What changed in this filing

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Item 1. Business

2022-02-15 compared with 2021-02-23 · 123 added, 101 removed, 279 unchanged (45% of the section changed)

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and its consolidated subsidiaries.

Leidos is a FORTUNE 500 ® science, engineering and information technology company that provides services and solutions in the defense, intelligence, homeland security, civil and health markets, both domestically and internationally.

Leidos is a FORTUNE 500 ® technology, engineering, and science company that provides services and solutions in the defense, intelligence, civil and health markets, both domestically and internationally.

We bring domain-specific capabilities and innovations to customers in each of these markets by leveraging five technical core competencies:

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Department of Homeland Security ("DHS"), the Federal Aviation Administration ("FAA"), the Department of Veterans Affairs ("VA") and many other U.S.

civilian, state and local government agencies as well as foreign government agencies.

With a focus on delivering mission-critical solutions, Leidos generated 87% of fiscal 2020 revenues from U.S.

civilian, state and local government agencies, foreign government agencies and commercial businesses.

With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended December 31, 2021 ("fiscal 2021") from U.S.

government contracts.

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Our Business Segments

At January 1, 2021, our business is aligned into three reportable segments (Defense Solutions, Civil and Health).

At December 31, 2021, our business is aligned into three reportable segments (Defense Solutions, Civil and Health).

Additionally, we separately present the unallocable costs associated with corporate functions as Corporate.

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Less than 8% of our revenues and tangible long-lived assets are generated by or owned by entities located outside of the United States.

Effective the beginning of fiscal 2020, certain contracts were reassigned from the Civil reportable segment to the Defense Solutions reportable segment.

Prior year segment results have been recast to reflect this change.

Defense Solutions

Defense Solutions provides leading-edge and technologically advanced services, solutions and products to a broad customer base.

Our ever-changing technologies and innovations cover a wide spectrum of markets with primary areas of concentration in digital modernization and integrated systems, Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance ("C4ISR") technologies and services, transformative software, analytics, intelligence analysis, mission support and logistics services, weapons systems and human space exploration.

Our ever-changing technologies and innovations cover a wide spectrum of markets with primary areas of concentration in digital transformation, Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance ("C4ISR") technologies and services, transformative software, analytics, intelligence analysis, mission support and logistics services, weapons systems and human space exploration.

We are dedicated to delivering cost-effective solutions backed by innovation-generating research and development to meet the evolving missions of our customers.

We provide a diverse portfolio of national security solutions and systems for air, land, sea, space and cyberspace for the U.S.

Intelligence Community, the DoD, the National Aeronautics and Space Administration ("NASA"), military services, government agencies of U.S.

Intelligence Community, the DoD, the National Aeronautics and Space Administration ("NASA"), Defense Information Systems Agency ("DISA"), military services, government agencies of U.S.

allies abroad and other federal and commercial customers in the national security industry.

Our solutions deliver innovative technology, large-scale systems, command and control platforms, data analytics, logistics and cybersecurity solutions, as well as intelligence analysis and operations support to critical missions around the world.

Defense Solutions represented 60% of total revenues for fiscal 2020 and 57% of total revenues for fiscal 2019 and 2018.

Defense Solutions represented 58% of total revenues for fiscal 2021, 60% of total revenues for the fiscal year ended January 1, 2021 ("fiscal 2020") and 57% of total revenues for the fiscal year ended January 3, 2020 ("fiscal 2019").

Leidos Holdings, Inc.

Annual Report - 3

• Digital Modernization and Integrated Systems – As an industry leader in enterprise IT, we provide extensive worldwide digital support operations for our nation's largest and most critical infrastructure.

• Digital Transformation – As an industry leader in enterprise IT, we provide extensive worldwide digital support operations for our nation's largest and most critical infrastructure.

We design, develop, implement and maintain IT environments to provide stability and flexibility to mission needs.

Our capabilities support offerings including cybersecurity, data analytics, digital transformation and operations and logistics.

Our cybersecurity solutions detect and manage the most sophisticated cyber threats.

