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Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 29, 2017	Feb. 13, 2018	Jun. 30, 2017
Document Documentand Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 29, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	LDOS
Entity Registrant Name	Leidos Holdings, Inc.
Entity Central Index Key	0001336920
Current Fiscal Year End Date	--12-29
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		151,459,401
Entity Public Float			$ 7,777,971,706

Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 29, 2017	Dec. 30, 2016
Current assets:
Cash and cash equivalents	$ 390	$ 376
Receivables, net	1,831	1,657
Inventory, prepaid expenses and other current assets	453	348
Total current assets	2,674	2,381
Property, plant and equipment, net	232	259
Intangible assets, net	856	1,589
Goodwill	4,974	4,622
Deferred income taxes	0	16
Other assets	254	265
Total assets	8,990	9,132
Current liabilities:
Accounts payable and accrued liabilities	1,639	1,427
Accrued payroll and employee benefits	487	483
Dividends payable	17	23
Income taxes payable	4	21
Notes payable and long-term debt, current portion	55	62
Total current liabilities	2,202	2,016
Notes payable and long-term debt, net of current portion	3,056	3,225
Deferred tax liabilities	220	540
Other long-term liabilities	129	204
Commitments and contingencies (Notes 18, 21 and 22)
Stockholder's equity:
Preferred stock, $.0001 par value,10 million shares authorized and no shares issued and outstanding at December 29, 2017, and December 30, 2016	0	0
Common stock, $.0001 par value, 500 million shares authorized, 151 million and 150 million shares issued and outstanding at December 29, 2017, and December 30, 2016, respectively	0	0
Additional paid-in capital	3,344	3,316
Accumulated deficit	(7)	(177)
Accumulated other comprehensive loss	33	(4)
Total stockholder's equity	3,370	3,135
Non-controlling interest	13	12
Total equity	3,383	3,147
Total liabilities and stockholders' equity	$ 8,990	$ 9,132

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 29, 2017	Dec. 30, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (shares)	10,000,000	10,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (shares)	500,000,000	500,000,000
Common stock, shares issued (shares)	151,000,000	150,000,000
Common stock, shares outstanding (shares)	151,000,000	150,000,000

Consolidated Statements Of Income - USD ($) $ in Millions	11 Months Ended	12 Months Ended
Consolidated Statements Of Income - USD ($) $ in Millions	Jan. 01, 2016	Dec. 29, 2017	Dec. 30, 2016
Income Statement [Abstract]
Revenues	$ 4,712	$ 10,170	$ 7,043
Cost of revenues	4,146	8,923	6,191
Selling, general and administrative expenses	201	552	334
Bad debt expense	8	10	3
Acquisition and integration costs	0	102	90
Asset impairment charges	33	0	4
Restructuring expenses	4	37	14
Equity earnings of non-consolidated subsidiaries	0	(13)	(10)
Operating income	320	559	417
Interest income	4	8	10
Interest expense	(53)	(148)	(96)
Other (expense) income, net	84	(26)	(13)
Income from continuing operations before income taxes	355	393	318
Income tax expense	(112)	(29)	(72)
Income from continuing operations	243	364	246
Discontinued operations:
Loss from discontinued operations before income taxes	(1)	0	0
Loss from discontinued operations	(1)	0	0
Net income	242	364	246
Less: net (loss) income attributable to non-controlling interest	0	(2)	2
Net income attributable to Leidos common stockholders	$ 242	$ 366	$ 244
Basic:
Income from continuing operations attributable to Leidos common stockholders (usd per share)	$ 3.33	$ 2.41	$ 2.39
Discontinued operations, net of taxes (usd per share)	(0.01)	0.00	0.00
Net income attributable to Leidos common stockholders (usd per share)	3.32	2.41	2.39
Diluted:
Income from continuing operations attributable to Leidos common stockholders (usd per share)	3.28	2.38	2.35
Discontinued operations, net of taxes (usd per share)	(0.01)	0.00	0.00
Net income attributable to Leidos common stockholders (usd per share)	$ 3.27	$ 2.38	$ 2.35

Consolidated Statements Of Comprehensive Income - USD ($) $ in Millions	11 Months Ended	12 Months Ended
	Jan. 01, 2016	Dec. 29, 2017	Dec. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 242	$ 364	$ 246
Other comprehensive income, net of taxes:
Foreign currency translation adjustments	(1)	24	(7)
Unrecognized gain on derivative instruments	(1)	(4)	(14)
Pension liability adjustments	3	9	(3)
Total other comprehensive income, net of taxes	3	37	4
Comprehensive income	245	401	250
Less: comprehensive (loss) income attributable to non-controlling interest	0	(2)	2
Comprehensive income attributable to Leidos common stockholders	$ 245	$ 403	$ 248

Consolidated Statements Of Stockholders' Equity - USD ($) shares in Millions, $ in Millions	Total	Leidos Holdings, Inc. stockholders' equity	Shares of common stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive income (loss)	Non-controlling interest
Balance, shares at Jan. 30, 2015			74
Balance, value at Jan. 30, 2015	$ 998	$ 998		$ 1,433	$ (424)	$ (11)	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	242	242			242
Other comprehensive income, net of taxes	3	3				3
Issuances of stock (less forfeitures), shares			1
Issuances of stock (less forfeitures)	7	7		7
Repurchases of stock and other, shares			(3)
Repurchases of stock and other	(118)	(118)		(118)
Dividends	(95)	(95)			(95)
Adjustments for income tax benefits from stock-based compensation	1	1		1
Stock-based compensation	30	30		30
Stock issued for the IS&GS Business acquisition	0
Balance, shares at Jan. 01, 2016			72
Balance, value at Jan. 01, 2016	1,068	1,068		1,353	(277)	(8)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	246	244			244		2
Other comprehensive income, net of taxes	4	4				4
Issuances of stock (less forfeitures), shares			1
Issuances of stock (less forfeitures)	36	36		36
Repurchases of stock and other	(24)	(24)		(24)
Dividends	(144)	(144)			(144)
Special cash dividend of $13.64 per share	(1,022)	(1,022)		(1,022)
Stock-based compensation	35	35		35
Stock issued for the IS&GS Business acquisition, shares			77
Stock issued for the IS&GS Business acquisition	2,938	2,938		2,938
Equity interest acquired	10						10
Balance, shares at Dec. 30, 2016			150
Balance, value at Dec. 30, 2016	3,147	3,135		3,316	(177)	(4)	12
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	364	366			366		(2)
Other comprehensive income, net of taxes	37	37				37
Issuances of stock (less forfeitures), shares			1
Issuances of stock (less forfeitures)	16	16		16
Repurchases of stock and other	(31)	(31)		(31)
Dividends	(196)	(196)			(196)
Stock-based compensation	43	43		43
Stock issued for the IS&GS Business acquisition	0
Equity interest acquired	3						3
Balance, shares at Dec. 29, 2017			151
Balance, value at Dec. 29, 2017	$ 3,383	$ 3,370		$ 3,344	$ (7)	$ 33	$ 13

Consolidated Statements Of Equity (Parenthetical) - $ / shares	11 Months Ended	12 Months Ended
	Jan. 01, 2016	Dec. 29, 2017	Dec. 30, 2016
Statement of Stockholders' Equity [Abstract]
Cash dividend per share	$ 1.28	$ 1.28	$ 1.28
Special cash dividend of $13.64 per share			$ 13.64

Consolidated Statements Of Cash Flows - USD ($) $ in Millions	11 Months Ended	12 Months Ended
	Jan. 01, 2016	Dec. 29, 2017	Dec. 30, 2016
Cash flows from operations:
Net income	$ 242	$ 364	$ 246
Income from discontinued operations	1	0	0
Adjustments to reconcile net income to net cash provided by continuing operations:
Depreciation and amortization	41	336	122
Amortization of equity method investments	0	14	0
Stock-based compensation	30	43	35
Asset impairment charges	33	0	4
Promissory note impairment	0	33	0
Gain on a real estate sale	(82)	0	0
Bad debt expense	8	10	3
Non-cash interest expense	1	12	4
Other	(3)	9	(7)
Change in assets and liabilities, net of effects of acquisitions and dispositions:
Receivables	(19)	(191)	123
Inventory, prepaid expenses and other current assets	(14)	(76)	(98)
Accounts payable and accrued liabilities	102	152	(25)
Accrued payroll and employee benefits	5	8	26
Deferred income taxes and income taxes receivable/payable	81	(151)	36
Other long-term assets/liabilities	(44)	(37)	(20)
Net cash provided by operating activities of continuing operations	382	526	449
Cash flows from investing activities:
Payments for property, plant and equipment	(27)	(81)	(29)
Acquisitions of businesses	0	0	25
Payments on accrued purchase price related to prior acquisition	(13)	0	0
Net proceeds from sale of assets	79	8	3
Proceeds from disposition of business	27	0	23
Other	4	2	4
Net cash (used in) provided by investing activities of continuing operations	70	(71)	26
Cash flows from financing activities:
Payments of long-term debt	(39)	(209)	(277)
Payments on real estate financing transaction	(8)	0	0
Proceeds from debt issuance	0	0	690
Payments for debt issuance and modification costs	0	(4)	(30)
Proceeds from issuances of stock	6	13	25
Repurchases of stock and other	(118)	(31)	(24)
Special cash dividend payment	0	0	(993)
Dividend payments	(93)	(198)	(142)
Other	1	0	0
Net cash used in financing activities of continuing operations	(251)	(429)	(751)
Net increase (decrease) in cash, cash equivalents and restricted cash from continuing operations	201	26	(276)
Cash flows from discontinued operations:
Net decrease in cash, cash equivalents and restricted cash from discontinued operations	(7)	0	0
Net cash used in operating activities of discontinued operations	6	0	(1)
Net decrease in cash, cash equivalents and restricted cash from discontinued operations	(1)	0	(1)
Net increase (decrease) in cash, cash equivalents and restricted cash	200	26	(277)
Cash, cash equivalents and restricted cash at beginning of year	473	396	673
Cash, cash equivalents and restricted cash at end of year	$ 673	$ 422	$ 396

