off. Our shareholders received one share of Engility common stock for every six shares of our common stock held on the record date (July 16, 2012). The effect of the spin-off is reflected in the cumulative total return as a reinvested dividend for the year ended December 31, 2012. The figures also assume that the starting value of each index and the investment in our common stock was $100 on December 31, 2011.

We are one of the companies included in the Standard & Poor’s 1500 Aerospace & Defense Index and the Standard & Poor’s 500 Composite Stock Index. The starting point for the measurement of our common stock cumulative total return was our closing stock price of $66.68 per share on December 30, 2011. The graph is not, and is not intended to be, indicative of future performance of our common stock.

 

25

Item 6. Selected Financial Data

The selected financial data presented below is derived from our audited consolidated financial statements and has been adjusted to reflect the divestiture of NSS in 2016 and the spin-off of Engility in 2012 and related classification of their assets, liabilities, results of operations and cash flows as discontinued operations.

	Year Ended December 31,
	2016			2015(1)			2014			2013			2012
	(in millions, except per share data)
Statements of Operations Data:
Net sales	$	10,511		$	10,466		$	10,986		$	11,420		$	11,802
Operating income	$	1,008		$	475		$	1,012		$	1,117		$	1,219
Loss related to business divestitures		—			31			—			—			—
Goodwill impairment charges		—			384			—			—			—
Segment operating income	$	1,008		$	890		$	1,012		$	1,117		$	1,219
Operating margin		9.6	%		4.5	%		9.2	%		9.8	%		10.3	%
Segment operating margin		9.6	%		8.5	%		9.2	%		9.8	%		10.3	%
Interest and other, net	$	(158	)	$	(153	)	$	(140	)	$	(137	)	$	(166	)
Income from continuing operations before income taxes	$	850		$	322		$	872		$	980		$	1,053
Provision for income taxes		(189	)		(25	)		(227	)		(264	)		(333	)
Income from continuing operations		661			297			645			716			720
Net income from continuing operations attributable to noncontrolling interests		(14	)		(15	)		(13	)		(9	)		(6	)
Net income from continuing operations attributable to L3	$	647		$	282		$	632		$	707		$	714
Earnings per share from continuing operations allocable to L3 common shareholders:
Basic	$	8.36		$	3.49		$	7.40		$	7.91		$	7.41
Diluted	$	8.21		$	3.44		$	7.20		$	7.76		$	7.32
L3 weighted average common shares outstanding:
Basic		77.4			80.7			85.4			89.4			96.3
Diluted		78.8			81.9			87.8			91.1			97.6
Cash dividends declared per common share	$	2.80		$	2.60		$	2.40		$	2.20		$	2.00

⁽¹⁾ Income from continuing operations for the year ended December 31, 2015 includes: (1) non-cash goodwill impairment charges of $384 million ($264 million after income taxes), or $3.22 per diluted share, including $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit and $46 million related to a business retained by L3 in connection with the sale of the NSS business comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit during 2015 and (ii) $9 million related to the re-allocation of goodwill, and (2) a pre-tax loss of $31 million ($20 million after income taxes), or $0.25 per diluted share, related to business divestitures.

26

	Year Ended December 31,
	2016			2015			2014			2013			2012
	(in millions)
Balance Sheet Data (at year end):
Working capital(1)	$	1,562		$	909		$	1,689		$	1,853		$	1,735
Total assets		11,865			12,069			13,692			13,849			13,665
Long-term debt, including current portion		3,325			3,626			3,916			3,611			3,607
Equity		4,624			4,429			5,360			6,056			5,527
Cash Flow Data:
Net cash from operating activities from continuing operations	$	1,097		$	1,069		$	1,088		$	1,160		$	1,067
Net cash used in investing activities from continuing operations		(16	)		(192	)		(221	)		(256	)		(198	)
Net cash used in financing activities from continuing operations		(856	)		(1,205	)		(893	)		(853	)		(1,530	)

⁽¹⁾ Based on continuing operations and excludes net assets held for sale.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Outlook

L3’s Business

L3 is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment and security and detection systems. L3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. Our customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

We have the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Financial information for our segments is included in Note 21 to our audited consolidated financial statements. Electronic Systems provides a broad range of products and services, including components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical space, airborne, ground and sea-based communication systems. Effective March 1, 2017, we will realign our Electronic Systems segment in connection with the retirement of the segment’s president in the second quarter of 2017. The current Electronic Systems segment will be split into two separate segments named (1) Electronic Systems and (2) Sensor Systems. Accordingly, our structure will consist of the following four segments: (1) Aerospace Systems, (2) Communication Systems, (3) Electronic Systems and (4) Sensor Systems. We will report our results under the realigned business segments commencing in the first quarter of 2017 at which time we will restate the corresponding information for prior periods.

On December 7, 2015, we entered into a definitive agreement to sell our National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS provided cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to L3’s continuing operations, unless specifically noted.

27

We generated sales of $10,511 million and $10,466 million for the years ended December 31, 2016 and 2015, respectively, and our primary customer was the DoD. See “Part I — Item 1 — Business — Major Customers” for additional information regarding a summary of our sales by end customer and the percent contributed by each to our total sales.

Most of our contracts (revenue arrangements) with the U.S. Government are subject to U.S. Defense Contract Audit Agency audits and various cost and pricing regulations and include standard provisions for termination for the convenience of the U.S. Government. Multiyear U.S. Government contracts and related orders are subject to cancellation if funds for contract performance for any subsequent year become unavailable. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government.

Business Environment

U.S. Government Markets. Sales to U.S. Government customers represented 73% of our 2016 sales and were primarily to DoD customers, which comprised 70% of our sales. Therefore, our annual sales are generally highly correlated to changes in U.S. Government spending levels, especially DoD budget levels.

The total DoD budget for FY 2015 was $560 billion, a decline of 4% as compared to the FY 2014 budget due to a decrease in the Overseas Contingency Operations (OCO) budget. The FY 2015 base budget remained substantially unchanged from FY 2014 at $497 billion, while the OCO budget decreased by $22 billion. The total DoD budget for FY 2016 is $581 billion, an increase of 4% compared to FY 2015. The increase is due to a base budget of $522 billion, higher by $25 billion compared to FY 2015. The FY 2016 OCO budget declined slightly to $59 billion compared to $63 billion for FY 2015.

On February 9, 2016, the Obama Administration submitted its FY 2017 DoD Budget Request. The total FY 2017 DoD Budget Request is $583 billion ($524 billion base budget, $59 billion OCO), which is substantially unchanged compared to the appropriated FY 2016 DoD budget. However, the FY 2017 DoD Budget Request was not approved or appropriated by Congress before October 1, 2016, and FY 2017 began with a Continuing Resolution (CR) to fund the government, which expires on April 28, 2017. The CR maintains funding at the current FY 2016 appropriated level resulting in a prohibition on new program starts and multi-year contract awards. On December 23, 2016, President Obama signed the FY 2017 National Defense Authorization Act (NDAA), which includes defense spending priorities and guidelines but does not appropriate money for those items. The NDAA largely supports the FY17 DoD Budget Request.

Furthermore, the Bipartisan Budget Act of 2015 (BBA), which suspended the debt ceiling through March 15, 2017 and raised spending caps previously enacted by Congress under the Budget Control Act of 2011 (BCA), places spending caps on defense programs. The BBA target for the DoD base budget is $551 billion for FY 2017 and $59 billion for the FY 2017 OCO funding. The BBA, however, does not change the previously enacted BCA sequestration cuts after FY 2017. The BCA specifies base budget spending caps and can only be changed through law enacted by Congress.

28

The table below presents the FY 2011 through FY 2016 DoD enacted budgets and the FY17 DoD Future Years Defense Plan (FYDP), as provided in the FY 2017 DoD Budget Request.

	DoD Budget							Annual Total Budget Change(1)
Fiscal Year (Ending September 30)	Base		OCO			Total
			(in billions)
2011	$	528	$	159		$	687		0	%
2012	$	530	$	115		$	645		-6	%
2013	$	496	$	82		$	578		-10	%
2014	$	496	$	85		$	581		+1	%
2015	$	497	$	63		$	560		-4	%
2016	$	522	$	59		$	581		+4	%
2017	$	524	$	59		$	583		0	%
2018	$	557		(2	)				+6	%
2019	$	565		(2	)				+1	%
2020	$	570		(2	)				+1	%
2021	$	585		(2	)				+3	%

Source: United States Department of Defense fiscal year 2017 budget request.

⁽¹⁾ The annual budget changes for FY 2018 to FY 2021 are calculated on only the base budgets. The base budget cumulative average growth rate over the five-year period from FY 2016 to FY 2021 is approximately 2%.

⁽²⁾ The FY 2017 DoD Budget Request did not include a budget amount for OCO appropriations after FY 2017, which will be addressed by the Trump Administration.

Future DoD budgets and spending levels are determined by a number of factors beyond our control, including changes to U.S. procurement policies, current and future domestic and international budget conditions, presidential administration priorities and changing national security and defense requirements. Furthermore, the U.S. Government’s overall fiscal challenges remain, including uncertainties regarding BCA sequestration cuts scheduled to resume in FY 2018. We expect the new Congress and the Trump Administration to continue to discuss various options throughout the budget appropriations process and complete the FY 2017 budget and submit an FY18 budget that includes an increase in OCO and supplemental budgets to address readiness shortfalls, as well as reforms to the federal income tax code and other significant policy initiatives. Although, we cannot predict the outcome of these efforts, which could have an impact on the Company, we believe that L3 will benefit from several of the DoD’s focus areas such as ISR, unmanned systems, undersea warfare, precision strike, secure communications, missile defense and space programs, electronic warfare, aircraft readiness and the ability to project power in denied environments. For more information on the risks and uncertainties related to our U.S. Government contracts, see “Part I — Item 1A — Risk Factors” in this Annual Report on Form 10-K.

International and Commercial Markets. Sales to end customers other than the U.S. Government represented 27% of our 2016 sales. We expect sales to international and commercial customers to represent 28% of our consolidated 2017 sales, an increase of 1% compared to 2016 primarily due to sales from businesses we acquired during 2016. These sales are generally affected by global economic conditions, geopolitical and security conditions and commodity prices, as well as our competitive success in winning new business and increasing market share. We believe that L3 will benefit from a large addressable international market with sales directly to foreign allied governments and under FMS agreements between the U.S. Government and foreign governments. Although our international sales are experiencing near-term softness, we believe the focus of our international markets in areas such as ISR, simulators, communication systems, night vision products and sensors systems will benefit L3 in the long term. We also believe that the commercial markets in which we participate such as aviation products, security and screening, simulation and training, and RF microwave and power have long term favorable fundamentals.

Key Performance Measures

The primary financial performance measures that we use to manage our businesses and monitor results of operations are (i) sales, (ii) operating income and (iii) net cash from operating activities (“Operating Cash Flow”). Management believes that these financial performance measures are the primary growth drivers for our earnings per

29

share and cash flow per common share. Generally, in evaluating our businesses and contract performance, we focus on net sales, operating income, operating margin, which we define as operating income as a percentage of sales, and Operating Cash Flow, and not the type or amount of operating costs.

One of our primary business objectives is to increase sales organically and through select business acquisitions. We define organic sales as net sales excluding the sales impact of acquisitions and divestitures. Sales declines related to business divestitures are sales from divestitures that are included in our actual results for the twelve-month period prior to the divestitures. Sales increases related to acquired businesses are sales from acquisitions that are included in our actual results for less than twelve-month period. We expect to supplement, strengthen and enhance our existing businesses by selectively acquiring businesses that: (1) add important new technologies and products, (2) provide access to select customers, programs and contracts and (3) provide attractive returns on investment. Another important financial performance measure that we use is operating margin, because sales growth combined with operating margin levels determine our operating income levels. Operating Cash Flow is also an important financial performance measure because Operating Cash Flow measures our ability to convert operating income into cash after paying income taxes and interest expenses and investing in working capital.

Sales Trends. For the year ended December 31, 2016, consolidated net sales of $10,511 million increased by 0.4%, compared to the year ended December 31, 2015. Organic sales increased $161 million, or 1.5% and net sales from business acquisitions was $93 million, or 0.9%. These increases were partially offset by divestitures of $209 million, or 2.0%. Our average annual sales declined for the five years ended December 31, 2016 by 2% due to a decline in average annual organic sales of approximately 2%. See “Results of Operations,” including segment results below for a further discussion of sales.

For the years ended December 31, 2016, 2015 and 2014, our largest contract (revenue arrangement) in terms of annual sales was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment. Under this contract, which generated approximately 4% of our 2016, 2015 and 2014 sales, we provide maintenance, logistics and other related sustainment support services for rotary wing aircraft assigned to Fort Rucker and satellite units in Alabama. Our period of performance under this contract continues through September 30, 2017. We are one of several contractors expected to bid on the re-competition of this contract and expect an award decision in the second half of 2017.

We derived approximately 70% of our 2016 sales from DoD customers and, as a result, our sales are highly correlated to DoD budget levels. DoD budgets are a function of several factors and uncertainties beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, U.S. military engagements, changing national security and defense requirements, geo-political developments, actual fiscal year congressional appropriations for defense budgets, and sequestration and other DoD budget reductions. Any of these factors could result in a significant increase, decrease or redirection of DoD budgets and impact L3’s future results of operations, including our sales and operating income growth rates. Additionally, L3’s future results of operations will be affected by our ability to retain our existing business, including our revenue arrangements with DoD customers, and to successfully re-compete for existing business and compete for new business, which largely depends on: (1) our successful performance on existing contracts, (2) the effectiveness and innovation of our technologies and research and development activities, (3) our ability to offer better program performance than our competitors at an affordable cost and (4) our ability to retain our employees and hire new ones, particularly those employees who have U.S. Government security clearances, particularly those with clearances of top-secret and above. We expect our 2017 consolidated sales to increase by approximately 2% compared to 2016, including an organic sales increase of 1%. We expect organic international sales to decline by approximately 3% due to the completion of certain contracts with foreign governments, and organic sales to the DoD and U.S. Government to increase by approximately 1%. We expect organic commercial sales to increase by approximately 2% primarily for commercial aviation products.

Operating Income Trends. For the year ended December 31, 2016, our consolidated and segment operating income was $1,008 million, an increase of 13% from $890 million for the year ended December 31, 2015, and our segment operating income as a percentage of sales (segment operating margin) was 9.6% for the year ended December 31, 2016, an increase of 110 basis points from 8.5% for the year ended December 31, 2015. Our consolidated operating income and consolidated operating margin for the year ended December 31, 2015 were impacted by a pre-tax goodwill impairment charge of $384 million and pre-tax losses of $31 million related to

30

business divestitures. The pre-tax goodwill impairment charge and pre-tax losses related to business divestitures are excluded from segment operating income because they are excluded by management for purposes of evaluating the operating performance of our business segments. See “Results of Operations”, including segment results below, for a further discussion of operating margin.

Our effective management of labor, material, subcontractor and other direct costs is an important element of cost control and favorable contract performance. We believe that proactively re-sizing our businesses to their anticipated sales, combined with continuous cost improvement, will enable us to increase our cost competitiveness. While we continue to undertake cost management actions, such as reducing our indirect costs, resizing select business units and improving our productivity and contract performance in an effort to maintain or even increase operating margin, these efforts may not be successful and may be partially or fully offset by other cost increases. Although we expect our 2017 annual consolidated and segment operating margin to increase as compared to 2016, changes in the competitive environment and DoD procurement practices, lower consolidated sales and changes in annual pension expense, including related assumptions such as the benefit obligation discount rates, among other factors, could result in lower operating margin. Furthermore, select business acquisitions and new business, including contract renewals and new contracts, could have lower future operating margins compared to our operating margins on existing contracts and could reduce future consolidated and segment operating margins.

Operating Cash Flow Trends. For the year ended December 31, 2016, Operating Cash Flow was $1,097 million, an increase of 3%, compared to the year ended December 31, 2015. The increase is primarily due to higher operating income adjusted for non-cash expenses, partially offset by higher uses of cash for working capital in the year ended December 31, 2016.

Other Events

Name Change and Elimination of Holding Company Structure. On December 31, 2016, we completed an internal reorganization to eliminate our holding company structure. Pursuant to the reorganization, L-3 Communications Holdings, Inc. (L-3 Holdings) was merged (the Merger) with and into our wholly-owned subsidiary, L-3 Communications Corporation (L-3 Corp), with the subsidiary 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. (the Name Change).

As a result of the Merger and the Name Change, all outstanding shares of L-3 Holdings’ common stock were automatically converted into the same number of shares of common stock of L3 Technologies, Inc., as the Surviving Entity, with economic, voting and other rights that are substantially identical. The common stock of L3 Technologies, Inc. commenced trading effective January 3, 2017 (the first trading day of 2017) on the New York Stock Exchange under the ticker symbol “LLL”, the same ticker symbol previously used by us.

Issuance of Senior Notes. On December 5, 2016, we issued $550 million aggregate principal amount of 3.85% Senior Notes that mature on December 15, 2026 (the 2026 Notes). The 2026 Notes were issued at a bond discount of $3 million. The net cash proceeds of $542 million from the offering plus cash on hand were used primarily to: (1) replenish the amount of cash used, and the amount of revolving credit borrowings drawn, to repay $200 million aggregate principal amount of our 3.95% Senior Notes which matured on November 15, 2016 (the 2016 Notes), and (2) redeem all of our outstanding 1.50% Senior Notes due May 28, 2017 (the 2017 Notes), which had an aggregate principal amount of $350 million.

Repurchases, Redemption and Maturities of Senior Notes. The repurchases, redemptions and maturities of senior notes are presented in the table below.

Note	Settlement Type	Date Settled	Aggregate Amount		Debt Retirement Charge		Cash Payments
			(in millions)
1.50% Senior Notes due 2017(1)	Redemption	December 30, 2016	$	350	$	2	$	351
3.95% Senior Notes due 2016	Maturity	November 15, 2016	$	200	$	—	$	200
3.95% Senior Notes due 2016(2)	Redemption	May 20, 2016	$	300	$	5	$	305
3.95% Senior Notes due 2024	Tender Offer	December 22, 2015	$	300	$	1	$	297
CODES due 2035(3)	Redemption	June 20, 2014	$	689	$	—	$	935

⁽¹⁾ The 1.50% Senior Notes due 2017 were redeemed at a price equal to 100.323%of the principal amount thereof,plus accrued and unpaid interest to the redemption date. Interest ceased to accrue on and after the redemption date.

31

⁽²⁾ The 3.95% Senior Notes due 2016 were redeemed at a price equal to 101.475% of the principal amount thereof, plus accrued and unpaid interest. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive payment of the Redemption Price and accrued interest.

⁽³⁾ In 2005, we sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, we repurchased approximately $11 million of the CODES. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. We settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, we recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014.

Discontinued Operations. On February 1, 2016, we completed the sale of our NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents the statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation and includes allocated interest expense for debt not directly attributable or related to L3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L3 consolidated net assets and (2) L3 consolidated total debt. See Note 3 to the audited consolidated financial statements for additional information.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net sales	$	86		$	1,088		$	1,138
Cost of sales		(92	)		(1,040	)		(1,065	)
Gain related to business divestiture(1)		64			—			—
Goodwill impairment charges		—			(571	)		—
Operating income (loss) from discontinued operations		58			(523	)		73
Interest expense allocated to discontinued operations		—			(20	)		(20	)
Income (loss) from discontinued operations before income taxes		58			(543	)		53
Income tax benefit (expense)		5			21			(21	)
Income (loss) from discontinued operations, net of income taxes	$	63		$	(522	)	$	32

⁽¹⁾ The year ended December 31, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

Business Acquisitions and Divestitures

As discussed above, one aspect of our strategy is to selectively acquire businesses that add new products and technologies, or provide access to select customers, programs and contracts. We intend to continue acquiring select businesses for reasonable valuations that will provide attractive returns to L3. Our business acquisitions, depending on their contract-type, sales mix or other factors, could reduce L3’s consolidated operating margin while still increasing L3’s operating income, earnings per share, and net cash from operating activities. In addition, we may also dispose of certain businesses if we determine that they no longer fit into L3’s overall business strategy and we are able to receive an attractive price.

32

Acquisitions. The table below summarizes the acquisitions that we have completed during the years ended December 31, 2014, 2015 and 2016 referred to herein as business acquisitions. See Note 3 to our audited consolidated financial statements for further information regarding our business acquisitions. During the year ended December 31, 2016, we used net cash of $388 million for business acquisitions.

Business Acquisitions	Date Acquired	Segment	Purchase Price(1)
			(in millions)
2014
Data Tactics Corporation (L3 Data Tactics)	March 4, 2014	Discontinued Operations	$	57
Total 2014			$	57
2015
MITEQ, Inc.	January 21, 2015	Communication Systems	$	41
CTC Aviation Group (L3 CTC)	May 27, 2015	Electronic Systems		236
ForceX, Inc. (L3 ForceX)	October 13, 2015	Electronic Systems		61
Total 2015			$	338
2016
Advanced Technical Materials, Inc. (ATM)	January 22, 2016	Communication Systems	$	27
Micreo Limited (Micreo) and Flight Training Acqusitions LLC (Aerosim)	September 30, 2016	Electronic Systems		86
MacDonald Humfrey (Automation) Limited (L3 MacDonald Humfrey)	November 22, 2016	Electronic Systems		327	(2)
Total 2016			$	440

⁽¹⁾ The purchase price represents the contractual consideration for the acquired business, excluding adjustments for net cash acquired and acquisition transaction costs.

⁽²⁾ Excludes additional purchase price, not to exceed $38 million, which is contingent upon the post-acquisition financial performance of L3 MacDonald Humfrey for the three-year period ending December 31, 2019.

All of our business acquisitions are included in our consolidated results of operations from their dates of acquisition. We regularly evaluate potential business acquisitions. On January 5, 2017, we completed the acquisition of the explosive trace detection (ETD) business of Implant Sciences Corporation (Implant) for a purchase price of $118 million, in addition to the assumption of specified liabilities. The acquisition was financed with cash on hand.

Business Divestitures. We regularly evaluate potential business divestitures. During the year ended December 31, 2015, we completed the sales of Marine Systems International (MSI), Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments we recorded related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received and net sales included in continuing operations related to our business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture			Proceeds Received		Net Sales
				(in millions)
MSI divestiture	$	(17	)	$	318	$	185
BSI divestiture		(4	)		26		7
Tinsley Product Line divestiture		(8	)		4		9
Klein divestiture		(2	)		10		8
Total	$	(31	)	$	358	$	209

MSI Divestiture. On May 29, 2015, we completed the sale of our MSI business to Wärtsilä Corporation for a sales price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within our Electronic Systems segment,

33

primarily selling to the commercial shipbuilding industry. We recorded a pre-tax loss of $17 million ($6 million after income taxes, or $0.07 per diluted share) for the year ended December 31, 2015, related to the divestiture of MSI. The loss is comprised of: (1) $17 million for a non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI.

BSI Divestiture. On April 24, 2015, we divested our BSI business for a sales price of $26 million. BSI provided wireless technology and communications systems services for use in the field of sports television broadcasting and was included in the Sensor Systems sector of the Electronic Systems segment. We recorded a pre-tax loss of $4 million ($6 million after income taxes, or $0.08 per diluted share) for the year ended December 31, 2015 related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, we divested our Tinsley Product Line for a sales price of $4 million. Tinsley provided optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes, or $0.08 per diluted share) for the year ended December 31, 2015.

Klein Divestiture. On December 31, 2015, we divested our Klein business for a sales price of $10 million. Klein provided side scan sonar equipment and waterside security and surveillance systems and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes, or $0.02 per diluted share) for the year ended December 31, 2015.

NSS Divestiture. On February 1, 2016, we completed the sale of our NSS business to CACI International Inc. See “Other Events – Discontinued Operations” above for further discussion of the divestiture and impact on our audited consolidated financial statements.

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to our audited consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and cost of sales during the reporting period. The most significant of these estimates and assumptions for L3 relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) products and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially. We believe that our critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are uncertain and require judgment at the time of the estimate, (2) use of reasonably different assumptions could have changed our estimates, particularly with respect to estimates of contract revenues and costs, and recoverability of assets, and (3) changes in the estimate could have a material effect on our financial condition or results of operations. We believe the following critical accounting policies contain the more significant judgments and estimates used in the preparation of our financial statements.

Contract Revenue Recognition and Contract Estimates. Approximately 50% of our consolidated net sales are generated from contracts (revenue arrangements) that require us to design, develop, manufacture, modify, upgrade, test and integrate complex aerospace and electronic equipment, and to provide related engineering and technical services according to the buyer’s specifications. These revenue arrangements or contracts are generally fixed-price, cost-plus or time-and-material type and are covered by contract accounting standards. Substantially all of our cost-plus type and time-and-material type contracts are with the U.S. Government, primarily the DoD. Certain of our contracts with the U.S. Government are multi-year contracts that are funded annually by the customer, and sales on these multi-year contracts are based on amounts appropriated (funded) by the U.S. Government. Our remaining sales are accounted for in accordance with accounting standards for revenue arrangements with commercial customers.

34

Sales and profits on fixed-price type contracts that are covered by contract accounting standards are substantially recognized using percentage-of-completion (POC) methods of accounting. Sales on such contracts represent approximately 41% of our consolidated net sales. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year.

Accounting for the sales and profits on these fixed-price contracts requires the preparation of estimates of the: (1) total contract revenue, (2) total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work, and (3) measurement of progress towards completion. The estimated profit or loss at completion on a contract is equal to the difference between the total estimated contract revenue and the total estimated cost at completion. Under the units-of-delivery method, sales on a fixed-price type contract are recorded as the units are delivered during the period based on their contractual selling prices. Under the cost-to-cost method, sales on a fixed-price type contract are recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by (i) the total estimated contract revenue, less (ii) the cumulative sales recognized in prior periods. The profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to (i) the current estimated total profit margin multiplied by the cumulative sales recognized, less (ii) the amount of cumulative profit previously recorded for the contract. In the case of a contract for which the total estimated costs exceed the total estimated revenues, a loss arises, and a provision for the entire loss is recorded in the period that the loss becomes evident. The unrecoverable costs on a loss contract that are expected to be incurred in future periods are recorded as a component of other current liabilities entitled “Estimated cost in excess of estimated contract value to complete contracts in process in a loss position.”

Revisions or adjustments to estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The impact of revisions in profit (loss) estimates for all types of contracts subject to POC accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as reduce the valuations of receivables and inventories, and in some cases result in liabilities to complete contracts in a loss position. Aggregate net changes in contract estimates amounted to increases of $148 million, or 15%, of consolidated operating income ($1.22 per diluted share) for the year ended December 31, 2016, increases of $52 million, or 11%, of consolidated operating income ($0.45 per diluted share) for the year ended December 31, 2015, and increases of $72 million, or 7%, of consolidated operating income ($0.52 per diluted share) for the year ended December 31, 2014.

Sales and profits on cost-plus type contracts that are covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. Sales on such contracts represent approximately 9% of our consolidated net sales. The estimated profit on a cost-plus contract is fixed or variable based on the contractual fee arrangement types. Incentive and award fees are our primary variable fee contractual arrangement types. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and we are able to make reasonably dependable estimates for them. Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of material and other direct non-labor costs. On a time-and-material type contract, the fixed hourly rates include amounts for the cost of direct labor, indirect contract costs and profit. Cost-plus type or time-and-material type contracts generally contain less estimation risks than fixed-price type contracts.

35

Sales on arrangements for (1) fixed-price type contracts that require us to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts), and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for our businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts within the scope of accounting standards for revenue arrangements with commercial customers are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, we apply the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case we apply the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. We recognize revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk, because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until the contract modification is obtained, indicating that adequate funds are available to the contract or task order.

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provide companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expand the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for us for interim and annual reporting periods beginning on January 1, 2018, with early application permitted beginning on January 1, 2017. See Note 2 to our audited consolidated financial statements for discussion of our efforts to evaluate and implement the new standard along with our evaluation of the expected impact of the standard on our audited consolidated financial statements.

Goodwill and Identifiable Intangible Assets. In accordance with the accounting standards for business combinations, we record the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). Identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, we do not recognize separate intangible assets for the assembled workforces of our business acquisitions.

Generally, the largest separately identifiable intangible asset from the businesses that we acquire is the value of their assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of our businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of our employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of our businesses, our ability to attract and retain employees who have U.S. Government security clearances, particularly those with top-secret and above clearances, is critical to our success and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for our acquired businesses. Furthermore, our U.S. Government contracts (revenue arrangements) generally permit other companies to use our patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill, the substantial

36

majority of the intangible assets for our acquired business acquisitions are recognized as goodwill. Additionally, the value assigned to goodwill for our business acquisitions also includes the value that we expect to realize from growth expectations and cost reduction measures that we implement for our acquired businesses. Goodwill equals the amount of the purchase price of the business acquired in excess of the sum of the fair value of identifiable acquired assets, both tangible and intangible, less the fair value of liabilities assumed. At December 31, 2016, we had goodwill of $6,560 million and identifiable intangible assets of $238 million.

The most significant identifiable intangible asset that is separately recognized in accordance with U.S. GAAP for our business acquisitions is customer contractual relationships. All of our customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows from working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. All identifiable intangible assets are amortized over their estimated useful lives as the economic benefits are consumed. We review customer contractual relationships for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with the accounting standards for long-lived assets. If any such event or change in circumstances occurs, and, if our revised estimates of future after-tax cash flows are significantly lower than our estimates at the date we acquired the customer contractual relationships, we may be required to record an impairment charge to write-down these intangible assets to their realizable values. We also review and update our estimates of the duration of our customer contractual relationships, at least annually. If such estimates indicate that the duration of our customer contractual relationships has decreased compared to the estimates made as of the date we acquired these intangible assets, then we accelerate the amortization period for our customer contractual relationships over their remaining useful lives.

We review goodwill for impairment annually as of November 30 and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors, such as macroeconomic conditions, industry and market conditions and entity relevant events or circumstances, to determine whether it is more likely or not that the fair value of a reporting unit is less than its carrying amount. We did not utilize a qualitative assessment approach for the November 30, 2016 goodwill impairment test, as we chose instead to complete the quantitative two-step testing process for each reporting unit.

A reporting unit is an operating segment, as defined by the segment reporting accounting standards, or a component of an operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and is reviewed by operating segment management. Two or more components of an operating segment may be aggregated and deemed a single reporting unit for goodwill impairment testing purposes if the components have similar economic characteristics.

L3 had 10 reporting units at December 31, 2016 and at November 30, 2016 when our annual goodwill impairment assessment was completed. L3 also had 10 reporting units at December 31, 2015.

L3’s aggregate balance of goodwill from continuing operations increased by $279 million to $6,560 million at December 31, 2016 from $6,281 million at December 31, 2015 due to an increase of $335 million for business acquisitions, partially offset by $56 million for foreign currency translation adjustments. The table below presents the number of reporting units and the associated goodwill at December 31, 2016 for each of our reportable segments.

Reportable Segment	Number of Reporting Units		Aggregate Goodwill
			(in millions)
Electronic Systems		6	$	4,177
Aerospace Systems		2		1,360
Communication Systems		2		1,023
Total		10	$	6,560

The first step in the process of testing goodwill for potential impairment is to compare the carrying value of the reporting unit to its fair value. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. Our

37

methodology for determining the fair value of a reporting unit is estimated using a discounted cash flow (DCF) valuation approach, and is dependent on estimates for future sales, operating income, depreciation and amortization, income tax payments, working capital changes and capital expenditures, as well as expected long-term growth rates for cash flows. All of these factors are affected by economic conditions related to the industries in which we operate (predominantly the U.S. defense industry), as well as conditions in the U.S. capital markets.

We did not record any goodwill impairment charges in 2016. We recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Vertex Aerospace business (formerly Logistics Solutions) as a result of the decline in their projected future cash flows. The adjustments we recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statement of operations and are summarized below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L3 Consolidated
	(in millions)
Vertex Aerospace reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

The more significant assumptions used in our DCF valuations to determine the fair values of our reporting units in connection with the goodwill valuation assessment at November 30, 2016 were: (1) detailed three-year cash flow projections for each of our reporting units, (2) the expected long-term cash flow growth rates for each of our reporting units (commonly known as Terminal Growth Rates), which approximate the expected long-term nominal growth rate for the U.S. DoD budget, the U.S. economy and the respective industries in which the reporting units operate, expected inflation rates, and specific circumstances for each reporting unit, including contracts or programs ending and expected new business, and (3) risk adjusted discount rates, which represent the weighted average cost of capital (WACC) for each reporting unit and include the estimated risk-free rate of return that is used to discount future cash flow projections to their present values. There were no changes to the underlying methods used in 2016 as compared to the prior year DCF valuations of our reporting units.

Each reporting unit WACC was comprised of: (1) an estimated required rate of return on equity, based on publicly traded companies with business and economic risk characteristics comparable to each of L3’s reporting units (Market Participants), including a risk free rate of return of 2.73% on the 20 year U.S. Treasury Bond as of November 30, 2016 (2.63% as of November 30, 2015) and an equity risk premium of 6% (unchanged compared to November 30, 2015), and (2) an after-tax rate of return on Market Participants’ debt, which was derived from a selected Corporate bond index having a Baa debt rating, consistent with the credit rating of the Market Participants. Each of the estimated required rate of return on equity and the after-tax rate of return on Market Participants’ debt is weighted by the relative market value percentages of the Market Participants’ equity and debt. The WACC assumptions for each reporting unit are based on a number of market inputs that are outside of our control and are updated annually to reflect changes to such market inputs as of the date of our annual goodwill impairment assessments, including changes to: (1) the estimated required rate of return on equity based on historical returns on common stock securities of Market Participants and the Standard & Poor’s 500 Index over the prior five-year period, (2) the risk free rate of return based on the prevailing market yield on the 20 year U.S. Treasury Bond, (3) the rate of return on Corporate bonds having a debt rating consistent with the credit rating of the Market Participants, and (4) the relative market value percentages of Market Participants’ equity and debt.

38

The table below presents the weighted average risk adjusted discount rate assumptions in WACC, used in our DCF valuation for each of our reportable segments for our goodwill impairment assessments at November 30, 2016 and 2015.

	WACC
Reportable Segments	2016			2015
Electronic Systems(1)		7.26	%		7.28	%
Aerospace Systems(2)		7.17	%		7.11	%
Communication Systems(3)		7.21	%		7.36	%

⁽¹⁾ The weighted average risk adjusted discount rate in WACC for the Electronic Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 6.98% to 8.06% for 2016 and 7.00% to 8.12% for 2015.

⁽²⁾ The weighted average risk adjusted discount rate in WACC for the Aerospace Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 6.98% to 9.11% for 2016 and 7.00% to 8.41% for 2015.

⁽³⁾ The weighted average risk adjusted discount rate in WACC for the Communication Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 6.98% to 8.01% for 2016 and 7.00% to 8.12% for 2015.

As presented in the table below, L3’s historical three-year average annual cash flow growth rates for 2016, 2015 and 2014 for our reportable segments ranged from a negative 6% to a positive 13%. The annual cash flows generated by each of our reporting units vary from year to year, and, therefore, the annual cash flow growth rates do not result in linear trends, due to a number of factors, including, but not limited to: (1) variability of annual sales volume and sales growth rates, (2) increases and decreases in working capital, including customer advance payments and billings on multi-year contracts (revenue arrangements) with long-term performance periods (exceeding one year), (3) the timing of invoicing and cash collections between fiscal years from receivables due from customers on multi-year contracts (revenue arrangements), (4) the timing of increases and decreases of select inventories procured and produced in anticipation of future product sales, which frequently overlap the ending and beginning of fiscal years, (5) the timing of the receipt of award fee and incentive fee payments from customers on contracts (revenue arrangements), (6) variability in annual cash outlays for research and development costs, (7) changes in cash outlays for capital expenditures for property, plant and equipment, and (8) increases in annual sales and costs and expense volumes of a reporting unit resulting from business acquisitions. As a result of the factors discussed above and the varying sizes of our reporting units, the annual cash flow levels and growth rates at the reporting unit level tend to fluctuate significantly from year to year.

The 2016 cash flow amount and the cash flow growth rate for each of the last three years for each of our segments are presented in the following table.

Reportable Segment	Estimated 2016 Cash Flow(1)		Estimated Average Annual Cash Flow Growth Rate(1)
	(in millions)		2016			2015			2014			3 Yr. Average
Electronic Systems(2)	$	500		20	%		(7	)%		10	%		8	%
Aerospace Systems(3)	$	280		43	%		(24	)%		(38	)%		(6	)%
Communication Systems(4)	$	187		(35	)%		(2	)%		75	%		13	%

⁽¹⁾ Reportable segment estimated cash flow excludes interest payments on debt and other corporate cash flows.

⁽²⁾ The increase in 2016 cash flows for Electronic Systems was primarily due to lower working capital requirements and lower capital expenditures primarily at Integrated Sensor Systems and Power & Propulsion. The decrease in 2015 cash flows was primarily related to Warrior Systems which was negatively impacted by costs related to alleged performance issues with EoTech’s HWS products and working capital reductions for night vision products in 2014 that did not recur in 2015, partially offset by increased cash flow at Aviation Products & Security due to increases in working capital requirements during 2014 that did not recur in 2015. The increase in 2014 cash flows was primarily a result of a lower effective tax rate, as well as lower working capital requirements at Warrior Systems, partially offset by an increase in working capital for MSI.

⁽³⁾ The increase in 2016 cash flows for Aerospace Systems was primarily due to higher cash flows from operations compared to 2015 and lower working capital requirements at ISR Systems and Vertex Aerospace in 2016 compared to 2015. The decrease in 2015 cash flows was due to lower cash flows from operations compared to 2014 at Aircraft Systems due to cost growth on international head-of-state aircraft modification contracts and higher working capital requirements at ISR Systems. The decrease in 2014 cash flows was due to lower cash flows from operations compared to 2013 at Vertex Aerospace and Aircraft Systems, partially offset by a decrease in tax payments as a result of a lower effective tax rate.

⁽⁴⁾ The decrease in 2016 cash flows for Communication Systems was primarily due to higher working capital requirements in 2016 compared to 2015. The decrease in 2015 cash flows was due to an increase in capital expenditures. The increase in 2014 cash flows was due to lower working capital requirements and capital expenditures, as well as primarily higher cash flows from operations and a decrease in tax payments as a result of a lower effective income tax rate.

39

We consistently consider several factors to determine expected future annual cash flows for our reporting units, including, historical multi-year average cash flow trends by reporting unit and the expected future cash flow growth rates for each of our reporting units primarily based on our estimates of future sales, operating income, and working capital changes. Furthermore, the substantial majority of our reporting units are primarily dependent upon the DoD budget and spending. Sales from DoD customers generate a significant portion of our annual sales and have historically represented approximately 67% or more of our total sales. Accordingly, to determine expected future annual cash flows for our reporting units we also consider: (1) the DoD budget and spending priorities, (2) expansion into new markets, (3) changing conditions in existing markets for our products, systems and services, (4) possible termination of certain government contracts, (5) expected success in new business competitions and re-competitions on existing business, and (6) anticipated operating margins and working capital requirements, which vary significantly depending on the stage of completion (early, mature, ending) of contracts (revenue arrangements). We closely monitor changes in these factors and their impact on the expected cash flow of our reporting units. In addition to these factors that were relevant and specific to each of our reporting units, our goodwill impairment assessments as of November 30, 2016 assumed 3.0% nominal growth in the base budget beginning with FY 2018, consistent with the base budget cumulative average growth rate during the four year period from FY 2017 to FY 2021, as shown in the DoD budget table presented with our discussion of the business environment on page 29.

Additionally, our actual cash flows may be higher than our projections, and the DCF valuation does not reflect actions that we may take to increase the profitability and cash flows of our reporting units. Actions we may take include consolidating and streamlining select business operations, creating future synergies with other L3 businesses or pursuing incremental targeted growth opportunities. Additionally, the DCF valuations do not assume future business acquisitions or divestitures.

The table below presents the estimated: (1) 2017 cash flow amount, (2) average annual cash flow growth rates for 2017 – 2019 and (3) weighted average annual cash flow growth rates after 2019 for each of our reportable segments.

Reportable Segment	Estimated 2017 Cash Flow(1)			Estimated Average Annual Cash Flow Growth Rate(1)
	(in millions)			3 Yr. Average 2017 - 2019			2020 - 2021			After 2021 Terminal Growth Rate
Electronic Systems(2)	$	375(2	)		(1	)%		3	%		2.6	%
Aerospace Systems(3)	$	212(3	)		(6	)%		3	%		2.5	%
Communications Systems(4)	$	172(4	)		(1	)%		3	%		2.6	%

⁽¹⁾ Reportable segment estimated cash flow excludes interest payments on debt and other corporate cash flows.

⁽²⁾ Electronic Systems projected cash flow is expected to decrease by $125 million from $500 million in 2016 to $375 million in 2017. The decrease is primarily due to an increase in forecasted tax payments as a result of a higher effective tax rate in 2017, higher working capital requirements at Power & Propulsion Systems and Aviation Products & Security, and higher capital expenditures at Precision Engagement & Training. Electronic Systems projected cash flows are expected to increase to $457 million by 2019, compared to $375 million in 2017 primarily due to forecasted annual sales growth of approximately 3% in 2018 and 2019, and an improvement in forecasted operating margins of approximately 70 basis points from 2017 to 2019. The improvement in forecasted operating margins from 2017 to 2019 is primarily due to higher expected sales volumes for the segment and a reduced level of spending for the Advanced Programs business forecasted in 2019. Additionally, cash flows are expected to improve by 2019 due to lower expected lease payments and capital expenditures.

⁽³⁾ Aerospace Systems projected cash flow is expected to decrease by $68 million from $280 million in 2016 to $212 million in 2017. The decrease is primarily due to higher working capital requirements, higher capital expenditures and lower cash flows from operations in 2017 at ISR Systems. Aerospace Systems projected cash flow levels are expected to increase to $222 million by 2019, compared to $212 million in 2017 primarily due to higher forecasted cash flows from operations from 2017 to 2019, partially offset by higher working capital requirements at ISR & Aircraft Systems.

⁽⁴⁾ Communications Systems projected cash flow is expected to decrease by $15 million from $187 million in 2016 to $172 million in 2017. The decrease is primarily due to a reduction in working capital requirements at Broadband Communication Systems during 2016 that is not expected to recur in 2017 and higher forecasted tax payments as a result of a higher effective tax rate. Communication Systems projected cash flow levels are expected to increase to $181 million by 2019, compared to $172 million in 2017 primarily due to forecasted average annual sales growth of approximately 2.0% during 2018 and 2019, and an improvement in forecasted operating margins of approximately 50 basis points from 2017 to 2019 primarily related to the Space & Power Systems business for higher expected demand of power devices for commercial satellites and the Broadband Communications Systems business for higher expected volume and deliveries of secure networked communication systems.

A decline in the estimated fair value of a reporting unit could result in a goodwill impairment, and a related non-cash impairment charge against earnings, if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill. A large decline in the estimated fair value of a reporting unit could result in an adverse effect on our financial condition and results of operations.

40

As discussed above, the more significant assumptions used in our DCF valuations for each of our reporting units were detailed three-year undiscounted cash flow projections, risk adjusted discount rates, or WACC, used to discount the cash flow projections to their present value and expected Terminal Growth Rates. The current year (2017-2019) consolidated three-year undiscounted cash flow projections increased 12% compared to the prior year (2016-2018), with the changes by each reporting unit ranging from a decline of 2% to an increase of 29%. The risk adjusted discount rate, or WACC, decreased by an average of 20 basis points compared to the prior year valuations primarily due to a 40 basis point decrease in the weighted average after-tax cost of debt. The expected Terminal Growth Rates utilized in the current year valuations increased by 50 basis points to 2.5% compared with those utilized in the prior year valuations for all reporting units except for the Space & Power business and the Aviation Products & Security reporting unit. The increase is slightly below the 2.8% cumulative average annual growth rate for the DoD base budget during the four year period from FY 2017 to FY 2021. The expected Terminal Growth Rate utilized for the Aviation Products & Security reporting unit was consistent with the 3% utilized in the prior year valuation. The Expected Terminal Growth Rate utilized for the Space & Power business, which is part of the Communication Systems reporting unit, increased from 2% in the prior year valuation to 3% in the current year valuation due to higher anticipated growth in the commercial satellites business.

As part of our annual impairment test, we evaluated the sensitivity of the DCF fair value estimates for each reporting unit, which were used for our goodwill impairment assessment, by separately assessing the impact on the estimated fair value of each reporting unit by: (1) increasing the risk adjusted discount rate (WACC) by 50 basis points, or (2) reducing the Terminal Growth Rate by 50 basis points, compared to those used in our estimated fair value calculations, while holding all other assumptions unchanged. All of our reporting units would have had a fair value in excess of their carrying value under both scenarios. In addition, we applied hypothetical decreases to the estimated fair values of each of our reporting units. We determined that a decrease in fair value of at least 20% would be required before any reporting unit would have a carrying value in excess of its fair value.

As discussed previously, in addition to the annual goodwill impairment assessment, we review goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of a reporting unit’s goodwill may not be recoverable. As such, listed below are certain circumstances, depending on their outcomes, that may require us to review goodwill for impairment prior to the next annual assessment (November 30, 2017):

• lower than expected annual sales from our contracts with the DoD, arising from unanticipated changes or reductions to future DoD budgets;

• the ability of the reporting units to: (1) achieve 2017 projected sales, operating income and cash flow, and (2) win contract re-competitions and new business pursuits, including the Fort Rucker Maintenance Support contract re-competition at our Vertex Aerospace reporting unit. The Vertex Aerospace reporting unit goodwill balance was $187 million at December 31, 2016.

Pension Plan and Postretirement Benefit Plan Obligations. The obligations for our pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, rates of return on plan assets, expected annual rates for salary increases for employee participants in the case of pension plans, and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit obligations. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, expected participant mortality and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in the assumptions, if significant, could materially affect the amount of annual net periodic benefit costs recognized in our results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans, and our annual cash requirements to fund these plans. Our pension expense for 2017 is expected to increase by $10 million to $107 million from $97 million in 2016. Our discount rate assumption decreased from a weighted average rate of 4.67% at December 31, 2015 to 4.41% at December 31, 2016. The expected increase in our 2017 pension expense is primarily due to the decrease in the weighted average discount rate, partially offset by higher expected asset returns due to an increase in plan asset balances compared to the prior year.

In 2016, we changed the approach utilized to measure the service and interest cost components of expense for all of our pension and postretirement benefit plans. Historically, we measured the service and interest cost components using a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Beginning in 2016, we elected to use a spot rate approach for our plans in

41

the measurement of the components of benefit cost by applying specific spot rates along the yield curve to the relevant projected cash flows, as we believe the new approach provides a more precise measurement of service and interest costs. We have accounted for this change prospectively as a change in accounting estimate. This change did not affect the measurement of our total benefit obligation. The estimated weighted average discount rates used to measure 2016 pension service and interest costs were 4.83% and 3.95%, respectively. The previous method would have used a weighted average discount rate for both pension service and interest costs of 4.67%, which represented the weighted average discount rate used to determine our benefit obligation at December 31, 2015. This change resulted in a reduction to pension expense of approximately $28 million compared to the prior approach. This change did not result in a material impact to postretirement medical expense. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Pension Plans” for a further discussion of our estimated 2017 pension expense.

Discount rates are used to determine the present value of our pension obligations and also affect the amount of pension expense in any given period. The discount rate assumptions used to determine our pension and postretirement benefit obligations at December 31, 2016 and 2015 were based on a hypothetical AA yield curve represented by a series of annualized individual discount rates. Each bond issue underlying the yield curve is required to have a rating of AA or better by Moody’s Investors Service, Inc. and/or Standard & Poor’s. The resulting discount rate reflects the matching of plan liability cash flows to the yield curve. For a sensitivity analysis projecting the impact of a change in the discount rate on our projected benefit obligation and pension expense, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Pension Plans.”

Valuation of Deferred Income Tax Assets and Liabilities. At December 31, 2016, we had deferred tax assets of $743 million, deferred tax liabilities of $965 million and a valuation allowance of $12 million. The deferred tax assets included $18 million for loss carryforwards and $6 million for tax credit carryforwards which are subject to various limitations and will expire if unused within their respective carryforward periods. Deferred income taxes are determined separately for each of our tax-paying entities in each tax jurisdiction. The future realization of our deferred income tax assets ultimately depends on our ability to generate sufficient taxable income of the appropriate character (for example, ordinary income or capital gains) within the carryback and carryforward periods available under the tax law and, to a lesser extent, our ability to execute successful tax planning strategies. Based on our estimates of the amounts and timing of future taxable income and tax planning strategies, we believe that we will be able to realize our deferred tax assets, except for capital losses and certain U.S. Federal, foreign and state net operating losses. A change in the ability of our operations to continue to generate future taxable income, or our ability to implement desired tax planning strategies, could affect our ability to realize the future tax deductions underlying our deferred tax assets, and require us to provide a valuation allowance against our deferred tax assets. The recognition of a valuation allowance would result in a reduction to net income and, if significant, could have a material impact on our effective tax rate, results of operations and financial position in any given period.

Liabilities for Pending and Threatened Litigation. We are subject to litigation, government investigations, proceedings, claims or assessments and various contingent liabilities incidental to our business or assumed in connection with certain business acquisitions. In accordance with the accounting standards for contingencies, we accrue a charge for a loss contingency when we believe it is both probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. If the loss is within a range of specified amounts, the most likely amount is accrued, and we accrue the minimum amount in the range if no amount within the range represents a better estimate. Generally, we record the loss contingency at the amount we expect to pay to resolve the contingency and the amount is generally not discounted to the present value. Amounts recoverable under insurance contracts are recorded as assets when recovery is deemed probable. Contingencies that might result in a gain are not recognized until realizable. Changes to the amount of the estimated loss, or resolution of one or more contingencies could have a material impact on our results of operations, financial position and cash flows. See Note 18 to our audited consolidated financial statements for further discussion of our litigation matters.

Valuation of Long-Lived Assets. In addition to goodwill and identifiable intangible assets recognized in connection with our business acquisitions, our long-lived assets also include property, plant and equipment, capitalized software development costs for software to be sold, leased or otherwise marketed, and certain long-term investments. At December 31, 2016, the consolidated carrying values of our property, plant and equipment were $1,121 million, capitalized software development costs were $56 million and certain long-term investments were $11 million. At December 31, 2016, the carrying value of our property, plant and equipment represented 9% of total

42

assets, and the carrying value of our capitalized software development costs and certain long-term investments each represented less than 1% of total assets. We review the valuation of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value or net realizable value expected to result from the asset’s use and eventual disposition. We use a variety of factors to assess valuation, depending upon the asset. Long-lived assets are evaluated based upon the expected period the asset will be utilized, and other factors depending on the asset, including estimated future sales, profits and related cash flows, estimated product acceptance and product life cycles, changes in technology and customer demand, and the performance of invested companies and joint ventures. Changes in estimates and judgments on any of these factors could have a material impact on our results of operations and financial position.

Results of Operations

The following information should be read in conjunction with our audited consolidated financial statements. Our results of operations for the periods presented are affected by our business acquisitions. See Note 3 to our audited consolidated financial statements for a discussion of our business acquisitions and dispositions.

Consolidated Results of Operations

The table below provides selected financial data, excluding discontinued operations, for the years ended December 31, 2016, 2015 and 2014.

	Year Ended December 31,						Increase/ (decrease)	Year Ended December 31,						Increase/ (decrease)
(in millions, except per share data)	2016			2015				2015			2014
Net sales	$	10,511		$	10,466		0.4%	$	10,466		$	10,986		(5)%
Operating income		1,008			475		nm		475			1,012		(53)%
Loss related to business divestitures		—			31		nm		31			—		nm
Goodwill impairment charges		—			384		nm		384			—		nm
Segment operating income	$	1,008		$	890		13%	$	890		$	1,012		(12)%
Operating margin		9.6	%		4.5	%	nm		4.5	%		9.2	%	(467) bpts
Segment operating margin		9.6	%		8.5	%	110 bpts		8.5	%		9.2	%	(70) bpts
Interest expense	$	169		$	169		—%	$	169		$	158		7%
Interest and other income, net	$	18		$	17		6%	$	17		$	18		(6)%
Debt retirement charges	$	7		$	1		nm	$	1		$	—		nm
Effective income tax rate		22.2	%		nm		nm		nm			26.0	%	nm
Net income from continuing operations attributable to L3	$	647		$	282		nm	$	282		$	632		(55)%
Adjusted net income from continuing operations attributable to L3(1)	$	647		$	566		14%	$	566		$	632		(10)%
Diluted earnings per share from continuing operations	$	8.21		$	3.44		nm	$	3.44		$	7.20		(52)%
Adjusted diluted earnings per share from continuing operations(1)	$	8.21		$	6.91		19%	$	6.91		$	7.20		(4)%
Diluted weighted average common shares outstanding		78.8			81.9		(4)%		81.9			87.8		(7)%
_________________
nm – not meaningful
(1) Non-GAAP metric that excludes the goodwill impairment charges and the aggregate loss related to business divestitures. See the table on page 47 for a reconciliation and a discussion of why this information is presented.

2016 Compared with 2015

Net Sales: For the year ended December 31, 2016, consolidated net sales of $10.5 billion increased $45 million, or 0.4%, compared to the year ended December 31, 2015. Organic sales for the year ended December 31, 2016 increased $161 million, or 2%. Organic sales exclude $209 million related to business divestitures and $93 million from business acquisitions. For the year ended December 31, 2016, organic sales to the U.S. Government increased $348 million, or 5%, to $7,631 million and organic sales to international and commercial customers decreased $187 million, or 6%, to $2,787 million.

43

Sales from products decreased by $147 million to $6,442 million for the year ended December 31, 2016, compared to $6,589 million for the year ended December 31, 2015. Product sales represented 61% and 63% of consolidated net sales for the years ended December 31, 2016 and 2015, respectively. Sales from products declined by $156 million due to the divestiture of MSI on May 29, 2015 and $86 million in the Space & Power Systems sector primarily due to reduced demand for power devices for commercial satellites. These decreases were partially offset by increases of $49 million in the Broadband Communications Systems sector primarily due to increased volume and deliveries of secure networked communication systems for the DoD and $46 million primarily for Aviation Products & Security due to deliveries of airport security screening systems to international customers and commercial aviation recorders products.

Sales from services increased by $192 million to $4,069 million for the year ended December 31, 2016, compared to $3,877 million for the year ended December 31, 2015. Service sales represented 39% and 37% of consolidated net sales for the years ended December 31, 2016 and 2015, respectively. Sales from services increased by: (1) $72 million due to the CTC Aviation Group (L3 CTC), ForceX and Aerosim business acquisitions, (2) $66 million for Vertex Aerospace primarily due to higher volume and pre-production activities for U.S. Navy training aircraft and the U.S. Army C-12 contract and (3) $54 million primarily for Broadband Communications Systems due to increased volume for logistics support services for the DoD. See the reportable segment results below for additional discussion of our segment sales trends.

Operating income and operating margin: Consolidated operating income for the year ended December 31, 2016 increased by $533 million to $1,008 million, compared to the year ended December 31, 2015. Segment operating income for the year ended December 31, 2016 increased by $118 million, or 13%, compared to the year ended December 31, 2015. Segment operating margin increased by 110 basis points to 9.6% for the year ended December 31, 2016, compared to 8.5% for the year ended December 31, 2015. Segment operating margin increased by: (1) 100 basis points due to losses in 2015 at Aerospace Systems on international head-of-state aircraft modification contracts which did not recur and (2) 40 basis points due to lower pension expense of $45 million. These increases were partially offset by sales mix changes. See the reportable segment results below for additional discussion of sales and operating margin trends.

Interest expense and other: Interest expense and other for the year ended December 31, 2016 included $7 million of debt retirement charges related to the redemption of: (1) $300 million aggregate principal amount of the 2016 Notes in the second quarter of 2016 and (2) $350 million aggregate principal amount of the 2017 Notes in the fourth quarter of 2016.

Effective income tax rate: The effective income tax rate for the year ended December 31, 2016 was 22.2%. The effective income tax rate for the year ended December 31, 2015 was not meaningful due to the goodwill impairment charges. Excluding the goodwill impairment charges and related income tax benefits, the effective income tax rate for 2015 would have been 20.5%. The increase in the effective income tax rate was driven by lower foreign tax benefits and lower Federal Research and Experimentation (R&E) tax credits in 2016 compared to 2015, partially offset by a benefit of $17 million due to the early adoption of a new accounting standard related to income tax benefits from employee stock-based compensation awards.

Net income from continuing operations attributable to L3 and diluted earnings per share (EPS) from continuing operations: Net income from continuing operations attributable to L3 in the year ended December 31, 2016 increased to $647 million, compared to $282 million in the year ended December 31, 2015. Diluted EPS from continuing operations was $8.21 for the year ended December 31, 2016, compared to $3.44 for the year ended December 31, 2015.

Adjusted net income from continuing operations attributable to L3 and adjusted diluted EPS from continuing operations: Adjusted net income from continuing operations attributable to L3 increased 14% to $647 million compared to the year ended December 31, 2015, and adjusted diluted EPS from continuing operations increased 19% to $8.21.

Diluted weighted average common shares outstanding: Diluted weighted average common shares outstanding for the year ended December 31, 2016 declined by 4% compared to the year ended December 31, 2015 due to repurchases of L3 common stock in connection with our share repurchase programs authorized by our Board of Directors, partially offset by additional shares issued in connection with various employee stock-based compensation programs and contributions to employee savings plans made in common stock.

44

2015 Compared with 2014

Net Sales: For the year ended December 31, 2015, consolidated net sales of $10.5 billion decreased $520 million, or 5%, compared to the year ended December 31, 2014. Organic sales for the year ended December 31, 2015 declined $269 million, or 3%. Organic sales exclude $354 million related to business divestitures and $103 million from business acquisitions. Sales to the U.S. Government declined 2%, or $173 million, to $7,291 million in the year ended December 31, 2015 compared to $7,464 million in the year ended December 31, 2014, driven primarily by U.S. defense budget constraints and reductions from sequestration and by the U.S. military drawdown in Afghanistan. Sales to international and commercial customers declined 10%, or $347 million, to $3,175 million in the year ended December 31, 2015, compared to $3,522 million in the year ended December 31, 2014. Organic sales to international and commercial customers decreased $92 million, or 3%, driven by foreign currency exchange rate changes.

Sales from products decreased by $250 million to $6,589 million for the year ended December 31, 2015, compared to $6,839 million for the year ended December 31, 2014. Product sales represented 63% and 62% of consolidated net sales for the years ended December 31, 2015 and 2014, respectively. Sales from products declined by: (1) $260 million related to the divestiture of MSI, (2) $113 million for Aircraft Systems due to unfavorable contract performance adjustments on international head-of-state aircraft modification contracts and lower volume to the United States Air Force (USAF) from the DoD’s planned reduction of the Compass Call aircraft and the DoD’s retirement of the Joint Cargo Aircraft (JCA), (3) $79 million related to foreign currency exchange rate changes, (4) $49 million for reduced sales at Warrior Systems driven by lower volume for night vision goggles and the HWS voluntary return program at EoTech and (5) $37 million for Space & Power Systems primarily due to lower volume for satellite command and control software for U.S. Government agencies and high frequency radios for a foreign government. These decreases were partially offset by an increase of: (1) $130 million primarily for large ISR aircraft systems for U.S. Government customers and small ISR aircraft systems to the DoD and a foreign government, (2) $100 million primarily due to a higher mix of product sales for Broadband Communication Systems and (3) $58 million primarily for Aviation Products & Security due to deliveries of cockpit avionics products to commercial and DoD customers and airport security systems products to international customers.

Sales from services decreased by $270 million to $3,877 million for the year ended December 31, 2015, compared to $4,147 million for the year ended December 31, 2014. Service sales represented 37% and 38% of consolidated net sales for the years ended December 31, 2015 and 2014, respectively. Sales from services declined by: (1) $81 million due to a lower mix of services sales for Broadband Communication Systems, (2) $72 million primarily related to lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan, (3) $72 million related to the MSI and BSI business divestitures, (4) $63 million related to lower volume for field maintenance and sustainment services, primarily for U.S. Army and U.S. Navy aircraft due to the completion of contracts and lower demand and lower prices due to competitive pressures, and (5) $29 million related to foreign currency exchange rate changes. These decreases were partially offset by an increase of $47 million primarily due to a higher mix of services sales for Aircraft Systems. See the reportable segment results below for additional discussion of our segment sales trends.

Operating income and operating margin: Consolidated operating income for the year ended December 31, 2015 decreased by $537 million to $475 million, compared to the year ended December 31, 2014. Segment operating income for the year ended December 31, 2015 decreased by $122 million, or 12%, compared to the year ended December 31, 2014. Segment operating margin decreased by 70 basis points to 8.5% for the year ended December 31, 2015 compared to 9.2% for the year ended December 31, 2014. This decrease was driven by higher pension expense of $61 million and unfavorable contract performance adjustments at the Aerospace Systems segment, partially offset by outside accounting and legal advisory expenses incurred in 2014 for the internal review at Aerospace Systems completed in October 2014. See the reportable segment results below for additional discussion of sales and operating margin trends.

Interest expense: Interest expense for the year ended December 31, 2015 increased by $11 million compared to the year ended December 31, 2014 due to the issuance of $1 billion in new debt on May 28, 2014, partially offset by the redemption of our 3% Convertible Contingent Debt securities in June 2014.

45

Interest and other income, net: Interest and other income, net, for the year ended December 31, 2015 decreased primarily due to lower interest income for a benefit plan trust and lower interest income accretion related to the net investment in sales-type leases of flight simulator systems during the year ended December 31, 2015, partially offset by a loss recorded on the sale of a business within the Warrior Systems sector of the Electronic Systems segment during the year ended December 31, 2014.

Effective income tax rate: The effective income tax rate for the year ended December 31, 2015 is not meaningful due to the goodwill impairment charges taken during 2015. Excluding the goodwill impairment charges and related income tax benefit, the effective income tax rate for 2015 would have decreased to 20.5% from 26.0% in 2014. The decrease was primarily due to: (1) $17 million of foreign tax benefits related to a legal restructuring of our foreign entities and (2) an increased benefit from the Federal R&E Tax Credit.

Net income from continuing operations attributable to L3 and diluted earnings per share (EPS) from continuing operations: Net income from continuing operations attributable to L3 in the year ended December 31, 2015 decreased to $282 million, compared to $632 million in the year ended December 31, 2014. Diluted EPS from continuing operations decreased 52% to $3.44 from $7.20 in the year ended December 31, 2014.

Adjusted net income from continuing operations attributable to L3 and adjusted diluted EPS from continuing operations: Adjusted net income from continuing operations attributable to L3 decreased 10% to $566 million compared to the year ended December 31, 2014, and adjusted diluted EPS from continuing operations decreased 4% to $6.91.

Diluted weighted average common shares outstanding: Diluted weighted average common shares outstanding for the year ended December 31, 2015 declined by 7% compared to the year ended December 31, 2014 due to repurchases of L3 common stock in connection with our share repurchase programs authorized by our Board of Directors, partially offset by additional shares issued in connection with various employee stock-based compensation programs and contributions to employee savings plans made in common stock.

46

The table below presents a reconciliation of: (1) net income from continuing operations attributable to L3 to adjusted net income from continuing operations attributable to L3 and (2) diluted EPS from continuing operations to adjusted diluted EPS from continuing operations.

	Year Ended December 31,
	2016		2015			2014
	(in millions, except per share data)
Net income from continuing operations attributable to L3	$	647	$	282		$	632
Loss on business divestitures(1)		—		20			—
Goodwill impairment charges(2)		—		264			—
Adjusted net income from continuing operations attributable to L3(3)	$	647	$	566		$	632
Diluted EPS from continuing operations attributable to L3' common stockholders	$	8.21	$	3.44		$	7.20
EPS impact of loss on business divestitures(1)		—		0.25			—
EPS impact of the goodwill impairment charges(2)		—		3.22			—
Adjusted diluted EPS from continuing operations(3)	$	8.21	$	6.91		$	7.20
_________________
(1) Loss on business divestitures	$	—	$	(31	)	$	—
Tax benefit		—		11			—
After-tax impact		—		(20	)		—
Diluted weighted average common shares outstanding		—		81.9			—
Per share impact(4)	$	—	$	(0.25	)	$	—
(2) Goodwill impairment charges	$	—	$	(384	)	$	—
Tax benefit		—		120			—
After-tax impact		—		(264	)		—
Diluted weighted average common shares outstanding		—		81.9			—
Per share impact	$	—	$	(3.22	)	$	—

⁽³⁾ Adjusted diluted EPS is diluted EPS attributable to L3's common stockholders, excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges. Adjusted net income attributable to L3 is net income attributable to L3, excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges. These amounts are not calculated in accordance with U.S. GAAP. We believe that the charges or credits relating to business divestitures and non-cash goodwill impairment charges affect the comparability of the results of operations of 2015 to the results of operations for 2016. We also believe that disclosing net income and diluted EPS excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges will allow investors to more easily compare the 2016 results to the 2015 results. However, these measures may not be defined or calculated by other companies in the same manner.

⁽⁴⁾ Amounts may not recalculate directly due to rounding.

47

Reportable Segment Results of Operations

The table below presents selected data by reportable segment reconciled to consolidated totals. The results of operations of the NSS business sold to CACI International Inc. are classified as discontinued operations for all periods presented. Accordingly, the NSS business is no longer a reportable segment. See Note 21 to our audited consolidated financial statements for additional reportable segment data.

	Year Ended December 31,
	2016			2015			2014
	(dollars in millions)
Net sales:(1)
Electronic Systems	$	4,219		$	4,269		$	4,645
Aerospace Systems		4,240			4,156			4,321
Communication Systems		2,052			2,041			2,020
Consolidated net sales	$	10,511		$	10,466		$	10,986
Operating income:
Electronic Systems	$	518		$	489		$	533
Aerospace Systems		289			205			283
Communication Systems		201			196			196
Total segment operating income		1,008			890			1,012
Loss related to business divestitures		—			(31	)		—
Goodwill impairment charges		—			(384	)		—
Consolidated operating income	$	1,008		$	475		$	1,012
Operating margin:
Electronic Systems		12.3	%		11.5	%		11.5	%
Aerospace Systems		6.8	%		4.9	%		6.5	%
Communication Systems		9.8	%		9.6	%		9.7	%
Total segment operating margin		9.6	%		8.5	%		9.2	%
Loss related to business divestitures		—	%		(0.3	)%		—	%
Goodwill impairment charges		—	%		(3.7	)%		—	%
Consolidated operating margin		9.6	%		4.5	%		9.2	%

⁽¹⁾ Net sales are after intercompany eliminations.

Electronic Systems

	Year Ended December 31,						Increase/ (decrease)			Year Ended December 31,
	2016			2015						2015			2014			Decrease
	(dollars in millions)
Net sales	$	4,219		$	4,269			(1.2	)%	$	4,269		$	4,645			(8.1	)%
Operating income	$	518		$	489			5.9	%	$	489		$	533			(8.3	)%
Operating margin		12.3	%		11.5	%		80	bpts		11.5	%		11.5	%		—	bpts

2016 Compared with 2015

Electronic Systems net sales for the year ended December 31, 2016 decreased by $50 million, or 1%, compared to the year ended December 31, 2015. Organic sales increased $81 million, or 2%, compared to the year ended December 31, 2015. Organic sales exclude $209 million of sales declines related to business divestitures and $78 million of sales increases related to business acquisitions. Sales increased by: (1) $42 million for Aviation Products & Security due to: (i) deliveries of airport security screening systems to international customers and commercial aviation recorders products and (ii) higher volume for overhaul and repair services for cockpit display products to the USAF and a new commercial cockpit control/display unit product, (2) $21 million for Power & Propulsion Systems primarily due to higher volume for Hybrid Electric Drive contracts, and power conversion and

48

distribution systems to the U.S. Navy and an allied foreign naval customer and (3) $18 million primarily for Sensor Systems due to increased deliveries of infrared detection and space electronics products to the U.S. Air Force and higher volume for photonics masts products to the U.S. Navy.

Electronic Systems operating income for the year ended December 31, 2016 increased by $29 million, or 6%, compared to the year ended December 31, 2015. Operating margin increased by 80 basis points to 12.3%. Operating margin increased by 40 basis points primarily due to higher margins related to acquisitions and divestitures and 40 basis points due to lower pension expense of $15 million.

As previously disclosed, in November 2015, we commenced a voluntary return program and began accepting customer returns for various EoTech HWS products that may have been affected by certain performance issues. The refund program gives eligible owners of such HWS products the option to return their products in exchange for a refund of the purchase price, including shipping costs. During 2016, we increased our product returns allowance by recording a reduction to net sales of $18 million. We continue to review the product returns allowance as the program matures and new information becomes available. Our ongoing evaluation may cause us to record further adjustments to the allowance in future periods. These adjustments could be material. See Note 7 to our audited consolidated financial statements for additional information.

2015 Compared with 2014

Electronic Systems net sales for the year ended December 31, 2015 decreased by $376 million, or 8%, compared to the year ended December 31, 2014. Excluding $354 million related to the divestitures of MSI, BSI, and the Tinsley Product Line, and $49 million for the CTC and ForceX acquisitions, organic sales declined $71 million, or 2%. The decrease was due to: (1) $85 million related to foreign currency exchange rate changes and (2) $24 million related to reduced sales at Warrior Systems driven by lower volume for night vision goggles and $20 million related to the HWS voluntary return program at EoTech. These decreases were partially offset by $58 million, primarily for Aviation Products & Security, due to deliveries of cockpit avionics products to commercial and DoD customers and airport security systems products to international customers.

Electronic Systems operating income for the year ended December 31, 2015 decreased by $44 million, or 8%, compared to the year ended December 31, 2014. Operating margin remained at 11.5% compared to the year ended December 31, 2014. Operating margin increased by: (1) 50 basis points due to acquisitions and divestitures, (2) 40 basis points for favorable contract performance adjustments and (3) 20 basis points due to lower severance expense of $8 million. These increases were offset by decreases of: (1) 80 basis points primarily due to lower volume for Sensor Systems and sales mix changes for Aviation Products & Security and (2) 30 basis points due to higher pension expense of $13 million.

Aerospace Systems

	Year Ended December 31,						Increase			Year Ended December 31,
	2016			2015						2015			2014			Decrease
	(dollars in millions)
Net sales	$	4,240		$	4,156			2.0	%	$	4,156		$	4,321			(3.8	)%
Operating income	$	289		$	205			41.0	%	$	205		$	283			(27.6	)%
Operating margin		6.8	%		4.9	%		190	bpts		4.9	%		6.5	%		(160	) bpts

2016 Compared with 2015

Aerospace Systems net sales for the year ended December 31, 2016 increased by $84 million, or 2%, compared to the year ended December 31, 2015. Sales increased $66 million for Vertex Aerospace and $36 million for Aircraft Systems, partially offset by an $18 million decrease for ISR Systems. Sales increased for Vertex Aerospace primarily due to higher volume and pre-production activities for U.S. Navy training aircraft and the U.S. Army C-12 contract. Sales increased for Aircraft Systems primarily due to unfavorable contract performance adjustments in the year ended December 31, 2015 that did not recur in the year ended December 31, 2016 on international head-of-state aircraft modification contracts. Sales decreased for ISR Systems by: (1) $148 million for large ISR aircraft systems for foreign military customers as contracts near completion and (2) $91 million for small ISR aircraft fleet management services to the U.S. Air Force due to reduced demand resulting from the U.S. military drawdown from Afghanistan. These decreases for ISR Systems were partially offset by increases of: (1) $107 million primarily due to the

49

procurement and delivery of two business jets to foreign military customers in the 2016 second quarter, (2) $74 million due to higher volume for special mission aircraft and large ISR aircraft systems primarily for the U.S. Government and (3) $40 million due to higher volume for small ISR aircraft systems primarily for the U.S. Army.

Aerospace Systems operating income for the year ended December 31, 2016 increased by $84 million, or 41%, compared to the year ended December 31, 2015. Operating margin increased by 190 basis points to 6.8%. Operating margin increased by: (1) 170 basis points primarily due to net aggregate unfavorable contract performance adjustments in the year ended December 31, 2015, which included $101 million of cost growth on international head-of-state aircraft modification contracts, that did not recur in the year ended December 31, 2016, (2) 40 basis points due to improved performance on the Army C-12 contract due to better terms on the new contract which began August 1, 2015 and (3) 40 basis points due to lower pension expense of $17 million. These increases were partially offset by a decrease of 60 basis points primarily due to sales mix changes at ISR Systems.

2015 Compared with 2014

Aerospace Systems net sales for the year ended December 31, 2015 decreased by $165 million, or 4%, compared to the year ended December 31, 2014. Sales decreased $159 million for Aircraft Systems and $63 million for Vertex Aerospace. Sales for ISR Systems increased by $57 million. Sales decreased for Aircraft Systems due to lower volume of: (1) $74 million primarily on the USAF Compass Call aircraft and the DoD’s retirement of the JCA, (2) $39 million on international head-of-state aircraft modification contracts primarily due to unfavorable contract performance adjustments, (3) $28 million for modification contracts primarily for the U.S. Navy maritime patrol aircraft and (4) $18 million primarily for aircraft cabin assemblies and subassemblies. The decrease in sales for Vertex Aerospace was due to lower volume for field maintenance and sustainment services, primarily for U.S. Army and U.S. Navy aircraft due to the completion of contracts and lower demand and lower prices due to competitive pressures. The increase in ISR Systems was due to an increase in sales of $182 million primarily for large ISR aircraft systems for U.S. Government customers and small ISR aircraft systems to the DoD and a foreign government, partially offset by $125 million of lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan.

Aerospace Systems operating income for the year ended December 31, 2015 decreased by $78 million, or 28%, compared to the year ended December 31, 2014. Operating margin decreased by 160 basis points to 4.9%. Operating margin decreased by: (1) 250 basis points due to contract performance adjustments at Aircraft Systems, which included $101 million of cost growth on international head-of-state aircraft modification contracts, compared to $15 million of cost growth on the same contracts in the year ended December 31, 2014, (2) 100 basis points primarily due to reduced flight hours and lower pricing due to competitive pressures on logistics and maintenance contracts, including the U.S. Navy T-45 contract, and (3) 70 basis points due to higher pension expense of $28 million. These decreases were partially offset by: (1) 110 basis points due to favorable contract performance adjustments at ISR Systems, (2) 70 basis points for improved performance on the Army C-12 contract due to better terms on the new contract and $18 million due to a partial recovery of cost overruns recognized in prior periods on the previous contract, (3) 40 basis points due to a $17 million increase in reserves for excess and obsolete inventory at Vertex Aerospace recorded during the year ended December 31, 2014 and (4) 40 basis points due to $25 million of outside accounting and legal advisory expenses incurred for the internal review of Aerospace Systems segment completed in October 2014.

Communication Systems

	Year Ended December 31,						Increase			Year Ended December 31,						Increase/ (decrease)
	2016			2015						2015			2014
	(dollars in millions)
Net sales	$	2,052		$	2,041			0.5	%	$	2,041		$	2,020			1.0	%
Operating income	$	201		$	196			2.6	%	$	196		$	196			—	%
Operating margin		9.8	%		9.6	%		20	bpts		9.6	%		9.7	%		(10	) bpts

2016 Compared with 2015

Communication Systems net sales for the year ended December 31, 2016 increased by $11 million, or 1%, compared to the year ended December 31, 2015. Organic sales decreased by $4 million, or 0.2%, compared to the year ended December 31, 2015. Organic sales exclude $15 million of sales increases related to business acquisitions.

50

The decrease was due to: (1) $88 million in the Space & Power Systems sector, primarily due to reduced demand for power devices for commercial satellites, and (2) $64 million in the Tactical Satcom sector due to fewer deliveries on a satellite communications (SATCOM) land terminals contract for the Australian Defence Force (ADF), which was completed in the second quarter of 2016. These decreases were largely offset by increases of $109 million in the Broadband Communication Systems sector primarily due to increased volume and deliveries of secure networked communication systems for the DoD and $39 million primarily for increased volume and deliveries to the DoD of mobile and ground-based SATCOM systems for the U.S. military in the Tactical Satcom sector.

Communication Systems operating income for the year ended December 31, 2016 increased by $5 million, or 3%, compared to the year ended December 31, 2015. Operating margin increased by 20 basis points to 9.8%. Operating margin increased by 60 basis points due to lower pension expense of $13 million, partially offset primarily due to sales mix changes.

2015 Compared with 2014

Communication Systems net sales for the year ended December 31, 2015 increased by $21 million, or 1%, compared to the year ended December 31, 2014. Excluding $55 million related to the Miteq acquisition, organic sales declined by $34 million, or 2%. The decrease was due to: (1) $37 million for the Space & Power Systems sector, primarily satellite command and control software for U.S. Government agencies and high frequency radios for a foreign government, and (2) $20 million for the Advanced Communications sector, primarily secure data recorders and communications equipment for the U.S. military as contracts near completion. These decreases were offset by $23 million for the Broadband Communication Systems sector, primarily due to increased volume for development and production of secure networked communication systems for the U.S. military. For the Tactical Satcom sector, lower sales of mobile and ground based satellite communication systems for the U.S. military were offset by sales on a new contract for the ADF.

Communication Systems operating income for the year ended December 31, 2015 remained the same at $196 million compared to the year ended December 31, 2014. Operating margin decreased by 10 basis points to 9.6%. Operating margin decreased by 100 basis points due to higher pension expense of $20 million. Improved contract performance and sales and mix changes, partially offset by lower margins from the Miteq acquisition, increased operating margin by 90 basis points.

Liquidity and Capital Resources

Anticipated Sources and Uses of Cash Flow

At December 31, 2016, we had total cash and cash equivalents of $363 million. While no amounts of the cash and cash equivalents are considered restricted, $197 million of cash was held by our foreign subsidiaries. The repatriation of cash held in non-U.S. jurisdictions is subject to local capital requirements, as well as income tax considerations. Our primary sources of liquidity are cash flow generated from operations, cash on hand and our new five-year unsecured $1 billion revolving credit facility (Credit Facility), which we entered into on October 31, 2016. The Credit Facility replaced the Amended and Restated Revolving Credit Facility, which was to expire on February 3, 2017. At December 31, 2016, we had the full availability of our Credit Facility. We generated $1,097 million of net cash from operating activities from continuing operations during the year ended December 31, 2016 and we received net cash proceeds of $561 million primarily for the NSS divestiture. Significant cash uses during the year ended December 31, 2016 included $388 million related to the business acquisitions, $373 million related to repurchasing shares of our common stock, $309 million for net debt reductions, $220 million related to the payment of dividends and $216 million related to capital expenditures.

We currently believe that our cash from operating activities generated during the year, together with our cash on hand, and available borrowings under our Credit Facility, will be adequate for the foreseeable future to meet our anticipated requirements for working capital, capital expenditures, defined benefit plan contributions, commitments, contingencies, research and development expenditures, select business acquisitions (depending on the size), program and other discretionary investments, interest payments, income tax payments, L3 dividends and share repurchases.

Balance Sheet

Billed receivables decreased by $15 million to $731 million at December 31, 2016 from $746 million at December 31, 2015 primarily due to: (1) the timing of billings and collections for ISR and Aircraft Systems and (2) $10 million for foreign currency translation adjustments. These decreases were partially offset by an increase of $25 million from business acquisitions.

51

Contracts in process decreased by $26 million to $2,055 million at December 31, 2016 from $2,081 million at December 31, 2015. During the year ended December 31, 2016, contracts in process decreased: (1) $17 million for foreign currency translation adjustments and (2) $14 million comprised of:

• decreases of $24 million in unbilled contract receivables primarily due to shipments for Aircraft Systems and Broadband Communication Systems, partially offset by sales exceeding billings for Aviation Products & Security, and

• increases of $10 million in inventoried contract costs, primarily due to the timing of deliveries for Space & Power Systems.

Business acquisitions increased contracts in process by $5 million.

L3’s receivables days sales outstanding (DSO) was 66 at December 31, 2016, compared with 70 at December 31, 2015. We calculate our DSO by dividing: (1) our aggregate end of period billed receivables and net unbilled contract receivables by (2) our trailing 12 month sales adjusted, on a pro forma basis, to include sales from business acquisitions and exclude sales from business divestitures that we completed as of the end of the period and discontinued operations, multiplied by the number of calendar days in the trailing 12 month period (366 days at December 31, 2016 and 365 days at 2015). Our trailing 12 month pro forma sales were $10,655 million at December 31, 2016 and $10,314 million at December 31, 2015. The decrease in DSO during 2016 was primarily due to a decrease in net billed and unbilled contract receivables, which is discussed above, and the increase in our trailing 12 month pro forma sales.

Inventories decreased by $3 million to $330 million at December 31, 2016 from $333 million at December 31, 2015, primarily due to Aviation Products & Security Systems deliveries of airport security screening systems to the U.S. Transportation Security Administration (TSA) and foreign customers, substantially offset by $23 million of acquired inventories from the L3 MacDonald Humfrey business acquisition.

The increase in other current assets was primarily due to insurance receivables principally for the Securities Class Action described in Note 18 (the Securities Class Action) to our audited consolidated financial statements and $7 million from business acquisitions, partially offset by a decrease in income tax receivables due to the application of accrued U.S. federal income tax overpayments to offset estimated tax payments.

The decrease in assets and liabilities of discontinued operations was due to the completion of the NSS divestiture during 2016.

The increase in property, plant and equipment was primarily due to capital expenditures exceeding depreciation expense during 2016.

Goodwill increased by $279 million to $6,560 million at December 31, 2016 from $6,281 million at December 31, 2015. The table below presents the changes in goodwill by segment.

	Electronic Systems			Aerospace Systems		Communication Systems		Consolidated Total
	(in millions)
Balance at December 31, 2015	$	3,925		$	1,353	$	1,003	$	6,281
Business acquisitions(1)		315			—		20		335
Foreign currency translation adjustments(2)		(63	)		7		—		(56	)
Balance at December 31, 2016	$	4,177		$	1,360	$	1,023	$	6,560

⁽¹⁾ The net increase in goodwill for the Electronic Systems segment was due to the L3 MacDonald Humfrey, Aerosim and Micreo business acquisitions, as well as the final purchase price allocations for the L3 ForceX and L3 CTC business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition.

⁽²⁾ The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, the Euro and the Australian dollar, offset by the weakening of the U.S. dollar against the Canadian dollar during 2016. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during 2016.

The increase in identifiable intangible assets was primarily due to $74 million of intangible assets recognized for the business acquisitions, primarily the L3 MacDonald Humfrey business acquisition, partially offset by amortization expense.

52

The fluctuations in accounts payable and accrued expenses were primarily due to the timing of when invoices for purchases from third party vendors and subcontractors were received and payments were made and $14 million of acquired balances from the business acquisitions.

The decrease in advance payments and billings in excess of costs incurred was primarily due to the liquidation of balances on contracts for Aircraft Systems, ISR Systems, Aviation Products & Security, and Broadband Communication Systems and $15 million for foreign currency translation adjustments. These decreases were partially offset by increases in advance payments and billings in excess of costs incurred due to cash collections on performance based billings for Power & Propulsion Systems, Precision Engagement & Training, and Sensors Systems and $13 million of acquired balances from the business acquisitions.

The increase in other current liabilities was primarily due to the anticipated costs of the settlements in principle in respect of the Securities Class Action and the EoTech Class Actions described in Note 18 to our audited consolidated financial statements and $7 million from business acquisitions.

The increase in deferred tax liabilities was primarily due to the tax amortization of certain goodwill and other identifiable intangible assets partially offset by an increase in the deferred tax asset for pension liabilities during 2016.

Pension Plans

L3 maintains defined benefit pension plans covering approximately 25% of its employees. At December 31, 2016, L3’s projected benefit obligation (PBO), which includes accumulated benefits plus the incremental benefits attributable to projected future salary increases for covered employees, was $3,758 million and exceeded the fair value of L3’s pension plan assets of $2,721 million by $1,037 million. At December 31, 2015, L3’s PBO was $3,448 million and exceeded the fair value of L3’s pension plan assets of $2,552 million by $896 million. The $141 million increase in our unfunded status was primarily due to the decrease in our weighted average discount rate from 4.67% at December 31, 2015 to 4.41% at December 31, 2016.

The expected long-term return on plan assets assumption represents the average rate that we expect to earn over the long-term on the assets of our benefit plans, including those from dividends, interest income and capital appreciation. We utilize a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical and forward looking rates of return for each individual asset class. With respect to the determination of our expected long-term return on plan assets assumption for the year ended December 31, 2016, we considered: (1) a 20-year forward looking return on plan assets as developed by our third-party consultant, which is currently 7.81% for our U.S. plans and 7.25% for our Canadian plans, and (2) our historical returns. While we review historical rates of return on our plan assets, the substantial volatility in any one year can result in historical data that is less indicative of future returns. Accordingly, we give greater consideration toward forward looking returns in developing our expected long-term return on plan assets assumption. In reviewing our historical returns, we noted that the average annual return on our U.S. pension plan assets over the period since L3’s formation in 1997 through 2015, net of investment management fees and administrative costs, determined on an arithmetic basis, was 6.92%. Arithmetic annual averages represent the simple average returns over independent annual periods. In addition, the actual annual returns have exceeded our long-term return on plan assets assumption in 12 of the past 19 years since L3’s formation. Due to a reduction in forward looking and historical returns on our plan assets compared to the prior year, we decreased our existing long-term return on plan assets assumption of 8.25% for our U.S plans by 25 basis points to 8.00% in 2016. The long-term return on plan assets assumption of 7.25% for our Canadian plans did not change. Based on the forward looking and historical returns on our plan assets discussed above and an allotment for active management, we believe our weighted average long-term return on plan assets assumption in 2016 of 7.92% is within a reasonable range.

We recorded net actuarial losses of $179 million in the year ended December 31, 2016 primarily due to the decrease in our weighted average discount rate, which is reflected in accumulated other comprehensive loss. Actuarial gains and losses in a period represent the difference between actual and actuarially assumed experience, primarily due to discount rates and pension plan asset returns. Actuarial gains and losses that our pension plans experience are not recognized in pension expense in the year incurred, but rather are recorded as a component of accumulated other comprehensive income (loss). The accumulated gains and losses in excess of a corridor, defined as the greater of 10% of the fair value of a plan’s assets and 10% of its projected benefit obligation, are generally amortized to pension expense in future periods over the estimated average remaining service periods of the covered employees. See Note 19 to our audited consolidated financial statements for additional information regarding our pension plans.

53

Our pension expense for 2016 was $97 million. We currently expect pension expense for 2017 to increase $10 million to approximately $107 million primarily due to the decrease in our weighted average discount rates, partially offset by higher than expected asset returns due to an increase in plan asset balances compared to the prior year.

Our pension expense for 2017 may be different from our current expectations when finalized due to a number of factors, including the effect of any future business acquisitions and divestitures for which we assume liabilities for pension benefits, changes in headcount at our businesses that sponsor pension plans, actual pension plan contributions and changes (if any) to our pension assumptions for 2017, including the discount rate, mortality rates, expected long-term return on plan assets and salary increases.

Our cash pension contributions for 2016 were $97 million and we currently expect to contribute approximately $100 million to our pension plans in 2017. Actual 2017 pension contributions could be affected by changes in the funded status of our pension plans during 2017. A substantial portion of our pension plan contributions for L3’s businesses that are U.S. Government contractors are recoverable as allowable indirect contract costs at amounts generally equal to the annual pension contributions.

Our projected benefit obligation and annual pension expense are significantly affected by, holding all other assumptions constant, certain actuarial assumptions. The following table illustrates the sensitivity of a change in certain assumptions for our pension plans and resulting increase (decrease) to the 2017 expected pension expense and PBO at December 31, 2016.

	Effect on 2017 Pension Expense			Effect on December 31, 2016 PBO
	(in millions)
25 basis point decrease in discount rate	$	14		$	133
25 basis point increase in discount rate		(13	)		(125	)
25 basis point decrease in expected return on assets		7			N/A
25 basis point increase in expected return on assets		(7	)		N/A

Statement of Cash Flows

The table below provides a summary of our cash flows from (used in) operating, investing and financing activities for the periods indicated.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net cash from operating activities from continuing operations	$	1,097		$	1,069		$	1,088
Net cash used in investing activities from continuing operations		(16	)		(192	)		(221	)
Net cash used in financing activities from continuing operations		(856	)		(1,205	)		(893	)

Operating Activities — Continuing Operations

2016 Compared with 2015. We generated $1,097 million of cash from operating activities during the year ended December 31, 2016, an increase of $28 million compared with $1,069 million generated during the year ended December 31, 2015. The increase was primarily due to higher income from continuing operations of $364 million, partially offset by: (1) lower non-cash expenses of $308 million primarily non-cash goodwill impairment charges in the year ended December 31, 2015 and (2) higher uses of cash for working capital of $28 million in the year ended December 31, 2016. The net cash from changes in operating assets and liabilities is further discussed above under “Liquidity and Capital Resources — Balance Sheet.”

2015 Compared with 2014. We generated $1,069 million of cash from operating activities during the year ended December 31, 2015, a decrease of $19 million compared with $1,088 million generated during the year ended December 31, 2014. The decrease was due to $348 million of lower income from continuing operations. This decrease was partially offset by increases of: (1) $269 million for higher non-cash expenses related to goodwill impairment charges, net of related tax benefits and (2) $60 million of less cash used for changes in operating assets and liabilities primarily related to trade accounts payable and accrued expenses.

54

Interest Payments. Our cash from operating activities included interest payments on debt of $162 million for the year ended December 31, 2016, $182 million for the year ended December 31, 2015, and $176 million for the year ended December 31, 2014. Our interest expense also included amortization of deferred debt issuance costs and bond discounts, which are non-cash items.

Investing Activities — Continuing Operations

During 2016, we used $16 million of cash from investing activities, which included $388 million for business acquisitions discussed under “Business Acquisitions and Divestitures” and $216 million for capital expenditures, partially offset by $561 million of cash received from business divestitures (primarily NSS).

During 2015, we used $192 million of cash primarily to: (1) acquire three businesses discussed under “Business Acquisitions and Divestitures” for $320 million and (2) pay $197 million for capital expenditures. These cash outflows were partially offset by net proceeds received of $318 million from the MSI, BSI, Tinsley Product Line and Klein divestitures.

During 2014, we used $221 million of cash primarily to: (1) acquire L3 Data Tactics and (2) pay $174 million for capital expenditures.

Financing Activities — Continuing Operations

Debt

At December 31, 2016, total outstanding debt was $3,325 million, compared to $3,626 million at December 31, 2015, all of which was senior debt. The decrease is primarily due to the redemption of the 2016 Notes and the 2017 Notes, partially offset by the issuance of the 2026 Notes. At December 31, 2016, there were no borrowings or letters of credit outstanding under our Credit Facility. Accordingly, we had the full availability of our $1 billion facility for future borrowings. We also had $402 million of outstanding standby letters of credit with financial institutions covering performance and financial guarantees per contractual requirements with certain customers at December 31, 2016. These standby letters of credit may be drawn upon in the event that we do not perform on certain of our contractual requirements. At December 31, 2016, our outstanding debt matures between October 15, 2019 and December 15, 2026. See Note 9 to our audited consolidated financial statements for the components of our debt at December 31, 2016.

We consider our credit rating as an important element of our capital allocation strategy and, while no assurances can be given, we intend to maintain our investment grade credit rating. On April 8, 2016, Standard and Poor’s changed our rating outlook to stable from negative and affirmed our BBB-senior unsecured rating. On November 1, 2016, Moody’s Investors Service changed our rating outlook to stable from negative and affirmed our Baa3 senior unsecured rating.

Debt Issuances

The terms of each of the outstanding Senior Notes issued by L3 during the years ended December 31, 2016 and 2014 are presented in the table below. There were no debt issuances during the year ended December 31, 2015. See Note 9 to our audited consolidated financial statements for additional information on the redemption provisions of our outstanding Senior Notes.

Note	Date of Issuance	Amount Issued		Bond Discount		Net Cash Proceeds		Effective Interest Rate			Redemption at Treasury Rate+
		(in millions)
1.50% Senior Notes due May 28, 2017	May 28, 2014	$	350	$	1	$	347		1.55	%	10 bps
3.95% Senior Notes due May 28, 2024	May 28, 2014	$	650	$	3	$	641		4.02	%	20 bps
3.85% Senior Notes due December 15, 2026	December 5, 2016	$	550	$	3	$	542		3.91	%	25 bps

On December 5, 2016, we issued the 2026 Notes. The 2026 Notes were issued at a bond discount of $3 million. The net cash proceeds of $542 million from the offering plus cash on hand were used primarily to: (1) replenish the amount of cash used, and the amount of revolving credit borrowings drawn, to repay the 2016 Notes, and (2) redeem the 2017 Notes.

55

Repurchases, Redemptions and Maturities of Senior Notes

The repurchases, redemptions and maturities of Senior Notes are presented in the table below. See Note 9 to our audited consolidated financial statements for additional information on the redemption provisions of our outstanding Senior Notes.

Note	Settlement Type	Date Settled	Aggregate Amount		Debt Retirement Charge		Cash Payments
			(in millions)
1.50% Senior Notes due 2017(1)	Redemption	December 30, 2016	$	350	$	2	$	351
3.95% Senior Notes due 2016	Maturity	November 15, 2016	$	200	$	—	$	200
3.95% Senior Notes due 2016(2)	Redemption	May 20, 2016	$	300	$	5	$	305
3.95% Senior Notes due 2024	Tender Offer	December 22, 2015	$	300	$	1	$	297
CODES due 2035(3)	Redemption	June 20, 2014	$	689	$	—	$	935

⁽¹⁾ The 1.50% Senior Notes due 2017 were redeemed at a price equal to 100.323% of the principal amount thereof, plus accrued and unpaidinterest to the redemption date. Interest ceased to accrue on and after the redemption date.

⁽²⁾ The 3.95% Senior Notes due 2016 were redeemed at a price equal to 101.475% of the principal amount thereof, plus accrued and unpaidinterest. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive paymentof the Redemption Price and accrued interest.

⁽³⁾ In 2005, we sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, we repurchased approximately $11 million of the CODES. The conversion value ofCODES of $935 million was calculated in accordance with the indenture governing the CODES. We settled the entire conversion value withrespect to converted CODES in cash. As a result of the conversion, we recorded a reduction to shareholders’ equity of $161 million, relatedto the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expenserecognized for the CODES was $2 million for the year ended December 31, 2014.

Debt Covenants and Other Provisions. The Credit Facility and Senior Notes contain financial and/or other restrictive covenants. See Note 9 to our audited consolidated financial statements for a description of our debt and related financial covenants and cross default provisions. We were in compliance with our financial and other restrictive covenants at December 31, 2016.

Guarantees. The borrowings under the Credit Facility are fully and unconditionally guaranteed by L3 and by substantially all of the material 100% owned domestic subsidiaries of L3 on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L3’s material 100% owned domestic subsidiaries that guarantee any of its other indebtedness. The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

Equity

During 2016 and 2015, L3’s Board of Directors authorized the following quarterly cash dividends:

Date Declared	Record Date	Cash Dividend Per Share		Total Cash Dividends Declared			Date Paid
				(in millions)
2016
February 9	March 1	$	0.70	$	55(1	)	March 15
May 3	May 17	$	0.70	$	55(1	)	June 15
June 21	August 17	$	0.70	$	55(1	)	September 15
October 18	November 17	$	0.70	$	55(1	)	December 15
2015
February 10	March 2	$	0.65	$	55(2	)	March 16
May 5	May 18	$	0.65	$	54(2	)	June 15
June 10	August 17	$	0.65	$	53(2	)	September 15
October 20	November 16	$	0.65	$	51(2	)	December 15

⁽¹⁾ During the year ended December 31, 2016, we paid $220 million of cash dividends. Payments of previously accrued dividends for employee held stock awards were offset by accrued dividends to be paid in future periods.

