LEIDOS HOLDINGS, INC. RESTON, Va., Sept. 9, 2014 /PRNewswire/ -- Leidos Holdings, Inc. (NYSE: LDOS), a national security, health and engineering solutions company, today reported financial results for the second quarter of fiscal year 2015, which ended August 1, 2014.
Roger Krone, Leidos Chief Executive Officer commented: "In the second quarter, we experienced deterioration in the sales pipeline for our commercial health and engineering businesses, which caused us to reappraise our long-term forecasts, resulting in goodwill and intangible impairment charges. Despite these accounting charges, Leidos revenue declines moderated, our non-GAAP EPS from continuing operations increased double-digits and cash flow from operations was solid. As we confront the realities of the government budget and the competitive commercial landscape, our near future entails some difficult challenges and lots of hard work. It is my mission to make our people and our capabilities succeed and drive substantial value for our employees, our customers and our shareholders."
Second Quarter Fiscal Year 2015 Summary Results
Revenues for the second quarter of fiscal year 2015 were $1.31 billion, reflecting a revenue contraction of 10 percent, as compared to $1.46 billion in the prior year.
Operating loss from continuing operations for the second quarter was $410 million, as compared to operating income from continuing operations of $10 million in the prior year. Operating loss from continuing operations includes non-cash goodwill and intangible impairment charges of $510 million.
Diluted loss per share from continuing operations for the second quarter was $5.93 compared to diluted earnings per share from continuing operations of $0.05 in the prior year. The diluted share count for the quarter was 74 million, down 12 percent from 84 million in the prior year. Non-GAAP diluted earnings per share from continuing operations, which excludes the non-cash impairment charges, for the second quarter was $0.61 compared to $0.53 in the prior year.
Second Quarter Fiscal Year 2015 Segment Operating Results
Three Months Ended
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August 1, 2014 August 2, 2013 Revenue
Contraction
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Revenues: ($ millions)
National Security Solutions $925 $1,019 (9)%
Health and Engineering 381 445 (14)%
Corporate and Other - (6) NM
Intersegment Elimination - (1) NM
Total $1,306 $1,457 (10)%
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Operating Margin
Operating income (loss): 2015 2014
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National Security Solutions $78 $72 8.4% 7.1%
Health and Engineering (482) (3) (126.5)% (0.7)%
Corporate and Other (6) (59) NM NM
Total $(410) $10 (31.4)% 0.7%
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National Security Solutions
National Security Solutions revenues for the second quarter of fiscal year 2015 decreased $94 million, or 9 percent, compared to the prior year. The revenue contraction was primarily attributable to contract activities tied to the drawdown of overseas U.S. military forces and reductions in defense and U.S. Government spending resulting from sequestration and budget cuts.
National Security Solutions operating income margin for the second quarter was 8.4 percent, up from 7.1 percent in the prior year. The increase in operating income margin was primarily due to net favorable changes in contract estimates in the second quarter of fiscal year 2015, as compared to net unfavorable changes in contract estimates in the prior year which was negatively impacted by two international fixed price development programs.
Health and Engineering
Health and Engineering revenues for the second quarter of fiscal year 2015 decreased $64 million, or 14 percent, compared to the prior year. The revenue contraction reflects a decline in engineering services primarily due to the completion of two energy design-build construction projects, lower sales in our commercial health consulting business, and lower sales volume in the security products business due to the timing of shipments.
Health and Engineering operating loss for the second quarter was $482 million compared to $3 million in the prior year. The second quarter of fiscal year 2015 was negatively impacted by non-cash impairment charges for health goodwill of $369 million, engineering goodwill of $117 million, and health customer related intangibles of $24 million. In addition, the second quarter of fiscal year 2015 was impacted by operating losses due to production shortfalls and outage at the Plainfield biomass power plant and lower sales volume from higher margin security products. The prior year quarter included an impairment charge of intangible assets of $30 million and an unfavorable change in contract estimates on the Plainfield construction project.
Corporate and Other
Corporate and Other segment operating loss was $6 million for the second quarter of fiscal year 2015 compared to $59 million in the prior year. In the prior year, there were separation transaction and restructuring expenses associated with the September 2013 spin-off of $19 million and costs to establish infrastructures for the two companies of $14 million.
Six Months Ended Fiscal Year 2015 Summary Results
Revenues for the first half of fiscal year 2015 were $2.62 billion, reflecting a revenue contraction of 14 percent, as compared to $3.05 billion in the prior year.
Operating loss from continuing operations for the first half of fiscal year 2015 was $323 million, as compared to operating income from continuing operations of $87 million in the prior year. Operating loss from continuing operations includes non-cash goodwill and intangible impairment charges of $510 million.
Diluted loss per share from continuing operations for the first half of fiscal year 2015 was $5.25 compared to diluted earnings per share from continuing operations of $0.50 in the prior year. The diluted share count for the first half of fiscal year 2015 was 75 million, down 11 percent from 84 million in the prior year. Non-GAAP diluted earnings per share from continuing operations, which excludes the impairment charges, for the first half of fiscal year 2015 was $1.21 compared to $1.13 in the prior year.
Cash Generation and Capital Deployment
Cash flow provided by operating activities of continuing operations for the second quarter of fiscal year 2015 was $124 million. Cash flow provided by investing activities of continuing operations for the second quarter fiscal 2015 was $68 million which was attributed to proceeds received related to the U.S. Treasury cash grant for the Plainfield plant of $80 million less expenditures for property plant and equipment of $12 million.
During the second quarter of fiscal year 2015, the Company paid a cash dividend of $0.32 per share. On September 6, 2014, the Company's Board of Directors declared a quarterly cash dividend of $0.32 per share payable on October 30, 2014 to stockholders of record as of the close of business on October 15, 2014. The Company intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Company's Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.
As of August 1, 2014, the Company had $358 million in cash and cash equivalents and $1.3 billion in long-term debt.
New Business Awards
New business bookings totaled $889 million in the second quarter of fiscal 2015, representing a book-to-bill ratio of 0.7.
Notable recent awards received include:
-- Intelligence Community. The Company was awarded contracts valued at $445
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.
-- U.S. Army Armament, Research, Development and Engineering Center. The
Company was awarded a prime contract by the U.S. Army's Armament,
Research, Development and Engineering Center. The multiple-award
cost-plus-fixed-fee/firm fixed-price, indefinite delivery/indefinite
quantity contract has a five-year period of performance and a contract
ceiling of $300 million for all awardees.
-- Nation Oceanic and Atmospheric Administration. The Company was awarded a
prime contract by the National Oceanic and Atmospheric Administration
Office of Coast Survey to provide hydrographic surveying services. The
multiple-award, indefinite delivery/indefinite quantity contract has a
five-year period of performance and a total contract value of $250
million for all awardees.
