On March 27, 2026, ("Acquisition Date"), Leidos, Inc. completed the acquisition of KENE Holdings, L.P. and KENE Parent Inc. ("Entrust") to acquire all of the shares of Entrust for a purchase price of $2.4 billion in cash, subject to customary adjustments for Entrust’s cash, debt, transaction expenses and net working capital. Entrust is an engineering firm that provides infrastructure design, grid modernization and program management services primarily to electric, gas and pipeline utilities. This acquisition enhances existing energy infrastructure capabilities within our Homeland reportable segment.


Cash and cash equivalents	$	47
Receivables	162
Other current assets	18
Property, plant and equipment	12
Intangible assets	664
Operating lease right-of-use assets	22
Deferred tax liabilities	(75)
Accounts payable and accrued liabilities	(75)
Accrued payroll and employee benefits	(21)
Operating lease liabilities	(18)
Total identifiable net assets acquired	736
Goodwill	1,652
Purchase price	$	2,388

Due to the timing and complexity of the acquisition, the assets acquired and liabilities assumed were recorded at their preliminary estimated fair values. As of July 3, 2026, we had not finalized the determination of fair values for substantially all of the acquired assets and liabilities assumed. The preliminary purchase price allocation is subject to change as we complete

The goodwill represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. Of the preliminary goodwill recognized, approximately $119 million is tax deductible.

The acquired customer relationships and backlog 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.

For the three and six months ended July 3, 2026, $141 million and $152 million, respectively, of revenues related to Entrust were recognized within the Homeland reportable segment.

The following pro forma financial information presents consolidated results of operations as if the acquisition of Entrust had occurred on January 4, 2025. 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 acquisition of Entrust and factually supportable. These adjustments include amortization and interest expense that are directly attributable to the acquisition.

The pro forma results below do not reflect future events that have occurred or may occur after the acquisition, including anticipated synergies or other expected benefits that may be realized from the acquisition. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 4, 2025, nor is it intended to be an indication of future operating results.


	Three Months Ended				Six Months Ended
(in millions, except per share amounts)	July 3, 2026		July 4, 2025		July 3, 2026		July 4, 2025
Revenues	$	4,558	$	4,394	$	9,086	$	8,772
Net income	355		390		697		730
Net income attributable to Leidos common stockholders	353		388		688		726
Earnings per share:
Basic	$	2.80	$	3.01	$	5.46	$	5.63
Diluted	2.80		2.98		5.41		5.59

The pro forma financial information above includes the following nonrecurring significant adjustment made to account for certain costs incurred as if the acquisition had been completed on January 4, 2025:

uAcquisition-related costs of $1 million and $30 million for the three and six months ended July 3, 2026, respectively, were excluded from the pro forma financial information for fiscal 2026 and were included in the pro forma financial information for fiscal 2025.

On May 23, 2025 (the "Purchase Date"), we completed the acquisition of Savanna Industries, Inc. ("Kudu Dynamics") for purchase consideration of $293 million, net of $29 million of cash acquired. The final goodwill recognized of $231 million represents intellectual capital and the acquired assembled workforce, neither of which qualify for recognition as a separate intangible asset. All of the goodwill recognized is tax deductible.

For the three and six months ended July 3, 2026, $17 million and $39 million, respectively, of revenues related to Kudu Dynamics were recognized within the Intelligence & Digital reportable segment.


	Three Months Ended				Six Months Ended
(in millions)	July 3, 2026		July 4, 2025		July 3, 2026		July 4, 2025
Acquisition costs	$	—	$	—	$	29	$	—
Integration costs	3		1		4		1
Restructuring costs	27		1		37		5
Total acquisition, integration and restructuring costs	$	30	$	2	$	70	$	6

These costs were recorded within the Homeland, Health and Intelligence & Digital reportable segments and Corporate, and presented in "Acquisition, integration and restructuring costs," "Cost of revenues," "Selling, general and administrative expenses," and "Interest expense, net" on the condensed consolidated statements of operations.

On April 14, 2026, Leidos, Inc. entered into a Contribution and Equity Purchase Agreement with certain affiliates of Altaris, LLC to form a new joint venture. The transaction will involve divesting our Security Enterprise Solutions and Industrial Automation businesses ("SES Business"), which will be combined with Analogic Corporation, a portfolio company of Altaris, LLC, in a newly formed joint venture. The joint venture will primarily focus on security product innovation, research and development, manufacturing, screening technologies, artificial Intelligence and 3D imaging solutions. The divestiture of the SES Business is expected to be completed during the second half of fiscal 2026. Upon close of the transaction, Leidos will retain a 41.5% non-controlling equity interest and Altaris will retain a 58.5% controlling interest in the new joint venture.

The Company has presented the associated assets and liabilities of the SES Business as held for sale in the Company's condensed consolidated balance sheet as of July 3, 2026. The major classes of assets and liabilities classified as held for sale were as follows:


(in millions)	July 3, 2026
Cash and cash equivalents	$	41
Receivables, net	94
Inventory, net	250
Other current assets	14
Property, plant and equipment, net	36
Intangible assets, net	112
Goodwill	337
Operating lease right-of-use assets, net	46
Other long-term assets	5
Total assets held for sale	$	935

Accounts payable and accrued liabilities	$	76
Accrued payroll and employee benefits	18
Operating lease liabilities	45
Other long-term liabilities	24
Total liabilities held for sale	$	163

Upon consummation of the transaction, Leidos will deconsolidate the SES Business and account for our 41.5% minority interest in the joint venture as an equity method investment. As the divestiture of the SES Business does not represent a material strategic shift in operations, the SES Business will not be presented as a discontinued operation.

During the quarter ended July 3, 2026, we also reclassified $8 million of aircraft from "Property, plant and equipment, net" to "Assets held for sale" on the condensed consolidated balance sheets, following the execution of sale agreements for those aircraft. The sales are expected to be finalized during the second half of fiscal 2026.