Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) (the “Company”) today
reported results for the three and six months ended June 30,
2022.
Financial Overview
|
Three months ended June 30, |
|
Six Months ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions, except percentage and per share
amounts) |
Net sales |
$ |
528.5 |
|
|
$ |
556.9 |
|
|
$ |
1,039.6 |
|
|
$ |
1,053.0 |
|
Net income |
|
16.4 |
|
|
|
45.0 |
|
|
|
44.2 |
|
|
|
63.1 |
|
Net income as a percentage of
net sales |
|
3.1 |
% |
|
|
8.1 |
% |
|
|
4.3 |
% |
|
|
6.0 |
% |
Adjusted Net Income (Non-GAAP
measure*) |
|
16.2 |
|
|
|
49.1 |
|
|
|
53.1 |
|
|
|
78.3 |
|
Adjusted Net Income (Non-GAAP
measure*) as a percentage of net sales |
|
3.1 |
% |
|
|
8.8 |
% |
|
|
5.1 |
% |
|
|
7.4 |
% |
Earnings Per Share (“EPS”) -
Diluted |
|
0.20 |
|
|
|
0.54 |
|
|
|
0.53 |
|
|
|
0.77 |
|
Adjusted EPS (Non-GAAP
measure*) |
|
0.20 |
|
|
|
0.59 |
|
|
|
0.63 |
|
|
|
0.96 |
|
Adjusted EBITDAP (Non-GAAP
measure*) |
|
41.5 |
|
|
|
86.6 |
|
|
|
110.8 |
|
|
|
145.1 |
|
Adjusted EBITDAP (Non-GAAP
measure*) as a percentage of net sales |
|
7.9 |
% |
|
|
15.6 |
% |
|
|
10.7 |
% |
|
|
13.8 |
% |
Cash used in operating
activities |
|
(33.8 |
) |
|
|
89.6 |
|
|
|
(108.8 |
) |
|
|
20.2 |
|
Free cash flow (Non-GAAP
measure*) |
|
(43.1 |
) |
|
|
81.1 |
|
|
|
(120.3 |
) |
|
|
7.9 |
|
_________* The Company provides Non-GAAP
measures as a supplement to financial results based on accounting
principles generally accepted in the United States (“GAAP”). A
reconciliation of the Non-GAAP measures to the most directly
comparable GAAP measures is included at the end of the release.
Aerojet Rocketdyne Holdings, Inc. reported year
to date sales of $1,040 million, down 1% year over year. Adjusted
EBITDAP margins grew by 150 basis points excluding EAC adjustments,
which included the impact of an unfavorable cumulative contract
adjustment in the second quarter to account for supply chain
disruptions and necessary technical and manufacturing changes on a
portion of the Standard Missile program. Free cash flow is down
from the prior year at net outflow of $120 million for the six
months ended June 30, 2022, compared with inflow of $8 million in
the same six month period of 2021, largely driven by anticipated
program working capital growth on the Terminal High Altitude Area
Defense ("THAAD") and Standard Missile programs. These programs are
both large multi-year awards that contributed to our strong cash
flow in prior years as milestone payments generated favorable
working capital which is subsequently being deployed.
“Our business remains strong, as robust orders
contributed to our quarter-end backlog of $6.9 billion, just shy of
our highest backlog recently recorded and equal to approximately
three times our annual sales. This backlog now includes our largest
RL10 award to date for 116 engines that will fly on the Vulcan
Centaur rocket and support the largest commercial launch contract
in history for Amazon’s Project Kuiper satellite broadband system,”
said Eileen P. Drake, Chief Executive Officer and President of
Aerojet Rocketdyne Holdings, Inc. “Other awards included in our
backlog are multi-year awards received in previous periods on
RS-25, Standard Missile, Patriot Advanced Capability-3 (“PAC-3”)
and THAAD. We announced during the quarter that an advanced Aerojet
Rocketdyne scramjet engine powered a successful flight test of the
Hypersonic Air-breathing Weapon Concept (“HAWC”) in a joint effort
with the Defense Advanced Research Projects Agency (“DARPA”), Air
Force Research Laboratory (“AFRL”), and Lockheed Martin. In
addition, we announced that we had been selected by Lockheed Martin
to build an advanced solid rocket motor booster for the second
stage of a DARPA hypersonic weapon system, known as Operational
Fires, or OpFires, and we are looking forward to seeing our RS-25
engines and other propulsion systems power various parts of the
Artemis I mission that is expected to launch later this month. We
remain focused on operational execution and growing EBITDAP
margins, excluding EAC adjustments, sequentially and year over
year. I’d like to thank our shareholders for the engagement and
support during the process we’ve undergone over the last six months
that culminated in the election of our outstanding new Board. This
Board and I are confident in the substantial value creation
opportunity ahead and will work hard to deliver for our
shareholders.”
