|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
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
|
10016
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
|
|
Emerging growth company
|
¨
|
|
|
|
Page
No.
|
|
PART I — FINANCIAL INFORMATION
|
|
|
|
|
ITEM 1.
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
|
|
|
|
PART II — OTHER INFORMATION
|
|
|
|
|
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 6.
|
||
|
(Unaudited)
|
|
|
||||
|
March 29,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
1,108
|
|
|
$
|
1,066
|
|
Billed receivables, net of allowances of $13 in 2019 and $12 in 2018
|
804
|
|
|
919
|
|
||
Contract assets
|
1,735
|
|
|
1,590
|
|
||
Inventories
|
896
|
|
|
879
|
|
||
Prepaid expenses and other current assets
|
362
|
|
|
356
|
|
||
Total current assets
|
4,905
|
|
|
4,810
|
|
||
Property, plant and equipment, net
|
1,178
|
|
|
1,169
|
|
||
Operating lease right-of-use assets
|
618
|
|
|
—
|
|
||
Goodwill
|
6,826
|
|
|
6,808
|
|
||
Identifiable intangible assets
|
378
|
|
|
390
|
|
||
Other assets
|
358
|
|
|
341
|
|
||
Total assets
|
$
|
14,263
|
|
|
$
|
13,518
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable, trade
|
$
|
672
|
|
|
$
|
699
|
|
Accrued employment costs
|
411
|
|
|
491
|
|
||
Accrued expenses
|
219
|
|
|
251
|
|
||
Contract liabilities
|
711
|
|
|
669
|
|
||
Income taxes payable
|
55
|
|
|
49
|
|
||
Other current liabilities
|
364
|
|
|
288
|
|
||
Total current liabilities
|
2,432
|
|
|
2,447
|
|
||
Pension and postretirement benefits
|
1,202
|
|
|
1,211
|
|
||
Deferred income taxes
|
205
|
|
|
196
|
|
||
Other liabilities
|
415
|
|
|
436
|
|
||
Operating lease liabilities
|
569
|
|
|
—
|
|
||
Long-term debt
|
3,322
|
|
|
3,321
|
|
||
Total liabilities
|
8,145
|
|
|
7,611
|
|
||
Commitments and contingencies (see Note 18)
|
|
|
|
|
|
||
Equity:
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Common stock: $.01 par value; 300,000,000 shares authorized, 79,397,240 shares outstanding at March 29, 2019 and 78,800,714 shares outstanding at December 31, 2018
|
6,904
|
|
|
6,866
|
|
||
Treasury stock (at cost), 84,999,711 shares at March 29, 2019 and December 31, 2018
|
(7,726
|
)
|
|
(7,726
|
)
|
||
Retained earnings
|
7,574
|
|
|
7,424
|
|
||
Accumulated other comprehensive loss
|
(701
|
)
|
|
(725
|
)
|
||
Total shareholders’ equity
|
6,051
|
|
|
5,839
|
|
||
Noncontrolling interests
|
67
|
|
|
68
|
|
||
Total equity
|
6,118
|
|
|
5,907
|
|
||
Total liabilities and equity
|
$
|
14,263
|
|
|
$
|
13,518
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
Net sales:
|
|
|
|
||||
Products
|
$
|
1,932
|
|
|
$
|
1,646
|
|
Services
|
768
|
|
|
725
|
|
||
Total net sales
|
2,700
|
|
|
2,371
|
|
||
Operating costs and expenses:
|
|
|
|
||||
Cost of sales — Products
|
(1,442
|
)
|
|
(1,191
|
)
|
||
Cost of sales — Services
|
(565
|
)
|
|
(532
|
)
|
||
General and administrative expenses
|
(382
|
)
|
|
(397
|
)
|
||
Total operating costs and expenses
|
(2,389
|
)
|
|
(2,120
|
)
|
||
Merger, acquisition and divestiture related expenses and losses
|
(18
|
)
|
|
—
|
|
||
Operating income
|
293
|
|
|
251
|
|
||
Interest expense
|
(37
|
)
|
|
(41
|
)
|
||
Interest and other income, net
|
4
|
|
|
6
|
|
||
Income from continuing operations before income taxes
|
260
|
|
|
216
|
|
||
Provision for income taxes
|
(37
|
)
|
|
(24
|
)
|
||
Income from continuing operations
|
223
|
|
|
192
|
|
||
Income from discontinued operations, net of income taxes
|
—
|
|
|
16
|
|
||
Net income
|
223
|
|
|
208
|
|
||
Net income from continuing operations attributable to noncontrolling interests
|
(6
|
)
|
|
(5
|
)
|
||
Net income attributable to L3
|
$
|
217
|
|
|
$
|
203
|
|
Basic earnings per share attributable to common shareholders:
|
|
|
|
||||
Continuing operations
|
$
|
2.74
|
|
|
$
|
2.40
|
|
Discontinued operations
|
—
|
|
|
0.20
|
|
||
Basic earnings per share
|
$
|
2.74
|
|
|
$
|
2.60
|
|
Diluted earnings per share attributable to common shareholders:
|
|
|
|
||||
Continuing operations
|
$
|
2.71
|
|
|
$
|
2.34
|
|
Discontinued operations
|
—
|
|
|
0.20
|
|
||
Diluted earnings per share
|
$
|
2.71
|
|
|
$
|
2.54
|
|
Cash dividends declared per common share
|
$
|
0.85
|
|
|
$
|
0.80
|
|
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
79.2
|
|
|
78.2
|
|
||
Diluted
|
80.0
|
|
|
79.9
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
Net income
|
$
|
223
|
|
|
$
|
208
|
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
23
|
|
|
33
|
|
||
Unrealized losses on hedging instruments
(1)
|
(6
|
)
|
|
(1
|
)
|
||
Pension and postretirement benefit plans:
|
|
|
|
||||
Amortization of net loss and prior service cost previously recognized
(2)
|
7
|
|
|
14
|
|
||
Total other comprehensive income
|
24
|
|
|
46
|
|
||
Comprehensive income
|
247
|
|
|
254
|
|
||
Comprehensive income attributable to noncontrolling interests
|
(6
|
)
|
|
(5
|
)
|
||
Comprehensive income attributable to L3
|
$
|
241
|
|
|
$
|
249
|
|
(1)
|
Net of income tax benefits of
$2 million
for the quarterly period ended
March 29, 2019
.
|
(2)
|
Net of income taxes of
$2 million
and
$4 million
for the quarterly periods ended
March 29, 2019
and
March 30, 2018
, respectively.
