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Leidos Holdings, Inc. Reports Third Quarter Fiscal Year 2016 Results

Revenues: $1.87 billion

(PRNewswire) —  Leidos Holdings, Inc. (NYSE: LDOS), a global science and technology solutions company, today reported financial results for the third quarter of fiscal year 2016.

Roger Krone, Leidos Chairman and Chief Executive Officer commented: "Our focus on growth and profitability drove record quarterly EPS for the Company and the fifth consecutive quarter of year over year organic growth. The integration activities following our successful acquisition of Lockheed Martin's IS&GS business during the quarter are proceeding well, with transaction-related synergies running ahead of plan. The encouraging results year-to-date, including strong bookings and cash generation, give us confidence in raising our full year outlook."

Summary Results

Revenues for the quarter were $1.87 billion as compared to $1.30 billion in the prior year. The current quarter included $620 million of revenue attributable to the Information Systems & Global Solutions business ("IS&GS Business") acquired from Lockheed Martin during the quarter.

Operating income from continuing operations for the quarter was $101 million compared to $94 million in the prior year, a growth of 7%. Operating margin decreased to 5.4% from 7.2% in the prior year, as the current quarter included $44 million of acquisition and integration costs, $27 million of amortization of intangible assets and $5 million of restructuring charges related to the acquisition of the IS&GS Business. Excluding these items, non-GAAP operating margin increased to 9.5% from 7.2% in the prior year quarter.

Diluted earnings per share ("EPS") from continuing operations for the quarter was $0.80 compared to $0.67 in the prior year. The weighted average diluted share count for the quarter was 114 million, up from 73 million in the prior year due to the issuance of approximately 77 million shares of Leidos common stock to participating Lockheed Martin stockholders in connection with the acquisition of the IS&GS Business.

Excluding the items mentioned above, non-GAAP diluted EPS from continuing operations for the quarter was $1.25 compared to $0.73 in the prior year.

National Security Solutions

National Security Solutions revenues for the quarter increased by $43 million, or 5%, compared to the prior year. The revenue growth was primarily attributable to revenues associated with our international business.

National Security Solutions operating income margin for the quarter was 9.9%, up from 8.9% in the prior year primarily due to a strong level of net fee write-ups.

Health and Infrastructure Sector

Health and Infrastructure Sector revenues for the quarter decreased by $90 million, or 22%, compared to the prior year. The revenue decline is primarily attributable to the divestiture of our design, build and heavy construction engineering services business in the second quarter of the current fiscal year. Excluding the revenues from the divested business, revenues increased $25 million, or 8.3%, primarily due to growth in the Federal Health business.

Health and Infrastructure Sector operating income margin for the quarter was 12.5%, up from 3.1% in the prior year due to improved fee performance from our federal health business, and decreases in bad debt expense and asset impairment charges.

Information Systems & Global Solutions

We have designated the IS&GS Business as a separate operating and reportable segment ("IS&GS"). IS&GS revenues were $620 million and operating margin was 4.2% for the quarter ended September 30, 2016. Excluding the impact of amortization of acquired intangibles, non-GAAP operating margin was 8.4% for the quarter.

Cash Flow Summary

Cash flows provided by operating activities of continuing operations for the quarter were $226 million compared to $269 million in the prior year. The lower operating cash inflows were primarily due to timing of collections and payments compared to the prior year quarter.

Cash flows provided by investing activities of continuing operations for the quarter were $16 million compared to $24 million cash flows provided in the prior year quarter. The $8 million difference in cash flows was primarily due to proceeds received from the disposition of a business in the prior year quarter that did not recur in the current year quarter, along with higher payments for property, plant and equipment in the current year quarter, partially offset by cash acquired as part of the acquisition of the IS&GS Business.

Cash flows used in financing activities of continuing operations for the quarter were $463 million compared to $23 million in the prior year. The higher financing cash outflows were primarily due to a special cash dividend payment in connection with the Transactions and the early repayment of debt, partially offset by the issuance of debt, net of issuance costs.

As of September 30, 2016, the Company had $449 million in cash and cash equivalents and $3.5 billion in notes payable and long-term debt.

New Business Awards

Net business bookings totaled $2.9 billion in the quarter, representing a book-to-bill ratio of 1.56.

Notable recent awards received include:

The Company's backlog of signed business orders at the end of the quarter was $18.7 billion, of which $5.6 billion was funded.

