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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 10, 2000
L-3 COMMUNICATIONS HOLDINGS, INC.
AND
L-3 COMMUNICATIONS CORPORATION
(Exact name of registrants as specified in their charters)
DELAWARE
(State or other jurisdiction of incorporation)
001-14141 13-3937434
333-46983 13-3937436
(Commission file numbers) (IRS Employer Identification No.)
600 THIRD AVE
NEW YORK, NY 10016
(212) 697-1111
(Address of principal executive office)
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ITEM 7. CONDENSED FINANCIAL STATEMENTS
A. FINANCIAL STATEMENTS
Honeywell Traffic Alert & Collision Avoidance System Business
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o Condensed Financial Statements
- Condensed Balance Sheet as of March 31, 2000 ............................... A-1
- Condensed Statements of Operations and Changes in Invested Equity for the
three months ended March 31, 2000 and March 31, 1999 ........................ A-2
- Condensed Statements of Cash Flows for the three months ended March 31,
2000 and March 31, 1999 ..................................................... A-3
- Notes to Unaudited Condensed Financial Statements ........................... A-4
B. PRO FORMA FINANCIAL INFORMATION
L-3 Communications Holdings, Inc. and L-3 Communications Corporation Unaudited
Pro Forma Condensed Consolidated Statement of Operations for the three months
ended March 31, 2000 ............................................................ B-1 - B-4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
L-3 COMMUNICATIONS HOLDINGS, INC. and
L-3 COMMUNICATIONS CORPORATION
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Registrant
Date: April 2, 2001 By: /s/ Robert V. LaPenta
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President and Chief Financial Officer
HONEYWELL TRAFFIC ALERT & COLLISION AVOIDANCE SYSTEM BUSINESS
CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, 2000
---------------
ASSETS
Current assets:
Accounts receivable ....................................... $20,200
Inventories ............................................... 12,371
Deferred tax assets ....................................... 2,257
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Total current assets .................................... 34,828
-------
Property, plant and equipment, net ......................... 2,385
Goodwill, net .............................................. 25,009
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Total assets ............................................ $62,222
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LIABILITIES AND INVESTED EQUITY
Current liabilities:
Accrued expenses .......................................... $ 7,595
-------
Total current liabilities ............................... 7,595
Commitments and contingencies
Invested equity ............................................ 54,627
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Total liabilities and invested equity ................... $62,222
=======
See notes to unaudited condensed financial statements.
A-1
HONEYWELL TRAFFIC ALERT & COLLISION AVOIDANCE SYSTEM BUSINESS
CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN INVESTED EQUITY
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
---------- ----------
Sales ............................................. $ 23,060 $ 27,336
Operating costs, expenses and other:
Cost of sales .................................... 10,130 12,458
Selling, general and administrative .............. 1,297 1,969
Research and development ......................... 975 2,106
-------- --------
Operating income .................................. 10,658 10,803
Interest expense .................................. 69 108
-------- --------
Income before income taxes ........................ 10,589 10,695
Provision for income taxes ........................ 4,204 4,295
-------- --------
Net income ........................................ 6,385 6,400
-------- --------
Invested equity, beginning of period .............. 54,347 22,978
Payments to Honeywell ............................. (6,105) (6,799)
-------- --------
Invested equity, end of period .................... $ 54,627 $ 22,579
======== ========
See notes to unaudited condensed financial statements.
A-2
HONEYWELL TRAFFIC ALERT & COLLISION AVOIDANCE SYSTEM BUSINESS
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................. $ 6,385 $ 6,400
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ......................... 489 488
Deferred income tax provision (benefit) ............... 31 (44)
Change in operating assets and liabilities:
Inventories ......................................... (277) --
Accrued expenses .................................... (314) 320
-------- --------
Net cash provided by operating activities .............. 6,314 7,164
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of fixed assets .............................. (209) (365)
-------- --------
CASH FLOWS USED IN FINANCING ACTIVITIES
Payments to Honeywell -- net ........................... (6,105) (6,799)
-------- --------
Net increase in cash and cash equivalents .............. -- --
Cash and cash equivalents at beginning of year ......... -- --
-------- --------
Cash and cash equivalents at end of year ............... $ -- $ --
======== ========
See notes to unaudited condensed financial statements.
