L3harris Annual Report 2016

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FY2016 Annual Report · L3harris

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600 THIRD AVENUE, NEW YORK, NY 10016 | WWW.L3T.COM

DISCIPLINED
GROWTH

2016 ANNUAL REPORT

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SELECT FINANCIAL HIGHLIGHTS

CORPORATE INFORMATION

(In millions, except per share amounts)

For the year ended December 31,

Net sales

Operating income

Segment operating income(b)

Operating margin

Segment operating margin(b)

Diluted earnings per share (EPS) from continuing operations

Adjusted diluted earnings per share (EPS) from continuing operations(c)

Diluted shares outstanding

2016 (a)

2015 (a)

2014 (a)

$10,511

$1,008

9.6%

$8.21

78.8

$10,466

$10,986

$475

$890

4.5%

8.5%

$3.44

$6.91

81.9

$1,012

9.2%

$7.20

87.8

Net cash from operating activities (NCFOA) from continuing operations

$1,097

$1,069

$1,088

Cash dividends per common share

Common stock repurchased

$2.80

$373

$2.60

$2.40

$740 $823

(a) The years ended December 31, 2016, 2015, and 2014 give effect to the sale of National Security Solutions, which was completed on February 1, 2016, and is reported as

discontinued operations.

(b) Segment operating income and margin represent earnings from L3’s business segments before the pre-tax losses related to business divestitures of $31 million and pre-tax

goodwill impairment charges of $384 million for the year ended December 31, 2015.

(c) Adjusted diluted EPS from continuing operations is a non-GAAP financial measure that excludes losses related to business divestitures and goodwill impairment charges.

Please see the page that precedes the 10-K in this report for a reconciliation of this measure to GAAP and a discussion of why the company is presenting this information.

SALES

(In millions)

ADJUSTED
DILUTED EPS

from continuing operations

6
8
9
0
1
$

6
6
4
0
1
$

1
1
5
0
1
$

1
2
8
$

0
2
7
$

1
9
6
$

NET CASH FROM
OPERATING ACTIVITIES

from continuing operations
(In millions)

8
8
0
,
1
$

9
6
0
,
1
$

7
9
0
,
1
$

CASH DIVIDENDS
PER COMMON SHARE

COMMON STOCK
REPURCHASED

(In millions)

0
8
2
$

0
6
2
$

0
4
2
$

3
2
8
$

0
4
7
$

3
7
3
$

CORPORATE HEADQUARTERS

EQUAL OPPORTUNITY EMPLOYER

You can contact the corporate headquarters by writing to:

It is the policy of L3 Technologies, Inc. to be an equal opportunity employer and

or by calling 212-697-1111. To send a fax, dial 212-867-5249.

without regard to race, color, religion, gender, age, national origin, genetic

to comply voluntarily with the concepts and practices of affirmative action.

In keeping with this policy, it is L3 Technologies’ objective to advertise for,

recruit, hire, train and promote into all job levels the most qualified applicants

information, citizenship status, marital status, gender identity, sexual orientation,

disability, protected veteran status or any other legally protected status. All such

News media, analysts, shareholders and others seeking corporate

decisions will be made in accordance with established personnel policies and

information about L3 should contact corporate communications

by utilizing objective standards based on the individual’s qualifications as they

Printed financial and governance materials can be obtained

without charge by written request to the corporate headquarters

Except for historical information contained herein, the matters set forth

addressed to the Corporate Secretary or by calling

in this Annual Report are forward-looking statements. Statements that are

relate to the particular job vacancy.

SAFE HARBOR STATEMENT UNDER THE PRIVATE

SECURITIES LITIGATION REFORM ACT OF 1995

You can access quarterly and annual financial information,

forward-looking statements set forth herein involve a number of risks and

news releases, job listings, information on becoming a supplier,

uncertainties that could cause actual results to differ materially from any such

and an overview of the company’s products and services on the

statement, including the risks and uncertainties discussed in the Company’s

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” 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,

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 18 to our audited consolidated financial statements

L3’s common stock is listed on the New York Stock Exchange

and the Company undertakes no obligation to update these forward-looking

The annual meeting of shareholders will be held at 2:30 p.m. on

included in this Annual Report.