Forward Guidance

As a result of the Company's year-to-date performance, the Company has updated guidance for revenues and non-GAAP diluted earnings per share from continuing operations. The updated guidance, which is based on a 12-month period from January 2, 2016, to December 30, 2016, is as follows:

Non-GAAP diluted earnings per share excludes amortization of acquired intangible assets, impairment charges, restructuring expenses, acquisition and integration related costs, gains and losses on disposal 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.

Conference Call Information

Leidos management will discuss operations and financial results in an earnings conference call beginning at 8 A.M. eastern time on November 3, 2016. 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 13646428.

About Leidos

Leidos is a global science and technology solutions leader working to solve the world's toughest challenges in the defense, intelligence, homeland security, civil and health markets. The company's 33,000 employees support vital missions for government and commercial customers. Headquartered in Reston, Virginia, Leidos reported pro forma annual revenues of approximately $10 billion for the fiscal year ended January 1, 2016 after giving effect to the recently completed combination of Leidos with Lockheed Martin's Information Systems & Global Solutions business.

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, adjusted EBITDA margins, operating income, earnings, earnings per share, charges, backlog, 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 or design build 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 prospectus included in the registration statement on Form S-4 filed by the Company on July 11, 2016 (which was declared effective by the SEC on July 11, 2016), our definitive proxy statement for the Company's annual meeting of stockholders filed on July 7, 2016, and the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our latest Transition 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 3, 2016. 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 P. Hernandez

Melissa L. Koskovich

571.526.6404

571.526.6850

Email Contact

Email Contact

 

 


LEIDOS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)




Three Months Ended   




Nine Months Ended  




September 30,
 2016



October 2,
 2015




September 30,
 2016
 




October 2,
 2015  


Revenues


$

1,868



$

1,302



$

4,468



$

3,805


Cost of revenues


1,630



1,138



3,925



3,344


Selling, general and administrative expenses


87



53



203



180


Bad debt expense


1



13



1



10


Acquisition and integration costs


44





68




Asset impairment charges




4





73


Restructuring expenses


5





6



2


Operating income


101



94



265



196


Interest income


3



1



8



2


Interest expense


(28)



(15)



(57)



(44)


Other (expense) income, net


(1)





(3)



1


Income from continuing operations before income taxes


75



80



213



155


Income tax benefit (expense)


17



(31)



(27)



(46)


Income from continuing operations


92



49



186



109


Discontinued operations:









Income tax benefit








18


Income from discontinued operations, net of taxes








18


Net income


92



49



186



127


Less: net income attributable to non-controlling interest,
  net of taxes


1





1




Net income attributable to Leidos Holdings, Inc.


$

91



$

49



$

185



$

127


Earnings per share:









Basic:









Income from continuing operations attributable to
  Leidos Holdings, Inc. common stockholders


$

0.81



$

0.68



$

2.18



$

1.49


Discontinued operations - net of tax








0.25


Net income attributable to Leidos Holdings, Inc.
  common stockholders


$

0.81



$

0.68



$

2.18



$

1.74


Diluted:









Income from continuing operations attributable to Leidos Holdings, Inc.
  common stockholders


$

0.80



$

0.67



$

2.13



$

1.47


Discontinued operations - net of tax








0.25


Net income attributable to Leidos Holdings, Inc.
  common stockholders


$

0.80



$

0.67



$

2.13



$

1.72











Weighted average number of common shares outstanding:









 Basic


112



72



85



73


 Diluted


114



73



87



74











 Cash dividends declared per share


$

13.96



$

0.32



$

14.60



$

0.96


 

 

 

LEIDOS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

 




September 30,
 2016


January 1,
 2016

ASSETS





Current assets:





Cash and cash equivalents


$

449



$

656


Receivables, net


1,677



921


Inventory, prepaid expenses and other current assets


430



216


Total current assets


2,556



1,793


Property, plant and equipment, net


231



142


Intangible assets, net


1,643



25


Goodwill


4,874



1,207


Deferred income taxes


15



8


Other assets


260



195




$

9,579



$

3,370


LIABILITIES AND EQUITY





Current liabilities:





Accounts payable and accrued liabilities


$

1,458



$

761


Accrued payroll and employee benefits


454



268


Dividends payable


23



2


Income taxes payable


3



6


  Notes payable and long-term debt, current portion


42



2


  Liabilities of discontinued operations




1


    Total current liabilities


1,980



1,040


Notes payable and long-term debt, net of current portion


3,428



1,079


Deferred tax liabilities


867



34


Other long-term liabilities


174



149


Commitments and contingencies





Stockholders' equity:





 Preferred stock, $.0001 par value, 10 million shares authorized and no shares
  issued and outstanding at September 30, 2016 and January 1, 2016





Common stock, $.0001 par value, 500 million shares authorized, 150 million and
 72 million shares issued and outstanding at September 30, 2016 and January 1,
 2016, respectively





Additional paid-in capital


3,310



1,353


Accumulated deficit


(188)



(277)


Accumulated other comprehensive loss


(6)



(8)


Total Leidos Holdings, Inc. stockholders' equity


3,116



1,068


Non-controlling interest


14




Total equity


3,130



1,068




$

9,579



$

3,370


 

 


LEIDOS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



Three Months Ended  


Nine Months Ended  



September 30,
 2016
 


October 2,
 2015  


September 30,
 2016
 


October 2,
 2015  

Cash flows from operations:









Net income


$

92



$

49



$

186



$

127


Income from discontinued operations








(18)


Adjustments to reconcile net income to net cash provided by operations:









Depreciation and amortization


37



11



54



35


Stock-based compensation


9



9



25



23


Asset impairment charges




4





73


Bad debt expense and other, net


1



9



(2)



8


Change in assets and liabilities, net of effects of acquisitions
  and dispositions:









Receivables


216



82



140



145


Inventory, prepaid expenses and other current assets


(117)



(12)



(124)



(22)


Accounts payable and accrued liabilities


29



57



36



71


Accrued payroll and employee benefits


(4)



(6)



(2)



(26)


Deferred income taxes and income taxes receivable/payable


(26)



68



(19)



(20)


Other long-term assets/liabilities


(11)



(2)



(10)



(18)


Total cash flows provided by operating activities of continuing operations


226



269



284



378


Cash flows from investing activities:









Payments for property, plant and equipment


(13)



(7)



(20)



(15)


Acquisition of business


25





25




Payments on accrued purchase price related to prior acquisition








(13)


Net proceeds from sale of assets




4



3



9


Proceeds from disposition of business




27



23



27


Proceeds from collections on promissory note


4





4




Other






(1)




Total cash flows provided by investing activities of
  continuing operations


16



24



34



8


Cash flows from financing activities:









Payments of long-term debt


(100)



(2)



(102)



(49)


Proceeds from debt issuance


690





690




Payments for debt issuance costs


(30)





(30)




Proceeds from issuances of stock


19



1



25



4


Repurchases of stock and other


(1)



(1)



(20)



(116)


Special cash dividend payment


(993)





(993)




Dividend payments


(48)



(23)



(94)



(71)


Other




2





3


Total cash flows used in financing activities of continuing operations


(463)



(23)



(524)



(229)


(Decrease) increase in cash and cash equivalents from continuing 
     operations


(221)



270



(206)



157


Cash flows from discontinued operations:









Cash provided by operating activities of discontinued operations








13


Cash (used in) provided by investing activities of discontinued operations






(1)



6


(Decrease) increase in cash and cash equivalents from discontinued 
      operations






(1)



19


Total (decrease) increase in cash and cash equivalents


(221)



270



(207)



176


Cash and cash equivalents at beginning of period


670



365



656



459


Cash and cash equivalents at end of period


$

449



$

635



$

449



$

635


 

 

LEIDOS HOLDINGS, INC.
UNAUDITED SEGMENT OPERATING RESULTS
(in millions)

During the third quarter, the Company completed its acquisition of Lockheed Martin's IS&GS Business and identified the business as a new operating and reportable segment.

The segment information for the periods presented was as follows:



Three Months Ended


Nine Months Ended



September 30,
 2016


October 2,
 2015


Dollar change


Percent change


September 30,
 2016


October 2,
 2015


Dollar change


Percent change

Revenues:











  National Security Solutions


$

921



$

878



$

43



4.9

%


$

2,734



$

2,619



$

115



4.4

%

  Health and Infrastructure


328



418



(90)



(21.5)%



1,115



1,182



(67)



(5.7)

%

  Information Systems & Global Solutions


620





620



NM



620





620



NM


  Corporate and Other


(1)



6



(7)



NM



(1)



4



(5)



NM


Total


$

1,868



$

1,302



$

566



43.5

%


$

4,468



$

3,805



$

663



17.4

%


















Operating income (loss):

















