================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------
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, 2002
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 ILEX SYSTEMS SAVINGS
AND SECURITY PLAN AND TRUST
(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)
================================================================================
L-3 ILEX SYSTEMS
----------------
SAVINGS AND SECURITY PLAN
-------------------------
AND TRUST
---------
INDEPENDENT AUDITORS' REPORT
----------------------------
AND
FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 2002 AND 2001
--------------------------
CONTENTS
--------
Page
---------
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 8
SUPPLEMENTAL SCHEDULES
Schedule H, Part IV, Question 4i* - Schedule of Assets Held
for Investment Purposes 9 - 10
* 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, 2002.
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Advisory Committee
L-3 Ilex Systems Savings and Security Plan and Trust
We have audited the accompanying statements of net assets available for benefits
of L-3 Ilex Systems Savings and Security Plan and Trust (the Plan) as of
December 31, 2002 and 2001, and the related statements of changes in net assets
available for benefits for the years then ended. 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 in accordance with auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules are presented
for the purpose of additional analysis and are not a required part of the basic
financial statements but are supplemental information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
\s\ Mayer Hoffman McCann P.C.
San Jose, California
June 4, 2003
-1-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
-----------------------------------------------
December 31,
------------------------------
2002 2001
-------------- --------------
INVESTMENTS, AT FAIR VALUE $ 22,944,062 $ 18,512,704
RECEIVABLE - Employer contribution 516,884 464,965
PARTICIPANT LOANS 686,722 390,147
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $ 24,147,668 $ 19,367,816
============== ==============
The accompanying notes are an integral part of these financial statements.
-2-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
----------------------------------------------------------
Years Ended December 31,
---------------------------------------
2002 2001
------------------ -----------------
ADDITIONS:
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
CONTRIBUTIONS
Participant $ 2,375,002 $ 2,058,145
Employer 517,418 424,456
Rollover 4,590,992 13,253
------------------ -----------------
7,483,412 2,495,854
------------------ -----------------
INVESTMENT INCOME (LOSS)
Net depreciation in fair value
of investments (2,756,608) (2,695,365)
Interest and dividends 474,943 538,640
Participant loan interest 30,824 25,597
------------------ -----------------
(2,250,841) (2,131,128)
------------------ -----------------
Total additions 5,232,571 364,726
------------------ -----------------
DEDUCTIONS:
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 684,310 878,608
Administrative expenses 31,775 29,105
Other 51,436 15,197
------------------ -----------------
Total deductions 767,521 922,910
------------------ -----------------
NET INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR BENEFITS 4,465,050 (558,184)
TRANSFER OF ASSETS TO PLAN 314,802 -
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of the year 19,367,816 19,926,000
------------------ -----------------
NET ASSETS AVAILABLE FOR BENEFITS,
end of the year $ 24,147,668 $ 19,367,816
================== =================
The accompanying notes are an integral part of these financial statements.
-3-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 1 - PLAN DESCRIPTION
-------------------------
The following description of the L-3 Ilex Systems Savings and
Security Plan and Trust (the Plan) provides only general information. More
detailed information concerning the Plan may be found by consulting the Plan
document, which is available from the plan administrator.
GENERAL
-------
The Plan is a defined contribution 401(k) profit sharing plan
with a salary deferral feature, covering all eligible employees of L-3
Communications Ilex Systems, Inc. (the Company and Plan Sponsor). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
CONTRIBUTIONS
-------------
Participants may elect salary deferral contributions up to 15% of
their annual eligible compensation, not to exceed limitations established
annually by the Internal Revenue Service pursuant to IRC Section 402(g). Salary
deferral contributions and earnings thereon are not subject to taxation until
withdrawn from the Plan.
The Plan provides for discretionary matching contributions. The
amount of the matching contribution is specified annually by the Company's Board
of Directors and shall be applied uniformly to all participants.
PARTICIPANT ACCOUNTS
--------------------
Participant contributions are invested in various investment
funds based upon instructions by the participant.
VESTING
-------
Participants are immediately vested in their voluntary
contributions plus actual earnings thereon. Company discretionary matching
contributions are vested in a graduated schedule as follows: 0 - 3 years, no
vesting; 3 or more years, 100% vested.
PAYMENT OF BENEFITS
-------------------
Upon death, retirement or termination of employment, participants
are entitled to receive their vested account balance. If the balance is equal to
or less than $5,000, the balance will be distributed in a lump-sum cash payment.
