PR Newswire
RESTON, Va., Nov. 2, 2017
RESTON, Va., Nov. 2, 2017 /PRNewswire/ -- Leidos Holdings, Inc. (NYSE: LDOS), a FORTUNE 500® science and technology solutions company, today reported financial results for the third quarter of fiscal year 2017.
Roger Krone, Leidos Chairman and Chief Executive Officer, commented: "Our third quarter results, including particularly strong margins and earnings, reflect continued momentum in our operational execution as a leading provider of science and technology solutions and services to our customers. We were able to leverage our scale to increase innovation, lower cost, and drive strong bookings which position us well for future growth."
Summary Results
Revenues for the quarter were $2.50 billion, compared to $1.87 billion in the prior year quarter. The current quarter results include $1.29 billion of revenue attributable to the Information Systems & Global Solutions business ("IS&GS Business") acquired from Lockheed Martin in August 2016, compared to $620 million of revenues in the prior year quarter.
Operating income for the quarter was $151 million, compared to $101 million in the prior year quarter. Operating margin increased to 6.0% from 5.4% in the prior year quarter. The current quarter results include $76 million of amortization of intangible assets, $21 million of acquisition and integration costs, $6 million of restructuring charges and $2 million of amortization of equity method investments related to the acquisition of the IS&GS Business. The prior year quarter results included $44 million of acquisition and integration costs, $27 million of amortization of intangible assets and $5 million of restructuring charges. Excluding these items, non-GAAP operating income for the quarter was $256 million compared to $177 million in the prior year quarter.
Diluted earnings per share ("EPS") attributable to Leidos common stockholders for the quarter was $0.53, compared to $0.80 in the prior year quarter. Excluding the items mentioned in the preceding paragraph, non-GAAP diluted EPS for the quarter was $0.95, compared to $1.25 in the prior year quarter. The weighted average diluted share count for the quarter was 154 million, up from 114 million in the prior year quarter primarily due to the issuance of approximately 77 million shares of Leidos common stock to participating Lockheed Martin stockholders during the third quarter of fiscal year 2016 in connection with the acquisition of the IS&GS Business.
Defense Solutions
Defense Solutions revenues for the quarter of $1,201 million increased by $192 million, or 19%, compared to the prior year quarter. The revenue growth was primarily attributable to the acquired IS&GS Business and growth in certain airborne programs, partially offset by a contract write-up in the prior year quarter that did not recur in the current period and completion of certain contracts.
Defense Solutions operating income margin for the quarter was 6.7%, compared to 9.2% in the prior year quarter. On a non-GAAP basis, operating margin for the quarter was 8.4%, compared to 9.6% in the prior year quarter, primarily due to a contract write-up on a certain contract in the prior year quarter that did not recur in the current period.
Civil
Civil revenues for the quarter of $838 million increased by $279 million, or 50%, compared to the prior year quarter. The revenue increase is primarily attributable to the acquired IS&GS Business.
Civil operating income margin for the quarter was 6.0%, compared to 6.8% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 11.2%, compared to 9.3% in the prior year quarter, reflecting stronger program performance and profit write-ups on certain contracts.
Health
Health revenues for the quarter of $464 million increased by $164 million, or 55%, compared to the prior year quarter. The revenue increase is primarily attributable to the acquired IS&GS Business.
Health operating income margin for the quarter was 13.6%, compared to 9.3% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 16.4%, compared to 12.3% in the prior year quarter, primarily attributable to higher margins on certain IS&GS contracts.
Cash Flow Summary
Net cash provided by operating activities for the quarter were $268 million compared to $273 million in the prior year quarter. The lower operating net cash inflows were primarily due to higher payments for taxes and interest, partially offset by lower payments for acquisition and integration expenses and lower vendor payments.
Net cash used in investing activities for the quarter were $19 million compared to net cash provided of $16 million in the prior year quarter. The decrease in net cash from investing activities was primarily due to cash acquired as part of the acquisition of the IS&GS business in the prior year quarter.
Net cash used in financing activities for the quarter were $175 million compared to $463 million in the prior year quarter. The decrease is primarily due to payment of a special cash dividend offset by the borrowings to finance the IS&GS acquisition in the prior year quarter. In addition, there were higher debt repayments in the quarter versus the prior year quarter.
As of September 29, 2017, the Company had $287 million in cash and cash equivalents and $3.1 billion of debt.
New Business Awards
Net bookings totaled $3.1 billion in the quarter, representing a book-to-bill ratio of 1.2.
Notable recent awards received include:
The Company's backlog at the end of the quarter was $17.7 billion, of which $5.6 billion was funded.
