x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Leidos Holdings, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware
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20-3562868
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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11951 Freedom Drive, Reston, Virginia
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20190
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(Address of principal executive office)
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(Zip Code)
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(571) 526-6000
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(Registrant's telephone number, including area code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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Page
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Part I
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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June 30,
2017 |
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December 30,
2016 |
||||
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(in millions)
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||||||
ASSETS
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||||
Current assets:
|
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||||
Cash and cash equivalents
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$
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262
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$
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376
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Receivables, net
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1,832
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1,657
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Inventory, prepaid expenses and other current assets
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340
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348
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Total current assets
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2,434
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2,381
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Property, plant and equipment, net
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215
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259
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Intangible assets, net
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1,006
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1,589
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Goodwill
|
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4,922
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4,622
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Deferred tax assets
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13
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16
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Other assets
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292
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|
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265
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$
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8,882
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$
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9,132
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LIABILITIES AND EQUITY
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||||
Current liabilities:
|
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||||
Accounts payable and accrued liabilities
|
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$
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1,330
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|
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$
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1,427
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Accrued payroll and employee benefits
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475
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|
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483
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Dividends payable
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17
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23
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Income taxes payable
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4
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21
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Long-term debt, current portion
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84
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62
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Total current liabilities
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1,910
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2,016
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Long-term debt, net of current portion
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3,147
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3,225
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Deferred tax liabilities
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362
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540
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Other long-term liabilities
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222
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204
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Commitments and contingencies (Notes 15 and 16)
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Stockholders’ equity:
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Common stock, $.0001 par value, 500 million shares authorized, 151 million and 150 million shares issued and outstanding at June 30, 2017 and December 30, 2016, respectively
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—
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—
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Additional paid-in capital
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3,321
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3,316
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Accumulated deficit
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(105
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)
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(177
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)
