5 unchanged sentences
Consolidated Balance Sheets as of December 29, 2023 and December 30, 2022
−Removed: Consolidated Statements of Income for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021
−Removed: Consolidated Statements of Comprehensive Income for the fiscal years ended December 30, 2022, December 31, 2021 , and January 1, 2021
−Removed: Consolidated Statements of Equity for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021
−Removed: Consolidated Statements of Cash Flows for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021
+Added: Consolidated Statements of Operations for the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021
+Added: Consolidated Statements of Comprehensive Income for the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021,
+Added: Consolidated Statements of Equity for the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021
+Added: Consolidated Statements of Cash Flows for the fiscal years ended December 29, 2023, December 30, 2022 and December 31, 2021
Notes to Consolidated Financial Statements
7 unchanged sentences
We have audited the accompanying consolidated balance sheets of Leidos Holdings, Inc.
−Removed: and subsidiaries (the "Company") as of December 30, 2022 and December 31, 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows, for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021, and the related notes (collectively referred to as the "financial statements").
−Removed: In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2022 and December 31, 2021, and the results of its operations and its cash flows for the fiscal years ended December 30, 2022, December 31, 2021, and January 1, 2021, in conformity with accounting principles generally accepted in the United States of America.
+Added: and subsidiaries (the "Company") as of December 29, 2023 and December 30, 2022, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for the fiscal years ended December 29, 2023, December 30, 2022, and December 31, 2021, and the related notes (collectively referred to as the "financial statements").
+Added: In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2023 and December 30, 2022, and the results of its operations and its cash flows for the fiscal years ended December 29, 2023, December 30, 2022, and December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2023, based on criteria established in Internal Control — Integrated Framework (2013 ) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 13, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
11 unchanged sentences
Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.
+Added: The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
3 unchanged sentences
Critical Audit Matter Description
−Removed: The Company performed a quantitative impairment evaluation of the goodwill for the Security Enterprise Solutions reporting unit by comparing the estimated fair value of the reporting unit to its carrying value.
−Removed: Estimating the fair value of a reporting unit requires the exercise of significant judgment and assumptions including judgments about expected future cash flows, weighted-average cost of capital, discount rates and expected long-term growth rates.
+Added: The Company’s accounting policy is to test goodwill for impairment on the first day of the fourth quarter of each year and more frequently if events or circumstances indicate that the carrying value may not be recoverable.
+Added: During the third quarter of fiscal year 2023, the Security Enterprise Solutions (“SES”) reporting unit refined its business portfolio and made strategic business decisions to exit certain product offerings, as well as cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.
+Added: These decisions, along with the continued delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.
+Added: As a result, the Company performed an interim quantitative impairment analysis of goodwill for the SES reporting unit by comparing the estimated fair value of the reporting unit to its carrying value.
+Added: The Company’s determination of the estimated fair value of the reporting unit was based on a blended approach, including discounted cash flow-models and market earnings multiple.
+Added: Estimating the fair value of a reporting unit requires the exercise of significant judgment and assumptions including judgments about expected future cash flows, weighted-average cost of capital, and growth rates in revenue and margins.
Changes in these assumptions could have a significant impact on the fair value of the reporting unit, the amount of any goodwill impairment charge, or both.
−Removed: The goodwill balance was $6,696 million as of December 30, 2022 of which $899 million related to the Security Enterprise Solutions reporting unit.
−Removed: The Company’s accounting policy is to test for impairment on the first day of the fourth quarter of each year and more frequently if events or circumstances indicate that the carrying value may not be recoverable.
−Removed: As a result of the quantitative assessment, the Company concluded that the fair value of the reporting unit exceeded the carrying value by $174 million, or 13%, which resulted in no impairment for the year ended December 30, 2022.
−Removed: We identified goodwill for the Security Enterprise Solutions reporting unit as a critical audit matter due to the significant judgments made by management to estimate the fair value of the reporting unit and the difference between its fair value and carrying value.
−Removed: Performing audit procedures to develop an independent estimate of the fair value of the Security Enterprise Solutions reporting unit, which included evaluating estimates and assumptions related to the cost of capital, forecasts of future cash flows, and terminal growth rates due to the sensitivity of the operations to changes in global aviation security products and related services markets, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
+Added: As a result of the quantitative assessment, the Company concluded that the carrying value of the reporting unit exceeded the fair value and recognized a goodwill impairment charge of $596 million for the year ended December 29, 2023.
+Added: We identified goodwill for the SES reporting unit as a critical audit matter due to the significant judgments made by management to estimate the fair value of the reporting unit and the sensitivity of the fair value to changes in these estimates.
+Added: Performing audit procedures to evaluate the reasonableness of management’s estimate required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the selection of the discount rate, terminal growth rate and forecasts of future revenues and cash flows for the Security Enterprise Solutions reporting unit included the following, among others:
−Removed: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the selection of the discount rate, terminal growth rate and management’s development of forecasted revenues and cash flows.
−Removed: • We developed an independent estimate of the fair value of the Security Enterprise Solutions reporting unit using the income approach.
−Removed: We utilized historical results of the reporting unit and inspected third-party industry reports for the global aviation security products and related services markets to develop projections.
−Removed: Additionally, we developed the discount rate and terminal year growth rate with the assistance of our fair value specialists.
−Removed: • We developed an independent estimate of the fair value of the Security Enterprise Solutions reporting unit using the market approach.
−Removed: We selected guideline peer companies and developed enterprise value multiples of revenues and earnings before interest, taxes, depreciation and amortization.
−Removed: • We calculated our independent expectation of the fair value of the reporting unit by weighting the results of the market and income approaches and compared the resulting fair value to the carrying value of the reporting unit.
−Removed: Revenues — Refer to Note 3 and Note 4 to the financial statements
−Removed: Critical Audit Matter Description
−Removed: The Company recognizes revenue on service-based contracts primarily over time as there is continuous transfer of control to the customer over the duration of the contract as the Company performs the promised services.
−Removed: The accounting conclusions for contracts involves judgment, particularly as it relates to determining whether multiple promises within a single contract are highly interrelated and represent a single performance obligation and whether the Company is acting as a principal in the fulfillment of the identified performance obligations on certain contracts.
+Added: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the selection of the discount, and terminal growth rates and management’s development of forecasted revenues and cash flows, including the completeness, accuracy and reasonableness of the forecasted amounts.
+Added: • We performed a sensitivity analysis of the forecasts of future revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and capital expenditures, which included their impact on the fair value of the SES reporting unit.
+Added: • We evaluated management’s ability to accurately forecast future SES reporting unit revenue and operating income, comparing actual results to management’s historical forecasts.
+Added: • We evaluated the reasonableness of management’s SES reporting unit revenue growth rates, EBITDA projections and timing of future cash flows by comparing the forecasts to:
+Added: ◦ Historical results and current performance.
+Added: ◦ Internal communications to management and the Board of Directors.
+Added: ◦ Forecasted information included in industry reports considering macroeconomic factors.
+Added: • With the assistance of our fair value specialists, we evaluated (1) the valuation methodology utilized, including testing mathematical accuracy of calculations and (2) the projections of future revenue growth rates, the discount rate and the determination of market multiples by either testing the underlying source information, or by developing a range of independent estimates and comparing those to the rate selected by management.
Leidos Holdings, Inc.
Annual Report - 66
−Removed: On firm-fixed-price ('FFP") contracts requiring system integration and cost-plus contracts with variable consideration, revenue is recognized over time generally using a method that measures the extent of progress towards completion of a performance obligation, principally using a cost-input method (referred to as the cost-to-cost method).
+Added: Revenues — Refer to Note 3 and Note 4 to the financial statements
+Added: Critical Audit Matter Description
+Added: The Company recognized certain customer contract revenue over time using a method that measures the extent of progress towards completion of a performance obligation, principally using a cost-input method (referred to as the cost-to-cost method).
Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion (EAC).
1 unchanged sentence
The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total costs for the performance obligation.
+Added: In addition, an EAC of a performance obligation includes future losses estimated to be incurred on onerous contracts, as and when known.
Given the judgments necessary to determine whether multiple promises within a single contract represent a single performance obligation, whether or not the Company is acting as principal in the fulfillment of the identified performance obligations on certain contracts, and estimates of total costs for the performance obligations that recognize revenue using the cost-to-cost method, auditing such accounting conclusions and estimates required extensive audit effort due to the volume and complexity of these contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.
How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to management’s conclusions regarding whether multiple promises within a single contract represent a single performance obligation, whether or not the Company is acting as a principal or an agent in fulfilling identified performance obligations on certain contracts, and estimates of total costs for the performance obligations that recognize revenue using the cost-to-cost method included the following, among others:
+Added: Our audit procedures related to management’s conclusions regarding whether multiple promises within a single contract represent a single performance obligation, whether the Company is acting as a principal or an agent in fulfilling identified performance obligations on certain contracts, and estimates of total costs for the performance obligations that recognize revenue using the cost-to-cost method included the following, among others:
• We tested the effectiveness of controls over contract revenue, including management’s controls over the initial setup of new contract arrangements and the estimates of total costs and revenues for identified performance obligations.
−Removed: • We tested recorded revenue using a combination of analytical procedures and detailed contract testing.
+Added: • We developed an expectation of revenue and compared it to the recorded balance.
• For a selection of contracts, we performed the following for each contract:
−Removed: ◦ Evaluated the terms and conditions of each contract and the appropriateness of the accounting treatment in accordance with generally accepted accounting principles, by:
+Added: ◦ Evaluated the terms and conditions of each contract and the appropriateness of the accounting treatment in accordance with accounting principles generally accepted in the United States of America, by:
▪ Inspecting the executed contract to verify that the facts on which management’s conclusions were reached were consistent with the actual terms and conditions of the contract.
−Removed: ▪ Evaluating the contract within the context of the five-step model prescribed by accounting principles generally accepted in the United States of America and that management’s conclusions were appropriate by evaluating the nature of the promises within the contract, the interrelationship of the promised services provided, the pattern by which obligations are fulfilled, the number of performance obligations identified, and which party is acting as principal in the fulfillment of the identified performance obligations.
+Added: ▪ Evaluating the contract within the context of the five-step model and that management’s conclusions were appropriate by evaluating the nature of the promises within the contract, the interrelationship of the promised services and/or products provided, the pattern by which obligations are fulfilled, the number of performance obligations identified, and which party is acting as principal in the fulfillment of the identified performance obligations.
+Added: ▪ Evaluating the appropriateness and consistency of the methods and assumptions used by management to develop estimates of future revenues that will be recognized and costs that will be incurred.
▪ Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.
9 unchanged sentences
2023 December 30,
−Removed: (in millions)
+Added: (in millions, except share and per share data)
Cash and cash equivalents $ 777 $ 516
20 unchanged sentences
Stockholders’ equity:
−Removed: Preferred stock, $ 0.0001 par value, 10 million shares authorized and no shares issued and outstanding at December 30, 2022 and December 31, 2021
−Removed: Common stock, $ 0.0001 par value, 500 million shares authorized, 137 million and 140 million shares issued and outstanding at December 30, 2022 and December 31, 2021, respectively
+Added: Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized and no shares issued and outstanding at December 29, 2023 and December 30, 2022
+Added: Common stock, $ 0.0001 par value, 500,000,000 shares authorized, 135,766,419 and 136,926,990 shares issued and outstanding at December 29, 2023, and December 30, 2022, respectively
Additional paid-in capital 1,885 2,005
9 unchanged sentences
LEIDOS HOLDINGS, INC.
