|
☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
13-3937436
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
|
600 Third Avenue, New York, NY
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10016
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered:
|
Common stock, par value $0.01 per share
|
|
New York Stock Exchange
|
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
|
Large accelerated filer ☒
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
Emerging growth company
o
|
|
PART I
|
|
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PART II
|
|
|
PART III
|
|
|
PART IV
|
|
|
|
|
2018 Sales
|
|
% of
Total Sales |
|||
|
|
(in millions)
|
|
|
|||
DoD
|
|
$
|
6,721
|
|
|
66
|
%
|
Other U.S. Government
|
|
423
|
|
|
4
|
|
|
Total U.S. Government
|
|
7,144
|
|
|
70
|
|
|
Foreign governments
|
|
1,528
|
|
|
15
|
|
|
Commercial — foreign
|
|
873
|
|
|
8
|
|
|
Commercial — domestic
|
|
699
|
|
|
7
|
|
|
Total sales
|
|
$
|
10,244
|
|
|
100
|
%
|
Sectors
|
|
% of 2018
Segment Sales |
|
ISR Systems
|
|
51
|
%
|
Airborne Sensor Systems
|
|
11
|
|
Warrior Sensor Systems
|
|
10
|
|
Space & Sensor Systems
|
|
9
|
|
Aircraft Systems
|
|
7
|
|
Military Aviation Services
|
|
4
|
|
Intelligence & Mission Systems
|
|
4
|
|
Advanced Programs
|
|
4
|
|
Total ISRS
|
|
100
|
%
|
Sectors
|
|
% of 2018
Segment Sales |
|
Broadband Communication Systems
|
|
38
|
%
|
Naval Power Systems
|
|
17
|
|
Advanced Communications
|
|
16
|
|
Space & Power Systems
|
|
15
|
|
Maritime Sensor Systems
|
|
14
|
|
Total C&NS
|
|
100
|
%
|
Sectors
|
|
% of 2018
Segment Sales |
|
Commercial Aviation Solutions
|
|
34
|
%
|
Precision Engagement Systems
|
|
27
|
|
Link Training & Simulation
|
|
21
|
|
Security & Detection Systems
|
|
18
|
|
Total Electronic Systems
|
|
100
|
%
|
|
|
Funded Backlog at
December 31, |
|
Percentage of Funded Backlog at December 31, 2018 Expected to be Recorded as Sales in 2019
|
|
Funded Orders
|
||||||||||||
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|||||||||
|
|
(in millions)
|
|
|
|
(in millions)
|
||||||||||||
Reportable Segment:
|
|
|
|
|
|
|
|
|
|
|
||||||||
ISRS
|
|
$
|
4,150
|
|
|
$
|
3,628
|
|
|
66%
|
|
$
|
5,121
|
|
|
$
|
4,313
|
|
C&NS
|
|
3,163
|
|
|
3,092
|
|
|
68%
|
|
3,364
|
|
|
3,096
|
|
||||
Electronic Systems
|
|
2,391
|
|
|
2,159
|
|
|
53%
|
|
3,096
|
|
|
2,587
|
|
||||
Consolidated
|
|
$
|
9,704
|
|
|
$
|
8,879
|
|
|
63%
|
|
$
|
11,581
|
|
|
$
|
9,996
|
|
|
|
2018
|
|
2017
|
||||||||||
|
|
Sales
|
|
% of
Total Sales |
|
Sales
|
|
% of
Total Sales |
||||||
|
|
(in millions)
|
|
|
|
(in millions)
|
|
|
||||||
Air Force
|
|
$
|
3,371
|
|
|
33
|
%
|
|
$
|
3,173
|
|
|
33
|
%
|
Navy/Marines
|
|
1,441
|
|
|
14
|
|
|
1,324
|
|
|
14
|
|
||
Army
|
|
1,123
|
|
|
11
|
|
|
1,071
|
|
|
11
|
|
||
Other Defense
|
|
786
|
|
|
8
|
|
|
761
|
|
|
8
|
|
||
Total DoD
|
|
6,721
|
|
|
66
|
|
|
6,329
|
|
|
66
|
|
||
Other U.S. Government
|
|
423
|
|
|
4
|
|
|
368
|
|
|
4
|
|
||
Total U.S. Government
|
|
7,144
|
|
|
70
|
|
|
6,697
|
|
|
70
|
|
||
Foreign governments
|
|
1,528
|
|
|
15
|
|
|
1,420
|
|
|
15
|
|
||
Commercial — foreign
|
|
873
|
|
|
8
|
|
|
809
|
|
|
8
|
|
||
Commercial — domestic
|
|
699
|
|
|
7
|
|
|
647
|
|
|
7
|
|
||
Total sales
|
|
$
|
10,244
|
|
|
100
|
%
|
|
$
|
9,573
|
|
|
100
|
%
|
•
|
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.
|
(1)
|
Includes fixed-price incentive fee type contracts, which contributed approximately
1%
for the years ended
December 31, 2018
,
2017
and
2016
.
|
(2)
|
Includes cost-plus award and incentive fee type contracts, which contributed approximately
4%
to our total net sales for the year ended
December 31, 2018
and 5% for each of the years ended December 31,
2017
and
2016
.
|
•
|
the occurrence of any event, series of events, change or other circumstances that could give us or Harris the right to terminate the Merger Agreement, including a termination of the Merger Agreement that could require us to pay a termination fee to Harris;
|
•
|
the ability to obtain regulatory approvals and satisfy other closing conditions to the proposed merger in a timely manner or at all, including the risk that regulatory approvals required for the proposed merger are not obtained or are obtained subject to conditions that are not anticipated and that could reduce or eliminate the anticipated benefits of the proposed merger;
|
•
|
the risk that the announcement of the proposed transaction could have adverse effects on the market price of our common stock or Harris’ common stock and the uncertainty as to the long-term value of the common stock of the combined company following the proposed merger or as a result of broader stock market movements;
|
•
|
the risk that we or Harris may not obtain the required stockholder approvals on the expected schedule or at all, including the failure of our stockholders to adopt the Merger Agreement or of Harris stockholders to approve the share issuance or to adopt the Harris charter amendment;
|
•
|
the risk of failure to satisfy other conditions to the completion of the proposed merger;
|
•
|
delays in closing, or the failure to close, the proposed merger for any reason could negatively impact us;
|
•
|
business disruptions from the proposed merger that may harm our business or Harris’ business, including current plans and operations;
|
•
|
difficulties and delays in integrating our business with Harris’ business or fully realizing anticipated cost savings and other benefits expected from the proposed merger;
|
•
|
certain restrictions during the pendency of the proposed merger that may impact our ability or the ability of Harris to pursue certain business opportunities or strategic transactions;
|
•
|
the outcome of any legal proceedings that may be instituted against us, Harris or our respective directors with respect to the proposed merger;
|
•
|
risks related to the diversion of the attention and time of Harris’ or our respective management teams from ongoing business concerns;
|
•
|
any announcement relating to the proposed transaction could have adverse effects on our ability or the ability of Harris to retain and hire key personnel or maintain relationships with suppliers, vendors, other partners and customers, including the U.S. government and other governments, or on our or Harris’ operating results and businesses generally;
|
•
|
the potential dilution of our stockholders’ and Harris stockholders’ ownership percentage of the combined company as a result of the proposed merger;
|
•
|
the business, economic and political conditions in the markets in which Harris and we operate;
|
•
|
events beyond our and Harris’ control, such as acts of terrorism; and
|
•
|
the potential dilution of the combined company’s earnings per share as a result of the proposed merger.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
|
|
Leased
|
|
Owned
|
|
Government- Owned
|
|
Total
|
||||
|
|
(Square feet in millions)
|
||||||||||
ISRS
|
|
2.0
|
|
|
1.9
|
|
|
3.3
|
|
|
7.2
|
|
C&NS
|
|
4.4
|
|
|
0.9
|
|
|
—
|
|
|
5.3
|
|
Electronic Systems
|
|
2.7
|
|
|
2.1
|
|
|
—
|
|
|
4.8
|
|
Total
|
|
9.1
|
|
|
4.9
|
|
|
3.3
|
|
|
17.3
|
|
•
|
ISRS — Tempe, Arizona; Orlando, Florida; Wilmington, Massachusetts; Londonderry, New Hampshire; Mason, Ohio; Pittsburgh, Pennsylvania; Greenville, Rockwall and Waco, Texas; Quebec and Ontario, Canada; and Tewkesbury, U.K.
|
•
|
C&NS — Anaheim, San Diego, San Leandro, Simi Valley, Sylmar and Torrance, California; Ayer and Northampton, Massachusetts; Camden, New Jersey; Hauppauge, New York; Tulsa, Oklahoma; Philadelphia and Williamsport, Pennsylvania; Salt Lake City, Utah; and Bologna, Italy.
|
•
|
Electronic Systems — Phoenix, Arizona; Anaheim, California; Pueblo, Colorado; Sanford, Sarasota and St. Petersburg, Florida; Tewksbury and Woburn, Massachusetts; Grand Rapids and Muskegon, Michigan; Mount Olive, New Jersey; Kirkwood, New York; Cincinnati, Ohio; Arlington, Grand Prairie and Plano, Texas; Hamilton, New Zealand; Tramaga, Portugal; and Bracknell, Crawley, Droitwich and Luton, U.K.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
(2)
|
|
2017
(3)
|
|
2016
(4)
|
|
2015
(5)
|
|
2014
|
||||||||||
|
(in millions, except per share data)
|
||||||||||||||||||
Statements of Operations Data:
|
|
|
|
|
|
|
|
||||||||||||
Net sales
|
$
|
10,244
|
|
|
$
|
9,573
|
|
|
$
|
9,210
|
|
|
$
|
9,231
|
|
|
$
|
9,691
|
|
Operating income
|
$
|
1,120
|
|
|
$
|
1,031
|
|
|
$
|
958
|
|
|
$
|
812
|
|
|
$
|
984
|
|
Goodwill impairment charge
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|||||
(Gain) loss related to business divestitures
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|||||
Merger and acquisition related expenses
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Segment operating income
|
$
|
1,106
|
|
|
$
|
1,031
|
|
|
$
|
958
|
|
|
$
|
889
|
|
|
$
|
984
|
|
Operating margin
|
10.9
|
%
|
|
10.8
|
%
|
|
10.4
|
%
|
|
8.8
|
%
|
|
10.2
|
%
|
|||||
Segment operating margin
|
10.8
|
%
|
|
10.8
|
%
|
|
10.4
|
%
|
|
9.6
|
%
|
|
10.2
|
%
|
|||||
Interest expense
|
$
|
(164
|
)
|
|
$
|
(169
|
)
|
|
$
|
(164
|
)
|
|
$
|
(162
|
)
|
|
$
|
(147
|
)
|
Interest and other income (loss), net
|
$
|
37
|
|
|
$
|
9
|
|
|
$
|
17
|
|
|
$
|
(10
|
)
|
|
$
|
34
|
|
Debt retirement charges
|
$
|
(69
|
)
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Income from continuing operations before income taxes
|
$
|
924
|
|
|
$
|
871
|
|
|
$
|
804
|
|
|
$
|
639
|
|
|
$
|
871
|
|
Provision for income taxes
|
(103
|
)
|
|
(102
|
)
|
|
(171
|
)
|
|
(132
|
)
|
|
(225
|
)
|
|||||
Income from continuing operations
|
821
|
|
|
769
|
|
|
633
|
|
|
507
|
|
|
646
|
|
|||||
Net income from continuing operations attributable to noncontrolling interests
|
(21
|
)
|
|
(16
|
)
|
|
(14
|
)
|
|
(15
|
)
|
|
(13
|
)
|
|||||
Net income from continuing operations attributable to L3
|
$
|
800
|
|
|
$
|
753
|
|
|
$
|
619
|
|
|
$
|
492
|
|
|
$
|
633
|
|
Adjusted net income from continuing operations attributable to L3
(1)
|
$
|
856
|
|
|
$
|
753
|
|
|
$
|
623
|
|
|
$
|
557
|
|
|
$
|
633
|
|
Earnings per share from continuing operations allocable to L3 common shareholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
10.19
|
|
|
$
|
9.65
|
|
|
$
|
7.99
|
|
|
$
|
6.10
|
|
|
$
|
7.41
|
|
Diluted
|
$
|
10.05
|
|
|
$
|
9.46
|
|
|
$
|
7.86
|
|
|
$
|
6.01
|
|
|
$
|
7.21
|
|
Adjusted Diluted
(1)
|
$
|
10.75
|
|
|
$
|
9.46
|
|
|
$
|
7.91
|
|
|
$
|
6.80
|
|
|
$
|
7.21
|
|
L3 weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
78.5
|
|
|
78.0
|
|
|
77.4
|
|
|
80.7
|
|
|
85.4
|
|
|||||
Diluted
|
79.6
|
|
|
79.6
|
|
|
78.8
|
|
|
81.9
|
|
|
87.8
|
|
|||||
Cash dividends declared per common share
|
$
|
3.20
|
|
|
$
|
3.00
|
|
|
$
|
2.80
|
|
|
$
|
2.60
|
|
|
$
|
2.40
|
|
(1)
|
Adjusted diluted EPS from continuing operations is diluted EPS from continuing operations excluding: (i) debt retirement charges, (ii) merger and acquisition related expenses, (iii) goodwill impairment charges and (iv) divestiture (gains) losses. We believe that the debt retirement charges, the merger and acquisition related expenses, goodwill impairment charges and divestiture (gains) losses affect the comparability of the results of operations. We also believe that disclosing diluted EPS excluding the debt retirement charges, the merger and acquisition related expenses, goodwill impairment charges and divestiture (gains) losses is useful to investors as it allows investors to more easily compare results. However, these non-GAAP financial measures may not be defined or calculated by other companies in the same manner.
|
(2)
|
Income from continuing operations for the year ended December 31, 2018 includes: (i) debt retirement charges of $69 million ($52 million after income taxes), or $0.66 per diluted share, (ii) a pre-tax gain of $42 million ($19 million after income taxes), or $0.24 per diluted share, related to the divestiture of the Crestview Aerospace and TCS businesses and (iii) merger and acquisition related expenses of $28 million ($23 million after income taxes), or $0.28 per diluted share. Excluding these items, adjusted diluted EPS from continuing operations would have been $10.75.
|
(3)
|
Provision for income taxes for the year ended December 31, 2017 includes estimated tax benefits of $79 million, or $0.99 per diluted share, related to the enactment of the U.S. Tax Cuts and Jobs Act (U.S. Tax Reform) in December 2017.
|
(4)
|
Income from continuing operations for the year ended December 31, 2016 includes debt retirement charges of $7 million ($4 million after income taxes), or $0.05 per diluted share. Excluding this item, adjusted diluted EPS from continuing operations would have been $7.91.
|
(5)
|
Income from continuing operations for the year ended December 31, 2015 includes: (i) non-cash goodwill impairment charge of $46 million ($44 million after income taxes), or $0.54 per diluted share, related to a business retained by L3 in connection with the sale of the National Security Solutions (NSS)
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance Sheet Data (at year end):
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital
(1)
|
$
|
2,363
|
|
|
$
|
1,871
|
|
|
$
|
1,467
|
|
|
$
|
797
|
|
|
$
|
1,580
|
|
Total assets
|
13,518
|
|
|
12,729
|
|
|
11,865
|
|
|
12,069
|
|
|
13,692
|
|
|||||
Long-term debt, including current portion
|
3,321
|
|
|
3,330
|
|
|
3,325
|
|
|
3,626
|
|
|
3,916
|
|
|||||
Equity
|
5,907
|
|
|
5,151
|
|
|
4,624
|
|
|
4,429
|
|
|
5,360
|
|
|||||
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities from continuing operations
|
$
|
1,042
|
|
|
$
|
985
|
|
|
$
|
1,022
|
|
|
$
|
1,035
|
|
|
$
|
1,065
|
|
Net cash used in investing activities from continuing operations
|
(91
|
)
|
|
(453
|
)
|
|
(10
|
)
|
|
(190
|
)
|
|
(218
|
)
|
|||||
Net cash used in financing activities from continuing operations
|
(520
|
)
|
|
(366
|
)
|
|
(856
|
)
|
|
(1,205
|
)
|
|
(893
|
)
|
(1)
|
Excludes net assets held for sale.
|
|
|
DoD Budget
|
|
Annual Total Budget Change
|
|||||||||||
Fiscal Year (Ending September 30)
|
|
Base
|
|
OCO
|
|
Total
|
|
||||||||
|
|
(in billions)
|
|
|
|||||||||||
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
|
|
|
$
|
82
|
|
|
$
|
606
|
|
|
+4
|
%
|
2018
|
|
$
|
529
|
|
|
$
|
83
|
|
|
$
|
612
|
|
|
+1
|
%
|
2019
|
|
$
|
606
|
|
|
$
|
68
|
|
|
$
|
674
|
|
|
+10
|
%
|
2020
|
|
$
|
681
|
|
|
$
|
20
|
|
|
$
|
701
|
|
|
+4
|
%
|
2021
|
|
$
|
694
|
|
|
$
|
20
|
|
|
$
|
714
|
|
|
+2
|
%
|
2022
|
|
$
|
707
|
|
|
$
|
20
|
|
|
$
|
727
|
|
|
+2
|
%
|
2023
|
|
$
|
722
|
|
|
$
|
20
|
|
|
$
|
742
|
|
|
+2
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net sales
|
$
|
597
|
|
|
$
|
1,429
|
|
|
$
|
1,402
|
|
Operating costs and expenses
(1)
|
(561
|
)
|
|
(1,531
|
)
|
|
(1,357
|
)
|
|||
Operating income (loss) from discontinued operations
|
36
|
|
|
(102
|
)
|
|
45
|
|
|||
Interest expense allocated to discontinued operations
|
(1
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|||
Gain on sale of businesses
|
234
|
|
|
—
|
|
|
64
|
|
|||
Income (loss) from discontinued operations before income taxes
|
269
|
|
|
(104
|
)
|
|
104
|
|
|||
Income tax (expense) benefit
|
(64
|
)
|
|
28
|
|
|
(13
|
)
|
|||
Income (loss) from discontinued operations, net of income taxes
|
$
|
205
|
|
|
$
|
(76
|
)
|
|
$
|
91
|
|
(1)
|
Due to a decline in estimated fair value, we recorded a goodwill impairment charge of $187 million during 2017 related to Vertex Aerospace.
|
Business Acquisitions
|
|
Date Acquired
|
|
Segment
|
|
Purchase Price
(1)
|
|||
|
|
|
|
|
|
(in millions)
|
|||
2016
|
|
|
|
|
|
|
|
||
Advanced Technical Materials, Inc. (ATM)
|
|
January 22, 2016
|
|
C&NS
|
|
$
|
27
|
|
|
Micreo Limited (Micreo) and Flight Training Acquisitions LLC (Aerosim)
|
|
September 30, 2016
|
|
ISRS and
Electronic Systems |
|
86
|
|
|
|
MacDonald Humfrey (Automation) Limited (MacH)
|
|
November 22, 2016
|
|
Electronic Systems
|
|
327
|
|
(2)
|
|
Total 2016
|
|
|
|
|
|
$
|
440
|
|
|
|
|
|
|
|
|
|
|
||
2017
|
|
|
|
|
|
|
|
||
Explosive Trace Detection business of Implant Sciences (ETD business)
|
|
January 5, 2017
|
|
Electronic Systems
|
|
$
|
118
|
|
|
OceanServer Technology, Inc. (OceanServer),
Open Water Power, Inc. (Open Water Power), and Doss Aviation, Inc. (Doss Aviation) |
|
March 17, 2017
May 19, 2017 and
September 12, 2017
|
|
C&NS and
Electronic Systems |
|
147
|
|
(3)
|
|
Adaptive Methods, Inc. (Adaptive Methods)
|
|
September 8, 2017
|
|
C&NS
|
|
33
|
|
|
|
Escola De Aviacao Aerocondor, S.A. (G-Air)
|
|
October 27, 2017
|
|
Electronic Systems
|
|
13
|
|
|
|
Kigre, Inc. (Kigre)
|
|
December 18, 2017
|
|
ISRS
|
|
13
|
|
|
|
Total 2017
|
|
|
|
|
|
$
|
324
|
|
|
|
|
|
|
|
|
|
|
Business Acquisitions
|
|
Date Acquired
|
|
Segment
|
|
Purchase Price
(1)
|
|||
|
|
|
|
|
|
(in millions)
|
|||
2018
|
|
|
|
|
|
|
|
||
Latitude Engineering, LLC
|
|
June 28, 2018
|
|
Electronic Systems
|
|
$
|
15
|
|
(4)
|
Applied Defense Solutions, Inc.
