Company Reports Strong Earnings, Cash Flow and New Business Activity
Planned Merger with
Net income in the third quarter of 2014 was
Orbital s third quarter financial results reflected good revenue
growth, strong earnings and free cash flow, and robust new business
activity, said Mr.
In addition, we are pleased with how the activities related to the planned merger of Orbital and ATK s Aerospace and Defense Groups are proceeding, with transition teams from both companies working hard to complete all aspects of the transaction. We are also continuing to target the end of the calendar year to complete all required regulatory reviews. However, if these approvals are received during the holiday season, the closing date would likely be in January, he added.
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* Adjusted operating income, adjusted net income and adjusted diluted earnings per share exclude merger transaction costs incurred in 2014 pertaining to the planned merger of Orbital and the Aerospace and Defense Groups of Alliant Techsystems Inc. ( ATK ) pursuant to an April 28, 2014 definitive transaction agreement. These financial measures, together with free cash flow, are non-GAAP financial measures. For additional details concerning these measures, please refer to the sections of this press release entitled Cash Flow and Disclosure of Non-GAAP Financial Measures. |
Financial Highlights
Third Quarter |
First Nine Months |
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($ in millions, except per share data) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues | $ | 338.2 | $ | 322.0 | $ | 979.6 | $ | 989.9 | |||||||
Operating Income | 33.3 | 25.6 | 71.5 | 83.0 | |||||||||||
Adjusted Operating Income | 36.5 | (1) | n/a | 81.3 | (1) | n/a | |||||||||
Net Income | 21.2 | 15.6 | 51.5 | 51.4 | |||||||||||
Adjusted Net Income | 23.3 | (1) | n/a | 57.8 | (1) | n/a | |||||||||
Diluted Earnings Per Share | $ | 0.35 | $ | 0.26 | $ | 0.85 | $ | 0.85 | |||||||
Adjusted Diluted Earnings Per Share | $ | 0.38 | (1) | n/a | $ | 0.95 | (1) | n/a | |||||||
(1) Adjusted to exclude merger transaction costs of
$3.2 million ($2.1 million after tax) and $9.8 million ($6.3
million |
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|
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Revenues increased
Adjusted operating income increased
The company s effective income tax rate was 35.5% in the third quarter of 2014 compared to 37.0% in the third quarter of 2013.
Adjusted net income in the third quarter of 2014 was
Segment Results
Launch Vehicles
Third Quarter |
First Nine Months |
|||||||||||
($ in millions) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||
Revenues | $129.9 | $127.9 | 2% | $392.9 | $396.2 | (1%) | ||||||
Operating Income | 16.8 | 11.3 | 49% | 39.6 | 33.8 | 17% | ||||||
Operating Margin | 12.9% | 8.8% | 10.1% | 8.5% | ||||||||
Launch vehicles segment revenues increased
Segment operating income increased
Satellites and Space Systems
Third Quarter |
First Nine Months | |||||||||||
($ in millions) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||
Revenues | $ 105.7 | $ 88.1 | 20% | $275.7 | $282.7 | (2%) | ||||||
Operating Income | 5.5 | 8.1 | (32%) | 11.5 | 29.6 | (61%) | ||||||
Operating Margin | 5.2% | 9.2% | 4.2% | 10.5% | ||||||||
Satellites and space systems segment revenues increased
Segment operating income decreased
Advanced Space Programs
Third Quarter |
First Nine Months | |||||||||||
($ in millions) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||
Revenues | $106.2 | $121.3 | (12%) | $323.7 | $351.2 | (8%) | ||||||
Operating Income | 14.2 | 6.2 | 129% | 30.2 | 19.6 | 54% | ||||||
Operating Margin | 13.4% | 5.1% | 9.3% | 5.6% | ||||||||
Advanced space programs segment revenues decreased
Segment operating income increased
Cash Flow
Third Quarter | First Nine Months | |||||||
($ in millions) | 2014 | 2014 | ||||||
Net cash provided by operating activities | $ | 70.5 | $ | 180.4 | ||||
Capital expenditures | (8.6 | ) | (24.8 | ) | ||||
Proceeds from disposition of property | - | 10.0 | ||||||
Free cash flow | 61.9 | 165.6 | ||||||
Other, net | (0.4 | ) | (3.9 | ) | ||||
Net increase in cash | 61.5 | 161.7 | ||||||
Beginning cash balance | 366.0 | 265.8 | ||||||
Ending cash balance | $ | 427.5 | $ | 427.5 | ||||
New Business Highlights
In the third quarter of 2014, Orbital recorded approximately
Operational Highlights
In the third quarter of 2014, Orbital carried out eight major space
missions, launched three small research rockets and delivered two other
systems for future missions. In early July, the
For the remainder of 2014, Orbital plans to conduct numerous major operational events and to deliver additional systems to customers for future space missions or operational deployments, resulting in an average of about one mission or product delivery per week for the year. Major mission operations for the remainder of 2014 will be highlighted by another Antares rocket launch and Cygnus spacecraft flight to the ISS, which is currently planned for late October. The company is also scheduled to launch up to five short- and medium-range targets and up to six smaller research rockets before the end of the year.
2014 Financial Guidance
The company updated its financial guidance for full year 2014, as follows:
Current | Previous | |||
Revenues ($ in millions) | $1,350 - $1,375 | $1,400 - $1,425 | ||
Adjusted Operating Income Margin (1) | 7.75% - 8.25% | 7.25% - 7.75% | ||
Adjusted Diluted Earnings per Share (1) | $1.20 - $1.25 | $1.10 - $1.20 | ||
Free Cash Flow ($ in millions) (1) | $165 - $175 | $130 - $150 | ||
(1) Adjusted to exclude merger transaction costs. |
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Disclosure of Non-GAAP Financial Measures
We define free cash flow as GAAP (U.S. Generally Accepted Accounting Principles) net cash provided by (used in) operating activities less capital expenditures for property, plant and equipment, plus proceeds from disposition of property. A reconciliation of free cash flow to net cash provided by (used in) operating activities is included above in the section entitled Cash Flow. Management believes that the company s presentation of free cash flow is useful because it provides investors with an important perspective on the company s liquidity, financial flexibility and ability to fund operations and service debt.
Adjusted operating income is defined as GAAP income from operations adjusted to exclude professional fees and other costs incurred in connection with the planned merger of Orbital and the Aerospace and Defense Groups of ATK. Adjusted net income is defined as GAAP net income adjusted to exclude these merger transaction costs. Adjusted diluted earnings per share is equal to adjusted net income divided by diluted shares. These measures are provided so investors can more easily compare current and prior period results without the impact of significant nonrecurring expenses. The reconciliation of GAAP income from operations to adjusted operating income and GAAP net income to adjusted net income is as follows:
Third Quarter | First Nine Months | |||||
($ in millions, except per share data) | 2014 | 2014 | ||||
GAAP income from operations | $ | 33.3 | $ | 71.5 | ||
Merger transaction costs, before tax (1) | 3.2 | 9.8 | ||||
Adjusted operating income | $ | 36.5 | $ | 81.3 | ||
GAAP net income | $ | 21.2 | $ | 51.5 | ||
Merger transaction costs, net of tax (1) | 2.1 | 6.3 | ||||
Adjusted net income | $ | 23.3 | $ | 57.8 | ||
Adjusted diluted earnings per share | $ | 0.38 | $ | 0.95 | ||
(1)Professional fees and other costs pertaining to the planned merger of Orbital and ATK's Aerospace and Defense Groups. |
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Orbital does not intend for the above non-GAAP financial measures to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define these measures differently.
Social Media Disclosure
Orbital communicates material financial information to its investors
using press releases,
About Orbital
Orbital develops and manufactures small- and medium-class rockets and
space systems for commercial, military and civil government customers.
The company s primary products are satellites and launch vehicles,
including low-Earth orbit, geosynchronous-Earth orbit and planetary
exploration spacecraft for communications, remote sensing, scientific
and defense missions; human-rated space systems for Earth-orbit, lunar
and other missions; ground- and air-launched rockets that deliver
satellites into orbit; missile defense systems that are used as
interceptor and target vehicles; and advanced flight systems for
atmospheric and space missions. Orbital also provides satellite
subsystems and space-related technical services to
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements in this press release may be forward-looking in
nature or forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, those related to our
financial outlook, liquidity, goals, business strategy, projected plans
and objectives of management for future operating results and forecasts
of future events, and those related to the proposed merger of Orbital
with ATK s Aerospace and Defense Groups and the expected timetable for
completing the merger. These statements can be identified by the fact
that they do not relate strictly to historical or current facts.
Forward-looking statements often include the words anticipate,
forecast, expect, believe, should, will, intend, plan and
words of similar substance. Such forward-looking statements are subject
to risks, trends and uncertainties that could cause the actual results
or performance of the company to be materially different from the
forward-looking statement. Uncertainty surrounding factors such as
Orbital s and ATK s ability to consummate the merger; the conditions to
the completion of the merger, including the receipt of approval of both
Orbital s stockholders and ATK s stockholders; the regulatory approvals
required for the merger not being obtained on the terms expected or on
the anticipated schedule; the parties ability to meet expectations
regarding the timing, completion and accounting and tax treatments of
the merger; reductions or changes in
Additional Information and Where to Find It
In connection with the proposed merger, Orbital and ATK intend to file
relevant materials with the
Participants in the Solicitation
This press release is not a solicitation of a proxy from any investor or
security holder. However, Orbital and ATK and their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction under the
rules of the
No Offer or Solicitation
This document shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
A transcript of the earnings teleconference call will be available on Orbital s website at http://www.orbital.com/Investor.
