Kratos Reports Fourth Quarter and Fiscal Year 2011 Results
Financial Highlights Include:
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Fiscal 2011 Revenues of
$723.1 Million Increase 77 Percent Over 2010 - Fiscal 2011 Adjusted EBITDA Margins Increase 300 Basis Points to 12.7 Percent
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Second Half Fiscal 2011 Adjusted Cash Flow from Operations of
$27.2 Million -
Fourth Quarter Revenues of
$218.2 Million Increase 81 Percent Over Fourth Quarter 2010 -
Fourth Quarter Adjusted EBITDA of
$27.0 Million , or 12.4 Percent -
Fourth Quarter Book-To-Bill Ratio 1.2 to 1.0, Total Backlog of
$1.1 Billion , Bid & Proposal Pipeline$3.7 Billion -
Previous 2012 Adjusted Free Cash Flow Guidance of Approximately
$50 Million To $65 Million Reaffirmed -
2012 Revenue Guidance of
$950 Million to $1 Billion , Adjusted EBITDA of$120 Million to $130 Million
Pro forma EPS for the fourth quarter and fiscal year ended
Management will discuss the financial results in a conference call beginning at
About Kratos Defense & Security Solutions
The
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, and market and industry 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
Adjusted Cash Flow From Operations is computed as Cash provided by operating activities from continuing operations excluding the payment of acquisition related items and Adjusted Free Cash Flow is computed as Cash provided by operating activities from continuing operations excluding the payment of acquisition related items less payments for capital expenditures. Certain of the information set forth herein, including Adjusted EBITDA, excluding losses from discontinued operations, transaction and other acquisition costs, recovery of legal fees in connection with litigation, stock compensation expense and income from SWAP instruments, and the associated margin rates, are considered non-GAAP financial measures.
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| Unaudited Condensed Consolidated Statements of Operations | ||||
| (in millions, except per share data) | ||||
| Three Months Ended | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| Service revenues | $ 100.9 | $ 73.3 | $ 353.6 | $ 284.8 |
| Product sales | 117.3 | 47.5 | 369.5 | 123.7 |
| Total revenues | 218.2 | 120.8 | 723.1 | 408.5 |
| Cost of service revenue | 73.0 | 55.0 | 263.1 | 221.2 |
| Cost of product sales | 86.0 | 41.0 | 267.8 | 103.0 |
| Total costs | 159.0 | 96.0 | 530.9 | 324.2 |
| Gross profit - services | 27.9 | 18.3 | 90.5 | 63.6 |
| Gross profit - products | 31.3 | 6.5 | 101.7 | 20.7 |
| Gross profit | 59.2 | 24.8 | 192.2 | 84.3 |
| Selling, general and administrative expenses | 31.1 | 12.5 | 100.5 | 46.3 |
| Recovery of legal fees in connection with litigation | -- | -- | -- | (1.4) |
| Merger and acquisition expenses | 1.2 | 1.6 | 12.5 | 3.1 |
| Research and development expenses | 3.9 | 0.6 | 9.0 | 2.2 |
| Depreciation | 1.4 | 0.5 | 4.0 | 1.8 |
| Amortization of intangible assets | 13.5 | 3.0 | 38.0 | 9.2 |
| Operating income | 8.1 | 6.6 | 28.2 | 23.1 |
| Interest expense, net | (16.3) | (6.5) | (51.1) | (22.3) |
| Other income (expense), net | 0.1 | 0.3 | 0.1 | 1.1 |
| Income (loss) from continuing operations before income taxes | (8.1) | 0.4 | (22.8) | 1.9 |
| Provision (benefit) for income taxes | 0.6 | (0.2) | 1.9 | (12.7) |
| Income (loss) from continuing operations | (8.7) | 0.6 | (24.7) | 14.6 |