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Accumulated other comprehensive income (loss)
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8
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(4
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)
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Total Leidos stockholders’ equity
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3,224
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3,135
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Non-controlling interest
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17
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12
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Total equity
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3,241
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3,147
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$
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8,882
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$
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9,132
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Three Months Ended
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Six Months Ended
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||||||||||||
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June 30,
2017 |
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July 1,
2016 |
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June 30,
2017 |
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July 1,
2016 |
||||||||
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(in millions, except per share amounts)
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||||||||||||||
Revenues
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$
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2,571
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$
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1,288
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$
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5,151
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$
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2,600
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Cost of revenues
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2,233
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1,141
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4,503
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2,295
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Selling, general and administrative expenses
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143
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56
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287
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116
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Acquisition and integration costs
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16
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15
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35
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24
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Restructuring expenses
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6
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1
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19
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1
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Equity losses of non-consolidated subsidiaries
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7
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—
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—
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—
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||||
Operating income
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166
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75
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307
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|
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164
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|
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Interest income
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2
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2
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4
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5
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Interest expense
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(36
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)
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(15
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)
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(74
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)
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(29
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)
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Other income (expense), net
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3
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(2
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)
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6
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(2
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)
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Income from continuing operations before income taxes
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135
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60
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243
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138
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Income tax expense
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(37
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)
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(19
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)
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(71
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)
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(44
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)
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Net income
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98
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41
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172
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94
