What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-31 compared with 2023-08-01 · 110 added, 92 removed, 160 unchanged (56% of the section changed)

23 unchanged sentences

Government Markets

During the three and six months ended June 30, 2023, we generated approximately 85% and 86%, respectively, of total revenues from contracts with the U.S.

government, as compared to 86% during both of the three and six months ended July 1, 2022.

During the three and nine months ended September 29, 2023, we generated approximately 87% and 86%, respectively, of total revenues from contracts with the U.S.

government, as compared to 87% during both of the three and nine months ended September 30, 2022.

Accordingly, our business performance is affected by the overall level of U.S.

government spending, especially on national security, homeland security and intelligence, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S.

Congress is currently working on the 12 appropriations bills that will fund the federal government in government fiscal year ("GFY") 2024.

The bills must presumably be within the agreed upon spending caps set by the debt ceiling bill that was signed by President Biden on June 3, 2023.

On September 30, 2023, Congress avoided a federal government shutdown by passing a continuing resolution ("CR") that provides government funding until November 17, 2023.

The CR gives lawmakers more time to consider the 12 appropriations bills for government fiscal year (“GFY”) 2024 and organize new leadership of the House of Representatives.

The House has passed the State and Foreign Operations, Defense, Military Construction and Homeland Security Appropriations bills.

For GFY 2024, the total federal discretionary spending request is $1.59 trillion with $886 billion for defense spending and $703 billion for non-defense discretionary spending programs.

Failure to pass the appropriations bills or a continuing resolution by September 30, 2023, results in a partial or complete federal government shutdown.

The Senate is also working on a government funding bill that will provide aid to Ukraine since such funding was not included in the CR.

Failure to pass the appropriations bills or another CR by November 17, 2023, will result in a partial or complete federal government shutdown.

LEIDOS HOLDINGS, INC.

International Markets

Sales to customers in international markets represented approximately 9% of total revenues for both the three and six months ended June 30, 2023, as compared to 8% of total revenues for both the three and six months ended July 1, 2022.

Sales to customers in international markets represented approximately 9% of total revenues for both the three and nine months ended September 29, 2023, as compared to 8% of total revenues for both the three and nine months ended September 30, 2022.

Our international customers include foreign governments and their agencies.

3 unchanged sentences

While we evaluate the impact of higher tariffs, currently, we do not expect tariffs to have a significant impact to our business.

LEIDOS HOLDINGS, INC.

Results of Operations

The following table summarizes our condensed consolidated results of operations for the periods presented:

Three Months Ended Six Months Ended

2022 Dollar change Percent change June 30,

Three Months Ended Nine Months Ended

September 29,

2023 September 30,

2022 Dollar change Percent change September 29,

2023 September 30,

2022 Dollar change Percent change

1 unchanged sentence

Revenues $ 3,921 $ 3,608 $ 313 8.7 % $ 11,458 $ 10,699 $ 759 7.1 %

Operating income 331 271 60 22.1 % 596 542 54 10.0 %

Operating (loss) income (336) 281 (617) (219.6) % 260 823 (563) (68.4) %

Non-operating expense, net

(52) (60) 8 (13.3) % (167) (155) (12) 7.7 %

Income before income taxes

(Loss) income before income taxes

(388) 221 (609) (275.6) % 93 668 (575) (86.1) %

1 unchanged sentence

(8) (57) 49 (86.0) % (115) (155) 40 (25.8) %

Net income $ 210 $ 172 $ 38 22.1 % $ 374 $ 349 $ 25 7.2 %

Net income attributable to Leidos common stockholders

Net (loss) income $ (396) $ 164 $ (560) (341.5) % $ (22) $ 513 $ (535) (104.3) %

Net (loss) income attributable to Leidos common stockholders

$ (399) $ 162 $ (561) (346.3) % $ (30) $ 508 $ (538) (105.9) %

1 unchanged sentence

Segment and Corporate Results

Three Months Ended Six Months Ended

Defense Solutions June 30,

2022 Dollar change Percent change June 30,

Three Months Ended Nine Months Ended

Defense Solutions September 29,

2023 September 30,

2022 Dollar change Percent change September 29,

2023 September 30,

2022 Dollar change Percent change

3 unchanged sentences

Operating margin 6.6 % 6.6 % 7.2 % 6.6 %

The increase in revenues for the three months ended June 30, 2023, as compared to the three months ended July 1, 2022, was primarily attributable to programs wins, a net increase in volumes on certain programs and a $28 million increase in revenues related to our Cobham Special Mission acquisition made in the last quarter of fiscal 2022.

