Leidos Holdings, Inc. Announces Third Quarter Fiscal Year 2014 Results

    Leidos Holdings, Inc. Announces Third Quarter Fiscal Year 2014 Results

- Revenues: $1.42 billion

- Operating Loss from Continuing Operations: $7 million

- Diluted Loss per Share from Continuing Operations: $0.11

- Cash Flows Provided by Operating Activities from Continuing Operations: $49
million

- Net New Bookings: $2.39 billion (book-to-bill ratio of 1.7)

- Leidos Announces Repurchase Authorization for Up to 20 million Shares

- Leidos Declares a Quarterly Cash Dividend of $0.32 per Share Payable on
January 30, 2014

PR Newswire

MCLEAN, Va., Dec. 10, 2013

MCLEAN, Va., Dec. 10, 2013 /PRNewswire/ --Leidos Holdings, Inc. (NYSE: LDOS),
a national security, health and engineering solutions company, today announced
financial results for the third quarter of fiscal year 2014, which ended
November 1, 2013. Today's release should be read in connection with the
Company's press release issued on December 3, 2013 in which the Company
lowered its guidance for fiscal year 2014.

(Logo:http://photos.prnewswire.com/prnh/20131120/PH20896LOGO )

On September 27, 2013, Leidos completed the previously announced separation of
Science Applications International Corporation (New SAIC). The separation was
effected through a tax-free distribution to Leidos shareholders for U.S.
federal tax purposes in which Leidos shareholders of record as of September
19, 2013 received one share of New SAIC for every seven shares of Leidos
common stock. In connection with the separation, Leidos received net cash of
$269 million from New SAIC. Leidos intends to use the proceeds primarily for
general corporate purposes, including share repurchases. Leidos results
included herein present New SAIC as a discontinued operation.

"In the third quarter of Fiscal 2014, Leidos performance reflects the impact
of several significant challenges we were not able to offset. Separation
expenses and setup costs added to the headwinds of sequestration, the
temporary government shutdown, discrete non-cash write-downs, continued delays
in the timing of awards and unexpected turbulence in our commercial
businesses," said John Jumper, Leidos Chairman and Chief Executive Officer.
"Earlier today, we announced a share-repurchase authorization for up to 20
million shares, which underscores the confidence we have in our business and
our firm commitment to drive shareholder value as we move forward. This adds
to the $450 million in special and regular dividends already returned to
shareholders in fiscal 2014 and continues our plan to return substantial value
to our shareholders."

Summary Results

Revenues for the third quarter of fiscal year 2014 were $1.42 billion,
compared to $1.67 billion in the third quarter of fiscal year 2013, reflecting
a revenue contraction of 15 percent. Revenues were impacted by the ramp down
of certain contracts, drawdowns of overseas U.S. military forces and the
reduction of the U.S. Government budget, as well as a decline in our
engineering and health business driven by program completions, lower new
program starts and hospital budgets that have experienced reductions in
reimbursements from U.S. Government funding, including reductions in Medicare
reimbursements which in turn impact hospital IT spending trends. The ramp down
of the Joint Logistics Integration (JLI) program accounted for 4 percent of
the revenue contraction year over year. Revenue contraction for the quarter
would have been 14 percent without the negative impact of $21 million in
revenues for the one less working day as compared to the third quarter of
fiscal year 2013.

Operating loss for the third quarter of fiscal year 2014 was $7 million, down
from operating income of $100 million in the third quarter of fiscal year
2013. The reduction in operating income was primarily attributable to $43
million of bad debt expense primarily related to receivables for two energy
design-build construction projects (Plainfield and Gradient), $25 million of
separation transaction and restructuring expenses, $19 million intangible
asset impairment charges related to our commercial health business, and $15
million related to the contraction in revenue.

Diluted loss per share from continuing operations for the quarter was $0.11
compared to diluted income per share of $0.66 in the third quarter of fiscal
year 2013. This decline was primarily attributable to the aforementioned
operating income reductions that translated to a reduction in income from
continuing operations of $64 million. The diluted share count for the quarter
was 84 million, up 1 percent from 83 million in the third quarter of fiscal
year 2013.

Segment Operating Results

In connection with the separation of New SAIC, the prior periods were recast
to give effect to the changes in reportable segments as a result of New SAIC
being reflected as a discontinued operation. The changes primarily represent
the addition of certain general corporate overhead expenses that were
previously allocated to, but not specifically related to New SAIC, and do not
meet the requirements to be presented as a component of the discontinued
operation. These costs were reallocated to the Health and Engineering and the
National Security Solutions segments.

                            Three Months Ended
                            November 1,  October 31,  Revenue Growth (%)
                            2013         2012         Total      Internal
                            ($ millions)
Revenues:
Health and Engineering      $  408       $  508       (20)%      (21)%
National Security Solutions 1,014        1,166        (13)%      (13)%
Corporate and other         (1)          —            N/A        N/A
Intersegment Elimination    (1)          (1)          N/A        N/A
Total                       $  1,420     $  1,673     (15)%      (16)%
                                                      Operating Margin
                                                      2013       2012
Operating Income (Loss):
Health and Engineering      $  (30)      $  46        (7)%       9%
National Security Solutions 63           79           6%         7%
Corporate and Other         (40)         (25)         N/A        N/A
Total                       $  (7)       $  100       —          6%
                            Nine Months Ended
                            November 1,  October 31,  Revenue Growth (%)
                            2013         2012         Total      Internal
                            ($ millions)
Revenues:
Health and Engineering      $  1,380     $  1,341     3%         (7)%
National Security Solutions 3,117        3,563        (13)%      (13)%
Corporate and Other         (8)          (1)          N/A        N/A
Intersegment Elimination    (3)          (4)          N/A        N/A
Total                       $  4,486     $  4,899     (8)%       (11)%
                                                      Operating Margin
                                                      2013       2012
Operating Income (Loss):
Health and Engineering      $  2         $  107       —          8%
National Security Solutions 195          260          6%         7%
Corporate and Other         (128)        (53)         N/A        N/A
Total                       $  69        $  314       2%         6%



Health and Engineering

Health and Engineering revenues decreased $100 million, or 20 percent, for the
third quarter of fiscal year 2014 as compared to the third quarter of fiscal
year 2013. Revenue contraction would have been 19 percent without the negative
impact of $5 million in revenues for the one less working day as compared to
the third quarter of fiscal year 2013. Revenue contraction reflects a decline
in our health business driven by program completions, lower new program starts
and hospital budgets that have experienced reductions in reimbursements from
U.S. Government funding, including reductions in Medicare reimbursements which
in turn impact hospital IT spending trends, a decline in engineering services
primarily related to energy design-build construction programs nearing
completion and decreased unit deliveries and related maintenance of our
non-intrusive inspection engineering products.

Health and Engineering operating income decreased $76 million, or 165 percent,
for the third quarter of fiscal year 2014 as compared to the third quarter of
fiscal year 2013. The decrease was primarily attributable to bad debt expense
for receivables related to two energy design-build construction projects
(Plainfield and Gradient), intangible asset impairment charges associated with
two commercial health acquisitions and lower revenues.

Health and Engineering Sector President Joe Craver is stepping aside as head
of the business segment. The Board of Directors and Leidos executive
management agree this segment will benefit from new leadership. Jumper will
step in immediately as acting head of the Health and Engineering Sector while
a search is launched for a new leader.

"We thank Joe for his 24 years of dedicated service to the company and wish
him the best as he moves forward," said Jumper.

