<PAGE>


               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the fiscal year ended December 31, 1999

 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from    to

                Commission file numbers 001-14141 and 333-46983
                        L-3 COMMUNICATIONS HOLDINGS, INC.
                         L-3 COMMUNICATIONS CORPORATION
           (Exact names of registrants as specified in their charters)



             DELAWARE                             13-3937434 AND 13-3937436
   (State or other jurisdiction of         (I.R.S. Employer Identification Nos.)
    incorporation or organization)
 600 THIRD AVENUE, NEW YORK, NEW YORK                    10016
(Address of principal executive offices)               (Zip Code)

                                 (212) 697-1111
                               (Telephone number)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                               TITLE OF EACH CLASS
                     Common stock, par value $0.01 per share
                   NAME OF EACH EXCHANGE ON WHICH REGISTERED:
                             New York Stock Exchange
           Securities registered pursuant to section 12(g) of the Act:
                                      None.


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes    [ ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]

     There were 32,900,408 shares of L-3 Communications Holdings, Inc. common
stock with a par value of $0.01 outstanding as of the close of business on
March 29, 2000. The aggregate market value of the L-3 Communications Holdings,
Inc. voting stock held by non-affiliates of the registrant as of March 29, 2000
was approximately $1,114.4 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive proxy statement to be filed with Securities and
Exchange Commission ("SEC") pursuant to Regulation 14A relating to the
registrant's Annual Meeting of Shareholders, to be held on April 25, 2000, will
be incorporated by reference in Part III of this Form 10-K. Such proxy
statement will be filed with the SEC not later than 120 days after the
registrant's fiscal year ended December 31, 1999.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

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

                       INDEX TO ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1999



<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>       <C>                                                                     <C>
PART I
 Item 1:  Business .............................................................   1
 Item 2:  Properties ...........................................................  18
 Item 3:  Legal Proceedings ....................................................  18
 Item 4:  Submission of Matters to a Vote of Security Holders ..................  18
PART II
 Item 5:  Market for the Registrant's Common Equity and Related Stockholder
           Matters .............................................................  19
 Item 6:  Selected Financial Data ..............................................  20
 Item 7:  Management's Discussion and Analysis of Results of Operations and
           Financial Condition .................................................  20
 Item 7A: Quantitative and Qualitative Disclosures About Market Risk ...........  30
 Item 8:  Financial Statements and Supplementary Data ..........................  30
 Item 9:  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure ................................................  30
PART III
 Item 10: Directors and Executive Officers of the Registrant ...................  31
 Item 11: Executive Compensation ...............................................  31
 Item 12: Security Ownership of Certain Beneficial Owners and Management .......  31
 Item 13: Certain Relationships and Related Transactions .......................  31
PART IV
 Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K ......  32
Signatures .....................................................................  34
</TABLE>

<PAGE>

                                     PART I

     "Holdings", "the Company", "L-3", "we", "us" and "our" refer to L-3
Communications Holdings, Inc. and its subsidiaries, including L-3
Communications Corporation ("L-3 Communications"), a wholly owned subsidiary.
The "Predecessor Company" means ten initial business units purchased by the
Company from Lockheed Martin Corporation ("Lockheed Martin") in April 1997 (the
"L-3 Acquisition").

ITEM 1. BUSINESS

COMPANY OVERVIEW

     L-3 is a leading merchant supplier of sophisticated secure communication
systems and specialized communication products. We produce secure, high data
rate communication systems, microwave components, avionics and ocean systems
and telemetry, instrumentation and space products. These systems and products
are critical elements of virtually all major communication, command and
control, intelligence gathering and space systems. Our systems and specialized
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
customers include the U.S. department of defense ("DoD"), certain U.S.
government intelligence agencies, major aerospace and defense contractors,
foreign governments and commercial customers.

     Our business areas employ proprietary technologies and capabilities and
have leading positions in their respective primary markets. We have two
reportable segments, Secure Communication Systems and Specialized Communication
Products. In addition, we are seeking to expand the products and technologies
of our reportable segments in commercial markets as we discuss under "--
Emerging Commercial Products" below.

     Financial information on our reportable segments is presented in Note 17
to our Consolidated (Combined) Financial Statements included under Item 14.
Additional financial data and commentary on the results of operations for
reportable segments are included in Management's Discussion and Analysis of
Results of Operations and Financial Condition under Item 7. These data and
comments should be referred to in conjunction with the summary description of
each of our reportable segments which follows.

     SECURE COMMUNICATION SYSTEMS. We are the established leader in secure,
high data rate communications for military and other U.S. government
reconnaissance and surveillance applications. The operations of our Secure
Communication Systems segment are located in Salt Lake City, Utah, Camden, New
Jersey and Shrewsbury, New Jersey. These operations are principally performed
under cost plus, sole source contracts supporting long-term programs for the
U.S. armed forces and classified customers. Our major secure communication
programs and systems include:

    o secure data links for airborne, satellite, ground-and sea-based remote
      platforms for information collection, command and control and
      dissemination to users in real time;

    o strategic and tactical signal intelligence systems that detect, collect,
      identify, analyze and disseminate information and related support
      contracts for military and intelligence efforts;

    o secure telephone, fax and network equipment and encryption management;

    o communication software support services to military and related
      government intelligence markets; and

    o communication systems for surface and undersea platforms and manned
      space flights.

     We believe that we have developed virtually every high bandwidth data link
that is currently used by the military for surveillance and reconnaissance. We
are also a leading supplier of communication software support services to
military and related government intelligence markets. In addition to these core
government programs, we are capitalizing on our technology base by expanding
into related commercial communication equipment markets. For instance, we are
applying our high data rate communications and archiving technology to the
medical image archiving market and our wireless communication expertise to
develop local wireless loop telecommunications equipment for the last mile
interconnect.


                                       1
<PAGE>

     SPECIALIZED COMMUNICATION PRODUCTS. This reportable segment includes three
product categories:


     Microwave Components. We are the preeminent worldwide supplier of
commercial off-the-shelf, high-performance microwave components and frequency
monitoring equipment. Our microwave products are sold under the
industry-recognized Narda brand name through a standard catalog to wireless,
industrial and military communication markets. We also provide
state-of-the-art, space-qualified communication components including channel
amplifiers and frequency filters for the commercial communications satellite
market serving major military and commercial frequencies, including Ka band.
Approximately 81% of Microwave Components sales for 1999 were made to
commercial customers, including Loral Space & Communications, Ltd., Motorola,
Inc., Lucent Technologies Inc., AT&T Corp. and Lockheed Martin.


     Avionics and Ocean Products. Avionics and Ocean Products include our
aviation recorders, display systems, antenna systems, acoustic undersea warfare
systems and naval power distribution, conditioning, switching and protection
equipment for naval ships and submarines. We are the world's leading
manufacturer of commercial cockpit voice and flight data recorders (known as
"black boxes"). These recorders are sold under the Fairchild brand name both to
aircraft manufacturers and to the world's major airlines for their existing
fleets of aircraft. Our aviation recorders are also installed on military
transport aircraft throughout the world. We provide military and high-end
commercial displays for use in military aircraft. We also manufacture high
performance surveillance and precision millimeter wave antennas and related
equipment for U.S. Air Force, U.S. Army and U.S. Navy aircraft and are the
leading supplier of ground-based radomes. We are one of the world's leading
product suppliers of acoustic undersea warfare systems and airborne dipping
sonar systems to the U.S. and over 20 foreign navies. We are the only fully
integrated, full-line provider of qualified turnkey electrical power delivery
and management systems for U.S. Navy surface ships and submarines.


     Telemetry, Instrumentation and Space Products. Our Telemetry,
Instrumentation and Space Products operations develop and manufacture
commercial off-the-shelf, real-time data collection and transmission products
and components for missile, aircraft and space-based electronic systems. These
products are used to gather flight data and other critical information and
transmit it from air or space to the ground. Telemetry products are also used
for range safety and training applications to simulate battlefield situations.
We are a leading global satellite communications systems provider offering
systems and services used in the satellite transmission of voice, video and
data through earth stations for uplink and downlink terminals. We provide
global satellite communications systems and services to customers that include
foreign post, telephone and telegraph administrations, domestic and
international prime communications infrastructure contractors,
telecommunications and satellite service providers, broadcasters and
media-related companies, government agencies and large corporations. We also
provide commercial, off-the-shelf satellite control software, telemetry,
tracking and control ("TT&C"), mission processors and software engineering
services to the worldwide military, civilian and commercial satellite markets.


     EMERGING COMMERCIAL PRODUCTS. One of our strategies which builds upon our
core technical expertise and capabilities, is to select applications from our
defense electronics technologies, develop them into commercial products, and
then partner with or sell them to companies that have proven marketing
infrastructures for those commercial products. We are seeking to expand into
several closely aligned commercial business areas and applications. Emerging
Commercial Products currently include the following niche markets:


    o medical simulation systems;

    o local wireless loop telecommunications equipment;

    o airport security equipment; and

    o information security.

                                       2
<PAGE>

     A majority of these commercial products were developed based on technology
used in our military businesses with relatively small additional expense. We
are applying our technical capabilities in high data rate communications and
archiving technology developed in our Secure Communication Systems segment to
the medical image archiving market. Based on secure, high data rate
communication technology also developed in our Secure Communication Systems
segment, we have developed local wireless loop telecommunications equipment
that is primarily designed for emerging market countries and rural areas where
voice and data communication infrastructure is inadequate or does not exist. We
have completed the development phase for the local wireless loop
telecommunications equipment and have begun deliveries. In addition, the
Federal Aviation Administration awarded us a development contract for next
generation airport security equipment for explosive detection. On November 23,
1998, we received FAA certification for our eXaminer 3DXTM 6000 system which is
the only second-generation system to receive certification and the only system
to generate full, three-dimensional images of all objects in a piece of
baggage. In the aggregate, revenues generated from our Emerging Commercial
Products have not yet been material to us.


INDUSTRY OVERVIEW

     The U.S. defense industry has undergone significant changes precipitated
by ongoing federal budget pressures and new roles and missions to reflect
changing strategic and tactical threats. Since the mid-1980's, the overall U.S.
defense budget has declined in real dollars. In response, the DoD had focused
its resources on enhancing its military readiness, joint operations and digital
command and control communications capabilities by incorporating advanced
electronics to improve the performance, reduce operating cost and extend the
life expectancy of its existing and future platforms. The emphasis on system
interoperability, force multipliers and providing battlefield commanders with
real-time data is increasing the electronics content of nearly all of the major
military procurement and research programs. As a result, the DoD's budget for
communications and defense electronics is expected to grow.

     The industry has also undergone dramatic consolidation resulting in the
emergence of three dominant prime system contractors (The Boeing Company
("Boeing"), Lockheed Martin and Raytheon Company ("Raytheon")). One outgrowth
of this consolidation among the remaining major prime contractors is their
desire to limit purchases of products and sub-systems from one another.
However, there are numerous essential products, components and systems that are
not economical for the major prime contractors to design, develop or
manufacture for their own internal use which creates opportunities for merchant
suppliers such as L-3. As the prime contractors continue to evaluate their core
competencies and competitive position, focusing their resources on larger
programs and platforms, the Company expects the prime contractors to continue
to exit non-strategic business areas and procure these needed elements on more
favorable terms from independent, commercially oriented merchant suppliers.
Recent examples of this trend include divestitures of certain non-core
defense-related businesses by Honeywell International ("Honeywell"), Lockheed
Martin and Raytheon.

     The prime contractors' focus on cost control is also driving increased use
of commercial off-the-shelf products for upgrades of existing systems and in
new systems. The Company believes the prime contractors will continue to be
under pressure to reduce their costs and will increasingly seek to focus their
resources and capabilities on major systems, turning to commercially oriented
merchant suppliers to produce sub-systems, components and products. Going
forward, successful merchant suppliers will use their resources to complement
and support, rather than compete with the prime contractors. L-3 anticipates
the relationship between the major prime contractors and their primary
suppliers will, as in the automotive and commercial aircraft industry, develop
into critical partnerships encompassing increasingly greater outsourcing of
non-core products and systems by the prime contractors to their key merchant
suppliers and increasing supplier participation in the development of future
programs. Early involvement in the upgrading of existing systems and the design
and engineering of new systems incorporating these outsourced products will
provide merchant suppliers, including the Company, with a competitive advantage
in securing new business and provide the prime contractors with significant
cost reduction opportunities through coordination of the design, development
and manufacturing processes.


                                       3
<PAGE>

RECENT DEVELOPMENTS

     LINK SIMULATION AND TRAINING. On February 10, 2000, we acquired the assets
of the Training Devices and Training Service ("TDTS") business of Raytheon for
$160.0 million in cash plus expenses, subject to adjustment based on closing
date net working capital, as defined. Following the acquisition, we changed the
name of TDTS to L-3 Communications Link Simulation and Training ("Link
Simulation and Training"). TDTS is a leader in high fidelity, fully integrated
simulator training products, such as flight simulators and pilot training
systems for aircraft and helicopters, combat vehicle trainers and training
support services. Its products and services are used by U.S. and foreign
military agencies and prime contractors.


     TREX COMMUNICATIONS. On February 14, 2000, we acquired the assets of Trex
Communication Corporation ("TrexCom") for $50.2 million in cash plus expenses,
subject to adjustment based on closing date net worth, as defined. TrexCom
provides antennas and complete tracking for Telemery, Tracking and Control
(TT&C) for receiving high rate imagery data, flight termination systems, up and
down converters for C, X, Ku and Ka- band, military fixed and portable command
and control ground stations, portable commercial satellite news gathering
uplinks and satellite components. Their customers include major
telecommunications companies, broadcast organizations, government agencies and
military customers.


     In March 2000, we completed the sale of L-3 Network Security, a majority
owned subsidiary of L-3 Communications, to Symantec Corporation for a one-time
cash payment of $20.0 million.


HISTORY

     Holdings was formed in April 1997 by Mr. Frank C. Lanza, the former
President and Chief Operating Officer of Loral Corporation ("Loral"), Mr.
Robert V. LaPenta, the former Senior Vice President and Controller of Loral,
Lehman Brothers Capital Partners III, L.P. and its affiliates ("the Lehman
Partnership") and Lockheed Martin to acquire the Predecessor Company from
Lockheed Martin pursuant to the L-3 Acquisition.


                                       4
<PAGE>

PRODUCTS AND SERVICES


     The systems and products of the Company's two reportable segments as of
December 31, 1999 (excluding the Company's recent acquisitions completed in
February 2000) are summarized in the tables below:


<TABLE>
<CAPTION>

                                           SECURE COMMUNICATION SYSTEMS



                SYSTEMS                        SELECTED APPLICATIONS               SELECTED PLATFORMS/END USES
-------------------------------------- -------------------------------------- --------------------------------------
<S>                                    <C>                                    <C>
 HIGH DATA RATE COMMUNICATIONS
  o  Wideband data links and ground     o  High performance, wideband          o  Used on aircraft, naval ships,
     terminals                             secure communication links for         unmanned aerial vehicles and
                                           interoperable tactical battlefield     satellites for relaying of
                                           data communication and                 intelligence and reconnaissance
                                           reconnaissance                         information

 SATELLITE COMMUNICATION TERMINALS
  o  Ground-based satellite             o  Interoperable, transportable        o  Provide remote personnel with
     communication terminals               ground terminals for remote data       communication links to distant
     and payloads                          links to distant segments via          forces
                                           commercial or military satellites

 SPACE COMMUNICATION AND SATELLITE CONTROL
  o  Satellite communication and        o  On-board satellite external         o  International Space Station;
     tracking system                       communications, video systems,         Earth Observing Satellite;
                                           solid state recorders and ground       Landsat-7; Space Shuttle; and
                                           support equipment                      National Oceanic and
                                                                                  Atmospheric Administration
                                                                                  weather satellites

  o  Satellite command and control      o  Software integration, test and      o  Air Force satellite control
     sustainment and support               maintenance support for Air            network and Titan IV launch
                                           Force satellite control network;       system
                                           engineering support for satellite
                                           launch system
 MILITARY COMMUNICATION
  o  Shipboard communications           o  Internal and external               o  Shipboard voice communications
     systems                               communications (radio room) for        systems for Aegis cruisers and
                                           ships and submarines                   destroyers and fully automated
                                                                                  Integrated Radio Room (IRR)
                                                                                  for ship-to-ship communications
                                                                                  on Trident submarines

  o  Digital battlefield                o  Communications on the move for      o  Communication systems for U.S.
     communications                        tactical battlefield                   Army C(2)V

  o  Communication software support     o  Value-aded, critical software       o  ASAS, JSTARS, and
     services                              support for C(3)I                      GUARDRAIL

 INFORMATION SECURITY SYSTEMS
  o  Secure Telephone Unit (STU         o  Secure and non-secure voice,        o  Office and battlefield secure and
     III)/Secure Terminal Equipment        data and video communication           non-secure communication for
     (STE)                                 utilizing ISDN and ATM                 armed services, intelligence and
                                           commercial network technologies        security agencies

  o  Local management devise/key        o  Provides electronic key material    o  User authorization and
     processor (LMD/KP)                    accounting, system management          recognition and message
                                           and audit support functions for        encryption for secure
                                           secure data communication              communication
                                           encryption

  o  Information processing systems     o  Custom designed strategic and       o  Classified military and national
                                           tactical intelligence systems that     agency intelligence efforts
                                           detect, collect, identify, analyze
                                           and disseminate information and
                                           related support contracts
</TABLE>

                                       5
<PAGE>


<TABLE>
<CAPTION>

                                           SPECIALIZED COMMUNICATION PRODUCTS


              SYSTEMS                             SELECTED APPLICATIONS               SELECTED PLATFORMS/END USES
------------------------------------------ ------------------------------------- --------------------------------------
<S>                                        <C>                                   <C>
 MICROWAVE COMPONENTS (CATALOG)
  o  Passive components, switches and       o  Radio transmission, switching      o  Broad-band and narrow-band
     wireless assemblies                       and conditioning, antenna and         commercial applications (PCS,
                                               base station testing and              cellular, SMR, and paging
                                               monitoring                            infrastructure) sold under the
                                                                                     Narda brand name; and
                                                                                     broadband military applications

  o  Safety products                        o  Radio frequency (RF)               o  Monitor cellular base station and
                                               monitoring and measurement for        industrial RF emissions
                                               safety                                frequency moniroting

  o  Semiconductors (diodes,                o  Radio frequency switches,          o  Various industrial and military
     capacitators)                             limiters, voltage control,            end uses, including commercial
                                               oscillators, harmonic generators      satellites, avionics and specialty
                                                                                     communications products

  o  Satellite and wireless components      o  Satellite transponder control,     o  China Sat, Pan AmSat, Telstar,
     (channel amplifiers, transceivers,        channel and frequency seperation      Sirius, Tempo, Tiros, Milstar,
     converters, filters and                                                         GPS and LandSat
     multiplexers)

  o  Amplifiers and amplifier based         o  Automatic Test Equipment           o  LEO satellites, ground stations,
     components (amplifiers, up/down           (ATE), military EW, ground and        LMDS, MMDS, military EW and
     converters and Ka assemblies)             space communications                  ATE

 AVIONICS AND OCEAN PRODUCTS
 Aviation Recorders
  o  Solid state crash resistant cockpit    o  Voice recorders continuously       o  Installed on business and
     voice and flight data recorders           record most recent 30-120             commercial aircraft and certain
                                               minutes of voice and sounds           military transport aircraft; sold to
                                               from cockpit and aircraft             both aircraft OEMs and airlines
                                               intercommunications. Flight data      under the Fairchild brand name
                                               recorders record the last 25 hours
                                               of flight parameters.

  o  Solid state video recorders            o  Reconnaissance platforms           o  New product

  Antenna Products
  o  Ultra-wide frequency and               o  Surveillance; radar detection      o  F-15, F-16, F-18, E-2C, P-3,
     advanced radar antenna systems                                                  C-130, B-2, AWACS, Apache,
     and rotary joints                                                               Cobra, Mirage (France),
                                                                                     Maritime Patrol (U.K.), and
                                                                                     Tornado (U.K.)

  o  Precision antenna systems serving      o  Antennas for high frequency,       o  Various military and commercial
     major military and commercial             millimeter satellite                  customers
     frequencies, including Ka band            communications programs and
                                               scientific astronomy

  o  Ground based radomes                   o  Protective shields for antennas    o  FAA, weather radar and military
                                               against weather                       applications
 Display Products
  o  Cockpit and mission display            o  High performance, ruggedized       o  E-2C, V-22, F-14, F-117, EA-6B,
     systems and controls                      flat panel and cathode ray tube       C-130, AWACS, JSTARS S-3,
                                               displays and processors               AH-64, T-38, C-27J, C-130,
                                                                                     SH-60J, U-2 and Bradley
 Ocean Products
  o  Airborne dipping sonar systems         o  Submarine detection and            o  SH-60, SH-2/3, AB-212, EH-101
                                               localization                          and Lynx Helicopters

  o  Submarine and surface ship             o  Submarine and surface ship         o  SSN, SSBN, DDG-963 and
     towed arrays                              detection and localization            FFG-7

  o  Torpedo defense systems                o  Torpedo detection and jamming      o  SSN, SSBN and DDG-963

  o  Mine countermeasure systems            o  Coastal and route survey           o  MCDV (Canada)
</TABLE>

                                        6
<PAGE>



<TABLE>
<CAPTION>

                                   SPECIALIZED COMMUNICATION PRODUCTS--CONTINUED


              SYSTEMS                          SELECTED APPLICATIONS               SELECTED PLATFORMS/END USES
--------------------------------------- ---------------------------------------- ------------------------------------
<S>                                     <C>                                      <C>
  o  Naval and commercial power          o  Switching, distribution and           o  All naval combatants;
     delivery and switching products        protection, as well as frequency         submarines, surface ships and
                                            and voltage conversion                   aircraft carriers, Trident, 688,
                                                                                     NSSN, DDG51, CG49, DD963
                                                                                     and Nimitz, class CVN

  o  Commercial transfer switches,       o  Production and maintenance of         o  FAA, financial institutions and
     UPS systems and power products         systems and high-speed switches          rail transportation
                                            for power interruption
                                            prevention for computer systems

  o  Shipboard communications and        o  Design, develop and manufacture       o  CVN, NSSN
     controls                               of ship control and interior
                                            communications equipment

  o  Ship electrical repair and          o  Repair, installation, overhaul and    o  All naval combatants
     overhaul                               testing services for USN
                                            shipboard electrical, electronic
                                            and ordinance systems

  TELEMETRY, INSTRUMENTATION AND SPACE PRODUCTS
  Airborne, Ground and Space Telemetry
  o  Aircraft, missile and satellite     o  Real time data acquisition,           o  Trident, JSF, F-15, F-18, F-22,
     telemetry and instrumentation          measurement, processing,                 Comanche, Nimrod (U.K.),
     systems                                simulation, distribution, display        Tactical Hellfire, Titan, EELV,
                                            and storage for flight testing           A2100, ATHENA, ARTEMIS
                                                                                     and ICO

  o  Global Positioning Systems          o  Space navigation, Gyro's,             o  Hubble, RIFCA, EKV, CALCM,
     (GPS) receivers and navigation         reaction wheels, star sensor             MLRS, MFCS and ERGM
     systems and subsystems

  o  Electronic safe and arm devices     o  Missiles                              o  Hellfire, Longbow, Javelin
  o  Training range telemetry systems    o  Training ranges and test ranges       o  Combat simulation and tests

  Space Products
  o  Global satellite communications     o  Satellite transmission of voice,      o  Rural telephony or private
     systems                                video and data                           networks, direct to home uplinks,
                                                                                     satellite news gathering and
                                                                                     wideband applications
</TABLE>

SECURE COMMUNICATION SYSTEMS

     L-3 is a leader in communication systems for high performance intelligence
collection, imagery processing and ground, air, sea and satellite
communications for the DoD and other government agencies. The Salt Lake City
operation provides secure, high data rate, real-time communication systems for
surveillance, reconnaissance and other intelligence collection systems. The
Camden operation designs, develops, produces and integrates communication
systems and support equipment for space, ground and naval applications. The
Shrewsbury operation provides communication software support services to
military and related government intelligence markets. Product lines of the
Secure Communication Systems business include high data rate communications
links, satellite communications ("SATCOM") terminals, Navy vessel communication
systems, space communications and satellite control systems, signal
intelligence information processing systems, information security systems,
tactical battlefield sensor systems and commercial communication systems.


o  HIGH DATA RATE COMMUNICATIONS

     The Company is a technology leader in high data rate, covert,
jam-resistant microwave communications in support of military and other
national agency reconnaissance and surveillance applications. L-3's product
line covers a full range of tactical and strategic secure point-to-point and
relay data transmission systems, products and support services that conform to
military and intelligence specifications. The Company's systems and products
are capable of providing battlefield commanders with real time, secure
surveillance and targeting information and were used extensively by U.S. armed
forces in the Persian Gulf war.


