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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
(Mark one)
x ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 001-14141
L-3 COMMUNICATIONS
MASTER SAVINGS PLAN
(FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN,
IF DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW)
L-3 COMMUNICATIONS HOLDINGS, INC.
600 Third Ave
New York, NY 10016
(Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office)
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L-3 COMMUNICATIONS MASTER SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
PAGES
-----
Report of Independent Registered Public Accounting Firm 2
Financial Statements:
Statements of Net Assets Available for Benefits
at December 31, 2003 and 2002 3-4
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2003 5
Notes to Financial Statements 6-15
Supplemental Schedule:
Schedule G, Part III* - Schedule of Nonexempt Transactions for the
year ended December 31, 2003 16
* Refers to item number in Form 5500 ("Annual Return/Report of Employee
Benefit Plan") filed with the Department of Labor for the plan year
ended December 31, 2003.
Other schedules required by Section 2520.103-10 of the Department of
Labor Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted as
the conditions under which they are required are not present.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
the L-3 Communications Master Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the L-3 Communications Master Savings Plan (the "Plan") as of December 31,
2003 and 2002, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2003. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in net assets available for benefits
for the year ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Nonexempt
Transactions, which is presented for the purpose of additional analysis and is
not a required part of the basic financial statements, is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
New York, New York
June 28, 2004
2
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003
(IN THOUSANDS)
Non-
Participant Participant
Directed Directed Total
-------- -------- --------
Assets:
Investment in Master Trust $891,597 $ 64,162 $955,759
Contributions receivable:
Participants 1,268 -- 1,268
Company 521 2,827 3,348
-------- -------- --------
Net assets available for benefits $893,386 $ 66,989 $960,375
======== ======== ========
See Notes to Financial Statements
3
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002
(IN THOUSANDS)
Non-
Participant Participant
Directed Directed Total
-------- -------- --------
Assets:
Investment in Master Trust $688,116 $ 28,482 $716,598
Contributions receivable:
Participants 1,303 -- 1,303
Company 5 618 623
-------- -------- --------
Net assets available for benefits $689,424 $ 29,100 $718,524
======== ======== ========
See Notes to Financial Statements
4
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS)
Non-
Participant Participant
Directed Directed Total
--------- --------- ---------
Contributions:
Participant $ 89,211 $ -- $ 89,211
Company 4,860 40,204 45,064
Rollover 14,356 -- 14,356
Investment income:
Appreciation in the fair value of
investment in Master Trust 107,940 7,767 115,707
Interest and dividends 16,071 51 16,122
Interest (participant loans) 1,403 1 1,404
Transfers from non-participant directed
funds to participant directed funds 7,865 (7,865) --
Transfers from other plans 22,186 -- 22,186
Benefit payments (59,676) (2,131) (61,807)
Administrative expenses (254) (138) (392)
--------- --------- ---------
Net increase 203,962 37,889 241,851
Net assets available for benefits
Beginning of period 689,424 29,100 718,524
--------- --------- ---------
Net assets available for benefits
End of period $ 893,386 $ 66,989 $ 960,375
========= ========= =========
See Notes to Financial Statements
5
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION
General
The following description of the L-3 Communications Master Savings Plan (the
"Plan") provides only general information. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
The Plan is a defined contribution 401(k) plan and is administered by the
Benefit Plan Committee ("Plan Administrator") appointed by L-3 Communications
Corporation (the "Company"). The Plan is designed to provide eligible employees
with tax advantaged long-term savings for retirement. The Plan covers employees
of 44 locations of the Company (See note 3 for a complete listing.) and is
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). Participants may direct their investment to a combination of mutual
funds, which are held in the L-3 Communications Master Savings Plan Trust (the
"Master Trust"), managed by Fidelity Management Trust Company ("FMTC"), as
Trustee.
Contributions
Generally, full time and part time employees who are scheduled to complete a
minimum of 20 hours of service weekly are eligible to participate in the Plan,
as of their date of hire. Each eligible employee wishing to participate in the
Plan must elect to authorize pre-tax and/or post-tax contributions by payroll
deduction. Participants may contribute from 1% to 18% of total compensation, as
defined. A participant may elect to increase, decrease, suspend or resume
contributions at any time. The election will become effective as soon as
administratively possible as of the first day of the payroll period elected. The
Internal Revenue Code ("IRC") of 1986, as amended, limited the maximum amount an
employee may contribute on a pre-tax basis in 2003 to $12,000 for participants
under 50 years of age and $14,000 for participants 50 years of age and over.