Second quarter of 2022 compared with second quarter of
2021
The decrease in net sales was primarily driven
by a decline on the Standard Missile, RS-25, and RS-68 programs
partially offset by an increase on the Next Generation Interceptor
(“NGI”) program.
The decrease in net income was primarily driven
by: (i) cost growth from supply chain disruptions and necessary
technical and manufacturing changes on a portion of the Standard
Missile program; (ii) favorable contract performance on the RS-68
program in the prior year; and (iii) costs associated with the
proxy contest and associated litigation matters in the current
period. These factors were partially offset by (i) lower retirement
benefits expense and (ii) lower terminated merger costs incurred in
the current period. The Company had $21.0 million of net
unfavorable changes in contract estimates on net income in the
current period compared with net favorable changes of $18.0 million
in the second quarter of 2021.
First half of 2022 compared with first half of
2021
The decrease in net sales was primarily driven
by a decline on the RS-25, RS-68, and Standard Missile programs
partially offset by an increase on the NGI and PAC-3 programs.
The decrease in net income was primarily driven
by: (i) cost growth from supply chain disruptions and necessary
technical and manufacturing changes on a portion of the Standard
Missile program; (ii) costs associated with legal matters in the
current period; (iii) favorable contract performance on the RS-68
program in the prior year; and (iv) costs associated with the proxy
contest and associated litigation matters in the current period.
These factors were partially offset by (i) lower retirement
benefits expense; (ii) lower terminated merger costs incurred in
the current period; and (iii) a loss on settlement of debt in the
prior year comparative period. The Company had $23.0 million of net
unfavorable changes in contract estimates on net income in the
current period compared with net favorable changes of $16.1 million
in the first half of 2021.
Backlog
As of June 30, 2022, the Company's total
remaining performance obligations, also referred to as backlog,
totaled $6.9 billion. The Company expects to recognize
approximately 34%, or $2.3 billion, of the remaining performance
obligations as sales over the next twelve months, an additional 24%
the following twelve months, and 42% thereafter. A summary of the
Company's backlog is as follows:
|
June 30, 2022 |
|
December 31, 2021 |
|
(In billions) |
Funded backlog |
$ |
3.2 |
|
$ |
3.1 |
Unfunded backlog |
|
3.7 |
|
|
3.7 |
Total backlog |
$ |
6.9 |
|
$ |
6.8 |
Total backlog includes both funded backlog
(unfilled orders for which funding is authorized, appropriated and
contractually obligated by the customer) and unfunded backlog (firm
orders for which funding has not been appropriated). Indefinite
delivery and quantity contracts and unexercised options are not
reported in total backlog. Backlog is subject to funding delays or
program restructurings/cancellations, which are beyond the
Company's control.
Income Taxes
As of June 30, 2022, the income tax payable
balance totaled $66.9 million. The increase in the income tax
payable balance compared with an income tax receivable balance of
$13.8 million as of December 31, 2021, is primarily the result of
the elimination of the option for the Company to deduct research
and development expenditures in the current period and requires the
Company to capitalize such costs and amortize the costs over five
years when incurred in the U.S.