                                       7
<PAGE>

     During the 1980s, largely based on its prior experience with command and
control guidance systems for remotely-piloted vehicles, L-3 developed its
current family of strategic and tactical data links, including its Modular
Interoperable Data Link ("MIDL") systems and Modular Interoperable Surface
Terminals ("MIST"). MIDL and MIST technologies are considered virtual DoD
standards in terms of data link hardware. The Company's primary focus is spread
spectrum communication (based on CDMA technology), which involves transmitting
a data signal with a high rate noise signal so as to make it difficult to
detect by others, and then re-capturing the signal and removing the noise. The
Company's data links are capable of providing information at over 200 Mb/s.

     L-3 provides these secure high band width products to the U.S. Air Force,
Navy, Army and various U.S. government agencies, many through long-term sole
source programs. The scope of these programs include air-to-ground, air-to-air,
ground-to-air and satellite communications. U.S. government programs include:
U-2 Support Program, Common High-Band Width Data Link ("CHBDL"), Battle Group
Passive Horizon Extension System ("BGPHES"), Light Airborne Multi-Purpose
System ("LAMPS"), TriBand SATCOM Subsystem ("TSS"), major unmanned aerial
vehicle ("UAV") programs and Direct Air-Satellite Relay ("DASR").


o  SATELLITE COMMUNICATION TERMINALS

     L-3 provides ground-to-satellite, high availability, real-time global
communications capability through a family of transportable field terminals to
communicate with commercial, military and international satellites. These
terminals provide remote personnel with anywhere, anytime effective
communication capability and provide communications links to distant forces.
The Company's TriBand SATCOM Subsystem ("TSS") employs a 6.25 meter tactical
dish with a single point feed that provides C, Ku and X band communication to
support the U.S. Army. The Company also offers an 11.3 meter dish which is
transportable on two C-130 aircraft. The SHF Portable Terminal System ("PTS")
is a lightweight (28 lbs.), manportable terminal, which communicates through
DSCS, NATO or SKYNET satellites and brings unprecedented connectivity to small
military tactical units and mobile command posts. L-3 delivered 14 of these
terminals for use by NATO forces in Bosnia.


o  SPACE COMMUNICATIONS AND SATELLITE CONTROL

     Continuing L-3's tradition of providing communications for every manned
U.S. space flight since Mercury, the Company is currently designing and testing
three communication subsystems for the International Space Station ("ISS").
These systems will control all ISS radio frequency ("RF") communications and
external video activities. The Company also provides solid-state recorders and
memory units for data capture, storage, transfer and retrieval for space
applications. The standard NASA tape recorder, which was developed and produced
by the Company, has completed over four million hours of service without a
mission failure. Current programs include recorders for the National Oceanic &
Atmospheric Administration ("NOAA") weather satellites, the Earth Observing
Satellite ("EOS"), AM spacecraft and Landsat-7 Earth-monitoring spacecraft. The
Company also provides space and satellite system simulation, satellite
operations and computer system training, depot support, network engineering,
resource scheduling, launch system engineering, support, software integration
and test through cost-plus contracts with the U.S. Air Force.


o  MILITARY COMMUNICATIONS

     The Company provides integrated, computer controlled switching systems for
the interior and exterior voice and data needs of today's Navy military
vessels. The Company's products include Integrated Voice Communication Systems
("IVCS") for Aegis cruisers and destroyers and the Integrated Radio Room
("IRR") for Trident class submarines, the first computer controlled
communications center in a submarine. These products integrate the intercom,
tactical and administrative communications network into one system accessing
various types of communication terminals throughout the ship. The Company's
MarCom 2000 secure digital switching system is in development for the Los
Angeles class attack submarine and provides an integrated approach to the
specialized voice and data communications needs of a shipboard environment for
internal and external communications, command and control and air


                                       8
<PAGE>

traffic control. The Company also offers on-board, high data rate communications
systems which provide a data link for carrier battle groups which are
interoperable with the U.S. Air Force's surveillance/ reconnaissance terminal
platforms. The Company provides the US Army's Command and Control Vehicle
("C2V") Mission Module Systems ("MMS"). MMS provides the "communications on the
move" capability needed for the digital battlefield by packaging advanced
communications into a modified Bradley Fighting Vehicle. The Company is a proven
supplier of superior technological expertise to the DoD, including its
contractors and related government intelligence agencies.


o  INFORMATION SECURITY SYSTEMS

     The Company has produced more than 112,000 secure telephone units ("STU
III") which are in use today by the U.S. armed forces to provide secure
telephone capabilities for classified confidential communication over public
commercial telephone networks. The Company has begun producing the
next-generation digital, ISDN-compatible STE. STE provides clearer voice and
thirteen-times faster data/fax transmission capabilities than the STU III. STE
also supports secure conference calls and secure video teleconferencing. STE
uses a CryptoCard security system which consists of a small, portable,
cryptographic module mounted on a PCMCIA card holding the algorithms, keys and
personalized credentials to identify its user for secure communications access.
The Company also provides LMD/KP which is the workstation component of the U.S.
government's Electronic Key Management System ("EKMS"), the next generation of
information security systems. EKMS is the Government system to replace current
"paper" secret keys used to secure government communications with "electronic"
secret keys. LMD/KP is the component of the EKMS which produces and distributes
the electronic keys. L-3 also develops specialized strategic and tactical
SIGINT systems to detect, acquire, collect, and process information derived
from electronic sources. These systems are used by classified customers for
intelligence gathering and require high-speed digital signal processing and
high-density custom hardware designs.


SPECIALIZED COMMUNICATION PRODUCTS


MICROWAVE AND WIRELESS COMPONENTS

     L-3 is the preeminent worldwide supplier of commercial off-the-shelf, high
performance RF microwave components, assemblies and instruments supplying the
wireless communications, industrial and military markets. The Company is also a
leading provider of state-of-the-art space-qualified commercial satellite and
strategic military RF products and millimeter amplifier based products. L-3
sells many of these components under the well-recognized Narda brand name and
through a comprehensive catalog of standard, stocked hardware. L-3 also sells
its products through a direct sales force and an extensive network of market
representatives. Specific catalog offerings include wireless products,
electro-mechanical switches, power dividers and hybrids, couplers/detectors,
attenuators, terminations and phase shifters, isolators and circulators,
adapters, control products, sources, mixers, waveguide components, RF safety
products, power meters/monitors and custom passive products. The Company
operates from three principal sites, one in Hauppauge, New York ("Narda East")
and two in Sacramento, California, ("Narda West" and "DBS").

     Narda East represents approximately 56% of L-3's microwave sales volume,
offering high performance microwave components, networks and instruments to the
wireless, industrial and military communications markets. Narda East's products
can be divided into three major categories: passive components, higher level
wireless assemblies/monitoring systems and safety instruments.

     Passive components are generally purchased in narrow frequency
configurations by wireless original equipment manufacturers and service
providers. Similar components are purchased in wide frequency configurations by
first-tier military equipment suppliers. Commercial applications for Narda
components are primarily in cellular or PCS base stations. Narda also
manufactures higher level assemblies for wireless base stations and the paging
industry. These products include communication antenna test sets, devices that
monitor reflected power to determine if a cellular base station antenna is
working and whether the base station radios are operating at peak power levels.
Military applications include general procurement


                                       9
<PAGE>

for test equipment or electronic surveillance and countermeasure systems. Safety
products are instru-ments which are used to measure the level of non-ionizing
radiation in a given area, i.e., from an antenna, test set or other emitting
source, and determine whether human exposure limits are within federal
standards.

     Narda West designs and manufactures state-of-the-art space-qualified and
wireless components. Space qualified components include channel amplifiers,
linearizers and diplexers/multiplexers, which are used to separate various
signals and direct them to the appropriate other sections of the payload. Narda
West's primary areas of focus are communications satellite payload products.
Channel amplifiers and linearizers constitute Narda West's main satellite
products. Channel amplifiers amplify the weak signals received from earth
stations by a factor of 1 million, and then drive the power amplifier tubes
that broadcast the signal back to earth. These products are sold to satellite
manufacturers and offer lower cost, lower weight and improved performance as
compared to in-house alternatives. On a typical satellite, for which there are
20 to 50 channel amplifiers, Narda West's channel amplifiers offer cost savings
of up to 60% (up to $1 million per satellite) and decrease launch weight by up
to 25 kilograms. Linearizers, used either in conjunction with a channel
amplifier or by themselves, pre-distort a signal to be transmitted back to
earth before it enters a Traveling Wave Tube ("TWT") for amplification. This
pre-distortion is exactly the opposite of the distortion created at peak power
by the TWT and, consequently has a cancellation effect that keeps the signal
linear over a much larger power band of the tube. This significantly increases
the useful output power of the TWT and consequent terrestrial coverage from the
satellite.

     Narda West products include wireless microwave components for cellular and
PCS base station applications. These products include filters used to transmit
and receive channel separation as well as ferrite components which isolate
certain microwave functions, thereby preventing undesired signal interaction.
Other products include a wide variety of high reliability power splitters,
combiners and filters for spacecraft and launch vehicles, such as LLV, Tiros,
THAAD, Mars Surveyor, Peacekeeper, Galileo, Skynet, Cassini, Milstar, Space
Shuttle, LandSat, FltSatCom, GPS, GPS Block IIR, IUS, ACE, SMEX and certain
classified programs. The balance of the operation's business involves wideband
filters used for electronic warfare applications.

     DBS designs and manufactures both broad and narrow band amplifiers and
amplifier-based products in the microwave and millimeter wave frequencies.
These amplifiers are used as low-noise, high-gain components in defense and
communications applications. These devices can be narrow band for communication
needs or broadband for electronic warfare. DBS has an extensive offering of
amplifier designs allowing it to rapidly respond to unique requirements from
its marketplace.

     DBS offers standard packaged amplifiers for use in various automated test
equipment and system applications. It is also developing higher-level
assemblies for specific military applications in which the amplifier serves as
the cornerstone component. For future growth, DBS is at the forefront of
technology in both the design and manufacturing of millimeter range ((is
greater than or equal to) 20GHz) amplifier products for use in emerging
communication applications such as back haul radios, LMDS and ground terminals
for LEOS. Further, DBS is starting to penetrate the space qualified
communications market with designs applicable to many LEO communication
satellite needs.


AVIONICS AND OCEAN PRODUCTS


o  AVIATION RECORDERS

     L-3 manufactures commercial solid-state crash-protected aviation recorders
("black boxes") under the Fairchild brand name, and has delivered over 47,000
flight recorders to airplane manufacturers and airlines around the world.
Recorders are mandated and regulated by various worldwide agencies for
commercial airlines and a large portion of business aviation aircraft.
Management anticipates growth opportunities in Aviation Recorders as a result
of the current high level of orders for new commercial aircraft. Expansion into
the military market shows continued growth opportunities. L-3 recorders were
recently selected for installation on the fleet of the Royal Australian Air
Force and Royal Australian Army transport aircraft and are currently being
installed on the U.S. Navy C-9 aircraft. There are two


                                       10
<PAGE>

types of recorders: (i) the Cockpit Voice Recorder ("CVR") which records the
last 30 to 120 minutes of crew conversation and ambient sounds from the cockpit
and (ii) the Flight Data Recorder ("FDR") which records the last 25 hours of
aircraft flight parameters such as speed, altitude, acceleration, thrust from
each engine and direction of the flight in its final moments. Recorders are
highly ruggedized instruments, designed to absorb the shock equivalent to that
of an object traveling at 268 knots stopping in 18 inches, fire resistant to
1,100 degrees centigrade and pressure resistant to 20,000 feet undersea for 30
days. Management believes that the Company has the leading worldwide market
position for CVR's and FDR's.


o  ANTENNA PRODUCTS

     Under the Randtron brand name, L-3 produces high performance antennas
designed for surveillance, high-resolution, ultra-wide frequency bands,
detection of low radar cross section ("LRCS") targets, LRCS installations,
severe environmental applications and polarization diversity. L-3's main
antenna product is a sophisticated 24-foot diameter antenna operational on all
E-2C aircraft. This airborne antenna consists of a 24-foot rotating aerodynamic
radome containing a UHF surveillance radar antenna, IFF antenna and forward and
aft auxiliary antennas. Production of this antenna began in the early 1980s,
and production is planned beyond 2000 for the E-2C, P-3 and C-130 AEW aircraft.
The replacement for this antenna is a very adaptive radar currently under
development for introduction early in the next decade. L-3 also produces
broad-band antennas for a variety of tactical aircraft and rotary joints for
the AWAC's and E-2C's antenna. Randtron has delivered over 2,000 aircraft sets
of antennas and has a current backlog through 1999. L-3 is a leading supplier
of ground-based radomes. Radomes are designed to enclose an antenna system as a
protective shield against the environment as well as to accentuate the
performance of an antenna system. Radomes are used to enclose antenna systems
used for air traffic control, weather radar, defense and scientific purposes.


o  DISPLAY PRODUCTS

     L-3 specializes in the design, development and manufacture of ruggedized
display system solutions for military and high-end commercial applications.
L-3's current product lines include cathode ray tubes ("CRTs"), the Actiview
family of active matrix liquid crystal displays ("AMLCD"), and a family of high
performance Display Processing systems. L-3 manufactures flat-panel displays
that are used on platforms such as E-2C, F-117, and the LCAC (Landing Craft Air
Cushion) vehicle. Recent new contracts for flat-panel displays include the
SH-60J helicopter and the C-130 Senior Scout. L-3 also manufactures CRT
displays for the E-2C Hawkeye, V-22 Osprey, F-14 Tomcat, T-38, Bradley and U-2
and electronics used in aircraft anti-lock braking systems.


o  OCEAN PRODUCTS

     The Company is one of the world's leading suppliers of acoustic undersea
warfare systems, having designed, manufactured and supported a broad range of
compact, lightweight, high performance acoustic systems for navies around the
world for over forty years. This experience spans a wide range of platforms,
including helicopters, submarines and surface ships, that employ the Company's
sonar systems and countermeasures.

     SPD is the world's leading provider of state-of-the-art, mission-critical
electronics and electrical power delivery products, systems and subsystems, as
well as communications and control systems for the U.S. Navy and many domestic
and international customers. In addition, SPD provides communications
subsystems and electrical products for transportation and utilities businesses.
SPD's four business units are: SPD Electrical Systems, which is the leading
U.S. manufacturer of military power delivery systems and components focused on
switching, distribution and protection providing engineering design and
development, manufacturing and overhaul and repair services; Power Paragon,
which is one of the world's leading providers of high technology electrical
power distribution, control and conversion systems focused on frequency and
voltage conversion for military and commercial applications; Henschel, which is
the leading designer, developer, and manufacturer of ship control and interior
communications equipment; and Pac Ord, which is the only combat systems
overhaul and repair contractor, which services the U.S. Naval Fleet on a
national basis with locations in San Diego, Norfolk and Jacksonville.


                                       11
<PAGE>

o  TELEMETRY, INSTRUMENTATION AND SPACE PRODUCTS

     The Company is a leader in component products and systems used in
telemetry and instrumentation for airborne applications such as satellites,
aircraft, UAVs, launch vehicles, guided missiles, projectiles and targets.
Telemetry involves the collection of data from these platforms, its
transmission to ground stations for analysis, and its further dissemination or
transportation to another platform. A principal use of this telemetry data is
to measure as many as 1,000 different parameters of the platform's operation
(in much the same way as a flight data recorder on an airplane measures various
flight parameters) and transmit this data to the ground.

     Additionally, for satellite platforms, the equipment also acquires the
command uplink that controls the satellite and transmits the necessary data for
ground processing. In these applications, high reliability of components is
crucial because of the high cost of satellite repair and the length of
uninterrupted service required. Telemetry also provides the data to terminate
the flight of missiles and rockets under errant conditions and/or at the end of
a mission. Telemetry and command/control products are currently provided on
missile programs such as AMRAAM, ASRAAM, AIM-9X, JASSM, JDAM, FOTT, ATACMS and
PAC-3, as well as satellite programs such as GPS BLK IIF, GLOBALSTAR,
EARTHWATCH, SBIRS, LUNAR PROSPECTOR, MTSAT, ARTEMIS and Hughes ICO.


o  AIRBORNE, GROUND AND SPACE TELEMETRY

     The Company provides airborne equipment and data link systems to gather
critical information and to process, format and transmit it to the ground
through communication data links from a communications satellite, spacecraft,
aircraft and/or missile. These products are available in both COTS and custom
configurations and include software and software engineering services. Major
customers are the major defense contractors who manufacture aircraft, missiles,
warheads, launch vehicles, munitions and bombs. Ground instrumentation activity
occurs at the ground station where the serial stream of combined data is
received and decoded in real-time, as it is received from the airborne
platform. Data can be encrypted and decrypted during this process, an
additional expertise that the Company offers. The company is a leader in
digital GPS receiver technology for high performance military applications.
These GPS receivers are currently in use on multiple aircraft, cruise missiles
and precision guided bombs providing highly accurate positioning and
navigational information. Additionally, the company provides navigation systems
for high performance weapon pointing and positioning systems for critical and
strategically important national defense programs like MLRS (Multiple Launch
Rocket System) and MFCS (Mortar Fire Control System).


o  SPACE PRODUCTS

     L-3 offers value-added solutions that require complex product integration,
rich software content and comprehensive support to its customers. The Company
focuses on the following niches within the satellite ground segment equipment
market: telephony, video broadcasting and multimedia. The Company's customers
include foreign PTT's, domestic and international prime communications
infrastructure contractors, telecommunications or satellite service providers,
broadcasters and media-related companies. The company also provides space
products for advanced guidance and control systems. These products include
gyroscopes, controlled momentum devices and star sensors for a wide range of
space and military applications for commercial and civil customers. These
products are used on satellites, launch vehicles, the Hubble telescope, the
space shuttle and the International Space Station.


EMERGING COMMERCIAL PRODUCTS


o  MEDICAL SIMULATION SYSTEMS

     The Company has approximately a one-third equity ownership interest in
Medical Education Technologies, Inc. ("METI"). METI is a medical technology
company engaged in the development, manufacture and sale of Human Patient
Simulators ("HPS"). The HPS is a computerized system with a life-like mannequin
that reacts to medical treatments and interventions similar to a human being.


                                       12
<PAGE>

Originally oriented to the anesthesiology training and education domain, METI
has expanded into cardiology, critical care, trauma care, allied health care,
military medicine and continuing medical education. METI's target customers for
its HPS include medical schools throughout the world, colleges with registered
nursing programs, community colleges and state, local and volunteer emergency
medical service organizations.


o  WIRELESS LOOP TELECOMMUNICATIONS EQUIPMENT

     The Company is applying its wireless communication expertise to introduce
local wireless loop telecommunications equipment using a synchronous Code
Division Multiple Access technology ("CDMA") supporting terrestrial and space
based, fixed and mobile communication services. The system's principal targeted
customer base is emerging market countries and rural areas where existing
telecommunications infrastructure is inadequate or non-existent. The Company's
system will have the potential to interface with low earth orbit ("LEO") PCS
systems such as Globalstar, Iridium and/or any local public telephone network.
The Company expects to manufacture for sale certain of the infrastructure
equipment. The Company intends to pursue joint ventures with third parties for
service and distribution capabilities. This same technology is also being
introduced into the Ellipso "big LEO" program to provide the key communications
capability in the ground and user segments. In this program, the Company will
provide the CDMA processing equipment in the Ground Control Segment and the
Ellipso user terminals, both fixed and mobile.


o  AIRPORT SECURITY EQUIPMENT

     The FAA has awarded the Company a development contract for next generation
airport security equipment for explosive detection. L-3 has teamed with
Analogic Corporation and GE to design and produce an explosive detection system
("EDS") utilizing a dual energy computer tomography ("CT") X-ray system. L-3's
EDS system, the eXaminer 3DXTM 6000, will analyze the contents of checked
baggage at airports for a wide-range of explosive material as specified by the
FAA. On November 23, 1998, L-3 received FAA certification for its eXaminer
3DXTM 6000 system which is the only second-generation system to receive
certification and the only system to generate full, three-dimensional images of
all objects in a piece of baggage. The eXaminer 3DXTM 6000 has been certified
at 500 bags per hour but eventually will be capable of inspecting baggage at an
average of 675 bags per hour, which will allow screening of passenger-checked
baggage for a large body aircraft, such as a Boeing 747, in approximately 40
minutes. It can be installed as a stand-alone unit in a conveyor system or in a
mobile van.


CONTRACTS

     A significant portion of L-3's sales are derived from high-priority,
long-term programs and from programs for which L-3 has been the incumbent
supplier, and in many cases acted as the sole provider for many years.
Approximately 56% of L-3's 1999 sales of $1,405.5 million were generated from
sole source contracts. L-3's customer satisfaction and excellent performance
record are evidenced by its performance-based award fees exceeding 90% on
average over the past two years. Management believes prime contractors will
increasingly award long-term, sole source, outsourcing contracts to the
merchant supplier they believe is most capable on the basis of quality,
responsiveness, design, engineering and program management support as well as
cost. As a consequence of L-3's strong competitive position, the Company has
experienced a contract award win rate for 1999 in excess of 58% on new
competitively bid contracts and in excess of 90% on contracts for which L-3 was
the incumbent.

     The Company enjoys a diverse business mix with a limited exposure to any
single program, a favorable balance of cost reimbursible and fixed price
contracts, a significant sole source follow-on business and an attractive
customer profile. See "Customers" below. L-3's sales mix of contracts for 1999
was 30% cost plus and 70% fixed price, providing the Company with a favorable
mix of predictable profitability (cost plus) and higher margin (fixed price)
business.

     Under firm fixed price contracts the Company agrees to perform for a
predetermined contract price. Although the Company's fixed price contracts
generally permit the Company to keep profits if costs are


                                       13
<PAGE>

less than projected, the Company does bear the risk that increased or unexpected
costs may reduce profit or cause the Company to sustain losses on the contracts.
Generally, firm fixed price contracts offer higher margin than cost plus type
contracts. All domestic defense contracts and subcontracts to which the Company
is a party are subject to audit, various profit and cost controls and standard
provisions for termination at the convenience of the U.S. government. Upon
termination, other than for a contractor's default, the contractor will normally
be entitled to reimbursement for allowable costs and an allowance for profit.
Foreign defense contracts generally contain comparable provisions relating to
termination at the convenience of the government. To date, no significant fixed
price contract of the Company has been terminated.

     Companies supplying defense-related equipment to the U.S. government are
subject to certain additional business risks peculiar to that industry. Among
these risks are the ability of the U.S. government to unilaterally suspend the
Company from new contracts pending resolution of alleged violations of
procurement laws or regulations. Other risks include a dependence on
appropriations by the U.S. government, changes in the U.S. government's
procurement policies (such as greater emphasis on competitive procurements) and
the need to bid on programs in advance of design completion. A reduction in
expenditures by the U.S. government for products and services of the type
manufactured and provided by the Company, lower margins resulting from
increasingly competitive procurement policies, a reduction in the volume of
contracts or subcontracts awarded to the Company or substantial cost overruns
could have an adverse effect on the Company.


BACKLOG

     The Company's backlog as of December 31, 1999 amounted to $1,003.7
million, of which $332.9 million was for the Secure Communication Systems
segment and $670.8 million for the Specialized Communication Products segment.
This backlog provides management with a useful tool to project sales and plan
its business on an on-going basis; however, no assurance can be given that the
Company's backlog will become revenues in any particular period or at all.
Funded backlog does not include the total contract value of multi-year,
cost-plus reimbursable contracts, which are funded as costs are incurred by the
Company. Funded backlog also does not include unexercised contract options
which represent the amount of revenue which would be recognized from the
performance of contract options that may be exercised by customers under
existing contracts and from purchase orders to be issued under indefinite
quantity contracts or basic ordering agreements. Overall, approximately 77% of
the December 31, 1999 funded backlog is expected to be shipped over the next
twelve-month period.