The increase was partially offset by completion of certain contracts and a $11 million unfavorable impact from exchange rate movements.

The increase in revenues for the six months ended June 30, 2023, as compared to the six months ended July 1, 2022, was primarily attributable to program wins, a net increase in volumes on certain programs, net write-ups and a $58 million increase in revenues related to our Cobham Special Mission acquisition made in the last quarter of fiscal 2022.

The increase was partially offset by completion of certain contracts and a $33 million unfavorable impact from exchange rate movements.

The increase in operating income for the three months ended June 30, 2023, as compared to the three months ended July 1, 2022, was primarily attributable to program wins and a net increase in volumes on certain programs, partially offset by the completion of certain contracts.

The increase in operating income for the six months ended June 30, 2023, as compared to the six months ended July 1, 2022, was primarily attributable to program wins, net write-ups and a net increase in volumes on certain programs.

The increase in revenues for the three months ended September 29, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to programs wins, a net increase in volumes on certain programs and a $28 million increase in revenues related to our Cobham Special Mission acquisition made in the last quarter of fiscal 2022.

The increase was partially offset by the completion of certain contracts.

Three Months Ended Six Months Ended

Civil June 30,

2022 Dollar change Percent change June 30,

The increase in revenues for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to a net increase in volumes on certain programs, programs wins, an increase in net write-ups on certain programs and a $86 million increase in revenues related to our Cobham Special Mission acquisition made in the last quarter of fiscal 2022.

The increase was partially offset by the completion of certain contracts and a $29 million unfavorable impact from exchange rate movements.

LEIDOS HOLDINGS, INC.

The increase in operating income for the three months ended September 29, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.

The increase in operating income for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to a net increase in volumes on certain programs, program wins, partially offset by the completion of certain contracts.

Three Months Ended Nine Months Ended

Civil September 29,

2023 September 30,

2022 Dollar change Percent change September 29,

2023 September 30,

2022 Dollar change Percent change

1 unchanged sentence

Revenues $ 924 $ 874 $ 50 5.7 % $ 2,703 $ 2,526 $ 177 7.0 %

Operating income 64 38 26 68.4 % 104 81 23 28.4 %

Operating (loss) income (607) 79 (686) NM (503) 160 (663) NM

Operating margin (65.7) % 9.0 % (18.6) % 6.3 %

LEIDOS HOLDINGS, INC.

The increase in revenues for the three and six months ended June 30, 2023, as compared to the three and six months ended July 1, 2022, were primarily attributable to a net increase in program volumes on certain programs and programs wins, partially offset by the completion of certain contracts.

The increase in operating income for the three and six months ended June 30, 2023, as compared to the three and six months ended July 1, 2022, were primarily driven by a net increase in program volumes on certain programs and $17 million and $19 million in legal reserves and fees, respectively, resulting from an adverse arbitration ruling related to the 2016 acquisition of the Information Systems & Global Solutions business from Lockheed Martin in the prior year periods.

Three Months Ended Six Months Ended

Health June 30,

2022 Dollar change Percent change June 30,

NM - not meaningful

The increase in revenues for the three and nine months ended September 29, 2023, as compared to the three and nine months ended September 30, 2022, were primarily attributable to a net increase in volumes and product mix on certain programs.

The decrease in operating income for the three months ended September 29, 2023, as compared to the three months ended September 30, 2022, were primarily driven by impairment charges of $679 million and restructuring charges of $9 million.

The decrease in operating income for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, were primarily driven by impairment charges of $679 million, restructuring charges of $10 million and a net decrease in volumes and product mix on certain programs.

The decrease was partially offset by $19 million in legal reserves and fees resulting from an adverse arbitration ruling related to the 2016 acquisition of the Information Systems & Global Solutions business from Lockheed Martin in the prior year periods and the performance of an equity method investment.

