STRENGTH THROUGH AGILITY 2012 ANNUAL REPORT 1 L-3 2012 AnnuAL Repo Rt DRIVING TO ENHANCE VALUE BUILDING ON OUR STRENGTHS ADAPTING TO THE CHANGING ENVIRONMENT L-3 demonstrated strong performance in 2012, notwithstanding the challenging environment, by reshaping our business, winning key competitions and remaining focused on customers and shareholder value. Throughout the year, we delivered highly competitive, innovative solutions while shaping our business to strengthen our positions, broaden our customer base and expand our market share. L-3 is strong, and we continue to execute our strategy to make the company stronger. select financial highlights In millions, except per share amounts For the year ended December 31,(a) Net sales Operating income 2011 and 2008 Items Operating income before Items Income from continuing operations attributable to L-3 2011 and 2008 Items Income from continuing operations attributable to L-3 before Items Net income attributable to L-3 (d) Diluted earnings per share from continuing operations 2011 and 2008 Items Diluted earnings per share from continuing operations before Items Diluted earnings per share (d) 2012 2011(b) 2010 2009 2008(c) $13,146 $13,158 $13,390 $13,147 $12,202 1,351 1,399 1,485 1,367 — 43 — — 1,351 1,442 1,485 1,367 1,384 (110) 1,274 756 (71) 685 938 6.10 748 — 748 901 6.30 — (0.58) 6.30 7.61 5.52 7.59 782 — 782 810 8.01 — 8.01 8.30 855 (28) 827 956 8.08 (0.26) 7.82 9.03 815 — 815 955 7.04 — 7.04 8.25 Net cash provided by operating activities from continuing operations 1,231 1,231 1,270 1,147 1,115 Less: Capital expenditures, net of dispositions Plus: Income tax payments attributable to discontinued operations Free cash flow (e) Equity 205 24 1,050 5,539 181 63 1,113 6,724 168 21 1,123 6,855 176 72 1,043 6,660 198 79 996 5,941 (a) The select financial highlights have been adjusted to reflect the spin-off of Engility Holdings, Inc., which was completed on July 17, 2012, as discontinued operations. (b) The year ended December 31, 2011, includes: (1) a tax benefit of $78 million, or $0.74 per diluted share, (2) a non-cash goodwill impairment charge of $43 million ($42 million after income taxes, or $0.40 per diluted share), and (3) a long-lived asset impairment charge at an equity method investment of $14 million ($8 million after income taxes, or $0.08 per diluted share) (collectively the “2011 Items”). (c) The year ended December 31, 2008 includes: (1) a pre-tax gain of $133 million ($81 million after income taxes, or $0.66 per diluted share) related to the reversal of a $126 million current liability for pending and threatened litigation and $7 million of related accrued interest, (2) a gain of $12 million ($7 million after income taxes, or $0.06 per diluted share) related to the sale of a product line, and (3) a non-cash impairment charge of $28 million ($17 million after income taxes, or $0.14 per diluted share) related to a write-down of capitalized software development costs for a general aviation product (collectively the “2008 Items”). (d) Net income attributable to L-3 and diluted earnings per share for the year ended December 31, 2008 includes an after-tax gain of $20 million, or $0.16 per diluted share, related to the divestiture of our 85% ownership interest in Medical Education Technologies, Inc. (e) We define “free cash flow” as net cash from operating activities, less capital expenditures, net of dispositions, plus income tax payments attributable to discontinued operations. Sales (In millions) operating Income excluding items* (In millions) Diluted epS from continuing operations excluding items* Free Cash Flow (In millions) $ 1 3 , 1 4 7 $ 1 3 , 3 9 0 $ 1 3 , 1 5 8 $ 1 3 , 1 4 6 $ 1 2 , 2 0 2 $ 1 , 4 8 5 $ 1 , 4 4 2 $ 1 , 3 5 1 $ 1 , 3 6 7 $ 1 , 2 7 4 $ 7 . 0 4 $ 6 . 3 0 $ 5 . 5 2 $ 7 . 8 2 $ 8 . 0 1 $ 9 9 6 $ 1 , 0 4 3 $ 1 , 1 2 3 $ 1 , 1 1 3 $ 1 , 0 5 0 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 cagR 2% cagR 1% cagR 10% cagR 1% *Operating income and diluted EPS for 2011 and 2008 exclude the 2011 and 2008 items, respectively, described above. This Summary Annual Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, included in this book. DeaR fellOW shaRehOlDeRs: For L-3, 2012 was a year of excellent performance on our key programs, sharp strategic focus on the changing environment, important business wins and market share gains. We significantly transformed the company to better address today’s realities and emerge better positioned for the future. Strong performance in a tough Balanced allocation of capital induS try cycle to deliver value L-3 posted solid financial results in 2012, despite the current defense industry environment. We delivered consolidated net sales of $13.1 billion, which was unchanged compared to 2011. This reflects a 15 per- cent increase in com mercial and international sales, offsetting lower sales to DoD and U.S. government customers. We grew diluted earnings per share (EPS) by 2 percent to $8.01 compared with 2011’s $7.82, before 2011 items of $0.26, and