−Removed: CONSOLIDATED STATEMENTS OF INCOME
+Added: CONSOLIDATED STATEMENTS OF OPERATIONS
2023 December 30,
−Removed: 2021 January 1,
−Removed: (in millions, except per share amounts)
+Added: 2022 December 31,
+Added: (in millions, except per share data)
Revenues $ 15,438 $ 14,396 $ 13,737
1 unchanged sentence
Selling, general and administrative expenses 942 951 851
−Removed: Credit losses (recoveries), net 1 ( 9 ) ( 68 )
Acquisition, integration and restructuring costs 24 17 27
+Added: Goodwill impairment charges
Asset impairment charges 91 40 4
19 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
1 unchanged sentence
Foreign currency translation adjustments 34 ( 95 ) ( 8 )
−Removed: Unrecognized gain (loss) on derivative instruments 54 29 ( 37 )
+Added: Unrecognized (loss) gain on derivative instruments
Pension adjustments ( 1 ) ( 20 ) 13
−Removed: Total other comprehensive (loss) income, net of taxes ( 61 ) 34 24
+Added: Total other comprehensive income (loss), net of taxes
Comprehensive income 233 632 793
−Removed: comprehensive income attributable to non-controlling interest 8 6 1
+Added: net income attributable to non-controlling interest
Comprehensive income attributable to Leidos common stockholders $ 224 $ 624 $ 787
8 unchanged sentences
income (loss) Leidos stockholders' equity Non-controlling interest Total stockholders' equity
−Removed: (in millions, except for per share amounts)
−Removed: Balance at January 3, 2020 141 $ 2,587 $ 896 $ ( 70 ) $ 3,413 $ 4 $ 3,417
−Removed: Cumulative adjustments related to ASU adoptions — — ( 1 ) — ( 1 ) — ( 1 )
+Added: (in millions, except for per share data)
Balance at January 1, 2021 142 $ 2,580 $ 1,328 $ ( 46 ) $ 3,862 $ 9 $ 3,871
9 unchanged sentences
Net capital contributions from non-controlling interest — — — — — 38 38
−Removed: Balance at January 1, 2021 142 2,580 1,328 ( 46 ) 3,862 9 3,871
+Added: Balance at December 31, 2021 140 2,423 1,880 ( 12 ) 4,291 53 4,344
Net income — — 685 — 685 8 693
−Removed: Other comprehensive income, net of taxes
+Added: Other comprehensive loss, net of taxes
— — — ( 61 ) ( 61 ) — ( 61 )
5 unchanged sentences
Stock-based compensation — 73 — — 73 — 73
−Removed: Net capital contributions from non-controlling interest — — — — — 38 38
+Added: Net capital distributions to non-controlling interest — — — — — ( 7 ) ( 7 )
Balance at December 30, 2022 137 2,005 2,367 ( 73 ) 4,299 54 4,353
Net income — — 199 — 199 9 208
−Removed: Other comprehensive loss, net of taxes
+Added: Other comprehensive income, net of taxes
— — — 25 25 — 25
13 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
4 unchanged sentences
Stock-based compensation 77 73 67
−Removed: Loss on debt extinguishment — — 36
+Added: Goodwill impairment charges 596 — —
Asset impairment charges 91 40 4
25 unchanged sentences
Net capital (distributions to) contributions from non-controlling interests ( 9 ) ( 7 ) 38
−Removed: Other — — ( 5 )
−Removed: Net cash (used in) provided by financing activities ( 865 ) ( 113 ) 1,451
−Removed: Net (decrease) increase in cash, cash equivalents and restricted cash ( 192 ) 188 ( 30 )
+Added: Net cash used in financing activities ( 715 ) ( 865 ) ( 113 )
+Added: Effect of foreign exchange rate changes on cash and cash equivalents 6 ( 6 ) ( 2 )
+Added: Net increase (decrease) in cash, cash equivalents and restricted cash 245 ( 192 ) 188
Cash, cash equivalents and restricted cash at beginning of year 683 875 687
7 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
15 unchanged sentences
("Leidos"), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc.
−Removed: 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.
+Added: Leidos, recognized as a member of the Fortune 500®, is a dynamic innovation company that is at the forefront of addressing the world’s most challenging issues in national security and health sectors.
+Added: With a global workforce of approximately 47,000 , Leidos is committed to developing smarter technology solutions, particularly for customers in highly regulated industries.
Leidos' customers include the U.S.
5 unchanged sentences
and its consolidated subsidiaries.
−Removed: We operate in three reportable segments:
+Added: Our business has been aligned into three reportable segments:
Defense Solutions, Civil and Health.
7 unchanged sentences
Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.
−Removed: Effective July 3, 2021, certain contracts were reassigned from the Defense Solutions reportable segment to the Civil reportable segment.
−Removed: Impact on prior year segment results were determined to be immaterial and have not been recast to reflect this change.
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
−Removed: We combined "Capital distributions to non-controlling interests" and "Capital contributions from non-controlling interests" into "Net capital (distributions to) contributions from non-controlling interests", "Collections on promissory notes" and "Bad debt expense and recoveries" into "Other" on the consolidated statements of cash flows.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 66
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: We combined "Credit losses (recoveries), net" into "Selling, general and administrative expenses" on the consolidated statements of operations.
+Added: We have certain entities where the functional currency is not the U.S.
+Added: dollar and have separately presented the effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies as a separate line in the consolidated statements of cash flows.
Note 2—Accounting Standards
Accounting Standards Updates Adopted
−Removed: ASU 2021-08, Business Combinations (Topic 805)
−Removed: In October 2021, the FASB issued ASU 2021-08, which amends how contract assets and liabilities acquired in a business combination are measured.
−Removed: Current guidance requires contract assets and liabilities to be measured at fair value in accordance with ASC 805, Business Combinations.
−Removed: The amendments in this Update remove the requirement to measure contract assets and liabilities at fair value and instead require that they be recognized in accordance with ASC 606, Revenue from Contracts with Customers.
−Removed: We adopted the requirements of ASU 2021-08 using the prospective method effective the first day of fiscal 2022.
−Removed: For business combinations occurring after adoption, we measured contract assets and liabilities acquired in accordance ASC 606.
−Removed: Accounting Standards Updates Issued But Not Yet Adopted
−Removed: ASU 2020-04, ASU 2021-01, and ASU 2022-06 Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, which provides companies with optional expedients and exceptions to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.
+Added: Accounting Standards Updates ("ASU") 2020-04, ASU 2021-01, and ASU 2022-06 Reference Rate Reform
+Added: In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, which provides companies with optional expedients and exceptions to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.
This update provides optional expedients for applying accounting guidance to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of the reference rate reform.
3 unchanged sentences
update are elective and provide optional relief for entities with hedge accounting and contract modifications affected
−Removed: by the discounting transition through December 31, 2022.
−Removed: In December 2022, the FASB issued ASU 2022-06 which extends the deadline for application of ASU 2021-01 through December 31, 2024.
+Added: by the transition from LIBOR through December 31, 2022.
+Added: In December 2022, the FASB issued ASU 2022-06 which extend the deadline for application of ASU 2021-01 through December 31, 2024.
Under this relief, entities may continue to account for contract modifications as a continuation of the existing contract and the continuation of the hedge accounting arrangement.
−Removed: We are currently evaluating the impacts of the reference rate reform.
−Removed: Except for our new $ 380 million term loan entered into on May 6, 2022 (see "Note 13—Debt"), we currently use the one-month LIBOR for which the rate publication will cease in June 2023.
+Added: In the first half of fiscal 2023, we adopted certain practical expedients available under Accounting Standards Codification ("ASC") 848.
+Added: Our term loans are based on a Secured Overnight Financing Rate (“SOFR”) rate (see "Note 13—Debt").
+Added: In fiscal 2023, we modified our interest rate swap agreements to reference SOFR (see "Note 12—Derivative Instruments") in conformity with the relief available under ASC 848.
+Added: The standard did not have a material impact on our financial position, results of operations or earnings per share.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 74
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Accounting Standards Updates Issued But Not Yet Adopted
+Added: ASU 2023-07 Segment Reporting
+Added: In November 2023, the FASB issued ASU 2023-07, to improve reportable segment disclosure requirements.
+Added: This update requires companies to disclose significant segment expense categories that are regularly provided to the chief operating decision maker ("CODM") on an interim and annual basis and disclosures about a reportable segment’s profit or loss and assets that are currently required annually on an interim basis.
+Added: Companies must also disclose how segment measures of profit or loss are used by the CODM.
+Added: The amendments in this update are effective for public entities as of November 2023 and should be adopted retrospectively for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024.
+Added: We are evaluating the impact of the update and plan to adopt the amendments for annual disclosures in fiscal 2024.
+Added: ASU 2023-09 Income Taxes
+Added: In December 2023, the FASB issued ASU 2023-09, to enhance the transparency and usefulness of income tax disclosures.
+Added: The update requires enhancements to the annual rate reconciliation, including disclosure of specific categories and additional information for reconciling items meeting a quantitative threshold.
+Added: The update also requires disclosure of income taxes paid disaggregated by federal, state and foreign taxes, and individual jurisdictions meeting a quantitative threshold.
+Added: The amendments in this update are effective for public business entities for annual periods beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis.
+Added: Early adoption is permitted.
+Added: We are currently evaluating the impacts of this update and plan to adopt these amendments using the prospective approach for annual disclosures in fiscal year 2025.
Note 3—Summary of Significant Accounting Policies
1 unchanged sentence
Leidos' fiscal year ends on the Friday nearest the end of December.
−Removed: Fiscal 2022 ended December 30, 2022.
−Removed: Fiscal 2022, 2021 and 2020 each included 52 weeks.
+Added: Fiscal 2023 ended December 29, 2023, fiscal 2022 ended December 30, 2022, and fiscal 2021 ended December 31, 2021.
+Added: Each fiscal year included 52 weeks.
Use of Estimates
5 unchanged sentences
Our operating cycle for long-term contracts may be greater than one year and is measured by the average time intervening between the inception and the completion of those contracts.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 67
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Business Combinations, Investments and Variable Interest Entities
3 unchanged sentences
Estimating the fair value of acquired assets and assumed liabilities, including intangibles, requires judgments about expected future cash flows, weighted-average cost of capital, discount rates and expected long-term growth rates.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 75
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investments in entities and corporate joint ventures where we have a non-controlling ownership interest but over which we have the ability to exercise significant influence, are accounted for under the equity method of accounting.
9 unchanged sentences
Restructuring expenses are incurred in connection with programs aimed at reducing our costs.
−Removed: Restructuring costs may include one-time termination of benefits, costs to terminate contracts and other permanent exit costs to consolidate or close facilities directly related to the restructuring program.
−Removed: One-time involuntary termination benefits are recognized as a liability at estimated fair value when the plan of termination has been communicated to employees and certain other criteria are met.
−Removed: Ongoing termination benefit arrangements are recognized as a liability at estimated fair value when it is probable that amounts will be paid and such amounts are reasonably estimable.
−Removed: Costs associated with exit or disposal activities, including the related one-time and ongoing involuntary termination benefits, are included as "Acquisition, integration and restructuring costs" on the consolidated statements of income.
+Added: Restructuring costs may include employee severance benefits, costs to terminate contracts and other permanent exit costs to consolidate or close facilities directly related to the restructuring program.
+Added: One-time involuntary termination benefits with a required service period of less than 60 days are recognized when the benefits have been communicated to employees and one-time termination benefits with a required service period in excess of 60 days are recognized over the requisite period.
+Added: Ongoing termination benefit arrangements are recognized at estimated fair value when it is probable that they will be incurred and are reasonably estimable.
+Added: Costs associated with exit or disposal activities, including the related one-time and ongoing involuntary termination benefits, are included as "Acquisition, integration and restructuring costs" on the consolidated statements of operations.
Revenue Recognition
3 unchanged sentences
We perform under various types of contracts, which include firm-fixed-price ("FFP"), time-and-materials ("T&M"), fixed-price-level-of-effort ("FP-LOE"), cost-plus-fixed-fee ("CPFF"), cost-plus-award-fee, cost-plus-incentive-fee and fixed-price-incentive-fee ("FP-IF") contracts.
+Added: To determine the proper revenue recognition, we first evaluate whether we have a duly approved and enforceable contract with a customer, in which the rights of the parties and payment terms are identified, and collectability is probable.
+Added: We also evaluate whether two or more contracts should be combined and accounted for as a single contract, including the task orders issued under an indefinite delivery/indefinite quantity ("IDIQ") award.
+Added: In addition, we assess contract modifications to determine whether changes to existing contracts should be accounted for as part of the original performance obligation or as a separate performance obligation.
+Added: Contract modifications generally relate to changes in contract specifications and requirements and do not add distinct services, and therefore are accounted for as part of the original performance obligation.
+Added: If contract modifications add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price, those modifications are accounted for as separate contracts.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: To determine the proper revenue recognition, we first evaluate whether we have a duly approved and enforceable contract with a customer, in which the rights of the parties and payment terms are identified, and collectability is probable.
−Removed: We also evaluate whether two or more contracts should be combined and accounted for as a single contract, including the task orders issued under an indefinite delivery/indefinite quantity ("IDIQ") award.
−Removed: In addition, we assess contract modifications to determine whether changes to existing contracts should be accounted for as part of the original contract or as a separate contract.
−Removed: Contract modifications generally relate to changes in contract specifications and requirements and do not add distinct services, and therefore are accounted for as part of the original contract.
−Removed: If contract modifications add distinct goods or services and increase the contract value by an amount that reflects the standalone selling price, those modifications are accounted for as separate contracts.
−Removed: Most of our contracts are comprised of multiple promises including the design and build of software-based systems, integration of hardware and software solutions, running and maintaining of IT infrastructure and procurement services.
+Added: Most of our contracts contain multiple promises including the design and build of software-based systems, integration of hardware and software solutions, running and maintaining of IT infrastructure and procurement services.
In all cases, we assess if the multiple promises should be accounted for as separate performance obligations or combined into a single performance obligation.
3 unchanged sentences
government often contain options to renew existing contracts for an additional period of time (generally a year at a time) under the same terms and conditions as the original contract, and generally do not provide the customer any material rights under the contract.
−Removed: We account for renewal options as separate contracts when they include distinct goods or services at standalone selling prices.
+Added: We account for renewal options as separate performance obligations when they include distinct goods or services at standalone selling prices.
+Added: Certain cost-plus and fixed-price contracts contain award fees, incentive fees or other provisions that may either increase or decrease the transaction price.
+Added: These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion.
+Added: We estimate variable consideration at the most probable amount that we expect to be entitled to, based on the assessment of the contractual variable fee criteria, complexity of work and related risks, extent of customer discretion, amount of variable consideration received historically and the potential of significant reversal of revenue.
Contracts with the U.S.
5 unchanged sentences
government agencies and commercial customers is based on specific negotiations with each customer.
−Removed: In circumstances where the standalone selling price is not directly observable, we estimate the standalone selling price using the expected cost-plus margin approach.
−Removed: Any taxes collected or imposed when determining the transaction price are excluded.