Participants are 100% vested in their contributions and earnings thereon.
Participant Accounts
Each participant's account is credited with the participant's contribution and
allocations of (a) the Company's contribution and (b) the Plan's earnings, and
may be charged with certain administrative expenses. Allocations are based on
participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
Master Trust Investment Options
All non-participant directed employer contributions must be initially invested
in the L-3 Stock Fund, and may not be invested in other Master Trust investment
options until two years after the end of the plan year in which the employer
contribution is made. Participants have the option of investing
participant-directed employee and employer contributions in the L-3 Stock Fund,
as well as other investment options that are described below.
L-3 Stock Fund - This fund was established effective October 1, 1998 and invests
in L-3 Communications Holdings, Inc. ("L-3 Holdings") common stock and money
market funds. Substantially all employer matching contributions are invested in
this fund. This fund represented 16.9% and 15.5% of the Plan's investment in the
Master Trust at December 31, 2003 and 2002, respectively.
6
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
Fidelity Freedom Funds - These funds invest in a combination of underlying
Fidelity stock, bond and money market mutual funds to provide asset allocation
with moderate risk. Each Fidelity Freedom Fund has a target retirement date and
will gradually adopt a more conservative asset allocation over time.
Fidelity Freedom 2000 Fund - This fund invests approximately 23% in
Fidelity stock mutual funds, 39% in Fidelity bond mutual funds and 38% in
Fidelity money market funds and is targeted to investors who expect to
retire in the near future. This fund represented less than one percent of
the Plan's investment in the Master Trust at December 31, 2003 and 2002.
Fidelity Freedom 2010 Fund - This fund invests approximately 45% in
Fidelity stock mutual funds, 45% in Fidelity bond mutual funds and 10% in
Fidelity money market funds and is targeted to investors who expect to
retire around the year 2010. This fund represented 6.0% and 6.5% of the
Plan's investment in the Master Trust at December 31, 2003 and 2002,
respectively.
Fidelity Freedom 2020 Fund - This fund invests approximately 70% in
Fidelity stock mutual funds and 30% in Fidelity bond mutual funds and is
targeted to investors who expect to retire around the year 2020. This fund
represented 2.8% and 2.1% of the Plan's investment in the Master Trust at
December 31, 2003 and 2002, respectively.
Fidelity Freedom 2030 Fund - This fund invests approximately 82% in
Fidelity stock mutual funds and 18% in Fidelity bond mutual funds and is
targeted to investors who expect to retire around the year 2030. This fund
represented 1.2% and less than one percent of the Plan's investment in the
Master Trust at December 31, 2003 and 2002, respectively.
Fidelity Freedom 2040 Fund - This fund invests approximately 90% in
Fidelity stock mutual funds and 10% in Fidelity bond mutual funds and is
targeted to investors who expect to retire around the year 2040. This fund
represented less than one percent of the Plan's investment in the Master
Trust at December 31, 2003 and 2002.
Fidelity Ginnie Mae Fund - Funds are invested for a high level of current income
primarily from Government National Mortgage Association mortgaged-backed
pass-through certificates that are guaranteed as to timely payment of interest
and principal by the full faith and credit of the U.S. Government. This fund
represented 4.7% and 6.2% of the Plan's investment in the Master Trust at
December 31, 2003 and 2002, respectively.
Fidelity Growth & Income Portfolio - Funds are invested mainly in securities of
companies that offer potential capital appreciation while paying current
dividends. This fund represented 10.1% and 10.7% of the Plan's investment in the
Master Trust at December 31, 2003 and 2002, respectively.
Fidelity Magellan Fund - Funds are invested for capital appreciation in a broad
range of equities of domestic, multinational and foreign companies. This fund
represented 15.2% of the Plan's investment in the Master Trust at December 31,
2003 and 2002.
Fidelity Managed Income Portfolio II - Funds are invested in investment
contracts offered by major insurance companies and in fixed income securities.
This fund represented 21.3% and 24.4% of the Plan's investment in the Master
Trust at December 31, 2003 and 2002, respectively.
