Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-99693
PROSPECTUS
L-3 COMMUNICATIONS HOLDINGS, INC.
448,582 SHARES OF COMMON STOCK
---------------------
All of the common stock offered hereby may be sold from time to time by
and for the account of the selling stockholders named in this prospectus.
The methods of sale of the common stock offered hereby are described
under the heading "Plan of Distribution." We will receive none of the proceeds
from such sales.
The selling stockholders and any broker-dealers that participate in the
distribution of the common stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933. As a result,
any commission or profit on the resale of shares received by such
broker-dealers may be deemed to be underwriting commissions and discounts
under the Securities Act. Upon being notified by the selling stockholders that
any material arrangement has been entered into with a broker or dealer for the
sale of the shares through a secondary distribution, or a purchase by a broker
or dealer, a supplemented prospectus will be filed, if required, disclosing
among other things the names of such brokers and dealers, the number of shares
involved, the price at which such shares are being sold and the commissions
paid or the discounts or concessions allowed to such broker-dealers.
The common stock of the Company is listed on the New York Stock Exchange
(Symbol: LLL). On October 30, 2002, the closing price of the shares was $45.80
per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
---------------------
The date of this Prospectus is October 31, 2002.
TABLE OF CONTENTS
PAGE PAGE
--------- ---------
The Company .................................... 1 Available Information .......................... 13
Use of Proceeds ................................ 1 Incorporation of Certain Documents by
Selling Stockholders ........................... 1 Reference ................................... 13
Unaudited Pro Forma Condensed Legal Matters .................................. 14
Consolidated Financial Information .......... 2 Experts ........................................ 14
Plan of Distribution ........................... 12
i
THE COMPANY
We are a leading merchant supplier of secure communications and
intelligence, surveillance and reconnaissance (ISR) systems, training,
simulation and support services, aviation products and aircraft modernization,
as well as specialized products. Our businesses employ proprietary
technologies and capabilities, and we believe our businesses have leading
positions in their respective primary markets. Our customers include the U.S.
Department of Defense and prime contractors thereof, certain U.S. Government
intelligence agencies, major aerospace and defense contractors, foreign
governments, commercial customers and certain other U.S. federal, state and
local government agencies.
----------------
Our principal executive offices are located at 600 Third Avenue, New
York, New York 10016, and our telephone number is (212) 697-1111.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
offered by the selling stockholders.
SELLING STOCKHOLDERS
The selling stockholders listed below received shares as partial
consideration in connection with our acquisition of ComCept, Inc. ("ComCept").
The selling shareholders may receive additional consideration in cash or
common stock, which is contingent on the performance of ComCept for each of
its fiscal years ending June 30, 2003 and June 30, 2004. The maximum
additional common stock which may be payable to the selling stockholders for
that additional contingent consideration is 219,088 shares, which would be
distributed to the selling stockholders on a pro rata basis.
The following table states the number of shares of our outstanding common
stock that the selling stockholders own resulting from payments made in our
common stock in connection with our acquisition of ComCept, the number of such
shares that may be sold for the account of the selling stockholders, and the
number of shares that will be owned by the selling stockholders assuming the
sale of all the shares offered hereby.
NUMBER OF NUMBER OF NUMBER OF
SHARES OF SHARES OF SHARES OF
COMMON STOCK COMMON STOCK COMMON STOCK
SELLING STOCKHOLDER OWNED TO BE SOLD OWNED AFTER SALE
----------------------- -------------- -------------- -----------------
Adelbert W. Carpenter 6,405 6,405 0
Anne L. Wester 5,025 5,025 0
Ben K. Howell 2,540 2,540 0
Brian D. Cullen 99,402 99,402 0
Christopher Christon 4,528 4,528 0
David L. Tschoerner 6,074 6,074 0
Dee Ann Watkins 1,397 1,397 0
Dennis R. Baas 7,731 7,731 0
Frederick L. Wahl 5,522 5,522 0
George M. Eargle 11,486 11,486 0
James C. Glenn, Jr. 1,325 1,325 0
Lex E. Thornton 1,833 1,833 0
Mark R. Von Schwarz 13,253 13,253 0
Michael C. Greer 17,671 17,671 0
Neal B. Cooper 12,480 12,480 0
Philip A. Yates 3,092 3,092 0
Robert E. Dryden 20,984 20,984 0
Robert S. Dunn 353 353 0
Robert L. Amick 7,731 7,731 0
Robert R. Spaulding 662 662 0
------ ------ ---
229,494 229,494 0
======= ======= ===
1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
operations ("pro forma statement of operations") data gives effect to the
following transactions as if they had occurred on January 1, 2001: (1) our
acquisition of AIS, which was completed on March 8, 2002, our acquisition of
the detection systems business of PerkinElmer, which was completed on June 14,
2002 and the acquisitions of KDI Precision Products, Inc., EER Systems, Inc.,
Spar Aerospace Limited, Emergent Government Services Group, Bulova
Technologies, and SY Technology, Inc., which we completed during the year
ended December 31, 2001, and their related financings (collectively, the
"Acquisitions"), (2) the offering of $750.0 million 7 5/8% Senior Subordinated
Notes due 2012 by L-3 Communications and the concurrent sale by L-3
Communications Holdings, Inc. of 14,000,000 shares of its common stock, par
value $.01 per share (collectively, the "Offerings") and (3) the application
of the net proceeds of those offerings to repay $500.0 million of indebtedness
outstanding under our senior subordinated interim loan agreement incurred in
connection with our acquisition of AIS, repay the $445.6 million of
indebtedness outstanding under our senior credit facilities, to repurchase and
redeem our 10 3/8% Senior Subordinated Notes due 2007 for approximately $237.4
million and increase our cash and cash equivalents, which will be used for
general corporate purposes, including potential acquisitions. All of the
Acquisitions described above are included in our consolidated balance sheet as
of June 30, 2002, and therefore, an unaudited pro forma condensed consolidated
balance sheet is not provided.