Summary of Significant Accounting Policies

12 Months Ended

Dec. 29, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation

Leidos Holdings, Inc., a Delaware corporation ("Leidos") is a holding company whose direct 100%-owned subsidiaries and principal operating companies are Leidos, Inc. and Leidos Innovations Corporation ("Leidos Innovations"). Leidos is a FORTUNE 500^® science, engineering and information technology company that makes the world healthier, safer and more efficient by providing services and solutions in the defense, intelligence, civil and health markets. Leidos' domestic customers include the U.S. Department of Defense ("DoD"), the U.S. Intelligence Community, the U.S. Department of Homeland Security ("DHS"), the Federal Aviation Administration, the Department of Veterans Affairs, several other U.S. Government civil agencies and state and local government agencies. Leidos' international customers include foreign governments and their agencies, primarily located in the United Kingdom, the Middle East and Australia. Unless indicated otherwise, references to the "Company," "we," "us" and "our" refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.

On August 16, 2016, a wholly-owned subsidiary of Leidos Holdings, Inc. merged with the Information Systems & Global Solutions business (the "IS&GS Business") of Lockheed Martin Corporation in a Reverse Morris Trust transaction. The acquired IS&GS Business was renamed Leidos Innovations Corporation. See "Note 2—Acquisitions" for further information. As a result of the Lockheed Martin transaction, the Company received a controlling interest in Mission Support Alliance, LLC ("MSA"), a joint venture with Jacobs Engineering Group, Inc. and Centerra Group, LLC. The Company has consolidated the financial results for MSA into its consolidated financial statements. The consolidated financial statements include the balances of all voting interest entities in which Leidos has a controlling voting interest ("subsidiaries") and a variable interest entity ("VIE") in which Leidos is the primary beneficiary. The consolidated balances of MSA, of which Leidos has a 47% interest, and the Company's variable interest entity are not material to the Company's consolidated financial statements for the periods presented. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

During fiscal 2017, the Company completed its business reorganization, which resulted in identification of three reportable segments (Defense Solutions, Civil and Health). Additionally, the Company separately presents the costs associated with corporate functions as Corporate. The Company commenced operating and reporting under the new organizational structure effective the beginning of fiscal 2017. As a result of this change, prior year segment results and disclosures have been recast to reflect the new reportable segments (see "Note 20—Business Segments").

In December 2017, the U.S. government enacted the Tax Cuts and Jobs Act ("Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code. In January 2018, the SEC issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standard Codification ("ASC") 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is not complete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act (see "Note 16—Income Taxes").

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. The Company separately disclosed "Bad debt expense" and "Non-cash interest expense" on the consolidated statements of cash flows, which was previously aggregated in "Other" within operating cash flows.

Reporting Periods

On March 20, 2015, the Board of Directors approved the amendment and restatement of the bylaws of Leidos to change Leidos' year end from the Friday nearest the end of January to the Friday nearest the end of December.

As a result of this change, the Company filed a Transition Report on Form 10-K for the 11-month period which began on January 31, 2015, and ended on January 1, 2016.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to estimated profitability of long-term contracts, indirect billing rates, allowances for doubtful accounts, inventories, fair value and impairment of intangible assets and goodwill, income taxes, pension benefits, stock-based compensation expense and contingencies. These estimates have been prepared by management on the basis of the most current and best available information; however, actual results could differ materially from those estimates.

Restructuring Expenses

Restructuring expenses are incurred in connection with programs aimed at reducing the Company's costs and primarily include lease termination, vacancy costs and termination costs associated with headcount reduction.

The Company's restructuring actions include one-time involuntary termination benefits as well as certain contractual termination benefits or employee terminations under ongoing benefit arrangements. One-time involuntary termination benefits are recognized as a liability at estimated fair value when the plan of termination has been communicated to employees and certain other criteria are met. Ongoing termination benefit arrangements are recognized as a liability at estimated fair value when it is probable that amounts will be paid to employees and such amounts are reasonably estimable. When the Company ceases using a facility but does not intend to or is unable to terminate the operating lease, the Company records a liability for the present value of the remaining lease payments, net of estimated sublease income, if any, that could be reasonably obtained for the property (even if the Company does not intend to sublease the facility for the remaining term of the lease). Costs associated with exit or disposal activities, including the related one-time and ongoing involuntary termination benefits, are reflected as "Restructuring expenses" on the consolidated statements of income. See "Note 4—Restructuring Expenses" for additional information about the Company's restructuring activities.

Operating Cycle

The Company's operating cycle for long-term contracts may be greater than one year and is measured by the average time intervening between the inception and the completion of those contracts. Contract-related assets and liabilities are therefore generally classified as current assets and current liabilities.

Business Combinations, Investments and Variable Interest Entities

Business Combinations

The accounting for business combinations requires the Company to make judgments and estimates related to the fair value of assets acquired, including the identification and valuation of intangible assets, as well as liabilities and contingencies assumed. Such judgments and estimates directly impact the amount of goodwill recognized in connection with an acquisition.

Investments

Investments in entities and corporate joint ventures where the Company has a noncontrolling ownership interest representing less than 50% and over which the Company has the ability to exercise significant influence, are accounted for under the equity method of accounting whereby the Company recognizes its proportionate share of the entities' net income or loss and does not consolidate the entities' assets and liabilities.

Equity investments in entities over which the Company does not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost or cost net of other-than-temporary impairments.

Variable Interest Entities

The Company occasionally forms joint ventures and/or enters into arrangements with special purpose limited liability companies for the purpose of bidding and executing on specific projects. The Company analyzes each such arrangement to determine whether it represents a VIE. If the arrangement is determined to be a VIE, the Company assesses whether it is the primary beneficiary of the VIE and is consequently required to consolidate the VIE.

Revenue Recognition

The Company's revenues are generated primarily from contracts with the U.S. Government, commercial customers and various international, state and local governments or from subcontracts with other contractors engaged in work with such customers. The Company performs under various types of contracts, which include firm-fixed-price, time-and-materials, fixed-price-level-of-effort, cost-plus-fixed-fee, cost-plus-award-fee, cost-plus-incentive-fee and fixed-price-incentive fee contracts.

Firm-fixed-price contracts—Revenues and fees on these contracts that are system integration or engineering in nature are primarily recognized using the percentage-of-completion method of accounting utilizing the cost-to-cost method. The completed contract method is utilized when reasonable and reliable cost estimates for a project cannot be made.

Time-and-materials contracts—Revenue is recognized on time-and-materials contracts based on the hours provided in performance under the contract multiplied by the negotiated contract billing rates, plus the negotiated contract billing rate of any allowable material and subcontract costs and out-of-pocket expenses.

Fixed-price-level-of-effort contracts ("FP-LOE")—These contracts are substantially similar to time-and-materials contracts except they require a specified level of effort over a stated period of time. Accordingly, the Company recognizes revenue on FP-LOE contracts with the U.S. Government in a manner similar to time-and-materials contracts in which the Company measures progress toward completion based on the hours provided in performance under the contract multiplied by the negotiated contract billing rates, plus the negotiated contract billing rate of any allowable material costs and out-of-pocket expenses.

Cost-plus-fixed-fee contracts—Revenue is recognized on cost-plus-fixed-fee contracts with the U.S. Government on the basis of partial performance equal to costs incurred, plus an estimate of applicable fees earned as the Company becomes contractually entitled to reimbursement of costs and the applicable fees.

Cost-plus-award-fee/cost-plus-incentive fee contracts—Revenues and fees on these contracts with the U.S. Government are recognized using the percentage-of-completion method of accounting using the cost-to-cost method. The Company includes an estimate of the ultimate incentive or award fee to be received on the contract in the estimate of contract revenues for purposes of applying the percentage-of-completion method of accounting.