Fidelity OTC Portfolio - This fund invests at least 80% of its assets in
securities traded on NASDAQ or other over-the-counter (OTC) markets that
primarily trade in small and medium-sized companies. This fund invests more than
25% of its assets in the technology sector. This fund represented 1.3% and less
than one percent of the Plan's investment in the Master Trust at December 31,
2003 and 2002, respectively.
7
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
INVESCO Dynamics Fund - Funds are invested in common stocks of rapidly growing
mid-sized domestic companies. Mid-sized companies are defined as those companies
that have a market capitalization of between $2.5 billion and $15.0 billion.
This fund represented 4.1% and 3.1% of the Plan's investment in the Master Trust
at December 31, 2003 and 2002, respectively.
Invesco Small Company Growth Fund - This fund invests in equities of companies
with market capitalizations of less than $2.5 billion. This fund focuses on
companies with accelerating earnings attributable to rapid sales growth. This
fund represented less than one percent of the Plan's investment in the Master
Trust at December 31, 2003 and 2002.
Janus Overseas Fund - Funds are invested in common stocks of foreign companies.
This fund represented 3.9% and 3.6% of the Plan's investment in the Master Trust
at December 31, 2003 and 2002, respectively.
Spartan U.S. Equity Index Fund - This fund invests at least 80% of its assets in
common stocks of the 500 companies that comprise the Standard & Poor's 500
Index. This fund represented 4.7% and 3.9% of the Plan's investment in the
Master Trust at December 31, 2003 and 2002, respectively.
T. Rowe Price Small-Cap Stock Fund - This fund invests at least 80% of its
assets in equities of small companies. A small company is defined as having a
market capitalization that falls within the range of the companies in the
Russell 2000 Index. This fund represented 3.5% and 2.6% of the Plan's investment
in the Master Trust at December 31, 2003 and 2002, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Master Trust
Investment assets of the Plan are maintained in the Master Trust administered by
FMTC, as Trustee. The Plan participates in the Master Trust along with all the
assets of the Aviation Communications & Surveillance Systems 401(k) Plan and the
SPD Technologies Defined Contribution Retirement Plan, collectively referred to
as the Participating Plans. During the year ended December 31, 2003, the SPD
Technologies Defined Contribution Retirement Plan was merged into the Plan.
The investment in the Master Trust represents the Plan's proportionate share of
assets held in the Master Trust. The assets consist of units of funds that are
maintained by FMTC. (See Note 1 for a description of the fund options.)
Contributions, benefit payments and certain administrative expenses are
specifically identified to the Plan.
Valuation of Investments
The investment in the Master Trust is stated at fair value.
The L-3 Stock Fund is a unitized fund whose underlying assets consist primarily
of L-3 Holdings common stock. Shares of L-3 Holdings common stock are valued at
the last reported quoted market price of a share on the last trading day of the
year.
Investments in mutual funds are valued at quoted market prices, which represent
the net asset value per share as reported by Fidelity Management and Research
Company. Participant loans are valued at cost, which approximates fair value.
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
8
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
Investment Transactions and Investment Income
Investment transactions are accounted for on a trade-date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on an accrual
basis. Gains and losses on sales of investment securities are determined based
on the average cost method.
Net appreciation in the fair value of the Plan's investment, as shown in the
Statement of Changes in Net Assets Available for Benefits, consists of the
Plan's proportionate share of realized gains or losses and unrealized
appreciation or depreciation on those investments. The net appreciation and
interest and dividends are allocated to the L-3 Participating Plans based upon
the relationship of each L-3 Participating Plan's respective monthly balances in
the investment pool to the total investment pool of the Master Trust, as
determined at the beginning of each month.
Forfeitures
Participants vest in Company contributions in accordance with the provisions of
their respective division and/or subsidiary plan as described in Note 3.
Non-vested Company contributions are forfeited upon termination and are used to
pay plan expenses and to reduce future Company contributions. Forfeitures
available were approximately $1,226,000 and $914,000 at December 31, 2003 and
2002, respectively.
Benefit Payments
Benefit payments are recorded when paid.
Plan Expenses
The Company pays all administrative expenses of the Plan including trustee,
record keeping, consulting, audit and legal fees, with the exception of loan
administration fees, which are charged to participants. Taxes and investment
fees related to the stock funds or mutual funds are paid from the net assets of
such funds.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results will differ from these estimates. The most
significant estimate relates to valuations of investments in the Master Trust.