⁽²⁾ During the year ended December 31, 2015, we paid $214 million of cash dividends, including $1 million of previously accrued dividends for employee held stock awards.

56

L3 repurchased $373 million, or 3.0 million shares, of its common stock during the year ended December 31, 2016, $740 million, or 6.4 million shares, of its common stock during the year ended December 31, 2015 and $823 million, or 6.9 million shares, of its common stock during the year ended December 31, 2014.

L3 announced, on February 13, 2017, that its Board of Directors had increased L3’s regular quarterly cash dividend by 7% to $0.75 per share, payable on March 15, 2017, to shareholders of record at the close of business on March 1, 2017.

The number of holders of record of L3’s common stock, on February 17, 2017, was 176,555. On February 17, 2017, the closing price of L3’s common stock, as reported by the NYSE, was $168.23 per share.

Contractual Obligations

The table below presents our estimated total contractual obligations from our continuing operations at December 31, 2016, including the amounts expected to be paid or settled for each of the periods indicated below.

			Payments due by Period
	Total		Less than 1 year			1 – 3 years		3 – 5 years			More than 5 years
	(in millions)
Contractual Obligations
Debt(1)	$	3,350	$	—		$	1,000	$	1,450		$	900
Interest payments(2)		768		157			314		156			141
Non-cancelable operating leases(3)		586		98			146		133	(4)		209
Notes payable and capital lease obligations		13		1			1		1			10
Purchase obligations(5)		2,199		1,780			341		53			25
Other long-term liabilities(6)		270		110	(7)		108		13			39
Total(8)	$	7,186	$	2,146		$	1,910	$	1,806		$	1,324

⁽¹⁾ Represents principal amount of debt and only includes scheduled principal payments.

⁽²⁾ Represents expected interest payments on L3’s debt balance at December 31, 2016 using the stated interest rate on our fixed rate debt, assuming that current borrowings remain outstanding to the contractual maturity date.

⁽³⁾ Non-cancelable operating leases are presented net of estimated sublease rental income.

⁽⁴⁾ Includes the residual value guarantee for three real estate lease agreements, expiring on August 31, 2020, that are accounted for as operating leases. We have the right to exercise options under the lease agreements to renew the leases, to purchase the properties for $45 million or sell the properties on behalf of the lessor. If we elect to sell the properties, we must pay the lessor a residual value guarantee of $39 million. See Note 18 to our audited consolidated financial statements for a further description of these leases.

⁽⁵⁾ Represents open purchase orders at December 31, 2016 for amounts expected to be paid for goods or services that are legally binding.

⁽⁶⁾ Other long-term liabilities primarily consist of workers compensation and deferred compensation for the years ending December 31, 2018 and thereafter and also include pension and postretirement benefit plan contributions that we expect to pay in 2017.

⁽⁷⁾ Our pension and postretirement benefit plan funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. For 2017, we expect to contribute approximately $100 million to our pension plans and approximately $10 million to our postretirement benefit plans. Due to the current uncertainty of the amounts used to compute our expected pension and postretirement benefit plan funding, we believe it is not practicable to reasonably estimate such future funding for periods in excess of one year and we may decide or be required to contribute more than we expect to our pension and postretirement benefit plans.

⁽⁸⁾ Excludes all income tax obligations, a portion of which represents unrecognized tax benefits in connection with uncertain tax positions taken, or expected to be taken on our income tax returns as of December 31, 2016 since we cannot determine the time period of future tax consequences. For additional information regarding income taxes, see Note 16 to our audited consolidated financial statements.

We also may enter into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. These agreements are designed to enhance the social and economic environment of the foreign country by requiring the contractor to promote investment in the country. Offset agreements may be satisfied through activities that do not require us to use cash, including transferring technology, providing manufacturing and other consulting support to in-country projects and the purchase by third parties of supplies from in-country vendors. These agreements also may be satisfied through our use of cash for such activities as purchasing supplies from in-country vendors, providing financial support for in-country projects, establishment of ventures with local companies and building or leasing facilities for in-country operations. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customer and typically require cash outlays that represent only a fraction of the original amount in the offset

57

agreement. The costs to satisfy our offset obligations are included in the estimates of our total costs to complete the contract and may impact our profitability and cash flows. The ability to recover investments that we make are generally dependent upon the successful operation of ventures that we do not control and may involve products and services that are dissimilar to our business activities. At December 31, 2016, the remaining obligations under our outstanding offset agreements totaled $1.3 billion, which primarily relate to our Aerospace Systems and Electronic Systems segments, some of which extend through 2028. To the extent we have entered into purchase obligations at December 31, 2016 that also satisfy offset agreements, those amounts are included in the preceding table. Offset programs usually extend over several years and may provide for penalties, estimated at approximately $104 million at December 31, 2016, in the event we fail to perform in accordance with offset requirements. While historically we have not been required to pay material penalties, resolution of offset requirements are often the result of negotiations and subjective judgments.

Off Balance Sheet Arrangements

The table below presents our estimated total contingent commitments and other guarantees at December 31, 2016, including the amounts expected to be paid or settled for each of the periods indicated below.

			Commitment Expiration by Period
	Total		2017		2018 - 2019		2020 - 2021		2022 and thereafter
	(in millions)
Contingent Commitments
Other standby letters of credit(1)	$	402	$	251	$	76	$	63	$	12
Other guarantees(2)		7		—		7		—		—
Total(3)(4)	$	409	$	251	$	83	$	63	$	12

⁽¹⁾ Represents outstanding letters of credit with financial institutions covering performance and financial guarantees per contractual requirements with certain customers. These letters of credit may be drawn upon in the event of L3’s nonperformance.

⁽²⁾ Represents the minimum guarantees made by L3 or the lessee under the purchase option for certain operating leases in which the lease renewal is not exercised (see Note 18 to our audited consolidated financial statements for a description of these guarantees).

⁽³⁾ The total amount does not include residual value guarantees for two real estate lease agreements, expiring on August 31, 2020, that are accounted for as operating leases. We have the right to exercise options under the lease agreements to purchase both properties for $45 million on or before August 31, 2020. See Note 18 to our audited consolidated financial statements for a further description of these leases.

⁽⁴⁾ The total amount does not include the fair value of the contingent consideration liability for the future potential earn-out payments relating to the L3 MacDonald Humfrey acquisition. See Note 12 to our audited consolidated financial statements for additional information on the fair value of the contingent consideration.

Legal Proceedings and Contingencies

We are engaged in providing products and services under contracts with the U.S. Government and, to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, periodically, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under U.S. Government procurement regulations, an indictment by a federal grand jury, or an administrative finding against us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in the suspension for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges, and could have a material adverse effect on our results of operations and cash flows. A conviction, or an administrative finding that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term and could have a material adverse effect on our results of operations and cash flows. We are currently cooperating with the U.S. Government on several investigations, none of which we anticipate will have a material adverse effect on our results of operations or cash flows. Also, we have been periodically subject to litigation, government investigations, proceedings, claims or assessments and various contingent liabilities incidental to our business. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For a description of our legal proceedings and contingencies, see Note 18 to our audited consolidated financial statements.

We continually assess our obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost that we will incur to comply with these laws, based upon available

58

internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, in the aggregate, would be material to our consolidated financial position, results of operations or cash flows.

Derivative Financial Instruments and Other Market Risk

Included in our derivative financial instruments are foreign currency forward contracts. All of our derivative financial instruments that are sensitive to market risk are entered into for purposes other than trading.

Interest Rate Risk. Our Credit Facility is subject to variable interest and is therefore sensitive to changes in interest rates. The interest rates on the Senior Notes are fixed-rate and are not affected by changes in interest rates. Additional data on our debt obligations and our applicable borrowing spreads included in the interest rates we would pay on borrowings under the Credit Facility, if any, are provided in Note 9 to our audited consolidated financial statements.

Foreign Currency Exchange Risk. Our U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, we enter into foreign currency forward contracts, which are generally designated and accounted for as cash flow hedges. At December 31, 2016, our foreign currency forward contracts had maturities ranging through 2021, a notional value of $358 million and a corresponding net fair value that was an asset of $6 million.

Accounting Standards Issued and Not Yet Implemented

For a discussion of accounting standards issued and not yet implemented, see Note 2 to our audited consolidated financial statements.

Inflation

The effect of inflation on our sales and earnings has not been significant. Although a majority of our sales are made under long-term contracts (revenue arrangements), the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to be incurred in these future periods. In addition, some of our contracts provide for price adjustments through cost escalation clauses.

Forward-Looking Statements

Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance and financial condition, including in particular, the likelihood of our success in developing and expanding our business and the realization of sales from backlog, include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.

All statements other than historical facts may be forward-looking statements, such as “may,” “will,” “should,” “likely,” “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions are used to identify forward-looking statements. We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Some of the factors that could cause actual results to differ include, but are not limited to, the following: our dependence on the defense industry; backlog processing and program slips resulting from delayed awards and/or funding from the DoD and other major customers; the U.S. Government fiscal situation; changes in DoD budget levels and spending priorities; U.S. Government failure to raise the debt ceiling; our reliance on contracts with a limited number of customers and the possibility of termination of government contracts by unilateral government action or for failure to perform; the extensive legal and regulatory requirements surrounding many of our contracts; our ability to retain our existing business and related contracts; our ability to successfully compete for and win new business; or, identify, acquire and integrate additional businesses; our ability to maintain and improve our operating margin; the availability of government funding and changes in customer requirements for our products and services; the outcome of litigation matters; results of audits by U.S. Government agencies and of ongoing governmental investigations; our significant amount of debt and the restrictions contained in our debt agreements and actions taken by rating agencies that could result in a downgrade of our debt; our ability to continue to recruit, retain and train our

59

employees; actual future interest rates, volatility and other assumptions used in the determination of pension benefits and equity based compensation, as well as the market performance of benefit plan assets; our collective bargaining agreements; our ability to successfully negotiate contracts with labor unions and our ability to favorably resolve labor disputes should they arise; the business, economic and political conditions in the markets in which we operate; global economic uncertainty; the DoD’s Better Buying Power and other efficiency initiatives; events beyond our control such as acts of terrorism; our ability to perform contracts on schedule; our international operations including currency risks and compliance with foreign laws; our extensive use of fixed-price type revenue arrangements; the rapid change of technology and high level of competition in which our businesses participate; risks relating to technology and data security; our introduction of new products into commercial markets or our investments in civil and commercial products or companies; our ability to predict the level of participation in, and the related costs our voluntary return program for certain EoTech holographic weapons sight products, and our ability to change and terminate the voluntary return program at our discretion; the impact on our business of improper conduct by our employees, agents or business partners; goodwill impairments and the fair values of our assets; and the ultimate resolution of contingent matters, claims and investigations relating to acquired businesses, and the impact on the final purchase price allocations.

In addition, for a discussion of other risks and uncertainties that could impair our results of operations or financial condition, see “Part I — Item 1A — Risk Factors” and Note 18 to our audited consolidated financial statements, in each case included in this Annual Report on Form 10-K for the year ended December 31, 2016 and any material updates to these factors contained in any of our future filings.

Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements.

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For data regarding quantitative and qualitative disclosures related to our market risk sensitive financial instruments, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Derivative Financial Instruments and Other Market Risk” and Note 13 to our audited consolidated financial statements. See Notes 12 and 14 to our audited consolidated financial statements for the aggregate fair values and notional amounts of our foreign currency forward contracts at December 31, 2016.

Item 8. Financial Statements and Supplementary Data

See our audited consolidated financial statements beginning on page F-1.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934 related to L3 Technologies, Inc. is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and

60

operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016. Based upon that evaluation, our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that, as of December 31, 2016, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of L3 Technologies, Inc., (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of L3 Technologies, Inc. internal control over financial reporting as of December 31, 2016. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —Integrated Framework, issued in 2013. Based on our assessments and those criteria, management determined that L3 Technologies, Inc. maintained effective internal control over financial reporting as of December 31, 2016.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report. See page F-2 to our audited consolidated financial statements for their report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

61

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The Company posts its Code of Ethics and Business Conduct on the Corporate Governance webpage of its website at http://www.L3T.com under the link “Code of Ethics and Business Conduct.” The Company’s Code of Ethics and Business Conduct applies to all directors, officers and employees, including our chairman and chief executive officer, our senior vice president and chief financial officer, and our corporate controller and principal accounting officer. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE, on our website within the required periods.

The remaining information called for by Item 10 will be included in the sections captioned “Proposal 1. Election of Directors,” “Continuing Members of the Board of Directors,” “Executives and Certain Other Officers of the Company,” “Section 16(A) Beneficial Ownership Reporting Compliance” and “The Board of Directors and Certain Governance Matters” in the definitive proxy statement (the “Company’s Proxy Statement”) relating to the Company’s 2017 Annual Meeting of Shareholders, to be held on May 9, 2017, and is incorporated herein by reference. L3 will file its proxy statement with the SEC pursuant to Regulation 14A within 120 days after the end of its 2016 fiscal year covered by this Form 10-K.

Item 11. Executive Compensation

The “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Tabular Executive Compensation Disclosure,” “Compensation of Directors” and “Compensation Committee Interlocks and Insider Participation” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management” and “Equity Compensation Plan Information” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The “Certain Relationships and Related Transactions” and “The Board of Directors and Certain Governance Matters” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The “Independent Registered Public Accounting Firm Fees” section of the Company’s Proxy Statement is incorporated herein by reference.

62

PART IV

Item 15. Exhibits, Financial Statement Schedules

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

(a)(1) Financial statements filed as part of this report:

	Page Number
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015		F-3
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014		F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014		F-5
Consolidated Statements of Equity for the years ended December 31, 2016, 2015 and 2014		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014		F-7
Notes to Consolidated Financial Statements		F-8

(a)(2) Financial Statement Schedules

Financial statement schedules are omitted since the required information is either not applicable or is included in our audited consolidated financial statements.

Item 16. Form 10-K Summary

None.

63

Exhibits

Exhibit No.	Description of Exhibits
2.1	Distribution Agreement between L-3 Communications Holdings, Inc. and Engility Holdings, Inc. dated as of July 16, 2012 (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File No. 333-46983)).
2.2	Stock Purchase Agreement, dated as of December 7, 2015, by and among L-3 Communications Corporation, CACI International Inc and CACI, Inc.-Federal (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on December 11, 2015 (File No. 333-46983)).
3.1	Restated Certificate of Incorporation of L3 Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 3, 2017 (File No. 333-46983)).
3.2	Amended and Restated Bylaws of L3 Technologies, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on January 3, 2017 (File No. 333-46983)).
*4.1	Form of Common Stock Certificate of L3 Technologies, Inc.
4.2	Indenture dated as of October 2, 2009 among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.15 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2009 (File No. 333-46983)).
4.3	Supplemental Indenture dated as of February 3, 2012 among L-3 Communications Corporation, The Bank of New York Mellon, as Trustee, and the guarantors named therein (incorporated by reference to Exhibit 4.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011 (File No. 333-46983)).
*4.4	Second Supplemental Indenture, dated as of October 31, 2016 among L-3 Communications Corporation, The Bank of New York Mellon, as Trustee, and the guarantors named therein.
4.5	Indenture, dated as of May 21, 2010, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated May 24, 2010 (File No. 333-46983)).
4.6	First Supplemental Indenture, dated as of May 21, 2010, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated May 24, 2010 (File No. 333-46983)).
4.7	Second Supplemental Indenture, dated as of February 7, 2011, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated February 8, 2011 (File No. 333-46983)).
4.8	Third Supplemental Indenture, dated as of November 22, 2011, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated November 22, 2011 (File No. 333-46983)).
4.9	Fourth Supplemental Indenture, dated as of February 3, 2012, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.12 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (File No. 333-46983)).
4.10	Fifth Supplemental Indenture, dated as of May 28, 2014, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated May 28, 2014 (File No. 333-46983)).

64

Exhibit No.	Description of Exhibits
4.11	Sixth Supplemental Indenture, dated as of June 21, 2016, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.2 to L-3 Communications Corporation’s Registration Statement on Form S-3ASR filed on June 21, 2016 (File No. 333-212152)).
*4.12	Seventh Supplemental Indenture, dated as of October 31, 2016, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee.
4.13	Eighth Supplemental Indenture, dated as of December 5, 2016, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.6 to the Registrant’s Current Report on Form 8-K dated December 5, 2016 (File No. 333-46983)).
10.1	Credit Agreement, dated as of October 31, 2016, among L-3 Communications Corporation, L-3 Communications Holdings, Inc. and certain subsidiaries of the Registrant from time to time party thereto as guarantors, certain lenders from time to time party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 31, 2016 (File No. 333-46983)).
*10.2	Amendment to Credit Agreement, dated as of December 22, 2016, among L-3 Communications Corporation, certain subsidiaries of the Registrant from time to time party thereto as guarantors, certain lenders from time to time party thereto, certain L/C issuers from time to time party thereto and Bank of America, N.A., as administrative agent.
*†10.3	Amended and Restated 1998 Directors Stock Option Plan for Non-Employee Directors of L3 Technologies, Inc.
†10.4	Form of L-3 Communications Holdings, Inc. 1998 Directors Stock Option Plan Nonqualified Stock Option Agreement (2007 Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 333-46983)).
*†10.5	L3 Technologies, Inc. Amended and Restated 1999 Long Term Performance Plan.
†10.6	Form of L-3 Communications Holdings, Inc. 1999 Long Term Performance Plan Nonqualified Stock Option Agreement (2006 Version) (incorporated by reference to Exhibit 10.64 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 333-46983)).
*†10.7	L3 Technologies, Inc. Amended and Restated 2008 Long Term Performance Plan.
†10.8	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2008 Version) (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 27, 2008 (File No. 333-46983)).
†10.9	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2009 Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 26, 2009 (File No. 333-46983)).
†10.10	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2011 Version) (incorporated by reference to Exhibit 10.12 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 333-46983)).
†10.11	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2014 Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).

65

Exhibit No.	Description of Exhibits
†10.12	Form of Amended and Restated L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2011 and 2012 CEO Version) (incorporated by reference to Exhibit 10.14 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 333-46983)).
†10.13	Form of Amended and Restated L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2013 CEO Version) (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File No. 333-46983)).
†10.14	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2014 CEO Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File No. 333-46983)).
†10.15	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2015 CEO Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File No. 333-46983)).
†10.16	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2016 CEO Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 25, 2016 (File No. 333-46983)).
†10.17	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Version) (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.18	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 CEO Version) (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.19	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2016 CEO Version) (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 25, 2016 (File No. 333-46983)).
†10.20	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Senior Executive Version) (incorporated by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.21	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2016 Senior Executive Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 25, 2016 (File No. 333-46983)).
†10.22	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2013 Non-Employee Directors Version) (incorporated by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File No. 333-46983)).
†10.23	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Non-Employee Directors Annual Equity Award Version) (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File No. 333-46983)).
†10.24	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Non-Employee Directors Deferred Compensation Version) (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File No. 333-46983)).

66

Exhibit No.	Description of Exhibits
†10.25	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Agreement (2014 Version) (incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.26	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2014 Version) (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.27	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2015 Version) (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File No. 333-46983)).
†10.28	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2016 Version) (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 25, 2016 (File No. 333-46983)).
*†10.29	L3 Technologies, Inc. Amended and Restated 2012 Cash Incentive Plan.
†10.30	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Agreement (2014 Version) (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.31	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2014 Version) (incorporated by reference to Exhibit 10.11 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File No. 333-46983)).
†10.32	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2015 Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File No. 333-46983)).
†10.33	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2016 Version) (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 25, 2016 (File No. 333-46983)).
*†10.34	L3 Technologies, Inc. Amended and Restated 2008 Directors Stock Incentive Plan.
†10.35	Form of L-3 Communications Holdings, Inc. 2008 Directors Stock Incentive Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 27, 2009 (File No. 333-46983)).
†10.36	Global Spin-Off Amendment to Equity Award Agreements dated as of July 18, 2012 (incorporated by reference to Exhibit 10.26 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 333-46983)).
†10.37	Global Amendment to Non-Employee Director RSU Agreements dated as of April 30, 2013 (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File No. 333-46983)).
*†10.38	Global Amendment to Equity-Based Award Agreements and Award Notices and Cash-Based Award Agreements and Award Notices dated as of December 31, 2016.
*†10.39	L3 Technologies, Inc. Amended and Restated Change in Control Severance Plan.
*†10.40	L3 Technologies, Inc. Supplemental Executive Retirement Plan.
*†10.41	L3 Technologies, Inc. Deferred Compensation Plan I.
*†10.42	L3 Technologies, Inc. Deferred Compensation Plan II.
10.43	Tax Matters Agreement between L-3 Communications Holdings, Inc. and Engility Holdings, Inc. dated as of July 16, 2012 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File No. 333-46983)).
+10.44	Master Supply Agreement between L-3 Communications Corporation (as Seller) and Engility Corporation (as Buyer) dated as of July 16, 2012 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File No. 333-46983)).

67

Exhibit No.	Description of Exhibits
+10.45	Master Supply Agreement between L-3 Communications Corporation (as Buyer) and Engility Corporation (as Seller) dated as of July 16, 2012 (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File No. 333-46983)).
**11	L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Common Share.
*21	Subsidiaries of the Registrant.
*23	Consent of PricewaterhouseCoopers LLP.
*31.1	Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
*31.2	Certification of Senior Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
*32	Section 1350 Certification.
***101.INS	XBRL Instance Document
***101.SCH	XBRL Taxonomy Extension Schema Document
***101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
***101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
***101.LAB	XBRL Taxonomy Extension Label Linkbase Document
***101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** The information required in this exhibit is presented in Note 15 to the consolidated financial statements as of December 31, 2016 in accordance with the provisions of ASC 260, Earnings Per Share.

*** Filed electronically with this report.

† Represents management contract, compensatory plan or arrangement in which directors and/or executive officers are entitled to participate.

+ Pursuant to a request for confidential treatment, portions of these exhibits have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs at the date they were made or at any other time.

68

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

L3 TECHNOLOGIES, INC.
By:	/s/ Ralph G. D’Ambrosio
Title:	Senior Vice President and Chief Financial Officer

Date: February 23, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on February 23, 2017.

Signature	Title
/s/ Michael T. Strianese	Chairman and Chief Executive Officer (Principal Executive Officer) and Director
Michael T. Strianese
/s/ Ralph G. D’Ambrosio	Senior Vice President and Chief Financial Officer (Principal Financial Officer)
Ralph G. D’Ambrosio
/s/ Dan Azmon	Vice President, Controller and Principal Accounting Officer
Dan Azmon
/s/ Robert B. Millard	Lead Director
Robert B. Millard
/s/ Claude R. Canizares	Director
Claude R. Canizares
/s/ Thomas A. Corcoran	Director
Thomas A. Corcoran
/s/ Ann E. Dunwoody	Director
Ann E. Dunwoody
/s/ Lewis Kramer	Director
Lewis Kramer
/s/ Lloyd W. Newton	Director
Lloyd W. Newton
/s/ Vincent Pagano, Jr.	Director
Vincent Pagano, Jr.
/s/ H. Hugh Shelton	Director
H. Hugh Shelton
/s/ Arthur L. Simon	Director
Arthur L. Simon

69

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014.

	Page No.
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015		F-3
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014		F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014		F-5
Consolidated Statements of Equity for the years ended December 31, 2016, 2015 and 2014		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014		F-7
Notes to Consolidated Financial Statements		F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of L3 Technologies, Inc.:

In our opinion, the accompanying consolidated balance sheets of L3 Technologies, Inc. and its subsidiaries and the related consolidated statements of operations, comprehensive income, equity, and cash flows, present fairly, in all material respects, the financial positions of L3 Technologies, Inc. and its subsidiaries as of December 31, 2016 and 2015, and the results of the operations and the cash flows of L3 Technologies, Inc. and its subsidiaries for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, L3 Technologies, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The management of L3 Technologies, Inc. are responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the internal control over financial reporting of L3 Technologies, Inc. based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 2 to the consolidated financial statements, L3 Technologies, Inc. changed the manner in which it accounts for excess tax benefits on share-based payments in 2016.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 23, 2017

F-2

L3 TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)

	December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	363		$	207
Billed receivables, net of allowances of $13 in 2016 and $15 in 2015		731			746
Contracts in process		2,055			2,081
Inventories		330			333
Other current assets		218			201
Assets of discontinued operations		—			664
Total current assets		3,697			4,232
Property, plant and equipment, net		1,121			1,097
Goodwill		6,560			6,281
Identifiable intangible assets		238			199
Other assets		249			260
Total assets	$	11,865		$	12,069
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	499
Accounts payable, trade		299			297
Accrued employment costs		516			504
Accrued expenses		375			390
Advance payments and billings in excess of costs incurred		492			562
Income taxes payable		22			13
Other current liabilities		431			394
Liabilities of discontinued operations		—			220
Total current liabilities		2,135			2,879
Pension and postretirement benefits		1,177			1,047
Deferred income taxes		236			219
Other liabilities		368			368
Long-term debt		3,325			3,127
Total liabilities		7,241			7,640
Commitments and contingencies (see Note 18)
Equity:
Shareholders’ equity:
Common stock: $.01 par value; 300,000,000 shares authorized, 77,232,204 shares outstanding at December 31, 2016 and 78,133,763 shares outstanding at December 31, 2015		6,285			6,052
Treasury stock (at cost), 82,385,075 shares at December 31, 2016 and 79,375,063 shares at December 31, 2015		(7,224	)		(6,851	)
Retained earnings		6,218			5,728
Accumulated other comprehensive loss		(726	)		(574	)
Total shareholders’ equity		4,553			4,355
Noncontrolling interests		71			74
Total equity		4,624			4,429
Total liabilities and equity	$	11,865		$	12,069

See notes to consolidated financial statements

F-3

L3 TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)

	Year Ended December 31,
	2016			2015			2014
Net sales:
Products	$	6,442		$	6,589		$	6,839
Services		4,069			3,877			4,147
Total net sales		10,511			10,466			10,986
Cost of sales:
Products		(5,785	)		(6,007	)		(6,161	)
Services		(3,718	)		(3,569	)		(3,813	)
Total cost of sales		(9,503	)		(9,576	)		(9,974	)
Loss related to business divestitures		—			(31	)		—
Goodwill impairment charges		—			(384	)		—
Operating income		1,008			475			1,012
Interest expense		(169	)		(169	)		(158	)
Interest and other income, net		18			17			18
Debt retirement charges		(7	)		(1	)		—
Income from continuing operations before income taxes		850			322			872
Provision for income taxes		(189	)		(25	)		(227	)
Income from continuing operations		661			297			645
Income (loss) from discontinued operations, net of income taxes		63			(522	)		32
Net income (loss)		724			(225	)		677
Net income from continuing operations attributable to noncontrolling interests		(14	)		(15	)		(13	)
Net income (loss) attributable to L3	$	710		$	(240	)	$	664
Basic earnings (loss) per share attributable to common shareholders:
Continuing operations	$	8.36		$	3.49		$	7.40
Discontinued operations		0.81			(6.46	)		0.38
Basic earnings (loss) per share	$	9.17		$	(2.97	)	$	7.78
Diluted earnings (loss) per share attributable to common shareholders:
Continuing operations	$	8.21		$	3.44		$	7.20
Discontinued operations		0.80			(6.37	)		0.36
Diluted earnings (loss) per share	$	9.01		$	(2.93	)	$	7.56
Cash dividends declared per common share	$	2.80		$	2.60		$	2.40
Weighted average common shares outstanding:
Basic		77.4			80.7			85.4
Diluted		78.8			81.9			87.8

See notes to consolidated financial statements

F-4

L3 TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)

	Year Ended December 31,
	2016			2015			2014
Net income (loss)	$	724		$	(225	)	$	677
Other comprehensive income (loss):
Foreign currency translation adjustments		(77	)		(120	)		(123	)
Unrealized gains (losses) on hedging instruments(1)		14			(3	)		(6	)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized(2)		30			43			9
Net (loss) gain arising during the period(3)		(119	)		90			(354	)
Net change in pension and postretirement benefit plans		(89	)		133			(345	)
Total other comprehensive (loss) income		(152	)		10			(474	)
Comprehensive income (loss)		572			(215	)		203
Comprehensive income attributable to noncontrolling interests		(14	)		(15	)		(13	)
Comprehensive income (loss) attributable to L3	$	558		$	(230	)	$	190

⁽¹⁾ Net of income taxes of $5 million in 2016, income tax benefits of $2 million in 2015 and $1 million in 2014.

⁽²⁾ Net of income taxes of $18 million in 2016, $24 million in 2015 and $6 million in 2014.

⁽³⁾ Net of income tax benefit of $69 million in 2016, income taxes of $49 million in 2015 and an income tax benefit of $211 million in 2014. The 2015 amount includes $9 million (net of income taxes of $5 million) for the reclassification of actuarial losses into net income related to the Marine Systems International business divestiture in accordance with Accounting Standards Codification 715, Defined Benefit Plans – Pension.

See notes to consolidated financial statements

F-5

L3 TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per share data)

	L3 Common Stock					Additional Paid-in Capital									Accumulated Other Comprehensive Loss
	Shares Outstanding			Par Value					Treasury Stock			Retained Earnings						Noncontrolling Interests			Total Equity
Balance at December 31, 2013		85.8		$	1	$	5,652		$	(5,288	)	$	5,726		$	(110	)	$	75		$	6,056
Net income													664						13			677
Other comprehensive loss																(474	)					(474	)
Distributions to noncontrolling interests																			(13	)		(13	)
Cash dividends declared ($2.40 per share)													(209	)								(209	)
Shares issued:
Employee savings plans		1.2					130															130
Exercise of stock options		1.2					109															109
Employee stock purchase plan		0.3					35															35
Vesting of restricted stock and performance units		0.6
Repurchases of common stock to satisfy tax withholding obligations		(0.2	)				(27	)														(27	)
Stock-based compensation expense							52															52
Treasury stock purchased		(6.9	)							(823	)											(823	)
Retirement of Convertible Contingent Debt Securities							(161	)														(161	)
Other							8															8
Balance at December 31, 2014		82.0			1		5,798			(6,111	)		6,181			(584	)		75			5,360
Net (loss) income													(240	)					15			(225	)
Other comprehensive income																10						10
Distributions to noncontrolling interests																			(16	)		(16	)
Cash dividends declared ($2.60 per share)													(213	)								(213	)
Shares issued:
Employee savings plans		1.1					120															120
Exercise of stock options		0.7					74															74
Employee stock purchase plan		0.3					34															34
Vesting of restricted stock and performance units		0.7
Repurchases of common stock to satisfy tax withholding obligations		(0.3	)				(33	)														(33	)
Stock-based compensation expense							49															49
Treasury stock purchased		(6.4	)							(740	)											(740	)
Other							9															9
Balance at December 31, 2015		78.1			1		6,051			(6,851	)		5,728			(574	)		74			4,429
Net income													710						14			724
Other comprehensive loss																(152	)					(152	)
Distributions to noncontrolling interests																			(17	)		(17	)
Cash dividends declared ($2.80 per share)													(220	)								(220	)
Shares issued:
Employee savings plans		0.9					115															115
Exercise of stock options		0.6					53															53
Employee stock purchase plan		0.4					31															31
Vesting of restricted stock and performance units		0.5
Repurchases of common stock to satisfy tax withholding obligations		(0.3	)				(21	)														(21	)
Stock-based compensation expense							49															49
Treasury stock purchased		(3.0	)							(373	)											(373	)
Other							6															6
Balance at December 31, 2016		77.2		$	1	$	6,284		$	(7,224	)	$	6,218		$	(726	)	$	71		$	4,624

See notes to consolidated financial statements

F-6

L3 TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

	Year Ended December 31,
	2016			2015			2014
Operating activities:
Net income (loss)	$	724		$	(225	)	$	677
Less: (Income) loss from discontinued operations, net of tax		(63	)		522			(32	)
Income from continuing operations		661			297			645
Depreciation of property, plant and equipment		162			166			165
Amortization of intangibles and other assets		44			44			49
Deferred income tax provision (benefit)		43			(66	)		113
Stock-based employee compensation expense		49			46			50
Contributions to employee savings plans in L3's common stock		113			110			119
Goodwill impairment charges		—			384			—
Amortization of pension and postretirement benefit plans net loss and prior service cost		48			67			15
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		8			8			7
Loss related to business divestitures		—			31			—
Other non-cash items		12			(3	)		—
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures, and discontinued operations:
Billed receivables		30			50			39
Contracts in process		14			32			7
Inventories		22			(38	)		—
Other assets		29			(27	)		(17	)
Accounts payable, trade		4			(32	)		(80	)
Accrued employment costs		9			34			(5	)
Accrued expenses		(17	)		14			(14	)
Advance payments and billings in excess of costs incurred		(69	)		(6	)		65
Income taxes		34			(33	)		(7	)
Other current liabilities		19			(2	)		6
Pension and postretirement benefits		(57	)		(8	)		(44	)
All other operating activities		(61	)		1			(25	)
Net cash from operating activities from continuing operations		1,097			1,069			1,088
Investing activities:
Business acquisitions, net of cash acquired		(388	)		(320	)		(57	)
Proceeds from the sale of businesses, net of closing date cash balances		561			318			1
Capital expenditures		(216	)		(197	)		(174	)
Dispositions of property, plant and equipment		21			3			4
Other investing activities		6			4			5
Net cash used in investing activities from continuing operations		(16	)		(192	)		(221	)
Financing activities:
Proceeds from sale of senior notes		547			—			996
Redemption of CODES		—			—			(935	)
Repurchases, redemptions and maturities of senior notes		(856	)		(297	)		—
Borrowings under revolving credit facility		819			1,194			1,367
Repayments of borrowings under revolving credit facility		(819	)		(1,194	)		(1,367	)
Common stock repurchased		(373	)		(740	)		(823	)
Dividends paid on L3's common stock		(220	)		(214	)		(208	)
Proceeds from exercise of stock options		53			48			93
Proceeds from employee stock purchase plan		31			34			35
Debt issue costs		(10	)		—			(8	)
Repurchases of common stock to satisfy tax withholding obligations		(21	)		(33	)		(27	)
Other financing activities		(7	)		(3	)		(16	)
Net cash used in financing activities from continuing operations		(856	)		(1,205	)		(893	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(13	)		(19	)		(17	)
Net cash (used in) from discontinued operations:
Operating activities		(56	)		56			54
Investing activities		—			(5	)		(8	)
Net cash (used in) from discontinued operations		(56	)		51			46
Change in cash balance in assets held for sale		—			61			(61	)
Net increase (decrease) in cash and cash equivalents		156			(235	)		(58	)
Cash and cash equivalents, beginning of the year		207			442			500
Cash and cash equivalents, end of the year	$	363		$	207		$	442

See notes to consolidated financial statements

F-7

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

L-3 Communications Holdings, Inc. (L-3 Holdings), a Delaware corporation organized in April 1997, derived all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications Corporation (L-3 Corp). On December 31, 2016, the Company completed an internal reorganization to eliminate its holding company structure. Pursuant to the reorganization, L-3 Holdings was merged (the Merger) with and into L-3 Corp, with the subsidiary 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. (the Name Change).

As a result of the Merger and the Name Change, all outstanding shares of L-3 Holdings’ common stock were automatically converted into the same number of shares of common stock of L3 Technologies, Inc., with economic, voting and other rights that are substantially identical. The common stock of L3 Technologies, Inc. commenced trading effective January 3, 2017 (the first trading day of 2017) on the New York Stock Exchange under the ticker symbol “LLL”, the same ticker symbol previously used by L-3 Holdings.

L3 Technologies, Inc. (L3 Technologies Inc. and, together with its subsidiaries, referred to herein as L3 or the Company), is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment and security and detection systems. L3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. The Company’s customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers. The Company is the successor of L-3 Communications Holdings, Inc.

The Company has the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Electronic Systems provides a broad range of products and services, including components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical space, airborne, ground and sea-based communication systems. Effective March 1, 2017, the Company will realign its Electronic Systems segment in connection with the retirement of the segment’s president in the second quarter of 2017. The current Electronic Systems segment will be split into two separate segments named (1) Electronic Systems and (2) Sensor Systems. Accordingly, the Company’s structure will consist of the following four segments: (1) Aerospace Systems, (2) Communication Systems, (3) Electronic Systems and (4) Sensor Systems. The Company will report its results under the realigned business segments commencing in the first quarter of 2017 at which time the Company will restate the corresponding information for prior periods. Financial information with respect to each of its segments is included in Note 21.

On December 7, 2015, the Company entered into a definitive agreement to sell its National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS provided cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to the Company’s continuing operations, unless specifically noted. See Note 3 for additional information.

2. Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying financial statements comprise the consolidated financial statements of L3. The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity

F-8

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method. For the classification of contract related assets and liabilities, the Company uses the duration of the related contract or program as its operating cycle, which may be longer than one year, and classifies them as current. Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for L3 relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) products, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Revisions or adjustments to estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to Percentage-of-Completion (POC) accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s results of operations and cash flows, as well as reduce the valuations of receivables and inventories, and in some cases result in liabilities to complete contracts in a loss position. Aggregate net changes in contract estimates amounted to increases of $148 million, or 15%, of consolidated operating income ($1.22 per diluted share) for the year ended December 31, 2016, increases of $52 million, or 11%, of consolidated operating income ($0.45 per diluted share) for the year ended December 31, 2015, and increases of $72 million, or 7%, of consolidated operating income ($0.52 per diluted share) for the year ended December 31, 2014.

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 50% of the Company’s net sales in 2016 were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 9% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a POC method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts).

Sales and profits on fixed-price type contracts that are covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become

F-9

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

evident. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

Sales and profits on cost-plus type contracts that are covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement types. Incentive and award fees are the primary variable fee contractual arrangement types for the Company. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require the Company to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts within the scope of accounting standards for revenue arrangements with commercial customers are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for

F-10

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2016			2015
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	105		$	93
Acquisitions during this period		3			1
Accruals for product warranties issued during the period		51			59
Changes to accruals for product warranties existing before January 1		—			2
Foreign currency translation adjustments		(1	)		(2	)
Settlements made during the period		(49	)		(48	)
Balance at December 31	$	109		$	105

⁽¹⁾ Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method. Deferred debt issuance costs, other than for line-of credit arrangements, are presented in the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the associated debt liability. Deferred debt issue costs for line-of-credit arrangements are presented in the Company’s consolidated balance sheets in other assets.

Pension Plan and Postretirement Benefit Plan Obligations: The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant’s compensation and/or years of service. The Company’s funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon.

The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company’s pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

In accordance with accounting standards for employee pension and postretirement benefits, the Company recognizes on a plan-by-plan basis the unfunded status of its pension and postretirement benefit plans in the consolidated financial statements and measures its pension and postretirement benefit plan assets and benefit obligations as of December 31.

The obligation for the Company’s pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, and rates of return on plan assets, and expected annual rates for salary increases for employee participants in the case of pension plans, and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit obligations. See Note 19, Pensions and Other Employee Benefits for additional information.

F-11

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L3 common stock instead of settling such obligations with cash payments.

Compensation expense for restricted stock unit and stock option awards is generally recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L3 common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period. Stock-based compensation expense is recognized net of estimated forfeitures.

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies. Deferred income tax assets and liabilities are classified as noncurrent in the Company’s balance sheet.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess, obsolete or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

F-12

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by generally applying the straight-line method to the estimated useful lives of the related assets. Useful lives generally range from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property, plant or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill and Indefinite-lived Intangible Assets: The carrying value of goodwill and indefinite-lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2016 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flow valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2016 and 2014. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If the Company’s current estimates indicate that the duration of its customer contractual relationships have decreased, then the Company adjusts the amortization period for those customer contractual relationships to their remaining useful economic life.

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the U.S. dollar, the Euro, the Canadian dollar and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

F-13

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Treasury Stock: The Company records treasury stock purchases at cost, which includes incremental direct transaction costs.

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2016, 2015 and 2014 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated OCI and are only recognized in income when a foreign subsidiary is divested.

Accounting Standards Issued and Not Yet Implemented: In January 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, the Company calculates the fair value of its assets and liabilities (including unrecognized assets and liabilities) as if acquired or assumed in a business combination. Under the amendments in this update the Company will determine the amount of goodwill impairment, by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment is recognized. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company expects the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this standard for the Company will depend on the outcomes of future goodwill impairment tests.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update provide new guidance to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The new guidance requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The new guidance reduces the number of transactions that need to be further evaluated. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2018, with early application permitted. The Company believes that the evaluation of whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses will be simplified under the new standard.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In the adoption year, the Company will be required to recognize and measure all leases using a modified retrospective approach, which requires the restatement of each prior reporting period presented, and permits a number of optional practical expedients that the Company may elect to apply. The optional practical expedients allow the Company to use: (i) its existing assessments under current accounting standards as to the classification of a lease as operating or financing, and whether any expired or existing contracts is or contains a lease, and (ii) hindsight to determine the term of existing leases, for the purpose of restating each prior reporting period presented. The Company is currently evaluating when it will adopt this ASU, whether to elect the optional practical expedients and the expected impact of the adoption of this standard on its consolidated financial statements and disclosures related to leasing activities.

F-14

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provides companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application with disclosure of results under the new and old standards for the first year of adoption.

The Company will adopt the standard as of January 1, 2018, using the modified retrospective transition method and is currently evaluating the expected impact of the adoption on its consolidated financial statements, and related disclosures. Under the modified retrospective transition method, the Company will be required to calculate and record the cumulative effect of adopting the new standard as of January 1, 2018, in the Company’s Quarterly Report on Form 10-Q for the first quarter of 2018. The Company expects to estimate the cumulative effect of adopting the new standard as of January 1, 2018 in the second half of 2017 based on expected contracts in process at December 31, 2017.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. Specifically, the Company has evaluated the impact of the standard on its various revenue streams. Based on progress made to date, the Company expects to recognize revenue over time on most of its contracts that are covered by current contract accounting standards by using cost inputs to measure progress toward the completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on the majority of these contracts. Accordingly, the Company expects the adoption of this standard to primarily impact contracts currently covered by contract accounting standards that recognize revenue using the POC units-of-delivery method. Approximately 20% of the Company’s net sales used the POC units-of-delivery method to recognize revenue in 2016. Upon adoption, the Company expects to recognize revenue earlier in the performance period as costs are incurred, as opposed to when units are delivered, on some of these contracts that currently use the POC units-of-delivery method to recognize revenue.

Additionally, the Company has also made progress on drafting its accounting policies affected by this standard, the redesign of internal controls over financial reporting related to the standard, as well as evaluating the expanded disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, and implement any changes to such business processes, controls and systems over the remainder of 2017.

New Accounting Standards Implemented: In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits are classified as an operating activity on the statement of cash flows. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 16 for additional information.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 during

F-15

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

the quarterly period ended December 31, 2016, with retrospective application to the consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014. The adoption of ASU 2016-15 resulted in changes in the classification on the statement of cash flows relating to payments of debt extinguishment costs and original issue discounts of $11 million and $1 million, for the years ended December 31, 2016 and 2015, respectively. These payments would have been previously classified in cash flows from operations, and are now classified in cash flows from financing activities.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

3. Acquisitions and Divestitures

Business Acquisitions

The business acquisitions discussed below are included in the Company’s results of operations from their respective dates of acquisition.

2016 Business Acquisitions

MacDonald Humfrey (Automation) Limited Acquisition. On November 22, 2016, the Company acquired MacDonald Humfrey (Automation) Limited, renamed L3 MacDonald Humfrey, for a purchase price of £263 million (approximately $327 million). The purchase price is subject to additional, contingent consideration not to exceed £30 million (approximately $38 million), and is based on L3 MacDonald Humfrey’s post-acquisition financial performance for the three-year period ending December 31, 2019. The Company recorded a £23 million (approximately $29 million) liability on the acquisition date for the fair value of the contingent consideration. The acquisition was funded from cash on hand and revolving credit borrowings that were repaid before the end of 2016. The final purchase price allocation, which is expected to be completed in the third quarter of 2017, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position. L3 MacDonald Humfrey is a globally recognized leader in the deployment of operationally effective and efficient aviation checkpoint security solutions, as well as in the development of state-of-the-art process automation and collaborative robotic capabilities supporting aviation and other adjacent markets. The goodwill recognized for this business was £205 million (approximately $252 million), which was assigned to the Electronics Systems reportable segment, and is not expected to be deductible for income tax purposes. The Company also recognized identifiable intangible assets of £43 million (approximately $53 million) in the aggregate, which consisted of £22 million (approximately $27 million) for technology and £21 million (approximately $26 million) for customer relationships. Identifiable intangible assets will be amortized over a weighted average useful life of 10 years.

Micreo Limited and Aerosim Acquisitions. On September 30, 2016, the Company acquired Micreo Limited (Micreo) and Flight Training Acquisitions LLC (Aerosim), in separate transactions, for an aggregate purchase price of approximately $86 million, which was financed with cash on hand. The final purchase prices are subject to customary adjustments for final working capital. The final purchase price allocations, which are expected to be completed in the second quarter of 2017, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position. Micreo specializes in solutions that utilize high-performance microwave, millimeter wave and photonic technology that complements the Company’s wide range of sensor products and is expected to strengthen the development of the Company’s future products in the higher Electronic Warfare (EW) radio frequency (RF) bandwidth. Micreo currently supports a variety of airborne, land and security programs in Australia. Aerosim provides innovative, portable and flexible pilot and maintenance technician training products and provides a flight school for prospective airline pilots. Aerosim’s commercial training capabilities are complementary to those offered by L3 Commercial Training Solutions. The aggregate goodwill recognized for these businesses was $61 million, which was assigned to the Electronic Systems reportable segment, of which $6 million is expected to be deductible for income tax purposes.

Advanced Technical Materials, Inc. (ATM) Acquisition. On January 22, 2016, the Company acquired the assets of ATM for a purchase price of $27 million, which was financed with cash on hand. The purchase price and purchase

F-16

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

price allocation of ATM was finalized as of September 23, 2016, with no significant changes to preliminary amounts. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components. The goodwill recognized for this business was $20 million, which was assigned to the Communication Systems reportable segment, all of which is expected to be deductible for income tax purposes.

Net sales and income before income taxes for L3 MacDonald Humfrey, Micreo, Aerosim and ATM, included in L3’s consolidated statement of operations for the year ended December 31, 2016, are presented in the table below.

	Year Ended December 31, 2016
	(in millions)
Net sales	$	37
Income before income taxes	$	7

2015 Business Acquisitions

ForceX, Inc. Acquisition. On October 13, 2015, the Company acquired ForceX, Inc., renamed L3 ForceX, for a purchase price of $61 million, which was financed with cash on hand. The purchase price and purchase price allocation of L3 ForceX was finalized as of September 23, 2016, with no significant changes to preliminary amounts. L3 ForceX specializes in ISR mission management software and geospatial application technology programs, offering an array of advanced products, including cueing system software, hardware and video algorithms, and wide-area sensor integration solutions and software. L3 ForceX’s proprietary processing, exploitation and dissemination capabilities provide an integrated tactical operational picture, allowing users to make critical decisions in real time. L3 ForceX also supports several key DoD ISR initiatives and classified programs. L3 ForceX’s customer base includes the U.S. Air Force, U.S. Special Operations Command, the Naval Surface Warfare Center and a variety of DoD agencies. The goodwill recognized for this business was $53 million, which was assigned to the Electronic Systems reportable segment, of which $52 million is expected to be deductible for income tax purposes.

CTC Aviation Group Acquisition. On May 27, 2015, the Company acquired CTC Aviation Group, renamed L3 CTC Ltd. (L3 CTC), for a purchase price of £153 million (approximately $236 million), which was financed with cash on hand. The purchase price and purchase price allocation of L3 CTC was finalized as of June 24, 2016, with no significant changes to preliminary amounts. L3 CTC is a global airline pilot training and crew resourcing specialist, based in the United Kingdom, which offers customized and innovative solutions to major airlines and flight training customers globally. L3 CTC expands L3’s commercial aviation training business to encompass a growing portfolio of airline and third-party training company customers. The goodwill recognized for this business was £118 million (approximately $182 million), which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes.

MITEQ, Inc. Acquisition. On January 21, 2015, the Company acquired the assets of MITEQ, Inc. (Miteq) for a purchase price of $41 million, which was financed with cash on hand. The purchase price and purchase price allocation of Miteq was finalized as of September 25, 2015, with no significant changes to preliminary amounts. Miteq was combined with the Company’s Narda Microwave-East business and the new organization was re-named L3 Narda-Miteq. Miteq offers a broad product line of active and passive RF microwave components and low-power satellite communications (SATCOM) products for space and military applications that complement the existing Narda Microwave East product line. The combined L3 Narda-Miteq business provides products for the DoD, other U.S. Government agencies, prime contractors and commercial customers. The goodwill recognized for this business was $11 million, of which $4 million is expected to be deductible for income tax purposes. The goodwill was assigned to the Communication Systems reportable segment.

2014 Business Acquisition

Data Tactics Corporation Acquisition. On March 4, 2014, the Company acquired Data Tactics Corporation, renamed L3 Data Tactics, for a purchase price of $57 million, which was financed with cash on hand. The purchase price and purchase price allocation for L3 Data Tactics was finalized as of December 31, 2014, with no significant changes to preliminary amounts. L3 Data Tactics is a specialized provider of large-scale data analytics, cybersecurity and cloud computing solution services, primarily to the DoD. Based on the final purchase price allocation, the

F-17

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

goodwill recognized for this business was $39 million, which was assigned to the former NSS reportable segment and is included in discontinued operations for the year ended December 31, 2015. On February 1, 2016, L3 Data Tactics was sold to CACI International Inc. in conjunction with the sale of the NSS business.

Business Acquisitions Completed After December 31, 2016

Implant Sciences Acquisition. On October 10, 2016, the Company entered into an asset purchase agreement (APA), to acquire certain assets of Implant, at which time Implant entered into Chapter 11 bankruptcy protection of the U.S. Bankruptcy Code. In December 2016, Implant received the U.S. Bankruptcy Court approval to consummate the APA. Implant’s ETD products have received approvals and certifications from several international regulatory agencies. Implant bolsters the Company’s leadership in efficient, scalable security solutions and greatly enhances its capabilities in the global aviation security and national security markets. On January 5, 2017, the Company completed the acquisition of the explosive trace detection (ETD) business of Implant Sciences Corporation (Implant), for a purchase price of $118 million, in addition to the assumption of specified liabilities, which was financed with cash on hand.

Discontinued Operations

As discussed in Note 1, on February 1, 2016, the Company completed the sale of its NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents the statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation and includes allocated interest expense for debt not directly attributable or related to L3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L3 consolidated net assets and (2) L3 consolidated total debt.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net sales	$	86		$	1,088		$	1,138
Cost of sales		(92	)		(1,040	)		(1,065	)
Gain related to business divestiture(1)		64			—			—
Goodwill impairment charges		—			(571	)		—
Operating income (loss) from discontinued operations		58			(523	)		73
Interest expense allocated to discontinued operations		—			(20	)		(20	)
Income (loss) from discontinued operations before income taxes		58			(543	)		53
Income tax benefit (expense)		5			21			(21	)
Income (loss) from discontinued operations, net of income taxes	$	63		$	(522	)	$	32

⁽¹⁾ The year ended December 31, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

F-18

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31, 2015
	(in millions)
Assets
Current assets	$	201
Property, plant and equipment, net		25
Goodwill(1)		390
Other assets		48
Total assets of discontinued operations	$	664
Liabilities
Accounts payable, trade	$	48
Other current liabilities		78
Current liabilities		126
Long-term liabilities		94
Total liabilities of discontinued operations	$	220

⁽¹⁾ The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L3 and NSS business sold.

Business Divestitures

2015 Business Divestitures

During the year ended December 31, 2015, the Company completed the sales of Marine Systems International (MSI), Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture			Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17	)	$	318	$	185
BSI divestiture		(4	)		26		7
Tinsley Product Line divestiture		(8	)		4		9
Klein divestiture		(2	)		10		8
Total	$	(31	)	$	358	$	209

MSI Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a sales price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. The Company recorded a pre-tax loss

F-19

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

of $17 million ($6 million after income taxes) for the year ended December 31, 2015, related to the divestiture of MSI. The loss is comprised of: (1) $17 million for a non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI.

BSI Divestiture. On April 24, 2015, the Company divested its BSI business for a sales price of $26 million. BSI provided wireless technology and communications systems services for use in the field of sports television broadcasting, and was included in the Sensor Systems sector of the Electronic Systems segment. The Company recorded a pre-tax loss of $4 million ($6 million after income taxes) during the year ended December 31, 2015, related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sales price of $4 million. Tinsley provided optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes) for the year ended December 31, 2015.

Klein Divestiture. On December 31, 2015, the Company divested its Klein business for a sales price of $10 million. Klein provided side scan sonar equipment and waterside security and surveillance systems, and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes) for the year ended December 31, 2015.

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December 31,
	2015		2014
	(in millions)
Net sales	$	209	$	596
Income before income taxes	$	—	$	27

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the years ended December 31, 2016 and 2015 assuming that the business acquisitions completed during 2016 and 2015 had occurred on January 1, 2015 and January 1, 2014, respectively. The unaudited pro forma Statements of Operations data below includes adjustment for additional amortization expense related to acquired intangible assets, depreciation and estimated reduction to interest income assuming the 2016 and 2015 acquisitions had occurred on January 1, 2015 and January 1, 2014, respectively.

	Year Ended December 31,
	2016		2015
	(in millions, except per share data)
Pro forma net sales	$	10,655	$	10,700
Pro forma income from continuing operations attributable to L3	$	660	$	307
Pro forma net income (loss) attributable to L3	$	723	$	(215	)
Pro forma diluted earnings per share from continuing operations	$	8.38	$	3.74
Pro forma diluted earnings (loss) per share	$	9.18	$	(2.63	)

The unaudited pro forma results disclosed in the table above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed these acquisitions on the dates indicated above.

F-20

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

4. Contracts in Process

The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments principally relate to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government. In connection with contracts in process assumed by the Company in its business acquisitions, the underlying contractual customer relationships are separately recognized as identifiable intangible assets at the date of acquisition, and are discussed and presented in Note 6.

	December 31,
	2016			2015
	(in millions)
Unbilled contract receivables, gross	$	2,020		$	2,120
Unliquidated progress payments		(827	)		(892	)
Unbilled contract receivables, net		1,193			1,228
Inventoried contract costs, gross		1,065			975
Unliquidated progress payments		(203	)		(122	)
Inventoried contract costs, net		862			853
Total contracts in process	$	2,055		$	2,081

Unbilled Contract Receivables. Unbilled contract receivables represent accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as sales, but have not yet been billed to customers. Unbilled contract receivables arise from the cost-to-cost method of revenue recognition that is used to record sales on certain fixed-price contracts. Unbilled contract receivables from fixed-price type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. Unbilled contract receivables also arise from cost-plus type contracts, time-and-material type contracts and fixed-price service type contracts for revenue amounts that have not been billed by the end of the accounting period due to the timing of preparation of invoices to customers. The Company believes that approximately 95% of the unbilled contract receivables, net at December 31, 2016 will be billed and collected within one year.

Unliquidated Progress Payments. Unliquidated progress payments arise from fixed-price type contracts with the U.S. Government that contain progress payment clauses, and represent progress payments on invoices that have been collected in cash, but have not yet been liquidated. Progress payment invoices are billed to the customer as contract costs are incurred at an amount generally equal to 80% of incurred costs. Unliquidated progress payments are liquidated as deliveries or other contract performance milestones are completed, at an amount equal to a percentage of the contract sales price for the items delivered or work performed, based on a contractual liquidation rate. Therefore, unliquidated progress payments are a contra asset account, and are classified against unbilled contract receivables if revenue for the underlying contract is recorded using the cost-to-cost method, and against inventoried contract costs if revenue is recorded using the units-of-delivery method.

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their G&A, IRAD and B&P costs that are allowable and reimbursable indirect contract costs under U.S. Government procurement regulations on their U.S. Government contracts (revenue arrangements) as inventoried contract costs. G&A, IRAD and B&P costs are allocated to contracts for which the U.S. Government is the end customer and are charged to costs of sales when sales on the related contracts are recognized. The Company’s U.S. Government contractor businesses record the unallowable portion of their G&A, IRAD and B&P costs to expense as incurred, and do not include them in inventoried contract costs.

F-21

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	137		$	114		$	121
Contract costs incurred:
IRAD and B&P		308			284			270
Other G&A		839			822			804
Total		1,147			1,106			1,074
Amounts charged to cost of sales		(1,111	)		(1,083	)		(1,081	)
Amounts included in inventoried contract costs at end of the year	$	173		$	137		$	114

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the consolidated statements of operations.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Selling, general and administrative expenses	$	223	$	261	$	297
Research and development expenses		54		52		63
Total	$	277	$	313	$	360

5. Inventories

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2016		2015
	(in millions)
Raw materials, components and sub-assemblies	$	165	$	164
Work in process		106		103
Finished goods		59		66
Total	$	330	$	333

6. Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. As part of the purchase price allocations for the Company’s business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, the Company does not recognize any intangible assets apart from goodwill for the assembled workforces of its business acquisitions. At December 31, 2016, the Company had approximately 38,000 employees, and the substantial majority of the sales generated by the Company’s businesses were from the productive labor efforts of its employees, as compared to selling manufactured products or right-to-use technology.

F-22

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Generally, the largest intangible assets from the businesses that the Company acquires are the assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of the Company’s businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of its employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of its businesses, the Company’s ability to attract and retain employees who have U.S. Government security clearances, particularly those of top-secret and above, is critical to its success, and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for the Company’s acquired businesses. Furthermore, the Company’s U.S. Government contracts (revenue arrangements) generally permit other companies to use the Company’s patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill in accordance with the accounting standards for business combinations, the substantial majority of the intangible assets for the Company’s business acquisitions is recognized as goodwill. Additionally, the value assigned to goodwill for the Company’s business acquisitions also includes the value that the Company expects to realize from cost reduction measures that it implements for its acquired businesses.

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems			Aerospace Systems			Communication Systems			Consolidated Total
	(in millions)
Balance at December 31, 2014
Goodwill	$	3,816		$	1,730		$	1,024		$	6,570
Accumulated impairment losses		(43	)		—			(15	)		(58	)
		3,773			1,730			1,009			6,512
Business acquisitions(1)		233			—			11			244
Business divestitures(2)		(20	)		—			—			(20	)
Business retained from NSS divestiture		26			—			2			28
Goodwill impairment charges		(26	)		(338	)		(20	)		(384	)
Foreign currency translation adjustments(3)		(61	)		(39	)		1			(99	)
Balance at December 31, 2015
Goodwill		3,994			1,691			1,038			6,723
Accumulated impairment losses(4)		(69	)		(338	)		(35	)		(442	)
		3,925			1,353			1,003			6,281
Business acquisitions(1)		315			—			20			335
Foreign currency translation adjustments(3)		(63	)		7			—			(56	)
Balance at December 31, 2016
Goodwill		4,246			1,698			1,058			7,002
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	4,177		$	1,360		$	1,023		$	6,560

⁽¹⁾ For the year ended December 31, 2016, the net increase in goodwill for the Electronic Systems segment was due to the L3 MacDonald Humfrey, Aeroism and Micreo business acquisitions, as well as the final purchase price allocations for the L3 ForceX and L3 CTC business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition. For the year ended December 31, 2015, the net increase in goodwill for the Electronic Systems segment was due to the L3 CTC and L3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition.

⁽²⁾ For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

F-23

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

⁽³⁾ During 2016, the decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, the Euro and the Australian dollar, offset by the weakening of the U.S. dollar against the Canadian dollar. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar. During 2015, the decrease in goodwil presented in the Electronic Systems segment was primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. The decrease in goodwill presented in the Aerospace Systems segment was due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽⁴⁾ The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

As discussed in Note 2, the carrying value of goodwill is tested for impairment annually as of November 30 and on an interim basis, using a two-step process, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Vertex Aerospace business as a result of the decline in their projected future cash flows. The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations and are summarized below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L3 Consolidated
	(in millions)
Vertex Aerospace reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Identifiable Intangible Assets. The most significant identifiable intangible assets that are separately recognized for the Company’s business acquisitions is customer contractual relationships. All of the Company’s customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from the customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2016								December 31, 2015
	Weighed Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)		(in millions)
Customer contractual relationships		15	$	409	$	269	$	140	$	370	$	246	$	124
Technology		11		191		102		89		156		91		65
Other		18		21		12		9		21		11		10
Total		14	$	621	$	383	$	238	$	547	$	348	$	199

F-24

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Amortization expense	$	35	$	35	$	39

Based on gross carrying amounts at December 31, 2016, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2017 through 2021 is presented in the table below.

	Year Ending December 31,
	2017		2018		2019		2020		2021
	(in millions)
Estimated amortization expense	$	39	$	35	$	32	$	28	$	24

7. Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2016		2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	70	$	75
Accrued product warranty costs		68		70
Accruals for pending and threatened litigation (see Note 18)(1)		51		6
Accrued interest		43		45
Deferred revenues		34		32
Product returns allowance(2)		5		20
Other		160		146
Total other current liabilities	$	431	$	394

⁽¹⁾ The year ended December 31, 2016, includes $14 million accrued in the third quarter of 2016 in connection with the EoTech matter.

⁽²⁾ In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech HWS products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015 associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $38 million. Accordingly, during 2016 the product returns allowance was increased by $18 million as a reduction to net sales. The product returns allowance, net of refund payments made to eligible owners, was $5 million at December 31, 2016. As of February 3, 2017, the Company had approved refunds at a cost of approximately $35 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material.

F-25

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The table below presents the components of other liabilities.

	December 31,
	2016		2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	124	$	161
Deferred compensation		47		45
Accrued product warranty costs		41		35
Accrued workers’ compensation		30		38
Estimated contingent purchase price payable for acquired businesses (see Note 3)		29		—
Notes payable and capital lease obligations		13		10
Other		84		79
Total other liabilities	$	368	$	368

8. Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2016			2015
	(in millions)
Land	$	54		$	60
Buildings and improvements		438			431
Machinery, equipment, furniture and fixtures		1,890			1,736
Leasehold improvements		344			343
Gross property, plant and equipment		2,726			2,570
Accumulated depreciation and amortization		(1,605	)		(1,473	)
Property, plant and equipment, net	$	1,121		$	1,097

9. Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Borrowings under Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		—			500
1.50% Senior Notes due 2017		—			350
5.20% Senior Notes due 2019		1,000			1,000
4.75% Senior Notes due 2020		800			800
4.95% Senior Notes due 2021		650			650
3.95% Senior Notes due 2024		350			350
3.85% Senior Notes due 2026		550			—
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(8	)		(8	)
Deferred debt issue costs		(17	)		(16	)
Carrying amount of long-term debt		3,325			3,626
Current portion of long-term debt		—			(499	)
Carrying amount of long-term debt, excluding current portion	$	3,325		$	3,127

⁽¹⁾ During 2016, L3's aggregate borrowings and repayments under the Credit Facility were $819 million. L3 had the full availability of its $1 billion Credit Facility at December 31, 2016 and December 31, 2015.

F-26

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

L3 Revolving Credit Facility

On October 31, 2016, L3 entered into a new five year unsecured revolving credit facility (Credit Facility), which replaced its amended and restated revolving credit agreement dated February 3, 2012. The Credit Facility provides for total aggregate borrowings of $1 billion and any outstanding borrowings under the Credit Facility are due and payable on October 31, 2021. Borrowings under the Credit Facility may consist of: (1) base rate loans, which shall bear interest at a rate equal to the sum of the applicable rate (as defined in the Credit Facility), and the “base rate” (as defined in the Credit Facility) and/or (2) eurodollar loans, which shall bear interest at a rate equal to the sum of the applicable rate plus the “Eurodollar rate” (as defined in the Credit Facility). The applicable rate for base rate loans under the Credit Facility ranges from 0.125% to 1.000%, and the applicable rate for eurodollar loans ranges from 1.125% to 2.000%, in each case based on the long-term debt rating of L3. In addition, the Credit Facility provides for uncommitted incremental revolving facilities and additional term loan facilities in an aggregate principal amount of up to $600 million.

L3 Senior Notes

The Senior Notes are unsecured senior obligations of L3. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance	Amount Issued		Discount(1)		Net Cash Proceeds			Effective Interest Rate			Redemption at Treasury Rate(2)(3)
		(in millions)
5.20% Senior Notes due October 15, 2019	October 2, 2009	$	1,000	$	4	$	987			5.25	%	30 bps
4.75% Senior Notes due July 15, 2020	May 21, 2010	$	800	$	3	$	790			4.79	%	25 bps
4.95% Senior Notes due February 15, 2021	February 7, 2011	$	650	$	4	$	639			5.02	%	25 bps
3.95% Senior Notes due May 28, 2024	May 28, 2014	$	650	$	3	$	641	(4)		4.02	%	20 bps
3.85% Senior Notes due December 15, 2026	December 5, 2016	$	550	$	3	$	542			3.91	%	25 bps

⁽¹⁾ Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾ The Senior Notes maturing in 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 and 2026 may be redeemed at any time prior to February 28, 2024 and September 15, 2026, respectively, (three months prior to their maturity) at the option of L3, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 and 2026 are redeemed at any time on or after February 28, 2024 and September 15, 2026, respectively, the redemption price would be equal to 100% of the principal amount.

⁽³⁾ Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L3 to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾ The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

Issuance of Senior Notes

On December 5, 2016, the Company issued $550 million aggregate principal amount of 3.85% Senior Notes that mature on December 15, 2026 (the 2026 Notes). The 2026 Notes were issued at a bond discount of $3 million. The net cash proceeds of $542 million from the offering plus cash on hand were used primarily to: (1) replenish the amount of cash used, and the amount of revolving credit borrowings drawn, to repay $200 million aggregate principal amount of its 3.95% Senior Notes which matured on November 15, 2016 (the 2016 Notes), and (2) redeem all of its outstanding 1.50% Senior Notes due May 28, 2017 (the 2017 Notes), which had an aggregate principal amount of $350 million.

F-27

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Repurchases, Redemptions and Maturities of Senior Notes

The repurchases, redemptions and maturities of Senior Notes are presented in the table below.

Note	Settlement Type	Date Settled	Aggregate Amount		Debt Retirement Charge		Cash Payments
			(in millions)
1.50% Senior Notes due 2017(1)	Redemption	December 30, 2016	$	350	$	2	$	351
3.95% Senior Notes due 2016	Maturity	November 15, 2016	$	200	$	—	$	200
3.95% Senior Notes due 2016(2)	Redemption	May 20, 2016	$	300	$	5	$	305
3.95% Senior Notes due 2024	Tender Offer	December 22, 2015	$	300	$	1	$	297
CODES due 2035(3)	Redemption	June 20, 2014	$	689	$	—	$	935

⁽¹⁾ The 1.50% Senior Notes due 2017 were redeemed at a price equal to 100.323%of the principal amount thereof,plus accrued and unpaid interest to the redemption date. Interest ceased to accrue on and after the redemption date.

⁽²⁾ The 3.95% Senior Notes due 2016 were redeemed at a price equal to 101.475% of the principal amount thereof, plus accrued and unpaid interest. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive payment of the Redemption Price and accrued interest.

⁽³⁾ In 2005, L3 sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, L3 repurchased approximately $11 million of the CODES. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L3 settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014.

Guarantees

The borrowings under the Credit Facility are fully and unconditionally guaranteed by L3 and by substantially all of the material 100% owned domestic subsidiaries of L3 on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L3’s material 100% owned domestic subsidiaries that guarantee any of its other indebtedness.

Subordination

The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

Covenants

Financial and other restrictive covenants. The Credit Facility contains financial and other restrictive covenants that limit, among other things, the ability of the subsidiaries of L3 to borrow additional funds, and the ability of L3 and its subsidiaries to incur liens, make investments, merge or consolidate or dispose of assets. The Company’s Credit Facility contains covenants that require that: (1) the Company’s consolidated interest coverage ratio be greater than or equal to 3.0 to 1.0, (2) the Company’s consolidated leverage ratio be less than or equal to 3.75 to 1.0, provided that the foregoing consolidated leverage ratio shall be increased to 4.0 to 1.0 as of the end of each of the four fiscal quarters immediately following a material acquisition (as defined in the Credit Facility). Calculations of the financial covenants are to exclude, among other things, certain items such as impairment losses on goodwill or other intangible assets, non-cash gains or losses from discontinued operations, gains or losses in connection with asset dispositions, and gains or losses with respect to judgments or settlements in connection with litigation matters. At December 31, 2016, the Company was in compliance with its financial and other restrictive covenants.

The indentures governing the Senior Notes (Senior Indentures) contain covenants customary for investment grade notes, including covenants that restrict the ability of L3 and its 100% owned domestic subsidiaries to create, incur, assume or permit to exist any lien, except permitted liens (as defined in the Senior Indentures) and restrict the ability of L3 and its subsidiaries to enter into certain sale and leaseback transactions (as defined in the Senior Indentures).

F-28

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Cross default provisions. The Credit Facility contains cross default provisions that are triggered when a payment default occurs or certain other defaults occur that would allow the acceleration of indebtedness, swap contracts or guarantees of L3 or its subsidiaries, so long as the aggregate amount of such indebtedness, swap contracts or guarantees is at least $75 million and such defaults (other than payment defaults and defaults that have resulted in acceleration) have not been cured within 10 days. The Senior Notes indenture contains a cross acceleration provision that is triggered when a default or acceleration occurs under any indenture or instrument of L3 or its subsidiaries or the payment of which is guaranteed by L3 or its subsidiaries in an aggregate amount of at least $100 million.

10. Accumulated Other Comprehensive (Loss) Income (AOCI)

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency translation			Unrealized gains (losses) on hedging instruments			Unrecognized (losses) gains and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2013	$	142		$	1		$	(253	)	$	(110	)
Other comprehensive loss before reclassifications, net of tax		(123	)		(13	)		(354	)		(490	)
Amounts reclassified from AOCI, net of tax		—			7			9			16
Net current period other comprehensive (loss)		(123	)		(6	)		(345	)		(474	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive (loss) income before reclassifications, net of tax		(161	)		(15	)		81			(95	)
Amounts reclassified from AOCI, net of tax		41			12			52			105
Net current period other comprehensive (loss) income		(120	)		(3	)		133			10
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(77	)		3			(119	)		(193	)
Amounts reclassified from AOCI, net of tax		—			11			30			41
Net current period other comprehensive (loss) income		(77	)		14			(89	)		(152	)
Balance at December 31, 2016	$	(178	)	$	6		$	(554	)	$	(726	)

F-29

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)									Affected Line Item in the Audited Consolidated Statements of Operations
	Year Ended December 31,
Details About AOCI Components	2016			2015			2014
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	—		$	(41	)	$	—		Loss related to business divestitures
		—			(41	)		—		Income from continuing operations before income taxes
	$	—		$	(41	)	$	—		Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	(2	)	$	—		Loss related to business divestitures
Other		(13	)		(16	)		(8	)	Cost of sales-products
		(13	)		(18	)		(8	)	Income from continuing operations before income taxes
		2			6			1		Provision for income taxes
	$	(11	)	$	(12	)	$	(7	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	(14	)	$	—		Loss related to business divestitures
Net loss		(48	)		(67	)		(15	)	(b)
		(48	)		(81	)		(15	)	Income from continuing operations before income taxes
		18			29			6		Provision for income taxes
	$	(30	)	$	(52	)	$	(9	)	Income from continuing operations
Total reclassification for the period	$	(41	)	$	(105	)	$	(16	)	Income from continuing operations

^(a) Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b) Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

11. Equity

On December 4, 2014, L3’s Board of Directors approved a share repurchase program that authorizes L3 to repurchase up to $1.5 billion of its common stock through June 30, 2017. Repurchases of L3’s common stock are made from time to time at management’s discretion in accordance with applicable U.S. Federal securities laws. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including, but not limited to, the Company’s financial position, earnings, legal requirements, other investment opportunities (including acquisitions) and market conditions. L3 repurchased 3.0 million shares of its common stock at an average price of $123.95 per share for an aggregate amount of $373 million from January 1, 2016 through December 31, 2016. All share repurchases of L3’s common stock have been recorded as treasury shares. At December 31, 2016, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $433 million. From January 1, 2017 through February 17, 2017, L3 did not repurchase shares of its common stock.

F-30

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

On February 13, 2017, L3’s Board of Directors declared a quarterly cash dividend of $0.75 per share, payable on March 15, 2017 to shareholders of record at the close of business on March 1, 2017. During the year ended December 31, 2016, the Company paid $220 million of cash dividends. Payments of previously accrued dividends for employee held stock awards were offset by accrued dividends to be paid in future periods.

12. Fair Value Measurements

L3 applies the accounting standards for fair value measurements to all of the Company’s assets and liabilities that are measured and recorded at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. The standards establish a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs.

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2016						2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	104	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		12		—		—		2		—
Total assets	$	104	$	12	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	6	$	—	$	—	$	16	$	—
Contingent consideration(4)		—		—		29		—		—		—
Total liabilities	$	—	$	6	$	29	$	—	$	16	$	—

⁽¹⁾ Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾ Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾ Level 3 is based on pricing inputs that are not observable and not corroborated by market data.

⁽⁴⁾ The contingent consideration liability represents the future potential earn-out payments relating to the L3 MacDonald Humfrey acquisition. The fair value of the contingent consideration liability is based on a Monte Carlo Simulation of the aggregate revenue of L3 MacDonald Humfrey for the three-year period ending December 31, 2019. The significant unobservable inputs used in calculating the fair value of the contingent consideration include: (i) projected revenues of the L3 MacDonald Humfrey acquired business, (ii) company specific risk premium, which is a component of the discount rate applied to the revenue projections, (iii) and volatility. The fair value of the contingent consideration for potential earn-out payments is reassessed quarterly, including an analysis of the significant inputs used in the evaluation, as well as the accretion of the present value discount. Changes are reflected within cost of sales in the consolidated statements of operations.

F-31

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

13. Financial Instruments

At December 31, 2016 and 2015, the Company’s financial instruments consisted primarily of cash and cash equivalents, billed receivables, trade accounts payable, Senior Notes, and foreign currency forward contracts. The carrying amounts of cash and cash equivalents, billed receivables and trade accounts payable are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2016				December 31, 2015
	Carrying Amount		Estimated Fair Value		Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,325	$	3,526	$	3,626		$	3,754
Foreign currency forward contracts(2)	$	6	$	6	$	(14	)	$	(14	)

⁽¹⁾ The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾ The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

14. Derivative Financial Instruments

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2016.

Currency	Notional Amount
	(in millions)
U.S. dollar	$	117
Euro		109
Canadian dollar		96
British pound		28
Other		8
Total	$	358

At December 31, 2016, the Company’s foreign currency forward contracts had maturities through 2021.

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2016								December 31, 2015
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1)	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1

⁽¹⁾ See Note 12 for a description of the fair value hierarchy related to the Company's foreign currency forward contracts.

The effects from foreign currency forward contracts on the consolidated statements of operations were a pre-tax loss of $13 million for the year ended December 31, 2016, a pre-tax loss of $18 million for the year ended December 31, 2015, and a pre-tax loss of $8 million for the year ended December 31, 2014. At December 31, 2016, the estimated net amount of existing gains that are expected to be reclassified into income within the next 12 months is $5 million.

F-32

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

15. L3’s Earnings Per Share

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	724		$	(225	)	$	677
Net income from continuing operations attributable to noncontrolling interests		(14	)		(15	)		(13	)
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) attributable to L3’s common shareholders:
Continuing operations	$	647		$	282		$	632
Discontinued operations, net of income tax		63			(522	)		32
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) per share attributable to L3’s common shareholders:
Basic:
Weighted average common shares outstanding		77.4			80.7			85.4
Basic earnings (loss) per share:
Continuing operations	$	8.36		$	3.49		$	7.40
Discontinued operations, net of income tax		0.81			(6.46	)		0.38
Net income (loss)	$	9.17		$	(2.97	)	$	7.78
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.4			80.7			85.4
Assumed exercise of stock options		2.6			2.4			3.0
Unvested restricted stock awards		1.0			1.3			1.6
Employee stock purchase plan contributions		0.1			0.1			—
Performance unit awards		0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.4	)		(2.7	)		(3.1	)
Assumed conversion of the CODES(1)		—			—			0.8
Common and potential common shares		78.8			81.9			87.8
Diluted earnings (loss) per share:
Continuing operations	$	8.21		$	3.44		$	7.20
Discontinued operations, net of income tax		0.80			(6.37	)		0.36
Net income (loss)	$	9.01		$	(2.93	)	$	7.56

⁽¹⁾ The CODES were retired on June 20, 2014 and were dilutive for the year ended December 31, 2014 as the average market price of L3’s common stock during the period that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L3’s common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71.

The computation of diluted EPS excluded shares for stock options and employee stock purchase plan contributions of 0.4 million, 0.6 million and 0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, as they were anti-dilutive.

F-33

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

16. Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Domestic	$	654	$	192	$	707
Foreign		196		130		165
Income from continuing operations before income taxes	$	850	$	322	$	872

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2016		2015			2014
	(in millions)
Current income tax provision:
Federal	$	88	$	60		$	78
State and local		10		5			1
Foreign		48		26			35
Subtotal		146		91			114
Deferred income tax provision/(benefit):
Federal		37		(67	)		101
State and local		6		(1	)		11
Foreign		—		2			1
Subtotal		43		(66	)		113
Total provision for income taxes	$	189	$	25		$	227

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.3			2.0			2.1
Foreign income taxes		(2.9	)		(14.2	)		(3.6	)
Manufacturing benefits		(2.2	)		(3.7	)		(1.7	)
Research and experimentation and other tax credits		(4.4	)		(12.9	)		(4.3	)
Resolution of tax contingencies		(2.9	)		(2.8	)		(1.0	)
Tax deductible dividends		(0.9	)		(2.3	)		(0.8	)
Equity compensation - excess income tax benefits		(2.0	)		—			—
Goodwill impairment		—			6.6			—
Other, net		0.2			0.1			0.3
Effective income tax rate on continuing operations		22.2	%		7.8	%(1)		26.0	%

⁽¹⁾ In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

F-34

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Deferred tax assets:
Inventoried costs	$	63		$	56
Compensation and benefits		152			147
Pension and postretirement benefits		415			354
Loss carryforwards		18			12
Tax credit carryforwards		6			6
Other		89			79
Deferred tax assets		743			654
Less: valuation allowance		(12	)		(9	)
Deferred tax assets, net of valuation allowance		731			645
Deferred tax liabilities:
Goodwill and other intangible assets	$	(752	)	$	(675	)
Income recognition on contracts in process		(63	)		(36	)
Property, plant and equipment		(96	)		(94	)
Other		(54	)		(56	)
Deferred tax liabilities		(965	)		(861	)
Total deferred tax liabilities, net of valuation allowance	$	(234	)	$	(216	)

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Non-current deferred tax assets	$	2		$	3
Non-current deferred tax liabilities		(236	)		(219	)
Total net deferred tax liabilities	$	(234	)	$	(216	)

Non-current deferred tax assets are presented in other assets on the consolidated balance sheets.

F-35

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The following table presents the Company’s loss and tax credit carryforwards at December 31, 2016 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2016
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross		Tax Effected		Expiration Periods
	(in millions)				(in millions)
Capital loss carryforwards	$	6	$	2	$	6	$	2	2017-2021
Federal net operating loss carryforwards		33		11		5		2	2026-2035
Foreign net operating loss carryforwards		14		3		3		1	Indefinite
State net operating loss carryforwards		136		2		47		1	2017-2036
Total loss carryforwards			$	18			$	6
State tax credit carryforwards		7		5		7		4	2017-2031
Foreign tax credit carryforwards		1		1		—		—	Indefinite
Total tax credit carryforwards			$	6			$	4

At December 31, 2016, the total amount of unrecognized tax benefits was $111 million, $92 million of which would reduce the effective income tax rate, if recognized. A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2016			2015			2014
	(in millions)
Balance at January 1	$	140		$	169		$	155
Additions for tax positions related to the current year		16			14			20
Additions for tax positions related to prior years		2			2			12
Reductions for tax positions related to prior years		(39	)		(37	)		(11	)
Reductions for tax positions related to settlements with taxing authorities		(1	)		(1	)		(1	)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7	)		(7	)		(6	)
Balance at December 31	$	111		$	140		$	169

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, which is the Company’s primary tax jurisdiction, and various state and foreign jurisdictions. At December 31, 2016, the statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2015 are open. The U.S. Internal Revenue Service (IRS) commenced audits of the Company’s U.S. Federal income tax returns for the years ended 2012 through 2014. The Company cannot predict the outcome of the audits at this time. At December 31, 2016, the Company anticipates that unrecognized tax benefits will decrease by approximately $9 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount of the decrease over the next 12 months could vary significantly depending on the ultimate timing and nature of any settlements.

During the years ended December 31, 2016, 2015 and 2014, the Company effectively settled various Federal, state and local and foreign audits. As a result of these settlements, the Company reversed previously accrued income tax expense of $25 million, $9 million and $8 million, including potential interest and penalties.

At December 31, 2016 and 2015, current and non-current income taxes payable include accrued potential interest of $11 million ($7 million after income taxes) and $18 million ($11 million after income taxes), respectively, and potential penalties of $8 million and $9 million, respectively. With respect to the interest related items, the Company’s income tax expense included a benefit of $4 million for the year ended December 31, 2016 and an expense of $2 million for the year ended December 31, 2015.

F-36

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Prior to 2015, the Company recorded a deferred tax liability related to the repatriation of earnings from certain subsidiaries. During 2015, the Company completed a legal restructuring of its significant foreign operations, and the earnings of these subsidiaries are now considered reinvested indefinitely. As a result, the Company recognized a $17 million deferred tax benefit in the year ended December 31, 2015. At December 31, 2016, the Company had not provided deferred U.S. income taxes and foreign withholding taxes for $708 million of undistributed earnings by its non-U.S. subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of additional taxes that may be payable on distribution is not practicable.

17. Stock-Based Compensation

Stock-Based Compensation Plans. The Company has adopted stock-based compensation plans in order to provide incentives to directors, officers, employees and other individuals providing services to or on behalf of the Company and its subsidiaries. The Company believes that its stock-based compensation awards encourage high levels of performance by individuals who contribute to the success of the Company and enable the Company to attract, retain and reward talented and experienced individuals. This is accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Company and/or by providing eligible individuals with additional incentives to join or remain with the Company. The stock-based compensation plans serve to better align the interests of management and its employees with those of the Company’s shareholders. During the year ended December 31, 2016, the Company awarded stock-based compensation under its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP). Awards under the 2008 LTPP may be granted to any officer or employee of the Company or any of its subsidiaries, non-employee directors, or to any other individual who provides services to or on behalf of the Company or any of its subsidiaries. To date, awards under the 2008 LTPP have been in the form of L3’s restricted stock units, performance units and options to purchase L3’s common stock.

On May 3, 2016, the stockholders of L3 approved an amendment to its 2008 LTPP to increase the number of shares authorized for issuance by 6.8 million shares to approximately 26.0 million shares. Each share of L3’s common stock issued under a full value award (that is, awards other than stock options and stock appreciation rights) granted on or after February 23, 2016 is counted as 4.26 shares for purposes of this share limit. Each share issued under full value awards granted between February 26, 2013 and February 22, 2016 is counted as 3.69 shares for purposes of the share limit. At December 31, 2016, 9.2 million shares of L3’s common stock remained available for future awards under the 2008 LTPP.

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Stock options	$	10		$	9		$	9
Restricted stock units		35			38			40
Performance units		4			2			3
Total before income taxes		49			49			52
Income taxes		(18	)		(18	)		(20	)
Total after income taxes		31			31			32
Less: Stock-based compensation recorded in discontinued operations, net of income taxes		1	(1)		1			1
Stock-based compensation recorded in continuing operations, net of income taxes	$	30		$	30		$	31

⁽¹⁾ Amount relates to the net impact of share based payment award modification in connection with the sale of NSS, which is further discussed below.

Stock Options. The exercise price of stock options granted under the 2008 LTPP may not be less than the fair market value of L3’s common stock on the date of grant. Options expire 10 years after the date of grant and vest

F-37

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

ratably over a three year period on the annual anniversary of the date of grant. The options granted to the Company’s Chairman and Chief Executive Officer are also subject to performance-based vesting conditions. All unvested options are subject to forfeiture upon termination of employment (subject to customary exceptions for death or disability). All of the stock option awards issued under the 2008 LTPP are non-qualified stock options for U.S. income tax regulations. The table below presents a summary of the Company’s stock option activity at December 31, 2016 and changes during the year then ended.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)					(in years)		(in millions)
Number of shares under option:
Outstanding at January 1, 2016		2,931.5		$	92.59		6.0	$	84
Options granted		617.6			116.68
Options exercised		(647.5	)		82.78
Options forfeited		(54.1	)		118.82
Outstanding at December 31, 2016		2,847.5		$	99.54		6.1	$	150
Vested and expected to vest at December 31, 2016(1)		2,835.7		$	99.46		6.1	$	149
Exercisable at December 31, 2016		1,802.0		$	87.77		4.9	$	116

⁽¹⁾ Represents outstanding options reduced by expected forfeitures for options not fully vested.

The weighted average grant date fair value of the stock options awarded during 2016, 2015 and 2014 was $15.90, $19.76 and $20.02, respectively. The aggregate intrinsic value, disclosed in the table above, represents the difference between L3’s closing stock price on the last trading day for the period, and the exercise price, multiplied by the number of in-the-money stock options.

The total intrinsic value of stock options exercised, based on the difference between the L3’s stock price at the time of exercise and the related exercise price, was $34 million, $35 million and $43 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, unrecognized compensation costs related to stock options were $9 million ($6 million after income taxes), which are expected to be recognized over a weighted average remaining period of 1.4 years.

The actual income tax benefit realized related to compensation deductions arising from the exercise of stock options by the Company’s employees totaled $12 million, $13 million and $14 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Stock Option Fair Value Estimation Assumptions. The Company estimates the fair value of its stock options at the date of grant using the Black-Scholes option-pricing valuation model. The Company’s valuation model is affected by L3’s stock price as well as weighted average assumptions for a number of subjective variables described below.

• Expected Holding Period. The expected holding period represents the period of time that granted stock options are expected to be outstanding until they are exercised. The Company uses historical stock option exercise data to estimate the expected holding period.

• Expected Volatility. Expected volatility is based on L3’s historical share price volatility matching the expected holding period.

• Expected Dividend Yield. Expected dividend yield is based on L3’s anticipated dividend payments and historical pattern of dividend increases over the expected holding period.

• Risk-Free Interest Rates. The risk-free interest rates for stock options are based on U.S. Treasuries for a maturity period matching the expected holding period.

F-38

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2016 Grants			2015 Grants			2014 Grants
Expected holding period (in years)		5.0			5.0			5.5
Expected volatility		21.3	%		21.4	%		24.4	%
Expected dividend yield		2.8	%		2.4	%		2.7	%
Risk-free interest rate		1.1	%		1.5	%		1.7	%

Restricted Stock Units. The Company awards restricted stock units that automatically convert into shares of L3’s common stock upon vesting (in the case of awards granted to employees) or upon the date on which the recipient ceases to be a director (in the case of awards granted to directors). Restricted stock units typically vest three years after the grant date for employees and one year after the grant date for non-employee directors, or if earlier, on the date of the first annual stockholders meeting held after the grant date. The restricted stock units automatically convert into shares of L3’s common stock upon vesting. The weighted average grant date fair value of the restricted stock units awarded during 2016, 2015 and 2014 was $116.72, $128.59 and $113.58, respectively. The grant date fair value of the restricted stock unit awards is based on L3’s closing stock price at the date of grant, and is generally recognized as compensation expense on a straight-line basis over the vesting period. However, for employees who attain retirement eligibility status prior to the end of the three year cliff vesting period, and who have provided at least one year of service after the date of grant, compensation expense is recognized over the shorter period from the date of grant to the retirement eligibility date. Retirement eligible employees are those employees that have attained the age of 65 and have completed at least five years of service (which service must be continuous through the date of termination except for a single break in service that does not exceed one year in length).

The table below presents a summary of the Company’s nonvested restricted stock unit awards at December 31, 2016 and changes during the year then ended.

	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested balance at January 1, 2016		1,171.9		$	102.91
Granted		397.6			116.72
Vested		(478.3	)		76.83
Forfeited		(113.3	)		111.89
Nonvested balance at December 31, 2016		977.9		$	120.24

At December 31, 2016, total unrecognized compensation costs related to nonvested restricted stock unit awards were $38 million ($24 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.2 years. The total fair value of restricted stock unit awards vested during the years ended December 31, 2016, 2015 and 2014 as of their vesting dates was $57 million, $82 million and $66 million, respectively.

Performance Units. The Company grants performance unit awards, with each unit having a value at the time of grant equal to a share of L3’s common stock. The number of units ultimately earned can range from zero to 200% of the original award based upon the level of performance achieved by the Company over the associated performance period in relation to pre-determined performance goals. Units earned under the program are converted into shares of L3’s common stock, or are paid in cash based on the closing price of L3’s common stock at the end of the performance period, as determined at the time of grant by the Compensation Committee of the Board of Directors.

During the years ended December 31, 2016, 2015, and 2014, the Company granted performance unit awards with a weighted average grant date fair value per unit of $116.20, $129.03 and $113.67, respectively. All the awards granted in 2016, 2015, and 2014 have performance conditions based on L3’s diluted EPS. The performance periods

F-39

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

for the awards began on January 1 of the applicable grant year and end on December 31 of the year corresponding to a three-year performance period. Units earned under the awards are convertible into shares of L3’s common stock. At December 31, 2016, total unrecognized compensation costs related to the awards were $6 million ($4 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.6 years.

The table below presents a summary of the Company’s performance unit awards based on expected performance at December 31, 2016 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of Units			Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2016		39.6		$	121.27
Granted		51.9			116.20
Increase due to expected performance		35.6			127.14
Vested		—			—
Forfeited		(2.4	)		121.72
Outstanding at December 31, 2016		124.7		$	120.83

The performance period for awards granted in 2014 ended on December 31, 2016. Based on L3’s cumulative diluted EPS during the performance period, no performance units were earned by the participants on December 31, 2016.

Employee Stock Purchase Plan. Effective July 1, 2009, the Company adopted the 2009 Employee Stock Purchase Plan (2009 ESPP). Under the 2009 ESPP, eligible employees are offered options to purchase shares of L3’s common stock at the end of each six-month offering period at 95% of fair market value based on the average of the highest and lowest sales prices for the stock on the purchase date. Eligible employees generally include all employees of the Company and each subsidiary or affiliate of the Company that has been designated to participate in the 2009 ESPP. Offering periods begin on the first trading day in January and July of each calendar year and end on the last trading day in June and December of each calendar year. Share purchases are funded through payroll deductions of up to 10% of an employee’s eligible compensation for each payroll period, or $21,250 each calendar year.

At December 31, 2016, 3.7 million shares were available for future issuance under the 2009 ESPP (i.e., excluding the effect of shares issued in January 2017 as described below). In July 2016, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $137.87 per share, which covered employee contributions for the six months ended June 30, 2016. In January 2017, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $144.73 per share, which covered employee contributions for the six months ended December 31, 2016. The 5% discount is not recognized as compensation expense in accordance with the accounting standard for share-based compensation expense.

Award Modifications. As disclosed in Note 3, the Company completed the sale of NSS on February 1, 2016. In connection with the divestiture of NSS, the Company modified unvested restricted stock unit and stock option awards held by approximately 300 NSS employees by converting each award into a right to receive a cash payment. The cash payment was based on the original number of units awarded, the closing price of the Company’s common stock on the closing date of the sale, and the portion of the three-year vesting period for the award that had been satisfied through the closing date, and additionally in the case of stock options, the exercise price of the options. As a result of the award modification, the Company reversed $4 million of previously recorded stock compensation expense relating to the original awards as a reduction to shareholders equity and recorded $5 million of expense based on the cash payments made to NSS employees in connection with the modified awards, each of which is included in the Company’s results from discontinued operations.

F-40

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

18. Commitments and Contingencies

Non-Cancelable Operating Leases

The Company leases certain facilities and equipment under agreements expiring at various dates through 2033. Certain leases contain renewal options or escalation clauses providing for increased rental payments based upon maintenance, utility and tax increases. No lease agreement imposes a restriction on the Company’s ability to pay dividends, engage in debt or equity financing transactions, or enter into further lease agreements.

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2016.

	Real Estate		Equipment		Total
	(in millions)
2017	$	94	$	5	$	99
2018		81		3		84
2019		63		2		65
2020		90		—		90
2021		45		—		45
Thereafter		213		—		213
Total minimum payments required		586		10		596
Less: Sublease rentals under non-cancelable leases		10		—		10
Net minimum payments required	$	576	$	10	$	586

Rent expense was $101 million for 2016, $104 million for 2015, and $117 million for 2014. Sublease rental income was $2 million for 2016, and $2 million for 2015 and $1 million for 2014, respectively.

Letters of Credit

The Company enters into standby letters of credit with financial institutions covering performance and financial guarantees pursuant to contractual arrangements with certain customers. The Company had total outstanding letters of credit aggregating to $402 million and $425 million at December 31, 2016 and 2015, respectively. The Company had the full availability of its $1 billion Credit Facility at December 31, 2016. These letters of credit may be drawn upon in the event of the Company’s nonperformance.

Guarantees

The Company, from time to time, enters into contractual guarantees that arise in connection with its business acquisitions, dispositions, and other contractual arrangements in the normal course of business.

In connection with the spin-off of Engility in 2012, L3 entered into a Distribution Agreement and several other agreements that govern certain aspects of L3’s relationship with Engility, including employee matters, tax matters, transition services, and the future supplier/customer relationship between L3 and Engility. These agreements generally provide cross-indemnities that, except as otherwise provided, are principally designed to place the financial responsibility for the obligations and liabilities of each entity with that respective entity. Engility has joint and several liability with L3 to the U.S. Internal Revenue Service (IRS) for the consolidated U.S. Federal income taxes of L3’s consolidated group for taxable periods in which Engility was a part of that group. However, the Tax Matters Agreement specifies the portion of this tax liability for which L3 and Engility will each bear responsibility, and L3 and Engility have agreed to indemnify each other against any amounts for which the other is not responsible. The Tax Matters Agreement also allocates responsibility between L3 and Engility for other taxes, including special rules for allocating tax liabilities in the event that the spin-off is determined not to be tax-free. Though valid as between the parties, the Tax Matters Agreement is not binding on the IRS.

The Company has three existing real estate lease agreements, which include residual guarantee amounts, expiring on August 31, 2020 and are accounted for as operating leases. On or before the lease expiration date, the Company can exercise options under the lease agreements to renew the leases, purchase the properties for $45

F-41

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

million, or sell the properties on behalf of the lessor (the “Sale Option”). If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $39 million for the properties, on or before the lease expiration date. In addition, at the time the properties are sold, the Company must pay the lessor a supplemental rent payment equal to the gross sales proceeds in excess of the residual guarantee, provided that such amount shall not exceed $6 million. For these real estate lease agreements, if the gross sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent payment, the Company is required to pay a supplemental rent payment to the extent the reduction in the fair value of the properties is demonstrated by an independent appraisal to have been caused by the Company’s failure to properly maintain the properties. The aggregate residual guarantee amounts equal $39 million and are included in the future minimum payments under non-cancelable real estate operating lease payments relating to the expiration dates of such leases.