CUSTOMERS

     L-3 enjoys an attractive customer mix of defense and commercial business,
with DoD related sales accounting for 62% and commercial, U.S. government
(non-DOD) and foreign government sales accounting for approximately 38% of 1999
sales of $1,405.5 million. The Company intends to leverage this favorable
business profile to expand its merchant supplier business base. The Company's
sales are predominantly derived from contracts with agencies of, and prime
contractors to, the U.S. government. Various U.S. government agencies and
contracting entities exercise independent purchasing decisions. Therefore,
sales to the U.S. government generally are not regarded as constituting sales
to one customer. Instead, each contracting entity is considered to be a
separate customer. For 1999 the Company had approximately 365 contracts with a
value exceeding $1.0 million. Sales to the U.S. government for 1999, including
sales through prime contractors, were $924.0 million or approximately 66%. The
Company's largest program is a long-term, sole source cost plus support
contract for the U-2 program which contributed approximately 7.7% of 1999
sales. No other program represented more than 4% of 1999 sales.


COMPETITION

     The Company's ability to compete for defense contracts depends to a large
extent on the effectiveness and innovativeness of its research and development
programs, its ability to offer better program performance than its competitors
at a lower cost to the Government customer, and its readiness in facilities,
equipment and personnel to undertake the programs for which it competes. In
some instances,


                                       14
<PAGE>

programs are sole source or work directed by the Government to a single
supplier. In such cases, there may be other suppliers who have the capability to
compete for the programs involved, but they can only enter or reenter the market
if the Government should choose to reopen the particular program to competition.
Approximately 44% of the Company's $1,405.5 million sales for 1999 were related
to competitive contracts.

     The Company experiences competition from industrial firms and U.S.
government agencies, some of which have substantially greater resources than
the Company. These competitors include: AlliedSignal, Inc. ("AlliedSignal"),
Cubic Corporation, Eaton Corporation, Globecomm Systems Inc., Harris
Corporation, Hughes, Motorola, Scientific-Atlanta, Inc., Thomson Marconi Sonar
Ltd., Titan Corporation and TRW Inc. A majority of the sales of the Company is
derived from contracts with the Government and its prime contractors, and such
contracts are awarded on the basis of negotiations or competitive bids.
Management does not believe any one competitor or a small number of competitors
is dominant in any of the business areas of the Company. Management believes
the Company will continue to be able to compete successfully based upon the
quality and cost competitiveness of its products and services.


RESEARCH AND DEVELOPMENT

     The Company employs scientific, engineering and other personnel to improve
its existing product lines and to develop new products and technologies in the
same or related fields. As of December 31, 1999, the Company employed
approximately 3,900 engineers (of whom 17% hold advanced degrees). The amounts
of research and development performed under customer-funded contracts and
Company-sponsored research projects including bid and proposal costs for 1999
were $302.4 million.


PATENTS AND LICENSES

     Although the Company owns some patents and has filed applications for
additional patents, it does not believe that its operations depend upon its
patents. In addition, the Company's U.S. government contracts generally license
it to use patents owned by others. Similar provisions in the U.S. government
contracts awarded to other companies make it impossible for the Company to
prevent the use by other companies of its patents in most domestic work.


GEOGRAPHIC REGION SALES

     Substantially all of the Company's operations are domestic. The Company's
foreign operations are not material to the Company's results of operations,
cash flows or financial position.


ENVIRONMENTAL MATTERS

     The Company's operations are subject to various federal, state and local
environmental laws and regulations relating to the discharge, storage,
treatment, handling, disposal and remediation of certain materials, substances
and wastes used in its operations. The Company continually assesses its
obligations and compliance with respect to these requirements. Management
believes that the Company's current operations are in substantial compliance
with all existing applicable environmental laws and permits. The Company does
not currently project the need for any material unbudgeted expenditures to
remain in compliance with applicable environmental laws and regulations.

     In conjunction with various manufacturing facilities of the Company's
acquired businesses, the Company has assessed the risk of environmental
contamination thereon and, where appropriate, has obtained indemnification,
either from the respective sellers of those acquired businesses or through
Pollution Liability Insurance. The Company does not project any material,
non-indemnified environmental remediation expenses for such manufacturing
facilities.


PENSION PLANS

     In connection with the L-3 Acquisition, Holdings and L-3 Communications
Corporation assumed certain liabilities relating to defined benefit pension
plans for present and former employees and retirees


                                       15
<PAGE>

of certain businesses which were transferred from Lockheed Martin to Holdings
and L-3 Communications. Prior to the consummation of the L-3 Acquisition,
Lockheed Martin received a letter from the Pension Benefit Guaranty Corporation
(the "PBGC") which requested information regarding the transfer of such pension
plans and indicated that the PBGC believed certain of such pension plans were
underfunded using the PBGC's actuarial assumptions. These assumptions result in
a larger liability for accrued benefits than the assumptions used for financial
reporting under Statement of Financial Accounting Standards No. 87. The PBGC
underfunding is related to the Communication Systems -- West and Aviation
Recorders pension plans (the "Subject Plans").

     With respect to the Subject Plans, Lockheed Martin entered into an
agreement (the "Lockheed Martin Commitment") among Lockheed Martin, L-3
Communications and the PBGC dated as of April 30, 1997. The material terms and
conditions of the Lockheed Martin Commitment include a commitment by Lockheed
Martin to the PBGC to, under certain circumstances, assume sponsorship of the
Subject Plans or provide another form of financial support for the Subject
Plans. The Lockheed Martin Commitment will continue with respect to any Subject
Plan until such time as such Subject Plan is no longer underfunded on a PBGC
basis for two consecutive years or, at any time after May 31, 2002, the Company
achieves investment grade credit ratings. Pursuant to the Lockheed Martin
Commitment, the PBGC agreed that it would take no further action in connection
with the L-3 Acquisition.

     Upon the occurrence of certain events, Lockheed Martin, at its option, has
the right to decide whether to cause the Company to transfer sponsorship of any
or all of the Subject Plans to Lockheed Martin, even if the PBGC has not sought
to terminate the Subject Plans. Such a triggering event occurred in 1998, that
reversed itself in 1999, relating to a decrease in the PBGC-mandated discount
rate in 1998 that had resulted in an increase in the underlying liability. The
Company notified Lockheed Martin the 1998 triggering event, and in February
1999, Lockheed Martin informed the Company that it had no present intention to
exercise its right to cause the Company to transfer sponsorship of the Subject
Plans. If Lockheed Martin did assume sponsorship of these plans, it would be
primarily liable for the costs associated with funding the Subject Plans or any
costs associated with the termination of the Subject Plans but L-3
Communications would be required to reimburse Lockheed Martin for these costs.
To date, the impact on pension expense and funding requirements resulting from
this arrangement has not been significant. However, should Lockheed Martin
assume sponsorship of the Subject Plans or if these plans were terminated, the
impact of any increased pension expenses or funding requirements could be
material to the Company. The Company has performed its obligations under the
letter agreement with Lockheed Martin and the Lockheed Martin Commitment and
has not received any communications from the PBGC concerning actions which the
PBGC contemplates taking in respect of the Subject Plans.


EMPLOYEES

     As of December 31, 1999, the Company employed approximately 10,200
full-time and part-time employees. The Company believes that its relations with
its employees are good.

     Approximately 540 of the Company's employees at its Communication
Systems--East operation in Camden, New Jersey are represented by four unions,
the Association of Scientists and Professional Engineering Personnel, the
International Federation of Professional and Technical Engineers, the
International Union of Electronic, Electrical, Salaried, Machine and Furniture
Workers and an affiliate of the International Brotherhood of Teamsters. The
collective bargaining agreements for these four unions were successfully
renegotiated in mid-1998 without any disruptions to operations. Three of the
collective bargaining agreements will expire in 2002, and the other agreement
will expire in 2001.

     Approximately 200 employees of Ocean Systems are represented by the United
Auto Workers. The collective bargaining agreement for this union was
successfully renegotiated in the third quarter, 1999 without any disruptions to
operations. The new collective bargaining agreement will expire in 2003.
Approximately 140 of the employees at Ocean Systems' ELAC subsidiary in Kiel,
Germany are represented by the Metal Trade Industrial Workers of the Hamburg
Region and ELAC is represented by the Association of Metal Industry Employers
for Schleswig-Holstein.


                                       16
<PAGE>

     Approximately 290 of SPD's employees located in Philadelphia, Pennsylvania
are represented by the United Automobile Aerospace and Agricultural Implement
Workers of America, Local 1612 Amalgamated. The four collective bargaining
agreements covering these employees were successfully renegotiated in April,
1999 without any disruptions to operations. The new collective bargaining
agreements expire in 2004. Approximately 36 of SPD's employees located in
National City, California are represented by the International Brotherhood of
Electrical Workers, Local 569, whose collective bargaining agreement expires in
late May 2000. While the Company has not yet initiated discussions with
representatives of the union, management believes that it will be able to
negotiate without material disruption to its business, a satisfactory new
collective bargaining agreement. However, there can be no assurance that a
satisfactory agreement will be reached with the covered employees or that a
material disruption to the Company's National City operations will not occur.
Approximately 28 of SPD's employees located in National City, California are
represented by the International Association of Machinists and Aerospace
Workers, Local 389. The collective bargaining agreement for the union was
successfully renegotiated in February 2000 without any disruptions to
operations. The new collective bargaining agreement expires in 2003.


     Approximately 125 of Electrodynamics' employees located in Rolling
Meadows, Illinois are represented by the International Brotherhood of
Electrical Workers. The collective bargaining agreement expires in the last
quarter of 2000. While the Company has not yet initiated discussions with
representatives of the union, management believes it will be able to negotiate,
without material disruptions to its business, a satisfactory new collective
bargaining agreement. However there can be no assurance that a satisfactory
agreement will be reached with the covered employees or that a material
disruption to the Company's Rolling Meadows operations will not occur.


     Approximately 120 of Telemetry East's employees located in Newtown,
Pennsylvania are represented by the International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers. The collective bargaining
agreement for this union was successfully renegotiated in December, 1999
without any disruptions to operations. The new collective bargaining agreement
expires in 2004.


                                       17
<PAGE>

ITEM 2. PROPERTIES

     The table below sets forth certain information with respect to significant
facilities and properties of the Company as of December 31, 1999.




<TABLE>
<CAPTION>
                     LOCATION                           OWNED       LEASED
--------------------------------------------------   ----------   ---------
                                                    (thousands of square feet)
<S>                                                  <C>          <C>
L-3 Headquarters, NY .............................          --        35.3
L-3 Washington Operations, Arlington, VA .........          --         4.6
SECURE COMMUNICATION SYSTEMS:
 Camden, NJ ......................................          --       580.6
 Salt Lake City, UT ..............................          --       487.7
SPECIALIZED COMMUNICATION PRODUCTS:
 Anaheim, CA .....................................       293.6       165.3
 Folsom, CA ......................................          --        57.5
 Menlo Park, CA ..................................          --        93.1
 San Diego, CA ...................................       196.0        68.9
 Sylmar, CA ......................................          --       253.0
 Ocala, FL .......................................       112.0          --
 Sarasota, FL ....................................          --       143.7
 Alpharetta, GA ..................................        93.0          --
 Concord, MA .....................................          --        60.0
 Lowell, MA ......................................          --        47.0
 Newburyport, MA .................................          --        81.2
 Teterboro, NJ ...................................          --       250.0
 Hauppauge, NY ...................................       240.1          --
 Philadelphia, PA ................................          --       230.0
 Newton, PA ......................................        78.0        13.5
 Kiel, Germany ...................................          --       302.7
 Leer, Germany ...................................          --        26.5
</TABLE>

     In total, the Company owns approximately 1,150,000 square feet and leases
approximately 3.3 million square feet of manufacturing facilities and
properties.


ITEM 3. LEGAL PROCEEDINGS


     From time to time the Company is involved in legal proceedings arising in
the ordinary course of its business. Management believes it is adequately
reserved for these liabilities and that there is no litigation pending that
could have a material adverse effect on the Company's results of operations and
financial condition.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


     Not applicable.

                                       18
<PAGE>

                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


PRICE RANGE OF COMMON STOCK


     The common stock of Holdings is traded on the New York Stock Exchange (the
"NYSE") under the symbol "LLL". The following table sets forth, for each of the
quarterly periods indicated since the IPO, the high and low closing price of
the common stock as reported on the NYSE.


<TABLE>
<CAPTION>
                                                     COMMON STOCK MARKET PRICE
                                                     -------------------------
1999                                                     HIGH          LOW
----                                                 -----------   -----------
<S>                                                  <C>           <C>
Fourth quarter ...................................    $  45.13      $  34.81
Third quarter ....................................       48.44         36.38
Second quarter ...................................       52.88         44.31
First quarter ....................................       47.88         39.38
1998
----
Fourth quarter ...................................    $  48.19      $  34.94
Third quarter ....................................       39.69         31.19
Second quarter (commencing May 19, 1998) .........       32.50         26.63
</TABLE>

     On March 28, 2000, the closing price of Holdings common stock, as reported
by the NYSE, was $46.00 per share. As of March 28, 2000, there were 174
stockholders of record of Holdings' common stock, not including the
stockholders for whom shares are held in a "nominee" or "street" name.


     L-3 Communications is a wholly owned subsidiary of Holdings.


DIVIDEND POLICY


     Since its inception, effective April 1, 1997, Holdings has paid no cash
dividends on its common stock. Holdings currently intends to retain its
earnings to finance future growth and, therefore, does not anticipate paying
any cash dividends on its common stock in the foreseeable future. Any
determination as to the payment of dividends will depend upon the future
results of operations, capital requirements and financial condition of Holdings
and its subsidiaries and such other facts as the Board of Directors of Holdings
may consider, including any contractual or statutory restrictions on Holdings'
ability to pay dividends. Moreover, Holdings is a holding company and its
ability to pay dividends is dependent upon receipt of dividends, distributions,
advances, loans or other cash transfers from L-3 Communications. Certain
outstanding debt instruments of L-3 Communications limit its ability to pay
dividends or other distributions on its common stock or to make advances, loans
or other cash transfers to Holdings.


                                       19
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

     The selected consolidated (combined) financial data have been derived from
the audited financial statements for the respective periods and should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Consolidated (Combined) Financial
Statements of the Company (Predecessor Company) included elsewhere herein.


<TABLE>
<CAPTION>

                                                                 COMPANY                           PREDECESSOR COMPANY
                                               -------------------------------------------- ----------------------------------
                                                                                              THREE
                                                       YEAR ENDED             NINE MONTHS     MONTHS
                                                      DECEMBER 31,               ENDED         ENDED    YEAR ENDED DECEMBER 31,
                                               ---------------------------    DECEMBER 31,    MARCH 31, -----------------------
                                                    1999          1998          1997(1)        1997      1996(2)     1995(2)
                                               ------------- ------------- ---------------- ---------- ----------- -----------
                                                                    (in millions, except per share data)
<S>                                            <C>           <C>           <C>              <C>        <C>         <C>
STATEMENT OF OPERATIONS DATA:
Sales ........................................  $ 1,405.5     $ 1,037.0       $  546.5       $  158.9   $  543.1    $  166.8
Operating income .............................      150.5         100.3           51.5(3)         7.9       43.7         4.7
Interest expense, net ........................       55.1          46.9           28.5            8.4       24.2         4.5
Provision (benefit) for income taxes .........       36.7          20.9           10.7           (0.2)       7.8         1.2
Net income (loss) ............................       58.7          32.6           12.3(3)        (0.3)      11.7        (1.0)
Earnings per common share:
 Basic .......................................  $    1.83    $     1.32      $    0.62(3)
 Diluted .....................................       1.75          1.26           0.61(3)
Weighted average common shares
 outstanding:
 Basic .......................................       32.1          24.7           20.0
 Diluted .....................................       33.5          25.9           20.0
BALANCE SHEET DATA
 (AT PERIOD END):
Working capital ..............................  $   249.4     $   157.8       $  143.2                  $   98.8    $   21.1
Total assets .................................    1,633.8       1,285.4          697.0                     590.6       228.5
Long-term debt ...............................      605.0         605.0          392.0
Invested equity ..............................                                                             473.6       194.7
Shareholders' equity .........................      583.2         300.0          113.7
</TABLE>


----------
(1)   Reflects the L-3 Acquisition effective April 1, 1997.

(2)   Reflects the Predecessor company's ownership of nine business units
      acquired by Lockheed Martin Corporation from Loral effective April 1,
      1996. Prior to April 1, 1996, the Predecessor Company was comprised only
      of Communications Systems -- East.

(3)   Includes a nonrecurring, noncash compensation charge of $4.4  million
      ($0.22 per share) related to the initial capitalization of the Company,
      which was recorded effective April 1, 1997.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION


GENERAL

     The Company is a leading merchant supplier of sophisticated secure
communication systems and specialized communication products. These systems and
products are critical elements of virtually all major communication, command
and control, intelligence gathering and space systems. The Company's customers
include the DoD, certain U.S. government intelligence agencies, major aerospace
and defense contractors, foreign governments and commercial customers. The
Company has two reportable segments, Secure Communication Systems and
Specialized Communication Products.

     The Secure Communication Systems segment provides secure, high data rate
communications systems for military and other U.S. government reconnaissance
and surveillance applications. These


                                       20
<PAGE>

operations are principally performed under cost plus, sole source contracts
supporting long-term programs for the U.S. armed forces and classified
customers. The Secure Communication Systems segment also supplies communication
software support services to military and related government intelligence
markets. The Specialized Communication Products segment includes three product
categories: microwave components, avionics and ocean products, and telemetry,
instrumentation and space products.

     All domestic government contracts and subcontracts of the Company are
subject to audit and various cost controls, and include standard provisions for
termination for the convenience of the U.S. government. Multi-year U.S.
government contracts and related orders are subject to cancellation if funds
for contract performance for any subsequent year become unavailable. Foreign
government contracts generally include comparable provisions relating to
termination for the convenience of the relevant foreign government.


 ACQUISITION HISTORY

     In April 1997 the Company completed the L-3 Acquisition and acquired the
Predecessor Company which was comprised of nine business units that Lockheed
Martin acquired from Loral in April 1996 and one business unit purchased by
Lockheed Martin as part of its acquisition of the aerospace business of General
Electric in April 1993.

     On February 5, 1998, March 4, 1998 and March 30, 1998 the Company
purchased the assets of the Satellite Transmission Systems division ("STS") of
California Microwave, Inc., ILEX Systems ("ILEX") and Ocean Systems business
("Ocean Systems") of the former AlliedSignal Inc. for cash of $26.1 million,
$54.3 million and $68.8 million, respectively. On August 13, 1998, the Company
purchased all of the outstanding stock of SPD Technologies, Inc. ("SPD") for
$238.3 million of cash, including expenses, net of cash acquired. SPD, STS,
ILEX and Ocean Systems collectively comprise the "1998 Acquisitions".
Additionally, during 1998 the Company purchased several other operations and
product lines, which individually and in the aggregate were not material to the
results of operations or financial position of the Company. In August 1999, the
Company issued 150,955 shares of common stock of Holdings valued at $6.4
million as additional consideration for the ILEX acquisition based on the 1998
financial performance of ILEX. At December 31, 1999, the Company recorded an
other current liability of $6.1 million for shares of common stock to be issued
in 2000 as additional consideration for the ILEX acquisition based on the 1999
financial performance of ILEX. The remaining contingent consideration for the
ILEX acquisition, payable in 2001, will be based on ILEX's 2000 financial
performance.

     On January 8, 1999, the Company acquired all of the outstanding common
stock of Microdyne Corporation ("Microdyne") for $94.2 million in cash,
including expenses and the repayment of assumed debt, net of cash acquired. On
April 16, 1999, the Company acquired all of the outstanding common stock of
Aydin Corporation ("Aydin") for $60.0 million, in cash, including expenses, net
of cash acquired. On June 30, 1999, the Company acquired all of the outstanding
common stock of Interstate Electronics Corporation ("IEC") of Scott
Technologies Inc. for $40.6 million in cash, including expenses. Collectively,
the acquisitions of Microdyne, Aydin and IEC comprise the "1999 Acquisitions".
See pro forma disclosures in Note 4 to the financial statements.

     On December 31, 1999, the Company completed its acquisition of the assets
of the Space and Navigation business ("Space & Nav") from Honeywell, for $55.0
million in cash plus expenses, subject to adjustment based on closing date net
assets, as defined.

     On February 10, 2000, the Company acquired the assets of the TDTS business
of Raytheon for $160.0 million in cash plus expenses, subject to adjustment
based on closing date net working capital, as defined. Following the
acquisition the Company changed the name of TDTS to Link Simulation and
Training. The acquisition was financed using borrowings under the Company's
Senior Credit Facilities.

     On February 14, 2000, the Company acquired the assets of TrexCom for $50.2
million in cash, plus expenses, subject to adjustment based on closing date net
worth, as defined. The acquisition was financed using borrowings under the
Company's Senior Credit Facilities.


                                       21
<PAGE>

     On February 10, 2000, the Company entered into an asset purchase agreement
to acquire the Traffic Alert and Collision Avoidance System ("TCAS") product
line from Honeywell for a purchase price of $225.0 million in cash, subject to
adjustment based on closing date net assets, as defined. In addition, on
February 25, 2000 the Company entered into a Memorandum of Agreement ("MOA")
with Thomson-CSF Sextant S.A. ("Sextant"), a subsidiary of Thomson-CSF, under
which L-3 will purchase the assets of TCAS from Honeywell, create a limited
liability corporation for TCAS (the "TCAS LLC"), contribute 100% of the TCAS
assets to TCAS LLC, and sell a 30% interest in the TCAS LLC to Sextant for a
cash purchase price equal to 30% of the final purchase price paid by the
Company for TCAS (collectively, the "TCAS LLC Transaction"). L-3 will maintain
operating management of the TCAS LLC and expects to consolidate it. The MOA
will terminate if the TCAS LLC Transaction is not consummated by May 31, 2000.
L-3 expects to finance the TCAS acquisition with borrowings under the Company's
existing credit facilities and a new revolving 364 day senior credit facility
for $250.0 million. The TCAS acquisition and the TCAS LLC Transaction are
subject to regulatory approval by United States agencies and the European Union
Commission.


     All of the acquisitions have been accounted for as purchase business
combinations and are included in the Company's results of operations from their
respective effective dates.


RESULTS OF OPERATIONS


     The following information should be read in conjunction with the
Consolidated (Combined) Financial Statements, which reflect the Company's
results of operations from the effective date of the L-3 Acquisition, April 1,
1997. The financial statements also reflect the results of operations of the
Predecessor Company for the three months ended March 31, 1997. The results of
operations for the periods presented are significantly affected by the timing
of the Company's acquisitions.


     The results of operations of the Predecessor Company include certain costs
and expenses allocated to it by Lockheed Martin for corporate office and
certain other expenses primarily using an allocation methodology prescribed by
U.S. government regulations for government contractors. Pension and
postretirement benefit costs were allocated based on employee headcount.
Interest expense was allocated to the Predecessor Company based on Lockheed
Martin's actual weighted average consolidated interest rate applied to the
portion of the beginning of the year invested equity deemed to be financed by
consolidated debt based on Lockheed Martin's debt to equity ratio on such date.
The provision (benefit) for income taxes was prepared on a separate taxpayer
basis, calculated by applying statutory rates to reported pre-tax income after
considering items that do not enter into the determination of taxable income
and tax credits related to the Predecessor Company. Accordingly, the results of
operations of the Predecessor Company may not be the same as would have
occurred had the Predecessor Company been an independent entity.


     The following table provides selected income statement data for the
Company for the years ended December 31, 1999 ("1999") and 1998 ("1998") and
the nine-month period ended December 31, 1997 and for the Predecessor Company
for the three-month period ended March 31, 1997. For purposes of the discussion
of the results of operations, results for the year ended December 31, 1997
("1997") were prepared by combining, without adjustment, the results of
operations of the Company for the nine-month period ended December 31, 1997
with those of the Predecessor Company for the three-month period ended March
31, 1997. Prior year reported segment information has been restated to conform
to the 1999 presentation of the Company's reportable segments.