−Removed: Certain cost-plus and fixed-price contracts contain award fees, incentive fees or other provisions that may either increase or decrease the transaction price.
−Removed: These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion.
−Removed: We estimate variable consideration at the most probable amount that we expect to be entitled to, based on the assessment of the contractual variable fee criteria, complexity of work and related risks, extent of customer discretion, amount of variable consideration received historically and the potential of significant reversal of revenue.
−Removed: We allocate the transaction price of a contract to its performance obligations in the proportion of its respective standalone selling prices.
−Removed: The standalone selling price of the performance obligations is generally based on an expected cost-plus margin approach, in accordance with the FAR.
+Added: We allocate the transaction price of a contract to its performance obligations based on their respective standalone selling prices.
+Added: The performance obligation's standalone selling price is generally based on an expected cost-plus margin approach.
For certain product sales, prices from other standalone sales are used.
Substantially all of our contracts do not contain a significant financing component, which would require an adjustment to the transaction price of the contract.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 69
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: We recognize revenue on our service-based contracts primarily over time as there is continuous transfer of control to the customer over the duration of the contract as the promised services are performed.
+Added: Any taxes collected or imposed when determining the transaction price are excluded.
+Added: We recognize revenue on our service-based contracts primarily over time as there is continuous transfer of control to the customer over the duration of the performance period as the work is performed.
government contracts, continuous transfer of control to the customer is evidenced by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay for costs incurred plus a reasonable profit and take control of any work-in-process.
1 unchanged sentence
government contracts, the customer typically controls the work-in-process as evidenced by rights to payment for work performed to date plus a reasonable profit to deliver products or services for which we do not have an alternate use.
−Removed: Anticipated losses on service-based contracts are recognized when incurred (generally on a straight-line basis) over the contract term.
+Added: Anticipated losses on service-based revenue contracts are recognized when incurred over the contract term while the full amount of anticipated losses on other contracts are recognized during the period in which the losses are determined.
In certain product sales, where the products have an alternate use, revenue is recognized at a point in time when the customer takes control of the asset usually denoted by possession, transfer of legal title and acceptance by the customer.
−Removed: On FFP contracts requiring system integration and cost-plus contracts with variable consideration, revenue is recognized over time generally using a method that measures the extent of progress towards completion of a performance obligation, principally using a cost-input method (referred to as the cost-to-cost method).
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 77
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: On performance obligations that require system integration and capability development efforts or contain variable consideration, revenue is recognized over time generally using a method that measures the extent of progress towards completion of a performance obligation, principally using a cost-input method (referred to as the cost-to-cost method).
Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion ("EAC").
1 unchanged sentence
In addition, an EAC of a performance obligation includes future losses estimated to be incurred on onerous contracts, as and when known.
−Removed: On certain other contracts, principally T&M, FP-LOE and CPFF, revenue is generally recognized using the right-to-invoice practical expedient as we are contractually able to invoice the customer based on the control transferred to the customer.
+Added: On certain other performance obligations, principally associated with T&M, FP-LOE and CPFF contracts, revenue is generally recognized using the right-to-invoice practical expedient as we are contractually able to invoice the customer based on the control transferred to the customer.
Additionally, on maintenance (generally FFP) performance obligations, revenue is recognized over time using a straight-line method as the control of the services is provided to the customer evenly over the period of performance.
6 unchanged sentences
Pre-contract Costs
−Removed: Costs incurred on projects as pre-contract costs are deferred as assets when we have been requested by the customer to begin work under a new arrangement prior to contract execution and it is probable that we will recover the costs through the issuance of a contract.
−Removed: Pre-contract costs are amortized over the contract period of performance or a specified period of performance.
+Added: Certain eligible costs incurred prior to the start of a project are deferred as assets when we are required to incur costs prior to contract execution in order to be able to perform on the contract and it is probable that we will recover the costs when the contract is issued.
+Added: Pre-contract costs are amortized over the requisite service period for which the cost relates.
Transition Costs
−Removed: Under certain service contracts, costs are incurred, usually at the beginning of the contract performance, to transition the services, employees and equipment to or from the customer, a prior contract or prior contractor.
+Added: Under certain service contracts, costs are incurred at the beginning of the contract to transition services, employees, and equipment to or from the customer or from a prior contractor.
These costs are generally capitalized as deferred assets and amortized on a straight-line basis over the anticipated term of the contract or a specified period of performance, including unexercised option periods that are reasonably certain of being exercised.
+Added: Project Assets
+Added: Purchases of assets used to fulfill a specific contract with a customer that do not constitute other specific asset classes are capitalized as project assets when the costs are generally expected to be recovered, we maintain ownership of the asset and the benefit is received over a period of time.
+Added: Project assets include prepaid services and maintenance agreements, certain material purchases and other costs incurred on contracts.
+Added: Project assets are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the expected contract period of performance.
+Added: Changes in Estimates on Contracts
+Added: Changes in estimates related to contracts accounted for using the cost-to-cost method of accounting are recognized in the period in which such changes are made for the inception-to-date effect of the changes, with the exception of contracts acquired through a business combination, where the adjustment is made for the period commencing from the date of acquisition.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Project Assets
−Removed: Purchases of project assets are capitalized for specific contracts where we maintain ownership of the asset over the life of the contract and the benefit is received over a period of time.
−Removed: Project assets include enterprise software licenses, dedicated hardware, maintenance agreements and significant material purchases and other costs incurred on contracts.
−Removed: Project assets are amortized from the balance sheet using the straight-line method over the estimated useful life of the asset or over the expected term of the period of performance, whichever is shorter.
−Removed: Changes in Estimates on Contracts
−Removed: Changes in estimates related to contracts accounted for using the cost-to-cost method of accounting are recognized in the period in which such changes are made for the inception-to-date effect of the changes, with the exception of contracts acquired through a business combination, where the adjustment is made for the period commencing from the date of acquisition.
Changes in estimates on contracts for the periods presented were as follows:
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions, except for per share amounts)
22 unchanged sentences
Under this method, changes in tax rates and laws are recognized in income in the period such changes are enacted.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 71
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized.
3 unchanged sentences
Such provision differs from the amounts currently payable because certain items of income and expense are recognized in different reporting periods for financial reporting purposes than for income tax purposes.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 79
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We record liabilities for uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
6 unchanged sentences
We have restricted cash balances, primarily representing advances from customers that are restricted as to use for certain expenditures related to that customer's contract.
−Removed: Restricted cash balances are included as "Other current assets" on the consolidated balance sheets.
+Added: Restricted cash balances are included within "Other current assets" on the consolidated balance sheets.
Our restricted cash balances were $ 151 million and $ 167 million at December 29, 2023, and December 30, 2022, respectively.
Receivables include amounts billed and currently due from customers, amounts billable where the right to consideration is unconditional and amounts unbilled.
−Removed: Amounts billable and unbilled amounts are recognized at estimated realizable value and consist of costs and fees, substantially all of which are expected to be billed and collected generally within one year.
+Added: Billable and unbilled amounts are recognized at estimated realizable value and consist of costs and fees, most of which are expected to be billed and collected generally within one year.
Unbilled amounts also include rate variances that are billable upon negotiation of final indirect rates with the Defense Contract Management Agency.
2 unchanged sentences
On certain contracts, the customer withholds a certain percentage of the contract price (retainage).
−Removed: These withheld amounts are included within unbilled receivables and are billed upon contract completion or the occurrence of a specified event, and when negotiation of final indirect rates with the U.S.
−Removed: government is complete.
+Added: These withheld amounts are included within unbilled receivables and are billed upon contract completion or the occurrence of a specified event, typically after negotiation of final indirect rates with the U.S.
Based on our historical experience, the write-offs of retention balances have not been significant.
When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.
+Added: This estimate is based on the age of outstanding receivables or specific identification of balances at risk of becoming uncollectible.
Amounts billed and collected on contracts but not yet recorded as revenue because we have not performed our obligation under the arrangement with a customer are deferred and included within "Accounts payable and accrued liabilities" or "Other long-term liabilities" on the consolidated balance sheets.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 72
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
1 unchanged sentence
Since our receivables are primarily with the U.S.
−Removed: government, we do not have exposure to a material credit risk.
+Added: government, we do not have exposure to material credit risk.
We manage our credit risk related to derivatives through the use of multiple counterparties with high credit standards.
Inventories are valued at the lower of cost or estimated net realizable value.
−Removed: Generally, raw material inventory is valued using the average cost method.
+Added: Generally, raw material inventory is valued using the moving average cost method.
Work-in-process inventory may include material costs, labor and allocable overhead costs.
1 unchanged sentence
Inventory is evaluated against historical or planned usage to determine appropriate provisions for obsolete inventory.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 80
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
−Removed: Goodwill is not amortized, but instead is tested annually for impairment at the reporting unit level and tested more frequently if events or circumstances indicate that the carrying value of the reporting unit may not be recoverable.
+Added: Goodwill is not amortized, but is tested for impairment at the reporting unit level on an annual basis and more frequently if events or circumstances indicate that the carrying value of the reporting unit may not be recoverable.
Our policy is to perform our annual goodwill impairment evaluation as of the first day of the fourth quarter of our fiscal year.
1 unchanged sentence
Goodwill is evaluated for impairment either under a qualitative assessment option or a quantitative approach, which depends on the facts and circumstances of a reporting unit, consideration of the excess of a reporting unit's fair value over its carrying amount in previous assessments and changes in business environment.
−Removed: When performing a qualitative assessment, we consider factors including, but not limited to, current macroeconomic conditions, industry and market conditions, cost factors, financial performance and other events relevant to the entity or reporting unit under evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
+Added: When performing a qualitative assessment, we consider factors including, but not limited to, current macroeconomic conditions, industry and market conditions, cost factors, financial performance and other relevant events to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.
If we determine that it is more likely than not that a reporting unit's fair value is less than its carrying value, a quantitative goodwill impairment test is performed.
2 unchanged sentences
We estimate the fair value of each reporting unit using Level 3 inputs when a quantitative analysis is performed.
−Removed: These analyses rely on significant judgements and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, operating margins and on the selection of guideline public companies.
+Added: These analyses rely on significant judgments and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, operating margins and on the selection of guideline public companies.
Intangible Assets
3 unchanged sentences
Customer relationships and software and technology intangible assets are amortized either on a straight-line basis over their estimated useful lives or over their respective estimated useful lives in proportion to the pattern of economic benefit based on expected future discounted cash flows, as deemed appropriate.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 73
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets with finite lives are amortized over the following periods:
9 unchanged sentences
Maintenance, repairs and minor renewals and improvements are expensed as incurred.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 81
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Construction-in-progress ("CIP") is used to accumulate all costs for projects that are not yet complete.
CIP balances are transferred to the appropriate asset account when the asset is capitalized and ready for its intended use.
−Removed: When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized.
+Added: When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is recognized.
Depreciation is recognized using the methods and estimated useful lives as follows:
13 unchanged sentences
therefore, the discount rate used is our incremental borrowing rate which is determined based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.
−Removed: An ROU asset is initially measured by the present value of the remaining lease payments, plus initial direct costs and prepaid lease payments, less any lease incentives received before commencement.
+Added: A ROU asset is initially measured by the present value of the remaining lease payments, plus initial direct costs and prepaid lease payments, less any lease incentives received before commencement.
The remaining lease cost is allocated over the remaining lease term on a straight-line basis unless another systematic or rational basis is more representative of the pattern in which the underlying asset is expected to be used.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 74
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain facility leases contain options to renew or extend the terms of the lease which are included in the determination of the ROU assets and lease liabilities when it is reasonably certain that we will exercise the option.
1 unchanged sentence
Variable lease payments that depend on an index or a rate are included in the determination of ROU assets and lease liabilities using the index or rate at the lease commencement date, whereas variable lease payments that do not depend on an index or rate are recorded as lease expense in the period incurred.
−Removed: At December 30, 2022, certain of the Company's equipment leases includ e residual value guarantees.
+Added: At December 29, 2023, certain of the Company's equipment leases include residual value guarantees.
We use the practical expedient to not separate non-lease components from lease components and instead account for both components as a single lease.
The practical expedient is applied to all material classes of leased assets except for aircraft, for which we account for the lease component and non-lease component separately.
−Removed: The related lease payments on short-term facilities and equipment leases are recognized as expense on a straight-line basis over the lease term.
+Added: The related lease payments on short-term facility and equipment leases are recognized as expense on a straight-line basis over the lease term.
ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets.
1 unchanged sentence
This includes an establishment of a plan of abandonment, which occurs when we have committed to a plan to abandon the lease before the end of its previously estimated useful life and there is no expectation that we will re-enter or re-purpose the space.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 82
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We are a lessor on certain equipment sales-type and operating lease arrangements with our customers.
17 unchanged sentences
The fair value of financial instruments is determined based on quoted market prices, if available, or management's best estimate (see "Financial Instruments" below).
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 75
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Management evaluates its investments for other-than-temporary impairment at each balance sheet date.
−Removed: When testing long-term investments for recovery of carrying value, the fair value of long-term investments is determined using various valuation techniques and factors, such as market prices of comparable companies (Level 2 input), discounted cash flow models (Level 3 input).
+Added: Management evaluates its investments for impairment at each balance sheet date.