The Company has a contract to provide and operate a full-service training facility for the U.S. Air Force (USAF), including simulator systems adjacent to a USAF base in Oklahoma. The Company acted as the construction agent on behalf of the third-party owner-lessors for procurement and construction for the simulator systems, which were completed and delivered in August 2002. The Company, as lessee, entered into operating lease agreements for a term of 15 years for the simulator systems with the owner-lessors. At the end of the lease term, the Company may elect to purchase the simulator systems at fair market value, which can be no less than $7 million and no greater than $21 million. If the Company does not elect to purchase the simulator systems on the date of expiration (during the first quarter of 2018), the Company must pay to the lessor, as additional rent, $7 million and return the simulator systems to the lessors.

Environmental Matters

Management continually assesses the Company’s obligations with respect to applicable environmental protection laws, including those obligations assumed in connection with certain business acquisitions. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company’s consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with the U.S. Government, foreign government customers and state and local governments. U.S. Government contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. The Company is currently cooperating with the U.S. Government on several investigations from which civil, criminal or administrative proceedings have or could result and give rise to fines, penalties, compensatory and treble damages, restitution and/or forfeitures, including investigations into the pricing of certain contracts entered into by the Communication Systems segment. The Company does not currently anticipate that any of these investigations will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows. However, under U.S. Government regulations, an indictment of the Company by a federal grand jury, or an administrative finding against the Company as to its present responsibility to be a U.S. Government contractor or subcontractor, could result in the Company being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges. A conviction, or an administrative finding against the Company that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term. In addition, all of the Company’s U.S. Government contracts: (1) are subject to audit and various pricing and cost controls, (2) include standard provisions for termination for the convenience of the U.S. Government or for default and (3) are subject to cancellation if funds for contracts become unavailable. Foreign government contracts generally include comparable provisions relating to terminations for convenience or default, as well as other procurement clauses relevant to the foreign government.

F-42

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Litigation Matters

The Company is also subject to litigation, proceedings, claims or assessments and various contingent liabilities incidental to its businesses, including those specified below. Furthermore, in connection with certain business acquisitions, the Company has assumed some or all claims against, and liabilities of, such acquired businesses, including both asserted and unasserted claims and liabilities.

In accordance with the accounting standard for contingencies, the Company records a liability when management believes that it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of the loss. Generally, the loss is recorded at the amount the Company expects to resolve the liability. The estimated amounts of liabilities recorded for pending and threatened litigation are disclosed in Note 7. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At December 31, 2016, the Company recorded approximately $34.5 million of receivables for recoveries from insurance contracts or third parties in connection with the amount of liabilities recorded for pending and threatened litigation. Legal defense costs are expensed as incurred. The Company believes it has recorded adequate provisions for its litigation matters. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While it is reasonably possible that an unfavorable outcome may occur in one or more of the following matters, unless otherwise stated below, the Company believes that it is not probable that a loss has been incurred in any of these matters. With respect to the litigation matters below for which it is reasonably possible that an unfavorable outcome may occur, an estimate of loss or range of loss is disclosed when such amount or amounts can be reasonably estimated. Although the Company believes that it has valid defenses with respect to legal matters and investigations pending against it, the results of litigation can be difficult to predict, particularly those involving jury trials. Therefore, it is possible that one or more of the following or other contingencies could have a material impact on the financial position, results of operations or cash flows of the Company in future periods.

EoTech Class Actions. During 2015 and 2016, five putative class action complaints against the Company were filed in the United States District Court for the Western District of Missouri alleging that the Company’s EoTech business unit knowingly sold defective holographic weapons sights (see Andrew Tyler Foster, et al., v. L-3 Communications EoTech, Inc., et al., Case No. 6:15 CV 03519 BCW). In October 2016, the parties reached a settlement in principle to resolve the allegations in these cases. On February 15, 2017, the Company received preliminary approval from the court to settle the five class action consumer lawsuits filed. Following an agreed-to notice period in which any contentions from objectors are addressed, the court, in its discretion and following a fairness hearing, will order final approval of the settlement and the litigation will be resolved. Any final approval order from the court is subject to appeal. Prior to final resolution of this litigation, either party retains rights to withdraw from the settlement under circumstances delineated in the settlement agreement. There are numerous risks associated with this settlement, including that the court finds that the settlement is not fair and adequate to the class members or for any other reason that the court deems appropriate to withhold final approval. If final approval does not occur, the litigation would recommence. As of December 31, 2016, the Company has accrued all amounts it deems appropriate for this matter.

Securities Class Action. In August 2014, three separate, putative class actions were filed in the United States District Court for the Southern District of New York (the District Court) against the Company and certain of its officers. These cases were consolidated into a single action on October 24, 2014. A consolidated amended complaint was filed in the District Court on December 22, 2014, which was further amended and restated on March 13, 2015. The complaint alleges violations of federal securities laws related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment, and seeks monetary damages, pre- and post-judgment interest, and fees and expenses. On March 30, 2016, the District Court dismissed with prejudice all claims against the Company’s officers and allowed the claim against the Company to proceed to discovery. On December 20, 2016, the parties reached an agreement in principle to resolve this matter for $34.5 million, subject to the execution of definitive settlement documents and final court approval. The Company’s insurers have agreed to fund the entire amount of the settlement.

F-43

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

SEC Inquiry Resolution. On January 11, 2017, the Company settled a Securities and Exchange Commission (SEC) inquiry related to its internal review of misconduct and accounting errors at its Aerospace Systems segment, pursuant to an administrative order issued by the SEC under which the Company paid a civil penalty of $1.6 million, without admitting or denying the findings in the order.

401(k) Plan Class Action. On June 24, 2016, a putative class action was filed in the United States District Court for the Southern District of New York on behalf of participants in and beneficiaries of a Company-sponsored 401(k) plan. An amended complaint was filed on September 29, 2016. As amended, the complaint alleged that certain of the Company’s officers breached fiduciary duties owed under the Employee Retirement Income Security Act by making the Company’s stock available as an investment alternative under the plan during a period prior to the disclosure of misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint sought, among other things, monetary damages, equitable relief, pre-judgment interest, and fees and expenses. On December 2, 2016, the matter was voluntarily dismissed without prejudice. On January 27, 2017, a new putative class action was filed in the United States District Court for the Southern District of New York on behalf of the same 401(k) participants and beneficiaries, asserting substantially similar claims against the same officers of the Company. The Company believes the suit lacks merit and intends to defend against it vigorously. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

Derivative Action. On July 13, 2016, a shareholder derivative complaint was filed in the Supreme Court of New York, County of New York, against certain of the Company’s current and former directors and officers. The complaint alleges, among other things, that the defendants breached fiduciary duties, caused corporate waste and were unjustly enriched in connection with misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks monetary damages, pre- and post-judgment interest, equitable relief and fees and expenses on behalf of the Company. The Company believes the suit lacks merit and intends to defend itself vigorously. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our former JovyAtlas business unit. The notice relates to losses resulting from a fire that occurred at an HVC Alkmaar bio-energy plant on July 21, 2013. The notice states that the fire resulted from the failure of an uninterruptible power supply (UPS) to provide sufficient power to act as a back-up energy supply, alleges that JovyAtlas was the manufacturer and service provider for the UPS and claims €11 million in estimated property damages and €35 million in estimated business interruption damages. The Company has tendered the notice of claim to its insurance carriers.

F-44

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

19. Pensions and Other Employee Benefits

The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,448		$	3,663		$	184		$	199
Service cost		108			123			2			3
Interest cost		135			149			6			7
Plan participants’ contributions		2			2			4			4
Amendments		15			—			(3	)		—
Actuarial loss (gain)		167			(261	)		(3	)		(12	)
Foreign currency exchange rate changes		9			(53	)		—			(4	)
Curtailments, settlements and special termination benefits		2			3			—			—
Business divestiture		—			(59	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Benefit obligation at the end of the year	$	3,758		$	3,448		$	177		$	184
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,552		$	2,570		$	57		$	60
Actual return on plan assets		189			54			5			—
Employer contributions		97			97			7			6
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		9			(52	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Fair value of plan assets at the end of the year	$	2,721		$	2,552		$	60		$	57
Unfunded status at the end of the year	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)
Assets and (liabilities) recognized on the consolidated balance sheets consist of:
Non-current assets	$	37		$	37		$	—		$	—
Current liabilities		(6	)		(5	)		(8	)		(8	)
Non-current liabilities		(1,068	)		(928	)		(109	)		(119	)
	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)

The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2016		2015		2016			2015
	(in millions)
Net loss (gain)	$	896	$	768	$	(12	)	$	(10	)
Prior service cost (credit)		14		—		(4	)		(3	)
Total amount recognized	$	910	$	768	$	(16	)	$	(13	)

F-45

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,413 million at December 31, 2016 and $3,120 million at December 31, 2015. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31, 2016 and 2015.

	Pension Plans
	2016		2015
	(in millions)
Projected benefit obligation	$	3,528	$	3,232
Accumulated benefit obligation	$	3,192	$	2,913
Fair value of plan assets	$	2,456	$	2,302

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2016 and 2015.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
Benefit obligations:
Discount rate		4.41	%(1)		4.67	%(1)		4.05	%(2)		4.22	%(2)
Rate of compensation increase		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.46% and 4.73% for the U.S. based plans, respectively, and 3.80% and 3.93% for the Canadian based plans, respectively.

⁽²⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.11% and 4.28% for the U.S. based plans, respectively, and 3.64% and 3.74% for the Canadian based plans, respectively.

⁽³⁾ The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2016 and 2015.

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Components of net periodic benefit cost:
Service cost	$	108		$	123		$	106		$	2		$	3		$	3
Interest cost		135			149			147			6			7			8
Expected return on plan assets		(200	)		(205	)		(193	)		(4	)		(5	)		(4	)
Amortization of prior service cost (credits)		—			1			2			(2	)		(2	)		(2	)
Amortization of net loss (gain)		52			68			17			(2	)		—			(2	)
Curtailment or settlement loss (gain)		2			3			1			—			—			(1	)
Net periodic benefit cost	$	97		$	139		$	80		$	—		$	3		$	2

In 2016, the Company changed the approach used to measure the service and interest components of expense for all of its pension and postretirement benefit plans. For fiscal 2015 and previous periods, the Company measured the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligations at the beginning of the period. Beginning in fiscal 2016, the Company elected to use a spot rate approach for its plans in the measurement of the components of benefit cost by applying specific spot rates along that yield curve to the relevant projected cash flows, as the Company believes the new approach provides a more precise measurement of service and interest costs. This change does not affect the measurement of the Company’s total benefit obligation. The Company has accounted for this change prospectively as a change in accounting estimate.

F-46

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)	$	179		$	(132	)	$	560		$	(4	)	$	(7	)	$	5
Prior service cost (credit)		15			—			1			(2	)		—			(1	)
Amortization of net (loss) gain		(52	)		(68	)		(17	)		2			—			2
Amortization of prior service (cost) credit		—			(1	)		(2	)		2			2			2
Total recognized in other comprehensive income		142			(201	)		542			(2	)		(5	)		8
Total recognized in net periodic benefit cost and other comprehensive income	$	239		$	(62	)	$	622		$	(2	)	$	(2	)	$	10

The following table summarizes the amounts expected to be amortized from accumulated OCI and recognized as components of net periodic benefit costs during 2017.

	Pension Plans		Postretirement Benefit Plans			Total
	(in millions)
Net loss (gain)	$	62	$	(2	)	$	60
Prior service cost (credit)		1		(1	)		—
	$	63	$	(3	)	$	60

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
Discount rates:
Benefit obligation		4.67	%(1)		4.14	%(1)		5.03	%(1)		4.22	%(4)		3.70	%(4)		4.43	%(4)
Service cost		4.83	%		—	(5)		—	(5)		4.37	%		—	(5)		—	(5)
Interest cost		3.95	%		—	(5)		—	(5)		3.26	%		—	(5)		—	(5)
Expected long-term return on plan assets		7.92	%(2)		8.14	%(2)		8.13	%(2)		7.42	%		7.65	%		7.64	%
Rate of compensation increase		3.50	%(3)		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015, and 2014 were comprised of separate assumptions determined by country of 4.73%, 4.20% and 5.10% for the U.S. based plans and 3.93%, 3.90% and 4.70% for the Canadian based plans, respectively.

⁽²⁾ The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.00% and 8.25% for the U.S. based plans for the years ended December 31, 2016 and 2015, respectively, and 7.25% for the Canadian based plans for the years ended December 31, 2016, and 2015.

⁽³⁾ The weighted average rate of compensation increase assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 3.50% for both the U.S and Canadian based plans.

⁽⁴⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 4.28%, 3.70% and 4.40% for the U.S. based plans and 3.74%, 3.70% and 4.60% for the Canadian based plans, respectively.

⁽⁵⁾ Not applicable as the Company changed to the spot rate approach beginning in 2016 as described above.

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company’s benefit plans, including those from dividends, interest

F-47

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

income and capital appreciation. The Company utilizes a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class. The Company utilizes a building block methodology that utilizes historical and forward looking rates of return for each asset class and takes into account expected returns above inflation and risk premium. These long-term rates of return are then applied to the target portfolio allocations that are generally aligned with the actual asset allocations of our plans to develop the expected long-term rate of return.

The annual increase in cost of benefits (health care cost trend rate) for the Company’s U.S. based plans covering retirees under 65 years of age is assumed to be an average of 7.0% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2021 and thereafter. The health care cost trend rate for the Company’s U.S. based plans covering retirees over 65 years of age is assumed to be an average of 8.5% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2024 and thereafter. The health care cost trend rate for the Company’s Canadian based plans is assumed to be an average of 6.5% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2023 and thereafter. Health care cost trend assumptions are based on (1) observed or expected short term rates of increase for different types of health models based on actual claims experience and benchmarking, and (2) a reasonable estimate of an appropriate, sustainable level of health care cost trend in the future, weighting the factors that primarily influence trends, which are price inflation and cost leveraging benefit plan features. Assumed health care cost trend rates can have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase		Decrease
	(in millions)
Effect on total service and interest cost	$	—	$	—
Effect on postretirement benefit obligations	$	5	$	(4	)

Plan Assets. The Company’s Benefit Plan Committee (Committee) has the responsibility to formulate the investment policies and strategies for the plans’ assets. The Committee structures the investment of plan assets to achieve the following goals: (1) maximize the plans’ long-term rate of return on assets for an acceptable level of risk; and (2) limit the volatility of investment returns and consequent impact on the plans’ assets. In the pursuit of these goals, the Committee has formulated the following investment policies and objectives: (1) invest assets of the plans in a manner consistent with the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA); (2) preserve the plans’ assets; (3) maintain sufficient liquidity to fund benefit payments and pay plan expenses; (4) evaluate the performance of investment managers; and (5) achieve, on average, a minimum total rate of return equal to the established benchmarks for each asset category.

The Committee retains a professional investment consultant to advise the Committee and help ensure that the above policies and strategies are met. The Committee does not actively manage the day to day operations and selection process of individual securities and investments, as it retains the professional services of qualified investment management organizations to fulfill those tasks. Qualified investment management organizations are evaluated on several criteria for selection, with a focus on the investment management organizations’ demonstrated capability to achieve results that will meet or exceed the investment objectives they have been assigned and conform to the policies established by the Committee. While the investment management organizations have investment discretion over the assets placed under their management, the Committee provides each investment manager with specific investment guidelines relevant to its asset class.

The Committee has established the allowable range that the plans’ assets may be invested in for each major asset category. In addition, the Committee has established guidelines regarding diversification within asset categories to limit risk and exposure to a single or limited number of securities. The investments of the plans’ include a diversified portfolio of both equity and fixed income investments. Equity investments are further diversified across U.S. and non-U.S. stocks, small to large capitalization stocks, and growth and value stocks. Fixed income assets are diversified across U.S. and non-U.S. issuers, corporate and governmental issuers, and credit quality. The plan also invests in real estate through publicly traded real estate securities. Derivatives may be used only for hedging purposes or to create

F-48

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

synthetic long positions. The plans are prohibited from directly owning commodities, unregistered securities, restricted stock, private placements, or interests in oil, gas, mineral exploration, or other development programs. Further, short selling or utilizing margin buying for investment purposes is prohibited.

The table below presents the allowable range for each major category of the plans’ assets at December 31, 2016 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2016 and 2015, by asset category.

	U.S.							Canada
Asset Category	Range	2016			2015			Range	2016			2015
Domestic equity(1)	30%-60%		55	%		52	%	—		15	%		13	%
International equity(2)	10%-20%		10			11		—		62			62
Total equities	45%-75%		65			63		40%-80%		77			75
Fixed income securities	20%-40%		22			22		—		13			16
Other, primarily cash and cash equivalents	0%-15%		5			8		—		10			9
Total fixed income securities and cash and cash equivalents	—		27			30		20%-60%		23			25
Real estate securities	0%-15%		8			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾ Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾ International equities for Canadian plans includes equities of U.S. companies.

The Committee regularly monitors the investment of the plans’ assets to ensure that the actual investment allocation remains within the established range. The Committee also regularly measures and monitors investment risk through ongoing performance reporting and investment manager reviews. Investment manager reviews include assessing the managers’ performance versus the appropriate benchmark index both in the short and long-term period, performance versus peers, and an examination of the risk the managers assumed in order to achieve rates of return.

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2016									Fair Value Measured at December 31, 2016
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,331	$	—	$	—	$	1,331		$	79	$	—	$	—	$	79
International Equity		85		—		—		85			104		—		—		104
Fixed Income — Investment Grade(2)		255		159		—		414			—		—		—		—
Fixed Income — High Yield(3)		—		136		—		136			—		—		—		—
Real Estate Investment Trusts(4)		193		—		—		193			—		—		—		—
Other(5)		—		114		—		114			5		27		—		32
Total assets at fair value	$	1,864	$	409	$	—	$	2,273		$	188	$	27	$	—	$	215
Liabilities for unsettled trades, net								(23	)								—
Other investments measured at net asset value(6)(7)								171									85
Total							$	2,421								$	300

F-49

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015									Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,200	$	—	$	—	$	1,200		$	73	$	—	$	—	$	73
International Equity		79		—		—		79			91		—		—		91
Fixed Income — Investment Grade(2)		237		163		—		400			—		—		—		—
Fixed Income — High Yield(3)		—		114		—		114			—		—		—		—
Real Estate Investment Trusts(4)		170		—		—		170			—		—		—		—
Other(5)		—		166		—		166			6		21		—		27
Total assets at fair value	$	1,686	$	443	$	—	$	2,129		$	170	$	21	$	—	$	191
Liabilities for unsettled trades, net								(30	)								—
Other investments measured at net asset value(6)(7)								170									92
Total							$	2,269								$	283

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾ Approximately 62% and 59% at December 31, 2016 and 2015, respectively, of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the Fund) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 38% and 41% at December 31, 2016 and 2015, respectively, of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of: (1) money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the U.S. plans other investments measured using NAV at December 31, 2016 and 2015 and approximately 55% and 52% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 45% and 48% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

F-50

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2016								Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	37	$	—	$	—	$	37	$	35	$	—	$	—	$	35
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		8		3		—		11
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		3		—		—		3
Other(5)		—		3		—		3		—		2		—		2
Total assets at fair value	$	49	$	8	$	—	$	57	$	47	$	7	$	—	$	54
Other investments measured at net asset value(6)(7)								3								3
Total							$	60							$	57

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾ Approximately 73% at December 31, 2016 and 2015 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2016 and 2015 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ REITs consist of securities that trade on the major exchanges and invest directly, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2016 and 2015 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

Contributions. The funding policy for the Company’s pension and postretirement benefit plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. The Company makes voluntary, additional contributions to the pension plans depending on a number of factors, including operating cash flow levels, alternative uses for excess cash and the plans’ funded status. At December 31, 2016, all legal funding requirements had been met. For the year ending December 31, 2017, the Company currently expects to contribute approximately $100 million to its pension plans, and approximately $10 million to its postretirement benefit plans.

F-51

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension Benefits		Benefit Payments		Subsidy Receipts
	(in millions)
2017	$	162	$	13	$	—
2018		156		13		—
2019		162		14		—
2020		171		14		—
2021		175		14		—
Years 2022-2026		1,001		65		1

Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company’s matching contributions in L3’s common stock and cash were $118 million for 2016, $131 million for 2015 and $135 million for 2014. These matching contributions include amounts attributable to discontinued operations of $1 million for 2016, $12 million for 2015 and $11 million for 2014.

Multiemployer Benefit Plans. Certain of the Company’s businesses participate in multiemployer defined benefit pension plans. The Company makes cash contributions to these plans under the terms of collective-bargaining agreements that cover its union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

	EIN/Pension Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L3									Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
Pension Fund		2016	2015		2016			2015			2014
								(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$	26	(3)	$	23	(4)	$	19	(4)	No	4/9/2017 to 6/28/2019(5)
Other Pension Funds(6)						—			—			—
Total contributions					$	26		$	23		$	19

⁽¹⁾ A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾ Funding improvement plan or rehabilitation plan.

⁽³⁾ At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2016 was not available.

⁽⁴⁾ Represents 5% of total plan contributions for the years ended December 31, 2015 and 2014 based on Form 5500.

⁽⁵⁾ The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 63% of 2016 contributions.

⁽⁶⁾ Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

F-52

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

20. Supplemental Cash Flow Information

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Interest paid on outstanding debt	$	162	$	182	$	176
Income tax payments	$	120	$	132	$	129
Income tax refunds	$	8	$	8	$	9

21. Segment Information

The Company has three reportable segments, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales, operating income and operating margin. Corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges, gains or losses related to business divestitures, and certain other items that are excluded by management for purposes of evaluating the operating performance of the Company’s business segments. Certain Corporate expenses of $15 million and $16 million for the years ended December 31, 2015 and 2014, respectively, that had previously been allocated to the NSS business were retained by the Company and were allocated to L3’s three reportable segments.

The tables below present net sales, operating income (loss), depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net Sales
Products
Electronic Systems	$	3,293		$	3,390		$	3,685
Aerospace Systems		1,662			1,661			1,722
Communication Systems		1,585			1,648			1,546
Elimination of intercompany sales		(98	)		(110	)		(114	)
Total products sales		6,442			6,589			6,839
Services
Electronic Systems	$	1,042		$	999		$	1,057
Aerospace Systems		2,580			2,503			2,604
Communication Systems		488			441			539
Elimination of intercompany sales		(41	)		(66	)		(53	)
Total services sales		4,069			3,877			4,147
Consolidated total	$	10,511		$	10,466		$	10,986
Operating income
Electronic Systems	$	518		$	489		$	533
Aerospace Systems		289			205			283
Communication Systems		201			196			196
Segment total		1,008			890			1,012
Loss related to business divestitures(1)		—			(31	)		—
Goodwill impairment charges(2)		—			(384	)		—
Consolidated total	$	1,008		$	475		$	1,012

F-53

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Depreciation and amortization
Electronic Systems	$	105	$	110	$	123
Aerospace Systems		54		50		40
Communication Systems		47		50		51
Consolidated total	$	206	$	210	$	214
Capital Expenditures
Electronic Systems	$	113	$	99	$	80
Aerospace Systems		56		55		59
Communication Systems		37		37		29
Corporate		10		6		6
Consolidated total	$	216	$	197	$	174
Total Assets
Electronic Systems	$	6,802	$	6,426	$	6,281
Aerospace Systems		2,535		2,630		3,011
Communication Systems		2,031		1,984		2,025
Corporate		497		365		566
Assets held for sale		—		—		547
Assets of discontinued operations		—		664		1,262
Consolidated total	$	11,865	$	12,069	$	13,692

⁽¹⁾ See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, and deferred income tax assets.

The table below presents property, plant and equipment, net by geographic area.

	Year Ended December 31,
	2016		2015
	(in millions)
United States	$	974	$	971
All Other		147		126
Total	$	1,121	$	1,097

F-54

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S.	$	8,199	$	7,908	$	8,051
International:
United Kingdom		331		336		335
Canada		297		281		289
Australia		254		321		254
Saudi Arabia		159		201		160
South Korea		127		207		226
Japan		81		95		124
France		75		62		74
Other		988		1,055		1,473
Total international		2,312		2,558		2,935
Consolidated	$	10,511	$	10,466	$	10,986

Net sales to principal customers are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S. Government agencies(1)	$	7,649	$	7,291	$	7,464
Commercial		1,282		1,376		1,656
Foreign governments(1)		1,580		1,799		1,866
Consolidated	$	10,511	$	10,466	$	10,986

⁽¹⁾ Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

22. Employee Severance and Termination Costs

Consistent with the Company’s strategy to continuously improve its cost structure and right-size its businesses, especially in view of U.S. defense budget constraints, L3 is completing employment reduction actions across several of its businesses to reduce both direct and indirect costs, including overhead and general and administrative costs. As a result of these initiatives and due to the impact of U.S. defense budget constraints at certain affected business units, the Company recorded employee severance and other termination costs of $17 million with respect to approximately 700 employees during the year ended December 31, 2016, $18 million with respect to approximately 800 employees during the year ended December 31, 2015 and $29 million with respect to approximately 1,800 employees during the year ended December 31, 2014. Employee severance and other termination costs are reported within cost of sales on the consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $9 million at December 31, 2016, which is expected to be paid in 2017, and $9 million at December 31, 2015, which was paid during 2016. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Electronic Systems	$	8	$	8	$	16
Aerospace Systems		2		4		5
Communication Systems		7		6		8
Consolidated	$	17	$	18	$	29

F-55

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

23. Unaudited Quarterly Financial Data

Unaudited summarized financial data by quarter for the years ended December 31, 2016 and 2015 is presented in the table below. The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
	(in millions, except per share data)
2016
Sales	$	2,353	$	2,664	$	2,505		$	2,989
Operating income		252		247		215			294
Income from continuing operations		167		151		151			192
Net income		230		151		151			192
Net income attributable to L3		227		147		148			188
Basic EPS from continuing operations(1)		2.11		1.90		1.91			2.43
Basic EPS(1)		2.92		1.90		1.91			2.43
Diluted EPS from continuing operations(1)		2.08		1.88		1.88			2.38
Diluted EPS(1)		2.87		1.88		1.88			2.38
2015
Sales	$	2,488	$	2,543	$	2,564		$	2,871
Operating income (loss)		187		153		231			(96	)
Income (loss) from continuing operations		105		120		128			(56	)
Net income (loss)		109		124		(296	)		(162	)
Net income (loss) attributable to L3		105		120		(299	)		(166	)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56			(0.76	)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74	)		(2.11	)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54			(0.76	)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68	)		(2.11	)

⁽¹⁾ EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

24. 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 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.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

F-56

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

The following 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 elimination of the holding company structure and the Merger discussed in Note 2, 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 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		2,162		3,227		1,171		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,867		5,430		—		(11,297	)		—
Total assets	$	10,216	$	10,846	$	2,236	$	(11,433	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		282		(282	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325
Total liabilities		5,663		1,222		774		(418	)		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	$	2,236	$	(11,433	)	$	11,865

F-57

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
At December 31, 2015:
Current assets:
Cash and cash equivalents	$	137	$	—	$	165	$	(95	)	$	207
Billed receivables, net		278		297		171		—			746
Contracts in process		872		958		251		—			2,081
Other current assets		288		137		109		—			534
Assets of discontinued operations		—		664		—		—			664
Total current assets		1,575		2,056		696		(95	)		4,232
Goodwill		2,318		2,973		990		—			6,281
Other assets		800		496		260		—			1,556
Investment in and amounts due from consolidated subsidiaries		5,609		3,739		111		(9,459	)		—
Total assets	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069
Current portion of long-term debt	$	499	$	—	$	—	$	—		$	499
Current liabilities		911		899		445		(95	)		2,160
Liabilities of discontinued operations		—		220		—		—			220
Other long-term liabilities		1,410		195		29		—			1,634
Long-term debt		3,127		—		—		—			3,127
Total liabilities		5,947		1,314		474		(95	)		7,640
L3 shareholders’ equity		4,355		7,950		1,583		(9,533	)		4,355
Noncontrolling interests		—		—		—		74			74
Total equity		4,355		7,950		1,583		(9,459	)		4,429
Total liabilities and equity	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069

F-58

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the year ended December 31, 2016:
Total net sales	$	3,388		$	6,063		$	1,379		$	(319	)	$	10,511
Total cost of sales		(3,078	)		(5,610	)		(1,134	)		319			(9,503	)
Operating income		310			453			245			—			1,008
Interest expense		(168	)		(1	)		—			—			(169	)
Interest and other income, net		11			1			6			—			18
Debt retirement charge		(7	)		—			—			—			(7	)
Income from continuing operations before income taxes		146			453			251			—			850
Provision for income taxes		(32	)		(101	)		(56	)		—			(189	)
Equity in net income of consolidated subsidiaries		596			—			—			(596	)		—
Income from continuing operations		710			352			195			(596	)		661
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		710			415			195			(596	)		724
Net income attributable to noncontrolling interests		—			—			—			(14	)		(14	)
Net income attributable to L3	$	710		$	415		$	195		$	(610	)	$	710
Comprehensive income attributable to L3	$	558		$	425		$	118		$	(543	)	$	558
For the year ended December 31, 2015:
Total net sales	$	3,580		$	5,265		$	1,935		$	(314	)	$	10,466
Total cost of sales		(3,283	)		(4,906	)		(1,701	)		314			(9,576	)
(Loss) gain related to business divestitures		(13	)		(31	)		13			—			(31	)
Goodwill impairment charges		—			(364	)		(20	)		—			(384	)
Operating income (loss)		284			(36	)		227			—			475
Interest expense		(167	)		(1	)		(1	)		—			(169	)
Interest and other income, net		16			—			1			—			17
Debt retirement charge		(1	)		—			—			—			(1	)
Income (loss) from continuing operations before income taxes		132			(37	)		227			—			322
(Provision) benefit for income taxes		(10	)		3			(18	)		—			(25	)
Equity in net loss of consolidated subsidiaries		(362	)		—			—			362			—
(Loss) income from continuing operations		(240	)		(34	)		209			362			297
Loss from discontinued operations, net of income tax		—			(522	)		—			—			(522	)
Net (loss) income		(240	)		(556	)		209			362			(225	)
Net income attributable to noncontrolling interests		—			—			—			(15	)		(15	)
Net (loss) income attributable to L3	$	(240	)	$	(556	)	$	209		$	347		$	(240	)
Comprehensive (loss) income attributable to L3	$	(230	)	$	(560	)	$	98		$	462		$	(230	)
For the year ended December 31, 2014:
Total net sales	$	3,586		$	5,460		$	2,218		$	(278	)	$	10,986
Total cost of sales		(3,255	)		(5,017	)		(1,980	)		278			(9,974	)
Operating income		331			443			238			—			1,012
Interest expense		(156	)		(2	)		—			—			(158	)
Interest and other income, net		15			—			3			—			18
Income from continuing operations before income taxes		190			441			241			—			872
Provision for income taxes		(49	)		(115	)		(63	)		—			(227	)
Equity in net income of consolidated subsidiaries		523			—			—			(523	)		—
Income from continuing operations		664			326			178			(523	)		645
Income from discontinued operations, net of income tax		—			32			—			—			32
Net income		664			358			178			(523	)		677
Net income attributable to noncontrolling interests		—			—			—			(13	)		(13	)
Net income attributable to L3	$	664		$	358		$	178		$	(536	)	$	664
Comprehensive income attributable to L3	$	190		$	356		$	47		$	(403	)	$	190

F-59

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	482		$	542		$	259		$	(186	)	$	1,097
Investing activities:
Business acquisitions, net of cash acquired		(388	)		—			—			—			(388	)
Proceeds from sale of business, net of closing date cash balances		563			—			(2	)		—			561
Other investing activities		(60	)		(86	)		(43	)		—			(189	)
Net cash from (used in) investing activities from continuing operations		115			(86	)		(45	)		—			(16	)
Financing activities:
Proceeds from sale of senior notes		547			—			—			—			547
Redemption of senior notes		(856	)		—			—			—			(856	)
Common stock repurchased		(373	)		—			—			—			(373	)
Dividends paid on L3’s common stock		(220	)		—			—			—			(220	)
Other financing activities		459			(399	)		(159	)		145			46
Net cash used in financing activities from continuing operations		(443	)		(399	)		(159	)		145			(856	)
Effect of foreign currency exchange rate changes on cash		—			—			(13	)		—			(13	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		154			1			42			(41	)		156
Cash and cash equivalents, beginning of the year		137			—			165			(95	)		207
Cash and cash equivalents, end of the year	$	291		$	1		$	207		$	(136	)	$	363

F-60

L3 TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	616		$	422		$	216		$	(185	)	$	1,069
Investing activities:
Business acquisitions, net of cash acquired		(320	)		—			—			—			(320	)
Proceeds from sale of business, net of closing date cash balances		14			28			276			—			318
Other investing activities		(84	)		(69	)		(37	)		—			(190	)
Net cash (used in) from investing activities from continuing operations		(390	)		(41	)		239			—			(192	)
Financing activities:
Repurchases of senior notes		(297	)		—			—			—			(297	)
Common stock repurchased		(740	)		—			—			—			(740	)
Dividends paid on L3's common stock		(214	)		—			—			—			(214	)
Other financing activities		801			(434	)		(473	)		152			46
Net cash used in financing activities from continuing operations		(450	)		(434	)		(473	)		152			(1,205	)
Effect of foreign currency exchange rate changes on cash		—			—			(19	)		—			(19	)
Net increase in cash and cash equivalents of discontinued operations		—			51			—			—			51
Change in cash balance in assets held for sale		—			1			60			—			61
Net (decrease) increase in cash		(224	)		(1	)		23			(33	)		(235	)
Cash and cash equivalents, beginning of the year		361			1			142			(62	)		442
Cash and cash equivalents, end of the year	$	137		$	—		$	165		$	(95	)	$	207
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	467		$	571		$	143		$	(93	)	$	1,088
Investing activities:
Business acquisitions, net of cash acquired		(57	)		—			—			—			(57	)
Other investing activities		(58	)		(85	)		(21	)		—			(164	)
Net cash used in investing activities from continuing operations		(115	)		(85	)		(21	)		—			(221	)
Financing activities:
Proceeds from sale of senior notes		996			—			—			—			996
Redemption of CODES		(935	)		—			—			—			(935	)
Common stock repurchased		(823	)		—			—			—			(823	)
Dividends paid on L3's common stock		(208	)		—			—			—			(208	)
Other financing activities		721			(530	)		(164	)		50			77
Net cash used in financing activities from continuing operations		(249	)		(530	)		(164	)		50			(893	)
Effect of foreign currency exchange rate changes on cash		—			—			(17	)		—			(17	)
Net increase in cash and cash equivalents of discontinued operations		—			46			—			—			46
Change in cash balance in assets held for sale		—			(1	)		(60	)		—			(61	)
Net increase (decrease) in cash		103			1			(119	)		(43	)		(58	)
Cash and cash equivalents, beginning of the year		258			—			261			(19	)		500
Cash and cash equivalents, end of the year	$	361		$	1		$	142		$	(62	)	$	442

F-61

EX-4.1

Exhibit 4.1

DELAWARE 1997 SEAL CORPORATE L3 Techno logie s, Inc . CHAIRMAN AND CHIEF EXECUTIVE OFFICER SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER AUTHORIZED SIGNATURE TRANSFER AGENT AND REGISTRAR COMPUTERSHARE TRUST COMPANY, N.A. By: COUNTERSIGNED AND REGISTERED: L3 Technologies, Inc. (hereinafter called the “Corporation”) transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF IS THE OWNER OF THIS CERTIFIES THAT CUSIP 502413 10 7 SEE REVERSE FOR CERTAIN DEFINITIONS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE COMMON STOCK N THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND COLLEGE STATION, TX L3 TECHNOLOGIES, INC.

THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. Signature(s) Guaranteed: THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF NOTICE: THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Dated to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Attorney of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Shares (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE For Value Received, hereby sell, assign and transfer unto Additional abbreviations may also be used though not in the above list. (State) (Cust) (Minor) Act under Uniform Gifts to Minors TEN COM — as tenants in common UNIF GIFT MIN ACT –– Custodian TEN ENT — as tenants by the entireties JT TEN — as joint tenants with right of survivorship and not as tenants in commom The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

EX-4.4

Exhibit 4.4

EXECUTION VERSION

SECOND SUPPLEMENTAL INDENTURE

SECOND SUPPLEMENTAL INDENTURE (this “Second Supplemental Indenture”), dated as of October 31, 2016, among L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the “Company”), each direct or indirect subsidiary of the Company signatory hereto (each, a “Guaranteeing Subsidiary”, and collectively, the “Guaranteeing Subsidiaries”), and The Bank of New York Mellon, as trustee under the indenture referred to below (the “Trustee”).

W I T N E S S E T H:

WHEREAS, the Company and the Guaranteeing Subsidiaries party thereto have heretofore executed and delivered to the Trustee (1) an indenture (as amended and supplemented to the date hereof, the “Base Indenture”), dated as of October 2, 2009, providing for the issuance of an unlimited amount of 5 ¹/₅% Senior Notes due 2019 (the “Notes”) and (2) a first supplemental indenture, dated as of February 3, 2012 (the “First Supplemental Indenture”, together with the Base Indenture, collectively, the “Indenture”), providing for the accession of certain Guaranteeing Subsidiaries.

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company’s Obligations (as defined in the Indenture) under the Notes and the Indenture on the terms and conditions set forth herein (the “Subsidiary Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Second Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE. Each Guaranteeing Subsidiary hereby agrees as follows:

(a) Such Guaranteeing Subsidiary, jointly and severally with all other current and future guarantors of the Notes (collectively, the “Guarantors” and each, a “Guarantor”), unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, regardless of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company under the Indenture or the Notes, that:

(i) the principal of, premium, interest and Special Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, interest and Special Interest, if any, on the Notes, to the extent lawful, and all other Obligations of the Company to the Holders or the Trustee thereunder or under the Indenture will be promptly paid in full, all in accordance with the terms thereof; and

(ii) in case of any extension of time for payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.

(b) Notwithstanding the foregoing, in the event that this Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of such Guaranteeing Subsidiary under this Second Supplemental Indenture and its Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law.

3. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.

(a) The Subsidiary Guarantee set forth in this Second Supplemental Indenture of a Guaranteeing Subsidiary shall be evidenced by the execution and delivery of this Second Supplemental Indenture by an Officer of such Guaranteeing Subsidiary.

(b) If the Officer whose signature is on this Second Supplemental Indenture no longer holds that office at the time the Trustee authenticates any Note under the Indenture, the Subsidiary Guarantee shall be valid nevertheless.

(c) The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Second Supplemental Indenture on behalf of each Guaranteeing Subsidiary.

(d) Each Guaranteeing Subsidiary hereby agrees that its Obligations hereunder shall be unconditional, regardless of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

(e) Each Guaranteeing Subsidiary hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee made pursuant to this Second Supplemental Indenture will not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture.

2

(f) If any Holder or the Trustee is required by any court or otherwise to return to the Company or any Guaranteeing Subsidiary, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or such Guaranteeing Subsidiary, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee made pursuant to this Second Supplemental Indenture, to the extent theretofore discharged, shall be reinstated in full force and effect.

(g) Each Guaranteeing Subsidiary agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby until payment in full of all Obligations guaranteed hereby. Each Guaranteeing Subsidiary further agrees that, as between such Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand:

(i) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee made pursuant to this Second Supplemental Indenture, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby; and

(ii) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Guaranteeing Subsidiary for the purpose of the Subsidiary Guarantee made pursuant to this Second Supplemental Indenture.

(h) Each Guaranteeing Subsidiary shall have the right to seek contribution from any other non-paying Guaranteeing Subsidiary so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Subsidiary Guarantee made pursuant to this Second Supplemental Indenture.

4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.

(a) Except as set forth in Article 5 of the Indenture, nothing contained in the Indenture, this Second Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into the Company or any other Guarantor or shall prevent any transfer, sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to the Company or any other Guarantor.

3

(b) Except as set forth in Article 5 of the Indenture, nothing contained in the Indenture, this Second Supplemental Indenture or in the Notes shall prevent any consolidation or merger of any Guaranteeing Subsidiary with or into an entity other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary), or successive consolidations or mergers in which a Guaranteeing Subsidiary or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of any Guaranteeing Subsidiary as an entirety or substantially as an entirety, to an entity other than the Company or any other Guarantor (in each case, whether or not affiliated with the Guaranteeing Subsidiary) authorized to acquire and operate the same; provided, however, that each Guaranteeing Subsidiary hereby covenants and agrees that (i) subject to the Indenture, upon any such consolidation, merger, sale or conveyance, the due and punctual performance and observance of all of the covenants and conditions of the Indenture and this Second Supplemental Indenture to be performed by such Guaranteeing Subsidiaries, shall be expressly assumed (in the event that such Guaranteeing Subsidiary is not the surviving entity in the merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the entity formed by such consolidation, or into which such Guaranteeing Subsidiary shall have been merged, or by the entity which shall have acquired such property and (ii) immediately after giving effect to such consolidation, merger, sale or conveyance no Default or Event of Default exists.

(c) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee made pursuant to this Second Supplemental Indenture and the due and punctual performance of all of the covenants and conditions of the Indenture and this Second Supplemental Indenture to be performed by such Guaranteeing Subsidiary, such successor entity shall succeed to and be substituted for such Guaranteeing Subsidiary with the same effect as if it had been named herein as the Guaranteeing Subsidiary. Such successor entity thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture and this Second Supplemental Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture and this Second Supplemental Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof.

4

5. RELEASES.

(a) Upon the release of a Guarantor from its Guarantees of, and all pledges and security interests granted in connection with, all other Indebtedness of the Company, such Guaranteeing Subsidiary shall be released and relieved of its Obligations under its Subsidiary Guarantee and this Second Supplemental Indenture. Any Guaranteeing Subsidiary not released from its Obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other Obligations of any Guaranteeing Subsidiary under the Indenture as provided herein.

(b) Each Guaranteeing Subsidiary shall be released and relieved of its obligations under this Second Supplemental Indenture in accordance with, and subject to, Sections 4.09 and 10.04 of the Indenture.

6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Subsidiary of the Company, as such, shall have any liability for any Obligations of the Company or any Subsidiary of the Company under the Notes, any Subsidiary Guarantees, the Indenture or this Second Supplemental Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

7. NEW YORK LAW TO GOVERN. THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

8. COUNTERPARTS. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company.

11. BENEFITS ACKNOWLEDGED. Each Guaranteeing Subsidiary’s Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Second Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.

5

12. SUCCESSORS. All agreements of the Guaranteeing Subsidiaries in this Second Supplemental Indenture shall bind its successors, except as otherwise provided in Section 10.04 of the Indenture. All agreements of the Trustee in this Second Supplemental Indenture shall bind its successors.

6

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, all as of the date first above written.

Dated: October 31, 2016	L-3 COMMUNICATIONS CORPORATION
	By:	/s/ Stephen M. Souza
		Name:	Stephen M. Souza
		Title:	Vice President and Treasurer

[Signature Page to Second Supplemental Indenture]

Electrodynamics, Inc.

Interstate Electronics Corporation

L-3 Advanced Programs, Inc.

L-3 Applied Technologies, Inc.

L-3 Chesapeake Sciences Corporation

L-3 Communications AIS GP Corporation

L-3 Communications Avionics Systems, Inc.

L-3 Communications Cincinnati Electronics Corporation

L-3 Communications Electron Technologies, Inc.

L-3 Communications EO/IR, Inc.

L-3 Communications ESSCO, Inc.

L-3 Communications Flight Capital LLC

L-3 Communications Flight International Aviation LLC

L-3 Communications Foreign Holdings, Inc.

L-3 Communications Investments Inc.

L-3 Communications MariPro, Inc.

L-3 Communications Mobile-Vision, Inc.

L-3 Communications Security And Detection Systems, Inc.

L-3 Communications Vector International Aviation LLC

L-3 Communications Vertex Aerospace LLC

L-3 Communications Westwood Corporation

L-3 Domestic Holdings, Inc.

L-3 Fuzing And Ordnance Systems, Inc.

L-3 Unidyne, Inc.

L-3 Unmanned Systems, Inc.

Pac Ord Inc.

Power Paragon, Inc.

SPD Electrical Systems, Inc.

SPD Switchgear Inc.

L-3 Afghanistan, LLC

L-3 Army Sustainment LLC

L-3 Centaur, LLC

L-3 CTC Aviation Holdings Inc.

L-3 CTC Aviation Leasing (US) Inc.

L-3 CTC Aviation Training (US) Inc.

L-3 Investments, LLC

As Guaranteeing Subsidiaries
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Second Supplemental Indenture]

L-3 Communications Integrated Systems L.P., a Delaware limited partnership
By:	L-3 COMMUNICATIONS AIS GP CORPORATION,
	as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
Mustang Technology Group, L.P., a Texas limited partnership
By:	L-3 COMMUNICATIONS CORPORATION,
	as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Second Supplemental Indenture]

Dated: October 31, 2016	THE BANK OF NEW YORK MELLON,
	as Trustee
	By:	/s/ Julie Hoffman-Ramos
		Name:	Julie Hoffman-Ramos
		Title:	Vice President

[Signature Page to Second Supplemental Indenture]

EX-4.12

Exhibit 4.12

EXECUTION VERSION

SEVENTH SUPPLEMENTAL INDENTURE

SEVENTH SUPPLEMENTAL INDENTURE (this “Seventh Supplemental Indenture”), dated as of October 31, 2016, among L-3 Communications Corporation (or its permitted successor), a Delaware corporation (the “Company”), each direct or indirect subsidiary of the Company signatory hereto (each, a “Guaranteeing Subsidiary”, and collectively, the “Guaranteeing Subsidiaries”), and The Bank of New York Mellon Trust Company, N.A., as trustee under the indenture referred to below (the “Trustee”).

W I T N E S S E T H:

WHEREAS, the Company and the Guaranteeing Subsidiaries party thereto have heretofore executed and delivered to the Trustee (1) an indenture dated May 21, 2010 (the “Base Indenture”), (2) a first supplemental indenture dated as of May 21, 2010 (the “First Supplemental Indenture”), providing for the issuance of $800,000,000 4.750% Senior Notes due 2020 (the “2020 Notes”) , (3) a second supplemental indenture dated as of February 7, 2011 (the “Second Supplemental Indenture”), providing for the issuance of $650,000,000 4.95% Senior Notes due 2021 (the “2021 Notes”), (4) a third supplemental indenture dated as of November 22, 2011 (the “Third Supplemental Indenture”), providing for the issuance of $500,000,000 3.95% Senior Notes due 2016 (the “2016 Notes”), (5) a fourth supplemental indenture dated as of February 3, 2012 (the “Fourth Supplemental Indenture”), providing for the accession of certain Guaranteeing Subsidiaries, (6) a fifth supplemental indenture dated as of May 28, 2014 (the “Fifth Supplemental Indenture”), providing for the issuance of $350,000,000 1.50% Senior Notes due 2017 (the “2017 Notes”) and the issuance of $650,000,000 3.95% Senior Notes due 2024 (the “2024 Notes”, together with the 2020 Notes, the 2021 Notes, the 2016 Notes, the 2017 Notes and the 2024 Notes, collectively, the “Notes”) and (7) a sixth supplemental indenture dated as of June 21, 2016 (the “Sixth Supplemental Indenture”, together with the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental Indenture and the Base Indenture, collectively, the “Indenture”), effecting certain amendments to the Indenture;

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries shall unconditionally guarantee all of the Company’s Obligations (as defined in the Indenture) under the Notes and the Indenture on the terms and conditions set forth herein (the “Subsidiary Guarantee”); and

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Seventh Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. SUBSIDIARY GUARANTOR. The Guaranteeing Subsidiaries hereby agree to each be Guarantors under the Indenture and to be bound by, and in accordance with, the terms of the Indenture applicable to Guarantors, including Article 10 thereof.

3. RELEASES. The Guarantees of the Guaranteeing Subsidiaries shall be unconditionally released and discharged as provided in Section 10.4 of the Indenture.

4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of any Guarantor, as such, shall have any liability for any Obligations of the Company or any Guarantor under the Notes, any Guarantee, the Indenture or this Seventh Supplemental Indenture or for any claim based on, in respect of, or by reason of, such Obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

5. NEW YORK LAW TO GOVERN. THIS SEVENTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

6. COUNTERPARTS. The parties may sign any number of copies of this Seventh Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Seventh Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiaries and the Company.

9. BENEFITS ACKNOWLEDGED. Each Guaranteeing Subsidiary’s Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Seventh Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.

10. SUCCESSORS. All agreements of the Guaranteeing Subsidiaries in this Seventh Supplemental Indenture shall bind its successors, except as otherwise provided in Section 10.4 of the Indenture. All agreements of the Trustee in this Seventh Supplemental Indenture shall bind its successors.

2

IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be duly executed, all as of the date first above written.

Dated: October 31, 2016	L-3 COMMUNICATIONS CORPORATION
	By:	/s/ Stephen M. Souza
		Name:	Stephen M. Souza
		Title:	Vice President and Treasurer

[Signature Page to Seventh Supplemental Indenture]

Electrodynamics, Inc.

Interstate Electronics Corporation

L-3 Advanced Programs, Inc.

L-3 Applied Technologies, Inc.

L-3 Chesapeake Sciences Corporation

L-3 Communications AIS GP Corporation

L-3 Communications Avionics Systems, Inc.

L-3 Communications Cincinnati Electronics Corporation

L-3 Communications Electron Technologies, Inc.

L-3 Communications EO/IR, Inc.

L-3 Communications ESSCO, Inc.

L-3 Communications Flight Capital LLC

L-3 Communications Flight International Aviation LLC

L-3 Communications Foreign Holdings, Inc.

L-3 Communications Investments Inc.

L-3 Communications MariPro, Inc.

L-3 Communications Mobile-Vision, Inc.

L-3 Communications Security And Detection Systems, Inc.

L-3 Communications Vector International Aviation LLC

L-3 Communications Vertex Aerospace LLC

L-3 Communications Westwood Corporation

L-3 Domestic Holdings, Inc.

L-3 Fuzing And Ordnance Systems, Inc.

L-3 Unidyne, Inc.

L-3 Unmanned Systems, Inc.

Pac Ord Inc.

Power Paragon, Inc.

SPD Electrical Systems, Inc.

SPD Switchgear Inc.

L-3 Afghanistan, LLC

L-3 Army Sustainment LLC

L-3 Centaur, LLC

L-3 CTC Aviation Holdings Inc.

L-3 CTC Aviation Leasing (US) Inc.

L-3 CTC Aviation Training (US) Inc.

L-3 Investments, LLC

As Guaranteeing Subsidiaries
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Seventh Supplemental Indenture]

L-3 Communications Integrated Systems L.P., a Delaware limited partnership
By:	L-3 COMMUNICATIONS AIS GP CORPORATION,
	as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
Mustang Technology Group, L.P., a Texas limited partnership
By:	L-3 COMMUNICATIONS CORPORATION,
	as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Seventh Supplemental Indenture]

Dated: October 31, 2016	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
	as Trustee
	By:	/s/ Laurence J. O’Brien
		Name:	Laurence J. O’Brien
		Title:	Vice President

[Signature Page to Seventh Supplemental Indenture]

EX-10.2

Exhibit 10.2

Execution Version

AMENDMENT TO CREDIT AGREEMENT

AMENDMENT (this “Amendment”), dated as of December 22, 2016, to the Credit Agreement dated as of October 31, 2016 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”) among L-3 COMMUNICATIONS CORPORATION, a Delaware corporation (the “Borrower”), the guarantors party thereto (collectively, the “Guarantors”), each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”), the L/C issuers from time to time party thereto (collectively, the “L/C Issuers” and individually, a “L/C Issuer”) and BANK OF AMERICA, N.A., as administrative agent (in such capacity, the “Administrative Agent”), Swing Line Lender and an L/C Issuer.

WHEREAS, the Borrower has requested that the Credit Agreement be amended as set forth below, and each Lender party hereto consents to this Amendment.

WHEREAS, this Amendment includes amendments of the Credit Agreement that are subject to the approval of the Required Lenders, and that, in each case, will become effective on the Amendment Effective Date (as defined below) on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as therein defined.

SECTION 2. Amendment. Each of the parties hereto agrees that, effective on the Amendment Effective Date, Section 8.05(g) shall be amended and restated as follows:

“(g) the sale or discount in the ordinary course of business of accounts receivable, including in connection with the compromise or collection thereof;”.

SECTION 3. Effectiveness. This Amendment (and the amendment to the Credit Agreement pursuant to Section 2 hereof) shall become effective as of the date (the “Amendment Closing Date”) on which each of the following conditions has been satisfied or waived:

(a)           the Administrative Agent has received this Amendment, executed and delivered by the Loan Parties and the Required Lenders;

(b)           the representations and warranties of the Borrower and each other Loan Party contained in Article VI of the Credit Agreement or any other Loan Document, or which are contained in any document furnished at any time in connection herewith or therewith, including this Amendment, shall be true and correct in all material respects on and as of the Amendment Closing Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects of such earlier date;

(c)           the Borrower shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent (or any of its Affiliates) to the extent invoiced on or prior to the date hereof; and

(d)           No Default or Event of Default shall exist as of the Amendment Effective Date, immediately prior to or after giving effect to this Amendment.

SECTION 4. Representations and Warranties. Each of the Loan Parties hereby represents and warrants that, after giving effect to the provisions of this Amendment, the following statements are true and correct:

(a)           the execution, delivery and performance of this Amendment have been duly authorized by all necessary corporate or other organizational action on the part of each Loan Party;

(b)           this Amendment has been duly executed and delivered on behalf of the Borrower and each other Loan Party; and

(c)           this Amendment constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party thereto, enforceable against each such Loan Party, as the case may be, in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

SECTION 5. Effect of Amendment.

(a)           Except as expressly set forth herein, this Amendment shall not (i) by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or Agents under the Credit Agreement or any other Loan Document and (ii) alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

(b)           From and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit Agreement in any other Loan Document shall be deemed a reference to the Credit Agreement as amended hereby. This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 6. Reaffirmation. Notwithstanding the effectiveness of this Amendment and the transactions contemplated hereby, (i) each of Holdings, the Borrower and each of the other Loan Parties party hereto (collectively, the “Specified Parties”) acknowledges and agrees that, each Loan Document to which it is a party is hereby confirmed and ratified and shall remain in full force and effect according to its respective terms (in the case of the Credit Agreement, as amended hereby).

2

SECTION 7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 8. Waiver of Right to Trial by Jury. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9. Miscellaneous Provisions. The provisions of Sections 11.03, 11.04, 11.10, 11.11, 11.12, and 11.14 (b), (c) and (d) of the Credit Agreement shall apply with like effect as to this Amendment.

[The remainder of this page is intentionally left blank]

3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

BORROWER:
L-3 COMMUNICATIONS CORPORATION,
a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
GUARANTORS:
L-3 COMMUNICATIONS HOLDINGS, INC.,
a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

GUARANTORS:
ELECTRODYNAMICS, INC.,
an Arizona corporation
INTERSTATE ELECTRONICS CORPORATION,
a California corporation
L-3 APPLIED TECHNOLOGIES, INC.,
a Delaware corporation
L-3 DOMESTIC HOLDINGS, INC.,
a Delaware corporation
L-3 UNIDYNE, INC.,
a Delaware corporation
L-3 CHESAPEAKE SCIENCES CORPORATION,
a Maryland corporation
L-3 COMMUNICATIONS AIS GP CORPORATION,
a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

GUARANTORS:
L-3 COMMUNICATIONS AVIONICS SYSTEMS, INC.,
a Delaware corporation
L-3 COMMUNICATIONS CINCINNATI ELECTRONICS CORPORATION, an Ohio corporation
L-3 COMMUNICATIONS ELECTRON TECHNOLOGIES, INC., a Delaware corporation
L-3 COMMUNICATIONS EO/IR, INC., a Florida corporation
L-3 COMMUNICATIONS ESSCO, INC., a Delaware corporation
L-3 COMMUNICATIONS FOREIGN HOLDINGS, INC., a Delaware corporation
L-3 COMMUNICATIONS INVESTMENTS INC., a Delaware corporation
L-3 COMMUNICATIONS MARIPRO, INC., a California corporation
L-3 COMMUNICATIONS MOBILE-VISION, INC., a New Jersey corporation
L-3 COMMUNICATIONS SECURITY AND DETECTION SYSTEMS, INC., a Delaware corporation
L-3 COMMUNICATIONS WESTWOOD CORPORATION, a Nevada corporation
L-3 FUZING AND ORDNANCE SYSTEMS, INC., a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

GUARANTORS:
L-3 UNMANNED SYSTEMS, INC.,
a Texas corporation
PAC ORD INC.,
a Delaware corporation
POWER PARAGON, INC.,
a Delaware corporation
SPD ELECTRICAL SYSTEMS, INC.,
a Delaware corporation
SPD SWITCHGEAR INC.,
a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., a Delaware limited partnership
By:	L-3 COMMUNICATIONS AIS GP CORPORATION, as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 COMMUNICATIONS VERTEX AEROSPACE LLC,
L-3 COMMUNICATIONS FLIGHT CAPITAL LLC, each a Delaware limited liability company
By:	L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., as Sole Member
By:	L-3 COMMUNICATIONS AIS GP CORPORATION, as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

L-3 ARMY SUSTAINMENT LLC,
L-3 COMMUNICATIONS VECTOR INTERNATIONAL AVIATION LLC,
L-3 COMMUNICATIONS FLIGHT INTERNATIONAL AVIATION LLC, each a Delaware limited liability company
By:	L-3 COMMUNICATIONS VERTEX AEROSPACE LLC, as Sole Member
By:	L-3 COMMUNICATIONS INTEGRATED SYSTEMS L.P., as Sole Member
By:	L-3 COMMUNICATIONS AIS GP CORPORATION,
	as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 ADVANCED PROGRAMS, INC., a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 CENTAUR, LLC,
L-3 AFGHANISTAN, LLC, a Delaware limited liability corporation
By:	L-3 COMMUNICATIONS CORPORATION, as Sole Member
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

MUSTANG TECHNOLOGY GROUP, LP, a Texas limited partnership
By:	L-3 COMMUNICATIONS CORPORATION, as General Partner
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 INVESTMENTS, LLC, a Delaware limited liability company
By:	L-3 COMMUNICATIONS FOREIGN HOLDINGS, INC., as Sole Member
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 CTC AVIATION HOLDINGS INC., a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer
L-3 CTC AVIATION TRAINING (US) INC., a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

L-3 CTC AVIATION LEASING (US) INC., a Delaware corporation
By:	/s/ Stephen M. Souza
	Name:	Stephen M. Souza
	Title:	Vice President and Treasurer

[Signature Page to Amendment]

BANK OF AMERICA, N.A.,
as Administrative Agent
By:	/s/ Maria A. McClain
	Name:	Maria A. McClain
	Title:	Vice President

[Signature Page to Amendment]

BANK OF AMERICA, N.A.,
as a Lender
By:	/s/ Jeannette Lu
Name:	Jeannette Lu
Title:	Director

[Signature Page to Amendment]

The Bank of Nova Scotia,
as a Lender
By:	/s/ Mauricio Saishio
Name:	Mauricio Saishio
Title:	Director

[Signature Page to Amendment]

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
as a Lender
By:	/s/ Maria Iarriccio
Name:	Maria Iarriccio
Title:	Director

[Signature Page to Amendment]

BARCLAYS BANK PLC,
as a Lender
By:	/s/ Graeme Palmer
Name:	Graeme Palmer
Title:	Assistant Vice President

[Signature Page to Amendment]

DEUTSCHE BANK AG NEW YORK BRANCH,
as a Lender
By:	/s/ Ming K. Chu
	Name:	Ming K. Chu
	Title:	Director
[For Lenders requiring two signature blocks]
By:	/s/ Yvonne Tilden
	Name:	Yvonne Tilden
	Title:	Director

[Signature Page to Amendment]

SUMITOMO MITSUI BANKING CORPORATION,
as a Lender
By:	/s/ David W. Kee
Name:	David W. Kee
Title:	Managing Director

[Signature Page to Amendment]

U.S. Bank National Association,
as a Lender
By:	/s/ Patrick McGraw
Name:	Patrick McGraw
Title:	Senior Vice President

[Signature Page to Amendment]

WELLS FARGO BANK, N.A.,
as a Lender and L/C Issuer
By:	/s/ Nathan R. Rantala
Name:	Nathan R. Rantala
Title:	Director

[Signature Page to Amendment]

THE BANK OF NEW YORK MELLON,
as a Lender
By:	/s/ Thomas J. Tarasovich, Jr.
Name:	Thomas J. Tarasovich, Jr.
Title:	Vice President

[Signature Page to Amendment]

Branch Banking and Trust Company,
as a Lender
By:	/s/ Jeff Skalka
Name:	Jeff Skalka
Title:	Vice President

[Signature Page to Amendment]

HSBC Bank USA, National Association,
as a Lender
By:	/s/ Michael Thilmany
Name:	Michael Thilmany
Title:	Corporate Director

[Signature Page to Amendment]

Crédit Industriel et Commercial, New York Branch,
as a Lender
By:	/s/ Eugene F. Kenny
Name:	Eugene F. Kenny
Title:	Vice President
By:	/s/ Nicholas Regent
Name:	Nicholas Regent
Title:	Vice President

[Signature Page to Amendment]

Comerica Bank,
as a Lender
By:	/s/ Timothy O’Rourke
Name:	Timothy O’Rourke
Title:	Vice President

[Signature Page to Amendment]

EX-10.3

Exhibit 10.3

AMENDED AND RESTATED 1998 DIRECTORS STOCK OPTION PLAN

FOR NON-EMPLOYEE DIRECTORS OF

L3 TECHNOLOGIES, INC.

(As amended through December 31, 2016)

1.             Purpose of the Plan

The Amended and Restated 1998 Directors Stock Option Plan for Non-Employee Directors of L3 Technologies, Inc. (the "Plan") is designed:

(a) to promote the long-term financial interests and growth of L3 Technologies, Inc. (the "Corporation") and its Subsidiaries by attracting and retaining Non-Employee Directors with the training, experience and ability to enable them to make a substantial contribution to the success of the Corporation's business; and

(b) to further the alignment of interests of Non-Employee Directors with those of the stockholders of the Corporation through opportunities for increased stock, or stock-based, ownership in the Corporation.

2.             Definitions

As used in the Plan, the following words shall have the following meanings:

(a)           "Board of Directors" means the Board of Directors of the Corporation.

(b)           "Code" means the Internal Revenue Code of 1986, as amended.

(c)           "Committee" means the Compensation Committee of the Board of Directors.

(d)           "Common Stock" or "Share" means common stock, par value $.01 per share of the Corporation.

(e)           "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(f)            "Fair Market Value" means, unless otherwise defined in an Option Agreement, the closing price of the Common Stock as reported on the composite tape of New York Stock Exchange issues (or if, at the date of determination, the Common Stock is not so listed or if the principal market on which it is traded is not the New York Stock Exchange, such other reporting system as shall be selected by the Committee) on the relevant date, or, if no sale of the Common Stock is reported for that date, the next preceding day for which there is a reported sale.

(g)           “Non-Employee Director” means a director of the Corporation who is not (i) an employee of the Corporation or any of its Subsidiaries, (ii) a director, officer or employee of any entity that owns, beneficially or of record, directly or indirectly, 10% or more of the Common Stock outstanding on the date of grant of the Option or (iii) a person that owns, beneficially or of record, directly or indirectly, 10% or more of the Common Stock outstanding on the date of grant of the Option.

(h)           "Option Agreement" means an agreement of the Corporation for the benefit of a Participant that sets forth or incorporates by reference the terms, conditions and limitations applicable to a grant of Options pursuant to the Plan.

(i)            "Option" means an option to purchase shares of the Common Stock granted to a Participant pursuant to Section 6, which will not be an "incentive stock option" (within the meaning of Section 422 of the Code).

(j)            "Participant" means a Non-Employee Director to whom one or more grants of Options have been made and such grants have not all been forfeited or terminated under the Plan.

(k)           "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Corporation if each of the corporations, or group of commonly controlled corporations, other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

3.             Stock Subject to the Plan

(a)           Subject to the provisions of Section 8 and this Section 3, the maximum number of shares of Common Stock in respect of which Options may be granted is 400,000. If and to the extent that an Option shall expire, terminate or be cancelled for any reason without having been exercised, the shares of Common Stock subject to such expired, terminated or cancelled portion of the Option shall again become available for purposes of the Plan.

(b)           Shares of Common Stock deliverable under the terms of the Plan may be, in whole or in part, authorized and unissued shares of Common Stock, or issued shares of Common Stock held in the Corporation’s treasury, or both.

(c)           The Corporation shall at all times reserve a number of shares of Common Stock (authorized and unissued shares of Common Stock, issued shares of Common Stock held in the Corporation’s treasury, or both) equal to the maximum number of shares of Common Stock that may be subject to outstanding Option grants and future Option grants under the Plan.

4.             Administration of the Plan

(a)           The Plan shall be administered by the Committee or a subcommittee appointed by the Committee. The Committee may adopt its own rules of procedure, and action of a majority of the members of the Committee taken at a meeting, or action taken without a meeting by unanimous written consent, shall constitute action by the Committee. The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules. Any such interpretations, rules and administration shall be consistent with the basic purposes of the Plan.

(b)           As to decisions in respect of Participants who are subject to Section 16 of the Exchange Act, the participating members of the Committee administering the Plan shall include only those members of the Committee who are non-Employee Directors (as defined in Rule 16b-3 promulgated under the Exchange Act).

(c)           Unless in contravention to any laws, rules and regulations governing the Plan, including the Exchange Act, the Committee may delegate to the Chief Executive Officer and to other senior officers of the Corporation its duties under the Plan subject to such conditions and limitations as the Committee shall prescribe; provided that under no circumstances may the Chief Executive Officer or any other senior officer be delegated the authority to approve or award the grant of an Option, except as permitted under New York and Delaware law.

2

(d)           The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons in respect of the administration of the Plan, who may be employees of the Corporation or outside advisers to the Corporation. The Committee, the Corporation, and the officers and directors of the Corporation shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Corporation and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Option grants, and all members of the Committee shall be fully protected, indemnified and held harmless by the Corporation with respect to any such action, determination or interpretation.

5.             Eligibility

Option grants may be made under this Plan only to Non-Employee Directors of the Corporation. The terms, conditions and limitations of each Option grant under the Plan shall be set forth or incorporated by reference in an Option Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, that such Option Agreement shall contain or incorporate by reference provisions dealing with the treatment of Option grants in the event of the termination, death or disability of a Participant, and may also include provisions concerning the treatment (including acceleration of vesting) of Option grants in the event of a change of control of the Corporation.

6.             Grants

(a)           Non-Employee Directors shall receive Option grants (each, a “Grant”) at such times and for such number of shares of Common Stock as shall be determined from time to time by the Board of Directors (and/or the Committee to the extent such authority is delegated thereto in whole or in part by the Board of Directors).

(b)           The Options contained in each Grant shall be subject to vesting in three equal annual installments on the first three anniversaries of the grant date, such that 1/3 of the shares of Common Stock contained in such Grant shall vest on the first anniversary of the date of grant, so long as the Participant has had continuous service as a Non-Employee Director of the Corporation through the first anniversary, 1/3 of the shares of Common Stock contained in such Grant shall vest on the second anniversary on the date of grant so long as the Participant has had continuous service as a Non-Employee Director of the Corporation through the second anniversary, and 1/3 of the shares of Common Stock contained in such Grant shall vest on the third anniversary on the date of grant so long as the Participant has had continuous service as a Non-Employee Director of the Corporation through the third anniversary. All vested Options shall be exercisable through the tenth anniversary of the grant date, after which such unexercised Options shall expire. All Options shall have an exercise price equal to the Fair Market Value of the Common Stock on the grant date.

3

(c)           At or prior to the time of the grant of each Option the Committee shall determine, and shall include or incorporate by reference in the Option Agreement, such other conditions or restrictions on the grant or exercise of the Option as the Committee deems appropriate. In addition to other restrictions contained in the Plan, an Option granted under this Section 6, may not be exercised more than ten years after the date it is granted.

(d)           The exercise price of an Option shall be paid in full at or prior to the time of the delivery of shares of Common Stock (i) in cash, (ii) through the surrender of previously acquired shares of Common Stock having a Fair Market Value on the exercise date equal to the exercise price of the Option, (iii) through the withholding by the Company (at the election of the Participant) of shares of Common Stock (that would otherwise be issuable upon the exercise price) having a Fair Market Value on the exercise date equal to the exercise price of the Option, (iv) by check or (v) by a combination of (i), (ii), (iii) and (iv). If shares of Common Stock are surrendered by the Participant or withheld by the Company, the Company shall be permitted to withhold such amounts as may then be required by the Code or applicable regulations thereunder, as provided in Section 11.

7.             Limitations and Conditions

(a)           No Options shall be granted under the Plan beyond ten years after the effective date of the Plan, but the terms of Options granted on or before the expiration of the Plan shall extend beyond such expiration, as provided in Section 6(b) above. At the time an Option is granted or amended or the terms or conditions of an Option are changed, the Committee may provide for limitations or conditions on such Grant.

(b)           Nothing contained herein shall affect the right of the Corporation or its directors or stockholders to remove any Non-Employee Director in accordance with the Certificate of Incorporation, By-laws of the Corporation or applicable law.

(c)           Other than by will or by the laws of descent and distribution, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void, except that Options may be transferred to and exercised by a family member or family members of a Participant, or transferred to an irrevocable trust or trusts (or other similar estate planning entity or entities) established for the benefit of a Participant and/or one or more of the Participant’s family members. No such benefit shall, prior to receipt thereof by the Participant, be in any manner or subject to attachment, satisfaction or discharge of the debts, contracts, liabilities, engagements, or obligations arising in respect of torts of the Participant. The designation of a beneficiary hereunder shall not constitute a transfer prohibited by the foregoing provisions.

(d)           Participants shall not be, and shall not have any of the rights or privileges of, stockholders of the Corporation in respect of any shares of Common Stock purchasable in connection with any Option grant unless and until such Option has been exercised in accordance with the terms of this Plan and any applicable Option Agreement.

(e)           During the lifetime of a Participant, an election as to benefits and/or the exercise of Options may be made only by such Participant or by his or her guardian, trustee or other legal representative, except that grants of Options may be transferred to and exercised by a family member or family members of a Participant, or transferred to an irrevocable trust or trusts (or other similar estate planning entity or entities) established for the benefit of a Participant and/or one or more of the Participant’s family members.

4

(f)           Absent express provisions to the contrary, any grant of Options under this Plan shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Corporation or its Subsidiaries and shall not affect any benefits under any other benefit plan of any kind now or subsequently in effect under which the availability or amount of benefits is related to level of compensation. This Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.

(g)           Unless the Committee determines otherwise, no benefit, Option or other promise under the Plan shall be secured by any specific assets of the Corporation or any of its Subsidiaries, nor shall any assets of the Corporation or any of its Subsidiaries be designated as attributable or allocated to the satisfaction of the Corporation's obligations under the Plan or any applicable Option Agreement.

8.             Adjustments

In the event of any change in the outstanding Common Stock by reason of a stock split, spin-off, stock dividend, stock combination or reclassification, recapitalization or merger, change of control, or similar event (including, without limitation, an extraordinary cash dividend), the Committee shall adjust appropriately and equitably the number of Shares subject to the Plan and available for or covered by Option grants and exercise prices related to outstanding Option grants and make such other revisions to outstanding Option grants as it deems, in its sole discretion, are equitably required.

9.             Merger, Consolidation, Exchange, Acquisition, Liquidation or Dissolution

In its absolute discretion, and on such terms and conditions as it deems appropriate, coincident with or after the grant of any Option, the Committee may provide that such Option cannot be exercised after the merger or consolidation of the Corporation into another corporation, the exchange of all or substantially all of the assets of the Corporation for the securities of another corporation, the acquisition by another corporation of 80% or more of the Corporation's then outstanding shares of voting stock or the recapitalization, reclassification, liquidation or dissolution of the Corporation, and if the Committee so provides, it shall also provide, either by the terms of such Option or by a resolution adopted prior to the occurrence of such merger, consolidation, exchange, acquisition, recapitalization, reclassification, liquidation or dissolution, that, for a period of at least thirty (30) days prior to such event, such Option (whether or not vested) shall be exercisable as to all Shares subject thereto, notwithstanding anything to the contrary herein (but subject to the provisions of Section 6(b)) and that, upon the occurrence of such event, such Option shall terminate and be of no further force or effect; provided, however, that the Committee may also provide, in its absolute discretion, that even if the Option shall remain exercisable after any such event, from and after such event, any such Option shall be exercisable only for the kind and amount of securities and/or other property, or the cash equivalent thereof, receivable as a result of such event by the holder of a number of shares of Common Stock for which such Option could have been exercised immediately prior to such event.

5

10.           Amendment and Termination

(a)           The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Option grants as are consistent with this Plan provided that, except for adjustments under Section 8 or 9 hereof, no such action shall modify such Option grant in a manner adverse to the Participant without the Participant's consent.

(b)           The Board of Directors may at any time amend, suspend or terminate this Plan, subject to any stockholder approval that may be required under applicable law. Notwithstanding the foregoing, no such action, other than an action under Section 8 or 9 hereof, may be taken that would change the exercise price of outstanding Options, change the requirements relating to the Committee, or (without obtaining stockholder approval) extend the term of the Plan.

11.           Withholding Taxes

The Corporation shall have the right to deduct from any cash payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Corporation to deliver shares of Common Stock upon the exercise of an Option that the Participant pay to the Corporation such amount as may be requested by the Corporation for the purpose of satisfying any liability for such withholding taxes at or prior to the time of the delivery of such shares of Common Stock. Any Option Agreement may provide that the Participant may elect, in accordance with any conditions set forth in such Option Agreement, to pay a portion or all of such withholding taxes in shares of Common Stock.

12.           Effective Date and Termination Dates

The Plan became effective on and as of the date of its approval by the Board of Directors of L-3 Communications Holdings, Inc. (which was subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)) and shall terminate ten years later, subject to earlier termination by the Board of Directors pursuant to Section 10.

13.           Governing Law

The validity, interpretation, construction and performance of this Plan and all Option Agreements hereunder shall be governed by, and construed in accordance with, the laws of the State of New York.

14.           Severability

If any provisions of this Plan or any applicable Option Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.\

6

EX-10.5

Exhibit 10.5

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

1999 LONG TERM PERFORMANCE PLAN

(Conformed Copy Reflecting All Amendments Through December 31, 2016)

TABLE OF CONTENTS

		PAGE
SECTION 1.	Purpose.	1
SECTION 2.	Definitions; Rules of Construction.	1
SECTION 3.	Eligibility.	4
SECTION 4.	Awards.	4
SECTION 5.	Shares of Stock and Share Units Available Under Plan.	7
SECTION 6.	Award Agreements.	9
SECTION 7.	Adjustments; Change in Control; Acquisitions.	11
SECTION 8.	Administration.	14
SECTION 9.	Amendment and Termination of this Plan.	16
SECTION 10.	Miscellaneous.	17

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

1999 LONG TERM PERFORMANCE PLAN

SECTION 1. Purpose.

The purpose of this Plan is to benefit the Corporation’s stockholders by encouraging high levels of performance by individuals who contribute to the success of the Corporation and its Subsidiaries and to enable the Corporation and its Subsidiaries to attract, motivate, retain and reward talented and experienced individuals.  This purpose is to be accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Corporation and/or by providing eligible individuals with additional incentives to join or remain with the Corporation and its Subsidiaries.

SECTION 2. Definitions; Rules of Construction.

(a)           Defined Terms.  The terms defined in this Section shall have the following meanings for purposes of this Plan:

"Award" means an award granted pursuant to Section 4.

"Award Agreement" means an agreement described in Section 6 by the Corporation for the benefit of a Participant, setting forth (or incorporating by reference) the terms and conditions of an Award granted to a Participant.

"Beneficiary" means a person or persons (including a trust or trusts) validly designated by a Participant or, in the absence of a valid designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan in the event of a Participant's death.

"Board of Directors" or "Board" means the Board of Directors of the Corporation.

"Cash Flow" means cash and cash equivalents derived from either (i) net cash flow from operations or (ii) net cash flow from operations, financings and investing activities, as determined by the Committee at the time an Award is granted.

"Change in Control" means change in control as defined in Section 7(c).

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Committee" means the Committee described in Section 8(a).

"Corporation" means L3 Technologies, Inc.

"Employee" means any person, including an officer (whether or not also a director) in the regular full-time employment of the Corporation or any of its Subsidiaries who, in the opinion of the Committee is, or is expected to be, primarily responsible for the management, growth or protection of some part or all of the business of the Corporation or any of its Subsidiaries, but excludes, in the case of an Incentive Stock Option, an Employee of any Subsidiary that is not a "subsidiary corporation" of the Corporation as defined in Code Section 424(f).

"EPS" means earnings per common share on a fully diluted basis determined by dividing (a) net earnings, less dividends on preferred stock of the Corporation by (b) the weighted average number of common shares and common share equivalents outstanding.

"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.

"Executive Officer" means executive officer as defined in Rule 3b‑7 under the Exchange Act.  If the Board has designated the executive officers of the Corporation for purposes of reporting under the Exchange Act, the designation shall be conclusive for purposes of this Plan.

"Fair Market Value" means the closing price of the relevant security as reported on the composite tape of New York Stock Exchange issues (or if, at the date of determination, the security is not so listed or if the principal market on which it is traded is not the New York Stock Exchange, such other reporting system as shall be selected by the Committee) on the relevant date, or, if no sale of the security is reported for that date, the next preceding day for which there is a reported sale.  The Committee shall determine the Fair Market Value of any security that is not publicly traded, using criteria as it shall determine, in its sole direction, to be appropriate for the valuation.

"Insider" means any person who is subject to Section 16(b) of the Exchange Act.

"Option" means a Nonqualified Stock Option or an Incentive Stock Option as described in Section 4(a)(1) or (2).

"Participant" means a person who is granted an Award, pursuant to this Plan, that remains outstanding.

"Performance‑Based Awards" is defined in Section 4(b).

2

"Performance Goal" means EPS or ROE or Cash Flow or Total Stockholder Return or such other performance goal that the Committee in its sole discretion establishes in accordance with the requirements of Section 162(m) of the Code for which applicable shareholder approval requirements are met, and "Performance Goals" means any combination thereof.

"ROE" means consolidated net income of the Corporation (less preferred dividends), divided by the average consolidated common stockholders’ equity.

"Rule 16b‑3" means Rule 16b‑3 under Section 16 of the Exchange Act, as amended from time to time.

"Share Units" means the number of units under an Award that is payable solely in cash or is actually paid in cash, determined by reference to the number of shares of Stock by which the Award is measured.

"Stock" means shares of Common Stock of the Corporation, par value $0.01 per share, subject to adjustments made under Section 7 or by operation of law.

"Subsidiary" means, as to any person, any corporation, association, partnership, joint venture or other business entity of which 50% or more of the voting stock or other equity interests (in the case of entities other than corporations), is owned or controlled (directly or indirectly) by that entity, or by one or more of the Subsidiaries of that entity, or by a combination thereof.

"Total Stockholder Return" means with respect to the Corporation or other entities (if measured on a relative basis), the (i) change in the market price of its common stock (as quoted in the principal market on which it is traded as of the beginning and ending of the period) plus dividends and other distributions paid, divided by (ii) the beginning quoted market price, all of which is adjusted for any changes in equity structure, including, but not limited to, stock splits and stock dividends.

(b)          Financial and Accounting Terms.  Except as otherwise expressly provided or the context otherwise requires, financial and accounting terms, including terms defined herein as Performance Goals, are used as defined for purposes of, and shall be determined in accordance with, generally accepted accounting principles and as derived from the audited consolidated financial statements of the Corporation, prepared in the ordinary course of business.

(c)          Rules of Construction.  For purposes of this Plan and the Award Agreements, unless otherwise expressly provided or the context otherwise requires, the terms defined in this Plan include the plural and the singular, and pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms.

3

SECTION 3. Eligibility.

Any one or more Awards may be granted to any Employee, or any non-Employee who provides services to or on behalf of the Corporation or any of its Subsidiaries, who is designated by the Committee to receive an Award.

SECTION 4. Awards.

(a)          Type of Awards.  The Committee may from time to time grant any of the following types of Awards, either singly, in tandem or in combination with other Awards:

(1)          Nonqualified Stock Options.  A Nonqualified Stock Option is an Award in the form of an option to purchase Stock that is not intended to comply with the requirements of Code Section 422.  The exercise price of each Nonqualified Stock Option granted under this Plan shall be not less than the Fair Market Value of the Stock on the date that the Option is granted.  All Nonqualified Stock Options granted in accordance with this clause (1) shall be treated as Performance-Based Awards subject to the applicable restrictions of Section 4(b).

(2)          Incentive Stock Options.  An Incentive Stock Option is an Award in the form of an option to purchase Stock that is intended to comply with the requirements of Code Section 422 or any successor section thereof.  The exercise price of each Incentive Stock Option granted under this Plan shall be not less than the Fair Market Value of the Stock on the date the Option is granted.  If a Participant on the date an Incentive Stock Option is granted owns, directly or indirectly within the meaning of Code Section 424(d), stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation, the exercise price per share of the Incentive Stock Option shall not be less than one hundred and ten percent (110%) of the Fair Market Value per share of the Stock at the time of grant, and such Incentive Stock Option shall not be exercisable after the expiration of five (5) years from the date such Incentive Stock Option is granted.  To the extent that the aggregate "fair market value" of Stock with respect to which one or more incentive stock options first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both Stock subject to Incentive Stock Options under this Plan and stock subject to incentive stock options under all other plans of the Corporation or of other entities referenced in Code Section 422(d)(1), the options shall be treated as Nonqualified Stock Options.  For this purpose, the "fair market value" of the Stock subject to options shall be determined as of the date the Options were awarded.  All Incentive Stock Options granted in accordance with this clause (2) shall be treated as Performance‑Based Awards subject to the applicable restrictions of Section 4(b).

4

(3)          Stock Appreciation Rights.  A Stock Appreciation Right is an Award in the form of a right to receive, upon surrender of the right, but without other payment, an amount based on the appreciation in the value of the Stock or the Option over a base price established in the Award, payable in cash, Stock or such other form or combination of forms of payout, at times and upon conditions (which may include a Change in Control), as may be approved by the Committee.  The minimum base price of a Stock Appreciation Right granted under this Plan shall be not less than the Fair Market Value of the underlying Stock on the date the Stock Appreciation Right is granted or, in the case of a Stock Appreciation Right related to an Option (whether already outstanding or concurrently granted), the exercise price of the related Option.  All Stock Appreciation Rights granted in accordance with this clause (3) shall be treated as Performance‑Based Awards subject to the applicable restrictions under Section 4(b).

(4)          Restricted Stock.  Restricted Stock is an Award of shares of Stock of the Corporation that are issued, but subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.  Restricted Stock Awards to Executive Officers that are either granted or vest upon attainment of one or more of the Performance Goals shall only be granted as Performance‑Based Awards under Section 4(b).  The minimum vesting period for Awards of Restricted Stock made after April 27, 2004 shall be three years following date of grant, except that Restricted Stock Awards made after such date that are Performance-Based Awards shall have a minimum vesting period of one year following date of grant, and provided that the vesting schedule of any Award of Restricted Stock (whether or not a Performance-Based Award) made after April 27, 2004 may not be accelerated.

(5)          Other Share‑Based Awards.  The Committee may from time to time grant Awards under this Plan that provide the Participants with Stock or the right to purchase Stock, or provide other incentive Awards (including, but not limited to, phantom stock or units, performance stock or units, bonus stock, dividend equivalent units, or similar securities or rights) that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in shares of Stock.  The Awards shall be in a form determined by the Committee, provided that the Awards shall not be inconsistent with the other express terms of this Plan.  Awards under this Section 4(a)(5) to Executive Officers that are either granted or become vested, exercisable or payable based on attainment of one or more of the Performance Goals shall only be granted as Performance‑Based Awards under Section 4(b).

(b)          Special Performance‑Based Awards.  Without limiting the generality of the foregoing, any of the type of Awards listed in Section 4(a) may be granted as awards that satisfy the requirements for "performance‑based compensation" within the meaning of Code Section 162(m) ("Performance‑Based Awards"), the grant, vesting, exercisability or payment of which depends on the degree of achievement of the Performance Goals relative to preestablished targeted levels for the Corporation or any of its Subsidiaries, divisions or other business units.  Notwithstanding anything contained in this Section 4(b) to the contrary, any Option or Stock Appreciation Right granted in accordance with paragraph (a) shall be subject only to the requirements of clauses (1) and (3) below in order for such Awards to satisfy the requirements for Performance‑Based Awards under this Section 4(b) (with such Awards hereinafter referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right", respectively).  With the exception of any Qualifying Option or Qualifying Stock Appreciation Right, an Award that is intended to satisfy the requirements of this Section 4(b) shall be designated as a Performance‑Based Award at the time of grant.

5

(1)          Eligible Class.  The eligible class of persons for Awards under this Section 4(b) shall be all Employees.

(2)          Performance Goals.  The performance goals for any Awards under this Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or relative basis, one or more of the Performance Goals.  The specific performance target(s) with respect to Performance Goal(s) must be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the performance relating to the Performance Goal(s) remains substantially uncertain.

(3)          Individual Limits.  The maximum number of shares of Stock or Share Units that are issuable under Options, Stock Appreciation Rights, Restricted Stock or other Awards (described under Section 4(a)(5)) that are granted as Performance-Based Awards to any Participant shall not exceed five percent of the total shares outstanding of the Corporation during the life of the Plan, either individually or in the aggregate, subject to adjustment as provided in Section 7.  Awards that are cancelled or repriced during the year shall be counted against this limit to the extent required by Code Section 162(m).

(4)          Committee Certification.  Before any Performance‑Based Award under this Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation Rights) is paid, the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Goal(s) and any other material terms of the Performance‑Based Award were satisfied; provided, however, that a Performance‑Based Award may be paid without regard to the satisfaction of the applicable Performance Goal in the event of the Participant’s death, permanent disability or retirement or in the event of a Change in Control as provided in Section 7(b).

6

(5)          Terms and Conditions of Awards; Committee Discretion to Reduce Performance Awards.  The Committee shall have discretion to determine the conditions, restrictions or other limitations, in accordance with the terms of this Plan and Code Section 162(m), on the payment of individual Performance‑Based Awards under this Section 4(b).  To the extent set forth in an Award Agreement, the Committee may reserve the right to reduce the amount payable in accordance with any standards or on any other basis (including the Committee's discretion), as the Committee may impose.  Notwithstanding anything to the contrary above, the minimum vesting period of any Performance-Based Award granted after April 27, 2004 shall be one year following date of grant, and, to the extent that any such Performance-Based Award is comprised of Restricted Stock, the vesting schedule of such Award, once outstanding, may not be accelerated.

(6)          Adjustments for Material Changes.  In the event of (i) a change in corporate capitalization, a corporate transaction or a complete or partial corporate liquidation, or (ii) any extraordinary gain or loss or other event that is treated for accounting purposes as an extraordinary item under generally accepted accounting principles, or (iii) any material change in accounting policies or practices affecting the Corporation and/or the Performance Goals or targets, then, to the extent any of the foregoing events (or a material effect thereof) was not anticipated at the time the targets were set, the Committee shall make adjustments to the Performance Goals and/or targets, applied as of the date of the event, and based solely on objective criteria, so as to neutralize, in the Committee's judgment, the effect of the event on the applicable Performance‑Based Award.

(7)          Interpretation.  Except as specifically provided in this Section 4(b), the provisions of this Section 4(b) shall be interpreted and administered by the Committee in a manner consistent with the requirements for exemption of Performance‑Based Awards granted to Executive Officers as "performance‑based compensation" under Code Section 162(m) and regulations and other interpretations issued by the Internal Revenue Service thereunder.

(8)          Maximum Term of Awards.  No Award that contemplates exercise or conversion may be exercised or converted to any extent, and no other Award that defers vesting, shall remain outstanding and unexercised, unconverted or unvested more than ten years after the date the Award was initially granted.

SECTION 5. Shares of Stock and Share Units Available Under Plan.

(a)          Aggregate Share Limit. (i) The maximum number of shares of Stock that may be issued pursuant to all Awards under the Plan is 14,500,000 and (ii) the maximum number of such shares of Stock that may be issued pursuant to all Awards of Incentive Stock Options is 3,000,000, in each case subject to adjustment as provided in this Section 5 or Section 7. The maximum number of shares of Stock for which Options and Stock Appreciation Rights (or Awards other than Performance Based Awards pursuant to Section 4(b)) may be granted during a calendar year to any Employee shall be 500,000. Any Restricted Stock grant may not exceed, in aggregate with all other Restricted Stock grants under this Plan, two percent of the shares of Stock outstanding at the time of grant, subject to adjustment as provided in this Section 5 or Section 7.

7

(b)          Aggregate Share Unit Limit.  The maximum number of Share Units that may be paid pursuant to all Awards shall not be more than 1,500,000, subject to adjustment as provided in this Section 5 or Section 7.  Notwithstanding the foregoing, if an Award paid or payable in Share Units satisfies the requirements for an exclusion from the definition of a derivative security under Rule 16a‑l(c) that does not require that the Award be made under a Rule 16b‑3 plan, the Share Units that may be paid under the Award shall not be counted against the Share Unit limit of this Section 5(b).

(c)          Reissue of Shares and Share Units.  Any unexercised, unconverted or undistributed portion of any expired, cancelled, terminated or forfeited Award, or any alternative form of consideration under an Award that is not paid in connection with the settlement of an Award or any portion of an Award, shall again be available for Award under Section 5(a) or 5(b), as applicable, whether or not the Participant has received benefits of ownership (such as dividends or dividend equivalents or voting rights) during the period in which the Participant's ownership was restricted or otherwise not vested.  Shares of Stock that are issued pursuant to Awards and subsequently reacquired by the Corporation pursuant to the terms and conditions of the Awards shall be available for reissuance under the Plan.

(d)          Interpretive Issues.  Additional rules for determining the number of shares of Stock or Share Units authorized under this Plan may be adopted by the Committee, as it deems necessary or appropriate.

(e)          Treasury Shares; No Fractional Shares.  The Stock which may be issued (which term includes Stock reissued or otherwise delivered) pursuant to an Award under this Plan may be treasury or authorized but unissued Stock or Stock acquired, subsequently or in anticipation of a transaction under this Plan, in the open market or in privately negotiated transactions to satisfy the requirements of this Plan.  No fractional shares shall be issued but fractional interests may be accumulated.

(f)          Consideration.  The Stock issued under this Plan may be issued (subject to Section 10(d)) for any lawful form of consideration, the value of which equals the par value of the Stock or such greater or lesser value as the Committee, consistent with Sections 10(d) and 4(a)(1), (2) and (3), may require.

8

(g)          Purchase or Exercise Price; Withholding.  The exercise or purchase price (if any) of the Stock issuable pursuant to any Award and any withholding obligation under applicable tax laws shall be paid at or prior to the time of the delivery of such Stock in cash or, subject to the Committee's express authorization and the restrictions, conditions and procedures as the Committee may impose, any one or combination of (i) cash, (ii) the delivery of shares of Stock, (iii) a reduction in the amount of Stock or other amounts otherwise issuable or payable pursuant to such Award, or (iv) to the extent permitted by law, the delivery of a promissory note or other obligation for the future payment in money, the terms and conditions of which shall be determined (subject to Section 10(d)) by the Committee.  In the case of a payment by the means described in clause (ii) or (iii) above, the Stock to be so delivered or offset shall be determined by reference to the Fair Market Value of the Stock on the date as of which the payment or offset is made.

(h)          Cashless Exercise.  The Committee may also permit the exercise of the Award and payment of any applicable withholding tax in respect of an Award by delivery of written notice, subject to the Corporation's receipt of a third party payment in full in cash (or in such other form as permitted under Section 5(g)) for the exercise price and the applicable withholding at or prior to the time of issuance of Stock, in the manner and subject to the procedures as may be established by the Committee.

SECTION 6. Award Agreements.

Each Award under this Plan shall be evidenced by an Award Agreement in a form approved by the Committee setting forth the number of shares of Stock or Share Units, as applicable, subject to the Award, and the price (if any) and term of the Award and, in the case of Performance‑Based Awards, the applicable Performance Goals.  The Award Agreement shall also set forth (or incorporate by reference) other material terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of this Plan.

(a)          Incorporated Provisions.  Award Agreements shall be subject to the terms of this Plan and shall be deemed to include the following terms, unless the Committee in the Award Agreement otherwise (consistent with applicable legal considerations) provides:

(1)          Transferability: An Award shall not be assignable nor transferable, except by will or by the laws of descent and distribution, and during the lifetime of a Participant the Award shall be exercised only by such Participant or by his or her guardian or legal representative, except that Awards, other than Incentive Stock Options, may be transferred to and exercised by a family member or family members of a Participant, or transferred to an irrevocable trust or trusts (or other similar estate planning entity or entities) established for the benefit of a Participant and/or one or more of the Participant’s family members, during the Participant’s lifetime.  The designation of a Beneficiary hereunder shall not constitute a transfer prohibited by the foregoing provisions.

9

(2)          Rights as Stockholder: A Participant shall have no rights as a holder of Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of these securities.  Except as provided in Section 7, no adjustment or other provision shall be made for dividends or other stockholder rights, except to the extent that the Award Agreement provides for dividend equivalents or similar economic benefits.

(3)          Withholding: The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld from an Award or an amount paid in satisfaction of an Award and these obligations shall be paid by the Participant on or prior to the payment of the Award.  In the case of an Award payable in cash, the withholding obligation shall be satisfied by withholding the applicable amount and paying the net amount in cash to the Participant.  In the case of an Award paid in shares of Stock, a Participant shall satisfy the withholding obligation as provided in Section 5(g) or Section 5(h).

(4)          Option Holding Period: Subject to the authority of the Committee under Section 7, a minimum six‑month period shall elapse between the date of initial grant of any Option and the sale of the underlying shares of Stock, and the Corporation may impose legend and other restrictions on the Stock issued on exercise of the Options to enforce this requirement.

(b)          Other Provisions.  Award Agreements may include other terms and conditions as the Committee shall approve, including but not limited to the following:

(1)          Termination of Employment:  A provision describing the treatment of an Award in the event of the retirement, disability, death or other termination of a Participant's employment with or services to the Corporation, including any provisions relating to the vesting, exercisability, forfeiture or cancellation of the Award in these circumstances, subject, in the case of Performance‑Based Awards, to the requirements for "performance‑based compensation" under Code Section 162(m).

10

(2)          Vesting; Effect of Termination; Change in Control:  Any other terms consistent with the terms of this Plan as are necessary and appropriate to effect the Award to the Participant, including but not limited to the vesting provisions, any requirements for continued employment, any other restrictions or conditions (including performance requirements) of the Award, and the method by which (consistent with Section 7) the restrictions or conditions lapse, and the effect on the Award of a Change in Control.  (A) The minimum vesting period for Performance-Based Awards made after April 27, 2004 shall be one year following date of grant and (B) the minimum vesting period for Awards of Restricted Stock made after April 27, 2004 shall be three years following date of grant, except that (i) Restricted Stock Awards that are Performance-Based Awards shall have a minimum vesting period of one year following date of grant and (ii) the vesting schedule of any Award of Restricted Stock (whether or not a Performance-Based Award) made after April 27, 2004 may not be accelerated.