The pro forma statements of operations do not include an extraordinary
pre-tax charge of $16.2 million ($9.9 million after-tax) related to the
repurchase and redemption of our $225.0 million 10 3/8% Senior Subordinated
Notes due 2007. The extraordinary charge includes the call premium of 5.188%
or approximately $11.7 million and fees and other expenses of approximately
$4.5 million, including the write-off of unamortized deferred debt issue costs
relating to the $225.0 million 10 3/8% Senior Subordinated Notes due 2007. The
extraordinary charge is not included in the pro forma statements of operations
because it is not a component of income (loss) from continuing operations.
However, had the repurchase and redemption occurred on January 1, 2001, the
extraordinary charge would have reduced pro forma basic earnings per common
share by $0.11 and pro forma diluted earnings per common share by $0.10 for
the six months ended June 30, 2001 and for the year ended December 31, 2001.
The pro forma adjustments related to our Acquisitions are based on
preliminary purchase prices and purchase price allocations. Actual adjustments
will be based on final purchase prices, audited historical net assets for the
Acquisitions, and final appraisals and other analyses of fair values of
contracts in process, inventories, estimated costs in excess of billings to
complete contracts in process, identifiable intangibles, pension and
postretirement benefit obligations and deferred tax assets and liabilities,
which will be completed after we obtain and review all of the data required
for the acquired assets and liabilities and complete our valuations of them.
Differences between the preliminary and final purchase price allocations could
have a material impact on our results of operations and financial position.
The unaudited pro forma condensed consolidated statement of operations does
not reflect any cost savings that we believe would have resulted had the
Acquisitions occurred on January 1, 2001.
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with (1) our unaudited condensed consolidated
financial statements for the six months ended June 30, 2002 and 2001, and our
audited consolidated financial statements for the year ended December 31, 2001
incorporated by reference in this prospectus; and (2) the audited combined
financial statements of AIS for the year ended December 31, 2001 incorporated
by reference in this prospectus. The other historical statement of operations
data for the Acquisitions are based on unaudited financial statement data not
included or incorporated by reference herein. The unaudited pro forma
condensed consolidated financial information may not be indicative of the
results of operations that actually would have occurred had the Acquisitions
and the Offerings been completed on January 1, 2001 or the results of our
operations that may be obtained in the future.
2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(IN MILLIONS)
PRO FORMA
PRO FORMA FOR OUR
L-3 ADJUSTMENTS PRO FORMA ADJUSTMENTS ACQUISITIONS
AS ACQUISITION FOR OUR FOR OUR FOR THE AND THE
REPORTED HISTORICAL(1)(2) ACQUISITIONS ACQUISITIONS OFFERINGS OFFERINGS
------------- ------------------ -------------- -------------- --------------- -------------
Sales ............................ $ 1,652.0 $ 276.6 $ -- $ 1,928.6 $ -- $ 1,928.6
Costs and expenses ............... 1,483.0 267.9 -- 1,750.9 -- 1,750.9
--------- -------- ------- --------- ------- ---------
Operating income ............... 169.0 8.7 -- 177.7 -- 177.7
Interest and other income
(expense) ....................... 0.8 -- (1.5)(3) (0.7) -- (0.7)
Interest expense ................. 57.7 -- 8.1 (4) 65.8 (6.8)(5) 59.0
Minority interest ................ 2.7 -- -- 2.7 -- 2.7
--------- -------- ------- ---------- ------- ----------
Income (loss) before income
taxes and extraordinary
item .......................... 109.4 8.7 (9.6) 108.5 6.8 115.3
Provision (benefit) for income
taxes(6) ........................ 38.6 6.0 (3.8) 40.8 2.7 43.5
--------- -------- ------- ---------- ------- ----------
Income (loss) from
continuing operations ......... $ 70.8 $ 2.7 $ (5.8) $ 67.7 $ 4.1 $ 71.8
========= ======== ======= ========== ======= ==========
Earnings per share:(7)
Basic ........................... $ 0.89 $ 0.85 $ 0.77
========== ========== ==========
Diluted ......................... $ 0.84 $ 0.81 $ 0.74
========== ========== ==========
Weighted average common
shares outstanding:(7)
Basic ........................... 79.4 79.4 14.0 93.4
========== ========== ======= ==========
Diluted ......................... 90.1 90.1 14.0 104.1
========== ========== ======= ==========
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN MILLIONS)
L-3
AS ACQUISITIONS
REPORTED HISTORICAL(1)(8)
------------- ------------------
Sales ............................ $ 1,023.5 $ 667.2
Costs and expenses ............... 916.1 649.3
--------- --------
Operating income ............... 107.4 17.9
Interest and other income
(expense) ....................... 1.4 (5.9)
Interest expense ................. 46.4 0.4
