Commission File Number | Exact Name of Registrant as Specified in its Charter, Address of Principal Executive Offices and Telephone Number | State of Incorporation | I.R.S. Employer Identification No | |||
001-33072 | Leidos Holdings, Inc. | Delaware | 20-3562868 | |||
11951 Freedom Drive, Reston, Virginia 20190 | ||||||
(571) 526-6000 | ||||||
000-12771 | Leidos, Inc. | Delaware | 95-3630868 | |||
11951 Freedom Drive, Reston, Virginia 20190 | ||||||
(571) 526-6000 |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit 99.1 | Press Release dated December 3, 2014 issued by Leidos Holdings, Inc. |
(Registrant) | LEIDOS HOLDINGS, INC. | ||||
Date: December 3, 2014 | By: | /s/ Vincent A. Maffeo | |||
Vincent A. Maffeo | |||||
Its: | Executive Vice President and General Counsel | ||||
(Registrant) | LEIDOS, INC. | ||||
Date: December 3, 2014 | By: | /s/ Vincent A. Maffeo | |||
Vincent A. Maffeo | |||||
Its: | Executive Vice President and General Counsel |
• | Revenues: $1.28 billion |
• | Diluted Earnings per Share from Continuing Operations: $0.51 |
• | Non-GAAP Diluted Earnings per Share from Continuing Operations: $0.65 |
• | Cash Flows Provided by Operating Activities of Continuing Operations: $179 million |
• | New Bookings: $1.19 billion (book-to-bill ratio of 0.9) |
Three Months Ended | |||||||||||||
October 31, 2014 | November 1, 2013 | Revenue Contraction | |||||||||||
Revenues: | ($ millions) | ||||||||||||
National Security Solutions | $ | 906 | $ | 1,011 | (10 | )% | |||||||
Health and Engineering | 373 | 406 | (8 | )% | |||||||||
Corporate and Other | (3 | ) | (2 | ) | NM | ||||||||
Intersegment Elimination | — | (1 | ) | NM | |||||||||
Total | $ | 1,276 | $ | 1,414 | (10 | )% | |||||||
Operating Margin | |||||||||||||
Operating income (loss): | 2015 | 2014 | |||||||||||
National Security Solutions | $ | 72 | $ | 66 | 7.9 | % | 6.5 | % | |||||
Health and Engineering | 4 | (30 | ) | 1.1 | % | (7.4 | )% | ||||||
Corporate and Other | (4 | ) | (41 | ) | NM | NM | |||||||
Total | $ | 72 | $ | (5 | ) | 5.6 | % | (0.4 | )% |
• | Intelligence Community. The Company was awarded contracts valued at $626 million, if all options are exercised, by U.S. national security and intelligence clients. Though the specific nature of these contracts is classified, they all encompass mission-critical services that help to counter global threats and strengthen national security. |
• | National Institutes of Health. The Company was awarded a prime contract by the National Institutes of Health to provide information technology service in support of the Electronic Research Administration . The single-award cost-plus fixed-fee contract has a one-year base period of performance, four one-year options and a total contract value of approximately $113 million, if all options are exercised. |
• | U.S. Air Force Research Laboratory. The Company was awarded a prime contract by the U.S. Air Force Research Laboratory to provide research and development and testing services in support of the Threat Warning and Countermeasures program for the AFRL Sensors Directorate. The single-award indefinite delivery/indefinite quantity cost-plus fixed-fee contract has a six-year period of performance and a total contract value of approximately $49 million. |
• | U.S. Air Force Research Laboratory. The Company was awarded a prime contract by the U.S. Air Force Research Laboratory to research, develop, and test electronic warfare and sensor technologies for the AFRL Spectrum Warfare Division, Sensors Directorate for the Advanced Novel Spectrum Warfare Environment Research program. The multiple-award indefinite delivery/indefinite quantity cost-plus fixed-fee contract has a seven-year period of performance and a total contract value of $47 million for all awardees. |