Fixed-price-incentive fee contracts ("FP-IF")—These contracts are substantially similar to cost-plus-incentive fee contracts recognized using the percentage-of-completion method of accounting except they require specified targets for cost and profit, price ceiling (but not a profit ceiling or floor), and profit adjustment formula. Under a FP-IF contract, the allowable costs incurred are eligible for reimbursement but are subject to a cost-share arrangement, which affects profitability. Generally, if costs exceed the contract target cost or are not allowable under the applicable regulations, the Company may not be able to obtain reimbursement for all costs and may have fees reduced or eliminated.

Revenues from services and maintenance contracts, notwithstanding contract type, are recognized over the term of the respective contracts as the services are performed and revenue is earned. Revenues from unit-priced contracts are recognized as transactions are processed based on objective measures of output. Revenues from the sale of manufactured products are recorded upon passage of title and risk of loss to the customer, which is generally upon delivery, provided that all other requirements for revenue recognition have been met.

The Company also uses the efforts-expended method of percentage-of-completion using measures such as labor dollars for measuring progress toward completion in situations in which this approach is more representative of the progress on the contract. For example, the efforts-expended method is utilized when there are significant amounts of materials or hardware procured for the contract that is not representative of progress on the contract. Additionally, the Company utilizes the units-of-delivery method under percentage-of-completion on contracts where separate units of output are produced. Under the units-of-delivery method, revenue is generally recognized when the units are delivered to the customer, provided that all other requirements for revenue recognition have been met.

The Company evaluates its contracts for multiple elements, and when appropriate, separates the contracts into separate units of accounting for revenue recognition. Revenues generated from product sales do not represent a material amount of the Company's total revenues.

The Company generally provides for anticipated losses on contracts by recording an expense during the period in which the losses are determined. Amounts billed and collected but not yet recognized as revenues under contracts are deferred. Contract costs incurred for U.S. Government contracts, including indirect costs, are subject to audit and adjustment through negotiations between the Company and government representatives. The Company's indirect cost audits by the Defense Contract Audit Agency remain open for fiscal 2012 and subsequent fiscal years for Leidos, Inc. and for fiscal 2011 and subsequent fiscal years for Leidos Innovations. Revenues on U.S. Government contracts have been recorded in amounts that are expected to be realized upon final settlement.

Contract claims are unanticipated additional costs incurred but not provided for in the executed contract price that the Company seeks to recover from the customer. Such costs are expensed as incurred. Additional revenue related to contract claims is recognized when the amounts are awarded by the customer. Un-priced change orders are included in revenue when they are probable of recovery in an amount at least equal to the cost.

On certain contracts where the Company is not the primary obligor such as the provision of administrative oversight and/or management of government-owned facilities or support services related to other vendors' products, the Company recognizes as revenue the net management fee associated with the services and excludes from its income statement the gross sales and costs associated with the facility or other vendors' products.

Changes in Estimates on Contracts

Changes in estimates related to long-term contracts accounted for using the percentage of completion method of accounting are recognized in the period in which such changes are made for the inception-to-date effect of the changes, with the exception of contracts acquired through the acquisition of the IS&GS Business (see "Note 2—Acquisitions"), where the adjustment is for the period commencing from the date of acquisition. Changes in these estimates can occur over the contract performance period for a variety of reasons, including changes in contract scope, contract cost estimates and estimated incentive or award fees.

Changes in estimates on contracts for the periods presented were as follows:



	12 Months Ended				11 Months Ended
	December 29, 2017		December 30, 2016		January 1, 2016
	(in millions, except for per share amounts)
Net favorable impact to income from continuing operations before taxes	$	103	$	37	$	18
Impact on diluted EPS from continuing operations attributable to Leidos common stockholders	$	0.41	$	0.22	$	0.14

The increase in the changes in estimates on contracts from fiscal 2016 to fiscal 2017 is primarily due to completion of contracts or events which mitigated risk and due the finalization of award and incentive fees.

The impact on diluted EPS from continuing operations attributable to Leidos common stockholders is calculated using the Company's statutory tax rate.

Divestitures

From time-to-time, the Company may dispose (or management may commit to plans to dispose) of strategic or non-strategic components of the business. Divestitures representing a strategic shift in operations are classified as discontinued operations for all periods presented. Non-strategic divestitures are not reclassified as discontinued operations and remain in continuing operations.

Pre-contract and Transition Costs

Pre-contract Costs

Costs incurred on projects as pre-contract costs are deferred as assets ("Inventory, prepaid expenses and other current assets") when the Company has been requested by the customer to begin work under a new arrangement prior to contract execution and it is probable that the Company will recover the costs through the issuance of a contract. When the formal contract has been executed, the costs are recorded to the contract and revenue is recognized.

Transition Costs

Under certain services contracts, costs are incurred, usually at the beginning of the contract performance, to transition the services, employees and equipment from the customer or prior contractor. These costs are capitalized as deferred assets and amortized over the shorter of the contractual period of performance or expected period of performance, if recoverability is deemed probable.

Fair Value Measurements

The accounting standard for fair value measurements establishes a three-level value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than quoted prices in active markets for identical assets or liabilities that are observable either directly or indirectly or quoted prices that are not active (Level 2); and unobservable inputs in which there is little or no market data (e.g., discounted cash flow and other similar pricing models), which requires the Company to develop its own assumptions (Level 3).

The accounting guidance for fair value measurements requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The accounting guidance provides for the irrevocable option to elect, on a contract-by-contract basis, to measure certain financial assets and liabilities at fair value at inception of the contract and record any subsequent changes in fair value in earnings. The Company has not made fair value option elections on any of its financial assets and liabilities.

The fair value of financial instruments is determined based on quoted market prices, if available, or management's best estimate (see "Financial Instruments" below).

Management evaluates its investments for other-than-temporary impairment at each balance sheet date. When testing long-term investments for recovery of carrying value, the fair value of long-term investments is determined using various valuation techniques and factors such as, market prices of comparable companies (Level 2 input), discounted cash flow models (Level 3 input) and recent capital transactions of the portfolio companies being valued (Level 3 input). If management determines that an other-than-temporary decline in the fair value of an investment has occurred, an impairment loss is recognized to reduce the investment to its estimated fair value.

The Company's non-financial instruments measured at fair value on a non-recurring basis include goodwill, indefinite-lived intangible assets and long-lived tangible assets. The valuation methods used to determine fair value require a significant degree of management judgment to determine the key assumptions. As such, the Company generally classifies non-financial instruments as either Level 2 or Level 3 fair value measurements.

Financial Instruments

The Company is exposed to certain market risks which are inherent in certain transactions entered into during the normal course of business. These transactions include sales or purchase contracts denominated in foreign currencies, investments in equity securities and exposure to changing interest rates. The Company manages its risk to changes in interest rates through the use of derivative instruments.

For fixed rate borrowings, the Company uses variable interest rate swaps, effectively converting fixed rate borrowings to variable rate borrowings. These swaps are designated as fair value hedges. The fair value of these interest rate swaps is determined based on observed values for underlying interest rates on the LIBOR yield curve (Level 2).

For variable rate borrowings, the Company uses fixed interest rate swaps, effectively converting a portion of the variable interest rate payments to fixed interest rate payments. These swaps are designated as cash flow hedges. The fair value of these interest rate swaps is determined based on observed values for the underlying interest rates (Level 2).

The Company does not hold derivative instruments for trading or speculative purposes.

The Company's defined benefit plan assets consist of investments in pooled funds that contain investments with values based on quoted market prices, but for which the pools are not valued on a daily quoted market basis (Level 2 inputs).

Cash and Cash Equivalents

The Company's cash equivalents were primarily comprised of investments in several large institutional money market funds and bank deposits, with original maturity of three months or less. The Company includes outstanding payments within "Cash and cash equivalents" and increases "Accounts payable and accrued liabilities" on the consolidated balance sheets. At December 29, 2017, and December 30, 2016, the Company included $169 million and $67 million, respectively, of outstanding payments within "Cash and cash equivalents."

Restricted Cash

The Company has restricted cash balances, primarily representing advances from customers that are restricted as to use for expenditures related to that customer's contract. Restricted cash balances are included as "Inventory, prepaid expenses and other current assets" in the Company's consolidated balance sheets.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of accounts receivable. Since the Company's receivables are primarily with the U.S. Government, the Company does not have exposure to a material credit risk. Additionally, the Company is subject to credit risk related to its derivatives which is managed through the use of multiple counterparties with high credit standards.

Receivables

The Company's receivables include amounts billed and currently due from customers and amounts currently due from customers but are unbilled. Amounts billable are recognized at estimated realizable value and consist of costs and fees, substantially all of which are expected to be billed and collected generally within one year. Unbilled amounts also include rate variances that are billable upon negotiation of final indirect rates with the U.S. Government and, once billed, are subject to audit and approval by government representatives.