(3)          Replacement and Substitution:  Any provisions permitting or requiring the surrender of outstanding Awards or securities held by the Participant in whole or in part in order to exercise or realize rights under or as a condition precedent to other Awards, or in exchange for the grant of new or amended Awards under similar or different terms.

(c)          Contract Rights, Forms and Signatures.  Any obligation of the Corporation to any Participant with respect to an Award shall be based solely upon contractual obligations created by this Plan and an Award Agreement.  No Award shall be enforceable until the Award Agreement has been signed on behalf of the Corporation by an Executive Officer (other than the recipient) or his or her delegate. By accepting receipt of the Award Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan and any action taken in good faith under this Plan by and within the discretion of the Committee, the Board of Directors or their delegates.  Unless the Award Agreement otherwise expressly provides, there shall be no third party beneficiaries of the obligations of the Corporation to the Participant under the Award Agreement.

SECTION 7. Adjustments; Change in Control; Acquisitions.

(a)          Adjustments.  If there shall occur any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Stock (whether in the form of cash, Stock or other property), or any split‑up, spin‑off, extraordinary redemption, or exchange of outstanding Stock, or there shall occur any other similar corporate transaction or event in respect of the Stock, or a sale of substantially all the assets of the Corporation as an entirety, then the Committee shall, in the manner and to the extent, if any, as it deems appropriate and equitable to the Participants and consistent with the terms of this Plan, and taking into consideration the effect of the event on the holders of the Stock:

11

(1)          proportionately adjust any or all of

(A)          the number and type of shares of Stock and Share Units which thereafter may be made the subject of Awards (including the specific maxima and numbers of shares of Stock or Share Units set forth elsewhere in this Plan),

(B)          the number and type of shares of Stock, other property, Share Units or cash subject to any or all outstanding Awards,

(C)          the grant, purchase or exercise price, or conversion ratio of any or all outstanding Awards, or of the Stock, other property or Share Units underlying the Awards,

(D)          the securities, cash or other property deliverable upon exercise or conversion of any or all outstanding Awards,

(E)          subject to Section 4(b), the performance targets or standards appropriate to any outstanding Performance‑Based Awards, or

(F)          any other terms as are affected by the event; and

(2)          subject to any applicable limitations in the case of a transaction to be accounted for as a pooling of interests under generally accepted accounting principles, provide for

(A)          an appropriate and proportionate cash settlement or distribution, or

(B)          the substitution or exchange of any or all outstanding Awards, or the cash, securities or property deliverable on exercise, conversion or vesting of the Awards.

Notwithstanding the foregoing, in the case of an Incentive Stock Option, no adjustment shall be made which would cause this Plan to violate Section 424(a) of the Code or any successor provisions thereto, without the written consent of the Participant adversely affected thereby.  The Committee shall act prior to an event described in this paragraph (a) (including at the time of an Award by means of more specific provisions in the Award Agreement) if deemed necessary or appropriate to permit the Participant to realize the benefits intended to be conveyed by an Award in respect of the Stock in the case of an event described in paragraph (a).

12

(b)          Change in Control.  The Committee may, in the Award Agreement, provide for the effect of a Change in Control on an Award.  Such provisions may include, but are not limited to any one or more of the following with respect to any or all Awards: (i) the specific consequences of a Change in Control on the Awards; (ii) a reservation of the Committee's right to determine in its discretion at any time that there shall be full acceleration or no acceleration of benefits under the Awards; (iii) that only certain or limited benefits under the Awards shall be accelerated; (iv) that the Awards shall be accelerated for a limited time only; or (v) that acceleration of the Awards shall be subject to additional conditions precedent (such as a termination of employment following a Change in Control).

In addition to any action required or authorized by the terms of an Award, the Committee may take any other action it deems appropriate to ensure the equitable treatment of Participants in the event of or in anticipation of a Change in Control, including but not limited to any one or more of the following with respect to any or all Awards: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from, the Awards; (ii) the waiver of conditions on the Awards that were imposed for the benefit of the Corporation, (iii) provision for the cash settlement of the Awards for their equivalent cash value, as determined by the Committee, as of the date of the Change in Control; or (iv) such other modification or adjustment to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following the Change in Control.  The Committee also may accord any Participant a right to refuse any acceleration of exercisability, vesting or benefits, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.

Notwithstanding the foregoing provisions of this Section 7(b) or any provision in an Award Agreement to the contrary, (i) in no event shall the Committee be deemed to have discretion to accelerate or not accelerate or make other changes in or to any or all Awards, in respect of a transaction, if such action or inaction would be inconsistent with or would otherwise frustrate the intended accounting for a proposed transaction as a pooling of interests under generally accepted accounting principles; and (ii) if any Award to any Insider is accelerated to a date that is less than six months after the date of the Award, the Committee may prohibit a sale of the underlying Stock (other than a sale by operation or law in exchange for or through conversion into other securities), and the Corporation may impose legend and other restrictions on the Stock to enforce this prohibition.

(c)          Change in Control Definition.  For purposes of this Plan, with respect to any Award other than an Award issued pursuant to an Award Agreement that separately defines the term “change in control,” a change in control shall include and be deemed to occur upon the following events:

13

(1)          The acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Corporation or any of its Subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of 51 percent or more of the combined voting power of the Corporation’s then outstanding voting securities, other than by any employee benefit plan maintained by the Corporation;

(2)          The sale of all or substantially all of the assets of the Corporation or any successor thereto; or

(3)          The election, including the filling of vacancies, during any period of 24 months or less, of 50 percent or more, of the members of the Board, without the approval of Continuing Directors, as constituted at the beginning of such period.  “Continuing Directors” shall mean any director of the Corporation who either (i) is a member of the Board on the date of grant of the relevant Award, or (ii) is nominated for election to the Board by a majority of the Board which is comprised of Directors who were, at the time of such nomination, Continuing Directors.

(d)          Business Acquisitions.  Awards may be granted under this Plan on the terms and conditions as the Committee considers appropriate, which may differ from those otherwise required by this Plan to the extent necessary to reflect a substitution for or assumption of stock incentive awards held by employees of other entities who become employees of the Corporation or a Subsidiary as the result of a merger of the employing entity with, or the acquisition of the property or stock of the employing entity by, the Corporation or a Subsidiary, directly or indirectly.

SECTION 8. Administration.

(a)          Committee Authority and Structure.  This Plan and all Awards granted under this Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board or subcommittee of the Compensation Committee as may be designated by the Board and constituted so as to permit this Plan to comply with the disinterested administration requirements of Rule 16b‑3 under the Exchange Act and the "outside director" requirement of Code Section 162(m).  The members of the Committee shall be designated by the Board.  A majority of the members of the Committee (but not fewer than two) shall constitute a quorum.  The vote of a majority of a quorum or the unanimous written consent of the Committee shall constitute action by the Committee.

(b)          Selection and Grant.  The Committee shall have the authority to determine the individuals (if any) to whom Awards will be granted under this Plan, the type of Award or Awards to be made, and the nature, amount, pricing, timing, and other terms of Awards to be made to any one or more of these individuals, subject to the terms of this Plan.

14

(c)          Construction and Interpretation.  The Committee shall have the power to interpret and administer this Plan and Award Agreements, and to adopt, amend and rescind related rules and procedures.  All questions of interpretation and determinations with respect to this Plan, the number of shares of Stock, Stock Appreciation Rights, or units or other Awards granted, and the terms of any Award Agreements, the adjustments required or permitted by Section 7, and other determinations hereunder shall be made by the Committee and its determination shall be final and conclusive upon all parties in interest.  In the event of any conflict between an Award Agreement and any non‑discretionary provisions of this Plan, the terms of this Plan shall govern.

(d)          Express Authority to Change Terms of Awards. The Committee may, at any time, alter or amend any or all Award Agreements under this Plan in any manner that would be authorized for a new Award under this Plan, including but not limited to any manner set forth in Section 9 (subject to any applicable limitations thereunder), except that no amendment may change the exercise price or base price of an Award, except in connection with an adjustment pursuant to Section 7(a). Without limiting the Committee's authority under this plan (including Sections 7 and 9), but subject to any express limitations of this plan (including under Sections 4(a)(4), 4(b)(5), 6(b)(2), 7 and 9), the Committee shall have the authority to accelerate the exercisability or vesting of an Award, to extend the term or waive early termination provisions of an Award (subject to the maximum ten-year term under Section 4(b)), and to waive the Corporation's rights with respect to an Award or restrictive conditions of an Award (including forfeiture conditions), in any case in such circumstances as the Committee deems appropriate.

(e)          Rule 16b‑3 Conditions; Bifurcation of Plan.  It is the intent of the Corporation that this Plan and Awards hereunder satisfy and be interpreted in a manner, that, in the case of Participants who are or may be Insiders, satisfies any applicable requirements of Rule 16b‑3, so that these persons will be entitled to the benefits of Rule 16b‑3 or other exemptive rules under Section 16 under the Exchange Act and will not be subjected to avoidable liability thereunder as to Awards intended to be entitled to the benefits of Rule 16b‑3.  If any provision of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 8(e), that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict.  To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed disregarded as to Awards intended as Rule 16b‑3 exempt Awards.  Notwithstanding anything to the contrary in this Plan, the provisions of this Plan may at any time be bifurcated by the Board or the Committee in any manner so that certain provisions of this Plan or any Award Agreement intended (or required in order) to satisfy the applicable requirements of Rule 16b‑3 are only applicable to Insiders and to those Awards to Insiders intended to satisfy the requirements of Rule 16b‑3.

15

(f)          Delegation and Reliance.  The Committee may delegate to the officers or employees of the Corporation the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose, except that the Committee may not delegate any discretionary authority to grant or amend an award or with respect to substantive decisions or functions regarding this Plan or Awards as these relate to the material terms of Performance‑Based Awards to Executive Officers or to the timing, eligibility, pricing, amount or other material terms of Awards to Insiders.  In making any determination or in taking or not taking any action under this Plan, the Board and the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Corporation.  No director, officer, employee or agent of the Corporation shall be liable for any such action or determination taken or made or omitted in good faith.

(g)          Exculpation and Indemnity.  Neither the Corporation nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any party for any action taken or not taken in good faith under this Plan or for the failure of an Award (or action in respect of an Award) to satisfy Code requirements as to incentive stock options or to realize other intended tax consequences, to qualify for exemption or relief under Rule 16b‑3 or to comply with any other law, compliance with which is not required on the part of the Corporation.

SECTION 9. Amendment and Termination of this Plan.

The Board of Directors may at any time amend, suspend or discontinue this Plan, subject to any stockholder approval that may be required under applicable law. Notwithstanding the foregoing, no such action by the Board or the Committee shall, in any manner adverse to a Participant other than as expressly permitted by the terms of an Award Agreement, affect any Award then outstanding and evidenced by an Award Agreement without the consent in writing of the Participant or a Beneficiary, a Participant's family member or a trust (or similar estate planning entity) established for the benefit of a Participant and/or one or more of the Participant’s family members entitled to an Award.  Notwithstanding the above, any amendment that would (i) materially increase the benefits accruing to any Participant or Participants hereunder, (ii) materially increase the aggregate number of shares of Stock, Share Units or other equity interest(s) that may be issued hereunder, or (iii) materially modify the requirements as to eligibility for participation in this Plan, shall be subject to shareholder approval.

16

SECTION 10. Miscellaneous.

(a)          Unfunded Plans.  This Plan shall be unfunded.  Neither the Corporation nor the Board of Directors nor the Committee shall be required to segregate any assets that may at any time be represented by Awards made pursuant to this Plan.  Neither the Corporation, the Committee, nor the Board of Directors shall be deemed to be a trustee of any amounts to be paid or securities to be issued under this Plan.

(b)          Rights of Employees.

(1)          No Right to an Award.  Status as an Employee shall not be construed as a commitment that any one or more Awards will be made under this Plan to an Employee or to Employees generally.  Status as a Participant shall not entitle the Participant to any additional Award.

(2)          No Assurance of Employment.  Nothing contained in this Plan (or in any other documents related to this Plan or to any Award) shall confer upon any Employee or Participant any right to continue in the employ or other service of the Corporation or any Subsidiary or constitute any contract (of employment or otherwise) or limit in any way the right of the Corporation or any Subsidiary to change a person's compensation or other benefits or to terminate the employment or services of a person with or without cause.

(c)          Effective Date; Duration.  This Plan was adopted by the Board of Directors of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  This Plan became effective upon the approval of the stockholders of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  This Plan shall remain in effect until any and all Awards under this Plan have been exercised, converted or terminated under the terms of this Plan and applicable Award Agreements.  Notwithstanding the foregoing, no Award may be granted under this Plan after April 27, 2009.  Notwithstanding the foregoing, any Award granted prior to such date may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares subject to, comprising or referenced in such Award other than as contemplated under Section 7.

(d)          Compliance with Laws.  This Plan, Award Agreements, and the grant, exercise, conversion, operation and vesting of Awards, and the issuance and delivery of shares of Stock and/or other securities or property or the payment of cash under this Plan, Awards or Award Agreements, are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may be necessary or, in the opinion of counsel for the Corporation, advisable in connection therewith.  Any securities delivered under this Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Corporation, provide such evidence, assurance and representations to the Corporation as to compliance with any of such restrictions) as the Corporation may deem necessary or desirable to assure compliance with all applicable legal requirements.

17

(e)          Applicable Law.  This Plan, Award Agreements and any related documents and matters shall be governed by, and construed in accordance with, the laws of the State of New York, except as to matters of Federal law.

(f)          Non‑Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed to limit the authority of the Corporation, the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Stock, under any other plan or authority.

18

EX-10.7

Exhibit 10.7

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

2008 LONG TERM PERFORMANCE PLAN

(As amended through December 31, 2016)

TABLE OF CONTENTS

		PAGE
SECTION 1.	Purpose.	1
SECTION 2.	Definitions; Rules of Construction.	1
SECTION 3.	Eligibility.	4
SECTION 4.	Awards.	4
SECTION 5.	Shares of Stock and Share Units Available Under Plan.	7
SECTION 6.	Award Agreements.	9
SECTION 7.	Adjustments; Change in Control; Acquisitions.	11
SECTION 8.	Administration.	14
SECTION 9.	Amendment and Termination of this Plan.	16
SECTION 10.	Miscellaneous.	17

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

2008 LONG TERM PERFORMANCE PLAN

SECTION 1. Purpose.

The purpose of this Plan is to benefit the Corporation’s stockholders by encouraging high levels of performance by individuals who contribute to the success of the Corporation and its Subsidiaries and to enable the Corporation and its Subsidiaries to attract, motivate, retain and reward talented and experienced individuals.  This purpose is to be accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Corporation and/or by providing eligible individuals with additional incentives to join or remain with the Corporation and its Subsidiaries.

SECTION 2. Definitions; Rules of Construction.

(a)           Defined Terms.  The terms defined in this Section shall have the following meanings for purposes of this Plan:

"Award" means an award granted pursuant to Section 4.

"Award Agreement" means an agreement described in Section 6 by the Corporation for the benefit of a Participant, setting forth (or incorporating by reference) the terms and conditions of an Award granted to a Participant.

"Beneficiary" means a person or persons (including a trust or trusts) validly designated by a Participant or, in the absence of a valid designation, entitled by will or the laws of descent and distribution, to receive the benefits specified in the Award Agreement and under this Plan in the event of a Participant's death.

"Board of Directors" or "Board" means the Board of Directors of the Corporation.

"Change in Control" means change in control as defined in Section 7(c).

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Committee" means the Committee described in Section 8(a).

"Corporation" means L3 Technologies, Inc.

"Employee" means any person, including an officer (whether or not also a director) in the regular full-time employment of the Corporation or any of its Subsidiaries who, in the opinion of the Committee is, or is expected to be, primarily responsible for the management, growth or protection of some part or all of the business of the Corporation or any of its Subsidiaries, but excludes, in the case of an Incentive Stock Option, an Employee of any Subsidiary that is not a "subsidiary corporation" of the Corporation as defined in Code Section 424(f).

"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.

"Executive Officer" means executive officer as defined in Rule 3b‑7 under the Exchange Act.  If the Board has designated the executive officers of the Corporation for purposes of reporting under the Exchange Act, the designation shall be conclusive for purposes of this Plan.

"Fair Market Value" means the closing price of the relevant security as reported on the composite tape of New York Stock Exchange issues (or if, at the date of determination, the security is not so listed or if the principal market on which it is traded is not the New York Stock Exchange, such other reporting system as shall be selected by the Committee) on the relevant date, or, if no sale of the security is reported for that date, the immediately preceding day for which there is a reported sale.  The Committee shall determine the Fair Market Value of any security that is not publicly traded, using criteria as it shall determine, in its sole direction, to be appropriate for the valuation.

"Insider" means any person who is subject to Section 16(b) of the Exchange Act.

“Minimum Ownership Stock” means any Award of shares of Stock of the Corporation that are issued, in accordance with Section 4(a)(5), in lieu of cash compensation in order to satisfy applicable stock ownership guidelines from time to time in effect.

“Non-Employee Director” means a director of the Corporation who is not an employee of the Corporation or any of its Subsidiaries.

"Option" means a Nonqualified Stock Option or an Incentive Stock Option as described in Section 4(a)(1) or (2).

"Participant" means a person who is granted an Award, pursuant to this Plan, that remains outstanding.

"Performance‑Based Awards" is defined in Section 4(b).

2

"Performance Goals" means any combination of one or more of the following criteria: (i) consolidated income before or after taxes (including income before interest, taxes, depreciation and amortization); (ii) EBIT or EBITDA; (iii) operating income or operating margin; (iv) book value per share of Stock; (v) expense management (including without limitation, total general and administrative expense percentages); (vi) improvements in capital structure; (vii) profitability of an identifiable business unit or product; (viii) maintenance or improvement of profit margins; (ix) stock price; (x) market share; (xi) revenue or sales (including, without limitation, net loans charged off and average finance receivables); (xii) costs (including, without limitation, total general and administrative expense percentage); (xiii) orders; (xiv) working capital; (xv) total debt (including, without limitation, total debt as a multiple of EBIT or EBITDA); (xvi) cash flow or net funds provided; (xvii) net income or earnings per share; (xviii) return on equity; (xix) return on investment or invested capital; and (xx) total stockholder return or any other performance goal that the Committee in its sole discretion establishes in accordance with the requirements of Section 162(m) of the Code for which applicable shareholder approval requirements are met.  Performance Goals may be stated in absolute terms or relative to comparison companies or indices to be achieved during a period of time.

"Rule 16b‑3" means Rule 16b‑3 under Section 16 of the Exchange Act, as amended from time to time.

"Share Units" means the number of units under an Award (or portion thereof) that is payable solely in cash or is actually paid in cash, determined by reference to the number of shares of Stock by which the Award (or portion thereof) is measured.

"Stock" means shares of Common Stock of the Corporation, par value $0.01 per share, subject to adjustments made under Section 7 or by operation of law.

"Subsidiary" means, as to any person, any corporation, association, partnership, joint venture or other business entity of which 50% or more of the voting stock or other equity interests (in the case of entities other than corporations), is owned or controlled (directly or indirectly) by that entity, or by one or more of the Subsidiaries of that entity, or by a combination thereof.

(b)          Rules of Construction.  For purposes of this Plan and the Award Agreements, unless otherwise expressly provided or the context otherwise requires, the terms defined in this Plan include the plural and the singular, and pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms.

3

SECTION 3. Eligibility.

Any one or more Awards may be granted to any Employee, or any non-Employee who provides services to or on behalf of the Corporation or any of its Subsidiaries (including without limitation any Non-Employee Director), who is designated by the Committee to receive an Award.

SECTION 4. Awards.

(a)          Type of Awards.  The Committee may from time to time grant any of the following types of Awards, either singly, in tandem or in combination with other Awards:

(1)          Nonqualified Stock Options.  A Nonqualified Stock Option is an Award in the form of an option to purchase Stock that is not intended to comply with the requirements of Code Section 422.  The exercise price of each Nonqualified Stock Option granted under this Plan shall not be less than the Fair Market Value of the Stock on the date that the Option is granted.

(2)          Incentive Stock Options.  An Incentive Stock Option is an Award in the form of an option to purchase Stock that is intended to comply with the requirements of Code Section 422 or any successor section thereof.  The exercise price of each Incentive Stock Option granted under this Plan shall not be less than the Fair Market Value of the Stock on the date the Option is granted.  If a Participant on the date an Incentive Stock Option is granted owns, directly or indirectly within the meaning of Code Section 424(d), stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation, the exercise price per share of the Incentive Stock Option shall not be less than one hundred and ten percent (110%) of the Fair Market Value per share of the Stock at the time of grant, and such Incentive Stock Option shall not be exercisable after the expiration of five (5) years from the date such Incentive Stock Option is granted.  To the extent that the aggregate Fair Market Value of Stock with respect to which one or more incentive stock options first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both Stock subject to Incentive Stock Options under this Plan and stock subject to incentive stock options under all other plans of the Corporation or of other entities referenced in Code Section 422(d)(1), the options shall be treated as Nonqualified Stock Options.  For this purpose, the Fair Market Value of the Stock subject to options shall be determined as of the date the Options were granted.

(3)          Stock Appreciation Rights.  A Stock Appreciation Right is an Award in the form of a right to receive, upon surrender of the right, but without other payment, an amount based on the appreciation in the value of the Stock or the Option over a base price established in the Award, payable in cash, Stock or such other form or combination of forms of payout, at times and upon conditions (which may include a Change in Control), as may be approved by the Committee.  The minimum base price of a Stock Appreciation Right granted under this Plan shall not be less than the Fair Market Value of the underlying Stock on the date the Stock Appreciation Right is granted.

4

(4)          Restricted Stock.  Restricted Stock is an Award of issued shares of Stock of the Corporation (other than Minimum Ownership Stock) that are subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.

(5)          Other Share‑Based Awards.  The Committee may from time to time grant Awards under this Plan that provide the Participants with Stock or the right to purchase Stock, or provide other incentive Awards (including, but not limited to, Minimum Ownership Stock, phantom stock or units, performance stock or units, bonus stock, dividend equivalent units, or similar securities or rights) that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in shares of Stock.  The Awards shall be in a form determined by the Committee, provided that the Awards shall not be inconsistent with the other express terms of this Plan applicable to such Awards.

(b)          Special Performance‑Based Awards.  Without limiting the generality of the foregoing, any of the type of Awards listed in Section 4(a) may be granted as awards that satisfy the requirements for "performance‑based compensation" within the meaning of Code Section 162(m) ("Performance‑Based Awards"), the grant, vesting, exercisability or payment of which may depend on the degree of achievement of the Performance Goals relative to preestablished targeted levels for the Corporation or any of its Subsidiaries, divisions or other business units.  Performance-Based Awards shall be subject to the requirements of clauses (1) through (7) below, except that notwithstanding anything contained in this Section 4(b) to the contrary, any Option or Stock Appreciation Right intended to qualify as a Performance-Based Award shall not be subject to the requirements of clauses (2), (4), (5) and (6) below (with such Awards hereinafter referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right", respectively).  An Award that is intended to satisfy the requirements of this Section 4(b) shall be designated as a Performance‑Based Award at the time of grant.

(1)          Eligible Class.  The eligible class of persons for Awards under this Section 4(b) shall be all Employees.

(2)          Performance Goals.  The performance goals for any Awards under this Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or relative basis, one or more of the Performance Goals.  The specific performance target(s) with respect to Performance Goal(s) must be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the performance relating to the Performance Goal(s) remains substantially uncertain.

5

(3)          Individual Limits.  The maximum number of shares of Stock or Share Units that are issuable under Options and Stock Appreciation Rights granted during a calendar year to any Employee shall be 750,000, and the maximum number of shares of Stock or Share Units that are issuable under other Performance-Based Awards granted to any Employee during a calendar year shall be 300,000, subject to adjustment as provided in Section 7.  Awards that are cancelled during the year shall be counted against these limits to the extent required by Code Section 162(m).

(4)          Committee Certification.  Before any Performance‑Based Award under this Section 4(b) (other than Qualifying Options and Qualifying Stock Appreciation Rights) is paid, the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Goal(s) and any other material terms of the Performance‑Based Award were satisfied; provided, however, that a Performance‑Based Award may be paid without regard to the satisfaction of the applicable Performance Goal in the event of the Participant’s death or permanent disability or in the event of a Change in Control as provided in Section 7(b).

(5)          Terms and Conditions of Awards. Committee Discretion to Reduce Performance Awards.  The Committee shall have discretion to determine the conditions, restrictions or other limitations, in accordance with the terms of this Plan and Code Section 162(m), on the payment of individual Performance‑Based Awards under this Section 4(b).  To the extent set forth in an Award Agreement, the Committee may reserve the right to reduce the amount payable in accordance with any standards or on any other basis (including the Committee's discretion), as the Committee may impose.

(6)          Adjustments for Material Changes.  To the extent set forth in an Award Agreement, in the event of (i) a change in corporate capitalization, a corporate transaction or a complete or partial corporate liquidation, or (ii) any extraordinary gain or loss or other event that is treated for accounting purposes as an extraordinary item under generally accepted accounting principles, or (iii) any material change in accounting policies or practices affecting the Corporation and/or the Performance Goals or targets, the Committee shall make adjustments to the Performance Goals and/or targets, applied as of the date of the event, and based solely on objective criteria, so as to neutralize, in the Committee's judgment, the effect of the event on the applicable Performance‑Based Award.

6

(7)          Interpretation.  Except as specifically provided in this Section 4(b), the provisions of this Section 4(b) shall be interpreted and administered by the Committee in a manner consistent with the requirements for exemption of Performance‑Based Awards granted to Executive Officers as "performance‑based compensation" under Code Section 162(m) and regulations and other interpretations issued by the Internal Revenue Service thereunder.

SECTION 5. Shares of Stock and Share Units Available Under Plan.

(a)          Aggregate Limits on Shares and Share Units. (i) Subject to Section 5(b), the maximum number of shares of Stock that may be issued pursuant to all Awards under the Plan is 26,013,817, (ii) the maximum number of such shares of Stock that may be issued pursuant to all Awards of Incentive Stock Options is 3,000,000, and (iii) the maximum number of shares of Stock subject to Awards granted during a calendar year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during such calendar year, shall not exceed $525,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes and excluding, for this purpose, the value of any dividends or dividend equivalents paid in accordance with Section 6(b)(4) on unissued shares of Stock or unpaid Share Units underlying any such Awards).

(b)          Share Usage for Full Value Awards.  Solely for purposes of calculating the number of shares of Stock available for issuance pursuant to Section 5(a)(i):

(1)          each share of Stock that may be issued pursuant to Awards granted from March 1, 2010 through February 25, 2013 (other than Awards of Options and Stock Appreciation Rights) shall be counted as 2.60 shares;

(2)          each share of Stock that may be issued pursuant to Awards granted from February 26, 2013 through February 22, 2016 (other than Awards of Options and Stock Appreciation Rights) shall be counted as 3.69 shares; and

(3)          each share of Stock that may be issued pursuant to Awards granted on or after February 23, 2016 (other than Awards of Options and Stock Appreciation Rights) shall be counted as 4.26 shares.

(c)          Reissue of Shares and Share Units.  Any unexercised, unconverted or undistributed portion of any expired, cancelled, terminated or forfeited Award, or any alternative form of consideration under an Award that is not paid in connection with the settlement of an Award or any portion of an Award, shall again be available for Awards under Sections 5(a) and (b), as applicable, whether or not the Participant has received benefits of ownership (such as dividends or dividend equivalents or voting rights) during the period in which the Participant's ownership was restricted or otherwise not vested.  To the extent an Award is settled in cash in lieu of issuing shares of Stock subject thereto, such shares shall be deemed to constitute Share Units (and not shares of Stock issued pursuant to an Award) for purposes of the limits set forth in Sections 5(a) and (b).  For the avoidance of doubt, the following shares of Stock shall not become available for reissuance under the Plan: (1) shares tendered by Participants as full or partial payment to the Corporation upon exercise of Options or other Awards granted under the Plan; (2) shares of Stock reserved for issuance upon the grant of Stock Appreciation Rights, to the extent the number of reserved shares exceeds the number of shares actually issued upon exercise of the Stock Appreciation Rights; (3) shares withheld by, or otherwise remitted to, the Corporation to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on Restricted Stock or the exercise of Options or Stock Appreciation Rights or upon any other payment or issuance of shares under any other Award granted under the Plan; and (4) shares of Stock that are acquired by the Corporation as contemplated by Section 5(e) in connection with this Plan or the satisfaction of an Award issued hereunder.

7

(d)          Interpretive Issues.  Additional rules for determining the number of shares of Stock or Share Units authorized under this Plan may be adopted by the Committee, as it deems necessary or appropriate.

(e)          Treasury Shares; No Fractional Shares.  The Stock which may be issued (which term includes Stock reissued or otherwise delivered) pursuant to an Award under this Plan may be treasury or authorized but unissued Stock or Stock acquired, subsequently or in anticipation of a transaction under this Plan, in the open market or in privately negotiated transactions to satisfy the requirements of this Plan.  No fractional shares shall be issued but fractional interests may be accumulated.

(f)          Consideration.  The Stock issued under this Plan may be issued (subject to Section 10(d)) for any lawful form of consideration, the value of which equals the par value of the Stock or such greater or lesser value as the Committee, consistent with Sections 10(d) and 4(a)(1), (2) and (3), may require.

(g)          Purchase or Exercise Price; Withholding.  The exercise or purchase price (if any) of the Stock issuable pursuant to any Award and any withholding obligation under applicable tax laws shall be paid at or prior to the time of the delivery of such Stock in cash or, subject to the Committee's express authorization and the restrictions, conditions and procedures as the Committee may impose, any one or combination of (i) cash, (ii) the delivery of shares of Stock, or (iii) a reduction in the amount of Stock or other amounts otherwise issuable or payable pursuant to such Award.  In the case of a payment by the means described in clause (ii) or (iii) above, the amount of Stock to be so delivered or offset in respect of such exercise price or purchase price (if any), or withholding obligations, shall be determined by reference to the Fair Market Value of the Stock on the date as of which the payment or offset is made.

8

(h)          Cashless Exercise.  The Committee may also permit the exercise of the Award and payment of any applicable withholding tax in respect of an Award by delivery of written notice, subject to the Corporation's receipt of a third party payment in full in cash (or in such other form as permitted under Section 5(g)) for the exercise price and the applicable withholding at or prior to the time of issuance of Stock, in the manner and subject to the procedures as may be established by the Committee.

SECTION 6. Award Agreements.

Each Award under this Plan shall be evidenced by an Award Agreement in a form approved by the Committee setting forth the number of shares of Stock or Share Units, as applicable, subject to the Award, and the price (if any) and term of the Award and, in the case of Performance‑Based Awards, the applicable Performance Goals, if any.  The Award Agreement shall also set forth (or incorporate by reference) other material terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of this Plan.

(a)          Incorporated Provisions.  Award Agreements shall be subject to the terms of this Plan and shall be deemed to include the following terms:

(1)          Transferability: An Award shall not be assignable nor transferable, except by will or by the laws of descent and distribution, and during the lifetime of a Participant the Award shall be exercised only by such Participant or by his or her guardian or legal representative.  The designation of a Beneficiary hereunder shall not constitute a transfer prohibited by the foregoing provisions.

(2)          Rights as Stockholder: A Participant shall have no rights as a holder of Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of these securities.  Except as provided in Section 7, no adjustment or other provision shall be made for dividends or other stockholder rights, except to the extent that the Award Agreement provides for dividend equivalents or similar economic benefits.

(3)          Withholding: The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld from an Award or an amount paid in satisfaction of an Award and these obligations shall be paid by the Participant on or prior to the payment of the Award.  In the case of an Award payable in cash, the withholding obligation shall be satisfied by withholding the applicable amount and paying the net amount in cash to the Participant.  In the case of an Award paid in shares of Stock, a Participant shall satisfy the withholding obligation as provided in Section 5(g) or Section 5(h).

9

(4)          Maximum Term of Awards.  No Nonqualified Stock Option, Incentive Stock Option or Stock Appreciation Right may be exercised or converted to any extent, or remain outstanding and unexercised, unconverted or unvested, more than ten years after the date such Nonqualified Stock Option, Incentive Stock Option or Stock Appreciation Right was initially granted.

(b)          Other Provisions.  Award Agreements may include other terms and conditions as the Committee shall approve, including but not limited to the following:

(1)          Termination of Employment:  A provision describing the treatment of an Award in the event of the retirement, disability, death or other termination of a Participant's employment with or services to the Corporation, including any provisions relating to the vesting, exercisability, forfeiture or cancellation of the Award in these circumstances, subject, in the case of Performance‑Based Awards, to the requirements for "performance‑based compensation" under Code Section 162(m).

(2)          Vesting; Effect of Termination; Change in Control:  Any other terms consistent with the terms of this Plan as are necessary and appropriate to effect the Award to the Participant, including but not limited to the vesting provisions, any requirements for continued employment, any other restrictions or conditions (including performance requirements) of the Award, and the method by which (consistent with Section 7) the restrictions or conditions lapse, and the effect on the Award of a Change in Control.  Unless otherwise provided by the Committee in the applicable Award Agreement, (1) the minimum vesting period for Awards of Restricted Stock shall be three years from the date of grant (or one year in the case of Restricted Stock Awards that are Performance-Based Awards) and (2) the vesting period of an Award of Restricted Stock may not be accelerated to a date that is within such minimum vesting period except in the event of the Participant’s death, permanent disability or retirement or in the event of a Change in Control.

(3)          Replacement and Substitution:  Any provisions permitting or requiring the surrender of outstanding Awards or securities held by the Participant in whole or in part in order to exercise or realize rights under or as a condition precedent to other Awards, or in exchange for the grant of new or amended Awards under similar or different terms; provided, that except in connection with an adjustment contemplated by Section 7, no such provisions of an Award Agreement shall permit a “Repricing” as defined in Section 8(d).

10

(4)          Dividends:  Any provisions providing for the payment of dividend equivalents on unissued shares of Stock or unpaid Share Units underlying an Award, on either a current or deferred or contingent basis, and either in cash or in additional shares of Stock; provided that dividend equivalents may not be paid with respect to Awards of Options or Stock Appreciation Rights.

(c)          Contract Rights, Forms and Signatures.  Any obligation of the Corporation to any Participant with respect to an Award shall be based solely upon contractual obligations created by this Plan and an Award Agreement.  No Award shall be enforceable until the Award Agreement has been signed on behalf of the Corporation by an Executive Officer (other than the recipient) or his or her delegate. By accepting receipt of the Award Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan and any action taken in good faith under this Plan by and within the discretion of the Committee, the Board of Directors or their delegates.  Unless the Award Agreement otherwise expressly provides, there shall be no third party beneficiaries of the obligations of the Corporation to the Participant under the Award Agreement.

SECTION 7. Adjustments; Change in Control; Acquisitions.

(a)          Adjustments.  If there shall occur any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Stock (whether in the form of cash, Stock or other property), or any split‑up, spin‑off, extraordinary redemption, or exchange of outstanding Stock, or there shall occur any other similar corporate transaction or event in respect of the Stock, or a sale of substantially all the assets of the Corporation as an entirety, then the Committee shall, in the manner and to the extent, if any, as it deems appropriate and equitable to the Participants and consistent with the terms of this Plan, and taking into consideration the effect of the event on the holders of the Stock:

(1)          proportionately adjust any or all of:

(A)          the number and type of shares of Stock and Share Units which thereafter may be made the subject of Awards (including the specific maxima and numbers of shares of Stock or Share Units set forth elsewhere in this Plan),

(B)          the number and type of shares of Stock, other property, Share Units or cash subject to any or all outstanding Awards,

(C)          the grant, purchase or exercise price, or conversion ratio of any or all outstanding Awards, or of the Stock, other property or Share Units underlying the Awards,

11

(D)          the securities, cash or other property deliverable upon exercise or conversion of any or all outstanding Awards,

(E)          subject to Section 4(b), the performance targets or standards appropriate to any outstanding Performance‑Based Awards, or

(F)          any other terms as are affected by the event; and/or

(2)          provide for:

(A)          an appropriate and proportionate cash settlement or distribution, or

(B)          the substitution or exchange of any or all outstanding Awards, or the cash, securities or property deliverable on exercise, conversion or vesting of the Awards.

Notwithstanding the foregoing, in the case of an Incentive Stock Option, no adjustment shall be made which would cause this Plan to violate Section 424(a) of the Code or any successor provisions thereto, without the written consent of the Participant adversely affected thereby.  The Committee shall act prior to an event described in this paragraph (a) (including at the time of an Award by means of more specific provisions in the Award Agreement) if deemed necessary or appropriate to permit the Participant to realize the benefits intended to be conveyed by an Award in respect of the Stock in the case of an event described in paragraph (a).

(b)          Change in Control.  The Committee may, in the Award Agreement, provide for the effect of a Change in Control on an Award.  Such provisions may include, but are not limited to any one or more of the following with respect to any or all Awards: (i) the specific consequences of a Change in Control on the Awards; (ii) a reservation of the Committee's right to determine in its discretion at any time that there shall be full acceleration or no acceleration of benefits under the Awards; (iii) that only certain or limited benefits under the Awards shall be accelerated; (iv) that the Awards shall be accelerated for a limited time only; or (v) that acceleration of the Awards shall be subject to additional conditions precedent (such as a termination of employment following a Change in Control).

In addition to any action required or authorized by the terms of an Award, the Committee may take any other action it deems appropriate to ensure the equitable treatment of Participants in the event of a Change in Control, including but not limited to any one or more of the following with respect to any or all Awards: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from, the Awards; (ii) the waiver of conditions on the Awards that were imposed for the benefit of the Corporation, (iii) provision for the cash settlement of the Awards for their equivalent cash value, as determined by the Committee, as of the date of the Change in Control; or (iv) such other modification or adjustment to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following the Change in Control.  The Committee also may accord any Participant a right to refuse any acceleration of exercisability, vesting or benefits, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.

12

Notwithstanding the foregoing provisions of this Section 7(b) or any provision in an Award Agreement to the contrary, if any Award to any Insider is accelerated to a date that is less than six months after the date of the Award, the Committee may prohibit a sale of the underlying Stock (other than a sale by operation or law in exchange for or through conversion into other securities), and the Corporation may impose legend and other restrictions on the Stock to enforce this prohibition.

(c)          Change in Control Definition.  For purposes of this Plan, with respect to any Award other than an Award issued pursuant to an Award Agreement that separately defines the term “change in control,” a change in control shall include and be deemed to occur upon the following events:

(1)          The acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Corporation or any of its Subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a majority of the combined voting power of the Corporation’s then outstanding voting securities, other than by any employee benefit plan maintained by the Corporation;

(2)          The sale of all or substantially all of the assets of the Corporation or any successor thereto;

(3)          The consummation of a merger, combination, consolidation, recapitalization, or other reorganization of the Corporation with one or more other entities that are not Subsidiaries if, as a result of the consummation of the merger, combination, consolidation, recapitalization or other reorganization, less than 50 percent of the outstanding voting securities of the surviving or resulting corporation shall immediately after the event be beneficially owned in the aggregate by the stockholders of the Corporation immediately prior to the event;

(4)          The election, including the filling of vacancies, during any period of 24 months or less, of 50 percent or more, of the members of the Board, without the approval of Continuing Directors, as constituted at the beginning of such period.  “Continuing Directors” shall mean any director of the Corporation who either (i) is a member of the Board on the date of grant of the relevant Award, or (ii) is nominated for election to the Board by a majority of the Board which is comprised of Directors who were, at the time of such nomination, Continuing Directors; or

13

(5)          In the Committee’s sole discretion on a case-by-case basis and solely with respect to Awards granted to Employees of a Subsidiary of the Corporation, or of a business unit or division of the Corporation or such Subsidiary, (i) the sale of all or substantially all of the assets of such Subsidiary, business unit or division or (ii) the sale (including without limitation by way of merger) of a majority of the combined voting power of such Subsidiary’s then outstanding voting securities.

(d)          Business Acquisitions.  Awards may be granted under this Plan on the terms and conditions as the Committee considers appropriate, which may differ from those otherwise required by this Plan to the extent necessary to reflect a substitution for or assumption of stock incentive awards held by employees of other entities who become employees of the Corporation or a Subsidiary as the result of a merger of the employing entity with, or the acquisition of the property or stock of the employing entity by, the Corporation or a Subsidiary, directly or indirectly (such awards, “Substitute Awards”). Substitute Awards shall not be counted against the limitations set forth in Section 5(a), provided that Substitute Awards issued in connection with the assumption of, or in substitution for, Incentive Stock Options shall be counted against the limits set forth in Section 5(a)(ii) of the Plan.

SECTION 8. Administration.

(a)          Committee Authority and Structure.  This Plan and all Awards granted under this Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board (or the full Board) or subcommittee of the Compensation Committee as may be designated by the Board (such committee, subcommittee or the full Board, as applicable, the “Committee”).  With respect to Awards granted to persons who are subject to the reporting requirements of Section 16(a) of the Exchange Act, the Committee shall be constituted so as to permit this Plan to comply with the disinterested administration requirements of Rule 16b‑3 under the Exchange Act, and with respect to Awards granted to persons who are “covered employees” as defined in Code Section 162(m), the Committee shall be constituted such that the "outside director" requirement of Code Section 162(m) is met.  The members of the Committee shall be designated by the Board.  A majority of the members of the Committee (but not fewer than two) shall constitute a quorum.  The vote of a majority of a quorum or the unanimous written consent of the Committee shall constitute action by the Committee.

(b)          Selection and Grant.  The Committee shall have the authority to determine the individuals (if any) to whom Awards will be granted under this Plan, the type of Award or Awards to be made, and the nature, amount, pricing, timing, and other terms of Awards to be made to any one or more of these individuals, subject to the terms of this Plan.

14

(c)          Construction and Interpretation.  The Committee shall have the power to interpret and administer this Plan and Award Agreements, and to adopt, amend and rescind related rules and procedures.  All questions of interpretation and determinations with respect to this Plan, the number of shares of Stock, Stock Appreciation Rights, or units or other Awards granted, and the terms of any Award Agreements, the adjustments required or permitted by Section 7, and other determinations hereunder shall be made by the Committee and its determination shall be final and conclusive upon all parties in interest.  In the event of any conflict between an Award Agreement and any non‑discretionary provisions of this Plan, the terms of this Plan shall govern.

(d)          Express Authority to Change Terms of Awards. The Committee may, at any time, alter or amend any or all Award Agreements under this Plan in any manner that would be authorized for a new Award under this Plan, including but not limited to any manner set forth in Section 9 (subject to any applicable limitations thereunder), except that no amendment or cancellation of an Award may effect a Repricing of such Award without shareholder approval, except in connection with an adjustment pursuant to Section 7.  A “Repricing” means any of the following: (i) changing the terms of an Award to lower its exercise price or base price, (ii) cancelling an Award with an exercise price or base price in exchange for other Awards with a lower exercise price or base price, or (iii) cancelling an Award with an exercise price or base price at a time when such price is equal to or greater than the Fair Market Value of the underlying Stock in exchange for other Awards, cash or property.  Without limiting the Committee's authority under this plan (including Sections 7 and 9), but subject to any express limitations of this Plan (including the prohibitions on Repricing set forth in this Section 8(d)), the Committee shall have the authority to accelerate the exercisability or vesting of an Award, to extend the term or waive early termination provisions of an Award (subject to the maximum ten-year term under Section 6(a)(4) to the extent applicable), and to waive the Corporation's rights with respect to an Award or restrictive conditions of an Award (including forfeiture conditions), in any case in such circumstances as the Committee deems appropriate.

(e)          Rule 16b‑3 Conditions; Bifurcation of Plan.  It is the intent of the Corporation that this Plan and Awards hereunder satisfy and be interpreted in a manner, that, in the case of Participants who are or may be Insiders, satisfies any applicable requirements of Rule 16b‑3, so that these persons will be entitled to the benefits of Rule 16b‑3 or other exemptive rules under Section 16 under the Exchange Act and will not be subjected to avoidable liability thereunder as to Awards intended to be entitled to the benefits of Rule 16b‑3.  If any provision of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 8(e), that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict.  To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed disregarded as to Awards intended as Rule 16b‑3 exempt Awards.  Notwithstanding anything to the contrary in this Plan, the provisions of this Plan may at any time be bifurcated by the Board or the Committee in any manner so that certain provisions of this Plan or any Award Agreement intended (or required in order) to satisfy the applicable requirements of Rule 16b‑3 are only applicable to Insiders and to those Awards to Insiders intended to satisfy the requirements of Rule 16b‑3.

15

(f)          Delegation and Reliance.  The Committee may delegate to the officers or employees of the Corporation the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose, except that the Committee may not delegate any discretionary authority to grant or amend an award or with respect to substantive decisions or functions regarding this Plan or Awards as these relate to the material terms of Performance‑Based Awards to Executive Officers or to the timing, eligibility, pricing, amount or other material terms of Awards to Insiders.  In making any determination or in taking or not taking any action under this Plan, the Board and the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Corporation.  No director, officer, employee or agent of the Corporation shall be liable for any such action or determination taken or made or omitted in good faith.

(g)          Exculpation and Indemnity.  Neither the Corporation nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any party for any action taken or not taken in good faith under this Plan or for the failure of an Award (or action in respect of an Award) to satisfy Code requirements as to incentive stock options or to realize other intended tax consequences (including any intended tax treatment under Section 409A of the Code), to qualify for exemption or relief under Rule 16b‑3 or to comply with any other law, compliance with which is not required on the part of the Corporation.

SECTION 9. Amendment and Termination of this Plan.

The Board of Directors may at any time amend, suspend or discontinue this Plan, subject to any stockholder approval that may be required under applicable law. Notwithstanding the foregoing, no such action shall, in any manner adverse to a Participant other than as expressly permitted by the terms of an Award Agreement, affect any Award then outstanding and evidenced by an Award Agreement without the consent in writing of the Participant or his or her Beneficiary, guardian or legal representative, to the extent applicable. Notwithstanding the above, any amendment to this Plan that would (i) materially increase the benefits accruing to any Participant or Participants hereunder, (ii) materially increase the aggregate number of shares of Stock, Share Units or other equity interest(s) that may be issued hereunder, or (iii) materially modify the requirements as to eligibility for participation in this Plan, shall be subject to shareholder approval.

16

SECTION 10. Miscellaneous.

(a)          Unfunded Plans.  This Plan shall be unfunded.  Neither the Corporation nor the Board of Directors nor the Committee shall be required to segregate any assets that may at any time be represented by Awards made pursuant to this Plan.  Neither the Corporation, the Committee, nor the Board of Directors shall be deemed to be a trustee of any amounts to be paid or securities to be issued under this Plan.

(b)          Rights of Employees.

(1)          No Right to an Award.  Status as an Employee shall not be construed as a commitment that any one or more Awards will be made under this Plan to an Employee or to Employees generally.  Status as a Participant shall not entitle the Participant to any additional Award.

(2)          No Assurance of Employment.  Nothing contained in this Plan (or in any other documents related to this Plan or to any Award) shall confer upon any Employee or Participant any right to continue in the employ or other service of the Corporation or any Subsidiary or constitute any contract (of employment or otherwise) or limit in any way the right of the Corporation or any Subsidiary to change a person's compensation or other benefits or to terminate the employment or services of a person with or without cause.

(c)          Effective Date; Duration.  This Plan was adopted by the Board of Directors of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  This Plan became effective upon the approval of the stockholders of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  This Plan shall remain in effect until any and all Awards under this Plan have been exercised, converted or terminated under the terms of this Plan and applicable Award Agreements.  Notwithstanding the foregoing, no Award may be granted under this Plan after March 1, 2026; provided, however, that any Award granted prior to such date may be amended after such date in any manner that would have been permitted hereunder prior to such date.

(d)          Compliance with Laws.  This Plan, Award Agreements, and the grant, exercise, conversion, operation and vesting of Awards, and the issuance and delivery of shares of Stock and/or other securities or property or the payment of cash under this Plan, Awards or Award Agreements, are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may be necessary or, in the opinion of counsel for the Corporation, advisable in connection therewith.  Any securities delivered under this Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Corporation, provide such evidence, assurance and representations to the Corporation as to compliance with any of such restrictions) as the Corporation may deem necessary or desirable to assure compliance with all applicable legal requirements.

17

(e)          Section 409A.  Notwithstanding any other provisions of the Plan or any Award Agreements thereunder, it is intended that the provisions of the Plan and such Award Agreements comply with Section 409A of the Code, and that no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan, or any Award Agreement interpreted, in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant.  In the event that it is reasonably determined by the Board or Committee that, as a result of Section 409A of the Code, payments in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the Corporation will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code; which, if the Participant is a “specified employee” within the meaning of the Section 409A, shall be the first day following the six-month period beginning on the date of Participant’s termination of Employment. Notwithstanding the foregoing, each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on him or her, or in respect of any payment or benefit delivered in connection with the Plan (including any taxes and penalties under Section 409A of the Code), and the Corporation shall not have any obligation to indemnify or otherwise hold any Participant harmless from any or all such taxes or penalties.

(f)          Applicable Law.  This Plan, Award Agreements and any related documents and matters shall be governed by, and construed in accordance with, the laws of the State of New York and applicable Federal law.

(g)          Non‑Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed to limit the authority of the Corporation, the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Stock, under any other plan or authority.

18

EX-10.29

Exhibit 10.29

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED 2012 CASH INCENTIVE PLAN

(As amended through December 31, 2016)

1. Purpose of the Plan

The purpose of the Plan is to enable the Company and its Subsidiaries to attract, retain, motivate and reward executive officers and key employees by providing them with the opportunity to earn competitive compensation directly linked to the Company’s performance or otherwise.

2. Definitions

The following capitalized terms used in the Plan have the respective meanings set forth in this Section:

(a)          “Affiliate” shall mean, with respect to any entity, any entity directly or indirectly controlling, controlled by, or under common control with, such entity.

(b)          “Board” shall mean the Board of Directors of the Company.

(c)          “Cause” shall mean the Participant’s (1) intentional failure to perform reasonably assigned duties, (2) dishonesty or willful misconduct in the performance of duties, (3) engaging in a transaction in connection with the performance of duties to the Company or its Subsidiaries which transaction is adverse to the interests of the Company and is engaged in for personal profit or (4) willful violation of any law, rule or regulation in connection with the performance of duties (other than traffic violations or similar offenses).

(d)          “Change in Control” shall have the meaning assigned to such term under the Company’s Equity Plan.

(e)          “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor thereto, and the regulations and guidance promulgated thereunder.

(f)          “Committee” shall mean the Compensation Committee of the Board (or a subcommittee thereof), or such other committee of the Board consisting solely of at least two individuals who are intended to qualify as “outside directors” within the meaning of Section 162(m) of the Code, to which the Board has delegated power to act under or pursuant to the provisions of the Plan.

(g)          “Company” shall mean L3 Technologies, Inc., a Delaware corporation.

(h)          “Covered Employee” shall have the meaning set forth in Section 162(m) of the Code.

(i)           “Disability” or “Disabled” shall mean, unless otherwise agreed by the Company (or any of its Subsidiaries) in a written agreement or employment letter with such Participant, that the Participant, as a result of incapacity due to physical or mental illness, becomes eligible for benefits under the long-term disability plan or policy of the Company or a Subsidiary in which the Participant is eligible to participate.  The Disability determination shall be in the sole discretion of the Committee.

(j)          “Equity Plan” shall mean the Company’s Amended and Restated 2008 Long Term Performance Plan, as amended, or any successor plan thereto.

(k)          “First Quarter” shall mean the period of calendar days during a given Performance Period that is equal to the lesser of (i) 25% of the full number of calendar days falling within such Performance Period or (ii) 90 days.

(l)          “Participant” shall mean each officer of the Company and other key employee of the Company or any of its Subsidiaries whom the Committee designates as a participant under the Plan.

(m)         “Performance Period” shall mean each fiscal year of the Company or such shorter or longer period, as determined by the Committee.

(n)          “Plan” shall mean this L3 Technologies, Inc. Amended and Restated 2012 Cash Incentive Plan, as set forth herein and as may be amended and in effect from time to time.

(o)          “Retirement” shall mean that the Participant (1) terminates employment with the Company and its Subsidiaries other than for Cause (and is not subject to termination for Cause at the time of such termination), (2) is available for consultation with the Company or its Subsidiaries at the reasonable request of the Company or its Subsidiaries and (3) terminates employment on or after attaining age 65 and completing at least five years of service in the aggregate with the Company and its Subsidiaries (which service must be continuous through the date of termination except for a single break in service that does not exceed one year in length).

(p)          “Section 409A” shall mean Section 409A of the Code and any rules, regulations and other official guidance promulgated thereunder.

(q)          “Service Recipient” shall mean the Company, any of its Subsidiaries, or any of its Affiliates that satisfies the definition of “service recipient” within the meaning of Treasury Regulation Section 1.409A-1 (or any successor regulation), with respect to which the person is a “service provider” (within the meaning of Treasury Regulation Section 1.409A-1(or any successor regulation).

(r)          “Share” shall mean a share of common stock of the Company.

(s)          “Subsidiary” shall mean, as to any person, any corporation, association, partnership, joint venture or other business entity of which 50% or more of the voting stock or other equity interests (in the case of entities other than corporations) is owned or controlled (directly or indirectly) by that entity, or by one or more of the Subsidiaries of that entity, or by a combination thereof.

2

3. Administration

(a)          The Plan shall be administered and interpreted by the Committee; provided, however, that the Board may, in its sole discretion, take any action delegated to the Committee under this Plan as it may deem necessary; provided that the Plan shall, to the extent reasonably possible, be administered and interpreted by the Committee in a manner which would be expected to cause any award intended to be qualified as performance-based compensation under Section 162(m) of the Code to so qualify.  The Committee shall establish the performance objective(s) for any Performance Period in accordance with Section 4 and certify whether and to what extent such performance objective(s) have been obtained.  Any determination made by the Committee under the Plan shall be final, conclusive and binding on the Company, any of its Subsidiaries, any Participant and any other person dealing with the Plan.

(b)          The Committee may employ such legal counsel, consultants and agents (including counsel or agents who are employees of the Company or any of its Subsidiaries) as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant or agent and any computation received from such consultant or agent.  All expenses incurred in the administration of the Plan, including, without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the Company.  No member or former member of the Board or the Committee shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan other than as a result of such individual’s willful misconduct.

4. Incentive Compensation

(a)          Performance Criteria.  No later than the last day of the First Quarter of a given Performance Period (or such other date as may be required or permitted under Section 162(m) of the Code), the Committee shall establish the performance objective or objectives that must be satisfied in order for a Participant to receive incentive compensation for each such Performance Period.  The Committee may establish different performance objectives for each Performance Period, and may provide for multiple, overlapping Performance Periods hereunder.  Any performance objective(s) established hereunder will be based upon the achievement of one or more of the following criteria or any combination thereof, as determined by the Committee: (i) consolidated income before or after taxes (including income before interest, taxes, depreciation and amortization); (ii) EBIT or EBITDA; (iii) operating income or operating margin; (iv) net income; (v) net income or earnings per Share; (vi) book value per Share; (vii) return on equity; (viii) expense management (including without limitation, total general and administrative expense percentages); (ix) return on investment or on invested capital; (x) improvements in capital structure; (xi) profitability of an identifiable business unit or product; (xii) maintenance or improvement of profit margins; (xiii) stock price; (xiv) market share; (xv) revenue or sales (including, without limitation, net loans charged off and average finance receivables); (xvi) costs (including, without limitation, total general and administrative expense percentage); (xvii) cash flow or net funds provided; (xviii) working capital; (xix) total debt (including, without limitation, total debt as a multiple of EBIT or EBITDA), (xx) orders and (xxi) total stockholder return. The foregoing criteria may relate to the Company, one or more of its Subsidiaries, one or more of their respective divisions or business units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine.  The Committee may provide, at the time when performance objectives are established with respect to a Performance Period (or at such later date as may be permitted under Section 162(m) of the Code), for the adjustment of such performance objectives as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine to be appropriate, including, without limitation, the gain or loss on disposal of a business segment.  In the event of an equity restructuring, as defined in Financial Accounting Standards Board Accounting Standards Codification 718-10 (formerly Statement of Financial Accounting Standards 123R), that affects the Shares, the Committee shall adjust any and all previously established Share-based performance objectives affected by such restructuring (including without limitation any performance objectives based on stock price) so as to preserve (without enlarging) such Participant’s incentive compensation opportunity in respect thereof, with the manner of such adjustment to be determined by the Committee in its sole discretion and in a manner consistent with Section 162(m) of the Code, to the extent applicable.

3

(b)          Incentive Compensation Targets; Discretionary Compensation.

(i)          No later than the last day of the First Quarter of a given Performance Period (or such other date as may be required or permitted under Section 162(m) of the Code), the Committee shall establish target incentive compensation amounts for each individual Participant, representing each such Participant’s incentive compensation opportunity to the extent that the applicable performance objectives for such Performance Period are achieved.

(ii)          The Committee may, in its sole discretion, grant such discretionary compensation, if any, to such Participants, if any, as the Committee may determine, in respect of any given Performance Period, that is not subject to the requirements of Section 4(a) and (c) of this Plan.

(c)          Determination of Incentive Compensation Earned/Maximum Amount Payable.  As soon as practicable after the applicable Performance Period ends, the Committee shall (x) determine (i) whether and to what extent any of the performance objective(s) established for the relevant Performance Period under Section 4(a) have been satisfied and certify to such determination, and (ii) the actual amount of incentive compensation to which such Participant shall be entitled, taking into consideration the extent to which the performance objective(s) have been met and such other factors as the Committee may deem appropriate pursuant to Section 4(d), and (y) cause such incentive compensation to be paid to such Participant in accordance with Section 5.  Any provision of this Plan notwithstanding, in no event shall any Participant earn incentive compensation under this Plan in respect of any fiscal year in excess of $10,000,000 (such maximum incentive compensation amount to be proportionately adjusted for Performance Periods that are shorter or longer than one year, with multiple incentive opportunities considered in the aggregate in the case where multiple, overlapping Performance Periods are established hereunder).

(d)          Negative Discretion.  Notwithstanding anything else contained in Section 4(c), 4(e) or 4(h) to the contrary, the Committee shall have the right, to the extent it so provides at the time when performance objectives are established with respect to a Performance Period, (i) to reduce or eliminate the amount otherwise payable to any Participant under Section 4(c) based on individual performance or any other factors that the Committee, in its sole discretion, shall deem appropriate and (ii) to establish rules or procedures that have the effect of limiting the amount payable to each Participant to an amount that is less than the maximum amount otherwise authorized under Section 4(c).

4

(e)          Qualified Termination of Employment.  Unless otherwise specified by the Committee at the time when performance objectives are established with respect to a Performance Period, if prior to the last day of any Performance Period for which a Participant is eligible to receive incentive compensation hereunder, the Participant’s employment is terminated: (1) by reason of death or Disability, (2) by Retirement at least one year after the first day of the Performance Period, or (3) by the Company without Cause (each, a “Qualified Termination”), then subject to Section 4(d), such Participant shall receive an amount of incentive compensation equal to the incentive compensation otherwise payable to such Participant based upon actual Company performance for the applicable Performance Period, multiplied by a fraction, the numerator of which is the number of days (or, in the case of Performance Periods exceeding one year in length, the number of completed months) that have elapsed during the Performance Period prior to and including the date of the Qualified Termination, and the denominator of which is the total number of days (or, in the case of Performance Periods exceeding one year in length, the total number of months) in the Performance Period.

(f)          Other Termination of Employment.  Unless otherwise determined by the Committee in a manner consistent with Section 162(m) of the Code (to the extent applicable) and except as may otherwise be provided in Section 4(e) above, no incentive compensation shall be payable under this Plan in respect of any Performance Period to any Participant whose employment terminates prior to the last day of such Performance Period.

(g)          Partial Performance Period.  To the extent permitted under Section 162(m) of the Code, if a Participant is hired or rehired by the Company (or any of its Subsidiaries) after the beginning of a Performance Period for which incentive compensation is payable hereunder, such Participant may, if determined by the Committee, receive an amount of incentive compensation equal to the incentive compensation otherwise payable to such Participant based upon actual Company performance for the applicable Performance Period, multiplied by a fraction, the numerator of which is the number of days (or, in the case of Performance Periods exceeding one year in length, the number of completed months) of active employment with the Company (or any of its Subsidiaries) during the Performance Period and the denominator of which is the total number of days (or, in the case of Performance Periods exceeding one year in length, the total number of months) in the Performance Period or such other amount as the Committee may deem appropriate.

(h)          Change in Control. Unless otherwise specified by the Committee at the time when performance objectives are established with respect to a Performance Period, in the event of a Change in Control prior to the last day of any Performance Period hereunder, then subject to Section 4(d), each Participant eligible to receive incentive compensation thereunder shall receive an amount of incentive compensation based upon achievement at the “target” level of the applicable performance objectives (or, if otherwise determined in the sole discretion of the Committee as constituted immediately prior to the Change in Control,  an amount of incentive compensation based upon such higher level of Company performance actually achieved when considered in light of the reduced Performance Period), multiplied by a fraction, the numerator of which is the number of days (or, in the case of Performance Periods exceeding one year in length, the number of completed months) that have elapsed during the Performance Period prior to and including the date of the Change in Control, and the denominator of which is the total number of days (or, in the case of Performance Periods exceeding one year in length, the total number of months) in the Performance Period.

5

(i)          Forfeiture/Clawback.  The Committee may, in its sole discretion, specify that the Participant’s rights, payments, and benefits with respect to any payment of incentive compensation made hereunder shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of such incentive compensation. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company or any of its Subsidiaries, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or restatement of the Company’s financial statements to reflect adverse results from those previously released financial statements.

5. Payment

(a)          In General.  Except as otherwise provided hereunder, payment of any incentive compensation amount determined under Section 4 shall be made to each Participant as soon as practicable after the Committee certifies that one or more of the applicable performance objectives have been attained or, in the case of any incentive compensation payable under the provisions of Section 4(d) or 4(h), after the Committee determines the amount of any such incentive compensation; provided, however, that in any event all payments made hereunder shall be in accordance with or exempt from the requirements of Section 409A.

(b)          Form of Payment.  All incentive compensation payable under this Plan shall be payable in cash.

6. General Provisions

(a)          Effectiveness of the Plan.  The Plan became effective on the date on which it was adopted by the Board of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Company (formerly known as L-3 Communications Corporation)) (the “Effective Date”), following the approval of the shareholders of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Company (formerly known as L-3 Communications Corporation)).  Any payments with respect to incentive compensation opportunities granted under the Plan prior to shareholder approval of the Plan shall be contingent upon obtaining such shareholder approval.  It is anticipated that shareholders will vote to re-approve the Plan (after its initial approval) no later than the day of the first meeting of shareholders of the Company that occurs in 2017.

(b)          Amendment and Termination.  The Board or the Committee may at any time amend, suspend, discontinue or terminate the Plan; provided, however, that no such amendment, suspension, discontinuance or termination shall adversely affect the rights of any Participant in respect of any Performance Period that has already commenced, and no such action shall be effective without approval by the shareholders of the Company to the extent necessary to continue to qualify the amounts payable hereunder to Covered Employees as under Section 162(m) of the Code, if such amounts are otherwise intended by the Committee to be so qualified.

6

(c)          No Right to Continued Employment or Awards.  Nothing in this Plan shall be construed as conferring upon any Participant any right to continue in the employment of the Company or any of its Subsidiaries.  No Participant shall have any claim to be granted any award, and there is no obligation for uniformity of treatment of Participants or beneficiaries.  The terms and conditions of awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not the Participants are similarly situated).

(d)          No Limitation on Corporate Actions.  Nothing contained in the Plan shall be construed to prevent the Company or any of its Subsidiaries from taking any corporate action which is deemed by it to be appropriate or in its best interest, whether or not such action would have an adverse effect on any awards made under the Plan.  No employee, beneficiary or other person shall have any claim against the Company or any of its Subsidiaries as a result of any such action.

(e)          Nonalienation of Benefits.  No Participant or beneficiary shall have the power or right to transfer, anticipate, or otherwise encumber the Participant’s interest under the Plan.  The Company’s obligations under this Plan are not assignable or transferable except to (i) a corporation which acquires all or substantially all of the Company’s assets or (ii) any corporation into which the Company may be merged or consolidated.  The provisions of the Plan shall inure to the benefit of each Participant and the Participant’s beneficiaries, heirs, executors, administrators or successors in interest.

(f)          Withholding.  A Participant may be required to pay to the Company or any of its Subsidiaries, and the Company or any of its Subsidiaries shall have the right and is hereby authorized to withhold from any payment due under this Plan or from any compensation or other payment otherwise owing to the Participant, applicable withholding taxes with respect to any payment under this Plan, and to take any such actions as may be deemed necessary in the opinion of the Company to satisfy all obligations for the payment of such withholding taxes.

(g)          Severability.  If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.

(h)          Governing Law.  The Plan shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws.

(i)          Headings.  Headings are inserted in this Plan for convenience of reference only and are to be ignored in a construction of the provisions of the Plan.

7

(k)          Compliance with Section 409A.  The Plan is intended to comply with or be exempt from Section 409A and will be interpreted in a manner intended to comply with Section 409A.  Notwithstanding anything herein to the contrary, if at the time of the Participant’s separation from service with any Service Recipient the Participant is a “specified employee” as defined in Section 409A, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such separation from service is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Participant) until the date that is six months and one day following the Participant’s separation from service with all Service Recipients (or the earliest date as is permitted under Section 409A), if such payment or benefit is payable upon a separation from service with any Service Recipient.  Each payment made under the Plan shall be designated as a “separate payment” within the meaning of Section 409A.

8

EX-10.34

Exhibit 10.34

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

2008 DIRECTORS STOCK INCENTIVE PLAN

(As amended through December 31, 2016)

1. Purpose of the Plan

The L3 Technologies, Inc. Amended and Restated 2008 Directors Stock Incentive Plan (the "Plan") is designed:

(a)  to promote the long-term financial interests and growth of L3 Technologies, Inc. (the "Corporation") and its Subsidiaries by attracting and retaining Non-Employee Directors with the training, experience and ability to enable them to make a substantial contribution to the success of the Corporation's business; and

(b)  to further the alignment of interests of Non-Employee Directors with those of the stockholders of the Corporation through opportunities for increased stock, or stock-based, ownership in the Corporation.

2. Definitions

As used in the Plan, the following words shall have the following meanings:

(a)          “Award” means any award granted pursuant to Section 3.

(b)          “Award Agreement” means an agreement described in Section 6 by the Corporation for the benefit of a Participant, setting forth (or incorporating by reference) the terms and conditions of an Award granted to a Participant.

(c)          "Board of Directors" means the Board of Directors of the Corporation.

(d)          "Code" means the Internal Revenue Code of 1986, as amended.

(e)          "Committee" means the Compensation Committee of the Board of Directors.

(f)          "Common Stock" or "Share" means common stock, par value $.01 per share of the Corporation, subject to adjustments made under Sections 8 and 9 or by operation of law.

(g)          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(h)          "Fair Market Value" means, unless otherwise defined in an Award Agreement, the closing price of the Common Stock as reported on the composite tape of New York Stock Exchange issues (or if, at the date of determination, the Common Stock is not so listed or if the principal market on which it is traded is not the New York Stock Exchange, such other reporting system as shall be selected by the Committee) on the relevant date, or, if no sale of the Common Stock is reported for that date, the next preceding day for which there is a reported sale.  The Committee shall determine the Fair Market Value of any security that is not publicly traded, using criteria as it shall determine, in its sole direction, to be appropriate for the valuation.

(i)          “Non-Employee Director” means a director of the Corporation who is not (i) an employee of the Corporation or any of its Subsidiaries, (ii) a director, officer  or employee of any entity that owns, beneficially or of record, directly or indirectly, 10% or more of the Common Stock outstanding on the date of grant of the Award or (iii) a person that owns, beneficially or of record, directly or indirectly, 10% or more of the Common Stock outstanding on the date of grant of the Award.

(j)          "Participant" means a Non-Employee Director to whom one or more grants of Awards have been made and such grants have not all been forfeited or terminated under the Plan.

(k)          "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Corporation if each of the corporations, or group of commonly controlled corporations, other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

3. Awards

(a)          Type of Awards.  Participants may be granted any of the following types of Awards, either singly, in tandem or in combination with other Awards, at such times and for such number of shares of Common Stock as shall be determined from time to time by the Board of Directors (and/or the Committee to the extent such authority is delegated thereto in whole or in part by the Board of Directors):

(1)          Options.  An Option is an Award in the form of an option to purchase shares of Common Stock that is not intended to comply with requirements of Section 422 of the Code.  The exercise price of each Option granted under this Plan shall not be less than the Fair Market Value of the Common Stock on the date that the Option is granted.  No dividend equivalents may be paid on unissued shares of Common Stock underlying an Award of Options.

(2)          Restricted Stock.  Restricted Stock is an Award of issued shares of Common Stock (other than Minimum Ownership Stock) that are subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.  Unless otherwise provided by the Committee in the applicable Award Agreement, the vesting period for Awards of Restricted Stock shall be three years following date of grant.

(3)          Restricted Stock Units.  A Restricted Stock Unit is an Award of bookkeeping credits that automatically convert into shares of Common Stock upon satisfaction of a stated vesting period or requirement.  Restricted Stock Units are not outstanding shares of Common Stock and do not entitle a Participant to voting or other rights with respect to Common Stock; provided, however, that the applicable Award Agreement may provide for the payment of dividend equivalents on unissued shares of Common Stock underlying an Award of Restricted Stock Units, on either a current or deferred or contingent basis, and either in cash or in additional shares of Common Stock.

(4)          Minimum Ownership Stock.  Minimum Ownership Stock is an Award of shares of Common Stock that are issued to the Participant in lieu of cash compensation otherwise payable to the Participant in order to satisfy the Corporation’s applicable stock ownership guidelines from time to time in effect.  Minimum Ownership Stock shall not be subject to any vesting period or requirement, but may be subject to restrictions on transfer and/or such other restrictions on incidents of ownership as the Committee may determine.

2

(b)          At or prior to the time of the grant of each Award the Committee shall determine, and shall include or incorporate by reference in the Award Agreement, such other conditions or restrictions on the grant or exercise of the Award as the Committee deems appropriate.

4. Shares of Common Stock Subject to the Plan

(a)          Subject to the provisions of Section 8 and this Section 4, the maximum number of shares of Common Stock that may be issued pursuant to all Awards under the Plan is 312,995.  Any unexercised, unconverted or undistributed portion of any expired, cancelled, terminated or forfeited Award, or any alternative form of consideration under an Award that is not paid in connection with the settlement of an Award or any portion of an Award (including any shares under an Award that are not issued in consideration for a cash settlement of equivalent value), shall again be available for Awards under the Plan, whether or not the Participant has received benefits of ownership (such as dividends or dividend equivalents or voting rights) during the period in which the Participant’s ownership was restricted or otherwise not vested.  For the avoidance of doubt, the following shares of Common Stock shall not become available for reissuance under the Plan: (1) shares tendered by Participants as full or partial payment to the Corporation upon exercise of Options and (2) shares withheld by, or otherwise remitted to, the Corporation to satisfy a Participant’s tax withholding obligations in connection with an Award.

(b)          Shares of Common Stock deliverable under the terms of the Plan may be, in whole or in part, authorized and unissued shares of Common Stock, or issued shares of Common Stock held in the Corporation’s treasury, or both.

(c)          The Corporation shall at all times reserve a number of shares of Common Stock (authorized and unissued shares of Common Stock, issued shares of Common Stock held in the Corporation’s treasury, or both) equal to the maximum number of shares of Common Stock that may be subject to outstanding Award grants and future Award grants under the Plan.

5. Administration of the Plan

(a)          The Plan shall be administered by the Committee or a subcommittee appointed by the Committee.  The Committee may adopt its own rules of procedure, and action of a majority of the members of the Committee taken at a meeting, or action taken without a meeting by unanimous written consent, shall constitute action by the Committee.  The Committee shall have the power and authority to administer, construe and interpret the Plan, to make rules for carrying it out and to make changes in such rules.  Any such interpretations, rules and administration shall be consistent with the basic purposes of the Plan.

(b)          The participating members of the Committee administering the Plan shall include only those members of the Committee who are “Non-Employee Directors” (as defined in Rule 16b-3 promulgated under the Exchange Act).

(c)          Unless in contravention to any laws, rules and regulations governing the Plan, including the Exchange Act, the Committee may delegate to the chief executive officer and to other senior officers of the Corporation its duties under the Plan subject to such conditions and limitations as the Committee shall prescribe; provided that under no circumstances may the chief executive officer or any other senior officer be delegated any authority (including the authority to approve or award the grant of an Award), except as permitted under New York and Delaware law.

3

(d)          The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons in respect of the administration of the Plan, who may be employees of the Corporation or outside advisers to the Corporation.  The Committee, the Corporation, and the officers and directors of the Corporation shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Participants, the Corporation and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Award grants, and all members of the Committee shall be fully protected, indemnified and held harmless by the Corporation with respect to any such action, determination or interpretation.

6. Eligibility

Award grants may be made under this Plan only to Non-Employee Directors of the Corporation. The terms, conditions and limitations of each Award granted under the Plan shall be set forth or incorporated by reference in an Award Agreement, in a form approved by the Committee, consistent, however, with the terms of the Plan; provided, however, that such Award Agreement shall contain or incorporate by reference provisions dealing with the treatment of Awards (including forfeiture or acceleration of vesting of all or a portion of the Award) in the event of the termination, death or disability of a Participant, or a change of control of the Corporation.

7. Limitations and Conditions

(a)          No Option may be exercised, converted or otherwise remain outstanding, more than ten years after the date the Option was initially granted.

(b)          Nothing contained herein shall affect the right of the Corporation or its directors or stockholders to remove any Non-Employee Director in accordance with the Certificate of Incorporation, By-laws of the Corporation or applicable law.

(c)          Other than by will or by the laws of descent and distribution, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void, except that Awards may be transferred to and exercised by a family member or family members of a Participant, or transferred to an irrevocable trust or trusts (or other similar estate planning entity or entities) established for the benefit of a Participant and/or one or more of the Participant’s family members.  No such benefit shall, prior to receipt thereof by the Participant, be in any manner or subject to attachment, satisfaction or discharge of the debts, contracts, liabilities, engagements, or obligations arising in respect of torts of the Participant. The designation of a beneficiary hereunder shall not constitute a transfer prohibited by the foregoing provisions.

(d)          A Participant shall have no rights as a holder of Common Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of these securities.  Except as provided in Section 8, no adjustment or other provision shall be made for dividends or other stockholder rights, except to the extent that the Award Agreement provides for dividend equivalents or similar economic benefits.

4

(e)          During the lifetime of a Participant, an election as to benefits and/or the exercise of Awards may be made only by such Participant or by his or her guardian, trustee or other legal representative, except that Awards may be transferred to and exercised by a family member or family members of a Participant, or transferred to an irrevocable trust or trusts (or other similar estate planning entity or entities) established for the benefit of a Participant and/or one or more of the Participant’s family members.

(f)          Absent express provisions to the contrary, any grant of Awards under this Plan shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Corporation or its Subsidiaries and shall not affect any benefits under any other benefit plan of any kind now or subsequently in effect under which the availability or amount of benefits is related to level of compensation.  This Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended.

(g)          Unless the Committee determines otherwise, no benefit, Award or other promise under the Plan shall be secured by any specific assets of the Corporation or any of its Subsidiaries, nor shall any assets of the Corporation or any of its Subsidiaries be designated as attributable or allocated to the satisfaction of the Corporation's obligations under the Plan or any applicable Award Agreement.

8.          Adjustments

If there shall occur any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Common Stock (whether in the form of cash, Common Stock or other property), or any split up, spin off, extraordinary redemption, or exchange of outstanding Common Stock, or there shall occur any other similar corporate transaction or event in respect of the Common Stock, or a sale of substantially all the assets of the Corporation as an entirety, then the Committee shall, in the manner and to the extent, if any, as it deems appropriate and equitable to the Participants and consistent with the terms of this Plan, and taking into consideration the effect of the event on the holders of the Common Stock:

(a)          proportionately adjust any or all of:

(1)          the number and type of shares of Common Stock which thereafter may be made the subject of Awards (including the specific maxima and numbers of shares of Common Stock set forth elsewhere in this Plan),

(2)          the number and type of shares of Common Stock, other property or cash subject to any or all outstanding Awards,

(3)          the grant, purchase or exercise price, or conversion ratio of any or all outstanding Awards, or of the Common Stock or other property underlying the Awards,

5

(4)          the securities, cash or other property deliverable upon exercise or conversion of any or all outstanding Awards, or

(5)          any other terms as are affected by the event; and/or

(b)          provide for:

(1)          an appropriate and proportionate cash settlement or distribution, or

(2)          the substitution or exchange of any or all outstanding Awards, or the cash, securities or property deliverable on exercise, conversion or vesting of the Awards.

The Committee shall act prior to an event described in this Section 8 (including at the time of an Award by means of more specific provisions in the Award Agreement) if deemed necessary or appropriate to permit the Participant to realize the benefits intended to be conveyed by an Award in respect of the Common Stock in the case of an event described in this Section 8.

9. Change in Control

The Committee may, in the Award Agreement, provide for the effect of a Change in Control (as defined in the L3 Technologies, Inc. Amended and Restated 2008 Long Term Performance Plan, as amended or replaced from time to time) on an Award.  Such provisions may include, but are not limited to any one or more of the following with respect to any or all Awards: (i) the specific consequences of a Change in Control on the Awards; (ii) a reservation of the Committee's right to determine in its discretion at any time that there shall be full acceleration or no acceleration of benefits under the Awards; (iii) that only certain or limited benefits under the Awards shall be accelerated; (iv) that the Awards shall be accelerated for a limited time only; or (v) that acceleration of the Awards shall be subject to additional conditions precedent (such as a termination of employment following a Change in Control).

In addition to any action required or authorized by the terms of an Award, the Committee may take any other action it deems appropriate to ensure the equitable treatment of Participants in the event of a Change in Control, including but not limited to any one or more of the following with respect to any or all Awards: (i) the acceleration or extension of time periods for purposes of exercising, vesting in, or realizing gain from, the Awards; (ii) the waiver of conditions on the Awards that were imposed for the benefit of the Corporation, (iii) provision for the cash settlement of the Awards for their equivalent cash value, as determined by the Committee, as of the date of the Change in Control; or (iv) such other modification or adjustment to the Awards as the Committee deems appropriate to maintain and protect the rights and interests of Participants upon or following the Change in Control.  The Committee also may accord any Participant a right to refuse any acceleration of exercisability, vesting or benefits, whether pursuant to the Award Agreement or otherwise, in such circumstances as the Committee may approve.

Notwithstanding the foregoing provisions of this Section 9 or any provision in an Award Agreement to the contrary, if any Award is accelerated to a date that is less than six months after the date of the Award, the Committee may prohibit a sale of the underlying Common Stock (other than a sale by operation of law in exchange for or through conversion into other securities), and the Corporation may impose legend and other restrictions on the Common Stock to enforce this prohibition.

6

10. Amendment and Termination

(a)          The Committee shall have the authority to make such amendments to any terms and conditions applicable to outstanding Awards as are consistent with this Plan; provided that, except for adjustments under Section 8 hereof, no such action shall modify any such Award in a manner adverse to the Participant without the Participant's consent; provided further that, no amendment or cancellation of an Award may effect a Repricing of such Award, except in connection with an adjustment pursuant to Sections 8 or 9.  A “Repricing” means any of the following: (i) changing the terms of an Award to lower its exercise price or base price, (ii) cancelling an Award with an exercise price or base price in exchange for other Awards with a lower exercise price or base price, or (iii) cancelling an Award with an exercise price or base price at a time when such price is equal to or greater than the Fair Market Value of the underlying Common Stock in exchange for other Awards, cash or property.

(b)          The Board of Directors may at any time amend, suspend or terminate this Plan, subject to any stockholder approval that may be required under applicable law. Notwithstanding the foregoing, no such action, other than an action under Section 8 or 9 hereof, may be taken that would modify an outstanding Award in a manner adverse to the Participant without the Participant’s consent, change the requirements relating to the Committee, or (without obtaining stockholder approval) extend the term of the Plan.

11. Purchase or Exercise Price; Withholding

The exercise or purchase price (if any) of the Common Stock issuable pursuant to any Award and the withholding obligation, if any, under applicable tax laws shall be paid at or prior to the time of the delivery of such Common Stock in cash or, subject to the Committee's express authorization and the restrictions, conditions and procedures as the Committee may impose, any one or combination of (i) cash, (ii) the delivery of shares of Common Stock, or (iii) a reduction in the amount of Common Stock or other amounts otherwise issuable or payable pursuant to such Award.  In the case of a payment by the means described in clause (ii) or (iii) above, the Common Stock to be so delivered or offset shall be determined by reference to the Fair Market Value of the Common Stock on the date as of which the payment or offset is made.

12. Effective Date; Duration

This Plan was adopted by the Board of Directors of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  This Plan became effective upon the approval of the stockholders of L-3 Communications Holdings, Inc. (which subsequently merged with and into the Corporation (formerly known as L-3 Communications Corporation)).  Subject to Section 10(b), this Plan shall remain in effect until any and all Awards under this Plan have been exercised, converted or terminated under the terms of this Plan and applicable Award Agreements.  Notwithstanding the foregoing, no Award may be granted under this Plan after April 29, 2018; provided, however, that any Award granted prior to such date may be amended after such date in any manner that would have been permitted hereunder prior to such date.

7

13. Governing Law

The validity, interpretation, construction and performance of this Plan and all Award Agreements hereunder shall be governed by, and construed in accordance with, the laws of the State of New York.

14. Severability

If any provisions of this Plan or any applicable Award Agreement shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

15. Section 409A

Notwithstanding other provisions of the Plan or any Award Agreements thereunder, no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant.  In the event that it is reasonably determined by the Board or Committee that, as a result of Section 409A of the Code, payments in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the Corporation will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code.

16. Option Holding Period

Subject to the authority of the Committee under Sections 8 and 9, and except as otherwise provided by the Committee or as allowed under Rule 16b-3 of the Exchange Act, a minimum six month period shall elapse between the date of initial grant of any Option and the sale of the underlying shares of Common Stock, and the Corporation may impose legend and other restrictions on the Common Stock issued on exercise of the Options to enforce this requirement; provided, however, that such limitation shall not apply to the extent provided by the Committee on account of the Participant’s death, permanent disability or retirement or in the event of a Change in Control.

17. Compliance with Laws; Exculpation and Indemnity

This Plan, Award Agreements, and the grant, exercise, conversion, operation and vesting of Awards, and the issuance and delivery of shares of Common Stock and/or other securities or property or the payment of cash under this Plan, Awards or Award Agreements, are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may be necessary or, in the opinion of counsel for the Corporation, advisable in connection therewith.  Any securities delivered under this Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Corporation, provide such evidence, assurance and representations to the Corporation as to compliance with any of such restrictions) as the Corporation may deem necessary or desirable to assure compliance with all applicable legal requirements.

8

Neither the Corporation nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any party for any action taken or not taken in good faith under this Plan or for the failure of an Award (or action in respect of an Award) to realize intended tax consequences, to qualify for exemption or relief under Rule 16b-3 or to comply with any other law, compliance with which is not required on the part of the Corporation.

18. Non Exclusivity of Plan

Nothing in this Plan shall limit or be deemed to limit the authority of the Corporation, the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.

9

EX-10.38

Exhibit 10.38

L3 TECHNOLOGIES, INC.

GLOBAL AMENDMENT TO

EQUITY-BASED AWARD AGREEMENTS AND AWARD NOTICES AND

CASH-BASED AWARD AGREEMENTS AND AWARD NOTICES

(L3 Employees and Directors)

THIS GLOBAL AMENDMENT (this “Amendment”), dated as of December 31, 2016, amends each equity-based and cash-based award agreement and award notice outstanding as of the date hereof  (each, an “Award Agreement”), whether granted as a stand-alone incentive award or granted under any of the 1998 Directors Stock Option Plan for Non-Employee Directors of L3 Technologies, Inc. (the “1998 Director Plan”), the L3 Technologies, Inc. 2008 Directors Stock Incentive Plan (the “2008 Director Plan”), the L3 Technologies, Inc. 1999 Long Term Performance Plan (the “1999 Performance Plan”), the L3 Technologies, Inc. 2008 Long Term Performance Plan (the “2008 Performance Plan”), and the L3 Technologies, Inc. 2012 Cash Incentive Plan (the “2012 Cash Plan, and together with the 1998 Director Plan, the 2008 Director Plan, the 1999 Performance Plan, the 2008 Performance Plan, in each case, as amended and restated through the date hereof, the “Plans”), and is entered into by L3 Technologies, Inc., a Delaware corporation (the “Company”).

WHEREAS, the Company was previously named L-3 Communications Corporation and was a wholly owned subsidiary of L-3 Communications Holdings, Inc., a Delaware corporation (“Holdings”);

WHEREAS, as of the date hereof (the “Effective Time”), Holdings and the Company consummated a merger agreement, dated as of March 4, 2016, as amended from time to time, pursuant to which Holdings merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”);

WHEREAS, in connection with the Merger, each of the Board of Directors of Holdings and the Board of Directors of the Company adopted resolutions directing that the name of the Company be changed to L3 Technologies, Inc. immediately following the Effective Time (the “Name Change”);

WHEREAS, pursuant to resolutions adopted by the Board of Directors of each of the Company and of Holdings, dated December 7, 2016, the Board of Directors of each of the Company and of Holdings approved the amendment of the Plans to reflect the Name Change and the Merger, including, as applicable, by having the Company assume sponsorship or maintenance of Plans previously sponsored or maintained by Holdings and by amending or eliminating references to Holdings in the Plans to instead refer to the Company as of the Effective Time; and

WHEREAS, the Company desires to amend each Award Agreement to reflect the Merger and the Name Change, as applicable.

NOW, THEREFORE, the Company has caused each Award Agreement to be amended as follows as of the Effective Time:

1. All references in each Award Agreement to the name of the applicable Plan, including, without limitation, the title of and the signature block to each Award Agreement and the title to any exhibit thereto, shall be amended to refer to the name of such Plan, as amended to reflect the Name Change, under which each such Award Agreement was granted.

2. All cross references in each Award Agreement to another Plan shall be amended to refer to the name of such Plan, as amended to reflect the Name Change, to which such Award Agreement refers.

3. The definition of “Corporation”, “Company” or “L-3”, as applicable in each Award Agreement, shall be amended to define such term, as applicable, as “L3 Technologies, Inc.”

4. To the extent applicable to an Award Agreement, the definition of “change in control”, “Section 409A Change in Control Event” or other similar defined term shall be amended to refer solely to a change in control with respect to the Company.

5. To the extent applicable to an Award Agreement, the definition of, or reference to, “common stock”, “Common Stock” or other similar defined term shall be amended to refer to the common stock of the Company.

6. The defined term “L-3 Holdings” in each Cash Unit Award Agreement shall be amended to refer to the Company.

7. All references in each Award Agreement to the “Agreement” shall mean such Award Agreement as amended by this Amendment.

8. Notwithstanding the foregoing, to the extent that any Award Agreement contains performance-based criteria, for the purposes of determining whether such performance-based criteria have been achieved, the performance-based criteria shall be deemed to refer (i) for any performance period, or portion thereof, occurring prior to the Effective Time, to the performance of Holdings and (ii) for any performance period, or portion thereof, occurring on or after the Effective Time, to the performance of the Company.

2

9. Notwithstanding the foregoing, to the extent that any Award Agreement provides for payment, accrual or any other accounting of cash or stock-based dividends or dividend equivalents and any accumulated earnings or reinvestments thereon (collectively, “Dividend Amounts”), as applicable, for any purposes under such Award Agreement, such Dividend Amounts and all related definitions and provisions shall be deemed to refer to or be calculated by reference to (i) for any period occurring prior to the Effective Time, the common stock of Holdings and (ii) for any period occurring on or after the Effective Time, the common stock of the Company.

10. All provisions of each Award Agreement that are not expressly amended by this Amendment shall remain in full force and effect.

11. To the extent not preempted by the laws of the United States, the laws of the State of New York shall be the controlling law in all matters related to this Amendment without giving effect to the principles of conflicts of laws, and any dispute arising out of, relating to or in connection with the Amendment shall be subject to the same dispute resolution procedures as provided for in the applicable Award Agreement with respect to any dispute thereunder or, if no such procedures are provided for in any Award Agreement, as provided for in the applicable Plan.

[Signature Page Follows]

3

IN WITNESS WHEREOF, L3 Technologies, Inc. has duly executed this Amendment as of the date first set forth above.

L3 TECHNOLOGIES, INC.

/s/ Ann D. Davidson

Ann D. Davidson

Senior Vice President, General Counsel and Corporate Secretary

/s/ Kevin L. Weiss

Kevin L. Weiss

Vice President, Human Resources

EX-10.39

Exhibit 10.39

L3 TECHNOLOGIES, INC.

AMENDED AND RESTATED

CHANGE IN CONTROL SEVERANCE PLAN

THIS L3 TECHNOLOGIES, INC. AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE PLAN, originally adopted on August 15, 2006 (the “Effective Date”) by L-3 Communications Holdings, Inc. (which subsequently merged with and into the Company (as defined below) (formerly known as L-3 Communications Corporation)), as amended and restated through December 31, 2016, has been established to provide for the payment of severance benefits to Employees (as defined below).

Section 1.              Definitions. Unless the context clearly indicates otherwise, when used in this Plan:

(a)           “Actual Bonus” means any Bonus actually paid or payable to an Eligible Employee (excluding any reduction in amount resulting from an adverse change to the assumptions (including the Employee’s Target Bonus) or calculation methodology for determining the amount of such Bonus made on or after a Change in Control).

(b)           “Affiliate” means, with respect to any entity, any other corporation, organization, association, partnership, sole proprietorship or other type of entity, whether incorporated or unincorporated, directly or indirectly controlling or controlled by or under direct or indirect common control with such entity.

(c)           “Annual Compensation” means the sum of (x) the greater of the Eligible Employee’s Base Salary in effect (A) immediately prior to the date of the Change in Control or (B) immediately prior to the date of termination of the Eligible Employee (or, if the termination is for Good Reason, immediately prior to the event set forth in the notice of termination given in accordance with Section 15 of this Plan), and (y) the Eligible Employee’s Average Bonus.

(d)           “Anticipatory Termination” means a termination of an Employee made in connection with or in anticipation of a Change in Control at the request of, or upon the initiative of, the acquiror in the Change in Control transaction or otherwise in connection with or anticipation of the Change in Control.

(e)           “Average Bonus” means the average of all Bonuses paid or payable to an Eligible Employee in respect of the three Fiscal Years occurring prior to the Fiscal Year in which the employment of the Eligible Employee is terminated (or, if the Eligible Employee was not an Employee during each of such Fiscal Years, such lesser number of Fiscal Years during which the Eligible Employee was an Employee); provided, that for purposes of this calculation, any Bonus awarded to the Eligible Employee for a Fiscal Year in which the Employee was employed for less than the full Fiscal Year shall be annualized; provided, further, that if the Bonus for the last of the three Fiscal Years utilized in this calculation (i) (x) has not been paid because the Employee was terminated prior to the scheduled date for payment of such Bonus and (y) is not determinable by way of a formula or calculation applied on a basis consistent with past practice or (ii) has been paid based on an adverse change to the assumptions (including the Employee’s Target Bonus) or calculation methodology for determining the amount of such Bonus made on or after a Change in Control, then the Bonus for such year shall be disregarded and the calculation shall be made on the basis of the average of the other Fiscal Years; provided, further, that if the Employee was not an Employee prior to the last of the three Fiscal Years utilized in this calculation and the Bonus for such last Fiscal Year is disregarded by operation of the immediately preceding proviso, then the term “Average Bonus” shall mean the Eligible Employee’s Target Bonus.

(f)            “Base Salary” means an Employee’s annual rate of base salary in effect on the date in question, determined on a “gross wages” basis (i.e. prior to reduction for any employee-elected salary reduction contributions made to an Employer-sponsored non-qualified deferred compensation plan or an Employer-sponsored plan pursuant to Section 401(k) or 125 of the Code), and excluding bonuses, overtime, allowances, commissions, deferred compensation payments and any other extraordinary remuneration.

(g)           “Board” means the board of directors of the Company.

(h)           “Bonus Fraction” means, with respect to any Eligible Employee, a fraction, the numerator of which shall equal the number of days the Eligible Employee was employed by the Eligible Employee’s Employer in the Fiscal Year in which the Eligible Employer’s termination occurs and the denominator of which shall equal 365.

(i)            “Bonus” means the amount payable to an Employee under the Employer’s applicable annual cash incentive bonus plan with respect to a Fiscal Year.

(j)            “Cause” means an Employee’s:

(1)           intentional failure to perform reasonably assigned duties;

(2)           dishonesty or willful misconduct in the performance of duties;

(3)           engaging in a transaction in connection with the performance of duties to the Company or its Affiliates which transaction is adverse to the interests of the Company and is engaged in for personal profit or;

(4)           willful violation of any law, rule or regulation in connection with the performance of duties (other than traffic violations or similar offenses).

For purposes of this definition, an act, or failure to act, on Employee’s part shall be deemed “willful” if done, or omitted to be done, by Employee in bad faith and without reasonable belief that Employee’s action or omission was in the best interest of the Company.

2

(k)           “Change in Control” means:

(1)           the acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Company or any of its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a majority of the combined voting power of the Company’s then outstanding voting securities, other than by any employee benefit plan maintained by the Company;

(2)           the sale of all or substantially all the assets of the Company and its subsidiaries taken as a whole; or

(3)           the election, including the filling of vacancies, during any period of 24 months or less, of 50% or more of the members of the Board, without the approval of Continuing Directors, as constituted at the beginning of such period.

For purposes of this definition, “Continuing Directors” shall mean, with respect to any date, any director of the Company who either (i) is a member of the Board on such date, or (ii) is subsequently nominated for election to the Board by a majority of the Board which is comprised of directors who were, at the time of such nomination, Continuing Directors.

(l)            “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

(m)          “Code” means the Internal Revenue Code of 1986, as amended.

(n)           “Committee” means the committee designated pursuant to Section 6 to administer this Plan.

(o)           “Company” means L3 Technologies, Inc., a Delaware corporation and, after a Change in Control, any successor or successors thereto.

(p)           “Director” means (a) any Director of the Company and (b) any other Employee who participates in the Executive Benefits Plan of the Company at the benefit level provided to Directors of the Company generally. For the avoidance of doubt, the phrase “Director of the Company” as used in clause (a) of this definition refers to an Employee serving with a title of Director, and not to a member of the Board.

(q)           “Disability” means an Employee, as a result of incapacity due to physical or mental illness, becomes eligible for benefits under the long-term disability plan or policy of the Company or a subsidiary in which the Employee is eligible to participate.

(r)            “Elected Officer” means a person who is elected or appointed as an officer of the Company pursuant to any resolution adopted by Board on or after the date of the most recent annual election of officers and prior to the date of the Change in Control (which election or appointment is not revoked prior to such date).

3

(s)           “Eligible Employee” means an Employee whose employment with Employee’s Employer (i) is terminated by the Employer for any reason other than Cause, Disability or death (A) as an Anticipatory Termination,but only (x) if an anticipated Change in Control actually occurs during the period in which this Plan is effective and (y) to the extent such Change in Control also constitutes a change in ownership or effective control, or in the ownership of a substantial portion of the assets, within the meaning of Section 409A(a)(2)(A)(v) of the Code or (B) during the two-year period beginning on the effective date of a Change in Control, or (ii) terminates during the two-year period beginning on the effective date of a Change in Control on account of such Employee’s resignation for Good Reason within six months from the date the Employee first becomes actually aware of the existence of Good Reason.

