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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, 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 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 Auditors 2
Financial Statements:
Statements of Net Assets Available for Benefits
at December 31, 2002 and 2001 3-4
Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2002 5
Notes to Financial Statements 6-16
Supplemental Schedule:
Schedule G, Part III* - Schedule of Nonexempt Transactions for the
year ended December 31, 2002 17
* 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.
REPORT OF INDEPENDENT AUDITORS
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 as of December 31, 2002 and 2001,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2002. 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 year ended December 31, 2002 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 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 27, 2003
2
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
3
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001
(IN THOUSANDS)
Non-
Participant Participant
Directed Directed Total
----------- ----------- --------
Assets:
Investment in Master Trust $500,714 $ 44,732 $545,446
Contributions receivable:
Participants 954 -- 954
Company 678 345 1,023
-------- -------- --------
Net assets available for benefits $502,346 $ 45,077 $547,423
======== ======== ========
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, 2002
(IN THOUSANDS)
Non-
Participant Participant
Directed Directed Total
----------- ----------- --------
Contributions:
Participant $ 66,894 $ -- $ 66,894
Company 2,386 25,505 27,891
Rollover 56,853 -- 56,853
Investment income:
Depreciation in the fair value of
investments of Master Trust (76,448) (9,246) (85,694)
Interest and dividends 13,166 139 13,305
Interest (participant loans) 1,267 3 1,270
Transfers from non-participant directed
funds to participant directed funds 28,617 (28,617) --
Transfers from other plans 142,447 233 142,680
Benefit payments (47,790) (3,737) (51,527)
Administrative expenses (314) (257) (571)
--------- --------- ---------
Net increase (decrease) 187,078 (15,977) 171,101
Net assets available for benefits
Beginning of period 502,346 45,077 547,423
--------- --------- ---------
Net assets available for benefits
End of period $ 689,424 $ 29,100 $ 718,524
========= ========= =========
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 41 locations of the Company 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 to $11,000 for participants under 50
years of age and $12,000 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 15.5% and 11.3% of net assets available for
benefits at December 31, 2002 and 2001, 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 moderate asset
allocation. Each Fidelity Freedom Fund has a target retirement date.
Fidelity Freedom 2000 Fund - This fund invests in approximately 22% in
Fidelity stock mutual funds, 43% in Fidelity bond mutual funds and 35% 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
net assets available for benefits at December 31, 2002 and 2001.
Fidelity Freedom 2010 Fund - This fund invests in 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 6.5% and 8.1% of net
assets available for benefits at December 31, 2002 and 2001, respectively.
Fidelity Freedom 2020 Fund - This fund invests in 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 2.1% and 1.6% of net assets available for benefits at December
31, 2002 and 2001, respectively.
Fidelity Freedom 2030 Fund - This fund invests in approximately 83% in
Fidelity stock mutual funds and 17% in Fidelity bond mutual funds and is
targeted to investors who expect to retire around the year 2030. This fund
represented less than one percent of net assets available for benefits at
December 31, 2002 and 2001.
Fidelity Freedom 2040 Fund - This fund invests in 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 net assets available for benefits at
December 31, 2002. This fund was added as an investment option effective
January 1, 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 6.2% and 3.9% of net assets available for benefits at December 31,
2002 and 2001, 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 10.7% and 13.0% of net assets available for
benefits at December 31, 2002 and 2001, 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% and 23.2% of net assets available for benefits at December 31,
2002 and 2001, respectively.
Fidelity Managed Income Portfolio II - Funds are invested in investment
contracts offered by major insurance companies and in fixed income securities.
This fund represented 24.4% and 20.7% of net assets available for benefits at
December 31, 2002 and 2001, respectively.
Fidelity OTC Portfolio - This fund invests at least 80% of its assets in
securities traded on NASDAQ or another over-the-counter (OTC) market, which has
more small and medium-sized companies than other markets. This fund invests more
than 25% of its assets in the technology sector. This fund represented less than
one percent of net assets available for benefits at December 31, 2002 and 2001.
7
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
INVESCO Dynamics Fund - Funds are invested in domestic common stocks of rapidly
growing mid-sized 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 3.1% and 3.8% of net assets available for benefits at
December 31, 2002 and 2001, 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 net assets available for benefits at
December 31, 2002 and 2001.
Janus Overseas Fund - Funds are invested in common stocks of foreign companies.
This fund represented 3.6% and 3.8% of net assets available for benefits at
December 31, 2002 and 2001, respectively.
Loral Space Stock Fund - This is a carry-over fund from the transfer of assets
from a plan of the Company's predecessor, Loral Corporation. Contributions and
reinvestment of dividends into this stock fund is not permitted, as this fund
was discontinued effective June 2001. Dividends received on this fund are
invested in the Fidelity Managed Income Portfolio II. This stock fund
represented less than one percent of net assets available for benefits at
December 31, 2002 and 2001.