+Added: When testing long-term investments for recovery of carrying value, the fair value of long-term investments is determined using various valuation techniques and factors, such as market prices of comparable companies (Level 2 input) and discounted cash flow models (Level 3 input).
If management determines that an other-than-temporary decline in the fair value of an investment has occurred, an impairment loss is recognized to reduce the investment to its estimated fair value.
6 unchanged sentences
We manage our risk to changes in interest rates and foreign currency exchange rates through the use of derivative instruments.
−Removed: For fixed rate borrowings, we use variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings.
−Removed: These swaps are designated as fair value hedges.
−Removed: The fair value of these interest rate swaps is determined based on observed values for underlying interest rates on the LIBOR yield curve (Level 2).
For variable rate borrowings, we use fixed interest rate swaps, effectively converting a portion of the variable interest rate payments to fixed interest rate payments.
1 unchanged sentence
The fair value of these interest rate swaps is determined based on observed values for the underlying interest rates (Level 2).
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 83
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We enter into foreign currency forward contracts in order to mitigate fluctuations in our earnings and cash flows due to changes in foreign currency exchange rates.
4 unchanged sentences
We account for stock-based compensation at the grant date based on the fair value of the award and recognize expense over the requisite service period, which is generally the vesting period, net of an estimated forfeiture rate.
−Removed: The fair value of restricted stock awards and performance-based stock awards is based on the closing price of Leidos common stock on the date of grant.
+Added: The fair value of restricted stock awards and performance-based stock awards is based on the closing price of Leidos common stock on the last business day prior to the grant date.
The fair value of performance-based stock awards with market conditions is based on using a Monte Carlo simulation.
7 unchanged sentences
Translation adjustments are recorded as accumulated other comprehensive loss in stockholders' equity.
−Removed: Gains and losses due to movements in foreign currency exchange rates are recognized as "Other expense, net" on the consolidated statements of income.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 76
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Gains and losses due to movements in foreign currency exchange rates are recognized as "Other expense, net" on the consolidated statements of operations.
Note 4—Revenues
17 unchanged sentences
Total $ 8,728 $ 3,571 $ 3,040 $ 15,339
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 84
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 30, 2022
8 unchanged sentences
Total $ 8,242 $ 3,362 $ 2,683 $ 14,287
−Removed: Year Ended January 1, 2021
+Added: Year Ended December 31, 2021
Defense Solutions Civil Health Total
13 unchanged sentences
government, as well as delays in program start dates or the award of a contract.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 77
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Disaggregated revenues by contract-type were as follows:
19 unchanged sentences
Total $ 8,242 $ 3,362 $ 2,683 $ 14,287
−Removed: Year Ended January 1, 2021
+Added: Year Ended December 31, 2021
Defense Solutions Civil Health Total
7 unchanged sentences
Total $ 8,029 $ 3,044 $ 2,544 $ 13,617
−Removed: Cost-reimbursement and FP-IF contracts are generally lower risk and have lower profits.
−Removed: T&M and FP-LOE contracts are also lower risk, but profits may vary depending on actual labor costs compared to negotiated contract billing rates.
−Removed: FFP contracts offer the potential for higher profits while increasing the exposure to risk of cost overruns.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Cost-reimbursement and FP-IF contracts are generally lower risk and have lower profits.
+Added: T&M and FP-LOE contracts are also lower risk, but profits may vary depending on actual labor costs compared to negotiated contract billing rates.
+Added: FFP contracts offer the potential for higher profits while increasing the exposure to risk of cost overruns.
Disaggregated revenues by geographic location were as follows:
15 unchanged sentences
Total $ 8,242 $ 3,362 $ 2,683 $ 14,287
−Removed: Year Ended January 1, 2021
+Added: Year Ended December 31, 2021
Defense Solutions Civil Health Total
16 unchanged sentences
As a result, the timing of revenue recognition, customer billings and cash collections for each contract results in a net contract asset or liability at the end of each reporting period.
−Removed: Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer, where right to payment is not solely subject to the passage of time.
−Removed: Unbilled receivables exclude amounts billable where the right to consideration is unconditional.
+Added: Contract assets consist of unbilled receivables, which is the amount of revenue recognized that exceeds the amount billed to the customer.
+Added: Unbilled receivables exclude amounts billable where the right to consideration is solely subject to the passage of time.
Contract liabilities consist of deferred revenue, which represents cash advances received prior to performance for programs and billings in excess of revenue recognized.
16 unchanged sentences
(1) Certain contracts record revenue on a net contract basis, and therefore, the respective deferred revenue balance will not fully convert to revenue.
−Removed: Revenue recognized during fiscal 2022 and 2021 of $ 270 million and $ 340 million, respectively, was included as a contract liability at December 31, 2021, and January 1, 2021, respectively.
+Added: The increase in deferred revenue was primarily due to the timing of advanced payments from customers, offset by revenue recognized during the period.
+Added: Revenue recognized during fiscal 2023 and 2022 of $ 232 million and $ 270 million, respectively, was included as a contract liability at December 30, 2022, and December 31, 2021, respectively.
There were no impairment losses recognized on contract assets during fiscal 2023, 2022 and 2021.
3 unchanged sentences
During fiscal 2021, we completed the acquisitions of Gibbs & Cox, 1901 Group, LLC ("1901 Group") and an immaterial strategic acquisition.
−Removed: During fiscal 2020, we completed the acquisitions of L3Harris Technologies' security detection and automation businesses (the "SD&A Businesses") and Dynetics, Inc.
−Removed: ("Dynetics").
Cobham Special Mission Acquisition
−Removed: On October 30, 2022 (the "Agreement Date"), we completed the acquisition of Cobham Special Mission for a preliminary purchase consideration of $ 295 million Australian dollars, net of $ 10 million of Australian dollars acquired, approximately $ 190 million United States dollars, net of $ 6 million of cash acquired, which is subject to working capital adjustments.
+Added: On October 30, 2022 (the "Agreement Date"), we completed the acquisition of Cobham Special Mission for purchase consideration of $ 298 million Australian dollars, net of $ 10 million of Australian dollars acquired, or $ 192 million United States dollars, net of $ 6 million of cash acquired.
Cobham Special Mission provides airborne border surveillance and search and rescue services to the Australian Federal Government.
−Removed: The preliminary goodwill recognized of $ 26 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset.
+Added: In the third quarter of fiscal 2023, we completed the determination of fair values of the assets acquired and liabilities assumed.
+Added: The final goodwill recognized of $ 22 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset.
None of the goodwill recognized is tax deductible.
−Removed: In connection with this acquisition, we acquired preliminary fair value of property, plant and equipment of $ 147 million at the Agreement Date.
−Removed: The following table summarizes the preliminary fair value of intangible assets acquired at the Agreement Date and the related weighted average amortization period:
+Added: In connection with this acquisition, we acquired property, plant and equipment with a fair value of $ 148 million at the Agreement Date.
+Added: The following table summarizes the fair value of intangible assets acquired at the Agreement Date and the related weighted average amortization period:
Weighted average amortization period Fair value
2 unchanged sentences
Technology 10 5
+Added: Total 11 $ 24
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: As of December 30, 2022, we had not finalized the determination of fair values allocated to assets and liabilities, including, but not limited to, property, plant and equipment, intangible assets, accounts receivables, accounts payable and accrued liabilities and other long-term liabilities.
−Removed: For fiscal 2022, $ 21 million of revenues related to the Cobham Special Mission acquisition were recognized within the Defense Solutions reportable segmen t.
+Added: For fiscal 2023 and 2022, $ 115 million and $ 21 million, respectively, of revenues related to the Cobham Special Mission acquisition were recognized within the Defense Solutions reportable segmen t.
Gibbs & Cox Acquisition
7 unchanged sentences
Programs 12 $ 89
−Removed: For fiscal 2022 and fiscal 2021, $ 114 million and $ 98 million, respectively, of revenues related to the Gibbs & Cox acquisition were recognized within the Defense Solutions reportable segment .
+Added: For fiscal 2023, 2022 and 2021, $ 129 million, $ 114 million and $ 98 million, respectively, of revenues related to the Gibbs & Cox acquisition were recognized within the Defense Solutions reportable segment .
1901 Group Acquisition
On January 14, 2021 (the "Closing Date"), we completed the acquisition of 1901 Group for purchase consideration of $ 212 million, net of $ 2 million of cash acquired.
−Removed: As of December 31, 2021, we had completed the determination of fair values of the acquired assets and liabilities assumed.
The final goodwill recognized of $ 123 million represents intellectual capital and the acquired assembled workforce, none of which qualify for recognition as separate intangible assets.
5 unchanged sentences
Programs 10 37
−Removed: For fiscal 2022 and fiscal 2021, $ 40 million and $ 47 million, respectively, of revenues related to the 1901 Group acquisition were recognized within the Defense Solutions reportable segmen t.
+Added: For fiscal 2023, 2022 and 2021, $ 46 million, $ 40 million and $ 47 million, respectively, of revenues related to the 1901 Group acquisition were recognized within the Defense Solutions reportable segmen t.
Strategic Business Acquisition
5 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: SD&A Businesses Acquisition
−Removed: On May 4, 2020 (the "Transaction Date"), we completed the acquisition of the SD&A Businesses.
−Removed: The SD&A Businesses were acquired for cash consideration of $ 1,019 million, net of $ 27 million of cash acquired.
−Removed: The purchase consideration includes the initial cash payment of $ 1,015 million plus a $ 31 million payment for contractual net working capital acquired.
−Removed: The SD&A Businesses provide airport and critical infrastructure screening products, automated tray return systems and other industrial automation products.
−Removed: The addition of the SD&A Businesses will expand the scope and scale of our global security detection and automation offerings.
−Removed: The final fair values of the assets acquired and liabilities assumed at the Transaction Date were as follows (in millions):
−Removed: Current assets $ 287
−Removed: Intangible assets 355
−Removed: Other assets 67
−Removed: Current liabilities ( 140 )
−Removed: Long-term liabilities ( 97 )
−Removed: Total identifiable net assets acquired 472
−Removed: Purchase price $ 1,046
−Removed: As of May 4, 2021, we had completed the determination of fair values of the acquired assets and liabilities assumed.
−Removed: The goodwill represents intellectual capital and the acquired assembled workforce.
−Removed: Of the goodwill recognized, $ 432 million is deductible for tax purposes.
−Removed: The following table summarizes the final fair value of intangible assets acquired at the Transaction Date and the related weighted average amortization period:
−Removed: Weighted average amortization period Fair value
−Removed: (in years) (in millions)
−Removed: Programs 13 $ 141
−Removed: Customer relationships 10 49
−Removed: Technology 10 73
−Removed: In-process research and development ("IPR&D") (1)
−Removed: Total 11 $ 355
−Removed: (1) IPR&D assets are indefinite-lived at the acquisition date until placed into service, at which time such assets will be reclassified to a finite-lived amortizable intangible asset.
−Removed: For fiscal 2022, fiscal 2021 and fiscal 2020, $ 330 million, $ 291 million and $ 243 million, respectively, of revenues related to the SD&A Businesses were recognized within the Civil reportable segment.
−Removed: Dynetics Acquisition
−Removed: On January 31, 2020 (the "Acquisition Date"), we completed our acquisition of Dynetics, an industry-leading applied research and national security solutions company.
−Removed: The addition of Dynetics will accelerate opportunities within our innovation engine that researches and develops new technologies and solutions to address the most challenging needs of our customers.
−Removed: All of the issued and outstanding shares of common stock of Dynetics were purchased for $ 1.64 billion, net of cash acquired.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 82
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The final fair values of the assets acquired and liabilities assumed at the Acquisition Date were as follows (in millions):
−Removed: Current assets $ 241
−Removed: Intangible assets 528
−Removed: Other assets 205
−Removed: Current liabilities ( 79 )
−Removed: Long-term liabilities ( 24 )
−Removed: Total identifiable net assets acquired 871
−Removed: Purchase price $ 1,660
−Removed: As of January 31, 2021, we had completed the determination of fair values of the acquired assets and liabilities assumed.
−Removed: The goodwill represents intellectual capital and the acquired assembled workforce.
−Removed: All of the goodwill recognized is deductible for tax purposes.
−Removed: The following table summarizes the final fair value of intangible assets acquired at the Acquisition Date and the related weighted average amortization period:
−Removed: Weighted average amortization period Fair value
−Removed: (in years) (in millions)
−Removed: Programs 13 $ 485
−Removed: Technology 11 11
−Removed: Total 12 $ 528
−Removed: For fiscal 2022, fiscal 2021 and fiscal 2020, $ 950 million, $ 1,065 million and $ 937 million, respectively, of revenues related to Dynetics were recognized within the Defense Solutions reportable segment.
Acquisition and Integration Costs
−Removed: The following expenses were incurred related to the acquisitions of Dynetics, the SD&A Businesses, 1901 Group, Gibbs & Cox, Cobham Special Mission and our strategic business acquisition:
+Added: The following expenses were incurred related to the Company's acquisitions:
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
2 unchanged sentences
Total acquisition and integration costs $ 19 $ 16 $ 24
−Removed: These acquisition and integration costs have been primarily recorded within Corporate and presented in "Acquisition, integration and restructuring costs" on the consolidated statement of income.
+Added: These acquisition and integration costs have been primarily recorded within Corporate and presented in "Acquisition, integration and restructuring costs" on the consolidated statement of operations.
