PROSPECTUS SUPPLEMENT
(To Prospectus dated June 20, 2002)
14,000,000 SHARES
[L-3 COMMUNICATIONS LOGO]
COMMON STOCK
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We are selling 14,000,000 shares of our common stock. We will receive all of
the net proceeds from the sale of these shares.
Our common stock is traded on the New York Stock Exchange under the symbol
"LLL." On June 24, 2002, the last reported sale price of our common stock on
the New York Stock Exchange was $56.60 per share.
Investing in our common stock involves risks. See page S-9 of this prospectus
supplement and "Risk Factors" beginning on page 5 of the accompanying
prospectus.
PER SHARE TOTAL
----------- ---------------
Public Offering Price ........................ $ 56.60 $792,400,000
Underwriting Discounts and Commissions ....... $ 1.70 $ 23,800,000
Proceeds to Us (before expenses) ............. $ 54.90 $768,600,000
We have granted the underwriters 30-day options to purchase up to an additional
2,100,000 shares of our common stock to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Lehman Brothers, on behalf of the underwriters, expects to deliver the shares
to purchasers on or about June 28, 2002.
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LEHMAN BROTHERS
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CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
SG COWEN
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GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
WACHOVIA SECURITIES
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June 24, 2002
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT -----
About This Prospectus Supplement .............. i
Prospectus Supplement Summary ................. S-1
Risks Related to Our Common Stock ............. S-9
Forward-Looking Statements .................... S-10
Use of Proceeds ............................... S-12
Dividend Policy ............................... S-12
Price Range of Common Stock ................... S-13
Capitalization ................................ S-14
Unaudited Pro Forma Condensed
Consolidated Financial Information ......... S-15
Summary of Pro Forma and Historical
Financial Data ............................. S-26
Certain U.S. Federal Tax Consequences to
Non-U.S. Holders ........................... S-27
Underwriting .................................. S-29
Legal Matters ................................. S-32
Experts ....................................... S-32
Available Information ......................... S-33
Incorporation of Certain Documents by
Reference .................................. S-33
PAGE
PROSPECTUS -----
Prospectus Summary ............................ 3
Risk Factors .................................. 5
The Company ................................... 12
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges
and Preferred Stock Dividends .............. 12
Use of Proceeds ............................... 13
Dividend Policy ............................... 13
Description of Debt Securities ................ 14
Description of Capital Stock .................. 20
Description of Stock Purchase Contracts
and Stock Purchase Units ................... 24
Description of Warrants ....................... 24
Selling Stockholders .......................... 25
Plan of Distribution .......................... 26
Legal Matters ................................. 26
Experts ....................................... 26
Available Information ......................... 26
Incorporation of Certain Documents by
Reference .................................. 27
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You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information provided by this
prospectus supplement or the accompanying prospectus is accurate as of any date
other than the date on the front of this prospectus supplement.
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ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering. A
description of our common stock is contained in the accompanying prospectus
beginning on page 20.
This prospectus supplement is part of and should be read in conjunction
with the accompanying prospectus. The information we present in this prospectus
supplement may add, update or change information included in the accompanying
prospectus. If information in this prospectus supplement, or the information
incorporated by reference in the accompanying prospectus, is inconsistent with
the accompanying prospectus, this prospectus supplement, or the information
incorporated by reference in the accompanying prospectus, will apply and will
supersede that information in the accompanying prospectus.
Unless the context otherwise requires, references in this prospectus
supplement to "L-3," "we," "us" and "our" refer to L-3 Communications Holdings,
Inc. and its subsidiaries, including L-3 Communications Corporation, its wholly
owned subsidiary.
i
PROSPECTUS SUPPLEMENT SUMMARY
Because this is a summary, it may not contain all the information that is
important to you. You should carefully read the entire prospectus supplement and
the accompanying prospectus, including the documents incorporated by reference,
which are described under "Incorporation of Certain Documents By Reference."
L-3
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.
For the year ended December 31, 2001, direct and indirect sales to the U.S.
Department of Defense provided 64.7% of our sales, and sales to commercial
customers, foreign governments and U.S. federal, state and local government
agencies other than the U.S. Department of Defense provided 35.3% of our sales.
For the year ended December 31, 2001, we had sales of $2,347.4 million, of which
U.S. customers accounted for 82.1% and foreign customers accounted for 17.9%,
operating income of $275.3 million and diluted earnings per share of $1.47. For
the three months ended March 31, 2002, we had sales of $696.8 million, operating
income of $71.3 million and diluted earnings per share of $0.36.
For the year ended December 31, 2001, on a pro forma basis for our
acquisitions, excluding our acquisition of the detection systems business of
PerkinElmer, and the related financings since January 1, 2001, we would have had
sales of $3,557.3 million, operating income of $367.2 million and diluted
earnings per share of $1.36. For the three months ended March 31, 2002, on a pro
forma basis for our acquisitions, excluding our acquisition of the detection
systems business of PerkinElmer, and the related financings since January 1,
2002, we would have had sales of $910.2 million, operating income of $75.6
million and diluted earnings per share of $0.32.
At December 31, 2001, we had two reportable segments: Secure Communication
Systems and Specialized Products. Effective as of January 1, 2002, primarily as
a result of our recent acquisitions, including our acquisition of Aircraft
Integration Systems business from Raytheon Company, we began to present our
businesses with the following four reportable segments: (1) Secure
Communications & ISR; (2) Training, Simulation & Support Services; (3) Aviation
Products & Aircraft Modernization; and (4) Specialized Products.
Secure Communications & ISR. This segment provides products and services
for the global ISR market, specializing in signals intelligence and
communications intelligence systems, which provide the unique ability to collect
and analyze unknown electronic signals from command centers, communication nodes
and air defense systems for real-time situation awareness and response in
real-time to the warfighter. This segment also provides secure, high data rate
communications systems for military and other U.S. Government and foreign
government reconnaissance and surveillance applications. We believe our systems
and products are critical elements of virtually all major communication, command
and control, intelligence gathering and space systems. Our systems and products
are used to connect a variety of airborne, space, ground and sea-based
communication systems and are used in the transmission, processing, recording,
monitoring and dissemination functions of these communication systems. The major
secure communication programs and systems include:
o secure data links for airborne, satellite, ground and sea-based remote
platforms for real time information collection and dissemination to
users;
S-1
o highly specialized fleet management and support, including procurement,
systems integration, sensor development, modifications and maintenance
for signals intelligence and ISR special mission aircraft and airborne
surveillance systems;
o strategic and tactical signal intelligence systems that detect,
collect, identify, analyze and disseminate information;
o secure telephone and network equipment and encryption management; and
o communication systems for surface and undersea vessels and manned space
flights.
Training, Simulation & Support Services. This segment provides a full
range of services, including:
o services designed to meet customer training requirements for aircrews,
navigators, mission operators, gunners and maintenance technicians for
virtually any platform, including military fixed and rotary wing
aircraft, air vehicles and various ground vehicles;
o communication software support, information services and a wide range
of engineering development services and integration support;
o high-end engineering and information support services used for command,
control, communications, computers and ISR architectures, as well as
for air warfare modeling and simulation tools for applications used by
the U.S. Department of Defense and U.S. Government intelligence
agencies, including missile and space systems, Unmanned Aerial Vehicles
and military aircraft;
o developing and managing extensive programs in the United States and
internationally, focusing on teaching, training and education,
logistics, strategic planning, organizational design, democracy
transition and leadership development; and
o design, prototype development and production of ballistic missile
targets for present and future threat scenarios.
Aviation Products & Aircraft Modernization. This segment provides aviation
products and aircraft modernization services, including:
o airborne traffic and collision avoidance systems;
o commercial, solid-state, crash-protected cockpit voice recorders and
flight data recorders (known as "black boxes") and cruise ship hardened
voyage recorders;
o ruggedized displays for military and high-end commercial applications;
o turnkey aviation life cycle management services that integrate custom
developed and commercial off-the-shelf products for various military
and commercial wide-body and rotary wing aircraft, including heavy
maintenance and structural modifications and Head-of-State and
commercial interior completions; and
o engineering, modification, maintenance, logistics and upgrade for U.S.
Special Operations Command aircraft, vehicles and personal equipment.
Specialized Products. This segment supplies products to military and
commercial customers in several niche markets. The products include:
o ocean products, including acoustic undersea warfare products for mine
hunting, dipping sonars and anti-submarine and naval power
distribution, conditioning, switching and protection equipment for
surface and undersea platforms;
o telemetry, instrumentation, space and guidance products including
tracking and flight termination;
S-2
o premium fuzing products;
o microwave components;
o explosives detection systems for checked baggage at airports;
o high performance antennas and ground based radomes; and
o training devices and motion simulators which produce advanced virtual
reality simulation and high-fidelity representations of cockpits and
mission stations for aircraft and land vehicles.
DEVELOPING COMMERCIAL OPPORTUNITIES
Our growth strategy includes identifying and exploiting commercial
applications from select products and technologies currently sold to defense
customers. We have currently identified two vertical markets where we believe
there are significant opportunities to expand our existing commercial sales:
Transportation Products and Broadband Wireless Communications Products. We
believe that these vertical markets, together with our existing commercial
products, provide us with the opportunity for substantial commercial growth in
future years.
Within the transportation market, we are offering (1) an explosives
detection system for checked baggage at airports, displays and power propulsion
systems for rail transportation and power switches for internet service
providers, all of which are part of our Specialized Products segment, and (2)
cruise ship voyage recorders and an enhanced aviation collision avoidance
product that incorporates ground proximity warning, which are part of our
Aviation Products & Aircraft Modernization segment.
Within the communications product market, we are offering local fixed
wireless access equipment for voice, DSL and internet access, transceivers for
LMDS (Local Multipoint Distribution Service) and a broad range of commercial
components and digital test equipment for broadband communications providers,
which are part of our Secure Communications & ISR and Specialized Products
segments.
We have developed the majority of our commercial products employing
technology used in our defense businesses. Sales generated from our developing
commercial opportunities have not yet been material to us.
THE AIS ACQUISITION
On March 8, 2002, we acquired the Aircraft Integration Systems business
(AIS) from Raytheon Company for $1,152.7 million in cash, subject to a purchase
price adjustment. The acquisition was financed using cash on hand, borrowings
under our senior credit facilities and a $500.0 million senior subordinated
interim loan.
AIS is a long-standing, sole-source provider of critical communications
intelligence, signals intelligence and unique systems for special customers
within the U.S. Government and has become an integral part of the U.S.
Military's ISR infrastructure. These systems collect, decode and transmit data,
providing the war fighter with real-time battlefield situational awareness.
AIS' major customers are increasingly focusing on these methods of intelligence
gathering and information distribution, suggesting excellent operating
prospects for the foreseeable future. This acquisition provides us with
platforms to capitalize on significant pull-through prospects related to the
sale of our secure communications and aviation products, including
communication links, signal processing, antennas, data recorders, displays and
traffic control and collision avoidance systems. AIS has been included in our
Secure Communications & ISR and our Aviation Products & Aircraft Modernization
reportable segments.
OUR STRATEGY
We intend to grow our sales, enhance our profitability and build on our
position as a leading merchant supplier of communication systems and products
to the major aerospace and defense
S-3
contractors as well as the U.S. Government. We also intend to leverage our
expertise and products into selected new commercial business areas where we can
adapt our existing products and technologies. Our strategy to achieve our
objectives includes:
EXPAND MERCHANT SUPPLIER RELATIONSHIPS. As an independent merchant
supplier, we intend to identify opportunities where we are able to use our
strong relationships to increase our business presence and allow customers to
reduce their costs.
SUPPORT CUSTOMER REQUIREMENTS. We intend to continue to align our
research and development, manufacturing and new business efforts to complement
our customers' requirements and provide state-of-the-art products.
ENHANCE OPERATING MARGINS. We intend to continue to enhance our operating
performance by reducing overhead expenses, continuing consolidation and
increasing productivity.
LEVERAGE TECHNICAL AND MARKET LEADERSHIP POSITIONS. We are applying our
technical expertise and capabilities to several closely aligned commercial
business markets and applications such as transportation and broadband wireless
communications and we expect to continue to explore other similar commercial
opportunities.
MAINTAIN DIVERSIFIED BUSINESS MIX. We have a diverse and broad business
mix with limited reliance on any particular program, a balance of
cost-reimbursable and fixed-price contracts, a significant follow-on business
and an attractive customer profile.
CAPITALIZE ON STRATEGIC ACQUISITION OPPORTUNITIES. We intend to enhance
our existing product base through internal research and development efforts and
selective acquisitions that will add new products in areas that complement our
present technologies. Since January 1, 2001, we acquired 14 businesses for an
aggregate adjusted purchase price of $1,736.0 million. We regularly evaluate
opportunities for future acquisitions. See "Risk Factors -- Our acquisition
strategy involves risks, and we may not successfully implement our strategy" on
page 5 of the accompanying prospectus.
RECENT DEVELOPMENTS
PerkinElmer's Detection Systems Business. On June 14, 2002, we acquired
the detection systems business of PerkinElmer for $100.0 million in cash plus
acquisition costs. PerkinElmer's detection systems business offers X-ray
screening for three major security applications: aviation systems for checked
and oversized baggage, break bulk cargo and air freight; port and border
applications including pallets, break bulk and air freight; and facility
protection, such as parcels, mail and cargo. PerkinElmer's detection systems
have a broad range of systems and technologies, with an installed base of over
16,000 units. PerkinElmer's detection systems business customer base includes
major airlines and airports, a number of domestic agencies, such as the U.S.
Customs Service, U.S. Marshals Service, U.S. Department of Agriculture and U.S.
Department of State, and international authorities throughout Europe, Asia and
South America.
DEBT TENDER OFFER
On June 6, 2002, L-3 Communications Corporation commenced a tender offer
to purchase any and all of its $225.0 million aggregate principal amount of
10 3/8% Senior Subordinated Notes due 2007. The tender offer is scheduled to
expire at 5:00 p.m., New York City time, on July 3, 2002, unless extended or
earlier terminated. The consummation of the tender offer is conditioned upon,
among other things, the consummation of this offering and the consummation of
the concurrent private placement of senior subordinated notes by L-3
Communications Corporation on terms acceptable to it.
S-4
The tender offer provides that the 10 3/8% Senior Subordinated Notes due
2007 will be purchased at 103.35% of the aggregate principal amount of the
notes, plus accrued interest up to the date of purchase. The tender offer also
provides that holders of the 10 3/8% Senior Subordinated Notes due 2007 that
tendered their notes on or before 5:00 p.m., New York City time, on June 24,
2002 will receive a premium of 2.0% of the aggregate principal amount of the
notes. If the tender offer is consummated, we intend to call for redemption all
of the 10 3/8% Senior Subordinated Notes due 2007 that remain outstanding at the
applicable redemption price of 105.188% of the principal amount thereof, plus
interest accrued to the redemption date. L-3 Communications Corporation intends
to use the proceeds from its concurrent private placement of senior
subordinated notes to finance the tender offer and the subsequent redemption.
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We are incorporated in Delaware, and the address of our principal
executive offices is 600 Third Avenue, New York, New York 10016. Our telephone
number is (212) 697-1111.
S-5
THE OFFERING
Common stock offered by us....... 14,000,000 shares.
Common stock to be outstanding
after this offering.............. 93,511,267 shares.
The number of shares of common stock to be outstanding after this
offering:
o includes 79,511,267 shares outstanding as of June 21, 2002;
o excludes an aggregate of 3,678,864 shares of common stock reserved for
issuance under our stock option plans for key employees and
non-employee directors of L-3;
o excludes 7,361,964 shares of common stock issuable upon conversion of
our outstanding 5.25% Convertible Senior Subordinated Notes due 2009;
o excludes 7,804,878 shares of common stock issuable upon conversion of
our outstanding 4% Senior Subordinated Convertible Contingent Notes
(CODES) due 2011; and
o assumes no exercise of the underwriters' over-allotment options in
connection with this offering to purchase up to an additional 2,100,000
shares of common stock from L-3.
Over-allotment options........... We have granted the underwriters options to
purchase 2,100,000 shares to cover
over-allotments.
Use of proceeds.................. We intend to use the net proceeds from this
offering to repay existing indebtedness and
for general corporate purposes, including
potential acquisitions. See "Use of
Proceeds."
NYSE symbol...................... "LLL."
Risk factors..................... You should carefully read and consider the
information set forth in "Risks Related to
Our Common Stock" beginning on page S-9 of
this prospectus supplement and "Risk Factors"
beginning on page 5 of the accompanying
prospectus before investing in our common
stock.
Unless otherwise stated, all share and per share data contained in this
prospectus supplement reflect a two-for-one stock split declared by L-3
Communications Holdings' board of directors on April 23, 2002. In addition,
except as otherwise noted, all information in this prospectus supplement
assumes no exercise by the underwriters of their over-allotment options.
S-6
SUMMARY FINANCIAL DATA
We derived the summary financial data presented below from our financial
statements. The financial statement data for the years ended December 31, 2001,
2000 and 1999 are derived from our audited consolidated financial statements
incorporated by reference in this prospectus supplement. We derived the balance
sheet data presented below at December 31, 2001 and 2000 from our audited
consolidated financial statements incorporated by reference in this prospectus
supplement. We derived the balance sheet data at December 31, 1999 from our
audited consolidated financial statements not included or incorporated by
reference in this prospectus supplement. We derived the financial statement
data for the three months ended March 31, 2002 and the balance sheet data at
March 31, 2002 from our unaudited condensed consolidated financial statements
incorporated by reference in this prospectus supplement. Our unaudited
condensed consolidated financial statements for the three months ended March
31, 2002 include, in our opinion, all adjustments consisting of normal
recurring adjustments necessary for a fair presentation of the results for the
period.
The supplemental data for the three months ended March 31, 2002 and for
the year ended December 31, 2001 was derived from our unaudited pro forma
condensed consolidated financial information included elsewhere herein, and
gives effect to our material acquisitions, excluding our acquisition of the
detection systems business of PerkinElmer, this offering and the concurrent
private placement of $750.0 million of senior subordinated notes by L-3
Communications Corporation, our wholly owned subsidiary. The supplemental data
is presented for illustrative purposes only, and is not indicative of the
results we would have had if these transactions had been completed on January
1, 2001, nor is it indicative of results we may expect in the future.