Three Months Ended Nine Months Ended

Health September 29,

2023 September 30,

2022 Dollar change Percent change September 29,

2023 September 30,

2022 Dollar change Percent change

3 unchanged sentences

Operating margin 19.6 % 13.8 % 17.0 % 16.8 %

The increase in revenues for the three months ended June 30, 2023, as compared to the three months ended July 1, 2022, was primarily attributable to a net increase in volumes on certain programs, program wins and net write-ups, partially offset by the completion of certain contracts.

The three months ended July 1, 2022, included $28 million in recoveries related to stop work orders on certain programs as a result of COVID-19.

The increase in revenues for the six months ended June 30, 2023, as compared to the six months ended July 1, 2022, was primarily attributable to a net increase in volumes on certain programs and program wins.

The increase was partially offset by the completion of certain contracts, higher volume of net write-ups in the prior year and $28 million in recoveries in the prior year related to stop work orders on certain programs as a result of COVID-19.

The decrease in operating income for the three months ended June 30, 2023, as compared to the three months ended July 1, 2022, was primarily attributable to $28 million in recoveries related to stop work orders on certain programs as a result of COVID-19 in the prior year quarter, partially offset by net write-ups on certain programs and program wins.

The decrease in operating income for the six months ended June 30, 2023, as compared to the six months ended July 1, 2022, was primarily attributable to $28 million in recoveries related to stop work orders on certain programs as a result of COVID-19 in the prior year, higher volume of net write-ups in the prior year and increased labor costs, partially offset by programs wins.

Three Months Ended Six Months Ended

Corporate June 30,

2022 Dollar change Percent change June 30,

The increase in revenues for the three months ended September 29, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to a net increase in volumes, program wins, write-ups for

incentive awards and recovery of prior expenditures in the medical examination business.

The increase in revenues for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to a net increase in program volumes, program wins and write-ups for incentive awards in the medical examination business.

The increase was partially offset by the completion of certain contracts.

The increase in operating income for the three months ended September 29, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to program wins, write-ups for

incentive awards and recovery of prior expenditures in the medical examination business.

The increase in operating income for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to write-ups for incentive awards in the medical examination business and program wins.

LEIDOS HOLDINGS, INC.

Three Months Ended Nine Months Ended

Corporate September 29,

2023 September 30,

2022 Dollar change Percent change September 29,

2023 September 30,

2022 Dollar change Percent change

1 unchanged sentence

Operating loss $ (28) $ (26) $ (2) 7.7 % $ (87) $ (81) $ (6) 7.4 %

The decrease in operating loss for the three months ended June 30, 2023, as compared to the three months ended July 1, 2022, was primarily attributable to reduced foreign payroll tax reserves in the current period.

The increase in operating loss for the six months ended June 30, 2023, as compared to the six months ended July 1, 2022, was primarily attributable to increased administrative costs and transaction fees in connection with the issuance of the senior unsecured notes and Credit Agreement entered into during the first quarter of fiscal 2023, see "Note 6–Debt" for further information.

The increase was partially offset by reduced foreign payroll tax reserves in the current year.

LEIDOS HOLDINGS, INC.

The increase in operating loss for the nine months ended September 29, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to increased administrative costs and transaction fees in connection with the issuance of the senior unsecured notes and Credit Agreement entered into during the first quarter of fiscal 2023, see "Note 6–Debt" for further information.

The increase was partially offset by the impact of foreign payroll tax reserves.

Non-Operating Expense, net

Non-operating expense, net for the three months ended June 30, 2023, was $57 million as compared to $46 million for the three months ended July 1, 2022.

Non-operating expense, net for the six months ended June 30, 2023, was $115 million as compared to $95 million for the six months ended July 1, 2022.

The increases in non-operating expense for both periods was primarily due to higher net interest expense driven by increased interest rates and refinancing activities, and unfavorable exchange rate movements.

Non-operating expense, net for the three months ended September 29, 2023, was $52 million as compared to $60 million for the three months ended September 30, 2022.

The decrease was primarily due to a net unrealized loss in our foreign currency forward contract related to the Cobham Special Mission acquisition as a result of unfavorable exchange rate movements in the prior year, partially offset by higher net interest expense driven by increased interest rates and refinancing activities.

Non-operating expense, net for the nine months ended September 29, 2023, was $167 million as compared to $155 million for the nine months ended September 30, 2022.

