Revisions to Previously Issued Financial Statements | 3 Months Ended |
Mar. 28, 2014 |
Accounting Changes and Error Corrections [Abstract] | ' |
Revisions to Previously Issued Financial Statements | ' |
3. Revisions to Previously Issued Financial Statements |
The Company is revising its previously issued financial statements to update for: (1) accounting adjustments due to the internal review at its Aerospace Systems segment, (2) accounting error related to a sales-type lease transaction for flight simulator systems within its Electronic Systems segment, and (3) previously identified immaterial errors already recognized in its financial statements but not recorded in the appropriate periods. The accounting errors related to the sales-type lease transaction and immaterial out of period amounts are not related to the internal review at its Aerospace Systems segment. |
Internal Review of Aerospace Systems Segment: The Company conducted an internal review related to instances of misconduct and accounting errors at its Aerospace Systems segment. This review was conducted with the assistance of outside legal and accounting advisors, and has been completed. As a result of the internal review, the Company identified and recorded aggregate pre-tax charges as follows: (1) $60 million for 2013, (2) $25 million for 2012, (3) $5 million for 2011, and (4) $4 million for periods prior to 2011. Furthermore, this Form 10-Q/A also includes aggregate pre-tax charges related to the internal review of the Aerospace Systems segment. The pre-tax charges related to the internal review of the Aerospace Systems segment for the three months ended March 28, 2014 is approximately $20 million. |
The adjustments related to the internal review only affected the Logistics Solutions and Platform Systems sectors of the Aerospace Systems segment. The cumulative aggregate adjustments attributable to the Logistics Solutions sector are approximately $91 million, and at the Platform Systems sector are approximately $23 million through March 28, 2014. The Logistics Solutions sector adjustments relate to: (1) losses of $58 million through March 28, 2014 with respect to the U.S. Army C-12 fixed-price maintenance and logistics support contract due to cost overruns inappropriately deferred, sales invoices inappropriately prepared, and the failure to timely and accurately perform contract estimates at completion and valuation assessments of inventories and receivables at the Army Sustainment Division, and (2) accounting errors of $33 million through March 28, 2014 in connection with the valuation of inventories and receivables, as well as the correction for certain accruals on other logistics support contracts. The Platform Systems sector adjustments are primarily due to: (1) losses of $11 million on two aircraft modification contracts and two contracts for rotary wing sub-assemblies and parts, and (2) write-offs of deferred costs of $12 million to design and test aerostructures for a new commercial aircraft. |
Sales-Type Lease Transaction: The Company routinely performs on-site accounting and internal control review procedures on a rotational basis As part of a previously planned review of its Simulation & Training business in its Electronic Systems segment and unrelated to the internal review at its Aerospace Systems segment, the Company evaluated the accounting treatment related to a sales-type lease transaction with the U.S. Army for rotary wing flight simulator systems. The period of performance under this contract began in 2004 and ends in 2023. Based on the results of this evaluation, the Company has adjusted its previously issued financial statements to: (1) increase interest income accretion on the net investment related to this sales-type lease transaction by an estimated aggregate amount of approximately $5 million for 2013, $3 million for each of 2012 and 2011 and $12 million for periods prior to 2011, and (2) decrease sales by approximately $5 million for the quarter ended March 28, 2014 and $7 million for 2013 and related decrease in cost of sales by approximately $5 million for the quarter ended March 28, 2014 and $7 million for 2013 and $5 million for periods prior to 2011. |