Risks and Uncertainties
The Plan provides for investment options in various mutual funds and the L-3
Stock Fund. Investment securities are exposed to various risks, such as interest
rate, market and credit risk. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to changes in the
value of investment securities, it is at least reasonably possible that changes
in risks in the near term would materially affect participants' account balances
and the amounts reported in the statement of net assets available for benefits
and the statement of changes in net assets available for benefits.
9
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
3. COMPANY MATCHING CONTRIBUTIONS AND VESTING PROVISIONS
The Company provides matching contributions based on a matching percentage of
the participant's contribution up to a designated percentage of the
participant's compensation. The Company's matching contribution percentages,
which vary by division and /or subsidiary, subject to limitations described in
the Plan document, are presented in the table below.
Division / Subsidiary Employer Match
--------------------- --------------
APCOM 50% up to 6%
Atlantic Science & Technology (1)
Aviation Recorders 25% up to 6% (2)
Avionics Systems 100% up to 6% (3)
Aydin Electro-Fab (1)
BT Fuze Products 50% up to 6%
Celerity (1)
Display Systems 60% up to 5%
EER Systems 50% up to 6%
Electrodynamics (4)
Electron Devices 50% up to 6% (5)
EMP (6)
ESSCO 50% up to 6%
IEC (7)
KDI (8)
L-3 Analytics Corporation 50% up to 6% (9)
L-3 Communications Integrated Systems 100% up to 4% (10)
L-3 Communications Link Simulation and Training 100% up to 4%
L-3 Communications Security and Detection Systems (11)
L-3 Communications SPD Technologies (12) (13)
L-3 Communications Systems- East 50% up to 8% (14)
L-3 Communications Systems- West (15)
L-3 Corporate 80% up to 5%
L-3 Global Network Solutions 50% up to 6%
L-3 Hygienetics Environmental Services 50% up to 2%
L-3 Military Aviation Services 50% up to 6%
Microdyne Outsourcing 25% up to 18% (16)
MPRI 100% up to 3%
Narda Microwave- East 40% up to 5%
Narda Microwave- West 50% up to 6%
Ocean Systems (17)
Power Paragon (18)
Prime Wave 100% up to 4%
Randtron 100% up to 6%
Ruggedized Command and Control Solutions 50% up to 6% (5)
Satellite Networks 50% up to 10%
Scandia None
SeaBeam 100% up to 1%
SYColeman/Coleman Aerospace 100% up to 7% (19)
Southern California Microwave (20)
Space & Navigation Systems (21)
Storm Control Systems 50% up to 6%
Telemetry East 50% up to 6%
Telemetry West 50% up to 6%
Substantially all of the Company matching contributions are made in L-3
Holdings' common stock.
10
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
(1) Company matching contributions for participants who are employees of
Atlantic Science & Technology, Aydin Electro-Fab and Celerity are
discretionary and are determined each year.
(2) The Company contribution for Aviation Recorders includes a supplemental
contribution of 1% of the participant's compensation and also may include a
discretionary match of up to 75% of 6% of the participant's compensation
contributed.
(3) The Company shall make a supplemental contribution each year for
participants who were participants in the Goodrich Corporation Employees'
Pension Plan on June 30, 2003 and who (1) are employees on the last day of
the plan year, (2) separated from employment with the employer during the
plan year due to death, retirement on or after age 65, disability, or (3)
are not employees on the last day of the plan year solely as a result of
the transfer of such participants to a division/subsidiary not
participating in the Plan in an amount ranging from 1.0% to 5.5% of
compensation, depending on years of age attained on the last day of the
plan year.
(4) The Company matching contribution for participants who are salaried
employees of Electrodynamics is 100% up to 5% of compensation. The Company
shall make a supplemental contribution for salaried employees ranging from
1% of total compensation to 8% of the first $10,000 of compensation plus 5%
of compensation in excess of $10,000, based on age attained during the plan
year. The Company matching contribution for participants who are members of
the International Brotherhood of Electrical Workers, Local 134 is 100% up
to 2% of salary.
