Business Segment Information

11 Months Ended

Jan. 01, 2016

Business Segment Information

Business Segment Information:

The Company defines its reportable segments based on the way the chief operating decision maker ("CODM"), currently its chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. The Company has the following reportable segments: National Security Solutions, Health and Engineering, and Corporate and Other.

National Security Solutions is focused on rapidly deploying agile, cost-effective solutions to meet the ever-changing missions of the Company's customers in areas of intelligence surveillance and reconnaissance, integrated systems and cybersecurity and global services. National Security Solutions provides a diverse portfolio of national security solutions and systems for air, land, sea, space and cyberspace for the U.S. Intelligence Community, the DoD, military services, the DHS, government agencies of U.S. allies abroad, and other federal, civilian, and commercial customers in the national security industry. The Company's solutions deliver innovative technology, large-scale intelligence systems, command and control, data analytics, logistics, cybersecurity solutions, as well as intelligence analysis and operations support to critical missions around the world.

Health and Engineering businesses capitalize on the Company's knowledge and experience in technology and innovation. Major customers of Health and Engineering primarily include the U.S. federal government, state and local governmental agencies, foreign governments, healthcare providers, and commercial enterprises in various industries. The Health business provides services and solutions to commercial hospitals, the DOD and other U.S. Government agencies focused on information technology and behavioral health and life sciences offerings. The healthcare business is focused on the overall availability and quality of electronic health data, clinical care optimization, and life sciences research and development that ultimately improves the quality of care while lowering cost for the Company's customers. The Engineering business leverages technology and skills in process engineering, engineering design and systems integration to create innovative and cost effective solutions for its customers. These include products and solutions in energy generation, efficiency and management, environmental services, securing critical infrastructure, and designing and building construction projects.

Corporate and Other includes the operations of the Company’s internal real estate management subsidiary, various corporate activities, certain corporate expense items that are not reimbursed by the Company’s U.S. Government customers and certain other revenue and expense items excluded from the CODM’s evaluation of a reportable segment’s performance.

The following tables summarize business segment information for the 11-month period ended January 1, 2016, fiscal 2015 and fiscal 2014:

	11 Months Ended			12 Months Ended
	January 1, 2016			January 30, 2015			January 31, 2014
	(in millions)
Revenues:
National Security Solutions	$	3,210		$	3,594		$	4,049
Health and Engineering	1,496			1,485			1,718
Corporate and Other	6			(16		)	(9		)
Intersegment elimination	—			—			(3		)
Total revenues	$	4,712		$	5,063		$	5,755
Operating income (loss):
National Security Solutions	$	263		$	286		$	292
Health and Engineering	76			(472		)	20
Corporate and Other	(19		)	(28		)	(149		)
Total operating income (loss)	$	320		$	(214	)	$	163
Amortization of intangible assets:
National Security Solutions	$	—		$	—		$	3
Health and Engineering	8			15			32
Total amortization of intangible assets	$	8		$	15		$	35

Asset information by segment is not a key measure of performance used by the CODM. Interest income, interest expense and provision for income taxes, as reported in the consolidated financial statements, are not part of operating income and are primarily recorded at the corporate level. Under U.S. Government Cost Accounting Standards, indirect costs including depreciation expense are collected in numerous indirect cost pools which are then collectively allocated out to the Company’s reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base. While depreciation expense is a component of the allocated costs, the allocation process precludes depreciation expense from being specifically identified by the Company’s individual reportable segments. For this reason, depreciation expense by reportable segment has not been reported above.

Substantially all of the Company's revenues and tangible long-lived assets are generated by or located in the United States. As such, the financial information by geographic location is not presented.

The Company's total revenues are largely attributable to prime contracts with the U.S. Government or to subcontracts with other contractors engaged in work for the U.S. Government. The percentages of total revenues for the U.S. Government, its agencies and other customers comprising more than 10% of total revenues in any of the years for the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014 were as follows:

	11 Months Ended		12 Months Ended
	January 1, 2016		January 30, 2015		January 31, 2014
U.S. Government	76	%	79	%	78	%
U.S. DoD	64	%	67	%	68	%
U.S. Army	14	%	16	%	19	%
Maryland Procurement Office	10	%	10	%	8	%

Leidos, Inc.