SUPPLEMENTAL
DATA FOR SUPPLEMENTAL
THREE THREE DATA FOR
MONTHS MONTHS YEAR
ENDED ENDED ENDED YEARS ENDED DECEMBER 31,(2)
MARCH 31, MARCH 31, DECEMBER 31, -----------------------------------------
2002(1) 2002(2) 2001(1)(3) 2001 2000 1999
------------- ----------- ------------- ------------- ------------- -------------
(in millions, except per share data)
STATEMENT OF OPERATIONS DATA:
Sales ..................................... $ 910.2 $ 696.8 $ 3,557.3 $ 2,347.4 $ 1,910.1 $ 1,405.5
Operating income .......................... 75.6 71.3 367.2 275.3 222.7 150.5
Interest expense, net ..................... 31.6 25.1 149.6 84.5 88.6 55.1
Minority interest ......................... 0.9 0.9 4.5 4.5 -- --
Provision for income taxes ................ 15.8 16.0 87.8 70.8 51.4 36.7
Income from continuing operations ......... 27.3 29.3 125.3 115.5 82.7 58.7
Income from continuing operations,
as adjusted(4) ........................... $ 27.3 $ 29.3 $ 159.2 $ 149.4 $ 112.3 $ 76.2
Earnings per common share:
Basic .................................... $ 0.29 $ 0.37 $ 1.36 $ 1.54 $ 1.24 $ 0.91
Basic, as adjusted(4) .................... $ 0.29 $ 0.37 $ 1.73 $ 1.99 $ 1.68 $ 1.19
Diluted .................................. $ 0.28 $ 0.36 $ 1.32 $ 1.47 $ 1.18 $ 0.88
Diluted, as adjusted(4) .................. $ 0.28 $ 0.36 $ 1.66 $ 1.87 $ 1.61 $ 1.14
Weighted average common
shares outstanding:
Basic .................................... 92.9 78.9 92.0 74.9 66.7 64.2
Diluted .................................. 96.4 82.4 102.5 85.4 69.9 67.0
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents ................. $ 46.0 $ 361.0 $ 32.7 $ 42.8
Working capital ........................... 807.3 717.8 360.9 255.5
Total assets .............................. 4,357.8 3,339.2 2,463.5 1,628.7
Total debt ................................ 2,175.0 1,325.0 1,095.0 605.0
Shareholders' equity ...................... 1,266.5 1,213.9 692.6 583.2
S-7
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(1) The supplemental data for the three months ended March 31, 2002 give effect
to our acquisition of AIS and the related financings as if they were
included for the entire period. The supplemental data for the year ended
December 31, 2001 give effect to all of our material acquisitions,
excluding our acquisition of the detection systems business of PerkinElmer,
since January 1, 2001 as if they and their related financings had occurred
on January 1, 2001. In addition, the supplemental data give effect to this
offering and the concurrent private placement of $750.0 million of senior
subordinated notes by L-3 Communications Corporation, our wholly owned
subsidiary. This offering is not conditioned upon the consummation of the
issuance of the senior subordinated notes. See "Unaudited Pro Forma
Condensed Consolidated Financial Information."
The senior subordinated notes to be issued in the concurrent private
placement by L-3 Communications Corporation have not been registered under
the Securities Act and may not be offered or sold in the United States
absent registration or an applicable exemption from registration
requirements.
(2) Our results of operations are impacted significantly by our acquisitions,
which are described elsewhere in this prospectus supplement and in the
documents incorporated by reference herein.
(3) The supplemental data for the year ended December 31, 2001, do not include
an extraordinary pre-tax charge of $16.1 million ($9.7 million after-tax)
related to the repurchase and/or redemption of L-3 Communications
Corporation's $225.0 million 10 3/8% Senior Subordinated Notes due 2007.
The extraordinary charge includes the call premium of 5.188% or
approximately $11.6 million pre-tax 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 would have reduced basic earnings
per common share by $0.11 and diluted earnings per common share by $0.09
for the year ended December 31, 2001.
(4) Represents income from continuing operations and basic and diluted earnings
per common share, adjusted to exclude goodwill amortization expense, net of
any income tax effects, recognized in those years related to goodwill that
is no longer being amortized.
S-8
RISKS RELATED TO OUR COMMON STOCK
Investing in our common stock involves risks. You should carefully
consider the following risk factors relating to our common stock and the risk
factors beginning on page 5 of the accompanying prospectus relating to our
business, in addition to the other information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus, and in
any other documents to which we refer you in this prospectus supplement or the
accompanying prospectus, in deciding whether to invest in our common stock.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD LOWER THE STOCK
PRICE.
We may, in the future, sell additional shares of our common stock in
subsequent public offerings. We may also issue additional shares of our common
stock to finance future acquisitions, including acquisitions larger than those
we have done in the past through the use of equity. Additionally, a substantial
number of shares of our common stock is available for future sale pursuant to
stock options that we granted to our employees to purchase shares of our common
stock, registration rights agreements and upon conversion of our convertible
notes due 2009 and of our CODES due 2011. We cannot predict the size of future
issuances of our common stock or the effect, if any, that future sales and
issuances of shares of our common stock will have on the market price of our
common stock. Sales of substantial amounts of our common stock (including
shares issued upon the exercise of stock options, acquisition financing or the
conversion of our outstanding convertible notes and CODES), or the perception
that such sales could occur, may adversely affect prevailing market prices for
our common stock.
DELAWARE LAW AND THE CHARTER DOCUMENTS OF L-3 COMMUNICATIONS HOLDINGS MAY
IMPEDE OR DISCOURAGE A TAKEOVER, WHICH COULD CAUSE THE MARKET PRICE OF ITS
SHARES TO DECLINE.
We are a Delaware corporation and the anti-takeover provisions of Delaware
law impose various impediments to the ability of a third party to acquire
control of us, even if a change in control would be beneficial to our existing
stockholders. In addition, our board of directors has the power, without
stockholders' approval, to designate the terms of one or more series of
preferred stock and issue shares of preferred stock, which could be used
defensively if a takeover is threatened. Our certificate of incorporation and
by-laws provide for a classified board of directors serving staggered
three-year terms, restrictions on who may call a special meeting of
stockholders and a prohibition on stockholder action by written consent. All
options issued under our stock option plans automatically vest upon a change in
control of L-3 Communications Holdings. Our incorporation under Delaware law,
the ability of our board of directors to create and issue a new series of
preferred stock, the acceleration of the vesting of the outstanding stock
options that we have granted upon a change in control of L-3 Communications
Holdings, and certain provisions of our certificate of incorporation and
by-laws could impede a merger, takeover or other business combination involving
L-3 Communications Holdings or discourage a potential acquiror from making a
tender offer for the common stock of L-3 Communications Holdings, which, under
certain circumstances, could reduce the market value of our common stock.
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY.
A number of factors could cause the market price of our common stock to
fluctuate significantly, including:
o our quarterly results of operations and cash flows or those of other
aerospace and defense companies;
o the public's reaction to our press releases, announcements and our
filings with the SEC;
o changes in estimates of our earnings or recommendations by research
analysts;
o changes in the U.S. defense budgets;
o changes in general conditions in the U.S. economy, financial markets or
defense industry;
S-9
o natural disasters; and
o other developments affecting us or our competitors.
In recent years, the stock market has experienced extreme price and volume
fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reasons unrelated to the operating
performance of these companies. See "Price Range of Common Stock."
OUR MANAGEMENT HAS DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING.
As described in "Use of Proceeds," we intend to use some or all of the net
proceeds of this offering to repay indebtedness under our existing 364-day and
five-year revolving credit facilities and for general corporate purposes,
including potential acquisitions. We regularly evaluate potential acquisitions
and joint venture transactions, but, except as disclosed herein or in the
documents incorporated or deemed incorporated by reference in this prospectus
supplement, we have not entered into any agreements with respect to any
material transactions at this time. Upon repayment of the debt outstanding
under the senior credit facilities, our borrowing capacity will be restored and
we will have wide discretion over the use of any funds subsequently borrowed
under the senior credit facilities.
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus supplement and the
accompanying prospectus and the documents incorporated herein and therein by
reference contain some forward-looking statements. Certain of the matters
discussed concerning our operations, cash flows, financial position, economic
performance and financial condition, including, in particular, the likelihood
of our success in developing and expanding our business and the realization of
sales from backlog include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Statements that are predictive in nature, that depend upon or refer to
future events or conditions or that include words such as "expects,"
"anticipates," "intends," "plans," "believes," "estimates" and similar
expressions are forward-looking statements. Although we believe that these
statements are based upon reasonable assumptions, including projections of
orders, sales, operating margins, earnings, cash flows, research and
development costs, working capital, capital expenditures and other projections,
they are subject to several risks and uncertainties, and therefore, we can give
no assurance that these statements will be achieved.
Our forward-looking statements will also be influenced by factors such as:
o our dependence on the defense industry and the business risks peculiar
to that industry, including changing priorities or reductions in the
U.S. Government defense budget;
o our reliance on contracts with a limited number of agencies of, or
contractors to, the U.S. Government and the possibility of termination
of government contracts by unilateral government action or for failure
to perform;
o our ability to obtain future government contracts on a timely basis;
o the availability of government funding and changes in customer
requirements for our products and services;
o our significant amount of debt and the restrictions contained in our
debt agreements;
o collective bargaining agreements and labor disputes;
o economic conditions, competitive environment, international business
and political conditions, timing of international awards and contracts;
S-10
o our extensive use of fixed price contracts as compared to cost plus
contracts;
o our ability to identify future acquisition candidates or to integrate
acquired operations;
o the rapid change of technology and high level of competition in the
communications equipment industry;
o our introduction of new products into commercial markets or our
investments in commercial products or companies;
o pension, environmental or legal matters or proceedings and various
other market, competition and industry factors, many of which are
beyond our control; and
o the fair values of assets including goodwill and other intangibles of
our businesses which can be impaired or reduced by the other factors
discussed above.
You are cautioned that our forward-looking statements are not guarantees
of future performance and the actual results or developments may differ
materially from the expectations expressed in the forward-looking statements.
As for the forward-looking statements that relate to future financial
results and other projections, actual results will be different due to the
inherent uncertainty of estimates, forecasts and projections and may be better
or worse than projected. Given these uncertainties, you should not place any
reliance on these forward-looking statements. These forward-looking statements
also represent our estimates and assumptions only as of the date that they were
made. We expressly disclaim a duty to provide updates to these forward-looking
statements, and the estimates and assumptions associated with them, after the
date of this prospectus supplement to reflect events or changes in
circumstances or changes in expectations or the occurrence of anticipated
events.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any additional disclosures we make in our
Form 10-K, Form 10-Q and Form 8-K reports to the Securities and Exchange
Commission. Also note that we provide a cautionary discussion of risks and
uncertainties under the caption "Risks Related to Our Common Stock" in this
prospectus supplement and "Risk Factors" in the accompanying prospectus. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could also
adversely affect us. This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995.
S-11
USE OF PROCEEDS
We will receive net proceeds of approximately $767.6 million from this
offering, after deducting the discounts, commissions and estimated expenses
payable by us. This amount will be approximately $882.9 million if the
underwriters fully exercise the over-allotment options we have granted them to
purchase up to an additional 2,100,000 newly issued shares of our common stock.
Concurrent with this offering, L-3 Communications Corporation intends to
consummate a private placement of senior subordinated notes from which it
expects to receive net proceeds of approximately $731.8 million, after
deducting related discounts, commissions and estimated expenses.
Assuming the successful completion of the concurrent private placement of
senior subordinated notes by L-3 Communications Corporation, the net proceeds
from this offering and the concurrent private placement will be used to (1)
repay the $500.0 million of indebtedness outstanding under our senior
subordinated interim loan agreement, (2) repay the indebtedness outstanding
under our senior credit facilities, which amounted to $351.0 million as of May
31, 2002, (3) repurchase and/or redeem all of the 10 3/8% Senior Subordinated
Notes due 2007 for approximately $237.4 million and (4) increase our cash and
cash equivalents, which will be used for general corporate purposes, including
potential acquisitions.
Assuming L-3 Communications Corporation does not complete its concurrent
private placement of senior subordinated notes, we intend to use the net
proceeds from this offering to repay the $500.0 million of indebtedness
outstanding under our senior subordinated interim loan agreement, repay the
$151.0 million of indebtedness outstanding under our 364-day revolving credit
facility and repay $116.6 million of indebtedness outstanding under our
five-year revolving credit facility, all of which was incurred in connection
with our acquisition of AIS. The weighted average interest rate as of May 31,
2002 under our revolving credit facilities was 4.85%. The 364-day revolving
credit facility matures on February 25, 2003 and the five-year revolving credit
facility matures on May 15, 2006. Amounts paid under each of our revolving
credit facilities will be available (subject to compliance with covenants) to
be reborrowed by us from time to time for, among other purposes, general
corporate purposes, including potential acquisitions. As of May 31, 2002, our
senior subordinated interim loan, which matures on May 15, 2009, had a weighted
average interest rate of 5.14%.
DIVIDEND POLICY
Since its inception, L-3 Communications Holdings has never paid a cash
dividend on its common stock. L-3 Communications Holdings currently intends to
retain its earnings to finance future growth and, therefore, does not
anticipate paying any cash dividends on its common stock in the foreseeable
future. Any determination as to the payment of dividends will depend upon the
future results of operations, capital requirements and financial condition of
L-3 Communications Holdings and its subsidiaries and such other facts as the
board of directors of L-3 Communications Holdings may consider, including any
contractual or statutory restrictions on L-3 Communications Holdings' ability
to pay dividends. Moreover, L-3 Communications Holdings is a holding company
and its ability to pay dividends is dependent upon receipt of dividends,
distributions, advances, loans or other cash transfers from L-3 Communications
Corporation. Certain outstanding debt instruments of L-3 Communications
Corporation limit its ability to pay dividends or other distributions on its
common stock or to make advances, loans or other cash transfers to L-3
Communications Holdings.
S-12
PRICE RANGE OF COMMON STOCK
The common stock of L-3 Communications Holdings trades on the New York
Stock Exchange under the symbol "LLL." The last reported sale price for our
common stock on June 24, 2002 was $56.60 per share, as reported on the NYSE.
The table below sets forth closing information on the high and low closing
prices for our common stock during the periods indicated, as adjusted for the
two-for-one stock split.
PRICE RANGE
OF COMMON STOCK
-------------------------
HIGH LOW
----------- -----------
FISCAL YEAR ENDED DECEMBER 31, 2000:
Quarter Ended:
March 31, 2000 ................................ $ 25.97 $ 17.85
June 30, 2000 ................................. 29.32 22.63
September 30, 2000 ............................ 31.88 26.28
December 31, 2000 ............................. 38.78 28.60
FISCAL YEAR ENDED DECEMBER 31, 2001:
Quarter Ended:
March 31, 2001 ................................ $ 45.00 $ 32.50
June 30, 2001 ................................. 44.45 38.04
September 30, 2001 ............................ 43.73 31.24
December 31, 2001 ............................. 48.24 39.70
FISCAL YEAR ENDED DECEMBER 31, 2002:
Quarter Ended:
March 31, 2002 ................................ $ 58.23 $ 44.09
June 30, 2002 (through June 24, 2002) ......... 65.99 52.05
S-13
CAPITALIZATION
The following table sets forth our capitalization: (1) on an actual basis
as of March 31, 2002, (2) as adjusted for this offering and the application of
the net proceeds therefrom, and (3) as adjusted for this offering, the
concurrent private placement of senior subordinated notes by L-3 Communications
Corporation and the application of the net proceeds therefrom.
AS OF MARCH 31, 2002
---------------------------------------------------
AS ADJUSTED
FOR THIS OFFERING
AND L-3
COMMUNICATIONS
CORPORATION'S
AS ADJUSTED CONCURRENT DEBT
ACTUAL FOR THIS OFFERING ISSUANCE(1)
------------ ------------------- ------------------
(IN MILLIONS)
Cash and cash equivalents ..................................... $ 46.0 $ 46.0 $ 458.0
========= ========= ==========
Long-term debt:
Senior credit facilities(2) .................................. $ 350.0 $ 82.4 $ --
Senior Subordinated Interim Loan ............................. 500.0 -- --
10 3/8% Senior Subordinated Notes due 2007 ................... 225.0 225.0 --
8 1/2% Senior Subordinated Notes due 2008 .................... 180.0 180.0 180.0
8% Senior Subordinated Notes due 2008 ........................ 200.0 200.0 200.0
7 5/8% Senior Subordinated Notes due 2012 .................... -- -- 750.0
5 1/4% Convertible Senior Subordinated Notes due 2009 ........ 300.0 300.0 300.0
4% Senior Subordinated Convertible Contingent Debt
Securities due 2011 ........................................ 420.0 420.0 420.0
--------- --------- ----------
Total debt ................................................. $ 2,175.0 $ 1,407.4 $ 1,850.0
Minority interest ............................................. $ 70.6 $ 70.6 $ 70.6
Shareholders' equity:
Common stock ................................................. $ 964.4 $ 1,732.0 $ 1,732.0
Retained earnings ............................................ 331.0 331.0 321.3 (3)
Unearned compensation ........................................ (5.1) (5.1) (5.1)
Accumulated other comprehensive loss ......................... (23.8) (23.8) (23.8)
--------- --------- ----------
Total shareholders' equity ................................. $ 1,266.5 $ 2,034.1 $ 2,024.4
--------- --------- ----------
Total capitalization ....................................... $ 3,512.1 $ 3,512.1 $ 3,945.0
========= ========= ==========
----------
(1) Concurrently with this offering, L-3 Communications Corporation, our wholly
owned subsidiary, intends to issue $750.0 million in principal amount of
senior subordinated notes in a private placement. Assuming the successful
completion of that offering, the net proceeds from this offering and the
concurrent private placement will be used to (1) repay the $500.0 million
of indebtedness outstanding under our senior subordinated interim loan
agreement, (2) repay the $350.0 million of indebtedness outstanding under
our senior credit facilities, (3) repurchase and/or redeem all of the
10 3/8% Senior Subordinated Notes due 2007 for approximately $237.4 million
and (4) increase our cash and cash equivalents, which will be used for
general corporate purposes, including potential acquisitions. See "Use of
Proceeds." This offering is not conditioned upon the consummation of the
issuance by L-3 Communications Corporation of the senior subordinated
notes.
(2) At March 31, 2002, our availability under the senior credit facilities at
any given time was $750.0 million (subject to compliance with covenants),
less the amount of outstanding borrowings and outstanding letters of
credit, which amounted to $350.0 million for outstanding borrowings and
$166.6 million for outstanding letters of credit at March 31, 2002.
(3) In connection with the repurchase and/or redemption of L-3 Communications
Corporation's 10 3/8% Senior Subordinated Notes due 2007, we estimate that
we will incur a pre-tax loss on the extinguishment of that debt of
approximately $16.1 million, or $9.7 million after-tax.