Minority interest ................ 1.6 --
--------- --------
Income (loss) before income
taxes ......................... 60.8 11.6
Provision (benefit) for income
taxes(6) ........................ 23.3 5.3
--------- --------
Income (loss) from
continuing operations ......... 37.5 6.3
Goodwill amortization expense,
net of tax ...................... 15.8 --
--------- --------
Income (loss) from
continuing operations, as
adjusted ...................... $ 53.3 $ 6.3
========= ========
Earnings per share:(7)
Basic ........................... $ 0.52
==========
Basic, as adjusted .............. $ 0.75
==========
Diluted ......................... $ 0.50
==========
Diluted, as adjusted ............ $ 0.71
==========
Weighted average common
shares outstanding:(7)
Basic ........................... 71.5
==========
Diluted ......................... 74.8
==========
PRO FORMA
PRO FORMA FOR OUR
ADJUSTMENTS PRO FORMA ADJUSTMENTS ACQUISITIONS
FOR OUR FOR OUR FOR THE AND THE
ACQUISITIONS ACQUISITIONS OFFERINGS OFFERINGS
------------------ -------------- ------------------ -------------
Sales ............................ $ -- $ 1,690.7 $ -- $ 1,690.7
Costs and expenses ............... (14.8)(9) 1,550.6 -- 1,550.6
---------- --------- --------- ---------
Operating income ............... 14.8 140.1 -- 140.1
Interest and other income
(expense) ....................... (1.4)(3) (5.9) -- (5.9)
Interest expense ................. 46.1 (4) 92.9 (20.0) (5) 72.9
Minority interest ................ -- 1.6 -- 1.6
---------- ---------- --------- ----------
Income (loss) before income
taxes ......................... (32.7) 39.7 20.0 59.7
Provision (benefit) for income
taxes(6) ........................ (13.9) 14.7 8.0 22.7
---------- ---------- --------- ----------
Income (loss) from
continuing operations ......... (18.8) 25.0 12.0 37.0
Goodwill amortization expense,
net of tax ...................... -- 15.8 -- 15.8
---------- ---------- --------- ----------
Income (loss) from
continuing operations, as
adjusted ...................... $ (18.8) $ 40.8 $ 12.0(10) $ 52.8
========== ========== ============ ==========
Earnings per share:(7)
Basic ........................... $ 0.32 $ 0.40
========== ==========
Basic, as adjusted .............. $ 0.53 $ 0.58
========== ==========
Diluted ......................... $ 0.31 $ 0.39
========== ==========
Diluted, as adjusted ............ $ 0.50 $ 0.56
========== ==========
Weighted average common
shares outstanding:(7)
Basic ........................... 6.1 (11) 77.6 14.0 91.6
============== ========== ============ ==========
Diluted ......................... 6.1 (11) 80.9 14.0 94.9
============== ========== ============ ==========
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
4
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(IN MILLIONS)
L-3
AS ACQUISITIONS
REPORTED HISTORICAL(1)(12)
------------- -------------------
Sales ............................ $ 2,347.4 $ 1,296.0
Costs and expenses ............... 2,072.1 1,235.5
--------- ----------
Operating income ............... 275.3 60.5
Interest and other income
(expense) ....................... 1.8 (11.3)
Interest expense ................. 86.3 0.5
Minority interest ................ 4.5 --
--------- ----------
Income (loss) before income
taxes ......................... 186.3 48.7
Provision (benefit) for income
taxes(6) ........................ 70.8 24.7
--------- ----------
Income (loss) from
continuing operations ......... 115.5 24.0
Goodwill amortization expense,
net of tax ...................... 33.9 --
--------- ----------
Income (loss) from
continuing operations, as
adjusted ...................... $ 149.4 $ 24.0
========= ==========
Earnings per share:(7)
Basic ........................... $ 1.54
==========
Basic, as adjusted .............. $ 1.99
==========
Diluted ......................... $ 1.47
==========
Diluted, as adjusted ............ $ 1.87
==========
Weighted average common
shares outstanding:(7)
Basic ........................... 74.9
==========
Diluted ......................... 85.4
==========
PRO FORMA
PRO FORMA FOR OUR
ADJUSTMENTS PRO FORMA ADJUSTMENTS ACQUISITIONS
FOR OUR FOR OUR FOR THE AND THE
ACQUISITIONS ACQUISITIONS OFFERINGS OFFERINGS
------------------ -------------- ------------------ -------------
Sales ............................ $ -- $ 3,643.4 $ -- $ 3,643.4
Costs and expenses ............... (30.0)(9) 3,277.6 -- 3,277.6
---------- --------- --------- ---------
Operating income ............... 30.0 365.8 -- 365.8
Interest and other income
(expense) ....................... (3.8)(3) (13.3) -- (13.3)
Interest expense ................. 82.0 (4) 168.8 (32.4) (5) 136.4
Minority interest ................ -- 4.5 -- 4.5
---------- ---------- --------- ----------
Income (loss) before income
taxes ......................... (55.8) 179.2 32.4 211.6
Provision (benefit) for income
taxes(6) ........................ (21.2) 74.3 13.0 87.3
---------- ---------- --------- ----------
Income (loss) from
continuing operations ......... (34.6) 104.9 19.4 124.3
Goodwill amortization expense,