Business Segment Information

Business Segment Information:

The Company defines its reportable segments based on the way the chief operating decision maker ("CODM"), currently its chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. The Company has the following reportable segments: National Security Solutions, Health and Engineering, and Corporate and Other.

National Security Solutions is focused on rapidly deploying agile, cost-effective solutions to meet the ever-changing missions of the Company's customers in areas of intelligence surveillance and reconnaissance, integrated systems and cybersecurity and global services. National Security Solutions provides a diverse portfolio of national security solutions and systems for air, land, sea, space and cyberspace for the U.S. Intelligence Community, the DoD, military services, the DHS, government agencies of U.S. allies abroad, and other federal, civilian, and commercial customers in the national security industry. The Company's solutions deliver innovative technology, large-scale intelligence systems, command and control, data analytics, logistics, cybersecurity solutions, as well as intelligence analysis and operations support to critical missions around the world.

Health and Engineering businesses capitalize on the Company's knowledge and experience in technology and innovation. Major customers of Health and Engineering primarily include the U.S. federal government, state and local governmental agencies, foreign governments, healthcare providers, and commercial enterprises in various industries. The Health business provides services and solutions to commercial hospitals, the DOD and other U.S. Government agencies focused on information technology and behavioral health and life sciences offerings. The healthcare business is focused on the overall availability and quality of electronic health data, clinical care optimization, and life sciences research and development that ultimately improves the quality of care while lowering cost for the Company's customers. The Engineering business leverages technology and skills in process engineering, engineering design and systems integration to create innovative and cost effective solutions for its customers. These include products and solutions in energy generation, efficiency and management, environmental services, securing critical infrastructure, and designing and building construction projects.

Corporate and Other includes the operations of the Company’s internal real estate management subsidiary, various corporate activities, certain corporate expense items that are not reimbursed by the Company’s U.S. Government customers and certain other revenue and expense items excluded from the CODM’s evaluation of a reportable segment’s performance.

The following tables summarize business segment information for the 11-month period ended January 1, 2016, fiscal 2015 and fiscal 2014:

	11 Months Ended			12 Months Ended
	January 1, 2016			January 30, 2015			January 31, 2014
	(in millions)
Revenues:
National Security Solutions	$	3,210		$	3,594		$	4,049
Health and Engineering	1,496			1,485			1,718
Corporate and Other	6			(16		)	(9		)
Intersegment elimination	—			—			(3		)
Total revenues	$	4,712		$	5,063		$	5,755
Operating income (loss):
National Security Solutions	$	263		$	286		$	292
Health and Engineering	76			(472		)	20
Corporate and Other	(19		)	(28		)	(149		)
Total operating income (loss)	$	320		$	(214	)	$	163
Amortization of intangible assets:
National Security Solutions	$	—		$	—		$	3
Health and Engineering	8			15			32
Total amortization of intangible assets	$	8		$	15		$	35

Asset information by segment is not a key measure of performance used by the CODM. Interest income, interest expense and provision for income taxes, as reported in the consolidated financial statements, are not part of operating income and are primarily recorded at the corporate level. Under U.S. Government Cost Accounting Standards, indirect costs including depreciation expense are collected in numerous indirect cost pools which are then collectively allocated out to the Company’s reportable segments based on a representative causal or beneficial relationship of the costs in the pool to the costs in the base. While depreciation expense is a component of the allocated costs, the allocation process precludes depreciation expense from being specifically identified by the Company’s individual reportable segments. For this reason, depreciation expense by reportable segment has not been reported above.

Substantially all of the Company's revenues and tangible long-lived assets are generated by or located in the United States. As such, the financial information by geographic location is not presented.

The Company's total revenues are largely attributable to prime contracts with the U.S. Government or to subcontracts with other contractors engaged in work for the U.S. Government. The percentages of total revenues for the U.S. Government, its agencies and other customers comprising more than 10% of total revenues in any of the years for the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014 were as follows:

	11 Months Ended		12 Months Ended
	January 1, 2016		January 30, 2015		January 31, 2014
U.S. Government	76	%	79	%	78	%
U.S. DoD	64	%	67	%	68	%
U.S. Army	14	%	16	%	19	%
Maryland Procurement Office	10	%	10	%	8	%