| Income (loss) from discontinued operations, net of taxes | 0.1 | (0.2) | 0.5 | (0.1) |
| Net income (loss) | $ (8.6) | $ 0.4 | $ (24.2) | $ 14.5 |
| Basic income (loss) per common share: | ||||
| Income (loss) from continuing operations | $ (0.25) | $ 0.03 | $ (0.90) | $ 0.88 |
| Income (loss) from discontinued operations, net of taxes | -- | (0.01) | 0.02 | (0.01) |
| Net income (loss) | $ (0.25) | $ 0.02 | $ (0.88) | $ 0.87 |
| Diluted income (loss) per common share: | ||||
| Income (loss) from continuing operations | $ (0.25) | $ 0.03 | $ (0.90) | $ 0.87 |
| Income (loss) from discontinued operations, net of taxes | -- | (0.01) | 0.02 | (0.01) |
| Net income (loss) | $ (0.25) | $ 0.02 | $ (0.88) | $ 0.86 |
| Weighted average common shares outstanding | ||||
| Basic | 33.9 | 18.3 | 27.4 | 16.6 |
| Diluted | 33.9 | 18.5 | 27.4 | 16.9 |
| Adjusted EBITDA (1) | $ 27.0 | $ 12.9 | $ 91.8 | $ 39.7 |
| Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income (loss) plus (income) 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 less recovery of legal fees in connection with litigation. | ||||
| 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 | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| Net income (loss) | $ (8.6) | $ 0.4 | $ (24.2) | $ 14.5 |
| (Income) loss from discontinued operations | (0.1) | 0.2 | (0.5) | 0.1 |
| Acquisition expenses | 1.2 | 1.6 | 12.5 | 3.1 |
| Interest expense, net | 16.3 | 6.5 | 51.1 | 22.3 |
| Other income related to SWAP instruments | -- | (0.3) | (0.3) | (1.0) |
| Provision (benefit) for income taxes | 0.6 | (0.2) | 1.9 | (12.7) |
| Depreciation | 3.1 | 1.2 | 10.0 | 3.7 |
| Stock compensation | 1.0 | 0.5 | 3.3 | 1.9 |
| Recovery of legal fees in connection with litigation | -- | -- | -- | (1.4) |
| Amortization of intangible assets | 13.5 | 3.0 | 38.0 | 9.2 |
| Adjusted EBITDA | $ 27.0 | $ 12.9 | $ 91.8 | $ 39.7 |
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| Unaudited Segment Data | ||||
| (in millions) | ||||
| Three Months Ended | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| Revenues: | ||||
| Government Solutions | $ 189.6 | $ 108.9 | $ 610.9 | $ 372.2 |
| Public Safety & Security | 28.6 | 11.9 | 112.2 | 36.3 |
| Total revenues | $ 218.2 | $ 120.8 | $ 723.1 | $ 408.5 |
| Operating income (loss) from continuing operations: | ||||
| Government Solutions | $ 7.0 | $ 7.5 | $ 34.1 | $ 25.1 |
| Public Safety & Security | 3.3 | 1.0 | 9.9 | 1.8 |
| Other activities | (2.2) | (1.9) | (15.8) | (3.8) |
| Total operating income from continuing operations | $ 8.1 | $ 6.6 | $ 28.2 | $ 23.1 |
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Note: Other activities in the three and twelve months ended |
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Other activities in the three and twelve months ended |
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| Reconciliation of consolidated Adjusted EBITDA to Adjusted EBITDA by segment is as follows: | ||||
| Three Months Ended | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| KGS | $ 23.1 | $ 11.7 | $ 79.4 | $ 37.3 |
| % of revenue | 12.2% | 10.7% | 13.0% | 10.0% |
| PSS | 3.9 | 1.2 | 12.4 | 2.4 |
| % of revenue | 13.6% | 10.1% | 11.1% | 6.5% |
| Total | $ 27.0 | $ 12.9 | $ 91.8 | $ 39.7 |
| % of revenue | 12.4% | 10.7% | 12.7% | 9.7% |
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| Consolidated Balance Sheet | ||||
| (in millions) | ||||
| Twelve Months Ended | ||||