S-14
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, 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") and (2) this offering and
the application of the net proceeds of this offering (assuming that the
concurrent private placement of senior subordinated notes by L-3 Communications
Corporation is not consummated) to repay $500.0 million of indebtedness
outstanding under our senior subordinated interim loan agreement and $267.6
million of borrowings outstanding under our senior credit facilities, all of
which incurred in connection with our acquisition of AIS. All of the
Acquisitions described above are included in our consolidated balance sheet as
of March 31, 2002, and, therefore, an unaudited pro forma condensed
consolidated balance sheet is not provided. The pro forma statement of
operations data does not give effect to our recent acquisition of the detection
systems business of PerkinElmer and the related financings.
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 supplemental pro forma data is provided as additional information and
gives effect as of January 1, 2001 to this offering and the concurrent private
placement of $750.0 million of senior subordinated notes by L-3 Communications
Corporation and the application of the net proceeds from this offering and the
concurrent private placement to (1) repay the $500.0 million of indebtedness
outstanding under our senior subordinated interim loan agreement, (2) repay the
$345.6 million of indebtedness outstanding under our senior credit facilities,
(3) repurchase and/or redeem all of the 10 3/8% Senior Subordinated Notes due
2007 for approximately $237.4 million and (4) increase our cash and cash
equivalents, which will be used for general corporate purposes, including
potential acquisitions.
The pro forma supplemental data adjustments for the three months ended
March 31, 2002 and 2001 and for the year ended December 31, 2001, do not
include an extraordinary pre-tax charge of $16.1 million ($9.7 million
after-tax) related to the repurchase and/or redemption of L-3 Communications
Corporation's $225.0 million 10 3/8% Senior Subordinated Notes due 2007. The
extraordinary charge includes the call premium of 5.188% or approximately $11.6
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
would have reduced basic earnings per common share by $0.11 and diluted
earnings per common share by $0.10 for the three months ended March 31, 2001
and would have reduced basic earnings per common share by $0.11 and diluted
earnings per common share by $0.09 for the year ended December 31, 2001.
S-15
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with (1) our unaudited condensed consolidated
financial statements for the three months ended March 31, 2002 and 2001, and
our audited consolidated financial statements for the year ended December 31,
2001 incorporated by reference herein; and (2) the audited combined financial
statements of AIS for the year ended December 31, 2001 included in our Current
Report on Form 8-K dated March 22, 2002, which is incorporated by reference
herein. 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, this offering and the concurrent
private placement of senior subordinated notes by L-3 Communications
Corporation been completed on January 1, 2001 or the results of our operations
that may be obtained in the future.
S-16
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
L-3 ADJUSTMENTS PRO FORMA
AS ACQUISITION FOR OUR FOR OUR
REPORTED HISTORICAL(1)(2) ACQUISITIONS ACQUISITIONS
----------- ------------------ -------------- --------------
Sales .......................... $ 696.8 $ 213.4 $ -- $ 910.2
Costs and expenses ............. 625.5 209.1 -- 834.6
------- -------- -------- -------
Operating income ............. 71.3 4.3 -- 75.6
Interest and other income
(expense) ..................... 1.0 -- (1.2)(3) (0.2)
Interest expense ............... 26.1 -- 7.3 (4) 33.4
Minority interest .............. 0.9 -- -- 0.9
------- -------- -------- -------
Income (loss) before
income taxes ................ 45.3 4.3 (8.5) 41.1
Provision (benefit) for income
taxes(7) ...................... 16.0 2.4 (3.4) 15.0
------- -------- -------- -------
Income (loss) from
continuing operations ....... $ 29.3 $ 1.9 $ (5.1) $ 26.1
======= ======== ======== =======
Earnings per share:(8)
Basic ........................ $ 0.37 $ 0.33
======= =======
Diluted ...................... $ 0.36 $ 0.32
======= =======
Weighted average common
shares outstanding:(8)
Basic ........................ 78.9 78.9
======= =======
Diluted ...................... 82.4 82.4
======= =======
SUPPLEMENTAL DATA
------------------------------------
PRO FORMA
FOR OUR
ADDITIONAL ACQUISITIONS
ADJUSTMENTS AND THIS
FOR L-3 OFFERING AND
PRO FORMA COMMUNICATIONS L-3 COMMUNICATIONS
FOR OUR CORPORATION'S CORPORATION'S
ADJUSTMENTS ACQUISITIONS CONCURRENT CONCURRENT
FOR THIS AND THIS DEBT DEBT
OFFERING OFFERING ISSUANCE ISSUANCE
--------------- -------------- ---------------- -------------------
Sales .......................... $ -- $ 910.2 -- $ 910.2
Costs and expenses ............. -- 834.6 -- 834.6
-------- ------- -- -------
Operating income ............. -- 75.6 -- 75.6
Interest and other income
(expense) ..................... -- (0.2) -- (0.2)
Interest expense ............... (9.9)(5) 23.5 7.9 (6) 31.4
Minority interest .............. -- 0.9 -- 0.9
-------- -------- ---- -------
Income (loss) before
income taxes ................ 9.9 51.0 (7.9) 43.1
Provision (benefit) for income
taxes(7) ...................... 4.0 19.0 (3.2) 15.8
-------- -------- ---- -------
Income (loss) from
continuing operations ....... $ 5.9 $ 32.0 $(4.7) $ 27.3
======== ======= ===== =======
Earnings per share:(8)
Basic ........................ $ 0.34 $ 0.29
======= =======
Diluted ...................... $ 0.33 $ 0.28
======= =======
Weighted average common
shares outstanding:(8)
Basic ........................ 14.0 92.9 92.9
======== ======= =======
Diluted ...................... 14.0 96.4 96.4
======== ======= =======
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
S-17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
L-3 ADJUSTMENTS PRO FORMA
AS ACQUISITIONS FOR OUR FOR OUR
REPORTED HISTORICAL(1)(9) ACQUISITIONS ACQUISITIONS
----------- ------------------ ----------------- --------------
Sales ............................ $ 461.9 $ 327.9 $ -- $ 789.8
Costs and expenses ............... 415.0 312.6 (7.1)(10) 720.5
------- -------- ---------- -------
Operating income ............... 46.9 15.3 7.1 69.3
Interest and other income
(expense) ....................... 0.5 (0.2) (1.0)(3) (0.7)
Interest expense ................. 24.4 0.3 22.4 (4) 47.1
Minority interest ................ -- -- -- --
------- -------- ---------- -------
Income (loss) before
income taxes .................. 23.0 14.8 (16.3) 21.5
Provision (benefit) for income
taxes(7) ........................ 8.8 6.4 ( 5.9) 9.3
------- -------- ---------- -------
Income (loss) from
continuing operations ......... 14.2 8.4 (10.4) 12.2
Goodwill amortization
expense, net of tax ............. 7.3 -- -- 7.3
------- -------- ---------- -------
Income (loss) from
continuing operations,
as adjusted ................... $ 21.5 $ 8.4 $ (10.4) $ 19.5
======= ======== ========== =======
Earnings per share:(8)
Basic .......................... $ 0.21 $ 0.16
======= =======
Basic, as adjusted ............. $ 0.32 $ 0.25
======= =======
Diluted ........................ $ 0.20 $ 0.15
======= =======
Diluted, as adjusted ........... $ 0.30 $ 0.24
======= =======
Weighted average common
shares outstanding:(8)
Basic .......................... 68.2 9.1 (12) 77.3
======= ========== =======
Diluted ........................ 71.5 9.1 (12) 80.6
======= ========== =======
SUPPLEMENTAL DATA
------------------------------------
PRO FORMA
FOR OUR
ADDITIONAL ACQUISITIONS
ADJUSTMENTS AND THIS
FOR L-3 OFFERING AND
PRO FORMA COMMUNICATIONS L-3 COMMUNICATIONS
FOR OUR CORPORATION'S CORPORATION'S
ADJUSTMENTS ACQUISITIONS CONCURRENT CONCURRENT
FOR THIS AND THIS DEBT DEBT
OFFERING OFFERING ISSUANCE ISSUANCE
---------------- -------------- ---------------- -------------------
Sales ............................ $ -- $ 789.8 $ -- $ 789.8
Costs and expenses ............... -- 720.5 -- 720.5
--------- ------- --------- --------
Operating income ............... -- 69.3 -- 69.3
Interest and other income
(expense) ....................... -- (0.7) -- (0.7)
Interest expense ................. (16.7)(5) 30.4 7.3 (6) 37.7
Minority interest ................ -- -- -- --
--------- ------- --------- --------
Income (loss) before
income taxes .................. 16.7 38.2 (7.3) 30.9
Provision (benefit) for income
taxes(7) ........................ 6.7 16.0 (2.9) 13.1
--------- ------- --------- ---------
Income (loss) from
continuing operations ......... 10.0 22.2 (4.4)(11) 17.8 (11)
Goodwill amortization
expense, net of tax ............. -- 7.3 -- 7.3
--------- ------- --------- --------
Income (loss) from
continuing operations,
as adjusted ................... $ 10.0 $ 29.5 $ (4.4) $ 25.1
========= ======= ========= =========
Earnings per share:(8)
Basic .......................... $ 0.24 $ 0.19(11)
======= =========
Basic, as adjusted ............. $ 0.32 $ 0.27
======= =========
Diluted ........................ $ 0.23 $ 0.19(11)
======= =========
Diluted, as adjusted ........... $ 0.31 $ 0.27
======= =========
Weighted average common
shares outstanding:(8)
Basic .......................... 14.0 91.3 91.3
========= ======= =========
Diluted ........................ 14.0 94.6 94.6
========= ======= =========
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
S-18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
L-3 ADJUSTMENTS PRO FORMA
AS ACQUISITIONS FOR OUR FOR OUR
REPORTED HISTORICAL(1)(13) ACQUISITIONS ACQUISITIONS
------------- ------------------- ------------------ --------------
Sales ............................ $ 2,347.4 $ 1,209.9 $ -- $ 3,557.3
Costs and expenses ............... 2,072.1 1,146.9 (28.9)(10) 3,190.1
--------- ---------- ---------- ---------
Operating income ............... 275.3 63.0 28.9 367.2
Interest and other income
(expense) ....................... 1.8 (11.2) (3.8)(3) (13.2)
Interest expense ................. 86.3 0.5 75.4 (4) 162.2
Minority interest ................ 4.5 -- -- 4.5
--------- ---------- ---------- ---------
Income (loss) before
income taxes .................. 186.3 51.3 (50.3) 187.3
Provision (benefit) for income
taxes(7) ........................ 70.8 25.7 (19.0) 77.5
--------- ---------- ---------- ---------
Income (loss) from
continuing operations ......... 115.5 25.6 (31.3) 109.8
Goodwill amortization
expense, net of tax ............. 33.9 -- -- 33.9
--------- ---------- ---------- ---------
Income (loss) from
continuing operations,
as adjusted ................... $ 149.4 $ 25.6 $ (31.3) $ 143.7
========= ========== ========== =========
Earnings per share:(8)
Basic .......................... $ 1.54 $ 1.41
========= =========
Basic, as adjusted ............. $ 1.99 $ 1.84
========= =========
Diluted ........................ $ 1.47 $ 1.36
========= =========
Diluted, as adjusted ........... $ 1.87 $ 1.74
========= =========
Weighted average common
shares outstanding:(8)
Basic .......................... 74.9 3.1 (12) 78.0
========= ========== ==========
Diluted ........................ 85.4 3.1 (12) 88.5
========= ========== ==========
SUPPLEMENTAL DATA
----------------------------------------
PRO FORMA
FOR OUR
ADDITIONAL ACQUISITIONS
ADJUSTMENTS AND THIS
FOR L-3 OFFERING AND
PRO FORMA COMMUNICATIONS L-3 COMMUNICATIONS
FOR OUR CORPORATION'S CORPORATION'S
ADJUSTMENTS ACQUISITIONS CONCURRENT CONCURRENT
FOR THIS AND THIS DEBT DEBT
OFFERING OFFERING ISSUANCE ISSUANCE
---------------- -------------- ------------------ ---------------------
Sales ............................ $ -- $ 3,557.3 $ -- $ 3,557.3
Costs and expenses ............... -- 3,190.1 -- 3,190.1
--------- --------- ---------- ----------
Operating income ............... -- 367.2 -- 367.2
Interest and other income
(expense) ....................... -- (13.2) -- (13.2)
Interest expense ................. (55.6)(5) 106.6 29.8 (6) 136.4
Minority interest ................ -- 4.5 -- 4.5
--------- --------- ---------- ----------
Income (loss) before
income taxes .................. 55.6 242.9 (29.8) 213.1
Provision (benefit) for income
taxes(7) ........................ 22.2 99.7 (11.9) 87.8
--------- --------- ---------- ----------
Income (loss) from
continuing operations ......... 33.4 143.2 (17.9)(11) 125.3 (11)
Goodwill amortization
expense, net of tax ............. -- 33.9 -- 33.9
--------- --------- ---------- ----------
Income (loss) from
continuing operations,
as adjusted ................... $ 33.4 $ 177.1 $ (17.9) $ 159.2
========= ========= ========== ==========
Earnings per share:(8)
Basic .......................... $ 1.56 $ 1.36(11)
========= ==========
Basic, as adjusted ............. $ 1.93 $ 1.73
========= ==========
Diluted ........................ $ 1.50 $ 1.32(11)
========= ==========
Diluted, as adjusted ........... $ 1.83 $ 1.66
========= ==========
Weighted average common
shares outstanding:(8)
Basic .......................... 14.0 92.0 92.0
========= ========= ==========
Diluted ........................ 14.0 102.5 102.5
========= ========= ==========
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
S-19
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. 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 $1,639.4 million.
2. The pro forma statement of operations for the three months ended March 31,
2002 includes the unaudited historical financial data for AIS for the two
months ended February 28, 2002. All of the other acquisitions are included
in our results of operations for the entire three months ended March 31,
2002.
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 our sale of $420.0 million of 4% Senior Subordinated
Convertible Contingent Debt Securities due September 15, 2011 ("CODES") in
October and November of 2001 and from our public offering of 9,150,000
shares of common stock (the "May 2001 Common Stock Offering") that were
assumed entirely to be used to finance the Acquisitions. Such eliminations
amounted to $1.2 million for the three months ended March 31, 2002, $1.0
million for the three months ended March 31, 2001 and $3.8 million for the
year ended December 31, 2001.
S-20
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. The aggregate purchase prices, including acquisition costs, for the
Acquisitions of $1,639.4 million were assumed to be financed at January 1,
2001 using (1) borrowings under our senior credit facilities of $345.6
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
our sale of $420.0 million of CODES in October and November of 2001 which
amounted to $407.5 million, and (5) the net proceeds from 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 three months
ended March 31, 2002 and 2001 and the year ended December 31, 2001 to give
effect to the financing of the Acquisitions are presented below.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED
------------------- DECEMBER 31,
2002 2001 2001
--------- --------- -------------
(IN MILLIONS)
Interest on borrowings under the senior credit
facilities (on $345.6 million) for the periods prior
to March 1, 2002(a) ................................ $ 2.8 $ 6.5 $ 22.7
Interest on the senior subordinated interim loan
(on $500.0 million) for the periods prior to
March 1, 2002(a) ................................... 4.5 11.6 38.0
Interest on the CODES offering for the periods
prior to October 31, 2001 (4% on $420.0 million
for 10 months). .................................... -- 4.2 14.0
Amortization of deferred debt issue costs incurred
on the CODES for periods prior to October 31,
2001 ............................................... -- 0.4 1.2
Eliminate historical interest expense for the KDI
and SY Technology acquisitions ..................... -- ( 0.3) ( 0.5)
------ ------ -------
Total pro forma adjustments to interest
expense ......................................... $ 7.3 $ 22.4 $ 75.4
====== ====== =======
----------
(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 4.85% for the three months ended
March 31, 2002, 7.55% for the three months ended March 31, 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
5.38% for the three months ended March 31, 2002, 9.30% for the three
months ended March 31, 2001, and 7.59% for the year ended December 31,
2001.
S-21
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. Assuming this offering was completed on January 1, 2001, the net proceeds
from this offering would have been $767.6 million, after deductions for
underwriting commissions and discounts and other offering expenses of $24.8
million. Such net proceeds would have been applied to repay all of the
borrowings under the senior subordinated interim loan of $500.0 million and
$267.6 million of the borrowings under the senior credit facilities. Total
interest expense after the pro forma adjustments for our acquisitions but
prior to this offering amounted to $33.4 million for the three months ended
March 31, 2002, $47.1 million for the three months ended March 31, 2001,
and $162.2 million for the year ended December 31, 2001. As a result of
this offering, total pro forma interest expense would have decreased by
$9.9 million for the three months ended March 31, 2002, $16.7 million for
the three months ended March 31, 2001 and $55.6 million for the year ended
December 31, 2001. The details of the reductions to interest expense are
described in the table below.
THREE MONTHS ENDED MARCH
31,
--------------------------- YEAR ENDED
2002 2001 DECEMBER 31, 2001
---------- -------------- ------------------
(IN MILLIONS)
Eliminate interest on the senior
subordinated interim loan(a) ............. $ (6.7) $ (11.6) $ (38.0)
Eliminate interest on $267.6 million of
the borrowings under the senior credit
facilities(a) ............................ (3.2) ( 5.1) (17.6)
------ ------- -------
Total pro forma interest expense ......... $ (9.9) $ (16.7) $ (55.6)
====== ======= =======
----------
(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 4.85% for the three
months ended March 31, 2002, 7.55% for the three months ended March 31,
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 5.38% for the three months ended March 31, 2002, 9.30% for
the three months ended March 31, 2001, and 7.59% for the year ended
December 31, 2001.
6. Assuming the concurrent private placement of $750.0 million of 7.625%
senior subordinated notes by L-3 Communications Corporation was
simultaneously completed with this offering on January 1, 2001, an
additional $78.0 million of borrowings outstanding under the senior credit
facilities would have been repaid, all of the 10 3/8% Senior Subordinated
Notes due 2007 would have been redeemed and/or repurchased for
approximately $237.4 million and $416.4 million would have been invested in
cash and cash equivalents. Total interest expense after the pro forma
adjustments for our acquisitions and this offering, but prior to the
concurrent private placement of the senior subordinated notes amounted to
$23.5 million for the three months ended March 31, 2002, $30.4 million for
the three months ended March 31, 2001, and $106.6 million for the year
ended December 31, 2001. As a result of the private placement of the senior
subordinated notes by L-3 Communications Corporation, total pro forma
interest expense would have increased by $7.9 million for the three months
ended March 31, 2002, $7.3 million for the three months ended March 31,
2001 and $29.8 million for the year ended December 31, 2001. The details of
the increases to interest expense are described in the table below.
