Earnings (Loss) Per Share (EPS)

9 Months Ended

Oct. 31, 2014

Earnings (Loss) Per Share (EPS)

Earnings (Loss) Per Share (EPS):

The Company is required to allocate a portion of its earnings to its unvested stock awards containing nonforfeitable rights to dividends or dividend equivalents (participating securities) in calculating EPS using the two-class method.

Unvested stock awards granted prior to fiscal 2013 are participating securities requiring application of the two-class method. In fiscal 2013, the Company began issuing unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are not participating securities requiring application of the two-class method, but are dilutive common share equivalents subject to the treasury stock method. Basic EPS is computed by dividing income less earnings allocable to participating securities by the basic weighted average number of shares outstanding. Diluted EPS is computed similar to basic EPS, except the weighted average number of shares outstanding is increased to include the dilutive effect of outstanding stock options and other stock-based awards.

A reconciliation of the income (loss) used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended					Nine Months Ended
	October 31, 2014		November 1, 2013			October 31, 2014			November 1, 2013
	(in millions)
Basic EPS:
Income (loss) from continuing operations, as reported	$	38	$	(8	)	$	(356	)	$	37
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Income (loss) from continuing operations, for computing basic EPS	$	38	$	(8	)	$	(356	)	$	34
Net income (loss), as reported	$	34	$	(3	)	$	(367	)	$	120
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Net income (loss), for computing basic EPS	$	34	$	(3	)	$	(367	)	$	117
Diluted EPS:
Income (loss) from continuing operations, as reported	$	38	$	(8	)	$	(356	)	$	37
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Income (loss) from continuing operations, for computing diluted EPS	$	38	$	(8	)	$	(356	)	$	34
Net income (loss), as reported	$	34	$	(3	)	$	(367	)	$	120
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Net income (loss), for computing diluted EPS	$	34	$	(3	)	$	(367	)	$	117

The following table provides a reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented. The presentation for the three and nine months ended November 1, 2013 gives effect to the one-for-four reverse stock split which occurred after market close on September 27, 2013.

	Three Months Ended		Nine Months Ended
	October 31, 2014	November 1, 2013	October 31, 2014	November 1, 2013
	(in millions)
Basic weighted average number of shares outstanding	73	84	75	84
Dilutive common share equivalents—stock options and other stock awards	1	—	—	—
Diluted weighted average number of shares outstanding	74	84	75	84

For the nine months ended October 31, 2014, all outstanding common stock equivalents were excluded in the computation of diluted income (loss) per share because their effect would have been anti-dilutive due to the net loss for the period.

For the three months ended November 1, 2013, all outstanding common stock equivalents were excluded in the computation of diluted income (loss) per share because their effect would have been anti-dilutive due to the net loss for the quarter. For the nine months ended November 1, 2013, the declared dividends exceeded current period earnings. Therefore, the Company was in a loss position for computing diluted income (loss) per share and all outstanding common stock equivalents were excluded in the computation because their effect would have been anti-dilutive.

The following anti-dilutive stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended		Nine Months Ended
	October 31, 2014	November 1, 2013	October 31, 2014	November 1, 2013
	(in millions)
Stock options	2	5	4	5
Vesting stock awards	—	3	3	3

In December 2013, the Company entered into an Accelerated Share Repurchase ("ASR") agreement with a financial institution to repurchase shares of its outstanding common stock for an aggregate purchase price of $300 million. During the fourth quarter of fiscal 2014, the Company paid $300 million to the financial institution and received an initial delivery of 5.6 million shares of its outstanding shares of common stock for an aggregate value of $255 million. The final delivery of approximately 1.0 million shares for a total value of $45 million under the program was completed during the first quarter of fiscal 2015. The purchase was allocated between additional paid in capital and retained earnings. All shares delivered were immediately retired.

In March 2014, the Company entered into a second Accelerated Share Repurchase agreement with a different financial institution to repurchase shares of its outstanding common stock for an aggregate purchase price of $200 million. During the first quarter of fiscal 2015, the Company paid $200 million to the financial institution and received an initial delivery of 4.5 million shares of its outstanding shares of common stock for an aggregate value of approximately $168 million. The final delivery of approximately 0.8 million shares for a total value of approximately $32 million under the program was completed during the second quarter of fiscal 2015. The purchase was allocated between additional paid in capital and retained earnings. All shares delivered were immediately retired.

The delivery of 6.3 million shares of Leidos common stock for both ASR purchases for the nine months ended October 31, 2014 reduced the Company's outstanding shares used to determine the weighted average shares outstanding for purposes of calculating basic and diluted EPS for the periods presented.

Leidos, Inc.