The increase was primarily due to higher net interest expense driven by increased interest rates and refinancing activities, partially offset by a net unrealized loss in our foreign currency forward contract related to the Cobham Special Mission acquisition as a result of unfavorable exchange rate movements in the prior year.

Provision for Income Taxes

For the three months ended June 30, 2023, our effective tax rate was 23.4% compared to 23.6% for the three months ended July 1, 2022.

The decrease to the effective tax rate was primarily due to a decrease in underpayment penalties, offset by a decrease in excess tax benefits related to stock-based payment transactions and an increase in unrecognized tax benefits.

For the six months ended June 30, 2023, our effective tax rate was 22.2% compared to 21.9% for the six months ended July 1, 2022.

The increase to the effective tax rate was primarily due to a decrease in excess tax benefits related to stock-based payment transactions offset by a decrease in underpayment penalties.

For the three months ended September 29, 2023, our effective tax rate was (2.1)% compared to 25.8% for the three months ended September 30, 2022.

The decrease to the effective tax rate was primarily due to the tax impacts of non-deductible goodwill impairments.

For the nine months ended September 29, 2023, our effective tax rate was 123.7% compared to 23.2% for the nine months ended September 30, 2022.

The increase to the effective tax rate was primarily due to the tax impacts of non-deductible goodwill impairments.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 ("TCJA") eliminated the option to currently deduct certain research and development costs for tax purposes and requires taxpayers to capitalize and amortize research costs over five years.

Based upon our interpretation of the law as currently enacted, we estimate that the fiscal 2023 impact will result in increases of $110 million to both our income taxes payable and net deferred tax assets.

We also estimate an increase to our unrecognized tax benefits of $75 million with a corresponding increase to net deferred tax assets.

The actual impact will depend on the amount of research and development costs the Company will incur, whether Congress modifies or repeals this provision and whether new guidance and interpretive rules are issued by the U.S.

Treasury, among other factors.

LEIDOS HOLDINGS, INC.

Bookings and Backlog

We recorded net bookings worth an estimated $2.9 billion and $5.9 billion during the three and six months ended June 30, 2023, as compared to $2.2 billion and $7.6 billion for the three and six months ended July 1, 2022.

We recorded net bookings worth an estimated $7.9 billion and $13.8 billion during the three and nine months ended September 29, 2023, as compared to $4.1 billion and $11.6 billion for the three and nine months ended September 30, 2022.

The estimated value of our total backlog was as follows:

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022

Segment Funded Unfunded Total Funded Unfunded Total

4 unchanged sentences

Total $ 9,047 $ 28,996 $ 38,043 $ 7,429 $ 27,599 $ 35,028

Total backlog as of June 30, 2023, as compared to July 1, 2022, included $610 million of backlog acquired through a business combination in our Defense Solutions reportable segment.

Total backlog as of September 29, 2023, as compared to September 30, 2022, included $610 million of backlog acquired through a business combination in our Defense Solutions reportable segment.

Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts, both funded and unfunded.

1 unchanged sentence

Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.

LEIDOS HOLDINGS, INC.

Liquidity and Capital Resources

As of June 30, 2023, we had $329 million in cash and cash equivalents.

As of September 29, 2023, we had $750 million in cash and cash equivalents.

In March 2023, we entered into a senior unsecured revolving credit facility which can provide up to $1 billion in additional borrowing, if required.

This new credit facility replaced the previous senior unsecured revolving credit facility.

As of June 30, 2023, there were no borrowings outstanding under the revolving credit facility.

We had outstanding debt of $4.9 billion at both June 30, 2023, and December 30, 2022.

As of September 29, 2023, there were no borrowings outstanding under the revolving credit facility.

We had outstanding debt of $4.7 billion and $4.9 billion at September 29, 2023, and December 30, 2022, respectively.

In February 2023, we entered into $750 million 5.75% fixed-rate senior notes.

2 unchanged sentences

The proceeds of the Term Loan Facility and cash on hand were used to repay in full all indebtedness, terminate all commitments and discharge all existing guarantees related to the $1.9 billion senior unsecured term loan facility and $750 million senior unsecured revolving facility, due January 2025.

As of June 30, 2023, borrowings under our Credit Agreement were based on a Term Secured Overnight Financing Rate (“SOFR”) with a 0.10% Term SOFR adjustment and an applicable margin range from 1.00% to 1.50%.