S-22
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED MARCH
31,
--------------------------- YEAR ENDED
2002 2001 DECEMBER 31, 2001
---------- -------------- ------------------
(IN MILLIONS)
Estimated interest on the concurrent
private placement of senior
subordinated notes (7.625% on
$750.0 million)............................ $ 14.3 $ 14.3 $ 57.2
Amortization of deferred debt issue costs
incurred on the concurrent private
placement of senior subordinated
notes ..................................... 0.5 0.5 1.8
Eliminate interest on the $78.0 million of
the borrowings under the senior credit
facilities(a) ............................. (0.9) (1.5) (5.1)
Eliminate interest on $225.0 million
10 3/8% Senior Subordinated Notes due
2007 ...................................... (5.8) (5.8) (23.3)
Eliminate amortization of deferred debt
issue costs incurred on $225.0 million
10 3/8% Senior Subordinated Notes due
2007 ...................................... (0.2) (0.2) (0.8)
------- ------- -------
Total pro forma interest expense ......... $ 7.9 $ 7.3 $ 29.8
======= ======= =======
----------
(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 4.85% for the three
months ended March 31, 2002, 7.55% for the three months ended March 31,
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 5.38% for the three months ended March 31, 2002, 9.30% for
the three months ended March 31, 2001, and 7.59% for the year ended
December 31, 2001.
The pro forma statements of operations do not reflect interest income on
the $416.4 million pro forma cash balance at January 1, 2001 that we would
have had after the concurrent private placement of senior subordinated
notes.
7. The pro forma adjustments for our Acquisitions, this offering, and the
concurrent private placement of senior subordinated notes were all
tax-effected, as appropriate, using an estimated statutory (federal and
state) tax rate of 40.0%. The pro forma adjustments also include an income
tax provision ($0.6 million for the three months ended March 31, 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.
8. 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 $2.6 million of after-tax interest
expense savings to reported net income for the three months ended March 31,
2002 and the three months ended March 31, 2001 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
three months ended March 31, 2002 and 2001 were anti-dilutive, and
therefore, their conversion was not assumed.
S-23
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. The pro forma statement of operations for the three months ended March 31,
2001 includes the following unaudited historical financial data for our
Acquisitions.
BT SY
KDI EER SPAR EMG FUZE TECHNOLOGY AIS ACQUISITIONS
--------- ---------- ---------- ---------- --------- ------------ ----------- -------------
(IN MILLIONS)
Sales ............................ $ 8.7 $ 37.0 $ 23.5 $ 16.5 $ 8.0 $ 15.0 $ 219.2 $ 327.9
Costs and expenses ............... 9.3 35.9 20.0 15.8 8.0 14.0 209.6 312.6
------ ------- ------- ------- ------ ------- -------- --------
Operating income (loss) ......... (0.6) 1.1 3.5 0.7 -- 1.0 9.6 15.3
Interest and other income
(expense) ..................... 0.1 0.1 (0.4) -- -- -- -- (0.2)
Interest expense ................ 0.2 -- -- -- -- 0.1 -- 0.3
------ ------- ------- ------- ------ ------- -------- --------
Income (loss) before
income taxes .................. (0.7) 1.2 3.1 0.7 -- 0.9 9.6 14.8
Income tax provision ............. -- -- 1.2 -- -- -- 5.2 6.4
------ ------- ------- ------- ------ ------- -------- --------
Income (loss) from
continuing operations ......... $ (0.7) $ 1.2 $ 1.9 $ 0.7 $ -- $ 0.9 $ 4.4 $ 8.4
====== ======= ======= ======= ====== ======= ======== ========
10. Adjustments to costs and expenses relating to the Acquisitions are
presented in the table below:
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 2001 DECEMBER 31, 2001
---------------- ------------------
(IN MILLIONS)
Eliminate historical goodwill amortization
for AIS, EMG and Spar(a) ....................... $ (7.6) $ (29.6)
Increase to goodwill amortization for KDI and EER
for higher goodwill recorded by L-3 than their
historical amounts of goodwill(a) .............. 0.5 0.7
------ -------
Total pro forma adjustments to costs and
expenses .................................... $ (7.1) $ (28.9)
====== =======
----------
(a) In accordance with the Financial Accounting Standards Board's 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 and AIS 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
S-24
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, and would have reduced pro
forma diluted earnings per share by $0.01 for each of the three months
ended March 31, 2002 and 2001 and by $0.03 for the year ended December 31,
2001.
11. The pro forma supplemental data adjustments for the three months ended
March 31, 2001 and for the year ended December 31, 2001, do not include an
extraordinary pre-tax charge of $16.1 million ($9.7 million after-tax)
related to the repurchase and/or redemption of L-3 Communications
Corporation's $225.0 million 10 3/8% Senior Subordinated Notes due 2007.
The extraordinary charge includes the call premium of 5.188% or
approximately $11.6 million and fees and other expenses of approximately
$4.5 million, including the write-off of unamortized deferred debt issue
costs on the $225.0 million 10 3/8% Senior Subordinated Notes due 2007. The
extraordinary charge would have reduced basic earnings per common share by
$0.11 and diluted earnings per common share by $0.10 for the three months
ended March 31, 2001 and would have reduced basic earnings per common share
by $0.11 and diluted earnings per common share by $0.09 for the year ended
December 31, 2001. This charge will be recognized in the period during
which such outstanding notes are repurchased and/or redeemed.
12. Our basic and diluted weighted average common shares outstanding for the
three months ended March 31, 2001 were increased by 9.1 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.
13. 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 ......... -- -- 3.3
-------- -------- --------
Income (loss) from
continuing operations ..... $ (2.3) $ (2.1) $ 5.4
======== ======== ========
BT SY
EMG(B) FUZE(C) TECHNOLOGY(C) AIS ACQUISITIONS
--------------- --------- --------------- ----------- -------------
(IN MILLIONS)
Sales ........................ $ 52.2 $ 34.7 $ 62.0 $ 918.6 $ 1,209.9
Costs and expenses ........... 49.1 32.8 56.5 876.7 1,146.9
-------- ------- ------- -------- ----------
Operating income (loss) ..... 3.1 1.9 5.5 41.9 63.0
Interest and other income
(expense) ................. (3.8)(g) -- -- (1.4) (11.2)
Interest expense ............ -- -- 0.2 -- 0.5
-------- ------- ------- -------- ----------
Income (loss) before
income taxes .............. (0.7) 1.9 5.3 40.5 51.3
Income tax provision ......... 0.3 -- -- 22.1 25.7
-------- ------- ------- -------- ----------
Income (loss) from
continuing operations ..... $ (1.0) $ 1.9 $ 5.3 $ 18.4 $ 25.6
======== ======= ======= ======== ==========
----------
(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.
S-25
SUMMARY OF PRO FORMA AND HISTORICAL FINANCIAL DATA
We derived the selected financial data presented below from our financial
statements. The financial statement data for the years ended December 31, 2001,
2000 and 1999 are derived from our audited consolidated financial statements
incorporated by reference in this prospectus supplement. We derived the balance
sheet data presented below at December 31, 2001 and 2000 from our audited
consolidated financial statements incorporated by reference in this prospectus
supplement. We derived the balance sheet data at December 31, 1999 from our
audited consolidated financial statements not incorporated by reference in this
prospectus supplement. We derived the financial statement data for the three
months ended March 31, 2002 and the balance sheet data at March 31, 2002 from
our unaudited condensed consolidated financial statements incorporated by
reference in this prospectus supplement. Our unaudited condensed consolidated
financial statements for the three months ended March 31, 2002 include, in our
opinion, all adjustments consisting of normal recurring adjustments necessary
for a fair presentation of the results for the period.
The pro forma data for the three months ended March 31, 2002 and for the
year ended December 31, 2001 were derived from our unaudited pro forma condensed
consolidated financial information included elsewhere herein, and gives effect
to our material acquisitions, excluding our acquisition of the detection systems
business of PerkinElmer, and this offering.
You should read the selected financial data together with our "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2001 and our Quarterly Report on Form 10-Q for the three months ended March
31, 2002, each incorporated herein by reference.
PRO FORMA
THREE THREE PRO FORMA
MONTHS MONTHS YEAR
ENDED ENDED ENDED YEARS ENDED DECEMBER 31,(1)
MARCH 31, MARCH 31, DECEMBER 31, -----------------------------------------
2002 2002 2001 2001 2000 1999
----------- ----------- ------------- ------------- ------------- -------------
(in millions, except per share data)
STATEMENT OF OPERATIONS DATA:
Sales ................................. $ 910.2 $ 696.8 $ 3,557.3 $ 2,347.4 $ 1,910.1 $ 1,405.5
Operating income ...................... 75.6 71.3 367.2 275.3 222.7 150.5
Interest expense, net ................. 23.7 25.1 119.8 84.5 88.6 55.1
Minority interest ..................... 0.9 0.9 4.5 4.5 -- --
Provision for income taxes ............ 19.0 16.0 99.7 70.8 51.4 36.7
Income from continuing operations ..... 32.0 29.3 143.2 115.5 82.7 58.7
Income from continuing operations,
as adjusted (2) ...................... $ 32.0 $ 29.3 $ 177.1 $ 149.4 $ 112.3 $ 76.2
Earnings per common share:
Basic ................................ $ 0.34 $ 0.37 $ 1.56 $ 1.54 $ 1.24 $ 0.91
Basic, as adjusted (2) ............... $ 0.34 $ 0.37 $ 1.93 $ 1.99 $ 1.68 $ 1.19
Diluted .............................. $ 0.33 $ 0.36 $ 1.50 $ 1.47 $ 1.18 $ 0.88
Diluted, as adjusted (2) ............. $ 0.33 $ 0.36 $ 1.83 $ 1.87 $ 1.61 $ 1.14
Weighted average common
shares outstanding:
Basic ................................ 92.9 78.9 92.0 74.9 66.7 64.2
Diluted .............................. 96.4 82.4 102.5 85.4 69.9 67.0
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents ............. $ 46.0 $ 361.0 $ 32.7 $ 42.8
Working capital ....................... 807.4 717.8 360.9 255.5
Total assets .......................... 4,357.8 3,339.2 2,463.5 1,628.7
Total debt ............................ 2,175.0 1,325.0 1,095.0 605.0
Stockholders' equity .................. 1,266.5 1,213.9 692.6 583.2
----------
(1) Our results of operations are impacted significantly by our acquisitions,
which are described elsewhere in this prospectus supplement and in the
documents incorporated by reference herein.
(2) Represents income from continuing operations and basic and diluted
earnings per common share, adjusted to exclude goodwill amortization
expense, net of any income tax effects, recognized in those years related
to goodwill that is no longer being amortized.
S-26
CERTAIN U.S. FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following summary describes the material U.S. federal income and estate
tax consequences of the ownership of common stock by a Non-U.S. Holder (as
defined below) as of the date hereof. This discussion does not address all
aspects of U.S. federal income and estate taxes and does not deal with foreign,
state and local consequences that may be relevant to such Non-U.S. Holders in
light of their personal circumstances. Special Rules may apply to certain
Non-U.S. Holders, such as certain United States expatriates, "controlled foreign
corporations", "passive foreign investment companies", "foreign personal holding
companies" and corporations that accumulate earnings to avoid U.S. federal
income tax, that are subject to special treatment under the Internal Revenue
Code of 1986, as amended (the "Code"). Such entities should consult their own
tax advisors to determine the U.S. federal, state, local and other tax
consequences that may be relevant to them. Furthermore, the discussion below is
based upon the provisions of the Code, and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in U.S. federal income tax
consequences different from those discussed below.
If a partnership holds common stock, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. Persons who are partners of partnerships holding common stock
should consult their tax advisors.
As used herein, a "U.S. Holder" of common stock means a holder that for
U.S. federal income tax purposes is (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to U.S. federal income taxation regardless of its
source or (iv) a trust (X) if a court within the United States is able to
exercise primary supervision over its administration and one or more United
States persons have the authority to control all of its substantial decisions or
(Y) that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person. A "Non-U.S. Holder" is a
holder that is not a U.S. Holder.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF COMMON STOCK
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX
CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty. However, dividends
that are effectively connected with the conduct of a trade or business by the
Non-U.S. Holder within the United States, and, where a tax treaty applies, are
attributable to a U.S. permanent establishment of the Non-U.S. Holder, are not
subject to the withholding tax, but instead are subject to U.S. federal income
tax on a net income basis at applicable graduated individual or corporate
rates. Certain certification and disclosure requirements must be satisfied in
order for effectively connected income to be exempt from withholding. Any such
effectively connected dividends received by a foreign corporation may be
subject to an additional "branch profits tax" at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
A Non-U.S. Holder of common stock who wishes to claim the benefit of an
applicable treaty rate (and avoid backup withholding as discussed below) for
dividends paid will be required (a) to complete Internal Revenue Service
("IRS") Form W-8BEN (or other applicable form) and certify under penalties of
perjury that such holder is not a United States person or (b) if the common
stock is held through certain foreign intermediaries, to satisfy the relevant
certification requirements of applicable U.S. Treasury regulations. Special
certification and other requirements apply to certain Non-U.S. Holders that are
entities rather than individuals.
A Non-U.S. Holder of common stock eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the IRS.
S-27
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of common stock
unless (i) the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States, and, where a tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Holder, (ii) in
the case of a Non-U.S. Holder who is an individual and holds the common stock
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of the sale or other disposition and certain other
conditions are met, or (iii) we are or have been a "U.S. real property holding
corporation" for U.S. federal income tax purposes.
A Non-U.S. Holder described in clause (i) above will be subject to tax on
the net gain derived from the sale under regular graduated U.S. federal income
tax rates, and, if it is a corporation, may be subject to the branch profits
tax at a rate equal to 30% of its effectively connected earnings and profits or
at such lower rate as may be specified by an applicable income tax treaty. An
individual Non-U.S. Holder described in clause (ii) above will be subject to a
flat 30% tax on the gain derived from the sale, which tax may be offset by U.S.
source capital losses (even though the individual is not considered a resident
of the United States).
We believe we are not and do not anticipate becoming a "U.S. real property
holding corporation" for U.S. federal income tax purposes.
FEDERAL ESTATE TAX
Common stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each Non-U.S. Holder the amount
of dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
A Non-U.S. Holder will be subject to backup withholding unless applicable
certification requirements are met.
Payment of the proceeds of a sale of common stock within the United States
or conducted through certain U.S.-related financial intermediaries is subject
to both backup withholding and information reporting unless the beneficial
owner certifies under penalties of perjury that it is a Non-U.S. Holder (and
the payor does not have actual knowledge or reason to know that the beneficial
owner is a United States person) or the holder otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules may be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
S-28
UNDERWRITING
Under the terms of an underwriting agreement, each of the underwriters
named below has severally agreed to purchase from us the respective number of
shares of common stock opposite its name below:
NUMBER OF
UNDERWRITERS SHARES
------------ ----------
Lehman Brothers Inc. ........................... 4,200,000
Credit Suisse First Boston Corporation ......... 2,520,000
Bear, Stearns & Co. Inc. ....................... 2,520,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ........................... 1,540,000
SG Cowen Securities Corporation ................ 1,540,000
Goldman, Sachs & Co. ........................... 560,000
Salomon Smith Barney Inc. ...................... 560,000
Wachovia Securities, Inc. ...................... 560,000
---------
Total .................................. 14,000,000
==========
The underwriting agreement provides that the underwriters are obligated to
purchase, subject to certain conditions, all of the shares of common stock in
the offering if any are purchased, other than those covered by the
over-allotment options described below.
The conditions contained in the underwriting agreement include the
requirements that:
o the representations made by us to the underwriters are true;
o there is no material change in the financial markets; and
o we deliver to the underwriters customary closing documents.
OVER-ALLOTMENT OPTIONS
We have granted to the underwriters 30-day options after the date of this
prospectus supplement to purchase, from time to time, in whole or in part, up
to an aggregate of an additional 2,100,000 shares at the public offering price
less underwriting discounts and commissions. These options may be exercised to
cover over-allotments, if any, made in connection with the offering. To the
extent these options are exercised, each underwriter will be obligated, subject
to certain conditions, to purchase its pro-rata portion of these additional
shares based on the underwriter's percentage underwriting commitment in the
offering as indicated on the preceding table. The foregoing limitations do not
apply to stabilizing transactions, syndicate covering transactions and penalty
bids for the purpose of pegging, fixing or maintaining the price of the common
stock, in accordance with Regulation M under the Exchange Act.
COMMISSIONS AND EXPENSES
The representatives of the underwriters have advised us that the
underwriters propose to offer shares of common stock directly to the public at
the public offering price on the cover of this prospectus supplement and to
selected dealers, who may include the underwriters, at such offering price less
a selling concession not in excess of $1.02 per share. The underwriters may
allow, and the selected dealers may re-allow, a discount from the concession
not in excess of $0.10 per share to other dealers. After the offering, the
underwriters may change the public offering price and other offering terms.
S-29
The following table summarizes the underwriting discounts and commissions
we will pay to the underwriters. These amounts are shown assuming both no
exercise and full exercise of the underwriters' over-allotment options to
purchase up to 2,100,000 additional shares. The underwriting fee, all of which
will be paid by us, is the difference between the initial price to the public
and the amount the underwriters pay us for the shares.
NO EXERCISE FULL EXERCISE
--------------- --------------
Per share .......................... $ 1.70 $ 1.70
Total Paid by the Company .......... $23,800,000 $27,370,000
The expenses of this offering, excluding underwriting discounts and cash
expenses summarized in the table above, that are payable by us, are estimated
to be $1,000,000.
SHORT POSITIONS AND PENALTY BIDS
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids or purchases for the purpose
of pegging, fixing or maintaining the price of the common stock, in accordance
with Regulation M of the Exchange Act.
o Over-allotment involves sales by the underwriters of shares in excess
of the number of shares the underwriters are obligated to purchase,
which creates a syndicate short position. The short position may be
either a covered short position or a naked short position. In a covered
short position, the number of shares over-allotted by the underwriters
is not greater than the number of shares that they may purchase in the
over-allotment options. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
options. The underwriters may close out any short position by either
exercising their over-allotment options and/or purchasing shares in the
open market.
o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
o Syndicate covering transactions involve purchases of the common stock
in the open market after the distribution has been completed in order
to cover syndicate short positions. In determining the source of shares
to close out the short position, the underwriters will consider, among
other things, the price at which they may purchase shares through their
over-allotment options. If the underwriters sell more shares than could
be covered by their over-allotment options, which is called a naked
short position, the position can only be closed out by buying shares in
the open market. A naked short position is more likely to be created if
the underwriters are concerned that there could be downward pressure on
the price of the shares in the open market after pricing that could
adversely affect investors who purchase the offering.
o Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the market price of
our common stock or preventing or retarding a decline in the market price of
our common stock. As a result, the price of the common stock may be higher than
the price that might otherwise exist in the open market. These transactions may
be effected on the NYSE or otherwise and, if commenced, may be discontinued at
any time.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make a representation that the underwriters will
engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.