If the account balance is over $5,000, the participant may elect to roll over
the balance to another qualified plan, receive the balance in a lump-sum cash
payment or receive annuity benefits as prescribed by the Plan.
-4-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 1 - PLAN DESCRIPTION (CONTINUED)
------------------------------------
PAYMENT OF BENEFITS (Continued)
------------------------------
The participant's share of Company contributions that have not
been vested will be forfeited. Forfeitures of Company matching contributions may
be used to reduce administrative expenses and reduce matching contributions for
the Plan year in which the forfeitures occur.
LOANS
-----
Loans are available to all participants. The minimum loan is
$1,000 and the maximum loan available is the lesser of $50,000 or 50% of the
participant's vested account balance based on the value of the participant's
account as of the most recent valuation date. Loans are secured by the balance
in the participant's account and bear interest at rates ranging from 5.75% to
10.75%, which approximates the market rate at the inception of the loans.
Principal and interest are paid ratably through monthly payroll deductions.
Repayment periods cannot exceed five years unless the loan is used for the
purchase of a principal residence. In this instance, the repayment period may be
up to 15 years.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
BASIS OF ACCOUNTING
-------------------
The financial statements of the Plan are prepared using the
accrual method of accounting.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, and
changes therein, and disclosure, of contingent assets and liabilities. Actual
results could differ from those estimates.
INVESTMENTS
-----------
Investments are recorded at fair value based upon quoted market
prices. The average cost method is used in determining the gain or loss arising
upon the sale of investments.
Participant loans are valued at cost which approximates fair
value.
Transactions are recorded on a trade date basis. Acquisition
costs are included in the cost of investments and sales are recorded net of
selling expenses.
-5-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
--------------------------------------------------------------
PLAN ASSETS HELD BY T. ROWE PRICE TRUST COMPANY, INVESTMENT
MANAGER
-----------------------------------------------------------
The Plan's investment manager, T. Rowe Price Trust Company,
maintains plan assets. The accounts are credited with actual earnings on the
underlying investments and charged for plan withdrawals and management fees
charged by T. Rowe Price Trust Company. The Plan's investments and changes
therein have been reported by the investment manager as having been determined
through the use of current market values.
PAYMENT OF BENEFITS
-------------------
Benefits are recorded when paid.
TAX STATUS
----------
The Plan received a favorable determination letter in October
1994, from the Internal Revenue Service stating that the Plan is qualified under
the provisions of Internal Revenue Code (IRC) Section 401(a) and the related
trust is exempt from federal income taxes under IRC Section 501(a). Accordingly,
no provision for income taxes is reflected in the accompanying financial
statements. The Plan Sponsor believes that the Plan is currently designed and
being operated in compliance with the applicable requirements of the Internal
Revenue Code. Continued qualification of the Plan depends on its future
operations.
PLAN ADMINISTRATIVE EXPENSES
----------------------------
Management fees are allocated on a pro rata basis to each
participant. The recordkeeper is paid by the Plan and all other significant
expenses are paid by the Plan Sponsor.
-6-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 3 - INVESTMENTS HELD BY T. ROWE PRICE TRUST COMPANY
--------------------------------------------------------
The fair value of individual investments that represent 5% or
more of the Plan's net assets are as follows:
2002 2001
------------------- -----------------
Stable Value Fund $ 2,977,808 $ 1,446,272
New Income Fund 1,770,857 -
Science & Technology Fund 2,705,699 3,988,261
Equity Income Fund 3,502,988 3,383,350
Capital Appreciation Fund 2,599,153 1,966,992
Small-Cap Value Fund 2,154,907 1,392,082
L-3 Stock Fund 1,996,377 1,475,914
The Plan's investments, including gains and losses on investments
bought and sold as well as held during the year, appreciated (depreciated) in
value as follows:
2002 2001
------------------- -----------------
Mutual funds $ (2,707,005) $ (2,892,558)
Common stock (49,603) 197,193
------------------- -----------------
$ (2,756,608) $ (2,695,365)
=================== =================
-7-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------
NOTE 4 - FORM 5500
------------------
The amounts reported on Form 5500 are in agreement with the
amounts included in the accompanying financial statements and supplemental
schedules, except as follows for December 31, 2002:
Employer Benefits and
Contributions Other Administrative
Income Payments Expenses
-------------------- ----------------- -------------------
Balance per financials $ 517,418 $ 735,746 $ 31,775
Difference (534) 67 (600)
-------------------- ----------------- -------------------
Balance per Form 5500 $ 516,884 $ 735,813 $ 31,175
==================== ================= ===================
The amounts reported on Form 5500 are in agreement with the
amounts included in the accompanying financial statements and supplemental
schedules, except as follows for December 31, 2001:
Other Income
-------------------
Balance per financials $ -
Difference 7,310
-------------------
Balance per Form 5500 $ 7,310
===================
NOTE 5 - TRANSFER OF ASSETS INTO THE PLAN
-----------------------------------------
L-3 Communications Ilex System, Inc. acquired a company in July
of 2002. In connection with this acquisition, participant loans, valued at
$314,802, were transferred to the Plan during 2002.
