LEIDOS HOLDINGS, INC. AND LEIDOS, INC.
UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
On July 24, 2015, Leidos Engineering, LLC (“Leidos Engineering”), a wholly-owned subsidiary of Leidos, Inc. (“Leidos”) sold all of the outstanding equity interests in Leidos Renewable Energy, LLC (“LRE”), the indirect parent of Plainfield Renewable Energy, LLC ("PRE"), to Greenleaf Power Consolidated, LLC (“Buyer”) pursuant to the Membership Interest Purchase Agreement by and among Leidos Engineering, PRE and Buyer dated March 24, 2015, as amended July 17, 2015 (the "Agreement").
Plainfield was historically included as part of Leidos' Health and Engineering reportable segment. The disposal of Plainfield does not represent a strategic shift in Leidos' business and does not qualify for presentation as a discontinued operation. Plainfield was classified as "Held for Sale" in Leidos' condensed consolidated balance sheet as of July 3, 2015.
The unaudited pro forma financial statements were derived from the Company’s historical financial statements and are being presented to give effect to the disposal of Plainfield.
Included herein are the following unaudited pro forma financial statements:
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| • | Condensed consolidated balance sheet as of April 3, 2015; |
| |
| • | Condensed consolidated statement of income for the quarter ended April 3, 2015; and |
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| • | Consolidated statement of income for the year ended January 30, 2015 |
The unaudited pro forma condensed consolidated balance sheet and statements of income should be read in conjunction with the historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable, that reflect the impacts of events directly attributable to the disposal and related transactions, and that are factually supportable. The unaudited pro forma financial statements are provided for illustrative and informational purposes only and are not intended to represent or be indicative of what Leidos' results of operations or financial position would have been had the sale occurred during those periods. The unaudited pro forma financial statements also should not be considered representative of Leidos’ future results of operations or financial position.
See combined notes to the unaudited pro forma condensed consolidated balance sheet and statements of income for a more detailed discussion of these transactions.
LEIDOS HOLDINGS, INC. AND LEIDOS, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
|
| | | | | | | | | | | | | | | |
| | April 3, 2015 |
| | | | Pro-Forma Adjustments | | |
| (in millions) | Historical Leidos Holdings, Inc. | | Plainfield
[A] | | Other | | Pro-Forma |
| | | | | | | | |
| ASSETS | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | $ | 377 |
| | $ | — |
| | $ | — |
| | $ | 377 |
|
| Receivables, net | 977 |
| | (2 | ) | | — |
| | 975 |
|
| Inventory, prepaid expenses and other current assets | 297 |
| | (3 | ) | | (1 | ) | [B] | 293 |
|
| Total current assets | 1,651 |
| | (5 | ) | | (1 | ) | | 1,645 |
|
| Property, plant and equipment, net | 308 |
| | (122 | ) | | — |
| | 186 |
|
| Intangible assets, net | 35 |
| | — |
| | — |
| | 35 |
|
| Goodwill | 1,207 |
| | — |
| | — |
| | 1,207 |
|
| Deferred income taxes | 13 |
| | — |
| | (6 | ) | [B] | 7 |
|
| Other assets | 95 |
| | (1 | ) | | — |
| | 94 |
|
| Total assets | $ | 3,309 |
| | $ | (128 | ) | | $ | (7 | ) | | $ | 3,174 |
|
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable and accrued liabilities | $ | 745 |
| | $ | (3 | ) | | $ | (1 | ) | [B] | $ | 741 |
|
| Accrued payroll and employee benefits | 237 |
| | — |
| | — |
| | 237 |
|
| Notes payable and long-term debt, current portion | 2 |
| | — |
| | — |
| | 2 |
|
| Liabilities of discontinued operations | 3 |
| | — |
| | — |
| | 3 |
|
| Total current liabilities | 987 |
| | (3 | ) | | (1 | ) | | 983 |
|
| Notes payable and long-term debt, net of current portion | 1,156 |
| | — |
| | — |
| | 1,156 |
|
| Other long-term liabilities | 166 |
| | — |
| | (6 | ) | [B] | 160 |
|
| Commitments and contingencies | | |
