Leidos Holdings, Inc. · NYSE:LDOS

Leidos — 2016 Cowen Aerospace / Defense & Transportation Conference

26 slides from Leidos's conference presentation, Feb 4, 2016

  1. Slide 1: 2016 Cowen Aerospace / Defense & Transportation Conference

    2016 Cowen Aerospace / Defense & Transportation Conference February 4, 2016 1 ©2016 LEIDOS. ALL RIGHTS RESERVED © Leidos. All rights reserved.

  2. Slide 2: Legal Disclosures

    Legal Disclosures Cautionary Statement Regarding Forward Looking Statements The forward looking statements contained in this document involve risks and uncertainties that may affect Leidos Holdings, Inc.’s (“Leidos”) operations, markets, products, services, prices and other factors as discussed in f

  3. Slide 3: Agenda

    Agenda  Leidos Strategy  Rationale for the Combination  Transaction Financials and Structure  Integration Plan 3 ©2016 LEIDOS. ALL RIGHTS RESERVED

  4. Slide 4: Leidos Strategy

    Leidos Strategy 4 ©2016 LEIDOS. ALL RIGHTS RESERVED

  5. Slide 5: Mission and Vision

    MISSION Through our culture of innovation, we will develop deep customer trust and create enduring solutions that improve our world. VISION To be a recognized global leader in solving important problems in National Security, Critical Infrastructure, and Health. Through the inspired work of our diver

  6. Slide 6: Current US Government Budget Environment

    Current US Government Budget Environment FY17 Administration Budget (current $B)  SecDef Carter releases top line budget for $582B in early February  OCO funding for operations was significantly bolstered, to $59B in FY17  On October 28, 2015, a budget deal was passed via the Bipartisan Budget Ag

  7. Slide 7: Basis for Competition in the Industry

    Basis for Competition in the Industry  Experience – both technical and domain knowledge People  Customer relationships – understanding the mission requirements  Advanced technology-based solutions Capabilities  Large scale network design & operation  Data driven intelligence  Competitive cost

  8. Slide 8: Rationale for the Combination

    Rationale for the Combination 8 ©2016 LEIDOS. ALL RIGHTS RESERVED

  9. Slide 9: Strategic Transaction + Significant Value to Stockholders

    Strategic Transaction + Significant Value to Stockholders  Creates a leading Government & IT Services player with mission-critical Strategic Rationale domain expertise and high-technical competencies  Highly complementary market offerings, capability, and customer reach  Identifiable run-rate syn

  10. Slide 10: Combined Company Market Alignment

    Combined Company Market Alignment Leidos IS&GS ~$1.7B ~$1.6B ~$1.8B Design, Develop, Maintain NextGen Manage and Modernize Provide World-Class Analytic C4ISR Component Systems Large-Scale Critical IT Systems Services Leanly and Efficiently ~$1.6B ~$1.8B ~$1.6B Engineering Secure, Productive Efficien

  11. Slide 11: Strategic Rationale – Complementary Capabilities

    Strategic Rationale – Complementary Capabilities IS&GS Pro forma Leidos Logistics    Facilities Management    Data Center Consolidation    Financial and HR ERP Outsourcing    IT Operations    C4ISR    Application Development    Government Cybersecurity    Commercial Cybersecu

  12. Slide 12: Transaction Financials & Structure

    Transaction Financials & Structure 12 ©2016 LEIDOS. ALL RIGHTS RESERVED

  13. Slide 13: Pro forma Leidos Positioned For Growth

    Pro forma Leidos Positioned For Growth Leidos Pro forma Leidos Increased Scale ~$5 billion ~$10 billion With More Civil & Commercial: 28% Civil & Commercial: 45% Balanced Portfolio Defense & Intel: 72% Defense & Intel: 55% Competitive Cost Structure and ~8.0% ~9.5 – 10% Structurally Higher EBITDA Ma

  14. Slide 14: Pro Forma 2016E IS&GS EBITDA

    Pro Forma 2016E IS&GS EBITDA EBITDA Margin Margin Margin ~9.0% ~10.0% ~ LMT IS&GS EBIT D&A Pension & Other Cost Savings Pro Forma IS&GS EBITDA Adjustments (1)  IS&GS historically constrained by cost structure within Lockheed Martin − Pension and other flowdown costs retained by Lockheed Martin  IS