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Treasury Stock
|
|
Retained
Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Noncontrolling Interests
|
|
Total Equity
|
|||||||||||||||||
|
Shares
Outstanding
|
|
Par Value
|
|
||||||||||||||||||||||||||
For the First Quarter Ended March 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2018
|
78.8
|
|
|
$
|
1
|
|
|
$
|
6,865
|
|
|
$
|
(7,726
|
)
|
|
$
|
7,424
|
|
|
$
|
(725
|
)
|
|
$
|
68
|
|
|
$
|
5,907
|
|
Net income
|
|
|
|
|
|
|
|
|
217
|
|
|
|
|
6
|
|
|
223
|
|
||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
24
|
|
|||||||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
(7
|
)
|
|||||||||||||
Cash dividends declared ($0.85 per share)
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
(67
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Employee savings plans
|
0.2
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
30
|
|
||||||||||||
Exercise of stock options
|
0.1
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
19
|
|
||||||||||||
Employee stock purchase plan
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||
Vesting of restricted stock and performance units
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Repurchases of common stock to satisfy tax withholding obligations
|
(0.1
|
)
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|||||||||||||
Other
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
||||||||||||
Balance at March 29, 2019
|
79.4
|
|
|
$
|
1
|
|
|
$
|
6,903
|
|
|
$
|
(7,726
|
)
|
|
$
|
7,574
|
|
|
$
|
(701
|
)
|
|
$
|
67
|
|
|
$
|
6,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
For the First Quarter Ended March 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2017 - as reported
|
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
|
|
|
|
|
|
|
|
|
203
|
|
|
|
|
5
|
|
|
208
|
|
||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
46
|
|
|||||||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
(6
|
)
|
|||||||||||||
Cash dividends declared ($0.80 per share)
|
|
|
|
|
|
|
|
|
(63
|
)
|
|
|
|
|
|
(63
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Employee savings plans
|
0.2
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
34
|
|
||||||||||||
Exercise of stock options
|
0.6
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
55
|
|
||||||||||||
Employee stock purchase plan
|
0.1
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||||
Vesting of restricted stock and performance units
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Repurchases of common stock to satisfy tax withholding obligations
|
(0.1
|
)
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|||||||||||||
Treasury stock purchased
|
(0.6
|
)
|
|
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
(119
|
)
|
||||||||||||
Other
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
|
|
4
|
|
||||||||||||
Balance at March 30, 2018
|
78.4
|
|
|
$
|
1
|
|
|
$
|
6,606
|
|
|
$
|
(7,523
|
)
|
|
$
|
6,814
|
|
|
$
|
(645
|
)
|
|
$
|
67
|
|
|
$
|
5,320
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
223
|
|
|
$
|
208
|
|
Less: income from discontinued operations, net of tax
|
—
|
|
|
(16
|
)
|
||
Income from continuing operations
|
223
|
|
|
192
|
|
||
Depreciation of property, plant and equipment
|
43
|
|
|
43
|
|
||
Amortization of intangibles and other assets
|
15
|
|
|
13
|
|
||
Deferred income tax provision
|
8
|
|
|
16
|
|
||
Stock-based employee compensation expense
|
12
|
|
|
20
|
|
||
Contributions to employee savings plans in common stock
|
30
|
|
|
32
|
|
||
Amortization of pension and postretirement benefit plans net loss and prior service cost
|
9
|
|
|
18
|
|
||
Other non-cash items
|
5
|
|
|
1
|
|
||
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures, and discontinued operations:
|
|
|
|
||||
Billed receivables
|
116
|
|
|
(73
|
)
|
||
Contract assets
|
(142
|
)
|
|
(145
|
)
|
||
Inventories
|
(20
|
)
|
|
(65
|
)
|
||
Prepaid expenses and other current assets
|
(31
|
)
|
|
(99
|
)
|
||
Accounts payable, trade
|
(32
|
)
|
|
56
|
|
||
Accrued employment costs
|
(70
|
)
|
|
(54
|
)
|
||
Accrued expenses
|
(31
|
)
|
|
(6
|
)
|
||
Contract liabilities
|
43
|
|
|
41
|
|
||
Income taxes
|
14
|
|
|
(11
|
)
|
||
All other operating activities
|
(18
|
)
|
|
(14
|
)
|
||
Net cash from (used in) operating activities from continuing operations
|
174
|
|
|
(35
|
)
|
||
|
|
|
|
||||
Investing activities:
|
|
|
|
||||
Proceeds from the sale of businesses, net of closing date cash balances
|
1
|
|
|
—
|
|
||
Working capital adjustment on prior divestitures
|
(20
|
)
|
|
—
|
|
||
Capital expenditures
|
(49
|
)
|
|
(56
|
)
|
||
Dispositions of property, plant and equipment
|
3
|
|
|
2
|
|
||
Other investing activities
|
(9
|
)
|
|
(29
|
)
|
||
Net cash used in investing activities from continuing operations
|
(74
|
)
|
|
(83
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
||||
Borrowings under revolving credit facility
|
—
|
|
|
207
|
|
||
Repayments of borrowings under revolving credit facility
|
—
|
|
|
(207
|
)
|
||
Common stock repurchased
|
—
|
|
|
(119
|
)
|
||
Dividends paid
|
(70
|
)
|
|
(65
|
)
|
||
Proceeds from exercises of stock options
|
19
|
|
|
55
|
|
||
Proceeds from employee stock purchase plan
|
—
|
|
|
8
|
|
||
Repurchases of common stock to satisfy tax withholding obligations
|
(22
|
)
|
|
(23
|
)
|
||
Other financing activities
|
(7
|
)
|
|
(2
|
)
|
||
Net cash used in financing activities from continuing operations
|
(80
|
)
|
|
(146
|
)
|
||
Effect of foreign currency exchange rate changes on cash and cash equivalents
|
3
|
|
|
6
|
|
||
Net cash from (used in) discontinued operations:
|
|
|
|
||||
Operating activities
|
19
|
|
|
(29
|
)
|
||
Investing activities
|
—
|
|
|
(1
|
)
|
||
Net cash from (used in) discontinued operations
|
19
|
|
|
(30
|
)
|
||
Net increase (decrease) cash and cash equivalents
|
42
|
|
|
(288
|
)
|
||
Cash and cash equivalents, beginning of the period
|
1,066
|
|
|
662
|
|
||
Cash and cash equivalents, end of the period
|
$
|
1,108
|
|
|
$
|
374
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions, except per share data)
|
||||||
Operating income
|
$
|
66
|
|
|
$
|
50
|
|
Diluted earnings per share
|
$
|
0.63
|
|
|
$
|
0.48
|
|
|
First Quarter Ended
|
||||
|