Out of Period Amounts: The Company identified various out of period amounts included in its previously issued financial statements that were deemed to be immaterial individually and in the aggregate. In prior periods, in accordance with Accounting Standards Codification (“ASC”) 650-10-S99 and S55 (formerly Staff Accounting Bulletins (“SAB”) No. 99 and No. 108), Accounting Changes and Error Corrections, the Company concluded that these errors were individually, and in the aggregate, not material, quantitatively or qualitatively, to the financial statements in the period recorded or to the relevant prior periods. Accordingly, the Company recorded these errors in its financial statements in the period that the error was identified. The Company, on a voluntary basis, is revising its previously issued financial statements to correct for these errors already recognized in its financial statements but not recorded in the appropriate periods to reflect them in the appropriate period. These out of period amounts were not discovered as part of the internal review of the Aerospace Systems segment discussed above, but rather represent previously identified errors “resulting from mathematical mistakes, mistakes in application of generally accepted accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared,” as defined in ASC 250-10-20 Accounting Changes and Error Corrections. The Company, therefore, is not treating these amounts as changes in estimates. These errors consist of: (1) increases in development and material costs related to Broadband Communication Systems that were recorded in the first quarter of 2013 but should have been recorded in the fourth quarter of 2012, (2) a sub-contractor subscription deposit that was recorded as sales and income in the fourth quarter of 2012 but should have been amortized to sales and income during 2013, (3) costs accrued in the fourth quarter of 2012 for goods or services received in the first quarter of 2013, (4) several unrecorded liabilities that were recorded in the first quarter of 2013 but should have been recorded in the fourth quarter of 2012, (5) a correction of accrued vacation that was recorded in the fourth quarter of 2013 but should have been recorded in the fourth quarter of 2012 and the first, second and third quarters of 2013, and (6) a warranty reserve reduction recorded in the third quarter of 2012 that should have been recorded in the fourth quarter of 2011. |
With respect to each of these immaterial out of period amounts included in the Company’s previously issued financial statements, the table below presents the: (1) nature of the adjustments, (2) applicable segment and (3) amount of increase (or decrease) to sales and operating income for the quarters ended December 31, September 27, June 28, and March 29, 2013. |
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| | | | December 31, | | | September 27, | | | June 28, | | | March 29, | | | | | | | |
2013 | 2013 | 2013 | 2013 | | | | | | |
Nature of Adjustment | | Applicable | | Sales | | | Operating | | | Sales | | | Operating | | | Sales | | | Operating | | | Sales | | | Operating | | | | | | | |
Segment | Income | Income | Income | Income | | | | | | |
| | | | ($ in millions) | | | | | | | |
Higher development and material costs for networked communications systems | | Communication Systems | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 10 | | | $ | 10 | | | | | | | |
| | | | | | | | | | | | | | | |
Sub-contractor subscription deposit | | Aerospace Systems | | | 5 | | | | — | | | | 7 | | | | 1 | | | | 7 | | | | 1 | | | | 7 | | | | 1 | | | | | | | |
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Costs accruals for goods/services received | | Aerospace Systems | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5 | | | | 1 | | | | | | | |
| | | | | | | | | | | | | | | |
Unrecorded liabilities | | Aerospace Systems | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2 | ) | | | — | | | | | | | |
| | | | | | | | | | | | | | | |
Accrued vacation | | Aerospace Systems | | | — | | | | 6 | | | | — | | | | (2 | ) | | | — | | | | (2 | ) | | | — | | | | (2 | ) | | | | | | |
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Overstated revenue | | Aerospace Systems | | | 4 | | | | — | | | | (4 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | |
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Warranty reserve | | Electronic Systems | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | |
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Total | | | | $ | 9 | | | $ | 6 | | | $ | 3 | | | $ | (1 | ) | | $ | 7 | | | $ | (1 | ) | | $ | 20 | | | $ | 10 | | | | | | | |
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The table below presents the impact of the matters discussed above on sales and pre-tax income for the years ended December 31, 2013, 2012 and 2011, and for the years ended prior to December 31, 2011. |
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| | 2013 | | | 2012 | | | 2011 | | | Prior to 2011 | | | | | | | | | |
| | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | | | | | | | |
Income | Income | Income | Income | | | | | | | | |
| | (in millions) | | | | | | | | | |
Army C-12 Contract | | $ | (25 | ) | | $ | (35 | ) | | $ | (3 | ) | | $ | (16 | ) | | $ | (1 | ) | | $ | (3 | ) | | $ | — | | | $ | — | | | | | | | | | |
Other Logistics Support Contracts | | | (2 | ) | | | (11 | ) | | | (2 | ) | | | (11 | ) | | | — | | | | (2 | ) | | | (1 | ) | | | (4 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Logistics Solutions | | $ | (27 | ) | | $ | (46 | ) | | $ | (5 | ) | | $ | (27 | ) | | $ | (1 | ) | | $ | (5 | ) | | $ | (1 | ) | | $ | (4 | ) | | | | | | | | |
Platform Systems | | | (12 | ) | | | (14 | ) | | | 3 | | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | |
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Total Internal Review of Aerospace | | $ | (39 | ) | | $ | (60 | ) | | $ | (2 | ) | | $ | (25 | ) | | $ | (1 | ) | | $ | (5 | ) | | $ | (1 | ) | | $ | (4 | ) | | | | | | | | |
Systems Segment | | | | | | | | |
Sales-Type Lease Transaction | | | (7 | ) | | | 5 | | | | — | | | | 3 | | | | — | | | | 3 | | | | — | | | | 17 | | | | | | | | | |
Out of Period Amounts | | | 39 | | | | 14 | | | | (36 | ) | | | (18 | ) | | | (3 | ) | | | 4 | | | | — | | | | — | | | | | | | | | |
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Total Revisions | | $ | (7 | ) | | $ | (41 | ) | | $ | (38 | ) | | $ | (40 | ) | | $ | (4 | ) | | $ | 2 | | | $ | (1 | ) | | $ | 13 | | | | | | | | | |
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The table below presents the impact of the matters discussed above on sales and pre-tax income for the quarters ended March 28, 2014, December 31, September 27, June 28, and March 29, 2013. |
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| | March 28, 2014 | | | December 31, 2013 | | | September 27, 2013 | | | 28-Jun-13 | | | March 29, 2013 | |
| | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | Sales | | | Pre-tax | | | Sales | | | Pre-tax | |
Income | Income | Income | Income | Income |
| | (in millions) | |
Army C-12 Contract | | $ | (2 | ) | | $ | (4 | ) | | $ | (24 | ) | | $ | (20 | ) | | $ | 3 | | | $ | (2 | ) | | $ | (3 | ) | | $ | (7 | ) | | $ | (1 | ) | | $ | (6 | ) |
Other Logistics Support Contracts | | | — | | | | (5 | ) | | | (1 | ) | | | (2 | ) | | | (1 | ) | | | (5 | ) | | | — | | | | (2 | ) | | | — | | | | (2 | ) |
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Logistics Solutions | | | (2 | ) | | | (9 | ) | | | (25 | ) | | | (22 | ) | | | 2 | | | | (7 | ) | | | (3 | ) | | | (9 | ) | | | (1 | ) | | | (8 | ) |
Platform Systems | | | (6 | ) | | | (11 | ) | | | (2 | ) | | | (2 | ) | | | 1 | | | | — | | | | (6 | ) | | | (6 | ) | | | (5 | ) | | | (6 | ) |
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Total Internal Review of Aerospace Systems Segment | | | (8 | ) | | | (20 | ) | | | (27 | ) | | | (24 | ) | | | 3 | | | | (7 | ) | | | (9 | ) | | | (15 | ) | | | (6 | ) | | | (14 | ) |
Sales-Type Lease Transaction | | | (5 | ) | | | — | | | | (3 | ) | | | 1 | | | | (1 | ) | | | 2 | | | | (1 | ) | | | 1 | | | | (2 | ) | | | 1 | |
Out of Period Amounts | | | — | | | | — | | | | 9 | | | | 6 | | | | 3 | | | | (1 | ) | | | 7 | | | | (1 | ) | | | 20 | | | | 10 | |
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Total Revisions | | $ | (13 | ) | | $ | (20 | ) | | $ | (21 | ) | | $ | (17 | ) | | $ | 5 | | | $ | (6 | ) | | $ | (3 | ) | | $ | (15 | ) | | $ | 12 | | | $ | (3 | ) |
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In accordance with ASC 650-10-S99 and S55, the Company performed an analysis to determine if the impact of the amounts disclosed above were material to its previously issued financial statements. Based on that analysis, the Company believes that its previously issued financial statements are not materially misstated on either a quantitative or qualitative basis. However, as a result of completing the review, the Company believes that correcting these errors in the quarterly report on Form 10-Q for the second quarter of 2014 would, in the aggregate, cause a material misstatement to forecasted pre-tax income and net income for the fiscal year ending December 31, 2014. Accordingly, the Company is correcting these errors by revising its previously issued financial statements to record all the adjustments in the tables above in the appropriate period. |