S-30
LOCK-UP AGREEMENTS
In connection with the offering, we and certain of our executive officers
and directors have agreed that they will not, subject to certain limited
exceptions, directly or indirectly, offer, sell, pledge or otherwise dispose of
any shares of common stock or any securities convertible into or exchangeable
or exercisable for common stock or enter into any swap or other derivative
transaction with similar effect as a sale of common stock, for a period of 90
days from the date of this prospectus supplement without the prior written
consent of Lehman Brothers Inc. The restrictions in this paragraph do not apply
to:
o the sale of common stock to the underwriters in this offering,
including shares sold pursuant to the over-allotment options,
o transactions by Mr. Lanza with respect to up to 500,000 shares of
common stock beginning on the date of this prospectus supplement,
o transactions by Mr. LaPenta with respect to up to 500,000 shares of
common stock beginning on the date of this prospectus supplement,
o the issuance by us of options under any of our currently effective
stock option or incentive plans or of shares of common stock upon the
exercise of a currently outstanding option, warrant or right or the
conversion of a security outstanding on the date of this prospectus
supplement,
o the issuance by us of shares of common stock to our employees or
directors or as dividends on our common stock, or
o the issuance by us of common stock as consideration for the purchase of
any business or assets.
INDEMNIFICATION
We have agreed to indemnify, under certain circumstances, the underwriters
against liabilities relating to the offering, including liabilities under the
Securities Act and liabilities arising from breaches of the representations and
warranties contained in the underwriting agreement, and to contribute, under
certain circumstances, to payments that the underwriters may be required to
make for these liabilities.
OFFERS AND SALES IN CANADA
This prospectus supplement and the accompanying prospectus are not, and
under no circumstances are to be construed as, an advertisement or a public
offering of shares in Canada or any province or territory thereof. Any offer or
sale of shares in Canada will be made only under an exemption from the
requirements to file a prospectus supplement or prospectus with the relevant
Canadian securities regulators and only by a dealer registered in accordance
with local provincial securities laws or, alternatively, pursuant to an
exemption from the dealer registration requirement in the relevant province or
territory of Canada in which such offer or sale is made.
STAMP TAXES
Purchasers of the shares of common stock may be required to pay stamp
taxes and other charges under the laws and practices of the country of
purchase, in addition to the offering price on the cover of this prospectus
supplement.
ELECTRONIC DISTRIBUTION
A prospectus in electronic format may be made available on the Internet
sites or through other online services maintained by one or more of the
underwriters and/or selling group members participating in this offering, or by
their affiliates. In those cases, prospective investors may view
S-31
offering terms online and, depending upon the particular underwriter or selling
group member, prospective investors may be allowed to place orders online. The
underwriters may agree with us to allocate a specific number of shares for sale
to online brokerage account holders. Any such allocation for online
distributions will be made by the representatives on the same basis as other
allocations.
Other than the prospectus in electronic format, the information on any
underwriter's or selling group member's web site and any information contained
in any other web site maintained by an underwriter or selling group member is
not part of the prospectus or the registration statement of which this
prospectus forms a part, has not been approved and/or endorsed by us or any
underwriter or selling group member in its capacity as underwriter or selling
group member and should not be relied upon by investors.
RELATIONSHIPS
From time to time, Lehman Brothers Inc., Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, SG Cowen Securities Corporation and their affiliates have
provided, and may continue to provide, investment banking services to us for
which we have paid customary fees and expense reimbursements. In addition,
Lehman Brothers Inc. and its affiliates are documentation agent, syndication
agent and arranger, an affiliate of SG Cowen Securities Corporation is an
arranger, Credit Suisse First Boston Corporation is a lender and Wachovia
Securities, Inc. is a lender under our senior credit facilities, which include
our 364-day and five-year revolving credit facilities and will receive, in the
aggregate, approximately $84.8 million of the net proceeds of this offering and
the concurrent private placement of notes by L-3 Communications Corporation as
repayment of principal on those loans. In addition, affiliates of Lehman
Brothers Inc. are administrative agent, book-running manager, arranger and
lender and affiliates of Credit Suisse First Boston Corporation are arranger
and lender under our senior subordinated interim loan, and will receive
approximately $375.0 million in the aggregate of the net proceeds of this
offering as repayment of the indebtedness outstanding under our senior
subordinated interim loan.
Under Rule 2710 of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), Lehman Brothers Inc. and its affiliates
are considered to have a "conflict of interest" with respect to this offering.
Because the net proceeds to us from this offering may be paid to affiliates of
certain of the underwriters to repay existing loans, this offering is being
conducted in accordance with Rule 2710(c)(8) and Rule 2720 of the NASD.
DISCRETIONARY SALES
The underwriters have informed us that they will not confirm sales to
accounts over which they exercise discretionary authority without the prior
written approval of the customer.
LEGAL MATTERS
The validity of the common stock offered by this prospectus supplement
will be passed upon for us by Simpson Thacher & Bartlett, New York, New York
and for the underwriters by Latham & Watkins, New York, New York.
EXPERTS
The following financial statements have been incorporated by reference in
this prospectus supplement 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 supplement from our Current Report on Form
8-K dated June 19, 2002; and
S-32
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
supplement from our Current Report on Form 8-K dated March 22, 2002.
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).
So long as we are subject to the periodic reporting requirements of the
Securities Exchange Act, we are required to furnish the information required to
be filed with the SEC to the trustee and the holders of the notes. We have
agreed that, even if we are not required under the Securities Exchange Act to
furnish such information to the SEC, we will nonetheless continue to furnish
information that would be required to be furnished by us by Section 13 of the
Securities Exchange Act to the trustee and the holders of the notes as if it
were subject to such periodic reporting requirements.
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
supplement. Information in this prospectus supplement supersedes information
incorporated by reference that we filed with the SEC prior to the date of this
prospectus supplement, 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 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 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; and
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.
S-33
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 supplement and the accompanying prospectus. We have
not authorized anyone else to provide you with different information. We are
not making 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
supplement or the accompanying prospectus is accurate as of any date other than
the date on the front of this document.
S-34
DATED JUNE 20, 2002
PROSPECTUS
$1,000,000,000
[L-3 COMMUNICATIONS LOGO]
L-3 COMMUNICATIONS HOLDINGS, INC.
COMMON STOCK
DEBT SECURITIES
PREFERRED STOCK
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
L-3 COMMUNICATIONS HOLDINGS, INC.
1,000,000 SHARES OF COMMON STOCK
L-3 COMMUNICATIONS CORPORATION
GUARANTEED DEBT SECURITIES
--------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. may offer and sell from time to time, in one
or more series, any one of the following securities:
o common stock,
o unsecured debt securities consisting of notes, debentures or other
evidences of indebtedness which may be senior debt securities, senior
subordinated debt securities or subordinated debt securities,
o preferred stock,
o warrants to purchase preferred stock, common stock or debt securities
of L-3 Communications Holdings,
o stock purchase contracts, and
o stock purchase units,
or any combination of these securities. L-3 Communications Holdings' debt
securities may be guaranteed by substantially all of its wholly-owned domestic
subsidiaries.
L-3 Communications Holdings' wholly-owned subsidiary, L-3 Communications
Corporation, may offer and sell from time to time, in one or more series of its
unsecured debt securities consisting of notes, debentures or other evidence of
indebtedness which may be senior debt securities, senior subordinated debt
securities or subordinated debt securities of L-3 Communications Corporation.
The debt securities issued by L-3 Communications Corporation will be fully and
unconditionally guaranteed by L-3 Communications Holdings and may be further
guaranteed by substantially all of L-3 Communications Corporation's
wholly-owned domestic subsidiaries.
The selling stockholders identified on page 25 may sell from time to time
up to 1,000,000 shares of common stock of L-3 Communications Holdings owned by
them. The common stock of L-3 Communications Holdings trades on the New York
Stock Exchange under the symbol "LLL."
We will provide more specific information about the terms of an offering
of any of these securities in supplements to this prospectus.
YOU SHOULD READ THIS PROSPECTUS, PARTICULARLY THE RISK FACTORS BEGINNING ON
PAGE 5, AND ANY SUPPLEMENT CAREFULLY BEFORE INVESTING.
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.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
-----
Prospectus Summary ...................... 3
Risk Factors ............................ 5
The Company ............................. 12
Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and
Preferred Stock Dividends ............ 12
Use of Proceeds ......................... 13
Dividend Policy ......................... 13
Description of Debt Securities .......... 14
Description of Capital Stock ............ 20
PAGE
-----
Description of Stock Purchase Contracts
and Stock Purchase Units ............. 24
Description of Warrants ................. 24
Selling Stockholders .................... 25
Plan of Distribution .................... 26
Legal Matters ........................... 26
Experts ................................. 26
Available Information ................... 26
Incorporation of Certain Documents by
Reference ............................ 27
----------------
ABOUT THIS PROSPECTUS
This prospectus describes the general terms of the securities to be
offered hereby. A prospectus supplement that will describe the specific
amounts, prices and other terms of the securities being offered will be
provided to you in connection with each sale of securities offered pursuant to
this prospectus. The prospectus supplement may also add, update or change
information contained in this prospectus. To understand the terms of securities
offered pursuant to this prospectus, you should carefully read this document
with the applicable prospectus supplement. Together, these documents will give
the specific terms of the offered securities. You should also read the
documents we have incorporated by reference in this prospectus described below
under "Incorporation of Certain Documents By Reference."
2
PROSPECTUS SUMMARY
THE SECURITIES WE MAY OFFER
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
the shelf registration process, L-3 Communications Holdings may offer and sell
from time to time up to an aggregate of $1,000,000,000 of any of the following
securities:
o common stock;
o debt securities;
o preferred stock;
o stock purchase contracts;
o stock purchase units; and
o warrants.
In addition, L-3 Communications Corporation may offer and sell from time to
time its debt securities that will be guaranteed by L-3 Communications Holdings
and may be further guaranteed by certain of L-3 Communications Corporation's
subsidiaries. Additionally, certain selling stockholders named herein may offer
and sell from time to time up to an aggregate of 1,000,000 shares of L-3
Communications Holdings' common stock owned by them. See "Selling
Stockholders". We will not receive any proceeds from the sale of common stock
by the selling stockholders.
COMMON STOCK
L-3 Communications Holdings may issue shares of its common stock, par
value $.01 per share. Holders of shares of L-3 Communications Holdings' common
stock are entitled to receive dividends when declared by the board of directors
of L-3 Communications Holdings, subject to the rights of holders of L-3
Communications Holdings' outstanding preferred stock, if any. Each holder of
L-3 Communications Holdings' common stock is entitled to one vote per share.
The holders of L-3 Communications Holdings' common stock have no preemptive
rights or cumulative voting rights.
In addition, certain selling stockholders named herein may offer and sell
from time to time up to an aggregate of 1,000,000 shares of L-3 Communications
Holdings' common stock owned by them.
On April 23, 2002, the board of directors of L-3 Communications Holdings
declared a two-for-one stock split to shareholders of record on May 6, 2002.
All share numbers contained in this prospectus give effect to the consummation
of the stock split.
DEBT SECURITIES
L-3 Communications Holdings may offer debt securities, which may be either
senior, senior subordinated or subordinated, and may be guaranteed by
substantially all of its wholly-owned domestic subsidiaries. L-3 Communications
Holdings may issue debt securities either separately, or together with, upon
conversion of or in exchange for other securities. L-3 Communications
Corporation may offer its debt securities, which may be either senior, senior
subordinated or subordinated and will be guaranteed by L-3 Communications
Holdings and may be further guaranteed by substantially all of L-3
Communications Corporation's wholly-owned domestic subsidiaries.
The debt securities issued by L-3 Communications Holdings will be issued
under an indenture between L-3 Communications Holdings and The Bank of New
York, as trustee. The debt securities issued by L-3 Communications Corporation
will be issued under an indenture among L-3 Communications Corporation, L-3
Communications Holdings, as guarantor, and The Bank of New
3
York, as trustee. We have summarized general features of the debt securities to
be issued by L-3 Communications Holdings and L-3 Communications Corporation
under "Description of Debt Securities." We encourage you to read the
indentures, forms of which are included as exhibits to the registration
statement of which this prospectus forms a part.
PREFERRED STOCK
L-3 Communications Holdings may issue shares of its preferred stock, $.01
par value per share, in one or more series. L-3 Communications Holdings' board
of directors will determine the dividend, voting, conversion and other rights
of the series of preferred stock being offered.
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
L-3 Communications Holdings may issue stock purchase contracts
representing contracts obligating holders to purchase from L-3 Communications
Holdings and L-3 Communications Holdings to sell to the holders a specified
number of shares of common stock or preferred stock of L-3 Communications
Holdings at a future date or dates. The price per share of common stock or
preferred stock may be fixed at the time the stock purchase contracts are
issued or may be determined by reference to a specific formula set forth in the
stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either of the following:
o Debt securities of L-3 Communications Holdings, or
o Debt obligations of third parties, including U.S. Treasury securities,
securing the holder's obligations to purchase the common stock or preferred
stock of L-3 Communications Holdings under the stock purchase contracts.
WARRANTS
L-3 Communications Holdings may issue warrants for the purchase of its
debt securities, preferred stock or common stock. L-3 Communications Holdings
may issue warrants independently or together with other securities. Each
warrant will entitle the holder to purchase the principal amount of its debt
securities, or the number of shares of its preferred stock or common stock at
the exercise price set forth in, or calculable as set forth in, the prospectus
supplement.
----------------
L-3 Communications Holdings is incorporated in Delaware, and the address
of its principal executive offices is 600 Third Avenue, New York, New York
10016. L-3 Communications Holdings' telephone number is (212) 697-1111.
L-3 Communications Corporation is incorporated in Delaware, and the
address of its principal executive offices is 600 Third Avenue, New York, New
York 10016. L-3 Communications Corporation's telephone number is (212)
697-1111.
4
RISK FACTORS
Investing in the securities offered pursuant to this prospectus involves
risks, including the risks described in this prospectus and in the other
documents which are incorporated herein by reference. Additional risks,
including those that relate to any particular securities that L-3
Communications Holdings or L-3 Communications Corporation will offer, will be
included in the applicable prospectus supplement. You should carefully consider
the risk factors before investing in any of the securities offered pursuant to
this prospectus.
OUR SIGNIFICANT LEVEL OF DEBT MAY ADVERSELY AFFECT OUR FINANCIAL AND OPERATING
ACTIVITY.
We have incurred substantial indebtedness to finance our acquisitions. As
of March 31, 2002, we had $2,175.0 million of outstanding debt, excluding
outstanding letters of credit (which aggregated approximately $166.6 million)
under our senior credit facilities. In addition, available borrowings under our
senior credit facilities after reductions for outstanding letters of credit
were approximately $233.4 million as of March 31, 2002. Our ratios of earnings
to fixed charges and earnings to combined fixed charges and preferred stock
dividends were both 2.5 to 1.0 for the three months ended March 31, 2002. In
the future we may borrow more money, subject to limitations imposed on us by
our debt agreements.
Our ability to make scheduled payments of principal and interest on our
indebtedness and to refinance our indebtedness depends on our future
performance. We do not have complete control over our future performance
because it is subject to economic, political, financial, competitive,
regulatory and other factors affecting the aerospace and defense industry. It
is possible that in the future our business may not generate sufficient cash
flow from operations to allow us to service our debt and make necessary capital
expenditures. If this situation occurs, we may have to sell assets, restructure
debt or obtain additional equity capital. We may not be able to do so or do so
without additional expense.
Our level of indebtedness has important consequences to you and your
investment in the securities offered pursuant to this prospectus. These
consequences may include:
o requiring a substantial portion of our cash flow from operations to be
used to pay interest and principal on our debt and therefore be
unavailable for other purposes including capital expenditures, research
and development and other investments;
o limiting our ability to obtain additional financing for acquisitions or
working capital to make investments or other expenditures, which may
limit our ability to carry out our acquisition strategy;
o higher interest expenses due to increases in interest rates on our
borrowings that have variable interest rates;
o heightening our vulnerability to downturns in our business or in the
general economy and restricting us from making acquisitions,
introducing new technologies and products or exploiting business
opportunities; and
o covenants that limit our ability to borrow additional funds, dispose of
assets or pay cash dividends. Failure to comply with such covenants
could result in an event of default which, if not cured or waived,
could result in the acceleration of our outstanding indebtedness.
Additionally, on December 31, 2001, we had contractual obligations,
including outstanding indebtedness, of $1,680.2 million and contingent
commitments, including outstanding letters of credit under our senior credit
facilities, of $261.1 million. These contractual obligations and contingent
commitments are described in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2001, which is incorporated herein by reference.
OUR ACQUISITION STRATEGY INVOLVES RISKS, AND WE MAY NOT SUCCESSFULLY IMPLEMENT
OUR STRATEGY.
We seek to acquire companies that complement our business. We may not be
able to continue to identify acquisition candidates on commercially reasonable
terms or at all. If we make additional
5
acquisitions, we may not realize the benefits anticipated from the
acquisitions. Likewise, we may not be able to obtain additional financing for
acquisitions. Such additional financing could be restricted by the terms of our
debt agreements.
The process of integrating acquired operations, including our recent
acquisitions, into our existing operations may result in unforeseen operating
difficulties and may require significant financial and managerial resources
that would otherwise be available for the ongoing development or expansion of
our existing operations. Possible future acquisitions could result in the
incurrence of additional debt and related interest expense, contingent
liabilities and amortization expenses related to certain purchased intangible
assets, all of which could result in an increase to our already significant
level of outstanding debt. We consider and execute strategic acquisitions on an
ongoing basis and may be evaluating acquisitions or engaged in acquisition
negotiations at any given time. We regularly evaluate potential acquisitions
and joint venture transactions, and, except as disclosed herein or in the
documents incorporated herein by reference, we have not entered into any
agreements with respect to any material transactions.
WE RELY ON SALES TO U.S. GOVERNMENT ENTITIES, AND THE LOSS OF SUCH CONTRACTS
WOULD RESULT IN A SIGNIFICANT DECREASE TO OUR REVENUE AND PROFITS.
Our government sales are predominantly derived from contracts with
agencies of, and prime contractors to, the U.S. Government. Approximately
64.7%, or $1,519 million, of our sales for the year ended December 31, 2001
were made directly or indirectly to the U.S. Department of Defense. At December
31, 2001, the number of contracts with a value exceeding $1.0 million was
approximately 575. Our largest program is a long-term, fixed-price contract for
secure terminal equipment that we sell to the U.S. Armed Services, intelligence
and securities agencies that provided approximately 3.9% of our sales for the
year ended December 31, 2001. No other program provided more than 3.2% of our
sales for the year ended December 31, 2001. The loss of all or a substantial
portion of our sales to the U.S. Government would result in a significant
decrease to our revenue and profits.