  National Security Solutions


$

91



$

78



$

13



16.7

%


$

224



$

214



$

10



4.7

%

  Health and Infrastructure


41



13



28



NM



116



(1)



117



NM


  Information Systems & Global Solutions


26





26



NM



26





26



NM


  Corporate and Other


(57)



3



(60)



NM



(101)



(17)



(84)



NM


Total


$

101



$

94



$

7



7.4

%


$

265



$

196



$

69



35.2

%


















Operating income (loss) margin:

















  National Security Solutions


9.9

%


8.9

%






8.2

%


8.2

%





  Health and Infrastructure


12.5

%


3.1

%






10.4

%


(0.1)

%





  Information Systems & Global Solutions


4.2

%








4.2

%







Total


5.4

%


7.2

%






5.9

%


5.2

%






NM - Not Meaningful

 


LEIDOS HOLDINGS, INC.
UNAUDITED BACKLOG BY REPORTABLE SEGMENT
(in millions)

Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts as work is performed. Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.

Funded backlog for contracts with the U.S. Government represents the value on contracts for which funding is appropriated less revenues previously recognized on these contracts. Funded backlog for contracts with non-U.S. Government agencies and commercial customers represents the estimated value on contracts, which may cover multiple future years, under which Leidos is obligated to perform, less revenue previously recognized on the contracts.

Negotiated unfunded backlog represents estimated amounts of revenue to be earned in the future from (1) contracts for which funding has not been appropriated and (2) unexercised priced contract options. Negotiated unfunded backlog does not include future potential task orders expected to be awarded under indefinite delivery/indefinite quantity, General Services Administration Schedule or other master agreement contract vehicles.

The estimated value of backlog as of the dates presented was as follows:



September 30,
 2016


January 1,
 2016

National Security Solutions:





Funded backlog


$

1,759



$

1,472


Negotiated unfunded backlog


6,166



6,554


   Total National Security Solutions backlog


$

7,925



$

8,026


Health and Infrastructure Sector:





Funded backlog


$

1,022



$

1,049


Negotiated unfunded backlog


866



820


Total Health and Infrastructure Sector backlog


$

1,888



$

1,869


Information Systems & Global Solutions:





Funded backlog


$

2,822



$


Negotiated unfunded backlog


6,029




Total Information Systems & Global Solutions backlog


$

8,851



$


Total:





Funded backlog


$

5,603



$

2,521


Negotiated unfunded backlog


13,061



7,374


Total backlog


$

18,664



$

9,895


Total backlog at September 30, 2016 included $454 million of reduction due to adverse impact of foreign currency movement between the U.S. dollar and the British pound.

LEIDOS HOLDINGS, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts)

The Company uses and refers to non-GAAP operating income, adjusted EBITDA, non-GAAP income from continuing operations and non-GAAP EPS from continuing operations, which are not measures of financial performance under generally accepted accounting principles in the U.S. ("GAAP") and, accordingly, these measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

Management believes that these non-GAAP measures provide another measure of the Company's results of operations and financial condition, including its ability to comply with financial covenants. These non-GAAP measures are frequently used by financial analysts covering Leidos and its peers. The Company's computation of its non-GAAP measures may not be comparable to similarly titled measures reported by other companies, thus limiting their use for comparability.

Non-GAAP operating income is computed by excluding the following items from income (loss) from continuing operations: (i) other income (expense), net; (ii) interest expense; (iii) interest income; (iv) income tax (expense) benefit adjusted to reflect non-GAAP adjustments; and (v) the following discrete items:

Non-GAAP income from continuing operations is computed by excluding the discrete items as identified above from income (loss) from continuing operations and adjusting income tax (expense) benefit for the effect of such exclusions.

Adjusted EBITDA is computed by excluding the following items from income (loss) from continuing operations, before income taxes: (i) discrete items as identified above; (ii) interest expense; (iii) interest income; and (iv) depreciation expense.

 

 

LEIDOS HOLDINGS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)


The following tables present the reconciliation of the non-GAAP measures identified above to the most directly comparable GAAP measures:




Quarter Ended September 30, 2016



As reported


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Non-GAAP results

Revenue


$

1,868



$



$



$



$

1,868


Cost of revenues


1,630









1,630


Selling, general and administrative expenses1


88





27





61


Acquisition and integration costs


44



44








Restructuring expenses


5







5




Operating income


101



(44)



(27)



(5)



177


Non-operating expense, net


(26)









(26)


Income from continuing operations, before
  income taxes


75



(44)



(27)



(5)



151


Income tax benefit (expense)2


17



11



11



2



(7)


Income from continuing operations


92



(33)



(16)



(3)



144


Less: net income attributable to non-controlling
  interest, net of taxes


1









1


Net income attributable to Leidos Holdings, Inc.


