L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

the STCs. Between 1990 and 1994, Chrysler Technologies Airborne Systems, Inc. (CTAS), a predecessor to L-3 Integrated Systems, performed as a subcontractor to GATX and modified an additional five aircraft using the STCs. Two of the aircraft modified by CTAS were owned by American International Airways, the predecessor to Kalitta Air. In 1996, the FAA determined that the engineering data provided by Hayes/Pemco supporting the STCs was inadequate and issued an Airworthiness Directive that effectively grounded the ten modified aircraft. The Kalitta Air aircraft have not been in revenue service since that date. The matter was tried in January 2001 against GATX and CTAS with the jury finding fault on the part of GATX, but rendering a unanimous defense verdict in favor of CTAS. Certain co-defendants had settled prior to trial. The U.S. Ninth Circuit Court of Appeals has reversed and remanded the trial court's summary judgment rulings in favor of CTAS regarding a negligence claim by Kalitta Air, which asserts that CTAS as an expert in aircraft modification should have known that the STCs were deficient, and excluding certain evidence at trial. In preparation for retrial, Kalitta Air has submitted to us an expert report on damages that calculated Kalitta Air's damages at either $232,000 or $602,000, depending on different factual assumptions. The Company has retained experts whose reports indicate that, even in the event of an adverse jury finding on the liability issues at trial, Kalitta Air has already recovered amounts from the other parties to the initial suit that more than fully compensated Kalitta Air for any damages it incurred. CTAS' insurance carrier has accepted defense of the matter with a reservation of its right to dispute its obligations under the applicable insurance policy in the event of an adverse jury finding. The trial relating to this matter is scheduled for January 2005. The Company believes that it has meritorious defenses and intends to continue to vigorously defend this matter. However, litigation is inherently uncertain and it is possible that an adverse decision could be rendered, which could have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

On November 18, 2002, the Company initiated a proceeding against OSI Systems, Inc. (OSI) in the United States District Court sitting in the Southern District of New York seeking, among other things, a declaratory judgment that the Company had fulfilled all of its obligations under a letter of intent with OSI (the "OSI Letter of Intent"). Under the OSI Letter of Intent, the Company was to negotiate definitive agreements with OSI for the sale of certain businesses the Company acquired from PerkinElmer, Inc. on June 14, 2002. On February 7, 2003, OSI filed an answer and counterclaims alleging, among other things, that the Company defrauded OSI, breached obligations of fiduciary duty to OSI and breached its obligations under the OSI Letter of Intent. OSI seeks damages in excess of $100,000 not including punitive damages. Under the OSI Letter of Intent, the Company proposed selling to OSI the conventional detection business and the ARGUS business that the Company acquired from PerkinElmer, Inc. Negotiations with OSI lasted for almost one year and ultimately broke down over issues regarding, among other things, intellectual property, product-line definitions, allocation of employees and due diligence. Discovery on the matter is essentially complete. The Company believes that the claims asserted by OSI in its suit are without merit and intends to vigorously defend against the OSI claims.

L-3 Communications Vertex Aerospace LLC (formerly known as Vertex Aerospace LLC and acquired by the Company on December 1, 2003) (L-3 Vertex) is named as a defendant in two wrongful death lawsuits in the United States District Court, Western District of North Carolina arising from the crash of Air Midwest Flight 5481 at Charlotte-Douglas International Airport in Charlotte, North Carolina on January 8, 2003. The crash resulted in the deaths of nineteen passengers and two crewmembers. Each of the lawsuits alleges contributing factors, including that the accident was caused by the improper maintenance of the aircraft by L-3 Vertex, and seeks to recover compensatory and punitive damages. No discovery has taken place in the lawsuits at this time. Nineteen claims resulting from this incident have previously settled. The National Transportation Safety Board (NTSB) investigated the cause of the crash and has concluded that the crash was caused by the incorrect rigging of the elevator control system

22

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS  — (continued)

(Dollars in thousands, except per share data)

compounded by the airplane's center of gravity, which was substantially aft of the certified limit, with several other contributing factors. L-3 Vertex believes that it has meritorious defenses to the pending lawsuits, and intends to defend the cases vigorously. The actions have been tendered to L-3 Vertex's insurance carrier, who has accepted the defense of each action served upon L-3 Vertex to date. L-3 Vertex was also indemnified by Air Midwest for losses L-3 Vertex incurred arising out of its provision of maintenance services to Air Midwest. Based on the availability of insurance and the indemnification from Air Midwest, the Company does not believe it will have a material liability in this matter.

With respect to those investigative actions, items of litigation, claims or assessments of which it is aware, management of the Company believes that, after taking into account certain provisions that have been made with respect to these matters, the ultimate resolution of any such investigative actions, items of litigation, claims or assessments will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. However, as discussed above, the Company is a party to a number of material litigations, for which an adverse determination could have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

23

---

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS —
    
(Dollars in thousands, except per share data)

13.    Pension and Other Employee Benefits

The following tables summarize the components of net periodic benefit cost for the Company's pension and postretirement benefit plans.

				Three Months Ended September 30,
				2004				2003				2004				2003
				Pension Plans								Postretirement Benefit Plans
Components of net periodic benefit cost:
Service cost				$	14,009			$	11,930			$	759			$	551
Interest cost					15,143				12,970				1,718				1,657
Amortization of prior service cost					361				269				(985	)			(177	)
Expected return on plan assets					(14,143	)			(9,974	)			(316	)			(117	)
Recognized actuarial (gain) loss					2,390				4,014				(186	)			(469	)
Settlement loss (gain)					2,288				—				—				(66	)
Net periodic benefit cost				$	20,048			$	19,209			$	990			$	1,379

				Nine Months Ended September 30,
				2004				2003				2004				2003
				Pension Plans								Postretirement Benefit Plans
Components of net periodic benefit cost:
Service cost				$	43,241			$	34,087			$	3,255			$	2,975
Interest cost					43,406				36,924				6,055				5,951
Amortization of prior service cost					872				466				(2,148	)			(1,027	)
Expected return on plan assets					(40,316	)			(28,924	)			(854	)			(117	)
Recognized actuarial (gain) loss					9,137				10,181				192				(627	)
Settlement loss (gain)					2,288				—				—				(66	)
Net periodic benefit cost				$	58,628			$	52,734			$	6,500			$	7,089

The Company expects to contribute cash of approximately $59,000 to its pension plans in 2004, of which approximately $48,000 was contributed during the nine months ended September 30, 2004.

14.    Supplemental Cash Flow Information

				Nine Months Ended September 30,
				2004				2003
Interest paid				$	100,048			$	81,382
Income tax payments					34,598				21,961
Income tax refunds					3,232				4,985
Noncash transactions:
Conversion of 5¼% convertible senior subordinated notes to L-3 Holdings common stock					298,183				—

24

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L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

15.    Segment Information

The Company has four reportable segments: (1) Secure Communications & ISR, (2) Training, Simulation & Government Services, (3) Aircraft Modernization, O&M and Products and (4) Specialized Products, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales and operating income.

The tables below present sales, operating income, depreciation and amortization and total assets by reportable segment.

				Three Months Ended September 30,								Nine Months Ended September 30,
				2004				2003				2004				2003
Sales:
Secure Communications & ISR				$	443,387			$	375,803			$	1,243,170			$	1,056,487
Training, Simulation & Government Services					335,120				255,236	(2)			927,651				773,332	(2)
Aircraft Modernization, O&M and Products(1)					573,737				256,596				1,648,164				664,380
Specialized Products					451,876				395,079	(2)			1,226,642				1,144,295	(2)
Elimination of intersegment sales					(19,988	)			(18,103	)			(59,866	)			(57,955	)
Consolidated total				$	1,784,132			$	1,264,611			$	4,985,761			$	3,580,539
Operating Income:
Secure Communications & ISR				$	53,631			$	45,102			$	156,595			$	119,952
Training, Simulation & Government Services					33,702				25,146	(2)			100,938				85,554	(2)
Aircraft Modernization, O&M and Products(1)					79,846				38,239				183,830				92,714
Specialized Products					32,181				43,885	(2)			87,717				91,735	(2)
Consolidated total				$	199,360			$	152,372			$	529,080			$	389,955
Depreciation and Amortization:
Secure Communications & ISR				$	8,644			$	7,568			$	24,589			$	21,301
Training, Simulation & Government Services					1,831				1,879				5,465				5,857
Aircraft Modernization, O&M and Products(1)					8,368				4,309				24,880				13,322
Specialized Products					11,861				9,845				34,559				30,731
Consolidated total				$	30,704			$	23,601			$	89,493			$	71,211

				September 30, 2004				December 31, 2003
Total Assets:
Secure Communications & ISR				$	1,280,128			$	1,201,187
Training, Simulation & Government Services					897,011				781,186	(2)
Aircraft Modernization, O&M and Products					2,132,377				2,043,677
Specialized Products					2,066,596				1,961,754	(2)
Corporate					627,105				505,086
Consolidated total				$	7,003,217			$	6,492,890

(1)	During the three months ended September 30, 2004, the Company changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units that are included in this segment have not changed.

(2)

In 2004, the Company consolidated the IMC business into L-3 Government Services, Inc. As a result of this realignment, $4,314 of sales and $477 of operating loss was reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment for the three months ended September 30, 2003. For the nine months ended September 30, 2003, $23,431 of sales and $2,188 of operating income was reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment. At December 31, 2003, $40,127 of total assets were reclassified from the Specialized Products segment to the Training, Simulation & Government Services Segment.

25

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L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

16.    Recently Issued Accounting Standards

On September 30, 2004, the EITF reached a consensus on issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings per Shares. See Note 10 above for a description of EITF No. 04-8 and a discussion of the impact on the Company's results of operations.

In December of 2003, the FASB revised its Interpretation No. 46, Consolidation of Variable InterestEntities (FIN 46R). FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46R requires that a business enterprise review all of its legal structures used to conduct its business activities, including those to hold assets, and its majority-owned subsidiaries, to determine whether those legal structures are variable interest entities (VIEs) required to be consolidated for financial reporting purposes by the business enterprise. Generally, a VIE is a legal structure for which the holders of a majority voting equity (ownership) interest may not have a controlling financial interest in the legal structure. Variable interests in a VIE are the contractual, ownership, creditor or other pecuniary interests in the VIE that change with changes in the fair value of the net assets exclusive of variable interests. FIN 46R provides guidance for identifying legal structures which are VIEs and the variable interests in a VIE, and also provides guidance for determining whether a business enterprise shall consolidate a VIE. FIN 46R requires that a business enterprise that holds a significant variable interest in a VIE make new disclosures in its financial statements. The Company adopted the provisions of FIN 46R during the interim period ended March 31, 2004. The Company does not hold any significant interests in VIEs that require consolidation or additional disclosures.