March 29,
2019 |
|
March 30,
2018 |
||
|
|
|
|
||
Over time (cost-to-cost method)
|
76
|
%
|
|
76
|
%
|
Point in time
|
19
|
%
|
|
18
|
%
|
Output method
|
3
|
%
|
|
3
|
%
|
Billing method
|
2
|
%
|
|
3
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
First Quarter Ended
|
||
|
March 30, 2018
|
||
|
(in millions, except per share data)
|
||
Pro forma net sales
|
$
|
2,404
|
|
Pro forma income from continuing operations attributable to L3
|
$
|
191
|
|
Pro forma net income attributable to L3
|
$
|
207
|
|
Pro forma diluted earnings per share from continuing operations
|
$
|
2.39
|
|
Pro forma diluted earnings per share
|
$
|
2.59
|
|
|
First Quarter Ended
|
||
|
March 30, 2018
|
||
|
(in millions)
|
||
Net sales
|
$
|
33
|
|
Income from continuing operations before income taxes
|
$
|
1
|
|
|
First Quarter Ended
|
||
|
March 30, 2018
|
||
|
(in millions)
|
||
Net sales
|
$
|
371
|
|
Operating costs and expenses
|
(349
|
)
|
|
Operating income from discontinued operations
|
22
|
|
|
Interest expense allocated to discontinued operations
|
(1
|
)
|
|
Income from discontinued operations before income taxes
|
21
|
|
|
Income tax expense
|
(5
|
)
|
|
Income from discontinued operations, net of income taxes
|
$
|
16
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Contract assets
|
$
|
1,735
|
|
|
$
|
1,590
|
|
Contract liabilities — current
|
(711
|
)
|
|
(669
|
)
|
||
Contract liabilities — non-current
|
(28
|
)
|
|
(31
|
)
|
||
Net contract assets
|
$
|
996
|
|
|
$
|
890
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Unbilled contract receivables, gross
|
$
|
3,035
|
|
|
$
|
2,716
|
|
Unliquidated progress payments and advances
|
(1,300
|
)
|
|
(1,126
|
)
|
||
Total contract assets
|
$
|
1,735
|
|
|
$
|
1,590
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Raw materials, components and sub-assemblies
|
$
|
372
|
|
|
$
|
351
|
|
Work in process
|
335
|
|
|
330
|
|
||
Finished goods
|
189
|
|
|
198
|
|
||
Total
|
$
|
896
|
|
|
$
|
879
|
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated Total
|
||||||||
|
(in millions)
|
||||||||||||||
Goodwill
|
$
|
2,660
|
|
|
$
|
2,004
|
|
|
$
|
2,248
|
|
|
$
|
6,912
|
|
Accumulated impairment losses
|
(46
|
)
|
|
(15
|
)
|
|
(43
|
)
|
|
(104
|
)
|
||||
December 31, 2018
|
2,614
|
|
|
1,989
|
|
|
2,205
|
|
|
6,808
|
|
||||
Business acquisitions
(1)
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Foreign currency translation adjustments
|
4
|
|
|
3
|
|
|
9
|
|
|
16
|
|
||||
March 29, 2019
|
2,618
|
|
|
1,994
|
|
|
2,214
|
|
|
6,826
|
|
||||
Goodwill
|
2,664
|
|
|
2,009
|
|
|
2,257
|
|
|
6,930
|
|
||||
Accumulated impairment losses
|
(46
|
)
|
|
(15
|
)
|
|
(43
|
)
|
|
(104
|
)
|
||||
|
$
|
2,618
|
|
|
$
|
1,994
|
|
|
$
|
2,214
|
|
|
$
|
6,826
|
|
(1)
|
The increase for the C&NS segment was due to the purchase price allocation adjustment for the ASV Global business acquisition.
|
|
|
|
March 29, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
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
|
17
|
|
$
|
468
|
|
|
$
|
295
|
|
|
$
|
173
|
|
|
$
|
468
|
|
|
$
|
288
|
|
|
$
|
180
|
|
Technology
|
10
|
|
245
|
|
|
137
|
|
|
108
|
|
|
245
|
|
|
132
|
|
|
113
|
|
||||||
Other
|
12
|
|
49
|
|
|
18
|
|
|
31
|
|
|
49
|
|
|
18
|
|
|
31
|
|
||||||
Total subject to amortization
|
|
|
762
|
|
|
450
|
|
|
312
|
|
|
762
|
|
|
438
|
|
|
324
|
|
||||||
IPR&D
|
indefinite
|
|
66
|
|
|
—
|
|
|
66
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||||
Total
|
|
|
$
|
828
|
|
|
$
|
450
|
|
|
$
|
378
|
|
|
$
|
828
|
|
|
$
|
438
|
|
|
$
|
390
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions)
|
||||||
Amortization expense
|
$
|
12
|
|
|
$
|
11
|
|
|
Year Ending December 31,
|
||||||||||||||||||
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Estimated amortization expense
|
$
|
51
|
|
|
$
|
47
|
|
|
$
|
42
|
|
|
$
|
37
|
|
|
$
|
28
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Other current liabilities:
|
|
|
|
|
|
||
Operating lease liabilities
|
$
|
74
|
|
|
$
|
—
|
|
Accrued product warranty costs
|
61
|
|
|
66
|
|
||
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position
|
46
|
|
|
40
|
|
||
Accrued interest
|
36
|
|
|
18
|
|
||
Estimated contingent purchase price payable for acquired businesses (see Note 14)
|
10
|
|
|
10
|
|
||
Other
|
137
|
|
|
154
|
|
||
Total other current liabilities
|
$
|
364
|
|
|
$
|
288
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Other liabilities:
|
|
|
|
|
|
||
Non-current income taxes payable (see Note 10)
|
$
|
159
|
|
|
$
|
161
|
|
Deferred compensation
|
54
|
|
|
53
|
|
||
Contract liabilities (see Note 5)
|
28
|
|
|
31
|
|
||
Notes payable and other debt
|
24
|
|
|
22
|
|
||
Accrued product warranty costs
|
21
|
|
|
22
|
|
||
Accrued workers' compensation
|
21
|
|
|
20
|
|
||
Estimated contingent purchase price payable for acquired businesses (see Note 14)
|
6
|
|
|
10
|
|
||
Other
|
102
|
|
|
117
|
|
||
Total other liabilities
|
$
|
415
|
|
|
$
|
436
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions)
|
||||||
Accrued product warranty costs:
|
|
|
|
|
|
||
Balance at January 1
|
$
|
88
|
|
|
$
|
99
|
|
Accruals for product warranties issued during the period
|
14
|
|
|
14
|
|
||
Changes to accruals for product warranties existing before January 1
|
(1
|
)
|
|
1
|
|
||
Settlements made during the period
|
(19
|
)
|
|
(14
|
)
|
||
Balance at end of period
|
$
|
82
|
|
|
$
|
100
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Borrowings under Revolving Credit Facility
(1)
|
$
|
—
|
|
|
$
|
—
|
|
4.95% Senior Notes due 2021
|
650
|
|
|
650
|
|
||
3.85% Senior Notes due 2023
|
800
|
|
|
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
|
|
|
1,000
|
|
||
Principal amount of long-term debt
(2)
|
3,350
|
|
|
3,350
|
|
||
Unamortized discounts
|
(7
|
)
|
|
(7
|
)
|
||
Deferred debt issue costs
|
(21
|
)
|
|
(22
|
)
|
||
Carrying amount of long-term debt
|
$
|
3,322
|
|
|
$
|
3,321
|
|
(1)
|
During the
quarterly period
ended
March 29, 2019
, L3 had no borrowings or repayments under the Credit Facility. At
March 29, 2019
, L3 had the full availability of its
$1 billion
Credit Facility.
|
(2)
|
With respect to the Company’s outstanding senior notes, upon the occurrence of both 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.