OUR GOVERNMENT CONTRACTS ENTAIL CERTAIN RISKS.
o Government contracts are dependent upon the U.S. defense budget.
The reduction in the U.S. defense budget in the early 1990s caused most
defense-related government contractors to experience decreased sales, increased
downward pressure on operating margins and, in certain cases, net losses. Our
predecessor company experienced a substantial decline in sales during that
period. A significant decline in U.S. military expenditures in the future could
result in a material decrease to our sales, earnings and cash flow. The loss or
significant reduction in government funding of a large program in which we
participate could also result in a material decrease to our future sales,
earnings and cash flows and thus limit our ability to satisfy our financial
obligations, including those relating to the securities offered by this
prospectus. U.S. Government contracts are also conditioned upon the continuing
approval by Congress of the amount of necessary spending. Congress usually
appropriates funds for a given program each fiscal year even though contract
periods of performance may exceed one year. Consequently, at the beginning of a
major program, the contract is usually partially funded, and additional monies
are normally committed to the contract only if appropriations are made by
Congress for future fiscal years.
o Government contracts contain unfavorable termination provisions and are
subject to audit and modification.
Companies engaged primarily in supplying defense-related equipment and
services to U.S. Government agencies are subject to certain business risks
peculiar to the defense industry. These risks include the ability of the U.S.
Government to unilaterally:
o suspend us from receiving new contracts pending resolution of alleged
violations of procurement laws or regulations;
o terminate existing contracts;
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o reduce the value of existing contracts;
o audit our contract-related costs and fees, including allocated indirect
costs; and
o control and potentially prohibit the export of our products.
All of our U.S. Government contracts can be terminated by the U.S.
Government either for its convenience or if we default by failing to perform
under the contract. Termination for convenience provisions provide only for our
recovery of costs incurred or committed, settlement expenses and profit on the
work completed prior to termination. Termination for default provisions provide
for the contractor to be liable for excess costs incurred by the U.S.
Government in procuring undelivered items from another source. Our contracts
with foreign governments generally contain similar provisions relating to
termination at the convenience of the customer.
The U.S. Government may review our costs and performance on their
contracts, as well as our accounting and general business practices. Based on
the results of such audits, the U.S. Government may adjust our contract-related
costs and fees, including allocated indirect costs. In addition, under U.S.
Government purchasing regulations, some of our costs, including most financing
costs, amortization of goodwill, portions of research and development costs,
and certain marketing expenses may not be reimbursable under U.S. Government
contracts. Further, as a U.S. Government contractor, we are subject to
investigation, legal action and/or liability that would not apply to a
commercial company.
o Government contracts are subject to competitive bidding and we are
required to obtain licenses for non-U.S. sales.
We obtain many of our U.S. Government contracts through a competitive
bidding process. We may not be able to continue to win competitively awarded
contracts. In addition, awarded contracts may not generate sales sufficient to
result in our profitability. We are also subject to risks associated with the
following:
o the frequent need to bid on programs in advance of the completion of
their design, which may result in unforeseen technological difficulties
and/or cost overruns;
o the substantial time and effort including the relatively unproductive
design and development required to prepare bids and proposals for
competitively awarded contracts that may not be awarded to us;
o design complexity and rapid technological obsolescence; and
o the constant need for design improvement.
In addition to these U.S. Government contract risks, we are required to
obtain licenses from U.S. Government agencies to export many of our products
and systems. Additionally, we are not permitted to export some of our products.
Failure to receive required licenses would eliminate our ability to sell our
products outside the United States.
OUR FIXED-PRICE AND COST-REIMBURSABLE CONTRACTS MAY COMMIT US TO UNFAVORABLE
TERMS.
We provide our products and services primarily through fixed-price or
cost-reimbursable contracts. Fixed-price contracts provided 68.3% of our sales
for the year ended December 31, 2001. Under a fixed-price contract we agree to
perform the scope of work required by the contract for a predetermined contract
price. Although a fixed-price contract generally permits us to retain profits
if the total actual contract costs are less than the estimated contract costs,
we bear the risk that increased or unexpected costs may reduce our profit or
cause us to sustain losses on the contract. Therefore, we fully absorb cost
overruns on fixed-price contracts and this reduces our profit margin on the
contract. Those cost overruns may result in a loss. A further risk associated
with fixed-price contracts is the difficulty of estimating sales and costs that
are related to performance in accordance with contract specifications and the
possibility of obsolescence in connection with long-term procurements. Failure
to anticipate technical problems, estimate costs accurately or control costs
during performance of a fixed-price contract may reduce our profitability or
cause a loss.
7
Cost-reimbursable contracts provided 31.7% of our sales for the year ended
December 31, 2001. On a cost-reimbursable contract we are paid up to
predetermined funding levels determined by our customers, our allowable
incurred costs and generally a fee representing a profit on those costs, which
can be fixed or variable depending on the contract's pricing arrangement.
Therefore, unless costs exceed specified funding limitations, on a
cost-reimbursable contract we usually do not bear the risks of unexpected cost
overruns. However, U.S. Government regulations require that we notify our
customer of any cost overruns or underruns on a cost-reimbursable contract on a
timely basis. If we incur costs in excess of the funding limitation specified
in a cost-reimbursable contract, we may not be able to recover those cost
overruns.
We record sales and profits on substantially all of our contracts using
percentage-of-completion methods of accounting. As a result, revisions made to
our estimates of sales and profits are recorded in the period in which the
conditions that require such revisions become known and can be estimated;
accordingly, the revisions may have a material impact in any one period. Our
provisions for losses for our fixed-price contracts are based on estimates. To
the extent our actual contract losses exceed our estimates, our contract loss
provisions will not be adequate to cover all actual future losses.
OUR OPERATIONS INVOLVE RAPIDLY EVOLVING PRODUCTS AND TECHNOLOGICAL CHANGE.
The rapid change of technology is a key feature of all of the industries
in which our businesses operate, including the commercial communications
industry in particular. To succeed in the future, we will need to continue to
design, develop, manufacture, assemble, test, market and support new products
and enhancements on a timely and cost-effective basis. Historically, our
technology has been developed through both customer-funded and internally
funded research and development. We may not be able to continue to maintain
comparable levels of research and development. In the past we have allocated
substantial funds to capital expenditures, programs and other investments. This
practice will continue to be required in the future. Even so, we may not be
able to successfully identify new opportunities and may not have the needed
financial resources to develop new products in a timely or cost-effective
manner. At the same time, products and technologies developed by others may
render our products and systems obsolete or non-competitive.
WE MAY NOT SUCCESSFULLY IMPLEMENT OUR PLAN TO EXPAND INTO COMMERCIAL MARKETS.
Our revenues have primarily come from business with the U.S. Department of
Defense and other U.S. Government agencies. In addition to continuing to pursue
these market areas, we will continue applying our technical capabilities and
expertise to related commercial markets. Some of our commercial products, such
as airport security equipment, voyage recorders and Prime Wave fixed wireless
loop products, have only recently been introduced.
These new commercial products are subject to certain risks and may require
us to:
o develop and maintain marketing, sales and customer support
capabilities;
o secure sales and customer support capabilities;
o obtain customer and/or regulatory certification;
o respond to rapidly changing technologies including those developed by
others that may render our products and systems obsolete or
non-competitive; and
o obtain customer acceptance of these products and product performance.
Our efforts to expand our presence in commercial markets require
significant resources, including additional working capital and capital
expenditures, as well as the use of our management's time. Our ability to sell
certain commercial products, particularly our broadband wireless communications
products, depends to a significant degree on the efforts of independent
distributors or communications service providers and on the financial viability
of our existing and target customers for the commercial products. Certain of
our existing and target customers are agencies or affiliates of governments of
emerging and under-developed countries or private business enterprises
operating in those countries.
8
In addition, we have made equity investments in entities that plan to commence
operations as communications service providers using some of our commercial
products. These distributors and service providers may not be able to market
our products or their services successfully and we may not be able to realize a
return of investment in them. We also may not be successful in addressing these
risks or in developing these commercial business opportunities.
CONSOLIDATION AND INTENSE COMPETITION IN THE INDUSTRIES IN WHICH OUR BUSINESSES
OPERATE COULD LIMIT OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS.
The communications equipment industry and the other industries in which
our businesses operate, and the market for defense applications, is highly
competitive. The defense industry has experienced substantial consolidation due
to declining defense budgets and increasing pressures for cost reductions. We
expect that the U.S. Department of Defense's increased use of commercial
off-the-shelf products and components in military equipment will continue to
encourage new competitors to enter the market. We also expect that competition
for original equipment manufacturing business will increase due to the
continued emergence of merchant suppliers. Our ability to compete for defense
contracts largely depends on the following factors:
o the effectiveness and innovations of our research and development
programs;
o our ability to offer better performance than our competitors at a lower
cost to the U.S. Government; and
o the readiness of our facilities, equipment and personnel to undertake
the programs for which we compete.
In some instances, the U.S. Government directs all work for a particular
project to a single supplier, commonly known as a sole-source project. In such
cases, other suppliers who may otherwise be able to compete for the programs
involved can only do so if the U.S. Government chooses to reopen the particular
program to competition. Additionally, many of our competitors are larger than
us and have substantially greater financial and other resources than we have.
OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO FINANCE OUR FUTURE OPERATIONS AND,
IF WE ARE UNABLE TO MEET OUR FINANCIAL RATIOS, COULD CAUSE OUR EXISTING DEBT TO
BE ACCELERATED.
Our debt agreements contain a number of significant provisions that, among
other things, restrict our ability to:
o sell assets;
o incur more indebtedness;
o repay certain indebtedness;
o pay dividends;
o make certain investments or acquisitions;
o repurchase or redeem capital stock;
o engage in mergers or consolidations; and
o engage in certain transactions with subsidiaries and affiliates.
These restrictions could hurt our ability to finance our future operations
or capital needs or engage in other business activities that may be in our
interest. In addition, some of our debt agreements also require us to maintain
compliance with certain financial ratios, including total consolidated earnings
before interest, taxes, depreciation and amortization to total consolidated
cash interest expense and total consolidated debt to total consolidated
earnings before interest, taxes, depreciation and amortization, and to limit
our capital expenditures. Our ability to comply with these ratios and limits
may be affected by events beyond our control. A breach of any of these
agreements
9
or our inability to comply with the required financial ratios or limits could
result in a default under those debt agreements. In the event of any such
default, the lenders under those debt agreements could elect to:
o declare all outstanding debt, accrued interest and fees to be due and
immediately payable;
o require us to apply all of our available cash to repay our outstanding
senior debt; and
o prevent us from making debt service payments on our other debt.
If we were unable to repay any of these borrowings when due, the lenders
under our senior credit facilities could proceed against their collateral,
which consists of a first priority security interest in the capital stock of
our material subsidiaries, including L-3 Communications Corporation. If the
indebtedness under the existing debt agreements were to be accelerated, our
assets may not be sufficient to repay such indebtedness in full.
IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY MANAGEMENT AND PERSONNEL, WE MAY
BECOME UNABLE TO OPERATE OUR BUSINESS EFFECTIVELY.
Our future success depends to a significant degree upon the continued
contributions of our management, including Messrs. Lanza and LaPenta, and our
ability to attract and retain other highly qualified management and technical
personnel. We do not maintain any key person life insurance policies for
members of our management. As of June 1, 2002, Messrs. Lanza and LaPenta
beneficially owned, in the aggregate 12.2% of the outstanding common stock of
L-3 Communications Holdings. We have entered into an employment agreement with
Mr. Lanza. We face competition for management and technical personnel from
other companies and organizations. Failure to attract and retain such personnel
would damage our prospects.
ENVIRONMENTAL LAWS AND REGULATION MAY SUBJECT US TO SIGNIFICANT LIABILITY.
Our operations are subject to various U.S. federal, state and local as
well as certain foreign environmental laws and regulations within the countries
in which we operate relating to the discharge, storage, treatment, handling,
disposal and remediation of certain materials, substances and wastes used in
our operations.
New laws and regulations, stricter enforcement of existing laws and
regulations, the discovery of previously unknown contamination or the
imposition of new clean-up requirements may require us to incur a significant
amount of additional costs in the future and could decrease the amount of free
cash flow available to us for other purposes, including capital expenditures,
research and development and other investments.
TERMINATION OF OUR BACKLOG OF ORDERS COULD NEGATIVELY IMPACT OUR SALES.
We currently have a backlog of orders, primarily under contracts with the
U.S. Government. The U.S. Government may unilaterally modify or terminate these
contracts. Accordingly, most of our backlog could be modified or terminated by
the U.S. Government. Therefore, existing backlog may not result in sales.
Further, any margin we record on sales from any contract included in backlog
may not be profitable.
OUR PENSION PLAN LIABILITIES MAY RESULT IN SIGNIFICANT EXPENSES.
We have assumed certain liabilities relating to defined benefit pension
plans for present and former employees and retirees of certain businesses which
we acquired. Prior to our formation, Lockheed Martin received a letter from the
Pension Benefit Guaranty Corporation (the "PBGC") which requested information
regarding the transfer of these pension plans and indicated that the PBGC
believed certain of these pension plans were underfunded using its actuarial
assumptions. These assumptions resulted in a larger liability for accrued
benefits than the assumptions used for financial reporting under Statement of
Financial Accounting Standards No. 87.
10
With respect to these plans, Lockheed Martin entered into an agreement
with us and the PBGC dated as of April 30, 1997. Under that agreement, Lockheed
Martin agreed, upon the occurrence of certain circumstances, either to:
o assume sponsorship of the subject plans; or
o provide another form of financial support.
If Lockheed Martin did assume sponsorship of these plans, it would be
primarily liable for the costs associated with funding these plans or any costs
associated with the termination of them, but we would be required to reimburse
Lockheed Martin for its obligations. Should Lockheed Martin assume sponsorship
of the subject plans, or if these plans were terminated, the impact of any
increased pension expenses or funding requirements could reduce the amount of
free cash flow available to us.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, WHICH MAY NOT BE CORRECT.
Certain of the matters discussed concerning our operations, economic
performance and financial condition, including in particular, the likelihood of
our success in developing and expanding our business and the realization of
sales from backlog, include forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934 ("Exchange Act"). Statements that are predictive in nature, that
depend upon or refer to future events or conditions or that include words such
as "expects," "anticipates," "intends," "plans," "believes," "estimates" and
similar expressions are forward-looking statements. Although we believe that
these statements are based upon reasonable assumptions, we can give no
assurance that their goals will be achieved.
11
THE COMPANY
We are a leading merchant supplier of secure communications and
intelligence, surveillance and reconaissance (ISR) systems, training,
simulation and support services, aviation products and aircraft modernization,
as well as, specialized products. Our business areas employ proprietary
technologies and capabilities, and we believe they 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.
L-3 Communications Holdings is a holding company and, except for its
outstanding 5.25% Convertible Senior Subordinated Notes due 2009 and for its
outstanding 4.00% Senior Subordinated Convertible Contingent debt securities
(CODES) due 2011, has no assets or liabilities and conducts no operations other
than through L-3 Communications Corporation. L-3 Communications Holdings has
guaranteed the bank credit facilities of L-3 Communications Corporation.
RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges, deficiency of earnings to cover
fixed charges and earnings to combined fixed charges and preferred stock
dividends presented below should be read together with the financial statements
and the notes accompanying them and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in our Annual Report on
Form 10-K for the year ended December 31, 2001 and our Quarterly Report on Form
10-Q for the three months ended March 31, 2002, each incorporated by reference
into this prospectus. In calculating the ratio of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends, earnings
consist of income (loss) before income taxes plus fixed charges. Fixed charges
consist of interest on indebtedness plus the amortization of deferred debt
issuance costs and that portion of lease rental expense representative of the
interest element. Preferred stock dividends are the pre-tax equivalent, at our
effective tax rate, of dividends earned on outstanding preferred stock.
L-3 PREDECESSOR COMPANY(1)
---------------------------------------------------------------------- -----------------------
YEAR ENDED DECEMBER 31,(2)
--------------------------------------- NINE MONTHS
THREE MONTHS ENDED THREE MONTHS
ENDED DECEMBER 31, ENDED
MARCH 31, 2002 2001 2000 1999 1998 1997(3) MARCH 31, 1997
---------------- --------- --------- --------- --------- ------------- -----------------------
Ratio of Earnings to Fixed
Charges: 2.5x 2.8x 2.3x 2.4x 2.0x 1.7x --(4)
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends: 2.5x 2.8x 2.3x 2.4x 2.0x 1.7x --(4)
----------
(1) The predecessor company refers to the ten initial business units we
purchased from Lockhead Martin Corporation in 1997.
(2) Our results of operations are impacted significantly by our
acquisitions, which are described in this prospectus or in documents
incorporated herein by reference.
(3) Reflects the acquisition of our predecessor company and the
commencement of our operations effective April 1, 1997.
(4) Earnings were insufficient to cover fixed charges and combined fixed
charges and preferred stock dividends by $0.5 million for the three
months ended March 31, 1997.
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USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement, L-3 Communications
Holdings and L-3 Communications Corporation, as the case may be, will use all or
a portion of the net proceeds from the sale of the offered securities for
general working capital purposes, including acquisitions. General working
capital purposes may include repayment of other debt, capital expenditures,
possible acquisitions and any other purposes that may be stated in any
prospectus supplement. The net proceeds may be invested temporarily or applied
to repay short-term or revolving debt until they are used for their stated
purposes.
We will not receive any proceeds from the sale of any shares of common
stock offered by the selling stockholders.
DIVIDEND POLICY
L-3 Communications Holdings currently intends to retain its earnings to
finance future growth and, therefore, does not anticipate paying any cash
dividends on its common stock in the foreseeable future. Any determination as
to the payment of dividends will depend upon the future results of operations,
capital requirements and financial condition of L-3 Communications Holdings and
its subsidiaries and such other facts as the board of directors of L-3
Communications Holdings may consider, including any contractual or statutory
restrictions on L-3 Communications Holdings' ability to pay dividends.
Moreover, L-3 Communications Holdings is a holding company and its ability to
pay dividends is dependent upon receipt of dividends, distributions, advances,
loans or other cash transfers from L-3 Communications Corporation. Certain
outstanding debt instruments of L-3 Communications Corporation limit its
ability to pay dividends or other distributions on L-3 Communications
Corporation's common stock or to make advances, loans or other cash transfers
to L-3 Communications Holdings.