|
|
June 29, 2018
|
|
ISRS
|
|
53
|
|
(5)
|
|
Azimuth Security and Linchpin Labs
|
|
August 31, 2018
|
|
ISRS
|
|
200
|
|
(6)
|
|
C.K. Industrial Engineers Limited
|
|
September 18, 2018
|
|
Electronic Systems
|
|
24
|
|
(7)
|
|
ASV Global, L.L.C.
|
|
September 20, 2018
|
|
C&NS
|
|
94
|
|
(8)
|
|
Total 2018
|
|
|
|
|
|
$
|
386
|
|
|
(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 £30 million (approximately $38 million), which is contingent upon the post-acquisition financial performance of MacH for the three-year period ending December 31, 2019.
|
(3)
|
Excludes additional purchase price, not to exceed $17 million, which is contingent upon Open Water Power achieving certain post-acquisition milestones for the four-year period ending December 31, 2021.
|
(4)
|
Excludes additional purchase price, not to exceed $20 million, $15 million of which is based on Latitude Engineering’s post-acquisition financial performance for the four-year period ending December 31, 2021, and the remaining $5 million of which is based on Latitude Engineering achieving certain post-acquisition milestones through December 31, 2020.
|
(5)
|
The purchase price net of cash acquired of approximately $1 million was $52 million.
|
(6)
|
The purchase price net of cash acquired of approximately $15 million was $185 million and excludes additional purchase price, not to exceed AUD $43 million (approximately $31 million), payable in L3 common stock, based on the combined company’s post-acquisition sales for each of the 12-month periods ending June 30, 2019, 2020 and 2021.
|
(7)
|
The purchase price net of cash acquired of £4 million (approximately $5 million) was £14 million (approximately $19 million).
|
(8)
|
The purchase price net of cash acquired of approximately $1 million was $93 million.
|
|
Year Ended
December 31, 2018 |
||
|
(in millions)
|
||
Net sales
|
$
|
64
|
|
Gain on sale of businesses
|
$
|
42
|
|
Income from continuing operations before income taxes
|
$
|
45
|
|
|
December 31,
2017 |
||
|
(in millions)
|
||
Assets
|
|
||
Billed receivables
|
$
|
14
|
|
Contracts in process
|
33
|
|
|
Total current assets
|
47
|
|
|
Property, plant and equipment, net
|
34
|
|
|
Goodwill
|
52
|
|
|
Identifiable intangible assets
|
2
|
|
|
Total assets classified as held for sale
|
$
|
135
|
|
|
|
||
Liabilities
|
|
||
Accounts payable, trade
|
$
|
3
|
|
Accrued employment costs
|
2
|
|
|
Accrued expenses
|
3
|
|
|
Other current liabilities
|
5
|
|
|
Total current liabilities
|
13
|
|
|
Deferred income taxes
|
4
|
|
|
Total liabilities classified as held for sale
|
$
|
17
|
|
|
Year Ended December 31, 2017
|
||||||||||
|
Pre-Tax
(Loss) gain |
|
Proceeds
Received |
|
Net Sales
|
||||||
|
(in millions)
|
||||||||||
Aviation Jet Services divestiture
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
$
|
1
|
|
Coleman divestiture
|
(3
|
)
|
|
17
|
|
|
9
|
|
|||
Display Product Line divestiture
|
4
|
|
|
7
|
|
|
—
|
|
|||
Total
|
$
|
(4
|
)
|
|
$
|
25
|
|
|
$
|
10
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions, except per share data)
|
||||||||||
Operating income
|
|
$
|
213
|
|
|
$
|
185
|
|
|
$
|
149
|
|
Diluted earnings per share
|
|
$
|
2.03
|
|
|
$
|
1.49
|
|
|
$
|
1.23
|
|
|
% of Total Net Sales
|
|
Over time (cost-to-cost method)
|
74
|
%
|
Point in time
|
19
|
%
|
Output method
|
4
|
%
|
Billing method
|
3
|
%
|
Total
|
100
|
%
|
Reportable Segment
|
|
Number of
Reporting Units |
|
Aggregate
Goodwill |
|||
|
|
|
|
(in millions)
|
|||
ISRS
|
|
6
|
|
|
$
|
2,596
|
|
C&NS
|
|
3
|
|
|
2,007
|
|
|
Electronic Systems
|
|
4
|
|
|
2,205
|
|
|
Total
|
|
13
|
|
|
$
|
6,808
|
|
•
|
the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis (November 30, 2017), which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment;
|
•
|
the carrying values of these reporting units as of November 30, 2018 compared to the previously calculated fair values as of the date of the most recent quantitative impairment analysis;
|
•
|
the current forecasts as compared to the forecasts included in the most recent quantitative impairment analysis;
|
•
|
public information from competitors and other industry information to determine if there were any significant adverse trends in our competitors' businesses, such as significant declines in market capitalization or significant goodwill impairment charges that could be an indication that the goodwill of our reporting units was potentially impaired;
|
•
|
changes related to U.S. Tax Reform;
|
•
|
changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting units;
|
•
|
changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting units had significantly decreased; and
|
•
|
whether there had been any significant increases to the weighted-average cost of capital (WACC) rates for each reporting unit, which could materially lower our prior valuation conclusions under a discounted cash flow approach.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in millions)
|
||||||||||
Net sales:
(1)
|
|
|
|
|
|
||||||
ISRS
|
$
|
4,441
|
|
|
$
|
3,995
|
|
|
$
|
4,101
|
|
C&NS
|
3,059
|
|
|
3,113
|
|
|
2,897
|
|
|||
Electronic Systems
|
2,744
|
|
|
2,465
|
|
|
2,212
|
|
|||
Consolidated net sales
|
$
|
10,244
|
|
|
$
|
9,573
|
|
|
$
|
9,210
|
|
|
|
|
|
|
|
||||||
Operating income:
|
|
|
|
|
|
||||||
ISRS
|
$
|
448
|
|
|
$
|
348
|
|
|
$
|
362
|
|
C&NS
|
282
|
|
|
362
|
|
|
298
|
|
|||
Electronic Systems
|
376
|
|
|
321
|
|
|
298
|
|
|||
Total segment operating income
|
1,106
|
|
|
1,031
|
|
|
958
|
|
|||
Gain on sale of the Crestview & TCS businesses
|
42
|
|
|
—
|
|
|
—
|
|
|||
Merger and acquisition related expenses
|
(28
|
)
|
|
—
|
|
|
—
|
|
|||
Consolidated operating income
|
$
|
1,120
|
|
|
$
|
1,031
|
|
|
$
|
958
|
|
|
|
|
|
|
|
||||||
Operating margin:
|
|
|
|
|
|
||||||
ISRS
|
10.1
|
%
|
|
8.7
|
%
|
|
8.8
|
%
|
|||
C&NS
|
9.2
|
%
|
|
11.6
|
%
|
|
10.3
|
%
|
|||
Electronic Systems
|
13.7
|
%
|
|
13.0
|
%
|
|
13.5
|
%
|
|||
Total segment operating margin
|
10.8
|
%
|
|
10.8
|
%
|
|
10.4
|
%
|
|||
Gain on sale of the Crestview & TCS businesses
|
0.4
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Merger and acquisition related expenses
|
(0.3
|
)%
|
|
—
|
%
|
|
—
|
%
|
|||
Consolidated operating margin
|
10.9
|
%
|
|
10.8
|
%
|
|
10.4
|
%
|
(1)
|
Net sales are after intercompany eliminations.
|
|
|
Year Ended December 31,
|
|
Increase
|
|
Year Ended December 31,
|
|
Decrease
|
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
|
2017
|
|
2016
|
|
|
||||||||||||||
|
|
(dollars in millions)
|
|
||||||||||||||||||||||
|
Net sales
|
$
|
4,441
|
|
|
$
|
3,995
|
|
|
11
|
|
%
|
|
$
|
3,995
|
|
|
$
|
4,101
|
|
|
(3
|
)
|
%
|
|
|
Operating income
|
$
|
448
|
|
|
$
|
348
|
|
|
29
|
|
%
|
|
$
|
348
|
|
|
$
|
362
|
|
|
(4
|
)
|
%
|
|
|
Operating margin
|
10.1
|
%
|
|
8.7
|
%
|
|
140
|
|
bpts
|
|
8.7
|
%
|
|
8.8
|
%
|
|
(10
|
)
|
bpts
|
|
|
|
Year Ended December 31,
|
|
Decrease
|
|
Year Ended December 31,
|
|
Increase
|
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
|
2017
|
|
2016
|
|
|
||||||||||||||
|
|
(dollars in millions)
|
|
||||||||||||||||||||||
|
Net sales
|
$
|
3,059
|
|
|
$
|
3,113
|
|
|
(2
|
)
|
%
|
|
$
|
3,113
|
|
|
$
|
2,897
|
|
|
7
|
|
%
|
|
|
Operating income
|
$
|
282
|
|
|
$
|
362
|
|
|
(22
|
)
|
%
|
|
$
|
362
|
|
|
$
|
298
|
|
|
21
|
|
%
|
|
|
Operating margin
|
9.2
|
%
|
|
11.6
|
%
|
|
(240
|
)
|
bpts
|
|
11.6
|
%
|
|
10.3
|
%
|
|
130
|
|
bpts
|
|
|
|
Year Ended December 31,
|
|
Increase
|
|
Year Ended December 31,
|
|
Increase/(decrease)
|
|
||||||||||||||||
|
|
2018
|
|
2017
|
|
|
2017
|
|
2016
|
|
|
||||||||||||||
|
|
(dollars in millions)
|
|
||||||||||||||||||||||
|
Net sales
|
$
|
2,744
|
|
|
$
|
2,465
|
|
|
11
|
|
%
|
|
$
|
2,465
|
|
|
$
|
2,212
|
|
|
11
|
|
%
|
|
|
Operating income
|
$
|
376
|
|
|
$
|
321
|
|
|
17
|
|
%
|
|
$
|
321
|
|
|
$
|
298
|
|
|
8
|
|
%
|
|
|
Operating margin
|
13.7
|
%
|
|
13.0
|
%
|
|
70
|
|
bpts
|
|
13.0
|
%
|
|
13.5
|
%
|
|
(50
|
)
|
bpts
|
|
|
ISRS
|
|
C&NS
|
|
Electronic
Systems |
|
Consolidated
Total |
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2017
|
$
|
2,458
|
|
|
$
|
1,962
|
|
|
$
|
2,195
|
|
|
$
|
6,615
|
|
Business acquisitions
(1)
|
158
|
|
|
56
|
|
|
33
|
|
|
247
|
|
||||
Foreign currency translation adjustments
|
(20
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
(54
|
)
|
||||
December 31, 2018
|
$
|
2,596
|
|
|
$
|
2,007
|
|
|
$
|
2,205
|
|
|
$
|
6,808
|
|
(1)
|
Business acquisitions
for the ISRS segment included the acquisitions of the Azimuth Security and Linchpin Labs and Applied Defense Solutions businesses and the purchase price allocation adjustments for the Kigre business acquisition. Business acquisitions for the C&NS segment included the acquisitions of the ASV Global business and purchase price allocation adjustments for the Adaptive Methods business acquisition. Business acquisitions for the Electronic Systems segment included the acquisitions of the Latitude Engineering and C.K. Industrial Engineers businesses and purchase price allocation adjustments for the G-Air and Doss Aviation business acquisitions.
|
|
Effect on 2019
Pension Expense |
|
Effect on
December 31, 2018 PBO |
||||
|
(in millions)
|
||||||
25 basis point decrease in discount rate
|
$
|
6
|
|
|
$
|
138
|
|
25 basis point increase in discount rate
|
(6
|
)
|
|
(130
|
)
|
||
25 basis point decrease in expected return on assets
|
7
|
|
|
N/A
|
|
||
25 basis point increase in expected return on assets
|
(7
|
)
|
|
N/A
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net cash from operating activities from continuing operations
|
$
|
1,042
|
|
|
$
|
985
|
|
|
$
|
1,022
|
|
Net cash used in investing activities from continuing operations
|
(91
|
)
|
|
(453
|
)
|
|
(10
|
)
|
|||
Net cash used in financing activities from continuing operations
|
(520
|
)
|
|
(366
|
)
|
|
(856
|
)
|
Note
|
|
Date of Issuance
|
|
Amount
Issued
|
|
Discount
(1)
|
|
Net
Cash
Proceeds
(2)
|
|
Effective
Interest
Rate
|
|
Redemption
at Treasury
Rate
(3)(4)
|
|||||||
|
|
|
|
(dollars in millions)
|
|||||||||||||||
3.85% Senior Notes due June 15, 2023 (the 2023 Notes)
|
|
June 6, 2018
|
|
$
|
800
|
|
|
$
|
2
|
|
|
$
|
792
|
|
|
3.89
|
%
|
|
20 bps
|
4.40% Senior Notes due June 15, 2028 (the 2028 Notes)
|
|
June 6, 2018
|
|
$
|
1,000
|
|
|
$
|
1
|
|
|
$
|
990
|
|
|
4.41
|
%
|
|
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 net cash proceeds of $1,782 million (after deduction of the discount, underwriting expenses and commissions and other related expenses) plus cash on hand were used to fund the concurrent cash tender offers (the Tender Offers) for any and all of $1 billion aggregate principal amount of the 2019 Notes and $800 million aggregate principal amount of the 2020 Notes and any related redemption of notes not tendered in the Tender Offers.
|
(3)
|
The 2023 Notes may be redeemed at any time prior to May 15, 2023 (one month prior to maturity), and the 2028 Notes may be redeemed at any time prior to March 15, 2028 (three months prior to maturity), at the option of L3, in whole or in part, at a redemption price equal to the greater of: (i) 100% of the principal amount, or (ii) 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 2023 Notes and the 2028 Notes are redeemed at any time on or after May 15, 2023 and March 15, 2028, respectively, the redemption price would be equal to 100% of the principal amount.
|
(4)
|
Upon the occurrence of a change in control (as defined in the indentures governing the senior notes) along with a “change of control triggering event” (generally described as the applicable series of senior notes ceasing to be rated investment grade, 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.
|
Note
|
|
Settlement Type
|
|
Date Settled
|
|
Aggregate
Amount
|
|
Premium
|
|
Cash
Payments
|
|
Interest
|
|
Total Cash
Payments
|
|
Debt
Retirement
Charge
|
|||||||||||
|
|
|
|
|
|
(dollars in millions)
|
|||||||||||||||||||||
5.20% Senior Notes due 2019
(1)
|
|
Redemption
|
|
July 6, 2018
|
|
$
|
317
|
|
|
103.048
|
%
|
|
$
|
327
|
|
|
$
|
4
|
|
|
$
|
331
|
|
|
$
|
10
|
|
4.75% Senior Notes due 2020
(1)
|
|
Redemption
|
|
July 6, 2018
|
|
$
|
265
|
|
|
103.818
|
%
|
|
$
|
275
|
|
|
$
|
6
|
|
|
$
|
281
|
|
|
$
|
11
|
|
5.20% Senior Notes due 2019
(2)
|
|
Tender Offer
|
|
June 6, 2018
|
|
$
|
683
|
|
|
103.282
|
%
|
|
$
|
705
|
|
|
$
|
5
|
|
|
$
|
710
|
|
|
$
|
24
|
|
4.75% Senior Notes due 2020
(2)
|
|
Tender Offer
|
|
June 6, 2018
|
|
$
|
535
|
|
|
104.092
|
%
|
|
$
|
557
|
|
|
$
|
10
|
|
|
$
|
567
|
|
|
$
|
24
|
|
1.50% Senior Notes due 2017
|
|
Redemption
|
|
December 30, 2016
|
|
$
|
350
|
|
|
100.323
|
%
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
352
|
|
|
$
|
2
|
|
3.95% Senior Notes due 2016
|
|
Maturity
|
|
November 15, 2016
|
|
$
|
200
|
|
|
100.000
|
%
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
—
|
|
3.95% Senior Notes due 2016
|
|
Redemption
|
|
May 20, 2016
|
|
$
|
300
|
|
|
101.475
|
%
|
|
$
|
305
|
|
|
$
|
—
|
|
|
$
|
305
|
|
|
$
|
5
|
|
(1)
|
The debt retirement charge includes $1 million which represents the non-cash retirement of associated unamortized debt issue costs and discounts.
|
(2)
|
Cash payments exclude $1 million of tender offer fees. The debt retirement charge includes $1 million of tender offer fees and $3 million which represents the non-cash retirement of associated unamortized debt issue costs and discounts.
|
Date Declared
|
|
Record Date
|
|
Cash Dividend Per Share
|
|
Total Cash Dividends Declared
|
|
Date Paid
|
|||||
|
|
|
|
|
|
(in millions)
|
|
|
|||||
2018
|
|
|
|
|
|
|
|
|
|
||||
February 12
|
|
March 1
|
|
$
|
0.80
|
|
|
$
|
63
|
|
(1)
|
|
March 15
|
May 8
|
|
May 18
|
|
$
|
0.80
|
|
|
$
|
63
|
|
(1)
|
|
June 15
|
July 10
|
|
August 17
|
|
$
|
0.80
|
|
|
$
|
63
|
|
(1)
|
|
September 17
|
October 22
|
|
November 16
|
|
$
|
0.80
|
|
|
$
|
64
|
|
(1)
|
|
December 17
|
|
|
|
|
|
|
|
|
|
|
||||
2017
|
|
|
|
|
|
|
|
|
|
||||
February 13
|
|
March 1
|
|
$
|
0.75
|
|
|
$
|
59
|
|
(2)
|
|
March 15
|
May 9
|
|
May 19
|
|
$
|
0.75
|
|
|
$
|
59
|
|
(2)
|
|
June 15
|
July 19
|
|
August 17
|
|
$
|
0.75
|
|
|
$
|
59
|
|
(2)
|
|
September 15
|
October 17
|
|
November 17
|
|
$
|
0.75
|
|
|
$
|
59
|
|
(2)
|
|
December 15
|
(1)
|
During the year ended December 31,
2018
, we paid
$254 million
of cash dividends, offset by a
$1 million
net reduction of previously accrued dividends for employee-held stock awards.
|
(2)
|
During the year ended December 31,
2017
, we paid
$236 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.
|
|
Total
|
|
Payments due by Period
|
||||||||||||||||
|
|
Less than
1 year |
|
1 – 3 years
|
|
3 – 5 years
|
|
More than
5 years |
|||||||||||
|
(in millions)
|
||||||||||||||||||
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
||||||||||
Debt
(1)
|
$
|
3,350
|
|
|
$
|
—
|
|
|
$
|
650
|
|
|
$
|
800
|
|
|
$
|
1,900
|
|
Interest payments
(2)
|
883
|
|
|
142
|
|
|
268
|
|
|
204
|
|
|
269
|
|
|||||
Non-cancelable operating leases
(3)
|
968
|
|
|
114
|
|
|
214
|
|
(4)
|
136
|
|
|
504
|
|
|||||
Notes payable and capital lease obligations
|
44
|
|
|
4
|
|
|
3
|
|
|
7
|
|
|
30
|
|
|||||
Purchase obligations
(5)
|
1,971
|
|
|
1,798
|
|
|
156
|
|
|
5
|
|
|
12
|
|
|||||
Other long-term liabilities
(6)
|
215
|
|
|
88
|
|
(7)
|
78
|
|
|
12
|
|
|
37
|
|
|||||
Total
(8)
|
$
|
7,431
|
|
|
$
|
2,146
|
|
|
$
|
1,369
|
|
|
$
|
1,164
|
|
|
$
|
2,752
|
|
(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,
2018
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
19
to our audited consolidated financial statements for a further description of these leases.
|
(5)
|
Represents open purchase orders at December 31,
2018
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,
2020
and thereafter and also include pension and postretirement benefit plan contributions that we expect to pay in
2019
.
|
(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
2019
, we expect to contribute approximately
$80 million
to our pension plans and approximately
$8 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 unrecognized tax benefits in connection with uncertain tax positions taken, or expected to be taken, on our income tax returns as of December 31,
2018
since we cannot determine the time period of future tax consequences. For additional information regarding income taxes, see Note
17
to our audited consolidated financial statements.
|
|
Total
|
|
Commitment Expiration by Period
|
||||||||||||||||
|
|
2019
|
|
2020 - 2021
|
|
2022 - 2023
|
|
2024 and thereafter
|
|||||||||||
|
(in millions)
|
||||||||||||||||||
Contingent Commitments
|
|
|
|
|
|
|
|
|
|
||||||||||
Other standby letters of credit
(1)
|
$
|
410
|
|
|
$
|
291
|
|
|
$
|
99
|
|
|
$
|
14
|
|
|
$
|
6
|
|
Total
(2)(3)(4)
|
$
|
410
|
|
|
$
|
291
|
|
|
$
|
99
|
|
|
$
|
14
|
|
|
$
|
6
|
|
(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)
|
The total amount does not include residual value guarantees 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 purchase both properties for $45 million on or before August 31, 2020. See Note
19
to our audited consolidated financial statements for a further description of these leases.