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The tables below present the Company’s: (1) As Previously Reported, (2) Adjustments, and (3) As Currently Reported Condensed Consolidated Balance Sheets as of March 28, 2014, Statements of Operations for the quarterly periods ended March 28, 2014 and March 29, 2013 and the Operating Activities for the Statement of Cash Flows for the period ended March 29, 2013. The Adjustments correct for: (1) the results of the Aerospace Systems internal review, (2) the accounting related to a sales-type lease transaction within the Company’s Electronic Systems segment and (3) immaterial out of period amounts previously recorded in the Company’s financial statements but not recorded in the appropriate period to reflect them in the appropriate period. |
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| | | | | Adjustments for: | | | | | | | | | | | | | | | | | | | | | | | | |
| | As | | | Aerospace | | | Sales-Type | | | Out of Period | | | As | | | | | | | | | | | | | | | | | | | | | |
Previously | Systems | Lease | Amounts | Revised | | | | | | | | | | | | | | | | | | | | |
Reported | Segment | Transaction | | | | | | | | | | | | | | | | | | | | | | |
| Internal | | | | | | | | | | | | | | | | | | | | | | | |
| Review | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | | | |
Unaudited Condensed Consolidated Balance Sheet as of March 28, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 227 | | | $ | — | | | $ | — | | | $ | — | | | $ | 227 | | | | | | | | | | | | | | | | | | | | | |
Billed receivables, net of allowances of $24 in 2014 | | | 1,093 | | | | (25 | ) | | | — | | | | — | | | | 1,068 | | | | | | | | | | | | | | | | | | | | | |
Contracts in process | | | 2,763 | | | | (82 | ) | | | (33 | ) | | | — | | | | 2,648 | | | | | | | | | | | | | | | | | | | | | |
Inventories | | | 375 | | | | — | | | | — | | | | — | | | | 375 | | | | | | | | | | | | | | | | | | | | | |
Deferred income taxes | | | 118 | | | | 26 | | | | — | | | | — | | | | 144 | | | | | | | | | | | | | | | | | | | | | |
Other current assets | | | 126 | | | | 8 | | | | 30 | | | | (4 | ) | | | 160 | | | | | | | | | | | | | | | | | | | | | |
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Total current assets | | | 4,702 | | | | (73 | ) | | | (3 | ) | | | (4 | ) | | | 4,622 | | | | | | | | | | | | | | | | | | | | | |
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Property, plant and equipment, net | | | 1,028 | | | | 5 | | | | — | | | | — | | | | 1,033 | | | | | | | | | | | | | | | | | | | | | |
Goodwill | | | 7,821 | | | | — | | | | — | | | | — | | | | 7,821 | | | | | | | | | | | | | | | | | | | | | |
Identifiable intangible assets | | | 283 | | | | — | | | | — | | | | — | | | | 283 | | | | | | | | | | | | | | | | | | | | | |
Deferred debt issue costs | | | 23 | | | | — | | | | — | | | | — | | | | 23 | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | 208 | | | | — | | | | 37 | | | | — | | | | 245 | | | | | | | | | | | | | | | | | | | | | |
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Total assets | | $ | 14,065 | | | $ | (68 | ) | | $ | 34 | | | $ | (4 | ) | | $ | 14,027 | | | | | | | | | | | | | | | | | | | | | |
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LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable, trade | | $ | 590 | | | $ | — | | | $ | — | | | $ | — | | | $ | 590 | | | | | | | | | | | | | | | | | | | | | |
Accrued employment costs | | | 538 | | | | 5 | | | | — | | | | — | | | | 543 | | | | | | | | | | | | | | | | | | | | | |
Accrued expenses | | | 403 | | | | 1 | | | | — | | | | — | | | | 404 | | | | | | | | | | | | | | | | | | | | | |
Advance payments and billings in excess of costs incurred | | | 523 | | | | 1 | | | | 5 | | | | — | | | | 529 | | | | | | | | | | | | | | | | | | | | | |
Income taxes | | | 22 | | | | (10 | ) | | | — | | | | 17 | | | | 29 | | | | | | | | | | | | | | | | | | | | | |
Other current liabilities | | | 380 | | | | 2 | | | | — | | | | — | | | | 382 | | | | | | | | | | | | | | | | | | | | | |
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Total current liabilities | | | 2,456 | | | | (1 | ) | | | 5 | | | | 17 | | | | 2,477 | | | | | | | | | | | | | | | | | | | | | |
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Pension and postretirement benefits | | | 729 | | | | — | | | | — | | | | — | | | | 729 | | | | | | | | | | | | | | | | | | | | | |
Deferred income taxes | | | 679 | | | | 3 | | | | — | | | | (21 | ) | | | 661 | | | | | | | | | | | | | | | | | | | | | |
Other liabilities | | | 382 | | | | — | | | | 12 | | | | — | | | | 394 | | | | | | | | | | | | | | | | | | | | | |
Long-term debt | | | 3,631 | | | | — | | | | — | | | | — | | | | 3,631 | | | | | | | | | | | | | | | | | | | | | |
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Total liabilities | | | 7,877 | | | | 2 | | | | 17 | | | | (4 | ) | | | 7,892 | | | | | | | | | | | | | | | | | | | | | |
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Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