+Added: Immaterial Divestiture
+Added: On October 20, 2023, we disposed of an immaterial business within our Defense Solutions reportable segment.
+Added: The preliminary sales price was approximately $ 2 million and net assets of $ 7 million were divested as a result of the transaction.
Aviation & Missile Solutions LLC ("AMS")
2 unchanged sentences
The net sales price was $ 15 million and net assets of $ 19 million were divested.
−Removed: The loss was recorded in "Other expense, net" on the consolidated statements of income.
+Added: The loss was recorded within "Other expense, net" on the consolidated statements of operations.
This disposition did not meet the criteria to be classified as a discontinued operation in the financial statements.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 83
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6—Receivables
9 unchanged sentences
The receivables sold are typically collectable from our customers within 30 days of the sale date.
−Removed: During fiscal 2022, 2021 and 2020, we sold $ 209 million, $ 693 million and $ 1,866 million, respectively, of accounts receivable under the agreements and received proceeds of $ 209 million, $ 693 million and $ 1,864 million, respectively.
+Added: During fiscal 2022 and 2021, we sold $ 209 million and $ 693 million, respectively, of accounts receivable under the agreements and received proceeds of $ 209 million and $ 693 million, respectively.
These activities are classified as operating activities in the consolidated statements of cash flows.
+Added: There were no sales of accounts receivable during fiscal 2023.
These transfers have been recognized as a sale, as the receivables had been legally isolated from Leidos, the financial institution had the right to pledge or exchange the assets received and we did not maintain effective control over the transferred accounts receivable.
As of December 30, 2022, and December 31, 2021, all sold receivables had been remitted to the financial institution.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 89
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7—Inventory
9 unchanged sentences
(in millions)
−Removed: Goodwill at January 1, 2021 (1)
+Added: Goodwill at December 31, 2021 (1)
$ 3,681 $ 2,097 $ 966 $ 6,744
1 unchanged sentence
Divestiture of a business ( 6 ) — — ( 6 )
−Removed: Goodwill re-allocation ( 17 ) 17 — —
Foreign currency translation adjustments ( 37 ) ( 31 ) — ( 68 )
1 unchanged sentence
3,664 2,066 966 6,696
−Removed: Acquisitions of businesses 26 — — 26
−Removed: Divestiture of a business ( 6 ) — — ( 6 )
+Added: Goodwill impairment — ( 596 ) — ( 596 )
+Added: Acquisitions of a business (2)
+Added: ( 4 ) — — ( 4 )
Foreign currency translation adjustments 9 7 — 16
2 unchanged sentences
(1) Carrying amount includes accumulated impairment losses of $ 369 million and $ 117 million within the Health and Civil segments, respectively.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 84
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: In the fourth quarter of fiscal 2022, we performed a qualitative analysis for certain reporting units which determined that it was more likely than not that the fair values of these reporting units were in excess of the individual reporting units' carrying values.
−Removed: We performed a quantitative analysis for certain reporting units and concluded that these reporting units were not impaired as their fair values exceeded their carrying values.
−Removed: The quantitative analysis for the Security Enterprise Solutions reporting unit, which holds goodwill of $ 899 million as of December 30, 2022, showed that fair value exceeded carrying value by 13 %.
−Removed: Operations of the reporting unit rely heavily on the sales and servicing of security and detection products, which have been negatively impacted by COVID-19.
−Removed: The forecasts utilized to estimate the fair value of the Security Enterprise Solutions reporting unit assume continued global operations in all of our existing markets and a gradual improvement in the global aviation security product and related service sales, reaching pre-COVID-19 levels by fiscal 2025.
−Removed: In the event that there are significant unfavorable changes to the forecasted cash flows of the reporting unit (including if the impact of COVID-19 on passenger travel levels is more prolonged or severe than what is incorporated into our forecast), terminal growth rates or the cost of capital used in the fair value estimates, we may be required to record a material impairment of goodwill or intangible assets at a future date.
+Added: (2) Adjustment to goodwill resulting from a measurement period purchase accounting adjustment.
+Added: (3) Carrying amount includes accumulated impairment losses of $ 369 million and $ 713 million within the Health and Civil segments, respectively.
+Added: Operations of the Security Enterprise Solutions (“SES”) reporting unit rely heavily on the sales and servicing of security and detection products, which continue to be negatively impacted due to delays in airline travel infrastructure projects as customer budgets recover from the pandemic.
+Added: During the third quarter of fiscal 2023, the SES reporting unit refined its portfolio and made strategic business decisions to exit certain product offerings, and cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.
+Added: These decisions, along with the delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.
+Added: As a result, in fiscal 2023, we conducted a quantitative goodwill impairment analysis and our estimates led us to determine that the carrying value of the SES reporting unit exceeded its estimated fair value (see “Note 11—Fair Value Measurements”).
+Added: Accordingly, we recognized a non-cash goodwill impairment charge of $ 596 million and had $ 308 million of goodwill remaining at the SES reporting unit as of December 29, 2023.
+Added: The impairment was recorded within the Civil reportable segment in the consolidated statements of operations.
In the fourth quarter of fiscal 2023, we performed a qualitative analysis for certain reporting units which determined that it was more likely than not that the fair values of these reporting units were in excess of the individual reporting units' carrying values.
−Removed: For reporting units whose composition was affected by a reorganization, or those for which an indication of impairment exists, a quantitative assessment was performed.
−Removed: The quantitative analysis for the Security Enterprise Solutions reporting unit within the Civil reportable segment, which holds goodwill in the amount of $ 926 million as of December 31, 2021, showed that the fair value of the reporting unit exceeded the carrying value.
−Removed: In the fourth quarter of fiscal 2020, we performed a qualitative analysis for all reporting units and determined that it was more likely than not that the fair values of the reporting units were in excess of the individual reporting units carrying values, and as a result, a quantitative step one analysis was not necessary.
−Removed: As a result, no goodwill impairments were identified as part of the annual goodwill impairment evaluation for the periods mentioned above.
+Added: We performed a second quantitative analysis for the SES reporting unit and concluded that no incremental impairment was necessary as the fair value of the reporting unit exceeded the carrying value as of the fourth quarter of fiscal 2023.
+Added: In the event that there are significant unfavorable changes to the forecasted cash flows, forecasted revenue, terminal growth rates or the cost of capital used in the fair value estimates, we may be required to record an additional impairment of goodwill at a future date.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: In the fourth quarter of fiscal 2022 and 2021, we performed a qualitative analysis for certain reporting units which determined that it was more likely than not that the fair values of these reporting units were in excess of the individual reporting units' carrying values.
+Added: We performed a quantitative analysis for certain reporting units and concluded that these reporting units were not impaired as their fair values exceeded their carrying values.
Intangible Assets
10 unchanged sentences
Customer relationships 52 ( 22 ) 30 87 ( 25 ) 62
−Removed: Backlog — — — 38 ( 37 ) 1
Trade names — — — 1 ( 1 ) —
6 unchanged sentences
Total intangible assets $ 2,008 $ ( 1,341 ) $ 667 $ 2,130 $ ( 1,178 ) $ 952
−Removed: (1) IPR&D assets are indefinite-lived at the acquisition date until placed into service, at which time such assets will be reclassified to a finite-lived amortizable intangible asset.
+Added: (1) IPR&D intangible assets are indefinite-lived at the acquisition date until placed into service, at which time such assets will be reclassified to a finite-lived amortizable intangible asset.
+Added: During fiscal 2023, $ 59 million was placed into service and reclassified to software and technology intangible assets.
+Added: Our strategic decisions regarding SES’ product offerings and operating regions (see the goodwill discussion above) caused certain technology, customer relationships and IPR&D intangible assets to be abandoned and the carrying values of certain program intangible assets to become unrecoverable.
+Added: As a result, we recognized intangible asset impairment charges of $ 79 million for fiscal 2023, which included $ 33 million for IPR&D intangible assets.
+Added: The impairment was recorded to “Asset impairment charges” in the consolidated statements of operations within the Civil reportable segment.
+Added: In the event that we are required to make an additional impairment of goodwill at a future date for any of the reasons identified in our discussion of goodwill or if other events occur that negatively impact these intangible assets, we may also be required to record an additional impairment of intangible assets at that time.
Amortization expense related to intangible assets was $ 202 million, $ 230 million and $ 228 million for fiscal 2023, 2022 and 2021, respectively.
−Removed: The estimated annual amortization expense related to finite-lived intangible assets as of December 30, 2022, is as follows:
−Removed: Fiscal Year Ending
−Removed: (in millions)
−Removed: 2028 and thereafter 201
−Removed: Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, the outcome and timing of completion of in-process research and development projects and other factors.
−Removed: In the fourth quarter of fiscal 2022, we evaluated indefinite-lived intangibles for impairment and concluded that no impairment was necessary.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: The estimated annual amortization expense related to finite-lived intangible assets as of December 29, 2023, is as follows:
+Added: Fiscal Year Ending
+Added: (in millions)
+Added: 2029 and thereafter 162
+Added: Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors.
Note 9—Property, Plant and Equipment
27 unchanged sentences
Operating leases Operating lease liabilities 516 570
+Added: In fiscal 2022, the Company entered into a Master Lease Agreement whereby we agreed to lease two aircraft from the time each aircraft is accepted through June 30, 2027.
+Added: In March 2023, we took possession of both aircraft and recognized a $ 64 million finance lease obligation and a corresponding ROU asset.
During fiscal 2022, we reduced our leased space by exiting and consolidating underutilized buildings as part of an ongoing facility rationalization effort.
1 unchanged sentence
The impairment charges were allocated across our reportable segments and to Corporate.
−Removed: During fiscal 2020, we made a decision to vacate one of our facilities.
−Removed: The carrying amount was determined to be less than the expected recovery from sublease income and as a result, we recorded an impairment charge of $ 11 million, which was recorded within our Health reportable segment.
Total lease cost for the periods presented consisted of the following:
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
8 unchanged sentences
(1) Includes ROU lease expense of $ 124 million, $ 134 million and $ 150 million for fiscal 2023, 2022 and 2021, respectively.
−Removed: Lease costs and sublease income are included in "Cost of revenues" and "Selling, general and administrative expenses" within the consolidated statements of income.
+Added: Lease costs and sublease income are included in "Cost of revenues" and "Selling, general and administrative expenses" within the consolidated statements of operations.
Leidos Holdings, Inc.
4 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
Weighted-average remaining lease term (in years):
6 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
15 unchanged sentences
Lease liability as of December 29, 2023 $ 91 $ 652
+Added: As of December 29, 2023, we have approximately $ 195 million of facility lease commitments that have not yet commenced.
+Added: The leases are expected to commence in fiscal 2024 with lease terms ranging from 12 to 16 years.
As of December 29, 2023 and December 30, 2022, we had a total net investment in sales-type leases, which relates to lease payment receivables, of $ 100 million and $ 103 million, respectively.
5 unchanged sentences
The components of lease income were as follows:
−Removed: Income statement line item December 30,
+Added: Statement of operations line item December 29,
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
10 unchanged sentences
2024 $ 44 $ 20
−Removed: 2028 and thereafter 4 —
Total undiscounted cash flows $ 107 $ 25
8 unchanged sentences
Derivatives $ 11 $ 11 $ 20 $ 20
−Removed: Financial liabilities:
−Removed: Derivatives $ — $ — $ 53 $ 53
−Removed: As of December 30, 2022, our derivatives primarily consisted of the cash flow interest rate swaps on $ 1.0 billion of the variable rate senior unsecured term loan (see "Note 12—Derivative Instruments").
−Removed: The fair value of the cash flow interest rate swaps is determined based on observed values for underlying interest rates on the LIBOR yield curve (Level 2 inputs).
+Added: As of December 29, 2023, and December 30, 2022, our derivatives primarily consisted of the cash flow interest rate swaps on $ 500 million and $ 1.0 billion, respectively, of the variable rate senior unsecured term loan (see "Note 12—Derivative Instruments").
+Added: The fair value of the cash flow interest rate swaps is determined based on observed values for underlying interest rates on the one-month SOFR rate as of December 29, 2023 and the LIBOR yield curve as of December 30, 2022 (Level 2 inputs).
Financial instruments measured on a recurring basis at fair value also include our defined benefit plan assets (Level 2 inputs).
5 unchanged sentences
The carrying amounts of our financial instruments, other than derivatives, which include cash equivalents, accounts receivable, accounts payable and accrued expenses, are reasonable estimates of their related fair values.
−Removed: The carrying value of our notes receivable of $ 12 million and $ 15 million as of December 30, 2022 and December 31, 2021, respectively, approximates fair value as the stated interest rates within the agreements are consistent with the current market rates used in notes with similar terms in the market (Level 2 inputs).
−Removed: As of December 30, 2022 and December 31, 2021, the fair value of debt was $ 4.6 billion and $ 5.4 billion, respectively, and the carrying amount was $ 4.9 billion and $ 5.1 billion, respectively (see "Note 13—Debt").
+Added: The carrying value of our notes receivable of $ 12 million as of both December 29, 2023, and December 30, 2022, approximates fair value as the stated interest rates within the agreements are consistent with the current market rates used in notes with similar terms in the market (Level 2 inputs).