|
(3)
|
The total amount does not include the fair value of the contingent consideration liability for the future potential earn-out payments related to the MacH, Open Water Power and Latitude Engineering acquisitions. See Note
13
to our audited consolidated financial statements for additional information on the fair value of the contingent consideration.
|
(4)
|
The total does not include future minimum payments under non-cancelable operating leases. See Note
19
to our audited consolidated financial statements for a further description of these leases.
|
|
|
Page Number
|
|
||
|
||
|
||
|
||
|
||
|
||
|
Exhibit
No. |
|
Description of Exhibits
|
|
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)).
|
|
|
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)).
|
|
|
Stock and Asset Purchase Agreement, dated as of May 1, 2018, by and among L-3 Communications Integrated Systems L.P., L3 Technologies, Inc. and 450 Madison Acquireco LLC (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 2, 2018 (File No. 001-37975)).
|
|
|
Agreement and Plan of Merger, dated as of October 12, 2018, by and among Harris Corporation, L3 Technologies, Inc. and Leopard Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on October 15, 2018 (File No. 001-37975)).
|
|
|
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. 001-37975)).
|
|
|
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 February 13, 2018 (File No. 333-46983)).
|
|
|
Form of Common Stock Certificate of L3 Technologies, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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 (incorporated by reference to Exhibit 4.12 of the Registrant’s Annual Report on Form 10‑K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
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)).
|
|
|
Ninth Supplemental Indenture, dated as of March 30, 2018 among L3 Technologies, Inc., The Bank of New York Mellon Trust Company, N.A., as Trustee, and the guarantors named therein (incorporated by reference to Exhibit 4.15 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30. 2018 (File No. 001-37975)).
|
|
|
Tenth Supplemental Indenture, dated as of June 6, 2018, among L3 Technologies, Inc., The Bank of New York Mellon Trust Company, N.A., as Trustee, and the guarantors named therein (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on June 6, 2018 (File No. 001-37975)).
|
Exhibit
No. |
|
Description of Exhibits
|
|
Eleventh Supplemental Indenture, dated as of September 27, 2018, among L3 Technologies, Inc., The Bank of New York Mellon Trust Company, N.A., as Trustee, and the guarantors named therein (incorporated by reference to Exhibit 4.12 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 28, 2018 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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 (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Amended and Restated 2008 Long Term Performance Plan (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2017 Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2018 Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2017 CEO Version) (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L-3 Technologies, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2018 CEO Version) (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017 Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2018 Version) (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017 CEO Version) (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017 Senior Executive Version) (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
Exhibit
No. |
|
Description of Exhibits
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017-2 Senior Executive Version) (incorporated by reference to Exhibit 10.23 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2017 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017 Non-Employee Directors Annual Equity Award Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Deferred Stock Unit Agreement (2018 Non-Employee Directors Annual Equity Award Version) (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2018) (File No. 001-37975)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2017 Non-Employee Directors Deferred Compensation Version) (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2018 Non-Employee Directors Deferred Compensation Version) (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Performance Unit Agreement (2017 Version) (incorporated by reference to Exhibit 10.7 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Performance Unit Agreement (2018 Version) (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Amended and Restated 2012 Cash Incentive Plan (incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2012 Cash Incentive Plan Performance Cash Award Agreement (2017 Version) (incorporated by reference to Exhibit 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2017 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2012 Cash Incentive Plan Performance Cash Award Agreement (2018 Version) (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 30, 2018 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Amended and Restated 2008 Directors Stock Incentive Plan (incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
Exhibit
No. |
|
Description of Exhibits
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Global Amendment to Equity-Based Award Agreements and Award Notices and Cash-Based Award Agreements and Award Notices dated as of December 31, 2016 (incorporated by reference to Exhibit 10.38 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
Global Amendment to Performance Unit Agreements dated as of July 25, 2018 (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2018 (File No. 001-37975)).
|
|
|
Global Amendment to Performance Cash Award Agreements dated as of July 25, 2018 (incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2018 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Amended and Restated Change in Control Severance Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2018 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the period ended June 29, 2018 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.40 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Deferred Compensation Plan I (incorporated by reference to Exhibit 10.41 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Deferred Compensation Plan II (incorporated by reference to Exhibit 10.42 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2016 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. Supplemental Savings Plan II (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-8 filed on November 29, 2017 (File No. 333-221805)).
|
|
|
Offer Letter between L3 Technologies, Inc. and Christopher E. Kubasik (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A dated October 31, 2017 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement, effective as of December 20, 2017, between L3 Technologies, Inc. and Christopher E. Kubasik (incorporated by reference to Exhibit 10.49 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2017 (File No. 001-37975)).
|
|
|
L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement, effective as of December 20, 2017, between L3 Technologies, Inc. and Christopher E. Kubasik (incorporated by reference to Exhibit 10.50 of the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2017 (File No. 001-37975)).
|
|
|
Letter Agreement between L3 Technologies, Inc. and Christopher E. Kubasik dated November 5, 2018.
|
|
|
L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Agreement, effective as of December 14, 2018, between L3 Technologies, Inc. and Christopher E. Kubasik (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated December 18, 2018 (File No. 001-37975)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Agreement.
|
|
|
Retirement Agreement and General Release between L3 Technologies, Inc. and Michael T. Strianese (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 8, 2017 (File No. 001-37975)).
|
|
|
Retirement Agreement and General Release between L3 Technologies, Inc. and Mark R. Von Schwarz (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 16, 2018 (File No. 001-37975)).
|
|
|
Form of Acknowledgment Letter Agreement Regarding Potential Repayment Obligations (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 18, 2018 (File No. 001-37975)).
|
Exhibit
No. |
|
Description of Exhibits
|
|
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)).
|
|
|
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)).
|
|
|
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)).
|
|
|
Subsidiaries of the Registrant.
|
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
Certification of Chairman, Chief Executive Officer and President pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
|
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.
|
|
|
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.
|
**
|
Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. The descriptions of the omitted schedules and exhibits are contained within the relevant agreement. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request.
|
***
|
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.
|
|
L3 TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/ Ralph G. D’Ambrosio
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
Signature
|
|
Title
|
|
|
|
/s/ Christopher E. Kubasik
|
|
Chairman, Chief Executive Officer and President
(Principal Executive Officer) and Director |
Christopher E. Kubasik
|
|
|
|
|
|
/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/ Rita S. Lane
|
|
Director
|
Rita S. Lane
|
|
|
|
|
|
/s/ Lloyd W. Newton
|
|
Director
|
Lloyd W. Newton
|
|
|
|
|
|
/s/ Vincent Pagano, Jr.
|
|
Director
|
Vincent Pagano, Jr.
|
|
|
|
|
|
/s/ H. Hugh Shelton
|
|
Director
|
H. Hugh Shelton
|
|
|
|
|
Page
No. |
|
||
|
||
|
||
|
||
|
||
|
||
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,066
|
|
|
$
|
662
|
|
Billed receivables, net of allowances of $12 in 2018 and $18 in 2017
|
919
|
|
|
723
|
|
||
Contract assets
|
1,590
|
|
|
—
|
|
||
Contracts in process
|
—
|
|
|
1,933
|
|
||
Inventories
|
879
|
|
|
389
|
|
||
Prepaid expenses and other current assets
|
356
|
|
|
300
|
|
||
Assets held for sale
|
—
|
|
|
135
|
|
||
Assets of discontinued operations
|
—
|
|
|
306
|
|
||
Total current assets
|
4,810
|
|
|
4,448
|
|
||
Property, plant and equipment, net
|
1,169
|
|
|
1,110
|
|
||
Goodwill
|
6,808
|
|
|
6,615
|
|
||
Identifiable intangible assets
|
390
|
|
|
292
|
|
||
Other assets
|
341
|
|
|
264
|
|
||
Total assets
|
$
|
13,518
|
|
|
$
|
12,729
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable, trade
|
$
|
699
|
|
|
$
|
531
|
|
Accrued employment costs
|
491
|
|
|
493
|
|
||
Accrued expenses
|
251
|
|
|
217
|
|
||
Contract liabilities
|
669
|
|
|
—
|
|
||
Advance payments and billings in excess of costs incurred
|
—
|
|
|
509
|
|
||
Income taxes payable
|
49
|
|
|
19
|
|
||
Other current liabilities
|
288
|
|
|
367
|
|
||
Liabilities held for sale
|
—
|
|
|
17
|
|
||
Liabilities of discontinued operations
|
—
|
|
|
226
|
|
||
Total current liabilities
|
2,447
|
|
|
2,379
|
|
||
Pension and postretirement benefits
|
1,211
|
|
|
1,313
|
|
||
Deferred income taxes
|
196
|
|
|
158
|
|
||
Other liabilities
|
436
|
|
|
398
|
|
||
Long-term debt
|
3,321
|
|
|
3,330
|
|
||
Total liabilities
|
7,611
|
|
|
7,578
|
|
||
|
|
|
|
||||
Commitments and contingencies (see Note 19)
|
|
|
|
||||
Equity:
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Common stock: $.01 par value; 300,000,000 shares authorized, 78,800,714 shares outstanding at December 31, 2018 and 77,876,687 shares outstanding at December 31, 2017
|
6,866
|
|
|
6,519
|
|
||
Treasury stock (at cost), 84,999,711 shares at December 31, 2018 and 83,362,412 shares at December 31, 2017
|
(7,726
|
)
|
|
(7,404
|
)
|
||
Retained earnings
|
7,424
|
|
|
6,659
|
|
||
Accumulated other comprehensive loss
|
(725
|
)
|
|
(691
|
)
|
||
Total shareholders’ equity
|
5,839
|
|
|
5,083
|
|
||
Noncontrolling interests
|
68
|
|
|
68
|
|
||
Total equity
|
5,907
|
|
|
5,151
|
|
||
Total liabilities and equity
|
$
|
13,518
|
|
|
$
|
12,729
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net sales:
|
|
|
|
|
|
||||||
Products
|
$
|
7,165
|
|
|
$
|
6,733
|
|
|
$
|
6,453
|
|
Services
|
3,079
|
|
|
2,840
|
|
|
2,757
|
|
|||
Total net sales
|
10,244
|
|
|
9,573
|
|
|
9,210
|
|
|||
|
|
|
|
|
|
||||||
Operating costs and expenses:
|
|
|
|
|
|
||||||
Cost of sales — Products
|
(5,345
|
)
|
|
(4,967
|
)
|
|
(4,879
|
)
|
|||
Cost of sales — Services
|
(2,192
|
)
|
|
(2,055
|
)
|
|
(2,086
|
)
|
|||
General and administrative expenses
|
(1,601
|
)
|
|
(1,520
|
)
|
|
(1,287
|
)
|
|||
Total operating costs and expenses
|
(9,138
|
)
|
|
(8,542
|
)
|
|
(8,252
|
)
|
|||
Gain on sale of the Crestview Aerospace and TCS businesses
|
42
|
|
|
—
|
|
|
—
|
|
|||
Merger and acquisition related expenses
|
(28
|
)
|
|
—
|
|
|
—
|
|
|||
Operating income
|
1,120
|
|
|
1,031
|
|
|
958
|
|
|||
Interest expense
|
(164
|
)
|
|
(169
|
)
|
|
(164
|
)
|
|||
Interest and other income, net
|
37
|
|
|
9
|
|
|
17
|
|
|||
Debt retirement charges
|
(69
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Income from continuing operations before income taxes
|
924
|
|
|
871
|
|
|
804
|
|
|||
Provision for income taxes
|
(103
|
)
|
|
(102
|
)
|
|
(171
|
)
|
|||
Income from continuing operations
|
821
|
|
|
769
|
|
|
633
|
|
|||
Income (loss) from discontinued operations, net of income taxes
|
205
|
|
|
(76
|
)
|
|
91
|
|
|||
Net income
|
1,026
|
|
|
693
|
|
|
724
|
|
|||
Net income from continuing operations attributable to noncontrolling interests
|
(21
|
)
|
|
(16
|
)
|
|
(14
|
)
|
|||
Net income attributable to L3
|
$
|
1,005
|
|
|
$
|
677
|
|
|
$
|
710
|
|
|
|
|
|
|
|
||||||
Basic earnings (loss) per share attributable to common shareholders:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
10.19
|
|
|
$
|
9.65
|
|
|
$
|
7.99
|
|
Discontinued operations
|
2.61
|
|
|
(0.97
|
)
|
|
1.18
|
|
|||
Basic earnings per share
|
$
|
12.80
|
|
|
$
|
8.68
|
|
|
$
|
9.17
|
|
|
|
|
|
|
|
||||||
Diluted earnings (loss) per share attributable to common shareholders:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
10.05
|
|
|
$
|
9.46
|
|
|
$
|
7.86
|
|
Discontinued operations
|
2.58
|
|
|
(0.95
|
)
|
|
1.15
|
|
|||
Diluted earnings per share
|
$
|
12.63
|
|
|
$
|
8.51
|
|
|
$
|
9.01
|
|
Cash dividends declared per common share
|
$
|
3.20
|
|
|
$
|
3.00
|
|
|
$
|
2.80
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
78.5
|
|
|
78.0
|
|
|
77.4
|
|
|||
Diluted
|
79.6
|
|
|
79.6
|
|
|
78.8
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income
|
$
|
1,026
|
|
|
$
|
693
|
|
|
$
|
724
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(82
|
)
|
|
124
|
|
|
(77
|
)
|
|||
Unrealized (losses) gains on hedging instruments
(1)
|
(19
|
)
|
|
3
|
|
|
14
|
|
|||
Pension and postretirement benefit plans:
|
|
|
|
|
|
||||||
Amortization of net loss and prior service cost previously recognized
(2)
|
53
|
|
|
45
|
|
|
30
|
|
|||
Net gain (loss) arising during the period
(3)
|
14
|
|
|
(137
|
)
|
|
(119
|
)
|
|||
Net change in pension and postretirement benefit plans
|
67
|
|
|
(92
|
)
|
|
(89
|
)
|
|||
Total other comprehensive (loss) income
|
(34
|
)
|
|
35
|
|
|
(152
|
)
|
|||
Comprehensive income
|
992
|
|
|
728
|
|
|
572
|
|
|||
Comprehensive income attributable to noncontrolling interests
|
(21
|
)
|
|
(16
|
)
|
|
(14
|
)
|
|||
Comprehensive income attributable to L3
|
$
|
971
|
|
|
$
|
712
|
|
|
$
|
558
|
|
(1)
|
Net of income tax benefits of
$5 million
in
2018
, net of income taxes of
$1 million
in
2017
and
$5 million
in
2016
.
|
(2)
|
Net of income taxes of
$15 million
in
2018
,
$14 million
in
2017
and
$18 million
in
2016
.
|
(3)
|
Net of income taxes of
$4 million
in
2018
, net of income tax benefits of
$42 million
in
2017
and
$69 million
in
2016
.
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Treasury
Stock |
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Loss |
|
Noncontrolling
Interests |
|
Total
Equity |
|||||||||||||||||
|
Shares Outstanding
|
|
Par Value
|
|
|
|
|
|
|
|||||||||||||||||||||
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
|
|
|||||||
Net income
|
|
|
|
|
|
|
|
|
677
|
|
|
|
|
16
|
|
|
693
|
|
||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|||||||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
(19
|
)
|
|||||||||||||
Cash dividends declared ($3.00 per share)
|
|
|
|
|
|
|
|
|
(236
|
)
|
|
|
|
|
|
(236
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Employee savings plans
|
0.8
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
113
|
|
||||||||||||
Exercise of stock options
|
0.5
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
46
|
|
||||||||||||
Employee stock purchase plan
|
0.2
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
32
|
|
||||||||||||
Vesting of restricted stock and performance units
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Repurchases of common stock to satisfy tax withholding obligations
|
(0.1
|
)
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|||||||||||||
Treasury stock purchased
|
(1.0
|
)
|
|
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
(180
|
)
|
||||||||||||
Other
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|||||||||||||
Balance at December 31, 2017
|
77.9
|
|
|
1
|
|
|
6,518
|
|
|
(7,404
|
)
|
|
6,659
|
|
|
(691
|
)
|
|
68
|
|
|
5,151
|
|
|||||||
Cumulative effect adjustment of ASC 606 on January 1, 2018, net of taxes
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
13
|
|
|||||||||||||
Net income
|
|
|
|
|
|
|
|
|
1,005
|
|
|
|
|
21
|
|
|
1,026
|
|
||||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
(34
|
)
|
|||||||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
(21
|
)
|
|||||||||||||
Cash dividends declared ($3.20 per share)
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
|
|
|
|
(253
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Employee savings plans
|
0.6
|
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
119
|
|
||||||||||||
Exercise of stock options
|
1.5
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
149
|
|
||||||||||||
Employee stock purchase plan
|
0.2
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
33
|
|
||||||||||||
Vesting of restricted stock and performance units
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Repurchases of common stock to satisfy tax withholding obligations
|
(0.1
|
)
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|||||||||||||
Treasury stock purchased
|
(1.6
|
)
|
|
|
|
|
|
(322
|
)
|
|
|
|
|
|
|
|
(322
|
)
|
||||||||||||
Other
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|||||||||||||
Balance at December 31, 2018
|
78.8
|
|
|
$
|
1
|
|
|
$
|
6,865
|
|
|
$
|
(7,726
|
)
|
|
$
|
7,424
|
|
|
$
|
(725
|
)
|
|
$
|
68
|
|
|
$
|
5,907
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
1,026
|
|
|
$
|
693
|
|
|
$
|
724
|
|
Less: (income) loss from discontinued operations, net of tax
|
(205
|
)
|
|
76
|
|
|
(91
|
)
|
|||
Income from continuing operations
|
821
|
|
|
769
|
|
|
633
|
|
|||
Depreciation of property, plant and equipment
|
182
|
|
|
172
|
|
|
156
|
|
|||
Amortization of intangibles and other assets
|
59
|
|
|
53
|
|
|
42
|
|
|||
Deferred income tax (benefit) provision
|
(7
|
)
|
|
(8
|
)
|
|
27
|
|
|||
Stock-based employee compensation expense
|
60
|
|
|
53
|
|
|
49
|
|
|||
Contributions to employee savings plans in common stock
|
115
|
|
|
106
|
|
|
102
|
|
|||
Amortization of pension and postretirement benefit plans net loss and prior service cost
|
68
|
|
|
59
|
|
|
48
|
|
|||
Loss (gain) on sale of property, plant and equipment
|
4
|
|
|
(31
|
)
|
|
(5
|
)
|
|||
Gain on sale of the Crestview Aerospace and TCS businesses
|
(42
|
)
|
|
—
|
|
|
—
|
|
|||
Debt retirement charges
|
69
|
|
|
—
|
|
|
7
|
|
|||
Other non-cash items
|
6
|
|
|
15
|
|
|
26
|
|
|||
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures, and discontinued operations:
|
|
|
|
|
|
||||||
Billed receivables
|
(195
|
)
|
|
(18
|
)
|
|
1
|
|
|||
Contract assets
|
(246
|
)
|
|
—
|
|
|
—
|
|
|||
Contracts in process
|
—
|
|
|
(70
|
)
|
|
26
|
|
|||
Inventories
|
57
|
|
|
(69
|
)
|
|
22
|
|
|||
Prepaid expenses and other current assets
|
(75
|
)
|
|
(58
|
)
|
|
(23
|
)
|
|||
Accounts payable, trade
|
158
|
|
|
99
|
|
|
(5
|
)
|
|||
Accrued employment costs
|
—
|
|
|
28
|
|
|
10
|
|
|||
Accrued expenses
|
55
|
|
|
32
|
|
|
(6
|
)
|
|||
Contract liabilities
|
108
|
|
|
—
|
|
|
—
|
|
|||
Advance payments and billings in excess of costs incurred
|
—
|
|
|
13
|
|
|
(73
|
)
|
|||
Income taxes
|
9
|
|
|
(39
|
)
|
|
33
|
|
|||
All other operating activities
|
(164
|
)
|
|
(121
|
)
|
|
(48
|
)
|
|||
Net cash from operating activities from continuing operations
|
1,042
|
|
|
985
|
|
|
1,022
|
|
|||
|
|
|
|
|
|
||||||
Investing activities:
|
|
|
|
|
|
||||||
Business acquisitions, net of cash acquired
|
(369
|
)
|
|
(316
|
)
|
|
(388
|
)
|
|||
Proceeds from the sale of businesses, net of closing date cash balances
|
535
|
|
|
18
|
|
|
561
|
|
|||
Capital expenditures
|
(232
|
)
|
|
(224
|
)
|
|
(210
|
)
|
|||
Dispositions of property, plant and equipment
|
3
|
|
|
74
|
|
|
21
|
|
|||
Other investing activities
|
(28
|
)
|
|
(5
|
)
|
|
6
|
|
|||
Net cash used in investing activities from continuing operations
|
(91
|
)
|
|
(453
|
)
|
|
(10
|
)
|
|||
|
|
|
|
|
|
||||||
Financing activities:
|
|
|
|
|
|
||||||
Proceeds from sale of senior notes
|
1,798
|
|
|
—
|
|
|
547
|
|
|||
Repurchases, redemptions and maturities of senior notes
|
(1,865
|
)
|
|
—
|
|
|
(856
|
)
|
|||
Borrowings under revolving credit facility
|
501
|
|
|
1,328
|
|
|
819
|
|
|||
Repayments of borrowings under revolving credit facility
|
(501
|
)
|
|
(1,328
|
)
|
|
(819
|
)
|
|||
Common stock repurchased
|
(322
|
)
|
|
(180
|
)
|
|
(373
|
)
|
|||
Dividends paid
|
(254
|
)
|
|
(236
|
)
|
|
(220
|
)
|
|||
Proceeds from exercise of stock options
|
149
|
|
|
46
|
|
|
53
|
|
|||
Proceeds from employee stock purchase plan
|
33
|
|
|
32
|
|
|
31
|
|
|||
Repurchases of common stock to satisfy tax withholding obligations
|
(31
|
)
|
|
(18
|
)
|
|
(21
|
)
|
|||
Debt issue costs
|
(15
|
)
|
|
—
|
|
|
(10
|
)
|
|||
Other financing activities
|
(13
|
)
|
|
(10
|
)
|
|
(7
|
)
|
|||
Net cash used in financing activities from continuing operations
|
(520
|
)
|
|
(366
|
)
|
|
(856
|
)
|
|||
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
(15
|
)
|
|
20
|
|
|
(13
|
)
|
|||
Net cash (used in) from discontinued operations:
|
|
|
|
|
|
||||||
Operating activities
|
(10
|
)
|
|
117
|
|
|
19
|
|
|||
Investing activities
|
(2
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|||
Net cash (used in) from discontinued operations
|
(12
|
)
|
|
113
|
|
|
13
|
|
|||
Net increase in cash and cash equivalents
|
404
|
|
|
299
|
|
|
156
|
|
|||
Cash and cash equivalents, beginning of the year
|
662
|
|
|
363
|
|
|
207
|
|
|||
Cash and cash equivalents, end of the year
|
$
|
1,066
|
|
|
$
|
662
|
|
|
$
|
363
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions, except per share data)
|
||||||||||
Operating income
|
|
$
|
213
|
|
|
$
|
185
|
|
|
$
|
149
|
|
Diluted earnings per share
|
|
$
|
2.03
|
|
|
$
|
1.49
|
|
|
$
|
1.23
|
|
|
% of Total Net Sales
|
|
Over time (cost-to-cost method)
|
74
|
%
|
Point in time
|
19
|
%
|
Output method
|
4
|
%
|
Billing method
|
3
|
%
|
Total
|
100
|
%
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Accrued product warranty costs
(1)
:
|
|
|
|
||||
Balance at January 1
|
$
|
99
|
|
|
$
|
109
|
|
Acquisitions during the period
|
—
|
|
|
3
|
|
||
Accruals for product warranties issued during the period
|
44
|
|
|
52
|
|
||
Changes to accruals for product warranties existing before January 1
|
1
|
|
|
—
|
|
||
Settlements made during the period
|
(55
|
)
|
|
(66
|
)
|
||
Foreign currency translation adjustments
|
(1
|
)
|
|
1
|
|
||
Balance at December 31
|
$
|
88
|
|
|
$
|
99
|
|
(1)
|
The balances above include both the current and non-current amounts.