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). This Act introduces a federal subsidy to employers who sponsor retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May of 2004, the FASB issued FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2). FSP 106-2 provides guidance on the accounting for the effects of the Act and requires certain disclosures regarding the effect of the federal subsidy provided by the Act. The guidance in FSP 106-2 applies only if (i) the prescription drug benefits under the Company's defined benefit postretirement health care plan are considered actuarially equivalent to Medicare Part D and therefore qualify for the subsidy under the Act, and (ii) the expected subsidy will reduce the Company's share of the cost of the underlying postretirement prescription drug coverage. FSP 106-2 is effective for the first interim period beginning after June 15, 2004. The Company has determined that the benefits provided by certain of its postretirement benefit plans are actuarially equivalent to Medicare Part D, but has concluded that the effects of the Act do not constitute a significant event. Therefore, the amount of the accumulated postretirement benefit obligations or net periodic benefit cost recorded in the unaudited condensed consolidated financial statements and disclosed in the accompanying notes do not include the effects of the Act. The effects of the Act will be incorporated in the measurement of the Company's postretirement benefits liability and periodic benefit cost for the year ending December 31, 2005.

17.    Unaudited Financial Information of L-3 Communications and its Subsidiaries

L-3 Communications is a wholly-owned subsidiary of L-3 Holdings. The debt of L-3 Communications, including the Senior Subordinated Notes and borrowings under amounts drawn against the senior credit facilities, are guaranteed, on a joint and several, full and unconditional basis, by certain of its wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries"). The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the "Non-Guarantor Subsidiaries") do not guarantee the

26

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L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION
    
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)
    
(Dollars in thousands, except per share data)

debt of L-3 Communications. None of the debt of L-3 Communications has been issued by its subsidiaries. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L-3 Communications.

The following unaudited condensed combining financial information present the results of operations, financial position and cash flows of (i) L-3 Holdings, excluding L-3 Communications, (ii) L-3 Communications, excluding its consolidated subsidiaries (the "Parent"), (iii) the Guarantor Subsidiaries, (iv) the Non-Guarantor Subsidiaries and (v) the eliminations to arrive at the information for L-3 Communications on a consolidated basis.

27

---

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Balance Sheets:
At September 30, 2004:
Current assets:
Cash and cash equivalents				$	—			$	357,848			$	(36,570	)		$	46,060			$	—			$	367,338
Contracts in process					—				579,044				1,032,420				246,276				—				1,857,740
Other current assets					—				119,140				46,640				5,109				—				170,889
Total current assets					—				1,056,032				1,042,490				297,445				—				2,395,967
Goodwill					—				834,471				2,518,241				410,193				—				3,762,905
Other assets					—				301,088				429,798				113,459				—				844,345
Investment in and amounts due from consolidated subsidiaries					3,622,746				3,926,418				797,454				27,109				(8,373,727	)			—
Total assets				$	3,622,746			$	6,118,009			$	4,787,983			$	848,206			$	(8,373,727	)		$	7,003,217
Current liabilities				$	—			$	471,332			$	451,735			$	161,406			$	—			$	1,084,473
Other long-term liabilities					—				284,628				167,683				25,278				—				477,589
Long-term debt					418,198				2,157,501				—				—				(418,198	)			2,157,501
Minority interests					—				—				—				79,106				—				79,106
Shareholders' equity					3,204,548				3,204,548				4,168,565				582,416				(7,955,529	)			3,204,548
Total liabilities and shareholders' equity				$	3,622,746			$	6,118,009			$	4,787,983			$	848,206			$	(8,373,727	)		$	7,003,217
At December 31, 2003:
Current assets:
Cash and cash equivalents				$	—			$	155,375			$	(41,291	)		$	20,792			$	—			$	134,876
Contracts in process					—				528,056				817,547				269,745				—				1,615,348
Other current assets					—				159,194				21,928				6,356				—				187,478
Total current assets					—				842,625				798,184				296,893				—				1,937,702
Goodwill					—				805,388				2,425,591				421,457				—				3,652,436
Other assets					—				343,914				446,403				112,435				—				902,752
Investment in and amounts due from consolidated subsidiaries					3,290,873				3,708,989				596,696				21,052				(7,617,610	)			—
Total assets				$	3,290,873			$	5,700,916			$	4,266,874			$	851,837			$	(7,617,610	)		$	6,492,890
Current liabilities				$	—			$	396,868			$	370,468			$	156,876			$	—			$	924,212
Other long-term liabilities					—				272,252				167,275				21,144				—				460,671
Long-term debt					716,377				2,457,300				—				—				(716,377	)			2,457,300
Minority interests					—				—				—				76,211				—				76,211
Shareholders' equity					2,574,496				2,574,496				3,729,131				597,606				(6,901,233	)			2,574,496
Total liabilities and shareholders' equity				$	3,290,873			$	5,700,916			$	4,266,874			$	851,837			$	(7,617,610	)		$	6,492,890

28

---

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Statements of Operations:
For the nine months ended September 30, 2004:
Sales				$	—			$	1,471,076			$	2,934,212			$	600,525			$	(20,052	)		$	4,985,761
Costs and expenses					—				1,290,523				2,660,095				526,115				(20,052	)			4,456,681
Operating income					—				180,553				274,117				74,410				—				529,080
Other expense (income), net					—				(11,738	)			783				3,545				9,138				1,728
Interest expense					13,630				106,030				410				9,477				(22,768	)			106,779
Minority interests in net income of consolidated subsidiaries					—				—				—				7,078				—				7,078
Provision (benefit) for income taxes					(4,975	)			31,486				99,617				19,823				4,975				150,926
Equity in net income of consolidated subsidiaries					271,224				207,794				—				—				(479,018	)			—
Net income				$	262,569			$	262,569			$	173,307			$	34,487			$	(470,363	)		$	262,569
For the nine months ended September 30, 2003:
Sales				$	—			$	1,371,589			$	1,949,595			$	273,778			$	(14,423	)		$	3,580,539
Costs and expenses					—				1,190,205				1,772,920				241,882				(14,423	)			3,190,584
Operating income					—				181,384				176,675				31,896				—				389,955
Other expense (income), net					—				(9,042	)			148				1,232				5,574				(2,088	)
Interest expense					24,763				97,369				396				6,041				(30,337	)			98,232
Minority interest in net income of consolidated subsidiaries					—				—				—				2,550				—				2,550
Loss on retirement of debt					—				11,225				—				—				—				11,225
Provision (benefit) for income taxes					(8,915	)			29,460				63,407				7,946				8,915				100,813
Equity in net income of consolidated subsidiaries					195,071				126,851				—				—				(321,922	)			—
Net income				$	179,223			$	179,223			$	112,724			$	14,127			$	(306,074	)		$	179,223
For the three months ended September 30, 2004:
Sales				$	—			$	532,908			$	1,041,919			$	215,674			$	(6,369	)		$	1,784,132
Costs and expenses					—				469,148				940,637				181,356				(6,369	)			1,584,772
Operating income					—				63,760				101,282				34,318				—				199,360
Other expense (income), net					—				(3,599	)			(25	)			(1,194	)			3,131				(1,687	)
Interest expense					4,590				34,629				153				3,203				(7,721	)			34,854
Minority interests in net income of consolidated subsidiaries					—				—				—				4,791				—				4,791
Provision (benefit) for income taxes					(1,675	)			11,947				36,921				10,044				1,675				58,912
Equity in net income of consolidated subsidiaries					105,405				81,707				—				—				(187,112	)			—
Net income				$	102,490			$	102,490			$	64,233			$	17,474			$	(184,197	)		$	102,490
For the three months ended September 30, 2003:
Sales				$	—			$	463,341			$	726,484			$	77,799			$	(3,013	)		$	1,264,611
Costs and expenses					—				392,084				657,630				65,538				(3,013	)			1,112,239
Operating income					—				71,257				68,854				12,261				—				152,372
Other expense (income), net					—				(2,966	)			22				247				1,930				(767	)
Interest expense					8,137				32,047				173				2,070				(10,067	)			32,360
Minority interest in net income of consolidated subsidiaries					—				—				—				1,862				—				1,862
Provision (benefit) for income taxes					(2,930	)			15,184				24,717				2,909				2,930				42,810
Equity in net income of consolidated subsidiaries					81,314				49,115				—				—				(130,429	)			—
Net income				$	76,107			$	76,107			$	43,942			$	5,173			$	(125,222	)		$	76,107

29

---

L-3 COMMUNICATIONS HOLDINGS, INC.
AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (continued)

(Dollars in thousands, except per share data)

				L-3 Holdings				L-3 Communications (Parent)				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated L-3 Communications
Condensed Combining Statements of Cash Flows:
For the nine months ended September 30, 2004:
Operating activities:
Net cash from operating activities				$	—			$	113,509			$	239,724			$	54,732			$	—			$	407,965
Investing activities:
Acquisition of businesses, net of cash acquired					—				(57,483	)			(76,860	)			(223	)			—				(134,566	)
Other investing activities					(108,700	)			(93,546	)			(26,787	)			(6,109	)			185,783				(49,359	)
Net cash used in investing activities					(108,700	)			(151,029	)			(103,647	)			(6,332	)			185,783				(183,925	)
Financing activities:
Net cash from (used in) financing activities					108,700				239,993				(131,356	)			(23,132	)			(185,783	)			8,422
Net increase in cash					—				202,473				4,721				25,268				—				232,462
Cash and cash equivalents, beginning of period					—				155,375				(41,291	)			20,792				—				134,876
Cash and cash equivalents, end of period				$	—			$	357,848			$	(36,570	)		$	46,060			$	—			$	367,338
For the nine months ended September 30, 2003:
Operating activities:
Net cash from (used in) operating activities				$	—			$	186,011			$	157,035			$	(15,967	)		$	—			$	327,079
Investing activities:
Acquisition of businesses, net of cash acquired					—				(44,121	)			(215,103	)			(2,161	)			—				(261,385	)
Other investing activities					(67,810	)			(244,349	)			(21,441	)			(6,854	)			285,074				(55,380	)
Net cash used in investing activities					(67,810	)			(288,470	)			(236,544	)			(9,015	)			285,074				(316,765	)
Financing activities:
Proceeds from sale of senior subordinated notes					—				398,160				—				—				—				398,160
Redemption of senior subordinated notes					—				(187,650	)			—				—				—				(187,650	)
Other financing activities					67,810				153,716				62,080				23,054				(285,074	)			21,586
Net cash from financing activities					67,810				364,226				62,080				23,054				(285,074	)			232,096
Net increase (decrease) in cash					—				261,767				(17,429	)			(1,928	)			—				242,410
Cash and cash equivalents, beginning of period					—				126,421				(7,248	)			15,683				—				134,856
Cash and cash equivalents, end of period				$	—			$	388,188			$	(24,677	)		$	13,755			$	—			$	377,266

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

We are a leading supplier of a broad range of products used in a substantial number of aerospace and defense platforms. We also are a major supplier of subsystems on many platforms, including those for secure communication networks and communication products, mobile satellite communications, information security systems, shipboard communications, naval power systems, fuzes and safety and arming devices for missiles and munitions, microwave assemblies for radars and missiles, telemetry and instrumentation, and airport security systems. We also are a prime system contractor for aircraft modernization and operations & maintenance (O&M), Intelligence, Surveillance and Reconnaissance (ISR) collection platforms, simulation and training, and government systems support services. The substantial majority of our sales are generated using written revenue arrangements, or contracts. Most of these contracts require us to design, develop, manufacture, modify, upgrade, test and integrate complex aerospace and electronic equipment, and to provide related engineering and technical services according to the buyer's specifications. Our primary customer is the U.S. Department of Defense (DoD). Our other customers include the U.S. Department of Homeland Security (DHS), certain U.S. Government intelligence agencies, major aerospace and defense contractors, foreign government ministries of defense, commercial customers and certain other U.S. federal, state and local government agencies.