Our capabilities support offerings including cybersecurity, data analytics, and operations and logistics.

Our cybersecurity solutions help detect and manage the most sophisticated cyber threats.

• C4ISR Technologies and Services – We offer a wide range of technologies and services in multiple domains that address the nation's most critical threats and deliver solutions to the U.S.

Intelligence Community, DoD and military services.

A primary focus is on the DoD's technology organizations, which include the Defense Advanced Research Projects Agency ("DARPA"), the U.S.

Army Research Lab, the U.S.

Air Force Research Lab and the Office of Naval Research.

Our market concentration is on airborne and ground intelligence, surveillance and reconnaissance ("ISR"), maritime systems, electronic warfare systems, distributed sensor systems, autonomous systems, sensors and Command and Control ("C2").

We provide multi-spectral, airborne, ground and maritime ISR collection and processing systems, advanced sensor design, C2 solutions and training systems.

Our sensor technologies have a wide range of capabilities deployed across the DoD in areas including airborne, ground, naval and space radar, electro-optical/infrared systems signals intelligence and electronic attack for the DoD.

We also provide laser and radio frequency-based communications systems for airborne, ground, naval and space platforms.

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In the air, we support a fleet of over 100 government and Leidos-owned fixed wing, rotary wing and unmanned aircraft.

Our spectrum of capabilities includes modification of commercial aircraft for military use, integration and installation of sophisticated sensors and monitoring stations and worldwide aircraft maintenance and logistics support.

On the ground, we provide mission-critical Command, Control and ISR and support through innovative solutions, essential services and enriched data management tools facilitating critical decision making.

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By applying leading science, innovative technologies and business acumen, our talented employees help customers achieve their missions and take on the connected world with data-driven insights, improved efficiencies and technological advantages in the areas of transportation solutions, security detection and automation, digital transformation services and environment, energy and infrastructure.

Civil represented 24% of total revenues for fiscal 2020 and 25% of total revenues for fiscal 2019 and 2018.

Civil represented 23% of total revenues for fiscal 2021, 24% of total revenues for fiscal 2020 and 25% of total revenues for fiscal 2019.

• Transportation Solutions – Leidos is a trusted systems developer, service provider and integrator serving Air Navigation Service Providers around the world, including the FAA.

We provide air traffic control systems that help manage the world's most complex airspace.

We deliver many of the FAA's key automation systems and services, including the En Route Automation Modernization, Advanced Technology Oceanic Procedures, Time Based Flow Management, Terminal Flight Data Management, Geo-7 and Future Flight Services as well as the recently-awarded Enterprise-Information Display System.

We deliver many of the FAA's key automation systems and services, including the En Route Automation Modernization ("ERAM"), Advanced Technology Oceanic Procedures ("ATOP"), Time Based Flow Management, Terminal Flight Data Management, Enterprise-Information Display System, Geo-7 and Future Flight Services.

Leidos recently received 10+ year extensions to the ERAM and ATOP contracts for continued delivery of the evolving National Airspace System needs.

In addition, under the Mode S Beacon Replacement Systems contract, Leidos is supporting the replacement of the FAA's Mode S Beacon Systems, which are secondary surveillance radar capable of providing surveillance and specific aircraft information necessary to support Air Traffic Control automation in all traffic environments.

We also provide key air traffic control systems around the world, including New Zealand, Kazakhstan and South Korea.

We also provide key air traffic control systems around the world, including New Zealand and South Korea.

• Security Detection and Automation – Our comprehensive suite of fully-integrated security detection and automation solutions help increase security for aviation, ports and borders and critical infrastructure customers around the world.

With more than 24,000 products deployed across 120 countries, this business has the most widespread global footprint within the Civil portfolio.

With more than 24,000 products deployed across over 120 countries, this business has the most widespread global footprint within the Civil portfolio.

Leveraging this portfolio, our core technical strengths and robust research and development initiatives, we are positioned to address emerging and evolving threats through rapid development of innovative solutions for our global customers.