|
BALANCE SHEET
|
December 31, 2017
As Reported
Under ASC 605
|
|
Adjustments Due
to ASC 606
|
|
January 1, 2018 As
Adjusted Under
ASC 606
|
||||||
|
(in millions)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Contract assets
|
$
|
—
|
|
|
$
|
1,349
|
|
|
$
|
1,349
|
|
Contracts in process
|
1,933
|
|
|
(1,933
|
)
|
|
—
|
|
|||
Inventories
|
389
|
|
|
537
|
|
|
926
|
|
|||
Prepaid expenses and other current assets
|
300
|
|
|
17
|
|
|
317
|
|
|||
Assets held for sale
|
135
|
|
|
3
|
|
|
138
|
|
|||
Assets of discontinued operations
|
306
|
|
|
(21
|
)
|
|
285
|
|
|||
Total current assets
|
4,448
|
|
|
(48
|
)
|
|
4,400
|
|
|||
Other assets
|
264
|
|
|
49
|
|
|
313
|
|
|||
Total assets
|
$
|
12,729
|
|
|
$
|
1
|
|
|
$
|
12,730
|
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Accrued expenses
|
$
|
217
|
|
|
$
|
(13
|
)
|
|
$
|
204
|
|
Contract liabilities
|
—
|
|
|
565
|
|
|
565
|
|
|||
Advance payments and billing in excess of costs incurred
|
509
|
|
|
(509
|
)
|
|
—
|
|
|||
Other current liabilities
|
367
|
|
|
(49
|
)
|
|
318
|
|
|||
Liabilities held for sale
|
17
|
|
|
(1
|
)
|
|
16
|
|
|||
Liabilities of discontinued operations
|
226
|
|
|
(23
|
)
|
|
203
|
|
|||
Total current liabilities
|
2,379
|
|
|
(30
|
)
|
|
2,349
|
|
|||
Deferred income taxes
|
158
|
|
|
4
|
|
|
162
|
|
|||
Other liabilities
|
398
|
|
|
14
|
|
|
412
|
|
|||
Total liabilities
|
7,578
|
|
|
(12
|
)
|
|
7,566
|
|
|||
Shareholders' Equity
|
|
|
|
|
|
||||||
Retained earnings
|
6,659
|
|
|
13
|
|
|
6,672
|
|
|||
Total equity
|
$
|
5,151
|
|
|
$
|
13
|
|
|
$
|
5,164
|
|
|
Year Ended December 31, 2018
|
||||||||||
STATEMENT OF OPERATIONS
|
Under
ASC 605
|
|
Effect of
ASC 606
|
|
As Reported
Under ASC 606
|
||||||
|
(in millions)
|
||||||||||
Net Sales:
|
|
|
|
|
|
||||||
Products
|
$
|
7,004
|
|
|
$
|
161
|
|
|
$
|
7,165
|
|
Services
|
3,101
|
|
|
(22
|
)
|
|
3,079
|
|
|||
Total
|
10,105
|
|
|
139
|
|
|
10,244
|
|
|||
|
|
|
|
|
|
||||||
Operating costs and expenses:
|
|
|
|
|
|
||||||
Cost of sales — Products
|
$
|
(5,235
|
)
|
|
$
|
(110
|
)
|
|
$
|
(5,345
|
)
|
Cost of sales — Services
|
(2,193
|
)
|
|
1
|
|
|
(2,192
|
)
|
|||
General and administrative expenses
|
(1,598
|
)
|
|
(3
|
)
|
|
(1,601
|
)
|
|||
Gain on sale of the Crestview & TCS Businesses
|
41
|
|
|
1
|
|
|
42
|
|
|||
Merger and acquisition related expenses
|
(28
|
)
|
|
—
|
|
|
(28
|
)
|
|||
Operating income
|
1,092
|
|
|
28
|
|
|
1,120
|
|
|||
Income from continuing operations before income taxes
|
896
|
|
|
28
|
|
|
924
|
|
|||
Provision for income taxes
|
(96
|
)
|
|
(7
|
)
|
|
(103
|
)
|
|||
Income from continuing operations
|
800
|
|
|
21
|
|
|
821
|
|
|||
Income from discontinued operations, net of income taxes
|
214
|
|
|
(9
|
)
|
|
205
|
|
|||
Net income
|
1,014
|
|
|
12
|
|
|
1,026
|
|
|||
Net income attributable to L3
|
$
|
993
|
|
|
$
|
12
|
|
|
$
|
1,005
|
|
|
|
|
|
|
|
||||||
Basic earnings per share attributable to common shareholders:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
9.92
|
|
|
$
|
0.27
|
|
|
$
|
10.19
|
|
Discontinued operations
|
2.73
|
|
|
(0.12
|
)
|
|
2.61
|
|
|||
Basic earnings per share
|
$
|
12.65
|
|
|
$
|
0.15
|
|
|
$
|
12.80
|
|
Diluted earnings per share attributable to common shareholders:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
9.79
|
|
|
$
|
0.26
|
|
|
$
|
10.05
|
|
Discontinued operations
|
2.69
|
|
|
(0.11
|
)
|
|
2.58
|
|
|||
Diluted earnings per share
|
$
|
12.48
|
|
|
$
|
0.15
|
|
|
$
|
12.63
|
|
|
Effect of ASC 606
|
||||||
|
Year Ended December 31, 2018
|
||||||
|
Sales
|
|
Operating Income
|
||||
|
(in millions)
|
||||||
ISRS
|
$
|
21
|
|
|
$
|
1
|
|
C&NS
|
68
|
|
|
12
|
|
||
Electronic Systems
|
50
|
|
|
14
|
|
||
Segment totals
|
$
|
139
|
|
|
$
|
27
|
|
|
December 31, 2018
|
||||||||||
BALANCE SHEET
|
Under
ASC 605 |
|
Effect of
ASC 606 |
|
As Reported
Under ASC 606
|
||||||
|
(in millions)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Contract assets
|
$
|
—
|
|
|
$
|
1,590
|
|
|
$
|
1,590
|
|
Contracts in process
|
2,127
|
|
|
(2,127
|
)
|
|
—
|
|
|||
Inventories
|
393
|
|
|
486
|
|
|
879
|
|
|||
Prepaid expenses and other current assets
|
340
|
|
|
16
|
|
|
356
|
|
|||
Total current assets
|
4,845
|
|
|
(35
|
)
|
|
4,810
|
|
|||
Other assets
|
295
|
|
|
46
|
|
|
341
|
|
|||
Total assets
|
$
|
13,507
|
|
|
$
|
11
|
|
|
$
|
13,518
|
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Accrued expenses
|
$
|
275
|
|
|
$
|
(24
|
)
|
|
$
|
251
|
|
Contract liabilities
|
—
|
|
|
669
|
|
|
669
|
|
|||
Advance payments and billings in excess of costs incurred
|
604
|
|
|
(604
|
)
|
|
—
|
|
|||
Income taxes payable
|
53
|
|
|
(4
|
)
|
|
49
|
|
|||
Other current liabilities
|
364
|
|
|
(76
|
)
|
|
288
|
|
|||
Total current liabilities
|
2,486
|
|
|
(39
|
)
|
|
2,447
|
|
|||
Deferred income taxes
|
185
|
|
|
11
|
|
|
196
|
|
|||
Other liabilities
|
422
|
|
|
14
|
|
|
436
|
|
|||
Total liabilities
|
7,625
|
|
|
(14
|
)
|
|
7,611
|
|
|||
Shareholders' Equity
|
|
|
|
|
|
||||||
Retained earnings
|
7,399
|
|
|
25
|
|
|
7,424
|
|
|||
Total equity
|
$
|
5,882
|
|
|
$
|
25
|
|
|
$
|
5,907
|
|
|
Year Ended
December 31, 2018 |
||
|
(in millions)
|
||
Net sales
|
$
|
46
|
|
Loss before income taxes
(1)
|
$
|
(7
|
)
|
(1)
|
Includes intangible amortization of
$7 million
and IRAD expense of
$1 million
.
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions, except per share data)
|
||||||
Pro forma net sales
|
$
|
10,324
|
|
|
$
|
9,741
|
|
Pro forma income from continuing operations attributable to L3
|
$
|
805
|
|
|
$
|
756
|
|
Pro forma net income attributable to L3
|
$
|
1,010
|
|
|
$
|
680
|
|
Pro forma diluted earnings per share from continuing operations
|
$
|
10.11
|
|
|
$
|
9.50
|
|
Pro forma diluted earnings per share
|
$
|
12.69
|
|
|
$
|
8.54
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net sales
|
$
|
64
|
|
|
$
|
119
|
|
|
$
|
166
|
|
Gain on sale of businesses
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income from continuing operations before income taxes
|
$
|
45
|
|
|
$
|
(2
|
)
|
|
$
|
12
|
|
|
December 31,
2017 |
||
|
(in millions)
|
||
Assets
|
|
||
Billed receivables
|
$
|
14
|
|
Contracts in process
|
33
|
|
|
Total current assets
|
47
|
|
|
Property, plant and equipment, net
|
34
|
|
|
Goodwill
|
52
|
|
|
Identifiable intangible assets
|
2
|
|
|
Total assets classified as held for sale
|
$
|
135
|
|
|
|
||
Liabilities
|
|
||
Accounts payable, trade
|
$
|
3
|
|
Accrued employment costs
|
2
|
|
|
Accrued expenses
|
3
|
|
|
Other current liabilities
|
5
|
|
|
Total current liabilities
|
13
|
|
|
Deferred income taxes
|
4
|
|
|
Total liabilities classified as held for sale
|
$
|
17
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net sales
|
$
|
597
|
|
|
$
|
1,429
|
|
|
$
|
1,402
|
|
Operating costs and expenses
(1)
|
(561
|
)
|
|
(1,531
|
)
|
|
(1,357
|
)
|
|||
Operating income (loss) from discontinued operations
|
36
|
|
|
(102
|
)
|
|
45
|
|
|||
Interest expense allocated to discontinued operations
|
(1
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|||
Gain on sale of businesses
|
234
|
|
|
—
|
|
|
64
|
|
|||
Income (loss) from discontinued operations before income taxes
|
269
|
|
|
(104
|
)
|
|
104
|
|
|||
Income tax (expense) benefit
|
(64
|
)
|
|
28
|
|
|
(13
|
)
|
|||
Income (loss) from discontinued operations, net of income taxes
|
$
|
205
|
|
|
$
|
(76
|
)
|
|
$
|
91
|
|
(1)
|
Due to a decline in estimated fair value, the Company recorded a goodwill impairment charge of
$187 million
during 2017 related to Vertex Aerospace.
|
|
December 31,
2017 |
||
|
(in millions)
|
||
Assets
|
|
||
Current assets
|
$
|
284
|
|
Property, plant and equipment, net
|
13
|
|
|
Other intangible assets
|
7
|
|
|
Other assets
|
2
|
|
|
Total assets of discontinued operations
|
$
|
306
|
|
|
|
||
Liabilities
|
|
||
Accounts payable, trade
|
$
|
63
|
|
Other current liabilities
|
131
|
|
|
Current liabilities
|
194
|
|
|
Long-term liabilities
|
32
|
|
|
Total liabilities of discontinued operations
|
$
|
226
|
|
|
Year Ended December 31, 2017
|
||||||||||
|
Pre-Tax
(Loss) gain |
|
Proceeds
Received |
|
Net Sales
|
||||||
|
(in millions)
|
||||||||||
Aviation Jet Services divestiture
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
$
|
1
|
|
Coleman divestiture
|
(3
|
)
|
|
17
|
|
|
9
|
|
|||
Display Product Line divestiture
|
4
|
|
|
7
|
|
|
—
|
|
|||
Total
|
$
|
(4
|
)
|
|
$
|
25
|
|
|
$
|
10
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net sales
|
$
|
10
|
|
|
$
|
59
|
|
Income before income taxes
|
$
|
2
|
|
|
$
|
8
|
|
|
December 31,
2018 |
|
January 1,
2018 |
||||
|
(in millions)
|
||||||
Contract assets
|
$
|
1,590
|
|
|
$
|
1,349
|
|
Contract liabilities — current
|
(669
|
)
|
|
(565
|
)
|
||
Contract liabilities — non-current
|
(31
|
)
|
|
(28
|
)
|
||
Net contract assets
|
$
|
890
|
|
|
$
|
756
|
|
|
December 31,
2018 |
|
January 1,
2018 |
||||
|
(in millions)
|
||||||
Unbilled contract receivables, gross
|
$
|
2,716
|
|
|
$
|
2,232
|
|
Unliquidated progress payments and advances
|
(1,126
|
)
|
|
(883
|
)
|
||
Total contract assets
|
$
|
1,590
|
|
|
$
|
1,349
|
|
|
December 31,
2017 |
||
|
(in millions)
|
||
Unbilled contract receivables, gross
|
$
|
1,874
|
|
Unliquidated progress payments
|
(761
|
)
|
|
Unbilled contract receivables, net
|
1,113
|
|
|
Inventoried contract costs, gross
|
891
|
|
|
Unliquidated progress payments
|
(71
|
)
|
|
Inventoried contract costs, net
|
820
|
|
|
Total contracts in process
|
$
|
1,933
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Amounts included in inventoried contract costs at beginning of the year
|
$
|
173
|
|
|
$
|
137
|
|
Contract costs incurred:
|
|
|
|
||||
IRAD and B&P
|
333
|
|
|
304
|
|
||
Other G&A
|
842
|
|
|
749
|
|
||
Total
|
1,175
|
|
|
1,053
|
|
||
Amounts charged to operating costs and expenses
|
(1,179
|
)
|
|
(1,017
|
)
|
||
Amounts included in inventoried contract costs at end of the year
|
$
|
169
|
|
|
$
|
173
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Raw materials, components and sub-assemblies
|
$
|
351
|
|
|
$
|
184
|
|
Work in process
|
330
|
|
|
98
|
|
||
Finished goods
|
198
|
|
|
107
|
|
||
Total
|
$
|
879
|
|
|
$
|
389
|
|
|
ISRS
|
|
C&NS
|
|
Electronic
Systems |
|
Consolidated
Total |
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
$
|
2,512
|
|
|
$
|
1,883
|
|
|
$
|
2,083
|
|
|
$
|
6,478
|
|
Accumulated impairment losses
|
(46
|
)
|
|
(15
|
)
|
|
(43
|
)
|
|
(104
|
)
|
||||
|
2,466
|
|
|
1,868
|
|
|
2,040
|
|
|
6,374
|
|
||||
Business acquisitions
(1)
|
8
|
|
|
73
|
|
|
131
|
|
|
212
|
|
||||
Business divestitures
(2)
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
||||
Foreign currency translation adjustments
|
26
|
|
|
21
|
|
|
46
|
|
|
93
|
|
||||
Assets held for sale
(3)
|
(42
|
)
|
|
—
|
|
|
(10
|
)
|
|
(52
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
2,504
|
|
|
1,977
|
|
|
2,238
|
|
|
6,719
|
|
||||
Accumulated impairment losses
|
(46
|
)
|
|
(15
|
)
|
|
(43
|
)
|
|
(104
|
)
|
||||
|
2,458
|
|
|
1,962
|
|
|
2,195
|
|
|
6,615
|
|
||||
Business acquisitions
(1)
|
158
|
|
|
56
|
|
|
33
|
|
|
247
|
|
||||
Foreign currency translation adjustments
|
(20
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
(54
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
2,634
|
|
|
2,022
|
|
|
2,248
|
|
|
6,904
|
|
||||
Accumulated impairment losses
|
(46
|
)
|
|
(15
|
)
|
|
(43
|
)
|
|
(104
|
)
|
||||
|
$
|
2,596
|
|
|
$
|
2,007
|
|
|
$
|
2,205
|
|
|
$
|
6,808
|
|
(1)
|
For the year ended
December 31, 2018
, business acquisitions
for the ISRS segment included the acquisitions of the Azimuth Security and Linchpin Labs and Applied Defense Solutions businesses and the purchase price allocation adjustments for the Kigre business acquisition. Business acquisitions for the C&NS segment included the acquisitions of the ASV Global business and purchase price allocation adjustments for the Adaptive Methods business acquisition. Business acquisitions for the Electronic Systems segment included the acquisitions of the Latitude Engineering and C.K. Industrial Engineers businesses and purchase price allocation adjustments for the G-Air and Doss Aviation business acquisitions.
For the year ended
December 31, 2017
, business acquisitions for the ISRS segment included primarily the Kigre business acquisition. Business acquisitions for the C&NS segment included primarily the Adaptive Methods, Open Water Power, and OceanServer business acquisitions. Business acquisitions for the Electronic Systems segment included the acquisitions of the ETD, Doss Aviation and G-Air businesses and purchase price allocation adjustments for the MacH and Aerosim business acquisitions.
|
(2)
|
The decrease for the Electronic Systems segment was due to the divestitures of Coleman and Aviation Jet Services during the quarterly period ended March 31, 2017.
|
(3)
|
The Crestview & TCS businesses from the Company’s ISRS segment were classified as held for sale as of December 31, 2017.