(t)            “Employee” means (1) any Elected Officer of the Company and (2) any other employee of the Company or any of its wholly-owned subsidiaries, whose payroll expenses are primarily allocated and recorded as a corporate expense of L3 Technologies, Inc. or any successor entity (and not as an expense of a group, division or subsidiary thereof) for financial reporting purposes, as applied immediately prior to the date of a Change in Control.

(u)           “Employer” means, with respect to any Employee, the legal entity that employed such Employee prior to any termination of employment contemplated hereunder.

(v)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(w)           “Executive” means a person qualifying as any of following immediately prior to the date of a Change in Control: (i) the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the General Counsel of the Company, (ii) any Executive Vice President, Senior Vice President or Group President of the Company and (iii) any Vice President or Director of the Company (as such positions are defined in this Section 1). For the avoidance of doubt, the term “Executive” shall not include any Employee who holds a title of Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel, Executive Vice President, Senior Vice President, Vice President or Director solely with respect to a Company group, division or subsidiary and not with respect to the Company generally.

(x)           “Fiscal Year” means any given fiscal year of the Company.

(y)           “Good Reason” means any of the following actions on or after a Change in Control, without Employee’s express prior written approval, other than due to Employee’s Disability or death:

(1)           (A) any reduction in Base Salary or annual or long-term incentive opportunity (including Target Bonus, if applicable) or (B) any adverse change to the calculation methodology for determining Bonuses or long-term incentives which is reasonably likely to have an adverse impact on the amounts the Eligible Employee has the potential to earn under such programs (which for the avoidance of doubt shall not be deemed to have occurred if an acquiror fails to continue or provide any equity-based incentive plan);

4

(2)           any failure by acquiror to continue to provide employee benefits that are substantially similar in the aggregate to those afforded to the Employee immediately prior to the Change in Control; for this purpose employee benefits shall mean pension and retirement, fringe and welfare benefits;

(3)           any material adverse change in Employee's duties or responsibilities;

(4)           any relocation of Employee’s principal place of business of 50 miles or more, provided that such relocation also increases Employee’s commute by at least 25 miles; or

(5)           any failure to pay Employee’s Base Salary and other amounts earned by Employee within ten (10) days after the date such compensation is due;

(6)           the failure of any successor or assignee (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company in connection with any Change in Control, by agreement in writing in form and substance reasonably satisfactory to Employee, expressly, absolutely and unconditionally to assume and agree to perform all obligations under this Plan.

(z)           “Plan” means the L3 TECHNOLOGIES, INC. AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE PLAN, as in effect from time to time.

(aa)         “Plan Year” means the calendar year.

(bb)        “Release” means a release to be signed by an Eligible Employee in such form as the Company shall reasonably determine, which shall, to the extent permitted by law, waive all claims and actions against the Employers and such other related parties and entities as the Company reasonably chooses to include in the release except for claims and actions for benefits provided under (or contemplated by) the terms of this Plan (which Release is not revoked by the Eligible Employee).

(cc)         “Severance Multiple” means, with respect to any Eligible Employee, the highest of the following multiples applicable to such person:

(1)           the multiple of three (3), for each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the General Counsel and any Executive Vice President of the Company;

(2)           the multiple of two and one-half (2.5), for each Senior Vice President or Group President of the Company;

5

(3)           the multiple of two (2), for each Vice President of the Company who is also an Elected Officer;

(4)           the multiple of one and one-half (1.5), for each Vice President of the Company who is not also an Elected Officer; and

(5)           the multiple of one (1), for each Director of the Company.

(dd)        “Target Bonus” means the greater of (1) an Employee’s target Bonus in effect immediately prior to the date of the Change in Control or (2) an Employee’s target Bonus in effect immediately prior to the date on which the Eligible Employee is terminated (or, if the termination is for Good Reason, immediately prior to the event set forth in the notice of termination given in accordance with Section 15).

(ee)         “Vice President” means (a) any Vice President of the Company and (b) any other Employee who participates in the Executive Benefits Plan of the Company at the benefit level provided to Vice Presidents of the Company generally.

Section 2.               Severance Benefits. Each Eligible Employee who executes a Release in the manner prescribed by the Company within 45 days following such Eligible Employee’s date of termination and additionally, for each Eligible Employee who is also an Elected Officer, who agrees at such time to be subject to the restrictive covenants set forth on Exhibit A shall be entitled to the following:

(a)           Severance Pay.

(1)           Each such Eligible Employee who is an Executive shall be entitled to receive severance pay from his or her Employer in a lump sum amount equal to the sum of:

(i)           the Eligible Employee’s Severance Multiple, multiplied by the Eligible Employee’s Annual Compensation; and

(ii)           the Average Bonus (or, if determinable on the date of termination (i.e., by way of a formula or calculation applied on a basis consistent with past practice), the Actual Bonus for the year of termination), multipliedby the Bonus Fraction.

(2)           Each such Eligible Employee who is not an Executive shall be entitled to receive severance pay from his or her Employer in a lump sumamount equal to the sum of:

(i)           the Average Bonus (or, if determinable on the date of termination (i.e., by way of a formula or calculation applied on a basis consistent with past practice), the Actual Bonus for the year of termination), multiplied by the Bonus Fraction; plus

6

(ii)           four (4) weeks of the Eligible Employee’s Annual Compensation; plus

(iii)           two (2) or three (3) weeks (as determined by the Chief Executive Officer of the Company on or prior to the date of the Change in Control) of the Eligible Employee’s Annual Compensation for each completed year of service by the Eligible Employee with the Company, its Affiliates and any of their respective predecessor entities; provided, however, that the sum of the amounts determined under clauses (ii) and (iii) above shall be limited to the amount of the Eligible Employee’s Annual Compensation (i.e., 52 weeks of the Eligible Employee’s Annual Compensation).

(b)           Medical, Dental and Life Insurance Benefit Continuation.

(1)           For each Eligible Employee who is an Executive, for a period of years (or fractions thereof) equal to the Severance Multiple following the Eligible Employee’s termination of employment (the “Executive Welfare Continuation Period”), the Eligible Employee and such Eligible Employee’s spouse and dependents (each as defined under the applicable program) shall receive the following benefits: (x) medical and dental insurance coverages at the same benefit levels as provided to the Eligible Employee immediately prior to the Change in Control, for which the Company will (A) reimburse the Eligible Employee during the first 18 months of the Executive Welfare Continuation Period or, if shorter, the period of actual COBRA continuation coverage received by the Eligible Employee during the Executive Welfare Continuation Period, for the total amount of the monthly COBRA medical and dental insurance premiums payable by the Eligible Employee for such continued benefits in excess of the cost the Eligible Employee paid for such coverage (on a monthly premium basis) immediately prior to such termination of employment and (B) provide such coverage for any remaining portion of the Executive Welfare Continuation Period at the same cost to the Eligible Employee as is generally provided to similarly situated active employees of the Company (or, if it is not possible, or is cost-prohibitive for the Company to provide such coverage for such remaining portion, the Company will pay the Eligible Employee a cash lump sum payment equal to the premiums the Company would have paid if the Eligible Employee had remained an active employer), provided, however, that if, during the Executive Welfare Continuation Period, the Eligible Employee becomes employed by a new employer, continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which the Eligible Employee becomes enrolled); and (y) life insurance coverage at the same benefit level as provided to the Eligible Employee immediately prior to the Change in Control and at the same cost to the Eligible Employee as is generally provided to similarly situated active employees of the Company (or if such coverage is no longer provided by the Company, then at the Employee’s cost immediately prior to the Change in Control).

7

(2)           For each Eligible Employee who is not an Executive, for a period not to exceed the number of weeks of Annual Compensation payable to the Eligible Employee pursuant to Section 2(a)(2) above, (the “Employee Welfare Continuation Period”), the Eligible Employee and such Eligible Employee’s spouse and dependents (each as defined under the applicable program) shall receive the following benefits: (x) medical and dental insurance coverages at the same benefit levels as provided to the Eligible Employee immediately prior to the Change in Control, for which the Company will reimburse the Eligible Employee during the first 52 weeks of the Employee Welfare Continuation Period or, if shorter, the period of actual COBRA continuation coverage received by the Eligible Employee during the Employee Welfare Continuation Period, for the total amount of the monthly COBRA medical and dental insurance premiums payable by the Eligible Employee for such continued benefits in excess of the cost the Eligible Employee paid for such coverage (on a monthly premium basis) immediately prior to such termination of employment, provided, however, that if, during the Employee Welfare Continuation Period, the Eligible Employee becomes employed by a new employer, continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which the Eligible Employee becomes enrolled); and (y) life insurance coverage at the same benefit level as provided to the Eligible Employee immediately prior to the Change in Control and at the same cost to the Eligible Employee as is generally provided to similarly situated active employees of the Company (or if such coverage is no longer provided by the Company, then at the Employee’s cost immediately prior to the Change in Control).

(c)           Outplacement. Such Eligible Employee shall receive reasonable outplacement services to be provided by a provider selected by such Eligible Employee, the cost of which shall be borne by the Company.

(d)           Accrued Benefits. Such Eligible Employee shall be entitled to receive any unpaid Base Salary through the date of such Eligible Employee’s termination, any Bonus earned but unpaid as of the date of such Eligible Employee’s termination for any previously completed Fiscal Year (which, if not determinable by way of a formula or calculation applied on a basis consistent with past practice, shall be an amount equal to the Eligible Employee’s Average Bonus), and all compensation previously deferred by such Eligible Employee but not yet paid as well as all accrued interest thereon. In addition, such Eligible Employee shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by such Eligible Employee in accordance with Company policies prior to the date of such Eligible Employee’s termination. Such Eligible Employee shall also be able to receive and enjoy such other benefits, if any, to which such Eligible Employee may be entitled pursuant to the terms and conditions of (1) the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy and as provided in Section 12(a) of this Plan, and (2) the indemnification and D&O insurance plans, policies or programs of the Company.

8

Section 3.               Form and Time of Payment. The cash severance pay benefits payable to an Eligible Employee under Section 2 above shall be paid to such Eligible Employee in a single lump sum less applicable withholdings under Section 4 of this Plan within 75 days after the Eligible Employee’s date of termination, except with respect to any additional bonus amount payable after such time period to the extent required pursuant to Section 2(d) above and except as provided pursuant to Section 5 of this Plan; provided, however, that the Company shall not be required to pay or continue to pay the cash severance pay benefits in the event such Eligible Employee does not sign a Release or such Eligible Employee revokes the Release during the time to revoke, if any.

Section 4.               Tax Withholding and Section 409A. Each Employer shall withhold from any amount payable to an Eligible Employee pursuant to this Plan, and shall remit to the appropriate governmental authority, any income, employment or other tax the Employer is required by applicable law to so withhold from and remit on behalf of such Eligible Employee. Notwithstanding any other provision of this Plan or certain compensation and benefit plans of the Employer, any payments or benefits due under this Plan or such Employer compensation and benefit plans upon or in connection with a termination of an Eligible Employee’s employment shall be paid, and this Plan shall be interpreted, in a manner that shall ensure that any such payments or benefits shall not be subject to any tax or interest under Section 409A of the Code (including, for the avoidance of doubt, by requiring that the payment of any severance due under Section 2 of this Plan to an Employee who is a “specified employee” within the meaning of the Section 409A of the Code be deferred until the date that is six months following such termination of the Employee’s employment, to the extent such delay is required to comply with Section 409A of the Code). Each payment made under this Plan shall be designated as a “separate payment” within the meaning of Section 409A of the Code. To the extent any reimbursements or in-kind benefits due to an Employee under this Plan constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to such Employee in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Notwithstanding the foregoing, neither the Company nor any of its employees or representatives shall have any liability to any Eligible Employee to the extent that any payment or benefit hereunder is determined to be subject to any tax or interest under Section 409A of the Code.

Section 5.               Limitation of Certain Payments.

(a)           In the event the Company determines, based upon the advice of the independent public accountants for the Company, that part or all of the consideration, compensation or benefits to be paid to an Employee under this Plan constitute “parachute payments” under Section 280G(b)(2) of the Code, as amended, then, if the aggregate present value of such parachute payments, singularly or together with the aggregate present value of any consideration, compensation or benefits to be paid to Employee under any other plan, arrangement or agreement which constitute “parachute payments” (collectively, the “Parachute Amount”) exceeds 2.99 times the Employee’s “base amount,” as defined in Section 280G(b)(3) of the Code (the “Employee Base Amount”), the amounts constituting “parachute payments” which would otherwise be payable to or for the benefit of Employee shall be reduced to the extent necessary so that the Parachute Amount is equal to 2.99 times the Employee Base Amount (the “Reduced Amount”); provided that such amounts shall not be so reduced if the Company determines, based upon the advice of an independent nationally recognized public accounting firm (which may, but need not be the independent public accountants of the Company), that without such reduction Employee would be entitled to receive and retain, on a net after-tax basis (including, without limitation, any excise taxes payable under Section 4999 of the Code), an amount which is greater than the amount, on a net after tax basis, that the Employee would be entitled to retain upon his receipt of the Reduced Amount.

9

(b)           If the determination made pursuant to clause (a) of this Section 5 results in a reduction of the payments that would otherwise be paid to Employee except for the application of clause (a) of this Section 5, the cash severance pay benefits payable under Section 2(a) shall be reduced. Within ten days following Employer’s notice to the Employee of its determination of the reduction in payments, the Company shall pay to or distribute to or for the benefit of Employee such amounts as are then due to Employee under this Plan and shall promptly pay to or distribute to or for the benefit of Employee in the future such amounts as become due to Employee pursuant to this Plan.

(c)           As a result of potential uncertainty in the application of Section 280G of the Code at the time of a determination hereunder, it is possible that payments will be made by the Employer which should not have been made under clause (a) of this Section 5 (“Overpayment”) or that additional payments which are not made by the Employer pursuant to clause (a) of this Section 5 should have been made (“Underpayment”). In the event that there is a final determination by the Internal Revenue Service, or a final determination by a court of competent jurisdiction, that an Overpayment has been made, any such Overpayment shall be repaid by Employee to the Employer together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. In the event that there is a final determination by the Internal Revenue Service, a final determination by a court of competent jurisdiction or a change in the provisions of the Code or regulations pursuant to which an Underpayment arises under this Plan, any such Underpayment shall be promptly paid by the Employer to or for the benefit of Employee, together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code.

Section 6.               Plan Administration. This Plan shall be administered by the Compensation Committee of the Board or, following a Change in Control, such other successor body as is designated by the acquiror in the Change in Control transaction (the “Committee”). Subject to the provisions of Section 7 of this Plan, the Committee shall have discretionary and final authority to interpret and implement the provisions of this Plan and to determine eligibility for benefits under the Plan. The Committee shall perform all of the duties and exercise all of the powers and discretion that the Committee deems necessary or appropriate for the proper administration of this Plan. The Committee may adopt such rules and regulations for the administration of this Plan as are consistent with the terms hereof, and shall keep adequate records of its proceedings and acts. The Committee may employ such agents, accountants and legal counsel (who may be agents, accountants and legal counsel for an Employer) as may be appropriate for the administration of the Plan. All reasonable administration expenses incurred by the Committee in connection with the administration of the Plan shall be paid by the Employer.

10

Section 7.              Dispute Resolution. Any dispute hereunder or with regard to any document or agreement referred to herein shall be resolved by arbitration before the American Arbitration Association in New York City, New York. The determination of the arbitrator shall be final and binding on the parties hereto and may be entered in any court of competent jurisdiction.

Section 8.              Applicable Law. This Plan shall be governed and construed in accordance with applicable federal law; provided, however, that wherever such law does not otherwise preempt state law, the laws of the State of New York shall govern.

Section 9.              Legal Fees. All reasonable legal fees and expenses incurred by an Eligible Employee in connection with any non-frivolous claim made pursuant to this Plan shall be borne by the Company.

Section 10.             Plan Amendment and Termination. Prior to the occurrence of a Change in Control, each of the Board and the Committee shall have the right and power at any time, and from time to time, subject to ninety (90) days advance written notice to all Employees, to amend or terminate this Plan, in whole or in part; provided, that no such amendment or termination shall be effective if made in connection with or in anticipation of a Change in Control at the request of, or upon the initiative of, the acquiror in the Change in Control transaction or otherwise in connection with or anticipation of the Change in Control. After the occurrence of a Change in Control and during the two-year period beginning on the effective date of the Change in Control, this Plan may not be amended or terminated without the consent of a majority of the Employees who are employed by an Employer at the time of the proposed amendment or termination or who are Eligible Employees receiving severance benefits pursuant to Section 2 of this Plan at such time. Any action to amend or terminate this Plan on or after the date on which a Change in Control occurs, without the foregoing consent, shall not be effective prior to the end of the two-year period beginning on the effective date of the Change in Control.

Section 11.            Nature of Plan and Rights. This Plan is an unfunded employee welfare benefit plan and no provision of this Plan shall be deemed or construed to create a trust fund of any kind or to grant a property interest of any kind to any Employee or former Employee. Any payment which becomes due under this Plan to an Eligible Employee shall be made by his or her Employer out of its general assets, and the right of any Eligible Employee to receive a payment hereunder from his or her Employer shall be no greater than the right of any unsecured general creditor of such Employer.

Section 12.            Entire Agreement; Offset; No Interference.

(a)           This Plan constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes the provisions of all other prior agreements expressly concerning the payment of severance benefits upon a termination of employment in connection with or following a Change in Control; provided, that in no event shall payments or benefits provided pursuant to any other severance agreement or policy entitle Employee to a duplication of payments and benefits pursuant to this Plan and, in the event of an Anticipatory Termination, any amount payable hereunder shall be offset and reduced by the amount of any termination payments or benefits previously provided to Employee under any other severance arrangement with the Company.

11

(b)           Except as expressly provided herein, this Plan shall not interfere in any way with the right of the Company to reduce Employee’s compensation or other benefits or terminate Employee’s employment, with or without Cause. Any rights that Employee shall have in that regard shall be as set forth in any applicable employment agreement between Employee and the Company.

Section 13.            Anticipatory Changes. Notwithstanding any provision in this Agreement to the contrary, no Employee shall suffer any reduction in the level of protections or benefits that would otherwise be enjoyed by the Employee hereunder as a result of any adverse change (including without limitation any such change in Base Salary; Target Bonus; assumptions or calculation methodology used for determining Actual Bonus; insurance coverages; or rank or status as an Elected Officer, Executive or Employee), made in connection with or in anticipation of a Change in Control at the request of, or upon the initiative of, the acquiror in the Change in Control transaction or otherwise in connection with or anticipation of the Change in Control (each, an “Anticipatory Change”). In the event of any such Anticipatory Change, the provisions of this Agreement shall be applied, and any amounts under this Agreement shall be calculated, as if such Anticipatory Change had not occurred.

Section 14.            Spendthrift Provision. No right or interest of an Eligible Employee under this Plan may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law, and no such right or interest shall be liable for or subject to any debt, obligation or liability of such Eligible Employee.

Section 15.            Notice. Notice of termination for Cause or for Good Reason shall be given in accordance with this Section, and shall indicate the specific termination provision under the Plan relied upon, the relevant facts and circumstances and the effective date of termination. For the purpose of this Plan, any notice and all other communication provided for in this Plan shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as the Company or the Eligible Employee may have furnished to the other in writing in accordance herewith.

If to the Company:

L3 Technologies, Inc.

600 Third Avenue

New York, New York 10016

If to Employee:

To the most recent address of Employee set forth in the personnel records of the Company.

12

Section 16.            Effectiveness. This Plan shall be effective as of the Effective Date and shall remain in effect until terminated pursuant to Section 10 of this Plan.

13

Exhibit A

CONFIDENTIALITY AND NON-COMPETITION RESTRICTIVE COVENANTS

I.             While employed by the Company, and at any time thereafter, no Eligible Employee shall, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except when required to do so by applicable law, by a court, by any governmental agency, or by any administrative body or legislative body (including a committee thereof); provided, however, that the Eligible Employee shall give reasonable notice under the circumstances to the Company that he or she has been notified that he or she will be required to so disclose as soon as possible after receipt of such notice in order to permit the Company to take whatever action it reasonably deems necessary to prevent such disclosure and the Eligible Employee shall cooperate with the Company to the extent that it reasonably requests him or her to do so. For purposes of this paragraph I, "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company, its subsidiaries, its affiliates or customers, that, in any case, is not otherwise available to the public (other than by the Eligible Employee’s breach of the terms hereof).

II.            In consideration of the Company’s obligations under the Plan to which this Exhibit A is attached, each Eligible Employee agrees that for a period of twelve (12) months after termination of employment with his or her Employer, without the prior written consent of the Board, (A) he or she will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any (i) entity which is in Competition with the business of the Company or its subsidiaries or (ii) Competitive Activity and (B) he or she shall not, on his or her own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who is or has been employed by the Company or its subsidiaries at any time during the twelve (12) months immediately preceding such solicitation. For purposes of this paragraph II: (a) an entity shall be deemed to be in “Competition” with the Company or its subsidiaries if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Company or its subsidiaries as a part of the business of the Company or its subsidiaries within the same geographic area in which the Company effects such sales or dealings or renders such services at the Relevant Date; and (b) “Competitive Activity” shall mean any business into which the Company or any of its subsidiaries has taken substantial steps to engage, as of the Relevant Date, which would be deemed to be in Competition with the business of the Company or its subsidiaries if such steps had been completed prior to the Relevant Date; and (c) the term “Relevant Date” shall mean the effective date of termination of Employee’s employment with his or her Employer.

III.           Notwithstanding anything contained in this Exhibit A, nothing herein shall (i) prohibit any Eligible Employee from serving as an officer, employee or independent consultant of any business unit or subsidiary which would not otherwise be in Competition with the Company or its subsidiaries or a Competitive Activity, but which business unit is a part of, or which subsidiary is controlled by, or under common control with, an entity that would be in competition with the Company or its subsidiaries, so long as the Eligible Employee does not engage in any activity which is in Competition with any business of the Company or its subsidiaries or is otherwise a Competitive Activity or (ii) be construed so as to preclude the Eligible Employee from investing in any publicly or privately held company, provided the Eligible Employee’s beneficial ownership of any class of such company’s securities does not exceed 5% of the outstanding securities of such class.

A-1

IV.           In the event the Company determines that an Eligible Employee has breached the covenants contained in this Exhibit A, the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Plan and/or obtain an injunction against the Eligible Employee from any court having jurisdiction over the matter restraining any further violation of this Exhibit A by the Eligible Employee. Further, if in the opinion of any court of competent jurisdiction any of the restraints identified herein is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended.

A-2

EX-10.40

Exhibit 10.40

L3 TECHNOLOGIES, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Restated January 1, 2017)

ARTICLE I

PURPOSE OF THE SERP

The purpose of this L3 Technologies, Inc. Supplemental Executive Retirement Plan is to provide supplemental retirement income for a select group of management and highly compensated employees of L3 Technologies, Inc. and certain of its subsidiaries and divisions by providing benefits equal to those benefits that cannot be provided under certain tax-qualified pension plans because of the limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended.

The Plan was effective as of May 1, 1997. It was amended and restated in 1999 and 2000. The Plan was amended and restated effective January 1, 2005 to comply with the requirements of Section 409A of the Code, except for Sections 3.4 and 3.5 which were amended effective January 1, 2009.

Effective after the close of business on December 31, 2016, L-3 Communications Corporation changed its name to L3 Technologies, Inc. Accordingly, the name of the Plan was changed from the L-3 Communications Corporation Supplemental Executive Retirement Plan to the L3 Technologies, Inc. Supplemental Executive Retirement Plan effective January 1, 2017.

The Plan is amended and restated effective January 1, 2017.

ARTICLE II

DEFINITIONS

Additional SERP Participant – An employee of a Participating Company who is not eligible to participate in a Participating Company sponsored defined benefit pension plan and designated by the Board or the Compensation Committee thereof as eligible to participate in the SERP.

Adjusted Compensation – The Participant’s “compensation” as defined in the applicable Pension Plan provided that (1) base salary deferred by a Participant under any deferred compensation plan sponsored by the Company shall be taken into account, (2) management incentive bonuses, whether or not deferred by a Participant under any deferred compensation plan sponsored by the Company shall be taken into account, and (3) the limitations under Section 401(a)(17) of the Code shall not apply.

Beneficiary – The Participant’s beneficiary with respect to the Pension Benefit payable under the Pension Plan or such Beneficiary elected at the time of benefit commencement.

Board – With respect to periods beginning on or after January 1, 2017, the Board of Directors of L3 Technologies, Inc. and with respect to periods ending on or before December 31, 2016, the Board of Directors of L-3 Communications Holdings, Inc.

Code – The Internal Revenue Code of 1986, as amended.

Committee – The committee described in Section 6.1, which administers this SERP.

Company – L3 Technologies, Inc.

Participant – The individuals who are described in (a) or (b) below:

(a)           An employee of a Participating Company who participates in a Pension Plan and (1) whose Adjusted Compensation for a calendar year, including all amounts deferred by the employee under any deferred compensation plan sponsored by the Company, exceeds the maximum dollar amount for that year under Section 401(a)(17) of the Code, or (2) for whom benefits under the Pension Plan are limited by Sections 401(a)(17) or 415 of the Code, provided that the employee meets any other requirements as determined by the Committee in its sole and exclusive discretion. An employee who satisfies the requirements for participation in this SERP for any calendar year shall continue to be a Participant for all subsequent years regardless of whether he or she meets the participation requirements of this paragraph for any such subsequent year.

(b)           An employee who is an Additional SERP Participant.

The Committee shall limit participation in this SERP to a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended, as determined by the Committee, in its sole and exclusive discretion.

Participating Company – The Company and any affiliate thereof that maintains a Pension Plan listed in Appendix A.

Pension Benefit – The Participant’s accrued benefit under the Pension Plan.

Pension Plan – The tax-qualified defined benefit plan, among those listed in Appendix A, in which the Participant participates (or, in the case of an Additional SERP Participant, would have been eligible to participate had he or she been an employee of the Participating Company on the date prior to the date the Pension Plan was frozen to newly hired employees).

Section 409A Change of Control Event – A change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code.

SERP – This L3 Technologies, Inc. Supplemental Executive Retirement Plan.

Supplemental Pension Benefit – The benefit, if any, to which a Participant is entitled under the terms of this SERP.

2	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

ARTICLE III

ELIGIBILITY FOR AND AMOUNT OF BENEFITS

3.1           Eligibility for Benefits. A Participant who terminates employment and is entitled to a Pension Benefit under the terms of the Pension Plan (or, in the case of an Additional SERP Participant, would have been entitled to a Pension Benefit had he or she been an employee of the Participating Company on the date prior to the date the Pension Plan was frozen to newly hired employees) shall be entitled to a Supplemental Pension Benefit in an amount determined in accordance with Section 3.2 or any applicable Appendix and payable in accordance with Sections 3.4 , 3.5 and 3.6.

3.2           Amount of Benefit for General SERP Participants. Except as otherwise provided in Section 3.3, Appendix B-1 or B-2, the Supplemental Pension Benefit shall be equal to the excess, if any, of:

(a)           the benefit that would have been paid under the applicable Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, based on Adjusted Compensation and irrespective of the limitations of Sections 401(a)(17) and 415 of the Code, less

(b)           the Pension Benefit that is actually payable under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant, based on “compensation” as defined in the Pension Plan and taking into account the limitations of Sections 401(a)(17) and 415 of the Code.

The Supplemental Pension Benefit resulting from (a) less (b) in this Section 3.2 is then further reduced based upon early commencement and optional form elected, if any. The reduction factors utilized for an early commencement are equivalent to the early reduction factors provided under the Pension Plan. For a surviving spouse Beneficiary where the Participant is deceased prior to commencement of the Pension Plan or Supplemental Pension Plan Benefit the Supplemental Pension Benefit will be reduced for early commencement, if applicable, and payable as a survivor benefit of a 50% joint and survivor annuity.

3.3           Amount of Benefit for Additional SERP Participants. The Supplemental Pension Benefit for an Additional SERP Participant shall be the benefit that would have been paid under the Pension Plan to such Participant (or his or her Beneficiary), based on Adjusted Compensation and irrespective of the limitations of Sections 401(a)(17) and 415 of the Code, if the Additional SERP Participant had been eligible to participate in the Pension Plan had it not been frozen to newly hired employees (but without regard to the Pension Plan provisions reflecting the limitations of Sections 401(a)(17) and 415 of the Code). Notwithstanding the foregoing, the Committee may determine in its discretion, at the time an employee is designated as an Additional SERP Participant, the period during which benefit accrual service, vesting service and compensation will be taken into account in determining the Supplemental Pension Benefit for an Additional SERP Participant.

3	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

3.4           Form of Benefit Payments.

(a)           Except as otherwise provided in subsections (b) or (c) below, any Supplemental Pension Benefit to which a Participant is entitled under this SERP shall be paid in the form of a life annuity.

(b)           A Participant may elect not more than 90 days prior to the event that gives rise to the right to benefit payments to receive any Supplemental Pension Benefit to which he or she is entitled in the form of a 50%, 75% or 100% joint and survivor annuity, or a life annuity with ten years certain, each of which shall be the actuarial equivalent of the Participant’s Supplemental Pension Benefit payable as a life annuity using a 6% interest rate and the mortality table under Rev. Rul. 2001-62. Upon the death of a Participant who has commenced a Supplemental Pension Benefit and has elected a 50%, 75% or 100% joint and survivor annuity or a life annuity with ten years certain, benefits shall continue to be paid to the Participant’s Beneficiary, provided that such Beneficiary survives the Participant.

(c)           If the present value of the Participant’s Supplemental Pension Benefit is $5,000 or less at the time payments are to commence, the entire amount of such Supplemental Pension Benefit, payable as a life annuity, shall be paid to the Participant in one payment. The present value of the Participant’s Supplement Pension Benefit shall be determined using the actuarial assumptions under Section 417(e) of the Code as such actuarial assumptions are incorporated in the Pension Plan and in effect on the date of payment.

3.5           Time of Benefit Payments.

(a)           Except as otherwise provided in subsection (b) or (c) below, a Supplemental Pension Benefit to which a Participant is entitled under this SERP shall be payable on the later of Participant’s termination of employment date or the Participant’s earliest retirement date under the applicable Pension Plan. The Participant’s earliest retirement date under the applicable Pension Plan shall mean the earliest date on which the Participant may begin to receive payment of his Pension Benefit.

(b)           If the Supplemental Pension Benefit becomes payable due to termination of employment (other than due to death), the first payment shall be made on the date that is six months following the termination of employment date. In such case, the amount of Supplemental Pension Benefit shall be determined as of the termination of employment date but actuarially increased to reflect the six-month delay in payment using the actuarial factors set forth in Section 3.4(b) or (c) (as applicable) or, with respect to a Supplemental Pension Benefit payable in the form set forth in Section 3.4(a), the same actuarial assumptions provided for under Section 3.4(b).

(c)           Notwithstanding the foregoing, if a Participant elects on or after January 1, 2008 and on or before December 31, 2008, in accordance with Notice 2007-86, 2007-46 IRB 990, the date on which benefit payments are to commence, payment of his or her Supplemental Pension Benefit shall be paid in accordance with such election. Such election will be effective only if it applies to amounts that would not otherwise be payable in 2008 and does not cause any amount to be paid prior to January 1, 2009.

4	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

3.6           Payment on Change of Control.

(a)           Notwithstanding any other provision of this SERP to the contrary, in the event of a Change of Control, a Participant who has not begun receiving benefits under this SERP and either (1) has a vested right to a Pension Benefit under the terms of the Pension Plan at the time of the Change of Control or (2) in the case of an Additional SERP Participant has completed five years of service with the Company at the time of the Change of Control shall be entitled to receive a Supplemental Pension Benefit in the amount determined under Section 3.2 or 3.3 or Appendix B-1 or B-2, in each case as of the date immediately preceding the Change of Control, which benefit shall be paid in a lump sum within 60 days following the date of the Change of Control. A Participant who began to receive benefits under this SERP prior to a Change of Control shall continue to receive payment of benefits in the same amount and in the same form as such benefits were paid prior to the Change of Control. The lump sum value of the Participant’s Supplement Pension Benefit shall be determined using the actuarial assumptions under Section 417(e) of the Code as such actuarial assumptions are incorporated in the Pension Plan and in effect on the day of payment.

(b)           For purposes of this SERP, a Change in Control shall be deemed to occur upon a Section 409A Change of Control Event that also constitutes one or more of the following:

(1)           The acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or any of its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a majority of the combined voting power of the Company’s then outstanding voting securities, other than by any employee benefit plan maintained by the Company;

(2)           The sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole; or

(3)           The election, including the filling of vacancies, during any period of 24 months or less, of 50 percent or more of the members of the Board without the approval of Continuing Directors, as constituted at the beginning of such period. “Continuing Directors” shall mean any director who either (i) is a member of the Board on July 1, 1997, or (ii) is nominated for election to the Board by a majority of the Board which is comprised of directors who were, at the time of such nomination, Continuing Directors.

3.7           Forfeiture of Benefits.

(a)           Notwithstanding any other provision of this SERP to the contrary, a Participant shall forfeit any and all benefits under this SERP (including benefits that are to be paid in the future and benefits that have already commenced payment) if the Participant (1) is dismissed for “Cause”, (2) becomes employed by another employer (or becomes self-employed) in substantial competition with a Participating Company, or (3) engages in conduct detrimental or contrary to the best interests of a Participating Company. “Cause” means an Employee’s:

5	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

(1)           intentional failure to perform reasonably assigned duties;

(2)           dishonesty or willful misconduct in the performance of duties;

(3)           engaging in a transaction in connection with the performance of duties to the Company or its affiliates which transaction is adverse to the interests of the Company and is engaged in for personal profit or;

(4)           willful violation of any law, rule or regulation in connection with the performance of duties (other than traffic violations or similar offenses).

For purposes of this definition, an act, or failure to act, on an Employee’s part shall be deemed “willful” if done, or omitted to be done, by an Employee in bad faith and without reasonable belief that Employee’s action or omission was in the best interest of the Company.

(b)           The Committee shall have full discretionary authority to make determinations under this Section 3.7. Any forfeiture determination made by the Committee shall be final and binding. The Committee may make a retroactive determination that a Participant’s SERP benefits are forfeited under this Section 3.7 after payment of SERP benefits has commenced. Such a forfeiture shall be effective as of the date that the Committee determines the events of forfeiture have occurred. Any SERP benefits that have been paid after the effective date of the retroactive forfeiture determination shall be considered a mistaken payment under Section 7.5.

ARTICLE IV

UNFUNDED PLAN

4.1           Unfunded Status of SERP.

(a)           This SERP constitutes a contractual promise by each Participating Company to make payments in the future, and a Participant’s rights shall be those of a general, unsecured creditor of the Participating Company. A Participant shall not have any beneficial interest in this SERP. Notwithstanding the foregoing, to assist each Participating Company in meeting its obligations under this SERP, the Committee may set aside assets in a trust described in Revenue Procedure 92-64, 1992-2 C.B. 422 (generally known as a “rabbi trust”), and the Committee may direct that its obligations under this SERP be satisfied by payments out of such trust or trusts. It is each Participating Company’s intention that this SERP be unfunded for federal income tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974.

(b)           Notwithstanding the above, in the event of a Change of Control, each Participating Company shall promptly fund all benefits due under this SERP to those Participants who are current employees or former employees with vested rights of such Participating Company, determined as of the date of the Change of Control, by making a contribution to an irrevocable trust established to pay benefits under this SERP.

6	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

4.2           Nonalienability of Benefits. A Participant’s rights to benefit payments under this SERP shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or his or her Beneficiary except as otherwise required by law.

ARTICLE V

AMENDMENT OR TERMINATION

5.1           Amendment. The Board, the Compensation Committee of the Board or, to the extent permitted by resolution of the Board or the Compensation Committee, any delegate of the Board or Compensation Committee may amend, modify, suspend or discontinue this SERP at any time; provided, however, that no such amendment, modification, suspension or discontinuance of the SERP shall have the effect of reducing a Participant’s Supplemental Pension Benefit determined as though the Participant had terminated employment with the Participating Company on the date of the amendment, modification, suspension or discontinuance.

5.2           Termination. The Board or the Compensation Committee of the Board reserves the right to terminate this SERP (by amendment to the SERP) at any time and to pay any benefits under this SERP in a lump sum immediately following such termination or at such time thereafter as it may determine, provided that any payments on termination of the Plan must comply with the requirements of Treasury Regulation §1.409A-3(j)(4)(ix).

ARTICLE VI

ADMINISTRATION

6.1           The Committee. This SERP shall be administered by the Compensation Committee of the Board or such other committee (whether of the Board or of executives of the Company) as may be designated by the Board to administer this SERP. The Compensation Committee or such other committee designated by the Board to administer this SERP is referred to in this document as the “Committee.”

6.2           Delegation and Reliance. The Committee may delegate to any officer or employee of the Company the authority to execute and deliver those instruments and documents and to take, or refrain from taking, all actions deemed necessary, advisable or convenient for the effective administration of this SERP in accordance with its terms and purposes. The Committee may also appoint a plan administrator or any other agent and delegate to such administrator or agent such powers and duties in connection with the administration of the SERP as the Committee may deem appropriate. In making any determination or in taking or not taking any action under this SERP, the Committee may obtain and rely upon the advice of experts, including professional advisors to the Company. No member of the Committee or officer of any Participating Company who is a Participant may participate in any decision specifically relating to his or her individual rights or benefits under this SERP.

7	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

6.3           Powers of the Committee. The Committee shall administer this SERP in accordance with its terms. The Committee shall have full discretion to construe and interpret the terms and provisions of this SERP, which interpretation or construction shall be final and binding on all parties, including but not limited to the Company, the Participating Companies and any Participant or Beneficiary. The Committee shall administer this SERP in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the SERP. The Committee shall have all powers necessary to administer the SERP, including without limitation, in addition to those powers set forth above, the following:

(a)           to determine whether individuals qualify as the Participants in the SERP;

(b)           to determine the amount of benefits payable to Participants and their Beneficiaries;

(c)           to maintain all records that may be necessary for the administration of the SERP; and

(d)           to make and publish rules and procedures for the administration of the SERP.

6.4           Exculpation and Indemnity. To the extent permitted by applicable law, the Company shall indemnify and hold harmless the Committee and each member thereof and delegates of the Committee who are employees of the Company or a Participating Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge of responsibilities under or incident to the SERP, other than expenses, liabilities and claims arising out of their willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under applicable law.

6.5           Facility of Payment. If a minor, person declared incompetent, or person incapable of handling the disposition of his or her property, is entitled to receive a benefit, make an application, or make an election hereunder, the Committee may direct that such benefits be paid to, or such application or election be made by, the guardian, legal representative, or person having the care and custody of such minor, incompetent, or incapable person. Any payment made, application allowed, or election implemented in accordance with this Section shall completely discharge the Participating Company and the Committee from all liability with respect thereto.

6.6           Proof of Claims. The Committee may require proof of the death, disability, competency, minority, or incapacity of any Participant or Beneficiary and of the right of a person to receive any benefit or make any application or election.

6.7           Claim Procedure.

(a)           Any person claiming a benefit, requesting an interpretation or ruling under this SERP, or requesting information under this SERP shall present the request in writing to the Committee, which shall respond in writing within 90 days. The Committee may, however, extend the reply period for an additional ninety 90 days for special circumstances. If the claim or request is denied, the written notice of denial shall state (1) the reason for denial, with specific reference to the plan provisions on which the denial is based, (2) a description of any additional material or information required and an explanation of why it is necessary, and (3) an explanation of the claims review procedure.

8	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

(b)           Within 60 days after the receipt by a claimant of the written decision described above or the expiration of the claims review period described above including any extension, the claimant may request review by giving written notice to the Committee. The claim or request shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing. If the claimant does not request a review within such sixty-day period, he or she shall be barred from challenging the original determination.

(c)           The decision on review shall normally be made within 60 days after the Committee’s receipt of a request for review. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reason and the relevant plan provisions. All decisions on review shall be final and binding on all parties concerned.

(d)           In the event of any dispute over benefits under this SERP, all remedies available to the disputing individual under this Section 6.7 must be exhausted, within the specified deadlines, before legal recourse of any type is sought.

ARTICLE VII

GENERAL PROVISIONS

7.1           No Guarantee of Employment. This SERP shall in no way obligate any Participating Company to continue the employment of a Participant with the Participating Company or limit the right of the Participating Company at any time and for any reason to terminate the Participant’s employment. In no event shall the SERP constitute an employment contract between the Participating Company and a Participant or in any way limit the right of the Participating Company to change a Participant’s compensation or other benefits.

7.2           Other SERP Benefits. Amounts under this SERP shall not be treated as compensation for purposes of calculating the amount of a Participant’s benefits or contributions under any pension, retirement, or other plan maintained by the Participating Company (or a subsidiary or division of the Participating Company), except as provided in such other plan.

7.3           Tax Withholding. To the extent required by law, the Participating Company shall withhold from benefit payments hereunder any Federal, state, or local income or payroll taxes required to be withheld and shall furnish the recipient and the applicable government agency or agencies with such reports, statements, or information as may be legally required.

7.4           Missing Payees. If all or portion of a Participant’s SERP benefit becomes payable and the Committee after a reasonable search cannot locate the Participant (or his or her Beneficiary if such Beneficiary is entitled to payment), the Committee may forfeit the Participant’s SERP benefit. If the Participant (or his or her Beneficiary) subsequently presents a valid claim for benefits to the Committee, the Committee shall restore and pay the appropriate SERP benefit.

9	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

7.5           Mistaken Payment. No Participant or Beneficiary shall have any right to any payment made in error or in contravention of the terms of the SERP, the Code, or ERISA. The Committee shall have full rights under the law to recover any such mistaken payment, and the right to recover attorney’s fees and other costs incurred with respect to such recovery. Recovery shall be made from future SERP payments, or by any other available means.

7.6           Receipt and Release for Payments. Any payment to a Participant, Beneficiary, or to any such person’s legal representative, parent, guardian, or any person or entity specified in Section 6.5, shall be in full satisfaction of all claims that can be made under the SERP against the Participating Company. The Participating Company may require such Participant, Beneficiary, legal representative, or any other person or entity described in Section 6.5, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Participating Company.

7.7           Successors. The provisions of this SERP shall be binding upon and inure to the benefit of each Participating Company, its successors, and its assigns, and to the Participants and their heirs, executors, administrators, and legal representatives.

7.8           Governing Law. The validity of this SERP and any of its provisions shall be construed, administered, and governed in all respects under and by the laws of the State of New York (including its statute of limitations and all substantive and procedural law, and without regard to its conflict of laws provisions), except as to matters of Federal law. If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

IN WITNESS WHEREOF, this L3 Technologies, Inc. Supplemental Executive Retirement Plan is hereby restated as of January 1, 2017.

		L3 TECHNOLOGIES, INC.
Date:	February 2, 2017	By:	/s/ Kevin Weiss
			Kevin Weiss
			Vice President – Human Resources.

10	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

Appendix A – Pension Plans

Pension Plans

L3 Technologies, Inc. Pension Plan

The Narda MITEQ Pension Plan

L3 Communication Systems - East Retirement Income Plan

L3 Aviation Products Retirement Plan

L3 Aviation Products Retirement Plan II

L3 Communication Systems West Retirement Plan

L3 Communication Systems West Retirement Plan II

L3 Link Simulation & Training Retirement Plan

L3 Pension Plan For Certain Divisions – Ocean Systems and Space & Navigation Divisions only

L-3 Communications Integrated Systems Retirement Plan

L-3 Communications Infrared Products Retirement Plan (prior to January 1, 2013)

Hycor Pension Plan (prior to October 2000)

A-1	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

Appendix B-1

Special Provisions for the Narda - East Division

This Appendix B-1 contains additional terms of the SERP that apply to Participants who are employees of the Narda - East Division of the Company (“Narda East”).

1.           Participation. An employee of Narda East is eligible to participate in the SERP if he or she became an officer of Narda East prior to January 1, 2003 (regardless of the amount of his or her annual base compensation).

2.           Supplemental Pension Benefit. A Participant shall be entitled to a Supplemental Pension Benefit equal to the greater of the amount determined under subsection (a) or (b) below:

(a)           the excess, if any, of:

(1)           the benefit that would have been paid under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, based on Compensation as defined in Section 4(d) of this Appendix B-1 and irrespective of the limitations of Sections 401(a)(17) and 415 of the Code, less

(2)           the Pension Benefit that is actually payable under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant, based on “compensation” as defined in the Pension Plan and taking into account the limitations of Sections 401(a)(17) and 415 of the Code.

(b)           the excess, if any, of:

(1)           the benefit that would have been paid to the Participant (or his or her Beneficiary) in the normal form of benefit payable to a single participant based on the Basic Plan Benefit Formula under the Basic Plan and based on compensation as defined in Section 4(d) of this Appendix B-1 and without regard to the limitations of Section 401(a)(17) and 415 of the Code, less

(2)           the Pension Benefit that is actually payable under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant, based on “compensation” as defined in the Pension Plan and taking into account the limitations of Sections 401(a)(17) and 415 of the Code.

3.           Payment of Supplemental Pension Benefit. The Supplemental Pension Benefit payable under this Appendix B-1 shall be subject to all of the terms of the SERP including, but not limited to, Sections 3.3, 3.4, 3.5 and 3.6.

B-1-1	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

4.           Definitions. The following definitions shall apply solely for purposes of this Appendix B-1:

(a)           “Average Compensation” means the Compensation, as defined in this Appendix B-1, of a Participant averaged over the five consecutive years which produce the highest annual average during the ten-year period (or the number of years of plan participation, if less than ten) ending on the date on which the Participant ceases to be a Participant.

(b)           “Basic Plan” means The Narda MITEQ Pension Plan, as amended and restated effective as of January 1, 2017.

(c)           “Basic Plan Benefit” means a benefit expressed as a single life annuity beginning at age 65 determined under the following formula:

20% of the Participant’s Average Compensation not in excess of his or her Covered Compensation, plus 50% of the Participant’s Average Compensation in excess of his or her Covered Compensation, reduced by 1/15th for each year of service, determined under the “elapsed time” method, less than 15 years determined as of the Participant’s 65th birthday, and further reduced by a fraction, the numerator of which is the Participant’s years of Credited Service at termination of employment and the denominator of which is the Participant’s years of Credited Service if he continued in employment with Narda East until age 65.

(d)           “Compensation” means the aggregate basic rate of annual remuneration paid by the Narda East division of the Company during the applicable year of Credited Service, including annual cash bonuses, and amounts deferred under the L3 Technologies, Inc. Deferred Compensation Plan and L3 Technologies, Inc. Deferred Compensation Plan II, and without regard to the limitations under Section 401(a)(17) of the Code.

(e)           “Covered Compensation” means the amount of compensation with respect to which old age and survivors insurance benefits would be provided under the Social Security Act computed as though for each year until the Participant reaches age 65 his annual compensation is at least equal to the taxable wage base, as set for in Revenue Ruling 99-47, 1999-47 I.R.B. 588 or any successor ruling thereto.

(f)           “Credited Service” means the full years and months of employment beginning with the first day of the month in which the Participant first became employed by Narda East (or its predecessor, The Narda Microwave Corporation) and ending on the Participant’s last day of employment with Narda East.

B-1-2	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

Appendix B-2

Special Provisions for the L3 Communication Systems - East Division

This Appendix B-2 contains additional terms of the SERP that apply to Participants who are employees of the L3 Communication Systems – East division of the Company (“CS-East Participants”). The L3 Communications Systems – East Retirement Income Plan (the “Pension Plan”) has been amended to freeze the benefit accruals of participants who are not subject to a collective bargaining agreement and have compensation in excess of specified amounts (the “Frozen HCE Amendments”) effective January 1, 2010 and January 1, 2017. Any participant in the Pension Plan whose benefits under the Pension Plan are affected by the Frozen HCE Amendments and who is not already a Participant in the SERP will become Participant in the SERP effective as of the first day of the Plan Year immediately following the date on which such individual ceases to accrue benefits under the Pension Plan as a result of the Frozen HCE Amendments. As a result, a Participant may be a CS-East Participant either as a result of the Frozen HCE Amendments (a “Frozen HCE”) or having been designated as a Participant in the SERP without regard to the Frozen HCE Amendments (a “Designated CS-East SERP Participant”). Accordingly, there are two categories of CS-East Participants: (1) CS-East Participants who are both Designated SERP Participants and Frozen HCEs, and (2) CS-East Participants who are Frozen HCEs but not Designated SERP Participants.

Except as otherwise specifically set forth in this Appendix B-2, the SERP benefits of CS-East Participants shall be calculated in accordance with other provisions of this SERP; provided, however, that:

(i)           Section 3.7 of the SERP shall not be applicable to any benefits payable to CS-East Participants under the SERP that would have been payable under the Pension Plan if the Frozen HCE Amendments had not been adopted; and

(ii)           a CS-East Participant who becomes a Participant in the SERP solely because of the Frozen HCE Amendments may commence to receive benefit payments under the SERP on a date elected by such Participant if the individual makes a written election of an alternate benefit commencement date no later than 30 days following the effective date of such individual’s participation in the SERP and the date elected is at least six months following the date of the Participant’s termination of employment.

1.           The Supplemental Pension Benefit of a CS-East Participant who is both a Designated SERP Participant and a Frozen HCE shall be equal to the excess, if any, of:

(a)           the benefit that would have been paid under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, if the Frozen HCE Amendments had not been adopted, based on final average pensionable earnings, as defined in subsection (c) below and irrespective of the limitations of Sections 401(a)(17) and 415 of the Code, over

B-2-1	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

(b)           the Pension Benefit that is actually payable under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant, taking into account the limitations of Sections 401(a)(17) and 415 of the Code and the Frozen HCE Amendments.

(c)           Solely for purposes of subsection (a) above, the benefit that would have been payable under the Pension Plan to such Participant (or his or her Beneficiary), shall be based on “final average pensionable earnings”, which shall be defined as the sum of:

(1)           The average rate of Pensionable Earnings as defined in the Pension Plan but excluding management incentive bonuses, determined by taking the amount of such Pensionable Earnings of an Employee (excluding management incentive bonuses) during the three calendar years selected from the most recent ten calendar years of his Period of Employment as defined in Section III(1) of the Pension Plan in respect of which he shall have the greatest aggregate amount of Pensionable Earnings (excluding management incentive bonuses), and dividing such amount by three; and

(2)           The average rate of the Participant’s management incentive bonuses, determined by taking the amount of such management incentive bonuses of the Employee during the three calendar years selected from the most recent ten calendar years of his Period of Employment as defined in Section III(1) of the Pension Plan in respect of which he shall have the greatest aggregate amount of management incentive bonuses, and dividing such amount by three.

(d)           Except as otherwise provided in subsection (c), final average pensionable earnings shall have the meaning provided in the Pension Plan.

2.           The Supplemental Pension Benefit of a CS-East Participant who is a Frozen HCE but not a Designated CS-East Participant shall be equal to the excess, if any, of:

(a)           the benefit that would have been paid under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, if the Frozen HCE Amendments had not been adopted, based on final average pensionable earnings as defined in the Pension Plan and taking into account the limitations of Sections 401(a)(17) and 415 of the Code, over

(b)           the Pension Benefit that is actually payable under the Pension Plan to such Participant (or his or her Beneficiary), in the normal form of benefit payable to a single participant, taking into account the limitations of Sections 401(a)(17) and 415 of the Code and the Frozen HCE Amendments.

3.           Additional Benefit. In addition to the Supplemental Pension Benefit described in Sections 1 and 2 above, a Designated SERP Participant who is an employee of the L3 Communication Systems - East division of the Company shall receive a retirement benefit from this SERP equal to the excess, if any, of the pension benefit calculated based on the formula described in Article V(1)(B) of the January 1, 1995 Martin Marietta Corporation Retirement Income Plan without regard to the limitation described in Article 5(1)(c), reduced by the greater of the pension benefits described in Article 5(1)(d)(i)(A) or (B) of that Plan.

B-2-2	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

4.           Additional Death Benefit to Beneficiary. If a Designated SERP Participant dies prior to retirement, his designated Beneficiary under the Pension Plan shall receive a lump sum pre-retirement death benefit from this SERP equal to the excess, if any, of (a) the lump sum pre-retirement death benefit which would have been paid to such designated Beneficiary under the Pension Plan if such payment were not limited by Code Sections 401(a)(17) and the incidental death benefit rules of Treasury Regulation 1.401-1(b)(1)(i), over (b) the lump sum pre-retirement death benefit actually payable under the Pension Plan. Such payment shall be made no later than March 15 of the calendar year following the calendar year in which the death occurred. Notwithstanding the foregoing, if the calculation of the amount of a payment is not administratively feasible due to events beyond the control of the Participant or Beneficiary, the payment will be treated as made upon the date specified in the prior sentence if the payment is made during the first taxable year of the Participant or Beneficiary in which the calculation of the amount is administratively feasible.

5.           Additional Death Benefit to Spouse. If a Designated SERP Participant dies prior to retirement and after having attained five years of vesting service under the Pension Plan, his surviving spouse shall receive a pre-retirement surviving spouse annuity from this SERP equal to the excess, if any, of (a) the pre-retirement surviving spouse annuity benefit which would have been paid to such surviving spouse under the Pension Plan if such payment were not limited by Code Sections 401(a)(17) and 415 and the incidental death benefit rules of Treasury Regulation 1.401-1(b)(1)(i), over (b) the pre-retirement surviving spouse annuity benefit actually payable under the Pension Plan. If the Participant has attained age 55 at the time of death, such annuity shall commence to be paid no later than March 15 of the calendar year following the calendar year in which the death occurred. If the Participant has not attained age 55 at the time of death, such annuity shall commence to be paid no later than March 15 of the calendar year following the calendar year in which the Participant’s 55th birthday would have occurred. Notwithstanding the foregoing, if the calculation of the amount of a payment is not administratively feasible due to events beyond the control of the Participant or Beneficiary, the payment will be treated as made upon the date specified in the applicable prior sentence if the payment is made during the first taxable year of the Participant or Beneficiary in which the calculation of the amount is administratively feasible.

6.           Contributions to Rabbi Trust. The Company will contribute to the L3 Technologies Supplemental Executive Retirement Plan Trust an amount equal to the amount required under the governmental Cost Accounting Standards (CAS) reimbursement rules. To the extent appropriate, the same cost methods and procedures will be used that would have applied had such benefits accrued under the Pension Plan.

B-2-3	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

7.           Benefit Accruals beginning January 1, 2011. Notwithstanding any provision of the foregoing, the benefit calculations under Section 1(a) and 2(a) above shall be made with respect to benefits accrued on or before December 31, 2010 taking into account only final average pensionable earnings, as defined in Sections 1(a) and 2(a) respectively, determined through that date. With respect to benefits accrued on and after January 1, 2011, the benefit calculations under Section 1(a) and 2(a) shall be made in accordance with those provisions, except taking into account pensionable earnings, as defined in the Pension Plan, with respect to each full and partial year of Credited Service commencing on or after that date, instead of final average pensionable earnings. The benefit calculations under Section 1(a) above as modified by this Section 7 shall be computed without regard to the limitations of Code Sections 401(a)(17) and 415 and the benefit calculations under Section 2(a) above as modified by this Section 7 shall be computed taking into account such limitations.

B-2-4	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

Appendix B-3

Special Provisions for the L3 Communication Systems - West Division

This Appendix B-3 contains additional terms of the SERP that apply to Participants who are employees of the L3 Communication Systems – West division of the Company (“CS-West Participants”). The L3 Communications Systems – West Retirement Plan and the L3 Communications Systems – West Retirement Plan II (each a “Pension Plan” and collectively the “Pension Plans”) have been amended to freeze the benefit accruals of participants who have more than $180,000 in compensation (the “Frozen HCE Amendments”) effective January 1, 2016. Any participant in a Pension Plan whose benefits under the Pension Plan are affected by the Frozen HCE Amendments and who is not already a Participant in the SERP will become Participant in the SERP effective as of the first day of the Plan Year immediately following the date on which such individual ceases to accrue benefits under a Pension Plan as a result of the Frozen HCE Amendments. As a result, a Participant may be a CS-West Participant either as a result of a Frozen HCE Amendment (a “Frozen HCE”) or having been designated as a Participant in the SERP without regard to the Frozen HCE Amendment (a “Designated CS-West SERP Participant”). Accordingly, there are two categories of CS-West Participants: (1) CS-West Participants who are both Designated SERP Participants and Frozen HCEs, and (2) CS-West Participants who are Frozen HCEs but not Designated SERP Participants. References to the “Pension Plan” herein mean the Pension Plan in which the CS-West Participant was a participant.

Except as otherwise specifically set forth in this Appendix B-3, the SERP benefits of CS-West Participants shall be calculated in accordance with other provisions of this SERP; provided, however, that:

(i)           Section 3.7 of the SERP shall not be applicable to any benefits payable to CS-West Participants under the SERP that would have been payable under a Pension Plan if the Frozen HCE Amendments had not been adopted; and

(ii)           a CS-West Participant who becomes a Participant in the SERP solely because of a Frozen HCE Amendment may commence to receive benefit payments under the SERP on a date elected by such Participant if the individual makes a written election of an alternate benefit commencement date no later than 30 days following the effective date of such individual’s participation in the SERP and the date elected is at least six months following the date of the Participant’s termination of employment.

1.           The Supplemental Pension Benefit of a CS-West Participant who is both a Designated SERP Participant and a Frozen HCE shall be equal to the excess, if any, of:

(a)           the benefit that would have been paid to such Participant under the Pension Plan in which the CS-West Participant participated, in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, if the Frozen HCE Amendment had not been adopted, and irrespective of the limitations of Sections 401(a)(17) and 415 of the Code, over

B-3-1	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

(b)           the Pension Benefit that is actually payable under the Pension Plan to such Participant, in the normal form of benefit payable to a single participant, taking into account the limitations of Sections 401(a)(17) and 415 of the Code and the Frozen HCE amendment.

2.           The Supplemental Pension Benefit of a CS-West Participant who is a Frozen HCE but not a Designated CS-West Participant shall be equal to the excess, if any, of:

(a)           the benefit that would have been paid to such Participant under the Pension Plan in which the CS-West Participant participated, in the normal form of benefit payable to a single participant pursuant to the terms of the Pension Plan, if the Frozen HCE amendment had not been adopted, and taking into account the limitations of Sections 401(a)(17) and 415 of the Code, over

(b)           the Pension Benefit that is actually payable under the Pension Plan to such Participant, in the normal form of benefit payable to a single participant, taking into account the limitations of Sections 401(a)(17) and 415 of the Code and the Frozen HCE amendment.

3.           Additional Death Benefit to Beneficiary. Upon the death of a CS-West Participant who was a Frozen HCE at the time of the Participant’s termination of employment with the Company, an amount equal to the Additional Death Benefit that would have been payable under Appendix A of the Pension Plan in which the CS-West Participant participated if it had not been amended by a Frozen HCE Amendment will be payable to the CS-West Participant’s designated beneficiary as determined under the Pension Plan.

4.           Contributions to Rabbi Trust. For each year commencing on or after January 1, 2016, the Company will contribute to the L3 Technologies Supplemental Executive Retirement Plan Trust an amount equal to the amount required under the governmental Cost Accounting Standards (CAS) reimbursement rules. To the extent appropriate, the same cost methods and procedures will be used that would have applied had such benefits accrued under the Pension Plans.

B-3-2	L3 Technologies, Inc.
	Supplemental Executive Retirement Plan

EX-10.41

Exhibit 10.41

L3 TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN

(Amended and Restated Effective January 1, 2017)

ARTICLE I

PURPOSES OF THE PLAN

The purposes of this L3 Technologies, Inc. Deferred Compensation Plan are to provide certain key management employees of the Company with the opportunity to elect to defer receipt of (a) a portion of their Base Salary, and (b) all or a portion of their Incentive Bonus.  Effective after the close of business on December 31, 2016, L-3 Communications Corporation changed its name to L3 Technologies, Inc.   Accordingly, the Plan is amended and restated effective January 1, 2017 solely to reflect this name change, to change the name of the Plan from the L-3 Communications Corporation Deferred Compensation Plan to the L3 Technologies, Inc. Deferred Compensation Plan and to incorporate an amendment that was adopted effective September 1, 2004.

ARTICLE II

DEFINITIONS

Unless the context indicates otherwise, the following words and phrases shall have the meanings hereinafter indicated:

Administrator -- The Vice President of Human Resources of the Company’s corporate office and the highest ranking Human Resource employee at each of the Company’s divisions or any other designated employee of the Company.

Base Salary -- An Eligible Employee’s annual base salary.

Beneficiary -- The person or persons designated by the Participant in his or her most recent beneficiary designation filed electronically with the Administrator to receive any benefits payable under this Plan as a result of the Participant’s death.  If no Beneficiary has been designated, or no designated Beneficiary survives the Participant, Beneficiary means the Participant’s estate.

Board -- The Board of Directors of L3 Technologies, Inc.

Code -- The Internal Revenue Code of 1986, as amended.

Committee -- The committee described in Section 1 of Article VIII.

Company -- L3 Technologies, Inc., including its divisions and subsidiaries.

Deferral Account -- The bookkeeping account maintained by the Company for each Participant which is credited with any (a) Deferred Base Salary and Deferred Incentive Bonus made on behalf of the Participant, (b) any Transferred Amount, and (c) earnings on those amounts.

Deferral Agreement -- The agreement executed by an Eligible Employee electronically in the form approved by the Administrator under which the Eligible Employee elects to defer Base Salary and/or Incentive Bonus for a calendar year.

Deferred Base Salary -- The amount of Base Salary deferred and credited to a Participant’s Deferral Account for a calendar year.

Deferred Incentive Bonus -- The amount of Incentive Bonus deferred and credited to a Participant’s Deferral Account for a calendar year.

Eligible Employee -- An employee who participates in the MIB and whose Base Salary for a calendar year equals or exceeds the dollar amount in Code Section 414(q), which amount is $85,000 for 2000.  The Committee shall limit participation in this Plan to employees whom the Committee believes to be a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended.

Incentive Bonus -- The incentive bonus amount awarded to an Eligible Employee for a calendar year under the MIB.

MIB -- The formal or informal program of the Company under which an employee receives an annual incentive bonus.

Participant -- An Eligible Employee who enters into a Deferral Agreement.  A Participant shall continue to participate in this Plan until his or her Deferral Account balance has been fully distributed.

Plan -- This L3 Technologies, Inc. Deferred Compensation Plan.

Transferred Amount – With respect to an individual who was a participant in the Lockheed Martin Corporation Deferred Management Incentive Compensation Plan on April 30, 1997, ("Prior Plan”) and became an employee of the Company on May 1, 1997, the amount equal to his account balance under the Prior Plan on December 31, 1997.

ARTICLE III

ELECTION OF DEFERRED COMPENSATION

1.          Deferral Agreement.

(a)          An Eligible Employee may elect to defer a portion of his or her Base Salary and/or Incentive Bonus for a calendar year by executing electronically in the form approved by the Administrator a Deferral Agreement no later than November 30 of the preceding calendar year or 30 days after the individual first becomes an Eligible Employee, if later.  An Eligible Employee’s Deferral Agreement shall be irrevocable when received by the Administrator and shall remain in effect for all succeeding years, except that an Eligible Employee may modify or revoke the Deferral Agreement with respect to any succeeding year by executing electronically in the form approved by the Administrator a new Deferral Agreement on or before November 30 of such succeeding year.  Notwithstanding the following, an Eligible Employee’s election to defer his or her Incentive Bonus for the 2004 calendar year and his or her Base Salary and/or Incentive Bonus for the 2005 calendar year shall be made no later than September 30, 2004.

2	L3 Technologies, Inc.
	Deferred Compensation Plan

(b)          Notwithstanding subsection (a) above, an Eligible Employee may revoke his or her Deferral Agreement in the event of a financial hardship with the consent of the Committee.  The revocation shall remain in effect for all succeeding years until the Eligible Employee files a new Deferral Agreement with the Administrator in accordance with Section 1 of this Article III.

2.          Amount of Deferral.  An Eligible Employee may elect to defer (a)  up to 50 percent of his or her Base Salary for a calendar year, and (b) all or a portion of his or her Incentive Bonus for a calendar year; provided, however, that the minimum Incentive Bonus amount deferred for a calendar year shall be $5,000.

3.          Time when Deferral Agreement Takes Effect.  An Eligible Employee’s Deferral Agreement with respect to the deferral of Base Compensation shall take effect beginning with the first payroll period of the calendar year following the year in which the Deferral Agreement is made; provided, that, a Deferral Agreement that is made within 30 days after the individual first becomes an Eligible Employee shall take effect beginning with the first payroll period following receipt of the Deferral Agreement by the Administrator. An Eligible Employee’s Deferral Agreement with respect to the deferral of Incentive Bonus shall take effect only if the Eligible Employee is awarded at least $10,000 of Incentive Bonus for the calendar year for which the Deferral Agreement applies.

ARTICLE IV

DEFERRAL ACCOUNT

1.          Establishment of Deferral Account.  A Deferral Account shall be established for each Participant, which shall be credited with his or her Deferred Base Salary, Deferred Incentive Bonus, Transferred Amount, if any, and earnings.

2.          Crediting of Deferred Amounts.  Deferred Base Salary and Deferred Incentive Bonus shall be credited to a Participant’s Deferral Account as of the fifteenth (15^th) day (or if such day is not a business day, the next following business day) of the month following the month in which such amounts would have been paid to the Participant if no Deferral Agreement were in effect.  Any Transferred Amount shall be credited to a Participant's Deferral Account as of December 31, 1997, and shall be credited with earnings as of that date.

3	L3 Technologies, Inc.
	Deferred Compensation Plan

3.          Crediting of Earnings.  Deferred Base Salary and Deferred Incentive Bonus shall be credited with earnings beginning on the first day (or if such day is not a business day, the next following business day) of the month following the month in which such amounts would have been paid to the Participant if no Deferral Agreement were in effect and ending on the business day immediately preceding the day on which such amounts are distributed or withdrawn.   Earnings shall be compounded and credited to a Participant’s Deferral Account each day based on the prime rate on the first business day of the calendar quarter that begins on or immediately precedes the date on which the earnings are credited.

4.          Vesting of Deferral Account Balance.  A Participant’s Deferral Account balance shall be fully vested at all times.

ARTICLE V

PAYMENT OF BENEFITS

1.          General.  The Company’s liability to pay benefits to a Participant or Beneficiary under this Plan shall be measured by, and in no event shall exceed, the Participant’s Deferral Account balance.  All benefit payments shall be made in cash.

2.          Payment of Deferral Account Balance.

(a)          At the time a Participant completes a Deferral Agreement for a calendar year, he or she shall irrevocably elect the date on which his or her Deferred Base Salary and Deferred Incentive Bonus for that calendar year (as adjusted for earnings) shall be paid.  The Participant may elect that his or her Deferred Base Salary and Deferred Incentive Bonus for the calendar year be paid on (a) the date on which the Participant terminates employment or (b) the first business day of any calendar year that is at least 12 months following the last day of the calendar year for which the Deferral Agreement is made.  However, if a Participant's employment is terminated prior to the date the Participant elected to have his or her Deferred Base Salary and Deferred Incentive Bonus paid out, the distribution will be made as soon as administratively feasible following the Participant's date of termination.

(b)          At the time the Participant completes his or her Deferral Agreement for the 1998 calendar year, the Participant shall irrevocably elect the date on which the Transferred Amount shall be paid, which shall be (a) the date on which the Participant terminates employment or (b) the first day of any calendar year that begins on or after 1999.

(c)          If a Participant fails to file a proper election form with respect to the time of payment, his or her Deferral Account balance shall be paid on the Participant's termination of employment.

4	L3 Technologies, Inc.
	Deferred Compensation Plan

3. Form of Payment.

(a)          At the time an Eligible Employee first completes a Deferral Agreement, he or she shall irrevocably elect the form of payment of his or her Deferral Account balance from among the following options:

(1)          A lump sum, or

(2)          Annual payments for a period of  up to 20 years, as designated by the Participant.  The amount of each annual payment shall be determined by dividing the Participant’s Deferral Account balance on the date such payment is processed by the number of years remaining in the designated installment period.  The installment period may be shortened, in the sole discretion of the Committee, if the Committee determines that the amount of the annual payments that would be made to the Participant during the designated installment period would be too small to justify the maintenance of the Participant’s Deferral Account and the processing of payments.

(b)          If the Participant fails to file a proper election form with respect to the form of payment, his or her Deferral Account balance shall be paid in a lump sum.

4.          Change of Payment Election.  The Committee may, in its discretion, permit a Participant to modify his or her payment election under Section 3 of this Article at the time the Participant enters into a new Deferral Agreement for a year; if accepted, such modification shall apply to amounts credited to the Participant’s Deferral Account as of the date of the new Deferral Agreement.  No such modification will be effective if made within one year of the date of the Participant’s termination of employment.

5.          Death Benefits.  Upon the death of a Participant, his or her unpaid Deferral Account balance, if any, will be paid to the Participant’s Beneficiary as soon as administratively feasible in a lump sum.

6.          Withdrawals with Forfeiture.  A Participant may withdraw his or her Deferral Account by filing a withdrawal request with the Committee.  A Participant who makes a withdrawal will incur a forfeiture of his or her Deferral Account balance in an amount equal to the withdrawal amount multiplied by the prime rate then in effect, plus 10 percent.

7.          Hardship Withdrawals.  A Participant may make a hardship withdrawal from his or her Deferral Account with the consent of the Committee.  A hardship shall mean a financial need of the Participant by reason of (a) an event that would constitute a hardship under Treasury Regulation § 1.401(k)-1(d)(2)(iv), or (b) such other event of an emergency or long-range nature as may be approved by the Committee, in its sole discretion.  The withdrawal amount shall not exceed the amount necessary to alleviate the hardship, including the amount needed to pay federal, state or local taxes with respect to the withdrawal amount.  The forfeiture provisions of Section 6 of this Article shall not apply to a hardship withdrawal.

5	L3 Technologies, Inc.
	Deferred Compensation Plan

8.          Acceleration upon Change in Control.

(a)          Notwithstanding any other provision of this Plan, the Deferral Account balance of each Participant shall be distributed in a single lump sum within 60 calendar days following a “Change in Control.”

(b)          For purposes of this Plan, a Change in Control shall include and be deemed to occur upon the following events:

(1)          The acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (“Exchange Act”), other than the Company or any of its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 51 percent or more of the combined voting power of the Company’s then outstanding voting securities, other than (i) pursuant to a transfer by Lehman Brothers Capital Partners III, L.P. to any of its affiliates, or (ii) by any employee benefit plan maintained by the Company;

(2)          The sale of all or substantially all of the assets of the Company or its subsidiaries; or

(3)          The election, including the filling of vacancies, during any period of 24 months or less, of 50 percent or more, of the members of the Board, without the approval of Continuing Directors, as constituted at the beginning of such period.  “Continuing Directors” shall mean any director of the Company who either (i) is a member of the Board on July 1, 1997, or (ii) is nominated for election to the Board by a majority of the Board which is comprised of directors who were, at the time of such nomination, Continuing Directors.

(c)          This Section shall apply only to a Change in Control of the Company and shall not cause immediate payout of a Deferral Account balance in any transaction involving the Company’s sale, liquidation, merger, or other disposition of any subsidiary.

(d)          The Company reserves the right to change or modify the definition of Change of Control set forth in this Section, and any such change or modification shall be binding on the Participants.

9.          Deductibility of Payments.  In the event that the payment of benefits in accordance with the Participant’s election under Section 3 of this Article would prevent the Company from claiming an income tax deduction with respect to any portion of the benefits paid, the Committee shall have the right to modify the timing of distributions from the Participant’s Deferral Account.  The Committee shall undertake to have distributions made at such times and in such amounts as most closely approximate the Participant’s election, consistent with the objective of maximum deductibility for the Company.  The Committee shall have no authority to reduce a Participant’s Deferral Account balance or to pay aggregate benefits less than the Participant’s Deferral Account balance in the event that all or a portion thereof would not be deductible by the Company.

6	L3 Technologies, Inc.
	Deferred Compensation Plan

10.          Change of Law.  Notwithstanding anything to the contrary herein, if the Committee determines in good faith, based on consultation with counsel, that the federal income tax treatment or legal status of this Plan has or may be adversely affected by a change in the Internal Revenue Code, Title I of the Employee Retirement Income Security Act of 1974, or other applicable law, or by an administrative or judicial construction thereof, the Committee may direct that the Deferral Account balances of affected Participants or of all Participants be distributed as soon as practicable after such determination is made, to the extent deemed necessary or advisable by the Committee.

11.          Tax Withholding.  To the extent required by law, the Company shall withhold from benefit payments hereunder, or with respect to any amounts credited to a Participant’s Deferral Account hereunder, any Federal, state, or local income or payroll taxes required to be withheld and shall furnish the recipient and the applicable government agency or agencies with such reports, statements, or information as may be legally required.

ARTICLE VI

PARTICIPANTS’ RIGHTS

1.          Unfunded Status of Plan.  This Plan constitutes a contractual promise by the Company to make payments in the future, and each Participant’s rights shall be those of a general, unsecured creditor of the Company.  No Participant shall have any beneficial interest in this Plan.  Notwithstanding the foregoing, to assist the Company in meeting its obligations under this Plan, the Company may, but is not required to, set aside assets in a trust or trusts described in Revenue Procedure 92-64, 1992-2 C.B. 422 (generally known as a “rabbi trust”), and direct that its obligations under this Plan be satisfied by payments out of such trust or trusts.  It is the Company’s intention that this Plan be unfunded for Federal income tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974.

2.          Nonalienability of Benefits.  A Participant’s rights to benefit payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary.

ARTICLE VII

AMENDMENT OR TERMINATION

1.          Amendment.  The Board may amend, modify, suspend or discontinue this Plan at any time; provided, however, that no such amendment shall have the effect of reducing a Participant’s Deferral Account balance or postponing the time when a Participant is entitled to receive a distribution of his or her Deferral Account balance.

2.          Termination.  The Board reserves the right to terminate this Plan at any time and to pay all Participants their Deferral Account balances in a lump sum immediately following such termination or at such time thereafter as the Board may determine.

7	L3 Technologies, Inc.
	Deferred Compensation Plan

ARTICLE VIII

ADMINISTRATION

1.          The Committee.  This Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board as may be designated by the Board.  The members of the Committee shall be designated by the Board.  A majority of the members of the Committee (but not fewer than three) shall constitute a quorum.  The vote of a quorum or the unanimous written consent of the Committee shall constitute action by the Committee.  The Committee shall have full authority to interpret this Plan, and interpretations of this Plan by the Committee shall be final and binding on all parties.

2.          Delegation and Reliance.  The Committee may delegate to any officer or employee of the Company the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purposes.  In making any determination or in taking or not taking any action under this Plan, the Committee may obtain and rely upon the advice of experts, including professional advisors to the Company.  No member of the Committee or officer of the Company who is a Participant hereunder may participate in any decision specifically relating to his or her individual rights or benefits under this Plan.

3.          Exculpation and Indemnity.  Neither the Company nor any member of the Board or of the Committee, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application thereof, shall have any liability to any party for any action taken or not taken in good faith under this Plan or for the failure of this Plan to achieve intended tax consequences, or to comply with any other law, compliance with which is not required on the part of the Company.

4.          Facility of Payment.  If a minor person declared incompetent, or person incapable of handling the disposition of his or her property, is entitled to receive a benefit, make an application, or make an election hereunder, the Committee may direct that such benefits be paid to, or such application or election be made by, the guardian, legal representative, or person having the care and custody of such minor, incompetent, or incapable person.  Any payment made, application allowed, or election implemented in accordance with this Section shall completely discharge the Company and the Committee from all liability with respect thereto.

5.          Proof of Claims.  The Committee may require proof of the death, disability, competency, minority, or incapacity of any Participant or Beneficiary and of the right of a person to receive any benefit or make any application or election.

6.          Claim Procedure.

(a)          Any person claiming a benefit, requesting an interpretation or ruling under this Plan, or requesting information under this Plan shall present the request in writing to the Committee which shall respond in writing within 60 days.  If the claim or request is denied, the written notice of denial shall state (1) the reason for denial, with specific reference to the plan provisions on which the denial is based, (2) a description of any additional material or information required and an explanation of why it is necessary, and (3) an explanation of the claim review procedure.

8	L3 Technologies, Inc.
	Deferred Compensation Plan

(b)          Any person whose claim or request is denied may request review by giving written notice to the Committee.  The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing.  On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

(c)          The decision on review shall normally be made within 60 days after the Committee’s receipt of a request for review.  If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days.  The decision shall be in writing and shall state the reason and the relevant plan provisions.  All decisions on review shall be final and binding on all parties concerned.

(d)          In the event of any dispute over benefits under this Plan, all remedies available to the disputing individual under this Article must be exhausted, within the specified deadlines, before legal recourse of any type is sought.

ARTICLE IX

GENERAL PROVISIONS

1.          No Guarantee of Employment.  Neither this Plan nor a Participant’s Deferral Agreement shall in any way obligate the Company to continue the employment of a Participant with the Company or limit the right of the Company at any time and for any reasons to terminate the Participant’s employment.  In no event shall this Plan or a Deferral Agreement constitute an employment contract between the Company and a Participant or in any way limit the right of the Company to change a Participant’s compensation or other benefits.

2.          Other Plan Benefits.  No amount credited to a Participant’s Deferral Account under this Plan shall be treated as compensation for purposes of calculating the amount of a Participant’s benefits or contributions under any pension, retirement, or other plan maintained by the Company, except as provided in such other plan.

3.          Agreement to Plan Terms.  By electing to become a Participant hereunder, each Eligible Employee shall be deemed conclusively to have accepted and consented to all the terms of this Plan and all actions or decisions made by the Company, the Board, or the Committee with regard to this Plan.

4.          Successors.  The provisions of this Plan and the Deferral Agreements hereunder shall be binding upon and inure to the benefit of the Company, its successors, and its assigns, and to the Participants and their heirs, executors, administrators, and legal representatives.

9	L3 Technologies, Inc.
	Deferred Compensation Plan

5.          Governing Law.  The validity of this Plan and any of its provisions shall be construed, administered, and governed in all respects under and by the laws of the State of New York (including its statute of limitations and all substantive and procedural law, and without regard to its conflict of laws provisions), except as to matters of federal law.  If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

IN WITNESS WHEREOF, this L3 Technologies, Inc. Deferred Compensation Plan is hereby amended and restated effective January 1, 2017.

L3 TECHNOLOGIES, INC.
By:	/s/ Kevin Weiss
Title:	Vice President, Human Resources

10	L3 Technologies, Inc.
	Deferred Compensation Plan

EX-10.42

Exhibit 10.42

L3 TECHNOLOGIES, INC.

DEFERRED COMPENSATION PLAN II

(Amended and Restated Effective January 1, 2017)

ARTICLE I

PURPOSE AND INTENT OF THE PLAN

1.          Purpose.  The purpose of this L3 Technologies, Inc. Deferred Compensation Plan II is to provide certain key management employees of the Company with the opportunity to elect to defer receipt of (a) a portion of their Base Salary, and (b) all or a portion of their Incentive Bonus.  This Plan was originally adopted effective as of January 1, 2009.  Elections to defer Base Salary and Incentive Bonuses and distributions of such Deferred Base Salary and Deferred Incentive Bonuses that were made on or after January 1, 2005 and before January 1, 2009 were made in accordance with the terms of this Plan as in effect on January 1, 2009.  Effective after the close of business on December 31, 2016, L-3 Communications Corporation changed its name to L3 Technologies, Inc.  Accordingly, the name of the Plan was changed from the L-3 Communications Corporation Deferred Compensation Plan II to the L3 Technologies, Inc. Deferred Compensation Plan II effective January 1, 2017.  The Plan is amended and restated effective January 1, 2017.

2.          Intent.          The Plan is intended to comply with the requirements of Section 409A of the Code and shall be interpreted in a manner that is consistent with such intent.  The Plan also is intended to be a top-hat plan under the Employee Retirement Income Security Act of 1974, as amended and shall be interpreted in a manner consistent with such intent.

ARTICLE II

DEFINITIONS

Unless the context indicates otherwise, the following words and phrases shall have the meanings hereinafter indicated:

Base Salary -- An Eligible Employee’s annual base salary.

Beneficiary -- The person or persons designated by the Participant in his or her most recent beneficiary designation made in accordance with procedures prescribed by the Company to receive any benefits payable under this Plan as a result of the Participant’s death.  The Participant may change his or her Beneficiary designation at any time by making a subsequent designation in accordance with procedures prescribed by the Company.  If no Beneficiary has been designated, or no designated Beneficiary survives the Participant, Beneficiary means the Participant’s estate.

Board – With respect to periods beginning on or after January 1, 2017, the Board of Directors of L3 Technologies, Inc. and with respect to periods ending on or before December 31, 2016, the Board of Directors of L-3 Communications Holdings, Inc.

Code -- The Internal Revenue Code of 1986, as amended.

Committee -- The committee described in Article VIII, Section 1, which administers the Plan.

Company -- L3 Technologies, Inc., including its divisions and subsidiaries.

Deferral Account -- The bookkeeping account maintained by the Company for each Participant which is credited with any (a) Deferred Base Salary and Deferred Incentive Bonus made on behalf of the Participant, and (b) earnings on those amounts.

Deferral Agreement -- The annual agreement executed or otherwise acknowledged by an Eligible Employee under procedures prescribed by the Company under which the Eligible Employee elects to defer Base Salary and/or Incentive Bonus for a calendar year.

Deferred Base Salary -- The amount of Base Salary deferred and credited to a Participant’s Deferral Account for a calendar year.

Deferred Incentive Bonus -- The amount of Incentive Bonus deferred and credited to a Participant’s Deferral Account for a calendar year.

Eligible Employee -- An employee who is subject to U.S. income taxes for a calendar year and who is eligible for an MIB award for such calendar year and whose Base Salary for a calendar year equals or exceeds the dollar amount in Code Section 414(q) shall be an Eligible Employee for such year.  The Committee shall limit participation in this Plan to employees whom the Committee believes to be a select group of management or highly compensated employees within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended.  Whether an individual is an Eligible Employee shall be determined each calendar year.

Incentive Bonus -- The incentive bonus amount awarded to an Eligible Employee for a calendar year under the MIB.

MIB -- The formal or informal program of the Company under which an employee receives an annual incentive bonus.

Open Enrollment Period -- The period of time during which an Eligible Employee may make an election to participate in the Plan for a calendar year as determined by the Company.  The Open Enrollment Period for an Employee who is a Participant shall end no later than December 31 of the year preceding the calendar year for which the Deferral Agreement is made.  The Open Enrollment Period for an employee who is first eligible to participate in the Plan mid-year either because he or she is newly hired or newly promoted shall begin on the date such individual is first notified by the Company that he or she is eligible to participate and shall end 30 days after such date.

2	L3 Technologies, Inc.
	Deferred Compensation Plan II

Participant -- An Eligible Employee who enters into a Deferral Agreement.  An Eligible Employee who enters into a Deferral Agreement shall continue to participate in this Plan until his or her Deferral Account balance has been fully distributed.

Plan -- This L3 Technologies, Inc. Deferred Compensation Plan II.

Section 409A Change of Control Event -- A change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code.

Separate from Service /Separation from Service; Separates from Service -- An Eligible Employee separates from service or experiences a separation from service if he or she dies, retires, or otherwise terminates employment as defined in Treasury Regulation §1.409A-1(h).

Specified Employee -- A “specified employee” as defined in Treasury Regulation             § 1.409A-1(i).

Unforeseeable Emergency --An “unforeseeable emergency” as defined in Treasury Regulation § 1.409A-3(i)(3).

U.S. Prime Rate -- The U.S. prime rate as reported in the Wall Street Journal or such other source as may be designated by the Committee.

ARTICLE III

ELECTION OF DEFERRED COMPENSATION

1.          Deferral Agreement.

(a)          An Eligible Employee for a calendar year may elect to defer a portion of his or her Base Salary and/or Incentive Bonus payable for services performed during a calendar year by executing or otherwise acknowledging under procedures prescribed by the Company a Deferral Agreement during the Open Enrollment Period.

(b)          An Eligible Employee’s Deferral Agreement shall be irrevocable for the calendar year for which it is made.  Such Deferral Agreement shall not continue in effect for any succeeding calendar year.

(c)          An individual who continues to be an Eligible Employee for a succeeding calendar year may make a new Deferral Agreement with respect to such succeeding calendar year by executing or otherwise acknowledging under procedures prescribed by the Company a new Deferral Agreement during the Open Enrollment Period for such succeeding calendar year.

(d)          Notwithstanding subsection (b) above, an Eligible Employee may revoke his or her Deferral Agreement in the event of an Unforeseeable Emergency, his or her  disability as defined in Treasury Regulation § 1.409A-3(j)(4)(xii), or following a financial hardship distribution pursuant to Treasury Regulation § 1.401(k)-1(d)(3) with the consent of the Company and subject to such procedures as the Company shall proscribe.  If an Eligible Employee revokes his or her Deferral Agreement,  then he or she may not make a new Deferral Agreement until the next Open Enrollment Period for the succeeding calendar year.

3	L3 Technologies, Inc.
	Deferred Compensation Plan II

2.          Amount of Deferral.  An Eligible Employee may elect to defer (a)  up to 50 percent of his or her Base Salary for a calendar year, and (b) up to 100 percent of his or her Incentive Bonus for a calendar year; provided, however, that to be eligible to defer all or a portion of his or her Incentive  Bonus for a calendar year, the Incentive Bonus for such calendar year must be at least $10,000 and the Deferred Incentive Bonus for such calendar year must be at least $5,000.

3.          Time when Deferral Agreement Takes Effect.  An Eligible Employee’s Deferral Agreement shall take effect on January 1 of the calendar year following the year in which the Deferral Agreement is made; provided, that the Deferral Agreement of an individual who becomes an Eligible Employee mid-year and makes a Deferral Agreement during the applicable Open Enrollment Period shall take effect as soon as administratively possible after such Deferral Agreement is executed or otherwise acknowledged by the Eligible Employee under the procedures prescribed by the Company.  An individual shall first become eligible to participate in the Plan upon being notified by Company that he or she is an Eligible Employee.

ARTICLE IV

DEFERRAL ACCOUNT

1.          Establishment of Deferral Account.  A Deferral Account shall be established for each Participant, which shall be credited with his or her Deferred Base Salary, Deferred Incentive Bonus and earnings.

2.          Crediting of Deferred Amounts.  Deferred Base Salary and Deferred Incentive Bonus shall be credited to a Participant’s Deferral Account as of the fifteenth (15^th) day (or if such day is not a business day, the nearest prior business day) of the month following the date on which such amounts would have been paid to the Participant if no Deferral Agreement were in effect.

3.          Crediting of Earnings.  Deferred Base Salary and Deferred Incentive Bonus shall be credited with earnings beginning on the first day (or if such day is not a business day, the next following business day) of the month following the month in which such amounts would have been paid to the Participant if no Deferral Agreement were in effect and ending on the business day immediately preceding the day on which such amounts are distributed or withdrawn.  Earnings shall be compounded and credited to a Participant’s Deferral Account each day based on the U.S. Prime Rate in effect on the first business day of the calendar quarter preceding the date on which the earnings are credited.

4.          Vesting of Deferral Account Balance.  A Participant’s Deferral Account balance shall be fully vested at all times.

4	L3 Technologies, Inc.
	Deferred Compensation Plan II

ARTICLE V

PAYMENT OF BENEFITS

1.          General.  The Company’s liability to pay benefits to a Participant or Beneficiary under this Plan shall be measured by, and in no event shall exceed, the Participant’s Deferral Account balance.  All benefit payments shall be made in cash.

2.          Payment of Deferral Account Balance.

(a)          At the time an Eligible Employee executes or otherwise acknowledges under procedures prescribed by the Company a Deferral Agreement for a calendar year, he or she shall irrevocably elect the date on which his or her Deferred Base Salary and Deferred Incentive Bonus for that calendar year (as adjusted for earnings) shall be paid.

(b)          The Participant may elect that his or her Deferred Base Salary and Deferred Incentive Bonus for the calendar year be paid (i) on Separation from Service  for any reason or (ii) on the first business day of any calendar year that is at least five full calendar years following the calendar year for which the Deferral Agreement is made.

(c)          Notwithstanding subsection (b) above, if a Participant Separates from Service for any reason prior to the date the Participant elected to have his or her Deferred Base Salary and Deferred Incentive Bonus paid out, such amount shall be paid on the Participant's Separation from Service.

(d)          Notwithstanding any other provision in this Plan to the contrary, any payment to a Specified Employee due to Separation from Service for any reason other than death shall be delayed for six months following the date the payment is otherwise due.  Earnings shall continue to be credited to the Specified Employee’s Deferral Account in accordance with Article IV, Section 3 above during the six-month delay period.

(e)          If a Participant fails to make an election with respect to the time of payment of his or her Deferred Base Salary and Deferred Incentive Bonus for a calendar year, such amount shall be paid on the Participant's Separation from Service, or, with respect to a Participant who is a Specified Employee, the date that is six months following the Participant’s Separation from Service.

(f)          Any Deferred Base Salary and Deferred Incentive Bonus to be paid on Separation from Service pursuant to subsection (b), (c) or (e) above shall be paid on or before December 31 of the year in which the Participant’s Separation from Service occurs or the 15^th day of the  third month following the Participant’s Separation from Service date, whichever is later.

3. Form of Payment.

(a)          At the time an Eligible Employee executes or otherwise acknowledges under procedures prescribed by the Company a Deferral Agreement for a calendar year, he or she shall irrevocably elect the form of payment of his or her Deferral Account balance from among the following options:

5	L3 Technologies, Inc.
	Deferred Compensation Plan II

(1)          A lump sum, or

(2)          Annual payments for a period of  up to 20 years, as designated by the Participant.  The amount of each annual payment shall be determined by dividing the Participant’s Deferral Account balance on the date such payment is processed by the number of annual payments remaining in the designated installment period.  If the total value of the Participant’s Deferral Account balance is less than $5,000 at the time an installment payment is due, the entire Deferral Account balance shall be paid to the Participant (or Beneficiary) in a lump sum.

(b)          A Participant’s election as to the form of payment shall be irrevocable and may not be changed.  In the event a Participant fails to timely elect a form of payment, The Participant shall be deemed to have elected a lump sup form of payment, which deemed election shall be irrevocable and may not be changed.

4.          Death Benefits.  Upon the death of a Participant, his or her unpaid Deferral Account balance, if any, will be paid to the Participant’s Beneficiary in accordance with the election made by the Participant, or, if the Participant fails to make a proper election form, in a lump sum.  Such payment shall be made on or before the later of December 31 of the year in which the Participant’s death occurs or the 15^th day of the  third month following the Participant’s date of death.

5.          Distribution on Account of Unforeseeable Emergency.  A Participant, or a Beneficiary upon the Participant’s death, may request a distribution or all or a portion of his or her Deferral Account balance on account of an Unforeseeable Emergency, which request must be approved by the Company and shall be subject to such procedures as the Company shall proscribe.  A distribution on account of an Unforeseeable Emergency shall meet the requirements of Treasury Regulation § 1.409A-3(i)(3).

6.          Acceleration upon Change in Control.

(a)          Notwithstanding any other provision of this Plan, the Deferral Account balance of each Participant shall be distributed in a single lump sum within 60 calendar days following a “Change in Control.”

(b)          For purposes of this Plan, a Change in Control shall be deemed to occur upon a Section 409A Change of Control Event that also constitutes one or more of the following:

(1)          The acquisition by any person or group (including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended  (the “Exchange Act”)), other than the Company  or any of its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a majority of the combined voting power of the Company’s then outstanding voting securities, other than by any employee benefit plan maintained by the Company;

6	L3 Technologies, Inc.
	Deferred Compensation Plan II

(2)          The sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole; or

(3)          The election, including the filling of vacancies, during any period of 24 months or less, of 50 percent or more of the members of the Board  without the approval of Continuing Directors, as constituted at the beginning of such period.  “Continuing Directors” shall mean any director who either (i) is a member of the Board on July 1, 1997, or (ii) is nominated for election to the Board by a majority of the Board which is comprised of directors who were, at the time of such nomination, Continuing Directors.

7.          Acceleration of or Delay in Payments. The Committee, in its sole and absolute discretion, may accelerate the time or form of payment of a benefit owed to a Participant, provided such acceleration is permitted under Treasury Regulation § 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to a Participant, provided such delay is permitted under Treasury Regulation §1.409A‑2(b)(7).  If the Plan receives a domestic relations order (within the meaning of Code Section 414(p)(1)(B)) directing that all or a portion of a Participant’s Accounts be paid to an “alternate payee,” any amounts to be paid to the alternate payee(s) shall be paid in a single lump sum.

8.          Change of Law.  Notwithstanding anything to the contrary herein, if the Committee determines in good faith, based on consultation with counsel, that the federal income tax treatment or legal status of this Plan has or may be adversely affected by a change in the Internal Revenue Code, Title I of the Employee Retirement Income Security Act of 1974, or other applicable law, or by an administrative or judicial construction thereof, the Committee may direct that the Deferral Account balances of affected Participants or of all Participants be distributed as soon as practicable after such determination is made, to the extent deemed necessary or advisable by the Committee and permitted by applicable law.

ARTICLE VI

PARTICIPANTS’ RIGHTS

1.          Unfunded Status of Plan.  This Plan constitutes a contractual promise by the Company to make payments in the future, and a Participant’s rights shall be those of a general, unsecured creditor of the Company.  A Participant shall not have any beneficial interest in this Plan.  Notwithstanding the foregoing, to assist the Company in meeting its obligations under this Plan, the Company may set aside assets in a trust described in Revenue Procedure 92-64, 1992-2 C.B. 422 (generally known as a “rabbi trust”), and the Company may direct that its obligations under this Plan be satisfied by payments out of such trust or trusts.  It is the Company’s intention that this Plan be unfunded for federal income tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974.

2.          Nonalienability of Benefits.  A Participant’s rights to benefit payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary, except as set forth in Article VI, Section 7(a) except as otherwise required by law.

7	L3 Technologies, Inc.
	Deferred Compensation Plan II

ARTICLE VII

AMENDMENT OR TERMINATION

1.          Amendment.  The  Board or the Compensation Committee of the Board or, to the extent permitted by Board resolution, any delegate of the Board or Compensation Committee, may amend, modify, suspend or discontinue this Plan at any time; provided, however, that no such amendment, modification, suspension or discontinuance shall have the effect of reducing a Participant’s Deferral Account balance or postponing the time when a Participant is entitled to receive a distribution of his or her Deferral Account balance.

2.          Termination.  The Board  or the Compensation Committee of the Board reserves the right to terminate this Plan (by Plan amendment) at any time and to pay all Participants their Deferral Account balances in a lump sum immediately following such termination or at such time thereafter as the Board or the Compensation Committee of the Board may determine, provided that any payments on termination of the Plan must comply with the requirements of Treasury Regulation §1.409A-3(j)(4)(ix).

ARTICLE VIII

ADMINISTRATION

1.          The Committee.  This Plan shall be administered by the Compensation Committee of the Board or such other committee (whether of the Board or of executives of the Company) as may be designated by the Board to administer this Plan.  The Compensation Committee or such other committee designated by the Board to administer this Plan is referred to in this document as the “Committee.”