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Our aviation solutions include best-in-class checkpoint computed tomography, people scanners, explosive trace detectors and checked baggage screening.

For ports and borders worldwide, Leidos is safeguarding the flow of regulated commerce through innovations in screening technologies, common interfaces and artificial intelligence and machine learning to effectively detect and mitigate threats across all trade elements, including cargo, vehicles and people.

For ports and borders worldwide, Leidos is helping safeguard the flow of regulated commerce through innovations in screening technologies, common interfaces and artificial intelligence and machine learning to effectively detect and mitigate threats across all trade elements, including cargo, vehicles and people.

We are the leading supplier of mobile non-intrusive inspection systems to U.S.

Customs and Border Protection ("CBP").

Leidos implemented the CBP “Port of the Future” pilot at Brownsville, Texas border crossing aimed at achieving CPB cargo and privately-owned vehicle border screening goals.

In addition, we are transforming security detection beyond ports of entry to deliver fully-integrated and frictionless security solutions for public venues and critical infrastructure.

• Digital Transformation Services – We deliver secure, user-centric IT solutions in cloud computing, mobility, application modernization, DevOps, data center and network modernization, asset management, help desk operations and digital workplace enablement .

• Digital Transformation – We deliver secure, user-centric IT solutions in cloud computing, mobility, application modernization, DevOps, data center and network modernization, asset management, help desk operations and digital workplace enablement.

We help our customers achieve their missions and business goals by delivering purpose-built solutions, cybersecurity as a standard, efficient project delivery and end-user satisfaction.

Leidos is modernizing enterprise IT in classified and unclassified environments, including programs with the FAA, NASA and the Department of Justice.

Leidos is modernizing enterprise IT in classified and unclassified environments, including programs with the FAA, NASA, IRS and the Department of Justice.

Leidos Holdings, Inc.

Annual Report - 5

• Environment, Energy and Infrastructure – We are trusted by government agencies and commercial customers with substantial environmental and sustainability driven missions.

Our pedigree across environmental management, nuclear security, energy efficiency, infrastructure management, mission support and IT modernization provides the applicable expertise needed to transform operations while modernizing aging infrastructure and maintaining environmental stewardship.

We support the critical missions of the Department of Energy ("DoE"), National Nuclear Security Administration, utilities, energy investors and developers and energy efficiency administrators.

• Climate, Energy and Environment – We are trusted by government agencies and commercial customers with substantial environmental and sustainability driven missions.

Our reputation across environmental management, nuclear security, energy efficiency, infrastructure management, mission support and IT modernization provides the applicable expertise needed to transform operations while modernizing aging infrastructure and maintaining environmental stewardship.

We support the critical missions of the Department of Energy ("DoE"), National Nuclear Security Administration, National Science Foundation, utilities, energy investors and developers and energy efficiency administrators.

At the DoE Hanford site, we provide site-wide infrastructure management and operation including oversight of land and logistics, public works, information technology, fleet transportation, environmental sustainability and compliance, first responder services and future project planning.

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health information management services, managed health services, digital transformation and life sciences research and development.

Health represented 16% of total revenues for fiscal 2020 and 18% of total revenues for fiscal 2019 and 2018.

Health represented 19% of total revenues for fiscal 2021, 16% of total revenues for fiscal 2020 and 18% of total revenues for 2019.

• Health Information Management Services – Leidos employs holistic-systems thinking in fielding applied technology solutions across the entire continuum of healthcare.

In our work delivering a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide, our responsibilities range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more.

We ensure all integrated systems are cyber secure.

We support cybersecurity across all integrated systems.

We also provide enterprise IT solutions to the VA, National Institutes of Health ("NIH"), DoD and other federal health customers to help operate mission critical infrastructure reliably and at a reasonable cost.

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• Digital Transformation – We manage the entire lifecycle of the IT journey for our customers.

Our expertise includes:

IT strategic planning;

outsourcing and management of large scale data centers;

agile software development and system transformation;

cloud migration and application modernization;

digitization and big data management and advanced analytics.