Tuesday, May 9, 2017, at The Ritz-Carlton New York, Battery Park,

CREDITS

Design: Conjure, Chicago

If you have questions concerning your shareholder account,

please contact the stock transfer agent:

Use of U.S. DoD and U.S. Coast Guard visual information does not imply or

constitute DoD/USCG endorsement.

responsibly managed forests.

Printed in the U.S.A. on paper made with postconsumer recycled fiber from

L3 Technologies

600 Third Avenue

New York, NY 10016

CORPORATE INFORMATION

at 212-697-1111.

PRINTED MATERIALS

(866) INFO-LLL (866) 463-6555.

INTERNET

L3 website at www.L3T.com.

STOCK EXCHANGE LISTING

(NYSE) under the symbol LLL.

ANNUAL MEETING

Two West Street, New York, NY.

SHAREHOLDER ASSISTANCE

REGULAR MAIL

Computershare

P.O. Box 30170

College Station, TX 77842-3170

OVERNIGHT DELIVERIES

Computershare

211 Quality Circle, Suite 210

College Station, TX 77845

14 15 16

This Summary Annual Report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 included in this book.

or call 877-282-1168 (781-575-2879 from outside the United States).

For the hearing impaired, the phone number is TDD: 800-490-1493.

You can also contact the stock transfer agent at its website at

www.computershare.com.

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OPTIMIZING L3 FOR
DISCIPLINED GROWTH

INVESTING IN OUR CORE. EXPANDING ON OUR STRENGTHS.

IMPROVING OUR OPERATIONS. BUILDING OUR TEAM. THIS IS HOW WE

ARE POSITIONING OUR COMPANY FOR DISCIPLINED GROWTH. WE ARE

NOW L3 TECHNOLOGIES—A NEW NAME THAT REPRESENTS BOTH OUR

CAPABILITIES TODAY AND OUR VISION FOR THE FUTURE.

DEAR FELLOW SHAREHOLDERS:

IN 2016, L3 ACHIEVED SOLID FINANCIAL AND PROGRAM

PERFORMANCE ACROSS THE BUSINESS. WE STRENGTHENED OUR

PORTFOLIO WITH THE GOAL TO OPTIMIZE OPERATIONS, IMPROVE

MARGINS AND ENHANCE VALUE. WE INTENSIFIED OUR FOCUS ON

GROWTH MARKETS THAT BETTER ALIGN WITH OUR STRENGTHS

AND OUR CUSTOMERS’ PRIORITIES. L3 IS NOW EMBARKING ON

OUR NEXT PHASE — DISCIPLINED GROWTH.

To achieve this objective, we have refined our business
strategy to address the global environment. The U.S.
defense budget is growing. Around the world, air traffic
continues to rise and our international allies have
increased security demands. We have positioned L3 to
capitalize on these trends by expanding our business devel-
opment efforts, and by making thoughtful investments in
R&D and acquisitions in markets where we are strongest.
2017 marks L3’s 20th anniversary, an important
milestone in our history. Over the last two decades, we
have built a company driven by continuous innovation
and an unwavering commitment to developing technol-
ogies our customers need to execute their missions. We
started this year with a new name, L3 Technologies, Inc.,
to reflect our ascent into a well-respected industry leader
and trusted partner with diverse capabilities that reach far
beyond communications.

L3 is fortunate to have a diverse and talented workforce

of 38,000 employees who adhere to the highest

standards of integrity, excellence and accountability.

reorganized Electronic Systems, will enhance our
drive for higher levels of organic growth and
operational efficiency.
Throughout 2016, we improved our program
performance, strengthening our position for follow-on
work and new contracts with existing customers. We
also streamlined operations by continuing to selectively
consolidate business units, manufacturing facilities and
back-office functions to reduce costs and combine
capabilities.
The success of L3’s strategy showed in our perfor-
mance. We exceeded our 2016 financial plan in key
metrics, including sales, orders, earnings per share and
free cash flow. We generated positive organic growth and
margin improvement in all of our segments. We won
major new contracts in the defense, commercial aviation
and security markets, and we entered 2017 with
positive momentum.
L3 is fortunate to have a diverse and talented
workforce of 38,000 employees who adhere to the highest
standards of integrity, excellence and accountability. Their
determination to deliver solutions for our customers is
unparalleled, and we owe L3’s continued success to their
hard work and unwavering dedication.