National Security Solutions

National Security Solutions revenues decreased $152 million, or 13 percent,
for the third quarter of fiscal year 2014 as compared to the third quarter of
fiscal year 2013. Revenue contraction for the quarter would have been 12
percent without the negative impact of $16 million in revenues for the one
less working day as compared to the third quarter of fiscal year 2013. Revenue
contraction was primarily attributable to the ramp down of the JLI program for
tactical mine resistant ambush protected vehicles and the completion of
several intelligence programs, with the remainder of the decline driven by the
reduction of the U.S. Government budget resulting from sequestration and
drawdowns of overseas U.S. military forces. This contraction was partially
offset by increased revenues related to several new intelligence contracts for
classified customers and two new intelligence information processing,
exploitation and dissemination contracts.

National Security Solutions operating income decreased $16 million, or 20
percent, for the third quarter of fiscal year 2014 as compared to the third
quarter of fiscal year 2013. This decrease was primarily attributable to lower
revenues and additional direct costs for work assumed to be at risk.

Corporate and Other

Corporate and Other segment operating loss for the quarter increased $15
million or 60 percent, from the third quarter of fiscal year 2014 as compared
to the third quarter of fiscal year 2013. The increase was primarily due to
expenses incurred in connection with the planned separation transaction and
restructuring expenses of $25 million which was primarily comprised of lease
termination and facility consolidation expenses of $17 million and strategic
advisory services of $5 million. There were also costs to establish
infrastructures for Leidos and New SAIC as separate stand-alone companies of
$11 million which were partially offset by costs allocated to the other
reporting segments of $9 million as well as a reduction in other unallocable
corporate costs.

Cash Generation and Capital Deployment

Cash flow provided by continuing operations for the quarter was $49 million,
down $137 million from the third quarter of fiscal year 2013, primarily due
toan increase in days sales outstanding to 74 days this quarter compared to
64 days in the prior year quarter as a result of a slowdown in payments from
the U.S. Government impacted by the discontinuance of the U.S. Government's
accelerated payment initiative that encouraged agencies to more timely pay
contractors, our system shutdown to effect the spin-off of New SAIC which
caused delays in our customer invoicing, and our name change which was further
impacted by the U.S. Government shutdown in October 2013.

During the quarter, the Company paid a cash dividend of $0.32 per share. On
December 6, 2013, the Company's Board of Directors declared a quarterly cash
dividend of $0.32 per share payable on January 30, 2014 to stockholders of
record as of the close of business on January 15, 2014. The Company intends
to continue paying dividends on a quarterly basis, although the declaration of
any future dividends will be determined by the Company's Board of Directors
each quarter and will depend on earnings, financial condition, capital
requirements and other factors.

On December 6, 2013, the Company's Board of Directors authorized the
repurchase of up to 20 million shares of the Company's outstanding common
stock through one or more open market repurchases or privately negotiated
transactions. This share repurchase authorization replaces the Board's
previous share repurchase authorization in March 2012.

As of November 1, 2013, the Company had $814 million in cash and cash
equivalents and $1.3 billion in long-term debt. As part of the acquisition of
Plainfield Renewable Energy Holdings, LLC, the Company assumed two secured
notes payable aggregating $149 million. On December 6, 2013, the Company
agreed to pay off both notes in December 2013 for $165 million.

New Business Awards

Net business bookings totaled $2.39 billion in the third quarter of fiscal
year 2014, representing a book-to-bill ratio of 1.7. Notable recent awards
received include:

  oDepartment of Homeland Security. The Company was awarded a prime contract
    by the Department of Homeland Security to provide tools and services to
    implement continuous monitoring through the Continuous Diagnostics and
    Mitigation (CDM) Tools and Continuous Monitoring as a Service contract.
    The multiple-award blanket purchase agreement administered by the General
    Services Administration, Federal Systems Integration and Management
    Center, has a one-year base period of performance, four one-year options,
    and a total contract value of up to $6 billion, if all options are
    exercised.
  oU.S. Federal Government. The Company was awarded $1.1 billion, if all
    options are exercised, in 152 separate awards by U.S. Federal Government
    clients in the national security and intelligence communities. Though the
    specific nature of these contracts is classified, they all encompass
    mission-critical services that help to counter global threats and
    strengthen national security.
  oTransportation Security Administration. The Company was awarded a prime
    contract by the Transportation Security Administration (TSA) to sustain
    Government Transportation Security Equipment, which account for more than
    11,250 pieces of passenger screening equipment. The contract was awarded
    under the TSA Integrated Logistics Support program. The single-award,
    fixed-price contract has a four-month base period of performance, four
    one-year options, and a total contract value of approximately $442
    million, if all options are exercised.
  oDefense Health Agency. The Company was awarded a prime contract by the
    Defense Health Agency to provide consultative, analytical, decision
    making, managerial, and implementation support services for a Nurse Advice
    Line that will support the Military Health System. The single-award firm
    fixed-price contract has a one-year base period of performance, four
    one-year options, and a total contract value of approximately $178
    million, if all options are exercised.
  oLSB Industries, Inc. The Company was awarded a prime contract by LSB
    Industries, Inc. to provide engineering, procurement, and construction
    services, managing the design and construction of an ammonia plant and
    associated facilities. The single-award cost-plus fixed-fee contract has a
    two year period of performance with no financing obligations and a total
    contract value of approximately $118 million.

The Company's backlog of signed business orders at the end of the third
quarter of fiscal year 2014 was $9.98 billion, of which $3.00 billion was
funded. As compared to the end of the third quarter of fiscal year 2013,
total backlog decreased 6 percent and funded backlog decreased 15 percent.
Negotiated backlog does not include any estimate of future task orders
expected to be awarded under IDIQ, GSA Schedule or other master agreement
contract vehicles.

Forward Guidance

As a result of the Company's third quarter financial performance and market
conditions being more challenging than previously expected, the Company
lowered guidance for fiscal year 2014 as provided in the Company's press
release issued on December 3, 2013. The revised fiscal year 2014 guidance is:

  oRevenues of $5.65 billion to $5.80 billion, down from the previous range
    of $5.85 to $6.10 billion;
  oDiluted earnings per share from continuing operations of $0.85 to $1.10,
    inclusive of a $0.16 positive net income impact for discontinued
    operations accounting treatment for planned divestitures, down from the
    previous range of $1.80 to $2.04; and
  oCash flows from continuing operations of at least $150 million, down from
    previous guidance of at least $325 million.

Fiscal year 2014 guidance excludes the impact of potential future acquisitions
and other non-ordinary course items.

About Leidos

Leidos management will discuss operations and financial results in an earnings
conference call beginning at 8 a.m. eastern on December 10, 2013. A live
audio broadcast of the conference call along with a supplemental presentation
will be available to the public through links on the Investor Relations
section of the Leidos web site (http://investors.leidos.com).

Leidos is a science and technology solutions leader working to address some of
the world's toughest challenges in national security, health, and engineering.
The Company's approximately 23,000 employees support vital missions for our
government and the commercial sector, develop innovative solutions to drive
better outcomes, and defend our Nation's digital and physical infrastructure
from 'new world' threats. Headquartered in Reston, Virginia and with employees
worldwide, Leidos reports approximately $6 billion in revenues for fiscal year
2013, on a pro forma basis, following the spin-off of the Company's technical,
engineering and enterprise IT business on September 27, 2013. For more
information, visit www.Leidos.com.