Our expertise includes IT strategic planning, outsourcing and management of large scale data centers, agile software development and system transformation, cloud migration and application modernization, digitization and big data management and advanced analytics.

Our customers include the Centers for Medicare & Medicaid Services, Food and Drug Administration, Social Security Administration, VA, Defense Health Agency ("DHA") and commercial customers.

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Our professionals operate a wide range of leading-edge research and development laboratories in the areas of genetics and genomics, proteins and proteomics, advanced biomedical computing and information technology, biopharmaceutical development and manufacturing, nanotechnology characterization and clinical trials management.

From the biomedical sciences to implementing and optimizing electronic health records, and enabling providers to perform care coordination and population health management, Leidos is pioneering the use of the depth and breadth of systems integration principles, processes and technologies to transform the health industry’s evolution towards better quality, more efficient and effective care.

From the biomedical sciences to implementing and optimizing electronic health records and enabling providers to perform care coordination and population health management, Leidos is pioneering the use of the depth and breadth of systems integration principles, processes and technologies to transform the health industry’s evolution towards better quality and more efficient and effective care.

Corporate includes the operations of various corporate activities, certain expense items that are not reimbursed by our U.S.

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Acquisitions and Divestitures

During fiscal 2020, we acquired Dynetics, Inc.

and L3Harris Technologies' ("L3Harris") security detection and automation businesses and entered into a definitive agreement to acquire 1901 Group, LLC ("1901 Group").

The acquisition of 1901 Group was subsequently completed in January 2021.

Additionally, during fiscal 2019, we acquired IMX Medical Management Services and its affiliated businesses.

See "Note 6—Acquisitions" and "Note 26—Subsequent Events" in Part II of this Annual Report on Form 10-K for further information.

During fiscal 2021, we completed the acquisitions of Gibbs & Cox, 1901 Group, LLC, and an immaterial strategic business acquisition.

During fiscal 2020, we completed the acquisitions of L3Harris Technologies' ("L3Harris") security detection and automation businesses and Dynetics, Inc.

Additionally, during fiscal 2019, we completed the acquisition of acquired IMX Medical Management Services and its affiliated businesses.

See "Note 5—Acquisitions and Divestitures" in Part II of this Annual Report on Form 10-K for further information.

During fiscal 2021, we signed a definitive agreement to dispose of Aviation & Missile Solutions LLC within our Defense Solutions segment.

During fiscal 2019, we divested of our commercial cybersecurity and health staff augmentation businesses.

For further information, see "Note 7—Divestitures" in Part II of this Annual Report on Form 10-K.

For further information, see "Note 5—Acquisitions and Divestitures" in Part II of this Annual Report on Form 10-K.

Key Customers

Substantially all of our revenues are generated in the United States.

The majority of our revenues are generated in the United States.

Our consolidated revenues are largely attributable to prime contracts or to subcontracts with other contractors engaged in work for the U.S.

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government, our revenues are diversified across many agencies, including various intelligence agencies, the U.S.

Army, Navy and Air Force, DHS, FAA, Transportation Security Administration, CBP, DHA, VA, Department of Health and Human Services, NASA, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as DARPA.

Army, Navy and Air Force, DHS, DISA, FAA, Transportation Security Administration, CBP, DHA, VA, Department of Health and Human Services, NASA, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as Defense Advanced Research Projects Agency.

These customers have a number of subsidiary agencies that have separate budgets and procurement functions.

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Employee and Workforce Demographics

As of January 1, 2021, we employed approximately 39,000 full and part-time employees of whom approximately 35,000 are located in the United States and the remainder of which are located in more than 35 countries worldwide.

Approximately 36% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 22% of our employees have advanced degrees and approximately 20% of our employees are military veterans.

We believe that a focus on inclusion and diversity improves team performance and influences innovative business strategies and enhances our reputation in the competitive marketplace for employees.

As of January 1, 2021, 33% of our global workforce was female and 32% of our U.S.

workforce was ethnically diverse.

As of December 31, 2021, we employed approximately 43,000 full and part-time employees of whom approximately 39,000 are located in the United States and the remainder of which are located in more than 39 countries worldwide.

