SEC Filings

Leidos Spent $500 Million On Buybacks In A Quarter Its Operating Cash Flow Fell

Operating cash flow fell to $523 million as vendor-payment timing turned, while lower tax payments flattered the nine-month total.

Leidos, the Reston, Virginia, government contractor, repurchased $500 million of its stock in the quarter ended October 2, while operating cash flow fell to $523 million from $711 million a year earlier, according to its 10-Q filed Tuesday.

Buybacks up, cash flow down

The company blamed unfavorable working capital, including the timing of vendor payments and of payroll and employee benefit payments, for the $188 million drop in quarterly operating cash flow.

Open-market repurchases were $500 million in the quarter against $100 million a year earlier, and $766 million over nine months. The prior 10-Q covered $66 million of buybacks in its quarter. Cash and equivalents ended the period at $630 million, down from $748 million at the end of that quarter.

The filing says the $400 million year-over-year rise in repurchases partly offset lower financing outflows, since the prior-year quarter included a $450 million term-loan prepayment.

Taxes flatter the nine-month total

Nine-month operating cash flow was $1,617 million, up $362 million from $1,255 million. Leidos pointed to a working-capital benefit and $148 million less in tax payments. Income taxes receivable/payable contributed $239 million, and cash taxes paid were $31 million versus $179 million a year earlier.

A bigger balance sheet underneath

Leidos provides science, engineering and technology services, software and products, mostly to government agencies. Debt stood at $6.0 billion on October 2, up from $4.6 billion at the start of the year, after the company sold $600 million and $800 million of senior notes in March to help fund its $2.4 billion cash purchase of Entrust, an engineering firm serving utilities.

Leidos put its security-equipment business into a new Altaris joint venture, a deal that closed October 5. It kept a 41.5% stake, accounted for under the equity method, and expects a non-operating gain of about $100 million in the fourth quarter. The estimate is preliminary. Fourth-quarter revenue will be lower because of the deal.

The company's market value was $18.1 billion in Tuesday trading.

A continuing resolution funds the government through December 11; without further legislation after that, Leidos warns, a partial or full shutdown would follow.