+Added: As of December 29, 2023, and December 30, 2022, the fair value of debt was $ 4.6 billion for both periods, and the carrying amount was $ 4.7 billion and $ 4.9 billion, respectively (see "Note 13—Debt").
The fair value of debt is determined based on current interest rates available for debt with terms and maturities similar to our existing debt arrangements (Level 2 inputs).
−Removed: On October 30, 2022, May 7, 2021, and January 14, 2021, non-financial instruments measured at fair value on a non-recurring basis were recorded in connection with the acquisitions of Cobham Special Mission, Gibbs & Cox and 1901 Group, respectively.
+Added: In fiscal 2023, we recorded impairment charges of SES' goodwill (see "Note 8—Goodwill and Intangible Assets").
+Added: The fair values of the assets and liabilities of the SES reporting unit were determined using a blended approach, including discounted cash flow models and market earnings multiples.
+Added: The market approach estimates fair value based on profitability and valuation metrics for peer companies and applies a multiple to the reporting unit's operating performance.
+Added: The income approach estimates fair value by discounting the reporting unit's estimated future cash flows using a weighted-average cost of capital reflecting current market conditions as well as the risk profile of the reporting unit.
+Added: Future cash flows are based on estimates of economic and market assumptions made using the best judgment of management, including growth rates in revenue and margins, and future changes in tax rates and cash expenditures.
+Added: Other significant assumptions and estimates include estimates of future capital expenditures, terminal value growth rates, and changes in future working capital requirements.
+Added: The fair value of the SES reporting unit was determined using Level 3 inputs.
+Added: On October 30, 2022, non-financial instruments measured at fair value on a non-recurring basis were recorded in connection with the acquisition of Cobham Special Mission.
The fair values of the assets acquired and liabilities assumed were determined using Level 3 inputs.
−Removed: See "Note 5—Acquisitions and Divestitures" for further details on these acquisitions.
+Added: See "Note 5—Acquisitions and Divestitures" for further details on this acquisition.
As of December 29, 2023, and December 30, 2022, we did not have any assets or liabilities measured at fair value on a non-recurring basis.
4 unchanged sentences
(in millions)
−Removed: Asset derivatives:
Cash flow interest rate swaps Other long-term assets $ 11 $ 20
−Removed: Liability derivatives:
−Removed: Cash flow interest rate swaps Other long-term liabilities $ — $ 53
The cash flows associated with the interest rate swaps are classified as operating activities in the consolidated statements of cash flows.
−Removed: During fiscal 2022, we entered into a foreign currency forward contract to offset foreign currency fluctuations of the $ 310 million Australian dollar preliminary purchase price for the Cobham Special Mission acquisition against the U.S.
−Removed: We realized a loss of $ 18 million resulting from the settlement of the foreign currency forward contract.
−Removed: The loss was recorded within Corporate and presented in "Other expense, net" on the consolidated statements of income and the settlement associated with the foreign currency forward contract was classified as investing activities in the consolidated statements of cash flows.
Cash Flow Hedges
−Removed: We have interest rate swap agreements to hedge the cash flows of $ 1.0 billion of the variable rate senior unsecured term loan (the "Variable Rate Loan").
+Added: We have interest rate swap agreements to hedge the cash flows of $ 500 million of the variable rate senior unsecured term loan (the "Variable Rate Loan").
These interest rate swap agreements have a maturity date of August 2025 and a fixed interest rate of 2.96 %.
−Removed: The objective of these instruments is to reduce variability in the forecasted interest payments of the Variable Rate Loan, which are based on the LIBOR rate.
−Removed: Under the terms of the interest rate swap agreements, we receive monthly variable interest payments based on the one-month LIBOR rate and pay interest at a fixed rate.
−Removed: The interest rate swap transactions were accounted for as cash flow hedges.
−Removed: The gain/loss on the swap is reported as a component of other comprehensive income (loss) and is reclassified into earnings when the interest payments on the underlying hedged items impact earnings.
+Added: The objective of these instruments is to reduce variability in the forecasted interest payments of the Variable Rate Loan.
+Added: During fiscal 2023, we modified our interest rate swap agreements to receive monthly variable interest payments based on the one-month SOFR rate as compared to LIBOR, and we will continue to pay interest at a fixed rate.
+Added: We applied the guidance of ASC 848 which permits the continuation of hedge accounting for such modification.
+Added: The interest rate swap transactions are accounted for as cash flow hedges.
+Added: The gain/loss on the swaps is reported as a component of other comprehensive income (loss) and is reclassified into earnings when the interest payments on the underlying hedged items impact earnings.
A qualitative assessment of hedge effectiveness is performed on a quarterly basis, unless facts and circumstances indicate the hedge may no longer be highly effective.
5 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
−Removed: Total interest expense, net presented in the consolidated statements of income in which the effects of cash flow hedges are recorded
+Added: Total interest expense, net presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded
$ 212 $ 199 $ 184
−Removed: Amount recognized in other comprehensive income (loss) 59 18 ( 61 )
+Added: Amount recognized in other comprehensive income
Amount reclassified from accumulated other comprehensive income (loss) to interest expense, net ( 15 ) 11 19
12 unchanged sentences
6.08 % 6.17 % $ — $ 320
−Removed: $ 380 million term loan, due May 2023
−Removed: 5.42 % 5.51 % 320 —
Current portion of long-term debt 18 672
1 unchanged sentence
Long-term debt:
−Removed: Senior unsecured term loan:
+Added: Senior unsecured term loans:
$ 1,925 million term loan, due January 2025
5.77 % 6.09 % $ — $ 1,211
+Added: $ 1,000 million term loan, due March 2028
+Added: 6.71 % 6.89 % 1,000 —
Senior unsecured notes:
5 unchanged sentences
4.38 % 4.50 % 750 750
+Added: $ 750 million notes, due March 2033
+Added: 5.75 % 5.81 % 750 —
$ 1,000 million notes, due February 2031
6 unchanged sentences
5.95 % 6.03 % 218 218
−Removed: Notes payable and finance leases due on various dates through fiscal 2032 1.84 %- 4.51 %
−Removed: Various 44 54
+Added: Finance leases due on various dates through fiscal 2032 Various 1.84 %- 6.31 %
unamortized debt discounts and deferred debt issuance costs ( 38 ) ( 34 )
4 unchanged sentences
Term Loans and Revolving Credit Facility
−Removed: On May 6, 2022, we entered into a 364 -day term loan credit agreement ("Term Loan Agreement") with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $ 380 million.
−Removed: The proceeds of the Term Loan Agreement were used to repay the $ 380 million senior unsecured term loan entered into on May 7, 2021.
−Removed: Borrowings under the Term Loan Agreement bear interest at a rate based on the Secured Overnight Financing Rate plus 1.10 %, or an alternate base rate at our option.
−Removed: The financial covenants in the Term Loan Agreement require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to increases to 4.50 to 1.00 following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.
−Removed: On May 7, 2021, we entered into a credit agreement with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $ 380 million with maturity 364 days after the credit agreement date.
−Removed: The proceeds were used to fund the acquisition of Gibbs & Cox.
−Removed: The term loan was repaid on May 6, 2022.
+Added: On March 10, 2023 (the “Closing Date”), we entered into a Credit Agreement (the “Credit Agreement”) with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $ 1.0 billion (the “Term Loan Facility”) and a $ 1.0 billion senior unsecured revolving facility (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”).
+Added: The Credit Facilities will mature in March 2028.
+Added: The Revolving Facility permits two additional one-year extensions subject to lender consent.
+Added: As of December 29, 2023, there were no borrowings outstanding under the Revolving Facility.
+Added: The proceeds of the Term Loan Facility and cash on hand on the Closing Date were used to repay in full all indebtedness, terminate all commitments and discharge all guarantees existing in connection with a predecessor $ 1.9 billion senior unsecured term loan facility and a $ 750 million senior unsecured revolving facility.
+Added: As of December 30, 2022, there were no borrowings outstanding under the predecessor senior unsecured revolving facility.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: We have a Credit Agreement (the "Credit Agreement") with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $ 1.9 billion (the "Term Loan Facility") and a $ 750 million senior unsecured revolving facility (the "Revolving Facility" and, together with the Term Loan Facility, the "Credit Facilities").
−Removed: The Credit Facilities are scheduled to mature in January 2025, with the Revolving Facility subject to two additional one year extensions.
−Removed: As of December 30, 2022, and December 31, 2021, there were no borrowings outstanding under the Revolving Facility.
−Removed: Borrowings under the Credit Agreement bear interest at a rate determined, at our option, based on either an alternate base rate or a LIBOR rate plus, in each case, an applicable margin that varies depending on our credit rating.
−Removed: The applicable margin range for LIBOR-denominated borrowings is from 1.13 % to 1.75 %.
−Removed: Based on our current ratings, the applicable margin for LIBOR-denominated borrowings is 1.38 %.
−Removed: The financial covenants in the Credit Agreement require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to two increases to 4.50 to 1.00 following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.
+Added: Borrowings under the Credit Agreement bear interest at a rate determined, at our option, based on either an alternate base rate or a Term SOFR rate with a 0.10 %, per annum Term SOFR adjustment, plus, in each case, an applicable margin that varies depending on our credit rating.
+Added: The applicable margin range for Term SOFR-denominated borrowings is from 1.00 % to 1.50 %.
+Added: Based on our current ratings, the applicable margin for Term SOFR-denominated borrowings is 1.25 %.
+Added: Principal payments are made quarterly on the Term Loan Facility beginning in March 2025, with the majority of the principal due at maturity.
+Added: Interest on the Term Loan Facility for Term SOFR-denominated borrowings is payable on a periodic basis, which must be at least quarterly.
+Added: The financial covenants in the Term Loan Agreement require that we maintain, as of the last day of each fiscal quarter, a ratio of adjusted consolidated total debt to consolidated EBITDA of not more than 3.75 to 1.00, subject to increases to 4.50 to 1.00 following a material acquisition, and a ratio of EBITDA to consolidated interest expense of not less than 3.50 to 1.00.
+Added: On May 6, 2022, we entered into a 364 -day term loan credit agreement with certain financial institutions, which provided for a senior unsecured term loan facility in an aggregate principal amount of $ 380 million, and was repaid in fiscal 2023.
+Added: The proceeds of the term loan were used to repay the $ 380 million senior unsecured term loan entered into on May 7, 2021.
+Added: On February 28, 2023, we issued and sold $ 750 million aggregate principal amount of fixed-rate senior notes (the “Notes”) maturing in March 2033.
+Added: The Notes are senior unsecured obligations issued by Leidos, Inc.
+Added: and guaranteed by Leidos Holdings, Inc.
+Added: The annual interest rate for the Notes is 5.75 % and is payable on a semi-annual basis.
+Added: In connection with the issuance of the Notes, $ 11 million of debt issuance costs and debt discounts were recognized, which were recorded as an offset against the carrying value of debt.
+Added: The proceeds from the Notes were used to repay all of the outstanding obligations in respect of principal, interest and fees on the $ 500 million 2.95 % notes, due May 2023, the majority of which were retired on February 28, 2023.
+Added: The remaining proceeds from the Notes were used to repay $ 210 million of the outstanding balance on the predecessor $ 1.9 billion senior unsecured term loan facility, due January 2025, and fund general corporate purposes.
Commercial Paper
−Removed: On July 12, 2021, we established a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") not to exceed $ 750 million.
+Added: We have a commercial paper program in which the Company may issue short-term unsecured commercial paper notes ("Commercial Paper Notes").
+Added: On May 26, 2023, we increased the size of the commercial paper program by $ 250 million, or not to exceed $ 1.0 billion.
The proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions and share repurchases.
−Removed: The Commercial Paper Notes will be issued in minimum denominations of $ 0.25 million and will have maturities of up to 397 days from the date of issuance.
+Added: The Commercial Paper Notes are issued in minimum denominations of $ 0.25 million and have maturities of up to 397 days from the date of issuance.
The Commercial Paper Notes will bear either a stated or floating interest rate, if interest bearing, or will be sold at a discount from the face amount.
As of December 29, 2023, and December 30, 2022, we did not have any Commercial Paper Notes outstanding.
−Removed: Principal Payments and Debt Issuance Costs
−Removed: We made principal payments on our debt of $ 545 million, $ 106 million and $ 731 million during fiscal 2022, 2021 and 2020, respectively.
−Removed: This activity included required principal payments on our term loans of $ 476 million, $ 96 million and $ 72 million during fiscal 2022, 2021 and 2020, respectively.
−Removed: During fiscal 2020, we made $ 4,925 million of principal repayments for outstanding debt and retired the $ 450 million senior notes.
−Removed: Principal payments are made quarterly on our Term Loan Facility, with the majority of the principal due at maturity.
−Removed: Interest on the Term Loan Facility is payable on a periodic basis, which must be at least quarterly.
−Removed: Principal on the Term Loan Agreement is due at maturity and interest is paid monthly.
−Removed: Interest on the senior fixed rate unsecured notes is payable on a semi-annual basis with principal payments due at maturity.
−Removed: Amortization of debt discount and deferred financing costs was $ 11 million for both fiscal 2022 and 2021, and $ 16 million for fiscal 2020.
−Removed: The Credit Facilities, the Term Loan Agreement, Commercial Paper Notes, senior unsecured term loans and notes are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances.