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Weighted 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
|
16
|
|
$
|
468
|
|
|
$
|
288
|
|
|
$
|
180
|
|
|
$
|
393
|
|
|
$
|
257
|
|
|
$
|
136
|
|
Technology
|
9
|
|
245
|
|
|
132
|
|
|
113
|
|
|
189
|
|
|
114
|
|
|
75
|
|
||||||
Other
|
9
|
|
49
|
|
|
18
|
|
|
31
|
|
|
29
|
|
|
14
|
|
|
15
|
|
||||||
Total subject to amortization
|
|
|
762
|
|
|
438
|
|
|
324
|
|
|
611
|
|
|
385
|
|
|
226
|
|
||||||
IPR&D
|
indefinite
|
|
66
|
|
|
—
|
|
|
66
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||||
Total
|
|
|
$
|
828
|
|
|
$
|
438
|
|
|
$
|
390
|
|
|
$
|
677
|
|
|
$
|
385
|
|
|
$
|
292
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Amortization expense
|
$
|
49
|
|
|
$
|
43
|
|
|
$
|
33
|
|
|
Year Ending December 31,
|
||||||||||||||||||
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Estimated amortization expense
|
$
|
51
|
|
|
$
|
47
|
|
|
$
|
42
|
|
|
$
|
37
|
|
|
$
|
28
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Other Current Liabilities:
|
|
|
|
||||
Accrued product warranty costs
|
$
|
66
|
|
|
$
|
69
|
|
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position
|
40
|
|
|
63
|
|
||
Accrued interest
|
18
|
|
|
43
|
|
||
Estimated contingent purchase price payable for acquired businesses (see Note 13)
|
10
|
|
|
11
|
|
||
Deferred revenues
|
—
|
|
|
38
|
|
||
Other
|
154
|
|
|
143
|
|
||
Total other current liabilities
|
$
|
288
|
|
|
$
|
367
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Other Liabilities:
|
|
|
|
||||
Non-current income taxes payable (see Note 17)
|
$
|
161
|
|
|
$
|
164
|
|
Deferred compensation
|
53
|
|
|
49
|
|
||
Notes payable and capital lease obligations
|
40
|
|
|
16
|
|
||
Contract liabilities (see Note 4)
|
31
|
|
|
—
|
|
||
Accrued product warranty costs
|
22
|
|
|
30
|
|
||
Accrued workers’ compensation
|
20
|
|
|
23
|
|
||
Estimated contingent purchase price payable for acquired businesses (see Note 13)
|
10
|
|
|
20
|
|
||
Deferred revenues
|
—
|
|
|
19
|
|
||
Other
|
99
|
|
|
77
|
|
||
Total other liabilities
|
$
|
436
|
|
|
$
|
398
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Land
|
$
|
34
|
|
|
$
|
34
|
|
Buildings and improvements
|
428
|
|
|
404
|
|
||
Machinery, equipment, furniture and fixtures
|
2,081
|
|
|
1,959
|
|
||
Leasehold improvements
|
407
|
|
|
376
|
|
||
Gross property, plant and equipment
|
2,950
|
|
|
2,773
|
|
||
Accumulated depreciation and amortization
|
(1,781
|
)
|
|
(1,663
|
)
|
||
Property, plant and equipment, net
|
$
|
1,169
|
|
|
$
|
1,110
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Borrowings under Revolving Credit Facility
(1)
|
$
|
—
|
|
|
$
|
—
|
|
5.20% Senior Notes due 2019
|
—
|
|
|
1,000
|
|
||
4.75% Senior Notes due 2020
|
—
|
|
|
800
|
|
||
4.95% Senior Notes due 2021
|
650
|
|
|
650
|
|
||
3.85% Senior Notes due 2023
|
800
|
|
|
—
|
|
||
3.95% Senior Notes due 2024
|
350
|
|
|
350
|
|
||
3.85% Senior Notes due 2026
|
550
|
|
|
550
|
|
||
4.40% Senior Notes due 2028
|
1,000
|
|
|
—
|
|
||
Principal amount of long-term debt
|
3,350
|
|
|
3,350
|
|
||
Unamortized discounts
|
(7
|
)
|
|
(7
|
)
|
||
Deferred debt issue costs
|
(22
|
)
|
|
(13
|
)
|
||
Carrying amount of long-term debt
|
$
|
3,321
|
|
|
$
|
3,330
|
|
(1)
|
During
2018
, L3's aggregate borrowings and repayments under the Credit Facility were
$501 million
. L3 had the full availability of its
$1 billion
Credit Facility at
December 31, 2018
and
December 31, 2017
.
|
Note
|
|
Date of Issuance
|
|
Amount Issued
|
|
Discount
(1)
|
|
Net
Cash Proceeds
|
|
Effective Interest Rate
|
|
Redemption at Treasury
Rate
(2)(3)
|
|||||||
|
|
|
|
(dollars in millions)
|
|||||||||||||||
4.95% Senior Notes due February 15, 2021
|
|
February 7, 2011
|
|
$
|
650
|
|
|
$
|
4
|
|
|
$
|
639
|
|
|
5.02
|
%
|
|
25 bps
|
3.85% Senior Notes due June 15, 2023
(4)
|
|
June 6, 2018
|
|
$
|
800
|
|
|
$
|
2
|
|
|
$
|
792
|
|
|
3.89
|
%
|
|
20 bps
|
3.95% Senior Notes due May 28, 2024
(5)
|
|
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
|
4.40% Senior Notes due June 15, 2028
(4)
|
|
June 6, 2018
|
|
$
|
1,000
|
|
|
$
|
1
|
|
|
$
|
990
|
|
|
4.41
|
%
|
|
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 2023 may be redeemed at any time prior to May 15, 2023 (one month prior to maturity) and the senior notes maturing in 2021, 2024, 2026 and 2028 may be redeemed at any time prior to November 15, 2020, February 28, 2024, September 15, 2026 and March 15, 2028, 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: (i) 100% of the principal amount, or (ii) 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 2021, 2023, 2024, 2026 and 2028 are redeemed at any time on or after November 15, 2020, May 15, 2023, February 28, 2024, September 15, 2026 and March 15, 2028, 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) along with a “change of control triggering event” (generally described as the applicable series of senior notes ceasing to be rated investment grade, 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
$1,782 million
(after deduction of the discount, underwriting expenses and commissions and other related expenses) plus cash on hand were used to fund the concurrent cash tender offers (the Tender Offers) for any and all of
$1 billion
aggregate principal amount of 5.20% Senior Notes due October 15, 2019 (the 2019 Notes) and
$800 million
aggregate principal amount of 4.75% Senior Notes due July 15, 2020 (the 2020 Notes) and any related redemption of notes not tendered in the Tender Offers.
|
(5)
|
On December 22, 2015, the Company repurchased
$300 million
of the
3.95%
Senior Notes due May 28, 2024.
|
Note
|
|
Settlement Type
|
|
Date Settled
|
|
Aggregate
Amount
|
|
Premium
|
|
Cash
Payments
|
|
Interest
|
|
Total Cash
Payments
|
|
Debt
Retirement
Charge
|
|||||||||||
|
|
|
|
|
|
(dollars in millions)
|
|||||||||||||||||||||
5.20% Senior Notes due 2019
(1)
|
|
Redemption
|
|
July 6, 2018
|
|
$
|
317
|
|
|
103.048
|
%
|
|
$
|
327
|
|
|
$
|
4
|
|
|
$
|
331
|
|
|
$
|
10
|
|
4.75% Senior Notes due 2020
(1)
|
|
Redemption
|
|
July 6, 2018
|
|
$
|
265
|
|
|
103.818
|
%
|
|
$
|
275
|
|
|
$
|
6
|
|
|
$
|
281
|
|
|
$
|
11
|
|
5.20% Senior Notes due 2019
(2)
|
|
Tender Offer
|
|
June 6, 2018
|
|
$
|
683
|
|
|
103.282
|
%
|
|
$
|
705
|
|
|
$
|
5
|
|
|
$
|
710
|
|
|
$
|
24
|
|
4.75% Senior Notes due 2020
(2)
|
|
Tender Offer
|
|
June 6, 2018
|
|
$
|
535
|
|
|
104.092
|
%
|
|
$
|
557
|
|
|
$
|
10
|
|
|
$
|
567
|
|
|
$
|
24
|
|
1.50% Senior Notes due 2017
|
|
Redemption
|
|
December 30, 2016
|
|
$
|
350
|
|
|
100.323
|
%
|
|
$
|
351
|
|
|
$
|
1
|
|
|
$
|
352
|
|
|
$
|
2
|
|
3.95% Senior Notes due 2016
|
|
Maturity
|
|
November 15, 2016
|
|
$
|
200
|
|
|
100.000
|
%
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
—
|
|
3.95% Senior Notes due 2016
|
|
Redemption
|
|
May 20, 2016
|
|
$
|
300
|
|
|
101.475
|
%
|
|
$
|
305
|
|
|
$
|
—
|
|
|
$
|
305
|
|
|
$
|
5
|
|
(1)
|
The debt retirement charge includes
$1 million
which represents the non-cash retirement of associated unamortized debt issue costs and discounts.
|
(2)
|
Cash payments exclude
$1 million
of tender offer fees. The debt retirement charge includes
$1 million
of tender offer fees and
$3 million
which represents the non-cash retirement of associated unamortized debt issue costs and discounts.
|
|
|
Foreign
currency translation |
|
Unrealized
(losses) gains on hedging instruments |
|
Unrecognized
(losses) gains and prior service cost, net |
|
Total
accumulated other comprehensive loss |
||||||||
|
|
(in millions)
|
||||||||||||||
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
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss) before reclassifications, net of tax
|
|
124
|
|
|
7
|
|
|
(137
|
)
|
|
(6
|
)
|
||||
Amounts reclassified from AOCI, net of tax
|
|
—
|
|
|
(4
|
)
|
|
45
|
|
|
41
|
|
||||
Net current period other comprehensive income (loss)
|
|
124
|
|
|
3
|
|
|
(92
|
)
|
|
35
|
|
||||
Balance at December 31, 2017
|
|
$
|
(54
|
)
|
|
$
|
9
|
|
|
$
|
(646
|
)
|
|
$
|
(691
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive loss before reclassifications, net of tax
|
|
(82
|
)
|
|
(17
|
)
|
|
14
|
|
|
(85
|
)
|
||||
Amounts reclassified from AOCI, net of tax
|
|
—
|
|
|
(2
|
)
|
|
53
|
|
|
51
|
|
||||
Net current period other comprehensive (loss) income
|
|
(82
|
)
|
|
(19
|
)
|
|
67
|
|
|
(34
|
)
|
||||
Balance at December 31, 2018
|
|
$
|
(136
|
)
|
|
$
|
(10
|
)
|
|
$
|
(579
|
)
|
|
$
|
(725
|
)
|
|
|
Amount Reclassified from AOCI
(a)
|
|
Affected Line Item in the
Audited Consolidated Statements of Operations |
||||||||||
|
|
Year Ended December 31,
|
|
|||||||||||
Details About AOCI Components
|
|
2018
|
|
2017
|
|
2016
|
|
|||||||
|
|
(in millions)
|
|
|
||||||||||
Gain (loss) on hedging instruments
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
(13
|
)
|
|
Cost of sales-products
|
|
|
3
|
|
|
5
|
|
|
(13
|
)
|
|
Income from continuing operations before income taxes
|
|||
|
|
(1
|
)
|
|
(1
|
)
|
|
2
|
|
|
Provision for income taxes
|
|||
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
(11
|
)
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
||||||
Amortization of defined benefit pension and postretirement items:
|
|
|
|
|
|
|
|
|
||||||
Net loss
(b)
|
|
$
|
(68
|
)
|
|
$
|
(59
|
)
|
|
$
|
(48
|
)
|
|
Income from continuing operations before income taxes
|
|
|
15
|
|
|
14
|
|
|
18
|
|
|
Provision for income taxes
|
|||
|
|
$
|
(53
|
)
|
|
$
|
(45
|
)
|
|
$
|
(30
|
)
|
|
Income from continuing operations
|
Total reclassification for the period
|
|
$
|
(51
|
)
|
|
$
|
(41
|
)
|
|
$
|
(41
|
)
|
|
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
20
for additional information).
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
Description
|
|
Level 1
(1)
|
|
Level 2
(2)
|
|
Level 3
(3)
|
|
Level 1
(1)
|
|
Level 2
(2)
|
|
Level 3
(3)
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
|
|
$
|
660
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
310
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives (foreign currency forward contracts)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
||||||
Total assets
|
|
$
|
660
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
310
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivatives (foreign currency forward contracts)
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Contingent consideration
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||||
Total liabilities
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
31
|
|
(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.
|
|
December 31, 2018
|
||
|
(in millions)
|
||
Balance at beginning of period
|
$
|
31
|
|
Acquisitions and investments
|
11
|
|
|
Cash payments
|
(7
|
)
|
|
Changes in fair value of contingent consideration, net
|
(15
|
)
|
|
Balance at end of period
|
$
|
20
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying
Amount |
|
Estimated
Fair Value |
|
Carrying
Amount |
|
Estimated
Fair Value |
||||||||
|
(in millions)
|
||||||||||||||
Senior notes
(1)
|
$
|
3,321
|
|
|
$
|
3,355
|
|
|
$
|
3,330
|
|
|
$
|
3,502
|
|
Foreign currency forward contracts
(2)
|
$
|
(16
|
)
|
|
$
|
(16
|
)
|
|
$
|
10
|
|
|
$
|
10
|
|
(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
15
for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.
|
Currency
|
|
Notional Amounts
|
||
|
|
(in millions)
|
||
U.S. dollar
|
|
$
|
204
|
|
Canadian dollar
|
|
123
|
|
|
Euro
|
|
67
|
|
|
United Arab Emirates dirham
|
|
12
|
|
|
British pound
|
|
9
|
|
|
Total
|
|
$
|
415
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||||||||||
|
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)
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
4
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Total derivative instruments
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
4
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
(1)
|
See Note
13
for a description of the fair value hierarchy related to the Company's foreign currency forward contracts.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions, except per share data)
|
||||||||||
Reconciliation of net income:
|
|
|
|
|
|
||||||
Net income
|
$
|
1,026
|
|
|
$
|
693
|
|
|
$
|
724
|
|
Net income from continuing operations attributable to noncontrolling interests
|
(21
|
)
|
|
(16
|
)
|
|
(14
|
)
|
|||
Net income attributable to L3’s common shareholders
|
$
|
1,005
|
|
|
$
|
677
|
|
|
$
|
710
|
|
Earnings (loss) attributable to L3’s common shareholders:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
800
|
|
|
$
|
753
|
|
|
$
|
619
|
|
Discontinued operations, net of income tax
|
205
|
|
|
(76
|
)
|
|
91
|
|
|||
Net income attributable to L3’s common shareholders
|
$
|
1,005
|
|
|
$
|
677
|
|
|
$
|
710
|
|
Earnings per share attributable to L3’s common shareholders:
|
|
|
|
|
|
||||||
Basic:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
78.5
|
|
|
78.0
|
|
|
77.4
|
|
|||
Basic earnings (loss) per share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
10.19
|
|
|
$
|
9.65
|
|
|
$
|
7.99
|
|
Discontinued operations, net of income tax
|
2.61
|
|
|
(0.97
|
)
|
|
1.18
|
|
|||
Net income
|
$
|
12.80
|
|
|
$
|
8.68
|
|
|
$
|
9.17
|
|
Diluted:
|
|
|
|
|
|
||||||
Common and potential common shares:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
78.5
|
|
|
78.0
|
|
|
77.4
|
|
|||
Effect of dilutive securities
|
1.1
|
|
|
1.6
|
|
|
1.4
|
|
|||
Common and potential common shares
|
79.6
|
|
|
79.6
|
|
|
78.8
|
|
|||
Diluted earnings (loss) per share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
10.05
|
|
|
$
|
9.46
|
|
|
$
|
7.86
|
|
Discontinued operations, net of income tax
|
2.58
|
|
|
(0.95
|
)
|
|
1.15
|
|
|||
Net income
|
$
|
12.63
|
|
|
$
|
8.51
|
|
|
$
|
9.01
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Domestic
|
$
|
630
|
|
|
$
|
649
|
|
|
$
|
608
|
|
Foreign
|
294
|
|
|
222
|
|
|
196
|
|
|||
Income from continuing operations before income taxes
|
$
|
924
|
|
|
$
|
871
|
|
|
$
|
804
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Current income tax provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
30
|
|
|
$
|
44
|
|
|
$
|
88
|
|
State and local
|
18
|
|
|
10
|
|
|
8
|
|
|||
Foreign
|
62
|
|
|
56
|
|
|
48
|
|
|||
Subtotal
|
110
|
|
|
110
|
|
|
144
|
|
|||
|
|
|
|
|
|
||||||
Deferred income tax provision/(benefit):
|
|
|
|
|
|
||||||
Federal
|
(7
|
)
|
|
(16
|
)
|
|
25
|
|
|||
State and local
|
—
|
|
|
6
|
|
|
2
|
|
|||
Foreign
|
—
|
|
|
2
|
|
|
—
|
|
|||
Subtotal
|
(7
|
)
|
|
(8
|
)
|
|
27
|
|
|||
Total provision for income taxes
|
$
|
103
|
|
|
$
|
102
|
|
|
$
|
171
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Statutory federal income tax rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State and local income taxes, net of federal income tax benefit
|
2.6
|
|
|
2.0
|
|
|
2.0
|
|
Foreign income taxes
|
(0.9
|
)
|
|
(6.7
|
)
|
|
(3.0
|
)
|
Manufacturing benefits
|
—
|
|
|
(1.4
|
)
|
|
(2.2
|
)
|
Research and experimentation and other tax credits
|
(5.2
|
)
|
|
(4.1
|
)
|
|
(4.6
|
)
|
Resolution of tax contingencies
|
(3.8
|
)
|
|
(0.4
|
)
|
|
(3.1
|
)
|
Tax deductible dividends
|
(0.5
|
)
|
|
(0.9
|
)
|
|
(1.0
|
)
|
Equity compensation - excess income tax benefits
|
(4.0
|
)
|
|
(2.3
|
)
|
|
(2.1
|
)
|
Mergers, acquisitions and divestitures
|
1.3
|
|
|
—
|
|
|
—
|
|
Tax reform
|
(0.1
|
)
|
|
(9.1
|
)
|
|
—
|
|
Other, net
|
0.7
|
|
|
(0.4
|
)
|
|
0.3
|
|
Effective income tax rate on continuing operations
|
11.1
|
%
|
|
11.7
|
%
|
|
21.3
|
%
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Inventoried costs
|
$
|
47
|
|
|
$
|
44
|
|
Compensation and benefits
|
90
|
|
|
94
|
|
||
Pension and postretirement benefits
|
271
|
|
|
281
|
|
||
Loss carryforwards
|
13
|
|
|
12
|
|
||
Tax credit carryforwards
|
4
|
|
|
5
|
|
||
Other
|
67
|
|
|
57
|
|
||
Deferred tax assets
|
492
|
|
|
493
|
|
||
Less: valuation allowance
|
(14
|
)
|
|
(10
|
)
|
||
Deferred tax assets, net of valuation allowance
|
478
|
|
|
483
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Goodwill and other intangible assets
|
$
|
(549
|
)
|
|
$
|
(514
|
)
|
Income recognition on contracts in process
|
(18
|
)
|
|
(24
|
)
|
||
Property, plant and equipment
|
(66
|
)
|
|
(59
|
)
|
||
Other
|
(36
|
)
|
|
(41
|
)
|
||
Deferred tax liabilities
|
(669
|
)
|
|
(638
|
)
|
||
Total deferred tax liabilities, net of valuation allowance
|
$
|
(191
|
)
|
|
$
|
(155
|
)
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Non-current deferred tax assets
|
$
|
5
|
|
|
$
|
3
|
|
Non-current deferred tax liabilities
|
(196
|
)
|
|
(158
|
)
|
||
Total net deferred tax liabilities
|
$
|
(191
|
)
|
|
$
|
(155
|
)
|
|
Year Ended December 31, 2018
|
||||||||||||||||
|
Carryforwards
|
|
Valuation Allowances
|
|
|
||||||||||||
|
Gross
|
|
Tax
Effected |
|
Gross
|
|
Tax
Effected |
|
Expiration
Periods |
||||||||
|
(in millions)
|
|
|
||||||||||||||
Federal net operating loss carryforwards
|
$
|
23
|
|
|
$
|
5
|
|
|
$
|
(5
|
)
|
|
$
|
(1
|
)
|
|
2026-2034
|
Foreign net operating loss carryforwards
|
18
|
|
|
4
|
|
|
(10
|
)
|
|
(3
|
)
|
|
Indefinite
|
||||
State net operating loss carryforwards
|
291
|
|
|
4
|
|
|
(131
|
)
|
|
(3
|
)
|
|
2019-2038
|
||||
Total loss carryforwards
|
|
|
$
|
13
|
|
|
|
|
$
|
(7
|
)
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
State tax credit carryforwards
|
5
|
|
|
4
|
|
|
(4
|
)
|
|
(3
|
)
|
|
2019-2033
|
||||
Total tax credit carryforwards
|
|
|
$
|
4
|
|
|
|
|
$
|
(3
|
)
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Balance at January 1
|
$
|
178
|
|
|
$
|
110
|
|
|
$
|
124
|
|
Additions for tax positions related to the current year
|
13
|
|
|
14
|
|
|
16
|
|
|||
Additions for tax positions related to prior years
|
37
|
|
|
66
|
|
|
2
|
|
|||
Reductions for tax positions related to prior years
|
(20
|
)
|
|
(4
|
)
|
|
(24
|
)
|
|||
Reductions for tax positions related to settlements with taxing authorities
|
(7
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations
|
(18
|
)
|
|
(8
|
)
|
|
(7
|
)
|
|||
Balance at December 31
|
$
|
183
|
|
|
$
|
178
|
|
|
$
|
110
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Stock options
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
10
|
|
Restricted stock units
|
43
|
|
|
43
|
|
|
35
|
|
|||
Performance units
|
10
|
|
|
7
|
|
|
4
|
|
|||
Total before income taxes
|
60
|
|
|
57
|
|
|
49
|
|
|||
Income taxes
|
(13
|
)
|
|
(12
|
)
|
|
(18
|
)
|
|||
Total after income taxes
|
47
|
|
|
45
|
|
|
31
|
|
|||
Less: Stock-based compensation recorded in discontinued operations, net of income taxes
|
—
|
|
|
1
|
|
|
1
|
|
|||
Stock-based compensation recorded in continuing operations, net of income taxes
|
$
|
47
|
|
|
$
|
44
|
|
|
$
|
30
|
|
|
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, 2018
|
2,698.9
|
|
|
$
|
113.67
|
|
|
5.7
|
|
$
|
227
|
|
Options granted
|
221.9
|
|
|
208.92
|
|
|
|
|
|
|||
Options exercised
|
(1,533.4
|
)
|
|
97.49
|
|
|
|
|
|
|||
Options forfeited
|
(175.7
|
)
|
|
147.37
|
|
|
|
|
|
|||
Outstanding at December 31, 2018
|
1,211.7
|
|
|
$
|
146.70
|
|
|
6.4
|
|
$
|
42
|
|
Vested and expected to vest at December 31, 2018
(1)
|
1,205.6
|
|
|
$
|
146.48
|
|
|
6.4
|
|
$
|
42
|
|
Exercisable at December 31, 2018
|
666.1
|
|
|
$
|
119.03
|
|
|
4.7
|
|
$
|
37
|
|
(1)
|
Represents outstanding options reduced by expected forfeitures for options not fully vested.