We have four reportable segments: (1) Secure Communications & ISR; (2) Training, Simulation & Government Services; (3) Aircraft Modernization, O&M and Products (formerly known as Aviation Products & Aircraft Modernization); and (4) Specialized Products.

Our Secure Communications & ISR segment provides products and services for the global ISR market as well as secure, high data rate communications systems and equipment primarily for military and other U.S. Government and foreign government reconnaissance and surveillance applications. We believe our systems and products are critical elements for a substantial number of major communication, command and control, intelligence gathering and space systems. Our systems and products are used to connect a variety of airborne, space, ground and sea-based communication systems and are used in the transmission, processing, recording, monitoring and dissemination functions of these communication systems. Our Training, Simulation & Government Services segment produces training systems and related support services, and provides a wide range of engineering development services and integration support, and a full range of teaching, training, logistics and communication software support services. Our Aircraft Modernization, O&M and Products segment provides our TCAS products, cockpit voice, flight data and cruise ship hardened voyage recorders, advanced cockpit avionics products, ruggedized custom cockpit displays and specialized aircraft modernization, upgrade and maintenance services. Our Specialized Products segment provides naval warfare products, telemetry, instrumentation, space and navigation products, premium fuzing products, security and surveillance systems, training devices and motion simulators, ruggedized commercial off-the-shelf technology and microwave components.

This Management's Discussion and Analysis of Results of Operations and Financial Condition (MD&A) should be read in conjunction with our MD&A for the fiscal year ended December 31, 2003, included in L-3's Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

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Acquisitions

The table below summarizes all of the acquisitions that we have completed during the year ended December 31, 2003 and the nine-month period ended September 30, 2004.

Acquired Business				Date Acquired				Purchase Price(1)
								(in millions)
Avionics Systems business of Goodrich Corporation(2)				March 28, 2003				$	188.7
Aeromet, Inc.				May 30, 2003				$	18.4
Flight Systems Engineering.				June 30, 2003				$	0.5
Klein Associates Inc.				September 30, 2003				$	29.4
Military Aviation Services business of Bombardier, Inc. (MAS)				October 31, 2003				$	89.6	(3)
Vertex Aerospace LLC (Vertex)				December 1, 2003				$	664.8	(4)
Certain defense and aerospace assets of IPICOM, Inc.				December 10, 2003				$	27.6
General Electric Driver Development (GEDD) business				May 11, 2004				$	3.5
Beamhit LLC				May 13, 2004				$	40.0	(5)(6)
Bay Metals and Fabrication, Inc.				June 8, 2004				$	3.4	(7)
Brashear, LP				June 14, 2004				$	36.3
AVISYS, Inc.				June 16, 2004				$	6.6	(5)(8)

(1)	The purchase price represents the contractual consideration for the acquired business, excluding adjustments for net cash acquired and acquisition costs.

(2)	Following the acquisition, we changed the name of Avionics Systems to L-3 Communications Avionics Systems, Inc.

(3)	Includes a $2.2 million final purchase price adjustment paid in October of 2004, which was based on the actual closing date net assets of MAS.

(4)	Includes a $3.3 million purchase price adjustment paid on the closing date and a $11.5 million final purchase price adjustment paid during the second quarter of 2004.

(5)	The purchase price is subject to adjustment based on actual closing date net assets or net working capital of the acquired business.

(6)	Excludes additional purchase price, which is contingent upon the financial performance of Beamhit for the years ending December 31, 2004, 2005, 2006 and 2007.

(7)	Excludes additional purchase price, not to exceed $1.7 million, which is contingent upon the financial performance of Bay Metals for the fiscal years ending June 8, 2005, 2006 and 2007.

(8)	Excludes additional purchase price, not to exceed $23.0 million, which is contingent upon (i) an award and funding of a certain contract from the U.S. Department of Homeland Security on or before June 30, 2005, and (ii) the financial performance of AVISYS for the years ending December 31, 2004, 2005 and 2006.

All of our business acquisitions are included in our consolidated results of operations from their respective effective dates of acquisitions. We regularly evaluate potential business acquisitions and joint venture transactions. On October 8, 2004, we acquired the stock of D.P. Associates Inc. We have also entered into agreements to acquire certain businesses for an approximate aggregate purchase price of $511 million, payable in cash. These businesses include Cincinnati Electronics, Northrop Grumman's Canadian Navigation Systems and Space Sensors System business and the Marine Controls Division of CAE. We have not entered into any other agreements with respect to any material transactions at this time. Certain of these business acquisitions are subject to regulatory approval. We expect to complete the business acquisitions by December 31, 2004, and will finance them using cash on hand and a portion of the proceeds from the expected notes offering discussed below under "Statement of Cash Flows—Financing Activities."

Results of Operations

The following information should be read in conjunction with our unaudited condensed consolidated financial statements. Our results of operations for the periods presented are impacted significantly by our acquisitions. See Note 3 to the consolidated financial statements for the year ended December 31, 2003 included in our Annual Report on Form 10-K for a discussion of our acquisitions.

Presentation of Sales and Costs and Expenses.    On the statements of operations, L-3 presents its sales and costs and expenses in two categories "Contracts, primarily U.S. Government" and "Commercial, primarily products." For a detailed description of these two categories, refer to Note 2 to the Unaudited Condensed Consolidated Financial Statements.

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Three Months Ended September 30, 2004 Compared with Three Months Ended September 30, 2003

The tables below provide two presentations of sales, operating income and operating margin data for L-3 for the three months ended September 30, 2004 (2004 Third Quarter) and September 30, 2003 (2003 Third Quarter). The first table presents the selected data segregated between L-3's U.S. Government contractor businesses and L-3's commercial businesses. See Note 2 to the unaudited condensed consolidated financial statements. The second table presents the selected data by reportable segment. See Note 15 to the unaudited condensed consolidated financial statements.

				Three Months Ended September 30,
				2004				2003
				(dollars in millions)
Statement of Operations Presentation
Sales:
Contracts, primarily U.S. Government				$	1,586.1			$	1,108.6	(1)
Commercial, primarily products					198.1				156.0	(1)
Consolidated				$	1,784.2			$	1,264.6
Operating income:
Contracts, primarily U.S. Government				$	184.1			$	141.8	(1)
Commercial, primarily products					15.3				10.6	(1)
Consolidated				$	199.4			$	152.4
Operating margin(2):
Contracts, primarily U.S. Government					11.6	%			12.8	%
Commercial, primarily products					7.7	%			6.8	%
Consolidated					11.2	%			12.0	%
Reportable Segment Presentation
Sales(3):
Secure Communications & ISR				$	442.4			$	375.6
Training, Simulation & Government Services					329.4				249.3	(5)
Aircraft Modernization, O&M and Products(4)					573.6				256.4
Specialized Products					438.8				383.3	(5)
Consolidated				$	1,784.2			$	1,264.6
Operating income:
Secure Communications & ISR				$	53.6			$	45.1
Training, Simulation & Government Services					33.7				25.2	(5)
Aircraft Modernization, O&M and Products(4)					79.9				38.2
Specialized Products					32.2				43.9	(5)
Consolidated				$	199.4			$	152.4
Operating margin(2):
Secure Communications & ISR					12.1	%			12.0	%
Training, Simulation & Government Services					10.2	%			10.1	%
Aircraft Modernization, O&M and Products(4)					13.9	%			14.9	%
Specialized Products					7.3	%			11.4	%
Consolidated					11.2	%			12.0	%

(1)

Effective January 1, 2004, we combined our explosives detection systems (EDS) business into L-3 Security and Detection Systems, and our IMC business into L-3 Government Services, Inc. As a result of these business realignments, reclassifications have been made to the prior period sales and operating income amounts to conform them to the current period presentation. Specifically, $6.9 million of sales and $6.1 million of operating income was reclassified from "Contracts, primarily U.S. Government" to "Commercial, primarily products", and $4.3 million of sales and $0.4 million of operating loss was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government."

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(2)	Operating margin is equal to operating income as a percentage of sales.

(3)	Sales are after intersegment eliminations. See Note 15 to the unaudited condensed consolidated financial statements.

(4)	During the 2004 Third Quarter, we changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units included in this reportable segment were not changed.

(5)	Effective January 1, 2004, we combined our IMC business into L-3 Government Services, Inc. As a result of this realignment, $4.3 million of sales and $0.5 million of operating loss were reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment.

Consolidated sales increased by $519.6 million, or 41.1%, to $1,784.2 million for the 2004 Third Quarter from $1,264.6 million for the 2003 Third Quarter. Organic sales growth for our defense businesses was 17.3%, or $193.4 million, driven by continued strong demand for L-3's secure communications and ISR systems, aircraft modernization, aviation products, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth for our commercial and other non-military businesses was 27.4%, or $39.6 million, primarily due to increased volume for commercial aviation products and for security products and maintenance services. The increase in consolidated sales from acquisitions was $286.6 million, or 22.7%. We define "organic sales growth," as the increase or decrease in sales for the current period compared to the prior period, excluding the increase in sales attributable to acquired businesses to the extent the acquired businesses were not included in L-3's results of operations for the entire current period and prior period. Our increases to sales from acquired businesses include all of L-3's acquired businesses regardless of their size. Our sales for "defense businesses" include our U.S. Government contractor businesses, all of which are presented under "Contracts, primarily U.S. Government" and commercial aviation products sold to military customers, which is presented under "Commercial, primarily products."

Sales from "Contracts, primarily U.S. Government" increased by $477.5 million, or 43.1%, to $1,586.1 million for the 2004 Third Quarter from $1,108.6 million for the 2003 Third Quarter. The increase in sales from acquired businesses was $286.6 million, or 25.9%. The acquired businesses include Klein, MAS, Vertex, and certain defense and aerospace assets of IPICOM, Inc., all of which were acquired in 2003, and AVISYS, Bay Metals, Beamhit, Brashear and the GEDD business, all of which were acquired in the second quarter of 2004. Organic sales growth was $190.9 million, or 17.2%, primarily because of higher sales volume for our secure network communications, ISR systems and communications products, aircraft modernization, operations and maintenance, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth does not include the portion of the U.S. Army Aviation and Missile Command (AMCOM) contract sales for maintenance and logistics support of rotary-wing aircraft at Fort Rucker, Alabama of $29.5 million attributable to Vertex's pre-acquisition ownership interest of 40% in the AMCOM contract, which is included in sales from acquired businesses.

Sales from "Commercial, primarily products" increased by $42.1 million, or 27.0%, to $198.1 million for the 2004 Third Quarter from $156.0 million for the 2003 Third Quarter. The increase was driven by organic sales growth for commercial aviation products and security products. There were no business acquisitions that affected the changes in these results.

Consolidated costs and expenses increased by $472.6 million, or 42.5%, to $1,584.8 million for the 2004 Third Quarter from $1,112.2 million for the 2003 Third Quarter, primarily as a result of the increase in sales.