                                       22
<PAGE>


<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31, 1997
                                                               --------------------------------------------
                                                                                PREDECESSOR
                                           COMPANY                COMPANY         COMPANY
                                 ---------------------------   --------------   -------------
                                                                 NINE MONTHS     THREE MONTHS
                                   YEAR ENDED DECEMBER 31,          ENDED           ENDED
                                 ---------------------------    DECEMBER 31,      MARCH 31,         1997
                                     1999           1998            1997             1997         COMBINED
                                 ------------   ------------   --------------   -------------   -----------
<S>                              <C>            <C>            <C>              <C>             <C>
Sales(1):
Secure Communication
 Systems .....................    $   542.9      $   483.5        $  307.6         $  84.9       $  392.5
Specialized Communication
 Products ....................        862.6          553.5           238.9            74.0          312.9
                                  ---------      ---------        --------         -------       --------
    Total ....................    $ 1,405.5      $ 1,037.0        $  546.5         $ 158.9       $  705.4
                                  =========      =========        ========         =======       ========
Operating income before
 noncash compensation
 charge:
 Secure Communication
   Systems ...................    $    47.0      $    39.9        $   25.8         $   0.1       $   25.9
 Specialized Communication
   Products ..................        103.5           60.4            30.0             7.8           37.8
                                  ---------      ---------        --------         -------       --------
    Total ....................        150.5          100.3            55.8             7.9           63.7
Noncash compensation charge(2)           --             --          (  4.4)             --         (  4.4)
                                  ---------      ---------        --------         -------       --------
Operating income .............    $   150.5      $   100.3        $   51.4         $   7.9       $   59.3
                                  =========      =========        ========         =======       ========
Depreciation and amortization
 expenses included in
 operating income:
 Secure Communication
   Systems ...................    $    18.4      $    17.3        $   12.9         $   5.2       $   18.1
 Specialized Communication
   Products ..................         35.3           23.1             9.3             2.6           11.9
 Noncash compensation
   charge ....................           --             --             4.4              --            4.4
                                  ---------      ---------        --------         -------       --------
    Total ....................    $    53.7      $    40.4        $   26.6         $   7.8       $   34.4
                                  =========      =========        ========         =======       ========
EBITDA(3)
 Secure Communication
   Systems ...................    $    65.4      $    57.2        $   38.7         $   5.3       $   44.0
 Specialized Communication
   Products ..................        138.8           83.5            39.3            10.4           49.7
                                  ---------      ---------        --------         -------       --------
    Total ....................    $   204.2      $   140.7        $   78.0         $  15.7       $   93.7
                                  =========      =========        ========         =======       ========
</TABLE>

----------
(1)   Sales are after intersegment eliminations. See Note 17 to the
      Consolidated (Combined) Financial Statements.

(2)   The Company did not include the 1997 noncash compensation charge of $4.4
      million in its internal measure of reportable segment profitability
      because that charge was not related to the operations of the segments.

(3)   EBITDA is defined as operating income plus depreciation expense and
      amortization expense (excluding the amortization of debt issuance costs)
      and the 1997 nonrecurring, noncash compensation charge of $4.4 million.
      EBITDA is not a substitute for operating income, net income or cash flows
      from operating activities as determined in accordance with generally
      accepted accounting principles as a measure of profitability or
      liquidity. EBITDA is presented as additional information because the
      Company believes it to be a useful indicator of the Company's ability to
      meet debt service and capital expenditure requirements.


                                       23
<PAGE>

     1999 COMPARED TO 1998. Sales increased $368.5 million to $1,405.5 million
in 1999 and was comprised of growth in sales of $59.4 million for the Secure
Communication Systems segment and $309.1 million for the Specialized
Communication Products segment. Operating income increased $50.2 million to
$150.5 million in 1999. Operating income as a percentage of sales ("operating
margin") improved to 10.7% from 9.7%. Depreciation and amortization expenses
increased $13.3 million to $53.7 million in 1999, reflecting increased goodwill
amortization associated with acquisitions and additional depreciation related
to capital expenditures and acquired businesses. EBITDA for 1999 increased
$63.5 million to $204.2 million. EBITDA as a percentage of sales ("EBITDA
margin") improved to 14.5% in 1999 from 13.6% in 1998. Basic earnings per
common share ("EPS") and diluted EPS grew 38.6% to $1.83 and 38.9% to $1.75,
respectively. Basic weighted-average common shares outstanding and diluted
weighted-average common shares outstanding increased 30.1% and 29.4%,
respectively, principally because of the timing of the issuance of 5.0 million
shares of common stock in connection with Holding's February 1999 stock
offering.

     Sales of the Secure Communication Systems segment increased $59.4 million
or 12.3% to $542.9 million in 1999. Operating income increased $7.1 million to
$47.0 million. Operating margin improved to 8.7% from 8.3%. The increase in
sales was primarily attributable to greater sales on the U-2 Support Program,
secure telephone equipment (STE) and airport security systems and the Microdyne
acquisition. These sales gains were partially offset by lower sales on certain
high data rate communication systems programs, communication subsystems for the
International Space Station (ISS) and local management device/key processor
(LMD/KP) units consistent with the scheduled phasedown of these programs. The
improvement in operating margin was principally attributable to improved
margins on military communication systems and high data rate communication
systems arising from cost reductions and operating efficiencies and sales
volume increases on STE, partially offset by lower margins from the Microdyne
acquired businesses and costs incurred for network security systems. EBITDA
increased $8.2 million to $65.4 million and EBITDA margin improved to 12.0% in
1999 from 11.8% in 1998. The increases in EBITDA and EBITDA margin were
attributable to the items affecting the trends in operating income.

     Sales of the Specialized Communication Products segment increased $309.1
million or 55.8% to $862.6 million in 1999. Operating income increased $43.1
million to $103.5 million in 1999, and operating margin increased to 12.0% from
10.9%. The increase in sales was principally attributable to the timing of the
Aydin and IEC acquisitions in 1999 and the SPD and Ocean Systems acquisitions
in 1998, as well as volume increases on ocean products, primarily for power
distribution, control and conversion systems for both military and commercial
applications, commercial aviation recorders and space and satellite control
products. These sales gains were partially offset by lower volume on microwave
components and decreased shipments of displays and antenna products. The
increase in operating margin was principally attributable to higher margins on
ocean products and aviation recorders attributable to volume increases and cost
reductions, higher margins from the SPD acquired business which was included in
the results of operations in 1998 for six months, and improved margins in 1999
for the STS business acquired in February 1998. These operating margin
improvements were partially offset by lower operating margins for the Aydin and
IEC acquired businesses, and lower margins on microwave components and antenna
products principally attributable to declines in sales. EBITDA increased $55.3
million to $138.8 million in 1999, and EBITDA margin increased to 16.1% from
15.1% in 1998. The changes in EBITDA and EBITDA margin were primarily
attributable to the items affecting the trends in operating income.

     Interest expense, net of interest and other income, increased $8.2 million
to $55.1 million in 1999 and reflects the higher average outstanding debt
during 1999 compared with 1998 principally because of the $200.0 million of
senior subordinated notes sold by the Company in December 1998. Interest and
other income for 1999 includes $0.4 million for a gain on the sale of a
business. The income tax provision for 1999 reflects the Company's effective
income tax rate for 1999 of 38.5%, compared with the effective tax rate of
39.1% for 1998.

     1998 COMPARED TO 1997. Sales increased $331.6 million to $1,037.0 million
in 1998. Operating income increased $41.0 million to $100.3 million in 1998.
Operating income for 1997 includes a non-recurring noncash compensation charge
of $4.4 million ($0.22 per share) recorded effective April 1, 1997 related to
the initial capitalization of the Company. Excluding this charge, operating
margin for 1997


                                       24
<PAGE>

would have been 9.0%. Excluding the 1997 noncash compensation charge, 1998
depreciation and amortization expenses increased $10.4 million to $40.4 million
in 1998, reflecting increased goodwill amortization associated with acquisitions
and additional depreciation related to capital expenditures. EBITDA for 1998
increased $47.0 million to $140.7 million. EBITDA margin improved to 13.6% from
13.3%.


     Sales of the Secure Communication Systems segment increased $91.0 million
or 23.2% to $483.5 million in 1998. Operating income increased $14.0 million to
$39.9 million. Operating margin improved to 8.3% from 6.6%. The increase in
sales was primarily attributable to the ILEX acquired business and increased
production and shipments of the CHBDL and Raptor high data rate communications
systems, UAV programs, and STE, partially offset by a decline in sales on the
ISS program. The increase in operating income was principally attributable to
acquisitions and improved margins on space communication systems, military
communication systems and space control systems, the 1998 sales growth and the
negative impact on prior year operating income resulting from $3.3 million of
costs related to certification efforts for the explosive detection system
("EDS"). EBITDA increased $13.2 million to $57.2 million in 1998 and EBITDA
margin improved to 11.8% in 1998 from 11.2% in 1997. The increases in EBITDA
and EBITDA margin were attributable to the items affecting the trends in
operating income.


     Sales of the Specialized Communication Products segment increased $240.6
million or 76.9% to $553.5 million in 1998. Operating income increased $22.6
million to $60.4 million in 1998, while operating margin decreased to 10.9%
from 12.1%. The increase in sales was principally attributable to the Ocean
Systems, STS and SPD acquired businesses and volume increases in aviation
recorders, display products on the E2C and V-22 platforms and microwave
components for RF safety and monitoring, partially offset by lower sales volume
on commercial telecommunications products. Sales for 1997 also included $1.8
million from a business which was sold in 1997. The decrease in operating
margin for 1998 is principally attributable to the lower margins from the STS
acquired business, partially offset by improved margins on aviation recorders,
display products and microwave monitoring components. EBITDA increased $33.8
million to $83.5 million in 1998, while EBITDA margin declined to 15.1% in 1998
from 15.9% in 1997. The changes in EBITDA and EBITDA margin were primarily
attributable to the items affecting the trends in operating income.


     Interest expense, net increased $10.0 million to $46.9 million in 1998 and
was primarily attributable to higher average outstanding debt balances during
1998. The effective income tax rate for 1998 was 39.1% compared with 46.4% for
1997, which reflected the Company's $4.4 million non-recurring, noncash
compensation charge and the Predecessor Company's amortization expense for
costs in excess of net assets acquired, both of which were not deductible for
income tax purposes.


LIQUIDITY AND CAPITAL RESOURCES


BALANCE SHEET


     Contracts in process increased $133.1 million in 1999, of which $104.3
million of the balance at December 31, 1999 was related to businesses acquired
during 1999. The remaining increase was principally from (i) increases in
unbilled contract receivables arising from an increase in programs entering the
production phase wherein unbilled costs and profits generally exceed progress
payments received from the customers until contract shipments are completed and
(ii) increases in inventory for production on certain commercial programs and
products. The increases in property, plant and equipment, intangibles, accounts
payable, accrued expenses and other current liabilities were principally
related to acquired businesses.


                                       25
<PAGE>

STATEMENT OF CASH FLOWS

     The following table provides cash flow statement data for the Company and
the Predecessor Company:


<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31, 1997
                                                             -------------------------------------------
                                                                               PREDECESSOR
                                          COMPANY               COMPANY          COMPANY
                                        -----------          --------------   ------------
                                                                                 THREE
                                                              NINE MONTHS       MONTHS
                                  YEAR ENDED DECEMBER 31,        ENDED           ENDED
                                  ------------------------    DECEMBER 31,      MARCH 31,        1997
                                     1999          1998           1997            1997         COMBINED
                                  ----------   -----------   --------------   ------------   -----------
<S>                               <C>          <C>           <C>              <C>            <C>
Net cash from (used in)
 operating activities .........    $   99.0     $   85.1        $   73.9        $ (16.3)      $   57.6
Net cash (used in) investing
 activities ...................      (284.8)      (472.9)         (457.8)         ( 4.3)        (462.1)
Net cash from financing
 activities ...................       202.4        336.4           461.4           20.6          482.0
</TABLE>

OPERATING ACTIVITIES

     During 1999, L-3 generated $99.0 million in cash from operating
activities, an increase of $13.9 million over 1998. Earnings plus noncash costs
and expenses and the deferred portion of the income tax provision increased
$55.6 million to $151.8 million in 1999 from $96.2 million in 1998 because of
growth in the Company's level of operations. During 1999 cash invested in
operating assets and liabilities increased $52.8 million compared with $11.1
million for 1998. The increase was principally related to the greater working
capital requirements primarily in contracts in process. Operating activities
are a principal source of L-3's cash flows. Over the past three years cash
generated from operating activities was $241.7 million which was partially used
to fund capital expenditures and acquisitions.


INVESTING ACTIVITIES

     Since L-3's formation in April 1997, the Company has actively pursued its
acquisition strategy. In 1999 the Company invested $272.2 million in
acquisitions primarily for the 1999 Acquisitions and Space & Nav. In 1998 cash
invested in acquisitions was $448.0 million including $389.7 million for the
1998 Acquisitions and $58.3 million for the purchase of other operations and
product lines.

     The Company's capital expenditures typically relate primarily to
improvement of manufacturing facilities and equipment. The Company expects that
its capital expenditures for 2000 will be approximately $40.0 million,
including those of the TrexCom and Link Simulation and Training businesses
acquired in February 2000.


FINANCING ACTIVITIES

     On February 4, 1999, Holdings sold 5.0 million shares of common stock in a
public offering for $42.00 per share (the "February 1999 Common Stock
Offering"); the net proceeds of $201.5 million were contributed to the Company
and partially used to repay borrowings made in January 1999 under the Senior
Credit Facilities to finance the Microdyne acquisition. In addition, 6.5
million shares were sold in the February 1999 Common Stock Offering by the
Lehman Partnership and Lockheed Martin. In October 1999, Lockheed Martin sold
its remaining ownership interest in Holdings' common stock in a private
transaction. In December 1999, the Lehman Partnership distributed approximately
3.8 million shares of its common stock of Holdings to its partners. At December
31, 1999 the Lehman Partnership owned approximately 16.8% and Lockheed Martin
owned none of the outstanding shares of Holdings' common stock.

     During 1999, the Senior Credit Facilities were amended to increase the
Company's revolving credit facilities by $15.0 million to $400.0 million. At
December 31, 1999, available borrowings under the revolving credit facilities
were $309.3 million after reductions for outstanding letters of credit of $90.7
million. In February 2000, the Company financed its acquisitions of TrexCom and
Link Simulation and Training with $210.2 million of borrowings under the
revolving credit facilities.


                                       26
<PAGE>

     On May 19, 1998, Holdings sold 6.9 million shares of its common stock in
an initial public offering (the "IPO") for $22.00 per share; the net proceeds
of $139.5 million were contributed to the Company.

     In April 1997, May 1998 and December 1998, the Company sold $225.0 million
of 10 3/8% senior subordinated notes due 2007, $180.0 million of 8 1/2% senior
subordinated notes, and $200.0 million of 8% senior subordinated notes,
respectively (collectively, the "Senior Subordinated Notes"), whose net
proceeds amounted to $209.4 million, $173.8 million and $192.8 million,
respectively, after debt issuance costs.

     The Senior Credit Facilities and the Senior Subordinated Notes contain
financial covenants which remain in effect so long as any amount is owed or any
commitment to lend exists thereunder by L-3 Communications. As of December 31,
1999, L-3 Communications had been in compliance with these covenants at all
times. The borrowings under the Senior Credit Facilities are guaranteed by
Holdings and by substantially all of the Company's subsidiaries. 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 the Company's subsidiaries, all
of which are wholly owned subsidiaries. See Note 7 to Consolidated (Combined)
Financial Statements for a description of the Company's debt and related
financial covenants at December 31, 1999.

     Based upon the current level of operations, management believes that the
Company's cash from operating activities, together with available borrowings
under the Senior Credit Facilities, will be adequate to meet its anticipated
requirements for working capital, capital expenditures, research and
development expenditures, program and other discretionary investments, and
interest payments for the foreseeable future including at least the next three
years. There can be no assurance, however, that the Company's business will
continue to generate cash flow at or above current levels or that currently
anticipated improvements will be achieved. If the Company is unable to generate
sufficient cash flow from operations in the future to service its debt, it may
be required to sell assets, reduce capital expenditures, refinance all or a
portion of its existing debt or obtain additional financing. The Company's
ability to make scheduled principal payments, to pay interest on or to
refinance its indebtedness depends on its 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 its control. There can
be no assurance that sufficient funds will be available to enable the Company
to service its indebtedness, or make necessary capital expenditures and program
and discretionary investments.


MARKET RISKS

     All of the Company's market risk sensitive instruments are entered into
for purposes other than trading.

     Interest Rate Risk. The Company's financial instruments that are sensitive
to changes in interest rates include borrowings under the Senior Credit
Facilities and purchased interest rate cap contracts and written interest rate
floor contracts, all of which are denominated in U.S. dollars. The interest
rates on the Senior Subordinated Notes are fixed-rate, and therefore, are not
affected by changes in interest rates.
To mitigate risks associated with changing interest rates on borrowings under
the Senior Credit Facilities which bear interest at variable rates the Company
entered into interest rate cap and floor contracts (the "interest rate
agreements"). The purchased interest rate cap provides protection against
increases in interest rates on borrowings to the extent (i) those borrowings
are less than or equal to the notional amount of the cap contract and (ii) the
interest rate paid on the borrowings rises above the cap reference rate plus
the Company's applicable borrowing spread. Conversely, the written interest
rate floor limits the ability of the Company to enjoy decreases in interest
rates on its borrowings to the extent (i) those borrowings are less than or
equal to the notional amount of the floor contract and (ii) the interest rate
paid on those borrowings falls below the floor reference rate plus the
Company's applicable borrowing spread. The Company manages exposure to
counterparty credit risk by entering into the interest rate agreements only
with major financial institutions that are expected to perform fully under the
terms of such agreements. Cash payments between the Company and the
counterparties are made (received) at the end of each quarter to the extent due
under the terms of the interest rate agreements. Such payments


                                       27
<PAGE>

(amounts received) are recorded as adjustments to interest expense and were not
material to interest expense or cash flows for 1999, 1998 or for the nine-month
period ended December 31, 1997. Additional data on the Company's debt
obligations, its applicable borrowing spreads included in the interest rates it
pays on borrowings under the Senior Credit Facilities and interest rate
agreements are provided in Notes 7 and 8 to the Consolidated (Combined)
Financial Statements.

     The weighted average interest rate on the Senior Subordinated Notes is
9.03%. The Senior Subordinated Notes mature in 2007 and 2008 and there are no
scheduled principal payments before their maturity dates. There were no
borrowings outstanding under the Senior Credit Facilities at the end of 1999.
For the interest rate agreements, the table below presents significant contract
terms and fair values at December 31, 1999.


<TABLE>
<CAPTION>
                                           CAPS                FLOORS
                                    ------------------   ------------------
                                                ($ in millions)
<S>                                 <C>                  <C>
Notional amount .................              $100.0                 $50.00
Cap/floor interest rate .........               7.50%                  5.50%
Reference rate ..................               LIBOR                  LIBOR
Designated maturity .............           Quarterly              Quarterly
Expiration date .................      March 28, 2002         March 28, 2002
Fair value ......................                $0.4                   $0.0
</TABLE>

     Foreign Currency Exchange Risk. The Company conducts certain of its
operations outside the U.S. in functional currencies other than the U.S.
dollar. The Company's exposure to foreign currency exchange risk related to
these foreign operations is not material to the Company's results of
operations, cash flows or financial position.

     Equity Price Risk. The Company's investments in common equities are
subject to equity price risks. Both the carrying values and estimated fair
values of such instruments amounted to $12.1 million at the end of 1999.


BACKLOG

     The Company's funded backlog at December 31, 1999, 1998 and 1997 was
$1,003.7 million, $855.9 million and $516.9 million, respectively. Funded
orders for the Company for 1999, 1998 and 1997 were $1,423.1 million, $1,057.0
million and $709.6 million, respectively. It is expected that approximately 77%
of the backlog at December 31, 1999 will be recorded as sales during the year
ending December 31, 2000. However, there can be no assurance that the Company's
backlog will become revenues in any particular period, if at all. Approximately
64% of the total backlog at December 31, 1999 was directly or indirectly for
defense contracts for end use by the U.S. government. Approximately $857.8
million of total backlog at December 31, 1999 was directly or indirectly for
U.S. and foreign government defense contracts, and approximately $31.6 million
of the backlog was directly or indirectly for U.S. and foreign government
non-defense contracts. Foreign customers accounted for approximately $263.8
million of the backlog.


RESEARCH AND DEVELOPMENT

     Research and development costs including bid and proposal costs ("R&D
costs") sponsored by the Company for 1999, 1998 and for the nine-month period
ended December 31, 1997 were $76.1 million, $59.9 million and $28.9 million,
respectively. Customer-funded research and development for 1999, 1998 and the
nine-month period ended December 31, 1997 were $226.3 million, $181.4 million
and $83.7 million, respectively. R&D costs sponsored by the Predecessor Company
and customer-funded research and development were $12.0 million and $33.4
million, respectively, for the three-month period ended March 31, 1997. The
decrease in customer-funded research and development in 1997 was primarily
attributable to the transition of research and development programs into
production.


CONTINGENCIES

     See Note 13 to the Consolidated (Combined) Financial Statements.

                                       28
<PAGE>

RECENTLY ISSUED AND PROPOSED ACCOUNTING STANDARDS

     In September 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company is currently evaluating the
impact, if any, of SFAS 133 which is effective for all quarters of fiscal years
beginning after September 15, 2000.

     In September 1999, the FASB issued a proposed new accounting standard for
business combinations that, among other things, would change the accounting for
and display of goodwill and other intangibles recorded in business acquisitions
for transactions after January 1, 2001. An important aspect of the proposal is
that goodwill amortization would be displayed as a separate element in the
Statement of Operations, net of applicable income tax benefits, and related
earnings per share effects could be displayed. On the basis presented in the
proposed accounting standard, L-3 estimates that it would have reported diluted
earnings per share before amortization of goodwill of $2.29 in 1999, $1.70 in
1998, and $0.83 for the nine-month period ended December 31, 1997. There can be
no assurance that this proposed accounting standard will be issued.


INFLATION

     The effect of inflation on the Company's sales and earnings has not been
significant. Although a majority of the Company's sales are made under
long-term contracts, the selling prices of such contracts, established for
deliveries in the future, generally reflect estimated costs to be incurred in
these future periods. In addition, some contracts provide for price adjustments
through escalation clauses.


YEAR 2000

     The Company has not experienced any impact to its business since the Year
2000 roll-over either internally or from its customers and infrastructure
suppliers. The planned phases of the Year 2000 efforts have been completed with
total cost for all the efforts of $18.7 million which included $6.2 million of
capitalized costs. Because the Company's business units operate autonomously,
each business unit had undertaken efforts to identify and mitigate Year 2000
issues related to their information systems, products, facilities, suppliers
and customers; such effects were coordinated through a Company wide program
instituted to oversee, guide and track each business unit's Year 2000 efforts.
Additionally, contingency plans for suppliers, customers, critical systems and
utilities impacted by Year 2000 issues were developed. A scaled down
organizational structure for the program will remain in place through the end
of the first quarter 2000 to address any unanticipated occurrences that arise.
Although the Company has experienced no failures in infrastructure systems and
in the customer and supply chains since the Year 2000 roll-over, the likelihood
and effect of such failure cannot be estimated, but such a failure could
potentially result in a material adverse impact on results of operations,
liquidity or financial position of the Company. The Year 2000 effort costs
reflected above could change in the event of any unknown Year 2000 related
occurrence during the remainder of the year ending December 31, 2000.


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


                                       29
<PAGE>

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; 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; the ability to obtain or the timing of obtaining future
government contracts; the availability of government funding and customer
requirements; economic conditions, competitive environment, international
business and political conditions, timing of international awards and contracts;
our extensive use of fixed price contracts as compared to cost plus contracts;
our ability to identify future acquisition candidates or to integrate acquired
operations; the rapid change of technology in the communication equipment
industry; the high level of competition in the communications equipment
industry; our introduction of new products into commercial markets or our
investments in commercial products or companies; the significant amount of our
debt and the restrictions contained in our debt agreements; Year 2000 issues;
collective bargaining labor disputes; pension, environmental or legal matters or
proceedings and various other market, competition and industry factors, many of
which are beyond our control. Investors are cautioned that any such statements
are not guarantees of future performance and the actual results or developments
may differ materially from the expectations expressed in the forward looking
statements.


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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     Data regarding quantitative and qualitative disclosures related to the
Company's market risk sensitive financial instruments are presented in
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources -- Market Risks" included herein
under Item 7 and in Note 8 to the consolidated (combined) Financial Statements.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


     See Financial Statements beginning on page F-1.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE


     Not applicable.

                                       30
<PAGE>

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table provides information concerning the directors and
executive officers of the Registrant as of March 7, 2000.




<TABLE>
<CAPTION>
NAME                                 AGE                          POSITION
---------------------------------   -----   ---------------------------------------------------
<S>                                 <C>     <C>
Frank C. Lanza ..................   68      Chairman, Chief Executive Officer and Director
Robert V. LaPenta ...............   54      President, Chief Financial Officer and Director
Michael T. Strianese ............   44      Vice President -- Finance and Controller
Christopher C. Cambria ..........   41      Vice President -- General Counsel and Secretary
Robert F. Mehmel ................   37      Vice President -- Planning and Assistant Secretary
Lawrence W. O'Brien .............   50      Vice President -- Treasurer
Joseph S. Paresi ................   44      Vice President -- Product Development
Lawrence H. Schwartz ............   62      Vice President -- Business Development
Jimmie V. Adams .................   63      Vice President -- Washington D.C. Operations
Robert Riscassi .................   63      Vice President -- Washington D.C. Operations
David J. Brand ..................   38      Director
Thomas A. Corcoran ..............   55      Director
Alberto M. Finali ...............   45      Director
Robert B. Millard ...............   49      Director
John E. Montague ................   45      Director
John M. Shalikashvili ...........   63      Director
Alan M. Washkowitz ..............   59      Director
</TABLE>

     All Executive Officers serve at the discretion of the Board of Directors.