Contract retentions are billed upon contract completion, or the occurrence of a specified event, and when negotiation of final indirect rates with the U.S. Government is complete. Consequently, the timing of collection of retention balances is outside the Company's control. Based on the Company's historical experience, the majority of retention balances are expected to be collected beyond one year and write-offs of retention balances have not been significant. When events or conditions indicate that amounts outstanding from customers may become uncollectible, an allowance is estimated and recorded.

Inventories

Inventories are valued at the lower of cost or estimated net realizable value. Raw material inventory is valued using the average cost method. Work-in-process inventory includes raw material costs plus labor costs, including fringe benefits and allocable overhead costs. The majority of finished goods inventory consists of security products and baggage scanning equipment. The Company evaluates inventory against historical and planned usage to determine appropriate provisions for obsolete inventory.

Property, Plant and Equipment

Purchases of property, plant and equipment as well as costs associated with major renewals and improvements are capitalized. Maintenance, repairs and minor renewals and improvements are expensed as incurred.

Construction in Progress ("CIP") is used to accumulate all costs for projects that are not yet complete. CIP balances are transferred to the appropriate asset account when the asset is capitalized and ready for its intended use.

When assets are sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is recognized. Depreciation is recognized using the methods and estimated useful lives as follows:



	Depreciation method	Estimated useful lives (in years)
Computers and other equipment	Straight-line or declining-balance	2-10
Buildings	Straight-line	Not to exceed 40
Building improvements and leasehold improvements	Straight-line	Shorter of useful life of asset or remaining lease term
Office furniture and fixtures	Straight-line or declining-balance	6-9

The Company evaluates its long-lived assets for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable and the carrying amount of the asset exceeds its estimated fair value.

Project Assets

Purchases of project assets are capitalized for specific contracts where delivery has not yet occurred or ownership is maintained by the Company over the life of the contract. Project assets include enterprise software licenses, computers and significant material purchases on contracts. These project assets are relieved from the balance sheet based on different methodologies, including transfer of assets, amortization based on useful life and percentage of completion utilizing efforts expended method of revenue recognition.

Goodwill

Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill is not amortized, but instead is tested annually for impairment at the reporting unit level and tested more frequently if events or circumstances indicate that the carrying value may not be recoverable. The Company's policy is to perform its annual goodwill impairment evaluation as of the first day of the fourth quarter of its fiscal year. During fiscal 2017, the Company had five reporting units for the purpose of testing goodwill for impairment.

Goodwill is evaluated for impairment either under a qualitative assessment option or a quantitative approach depending on the facts and circumstances of a reporting unit, including consideration of the excess of fair value over carrying amount in previous assessments and changes in business environment.

When performing a qualitative assessment, the Company considers factors including, but not limited to, current macroeconomic conditions, industry and market conditions, cost factors, financial performance and other events relevant to the entity or reporting unit under evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that a reporting unit's fair value is less than its carrying amount, a quantitative goodwill impairment test is performed.

When performing a quantitative goodwill impairment test, the reporting unit carrying value is compared to its fair value. Goodwill is deemed impaired if, and the impairment loss is recognized for the amount by which, the reporting unit carrying value exceeds its fair value.

The Company estimates the fair value of each reporting unit using both market and income approaches (Level 3) when a quantitative analysis is performed. To determine the fair value of the reporting units, the outputs from both methods are equally weighted.

The market approach is a technique where the fair value is calculated based on fair values of publicly-traded companies that provide a reasonable basis of comparison with the reporting unit. Valuation ratios are selected that relate market prices to selected financial metrics from comparable companies. These ratios are applied after consideration of adjustments and weightings related to financial position, growth, volatility, working capital movement and other factors. Due to the fact that stock prices of comparable companies represent minority interests, the Company also considers an acquisition control premium to reflect the impact of additional value associated with a controlling interest.

The income approach is a technique where the fair value is calculated based on present value of future cash flows using risk-adjusted discount rates, which represent the weighted-average cost of capital ("WACC") for each reporting unit. Determination of WACC includes assessing the cost of equity and debt as of the valuation date. In addition, a terminal value is developed for forecasted future cash flows beyond the projection period discounted back to the present value. The forecasts used in the Company’s estimation of fair value are developed by management based on business and market considerations.

The goodwill impairment test process and valuation model is based upon certain key assumptions that require the exercise of significant judgment and assumptions including the use of appropriate financial projections, economic expectations, WACC, expected long-term growth rates, as well as using available market data. Significant changes to these estimates and assumptions could adversely impact conclusions and actual future results may differ from the estimates. In addition, the identification of reporting units and the allocation of assets and liabilities to the reporting units when determining the carrying value of each reporting unit also requires judgment.

Intangible Assets

Acquired intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are amortized over the following periods:



		Estimated useful lives (in years)
Program and contract intangibles		6-11
Backlog		1
Customer relationships		8
Software and technology		4-15

Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Intangible assets with indefinite lives are not amortized but are assessed for impairment at the beginning of the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Selling, General and Administrative Expenses

The Company classifies indirect costs incurred within or allocated to its U.S. Government customers as overhead (included in cost of revenues) or general and administrative expenses in the same manner as such costs are defined in the Company's disclosure statements under U.S. Government Cost Accounting Standards.

Selling, general and administrative expenses include general and administrative, bid and proposal and internal research and development ("IR&D") expenses.

The Company conducts research and development activities under customer-funded contracts and with company-funded IR&D funds. For fiscal 2017, fiscal 2016 and the 11-month period ended January 1, 2016, company-funded IR&D expense was $42 million, $44 million and $29 million, respectively. Expenses for research and development activities performed under customer contracts are charged directly to cost of revenues for those contracts.

Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with the accounting standard for income taxes. The asset and liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. Under this method, changes in tax rates and laws are recognized in income in the period such changes are enacted.

The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. If the Company were to determine that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount or would no longer be able to realize its deferred income tax assets in the future as currently recorded, the Company would make an adjustment to the valuation allowance which would decrease or increase the provision for income taxes.

The provision for federal, state, foreign and local income taxes is calculated on income before income taxes based on current tax law and includes the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provision differs from the amounts currently payable because certain items of income and expense are recognized in different reporting periods for financial reporting purposes than for income tax purposes.

The Company recognizes liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to uncertain tax positions in its income tax expense.

Stock-Based Compensation

The Company accounts for stock-based compensation at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period, net of an estimated forfeiture rate.

The fair value of restricted stock awards and performance-based stock awards is based on the closing price of the Company's common stock on the date of grant.

The fair value of stock option awards granted is based on using the Black-Scholes-Merton option pricing model. The estimation of stock option fair value requires management to make estimates and judgments about, among other things, employee exercise behavior, forfeiture rates and the expected volatility of Leidos common stock over the expected option term. These judgments directly affect the amount of compensation expense that will ultimately be recognized.

Foreign Currency

The financial statements of consolidated international subsidiaries, for which the functional currency is not the U.S. dollar, are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate over the reporting period for revenues, expenses, gains and losses. Translation adjustments are recorded as accumulated other comprehensive income (loss) in stockholders' equity. Gains and losses due to movements in foreign currency exchange rates, are recognized as "Other (expense) income, net" in the Company's consolidated statements of income.

Accounting Standards Updates Adopted

During fiscal 2017, the Company adopted the following Accounting Standards Updates ("ASU"):

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminates step two of the goodwill impairment test and simplifies how the amount of an impairment loss is determined. The update is effective for public companies in the beginning of fiscal year 2020 and shall be applied on a prospective basis. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the provisions of ASU 2017-04 prospectively in the first quarter of fiscal 2017 and the standard did not have a material effect on the Company's consolidated financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides clarification on when to apply modification accounting for a stock-based award to reduce diversity in practice. The update is effective for public companies in the beginning of fiscal year 2018 and shall be applied on a prospective basis. Early adoption is permitted for public business entities. The Company adopted the provisions of ASU 2017-09 prospectively in the second quarter of fiscal 2017 and the standard did not have a material effect on the Company's consolidated financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU clarifies guidance in how certain cash receipts and cash payments are presented and classified on the statement of cash flows to reduce diversity in practice. The update is effective for public companies in the beginning of fiscal 2018. The amendments should be applied using a retrospective transition method to each period presented. For items that are impractical to apply the amendments retrospectively, they shall be applied prospectively as of the earliest date practicable. Early adoption is permitted. The Company early adopted the provisions of ASU 2016-15 in the third quarter of fiscal 2017, and the adoption did not have a material impact on the Company's consolidated statement of cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a revised guidance that requires restricted cash and restricted cash equivalents to be included within beginning and ending total cash amounts reported in the consolidated statements of cash flows. The ASU requires disclosure of the nature of the restrictions on cash balances along with a reconciliation of the amount of cash and cash equivalents, as presented on the balance sheet, to the amount of cash, cash equivalents and restricted cash, as presented on the statement of cash flows. The update is effective for public companies in the beginning of fiscal year 2018, and should be applied on a retrospective basis. Early adoption is permitted. The Company early adopted the provisions of ASU 2016-18 in the third quarter of fiscal 2017.

