Leidos Holdings, Inc. Reports Fourth Quarter and Fiscal Year 2016 Results

- Revenues: $2.58 billion for fourth quarter; $7.04 billion for fiscal year 2016

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

Roger Krone, Leidos Chairman and Chief Executive Officer, commented: "I am pleased with our fourth quarter results and with a strong close to a successful and transformational year for the Company. Through the dedicated effort of our employees and the innovative solutions we bring to our customers, we were able to grow revenues, margins, earnings, and cash flow from operations, compared to the prior year.  We are proceeding well against our stated targets and remain committed to building on our successes in the year ahead."

Fourth Quarter Summary Results

Revenues for the quarter were $2.58 billion, compared to $1.28 billion in the prior year quarter. The current quarter included $1.35 billion of revenue attributable to the Information Systems & Global Solutions business ("IS&GS Business") acquired from Lockheed Martin during the third quarter of fiscal year 2016.

Operating income from continuing operations for the quarter was $152 million, compared to $102 million in the prior year quarter. Operating margin decreased to 5.9% from 8.0% in the prior year quarter, as the current quarter included $54 million of amortization of acquired intangible assets, $22 million of acquisition and integration costs, $8 million of restructuring charges and $4 million of asset impairment charges. Excluding these items, the non-GAAP operating margin increased to 9.3% from 8.4% in the prior year quarter.

Diluted earnings per share ("EPS") from continuing operations attributable to Leidos common stockholders for the quarter was $0.39, compared to $1.72 in the prior year quarter. The weighted average diluted share count for the quarter was 153 million, up from 74 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 in connection with the acquisition of the IS&GS Business during the third quarter of fiscal year 2016. Excluding the items mentioned above, non-GAAP diluted EPS from continuing operations attributable to Leidos common stockholders for the fourth quarter was $0.75 compared to $0.80 in the prior year quarter.

National Security Solutions

National Security Solutions revenues for the quarter of $876 million increased $28 million, or 3%, compared to the prior year quarter. The revenue growth was primarily attributable to revenues associated with our international business and increases in fees resulting from the achievement of contract milestones and related profit write-ups on certain contracts. These increases were partially offset by reduced revenue due to lower scope and completion of certain contracts.

National Security Solutions operating income margin for the quarter was 7.8%, compared to 7.7% in the prior year quarter.

Information Systems & Global Solutions

IS&GS revenues for the fourth quarter were $1.35 billion with an operating margin of 6.5%. Excluding the impact of amortization of the acquired intangibles, the non-GAAP operating margin of IS&GS was 10.4%.

Health and Infrastructure Sector

Health and Infrastructure Sector ("HIS") revenues of $348 million for the quarter decreased $84 million, or 19%, compared to the prior year quarter. The revenue decline is primarily attributable to the divestiture of the heavy construction business in the current fiscal year. Excluding the revenues from the divested business, HIS revenues increased $26 million, or 8.1%, primarily due to growth in the Federal Health business.

Health and Infrastructure Sector operating income margin for the quarter was 13.2%, up from 10.6% in the prior year, due to the divestiture of the heavy construction business.

Fiscal Year 2016 Summary Results

Revenues for fiscal year 2016 were $7.04 billion, compared to $5.09 billion in the prior calendar year. Fiscal year 2016 revenues included $1.97 billion of revenue attributable to the IS&GS Business.

Operating income from continuing operations for fiscal year 2016 was $417 million, compared to $298 million in the prior calendar year. Operating margin was 5.9% for both fiscal year 2016 as well as the prior calendar year. The current year operating income included $84 million of amortization of intangible assets, $90 million of acquisition and integration costs, $14 million of restructuring charges and $4 million of asset impairment charges. Excluding these items, the non-GAAP operating margin increased to 8.6% from 7.6% in the prior calendar year.

Diluted EPS from continuing operations attributable to Leidos common stockholders for fiscal year 2016 was $2.35, compared to $3.19 for the prior calendar year. The diluted share count was 104 million, up from 74 million in the prior calendar 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 during the third quarter of fiscal year 2016. Excluding the impact of items mentioned above and the prior year gain on sale of the Company's former headquarters, the non-GAAP diluted EPS from continuing operations attributable to Leidos common stockholders for fiscal year 2016 was $3.51, compared to $2.96 in the prior calendar year.

National Security Solutions

National Security Solutions revenues of $3.61 billion for fiscal year 2016 increased $143 million, or 4%, compared to the prior calendar year. The revenue growth was primarily attributable to revenues from our international business and increases in fees resulting from the achievement of contract milestones and related profit write-ups on certain contracts. These increases were partially offset by reduced revenue due to lower scope and completion of certain contracts.

National Security Solutions operating income margin for fiscal year 2016 was 8.1%, compared to 8.0% in the prior calendar year.

Information Systems & Global Solutions

IS&GS revenues were $1.97 billion and operating margin was 5.8% for fiscal year 2016. Excluding the impact of amortization of acquired intangibles, non-GAAP operating margin was 9.8%.

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