Costs and expenses for "Contracts, primarily U.S. Government" increased by $435.2 million, or 45.0%, to $1,402.0 million for the 2004 Third Quarter from $966.8 million for the 2003 Third Quarter. The costs and expenses related to the increase in sales from acquired businesses was $260.1 million. The remaining increase is primarily attributed to costs and expenses associated with the organic sales growth of our defense businesses. Costs and expenses for our sales from contracts with the U.S. Government include selling, general and administrative (SG&A), independent research and development (IRAD) and bid and proposal (B&P) costs. These SG&A, IRAD and B&P costs are allowable indirect contract costs that are allocated to our U.S. Government contracts in accordance with U.S. Government regulations. We report SG&A, IRAD and B&P costs allocated to U.S. Government contracts as costs and expenses when the related contract sales are recognized as revenue. SG&A, IRAD and B&P costs included in costs and

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expenses for "Contracts, primarily U.S. Government" were $157.3 million for the 2004 Third Quarter and $128.3 million for the 2003 Third Quarter. See Note 5 to our unaudited condensed consolidated financial statements.

Costs and expenses for "Commercial, primarily products" increased by $37.4 million, or 25.7%, to $182.8 million for the 2004 Third Quarter from $145.4 million for the 2003 Third Quarter. Cost of sales increased by $37.3 million to $127.7 million for the 2004 Third Quarter from $90.4 million for the 2003 Third Quarter. The increase in cost of sales was primarily due to organic sales growth. SG&A expenses decreased by $2.1 million to $37.1 million for the 2004 Third Quarter from $39.2 million for the 2003 Third Quarter, and declined as a percentage of sales to 18.7% from 25.1% due to cost and expense reductions and sales volume increases. Research and development (R&D) expenses increased by $2.2 million to $18.0 million for the 2004 Third Quarter from $15.8 million for the 2003 Third Quarter, primarily due to development expenditures for Smartdeck^TM at our Avionics Systems business.

Consolidated operating income increased by $47.0 million, or 30.8%, to $199.4 million for the 2004 Third Quarter from $152.4 million for the 2003 Third Quarter. The increase was primarily due to higher sales for all of our segments. Consolidated operating income as a percentage of sales (operating margin) decreased to 11.2% for the 2004 Third Quarter, compared to 12.0% for the 2003 Third Quarter. The decrease was principally due to lower margins for the Vertex Aerospace business, which was acquired on December 1, 2003, and changes in product sales mix for certain businesses within our Specialized Products segment. The changes in the operating margins are explained in our segment results discussed below.

Operating income for "Contracts, primarily U.S. Government" increased by $42.3 million, or 29.8%, to $184.1 million for the 2004 Third Quarter from $141.8 million for the 2003 Third Quarter. Operating margin decreased by 1.2 percentage points to 11.6% for the 2004 Third Quarter from 12.8% for the 2003 Third Quarter. Operating margin decreased primarily because of lower operating margins from the Vertex Aerospace acquired business and lower sales for fuzing products. The 2003 Third Quarter operating income also included a $4.5 million gain related to the settlement of a claim.

Operating income for "Commercial, primarily products" increased by $4.7 million, or 44.3%, to $15.3 million for the 2004 Third Quarter from $10.6 million for the 2003 Third Quarter. Operating margin increased by 0.9 percentage points to 7.7% for the 2004 Third Quarter from 6.8% for the 2003 Third Quarter primarily because of cost reductions for microwave components and higher sales volume for commercial aviation products.

Interest expense increased by $2.5 million to $34.9 million for the 2004 Third Quarter from $32.4 million for the 2003 Third Quarter because of higher levels of outstanding debt during the 2004 Third Quarter compared to the levels of outstanding debt during the 2003 Third Quarter due to the sale of $400.0 million of 6 1/8% senior subordinated notes in December of 2003, which was partially offset by the conversions and redemptions of our $300.0 million of 5¼% convertible senior subordinated notes in January of 2004.

For the 2004 Third Quarter, other expense (income), net, includes $1.4 million of interest income.

The income tax provision for the 2004 Third Quarter was based on an estimated effective income tax rate of 36.5%. During October 2004, the U.S. Congress enacted a new tax law that restored the U.S. Federal income tax credit for research and experimentation expenses (R&E Tax Credit), retroactively from July 1, 2004 and continuing to December 31, 2005. As a result of applying the R&E Tax Credit to all of 2004, the estimated effective income tax rate for the full year 2004 is expected to decline from 36.5% to 36.0%. The lower tax rate will be included in our results for the 2004 fourth quarter and for the year ending December 31, 2004.

Basic earnings per share (EPS) increased by $0.17 to $0.96 for the 2004 Third Quarter from $0.79 for the 2003 Third Quarter. Diluted EPS increased by $0.19, or 25.7%, to $0.93 for the 2004 Third Quarter from $0.74 for the 2003 Third Quarter.

Non-Cash Reductions to Diluted EPS From New Accounting Rule.    On September 30, 2004, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on EITF Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per

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Share, which addresses when the diluted effect of contingently convertible debt instruments should be included in diluted EPS. EITF 04-8 requires that contingently convertible debt instruments are to be included in the computation of diluted EPS regardless of whether the market price trigger has been met. EITF 04-8 also requires that prior period diluted EPS amounts presented for comparative purposes be restated. EITF 04-8 is expected to be effective for reporting periods ending after December 15, 2004. We expect to adopt the provisions of EITF 04-8 during the 2004 fourth quarter. The impact of applying EITF 04-8 to our CODES will result in non-cash reductions to our reported diluted EPS for the 2004 Third Quarter of $0.04 from $0.93 to $0.89 and $0.03 from $0.74 to $0.71 for the 2003 Third Quarter. See Liquidity and Capital Resources—Statement of Cash Flows Financing Activities below and Note 8 to the unaudited condensed consolidated financial statements for a discussion of the conversion and redemption of our CODES, which occurred during October 2004.

Secure Communications & ISR

Sales within our Secure Communications & ISR segment increased by $66.8 million, or 17.8%, to $442.4 million for the 2004 Third Quarter from $375.6 million for the 2003 Third Quarter. Organic sales growth was $63.0 million, or 16.8%, reflecting continued strong demand from the DoD and other U.S. Government agencies for our secure network communications, ISR systems and communications products. The increase in sales from acquired businesses was $3.8 million. The acquired businesses include certain defense and aerospace assets of IPICOM, Inc., which was acquired in 2003.

Operating income increased by $8.5 million to $53.6 million for the 2004 Third Quarter from $45.1 million for the 2003 Third Quarter. Operating margin increased slightly by 0.1 percentage points to 12.1% for the 2004 Third Quarter from 12.0% for the 2003 Third Quarter. These increases were primarily due to slightly higher operating margins for communications products resulting from sales growth.

Training, Simulation & Government Services

Sales within our Training, Simulation & Government Services segment increased by $80.1 million, or 32.1%, to $329.4 million for the 2004 Third Quarter from $249.3 million for the 2003 Third Quarter. Organic sales growth was $77.4 million, or 31.0%, driven by increased sales of training and government services. The increase in sales from acquired businesses was $2.7 million. The acquired businesses include Beamhit and the GEDD business, which were both acquired during the second quarter of 2004.

Operating income increased by $8.5 million to $33.7 million for the 2004 Third Quarter from $25.2 million for the 2003 Third Quarter because of higher sales volume for training and operations services. Operating margin increased slightly by 0.1 percentage points to 10.2% for the 2004 Third Quarter from 10.1% for the 2003 Third Quarter.

Aircraft Modernization, O&M and Products

Sales within our Aircraft Modernization, O&M and Products segment increased by $317.2 million, or 123.7%, to $573.6 million for the 2004 Third Quarter from $256.4 million for the 2003 Third Quarter. The increase in sales from acquired businesses was $262.9 million. The acquired businesses include Vertex and MAS, which were acquired during 2003, and AVISYS, which was acquired during the second quarter of 2004. Organic sales growth was $54.3 million, or 21.2%, driven by sales of $44.2 million from the AMCOM contract and an increase in volume for commercial aviation products.

Operating income increased by $41.7 million to $79.9 million for the 2004 Third Quarter from $38.2 million for the 2003 Third Quarter because of higher sales volume partially offset by lower operating margin. Operating margin declined by 1.0 percentage points to 13.9% for the 2004 Third Quarter from 14.9% for the 2003 Third Quarter. Margins from acquired businesses, primarily Vertex, decreased operating margin by 3.2 percentage points. This decrease was partially offset by 0.8 percentage points for the incentives and award fees earned on the AMCOM contract and by 1.4 percentage points, primarily from commercial aviation products. The operating margin increase from commercial aviation products was due to higher sales volume, which was partially offset by certification costs for new product introductions.

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Specialized Products

Sales within our Specialized Products segment increased by $55.5 million, or 14.5%, to $438.8 million for the 2004 Third Quarter from $383.3 million for the 2003 Third Quarter. Organic sales growth was $38.3 million, or 10.0%. The increase was primarily driven by increased sales of training devices, imaging products, naval power equipment and services, security products and maintenance of security systems. These increases were partially offset by lower sales volume for fuzing products because of additional acceptance testing that delayed shipments and product remediation efforts for undersea dipping sonar products, which reduced production and sales volume. The increase in sales from acquired businesses was $17.2 million. The acquired businesses include Klein, which was acquired in September 2003, and Bay Metals and Brashear, which were both acquired during the second quarter of 2004.

Operating income decreased by $11.7 million to $32.2 million for the 2004 Third Quarter from $43.9 million for the 2003 Third Quarter primarily because of lower sales volume and additional acceptance testing for certain fuzing products, changes in product sales mix for security products, including fewer than expected sales of higher margin explosives detection systems (EDS) and production delays for undersea dipping sonar products caused by efforts to improve the reliability of certain products. The 2003 Third Quarter operating income also included a $4.5 million gain related to the settlement of a claim. These decreases to operating income were partially offset by cost reductions and volume increases for imaging products, naval power equipment and services and microwave components. Operating margin decreased by 4.1 percentage points to 7.3% for the 2004 Third Quarter from 11.4% for the 2003 Third Quarter. Operating margin decreased by 1.4 percentage points due to lower margins for security products, 1.8 percentage points due to volume decreases and additional costs for fuzing and undersea dipping sonar products and 0.9 percentage points primarily due to a gain of $4.5 million recorded in the 2003 Third Quarter related to the settlement of a claim.

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

The tables below provide two presentations of sales, operating income and operating margin data for L-3 for the nine months ended September 30, 2004 (2004 Nine Month Period) and September 30, 2003 (2003 Nine Month Period). The first table presents the selected data segregated between L-3's U.S. Government contractor businesses and L-3's commercial businesses. See Note 2 to the unaudited condensed consolidated financial statements. The second table presents the selected data by reportable segment. See Note 15 to the unaudited condensed consolidated financial statements.