L-3 shareholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
L-3 Communications Holdings, Inc.’s common stock | | | 5,767 | | | | — | | | | — | | | | — | | | | 5,767 | | | | | | | | | | | | | | | | | | | | | |
L-3 Communications Holdings, Inc.’s treasury stock at cost | | | (5,421 | ) | | | — | | | | — | | | | — | | | | (5,421 | ) | | | | | | | | | | | | | | | | | | | | |
Retained earnings | | | 5,895 | | | | (73 | ) | | | 18 | | | | 2 | | | | 5,842 | | | | | | | | | | | | | | | | | | | | | |
Accumulated other comprehensive loss | | | (128 | ) | | | — | | | | — | | | | — | | | | (128 | ) | | | | | | | | | | | | | | | | | | | | |
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Total L-3 shareholders’ equity | | | 6,113 | | | | (73 | ) | | | 18 | | | | 2 | | | | 6,060 | | | | | | | | | | | | | | | | | | | | | |
Noncontrolling interests | | | 75 | | | | — | | | | — | | | | — | | | | 75 | | | | | | | | | | | | | | | | | | | | | |
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Total equity | | | 6,188 | | | | (73 | ) | | | 18 | | | | 2 | | | | 6,135 | | | | | | | | | | | | | | | | | | | | | |
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Total liabilities and equity | | $ | 14,065 | | | $ | (71 | ) | | $ | 35 | | | $ | (2 | ) | | $ | 14,027 | | | | | | | | | | | | | | | | | | | | | |
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| | As | | | Adjustments for: | | | As | | | | | | | | | | | | | | | | | | | | | |
Previously | Revised | | | | | | | | | | | | | | | | | | | | |
| | Reported | | Aerospace | | | Sales-Type | | | Out of Period | | | | | | | | | | | | | | | | | | | | | | | |
| Systems | Lease | Amounts | | | | | | | | | | | | | | | | | | | | | |
| Segment | Transaction | | | | | | | | | | | | | | | | | | | | | | |
| Internal | | | | | | | | | | | | | | | | | | | | | | | |
| Review | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions, except per share data) | | | | | | | | | | | | | | | | | | | | | |
Unaudited Condensed Consolidated Statement of Operations, for the quarter ended March 28, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | 1,661 | | | $ | (7 | ) | | $ | (5 | ) | | $ | — | | | $ | 1,649 | | | | | | | | | | | | | | | | | | | | | |
Services | | | 1,310 | | | | (2 | ) | | | — | | | | — | | | | 1,308 | | | | | | | | | | | | | | | | | | | | | |
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Total net sales | | | 2,971 | | | | (9 | ) | | | (5 | ) | | | — | | | | 2,957 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | | (1,467 | ) | | | (4 | ) | | | 5 | | | | — | | | | (1,466 | ) | | | | | | | | | | | | | | | | | | | | |
Services | | | (1,197 | ) | | | (7 | ) | | | — | | | | (1 | ) | | | (1,205 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total cost of sales | | | (2,664 | ) | | | (11 | ) | | | 5 | | | | (1 | ) | | | (2,671 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 307 | | | | (20 | ) | | | — | | | | (1 | ) | | | 286 | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | (43 | ) | | | — | | | | — | | | | — | | | | (43 | ) | | | | | | | | | | | | | | | | | | | | |
Interest and other income, net | | | 3 | | | | — | | | | 2 | | | | — | | | | 5 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 267 | | | | (20 | ) | | | 2 | | | | (1 | ) | | | 248 | | | | | | | | | | | | | | | | | | | | | |
Provision for income taxes | | | (85 | ) | | | 9 | | | | — | | | | — | | | | (76 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 182 | | | $ | (11 | ) | | $ | 2 | | | $ | (1 | ) | | $ | 172 | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to noncontrolling interests | | | (2 | ) | | | — | | | | — | | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to L-3 | | $ | 180 | | | $ | (11 | ) | | $ | 2 | | | $ | (1 | ) | | $ | 170 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share attributable to L-3 Holdings’ common shareholders: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 2.09 | | | $ | (0.13 | ) | | $ | 0.02 | | | $ | (0.01 | ) | | $ | 1.97 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted | | $ | 2.01 | | | $ | (0.12 | ) | | $ | 0.02 | | | $ | (0.01 | ) | | $ | 1.9 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash dividends paid per common share | | $ | 0.6 | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.6 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
L-3 Holdings’ weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 86.1 | | | | — | | | | — | | | | — | | | | 86.1 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted | | | 89.4 | | | | — | | | | — | | | | — | | | | 89.4 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As | | | Adjustments for: | | | As | | | | | | | | | | | | | | | | | | | | | |