|
|
|
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, 2018
|
|
$
|
(136
|
)
|
|
$
|
(10
|
)
|
|
$
|
(579
|
)
|
|
$
|
(725
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
|
23
|
|
|
(5
|
)
|
|
—
|
|
|
18
|
|
||||
Amounts reclassified from AOCI, net of tax
|
|
—
|
|
|
(1
|
)
|
|
7
|
|
|
6
|
|
||||
Net current period other comprehensive income (loss)
|
|
23
|
|
|
(6
|
)
|
|
7
|
|
|
24
|
|
||||
Balance at March 29, 2019
|
|
$
|
(113
|
)
|
|
$
|
(16
|
)
|
|
$
|
(572
|
)
|
|
$
|
(701
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2017
|
|
$
|
(54
|
)
|
|
$
|
9
|
|
|
$
|
(646
|
)
|
|
$
|
(691
|
)
|
Other comprehensive income before reclassifications, net of tax
|
|
33
|
|
|
—
|
|
|
—
|
|
|
33
|
|
||||
Amounts reclassified from AOCI, net of tax
|
|
—
|
|
|
(1
|
)
|
|
14
|
|
|
13
|
|
||||
Net current period other comprehensive income (loss)
|
|
33
|
|
|
(1
|
)
|
|
14
|
|
|
46
|
|
||||
Balance at March 30, 2018
|
|
$
|
(21
|
)
|
|
$
|
8
|
|
|
$
|
(632
|
)
|
|
$
|
(645
|
)
|
|
|
Amount Reclassified from AOCI
(a)
|
|
Affected Line Item in the
Unaudited Condensed Consolidated
Statements of Operations
|
||||||
|
|
First Quarter Ended
|
|
|||||||
Details About AOCI Components
|
|
March 29,
2019 |
|
March 30,
2018 |
|
|||||
|
|
(in millions)
|
|
|
||||||
Gain on hedging instruments
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Cost of sales - Products
|
|
|
1
|
|
|
1
|
|
|
Income from continuing operations before income taxes
|
||
|
|
—
|
|
|
—
|
|
|
Provision for income taxes
|
||
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
||||
Amortization of defined benefit
pension and postretirement items:
|
|
|
|
|
|
|
||||
Net loss
(b)
|
|
$
|
(9
|
)
|
|
$
|
(18
|
)
|
|
Income from continuing operations before income taxes
|
|
|
2
|
|
|
4
|
|
|
Provision for income taxes
|
||
|
|
$
|
(7
|
)
|
|
$
|
(14
|
)
|
|
Income from continuing operations
|
Total reclassification for the period
|
|
$
|
(6
|
)
|
|
$
|
(13
|
)
|
|
Income from continuing operations
|
(a)
|
Amounts in parenthesis indicate charges to the unaudited condensed consolidated statements of operations.
|
(b)
|
Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note
19
for additional information).
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions, except per share data)
|
||||||
Reconciliation of net income:
|
|
|
|
||||
Net income
|
$
|
223
|
|
|
$
|
208
|
|
Net income from continuing operations attributable to noncontrolling interests
|
(6
|
)
|
|
(5
|
)
|
||
Net income attributable to L3’s common shareholders
|
$
|
217
|
|
|
$
|
203
|
|
Earnings attributable to L3’s common shareholders:
|
|
|
|
||||
Continuing operations
|
$
|
217
|
|
|
$
|
187
|
|
Discontinued operations, net of income tax
|
—
|
|
|
16
|
|
||
Net income attributable to L3’s common shareholders
|
$
|
217
|
|
|
$
|
203
|
|
Earnings per share attributable to L3’s common
shareholders:
|
|
|
|
||||
Basic:
|
|
|
|
||||
Weighted average common shares outstanding
|
79.2
|
|
|
78.2
|
|
||
Basic earnings per share:
|
|
|
|
||||
Continuing operations
|
$
|
2.74
|
|
|
$
|
2.40
|
|
Discontinued operations, net of income tax
|
—
|
|
|
0.20
|
|
||
Net income
|
$
|
2.74
|
|
|
$
|
2.60
|
|
Diluted:
|
|
|
|
||||
Common and potential common shares:
|
|
|
|
||||
Weighted average common shares outstanding
|
79.2
|
|
|
78.2
|
|
||
Effect of dilutive securities
|
0.8
|
|
|
1.7
|
|
||
Common and potential common shares
|
80.0
|
|
|
79.9
|
|
||
Diluted earnings per share:
|
|
|
|
||||
Continuing operations
|
$
|
2.71
|
|
|
$
|
2.34
|
|
Discontinued operations, net of income tax
|
—
|
|
|
0.20
|
|
||
Net income
|
$
|
2.71
|
|
|
$
|
2.54
|
|
|
|
March 29, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
Description
|
|
Level 1
(1)
|
|
Level 2
(2)
|
|
Level 3
(3)
|
|
Level 1
(1)
|
|
Level 2
(2)
|
|
Level 3
(3)
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash equivalents
|
|
$
|
756
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
660
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivatives (foreign currency forward contracts)
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||
Total assets
|
|
$
|
756
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
660
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivatives (foreign currency forward contracts)
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
Derivatives (treasury lock contracts)
(4)
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Contingent consideration
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||||
Total liabilities
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
20
|
|
(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, interest rates and consideration of non-performance risk.
|
(3)
|
Level 3 is based on pricing inputs that are not observable and not corroborated by market data.
|
(4)
|
See Note
16
for information regarding the treasury lock contracts.
|
|
March 29, 2019
|
||
|
(in millions)
|
||
Balance at beginning of period
|
$
|
20
|
|
Changes in fair value of contingent consideration, net
|
(4
|
)
|
|
Balance at end of period
|
$
|
16
|
|
|
March 29, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Senior notes
(1)
|
$
|
3,322
|
|
|
$
|
3,451
|
|
|
$
|
3,321
|
|
|
$
|
3,355
|
|
Foreign currency forward contracts
(2)
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
$
|
(16
|
)
|
|
$
|
(16
|
)
|
Treasury lock contracts
(3)
|
$
|
(16
|
)
|
|
$
|
(16
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
(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
16
for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.
|
(3)
|
The Company measures the fair values of treasury lock contracts based on 10-year treasury rates. See Note
16
for additional disclosures regarding the notional amounts and fair values of treasury lock contracts.
|
Currency
|
|
Notional Amounts
|
||
|
|
(in millions)
|
||
U.S. dollar
|
|
$
|
197
|
|
Canadian dollar
|
|
85
|
|
|
Euro
|
|
75
|
|
|
British pound
|
|
11
|
|
|
United Arab Emirates dirham
|
|
9
|
|
|
New Zealand dollar
|
|
9
|
|
|
Total
|
|
$
|
386
|
|
|
March 29, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
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)
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
4
|
|
Treasury lock contracts
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total derivative instruments
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
4
|
|
(1)
|
See Note
14
for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts and treasury lock contracts.