• | National Geospatial-Intelligence Agency. The Company was awarded a prime contract by the National Geospatial-Intelligence Agency to provide geospatial solutions to the GEOINT Data Services program. The single-award indefinite delivery/indefinite quantity cost-plus fixed fee contract has a one-year base period of performance, three one-year options and a total contract value of $31 million, if the options are exercised. |
• | Naval Medical Logistics Command. The Company was awarded a prime contract by the Naval Medical Logistics Command to provide services in support of the Naval Health Research Center’s, Department of Defense, HIV/AIDS Prevention Program. The single-award cost-plus fixed-fee contract has a one-year base period of performance, four one-year options and a total contract value of approximately $14 million, if all options are exercised. |
• | Magellan Midstream Partners, L.P. The Company was awarded a multi-million dollar prime contract from Magellan Midstream Partners, L.P. to provide engineering, procurement and construction (EPC) services for a condensate splitter at Magellan’s Corpus Christi, Texas, processing and storage terminal. The Company will use its DesignBuildSM services to design and install the single, 50,000 bpd train to process the Eagle Ford condensate feed, making Leidos a valuable adviser to Magellan in expanding their midstream processing capabilities. |
• | Revenues of $4.9 billion to $5.1 billion; |
• | Non-GAAP diluted earnings per share from continuing operations of $2.10 to $2.30; and |
• | Cash flows provided by operating activities from continuing operations of at or above $300 million. |
CONTACTS: |
Investor Relations: |
Kelly P. Hernandez |
571.526.6404 |
Kelly.P.Hernandez@leidos.com |
Media Relations: |
Melissa Koskovich |
571.526.6851 |
Melissa.I.Koskovich@leidos.com |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 31, 2014 | November 1, 2013 | October 31, 2014 | November 1, 2013 | ||||||||||||
Revenues | $ | 1,276 | $ | 1,414 | $ | 3,894 | $ | 4,464 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenues | 1,115 | 1,219 | 3,375 | 3,885 | |||||||||||
Selling, general and administrative expenses | 72 | 113 | 239 | 343 | |||||||||||
Bad debt expense | — | 43 | 3 | 45 | |||||||||||
Goodwill impairment charges | — | — | 486 | — | |||||||||||
Intangible asset impairment charges | 17 | 19 | 41 | 51 | |||||||||||
Separation transaction and restructuring expenses | — | 25 | 1 | 58 | |||||||||||
Operating income (loss) | 72 | (5 | ) | (251 | ) | 82 | |||||||||
Non-operating income (expense): | |||||||||||||||
Interest income | — | 5 | 1 | 15 | |||||||||||
Interest expense | (18 | ) | (21 | ) | (58 | ) | (59 | ) | |||||||
Other income, net | — | 2 | 1 | 3 | |||||||||||
Income (loss) from continuing operations before income taxes | 54 | (19 | ) | (307 | ) | 41 | |||||||||
Income tax (expense) benefit | (16 | ) | 11 | (49 | ) | (4 | ) | ||||||||
Income (loss) from continuing operations | 38 | (8 | ) | (356 | ) | 37 | |||||||||
Discontinued operations: | |||||||||||||||
(Loss) income from discontinued operations before income taxes | (1 | ) | 19 | (12 | ) | 144 | |||||||||
Income tax (expense) benefit | (3 | ) | (14 | ) | 1 | (61 | ) | ||||||||
(Loss) income from discontinued operations | (4 | ) | 5 | (11 | ) | 83 | |||||||||
Net income (loss) | $ | 34 | $ | (3 | ) | $ | (367 | ) | $ | 120 | |||||
Earnings (loss) per share (EPS): | |||||||||||||||
Income (loss) from continuing operations | 38 | (8 | ) | (356 | ) | 37 | |||||||||