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Less: net income attributable to non-controlling interest
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—
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—
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2
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—
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Net income attributable to Leidos common stockholders
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$
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98
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$
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41
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$
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170
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$
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94
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Earnings per share:
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Basic
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$
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0.65
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$
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0.56
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$
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1.13
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$
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1.31
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Diluted
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0.64
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0.55
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1.11
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1.27
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Cash dividends declared per share
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$
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0.32
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$
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0.32
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$
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0.64
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$
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0.64
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Three Months Ended
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Six Months Ended
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||||||||||||
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June 30,
2017 |
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July 1,
2016 |
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June 30,
2017 |
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July 1,
2016 |
||||||||
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(in millions)
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||||||||||||||
Net income
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$
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98
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$
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41
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$
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172
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$
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94
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Other comprehensive income, net of taxes:
|
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|
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||||||||
Foreign currency translation adjustments
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2
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2
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13
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4
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Unrecognized loss on derivative instruments
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(2
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)
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—
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(1
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)
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—
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|
||||
Total other comprehensive income, net of taxes
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—
|
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2
|
|
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12
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|
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4
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|
||||
Comprehensive income
|
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98
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|
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43
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|
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184
|
|
|
98
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|
||||
Less: comprehensive income attributable to non-controlling interest
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—
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—
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2
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|
|
—
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|
||||
Comprehensive income attributable to Leidos common stockholders
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$
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98
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$
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43
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$
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182
|
|
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$
|
98
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|
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Six Months Ended
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||||||
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June 30,
2017 |
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July 1,
2016 |
||||
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(in millions)
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||||||
Cash flows from operations:
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|
|
|
|
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Net income
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$
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172