-8-
SUPPLEMENTAL SCHEDULES
----------------------
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
-----------------------------------------------
DECEMBER 31, 2002
-----------------
Issuer Description of Investment Units Fair Value
--------------------------- --------------------------------- ------------------ ---------------------
T. Rowe Price Trust Company Stable Value Fund 2,977,808.100 $ 2,977,808
T. Rowe Price Trust Company International Stock Fund 101,377.032 900,228
T. Rowe Price Trust Company New Income Fund 199,196.482 1,770,857
T. Rowe Price Trust Company Prime Reserve Fund 949,728.370 949,728
T. Rowe Price Trust Company Short Term Bond Fund 238,383.860 1,144,243
T. Rowe Price Trust Company Science & Technology Fund 217,674.931 2,705,699
T. Rowe Price Trust Company Equity Income Fund 177,008.007 3,502,988
T. Rowe Price Trust Company Capital Appreciation Fund 182,910.128 2,599,153
T. Rowe Price Trust Company New Asia Fund 130,991.481 732,242
T. Rowe Price Trust Company Small-Cap Value Fund 98,218.166 2,154,907
T. Rowe Price Trust Company Value Fund 56,978.572 886,587
T. Rowe Price Trust Company Dividend Growth Fund 37,186.461 623,245
T. Rowe Price Trust Company L-3 Stock Fund 44,452.832 1,996,377
----------------------
22,944,062
Participant Loans Interest at 5.75% to 10.75% 686,722
----------------------
$ 23,630,784
======================
-9-
L-3 ILEX SYSTEMS SAVINGS AND SECURITY PLAN AND TRUST
----------------------------------------------------
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
-----------------------------------------------
DECEMBER 31, 2001
-----------------
Issuer Description of Investment Units Fair Value
--------------------------- --------------------------------- ------------------ ---------------------
T. Rowe Price Trust Company Stable Value Fund 1,446,271.810 $ 1,446,272
T. Rowe Price Trust Company International Stock Fund 86,879.027 954,801
T. Rowe Price Trust Company New Income Fund 93,472.733 811,343
T. Rowe Price Trust Company Prime Reserve Fund 677,613.340 677,613
T. Rowe Price Trust Company Short Term Bond Fund 89,917.812 428,908
T. Rowe Price Trust Company Science & Technology Fund 190,643.453 3,988,261
T. Rowe Price Trust Company Equity Income Fund 143,059.200 3,383,350
T. Rowe Price Trust Company Capital Appreciation Fund 134,357.404 1,966,992
T. Rowe Price Trust Company New Asia Fund 132,810.377 824,752
T. Rowe Price Trust Company Small-Cap Value Fund 61,433.466 1,392,082
T. Rowe Price Trust Company Value Fund 36,630.554 691,585
T. Rowe Price Trust Company Dividend Growth Fund 22,647.006 470,831
T. Rowe Price Trust Company L-3 Stock Fund 16,399.047 1,475,914
----------------------
18,512,704
Participant Loans Interest at 7.9% to 11% 390,147
----------------------
$ 18,902,851
======================
-10-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees of the L-3 ILEX Systems Savings and Security Plan and Trust have duly
caused this annual report to be signed on their behalf by the undersigned
thereunto duly authorized.
L-3 ILEX Systems Savings and Security Plan and Trust
Registrant
Date: June 27, 2003
/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 AUDITORS
-------------------------------
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (No.'s 333-64389 and 333-103752) of L-3 Communications Holdings,
Inc. of our report dated June 4, 2003 on our audit of the financial statements
of the L-3 Ilex Systems Savings and Security Plan and Trust as of December 31,
2002 and 2001 and for the years then ended, which is included in this annual
report on Form 11-K.
\s\ Mayer Hoffman McCann P.C.
June 25, 2003
EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------------- ------------------------------------------------------
** 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
** 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
**Filed herewith