Health and Infrastructure Sector
Health and Infrastructure Sector revenues for fiscal year 2016 of $1.46 billion decreased $151 million, or 9%, compared to the prior calendar year. The revenue decline is primarily attributable to the divestiture of the heavy construction business in the second quarter of fiscal year 2016 and the sale of the Plainfield Renewable Energy facility ("Plainfield"), which closed in the second quarter of the prior calendar year. Excluding the revenues from the divested businesses, HIS revenues increased $134 million, or 10.1%, primarily due to growth in the Federal Health business, partially offset by lower revenues in our engineering services business.
Health and Infrastructure Sector operating margin for fiscal year 2016 was 11.1%, up from 2.8% in the prior calendar year due to the divestiture of the heavy construction business, the sale of Plainfield, reduced indirect costs, lower asset impairment charges and bad debt expense.
Cash Flow Summary
Cash flows provided by operating activities of continuing operations for the quarter were $162 million compared to $32 million in the prior year. The higher operating cash inflows were primarily due to timing of collections and vendor and benefit payments compared to the prior year quarter.
Cash flows used in investing activities of continuing operations for the quarter were $8 million compared to $56 million of cash flows provided by investing activities in the prior year quarter. The $64 million lower cash flows was primarily due to proceeds received from the sale of assets in the prior year quarter that did not recur in the current year quarter.
Cash flows used in financing activities of continuing operations for the quarter were $227 million compared to $67 million in the prior year quarter. The higher financing cash outflows were primarily due to the early repayment of debt in the current year quarter.
Cash flows provided by operating activities of continuing operations for the fiscal year were $446 million compared to $410 million in the prior calendar year. The higher operating cash inflows were primarily due to timing of collections and vendor and benefit payments compared to the prior calendar year.
Cash flows provided by investing activities of continuing operations for the fiscal year were $26 million compared to $64 million in the prior calendar year. The $38 million lower cash flows was primarily due to proceeds received from the sale of assets in the prior calendar year that did not recur in the current fiscal year, partially offset by cash acquired as part of the acquisition of the IS&GS Business in the current fiscal year.
Cash flows used in financing activities of continuing operations for the fiscal year were $751 million compared to $296 million in in the prior calendar 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 December 30, 2016, the Company had $376 million in cash and cash equivalents and $3.3 billion in notes payable and long-term debt.
New Business Awards
New business bookings totaled $1.84 billion in the fourth quarter of fiscal year 2016 and $6.95 billion for fiscal year 2016, representing a book-to-bill ratio of 0.7 and 1.0 for the fourth quarter and fiscal year 2016, respectively.
Notable recent awards received include:
- U.S. Air Force: Leidos was awarded a prime contract by the United States Air Force ("USAF") to continue to provide mission planning systems engineering and integration for the Joint Mission Planning Enterprise. The single-award indefinite-delivery/indefinite-quantity contract has a ten-year period of performance and a total contract value of $350 million.
- Joint Improvised Threat Defeat Organization: Leidos was awarded a subcontract to support the Joint Improvised Threat Defeat Organization ("JIDO") with analytical operations, intelligence and training services. The single-award cost-plus award-fee task order has a two-year base period of performance, three one-year options and a total subcontract value to Leidos of $202 million if all options are exercised.
- Defense Logistics Agency: Leidos was awarded a contract by the Defense Logistics Agency ("DLA") to support the J6 Enterprise Technology Services ("JETS") program. The multiple-award indefinite-delivery/indefinite-quantity contract has a five-year base period of performance, one three-year option and a total contract ceiling of $6 billion for all awardees if the option is exercised. The DLA JETS program will provide DLA Information Operations the full range of information technology services to develop, maintain, and protect the applications, software, hardware and systems that support DLA's mission as the logistics combat support agency to the U.S. military services.
- U.S. Intelligence Community: The Company was awarded contracts valued at $265 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.
The Company's backlog of signed business orders at the end of fiscal year 2016 was $17.74 billion, of which $5.98 billion was funded, and at the end of calendar year 2015 was $9.90 billion, of which $2.52 billion was funded. The increase in backlog was primarily due to the acquisition of the IS&GS Business.
The Company's outlook for fiscal year 2017 is being presented based on a 12-month period from December 31, 2016, to December 29, 2017, as follows:
- Revenues of $10.0 billion to $10.4 billion;
- Adjusted EBITDA margins of 9.5% to 10.0%;
- Non-GAAP diluted earnings per share from continuing operations of $3.05 to $3.35; and
- Cash flows provided by operating activities from continuing operations at or above $475 million.
Fiscal year 2017 guidance excludes the impact of any future acquisitions, divestitures and other non-ordinary course items.
Conference Call Information
Leidos management will discuss operations and financial results in an earnings conference call beginning at 8 A.M. eastern on February 23, 2017. 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 passcode 13652714.
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 32,000 employees support vital missions for government and commercial customers.
For more information, visit www.leidos.com.
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, 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.