				Nine Months Ended September 30,
				2004				2003
				(dollars in millions)
Statement of Operations Presentation
Sales:
Contracts, primarily U.S. Government				$	4,462.0			$	3,132.0	(1)
Commercial, primarily products					523.8				448.5	(1)
Consolidated				$	4,985.8			$	3,580.5
Operating income:
Contracts, primarily U.S. Government				$	484.2			$	368.8	(1)
Commercial, primarily products					44.9				21.2	(1)
Consolidated				$	529.1			$	390.0
Operating margin(2):
Contracts, primarily U.S. Government					10.9	%			11.8	%
Commercial, primarily products					8.6	%			4.7	%
Consolidated					10.6	%			10.9	%

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				Nine Months Ended September 30,
				2004				2003
				(dollars in millions)
Reportable Segment Presentation
Sales(3):
Secure Communications & ISR				$	1,240.3			$	1,055.9
Training, Simulation & Government Services					911.4				750.6	(5)
Aircraft Modernization, O&M and Products(4)					1,647.4				662.5
Specialized Products					1,186.7				1,111.5	(5)
Consolidated				$	4,985.8			$	3,580.5
Operating income:
Secure Communications & ISR				$	156.6			$	120.0
Training, Simulation & Government Services					100.9				85.6	(5)
Aircraft Modernization, O&M and Products(4)					183.9				92.7
Specialized Products					87.7				91.7	(5)
Consolidated				$	529.1			$	390.0
Operating margin(2):
Secure Communications & ISR					12.6	%			11.4	%
Training, Simulation & Government Services					11.1	%			11.4	%
Aircraft Modernization, O&M and Products(4)					11.2	%			14.0	%
Specialized Products					7.4	%			8.3	%
Consolidated					10.6	%			10.9	%

(1)

Effective January 1, 2004, we combined our EDS business into L-3 Security and Detection Systems, and our IMC business into L-3 Government Services, Inc. As a result of these business realignments, reclassifications have been made to the prior period sales and operating income amounts to conform them to the current period presentation. Specifically, $50.1 million of sales and $11.8 million of operating income was reclassified from "Contracts, primarily U.S. Government" to "Commercial, primarily products", and $25.0 million of sales and $0.4 million of operating income was reclassified from "Commercial, primarily products" to "Contracts, primarily U.S. Government."

(2)	Operating margin is equal to operating income as a percentage of sales.

(3)	Sales are after intersegment eliminations. See Note 15 to the unaudited condensed consolidated financial statements.

(4)	During the 2004 Third Quarter, we changed the name of the reportable segment from Aviation Products & Aircraft Modernization to Aircraft Modernization, O&M and Products. The businesses and reporting units included in this reportable segment were not changed.

(5)	Effective January 1, 2004, we combined our IMC business into L-3 Government Services, Inc. As a result of this realignment, $23.4 million of sales and $2.2 million of operating income were reclassified from the Specialized Products segment to the Training, Simulation & Government Services segment.

Consolidated sales increased by $1,405.3 million, or 39.2%, to $4,985.8 million for the 2004 Nine Month Period from $3,580.5 million for the 2003 Nine Month Period. Organic sales growth for our defense businesses was 16.3%, or $513.6 million, driven by continued strong demand for L-3's secure communications and ISR systems, aircraft modernization, aviation products, training and government services, training devices, imaging products and naval power equipment and services. Organic sales growth for our commercial and other non-military businesses was 9.9%, or $42.2 million, principally due to increased volume for commercial aviation products. The increase in consolidated sales from acquired businesses was $849.5 million, or 23.7%.

Sales from "Contracts, primarily U.S. Government" increased by $1,330.0 million, or 42.5%, to $4,462.0 million for the 2004 Nine Month Period from $3,132.0 million for the 2003 Nine Month Period. The increase in sales from acquired businesses was $822.1 million, or 26.2%. The acquired businesses include Aeromet, Klein, MAS, Vertex, and certain defense and aerospace assets of IPICOM, Inc., all of which were acquired in 2003, and AVISYS, Bay Metals, Beamhit, Brashear and the GEDD business, all of which were acquired in the second quarter of 2004. Organic sales growth was $507.9 million, or 16.2%, primarily because of higher sales volume for our secure network communications, ISR systems and communications products, aircraft modernization, operations and maintenance, training and government

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services, training devices, imaging products, military aviation products and naval power equipment and services. Organic sales growth does not include the portion of the AMCOM contract sales of $73.2 million attributable to Vertex's pre-acquisition ownership interest of 40% in the contract, which is included in sales from acquired businesses.

Sales from "Commercial, primarily products" increased by $75.3 million, or 16.8%, to $523.8 million for the 2004 Nine Month Period from $448.5 million for the 2003 Nine Month Period. The increase in sales from the Avionics Systems and Flight Systems Engineering acquired businesses, both acquired in 2003, was $27.4 million. Organic sales increased by 10.7%, or $47.9 million, primarily due to the increased volume for commercial aviation products.

Consolidated costs and expenses increased by $1,266.2 million, or 39.7%, to $4,456.7 million for the 2004 Nine Month Period from $3,190.5 million for the 2003 Nine Month Period, primarily as a result of the increase in sales.

Costs and expenses for "Contracts, primarily U.S. Government" increased by $1,214.6 million, or 44.0%, to $3,977.8 million for the 2004 Nine Month Period from $2,763.2 million for the 2003 Nine Month Period. The costs and expenses related to the increase in sales from acquired businesses was $750.2 million. The remaining increase is primarily attributed to costs and expenses associated with the organic sales growth of our defense businesses. SG&A, IRAD and B&P costs included in costs and expenses for "Contracts, primarily U.S. Government" were $436.7 million for the 2004 Nine Month Period and $365.6 million for the 2003 Nine Month Period. See Note 5 to our unaudited condensed consolidated financial statements.

Costs and expenses for "Commercial, primarily products" increased by $51.6 million, or 12.1%, to $478.9 million for the 2004 Nine Month Period from $427.3 million for the 2003 Nine Month Period. Cost of sales increased by $42.5 million to $320.9 million for the 2004 Nine Month Period from $278.4 million for the 2003 Nine Month Period. The increase in cost of sales was primarily due to increased costs attributable to the Avionics Systems acquired business and higher sales volume for our commercial aviation products, services related to security products and maintenance of security systems. SG&A expenses decreased by $1.1 million to $107.5 million for the 2004 Nine Month Period from $108.6 million for the 2003 Nine Month Period, and declined as a percentage of sales to 20.5% from 24.2% due to cost and expense reductions and sales volume increases. R&D expenses increased by $10.2 million to $50.5 million for the 2004 Nine Month Period from $40.3 million for the 2003 Nine Month Period, primarily due to development expenditures for Smartdeck^TM.

Consolidated operating income increased by $139.1 million, or 35.7%, to $529.1 million for the 2004 Nine Month Period from $390.0 million for the 2003 Nine Month Period. The increase was primarily due to higher sales from all of our segments. Consolidated operating margin decreased to 10.6% from 10.9% for the 2004 Nine Month Period compared to the 2003 Nine Month Period. The changes in the operating margins for our segments are discussed below.

Operating income for "Contracts, primarily U.S. Government" increased by $115.4 million, or 31.3%, to $484.2 million for the 2004 Nine Month Period from $368.8 million for the 2003 Nine Month Period. Operating margin declined by 0.9 percentage points to 10.9% for the 2004 Nine Month Period from 11.8% for the 2003 Nine Month Period. Operating margin decreased primarily because of lower operating margins from the Vertex Aerospace acquired business and lower sales for fuzing products. The 2003 Nine Month Period operating income also included a $4.5 million gain related to the settlement of a claim.

Operating income for "Commercial, primarily products" increased by $23.7 million, or 111.8%, to $44.9 million for the 2004 Nine Month Period from $21.2 million for the 2003 Nine Month Period. Operating margin increased by 3.9 percentage points to 8.6% for the 2004 Nine Month Period from 4.7% for the 2003 Nine Month Period primarily because of cost reductions for microwave components, higher sales volume for commercial aviation products and cost and expense reductions at our PrimeWave Communications business. These increases were partially offset by development expenditures for Smartdeck^TM, certification costs for new commercial aviation products and fewer than expected sales of higher margin EDS systems.

Interest expense increased by $8.6 million to $106.8 million for the 2004 Nine Month Period from $98.2 million for the 2003 Nine Month Period because of higher levels of outstanding debt during the 2004

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Nine Month Period compared to the levels of outstanding debt during the 2003 Nine Month Period. Our outstanding debt increased as a result of the sale of $400.0 million of 6 1/8% senior subordinated notes in December of 2003 and the sale of $400.0 million of 6 1/8% senior subordinated notes in May of 2003. This increase was partially offset by the early retirement of our $180.0 million of 8½% senior subordinated notes in June of 2003 and the conversions and redemptions of our $300.0 million of 5¼% convertible senior subordinated notes in January of 2004.

For the 2004 Nine Month Period, other expense (income), net, includes a $2.6 million loss for our pro rata share of the losses related to our investments accounted for using the equity method, a $1.5 million loss related to an increase in the liability that represents the fair value assigned to the embedded derivatives related to the CODES, and $2.9 million of interest income.

The income tax provision for the 2004 Nine Month Period was based on an estimated effective income tax rate of 36.5%.

Basic EPS increased by $0.61 to $2.48 for the 2004 Nine Month Period from $1.87 for the 2003 Nine Month Period. Diluted EPS increased by $0.64 to $2.41 for the 2004 Nine Month Period from $1.77 for the 2003 Nine Month Period. Net income for the 2003 Nine Month Period includes an after-tax charge of $7.2 million, or $.07 per diluted share, for the early retirement of our $180.0 million of 8½% senior subordinated notes. Excluding this debt retirement charge, diluted EPS would have increased by $0.57 for the 2004 Nine Month Period compared to the 2003 Nine Month Period.

The impact of applying EITF 04-8 to our CODES will result in non-cash reductions to our reported diluted EPS for the 2004 Nine Month Period of $0.09 from $2.41 to $2.32 and $0.05 from $1.77 to $1.72 for the 2003 Nine Month Period. See the discussion above concerning the 2004 Third Quarter results of operations.

Secure Communications & ISR

Sales within our Secure Communications & ISR segment increased by $184.4 million, or 17.5%, to $1,240.3 million for the 2004 Nine Month Period from $1,055.9 million for the 2003 Nine Month Period. Organic sales growth was $157.7 million, or 14.9%, reflecting continued strong demand from the DoD and other U.S. Government agencies for our secure network communications, ISR systems and communications products. The increase in sales from acquired businesses was $26.7 million, or 2.5%. The acquired businesses include Aeromet and certain defense and aerospace assets of IPICOM, Inc., which were acquired in 2003.

Operating income increased by $36.6 million to $156.6 million for the 2004 Nine Month Period from $120.0 million for the 2003 Nine Month Period because of higher sales volume for communications products and ISR systems and lower operating losses for the PrimeWave Communications business due to cost and expense reductions. Operating margin increased by 1.2 percentage points to 12.6% for the 2004 Nine Month Period from 11.4% for the 2003 Nine Month Period, primarily because of organic sales growth for ISR systems and communications products and cost reductions and lower operating losses for the PrimeWave Communications business. These improvements to operating margin were partially offset by a loss related to the design, development and testing activities on a production contract for transportable tactical satellite communications terminals, which reduced operating margin by 0.6 percentage points.

Training, Simulation & Government Services

Sales within our Training, Simulation & Government Services segment increased by $160.8 million, or 21.4%, to $911.4 million for the 2004 Nine Month Period from $750.6 million for the 2003 Nine Month Period. Organic sales growth was $154.1 million, or 20.5%, driven by increased sales of training and government services. The increase in sales from acquired businesses was $6.7 million. The acquired businesses include Beamhit and the GEDD business, which were both acquired during the second quarter of 2004.