| |
| |
|
| Stockholders' equity: | 1,000 |
| | (125 | ) | | — |
| | 875 |
|
| Total stockholders' equity | 1,000 |
| | (125 | ) | | — |
| | 875 |
|
| Total liabilities and stockholder's equity | $ | 3,309 |
| | $ | (128 | ) | | $ | (7 | ) | | $ | 3,174 |
|
LEIDOS HOLDINGS, INC. AND LEIDOS, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF INCOME
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| | | | | | | | | | | | | | | |
| | Three Months Ended April 3, 2015 |
| | | | Pro-Forma Adjustments | | |
| (in millions, except per share amounts) | Historical Leidos Holdings, Inc. | | Plainfield
[A] | | Other | | Pro-Forma |
| | | | | | | | |
| Revenues | $ | 1,246 |
| | $ | (5 | ) | | $ | — |
| | $ | 1,241 |
|
| Costs and expenses: | | | | | | | |
| Cost of revenues | 1,093 |
| | (9 | ) |
| — |
| | 1,084 |
|
| Selling, general and administrative expenses | 75 |
| | (2 | ) | | — |
| | 73 |
|
| Asset impairment charges | 40 |
| | (40 | ) | | — |
| | — |
|
| Operating income | 38 |
| | 46 |
| | — |
| | 84 |
|
| Non-operating income (expense): | | | | | | | |
| Interest expense, net | (14 | ) | | 1 |
|
| (1 | ) | [C] | (14 | ) |
| Other expense, net | (1 | ) | | — |
| | — |
| | (1 | ) |
| Income from continuing operations before income taxes | 23 |
| | 47 |
| | (1 | ) | | 69 |
|
| Income tax expense | — |
| | — |
|
| (18 | ) | [D] | (18 | ) |
| Income from continuing operations | $ | 23 |
| | $ | 47 |
| | $ | (19 | ) | | $ | 51 |
|
| Earnings per share: | | | | | | | |
| Basic earnings per share from continuing operations | | | | | | | $ | 0.70 |
|
| Diluted earnings per share from continuing operations | | | | | | | $ | 0.68 |
|
LEIDOS HOLDINGS, INC. AND LEIDOS, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME
|
| | | | | | | | | | | | | | | |
| | Year Ended January 30, 2015 |
| | | | Pro-Forma Adjustments | | |
| (in millions, except per share amounts) | Historical Leidos Holdings, Inc. | | Plainfield
[A] | | Other | | Pro-Forma |
| | | | | | | | |
| Revenues | $ | 5,063 |
| | $ | (13 | ) | | $ | — |
| | $ | 5,050 |
|
| Costs and expenses: | | | | | | | |
| Cost of revenues | 4,392 |
| | (34 | ) | | — |
| | 4,358 |
|
| Selling, general and administrative expenses | 315 |
| | (8 | ) | | — |
|
| 307 |
|
| Goodwill impairment charges | 486 |
| | — |
| | — |
| | 486 |
|
| Asset impairment charges | 81 |
| | (43 | ) | | — |
| | 38 |
|
| Separation transaction expenses | 3 |
| | — |
| | — |
|
| 3 |
|
| Operating loss | (214 | ) | | 72 |
| | — |
| | (142 | ) |
| Non-operating income (expense): | | | | | | | |
| Interest income | 1 |
| | — |
| | — |
| | 1 |
|
| Interest expense | (75 | ) | | 3 |
| | (3 | ) | [C] | (75 | ) |
| Other income, net | 5 |
| | — |
| | — |
| | 5 |
|
| Loss from continuing operations before income taxes | (283 | ) | | 75 |
| | (3 | ) | | (211 | ) |
| Income tax expense | (47 | ) | | — |
| | (29 | ) | [D] | (76 | ) |
| Loss from continuing operations | $ | (330 | ) | | $ | 75 |
| | $ | (32 | ) | | $ | (287 | ) |
| Loss per share: | | | | | | | |
| Basic loss per share from continuing operations | | | | | | | $ | (3.88 | ) |
| Diluted loss per share from continuing operations | | | | | | | $ | (3.88 | ) |
LEIDOS HOLDINGS, INC. AND LEIDOS, INC.
COMBINED NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
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| | | | | |
| [A] | The adjustments remove the balances and the results of operations of Plainfield Renewable Energy, LLC ("Plainfield"). The adjustments to the results of operations exclude certain corporate allocations and intercompany transactions, which would have been absorbed by Leidos on a consolidated level, independent of Plainfield. |
| | | | | | |
| [B] | The adjustments reflect the tax impacts due to Plainfield operations. |
| | | | | | |
| [C] | Plainfield interest expense incurred is intercompany in nature and is eliminated in consolidations.
|
| | | | | | |
| [D] | The adjustments in [A] above in the statements of operations were tax effected using an estimated tax rate of 39.8%, based on the blended federal and state statutory income tax rates. |