Previously | Revised | | | | | | | | | | | | | | | | | | | | |
| Reported | | Aerospace | | | Sales-Type | | | Out of Period | | | | | | | | | | | | | | | | | | | | | | | |
| Systems | Lease | Amounts | | | | | | | | | | | | | | | | | | | | | |
| Segment | Transaction | | | | | | | | | | | | | | | | | | | | | | |
| Internal | | | | | | | | | | | | | | | | | | | | | | | |
| Review | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions, except per share data) | | | | | | | | | | | | | | | | | | | | | |
Unaudited Condensed Consolidated Statement of Operations, for the quarter ended March 29, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | 1,813 | | | $ | (4 | ) | | $ | (2 | ) | | $ | 14 | | | $ | 1,821 | | | | | | | | | | | | | | | | | | | | | |
Services | | | 1,372 | | | | (1 | ) | | | — | | | | 5 | | | | 1,376 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total net sales | | | 3,185 | | | | (5 | ) | | | (2 | ) | | | 19 | (1) | | | 3,197 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of sales: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | | (1,620 | ) | | | (1 | ) | | | 2 | | | | (3 | ) | | | (1,622 | ) | | | | | | | | | | | | | | | | | | | | |
Services | | | (1,252 | ) | | | (7 | ) | | | — | | | | (6 | ) | | | (1,265 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total cost of sales | | | (2,872 | ) | | | (8 | ) | | | 2 | | | | (9 | ) | | | (2,887 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 313 | | | | (13 | ) | | | — | | | | 10 | | | | 310 | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | (43 | ) | | | — | | | | — | | | | — | | | | (43 | ) | | | | | | | | | | | | | | | | | | | | |
Interest and other income, net | | | 3 | | | | — | | | | 1 | | | | (1 | ) | | | 3 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 273 | | | | (13 | ) | | | 1 | | | | 9 | | | | 270 | | | | | | | | | | | | | | | | | | | | | |
Provision for income taxes | | | (79 | ) | | | 4 | | | | — | | | | (3 | ) | | | (78 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 194 | | | $ | (9 | ) | | $ | 1 | | | $ | 6 | | | $ | 192 | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to noncontrolling interests | | | (1 | ) | | | — | | | | — | | | | — | | | | (1 | ) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to L-3 | | $ | 193 | | | $ | (9 | ) | | $ | 1 | | | $ | 6 | | | $ | 191 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share attributable to L-3 Holdings’ common shareholders: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 2.14 | | | $ | (0.10 | ) | | $ | 0.01 | | | $ | 0.07 | | | $ | 2.12 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted | | $ | 2.11 | | | $ | (0.10 | ) | | $ | 0.01 | | | $ | 0.07 | | | $ | 2.09 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash dividends paid per common share | | $ | 0.55 | | | $ | — | | | $ | — | | | $ | — | | | $ | 0.55 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
L-3 Holdings’ weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 90.3 | | | | — | | | | — | | | | — | | | | 90.3 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted | | | 91.5 | | | | — | | | | — | | | | — | | | | 91.5 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
(1) | Includes rounding of $1 million. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As | | | Net | | | As | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Previously | Adjustments | Revised | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reported | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaudited Condensed Consolidated Statement of Cash Flows for the quarter ended March 28, 2014: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 182 | | | $ | (10 | ) | | $ | 172 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation of property, plant and equipment | | | 42 | | | | — | | | | 42 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles and other assets | | | 12 | | | | — | | | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred income tax provision | | | 22 | | | | 1 | | | | 23 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based employee compensation expense | | | 15 | | | | — | | | | 15 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contributions to employee savings plans in L-3 Holdings’ common stock | | | 44 | | | | — | | | | 44 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of pension and postretirement benefit plans net loss and prior service cost | | | 4 | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of bond discounts and deferred debt issue costs (included in interest expense) | | | 2 | | | | — | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other