     The remaining information called for by Item 10 is incorporated herein by
reference to the definitive proxy statement relating to Holdings' Annual
Meeting of Shareholders to be held on April 25, 2000. Holdings will file such
definitive proxy statement with the Securities and Exchange Commission pursuant
to regulation 14A within 120 days after the end of the fiscal year covered by
this Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION

     The information called for by Item 11 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information called for by Item 12 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information called for by Item 13 is incorporated herein by reference
to the definitive proxy statement referred to above in Item 10.


                                       31
<PAGE>

                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.


(A) 1. FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:




<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                        NUMBER
                                                                                       -------
<S>                                                                                      <C>
Report of Independent Auditors .......................................................   F-2
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ............   F-3
Consolidated (Combined) Statements of Operations for the years ended December 31, 1999
 and 1998, nine months ended December 31, 1997 and three months ended
 March 31, 1997 ......................................................................   F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999
 and 1998, and nine months ended December 31, 1997 ...................................   F-5
Consolidated (Combined) Statements of Cash Flows for the years ended December 31, 1999
 and 1998, nine months ended December 31, 1997, and three months ended March 31,
 1997 ................................................................................   F-6
Notes to Consolidated (Combined) Financial Statements ................................   F-7
</TABLE>

(A) 2. FINANCIAL STATEMENT SCHEDULES

     Not applicable


(B) REPORTS FILED ON 8-K.

     None


(C) EXHIBITS

     Exhibits identified in parentheses below are on file with the SEC and are
incorporated herein by reference to such previous filings.




<TABLE>
<CAPTION>
     EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
----------------- -----------------------------------------------------------------
<S>               <C>

     3.1          Certificate of Incorporation of L-3 Communications Holdings, Inc.
                  (incorporated by reference to Exhibit 3.1 to the Registrant's
                  Registration Statement of Form S-1 No. 333-46975).

     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 No. 333-46975)

     4.1          Form of Common Stock Certificate (incorporated by reference to
                  Exhibit 4.1 to the Registrant's Registration Statement on Form
                  S-1 No. 333-46975).

    10.1          Amended and Restated Credit Agreement, dated as of August 13,
                  1998 among L-3 Communications Corporation and lenders named
                  therein (incorporated by reference to Exhibit 99.1 to L-3
                  Communication Corporation's Quarterly Report On Form 10-Q for the
                  quarterly period ended September 30, 1998.)

    10.2          364 Day Credit Agreement, dated August 13, 1998 among L-3
                  Communications and lenders named therein (incorporated by
                  reference to exhibit 99.2 to L-3 Communications Corporation's
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  September 30, 1998).

    10.3          Indenture dated as of April 30, 1997 between L-3 Communications
                  Corporation and The Bank of New York, as Trustee (incorporated by
                  reference to Exhibit 4.1 to L-3 Communications Corporation's
                  Registration Statement on Form S-4 No. 333-31649).
<PAGE>

    10.31         Indenture dated as of May 22, 1998 between L-3 Communications and
                  The Bank of New York, as Trustee (incorporated by reference to
                  Exhibit 10.6 to L-3 Communications Corporation's Registration
                  Statement on Form S-4 No. 333-70199).

    10.32         Indenture dated as of December 11, 1998 among L-3 Communications
                  Corporation, the Guarantors named therein and The Bank of New
                  York, as Trustee (incorporated by reference to Exhibit 10.32 to
                  Registrant's Registration Statement on Form S-1, No. 333-70125).

    10.4          Stockholders Agreement dated as of April 30, 1997 among L-3
                  Communications Holdings, Inc. and the stockholders parties
                  thereto (incorporated by reference to Exhibit 10.3 to the
                  Registrant's Registration Statement on Form S-1 No. 333-46975).

    10.5          Transaction Agreement dated as of March 28, 1997, as amended,
                  among Lockheed Martin Corporation, Lehman Brothers Capital
                  Partners III, L.P., Frank C. Lanza, Robert V. LaPenta and L-3
                  Communications Holdings, Inc. (incorporated by reference to
                  Exhibit 10.4)

    10.6          Employment Agreement dated April 30, 1997 between Frank C. Lanza
                  and L-3 Communications Holdings, Inc. (incorporated by reference
                  to Exhibit 10.5 to the Registrant's Registration Statement on
                  Form S-1 No. 333-46975).

    10.7          Employment Agreement dated April 30, 1997 between Robert V.
                  LaPenta and L-3 Communications Holdings, Inc. (incorporated by
                  reference to Exhibit 10.51 to the Registrant Statement on Form
                  S-1 No. 333-46975).

    10.8          Limited Noncompetition Agreement dated April 30, 1997 Lockheed
                  Martin Corporation and L-3 Communications Corporation
                  (incorporated by reference to Exhibit 10.7 to the Registrant's
                  Registration Statement on Form S-1 No. 333-46975).

    10.9          Asset Purchase Agreement dated as of December 19, 1997 between
                  L-3 Communications Corporation and California Microwave, Inc.
                  (incorporated by reference to Exhibit 10.8 to the Registrant's
                  Registration Statement on Form S-1 No. 333-46975).

    10.91         Asset Purchase Agreement dated as of February 10, 1998 between
                  FAP Trust and L-3 Communications Corporation (incorporated by
                  reference to Exhibit 10.81 to the Registrant's Registration
                  Statement on Form S-1 No. 333-46975).

    10.92         Asset Purchase Agreement dated as of March 30, 1998 among
                  AlliedSignal Inc., AlliedSignal Technologies, Inc., AlliedSignal
                  Deutschland GMBH and L-3 Communications Corporation (incorporated
                  by reference to Exhibit 10.82 to the Registrant's Registration
                  Statement on Form S-1 No. 333-46975).

    10.93         Agreement and Plan of Merger dated as of December 3, 1998 among
                  L-3 Communications, LM Acquisition Corporation and Microdyne
                  Corporation (incorporated by reference to Exhibit 2 to the
                  Registrant's Current Report on Form 8-K filed on December 9,
                  1998).

    10.10         Form of Stock Option Agreement of Employee Options (incorporated
                  by reference to Exhibit 10.9 to the Registrant's Registration
                  Statement on Form S-1 No. 333-46975).
<PAGE>

    10.11         1997 Stock Option Plan for Key Employees (incorporated by
                  reference to Exhibit 10.11 to Registrant's Registration Statement
                  on Form S-1, No. 333-70125).

    10.12         Non-Qualified Stock Option Agreement dated as of April 30, 1997
                  by and between L-3 Communications Holdings, Inc. and Frank C.
                  Lanza (incorporated by reference to Exhibit 10.12 to Registrant"
                  Registration Statement on Form S-1, No. 333-70125).

    10.13         Non-Qualified Stock Option Agreement dated as of April 30, 1997
                  by and between L-3 Communications Holdings, Inc. and Robert V.
                  LaPenta (incorporated by reference to Exhibit 10.13 to
                  Registrant's Registration Statement on Form S-1, No. 333-70125).

    10.14         Amended and Restated Agreement and Plan of Merger dated as of
                  August 13, 1998 by and among L-3 Communications Corporation, SPD
                  Merger Co., SPD Technologies, Inc. and Midmark Capital L.P.
                  (incorporated by reference to Exhibit 2 to L-3 Communications
                  Corporation's Current Report on Form 8-K filed on October 27,
                  1998).

    10.15         Option Plan for Non-Employee Directors of L-3 Communication's
                  Holdings, Inc. (incorporated by reference to Exhibit 10.15 to
                  Registrant's annual report on Form 10-K filed on March 31, 1999)

    10.20         L-3 Communications Corporation Pension Plan (incorporated by
                  reference to Exhibit 10.10 to the Registrant's Registration
                  Statement on Form S-1 No. 333-46975).

  **10.16         1999 Long Term Performance Plan dated as of April 27, 1999.

    10.33         Agreement and Plan of Merger, dated as of March 1, 1999, by and
                  among L-3 Communications Corporation, Angel Acquisition
                  Corporation and Aydin Corporation (incorporated herein by
                  reference to Exhibit (2) of the Form 8-K filed on March 1, 1999).

   *11            L-3 Communications Holdings, Inc. Computation of Basic Earnings
                  Per Share and
                         Diluted Earnings Per Share.

  **21            Subsidiaries of the Registrant.

  **23.1          Consent of PricewaterhouseCoopers LLP, independent auditors.

  **27            Financial Data Schedule

</TABLE>

----------
*  The information required in this exhibit is presented on Note 10 to the
   Unaudited Condensed Consolidated Financial Statements as of December 31,
   1999 in accordance with the provisions of SFAS No. 128, Earnings Per
   Share.

** Filed herewith


                                       34
<PAGE>

                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) 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, on March 29,
2000.


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


                                By: /s/ Robert V. LaPenta
                                    --------------------------------------------
                                    Name: Robert V. LaPenta
                                    Title: President and Chief Financial Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrants on
March 29, 2000 and in the capacities indicated.




<TABLE>
<CAPTION>
             SIGNATURE                                          TITLE
-----------------------------------   --------------------------------------------------------
<S>                                   <C>
       /s/ Frank C. Lanza             Chairman, Chief Executive Officer (Principal
---------------------------------
        Frank C. Lanza                  Executive Officer) and Director

       /s/ Robert V. LaPenta          President, Chief Financial Officer (Principal Financial
---------------------------------
          Robert V. LaPenta             Officer) and Director

        /s/ Michael T. Strianese      Vice President -- Finance and Controller (Principal
---------------------------------
           Michael T. Strianese         Accounting Officer)

         /s/ David J. Brand           Director
---------------------------------
           David J. Brand

         /s/ Thomas A. Corcoran       Director
---------------------------------
            Thomas A. Corcoran

          /s/ Alberto M. Finali       Director
---------------------------------
          Alberto M. Finali

          /s/ Robert B. Millard       Director
---------------------------------
          Robert B. Millard

                                      Director
---------------------------------
          John E. Montague

                                      Director
---------------------------------
          John M. Shalikashvili

                                      Director
---------------------------------
            Alan H. Washkowitz
</TABLE>

                                       35
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

     Consolidated (Combined) Financial Statements as of December 31, 1999 and
1998, and for the years ended December 31, 1999 and 1998, nine months ended
December 31, 1997, and three months ended March 31, 1997.



<TABLE>
<S>                                                                                     <C>
Report of Independent Auditors ......................................................   F-2
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 ...........   F-3
Consolidated (Combined) Statements of Operations for the years ended December 31,
 1999 and 1998, nine months ended December 31, 1997 and three months ended
 March 31, 1997 .....................................................................   F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999
 and 1998, and nine months ended December 31, 1997 ..................................   F-5
Consolidated (Combined) Statements of Cash Flows for the years ended December 31,
 1999 and 1998, nine months ended December 31, 1997, and three months ended
 March 31, 1997 .....................................................................   F-6
Notes to Consolidated (Combined) Financial Statements ...............................   F-7
</TABLE>


                                      F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Shareholders of
 L-3 Communications Holdings, Inc.


We have audited the accompanying consolidated balance sheets of L-3
Communications Holdings, Inc. and L-3 Communications Corporation and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the two years ended December 31, 1999 and the nine months ended
December 31, 1997 and the combined statements of operations and cash flows of
the Predecessor Company, as defined in Note 1 to the Company's financial
statements for the three months ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.


We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1999 and 1998, their consolidated results of operations and cash
flows for the two years ended December 31, 1999 and the nine months ended
December 31, 1997, and the combined results of operations and cash flows of the
Predecessor Company for the three months ended March 31, 1997 in conformity with
accounting principles generally accepted in the United States of America.


                                                  /s/ PricewaterhouseCoopers LLP


1177 Avenue of the Americas
New York, New York
February 2, 2000


                                      F-2
<PAGE>

                       L-3 COMMUNICATIONS HOLDINGS , INC.
                       AND L-3 COMMUNICATIONS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                        (IN THOUSANDS, EXCEPT SHARE DATA)




<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                       -----------------------------
                                                                            1999            1998
                                                                       -------------   -------------
<S>                                                                    <C>             <C>
                            ASSETS
Current assets:
 Cash and cash equivalents .........................................    $   42,788      $   26,130
 Contracts in process ..............................................       484,173         351,049
 Deferred income taxes .............................................        32,985          16,591
 Other current assets ..............................................         7,761          11,597
                                                                        ----------      ----------
   Total current assets ............................................       567,707         405,367
                                                                        ----------      ----------
Property, plant and equipment, net .................................       140,971         123,155
Intangibles, primarily cost in excess of net assets acquired, net of
 amortization ......................................................       821,552         669,362
Deferred income taxes ..............................................        56,858          39,139
Other assets .......................................................        46,683          48,373
                                                                        ----------      ----------
   Total assets ....................................................    $1,633,771      $1,285,396
                                                                        ==========      ==========
                  LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Accounts payable, trade ...........................................    $   98,693      $   81,826
 Accrued employment costs ..........................................        70,618          58,380
 Accrued expenses ..................................................        27,931          17,474
 Customer advances .................................................        56,738          45,874
 Accrued interest ..................................................        12,683           6,698
 Income taxes ......................................................         2,715             767
 Other current liabilities .........................................        48,928          36,515
                                                                        ----------      ----------
   Total current liabilities .......................................       318,306         247,534
                                                                        ----------      ----------
Pension and postretirement benefits ................................       110,262         114,293
Other liabilities ..................................................        17,028          18,595
Long-term debt .....................................................       605,000         605,000
Commitments and contingencies ......................................
Shareholders' equity :
 Common stock $.01 par value; authorized 100,000,000 shares,
   issued and outstanding 32,794,547 and 27,402,429 shares .........       483,694         264,769
 Retained earnings .................................................       103,545          44,856
 Unearned compensation .............................................        (1,661)             --
 Accumulated other comprehensive loss ..............................        (2,403)         (9,651)
                                                                        ----------      ----------
Total shareholders' equity .........................................       583,175         299,974
                                                                        ----------      ----------
   Total liabilities and shareholders' equity ......................    $1,633,771      $1,285,396
                                                                        ==========      ==========
</TABLE>

            See notes to consolidated (combined) financial statements

                                      F-3
<PAGE>

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

                CONSOLIDATED (COMBINED) STATEMENTS OF OPERATIONS

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)




<TABLE>
<CAPTION>
                                                                                                    PREDECESSOR
                                                                                                      COMPANY
                                                          COMPANY CONSOLIDATED                        COMBINED
                                         ------------------------------------------------------   ---------------
                                              YEAR ENDED DECEMBER 31,            NINE MONTHS        THREE MONTHS
                                         ---------------------------------         ENDED               ENDED
                                               1999              1998         DECEMBER 31, 1997    MARCH 31, 1997
                                         ---------------   ---------------   ------------------   ---------------
<S>                                      <C>               <C>               <C>                  <C>
Sales ................................     $ 1,405,462       $ 1,037,045         $ 546,525           $ 158,873
Costs and expenses ...................       1,254,976           936,696           495,079             150,937
                                           -----------       -----------         ---------           ---------
Operating income .....................         150,486           100,349            51,446               7,936
Interest and other income ............           5,534             2,659             1,430                  --
Interest expense .....................          60,590            49,558            29,884               8,441
                                           -----------       -----------         ---------           ---------
Income (loss) before income taxes.....          95,430            53,450            22,992                (505)
Provision (benefit) for income
 taxes ...............................          36,741            20,899            10,687                (247)
                                           -----------       -----------         ---------           ---------
Net income (loss) ....................     $    58,689       $    32,551         $  12,305           $    (258)
                                           ===========       ===========         =========           =========
Earnings per common share:
 Basic ...............................     $      1.83       $      1.32         $    0.62
                                           ===========       ===========         =========
 Diluted .............................     $      1.75       $      1.26         $    0.61
                                           ===========       ===========         =========
Weighted average common shares
 outstanding:
 Basic ...............................          32,107            24,679            20,000
                                           ===========       ===========         =========
 Diluted .............................          33,516            25,900            20,012
                                           ===========       ===========         =========
</TABLE>

           See notes to consolidated (combined) financial statements.

                                      F-4
<PAGE>

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

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
                     AND NINE MONTHS ENDED DECEMBER 31, 1997

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                      COMMON STOCK                                            ACCUMULATED
                                    ----------------  ADDITIONAL                                 OTHER
                                     SHARES    PAR      PAID-IN    RETAINED     UNEARNED     COMPREHENSIVE
                                     ISSUED   VALUE     CAPITAL    EARNINGS   COMPENSATION   INCOME (LOSS)     TOTAL
                                    -------- ------- ------------ ---------- -------------- -------------- -----------
<S>                                 <C>      <C>     <C>          <C>        <C>            <C>            <C>
Net income ........................                                $ 12,305                                  $ 12,305
                                                                                                             --------
Comprehensive income ..............                                                                            12,305
Shares issued .....................  17,056    $171    $110,191                                               110,362
Deemed distribution ...............                      (9,000)                                               (9,000)
                                    -------- -------   ---------  ---------   ----------        ---------    --------
Balance December 31, 1997 .........  17,056     171     101,191      12,305                                   113,667

Net income ........................                                  32,551                                    32,551
Minimum pension liability
 adjustment .......................                                                             $(9,514)       (9,514)
Foreign currency translation
 adjustment .......................                                                                (137)         (137)
                                                                                                             --------
Comprehensive income ..............                                                                            22,900
Shares issued:
 Sale of common stock .............   6,900      69     139,431                                               139,500
 Exercise of stock options
  and related tax benefits ........     480       5       3,887                                                 3,892
 Employee benefit plans ...........      22      --         967                                                   967
 Conversion of common
  stock subject to
  repurchase agreement ............   2,944      29      19,019                                                19,048
                                    -------- -------   ---------  ---------   ----------        ---------    --------
Balance December 31, 1998 .........  27,402     274     264,495      44,856                      (9,651)      299,974

Net income ........................                                  58,689                                    58,689
Minimum pension liability
 adjustment .......................                                                               9,443         9,443
Unrealized loss on securities .....                                                                (970)         (970)
Foreign currency translation
 adjustment .......................                                                              (1,225)       (1,225)
                                                                                                             --------
Comprehensive income ..............                                                                            65,937
Shares issued:
 Sale of common stock .............   5,000      50     201,763                                               201,813
 Employee benefit plans ...........     163       2       6,991                                                 6,993
 Earnout under acquisition
  agreement .......................     151       2       6,432                                                 6,434
 Exercise of stock options
  and related tax benefits ........      79      --       1,764                                                 1,764
Grant under restricted stock
 agreement ........................                       1,921                $  (1,921)                          --
Amortization of unearned
 compensation .....................                                                  260                          260
                                    -------- -------   ---------  ---------   ----------        ---------    --------
Balance December 31, 1999 .........  32,795    $328    $483,366    $103,545    $  (1,661)       $(2,403)     $583,175
                                    ======== =======   =========  =========   ==========        =========    ========
</TABLE>

           See notes to consolidated (combined) financial statements.

                                       F-5
<PAGE>

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

                CONSOLIDATED (COMBINED) STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                                        PREDECESSOR
                                                                                                          COMPANY
                                                                  COMPANY CONSOLIDATED                    COMBINED
                                                    ------------------------------------------------  ---------------
                                                      YEAR ENDED DECEMBER 31,         NINE MONTHS       THREE MONTHS
                                                    ----------------------------         ENDED             ENDED
                                                         1999           1998       DECEMBER 31, 1997   MARCH 31, 1997
                                                    -------------  -------------  ------------------  ---------------
<S>                                                 <C>            <C>            <C>                 <C>
OPERATING ACTIVITIES:
Net income (loss) ................................   $   58,689     $   32,551        $   12,305         $    (258)
Depreciation and amortization ....................       53,718         40,355            22,190             7,790
Noncash compensation charge ......................           --             --             4,410                --
Amortization of deferred debt issue costs ........        3,904          2,564             1,517                --
Deferred income tax provision ....................       28,831         19,786             9,991                --
Other noncash items ..............................        6,617            967                --                --
Changes in operating assets and liabilities,
net of amounts acquired:
 Contracts in process ............................      (61,670)       (23,807)           20,266           (17,857)
 Other current assets ............................          (70)            48              (275)             (481)
 Other assets ....................................          552           (376)            2,141              (765)
 Accounts payable ................................        2,896         23,480            (6,146)             (207)
 Accrued employment costs ........................        2,052          8,653             6,786              (625)
 Accrued expenses ................................       (6,280)           (90)            2,789               523
 Customer advances ...............................        5,766        (12,132)             (611)            1,146
 Accrued interest ................................        5,985          2,279             4,419                --
 Income taxes ....................................        3,917            331               436                --
 Other current liabilities .......................       (7,435)       (12,281)          (11,894)           (5,045)
 Pension and postretirement benefits .............        1,788             18             4,284                --
 Other liabilities ...............................          983          2,873             1,252              (500)
 All other operating activities ..................       (1,225)          (137)               --                --
                                                     ----------     ----------        ----------         ---------
Net cash from (used in) operating activities .....       99,018         85,082            73,860           (16,279)
                                                     ----------     ----------        ----------         ---------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash
 acquired ........................................     (272,195)      (447,988)         (466,317)               --
Net cash from assets held for sale ...............           --             --             3,179                --
Proceeds from net assets held for sale ...........           --          6,653             9,458                --
Proceeds from assumption of contract
 obligation ......................................           --             --            12,176                --
Capital expenditures .............................      (23,456)       (23,429)          (11,934)           (4,300)
Disposition of property, plant and
 equipment .......................................        6,713            970               771                --
Other investing activities .......................        4,136         (9,069)           (5,113)               --
                                                     ----------     ----------        ----------         ---------
Net cash (used in) investing activities ..........     (284,802)      (472,863)         (457,780)           (4,300)
                                                     ----------     ----------        ----------         ---------
FINANCING ACTIVITIES:
Borrowings under term loan facilities ............           --             --           175,000                --
Repayment of borrowings under term loan
 facilities ......................................           --       (172,000)           (3,000)               --
Borrowings under revolving credit facility .......       74,700        367,000                --                --
Repayment of borrowings under revolving
 credit facility .................................      (74,700)      (367,000)               --                --
Proceeds from sale of senior subordinated
 notes ...........................................           --        380,000           225,000                --
Proceeds from sale of common stock, net ..........      201,582        139,500            80,000                --
Debt issuance costs ..............................         (323)       (14,173)          (15,606)               --
Proceeds from exercise of stock options ..........          658          3,110                --                --
Other financing activities .......................          525             --                --                --
Advances from Lockheed Martin ....................           --             --                --            20,579
                                                     ----------     ----------        ----------         ---------
Net cash from financing activities ...............      202,442        336,437           461,394            20,579
                                                     ----------     ----------        ----------         ---------
Net increase (decrease) in cash ..................       16,658        (51,344)           77,474                --
Cash and cash equivalents, beginning of
 period ..........................................       26,130         77,474                --                --
                                                     ----------     ----------        ----------         ---------
Cash and cash equivalents, end of period .........   $   42,788     $   26,130        $   77,474         $      --
                                                     ==========     ==========        ==========         =========
</TABLE>

           See notes to consolidated (combined) financial statements.

                                       F-6
<PAGE>

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

              NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     L-3 Communications Holdings, Inc. ("Holdings", and together with its
subsidiaries, "L-3" or "the Company") is a leading merchant supplier of
sophisticated secure communication systems and specialized communication
products. These systems and products are critical elements of virtually all
major communication, command and control, intelligence gathering and space
systems. The Company's customers include the U.S. department of defense (the
"DoD"), certain U.S. government intelligence agencies, major aerospace and
defense contractors, foreign governments and commercial customers. The Company
has two reportable segments, Secure Communication Systems and Specialized
Communication Products.

     Secure Communication Systems. This segment provides secure, high data rate
communications systems for military and other U.S. government reconnaissance
and surveillance applications. These operations are principally performed under
cost plus, sole source contracts supporting long-term programs for the U.S.
armed forces and classified customers. Major secure communications programs and
systems include: secure data links for airborne, satellite, ground-and
sea-based remote platforms for information collection, command and control and
dissemination to users in real-time; strategic and tactical signal intelligence
systems that detect, collect, identify, analyze and disseminate information and
related support contracts for military and intelligence efforts; secure
telephone, fax and network equipment and encryption management; communication
software support services to military and related government intelligence
markets; and communications systems for surface and undersea platforms and
manned space flights.