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|
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$
|
94
|
|
Adjustments to reconcile net income to net cash provided by operations:
|
|
|
|
|
||||
Depreciation and amortization
|
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162
|
|
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17
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Stock-based compensation
|
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20
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|
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16
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|
||
Bad debt expense
|
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12
|
|
|
—
|
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||
Other
|
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15
|
|
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(3
|
)
|
||
Change in assets and liabilities, net of effects of acquisitions and dispositions:
|
|
|
|
|
||||
Receivables
|
|
(179
|
)
|
|
(76
|
)
|
||
Inventory, prepaid expenses and other current assets
|
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35
|
|
|
(7
|
)
|
||
Accounts payable and accrued liabilities
|
|
(123
|
)
|
|
7
|
|
||
Accrued payroll and employee benefits
|
|
(7
|
)
|
|
2
|
|
||
Deferred income taxes and income taxes receivable/payable
|
|
(44
|
)
|
|
7
|
|
||
Other long-term assets/liabilities
|
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26
|
|
|
1
|
|
||
Net cash provided by operating activities of continuing operations
|
|
89
|
|
|
58
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Payments for property, plant and equipment
|
|
(23
|
)
|
|
(7
|
)
|
||
Collections on promissory note
|
|
2
|
|
|
—
|
|
||
Net proceeds from sale of assets
|
|
7
|
|
|
3
|
|
||
Proceeds from disposition of business
|
|
—
|
|
|
23
|
|
||
Other
|
|
—
|
|
|
(1
|
)
|
||
Net cash (used in) provided by investing activities of continuing operations
|
|
(14
|
)
|
|
18
|
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Payments of long-term debt
|
|
(69
|
)
|
|
(2
|
)
|
||
Proceeds from issuances of stock
|
|
7
|
|
|
6
|
|
||
Repurchases of stock and other
|
|
(25
|
)
|
|
(19
|
)
|
||
Dividend payments
|
|
(102
|
)
|
|
(46
|
)
|
||
Net cash used in financing activities of continuing operations
|
|
(189
|
)
|
|
(61
|
)
|
||
Net (decrease) increase in cash and cash equivalents from continuing operations
|
|
(114
|
)
|
|
15
|
|
||
Cash flows from discontinued operations:
|
|
|
|
|
||||
Net cash used in investing activities of discontinued operations
|
|
—
|
|
|
(1
|
)
|
||
Net decrease in cash and cash equivalents from discontinued operations
|
|
—
|
|
|
(1
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
|
(114
|
)
|
|
14
|
|
||
Cash and cash equivalents at beginning of period
|
|
376
|
|
|
656
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
262
|
|
|
$
|
670
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
|
June 30,
2017 |
|
July 1,
2016 |
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
Net favorable impact to income from continuing operations before taxes
|
|
$
|
40
|
|
|
$
|
5
|
|
|
$
|
62
|
|
|
$
|
13
|
|
Impact on diluted EPS from continuing operations attributable to Leidos common stockholders
|
|
$
|
0.17
|
|
|
$
|
0.04
|
|
|
$
|
0.26
|
|
|
$
|
0.11
|
|
Value of common stock issued to Lockheed Martin stockholders
(1)
|
$
|
2,929
|
|
Equity consideration for replacement awards
(2)
|
9
|
|
|
Preliminary working capital adjustments
|
55
|
|
|
Preliminary purchase price
|
$
|
2,993
|
|
Cash
|
$
|
25
|
|
Receivables
|
954
|
|
|
Inventory, prepaid expenses and other current assets
|
68
|
|
|
Property, plant and equipment
|
91
|
|
|
Deferred tax assets
|
8
|
|
|
Intangible assets
|
1,202
|
|
|
Other assets
|
57
|
|
|
Accounts payable and accrued liabilities
|
(713
|
)
|
|
Accrued payroll and employee benefits
|
(190
|
)
|
|
Long-term debt, current portion
|
(23
|
)
|
|
Deferred tax liabilities
|
(356
|
)
|
|
Long-term debt, net of current portion
|
(1,780
|
)
|
|
Other long-term liabilities
|
(52
|
)
|
|
Total identifiable net liabilities assumed
|
(709
|
)
|
|
Non-controlling interest
|
(13
|
)
|
|
Goodwill
|
3,715
|
|
|
Preliminary purchase price
|
$
|
2,993
|
|
|
|
Weighted average amortization period
|
|
Fair value
|
||
|
|
(in years)
|
|
(in millions)
|
||
Programs and contract intangibles
(1)
|
|
9.0
|
|
$
|
997
|
|
Backlog
|
|
1.4
|
|
178
|
|
|
Software and technology
|
|
1.2
|
|
27
|
|
|
Total
|
|
7.8
|
|
$
|
1,202
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
|
June 30,
2017 |
|
July 1,
2016 |
||||||||
|
|
(in millions)
|
||||||||||||||
Acquisition costs
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
13
|
|
Integration costs
|
|
16
|
|
|
8
|
|
|
34
|
|
|
11
|
|
||||
Total acquisition and integration costs
|
|
$
|
16
|
|
|
$
|
15
|
|
|
$
|
35
|
|
|
$
|
24
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
(unaudited)
|
|
July 1,
2016 |
|
July 1,
2016 |
||||
|
|
(in millions, except per share amounts)
|
||||||
Revenues
|
|
$
|
2,624
|
|
|
$
|
5,261
|
|
Income from continuing operations
|
|
103
|
|
|
150
|
|
||
Income from continuing operations attributable to Leidos common stockholders
|
|
102
|
|
|
147
|
|
||
Earnings per share:
|
|
|
|
|
||||
Basic
|
|
$
|
0.68
|
|
|
$
|
0.99
|
|
Diluted
|
|
0.68
|
|
|
0.97
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
June 30,
2017 |
|
June 30,
2017 |
||||
|
|
(in millions)
|
||||||
Severance costs
|
|
$
|
2
|
|
|
$
|
12
|
|
Lease termination expenses
|
|
4
|
|
|
7
|
|
||
Restructuring expenses related to the IS&GS Business
|
|
$
|
6
|
|
|
$
|
19
|
|
|
|
Severance costs
|
|
Lease termination expenses
|
|
Total
|
||||||
|
|
(in millions)
|
||||||||||
Balance as of December 30, 2016
|
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
8
|
|
Charges
|
|
12
|
|
|
7
|
|
|
19
|
|
|||
Cash payments
|
|
(17
|
)
|
|
(6
|
)
|
|
(23
|
)
|
|||
Balance as of June 30, 2017
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
|
June 30, 2017
|
|
December 30, 2016
|
||||||||||||
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Financial assets
|
|
|
|
|
|
|
|
|
||||||||
Derivatives
|
|
$
|
30
|
|
|
$
|
30
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
|
Defense Solutions
|
|
Civil
|
|
Health
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
Goodwill at January 1, 2016
|
|
$
|
792
|
|
|
$
|
244
|
|
|
$
|
171
|
|
|
$
|
1,207
|
|
Acquisition of the IS&GS Business
|
|
1,162
|
|
|
1,487
|
|
|
766
|
|
|
3,415
|
|
||||
Goodwill at December 30, 2016
|
|
1,954
|
|
|
1,731