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 3.9% and 3.7% of net assets available for benefits
at December 31, 2002 and 2001, 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 2.6% and 1.8% of net assets available
for benefits at December 31, 2002 and 2001, 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 L-3 Communications Systems-East Savings Plan, the Aviation
Communications & Surveillance Systems 401(k) Plan, the Coleman Research
Corporation Money Purchase Plan and the SPD Technologies Defined Contribution
Retirement Plan, collectively referred to as the Participating Plans. During the
year ended December 31, 2002, the L-3 Communications Systems-East Savings Plan
and the Coleman Research Corporation Money Purchase Plan were 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 described
in Note 1 maintained by FMTC. Contributions, benefit payments and certain
administrative expenses are specifically identified to the Plan.
8
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Valuation of Investments
The investment in the Master Trust is stated at fair value.
The L-3 Stock Fund and the Loral Space Stock Fund are unitized funds whose
underlying assets consist primarily of L-3 Holdings or Loral Corporation common
stock. Shares of L-3 Holdings and Loral Corporation common stock are valued at
the last reported quoted market price of a share on the last business 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.
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 depreciation in the fair value of the Plan's investments, 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 net unrealized
depreciation on those investments. The net depreciation 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 $914,000 and $630,000 at December 31, 2002 and
2001, respectively.
Benefit Payments
Benefit payments are recorded when paid.
Plan Expenses
The Company pays all administrative expenses of the Plan including trust, 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.
9
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 stock
funds. 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.
10
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)
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 (3)
Electron Devices 50% up to 6% (4)
EMP (5)
ESSCO 50% up to 6%
IEC (6)
L-3 Analytics Corporation 50% up to 6% (7)
L-3 Communications Integrated Systems 100% up to 4% (8)
L-3 Communications Link Simulation and Training 100% up to 4%
L-3 Communications Security and Detection Systems (9)
L-3 Communications SPD Technologies (10)
L-3 Communications Systems- East 50% up to 8% (11)
L-3 Communications Systems- West (12)
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%
Microdyne Outsourcing 25% up to 18% (13)
MPRI 100% up to 3%
Narda Microwave- East 40% up to 5%
Narda Microwave- West 50% up to 6%
Ocean Systems (14)
Power Paragon (15)
Prime Wave 100% up to 4%
Randtron 100% up to 6%
Ruggedized Command and Control Solutions 50% up to 6% (4)
Satellite Networks 50% up to 10%
Scandia None
SeaBeam 100% up to 1%
SYColeman/Coleman Aerospace 100% up to 7% (16)
Southern California Microwave (17)
Space & Navigation Systems (18)
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.
11
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 may include a
discretionary match of up to 75% of 6% of the participant's compensation
contributed.
(3) The Company matching contribution for participants who are salaried
employees of Electrodynamics is 100% up to 5% of compensation. Effective
November 19, 2002, Company matching contributions began for participants
who are members of the International Brotherhood of Electrical Workers,
Local 134. The Company matching contribution for those participants will
be 100% up to 2% of salary.
(4) 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, 4% of compensation for participants between 45 and
54 years of age, and 7% of compensation for participants 55 years of age
or above.
(5) 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.
(6) 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.
(7) Participants who are part-time employees of L-3 Analytics Corporation
will receive matching contributions after they complete one year of
service. In addition to matching contributions, the Company may make a
discretionary profit sharing contribution to participants who are
employees of L-3 Analytics Corporation, which is determined each year.
(8) 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 participants
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.
(9) 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 Cypruss 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 will be
equal to 100% of the participant's contribution up to 5% of basic
compensation.
(10) 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) 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.
(12) 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.
(13) The maximum Company matching contribution for Microdyne Outsourcing is
$500 per year.
12
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(14) 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.
(15) Through December 31, 2003, 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. For the year ended December 31, 2002, the Company
matching contribution was capped at $600.
(16) Company matching contributions for employees of SY Coleman and Coleman
Aerospace will commence on January 1, 2003. Participants may not receive
Company matching contributions until after two years of service. For the
year ended December 31, 2002, Company matching contributions for
participants who were employees of Coleman Aerospace Corporation were
discretionary.
(17) The Company contribution for Southern California Microwave is through a
discretionary profit sharing contribution of 7.5% of a participant's
compensation.
(18) 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 vary by division and/or subsidiary and are
listed below.
Aviation Recorders:
Years of Service Vested Percentage
---------------- -----------------
Less than 3 0%
3 33%
4 67%
5 or more 100%
APCOM, Atlantic Science & Technology, Aydin Electro-Fab, Celerity, Display
Systems, EER Systems (for employees hired prior to July 1, 2002),
Electrodynamics, IEC, including IEC's Redmond operations, L-3 Communications
SPD Technologies, 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%
Ocean Systems (hourly employees) and Space & Navigation Systems (hourly
employees):
Years of Service Vested Percentage
---------------- -----------------
Less than 5 0%
5 or more 100%
13
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
EER Systems (for employees hired or or after July 1, 2002), Electron Devices,
EMP, L-3 Analytics Corporation, L-3 Communications Security and Detection
Systems, L-3 Hygienetics Environmental 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 net assets of the Master Trust held by the Trustee and the
Plan's portion of the fair value at December 31, 2002 and 2001 are presented in
the table below. The Plan's percentage interest in the Master Trust was 99.7% at
December 31, 2002 and 89.9% at December 31, 2001.