Operating income increased by $15.3 million to $100.9 million for the 2004 Nine Month Period from $85.6 million for the 2003 Nine Month Period because of higher sales volume for training and operations

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services. Operating margin decreased by 0.3 percentage points to 11.1% for the 2004 Nine Month Period from 11.4% for the 2003 Nine Month Period. The decrease was primarily due to higher sales from cost-reimbursable, time-and-material and unit-price type contracts, for which the ability to earn higher profit margins is lower than those for fixed-priced type contracts.

Aircraft Modernization, O&M and Products

Sales within our Aircraft Modernization, O&M and Products segment increased by $984.9 million, or 148.7%, to $1,647.4 million for the 2004 Nine Month Period from $662.5 million for the 2003 Nine Month Period. The increase in sales from acquired businesses was $788.9 million. The acquired businesses include Vertex, MAS, Avionics Systems and Flight Systems Engineering, which were acquired during 2003, and AVISYS, which was acquired during the second quarter of 2004. Organic sales growth was $196.0 million, or 29.6%, driven by sales of $109.9 million from the AMCOM contract, $38.6 million for aircraft modernization, operations and maintenance and $47.5 million primarily for commercial and military aviation products.

Operating income increased by $91.2 million to $183.9 million for the 2004 Nine Month Period from $92.7 million for the 2003 Nine Month Period because of higher sales volume partially offset by lower operating margin. Operating margin declined by 2.8 percentage points to 11.2% for the 2004 Nine Month Period from 14.0% for the 2003 Nine Month Period. Margins from acquired businesses, primarily Vertex, decreased operating margin by 2.1 percentage points, margins on the AMCOM contract, a new competitively awarded contract for which performance commenced in December of 2003, decreased operating margin by 0.2 percentage points, and the remaining decrease is primarily due to increased certification costs for new commercial aviation products.

Specialized Products

Sales within our Specialized Products segment increased by $75.2 million, or 6.8%, to $1,186.7 million for the 2004 Nine Month Period from $1,111.5 million for the 2003 Nine Month Period. Organic sales growth was $48.0 million, or 4.3%. The increase was driven by increased sales of $87.7 million primarily for training devices, imaging products, naval power equipment and services, maintenance of security systems and fuzing products. These increases were partially offset by volume declines of $17.1 million for ruggedized computers and displays and lower volume of $22.6 million for undersea warfare products. The increase in sales from acquired businesses was $27.2 million. The acquired businesses include Klein, which was acquired in September 2003, and Bay Metals and Brashear, which were both acquired during the second quarter of 2004.

Operating income decreased by $4.0 million to $87.7 million for the 2004 Nine Month Period from $91.7 million for the 2003 Nine Month Period primarily because of additional acceptance testing for certain fuzing products, changes in product sales mix for security products, including fewer than expected sales of higher margin EDS, and production delays for undersea dipping sonar products caused by efforts to improve the reliability of certain products. These decreases were partially offset by cost reductions for microwave components and higher volume for imaging products and naval power equipment and services. Operating margin decreased by 0.9 percentage points to 7.4% for the 2004 Nine Month Period from 8.3% for the 2003 Nine Month Period. Operating margin decreased by 1.4 percentage points due to additional costs for fuzing and undersea dipping sonar products, 0.9 percentage points due to lower margins for security products and 0.4 percentage points due to a gain of $4.5 million recorded in the 2003 Third quarter related to the settlement of a claim. These decreases were partially offset by an increase of 1.8 percentage points primarily for cost reductions for microwave components and higher volume for imaging products and naval power equipment and services.

LIQUIDITY AND CAPITAL RESOURCES

Balance Sheet

Contracts in process increased by $242.4 million to $1,857.7 million at September 30, 2004 from $1,615.3 million at December 31, 2003. See Note 5 to the unaudited condensed consolidated financial statements. The increase included $26.3 million related to acquired business and $216.1 million principally from:

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•

increases of $133.9 million in unbilled contract receivables due to sales exceeding deliveries and billings for secure network communications, ISR systems, communications products, training and government services, and incentive fees earned but not yet billed in the AMCOM contract. These increases were partially offset by a decrease in unbilled contract receivables for aircraft modernization due to milestone billings, and lower EDS sales;

•	increases of $43.8 million in billed receivables because of higher sales volume of secure network communications systems, training devices and aircraft modernization. These increases were partially offset by a reduction in billed receivables for EDS due to lower sales volumes and improved collections for communication software support services;

•	increases of $17.3 million in inventoried contract costs, primarily for ruggedized computers and displays, aircraft modernization and secure network communications. These increases were partially offset by a decrease for communications products due to deliveries during the period; and

•	increases of $21.1 million in inventories at lower of cost or market due to increases for security products, primarily EDS, partially offset by decreases for satellite communications due to higher sales volume.

L-3's days receivable outstanding (DRO) was 72.3 at September 30, 2004, compared to 70.3 at December 31, 2003. We calculate our DRO by dividing (i) our aggregate end of period billed receivables and net unbilled contract receivables, by (ii) our sales for the last twelve-month period adjusted on a pro forma basis to include sales from acquisitions that we completed as of the end of the period (which amounted to $6,661.4 million for the twelve-month period ended September 30, 2004), multiplied by 365.

L-3's days inventory held (DIH) was 34.2 at September 30, 2004, compared with 36.3 at December 31, 2003. We calculate DIH by dividing (i) our aggregate end of period net inventoried contract costs and inventories at lower of cost or market, by (ii) our cost of sales for the last twelve-month period adjusted on a pro forma basis to include cost of sales from acquisitions that we completed as of the end of the period (which amounted to $5,739.4 million for the twelve month period ended September 30, 2004), multiplied by 365.

Included in contracts in process at September 30, 2004 are net billed receivables of $4.3 million and net inventories of $9.6 million related to our PrimeWave Communications business. At December 31, 2003, we had $6.7 million of net billed receivables and $11.4 million of net inventories related to our PrimeWave Communications business.

The increase in other current assets during the 2004 Nine Month Period was principally due to deposits paid to vendors for the procurement of subsystems used in our airport security products.

The decrease in property, plant and equipment (PP&E) during the 2004 Nine Month Period was principally related to depreciation expense and disposals, partially offset by capital expenditures. The percentage of depreciation expense to average gross PP&E increased to 9.5% for the 2004 Nine Month Period from 9.0% for the 2003 Nine Month Period. The increase was attributable to the impact of business acquisitions completed during 2003. We did not change any of the depreciation methods or assets estimated useful lives that L-3 uses to calculate its depreciation expense.

Goodwill increased by $110.5 million to $3,762.9 million at September 30, 2004 from $3,652.4 million at December 31, 2003. The increase was comprised of (i) $74.3 million for acquisitions completed during the 2004 Nine Month Period, (ii) $33.3 million for increases to purchase price payments for certain acquisitions completed prior to January 1, 2004, related to final closing date net assets of the acquired businesses and contingent purchase price adjustments or earnouts, which were resolved during the period, and (iii) $2.9 million primarily related to final estimates of fair value for assets acquired and liabilities assumed in connection with business acquisitions completed prior to January 1, 2004.

The increase in accounts payable was due to increased purchases from third-party vendors and subcontractors to support higher volumes for sales and related contracts-in-process, and the timing of payments for such purchases. The increase in accrued employment costs was due to the timing of payments of salaries and wages to employees. The decrease in other current liabilities was primarily due

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to the payment of the remaining purchase price for the acquisition of certain aerospace and defense assets of IPICOM, Inc. The increase in pension and postretirement benefit liabilities was primarily due to pension expenses exceeding related cash contributions of $48.0 million.

Statement of Cash Flows

Nine Months Ended September 30, 2004 Compared with Nine Months Ended September 30, 2003

Cash increased to $367.3 million at September 30, 2004 from $134.9 million at December 31, 2003. The table below provides a summary of our cash flows for the periods indicated.

				Nine Months Ended September 30,
				2004				2003
				(in millions)
Net cash from operating activities				$	408.0			$	327.1
Net cash used in investing activities					(183.9	)			(316.8	)
Net cash from financing activities					8.4				232.1
Net increase in cash				$	232.5			$	242.4

Operating Activities

We generated $408.0 million of cash from operating activities during the 2004 Nine Month Period, an increase of $80.9 million from the $327.1 million generated during the 2003 Nine Month Period. Net income adjusted for non-cash expenses and deferred income taxes increased by $122.0 million to $481.9 million for the 2004 Nine Month Period from $359.9 million for the 2003 Nine-Month Period. Deferred income taxes increased primarily because of larger estimated tax deductions arising from our recent acquisitions. Non-cash expenses consist primarily of contributions of L-3 Holdings' common stock to employee savings plans of $37.6 million and depreciation and amortization of $89.5 million. During the 2004 Nine Month Period, the use of cash related to the change in operating assets and liabilities was $73.9 million, compared to $32.8 million for the 2003 Nine Month Period. The use of cash for contracts in process was primarily driven by increases in unbilled contract receivables and billed receivables arising from the organic sales growth for our businesses, as discussed above under "Liquidity and Capital Resources—Balance Sheet" and "Results of Operations". The use of cash for other current assets was primarily due to deposits paid to vendors during the 2004 Nine Month Period. The source of cash for accounts payable was due to increased purchases of materials, components and services and the timing of payments for such purchases. The timing of payment dates of employee salaries and wages was a source of cash. The source of cash for other current liabilities was primarily due to cash received from billings in excess of costs incurred for certain training and satellite communications contracts and the timing of interest payments, which was partially offset by the payment upon settlement of a foreign currency hedging forward contract, and cash payments for costs incurred in excess of estimated contract values for certain contracts in a loss position. The source of cash from the change in pension and postretirement benefit liabilities was due to expenses exceeding related cash contributions.

We expect to generate net cash from operating activities of approximately $545 million for the full year 2004, including a use of cash of approximately $130 million for changes in operating assets and liabilities, including working capital. During the 2004 fourth quarter, primarily due to the timing of billings, collections and payments, we expect contracts in process to decline by approximately $20 million, and accrued employment costs to decline by approximately $15 million, and we also expect reductions to accounts payable and billings in excess of costs incurred.

Our cash interest payments, which are based on the fixed rate coupons and the interest payment dates of our debt, were approximately $29 million for the first quarter of 2004, $30 million for the second quarter of 2004, and $41 million for the 2004 Third Quarter. These cash interest payments, before any potential savings from our interest rate swap agreements, are expected to be approximately $30 million for the fourth quarter of 2004. The interest payments for the third quarter of 2004 exceed those for each of the other three quarters of 2004 because of the timing of the interest coupon payments on the $400.0 million of 6 1/8% Senior Subordinated Notes we sold in December 2003, which are paid in January and July, commencing July 2004.