Forward-Looking Statements

Certain statements in this release contain or are based on "forward-looking"
information within the meaning of the Private Securities Litigation Reform Act
of 1995. In some cases, you can identify forward-looking statements by words
such as "expects," "intends," "plans," "anticipates," "believes," "estimates,"
"guidance," and similar words or phrases. Forward-looking statements in this
release include, among others, estimates of future revenues, operating income,
earnings, earnings per share, charges, backlog, outstanding shares and cash
flows, as well as statements about future dividends, share repurchases and
acquisitions. These statements reflect our belief and assumptions as to future
events that may not prove to be accurate. Actual performance and results may
differ materially from the guidance and other forward-looking statements made
in this release depending on a variety of factors, including: developments in
the U.S. Government defense budget, including budget reductions,
implementation of spending cuts (sequestration) or changes in budgetary
priorities; delays in the U.S. Government budget process or approval to raise
the U.S. debt ceiling; delays in the U.S. Government contract procurement
process or the award of contracts; delays or loss of contracts as result of
competitor protests; changes in U.S. Government procurement rules, regulations
and practices; our compliance with various U.S. Government and other
government procurement rules and regulations; governmental reviews, audits and
investigations of our company; our ability to effectively compete and win
contracts with the U.S. Government and other customers; our ability to
attract, train and retain skilled employees, including our management team,
and to obtain security clearances for our employees; our ability to accurately
estimate costs associated with our firm-fixed-price and other contracts; our
ability to comply with certain agreements entered into in connection with the
CityTime matter; cybersecurity, data security or other security threats,
systems failures or other disruptions of our business; resolution of legal and
other disputes with our customers and others or legal or regulatory compliance
issues; our ability to effectively acquire businesses and make investments;
our ability to maintain relationships with prime contractors, subcontractors
and joint venture partners; our ability to manage performance and other risks
related to customer contracts, including complex engineering or design build
projects; our ability to profitably operate and recover our investment in the
Plainfield Renewable Energy project; the failure of our inspection or
detection systems to detect threats; the adequacy of our insurance programs
designed to protect us from significant product or other liability claims; our
ability to manage risks associated with our international business; our
ability to declare future dividends based on our earnings, financial
condition, capital requirements and other factors, including compliance with
applicable laws and contractual agreements; risks associated with the
recently-completed spin-off of our technical, engineering and enterprise
information technology services business, such as disruption to business
operations, or a failure to realize the expected benefits of the proposed
spin-off; and our ability to execute our business plan and long-term
management initiatives effectively and to overcome these and other known and
unknown risks that we face. These are only some of the factors that may affect
the forward-looking statements contained in this release. For further
information concerning risks and uncertainties associated with our business,
please refer to the filings we make from time to time with the U.S. Securities
and Exchange Commission, including the "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Legal Proceedings" sections of our latest annual report on Form 10-K and
quarterly reports on Form 10-Q, all of which may be viewed or obtained through
the Investor Relations section of our web site at www.leidos.com.

All information in this release is as of December 10, 2013. The Company
expressly disclaims any duty to update the guidance or any other
forward-looking statement provided in this release to reflect subsequent
events, actual results or changes in the Company's expectations. The Company
also disclaims any duty to comment upon or correct information that may be
contained in reports published by investment analysts or others.

CONTACTS:

Investor Relations:
John P. Sweeney
571.526.6402
John.P.Sweeney@leidos.com

Media Relations:
Melissa Koskovich
571.526.6851
Melissa.I.Koskovich@leidos.com



LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
                            Three MonthsEnded        Nine Months Ended
                            November1,  October31,  November1,  October31,