|
|
|
937
|
|
|
4,622
|
|
||||
Adjustment to original purchase price allocation
|
|
72
|
|
|
151
|
|
|
77
|
|
|
300
|
|
||||
Goodwill at June 30, 2017
|
|
$
|
2,026
|
|
|
$
|
1,882
|
|
|
$
|
1,014
|
|
|
$
|
4,922
|
|
|
|
June 30, 2017
|
|
December 30, 2016
|
||||||||||||||||||||
|
|
Gross carrying value
|
|
Accumulated amortization
|
|
Net carrying value
|
|
Gross carrying value
|
|
Accumulated amortization
|
|
Net carrying value
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Programs and contract intangibles
|
|
$
|
997
|
|
|
$
|
(91
|
)
|
|
$
|
906
|
|
|
$
|
1,450
|
|
|
$
|
(25
|
)
|
|
$
|
1,425
|
|
Backlog
|
|
178
|
|
|
(113
|
)
|
|
65
|
|
|
200
|
|
|
(54
|
)
|
|
146
|
|
||||||
Software and technology
|
|
89
|
|
|
(59
|
)
|
|
30
|
|
|
61
|
|
|
(48
|
)
|
|
13
|
|
||||||
Customer relationships
|
|
6
|
|
|
(5
|
)
|
|
1
|
|
|
6
|
|
|
(5
|
)
|
|
1
|
|
||||||
Total finite-lived intangible assets
|
|
1,270
|
|
|
(268
|
)
|
|
1,002
|
|
|
1,717
|
|
|
(132
|
)
|
|
1,585
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade names
|
|
4
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||
Total intangible assets
|
|
$
|
1,274
|
|
|
$
|
(268
|
)
|
|
$
|
1,006
|
|
|
$
|
1,721
|
|
|
$
|
(132
|
)
|
|
$
|
1,589
|
|
Fiscal Year Ending
|
|
|
||
|
|
(in millions)
|
||
2017 (remainder of year)
|
|
$
|
149
|
|
2018
|
|
206
|
|
|
2019
|
|
180
|
|
|
2020
|
|
132
|
|
|
2021
|
|
111
|
|
|
2022 and thereafter
|
|
224
|
|
|
|
|
$
|
1,002
|
|
|
|
June 30,
2017 |
|
December 30,
2016 |
||||
|
|
(in millions)
|
||||||
Computers and other equipment
|
|
$
|
191
|
|
|
$
|
172
|
|
Leasehold improvements
|
|
167
|
|
|
161
|
|
||
Buildings and improvements
|
|
54
|
|
|
104
|
|
||
Office furniture and fixtures
|
|
35
|
|
|
35
|
|
||
Land
|
|
49
|
|
|
57
|
|
||
Construction in progress
|
|
8
|
|
|
12
|
|
||
|
|
504
|
|
|
541
|
|
||
Less: accumulated depreciation and amortization
|
|
(289
|
)
|
|
(282
|
)
|
||
|
|
$
|
215
|
|
|
$
|
259
|
|
|
|
Balance sheet line item
|
|
June 30,
2017 |
|
December 30,
2016 |
||||
|
|
|
|
(in millions)
|
||||||
Fair value interest rate swaps
|
|
Other assets
|
|
$
|
5
|
|
|
$
|
3
|
|
Cash flow interest rate swaps
|
|
Other assets
|
|
25
|
|
|
26
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
|
June 30,
2017 |
|
June 30,
2017 |
||||
|
|
(in millions)
|
||||||
Effective portion recognized in other comprehensive income
|
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
Effective portion reclassified from accumulated other comprehensive income (loss) to earnings
|
|
—
|
|
|
1
|
|
||
Ineffective portion recognized in earnings
|
|
1
|
|
|
1
|
|
|
|
Stated interest rate
|
|
Effective interest rate
|
|
June 30, 2017
(1)
|
|
December 30, 2016
(1)
|
||||
|
|
|
|
|
|
(in millions)
|
||||||
Senior secured notes:
|
|
|
|
|
|
|
|
|
||||
$450 million notes, due December 2020
|
|
4.45%
|
|
4.53%
|
|
$
|
453
|
|
|
$
|
451
|
|
$300 million notes, due December 2040
|
|
5.95%
|
|
6.03%
|
|
216
|
|
|
216
|
|
||
Senior secured term loans:
|
|
|
|
|
|
|
|
|
||||
$400 million Term Loan A, due August 2019
|
|
3.06%
|
|
4.04%
|
|
89
|
|
|
123
|
|
||
$690 million Term Loan A, due August 2021
|
|
3.06%
|
|
3.63%
|
|
661
|
|
|
676
|
|
||
$310 million Term Loan A, due August 2021
|
|
3.06%
|
|
3.60%
|
|
297
|
|
|
304
|
|
||
$1,131 million Term Loan B, due August 2023
|
|
3.31%
|
|
3.67%
|
|
1,105
|
|
|
1,110
|
|
||
Senior unsecured notes:
|
|
|
|
|
|
|
|
|
||||
$250 million notes, due July 2032
|
|
7.13%
|
|
7.43%
|
|
246
|
|
|
246
|
|
||
$300 million notes, due July 2033
|
|
5.50%
|
|
5.88%
|
|
158
|
|
|
158
|
|
||
Capital leases due on various dates through fiscal 2020
|
|
0%-5.94%
|
|
Various
|
|
6
|
|
|
3
|
|
||
Total long-term debt
|
|
|
|
|
|
3,231
|
|
|
3,287
|
|
||
Less: current portion
|
|
|
|
|
|
84
|
|
|
62
|
|
||
Total long-term debt, net of current portion
|
|
|
|
|
|
$
|
3,147
|
|
|
$
|
3,225
|
|
(1)
|
The carrying amounts of the senior secured term loans and notes and unsecured notes as of June 30, 2017, and December 30, 2016, include the remaining principal outstanding of
$3,270 million
and
$3,336 million
, respectively, plus
$5 million
and
$3 million
, respectively, related to the fair value of the interest rate swaps (see "Note 9–Derivative Instruments"), less unamortized debt discounts of
$41 million
and
$46 million
, respectively, less deferred debt issuance costs of
$9 million
for both periods.
|
|
|
Foreign currency translation adjustments
|
|
Unrecognized (loss) gain on derivative instruments
|
|
Pension liability adjustments
|
|
Total accumulated other comprehensive income (loss)
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balance at January 1, 2016
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
Other comprehensive (loss) income
|
|
(8
|
)
|
|
26
|
|
|
1
|
|
|
19
|
|
||||
Taxes
|
|
1
|
|
|
(10
|
)
|
|
2
|
|
|
(7
|
)
|
||||
Reclassification from accumulated other comprehensive income (loss)
|
|
—
|
|
|
(2
|
)
|
|
(6
|
)
|
|
(8
|
)
|
||||
Balance at December 30, 2016
|
|
(7
|
)
|
|
10
|
|
|
(7
|
)
|
|
(4
|
)
|
||||
Other comprehensive income (loss)
|
|
15
|
|
|
(1
|
)
|
|
—
|
|
|
14
|
|
||||
Taxes
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
||||
Reclassification from accumulated other comprehensive income (loss)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Balance at June 30, 2017
|
|
$
|
6
|
|
|
$
|
9
|
|
|
$
|
(7
|
)
|
|
$
|
8
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
|
June 30,
2017 |
|
July 1,
2016 |
||||
|
|
(in millions)
|
||||||||||
Basic weighted average number of shares outstanding
|
|
151
|
|
|
73
|
|
|
151
|
|
|
72
|
|
Dilutive common share equivalents—stock options and other stock awards
|
|
2
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Diluted weighted average number of shares outstanding
|
|
153
|
|
|
74
|
|
|
153
|
|
|
74
|
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
||||
|
|
(in millions)
|
||||||
Supplementary cash flow information:
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
59
|
|
|
$
|
43
|
|
Cash paid for income taxes, net of refunds
|
|
107
|
|
|
38
|
|
||
Non-cash financing activity:
|
|
|
|
|
||||
Capital lease obligation
|
|
6
|
|
|
—
|
|
•
|
Defense Solutions – delivers cutting edge technology and services to the DoD, military services, the U.S. Intelligence Community, DHS, agencies of U.S. allies abroad and other federal and civilian customers. The Company's Defense Solutions business is focused on cybersecurity, data analytics, IT modernization and software development, as well as technology to support intelligence, surveillance and reconnaissance services.