At June 30, 2023, the applicable margin for SOFR-denominated borrowings was 1.25%.

We have a commercial paper program in which we may issue short-term unsecured commercial paper notes and have maturities of up to 397 days from the date of issuance.

As of September 29, 2023, borrowings under our Credit Agreement were based on a Term Secured Overnight Financing Rate (“SOFR”) with a 0.10% Term SOFR adjustment and an applicable margin range from 1.00% to 1.50%.

At September 29, 2023, the applicable margin for SOFR-denominated borrowings was 1.25%.

We have a commercial paper program in which we may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") and have maturities of up to 397 days from the date of issuance.

On May 26, 2023, we increased the size of the commercial paper program by $250 million, or not to exceed $1.0 billion.

As of June 30, 2023, we had $200 million Commercial Paper Notes outstanding.

We made principal payments on our debt of $325 million and $2,036 million during the three and six months ended June 30, 2023, respectively, and $407 million and $434 million during the three and six months ended July 1, 2022, respectively.

This activity included a required principal repayment of $320 million to discharge the 364-day term loan credit agreement ("Term Loan Agreement") for the three months ended June 30, 2023, as compared to required principal payments on our term loans of $404 million for the three months ended July 1, 2022.

The activity for the six months ended June 30, 2023, included a $1,210 million payment to discharge the existing Term Loan Facility, a $498 million payment to discharge the $500 million 2.95% notes, due May 2023, and a principal repayment of $320 million to discharge the Term Loan Agreement, as compared to $428 million required principal payments on our Term Loan Facility for the six months ended July 1, 2022.

Our credit facilities, commercial paper notes, senior unsecured term loans and notes outstanding as of June 30, 2023, contain financial covenants and customary restrictive covenants.

We were in compliance with all covenants as of June 30, 2023.

During the three months ended June 30, 2023, we modified our interest rate swap agreements to reference SOFR prior to the discontinuation of LIBOR.

Under the revised interest rate swap agreement, we will receive monthly variable interest payments based on the one-month SOFR rate and we will continue to pay interest at a fixed rate.

Under the ASC 848 relief, we will continue to apply hedge accounting for the interest rate swap arrangement.

We paid dividends of $50 million and $100 million during the three and six months ended June 30, 2023, respectively, and $49 million and $100 million during the three and six months ended July 1, 2022, respectively.

As of September 29, 2023, we did not have any Commercial Paper Notes outstanding.

We made principal payments, excluding the impacts of our Commercial Paper Notes, on our debt of $5 million and $2,041 million during the three and nine months ended September 29, 2023, respectively, and $25 million and $459 million during the three and nine months ended September 30, 2022, respectively.

The activity for the nine months ended September 29, 2023, included a $1,210 million payment to discharge the existing Term Loan Facility, a $498 million payment to discharge the $500 million 2.95% notes, due May 2023, and a principal repayment of $320 million to discharge the 364-day term loan credit agreement, as compared to $452 million required principal payments on our Term Loan Facility for the nine months ended September 30, 2022.

LEIDOS HOLDINGS, INC.

Our credit facilities, commercial paper notes, senior unsecured term loans and notes outstanding as of September 29, 2023, contain financial covenants and customary restrictive covenants.

We were in compliance with all covenants as of September 29, 2023.

We paid dividends of $50 million and $150 million during the three and nine months ended September 29, 2023, respectively, and $49 million and $149 million during the three and nine months ended September 30, 2022, respectively.

Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase agreements.

1 unchanged sentence

The repurchase program may be accelerated, suspended, delayed or discontinued at any time.

During the six months ended June 30, 2023, we made open market repurchases of our common stock for aggregate purchase price of $25 million.

No share repurchases were made during the three months ended June 30, 2023.

During the nine months ended September 29, 2023, we made open market repurchases of our common stock for aggregate purchase price of $25 million.

No share repurchases were made during the three months ended September 29, 2023.

Beginning in 2022, a provision in the TCJA which eliminated the option to currently deduct research and development costs for tax purposes and requires taxpayers to capitalize and amortize the costs over five years became effective.

2 unchanged sentences

Treasury, among other factors.

LEIDOS HOLDINGS, INC.

For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility.