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We expect to generate a deferred income tax provision in excess of $110 million for the full year 2004. This estimate of deferred income taxes for 2004 will probably increase, if we acquire additional businesses during 2004. L-3 receives substantial income tax deductions from its acquisitions of businesses that are structured as asset purchases for income tax purposes. The effect of these income tax deductions is that our cash payments for income taxes are less than our provision for income taxes reported on the statement of operations. This difference is presented in the deferred income tax provision on our statement of cash flows. The deferred income tax provision primarily results from deducting amortization of tax intangibles, including goodwill, from the acquisitions structured as asset purchases on L-3's income tax returns over 15 years, in accordance with income tax rules and regulations, while no goodwill amortization is recorded for financial reporting purposes, in accordance with SFAS No. 142. We expect our business acquisitions that have been structured as asset purchases for income tax purposes to continue to generate substantial annual deferred tax benefits through 2017. While these income tax deductions are reported as changes to deferred income tax liabilities and assets, they are not differences that are scheduled to reverse in future periods from normal operations. Rather, they will only reverse if L-3 sells its acquired businesses or incurs a goodwill impairment loss for them, because in either case, L-3's financial reporting amounts for goodwill would be greater than the income tax basis for goodwill.

Investing Activities

During the 2004 Nine Month Period, we used $134.6 million of cash for acquisitions of businesses. We paid $89.7 million to acquire Beamhit, Brashear, GEDD, AVISYS and Bay Metals. We paid $11.5 million for the final contractual purchase price adjustment for the Vertex acquired business. We also paid $33.4 million primarily for the remaining contractual purchase price for certain aerospace and defense assets of IPICOM, Inc., and for earnouts, most of which were accrued as other current liabilities at December 31, 2003. During the 2003 Nine Month Period, we used $261.4 million of cash to acquire businesses, including Avionics Systems, Aeromet and Klein Associates.

On October 8, 2004, we acquired the stock of D.P. Associates Inc. In addition, we have entered into agreements to acquire certain businesses for an approximate aggregate purchase price of $511 million, payable in cash. These businesses include Cincinnati Electronics, Northrop Grumman's Canadian Navigation Systems and Space Sensors System business and the Marine Controls Division of CAE. We have not entered into any other agreements with respect to any material transactions at this time. Certain of these business acquisitions are subject to regulatory approval. We expect to complete the acquisitions by December 31, 2004, and will finance them using cash on hand and/or a portion of the proceeds from the expected notes offering discussed below in Financing Activities.

We make capital expenditures for the improvement of manufacturing facilities and equipment. We expect to use approximately $85 million of cash for capital expenditures, net of cash proceeds from dispositions of property, plant and equipment, for the full year of 2004.

Financing Activities

Debt

Senior Credit Facilities.    At September 30, 2004, available borrowings under our senior credit facilities were $671.5 million, after reductions for outstanding letters of credit of $78.5 million. There were no outstanding borrowings under our senior credit facilities at September 30, 2004.

Redemptions and Related Conversion of Convertible Debt into Common Stock.    On December 22, 2003, L-3 Holdings announced a full redemption of $300.0 million of its 5.25% Convertible Senior Subordinated Notes due 2009 (Convertible Notes), which expired on January 9, 2004. At December 31, 2003, holders of approximately $1.6 million of the Convertible Notes had exercised their conversion rights and converted such notes into 40,000 shares of L-3 Holdings common stock. On January 9, 2004, holders of $298.2 million of the Convertible Notes exercised their conversion rights and converted such notes into 7,317,327 shares of L-3 Holdings common stock. The remaining $0.2 million of Convertible Notes were redeemed for cash on January 12, 2004. On October 5, 2004, L-3 Holdings announced a full redemption of all the $420.0 million of its 4.00% Senior Subordinated Convertible Contingent Debt Securities

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(CODES) due 2011 which expired on Thursday, October 21, 2004. On October 21, 2004, holders of $419.8 million of the principal amount of CODES exercised their conversion rights and converted such CODES into 7,800,797 shares of L-3 Holdings common stock. The remaining $0.2 million of the CODES were redeemed for cash on October 25, 2004, at a redemption price of 102.0% of the principal amount, plus accrued and unpaid interest (including contingent interest) to October 25, 2004.

Senior Subordinated Notes Offering.    On November 1, 2004, L-3 Communications agreed to sell $650 million aggregate principal amount of 5 7/8% Senior Subordinated Notes due 2015 through a private placement. The notes will mature on January 15, 2015, with interest payable semi-annually at a rate of 5 7/8% per annum. We expect to complete the offering, subject to certain conditions, on or about November 12, 2004. The notes are being offered within the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, and, outside the United States, only to non-U.S. investors. The securities to be offered have not been registered under the Securities Act, or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. We intend to use the net proceeds to redeem our outstanding $200.0 million of 8% Senior Subordinated Notes due 2008 and for general corporate purposes, including payments for business acquisitions.

In connection with the early redemption of the $200 million of 8% Senior Subordinated Notes, we expect to record a pre-tax debt retirement charge of approximately $5.0 million, or $0.03 per diluted share, net of taxes.

Interest Rate Swap Agreements.    Depending on interest rate levels, we may enter into interest rate swap agreements to convert certain of our fixed interest rate debt obligations to variable interest rates, or terminate any existing interest rate swap agreements. The variable interest rate that we pay under the swap agreements is equal to (i) the variable rate basis, plus (ii) the variable rate spread. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for a detailed table of our interest rate swap agreement that is currently outstanding, and a table that presents the activity for our terminated interest rate swap agreements through September 30, 2004.

Outstanding interest rate swap agreements reduced interest expense by $2.0 million during the 2004 Third Quarter, compared to $2.7 million during the 2003 Third Quarter and by $4.1 million during the 2004 Nine Month Period, compared to $5.5 million during the 2003 Nine Month Period. Interest expense was reduced by $1.1 million for the 2004 Third Quarter, compared to $0.9 million for the 2003 Third Quarter and by $3.2 million for the 2004 Nine Month Period compared to $2.1 million for the 2003 Nine Month Period for amortization of deferred gains on terminated interest rate swap agreements.

Debt Covenants.    The senior credit facilities and senior subordinated notes agreements contain financial covenants and other restrictive covenants, which remain in effect so long as we owe any amount or any commitment to lend exists thereunder. We are in compliance with those covenants in all material respects. The borrowings under the senior credit facilities are guaranteed by L-3 Holdings and by substantially all of the material domestic subsidiaries of L-3 Communications on a senior basis. The payments of principal and premium, if any, and interest on the senior subordinated notes are unconditionally guaranteed, on an unsecured senior subordinated basis, jointly and severally, by substantially all of L-3 Communications' restricted subsidiaries other than its foreign subsidiaries. The guarantees of the senior subordinated notes are junior to the guarantees of the senior credit facilities and rank pari passu with each other. See Note 8 to our consolidated financial statements for the fiscal year ended December 31, 2003, included in our Annual Report on Form 10-K filed on March 4, 2004, for a description of our debt and related financial covenants at December 31, 2003.

Equity

In January of 2004, we announced that our Board of Directors declared our first quarterly cash dividend of $0.10 per share. On March 15, 2004, we paid cash dividends of $10.5 million in aggregate to shareholders of record at the close of business on February 17, 2004.

In April of 2004, we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share. On June 15, 2004, we paid cash dividends of $10.6 million in aggregate to shareholders of record at the close of business on May 17, 2004.

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In July of 2004, we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share. On September 15, 2004, we paid cash dividends of $10.7 million in aggregate to shareholders of record at the close of business on August 17, 2004.

On October 12, 2004 we announced that our Board of Directors declared a regular quarterly dividend of $0.10 per share payable on December 15, 2004, to shareholders of record at the close of business on November 17, 2004.

As discussed above under "Statement of Cash Flows—Financing," holders of $419.8 million principal amount of our CODES exercised their conversion rights and converted such CODES into 7,800,797 shares of L-3 Holdings common stock.

Based upon our current level of operations, we believe that our cash from operating activities, together with available borrowings under the senior credit facilities, will be adequate to meet our anticipated requirements for working capital, capital expenditures, commitments, research and development expenditures, contingent purchase prices, program and other discretionary investments, dividends and interest payments for the foreseeable future. There can be no assurance, however, that our business will continue to generate cash flow at current levels, or that currently anticipated improvements will be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to sell assets, refrain from declaring quarterly dividends, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the defense industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control. There can be no assurance that sufficient funds will be available to enable us to service our indebtedness, or make necessary capital expenditures and to make discretionary investments.

Contingencies

A substantial majority of our revenues are generated from providing products and services under legally binding agreements, or contracts with U.S. Government customers. The U.S. Government contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under U.S. Government procurement regulations, an indictment of the Company by a federal grand jury could result in the Company being suspended for a period of time from eligibility for awards of new government contracts. A conviction could result in debarment from contracting with the federal government for a specified term. In addition, all of our U.S. Government contracts are subject to audit and various pricing and cost controls, and include standard provisions for termination for the convenience of the U.S. Government. U.S. Government contracts and related orders are subject to cancellation if funds for contracts become unavailable or for termination for the convenience of the U.S. Government. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government.

Additionally, we have been periodically subject to litigation, claims or assessments and various contingent liabilities incidental to our businesses. For a detailed discussion of items of litigation, see Note 12 to the Unaudited Condensed Consolidated Financial Statements. Litigation is inherently uncertain and it is possible that an adverse decision could be rendered against us, which could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We also continually assess our obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost to be incurred by us in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

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Recently Issued and Proposed Accounting Standards

In December of 2003, the Financial Accounting Standards Board (FASB) revised its FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R). FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN 46R requires that a business enterprise review all of its legal structures used to conduct its business activities, including those to hold assets, and its majority-owned subsidiaries, to determine whether those legal structures are variable interest entities (VIEs) required to be consolidated for financial reporting purposes by the business enterprise. Generally a VIE is a legal structure for which the holders of a majority voting equity (ownership) interest may not have a controlling financial interest in the legal structure. Variable interests in a VIE are the contractual, ownership, creditor or other pecuniary interests in the VIE that change with changes in the fair value of the net assets exclusive of variable interests.. FIN 46R provides guidance for identifying legal structures which are VIEs and the variable interests in a VIE, and also provides guidance for determining whether a business enterprise shall consolidate a VIE. FIN 46R requires that a business enterprise that holds a significant variable interest in a VIE make new disclosures in its financial statements. We adopted the provisions of FIN 46R during the interim period ended March 31, 2004. We do not hold any significant interests in VIEs that require consolidation or additional disclosures.

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). This Act introduces a federal subsidy to employees who sponsor retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May of 2004, the FASB issued FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2). FSP 106-2 provides guidance on the accounting for the effects of the Act and requires certain disclosures regarding the effect of the federal subsidy provided by the Act. The guidance in FSP 106-2 applies only if (i) the prescription drug benefits under our defined benefit postretirement health care plan are considered actuarially equivalent to Medicare Part D and therefore qualify for the subsidy under the Act, and (ii) the expected subsidy will reduce our share of the cost of the underlying postretirement prescription drug coverage. FSP 106-2 is effective for the first interim period beginning after June 15, 2004. We have determined that the benefits provided by certain of our postretirement benefit plans are actuarially equivalent to Medicare Part D, but have concluded that the effects of the Act do not constitute a significant event. Therefore, the amount of the accumulated postretirement benefit obligation or net periodic benefit cost recorded in the unaudited condensed consolidated financial statements and disclosed in the accompanying notes do not include the effects of the Act. The effects of the Act will be incorporated in the measurement of our postretirement benefits liability and periodic benefit cost for the year ending December 31, 2005.