     Specialized Communication Products. This segment includes three product
categories: microwave components, avionics and ocean products, and telemetry,
instrumentation and space products. Microwave Components includes commercial
off-the-shelf, high-performance microwave components and frequency monitoring
equipment. Avionics and Ocean Products include aviation recorders, display
products, antenna products, acoustic undersea warfare systems and naval power
distribution, conditioning, switching and protection equipment for naval ships
and submarines. Telemetry, Instrumentation and Space Products include
commercial off-the-shelf real-time data collection and transmission products
and components for missile, aircraft and space-based electronic systems. The
Specialized Communication Products segment provides products, systems and
services used in the satellite transmission of voice, video and data through
earth stations for uplink and downlink terminals. This segment also provides
commercial off-the-shelf satellite control software, telemetry, tracking and
control, mission processors and software engineering services to the worldwide
military, civilian and commercial satellite markets.

     All domestic government contracts and subcontracts of the Company are
subject to audit and various cost controls, and include standard provisions for
termination for the convenience of the U.S. government. Multi-year government
contracts and related orders are subject to cancellation if funds for contract
performance for any subsequent year become unavailable. Foreign government
contracts generally include comparable provisions relating to termination for
the convenience of the relevant foreign government.

     The accompanying consolidated financial statements are those of the
Company for the years ended December 31, 1999 and 1998 and for the nine-month
period ended December 31, 1997. Prior to April 1, 1997, the combined financial
statements comprised the results of operations and cash flows of the ten
initial business units (the "Predecessor Company") purchased by the Company in
April 1997 (the "L-3 Acquisition") from Lockheed Martin Corporation ("Lockheed
Martin"). Holdings is the successor company of the Predecessor Company
following the change in ownership which was effective April 1, 1997. Holdings
has no other assets or liabilities and conducts no other operations other than
through its wholly-owned subsidiary, L-3 Communications Corporation ("L-3
Communications"). Therefore, the


                                      F-7
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

consolidated financial statements of Holdings and L-3 Communications reflect the
same results of operations, cash flows, assets, liabilities and shareholders'
equity. L-3 Communications common stock consists of 100 shares authorized and
outstanding of $0.01 par value. The combined financial statements of the
Predecessor Company reflect results of operations and cash flows included in
Lockheed Martin's historical financial statements. Intercompany accounts between
Lockheed Martin and the Predecessor Company have been included in invested
equity. Significant intercompany and inter-business transactions and balances
have been eliminated.


2. L-3 ACQUISITION

     L-3 was formed in April 1997 by Mr. Frank C. Lanza, the former President
and Chief Operating Officer of Loral, Mr. Robert V. LaPenta, the former Senior
Vice President and Controller of Loral (collectively, the "Equity Executives"),
Lehman Brothers Capital Partners III, L.P. and its affiliates ("the Lehman
Partnership") and Lockheed Martin to acquire the Predecessor Company.

     On March 28, 1997, Lanza, LaPenta, the Lehman Partnership, L-3 and
Lockheed Martin entered into a Transaction Agreement (the "L-3 Acquisition
Agreement") pursuant to which Holdings acquired the Predecessor Company from
Lockheed Martin (the "L-3 Acquisition") for $511,779, comprised of $466,779 in
cash including expenses of $8,000 and $45,000 of common equity, representing a
34.9% interest in Holdings initially retained by Lockheed Martin. As of
December 31, 1999, Lockheed Martin owns no interest in Holdings.

     The L-3 Acquisition has been accounted for as a purchase business
combination effective as of April 1, 1997. The assets and liabilities recorded
in connection with the purchase price allocation were $664,800 and $164,400,
respectively. The Company valued acquired contracts in process at contract
price, less the estimated costs to complete and an allowance for normal profit
on the Company's effort to complete such contracts. The excess of the purchase
cost over the fair value of net assets acquired of $280,918 was recorded as
goodwill, and is being amortized over a period of 40 years. As a result of the
34.9% ownership interest initially retained by Lockheed Martin, a deemed
distribution of $9,000 was recognized in the purchase price allocation.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS: Cash equivalents consist of highly liquid
investments with a maturity of three months or less at time of purchase.

     REVENUE RECOGNITION: Sales on production-type contracts are recorded as
units are shipped and profits applicable to such shipments are recorded pro
rata based upon estimated total profit at completion of the contract. Sales and
profits on cost reimbursable contracts are recognized as costs are incurred.
Sales and estimated profits under other long-term contracts are recognized
under the percentage of completion method of accounting using the cost-to-cost
method. Amounts representing contract change orders or claims are included in
sales only when they can be reliably estimated and their realization is
reasonably assured. Losses on contracts are recognized when determined. The
impact of revisions in profit estimates are recognized on a cumulative catch-up
basis in the period in which the revisions are made.

     CONTRACTS IN PROCESS: Costs accumulated on contracts in process include
direct costs and manufacturing overhead costs, and for U.S. government
contracts and contracts with prime contractors or subcontractors of the U.S.
government, general and administrative costs, independent research and
development costs and bid and proposal costs. Contracts in process contain
amounts relating to contracts and programs with long performance cycles, a
portion of which may not be realized within one year. Unbilled contract
receivables represent accumulated recoverable costs and earned profits on
contracts in


                                      F-8
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

process that have been recorded as sales, but have not yet been billed to
customers. Inventoried costs include recoverable costs incurred on contracts in
process, as well as costs of other product inventories that are stated at the
lower of cost or estimated net realizable value primarily using the average cost
method. Under the contractual arrangements on certain contracts with the U.S.
government, the Company receives progress payments as it incurs costs. The U.S.
government has a security interest in the unbilled contract receivables and
inventoried costs to which progress payments have been applied, and such
progress payments are reflected as an offset against the related unbilled
contract receivables and inventoried costs. Other customer advances are
classified as current liabilities.

     PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is computed by applying principally the straight-line method
to the estimated useful lives of the related assets. Useful lives range
substantially from 10 to 40 years for buildings and improvements and 3 to 10
years for machinery, equipment, furniture and fixtures. Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life
of the improvements.

     DEBT ISSUANCE COSTS: Costs incurred to issue debt are deferred and
amortized as interest expense over the terms of the related debt using a method
that approximates the effective interest method.

     INTANGIBLES: Intangibles consist primarily of the excess of the purchase
cost of acquired businesses over the fair value of net assets acquired
(goodwill) and are amortized on a straight-line basis over periods ranging from
10 to 40 years. Goodwill amortization expense was $20,607 for 1999, $13,799 for
1998 and $5,741 for the nine-month period ended December 31, 1997. Accumulated
goodwill amortization was $40,147, and $19,540, respectively, at December 31,
1999 and 1998. The carrying amount of cost in excess of net assets acquired is
evaluated on a recurring basis. Current and estimated future profitability and
undiscounted cash flows excluding financing costs of the acquired businesses
are the primary indicators used to assess the recoverability of goodwill. For
1999 and 1998, there were no reductions to the carrying amounts of goodwill
resulting from these evaluations.

     INCOME TAXES: The Company provides for income taxes using the liability
method prescribed by the Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. Under the liability method, deferred income tax assets and
liabilities reflect tax carryforwards and the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes, as determined under enacted tax
laws and rates. The effect of changes in tax laws or rates is accounted for in
the period of enactment.

     RESEARCH AND DEVELOPMENT: Research and development costs sponsored by the
Company and the Predecessor Company include bid and proposal costs related to
government products and services. These costs generally are allocated among all
contracts and programs in progress under U.S. government contractual
arrangements. Customer-sponsored research and development costs incurred
pursuant to contracts are accounted for as direct contract costs.

     STOCK OPTIONS: In accordance with Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25") and related
interpretations, compensation expense for stock options is recognized in income
based on the excess, if any, of Holdings' fair value of the stock at the grant
date of the award or other measurement date over the amount an employee must
pay to acquire the stock. The exercise price for stock options granted to
employees equals or exceeds the fair value of the Holdings common stock at the
date of grant, thereby resulting in no recognition of compensation expense by
the Company. The Company has adopted the disclosure only provisions of SFAS No.
123, Accounting for Stock-Based Compensation.

     USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported


                                      F-9
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
sales and costs and expenses during the reporting period. The most significant
of these estimates and assumptions relate to contract estimates of sales and
costs, estimates of pension and postretirement benefit obligations, allocations
of costs and expenses from Lockheed Martin to the Predecessor Company,
recoverability of recorded amounts of fixed assets and cost in excess of net
assets acquired, income taxes, litigation and environmental obligations. Actual
results could differ from these estimates.

     RECENTLY ISSUED ACCOUNTING STANDARDS: In September 1998, the FASB issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value and is effective
for all quarters of fiscal years beginning after September 15, 2000. The
Company does not expect SFAS 133 to have a material impact on its financial
position.

     RECLASSIFICATIONS: Certain reclassifications have been made to conform
prior-year amounts to the current-year presentation.


4. ACQUISITIONS

     On January 8, 1999 the Company acquired all of the outstanding common
stock of Microdyne Corporation ("Microdyne") for $94,228 in cash including
expenses and the repayment of assumed debt, net of cash acquired. On April 16,
1999 the Company acquired all of the outstanding common stock of Aydin
Corporation ("Aydin") for $60,034 in cash, including expenses net of cash
acquired. On June 30, 1999 the Company acquired all the outstanding common
stock of Interstate Electronics Corporation ("IEC") from Scott Technologies
Inc. for $40,610 in cash including expenses. Collectively, the acquisitions of
Microdyne, Aydin and IEC comprise the "1999 Acquisitions". On December 31,
1999, the Company acquired the assets of the Space and Navigation Systems
business ("Space & Nav") of Honeywell International Inc. ("Honeywell") for
$55,000 in cash, plus expenses, subject to adjustment based on closing date net
assets, as defined.

     On February 5, 1998, March 4, 1998 and March 30, 1998 the Company
purchased the assets of the Satellite Transmission Systems division ("STS") of
California Microwave, Inc., ILEX Systems ("ILEX") and Ocean Systems business
("Ocean Systems") of AlliedSignal Inc. for cash, including expenses, of
$26,079, $54,304 and $68,822, respectively. On August 13, 1998, the Company
purchased all of the outstanding stock of SPD Technologies, Inc. ("SPD") for
$238,337 of cash, including expenses, net of cash acquired. SPD, STS, ILEX and
Ocean Systems, collectively comprise the "1998 Acquisitions". During 1998, the
Company also purchased several other operations and product lines for an
aggregate purchase price of $57,700 of cash before expenses and certain
adjustments based on closing date net assets, as defined, and certain
additional consideration based on post-acquisition performance. These other
acquisitions, both individually and in the aggregate, were not material to the
results of operations or financial position of the Company. In August 1999, the
Company issued 150,955 shares of Holdings' common stock valued at $6,434 as
additional consideration for the ILEX acquisition that was based on the 1998
financial performance of ILEX. At December 31, 1999, the Company recorded an
other current liability of $6,119 for shares of common stock to be issued in
2000 as additional consideration for the ILEX acquisition based on 1999
financial performance of ILEX. The remaining contingent consideration for the
ILEX acquisition, payable in 2001, will be based on ILEX's 2000 financial
performance.

     All of the acquisitions have been accounted for as purchase business
combinations and are included in the Company's results of operations from their
effective dates. The assets and liabilities recorded in


                                      F-10
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

connection with the acquisition of Space & Nav are based upon preliminary
estimates of fair values. Actual amounts will be based on the final purchase
price, the audited closing date balance sheet and the final appraisals and
other analyses of fair values which are in process. Management does not expect
that differences between the preliminary and final purchase price allocations
will have a material impact on the Company's financial position or results of
operations. The assets and liabilities recorded in connection with the
acquisitions of Microdyne, Aydin, IEC, Space & Nav, SPD, Ocean Systems, ILEX
and STS were $114,967 and $19,254, $92,929 and $17,851, $50,428 and $9,818,
$66,085 and $13,893, $319,701 and $77,964, $142,423 and $72,801, $71,614 and
$10,909, and $35,559 and $7,909, respectively. The Company has valued certain
acquired contracts in process at contract price, less the estimated costs to
complete and an allowance for normal profit on the Company's effort to complete
such contracts. The excess of purchase price over the fair value of net assets
acquired is being amortized on a straight-line basis over periods of 40 years
for Aydin, Microdyne, IEC, SPD, Ocean Systems and ILEX and 15 years for STS.


     Had the 1999 Acquisitions and 1998 Acquisitions and the related financing
transactions occurred on January 1, 1998, the unaudited pro forma sales, net
income and diluted earnings per share would have been $1,457,400, $61,000 and
$1.82, respectively, for 1999 and $1,370,700, $19,300 and $0.57, respectively,
for 1998. The pro forma results are based on various assumptions and are not
necessarily indicative of the result of operations that would have occurred had
the acquisitions and the related financing transactions occurred on January 1,
1998.


     In February  2000, the Company expects to acquire the assets of the
Training Devices and Training Services ("TDTS") business of Raytheon Company
for $160,000 in cash plus expenses, subject to adjustment based on closing date
net working capital, as defined. Following the acquisition the Company will
change the name of TDTS to L-3 Communications Link Simulation and Training
("Link Simulation and Training"). The acquisition is expected to be financed
using borrowings under the Company's Senior Credit Facilities.


     In February  2000, the Company expects to acquire the assets of Trex
Communications Corporation, ("TrexCom"), for $50,210 in cash, plus expenses,
subject to adjustment based on closing date net worth, as defined. The
acquisition is expected to be financed using borrowings under the Company's
Senior Credit Facilities.


     In February 2000, the Company expects to enter into an asset purchase
agreement to acquire the Traffic Alert and Collision Avoidance System ("TCAS")
product line from Honeywell for a purchase price of $255,000 in cash subject to
adjustment based on closing date net assets, as defined. In addition, in
February 2000, the Company expects to enter into a Memorandum of Agreement
("MOA") with Thomson-CSF Sextant S.A. ("Sextant"), a subsidiary of Thomson-CSF,
under which L-3 will purchase the assets of TCAS from Honeywell, create a
limited liability corporation for TCAS (the "TCAS LLC"), contribute 100% of the
TCAS assets to TCAS LLC, and sell a 30% interest in the TCAS LLC to Sextant for
a cash purchase price equal to 30% of the final purchase price paid by the
Company for TCAS (collectively, the "TCAS LLC Transaction"). L-3 expects to
maintain operating management of the TCAS LLC and to consolidate it. The MOA is
expected to terminate if the TCAS LLC Transaction is not consummated by May 31,
2000. L-3 expects to finance the TCAS acquisition with borrowings under the
Company's existing credit facilities and a new revolving 364 day senior credit
facility for $250,000. The TCAS acquisition and the TCAS LLC Transaction will
be subject to regulatory approval by United States agencies and the European
Union Commission.


                                      F-11
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

5. CONTRACTS IN PROCESS


     The components of contracts in process are presented in the table below.
The unbilled contract receivables, inventoried costs and progress payments are
principally related to contracts with the U.S. government and prime contractors
or subcontractors of the U.S. government.


<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                 -------------------------
                                                     1999          1998
                                                 -----------   -----------
<S>                                              <C>           <C>
Billed receivables ...........................    $ 258,054     $ 177,165
                                                  ---------     ---------
Unbilled contract receivables, gross .........      125,652        72,883
Less: unliquidated progress payments .........      (10,351)         (166)
                                                  ---------     ---------
 Unbilled contract receivables, net ..........      115,301        72,717
                                                  ---------     ---------
Inventoried costs, gross .....................      130,091       130,350
Less: unliquidated progress payments .........      (19,273)      (29,183)
                                                  ---------     ---------
 Inventoried costs, net ......................      110,818       101,167
                                                  ---------     ---------
 Total contracts in process ..................    $ 484,173     $ 351,049
                                                  =========     =========
</TABLE>

     The Company believes that approximately $102,000 of the unbilled contract
receivables at December 31, 1999 will be billed and collected within one year.


     The following data have been used in the determination of the costs and
expenses presented on the statements of operations:




<TABLE>
<CAPTION>
                                                                                            PREDECESSOR
                                                                COMPANY                       COMPANY
                                              -------------------------------------------- -------------
                                                   YEAR           YEAR        NINE MONTHS   THREE MONTHS
                                                   ENDED          ENDED          ENDED         ENDED
                                               DECEMBER 31,   DECEMBER 31,   DECEMBER 31,    MARCH 31,
                                                   1999           1998           1997           1997
                                              -------------- -------------- -------------- -------------
<S>                                           <C>            <C>            <C>            <C>
Selling, general and administrative ("SG&A")
 costs included in inventoried costs ........    $ 23,637       $ 16,550        $15,379       $14,536
SG&A incurred costs .........................     265,136        189,507         88,527        28,449
Independent research and development,
 including bid and proposal costs included in
 SG&A incurred costs ........................      74,917         59,897         28,893        12,024
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                            -------------------------
                                                                1999          1998
                                                            -----------   -----------
<S>                                                         <C>           <C>
Land ....................................................    $  9,658      $  9,145
Buildings and improvements ..............................      30,071        28,168
Machinery, equipment, furniture and fixtures ............     137,665       105,569
Leasehold improvements ..................................      14,015        12,830
                                                             --------      --------
 Gross property, plant and equipment ....................     191,409       155,712
Less: accumulated depreciation and amortization .........      50,438        32,557
                                                             --------      --------
 Property, plant and equipment, net .....................    $140,971      $123,155
                                                             ========      ========
</TABLE>

                                      F-12
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     Depreciation and amortization expense for property, plant and equipment
was $29,554 for 1999, $22,463 for 1998, $13,320 for the nine-month period ended
December 31, 1997 and $4,529 for the three-month period ended March 31, 1997.

7. DEBT

     The Company's long-term debt consists of:



<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       -----------------------
                                                          1999         1998
                                                       ----------   ----------
<S>                                                    <C>          <C>
Senior Credit Facilities ...........................    $     --     $     --
10 3/8% Senior Subordinated Notes due 2007 .........     225,000      225,000
8 1/2% Senior Subordinated Notes due 2008 ..........     180,000      180,000
8% Senior Subordinated Notes due 2008 ..............     200,000      200,000
                                                        --------     --------
 Total debt ........................................     605,000      605,000
Less current portion ...............................          --           --
                                                        --------     --------
 Total long-term debt ..............................    $605,000     $605,000
                                                        ========     ========
</TABLE>

     In connection with the L-3 Acquisition, the Company entered into credit
facilities (the "Senior Credit Facilities") with a syndicate of banks and
financial institutions led by Bank of America National Trust & Savings
Association ("Bank of America"), as administrative agent, originally consisting
of $175,000 of term loans (the "Term Loan Facilities") and a $100,000 revolving
credit facility (the "Revolving Credit Facility"). In 1998, the Company prepaid
all of the outstanding borrowings under the Term Loan Facilities. In 1999 and
1998 the Company amended the Senior Credit Facilities to increase the Revolving
Credit Facility to $200,000 which expires on March 31, 2003 and to add a
revolving 364 day credit facility for $200,000 (the "Revolving 364 Day Credit
Facility"), which was renewed in July 1999 for an additional 364 days and will
expire on August 10, 2000 at which time the Company may exercise an option to
convert any or all of the borrowings outstanding thereunder into term loans
which amortize over a two year period beginning March 31, 2001. Available
borrowings under the Revolving Credit Facility and the Revolving 364 Day Credit
Facility at December 31, 1999 were $109,312 and $200,000 respectively, after
reductions for outstanding letters of credit of $90,688.

     Borrowings under the Senior Credit Facilities bear interest, at L-3
Communications' option, at either: (i) a "base rate" equal to the higher of
0.50% per annum above the latest federal funds rate and the Bank of America
"reference rate" (as defined) plus a spread ranging from 0.0% to 0.875% per
annum depending on L-3 Communications' ratio of debt to EBITDA, as defined (the
"Debt to EBITDA Ratio") at the time of determination or (ii) a "LIBOR rate" (as
defined) plus a spread ranging from 0.625% to 1.875% per annum depending on L-3
Communications' Debt to EBITDA Ratio at the time of determination. L-3
Communications pays commitment fees calculated on the daily amounts of the
available unused commitments under the Revolving Credit Facility at a rate
ranging from 0.25% to 0.50% per annum and under the Revolving 364 Day Facility
at a rate ranging from 0.125% to 0.30% per annum, in each case depending on L-3
Communications' Debt to EBITDA Ratio in effect. L-3 Communications pays letter
of credit fees calculated at a rate ranging from 0.3125% to 0.9375% per annum
for performance letters of credit and 0.625% to 1.875% for all other letters of
credit, in each case depending on L-3 Communications' Debt to EBITDA Ratio at
the time of determination.

     In January 2000, the Senior Credit Facilities were amended to change the
spreads on borrowings, commitment fees and letter of credit fees thereunder, as
follows: on "base rate" borrowings, ranging from 0.375% to 1.25%; on "LIBOR
rate" borrowings and financial letters of credit, ranging from 1.00% to


                                      F-13
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2.25%; on commitment fees, ranging from 0.20% to 0.50%; and, on performance
letters of credit, ranging from 0.50% to 1.125%, in each case, depending on L-3
Communications' Debt to EBITDA Ratio at the time of determination.

     In April 1997, L-3 Communications sold $225,000 of 10 3/8% senior
subordinated notes (the "1997 Notes") due May 1, 2007 with interest payable
semi-annually on May 1 and November 1 of each year commencing November 1, 1997.
In May 1998, L-3 Communications sold $180,000 of 8 1/2 % senior subordinated
notes (the "May 1998 Notes") due May 15, 2008 with interest payable
semi-annually on May 15 and November 15 of each year commencing November 15,
1998. In December 1998, L-3 Communications sold $200,000 of 8% senior
subordinated notes (the "December 1998 Notes") due August 1, 2008 with interest
payable semi-annually on February 1 and August 1 of each year commencing
February 1, 1999. Collectively, the 1997 Notes, May 1998 Notes and December
1998 Notes comprise the "Senior Subordinated Notes". The Senior Subordinated
Notes mature $225,000  in 2007 and $380,000  in 2008. The 1997 Notes, May 1998
Notes and December 1998 Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after May 1, 2002, August 1, 2003, and
August 1, 2003, respectively, at various redemption prices plus accrued and
unpaid interest to the applicable redemption date. In addition, prior to May 1,
2000, May 15, 2001, and December 11, 2001, the Company may redeem up to 35% of
the aggregate principal amount of the 1997 Notes, May 1998 Notes and December
1998 Notes, respectively, at redemption prices of 109.375%, 108.500%, and
108.00% of the principal amount thereof, plus accrued and unpaid interest to
the applicable redemption date with the net cash proceeds of one or more equity
offerings by Holdings that are contributed to L-3 Communications as common
equity capital.

     The Senior Credit Facilities and Senior Subordinated Notes agreements
contain financial and other restrictive covenants that limit, among other
things, the ability of the Company to borrow additional funds, dispose of
assets, or pay cash dividends. The Senior Credit Facilities contain financial
covenants which require that (i) the Company's Debt to EBITDA Ratio be less
than or equal to 4.75 for the quarter ended December 31, 1999, and that the
maximum allowable debt ratio, as defined, thereafter decline over time to less
than or equal to 3.25 for the quarters ending September 30, 2002 and
thereafter, and (ii) the Company's interest coverage ratio, as defined, be
greater than or equal to 2.25 for the quarter ended December 31, 1999, and that
the minimum allowable interest coverage ratio, as defined, thereafter increase
over time to greater than or equal to at least 3.00 for the quarters ending
September 30, 2002 and thereafter. Through December 31, 1999 the Company was in
compliance with these covenants at all times.

     In connection with the Senior Credit Facilities, the Company has granted
the lenders a first priority lien on the stock of L-3 Communications and
substantially all of its domestic subsidiaries. The borrowings under the Senior
Credit Facilities are guaranteed by Holdings and by substantially all of the
Company's subsidiaries. The payment of principal and premium, if any, and
interest on the Senior Subordinated Notes is unconditionally guaranteed, on an
unsecured senior subordinated basis, jointly and severally, by substantially
all of the Company's domestic subsidiaries, all of which are wholly owned.