A-3
HONEYWELL TRAFFIC ALERT & COLLISION AVOIDANCE SYSTEM BUSINESS
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BACKGROUND AND DESCRIPTION OF BUSINESS
The Honeywell Traffic Alert and Collision Avoidance System product line (the
"TCAS Business"), a leader in avionics safety systems, produces and develops
airborne collision avoidance systems of which approximately 6,500 units have
been installed in commercial, corporate and military aircraft. The systems
reduce the potential for mid-air collisions and so-called near-miss incidents
among aircraft. The systems help prevent accidents by displaying to the flight
crew the position of surrounding aircraft and, when necessary, providing both
visual and audible warnings and maneuvering instructions and provide an
independent and complementary supplement to the air traffic control system.
The TCAS business headquarters and principal operations are located in Phoenix,
Arizona.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
BASIS OF PRESENTATION AND USE OF ESTIMATES
The TCAS Business unit was an integrated business unit of Honeywell Inc.
("Honeywell"). The accompanying financial statements reflect the TCAS Business
assets, liabilities and operations, which have been derived from Honeywell's
historical financial statements and accounting records. As an integrated
business unit, prior to December 31, 1999, Honeywell did not maintain separate
accounts receivable and inventory records for the TCAS Business, nor did it
allocate any such balances to the TCAS Business. All significant intercompany
accounts and transactions have been eliminated.
The TCAS Business operations, as presented herein include significant
allocations and estimates of expenses of Honeywell based upon estimates of
services performed by Honeywell, which management of the TCAS Business believes
are reasonable. Such services include manufacturing support, treasury, cash
management, employee benefits, taxes, risk management, internal audit and
general corporate services. Accordingly, the financial position results of
operations and cash flows as presented herein may not be the same as if the
TCAS Business had been an independent, stand alone entity.
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires the TCAS
Business management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. The most significant of these
estimates and assumptions relate to cost allocations from Honeywell, cost in
excess of net assets acquired, income taxes, litigation and environmental
obligations, warranty reserves, pension estimates and recoverability of
recorded amounts of fixed assets. Actual results could differ from these
estimates.
The accompanying financial statements have been prepared in accordance with the
accounting principles applicable to interim financial statements and the rules
of the Security and Exchange Commission, and accordingly may not include all
disclosures required by accounting principles generally accepted in the United
States of America. These financial statements are unaudited but in the opinion
of management reflect all adjustments, consistent of normal recurring
adjustments required for a fair presentation.
3. TRANSACTIONS WITH HONEYWELL
The TCAS Business relies on Honeywell for certain services, including
manufacturing support, treasury, purchasing, procurement of inventories, cash
management, employee benefits, taxes, risk management, internal audit, fixed
asset systems support, payroll processing, mainframe and PC processing and
support services, and general corporate services. Although certain assets,
liabilities and expenses related to these services have been allocated to the
TCAS Business, the combined financial position, results of operations and cash
flows presented in the accompanying financial statements would not be the same
as if the TCAS Business had been an independent, stand alone entity.
A-4
HONEYWELL TRAFFIC ALERT & COLLISION AVOIDANCE SYSTEM BUSINESS
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
4. INVENTORIES
MARCH 31,
2000
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Raw materials ........... $ 6,845
Work in process ......... 2,422
Finished goods .......... 3,104
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Total .................. $12,371
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5. COMMITMENTS AND CONTINGENCIES
The TCAS Business is periodically subject to litigation, claims or assessments
and various contingent liabilities (including environmental matters) incidental
to its business. With respect to those investigative actions, items of
litigation, claims or assessments of which they are aware, management of the
TCAS Business is of the opinion that the probability is remote that, after
taking into account certain provisions that have been made with respect to
these matters, the ultimate resolution of any such investigative actions, items
of litigation, claims or assessments will have a material adverse effect on the
financial position, cash flows or results of operations of the TCAS Business.