Earnings (Loss) Per Share (EPS)

Earnings (Loss) Per Share (EPS):

The Company is required to allocate a portion of its earnings to its unvested stock awards containing nonforfeitable rights to dividends or dividend equivalents (participating securities) in calculating EPS using the two-class method.

Unvested stock awards granted prior to fiscal 2013 are participating securities requiring application of the two-class method. In fiscal 2013, the Company began issuing unvested stock awards that have forfeitable rights to dividends or dividend equivalents. These stock awards are not participating securities requiring application of the two-class method, but are dilutive common share equivalents subject to the treasury stock method. Basic EPS is computed by dividing income less earnings allocable to participating securities by the basic weighted average number of shares outstanding. Diluted EPS is computed similar to basic EPS, except the weighted average number of shares outstanding is increased to include the dilutive effect of outstanding stock options and other stock-based awards.

A reconciliation of the income (loss) used to compute basic and diluted EPS for the periods presented was as follows:

	Three Months Ended					Nine Months Ended
	October 31, 2014		November 1, 2013			October 31, 2014			November 1, 2013
	(in millions)
Basic EPS:
Income (loss) from continuing operations, as reported	$	38	$	(8	)	$	(356	)	$	37
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Income (loss) from continuing operations, for computing basic EPS	$	38	$	(8	)	$	(356	)	$	34
Net income (loss), as reported	$	34	$	(3	)	$	(367	)	$	120
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Net income (loss), for computing basic EPS	$	34	$	(3	)	$	(367	)	$	117
Diluted EPS:
Income (loss) from continuing operations, as reported	$	38	$	(8	)	$	(356	)	$	37
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Income (loss) from continuing operations, for computing diluted EPS	$	38	$	(8	)	$	(356	)	$	34
Net income (loss), as reported	$	34	$	(3	)	$	(367	)	$	120
Less: allocation of distributed and undistributed earnings to participating securities	—		—			—			(3		)
Net income (loss), for computing diluted EPS	$	34	$	(3	)	$	(367	)	$	117

The following table provides a reconciliation of the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented. The presentation for the three and nine months ended November 1, 2013 gives effect to the one-for-four reverse stock split which occurred after market close on September 27, 2013.

	Three Months Ended		Nine Months Ended
	October 31, 2014	November 1, 2013	October 31, 2014	November 1, 2013
	(in millions)
Basic weighted average number of shares outstanding	73	84	75	84
Dilutive common share equivalents—stock options and other stock awards	1	—	—	—
Diluted weighted average number of shares outstanding	74	84	75	84

For the nine months ended October 31, 2014, all outstanding common stock equivalents were excluded in the computation of diluted income (loss) per share because their effect would have been anti-dilutive due to the net loss for the period.

For the three months ended November 1, 2013, all outstanding common stock equivalents were excluded in the computation of diluted income (loss) per share because their effect would have been anti-dilutive due to the net loss for the quarter. For the nine months ended November 1, 2013, the declared dividends exceeded current period earnings. Therefore, the Company was in a loss position for computing diluted income (loss) per share and all outstanding common stock equivalents were excluded in the computation because their effect would have been anti-dilutive.

The following anti-dilutive stock-based awards were excluded from the weighted average number of shares outstanding used to compute basic and diluted EPS for the periods presented:

	Three Months Ended		Nine Months Ended
	October 31, 2014	November 1, 2013	October 31, 2014	November 1, 2013
	(in millions)
Stock options	2	5	4	5
Vesting stock awards	—	3	3	3

In December 2013, the Company entered into an Accelerated Share Repurchase ("ASR") agreement with a financial institution to repurchase shares of its outstanding common stock for an aggregate purchase price of $300 million. During the fourth quarter of fiscal 2014, the Company paid $300 million to the financial institution and received an initial delivery of 5.6 million shares of its outstanding shares of common stock for an aggregate value of $255 million. The final delivery of approximately 1.0 million shares for a total value of $45 million under the program was completed during the first quarter of fiscal 2015. The purchase was allocated between additional paid in capital and retained earnings. All shares delivered were immediately retired.

In March 2014, the Company entered into a second Accelerated Share Repurchase agreement with a different financial institution to repurchase shares of its outstanding common stock for an aggregate purchase price of $200 million. During the first quarter of fiscal 2015, the Company paid $200 million to the financial institution and received an initial delivery of 4.5 million shares of its outstanding shares of common stock for an aggregate value of approximately $168 million. The final delivery of approximately 0.8 million shares for a total value of approximately $32 million under the program was completed during the second quarter of fiscal 2015. The purchase was allocated between additional paid in capital and retained earnings. All shares delivered were immediately retired.

The delivery of 6.3 million shares of Leidos common stock for both ASR purchases for the nine months ended October 31, 2014 reduced the Company's outstanding shares used to determine the weighted average shares outstanding for purposes of calculating basic and diluted EPS for the periods presented.