As a result of adoption of this ASU, changes in restricted cash, which had previously been presented as operating activities, are now included within beginning and ending cash, cash equivalents and restricted cash balances on the consolidated statements of cash flows. Consequently, operating cash flows for fiscal 2017 and fiscal 2016 increased by $12 million and $3 million, respectively, with a corresponding increase in the total change in cash, cash equivalents and restricted cash for the respective periods. Operating cash flows for the 11-month period ended January 1, 2016, decreased $13 million, with a corresponding decrease in the total change in cash, cash equivalents and restricted cash (see "Note 19—Supplementary Cash Flow Information and Restricted Cash" for the disclosures required by this ASU).

Accounting Standards Updates Issued But Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). This ASU superseded all revenue recognition requirements in Topic 605 “Revenue Recognition” and industry-specific guidance throughout the Industry Topics of the codification. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of control for promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this principle, an entity is required to identify the contract(s) with a customer, identify the performance obligations in the contract(s), determine the transaction price, allocate the transaction price to the performance obligations in the contract(s) and recognize revenue when (or as) the performance obligation is satisfied. The ASU also requires expanded disclosures to enable users of financial statements to understand the amount, timing risks and judgments related to revenue recognition and related cash flows, including how and when performance obligations are satisfied and the relationship between revenue recognized and changes in contract balances during a reporting period.

The Company will adopt this ASU in the beginning of fiscal 2018 using the modified retrospective method. This method requires recording the cumulative effect of adoption of this ASU as an adjustment to the beginning balance of retained earnings and not restating prior comparative periods, and also requires certain additional disclosures in the initial year of adoption.

As of December 29, 2017, the Company has substantially completed its evaluation of the impact of adoption of this ASU, including assessment of differences in the timing and/or method of revenue recognition for contracts, impact on business processes, systems and controls and the required disclosures. The Company is currently completing its assessment of adoption of the ASU on the contract awards and modifications during the fourth quarter of fiscal 2017, and also finalizing system reports related to the new disclosures.

Based on the Company's current evaluation, Leidos does not expect the impact of adoption of ASC 606 to be material. The Company believes the timing of and amount of revenue recognition will largely remain consistent between the current revenue standard and ASC 606. For the majority of the Company's contracts, the Company will continue to recognize revenue over time because of the continuous transfer of control to the customer, using an input measure (e.g., cost incurred) to reflect progress. The Company currently expects that the impact of adoption of ASC 606 will primarily occur within certain contracts as a result of the identification of new performance obligations, and on contracts that currently use the units-of-delivery method of revenue recognition, which will convert to an over-time model from the current point-in-time model.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU will supersede the current lease guidance under ASC 840 and makes several changes, such as requiring an entity to recognize a right-of-use asset and corresponding lease obligation in the balance sheet, classified as financing or operating, as appropriate. The update is effective for public companies in the beginning of fiscal 2019 and should be adopted under the modified retrospective approach. Early adoption is permitted. The Company is evaluating the provisions of ASU 2016-02 and its impact on the Company's consolidated financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This ASU eliminates the requirement that a credit loss on a financial instrument be "probable" prior to recognition. Instead, a valuation allowance will be recorded to reflect an entity's current estimate of all expected credit losses, based on both historical and forecasted information related to an instrument. The update is effective for public companies in the beginning of fiscal 2020 and should be adopted using a modified-retrospective approach, which applies a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. A prospective approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date and loans and debt securities acquired with deteriorated credit quality. The guidance may be early-adopted for fiscal 2019. The Company is evaluating the provisions of ASU 2016-13 and its impact on the Company's consolidated financial position, results of operations and cash flows.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedge Activities. This ASU improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities. The update is effective for public companies in the beginning of fiscal 2019 and should be applied on a modified retrospective basis. Early adoption is permitted. The Company is evaluating the provisions of ASU 2017-12 and its impact on the Company's consolidated financial position, results of operations and cash flows.

Acquisitions

12 Months Ended

Dec. 29, 2017

Business Combinations [Abstract]

Acquisitions

The Company may acquire businesses as part of its growth strategy to provide new or enhance existing capabilities and offerings to customers. During fiscal 2016, the Company completed the acquisition of Lockheed Martin's IS&GS Business.

Lockheed Martin Transaction

On January 26, 2016, Leidos announced it had entered into a definitive agreement (as amended, the "Merger Agreement") with Lockheed Martin Corporation ("Lockheed Martin"); Abacus Innovations Corporation, a Delaware corporation and a wholly owned subsidiary of Lockheed Martin ("Splitco"); and Lion Merger Co., a Delaware corporation and, at the time of announcement, a wholly owned subsidiary of Leidos ("Merger Sub"), pursuant to which Leidos would combine with Lockheed Martin's realigned Information Systems & Global Solutions business in a Reverse Morris Trust transaction. In connection with the Merger Agreement, Lockheed Martin and Splitco entered into a Separation Agreement dated January 26, 2016 (as amended, the "Separation Agreement"), pursuant to which Lockheed Martin would separate the IS&GS Business from Lockheed Martin and transfer the IS&GS Business to Splitco. The transactions contemplated by the Merger Agreement and the Separation Agreement are referred to herein as the "Transactions."

On August 16, 2016, the acquisition date, the Company completed the Transactions. In the Transactions, among other steps, (i) Lockheed Martin transferred the IS&GS Business to Splitco; (ii) Lockheed Martin offered to Lockheed Martin stockholders the right to exchange all or a portion of their shares of Lockheed Martin common stock for shares of Splitco common stock by way of an exchange offer (the "Distribution"); and (iii) Merger Sub merged with and into Splitco, with Splitco as the surviving corporation (the "Merger") and a wholly owned subsidiary of Leidos. Additionally, on the closing date of the Transactions, Splitco's name was changed to Leidos Innovations Corporation. Upon consummation of the Transactions, those Lockheed Martin stockholders who elected to participate in the exchange offer received approximately 77 million shares of Leidos common stock, which represented approximately 50.5% of the outstanding shares of Leidos common stock after consummation of the Transactions. Holders of Leidos shares prior to the transaction held the remaining 49.5% of the outstanding shares of Leidos common stock immediately after the closing.

Prior to the Distribution, Splitco incurred third-party debt financing in an aggregate principal amount of $1.8 billion and immediately thereafter, Lockheed Martin transferred the IS&GS Business to Splitco and Splitco made a special cash payment to Lockheed Martin of $1.8 billion.

In connection with the Transactions, Leidos incurred new indebtedness and assumed Splitco's indebtedness in the form of term loans in an aggregate principal amount of $690 million and $1.8 billion, respectively, and entered into a new $750 million senior secured revolving credit facility, which replaced its existing revolving credit facility. See "Note 12—Debt" for further information regarding the new debt incurred and the new senior revolving credit facility.

In conjunction with the Transactions, Leidos' Board of Directors declared a special dividend of $13.64 per share of Leidos common stock. Consequently, on August 22, 2016, the Company paid $993 million to stockholders of record as of August 15, 2016, and accrued $29 million of dividend equivalents with respect to outstanding equity awards. See "Note 15—Stock-Based Compensation" for further information regarding the modifications made to the Company's outstanding stock awards as a result of the special dividend.

As a result of the Transactions, membership on the Leidos Board of Directors was increased to 12 directors, in which three directors designated by Lockheed Martin were appointed to the board. A majority of the senior management of Leidos immediately prior to the consummation of the Transactions remained Leidos executive officers immediately after the Transactions. Leidos management determined that Leidos is the accounting acquirer in the Transactions based on the facts and circumstances noted within this section and other relevant factors.

The acquisition adds large, complex information technology ("IT") system implementation and operation experience and additional federal and international IT solutions and services work to the Leidos portfolio, providing more venues to sell value added services such as cybersecurity and analytics. As a result, the Company is more diversified in markets it serves and provides the Company the scale and access to markets intended to further growth.

The final purchase consideration for the acquisition of the IS&GS Business was as follows (in millions):



Value of common stock issued to Lockheed Martin stockholders⁽¹⁾	$	2,929
Equity consideration for replacement awards⁽²⁾	9
Working capital adjustments⁽³⁾	81
Purchase price	$	3,019

⁽¹⁾ Represents approximately 77 million new shares of Leidos common stock issued to those Lockheed Martin stockholders who elected to participate in the exchange offer, based on the Company's August 16, 2016, closing share price of $51.69, less the Leidos special cash dividend amount of $13.64, which the Lockheed Martin stockholders were not entitled to receive.

⁽²⁾ Represents a portion of the $23 million total fair value of replacement equity-based awards attributable to the pre-Merger service period. The remaining $12 million, net of estimated forfeitures, will be recognized as stock-based compensation expense over the remaining requisite service period (see "Note 15—Stock-Based Compensation").