|
|
First Quarter Ended
|
||
|
March 29, 2019
|
||
|
(in millions)
|
||
Operating lease cost
|
$
|
29
|
|
Short-term and equipment lease cost
|
1
|
|
|
Variable lease cost
|
4
|
|
|
Sublease income
|
(1
|
)
|
|
Net lease cost
|
$
|
33
|
|
|
March 29, 2019
|
||
|
(in millions)
|
||
Operating lease right-of-use assets
|
$
|
618
|
|
|
|
||
Other current liabilities
|
$
|
74
|
|
Operating lease liabilities
|
569
|
|
|
Total operating lease liabilities
|
$
|
643
|
|
|
First Quarter Ended
|
||
(in millions, except lease term and discount rate)
|
March 29, 2019
|
||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
33
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
3
|
|
Weighted average remaining lease term - operating leases (in years)
|
10.9
|
|
Weighted average discount rate - operating leases
|
4.4
|
%
|
|
Operating Leases
|
||
|
March 29, 2019
|
||
|
(in millions)
|
||
2019
|
$
|
76
|
|
2020
|
91
|
|
|
2021
|
81
|
|
|
2022
|
73
|
|
|
2023
|
64
|
|
|
Thereafter
|
437
|
|
|
Total future lease payments required
|
822
|
|
|
Less: imputed interest
|
179
|
|
|
Total
|
$
|
643
|
|
|
Operating Leases
|
||
|
December 31, 2018
|
||
|
(in millions)
|
||
2019
|
$
|
115
|
|
2020
|
134
|
|
|
2021
|
82
|
|
|
2022
|
73
|
|
|
2023
|
65
|
|
|
Thereafter
|
506
|
|
|
Total minimum payments required
|
975
|
|
|
Sublease rentals under non-cancelable leases
|
(7
|
)
|
|
Net minimum payments required
|
$
|
968
|
|
|
Pension Plans
|
|
Postretirement Benefit Plans
|
||||||||||||
|
First Quarter Ended
|
|
First Quarter Ended
|
||||||||||||
|
March 29,
2019 |
|
March 30,
2018 |
|
March 29,
2019 |
|
March 30,
2018 |
||||||||
|
(in millions)
|
||||||||||||||
Components of net
periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service cost
|
$
|
6
|
|
|
$
|
26
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Interest cost
|
40
|
|
|
36
|
|
|
1
|
|
|
1
|
|
||||
Expected return on plan assets
|
(49
|
)
|
|
(56
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amortization of prior service credits
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Amortization of net loss (gains)
|
11
|
|
|
19
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Curtailment loss
(1)
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost
|
$
|
9
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
(1)
|
During the quarterly period ended March 29, 2019, the Company recognized a
$2 million
pension curtailment loss related to severance and restructuring activities in the C&NS segment.
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions)
|
||||||
Interest paid
|
$
|
18
|
|
|
$
|
37
|
|
Income tax payments
|
$
|
20
|
|
|
$
|
21
|
|
Income tax refunds
|
$
|
5
|
|
|
$
|
2
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions)
|
||||||
Net Sales:
|
|
|
|
|
|
||
ISRS
|
$
|
1,259
|
|
|
$
|
1,018
|
|
C&NS
|
793
|
|
|
713
|
|
||
Electronic Systems
|
670
|
|
|
659
|
|
||
Elimination of intercompany sales
|
(22
|
)
|
|
(19
|
)
|
||
Consolidated total
|
$
|
2,700
|
|
|
$
|
2,371
|
|
Operating Income:
|
|
|
|
||||
ISRS
|
$
|
130
|
|
|
$
|
93
|
|
C&NS
|
84
|
|
|
64
|
|
||
Electronic Systems
|
97
|
|
|
94
|
|
||
Segment total
|
311
|
|
|
251
|
|
||
Merger, acquisition and divestiture related expenses and losses
|
(18
|
)
|
|
—
|
|
||
Consolidated total
|
$
|
293
|
|
|
$
|
251
|
|
Depreciation and amortization:
|
|
|
|
||||
ISRS
|
$
|
23
|
|
|
$
|
21
|
|
C&NS
|
16
|
|
|
17
|
|
||
Electronic Systems
|
19
|
|
|
18
|
|
||
Consolidated total
|
$
|
58
|
|
|
$
|
56
|
|
|
March 29,
2019 |
|
December 31,
2018 |
||||
|
(in millions)
|
||||||
Total Assets:
|
|
|
|
|
|||
ISRS
|
$
|
4,823
|
|
|
$
|
4,749
|
|
C&NS
|
3,991
|
|
|
3,641
|
|
||
Electronic Systems
|
4,257
|
|
|
4,128
|
|
||
Corporate
|
1,192
|
|
|
1,000
|
|
||
Consolidated total
|
$
|
14,263
|
|
|
$
|
13,518
|
|
|
|
First Quarter Ended March 29, 2019
|
||||||||||||||
End Customer
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Total DoD
|
|
$
|
921
|
|
|
$
|
593
|
|
|
$
|
335
|
|
|
$
|
1,849
|
|
Other U.S. Government
|
|
26
|
|
|
25
|
|
|
28
|
|
|
79
|
|
||||
Total U.S. Government
|
|
947
|
|
|
618
|
|
|
363
|
|
|
1,928
|
|
||||
Foreign governments
(1)
|
|
254
|
|
|
86
|
|
|
57
|
|
|
397
|
|
||||
Commercial — foreign
|
|
20
|
|
|
31
|
|
|
160
|
|
|
211
|
|
||||
Commercial — domestic
|
|
32
|
|
|
50
|
|
|
82
|
|
|
164
|
|
||||
Total
|
|
$
|
1,253
|
|
|
$
|
785
|
|
|
$
|
662
|
|
|
$
|
2,700
|
|
|
|
First Quarter Ended March 30, 2018
|
||||||||||||||
End Customer
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Total DoD
|
|
$
|
726
|
|
|
$
|
516
|
|
|
$
|
320
|
|
|
$
|
1,562
|
|
Other U.S. Government
|
|
30
|
|
|
27
|
|
|
36
|
|
|
93
|
|
||||
Total U.S. Government
|
|
756
|
|
|
543
|
|
|
356
|
|
|
1,655
|
|
||||
Foreign governments
(1)
|
|
205
|
|
|
83
|
|
|
43
|
|
|
331
|
|
||||
Commercial — foreign
|
|
29
|
|
|
26
|
|
|
162
|
|
|
217
|
|
||||
Commercial — domestic
|
|
26
|
|
|
55
|
|
|
87
|
|
|
168
|
|
||||
Total
|
|
$
|
1,016
|
|
|
$
|
707
|
|
|
$
|
648
|
|
|
$
|
2,371
|
|
(1)
|
Includes sales under foreign military sales agreements, which are made directly between the U.S. Government and foreign governments.
|
|
|
First Quarter Ended March 29, 2019
|
||||||||||||||
Contract Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed-price
(1)
|
|
$
|
908
|
|
|
$
|
577
|
|
|
$
|
545
|
|
|
$
|
2,030
|
|
Cost-plus
(2)
|
|
295
|
|
|
189
|
|
|
107
|
|
|
591
|
|
||||
Time-and-material
|
|
50
|
|
|
19
|
|
|
10
|
|
|
79
|
|
||||
Total sales
|
|
$
|
1,253
|
|
|
$
|
785
|
|
|
$
|
662
|
|
|
$
|
2,700
|
|
|
|
First Quarter Ended March 30, 2018
|
||||||||||||||
Contract Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed-price
(1)
|
|
$
|
639
|
|
|
$
|
506
|
|
|
$
|
547
|
|
|
$
|
1,692
|
|
Cost-plus
(2)
|
|
324
|
|
|
179
|
|
|
93
|
|
|
596
|
|
||||
Time-and-material
|
|
53
|
|
|
22
|
|
|
8
|
|
|
83
|
|
||||
Total sales
|
|
$
|
1,016
|
|
|
$
|
707
|
|
|
$
|
648
|
|
|
$
|
2,371
|
|
(1)
|
Includes fixed-price incentive fee type contracts, which contributed approximately
1%
and
2%
to the Company's total net sales for the quarterly periods ended
March 29, 2019
and
March 30, 2018
, respectively.