Also, effective March 1, 2017, we realigned our
businesses to better pursue global opportunities by
splitting our Electronic Systems segment in two. The
new Sensor Systems segment develops market-leading
technologies for gathering and securely sharing informa-
tion. L3’s segments, which include Aerospace Systems,
Communication Systems, Sensor Systems and the

A RETURN TO GROWTH

One of L3’s central objectives is to create value for our
shareholders and customers. By that measure, 2016 was
a solid year. We achieved 2 percent organic growth, led
by a 5 percent increase in our Department of Defense
(DoD) sales, which offset declines in our commercial and
international end markets. Our defense business grew at a

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L3 continued to generate robust cash flow and deploy it

strategically while maintaining a strong capital structure

to support growth initiatives.

rate that exceeded DoD budget growth, indicating that we
are well-positioned in DoD priority areas. We posted con-
solidated net sales of $10.5 billion and operating income
of $1.0 billion. Orders increased 11 percent compared
with the previous year, resulting in a healthy book-to-bill
ratio of 1.05. Diluted earnings per share from continuing
operations was $8.21 in 2016, a 19 percent improvement
compared to 2015. We converted net income to cash at an
impressive rate of 136 percent.

DISCIPLINED CAPITAL ALLOCATION: DELIVERING VALUE

L3 continued to generate robust cash flow and deploy it
strategically while maintaining a strong capital structure to
support growth initiatives. Net cash from operating activ-
ities was $1,097 million in 2016, and we returned $593
million to our shareholders through share repurchases
and dividends. We stabilized our investment-grade credit
ratings and extended our debt maturity profile during
the year, reducing debt by $300 million while refinancing

TOP LEFT: With fully active four- and five-axis MX ™-Series stabilization, L3’s MX
designating systems are configured with a series of high-sensitivity, multi-spectral
sensors that enable precision engagement from tactical ranges during daylight,
low-light and nighttime missions. In 2016, L3 won an FMS contract to provide this
technology to support counterterrorism efforts in North Africa.

TOP RIGHT: The highly successful ROVER™ family of products is designed to be
interoperable across current U.K., U.S. and NATO intelligence, surveillance, target
acquisition and reconnaissance (ISTAR) platforms, as well as the most recent U.K.
AH-64 Apache E Block upgrade and the P-8 maritime patrol aircraft.

BOTTOM LEFT: For the U.S. Coast Guard (USCG), L3 extends our legacy of integrating
command, control, communications, computers, intelligence, surveillance and
reconnaissance (C4ISR) systems with a contract for the Sentinel-class Fast Response
Cutter (FRC). The FRC is the USCG’s newest-generation patrol vessel and plays a vital
role in its homeland security mission.

$4.1B
AEROSPACE SYSTEMS

$2.1B
COMMUNICATION SYSTEMS

NET SALES

$3.0B
ELECTRONIC SYSTEMS

$1.5B
SENSOR SYSTEMS

L3’S NEW BUSINESS SEGMENTS
L3’S NEW BUSINESS SEGMENTS

14%

20%

38%

28%

AEROSPACE SYSTEMS - 38%

COMMUNICATION SYSTEMS - 20%

Aerospace Systems is a lead integrator that
installs ISR systems and performs modification and
maintenance on virtually any aircraft.

Communication Systems increases situational awareness
by enabling secure communications and interoperability
across multiple platforms.

ELECTRONIC SYSTEMS - 28%

SENSOR SYSTEMS - 14%

Electronic Systems provides training, avionics, airport
security, precision engagement, and power and
propulsion systems to customers around the world.

Sensor Systems provides sensor-driven market-leading
solutions for land, sea, air, space and cyber applications.

$550 million of debt with new 10-year senior notes at
3.85 percent, L3’s lowest coupon rate ever for 10-year
fixed-rate notes. We also renewed our $1 billion 5-year
revolving credit facility.
We shifted the balance of our capital allocation to
accelerate disciplined growth by increasing investments
in our businesses. Complementing our 12th consecutive
annual dividend increase, L3 boosted research and
development (R&D) spending by 13 percent year-
over-year to $258 million and accelerated our mergers
and acquisitions (M&A) activities with a number of
bolt-on acquisitions.