net of tax ...................... -- 33.9 -- 33.9
---------- ---------- --------- ----------
Income (loss) from
continuing operations, as
adjusted ...................... $ (34.6) $ 138.8 $ 19.4(10) $ 158.2
========== ========== ============ ==========
Earnings per share:(7)
Basic ........................... $ 1.35 $ 1.35
========== ==========
Basic, as adjusted .............. $ 1.78 $ 1.72
========== ==========
Diluted ......................... $ 1.30 $ 1.32
========== ==========
Diluted, as adjusted ............ $ 1.69 $ 1.65
========== ==========
Weighted average common
shares outstanding:(7)
Basic ........................... 3.1 (11) 78.0 14.0 92.0
============== ========== ============ ==========
Diluted ......................... 3.1 (11) 88.5 14.0 102.5
============== ========== ============ ==========
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
5
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. On March 8, 2002, we acquired AIS for $1,152.7 million in cash which
includes $1,130.0 million for the original contract purchase price, $4.0
million for estimated acquisition costs and an increase to the contract
purchase price of $18.7 million related to additional assets contributed
by Raytheon to AIS. The purchase price is subject to adjustment based on
the AIS closing date net tangible book value, as defined. The AIS
acquisition was financed using cash on hand as well as available
borrowings under our senior credit facilities and a $500.0 million senior
subordinated interim loan. On June 14, 2002, we acquired the detection
systems business of PerkinElmer ("PKI") for $100.0 million in cash plus
acquisition costs, subject to adjustment based on closing date net
working capital, as defined. During the year ended December 31, 2001, we
also made the following acquisitions:
o in May 2001, all the outstanding common stock of KDI Precision
Products, Inc. ("KDI") for $79.4 million in cash including
acquisition costs.
o in May 2001, all the outstanding common stock of EER Systems, Inc.
("EER") for $119.5 million in cash including acquisition costs, and
subject to an additional purchase price not to exceed $5.0 million
which is contingent upon the financial performance of EER for the
year ending December 31, 2002.
o in November and December 2001, 70.3% of the outstanding common stock
of Spar Aerospace Limited ("Spar") for $105.1 million in cash
including acquisition costs. We acquired and paid for the remaining
outstanding common stock of Spar in January 2002 for $43.6 million.
o in November 2001, all the outstanding common stock of Emergent
Government Services Group ("EMG") for $39.8 million, subject to
adjustment based on closing date net working capital. Following the
acquisition, we changed Emergent Government Services Group's name to
L-3 Communications Analytics.
o in December 2001, the net assets of Bulova Technologies for $49.5
million, subject to adjustment based on closing date net assets.
Following the acquisition, we changed Bulova Technologies name to BT
Fuze Products ("BT Fuze").
o in December 2001, the net assets of SY Technology Inc. ("SY") for
$49.8 million, subject to adjustment based on closing date net
assets, and additional purchase price not to exceed $3.0 million,
which is contingent upon the financial performance of SY for the
years ending December 31, 2002 and 2003.
The aggregate purchase price of these acquisitions, including acquisition
costs, is $1,739.4 million.
2. The pro forma statement of operations for the six months ended June 30,
2002 includes the following unaudited historical financial data for our
Acquisitions.
AIS(a) PKI(b) ACQUISITIONS
----------- ---------- -------------
(IN MILLIONS)
Sales ....................................... $ 213.4 $ 63.2 $ 276.6
Costs and expenses .......................... 209.1 58.8 267.9
-------- ------- --------
Operating income ........................... 4.3 4.4 8.7
Interest and other income ................... -- -- --
Interest expense ............................ -- -- --
-------- ------- --------
Income before income taxes and extraordinary
item ..................................... 4.3 4.4 8.7
Income tax provision ........................ 2.4 3.6 6.0
-------- ------- --------
Income from continuing operations .......... $ 1.9 $ 0.8 $ 2.7
======== ======= ========
----------
(a) Represents historical results of operations for the two-month period
ended February 28, 2002.
(b) Represents historical results of operations for the period from January
1, 2002 to June 14, 2002.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. Our historical interest income has been eliminated because the cash and
cash equivalents which earned the interest income were obtained from the
net proceeds from the CODES (as defined below) offering and the May 2001
Common Stock Offering (as defined below) that were assumed entirely to be
used to finance the Acqusitions. Such eliminations amounted to $1.5
million for the six months ended June 30, 2002, $1.4 million for the six
months ended June 30, 2001 and $3.8 million for the year ended December
31, 2001.