⁽³⁾In January 2018, the Company finalized its net working capital at $105 million. The additional $24 million was recorded as acquisition costs in the consolidated statements of income.

The final fair values of the assets acquired and liabilities assumed at the date of the Transactions were as follows (in millions):



Cash	$	25
Receivables, net	938
Inventory, prepaid expenses and other current assets	73
Property, plant and equipment	87
Intangible assets	1,194
Other assets	58
Accounts payable and accrued liabilities	(733		)
Accrued payroll and employee benefits	(186		)
Long-term debt, current portion	(23		)
Deferred tax liabilities	(328		)
Long-term debt, net of current portion	(1,780		)
Other long-term liabilities	(45		)
Total identifiable net liabilities assumed	(720		)
Non-controlling interest	(13		)
Goodwill	3,752
Purchase price	$	3,019

During fiscal 2017, the Company recorded adjustments to finalize the fair value of acquired assets and liabilities assumed which resulted in a $337 million increase in goodwill. Significant changes included intangible assets, property, plant and equipment, deferred tax assets, other assets, accounts payable and accrued liabilities and deferred tax liabilities.

During fiscal 2017, the Company recognized cumulative catch-up adjustments related to valuation adjustments for equity method investments and property, plant, and equipment, which resulted in an increase of $7 million in amortization expense and an increase $7 million of depreciation expense, respectively. The Company recorded the cumulative catch-up adjustments to equity method investments within "Equity earnings of non-consolidated subsidiaries" and adjustments to depreciation within "Costs of revenues" and "Selling, general and administrative expenses" in the Company's consolidated statements of income.

Additionally, during fiscal 2017, the Company recorded a valuation adjustment to reflect the fair value of the non-controlling interest acquired. The fair value of $13 million was determined by calculating the present value of future cash flows for the non-controlling interest. Significant assumptions inherent in the valuation of the non-controlling interest include the estimated after-tax cash flows expected to be received and an assessment of the appropriate discount rate.

The goodwill represents intellectual capital and the acquired assembled work force, none of which qualify for recognition as a separate intangible asset. The value of goodwill has been allocated to the reporting units on a relative fair value approach (see "Note 6—Goodwill"). Of the total goodwill, $414 million is tax deductible.

The Company identified $1.2 billion of intangible assets, representing program and contract intangibles, backlog and software and technology. The fair value measurements were primarily based on significant inputs that are not observable in the market and represent a Level 3 measurement (see "Note 5—Fair Value Measurements"). The income approach was primarily used to value the intangible assets, consisting primarily of acquired program and contract intangibles and backlog. The income approach indicates value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flow is discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money.

The following table summarizes the fair value of intangible assets acquired at the date of acquisition and the related weighted average amortization period:



	Weighted average amortization period	Fair value
	(in years)	(in millions)
Program and contract intangibles⁽¹⁾	9.7	$	1,011
Backlog	1.8	157
Software and technology⁽¹⁾	4.6	26
Total	8.6	$	1,194

⁽¹⁾ The weighted average amortization period is estimated based on the projected economic benefits associated with these assets. Refer to "Note 7—Intangible Assets" for additional information.

The Company incurred the following expenses related to the acquisition and integration of the IS&GS Business:



	12 Months Ended
	December 29, 2017		December 30, 2016
	(in millions)
Acquisition costs	$	25	$	44
Integration costs	77		46
Total acquisition and integration costs	$	102	$	90

On January 10, 2018, the final net working capital of the IS&GS Business as of the closing date of the Transactions was finally determined through a binding arbitration proceeding in accordance with the Separation Agreement with Lockheed Martin. As a result, $24 million was recorded as acquisition costs in the consolidated statements of income for fiscal 2017. On January 18, 2018, the final working capital adjustment amount of $105 million was paid to Lockheed Martin.

Pro Forma Financial Information (unaudited)

The following pro forma financial information presents consolidated results of operations as if the acquisition had occurred on January 31, 2015. The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to the events that are directly attributable to the Transactions and factually supportable. The pro forma results below do not reflect future events that have occurred or may occur after the Transactions, including anticipated synergies or other expected benefits that may be realized from the Transactions. The pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 31, 2015, nor is it intended to be an indication of future operating results.



	12 Months Ended		11 Months Ended
(unaudited)	December 30, 2016		January 1, 2016
	(in millions, except for per share amounts)
Revenues	$	10,443	$	9,868
Income from continuing operations	340		336
Income from continuing operations attributable to Leidos common stockholders	335		331
Earnings per share:
Basic	$	2.23	$	2.21
Diluted	$	2.20	$	2.19

The unaudited pro forma financial information above excludes acquisition-related costs of $44 million for fiscal 2016 and includes these costs within the 11-month period ended January 1, 2016 as a nonrecurring significant adjustment. This adjustment was made to account for certain costs incurred as if the Transactions had been completed on January 31, 2015.

Divestitures

12 Months Ended

Dec. 29, 2017

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

In April 2016, the Company's Civil segment disposed of a business that was primarily focused on providing design, build and heavy construction engineering services. The Company received cash proceeds of $23 million, resulting in a preliminary pre-tax gain on sale of $3 million. The major classes of assets and liabilities sold included $73 million of accounts receivable, net; $3 million of non-current assets and $63 million of accounts payable and accrued liabilities. In addition, the Company recorded a $6 million liability in connection with issuance of a performance guarantee on a contract and guarantee of collection of the accounts receivables transferred. The Company paid $1 million of selling costs related to the transaction. The Company recorded the pre-tax gain on sale in "Other (expense) income, net" in the Company's consolidated statements of income.

Plainfield Renewable Energy Holdings LLC

Plainfield Renewable Energy Holdings LLC ("Plainfield") is a 37.5 megawatt biomass-fueled power plant in Plainfield, Connecticut (the "plant"). In March 2015, the Company entered into a definitive Membership Interest Purchase Agreement (the "Agreement") to sell 100% of its equity membership interest in Plainfield. During the quarter ended July 3, 2015, further negotiations occurred related to the sale of Plainfield resulting in an approximate $29 million impairment charge. The Company adjusted the carrying values of Plainfield's assets to their fair values based on the estimated selling price of the business pursuant to the terms of the Agreement that was amended on July 17, 2015 (Level 1). The Company recorded these tangible asset impairment charges in "Asset impairment charges" in the Company's consolidated statements of income.

On July 24, 2015, the Company completed the sale of its equity interests in Plainfield for an aggregate consideration of $102 million, subject to certain adjustments, and contingent earn-out payments. The consideration received at closing consisted of a cash payment of $29 million (the "Closing Payment") and a secured promissory note for $73 million (the "Note"). The sale resulted in an immaterial deferred gain. In addition to the Closing Payment and the Note, the Company is eligible to receive certain contingent earn-out payments not to exceed $30 million. The Company will recognize any consideration for the contingent earn-out payments when received. In conjunction with the sale of the plant, the Company paid $2 million of the purchase price contingent consideration accrued at January 30, 2015, based on the successful sale of the plant. The remaining accrued contingent consideration was released and not paid as the selling price did not meet the qualifications for the payment of the remaining contingent consideration.

The original maturity date of the Note is July 24, 2017 (the "Original Maturity Date"), with an option to extend the maturity date for three consecutive one-year periods. The annual interest rate of 6% will increase to 8% if the maturity date is extended beyond July 24, 2017, and will increase to 9% if extended beyond July 24, 2019. The first payment of accrued and unpaid interest was due January 24, 2016, with subsequent payments occurring every six months, including a portion of the principal balance. The note allows for a six-month deferral of certain payments due in January 2016 and July 2016. In January 2016 and July 2016, the Company was notified by the buyer that the interest payment due on January 24, 2016, would be deferred to the next payment date, and a portion of the principal payment due on July 24, 2016, would be deferred to the next payment due date.

During the quarter ended June 30, 2017, Plainfield exercised the first of three one-year term extension options available under the original credit agreement, thereby extending the maturity date of the Note to July 24, 2018. Concurrent with this extension, the interest rate on the Note increased from 6% to 8%. Also, during the quarter ended June 30, 2017, Leidos and Plainfield entered into an amendment to the Note allowing Plainfield to defer up to $4 million of the interest and principal payments due in July 2017 and January 2018 until July 2018. In consideration of this deferment, Leidos received certain concessions and releases from obligations under the original transaction documents.

The Company collected $6 million of principal and interest each year during fiscal 2016 and fiscal 2017. Payments under the Note are secured by a general security interest in the personal property of Plainfield, a pledge of the membership interests of Plainfield and a first mortgage on the real property that comprises the plant.

Subsequent to fiscal 2017, the Company entered into negotiations with the equity owners of Plainfield LLC regarding the Plainfield Recapitalization Plan ("Plan"). The proposed Plan envisions raising new equity combined with reduction of Plainfield's debt and, consequently, would cause impairment of Leidos' note receivable.