$

91



$

(33)



$

(16)



$

(3)



$

143













Diluted EPS from continuing operations attributable
  to Leidos Holdings, Inc.3


$

0.80



$

(0.29)



$

(0.14)



$

(0.03)



$

1.25


Diluted shares


114



114



114



114



114



(1) Selling, general and administrative expenses includes bad debt expense of $1 million.

(2) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments.

(3) Earnings per share is computed independently for each of the non-GAAP adjustment presented and therefore may not sum to the total
      non-GAAP earnings per share due to rounding.

 

 



Quarter Ended September 30, 2016



As reported


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Non-GAAP results

Income from continuing operations, before income taxes


$

75



$

(44)



$

(27)



$

(5)



$

151


Depreciation expense


10









10


Amortization expense


27





27






Interest expense, net


25









25


EBITDA


$

137



$

(44)



$



$

(5)



$

186


 

LEIDOS HOLDINGS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)




Quarter Ended October 2, 2015



As reported


Asset impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP results

Revenue


$

1,302



$



$



$



$

1,302


Cost of revenues


1,138









1,138


Selling, general and administrative expenses2


66





2



1



63


Asset impairment charges


4



4








Operating income


94



(4)



(2)



(1)



101


Non-operating expense, net


(14)









(14)


Income from continuing operations, before
  income taxes


80



(4)



(2)



(1)



87


Income tax (expense) benefit3


(31)



2



1





(34)


Income from continuing operations


$

49



$

(2)



$

(1)



$

(1)



$

53













Diluted EPS from continuing operations4


$

0.67



$

(0.03)



$

(0.01)



$

(0.01)



$

0.73


Diluted shares


73



73



73



73



73



(1) Prior period has been recast to reflect amortization of acquired intangible assets as a non-GAAP adjustment.

(2) Selling, general and administrative expenses includes bad debt expense of $13 million and restructuring expense of $1 million.

(3) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments.

(4) Earnings per share is computed independently for each of the non-GAAP adjustment presented and therefore may not sum to the total
      non-GAAP earnings per share due to rounding.

 

 



Quarter Ended October 2, 2015



As reported


Asset impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP results

Income from continuing operations, before income taxes


$

80



$

(4)



$

(2)



$

(1)



$

87


Depreciation expense


9









9


Amortization expense


2





2






Interest expense, net


14









14


EBITDA


$

105



$

(4)



$



$

(1)



$

110



(1) Prior period has been recast to reflect amortization of acquired intangible assets as a non-GAAP adjustment.

 

LEIDOS HOLDINGS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)

 




Nine Months Ended September 30, 2016



As reported


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Gains (losses) on sale of assets


Non-GAAP results

Revenue


$

4,468



$



$



$



$



$

4,468


Cost of revenues


3,925











3,925


Selling, general and administrative expenses1


204





30







174


Acquisition and integration costs


68



68










Restructuring expenses


6







6






Operating income


265



(68)



(30)



(6)





369


Non-operating (expense) income, net


(52)









5



(57)


Income from continuing operations, before income taxes


213



(68)



(30)



(6)



5



312


Income tax (expense) benefit2


(27)



21



12



2



(1)



(61)


Income from continuing operations


186



(47)



(18)



(4)



4



251


Less: net income attributable to non-controlling interest, net of taxes


1











1


Net income attributable to Leidos Holdings, Inc.


$

185



$

(47)



$

(18)



$

(4)



$

4



$

250















Diluted EPS from continuing operations attributable to Leidos Holdings, Inc.3


$

2.13



$

(0.54)



$

(0.21)



$

(0.05)



$

0.05



$

2.87


Diluted shares


87



87



87



87



87



87





(1) Selling, general and administrative expenses includes bad debt expense of $1 million.



(2) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments.



(3) Earnings per share is computed independently for each of the non-GAAP adjustment presented and therefore may not sum to the total
     non-GAAP earnings per share due to rounding.