generated very strong free cash flow of $1,050 million for the year. Despite fiscal uncertainties, L-3’s business expanded in several key areas. Orders increased by 7 percent year-over-year, resulting in a funded backlog of $10.9 billion—a 10 percent increase over 2011. Similarly, our book-to-bill ratio of 1.05 compares favorably with last year’s 0.98. L-3’s disciplined cash deployment throughout 2012 underscores our continuing commitment to enhancing shareholder value. Our approach balances strategic investment in research and development with key acquisitions, modest debt reduction and meaningful returns for our investors through increased dividends and share repurchases. In 2012, L-3 paid $195 million in dividends— reflecting our eighth consecutive annual per share dividend increase. We repurchased $872 million of L-3 common stock, underscoring our confidence in the company’s future and contributing to our EPS performance. In early 2013, L-3’s board approved a sixth share repurchase program, authorizing the purchase of up to an additional $1.5 billion of the company’s common stock through June 30, 2015. L-3 2012 AnnuAL Repo Rt 1 Together, dividends and stock repurchases totaled more than $1 billion, exceeding the free cash flow we generated in 2012. We also strengthened our balance sheet by reducing our outstanding long-term debt by $500 million. a diSciplined approach to reShaping our B uSine SS In 2012, L-3 successfully completed the spin-off of Engility Holdings, Inc. to L-3’s shareholders. This transaction was completed on schedule. The spin-off enabled L-3 to strengthen our competitive posi- tion and improve our financial performance. It also reduced L-3’s exposure to the troop drawdowns in Iraq and Afghanistan and eliminated organizational conflict of interest issues. We also continued to aggressively reduce operating costs and increase our cost competitiveness. L-3 maintained its disciplined and highly discrimi- nating approach to acquisitions, focusing exclu sively on businesses that align with our growth strategies, add new products or technologies, deliver attractive returns on investment, or increase our commercial and international sales. In the first quarter of 2012, we completed the acquisition of the Kollmorgen Electro-Optical (KEO) unit of Danaher Corporation. KEO’s advanced electro-optical/infrared (EO/IR) submarine photon- ics and periscope systems increase our presence on strategically important DoD programs, such as the Virginia-class submarine, expand our international business and provide growth opportunities in an area that we expect will remain a funding priority in the years ahead. We also acquired the commercial aircraft simulation business of Thales Group. This transaction created a new entity, Link UK, that complements our existing world-class military simulation and training capabilities with an established commercial aircraft simulation business and elevates L-3’s standing among global training providers. In addition to reshaping our business and winning key competitions, we also enhanced our board of directors by welcoming General (Ret.) Lloyd W. Newton. General Newton brings broad experience that includes a distinguished 34-year military career and 13 years as an accomplished executive in the private sector. With his extraordinary leadership skills and industry knowledge, he is a valuable addition to our board. Well-Balanced B uSine SS driving our reSultS The diversity of L-3’s business mix is a key driver of our success. Our footprint is broad, diverse and focused on the areas of highest customer priority. This enables us to occupy leading positions in the majority of our markets, providing a strong foundation for future growth. Our most diverse business segment, Electronic Systems, had a number of key wins in 2012. The U.S. Special Operations Command (USSOCOM) awarded L-3 a contract for its next-generation Binocular Night Vision Device, the smallest, lightest and best-performing product of its kind. We are also a leading supplier of SATCOM terminals for military and international customers, and our Very Small Aperture Terminals (VSATs) were selected by USSOCOM to provide Special Operations Forces with worldwide communications connectivity. In addition, our production contract for modems and SATCOM technology on the U.S. Army’s Warfighter Information Network-Tactical (WIN-T) program 2 L-3 2012 AnnuAL Repo Rt keeps soldiers connected in-theater. To date, L-3 has received orders for more than 1,500 ruggedized modems and over 600 SATCOM antennas in support of WIN-T. L-3’s U.S. Navy business is equally diverse. In 2012, we were selected to provide hybrid-electric drives for the Navy’s Arleigh Burke-class destroyer, representing a strategic win that has potential application across a variety of military and commercial vessels, and our EO/IR systems and sensors continue to be in strong demand for air, ground and maritime applications. the diversity of l-3’s business mix is a key driver of our success. our footprint is