                            2013         2012         2013         2012
                            (inmillions,except per share amounts)
Revenues                    $  1,420     $  1,673     $  4,486     $  4,899
Costs and expenses:
Cost of revenues            1,224        1,434        3,903        4,218
Selling, general and        116          139          360          367
administrative expenses
Bad debt expense            43           —            45           —
Intangible asset impairment 19           —            51           —
losses
Separation transaction and  25           —            58           —
restructuring expenses
Operating (loss) income     (7)          100          69           314
Non-operating income
(expense):
Interest income             5            1            15           5
Interest expense            (21)         (20)         (59)         (73)
Other income, net           2            2            3            8
(Loss) income from
continuing operations       (21)         83           28           254
before income taxes
Income tax benefit          12           (28)         1            (89)
(expense)
(Loss) income from          (9)          55           29           165
continuing operations
Discontinued operations:
Income from discontinued
operations before income    21           94           158          279
taxes
Income tax expense          (15)         (37)         (67)         (105)
Income from discontinued    6            57           91           174
operations
Net (loss) income           $  (3)       $  112       $  120       $  339
Earnings per share:
Basic:
(Loss) income from          $  (0.11)    $  0.66      $  0.31      $  1.95
continuing operations
Income from discontinued    0.07         0.66         1.08         2.05
operations
                            $  (0.04)    $  1.32      $  1.39      $  4.00
Diluted:
(Loss) income from          $  (0.11)    $  0.66      $  0.31      $  1.95
continuing operations
Income from discontinued    0.07         0.66         1.08         2.05
operations
                            $  (0.04)    $  1.32      $  1.39      $  4.00
Cash dividends declared per $  0.32      $  0.48      $  5.28      $  1.44
share

LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                                                      November 1,  January31,

                                                      2013         2013
                                                      (in millions)
ASSETS
Current assets:
Cash and cash equivalents                             $  814       $  735
Receivables, net                                      1,161        1,168
Inventory, prepaid expenses and other current assets  298          342
Assets of discontinued operations                     13           1,371
Total current assets                                  2,286        3,616
Property, plant and equipment, net                    473          288
Intangible assets, net                                100          178
Goodwill                                              1,704        1,704
Deferred income taxes                                 10           12
Other assets                                          62           77
                                                      $  4,635     $  5,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities              $  782       $  787
Accrued payroll and employee benefits                 307          357
Notes payable and long-term debt, current portion     151          —
Liabilities of discontinued operations                —            648
Total current liabilities                             1,240        1,792
Notes payable and long-term debt, net of current      1,330        1,295
portion
Other long-term liabilities                           182          170
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value, 500 million shares
authorized, 86million shares
                                                      —            —
issued and outstanding at November 1, 2013 and
January31, 2013, respectively
Additional paid-in capital                            1,735        2,110
Retained earnings                                     150          510
Accumulated other comprehensive loss                  (2)          (2)
Total stockholders' equity                            1,883        2,618
                                                      $  4,635     $  5,875

LEIDOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                            Three Months Ended        Nine Months Ended
                            November1,  October31,  November1,  October31,

                            2013         2012         2013         2012
                            (inmillions)
Cash flows from operations:
Net (loss) income           $   (3)      $   112      $   120      $   339
Income from discontinued    (6)          (56)         (91)         (174)
operations
Adjustments to reconcile
net income to net cash

provided by
operations:
Depreciation and            12           28           66           73
amortization
Stock-based compensation    13           14           43           42
Intangible asset impairment 19           (1)          51           —
losses
Inventory write-down        —            —            3            —
Bad debt expense            45           —            45           —
Net gain on sales and       (2)          (1)          (9)          (7)
disposals of assets
Other                       (1)          2            3            3
Increase (decrease) in cash
and cash equivalents,

net of effects of
acquisitions and
dispositions,

resulting from changes
in:
Receivables                 (16)         77           (139)        211
Inventory, prepaid expenses
and other                   (20)         (111)        30           (73)

current assets
Deferred income taxes       20           (4)          20           (4)
Other assets                (4)          (2)          3            (2)
Accounts payable and        24           (10)         9            (671)
accrued liabilities
Accrued payroll and         (6)          99           (48)         74
employee benefits
Income taxes                (14)         32           (14)         35
receivable/payable
Other long-term liabilities (12)         7            (14)         3
Total cash flows provided
by (used in) operating
                            49           186          78           (151)
activities of
continuing operations
Cash flows from investing
activities:
Expenditures for property,  (1)          (10)         (31)         (31)
plant and equipment
Acquisitions of businesses  (1)          (479)        (1)          (478)
Proceeds from sale of       —            —            65           2
assets
Net proceeds (purchases) of
cost method                 12           —            12           —

investments
Dividend received from the  295          —            295          —
separation of New SAIC
Contribution paid related
to the separation of New    (26)         —            (26)         —