Less: earnings allocated to participating securities | — | — | — | (3 | ) | ||||||||||
Income (loss) from continuing operations, for computing basic EPS | $ | 38 | $ | (8 | ) | $ | (356 | ) | $ | 34 | |||||
Net income (loss), as reported | 34 | (3 | ) | (367 | ) | 120 | |||||||||
Less: earnings allocated to participating securities | — | — | — | (3 | ) | ||||||||||
Net income (loss) for computing EPS | $ | 34 | $ | (3 | ) | $ | (367 | ) | $ | 117 | |||||
Basic: | |||||||||||||||
Income (loss) from continuing operations | $ | 0.52 | $ | (0.10 | ) | $ | (4.75 | ) | $ | 0.40 | |||||
(Loss) income from discontinued operations | (0.05 | ) | 0.06 | (0.14 | ) | 0.99 | |||||||||
$ | 0.47 | $ | (0.04 | ) | $ | (4.89 | ) | $ | 1.39 | ||||||
Diluted: | |||||||||||||||
Income (loss) from continuing operations | $ | 0.51 | $ | (0.10 | ) | $ | (4.75 | ) | $ | 0.40 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 31, 2014 | November 1, 2013 | October 31, 2014 | November 1, 2013 | ||||||||||||
(Loss) income from discontinued operations | (0.05 | ) | 0.06 | (0.14 | ) | 0.99 | |||||||||
$ | 0.46 | $ | (0.04 | ) | $ | (4.89 | ) | $ | 1.39 | ||||||
Cash dividends declared per share | $ | 0.32 | $ | 0.32 | $ | 0.96 | $ | 5.28 | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 73 | 84 | 75 | 84 | |||||||||||
Diluted | 74 | 84 | 75 | 84 |
October 31, 2014 | January 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 418 | $ | 430 | |||
Receivables, net | 1,021 | 1,082 | |||||
Inventory, prepaid expenses and other current assets | 228 | 256 | |||||
Assets of discontinued operations | 8 | 39 | |||||
Total current assets | 1,675 | 1,807 | |||||
Property, plant and equipment, net | 360 | 482 | |||||
Intangible assets, net | 39 | 93 | |||||
Goodwill | 1,207 | 1,693 | |||||
Deferred income taxes | 18 | 15 | |||||
Other assets | 99 | 72 | |||||
$ | 3,398 | $ | 4,162 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 704 | $ | 716 | |||
Accrued payroll and employee benefits | 287 | 285 | |||||
Notes payable and long-term debt, current portion | 2 | 2 | |||||
Liabilities of discontinued operations | 8 | 6 | |||||
Total current liabilities | 1,001 | 1,009 | |||||
Notes payable and long-term debt, net of current portion | 1,227 | 1,331 | |||||
Other long-term liabilities | 194 | 227 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $.0001 par value, 10 million shares authorized and no shares issued and outstanding at October 31, 2014 and January 31, 2014 | — | — | |||||
Common stock, $.0001 par value, 500 million shares authorized, 74 million and 80 million shares issued and outstanding at October 31, 2014 and January 31, 2014, respectively | — | — | |||||
Additional paid-in capital | 1,435 | 1,576 | |||||
Accumulated (deficit) earnings | (453 | ) | 25 | ||||
Accumulated other comprehensive loss | (6 | ) | (6 | ) | |||
Total stockholders’ equity | 976 | 1,595 | |||||
$ | 3,398 | $ | 4,162 |
Three Months Ended | Nine Months Ended | |||||||||||||
October 31, 2014 | November 1, 2013 | October 31, 2014 | November 1, 2013 | |||||||||||
Cash flows from operations: | ||||||||||||||
Net income (loss) | $ | 34 | $ | (3 | ) | $ | (367 | ) | $ | 120 | ||||
Loss (income) from discontinued operations | 4 | (5 | ) | 11 | (83 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operations: | ||||||||||||||
Depreciation and amortization | 16 | 13 | 50 | 64 | ||||||||||
Stock-based compensation | 10 | 13 | 33 | 43 | ||||||||||
Goodwill impairment charges | — | — | 486 | — | ||||||||||
Intangible asset impairment charges | 17 | 19 | 41 | 51 | ||||||||||
Bad debt expense | — | 43 | 3 | 45 | ||||||||||
