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

6 Months Ended

Jun. 30, 2017

Condensed Combining Financial Information of L3 and Its Subsidiaries

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

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
Condensed Combining Balance Sheets:
At June 30, 2017:
Current assets:
Cash and cash equivalents	$	272	$	—	$	198	$	(85	)	$	385
Billed receivables, net		237		377		229		—			843
Contracts in process		769		1,166		265		—			2,200
Other current assets		241		231		121		—			593
Total current assets		1,519		1,774		813		(85	)		4,021
Goodwill		2,386		3,099		1,254		—			6,739
Other assets		694		605		373		—			1,672
Investment in and amounts due from consolidated subsidiaries		6,091		4,991		—		(11,082	)		—
Total assets	$	10,690	$	10,469	$	2,440	$	(11,167	)	$	12,432
Current liabilities	$	757	$	993	$	530	$	(85	)	$	2,195
Amounts due to consolidated subsidiaries		—		—		303		(303	)		—
Other long-term liabilities		1,630		204		29		—			1,863
Long-term debt		3,327		—		—		—			3,327
Total liabilities		5,714		1,197		862		(388	)		7,385
L3 shareholders’ equity		4,976		9,272		1,578		(10,850	)		4,976
Noncontrolling interests		―		—		—		71			71
Total equity		4,976		9,272		1,578		(10,779	)		5,047
Total liabilities and equity	$	10,690	$	10,469	$	2,440	$	(11,167	)	$	12,432

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

Condensed Combining Statements of Operations

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the quarter ended June 30, 2017:
Total net sales	$	901		$	1,512		$	420		$	(101	)	$	2,732
Total cost of sales		(811	)		(1,357	)		(353	)		101			(2,420	)
Operating income		90			155			67			—			312
Interest expense		(42	)		(1	)		—			—			(43	)
Interest and other income, net		2			—			2			—			4
Income before income taxes		50			154			69			—			273
Provision for income taxes		(12	)		(37	)		(17	)		—			(66	)
Equity in net income of consolidated subsidiaries		164			—			—			(164	)		—
Net income		202			117			52			(164	)		207
Net income attributable to noncontrolling interests		—			—			—			(5	)		(5	)
Net income attributable to L3	$	202		$	117		$	52		$	(169	)	$	202
Comprehensive income attributable to L3	$	264		$	117		$	105		$	(222	)	$	264

For the quarter ended June 24, 2016:
Total net sales	$	903		$	1,374		$	454		$	(67	)	$	2,664
Total cost of sales		(803	)		(1,295	)		(386	)		67			(2,417	)
Operating income		100			79			68			—			247
Interest expense		(43	)		—			—			—			(43	)
Interest and other income, net		3			—			2			—			5
Debt retirement charge		(5	)		—			—			—			(5	)
Income before income taxes		55			79			70			—			204
Provision for income taxes		(14	)		(21	)		(18	)		—			(53	)
Equity in net income of consolidated subsidiaries		106			—			—			(106	)		—
Net income		147			58			52			(106	)		151
Net income attributable to noncontrolling interests		—			—			—			(4	)		(4	)
Net income attributable to L3	$	147		$	58		$	52		$	(110	)	$	147
Comprehensive income attributable to L3	$	161		$	61		$	55		$	(116	)	$	161

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the first half period ended June 30, 2017:
Total net sales	$	1,763		$	3,019		$	793		$	(174	)	$	5,401
Total cost of sales		(1,588	)		(2,756	)		(666	)		174			(4,836	)
Operating income		175			263			127			—			565
Interest expense		(84	)		(1	)		—			—			(85	)
Interest and other income, net		5			—			4			—			9
Income before income taxes		96			262			131			—			489
Provision for income taxes		(22	)		(61	)		(31	)		—			(114	)
Equity in net income of consolidated subsidiaries		292			—			—			(292	)		—
Net income		366			201			100			(292	)		375
Net income attributable to noncontrolling interests		—			—			—			(9	)		(9	)
Net income attributable to L3	$	366		$	201		$	100		$	(301	)	$	366
Comprehensive income attributable to L3	$	456		$	201		$	173		$	(374	)	$	456

For the first half period ended June 24, 2016:
Total net sales	$	1,725		$	2,559		$	863		$	(130	)	$	5,017
Total cost of sales		(1,542	)		(2,363	)		(743	)		130			(4,518	)
Operating income		183			196			120			—			499
Interest expense		(84	)		—			—			—			(84	)
Interest and other income, net		6			—			3			—			9
Debt retirement charge		(5	)		—			—			—			(5	)
Income from continuing operations before income taxes		100			196			123			—			419
Provision for income taxes		(24	)		(47	)		(30	)		—			(101	)
Equity in net income of consolidated subsidiaries		298			—			—			(298	)		—
Income from continuing operations		374			149			93			(298	)		318
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		374			212			93			(298	)		381
Net income attributable to noncontrolling interests		—			—			—			(7	)		(7	)
Net income attributable to L3	$	374		$	212		$	93		$	(305	)	$	374
Comprehensive income attributable to L3	$	404		$	223		$	96		$	(319	)	$	404

Condensed Combining Statements of Cash Flows

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows For the first half period ended June 30, 2017:
Operating activities:
Net cash from operating activities	$	162		$	109		$	121		$	(41	)	$	351
Investing activities:
Business acquisitions, net of cash acquired		(191	)		—			—			—			(191	)
Proceeds from sale of businesses, net of closing date cash balances		15			—			1			—			16
Other investing activities		(33	)		11			(12	)		—			(34	)
Net cash (used in) from investing activities		(209	)		11			(11	)		—			(209	)
Financing activities:
Common stock repurchased		(26	)		—			—			—			(26	)
Dividends paid on L3’s common stock		(119	)		—			—			—			(119	)
Other financing activities		173			(121	)		(129	)		92			15
Net cash from (used in) financing activities		28			(121	)		(129	)		92			(130	)
Effect of foreign currency exchange rate changes on cash		—			—			10			—			10
Net (decrease) increase in cash		(19	)		(1	)		(9	)		51			22
Cash and cash equivalents, beginning of the period		291			1			207			(136	)		363
Cash and cash equivalents, end of the period	$	272		$	—		$	198		$	(85	)	$	385

For the first half period ended June 24, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	168		$	206		$	79		$	(77	)	$	376
Investing activities:
Business acquisitions, net of cash acquired		(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balance		576			—			(1	)		—			575
Other investing activities		(11	)		(28	)		(19	)		—			(58	)
Net cash from (used in) investing activities from continuing operations		538			(28	)		(20	)		—			490
Financing activities:
Redemption of senior notes		(305	)		—			—			—			(305	)
Common stock repurchased		(276	)		—			—			—			(276	)
Dividends paid on L3’s common stock		(112	)		—			—			—			(112	)
Other financing activities		49			(122	)		(59	)		160			28
Net cash used in financing activities from continuing operations		(644	)		(122	)		(59	)		160			(665	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		62			—			—			83			145
Cash and cash equivalents, beginning of the period		137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	199		$	—		$	165		$	(12	)	$	352