Leidos Holdings, Inc. (LDOS) 10-Q Quarterly Report Mon Nov 02 2020

Roger Krone, Leidos Chairman and Chief Executive Officer, commented: “Leidos’ third quarter results reflect the hard work and dedication of our employees and close collaboration with our customers as we provided continuity of operations while accelerating our pandemic response plan. This is evidenced by record revenue, solid margins, record backlog and record operational cash generation in the recent quarter. While challenges still remain, we are pleased with the growth and margin trajectory as we enter the fourth quarter and beyond.”

Summary Results

Revenues for the quarter were $3.24 billion, compared to $2.84 billion in the prior year quarter, reflecting a 14.4% increase. Revenues for the quarter included $302 million and $74 million related to the acquisitions of Dynetics, Inc. ("Dynetics") and L3Harris Technologies' security detection and automation businesses (the "SD&A Businesses"), respectively.

Operating income for the quarter was $258 million, compared to $249 million in the prior year quarter, reflecting a 3.6% increase. Operating income margin decreased to 8.0% from 8.8% in the prior year quarter. Non-GAAP operating income margin for the quarter was 10.0%, compared to 10.4% in the prior year quarter, primarily attributable to a $54 million recovery recognized in the prior year quarter related to the receipt of the Greek arbitration award.

Diluted earnings per share ("EPS") attributable to Leidos common stockholders for the quarter was $1.13, compared to $1.11 in the prior year quarter. Non-GAAP diluted EPS for the quarter was $1.47, compared to $1.36 in the prior year quarter. The weighted average diluted share count for the quarter was 144 million compared to 145 million in the prior year quarter.

Defense Solutions

Defense Solutions revenues for the quarter of $1,951 million increased by $357 million, or 22.4%, compared to the prior year quarter. The revenue increase was primarily attributable to $302 million of revenues related to the acquisition of Dynetics and program wins, partially offset by the completion of certain contracts and reduced volume on certain contracts due to negative impacts related to the coronavirus pandemic ("COVID-19").

Defense Solutions operating income margin for the quarter was 7.4%, compared to 6.7% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 8.8%, compared to 7.7% in the prior year quarter. The increase in margin was primarily attributable to higher margins on program wins and lower indirect expenditures.

Civil

Civil revenues for the quarter of $771 million increased by $38 million, or 5.2%, compared to the prior year quarter. The revenue increase was primarily attributable to $74 million of revenues related to the acquisition of the SD&A Businesses and program wins, partially offset by the completion of certain contracts, prior year upfront lease revenue recognized on certain programs and reduced volume on certain contracts due to negative impacts related to COVID-19.

The following information was filed by Leidos Holdings, Inc. (LDOS) on Monday, November 2, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Leidos Holdings, Inc.'s 10-Q Quarterly Report:

M & A - Other Highlight
Net cash used in investing activities increased $2,833 million for the nine months ended October 2, 2020, when compared to the prior year, primarily due to $2,610 million of net cash paid related to the acquisitions of Dynetics and the SD&A Businesses, $183 million received in the prior year for the disposition of our commercial cybersecurity and health staff augmentation businesses, $96 million of proceeds received for the sale of real estate properties in the prior year and higher purchases of equipment and leasehold improvements associated with our new global headquarters.

Financial - Debt Highlight
Net cash provided by financing activities increased $1,918 million for the nine months ended October 2, 2020, when compared to the prior year, primarily due to $6,225 million of proceeds received related to the issuance of debt and $400 million of stock repurchases in the prior year.
Financial - Expense Highlight
We are seeking reimbursement of some of the COVID-19 related costs under our U.S. government contracts through a combination of equitable adjustments to the contract prices and reimbursement of the costs under Section 3610, which allows, but does not require, federal agencies to reimburse contractors at the minimum applicable contract billing rate for costs arising from certain paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of government and contractor personnel.
Financial - Income Highlight
The decrease in operating income for the nine months ended October 2, 2020, as compared to the nine months ended September 27, 2019, was primarily attributable to approximately $56 million of negative impacts from reduced volume on certain managed service contracts with fixed cost infrastructures that were impacted by COVID-19, partially offset by a net increase in volumes on certain programs.
Financial - Dividend Highlight
Net cash used in financing activities increased $313 million for the three months ended October 2, 2020, when compared to the prior year quarter, primarily due to the early repayment of our $450 million senior unsecured notes in the current quarter and the timing of dividend payments, partially offset by $200 million of stock repurchases in the prior year quarter.
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Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

Leidos Holdings, Inc. provided additional information to their SEC Filing as exhibits

Exhibit 31.1: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 31.2: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 32.1: Section 1350 Certification

Exhibit 32.2: Section 1350 Certification

Ticker: LDOS
CIK: 1336920
Form Type: 10-Q Quarterly Report
Accession Number: 0001336920-20-000083
Submitted to the SEC: Mon Nov 02 2020 1:38:39 PM EST
Accepted by the SEC: Mon Nov 02 2020
Period: Friday, October 2, 2020
Industry: Computer Integrated Systems Design