Restructuring charges, net | — | 6 | 1 | 18 | ||||||||||
Other | 2 | (4 | ) | 3 | (3 | ) | ||||||||
Change in assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||||||
Receivables | 85 | (16 | ) | 29 | (142 | ) | ||||||||
Inventory, prepaid expenses and other current assets | (7 | ) | (21 | ) | 2 | 27 | ||||||||
Deferred income taxes | 46 | 20 | 46 | 20 | ||||||||||
Other assets | (1 | ) | (3 | ) | (2 | ) | 3 | |||||||
Accounts payable and accrued liabilities | 24 | 20 | (11 | ) | (7 | ) | ||||||||
Accrued payroll and employee benefits | (9 | ) | (6 | ) | 3 | (46 | ) | |||||||
Income taxes receivable/payable | (33 | ) | (14 | ) | (22 | ) | (14 | ) | ||||||
Other long-term liabilities | (9 | ) | (12 | ) | (12 | ) | (14 | ) | ||||||
Total cash flows provided by operating activities of continuing operations | 179 | 50 | 294 | 82 | ||||||||||
Cash flows from investing activities: | ||||||||||||||
Expenditures for property, plant and equipment | (4 | ) | (1 | ) | (26 | ) | (31 | ) | ||||||
Proceeds from sale of assets | — | — | — | 65 | ||||||||||
Proceeds from U.S. Treasury cash grant | — | — | 80 | — | ||||||||||
Net proceeds of cost method investments | — | 10 | — | 12 | ||||||||||
Dividend received from the separation of New SAIC | — | 295 | — | 295 | ||||||||||
Contribution paid related to the separation of New SAIC | — | (26 | ) | — | (26 | ) | ||||||||
Other | — | (2 | ) | — | (3 | ) | ||||||||
Total cash flows (used in) provided by investing activities of continuing operations | (4 | ) | 276 | 54 | 312 | |||||||||
Cash flows from financing activities: | ||||||||||||||
Payments of notes payable and long-term debt | (103 | ) | — | (104 | ) | (1 | ) | |||||||
Payments of deferred financing costs | — | (5 | ) | — | (5 | ) | ||||||||
Payments from New SAIC for deferred financing costs | — | 5 | — | 5 |
Three Months Ended | Nine Months Ended | |||||||||||||
October 31, 2014 | November 1, 2013 | October 31, 2014 | November 1, 2013 | |||||||||||
Proceeds from real estate financing transaction | — | — | — | 38 | ||||||||||
Proceeds from debt issuance | — | 500 | — | 500 | ||||||||||
Distribution of debt to New SAIC | — | (500 | ) | — | (500 | ) | ||||||||
Sales of stock and exercises of stock options | 2 | 3 | 6 | 11 | ||||||||||
Repurchases of stock | (1 | ) | — | (213 | ) | (17 | ) | |||||||
Dividend payments | (24 | ) | (28 | ) | (72 | ) | (452 | ) | ||||||
Other | — | — | 1 | 2 | ||||||||||
Total cash flows used in financing activities of continuing operations | (126 | ) | (25 | ) | (382 | ) | (419 | ) | ||||||
Increase (decrease) in cash and cash equivalents from continuing operations | 49 | 301 | (34 | ) | (25 | ) | ||||||||
Cash flows from discontinued operations: | ||||||||||||||
Cash (used in) provided by operating activities of discontinued operations | (8 | ) | 61 | (5 | ) | 121 | ||||||||
Cash provided by (used in) investing activities of discontinued operations | 19 | (15 | ) | 27 | (17 | ) | ||||||||
Cash provided by in financing activities of discontinued operations | — | 5 | — | — | ||||||||||
Increase in cash and cash equivalents from discontinued operations | 11 | 51 | 22 | 104 | ||||||||||
Total increase (decrease) in cash and cash equivalents | 60 | 352 | (12 | ) | 79 | |||||||||
Cash and cash equivalents at beginning of period | 358 | 462 | 430 | 735 | ||||||||||
Cash and cash equivalents at end of period | $ | 418 | $ | 814 | $ | 418 | $ | 814 |
Nine Months Ended | |||||||||||
October 31, 2014 | November 1, 2013 | Revenue Contraction | |||||||||
Revenues: | |||||||||||
National Security Solutions | $ | 2,775 | $ | 3,107 | (11 | )% | |||||