Forward Guidance
As a result of the Company's year-to-date performance and updated expectations, the Company is updating its fiscal year 2017 guidance as follows:
Non-GAAP diluted earnings per share excludes amortization of acquired intangible assets, asset impairment charges, restructuring expenses, acquisition and integration costs, amortization of equity method investments, gains and losses on sale of assets and businesses and adjustments to the income tax provision to reflect non-GAAP exclusions. See Leidos' non-GAAP financial measures and the related reconciliation included elsewhere in this release.
The Company does not provide a reconciliation of forward-looking adjusted EBITDA margins (non-GAAP) or non-GAAP diluted earnings per share from continuing operations to GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income (loss) may vary significantly based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amounts of these deductions may be material and, therefore, could result in projected GAAP net income (loss) and diluted earnings per share from continuing operations being materially less than projected adjusted EBITDA margins (non-GAAP) and non-GAAP diluted earnings per share from continuing operations.
Conference Call Information
Leidos management will discuss operations and financial results in an earnings conference call beginning at 7:30 A.M. eastern time on November 2, 2017. Analysts and institutional investors may participate by dialing +1 (877) 869-3847 (U.S. dial-in) or +1 (201) 689-8261 (international dial-in).
A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leidos Investor Relations website (http://ir.leidos.com).
After the call concludes, an audio replay can be accessed on the Leidos Investor Relations website or by dialing +1 (877) 660-6853 (toll-free U.S.) or +1 (201) 612-7415 (international) and entering conference ID 13671145.
About Leidos
Leidos is a FORTUNE 500® science and technology solutions and services leader working to solve the world's toughest challenges in the defense, intelligence, homeland security, civil and health markets. The company's 32,000 employees support vital missions for government and commercial customers. Headquartered in Reston, Virginia, Leidos reported annual revenues of approximately $7.04 billion for the fiscal year ended December 30, 2016.
For more information, visit www.leidos.com.
Forward-Looking Statements
Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates," "guidance" and similar words or phrases. Forward-looking statements in this release include, among others, estimates of future revenues, EBITDA margins (including on a non-GAAP basis), operating income, earnings, earnings per share (including on a non-GAAP basis), charges, backlog, bookings, contract values, outstanding shares and cash flows, as well as statements about future dividends, share repurchases, acquisitions and dispositions. These statements reflect our belief and assumptions as to future events that may not prove to be accurate.
Actual performance and results may differ materially from the guidance and other forward-looking statements made in this release depending on a variety of factors, including: changes to our reputation and relationships with government agencies, developments in the U.S. Government defense budget, including budget reductions, implementation of spending cuts (sequestration) or changes in budgetary priorities; delays in the U.S. Government budget process; delays in the U.S. Government contract procurement process or the award of contracts; delays or loss of contracts as a result of competitor protests; changes in U.S. Government procurement rules, regulations and practices; changes in interest rates and other market factors out of our control; our compliance with various U.S. Government and other government procurement rules and regulations; governmental reviews, audits and investigations of our Company; our ability to effectively compete for and win contracts with the U.S. Government and other customers; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; factors relating to the transaction with Lockheed Martin, including, tax treatment; the possibility that we may be unable to achieve expected synergies and operating efficiencies within the expected time-frames or at all, the integration of the acquired Information Systems & Global Solutions business being more difficult, time-consuming or costly than expected; the effect of any changes resulting from the transaction in customer, supplier and other business relationships; general market perception of the transaction and exposure to lawsuits and contingencies associated with the Information Systems & Global Solutions business; the mix of our contracts and our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; our ability to realize as revenues the full amount of our backlog; cybersecurity, data security or other security threats, systems failures or other disruptions of our business; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; our ability to effectively acquire businesses and make investments; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts, including complex engineering projects; the failure of our inspection or detection systems to detect threats; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to manage risks associated with our international business; our ability to declare future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable laws and contractual agreements; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in this release. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission ("SEC"), including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our latest Annual Report on Form 10-K and quarterly reports on Form 10-Q, all of which may be viewed or obtained through the Investor Relations section of our website at www.leidos.com.
All information in this release is as of November 2, 2017. The Company expressly disclaims any duty to update the guidance or any other forward-looking statement provided in this release to reflect subsequent events, actual results or changes in the Company's expectations. The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.
CONTACTS: | |
| |
Investor Relations: | Media Relations: |
Kelly M. Freeman | Melissa L. Koskovich |
571.526.7686 | 571.526.6850 |
LEIDOS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, Revenues $ 2,503 $ 1,868 $ 7,654 $ 4,468 Cost of revenues 2,189 1,630 6,692 3,925 Selling, general and administrative expenses 141 88 428 204 Acquisition and integration costs 21 44 56 68 Restructuring expenses 6 5 25 6 Equity earnings of non-consolidated subsidiaries (5) — (5) — Operating income 151 101 458 Hinweis:
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