M&A: STRENGTHENING CORE CAPABILITIES

Our acquisition strategy focuses on the intersection
of identifying market opportunities, building on our
core capabilities and evaluating companies with comple-
mentary strengths at attractive valuations. In 2016,
we enhanced our portfolio through acquisitions that
provide more high-value, comprehensive solutions for
our customers.
We bolstered our Commercial Training Solutions
with the addition of Aerosim Technologies and Aerosim
Flight Academy, leading U.S.-based commercial pilot
instruction businesses. This acquisition adds innovative

L3 is a global leader in providing F/A-18 A-D maintenance solutions, with
an international customer base including Canada, Australia, Finland, Spain
and Switzerland. The U.S. Navy life-extension and depot maintenance
contract represents a significant milestone in our long-standing relationship
with this customer.

and flexible maintenance training products, distance
learning and low-cost training devices to L3’s offerings,
enabling us to deliver complete training, resourcing and
simulation solutions to commercial aviation customers,
including pilots at every proficiency level.
We also significantly strengthened L3’s ability to
provide total system solutions in aviation security with
the acquisitions of MacDonald Humfrey (Automation)
in November 2016 and the explosives trace detection
assets of Implant Sciences Corporation in January 2017.
MacDonald Humfrey is a U.K.-based systems integrator
of networked software-based airport checkpoint security
and baggage handling systems. Both companies brought
critical automation and screening technologies to our
growing security and detection business.
Early in 2016, we expanded L3’s advanced communi-
cations business with the acquisition of Advanced
Technical Materials (ATM), and integrated its
coaxial and waveguide RF microwave products into
L3’s Narda-MITEQ division. We enhanced our elec-
tronic warfare capabilities and expanded our sensor
offerings with the acquisition of Micreo, an Australian
developer of high-performance microwave, millimeter
wave and photonic components. The addition of
Micreo also positions L3 for broader penetration into
the Australian defense market.

TECHNOLOGY LEADERSHIP: DRIVING INNOVATION

L3’s investments in R&D help develop solutions that
define us as a leader in innovative and affordable technol-
ogies. In 2016, we continued to build a pipeline of

discriminating next-generation products by investing
in projects with near-term potential, including ways
to reduce size, weight, power and cost, as well as those
out on the development horizon. We are engaging in a
number of initiatives and collaborative relationships with
commercial enterprises and are incorporating advanced
commercial technologies into defense applications in
attractive growth areas, such as virtual reality, with the
objective of anticipating customer needs.

Our acquisition strategy focuses on the intersection

of identifying market opportunities, building on our

core capabilities and evaluating companies with

complementary strengths at attractive valuations.

One example is our next-generation Military Code
(M-Code) GPS User Equipment. In 2016, we successfully
obtained U.S. government security certification for this
product, making L3 the first DoD contractor to receive
this designation. To support the manned-unmanned
teaming MUMT-X program and other advanced plat-
forms, we continue to invest in developing an advanced
signal processing engine that is an agile enabler for secure
communications. Another technology we introduced in
2016 was a high-performing, high-resolution night vision
image intensifier. L3 is also creating new simulation
systems that utilize the visual spectrum in both strategic
and tactical environments to heighten the advantage
to our warfighters.

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TOP: The USAF chose L3 to provide full contractor logistics
support for 59 USAF KC-10s and two Royal Netherlands Air Force
KDC-10 aircraft, demonstrating L3’s ability to provide innovative
solutions for this mission-critical platform.

RIGHT: L3’s RealitySeven™ full flight simulators can be
reconfigured to multiple commercial air transport platforms.
L3 utilizes cutting-edge technologies, such as virtual reality and
augmented reality, in training highly skilled pilots for airlines
throughout the world.

BOTTOM: L3’s Mode S transponders are compliant with global
ADS-B mandates. The NXT line is optimized for flight in the next-
generation air traffic environment.