2¼% Convertible Senior Notes (“2¼%
Notes”)
On July 15, 2022, the Company announced that it
issued a notice of redemption to holders of its outstanding 2¼%
Notes stating its intention to redeem all outstanding 2¼% Notes in
full on September 19, 2022, in accordance with the terms of the
indenture governing the 2¼% Notes. The Company is electing to
settle conversions of the 2¼% Notes using Cash Settlement, as
defined in the indenture for the 2¼% Notes.
Proxy Contest
As a result of the proxy contest and related
litigation, costs in excess of $16 million were incurred by certain
participants in these activities. These costs have been submitted
to the Company for reimbursement, subject to the approval of the
Board of Directors at their upcoming meeting. Should such approval
be obtained, the resulting cash outflow would be expected to occur
in the second half of 2022.
Revision of Previously Issued
Consolidated Financial Statements
During the three months ended March 31, 2022,
the Company identified an error in its accounting for income taxes
associated with its 2¼% Notes. Upon issuance of the 2¼% Notes in
2016, the Company did not record the applicable deferred tax
liability associated with the conversion option that had been
reflected in other capital, which resulted in an overstatement of
other capital, an understatement of deferred tax liabilities and an
error in income tax expense in subsequent periods. The Company
evaluated the errors and concluded that the errors were not
material, either individually or in the aggregate, to its current
or previously issued consolidated financial statements.
Accordingly, the accompanying financial tables have been revised to
correct for such immaterial errors.
Forward-Looking Statements
This release contains certain “forward-looking
statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Such statements in this
release and in subsequent discussions with the Company’s management
are based on management’s current expectations and are subject to
risks, uncertainty and changes in circumstances, which could cause
actual results, performance or achievements to differ materially
from anticipated results, performance or achievements. All
statements contained herein and in subsequent discussions with the
Company’s management that are not clearly historical in nature are
forward-looking, and the words “anticipate,” “believe,” “expect,”
“estimate,” “plan,” and similar expressions are generally intended
to identify forward-looking statements. We caution you that any
forward-looking statements made in this report are not guarantees
of future performance, events or results, and you should not place
undue reliance on these forward-looking statements, which speak
only as of the date of this report. We do not intend, and we
undertake no obligation, to update any forward-looking information
to reflect new information, future events or otherwise, except as
required by law. A variety of factors could cause actual results or
outcomes to differ materially from those expected and expressed in
the Company’s forward-looking statements. Important risk factors
that could cause actual results or outcomes to differ from those
expressed in the forward-looking statements include, but are not
limited to, the following:
- effects of the termination of the proposed merger with Lockheed
Martin;
- effects of the proxy contest and associated litigation;
- effects of the recent changes to the Company's Board of
Directors and their strategic oversight;
- reductions, delays or changes in U.S. government spending;
- cancellation or material modification of one or more
significant contracts;
- failure of the Company's subcontractors or suppliers to perform
their contractual obligations;
- loss of key qualified suppliers of technologies, components,
and materials;
- the release, unplanned ignition, explosion, or improper
handling of dangerous materials used in the Company's
businesses;
- risks inherent to the real estate market;
- the COVID-19 pandemic and its impact on economic and other
conditions worldwide, including global spending, sourcing and the
business operations of the Company and its customers and suppliers,
among others;
- actions taken by governments, businesses and individuals in
response to the COVID-19 pandemic, including mandated
vaccinations;
- cost overruns on the Company's contracts that require the
Company to absorb excess costs;
- failure of the Company's information technology infrastructure,
including a successful cyber-attack, accident, unsuccessful
outsourcing of certain information technology and cyber security
functions, or security breach that could result in disruptions to
the Company's operations;
- changes in economic and other conditions in the Sacramento,
California metropolitan area real estate market or changes in
interest rates affecting real estate values in that market;
- the loss of key employees and shortage of available skilled
employees to achieve anticipated growth;
- a strike or other work stoppage or the Company's inability to
renew collective bargaining agreements on favorable terms;
- changes in estimates related to contract accounting;
- the funded status of the Company's defined benefit pension plan
and the Company's obligation to make cash contributions in excess
of the amount that the Company can recover in its current period
overhead rates;
- the substantial amount of debt that places significant demands
on the Company's cash resources and could limit the Company's
ability to borrow additional funds or expand its operations;
- the Company's ability to comply with the financial and other
covenants contained in the Company's debt agreements;
- changes in LIBOR reporting practices or the method by which
LIBOR is determined;
- failure to secure contracts;
- costs and time commitment related to potential and/or actual
acquisition activities may exceed expectations;
- failure to comply with regulations applicable to contracts with
the U.S. government;
- failure of the Company's information technology infrastructure
or failure to perform by the Company's third party service
providers;
- product failures, schedule delays or other problems with
existing or new products and systems;
- the possibility that environmental and other government
regulations that impact the Company become more stringent or
subject the Company to material liability in excess of its
established reserves;
- environmental claims related to the Company's current and
former businesses and operations including the inability to protect
or enforce previously executed environmental agreements;
- reductions in the amount recoverable from environmental
claims;
- significant risk exposures and potential liabilities that are
inadequately covered by insurance;
- limitations associated with our stockholders' ability to obtain
a favorable judicial forum for certain disputes due to the Delaware
exclusive forum provision in our Certificate of Incorporation;
- business disruptions to the extent not covered by
insurance;
- changes or clarifications to current tax law or procedural
guidance could adversely impact the Company’s tax liabilities and
effective tax rate;
- exposures and uncertainties related to claims and
litigation;
- effects of changes in discount rates and actuarial estimates,
actual returns on plan assets, and government regulations on
defined benefit pension plans;
- inability to protect the Company's patents and proprietary
rights; and
- those risks detailed in the Company's reports filed with the
SEC.
About Aerojet Rocketdyne Holdings,
Inc.
Aerojet Rocketdyne Holdings, Inc., headquartered
in El Segundo, California, is an innovative technology-based
manufacturer of aerospace and defense products and systems, with a
real estate segment that includes activities related to the
entitlement, sale, and leasing of the Company’s excess real estate
assets. More information can be obtained by visiting the Company’s
websites at www.rocket.com or www.aerojetrocketdyne.com.
Contact information:Investors: Kelly Anderson,
investor relations 310.252.8155
Aerojet Rocketdyne
Holdings, Inc. |
|
|
|
|
|
|
|
Unaudited
Condensed Consolidated Statement of Operations |
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions, except per share amounts) |
Net sales |
$ |
528.5 |
|
|
$ |
556.9 |
|
|
$ |
1,039.6 |
|
|
$ |
1,053.0 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of sales (exclusive of items shown separately below) |
|
469.5 |
|
|
|
446.1 |
|
|
|
895.0 |
|
|
|
864.1 |
|
Selling, general and administrative expense |
|
9.6 |
|
|
|
13.6 |
|
|
|
17.8 |
|
|
|
22.6 |
|
Depreciation and amortization |
|
13.8 |
|
|
|
15.7 |
|
|
|
28.2 |
|
|
|
30.9 |
|
Other expense, net |
|
|
|
|
|
|
|
Legal matters |
|
— |
|
|
|
— |
|
|
|
16.1 |
|
|
|
— |
|
Proxy costs and related litigation |
|
8.9 |
|
|
|
— |
|
|
|
12.0 |
|
|
|
— |
|
Other |
|
(1.5 |
) |
|
|
7.2 |
|
|
|
(0.4 |
) |
|
|
15.3 |
|
Total operating costs and expenses |
|
500.3 |
|
|
|
482.6 |
|
|
|
968.7 |
|
|
|
932.9 |
|
Operating income |
|
28.2 |
|
|
|
74.3 |
|
|
|
70.9 |
|
|
|
120.1 |
|
Non-operating: |
|
|
|
|
|
|
|
Retirement benefits expense |
|
0.2 |
|
|
|
8.4 |
|
|
|
0.5 |
|
|
|
16.9 |
|
Loss on debt |
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
9.6 |
|
Interest income and other |
|
— |
|
|
|
(0.7 |
) |
|
|
0.2 |
|
|
|
(1.3 |
) |
Interest expense |
|
4.3 |
|
|
|
5.1 |
|
|
|
8.2 |
|
|
|
10.2 |
|
Total non-operating expense, net |
|
4.5 |
|
|
|
13.3 |
|
|
|
8.9 |
|
|
|
35.4 |
|
Income before income
taxes |
|
23.7 |
|
|
|
61.0 |
|
|
|
62.0 |
|
|
|
84.7 |
|
Income tax provision |
|
7.3 |
|
|
|
16.0 |
|
|
|
17.8 |
|
|
|
21.6 |
|
Net income |
$ |
16.4 |
|
|
$ |
45.0 |
|
|
$ |
44.2 |
|
|
$ |
63.1 |
|
Earnings per share
of common stock |
|
|
|
|
|
|
Basic earnings per share |
$ |
0.20 |
|
|
$ |
0.56 |
|
|
$ |
0.55 |
|
|
$ |
0.80 |
|
Diluted earnings per
share |
$ |
0.20 |
|
|
$ |
0.54 |
|
|
$ |
0.53 |
|
|
$ |
0.77 |
|
Weighted average shares of
common stock outstanding, basic |
|
80.3 |
|
|
|
79.7 |
|
|
|
80.2 |
|
|
|
78.5 |
|
Weighted average shares of
common stock outstanding, diluted |
|
85.9 |
|
|
|
82.5 |
|
|
|
85.8 |
|
|
|
81.3 |
|
Cash dividends paid per
share |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
5.00 |
|
Aerojet Rocketdyne
Holdings, Inc. |
|
|
|
|
|
|
|
Unaudited Operating
Segment Information |
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions) |
Net Sales: |
|
|
|
|
|
|
|
Aerospace and Defense |
$ |
527.9 |
|
|
$ |
556.0 |
|
|
$ |
1,038.4 |
|
|
$ |
1,051.5 |
|
Real Estate |
|
0.6 |
|
|
|
0.9 |
|
|
|
1.2 |
|
|
|
1.5 |
|
Total Net Sales |
$ |
528.5 |
|
|
$ |
556.9 |
|
|
$ |
1,039.6 |
|
|
$ |
1,053.0 |
|
Segment Performance: |
|
|
|
|
|
|
|
Aerospace and Defense |
$ |
37.5 |
|
|
$ |
84.9 |
|
|
$ |
100.2 |
|
|
$ |
137.3 |
|
Environmental remediation provision adjustments |
|
(0.6 |
) |
|
|
(0.6 |
) |
|
|
(1.0 |
) |
|
|
(1.0 |
) |
GAAP/Cost Accounting Standards retirement benefits expense
difference |
|
9.1 |
|
|
|
2.7 |
|
|
|
18.3 |
|
|
|
5.9 |
|
Unusual items |
|
— |
|
|
|
(2.9 |
) |
|
|
(16.3 |
) |
|
|
(4.6 |
) |
Aerospace and Defense Total |
|
46.0 |
|
|
|
84.1 |
|
|
|
101.2 |
|
|
|
137.6 |
|
Real Estate |
|
(0.2 |
) |
|
|
(0.3 |
) |
|
|
(0.3 |
) |
|
|
(0.6 |
) |
Total Segment Performance |
$ |
45.8 |
|
|
$ |
83.8 |
|
|
$ |
100.9 |
|
|
$ |
137.0 |
|
Reconciliation of segment
performance to income before income taxes: |
|
|
|
|
|
|
|
Segment performance |
$ |
45.8 |
|
|
$ |
83.8 |
|
|
$ |
100.9 |
|
|
$ |
137.0 |
|
Interest expense |
|
(4.3 |
) |
|
|
(5.1 |
) |
|
|
(8.2 |
) |
|
|
(10.2 |
) |
Interest income and other |
|
— |
|
|
|
0.7 |
|
|
|
(0.2 |
) |
|
|
1.3 |
|
Stock-based compensation |
|
(2.9 |
) |
|
|
(7.3 |
) |
|
|
(2.0 |
) |
|
|
(10.1 |
) |
Corporate retirement benefits |
|
0.1 |
|
|
|
(1.6 |
) |
|
|
0.1 |
|
|
|
(3.3 |
) |
Corporate and other |
|
(6.1 |
) |
|
|
(5.8 |
) |
|
|
(14.3 |
) |
|
|
(11.4 |
) |
Unusual items |
|
(8.9 |
) |
|
|
(3.7 |
) |
|
|
(14.3 |
) |
|
|
(18.6 |
) |
Income before income taxes |
$ |
23.7 |
|
|
$ |
61.0 |
|
|
$ |
62.0 |
|
|
$ |
84.7 |
|
The Company evaluates its operating segments
based on several factors, of which the primary financial measure is
segment performance. Segment performance represents net sales less
applicable costs, expenses and provisions for unusual items
relating to the segment. Excluded from segment performance are:
corporate income and expenses, interest expense, interest income,
income taxes, and unusual items not related to the segment. The
Company believes that segment performance provides information
useful to investors in understanding its underlying operational
performance.
Aerojet Rocketdyne
Holdings, Inc. |
|
|
|
Unaudited Condensed
Consolidated Balance Sheet |
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|
(In millions) |
ASSETS |
Current Assets |
|
|
|
Cash and cash equivalents |
$ |
560.3 |
|
|
$ |
700.4 |
|
Restricted cash |
|
3.0 |
|
|
|
3.0 |
|
Marketable securities |
|
9.1 |
|
|
|
10.6 |
|
Accounts receivable |
|
170.3 |
|
|
|
60.6 |
|
Contract assets |
|
377.3 |
|
|
|
354.2 |
|
Other current assets |
|
125.7 |
|
|
|
99.5 |
|
Total Current Assets |
|
1,245.7 |
|
|
|
1,228.3 |
|
Noncurrent Assets |
|
|
|
Right-of-use assets |
|
46.3 |
|
|
|
52.6 |
|
Property, plant and equipment,
net |
|
411.0 |
|
|
|
421.1 |
|
Recoverable environmental
remediation costs |
|
217.7 |
|
|
|
226.2 |
|
Deferred income taxes |
|
145.5 |
|
|
|
55.6 |
|
Goodwill |
|
161.4 |
|
|
|
161.4 |
|
Intangible assets |
|
31.5 |
|
|
|
34.9 |
|
Other noncurrent assets |
|
207.1 |
|
|
|
243.3 |
|
Total Noncurrent Assets |
|
1,220.5 |
|
|
|
1,195.1 |
|
Total Assets |
$ |
2,466.2 |
|
|
$ |
2,423.4 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current Liabilities |
|
|
|
Current portion of long-term
debt |
$ |
179.3 |
|
|
$ |
166.7 |
|
Accounts payable |
|
115.1 |
|
|
|
132.2 |
|
Reserves for environmental
remediation costs |
|
42.6 |
|
|
|
37.7 |
|
Contract liabilities |
|
371.5 |
|
|
|
366.5 |
|
Other current liabilities |
|
254.7 |
|
|
|
172.7 |
|
Total Current Liabilities |
|
963.2 |
|
|
|
875.8 |
|
Noncurrent Liabilities |
|
|
|
Long-term debt |
|
276.7 |
|
|
|
294.6 |
|
Reserves for environmental
remediation costs |
|
248.9 |
|
|
|
258.7 |
|
Pension benefits |
|
230.0 |
|
|
|
255.9 |
|
Operating lease
liabilities |
|
36.1 |
|
|
|
41.3 |
|
Other noncurrent
liabilities |
|
137.2 |
|
|
|
173.8 |
|
Total Noncurrent Liabilities |
|
928.9 |
|
|
|
1,024.3 |
|
Total Liabilities |
|
1,892.1 |
|
|
|
1,900.1 |
|
Commitments and
contingencies |
|
|
|
Stockholders’ Equity |
|
|
|
Common stock |
|
8.0 |
|
|
|
8.0 |
|
Other capital |
|
574.5 |
|
|
|
578.1 |
|
Treasury stock |
|
(64.4 |
) |
|
|
(64.4 |
) |
Retained earnings |
|
146.6 |
|
|
|
102.6 |
|
Accumulated other
comprehensive loss, net of income taxes |
|
(90.6 |
) |
|
|
(101.0 |
) |
Total Stockholders’ Equity |
|
574.1 |
|
|
|
523.3 |
|
Total Liabilities and Stockholders’ Equity |
$ |
2,466.2 |
|
|
$ |
2,423.4 |
|
Aerojet Rocketdyne
Holdings, Inc. |
|
|
|
Unaudited Condensed
Consolidated Statements of Cash Flows |
|
|
|
|
Six months ended June 30, |
|
2022 |
|
2021 |
|
(In millions) |
Operating
Activities |
|
|
|
Net income |
$ |
44.2 |
|
|
$ |
63.1 |
|
Adjustments to reconcile net
income to net cash (used in) provided by operating activities: |
|
|
|
Depreciation and amortization |
|
28.2 |
|
|
|
30.9 |
|
Amortization of debt discount and deferred financing costs |
|
0.8 |
|
|
|
3.0 |
|
Stock-based compensation |
|
2.0 |
|
|
|
10.1 |
|
Retirement benefits, net |
|
(13.1 |
) |
|
|
2.8 |
|
Loss on debt |
|
— |
|
|
|
9.6 |
|
Other, net |
|
1.4 |
|
|
|
(0.8 |
) |
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
(109.7 |
) |
|
|
(91.5 |
) |
Contract assets |
|
(23.1 |
) |
|
|
(1.9 |
) |
Other current assets |
|
(26.2 |
) |
|
|
2.3 |
|
Recoverable environmental remediation costs |
|
8.5 |
|
|
|
7.3 |
|
Other noncurrent assets |
|
35.7 |
|
|
|
12.3 |
|
Accounts payable |
|
(18.8 |
) |
|
|
(0.9 |
) |
Contract liabilities |
|
5.0 |
|
|
|
(17.4 |
) |
Other current liabilities |
|
87.0 |
|
|
|
6.6 |
|
Deferred income taxes |
|
(91.5 |
) |
|
|
(3.3 |
) |
Reserves for environmental remediation costs |
|
(4.9 |
) |
|
|
(6.8 |
) |
Other noncurrent liabilities and other |
|
(34.3 |
) |
|
|
(5.2 |
) |
Net Cash (Used in) Provided by Operating Activities |
|
(108.8 |
) |
|
|
20.2 |
|
Investing
Activities |
|
|
|
Purchases of marketable
securities |
|
(0.4 |
) |
|
|
(1.9 |
) |
Capital expenditures |
|
(11.5 |
) |
|
|
(12.3 |
) |
Net Cash Used in Investing Activities |
|
(11.9 |
) |
|
|
(14.2 |
) |
Financing
Activities |
|
|
|
Dividend payments |
|
(1.2 |
) |
|
|
(428.5 |
) |
Debt repayments |
|
(14.3 |
) |
|
|
(155.8 |
) |
Repurchase of shares for
withholding taxes and option costs under equity plans |
|
(4.3 |
) |
|
|
(4.0 |
) |
Proceeds from shares issued
under equity plans |
|
0.4 |
|
|
|
4.1 |
|
Net Cash Used in Financing Activities |
|
(19.4 |
) |
|
|
(584.2 |
) |
Net Decrease in Cash,
Cash Equivalents and Restricted Cash |
|
(140.1 |
) |
|
|
(578.2 |
) |
Cash, Cash Equivalents and
Restricted Cash at Beginning of Period |
|
703.4 |
|
|
|
1,152.5 |
|
Cash, Cash Equivalents and
Restricted Cash at End of Period |
$ |
563.3 |
|
|
$ |
574.3 |
|
Use of Unaudited Non-GAAP Financial
Measures
Adjusted EBITDAP, Adjusted Net Income, and Adjusted EPS
The Company provides the Non-GAAP financial
measures of its performance called Adjusted EBITDAP, Adjusted Net
Income, and Adjusted EPS. The Company uses these metrics to measure
its operating and total Company performance. The Company believes
that for management and investors to effectively compare core
performance from period to period, the metrics should exclude items
that are not indicative of, or are unrelated to, results from the
ongoing business operations such as retirement benefits (pension
and postretirement benefits), significant non-cash expenses, the
impacts of financing decisions on earnings, and items incurred
outside the ordinary, ongoing and customary course of business.