|
•
|
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.
|
|
2018 Grants
|
|
2017 Grants
|
|
2016 Grants
|
|||
Expected holding period (in years)
|
5.2
|
|
|
5.2
|
|
|
5.0
|
|
Expected volatility
|
19.8
|
%
|
|
19.9
|
%
|
|
21.3
|
%
|
Expected dividend yield
|
1.8
|
%
|
|
2.0
|
%
|
|
2.8
|
%
|
Risk-free interest rate
|
2.7
|
%
|
|
2.0
|
%
|
|
1.1
|
%
|
|
Number of Shares
|
|
Weighted Average
Grant Date Fair Value
|
|||
|
(in thousands)
|
|
|
|||
Nonvested balance at January 1, 2018
|
902.7
|
|
|
$
|
137.12
|
|
Granted
|
317.9
|
|
|
205.73
|
|
|
Vested
|
(320.7
|
)
|
|
137.00
|
|
|
Forfeited
|
(86.2
|
)
|
|
142.21
|
|
|
Nonvested balance at December 31, 2018
|
813.7
|
|
|
$
|
163.44
|
|
|
Payable in Shares (EPS)
|
|||||
|
Number of
Units |
|
Weighted Average
Grant Date Fair Value |
|||
|
(in thousands)
|
|
|
|||
Outstanding at January 1, 2018
|
132.1
|
|
|
$
|
135.99
|
|
Granted
|
22.1
|
|
|
209.91
|
|
|
Increase due to expected performance
|
25.3
|
|
|
38.96
|
|
|
Vested
|
(57.5
|
)
|
|
116.20
|
|
|
Forfeited
|
(27.0
|
)
|
|
133.41
|
|
|
Outstanding at December 31, 2018
|
95.0
|
|
|
$
|
140.14
|
|
|
Real Estate
|
|
Equipment
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
2019
|
$
|
111
|
|
|
$
|
4
|
|
|
$
|
115
|
|
2020
|
132
|
|
|
2
|
|
|
134
|
|
|||
2021
|
81
|
|
|
1
|
|
|
82
|
|
|||
2022
|
73
|
|
|
—
|
|
|
73
|
|
|||
2023
|
65
|
|
|
—
|
|
|
65
|
|
|||
Thereafter
|
506
|
|
|
—
|
|
|
506
|
|
|||
Total minimum payments required
|
968
|
|
|
7
|
|
|
975
|
|
|||
Sublease rentals under non-cancelable leases
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||
Net minimum payments required
|
$
|
961
|
|
|
$
|
7
|
|
|
$
|
968
|
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at the beginning of the year
|
$
|
4,228
|
|
|
$
|
3,758
|
|
|
$
|
165
|
|
|
$
|
177
|
|
Service cost
|
103
|
|
|
97
|
|
|
2
|
|
|
2
|
|
||||
Interest cost
|
143
|
|
|
142
|
|
|
5
|
|
|
5
|
|
||||
Plan participants’ contributions
|
2
|
|
|
2
|
|
|
5
|
|
|
5
|
|
||||
Amendments
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Actuarial (gain) loss
|
(340
|
)
|
|
391
|
|
|
(11
|
)
|
|
(13
|
)
|
||||
Foreign currency exchange rate changes
|
(27
|
)
|
|
22
|
|
|
(2
|
)
|
|
2
|
|
||||
Curtailments and special termination benefits
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Benefits paid
|
(159
|
)
|
|
(186
|
)
|
|
(14
|
)
|
|
(13
|
)
|
||||
Benefit obligation at the end of the year
|
$
|
3,937
|
|
|
$
|
4,228
|
|
|
$
|
150
|
|
|
$
|
165
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at the beginning of the year
|
$
|
3,047
|
|
|
$
|
2,721
|
|
|
$
|
67
|
|
|
$
|
60
|
|
Actual return on plan assets
|
(119
|
)
|
|
391
|
|
|
(3
|
)
|
|
8
|
|
||||
Employer contributions
|
96
|
|
|
97
|
|
|
6
|
|
|
7
|
|
||||
Plan participants’ contributions
|
2
|
|
|
2
|
|
|
5
|
|
|
5
|
|
||||
Foreign currency exchange rate changes
|
(27
|
)
|
|
22
|
|
|
—
|
|
|
—
|
|
||||
Benefits paid
|
(159
|
)
|
|
(186
|
)
|
|
(14
|
)
|
|
(13
|
)
|
||||
Fair value of plan assets at the end of the year
|
$
|
2,840
|
|
|
$
|
3,047
|
|
|
$
|
61
|
|
|
$
|
67
|
|
Unfunded status at the end of the year
|
$
|
(1,097
|
)
|
|
$
|
(1,181
|
)
|
|
$
|
(89
|
)
|
|
$
|
(98
|
)
|
|
|
|
|
|
|
|
|
||||||||
Assets and (liabilities) recognized on the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
||||||||
Non-current assets
|
$
|
40
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(8
|
)
|
|
(6
|
)
|
|
(7
|
)
|
|
(8
|
)
|
||||
Non-current liabilities
|
(1,129
|
)
|
|
(1,223
|
)
|
|
(82
|
)
|
|
(90
|
)
|
||||
|
$
|
(1,097
|
)
|
|
$
|
(1,181
|
)
|
|
$
|
(89
|
)
|
|
$
|
(98
|
)
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Net loss (gain)
|
$
|
958
|
|
|
$
|
1,035
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
Prior service (credit) cost
|
(1
|
)
|
|
10
|
|
|
(25
|
)
|
|
(27
|
)
|
||||
Total amount recognized
|
$
|
957
|
|
|
$
|
1,045
|
|
|
$
|
(28
|
)
|
|
$
|
(30
|
)
|
|
Pension Plans
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Projected benefit obligation
|
$
|
3,681
|
|
|
$
|
3,875
|
|
Accumulated benefit obligation
|
$
|
3,367
|
|
|
$
|
3,490
|
|
Fair value of plan assets
|
$
|
2,547
|
|
|
$
|
2,651
|
|
(1)
|
The weighted average discount rate assumptions used at
December 31, 2018
and
2017
were comprised of separate assumptions determined by country of
4.48%
and
3.81%
for the U.S. based plans, respectively, and
3.88%
and
3.39%
for the Canadian based plans, respectively.
|
(2)
|
The weighted average discount rate assumptions used at
December 31, 2018
and
2017
were comprised of separate assumptions determined by country of
4.34%
and
3.63%
for the U.S. based plans, respectively, and
3.81%
and
3.33%
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, 2018
and
2017
.
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
(1)
|
$
|
103
|
|
|
$
|
97
|
|
|
$
|
94
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
143
|
|
|
142
|
|
|
135
|
|
|
5
|
|
|
5
|
|
|
6
|
|
||||||
Expected return on plan assets
(1)
|
(223
|
)
|
|
(197
|
)
|
|
(186
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||||
Amortization of prior service (credits) cost
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||||
Amortization of net loss (gains)
|
74
|
|
|
61
|
|
|
52
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||||
Curtailment loss and special termination benefits
(2)
|
1
|
|
|
6
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net periodic benefit cost
|
$
|
96
|
|
|
$
|
110
|
|
|
$
|
97
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
In connection with the adoption of ASU 2017-07, the Company reclassified pension plan administrative expenses amounting to
$15 million
and
$14 million
for the years ended December 31, 2017 and 2016, respectively, from the service cost component to the expected return on plan assets component of net periodic benefit cost. Including the aforementioned policy change in connection with the adoption of this standard, operating income increased by
$11 million
and
$1 million
for the years ended December 31, 2017 and 2016, respectively, with a corresponding decrease of Interest and other income, net. The Company’s percentage assumptions for expected long-term return on plan assets, which are disclosed further below, exclude expected plan administrative expenses.
|
(2)
|
During the year ended December 31, 2017, the curtailment loss and special termination benefits charge is primarily due to a pension curtailment charge in connection with the decision to discontinue future service accruals for substantially all salaried employee defined benefit plans effective January 1, 2019.
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net (gain) loss
|
$
|
(3
|
)
|
|
$
|
200
|
|
|
$
|
179
|
|
|
$
|
(2
|
)
|
|
$
|
(17
|
)
|
|
$
|
(4
|
)
|
Prior service (cost) credit
|
(13
|
)
|
|
(4
|
)
|
|
15
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Amortization of net (loss) gain
|
(74
|
)
|
|
(61
|
)
|
|
(52
|
)
|
|
3
|
|
|
2
|
|
|
2
|
|
||||||
Amortization of prior service credit (cost)
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||||
Total recognized in other comprehensive (loss) income
|
(88
|
)
|
|
134
|
|
|
142
|
|
|
2
|
|
|
(14
|
)
|
|
(2
|
)
|
||||||
Total recognized in net periodic benefit cost and other comprehensive income (loss)
|
$
|
8
|
|
|
$
|
244
|
|
|
$
|
239
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
(2
|
)
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
Net loss (gain)
|
$
|
44
|
|
|
$
|
(3
|
)
|
|
$
|
41
|
|
Prior service credit
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|||
|
$
|
42
|
|
|
$
|
(3
|
)
|
|
$
|
39
|
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
|
||||||
Discount rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Benefit obligation
|
3.78
|
%
|
(1)
|
4.40
|
%
|
(1)
|
4.67
|
%
|
(1)
|
3.59
|
%
|
(4)
|
4.05
|
%
|
(4)
|
4.22
|
%
|
(4)
|
Service cost
|
3.84
|
%
|
|
4.55
|
%
|
|
4.83
|
%
|
|
3.64
|
%
|
|
4.21
|
%
|
|
4.37
|
%
|
|
Interest cost
|
3.45
|
%
|
|
3.84
|
%
|
|
3.95
|
%
|
|
3.07
|
%
|
|
3.26
|
%
|
|
3.26
|
%
|
|
Expected long-term return on plan assets
|
7.92
|
%
|
(2)
|
7.92
|
%
|
(2)
|
7.92
|
%
|
(2)
|
8.00
|
%
|
|
7.43
|
%
|
|
7.42
|
%
|
|
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, 2018
,
2017
, and
2016
were comprised of separate assumptions determined by country of
3.81%
,
4.45%
and
4.73%
for the U.S. based plans and
3.39%
,
3.79%
and
3.93%
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%
for the years ended
December 31, 2018
,
2017
and
2016
for the U.S. based plans and
7.25%
for the Canadian based plans for the years ended
December 31, 2018
,
2017
and
2016
.
|
(3)
|
The weighted average rate of compensation increase assumptions used for the years ended
December 31, 2018
,
2017
and
2016
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, 2018
,
2017
and
2016
were comprised of separate assumptions determined by country of
3.63%
,
4.11%
and
4.28%
for the U.S. based plans and
3.33%
,
3.64%
and
3.74%
for the Canadian based plans, respectively.
|
|
1 percentage point
|
||||||
|
Increase
|
|
Decrease
|
||||
|
(in millions)
|
||||||
Effect on total service and interest cost
|
$
|
—
|
|
|
$
|
—
|
|
Effect on postretirement benefit obligations
|
$
|
4
|
|
|
$
|
(4
|
)
|
|
|
U.S.
|
|
Canada
|
||||||||||||
Asset Category
|
|
Range
|
|
2018
|
|
2017
|
|
Range
|
|
2018
|
|
2017
|
||||
Domestic equity
(1)
|
|
30%-60%
|
|
47
|
%
|
|
47
|
%
|
|
—%
|
|
13
|
%
|
|
15
|
%
|
International equity
(2)
|
|
10%-20%
|
|
10
|
|
|
11
|
|
|
—
|
|
52
|
|
|
47
|
|
Total equities
|
|
45%-75%
|
|
57
|
|
|
58
|
|
|
40%-80%
|
|
65
|
|
|
62
|
|
Fixed income securities
|
|
20%-40%
|
|
30
|
|
|
28
|
|
|
—
|
|
28
|
|
|
25
|
|
Other, primarily cash and cash equivalents
|
|
0%-15%
|
|
6
|
|
|
7
|
|
|
—
|
|
7
|
|
|
13
|
|
Total fixed income securities and cash and cash equivalents
|
|
NA
|
|
NA
|
|
|
NA
|
|
|
20%-60%
|
|
35
|
|
|
38
|
|
Real estate securities
|
|
0%-15%
|
|
7
|
|
|
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.
|
|
|
U.S. Pension Plans’ Assets
|
|
Canadian Pension Plans’ Assets
|
||||||||||||||||||||||||||||
|
|
Fair Value Measured At December 31, 2018
|
|
Fair Value Measured At December 31, 2018
|
||||||||||||||||||||||||||||
Asset Category
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||
Equity securities
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. Equity
|
|
$
|
1,205
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,205
|
|
|
$
|
64
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64
|
|
International Equity
|
|
90
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
||||||||
Fixed Income — Investment Grade
(2)
|
|
313
|
|
|
160
|
|
|
—
|
|
|
473
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed Income — High Yield
(3)
|
|
—
|
|
|
271
|
|
|
—
|
|
|
271
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Real Estate Investment Trusts
(4)
|
|
185
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other
(5)
|
|
—
|
|
|
146
|
|
|
—
|
|
|
146
|
|
|
4
|
|
|
16
|
|
|
—
|
|
|
20
|
|
||||||||
Total assets at fair value
|
|
$
|
1,793
|
|
|
$
|
577
|
|
|
$
|
—
|
|
|
$
|
2,370
|
|
|
$
|
163
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
179
|
|
Liabilities for unsettled trades, net
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Other investments measured at net asset value
(6)(7)
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
|
124
|
|
||||||||||||||
Total
|
|
|
|
|
|
|
|
$
|
2,537
|
|
|
|
|
|
|
|
|
$
|
303
|
|
|
|
U.S. Pension Plans’ Assets
|
|
Canadian Pension Plans’ Assets
|
||||||||||||||||||||||||||||
|
|
Fair Value Measured At December 31, 2017
|
|
Fair Value Measured At December 31, 2017
|
||||||||||||||||||||||||||||
Asset Category
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||
Equity securities
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. Equity
|
|
$
|
1,297
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,297
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71
|
|
International Equity
|
|
87
|
|
|
—
|
|
|
—
|
|
|
87
|
|
|
105
|
|
|
—
|
|
|
—
|
|
|
105
|
|
||||||||
Fixed Income — Investment Grade
(2)
|
|
329
|
|
|
205
|
|
|
—
|
|
|
534
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed Income — High Yield
(3)
|
|
—
|
|
|
219
|
|
|
—
|
|
|
219
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Real Estate Investment Trusts
(4)
|
|
196
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other
(5)
|
|
—
|
|
|
198
|
|
|
—
|
|
|
198
|
|
|
8
|
|
|
37
|
|
|
—
|
|
|
45
|
|
||||||||
Total assets at fair value
|
|
$
|
1,909
|
|
|
$
|
622
|
|
|
$
|
—
|
|
|
$
|
2,531
|
|
|
$
|
184
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
221
|
|
Liabilities for unsettled trades, net
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
—
|
|
||||||||||||||
Other investments measured at net asset value
(6)(7)
|
|
|
|
|
|
|
|
203
|
|
|
|
|
|
|
|
|
122
|
|
||||||||||||||
Total
|
|
|
|
|
|
|
|
$
|
2,704
|
|
|
|
|
|
|
|
|
$
|
343
|
|
(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
66%
and
62%
at
December 31, 2018
and
2017
, 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
34%
and
38%
at
December 31, 2018
and
2017
, 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, 2018
and
2017
and approximately
30%
and
31%
at
December 31, 2018
and
2017
, 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
70%
and
69%
at
December 31, 2018
and
2017
, 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.
|
|
|
Postretirement Benefit Plans’ Assets
|
||||||||||||||||||||||||||||||
|
|
Fair Value Measured At December 31, 2018
|
|
Fair Value Measured At December 31, 2017
|
||||||||||||||||||||||||||||
Asset Category
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||
Equity securities
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. Equity
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38
|
|
International Equity
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||||
Fixed Income — Investment Grade
(2)
|
|
9
|
|
|
2
|
|
|
—
|
|
|
11
|
|
|
10
|
|
|
3
|
|
|
—
|
|
|
13
|
|
||||||||
Fixed Income — High Yield
(3)
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||||
Real Estate Investment Trusts
(4)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||||
Other
(5)
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||||
Total assets at fair value
|
|
$
|
48
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
53
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
64
|
|
Other investments measured at net asset value
(6)(7)
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
3
|
|
||||||||||||||
Total
|
|
|
|
|
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
$
|
67
|
|
(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
82%
and
77%
at
December 31, 2018
and
2017
, respectively, 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
18%
and
23%
at
December 31, 2018
and
2017
, respectively, 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, 2018
and
2017
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.