The net realizable value of the Note, at December 29, 2017, is estimated to be approximately $40 million, compared to its carrying value of $73 million, including accrued interest. As a result, the Company recorded a $33 million impairment of its Note, which is presented within "Other (expense) income, net" in the Company's consolidated statements of income.

Prior to the divestiture of Plainfield, the Company received a cash grant of $80 million from the U.S. Treasury Department, which contains a recapture provision that could require the Company to repay funds to the Treasury in certain circumstances. As outlined in the amended Agreement, the buyer represents to the Company that it meets the definition of a qualified buyer in regards to the terms in the U.S. Treasury cash grant. During the remaining recapture period, which ends in December 2018, the buyer and any following acquired companies, including any transferred membership interests to these companies, is contractually obligated to remain a qualified buyer, and the buyer shall cause any transferee of the plant permitted under the Agreement to enter into a written agreement to be jointly liable for any recapture event. In addition, the buyer and any continuing membership interests to acquired companies shall operate the plant as an "open-loop biomass" facility in accordance with Section 1603 of the cash grant, timely file all reports related to Section 1603 and indemnify the Company for any liabilities incurred that may arise if these obligations are breached. Based on the indemnification in the Agreement, and since the onus is on the buyer to comply with the conditions of the grant, the Company has deemed a recapture event not probable; therefore, has not recorded a liability associated with a potential recapture of the grant.

Separation of New SAIC

The Company completed the spin-off of New SAIC on September 27, 2013. The spin-off was made pursuant to the terms of a Distribution Agreement and several other agreements entered into between the Company and New SAIC on September 25, 2013. These agreements set forth, among other things, the principal actions needed to be taken in connection with the separation and govern certain aspects of the relationship between the Company and New SAIC following the separation. These agreements generally provide with certain exceptions, that each party is responsible for its respective assets, liabilities and obligations, including employee benefits, insurance and tax related assets and liabilities, whether accrued or contingent, except that unknown liabilities will be shared between the parties in certain circumstances. The agreements also describe the party's commitments to provide each other with certain services for a limited time to help ensure an orderly transition. The agreements also include the treatment of existing contracts, proposals, and teaming arrangements where New SAIC will jointly perform work after separation on Leidos contracts. While the Company is a party to the Distribution Agreement and the ancillary agreements, the Company has determined that it does not have significant continuing involvement in the operations of New SAIC, nor does the Company expect significant continuing cash flows from New SAIC.

The operating results of activities related to the Company's distribution agreement with New SAIC for the periods presented were as follows:



	12 Months Ended				11 Months Ended
	December 29, 2017		December 30, 2016		January 1, 2016
	(in millions)
Revenues	$	10	$	14	$	17
Cost of revenues	10		14		17
Operating income	$	—	$	—	$	—

The operating results through the date of disposal of the Company's discontinued operations, excluding the spin-off of New SAIC, for fiscal 2017, fiscal 2016 and the 11-month period ended January 1, 2016, were immaterial.

The major classes of assets and liabilities included in discontinued operations through the date of disposal for the periods presented are immaterial for disclosure purposes.

Restructuring Expenses

12 Months Ended

Dec. 29, 2017

Restructuring and Related Activities [Abstract]

Restructuring Expenses

IS&GS Business Acquisition

After the acquisition of the IS&GS Business, the Company began an initiative to align its cost structure, which includes optimization of its real estate portfolio by vacating certain facilities and consolidating others, and by reducing headcount.

The restructuring expenses related to this program were as follows:



	12 Months Ended
	December 29, 2017		December 30, 2016
	(in millions)
Severance costs	$	18	$	10
Lease termination expenses	19		2
Restructuring expenses related to the IS&GS Business in operating income	$	37	$	12

These restructuring expenses have been recorded within Corporate and presented separately within "Restructuring expenses" on the consolidated statements of income.

The related restructuring liability related to this program was as follows:



	Severance Costs			Lease Termination Expenses			Total
	(in millions)
Balance as of January 1, 2016	$	—		$	—		$	—
Charges	10			2			12
Cash payments	(3		)	(1		)	(4		)
Balance as of December 30, 2016	7			1			8
Charges	18			19			37
Cash payments	(20		)	(16		)	(36		)
Balance as of December 29, 2017	$	5		$	4		$	9

The Company expects the remainder of the restructuring liability to be substantially settled within one year.

Fair Value Measurements (Notes)

12 Months Ended

Dec. 29, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

The Company's financial assets measured on a recurring basis at fair value consisted of the following:



	December 29, 2017				December 30, 2016
	Carrying value		Fair value		Carrying value		Fair value
	(in millions)
Derivatives	$	37	$	37	$	29	$	29

The Company's derivatives consisted of the fair value interest rate swaps on its $450 million fixed rate 4.45% senior secured notes maturing in December 2020, and cash flow interest rate swaps on $1.5 billion of the Company's variable rate senior secured term loans (see "Note 11—Derivative Instruments"). The fair value of the fair value interest rate swaps and cash flow interest rate swaps is determined based on observed values for underlying interest rates on the LIBOR yield curve and the underlying interest rate, respectively (Level 2 inputs).

The carrying amounts of the Company's financial instruments, other than derivatives, which include cash equivalents, accounts receivable, accounts payable and accrued expenses, are reasonable estimates of their related fair values. The carrying value of the Company's notes receivable (see "Note 3—Divestitures" and "Note 18—Leases") of $63 million and $92 million as of December 29, 2017, and December 30, 2016, respectively, approximates fair value as the stated interest rates within the agreements are consistent with the current market rates used in notes with similar terms in the market (Level 2 inputs).

As of December 29, 2017, and December 30, 2016, the fair value of debt was $3.2 billion and $3.3 billion, respectively, and the carrying amount was $3.1 billion and $3.3 billion, respectively (see "Note 12—Debt"). The fair value of long-term debt is determined based on current interest rates available for debt with terms and maturities similar to the Company's existing debt arrangements (Level 2 inputs).

At December 29, 2017, the Company did not have any assets or liabilities measured at fair value on a non-recurring basis. At December 30, 2016, the Company had non-financial instruments measured at fair value on a non-recurring basis in connection with the acquisition of Lockheed Martin's IS&GS Business. Refer to "Note 2—Acquisitions" for the final fair values of the assets acquired and liabilities assumed.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Goodwill

12 Months Ended

Dec. 29, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill, including the amounts from the acquisition of the IS&GS Business, was allocated to the reporting units on a relative fair value approach.

The following table presents changes in the carrying amount of goodwill by reportable segment:



	Defense Solutions		Civil		Health			Total
	(in millions)
Goodwill at January 1, 2016⁽¹⁾	$	792	$	244	$	171		$	1,207
Acquisition of the IS&GS Business	1,162		1,487		766			3,415
Goodwill at December 30, 2016⁽¹⁾	1,954		1,731		937			4,622
Adjustment to original purchase price allocation	94		259		(16		)	337
Foreign currency translation adjustments	7		8		—			15
Goodwill at December 29, 2017⁽¹⁾	$	2,055	$	1,998	$	921		$	4,974

⁽¹⁾Carrying amount includes accumulated impairment losses of $369 million and $117 million within the Health and Civil segments, respectively.

See "Note 2—Acquisitions" for the description of adjustments to the original purchase price allocation.

In conjunction with the change in reportable segments, the Company evaluated goodwill for impairment, both before and after the segment change and determined that goodwill was not impaired.

Based on a qualitative analysis performed during the Company's annual impairment evaluation for fiscal 2016 and the 11-month period ended January 1, 2016, for certain of its reporting units, it was determined that it is more likely than not that the fair values of the reporting units were in excess of the individual reporting unit carrying values. In fiscal 2017, the company performed a quantitative analysis, see "Note 1—Summary of Significant Accounting Policies," for all reporting units. It was determined that the fair values of all individual reporting units exceeded their carrying values. As a result, no goodwill impairments were identified as part of the annual goodwill impairment evaluation for the periods mentioned above.

Intangible Assets

12 Months Ended

Dec. 29, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible assets consisted of the following:



	December 29, 2017							December 30, 2016
	Gross carrying value		Accumulated amortization			Net carrying value		Gross carrying value		Accumulated amortization			Net carrying value
	(in millions)
Finite-lived intangible assets:
Program and contract intangibles	$	1,013	$	(187	)	$	826	$	1,450	$	(25	)	$	1,425
Backlog	158		(158		)	—		200		(54		)	146
Software and technology	89		(64		)	25		61		(48		)	13
Customer relationships	4		(3		)	1		6		(5		)	1
Total finite-lived intangible assets	1,264		(412		)	852		1,717		(132		)	1,585
Indefinite-lived intangible assets:
Trade names	4		—			4		4		—			4
Total intangible assets	$	1,268	$	(412	)	$	856	$	1,721	$	(132	)	$	1,589

Amortization expense related to intangible assets, including those acquired through the Transactions, was $281 million, $84 million and $8 million for fiscal 2017, fiscal 2016 and the 11-month period ended January 1, 2016, respectively.