|
(2)
|
Includes cost-plus award and incentive fee type contracts, which contributed approximately
3%
and
4%
to the Company's total net sales for the quarterly periods ended
March 29, 2019
and
March 30, 2018
, respectively.
|
|
|
First Quarter Ended March 29, 2019
|
||||||||||||||
Sales by Deliverable Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Products
|
|
$
|
855
|
|
|
$
|
606
|
|
|
$
|
471
|
|
|
$
|
1,932
|
|
Services
|
|
398
|
|
|
179
|
|
|
191
|
|
|
768
|
|
||||
Total sales
|
|
$
|
1,253
|
|
|
$
|
785
|
|
|
$
|
662
|
|
|
$
|
2,700
|
|
|
|
First Quarter Ended March 30, 2018
|
||||||||||||||
Sales by Deliverable Type
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Products
|
|
$
|
655
|
|
|
$
|
532
|
|
|
$
|
459
|
|
|
$
|
1,646
|
|
Services
|
|
361
|
|
|
175
|
|
|
189
|
|
|
725
|
|
||||
Total sales
|
|
$
|
1,016
|
|
|
$
|
707
|
|
|
$
|
648
|
|
|
$
|
2,371
|
|
|
|
First Quarter Ended March 29, 2019
|
||||||||||||||
Revenue Recognition Method
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Over time (cost-to-cost method)
|
|
$
|
981
|
|
|
$
|
647
|
|
|
$
|
417
|
|
|
$
|
2,045
|
|
Point in time
|
|
225
|
|
|
115
|
|
|
163
|
|
|
503
|
|
||||
Output method
|
|
24
|
|
|
5
|
|
|
67
|
|
|
96
|
|
||||
Billing method
|
|
23
|
|
|
18
|
|
|
15
|
|
|
56
|
|
||||
Total sales
|
|
$
|
1,253
|
|
|
$
|
785
|
|
|
$
|
662
|
|
|
$
|
2,700
|
|
|
|
First Quarter Ended March 30, 2018
|
||||||||||||||
Revenue Recognition Method
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated L3
|
||||||||
|
|
(in millions)
|
||||||||||||||
Over time (cost-to-cost method)
|
|
$
|
807
|
|
|
$
|
576
|
|
|
$
|
419
|
|
|
$
|
1,802
|
|
Point in time
|
|
157
|
|
|
103
|
|
|
172
|
|
|
432
|
|
||||
Output method
|
|
16
|
|
|
7
|
|
|
51
|
|
|
74
|
|
||||
Billing method
|
|
36
|
|
|
21
|
|
|
6
|
|
|
63
|
|
||||
Total sales
|
|
$
|
1,016
|
|
|
$
|
707
|
|
|
$
|
648
|
|
|
$
|
2,371
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(in millions)
|
||||||
Reportable Segment
|
|
|
|
||||
ISRS
|
$
|
1
|
|
|
$
|
1
|
|
C&NS
|
4
|
|
|
5
|
|
||
Electronic Systems
|
1
|
|
|
2
|
|
||
Consolidated
|
$
|
6
|
|
|
$
|
8
|
|
|
March 29, 2019
|
||
|
(in millions)
|
||
Balance at beginning of period
|
$
|
14
|
|
Additional provisions
|
6
|
|
|
Cash payments
|
(11
|
)
|
|
Balance at end of period
|
$
|
9
|
|
|
L3
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated L3
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Condensed Combining Balance Sheets:
|
|
|
|
|
|
|
|
|
|
||||||||||
At March 29, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
856
|
|
|
$
|
19
|
|
|
$
|
309
|
|
|
$
|
(76
|
)
|
|
$
|
1,108
|
|
Billed receivables, net
|
230
|
|
|
268
|
|
|
306
|
|
|
—
|
|
|
804
|
|
|||||
Contract assets
|
580
|
|
|
953
|
|
|
202
|
|
|
—
|
|
|
1,735
|
|
|||||
Inventories
|
369
|
|
|
268
|
|
|
259
|
|
|
—
|
|
|
896
|
|
|||||
Prepaid expenses and other current assets
|
127
|
|
|
180
|
|
|
55
|
|
|
—
|
|
|
362
|
|
|||||
Total current assets
|
2,162
|
|
|
1,688
|
|
|
1,131
|
|
|
(76
|
)
|
|
4,905
|
|
|||||
Goodwill
|
2,124
|
|
|
3,007
|
|
|
1,695
|
|
|
—
|
|
|
6,826
|
|
|||||
Other assets
|
1,004
|
|
|
954
|
|
|
574
|
|
|
—
|
|
|
2,532
|
|
|||||
Investment in and amounts due from consolidated subsidiaries
|
6,049
|
|
|
6,534
|
|
|
—
|
|
|
(12,583
|
)
|
|
—
|
|
|||||
Total assets
|
$
|
11,339
|
|
|
$
|
12,183
|
|
|
$
|
3,400
|
|
|
$
|
(12,659
|
)
|
|
$
|
14,263
|
|
Current liabilities
|
$
|
797
|
|
|
$
|
1,036
|
|
|
$
|
675
|
|
|
$
|
(76
|
)
|
|
$
|
2,432
|
|
Amounts due to consolidated subsidiaries
|
—
|
|
|
—
|
|
|
445
|
|
|
(445
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
1,169
|
|
|
963
|
|
|
259
|
|
|
—
|
|
|
2,391
|
|
|||||
Long-term debt
|
3,322
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,322
|
|
|||||
Total liabilities
|
5,288
|
|
|
1,999
|
|
|
1,379
|
|
|
(521
|
)
|
|
8,145
|
|
|||||
L3 shareholders’ equity
|
6,051
|
|
|
10,184
|
|
|
2,021
|
|
|
(12,205
|
)
|
|
6,051
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
67
|
|
|||||
Total equity
|
6,051
|
|
|
10,184
|
|
|
2,021
|
|
|
(12,138
|
)
|
|
6,118
|
|
|||||
Total liabilities and equity
|
$
|
11,339
|
|
|
$
|
12,183
|
|
|
$
|
3,400
|
|
|
$
|
(12,659
|
)
|
|
$
|
14,263
|
|
|
L3
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated L3
|
||||||||||
|
(in millions)
|
||||||||||||||||||
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)
|
||||||||||||||||||
Condensed Combining Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
For the quarter ended March 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total net sales
|
$
|
904
|
|
|
$
|
1,418
|
|
|
$
|
462
|
|
|
$
|
(84
|
)
|
|
$
|
2,700
|
|
Total operating costs and expenses
|
(785
|
)
|
|
(1,312
|
)
|
|
(376
|
)
|
|
84
|
|
|
(2,389
|
)
|
|||||
Merger, acquisition and divestiture related expenses and losses
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|||||
Operating income
|
101
|
|
|
106
|
|
|
86
|
|
|
—
|
|
|
293
|
|
|||||
Interest expense
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|||||
Interest and other income, net
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Income from continuing operations before income taxes
|
67
|
|
|
107
|
|
|
86
|
|
|
—
|
|
|
260
|
|
|||||
Provision for income taxes
|
(10
|
)
|
|
(15
|
)
|
|
(12
|
)
|
|
—
|
|
|
(37
|
)
|
|||||
Equity in net income of consolidated subsidiaries
|
160
|
|
|
36
|
|
|
—
|
|
|
(196
|
)
|
|
—
|
|
|||||
Net income
|
217
|
|
|
128
|
|
|
74
|
|
|
(196
|
)
|
|
223
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|||||
Net income attributable to L3
|
$
|
217
|
|
|
$
|
128
|
|
|
$
|
74
|
|
|
$
|
(202
|
)
|
|
$
|
217
|
|
Comprehensive income attributable to L3
|
$
|
241
|
|
|
$
|
158
|
|
|
$
|
101
|
|
|
$
|
(259
|
)
|
|
$
|
241
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
For the quarter ended March 30, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total net sales
|
$
|
807
|
|
|
$
|
1,239
|
|
|
$
|
422
|
|
|
$
|
(97
|
)
|
|
$
|
2,371
|
|
Total operating costs and expenses
|
(722
|
)
|
|
(1,155
|
)
|
|
(340
|
)
|
|
97
|
|
|
(2,120
|
)
|
|||||
Operating income
|
85
|
|
|
84
|
|
|
82
|
|
|
—
|
|
|
251
|
|
|||||
Interest expense
|
(41