4. The aggregate purchase prices, including acquisition costs, for the
Acquisitions of $1,739.4 million were assumed to be financed at January
1, 2001 using (1) borrowings under our senior credit facilities of $445.6
million, (2) borrowings of $500.0 million under the senior subordinated
interim loan, (3) cash on hand of $32.7 million, (4) the net proceeds
from the sale of $420.0 million of 4% Senior Subordinated Convertible
Contingent Debt Securities due September 15, 2011 ("CODES") in October
and November of 2001, which amounted to $407.5 million, and (5) the net
proceeds from our public offering of 9,150,000 shares of our common stock
in May 2001 (the "May 2001 Common Stock Offering") which amounted to
$353.6 million. The borrowings under the senior credit facilities and the
senior subordinated interim loan that we made to finance the AIS
acquisition were included in our historical results of operations
effective March 1, 2002.
The adjustments to our historical interest expense for the six months
ended June 30, 2002 and 2001 and the year ended December 31, 2001 to give
effect to the financing of the Acquisitions are presented below.
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
-------------------- DECEMBER 31,
2002 2001 2001
--------- ---------- -------------
(IN MILLIONS)
Interest on borrowings under the senior credit
facilities (on $445.6 million) for the periods prior
to March 1, 2002(a) .................................. $ 3.6 $ 15.8 $ 29.3
Interest on senior subordinated interim loan (on
$500.0 million) for the periods prior to March 1,
2002(a) .............................................. 4.5 21.6 38.0
Interest on the CODES offering for the periods
prior to October 31, 2001 (4% on $420.0 million
for 10 months). ...................................... -- 8.4 14.0
Amortization of deferred debt issue costs incurred
on the CODES for periods prior to October 31,
2001 ................................................. -- 0.7 1.2
Eliminate historical interest expense for the KDI
and SY Technology acquisitions ....................... -- (0.4) (0.5)
------ ------- -------
Total pro forma adjustments to interest
expense ........................................... $ 8.1 $ 46.1 $ 82.0
====== ======= =======
----------
(a) The adjustments to pro forma interest for the pro forma adjustments for
borrowings under the senior credit facilities and senior subordinated
interim loan are based on the average prevailing interest rates that L-3
would have paid on those borrowings for the periods presented had such
borrowings been outstanding at the beginning of each of the periods
presented. The average prevailing interest rates on the senior credit
facilities would have been 4.86% for the six months ended June 30, 2002,
7.11% for the six months ended June 30, 2001 and 6.57% for the year ended
December 31, 2001. The average prevailing interest rates on the senior
subordinated interim loan would have been 5.36% for the six months ended
June 30, 2002, 8.65% for the six months ended June 30, 2001, and 7.59%
for the year ended December 31, 2001.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. Assuming the offering of the senior subordinated notes by L-3
Communications and the concurrent sale of common stock of 14,000,000
million shares were completed on January 1, 2001, the net aggregate
proceeds from the Offerings of $1,499.4 million, after deductions for
underwriting commissions and discounts and other offering expenses
totaling $43.0 million, would have been applied to repay all of the
borrowings under the senior subordinated interim loan of $500.0 million,
repurchase and redeem our 10 3/8% Senior Subordinated Notes due 2007,
repay $445.6 million of borrowings outstanding under the senior credit
facilities and $316.4 million would have been invested in cash and cash
equivalents. Total interest expense after the pro forma adjustments for
our Acquisitions but prior to the Offerings amounted to $65.8 million for
the six months ended June 30, 2002, $92.9 million for the six months
ended June 30, 2001, and $168.8 million for the year ended December 31,
2001. As a result of the Offerings, total pro forma interest expense
would have decreased by $6.8 million for the six months ended June 30,
2002, $20.0 million for the six months ended June 30, 2001 and $32.4
million for the year ended December 31, 2001. The details of the changes
to interest expense are described in the table below.
SIX MONTHS ENDED JUNE 30,
--------------------------- YEAR ENDED
2002 2001 DECEMBER 31, 2001
---------- -------------- ------------------
(IN MILLIONS)
Estimated interest on $750.0 million 75/8%
Senior Subordinated Notes offered by
L-3 Communications ......................... $ 28.6 $ 28.6 $ 57.2
Amortization of deferred debt issue costs
incurred on $750.0 million Senior
Subordinated Notes offered by
L-3 Communications ......................... 0.9 0.9 1.8
Eliminate interest on the senior
subordinated interim loan(a) ............... (13.4) (21.6) (38.0)
Eliminate interest on $225.0 million 10 3/8%
Senior Subordinated Notes due 2007 ......... (11.7) (11.7) (23.3)
Eliminate amortization of deferred debt
issue costs incurred on $225.0 million
10 3/8% Senior Subordinated Notes due
2007 ....................................... (0.4) (0.4) (0.8)
Eliminate interest on borrowings under the
senior credit facilities (on $445.6
million)(a) ................................ (10.8) (15.8) (29.3)
------- ------- -------
Total adjustments to pro forma interest
expense ................................... $ (6.8) $ (20.0) $ (32.4)
======= ======= =======
----------
(a) The adjustments to pro forma interest expense for the pro forma
adjustments for borrowings under the senior credit facilities and senior
subordinated interim loan are based on the average prevailing interest
rates that L-3 would have paid on those borrowings for the periods
presented had such borrowings been outstanding at the beginning of each
of the periods presented. The average prevailing interest rates on the
senior credit facilities would have been 4.86% for the six months ended
June 30, 2002, 7.11% for the six months ended June 30, 2001 and 6.57% for
the year ended December 31, 2001. The average prevailing interest rates
on the senior subordinated interim loan would have been 5.36% for the six
months ended June 30, 2002, 8.65% for the six months ended June 30, 2001,
and 7.59% for the year ended December 31, 2001.