2.          Delegation and Reliance.  The Committee may delegate to any officer or employee of the Company the authority to execute and deliver those instruments and documents and to take, or refrain from taking, all actions deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purposes. The Committee may also appoint a plan administrator or any other agent and delegate to such administrator or agent such powers and duties in connection with the administration of the Plan as the Committee may deem appropriate. In making any determination or in taking or not taking any action under this Plan, the Committee may obtain and rely upon the advice of experts, including professional advisors to the Company.  No member of the Committee or officer or employee of the Company (or any of its divisions or subsidiaries) who is a Participant may participate in any decision specifically relating to his or her individual rights or benefits under this Plan.

3.          Powers of the Committee.    The Committee shall administer this Plan in accordance with its terms.  The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer this Plan in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan.  The Committee shall have all powers necessary to administer the Plan, including without limitation, in addition to those powers set forth above, the following:

8	L3 Technologies, Inc.
	Deferred Compensation Plan II

(a)          to determine whether individuals qualify as the Participants in this Plan;

(b)          to determine the amount of benefits payable to Participants and their Beneficiaries;

(c)          to maintain all records that may be necessary for the administration of this Plan; and

(d)          to make and publish rules and procedures for the administration of this Plan.

4.          Exculpation and Indemnity.  To the extent permitted by applicable law, the Company shall indemnify and hold harmless the Committee and each member thereof and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge of responsibilities under or incident to the Plan, other than expenses, liabilities and claims arising out of their willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under applicable law.

5.          Facility of Payment.  If a minor, person declared incompetent, or person incapable of handling the disposition of his or her property, is entitled to receive a benefit, make an application, or make an election hereunder, the Committee may direct that such benefits be paid to, or such application or election be made by, the guardian, legal representative, or person having the care and custody of such minor, incompetent, or incapable person.  Any payment made, application allowed, or election implemented in accordance with this Section shall completely discharge the Company and the Committee from all liability with respect thereto.

6.          Proof of Claims.  The Committee may require proof of the death, disability, competency, minority, or incapacity of any Participant or Beneficiary and of the right of a person to receive any benefit or make any application or election.

7.          Claim Procedure.

(a)          Any person claiming a benefit, requesting an interpretation or ruling under this Plan, or requesting information under this Plan shall present the request in writing to the Committee, which shall respond in writing within 90 days.  The Committee may, however, extend the reply period for an additional ninety 90 days for special circumstances.  If the claim or request is denied, the written notice of denial shall state (1) the reason for denial, with specific reference to the plan provisions on which the denial is based, (2) a description of any additional material or information required and an explanation of why it is necessary, and (3) an explanation of the claims review procedure.

9	L3 Technologies, Inc.
	Deferred Compensation Plan II

(b)          Within 60 days after the receipt by a claimant of the written decision described above or the expiration of the claims review period described above including any extension, the claimant  may request review by giving written notice to the Committee.  The claim or request shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing.  On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.  If the claimant does not request a review within such sixty-day period, he or she shall be barred from challenging the original determination.

(c)          The decision on review shall normally be made within 60 days after the Committee’s receipt of a request for review.  If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days.  The decision shall be in writing and shall state the reason and the relevant plan provisions.  All decisions on review shall be final and binding on all parties concerned.

(d)          In the event of any dispute over benefits under this Plan, all remedies available to the disputing individual under this Section 7 must be exhausted, within the specified deadlines, before legal recourse of any type is sought.

ARTICLE IX

GENERAL PROVISIONS

1.          No Guarantee of Employment.  This Plan shall in no way obligate the Company (or any of its affilites) to continue the employment of a Participant with the Company (or its affiliates) or limit the right of the Company (or its affiliates) at any time and for any reason to terminate the Participant’s employment.  In no event shall this  Plan constitute an employment contract between the Company (or its affiliates) and a Participant or in any way limit the right of the Company (and its affiliates) to change a Participant’s compensation or other benefits.

2.          Other Plan Benefits.  No amount credited to a Participant’s Deferral Account under this Plan shall be treated as compensation for purposes of calculating the amount of a Participant’s benefits or contributions under any pension, retirement, or other plan maintained by the Company, except as provided in such other plan.

3.          Tax Withholding; Section 409A.  To the extent required by law, the Company shall withhold from benefit payments hereunder any Federal, state, or local income or payroll taxes required to be withheld and shall furnish the recipient and the applicable government agency or agencies with such reports, statements, or information as may be legally required.  This Plan shall be interpreted in a manner that is intended to ensure that any such payments or benefits shall not be subject to any tax or interest under Section 409A of the Code; provided, that neither the Company, the Committee nor any employee or representative thereof shall have any liability to a Participant or a Beneficiary with respect thereto.  Each payment made under this Plan shall be designated as a “separate payment” within the meaning of Section 409A of the Code.

10	L3 Technologies, Inc.
	Deferred Compensation Plan II

4.          Missing Payees.  If all or portion of a Participant’s Plan benefit becomes payable and the Committee after a reasonable search cannot locate the Participant (or his or her Beneficiary if such Beneficiary is entitled to payment), the Committee may forfeit the Participant’s Plan benefit.  If the  Participant (or his or her Beneficiary) subsequently presents a valid claim for benefits to the Committee, the Committee shall restore and pay the appropriate Plan benefit.

5.          Mistaken Payment.  No Participant or Beneficiary shall have any right to any payment made  in error or in contravention of the terms of this Plan, the Code, or ERISA.  The Committee shall have full rights under the law to recover any such mistaken payment, and the right to recover attorney’s fees and other costs incurred with respect to such recovery.  Recovery shall be made from future Plan payments, or by any other available means.

6.          Receipt and Release for Payments.  Any payment to a Participant, Beneficiary, or to any such person’s legal representative, parent, guardian, or any person or entity specified in Section 5 of Article VIII shall be in full satisfaction of all claims that can be made under the Plan against the Company (and its affiliates). The Company may require such Participant, Beneficiary, legal representative, or any other person or entity specified in Section 5 of Article VIII, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Company.

7.          Successors.  The provisions of this Plan shall be binding upon and inure to the benefit of the Company, its successors, and its assigns, and to the Participants and their heirs, executors, administrators, and legal representatives.

8.          Governing Law.  The validity of this Plan and any of its provisions shall be construed, administered, and governed in all respects under and by the laws of the State of New York (including its statute of limitations and all substantive and procedural law, and without regard to its conflict of laws provisions), except as to matters of Federal law.  If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

IN WITNESS WHEREOF, this L3 Technologies, Inc. Deferred Compensation Plan II is hereby amended and restated effective as of January 1, 2017.

		L3 TECHNOLOGIES, INC.
Date:	February 2, 2017	By:	/s/ Kevin Weiss
		Title:	Vice President, Human Resources

11	L3 Technologies, Inc.
	Deferred Compensation Plan II

EX-21

Exhibit 21

L3 Technologies, Inc. and Subsidiaries
As of December 31, 2016

Name	Jurisdiction
AeroElite Limited	United Kingdom
AeroElite Training LLC	Delaware
Aerosim Academy, Inc	Florida
Aerosim Bangkok Company Limited	Thailand
Aerosim Holdings Inc.	Delaware
Aerosim Technologies, Inc.	Minnesota
Aerosim Thai Company Limited	Thailand
Airline Placement Limited	United Kingdom
Airline Recruitment Limited	United Kingdom
Asian Aviation Training Centre Ltd.	Thailand
Aviation Communications & Surveillance Systems, LLC*	Delaware
Beijing MAPPS-SERI Technology Company Ltd.*	China
Calzoni Srl.	Italy
Combat Advanced Propulsion, LLC*	Delaware
CTC Aviation Group Limited	United Kingdom
CTC Aviation Holdings Limited	United Kingdom
CTC Aviation International Limited	United Kingdom
CTC Aviation Jet Services Limited	United Kingdom
CTC Aviation Services Limited	United Kingdom
CTC Aviation Training (N.Z.) Limited	New Zealand
CTC Aviation Training (U.K) Limited	United Kingdom
Electrodynamics, Inc.	Arizona
ESSCO Collins Limited	Ireland
Exmac Automation Limited	United Kingdom
FAST Holdings Limited*	United Kingdom
FAST Training Services Limited*	United Kingdom
Flight Training Acquisitions LLC	Delaware
ForceX, Inc.	Tennessee
FTA Acquisitions Inc.	Delaware
Honeywell TCAS Inc.*	Delaware
Interstate Electronics Corporation	California
L3 Aviation Products, Inc.	Delaware
L3 Electron Devices, Inc.	Delaware
L3 Technologies, Inc.	Delaware
L-3 Advanced Programs, Inc.	Delaware
L-3 Afghanistan, LLC	Delaware
L-3 Applied Technologies, Inc.	Delaware
L-3 Army Sustainment, LLC	Delaware
L-3 Brasil Importação, Exportação e Comércio Ltda.	Brazil
L-3 Centaur, LLC	Delaware
L-3 Chesapeake Sciences Corporation	Maryland
L-3 Communications AIS GP Corporation	Delaware
L-3 Communications ASA Limited	United Kingdom
L-3 Communications Australia Group Pty Ltd	Australia
L-3 Communications Australia Pty Ltd	Australia
L-3 Communications Canada Inc.	Canada
L-3 Communications Cincinnati Electronics Corporation	Ohio

Name	Jurisdiction
L-3 Communications Electronic Systems Inc.	Canada
L-3 Communications EO/IR, Inc.	Florida
L-3 Communications ESSCO, Inc.	Delaware
L-3 Communications Flight Capital LLC	Delaware
L-3 Communications Flight International Aviation LLC	Delaware
L-3 Communications Foreign Holdings, Inc.	Delaware
L-3 Communications Holding GmbH	Germany
L-3 Communications Hong Kong Limited	Hong Kong
L-3 Communications India Private Limited	India
L-3 Communications Integrated Systems L.P.	Delaware
L-3 Communications Investments Inc.	Delaware
L-3 Communications Korea Corporation	South Korea
L-3 Communications Link Simulation and Training UK Limited	United Kingdom
L-3 Communications Link Simulation and Training UK (Overseas) Limited	United Kingdom
L-3 Communications Ltd.	United Kingdom
L-3 Communications Magnet-Motor GmbH	Germany
L-3 Communications MAPPS Inc.	Canada
L-3 Communications MAPPS Malaysia Sdn. Bhd.	Malaysia
L-3 Communications Marine Systems UK Ltd.	United Kingdom
L-3 Communications MariPro, Inc.	California
L-3 Communications MAS (Canada) Inc.	Canada
L-3 Communications Mobile-Vision, Inc.	New Jersey
L-3 Communications Oceania Pty Limited	Australia
L-3 Communications Security and Detection Systems, Inc.	Delaware
L-3 Communications Singapore Pte Ltd	Singapore
L-3 Communications U.K. Ltd.	United Kingdom
L-3 Communications Vector International Aviation LLC	Delaware
L-3 Communications Vertex Aerospace LLC	Delaware
L-3 Communications Westwood Corporation	Nevada
L-3 CTC Aviation Holdings Inc.	Delaware
L-3 CTC Aviation Leasing (US) Inc.	Delaware
L-3 CTC Aviation Training (US) Inc.	Delaware
L-3 CTC Ltd.	United Kingdom
L-3 Domestic Holdings, Inc.	Delaware
L-3 Fuzing and Ordnance Systems, Inc.	Delaware
L-3 Global Holding UK Ltd.	United Kingdom
L-3 International UK Ltd.	United Kingdom
L-3 Investments, LLC	Delaware
L-3 Saudi Arabia LLC	Saudi Arabia
L-3 Security Equipment Trading (Beijing) Co., Ltd.*	China
L-3 Societa Srl.	Italy
L-3 Technology & Services UK Ltd.	United Kingdom
L-3 Unidyne, Inc.	Delaware
L-3 Unmanned Systems, Inc.	Texas
L-Tres Communicaciones Costa Rica, S.A.	Costa Rica
MacDonald Humfrey (Automation) Middle East Control Systems L.L.C.	United Arab Emirates
MacDonald Humfrey (Automation) India Private Limited	India
MacDonald Humfrey (Automation) Limited	United Kingdom
MacDonald Humfrey (Automation) SEA PTE. Ltd.	Singapore

Name	Jurisdiction
MHA-Stopford Limited*	United Kingdom
Micreo Limited	Australia
Mustang Technology Group, L.P.	Texas
Narda Safety Test Solutions GmbH	Germany
Narda Safety Test Solutions S.r.l.	Italy
Power Paragon, Inc.	Delaware
SPD Electrical Systems, Inc.	Delaware
SPD Switchgear Inc.	Delaware
TRL Electronics Limited	United Kingdom
TRL Technology Limited	United Kingdom
Wescam Inc.	Canada

* Represents a non-wholly owned subsidiary.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-212152) and Form S-8 (Nos. 333-183353, 333-168467, 333-160359, 333-144135, 333-103752, 333-64389, 333-212151, 333-188450, 333-168466, 333-151964, 333-123424, 333-120393 and 333-78317) of L3 Technologies, Inc. of our report dated February 23, 2017 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 23, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael T. Strianese, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2016 of L3 Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2017

/s/ Michael T. Strianese

Michael T. Strianese

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Ralph G. D’Ambrosio, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2016 of L3 Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2017

/s/ Ralph G. D’Ambrosio

Ralph G. D’Ambrosio

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of L3 Technologies, Inc. (“L3”) on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Michael T. Strianese, Chairman and Chief Executive Officer and Ralph G. D’Ambrosio, Senior Vice President and Chief Financial Officer, of L3, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L3.

Date: February 23, 2017

/s/ Michael T. Strianese	/s/ Ralph G. D’Ambrosio
Michael T. Strianese	Ralph G. D’Ambrosio
Chairman and Chief Executive Officer	Senior Vice President and Chief Financial Officer

XML

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2016	Feb. 17, 2017	Jun. 24, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	L3 TECHNOLOGIES, INC.
Entity Central Index Key	0001039101
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 10.8
Entity Common Stock, Shares Outstanding		77,798,844
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 363	$ 207
Billed receivables, net of allowances of $13 in 2016 and $15 in 2015	731	746
Contracts in process	2,055	2,081
Inventories	330	333
Other current assets	218	201
Assets of discontinued operations	0	664
Total current assets	3,697	4,232
Property, plant and equipment, net	1,121	1,097
Goodwill	6,560	6,281
Identifiable intangible assets	238	199
Other assets	249	260
Total assets	11,865	12,069
Current liabilities:
Current portion of long-term debt	0	499
Accounts payable, trade	299	297
Accrued employment costs	516	504
Accrued expenses	375	390
Advance payments and billings in excess of costs incurred	492	562
Income taxes payable	22	13
Other current liabilities	431	394
Liabilities of discontinued operations	0	220
Total current liabilities	2,135	2,879
Pension and postretirement benefits	1,177	1,047
Deferred income taxes	236	219
Other liabilities	368	368
Long-term debt	3,325	3,127
Total liabilities	7,241	7,640
Commitments and contingencies (see Note 18)
Shareholders' equity:
Common stock: $.01 par value; 300,000,000 shares authorized, 77,232,204 shares outstanding at December 31, 2016 and 78,133,763 shares outstanding at December 31, 2015	6,285	6,052
Treasury stock (at cost), 82,385,075 shares at December 31, 2016 and 79,375,063 shares at December 31, 2015	(7,224)	(6,851)
Retained earnings	6,218	5,728
Accumulated other comprehensive loss	(726)	(574)
Total shareholders' equity	4,553	4,355
Noncontrolling interests	71	74
Total equity	4,624	4,429
Total liabilities and equity	$ 11,865	$ 12,069

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Allowances for billed receivables	$ 13	$ 15
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares outstanding (in shares)	77,232,204	78,133,763
Treasury stock at cost (in shares)	82,385,075	79,375,063

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net sales:
Products		$ 6,442	$ 6,589	$ 6,839
Services		4,069	3,877	4,147
Total net sales		10,511	10,466	10,986
Cost of sales:
Products		(5,785)	(6,007)	(6,161)
Services		(3,718)	(3,569)	(3,813)
Total cost of sales		(9,503)	(9,576)	(9,974)
Loss related to business divestitures	[1]	0	(31)	0
Goodwill impairment charges	[2]	0	(384)	0
Operating income		1,008	475	1,012
Interest expense		(169)	(169)	(158)
Interest and other income, net		18	17	18
Debt retirement charges		(7)	(1)	0
Income from continuing operations before income taxes		850	322	872
Provision for income taxes		(189)	(25)	(227)
Income from continuing operations		661	297	645
Income (loss) from discontinued operations, net of income taxes		63	(522)	32
Net income (loss)		724	(225)	677
Net income from continuing operations attributable to noncontrolling interests		(14)	(15)	(13)
Net income (loss) attributable to L3		$ 710	$ (240)	$ 664
Basic earnings (loss) per share attributable to common shareholders:
Continuing operations (in dollars per share)		$ 8.36	$ 3.49	$ 7.40
Discontinued operations (in dollars per share)		0.81	(6.46)	0.38
Basic earnings (loss) per share (in dollars per share)		9.17	(2.97)	7.78
Diluted earnings (loss) per share attributable to common shareholders:
Continuing operations (in dollars per share)		8.21	3.44	7.20
Discontinued operations (in dollars per share)		0.80	(6.37)	0.36
Diluted earnings (loss) per share (in dollars per share)		9.01	(2.93)	7.56
Cash dividends declared per common share (in dollars per share)		$ 2.80	$ 2.60	$ 2.40
Weighted average common shares outstanding:
Basic (in shares)		77.4	80.7	85.4
Diluted (in shares)		78.8	81.9	87.8

[1] See Note 3 for information regarding the Company's business divestitures.

[2] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income (loss)		$ 724	$ (225)	$ 677
Other comprehensive income (loss):
Foreign currency translation adjustments		(77)	(120)	(123)
Unrealized gains (losses) on hedging instruments	[1]	14	(3)	(6)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized	[2]	30	43	9
Net (loss) gain arising during the period	[3]	(119)	90	(354)
Net change in pension and postretirement benefit plans		(89)	133	(345)
Total other comprehensive (loss) income		(152)	10	(474)
Comprehensive income (loss)		572	(215)	203
Comprehensive income attributable to noncontrolling interests		(14)	(15)	(13)
Comprehensive income (loss) attributable to L3		$ 558	$ (230)	$ 190

[1] Net of income taxes of $5 million in 2016, income tax benefits of $2 million in 2015 and $1 million in 2014.

[2] Net of income taxes of $18 million in 2016, $24 million in 2015 and $6 million in 2014.

[3] Net of income tax benefit of $69 million in 2016, income taxes of $49 million in 2015 and an income tax benefit of $211 million in 2014. The 2015 amount includes $9 million (net of income taxes of $5 million) for the reclassification of actuarial losses into net income related to the Marine Systems International business divestiture in accordance with Accounting Standards Codification 715, Defined Benefit Plans - Pension.

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Income tax expense (benefit) on unrealized gains (losses) on hedging instruments	$ (5)	$ (2)	$ (1)
Income tax (expense) on amortization of net loss and prior service cost previously recognized	(18)	(24)	(6)
Income tax expense (benefit) on net (loss) gain arising during the period	$ 69	49	$ (211)
Amount includes in other comprehensive income (loss), net actuarial gain (loss), before tax		9
Other comprehensive income (loss), net actuarial gain (loss), tax		$ 5

XML

CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Millions, $ in Millions	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Noncontrolling Interests [Member]	Total
Beginning Balance at Dec. 31, 2013	$ 1	$ 5,652	$ (5,288)	$ 5,726	$ (110)	$ 75	$ 6,056
Beginning Balance (in shares) at Dec. 31, 2013	85.8
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income				664		13	677
Other comprehensive income (loss)					(474)		(474)
Distributions to noncontrolling interests						(13)	(13)
Cash dividends declared				(209)			(209)
Shares issued:
Employee savings plans		130					130
Employee savings plans (in shares)	1.2
Exercise of stock options		109					109
Exercise of stock options (in shares)	1.2
Employee stock purchase plan		35					35
Employee stock purchase plan (in shares)	0.3
Vesting of restricted stock and performance units (in shares)	0.6
Repurchases of common stock to satisfy tax withholding obligations		(27)					(27)
Repurchases of common stock to satisfy tax withholding obligations (in shares)	(0.2)
Stock-based compensation expense		52					52
Treasury stock purchased			(823)				(823)
Treasury stock purchased (in shares)	(6.9)
Retirement of Convertible Contingent Debt Securities		(161)					(161)
Other		8					8
Ending Balance at Dec. 31, 2014	$ 1	5,798	(6,111)	6,181	(584)	75	5,360
Ending Balance (in shares) at Dec. 31, 2014	82.0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income				(240)		15	(225)
Other comprehensive income (loss)					10		10
Distributions to noncontrolling interests						(16)	(16)
Cash dividends declared				(213)			(213)
Shares issued:
Employee savings plans		120					120
Employee savings plans (in shares)	1.1
Exercise of stock options		74					74
Exercise of stock options (in shares)	0.7
Employee stock purchase plan		34					34
Employee stock purchase plan (in shares)	0.3
Vesting of restricted stock and performance units (in shares)	0.7
Repurchases of common stock to satisfy tax withholding obligations		(33)					(33)
Repurchases of common stock to satisfy tax withholding obligations (in shares)	(0.3)
Stock-based compensation expense		49					49
Treasury stock purchased			(740)				(740)
Treasury stock purchased (in shares)	(6.4)
Other		9					9
Ending Balance at Dec. 31, 2015	$ 1	6,051	(6,851)	5,728	(574)	74	4,429
Ending Balance (in shares) at Dec. 31, 2015	78.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net (loss) income				710		14	724
Other comprehensive income (loss)					(152)		(152)
Distributions to noncontrolling interests						(17)	(17)
Cash dividends declared				(220)			(220)
Shares issued:
Employee savings plans		115					115
Employee savings plans (in shares)	0.9
Exercise of stock options		53					53
Exercise of stock options (in shares)	0.6
Employee stock purchase plan		31					31
Employee stock purchase plan (in shares)	0.4
Vesting of restricted stock and performance units (in shares)	0.5
Repurchases of common stock to satisfy tax withholding obligations		(21)					(21)
Repurchases of common stock to satisfy tax withholding obligations (in shares)	(0.3)
Stock-based compensation expense		49					49
Treasury stock purchased			(373)				(373)
Treasury stock purchased (in shares)	(3.0)
Other		6					6
Ending Balance at Dec. 31, 2016	$ 1	$ 6,284	$ (7,224)	$ 6,218	$ (726)	$ 71	$ 4,624
Ending Balance (in shares) at Dec. 31, 2016	77.2

XML

CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CONSOLIDATED STATEMENTS OF EQUITY [Abstract]
Cash dividends declared per share (in dollars per share)	$ 2.80	$ 2.60	$ 2.40

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating activities:
Net income (loss)		$ 724	$ (225)	$ 677
Less: (Income) loss from discontinued operations, net of tax		(63)	522	(32)
Income from continuing operations		661	297	645
Depreciation of property, plant and equipment		162	166	165
Amortization of intangibles and other assets		44	44	49
Deferred income tax provision (benefit)		43	(66)	113
Stock-based employee compensation expense		49	46	50
Contributions to employee savings plans in L3's common stock		113	110	119
Goodwill impairment charges	[1]	0	384	0
Amortization of pension and postretirement benefit plans net loss and prior service cost		48	67	15
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		8	8	7
Loss related to business divestitures	[2]	0	31	0
Other non-cash items		12	(3)	0
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures, and discontinued operations:
Billed receivables		30	50	39
Contracts in process		14	32	7
Inventories		22	(38)	0
Other assets		29	(27)	(17)
Accounts payable, trade		4	(32)	(80)
Accrued employment costs		9	34	(5)
Accrued expenses		(17)	14	(14)
Advance payments and billings in excess of costs incurred		(69)	(6)	65
Income taxes		34	(33)	(7)
Other current liabilities		19	(2)	6
Pension and postretirement benefits		(57)	(8)	(44)
All other operating activities		(61)	1	(25)
Net cash from operating activities from continuing operations		1,097	1,069	1,088
Investing activities:
Business acquisitions, net of cash acquired		(388)	(320)	(57)
Proceeds from the sale of businesses, net of closing date cash balances		561	318	1
Capital expenditures		(216)	(197)	(174)
Dispositions of property, plant and equipment		21	3	4
Other investing activities		6	4	5
Net cash used in investing activities from continuing operations		(16)	(192)	(221)
Financing activities:
Proceeds from sale of senior notes		547	0	996
Redemption of CODES		0	0	(935)
Repurchases, redemptions and maturities of senior notes		(856)	(297)	0
Borrowings under revolving credit facility		819	1,194	1,367
Repayments of borrowings under revolving credit facility		(819)	(1,194)	(1,367)
Common stock repurchased		(373)	(740)	(823)
Dividends paid on L3's common stock		(220)	(214)	(208)
Proceeds from exercise of stock options		53	48	93
Proceeds from employee stock purchase plan		31	34	35
Debt issue costs		(10)	0	(8)
Repurchases of common stock to satisfy tax withholding obligations		(21)	(33)	(27)
Other financing activities		(7)	(3)	(16)
Net cash used in financing activities from continuing operations		(856)	(1,205)	(893)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(13)	(19)	(17)
Net cash (used in) from discontinued operations
Operating activities		(56)	56	54
Investing activities		0	(5)	(8)
Net cash (used in) from discontinued operations		(56)	51	46
Change in cash balance in assets held for sale		0	61	(61)
Net increase (decrease) in cash and cash equivalents		156	(235)	(58)
Cash and cash equivalents, beginning of the year		207	442	500
Cash and cash equivalents, end of the year		$ 363	$ 207	$ 442

[1] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

[2] See Note 3 for information regarding the Company's business divestitures.

XML

Description of Business

12 Months Ended

Dec. 31, 2016

Description of Business [Abstract]

Description of Business

1. Description of Business

L-3 Communications Holdings, Inc. (L-3 Holdings), a Delaware corporation organized in April 1997, derived all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications Corporation (L-3 Corp). On December 31, 2016, the Company completed an internal reorganization to eliminate its holding company structure. Pursuant to the reorganization, L-3 Holdings was merged (the Merger) with and into L-3 Corp, with the subsidiary 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. (the Name Change).

As a result of the Merger and the Name Change, all outstanding shares of L-3 Holdings’ common stock were automatically converted into the same number of shares of common stock of L3 Technologies, Inc., with economic, voting and other rights that are substantially identical. The common stock of L3 Technologies, Inc. commenced trading effective January 3, 2017 (the first trading day of 2017) on the New York Stock Exchange under the ticker symbol “LLL”, the same ticker symbol previously used by L-3 Holdings.

L3 Technologies, Inc. (L3 Technologies Inc. and, together with its subsidiaries, referred to herein as L3 or the Company), is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment and security and detection systems. L3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. The Company’s customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers. The Company is the successor of L-3 Communications Holdings, Inc.

The Company has the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Electronic Systems provides a broad range of products and services, including components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical space, airborne, ground and sea-based communication systems. Effective March 1, 2017, the Company will realign its Electronic Systems segment in connection with the retirement of the segment’s president in the second quarter of 2017. The current Electronic Systems segment will be split into two separate segments named (1) Electronic Systems and (2) Sensor Systems. Accordingly, the Company’s structure will consist of the following four segments: (1) Aerospace Systems, (2) Communication Systems, (3) Electronic Systems and (4) Sensor Systems. The Company will report its results under the realigned business segments commencing in the first quarter of 2017 at which time the Company will restate the corresponding information for prior periods. Financial information with respect to each of its segments is included in Note 21.

On December 7, 2015, the Company entered into a definitive agreement to sell its National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS provided cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to the Company’s continuing operations, unless specifically noted. See Note 3 for additional information.

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying financial statements comprise the consolidated financial statements of L3. The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method. For the classification of contract related assets and liabilities, the Company uses the duration of the related contract or program as its operating cycle, which may be longer than one year, and classifies them as current. Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for L3 relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) products, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Revisions or adjustments to estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to Percentage-of-Completion (POC) accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s results of operations and cash flows, as well as reduce the valuations of receivables and inventories, and in some cases result in liabilities to complete contracts in a loss position. Aggregate net changes in contract estimates amounted to increases of $148 million, or 15%, of consolidated operating income ($1.22 per diluted share) for the year ended December 31, 2016, increases of $52 million, or 11%, of consolidated operating income ($0.45 per diluted share) for the year ended December 31, 2015, and increases of $72 million, or 7%, of consolidated operating income ($0.52 per diluted share) for the year ended December 31, 2014.

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 50% of the Company’s net sales in 2016 were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 9% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a POC method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts).

Sales and profits on fixed-price type contracts that are covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become evident. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

Sales and profits on cost-plus type contracts that are covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement types. Incentive and award fees are the primary variable fee contractual arrangement types for the Company. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require the Company to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts within the scope of accounting standards for revenue arrangements with commercial customers are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2016			2015
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	105		$	93
Acquisitions during this period		3			1
Accruals for product warranties issued during the period		51			59
Changes to accruals for product warranties existing before January 1		—			2
Foreign currency translation adjustments		(1	)		(2	)
Settlements made during the period		(49	)		(48	)
Balance at December 31	$	109		$	105

⁽¹⁾ Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method. Deferred debt issuance costs, other than for line-of credit arrangements, are presented in the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the associated debt liability. Deferred debt issue costs for line-of-credit arrangements are presented in the Company’s consolidated balance sheets in other assets.

Pension Plan and Postretirement Benefit Plan Obligations: The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant’s compensation and/or years of service. The Company’s funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon.

The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company’s pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

In accordance with accounting standards for employee pension and postretirement benefits, the Company recognizes on a plan-by-plan basis the unfunded status of its pension and postretirement benefit plans in the consolidated financial statements and measures its pension and postretirement benefit plan assets and benefit obligations as of December 31.

The obligation for the Company’s pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, and rates of return on plan assets, and expected annual rates for salary increases for employee participants in the case of pension plans, and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit obligations. See Note 19, Pensions and Other Employee Benefits for additional information.

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L3 common stock instead of settling such obligations with cash payments.

Compensation expense for restricted stock unit and stock option awards is generally recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L3 common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period. Stock-based compensation expense is recognized net of estimated forfeitures.

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies. Deferred income tax assets and liabilities are classified as noncurrent in the Company’s balance sheet.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess, obsolete or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by generally applying the straight-line method to the estimated useful lives of the related assets. Useful lives generally range from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property, plant or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill and Indefinite-lived Intangible Assets: The carrying value of goodwill and indefinite-lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2016 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flow valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2016 and 2014. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If the Company’s current estimates indicate that the duration of its customer contractual relationships have decreased, then the Company adjusts the amortization period for those customer contractual relationships to their remaining useful economic life.

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the U.S. dollar, the Euro, the Canadian dollar and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Treasury Stock: The Company records treasury stock purchases at cost, which includes incremental direct transaction costs.

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2016, 2015 and 2014 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated OCI and are only recognized in income when a foreign subsidiary is divested.

Accounting Standards Issued and Not Yet Implemented: In January 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, the Company calculates the fair value of its assets and liabilities (including unrecognized assets and liabilities) as if acquired or assumed in a business combination. Under the amendments in this update the Company will determine the amount of goodwill impairment, by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment is recognized. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company expects the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this standard for the Company will depend on the outcomes of future goodwill impairment tests.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update provide new guidance to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The new guidance requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The new guidance reduces the number of transactions that need to be further evaluated. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2018, with early application permitted. The Company believes that the evaluation of whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses will be simplified under the new standard.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In the adoption year, the Company will be required to recognize and measure all leases using a modified retrospective approach, which requires the restatement of each prior reporting period presented, and permits a number of optional practical expedients that the Company may elect to apply. The optional practical expedients allow the Company to use: (i) its existing assessments under current accounting standards as to the classification of a lease as operating or financing, and whether any expired or existing contracts is or contains a lease, and (ii) hindsight to determine the term of existing leases, for the purpose of restating each prior reporting period presented. The Company is currently evaluating when it will adopt this ASU, whether to elect the optional practical expedients and the expected impact of the adoption of this standard on its consolidated financial statements and disclosures related to leasing activities.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provides companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application with disclosure of results under the new and old standards for the first year of adoption.

The Company will adopt the standard as of January 1, 2018, using the modified retrospective transition method and is currently evaluating the expected impact of the adoption on its consolidated financial statements, and related disclosures. Under the modified retrospective transition method, the Company will be required to calculate and record the cumulative effect of adopting the new standard as of January 1, 2018, in the Company’s Quarterly Report on Form 10-Q for the first quarter of 2018. The Company expects to estimate the cumulative effect of adopting the new standard as of January 1, 2018 in the second half of 2017 based on expected contracts in process at December 31, 2017.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. Specifically, the Company has evaluated the impact of the standard on its various revenue streams. Based on progress made to date, the Company expects to recognize revenue over time on most of its contracts that are covered by current contract accounting standards by using cost inputs to measure progress toward the completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on the majority of these contracts. Accordingly, the Company expects the adoption of this standard to primarily impact contracts currently covered by contract accounting standards that recognize revenue using the POC units-of-delivery method. Approximately 20% of the Company’s net sales used the POC units-of-delivery method to recognize revenue in 2016. Upon adoption, the Company expects to recognize revenue earlier in the performance period as costs are incurred, as opposed to when units are delivered, on some of these contracts that currently use the POC units-of-delivery method to recognize revenue.

Additionally, the Company has also made progress on drafting its accounting policies affected by this standard, the redesign of internal controls over financial reporting related to the standard, as well as evaluating the expanded disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, and implement any changes to such business processes, controls and systems over the remainder of 2017.

New Accounting Standards Implemented: In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits are classified as an operating activity on the statement of cash flows. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 16 for additional information. 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 the quarterly period ended December 31, 2016, with retrospective application to the consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014. The adoption of ASU 2016-15 resulted in changes in the classification on the statement of cash flows relating to payments of debt extinguishment costs and original issue discounts of $11 million and $1 million, for the years ended December 31, 2016 and 2015, respectively. These payments would have been previously classified in cash flows from operations, and are now classified in cash flows from financing activities.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

XML

Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2016

Acquisitions and Divestitures [Abstract]

Acquisitions and Divestitures

3. Acquisitions and Divestitures

Business Acquisitions

The business acquisitions discussed below are included in the Company’s results of operations from their respective dates of acquisition.

2016 Business Acquisitions

MacDonald Humfrey (Automation) Limited Acquisition. On November 22, 2016, the Company acquired MacDonald Humfrey (Automation) Limited, renamed L3 MacDonald Humfrey, for a purchase price of £263 million (approximately $327 million). The purchase price is subject to additional, contingent consideration not to exceed £30 million (approximately $38 million), and is based on L3 MacDonald Humfrey’s post-acquisition financial performance for the three-year period ending December 31, 2019. The Company recorded a £23 million (approximately $29 million) liability on the acquisition date for the fair value of the contingent consideration. The acquisition was funded from cash on hand and revolving credit borrowings that were repaid before the end of 2016. The final purchase price allocation, which is expected to be completed in the third quarter of 2017, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position. L3 MacDonald Humfrey is a globally recognized leader in the deployment of operationally effective and efficient aviation checkpoint security solutions, as well as in the development of state-of-the-art process automation and collaborative robotic capabilities supporting aviation and other adjacent markets. The goodwill recognized for this business was £205 million (approximately $252 million), which was assigned to the Electronics Systems reportable segment, and is not expected to be deductible for income tax purposes. The Company also recognized identifiable intangible assets of £43 million (approximately $53 million) in the aggregate, which consisted of £22 million (approximately $27 million) for technology and £21 million (approximately $26 million) for customer relationships. Identifiable intangible assets will be amortized over a weighted average useful life of 10 years.

Micreo Limited and Aerosim Acquisitions. On September 30, 2016, the Company acquired Micreo Limited (Micreo) and Flight Training Acquisitions LLC (Aerosim), in separate transactions, for an aggregate purchase price of approximately $86 million, which was financed with cash on hand. The final purchase prices are subject to customary adjustments for final working capital. The final purchase price allocations, which are expected to be completed in the second quarter of 2017, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position. Micreo specializes in solutions that utilize high-performance microwave, millimeter wave and photonic technology that complements the Company’s wide range of sensor products and is expected to strengthen the development of the Company’s future products in the higher Electronic Warfare (EW) radio frequency (RF) bandwidth. Micreo currently supports a variety of airborne, land and security programs in Australia. Aerosim provides innovative, portable and flexible pilot and maintenance technician training products and provides a flight school for prospective airline pilots. Aerosim’s commercial training capabilities are complementary to those offered by L3 Commercial Training Solutions. The aggregate goodwill recognized for these businesses was $61 million, which was assigned to the Electronic Systems reportable segment, of which $6 million is expected to be deductible for income tax purposes.

Advanced Technical Materials, Inc. (ATM) Acquisition. On January 22, 2016, the Company acquired the assets of ATM for a purchase price of $27 million, which was financed with cash on hand. The purchase price and purchase price allocation of ATM was finalized as of September 23, 2016, with no significant changes to preliminary amounts. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components. The goodwill recognized for this business was $20 million, which was assigned to the Communication Systems reportable segment, all of which is expected to be deductible for income tax purposes.

Net sales and income before income taxes for L3 MacDonald Humfrey, Micreo, Aerosim and ATM, included in L3’s consolidated statement of operations for the year ended December 31, 2016, are presented in the table below.

	Year Ended December 31, 2016
	(in millions)
Net sales	$	37
Income before income taxes	$	7

2015 Business Acquisitions

ForceX, Inc. Acquisition. On October 13, 2015, the Company acquired ForceX, Inc., renamed L3 ForceX, for a purchase price of $61 million, which was financed with cash on hand. The purchase price and purchase price allocation of L3 ForceX was finalized as of September 23, 2016, with no significant changes to preliminary amounts. L3 ForceX specializes in ISR mission management software and geospatial application technology programs, offering an array of advanced products, including cueing system software, hardware and video algorithms, and wide-area sensor integration solutions and software. L3 ForceX’s proprietary processing, exploitation and dissemination capabilities provide an integrated tactical operational picture, allowing users to make critical decisions in real time. L3 ForceX also supports several key DoD ISR initiatives and classified programs. L3 ForceX’s customer base includes the U.S. Air Force, U.S. Special Operations Command, the Naval Surface Warfare Center and a variety of DoD agencies. The goodwill recognized for this business was $53 million, which was assigned to the Electronic Systems reportable segment, of which $52 million is expected to be deductible for income tax purposes.

CTC Aviation Group Acquisition. On May 27, 2015, the Company acquired CTC Aviation Group, renamed L3 CTC Ltd. (L3 CTC), for a purchase price of £153 million (approximately $236 million), which was financed with cash on hand. The purchase price and purchase price allocation of L3 CTC was finalized as of June 24, 2016, with no significant changes to preliminary amounts. L3 CTC is a global airline pilot training and crew resourcing specialist, based in the United Kingdom, which offers customized and innovative solutions to major airlines and flight training customers globally. L3 CTC expands L3’s commercial aviation training business to encompass a growing portfolio of airline and third-party training company customers. The goodwill recognized for this business was £118 million (approximately $182 million), which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes.

MITEQ, Inc. Acquisition. On January 21, 2015, the Company acquired the assets of MITEQ, Inc. (Miteq) for a purchase price of $41 million, which was financed with cash on hand. The purchase price and purchase price allocation of Miteq was finalized as of September 25, 2015, with no significant changes to preliminary amounts. Miteq was combined with the Company’s Narda Microwave-East business and the new organization was re-named L3 Narda-Miteq. Miteq offers a broad product line of active and passive RF microwave components and low-power satellite communications (SATCOM) products for space and military applications that complement the existing Narda Microwave East product line. The combined L3 Narda-Miteq business provides products for the DoD, other U.S. Government agencies, prime contractors and commercial customers. The goodwill recognized for this business was $11 million, of which $4 million is expected to be deductible for income tax purposes. The goodwill was assigned to the Communication Systems reportable segment.

2014 Business Acquisition

Data Tactics Corporation Acquisition. On March 4, 2014, the Company acquired Data Tactics Corporation, renamed L3 Data Tactics, for a purchase price of $57 million, which was financed with cash on hand. The purchase price and purchase price allocation for L3 Data Tactics was finalized as of December 31, 2014, with no significant changes to preliminary amounts. L3 Data Tactics is a specialized provider of large-scale data analytics, cybersecurity and cloud computing solution services, primarily to the DoD. Based on the final purchase price allocation, the goodwill recognized for this business was $39 million, which was assigned to the former NSS reportable segment and is included in discontinued operations for the year ended December 31, 2015. On February 1, 2016, L3 Data Tactics was sold to CACI International Inc. in conjunction with the sale of the NSS business.

Business Acquisitions Completed After December 31, 2016

Implant Sciences Acquisition. On October 10, 2016, the Company entered into an asset purchase agreement (APA), to acquire certain assets of Implant, at which time Implant entered into Chapter 11 bankruptcy protection of the U.S. Bankruptcy Code. In December 2016, Implant received the U.S. Bankruptcy Court approval to consummate the APA. Implant’s ETD products have received approvals and certifications from several international regulatory agencies. Implant bolsters the Company’s leadership in efficient, scalable security solutions and greatly enhances its capabilities in the global aviation security and national security markets. On January 5, 2017, the Company completed the acquisition of the explosive trace detection (ETD) business of Implant Sciences Corporation (Implant), for a purchase price of $118 million, in addition to the assumption of specified liabilities, which was financed with cash on hand.

Discontinued Operations

As discussed in Note 1, on February 1, 2016, the Company completed the sale of its NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents the statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation and includes allocated interest expense for debt not directly attributable or related to L3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L3 consolidated net assets and (2) L3 consolidated total debt.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net sales	$	86		$	1,088		$	1,138
Cost of sales		(92	)		(1,040	)		(1,065	)
Gain related to business divestiture(1)		64			—			—
Goodwill impairment charges		—			(571	)		—
Operating income (loss) from discontinued operations		58			(523	)		73
Interest expense allocated to discontinued operations		—			(20	)		(20	)
Income (loss) from discontinued operations before income taxes		58			(543	)		53
Income tax benefit (expense)		5			21			(21	)
Income (loss) from discontinued operations, net of income taxes	$	63		$	(522	)	$	32

⁽¹⁾ The year ended December 31, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31, 2015
	(in millions)
Assets
Current assets	$	201
Property, plant and equipment, net		25
Goodwill(1)		390
Other assets		48
Total assets of discontinued operations	$	664
Liabilities
Accounts payable, trade	$	48
Other current liabilities		78
Current liabilities		126
Long-term liabilities		94
Total liabilities of discontinued operations	$	220

⁽¹⁾ The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L3 and NSS business sold.

Business Divestitures

2015 Business Divestitures

During the year ended December 31, 2015, the Company completed the sales of Marine Systems International (MSI), Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture			Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17	)	$	318	$	185
BSI divestiture		(4	)		26		7
Tinsley Product Line divestiture		(8	)		4		9
Klein divestiture		(2	)		10		8
Total	$	(31	)	$	358	$	209

MSI Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a sales price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. The Company recorded a pre-tax loss of $17 million ($6 million after income taxes) for the year ended December 31, 2015, related to the divestiture of MSI. The loss is comprised of: (1) $17 million for a non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI.

BSI Divestiture. On April 24, 2015, the Company divested its BSI business for a sales price of $26 million. BSI provided wireless technology and communications systems services for use in the field of sports television broadcasting, and was included in the Sensor Systems sector of the Electronic Systems segment. The Company recorded a pre-tax loss of $4 million ($6 million after income taxes) during the year ended December 31, 2015, related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sales price of $4 million. Tinsley provided optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes) for the year ended December 31, 2015.

Klein Divestiture. On December 31, 2015, the Company divested its Klein business for a sales price of $10 million. Klein provided side scan sonar equipment and waterside security and surveillance systems, and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes) for the year ended December 31, 2015.

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December 31,
	2015		2014
	(in millions)
Net sales	$	209	$	596
Income before income taxes	$	—	$	27

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the years ended December 31, 2016 and 2015 assuming that the business acquisitions completed during 2016 and 2015 had occurred on January 1, 2015 and January 1, 2014, respectively. The unaudited pro forma Statements of Operations data below includes adjustment for additional amortization expense related to acquired intangible assets, depreciation and estimated reduction to interest income assuming the 2016 and 2015 acquisitions had occurred on January 1, 2015 and January 1, 2014, respectively.

	Year Ended December 31,
	2016		2015
	(in millions, except per share data)
Pro forma net sales	$	10,655	$	10,700
Pro forma income from continuing operations attributable to L3	$	660	$	307
Pro forma net income (loss) attributable to L3	$	723	$	(215	)
Pro forma diluted earnings per share from continuing operations	$	8.38	$	3.74
Pro forma diluted earnings (loss) per share	$	9.18	$	(2.63	)

The unaudited pro forma results disclosed in the table above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed these acquisitions on the dates indicated above.

XML

Contracts in Process

12 Months Ended

Dec. 31, 2016

Contracts in Process [Abstract]

Contracts in Process

4. Contracts in Process

The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments principally relate to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government. In connection with contracts in process assumed by the Company in its business acquisitions, the underlying contractual customer relationships are separately recognized as identifiable intangible assets at the date of acquisition, and are discussed and presented in Note 6.

	December 31,
	2016			2015
	(in millions)
Unbilled contract receivables, gross	$	2,020		$	2,120
Unliquidated progress payments		(827	)		(892	)
Unbilled contract receivables, net		1,193			1,228
Inventoried contract costs, gross		1,065			975
Unliquidated progress payments		(203	)		(122	)
Inventoried contract costs, net		862			853
Total contracts in process	$	2,055		$	2,081

Unbilled Contract Receivables. Unbilled contract receivables represent accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as sales, but have not yet been billed to customers. Unbilled contract receivables arise from the cost-to-cost method of revenue recognition that is used to record sales on certain fixed-price contracts. Unbilled contract receivables from fixed-price type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. Unbilled contract receivables also arise from cost-plus type contracts, time-and-material type contracts and fixed-price service type contracts for revenue amounts that have not been billed by the end of the accounting period due to the timing of preparation of invoices to customers. The Company believes that approximately 95% of the unbilled contract receivables, net at December 31, 2016 will be billed and collected within one year.

Unliquidated Progress Payments. Unliquidated progress payments arise from fixed-price type contracts with the U.S. Government that contain progress payment clauses, and represent progress payments on invoices that have been collected in cash, but have not yet been liquidated. Progress payment invoices are billed to the customer as contract costs are incurred at an amount generally equal to 80% of incurred costs. Unliquidated progress payments are liquidated as deliveries or other contract performance milestones are completed, at an amount equal to a percentage of the contract sales price for the items delivered or work performed, based on a contractual liquidation rate. Therefore, unliquidated progress payments are a contra asset account, and are classified against unbilled contract receivables if revenue for the underlying contract is recorded using the cost-to-cost method, and against inventoried contract costs if revenue is recorded using the units-of-delivery method.

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their G&A, IRAD and B&P costs that are allowable and reimbursable indirect contract costs under U.S. Government procurement regulations on their U.S. Government contracts (revenue arrangements) as inventoried contract costs. G&A, IRAD and B&P costs are allocated to contracts for which the U.S. Government is the end customer and are charged to costs of sales when sales on the related contracts are recognized. The Company’s U.S. Government contractor businesses record the unallowable portion of their G&A, IRAD and B&P costs to expense as incurred, and do not include them in inventoried contract costs.

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	137		$	114		$	121
Contract costs incurred:
IRAD and B&P		308			284			270
Other G&A		839			822			804
Total		1,147			1,106			1,074
Amounts charged to cost of sales		(1,111	)		(1,083	)		(1,081	)
Amounts included in inventoried contract costs at end of the year	$	173		$	137		$	114

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the consolidated statements of operations.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Selling, general and administrative expenses	$	223	$	261	$	297
Research and development expenses		54		52		63
Total	$	277	$	313	$	360

XML

Inventories

12 Months Ended

Dec. 31, 2016

Inventories [Abstract]

Inventories

5. Inventories

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2016		2015
	(in millions)
Raw materials, components and sub-assemblies	$	165	$	164
Work in process		106		103
Finished goods		59		66
Total	$	330	$	333

XML

Goodwill and Identifiable Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Identifiable Intangible Assets [Abstract]

Goodwill and Identifiable Intangible Assets

6. Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. As part of the purchase price allocations for the Company’s business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, the Company does not recognize any intangible assets apart from goodwill for the assembled workforces of its business acquisitions. At December 31, 2016, the Company had approximately 38,000 employees, and the substantial majority of the sales generated by the Company’s businesses were from the productive labor efforts of its employees, as compared to selling manufactured products or right-to-use technology.

Generally, the largest intangible assets from the businesses that the Company acquires are the assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of the Company’s businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of its employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of its businesses, the Company’s ability to attract and retain employees who have U.S. Government security clearances, particularly those of top-secret and above, is critical to its success, and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for the Company’s acquired businesses. Furthermore, the Company’s U.S. Government contracts (revenue arrangements) generally permit other companies to use the Company’s patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill in accordance with the accounting standards for business combinations, the substantial majority of the intangible assets for the Company’s business acquisitions is recognized as goodwill. Additionally, the value assigned to goodwill for the Company’s business acquisitions also includes the value that the Company expects to realize from cost reduction measures that it implements for its acquired businesses.

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems			Aerospace Systems			Communication Systems			Consolidated Total
	(in millions)
Balance at December 31, 2014
Goodwill	$	3,816		$	1,730		$	1,024		$	6,570
Accumulated impairment losses		(43	)		—			(15	)		(58	)
		3,773			1,730			1,009			6,512
Business acquisitions(1)		233			—			11			244
Business divestitures(2)		(20	)		—			—			(20	)
Business retained from NSS divestiture		26			—			2			28
Goodwill impairment charges		(26	)		(338	)		(20	)		(384	)
Foreign currency translation adjustments(3)		(61	)		(39	)		1			(99	)
Balance at December 31, 2015
Goodwill		3,994			1,691			1,038			6,723
Accumulated impairment losses(4)		(69	)		(338	)		(35	)		(442	)
		3,925			1,353			1,003			6,281
Business acquisitions(1)		315			—			20			335
Foreign currency translation adjustments(3)		(63	)		7			—			(56	)
Balance at December 31, 2016
Goodwill		4,246			1,698			1,058			7,002
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	4,177		$	1,360		$	1,023		$	6,560

⁽¹⁾ For the year ended December 31, 2016, the net increase in goodwill for the Electronic Systems segment was due to the L3 MacDonald Humfrey, Aeroism and Micreo business acquisitions, as well as the final purchase price allocations for the L3 ForceX and L3 CTC business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition. For the year ended December 31, 2015, the net increase in goodwill for the Electronic Systems segment was due to the L3 CTC and L3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition.

⁽²⁾ For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽³⁾ During 2016, the decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, the Euro and the Australian dollar, offset by the weakening of the U.S. dollar against the Canadian dollar. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar. During 2015, the decrease in goodwil presented in the Electronic Systems segment was primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. The decrease in goodwill presented in the Aerospace Systems segment was due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽⁴⁾ The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

As discussed in Note 2, the carrying value of goodwill is tested for impairment annually as of November 30 and on an interim basis, using a two-step process, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Vertex Aerospace business as a result of the decline in their projected future cash flows. The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations and are summarized below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L3 Consolidated
	(in millions)
Vertex Aerospace reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Identifiable Intangible Assets. The most significant identifiable intangible assets that are separately recognized for the Company’s business acquisitions is customer contractual relationships. All of the Company’s customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from the customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2016								December 31, 2015
	Weighed Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)		(in millions)
Customer contractual relationships		15	$	409	$	269	$	140	$	370	$	246	$	124
Technology		11		191		102		89		156		91		65
Other		18		21		12		9		21		11		10
Total		14	$	621	$	383	$	238	$	547	$	348	$	199

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Amortization expense	$	35	$	35	$	39

Based on gross carrying amounts at December 31, 2016, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2017 through 2021 is presented in the table below.

	Year Ending December 31,
	2017		2018		2019		2020		2021
	(in millions)
Estimated amortization expense	$	39	$	35	$	32	$	28	$	24

XML

Other Current Liabilities and Other Liabilities

12 Months Ended

Dec. 31, 2016

Other Current Liabilities and Other Liabilities [Abstract]

Other Current Liabilities and Other Liabilities

7. Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2016		2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	70	$	75
Accrued product warranty costs		68		70
Accruals for pending and threatened litigation (see Note 18)(1)		51		6
Accrued interest		43		45
Deferred revenues		34		32
Product returns allowance(2)		5		20
Other		160		146
Total other current liabilities	$	431	$	394

⁽¹⁾ The year ended December 31, 2016, includes $14 million accrued in the third quarter of 2016 in connection with the EoTech matter.

⁽²⁾ In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech HWS products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015 associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $38 million. Accordingly, during 2016 the product returns allowance was increased by $18 million as a reduction to net sales. The product returns allowance, net of refund payments made to eligible owners, was $5 million at December 31, 2016. As of February 3, 2017, the Company had approved refunds at a cost of approximately $35 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material.

The table below presents the components of other liabilities.

	December 31,
	2016		2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	124	$	161
Deferred compensation		47		45
Accrued product warranty costs		41		35
Accrued workers’ compensation		30		38
Estimated contingent purchase price payable for acquired businesses (see Note 3)		29		—
Notes payable and capital lease obligations		13		10
Other		84		79
Total other liabilities	$	368	$	368

XML

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

8. Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2016			2015
	(in millions)
Land	$	54		$	60
Buildings and improvements		438			431
Machinery, equipment, furniture and fixtures		1,890			1,736
Leasehold improvements		344			343
Gross property, plant and equipment		2,726			2,570
Accumulated depreciation and amortization		(1,605	)		(1,473	)
Property, plant and equipment, net	$	1,121		$	1,097

XML

Debt

12 Months Ended

Dec. 31, 2016

Debt [Abstract]

Debt

9. Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Borrowings under Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		—			500
1.50% Senior Notes due 2017		—			350
5.20% Senior Notes due 2019		1,000			1,000
4.75% Senior Notes due 2020		800			800
4.95% Senior Notes due 2021		650			650
3.95% Senior Notes due 2024		350			350
3.85% Senior Notes due 2026		550			—
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(8	)		(8	)
Deferred debt issue costs		(17	)		(16	)
Carrying amount of long-term debt		3,325			3,626
Current portion of long-term debt		—			(499	)
Carrying amount of long-term debt, excluding current portion	$	3,325		$	3,127

⁽¹⁾ During 2016, L3's aggregate borrowings and repayments under the Credit Facility were $819 million. L3 had the full availability of its $1 billion Credit Facility at December 31, 2016 and December 31, 2015.

L3 Revolving Credit Facility

On October 31, 2016, L3 entered into a new five year unsecured revolving credit facility (Credit Facility), which replaced its amended and restated revolving credit agreement dated February 3, 2012. The Credit Facility provides for total aggregate borrowings of $1 billion and any outstanding borrowings under the Credit Facility are due and payable on October 31, 2021. Borrowings under the Credit Facility may consist of: (1) base rate loans, which shall bear interest at a rate equal to the sum of the applicable rate (as defined in the Credit Facility), and the “base rate” (as defined in the Credit Facility) and/or (2) eurodollar loans, which shall bear interest at a rate equal to the sum of the applicable rate plus the “Eurodollar rate” (as defined in the Credit Facility). The applicable rate for base rate loans under the Credit Facility ranges from 0.125% to 1.000%, and the applicable rate for eurodollar loans ranges from 1.125% to 2.000%, in each case based on the long-term debt rating of L3. In addition, the Credit Facility provides for uncommitted incremental revolving facilities and additional term loan facilities in an aggregate principal amount of up to $600 million.

L3 Senior Notes

The Senior Notes are unsecured senior obligations of L3. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance	Amount Issued		Discount(1)		Net Cash Proceeds			Effective Interest Rate			Redemption at Treasury Rate(2)(3)
		(in millions)
5.20% Senior Notes due October 15, 2019	October 2, 2009	$	1,000	$	4	$	987			5.25	%	30 bps
4.75% Senior Notes due July 15, 2020	May 21, 2010	$	800	$	3	$	790			4.79	%	25 bps
4.95% Senior Notes due February 15, 2021	February 7, 2011	$	650	$	4	$	639			5.02	%	25 bps
3.95% Senior Notes due May 28, 2024	May 28, 2014	$	650	$	3	$	641	(4)		4.02	%	20 bps
3.85% Senior Notes due December 15, 2026	December 5, 2016	$	550	$	3	$	542			3.91	%	25 bps

⁽¹⁾ Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾ The Senior Notes maturing in 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 and 2026 may be redeemed at any time prior to February 28, 2024 and September 15, 2026, respectively, (three months prior to their maturity) at the option of L3, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 and 2026 are redeemed at any time on or after February 28, 2024 and September 15, 2026, respectively, the redemption price would be equal to 100% of the principal amount.

⁽³⁾ Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L3 to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾ The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

Issuance of Senior Notes

On December 5, 2016, the Company issued $550 million aggregate principal amount of 3.85% Senior Notes that mature on December 15, 2026 (the 2026 Notes). The 2026 Notes were issued at a bond discount of $3 million. The net cash proceeds of $542 million from the offering plus cash on hand were used primarily to: (1) replenish the amount of cash used, and the amount of revolving credit borrowings drawn, to repay $200 million aggregate principal amount of its 3.95% Senior Notes which matured on November 15, 2016 (the 2016 Notes), and (2) redeem all of its outstanding 1.50% Senior Notes due May 28, 2017 (the 2017 Notes), which had an aggregate principal amount of $350 million.

Repurchases, Redemptions and Maturities of Senior Notes

The repurchases, redemptions and maturities of senior notes are presented in the table below.

Note	Settlement Type	Date Settled	Aggregate Amount		Debt Retirement Charge		Cash Payments
			(in millions)
1.50% Senior Notes due 2017(1)	Redemption	December 30, 2016	$	350	$	2	$	351
3.95% Senior Notes due 2016	Maturity	November 15, 2016	$	200	$	—	$	200
3.95% Senior Notes due 2016(2)	Redemption	May 20, 2016	$	300	$	5	$	305
3.95% Senior Notes due 2024	Tender Offer	December 22, 2015	$	300	$	1	$	297
CODES due 2035(3)	Redemption	June 20, 2014	$	689	$	—	$	935

⁽¹⁾ The 1.50% Senior Notes due 2017 were redeemed at a price equal to 100.323%of the principal amount thereof,plus accrued and unpaid interest to the redemption date. Interest ceased to accrue on and after the redemption date.

⁽²⁾ The 3.95% Senior Notes due 2016 were redeemed at a price equal to 101.475% of the principal amount thereof, plus accrued and unpaid interest. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive payment of the Redemption Price and accrued interest.

⁽³⁾ In 2005, L3 sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, L3 reporchased approximately $11 million of the CODES. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L3 settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014.

Guarantees

The borrowings under the Credit Facility are fully and unconditionally guaranteed by L3 and by substantially all of the material 100% owned domestic subsidiaries of L3 on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L3’s material 100% owned domestic subsidiaries that guarantee any of its other indebtedness.

Subordination

The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

Covenants

Financial and other restrictive covenants. The Credit Facility contains financial and other restrictive covenants that limit, among other things, the ability of the subsidiaries of L3 to borrow additional funds, and the ability of L3 and its subsidiaries to incur liens, make investments, merge or consolidate or dispose of assets. The Company’s Credit Facility contains covenants that require that: (1) the Company’s consolidated interest coverage ratio be greater than or equal to 3.0 to 1.0, (2) the Company’s consolidated leverage ratio be less than or equal to 3.75 to 1.0, provided that the foregoing consolidated leverage ratio shall be increased to 4.0 to 1.0 as of the end of each of the four fiscal quarters immediately following a material acquisition (as defined in the Credit Facility). Calculations of the financial covenants are to exclude, among other things, certain items such as impairment losses on goodwill or other intangible assets, non-cash gains or losses from discontinued operations, gains or losses in connection with asset dispositions, and gains or losses with respect to judgments or settlements in connection with litigation matters. At December 31, 2016, the Company was in compliance with its financial and other restrictive covenants.

The indentures governing the Senior Notes (Senior Indentures) contain covenants customary for investment grade notes, including covenants that restrict the ability of L3 and its 100% owned domestic subsidiaries to create, incur, assume or permit to exist any lien, except permitted liens (as defined in the Senior Indentures) and restrict the ability of L3 and its subsidiaries to enter into certain sale and leaseback transactions (as defined in the Senior Indentures).

Cross default provisions. The Credit Facility contains cross default provisions that are triggered when a payment default occurs or certain other defaults occur that would allow the acceleration of indebtedness, swap contracts or guarantees of L3 or its subsidiaries, so long as the aggregate amount of such indebtedness, swap contracts or guarantees is at least $75 million and such defaults (other than payment defaults and defaults that have resulted in acceleration) have not been cured within 10 days. The Senior Notes indenture contains a cross acceleration provision that is triggered when a default or acceleration occurs under any indenture or instrument of L3 or its subsidiaries or the payment of which is guaranteed by L3 or its subsidiaries in an aggregate amount of at least $100 million.

XML

Accumulated Other Comprehensive (Loss) Income (AOCI)

12 Months Ended

Dec. 31, 2016

Accumulated Other Comprehensive (Loss) Income (AOCI) [Abstract]

Accumulated Other Comprehensive (Loss) Income (AOCI)

10. Accumulated Other Comprehensive (Loss) Income (AOCI)

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency translation			Unrealized gains (losses) on hedging instruments			Unrecognized (losses) gains and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2013	$	142		$	1		$	(253	)	$	(110	)
Other comprehensive loss before reclassifications, net of tax		(123	)		(13	)		(354	)		(490	)
Amounts reclassified from AOCI, net of tax		—			7			9			16
Net current period other comprehensive (loss)		(123	)		(6	)		(345	)		(474	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive (loss) income before reclassifications, net of tax		(161	)		(15	)		81			(95	)
Amounts reclassified from AOCI, net of tax		41			12			52			105
Net current period other comprehensive (loss) income		(120	)		(3	)		133			10
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(77	)		3			(119	)		(193	)
Amounts reclassified from AOCI, net of tax		—			11			30			41
Net current period other comprehensive (loss) income		(77	)		14			(89	)		(152	)
Balance at December 31, 2016	$	(178	)	$	6		$	(554	)	$	(726	)

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)									Affected Line Item in the Audited Consolidated Statements of Operations
	Year Ended December 31,
Details About AOCI Components	2016			2015			2014
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	—		$	(41	)	$	—		Loss related to business divestitures
		—			(41	)		—		Income from continuing operations before income taxes
	$	—		$	(41	)	$	—		Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	(2	)	$	—		Loss related to business divestitures
Other		(13	)		(16	)		(8	)	Cost of sales-products
		(13	)		(18	)		(8	)	Income from continuing operations before income taxes
		2			6			1		Provision for income taxes
	$	(11	)	$	(12	)	$	(7	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	(14	)	$	—		Loss related to business divestitures
Net loss		(48	)		(67	)		(15	)	(b)
		(48	)		(81	)		(15	)	Income from continuing operations before income taxes
		18			29			6		Provision for income taxes
	$	(30	)	$	(52	)	$	(9	)	Income from continuing operations
Total reclassification for the period	$	(41	)	$	(105	)	$	(16	)	Income from continuing operations

^(a) Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b) Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

XML

Equity

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Equity

11. Equity

On December 4, 2014, L3’s Board of Directors approved a share repurchase program that authorizes L3 to repurchase up to $1.5 billion of its common stock through June 30, 2017. Repurchases of L3’s common stock are made from time to time at management’s discretion in accordance with applicable U.S. Federal securities laws. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including, but not limited to, the Company’s financial position, earnings, legal requirements, other investment opportunities (including acquisitions) and market conditions. L3 repurchased 3.0 million shares of its common stock at an average price of $123.95 per share for an aggregate amount of $373 million from January 1, 2016 through December 31, 2016. All share repurchases of L3’s common stock have been recorded as treasury shares. At December 31, 2016, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $433 million. From January 1, 2017 through February 17, 2017, L3 did not repurchase shares of its common stock.

On February 13, 2017, L3’s Board of Directors declared a quarterly cash dividend of $0.75 per share, payable on March 15, 2017 to shareholders of record at the close of business on March 1, 2017. During the year ended December 31, 2016, the Company paid $220 million of cash dividends. Payments of previously accrued dividends for employee held stock awards were offset by accrued dividends to be paid in future periods.

XML

Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

12. Fair Value Measurements

L3 applies the accounting standards for fair value measurements to all of the Company’s assets and liabilities that are measured and recorded at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. The standards establish a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs.

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2016						2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	104	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		12		—		—		2		—
Total assets	$	104	$	12	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	6	$	—	$	—	$	16	$	—
Contingent consideration(4)		—		—		29		—		—		—
Total liabilities	$	—	$	6	$	29	$	—	$	16	$	—

⁽¹⁾ Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾ Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾ Level 3 is based on pricing inputs that are not observable and not corroborated by market data.

⁽⁴⁾ The contingent consideration liability represents the future potential earn-out payments relating to the L3 MacDonald Humfrey acquisition. The fair value of the contingent consideration liability is based on a Monte Carlo Simulation of the aggregate revenue of L3 MacDonald Humfrey for the three-year period ending December 31, 2019. The significant unobservable inputs used in calculating the fair value of the contingent consideration include: (i) projected revenues of the L3 MacDonald Humfrey acquired business, (ii) company specific risk premium, which is a component of the discount rate applied to the revenue projections, (iii) and volatility. The fair value of the contingent consideration for potential earn-out payments is reassessed quarterly, including an analysis of the significant inputs used in the evaluation, as well as the accretion of the present value discount. Changes are reflected within cost of sales in the consolidated statements of operations.

XML

Financial Instruments

12 Months Ended

Dec. 31, 2016

Financial Instruments [Abstract]

Financial Instruments

13. Financial Instruments

At December 31, 2016 and 2015, the Company’s financial instruments consisted primarily of cash and cash equivalents, billed receivables, trade accounts payable, Senior Notes, and foreign currency forward contracts. The carrying amounts of cash and cash equivalents, billed receivables and trade accounts payable are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2016				December 31, 2015
	Carrying Amount		Estimated Fair Value		Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,325	$	3,526	$	3,626		$	3,754
Foreign currency forward contracts(2)	$	6	$	6	$	(14	)	$	(14	)

⁽¹⁾ The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾ The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

XML

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2016

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

14. Derivative Financial Instruments

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2016.

Currency	Notional Amount
	(in millions)
U.S. dollar	$	117
Euro		109
Canadian dollar		96
British pound		28
Other		8
Total	$	358

At December 31, 2016, the Company’s foreign currency forward contracts had maturities through 2021.

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2016								December 31, 2015
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1)	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1

⁽¹⁾ See Note 12 for a description of the fair value hierarchy related to the Company's foreign currency forward contracts.

The effects from foreign currency forward contracts on the consolidated statements of operations were a pre-tax loss of $13 million for the year ended December 31, 2016, a pre-tax loss of $18 million for the year ended December 31, 2015, and a pre-tax loss of $8 million for the year ended December 31, 2014. At December 31, 2016, the estimated net amount of existing gains that are expected to be reclassified into income within the next 12 months is $5 million.

XML

L3's Earnings Per Share

12 Months Ended

Dec. 31, 2016

L3's Earnings Per Share [Abstract]

L3's Earnings Per Share

15. L3’s Earnings Per Share

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	724		$	(225	)	$	677
Net income from continuing operations attributable to noncontrolling interests		(14	)		(15	)		(13	)
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) attributable to L3’s common shareholders:
Continuing operations	$	647		$	282		$	632
Discontinued operations, net of income tax		63			(522	)		32
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) per share attributable to L3’s common shareholders:
Basic:
Weighted average common shares outstanding		77.4			80.7			85.4
Basic earnings (loss) per share:
Continuing operations	$	8.36		$	3.49		$	7.40
Discontinued operations, net of income tax		0.81			(6.46	)		0.38
Net income (loss)	$	9.17		$	(2.97	)	$	7.78
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.4			80.7			85.4
Assumed exercise of stock options		2.6			2.4			3.0
Unvested restricted stock awards		1.0			1.3			1.6
Employee stock purchase plan contributions		0.1			0.1			—
Performance unit awards		0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.4	)		(2.7	)		(3.1	)
Assumed conversion of the CODES(1)		—			—			0.8
Common and potential common shares		78.8			81.9			87.8
Diluted earnings (loss) per share:
Continuing operations	$	8.21		$	3.44		$	7.20
Discontinued operations, net of income tax		0.80			(6.37	)		0.36
Net income (loss)	$	9.01		$	(2.93	)	$	7.56

⁽¹⁾ The CODES were retired on June 20, 2014 and were dilutive for the year ended December 31, 2014 as the average market price of L3’s common stock during the period that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L3’s common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71.

The computation of diluted EPS excluded shares for stock options and employee stock purchase plan contributions of 0.4 million, 0.6 million and 0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, as they were anti-dilutive.

XML

Income Taxes

12 Months Ended

Dec. 31, 2016

Income Taxes [Abstract]

Income Taxes

16. Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Domestic	$	654	$	192	$	707
Foreign		196		130		165
Income from continuing operations before income taxes	$	850	$	322	$	872

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2016		2015			2014
	(in millions)
Current income tax provision:
Federal	$	88	$	60		$	78
State and local		10		5			1
Foreign		48		26			35
Subtotal		146		91			114
Deferred income tax provision/(benefit):
Federal		37		(67	)		101
State and local		6		(1	)		11
Foreign		—		2			1
Subtotal		43		(66	)		113
Total provision for income taxes	$	189	$	25		$	227

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.3			2.0			2.1
Foreign income taxes		(2.9	)		(14.2	)		(3.6	)
Manufacturing benefits		(2.2	)		(3.7	)		(1.7	)
Research and experimentation and other tax credits		(4.4	)		(12.9	)		(4.3	)
Resolution of tax contingencies		(2.9	)		(2.8	)		(1.0	)
Tax deductible dividends		(0.9	)		(2.3	)		(0.8	)
Equity compensation - excess income tax benefits		(2.0	)		—			—
Goodwill impairment		—			6.6			—
Other, net		0.2			0.1			0.3
Effective income tax rate on continuing operations		22.2	%		7.8	%(1)		26.0	%

⁽¹⁾ In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Deferred tax assets:
Inventoried costs	$	63		$	56
Compensation and benefits		152			147
Pension and postretirement benefits		415			354
Loss carryforwards		18			12
Tax credit carryforwards		6			6
Other		89			79
Deferred tax assets		743			654
Less: valuation allowance		(12	)		(9	)
Deferred tax assets, net of valuation allowance		731			645
Deferred tax liabilities:
Goodwill and other intangible assets	$	(752	)	$	(675	)
Income recognition on contracts in process		(63	)		(36	)
Property, plant and equipment		(96	)		(94	)
Other		(54	)		(56	)
Deferred tax liabilities		(965	)		(861	)
Total deferred tax liabilities, net of valuation allowance	$	(234	)	$	(216	)

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Non-current deferred tax assets	$	2		$	3
Non-current deferred tax liabilities		(236	)		(219	)
Total net deferred tax liabilities	$	(234	)	$	(216	)

Non-current deferred tax assets are presented in other assets on the consolidated balance sheets.

The following table presents the Company’s loss and tax credit carryforwards at December 31, 2016 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2016
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross		Tax Effected		Expiration Periods
	(in millions)				(in millions)
Capital loss carryforwards	$	6	$	2	$	6	$	2	2017-2021
Federal net operating loss carryforwards		33		11		5		2	2026-2035
Foreign net operating loss carryforwards		14		3		3		1	Indefinite
State net operating loss carryforwards		136		2		47		1	2017-2036
Total loss carryforwards			$	18			$	6
State tax credit carryforwards		7		5		7		4	2017-2031
Foreign tax credit carryforwards		1		1		—		—	Indefinite
Total tax credit carryforwards			$	6			$	4

At December 31, 2016, the total amount of unrecognized tax benefits was $111 million, $92 million of which would reduce the effective income tax rate, if recognized. A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2016			2015			2014
	(in millions)
Balance at January 1	$	140		$	169		$	155
Additions for tax positions related to the current year		16			14			20
Additions for tax positions related to prior years		2			2			12
Reductions for tax positions related to prior years		(39	)		(37	)		(11	)
Reductions for tax positions related to settlements with taxing authorities		(1	)		(1	)		(1	)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7	)		(7	)		(6	)
Balance at December 31	$	111		$	140		$	169

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, which is the Company’s primary tax jurisdiction, and various state and foreign jurisdictions. At December 31, 2016, the statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2015 are open. The U.S. Internal Revenue Service (IRS) commenced audits of the Company’s U.S. Federal income tax returns for the years ended 2012 through 2014. The Company cannot predict the outcome of the audits at this time. At December 31, 2016, the Company anticipates that unrecognized tax benefits will decrease by approximately $9 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount of the decrease over the next 12 months could vary significantly depending on the ultimate timing and nature of any settlements.

During the years ended December 31, 2016, 2015 and 2014, the Company effectively settled various Federal, state and local and foreign audits. As a result of these settlements, the Company reversed previously accrued income tax expense of $25 million, $9 million and $8 million, including potential interest and penalties.

At December 31, 2016 and 2015, current and non-current income taxes payable include accrued potential interest of $11 million ($7 million after income taxes) and $18 million ($11 million after income taxes), respectively, and potential penalties of $8 million and $9 million, respectively. With respect to the interest related items, the Company’s income tax expense included a benefit of $4 million for the year ended December 31, 2016 and an expense of $2 million for the year ended December 31, 2015.

Prior to 2015, the Company recorded a deferred tax liability related to the repatriation of earnings from certain subsidiaries. During 2015, the Company completed a legal restructuring of its significant foreign operations, and the earnings of these subsidiaries are now considered reinvested indefinitely. As a result, the Company recognized a $17 million deferred tax benefit in the year ended December 31, 2015. At December 31, 2016, the Company had not provided deferred U.S. income taxes and foreign withholding taxes for $708 million of undistributed earnings by its non-U.S. subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of additional taxes that may be payable on distribution is not practicable.

XML

Stock-Based Compensation

12 Months Ended

Dec. 31, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation

17. Stock-Based Compensation

Stock-Based Compensation Plans. The Company has adopted stock-based compensation plans in order to provide incentives to directors, officers, employees and other individuals providing services to or on behalf of the Company and its subsidiaries. The Company believes that its stock-based compensation awards encourage high levels of performance by individuals who contribute to the success of the Company and enable the Company to attract, retain and reward talented and experienced individuals. This is accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Company and/or by providing eligible individuals with additional incentives to join or remain with the Company. The stock-based compensation plans serve to better align the interests of management and its employees with those of the Company’s shareholders. During the year ended December 31, 2016, the Company awarded stock-based compensation under its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP). Awards under the 2008 LTPP may be granted to any officer or employee of the Company or any of its subsidiaries, non-employee directors, or to any other individual who provides services to or on behalf of the Company or any of its subsidiaries. To date, awards under the 2008 LTPP have been in the form of L3’s restricted stock units, performance units and options to purchase L3’s common stock.

On May 3, 2016, the stockholders of L3 approved an amendment to its 2008 LTPP to increase the number of shares authorized for issuance by 6.8 million shares to approximately 26.0 million shares. Each share of L3’s common stock issued under a full value award (that is, awards other than stock options and stock appreciation rights) granted on or after February 23, 2016 is counted as 4.26 shares for purposes of this share limit. Each share issued under full value awards granted between February 26, 2013 and February 22, 2016 is counted as 3.69 shares for purposes of the share limit. At December 31, 2016, 9.2 million shares of L3’s common stock remained available for future awards under the 2008 LTPP.

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Stock options	$	10		$	9		$	9
Restricted stock units		35			38			40
Performance units		4			2			3
Total before income taxes		49			49			52
Income taxes		(18	)		(18	)		(20	)
Total after income taxes		31			31			32
Less: Stock-based compensation recorded in discontinued operations, net of income taxes		1	(1)		1			1
Stock-based compensation recorded in continuing operations, net of income taxes	$	30		$	30		$	31

⁽¹⁾ Amount relates to the net impact of share based payment award modification in connection with the sale of NSS, which is further discussed below.

Stock Options. The exercise price of stock options granted under the 2008 LTPP may not be less than the fair market value of L3’s common stock on the date of grant. Options expire 10 years after the date of grant and vest ratably over a three year period on the annual anniversary of the date of grant. The options granted to the Company’s Chairman and Chief Executive Officer are also subject to performance-based vesting conditions. All unvested options are subject to forfeiture upon termination of employment (subject to customary exceptions for death or disability). All of the stock option awards issued under the 2008 LTPP are non-qualified stock options for U.S. income tax regulations. The table below presents a summary of the Company’s stock option activity at December 31, 2016 and changes during the year then ended.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)					(in years)		(in millions)
Number of shares under option:
Outstanding at January 1, 2016		2,931.5		$	92.59		6.0	$	84
Options granted		617.6			116.68
Options exercised		(647.5	)		82.78
Options forfeited		(54.1	)		118.82
Outstanding at December 31, 2016		2,847.5		$	99.54		6.1	$	150
Vested and expected to vest at December 31, 2016(1)		2,835.7		$	99.46		6.1	$	149
Exercisable at December 31, 2016		1,802.0		$	87.77		4.9	$	116

⁽¹⁾ Represents outstanding options reduced by expected forfeitures for options not fully vested.

The weighted average grant date fair value of the stock options awarded during 2016, 2015 and 2014 was $15.90, $19.76 and $20.02, respectively. The aggregate intrinsic value, disclosed in the table above, represents the difference between L3’s closing stock price on the last trading day for the period, and the exercise price, multiplied by the number of in-the-money stock options.

The total intrinsic value of stock options exercised, based on the difference between the L3’s stock price at the time of exercise and the related exercise price, was $34 million, $35 million and $43 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, unrecognized compensation costs related to stock options were $9 million ($6 million after income taxes), which are expected to be recognized over a weighted average remaining period of 1.4 years.

The actual income tax benefit realized related to compensation deductions arising from the exercise of stock options by the Company’s employees totaled $12 million, $13 million and $14 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Stock Option Fair Value Estimation Assumptions. The Company estimates the fair value of its stock options at the date of grant using the Black-Scholes option-pricing valuation model. The Company’s valuation model is affected by L3’s stock price as well as weighted average assumptions for a number of subjective variables described below.

• Expected Holding Period. The expected holding period represents the period of time that granted stock options are expected to be outstanding until they are exercised. The Company uses historical stock option exercise data to estimate the expected holding period.

• Expected Volatility. Expected volatility is based on L3’s historical share price volatility matching the expected holding period.

• Expected Dividend Yield. Expected dividend yield is based on L3’s anticipated dividend payments and historical pattern of dividend increases over the expected holding period.

• Risk-Free Interest Rates. The risk-free interest rates for stock options are based on U.S. Treasuries for a maturity period matching the expected holding period.

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2016 Grants			2015 Grants			2014 Grants
Expected holding period (in years)		5.0			5.0			5.5
Expected volatility		21.3	%		21.4	%		24.4	%
Expected dividend yield		2.8	%		2.4	%		2.7	%
Risk-free interest rate		1.1	%		1.5	%		1.7	%

Restricted Stock Units. The Company awards restricted stock units that automatically convert into shares of L3’s common stock upon vesting (in the case of awards granted to employees) or upon the date on which the recipient ceases to be a director (in the case of awards granted to directors). Restricted stock units typically vest three years after the grant date for employees and one year after the grant date for non-employee directors, or if earlier, on the date of the first annual stockholders meeting held after the grant date. The restricted stock units automatically convert into shares of L3’s common stock upon vesting. The weighted average grant date fair value of the restricted stock units awarded during 2016, 2015 and 2014 was $116.72, $128.59 and $113.58, respectively. The grant date fair value of the restricted stock unit awards is based on L3’s closing stock price at the date of grant, and is generally recognized as compensation expense on a straight-line basis over the vesting period. However, for employees who attain retirement eligibility status prior to the end of the three year cliff vesting period, and who have provided at least one year of service after the date of grant, compensation expense is recognized over the shorter period from the date of grant to the retirement eligibility date. Retirement eligible employees are those employees that have attained the age of 65 and have completed at least five years of service (which service must be continuous through the date of termination except for a single break in service that does not exceed one year in length).

The table below presents a summary of the Company’s nonvested restricted stock unit awards at December 31, 2016 and changes during the year then ended.

	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested balance at January 1, 2016		1,171.9		$	102.91
Granted		397.6			116.72
Vested		(478.3	)		76.83
Forfeited		(113.3	)		111.89
Nonvested balance at December 31, 2016		977.9		$	120.24

At December 31, 2016, total unrecognized compensation costs related to nonvested restricted stock unit awards were $38 million ($24 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.2 years. The total fair value of restricted stock unit awards vested during the years ended December 31, 2016, 2015 and 2014 as of their vesting dates was $57 million, $82 million and $66 million, respectively.

Performance Units. The Company grants performance unit awards, with each unit having a value at the time of grant equal to a share of L3’s common stock. The number of units ultimately earned can range from zero to 200% of the original award based upon the level of performance achieved by the Company over the associated performance period in relation to pre-determined performance goals. Units earned under the program are converted into shares of L3’s common stock, or are paid in cash based on the closing price of L3’s common stock at the end of the performance period, as determined at the time of grant by the Compensation Committee of the Board of Directors.

During the years ended December 31, 2016, 2015, and 2014, the Company granted performance unit awards with a weighted average grant date fair value per unit of $116.20, $129.03 and $113.67, respectively. All the awards granted in 2016, 2015, and 2014 have performance conditions based on L3’s diluted EPS. The performance periods for the awards began on January 1 of the applicable grant year and end on December 31 of the year corresponding to a three-year performance period. Units earned under the awards are convertible into shares of L3’s common stock. At December 31, 2016, total unrecognized compensation costs related to the awards were $6 million ($4 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.6 years.

The table below presents a summary of the Company’s performance unit awards based on expected performance at December 31, 2016 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of Units			Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2016		39.6		$	121.27
Granted		51.9			116.20
Increase due to expected performance		35.6			127.14
Vested		—			—
Forfeited		(2.4	)		121.72
Outstanding at December 31, 2016		124.7		$	120.83

The performance period for awards granted in 2014 ended on December 31, 2016. Based on L3’s cumulative diluted EPS during the performance period, no performance units were earned by the participants on December 31, 2016.

Employee Stock Purchase Plan. Effective July 1, 2009, the Company adopted the 2009 Employee Stock Purchase Plan (2009 ESPP). Under the 2009 ESPP, eligible employees are offered options to purchase shares of L3’s common stock at the end of each six-month offering period at 95% of fair market value based on the average of the highest and lowest sales prices for the stock on the purchase date. Eligible employees generally include all employees of the Company and each subsidiary or affiliate of the Company that has been designated to participate in the 2009 ESPP. Offering periods begin on the first trading day in January and July of each calendar year and end on the last trading day in June and December of each calendar year. Share purchases are funded through payroll deductions of up to 10% of an employee’s eligible compensation for each payroll period, or $21,250 each calendar year.

At December 31, 2016, 3.7 million shares were available for future issuance under the 2009 ESPP (i.e., excluding the effect of shares issued in January 2017 as described below). In July 2016, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $137.87 per share, which covered employee contributions for the six months ended June 30, 2016. In January 2017, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $144.73 per share, which covered employee contributions for the six months ended December 31, 2016. The 5% discount is not recognized as compensation expense in accordance with the accounting standard for share-based compensation expense.

Award Modifications. As disclosed in Note 3, the Company completed the sale of NSS on February 1, 2016. In connection with the divestiture of NSS, the Company modified unvested restricted stock unit and stock option awards held by approximately 300 NSS employees by converting each award into a right to receive a cash payment. The cash payment was based on the original number of units awarded, the closing price of the Company’s common stock on the closing date of the sale, and the portion of the three-year vesting period for the award that had been satisfied through the closing date, and additionally in the case of stock options, the exercise price of the options. As a result of the award modification, the Company reversed $4 million of previously recorded stock compensation expense relating to the original awards as a reduction to shareholders equity and recorded $5 million of expense based on the cash payments made to NSS employees in connection with the modified awards, each of which is included in the Company’s results from discontinued operations.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

18. Commitments and Contingencies

Non-Cancelable Operating Leases

The Company leases certain facilities and equipment under agreements expiring at various dates through 2033. Certain leases contain renewal options or escalation clauses providing for increased rental payments based upon maintenance, utility and tax increases. No lease agreement imposes a restriction on the Company’s ability to pay dividends, engage in debt or equity financing transactions, or enter into further lease agreements.

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2016.

	Real Estate		Equipment		Total
	(in millions)
2017	$	94	$	5	$	99
2018		81		3		84
2019		63		2		65
2020		90		—		90
2021		45		—		45
Thereafter		213		—		213
Total minimum payments required		586		10		596
Less: Sublease rentals under non-cancelable leases		10		—		10
Net minimum payments required	$	576	$	10	$	586

Rent expense was $101 million for 2016, $104 million for 2015, and $117 million for 2014. Sublease rental income was $2 million for 2016, and $2 million for 2015 and $1 million for 2014, respectively.

Letters of Credit

The Company enters into standby letters of credit with financial institutions covering performance and financial guarantees pursuant to contractual arrangements with certain customers. The Company had total outstanding letters of credit aggregating to $402 million and $425 million at December 31, 2016 and 2015, respectively. The Company had the full availability of its $1 billion Credit Facility at December 31, 2016. These letters of credit may be drawn upon in the event of the Company’s nonperformance.

Guarantees

The Company, from time to time, enters into contractual guarantees that arise in connection with its business acquisitions, dispositions, and other contractual arrangements in the normal course of business.

In connection with the spin-off of Engility in 2012, L3 entered into a Distribution Agreement and several other agreements that govern certain aspects of L3’s relationship with Engility, including employee matters, tax matters, transition services, and the future supplier/customer relationship between L3 and Engility. These agreements generally provide cross-indemnities that, except as otherwise provided, are principally designed to place the financial responsibility for the obligations and liabilities of each entity with that respective entity. Engility has joint and several liability with L3 to the U.S. Internal Revenue Service (IRS) for the consolidated U.S. Federal income taxes of L3’s consolidated group for taxable periods in which Engility was a part of that group. However, the Tax Matters Agreement specifies the portion of this tax liability for which L3 and Engility will each bear responsibility, and L3 and Engility have agreed to indemnify each other against any amounts for which the other is not responsible. The Tax Matters Agreement also allocates responsibility between L3 and Engility for other taxes, including special rules for allocating tax liabilities in the event that the spin-off is determined not to be tax-free. Though valid as between the parties, the Tax Matters Agreement is not binding on the IRS.

The Company has three existing real estate lease agreements, which include residual guarantee amounts, expiring on August 31, 2020 and are accounted for as operating leases. On or before the lease expiration date, the Company can exercise options under the lease agreements to renew the leases, purchase the properties for $45 million, or sell the properties on behalf of the lessor (the “Sale Option”). If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $39 million for the properties, on or before the lease expiration date. In addition, at the time the properties are sold, the Company must pay the lessor a supplemental rent payment equal to the gross sales proceeds in excess of the residual guarantee, provided that such amount shall not exceed $6 million. For these real estate lease agreements, if the gross sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent payment, the Company is required to pay a supplemental rent payment to the extent the reduction in the fair value of the properties is demonstrated by an independent appraisal to have been caused by the Company’s failure to properly maintain the properties. The aggregate residual guarantee amounts equal $39 million and are included in the future minimum payments under non-cancelable real estate operating lease payments relating to the expiration dates of such leases.

The Company has a contract to provide and operate a full-service training facility for the U.S. Air Force (USAF), including simulator systems adjacent to a USAF base in Oklahoma. The Company acted as the construction agent on behalf of the third-party owner-lessors for procurement and construction for the simulator systems, which were completed and delivered in August 2002. The Company, as lessee, entered into operating lease agreements for a term of 15 years for the simulator systems with the owner-lessors. At the end of the lease term, the Company may elect to purchase the simulator systems at fair market value, which can be no less than $7 million and no greater than $21 million. If the Company does not elect to purchase the simulator systems on the date of expiration (during the first quarter of 2018), the Company must pay to the lessor, as additional rent, $7 million and return the simulator systems to the lessors.

Environmental Matters

Management continually assesses the Company’s obligations with respect to applicable environmental protection laws, including those obligations assumed in connection with certain business acquisitions. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company’s consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with the U.S. Government, foreign government customers and state and local governments. U.S. Government contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. The Company is currently cooperating with the U.S. Government on several investigations from which civil, criminal or administrative proceedings have or could result and give rise to fines, penalties, compensatory and treble damages, restitution and/or forfeitures, including investigations into the pricing of certain contracts entered into by the Communication Systems segment. The Company does not currently anticipate that any of these investigations will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows. However, under U.S. Government regulations, an indictment of the Company by a federal grand jury, or an administrative finding against the Company as to its present responsibility to be a U.S. Government contractor or subcontractor, could result in the Company being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges. A conviction, or an administrative finding against the Company that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term. In addition, all of the Company’s U.S. Government contracts: (1) are subject to audit and various pricing and cost controls, (2) include standard provisions for termination for the convenience of the U.S. Government or for default and (3) are subject to cancellation if funds for contracts become unavailable. Foreign government contracts generally include comparable provisions relating to terminations for convenience or default, as well as other procurement clauses relevant to the foreign government.

Litigation Matters

The Company is also subject to litigation, proceedings, claims or assessments and various contingent liabilities incidental to its businesses, including those specified below. Furthermore, in connection with certain business acquisitions, the Company has assumed some or all claims against, and liabilities of, such acquired businesses, including both asserted and unasserted claims and liabilities.

In accordance with the accounting standard for contingencies, the Company records a liability when management believes that it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of the loss. Generally, the loss is recorded at the amount the Company expects to resolve the liability. The estimated amounts of liabilities recorded for pending and threatened litigation are disclosed in Note 7. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At December 31, 2016, the Company recorded approximately $34.5 million of receivables for recoveries from insurance contracts or third parties in connection with the amount of liabilities recorded for pending and threatened litigation. Legal defense costs are expensed as incurred. The Company believes it has recorded adequate provisions for its litigation matters. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While it is reasonably possible that an unfavorable outcome may occur in one or more of the following matters, unless otherwise stated below, the Company believes that it is not probable that a loss has been incurred in any of these matters. With respect to the litigation matters below for which it is reasonably possible that an unfavorable outcome may occur, an estimate of loss or range of loss is disclosed when such amount or amounts can be reasonably estimated. Although the Company believes that it has valid defenses with respect to legal matters and investigations pending against it, the results of litigation can be difficult to predict, particularly those involving jury trials. Therefore, it is possible that one or more of the following or other contingencies could have a material impact on the financial position, results of operations or cash flows of the Company in future periods.

EoTech Class Actions. During 2015 and 2016, five putative class action complaints against the Company were filed in the United States District Court for the Western District of Missouri alleging that the Company’s EoTech business unit knowingly sold defective holographic weapons sights (see Andrew Tyler Foster, et al., v. L-3 Communications EoTech, Inc., et al., Case No. 6:15 CV 03519 BCW). In October 2016, the parties reached a settlement in principle to resolve the allegations in these cases. On February 15, 2017, the Company received preliminary approval from the court to settle the five class action consumer lawsuits filed. Following an agreed-to notice period in which any contentions from objectors are addressed, the court, in its discretion and following a fairness hearing, will order final approval of the settlement and the litigation will be resolved. Any final approval order from the court is subject to appeal. Prior to final resolution of this litigation, either party retains rights to withdraw from the settlement under circumstances delineated in the settlement agreement. There are numerous risks associated with this settlement, including that the court finds that the settlement is not fair and adequate to the class members or for any other reason that the court deems appropriate to withhold final approval. If final approval does not occur, the litigation would recommence. As of December 31, 2016, the Company has accrued all amounts it deems appropriate for this matter.

Securities Class Action. In August 2014, three separate, putative class actions were filed in the United States District Court for the Southern District of New York (the District Court) against the Company and certain of its officers. These cases were consolidated into a single action on October 24, 2014. A consolidated amended complaint was filed in the District Court on December 22, 2014, which was further amended and restated on March 13, 2015. The complaint alleges violations of federal securities laws related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment, and seeks monetary damages, pre- and post-judgment interest, and fees and expenses. On March 30, 2016, the District Court dismissed with prejudice all claims against the Company’s officers and allowed the claim against the Company to proceed to discovery. On December 20, 2016, the parties reached an agreement in principle to resolve this matter for $34.5 million, subject to the execution of definitive settlement documents and final court approval. The Company’s insurers have agreed to fund the entire amount of the settlement.

SEC Inquiry Resolution. On January 11, 2017, the Company settled a Securities and Exchange Commission (SEC) inquiry related to its internal review of misconduct and accounting errors at its Aerospace Systems segment, pursuant to an administrative order issued by the SEC under which the Company paid a civil penalty of $1.6 million, without admitting or denying the findings in the order.

401(k) Plan Class Action. On June 24, 2016, a putative class action was filed in the United States District Court for the Southern District of New York on behalf of participants in and beneficiaries of a Company-sponsored 401(k) plan. An amended complaint was filed on September 29, 2016. As amended, the complaint alleged that certain of the Company’s officers breached fiduciary duties owed under the Employee Retirement Income Security Act by making the Company’s stock available as an investment alternative under the plan during a period prior to the disclosure of misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint sought, among other things, monetary damages, equitable relief, pre-judgment interest, and fees and expenses. On December 2, 2016, the matter was voluntarily dismissed without prejudice. On January 27, 2017, a new putative class action was filed in the United States District Court for the Southern District of New York on behalf of the same 401(k) participants and beneficiaries, asserting substantially similar claims against the same officers of the Company. The Company believes the suit lacks merit and intends to defend against it vigorously. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

Derivative Action. On July 13, 2016, a shareholder derivative complaint was filed in the Supreme Court of New York, County of New York, against certain of the Company’s current and former directors and officers. The complaint alleges, among other things, that the defendants breached fiduciary duties, caused corporate waste and were unjustly enriched in connection with misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks monetary damages, pre- and post-judgment interest, equitable relief and fees and expenses on behalf of the Company. The Company believes the suit lacks merit and intends to defend itself vigorously. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our former JovyAtlas business unit. The notice relates to losses resulting from a fire that occurred at an HVC Alkmaar bio-energy plant on July 21, 2013. The notice states that the fire resulted from the failure of an uninterruptible power supply (UPS) to provide sufficient power to act as a back-up energy supply, alleges that JovyAtlas was the manufacturer and service provider for the UPS and claims €11 million in estimated property damages and €35 million in estimated business interruption damages. The Company has tendered the notice of claim to its insurance carriers.

XML

Pensions and Other Employee Benefits

12 Months Ended

Dec. 31, 2016

Pensions and Other Employee Benefits [Abstract]

Pensions and Other Employee Benefits

19. Pensions and Other Employee Benefits

The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,448		$	3,663		$	184		$	199
Service cost		108			123			2			3
Interest cost		135			149			6			7
Plan participants’ contributions		2			2			4			4
Amendments		15			—			(3	)		—
Actuarial loss (gain)		167			(261	)		(3	)		(12	)
Foreign currency exchange rate changes		9			(53	)		—			(4	)
Curtailments, settlements and special termination benefits		2			3			—			—
Business divestiture		—			(59	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Benefit obligation at the end of the year	$	3,758		$	3,448		$	177		$	184
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,552		$	2,570		$	57		$	60
Actual return on plan assets		189			54			5			—
Employer contributions		97			97			7			6
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		9			(52	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Fair value of plan assets at the end of the year	$	2,721		$	2,552		$	60		$	57
Unfunded status at the end of the year	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)
Assets and (liabilities) recognized on the consolidated balance sheets consist of:
Non-current assets	$	37		$	37		$	—		$	—
Current liabilities		(6	)		(5	)		(8	)		(8	)
Non-current liabilities		(1,068	)		(928	)		(109	)		(119	)
	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)

The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2016		2015		2016			2015
	(in millions)
Net loss (gain)	$	896	$	768	$	(12	)	$	(10	)
Prior service cost (credit)		14		—		(4	)		(3	)
Total amount recognized	$	910	$	768	$	(16	)	$	(13	)

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,413 million at December 31, 2016 and $3,120 million at December 31, 2015. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31, 2016 and 2015.