             

 



Nine Months Ended September 30, 2016



As reported


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Gains (losses) on sale of assets


Non-GAAP results

Income from continuing operations,
 before income taxes


$

213



$

(68)



$

(30)



$

(6)



$

5



$

312


Depreciation expense


24











24


Amortization expense


30





30








Interest expense, net


49











49


EBITDA


$

316



$

(68)



$



$

(6)



$

5



$

385


 

 

LEIDOS HOLDINGS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)

 




Nine Months Ended October 2, 2015



As reported


Asset impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP results

Revenue


$

3,805



$



$



$



$

3,805


Cost of revenues


3,344









3,344


Selling, general and administrative
 expenses2


192





7



3



182


Asset impairment charges


73



73








Operating income


196



(73)



(7)



(3)



279


Non-operating expense, net


(41)









(41)


Income from continuing operations,
 before income taxes


155



(73)



(7)



(3)



238


Income tax (expense) benefit3


(46)



28



3



1



(78)


Income from continuing operations


109



(45)



(4)



(2)



160


Income from discontinued operations,
 net of taxes


18









18


Net income


$

127



$

(45)



$

(4)



$

(2)



$

178













Diluted EPS from continuing operations4


$

1.47



$

(0.61)



$

(0.05)



$

(0.03)



$

2.16


Diluted shares


74



74



74



74



74



(1) Prior period has been recast to reflect amortization of acquired intangible assets as a non-GAAP adjustment.

(2) Selling, general and administrative expenses includes bad debt expense of $10 million and restructuring expense of $3 million.

(3) Calculation uses an estimated statutory tax rate on non-GAAP tax deductible adjustments.

(4) Earnings per share is computed independently for each of the non-GAAP adjustment presented and therefore may not sum to the total
     non-GAAP earnings per share due to rounding.

 

 



Nine Months Ended October 2, 2015



As reported


Asset impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP results

Income from continuing operations,
 before income taxes


$

155



$

(73)



$

(7)



$

(3)



$

238


Depreciation expense


28









28


Amortization expense


7





7






Interest expense, net


42









42


EBITDA


$

232



$

(73)



$



$

(3)



$

308



(1) Prior period has been recast to reflect amortization of acquired intangible assets as a non-GAAP adjustment.

LEIDOS HOLDINGS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)

 


The following tables present the reconciliation of the non-GAAP operating income by reportable segment:




Quarter Ended September 30, 2016





Operating income (loss)


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Non-GAAP Operating income (loss)


Non-GAAP Operating Margin

National Security Solutions


$

91



$



$



$



$

91



9.9

%

Health and Infrastructure


41





1





42



12.8

%

Information Systems & Global Solutions


26





26





52



8.4

%

Corporate and Other


(57)



44





5



(8)



NM

Total


$

101



$

44



$

27



$

5



$

177



9.5

%

 



Quarter Ended October 2, 2015





Operating income


Asset impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP Operating income


Non-GAAP Operating Margin

National Security Solutions


$

78



$



$



$



$

78



8.9

%

Health and Infrastructure


13



4



2





19



4.5

%

Corporate and Other


3







1



4



NM

Total


$

94



$

4



$

2



$

1



$

101



7.8

%

 



Nine Months Ended September 30, 2016





Operating income (loss)


Acquisition and integration costs


Amortization of intangibles


Restructuring expenses


Non-GAAP Operating income (loss)


Non-GAAP Operating Margin

National Security Solutions


$

224



$



$



$



$

224



8.2

%

Health and Infrastructure


116





4





120



10.8

%

Information Systems & Global Solutions


26





26





52



8.4

%

Corporate and Other


(101)



68





6



(27)



NM

Total


$

265



$

68



$

30



$

6



$

369



8.3

%

 



Nine Months Ended October 2, 2015





Operating income (loss)


Impairment charges


Amortization of intangibles1


Restructuring expenses


Non-GAAP Operating income (loss)


Non-GAAP Operating Margin

National Security Solutions


$

214



$



$



$



$

214



8.2

%

Health and Infrastructure


(1)



73



7





79



6.7

%

Corporate and Other


(17)







3



(14)



NM

Total


$

196



$

73



$

7



$

3



$

279



7.3

%


(1) Prior period has been recast to reflect amortization of acquired intangible assets as a non-GAAP adjustment.


NM - Not Meaningful

 

To view the original version on PR Newswire, visit: http://www.prnewswire.com/news-releases/leidos-holdings-inc-reports-third-quarter-fiscal-year-2016-results-300356529.html

SOURCE Leidos Holdings, Inc.

Contact:
Leidos Holdings, Inc.
Web: http://www.leidos.com