The pro forma statements of operations do not reflect interest income on
the $316.4 million pro forma cash balance at January 1, 2001 that we
would have had after the Offerings.
6. The pro forma adjustments for our Acquisitions and the Offerings were all
tax-effected, as appropriate, using an estimated statutory (federal and
state) tax rate of 40.0%. The pro forma
8
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustments also include an income tax (benefit) provision (($0.8)
million for the six months ended June 30, 2001 and $1.1 million for the
year ended December 31, 2001) to record the aggregate income tax expense
for the historical results of operations of KDI, EER, BT Fuze and SY to
the statutory income tax rate of 40.0% that they would have incurred had
we acquired them on January 1, 2001, but did not because they were not
subject to income tax prior to their acquisition by us.
7. Our diluted weighted average shares outstanding and diluted earnings per
share give effect to the assumed conversion of the 7,361,964 shares
issuable upon the conversion of $300.0 million of our 5 1/4% Convertible
Senior Subordinated Notes due 2009 (the "Convertible Notes"). The assumed
conversion results in the addition of $5.2 million of after-tax interest
expense savings to reported net income for the six months ended June 30,
2002 and $10.5 million for the year ended December 31, 2001 for the
purposes of calculating diluted earnings per share. The assumed
conversion of the Convertible Notes for the six months ended June 30,
2001 were anti-dilutive, and therefore, their conversion was not assumed
for that period.
8. The pro forma statement of operations for the six months ended June 30,
2001 includes the following unaudited historical financial data for our
Acquisitions.
BT SY
KDI(a) EER(a) SPAR EMG FUZE TECHNOLOGY AIS
--------------- --------------- ---------- ---------- ---------- ------------ -----------
(IN MILLIONS)
Sales ............................ $ 16.2 $ 49.3 $ 48.1 $ 33.0 $ 13.4 $ 30.6 $ 435.5
Costs and expenses ............... 16.6 47.4 41.5 30.4 13.7 27.9 428.2
-------- -------- ------- ------- ------ ------- --------
Operating income (loss) ......... (0.4) 1.9 6.6 2.6 (0.3) 2.7 7.3
Interest and other income
(expense) ....................... (1.6)(b) (4.0)(c) 0.5 -- -- -- (0.7)
Interest expense ................. 0.3 -- -- -- -- 0.1 --
-------- -------- ------- ------- ------ ------- --------
Income (loss) before
income taxes .................. (2.3) (2.1) 7.1 2.6 (0.3) 2.6 6.6
Income tax provision
(benefit) ....................... -- -- 2.7 -- -- -- 3.6
-------- -------- ------- ------- ------ ------- --------
Income (loss) from
continuing operations ......... $ (2.3) $ (2.1) $ 4.4 $ 2.6 $ (0.3) $ 2.6 $ 3.0
======== ======== ======= ======= ======= ======= ========
PKI ACQUISITIONS
---------- -------------
Sales ............................ $ 41.1 $ 667.2
Costs and expenses ............... 43.6 649.3
------ --------
Operating income (loss) ......... (2.5) 17.9
Interest and other income
(expense) ....................... (0.1) (5.9)
Interest expense ................. -- 0.4
------ --------
Income (loss) before
income taxes .................. (2.6) 11.6
Income tax provision
(benefit) ....................... (1.0) 5.3
------ --------
Income (loss) from
continuing operations ......... $ (1.6) $ 6.3
======= ========
----------
(a) Represents historical results of operations for the four-month period
ended April 30, 2001.
(b) Includes a charge to write-down excess inventory of $1.7 million.
(c) Includes a charge of $4.2 million of investment banking fees and other
non-recurring charges.
9
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. Adjustments to costs and expenses relating to the Acquisitions are presented
in the table below:
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2001
--------------- ------------------
(IN MILLIONS)
Eliminate historical goodwill amortization
for AIS, EMG, Spar and PKI(a) .................. $ (15.5) $ (30.7)
Increase to goodwill amortization for KDI and EER
for higher goodwill recorded by L-3 than their
historical amounts of goodwill(a) .............. 0.7 0.7
------- -------
Total pro forma adjustments to costs and
expenses .................................... $ (14.8) $ (30.0)
======= =======
----------
(a) In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 142, no goodwill amortization expenses would have been recorded by us
in 2001 for the acquisitions of EMG, Spar, BT Fuze, SY, AIS and PKI
because these acquisitions were completed after June 30, 2001.