Approximately 35% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 22% of our employees have advanced degrees, 49% of our employees possess U.S.

security clearances and approximately 20% of our employees are military veterans.

Leidos Holdings, Inc.

Annual Report - 7

Our inclusion and diversity practices help to build and sustain a culture that values individual diversity of thought, experiences, backgrounds and perspectives and foster full participation in the use of our resources, expanding opportunities and enhancing decisions across the company.

Our employees have the opportunity to create and join multiple employee resource groups (“ERGs”) where they can gain competence across various categories of diversity, enhance their personal and leadership development and actively contribute to making Leidos a great place to work.

We have ERGs for many dimensions of diversity including gender, ethnicity, military status, diverse-ability, LGBTQ+, generation and work location.

In fiscal 2020, we launched the inaugural Enterprise Inclusion Council, where a member of our Board of Directors serves as a senior advisor and which is chaired by two senior executives, to advise on the evolution of our inclusion and diversity strategy and help leverage best practices across the company.

We also require all employees to take diversity and inclusion training to help employees recognize and address the effects of unconscious bias and create a culture that strives to be more inclusive.

We have an Executive Mentoring Program that works to develop high-potential female and ethnically diverse employees.

Our Executives serve as mentors to one or more female or ethnically diverse employees in a year-long program that includes several leadership development sessions.

As of December 31, 2021, our workforce consisted of the following:

Gender of global employees Male (1)

Global workforce 66 % 34 %

(1) Based on employees who self-identify.

Age of global employees

Less than 30 years 15 %

30-50 years 49 %

Greater than 50 years 36 %

Ethnicity of US employees (1)

Asian/Indian 9 %

Hispanic/Latino 8 %

Undisclosed 3 %

(1) Based on employees who self-identify.

Inclusion and Diversity

Our inclusion and diversity strategy and approach focuses on extensive education and best practices to enable leader accountability, improve enterprise representation and evolve an inclusive culture.

To further incorporate inclusion in all areas of our business processes and practices, all leaders and employees are required to take inclusion training annually to recognize challenges and mitigate barriers to inclusion in the workplace.

Our employees are encouraged to create and join multiple employee resource groups (“ERGs”) where they can continue to develop cultural competence across various categories of diversity, enhance their personal networks, develop leadership skills, and actively contribute to making Leidos a great place to work.

In fiscal 2020, we launched our inaugural Enterprise Inclusion Council to advise on the evolution of our inclusion and diversity strategy and help leverage best practices across the company.

The Council is chaired by two senior executives, a board member who serves as a senior advisor and volunteers from across the business lines and functions.

Our Executive Mentoring Program is a year-long cohort designed to engage, develop and retain high-potential employees, most of which are female and/or ethnically diverse participants.

Our executives are each assigned to mentor at least one employee nominated through the program to provide advice and guidance on development and preparation for advancement opportunities.

Culture and Values

We have six core values that make us who we are as individuals and collectively as a company – integrity, inclusion, innovation, agility, collaboration and commitment.

These values are intended to provide a roadmap for our behavior and help to guide our decisions in the workplace, and are a key component of our corporate culture.

These values provide a roadmap for our behavior and help to guide our decisions in the workplace.

They are a key component of our corporate culture and are integrated into all employees' annual assessments to reinforce expectations.

Our practices are based on our commitment to do the right thing for our customers, our employees and our community.

Our values are demonstrated by our employees as they help our customers execute important missions on the front lines of the world’s most complex markets.

In addition, we have integrated our values into all employees’ annual performance assessments to focus on the behaviors expected of employees.

Our policies, procedures, training and communications form a comprehensive program that promotes a culture of integrity as a foundation for employee conduct.

For the third consecutive year, the Ethisphere Institute named Leidos one of the World's Most Ethical Companies in 2020.

For the fourth consecutive year, the Ethisphere Institute named Leidos one of the World's Most Ethical Companies in 2021.

Leidos Holdings, Inc.