+Added: The Credit Facilities, Commercial Paper Notes, senior unsecured term loans and notes are fully and unconditionally guaranteed and contain certain customary restrictive covenants, including among other things, restrictions on our ability to create liens and enter into sale and leaseback transactions under certain circumstances.
We were in compliance with all covenants as of December 29, 2023.
3 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Principal Payments
Future minimum payments of debt are as follows:
13 unchanged sentences
Reclassification from AOCI — 19 — 19
−Removed: Balance at January 1, 2021 30 ( 70 ) ( 6 ) ( 46 )
+Added: Balance at December 31, 2021 22 ( 41 ) 7 ( 12 )
Other comprehensive income (loss) ( 108 ) 59 ( 27 ) ( 76 )
6 unchanged sentences
Balance at December 29, 2023 $ ( 39 ) $ 5 $ ( 14 ) $ ( 48 )
−Removed: Reclassifications for unrecognized gain (loss) on derivative instruments are associated with outstanding debt and are recorded in "Interest expense, net" on the consolidated statements of income.
+Added: Reclassifications for unrecognized gain (loss) on derivative instruments are associated with outstanding debt are recorded in "Interest expense, net" on the consolidated statements of operations.
See "Note 12—Derivative Instruments" for more information on our interest rate swap agreements.
8 unchanged sentences
Other current assets:
−Removed: Restricted cash $ 167 $ 148
Transition costs and project assets (1)
1 unchanged sentence
Transition costs and project assets (1)
−Removed: Equity method investments (3)
+Added: Long-term deferred tax assets
Accounts payable and accrued liabilities:
8 unchanged sentences
(2) Balance represents items that are not individually significant to disclose separately.
−Removed: (3) Balances are net of $ 19 million and $ 16 million of dividends received during fiscal 2022 and fiscal 2021, respectively, that were recorded in cash flows provided by operating activities of continuing operations on the consolidated statements of cash flows.
−Removed: (4) Certain accounts in accrued liabilities were reclassified in the prior year to other to conform to current year presentation.
−Removed: Statements of Income
−Removed: 2022 December 31,
−Removed: 2021 January 1,
−Removed: (in millions)
−Removed: Other expense, net:
−Removed: Loss on debt extinguishment $ — $ — $ ( 36 )
−Removed: Loss on sale of businesses — ( 3 ) —
−Removed: Loss on foreign currencies ( 3 ) ( 1 ) ( 4 )
−Removed: Other income, net — 3 2
−Removed: $ ( 3 ) $ ( 1 ) $ ( 38 )
Note 16—Earnings Per Share ("EPS")
2 unchanged sentences
The dilutive effect of outstanding equity-based compensation awards is reflected in diluted EPS by application of the treasury stock method, only in periods in which such effect would have been dilutive for the period.
+Added: We issue unvested stock awards that have forfeitable rights to dividends or dividend equivalents.
+Added: These stock awards are dilutive common share equivalents subject to the treasury stock method.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: We issue unvested stock awards that have forfeitable rights to dividends or dividend equivalents.
−Removed: These stock awards are dilutive common share equivalents subject to the treasury stock method.
The weighted average number of shares used to compute basic and diluted EPS attributable to Leidos stockholders were:
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
3 unchanged sentences
Anti-dilutive stock-based awards are excluded from the weighted average number of shares outstanding used to compute diluted EPS.
−Removed: The total outstanding stock options and vesting stock awards that were anti-dilutive were 1 million for both fiscal 2022 and 2021.
−Removed: There were no significant anti-diluted equity awards for fiscal 2020.
+Added: The total outstanding stock options and vesting stock awards that were anti-dilutive were 1 million for each of the periods presented above.
Share Repurchases
11 unchanged sentences
The 2017 Omnibus Incentive Plan provides Leidos and its affiliates' employees, directors and consultants the opportunity to receive various types of stock-based compensation awards, such as stock options, restricted stock units and performance-based awards, as well as cash awards.
−Removed: We grant service-based awards that generally vest or become exercisable 25 % a year over four years or cliff vest in three years .
+Added: We grant service-based awards that generally vest or become exercisable 33 % a year over three years , 25 % a year over four years or cliff vest in three years .
As of December 29, 2023, 3.8 million shares of Leidos' stock were reserved for future issuance under the 2017 Omnibus Incentive Plan and the 2006 Equity Incentive Plan.
14 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
3 unchanged sentences
Stock Options
−Removed: Stock options are granted with exercise prices equal to the fair market value of Leidos' common stock on the date of grant and for terms not greater than ten years .
−Removed: Stock options have a term of seven years and a vesting period of four years , except for stock options granted to our outside directors, which have a vesting period of the earlier of one year from grant date or the next annual meeting of stockholders following grant date.
+Added: Stock options are granted with exercise prices equal to the fair market value of Leidos' common stock using the closing price on the business day prior to the grant date and for terms not greater than ten years .
+Added: Stock options have a term of seven years and a vesting period of three or four years , except for stock options granted to our outside directors, which have a vesting period of the earlier of one year from grant date or the next annual meeting of stockholders following grant date.
The fair value of the stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model.
−Removed: The fair value of the stock option awards to employees are expensed on a straight-line basis over the vesting period of four years , except for stock options granted to our outside directors, which is recognized over the vesting period of one year or less.
+Added: The fair value of the stock option awards to employees are expensed on a straight-line basis over the vesting period of three or four years , except for stock options granted to our outside directors, which is recognized over the vesting period of one year or less.
During fiscal 2023, 2022 and 2021, we used a blended approach to measure expected volatility that is based on our weighted average historical and implied volatilities.
4 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
Weighted average grant-date fair value $ 25.21 $ 24.67 $ 20.23
17 unchanged sentences
Options exercised ( 0.4 ) 38.79 27
−Removed: Outstanding at January 1, 2021 2.2 $ 56.01 3.5 $ 108
+Added: Outstanding at December 31, 2021 2.1 $ 65.18 3.5 $ 54
Options granted 0.3 105.01
12 unchanged sentences
Restricted Stock Units and Awards
−Removed: Compensation expense is measured at the grant date fair value and generally recognized over the vesting period of either three to four years based upon required service conditions and in some cases revenue or EPS-based performance conditions.
+Added: Compensation expense is measured at the grant date fair value and generally recognized over the vesting period of three or four years based upon required service conditions and in some cases revenue or EPS-based performance conditions.
Leidos Holdings, Inc.
12 unchanged sentences
Awards vested ( 0.5 ) 71.60
−Removed: Unvested stock awards at January 1, 2021 1.3 $ 79.05
+Added: Unvested stock awards at December 31, 2021 1.4 $ 88.89
Awards granted 0.5 104.78
8 unchanged sentences
The fair value of restricted stock units that vested in fiscal 2023, 2022 and 2021 was $ 40 million, $ 52 million and $ 48 million, respectively.
−Removed: In addition, the fair value of dividend equivalents with respect to restricted stock units that vested in fiscal 2022, 2021 and 2020 was immaterial.
Performance-Based Stock Awards
22 unchanged sentences
Awards vested ( 0.2 ) 65.30
−Removed: Unvested at January 1, 2021 0.5 $ 80.20
+Added: Unvested at December 31, 2021 0.5 $ 88.72
Awards granted 0.2 114.98
10 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
Expected volatility 26.35 % 33.18 % 32.86 %
10 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
8 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
1 unchanged sentence
State income taxes, net of federal tax benefit 26 36 34
+Added: Goodwill 104 — —
Research and development credits ( 19 ) ( 31 ) ( 23 )
7 unchanged sentences
Effective income tax rate 48.4 % 21.8 % 21.5 %
+Added: The effective tax rate for fiscal 2023 was unfavorably impacted primarily by non tax deductible goodwill impairments.
The effective tax rates for both fiscal 2022 and fiscal 2021 were favorably impacted primarily by federal research tax credits and excess tax benefits related to employee stock-based payment transactions.
−Removed: The effective tax rate for fiscal 2020 was favorably impacted primarily by federal research tax credits and excess tax benefits related to employee stock-based payment transactions, partially offset by taxes related to foreign operations.
Leidos Holdings, Inc.
13 unchanged sentences
Vesting stock awards 29 27
−Removed: Deferred revenue — 16
Accumulated other comprehensive loss — 2
5 unchanged sentences
Property, plant and equipment ( 90 ) ( 75 )
−Removed: Accumulated other comprehensive income — ( 1 )
Deferred revenue ( 3 ) ( 4 )
1 unchanged sentence
Total deferred tax liabilities ( 570 ) ( 639 )
−Removed: Net deferred tax liabilities $ ( 12 ) $ ( 226 )
−Removed: At December 30, 2022, we had state net operating losses of $ 62 million and state tax credits of $ 2 million.
−Removed: Both will begin to expire in fiscal 2023;
−Removed: however, we expect to utilize $ 45 million and $ 2 million of these state net operating losses and state tax credits, respectively.
+Added: Net deferred tax assets (liabilities) $ 99 $ ( 12 )
+Added: At December 29, 2023, we had state net operating losses of $ 92 million.
+Added: These will begin to expire in fiscal 2023, however, we expect to utilize $ 76 million of these state net operating losses.
We had foreign tax credits of $ 21 million that will begin to expire in fiscal 2030.
2 unchanged sentences
We expect to utilize $ 2 million of these foreign net operating losses.
−Removed: Our valuation allowance for deferred tax assets was $ 24 million and $ 21 million as of December 30, 2022 and December 31, 2021, respectively.
Leidos Holdings, Inc.
17 unchanged sentences
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
2 unchanged sentences
Additions for tax positions related to prior years 15 — 2
+Added: Reductions for tax positions related to current year
Reductions for tax positions related to prior years ( 54 ) — ( 2 )
3 unchanged sentences
Unrecognized tax benefits that, if recognized, would affect the effective income tax rate
−Removed: At December 30, 2022, and December 31, 2021, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $ 92 million and $ 2 million, respectively, which were classified as other long-term liabilities on the consolidated balance sheets.
−Removed: At January 1, 2021, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $ 6 million, $ 4 million of which were classified as other long-term liabilities on the consolidated balance sheets.
−Removed: 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.
−Removed: Based upon our interpretation of the law as currently enacted, we recorded the estimated fiscal 2022 impact, resulting in increases of $ 130 million to both our income taxes payable and net deferred tax assets.
−Removed: Our unrecognized tax benefits also increased by $ 91 million with a corresponding increase to net deferred tax assets.
−Removed: 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.
−Removed: Treasury, among other factors.
+Added: At December 29, 2023, December 30, 2022, and December 31, 2021, the balance of unrecognized tax benefits included liabilities for uncertain tax positions of $ 110 million, $ 92 million and $ 2 million, respectively, which were classified as other long-term liabilities on the consolidated balance sheets.
+Added: For fiscal 2023, unrecognized tax benefits decreased $ 54 million for tax positions related to prior years, primarily as a result of completing a detailed study of our capitalized research and development costs and considering recent guidance issued by the Internal Revenue Service.
+Added: In addition, unrecognized tax benefits increased $ 58 million for tax positions related to the current year, primarily as a result of capitalized research and development costs.
+Added: At December 29, 2023, accrued interest and penalties totaled $ 4 million.
+Added: At December 30, 2022, and December 31, 2021, accrued interest and penalties were immaterial.
+Added: For fiscal 2023, $ 4 million of interest and penalties were recognized in the Company's consolidated statements of operations.
+Added: For fiscal 2022 and 2021, the amount of interest and penalties was immaterial .
Leidos Holdings, Inc.
3 unchanged sentences
We file income tax returns in the United States and various state and foreign jurisdictions.
−Removed: For the year ended December 30, 2022, we are participating in the Internal Revenue Service (“IRS”) Compliance Assurance Process ("CAP"), a real-time audit of our consolidated federal corporate income tax return.
+Added: For the years ended December 30, 2022, and December 29, 2023, we are participating in the Internal Revenue Service (“IRS”) Compliance Assurance Process ("CAP"), a real-time audit of our consolidated federal corporate income tax returns.
The IRS has examined our consolidated federal income tax returns through the year ended January 3, 2020.
1 unchanged sentence
We believe that participation in CAP should reduce tax-related uncertainties, if any.
−Removed: Additionally, with a few exceptions, as of December 30, 2022, we are no longer subject to state, local, or foreign examinations by the tax authorities for fiscal years ended on or before December 28, 2018.
+Added: Additionally, with a few exceptions, as of December 29, 2023, we were no longer subject to state, local, or foreign examinations by the tax authorities for fiscal years ended on or before January 3, 2020.
During the next 12 months, we expect our balance of unrecognized tax benefits to decrease by $ 22 million related to capitalized research and development costs.
6 unchanged sentences
Deferred Compensation Plans
−Removed: We maintain three deferred compensation plans, the Keystaff Deferral Plan ("KDP"), the KESDP and the MSCP (the "Plans"), for the benefit of certain management or highly compensated employees or members of the Board of Directors.
−Removed: The Plans allow eligible participants to elect to defer a portion of their salary, and all or a portion of certain bonuses, including restricted stock unit awards.
+Added: We maintain three deferred compensation plans, the Keystaff Deferral Plan ("KDP"), the KESDP and the MSCP (the "Deferred Compensation Plans"), for the benefit of certain management or highly compensated employees or members of the Board of Directors.