Master Trust Plan's Portion
------------------------------ -------------------------------
Fund 2002 2001 2002 2001
------------------------------------------------ -------------- ------------ -------------- -------------
(in thousands)
L-3 Stock Fund $ 111,997 $ 71,717 $ 110,933 $ 61,630
Fidelity Blue Chip Fund - 2,359 - -
Fidelity Contrafund - 1,933 - -
Fidelity Diversified International Fund - 708 - -
Fidelity Equity Income Fund - 1,100 - -
Fidelity Freedom 2000 Fund 5,051 3,129 5,031 2,769
Fidelity Freedom 2010 Fund 46,689 46,133 46,652 44,355
Fidelity Freedom 2020 Fund 15,253 9,765 15,157 8,579
Fidelity Freedom 2030 Fund 7,098 5,545 7,018 4,804
Fidelity Freedom 2040 Fund 97 18 97 -
Fidelity Freedom Income Fund - 60 - -
Fidelity Ginnie Mae Fund 44,804 23,069 44,740 21,255
Fidelity Growth & Income Portfolio 76,540 76,831 76,428 70,809
Fidelity Low-Priced Stock Fund - 2,101 - -
Fidelity Magellan Fund 108,998 127,522 108,817 126,551
Fidelity Managed Income Portfolio II 175,271 119,351 174,868 112,832
Fidelity OTC Portfolio 6,497 6,286 6,479 4,288
Fidelity Puritan Fund - 552 - -
Fidelity Retirement Money Market Portfolio - 3,390 - -
INVESCO Dynamics Fund 22,612 24,237 22,545 20,731
INVESCO Small Company Growth Fund 3,366 1,885 3,356 1,794
Janus Overseas Fund 25,663 24,361 25,594 20,469
Loral Space Stock Fund 66 478 66 478
Pimco Total Return Fund - 491 - -
Chicago Trust Safety of Principal Fund - 1,578 - 1,578
Spartan U.S. Equity Index Fund 28,249 27,827 28,158 19,910
T. Rowe Price Small-Cap Stock Fund 18,811 9,875 18,762 9,652
Participant Loans ( 4.8% to 12.1%) 21,947 14,407 21,897 12,962
-------------- ------------ -------------- -------------
$ 719,009 $606,708 $ 716,598 $ 545,446
============== ============ ============== =============
14
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, 2002 is presented
in the table below.
Master Trust Plan's Portion
------------ --------------
(in thousands)
Net depreciation in fair value of investments $(95,552) $(85,694)
Interest and dividend income 14,106 13,305
-------- --------
Net decrease in fair value $(81,446) $(72,389)
======== ========
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 $39,463 for the year ended December 31,
2002.
15
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.
16
L-3 COMMUNICATIONS MASTER SAVINGS PLAN
SCHEDULE G, PART III
SCHEDULE OF NON-EXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Identity Relationship Description Date Cost Current Value Net gain
-------- ------------ ----------- ---- ---- ------------- --------
L-3 Communications Corporation Employer Indirect loan 1/23/02 $9,089 $9,136 $ 47
L-3 Communications Corporation Employer Indirect loan 2/22/02 25,476 25,500 24
L-3 Communications Corporation Employer Indirect loan 3/21/02 16,088 16,111 23
L-3 Communications Corporation Employer Indirect loan 4/19/02 103,293 107,723 4,430
L-3 Communications Corporation Employer Indirect loan 5/21/02 26,285 26,341 56
L-3 Communications Corporation Employer Indirect loan 6/21/02 18,708 18,752 44
L-3 Communications Corporation Employer Indirect loan 7/22/02 9,452 9,475 23
L-3 Communications Corporation Employer Indirect loan 7/22/02 9,496 9,521 25
L-3 Communications Corporation Employer Indirect loan 10/22/02 20,171 20,209 38
L-3 Communications Corporation Employer Indirect loan 10/22/02 11,586 11,681 95
L-3 Communications Corporation Employer Indirect loan 12/20/02 27,122 27,174 52
L-3 Communications Corporation Employer Indirect loan 1/22/03 26,704 26,755 51
17
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 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 Statements on
Form S-8 (File No.'s 333-59281, 333-64389, 333-78317, 333-64300 and 333-103752)
and on Form S-3 (File No.'s 333-58328, 333-75558, 333-84826 and 333-99693) of
L-3 Communications Holdings, Inc. of our report dated June 27, 2003 on our audit
of the financial statements of the L-3 Communications Master Savings Plan as of
December 31, 2002 and for the year then ended, which report is included in this
Annual Report on Form 11-K.
/s/ PricewaterhouseCoopers LLP
New York, NY
June 27, 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