Annual Report - 8

Career Mobility, Development and Growth

We recognize the value of having a high-performing workforce and are committed to providing opportunities for employees by encouraging career growth and movement across the enterprise.

We view career development as a partnership between employees, managers and the company with a focus on building skills and experiences through internal mobility, experiential learning, specialized programs (such as rotational opportunities), feedback and mentoring.

We recognize the value of a high-performing workforce and are committed to providing opportunities for employees by encouraging career growth and movement across the enterprise.

We view career development as a partnership between employees, leaders and the company with a focus on building skills and experiences through internal mobility, experiential learning, specialized programs (such as rotational opportunities), feedback and mentoring.

We provide a variety of career development resources, training and engagement sessions for employees and leaders.

We are dedicated to undertaking efforts to retain and strengthen our highly skilled professional workforce.

We have an Internal Mobility Program that identifies internal opportunities, evaluates skill gaps and targets learning accordingly.

We are dedicated to undertaking efforts to retain and strengthen our highly-skilled workforce.

We recognize the importance of technical upskilling and reskilling to support evolving workforce needs, and we offer programs which allow us to develop and retain internal talent while providing employees with career growth.

We have an Internal Mobility Program with a dedicated team that proactively focuses on the redeployment of our employees.

We teach employees how to use the tools and resources available to them, and gain visibility across the enterprise.

We assist managers and recruiters in identifying internal candidates for their programs.

We also conduct formal employee engagement surveys and run quarterly pulse surveys to drive engagement, inclusion and retention across the organization.

We offer instructor-led, virtual training and self-paced learning and development programs that enhance employee skills and help develop new talents.

We also offer formal programs to help employees prepare for certifications including the Project Management Institute and International Council on Systems Engineering as well as resources to prepare for over 95 industry-standard professional and technical certifications.

We offer instructor-led, virtual training and self-paced learning and development programs that develop and enhance employee skills.

We offer formal programs to help employees prepare for certifications including the Project Management Institute and International Council on Systems Engineering as well as resources to prepare for over 95 industry-standard professional and technical certifications.

Additionally, we offer tuition assistance to all U.S.

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We invest in our current and future leaders in a number of ways.

We have the Leidos Leadership program, which develops effective and inclusive leaders.

Our managers and executive leaders participate in leadership development programs targeted towards the competencies and skills needed at their level.

We have the Leidos Leadership program, which develops effective and inclusive leaders, where our managers and executive leaders participate in leadership development programs targeted towards the competencies and skills needed at their level.

Annually we host a two-day Leadership Summit for approximately 350 of our most senior leaders aligning business strategy and transformation initiatives, alongside emphasizing the core values of our organization.

Leidos Holdings, Inc.

Annual Report - 8

We have an annual succession planning process at Leidos that identifies and develops high-potential employees at all levels of the organization.

We have an annual succession planning rhythm and process that identifies and develops high-potential employees at all levels of the organization.

We create succession plans for all executive-level positions as well as for other roles throughout the organization considered vital to our success.

In addition, we create development and engagement plans for top talent comprised of formal and informal training, mentoring, coaching and experiential learning opportunities.

In addition, we establish development and engagement plans for top talent comprised of formal and informal training, mentoring, coaching and experiential learning opportunities.

Diversity in Talent Acquisition

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We leverage our college campus and military veteran outreach as well as our ERGs to recruit diverse candidates.

Our college campus outreach engages talent from multiple university sources including the Leidos Strategic University Alliances, Historically Black Colleges and Universities and Hispanic Serving Institutions.

Our military veteran outreach program attracts, retains and supports current veterans, transitioning service members and military spouses.

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Our primary focus is on the health and safety of our employees.

We have formed a multi-functional working group to monitor and respond to COVID-19.

This group is closely following the recommendations of the World Health Organization and the U.S.

Our multi-functional working group established in fiscal 2020 continues to monitor and respond to COVID-19.

This group closely follows the recommendations of the World Health Organization and the U.S.

Centers for Disease Control and Prevention, as well as national and local authorities in the regions where we perform work for our customers.

We have taken steps to support increased teleworking and working environments.

We have established a three phase COVID-19 guide recommending when it is safe for employees to return to work and the percentage of employees permitted to be in a Leidos facility.

Employees are also required to review our self-screening checklist prior to coming into a facility.

When working at a Leidos facility, we require all employees to wear face coverings while in common areas and where social distancing is not easily maintained and common surface areas and equipment are sanitized before and after each use.

We have established a COVID-19 Safety Policy to ensure safety protocols are implemented throughout the pandemic.

Employees are also required to review our self-screening checklist to ensure they are not experiencing symptoms prior to coming into a facility.

Leidos Holdings, Inc.

Annual Report - 9

On September 9, 2021, President Biden issued a series of executive orders to combat COVID-19, one of which requires us, as a federal contractor, to have our employees fully vaccinated unless the employee is legally entitled to a religious or medical exemption.

That executive order is currently under a nationwide injunction and its future is uncertain.

We are prepared to comply with the executive order in the event the injunction is lifted.

We believe we are a leader in the field of occupational health and safety (“OH&S”) and we place a strong emphasis on these activities, both internally and on behalf of our customers.

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Our corporate policies and procedures support compliance with OH&S regulations at work locations.

We have a proactive compliance program of employee education, training, auditing and reporting that, through employee awareness and integration into our business operations, supports our commitment to a safe and healthy environment.

Environmental Matters

Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations.

In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability.

See "Risk Factors" in this Annual Report on Form 10-K for further details.

Although we do not currently anticipate that the costs of complying with, or the liabilities associated with, environmental laws will materially and adversely affect us, we cannot ensure that we will not incur material costs or liabilities in the future.

Research and Development

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We selectively pursue opportunities to license or transfer our technologies to third parties.

Leidos Holdings, Inc.

Annual Report - 9

In connection with the performance of services and solutions, the U.S.

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government and our commercial customers, we frequently collaborate with other companies to compete for large contracts and bid against these same companies in other situations.

Leidos Holdings, Inc.

Annual Report - 10

We believe that our principal competitors currently include the following companies:

Amentum Services Inc., Booz Allen Hamilton Inc., CACI International Inc., General Dynamics Corporation, Jacobs Engineering Group Inc., KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech International Corporation, Northrop Grumman Corporation, Perspecta Inc., Raytheon Technologies Corporation and SAIC.

Amentum Services Inc., Booz Allen Hamilton Inc., CACI International Inc., General Dynamics Corporation, Jacobs Engineering Group Inc., KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech International Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, SAIC and Peraton.

These companies span across sectors that include engineering and technical services divisions of large defense contractors, diversified U.S.

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For the contractor, this method of contracting may provide greater certainty of the timing and amounts to be received at the time of contract award because it generally results in the customer contracting for a specific scope of services or products from the single definitive successful awardee.

Leidos Holdings, Inc.

Annual Report - 10

• Indefinite Delivery/Indefinite Quantity ("IDIQ") Contracts.

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government will purchase under the contract, and in the case of a multiple-award IDIQ, the contractor from which such purchases may be made.

Leidos Holdings, Inc.

Annual Report - 11

General Services Administration ("GSA") Schedule Contracts.

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These regulations and risks are described in more detail below under "Business–Regulation" and "Risk Factors" in this Annual Report on Form 10-K.

Leidos Holdings, Inc.

Annual Report - 11

Contract Types

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These contracts provide for reimbursement of our direct contract costs and allocable indirect costs, plus a fee.

These contracts are generally used when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract.

Cost-reimbursement contracts generally subject us to lower risk but generally require us to use our best efforts to accomplish the scope of the work within a specified time and budget.

These contracts are typically used when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract.

Cost-reimbursement contracts generally subject us to lower risk but require us to use our best efforts to accomplish the scope of the work within a specified time and budget.

Award and incentive fees are generally based on performance criteria such as cost, schedule, quality and/or technical performance.