1 unchanged sentence

The following table summarizes cash flow information for the periods presented:

Three Months Ended Six Months Ended

2022 June 30,

Three Months Ended Nine Months Ended

September 29,

2023 September 30,

2022 September 29,

2023 September 30,

(in millions)

2 unchanged sentences

Net cash used in investing activities (52) (26) (135) (55)

Net cash (used in) provided by financing activities (164) 6 (221) (513)

(1) Net cash provided by operating activities during the three and six months ended July 1, 2022, were recast to present the effect of foreign exchange rate changes on cash, cash equivalents and restricted cash as a separate line in the condensed consolidated statements of cash flows.

Net cash provided by operating activities increased $119 million during the three months ended June 30, 2023, when compared to the prior year quarter.

The changes were primarily due to strong collections on trade accounts receivable and favorable timing of customer advance payments, partially offset by higher tax payments.

Net cash provided by operating activities decreased $72 million during the six months ended June 30, 2023, when compared to the prior year.

The changes were primarily due to higher tax payments of $152 million mainly in connection to the TCJA provision and a $62 million payment for payroll taxes related to the CARES Act, partially offset by strong collections on trade accounts receivable and favorable timing of customer advance payments.

Net cash used in investing activities increased $36 million and $54 million, respectively, for the three and six months ended June 30, 2023, when compared to the prior year periods, primarily due to higher capital expenditures of $19 million and $30 million, respectively, and proceeds received from the sale of Aviation & Missile Solutions LLC in the prior year periods.

Net cash used in financing activities increased $170 million for the three months ended June 30, 2023, when compared to the prior year quarter primarily due to a decrease of $173 million in net proceeds received from debt activities.

Net cash used in financing activities decreased $292 million for the six months ended June 30, 2023, when compared to the prior year primarily due to a net decrease of $485 million used in stock repurchases

primarily attributable to the accelerated share repurchase activities from prior year, partially offset by a decrease of $189 million in net proceeds received from debt activities.

Net cash used in financing activities

(249) (217) (470) (730)

(1) Net cash provided by operating activities during the three and nine months ended September 30, 2022, were recast to present the effect of foreign exchange rate changes on cash, cash equivalents and restricted cash as a separate line in the condensed consolidated statements of cash flows.

Net cash provided by operating activities increased $66 million during the three months ended September 29, 2023, when compared to the prior year quarter.

The changes were primarily due to favorable timing of customer advance payments and vendor payments, partially offset by higher tax payments.

Net cash provided by operating activities decreased $6 million during the nine months ended September 29, 2023, when compared to the prior year.

The changes were primarily due to higher tax payments of $189 million, mainly in connection to the TCJA provision and a $62 million payment for payroll taxes related to the CARES Act, partially offset with strong collections on trade accounts receivable, favorable timing of customer advance payments and vendor payments.

LEIDOS HOLDINGS, INC.

Net cash used in investing activities increased $26 million for the three months ended September 29, 2023, when compared to the prior year quarter primarily due to higher capital expenditures of $23 million.

Net cash used in investing activities increased $80 million for the nine months ended September 29, 2023, when compared to the prior year.

The changes were primarily due to higher capital expenditures of $53 million and $15 million of proceeds received from the sale of Aviation & Missile Solutions LLC in the prior year.

Net cash used in financing activities increased $32 million for the three months ended September 29, 2023, when compared to the prior year quarter primarily due to a $30 million increase in net payments from debt activities.

Net cash used in financing activities decreased $260 million for the nine months ended September 29, 2023, when compared to the prior year primarily due to a net decrease of $488 million in stock repurchases driven by the accelerated share repurchase activities in the prior year and an increase of $1.4 billion in proceeds received from the issuance of debt in the current year, partially offset by an increase of $1.6 billion in payments of debt.

Off-Balance Sheet Arrangements

31 unchanged sentences

Balance Sheet Information for the Guarantor and Issuer of Registered Notes

September 29,

2023 December 30,

10 unchanged sentences

LEIDOS HOLDINGS, INC.

Statements of Income Information for the Guarantor and Issuer of Registered Notes

Six Months Ended

Statement of Operations Information for the Guarantor and Issuer of Registered Notes

Nine Months Ended

September 29,

(in millions)

1 unchanged sentence

Operating income

Net income attributable to Leidos common stockholders 117

Net loss attributable to Leidos common stockholders

Contractual Obligations and Commitments

9 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis