Company Reports Revenue of
2015 Financial Guidance Updated With Increased Revenue, Operating Margin and Earnings Per Share Targets
The company reported adjusted revenues of
_______
The adjusted financial results contained in this press release are
non-GAAP financial measures and are adjusted to give effect to the
merger of
Orbital ATK reported excellent second quarter financial results
characterized by better-than-expected revenue and very strong earnings.
These results benefited from outstanding new orders, as well as
continued solid operational execution on our major programs. As a
result, we are increasing the company s outlook for sales and earnings
this year and expanding our previously-announced capital deployment
program as well, said
For the first six months of 2015, the company reported adjusted revenues
of
Adjusted Consolidated Financial Highlights
Except as noted, all financial measures discussed below are non-GAAP adjusted financial results from continuing operations. See the reconciliation tables for details.
Second Quarter
|
First Six Months
|
||||||||||||||
($ in millions, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenues | $ | 1,130 | $ | 1,055 | $ | 2,246 | $ | 2,210 | |||||||
Operating Income | 131.6 | 115.8 | 248.3 | 190.1 | |||||||||||
Net Income | 76.6 | 65.9 | 144.1 | 105.4 | |||||||||||
Diluted Earnings Per Share | $ | 1.28 | $ | 1.10 | $ | 2.41 | $ | 1.76 | |||||||
Adjusted results. See reconciliation tables in the "Disclosure of Non-GAAP Financial Measures" section for details. | |||||||||||||||
Revenues increased
Operating income increased
The increases in net income and earnings per share in the 2015 second
quarter as compared to the same period last year were attributable to
the improvement in adjusted operating income results. Net income and
earnings per share for both quarters reflect interest expense at a
blended rate of 3.6% on approximately
In the second quarter of 2015,
Adjusted Segment Results
Second Quarter
|
First Six Months | |||||||||||||||||||||||
($ in millions) | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||
Revenues | $ | 398.1 | $ | 367.4 | 8.3 | % | $ | 764.1 | $ | 751.4 | 1.7 | % | ||||||||||||
Operating Income | 58.1 | 44.5 | 30.6 | % | 102.8 | 78.2 | 31.5 | % | ||||||||||||||||
Operating Margin | 14.6 | % | 12.1 | % | 13.4 | % | 10.4 | % | ||||||||||||||||
Adjusted results. See reconciliation tables in the "Disclosure of Non-GAAP Financial Measures" section for details. | ||||||||||||||||||||||||
FSG revenues increased
Second Quarter
|
First Six Months | |||||||||||||||||||||||
($ in millions) | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||
Revenues | $ | 439.8 | $ | 441.2 | (0.3 | %) | $ | 941.8 | $ | 962.2 | (2.1 | %) | ||||||||||||
Operating Income | 44.5 | 45.8 | (2.9 | %) | 96.1 | 86.2 | 11.4 | % | ||||||||||||||||
Operating Margin | 10.1 | % | 10.4 | % | 10.2 | % | 9.0 | % | ||||||||||||||||
Adjusted results. See reconciliation tables in the "Disclosure of Non-GAAP Financial Measures" section for details. | ||||||||||||||||||||||||
DSG revenues decreased
Second Quarter
|
First Six Months | |||||||||||||||||||||||
($ in millions) | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||
Revenues | $ | 310.1 | $ | 265.6 | 16.7 | % | $ | 597.1 | $ | 541.6 | 10.2 | % | ||||||||||||
Operating Income | 41.4 | 15.5 | 166.6 | % | 63.6 | 35.3 | 79.9 | % | ||||||||||||||||
Operating Margin | 13.4 | % | 5.9 | % | 10.6 | % | 6.5 | % | ||||||||||||||||
Adjusted results. See reconciliation tables in the "Disclosure of Non-GAAP Financial Measures" section for details. | ||||||||||||||||||||||||
SSG revenues increased
Corporate:
Intercompany revenue eliminations were essentially flat year over year,
while corporate income decreased
Adjusted Free Cash Flow and Capital Allocation Plan
Adjusted free cash flow in the second quarter was negative
The company also reported that it repurchased approximately
Operational Highlights
Orbital ATK s strong operational execution led to the achievement of numerous milestones in the quarter. These included the following important events:
-
In the
Flight Systems Group ,Orbital ATK received a positive rating fromNASA for recent progress on the Space Launch System s solid rocket booster program. The company also supported an Atlas V rocket launch by providing important subsystems toUnited Launch Alliance and conducted three Coyote target missile flights for theU.S. Navy . In addition, an extensive series of certification and acceptance tests were successfully completed on the new first-stage propulsion system for the Antares space launch vehicle. The first ship-set of two engines was received at the company sWallops Island integration facilities in July, with all remaining hardware required for the vehicle s next launch set to arrive at Wallops by mid-August. -
In the
Defense Systems Group , the company delivered more than 5,000 tactical missile rocket motors, warheads and related products, and approximately 300 million rounds of small- and medium-caliber ammunition in the second quarter. Several programs passed important testing milestones in the quarter, including our advanced 120 mm tactical round used to defeat adversary tank armor, which passed final customer testing enabling the program to transition into production. Similarly, the company s hardened electronic void-sensing fuze also completed rigorous testing and is transitioning into production and the Precision Guidance Kit program achieved 100% success in verification and accuracy testing in the first three production lots. -
In the
Space Systems Group , theOrbital ATK -built SKYM-1 commercial communications satellite was launched, completed in-orbit testing and operational control was turned over to DIRECTV. Also in the second quarter, the company supplied several critical components that performed successfully for NASA s Low Density Supersonic Decelerator program. Finally, the company-built Dawn spacecraft continued its reconnaissance of Ceres, using its ion propulsion system to descend to its third mapping orbit on its way to eventually reaching an altitude of just 230 miles above the dwarf planet by year end.
Commenting on second quarter 2015 operations, Chief Operating Officer
New Business Summary
In the second quarter of 2015,
Adjusted Calendar Year 2015 Financial Guidance
The company provided the following revised financial guidance for
calendar year 2015. This guidance is adjusted to include Orbital s
results from
Guidance | Previous 2015 Guidance | Current 2015 Guidance | ||||||
Revenues ($ in millions) | $ | 4,350 - $4,450 | $ | 4,425 - $4,500 | ||||
Operating Income Profit Margin | 10.25% - 10.75% | 10.5% - 11.0% | ||||||
Diluted Earnings Per Share | $ | 4.40 - $4.60 | $ | 4.60 - $4.80 | ||||
Free Cash Flow ($ in millions) | $ | 225 - $275 | $ | 225 - $275 | ||||
Conference Call Information
Investors can listen to a live audio webcast of the conference call with
analysts that
Social Media Disclosure
About
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements in this press release may be forward-looking
statements as defined by the Private Securities Litigation Reform Act
of 1995. Forward-looking statements often include the words forecast,
expect, believe, will, intend, plan, and words of similar
substance. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results or performance to differ,
including the following: potential difficulties in achieving expected
merger synergies and efficiencies within the expected time-frames or at
all; the integration of business operations being more difficult,
time-consuming or costly than expected; operating costs, customer loss
and business disruption that might result from the merger; potential
difficulties in retaining key employees; the Company s ability to
maintain and grow its relationship with its customers; reductions or
changes in
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. 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.
The adjusted financial results contained in this press release are
non-GAAP financial measures adjusted to give effect to the merger of
Orbital and ATK in all periods except the quarter ended
Adjusted measures are provided so investors can more easily compare current and prior period results of the combined companies. The reconciliation of GAAP results to adjusted results are as follows:
Consolidated Results
Quarter Ended
($ in millions, except per share data) | Revenue |
Operating |
Operating |
|||||||
As Reported | $ | 1,130 | $ | 125.8 | 11.1 | % | ||||
Merger- related adjustments (1) | 5.8 | |||||||||
As Adjusted | $ | 1,130 | $ | 131.6 | 11.6 | % | ||||
Interest expense as reported | (15.4 | ) | ||||||||
Taxes (2) | (39.5 | ) | ||||||||
Adjusted Net Income | $ | 76.6 | ||||||||
Adjusted EPS (3) | $ | 1.28 | ||||||||
(1) Includes the impact of transaction expenses and merger related costs. | ||||||||||
(2) Calculated using an effective tax rate of 34%. | ||||||||||
(3) Calculated using a diluted share count of 59.75 million. | ||||||||||
First Six Months 2015
($ in millions, except per share data) | Revenue |
Operating |
Operating |
||||||||
Continuing Operations, As Reported | $ | 2,100 | $ | 124.7 | 5.9 | % | |||||
Orbital results for Jan. 1 to Feb. 8, 2015 | 129 | (7.5 | ) | ||||||||
$ | 2,229 | $ | 117.2 | 5.3 | % | ||||||
Transaction expenses | 30.6 | ||||||||||
Severance and accelerated vesting | 25.2 | ||||||||||
Intangible amortization | (7.0 | ) | |||||||||
Goodwill impairment | 34.3 | ||||||||||
Legal settlement | 25.0 | ||||||||||
Other (1) | 17 | 23.0 | |||||||||
As Adjusted | $ | 2,246 | $ | 248.3 | 11.1 | % | |||||
Interest expense (2) | (29.9 | ) | |||||||||
Taxes (3) | (74.2 | ) | |||||||||
Adjusted Net Income | $ | 144.1 | |||||||||
Adjusted EPS (4) | $ | 2.41 | |||||||||
(1) Includes change in intracompany eliminations, restructuring and other transaction impacts. | |||||||||||
(2) Calculated assuming a blended interest rate of 3.6% on $1.6 billion average outstanding debt. | |||||||||||
(3) Calculated using an effective tax rate of 34%. | |||||||||||
(4) Calculated using a diluted share count of 59.75 million. | |||||||||||
Quarter Ended
($ in millions, except per share data) | Revenue |
Operating |
Operating |
|||||||||
Continuing Operations, As Reported | $ | 714 | $ | 71.8 | 10.1 | % | ||||||
Orbital results for April 1 to June 30, 2014(1) | 318 | 27.2 | ||||||||||
$ | 1,032 | $ | 99.0 | 9.6 | % | |||||||
Intangible amortization | (12.5 | ) | ||||||||||
Facility rationalization | 10.6 | |||||||||||
Transaction expenses | 12.2 | |||||||||||
Pension close- out | (3 | ) | (3.1 | ) | ||||||||
Change in intracompany eliminations | 25 | 9.6 | ||||||||||
As Adjusted | $ | 1,055 | $ | 115.8 | 11.0 | % | ||||||
Interest expense (2) | (16.0 | ) | ||||||||||
Taxes (3) | (33.9 | ) | ||||||||||
Adjusted Net Income | $ | 65.9 | ||||||||||
Adjusted EPS (4) | $ | 1.10 | ||||||||||
(1) Per Orbital Sciences Corporation Form 10-Q for the quarter ended June 30, 2014. | ||||||||||||
(2) Calculated assuming a blended interest rate of 3.6% on $1.6 billion average outstanding debt. | ||||||||||||
(3) Calculated using an effective tax rate of 34%. | ||||||||||||
(4) Calculated using a diluted share count of 59.75 million. | ||||||||||||
First Six Months 2014
($ in millions, except per share data) | Revenue |
Operating |
Operating |
||||||||
Continuing Operations, As Reported | $ | 1,505 | $ | 149.9 | 10.0 | % | |||||
Orbital results for January 1 to June 30, 2014(1) | 641 | 50.2 | |||||||||
$ | 2,146 | $ | 200.1 | 9.3 | % | ||||||
Transaction expenses | 13.3 | ||||||||||
Intangible amortization | (25.0 | ) | |||||||||
Pension close-out | (30 | ) | (30.5 | ) | |||||||
Environmental settlement | 5.2 | ||||||||||
Change in intracompany eliminations | 93 | 16.4 | |||||||||
Facility Rationalization | 10.6 | ||||||||||
As Adjusted | $ | 2,210 | $ | 190.1 | 8.6 | % | |||||
Interest expense (2) | (30.5 | ) | |||||||||
Taxes (3) | (54.2 | ) | |||||||||
Adjusted Net Income | $ | 105.4 | |||||||||
Adjusted EPS (4) | $ | 1.76 | |||||||||
(1) Per Orbital Sciences Corporation Form 10-Q for the quarter ended June 30, 2014. | |||||||||||
(2) Calculated assuming a blended interest rate of 3.6% on $1.6 billion average outstanding debt. | |||||||||||
(3) Calculated using an effective tax rate of 34%. | |||||||||||
(4) Calculated using a diluted share count of 59.75 million. | |||||||||||
Second Quarter 2015 | First Six Months 2015 | |||||||||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating |
||||||||||||||||
GAAP as Reported | $ | 398 | $ | 58.1 | 14.6 | % | $ | 726 | $ | 100.8 | 13.9 | % | ||||||||||
Orbital results for Jan. 1 to Feb. 8, 2015 | - | - | 38 | 2.0 | ||||||||||||||||||
As Adjusted | $ | 398 | $ | 58.1 | 14.6 | % | $ | 764 | $ | 102.8 | 13.4 | % | ||||||||||
Second Quarter 2014 | First Six Months 2014 | ||||||||||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating
|
|||||||||||||||||
GAAP as Reported | $ | 257 | $ | 32.7 | 12.7 | % | $ | 504 | $ | 54.7 | 10.8 | % | |||||||||||
Orbital results(1) | 126 | 11.0 | 263 | 22.7 | |||||||||||||||||||
$ | 383 | $ | 43.7 | 11.4 | % | $ | 767 | $ | 77.4 | 10.1 | % | ||||||||||||
Other eliminations | (16 | ) | 0.8 | (16 | ) | 0.8 | |||||||||||||||||
As Adjusted | $ | 367 | $ | 44.5 | 12.1 | % | $ | 751 | $ | 78.2 | 10.4 | % | |||||||||||
(1) Per Orbital Sciences Corporation Form 10-Q for quarter ended June 30, 2014. | |||||||||||||||||||||||
Second Quarter 2015 | First Six Months 2015 | |||||||||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating |
||||||||||||||||
GAAP as Reported | $ | 440 | $ | 39.2 | 8.9 | % | $ | 935 | $ | 84.1 | 9.0 | % | ||||||||||
Transaction-related impacts | 5.3 | $ | 7.0 | 12.0 | ||||||||||||||||||
As Adjusted | $ | 440 | $ | 44.5 | 10.1 | % | $ | 942 | $ | 96.1 | 10.2 | % | ||||||||||
Second Quarter 2014 | First Six Months 2014 | ||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating |
|||||||||
GAAP as Reported | $ 442 | $ 45.1 | 10.2% | $ 990 | $ 85.5 | 8.6% | |||||||||
Pension close out and other eliminations | (1) | 0.7 | (28) | 0.7 | |||||||||||
As Adjusted | $ 441 | $ 45.8 | 10.4% | $ 962 | $ 86.2 | 9.0% | |||||||||
Second Quarter 2015 | First Six Months 2015 | |||||||||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating |
||||||||||||||||
GAAP as Reported | $ | 310 | $ | 41.4 | 13.4 | % | $ | 501 | $ | 22.9 | 4.6 | % | ||||||||||
Orbital results for Jan. 1 to Feb. 8, 2015 | - | - | 92 | 2.3 | ||||||||||||||||||
$ | 310 | $ | 41.4 | 13.4 | % | $ | 594 | $ | 25.3 | 4.3 | % | |||||||||||
Goodwill impairment | - | - | - | 34.3 | ||||||||||||||||||
Transaction-related impacts | - | - | 4 | 4.0 | ||||||||||||||||||
As Adjusted | $ | 310 | $ | 41.4 | 13.4 | % | $ | 597 | $ | 63.6 | 10.6 | % | ||||||||||
Second Quarter 2014 | First Six Months 2014 | |||||||||||||||||||||||||
($ in millions) | Revenue |
Operating |
Operating |
Revenue |
Operating |
Operating |
||||||||||||||||||||
GAAP as Reported | $ | 76 | $ | 5.7 | 7.5 | % | $ | 162 | $ | 14.3 | 8.8 | % | ||||||||||||||
Orbital results(1) | 197 | 10.8 | 388 | 22.1 | ||||||||||||||||||||||
$ | 274 | $ | 16.5 | 6.0 | % | $ | 550 | $ | 36.4 | 6.6 | % | |||||||||||||||
Other eliminations | (8 | ) | (1.0 | ) | (8 | ) | (1.0 | ) | ||||||||||||||||||
As Adjusted | $ | 266 | $ | 15.5 | 5.9 | % | $ | 542 | $ | 35.3 | 6.5 | % | ||||||||||||||
(1) Per Orbital Sciences Corporation Form 10-Q for quarter ended June 30, 2014. | ||||||||||||||||||||||||||
Free Cash Flow
($ in millions) |
Second |
First Six |
||||||
Net cash used in/provided by continuing operating activities | $ | (11.0 | ) |
$ |
132.2 | |||
Capital expenditures | (26.2 |
) |
(77.5 | ) | ||||
(37.2 | ) | 54.7 | ||||||
Adjustments | 31.7 |
(1) |
(1.5 |
)(2) |
||||
Adjusted Free Cash Flow | $ | (5.5 |
) |
$ | 53.2 | |||
(1) Excludes litigation settlement and merger related cash expenditures | ||||||||
(2) Includes Orbital cash flow for premerger period; excludes merger, litigation settlement and other non-recurring cash expenditures and adjusts for the timing of certain significant cash expenditures. |
Condensed Consolidated Statements of Income GAAP As Reported |
|||||||
Second Quarter | |||||||
(In millions except per share data) | 2015 | 2014 | |||||
Sales | $ 1,130.0 | $ 714.4 | |||||
Cost of sales | 875.6 | 551.7 | |||||
Gross profit | 254.4 | 162.7 | |||||
Operating expenses: | |||||||
Research and development | 24.7 | 5.2 | |||||
Selling | 32.5 | 23.1 | |||||
General and administrative | 71.4 | 62.6 | |||||
Income from continuing operations, before interest, income taxes and | |||||||
noncontrolling interest | 125.8 | 71.8 | |||||
Interest expense | (15.4) | (23.4) | |||||
Income from continuing operations, before income taxes and noncontrolling interest | |||||||
noncontrolling interest | 110.4 | 48.4 | |||||
Income taxes | 37.5 | 16.6 | |||||
Income from continuing operations, before noncontrolling interest | 72.9 | 31.8 | |||||
Less net income attributable to noncontrolling interest | 0.1 | - | |||||
Income from continuing operations of Orbital ATK, Inc. | 72.8 | 31.8 | |||||
Discontinued operations: | |||||||
Income from discontinued operations, before income taxes | - | 83.7 | |||||
Income taxes | - | 29.9 | |||||
Income from discontinued operations | - | 53.8 | |||||
Net income attributable to Orbital ATK, Inc. | $ 72.8 | $ 85.6 | |||||
Basic earnings per common share: | |||||||
Continuing operations | $ 1.23 | $ 1.01 | |||||
Discontinued operations | - | 1.70 | |||||
Net income attributable to Orbital ATK, Inc. | $ 1.23 | $ 2.71 | |||||
Weighted-average number of common shares outstanding | 59,144 | 31,640 | |||||
Diluted earnings per common share: | |||||||
Continuing operations | $ 1.22 | $ 0.96 | |||||
Discontinued operations | - | 1.63 | |||||
Net income attributable to Orbital ATK, Inc. | $ 1.22 | $ 2.59 | |||||
Weighted-average number of diluted common shares outstanding | 59,749 | 33,108 | |||||
Condensed Consolidated Balance Sheets | ||||||||
GAAP As Reported | ||||||||
(In millions) | July 5, 2015 | March 31, 2015 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 50 | $ | 139 | ||||
Net receivables | 1,891 | 1,794 | ||||||
Net inventories | 182 | 196 | ||||||
Other current assets | 239 | 260 | ||||||
Total current assets | 2,362 | 2,389 | ||||||
Net property, plant and equipment | 802 | 807 | ||||||
Goodwill | 1,875 | 1,875 | ||||||
Other noncurrent assets | 404 | 433 | ||||||
Total assets | $ | 5,443 | $ | 5,504 | ||||
Liabilites and Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 60 | $ | 60 | ||||
Accounts payable | 169 | 158 | ||||||
Other current liabilities | 760 | 879 | ||||||
Total current liabilities | 989 | 1,097 | ||||||
Long-term debt | 1,514 | 1,529 | ||||||
Pension and other noncurrent liabilities | 1,067 | 1,090 | ||||||
Total liabilities | 3,570 | 3,716 | ||||||
Total equity | 1,873 | 1,788 | ||||||
Total liabilities and equity | $ | 5,443 | $ | 5,504 | ||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||
GAAP As Reported | ||||||||||||
Second Quarter | ||||||||||||
(In millions) | 2015 | 2014 | ||||||||||
Operating Activities | ||||||||||||
Continuing operations: | ||||||||||||
Income from continuing operations | $ | 72.9 | $ | 31.8 | ||||||||
Depreciation | 32.0 | 17.6 | ||||||||||
Amortization of intangible assets | 13.0 | 0.8 | ||||||||||
Amortization of debt related costs | 1.0 | 3.1 | ||||||||||
Changes in assets and liabilities | (136.0 | ) | (75.4 | ) | ||||||||
Other | 6.1 | (0.4 | ) | |||||||||
Cash used for operating activities of continuing operations | (11.0 | ) | (22.5 | ) | ||||||||
Cash used for operating activities of discontinued operations | - | (69.1 | ) | |||||||||
Cash used for operating activities | (11.0 | ) | (91.6 | ) | ||||||||
Investing Activities | ||||||||||||
Continuing operations: | ||||||||||||
Capital expenditures | (26.2 | ) | (18.5 | ) | ||||||||
Proceeds from the disposition of property | - | 2.2 | ||||||||||
Cash used for investing activities of continuing operations | (26.2 | ) | (16.3 | ) | ||||||||
Cash used for investing activities of discontinued operations | - | (11.0 | ) | |||||||||
Cash used for investing activities | (26.2 | ) | (27.3 | ) | ||||||||
Financing Activities | ||||||||||||
Cash used for financing activities | (52.5 | ) | (15.2 | ) | ||||||||
Effect of foreign exchange rate fluctuations on cash | - | 0.2 | ||||||||||
Decrease in cash and cash equivalents | (89.7 | ) | (133.9 | ) | ||||||||
Cash and cash equivalents at beginning of period | 139.3 | 266.6 | ||||||||||
Cash and cash equivalents at end of period | $ | 49.6 | $ | 132.7 | ||||||||
Source:
Investor and Media:
Orbital ATK Inc.
Barron Beneski,
703-406-5528
Barron.Beneski@orbitalatk.com