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| 2011 | 2010 | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 69.8 | $ 10.8 | ||
| Restricted cash | 1.1 | 8.5 | ||
| Accounts receivable, net | 250.6 | 125.8 | ||
| Inventoried costs | 80.6 | 25.9 | ||
| Income taxes receivable | 2.9 | 2.3 | ||
| Prepaid expenses | 12.8 | 7.1 | ||
| Other current assets | 3.2 | 2.7 | ||
| Current assets of discontinued operations | -- | 0.5 | ||
| Total current assets | 421.0 | 183.6 | ||
| Property and equipment, net | 73.0 | 28.4 | ||
| Goodwill | 573.5 | 226.8 | ||
| Intangibles, net | 124.6 | 89.1 | ||
| Other assets | 24.3 | 7.8 | ||
| Total assets | $ 1,216.4 | $ 535.7 | ||
| Liabilities and Stockholders' Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ 54.8 | $ 45.6 | ||
| Accrued expenses | 52.1 | 21.4 | ||
| Accrued compensation | 40.5 | 21.7 | ||
| Billings in excess of costs and earnings on uncompleted contracts | 37.7 | 17.2 | ||
| Deferred income tax liability | 8.5 | -- | ||
| Acquisition related holdback payments | -- | 8.1 | ||
| Other current liabilities | 16.8 | 1.4 | ||
| Current portion of long-term debt | 1.0 | -- | ||
| Current portion of capital lease obligations | 0.6 | 0.6 | ||
| Current liabilities of discontinued operations | 1.8 | 2.1 | ||
| Total current liabilities | 213.8 | 118.1 | ||
| Long-term debt, net of current portion | 630.8 | 225.0 | ||
| Long-term debt premium | 22.8 | -- | ||
| Capital lease obligations, net of current portion | 0.7 | 1.1 | ||
| Deferred income tax liability | 2.7 | 11.6 | ||
| Other long-term liabilities | 32.5 | 8.6 | ||
| Non-current liabilities of discontinued operations | 0.5 | 1.4 | ||
| Total liabilities | 903.8 | 365.8 | ||
| Commitments and contingencies | ||||
| Stockholders' equity: | ||||
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Preferred stock, 5,000,000 shares authorized Series B Convertible Preferred Stock, |
-- | -- | ||
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Common stock, |
-- | -- | ||
| Additional paid-in capital | 720.6 | 553.5 | ||
| Accumulated other comprehensive loss | (0.2) | -- | ||
| Accumulated deficit | (407.8) | (383.6) | ||
| Total stockholders' equity | 312.6 | 169.9 | ||
| Total liabilities and stockholders' equity | $ 1,216.4 | $ 535.7 | ||
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| Consolidated Statement of Cash Flows | ||||
| (in millions) | ||||
| Twelve Months Ended | ||||
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| 2011 | 2010 | |||
| Operating activities: | ||||
| Net income (loss) | $ (24.2) | $ 14.5 | ||
| Less: Income (loss) from discontinued operations | 0.5 | (0.1) | ||
| Income (loss) from continuing operations | (24.7) | 14.6 | ||
| Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities from continuing operations: | ||||
| Depreciation and amortization | 48.0 | 12.9 | ||
| Deferred income taxes | (0.1) | (14.4) | ||
| Amortization of premium on Senior Secured Notes | (2.8) | -- | ||
| Amortization of deferred financing costs | 3.7 | 5.0 | ||
| Provision for doubtful accounts | 1.8 | 0.4 | ||
| Stock‑based compensation | 3.3 | 1.9 | ||
| Mark to market on swaps | (0.3) | (1.0) | ||
| Changes in assets and liabilities, net of acquisitions: | ||||
| Accounts receivable | (16.2) | 2.9 | ||
| Inventoried costs | 3.8 | 2.9 | ||
| Prepaid expenses | 1.4 | (2.9) | ||
| Other assets | 1.1 | 3.2 | ||
| Accounts payable | (16.0) | 8.7 | ||
| Accrued expenses | 4.8 | (9.4) | ||
| Accrued compensation | (3.5) | 3.4 | ||