(5) Participants who were employees of Electron Devices or Ruggedized Command
and Control Solutions on October 26, 2002 and as of the last day of the
plan year are eligible for a supplemental employer contribution. The
supplemental contribution is equal to 1% of compensation for participants
under 45 years of age, 3% of compensation for participants between 45 and
54 years of age, and 5% of compensation for participants 55 years of age or
above.
(6) The Company matching contribution for EMP is 2% of compensation if the
participant's contribution is 1% of compensation, increasing to 4% if the
participant's contribution is 2% of compensation, 4.25% if the
participant's contribution is 3% of compensation and 4.50% if the
participant's contribution is 4% of compensation. On October 1, 2003, the
Company's EMP division was merged into ESSCO.
(7) With the exception of IEC's Redmond operations, the Company matching
contribution for IEC is 100% of the participants contribution up to 2% of
the participant's compensation plus 50% of the participants contribution on
the next 4% of the participant's compensation. For IEC's Redmond
operations, the Company matching contribution is 50% of the first 8% of
compensation, which increases to 100% of the first 8% of compensation after
5 years of participation. Participants from IEC's Redmond operations do not
receive any matching contributions during the first year of employment.
(8) The Company matching contribution for KDI is 100% of the participant's
contribution up to 3% of compensation, plus 75% of the participant's
contribution on the next 4% to 7% of compensation.
(9) On October 1, 2003, L-3 Analytics Corporation and EER Systems were merged
and named Government Services, Inc.
(10) The Company shall make a supplemental contribution for a participant who is
employed by L-3 Communications Integrated Systems on the last day of the
plan year in an amount equal to 0.5% of the participant's compensation. No
matching or supplemental contribution shall be made on behalf of a
participant who is an employee covered by the Service Contract Act, as
amended.
(11) Prior to March 1, 2003, the matching contribution for L-3 Communications
Security and Detection Systems was equal to 50% of the participant's
contribution up to 6% of basic compensation for employees at the Woburn and
Cypress locations, and 80% of the participant's contribution up to 5% of
basic compensation for employees at the Largo location. Beginning March 1,
2003, the matching contribution for all participants is equal to 100% of
the participant's contribution up to 5% of basic compensation.
(12) The Company matching contribution for participants who are employees of SPD
Electrical Systems, SPD Switchgear, Henschel, Electronic Design, Inc., or
who are salaried employees of PacOrd is 50% of the participant's
contribution up to 6% of compensation. The Company matching contribution
for participants who are hourly employees of PacOrd may range from 15% to
30% of the participant's contribution, as determined by the Company, up to
6% of compensation.
11
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
(13) Participants who are represented by UAW Local 1612 and who do not
participate in the SPD Technologies Retirement Pension Plan may participate
in an additional employer contribution ranging from 1% to 2% of
compensation depending on employee eligibility and years of participation
in this employer contribution arrangement.
(14) The Company matching contribution for participants who are hourly employees
of L-3 Communications Systems- East with less than 36 months of employment
is 50% of the participants contribution up to 6% of compensation.
(15) The Company matching contribution for L-3 Communications Systems - West is
100% of the participant's contribution up to 4% of compensation for
participants that are salaried employees and 75% of the participant's
contribution up to 4% of compensation for participants that are union
employees. Additionally, the Company shall make a supplemental contribution
of 2% of compensation for participants that are union employees, except for
participants who are members of the East Coast Lodge 815, International
Association of Machinists & Aerospace Workers.
(16) The maximum Company matching contribution for Microdyne Outsourcing is $500
per year.
(17) The Company matching contribution for participants who are salaried
employees of Ocean Systems is 50% of the participant's contribution up to
8% of salary, which increases to 100% of the participant's contribution up
to 8% of salary after 5 years of participation. Salaried employees of Ocean
Systems do not receive any matching contributions during the first year of
employment. The Company matching contribution for participants who are
hourly employees of Ocean Systems is 50% of the participant's contribution
up to 4% of salary.
(18) The Company matching contribution for Power Paragon is 50% of the first 1%
of compensation, plus 20% of the next 2% to 6% of compensation.
(19) Participants who have reached twenty-one years of age are eligible for
Company matching contributions on the first day of the calendar quarter
following two years of service.
(20) The Company contribution for Southern California Microwave is a
discretionary profit sharing contribution of 7.5% of a participant's
compensation.