U.S. DEFENSE: INCREASED SUPPORT TO THE DOD

Defense has always been L3’s core business. The DoD
remains our largest customer — constituting approxi-
mately 70 percent of our total sales. L3 has a long track
record of combining our broad capabilities to deliver
effective solutions in priority areas on time and on budget.
This positions us to benefit from defense spending that is
trending upward for the first time since fiscal year 2010.
We are confident L3 has the right mix of in-demand
capabilities, including ISR solutions, secure communica-
tions, precision strike, electronic warfare, sensors, night
vision equipment and naval systems. We also believe
readiness and special operations forces support are areas
of increased opportunity. Whatever is needed, we have
the products, technologies and expertise to help the DoD
achieve its objectives.
L3 has a well-earned reputation as a highly responsive
and proven provider of ISR systems and solutions for a
wide variety of aircraft. In 2016, less than one year after
the original award, L3 completed the inaugural flight
of the U.S. Army’s Enhanced Medium Altitude Recon-
naissance and Surveillance System EMARSS-M1
prototype aircraft — completing a major milestone in
the program.
Underscoring L3’s value as a trusted provider of
military flight training services, we were selected to supply
two additional trainers and associated services in support
of the UH-60M helicopter. This critical training program
has logged more than 250,000 hours. L3 also received
a contract modification to deliver the first full-motion,
high-fidelity aircrew simulators as part of the Flight
School XXI program.
For the U.S. Army, we extended our night vision and
laser rangefinder technology leadership with a production
contract to deliver our Small Tactical Optical Rifle-
Mounted (STORM) SLX precision targeting system. Size
and weight are critical design factors for our customer,
and the improved SLX system delivers increased perfor-
mance while reducing the weight of the current STORM
by one-third.
For the U.S. Navy, L3 won a contract to provide
depot-level maintenance for its F/A-18 fleet. Building
upon our international F/A-18 experience, this competi-
tive win represents the first time we will perform sustain-
ment on this Navy platform at our facilities in Canada
and Waco, Texas. L3 is developing an optical system that
increases shipboard situational awareness, threat detection
and cueing as part of the Combined EO/IR Surveillance
and Response System (CESARS). CESARS represents
an opportunity to apply our leading airborne wide-
field-of-view ISR capabilities to protect U.S. Navy ships
and sailors.
Our contractor logistics support (CLS) services
maintain a variety of military platforms all over the

world. In 2016, we won the right to provide full CLS
services for the U.S. Air Force’s (USAF) KC-10 aircraft,
a contract that is expected to be valued at $1.9 billion
over nine years.
L3 has maintained a longtime position as the prime
contractor on the USAF’s E-3 Airborne Warning and
Control System (AWACS) flight crew training program.
This includes performing the majority of the program’s
ground-based flight crew training using our devices at
an L3 training facility. In 2016, L3 won a contract for
the new AWACS Diminishing Manufacturing Sources
Replacement of Avionics for Global Operations and
Navigation (DRAGON) flight crew training program.

INTERNATIONAL DEFENSE: SUPPORTING ALLIES IN A
DANGEROUS WORLD

In a persistent and unpredictable global threat
environment, delivering solutions that aid and protect
our U.S. allies is of crucial importance for us. We are
investing and expanding in key markets by opening
additional facilities and forming new partnerships, while
strengthening our established relationships around the
world. We continue to see long-term growth potential for
our EO/IR sensors and night vision equipment, airport
security systems and secure communications. L3’s strong
reputation for expertise, quality and affordability
contributed to a number of significant international
wins in 2016.
L3 continued our long-term support of Canada with
a contract for the sustainment of mission systems and
avionics installed in the Royal Canadian Air Force’s
CP-140 aircraft, which ensures that the platform main-
tains mission-capable avionics for ISR operations.

L3 has a long track record of combining our broad

capabilities to deliver effective solutions in priority

areas on time and on budget.

The U.K. Ministry of Defence (MOD) awarded L3
a contract to deliver our ROVER™ transceivers for the
Joint Common Remote Viewing Terminal (JCRVT). The
JCRVT enables the secure exchange of ISR information,
including full-motion video, across the battlespace via a
wideband IP network. In a separate MOD contract, L3
will deliver TacNet ROVERs™ and ROVER™ 6i receivers
— flexible, highly mobile systems that transmit secure
full-motion video and other data to support real-time
situational awareness in land and maritime applications.
Demand for our night vision equipment continues
to grow internationally, including the purchase of our
Clip-On Ruggedized Advanced Thermal Optical Sight

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(CRATOS) for a European law enforcement customer
and a Middle Eastern ally. CRATOS is a miniaturized,
all-in-one thermal weapon sight designed for handheld,
weapon clip-on or stand-alone use in degraded
visual environments.

