Photo Release -- Kratos Reports First Quarter Fiscal 2015 Financial Results
Kratos' total backlog at the end of the first quarter was approximately
For the quarter ended
Photos accompanying this announcement are available at
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Kratos' Board of Directors is continuing to work with an investment banking firm to assist the Board in formally reviewing Kratos' businesses, markets and competitive positioning and in evaluating strategic alternatives, including the potential divestiture of certain of the Company's businesses.
Management will discuss the financial results in a conference call beginning at
About Kratos Defense & Security Solutions
Notice Regarding Forward-Looking Statements
This news release and filing
contains certain forward-looking statements that involve risks and uncertainties, including, without limitation, express or implied statements concerning the Company's expectations regarding its future financial performance, bid and proposal pipeline, demand for its products and services, performance of key contracts, timing and expected impact of integration and cost-cutting activities, expected impact of the Company's initiative to evaluate strategic alternatives, including potential divestiture of certain of its businesses, and market and industry developments, including the potential impacts on the Company's business as a result of sequestration, Federal budget cuts and increased protest actions submitted against the Company's projects by its competitors. 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 to our business and financial results related to the reductions and other spending constraints imposed on the
Note Regarding Use of Non-GAAP Financial Measures
This news release contains non-GAAP financial measures, including Adjusted EPS (computed using net income (loss) from continuing operations before income taxes, excluding amortization of purchased intangibles, stock compensation expense, acquisition and restructuring related items and other, unused office space expense, contract design retrofit costs and transaction gains and losses, less the estimated tax cash payments), Adjusted EBITDA (which excludes losses from discontinued operations, restructuring and acquisition related items and other, stock compensation expense, unused office space expense, and transaction gains and losses and the associated margin rates).
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| Unaudited Condensed Consolidated Statements of Operations | ||||||||
| (in millions, except per share data) | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Service revenues | $ | 87.4 | $ | 100.6 | ||||
| Product sales | 95.1 | 99.5 | ||||||
| Total revenues | 182.5 | 200.1 | ||||||
| Cost of service revenues | 66.0 | 74.1 | ||||||
| Cost of product sales | 69.6 | 73.4 | ||||||
| Total costs | 135.6 | 147.5 | ||||||
| Gross profit - services | 21.4 | 26.5 | ||||||
| Gross profit - products | 25.5 | 26.1 | ||||||
| Total gross profit | 46.9 | 52.6 | ||||||
| Selling, general and administrative expenses | 37.2 | 37.0 | ||||||
| Acquisition and restructuring related items and other | 1.0 | 0.5 | ||||||
| Research and development expenses | 4.8 | 5.2 | ||||||
| Unused office space expense and other | - | 0.2 | ||||||
| Depreciation | 0.8 | 0.8 | ||||||
| Amortization of intangible assets | 4.6 | 5.6 | ||||||
| Operating income (loss) | (1.5 | ) | 3.3 | |||||
| Interest expense, net | (12.2 | ) | (16.1 | ) | ||||
| Other income (expense), net | (0.4 | ) | 0.2 | |||||
| Loss from continuing operations before income taxes | (14.1 | ) | (12.6 | ) | ||||
| Provision for income taxes | 2.4 | 2.3 | ||||||
| Loss from continuing operations | (16.5 | ) | (14.9 | ) | ||||
| Income (loss) from discontinued operations, net of taxes | 0.2 | (0.1 | ) | |||||
| Net loss | $ | (16.3 | ) | $ | (15.0 | ) | ||
| Basic and diluted loss per common share: | ||||||||
| Loss from continuing operations | $ | (0.28 | ) | $ | (0.26 | ) | ||
| Loss from discontinued operations, net of taxes | - | - | ||||||
| Net loss | $ | (0.28 | ) | $ | (0.26 | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic and diluted | 58.3 | 57.4 | ||||||
| Adjusted EBITDA (1) | $ | 11.6 | $ | 16.9 | ||||
| Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income (loss) plus (income) loss from discontinued operations, interest expense, net, income taxes, depreciation and amortization, stock compensation, amortization of intangible assets, contract design retrofit costs, transaction gain (loss), transaction and litigation related costs and restructuring and acquisition related items and other. | ||||||||
| 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 loss to Adjusted EBITDA: | ||||||||
| Reconciliation of Net loss to Adjusted EBITDA is as follows: | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Net loss | $ | (16.3 | ) | $ | (15.0 | ) | ||
| Income (loss) from discontinued operations | (0.2 | ) | 0.1 | |||||
| Interest expense, net | 12.2 | 16.1 | ||||||
| Provision (benefit) for income taxes | 2.4 | 2.3 | ||||||
| Depreciation * | 3.9 | 4.0 | ||||||
| Stock compensation | 2.0 | 1.8 | ||||||
| Foreign transaction (gain)/loss | 0.4 | (0.2 | ) | |||||
| Unused office space expense and other | - | 0.2 | ||||||
| Amortization of intangible assets | 4.6 | 5.6 | ||||||
| Acquisition and restructuring related items, excess capacity and other | 1.9 | 1.0 | ||||||
| Contract design retrofit and contract conversion adjustment | 0.7 | 1.0 | ||||||
| Adjusted EBITDA | $ | 11.6 | $ | 16.9 | ||||
| * Includes depreciation reported in cost of service revenues and product sales. | ||||||||
| Reconciliation of acquisition and restructuring related items and other included in Adjusted EBITDA: | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Excess capacity and restructuring costs | $ | 1.5 | $ | 1.0 | ||||
| Transaction and litigation related items | 0.1 | - | ||||||
| Costs related to pending customer change orders | 0.3 | - | ||||||
| $ | 1.9 | $ | 1.0 | |||||
| Unaudited Segment Data | ||||||||
| (in millions) | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Revenues: | ||||||||
| Unmanned Systems | $ | 12.4 | $ | 19.7 | ||||
| Government Solutions | 132.5 | 131.5 | ||||||
| Public Safety & Security | 37.6 | 48.9 | ||||||
| Total revenues | $ | 182.5 | $ | 200.1 | ||||
| Operating income (loss) from continuing operations: | ||||||||
| Unmanned Systems | $ | (4.1 | ) | $ | (1.8 | ) | ||
| Government Solutions | 4.7 | 5.9 | ||||||
| Public Safety & Security | 0.1 | 1.0 | ||||||
| Other activities | (2.2 | ) | (1.8 | ) | ||||
| Total operating income (loss) from continuing operations | $ | (1.5 | ) | $ | 3.3 | |||
| Note: Other activities in the three months ended | ||||||||
| Reconciliation of consolidated Adjusted EBITDA to Adjusted EBITDA by segment is as follows: | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Unmanned Systems | $ | (0.9 | ) | $ | 1.3 | |||
| % of revenue | -7.3 | % | 6.6 | % | ||||
| Government Solutions | 11.8 | 13.9 | ||||||
| % of revenue | 8.9 | % | 10.6 | % | ||||
| Public Safety & Security | 0.7 | 1.7 | ||||||
| % of revenue | 1.9 | % | 3.5 | % | ||||
| Total | $ | 11.6 | $ | 16.9 | ||||
| % of revenue | 6.4 | % | 8.4 | % | ||||
| Unaudited Condensed Consolidated Balance Sheet | ||||||||
| (in millions) | ||||||||
| As of | ||||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 34.4 | $ | 34.7 | ||||
| Restricted cash | 1.6 | 5.4 | ||||||
| Accounts receivable, net | 238.6 | 248.2 | ||||||
| Inventoried costs | 72.1 | 68.0 | ||||||
| Prepaid expenses | 8.4 | 8.5 | ||||||
| Other current assets | 11.1 | 10.1 | ||||||
| Total current assets | 366.2 | 374.9 | ||||||
| Property, plant and equipment, net | 81.5 | 82.6 | ||||||
| Goodwill | 596.4 | 596.4 | ||||||
| Intangible assets, net | 47.7 | 52.3 | ||||||
| Other assets | 30.8 | 32.6 | ||||||
| Total assets | $ | 1,122.6 | $ | 1,138.8 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 42.5 | $ | 48.4 | ||||
| Accrued expenses | 31.5 | 34.2 | ||||||
| Accrued compensation | 39.2 | 46.4 | ||||||
| Accrued interest | 16.5 | 5.6 | ||||||
| Billings in excess of costs and earnings on uncompleted contracts | 56.5 | 52.1 | ||||||
| Deferred income tax liability | 30.2 | 30.3 | ||||||
| Other current liabilities | 6.6 | 9.1 | ||||||
| Total current liabilities | 223.0 | 226.1 | ||||||
| Long-term debt principal, net of current portion | 622.0 | 622.0 | ||||||
| Line of credit | 41.0 | 41.0 | ||||||
| Other long-term liabilities | 25.1 | 25.4 | ||||||
| Total liabilities | 911.1 | 914.5 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Common stock | - | - | ||||||
| Additional paid-in capital | 867.1 | 863.4 | ||||||
| Accumulated other comprehensive loss | (1.9 | ) | (1.7 | ) | ||||
| Accumulated deficit | (653.7 | ) | (637.4 | ) | ||||
| Total stockholders' equity | 211.5 | 224.3 | ||||||
| Total liabilities and stockholders' equity | $ | 1,122.6 | $ | 1,138.8 | ||||
| Unaudited Condensed Consolidated Statement of Cash Flows | ||||||||
| (in millions) | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (16.3 | ) | $ | (15.0 | ) | ||
| Less: Loss (income) from discontinued operations | 0.2 | (0.1 | ) | |||||
| Loss from continuing operations | (16.5 | ) | (14.9 | ) | ||||
| Adjustments to reconcile loss from continuing operations to net cash provided by operating activities from continuing operations: | ||||||||
| Depreciation and amortization | 8.5 | 9.6 | ||||||
| Deferred income taxes | 1.8 | - | ||||||
| Stock‑based compensation | 2.0 | 1.8 | ||||||
| Change in unused office space accrual | - | 0.2 | ||||||
| Amortization of deferred financing costs | 0.5 | 1.3 | ||||||
| Amortization of premium on Senior Secured Notes | 0.3 | (1.0 | ) | |||||
| Provision for doubtful accounts | 0.1 | 0.1 | ||||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | 9.6 | 17.8 | ||||||
| Inventoried costs | (6.0 | ) | (6.7 | ) | ||||
| Customer advances & progress payments | 1.7 | - | ||||||
| Prepaid expenses and other assets | (1.4 | ) | 2.2 | |||||
| Accounts payable | (6.4 | ) | (13.7 | ) | ||||
| Accrued compensation | (7.2 | ) | (6.3 | ) | ||||
| Accrued expenses | (2.8 | ) | (5.2 | ) | ||||
| Accrued interest payable | 10.9 | 15.6 | ||||||
| Billings in excess of costs and earnings on uncompleted contracts | 4.4 | (0.1 | ) | |||||
| Income tax receivable and payable | (0.1 | ) | 1.8 | |||||
| Other liabilities | (2.3 | ) | (0.8 | ) | ||||
| Net cash provided by (used in) operating activities from continuing operations | (2.9 | ) | 1.7 | |||||
| Investing activities: | ||||||||
| Cash paid for acquisitions, net of cash acquired | - | (1.6 | ) | |||||
| Decrease in restricted cash | 3.8 | - | ||||||
| Capital expenditures | (2.2 | ) | (3.1 | ) | ||||
| Net cash provided by (used in) investing activities from continuing operations | 1.6 | (4.7 | ) | |||||
| Financing activities: | ||||||||
| Repayment of debt | (0.2 | ) | (0.2 | ) | ||||
| Other | 1.7 | 1.6 | ||||||
| Net cash provided by financing activities from continuing operations | 1.5 | 1.4 | ||||||
| Net cash flows from continuing operations | 0.2 | (1.6 | ) | |||||
| Net operating cash flows from discontinued operations | (0.2 | ) | (0.5 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (0.3 | ) | - | |||||
| Net decrease in cash and cash equivalents | (0.3 | ) | (2.1 | ) | ||||
| Cash and cash equivalents at beginning of period | 34.7 | 55.7 | ||||||
| Cash and cash equivalents at end of period | $ | 34.4 | $ | 53.6 | ||||
| Unaudited Non-GAAP Measures | ||||||||
| Computation of Adjusted Earnings Per Share | ||||||||
| (in millions, except per share data) | ||||||||
| Three Months Ended | ||||||||
| 2015 | 2014 | |||||||
| Loss from continuing operations before taxes | $ | (14.1 | ) | $ | (12.6 | ) | ||
| Add: Amortization of intangible assets | 4.6 | 5.6 | ||||||
| Add: Stock compensation | 2.0 | 1.8 | ||||||
| Add: Unused office space expense and other | - | 0.2 | ||||||
| Add: Foreign transaction (gain)/loss | 0.4 | (0.2 | ) | |||||
| Add: Contract design retrofit costs and contract conversion adjustment | 0.7 | 1.0 | ||||||
| Add: Restructuring and acquisition related items and other | 1.9 | 1.0 | ||||||
| Adjusted loss from continuing operations before income taxes | (4.5 | ) | (3.2 | ) | ||||
| Estimated cash tax provision | 0.7 | 0.7 | ||||||
| Adjusted loss from continuing operations | $ | (5.2 | ) | $ | (3.9 | ) | ||
| Diluted income per common share: | ||||||||
| Adjusted loss from continuing operations | $ | (0.09 | ) | $ | (0.07 | ) | ||
| Weighted average common shares outstanding | ||||||||
| Diluted | 58.3 | 57.4 | ||||||
Press Contact:Yolanda White 858-812-7302 Direct Investor Information: 877-934-4687 investor@kratosdefense.com
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