(21) The Company matching contribution for participants who are salaried
employees of Space & Navigation Systems is 50% of the participant's
contribution up to 8% of salary, increasing to 100% of the participant's
contribution up to 8% of salary after 5 years of participation. The Company
matching contribution for participants who are hourly employees of Space &
Navigation Systems is 50% of the participant's contribution up to 5% of
salary.
Vesting of Company contributions in effect during 2003 varied by division and/or
subsidiary and is listed below.
APCOM, Atlantic Science & Technology, Aviation Recorders, Avionics Systems,
Aydin Electro-Fab, Celerity, Display Systems, Electrodynamics, IEC, including
IEC's Redmond operations, KDI, L-3 Communications SPD Technologies (excluding
the additional Company contribution for employees covered by UAW Local 1612
which vests after five years of service), L-3 Communication Systems-West
(salaried employees), L-3 Corporate, L-3 Global Network Solutions, Microdyne
Outsourcing, Narda Microwave-East, Narda Microwave-West, Ocean Systems (salaried
employees), Power Paragon, Prime Wave, Satellite Networks, Space & Navigation
Systems (salaried employees), Storm Control Systems, Telemetry East and
Telemetry West:
Years of Service Vested Percentage
---------------- -----------------
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
12
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
Ocean Systems (hourly employees) and Space & Navigation Systems (hourly
employees):
Years of Service Vested Percentage
---------------- -----------------
Less than 5 0%
5 or more 100%
EER Systems, Electron Devices, EMP, L-3 Analytics Corporation, L-3
Communications Security and Detection Systems, L-3 Hygienetics Environmental
Services, L-3 Military Aviation Services, MPRI, Ruggedized Command and Control
Solutions and SYColeman/Coleman Aerospace:
Years of Service Vested Percentage
---------------- -----------------
Less than 1 0%
1 25%
2 50%
3 or more 100%
Company matching contributions for BT Fuze Products, Essco, L-3 Communications
Integrated Systems, L-3 Communications Link Simulation and Training, L-3
Communications Systems - East, union employees of L-3 Communications Systems -
West, Randtron, SeaBeam and Southern California Microwave are 100% vested
immediately. Company contributions for the other divisions and/or subsidiaries
also become vested after the earlier of (i) attainment of age 65, (ii) total and
permanent disability or (iii) death.
4. MASTER TRUST
The fair value of the investments of the Master Trust held by the Trustee and
the Plan's portion of the fair value at December 31, 2003 and 2002 are presented
in the table below. The Plan's percentage interest in the Master Trust was 99.5%
at December 31, 2003 and 99.7% at December 31, 2002.
Master Trust Plan's Portion
------------------- -------------------
Fund 2003 2002 2003 2002
------------------------------------- -------- -------- -------- --------
(in thousands)
L-3 Stock Fund $163,886 $111,997 $161,873 $110,933
Fidelity Freedom 2000 Fund 7,340 5,051 7,306 5,031
Fidelity Freedom 2010 Fund 57,360 46,689 57,296 46,652
Fidelity Freedom 2020 Fund 26,681 15,253 26,457 15,157
Fidelity Freedom 2030 Fund 11,882 7,098 11,741 7,018
Fidelity Freedom 2040 Fund 1,608 97 1,608 97
Fidelity Ginnie Mae Fund 45,371 44,804 45,187 44,740
Fidelity Growth & Income Portfolio 96,541 76,540 96,302 76,428
Fidelity Magellan Fund 146,006 108,998 145,618 108,817
Fidelity Managed Income Portfolio II 204,132 175,271 203,567 174,868
Fidelity OTC Portfolio 12,876 6,497 12,824 6,479
INVESCO Dynamics Fund 39,261 22,612 39,134 22,545
INVESCO Small Company Growth Fund 7,921 3,366 7,888 3,356
Janus Overseas Fund 37,591 25,663 37,437 25,594
Loral Space Stock Fund -- 66 -- 66
Spartan U.S. Equity Index Fund 45,038 28,249 44,859 28,158
T. Rowe Price Small-Cap Stock Fund 33,525 18,811 33,386 18,762
Participant Loans (4.3% to 12.1%) 23,431 21,947 23,276 21,897
-------- -------- -------- --------
$960,450 $719,009 $955,759 $716,598
======== ======== ======== ========
13
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
The net change in the fair value of the Master Trust and the Plan's portion of
the net change in fair value for the year ended December 31, 2003 is presented
in the table below.