L3 has built a broad portfolio of pilot training services

and equipment that enables us to deliver a suite of

solutions to commercial aviation customers worldwide.

L3 received a significant contract valued at approxi-
mately $200 million over five years under the Australian
Defence Force Soldier Modernisation Systems Program
to provide the Australian Army with innovative target-
ing and detection capabilities designed to perform at
night and under all weather conditions. These include
binocular night vision goggles, which incorporate white
phosphor image intensification (I2) technology, a com-
pact multifunction aiming laser with integrated white
light capability, and the next generation of lightweight,
miniature laser rangefinders. Other awards in the region
included a contract for the Integrated Starter Generator
(ISG) for Australia’s Hawkei armored vehicle, an order for
an F-16 mission training system from Taiwan, and fund-
ing for communications and ISR integration on South
Korea’s Global Hawk program.
We are identifying areas where our industry-leading
expertise and technologies can contribute to security in
the Middle East and Africa. In 2016, we were selected

under a Foreign Military Sales (FMS) contract to provide
our MX™-10D EO/IR turrets for a North African nation
in support of counterterrorism operations aboard newly
acquired UH-60 helicopters. Other important wins for
the year included a contract to supply MX™-15 EO/IR
turrets to a Middle Eastern country for internal security
and a major integration contract for ISR/data link tech-
nology on multiple rotary-wing aircraft for another North
African customer.

COMMERCIAL AVIATION: EXPANDING BUSINESS WITH
ADVANCED PRODUCTS AND TRAINING

The commercial aviation market represents a significant
long-term growth opportunity for L3. Global air traffic
revenue continues to grow at a faster rate than global
GDP. Pilot shortages are projected to worsen over the
next decade and beyond, enhancing demand for our pilot
training capabilities around the world. Mature markets in
North America and Europe continue to recapitalize their
fleets, while Asia and the Middle East are investing in new
or expanded commercial air travel capacity. The outlook
remains robust for pilot training and commercial avionics,
including displays, flight recorders, and Traffic Alert and
Collision Avoidance System (TCAS) solutions — areas
where L3 is a well-recognized industry leader.
L3 has built a broad portfolio of pilot training ser-
vices and equipment that enables us to deliver a suite of
solutions to commercial aviation customers worldwide.
Capitalizing on the trend for airlines to cut costs by out-
sourcing this function, L3 developed flexible, scalable end-
to-end pilot training that ranges from ab initio coursework
for beginners to specific training tailored to experienced

In the commercial SATCOM marketplace, L3 is
reshaping Traveling Wave Tube Amplifier (TWTA)
capabilities by introducing new technologies to better
serve high-throughput satellites. As the frequency spec-
trum becomes more congested, L3 has products ready
to fill the need for higher-frequency TWTAs through
V-Band and beyond. In 2016, we continued to deliver
space-qualified TWTAs to satellite customers and antic-
ipate that we will announce the first sale of our new
Q-Band TWTA product in 2017.

AVIATION SECURITY: MEETING A GLOBAL NEED

Growth in commercial air traffic worldwide and enduring
security threats continue to drive the requirement for
increasingly more sophisticated, safe, fast and reliable
screening solutions.
Our recent acquisitions added highly advanced
baggage screening and explosives trace detection technol-
ogies, broadening and deepening L3’s whole-system solu-
tions to streamline airport security and make the passen-
ger experience easier without compromising safety. Our
systems are operating at several major airports around
the world, and we are developing more compact equip-
ment to accommodate the smaller footprints of regional
airports. In 2016, L3 expanded our market share with
steady sales growth of our ProVision® and ClearScan™
passenger and cabin baggage screening brands world-
wide. Additional orders from the U.S. Transportation
Security Administration (TSA), the Canadian Air Trans-
port Security Authority (CATSA) and other international
regulators currently give us an installed base of more than
1,800 ProVisions at over 300 airports worldwide, making
this the industry-leading solution for safe, reliable and
efficient personnel screening. We also received orders for
our MV3D® checked baggage screening equipment from
customers in Istanbul and Bahrain.

L3 remains committed to principles of good stewardship

and corporate responsibility for the communities in

which we live and work.