broad, diverse and focused on the areas of highest customer priority. L-3’s Electronic Systems figures prominently in our commercial growth strategy. China’s fast-growing Spring Airlines selected L-3’s flight simulators for pilot training, an important step in establishing our presence in the global civil aircraft simulation and training marketplace. We were also awarded a contract to supply displays, processors and software for the Honeywell Multifunction Control Display Unit Redesign. This program will upgrade technology on Boeing, Airbus, Gulfstream and Cessna aircraft platforms, reflecting L-3’s strategic expansion into commercial cockpit displays. Additionally, L-3 holds a leading market position in scanning equipment for cargo, baggage, personnel and airport checkpoints in the United States and overseas. Our ProVision® Automatic Target Detection (ATD) image-free threat detection system continued to gain international market share in 2012, receiving European certification and orders from Canada, the U.K., Italy, Australia, and several nations in the Middle East and South America. L-3’s newly introduced ProVision 2 offers the same safe, efficient and effective detection capabilities in a reduced footprint, making it ideal for smaller airports and other public safety applications worldwide. With 2012 sales up 3 percent year-over-year, L-3’s C3ISR business grew steadily on continued demand for airborne ISR, network communications, and specialized security and encryption products. Dur- ing the year, we continued to see order activity for communications and data link systems for Predator, Global Hawk and Gray Eagle unmanned platforms, as well as for our ROVER full-motion video receivers and support services. L-3’s specialized ISR aircraft integration capabilities earned us important new and follow-on contract awards from the U.S. and foreign militaries. The modification of the first of three AIRSEEKER aircraft for the U.K. Ministry of Defence’s Rivet Joint air surveillance fleet is on track for completion in 2013, ahead of schedule and on budget. In 2012, we began work on the second AIRSEEKER aircraft. Throughout the year, L-3 conducted successful demonstrations of SPYDR, our next-generation small, manned airborne ISR platform. SPYDR’s technologies are generating strong interest from our domestic and international customers, and we have already begun to sell these capabilities as enhance- ments to existing fleets. We see sales continuing over the coming years as the demand for our advanced, proven SPYDR technologies increases. L-3’s largest 2012 contract award came in our AM&M segment. We won an important recompetition to L-3 2012 AnnuAL Repo Rt 3 provide maintenance and logistics support for more than 600 rotary-wing aircraft for the U.S. Army at Fort Rucker, Alabama. This key win occurred in a highly competitive marketplace and represents approximately $2 billion in revenue over the next five years. L-3 further increased its market share and leadership in systems sustainment with a num- ber of contractor logistics support wins, including sustainment support for the Navy EA-18G, as well as P-3C upgrades and maintenance. We also improved our processes in support of the Navy’s fleet of P-3, EP-3 and NP-3 aircraft, returning aircraft to service 43 percent faster than ever before. In 2012, L-3 expanded into the DoD ground equipment mainte- nance market with a new Logistics Support Services contract for the U.S. Army at Fort Bragg, North Carolina, and an Enhanced Army Global Logistics Enterprise basic ordering agreement award. the current geopolitical landscape reflects continued instability around the world. as these global threats escalate and change, l-3 is strategically well-positioned to support our nation. L-3 is regarded as a leader in the VIP aircraft sector. We are continuing our customization of a Boeing 747-8 for a Head of State and will be among the first modification centers in the world to deliver this aircraft in a VIP configuration. In 2012, we received a second 747-8 modification contract for another customer. L-3’s unique capabilities and reputation in this niche market position us well for new business pursuits. L-3’s National Security Solutions (NSS) segment provides a diverse set of skills and capabilities to meet the growing demand for cyber operations, enterprise and mission IT, intelligence operations support and operational infrastructure solutions for federal and international customers. Throughout 2012, in an environment defined by competitive multi-award contracts, L-3 strategically positioned itself to win a number of large contract vehicles with long-term significance, such as a cybersecurity development contract for the Air Force, an Army contract for tactical advanced communications systems and an intelligence analysis contract for the U.S. govern- ment. L-3 was also selected to perform a two-year intelligence support contract for U.S. forces in Afghanistan and won an important recompetition of an integration contract to