6. INVESTED EQUITY
Invested equity represents the equity contributed to the TCAS Business by
Honeywell, advances to or from affiliates, and the accumulated results of
operations of the TCAS Business.
A-5
b. Pro Forma Financial Information
L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
B-1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma statement of operations data gives effect
to the acquisition by L-3 Communications Holdings, Inc. (the "Company") of the
Traffic Alert and Collision Avoidance System Business ("TCAS Business") of
Honeywell, Inc. which was completed in April 2000, as if it had occurred on
January 1, 2000.
On April 28, 2000, the Company acquired the TCAS Business from Honeywell
Inc. for $239.6 million in cash including expenses. The TCAS acquisition was
financed with borrowings under a revolving 364-day senior credit facility.
The unaudited condensed pro forma statement of operations does not reflect
any cost savings that management of the Company believes would have resulted had
the acquisition occurred on January 1, 2000. The pro forma financial information
should be read in conjunction with the audited consolidated financial statements
of the Company as of December 31, 2000. The unaudited pro forma condensed
financial information may not be indicative of the results of operations of the
Company that actually would have occurred had the acquisition been completed on
January 1, 2000 or the results of operations of the Company that may be obtained
in the future.
B-2
L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
TCAS
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PRO FORMA
L-3 HISTORICAL(1) ADJUSTMENTS PRO FORMA
----------- --------------- ----------------- ----------
(in millions)
STATEMENT OF OPERATIONS DATA:
- -----------------------------
Sales ................................................. $ 377.1 $ 23.1 $ -- $ 400.2
Costs and expenses .................................... 342.4 12.4 1.1 (2) 355.9
------- ------- ----------- -------
Operating income (loss) ............................. 34.7 10.7 (1.1) 44.3
Interest and investment income ........................ 0.8 -- -- 0.8
Interest expense ...................................... 17.6 0.1 4.3 (3) 22.0
------- ------- ----------- -------
Income (loss) before income taxes ................... 17.9 10.6 (5.4) 23.1
Provision (benefit) for income taxes .................. 7.0 4.2 (2.1) (4) 9.1
------- ------- ----------- -------
Net income (loss) ................................... $ 10.9 $ 6.4 $ (3.3) $ 14.0
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L-3 HOLDINGS, INC. EARNINGS PER SHARE:
- --------------------------------------
Basic ............................................... $ 0.33 $ 0.42
Diluted ............................................. $ 0.32 $ 0.41
L-3 HOLDINGS, INC. WEIGHTED AVERAGE SHARES OUTSTANDING:
- -------------------------------------------------------
Basic ............................................... 33.0 33.0
Diluted ............................................. 34.5 34.5
B-3
L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
1. On April 28, 2000, the Company acquired the TCAS Business from Honeywell
Inc. for $239.6 million in cash including expenses. The TCAS acquisition
was financed with borrowings under a revolving 364-day senior credit
facility.
2. Estimated excess of purchase price, including expenses, over the estimated
fair value of the identifiable net assets acquired (goodwill) related to
the TCAS acquisition was $214.3 million. The goodwill is being amortized
over 40 years. The table below presents the estimated increase to goodwill
amortization for the three months ended March 31, 2000 that would have
occurred if the TCAS acquisition was completed on January 1, 2000.
(in millions)
Pro forma amortization expense ................. $ 1.3
Less: historical amortization expense .......... (0.2)
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Pro forma adjustment ........................... $ 1.1
======
3. Pro forma interest expense was calculated using the average interest rate of
7.422% on the Company's outstanding revolver borrowings during the three
months ended March 31, 2000 and the borrowings of $239.6 million incurred to
finance the TCAS acquisition. The table below presents the increase to
interest expense for the three months ended March 31, 2000 that would have
occurred if the TCAS acquisition was completed on January 1, 2000.
(in millions)
Pro forma interest expense ..................... $ 4.4
Less: historical interest expense .............. (0.1)
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Pro forma adjustment ........................... $ 4.3
======
4. The pro forma adjustments were tax-effected using a statutory (federal and
state) tax rate of 39.4%.
B-4