COMMITMENT TO COMMUNITY

L3 remains committed to principles of good stewardship
and corporate responsibility for the communities in which
we live and work. We make contributions at the corpo-
rate and local levels and place the utmost importance
on those initiatives that assist, serve and honor our U.S.
military personnel, veterans and families. L3 is a member
of the Employer Partnership of the Armed Forces, an
organization that provides employment opportunities
to former service members by leveraging their military

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L3 is a global leader in providing safe and effective aviation security
technologies that help airports protect passengers and their belongings
while moving them efficiently through checkpoints.

aviators. Over the years, we have expanded our high-fi-
delity simulation and training offerings by adding flight
schools and instructors worldwide and becoming one
of the few licensed authorities in Europe and Asia. This
enables L3 to offer a variety of innovative and cost-effec-
tive programs to airlines, such as pay-by-the-hour flight
instruction, that train and certify pilots for a broad range
of commercial aircraft.
All Nippon Airways (ANA) awarded L3 a contract
to build and deliver a customized full flight simulator
for A320 aircraft based on our RealitySeven™ flight
simulation platform. The new device will be installed at
ANA’s Tokyo flight training facility, joining an existing
RealitySeven B787 full flight simulator. The contract
affirms our relationship with ANA to support its long-term
fleet expansion plans. L3 also received full flight simulator
orders from Hainan Airlines and Sichuan Airlines
during the year.

In commercial avionics, L3 further increased our
market share with contracts to provide our solutions on
new and existing aircraft for airlines around the world.
In 2016, we reached agreements with various operators
to install a mix of our aviation products, including flight
data recorders, SATCOM systems, T3CAS collision
avoidance systems and NXT-800™ systems, on more
than 2,000 aircraft, including AirAsia, easyJet and
China Eastern Airlines. In addition, as they equip their
fleets to meet European Aviation Safety Agency (EASA)
and the FAA’s 2020 ADS-B mandates, increasing
numbers of airline customers are selecting L3 to
retrofit in-service platforms with our NXT-800 ADS-B
Out transponder.

training and experience. We contribute to charities such
as the Bob Woodruff Foundation, which funds programs
that meet the needs of our injured heroes, and Homes
for Our Troops (HFOT), which builds adaptable housing
for veterans. In the last six years, employees from across
L3 have donated funds, specialized items and manpower
to build six HFOT homes, with more in the works. L3
honors the legacy and sacrifices of our armed services
by supporting the capital campaign to build the first-ever
National Museum of the U.S. Army. We provide financial
assistance to the Special Operations Warrior Foundation,
the Tragedy Assistance Program for Survivors (TAPS),
the Marine Corps Scholarship Foundation and the Coast
Guard Foundation, just to highlight a few.

As a company founded on technology leadership and
engineering expertise, L3 has long valued the importance
of science, technology, engineering and mathematics
(STEM) education. We actively support a wide variety
of programs at all education levels through mentoring
and educational partnerships in STEM-oriented cur-
ricula, and we donate funds to university and college
research programs.
L3 employees and divisions also contribute significant
time, labor and money to causes outside of industry
that provide critical support in their communities. In
addition to fundraising efforts for medical research, our
businesses have raised funds as part of local United Way
campaigns and donated food, toys and manpower to help
children, families and the elderly.

OPPOSITE TOP: L3 is Canada’s leading In-Service Support integrator, delivering
engineering and maintenance solutions for a variety of fleets, including
Canada’s CF-18 Hornet fighter, CC-150 Polaris transport aircraft, CH-148
Cyclone maritime helicopter and CT-114 Tutor demonstration aircraft.

OPPOSITE BOTTOM: L3 provides advanced submarine sensors and electronics
to global naval customers. In 2016, L3 was awarded a contract for the
development and production of the TB-29X and TB-34X towed array passive
sonar receivers installed aboard U.S. Navy submarines, as well as one to
provide switchboard power control systems on the USS Columbia – the Ohio
Replacement Program.

LEFT: Aerosim gives L3 a stronger presence in commercial pilot training in
the United States and Asia-Pacific by adding capabilities that include distance
learning and flexible, low-cost flight training devices.

BOTTOM: The SPYDR II is mission-ready and fully certified with FA A
Supplemental Type Certificates and features the L3-developed Rapid Aircraft
Payload Deployment System (RAPDS), which is specifically designed for the
rapid reconfiguration of sensor payloads. RAPDS allows customers to customize
the aircraft’s mission configuration on short notice for any ISR requirement.