provide communications and public safety wireless radios to the Metropolitan Washington Airports Authority. In addition, L-3 partnered with the British government on Project SKYSIREN, an award-winning integrated broadcast service connecting all branches of the U.K. military. L-3 continued its long-standing relationship with academic institutions by establishing the NSS Solutions Center in conjunction with Virginia Tech. This center will foster innovation and technical excellence in the development of leading-edge cyber solutions. L-3’s partnership with several leading universities, including the Massachusetts Institute of Technology, the University of Maryland and the Poly- technic Institute of New York University, will speed the development and delivery of innovative national security technologies and solutions for our customers. dedicated to our communitieS Our commitment to operating with integrity and accountability includes supporting the communities where we live and work. As a top contractor in the aerospace and defense sector, L-3 is proud to 4 L-3 2012 AnnuAL Repo Rt be part of an industry that represents more than two million jobs in our local communities and is a major employer of former military personnel. our agility, our balanced business mix, our flexible cost structure and our ability to generate significant free cash flow—all of which make us well-prepared to perform in any environment. our commitment to operating with integrity and accountability includes supporting the communities where we live and work. At the end of the day, our strength comes from our people. We are an organization of innovators, with an experienced management team and dedicated employees who take pride in our reputation for superior program execution. We are focused on our customers’ needs and committed to the highest ethical standards. By continuing to work together and adhering to our strategy, I am confident that L-3 will emerge from today’s challenges stronger and ready to take advantage of the future’s opportunities. Sincerely, Michael T. Strianese Chairman, President and Chief Executive Officer Veterans’ issues have always been important at L-3, evidenced by our membership in the Employer Part- nership of the Armed Forces and our ongoing support of Homes for Our Troops and the Wounded Warrior Project. We also work to promote education and diversity in science, technology, engineering and math (STEM) through board participation and research partnerships with other interested organizations. L-3’s employees also participate in volunteer programs around the world. We are committed to making a positive impact in many diverse communities. L-3 was proud to be selected as one of 15 recipients of the 2012 Secretary of Defense Employer Support Freedom Award, recognizing “exceptional support of the U.S. National Guard and their families, and steadfast dedication to national defense.” Honors such as these reflect L-3’s dedication to supporting those who defend our nation and keep us safe. prepared to meet the challenge The current geopolitical landscape reflects continued instability around the world. As these global threats escalate and change, L-3 is strategically well-posi- tioned to support our nation. We continue to manage the defense down cycle by focusing on DoD high- priority initiatives, expanding our prime contractor positions and increasing our commercial and interna- tional business. We are deploying capital effectively to generate returns for our shareholders and capitalize on emerging opportunities. We will also continue to proactively manage our costs and make the invest- ments necessary to deliver affordable and innovative solutions for our customers. L-3’s strengths include L-3 2012 AnnuAL Repo Rt 5 BUsiness segMents ELECTRONIC SYSTEMS The Hawkeye™ family of flyaway VSAT terminals has long been a staple of the U.S. Army’s technology arsenal. The next generation of specialized Hawkeye terminals was recently selected by USSOCOM for the Special Operations Forces Deployable Node-Family of Terminals (SDN-FoT) program. leVeRaging OUR BReaDth Of technOlOgY Electronic Systems is L-3’s largest and broadest segment. With avionics and display products for passenger and freight carriers strong market share across a balanced defense, commercial and international customer base, Electronic Systems’ opportuni- and is equipping aircraft with ADS-B In systems, such as SafeRoute™, and other solutions that meet the FAA’s upcoming ties to grow are as diverse as its capabilities. mandates. L-3’s Marine & Power Systems businesses provide fully integrated solutions across a broad spectrum of platforms L-3 differentiates itself in this segment with innovative solutions aboard U.S. Navy, U.S. Coast Guard, commercial and interna- that span a very wide range of needs. Leading EO/IR products tional navy vessels. and integrated sensor systems are integral to current and next- generation technologies. Advanced, increasingly compact VSAT L-3 has a strong presence on high-priority