SAIC
Other                       (3)          1            (2)          1
Total cash flows provided
by (used in) investing
                            276          (488)        312          (506)
activities of
continuing operations
Cash flows from financing
activities:
Payments on notes payable   —            —            (1)          (550)
and long-term debt
Payments for deferred       (5)          —            (5)          —
financing costs
Payment from New SAIC for
deferred financing          5            —            5            —

costs
Proceeds from real estate   —            —            38           —
financing transaction
Proceeds from debt issuance 500          —            500          —
Distribution of debt to New (500)        —            (500)        —
SAIC
Sales of stock and          3            5            11           15
exercises of stock options
Repurchases of stock        —            (1)          (17)         (21)
Dividend payments           (28)         (41)         (452)        (124)
Other                       —            —            2            —
Total cash flows provided
by (used in) financing
                            (25)         (37)         (419)        (680)
activities of
continuing operations
Increase (decrease) in
cash and cash equivalents
                            300          (339)        (29)         (1,337)
from continuing
operations
Cash flows from
discontinued operations:
Cash provided by operating
activities of
                            62           115          125          285
discontinued
operations
Cash provided by (used in)
investing activities of
                            (15)         1            (17)         (6)
discontinued
operations
Cash provided by (used in)
financing activities of
                            5            (1)          —            (3)
discontinued
operations
Increase in cash and cash
equivalents from
                            52           115          108          276
discontinued
operations
Total increase (decrease)
in cash and cash            352          (224)        79           (1,061)

equivalents
Cash and cash equivalents   462          755          735          1,592
at beginning of period
Cash and cash equivalents   $   814      $   531      $   814      $   531
at end of period



LEIDOS HOLDINGS, INC.
BACKLOG BY REPORTABLE SEGMENT
(Unaudited)

Backlog represents the estimated amount of future revenues to be recognized
under negotiated contracts as work is performed and excludes contract awards
which have been protested by competitors. Leidos Holdings, Inc. segregates its
backlog into two categories: funded backlog and negotiated unfunded backlog.
Funded backlog for contracts with government agencies primarily represents
contracts for which funding is appropriated less revenues previously
recognized on these contracts, and does not include the unfunded portion of
contracts where funding is incrementally appropriated or authorized on a
quarterly or annual basis by the U.S. Government and other customers, even
though the contract may call for performance over a number of years. Funded
backlog for contracts with non-government agencies represents the estimated
value on contracts, which may cover multiple future years, under which Leidos
Holdings, Inc. is obligated to perform, less revenues previously recognized on
these contracts. Negotiated unfunded backlog represents the estimated amounts
of revenue to be earned in the future from (1) negotiated contracts for which
funding has not been appropriated or otherwise authorized and (2) unexercised
priced contract options. Negotiated unfunded backlog does not include any
estimate of future potential task orders expected to be awarded under IDIQ,
GSA Schedule or other master agreement contract vehicles.

The estimated value of backlog as of the dates presented was as follows:

                                 November 1,  August 2,  May 3,    January 31,

                                 2013         2013       2013      2013
                                 (in millions)
Health and Engineering:
Funded backlog                   $  1,040     $  996     $ 1,094   $  1,295
Negotiated unfunded backlog      816          669        664       676
Total Health and Engineering     $  1,856     $  1,665   $ 1,758   $  1,971
backlog
National Security Solutions:
Funded backlog                   $  1,958     $  1,900   $ 1,877   $  2,119
Negotiated unfunded backlog      6,166        5,442      5,737     6,037
Total National Security          $  8,124     $  7,342   $ 7,614   $  8,156
Solutions backlog
Total:
Funded backlog                   $  2,998     $  2,896   $ 2,971   $  3,414
Negotiated unfunded backlog      6,982        6,111      6,401     6,713
Total backlog                    $  9,980     $  9,007   $ 9,372   $  10,127



