Business Context and Reporting Period
This Form 8-K, filed on July 29, 2016, by Leidos Holdings, Inc. (Leidos), addresses the ongoing Reverse Morris Trust transaction to combine Leidos with Lockheed Martin Corporation's Information Systems & Global Solutions (IS&GS) business segment. The filing provides updated unaudited pro forma financial information and interim financial statements for the IS&GS business as of June 26, 2016, and for the six months ended June 26, 2016.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it references the inclusion of the following unaudited financial data in attached exhibits:
- Pro forma combined condensed consolidated balance sheet as of July 1, 2016.
- Pro forma combined condensed consolidated statement of income for the six months ended July 1, 2016.
- Pro forma combined consolidated statement of income for the eleven months ended January 1, 2016.
- Supplemental combined consolidated statement of income for the 12 months ended January 1, 2016.
- Unaudited interim combined financial statements of the IS&GS business.
- Estimated value of backlog for the combined entity.
Non-GAAP financial measures and reconciliations to GAAP measures (including EPS) are also referenced but not detailed in the text of this report.
Material Changes
The primary material event is the commencement of an exchange offer by Lockheed Martin on July 11, 2016, allowing stockholders to exchange Lockheed Martin common stock for shares of Abacus Innovations Corporation (Splitco), which will convert to Leidos common stock upon merger completion. The filing updates the pro forma financial information previously disclosed to reflect the transaction as if consummated.
Guidance, Outlook, and Risks
Management commentary is limited to the disclosure of updated pro forma data and the inclusion of Management's Discussion and Analysis (MD&A) for the IS&GS business in the exhibits. The filing contains a comprehensive cautionary statement regarding forward-looking statements, highlighting significant risks including:
- Completion of the transaction on anticipated terms and timing.
- Obtaining necessary stockholder and regulatory approvals.
- Anticipated tax treatment and market conditions affecting the split-off transaction.
- Unforeseen liabilities and integration challenges.
- Disruptions to business operations and the ability to achieve anticipated synergies.
Investor Verification Checklist
- Review Exhibit 99.1 for the specific unaudited pro forma combined financial statements and non-GAAP reconciliations.
- Examine Exhibits 99.2 and 99.3 for the unaudited interim financial statements and MD&A of the Lockheed Martin IS&GS business.
- Verify the status of the exchange offer and the effectiveness of the Registration Statements (Form S-4 and S-1) filed on July 11, 2016.
- Assess the estimated backlog value provided in the Additional Financial Information.
- Consult the definitive proxy statement and prospectus for detailed risk factors and transaction terms.