Master Trust Plan's Portion
------------ --------------
(in thousands)
Net appreciation in fair value of investment:
Registered investment companies $ 94,909 $ 94,616
L-3 Stock Fund 21,361 21,091
-------- --------
116,270 115,707
Interest and dividend income 16,168 16,122
-------- --------
Net increase in fair value $132,438 $131,829
======== ========
5. BENEFIT PAYMENTS
Upon termination, participants may receive the vested portion of their account
balance as soon as practicable after termination. Terminated participants who
have an account balance in excess of $5,000 may elect to leave their account
balance in the Plan and withdraw it at any time up to age 65.
Assets in a participant's account may be withdrawn before termination of
employment or before reaching age 59 1/2 only for financial hardship. Financial
hardship is determined pursuant to provisions of the Plan and the IRC.
Generally, a penalty will be imposed on withdrawals made before the participant
reaches age 59 1/2. In the event of retirement or termination of employment
prior to age 59 1/2, funds may be rolled over to another qualified plan or
individual retirement account without being subject to income tax or a penalty.
6. LOANS
The Plan provides for loans to active participants. Participants may not have
more than one loan outstanding at any time. The maximum loan allowed to each
participant is the lesser of (1) $50,000 less the highest outstanding loan
balance over the prior 12 months or (2) 50% of the vested value of the
participant's account in the Plan. The minimum loan amount is $1,000. The
interest rate is based on the prime interest rate, as defined, plus one percent.
Repayment periods generally range from one to five years, and six to thirty
years for loans used in connection with the purchase of a principal residence.
Loan repayments are made through payroll deductions, with principal and interest
credited to the participants' fund accounts. Repayment of the entire balance is
permitted at any time. Participant loans are secured by the participant's vested
account balance.
7. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a letter
dated August 5, 2002, that the Plan and related trust are designed in accordance
with applicable sections of the IRC, and thus is exempt from federal income
taxes. The Plan has been amended since receiving the determination letter. The
Plan Administrator and the Plan's counsel believe that the Plan is designed and
is currently being operated in compliance with the applicable regulations of the
IRC.
8. RELATED-PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by FMTC and
therefore these transactions qualify as party-in-interest. Fees paid by the
Company for record keeping services were $38,271 for the year ended December 31,
2003.
14
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS- CONTINUED
9. TERMINATION PRIORITIES
Although the Company has not expressed intent to do so, the Company can
discontinue its contributions and/or terminate any or all of the division and/or
subsidiary plans at any time, subject to the provisions of ERISA. In the event
of a discontinuance and/or termination of a division and/or subsidiary plan,
participants in that plan will become 100 percent vested in Company
contributions and the net assets of that plan will be allocated among the
participants and their beneficiaries in accordance with the provisions of ERISA.
15
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
SCHEDULE G, PART III
SCHEDULE OF NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
Identity Relationship Description Date Cost Current Value Net gain
-------- ------------ ----------- ---- ---- ------------- --------
L-3 Communications Corporation Employer Indirect Loan 3/21/03 $ 23,102 $ 23,959 $ 857
L-3 Communications Corporation Employer Indirect Loan 5/30/03 27,617 29,646 2,029
L-3 Communications Corporation Employer Indirect Loan 12/15/03 1,746,465 1,748,786 2,321
16
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees of the L-3 Communications Master Savings Plan have duly caused this
annual report to be signed on their behalf by the undersigned thereunto duly
authorized.
L-3 Communications Master Savings Plan
Registrant
Date: June 28, 2004
/s/ Michael T. Strianese
-----------------------------------------
Name: Michael T. Strianese
Title: Senior Vice President, Finance
of L-3 Communications Holdings, Inc.
(Principal Accounting Officer)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (File Nos. 333-59281, 333-64389, 333-78317, 333-64300 and 333-103752)
and on Form S-3 (File Nos. 333-75558, 333-84826 and 333-99693) of L-3
Communications Holdings, Inc. of our report dated June 28, 2004 on our audit of
the financial statements of the L-3 Communications Master Savings Plan, included
in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
New York, NY
June 28, 2004