LEIDOS HOLDINGS, INC.
INTERNAL REVENUE GROWTH (CONTRACTION) PERCENTAGE CALCULATIONS (NON-GAAP
RECONCILIATION)
(Unaudited)

In this release, Leidos Holdings, Inc. refers to internal revenue growth
(contraction) percentage, which is a non-GAAP financial measure that is
reconciled to the most directly comparable GAAP financial measure. The Company
calculates its internal revenue growth (contraction) percentage by comparing
reported revenue for the current year period to the revenue for the prior year
period adjusted to include the actual revenue of acquired businesses for the
comparable prior year period before acquisition. This calculation has the
effect of adding revenue for the acquired businesses for the comparable prior
year period to the company's prior year period reported revenue.

Leidos Holdings, Inc. uses internal revenue growth (contraction) percentage as
an indicator of how successful it is at growing its base business and how
successful it is at growing the revenues of the businesses that it acquires.
The integration of acquired businesses allows current management to leverage
business development capabilities, drive internal resource collaboration,
utilize access to markets and qualifications, and refine strategies to realize
synergies, which benefits both acquired and existing businesses. As a result,
the performance of the combined enterprise post-acquisition is an important
measurement. In addition, as a means of rewarding the successful integration
and growth of acquired businesses, and not acquisitions themselves, incentive
compensation for senior management is based, in part, on achievement of
revenue targets linked to internal revenue growth.

The limitation of this non-GAAP financial measure as compared to the most
directly comparable GAAP financial measure is that internal revenue growth
(contraction) percentage is one of two components of the total revenue growth
(contraction) percentage, which is the most directly comparable GAAP financial
measure. The Company addresses this limitation by presenting the total revenue
growth percentage next to or near disclosures of internal revenue growth
(contraction) percentage.

This financial measure is not meant to be considered in isolation or as a
substitute for comparable GAAP measures and should be read only in conjunction
with Leidos Holdings, Inc.'s consolidated financial statements prepared in
accordance with GAAP. The method that the Company uses to calculate internal
revenue growth (contraction) percentage is not necessarily comparable to
similarly titled financial measures presented by other companies.

Internal revenue contraction percentages were calculated as follows:

                                             Three Months      Nine Months

                                             Ended              Ended
                                             November1,        November1,

                                             2013               2013
                                             (in millions, expect percentages)
Health and Engineering:
Prior year period's revenues, as reported    $    508           $    1,341
Revenues of acquired businesses for the      10                 145
comparable prior year period
Prior year period's revenues, as adjusted    518                1,486
Current year period's revenues, as reported  408                1,380
Internal revenue contraction                 $    (110)         $    (106)
Internal revenue contraction percentage      (21)%              (7)%
National Security Solutions:
Prior year period's revenues, as reported    $    1,166         $    3,563
Revenues of acquired businesses for the      —                  —
comparable prior year period
Prior year period's revenues, as adjusted    1,166              3,563
Current year period's revenues, as reported  1,014              3,117
Internal revenue contraction                 $    (152)         $    (446)
Internal revenue contraction percentage      (13)%              (13)%
Total*:
Prior year period's revenues, as reported    $    1,673         $    4,899
Revenues of acquired businesses for the      10                 145
comparable prior year period
Prior year period's revenues, as adjusted    1,683              5,044
Current year period's revenues, as reported  1,420              4,486
Internal revenue contraction                 $    (263)         $    (558)
Internal revenue contraction percentage      (16)%              (11)%
* Total revenues include amounts related to Corporate and Other and
intersegment eliminations.



SOURCE Leidos Holdings, Inc.

Website: http://www.leidos.com