naval programs, includ- systems and microwave solutions are meeting a growing demand ing the U.S. Navy’s Virginia-class submarine, and the acquisition for mobile, secure communications, while L-3 precision engage- of KEO in 2012 further bolsters that presence. KEO is a leading ment and night vision products protect ground forces and designer and manufacturer of photonic masts, in addition to other support mission success. specialized equipment for submarines. In commercial aviation, L-3’s groundbreaking safe and effective L-3 is the premier provider of sophisticated, high-fidelity training millimeter wave screening technology with ATD has emerged as and simulation systems for a wide variety of platforms, from the preferred choice at airports worldwide. In 2012, the TSA advanced jet fighters to transport aircraft. In 2012, we signifi- awarded L-3 contracts for the screening of checked luggage, cantly expanded our world-class capabilities and growth as well as for checkpoint screening systems for carry-on opportunities to include commercial and civil aviation with baggage. L-3 also offers TSA-certified systems for air cargo the acquisition of Link UK. and break-bulk screening. In addition, L-3 supplies advanced 6 L-3 2012 AnnuAL Repo Rt Top left: In 2012, China’s Spring Airlines awarded L-3 a contract to deliver its RealitySeven™ next-generation flight simulation and training systems for the airline’s A320 aircraft. Top right: The new ProVision® 2 provides image-free threat detection and millimeter wave passenger screening capabilities in a smaller footprint. Middle left: The Australian government chose L-3’s MX-10MS sensor technology to provide stabilized imagery capabilities on its new Cape Class Patrol Boat. Middle right: In 2012, after winning a new multi-year contract, L-3 began the design sequence for the installation of a 200-square-nautical mile (nm2) Undersea Warfare Training Range for the U.S. Navy, with options for an additional 300 nm2. Bottom left: L-3’s O•N•E 360™ is a real-time 360° situational awareness system for combat vehicle self-protection that provides instantaneous and continuous coverage of the entire battlefield—day and night. Bottom right: L-3 won a major contract to provide advanced night vision binoculars to the U.S. Special Operations Command. L-3 2012 AnnuAL Repo Rt 7 BUsiness segMents C3ISR cOMManD cOntROl cOMMUnicatiOns intelligence sURVeillance RecOnnaissance L-3 is on track to deliver the U.K. Royal Air Force’s first RC-135W AIRSEEKER electronic surveillance aircraft in 2013. leaDeRshiP in a cRitical aRea Of neeD The demand for ISR solutions continues to grow, both domesti- L-3 is a key secure communications and ISR integrator on cally and internationally. Even as current conflicts wind down, several new, long-term maritime platforms, including the National situational awareness is a persistent requirement. In the current Security Cutter, Fast Response Cutter and an Australian naval geopolitical climate, reliable ISR is critical to defending our program. Our expertise in complex encryption and data security nation and our allies. projects has been sought after for new aircraft programs as well as specialized agency initiatives. In 2012, L-3 delivered more L-3 is a global market leader in ISR. We design, develop and than 3,500 Battlefield Anti-Intrusion Systems for a critical U.S. support the upgrade of highly complex ISR systems on the Army infrastructure program ahead of schedule. ground, in the air and at sea. L-3’s solutions provide customers with the ability to detect and locate specific targets, track A deep understanding of how platforms operate in the field and their movement and determine their intent to decide the best our keen awareness of the evolving threat environment provide strategic response. L-3 with a unique ability to anticipate customer needs. L-3 person- nel leverage their operational experience to refine our systems Today, L-3 products and systems are in use on virtually every and respond to challenges. This firsthand knowledge guides our airborne ISR platform. This is a testament to our unrivaled investments in the next generation of products and technologies technical expertise and our proven ability to deliver advanced and speeds our response when new requirements emerge. technologies that meet each customer’s requirements on highly accelerated delivery schedules. 