| Billings in excess of costs and earnings on uncompleted contracts | (1.0) | 3.2 | ||
| Income tax receivable and payable | (0.2) | (0.3) | ||
| Other liabilities | (0.2) | (2.8) | ||
| Net cash provided by operating activities from continuing operations | 2.9 | 28.3 | ||
| Investing activities: | ||||
| Cash paid for acquisitions, net of cash acquired | (391.1) | (206.5) | ||
| Cash paid for contingent acquisition consideration | -- | (0.4) | ||
| Proceeds from the disposition of discontinued operations | -- | 0.1 | ||
| Cash transferred from (to) restricted cash | 3.0 | (0.1) | ||
| Capital expenditures | (7.5) | (2.3) | ||
| Net cash used in investing activities from continuing operations | (395.6) | (209.2) | ||
| Financing activities: | ||||
| Proceeds from issuance of common stock, net of issuance costs | 61.1 | 24.7 | ||
| Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan | 2.0 | 1.7 | ||
| Proceeds from issuance of long-term debt | 425.7 | 225.0 | ||
| Payments of subordinated debt | -- | (0.5) | ||
| Borrowings under credit facility | -- | 61.9 | ||
| Repayments under credit facility | (2.7) | (119.6) | ||
| Repayment of capital lease obligations | (0.7) | (0.3) | ||
| Purchase of treasury stock | (10.9) | -- | ||
| Debt issuance costs | (22.1) | (11.0) | ||
| Net cash provided by (used in) financing activities from continuing operations | 452.4 | 181.9 | ||
| Net cash flows from continuing operations | 59.7 | 1.0 | ||
| Net operating cash flows from discontinued operations | (0.2) | (0.1) | ||
| Effect of exchange rate changes on cash and cash equivalents | (0.5) | -- | ||
| Net increase in cash and cash equivalents | 59.0 | 0.9 | ||
| Cash and cash equivalents at beginning of year | 10.8 | 9.9 | ||
| Cash and cash equivalents at end of year | $ 69.8 | $ 10.8 | ||
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| Unaudited Non-GAAP Measures | ||||
| Adjusted Earnings Before Amortization and Acquisition Related Expenses | ||||
| (in millions, except per share data) | ||||
| Three Months Ended | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| Income (loss) from continuing operations before taxes | $ (8.1) | $ 0.4 | $ (22.8) | $ 1.9 |
| Add: Amortization of intangible assets | 13.5 | 3.0 | 38.0 | 9.2 |
| Add: Merger and acquisition expenses | 1.2 | 1.6 | 12.5 | 3.1 |
| Adjusted income from continuing operations before income taxes | $ 6.6 | $ 5.0 | $ 27.7 | $ 14.2 |
| Estimated cash tax provision | 0.7 | 0.4 | 2.8 | 1.6 |
| Adjusted income from continuing operations before acquisition and amortization expenses | $ 5.9 | $ 4.6 | $ 24.9 | $ 12.6 |
| Diluted income (loss) per common share: | ||||
| Adjusted income from continuing operations | $ 0.17 | $ 0.25 | $ 0.91 | $ 0.74 |
| Weighted average common shares outstanding | ||||
| Diluted | 33.9 | 18.5 | 27.4 | 16.9 |
| Adjusted Cash Flows From Operations | ||||
| (in millions) | ||||
| Six Months Ended | Twelve Months Ended | |||
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| 2011 | 2010 | 2011 | 2010 | |
| Net cash provided by operating activities from continuing operations | $ 13.2 | $ 21.7 | $ 2.9 | $ 28.3 |
| Add: Acquisition related items | 14.0 | 1.7 | 27.8 | 3.1 |
| Adjusted cash flows from operations | $ 27.2 | $ 23.4 | $ 30.7 | $ 31.4 |
CONTACT: Press Contact:
Yolanda White
858-812-7302 Direct
Investor Information:
877-934-4687
investor@kratosdefense.com
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