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|||||
Interest and other income, net
|
5
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
6
|
|
|||||
Income from continuing operations before income taxes
|
49
|
|
|
84
|
|
|
83
|
|
|
—
|
|
|
216
|
|
|||||
Provision for income taxes
|
(6
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|
—
|
|
|
(24
|
)
|
|||||
Equity in net income of consolidated subsidiaries
|
144
|
|
|
47
|
|
|
—
|
|
|
(191
|
)
|
|
—
|
|
|||||
Income from continuing operations
|
187
|
|
|
122
|
|
|
74
|
|
|
(191
|
)
|
|
192
|
|
|||||
Income from discontinued operations, net of income taxes
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|||||
Net income
|
203
|
|
|
122
|
|
|
74
|
|
|
(191
|
)
|
|
208
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|||||
Net income attributable to L3
|
$
|
203
|
|
|
$
|
122
|
|
|
$
|
74
|
|
|
$
|
(196
|
)
|
|
$
|
203
|
|
Comprehensive income attributable to L3
|
$
|
249
|
|
|
$
|
153
|
|
|
$
|
107
|
|
|
$
|
(260
|
)
|
|
$
|
249
|
|
|
L3
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated L3
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Condensed Combining Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
For the quarter ended March 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash from operating activities from continuing operations
|
$
|
101
|
|
|
$
|
55
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
174
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from sale of businesses, net of closing date cash balances
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Other investing activities
|
(42
|
)
|
|
(19
|
)
|
|
(14
|
)
|
|
—
|
|
|
(75
|
)
|
|||||
Net cash used in investing activities from continuing operations
|
(41
|
)
|
|
(19
|
)
|
|
(14
|
)
|
|
—
|
|
|
(74
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Dividends paid
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|||||
Other financing activities
|
91
|
|
|
(38
|
)
|
|
(4
|
)
|
|
(59
|
)
|
|
(10
|
)
|
|||||
Net cash from (used in) financing activities from continuing operations
|
21
|
|
|
(38
|
)
|
|
(4
|
)
|
|
(59
|
)
|
|
(80
|
)
|
|||||
Effect of foreign currency exchange rate changes on cash
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||
Net increase in cash and cash equivalents of discontinued operations
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Net increase (decrease) in cash
|
100
|
|
|
(2
|
)
|
|
3
|
|
|
(59
|
)
|
|
42
|
|
|||||
Cash and cash equivalents, beginning of the period
|
756
|
|
|
21
|
|
|
306
|
|
|
(17
|
)
|
|
1,066
|
|
|||||
Cash and cash equivalents, end of the period
|
$
|
856
|
|
|
$
|
19
|
|
|
$
|
309
|
|
|
$
|
(76
|
)
|
|
$
|
1,108
|
|
For the quarter ended March 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash from (used in) operating activities from continuing operations
|
$
|
198
|
|
|
$
|
(204
|
)
|
|
$
|
(24
|
)
|
|
$
|
(5
|
)
|
|
$
|
(35
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other investing activities
|
(62
|
)
|
|
(17
|
)
|
|
(4
|
)
|
|
—
|
|
|
(83
|
)
|
|||||
Net cash used in investing activities from continuing operations
|
(62
|
)
|
|
(17
|
)
|
|
(4
|
)
|
|
—
|
|
|
(83
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock repurchased
|
(119
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(119
|
)
|
|||||
Dividends paid
|
(65
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65
|
)
|
|||||
Other financing activities
|
(196
|
)
|
|
226
|
|
|
(50
|
)
|
|
58
|
|
|
38
|
|
|||||
Net cash (used in) from financing activities from continuing operations
|
(380
|
)
|
|
226
|
|
|
(50
|
)
|
|
58
|
|
|
(146
|
)
|
|||||
Effect of foreign currency exchange rate changes on cash
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|||||
Net decrease in cash and cash equivalents of discontinued operations
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|||||
Net (decrease) increase in cash
|
(274
|
)
|
|
5
|
|
|
(72
|
)
|
|
53
|
|
|
(288
|
)
|
|||||
Cash and cash equivalents, beginning of the period
|
432
|
|
|
14
|
|
|
287
|
|
|
(71
|
)
|
|
662
|
|
|||||
Cash and cash equivalents, end of the period
|
$
|
158
|
|
|
$
|
19
|
|
|
$
|
215
|
|
|
$
|
(18
|
)
|
|
$
|
374
|
|
|
2018 Sales
|
|
% of
2018 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
|
%
|
|
First Quarter Ended
|
||
|
March 30, 2018
|
||
|
(in millions)
|
||
Net sales
|
$
|
371
|
|
Operating costs and expenses
|
(349
|
)
|
|
Operating income from discontinued operations
|
22
|
|
|
Interest expense allocated to discontinued operations
|
(1
|
)
|
|
Income from discontinued operations before income taxes
|
21
|
|
|
Income tax expense
|
(5
|
)
|
|
Income from discontinued operations, net of income taxes
|
$
|
16
|
|
|
|
First Quarter Ended
|
|
|
|
|
||||||
|
(in millions, except per share data)
|
March 29,
2019 |
|
March 30,
2018 |
|
Increase/(decrease)
|
|
|||||
|
Net sales
|
$
|
2,700
|
|
|
$
|
2,371
|
|
|
14
|
%
|
|
|
Operating income
|
293
|
|
|
251
|
|
|
17
|
%
|
|
||
|
Plus: merger, acquisition and divestiture related expenses and losses
|
18
|
|
|
—
|
|
|
nm
|
|
|
||
|
Segment operating income
|
$
|
311
|
|
|
$
|
251
|
|
|
24
|
%
|
|
|
Operating margin
|
10.9
|
%
|
|
10.6
|
%
|
|
30
|
bpts
|
|
||
|
Segment operating margin
|
11.5
|
%
|
|
10.6
|
%
|
|
90
|
bpts
|
|
||
|
Interest expense
|
$
|
(37
|
)
|
|
$
|
(41
|
)
|
|
(10)
|
%
|
|
|
Interest income and other
|
$
|
4
|
|
|
$
|
6
|
|
|
nm
|
|
|
|
Effective income tax rate
(1)
|
14.2
|
%
|
|
11.1
|
%
|
|
nm
|
|
|
||
|
Net income from continuing operations attributable to L3
|
$
|
217
|
|
|
$
|
187
|
|
|
16
|
%
|
|
|
Adjusted net income from continuing operations attributable to L3
(2)
|
$
|
231
|
|
|
$
|
187
|
|
|
24
|
%
|
|
|
Diluted earnings per share from continuing operations
|
$
|
2.71
|
|
|
$
|
2.34
|
|
|
16
|
%
|
|
|
Adjusted diluted earnings per share from continuing operations
(2)
|
$
|
2.89
|
|
|
$
|
2.34
|
|
|
24
|
%
|
|
|
Diluted weighted average common shares outstanding
|
80.0
|
|
|
79.9
|
|
|
—
|
%
|
|
||
|
__________________
|
|
|
|
|
|
|
|
||||
|
(1)
___
The effective income tax rate corresponding to adjusted diluted EPS is 14.7% for the 2019 first quarter.