  15. Slide 15: Identifiable Run-Rate Net Cost Synergies of $120mm

    Identifiable Run-Rate Net Cost Synergies of $120mm, with Significant Portion Captured in Year-One Annual $120 $110 Net Cost Synergies(1) $70 ($M) $10 2016 2017 2018 2019  Confidence in delivering identified synergies expected annual run-rate net cost synergies of $120 million, fully achieved by lat

  16. Slide 16: RMT Transaction Structure

    RMT Transaction Structure  Leidos stockholders receive a fixed $1.0 billion cash dividend or ~$13.50 per share  LMT stockholders who elect to exchange will not receive the special dividend Leidos LMT IS&GS Fixed Share Price (1) $55 (2) Less: Dividend Per ~ ($13.50) Share Pro Forma Share Price ~ $4

  17. Slide 17: Integration Plan

    Integration Plan 17 ©2016 LEIDOS. ALL RIGHTS RESERVED

  18. Slide 18: Manageable Integration Risks With Significant Benefits Under Leidos Ownership

    Manageable Integration Risks With Significant Benefits Under Leidos Ownership Risk Mitigation Benefits Under LDOS Ownership  Leidos business is stable and has  Lower cost structure will improve returned to growth win rates  Attractive debt financing costs and  IS&GS will benefit from increased p

  19. Slide 19: Integration Philosophy and Timeline

    Integration Philosophy and Timeline Integration Philosophy  Apply Leidos “Line-Functional Matrix”  Focus early organization integration on areas with revenue growth synergies (including Health IT / Airport Modernization)  Business Development alignment with customers via Account Managers, to main

  20. Slide 20: Summary of IS&GS Transaction

    Summary of IS&GS Transaction Creates a leading Government & IT Services player with mission-critical domain expertise and high-technical competencies Highly complementary market offerings, capability and customer reach Consistent with Clearly identifiable near-term cost synergies and long term reven

  21. Slide 21: Appendix

    Appendix 21 ©2016 LEIDOS. ALL RIGHTS RESERVED

  22. Slide 22: Transaction Summary

    Transaction Summary  Leidos to combine with Lockheed Martin’s Information Systems & Global Solutions (“IS&GS”) business via a Reverse Morris Trust structure Structure and  Total transaction value of $5 billion for IS&GS, including $3.2 billion(1) in Leidos stock Consideration (~77 million shares)

  23. Slide 23: How Does The RMT Transaction Work?

    How Does The RMT Transaction Work? IS&GS merges with Leidos in tax-free Reverse Morris Trust transaction Transaction LMT Participating LMT Existing Leidos Stockholders Stockholders Stockholders 2 Split-off Shares 50.5% 49.5% 1 Cash LMT Leidos $1.0B 1 Cash $1.8B Retained 3 Merge (via merger sub) IS&G

  24. Slide 24: RMT Transaction Relative Ownership

    RMT Transaction Relative Ownership  Tax-free Reverse Morris Trust structure  Ownership split − 49.5% existing Leidos stockholders − 50.5% Lockheed Martin stockholders  One-time special dividend of ~$13.50 / share to Leidos stockholders at close IS&GS Enterprise Value(1) $5.0 billion $4.6 billion

  25. Slide 25: How Does The Split-Off Work?

    How Does The Split-Off Work? Split-off allows LMT stockholders to elect to exchange LMT stock for Leidos stock and doesn’t create any transaction risk  Existing LMT stockholders can elect to exchange LMT shares for Leidos shares  ~15M LMT shares (less than 5% of LMT shares) exchanged for ~77M Leid

  26. Slide 26: Prudent Leverage, in Line With Peers

    Prudent Leverage, in Line With Peers  Strong free cash flow profile will support continuous capital return to stockholders and rapid delevering Pro Forma Capitalization ($B) − Maintain quarterly $0.32 / share dividends to all stockholders Cash $0.2 Gross Debt / LTM Adj. Bank EBITDA(1,2) Existing Le

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