8 L-3 2012 AnnuAL Repo Rt L-3’s SPYDR is an end-to-end airborne ISR solution that offers flexibility and performance at a disruptive price point for government, commercial and international customers alike. Middle images: L-3’s Hawklink system is a high-speed digital data link that transmits tactical video, radar and acoustic sensor data from the U.S. Navy’s MH-60R Light Airborne Multi-Purpose System helicopter to its host surface ships. Bottom left: L-3 provides advanced data link systems for Gray Eagle, an innovative and technologically advanced next-generation tactical UAS solution. Bottom right: The success of L-3 technologies onboard the U.S. Coast Guard’s Fast Response Cutter positions the company to equip future Coast Guard platforms. L-3 2012 AnnuAL Repo Rt 9 BUsiness segMents AM&M aiRcRaft MODeRnizatiOn anD Maintenance L-3 and a partner company were selected by the Commonwealth of Australia to provide C-27J Spartan aircraft for its Battlefield Airlifter program. sUPPORting ReaDiness in these tiMes These are uniquely challenging times for defense and commercial L-3 is also the first choice of a growing number of nations for aviation customers alike. In the defense arena, the demand VIP/Head-of-State aircraft. We are one of a select few companies for a high degree of readiness and presence in multiple regions that can perform this level of customized, high-end modernization. continues. Budget constraints are causing the delay, extension In this specialized area, we are a leader with deep and broad or cancellation of new programs, making the sustainment of experience that includes being among the first to modify the existing equipment more critical than ever. Commercial aviation new 747-8 platform. customers, also under economic pressures, have many of the same requirements as their counterparts in defense—they need Across its entire business, L-3 is more than a Maintenance, Repair maximum equipment availability at minimum cost, without and Overhaul (MRO) provider. Our ability to draw expertise and compromising performance or safety. technologies from other L-3 businesses and industry partners allows us to deliver customized solutions that are collaboratively L-3 has established itself as a trusted, proven partner that tailored to the requirements of each customer—rapidly and enables defense, commercial and international customers to cost-effectively. keep their fielded assets not just operational, but operationally relevant. L-3 provides a wide array of services in systems sustainment, from field maintenance, structural repair, modifica- tion and upgrades, to fleet management and logistics support. These services optimize the performance of many key rotary- and fixed-wing aircraft platforms in use today. 10 L-3 2012 AnnuAL Repo Rt L-3 is a leader in aircraft modifications and systems sustainment for a wide range of rotary- and fixed-wing platforms, including the P-3, EP-3, NP-3 and C-130 to include Compass Call. L-3’s completion center is the first in the world to modify two 747-8 aircraft simultaneously, customizing interiors on the new aircraft type for two Head-of-State customers. In 2012, L-3 won the recompetition for aircraft maintenance and logistics support on more than 600 rotary-wing aircraft at Fort Rucker, Alabama. L-3 2012 AnnuAL Repo Rt 11 BUsiness segMents NATIONAL SECURITY SOLUTIONS L-3 continues its strategy to obtain prime positions on key strategic multi-award contracts, including the U.S. Air Force’s Agile Cyber Technology (ACT) program, the U.S. Army’s Global Tactical Advanced Communications Systems (GTACS) contract and many others. In addition, L-3 won a large number of task order competitions on existing multi-award contracts. DeliVeRing sPecializeD sOlUtiOns anD eXPeR tise Our world relies on wireless and networked communications to L-3’s NSS segment has four business areas: cyber, information function. Governments, businesses and individuals generate, technology (IT), intelligence and infrastructure. Our cyber business transmit and store massive amounts of data, much of it criti- defends networks and equipment from attack, and we play an cal, sensitive or classified. With technology evolving at blinding important role in deterrence by developing forensics that identify speeds, securing networks and data has never been more and trace attempted incursions. Mission and enterprise IT ranges important, or more challenging. from designing, building and maintaining large global networks, to The U.S. DoD views the protection of cyberspace as critical to its Intelligence focuses on sense-making tools, systems and mission- mission. Domestic and international corporations also place the essential specialists for analysis and conversion of large amounts highest priority on safeguarding their information and intellectual of data and actionable information. Operational infrastructure assets against increasingly sophisticated cyber attacks. spans a variety of projects, including complex architectures and developing mission-specific applications, systems and solutions. solutions that support critical missions or needs. Information security is fundamental to every technology, product and system L-3 designs. With our product leadership and exper- tise in C3ISR and Electronic Systems, our culture of rapid develop- A key element of L-3’s strategy for NSS is research partnerships. We are working with leading institutions, such as Virginia Tech, ment and agility, and our partnerships with leading institutions, the Massachusetts Institute of Technology, the University of Mary- L-3 is developing solutions for customers facing malicious, con- land and the Polytechnic Institute of New York University, to drive stantly evolving threats to their systems and sensitive information. advancements in real-time solutions, mobile and cloud security, artificial intelligence, complex computing, and other focus areas critical to meeting tomorrow’s cybersecurity challenges. 