LEIDOS HOLDINGS, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts)
The Company uses and refers to non-GAAP operating income, adjusted EBITDA and non-GAAP EPS from continuing operations, which are not measures of financial performance under generally accepted accounting principles in the U.S. ("GAAP") and, accordingly, these measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.
Management believes that these non-GAAP measures provide another measure of the Company's results of operations and financial condition, including its ability to comply with financial covenants. These non-GAAP measures are frequently used by financial analysts covering Leidos and its peers. The Company's computation of its non-GAAP measures may not be comparable to similarly titled measures reported by other companies, thus limiting their use for comparability.
Non-GAAP operating income is computed by excluding the following items from income from continuing operations: (i) other (expense) income, net; (ii) interest expense; (iii) interest income; (iv) income tax (expense) benefit adjusted to reflect non-GAAP adjustments; and (v) the following discrete items:
- Acquisition and integration costs – Represents costs related to the acquisition and integration of the IS&GS Business.
- Amortization of acquired intangible assets – Represents the amortization of the fair value of the acquired intangible assets.
- Restructuring expenses – Represents costs associated with lease termination and severance costs related to the Company's acquisition of the IS&GS Business and the September 2013 spin-off of its former technical services.
- Amortization of equity method investments – Represents the amortization of the fair value of equity method investments acquired with the IS&GS Business.
- Gains and losses on sale of assets and businesses – Represents the gains or losses on certain sales of real estate and businesses.
- Asset impairment charges – Represents impairments of long lived intangible and tangible assets.
Non-GAAP operating margin is computed by dividing non-GAAP operating income by revenue.
Adjusted EBITDA is computed by excluding the following items from income from continuing operations, before income taxes: (i) discrete items as identified above; (ii) interest expense; (iii) interest income; and (iv) depreciation expense.
Adjusted EBITDA margin is computed by dividing adjusted EBITDA by revenue.
LEIDOS HOLDINGS, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES [CONTINUED]
(in millions, except per share amounts)
The following tables present the reconciliation of the non-GAAP measures identified above to the most directly comparable GAAP measures:
|
Quarter Ended September 29, 2017 |
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|
As reported |
Acquisition and integration costs |
Amortization of intangibles |
Restructuring expenses |
Amortization of equity method investments |
Non-GAAP results |
|||||||||||||||||||
|
Operating income |
$ |
151 |
$ |
21 |
$ |
76 |
$ |
6 |
$ |
2 |
$ |
256 |
||||||||||||
|
Non-operating expense, net |
(35) |
— |
— |
— |
— |
(35) |
||||||||||||||||||
|
Income from continuing
|
116 |
21 |
76 |
6 |
2 |
221 |
||||||||||||||||||
|
Income tax expense1 |
(37) |
(8) |
(30) |
(2) |
(1) |
(78) |
||||||||||||||||||
|
Net income |
79 |
13 |
46 |
4 |
1 |
143 |
||||||||||||||||||
|
Less: net loss attributable to non-
|
(3) |
— |
— |
— |
— |
(3) |
||||||||||||||||||
|
Net income attributable to Leidos
|
$ |
82 |
$ |
13 |
$ |
46 |
$ |
4 |
$ |
1 |
$ |
146 |
||||||||||||
|
Diluted EPS attributable to Leidos
|
$ |
0.53 |
$ |
0.08 |
$ |
0.30 |
$ |
0.03 |
$ |
0.01 |
$ |
0.95 |
||||||||||||
|
Diluted shares |
154 |
154 |
154 |
154 |
154 |
154 |
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|
(1) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments. |
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