Additionally, in accordance with SFAS No. 142, effective January 1, 2002
goodwill amortization is no longer being recorded for any of the
Acquisitions.
The assets and liabilities recorded in connection with the purchase price
allocations for the Acquisitions are all based upon preliminary estimates
of fair values for contracts in process, estimated costs in excess of
billings to complete contracts in process, inventories, identifiable
intangibles and deferred taxes. Actual adjustments will be based on the
final purchase prices and final appraisals and other analyses of fair
values which are in process. With the exception of the AIS acquisition,
we do not expect the differences between the preliminary and final
purchase price allocations for the acquisitions to be material. Material
differences between the preliminary and final purchase price allocations
for the AIS acquisition could result from the valuation of contracts in
process, estimated costs in excess of billings to complete contracts in
process, identifiable intangibles, deferred income taxes and pension and
postretirement benefits and other items. A review of the contracts in
process and identifiable intangible assets included in the AIS
acquisition is being performed. All of the data required to prepare this
review and the related valuations is not currently available and at this
time it is not practicable to reasonably estimate these valuations. In
addition, no adjustment has been made to contracts in process which will
be valued at their estimated contract prices less the estimated costs to
complete and an allowance for a normal profit on the effort to complete
such contracts. Although the final purchase price allocation for the
contracts in process, estimated costs in excess of billings to complete
contracts in process, deferred taxes and pension and postretirement
benefits of AIS could materially affect the amount of goodwill recorded
for AIS, such final purchase price allocations are not expected to have a
material effect on our results of operations. Furthermore, any allocation
of purchase price to identifiable intangible assets with finite lives
will result in additional amortization expense and a reduction to the
estimated goodwill for AIS. For example, an allocation of $50.0 million
to identifiable intangible assets with a 10 year life would result in an
increase of $5.0 million per annum to costs and expenses and a decrease
of $3.0 million per annum to income from continuing operations.
10. The pro forma adjustments for the Offerings for the six months ended June
30, 2001 and the year ended December 31, 2001 do not include an
extraordinary charge of $16.2 million ($9.9 million after-tax) related to
the repurchase and redemption of our $225.0 million 10 3/8% Senior
Subordinated Notes due 2007. The extraordinary charge includes the call
premium of 5.188% or approximately $11.7 million and fees and other
expenses of approximately $4.5 million, including the write-off of the
unamortized deferred debt issue costs on the $225.0 million 10 3/8% Senior
Subordinated Notes due 2007. The extraordinary charge is not included in
the pro forma adjustments because it is not a component of income (loss)
from continuing operations. However, had the repurchase and redemption
occurred on January 1, 2001, the extraordinary charge would
10
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
have reduced pro forma basic earnings per common share by $0.11 and pro
forma diluted earnings per common share by $0.10 for the six months ended
June 30, 2001 and for the year ended December 31, 2001.
11. Our basic and diluted weighted average common shares outstanding for the
six months ended June 30, 2001 were increased by 6.1 million shares, and
for the year ended December 31, 2001 were increased by 3.1 million shares
of common stock to give effect to the assumed completion of our May 2001
Common Stock Offering as of January 1, 2001.
12. The pro forma statement of operations for the year ended December 31,
2001 includes the following unaudited historical financial data for our
Acquisitions.
KDI(a) EER(a) SPAR(b)
--------------- --------------- ---------------
(IN MILLIONS)
Sales ............................ $ 16.2 $ 49.3 $ 76.9
Costs and expenses ............... 16.6 47.4 67.8
-------- -------- --------
Operating income (loss) ......... (0.4) 1.9 9.1
Interest and other income
(expense) ....................... (1.6)(d) (4.0)(e) (0.4)(f)
Interest expense ................. 0.3 -- --
-------- -------- --------
Income (loss) before
income taxes .................. (2.3) (2.1) 8.7
Income tax provision
(benefit) ....................... -- -- 3.3
-------- -------- --------
Income (loss) from
continuing operations ......... $ (2.3) $ (2.1) $ 5.4
======== ======== ========
BT SY
EMG(b) FUZE(c) TECHNOLOGY(c) AIS PKI ACQUISITIONS
--------------- --------- --------------- ----------- ---------- -------------
(IN MILLIONS)
Sales ............................ $ 52.2 $ 34.7 $ 62.0 $ 918.6 $ 86.1 $ 1,296.0
Costs and expenses ............... 49.1 32.8 56.5 876.7 88.6 1,235.5
-------- ------- ------- -------- ------ ----------
Operating income (loss) ......... 3.1 1.9 5.5 41.9 (2.5) 60.5
Interest and other income
(expense) ....................... (3.8)(g) -- -- (1.4) (0.1) (11.3)
Interest expense ................. -- -- 0.2 -- -- 0.5
-------- ------- ------- -------- ------ ----------
Income (loss) before
income taxes .................. (0.7) 1.9 5.3 40.5 (2.6) 48.7
Income tax provision
(benefit) ....................... 0.3 -- -- 22.1 (1.0) 24.7
-------- ------- ------- -------- ------ ----------
Income (loss) from
continuing operations ......... $ (1.0) $ 1.9 $ 5.3 $ 18.4 $ (1.6) $ 24.0
======== ======= ======= ======== ======= ==========
----------
(a) Represents historical results of operations for the four-month period
ended April 30, 2001.