non-cash items | | | 1 | | | | — | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Billed receivables | | | (74 | ) | | | 1 | | | | (73 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts in process | | | (236 | ) | | | 22 | | | | (214 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Inventories | | | (16 | ) | | | — | | | | (16 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | (4 | ) | | | (6 | ) | | | (10 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable, trade | | | 49 | | | | — | | | | 49 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accrued employment costs | | | (12 | ) | | | 2 | | | | (10 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accrued expenses | | | (49 | ) | | | (2 | ) | | | (51 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advance payments and billings in excess of costs incurred | | | (46 | ) | | | — | | | | (46 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income taxes | | | 38 | | | | (10 | ) | | | 28 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excess income tax benefits related to share-based payment arrangements | | | (14 | ) | | | — | | | | (14 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other current liabilities | | | (8 | ) | | | 2 | | | | (6 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension and postretirement benefits | | | (2 | ) | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
All other operating activities | | | (12 | ) | | | — | | | | (12 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash (used in) from operating activities | | $ | (62 | ) | | $ | — | | | $ | (62 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As | | | Net | | | As | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Previously | Adjustments | Revised | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reported | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaudited Condensed Consolidated Statement of Cash Flows for the quarter ended March 29, 2013: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 194 | | | $ | (2 | ) | | $ | 192 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation of property, plant and equipment | | | 42 | | | | — | | | | 42 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles and other assets | | | 12 | | | | — | | | | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred income tax provision | | | 19 | | | | (1 | ) | | | 18 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based employee compensation expense | | | 14 | | | | — | | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contributions to employee savings plans in L-3 Holdings’ common stock | | | 32 | | | | — | | | | 32 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of pension and postretirement benefit plans net loss and prior service cost | | | 22 | | | | — | | | | 22 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of bond discounts and deferred debt issue costs (included in interest expense) | | | 2 | | | | — | | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other non-cash items | | | 3 | | | | — | | | | 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Billed receivables | | | (146 | ) | | | — | | | | (146 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contracts in process | | | (145 | ) | | | 20 | | | | (125 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Inventories | | | 8 | | | | — | | | | 8 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | 49 | | | | (2 | ) | | | 47 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable, trade | | | 105 | | | | (11 | ) | | | 94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accrued employment costs | | | 13 | | | | 4 | | | | 17 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accrued expenses | | | (41 | ) | | | — | | | | (41 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advance payments and billings in excess of costs incurred | | | (37 | ) | | | — | | | | (37 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income taxes | | | 51 | | | | — | | | | 51 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Excess income tax benefits related to share-based payment arrangements | | | (2 | ) | | | — | | | | (2 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other current liabilities | | | 4 | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pension and postretirement benefits | | | 4 | | | | — | | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
All other operating activities | | | (57 | ) | | | (8 | ) | | | (65 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash (used in) from operating activities | | $ | 146 | | | $ | — | | | $ | 146 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |