Leidos [LDOS] on Wednesday reported fourth quarter earnings that were the same as a year ago despite a decline in sales as a tax benefit strengthened the bottom line.
Leidos also said that Roger Krone, who became the company’s CEO last fall, was designated chairman on March 20, succeeding John Jumper, who will remain on the board.
Fourth quarter revenues were $1.2 billion, compared to $1.3 billion in the previous year. Net income was level at $44 million, 59 cents earnings per share (EPS). A year ago per share earnings were 52 cents. The income results improved due to a handsome tax benefit and income from discontinued operations.
Excluding results from discontinued operations, per share earnings were 69 cents, 21 cents above consensus estimates.
The company’s full year profit was down $214 million from $163 reported for FY 2014.
Company officials said the fiscal year saw write-offs that held back the year, including a $40 million charge related to the sale of a biomass power plant below the company’s carrying value.
Sales in the National Security Solutions segment for the fourth quarter decreased 13 percent, or $123 million, compared to the previous year, primarily due to contract activities relating to the drawdown of overseas U.S. military forces, reductions in defense and government spending due to sequestration and budget cuts and higher competition resulting in lower contract awards.
Operating margins in the segment for the quarter were 7.2 percent, down from 8.8 percent in the prior year primarily due to a decrease in net favorable changes in contract estimates from the prior year and facilities exit costs.
Bookings in the quarter were $600 million and $3.6 billion for the year.
“Our book-to-bill, particularly in the National Security Sector, although up from year ago levels, was lower than we would like it to be. Beyond the gradual improvements, we anticipate as our initiatives bear fruit, we do expect a material increase in our book-to-bill in the second quarter,” Krone said on Wednesday’s analyst call.
Leidos is the preferred bidder and is negotiating a 13-year U.K. logistics award valued at $10.7 billion to $12.2 billion. Krone said he expects to sign the agreement in the coming weeks.
Other recent awards, with the value to include the exercise of all options, include a potential $237 million from intelligence community contracts and a $77 million award from NATO for systems engineering and integration for a ballistic missile defense program.
Leidos predicts calendar year 2015 revenues of $4.6 billion to $5 billion, with diluted earnings in a $2.20-$2.45 range per share.
Krone cited people, innovation and collaboration and to “continue to streamline our organization and reduce our cost profile through the implementation of Lean Six Sigma, and other tactics,” as his top three priorities for the coming fiscal year.
Leidos also is moving the fiscal year-end from the Friday nearest the end of January to the Friday nearest the end of December. This change is effective this calendar year, but does not affect the current fiscal year, which ended Jan. 30.