8. FINANCIAL INSTRUMENTS

     Fair Value of Financial Instruments. The Company's financial instruments
consist primarily of cash and cash equivalents, billed contract receivables,
other billed receivables (principally commercial and affiliates), investments,
trade accounts payable, customer advances, Senior Subordinated Notes (see Note
7), and interest rate cap and interest rate floor contracts. The carrying
amounts of cash and cash equivalents, billed contract receivables, other billed
receivables, trade accounts payable and customer advances are representative of
their respective fair values because of the short-term maturities or expected
settlement dates of these instruments. The fair value of the Company's
investments are based on quoted market prices, as available, and historical
costs which approximate fair value. The Senior


                                      F-14
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Subordinated Notes are registered, unlisted public debt which are traded in the
over-the-counter market and their fair values are based on quoted trading
activity. The fair values of the interest rate caps and floor contracts were
estimated by discounting expected cash flows using quoted market interest rates.
The carrying amounts and estimated fair value of the Company's financial
instruments are as follows:




<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                    ----------------------------------------------
                                             1999                    1998
                                    ----------------------- ----------------------
                                     CARRYING    ESTIMATED   CARRYING   ESTIMATED
                                      AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                    ---------- ------------ ---------- -----------
<S>                                 <C>        <C>          <C>        <C>
Investments .......................  $ 12,068    $ 12,068    $ 11,446   $ 12,274
Senior Subordinated Notes .........   605,000     582,000     605,000    633,830
Interest rate caps ................       800         435       1,170        236
Interest rate floor ...............      (137)        (49)       (200)    (1,094)
</TABLE>

     Interest Rate Risk Management. To mitigate risks associated with changing
interest rates on borrowings under the Senior Credit Facilities, the Company
entered into interest rate caps and interest rate floors (collectively, the
"interest rate agreements"). The interest rate agreements are denominated in
U.S. dollars and have designated maturities which occur every three months
until the interest rate agreements expire in March 2002. Cash payments are
received from (paid to) the counterparties on the interest rate caps (floors)
contracts by the amount that the reference interest rates are greater than
(less than) the cap (floor) contract rates on the designated maturity dates,
multiplied by the notional amounts underlying the respective interest rate
agreements. Cash payments between the Company and counterparties are recorded
as a component of interest expense. The initial cost (receipt) of these
arrangements are deferred and amortized as interest expense over the term of
the interest rate agreement. The Company manages exposure to counterparty
credit risk by entering into the interest rate agreements only with major
financial institutions that are expected to fully perform under the terms of
such agreements. The notional amounts are used to measure the volume of these
agreements and do not represent exposure to credit loss. The impact of the
interest rate agreements was not material to interest expense or cash flows for
1999, 1998 and for the nine-month period ended December 31, 1997. Information
with respect to the interest rate cap and floor contracts is as follows:




<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                ------------------------------------------------------------
                                            1999                            1998
                                -----------------------------   ----------------------------
                                 NOTIONAL       UNREALIZED       NOTIONAL       UNREALIZED
                                  AMOUNT      GAINS (LOSSES)      AMOUNT      GAINS (LOSSES)
                                ----------   ----------------   ----------   ---------------
<S>                             <C>          <C>                <C>          <C>
Interest rate caps ..........    $100,000         $ (365)        $100,000        $ (934)
Interest rate floor .........      50,000             88           50,000          (894)
</TABLE>

9. COMMON STOCK

     On February 4, 1999, Holdings sold 5.0 million shares of common stock in a
public offering for $42.00 per share (the "February 1999 Common Stock
Offering"); the net proceeds amounted to $201.5 million and were contributed by
Holdings to L-3 Communications. In addition, 6.5 million shares were also sold
in the February 1999 Common Stock Offering by the Lehman Partnership and
Lockheed Martin. In October 1999, Lockheed Martin sold its remaining interest
in Holdings' common stock. In December 1999, the Lehman Partnership distributed
approximately 3.8 million shares of its common stock of Holdings to its
partners. At December 31, 1999 the Lehman Partnership owned approximately 16.8%
and Lockheed Martin owned none of the outstanding shares of Holdings' common
stock.

     On May 19, 1998, Holdings sold 6.9 million shares of its common stock in
an initial public offering ("IPO"); the net proceeds amounted to $139,500 and
were contributed by Holdings to L-3 Communica-


                                      F-15
<PAGE>

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

      NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

tions. Prior to the IPO, the Company's common stock consisted of three classes
Class A, Class B, and Class C common stock. Immediately prior to the IPO, each
authorized share of Holdings Class A common stock, Class B common stock and
Class C common stock was converted into one class of common stock and the
authorized Holdings common stock was increased to 100 million shares.

     In connection with the initial capitalization of L-3 in April 1997, the
Class A common stock and Class B common stock were issued at per share prices
of $6.47 and $5.00, respectively. The aggregate difference in issuance prices
of $4,410 was recorded as a noncash compensation charge effective April 1,
1997.


10. EARNINGS PER SHARE

     A reconciliation of basic and diluted earnings per share ("EPS") follows
(in thousands, except per share amounts):




<TABLE>
<CAPTION>
                                                                                       NINE MONTHS
                                                                                          ENDED
                                                                                       DECEMBER 31,
                                                            1999           1998            1997
                                                        ------------   ------------   -------------
<S>                                                     <C>            <C>            <C>
Basic:
 Net income .........................................    $  58,689      $  32,551       $  12,305
 Weighted average common shares outstanding .........       32,107         24,679          20,000
                                                         ---------      ---------       ---------
 Basic earnings per share ...........................    $    1.83      $    1.32       $    0.62
                                                         =========      =========       =========
Diluted:
 Net income .........................................    $  58,689      $  32,551       $  12,305
                                                         ---------      ---------       ---------
 Common and potential shares:
 Weighted average common shares outstanding .........       32,107         24,679          20,000
 Assumed exercise of stock options ..................        3,376          2,824           2,482
 Assumed purchase of common shares for treasury .....       (1,967)        (1,603)         (2,470)
                                                         ---------      ---------       ---------
Common and potential common shares ..................       33,516         25,900          20,012
                                                         =========      =========       =========
Diluted earnings per share ..........................    $    1.75      $    1.26       $    0.61
                                                         =========      =========       =========
</TABLE>

11. INCOME TAXES

     Pretax income of the Company was $95,430 for 1999, $53,450 for 1998 and
$22,992 for the nine-month period ended December 31, 1997, substantially all of
which was derived from domestic operations. The components of the Company's
provision for income taxes were:




<TABLE>
<CAPTION>
                                                                   YEAR ENDED          NINE MONTHS
                                                                  DECEMBER 31,            ENDED
                                                              ---------------------    DECEMBER 31,
                                                                 1999        1998          1997
                                                              ---------   ---------   -------------
<S>                                                           <C>         <C>         <C>
Current income tax provision, primarily federal . .........    $ 7,910     $ 1,113       $   696
Deferred income tax provision:
 Federal ..................................................     27,881      18,203         8,635
 State and local ..........................................        950       1,583         1,356
                                                               -------     -------       -------
   Subtotal ...............................................     28,831      19,786         9,991
                                                               -------     -------       -------
Total provision for income taxes ..........................    $36,741     $20,899       $10,687
                                                               =======     =======       =======
</TABLE>

                                      F-16
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     A reconciliation of the statutory federal income tax rate to the effective
income tax rate of the Company follows:



<TABLE>
<CAPTION>
                                                                  YEAR ENDED           NINE MONTHS
                                                                 DECEMBER 31,             ENDED
                                                            -----------------------    DECEMBER 31,
                                                               1999         1998           1997
                                                            ----------   ----------   -------------
<S>                                                         <C>          <C>          <C>
Statutory federal income tax rate .......................      35.0%        35.0%         35.0%
State and local income taxes, net of federal income
 tax benefit ............................................       4.6          4.7           5.8
Noncash compensation charge .............................        --           --           6.8
Nondeductible goodwill amortization and other
 expenses ...............................................       5.2          4.6           3.1
Research and experimentation and other tax credits ......      (7.1)        (6.8)         (5.5)
Other, net ..............................................       0.8          1.6           1.3
                                                               ----         ----          ----
Effective income tax rate ...............................      38.5%        39.1%         46.5%
                                                               ====         ====          ====
</TABLE>

     The provision for income taxes excludes current tax benefits related to
the exercise of stock options credited directly to shareholders' equity of
$1,011 and $782 for 1999 and 1998, respectively.

     The significant components of the Company's net deferred tax assets and
liabilities are:




<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                            --------------------------
                                                                1999           1998
                                                            ------------   -----------
<S>                                                         <C>            <C>
Deferred tax assets:
 Inventoried costs ......................................    $  11,033      $  8,243
 Compensation and benefits ..............................        1,873            --
 Pension and postretirement benefits ....................       31,768        25,597
 Property, plant and equipment ..........................       17,149         7,748
 Income recognition on long-term contracts ..............        8,617           436
 Accrued warranty costs .................................        2,401         5,268
 Net operating loss carryforwards .......................       12,749         8,112
 Tax credit carryforwards ...............................       16,576         4,320
 Other, net .............................................        4,492           475
                                                             ---------      --------
   Total deferred tax assets ............................      106,658        60,199
                                                             ---------      --------
Deferred tax liabilities:
 Cost in excess of net assets acquired ..................       (9,656)       (3,348)
 Compensation and benefits ..............................           --          (378)
 Other, net .............................................       (7,159)         (743)
                                                             ---------      --------
   Total deferred tax liabilities .......................      (16,815)       (4,469)
                                                             ---------      --------
    Net deferred tax assets .............................    $  89,843      $ 55,730
                                                             =========      ========
   The net deferred tax assets are classified as follows:

Current deferred tax assets .............................    $  32,985      $ 16,591
Long-term deferred tax assets ...........................       56,858        39,139
                                                             ---------      --------
   Total net deferred tax assets ........................    $  89,843      $ 55,730
                                                             =========      ========
</TABLE>

                                      F-17
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     At December 31, 1999 the Company had $29,325 of tax carryforwards
primarily related to U.S. federal net operating losses, alternative minimum tax
credits, research and experimentation tax credits, and various state and local
tax credits which primarily will expire, subject to various limitations and
restrictions, if unused beginning in 2011. The Company believes that these
carryforwards will be available to reduce future income tax liabilities and has
recorded these carryforwards as non-current deferred tax assets.


12. STOCK OPTIONS


     On April 27, 1999 the Company adopted the 1999 Long Term Performance Plan
which reserved 1,000,000 shares of Holdings' common stock which may be awarded
to employees of the Company in the form of non-qualified stock options,
incentive stock options, stock appreciation rights, restricted stock or other
incentive awards. On May 19, 1999, the Company awarded 40,339 shares of
restricted stock of Holdings to employees which vest January 1, 2004. As of
December 31, 1999 the Company had 900,994 shares of Holdings' common stock
available for awards under the 1999 Long Term Performance Plan and 2,355 shares
of Holdings' common stock available for option grants under the 1997 option
plan.


     On April 5, 1999, the Company amended the performance options, which were
granted to the Equity Executives on April 30, 1997 to purchase at $6.47,
1,142,857 shares of Holdings' common stock, to eliminate the performance target
acceleration provisions and to provide that the unvested portion of the
performance options which aggregated 914,286 options at April 5, 1999 will vest
and become exercisable as of April 30, 2000, if their employment continues
through and including such date. Such performance options would have originally
vested nine years after the grant date, but could have become exercisable with
respect to 25% of the shares subject to such performance options on each of
April 30, 1999, 2000, 2001 and 2002, to the extent certain targets for the
Company's EBITDA were achieved.


     The following table presents the Company's stock option activity:




<TABLE>
<CAPTION>
                                                         WEIGHTED
                                                         AVERAGE
                                           NUMBER OF     EXERCISE
                                            OPTIONS       PRICE
                                         ------------   ---------
                                              (IN THOUSANDS)
<S>                                      <C>            <C>
Balance at April 1, 1997 .............         --        $   --
 Options granted .....................      2,975          6.47
 Options exercised ...................         --            --
 Options canceled ....................         (4)         6.47
                                            ------
Balance at December 31, 1997 .........      2,971          6.47
 Options granted .....................        425         25.60
 Options exercised ...................       (481)         6.47
 Options canceled ....................        (37)         8.19
                                            ------
Balance at December 31, 1998 .........      2,878          9.27
 Options granted .....................      1,004         39.10
 Options exercised ...................        (79)         8.37
 Options canceled ....................        (43)        29.99
                                            ------
Balance at December 31, 1999 .........      3,760       $ 17.02
                                            ======
</TABLE>



                                      F-18
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     The following table summarizes information about stock options outstanding
at December 31, 1999.




<TABLE>
<CAPTION>
                                           OUTSTANDING                                  EXERCISABLE
                            ------------------------------------------   -----------------------------------------
                                              WEIGHTED                                     WEIGHTED
                                               AVERAGE       WEIGHTED                       AVERAGE       WEIGHTED
         RANGE OF                             REMAINING       AVERAGE                      REMAINING      AVERAGE
         EXERCISE              NUMBER        CONTRACTUAL     EXERCISE       NUMBER        CONTRACTUAL     EXERCISE
          PRICES             OF OPTIONS     LIFE (YEARS)       PRICE      OF OPTIONS     LIFE (YEARS)      PRICE
-------------------------   ------------   --------------   ----------   ------------   --------------   ---------
<S>                         <C>            <C>              <C>          <C>            <C>              <C>
$6.47 ...................       2,379             7.4        $  6.47          593              7.4       $  6.47
$22.00 ..................         263             8.3        $ 22.00           48              8.3       $ 22.00
$32.75 - $39.99 .........         724             9.6        $ 37.08           45              8.7       $ 32.83
$40.00 - $45.00 .........         394             9.0        $ 40.53           --                             --
                                -----                                         ---
 Total ..................       3,760             8.0        $ 17.02          686              7.6       $  9.31
                                =====                                         ===
</TABLE>

     The weighted average fair values of stock options at their grant date
during 1999 and 1998, where the exercise price equaled the market price
(estimated fair value) on the grant date were $14.04 and $8.86, respectively.
In accordance with APB 25, no compensation expense was recognized. The
following table reflects pro forma net income and EPS had the Company elected
to adopt the fair value approach of SFAS 123:




<TABLE>
<CAPTION>
                                 YEAR ENDED             NINE MONTHS
                                DECEMBER 31,               ENDED
                         ---------------------------    DECEMBER 31,
                             1999           1998            1997
                         ------------   ------------   -------------
<S>                      <C>            <C>            <C>
Net income:
 As reported .........     $ 58,689       $ 32,551       $ 12,305
 Pro forma ...........       54,625         31,246         11,751
Basic EPS:
 As reported .........     $   1.83       $   1.32       $   0.62
 Pro forma ...........         1.70           1.27           0.59
Diluted EPS:
 As reported .........     $   1.75       $   1.26       $   0.61
 Pro forma ...........         1.63           1.21           0.59
</TABLE>

     The estimated fair values of each option granted in 1999 and 1998 were
calculated using the Black-Scholes option-pricing model. The estimated fair
value of each option granted in 1997 was calculated using the minimum value
method under SFAS 123 because Holdings common stock was not publicly traded
prior to its IPO. See Note 9. The weighted average assumptions used in the
valuation models were as follows:




<TABLE>
<CAPTION>
                                       1999       1998       1997
                                     --------   --------   --------
<S>                                  <C>        <C>        <C>
Expected option term .............      4.8        4.1        5.5
Expected volatility ..............     31.0%      31.0%      n.a.
Expected dividend yield ..........       --         --         --
Risk-free interest rate ..........      4.7%       5.6%       6.3%
</TABLE>



                                      F-19
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

13. COMMITMENTS AND CONTINGENCIES

     The Company leases certain facilities and equipment under agreements
expiring at various dates through 2018. At December 31, 1999, future minimum
payments under noncancellable operating leases with initial or remaining terms
in excess of one year were:




<TABLE>
<CAPTION>
                                   OPERATING LEASES
                       ----------------------------------------
                        REAL ESTATE     EQUIPMENT       TOTAL
                       -------------   -----------   ----------
<S>                    <C>             <C>           <C>
2000 ...............      $ 21,337        $3,519      $ 24,856
2001 ...............        19,679         2,685        22,364
2002 ...............        17,427         1,369        18,796
2003 ...............        11,540           645        12,185
2004 ...............         9,493           183         9,676
Thereafter .........       132,518            73       132,591
                          --------        ------      --------
 Total .............      $211,994        $8,474      $220,468
                          ========        ======      ========
</TABLE>

     Real estate lease commitments have been reduced by minimum sublease rental
income of $4,873 due in the future under noncancellable subleases. Leases
covering major items of real estate and equipment contain renewal and or
purchase options. Rent expense, net of sublease income was $22,452 for 1999,
$15,290 for 1998, $7,330 for the nine-month period ended December 31, 1997, and
$2,553 for the three-month period ended March 31, 1997.

     On March 30, 1998 and June 30, 1999, the Company entered into two separate
real estate lease agreements, as lessee, with unrelated lessors which expire on
March 30, 2001 and June 30, 2002, respectively, and are accounted for as
operating leases. On or before each lease expiration date, the Company can
exercise options under each lease agreement to either renew the lease, purchase
the subject properties for $12,500 and $15,500, respectively, or sell the
property on behalf of the lessor (the "Sale Option"). If the Company exercises
the Sale Option, the Company must pay the lessor a residual guarantee amount of
$10,894 and $13,524, respectively, on or before the lease expiration date, and
at the time the property is sold, the Company must pay the lessor a
supplemental rent in the amount of $1,606 and $1,976, respectively, to the
extent that the sales proceeds exceeds the respective residual guarantee amount
by the supplemental rent amounts. In the event that the sales proceeds are less
than the sum of the residual guarantee amount and the supplemental rent, the
Company is required to pay a supplemental rent to the extent that the reduction
in the fair value of the property is demonstrated by an independent appraisal
to have been caused by the Company's failure to properly maintain the property.
Accordingly, the aggregate residual guarantee amounts of $24,418 have been
included in the noncancellable real estate operating lease payments relating to
the expiration of such leases.

     The Company is engaged in providing products and services under contracts
with the U.S. government and to a lesser degree, under foreign government
contracts, some of which are funded by the U.S. government. All such 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 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.
Additionally, in the event that U.S. government expenditures for products and
services of the type manufactured and provided by the Company are reduced, and
not offset by greater commercial sales or other new programs or products, or
acquisitions, there may be a reduction in the volume of contracts or
subcontracts awarded to the Company.


                                      F-20
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     Management continually assesses the Company's obligations with respect to
applicable environmental protection laws. While it is difficult to determine
the timing and ultimate cost to be incurred by the Company in order to comply
with these laws, based upon available internal and external assessments, with
respect to those environmental loss contingencies of which management is aware,
the Company believes 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 the Company's results of
operations. The Company accrues for these contingencies when it is probable
that a liability has been incurred and the amount of the loss can be reasonably
estimated.


     The Company has been periodically subject to litigation, claims or
assessments and various contingent liabilities incidental to its business. With
respect to those investigative actions, items of litigation, claims or
assessments of which they are aware, management of the Company is of the
opinion that the probability is remote 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 have a material adverse effect on the financial position or
results of operations of the Company.


14. PENSIONS AND OTHER EMPLOYEE BENEFITS


     The Company maintains a number of pension plans, both contributory and
noncontributory, covering employees of certain locations. Eligibility for
participation in these plans varies and benefits are generally based on the
participant's compensation and/or years of service. The Company's funding
policy is generally to contribute in accordance with cost accounting standards
that affect government contractors, subject to the Internal Revenue Code and
regulations thereon. Plan assets are invested primarily in U.S. government and
agency obligations and listed stocks and bonds.


     The Company also provides postretirement medical and life insurance
benefits for retired employees and dependents at certain locations.
Participants are eligible for these benefits when they retire from active
service and meet the eligibility requirements for the Company's pension plans.
These benefits are funded primarily on a pay-as-you-go basis with the retiree
generally paying a portion of the cost through contributions, deductibles and
coinsurance provisions.


     The following table summarizes the balance sheet impact, as well as the
benefit obligations, assets, funded status and rate assumptions associated with
the pension and postretirement benefit plans.




<TABLE>
<CAPTION>
                                                                                     POSTRETIREMENT
                                                          PENSION PLANS               BENEFIT PLANS
                                                    -------------------------   -------------------------
                                                        1999          1998          1999          1998
                                                    -----------   -----------   ------------   ----------
<S>                                                 <C>           <C>           <C>            <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year .........    $ 340,483     $ 198,431     $  75,262      $ 18,880
Service cost ....................................       13,513        10,717         1,595         1,288
Interest cost ...................................       23,092        17,996         4,175         2,933
Participants' contributions .....................           20            --            --            --
Amendments ......................................        3,564            --        (1,429)           --
Actuarial loss (gain) ...........................      (41,372)       18,590       (11,201)        1,547
Acquisitions ....................................           --       105,072           753        52,435
Benefits paid ...................................      (10,759)      (10,323)       (3,601)       (1,821)
                                                     ---------     ---------     ---------      --------
Benefit obligation at end of year ...............    $ 328,541     $ 340,483     $  65,554      $ 75,262
                                                     ---------     ---------     ---------      --------
</TABLE>

                                      F-21
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                        POSTRETIREMENT
                                                         PENSION PLANS                   BENEFIT PLANS
                                                 -----------------------------   -----------------------------
                                                      1999            1998            1999            1998
                                                 -------------   -------------   -------------   -------------
<S>                                              <C>             <C>             <C>             <C>
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of
 year ........................................     $ 288,502       $ 173,450       $      --       $      --
Actual return on plan assets .................        81,800          22,059              --              --
Acquisitions .................................            --          93,822              --              --
Employer contributions .......................         7,888           9,494           3,601           1,821
Participants contributions ...................            20              --              --              --
Benefits paid ................................       (10,759)        (10,323)         (3,601)         (1,821)
                                                   ---------       ---------       ---------       ---------
Fair value of plan assets at end of year .....     $ 367,451       $ 288,502       $      --       $      --
                                                   ---------       ---------       ---------       ---------
FUNDED STATUS OF THE PLANS ...................     $  38,910       $ (51,981)      $ (65,554)      $ (75,262)
Unrecognized actuarial loss (gain) ...........       (76,592)         20,299          (8,924)          2,165
Unrecognized prior service cost ..............         3,275              --          (1,306)             --
                                                   ---------       ---------       ---------       ---------
Net amount recognized ........................     $ (34,407)      $ (31,682)      $ (75,784)      $ (73,097)
                                                   =========       =========       =========       =========
AMOUNTS RECOGNIZED IN THE BALANCE SHEET
 CONSIST OF:
Accrued benefit liability ....................     $ (34,478)      $ (41,196)      $ (75,784)      $ (73,097)
Accumulated other comprehensive income........            71           9,514              --              --
                                                   ---------       ---------       ---------       ---------
Net amount recognized ........................     $ (34,407)      $ (31,682)      $ (75,784)      $ (73,097)
                                                   =========       =========       =========       =========
RATE ASSUMPTIONS:
Discount rate ................................          7.75%           6.75%           7.75%           6.75%
Rate of return on plan assets ................          9.50%           9.00%           n.a.            n.a.
Salary increases .............................          4.50%           4.50%           4.50%           4.50%
Annual increase in cost of benefits ..........          n.a.            n.a.            6.50%           6.50%
</TABLE>

     The annual increase in cost of benefits ("health care cost trend rate") is
assumed to decrease gradually to a rate of 4.5% by the year 2001. Assumed
health care cost trend rates have a significant effect on amounts reported for
postretirement medical benefit plans. A one percentage point decrease in the
assumed health care cost trend rates would have the effect of decreasing the
aggregate service and interest cost components and the postretirement medical
obligations by $636 and $4,776, respectively. A one percentage point increase
in the assumed health care cost trend rate would have the effect of increasing
the aggregate service and interest cost components and the postretirement
medical obligations by $777 and $5,680, respectively.

     The following table summarizes the components of net periodic pension and
postretirement medical costs.

<TABLE>
<CAPTION>
                                                                                POSTRETIREMENT
                                                      PENSION PLANS              PENSION PLANS
                                               ---------------------------   ---------------------
                                                   1999           1998          1999        1998
                                               ------------   ------------   ---------   ---------
<S>                                            <C>            <C>            <C>         <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost ...............................    $  13,513      $  10,717      $1,595      $1,288
Interest cost ..............................       23,092         17,996       4,175       2,933
Amortization of prior service cost .........          289             --        (123)         --
Expected return on plan assets .............      (26,251)       (19,938)         --          --
Recognized actuarial (gain) loss ...........          (30)           (25)       (112)          7
Recognition due to settlement ..............           --           (376)         --          --
                                                ---------      ---------      ------      ------
 Net periodic benefit cost .................    $  10,613      $   8,374      $5,535      $4,228
                                                =========      =========      ======      ======
</TABLE>

                                      F-22
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

     The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $4,459, $5,307 and $893 respectively, as of December
31, 1999, and $271,411, $251,228, and $228,856, respectively, as of December
31, 1998.

     In connection with the Company's assumption of certain plan obligations
pursuant to the L-3 Acquisition, Lockheed Martin has provided the Pension
Benefit Guaranty Corporation ("PBGC") with commitments to assume sponsorship or
other forms of financial support under certain circumstances of the Company's
pension plans for Communication Systems -- West and Aviation Recorders (the
"Subject Plans"). Upon the occurrence of certain events, Lockheed Martin, at
its option, has the right to decide whether to cause the Company to transfer
sponsorship of any or all of the Subject Plans to Lockheed Martin, even if the
PBGC has not sought to terminate the Subject Plans. Such a triggering event
occurred in 1998, that reversed itself in 1999, relating to a decrease in the
PBGC-mandated discount rate in 1998 that had resulted in an increase in the
underlying liability. The Company notified Lockheed Martin of the 1998
triggering event, and in February 1999, Lockheed Martin informed the Company
that it had no present intention to exercise its right to cause the Company to
transfer sponsorship of the Subject Plans. If Lockheed Martin did assume
sponsorship of these plans, it would be primarily liable for the costs
associated with funding the Subject Plans or any costs associated with the
termination of the Subject Plans but L-3 Communications would be required to
reimburse Lockheed Martin for these costs. To date, the impact on pension
expense and funding requirements resulting from this arrangement has not been
significant. However, should Lockheed Martin assume sponsorship of the Subject
Plans or if these plans were terminated, the impact of any increased pension
expenses or funding requirements could be material to the Company. The Company
has performed its obligations under the letter agreement with Lockheed Martin
and the Lockheed Martin Commitment and has not received any communications from
the PBGC concerning actions which the PBGC contemplates taking in respect of
the Subject Plans.

     Employee Savings Plans. Under its various employee savings plans, the
Company matches the contributions of participating employees up to a designated
level. The extent of the match, vesting terms and the form of the matching
contributions vary among the plans. Under these plans, the Company's matching
contributions, in Holdings common stock or cash, for 1999 and 1998 and
nine-month period ended December 31, 1997 were $8,798, $6,366 and $3,742,
respectively.


15. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                YEAR ENDED           NINE MONTHS
                                                               DECEMBER 31,             ENDED
                                                          -----------------------    DECEMBER 31,
                                                             1999         1998           1997
                                                          ----------   ----------   -------------
<S>                                                       <C>          <C>          <C>
Interest paid .........................................    $50,532      $42,908        $21,245
Income taxes paid .....................................      6,317          496            109
Noncash transactions:
 Common stock issued related to acquisition ...........      6,434           --         45,000
 Contribution in common stock to savings plan .........      6,993          967             --
</TABLE>

16. TRANSACTIONS WITH LOCKHEED MARTIN

     The Company sells products to Lockheed Martin and its affiliates. Net
sales to Lockheed Martin amounted to $65,776, $70,401 and $60,402,
respectively, for the years ended December 31, 1999 and 1998, and the
nine-month period ended December 31, 1997. The net sales of the Predecessor
Company to Lockheed Martin for the three-month period ended March 31, 1997 was
$21,171. Lockheed Martin provides the Company information systems and other
services and previously provided similar services to the Predecessor Company
for which the Company and the Predecessor Company were charged $12,095,


                                      F-23
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

$13,690, and $4,210 for the year ended December 31, 1998, the nine-month period
ended December 31, 1997, and the three-month period ended March 31, 1997
respectively.

     On October 25, 1999, Lockheed Martin sold its remaining shares of Holdings
common stock through a private transaction, and as of such date, Lockheed
Martin is no longer an affiliate or a related party of the Company.

     The Predecessor Company relied on Lockheed Martin for certain services,
including treasury, cash management, employee benefits, taxes, risk management,
internal audit, financial reporting, contract administration and general
corporate services. Although expenses of $5,208 for the three-month period
ended March 31, 1997 related to these services have been allocated to the
Predecessor Company, the combined results of operations and cash flows of the
Predecessor Company would not be the same had it been an independent entity.
The allocation was estimated based primarily on an allocation methodology
prescribed by government regulations pertaining to government contractors.
Interest expense was allocated to the Predecessor Company by applying Lockheed
Martin's weighted average consolidated interest rate to the portion of the
beginning of period invested equity account deemed to be financed by
consolidated debt, which was determined based on Lockheed Martin's debt to
equity ratio on such date, except that the acquisition of the Loral Acquired
Businesses was assumed to be fully financed by debt. Interest expense of the
Predecessor Company was calculated using an invested equity balance of $473,609
and an interest rate of 7.1%. The benefit for income taxes for the Predecessor
Company was calculated by applying statutory tax rates to the reported income
before income taxes after considering items that do not enter into the
determination of taxable income and tax credits reflected in the consolidated
provision of Lockheed Martin which are related to the Predecessor Company.

     The changes in invested equity of the Predecessor Company for the
three-month period ended March 31, 1997 were comprised of a net loss of $258
and advances from Lockheed Martin of $20,579.


17. SEGMENT INFORMATION

     The Company has two reportable segments, Secure Communication Systems and
Specialized Communication Products, which are described in Note 1. The prior
year reportable segment information has been restated to conform to the 1999
presentation of the Company's reportable segments. The Company evaluates the
performance of its operating divisions and reportable segments based on sales
and operating income. All corporate expenses are allocated to the Company's
divisions using an allocation methodology prescribed by U.S. government
regulations for government contractors. Accordingly, all costs and expenses are
included in the Company's measure of segment profitability.




<TABLE>
<CAPTION>
                                           SECURE       SPECIALIZED                ELIMINATION OF   CONSOLIDATED
                                       COMMUNICATION   COMMUNICATION                INTERSEGMENT     (COMBINED)
                                          SYSTEMS         PRODUCTS     CORPORATE        SALES          TOTAL
                                      --------------- --------------- ----------- ---------------- -------------
<S>                                   <C>             <C>             <C>         <C>              <C>
COMPANY
1999
----
Sales ...............................     $544,418       $  867,495                  $  (6,451)     $1,405,462
Operating income ....................       46,955          103,531                                    150,486
Total assets ........................      381,699        1,123,487     $128,585                     1,633,771
Capital expenditures . ..............        6,980           16,476                                     23,456
Depreciation and amortization .......       18,451           35,267                                     53,718

1998
----
Sales ...............................     $493,188       $  561,393                  $ (17,536)     $1,037,045
Operating income ....................       39,885           60,464                                    100,349
Total assets ........................      368,891          797,469     $119,036                     1,285,396
Capital expenditures . ..............        5,755           17,674                                     23,429
Depreciation and amortization .......       17,325           23,030                                     40,355
</TABLE>


                                      F-24
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                             SECURE       SPECIALIZED                ELIMINATION OF   CONSOLIDATED
                                         COMMUNICATION   COMMUNICATION                INTERSEGMENT     (COMBINED)
                                            SYSTEMS         PRODUCTS     CORPORATE        SALES          TOTAL
                                        --------------- --------------- ----------- ---------------- -------------
<S>                                     <C>             <C>             <C>         <C>              <C>
Nine Months Ended December 31, 1997
---------------------------------------
Sales .................................     $309,143        $244,497                    $ (7,115)       $546,525
Operating income (loss) ...............       25,800          30,056     $ (4,410)                        51,446
Total assets ..........................      265,959         290,244      140,779                        696,982
Capital expenditures ..................        5,534           6,400                                      11,934
Depreciation and amortization .........       12,878           9,312                                      22,190

PREDECESSOR COMPANY
Three Months Ended March 31, 1997
----------------------------------------
Sales .................................     $ 84,862        $ 74,399                    $   (388)       $158,873
Operating income ......................          127           7,809                                       7,936
Total assets ..........................      402,867         203,345                                     606,212
Capital expenditures . ................        1,263           3,037                                       4,300
Depreciation and amortization .........        5,095           2,695                                       7,790
</TABLE>

     Corporate assets not allocated to the reportable segments primarily
include cash and cash equivalents, corporate office fixed assets, deferred
income tax assets and deferred debt issuance costs. Corporate operating loss
for the nine-month period ended December 31, 1997 represents the nonrecurring
noncash charge recorded in April, 1997 related to the initial capitalization of
the Company.


     Substantially all of the Company's operations are domestic. The Company's
foreign operations are not material to the Company's results of operations,
cash flows or financial position. Sales to principal customers are summarized
in the table below:



<TABLE>
<CAPTION>
                                                                                                  PREDECESSOR
                                                                   COMPANY                          COMPANY
                                                ----------------------------------------------   ------------
                                                                                     NINE            THREE
                                                         YEAR ENDED                 MONTHS          MONTHS
                                                        DECEMBER 31,                 ENDED           ENDED
                                                -----------------------------    DECEMBER 31,      MARCH 31,
                                                     1999            1998            1997            1997
                                                -------------   -------------   --------------   ------------
<S>                                             <C>             <C>             <C>              <C>
U.S. government agencies . ..................    $  924,006      $  716,234        $434,020        $128,505
Foreign governments .........................       127,637         100,911          12,090           2,017
Commercial export . .........................       144,274          85,331          32,743          11,595
Other (principally U.S. commercial) .........       209,545         134,569          67,672          16,756
                                                 ----------      ----------        --------        --------
                                                 $1,405,462      $1,037,045        $546,525        $158,873
                                                 ==========      ==========        ========        ========
</TABLE>

18. UNAUDITED QUARTERLY FINANCIAL DATA


     Unaudited summarized financial data by quarter for the years ended
December 31, 1999 and 1998 is presented below.


<TABLE>
<CAPTION>
                                                        COMPANY
                             -------------------------------------------------------------
                                MARCH 31        JUNE 30       SEPTEMBER 30     DECEMBER 31
                             -------------   -------------   --------------   ------------
<S>                          <C>             <C>             <C>              <C>
1999
Sales ....................     $ 275,562       $ 314,432       $ 382,356       $ 433,112
Operating income .........        26,167          31,149          42,840          50,330
Net income ...............         7,199          11,086          17,349          23,055
Basic EPS . ..............     $    0.24       $    0.34       $    0.53       $    0.70
Diluted EPS ..............     $    0.23       $    0.33       $    0.51       $    0.68
</TABLE>

                                      F-25
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                        COMPANY
                             -------------------------------------------------------------
                                MARCH 31        JUNE 30       SEPTEMBER 30     DECEMBER 31
                             -------------   -------------   --------------   ------------
<S>                          <C>             <C>             <C>              <C>
1998
Sales ....................     $ 186,564       $ 230,424       $ 291,312       $ 328,745
Operating income .........        14,093          19,458          30,068          36,730
Net income ...............         2,613           5,610          10,467          13,861
Basic EPS . ..............     $    0.13       $    0.24       $    0.38       $    0.51
Diluted EPS ..............     $    0.13       $    0.23       $    0.37       $    0.48
</TABLE>

19. FINANCIAL INFORMATION OF L-3 COMMUNICATIONS SUBSIDIARY GUARANTORS


     L-3 Communications is a wholly-owned subsidiary of Holdings. The debt of
L-3 Communications, including the Senior Subordinated Notes and borrowings
under and 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"). See Note 7.
The foreign subsidiaries and certain domestic subsidiaries of L-3
Communications (the "Non-Guarantor Subsidiaries") do not guarantee the 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.


     In lieu of providing separate audited financial statements for the
Guarantor Subsidiaries, the Company has included the accompanying condensed
combining financial statement based on the Company's understanding of the
interpretation and application of Rule 3-10 of SEC Regulation S-X and SEC Staff
Accounting Bulletin No. 53. The Company does not believe that separate
financial statements of the Guarantor Subsidiaries are material to users of the
financial statements. Therefore, separate financial statements of the Guarantor
Subsidiaries are not presented.


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


                                      F-26
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)




<TABLE>
<CAPTION>
                                                                 GUARANTOR    NON-GUARANTOR                     CONSOLIDATED
                                                    PARENT     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS   L-3 COMMUNICATIONS
                                                ------------- -------------- --------------- -------------- -------------------
<S>                                             <C>           <C>            <C>             <C>            <C>
CONDENSED COMBINING BALANCE SHEETS:
-----------------------------------------------
AS OF DECEMBER 31, 1999:
-----------------------------------------------
Current assets:
 Cash and cash equivalents                       $   34,037      $  5,164       $   3,587      $       --        $   42,788
 Contracts in process                               264,658       162,088          57,427              --           484,173
 Other current assets                                24,616        10,455           5,675              --            40,746
                                                 ----------      --------       ---------      ----------        ----------
   Total current assets                             323,311       177,707          66,689              --           567,707
                                                 ----------      --------       ---------      ----------        ----------
Property, plant and equipment, net                  104,087        25,005          11,879              --           140,971
Intangibles, net                                    399,746       377,177          44,629              --           821,552
Other assets                                         67,820        10,337          25,384              --           103,541
Investment in and amounts due to and from
 consolidated subsidiaries                          644,560        23,591         (25,423)       (642,728)               --
                                                 ----------      --------       ---------      ----------        ----------
   Total assets                                  $1,539,524       613,817       $ 123,158      $ (642,728)       $1,633,771
                                                 ==========      ========       =========      ==========        ==========
Current liabilities:
 Accounts payable and accrued expenses           $  135,709      $ 57,924       $  19,007      $       --        $  212,640
 Customer advances                                   53,345           543           2,850              --            56,738
 Other current liabilities                           24,798        17,230           6,900              --            48,928
                                                 ----------      --------       ---------      ----------        ----------
   Total current liabilities                        213,852        75,697          28,757              --           318,306
                                                 ----------      --------       ---------      ----------        ----------
Other liabilities                                    79,234        47,961              95              --           127,290
Long-term debt                                      605,000            --              --              --           605,000
Shareholders' equity                                641,438       490,159          94,306        (642,728)          583,175
                                                 ----------      --------       ---------      ----------        ----------
   Total liabilities and shareholders' equity    $1,539,524      $613,817       $ 123,158      $ (642,728)       $1,633,771
                                                 ==========      ========       =========      ==========        ==========
AS OF DECEMBER 31, 1998:
-----------------------------------------------
Current assets:
 Cash and cash equivalents                       $   23,737      $    459       $   1,934      $       --        $   26,130
 Contracts in process                               230,940        82,822          37,287              --           351,049
 Other current assets                                16,752        10,802             634              --            28,188
                                                 ----------      --------       ---------      ----------        ----------
   Total current assets                             271,429        94,083          39,855              --           405,367
                                                 ----------      --------       ---------      ----------        ----------
Property, plant and equipment, net                  101,532        15,105           6,518              --           123,155
Intangibles, net                                    367,647       282,972          18,743              --           669,362
Other assets                                         55,306        14,612          17,594              --            87,512
Investment in and amounts due from (to)
 consolidated subsidiaries                          388,846         6,166         (18,085)       (376,927)               --
                                                 ----------      --------       ---------      ----------        ----------
   Total assets                                  $1,184,760      $412,938       $  64,625      $ (376,927)       $1,285,396
                                                 ==========      ========       =========      ==========        ==========
Current liabilities:
 Accounts payable and accrued expenses           $  120,679      $ 32,637       $  11,829      $       --        $  165,145
 Customer advances                                   43,312           699           1,863              --            45,874
 Other current liabilities                           29,947         5,678             890              --            36,515
                                                 ----------      --------       ---------      ----------        ----------
   Total current liabilities                        193,938        39,014          14,582              --           247,534
                                                 ----------      --------       ---------      ----------        ----------
Other liabilities                                    85,848        46,892             148              --           132,888
Long-term debt                                      605,000            --              --              --           605,000
Shareholders' equity                                299,974       327,032          49,895        (376,927)          299,974
                                                 ----------      --------       ---------      ----------        ----------
   Total liabilities and shareholders' equity    $1,184,760      $412,938       $  64,625      $ (376,927)       $1,285,396
                                                 ==========      ========       =========      ==========        ==========
</TABLE>

                                      F-27
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                      GUARANTOR    NON-GUARANTOR                     CONSOLIDATED
                                          PARENT    SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS   L-3 COMMUNICATIONS
                                       ----------- -------------- --------------- -------------- -------------------
<S>                                    <C>         <C>            <C>             <C>            <C>
CONDENSED COMBINING STATEMENTS OF
--------------------------------------
  OPERATIONS:
--------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999:
--------------------------------------
Sales                                   $837,924      $440,160       $130,122       $  (2,744)        $1,405,462
                                        --------      --------       --------       ---------         ----------
Operating income (loss)                  103,753        52,016         (5,283)             --            150,486
Interest and other income                  4,738           469            327              --              5,534
Interest expense                          60,307            --            283              --             60,590
Provision (benefit) for income taxes      18,238        20,091         (1,588)             --             36,741
Equity in net income (loss) of
 consolidated subsidiaries                28,743            --             --         (28,743)                --
                                        --------      --------       --------       ---------         ----------
Net income (loss)                       $ 58,689      $ 32,394       $ (3,651)      $ (28,743)        $   58,689
                                        ========      ========       ========       =========         ==========
FOR THE YEAR ENDED DECEMBER 31, 1998:
--------------------------------------
Sales                                   $833,471      $172,333       $ 33,777       $  (2,536)        $1,037,045
                                        --------      --------       --------       ---------         ----------
Operating income                          82,852        16,137          1,360              --            100,349
Interest and other income                  2,546           422             --            (309)             2,659
Interest expense                          49,503            --            364            (309)            49,558
Provision for income taxes                14,158         6,375            366              --             20,899
Equity in net income of
 consolidated subsidiaries                10,814            --             --         (10,814)                --
                                        --------      --------       --------       ---------         ----------
Net income                              $ 32,551      $ 10,184       $    630       $ (10,814)        $   32,551
                                        ========      ========       ========       =========         ==========
</TABLE>




                                      F-28
<PAGE>

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

       NOTES TO CONSOLIDATED (COMBINED) FINANCIAL STATEMENTS--(CONTINUED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                               GUARANTOR      NON-GUARANTOR
                                                                  PARENT     SUBSIDIARIES      SUBSIDIARIES
                                                              ------------- --------------   ---------------
<S>                                                           <C>           <C>              <C>
CONDENSED COMBINING STATEMENTS OF CASH FLOWS:
-------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999:
-------------------------------------------------------------
OPERATING ACTIVITIES:
Net income (loss)                                              $    29,946     $ 32,394         $ (3,651)
Depreciation, amortization, deferred taxes and noncash
 items                                                              57,147       32,703            3,220
Equity in net (income) loss of consolidated subsidiaries           (28,743)          --
Changes in operating assets and liabilities                        (11,356)     (33,782)          (7,603)
                                                               -----------     --------         --------
Net cash from (used in) operating activities                        46,994       31,315           (8,034)
                                                               -----------     --------         --------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired                    (58,864)    (156,196)         (57,135)
Investment in consolidated subsidiaries                           (213,331)          --               --
Capital expenditures, net of dispositions                          (12,572)      (1,686)          (2,485)
Other investing activities                                           4,649        2,275           (2,788)
                                                               -----------     --------         --------
Net cash (used in) investing activities                           (280,118)    (155,607)         (62,408)
                                                               -----------     --------         --------
FINANCING ACTIVITIES:
Borrowings (repayments) under senior credit facilities, net             --           --               --
Contribution from Holdings                                         201,582           --               --
Intercompany financing activities, net                              41,738      130,330           70,006
Other financing activities                                             104       (1,333)           2,089
                                                               -----------     --------         --------
Net cash from (used in) financing activities                       243,424      128,997           72,095
                                                               -----------     --------         --------
Net increase (decrease) in cash                                     10,300        4,705            1,653
Cash and cash equivalents, beginning of period                      23,737          459            1,934
                                                               -----------     --------         --------
Cash and cash equivalents, end of period                       $    34,037     $  5,164         $  3,587
                                                               ===========     ========         ========
FOR THE YEAR ENDED DECEMBER 31, 1998:
-------------------------------------------------------------
OPERATING ACTIVITIES:
Net income                                                     $    21,737     $ 10,184         $    630
Depreciation, amortization, deferred taxes and noncash
 items                                                              50,372       12,273            1,027
Equity in net (income) loss of consolidated subsidiaries           (10,814)          --               --
Changes in operating assets and liabilities                          4,861      (13,026)          (2,976)
                                                               -----------     --------         --------
Net cash from (used in) operating activities                        66,156        9,431           (1,319)
                                                               -----------     --------         --------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired                    (82,704)    (320,218)         (45,066)
Investment in consolidated subsidiaries                           (365,284)          --               --
Capital expenditures, net of dispositions                          (19,003)      (2,806)            (650)
Other investing activities                                           6,653           --           (9,069)
                                                               -----------     --------         --------
Net cash (used in) investing activities                           (460,338)    (323,024)         (54,785)
                                                               -----------     --------         --------
FINANCING ACTIVITIES:
Borrowings (repayments) under senior credit facilities, net       (172,000)          --               --
Proceeds from sale of senior subordinated notes                    380,000           --               --
Contribution from Holdings                                         139,500           --               --
Intercompany financing activities, net                               4,008      314,052           58,038
Other financing activities                                         (11,063)          --               --
                                                               -----------     --------         --------
Net cash from (used in) financing activities                       346,445      314,052           58,038
                                                               -----------     --------         --------
Net increase (decrease) in cash                                    (53,737)         459            1,934
Cash and cash equivalents, beginning of period                      77,474           --               --
                                                               -----------     --------         --------
Cash and cash equivalents, end of period                       $    23,737     $    459         $  1,934
                                                               ===========     ========         ========







<CAPTION>
                                                                                  CONSOLIDATED
                                                                ELIMINATIONS   L-3 COMMUNICATIONS
                                                               -------------- -------------------
<S>                                                            <C>            <C>
CONDENSED COMBINING STATEMENTS OF CASH FLOWS:
-------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999:
-------------------------------------------------------------
OPERATING ACTIVITIES:
Net income (loss)                                                     --          $    58,689
Depreciation, amortization, deferred taxes and noncash
 items                                                                --               93,070
Equity in net (income) loss of consolidated subsidiaries          28,743                   --
Changes in operating assets and liabilities                           --              (52,741)
                                                               -----------        -----------
Net cash from (used in) operating activities                      28,743               99,018
                                                               -----------        -----------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired                       --             (272,195)
Investment in consolidated subsidiaries                          213,331                   --
Capital expenditures, net of dispositions                             --              (16,743)
Other investing activities                                            --                4,136
                                                               -----------        -----------
Net cash (used in) investing activities                          213,331             (284,802)
                                                               -----------        -----------
FINANCING ACTIVITIES:
Borrowings (repayments) under senior credit facilities, net           --                   --
Contribution from Holdings                                            --              201,582
Intercompany financing activities, net                          (242,074)                  --
Other financing activities                                            --                  860
                                                               -----------        -----------
Net cash from (used in) financing activities                    (242,074)             202,442
                                                               -----------        -----------

Net increase in cash                                                  --               16,658
Cash and cash equivalents, beginning of period                        --               26,130
                                                               -----------        -----------
Cash and cash equivalents, end of period                              --          $    42,788
                                                               ===========        ===========
FOR THE YEAR ENDED DECEMBER 31, 1998:
-------------------------------------------------------------
OPERATING ACTIVITIES:
Net income                                                            --          $    32,551
Depreciation, amortization, deferred taxes and noncash
 items                                                                --               63,672
Equity in net (income) loss of consolidated subsidiaries          10,814                   --
Changes in operating assets and liabilities                           --              (11,141)
                                                               -----------        -----------
Net cash from (used in) operating activities                      10,814               85,082
                                                               -----------        -----------
INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired                       --             (447,988)
Investment in consolidated subsidiaries                          365,284                   --
Capital expenditures, net of dispositions                             --              (22,459)
Other investing activities                                            --               (2,416)
                                                               -----------        -----------
Net cash (used in) investing activities                          365,284             (472,863)
                                                               -----------        -----------
FINANCING ACTIVITIES:
Borrowings (repayments) under senior credit facilities, net           --             (172,000)
Proceeds from sale of senior subordinated notes                       --              380,000
Contribution from Holdings                                            --              139,500
Intercompany financing activities, net                          (376,098)                  --
Other financing activities                                            --              (11,063)
                                                               -----------        -----------
Net cash from (used in) financing activities                    (376,098)             336,437
                                                               -----------        -----------
Net increase (decrease) in cash                                       --              (51,344)
Cash and cash equivalents, beginning of period                        --               77,474
                                                               -----------        -----------
Cash and cash equivalents, end of period                              --          $    26,130
                                                               ===========        ===========
</TABLE>



                                      F-29