TAKING A STRONGER L3 FORWARD

Over the past few years, we have moved with decisiveness
and clarity to forge a stronger L3 for the future. Our
portfolio is well-aligned with customer needs and
market trends in higher-growth areas of domestic and
international defense, commercial aviation and global
security. We have streamlined operations, maintained a
strong, flexible balance sheet and returned to growth.
In short, we did what we said we would do, but our work
is never done.
Looking ahead, we will continue to optimize for
increased efficiency and cross-business collaboration.
We will employ a balanced capital allocation strategy
that supports innovation and growth to drive long-term
shareholder value. We remain committed to maintaining
high standards, and meeting and exceeding the needs of
all of our stakeholders.

L3’s strength is our agility, responsiveness and mar-
ket-leading technologies. Since 1997, we have grown to
become one of the world’s leading defense companies.
Each of us is proud of the role our company plays in
making our nation and the world safer and more secure.
In an ever more complex global threat environment,
no one knows for certain the impact of changing geopolit-
ical and economic forces. What we do know is that
L3 stands ready to deliver for our customers and our
shareholders — with purpose, integrity and discipline.

Sincerely,

MICHAEL T. STRIANESE

Chairman and Chief Executive Officer

L
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Michael T. Strianese

Claude R. Canizares

Thomas A. Corcoran

General (Ret.) Ann E.
Dunwoody

Lewis Kramer

Robert B. Millard

General (Ret.) Lloyd W.
Newton

Vincent Pagano, Jr.

General (Ret.) H. Hugh
Shelton

Arthur L. Simon

Christopher E. Kubasik
President and
Chief Operating Officer

Curtis Brunson*
Former EVP, Corporate
Strategy and Development

Richard A. Cody
SVP, Washington Operations

Ron Cook
SVP, London Operations

Ralph G. D’Ambrosio
SVP and Chief Financial
Officer

Ann D. Davidson
SVP, General Counsel
and Corporate Secretary

Steve Kantor*
Former SVP and President of
Electronic Systems

Kathleen E. Karelis
SVP and Senior Counsel

John S. Mega
SVP and President of
Communication Systems

David M. Van Buren
SVP, Program Development

Mark Von Schwarz
SVP and President of
Aerospace Systems

Heidi Wood
SVP, Strategy

Todd W. Gautier
SVP and President of
Electronic Systems

Jeff Miller
SVP and President of
Sensor Systems

Juliet N. Bouyea
VP, Corporate Communications

Sheila M. Sheridan
VP, Administration

Lawrence V. Wasnock
VP and Corporate
Ethics Officer

Kevin Weiss
VP, Human Resources

* Transitioned from these roles in March 2017 and retiring from L3 in the second quarter of 2017.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

ADJUSTED DILUTED EARNINGS PER SHARE (EPS) FROM CONTINUING OPERATIONS

Diluted EPS from continuing operations

Loss related to business divestitures

Goodwill impairment charges

2016

$8.21

2015

$3.44

0.25

3.22

2014

$7.20

Adjusted diluted EPS from continuing operations

$8.21

$6.91

$7.20

Adjusted diluted EPS is diluted EPS, excluding the charges related to business divestitures and non-cash goodwill impairment charges. These amounts are not calculated in

accordance with accounting principles generally accepted in the United States of America. The company believes that the charges related to business divestitures and non-cash

goodwill impairment charges affect the comparability of the results of operations for 2016 to the results of operations for 2015 and 2014. The company also believes that disclosing

diluted EPS, excluding the charges related to business divestitures and non-cash goodwill impairment charges, will allow investors to more easily compare the 2016 results to the

2015 and 2014 results. However, these measures may not be defined or calculated by other companies in the same manner.

L3 Form 10-K

Summit Financial Printing LLC sum134745a2_DisciplinedGrowth_COVER

pg_2 Proof 2

SELECT FINANCIAL HIGHLIGHTS

CORPORATE INFORMATION

Diluted earnings per share (EPS) from continuing operations $8.21

$3.44 $7.20

at 212-697-1111.

PRINTED MATERIALS

Adjusted diluted earnings per share (EPS) from continuing operations(c) $8.21

$6.91 $7.20

Printed financial and governance materials can be obtained

relate to the particular job vacancy.

SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995