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DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities summarizes
certain general terms that will apply to the debt securities offered by L-3
Communications Holdings or by L-3 Communications Corporation, as the case may
be. The description is not complete, and we refer you to the indentures, forms
of which are included as exhibits to the registration statement of which this
prospectus is a part. In addition, the terms described below may be amended,
supplemented or otherwise modified pursuant to one or more supplemental
indentures. Any such amendments, supplements or modifications will be set forth
in the applicable prospectus supplement. For your reference, in several cases
below we have noted the section in the indentures that the paragraph
summarizes. Capitalized items have the meanings assigned to them in the
indentures. The referenced sections of the indentures and the definitions of
capitalized terms are incorporated by reference in the following summary.
The debt securities issued by L-3 Communications Corporation will be
senior, senior subordinated or subordinated debt of L-3 Communications
Corporation and will be guaranteed by L-3 Communications Holdings and may be
further guaranteed by substantially all of L-3 Communications Corporation's
wholly-owned domestic subsidiaries. The debt securities issued by L-3
Communications Holdings will be senior, senior subordinated or subordinated
debt of L-3 Communications Holdings and may be guaranteed by substantially all
of its wholly-owned domestic subsidiaries. L-3 Communications Holdings may
issue debt securities either separately, or together with, upon conversion of
or in exchange for other securities.
The debt securities issued by L-3 Communications Holdings will be issued
under an indenture between L-3 Communications Holdings and The Bank of New
York, as Trustee (the "Holdings Indenture"). The debt securities to be issued
by L-3 Communications Corporation will be issued under an indenture among L-3
Communications Corporation, L-3 Communications Holdings, as guarantor, and The
Bank of New York, as trustee (the "Communications Indenture," and together with
the Holdings Indenture referred to herein as the "Indentures"). The Indentures
are substantially identical, except for the provisions relating to L-3
Communications Holdings' guarantee of the debt securities that may be issued by
L-3 Communications Corporation. For purposes of the summary set forth below,
obligors refers to L-3 Communications Holdings in the case of debt securities
issued by L-3 Communications Holdings pursuant to the Holdings Indenture and
L-3 Communications Corporation and L-3 Communications Holdings, as guarantor,
in the case of debt securities issued by L-3 Communications Corporation
pursuant to the Communications Indenture. This summary of the Indentures is
qualified by reference to the Indentures. You should refer to the Indentures in
addition to reading this summary. The summary is not complete and is subject to
the specific terms of the Indentures.
GENERAL
Under the Holdings Indenture and the Communications Indenture, L-3
Communications Holdings and L-3 Communications Corporation, respectively, will
be able to issue from time to time in one or more series an unlimited amount of
debt securities. Each time that L-3 Communications Holdings or L-3
Communications Corporation issues a new series of debt securities, the
supplement to the prospectus relating to that new series will specify the terms
of those debt securities, including:
o Designation, amount and denominations;
o Percentage of principal amount at which debt securities will be issued;
o Maturity date;
o Interest rate and payment dates;
o Terms and conditions of exchanging or converting debt securities for
other securities;
o Currency of issue;
o Redemption terms;
o Whether the debt securities will be guaranteed by subsidiaries of L-3
Communications Holdings or L-3 Communications Corporation, as the case
may be;
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o Whether the debt securities and/or any guarantees will be senior,
senior subordinated or subordinated; and
o Any other specific terms of the debt securities, including any deleted,
modified or additional events of default or remedies or additional
covenants provided with respect to the debt securities, and any terms
that may be required by or advisable under applicable laws or
regulations.
Unless otherwise specified in any prospectus supplement, the debt
securities will be issuable in registered form without coupons and in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any transfer or exchange of any debt securities, but the
issuer may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Debt securities may bear interest at a fixed rate or a floating rate. Debt
securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate may be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to discounted debt securities or to some debt
securities issued at par that are treated as having been issued at a discount
for United States federal income tax purposes will be described in the
applicable prospectus supplement.
In determining whether the holders of the requisite aggregate principal
amount of outstanding debt securities of any series have given any request,
demand, authorization, direction, notice, consent or waiver under the
Indentures, the principal amount of any series of debt securities originally
issued at a discount from their stated principal amount that will be deemed to
be outstanding for such purposes will be the amount of the principal thereof
that would be due and payable as of the date of the determination upon a
declaration of acceleration of the maturity thereof.
Payments relating to the debt securities generally will be paid by L-3
Communications Holdings or L-3 Communications Corporation, as the case may be,
at The Bank of New York's corporate trust office. However, L-3 Communications
Holdings or L-3 Communications Corporation, as the case may be, may elect to
pay interest by mailing checks directly to the registered holders of the debt
securities. You can transfer your debt securities at The Bank of New York's
corporate trust office.
RANKING
Unless otherwise described in the prospectus supplement for any series,
the debt securities issued by L-3 Communications Holdings or L-3 Communications
Corporation, as the case may be, will be unsecured and will rank on a parity
with all of the other unsecured and unsubordinated indebtedness issued by L-3
Communications Holdings or L-3 Communications Corporation, as the case may be.
L-3 Communications Holdings is a holding company and conducts all of its
operations through subsidiaries. L-3 Communications Corporation, L-3
Communications Holdings' wholly-owned subsidiary, conducts a material amount of
operations through its subsidiaries. L-3 Communications Holdings' and L-3
Communications Corporation's right to participate as a shareholder in any
distribution of assets of any subsidiary (and thus the ability of holders of
the debt securities issued by L-3 Communications Holdings or L-3 Communications
Corporation, as the case may be, to benefit as creditors of L-3 Communications
Holdings or L-3 Communications Corporation, as the case may be, from such
distribution) is junior to creditors of that subsidiary. As a result, claims of
holders of the debt securities issued by L-3 Communications Holdings or L-3
Communications Corporation will generally have a junior position to claims of
creditors of L-3 Communications Holdings' or L-3 Communications Corporation's
subsidiaries, except to the extent that L-3 Communications Holdings or L-3
Communications Corporation, as the case may be, may be recognized as a creditor
of those subsidiaries or those subsidiaries guarantee the debt securities.
REOPENING OF ISSUE
L-3 Communications Holdings and L-3 Communications Corporation, as the
case may be, may, from time to time, reopen an issue of debt securities without
the consent of the holders of the debt
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securities and issue additional debt securities with the same terms (including
maturity and interest payment terms) as debt securities issued on an earlier
date. After such additional debt securities are issued they will be fungible
with the previously issued debt securities to the extent specified in the
applicable prospectus supplement.
DEBT GUARANTEES
L-3 Communications Holdings will fully and unconditionally guarantee,
pursuant to the Communications Indenture, the due and prompt payment of the
principal of and premium, if any, and interest on the debt securities issued by
L-3 Communications Corporation when and as the same shall become due and
payable, whether at the stated maturity, by declaration of acceleration, call
for redemption or otherwise. Debt securities of L-3 Communications Holdings may
be guaranteed by, and debt securities of L-3 Communications Corporation may be
further guaranteed by, additional subsidiaries of L-3 Communications Holdings,
the "subsidiary guarantors". If debt securities are guaranteed by subsidiary
guarantors, that guarantee will be set forth in the applicable Indenture or a
supplemental indenture.
Payments with respect to the guarantee by L-3 Communications Holdings of
the senior subordinated debt securities and subordinated debt securities issued
by L-3 Communications Corporation will be subordinated in right of payment to
the prior payment in full of all senior indebtedness of L-3 Communications
Holdings to the same extent and manner that payments with respect to the senior
subordinated debt securities and subordinated debt securities issued by L-3
Communications Corporation are subordinated in right of payment to the prior
payment in full of all senior indebtedness of L-3 Communications Corporation.
Likewise, payments with respect to subsidiary guarantees of senior subordinated
debt securities and subordinated debt securities of L-3 Communications Holdings
and L-3 Communications Corporation, as the case may be, will be subordinated in
right of payment to the prior payment in full of all senior indebtedness of
each such subsidiary guarantor to the same extent and manner that payments with
respect to the senior subordinated debt securities and subordinated debt
securities of L-3 Communications Holdings and L-3 Communications Corporation,
as the case may be, are subordinated in right of payment to the prior payment
in full of all senior indebtedness of the issuer of such debt securities.
MERGER AND CONSOLIDATION
Unless otherwise described in the prospectus supplement of any series,
each of L-3 Communications Holdings and L-3 Communications Corporation may
under the applicable Indenture, without the consent of the holders of debt
securities, consolidate with, merge with or into or transfer all or
substantially all of its assets to any other corporation organized under the
laws of the United States or any of its political subdivisions provided that:
o the surviving corporation assumes all the obligations of L-3
Communications Holdings and L-3 Communications Corporation, as the case
may be, under the applicable Indenture;
o at the time of such transaction, no event of default, and no event
which, after notice or lapse of time, would become an event of default,
shall have happened and be continuing; and
o certain other conditions are met.
MODIFICATION
Generally, the rights and obligations of L-3 Communications Holdings and
L-3 Communications Corporation, as the case may be, and the holders' rights may
be modified with the consent of holders of a majority of the outstanding debt
securities of each series affected by such modification. However, unless
otherwise described in the prospectus supplement of any series, no modification
or amendment may occur without the consent of the affected holder of a debt
security if that modification or amendment would do any of the following:
o Change the stated maturity date of the principal of, or any installment
of interest on, any of the holder's debt securities.
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o Reduce the principal amount of, or the interest (or premium, if any)
on, the debt security (including in the case of a discounted debt
security, the amount payable upon acceleration of maturity or provable
in bankruptcy).
o Change the currency of payment of the debt security.
o Impair the right to institute suit for the enforcement of any payment
on the debt security or adversely affect the right of repayment, if
any, at the option of the holder.
o Reduce the percentage of holders of debt securities necessary to modify
or amend the Indentures or to waive any past default.
o Release a guarantor from its obligations under its guarantee, other
than in accordance with the terms thereof.
o Modify the obligations of L-3 Communications Holdings or L-3
Communications Corporation, as the case may be, to maintain an office
or agency in New York City.
A modification which changes a covenant or provision expressly included
solely for the benefit of holders of one or more particular series will not
affect the rights of holders of debt securities of any other series. (Section
9.02)
Each Indenture provides that the obligors and The Bank of New York, as
trustee, may make modifications without the consent of the debt security
holders in order to do the following: (Section 9.01)
o Evidence the assumption by a successor entity of the obligations of any
of the obligors under that Indenture.
o Convey security for the debt securities to The Bank of New York.
o Add covenants, restrictions or conditions for the protection of the
debt security holders.
o Provide for the issuance of debt securities in coupon or fully
registered form.
o Establish the form or terms of debt securities of any series.
o Cure any ambiguity or correct any defect in the applicable Indenture
which does not adversely affect the interests of a holder.
o Evidence the appointment of a successor trustee or more than one
trustee.
o Surrendering any right or power conferred upon L-3 Communications
Holdings or L-3 Communications Corporation, as the case may be.
o Complying with the requirements of the Securities and Exchange
Commission in order to maintain the qualification of the Indentures
under the Trust Indenture Act of 1939, as amended.
o Adding or modifying any other provisions with respect to matters or
questions arising under the Indentures which L-3 Communications
Holdings or L-3 Communications Corporation, as the case may be, and The
Bank of New York may deem necessary or desirable and which will not
adversely affect the interests of holders of debt securities.
o Modify the existing covenants and events of default solely in respect
of, or add new covenants or events of default that apply solely to,
debt securities not yet issued and outstanding.
o To provide for guarantees of the debt securities and to specify the
ranking of the obligations of the guarantors under their respective
guarantees.
EVENTS OF DEFAULT
In the Indentures, an event of default means, unless otherwise described
in the prospectus supplement of any series, any one of the following:
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o Failure to pay interest on a debt security for 30 days;
o Failure to pay principal and premium, if any, when due;
o Failure to pay or satisfy a sinking fund installment when due;
o Failure by L-3 Communications Holdings or L-3 Communications
Corporation, as the case may be, or by a guarantor of the debt
securities to perform any other covenant in the Indenture that
continues for 60 days after receipt of notice;
o Certain events in bankruptcy, insolvency or reorganization; or
o A guarantee being held in any judicial proceeding to be unenforceable
or invalid.
An event of default relating to one series of debt securities does not
necessarily constitute an event of default with respect to any other series
issued under the applicable Indenture. If an event of default exists with
respect to a series of debt securities, The Bank of New York or the holders of
at least 25% of the outstanding debt securities of that series may declare the
principal of that series due and payable.
Any event of default with respect to a particular series of debt
securities may be waived by the holders of a majority of the outstanding debt
securities of that series, except for a failure to pay principal premium or
interest on the debt security. (Sections 5.01, 5.02 and 5.08)
The Bank of New York may withhold notice to the holder of the debt
securities of any default (except in payment of principal, premium, interest or
sinking fund payment) if The Bank of New York thinks it is in the interest of
the holders. (Section 6.02)
Subject to the specific duties that arise under the applicable Indenture
if an event of default exists, The Bank of New York is not obligated to
exercise any of its rights or powers under the applicable Indenture at the
request of the holders of the debt securities unless they provide reasonable
indemnity satisfactory to it. (Sections 6.01 and 6.03) Generally, the holders
of a majority of the outstanding debt securities can direct the proceeding for
a remedy available to The Bank of New York or for exercising any power
conferred on The Bank of New York as the trustee. (Section 5.08)
TRUSTEE'S RELATIONSHIP
The Bank of New York or its affiliates may from time to time in the future
provide banking and other services to L-3 Communications Holdings and L-3
Communications Corporation in the ordinary course of their business. The
Indentures provide that L-3 Communications Holdings or L-3 Communications
Corporation, as the case may be, will indemnify The Bank of New York against
any and all loss, liability claim, damage or expense incurred that arises from
the trust created by the applicable Indenture unless the loss, liability or
expense results from The Bank of New York's negligence or willful misconduct.
(Sections 6.01 and 6.07)
GLOBAL SECURITIES
L-3 Communications Holdings and L-3 Communications Corporation may issue
some of the debt securities as global securities that will be deposited with a
depository identified in a prospectus supplement. Global securities may be
issued in registered form and may be either temporary or permanent. A
prospectus supplement will contain additional information about depository
arrangements.
Registered global securities will be registered in the depository's name
or in the name of its nominee. When L-3 Communications Holdings or L-3
Communications Corporation issues a global security, the depository will credit
that amount of debt securities to the investors that have accounts with the
depository or its nominee. The underwriters or the debt security holders' agent
will designate the accounts to be credited, unless the debt securities are
offered and sold directly by L-3 Communications Holdings or L-3 Communications
Corporation, in which case, L-3 Communications Holdings or L-3 Communications
Corporation, as the case may be, will designate the appropriate account to be
credited.
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Investors who have accounts with a depository, and people who have an
interest in those institutions, are the beneficial owners of global securities
held by that particular depository.
Neither L-3 Communications Holdings nor L-3 Communications Corporation
will maintain records regarding ownership or the transfer of global securities
held by a depository or to nominee. If you are the beneficial owner of global
securities held by a depository, you must get information directly from the
depository.
As long as a depository is the registered owner of a global security, that
depository will be considered the sole owner of the debt securities represented
by that global security. Except as set forth below, beneficial owners of global
securities held by a depository will not be entitled to:
o Register the represented debt securities in their names;
o Receive physical delivery of the debt securities; or
o Be considered the owners or holders of the global security under the
applicable Indenture.
Payments on debt securities registered in the name of a depository or its
nominee will be made to the depositary or its nominee. (Section 2.03)
When a depository receives a payment, it must immediately credit the
accounts in amounts proportionate to the account holders' interests in the
global security. The beneficial owners of a global security should, and are
expected to, establish standing instructions and customary practices with their
investor that has an account with the depository, so that payments can be made
with regard to securities beneficially held for them, much like securities held
for the accounts of customers in bearer form or registered in "street name."
A global security can only be transferred in whole by the depository to a
nominee of such depository, or to another nominee of a depository. If a
depository is unwilling or unable to continue as a depository and L-3
Communications Holdings or L-3 Communications Corporation, as the case may be,
does not appoint a successor depository within ninety (90) days, L-3
Communications Holdings or L-3 Communications Corporation, as the case may be,
will issue debt securities in exchange for all of the global securities held by
that depository. In addition, L-3 Communications Holdings and L-3
Communications Corporation may eliminate all global securities at any time and
issue debt securities in exchange for them. Further, L-3 Communications
Holdings and L-3 Communications Corporation may allow a depository to surrender
a global security in exchange for debt securities on any terms that are
acceptable to them and the depository. Finally, an interest in the global
security is exchangeable for a definitive debt security if an event of default
has occurred as described above under "Events of Default." (Section 3.07)
If any of these events occur, L-3 Communications Holdings and L-3
Communications Corporation, as the case may be, will execute and The Bank of
New York will authenticate and deliver to the beneficial owners of the global
security in question a new registered security in an amount equal to and in
exchange for that person's beneficial interest in the exchange global security.
The depository will receive a new global security in an amount equal to the
difference, if any, between the amount of the surrendered global security and
the amount of debt securities delivered to the beneficial owners. Debt
securities issued in exchange for global securities will be registered in the
same names and in the same denominations as indicated by the depository's
records and in accordance with the instructions from its direct and indirect
participants. (Section 3.07)
The laws of certain jurisdictions require some people who purchase
securities to actually take physical possession of those securities. The
limitations imposed by these laws may impair your ability to transfer your
beneficial interests in a global security.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The current certificate of incorporation of L-3 Communications Holdings
authorizes 300,000,000 shares of common stock with a par value of $.01 per
share and 50,000,000 shares of preferred stock. As of June 1, 2002, the
outstanding capital stock of L-3 Communications Holdings consisted of
79,460,365 shares of common stock. The following summaries of certain
provisions of L-3 Communications Holdings' capital stock do not purport to be
complete and are subject to, and qualified in their entirety by (1) the
provisions of the certificate of incorporation, including the certificate of
designations pursuant to which any series of preferred stock may be issued, (2)
the bylaws of L-3 Communications Holdings and (3) by applicable law.
COMMON STOCK
Voting Rights. Holders of L-3 Communications Holdings' common stock are
entitled to one vote per share on all matters to be voted upon by stockholders
of L-3 Communications Holdings, and do not have cumulative voting rights.
Dividend Rights. The holders of L-3 Communications Holdings' common stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the board of directors of L-3 Communications Holdings out of
funds legally available for that purpose, subject to preferences that may be
applicable to any outstanding preferred stock and any other provisions of L-3
Communications Holdings' certificate of incorporation. L-3 Communications
Holdings does not, however, anticipate paying any cash dividends in the
foreseeable future.
Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of L-3 Communications Holdings, after
payment of the debts and other liabilities of L-3 Communications Holdings, and
subject to the rights of holders of shares of preferred stock, holders of
common stock are entitled to share in any distribution to the stockholders on a
pro rata basis.