|
•
|
Civil – provides services and solutions to civil agencies of the U.S. Government and commercial customers. The Company's Civil business is focused on software development, operations and sustainment, enterprise IT modernization, systems engineering and cyber services.
|
•
|
Health – provides services and solutions to the Defense Health Agency, Veterans Administration, HHS, other civil health agencies of the U.S. Government and commercial healthcare providers. The Company's Health business is focused on enterprise IT modernization, software development, data analytics, electronic health record implementation, mission critical operations and sustainment, life sciences and public health.
|
•
|
Corporate expenses – includes the operations of various corporate activities and certain expense items that are not reimbursed by the Company's U.S. Government customers.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
|
June 30,
2017 |
|
July 1,
2016 |
||||||||
|
|
(in millions)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Defense Solutions
|
|
$
|
1,243
|
|
|
$
|
785
|
|
|
$
|
2,537
|
|
|
$
|
1,565
|
|
Civil
|
|
875
|
|
|
300
|
|
|
1,717
|
|
|
661
|
|
||||
Health
|
|
454
|
|
|
203
|
|
|
897
|
|
|
374
|
|
||||
Corporate expenses
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total revenues
|
|
$
|
2,571
|
|
|
$
|
1,288
|
|
|
$
|
5,151
|
|
|
$
|
2,600
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Defense Solutions
|
|
$
|
63
|
|
|
$
|
60
|
|
|
$
|
142
|
|
|
$
|
131
|
|
Civil
|
|
66
|
|
|
20
|
|
|
120
|
|
|
42
|
|
||||
Health
|
|
74
|
|
|
18
|
|
|
121
|
|
|
34
|
|
||||
Corporate expenses
|
|
(37
|
)
|
|
(23
|
)
|
|
(76
|
)
|
|
(43
|
)
|
||||
Total operating income
|
|
$
|
166
|
|
|
$
|
75
|
|
|
$
|
307
|
|
|
$
|
164
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
$
|
2,571
|
|
|
$
|
1,288
|
|
|
$
|
1,283
|
|
|
99.6
|
%
|
|
$
|
5,151
|
|
|
$
|
2,600
|
|
|
$
|
2,551
|
|
|
98.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating income
|
|
166
|
|
|
75
|
|
|
91
|
|
|
121.3
|
%
|
|
307
|
|
|
164
|
|
|
143
|
|
|
87.2
|
%
|
||||||
Non-operating expense, net
|
|
(31
|
)
|
|
(15
|
)
|
|
(16
|
)
|
|
106.7
|
%
|
|
(64
|
)
|
|
(26
|
)
|
|
(38
|
)
|
|
146.2
|
%
|
||||||
Income from continuing operations before income taxes
|
|
135
|
|
|
60
|
|
|
75
|
|
|
125.0
|
%
|
|
243
|
|
|
138
|
|
|
105
|
|
|
76.1
|
%
|
||||||
Income tax expense
|
|
(37
|
)
|
|
(19
|
)
|
|
(18
|
)
|
|
94.7
|
%
|
|
(71
|
)
|
|
(44
|
)
|
|
(27
|
)
|
|
61.4
|
%
|
||||||
Net income
|
|
98
|
|
|
41
|
|
|
57
|
|
|
139.0
|
%
|
|
172
|
|
|
94
|
|
|
78
|
|
|
83.0
|
%
|
||||||
Less: net income attributable to non-controlling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
NM
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
NM
|
|
||||||
Net income attributable to Leidos common stockholders
|
|
$
|
98
|
|
|
$
|
41
|
|
|
$
|
57
|
|
|
139.0
|
%
|
|
$
|
170
|
|
|
$
|
94
|
|
|
$
|
76
|
|
|
80.9
|
%
|
Operating margin
|
|
6.5
|
%
|
|
5.8
|
%
|
|
|
|
|
|
6.0
|
%
|
|
6.3
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
Defense Solutions
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
$
|
1,243
|
|
|
$
|
785
|
|
|
$
|
458
|
|
|
58.3
|
%
|
|
$
|
2,537
|
|
|
$
|
1,565
|
|
|
$
|
972
|
|
|
62.1
|
%
|
Operating income