	Pension Plans
	2016		2015
	(in millions)
Projected benefit obligation	$	3,528	$	3,232
Accumulated benefit obligation	$	3,192	$	2,913
Fair value of plan assets	$	2,456	$	2,302

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2016 and 2015.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
Benefit obligations:
Discount rate		4.41	%(1)		4.67	%(1)		4.05	%(2)		4.22	%(2)
Rate of compensation increase		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.46% and 4.73% for the U.S. based plans, respectively, and 3.80% and 3.93% for the Canadian based plans, respectively.

⁽²⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.11% and 4.28% for the U.S. based plans, respectively, and 3.64% and 3.74% for the Canadian based plans, respectively.

⁽³⁾ The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2016 and 2015.

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Components of net periodic benefit cost:
Service cost	$	108		$	123		$	106		$	2		$	3		$	3
Interest cost		135			149			147			6			7			8
Expected return on plan assets		(200	)		(205	)		(193	)		(4	)		(5	)		(4	)
Amortization of prior service cost (credits)		—			1			2			(2	)		(2	)		(2	)
Amortization of net loss (gain)		52			68			17			(2	)		—			(2	)
Curtailment or settlement loss (gain)		2			3			1			—			—			(1	)
Net periodic benefit cost	$	97		$	139		$	80		$	—		$	3		$	2

In 2016, the Company changed the approach used to measure the service and interest components of expense for all of its pension and postretirement benefit plans. For fiscal 2015 and previous periods, the Company measured the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligations at the beginning of the period. Beginning in fiscal 2016, the Company elected to use a spot rate approach for its plans in the measurement of the components of benefit cost by applying specific spot rates along that yield curve to the relevant projected cash flows, as the Company believes the new approach provides a more precise measurement of service and interest costs. This change does not affect the measurement of the Company’s total benefit obligation. The Company has accounted for this change prospectively as a change in accounting estimate.

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)	$	179		$	(132	)	$	560		$	(4	)	$	(7	)	$	5
Prior service cost (credit)		15			—			1			(2	)		—			(1	)
Amortization of net (loss) gain		(52	)		(68	)		(17	)		2			—			2
Amortization of prior service (cost) credit		—			(1	)		(2	)		2			2			2
Total recognized in other comprehensive income		142			(201	)		542			(2	)		(5	)		8
Total recognized in net periodic benefit cost and other comprehensive income	$	239		$	(62	)	$	622		$	(2	)	$	(2	)	$	10

The following table summarizes the amounts expected to be amortized from accumulated OCI and recognized as components of net periodic benefit costs during 2017.

	Pension Plans		Postretirement Benefit Plans			Total
	(in millions)
Net loss (gain)	$	62	$	(2	)	$	60
Prior service cost (credit)		1		(1	)		—
	$	63	$	(3	)	$	60

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
Discount rates:
Benefit obligation		4.67	%(1)		4.14	%(1)		5.03	%(1)		4.22	%(4)		3.70	%(4)		4.43	%(4)
Service cost		4.83	%		—	(5)		—	(5)		4.37	%		—	(5)		—	(5)
Interest cost		3.95	%		—	(5)		—	(5)		3.26	%		—	(5)		—	(5)
Expected long-term return on plan assets		7.92	%(2)		8.14	%(2)		8.13	%(2)		7.42	%		7.65	%		7.64	%
Rate of compensation increase		3.50	%(3)		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015, and 2014 were comprised of separate assumptions determined by country of 4.73%, 4.20% and 5.10% for the U.S. based plans and 3.93%, 3.90% and 4.70% for the Canadian based plans, respectively.

⁽²⁾ The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.00% and 8.25% for the U.S. based plans for the years ended December 31, 2016 and 2015, respectively, and 7.25% for the Canadian based plans for the years ended December 31, 2016, and 2015.

⁽³⁾ The weighted average rate of compensation increase assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 3.50% for both the U.S and Canadian based plans.

⁽⁴⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 4.28%, 3.70% and 4.40% for the U.S. based plans and 3.74%, 3.70% and 4.60% for the Canadian based plans, respectively.

⁽⁵⁾ Not applicable as the Company changed to the spot rate approach beginning in 2016 as described above.

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company’s benefit plans, including those from dividends, interest income and capital appreciation. The Company utilizes a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class. The Company utilizes a building block methodology that utilizes historical and forward looking rates of return for each asset class and takes into account expected returns above inflation and risk premium. These long-term rates of return are then applied to the target portfolio allocations that are generally aligned with the actual asset allocations of our plans to develop the expected long-term rate of return.

The annual increase in cost of benefits (health care cost trend rate) for the Company’s U.S. based plans covering retirees under 65 years of age is assumed to be an average of 7.0% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2021 and thereafter. The health care cost trend rate for the Company’s U.S. based plans covering retirees over 65 years of age is assumed to be an average of 8.5% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2024 and thereafter. The health care cost trend rate for the Company’s Canadian based plans is assumed to be an average of 6.5% in 2017 and is assumed to gradually decrease to a rate of 5.0% in 2023 and thereafter. Health care cost trend assumptions are based on (1) observed or expected short term rates of increase for different types of health models based on actual claims experience and benchmarking, and (2) a reasonable estimate of an appropriate, sustainable level of health care cost trend in the future, weighting the factors that primarily influence trends, which are price inflation and cost leveraging benefit plan features. Assumed health care cost trend rates can have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase		Decrease
	(in millions)
Effect on total service and interest cost	$	—	$	—
Effect on postretirement benefit obligations	$	5	$	(4	)

Plan Assets. The Company’s Benefit Plan Committee (Committee) has the responsibility to formulate the investment policies and strategies for the plans’ assets. The Committee structures the investment of plan assets to achieve the following goals: (1) maximize the plans’ long-term rate of return on assets for an acceptable level of risk; and (2) limit the volatility of investment returns and consequent impact on the plans’ assets. In the pursuit of these goals, the Committee has formulated the following investment policies and objectives: (1) invest assets of the plans in a manner consistent with the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA); (2) preserve the plans’ assets; (3) maintain sufficient liquidity to fund benefit payments and pay plan expenses; (4) evaluate the performance of investment managers; and (5) achieve, on average, a minimum total rate of return equal to the established benchmarks for each asset category.

The Committee retains a professional investment consultant to advise the Committee and help ensure that the above policies and strategies are met. The Committee does not actively manage the day to day operations and selection process of individual securities and investments, as it retains the professional services of qualified investment management organizations to fulfill those tasks. Qualified investment management organizations are evaluated on several criteria for selection, with a focus on the investment management organizations’ demonstrated capability to achieve results that will meet or exceed the investment objectives they have been assigned and conform to the policies established by the Committee. While the investment management organizations have investment discretion over the assets placed under their management, the Committee provides each investment manager with specific investment guidelines relevant to its asset class.

The Committee has established the allowable range that the plans’ assets may be invested in for each major asset category. In addition, the Committee has established guidelines regarding diversification within asset categories to limit risk and exposure to a single or limited number of securities. The investments of the plans’ include a diversified portfolio of both equity and fixed income investments. Equity investments are further diversified across U.S. and non-U.S. stocks, small to large capitalization stocks, and growth and value stocks. Fixed income assets are diversified across U.S. and non-U.S. issuers, corporate and governmental issuers, and credit quality. The plan also invests in real estate through publicly traded real estate securities. Derivatives may be used only for hedging purposes or to create synthetic long positions. The plans are prohibited from directly owning commodities, unregistered securities, restricted stock, private placements, or interests in oil, gas, mineral exploration, or other development programs. Further, short selling or utilizing margin buying for investment purposes is prohibited.

The table below presents the allowable range for each major category of the plans’ assets at December 31, 2016 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2016 and 2015, by asset category.

	U.S.							Canada
Asset Category	Range	2016			2015			Range	2016			2015
Domestic equity(1)	30%-60%		55	%		52	%	—		15	%		13	%
International equity(2)	10%-20%		10			11		—		62			62
Total equities	45%-75%		65			63		40%-80%		77			75
Fixed income securities	20%-40%		22			22		—		13			16
Other, primarily cash and cash equivalents	0%-15%		5			8		—		10			9
Total fixed income securities and cash and cash equivalents	—		27			30		20%-60%		23			25
Real estate securities	0%-15%		8			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾ Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾ International equities for Canadian plans includes equities of U.S. companies.

The Committee regularly monitors the investment of the plans’ assets to ensure that the actual investment allocation remains within the established range. The Committee also regularly measures and monitors investment risk through ongoing performance reporting and investment manager reviews. Investment manager reviews include assessing the managers’ performance versus the appropriate benchmark index both in the short and long-term period, performance versus peers, and an examination of the risk the managers assumed in order to achieve rates of return.

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2016									Fair Value Measured at December 31, 2016
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,331	$	—	$	—	$	1,331		$	79	$	—	$	—	$	79
International Equity		85		—		—		85			104		—		—		104
Fixed Income — Investment Grade(2)		255		159		—		414			—		—		—		—
Fixed Income — High Yield(3)		—		136		—		136			—		—		—		—
Real Estate Investment Trusts(4)		193		—		—		193			—		—		—		—
Other(5)		—		114		—		114			5		27		—		32
Total assets at fair value	$	1,864	$	409	$	—	$	2,273		$	188	$	27	$	—	$	215
Liabilities for unsettled trades, net								(23	)								—
Other investments measured at net asset value(6)(7)								171									85
Total							$	2,421								$	300

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015									Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,200	$	—	$	—	$	1,200		$	73	$	—	$	—	$	73
International Equity		79		—		—		79			91		—		—		91
Fixed Income — Investment Grade(2)		237		163		—		400			—		—		—		—
Fixed Income — High Yield(3)		—		114		—		114			—		—		—		—
Real Estate Investment Trusts(4)		170		—		—		170			—		—		—		—
Other(5)		—		166		—		166			6		21		—		27
Total assets at fair value	$	1,686	$	443	$	—	$	2,129		$	170	$	21	$	—	$	191
Liabilities for unsettled trades, net								(30	)								—
Other investments measured at net asset value(6)(7)								170									92
Total							$	2,269								$	283

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾ Approximately 62% and 59% at December 31, 2016 and 2015, respectively, of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the Fund) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 38% and 41% at December 31, 2016 and 2015, respectively, of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of: (1) money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the U.S. plans other investments measured using NAV at December 31, 2016 and 2015 and approximately 55% and 52% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 45% and 48% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2016								Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	37	$	—	$	—	$	37	$	35	$	—	$	—	$	35
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		8		3		—		11
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		3		—		—		3
Other(5)		—		3		—		3		—		2		—		2
Total assets at fair value	$	49	$	8	$	—	$	57	$	47	$	7	$	—	$	54
Other investments measured at net asset value(6)(7)								3								3
Total							$	60							$	57

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾ Approximately 73% at December 31, 2016 and 2015 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2016 and 2015 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ REITs consist of securities that trade on the major exchanges and invest directly, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2016 and 2015 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

Contributions. The funding policy for the Company’s pension and postretirement benefit plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. The Company makes voluntary, additional contributions to the pension plans depending on a number of factors, including operating cash flow levels, alternative uses for excess cash and the plans’ funded status. At December 31, 2016, all legal funding requirements had been met. For the year ending December 31, 2017, the Company currently expects to contribute approximately $100 million to its pension plans, and approximately $10 million to its postretirement benefit plans.

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension Benefits		Benefit Payments		Subsidy Receipts
	(in millions)
2017	$	162	$	13	$	—
2018		156		13		—
2019		162		14		—
2020		171		14		—
2021		175		14		—
Years 2022-2026		1,001		65		1

Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company’s matching contributions in L3’s common stock and cash were $118 million for 2016, $131 million for 2015 and $135 million for 2014. These matching contributions include amounts attributable to discontinued operations of $1 million for 2016, $12 million for 2015 and $11 million for 2014.

Multiemployer Benefit Plans. Certain of the Company’s businesses participate in multiemployer defined benefit pension plans. The Company makes cash contributions to these plans under the terms of collective-bargaining agreements that cover its union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

	EIN/Pension Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L3									Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
Pension Fund		2016	2015		2016			2015			2014
								(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$	26	(3)	$	23	(4)	$	19	(4)	No	4/9/2017 to 6/28/2019(5)
Other Pension Funds(6)						—			—			—
Total contributions					$	26		$	23		$	19

⁽¹⁾ A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾ Funding improvement plan or rehabilitation plan.

⁽³⁾ At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2016 was not available.

⁽⁴⁾ Represents 5% of total plan contributions for the years ended December 31, 2015 and 2014 based on Form 5500.

⁽⁵⁾ The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 63% of 2016 contributions.

⁽⁶⁾ Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

XML

Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2016

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

20. Supplemental Cash Flow Information

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Interest paid on outstanding debt	$	162	$	182	$	176
Income tax payments	$	120	$	132	$	129
Income tax refunds	$	8	$	8	$	9

XML

Segment Information

12 Months Ended

Dec. 31, 2016

Segment Information [Abstract]

Segment Information

21. Segment Information

The Company has three reportable segments, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales, operating income and operating margin. Corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges, gains or losses related to business divestitures, and certain other items that are excluded by management for purposes of evaluating the operating performance of the Company’s business segments. Certain Corporate expenses of $15 million and $16 million for the years ended December 31, 2015 and 2014, respectively, that had previously been allocated to the NSS business were retained by the Company and were allocated to L3’s three reportable segments.

The tables below present net sales, operating income (loss), depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net Sales
Products
Electronic Systems	$	3,293		$	3,390		$	3,685
Aerospace Systems		1,662			1,661			1,722
Communication Systems		1,585			1,648			1,546
Elimination of intercompany sales		(98	)		(110	)		(114	)
Total products sales		6,442			6,589			6,839
Services
Electronic Systems	$	1,042		$	999		$	1,057
Aerospace Systems		2,580			2,503			2,604
Communication Systems		488			441			539
Elimination of intercompany sales		(41	)		(66	)		(53	)
Total services sales		4,069			3,877			4,147
Consolidated total	$	10,511		$	10,466		$	10,986
Operating income
Electronic Systems	$	518		$	489		$	533
Aerospace Systems		289			205			283
Communication Systems		201			196			196
Segment total		1,008			890			1,012
Loss related to business divestitures(1)		—			(31	)		—
Goodwill impairment charges(2)		—			(384	)		—
Consolidated total	$	1,008		$	475		$	1,012

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Depreciation and amortization
Electronic Systems	$	105	$	110	$	123
Aerospace Systems		54		50		40
Communication Systems		47		50		51
Consolidated total	$	206	$	210	$	214
Capital Expenditures
Electronic Systems	$	113	$	99	$	80
Aerospace Systems		56		55		59
Communication Systems		37		37		29
Corporate		10		6		6
Consolidated total	$	216	$	197	$	174
Total Assets
Electronic Systems	$	6,802	$	6,426	$	6,281
Aerospace Systems		2,535		2,630		3,011
Communication Systems		2,031		1,984		2,025
Corporate		497		365		566
Assets held for sale		—		—		547
Assets of discontinued operations		—		664		1,262
Consolidated total	$	11,865	$	12,069	$	13,692

⁽¹⁾ See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, and deferred income tax assets.

The table below presents property, plant and equipment, net by geographic area.

	Year Ended December 31,
	2016		2015
	(in millions)
United States	$	974	$	971
All Other		147		126
Total	$	1,121	$	1,097

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S.	$	8,199	$	7,908	$	8,051
International:
United Kingdom		331		336		335
Canada		297		281		289
Australia		254		321		254
Saudi Arabia		159		201		160
South Korea		127		207		226
Japan		81		95		124
France		75		62		74
Other		988		1,055		1,473
Total international		2,312		2,558		2,935
Consolidated	$	10,511	$	10,466	$	10,986

Net sales to principal customers are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S. Government agencies(1)	$	7,649	$	7,291	$	7,464
Commercial		1,282		1,376		1,656
Foreign governments(1)		1,580		1,799		1,866
Consolidated	$	10,511	$	10,466	$	10,986

⁽¹⁾ Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

XML

Employee Severance and Termination Costs

12 Months Ended

Dec. 31, 2016

Employee Severance and Termination Costs [Abstract]

Employee Severance and Termination Costs

22. Employee Severance and Termination Costs

Consistent with the Company’s strategy to continuously improve its cost structure and right-size its businesses, especially in view of U.S. defense budget constraints, L3 is completing employment reduction actions across several of its businesses to reduce both direct and indirect costs, including overhead and general and administrative costs. As a result of these initiatives and due to the impact of U.S. defense budget constraints at certain affected business units, the Company recorded employee severance and other termination costs of $17 million with respect to approximately 700 employees during the year ended December 31, 2016, $18 million with respect to approximately 800 employees during the year ended December 31, 2015 and $29 million with respect to approximately 1,800 employees during the year ended December 31, 2014. Employee severance and other termination costs are reported within cost of sales on the consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $9 million at December 31, 2016, which is expected to be paid in 2017, and $9 million at December 31, 2015, which was paid during 2016. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Electronic Systems	$	8	$	8	$	16
Aerospace Systems		2		4		5
Communication Systems		7		6		8
Consolidated	$	17	$	18	$	29

XML

Unaudited Quarterly Financial Data

12 Months Ended

Dec. 31, 2016

Unaudited Quarterly Financial Data [Abstract]

Unaudited Quarterly Financial Data

23. Unaudited Quarterly Financial Data

Unaudited summarized financial data by quarter for the years ended December 31, 2016 and 2015 is presented in the table below. The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
	(in millions, except per share data)
2016
Sales	$	2,353	$	2,664	$	2,505		$	2,989
Operating income		252		247		215			294
Income from continuing operations		167		151		151			192
Net income		230		151		151			192
Net income attributable to L3		227		147		148			188
Basic EPS from continuing operations(1)		2.11		1.90		1.91			2.43
Basic EPS(1)		2.92		1.90		1.91			2.43
Diluted EPS from continuing operations(1)		2.08		1.88		1.88			2.38
Diluted EPS(1)		2.87		1.88		1.88			2.38
2015
Sales	$	2,488	$	2,543	$	2,564		$	2,871
Operating income (loss)		187		153		231			(96	)
Income (loss) from continuing operations		105		120		128			(56	)
Net income (loss)		109		124		(296	)		(162	)
Net income (loss) attributable to L3		105		120		(299	)		(166	)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56			(0.76	)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74	)		(2.11	)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54			(0.76	)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68	)		(2.11	)

⁽¹⁾ EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

XML

Financial Information of L3 and Its Subsidiaries

12 Months Ended

Dec. 31, 2016

Financial Information of L3 and Its Subsidiaries [Abstract]

Financial Information of L3 and Its Subsidiaries

24. 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 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.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

The following 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 elimination of the holding company structure and the Merger discussed in Note 2, 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 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		2,162		3,227		1,171		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,867		5,430		—		(11,297	)		—
Total assets	$	10,216	$	10,846	$	2,236	$	(11,433	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		282		(282	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325
Total liabilities		5,663		1,222		774		(418	)		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	$	2,236	$	(11,433	)	$	11,865

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
At December 31, 2015:
Current assets:
Cash and cash equivalents	$	137	$	—	$	165	$	(95	)	$	207
Billed receivables, net		278		297		171		—			746
Contracts in process		872		958		251		—			2,081
Other current assets		288		137		109		—			534
Assets of discontinued operations		—		664		—		—			664
Total current assets		1,575		2,056		696		(95	)		4,232
Goodwill		2,318		2,973		990		—			6,281
Other assets		800		496		260		—			1,556
Investment in and amounts due from consolidated subsidiaries		5,609		3,739		111		(9,459	)		—
Total assets	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069
Current portion of long-term debt	$	499	$	—	$	—	$	—		$	499
Current liabilities		911		899		445		(95	)		2,160
Liabilities of discontinued operations		—		220		—		—			220
Other long-term liabilities		1,410		195		29		—			1,634
Long-term debt		3,127		—		—		—			3,127
Total liabilities		5,947		1,314		474		(95	)		7,640
L3 shareholders’ equity		4,355		7,950		1,583		(9,533	)		4,355
Noncontrolling interests		—		—		—		74			74
Total equity		4,355		7,950		1,583		(9,459	)		4,429
Total liabilities and equity	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the year ended December 31, 2016:
Total net sales	$	3,388		$	6,063		$	1,379		$	(319	)	$	10,511
Total cost of sales		(3,078	)		(5,610	)		(1,134	)		319			(9,503	)
Operating income		310			453			245			—			1,008
Interest expense		(168	)		(1	)		—			—			(169	)
Interest and other income, net		11			1			6			—			18
Debt retirement charge		(7	)		—			—			—			(7	)
Income from continuing operations before income taxes		146			453			251			—			850
Provision for income taxes		(32	)		(101	)		(56	)		—			(189	)
Equity in net income of consolidated subsidiaries		596			—			—			(596	)		—
Income from continuing operations		710			352			195			(596	)		661
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		710			415			195			(596	)		724
Net income attributable to noncontrolling interests		—			—			—			(14	)		(14	)
Net income attributable to L3	$	710		$	415		$	195		$	(610	)	$	710
Comprehensive income attributable to L3	$	558		$	425		$	118		$	(543	)	$	558
For the year ended December 31, 2015:
Total net sales	$	3,580		$	5,265		$	1,935		$	(314	)	$	10,466
Total cost of sales		(3,283	)		(4,906	)		(1,701	)		314			(9,576	)
(Loss) gain related to business divestitures		(13	)		(31	)		13			—			(31	)
Goodwill impairment charges		—			(364	)		(20	)		—			(384	)
Operating income (loss)		284			(36	)		227			—			475
Interest expense		(167	)		(1	)		(1	)		—			(169	)
Interest and other income, net		16			—			1			—			17
Debt retirement charge		(1	)		—			—			—			(1	)
Income (loss) from continuing operations before income taxes		132			(37	)		227			—			322
(Provision) benefit for income taxes		(10	)		3			(18	)		—			(25	)
Equity in net loss of consolidated subsidiaries		(362	)		—			—			362			—
(Loss) income from continuing operations		(240	)		(34	)		209			362			297
Loss from discontinued operations, net of income tax		—			(522	)		—			—			(522	)
Net (loss) income		(240	)		(556	)		209			362			(225	)
Net income attributable to noncontrolling interests		—			—			—			(15	)		(15	)
Net (loss) income attributable to L3	$	(240	)	$	(556	)	$	209		$	347		$	(240	)
Comprehensive (loss) income attributable to L3	$	(230	)	$	(560	)	$	98		$	462		$	(230	)
For the year ended December 31, 2014:
Total net sales	$	3,586		$	5,460		$	2,218		$	(278	)	$	10,986
Total cost of sales		(3,255	)		(5,017	)		(1,980	)		278			(9,974	)
Operating income		331			443			238			—			1,012
Interest expense		(156	)		(2	)		—			—			(158	)
Interest and other income, net		15			—			3			—			18
Income from continuing operations before income taxes		190			441			241			—			872
Provision for income taxes		(49	)		(115	)		(63	)		—			(227	)
Equity in net income of consolidated subsidiaries		523			—			—			(523	)		—
Income from continuing operations		664			326			178			(523	)		645
Income from discontinued operations, net of income tax		—			32			—			—			32
Net income		664			358			178			(523	)		677
Net income attributable to noncontrolling interests		—			—			—			(13	)		(13	)
Net income attributable to L3	$	664		$	358		$	178		$	(536	)	$	664
Comprehensive income attributable to L3	$	190		$	356		$	47		$	(403	)	$	190

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	482		$	542		$	259		$	(186	)	$	1,097
Investing activities:
Business acquisitions, net of cash acquired		(388	)		—			—			—			(388	)
Proceeds from sale of business, net of closing date cash balances		563			—			(2	)		—			561
Other investing activities		(60	)		(86	)		(43	)		—			(189	)
Net cash from (used in) investing activities from continuing operations		115			(86	)		(45	)		—			(16	)
Financing activities:
Proceeds from sale of senior notes		547			—			—			—			547
Redemption of senior notes		(856	)		—			—			—			(856	)
Common stock repurchased		(373	)		—			—			—			(373	)
Dividends paid on L3’s common stock		(220	)		—			—			—			(220	)
Other financing activities		459			(399	)		(159	)		145			46
Net cash used in financing activities from continuing operations		(443	)		(399	)		(159	)		145			(856	)
Effect of foreign currency exchange rate changes on cash		—			—			(13	)		—			(13	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		154			1			42			(41	)		156
Cash and cash equivalents, beginning of the year		137			—			165			(95	)		207
Cash and cash equivalents, end of the year	$	291		$	1		$	207		$	(136	)	$	363

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	616		$	422		$	216		$	(185	)	$	1,069
Investing activities:
Business acquisitions, net of cash acquired		(320	)		—			—			—			(320	)
Proceeds from sale of business, net of closing date cash balances		14			28			276			—			318
Other investing activities		(84	)		(69	)		(37	)		—			(190	)
Net cash (used in) from investing activities from continuing operations		(390	)		(41	)		239			—			(192	)
Financing activities:
Repurchases of senior notes		(297	)		—			—			—			(297	)
Common stock repurchased		(740	)		—			—			—			(740	)
Dividends paid on L3's common stock		(214	)		—			—			—			(214	)
Other financing activities		801			(434	)		(473	)		152			46
Net cash used in financing activities from continuing operations		(450	)		(434	)		(473	)		152			(1,205	)
Effect of foreign currency exchange rate changes on cash		—			—			(19	)		—			(19	)
Net increase in cash and cash equivalents of discontinued operations		—			51			—			—			51
Change in cash balance in assets held for sale		—			1			60			—			61
Net (decrease) increase in cash		(224	)		(1	)		23			(33	)		(235	)
Cash and cash equivalents, beginning of the year		361			1			142			(62	)		442
Cash and cash equivalents, end of the year	$	137		$	—		$	165		$	(95	)	$	207
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	467		$	571		$	143		$	(93	)	$	1,088
Investing activities:
Business acquisitions, net of cash acquired		(57	)		—			—			—			(57	)
Other investing activities		(58	)		(85	)		(21	)		—			(164	)
Net cash used in investing activities from continuing operations		(115	)		(85	)		(21	)		—			(221	)
Financing activities:
Proceeds from sale of senior notes		996			—			—			—			996
Redemption of CODES		(935	)		—			—			—			(935	)
Common stock repurchased		(823	)		—			—			—			(823	)
Dividends paid on L3's common stock		(208	)		—			—			—			(208	)
Other financing activities		721			(530	)		(164	)		50			77
Net cash used in financing activities from continuing operations		(249	)		(530	)		(164	)		50			(893	)
Effect of foreign currency exchange rate changes on cash		—			—			(17	)		—			(17	)
Net increase in cash and cash equivalents of discontinued operations		—			46			—			—			46
Change in cash balance in assets held for sale		—			(1	)		(60	)		—			(61	)
Net increase (decrease) in cash		103			1			(119	)		(43	)		(58	)
Cash and cash equivalents, beginning of the year		258			—			261			(19	)		500
Cash and cash equivalents, end of the year	$	361		$	1		$	142		$	(62	)	$	442

XML

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation: The accompanying financial statements comprise the consolidated financial statements of L3. The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method. For the classification of contract related assets and liabilities, the Company uses the duration of the related contract or program as its operating cycle, which may be longer than one year, and classifies them as current. Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Accounting Estimates

Accounting Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions for L3 relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) products, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Revisions or adjustments to estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to Percentage-of-Completion (POC) accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s results of operations and cash flows, as well as reduce the valuations of receivables and inventories, and in some cases result in liabilities to complete contracts in a loss position. Aggregate net changes in contract estimates amounted to increases of $148 million, or 15%, of consolidated operating income ($1.22 per diluted share) for the year ended December 31, 2016, increases of $52 million, or 11%, of consolidated operating income ($0.45 per diluted share) for the year ended December 31, 2015, and increases of $72 million, or 7%, of consolidated operating income ($0.52 per diluted share) for the year ended December 31, 2014.

Revenue Recognition

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 50% of the Company’s net sales in 2016 were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 9% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a POC method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts).

Sales and profits on fixed-price type contracts that are covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become evident. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

Sales and profits on cost-plus type contracts that are covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement types. Incentive and award fees are the primary variable fee contractual arrangement types for the Company. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require the Company to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts within the scope of accounting standards for revenue arrangements with commercial customers are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2016			2015
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	105		$	93
Acquisitions during this period		3			1
Accruals for product warranties issued during the period		51			59
Changes to accruals for product warranties existing before January 1		—			2
Foreign currency translation adjustments		(1	)		(2	)
Settlements made during the period		(49	)		(48	)
Balance at December 31	$	109		$	105

⁽¹⁾ Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

Deferred Debt Issue Costs

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method. Deferred debt issuance costs, other than for line-of credit arrangements, are presented in the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the associated debt liability. Deferred debt issue costs for line-of-credit arrangements are presented in the Company’s consolidated balance sheets in other assets.

Pension Plan and Postretirement Benefit Plan Obligations

Pension Plan and Postretirement Benefit Plan Obligations: The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant’s compensation and/or years of service. The Company’s funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon.

The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company’s pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

In accordance with accounting standards for employee pension and postretirement benefits, the Company recognizes on a plan-by-plan basis the unfunded status of its pension and postretirement benefit plans in the consolidated financial statements and measures its pension and postretirement benefit plan assets and benefit obligations as of December 31.

The obligation for the Company’s pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, and rates of return on plan assets, and expected annual rates for salary increases for employee participants in the case of pension plans, and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit obligations. See Note 19, Pensions and Other Employee Benefits for additional information.

Stock-Based Compensation

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L3 common stock instead of settling such obligations with cash payments.

Compensation expense for restricted stock unit and stock option awards is generally recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L3 common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period. Stock-based compensation expense is recognized net of estimated forfeitures.

Income Taxes

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies. Deferred income tax assets and liabilities are classified as noncurrent in the Company’s balance sheet.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

Cash and Cash Equivalents

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess, obsolete or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

Property, Plant and Equipment

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by generally applying the straight-line method to the estimated useful lives of the related assets. Useful lives generally range from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property, plant or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill and Indefinite-lived Intangible Assets

Goodwill and Indefinite-lived Intangible Assets: The carrying value of goodwill and indefinite-lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2016 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flow valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2016 and 2014. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If the Company’s current estimates indicate that the duration of its customer contractual relationships have decreased, then the Company adjusts the amortization period for those customer contractual relationships to their remaining useful economic life.

Derivative Financial Instruments

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the U.S. dollar, the Euro, the Canadian dollar and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Treasury Stock

Treasury Stock: The Company records treasury stock purchases at cost, which includes incremental direct transaction costs.

Translation of Foreign Currency and Foreign Currency Transactions

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2016, 2015 and 2014 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated OCI and are only recognized in income when a foreign subsidiary is divested.

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Adoption of New Accounting Standards

Accounting Standards Issued and Not Yet Implemented: In January 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2, the computation of the implied fair value of goodwill to determine the amount of impairment, from the goodwill impairment test. In computing the implied fair value of goodwill for Step 2 under current accounting standards, the Company calculates the fair value of its assets and liabilities (including unrecognized assets and liabilities) as if acquired or assumed in a business combination. Under the amendments in this update the Company will determine the amount of goodwill impairment, by comparing the Step 1 fair value of a reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its Step 1 fair value, a goodwill impairment is recognized. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company expects the adoption of this standard will reduce the complexity surrounding the evaluation of goodwill for impairment. The impact of this standard for the Company will depend on the outcomes of future goodwill impairment tests.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update provide new guidance to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The new guidance requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The new guidance reduces the number of transactions that need to be further evaluated. The new standard, as amended, will be effective for the Company prospectively for interim and annual reporting periods beginning on January 1, 2018, with early application permitted. The Company believes that the evaluation of whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses will be simplified under the new standard.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In the adoption year, the Company will be required to recognize and measure all leases using a modified retrospective approach, which requires the restatement of each prior reporting period presented, and permits a number of optional practical expedients that the Company may elect to apply. The optional practical expedients allow the Company to use: (i) its existing assessments under current accounting standards as to the classification of a lease as operating or financing, and whether any expired or existing contracts is or contains a lease, and (ii) hindsight to determine the term of existing leases, for the purpose of restating each prior reporting period presented. The Company is currently evaluating when it will adopt this ASU, whether to elect the optional practical expedients and the expected impact of the adoption of this standard on its consolidated financial statements and disclosures related to leasing activities.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provides companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application with disclosure of results under the new and old standards for the first year of adoption.

The Company will adopt the standard as of January 1, 2018, using the modified retrospective transition method and is currently evaluating the expected impact of the adoption on its consolidated financial statements, and related disclosures. Under the modified retrospective transition method, the Company will be required to calculate and record the cumulative effect of adopting the new standard as of January 1, 2018, in the Company’s Quarterly Report on Form 10-Q for the first quarter of 2018. The Company expects to estimate the cumulative effect of adopting the new standard as of January 1, 2018 in the second half of 2017 based on expected contracts in process at December 31, 2017.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. Specifically, the Company has evaluated the impact of the standard on its various revenue streams. Based on progress made to date, the Company expects to recognize revenue over time on most of its contracts that are covered by current contract accounting standards by using cost inputs to measure progress toward the completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on the majority of these contracts. Accordingly, the Company expects the adoption of this standard to primarily impact contracts currently covered by contract accounting standards that recognize revenue using the POC units-of-delivery method. Approximately 20% of the Company’s net sales used the POC units-of-delivery method to recognize revenue in 2016. Upon adoption, the Company expects to recognize revenue earlier in the performance period as costs are incurred, as opposed to when units are delivered, on some of these contracts that currently use the POC units-of-delivery method to recognize revenue.

Additionally, the Company has also made progress on drafting its accounting policies affected by this standard, the redesign of internal controls over financial reporting related to the standard, as well as evaluating the expanded disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, and implement any changes to such business processes, controls and systems over the remainder of 2017.

Adjustments for New Accounting Pronouncement [Member]

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Adoption of New Accounting Standards

New Accounting Standards Implemented: In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits are classified as an operating activity on the statement of cash flows. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 16 for additional information. 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The Company adopted ASU 2016-15 the quarterly period ended December 31, 2016, with retrospective application to the consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014. The adoption of ASU 2016-15 resulted in changes in the classification on the statement of cash flows relating to payments of debt extinguishment costs and original issue discounts of $11 million and $1 million, for the years ended December 31, 2016 and 2015, respectively. These payments would have been previously classified in cash flows from operations, and are now classified in cash flows from financing activities.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

XML

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Summary of Significant Accounting Policies [Abstract]

Changes in Company's Accrued Product Warranty Costs

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2016			2015
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	105		$	93
Acquisitions during this period		3			1
Accruals for product warranties issued during the period		51			59
Changes to accruals for product warranties existing before January 1		—			2
Foreign currency translation adjustments		(1	)		(2	)
Settlements made during the period		(49	)		(48	)
Balance at December 31	$	109		$	105

⁽¹⁾ Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

XML

Acquisitions and Divestitures (Tables)

12 Months Ended

Dec. 31, 2016

Net Sales and Income Before Income Taxes for L-3 MacDonald Humfrey, Micreo, Aerosim and ATM

Net sales and income before income taxes for L3 MacDonald Humfrey, Micreo, Aerosim and ATM, included in L3’s consolidated statement of operations for the year ended December 31, 2016, are presented in the table below.

	Year Ended December 31, 2016
	(in millions)
Net sales	$	37
Income before income taxes	$	7

Components of Loss of Business Divestitures, Related Sales Proceeds Received and Sales Included in Continuing Operations

The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture			Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17	)	$	318	$	185
BSI divestiture		(4	)		26		7
Tinsley Product Line divestiture		(8	)		4		9
Klein divestiture		(2	)		10		8
Total	$	(31	)	$	358	$	209

Net Sales and Income Before Income Taxes for MSI, BSI, Tinsley Product Line and Klein

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December 31,
	2015		2014
	(in millions)
Net sales	$	209	$	596
Income before income taxes	$	—	$	27

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the years ended December 31, 2016 and 2015 assuming that the business acquisitions completed during 2016 and 2015 had occurred on January 1, 2015 and January 1, 2014, respectively. The unaudited pro forma Statements of Operations data below includes adjustment for additional amortization expense related to acquired intangible assets, depreciation and estimated reduction to interest income assuming the 2016 and 2015 acquisitions had occurred on January 1, 2015 and January 1, 2014, respectively.

	Year Ended December 31,
	2016		2015
	(in millions, except per share data)
Pro forma net sales	$	10,655	$	10,700
Pro forma income from continuing operations attributable to L3	$	660	$	307
Pro forma net income (loss) attributable to L3	$	723	$	(215	)
Pro forma diluted earnings per share from continuing operations	$	8.38	$	3.74
Pro forma diluted earnings (loss) per share	$	9.18	$	(2.63	)

NSS [Member]

Statement of Operations Data Classified as Discontinued Operations

The table below presents the statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation and includes allocated interest expense for debt not directly attributable or related to L3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L3 consolidated net assets and (2) L3 consolidated total debt.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net sales	$	86		$	1,088		$	1,138
Cost of sales		(92	)		(1,040	)		(1,065	)
Gain related to business divestiture(1)		64			—			—
Goodwill impairment charges		—			(571	)		—
Operating income (loss) from discontinued operations		58			(523	)		73
Interest expense allocated to discontinued operations		—			(20	)		(20	)
Income (loss) from discontinued operations before income taxes		58			(543	)		53
Income tax benefit (expense)		5			21			(21	)
Income (loss) from discontinued operations, net of income taxes	$	63		$	(522	)	$	32

⁽¹⁾ The year ended December 31, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

Major Classes of Assets and Liabilities Included as Discontinued Operations/Held For Sale

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31, 2015
	(in millions)
Assets
Current assets	$	201
Property, plant and equipment, net		25
Goodwill(1)		390
Other assets		48
Total assets of discontinued operations	$	664
Liabilities
Accounts payable, trade	$	48
Other current liabilities		78
Current liabilities		126
Long-term liabilities		94
Total liabilities of discontinued operations	$	220

⁽¹⁾ The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L3 and NSS business sold.

XML

Contracts in Process (Tables)

12 Months Ended

Dec. 31, 2016

Contracts in Process [Abstract]

Components of Contracts in Process

In connection with contracts in process assumed by the Company in its business acquisitions, the underlying contractual customer relationships are separately recognized as identifiable intangible assets at the date of acquisition, and are discussed and presented in Note 6.

	December 31,
	2016			2015
	(in millions)
Unbilled contract receivables, gross	$	2,020		$	2,120
Unliquidated progress payments		(827	)		(892	)
Unbilled contract receivables, net		1,193			1,228
Inventoried contract costs, gross		1,065			975
Unliquidated progress payments		(203	)		(122	)
Inventoried contract costs, net		862			853
Total contracts in process	$	2,055		$	2,081

General and Administrative, Independent Research and Development and Bid and Proposal Costs

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	137		$	114		$	121
Contract costs incurred:
IRAD and B&P		308			284			270
Other G&A		839			822			804
Total		1,147			1,106			1,074
Amounts charged to cost of sales		(1,111	)		(1,083	)		(1,081	)
Amounts included in inventoried contract costs at end of the year	$	173		$	137		$	114

Selling, General and Administrative Expenses and Research and Development Expenses

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the consolidated statements of operations.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Selling, general and administrative expenses	$	223	$	261	$	297
Research and development expenses		54		52		63
Total	$	277	$	313	$	360

XML

Inventories (Tables)

12 Months Ended

Dec. 31, 2016

Inventories [Abstract]

Inventories at Lower of Cost or Market

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2016		2015
	(in millions)
Raw materials, components and sub-assemblies	$	165	$	164
Work in process		106		103
Finished goods		59		66
Total	$	330	$	333

XML

Goodwill and Identifiable Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Goodwill and Identifiable Intangible Assets [Abstract]

Changes in Goodwill by Segment

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems			Aerospace Systems			Communication Systems			Consolidated Total
	(in millions)
Balance at December 31, 2014
Goodwill	$	3,816		$	1,730		$	1,024		$	6,570
Accumulated impairment losses		(43	)		—			(15	)		(58	)
		3,773			1,730			1,009			6,512
Business acquisitions(1)		233			—			11			244
Business divestitures(2)		(20	)		—			—			(20	)
Business retained from NSS divestiture		26			—			2			28
Goodwill impairment charges		(26	)		(338	)		(20	)		(384	)
Foreign currency translation adjustments(3)		(61	)		(39	)		1			(99	)
Balance at December 31, 2015
Goodwill		3,994			1,691			1,038			6,723
Accumulated impairment losses(4)		(69	)		(338	)		(35	)		(442	)
		3,925			1,353			1,003			6,281
Business acquisitions(1)		315			—			20			335
Foreign currency translation adjustments(3)		(63	)		7			—			(56	)
Balance at December 31, 2016
Goodwill		4,246			1,698			1,058			7,002
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	4,177		$	1,360		$	1,023		$	6,560

⁽¹⁾ For the year ended December 31, 2016, the net increase in goodwill for the Electronic Systems segment was due to the L3 MacDonald Humfrey, Aeroism and Micreo business acquisitions, as well as the final purchase price allocations for the L3 ForceX and L3 CTC business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition. For the year ended December 31, 2015, the net increase in goodwill for the Electronic Systems segment was due to the L3 CTC and L3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition.

⁽²⁾ For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽³⁾ During 2016, the decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, the Euro and the Australian dollar, offset by the weakening of the U.S. dollar against the Canadian dollar. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar. During 2015, the decrease in goodwil presented in the Electronic Systems segment was primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. The decrease in goodwill presented in the Aerospace Systems segment was due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽⁴⁾ The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

Adjustments Related to Goodwill Impairment Charges

The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations and are summarized below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L3 Consolidated
	(in millions)
Vertex Aerospace reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Identifiable Intangible Assets

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2016								December 31, 2015
	Weighed Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)		(in millions)
Customer contractual relationships		15	$	409	$	269	$	140	$	370	$	246	$	124
Technology		11		191		102		89		156		91		65
Other		18		21		12		9		21		11		10
Total		14	$	621	$	383	$	238	$	547	$	348	$	199

Amortization Expense

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Amortization expense	$	35	$	35	$	39

Estimated Amortization Expense

Based on gross carrying amounts at December 31, 2016, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2017 through 2021 is presented in the table below.

	Year Ending December 31,
	2017		2018		2019		2020		2021
	(in millions)
Estimated amortization expense	$	39	$	35	$	32	$	28	$	24

XML

Other Current Liabilities and Other Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Other Current Liabilities and Other Liabilities [Abstract]

Other Current Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2016		2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	70	$	75
Accrued product warranty costs		68		70
Accruals for pending and threatened litigation (see Note 18)(1)		51		6
Accrued interest		43		45
Deferred revenues		34		32
Product returns allowance(2)		5		20
Other		160		146
Total other current liabilities	$	431	$	394

⁽¹⁾ The year ended December 31, 2016, includes $14 million accrued in the third quarter of 2016 in connection with the EoTech matter.

⁽²⁾ In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech HWS products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015 associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $38 million. Accordingly, during 2016 the product returns allowance was increased by $18 million as a reduction to net sales. The product returns allowance, net of refund payments made to eligible owners, was $5 million at December 31, 2016. As of February 3, 2017, the Company had approved refunds at a cost of approximately $35 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material.

Other Liabilities

The table below presents the components of other liabilities.

	December 31,
	2016		2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	124	$	161
Deferred compensation		47		45
Accrued product warranty costs		41		35
Accrued workers’ compensation		30		38
Estimated contingent purchase price payable for acquired businesses (see Note 3)		29		—
Notes payable and capital lease obligations		13		10
Other		84		79
Total other liabilities	$	368	$	368

XML

Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2016			2015
	(in millions)
Land	$	54		$	60
Buildings and improvements		438			431
Machinery, equipment, furniture and fixtures		1,890			1,736
Leasehold improvements		344			343
Gross property, plant and equipment		2,726			2,570
Accumulated depreciation and amortization		(1,605	)		(1,473	)
Property, plant and equipment, net	$	1,121		$	1,097

XML

Debt (Tables)

12 Months Ended

Dec. 31, 2016

Debt [Abstract]

Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Borrowings under Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		—			500
1.50% Senior Notes due 2017		—			350
5.20% Senior Notes due 2019		1,000			1,000
4.75% Senior Notes due 2020		800			800
4.95% Senior Notes due 2021		650			650
3.95% Senior Notes due 2024		350			350
3.85% Senior Notes due 2026		550			—
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(8	)		(8	)
Deferred debt issue costs		(17	)		(16	)
Carrying amount of long-term debt		3,325			3,626
Current portion of long-term debt		—			(499	)
Carrying amount of long-term debt, excluding current portion	$	3,325		$	3,127

⁽¹⁾ During 2016, L3's aggregate borrowings and repayments under the Credit Facility were $819 million. L3 had the full availability of its $1 billion Credit Facility at December 31, 2016 and December 31, 2015.

Information Regarding Outstanding Senior Subordinated Notes

The Senior Notes are unsecured senior obligations of L3. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance	Amount Issued		Discount(1)		Net Cash Proceeds			Effective Interest Rate			Redemption at Treasury Rate(2)(3)
		(in millions)
5.20% Senior Notes due October 15, 2019	October 2, 2009	$	1,000	$	4	$	987			5.25	%	30 bps
4.75% Senior Notes due July 15, 2020	May 21, 2010	$	800	$	3	$	790			4.79	%	25 bps
4.95% Senior Notes due February 15, 2021	February 7, 2011	$	650	$	4	$	639			5.02	%	25 bps
3.95% Senior Notes due May 28, 2024	May 28, 2014	$	650	$	3	$	641	(4)		4.02	%	20 bps
3.85% Senior Notes due December 15, 2026	December 5, 2016	$	550	$	3	$	542			3.91	%	25 bps

⁽¹⁾ Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾ The Senior Notes maturing in 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 and 2026 may be redeemed at any time prior to February 28, 2024 and September 15, 2026, respectively, (three months prior to their maturity) at the option of L3, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 and 2026 are redeemed at any time on or after February 28, 2024 and September 15, 2026, respectively, the redemption price would be equal to 100% of the principal amount.

⁽³⁾ Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L3 to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾ The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

Repurchases, Redemptions and Maturities of Senior Notes

The repurchases, redemptions and maturities of senior notes are presented in the table below.

Note	Settlement Type	Date Settled	Aggregate Amount		Debt Retirement Charge		Cash Payments
			(in millions)
1.50% Senior Notes due 2017(1)	Redemption	December 30, 2016	$	350	$	2	$	351
3.95% Senior Notes due 2016	Maturity	November 15, 2016	$	200	$	—	$	200
3.95% Senior Notes due 2016(2)	Redemption	May 20, 2016	$	300	$	5	$	305
3.95% Senior Notes due 2024	Tender Offer	December 22, 2015	$	300	$	1	$	297
CODES due 2035(3)	Redemption	June 20, 2014	$	689	$	—	$	935

⁽¹⁾ The 1.50% Senior Notes due 2017 were redeemed at a price equal to 100.323%of the principal amount thereof,plus accrued and unpaid interest to the redemption date. Interest ceased to accrue on and after the redemption date.

⁽²⁾ The 3.95% Senior Notes due 2016 were redeemed at a price equal to 101.475% of the principal amount thereof, plus accrued and unpaid interest. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive payment of the Redemption Price and accrued interest.

⁽³⁾ In 2005, L3 sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, L3 reporchased approximately $11 million of the CODES. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L3 settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014.

XML

Accumulated Other Comprehensive (Loss) Income (AOCI) (Tables)

12 Months Ended

Dec. 31, 2016

Accumulated Other Comprehensive (Loss) Income (AOCI) [Abstract]

Summary of Amounts Reclassified from AOCI into Net Income

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency translation			Unrealized gains (losses) on hedging instruments			Unrecognized (losses) gains and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2013	$	142		$	1		$	(253	)	$	(110	)
Other comprehensive loss before reclassifications, net of tax		(123	)		(13	)		(354	)		(490	)
Amounts reclassified from AOCI, net of tax		—			7			9			16
Net current period other comprehensive (loss)		(123	)		(6	)		(345	)		(474	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive (loss) income before reclassifications, net of tax		(161	)		(15	)		81			(95	)
Amounts reclassified from AOCI, net of tax		41			12			52			105
Net current period other comprehensive (loss) income		(120	)		(3	)		133			10
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(77	)		3			(119	)		(193	)
Amounts reclassified from AOCI, net of tax		—			11			30			41
Net current period other comprehensive (loss) income		(77	)		14			(89	)		(152	)
Balance at December 31, 2016	$	(178	)	$	6		$	(554	)	$	(726	)

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)									Affected Line Item in the Audited Consolidated Statements of Operations
	Year Ended December 31,
Details About AOCI Components	2016			2015			2014
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	—		$	(41	)	$	—		Loss related to business divestitures
		—			(41	)		—		Income from continuing operations before income taxes
	$	—		$	(41	)	$	—		Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	(2	)	$	—		Loss related to business divestitures
Other		(13	)		(16	)		(8	)	Cost of sales-products
		(13	)		(18	)		(8	)	Income from continuing operations before income taxes
		2			6			1		Provision for income taxes
	$	(11	)	$	(12	)	$	(7	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	(14	)	$	—		Loss related to business divestitures
Net loss		(48	)		(67	)		(15	)	(b)
		(48	)		(81	)		(15	)	Income from continuing operations before income taxes
		18			29			6		Provision for income taxes
	$	(30	)	$	(52	)	$	(9	)	Income from continuing operations
Total reclassification for the period	$	(41	)	$	(105	)	$	(16	)	Income from continuing operations

^(a) Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b) Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

XML

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Company's Assets and Liabilities at Fair Value on Recurring Basis

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2016						2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	104	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		12		—		—		2		—
Total assets	$	104	$	12	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	6	$	—	$	—	$	16	$	—
Contingent consideration(4)		—		—		29		—		—		—
Total liabilities	$	—	$	6	$	29	$	—	$	16	$	—

⁽¹⁾ Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾ Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾ Level 3 is based on pricing inputs that are not observable and not corroborated by market data.

⁽⁴⁾ The contingent consideration liability represents the future potential earn-out payments relating to the L3 MacDonald Humfrey acquisition. The fair value of the contingent consideration liability is based on a Monte Carlo Simulation of the aggregate revenue of L3 MacDonald Humfrey for the three-year period ending December 31, 2019. The significant unobservable inputs used in calculating the fair value of the contingent consideration include: (i) projected revenues of the L3 MacDonald Humfrey acquired business, (ii) company specific risk premium, which is a component of the discount rate applied to the revenue projections, (iii) and volatility. The fair value of the contingent consideration for potential earn-out payments is reassessed quarterly, including an analysis of the significant inputs used in the evaluation, as well as the accretion of the present value discount. Changes are reflected within cost of sales in the consolidated statements of operations.

XML

Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Financial Instruments [Abstract]

Carrying Amounts and Estimated Fair Values of Company's Long-Term Debt and Foreign Currency Forward Contracts

The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2016				December 31, 2015
	Carrying Amount		Estimated Fair Value		Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,325	$	3,526	$	3,626		$	3,754
Foreign currency forward contracts(2)	$	6	$	6	$	(14	)	$	(14	)

⁽¹⁾ The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾ The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

XML

Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Financial Instruments [Abstract]

Notional Amounts of Company's Outstanding Foreign Currency Forward Contracts by Currency

The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2016.

Currency	Notional Amount
	(in millions)
U.S. dollar	$	117
Euro		109
Canadian dollar		96
British pound		28
Other		8
Total	$	358

Location of Company's Derivative Instruments Recorded at Fair Value on the Consolidated Balance Sheets

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2016								December 31, 2015
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1)	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	10	$	2	$	6	$	—	$	1	$	1	$	15	$	1

⁽¹⁾ See Note 12 for a description of the fair value hierarchy related to the Company's foreign currency forward contracts.

XML

L3's Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

L3's Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Earnings per Share (EPS)

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	724		$	(225	)	$	677
Net income from continuing operations attributable to noncontrolling interests		(14	)		(15	)		(13	)
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) attributable to L3’s common shareholders:
Continuing operations	$	647		$	282		$	632
Discontinued operations, net of income tax		63			(522	)		32
Net income (loss) attributable to L3’s common shareholders	$	710		$	(240	)	$	664
Earnings (loss) per share attributable to L3’s common shareholders:
Basic:
Weighted average common shares outstanding		77.4			80.7			85.4
Basic earnings (loss) per share:
Continuing operations	$	8.36		$	3.49		$	7.40
Discontinued operations, net of income tax		0.81			(6.46	)		0.38
Net income (loss)	$	9.17		$	(2.97	)	$	7.78
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.4			80.7			85.4
Assumed exercise of stock options		2.6			2.4			3.0
Unvested restricted stock awards		1.0			1.3			1.6
Employee stock purchase plan contributions		0.1			0.1			—
Performance unit awards		0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.4	)		(2.7	)		(3.1	)
Assumed conversion of the CODES(1)		—			—			0.8
Common and potential common shares		78.8			81.9			87.8
Diluted earnings (loss) per share:
Continuing operations	$	8.21		$	3.44		$	7.20
Discontinued operations, net of income tax		0.80			(6.37	)		0.36
Net income (loss)	$	9.01		$	(2.93	)	$	7.56

⁽¹⁾ The CODES were retired on June 20, 2014 and were dilutive for the year ended December 31, 2014 as the average market price of L3’s common stock during the period that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L3’s common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71.

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Taxes [Abstract]

Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Domestic	$	654	$	192	$	707
Foreign		196		130		165
Income from continuing operations before income taxes	$	850	$	322	$	872

Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2016		2015			2014
	(in millions)
Current income tax provision:
Federal	$	88	$	60		$	78
State and local		10		5			1
Foreign		48		26			35
Subtotal		146		91			114
Deferred income tax provision/(benefit):
Federal		37		(67	)		101
State and local		6		(1	)		11
Foreign		—		2			1
Subtotal		43		(66	)		113
Total provision for income taxes	$	189	$	25		$	227

Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.3			2.0			2.1
Foreign income taxes		(2.9	)		(14.2	)		(3.6	)
Manufacturing benefits		(2.2	)		(3.7	)		(1.7	)
Research and experimentation and other tax credits		(4.4	)		(12.9	)		(4.3	)
Resolution of tax contingencies		(2.9	)		(2.8	)		(1.0	)
Tax deductible dividends		(0.9	)		(2.3	)		(0.8	)
Equity compensation - excess income tax benefits		(2.0	)		—			—
Goodwill impairment		—			6.6			—
Other, net		0.2			0.1			0.3
Effective income tax rate on continuing operations		22.2	%		7.8	%(1)		26.0	%

⁽¹⁾ In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

Components of Net Deferred Tax Assets and Liabilities

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Deferred tax assets:
Inventoried costs	$	63		$	56
Compensation and benefits		152			147
Pension and postretirement benefits		415			354
Loss carryforwards		18			12
Tax credit carryforwards		6			6
Other		89			79
Deferred tax assets		743			654
Less: valuation allowance		(12	)		(9	)
Deferred tax assets, net of valuation allowance		731			645
Deferred tax liabilities:
Goodwill and other intangible assets	$	(752	)	$	(675	)
Income recognition on contracts in process		(63	)		(36	)
Property, plant and equipment		(96	)		(94	)
Other		(54	)		(56	)
Deferred tax liabilities		(965	)		(861	)
Total deferred tax liabilities, net of valuation allowance	$	(234	)	$	(216	)

Classification of Deferred Tax Assets and Liabilities

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2016			2015
	(in millions)
Non-current deferred tax assets	$	2		$	3
Non-current deferred tax liabilities		(236	)		(219	)
Total net deferred tax liabilities	$	(234	)	$	(216	)

Summary of Loss and Tax Credit Carryforwards

The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2016
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross		Tax Effected		Expiration Periods
	(in millions)				(in millions)
Capital loss carryforwards	$	6	$	2	$	6	$	2	2017-2021
Federal net operating loss carryforwards		33		11		5		2	2026-2035
Foreign net operating loss carryforwards		14		3		3		1	Indefinite
State net operating loss carryforwards		136		2		47		1	2017-2036
Total loss carryforwards			$	18			$	6
State tax credit carryforwards		7		5		7		4	2017-2031
Foreign tax credit carryforwards		1		1		—		—	Indefinite
Total tax credit carryforwards			$	6			$	4

Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties

A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2016			2015			2014
	(in millions)
Balance at January 1	$	140		$	169		$	155
Additions for tax positions related to the current year		16			14			20
Additions for tax positions related to prior years		2			2			12
Reductions for tax positions related to prior years		(39	)		(37	)		(11	)
Reductions for tax positions related to settlements with taxing authorities		(1	)		(1	)		(1	)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7	)		(7	)		(6	)
Balance at December 31	$	111		$	140		$	169

XML

Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Stock-Based Compensation [Abstract]

Stock-Based Compensation by Form of Award

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Stock options	$	10		$	9		$	9
Restricted stock units		35			38			40
Performance units		4			2			3
Total before income taxes		49			49			52
Income taxes		(18	)		(18	)		(20	)
Total after income taxes		31			31			32
Less: Stock-based compensation recorded in discontinued operations, net of income taxes		1	(1)		1			1
Stock-based compensation recorded in continuing operations, net of income taxes	$	30		$	30		$	31

⁽¹⁾ Amount relates to the net impact of share based payment award modification in connection with the sale of NSS, which is further discussed below.

Company's Stock Option Activity and Changes

The table below presents a summary of the Company’s stock option activity at December 31, 2016 and changes during the year then ended.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)					(in years)		(in millions)
Number of shares under option:
Outstanding at January 1, 2016		2,931.5		$	92.59		6.0	$	84
Options granted		617.6			116.68
Options exercised		(647.5	)		82.78
Options forfeited		(54.1	)		118.82
Outstanding at December 31, 2016		2,847.5		$	99.54		6.1	$	150
Vested and expected to vest at December 31, 2016(1)		2,835.7		$	99.46		6.1	$	149
Exercisable at December 31, 2016		1,802.0		$	87.77		4.9	$	116

⁽¹⁾ Represents outstanding options reduced by expected forfeitures for options not fully vested.

Weighted Average Assumptions in Valuation Model

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2016 Grants			2015 Grants			2014 Grants
Expected holding period (in years)		5.0			5.0			5.5
Expected volatility		21.3	%		21.4	%		24.4	%
Expected dividend yield		2.8	%		2.4	%		2.7	%
Risk-free interest rate		1.1	%		1.5	%		1.7	%

Company's Nonvested Restricted Stock Unit Awards and Changes

The table below presents a summary of the Company’s nonvested restricted stock unit awards at December 31, 2016 and changes during the year then ended.

	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested balance at January 1, 2016		1,171.9		$	102.91
Granted		397.6			116.72
Vested		(478.3	)		76.83
Forfeited		(113.3	)		111.89
Nonvested balance at December 31, 2016		977.9		$	120.24

Company's Performance Unit Awards Based on Expected Performance

The table below presents a summary of the Company’s performance unit awards based on expected performance at December 31, 2016 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of Units			Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2016		39.6		$	121.27
Granted		51.9			116.20
Increase due to expected performance		35.6			127.14
Vested		—			—
Forfeited		(2.4	)		121.72
Outstanding at December 31, 2016		124.7		$	120.83

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies [Abstract]

Future Minimum Payments under Non-Cancelable Operating Leases

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2016.

	Real Estate		Equipment		Total
	(in millions)
2017	$	94	$	5	$	99
2018		81		3		84
2019		63		2		65
2020		90		—		90
2021		45		—		45
Thereafter		213		—		213
Total minimum payments required		586		10		596
Less: Sublease rentals under non-cancelable leases		10		—		10
Net minimum payments required	$	576	$	10	$	586

XML

Pensions and Other Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2016

Pensions and Other Employee Benefits [Abstract]

Changes in Benefit Obligations, Plan Assets and Funded Status and Aggregate Balance Sheet Impact

The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,448		$	3,663		$	184		$	199
Service cost		108			123			2			3
Interest cost		135			149			6			7
Plan participants’ contributions		2			2			4			4
Amendments		15			—			(3	)		—
Actuarial loss (gain)		167			(261	)		(3	)		(12	)
Foreign currency exchange rate changes		9			(53	)		—			(4	)
Curtailments, settlements and special termination benefits		2			3			—			—
Business divestiture		—			(59	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Benefit obligation at the end of the year	$	3,758		$	3,448		$	177		$	184
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,552		$	2,570		$	57		$	60
Actual return on plan assets		189			54			5			—
Employer contributions		97			97			7			6
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		9			(52	)		—			—
Benefits paid		(128	)		(119	)		(13	)		(13	)
Fair value of plan assets at the end of the year	$	2,721		$	2,552		$	60		$	57
Unfunded status at the end of the year	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)
Assets and (liabilities) recognized on the consolidated balance sheets consist of:
Non-current assets	$	37		$	37		$	—		$	—
Current liabilities		(6	)		(5	)		(8	)		(8	)
Non-current liabilities		(1,068	)		(928	)		(109	)		(119	)
	$	(1,037	)	$	(896	)	$	(117	)	$	(127	)

Net Loss and Prior Service Cost Balances in Accumulated Other Comprehensive Loss Account

The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2016		2015		2016			2015
	(in millions)
Net loss (gain)	$	896	$	768	$	(12	)	$	(10	)
Prior service cost (credit)		14		—		(4	)		(3	)
Total amount recognized	$	910	$	768	$	(16	)	$	(13	)

Pension Plans with an Accumulated Benefit Obligation in Excess of Fair Value of Plan Assets

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,413 million at December 31, 2016 and $3,120 million at December 31, 2015. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31, 2016 and 2015.

	Pension Plans
	2016		2015
	(in millions)
Projected benefit obligation	$	3,528	$	3,232
Accumulated benefit obligation	$	3,192	$	2,913
Fair value of plan assets	$	2,456	$	2,302

Weighted Average Assumptions Used to Determine Benefit Obligations

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2016 and 2015.

	Pension Plans						Postretirement Benefit Plans
	2016			2015			2016			2015
Benefit obligations:
Discount rate		4.41	%(1)		4.67	%(1)		4.05	%(2)		4.22	%(2)
Rate of compensation increase		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.46% and 4.73% for the U.S. based plans, respectively, and 3.80% and 3.93% for the Canadian based plans, respectively.

⁽²⁾ The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.11% and 4.28% for the U.S. based plans, respectively, and 3.64% and 3.74% for the Canadian based plans, respectively.

⁽³⁾ The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2016 and 2015.

Components of Net Periodic Benefit Cost

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Components of net periodic benefit cost:
Service cost	$	108		$	123		$	106		$	2		$	3		$	3
Interest cost		135			149			147			6			7			8
Expected return on plan assets		(200	)		(205	)		(193	)		(4	)		(5	)		(4	)
Amortization of prior service cost (credits)		—			1			2			(2	)		(2	)		(2	)
Amortization of net loss (gain)		52			68			17			(2	)		—			(2	)
Curtailment or settlement loss (gain)		2			3			1			—			—			(1	)
Net periodic benefit cost	$	97		$	139		$	80		$	—		$	3		$	2

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)	$	179		$	(132	)	$	560		$	(4	)	$	(7	)	$	5
Prior service cost (credit)		15			—			1			(2	)		—			(1	)
Amortization of net (loss) gain		(52	)		(68	)		(17	)		2			—			2
Amortization of prior service (cost) credit		—			(1	)		(2	)		2			2			2
Total recognized in other comprehensive income		142			(201	)		542			(2	)		(5	)		8
Total recognized in net periodic benefit cost and other comprehensive income	$	239		$	(62	)	$	622		$	(2	)	$	(2	)	$	10

Amounts Expected to be Amortized from Accumulated OCI and Recognized as Components of Net Periodic Benefit Costs

The following table summarizes the amounts expected to be amortized from accumulated OCI and recognized as components of net periodic benefit costs during 2017.

	Pension Plans		Postretirement Benefit Plans			Total
	(in millions)
Net loss (gain)	$	62	$	(2	)	$	60
Prior service cost (credit)		1		(1	)		—
	$	63	$	(3	)	$	60

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014.

	Pension Plans									Postretirement Benefit Plans
	2016			2015			2014			2016			2015			2014
Discount rates:
Benefit obligation		4.67	%(1)		4.14	%(1)		5.03	%(1)		4.22	%(4)		3.70	%(4)		4.43	%(4)
Service cost		4.83	%		—	(5)		—	(5)		4.37	%		—	(5)		—	(5)
Interest cost		3.95	%		—	(5)		—	(5)		3.26	%		—	(5)		—	(5)
Expected long-term return on plan assets		7.92	%(2)		8.14	%(2)		8.13	%(2)		7.42	%		7.65	%		7.64	%
Rate of compensation increase		3.50	%(3)		3.50	%(3)		3.50	%(3)

⁽¹⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015, and 2014 were comprised of separate assumptions determined by country of 4.73%, 4.20% and 5.10% for the U.S. based plans and 3.93%, 3.90% and 4.70% for the Canadian based plans, respectively.

⁽²⁾ The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.00% and 8.25% for the U.S. based plans for the years ended December 31, 2016 and 2015, respectively, and 7.25% for the Canadian based plans for the years ended December 31, 2016, and 2015.

⁽³⁾ The weighted average rate of compensation increase assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 3.50% for both the U.S and Canadian based plans.

⁽⁴⁾ The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 4.28%, 3.70% and 4.40% for the U.S. based plans and 3.74%, 3.70% and 4.60% for the Canadian based plans, respectively.

⁽⁵⁾ Not applicable as the Company changed to the spot rate approach beginning in 2016 as described above.

Effect of One Percentage Point Change in Assumed Health Care Cost Trend Rates

A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase		Decrease
	(in millions)
Effect on total service and interest cost	$	—	$	—
Effect on postretirement benefit obligations	$	5	$	(4	)

Allowable Range for Each Major Category of the Plans' Assets and Weighted-Average Asset Allocations by Asset Category

The table below presents the allowable range for each major category of the plans’ assets at December 31, 2016 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2016 and 2015, by asset category.

	U.S.							Canada
Asset Category	Range	2016			2015			Range	2016			2015
Domestic equity(1)	30%-60%		55	%		52	%	—		15	%		13	%
International equity(2)	10%-20%		10			11		—		62			62
Total equities	45%-75%		65			63		40%-80%		77			75
Fixed income securities	20%-40%		22			22		—		13			16
Other, primarily cash and cash equivalents	0%-15%		5			8		—		10			9
Total fixed income securities and cash and cash equivalents	—		27			30		20%-60%		23			25
Real estate securities	0%-15%		8			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾ Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾ International equities for Canadian plans includes equities of U.S. companies.

Fair Value of the Company's Pension Plans' and Postretirement Benefit Plans' Assets

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2016									Fair Value Measured at December 31, 2016
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,331	$	—	$	—	$	1,331		$	79	$	—	$	—	$	79
International Equity		85		—		—		85			104		—		—		104
Fixed Income — Investment Grade(2)		255		159		—		414			—		—		—		—
Fixed Income — High Yield(3)		—		136		—		136			—		—		—		—
Real Estate Investment Trusts(4)		193		—		—		193			—		—		—		—
Other(5)		—		114		—		114			5		27		—		32
Total assets at fair value	$	1,864	$	409	$	—	$	2,273		$	188	$	27	$	—	$	215
Liabilities for unsettled trades, net								(23	)								—
Other investments measured at net asset value(6)(7)								171									85
Total							$	2,421								$	300

	U.S. Pension Plans’ Assets									Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015									Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	1,200	$	—	$	—	$	1,200		$	73	$	—	$	—	$	73
International Equity		79		—		—		79			91		—		—		91
Fixed Income — Investment Grade(2)		237		163		—		400			—		—		—		—
Fixed Income — High Yield(3)		—		114		—		114			—		—		—		—
Real Estate Investment Trusts(4)		170		—		—		170			—		—		—		—
Other(5)		—		166		—		166			6		21		—		27
Total assets at fair value	$	1,686	$	443	$	—	$	2,129		$	170	$	21	$	—	$	191
Liabilities for unsettled trades, net								(30	)								—
Other investments measured at net asset value(6)(7)								170									92
Total							$	2,269								$	283

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾ Approximately 62% and 59% at December 31, 2016 and 2015, respectively, of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the Fund) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 38% and 41% at December 31, 2016 and 2015, respectively, of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of: (1) money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the U.S. plans other investments measured using NAV at December 31, 2016 and 2015 and approximately 55% and 52% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 45% and 48% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2016								Fair Value Measured at December 31, 2015
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	37	$	—	$	—	$	37	$	35	$	—	$	—	$	35
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		8		3		—		11
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		3		—		—		3
Other(5)		—		3		—		3		—		2		—		2
Total assets at fair value	$	49	$	8	$	—	$	57	$	47	$	7	$	—	$	54
Other investments measured at net asset value(6)(7)								3								3
Total							$	60							$	57

⁽¹⁾ Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾ Approximately 73% at December 31, 2016 and 2015 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2016 and 2015 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾ Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾ REITs consist of securities that trade on the major exchanges and invest directly, either through properties or mortgages.

⁽⁵⁾ Other consists primarily of money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾ In accordance with ASU 2015-07, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2016 and 2015 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

Estimated Future Benefit Payments

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension Benefits		Benefit Payments		Subsidy Receipts
	(in millions)
2017	$	162	$	13	$	—
2018		156		13		—
2019		162		14		—
2020		171		14		—
2021		175		14		—
Years 2022-2026		1,001		65		1

Cash Contributions and Expenses under Multi-Employer Benefit Plans

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

	EIN/Pension Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L3									Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
Pension Fund		2016	2015		2016			2015			2014
								(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$	26	(3)	$	23	(4)	$	19	(4)	No	4/9/2017 to 6/28/2019(5)
Other Pension Funds(6)						—			—			—
Total contributions					$	26		$	23		$	19

⁽¹⁾ A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾ Funding improvement plan or rehabilitation plan.

⁽³⁾ At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2016 was not available.

⁽⁴⁾ Represents 5% of total plan contributions for the years ended December 31, 2015 and 2014 based on Form 5500.

⁽⁵⁾ The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 63% of 2016 contributions.

⁽⁶⁾ Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

XML

Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2016

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Interest paid on outstanding debt	$	162	$	182	$	176
Income tax payments	$	120	$	132	$	129
Income tax refunds	$	8	$	8	$	9

XML

Segment Information (Tables)

12 Months Ended

Dec. 31, 2016

Segment Information [Abstract]

Summary of Segment Information

The tables below present net sales, operating income (loss), depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2016			2015			2014
	(in millions)
Net Sales
Products
Electronic Systems	$	3,293		$	3,390		$	3,685
Aerospace Systems		1,662			1,661			1,722
Communication Systems		1,585			1,648			1,546
Elimination of intercompany sales		(98	)		(110	)		(114	)
Total products sales		6,442			6,589			6,839
Services
Electronic Systems	$	1,042		$	999		$	1,057
Aerospace Systems		2,580			2,503			2,604
Communication Systems		488			441			539
Elimination of intercompany sales		(41	)		(66	)		(53	)
Total services sales		4,069			3,877			4,147
Consolidated total	$	10,511		$	10,466		$	10,986
Operating income
Electronic Systems	$	518		$	489		$	533
Aerospace Systems		289			205			283
Communication Systems		201			196			196
Segment total		1,008			890			1,012
Loss related to business divestitures(1)		—			(31	)		—
Goodwill impairment charges(2)		—			(384	)		—
Consolidated total	$	1,008		$	475		$	1,012

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Depreciation and amortization
Electronic Systems	$	105	$	110	$	123
Aerospace Systems		54		50		40
Communication Systems		47		50		51
Consolidated total	$	206	$	210	$	214
Capital Expenditures
Electronic Systems	$	113	$	99	$	80
Aerospace Systems		56		55		59
Communication Systems		37		37		29
Corporate		10		6		6
Consolidated total	$	216	$	197	$	174
Total Assets
Electronic Systems	$	6,802	$	6,426	$	6,281
Aerospace Systems		2,535		2,630		3,011
Communication Systems		2,031		1,984		2,025
Corporate		497		365		566
Assets held for sale		—		—		547
Assets of discontinued operations		—		664		1,262
Consolidated total	$	11,865	$	12,069	$	13,692

⁽¹⁾ See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

Property, Plant and Equipment by Geographic Area

The table below presents property, plant and equipment, net by geographic area.

	Year Ended December 31,
	2016		2015
	(in millions)
United States	$	974	$	971
All Other		147		126
Total	$	1,121	$	1,097

Company's Sales Attributable to U.S. Customers and International Customers

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S.	$	8,199	$	7,908	$	8,051
International:
United Kingdom		331		336		335
Canada		297		281		289
Australia		254		321		254
Saudi Arabia		159		201		160
South Korea		127		207		226
Japan		81		95		124
France		75		62		74
Other		988		1,055		1,473
Total international		2,312		2,558		2,935
Consolidated	$	10,511	$	10,466	$	10,986

Net Sales to Principal Customers

Net sales to principal customers are summarized in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
U.S. Government agencies(1)	$	7,649	$	7,291	$	7,464
Commercial		1,282		1,376		1,656
Foreign governments(1)		1,580		1,799		1,866
Consolidated	$	10,511	$	10,466	$	10,986

⁽¹⁾ Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

XML

Employee Severance and Termination Costs (Tables)

12 Months Ended

Dec. 31, 2016

Employee Severance and Termination Costs [Abstract]

Employee Severance and Other Termination Costs Incurred by Reportable Segment

Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2016		2015		2014
	(in millions)
Electronic Systems	$	8	$	8	$	16
Aerospace Systems		2		4		5
Communication Systems		7		6		8
Consolidated	$	17	$	18	$	29

XML

Unaudited Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2016

Unaudited Quarterly Financial Data [Abstract]

Unaudited Quarterly Financial Data

Unaudited summarized financial data by quarter for the years ended December 31, 2016 and 2015 is presented in the table below. The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
	(in millions, except per share data)
2016
Sales	$	2,353	$	2,664	$	2,505		$	2,989
Operating income		252		247		215			294
Income from continuing operations		167		151		151			192
Net income		230		151		151			192
Net income attributable to L3		227		147		148			188
Basic EPS from continuing operations(1)		2.11		1.90		1.91			2.43
Basic EPS(1)		2.92		1.90		1.91			2.43
Diluted EPS from continuing operations(1)		2.08		1.88		1.88			2.38
Diluted EPS(1)		2.87		1.88		1.88			2.38
2015
Sales	$	2,488	$	2,543	$	2,564		$	2,871
Operating income (loss)		187		153		231			(96	)
Income (loss) from continuing operations		105		120		128			(56	)
Net income (loss)		109		124		(296	)		(162	)
Net income (loss) attributable to L3		105		120		(299	)		(166	)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56			(0.76	)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74	)		(2.11	)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54			(0.76	)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68	)		(2.11	)

⁽¹⁾ EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

XML

Financial Information of L3 and Its Subsidiaries (Tables)

12 Months Ended

Dec. 31, 2016

Financial Information of L3 and Its Subsidiaries [Abstract]

Condensed Combining Balance Sheets

The following 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 elimination of the holding company structure and the Merger discussed in Note 2, 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 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		2,162		3,227		1,171		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,867		5,430		—		(11,297	)		—
Total assets	$	10,216	$	10,846	$	2,236	$	(11,433	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		282		(282	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325
Total liabilities		5,663		1,222		774		(418	)		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	$	2,236	$	(11,433	)	$	11,865

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
At December 31, 2015:
Current assets:
Cash and cash equivalents	$	137	$	—	$	165	$	(95	)	$	207
Billed receivables, net		278		297		171		—			746
Contracts in process		872		958		251		—			2,081
Other current assets		288		137		109		—			534
Assets of discontinued operations		—		664		—		—			664
Total current assets		1,575		2,056		696		(95	)		4,232
Goodwill		2,318		2,973		990		—			6,281
Other assets		800		496		260		—			1,556
Investment in and amounts due from consolidated subsidiaries		5,609		3,739		111		(9,459	)		—
Total assets	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069
Current portion of long-term debt	$	499	$	—	$	—	$	—		$	499
Current liabilities		911		899		445		(95	)		2,160
Liabilities of discontinued operations		—		220		—		—			220
Other long-term liabilities		1,410		195		29		—			1,634
Long-term debt		3,127		—		—		—			3,127
Total liabilities		5,947		1,314		474		(95	)		7,640
L3 shareholders’ equity		4,355		7,950		1,583		(9,533	)		4,355
Noncontrolling interests		—		—		—		74			74
Total equity		4,355		7,950		1,583		(9,459	)		4,429
Total liabilities and equity	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069

Condensed Combining Statements of Operations

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the year ended December 31, 2016:
Total net sales	$	3,388		$	6,063		$	1,379		$	(319	)	$	10,511
Total cost of sales		(3,078	)		(5,610	)		(1,134	)		319			(9,503	)
Operating income		310			453			245			—			1,008
Interest expense		(168	)		(1	)		—			—			(169	)
Interest and other income, net		11			1			6			—			18
Debt retirement charge		(7	)		—			—			—			(7	)
Income from continuing operations before income taxes		146			453			251			—			850
Provision for income taxes		(32	)		(101	)		(56	)		—			(189	)
Equity in net income of consolidated subsidiaries		596			—			—			(596	)		—
Income from continuing operations		710			352			195			(596	)		661
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		710			415			195			(596	)		724
Net income attributable to noncontrolling interests		—			—			—			(14	)		(14	)
Net income attributable to L3	$	710		$	415		$	195		$	(610	)	$	710
Comprehensive income attributable to L3	$	558		$	425		$	118		$	(543	)	$	558
For the year ended December 31, 2015:
Total net sales	$	3,580		$	5,265		$	1,935		$	(314	)	$	10,466
Total cost of sales		(3,283	)		(4,906	)		(1,701	)		314			(9,576	)
(Loss) gain related to business divestitures		(13	)		(31	)		13			—			(31	)
Goodwill impairment charges		—			(364	)		(20	)		—			(384	)
Operating income (loss)		284			(36	)		227			—			475
Interest expense		(167	)		(1	)		(1	)		—			(169	)
Interest and other income, net		16			—			1			—			17
Debt retirement charge		(1	)		—			—			—			(1	)
Income (loss) from continuing operations before income taxes		132			(37	)		227			—			322
(Provision) benefit for income taxes		(10	)		3			(18	)		—			(25	)
Equity in net loss of consolidated subsidiaries		(362	)		—			—			362			—
(Loss) income from continuing operations		(240	)		(34	)		209			362			297
Loss from discontinued operations, net of income tax		—			(522	)		—			—			(522	)
Net (loss) income		(240	)		(556	)		209			362			(225	)
Net income attributable to noncontrolling interests		—			—			—			(15	)		(15	)
Net (loss) income attributable to L3	$	(240	)	$	(556	)	$	209		$	347		$	(240	)
Comprehensive (loss) income attributable to L3	$	(230	)	$	(560	)	$	98		$	462		$	(230	)
For the year ended December 31, 2014:
Total net sales	$	3,586		$	5,460		$	2,218		$	(278	)	$	10,986
Total cost of sales		(3,255	)		(5,017	)		(1,980	)		278			(9,974	)
Operating income		331			443			238			—			1,012
Interest expense		(156	)		(2	)		—			—			(158	)
Interest and other income, net		15			—			3			—			18
Income from continuing operations before income taxes		190			441			241			—			872
Provision for income taxes		(49	)		(115	)		(63	)		—			(227	)
Equity in net income of consolidated subsidiaries		523			—			—			(523	)		—
Income from continuing operations		664			326			178			(523	)		645
Income from discontinued operations, net of income tax		—			32			—			—			32
Net income		664			358			178			(523	)		677
Net income attributable to noncontrolling interests		—			—			—			(13	)		(13	)
Net income attributable to L3	$	664		$	358		$	178		$	(536	)	$	664
Comprehensive income attributable to L3	$	190		$	356		$	47		$	(403	)	$	190

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 ended December 31, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	482		$	542		$	259		$	(186	)	$	1,097
Investing activities:
Business acquisitions, net of cash acquired		(388	)		—			—			—			(388	)
Proceeds from sale of business, net of closing date cash balances		563			—			(2	)		—			561
Other investing activities		(60	)		(86	)		(43	)		—			(189	)
Net cash from (used in) investing activities from continuing operations		115			(86	)		(45	)		—			(16	)
Financing activities:
Proceeds from sale of senior notes		547			—			—			—			547
Redemption of senior notes		(856	)		—			—			—			(856	)
Common stock repurchased		(373	)		—			—			—			(373	)
Dividends paid on L3’s common stock		(220	)		—			—			—			(220	)
Other financing activities		459			(399	)		(159	)		145			46
Net cash used in financing activities from continuing operations		(443	)		(399	)		(159	)		145			(856	)
Effect of foreign currency exchange rate changes on cash		—			—			(13	)		—			(13	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		154			1			42			(41	)		156
Cash and cash equivalents, beginning of the year		137			—			165			(95	)		207
Cash and cash equivalents, end of the year	$	291		$	1		$	207		$	(136	)	$	363

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	616		$	422		$	216		$	(185	)	$	1,069
Investing activities:
Business acquisitions, net of cash acquired		(320	)		—			—			—			(320	)
Proceeds from sale of business, net of closing date cash balances		14			28			276			—			318
Other investing activities		(84	)		(69	)		(37	)		—			(190	)
Net cash (used in) from investing activities from continuing operations		(390	)		(41	)		239			—			(192	)
Financing activities:
Repurchases of senior notes		(297	)		—			—			—			(297	)
Common stock repurchased		(740	)		—			—			—			(740	)
Dividends paid on L3's common stock		(214	)		—			—			—			(214	)
Other financing activities		801			(434	)		(473	)		152			46
Net cash used in financing activities from continuing operations		(450	)		(434	)		(473	)		152			(1,205	)
Effect of foreign currency exchange rate changes on cash		—			—			(19	)		—			(19	)
Net increase in cash and cash equivalents of discontinued operations		—			51			—			—			51
Change in cash balance in assets held for sale		—			1			60			—			61
Net (decrease) increase in cash		(224	)		(1	)		23			(33	)		(235	)
Cash and cash equivalents, beginning of the year		361			1			142			(62	)		442
Cash and cash equivalents, end of the year	$	137		$	—		$	165		$	(95	)	$	207
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	467		$	571		$	143		$	(93	)	$	1,088
Investing activities:
Business acquisitions, net of cash acquired		(57	)		—			—			—			(57	)
Other investing activities		(58	)		(85	)		(21	)		—			(164	)
Net cash used in investing activities from continuing operations		(115	)		(85	)		(21	)		—			(221	)
Financing activities:
Proceeds from sale of senior notes		996			—			—			—			996
Redemption of CODES		(935	)		—			—			—			(935	)
Common stock repurchased		(823	)		—			—			—			(823	)
Dividends paid on L3's common stock		(208	)		—			—			—			(208	)
Other financing activities		721			(530	)		(164	)		50			77
Net cash used in financing activities from continuing operations		(249	)		(530	)		(164	)		50			(893	)
Effect of foreign currency exchange rate changes on cash		—			—			(17	)		—			(17	)
Net increase in cash and cash equivalents of discontinued operations		—			46			—			—			46
Change in cash balance in assets held for sale		—			(1	)		(60	)		—			(61	)
Net increase (decrease) in cash		103			1			(119	)		(43	)		(58	)
Cash and cash equivalents, beginning of the year		258			—			261			(19	)		500
Cash and cash equivalents, end of the year	$	361		$	1		$	142		$	(62	)	$	442

XML

Description of Business (Details)	12 Months Ended
	Dec. 31, 2016 Segment
Description of Business [Abstract]
Number of reportable segments	3

XML

Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accounting Estimates [Abstract]
Increase in operating income due to changes in contract estimates		$ 148	$ 52	$ 72
Percentage of increase in consolidated operating income due to changes in contract estimates		15.00%	11.00%	7.00%
Increase in operating income due to changes in contract estimates, diluted (in dollars per share)		$ 1.22	$ 0.45	$ 0.52
Revenue Recognition [Abstract]
Percentage of net sales accounted for under contract accounting standards		50.00%
Percentage of fixed-price type contracts		41.00%
Percentage of cost-plus type contracts		9.00%
Period of performance for contracts accounted for under the percentage-of-completion method of accounting, minimum		1 year
Accrued product warranty costs [Roll Forward]:
Balance at January 1	[1]	$ 105	$ 93
Acquisitions during this period	[1]	3	1
Accruals for product warranties issued during the period	[1]	51	59
Changes to accruals for product warranties existing before January 1	[1]	0	2
Foreign currency translation adjustments	[1]	(1)	(2)
Settlements made during the period	[1]	(49)	(48)
Balance at December 31	[1]	109	105	$ 93
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges	[2]	$ 0	384	$ 0
Discontinued Operations [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			571
Continuing Operations [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			384
NSS and Logistics Solutions [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			955
NSS and Logistics Solutions [Member] | Discontinued Operations [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			571
NSS and Logistics Solutions [Member] | Continuing Operations [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			384
Minimum [Member] | Buildings and Improvements [Member]
Property, Plant and Equipment [Abstract]
Estimated useful life		10 years
Minimum [Member] | Machinery, Equipment, Furniture and Fixtures [Member]
Property, Plant and Equipment [Abstract]
Estimated useful life		3 years
Maximum [Member] | Buildings and Improvements [Member]
Property, Plant and Equipment [Abstract]
Estimated useful life		40 years
Maximum [Member] | Machinery, Equipment, Furniture and Fixtures [Member]
Property, Plant and Equipment [Abstract]
Estimated useful life		10 years
Electronic Systems [Member]
Goodwill and Indefinite-lived Intangible Assets [Abstract]
Goodwill impairment charges			$ 26

[1] Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

[2] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

Summary of Significant Accounting Policies, Accounting Standards Issued and Not Yet Implemented (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Summary of Significant Accounting Policies [Line Items]
Percentage of net sales generated from revenue that use the units-of-delivery method	20.00%
ASU 2016-15 [Member]
Summary of Significant Accounting Policies [Line Items]
Debt extinguishment costs and original issue discounts	$ 11	$ 1

XML

Acquisitions and Divestitures, Business Acquisitions (Details) £ in Millions, $ in Millions											3 Months Ended								12 Months Ended
	Jan. 05, 2017 USD ($)	Nov. 22, 2016 USD ($)	Nov. 22, 2016 GBP (£)	Sep. 30, 2016 USD ($)	Jan. 22, 2016 USD ($)	Oct. 13, 2015 USD ($)	May 27, 2015 USD ($)	May 27, 2015 GBP (£)	Jan. 21, 2015 USD ($)	Mar. 04, 2014 USD ($)	Dec. 31, 2016 USD ($)	Sep. 23, 2016 USD ($)	Jun. 24, 2016 USD ($)	Mar. 25, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 25, 2015 USD ($)	Jun. 26, 2015 USD ($)	Mar. 27, 2015 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Nov. 22, 2016 GBP (£)	May 27, 2015 GBP (£)
Business Acquisition [Line Items]
Fair value of liability, contingent consideration											$ 29				$ 0				$ 29	$ 0
Goodwill recognized											6,560				6,281				6,560	6,281	$ 6,512
Net sales											$ 2,989	$ 2,505	$ 2,664	$ 2,353	$ 2,871	$ 2,564	$ 2,543	$ 2,488	10,511	10,466	10,986
Income before income taxes																			850	$ 322	$ 872
MacDonald Humfrey (Automation) Limited [Member]
Business Acquisition [Line Items]
Purchase price of acquisition		$ 327	£ 263
Fair value of liability, contingent consideration		29																				£ 23
Goodwill recognized		252																				205
Identifiable intangible assets		$ 53																				43
Weighted average useful life		10 years	10 years
MacDonald Humfrey (Automation) Limited [Member] | Maximum [Member]
Business Acquisition [Line Items]
Business acquisition contingent consideration		$ 38																				30
MacDonald Humfrey (Automation) Limited [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Identifiable intangible assets		26																				21
MacDonald Humfrey (Automation) Limited [Member] | Technology [Member]
Business Acquisition [Line Items]
Identifiable intangible assets		$ 27																				£ 22
Micreo Limited and Aerosim Technologies Inc [Member]
Business Acquisition [Line Items]
Purchase price of acquisition				$ 86
Goodwill recognized				61
Goodwill deductible for income tax purposes				$ 6
Advanced Technical Materials, Inc. [Member]
Business Acquisition [Line Items]
Purchase price of acquisition					$ 27
Goodwill recognized					$ 20
L3 MacDonald Humfrey, Micreo Aerosim and ATM [Member]
Business Acquisition [Line Items]
Net sales																			37
Income before income taxes																			$ 7
ForceX, Inc. [Member]
Business Acquisition [Line Items]
Purchase price of acquisition						$ 61
Goodwill recognized						53
Goodwill deductible for income tax purposes						$ 52
CTC Aviation Group [Member]
Business Acquisition [Line Items]
Purchase price of acquisition							$ 236	£ 153
Goodwill recognized							$ 182																£ 118
MITEQ, Inc. Acquisition [Member]
Business Acquisition [Line Items]
Purchase price of acquisition									$ 41
Goodwill recognized									11
Goodwill deductible for income tax purposes									$ 4
Data Tactics Corporation Acquisition [Member]
Business Acquisition [Line Items]
Purchase price of acquisition										$ 57
Goodwill recognized										$ 39
Implant Sciences Corporation [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Purchase price of acquisition	$ 118

XML

Acquisitions and Divestitures, Discontinued Operations (Details) - USD ($) $ in Millions			12 Months Ended
		Feb. 01, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Discontinued Operations [Abstract]
Proceeds from sale of discontinued operations				$ 358
Net sales				209
Income (loss) from discontinued operations, net of income taxes			$ 63	(522)	$ 32
Gain (loss) on sale of business	[1]		0	(31)	0
Assets [Abstract]
Current assets			0	664	1,262
Liabilities [Abstract]
Current liabilities			0	220
NSS [Member]
Discontinued Operations [Abstract]
Net sales			86	1,088	1,138
Cost of sales			(92)	(1,040)	(1,065)
Gain related to business diverstiture	[2]		64	0	0
Goodwill impairment charges			0	(571)	0
Operating income (loss) from discontinued operations			58	(523)	73
Interest expense allocated to discontinued operations			0	(20)	(20)
Income (loss) from discontinued operations before income taxes			58	(543)	53
Income tax benefit (expense)			5	21	(21)
Income (loss) from discontinued operations, net of income taxes			63	(522)	$ 32
NSS [Member] | Discontinued Operations, Disposed of by Sale [Member]
Discontinued Operations [Abstract]
Gain (loss) on sale of business			$ 64
Assets [Abstract]
Current assets				201
Property, plant and equipment, net				25
Goodwill	[3]			390
Other assets				48
Total assets of discontinued operations				664
Liabilities [Abstract]
Accounts payable, trade				48
Other current liabilities				78
Current liabilities				126
Long-term liabilities				94
Total liabilities of discontinued operations				$ 220
CACI International Inc [Member] | Discontinued Operations, Disposed of by Sale [Member]
Discontinued Operations [Abstract]
Proceeds from sale of discontinued operations		$ 547

[1] See Note 3 for information regarding the Company's business divestitures.

[2] The year ended December 31, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

[3] The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L3 and NSS business sold.

XML

Acquisitions and Divestitures, Business Divestitures (Details) € in Millions, $ in Millions					3 Months Ended								12 Months Ended
		Jul. 27, 2015 USD ($)	May 29, 2015 USD ($)	Apr. 24, 2015 USD ($)	Dec. 31, 2016 USD ($)	Sep. 23, 2016 USD ($)	Jun. 24, 2016 USD ($)	Mar. 25, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 25, 2015 USD ($)	Jun. 26, 2015 USD ($)	Mar. 27, 2015 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	May 29, 2015 EUR (€)
Business Divestiture [Abstract]
Loss related to business divestitures	[1]												$ 0	$ (31)	$ 0
Proceeds received														358
Net sales														209
Realized pre-tax loss on forward contract													(13)	(18)	(8)
Net sales					$ 2,989	$ 2,505	$ 2,664	$ 2,353	$ 2,871	$ 2,564	$ 2,543	$ 2,488	10,511	10,466	10,986
Income before income taxes													$ 850	322	872
Discontinued Operations [Member]
Business Divestiture [Abstract]
Net sales														209	596
Income before income taxes														0	$ 27
MSI [Member]
Business Divestiture [Abstract]
Loss related to business divestitures														(17)
Proceeds received														318
Net sales														185
Sale of business, sale price			$ 318													€ 295
Estimated employee pension related liabilities | €																€ 60
Gain (loss) on sale of business after income taxes														(6)
Pre-tax non-cash impairment charge														17
MSI [Member] | Foreign Currency Forward Contracts [Member]
Business Divestiture [Abstract]
Realized pre-tax loss on forward contract			$ (4)
BSI [Member]
Business Divestiture [Abstract]
Loss related to business divestitures				$ (4)										(4)
Proceeds received														26
Net sales														7
Sale of business, sale price				26
Gain (loss) on sale of business after income taxes				$ (6)
Tinsley Product Line [Member]
Business Divestiture [Abstract]
Loss related to business divestitures		$ (8)												(8)
Proceeds received														4
Net sales														9
Sale of business, sale price		4
Gain (loss) on sale of business after income taxes		$ (6)
Klein [Member]
Business Divestiture [Abstract]
Loss related to business divestitures														(2)
Proceeds received														10
Net sales														8
Sale of business, sale price									$ 10					10
Gain (loss) on sale of business after income taxes														$ (2)

[1] See Note 3 for information regarding the Company's business divestitures.