(b) Represents historical results of operations for the ten-month period
ended October 31, 2001.
(c) Represents historical results of operations for the eleven-month period
ended November 30, 2001.
(d) Includes a charge to write-down excess inventory of $1.7 million.
(e) Includes a charge of $4.2 million for investment banking fees and other
non-recurring charges.
(f) Includes a $1.4 million restructuring charge.
(g) Includes a $3.8 million restructuring charge.
The historical results of operations for KDI, EER, BT Fuze and SY do not
include a provision for income taxes because they each were either an S
Corporation or a Limited Liability Company and the income taxes on their
income were paid by their individual stockholders rather than the
entities.
11
PLAN OF DISTRIBUTION
We have been advised that the distribution of the common stock by the
selling stockholders may be effected from time to time in one or more
transactions (which may involve block transactions): (1) on the New York Stock
Exchange or such other national security exchanges on which our common stock
are listed, in transactions that may include special offerings and exchange
distributions pursuant to and in accordance with the rules of such exchanges,
(2) in the over-the-counter market, or (3) in transactions otherwise than on
such exchanges or in the over-the-counter market, or in a combination of any
such transactions. Such transactions may be effected by the selling
stockholders at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices. The selling stockholders may effect such transactions by selling the
common stock to or through broker-dealers and such broker-dealers will receive
compensation in the form of discounts or commissions from the selling
stockholders and may receive commissions from the purchasers of the common
stock for whom they may act as agent (which discounts or commissions from the
selling stockholders or such purchasers will not exceed those customary in the
type of transactions involved).
Any broker-dealers that participate with the selling stockholders in the
distribution of the common stock may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions or discounts received by
such broker-dealers and any profit on the resale of the common stock by such
broker-dealers might be deemed to be underwriting discounts and commissions
under such act.
Upon being notified by the selling stockholders that any material
arrangement has been entered into with a broker or dealer for the sale of the
common stock through a secondary distribution, or a purchase by a broker or
dealer, a supplemented prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, disclosing:
o The names of such broker-dealers;
o The number of shares involved;
o The price at which such shares are being sold;
o The commission paid or the discounts or concessions allowed to such
broker-dealer;
o Where applicable, that such broker-dealers did not conduct any
investigation to verify the information set out or incorporated by
reference in this prospectus, as supplemented; and
o Other facts material to the transaction.
12
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, file reports and other
information with the SEC. Such reports and other information can be inspected
and copied at the Public Reference Section of the SEC located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at a
regional public reference facility maintained by the SEC located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material can be obtained from the Public Reference Section of the SEC
at prescribed rates. Such material may also be accessed electronically by
means of the SEC's home page on the Internet (http://www.sec.gov).
As permitted by the rules and regulations of the SEC, this prospectus
omits certain information contained in the registration statement on Form S-3,
as amended, of which this prospectus is a part. For further information with
respect to the Company and the common stock, reference is made to the
registration statement and the exhibits thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information in this prospectus supersedes information incorporated
by reference that we filed with the SEC prior to the date of this prospectus,
while information that we file later with the SEC will automatically update
and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
o Description of our common stock contained in our registration
statement on Form S-3/A dated June 19, 2002 (File No. 333-84826);
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2001, as amended by our Annual Report on Form 10-K/A-1 dated June 19,
2002;
o Our Quarterly Report on Form 10-Q for the three month period ended
March 31, 2002;
o Our Quarterly Report on Form 10-Q for the three month period ended
June 30, 2002;
o Our Current Report on Form 8-K dated March 22, 2002;
o Our Current Report on Form 8-K dated April 24, 2002;
o Our Current Report on Form 8-K dated June 6, 2002;
o Our Current Report on Form 8-K dated June 19, 2002, which includes
our revised consolidated financial statements for the fiscal year
ended December 31, 2001; and
o Our Current Report on Form 8-K dated June 28, 2002.
You can request a copy of these filings at no cost, by writing or calling
us at the following address:
L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
(212) 697-1111
Attention: Corporate Secretary.
You should only rely on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. This prospectus shall not constitute an offer of
shares of common stock in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of
any date other than the date on the front of this document.
13
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The following financial statements have been incorporated by reference in
this prospectus in reliance of the reports of PricewaterhouseCoopers LLP,
independent accountants, given on their authority as experts in accounting and
auditing:
o Our consolidated financial statements as of December 31, 2001 and
2000 and for the three years ended December 31, 2001 incorporated by
reference in this prospectus from our Current Report on Form 8-K
dated June 19, 2002; and
o The combined financial statements of Aircraft Integration Systems
Business as of December 31, 2001 and 2000 and for the three years
ended December 31, 2001 incorporated by reference in this prospectus
from our Current Report on Form 8-K dated March 22, 2002.
14
L-3 COMMUNICATIONS HOLDINGS, INC.
448,582 SHARES OF COMMON STOCK
---------------------
PROSPECTUS
OCTOBER 31, 2002
---------------------