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Incentive fees that are based on cost provide for an initially negotiated fee to be adjusted later, typically using a formula to measure performance against the associated criteria, based on the relationship of total allowable costs to total target costs.

Leidos Holdings, Inc.

Annual Report - 12

• Fixed-price-incentive-fee ("FP-IF") contracts are substantially similar to cost-plus-incentive-fee contracts except they require specified targets for cost and profit, price ceiling (but not a profit ceiling or floor) and profit adjustment formula.

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Payment is based on the effort expended rather than the results achieved.

• FFP contracts provide for a fixed price for specified products, systems and/or services.

This type of contract is generally used when the government acquires products and services on the basis of reasonably definitive specifications and which have a determinable fair and reasonable price.

These contracts offer us potential increased profits if we can complete the work at lower costs than planned.

While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns.

• Firm-Fixed-Price (“FFP”) contracts provide for a fixed price for specified products, systems and/or services.

This type of contract is typically used when the customer acquires products and services on the basis of reasonably definitive specifications that have a determinable fair and reasonable price.

These contracts offer us potential increased profits if we can complete the work at lower costs than planned, but FFP contracts increase our exposure to the risk of cost overruns.

Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract and the nature of services or products provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive-fee and award-fee contracts, is finally determined.

Cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts.

Leidos Holdings, Inc.

Annual Report - 12

government's fiscal year ends on September 30 of each year.

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government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts.

government contracts generally are subject to the Federal Acquisition Regulation ("FAR"), which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S.

government, agency-specific regulations that implement or supplement the FAR, such as the DoD Federal Acquisition Regulation Supplement ("DFARS"), and other applicable laws and regulations.

Some significant laws and regulations that affect us include:

• the Federal Acquisition Regulation ("FAR") and supplements, including the DoD Federal Federal Acquisition Regulation Supplement ("DFARS"), which regulate the formation, administration and performance of U.S.

government contracts;

• the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations;

• the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information and our ability to provide compensation to certain former government officials;

Leidos Holdings, Inc.

Annual Report - 13

• the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S.

government for payment or approval;

• the False Statements Act, which imposes civil and criminal liability for making false statements to the U.S.

government Cost Accounting Standards ("CAS"), which imposes accounting requirements that govern our right to reimbursement under certain cost-based U.S.

government contracts.

These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment and audit requirements.

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• require compliance with U.S.

government Cost Accounting Standards ("CAS");

government CAS;

• require reviews by the Defense Contract Audit Agency ("DCAA"), Defense Contract Management Agency ("DCMA") and other U.S.

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In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance trainings relevant to their position.

Privacy and Data Security Laws

Some of our operations and service offerings involve access to and use by us of personally identifiable information and/or protected health information.

These activities are regulated by extensive federal, state and international privacy and data security laws requiring organizations to provide certain privacy protections and security safeguards for such information.

Environmental Matters

Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations.

In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability.

See "Risk Factors" in this Annual Report on Form 10-K for further details.

• the European Union's ("EU’s") General Data Protection Regulation (“GDPR”), which took effect in May 2018, has created new compliance obligations for companies that process data of EU data subjects, which require investment into ongoing data protection activities and documentation requirements, and creates the potential for significantly increased fines for noncompliance;

• the California Consumer Protection Privacy Act of 2018 (“CCPA”), which took effect on January 1, 2020, provides new consumer privacy rights to natural persons residing in California by regulating the processing of personal information of California residents and increasing the obligations on businesses in connection with such activities;

• the California Privacy Rights Act (“CPRA”), will take effect in most material respects on January 1, 2023.

The CPRA modifies the CCPA significantly, including by expanding consumers’ rights with respect to certain sensitive personal information and creating a new state agency to oversee implementation and enforcement efforts;

• the Virginia Consumer Data Protection Act (“VCDPA”), which will go into effect on January 1, 2023, grants Virginia residents the rights to access, correct, delete, know and opt-out of the sale and processing for targeted advertising purposes of their personal information, similar to the CCPA and CPRA.

The VCDPA also provides for additional data protection assessment requirements.

Leidos Holdings, Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business