XML

Acquisitions and Divestitures, Unaudited Pro Forma Statements of Operations Data (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Acquisitions and Divestitures [Abstract]
Pro forma net sales	$ 10,655	$ 10,700
Pro forma income from continuing operations attributable to L3	660	307
Pro forma net income (loss) attributable to L-3	$ 723	$ (215)
Pro forma diluted earnings per share from continuing operations (in dollars per share)	$ 8.38	$ 3.74
Pro forma diluted earnings (loss) per share (in dollars per share)	$ 9.18	$ (2.63)

XML

Contracts in Process (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Contracts Receivable [Abstract]
Unbilled contract receivables, gross	$ 2,020	$ 2,120
Unliquidated progress payments	(827)	(892)
Unbilled contract receivables, net	1,193	1,228
Inventoried contract costs, gross	1,065	975
Unliquidated progress payments	(203)	(122)
Inventoried contract costs, net	862	853
Total contracts in process	$ 2,055	2,081
Percentage of unbilled contract receivables, net billed and collected within one year	95.00%
Contracts Receivable [Line Items]
Percentage of incurred costs billed	80.00%
Summary of Inventory for Long Term Contracts or Programs [Roll Forward]
Amounts included in inventoried contract costs at beginning of the year	$ 137	114	$ 121
Contract costs incurred [Abstract]:
IRAD and B&P	308	284	270
Other G&A	839	822	804
Total	1,147	1,106	1,074
Amounts charged to cost of sales	(1,111)	(1,083)	(1,081)
Amounts included in inventoried contract costs at end of the year	173	137	114
Operating Expenses [Abstract]
Selling, general and administrative expenses	223	261	297
Research and development expenses	54	52	63
Total	$ 277	$ 313	$ 360
Maximum [Member]
Contracts Receivable [Line Items]
Number of years for billed and collected, unbilled contract receivables	1 year

XML

Inventories (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Inventories [Abstract]
Raw materials, components and sub-assemblies	$ 165	$ 164
Work in process	106	103
Finished goods	59	66
Total	$ 330	$ 333

XML

Goodwill and Identifiable Intangible Assets, Allocated by Reportable Segment (Details) $ in Millions		12 Months Ended
		Dec. 31, 2016 USD ($) Employee	Dec. 31, 2015 USD ($)		Dec. 31, 2014 USD ($)
Goodwill [Line Items]
Approximate number of employees | Employee		38,000
Goodwill [Roll Forward]
Goodwill		$ 7,002	$ 6,723		$ 6,570
Accumulated impairment losses		(442)	(442)	[1]	(58)
Balance, Beginning		6,281	6,512
Business acquisitions	[2]	335	244
Business divestitures	[3]		(20)
Business retained from NSS divestiture			28
Goodwill impairment charges	[4]	0	(384)		0
Foreign currency translation adjustments	[5]	(56)	(99)
Balance, Ending		6,560	6,281		6,512
Vertex Aerospace [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(338)
Continuing Operations [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(384)
Continuing Operations [Member] | Vertex Aerospace [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(338)
Discontinued Operations [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(571)
Discontinued Operations [Member] | Vertex Aerospace [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			0
NSS [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(608)
NSS [Member] | Continuing Operations [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(37)
NSS [Member] | Discontinued Operations [Member]
Goodwill [Roll Forward]
Goodwill impairment charges			(571)
Electronic Systems [Member]
Goodwill [Roll Forward]
Goodwill		4,246	3,994		3,816
Accumulated impairment losses		(69)	(69)	[1]	(43)
Balance, Beginning		3,925	3,773
Business acquisitions	[2]	315	233
Business divestitures	[3]		(20)
Business retained from NSS divestiture			26
Goodwill impairment charges			(26)
Foreign currency translation adjustments	[5]	(63)	(61)
Balance, Ending		4,177	3,925		3,773
Aerospace Systems [Member]
Goodwill [Roll Forward]
Goodwill		1,698	1,691		1,730
Accumulated impairment losses		(338)	(338)	[1]	0
Balance, Beginning		1,353	1,730
Business acquisitions	[2]	0	0
Business divestitures	[3]		0
Business retained from NSS divestiture			0
Goodwill impairment charges			(338)
Foreign currency translation adjustments	[5]	7	(39)
Balance, Ending		1,360	1,353		1,730
Communication Systems [Member]
Goodwill [Roll Forward]
Goodwill		1,058	1,038		1,024
Accumulated impairment losses		(35)	(35)	[1]	(15)
Balance, Beginning		1,003	1,009
Business acquisitions	[2]	20	11
Business divestitures	[3]		0
Business retained from NSS divestiture			2
Goodwill impairment charges			(20)
Foreign currency translation adjustments	[5]	0	1
Balance, Ending		$ 1,023	$ 1,003		$ 1,009

[1] The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

[2] For the year ended December 31, 2016, the net increase in goodwill for the Electronic Systems segment was due to the L3 MacDonald Humfrey, Aeroism and Micreo business acquisitions, as well as the final purchase price allocations for the L3 ForceX and L3 CTC business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition. For the year ended December 31, 2015, the net increase in goodwill for the Electronic Systems segment was due to the L3 CTC and L3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition.

[3] For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

[4] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

[5] During 2016, the decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, the Euro and the Australian dollar, offset by the weakening of the U.S. dollar against the Canadian dollar. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar. During 2015, the decrease in goodwil presented in the Electronic Systems segment was primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. The decrease in goodwill presented in the Aerospace Systems segment was due to the strengthening of the U.S. dollar against the Canadian dollar.

XML

Goodwill and Identifiable Intangible Assets, Schedule of Adjustments Related to Goodwill Impairment Charges (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Goodwill [Line Items]
Goodwill impairment charges	[1]	$ 0	$ 384	$ 0
NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges			608
Re-Allocation of Goodwill for Business Retained National Security Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			9
NSS Business and Vertex Aerospace [Member]
Goodwill [Line Items]
Goodwill impairment charges			955
Vertex Aerospace [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Continuing Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges			384
Continuing Operations [Member] | NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges			37
Continuing Operations [Member] | Re-Allocation of Goodwill for Business Retained National Security Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			9
Continuing Operations [Member] | Vertex Aerospace [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Discontinued Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges			571
Discontinued Operations [Member] | NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges			571
Discontinued Operations [Member] | Re-Allocation of Goodwill for Business Retained National Security Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			0
Discontinued Operations [Member] | Vertex Aerospace [Member]
Goodwill [Line Items]
Goodwill impairment charges			$ 0

[1] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

Goodwill and Identifiable Intangible Assets, Identifiable Intangible Assets (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets Subject to Amortization [Abstract]
Weighted average amortization period	14 years
Gross carrying amount	$ 621	$ 547
Accumulated amortization	383	348
Net carrying amount	238	199
Amortization expense	35	35	$ 39
Estimated Amortization Expense for Identifiable Intangible Assets
Estimated amortization expense, 2017	39
Estimated amortization expense, 2018	35
Estimated amortization expense, 2019	32
Estimated amortization expense, 2020	28
Estimated amortization expense, 2021	$ 24
Customer Contractual Relationships [Member]
Finite-Lived Intangible Assets Subject to Amortization [Abstract]
Weighted average amortization period	15 years
Gross carrying amount	$ 409	370
Accumulated amortization	269	246
Net carrying amount	$ 140	124
Technology [Member]
Finite-Lived Intangible Assets Subject to Amortization [Abstract]
Weighted average amortization period	11 years
Gross carrying amount	$ 191	156
Accumulated amortization	102	91
Net carrying amount	$ 89	65
Other [Member]
Finite-Lived Intangible Assets Subject to Amortization [Abstract]
Weighted average amortization period	18 years
Gross carrying amount	$ 21	21
Accumulated amortization	12	11
Net carrying amount	$ 9	$ 10

XML

Other Current Liabilities and Other Liabilities (Details) $ in Millions			3 Months Ended	12 Months Ended
		Feb. 03, 2017 USD ($) $ / shares	Dec. 31, 2015 USD ($)	Dec. 31, 2016 USD ($)
Other Current Liabilities [Abstract]
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position			$ 75	$ 70
Accrued product warranty costs			70	68
Accruals for pending and threatened litigation (see Note 18)	[1]		6	51
Accrued interest			45	43
Deferred revenues			32	34
Product returns allowance	[1],[2]		20	5
Other			146	160
Total other current liabilities			394	431
Other Liabilities [Abstract]
Non-current income taxes payable (see Note 16)			161	124
Deferred compensation			45	47
Accrued product warranty costs			35	41
Accrued workers' compensation			38	30
Estimated contingent purchase price payable for acquired businesses (see Note 3)			0	29
Notes payable and capital lease obligations			10	13
Other			79	84
Total other liabilities			368	368
Accrued Liabilities And Deferred Credits [Line Items]
Accruals for pending and threatened litigation	[1]		6	51
Electronic Systems [Member] | EoTech HWS [Member]
Other Current Liabilities [Abstract]
Accruals for pending and threatened litigation (see Note 18)				14
Accrued Liabilities And Deferred Credits [Line Items]
Reduction to net sales			$ 20	18
Total expected cost of the voluntary return program				38
Accruals for pending and threatened litigation				$ 14
Electronic Systems [Member] | EoTech HWS [Member] | Subsequent Event [Member]
Accrued Liabilities And Deferred Credits [Line Items]
Approved refunds cost		$ 35
Average refund cost per unit (in dollars per unit) | $ / shares		500

[1] The year ended December 31, 2016, includes $14 million accrued in the third quarter of 2016 in connection with the EoTech matter.

[2] In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech HWS products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015 associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $38 million. Accordingly, during 2016 the product returns allowance was increased by $18 million as a reduction to net sales. The product returns allowance, net of refund payments made to eligible owners, was $5 million at December 31, 2016. As of February 3, 2017, the Company had approved refunds at a cost of approximately $35 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company's ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material.

XML

Property, Plant and Equipment (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Land	$ 54	$ 60
Buildings and improvements	438	431
Machinery, equipment, furniture and fixtures	1,890	1,736
Leasehold improvements	344	343
Gross property, plant and equipment	2,726	2,570
Accumulated depreciation and amortization	(1,605)	(1,473)
Property, plant and equipment, net	$ 1,121	$ 1,097

XML

Debt, Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Oct. 31, 2016
Components of Debt [Abstract]
Current portion of long-term debt		$ 0	$ (499)
Carrying amount of long-term debt, excluding current portion		3,325	3,127
Repayments under the credit facility		819	1,194	$ 1,367
Proceeds under the credit facility		819	1,194	$ 1,367
Available borrowings under credit facility		1,000	1,000
3.95% Senior Notes due 2016 [Member]
Components of Debt [Abstract]
Principal amount of long-term debt		200
5.20% Senior Notes due 2019 [Member]
Components of Debt [Abstract]
Unamortized discounts	[1]	(4)
4.75% Senior Notes due 2020 [Member]
Components of Debt [Abstract]
Unamortized discounts	[1]	(3)
4.95% Senior Notes due 2021 [Member]
Components of Debt [Abstract]
Unamortized discounts	[1]	(4)
3.95% Senior Notes due 2024 [Member]
Components of Debt [Abstract]
Unamortized discounts	[1]	(3)
3.85% Senior Notes due 2026 [Member]
Components of Debt [Abstract]
Unamortized discounts	[1]	$ (3)
Revolving Credit Facility [Member]
Amended and Restated Revolving Credit Facility [Abstract]
Revolving credit facility expiration period		5 years
Total aggregate borrowings under revolving credit facility					$ 1,000
Revolving credit facility expiration date		Oct. 31, 2021
Uncommitted incremental revolving facilities and additional term loan facilities					$ 600
Revolving Credit Facility [Member] | Federal Funds Rate [Member] | Minimum [Member]
Amended and Restated Revolving Credit Facility [Abstract]
Applicable spread on base rate		0.125%
Revolving Credit Facility [Member] | Federal Funds Rate [Member] | Maximum [Member]
Amended and Restated Revolving Credit Facility [Abstract]
Applicable spread on base rate		1.00%
Revolving Credit Facility [Member] | Eurodollar Rate [Member] | Minimum [Member]
Amended and Restated Revolving Credit Facility [Abstract]
Applicable spread on base rate		1.125%
Revolving Credit Facility [Member] | Eurodollar Rate [Member] | Maximum [Member]
Amended and Restated Revolving Credit Facility [Abstract]
Applicable spread on base rate		2.00%
L3 Technologies [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility	[2]	$ 0	0
Principal amount of long-term debt		3,350	3,650
Unamortized discounts		(8)	(8)
Deferred debt issue costs		(17)	(16)
Carrying amount of long-term debt		3,325	3,626
Current portion of long-term debt		0	(499)
Carrying amount of long-term debt, excluding current portion		3,325	3,127
L3 Technologies [Member] | 3.95% Senior Notes due 2016 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 0	500
Interest rate on senior notes		3.95%
Debt instrument maturity period		2016
L3 Technologies [Member] | 1.50% Senior Notes due 2017 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 0	350
Interest rate on senior notes		1.50%
Debt instrument maturity period		2017
L3 Technologies [Member] | 5.20% Senior Notes due 2019 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 1,000	1,000
Interest rate on senior notes		5.20%
Debt instrument maturity period		2019
L3 Technologies [Member] | 4.75% Senior Notes due 2020 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 800	800
Interest rate on senior notes		4.75%
Debt instrument maturity period		2020
L3 Technologies [Member] | 4.95% Senior Notes due 2021 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 650	650
Interest rate on senior notes		4.95%
Debt instrument maturity period		2021
L3 Technologies [Member] | 3.95% Senior Notes due 2024 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 350	350
Interest rate on senior notes		3.95%
Debt instrument maturity period		2024
L3 Technologies [Member] | 3.85% Senior Notes due 2026 [Member]
Components of Debt [Abstract]
Borrowings under Revolving Credit Facility		$ 550	0
Interest rate on senior notes		3.85%
Debt instrument maturity period		2026
L3 Technologies [Member] | Revolving Credit Facility [Member]
Components of Debt [Abstract]
Repayments under the credit facility		$ 819
Proceeds under the credit facility		819
Available borrowings under credit facility		$ 1,000	$ 1,000

[1] Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

[2] During 2016, L3's aggregate borrowings and repayments under the Credit Facility were $819 million. L3 had the full availability of its $1 billion Credit Facility at December 31, 2016 and December 31, 2015.

XML

Debt, Outstanding Senior Subordinated Notes (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Feb. 02, 2017
Outstanding Senior Note Terms [Abstract]
Net Cash Proceeds		$ 547	$ 0	$ 996
Net cash proceeds from senior unsecured notes		$ 988
Senior Notes Redemption [Abstract]
Tender date		Dec. 22, 2015
Debt Retirement Charge		$ (7)	(1)	0
Cash payments of senior notes		856	297	0
Repayments under the credit facility		$ 819	1,194	1,367
Conversion of converted securities				161
CODES Due 2035 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		3.00%
Senior Notes Redemption [Abstract]
Redemption Date	[1]	Jun. 20, 2014
Redemption amount	[1]	$ 700
Debt Retirement Charge	[1]	0
Redemption cash payments	[1]	$ 935
Interest rate on senior notes		3.00%
Sale of 3% Convertible Contingent Debt Securities by L-3 Holdings		$ 700
Conversion of converted securities		935
Excess of conversion value over fair value of the debt component		$ 161
Interest expense recognized				2
CODES Due 2035 [Member] | Subsequent Event [Member]
Senior Notes Redemption [Abstract]
Debt repurchased					$ 11
3.95% Senior Notes due 2016 [Member]
Outstanding Senior Note Terms [Abstract]
Redemption price as percentage of principal amount		101.475%
Senior Notes due		Nov. 15, 2016
Senior Notes Redemption [Abstract]
Redemption Date	[2]	May 20, 2016
Maturity date		Nov. 15, 2016
Redemption amount	[2]	$ 300
Principal Amount		200
Debt Retirement Charge	[2]	5
Redemption cash payments	[2]	305
Cash payments of senior notes		$ 200
1.50% Senior Notes due 2017 [Member]
Outstanding Senior Note Terms [Abstract]
Redemption price as percentage of principal amount		100.323%
Senior Notes Redemption [Abstract]
Redemption Date	[3]	Dec. 30, 2016
Redemption amount	[3]	$ 350
Debt Retirement Charge	[3]	2
Redemption cash payments	[3]	$ 351
5.20% Senior Notes due 2019 [Member]
Outstanding Senior Note Terms [Abstract]
Date of Issuance		Oct. 02, 2009
Amount Issued		$ 1,000
Discount	[4]	4
Net Cash Proceeds		$ 987
Effective Interest Rate		5.25%
Redemption at Treasury Rate	[5],[6]	30.00%
4.75% Senior Notes due 2020 [Member]
Outstanding Senior Note Terms [Abstract]
Date of Issuance		May 21, 2010
Amount Issued		$ 800
Discount	[4]	3
Net Cash Proceeds		$ 790
Effective Interest Rate		4.79%
Redemption at Treasury Rate	[5],[6]	25.00%
4.95% Senior Notes due 2021 [Member]
Outstanding Senior Note Terms [Abstract]
Date of Issuance		Feb. 07, 2011
Amount Issued		$ 650
Discount	[4]	4
Net Cash Proceeds		$ 639
Effective Interest Rate		5.02%
Redemption at Treasury Rate	[5],[6]	25.00%
3.95% Senior Notes due 2024 [Member]
Outstanding Senior Note Terms [Abstract]
Date of Issuance		May 28, 2014
Amount Issued		$ 650
Discount	[4]	3
Net Cash Proceeds	[7]	$ 641
Effective Interest Rate		4.02%
Redemption at Treasury Rate	[5],[6]	20.00%
Senior Notes Redemption [Abstract]
Tender amount		$ 300
Debt Retirement Charge		1
Tender cash payments		$ 297
3.85% Senior Notes due 2026 [Member]
Outstanding Senior Note Terms [Abstract]
Date of Issuance		Dec. 05, 2016
Amount Issued		$ 550
Discount	[4]	3
Net Cash Proceeds		$ 542
Effective Interest Rate		3.91%
Redemption at Treasury Rate	[5],[6]	25.00%
L3 Technologies [Member]
Outstanding Senior Note Terms [Abstract]
Discount		$ 8	8
Net Cash Proceeds		$ 547		$ 996
Redemption price as percentage of principal amount		101.00%
Senior Notes Redemption [Abstract]
Principal Amount		$ 3,350	3,650
Debt Retirement Charge		(7)	(1)
Cash payments of senior notes		$ 856	$ 297
L3 Technologies [Member] | Minimum [Member]
Outstanding Senior Note Terms [Abstract]
Redemption price as percentage of principal amount		100.00%
L3 Technologies [Member] | 3.95% Senior Notes due 2016 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		3.95%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		3.95%
L3 Technologies [Member] | 1.50% Senior Notes due 2017 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		1.50%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		1.50%
L3 Technologies [Member] | 5.20% Senior Notes due 2019 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		5.20%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		5.20%
L3 Technologies [Member] | 4.75% Senior Notes due 2020 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		4.75%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		4.75%
L3 Technologies [Member] | 4.95% Senior Notes due 2021 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		4.95%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		4.95%
L3 Technologies [Member] | 3.95% Senior Notes due 2024 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		3.95%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		3.95%
L3 Technologies [Member] | 3.95% Senior Notes due 2024 [Member] | Minimum [Member]
Outstanding Senior Note Terms [Abstract]
Senior Notes due		Feb. 28, 2024
Senior Notes Redemption [Abstract]
Maturity date		Feb. 28, 2024
L3 Technologies [Member] | 3.85% Senior Notes due 2026 [Member]
Outstanding Senior Note Terms [Abstract]
Interest rate on senior notes		3.85%
Senior Notes Redemption [Abstract]
Interest rate on senior notes		3.85%
L3 Technologies [Member] | 3.85% Senior Notes due 2026 [Member] | Minimum [Member]
Outstanding Senior Note Terms [Abstract]
Senior Notes due		Sep. 15, 2026
Senior Notes Redemption [Abstract]
Maturity date		Sep. 15, 2026

[1] In 2005, L3 sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On February 2, 2011, L3 repurchased approximately $11 million of the CODES. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L3 settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders' equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014.

[2] The redemption price was determined on May 17, 2016 at 101.475% of the principal amount. Interest ceased to accrue on and after May 20, 2016 and the only remaining right of holders of such Notes was to receive payment of the Redemption Price and accrued interest.

[3] The Notes were redeemed at a price equal to 100.323%, plus accrued and unpaid interest, if any, to the redemption date. Interest ceased to accrue on and after the redemption date.

[4] Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

[5] The Senior Notes maturing in 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 and 2026 may be redeemed at any time prior to February 28, 2024 and September 15, 2026, respectively, (three months prior to their maturity) at the option of L3, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 and 2026 are redeemed at any time on or after February 28, 2024 and September 15, 2026, respectively, the redemption price would be equal to 100% of the principal amount.

[6] Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L3 to repurchase all or any part of such holder's notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

[7] The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

XML

Debt, Guarantees and Covenants (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
L3 Technologies [Member]
Debt Instrument [Line Items]
Ownership percentage	100.00%
Minimum consolidated interest coverage ratio under revolving credit facility covenants	300.00%
Minimum consolidated senior leverage ratio under revolving credit facility covenants	375.00%
Maximum consolidated senior leverage ratio under revolving credit facility covenants	400.00%
Minimum aggregate amount of indebtedness, swap contracts or guarantees to trigger cross default provisions	$ 75
Maximum days to cure defaults triggering cross default provisions	10 days
Minimum aggregate amount of senior notes accelerated to trigger cross default provisions	$ 100
3.95% Senior Notes due 2024 [Member] | L3 Technologies [Member]
Debt Instrument [Line Items]
Interest rate on senior notes	3.95%
3.95% Senior Notes due 2024 [Member] | Minimum [Member] | L3 Technologies [Member]
Debt Instrument [Line Items]
Redemption date	Feb. 28, 2024
CODES Due 2035 [Member]
Debt Instrument [Line Items]
Interest rate on senior notes	3.00%

XML

Accumulated Other Comprehensive (Loss) Income (AOCI), Summary of AOCI Balances Including Amounts Reclassified from AOCI into Net Income (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	$ 4,355
Ending Balance	4,553	$ 4,355
Foreign Currency Translation Adjustments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(101)	19	$ 142
Other comprehensive (loss) income before reclassifications, net of tax	(77)	(161)	(123)
Amounts reclassified from AOCI, net of tax	0	41	0
Net current period other comprehensive (loss) income	(77)	(120)	(123)
Ending Balance	(178)	(101)	19
Unrealized Gains (Losses) on Hedging Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(8)	(5)	1
Other comprehensive (loss) income before reclassifications, net of tax	3	(15)	(13)
Amounts reclassified from AOCI, net of tax	11	12	7
Net current period other comprehensive (loss) income	14	(3)	(6)
Ending Balance	6	(8)	(5)
Unrecognized (Losses) Gains and Prior Service Cost, Net [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(465)	(598)	(253)
Other comprehensive (loss) income before reclassifications, net of tax	(119)	81	(354)
Amounts reclassified from AOCI, net of tax	30	52	9
Net current period other comprehensive (loss) income	(89)	133	(345)
Ending Balance	(554)	(465)	(598)
Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(574)	(584)	(110)
Other comprehensive (loss) income before reclassifications, net of tax	(193)	(95)	(490)
Amounts reclassified from AOCI, net of tax	41	105	16
Net current period other comprehensive (loss) income	(152)	10	(474)
Ending Balance	$ (726)	$ (574)	$ (584)

XML

Accumulated Other Comprehensive (Loss) Income (AOCI), Summary of Amounts Reclassified from AOCI into Net Income (Details) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
		Dec. 31, 2016	Sep. 23, 2016	Jun. 24, 2016	Mar. 25, 2016	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of sales-products										$ (5,785)	$ (6,007)	$ (6,161)
Loss related to business divestitures	[1]									0	(31)	0
Income from continuing operations before income taxes										850	322	872
Provision for income taxes										(189)	(25)	(227)
Income from continuing operations		$ 192	$ 151	$ 151	$ 167	$ (56)	$ 128	$ 120	$ 105	661	297	645
MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures											(17)
Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations	[2]									(41)	(105)	(16)
Foreign Currency Translation Adjustments [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations before income taxes	[2]									0	(41)	0
Income from continuing operations	[2]									0	(41)	0
Foreign Currency Translation Adjustments [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures	[2]									0	(41)	0
Losses on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of sales-products	[2]									(13)	(16)	(8)
Income from continuing operations before income taxes	[2]									(13)	(18)	(8)
Provision for income taxes	[2]									2	6	1
Income from continuing operations	[2]									(11)	(12)	(7)
Losses on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures	[2]									0	(2)	0
Amortization of Defined Benefit Pension Items [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net loss	[2],[3]									(48)	(67)	(15)
Income from continuing operations before income taxes	[2]									(48)	(81)	(15)
Provision for income taxes	[2]									18	29	6
Income from continuing operations	[2]									(30)	(52)	(9)
Amortization of Defined Benefit Pension Items [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures	[2]									$ 0	$ (14)	$ 0

[1] See Note 3 for information regarding the Company's business divestitures.

[2] Amounts in parentheses indicate charges to the consolidated statements of operations.

[3] Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

XML

Equity (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		2 Months Ended	12 Months Ended
	Feb. 13, 2017	Feb. 17, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 04, 2014
Class of Stock [Line Items]
Aggregate amount of repurchased shares			$ 373	$ 740	$ 823
Cash dividends declared per common share (in dollars per share)			$ 2.80	$ 2.60	$ 2.40
Dividend declared date			Feb. 13, 2017
Dividend paid date			Mar. 15, 2017
Dividend paid, record date			Mar. 01, 2017
Cash dividends			$ 220	$ 213	$ 209
Subsequent Event [Member]
Class of Stock [Line Items]
Cash dividends declared per common share (in dollars per share)	$ 0.75
Treasury Stock [Member]
Class of Stock [Line Items]
Aggregate amount of repurchased shares			$ 373	$ 740	$ 823
Share Repurchase Program December 4, 2014 [Member]
Class of Stock [Line Items]
Amount of shares authorized to be repurchased						$ 1,500
Average price per share of repurchased shares (in dollars per share)			$ 123.95
Aggregate amount of repurchased shares			$ 373
Remaining authorized amount of share repurchase programs			$ 433
Share Repurchase Program December 4, 2014 [Member] | Treasury Stock [Member]
Class of Stock [Line Items]
Number of common shares repurchased (in shares)			3
Share Repurchase Program December 4, 2014 [Member] | Treasury Stock [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Number of common shares repurchased (in shares)		0

XML

Fair Value Measurements (Details) - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015
Liabilities [Abstract]
Contingent consideration		$ 29	$ 0
Recurring [Member] | Level 1 [Member]
Assets [Abstract]
Cash equivalents	[1]	104	187
Derivatives (foreign currency forward contracts)	[1]	0	0
Total assets	[1]	104	187
Liabilities [Abstract]
Derivatives (foreign currency forward contracts)	[1]	0	0
Contingent consideration	[1],[2]	0	0
Total liabilities	[1]	0	0
Recurring [Member] | Level 2 [Member]
Assets [Abstract]
Cash equivalents	[3]	0	0
Derivatives (foreign currency forward contracts)	[3]	12	2
Total assets	[3]	12	2
Liabilities [Abstract]
Derivatives (foreign currency forward contracts)	[3]	6	16
Contingent consideration	[2],[3]	0	0
Total liabilities	[3]	6	16
Recurring [Member] | Level 3 [Member]
Assets [Abstract]
Cash equivalents	[4]	0	0
Derivatives (foreign currency forward contracts)	[4]	0	0
Total assets	[4]	0	0
Liabilities [Abstract]
Derivatives (foreign currency forward contracts)	[4]	0	0
Contingent consideration	[2],[4]	29	0
Total liabilities	[4]	$ 29	$ 0

[1] Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

[2] The contingent consideration liability represents the future potential earn-out payments relating to the L3 MacDonald Humfrey acquisition. The fair value of the contingent consideration liability is based on a Monte Carlo Simulation of the aggregate revenue of L3 MacDonald Humfrey for the three-year period ending December 31, 2019. The significant unobservable inputs used in calculating the fair value of the contingent consideration include: (i) projected revenues of the L3 MacDonald Humfrey acquired business, (ii) company specific risk premium, which is a component of the discount rate applied to the revenue projections, (iii) and volatility. The fair value of the contingent consideration for potential earn-out payments is reassessed quarterly, including an analysis of the significant inputs used in the evaluation, as well as the accretion of the present value discount. Changes are reflected within cost of sales in the consolidated statements of operations.

[3] Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

[4] Level 3 is based on pricing inputs that are not observable and not corroborated by market data.

XML

Financial Instruments (Details) - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes	[1]	$ 3,325	$ 3,626
Foreign currency forward contracts	[2]	6	(14)
Estimated Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes	[1]	3,526	3,754
Foreign currency forward contracts	[2]	$ 6	$ (14)

[1] The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

[2] The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

XML

Derivative Financial Instruments, Outstanding Forward Contracts By Currency (Details) - Foreign Currency Forward Contracts [Member] $ in Millions	Dec. 31, 2016 USD ($)
Derivative [Line Items]
Notional amount of foreign currency forward contracts	$ 358
U.S. Dollar [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	117
Euro [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	109
Canadian Dollar [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	96
British Pound [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	28
Other [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	$ 8

XML

Derivative Financial Instruments, Fair Value on Consolidated Balance Sheet (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Realized pre-tax loss on forward contract		$ (13)	$ (18)	$ (8)
Estimated net amount of existing (losses) expected to be reclassified into income within the next 12 months		5
Other Current Assets [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets		10	1
Other Current Assets [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	[1]	10	1
Other Assets [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets		2	1
Other Assets [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	[1]	2	1
Other Current Liabilities [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities		6	15
Other Current Liabilities [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	[1]	6	15
Other Liabilities [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities		0	1
Other Liabilities [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	[1]	$ 0	$ 1

[1] See Note 12 for a description of the fair value hierarchy related to the Company's foreign currency forward contracts.

XML

L3's Earnings Per Share, Reconciliation of Basic and Diluted Earnings Per Share (EPS) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended																12 Months Ended
		Dec. 31, 2016		Sep. 23, 2016		Jun. 24, 2016		Mar. 25, 2016		Dec. 31, 2015		Sep. 25, 2015		Jun. 26, 2015		Mar. 27, 2015		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Reconciliation of net income (loss) [Abstract]
Net income (loss)		$ 192		$ 151		$ 151		$ 230		$ (162)		$ (296)		$ 124		$ 109		$ 724	$ (225)	$ 677
Net income from continuing operations attributable to noncontrolling interests																		(14)	(15)	(13)
Net income (loss) attributable to L3		$ 188		$ 148		$ 147		$ 227		$ (166)		$ (299)		$ 120		$ 105		710	(240)	664
Earnings (loss) attributable to L3's common shareholders: [Abstract]
Continuing operations																		647	282	632
Discontinued operations, net of income tax																		63	(522)	32
Net income (loss) attributable to L3 common shareholders																		$ 710	$ (240)	$ 664
Basic [Abstract]
Weighted average common shares outstanding (in shares)																		77.4	80.7	85.4
Basic earnings (loss) per share [Abstract]
Continuing operations (in dollars per share)		$ 2.43	[1]	$ 1.91	[1]	$ 1.90	[1]	$ 2.11	[1]	$ (0.76)	[1]	$ 1.56	[1]	$ 1.41	[1]	$ 1.23	[1]	$ 8.36	$ 3.49	$ 7.40
Discontinued operations, net of income tax (in dollars per share)																		0.81	(6.46)	0.38
Basic earnings (loss) per share (in dollars per share)		2.43	[1]	1.91	[1]	1.90	[1]	2.92	[1]	(2.11)	[1]	(3.74)	[1]	1.46	[1]	1.28	[1]	$ 9.17	$ (2.97)	$ 7.78
Common and potential common shares [Abstract]
Weighted average common shares outstanding (in shares)																		77.4	80.7	85.4
Assumed purchase of common shares for treasury (in shares)																		(2.4)	(2.7)	(3.1)
Assumed conversion of the CODES (in shares)	[2]																	0.0	0.0	0.8
Common and potential common shares (in shares)																		78.8	81.9	87.8
Diluted earnings (loss) per share [Abstract]
Continuing operations (in dollars per share)		2.38	[1]	1.88	[1]	1.88	[1]	2.08	[1]	(0.76)	[1]	1.54	[1]	1.39	[1]	1.20	[1]	$ 8.21	$ 3.44	$ 7.20
Discontinued operations, net of income tax (in dollars per share)																		0.80	(6.37)	0.36
Diluted earnings (loss) per share (in dollars per share)		$ 2.38	[1]	$ 1.88	[1]	$ 1.88	[1]	$ 2.87	[1]	$ (2.11)	[1]	$ (3.68)	[1]	$ 1.44	[1]	$ 1.25	[1]	$ 9.01	$ (2.93)	$ 7.56
Stock Options [Member]
Common and potential common shares [Abstract]
Common and potential common shares (in shares)																		2.6	2.4	3.0
Unvested Restricted Stock Awards [Member]
Common and potential common shares [Abstract]
Common and potential common shares (in shares)																		1.0	1.3	1.6
Performance Unit Awards [Member]
Common and potential common shares [Abstract]
Common and potential common shares (in shares)																		0.1	0.1	0.1
Employee Stock Purchase Plan Contributions [Member]
Common and potential common shares [Abstract]
Common and potential common shares (in shares)																		0.1	0.1	0.0

[1] EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters' EPS may not equal the full year computed EPS.

[2] The CODES were retired on June 20, 2014 and were dilutive for the year ended December 31, 2014 as the average market price of L3's common stock during the period that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L3's common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71.

XML

L3's Earnings Per Share (Details) - $ / shares shares in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jun. 18, 2014
Subsidiary, Sale of Stock [Line Items]
Shares excluded from computation of diluted earnings per share (in shares)	0.4	0.6	0.5
CODES Due 2035 [Member]
Subsidiary, Sale of Stock [Line Items]
Conversion price of L-3 Holdings' CODES (in dollars per share)				$ 88.71

XML

Income Taxes, Income from Continuing Operations Before Income Taxes (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Domestic	$ 654	$ 192	$ 707
Foreign	196	130	165
Income from continuing operations before income taxes	$ 850	$ 322	$ 872

XML

Income Taxes, Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current income tax provision [Abstract]
Federal	$ 88	$ 60	$ 78
State and local	10	5	1
Foreign	48	26	35
Subtotal	146	91	114
Deferred income tax provision/(benefit) [Abstract]
Federal	37	(67)	101
State and local	6	(1)	11
Foreign	0	2	1
Subtotal	43	(66)	113
Total provision for income taxes	$ 189	$ 25	$ 227

XML

Income Taxes, Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015		Dec. 31, 2014
Income Taxes [Abstract]
Statutory federal income tax rate		35.00%	35.00%		35.00%
State and local income taxes, net of federal income tax benefit		2.30%	2.00%		2.10%
Foreign income taxes		(2.90%)	(14.20%)		(3.60%)
Manufacturing benefits		(2.20%)	(3.70%)		(1.70%)
Research and experimentation and other tax credits		(4.40%)	(12.90%)		(4.30%)
Resolution of tax contingencies		(2.90%)	(2.80%)		(1.00%)
Tax deductible dividends		(0.90%)	(2.30%)		(0.80%)
Equity compensation - excess income tax benefits		(2.00%)	0.00%		0.00%
Goodwill Impairment		0.00%	6.60%		0.00%
Other, net		0.20%	0.10%		0.30%
Effective income tax rate on continuing operations		22.20%	7.80%	[1]	26.00%
Non-cash goodwill impairment charges	[2]	$ 0	$ 384		$ 0
Deferred tax benefit			$ (120)
Effective income tax rate excluding goodwill impairment charge and related income tax benefit			20.50%

[1] In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

[2] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

Income Taxes, Components of Net Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets [Abstract]
Inventoried costs	$ 63	$ 56
Compensation and benefits	152	147
Pension and postretirement benefits	415	354
Loss carryforwards	18	12
Tax credit carryforwards	6	6
Other	89	79
Deferred tax assets	743	654
Less: valuation allowance	(12)	(9)
Deferred tax assets, net of valuation allowance	731	645
Deferred tax liabilities [Abstract]
Goodwill and other intangible assets	(752)	(675)
Income recognition on contracts in process	(63)	(36)
Property, plant and equipment	(96)	(94)
Other	(54)	(56)
Deferred tax liabilities	(965)	(861)
Total deferred tax liabilities, net of valuation allowance	$ (234)	$ (216)

XML

Income Taxes, Classification of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Abstract]
Non-current deferred tax assets	$ 2	$ 3
Non-current deferred tax liabilities	(236)	(219)
Total deferred tax liabilities, net of valuation allowance	$ (234)	$ (216)

XML

Income Taxes, Summary of Loss and Tax Credit Carryforwards (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Tax Effected	$ 18	$ 12
Capital loss carryforwards, Valuation Allowance, Tax Effected	12	9
Total loss carryforwards, Tax Effected	18
Tax credit carryforwards, Tax Effected	6	$ 6
Tax credit carryforwards, Valuation Allowances Tax Effected	4
Federal [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Gross	33
Capital loss carryforwards, Tax Effected	11
Capital loss carryforwards, Valuation Allowance, Gross	5
Capital loss carryforwards, Valuation Allowance, Tax Effected	$ 2
Federal [Member] | Minimum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2026
Federal [Member] | Maximum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2035
Foreign [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Gross	$ 14
Capital loss carryforwards, Tax Effected	3
Capital loss carryforwards, Valuation Allowance, Gross	3
Capital loss carryforwards, Valuation Allowance, Tax Effected	1
Tax credit carryforwards, Tax Effected	1
Tax credit carryforwards, Gross	1
Tax credit carryforwards, Valuation Allowances Gross	0
Tax credit carryforwards, Valuation Allowances Tax Effected	0
State [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Gross	136
Capital loss carryforwards, Tax Effected	2
Capital loss carryforwards, Valuation Allowance, Gross	47
Capital loss carryforwards, Valuation Allowance, Tax Effected	1
Tax credit carryforwards, Tax Effected	5
Tax credit carryforwards, Gross	7
Tax credit carryforwards, Valuation Allowances Gross	7
Tax credit carryforwards, Valuation Allowances Tax Effected	$ 4
State [Member] | Minimum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2017
Tax credit carryforwards, Expiration Periods	2017
State [Member] | Maximum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2036
Tax credit carryforwards, Expiration Periods	2031
Capital Loss Carryforwards [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Gross	$ 6
Capital loss carryforwards, Tax Effected	2
Capital loss carryforwards, Valuation Allowance, Gross	6
Capital loss carryforwards, Valuation Allowance, Tax Effected	$ 2
Capital Loss Carryforwards [Member] | Minimum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2017
Capital Loss Carryforwards [Member] | Maximum [Member]
Tax Credit Carryforward [Line Items]
Capital loss carryforwards, Expiration Period	2021

XML

Income Taxes, Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2016
Income Taxes [Abstract]
Unrecognized tax benefits	$ 111	$ 169	$ 169	$ 111
Unrecognized tax benefits that would reduce the effective income tax rate				$ 92
Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties [Roll Forward]
Balance at January 1	140	169	155
Additions for tax positions related to the current year	16	14	20
Additions for tax positions related to prior years	2	2	12
Reductions for tax positions related to prior years	(39)	(37)	(11)
Reductions for tax positions related to settlements with taxing authorities	(1)	(1)	(1)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations	(7)	(7)	(6)
Balance at December 31	$ 111	$ 140	$ 169

XML

Income Taxes, Income Tax Returns (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Abstract]
Anticipated decrease in unrecognized tax benefits over the next 12 months	$ 9
Reversal of previously accrued income tax expense, including interest and penalties	25	$ 9	$ 8
Change in previously accrued income tax expenses related to tax returns			$ 8
Accrued potential interest included within current and non-current income taxes payable	11	18
Accrued potential interest included within current and non-current income taxes payable after income taxes	7	11
Potential penalties	8	9
Benefit (Expense) Related Items Included in Income Taxes Expenses	(4)	2
Deferred taxes for the repatriation of earnings from certain subsidiaries		$ 17
Undistributed earnings of non-U.S. Companies	$ 708

XML

Stock-Based Compensation, Stock-Based Compensation Plans (Details) - USD ($) shares in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014	May 03, 2016	Feb. 23, 2016	Feb. 22, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of L-3 Holdings common stock available to be awarded (in shares)						4,260	3,690
Share-based Compensation Arrangement by Share-based Payment Award [Abstract]
Stock based compensation	$ 49		$ 49	$ 52
Income taxes	(18)		(18)	(20)
Total after income taxes	31		31	32
Less: Stock-based compensation recorded in discontinued operations, net of income taxes	1	[1]	1	1
Stock-based compensation recorded in continuing operations, net of income taxes	30		30	31
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Abstract]
Stock based compensation	10		9	9
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Abstract]
Stock based compensation	35		38	40
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Abstract]
Stock based compensation	$ 4		$ 2	$ 3
2008 Long Term Performance Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of additional shares authorized for issuance under the amendment (in shares)					6,800
Number of shares authorized for issuance under the amendment (in shares)					26,000
Maximum number of shares of L-3 Holdings common stock may be issued pursuant to "full value" awards under the amendment (in shares)	9,200

[1] Amount relates to the net impact of share based payment award modification in connection with the sale of NSS, which is further discussed below.

XML

Stock-Based Compensation, Stock Options (Details) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of stock options granted from date of grant		10 years
Vesting period		3 years
Weighted average grant date fair value of stock options (in dollars per share)		$ 15.90	$ 19.76	$ 20.02
Intrinsic value of stock options exercised		$ 34	$ 35	$ 43
Unrecognized compensation costs related to equity awards after income taxes		6
Unrecognized compensation costs related to stock awards		$ 9
Weighted average remaining period for recognition of unrecognized costs related to equity awards		1 year 4 months 24 days
Actual income tax benefit realized related to compensation deductions arising from the exercise of stock options		$ 12	$ 13	$ 14
Number of Options [Roll Forward]
Beginning Balance, Outstanding (in shares)		2,931,500
Options granted (in shares)		617,600
Options exercised (in shares)		(647,500)
Options forfeited (in shares)		(54,100)
Ending Balance, Outstanding (in shares)		2,847,500	2,931,500
Vested and expected to vest (in shares)	[1]	2,835,700
Exercisable (in shares)		1,802,000
Weighted Average Exercise Price [Abstract]
Beginning Balance, Outstanding (in dollars per share)		$ 92.59
Options granted (in dollars per share)		116.68
Options exercised (in dollars per share)		82.78
Options forfeited (in dollars per share)		118.82
Ending Balance, Outstanding (in dollars per share)		99.54	$ 92.59
Vested and expected to vest (in dollars per share)	[1]	99.46
Exercisable (in dollars per share)		$ 87.77
Weighted Average Remaining Contractual Term [Abstract]
Weighted Average Remaining Contractual Term, Outstanding		6 years 1 month 6 days	6 years
Vested and expected to vest	[1]	6 years 1 month 6 days
Exercisable		4 years 10 months 24 days
Aggregate Intrinsic Value [Abstract]
Beginning Balance, Outstanding		$ 84
Ending Balance, Outstanding		150	$ 84
Vested and expected to Vest	[1]	149
Exercisable		$ 116
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Expected holding period		5 years	5 years	5 years 6 months
Expected volatility		21.30%	21.40%	24.40%
Expected dividend yield		2.80%	2.40%	2.70%
Risk-free interest rate		1.10%	1.50%	1.70%

[1] Represents outstanding options reduced by expected forfeitures for options not fully vested.

XML

Stock-Based Compensation, Restricted Stock Units (Details) - Restricted Stock Units [Member] - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Weighted average grant date fair value (in dollars per share)	$ 116.72	$ 128.59	$ 113.58
Length of service after grant date	1 year
Age of retirement eligible employees	65 years
Unrecognized compensation costs related to stock awards	$ 38
Unrecognized compensation costs related to equity awards after income taxes	$ 24
Weighted average remaining period for recognition of unrecognized costs related to equity awards	1 year 2 months 12 days
Fair value of restricted stock unit awards vested	$ 57	$ 82	$ 66
Nonvested, Number of Shares [Roll Forward]
Beginning Balance, Nonvested (in shares)	1,171,900
Granted (in shares)	397,600
Vested (in shares)	(478,300)
Forfeited (in shares)	(113,300)
Ending Balance, Nonvested (in shares)	977,900	1,171,900
Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Beginning Balance, Nonvested (in dollars per share)	$ 102.91
Granted (in dollars per share)	116.72	$ 128.59	$ 113.58
Vested (in dollars per share)	76.83
Forfeited (in dollars per share)	111.89
Ending Balance, Nonvested (in dollars per share)	$ 120.24	$ 102.91
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Length of service for retirement eligible employees	5 years
Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year

XML

Stock-Based Compensation, Performance Units (Details) - Performance Units [Member] - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value (in dollars per share)	$ 116.20	$ 129.03	$ 113.67
Length of service after grant date	3 years	3 years	3 years
Unrecognized compensation costs related to equity awards after income taxes	$ 4
Unrecognized compensation costs related to stock awards	$ 6
Weighted average remaining period for recognition of unrecognized costs related to equity awards	1 year 7 months 6 days
Total performance units earned	0
Nonvested, Number of Shares [Roll Forward]
Beginning Balance, Nonvested (in shares)	39,600
Granted (in shares)	51,900
Increase due to expected performance (in shares)	35,600
Vested (in shares)	0
Forfeited (in shares)	(2,400)
Ending Balance, Nonvested (in shares)	124,700	39,600
Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Beginning Balance, Nonvested (in dollars per share)	$ 121.27
Granted (in dollars per share)	116.20	$ 129.03	$ 113.67
Increase due to expected performance (in dollars per share)	127.14
Vested (in dollars per share)	0
Forfeited (in dollars per share)	121.72
Ending Balance, Nonvested (in dollars per share)	$ 120.83	$ 121.27
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payout Range	200.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Payout Range	0.00%

XML

Stock-Based Compensation, Employee Stock Purchase Plan (Details) $ / shares in Units, shares in Millions			12 Months Ended
	Jan. 31, 2017 $ / shares shares	Feb. 01, 2016 USD ($) Employee	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	May 03, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee discount on the purchase of common stock			5.00%
Stock compensation expense on cash payments made			$ 49,000,000	$ 49,000,000	$ 52,000,000
NSS [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees held unvested restricted stock unit and stock option awards | Employee		300
Vesting period		3 years
Reversed previously recorded stock compensation expense relating to the original awards		$ 4,000,000
Stock compensation expense on cash payments made		$ 5,000,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Stock compensation expense on cash payments made			$ 10,000,000	9,000,000	9,000,000
Unvested Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Stock compensation expense on cash payments made			$ 35,000,000	38,000,000	40,000,000
Unvested Restricted Stock Awards [Member] | Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense on cash payments made			$ 4,000,000	$ 2,000,000	$ 3,000,000
2008 Long Term Performance Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized for issuance under the amendment (in shares) | shares						26.0
2009 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of fair market value for offering period			95.00%
Share purchases funded through payroll deductions, value			$ 21,250
Issued shares under the ESPP (in shares) | shares			0.1
Average price of issued shares under the ESPP (in dollars per share) | $ / shares			$ 137.87
Number of shares authorized for issuance under the amendment (in shares) | shares			3.7
2009 Employee Stock Purchase Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share purchases funded through payroll deductions, percentage			10.00%
2009 Employee Stock Purchase Plan [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issued shares under the ESPP (in shares) | shares	0.1
Average price of issued shares under the ESPP (in dollars per share) | $ / shares	$ 144.73

XML

Commitments and Contingencies, Non-Cancelable Operating Leases (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Future Minimum Payments under Non-Cancelable Operating Leases [Abstract]
2017	$ 99
2018	84
2019	65
2020	90
2021	45
Thereafter	213
Total minimum payments required	596
Less: Sublease rentals under non-cancelable leases	10
Net minimum payments required	586
Rent expense, net of sublease income	101	$ 104	$ 117
Sublease rental income	2	$ 2	$ 1
Real Estate [Member]
Future Minimum Payments under Non-Cancelable Operating Leases [Abstract]
2017	94
2018	81
2019	63
2020	90
2021	45
Thereafter	213
Total minimum payments required	586
Less: Sublease rentals under non-cancelable leases	10
Net minimum payments required	576
Equipment [Member]
Future Minimum Payments under Non-Cancelable Operating Leases [Abstract]
2017	5
2018	3
2019	2
2020	0
2021	0
Thereafter	0
Total minimum payments required	10
Less: Sublease rentals under non-cancelable leases	0
Net minimum payments required	$ 10

XML

Commitments and Contingencies, Letters of Credit and Guarantees (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($) Agreement	Dec. 31, 2015 USD ($)
Loss Contingencies [Line Items]
Total outstanding letters of credit	$ 402	$ 425
Available borrowings under Credit Facility	$ 1,000	$ 1,000
Number of existing real estate lease agreements | Agreement	3
Real estate lease agreements, expiry date	Aug. 31, 2020
Purchase price of property on or before expiration date	$ 45
Residual guarantee amount	39
Maximum amount of supplemental rent payment	6
Aggregate residual guarantee amount	$ 39
Simulator Systems [Member]
Loss Contingencies [Line Items]
Operating lease agreements, term of contract	15 years
Operating lease, date of expiration	Mar. 31, 2018
Operating lease, additional rent	$ 7
Simulator Systems [Member] | Minimum [Member]
Loss Contingencies [Line Items]
Fair market value simulator systems	7
Simulator Systems [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Fair market value simulator systems	$ 21

XML

Commitments and Contingencies, Litigation Matters (Details) € in Millions, $ in Millions				1 Months Ended				3 Months Ended	12 Months Ended
	Jan. 11, 2017 USD ($)	Dec. 20, 2016 USD ($)	Jul. 23, 2014 EUR (€)	Aug. 31, 2016 Complaint	Mar. 31, 2016 Complaint	Feb. 29, 2016 Complaint	Aug. 31, 2014 Complaint	Sep. 23, 2016 USD ($)	Dec. 31, 2016 USD ($)
Contingencies And Commitments [Line Items]
Recoveries from insurance contracts in connection with liabilities amount									$ 34.5
Pre tax charge amount								$ 14.0
EoTech Class Actions [Member]
Contingencies And Commitments [Line Items]
Number of putative class action complaints against entity | Complaint					2	3
Number of putative class action complaints against entity consolidated | Complaint				5
Securities Class Action [Member]
Contingencies And Commitments [Line Items]
Number of putative class action complaints against entity and officers | Complaint							3
Settlement agreement amount		$ 34.5
Property Damages [Member] | HVC Alkmaar [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages | €			€ 11
Business Interruption [Member] | HVC Alkmaar [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages | €			€ 35
Subsequent Event [Member] | Civil Penalty [Member]
Contingencies And Commitments [Line Items]
Settlement paid	$ 1.6

XML

Pensions and Other Employee Benefits, Changes in Benefit Obligations, Plan Assets and Funded Status and Aggregate Balance Sheet Impact (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assets and (liabilities) recognized on the consolidated balance sheets consist of [Abstract]
Non-current liabilities	$ (1,177)	$ (1,047)
Pension Plans [Member]
Change in benefit obligation [Abstract]
Benefit obligation at the beginning of the year	3,448	3,663
Service cost	108	123	$ 106
Interest cost	135	149	147
Plan participants' contributions	2	2
Amendments	15
Actuarial loss (gain)	167	(261)
Foreign currency exchange rate changes	9	(53)
Curtailments, settlements and special termination benefits	2	3
Business divestiture	0	(59)
Benefits paid	(128)	(119)
Benefit obligation at the end of the year	3,758	3,448	3,663
Change in plan assets [Abstract]
Fair value of plan assets at the beginning of the year	2,552	2,570
Actual return on plan assets	189	54
Employer contributions	97	97
Plan participants' contributions	2	2
Foreign currency exchange rate changes	9	(52)
Benefits paid	(128)	(119)
Fair value of plan assets at the end of the year	2,721	2,552	2,570
Unfunded status at the end of the year	(1,037)	(896)
Assets and (liabilities) recognized on the consolidated balance sheets consist of [Abstract]
Non-current assets	37	37
Current liabilities	(6)	(5)
Non-current liabilities	(1,068)	(928)
Total	(1,037)	(896)
Postretirement Benefit Plans [Member]
Change in benefit obligation [Abstract]
Benefit obligation at the beginning of the year	184	199
Service cost	2	3	3
Interest cost	6	7	8
Plan participants' contributions	4	4
Amendments	(3)
Actuarial loss (gain)	(3)	(12)
Foreign currency exchange rate changes	0	(4)
Curtailments, settlements and special termination benefits	0	0
Business divestiture	0	0
Benefits paid	(13)	(13)
Benefit obligation at the end of the year	177	184	199
Change in plan assets [Abstract]
Fair value of plan assets at the beginning of the year	57	60
Actual return on plan assets	5	0
Employer contributions	7	6
Plan participants' contributions	4	4
Foreign currency exchange rate changes	0	0
Benefits paid	(13)	(13)
Fair value of plan assets at the end of the year	60	57	$ 60
Unfunded status at the end of the year	(117)	(127)
Assets and (liabilities) recognized on the consolidated balance sheets consist of [Abstract]
Non-current assets	0	0
Current liabilities	(8)	(8)
Non-current liabilities	(109)	(119)
Total	$ (117)	$ (127)

XML

Pensions and Other Employee Benefits, Net Loss and Prior Service Cost Balances in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	$ 896	$ 768
Prior service cost (credit)	14	0
Total amount recognized	910	768
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	(12)	(10)
Prior service cost (credit)	(4)	(3)
Total amount recognized	$ (16)	$ (13)

XML

Pensions and Other Employee Benefits, Aggregate Accumulated Benefit Obligation in Excess of Fair Value (Details) - Pension Plans [Member] - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Aggregate accumulated benefit obligation (ABO)	$ 3,413	$ 3,120
Projected benefit obligation	3,528	3,232
Accumulated benefit obligation	3,192	2,913
Fair value of plan assets	$ 2,456	$ 2,302

XML

Pensions and Other Employee Benefits, Weighted Average Assumptions Used to Determine Benefit Obligations (Details)		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Pension Plans [Member]
Benefit obligations [Abstract]
Discount rate	[1]	4.41%	4.67%
Rate of compensation increase	[2]	3.50%	3.50%
U.S. Based Pension Plans [Member]
Benefit obligations [Abstract]
Rate of compensation increase		3.50%	3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		4.46%	4.73%
Canadian Based Pension Plans [Member]
Benefit obligations [Abstract]
Rate of compensation increase		3.50%	3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		3.80%	3.93%
Postretirement Benefit Plans [Member]
Benefit obligations [Abstract]
Discount rate	[3]	4.05%	4.22%
U.S. Based Postretirement Benefit Plans [Member]
Benefit obligations [Abstract]
Assumptions used to determine net periodic benefit cost, weighted average discount rate		4.11%	4.28%
Canadian Based Postretirement Benefit Plans [Member]
Benefit obligations [Abstract]
Assumptions used to determine net periodic benefit cost, weighted average discount rate		3.64%	3.74%

[1] The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.46% and 4.73% for the U.S. based plans, respectively, and 3.80% and 3.93% for the Canadian based plans, respectively.

[2] The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2016 and 2015.

[3] The weighted average discount rate assumptions used at December 31, 2016 and 2015 were comprised of separate assumptions determined by country of 4.11% and 4.28% for the U.S. based plans, respectively, and 3.64% and 3.74% for the Canadian based plans, respectively.

XML

Pensions and Other Employee Benefits, Net Periodic Benefit Cost (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plans [Member]
Components of net periodic benefit cost [Abstract]
Service cost	$ 108	$ 123	$ 106
Interest cost	135	149	147
Expected return on plan assets	(200)	(205)	(193)
Amortization of prior service cost (credits)	0	1	2
Amortization of net loss (gain)	52	68	17
Curtailment or settlement loss (gain)	2	3	1
Net periodic benefit cost	97	139	80
Postretirement Benefit Plans [Member]
Components of net periodic benefit cost [Abstract]
Service cost	2	3	3
Interest cost	6	7	8
Expected return on plan assets	(4)	(5)	(4)
Amortization of prior service cost (credits)	(2)	(2)	(2)
Amortization of net loss (gain)	(2)	0	(2)
Curtailment or settlement loss (gain)	0	0	(1)
Net periodic benefit cost	$ 0	$ 3	$ 2

XML

Pensions and Other Employee Benefits, Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other changes in plan assets and benefit obligations recognized in other comprehensive income [Abstract]
Net loss (gain)	$ 60
Prior service cost (credit)	0
Total amount expected to be amortized	60
Pension Plans [Member]
Other changes in plan assets and benefit obligations recognized in other comprehensive income [Abstract]
Net loss (gain)	179	$ (132)	$ 560
Prior service cost (credit)	15	0	1
Amortization of net (loss) gain	(52)	(68)	(17)
Amortization of prior service (cost) credit	0	(1)	(2)
Total recognized in other comprehensive income	142	(201)	542
Total recognized in net periodic benefit cost and other comprehensive income	239	(62)	622
Net loss (gain)	62
Prior service cost (credit)	1
Total amount expected to be amortized	63
Postretirement Benefit Plans [Member]
Other changes in plan assets and benefit obligations recognized in other comprehensive income [Abstract]
Net loss (gain)	(4)	(7)	5
Prior service cost (credit)	(2)	0	(1)
Amortization of net (loss) gain	2	0	2
Amortization of prior service (cost) credit	2	2	2
Total recognized in other comprehensive income	(2)	(5)	8
Total recognized in net periodic benefit cost and other comprehensive income	(2)	$ (2)	$ 10
Net loss (gain)	(2)
Prior service cost (credit)	(1)
Total amount expected to be amortized	$ (3)

XML

Pensions and Other Employee Benefits, Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015		Dec. 31, 2014
Defined Benefit Plan Disclosure [Line Items]
Effect of one percentage point increase on total service and interest cost		$ 0
Effect of one percentage point decrease on total service and interest cost		0
Effect of one percentage point increase on postretirement benefit obligations		5
Effect of one percentage point decrease on postretirement benefit obligations		$ (4)
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation	[1]	4.67%	4.14%		5.03%
Service cost		4.83%	0.00%	[2]	0.00%	[2]
Interest cost		3.95%	0.00%	[2]	0.00%	[2]
Expected long-term return on plan assets	[3]	7.92%	8.14%		8.13%
Rate of compensation increase	[4]	3.50%	3.50%		3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate	[1]	4.67%	4.14%		5.03%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets	[3]	7.92%	8.14%		8.13%
Assumptions used to determine net periodic benefit cost, Rate of compensation increase	[4]	3.50%	3.50%		3.50%
U.S. Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation		4.73%	4.20%		5.10%
Expected long-term return on plan assets		8.00%	8.25%
Rate of compensation increase		3.50%	3.50%		3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		4.73%	4.20%		5.10%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets		8.00%	8.25%
Assumptions used to determine net periodic benefit cost, Rate of compensation increase		3.50%	3.50%		3.50%
Health care cost trend rate, covering retirees under 65 years of age in 2017		7.00%
Health care cost trend rate, covering retirees over 65 years of age in 2017		8.50%
U.S. Based Pension Plans [Member] | 2021 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend rate, covering retirees under 65 years of age		5.00%
U.S. Based Pension Plans [Member] | 2024 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend rate, covering retirees over 65 years of age		5.00%
Canadian Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation		3.93%	3.90%		4.70%
Expected long-term return on plan assets		7.25%	7.25%
Rate of compensation increase		3.50%	3.50%		3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		3.93%	3.90%		4.70%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets		7.25%	7.25%
Assumptions used to determine net periodic benefit cost, Rate of compensation increase		3.50%	3.50%		3.50%
Health care cost trend in 2017		6.50%
Canadian Based Pension Plans [Member] | 2023 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend		5.00%
German Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation		0.00%	2.20%		3.50%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		0.00%	2.20%		3.50%
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation	[5]	4.22%	3.70%		4.43%
Service cost	[2]	4.37%	0.00%		0.00%
Interest cost	[2]	3.26%	0.00%		0.00%
Expected long-term return on plan assets		7.42%	7.65%		7.64%
Assumptions used to determine net periodic benefit cost, weighted average discount rate	[5]	4.22%	3.70%		4.43%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets		7.42%	7.65%		7.64%
U.S. Based Postretirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation		4.28%	3.70%		4.60%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		4.28%	3.70%		4.60%
Canadian Based Postretirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation		3.74%	3.70%		4.60%
Assumptions used to determine net periodic benefit cost, weighted average discount rate		3.74%	3.70%		4.60%

[1] The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015, and 2014 were comprised of separate assumptions determined by country of 4.73%, 4.20% and 5.10% for the U.S. based plans and 3.93%, 3.90% and 4.70% for the Canadian based plans, respectively.

[2] Not applicable as the Company changed to the spot rate approach beginning in 2016 as described above.

[3] The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.00% and 8.25% for the U.S. based plans for the years ended December 31, 2016 and 2015, respectively, and 7.25% for the Canadian based plans for the years ended December 31, 2016, and 2015.

[4] The weighted average rate of compensation increase assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 3.50% for both the U.S and Canadian based plans.

[5] The weighted average discount rate assumptions used for the years ended December 31, 2016, 2015 and 2014 were comprised of separate assumptions determined by country of 4.28%, 3.70% and 4.40% for the U.S. based plans and 3.74%, 3.70% and 4.60% for the Canadian based plans, respectively.

XML

Pensions and Other Employee Benefits, Weighted Average Asset Allocations by Asset Category (Details)		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
U.S. [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		100.00%	100.00%
U.S. [Member] | Domestic Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	[1]	30.00%
Percentage of plan assets, maximum range	[1]	60.00%
Weighted-average asset allocations	[1]	55.00%	52.00%
U.S. [Member] | International Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	[2]	10.00%
Percentage of plan assets, maximum range	[2]	20.00%
Weighted-average asset allocations	[2]	10.00%	11.00%
U.S. [Member] | Total Equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		45.00%
Percentage of plan assets, maximum range		75.00%
Weighted-average asset allocations		65.00%	63.00%
U.S. [Member] | Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		20.00%
Percentage of plan assets, maximum range		40.00%
Weighted-average asset allocations		22.00%	22.00%
U.S. [Member] | Other, Primarily Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		0.00%
Percentage of plan assets, maximum range		15.00%
Weighted-average asset allocations		5.00%	8.00%
U.S. [Member] | Total Fixed Income Securities and Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		27.00%	30.00%
U.S. [Member] | Real Estate Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		0.00%
Percentage of plan assets, maximum range		15.00%
Weighted-average asset allocations		8.00%	7.00%
Canada [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		100.00%	100.00%
Canada [Member] | Domestic Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	[1]	15.00%	13.00%
Canada [Member] | International Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	[2]	62.00%	62.00%
Canada [Member] | Total Equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		40.00%
Percentage of plan assets, maximum range		80.00%
Weighted-average asset allocations		77.00%	75.00%
Canada [Member] | Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		13.00%	16.00%
Canada [Member] | Other, Primarily Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		10.00%	9.00%
Canada [Member] | Total Fixed Income Securities and Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range		20.00%
Percentage of plan assets, maximum range		60.00%
Weighted-average asset allocations		23.00%	25.00%
Canada [Member] | Real Estate Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations		0.00%	0.00%

[1] Domestic equities for Canadian plans refers to equities of Canadian companies.

[2] International equities for Canadian plans includes equities of U.S. companies.

XML

Pensions and Other Employee Benefits, Fair Value of Pension Plan Assets (Details) - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plans [Member]
Equity securities [Abstract]
Fair value of company's plan assets		$ 2,721	$ 2,552	$ 2,570
U.S. Pension Plans' Assets [Member]
Equity securities [Abstract]
Liabilities for unsettled trades, net		(23)	(30)
Fair value of company's plan assets		$ 2,421	$ 2,269
Percentage of mutual fund in total investment in fixed income - investment grade securities		62.00%	59.00%
Percentage of pooled bond funds in total investment in fixed income - investment grade securities		38.00%	41.00%
U.S. Pension Plans' Assets [Member] | U.S. Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	$ 1,331	$ 1,200
U.S. Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	1,331	1,200
U.S. Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
U.S. Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
U.S. Pension Plans' Assets [Member] | International Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	85	79
U.S. Pension Plans' Assets [Member] | International Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	85	79
U.S. Pension Plans' Assets [Member] | International Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
U.S. Pension Plans' Assets [Member] | International Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
U.S. Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	414	400
U.S. Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	255	237
U.S. Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	159	163
U.S. Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
U.S. Pension Plans' Assets [Member] | Fixed Income - High Yield [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	136	114
U.S. Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
U.S. Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	136	114
U.S. Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
U.S. Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	193	170
U.S. Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	193	170
U.S. Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
U.S. Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
U.S. Pension Plans' Assets [Member] | Other [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	114	166
U.S. Pension Plans' Assets [Member] | Other [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	0	0
U.S. Pension Plans' Assets [Member] | Other [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	114	166
U.S. Pension Plans' Assets [Member] | Other [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	0	0
U.S. Pension Plans' Assets [Member] | Total Assets at Fair Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets		2,273	2,129
U.S. Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		1,864	1,686
U.S. Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		409	443
U.S. Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		0	0
U.S. Pension Plans' Assets [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[6],[7]	171	170
Canadian Pension Plans' Assets [Member]
Equity securities [Abstract]
Liabilities for unsettled trades, net		0	0
Fair value of company's plan assets		300	283
Canadian Pension Plans' Assets [Member] | U.S. Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	79	73
Canadian Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	79	73
Canadian Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Canadian Pension Plans' Assets [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Canadian Pension Plans' Assets [Member] | International Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	104	91
Canadian Pension Plans' Assets [Member] | International Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	104	91
Canadian Pension Plans' Assets [Member] | International Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Canadian Pension Plans' Assets [Member] | International Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - High Yield [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Canadian Pension Plans' Assets [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Canadian Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Canadian Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Canadian Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Canadian Pension Plans' Assets [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Canadian Pension Plans' Assets [Member] | Other [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	32	27
Canadian Pension Plans' Assets [Member] | Other [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	5	6
Canadian Pension Plans' Assets [Member] | Other [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	27	21
Canadian Pension Plans' Assets [Member] | Other [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	0	0
Canadian Pension Plans' Assets [Member] | Total Assets at Fair Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets		215	191
Canadian Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		188	170
Canadian Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		27	21
Canadian Pension Plans' Assets [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		0	0
Canadian Pension Plans' Assets [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[6],[7]	$ 85	$ 92
Percentage of mutual fund investment in equity trust funds		55.00%	52.00%
Percentage of pooled bond fund investment in equity trust funds		45.00%	48.00%
Postretirement Benefit Plans [Member]
Equity securities [Abstract]
Fair value of company's plan assets		$ 60	$ 57	$ 60
Percentage of mutual fund in total investment in fixed income - investment grade securities		73.00%	73.00%
Percentage of pooled bond funds in total investment in fixed income - investment grade securities		27.00%	27.00%
Postretirement Benefit Plans [Member] | U.S. Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	$ 37	$ 35
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	37	35
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	0	0
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	0	0
Postretirement Benefit Plans [Member] | International Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	1	1
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	1	1
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	0	0
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[8]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[9]	11	11
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[9]	8	8
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[9]	3	3
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[9]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	2	2
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	2	2
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[10]	3	3
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[10]	3	3
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[10]	0	0
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[10]	0	0
Postretirement Benefit Plans [Member] | Other [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[11]	3	2
Postretirement Benefit Plans [Member] | Other [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[11]	0	0
Postretirement Benefit Plans [Member] | Other [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[11]	3	2
Postretirement Benefit Plans [Member] | Other [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[11]	0	0
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets		57	54
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		49	47
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		8	7
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		0	0
Postretirement Benefit Plans [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities [Abstract]
Liabilities for unsettled trades, net	[12],[13]	$ 3	$ 3

[1] Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

[2] Approximately 62% and 59% at December 31, 2016 and 2015, respectively, of U.S. plan assets that are invested in the Fixed Income - Investment Grade asset category consist of a mutual fund offered by a registered investment company (the Fund) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 38% and 41% at December 31, 2016 and 2015, respectively, of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

[3] Fixed Income - High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

[4] Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

[5] Other consists primarily of: (1) money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

[6] All of the U.S. plans other investments measured using NAV at December 31, 2016 and 2015 and approximately 55% and 52% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund's holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 45% and 48% at December 31, 2016 and 2015, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the "Bond Funds"). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

[7] In accordance with ASU 2015-07, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

[8] Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

[9] Approximately 73% at December 31, 2016 and 2015 of the postretirement benefit plan assets that are invested in the Fixed Income - Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2016 and 2015 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

[10] REITs consist of securities that trade on the major exchanges and invest directly, either through properties or mortgages.

[11] Other consists primarily of money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

[12] All of the postretirement benefit plans other investments measured using NAV at December 31, 2016 and 2015 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund's holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

[13] In accordance with ASU 2015-07, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

XML

Pensions and Other Employee Benefits, Fair Value of Postretirement Benefit Plans Assets (Details) - USD ($) $ in Millions		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plans [Member]
Equity securities [Abstract]
Fair value of company's plan assets		$ 2,721	$ 2,552	$ 2,570
Postretirement Benefit Plans [Member]
Equity securities [Abstract]
Fair value of company's plan assets		$ 60	$ 57	$ 60
Percentage of mutual fund in total investment in fixed income - investment grade securities		73.00%	73.00%
Percentage of pooled bond funds in total investment in fixed income - investment grade securities		27.00%	27.00%
Postretirement Benefit Plans [Member] | U.S. Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	$ 37	$ 35
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	37	35
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Postretirement Benefit Plans [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Postretirement Benefit Plans [Member] | International Equity [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	1	1
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	1	1
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Postretirement Benefit Plans [Member] | International Equity [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[1]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	11	11
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	8	8
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	3	3
Postretirement Benefit Plans [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[2]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	2	2
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	2	2
Postretirement Benefit Plans [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[3]	0	0
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	3	3
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	3	3
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Postretirement Benefit Plans [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[4]	0	0
Postretirement Benefit Plans [Member] | Other Plan Assets [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	3	2
Postretirement Benefit Plans [Member] | Other Plan Assets [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	0	0
Postretirement Benefit Plans [Member] | Other Plan Assets [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	3	2
Postretirement Benefit Plans [Member] | Other Plan Assets [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets	[5]	0	0
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member]
Equity securities [Abstract]
Fair value of company's plan assets		57	54
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		49	47
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		8	7
Postretirement Benefit Plans [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities [Abstract]
Fair value of company's plan assets		0	0
Postretirement Benefit Plans [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities [Abstract]
Liabilities for unsettled trades, net	[6],[7]	$ 3	$ 3

[1] Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

[2] Approximately 73% at December 31, 2016 and 2015 of the postretirement benefit plan assets that are invested in the Fixed Income - Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2016 and 2015 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

[3] Fixed Income - High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

[4] REITs consist of securities that trade on the major exchanges and invest directly, either through properties or mortgages.

[5] Other consists primarily of money market accounts, which invest primarily in short-term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

[6] All of the postretirement benefit plans other investments measured using NAV at December 31, 2016 and 2015 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund's holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

[7] In accordance with ASU 2015-07, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

XML

Pensions and Other Employee Benefits, Contributions (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($)
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected contributions to plans in 2017	$ 100
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected contributions to plans in 2017	$ 10

XML

Pensions and Other Employee Benefits, Estimated Future Benefit Payments (Details) $ in Millions	Dec. 31, 2016 USD ($)
Pension Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2017	$ 162
2018	156
2019	162
2020	171
2021	175
Years 2022-2026	1,201
Postretirement Benefit Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2017	13
2018	13
2019	14
2020	14
2021	14
Years 2022-2026	65
Subsidy Receipts, 2017	0
Subsidy Receipts, 2018	0
Subsidy Receipts, 2019	0
Subsidy Receipts, 2020	0
Subsidy Receipts, 2021	0
Subsidy Receipts, Years 2022-2026	$ 1

XML

Pensions and Other Employee Benefits, Employee Savings Plans (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Continuing Operations [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's matching contributions in L-3 Holdings' common stock and cash	$ 118	$ 131	$ 135
Discontinued Operations [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's matching contributions in L-3 Holdings' common stock and cash	$ 1	$ 12	$ 11

XML

Pensions and Other Employee Benefits, Multi-Employer Benefit Plans (Details) $ in Millions		12 Months Ended
		Dec. 31, 2016 USD ($) PensionFunds		Dec. 31, 2015 USD ($)		Dec. 31, 2014 USD ($)
Multiemployer Plans [Line Items]
Contributions by L-3 Communications		$ 26		$ 23		$ 19
Minimum percentage funded to have green zone status rating		80.00%
Percentage of total plan contributions				5.00%		5.00%
Percentage of contributions from reportable segment		63.00%
Expiration date of multiple bargaining agreements		Apr. 28, 2019
Number of pension funds included in Other Pension Funds | PensionFunds		3
IAM National Pension Fund [Member]
Multiemployer Plans [Line Items]
Contributions by L-3 Communications		$ 26	[1]	$ 23	[2]	$ 19	[2]
EIN/Pension Plan Number		51-6031295/002
Pension Protection Act Zone Status	[3]	Green		Green
FIP/RP Status Pending/Implemented	[4]	No
Surcharge Imposed		No
Expiration Date of Collective-Bargaining Agreement, First		Apr. 09, 2017
Expiration Date of Collective-Bargaining Agreement, Last	[5]	Jun. 28, 2019
Other Pension Funds [Member]
Multiemployer Plans [Line Items]
Contributions by L-3 Communications	[6]	$ 0		$ 0		$ 0

[1] At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2016 was not available.

[2] Represents [5%] of total plan contributions for the years ended December 31, 2015 and 2014 based on Form 5500.

[3] A zone status rating of green indicates the plan is at least 80% funded.

[4] Funding improvement plan or rehabilitation plan.

[5] The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company's Aerospace Systems reportable segment and represents 63% of 2016 contributions.

[6] Consists of three pension funds in which the Company's contributions are individually, and in the aggregate, insignificant.

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Supplemental Cash Flow Information [Abstract]
Interest paid on outstanding debt	$ 162	$ 182	$ 176
Income tax payments	120	132	129
Income tax refunds	$ 8	$ 8	$ 9

XML

Segment Information, Products and Services (Details) $ in Millions		3 Months Ended								12 Months Ended
		Dec. 31, 2016 USD ($)	Sep. 23, 2016 USD ($)	Jun. 24, 2016 USD ($)	Mar. 25, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 25, 2015 USD ($)	Jun. 26, 2015 USD ($)	Mar. 27, 2015 USD ($)	Dec. 31, 2016 USD ($) Segment	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Segment Information [Abstract]
Number of reportable segments | Segment										3
Corporate expenses											$ 15	$ 16
Net Sales [Abstract]
Products										$ 6,442	6,589	6,839
Services										4,069	3,877	4,147
Total net sales		$ 2,989	$ 2,505	$ 2,664	$ 2,353	$ 2,871	$ 2,564	$ 2,543	$ 2,488	10,511	10,466	10,986
Operating income [Abstract]
Operating income		294	$ 215	$ 247	$ 252	(96)	$ 231	$ 153	$ 187	1,008	475	1,012
Loss related to business divestitures	[1]									0	(31)	0
Goodwill impairment charges	[2]									0	(384)	0
Depreciation and amortization [Abstract]
Depreciation and amortization										206	210	214
Capital Expenditures [Abstract]
Capital Expenditures										216	197	174
Total Assets [Abstract]
Total Assets		11,865				12,069				11,865	12,069	13,692
Assets held for sale		0				0				0	0	547
Assets of discontinued operations		0				664				0	664	1,262
Continuing Operations [Member]
Operating income [Abstract]
Goodwill impairment charges											(384)
NSS Including Business Retained [Member] | Continuing Operations [Member]
Operating income [Abstract]
Goodwill impairment charges											(46)
NSS [Member]
Operating income [Abstract]
Goodwill impairment charges											(608)
NSS [Member] | Continuing Operations [Member]
Operating income [Abstract]
Goodwill impairment charges											(37)
Business Retained from NSS [Member] | Continuing Operations [Member]
Operating income [Abstract]
Goodwill impairment charges											(9)
Vertex Aerospace [Member]
Operating income [Abstract]
Goodwill impairment charges											(338)
Vertex Aerospace [Member] | Continuing Operations [Member]
Operating income [Abstract]
Goodwill impairment charges											(338)
Electronic Systems [Member]
Operating income [Abstract]
Goodwill impairment charges											(26)
Aerospace Systems [Member]
Operating income [Abstract]
Goodwill impairment charges											(338)
Communication Systems [Member]
Operating income [Abstract]
Goodwill impairment charges											(20)
Operating Segments [Member]
Operating income [Abstract]
Operating income										1,008	890	1,012
Operating Segments [Member] | Electronic Systems [Member]
Net Sales [Abstract]
Products										3,293	3,390	3,685
Services										1,042	999	1,057
Operating income [Abstract]
Operating income										518	489	533
Depreciation and amortization [Abstract]
Depreciation and amortization										105	110	123
Capital Expenditures [Abstract]
Capital Expenditures										113	99	80
Total Assets [Abstract]
Total Assets		6,802				6,426				6,802	6,426	6,281
Operating Segments [Member] | Aerospace Systems [Member]
Net Sales [Abstract]
Products										1,662	1,661	1,722
Services										2,580	2,503	2,604
Operating income [Abstract]
Operating income										289	205	283
Depreciation and amortization [Abstract]
Depreciation and amortization										54	50	40
Capital Expenditures [Abstract]
Capital Expenditures										56	55	59
Total Assets [Abstract]
Total Assets		2,535				2,630				2,535	2,630	3,011
Operating Segments [Member] | Communication Systems [Member]
Net Sales [Abstract]
Products										1,585	1,648	1,546
Services										488	441	539
Operating income [Abstract]
Operating income										201	196	196
Depreciation and amortization [Abstract]
Depreciation and amortization										47	50	51
Capital Expenditures [Abstract]
Capital Expenditures										37	37	29
Total Assets [Abstract]
Total Assets		2,031				1,984				2,031	1,984	2,025
Corporate [Member]
Capital Expenditures [Abstract]
Capital Expenditures										10	6	6
Total Assets [Abstract]
Total Assets		$ 497				$ 365				497	365	566
Elimination of Intercompany Sales [Member]
Net Sales [Abstract]
Products										(98)	(110)	(114)
Services										$ (41)	$ (66)	$ (53)

[1] See Note 3 for information regarding the Company's business divestitures.

[2] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

Segment Information, Geographic Location (Details) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
		Dec. 31, 2016	Sep. 23, 2016	Jun. 24, 2016	Mar. 25, 2016	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Property, plant and equipment, net		$ 1,121				$ 1,097				$ 1,121	$ 1,097
Net sales		2,989	$ 2,505	$ 2,664	$ 2,353	2,871	$ 2,564	$ 2,543	$ 2,488	10,511	10,466	$ 10,986
U.S. Government Agencies [Member]
Segment Reporting Information [Line Items]
Net sales	[1]									7,649	7,291	7,464
Commercial [Member]
Segment Reporting Information [Line Items]
Net sales										1,282	1,376	1,656
Foreign Governments [Member]
Segment Reporting Information [Line Items]
Net sales	[1]									1,580	1,799	1,866
Reportable Geographical Components [Member] | United States [Member]
Segment Reporting Information [Line Items]
Property, plant and equipment, net		974				971				974	971
Net sales										8,199	7,908	8,051
Reportable Geographical Components [Member] | United Kingdom [Member]
Segment Reporting Information [Line Items]
Net sales										331	336	335
Reportable Geographical Components [Member] | Australia [Member]
Segment Reporting Information [Line Items]
Net sales										254	321	254
Reportable Geographical Components [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales										297	281	289
Reportable Geographical Components [Member] | South Korea [Member]
Segment Reporting Information [Line Items]
Net sales										127	207	226
Reportable Geographical Components [Member] | Saudi Arabia (Member)
Segment Reporting Information [Line Items]
Net sales										159	201	160
Reportable Geographical Components [Member] | Japan [Member]
Segment Reporting Information [Line Items]
Net sales										81	95	124
Reportable Geographical Components [Member] | France
Segment Reporting Information [Line Items]
Net sales										75	62	74
Reportable Geographical Components [Member] | Other [Member]
Segment Reporting Information [Line Items]
Property, plant and equipment, net		$ 147				$ 126				147	126
Net sales										988	1,055	1,473
Reportable Geographical Components [Member] | Total International [Member]
Segment Reporting Information [Line Items]
Net sales										$ 2,312	$ 2,558	$ 2,935

[1] Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

XML

Employee Severance and Termination Costs (Details) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($) Employees	Dec. 31, 2015 USD ($) Employees	Dec. 31, 2014 USD ($) Employees
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 17	$ 18	$ 29
Number of employees terminated | Employees	700	800	1,800
Remaining balance of employee termination costs	$ 9
Electronic Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	8	$ 8	$ 16
Aerospace Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	2	4	5
Communication Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 7	6	$ 8
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Payments for employee termination costs		$ 9

XML

Unaudited Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended																12 Months Ended
	Dec. 31, 2016		Sep. 23, 2016		Jun. 24, 2016		Mar. 25, 2016		Dec. 31, 2015		Sep. 25, 2015		Jun. 26, 2015		Mar. 27, 2015		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unaudited Quarterly Financial Data [Abstract]
Sales	$ 2,989		$ 2,505		$ 2,664		$ 2,353		$ 2,871		$ 2,564		$ 2,543		$ 2,488		$ 10,511	$ 10,466	$ 10,986
Operating income (loss)	294		215		247		252		(96)		231		153		187		1,008	475	1,012
Income (loss) from continuing operations	192		151		151		167		(56)		128		120		105		661	297	645
Net income (loss)	192		151		151		230		(162)		(296)		124		109		724	(225)	677
Net income (loss) attributable to L3	$ 188		$ 148		$ 147		$ 227		$ (166)		$ (299)		$ 120		$ 105		$ 710	$ (240)	$ 664
Basic earnings (loss) per share from continuing operations (in dollars per share)	$ 2.43	[1]	$ 1.91	[1]	$ 1.90	[1]	$ 2.11	[1]	$ (0.76)	[1]	$ 1.56	[1]	$ 1.41	[1]	$ 1.23	[1]	$ 8.36	$ 3.49	$ 7.40
Basic earnings (loss) per share (in dollars per share)	2.43	[1]	1.91	[1]	1.90	[1]	2.92	[1]	(2.11)	[1]	(3.74)	[1]	1.46	[1]	1.28	[1]	9.17	(2.97)	7.78
Diluted earnings (loss) per share from continuing operations (in dollars per share)	2.38	[1]	1.88	[1]	1.88	[1]	2.08	[1]	(0.76)	[1]	1.54	[1]	1.39	[1]	1.20	[1]	8.21	3.44	7.20
Diluted earnings (loss) per share (in dollars per share)	$ 2.38	[1]	$ 1.88	[1]	$ 1.88	[1]	$ 2.87	[1]	$ (2.11)	[1]	$ (3.68)	[1]	$ 1.44	[1]	$ 1.25	[1]	$ 9.01	$ (2.93)	$ 7.56

[1] EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters' EPS may not equal the full year computed EPS.

XML

Financial Information of L3 and Its Subsidiaries, Condensed Combining Balance Sheets (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 363	$ 207	$ 442	$ 500
Billed receivables, net	731	746
Contracts in process	2,055	2,081
Other current assets	548	534
Assets of discontinued operations	0	664	1,262
Total current assets	3,697	4,232
Goodwill	6,560	6,281	6,512
Other assets	1,608	1,556
Investment in and amounts due from consolidated subsidiaries	0	0
Total assets	11,865	12,069	13,692
Current portion of long-term debt	0	499
Current liabilities	2,135	2,160
Liabilities of discontinued operations	0	220
Amounts due to consolidated subsidiaries	0
Other long-term liabilities	1,781	1,634
Long-term debt	3,325	3,127
Total liabilities	7,241	7,640
L3 shareholders' equity	4,553	4,355
Noncontrolling interests	71	74
Total equity	4,624	4,429	5,360	6,056
Total liabilities and equity	11,865	12,069
L3 [Member]
Current assets:
Cash and cash equivalents	291	137	361	258
Billed receivables, net	261	278
Contracts in process	694	872
Other current assets	236	288
Assets of discontinued operations		0
Total current assets	1,482	1,575
Goodwill	2,162	2,318
Other assets	705	800
Investment in and amounts due from consolidated subsidiaries	5,867	5,609
Total assets	10,216	10,302
Current portion of long-term debt	0	499
Current liabilities	789	911
Liabilities of discontinued operations		0
Amounts due to consolidated subsidiaries	0
Other long-term liabilities	1,549	1,410
Long-term debt	3,325	3,127
Total liabilities	5,663	5,947
L3 shareholders' equity	4,553	4,355
Noncontrolling interests	0	0
Total equity	4,553	4,355
Total liabilities and equity	10,216	10,302
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	1	0	1	0
Billed receivables, net	285	297
Contracts in process	1,125	958
Other current assets	187	137
Assets of discontinued operations		664
Total current assets	1,598	2,056
Goodwill	3,227	2,973
Other assets	591	496
Investment in and amounts due from consolidated subsidiaries	5,430	3,739
Total assets	10,846	9,264
Current portion of long-term debt		0
Current liabilities	1,022	899
Liabilities of discontinued operations		220
Amounts due to consolidated subsidiaries	0
Other long-term liabilities	200	195
Long-term debt	0	0
Total liabilities	1,222	1,314
L3 shareholders' equity	9,624	7,950
Noncontrolling interests	0	0
Total equity	9,624	7,950
Total liabilities and equity	10,846	9,264
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	207	165	142	261
Billed receivables, net	185	171
Contracts in process	236	251
Other current assets	125	109
Assets of discontinued operations		0
Total current assets	753	696
Goodwill	1,171	990
Other assets	312	260
Investment in and amounts due from consolidated subsidiaries	0	111
Total assets	2,236	2,057
Current portion of long-term debt		0
Current liabilities	460	445
Liabilities of discontinued operations		0
Amounts due to consolidated subsidiaries	282
Other long-term liabilities	32	29
Long-term debt	0	0
Total liabilities	774	474
L3 shareholders' equity	1,462	1,583
Noncontrolling interests	0	0
Total equity	1,462	1,583
Total liabilities and equity	2,236	2,057
Eliminations [Member]
Current assets:
Cash and cash equivalents	(136)	(95)	$ (62)	$ (19)
Billed receivables, net	0	0
Contracts in process	0	0
Other current assets	0	0
Assets of discontinued operations		0
Total current assets	(136)	(95)
Goodwill	0	0
Other assets	0	0
Investment in and amounts due from consolidated subsidiaries	(11,297)	(9,459)
Total assets	(11,433)	(9,554)
Current portion of long-term debt		0
Current liabilities	(136)	(95)
Liabilities of discontinued operations		0
Amounts due to consolidated subsidiaries	(282)
Other long-term liabilities	0	0
Long-term debt	0	0
Total liabilities	(418)	(95)
L3 shareholders' equity	(11,086)	(9,533)
Noncontrolling interests	71	74
Total equity	(11,015)	(9,459)
Total liabilities and equity	$ (11,433)	$ (9,554)

XML

Financial Information of L3 and Its Subsidiaries, Condensed Combining Statements of Operations (Details) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
		Dec. 31, 2016	Sep. 23, 2016	Jun. 24, 2016	Mar. 25, 2016	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Condensed Financial Statements, Captions [Line Items]
Total net sales		$ 2,989	$ 2,505	$ 2,664	$ 2,353	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 10,511	$ 10,466	$ 10,986
Total cost of sales										(9,503)	(9,576)	(9,974)
(Loss) gain related to business divestitures	[1]									0	(31)	0
Impairment charge	[2]									0	(384)	0
Operating income (loss)		294	215	247	252	(96)	231	153	187	1,008	475	1,012
Interest expense										(169)	(169)	(158)
Interest and other income, net										18	17	18
Debt retirement charge										(7)	(1)	0
Income (loss) from continuing operations before income taxes										850	322	872
(Provision) benefit for income taxes										(189)	(25)	(227)
Equity in net income of consolidated subsidiaries										0	0	0
Income from continuing operations		192	151	151	167	(56)	128	120	105	661	297	645
Income from discontinued operations, net of income tax										63	(522)	32
Net (loss) income		192	151	151	230	(162)	(296)	124	109	724	(225)	677
Net income attributable to noncontrolling interests										(14)	(15)	(13)
Net income (loss) attributable to L3		$ 188	$ 148	$ 147	$ 227	$ (166)	$ (299)	$ 120	$ 105	710	(240)	664
Comprehensive (loss) income attributable to L3										558	(230)	190
L3 [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales										3,388	3,580	3,586
Total cost of sales										(3,078)	(3,283)	(3,255)
(Loss) gain related to business divestitures											(13)
Impairment charge											0
Operating income (loss)										310	284	331
Interest expense										(168)	(167)	(156)
Interest and other income, net										11	16	15
Debt retirement charge										(7)	(1)
Income (loss) from continuing operations before income taxes										146	132	190
(Provision) benefit for income taxes										(32)	(10)	(49)
Equity in net income of consolidated subsidiaries										596	(362)	523
Income from continuing operations										710	(240)	664
Income from discontinued operations, net of income tax										0	0	0
Net (loss) income										710	(240)	664
Net income attributable to noncontrolling interests										0	0	0
Net income (loss) attributable to L3										710	(240)	664
Comprehensive (loss) income attributable to L3										558	(230)	190
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales										6,063	5,265	5,460
Total cost of sales										(5,610)	(4,906)	(5,017)
(Loss) gain related to business divestitures											(31)
Impairment charge											(364)
Operating income (loss)										453	(36)	443
Interest expense										(1)	(1)	(2)
Interest and other income, net										1	0	0
Debt retirement charge										0	0
Income (loss) from continuing operations before income taxes										453	(37)	441
(Provision) benefit for income taxes										(101)	3	(115)
Equity in net income of consolidated subsidiaries										0	0	0
Income from continuing operations										352	(34)	326
Income from discontinued operations, net of income tax										63	(522)	32
Net (loss) income										415	(556)	358
Net income attributable to noncontrolling interests										0	0	0
Net income (loss) attributable to L3										415	(556)	358
Comprehensive (loss) income attributable to L3										425	(560)	356
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales										1,379	1,935	2,218
Total cost of sales										(1,134)	(1,701)	(1,980)
(Loss) gain related to business divestitures											13
Impairment charge											(20)
Operating income (loss)										245	227	238
Interest expense										0	(1)	0
Interest and other income, net										6	1	3
Debt retirement charge										0	0
Income (loss) from continuing operations before income taxes										251	227	241
(Provision) benefit for income taxes										(56)	(18)	(63)
Equity in net income of consolidated subsidiaries										0	0	0
Income from continuing operations										195	209	178
Income from discontinued operations, net of income tax										0	0	0
Net (loss) income										195	209	178
Net income attributable to noncontrolling interests										0	0	0
Net income (loss) attributable to L3										195	209	178
Comprehensive (loss) income attributable to L3										118	98	47
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales										(319)	(314)	(278)
Total cost of sales										319	314	278
(Loss) gain related to business divestitures											0
Impairment charge											0
Operating income (loss)										0	0	0
Interest expense										0	0	0
Interest and other income, net										0	0	0
Debt retirement charge										0	0
Income (loss) from continuing operations before income taxes										0	0	0
(Provision) benefit for income taxes										0	0	0
Equity in net income of consolidated subsidiaries										(596)	362	(523)
Income from continuing operations										(596)	362	(523)
Income from discontinued operations, net of income tax										0	0	0
Net (loss) income										(596)	362	(523)
Net income attributable to noncontrolling interests										(14)	(15)	(13)
Net income (loss) attributable to L3										(610)	347	(536)
Comprehensive (loss) income attributable to L3										$ (543)	$ 462	$ (403)

[1] See Note 3 for information regarding the Company's business divestitures.

[2] Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Vertex Aerospace reporting unit, and (ii) $46 million related to a business retained by L3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

XML

Financial Information of L3 and Its Subsidiaries, Condensed Combining Statements of Cash Flows (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating activities:
Net cash from operating activities from continuing operations	$ 1,097	$ 1,069	$ 1,088
Investing activities:
Business acquisitions, net of cash acquired	(388)	(320)	(57)
Proceeds from sale of business, net of closing date cash balances	561	318	1
Other investing activities	(189)	(190)	(164)
Net cash used in investing activities from continuing operations	(16)	(192)	(221)
Financing activities:
Proceeds from sale of senior notes	547	0	996
Repurchases of senior notes	(856)	(297)	0
Redemption of CODES	0	0	(935)
Common stock repurchased	(373)	(740)	(823)
Dividends paid on L3's common stock	(220)	(214)	(208)
Other financing activities	46	46	77
Net cash used in financing activities from continuing operations	(856)	(1,205)	(893)
Effect of foreign currency exchange rate changes on cash	(13)	(19)	(17)
Net increase in cash and cash equivalents of discontinued operations	(56)	51	46
Change in cash balance in assets held for sale	0	61	(61)
Net (decrease) increase in cash	156	(235)	(58)
Cash and cash equivalents, beginning of the year	207	442	500
Cash and cash equivalents, end of the year	363	207	442
L3 [Member]
Operating activities:
Net cash from operating activities from continuing operations	482	616	467
Investing activities:
Business acquisitions, net of cash acquired	(388)	(320)	(57)
Proceeds from sale of business, net of closing date cash balances	563	14
Other investing activities	(60)	(84)	(58)
Net cash used in investing activities from continuing operations	115	(390)	(115)
Financing activities:
Proceeds from sale of senior notes	547		996
Repurchases of senior notes	(856)	(297)
Redemption of CODES			(935)
Common stock repurchased	(373)	(740)	(823)
Dividends paid on L3's common stock	(220)	(214)	(208)
Other financing activities	459	801	721
Net cash used in financing activities from continuing operations	(443)	(450)	(249)
Effect of foreign currency exchange rate changes on cash	0	0	0
Net increase in cash and cash equivalents of discontinued operations	0	0	0
Change in cash balance in assets held for sale		0	0
Net (decrease) increase in cash	154	(224)	103
Cash and cash equivalents, beginning of the year	137	361	258
Cash and cash equivalents, end of the year	291	137	361
Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities from continuing operations	542	422	571
Investing activities:
Business acquisitions, net of cash acquired	0	0	0
Proceeds from sale of business, net of closing date cash balances	0	28
Other investing activities	(86)	(69)	(85)
Net cash used in investing activities from continuing operations	(86)	(41)	(85)
Financing activities:
Proceeds from sale of senior notes	0		0
Repurchases of senior notes	0	0
Redemption of CODES			0
Common stock repurchased	0	0	0
Dividends paid on L3's common stock	0	0	0
Other financing activities	(399)	(434)	(530)
Net cash used in financing activities from continuing operations	(399)	(434)	(530)
Effect of foreign currency exchange rate changes on cash	0	0	0
Net increase in cash and cash equivalents of discontinued operations	(56)	51	46
Change in cash balance in assets held for sale		1	(1)
Net (decrease) increase in cash	1	(1)	1
Cash and cash equivalents, beginning of the year	0	1	0
Cash and cash equivalents, end of the year	1	0	1
Non-Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities from continuing operations	259	216	143
Investing activities:
Business acquisitions, net of cash acquired	0	0	0
Proceeds from sale of business, net of closing date cash balances	(2)	276
Other investing activities	(43)	(37)	(21)
Net cash used in investing activities from continuing operations	(45)	239	(21)
Financing activities:
Proceeds from sale of senior notes	0		0
Repurchases of senior notes	0	0
Redemption of CODES			0
Common stock repurchased	0	0	0
Dividends paid on L3's common stock	0	0	0
Other financing activities	(159)	(473)	(164)
Net cash used in financing activities from continuing operations	(159)	(473)	(164)
Effect of foreign currency exchange rate changes on cash	(13)	(19)	(17)
Net increase in cash and cash equivalents of discontinued operations	0	0	0
Change in cash balance in assets held for sale		60	(60)
Net (decrease) increase in cash	42	23	(119)
Cash and cash equivalents, beginning of the year	165	142	261
Cash and cash equivalents, end of the year	207	165	142
Eliminations [Member]
Operating activities:
Net cash from operating activities from continuing operations	(186)	(185)	(93)
Investing activities:
Business acquisitions, net of cash acquired	0	0	0
Proceeds from sale of business, net of closing date cash balances	0	0
Other investing activities	0	0	0
Net cash used in investing activities from continuing operations	0	0	0
Financing activities:
Proceeds from sale of senior notes	0		0
Repurchases of senior notes	0	0
Redemption of CODES			0
Common stock repurchased	0	0	0
Dividends paid on L3's common stock	0	0	0
Other financing activities	145	152	50
Net cash used in financing activities from continuing operations	145	152	50
Effect of foreign currency exchange rate changes on cash	0	0	0
Net increase in cash and cash equivalents of discontinued operations	0	0	0
Change in cash balance in assets held for sale		0	0
Net (decrease) increase in cash	(41)	(33)	(43)
Cash and cash equivalents, beginning of the year	(95)	(62)	(19)
Cash and cash equivalents, end of the year	$ (136)	$ (95)	$ (62)