|
|
63
|
|
|
60
|
|
|
3
|
|
|
5.0
|
%
|
|
142
|
|
|
131
|
|
|
11
|
|
|
8.4
|
%
|
||||||
Operating income margin
|
|
5.1
|
%
|
|
7.6
|
%
|
|
|
|
|
|
5.6
|
%
|
|
8.4
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
Civil
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
$
|
875
|
|
|
$
|
300
|
|
|
$
|
575
|
|
|
191.7
|
%
|
|
$
|
1,717
|
|
|
$
|
661
|
|
|
$
|
1,056
|
|
|
159.8
|
%
|
Operating income
|
|
66
|
|
|
20
|
|
|
46
|
|
|
NM
|
|
|
120
|
|
|
42
|
|
|
78
|
|
|
185.7
|
%
|
||||||
Operating income margin
|
|
7.5
|
%
|
|
6.7
|
%
|
|
|
|
|
|
7.0
|
%
|
|
6.4
|
%
|
|
|
|
|
||||||||||
NM - Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
Health
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
$
|
454
|
|
|
$
|
203
|
|
|
$
|
251
|
|
|
123.6
|
%
|
|
$
|
897
|
|
|
$
|
374
|
|
|
$
|
523
|
|
|
139.8
|
%
|
Operating income
|
|
74
|
|
|
18
|
|
|
56
|
|
|
NM
|
|
|
121
|
|
|
34
|
|
|
87
|
|
|
NM
|
|
||||||
Operating income margin
|
|
16.3
|
%
|
|
8.9
|
%
|
|
|
|
|
|
13.5
|
%
|
|
9.1
|
%
|
|
|
|
|
||||||||||
NM - Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||
Corporate expenses
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
|
June 30,
2017 |
|
July 1,
2016 |
|
Dollar change
|
|
Percent change
|
||||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||||||||
Revenues
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
NM
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
NM
|
|
Operating loss
|
|
(37
|
)
|
|
(23
|
)
|
|
(14
|
)
|
|
60.9
|
%
|
|
(76
|
)
|
|
(43
|
)
|
|
(33
|
)
|
|
76.7
|
%
|
||||||
NM - Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017 |
|
December 30,
2016 |
||||
|
|
(in millions)
|
||||||
Defense Solutions:
|
|
|
|
|
||||
Funded backlog
|
|
$
|
2,326
|
|
|
$
|
3,171
|
|
Negotiated unfunded backlog
|
|
5,064
|
|
|
4,936
|
|
||
Total Defense Solutions backlog
|
|
$
|
7,390
|
|
|
$
|
8,107
|
|
Civil:
|
|
|
|
|
||||
Funded backlog
|
|
$
|
2,007
|
|
|
$
|
1,950
|
|
Negotiated unfunded backlog
|
|
4,883
|
|
|
5,250
|
|
||
Total Civil backlog
|
|
$
|
6,890
|
|
|
$
|
7,200
|
|
Health:
|
|
|
|
|
||||
Funded backlog
|
|
$
|
660
|
|
|
$
|
854
|
|
Negotiated unfunded backlog
|
|
2,151
|
|
|
1,575
|
|
||
Total Health backlog
|
|
$
|
2,811
|
|
|
$
|
2,429
|
|
Total:
|
|
|
|
|
||||
Funded backlog
|
|
$
|
4,993
|
|
|
$
|
5,975
|
|
Negotiated unfunded backlog
|
|
12,098
|
|
|
11,761
|
|
||
Total backlog
|
|
$
|
17,091
|
|
|
$
|
17,736
|
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
2017 |
|
July 1,
2016 |
||||
|
|
(in millions)
|
||||||
Net cash provided by operating activities of continuing operations
|
|
$
|
89
|
|
|
$
|
58
|
|
Net cash (used in) provided by investing activities of continuing operations
|
|
(14
|
)
|
|
18
|
|
||
Net cash used in financing activities of continuing operations
|
|
(189
|
)
|
|
(61
|
)
|
||
Net (decrease) increase in cash and cash equivalents from continuing operations
|
|
(114
|
)
|
|
15
|
|
||
Net decrease in cash and cash equivalents from discontinued operations
|
|
—
|
|
|
(1
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
|
$
|
(114
|
)
|
|
$
|
14
|
|
(a)
|
None
|
(b)
|
None
|
(c)
|
Purchases of Equity Securities by the Company
|
Period
|
|
Total Number of Shares
(or Units) Purchased (1) |
|
Average Price
Paid per Share (or Unit) |