|
|
||||||||||
|
(2)
___
Income from continuing operations for the 2019 first quarter included merger, acquisition and divestiture related expenses and losses of $18 million ($14 million after income taxes), or $0.18 per diluted share. Excluding these items, adjusted net income from continuing operations attributable to L3 was $231 million, and adjusted diluted EPS from continuing operations was $2.89 for the 2019 first quarter. We believe that the merger, acquisition and divestiture related expenses and losses affect the comparability of the results of operations. We also believe that disclosing net income and diluted EPS excluding these items is useful to investors as it allows investors to more easily compare results. However, this non-GAAP financial measure may not be defined or calculated by other companies in the same manner.
|
|
||||||||||
|
nm - not meaningful
|
|
|
First Quarter Ended
|
||||||
|
March 29,
2019 |
|
March 30,
2018 |
||||
|
(dollars in millions)
|
||||||
Net sales:
(1)
|
|
|
|
||||
ISRS
|
$
|
1,253
|
|
|
$
|
1,016
|
|
C&NS
|
785
|
|
|
707
|
|
||
Electronic Systems
|
662
|
|
|
648
|
|
||
Consolidated net sales
|
$
|
2,700
|
|
|
$
|
2,371
|
|
Operating income:
|
|
|
|
||||
ISRS
|
$
|
130
|
|
|
$
|
93
|
|
C&NS
|
84
|
|
|
64
|
|
||
Electronic Systems
|
97
|
|
|
94
|
|
||
Total segment operating income
|
311
|
|
|
251
|
|
||
Merger, acquisition and divestiture related expenses and losses
|
(18
|
)
|
|
—
|
|
||
Consolidated operating income
|
$
|
293
|
|
|
$
|
251
|
|
Operating margin:
|
|
|
|
||||
ISRS
|
10.4
|
%
|
|
9.2
|
%
|
||
C&NS
|
10.7
|
%
|
|
9.1
|
%
|
||
Electronic Systems
|
14.7
|
%
|
|
14.5
|
%
|
||
Total segment operating margin
|
11.5
|
%
|
|
10.6
|
%
|
||
Merger, acquisition and divestiture related expenses and losses
|
(0.6
|
)%
|
|
—
|
%
|
||
Consolidated operating margin
|
10.9
|
%
|
|
10.6
|
%
|
(1)
|
Net sales after intercompany eliminations.
|
|
|
First Quarter Ended
|
|
|
|
|
|||||||
|
|
March 29,
2019 |
|
March 30,
2018 |
|
Increase
|
|
||||||
|
|
(dollars in millions)
|
|
||||||||||
|
Net sales
|
$
|
1,253
|
|
|
$
|
1,016
|
|
|
23
|
|
%
|
|
|
Operating income
|
$
|
130
|
|
|
$
|
93
|
|
|
40
|
|
%
|
|
|
Operating margin
|
10.4
|
%
|
|
9.2
|
%
|
|
120
|
|
bpts
|
|
|
|
First Quarter Ended
|
|
|
|
|
|||||||
|
|
March 29,
2019 |
|
March 30,
2018 |
|
Increase
|
|
||||||
|
|
(dollars in millions)
|
|
||||||||||
|
Net sales
|
$
|
785
|
|
|
$
|
707
|
|
|
11
|
|
%
|
|
|
Operating income
|
$
|
84
|
|
|
$
|
64
|
|
|
31
|
|
%
|
|
|
Operating margin
|
10.7
|
%
|
|
9.1
|
%
|
|
160
|
|
bpts
|
|
|
ISRS
|
|
C&NS
|
|
Electronic Systems
|
|
Consolidated Total
|
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2018
|
$
|
2,614
|
|
|
$
|
1,989
|
|
|
$
|
2,205
|
|
|
$
|
6,808
|
|
Business acquisitions
(1)
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Foreign currency translation adjustments
|
4
|
|
|
3
|
|
|
9
|
|
|
16
|
|
||||
March 29, 2019
|
$
|
2,618
|
|
|
$
|
1,994
|
|
|
$
|
2,214
|
|
|
$
|
6,826
|
|
(1)
|
The increase for the C&NS segment was due to the purchase price allocation adjustment for the ASV Global business acquisition.
|
|
First Quarter Ended
|
||||||||||
|
March 29,
2019 |
|
March 30,
2018 |
|
Cash Flow
Increase/
(decrease)
|
||||||
|
(in millions)
|
||||||||||
Net cash from (used in) operating activities from continuing operations
|
$
|
174
|
|
|
$
|
(35
|
)
|
|
$
|
209
|
|
Net cash used in investing activities from continuing operations
|
(74
|
)
|
|
(83
|
)
|
|
9
|
|
|||
Net cash used in financing activities from continuing operations
|
(80
|
)
|
|
(146
|
)
|
|
66
|
|
Date Declared
|
|
Record Date
|
|
Cash Dividend
Per Share
|
|
Total Cash
Dividends
Declared
|
|
Date Paid
|
|||||
|
|
|
|
|
|
(in millions)
|
|
|
|||||
February 12, 2019
|
|
March 1, 2019
|
|
$
|
0.85
|
|
|
$
|
67
|
|
(1)
|
|
March 15, 2019
|
(1)
|
During the
2019
first quarter
, we paid
$70 million
of cash dividends, including a
$3 million
net reduction of previously accrued dividends for employee-held stock awards.
|
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)).
|
|
|
Form of L3 Technologies, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2019 Version).
|
|
|
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.
|
|
L3 TECHNOLOGIES, INC.
|
|
|
|
|
|
By:
|
/s/ Ralph G. D’Ambrosio
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer and Authorized Signatory)
|
|
|
|
Date: May 1, 2019
|
|
|
|
By: L3 TECHNOLOGIES, INC.
_______
|
|
————————————————————
Christopher E. Kubasik
_________________
Chief Executive Officer and President
__ ___
|
|
|
|
————————————————————
Ann D. Davidson
______________________
Senior Vice President, General Counsel and
_
Corporate Secretary
__________________
|
1.
|
I have reviewed this report on Form 10-Q for the quarter ended
March 29, 2019
of L3 Technologies, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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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)
|
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-Q for the quarter ended
March 29, 2019
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)
|
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;
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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)
|
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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