|
|
|
|
Postretirement Benefits
|
||||||||
|
Pension
Benefits |
|
Benefit
Payments |
|
Subsidy
Receipts |
||||||
|
(in millions)
|
||||||||||
2019
|
$
|
168
|
|
|
$
|
12
|
|
|
$
|
—
|
|
2020
|
176
|
|
|
12
|
|
|
—
|
|
|||
2021
|
184
|
|
|
12
|
|
|
—
|
|
|||
2022
|
194
|
|
|
12
|
|
|
—
|
|
|||
2023
|
201
|
|
|
12
|
|
|
—
|
|
|||
Years 2024 - 2028
|
1,150
|
|
|
53
|
|
|
1
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Interest paid
|
$
|
183
|
|
|
$
|
165
|
|
|
$
|
162
|
|
Income tax payments
|
$
|
108
|
|
|
$
|
163
|
|
|
$
|
120
|
|
Income tax refunds
|
$
|
7
|
|
|
$
|
16
|
|
|
$
|
8
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net Sales
|
|
|
|
|
|
||||||
Products
|
|
|
|
|
|
||||||
ISRS
|
$
|
2,907
|
|
|
$
|
2,540
|
|
|
$
|
2,662
|
|
C&NS
|
2,307
|
|
|
2,424
|
|
|
2,238
|
|
|||
Electronic Systems
|
2,007
|
|
|
1,814
|
|
|
1,617
|
|
|||
Elimination of intercompany sales
|
(56
|
)
|
|
(45
|
)
|
|
(64
|
)
|
|||
Total products sales
|
7,165
|
|
|
6,733
|
|
|
6,453
|
|
|||
|
|
|
|
|
|
||||||
Services
|
|
|
|
|
|
||||||
ISRS
|
$
|
1,549
|
|
|
$
|
1,463
|
|
|
$
|
1,450
|
|
C&NS
|
787
|
|
|
717
|
|
|
678
|
|
|||
Electronic Systems
|
789
|
|
|
695
|
|
|
653
|
|
|||
Elimination of intercompany sales
|
(46
|
)
|
|
(35
|
)
|
|
(24
|
)
|
|||
Total services sales
|
3,079
|
|
|
2,840
|
|
|
2,757
|
|
|||
Consolidated total
|
$
|
10,244
|
|
|
$
|
9,573
|
|
|
$
|
9,210
|
|
|
|
|
|
|
|
||||||
Operating income
|
|
|
|
|
|
||||||
ISRS
|
$
|
448
|
|
|
$
|
348
|
|
|
$
|
362
|
|
C&NS
|
282
|
|
|
362
|
|
|
298
|
|
|||
Electronic Systems
|
376
|
|
|
321
|
|
|
298
|
|
|||
Segment total
|
1,106
|
|
|
1,031
|
|
|
958
|
|
|||
Gain on sale of the Crestview & TCS businesses
|
42
|
|
|
—
|
|
|
—
|
|
|||
Merger and acquisition related expenses
|
(28
|
)
|
|
—
|
|
|
—
|
|
|||
Consolidated total
|
$
|
1,120
|
|
|
$
|
1,031
|
|
|
$
|
958
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
|
|
|
|
||||||
ISRS
|
$
|
92
|
|
|
$
|
87
|
|
|
$
|
80
|
|
C&NS
|
69
|
|
|
66
|
|
|
63
|
|
|||
Electronic Systems
|
80
|
|
|
72
|
|
|
55
|
|
|||
Consolidated total
|
$
|
241
|
|
|
$
|
225
|
|
|
$
|
198
|
|
|
|
|
|
|
|
||||||
Capital Expenditures
|
|
|
|
|
|
||||||
ISRS
|
$
|
57
|
|
|
$
|
74
|
|
|
$
|
83
|
|
C&NS
|
50
|
|
|
76
|
|
|
51
|
|
|||
Electronic Systems
|
108
|
|
|
52
|
|
|
66
|
|
|||
Corporate
|
17
|
|
|
22
|
|
|
10
|
|
|||
Consolidated total
|
$
|
232
|
|
|
$
|
224
|
|
|
$
|
210
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Total Assets
|
|
|
|
|
|
||||||
ISRS
|
$
|
4,720
|
|
|
$
|
4,135
|
|
|
$
|
4,117
|
|
C&NS
|
3,670
|
|
|
3,505
|
|
|
3,258
|
|
|||
Electronic Systems
|
4,128
|
|
|
3,939
|
|
|
3,542
|
|
|||
Corporate
|
1,000
|
|
|
709
|
|
|
467
|
|
|||
Assets held for sale
|
—
|
|
|
135
|
|
|
—
|
|
|||
Assets of discontinued operations
|
—
|
|
|
306
|
|
|
481
|
|
|||
Consolidated total
|
$
|
13,518
|
|
|
$
|
12,729
|
|
|
$
|
11,865
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
U.S.
|
$
|
7,843
|
|
|
$
|
7,344
|
|
|
$
|
6,947
|
|
International:
|
|
|
|
|
|
||||||
Canada
|
312
|
|
|
280
|
|
|
297
|
|
|||
United Kingdom
|
309
|
|
|
335
|
|
|
331
|
|
|||
Australia
|
219
|
|
|
268
|
|
|
254
|
|
|||
China
|
156
|
|
|
167
|
|
|
67
|
|
|||
Japan
|
145
|
|
|
125
|
|
|
81
|
|
|||
Saudi Arabia
|
128
|
|
|
58
|
|
|
159
|
|
|||
Turkey
|
113
|
|
|
61
|
|
|
61
|
|
|||
Other
|
1,019
|
|
|
935
|
|
|
1,013
|
|
|||
Total international
|
2,401
|
|
|
2,229
|
|
|
2,263
|
|
|||
Consolidated
|
$
|
10,244
|
|
|
$
|
9,573
|
|
|
$
|
9,210
|
|
|
Year Ended December 31,
|
|||||||||
|
2018
|
|
2017
|
|
2016
|
|||||
|
(in millions)
|
|||||||||
U.S. Government agencies
(1)
|
$
|
7,144
|
|
|
6,697
|
|
|
$
|
6,399
|
|
Commercial
|
1,572
|
|
|
1,456
|
|
|
1,280
|
|
||
Foreign governments
(1)
|
1,528
|
|
|
1,420
|
|
|
1,531
|
|
||
Consolidated
|
$
|
10,244
|
|
|
9,573
|
|
|
$
|
9,210
|
|
(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.
|
|
|
Year Ended December 31, 2018
|
||||||||||||||
End Customer
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Total DoD
|
|
$
|
3,081
|
|
|
$
|
2,291
|
|
|
$
|
1,349
|
|
|
$
|
6,721
|
|
Other U.S. Government
|
|
150
|
|
|
95
|
|
|
178
|
|
|
423
|
|
||||
Total U.S. Government
|
|
3,231
|
|
|
2,386
|
|
|
1,527
|
|
|
7,144
|
|
||||
Foreign governments
(1)
|
|
1,006
|
|
|
327
|
|
|
195
|
|
|
1,528
|
|
||||
Commercial — foreign
|
|
75
|
|
|
123
|
|
|
675
|
|
|
873
|
|
||||
Commercial — domestic
|
|
129
|
|
|
223
|
|
|
347
|
|
|
699
|
|
||||
Total
|
|
$
|
4,441
|
|
|
$
|
3,059
|
|
|
$
|
2,744
|
|
|
$
|
10,244
|
|
(1)
|
Includes sales under foreign military sales agreements, which are made directly between the U.S. Government and foreign governments.
|
|
|
Year Ended December 31, 2018
|
||||||||||||||
Contract Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed-price
(1)
|
|
$
|
2,839
|
|
|
$
|
2,202
|
|
|
$
|
2,317
|
|
|
$
|
7,358
|
|
Cost-plus
(2)
|
|
1,393
|
|
|
768
|
|
|
410
|
|
|
2,571
|
|
||||
Time-and-material
|
|
209
|
|
|
89
|
|
|
17
|
|
|
315
|
|
||||
Total sales
|
|
$
|
4,441
|
|
|
$
|
3,059
|
|
|
$
|
2,744
|
|
|
$
|
10,244
|
|
(1)
|
Includes fixed-price incentive fee type contracts, which contributed approximately
1%
to the Company's total net sales for the year ended
December 31, 2018
.
|
(2)
|
Includes cost-plus award and incentive fee type contracts, which contributed approximately
4%
to the Company's total net sales for the year ended
December 31, 2018
.
|
|
|
Year Ended December 31, 2018
|
||||||||||||||
Sales by Deliverable Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Products
|
|
$
|
2,907
|
|
|
$
|
2,299
|
|
|
$
|
1,959
|
|
|
$
|
7,165
|
|
Services
|
|
1,534
|
|
|
760
|
|
|
785
|
|
|
3,079
|
|
||||
Total sales
|
|
$
|
4,441
|
|
|
$
|
3,059
|
|
|
$
|
2,744
|
|
|
$
|
10,244
|
|
|
|
Year Ended December 31, 2018
|
||||||||||||||
Revenue Recognition Method
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Over time (cost-to-cost method)
|
|
$
|
3,352
|
|
|
$
|
2,603
|
|
|
$
|
1,649
|
|
|
$
|
7,604
|
|
Point in time
|
|
866
|
|
|
359
|
|
|
705
|
|
|
1,930
|
|
||||
Output method
|
|
74
|
|
|
23
|
|
|
343
|
|
|
440
|
|
||||
Billing method
|
|
149
|
|
|
74
|
|
|
47
|
|
|
270
|
|
||||
Total sales
|
|
$
|
4,441
|
|
|
$
|
3,059
|
|
|
$
|
2,744
|
|
|
$
|
10,244
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
|
|
|
|
|
|
||||||
ISRS
(1)(2)
|
$
|
7
|
|
|
$
|
38
|
|
|
$
|
5
|
|
C&NS
(3)
|
11
|
|
|
52
|
|
|
8
|
|
|||
Electronic Systems
(2)
|
8
|
|
|
11
|
|
|
4
|
|
|||
Consolidated
|
$
|
26
|
|
|
$
|
101
|
|
|
$
|
17
|
|
(1)
|
The severance and restructuring related costs incurred during the year ended December 31, 2017 include a
$12 million
loss on the sale of a building in Garland, Texas in the fourth quarter of 2017.
|
(2)
|
The severance and restructuring related costs incurred during the year ended December 31, 2017 include
$1 million
and
$5 million
of salaried employee pension plan curtailment losses for Electronic Systems and ISRS segments, respectively. See Note
20
for additional information.
|
(3)
|
The severance and restructuring related costs incurred during the year ended December 31, 2017 exclude a pre-tax gain of
$42 million
on the sale of the Company's property in San Carlos, California in the second quarter of 2017.
|
|
December 31, 2018
|
||
|
(in millions)
|
||
Balance at beginning of period
|
$
|
23
|
|
Additional provisions
|
26
|
|
|
Cash payments
|
(35
|
)
|
|
Balance at end of period
|
$
|
14
|
|
|
First
Quarter |
|
Second
Quarter (1) |
|
Third
Quarter (2) |
|
Fourth
Quarter (3) |
||||||||
|
(in millions, except per share data)
|
||||||||||||||
2018
|
|
|
|
|
|
|
|
||||||||
Sales
|
$
|
2,371
|
|
|
$
|
2,583
|
|
|
$
|
2,519
|
|
|
$
|
2,771
|
|
Operating income
|
251
|
|
|
321
|
|
|
272
|
|
|
276
|
|
||||
Income from continuing operations
|
192
|
|
|
189
|
|
|
208
|
|
|
232
|
|
||||
Net income
|
208
|
|
|
379
|
|
|
208
|
|
|
231
|
|
||||
Net income attributable to L3
|
203
|
|
|
375
|
|
|
202
|
|
|
225
|
|
||||
Basic EPS from continuing operations
(4)
|
2.40
|
|
|
2.36
|
|
|
2.57
|
|
|
2.87
|
|
||||
Basic EPS
(4)
|
2.60
|
|
|
4.78
|
|
|
2.57
|
|
|
2.86
|
|
||||
Diluted EPS from continuing operations
(4)
|
2.34
|
|
|
2.33
|
|
|
2.54
|
|
|
2.83
|
|
||||
Diluted EPS
(4)
|
2.54
|
|
|
4.72
|
|
|
2.54
|
|
|
2.82
|
|
(1)
|
Income from continuing operations includes debt retirement charges of
$48 million
(
$36 million
after income taxes), or
$0.45
per diluted share and a pre-tax gain of
$48 million
(
$25 million
after income taxes), or
$0.31
per diluted share, related to the divestiture of the Crestview Aerospace and TCS businesses. The Company recorded a pre-tax gain of
$237 million
(
$180 million
after income taxes, or
$2.27
per diluted share) related to the divestiture of the Vertex Aerospace business, which is reported in discontinued operations.
|
(2)
|
Income from continuing operations includes debt retirement charges of
$21 million
(
$16 million
after income taxes), or
$0.21
per diluted share, merger and acquisition related expenses of
$5 million
(
$4 million
after income taxes), or
$0.06
per diluted share and adjustments to divestiture gains of
$4 million
(
$4 million
after income taxes), or
$0.04
per diluted share, related to the sale of the Crestview Aerospace and TCS businesses.
|
(3)
|
Income from continuing operations includes merger and acquisition related expenses of
$23 million
(
$19 million
after income taxes), or
$0.24
per diluted share and adjustments to divestiture gains of
$2 million
(
$2 million
after income taxes), or
$0.03
per diluted share, related to the sale of the Crestview Aerospace and TCS businesses.
|
(4)
|
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.
|
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter (1) |
|
Fourth
Quarter (2) |
||||||||
|
(in millions, except per share data)
|
||||||||||||||
2017
|
|
|
|
|
|
|
|
||||||||
Sales
|
$
|
2,321
|
|
|
$
|
2,385
|
|
|
$
|
2,293
|
|
|
$
|
2,574
|
|
Operating income
|
237
|
|
|
294
|
|
|
232
|
|
|
268
|
|
||||
Income from continuing operations
|
157
|
|
|
195
|
|
|
146
|
|
|
271
|
|
||||
Net income
|
168
|
|
|
207
|
|
|
25
|
|
|
293
|
|
||||
Net income attributable to L3
|
164
|
|
|
202
|
|
|
22
|
|
|
289
|
|
||||
Basic EPS from continuing operations
(3)
|
1.97
|
|
|
2.44
|
|
|
1.83
|
|
|
3.42
|
|
||||
Basic EPS
(3)
|
2.11
|
|
|
2.59
|
|
|
0.28
|
|
|
3.70
|
|
||||
Diluted EPS from continuing operations
(3)
|
1.93
|
|
|
2.39
|
|
|
1.79
|
|
|
3.34
|
|
||||
Diluted EPS
(3)
|
2.07
|
|
|
2.54
|
|
|
0.28
|
|
|
3.62
|
|
(1)
|
The Company recorded a goodwill impairment charge of
$187 million
or
$1.67
per diluted share for the Vertex Aerospace reporting unit in 2017, which is reported in discontinued operations.
|
(2)
|
Provision for income taxes for the fourth quarter of 2017, includes estimated tax benefits of
$79 million
or
$0.99
per diluted share, related to the enactment of the U.S. Tax Reform in December 2017.
|
(3)
|
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.
|
|
L3
|
|
Guarantor
Subsidiaries |
|
Non-
Guarantor Subsidiaries |
|
Eliminations
|
|
Consolidated
L3 |
||||||||||
|
(in millions)
|
||||||||||||||||||
Condensed Combining Balance Sheets:
|
|
|
|
|
|
|
|
|
|
||||||||||
At December 31, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
756
|
|
|
$
|
21
|
|
|
$
|
306
|
|
|
$
|
(17
|
)
|
|
$
|
1,066
|
|
Billed receivables, net
|
291
|
|
|
341
|
|
|
287
|
|
|
—
|
|
|
919
|
|
|||||
Contract assets
|
562
|
|
|
833
|
|
|
195
|
|
|
—
|
|
|
1,590
|
|
|||||
Inventories
|
378
|
|
|
258
|
|
|
243
|
|
|
—
|
|
|
879
|
|
|||||
Prepaid expenses and other current assets
|
127
|
|
|
166
|
|
|
63
|
|
|
—
|
|
|
356
|
|
|||||
Total current assets
|
2,114
|
|
|
1,619
|
|
|
1,094
|
|
|
(17
|
)
|
|
4,810
|
|
|||||
Goodwill
|
2,124
|
|
|
3,009
|
|
|
1,675
|
|
|
—
|
|
|
6,808
|
|
|||||
Other assets
|
690
|
|
|
765
|
|
|
445
|
|
|
—
|
|
|
1,900
|
|
|||||
Investment in and amounts due from consolidated subsidiaries
|
5,931
|
|
|
6,912
|
|
|
—
|
|
|
(12,843
|
)
|
|
—
|
|
|||||
Total assets
|
$
|
10,859
|
|
|
$
|
12,305
|
|
|
$
|
3,214
|
|
|
$
|
(12,860
|
)
|
|
$
|
13,518
|
|
Current liabilities
|
$
|
821
|
|
|
$
|
955
|
|
|
$
|
688
|
|
|
$
|
(17
|
)
|
|
$
|
2,447
|
|
Amounts due to consolidated subsidiaries
|
—
|
|
|
—
|
|
|
417
|
|
|
(417
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
878
|
|
|
804
|
|
|
161
|
|
|
—
|
|
|
1,843
|
|
|||||
Long-term debt
|
3,321
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,321
|
|
|||||
Total liabilities
|
5,020
|
|
|
1,759
|
|
|
1,266
|
|
|
(434
|
)
|
|
7,611
|
|
|||||
L3 shareholders’ equity
|
5,839
|
|
|
10,546
|
|
|
1,948
|
|
|
(12,494
|
)
|
|
5,839
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
68
|
|
|||||
Total equity
|
5,839
|
|
|
10,546
|
|
|
1,948
|
|
|
(12,426
|
)
|
|
5,907
|
|
|||||
Total liabilities and equity
|
$
|
10,859
|
|
|
$
|
12,305
|
|
|
$
|
3,214
|
|
|
$
|
(12,860
|
)
|
|
$
|
13,518
|
|
|
L3
|
|
Guarantor
Subsidiaries |
|
Non-
Guarantor Subsidiaries |
|
Eliminations
|
|
Consolidated
L3 |
||||||||||
|
(in millions)
|
||||||||||||||||||
At December 31, 2017:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
432
|
|
|
$
|
16
|
|
|
$
|
285
|
|
|
$
|
(71
|
)
|
|
$
|
662
|
|
Billed receivables, net
|
266
|
|
|
244
|
|
|
213
|
|
|
—
|
|
|
723
|
|
|||||
Contracts in process
|
706
|
|
|
912
|
|
|
315
|
|
|
—
|
|
|
1,933
|
|
|||||
Prepaid expenses and other current assets
|
330
|
|
|
235
|
|
|
124
|
|
|
—
|
|
|
689
|
|
|||||
Assets held for sale
|
—
|
|
|
135
|
|
|
—
|
|
|
—
|
|
|
135
|
|
|||||
Assets of discontinued operations
|
306
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
306
|
|
|||||
Total current assets
|
2,040
|
|
|
1,542
|
|
|
937
|
|
|
(71
|
)
|
|
4,448
|
|
|||||
Goodwill
|
2,099
|
|
|
2,932
|
|
|
1,584
|
|
|
—
|
|
|
6,615
|
|
|||||
Other assets
|
658
|
|
|
687
|
|
|
321
|
|
|
—
|
|
|
1,666
|
|
|||||
Investment in and amounts due from consolidated subsidiaries
|
5,662
|
|
|
6,310
|
|
|
—
|
|
|
(11,972
|
)
|
|
—
|
|
|||||
Total assets
|
$
|
10,459
|
|
|
$
|
11,471
|
|
|
$
|
2,842
|
|
|
$
|
(12,043
|
)
|
|
$
|
12,729
|
|
Current liabilities
|
$
|
811
|
|
|
$
|
832
|
|
|
$
|
564
|
|
|
$
|
(71
|
)
|
|
$
|
2,136
|
|
Liabilities held for sale
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|||||
Liabilities of discontinued operations
|
226
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|||||
Amounts due to consolidated subsidiaries
|
—
|
|
|
—
|
|
|
391
|
|
|
(391
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
1,009
|
|
|
729
|
|
|
131
|
|
|
—
|
|
|
1,869
|
|
|||||
Long-term debt
|
3,330
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,330
|
|
|||||
Total liabilities
|
5,376
|
|
|
1,578
|
|
|
1,086
|
|
|
(462
|
)
|
|
7,578
|
|
|||||
L3 shareholders’ equity
|
5,083
|
|
|
9,893
|
|
|
1,756
|
|
|
(11,649
|
)
|
|
5,083
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
68
|
|
|||||
Total equity
|
5,083
|
|
|
9,893
|
|
|
1,756
|
|
|
(11,581
|
)
|
|
5,151
|
|
|||||
Total liabilities and equity
|
$
|
10,459
|
|
|
$
|
11,471
|
|
|
$
|
2,842
|
|
|
$
|
(12,043
|
)
|
|
$
|
12,729
|
|
|
L3
|
|
Guarantor
Subsidiaries |
|
Non-
Guarantor Subsidiaries |
|
Eliminations
|
|
Consolidated
L3 |
||||||||||
|
(in millions)
|
||||||||||||||||||
Condensed Combining Statements of Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
For the year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total net sales
|
$
|
3,626
|
|
|
$
|
5,259
|
|
|
$
|
1,806
|
|
|
$
|
(447
|
)
|
|
$
|
10,244
|
|
Total operating costs and expenses
|
(3,180
|
)
|
|
(4,943
|
)
|
|
(1,462
|
)
|
|
447
|
|
|
(9,138
|
)
|
|||||
Gain on sale of Crestview & TCS Businesses
|
—
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|||||
Merger and acquisition related expenses
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|||||
Operating income
|
418
|
|
|
358
|
|
|
344
|
|
|
—
|
|
|
1,120
|
|
|||||
Interest expense
|
(163
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(164
|
)
|
|||||
Interest and other income, net
|
31
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
37
|
|
|||||
Debt retirement charges
|
(69
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(69
|
)
|
|||||
Income from continuing operations before income taxes
|
217
|
|
|
361
|
|
|
346
|
|
|
—
|
|
|
924
|
|
|||||
Provision for income taxes
|
(24
|
)
|
|
(40
|
)
|
|
(39
|
)
|
|
—
|
|
|
(103
|
)
|
|||||
Equity in net income of consolidated subsidiaries
|
607
|
|
|
184
|
|
|
—
|
|
|
(791
|
)
|
|
—
|
|
|||||
Income from continuing operations
|
800
|
|
|
505
|
|
|
307
|
|
|
(791
|
)
|
|
821
|
|
|||||
Income from discontinued operations, net of income tax
|
205
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
205
|
|
|||||
Net income
|
1,005
|
|
|
505
|
|
|
307
|
|
|
(791
|
)
|
|
1,026
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
(21
|
)
|
|||||
Net income attributable to L3
|
$
|
1,005
|
|
|
$
|
505
|
|
|
$
|
307
|
|
|
$
|
(812
|
)
|
|
$
|
1,005
|
|
Comprehensive income attributable to L3
|
$
|
971
|
|
|
$
|
427
|
|
|
$
|
226
|
|
|
$
|
(653
|
)
|
|
$
|
971
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total net sales
|
$
|
3,520
|
|
|
$
|
4,852
|
|
|
$
|
1,581
|
|
|
$
|
(380
|
)
|
|
$
|
9,573
|
|
Total operating costs and expenses
|
(3,169
|
)
|
|
(4,446
|
)
|
|
(1,307
|
)
|
|
380
|
|
|
(8,542
|
)
|
|||||
Operating income
|
351
|
|
|
406
|
|
|
274
|
|
|
—
|
|
|
1,031
|
|
|||||
Interest expense
|
(168
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(169
|
)
|
|||||
Interest and other income (loss), net
|
6
|
|
|
(8
|
)
|
|
11
|
|
|
—
|
|
|
9
|
|
|||||
Income from continuing operations before income taxes
|
189
|
|
|
398
|
|
|
284
|
|
|
—
|
|
|
871
|
|
|||||
Provision for income taxes
|
(22
|
)
|
|
(47
|
)
|
|
(33
|
)
|
|
—
|
|
|
(102
|
)
|
|||||
Equity in net income of consolidated subsidiaries
|
586
|
|
|
144
|
|
|
—
|
|
|
(730
|
)
|
|
—
|
|
|||||
Income from continuing operations
|
753
|
|
|
495
|
|
|
251
|
|
|
(730
|
)
|
|
769
|
|
|||||
Loss from discontinued operations, net of income tax
|
(76
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76
|
)
|
|||||
Net income
|
677
|
|
|
495
|
|
|
251
|
|
|
(730
|
)
|
|
693
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(16
|
)
|
|||||
Net income attributable to L3
|
$
|
677
|
|
|
$
|
495
|
|
|
$
|
251
|
|
|
$
|
(746
|
)
|
|
$
|
677
|
|
Comprehensive income attributable to L3
|
$
|
712
|
|
|
$
|
604
|
|
|
$
|
378
|
|
|
$
|
(982
|
)
|
|
$
|
712
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total net sales
|
$
|
3,351
|
|
|
$
|
4,842
|
|
|
$
|
1,348
|
|
|
$
|
(331
|
)
|
|
$
|
9,210
|
|
Total operating costs and expenses
|
(3,064
|
)
|
|
(4,406
|
)
|
|
(1,113
|
)
|
|
331
|
|
|
(8,252
|
)
|
|||||
Operating income
|
287
|
|
|
436
|
|
|
235
|
|
|
—
|
|
|
958
|
|
|||||
Interest expense
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|||||
Interest and other income (loss), net
|
9
|
|
|
(3
|
)
|
|
11
|
|
|
—
|
|
|
17
|
|
|||||
Debt retirement charges
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||||
Income from continuing operations before income taxes
|
125
|
|
|
433
|
|
|
246
|
|
|
—
|
|
|
804
|
|
|||||
Provision for income taxes
|
(26
|
)
|
|
(92
|
)
|
|
(53
|