The acquired program and contract, and software and technology intangible assets are amortized over their respective estimated useful lives in proportion to the pattern of economic benefit based on expected future discounted cash flows. The acquired backlog intangible assets, as well as the Company's existing customer relationships and software and technology intangible assets, are amortized on a straight-line basis over their estimated useful lives.

The estimated annual amortization expense related to finite-lived intangible assets as of December 29, 2017, is as follows:



Fiscal Year Ending
	(in millions)
2018	$	202
2019	172
2020	128
2021	106
2022	92
2023 and thereafter	152
	$	852

Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, the outcome and timing of completion of in-process research and development projects and other factors.

Receivables

12 Months Ended

Dec. 29, 2017

Receivables [Abstract]

Receivables

The components of receivables, net consisted of the following:



	December 29, 2017			December 30, 2016
	(in millions)
Billed receivables	$	771		$	847
Unbilled receivables	1,074			821
Allowance for doubtful accounts	(14		)	(11		)
	$	1,831		$	1,657

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details

Property Plant and Equipment

12 Months Ended

Dec. 29, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:



	December 29, 2017			December 30, 2016
	(in millions)
Computers and other equipment	$	194		$	172
Leasehold improvements	171			161
Buildings and improvements	54			104
Office furniture and fixtures	34			35
Land	49			57
Construction in progress	44			12
	546			541
Less: accumulated depreciation and amortization	(314		)	(282		)
	$	232		$	259

The change related to Buildings and improvements relates to valuation adjustments as a result of the acquisition of the IS&GS Business, see "Note 2—Acquisitions".

Depreciation expense was $55 million, $38 million and $33 million for fiscal 2017, fiscal 2016 and the 11-month period ended January 1, 2016, respectively.

During the 11-month period ended January 1, 2016, the Company amended its sale agreement entered into in 2013 and closed the sale of the remaining building, parcels of land that surround the building and the multi-level surface parking garage associated with the Company's former headquarters. The sale resulted in a write-off of $40 million in aggregate net book value of assets disposed, including $29 million for buildings and $10 million attributed to land. See "Note 18—Leases" for further information regarding the sale of the Company's former headquarters.

Composition of Certain Financial Statement Captions

12 Months Ended

Dec. 29, 2017

Disclosure Schedule Of Certain Financial Statement Captions [Abstract]

Composition of Certain Financial Statement Captions



Balance Sheet	December 29, 2017		December 30, 2016
	(in millions)
Inventory, prepaid expenses and other current assets:
Prepaid expenses	$	90	$	90
Inventory	76		67
Pre-contract costs	64		33
Transition costs and project assets	59		62
Prepaid income taxes and tax refunds receivable	54		13
Short-term notes receivable	40		3
Restricted cash	32		20
Other	38		60
	$	453	$	348
Other assets:
Investment in rabbi trust	$	58	$	48
Derivatives	37		29
Equity method investments⁽¹⁾	37		20
Deferred costs	24		31
Long-term notes receivables	23		89
Other	75		48
	$	254	$	265
Accounts payable and accrued liabilities:
Accrued liabilities	$	747	$	493
Accounts payable	557		591
Collections in excess of revenues and deferred revenue	293		246
Tax indemnity liability	23		—
Provision for loss contracts	19		97
	$	1,639	$	1,427
Accrued payroll and employee benefits:
Salaries, bonuses and amounts withheld from employees’ compensation	$	245	$	211
Accrued vacation	236		244
Accrued contributions to employee benefit plans	6		28
	$	487	$	483
Other long-term liabilities:
Deferred compensation	$	56	$	48
Lease related obligations	33		37
Deferred revenue	17		20
Liabilities for uncertain tax positions	7		5
Tax indemnity liability	1		31
Accrued pension liabilities	—		6
Other	15		57
	$	129	$	204

⁽¹⁾Net of $30 million and $10 million of dividends received during fiscal 2017 and fiscal 2016, respectively, that were recorded in cash flows provided by operating activities of continuing operations on the consolidated statements of cash flows.



	12 Months Ended						11 Months Ended
Income Statement	December 29, 2017			December 30, 2016			January 1, 2016
	(in millions)
Other (expense) income, net
Promissory note impairment	$	(33	)	$	—		$	—
Gain (loss) on foreign currency	5			(18		)	—
Gain on sale of former headquarters	—			—			82
Other income, net	2			5			2
	$	(26	)	$	(13	)	$	84

Derivative Instruments

12 Months Ended

Dec. 29, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Fair Value Hedges

The Company has interest rate swap agreements to hedge the fair value of the $450 million fixed rate 4.45% senior secured notes maturing in December 2020 (the "Notes"). The objective of these instruments is to hedge the Notes against changes in fair value due to the variability in the six-month LIBOR rate (the benchmark interest rate). Under the terms of the interest rate swap agreements, the Company will receive semi-annual interest payments at the coupon rate of 4.45% and will pay variable interest based on the six-month LIBOR rate.

The interest rate swaps were accounted for as a fair value hedge of the Notes and qualified for the shortcut method of hedge accounting, which allows for the assumption of no ineffectiveness reported in earnings. The resulting changes in the fair value of the interest rate swaps are fully offset by the changes in the fair value of the underlying debt (the hedged item).

The fair value of the Notes is stated at an amount that reflects changes in the six-month LIBOR rate subsequent to the inception of the interest rate swaps through the reporting date.

Cash Flow Hedges

In August 2016, the Company entered into interest rate swap agreements to hedge the cash flows with respect to $1.2 billion of the Company's variable rate senior secured term loans (the "Variable Rate Loans"). In September 2017, the Company entered into interest rate swap agreements to hedge the cash flows of an additional $300 million of its Variable Rate Loans. The objective of these instruments is to reduce variability in the forecasted interest payments of the Company's Variable Rate Loans, which is based on the LIBOR rate. Under the terms of the interest rate swap agreements, the Company will receive monthly variable interest payments based on the one-month LIBOR rate and will pay interest at a fixed rate. The interest rate swap agreements on $1.2 billion and $300 million of the Company's Variable Rate Loans have a maturity date of December 2021 and August 2022, respectively, and a fixed interest rate of 1.08% and 1.66%, respectively. The counterparties to these agreements are financial institutions.

The interest rate swaps were accounted for as cash flow hedges of the Variable Rate Loans and qualified for hedge accounting treatment through the application of the long-haul method, which involves the comparison of cumulative changes in the fair value of the swap to the cumulative change in fair value of scheduled interest payments on the notional value (the perfectly effective hypothetical or "PEH"). The effective portion of the gain/loss on the swap is reported as a component of other comprehensive income/loss and will be reclassified into earnings on the dates the interest payments impact earnings. The amount of ineffectiveness recorded in earnings is equal to the excess of the cumulative change in fair value of the swap over the cumulative change in the fair value of the PEH.

The fair value of the interest rate swaps was as follows:



	Balance sheet line item	December 29, 2017		December 30, 2016
		(in millions)
Fair value interest rate swaps	Other assets	$	—	$	3
Cash flow interest rate swaps	Other assets	37		26
		$	37	$	29

The fair value adjustment to the fair value interest rate swap and the underlying debt was a decrease of $3 million and $5 million for the year ended December 29, 2017, and December 30, 2016, respectively.

The effect of the Company's cash flow hedges on other comprehensive income and earnings for the periods presented was as follows:



	12 Months Ended
	December 29, 2017		December 30, 2016
	(in millions)
Effective portion recognized in other comprehensive income	$	10	$	22
Effective portion reclassified from accumulated other comprehensive income (loss) to interest expense	—		2
Ineffective portion recognized in other (expense) income, net	1		2

The Company expects to reclassify gains of $8 million from accumulated other comprehensive income (loss) into earnings during the next 12 months.

The cash flows associated with the interest rate swaps are classified as operating activities in the consolidated statements of cash flows.

Debt

12 Months Ended

Dec. 29, 2017

Debt Disclosure [Abstract]

Debt

The Company's debt consisted of the following:



	Stated interest rate		Effective interest rate		December 29, 2017⁽¹⁾		December 30, 2016⁽¹⁾
					(in millions)
Senior secured notes:
$450 million notes, due December 2020	4.45	%	4.53	%	$	449	$	451
$300 million notes, due December 2040	5.95	%	6.03	%	216		216
Senior secured term loans:
$400 million Term Loan A, due August 2019	—	%	—	%	—		123
$690 million Term Loan A, due August 2022	3.13	%	3.61	%	644		676
$310 million Term Loan A, due August 2022	3.13	%	3.60	%	270		304
$1,131 million Term Loan B, due August 2023	3.38	%	3.74	%	1,101		1,110
Senior unsecured notes:
$250 million notes, due July 2032	7.13	%	7.43	%	246		246
$300 million notes, due July 2033	5.50	%	5.88	%	158		158
Capital leases and notes payable due on various dates through fiscal 2022	0%-5.55%		Various		27		3
Total long-term debt