Miscellaneous. All of the outstanding shares of common stock of L-3
Communications Holdings are, and the shares of common stock offered hereby will
be, fully paid and non-assessable. Holders of common stock have no preemptive
or other rights to subscribe for additional shares. No shares of common stock
are subject to redemption or a sinking fund.
PREFERRED STOCK
General. L-3 Communications Holdings' certificate of incorporation
authorizes its board of directors to cause preferred stock to be issued in one
or more series, without stockholder action. The board of directors of L-3
Communications Holdings is authorized to issue up to 50,000,000 shares of
preferred stock, par value $.01 per share, and can determine the number of
shares of each series, and the rights, preference and limitations of each
series. L-3 Communications Holdings may amend its certificate of incorporation
to increase the number of authorized shares of preferred stock in a manner
permitted by its certificate of incorporation and the Delaware General
Corporation Law.
The particular terms of any series of preferred stock being offered by L-3
Communications Holdings under this shelf registration will be described in the
prospectus supplement relating to that series of preferred stock. Those terms
may include:
o The number of shares of the series of preferred stock being offered;
o The title and liquidation preference per share of that series of the
preferred stock;
o The purchase price of the preferred stock;
o The dividend rate or method for determining such rate;
o The dates on which dividends will be paid;
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o Whether dividends on that series of preferred stock will be cumulative
or noncumulative and, if cumulative, the dates from which dividends
shall commence to accumulate;
o Any redemption or sinking fund provisions applicable to that series of
preferred stock;
o Any conversion or exchange provisions applicable to that series of
preferred stock;
o Whether L-3 Communications Holdings has elected to offer depositary
shares with respect to that series of preferred stock; and
o Any additional dividend, liquidation, redemption, sinking fund and
other rights and restrictions applicable to that series of preferred
stock.
If the terms of any series of preferred stock being offered differ from
the terms set forth herein, those terms will also be disclosed in the
prospectus supplement relating to that series of preferred stock. The following
summary is not complete. You should refer to the certificate of designations
relating to the series of the preferred stock for the complete terms of that
preferred stock. That certificate of designations will be filed with the
Securities and Exchange Commission promptly after the offering of the preferred
stock.
The preferred stock will, when issued, be fully paid and nonassessable.
Voting Rights. Except as indicated in the prospectus supplement, or
except as expressly required by applicable law, the holders of preferred stock
will not be entitled to vote.
Dividend Rights. Holders of preferred stock of each series will be
entitled to receive, when, as and if declared by the board of directors of L-3
Communications Holdings, cash dividends at the rates and on the dates set forth
in the prospectus supplement. Dividend rates may be fixed or variable or both.
Different series of preferred stock may be entitled to dividends at different
dividend rates or based upon different methods of determination. Each dividend
will be payable to the holders of record as they appear on L-3 Communications
Holdings' stock books on record dates determined by the board of directors of
L-3 Communications Holdings. Dividends on any series of the preferred stock may
be cumulative or noncumulative, as specified in the prospectus supplement. If
the board of directors of L-3 Communications Holdings fails to declare a
dividend on any series of preferred stock for which dividends are
noncumulative, then the right to receive that dividend will be lost, and L-3
Communications Holdings will have no obligation to pay the dividend for that
dividend period, whether or not dividends are declared for any future dividend
period.
No full dividends will be declared or paid on any series of preferred
stock, unless full dividends for the dividend period commencing after the
immediately preceding dividend payment date (and cumulative dividends still
owing, if any) have been or contemporaneously are declared and paid on all
other series of preferred stock that have the same rank as, or rank senior to,
that preferred stock. When those dividends are not paid in full, dividends will
be declared pro rata, so that the amount of dividends declared per share on
that series of preferred stock and on each other series of preferred stock
having the same rank as, or ranking senior to, that series of preferred stock
will in all cases bear to each other the same ratio that accrued dividends per
share on that series of preferred stock and the other preferred stock bear to
each other. In addition, generally, unless full dividends, including cumulative
dividends still owing, if any, on all outstanding shares of any series of
preferred stock have been paid, no dividends will be declared or paid on the
common stock and generally L-3 Communications Holdings may not redeem or
purchase any common stock. No interest, or sum of money in lieu of interest,
will be paid in connection with any dividend payment or payments which may be
in arrears.
Unless otherwise described in the prospectus supplement, the amount of
dividends payable for each dividend period will be computed by annualizing the
applicable dividend rate and dividing by the number of dividend periods in a
year, except that the amount of dividends payable for the initial dividend
period or any period shorter than a full dividend period shall be computed on
the basis of a 360-day year consisting of twelve 30-day months and, for any
period less than a full month, the actual number of days elapsed in the period.
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Rights Upon Liquidation. In the event L-3 Communications Holdings
liquidates, dissolves or winds-up its affairs, either voluntarily or
involuntarily, the holders of each series of preferred stock will be entitled
to receive liquidating distributions in the amount set forth in the prospectus
supplement relating to each series of preferred stock, plus an amount equal to
accrued and unpaid dividends, if any, before any distribution of assets is made
to the holders of L-3 Communications Holdings' common stock. If the amounts
payable with respect to preferred stock of any series and any stock having the
same rank as that series of preferred stock are not paid in full, the holders
of preferred stock and of such other stock will share ratably in any such
distribution of assets in proportion to the full respective preferential
amounts to which they are entitled. After the holders of each series of
preferred stock and any stock having the same rank as the preferred stock are
paid in full, they will have no right or claim to any of L-3 Communications
Holdings' remaining assets unless otherwise specified in the applicable
prospectus supplement. Neither the sale of all or substantially all of L-3
Communications Holdings' property or business nor a merger or consolidation by
L-3 Communications Holdings with any other corporation will be considered a
dissolution, liquidation or winding up by L-3 Communications Holdings of its
business affairs.
Redemption. Any series of preferred stock may be redeemable, in whole or
in part, at the option of L-3 Communications Holdings. In addition, any series
of preferred stock may be subject to mandatory redemption, including pursuant
to a sinking fund. The redemption provisions that may apply to a series of
preferred stock, including the redemption dates and the redemption prices for
that series, will be set forth in the prospectus supplement.
If a series of preferred stock is subject to mandatory redemption, the
prospectus supplement will specify (1) the year L-3 Communications Holdings can
begin to redeem shares of the preferred stock, (2) the number of shares of the
preferred stock that L-3 Communications Holdings can redeem each year, and (3)
the redemption price per share. L-3 Communications Holdings may pay the
redemption price in cash, stock or in cash that it has received specifically
from the sale of its capital stock, as specified in the prospectus supplement.
If the redemption price is to be paid only from the proceeds of the sale of its
capital stock, the terms of the series of preferred stock may also provide
that, if no such capital stock is sold or if the amount of cash received is
insufficient to pay in full the redemption price then due, the series of
preferred stock will automatically be converted into shares of the applicable
capital stock pursuant to conversion provisions specified in the prospectus
supplement.
If fewer than all the outstanding shares of any series of preferred stock
are to be redeemed, whether by mandatory or optional redemption, the board of
directors of L-3 Communications Holdings will determine the method for
selecting the shares to be redeemed, which may be by lot or pro rata or by any
other method determined to be equitable. From and after the redemption date,
dividends will cease to accrue on the shares of preferred stock called for
redemption and all rights of the holders of those shares other than the right
to receive the redemption price will cease.
In the event that full dividends, including accrued but unpaid dividends,
if any, have not been paid on any series of preferred stock, L-3 Communications
Holdings may not redeem that series in part and may not purchase or acquire any
shares of that series of preferred stock, except by any offer made on the same
terms to all holders of that series of preferred stock.
Miscellaneous. The preferred stock will, when issued, be fully paid and
nonassessable. The preferred stock will have no preemptive rights.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for L-3 Communications Holdings' common
stock is EquiServe Trust Company, N.A. The transfer agent and registrar for L-3
Communications Holdings' preferred stock will be set forth in the applicable
prospectus supplement.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF L-3 COMMUNICATIONS HOLDINGS' CHARTER AND
BYLAWS
The certificate of incorporation of L-3 Communications Holdings provides
for its board of directors to be divided into three classes, with staggered
three-year terms. As a result, only one class
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of directors will be elected at each annual meeting of stockholders, with the
other classes continuing for the remainder of their respective three-year
terms. Stockholders have no cumulative voting rights, and the stockholders
representing a majority of the shares of common stock outstanding are able to
elect all of the directors.
The certificate of incorporation of L-3 Communications Holdings also
requires that any action required or permitted to be taken by its stockholders
must be effected at a duly called annual or special meeting of the stockholders
and may not be effected by a consent in writing. The stockholders of L-3
Communications Holdings may amend the bylaws of L-3 Communications Holdings or
adopt new bylaws, by the affirmative vote of 66 2/3% of the outstanding voting
securities. A special meeting of the stockholders may be called by L-3
Communications Holdings' Chairman, Chief Executive Officer or stockholders
owning 10% or more of the outstanding voting capital stock. These provisions
may have the effect of delaying, deferring or preventing a change in control.
The classification of the board of directors and lack of cumulative voting
will make it more difficult not only for another party to obtain control of L-3
Communications Holdings by replacing its board of directors, but also for its
existing stockholders to replace the board of directors. Since the board of
directors has the power to retain and discharge its officers, these provisions
could also make it more difficult for existing stockholders or another party to
effect a change in management.
L-3 Communications Holdings' anti-takeover and other provisions may have
the effect of deterring hostile takeovers or delaying changes in control or
management. They are intended to enhance the likelihood of continued stability
in the composition of its board of directors and in the policies of its board
of directors and to discourage certain types of transactions that may involve
an actual or threatened change in control. Additionally, these provisions are
designed to reduce L-3 Communications Holdings' vulnerability to an unsolicited
acquisition proposal. The provisions also are intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for L-3
Communications Holdings' shares and, as a consequence, they also may inhibit
fluctuations in the market price of L-3 Communications Holdings' shares that
could result from actual or rumored takeover attempts. Such provisions also may
have the effect of preventing changes in L-3 Communications Holdings'
management.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
L-3 Communications Holdings, as a Delaware corporation, is subject to
Section 203 of the Delaware General Corporation Law, which, subject to certain
exceptions, prohibits it from engaging in any business combination with any
interested stockholder for a period of three years following the time that such
stockholder became an interested stockholder, unless:
o prior to such time, the board of directors of L-3 Communications
Holdings approved either the business combination or the transaction
that resulted in the stockholder becoming an interested holder;
o upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85.0% of the outstanding voting stock of L-3 Communications
Holdings at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding those shares owned (a)
by persons who are directors and also officers and (b) by employee
stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or
o at or subsequent to such time, the business combination is approved by
the board of directors of L-3 Communications Holdings and authorized at
an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding
voting stock of L-3 Communications Holdings that is not owned by the
interested stockholder.
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In general, Section 203 defines "business combination" to include the
following:
o any merger or consolidation involving the interested stockholder and
L-3 Communications Holdings;
o any sale, transfer, pledge or other disposition of 10% or more of
assets involving the interested stockholder;
o subject to certain exceptions, any transaction that results in the
issuance or transfer of any of L-3 Communications Holdings' stock to
the interested stockholder;
o any transaction involving L-3 Communications Holdings that has the
effect of increasing the proportionate share of the stock or any class
or series of L-3 Communications Holdings' stock beneficially owned by
the interested stockholder; or
o the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits by or through
L-3 Communications Holdings.
In general, Section 203 defines "interested stockholder" as an entity or
person beneficially owning 15% or more of the outstanding voting stock of L-3
Communications Holdings and any entity or person affiliated with or controlling
or controlled by such entity or person.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
L-3 Communications Holdings may issue stock purchase contracts
representing contracts obligating holders to purchase from L-3 Communications
Holdings and obligating L-3 Communications Holdings to sell to the holders a
specified number of shares of common stock or preferred stock at a future date
or dates. The price per share of common stock or preferred stock may be fixed
at the time the stock purchase contracts are issued or may be determined by
reference to a specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either of the following:
o Debt securities of L-3 Communications Holdings, or
o Debt obligations of third parties, including U.S. Treasury securities,
securing the holder's obligations to purchase the common stock or preferred
stock under the stock purchase contracts. The stock purchase contracts may
require L-3 Communications Holdings to make periodic payments to the holders of
the stock purchase units or vice versa, and such payments may be unsecured or
prefunded on some basis. The stock purchase contracts may require holders to
secure their obligations in a specified manner and in certain circumstances L-3
Communications Holdings may deliver newly issued prepaid stock purchase
contracts, often known as prepaid securities, upon release to a holder of any
collateral securing each holder's obligations under the original stock purchase
contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the prospectus supplement will not contain all
of the information that you may find useful. For more information, you should
review the stock purchase contracts, the collateral arrangements and depositary
arrangements, if applicable, relating to such stock purchase contracts or stock
purchase units and, if applicable, the prepaid securities and the document
pursuant to which the prepaid securities will be issued, which will be filed
with the Securities and Exchange Commission promptly after the offering of such
stock purchase contracts or stock purchase units and, if applicable, prepaid
securities.
DESCRIPTION OF WARRANTS
L-3 Communications Holdings may issue warrants for the purchase of debt
securities, preferred stock or common stock of L-3 Communications Holdings. L-3
Communications Holdings may issue
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warrants independently or together with other securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into
between L-3 Communications Holdings and a bank or trust company, as warrant
agent. You should refer to the warrant agreement relating to the specific
warrants being offered for the complete terms of the warrant agreement and the
warrants.
Each warrant will entitle the holder to purchase the principal amount of
debt securities of L-3 Communications Holdings, or the number of shares of
preferred stock or common stock of L-3 Communications Holdings at the exercise
price set forth in, or calculable as set forth in, the prospectus supplement.
The exercise price may be subject to adjustment upon the occurrence of certain
events, as set forth in the prospectus supplement. After the close of business
on the expiration date of the warrant, unexercised warrants will become void.
The place or places where, and the manner in which, warrants may be exercised
shall be specified in the prospectus supplement.
The applicable prospectus supplement will describe the following terms,
where applicable, of the warrants in respect of which this prospectus is being
delivered:
o the title of the warrants;
o the aggregate number of the warrants;
o the price or prices at which the warrants will be issued;
o the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of the warrants;
o the designation and terms of the securities with which the warrants are
issued and the number of the warrants issued with each such security;
o if applicable, the date on and after which the warrants and the related
securities will be separately transferable;
o the price at which the securities purchasable upon exercise of the
warrants may be purchased;
o the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
o the minimum or maximum amount of the warrants that may be exercised at
any one time;
o information with respect to book-entry procedures, if any;
o a discussion of certain United States federal income tax
considerations; and
o any other terms of the warrants, including terms, procedures and
limitations relating to the exercise of the warrants.
SELLING STOCKHOLDERS
The table below presents certain information regarding the beneficial
ownership of the common stock of L-3 Communications Holdings outstanding as of
June 1, 2002 by Frank C. Lanza, our Chairman, Chief Executive Officer and
Director, and Robert V. LaPenta, our President, Chief Financial Officer and
Director.
NUMBER OF SHARES OF COMMON
STOCK BENEFICIALLY OWNED
AFTER THE SALE OF
SHARES OF COMMON STOCK MAXIMUM NUMBER OF MAXIMUM NUMBER OF
BENEFICIALLY OWNED SHARES OF COMMON SHARES OF COMMON STOCK
------------------------ STOCK TO BE SOLD -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE HEREUNDER NUMBER PERCENTAGE
--------------------------- ----------- ------------ ------------------ ----------- -----------
Frank C. Lanza ............ 4,779,914 5.9% 500,000 4,279,914 4.4%
Robert V. LaPenta ......... 5,135,199 6.3% 500,000 4,635,199 4.8%
25
PLAN OF DISTRIBUTION
L-3 Communications Holdings, L-3 Communications Corporation and the
selling stockholders may sell the securities offered by this prospectus through
underwriters, dealers or agents or directly to one or more purchasers including
through a dividend reinvestment program. The applicable prospectus supplement
will list the names of any underwriters or agents involved in the sale of the
offered securities and any applicable commissions or discounts. In addition,
the applicable prospectus supplement will list any securities exchanges on
which the offered securities may be listed.
If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the offered securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The offered securities may be offered through an
underwriting syndicate represented by many underwriters. The obligations of the
underwriters to purchase the offered securities will be subject to certain
conditions. The underwriters will be obligated to purchase all the offered
securities if any are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
The offered securities may be sold directly by L-3 Communications
Holdings, L-3 Communications Corporation and the selling stockholders or
through agents. Any agent will be named, and any commissions payable to that
agent will be set forth in the prospectus supplement. Unless otherwise
indicated in the prospectus supplement, any agent will be acting on a best
efforts basis.
L-3 Communications Holdings, L-3 Communications Corporation and the
selling stockholders may authorize agents, underwriters or dealers to solicit
offers by specified institutions to purchase securities offered by this
prospectus pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. These contracts will be subject
only to those conditions set forth in the prospectus supplement. The prospectus
supplement will set forth the commission payable for soliciting such contracts.
L-3 Communications Holdings, L-3 Communications Corporation and the
selling stockholders may agree to indemnify underwriters, dealers or agents
against certain civil liabilities, including liabilities under the Securities
Act of 1933, and may also agree to contribute to payments which the
underwriters, dealers or agents may be required to make.
LEGAL MATTERS
The validity of each of the securities offered by this prospectus will be
passed upon for us by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The following financial statements have been incorporated by reference in
this registration statement 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 registration statement 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 registration
statement from our Current Report on Form 8-K dated March 22, 2002.
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
26
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).
So long as we are subject to the periodic reporting requirements of the
Securities Exchange Act, we are required to furnish the information required to
be filed with the SEC to the trustee and the holders of the notes. We have
agreed that, even if we are not required under the Securities Exchange Act to
furnish such information to the SEC, we will nonetheless continue to furnish
information that would be required to be furnished by us by Section 13 of the
Securities Exchange Act to the trustee and the holders of the notes as if it
were subject to such periodic reporting requirements.
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 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 quarter ended March 31, 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; and
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.
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 OR ANY SUPPLEMENT TO THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
SUPPLEMENT TO THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THOSE DOCUMENTS. YOU SHOULD READ ALL INFORMATION SUPPLEMENTING
THIS PROSPECTUS.
27
14,000,000 SHARES
[L-3 COMMUNICATIONS LOGO]
COMMON STOCK
---------------------
PROSPECTUS SUPPLEMENT
JUNE 24, 2002
---------------------
LEHMAN BROTHERS
---------------------
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
SG COWEN
---------------------
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
WACHOVIA SECURITIES