+Added: The Deferred Compensation Plans allow eligible participants to elect to defer a portion of their salary, and all or a portion of certain bonuses, including restricted stock unit awards.
Directors may also elect to defer their cash compensation in addition to their restricted stock unit awards.
−Removed: Deferred balances in the Plans are paid in lump sum or installments upon retirement, termination or the elected specified date.
+Added: Balances in the Deferred Compensation Plans are paid in lump sum or installments upon retirement, termination or the elected specified date.
We do not make any contributions to the KDP but maintain participant accounts for deferred amounts and investments.
6 unchanged sentences
Defined Benefit Plans
−Removed: We sponsor two frozen defined benefit pension plans ("the Plans"), one in the United Kingdom ("UK") for former employees on an expired customer contract and another assumed as a result of the Gibbs & Cox acquisition.
−Removed: On May 20, 2022, the trustee of our UK defined benefit pension plan (the “Plan”) invested the assets of the Plan in a bulk purchase annuity policy to fully insure the benefits payable to the members of the Plan.
−Removed: As the buy-in transaction insured the defined benefit obligation, we do not anticipate material future contributions.
−Removed: The bulk purchase annuity policy is structured to enable the Plan to move to a full buy-out, at which time the insurer would become directly responsible for all pension payments and we would be relieved of our obligations under the Plan.
−Removed: At this future date, a settlement loss will be recognized for an amount equal to any unamortized loss associated with the Plan recorded within AOCI and any remaining net plan assets of the Plan will be remitted to the Company.
−Removed: As of December 30, 2022, the unamortized loss within AOCI related to the Plan was $ 20 million and the Plan had net assets of $ 7 million.
+Added: We sponsor two frozen defined benefit pension plans ("the Defined Benefit Plans"), one in the United Kingdom ("UK") for former employees on an expired customer contract and another assumed as a result of the Gibbs & Cox acquisition.
Leidos Holdings, Inc.
2 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The projected benefit obligation of the Plans as of December 30, 2022 and December 31, 2021, was $ 101 million and $ 160 million, respectively.
−Removed: The decrease in the projected benefit obligation was primarily due to assumption changes and an actuarial gain.
−Removed: The fair value of the Plans assets as of December 30, 2022, and December 31, 2021, was $ 101 million and $ 189 million, respectively.
+Added: On May 20, 2022, the trustee of our UK defined benefit pension plan (the “Plan”) invested the assets of the Plan in a bulk purchase annuity policy to fully insure the benefits payable to the members of the Plan.
+Added: As the buy-in transaction insured the defined benefit obligation, we do not anticipate material future contributions.
+Added: The bulk purchase annuity policy is structured to enable the Plan to move to a full buy-out, at which time the insurer would become directly responsible for all pension payments and we would be relieved of our obligations under the Plan.
+Added: At this future date, a settlement loss will be recognized for an amount equal to any unamortized loss associated with the Plan recorded within AOCI and any remaining net plan assets of the Plan will be remitted to the Company.
+Added: As of December 29, 2023, and December 30, 2022, the unamortized loss within AOCI related to the Plan was $ 21 million and $ 20 million, respectively.
+Added: As of December 29, 2023, and December 30, 2022, the Plan had net assets of $ 8 million and $ 7 million, respectively.
+Added: The projected benefit obligation of the Defined Benefit Plans as of December 29, 2023, and December 30, 2022, was $ 99 million and $ 101 million, respectively.
+Added: The decrease in the projected benefit obligation was primarily due to assumption changes, offset by exchange rate movements.
+Added: The fair value of the Defined Benefit Plans assets as of December 29, 2023, and December 30, 2022, was $ 103 million and $ 101 million, respectively.
The decrease was primarily driven by assumption changes to reflect the fair value of the annuity contract and return on plan assets.
2 unchanged sentences
The fair value of Plans assets has been included within "Other long-term liabilities" on the consolidated balance sheets.
−Removed: We also sponsor multiemployer defined benefit pension plans and a defined contribution plan (a 401(k) plan) (the "Sponsored Plans") for employees working on two U.S.
+Added: We also sponsor multiemployer defined benefit pension plans and defined contribution plans (401(k) plans) (the "Sponsored Plans") for employees working on two U.S.
government contracts.
4 unchanged sentences
Since we are not responsible for the current or future funded status of the pension plans, no assets or liabilities arising from their funded status are recorded in the consolidated financial statements and no amounts associated with these pension plans are included in the defined benefit plan disclosures above.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 111
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20—Business Segments
Our operations and reportable segments are organized around the customers and markets we serve.
−Removed: We define our reportable segments based on the way the chief operating decision maker ("CODM"), currently the Chairman and Chief Executive Officer, manages the operations for purposes of allocating resources and assessing performance.
−Removed: Our business is aligned into three reportable segments (Defense Solutions, Civil and Health).
+Added: We define our reportable segments based on the way the CODM, currently the Chief Executive Officer, manages the operations for purposes of allocating resources and assessing performance.
+Added: Our business has been aligned into three reportable segments (Defense Solutions, Civil and Health).
Additionally, we separately present the unallocable costs associated with corporate functions as Corporate.
−Removed: Effective July 3, 2021, certain contracts were reassigned from the Defense Solutions reportable segment to the Civil reportable segment.
−Removed: Impact on prior year segment results were determined to be immaterial and have not been recast to reflect this change.
−Removed: Defense Solutions provides leading-edge and technologically advanced services, solutions and products to a broad customer base.
+Added: Defense Solutions has provided 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, mission systems and integration, Command, Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance ("C4ISR") technologies and services, maritime solutions, transformative software, analytics, intelligence analysis, mission support and logistics services, weapons systems and space systems and solutions.
5 unchanged sentences
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.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 106
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Our Civil business is focused on modernizing infrastructure, systems and security for government and commercial customers both domestically and internationally.
+Added: Our Civil business has been focused on modernizing infrastructure, systems and security for government and commercial customers both domestically and internationally.
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 digital modernization, energy infrastructure, integrated missions, transportation applications and security detection.
−Removed: Our Health business focuses on delivering effective and affordable solutions to federal and commercial customers that are responsible for the health and well-being of people worldwide, including service members and veterans.
+Added: Our Health business has been focused on delivering effective and affordable solutions to federal and commercial customers that are responsible for the health and well-being of people worldwide, including service members and veterans.
Our solutions enable customers to deliver on the health mission of providing high-quality, cost-effective care, and are accomplished through the integration of information technology, engineering, life sciences, health services, clinical insights and health policy.
3 unchanged sentences
government customers and certain other expense items excluded from a reportable segment's performance.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 112
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes business segment information for the periods presented:
2023 December 30,
−Removed: 2021 January 1,
+Added: 2022 December 31,
(in millions)
14 unchanged sentences
Total amortization of intangible assets $ 202 $ 230 $ 228
−Removed: The income statement performance measures used to evaluate segment performance are revenues and operating income.
+Added: The statement of operations performance measures used to evaluate segment performance are revenues and operating income.
As a result, "Interest expense, net," "Other expense, net," and "Income tax expense," as reported in the consolidated financial statements are not allocated to our segments.
3 unchanged sentences
Asset information by segment is not a key measure of performance used by the CODM.
−Removed: Leidos Holdings, Inc.
−Removed: Annual Report - 107
−Removed: LEIDOS HOLDINGS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: We generated approximately 86 % of our total revenues in fiscal 2022, and 87 % in fiscal 2021 and 2020 from contracts with the U.S.
+Added: We generated approximately 87 % of our total revenues in fiscal 2023, 86 % in fiscal 2022 and 87 % in fiscal 2021 from contracts with the U.S.
government, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S.
1 unchanged sentence
Intelligence Community, including subcontracts under which the DoD or the U.S.
−Removed: Intelligence Community is the ultimate purchaser, represented approximately 44 % of our total revenues for fiscal 2022, 44 % for fiscal 2021 and 49 % for fiscal 2020.
−Removed: Approximately 8 % of our revenues and tangible long-lived assets are generated by or owned by entities outside of the United States.
+Added: Intelligence Community is the ultimate purchaser, represented approximately 49 % of our total revenues for fiscal 2023 and 44 % of total revenues for both fiscal 2022 and 2021.
+Added: Approximately 9 % of our revenues in fiscal 2023, and 8 % in both fiscal 2022 and 2021, are generated by entities outside of the United States.
As such, additional financial information by geographic location is not presented.
2 unchanged sentences
We are involved in various claims and lawsuits arising in the normal conduct of our business, none of which, in the opinion of management, based upon current information, will likely have a material adverse effect on our financial position, results of operations or cash flows.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 113
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contingencies
19 unchanged sentences
In addition, the patents at issue in these cases are subject to U.S.
−Removed: Patent and Trademark Office post-grant inter partes review and/or reexamination proceedings and related appeals, which may result in all or part of these patents being invalidated or the claims of the patents being limited.
−Removed: Thus, no assurances can be given when or if we will receive any proceeds in connection with these jury awards.
+Added: Patent and Trademark Office ("USPTO") post-grant inter partes review and/or reexamination proceedings and related appeals, which may result in all or part of these patents being invalidated or the claims of the patents being limited.
+Added: On March 30, 2023, the U.S.
+Added: Court of Appeals for the Federal Circuit issued a ruling affirming prior decisions of the USPTO’s Patent Trial and Appeal Board finding certain claims of the patents at issue in the Apple II case to be unpatentable.
+Added: On March 31, 2023, the Federal Circuit issued a decision vacating the District Court’s judgment in the Apple II case and remanding it back to the District Court with instructions to dismiss the case as moot.
+Added: These Federal Circuit decisions remain subject to potential motions and/or appeals by VirnetX, including potentially seeking rehearing or certiorari review.
+Added: On May 1, 2023, VirnetX filed a petition for panel rehearing on the Apple II litigation decision at the Federal Circuit, but this petition was denied by the Federal Circuit on June 27, 2023.
+Added: On June 5, 2023, VirnetX filed a petition for panel rehearing on the Federal Circuit’s decision finding the patents at issue in the Apple II case to be unpatentable, but this petition was denied by the Federal Circuit on June 22, 2023.
+Added: On September 20, 2023, VirnetX filed a petition for a writ of certiorari with the Supreme Court of the United States to review the Federal Circuit decisions.
+Added: Thus, no assurances can be given when or if we will receive any proceeds in connection with the Apple II case.
In addition, if Leidos receives any proceeds, we are required to pay a royalty to the customer who paid for the development of the technology.
18 unchanged sentences
Attorney’s Office for the Southern District of California, in conjunction with the U.S.
−Removed: Department of Justice’s Fraud Section.
+Added: Department of Justice’s Fraud Division.
The subpoena requests documents relating to the conduct that is the subject of the Company’s internal investigation.
−Removed: The Company is in the process of responding to the subpoena.
+Added: The Company has responded to the subpoena.
+Added: In February 2023, a former employee of the Company who was terminated at the outset of the investigation was indicted on wire fraud and other charges by a Federal Grand Jury in the U.S.
+Added: District Court in the Southern District of California.
+Added: These charges were later dismissed as a result of the death of the former employee.
In August 2022, the Company received a Federal Grand Jury Subpoena in connection with a criminal investigation being conducted by the U.S.
−Removed: Department of Justice Antitrust Division (“DOJ”).
+Added: Department of Justice Antitrust Division.
The subpoena requests that the Company produce a broad range of documents related to three U.S.
Government procurements associated with the Company’s Intelligence Group in 2021 and 2022.
−Removed: We intend to fully cooperate with the investigation, and we are conducting our own internal investigation with the assistance of outside counsel.
+Added: We are fully cooperating with the investigation, and we are conducting our own internal investigation with the assistance of outside counsel.
It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties, or further liabilities in connection with the investigation pursuant to which the subpoena was issued.
−Removed: We have outstanding letters of credit of $ 72 million as of December 30, 2022, principally related to performance guarantees on contracts.
−Removed: We also have outstanding surety bonds with a notional amount of $ 100 million as of December 30, 2022, principally related to performance and subcontractor payment bonds on contracts.
+Added: As of December 29, 2023, we have outstanding letters of credit of $ 64 million, principally related to performance guarantees on contracts and outstanding surety bonds with a notional amount of $ 104 million, principally related to performance and subcontractor payment bonds on contracts.
The value of the surety bonds may vary due to changes in the underlying project status and/or contractual modifications.
−Removed: We also have future lease commitments of $ 74 million for the use of certain aircraft.
−Removed: As of December 30, 2022, the future expirations of the outstanding letters of credit, surety bonds and future lease commitments were as follows:
+Added: As of December 29, 2023, the future expirations of the outstanding letters of credit and surety bonds were as follows:
Fiscal year ending
3 unchanged sentences
Annual Report - 115
+Added: LEIDOS HOLDINGS, INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Note 22—Subsequent Events
+Added: Segment Realignment
+Added: Beginning in fiscal 2024, we will operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers.
+Added: The four reportable segments will be National Security and Digital, Health & Civil, Commercial & International and Defense Systems.
+Added: We will also separately present the unallocable costs associated with corporate functions as Corporate.
+Added: All historical segment financial information will be recast to conform to the new reportable segment structure in our financial statements and accompanying notes, beginning in the first quarter of fiscal 2024.
+Added: Leidos Holdings, Inc.
+Added: Annual Report - 116
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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.