)
|
|
—
|
|
|
(171
|
)
|
|||||
Equity in net income of consolidated subsidiaries
|
520
|
|
|
130
|
|
|
—
|
|
|
(650
|
)
|
|
—
|
|
|||||
Income from continuing operations
|
619
|
|
|
471
|
|
|
193
|
|
|
(650
|
)
|
|
633
|
|
|||||
Income from discontinued operations, net of income tax
|
91
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|||||
Net income
|
710
|
|
|
471
|
|
|
193
|
|
|
(650
|
)
|
|
724
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(14
|
)
|
|||||
Net income attributable to L3
|
$
|
710
|
|
|
$
|
471
|
|
|
$
|
193
|
|
|
$
|
(664
|
)
|
|
$
|
710
|
|
Comprehensive income attributable to L3
|
$
|
558
|
|
|
$
|
409
|
|
|
$
|
116
|
|
|
$
|
(525
|
)
|
|
$
|
558
|
|
|
L3
|
|
Guarantor
Subsidiaries |
|
Non-
Guarantor Subsidiaries |
|
Eliminations
|
|
Consolidated
L3 |
||||||||||
|
(in millions)
|
||||||||||||||||||
Condensed Combining Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
||||||||||
For the year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities from continuing operations
|
$
|
555
|
|
|
$
|
238
|
|
|
$
|
256
|
|
|
$
|
(7
|
)
|
|
$
|
1,042
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Business acquisitions, net of cash acquired
|
(193
|
)
|
|
—
|
|
|
(176
|
)
|
|
—
|
|
|
(369
|
)
|
|||||
Proceeds from sale of businesses, net of closing date cash balances
|
360
|
|
|
175
|
|
|
—
|
|
|
—
|
|
|
535
|
|
|||||
Other investing activities
|
(119
|
)
|
|
(90
|
)
|
|
(48
|
)
|
|
—
|
|
|
(257
|
)
|
|||||
Net cash from (used in) investing activities from continuing operations
|
48
|
|
|
85
|
|
|
(224
|
)
|
|
—
|
|
|
(91
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from sale of senior notes
|
1,798
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,798
|
|
|||||
Repurchases and redemptions of senior notes
|
(1,865
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,865
|
)
|
|||||
Common stock repurchased
|
(322
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(322
|
)
|
|||||
Dividends paid
|
(254
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(254
|
)
|
|||||
Other financing activities
|
376
|
|
|
(318
|
)
|
|
4
|
|
|
61
|
|
|
123
|
|
|||||
Net cash (used in) from financing activities from continuing operations
|
(267
|
)
|
|
(318
|
)
|
|
4
|
|
|
61
|
|
|
(520
|
)
|
|||||
Effect of foreign currency exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|||||
Net decrease in cash and cash equivalents of discontinued operations
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|||||
Net increase in cash
|
324
|
|
|
5
|
|
|
21
|
|
|
54
|
|
|
404
|
|
|||||
Cash and cash equivalents, beginning of the year
|
432
|
|
|
16
|
|
|
285
|
|
|
(71
|
)
|
|
662
|
|
|||||
Cash and cash equivalents, end of the year
|
$
|
756
|
|
|
$
|
21
|
|
|
$
|
306
|
|
|
$
|
(17
|
)
|
|
$
|
1,066
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities from continuing operations
|
$
|
374
|
|
|
$
|
426
|
|
|
$
|
263
|
|
|
$
|
(78
|
)
|
|
$
|
985
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Business acquisitions, net of cash acquired
|
(316
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(316
|
)
|
|||||
Proceeds from sale of businesses, net of closing date cash balances
|
17
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|||||
Other investing activities
|
(92
|
)
|
|
(38
|
)
|
|
(25
|
)
|
|
—
|
|
|
(155
|
)
|
|||||
Net cash used in investing activities from continuing operations
|
(391
|
)
|
|
(38
|
)
|
|
(24
|
)
|
|
—
|
|
|
(453
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock repurchased
|
(180
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
|||||
Dividends paid
|
(236
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(236
|
)
|
|||||
Other financing activities
|
490
|
|
|
(377
|
)
|
|
(177
|
)
|
|
114
|
|
|
50
|
|
|||||
Net cash from (used in) financing activities from continuing operations
|
74
|
|
|
(377
|
)
|
|
(177
|
)
|
|
114
|
|
|
(366
|
)
|
|||||
Effect of foreign currency exchange rate changes on cash
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
|||||
Net increase in cash and cash equivalents of discontinued operations
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|||||
Net increase in cash
|
170
|
|
|
11
|
|
|
82
|
|
|
36
|
|
|
299
|
|
|||||
Cash and cash equivalents, beginning of the year
|
262
|
|
|
5
|
|
|
203
|
|
|
(107
|
)
|
|
363
|
|
|||||
Cash and cash equivalents, end of the year
|
$
|
432
|
|
|
$
|
16
|
|
|
$
|
285
|
|
|
$
|
(71
|
)
|
|
$
|
662
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
L3
|
|
Guarantor
Subsidiaries |
|
Non-
Guarantor Subsidiaries |
|
Eliminations
|
|
Consolidated
L3 |
||||||||||
|
(in millions)
|
||||||||||||||||||
For the year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash from operating activities from continuing operations
|
$
|
440
|
|
|
$
|
509
|
|
|
$
|
259
|
|
|
$
|
(186
|
)
|
|
$
|
1,022
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Business acquisitions, net of cash acquired
|
(388
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(388
|
)
|
|||||
Proceeds from sale of businesses, net of closing date cash balances
|
563
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
561
|
|
|||||
Other investing activities
|
(63
|
)
|
|
(77
|
)
|
|
(43
|
)
|
|
—
|
|
|
(183
|
)
|
|||||
Net cash from (used in) investing activities from continuing operations
|
112
|
|
|
(77
|
)
|
|
(45
|
)
|
|
—
|
|
|
(10
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from sale of senior notes
|
547
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
547
|
|
|||||
Redemption of senior notes
|
(856
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(856
|
)
|
|||||
Common stock repurchased
|
(373
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(373
|
)
|
|||||
Dividends paid
|
(220
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(220
|
)
|
|||||
Other financing activities
|
490
|
|
|
(427
|
)
|
|
(163
|
)
|
|
146
|
|
|
46
|
|
|||||
Net cash used in financing activities from continuing operations
|
(412
|
)
|
|
(427
|
)
|
|
(163
|
)
|
|
146
|
|
|
(856
|
)
|
|||||
Effect of foreign currency exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|||||
Net increase in cash and cash equivalents of discontinued operations
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Net increase in cash
|
153
|
|
|
5
|
|
|
38
|
|
|
(40
|
)
|
|
156
|
|
|||||
Cash and cash equivalents, beginning of the year
|
109
|
|
|
—
|
|
|
165
|
|
|
(67
|
)
|
|
207
|
|
|||||
Cash and cash equivalents, end of the year
|
$
|
262
|
|
|
$
|
5
|
|
|
$
|
203
|
|
|
$
|
(107
|
)
|
|
$
|
363
|
|
1.
|
Position.
|
2.
|
Compensation
.
|
3.
|
Termination of Employment
.
|
A.
|
each stock option will become fully vested and exercisable immediately prior to the termination of your employment, and each option (whether it became vested immediately prior to termination or was previously vested) will remain exercisable for the life of the award;
|
B.
|
each restricted stock unit shall become fully vested and promptly issuable for one share of the Company’s common stock pursuant to its terms; and
|
C.
|
each performance share unit or performance restricted stock unit will remain outstanding and (A) if your termination occurs prior to the end of the applicable performance period, the units will remain outstanding and eligible to vest for the remainder of the applicable performance period based on the attainment of the applicable performance goals (and any requirement for you to remain employed will be waived); and (B) if your termination occurs after the end of the applicable performance period and there is a requirement for you to remain employed for a subsequent vesting period, such requirement shall be waived and the number of shares earned with respect to such performance period shall become fully vested.
|
4.
|
Acknowledgments.
|
5.
|
Miscellaneous.
|
|
Sincerely,
|
|
L3 TECHNOLOGIES, INC.
|
|
|
|
By:
/s/ Thomas A. Corcoran
Name: Thomas A. Corcoran
Title: Director and Compensation Committee Member
|
|
By: L3 TECHNOLOGIES, INC.
_______
|
|
————————————————————
Ann D. Davidson
______________________
Senior Vice President, General Counsel and
_
Corporate Secretary
__________________
|
Name
|
|
Jurisdiction
|
AeroElite Limited
|
|
United Kingdom
|
Aerosim Academy, Inc.
|
|
Florida
|
Aerosim Bangkok Company Limited
|
|
Thailand
|
Aerosim Technologies, Inc.
|
|
Minnesota
|
Aerosim Thai Company Limited
|
|
Thailand
|
Airline Placement Limited
|
|
United Kingdom
|
Airline Recruitment Limited
|
|
United Kingdom
|
Applied Defense Solutions, Inc.
|
|
Delaware
|
Asian Aviation Training Centre Ltd.
|
|
Thailand
|
ASV Global, L.L.C.
|
|
Louisiana
|
Autonomous Surface Vehicles Limited
|
|
United Kingdom
|
Autonomous Surface Vehicles, LLC
|
|
Louisiana
|
Aviation Communication & Surveillance Systems, LLC
|
|
Delaware
|
Azimuth Security Pty Ltd.
|
|
Australia
|
Azimuth Security Trust
|
|
Australia
|
Azimuth Security, LLC
|
|
Florida
|
Beijing MAPPS-SERI Technology Company Ltd.*
|
|
China
|
Calzoni S.r.l.
|
|
Italy
|
C.K. Industrial Engineers Limited
|
|
United Kingdom
|
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 Services Limited
|
|
United Kingdom
|
CTC Aviation Training (UK) Limited.
|
|
United Kingdom
|
DMRAC - Aviation Corporation-SGPS, Unipessoal Lda
|
|
Portugal
|
EAA - Escola de Aviação Aerocondor, S.A.
|
|
Portugal
|
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
|
G4U - Gestão de Activos Aeronáuticos, Sociedade, Lda
|
|
Portugal
|
G Air Advanced Training, Lda
|
|
Portugal
|
G Air II Maintenance, Lda
|
|
Portugal
|
Honeywell TCAS Inc.*
|
|
Delaware
|
Interstate Electronics Corporation
|
|
California
|
L3 Adaptive Methods, Inc.
|
|
Delaware
|
L-3 Afghanistan, LLC
|
|
Delaware
|
L3 Applied Technologies, Inc.
|
|
Delaware
|
L3 Australia Group Pty Ltd
|
|
Australia
|
L3 Aviation Products, Inc.
|
|
Delaware
|
L-3 Brasil Importação, Exportação e Comércio Ltda.
|
|
Brazil
|
L-3 Centaur, LLC
|
|
Delaware
|
Name
|
|
Jurisdiction
|
L3 Chesapeake Sciences Corporation
|
|
Maryland
|
L3 Cincinnati Electronics Corporation
|
|
Ohio
|
L3 Commercial Training Solutions Limited
|
|
United Kingdom
|
L-3 Communications AIS GP Corporation
|
|
Delaware
|
L-3 Communications ASA Limited
|
|
United Kingdom
|
L-3 Communications Australia Pty Ltd
|
|
Australia
|
L-3 Communications Flight Capital LLC
|
|
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 Co., Ltd.
|
|
South Korea
|
L-3 Communications Limited
|
|
United Kingdom
|
L-3 Communications Link Simulation and Training UK (Overseas) Limited
|
|
United Kingdom
|
L-3 Communications Singapore Pte. Ltd.
|
|
Singapore
|
L-3 Communications U.K. Ltd.
|
|
United Kingdom
|
L3 CTS Airline Academy (NZ) Limited
|
|
New Zealand
|
L3 CTS Airline and Academy Training Limited
|
|
United Kingdom
|
L-3 Domestic Holdings, Inc.
|
|
Delaware
|
L3 Doss Aviation, Inc.
|
|
Texas
|
L3 Electron Devices, Inc.
|
|
Delaware
|
L3 ESSCO, Inc.
|
|
Delaware
|
L3 Foreign Holdings, Inc.
|
|
Delaware
|
L3 Fuzing and Ordnance Systems, Inc.
|
|
Delaware
|
L-3 Global Holding UK Ltd.
|
|
United Kingdom
|
L3 International Australia Pty Ltd.
|
|
United Kingdom
|
L-3 International UK Ltd
|
|
United Kingdom
|
L3 Investments UK Holdings Ltd.
|
|
United Kingdom
|
L3 Investments, LLC
|
|
Delaware
|
L3 Kenya Ltd
|
|
Kenya
|
L3 Kigre, Inc.
|
|
Ohio
|
L3 Latitude, LLC
|
|
Arizona
|
L3 Magnet-Motor GmbH
|
|
Germany
|
L3 MAPPS Inc.
|
|
Canada
|
L3 MAPPS Limited
|
|
United Kingdom
|
L3 MAPPS Sdn. Bhd.
|
|
Malaysia
|
L3 MariPro, Inc.
|
|
California
|
L3 Mobile-Vision, Inc.
|
|
New Jersey
|
L3 Open Water Power, Inc.
|
|
Delaware
|
L3 OceanServer, Inc.
|
|
Massachusetts
|
L3 Oceania Pty Limited, Inc.
|
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Australia
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L-3 Saudi Arabia LLC
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Saudi Arabia
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L3 Security & Detection Systems, Inc.
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Delaware
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L-3 Security Equipment Trading (Beijing) Co., Ltd.*
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China
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L-3 Societa Srl.
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Italy
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L3 Technologies Australia Group Pty Ltd
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Australia
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L3 Technologies Canada Group Inc.
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Canada
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L3 Technologies Canada Inc.
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Canada
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Name
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Jurisdiction
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L3 Technologies ESS Inc.
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Canada
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L3 Technologies Investments Limited
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Cyprus
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L3 Technologies MAS Inc.
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Canada
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L3 Technologies UK Group Ltd
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United Kingdom
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L-3 Technology & Services UK Ltd
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United Kingdom
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L3 Unidyne, Inc.
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Delaware
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L3 Unmanned Systems, Inc.
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Texas
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L3 Westwood Corporation
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Nevada
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Linchpin Labs Inc.
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Canada
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Linchpin Labs Inc.
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Delaware
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Linchpin Labs Limited
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New Zealand
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Linchpin Labs Limited
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United Kingdom
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Linchpin Labs Pty Limited
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Australia
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L-Tres Comunicaciones Costa Rica, S.A.
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Costa Rica
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MacDonald Humfrey (Automation) India Private Limited
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India
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MacDonald Humfrey (Automation) Limited
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United Kingdom
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MacDonald Humfrey (Automation) SEA PTE. Ltd.
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Singapore
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MacDonald Humfrey Automation Middle East Control Systems LLC
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United Arab Emirates
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Mustang Technology Group, L.P.
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Texas
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Narda Safety Test Solutions GmbH
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Germany
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Narda Safety Test Solutions S.r.l.
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Italy
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Power Paragon, Inc.
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Delaware
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SPD Electrical Systems, Inc.
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Delaware
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TRL Electronics Limited
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United Kingdom
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TRL Technology Limited
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United Kingdom
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Wescam Inc.
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Canada
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Wescam USA, Inc.
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Florida
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*
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Represents a non-wholly owned subsidiary.
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1.
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I have reviewed this report on Form 10-K for the year ended
December 31, 2018
of L3 Technologies, Inc.;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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/s/ Christopher E. Kubasik
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Christopher E. Kubasik
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Chairman, Chief Executive Officer and President
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1.
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I have reviewed this report on Form 10-K for the year ended
December 31, 2018
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;
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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
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d)
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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
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5.
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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
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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.
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/s/ Ralph G. D’Ambrosio
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Ralph G. D’Ambrosio
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Senior Vice President and Chief Financial Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L3.
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/s/ Christopher E. Kubasik
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/s/ Ralph G. D’Ambrosio
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Christopher E. Kubasik
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Ralph G. D’Ambrosio
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Chairman, Chief Executive Officer and President
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|
Senior Vice President and Chief Financial Officer
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