On September 30, 2004 the EITF reached a consensus on issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings Per Share. See "Results of Operations" above for a description of EITF No. 04-8 and a discussion of its impact on our results of operations.

Forward-Looking Statements

Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance, and financial condition, including in particular, the likelihood of our success in developing and expanding our business and the realization of sales from backlog, include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.

Statements that are predictive in nature, that depend upon or refer to events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures and other projections, they are subject to several risks and uncertainties, and therefore, we can give no assurance that these statements will be achieved. Such statements will also be influenced by factors such as:

•	our dependence on the defense industry and the business risks peculiar to that industry, including changing priorities or reductions in the U.S. Government defense budget;

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•	our reliance on contracts with a limited number of agencies of, or contractors to, the U.S. Government and the possibility of termination of government contracts by unilateral government action or for failure to perform;

•	our ability to obtain future government contracts on a timely basis;

•	the availability of government funding and changes in customer requirements for our products and services;

•	our significant amount of debt and the restrictions contained in our debt agreements;

•	our ability to continue to retain and train our existing employees and to recruit and hire new qualified and skilled employees;

•	our collective bargaining agreements and our ability to favorably resolve labor disputes should they arise;

•	the business and economic conditions in the markets in which we operate, including those for the commercial aviation and communications markets;

•	economic conditions, competitive environment, international business and political conditions and timing of international awards and contracts;

•	our extensive use of fixed-price type contracts as compared to cost-reimbursable type and time-and-material type contracts;

•	our ability to identify future acquisition candidates or to integrate acquired operations;

•	the rapid change of technology and high level of competition in the communication equipment industry;

•	our introduction of new products into commercial markets or our investments in commercial products or companies;

•	pension, environmental or legal matters or proceedings and various other market, competition and industry factors, many of which are beyond our control; and

•	the fair values of our assets including identifiable intangible assets and the estimated fair value of the goodwill balances for our reporting units which can be impaired or reduced by the other factors discussed above.

Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and our actual results or developments may differ materially from the expectations expressed in the forward-looking statements.

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes or circumstances or changes in expectations or the occurrence of anticipated events.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Part II, Item 7, "Management's Discussion and Analysis of Results of Operations and Financial Condition — Liquidity and Capital Resources — Derivative Financial Instruments," of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for a discussion of the Company's exposure to market risks. The only substantial change in those risks during the nine months ended September 30, 2004 is discussed below.

Derivative Financial Instruments

Interest Rate Risk. Our financial instruments that are sensitive to changes in interest rates include borrowings under the senior credit facilities and interest rate swap agreements, all of which are denominated in U.S. dollars. The interest rates on the senior subordinated notes are fixed-rate and are not affected by changes in interest rates.

In March and April of 2004, we entered into new interest rate swap agreements on $300.0 million aggregate principal amount of our $400.0 million of 6 1/8% senior subordinated notes due 2014, to convert their fixed interest rates to variable rates. During the nine-month period ended September 30, 2004, we terminated $200.0 million aggregate notional amounts of these interest rate swap agreements. At September 30, 2004, $100.0 million notional amount interest rate swap agreement was outstanding. These transactions are discussed above under "Management's Discussion and Analysis of Results of Operations and Financial Condition — Statement of Cash Flows — Financing Activities," of this report.

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ITEM 4.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chairman and Chief Executive Officer and our President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2004. Based upon that evaluation and subject to the foregoing, our Chairman and Chief Executive Officer and our President and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

In addition, there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe that we are adequately reserved for these liabilities and that there is no litigation that will have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, as discussed below, we are a party to a number of material litigations, for which an adverse determination could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

L-3 Integrated Systems and its predecessors have been involved in a litigation with Kalitta Air arising from a contract to convert Boeing 747 aircraft from passenger configuration to cargo freighters. The lawsuit was brought in the northern district of California on January 31, 1997. The aircraft were modified using Supplemental Type Certificates (STCs) issued in 1988 by the Federal Aviation Administration (FAA) to Hayes International, Inc. (Hayes/Pemco) as a subcontractor to GATX/Airlog Company (GATX). Between 1988 and 1990, Hayes/Pemco modified five aircraft as a subcontractor to GATX using the STCs. Between 1990 and 1994, Chrysler Technologies Airborne Systems, Inc. (CTAS), a predecessor to L-3 Integrated Systems, performed as a subcontractor to GATX and modified an additional five aircraft using the STCs. Two of the aircraft modified by CTAS were owned by American International Airways, the predecessor to Kalitta Air. In 1996, the FAA determined that the engineering data provided by Hayes/Pemco supporting the STCs was inadequate and issued an Airworthiness Directive that effectively grounded the ten modified aircraft. The Kalitta Air aircraft have not been in revenue service since that date. The matter was tried in January 2001 against GATX and CTAS with the jury finding fault on the part of GATX but rendering a unanimous defense verdict in favor of CTAS. Certain co-defendants had settled prior to trial. The U.S. Ninth Circuit Court of Appeals has reversed and remanded the trial court's summary judgment rulings in favor of CTAS regarding a negligence claim by Kalitta Air, which asserts that CTAS as an expert in aircraft modification should have known that the STCs were deficient, and excluding certain evidence at trial. Based on this ruling, a retrial has been scheduled for September 2004. In preparation for retrial, Kalitta Air has submitted to us an expert report on damages that calculated Kalitta Air's damages at either $232 million or $602 million, depending on different factual assumptions. We have retained experts whose reports indicate that, even in the event of an adverse jury finding on the liability issues at trial, Kalitta Air has already recovered amounts from the other parties to the initial suit that more than fully compensated Kalitta Air for any damages it incurred. CTAS' insurance carrier has accepted defense of the matter with a reservation of its right to dispute its obligations under the applicable insurance policy in the event of an adverse jury finding. The trial relating to this matter is scheduled for January 2005. We have meritorious defenses and intend to continue to vigorously defend this matter. However, litigation is inherently uncertain and it is possible that an adverse decision could be rendered, which could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On November 18, 2002, we initiated a proceeding against OSI Systems, Inc. (OSI) in the United States District Court sitting in the Southern District of New York seeking, among other things, a declaratory judgment that we had fulfilled all of our obligations under a letter of intent with OSI (the "OSI Letter of Intent"). Under the OSI Letter of Intent, we were to negotiate definitive agreements with OSI for the sale of certain businesses we acquired from PerkinElmer, Inc. on June 14, 2002. On February 7, 2003, OSI filed an answer and counterclaims alleging, among other things, that we defrauded OSI, breached obligations of fiduciary duty to OSI and breached our obligations under the OSI Letter of Intent. OSI seeks damages in excess of $100 million, not including punitive damages. Under the OSI Letter of Intent, we proposed selling to OSI the conventional detection business and the ARGUS business that we acquired from PerkinElmer, Inc. Negotiations with OSI lasted for almost one year and ultimately broke down over issues regarding, among other things, intellectual property, product-line definitions, allocation of employees and due diligence. Discovery on the matter is essentially complete. We believe that the claims asserted by OSI in its suit are without merit and intend to vigorously defend against the OSI claims.

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L-3 Communications Vertex Aerospace LLC (formerly known as Vertex Aerospace LLC and acquired by L-3 Communications Corporation on December 1, 2003) (L-3 Vertex) is named as a defendant in two wrongful death lawsuits in the United States District Court, Western District of North Carolina arising from the crash of Air Midwest Flight 5481 at Charlotte-Douglas International Airport in Charlotte, North Carolina on January 8, 2003. The crash resulted in the deaths of nineteen passengers and two crewmembers. Each of the lawsuits alleges contributing factors, including that the accident was caused by the improper maintenance of the aircraft by L-3 Vertex, and seeks to recover compensatory and punitive damages. No discovery has taken place in the lawsuits at this time. Nineteen claims resulting from this incident have previously settled. The National Transportation Safety Board (NTSB) investigated the cause of the crash and has concluded that the crash was caused by the incorrect rigging of the elevator control system compounded by the airplane's center of gravity, which was substantially aft of the certified limit, with several other contributing factors. L-3 Vertex believes that it has meritorious defenses to the pending lawsuits, and intends to defend the cases vigorously. The actions have been tendered to L-3 Vertex's insurance carrier, who has accepted the defense of each action served upon L-3 Vertex to date. L-3 Vertex was also indemnified by Air Midwest for losses L-3 Vertex incurred arising out of its provision of maintenance services to Air Midwest. Based on the availability of insurance and the indemnification from Air Midwest, we do not believe we will have a material liability in this matter.

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ITEM 6.

EXHIBITS

(a) Exhibits

Exhibit Number				Description of Exhibit
3.1				Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants' Quarterly Report on Form 10-Q for the period ended June 30, 2002).
3.2				By laws of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-46975)).
3.3				Certificate of Incorporation of L-3 Communications Corporation (incorporated by reference to Exhibit 3.1 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
3.4				Bylaws of L-3 Communications Corporation (incorporated by reference to Exhibit 3.2 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
**10.56				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 11, 1998 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.94				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of June 28, 2002 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.95				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of May 21, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.96				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 22, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.97				Form of L-3 Communications Holdings, Inc. 1999 Long Term Incentive Plan Nonqualified Stock Option Agreement.
*11				L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share.
**12.1				Ratio of Earnings to Fixed Charges.
**31.1				Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d -14(a) of the Securities Exchange Act, as amended.
**31.2				Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d- 14(a) of the Securities Exchange Act, as amended.
**32				Section 1350 Certifications.

*	The information required in this exhibit is presented in Note 10 to the Unaudited Condensed Consolidated Financial Statements as of September 30, 2004 in accordance with the provisions of SFAS No. 128, Earnings Per Share.

**	Filed herewith

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

L-3 Communications Holdings, Inc. and L-3 Communications Corporation     Registrants

Date: November 9, 2004

/s/ Robert V. LaPenta                     

Name: Robert V. LaPenta Title: President and Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number				Description of Exhibit
3.1				Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants' Quarterly Report on Form 10-Q for the period ended June 30, 2002).
3.2				By laws of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-46975)).
3.3				Certificate of Incorporation of L-3 Communications Corporation (incorporated by reference to Exhibit 3.1 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
3.4				Bylaws of L-3 Communications Corporation (incorporated by reference to Exhibit 3.2 to L-3 Communications Corporation's Registration Statement on Form S-4 (File No. 333-31649)).
**10.56				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 11, 1998 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.94				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of June 28, 2002 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.95				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of May 21, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.96				Supplemental Indenture dated as of August 5, 2004 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein to the Indenture dated as of December 22, 2003 among L-3 Communications Corporation, The Bank of New York, as trustee, and the guarantors named therein.
**10.97				Form of L-3 Communications Holdings, Inc. 1999 Long Term Incentive Plan Nonqualified Stock Option Agreement.
*11				L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Share.
**12.1				Ratio of Earnings to Fixed Charges.
**31.1				Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
**31.2				Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule15d-14(a) of the Securities Exchange Act, as amended.
**32				Section 1350 Certifications.

*	The information required in this exhibit is presented in Note 10 to the Unaudited Condensed Consolidated Financial Statements as of September 30, 2004 in accordance with the provisions of SFAS No. 128, Earnings Per Share.

**	Filed herewith

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