ORBITAL SCIENCES CORPORATION |
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Third Quarter | First Nine Months | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenues | $ | 338,207 | $ | 321,976 | $ | 979,616 | $ | 989,870 | |||||||||
Cost of revenues | 263,662 | 247,070 | 794,504 | 752,477 | |||||||||||||
Research and development expenses | 7,509 | 23,146 | 21,773 | 78,470 | |||||||||||||
Selling, general and administrative expenses | 33,776 | 26,154 | 91,837 | 75,904 | |||||||||||||
Income from operations | 33,260 | 25,606 | 71,502 | 83,019 | |||||||||||||
Interest income and other | 672 | 230 | 12,465 | 1,272 | |||||||||||||
Interest expense | (1,082 | ) | (1,143 | ) | (3,292 | ) | (3,438 | ) | |||||||||
Income before income taxes | 32,850 | 24,693 | 80,675 | 80,853 | |||||||||||||
Income tax provision | (11,650 | ) | (9,141 | ) | (29,131 | ) | (29,421 | ) | |||||||||
Net income | $ | 21,200 | $ | 15,552 | $ | 51,544 | $ | 51,432 | |||||||||
Basic income per share | $ | 0.35 | $ | 0.26 | $ | 0.85 | $ | 0.85 | |||||||||
Diluted income per share | 0.35 | 0.26 | 0.85 | 0.85 | |||||||||||||
Shares used in computing basic income per share | 60,760 | 60,328 | 60,626 | 60,056 | |||||||||||||
Shares used in computing diluted income per share | 61,020 | 60,530 | 60,998 | 60,337 | |||||||||||||
ORBITAL SCIENCES CORPORATION |
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Third Quarter | First Nine Months | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenues: | |||||||||||||||||
Launch Vehicles | $ | 129.9 | $ | 127.9 | $ | 392.9 | $ | 396.2 | |||||||||
Satellites and Space Systems | 105.7 | 88.1 | 275.7 | 282.7 | |||||||||||||
Advanced Space Programs | 106.2 | 121.3 | 323.7 | 351.2 | |||||||||||||
Eliminations | (3.6 | ) | (15.3 | ) | (12.7 | ) | (40.2 | ) | |||||||||
Total revenues | $ | 338.2 | $ | 322.0 | $ | 979.6 | $ | 989.9 | |||||||||
Income from operations: | |||||||||||||||||
Launch Vehicles | $ | 16.8 | $ | 11.3 | $ | 39.6 | $ | 33.8 | |||||||||
Satellites and Space Systems | 5.5 | 8.1 | 11.5 | 29.6 | |||||||||||||
Advanced Space Programs | 14.2 | 6.2 | 30.2 | 19.6 | |||||||||||||
Corporate and Other (1) | (3.2 | ) | - | (9.8 | ) | - | |||||||||||
Total income from operations | $ | 33.3 | $ | 25.6 | $ | 71.5 | $ | 83.0 | |||||||||
(1) Corporate and other is comprised solely of merger transaction costs. | |||||||||||||||||
ORBITAL SCIENCES CORPORATION |
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September 30, |
December 31, |
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2014 |
2013 |
||||||
Assets | |||||||
Cash | $ | 427,498 | $ | 265,837 | |||
Receivables | 486,812 | 583,518 | |||||
Inventories | 60,328 | 61,675 | |||||
Deferred income taxes, net | 34,391 | 30,154 | |||||
Other current assets | 23,697 | 9,889 | |||||
Total current assets | 1,032,726 | 951,073 | |||||
Property, plant and equipment, net | 231,921 | 246,060 | |||||
Goodwill | 71,260 | 71,260 | |||||
Other non-current assets | 13,801 | 16,368 | |||||
Total assets | $ | 1,349,708 | $ | 1,284,761 | |||
Liabilities and stockholders equity | |||||||
Accounts payable and accrued expenses | $ | 247,124 | $ | 281,631 | |||
Deferred revenues and customer advances | 55,290 | 21,250 | |||||
Current portion of long-term debt | 7,500 | 8,236 | |||||
Total current liabilities | 309,914 | 311,117 | |||||
Long-term debt | 129,375 | 135,000 | |||||
Deferred income taxes, net | 26,431 | 26,611 | |||||
Other non-current liabilities | 32,158 | 16,732 | |||||
Total stockholders equity | 851,830 | 795,301 | |||||
Total liabilities and stockholders equity | $ | 1,349,708 | $ | 1,284,761 | |||
ORBITAL SCIENCES CORPORATION |
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Third Quarter |
First Nine Months |
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2014 |
2014 |
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Net income | $ 21,200 | $ 51,544 | |||
Depreciation and amortization | 10,622 | 31,728 | |||
Deferred income taxes | 6,170 | 11,148 | |||
Changes in assets and liabilities | 33,613 | 84,256 | |||
Other | (1,106) | 1,753 | |||
Net cash provided by operating activities | 70,499 | 180,429 | |||
Capital expenditures | (8,621) | (24,784) | |||
Proceeds from disposition of property | - | 10,000 | |||
Net cash used in investing activities | (8,621) | (14,784) | |||
Principal payments on long-term debt | (1,875) | (6,361) | |||
Net proceeds from issuance of common stock and other | 1,478 | 2,377 | |||
Net cash used in financing activities | (397) | (3,984) | |||
Net increase in cash | 61,480 | 161,660 | |||
Cash, beginning of period | 366,017 | 265,837 | |||
Cash, end of period | $427,497 | $ 427,497 | |||
Source:
Orbital Sciences Corporation
Barron Beneski, 703-406-5528
Public
and Investor Relations
beneski.barron@orbital.com