Health and Engineering | 1,126 | 1,368 | (18 | )% | |||||||
Corporate and Other | (7 | ) | (8 | ) | NM | ||||||
Intersegment Elimination | — | (3 | ) | NM | |||||||
Total | $ | 3,894 | $ | 4,464 | (13 | )% | |||||
Operating Margin | |||||||||||
2015 | 2014 | ||||||||||
Operating income (loss): | |||||||||||
National Security Solutions | $ | 227 | $ | 209 | 8.2 | % | 6.7 | % | |||
Health and Engineering | (455 | ) | 2 | (40.4 | )% | 0.1 | % | ||||
Corporate and Other | (23 | ) | (129 | ) | NM | NM | |||||
Total | $ | (251 | ) | $ | 82 | (6.4 | )% | 1.8 | % |
October 31, 2014 | August 1, 2014 | May 2, 2014 | January 31, 2014 | ||||||||||||
National Security Solutions: | |||||||||||||||
Funded backlog | $ | 1,594 | $ | 1,837 | $ | 1,986 | $ | 1,854 | |||||||
Negotiated unfunded backlog | 4,947 | 4,778 | 5,005 | 5,604 | |||||||||||
Total National Security Solutions backlog | $ | 6,541 | $ | 6,615 | $ | 6,991 | $ | 7,458 | |||||||
Health and Engineering: | |||||||||||||||
Funded backlog | $ | 1,092 | $ | 1,048 | $ | 1,112 | $ | 1,144 | |||||||
Negotiated unfunded backlog | 698 | 750 | 728 | 694 | |||||||||||
Total Health and Engineering backlog | $ | 1,790 | $ | 1,798 | $ | 1,840 | $ | 1,838 | |||||||
Total: | |||||||||||||||
Funded backlog | $ | 2,686 | $ | 2,885 | $ | 3,098 | $ | 2,998 | |||||||
Negotiated unfunded backlog | 5,645 | 5,528 | 5,733 | 6,298 | |||||||||||
Total backlog | $ | 8,331 | $ | 8,413 | $ | 8,831 | $ | 9,296 |
• | Goodwill and intangible asset impairment charges - This adjustment represents impairments of goodwill and long-lived intangible assets due to changes in actual performance against performance projected when the goodwill and long-lived intangible assets were acquired. |
• | Separation transaction and restructuring charges - This adjustment represents costs for strategic advisory services, legal and accounting services, lease termination and facility consolidation, and severance costs associated with the Company's September 2013 spin-off of New SAIC. |
• | Impact of Plainfield - This adjustment represents the write-down taken as part of cancelling accounts receivable in exchange for the asset of the Plainfield plant and estimate-at-completion adjustments related to the Plainfield construction project prior to the Company's acquisition of the Plainfield plant in October 2013. |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 31, 2014 | November 1, 2013 | October 31, 2014 | November 1, 2013 | ||||||||||||
GAAP income (loss) from continuing operations | $ | 38 | $ | (8 | ) | $ | (356 | ) | $ | 37 | |||||
Goodwill impairment charges | — | — | 486 | — | |||||||||||
Intangible asset impairment charges | 17 | 19 | 41 | 51 | |||||||||||
Separation transaction and restructuring expenses | — | 25 | 1 | 58 | |||||||||||
Impact of Plainfield | — | 32 | — | 49 | |||||||||||
Total non-GAAP adjustments | 17 | 76 | 528 | 158 | |||||||||||
Adjustment to the income tax provision to reflect non-GAAP adjustments* | (7 | ) | (26 | ) | (32 | ) | (55 | ) | |||||||
Non-GAAP income from continuing operations | $ | 48 | $ | 42 | $ | 140 | $ | 140 | |||||||
GAAP diluted earnings (loss) per share from continuing operations | $ | 0.51 | $ | (0.10 | ) | $ | (4.75 | ) | $ | 0.40 | |||||
Total adjustments from non-GAAP income from continuing operations, above | 0.14 | 0.59 | 6.59 | 1.23 | |||||||||||
Non GAAP diluted earnings per share from continuing operations | $ | 0.65 | $ | 0.49 | $ | 1.84 | $ | 1.63 | |||||||
Diluted weighted average number of common shares outstanding | 74 | 86 | 76 | 84 | |||||||||||
* Calculation uses an estimated tax rate on non-GAAP tax deductible adjustments. |