|
Total Number of Shares
(or Units) Purchased as Part of Publicly Announced Repurchase Plans or Programs |
|
Maximum Number of Shares (or Units) that May Yet Be
Purchased Under the Plans or Programs |
|||||
April 1, 2017 - April 30, 2017
|
|
15,139
|
|
|
$
|
50.65
|
|
|
—
|
|
|
5,718,172
|
|
May 1, 2017 - May 31, 2017
|
|
24,447
|
|
|
52.87
|
|
|
—
|
|
|
5,718,172
|
|
|
June 1, 2017 - June 30, 2017
|
|
21,845
|
|
|
55.32
|
|
|
—
|
|
|
5,718,172
|
|
|
Total
|
|
61,431
|
|
|
53.20
|
|
|
—
|
|
|
|
(1)
|
The total number of shares purchased includes: (i) shares surrendered to satisfy statutory tax withholdings obligations related to vesting of restricted stock units; and (ii) shares purchased upon surrender by stockholders of previously owned shares in payment of the exercise price of non-qualified stock options and/or to satisfy statutory tax withholdings obligations.
|
Exhibit
Number |
|
Description of Exhibit
|
10.1
|
|
Amended and Restated Leidos Holdings, Inc.'s 2006 Employee Stock Purchase Plan.
|
|
|
|
10.2
|
|
Leidos Holdings, Inc.'s 2017 Omnibus Incentive Plan. Incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-3 filed with the SEC on June 1, 2017.
|
|
|
|
10.3
|
|
Retirement Agreement dated June 5, 2017, between Leidos Holdings, Inc. and Vincent A. Maffeo. Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 9, 2017.
|
|
|
|
31.1
|
|
Certification of Chairman and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101
|
|
Interactive Data File.
|
Leidos Holdings, Inc.
|
|
/s/ James C. Reagan
|
James C. Reagan
Executive Vice President and Chief Financial Officer and
as a duly authorized officer
|
1.
|
Establishment of Plan.
|
2.
|
Definitions.
|
3.
|
Number of Shares.
|
4.
|
Administration.
|
5.
|
Eligibility.
|
6.
|
Offering Dates.
|
7.
|
Participation in this Plan.
|
8.
|
Grant of Option on Enrollment.
|
9.
|
Purchase Price.
|
10.
|
Payment of Purchase Price; Changes in Payroll Deductions; Issuance of Shares.
|
11.
|
Limitations on Shares to be Purchased.
|
12.
|
Withdrawal.
|
13.
|
Termination of Employment.
|
14.
|
Return of Payroll Deductions.
|
15.
|
Capital Changes.
|
16.
|
Nonassignability.
|
17.
|
Reports.
|
18.
|
Notice of Disposition.
|
19.
|
No Rights to Continued Employment.
|
20.
|
Additional Provisions to Comply with Local Law.
|
21.
|
Notices.
|
22.
|
Term; Stockholder Approval.
|
23.
|
Conditions Upon Issuance of Shares; Limitation on Sale of Shares.
|
24.
|
Applicable Law.
|
25.
|
Amendment or Termination.
|
26.
|
Tax Obligations.
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2017, of Leidos Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including the registrant's consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Roger A. Krone
|
Roger A. Krone
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2017, of Leidos Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including the registrant's consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ James C. Reagan
|
James C. Reagan
Executive Vice President and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Roger A. Krone
|
Roger A. Krone
Chairman and Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ James C. Reagan
|
James C. Reagan
Executive Vice President and Chief Financial Officer
|