Kratos Defense & Security Solutions Announces First Quarter Financial Results
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First Quarter Revenues of
$122.8 Million , Up Year-Over-Year From$68.7 Million -
Adjusted First Quarter EBITDA of
$12.6 Million , or 10.3%, Up Year-Over-Year From$5.9 Million , or 8.6%, in the First Quarter of 2010 -
Reaffirms Pro Forma Full Year 2011 Guidance of
$750-$760 Million in Revenues and$102 - $105 Million in EBITDA
Kratos' contractual and operational highlights during the first quarter included:
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Kratos supported a critical Aegis Ballistic Missile Defense Test that was part of the Atlantic Trident 2011 in which the Company's Ballistic Missile Defense ("BMD") targets were used as part of the first live sea-based AEGIS BMD test on the
East Coast . - Kratos provided targets and related launch services for certain other successful Ballistic Missile Defense tests.
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Kratos' team was selected to continue
Program Executive Office for Integrated Warfare Systems Support work, providing specialized support to a number of importantNavy programs and initiatives, including ongoing combat systems deployment. The total potential value to the team, which is one base year, plus four option years, is$200 million . -
Kratos received new contracts totaling
$23 million for unmanned systems, command and control and war fighter support related products from certainDepartment of Defense and National Security related customers. -
Kratos' team was awarded a multi-year contract to provide Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) services for a National Security customer under an IDIQ contract pursuant to which the team can compete for task orders in excess of
$750 million for installation, testing, evaluation and support of C4ISR-related equipment and systems. - Kratos continued upgrade and sustainment work on a number of weapons systems and related platforms, including missile systems and rotary aircraft platforms.
- Kratos performed work or delivered critical products for or related to certain unmanned aerial vehicle platforms, intelligence, surveillance and reconnaissance platforms and command and control systems.
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Kratos' Public Safety and Security Division received a multi-million dollar contract award to deploy mobile video surveillance and wireless infrastructure, including specialized day/night cameras, specialized listening devices and digital video recorders on a large
Municipal Transit Authority transportation fleet. -
Kratos expanded the use of NeuralStar and dopplerVUE for Network Situational Awareness for an unnamed
National Defense and Intelligence Agency within theDepartment of Defense . -
Kratos issued
$285 million of additional Tack-on Notes for gross proceeds of$314 million , with an effective interest rate of 8.5%, net of an issuance premium of$20 million and accrued interest of$9 million . -
Kratos raised
$61 million of net proceeds from the offering of its common stock at a purchase price of$13.25 per share.
DeMarco concluded, "As we expect our bookings and contract awards to strengthen now that the continuing resolution is resolved, we remain comfortable in reaffirming our 2011 annual guidance of
Management will discuss the financial results in a conference call beginning at
About
The
Notice Regarding Forward-Looking Statements
This news release and filing contains certain forward-looking statements that involve risks and uncertainties, including, without limitation, expressed or implied statements concerning the Company's expectations regarding financial performance, bid and proposal pipeline, performance of key contracts, and market developments. Such statements are only predictions, and the Company's actual results may differ materially. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Factors that may cause the Company's results to differ include, but are not limited to: risks of adverse regulatory action or litigation; risks associated with
debt leverage; risks that our cost cutting initiatives will not provide the anticipated benefits; risks that changes, cutbacks or delays in spending by the
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including adjusted EBITDA, excluding losses from discontinued operations, transaction and other acquisition costs, stock compensation expense and income from SWAP instruments, and the associated margin rates, are considered non-GAAP financial measures. Kratos believes this information is useful to investors because it provides a basis for measuring the Company's available capital resources, the operating performance of the Company's business and the Company's cash flow, excluding non-operational items and non-cash items that would normally be included in the most directly comparable measures calculated and presented in accordance with GAAP. The Company's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company's operating performance and capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies.
| Kratos Defense & Security Solutions | ||
| Unaudited Condensed Consolidated Statements of Operations | ||
| (in millions, except per share data) | ||
| Three Months Ended | ||
|
March 27, 2011 |
March 28, 2010 |
|
| Service revenues | $ 79.8 | $ 64.6 |
| Product sales | 43.0 | 4.1 |
| Total revenues | 122.8 | 68.7 |
| Cost of service revenue | 60.3 | 49.9 |
| Cost of product sales | 35.1 | 3.5 |
| Total costs | 95.4 | 53.4 |
| Gross profit services | 19.5 | 14.7 |
| Gross profit products | 7.9 | 0.6 |
| Gross profit | 27.4 | 15.3 |
| Selling, general and administrative expenses | 15.5 | 9.4 |
| Merger and acquisition expenses and other | 5.8 | -- |
| Research and development expenses | 0.6 | 0.6 |
| Depreciation | 0.7 | 0.4 |
| Amortization of intangible assets | 3.4 | 1.3 |
| Operating income | 1.4 | 3.6 |
| Interest expense, net | (6.7) | (3.9) |
| Other income, net | 0.3 | 0.2 |
| Loss from continuing operations before income taxes | (5.0) | (0.1) |
| Provision (benefit) for income taxes | (1.2) | 0.3 |
| Loss from continuing operations | (3.8) | (0.4) |
| Income from discontinued operations, net of taxes | 0.3 | 0.6 |
| Net income (loss) | $ (3.5) | $ 0.2 |
| Basic and diluted income (loss) per common share: | ||
| Loss from continuing operations | $ (0.18) | $ (0.02) |
| Income from discontinued operations, net of taxes | 0.01 | 0.04 |
| Net income (loss) | $ (0.17) | $ 0.02 |
| Weighted average common shares outstanding | ||
| Basic | 21.3 | 15.9 |
| Diluted | 21.3 | 15.9 |
| Adjusted EBITDA (1) | $ 12.6 | $ 5.9 |
|
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income (loss) plus loss from discontinued operations, interest expense, net other (income) related to SWAP instruments, income taxes, depreciation and amortization, stock compensation, amortization of intangible assets, and acquisition related expenses. |
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Adjusted EBITDA as calculated by us may be calculated differently than EBITDA for other companies. We have provided Adjusted EBITDA because we believe it is a commonly used measure of financial performance in comparable companies and is provided to help investors evaluate companies on a consistent basis, as well as to enhance an understanding of our operating results. Adjusted EBITDA should not be construed as either an alternative to net income or as an indicator of our operating performance or an alternative to cash flows as a measure of liquidity. Please refer to the following table that reconciles GAAP net income to Adjusted EBITDA: |
||
| Reconciliation of Net income (loss) to Adjusted EBITDA is as follows: | ||
| Three Months Ended | ||
|
March 27, 2011 |
March 28, 2010 |
|
| Net income (loss) | $ (3.5) | $ 0.2 |
| Income from discontinued operations | (0.3) | (0.6) |
| Merger and acquisition expenses and other | 5.8 | -- |
| Interest expense, net | 6.7 | 3.9 |
| Other income related to SWAP instruments | (0.3) | (0.2) |
| Provision (benefit) for income taxes | (1.2) | 0.3 |
| Depreciation | 1.4 | 0.6 |
| Stock compensation | 0.6 | 0.4 |
| Amortization of intangible assets | 3.4 | 1.3 |
| Adjusted EBITDA | $ 12.6 | $ 5.9 |
| Kratos Defense & Security Solutions | ||
| Unaudited Segment Data | ||
| (in millions) | ||
| Three Months Ended | ||
|
March 27, 2011 |
March 28, 2010 |
|
| Revenues: | ||
| Kratos Government Solutions | $ 97.4 | $ 61.5 |
| Public Safety & Security | 25.4 | 7.2 |
| Total revenues | $ 122.8 | $ 68.7 |
| Operating income from continuing operations: | ||
| Kratos Government Solutions | $ 6.6 | $ 4.0 |
| Public Safety & Security | 1.2 | -- |
| Other activities | (6.4) | (0.4) |
| Total operating income from continuing operations | $ 1.4 | $ 3.6 |
| Note: Other activities in the three months ended March 27, 2011 include merger and acquisition and other expenses of $5.8 million. | ||
| Reconciliation of consolidated Adjusted EBITDA to Adjusted EBITDA by segment is as follows: | ||
| Three Months Ended | ||
|
March 27, 2011 |
March 28, 2010 |
|
| PSS | $ 1.9 | $ 0.2 |
| % of revenue | 7.5% | 2.8% |
| KGS | 10.7 | 5.7 |
| % of revenue | 11.0% | 9.3% |
| Total | $ 12.6 | $ 5.9 |
| % of revenue | 10.3% | 8.6% |
CONTACT: Press Contact:
Yolanda White
858-812-7302
Investor Information:
877-934-4687
investor@kratosdefense.com
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