12 L-3 2012 AnnuAL Repo Rt Top and bottom: L-3’s cooperative partnership in cybersecurity research and development with Virginia Tech’s Hume Center for National Security and Technology enhances our ability to deliver innovative national security solutions that secure our customers’ critical networks and information. L-3 2012 AnnuAL Repo Rt 13 ManageMent board of directors Michael T. Strianese Claude R. Canizares Thomas A. Corcoran Lewis Kramer Robert B. Millard General (Ret.) Lloyd W. Newton General (Ret.) H. Hugh Shelton Arthur L. Simon Alan H. Washkowitz John P. White executive management Curtis Brunson Ralph G. D’Ambrosio Steven M. Post Executive Vice President, Corporate Senior Vice President and Strategy and Development Chief Financial Officer Senior Vice President, General Counsel and Corporate Secretary Richard A. Cody Senior Vice President, Washington Operations group presidents Steve Kantor Senior Vice President and President, Electronic Systems Group John C. McNellis Senior Vice President and President, Integrated Systems Group John S. Mega Senior Vice President and President, Microwave Group Susan D. Opp Senior Vice President and President, Communication Systems Group Robert E. Leskow Vice President and President, Marine & Power Systems Group Les A. Rose Vice President and President, National Security Solutions Group 14 L-3 2012 AnnuAL Repo Rt cORPORate infORMatiOn CoRpoRAte HeADquARteRS equAL oppoRtunIty empLoyeR L-3 Communications is an equal opportunity employer and does not discriminate on the basis of age, race, sex, sexual orientation, creed, color, national origin, ancestry, marital status, disability or any other characteristic protected by law. All employment-related decisions are based solely on business needs and relevant requisite skills related to the position. SAFe HARboR StAtement unDeR tHe pRIvAte SeCuRItIeS LItIgAtIon ReFoRm ACt oF 1995 Except for historical information contained herein, the matters set forth in this Annual Report are forward-looking statements. Statements that are predictive in nature, that depend upon or refer to events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. The forward-looking statements set forth herein involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including the risks and uncertainties discussed in the Company’s “Forward-looking Statements” included in the Company’s recent filings, including Forms 10-K and 10-Q, with the Securities and Exchange Commission. The forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update these forward-looking statements. For a discussion of other risks and uncertainties that could impair our results of operations or financial condition, see Part I - Item 1A -“Risk Factors” and Note 19 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2012. CReDItS Design: Froeter Design Company, Chicago. Use of U.S. DoD and Coast Guard images featured throughout this report does not imply or constitute endorsement of these organizations, their products or services. Page 7 middle left: Photo courtesy of Austal. © 2013 L-3 Communications Holdings, Inc. Printed in the U.S.A. You can contact the corporate headquarters by writing to: L-3 Communications 600 Third Avenue New York, NY 10016 or by calling 212-697-1111. To send a fax, dial 212-867-5249. CoRpoRAte InFoRmAtIon News media, analysts, shareholders and others seeking corporate information about L-3 Communications should contact corporate communications at 212-697-1111. pRInteD mAteRIALS Printed financial and governance materials may be obtained without charge by calling (866) INFO-LLL (866-463-6555). InteRnet You can access quarterly and annual financial information, news releases and an overview of the company’s products and services through the L-3 Communications website at www.L-3com.com StoCk exCHAnge LIStIng The common stock of L-3 Communications Holdings, Inc. is traded on the New York Stock Exchange (NYSE) under the symbol LLL. AnnuAL meetIng The annual meeting of shareholders will be held at 2:30 p.m. on Tuesday, April 30, 2013, at The Ritz-Carlton New York, Battery Park, Two West Street, New York, NY. SHAReHoLDeR ASSIStAnCe If you have questions concerning your shareholder account, please contact the stock transfer agent: ReguLAR mAIL Computershare Trust Company, N.A. P.O. Box 43078 Providence, RI 02940-3078 oveRnIgHt DeLIveRIeS 250 Royall Street Canton, MA 02021 or call 877-282-1168 (781-575-2879 from outside the United States). For the hearing impaired, the phone number is TDD: 800-952-9245. You can also contact the stock transfer agent at its website at: www.computershare.com L-3 2012 AnnuAL Repo Rt 15 L - 3 COm mU N I C A T I O N S 6 0 0 TH I Rd A vE N U E NEw YO Rk , N Y 1 0 0 1 6 16 L-3 2012 AnnuAL Repo Rt