Accordingly, the Company defines Adjusted EBITDAP as GAAP net
income adjusted to exclude interest expense, interest income,
income taxes, depreciation and amortization, retirement benefits
net of amounts that are recoverable under the Company's U.S.
government contracts, and unusual items. Adjusted Net Income and
Adjusted EPS exclude retirement benefits net of amounts that are
recoverable under its U.S. government contracts and unusual items
which the Company does not believe are reflective of such ordinary,
ongoing and customary activities. Adjusted Net Income and Adjusted
EPS do not represent, and should not be considered an alternative
to, net income or diluted EPS as determined in accordance with
GAAP.
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions, except per share and percentage
amounts) |
Net income |
$ |
16.4 |
|
|
$ |
45.0 |
|
|
$ |
44.2 |
|
|
$ |
63.1 |
|
Interest expense |
|
4.3 |
|
|
|
5.1 |
|
|
|
8.2 |
|
|
|
10.2 |
|
Interest income and other |
|
— |
|
|
|
(0.7 |
) |
|
|
0.2 |
|
|
|
(1.3 |
) |
Income tax provision |
|
7.3 |
|
|
|
16.0 |
|
|
|
17.8 |
|
|
|
21.6 |
|
Depreciation and
amortization |
|
13.8 |
|
|
|
15.7 |
|
|
|
28.2 |
|
|
|
30.9 |
|
GAAP retirement benefits
expense |
|
0.2 |
|
|
|
8.4 |
|
|
|
0.5 |
|
|
|
16.9 |
|
CAS recoverable retirement
benefits expense |
|
(9.4 |
) |
|
|
(9.5 |
) |
|
|
(18.9 |
) |
|
|
(19.5 |
) |
Unusual items |
|
8.9 |
|
|
|
6.6 |
|
|
|
30.6 |
|
|
|
23.2 |
|
Adjusted EBITDAP |
$ |
41.5 |
|
|
$ |
86.6 |
|
|
$ |
110.8 |
|
|
$ |
145.1 |
|
Net income as a percentage of
net sales |
|
3.1 |
% |
|
|
8.1 |
% |
|
|
4.3 |
% |
|
|
6.0 |
% |
Adjusted EBITDAP as a
percentage of net sales |
|
7.9 |
% |
|
|
15.6 |
% |
|
|
10.7 |
% |
|
|
13.8 |
% |
|
|
|
|
|
|
|
|
Net income |
$ |
16.4 |
|
|
$ |
45.0 |
|
|
$ |
44.2 |
|
|
$ |
63.1 |
|
GAAP retirement benefits
expense |
|
0.2 |
|
|
|
8.4 |
|
|
|
0.5 |
|
|
|
16.9 |
|
CAS recoverable retirement
benefits expense |
|
(9.4 |
) |
|
|
(9.5 |
) |
|
|
(18.9 |
) |
|
|
(19.5 |
) |
Unusual items |
|
8.9 |
|
|
|
6.6 |
|
|
|
30.6 |
|
|
|
23.2 |
|
Income tax impact of
adjustments (1) |
|
0.1 |
|
|
|
(1.4 |
) |
|
|
(3.3 |
) |
|
|
(5.4 |
) |
Adjusted Net Income |
$ |
16.2 |
|
|
$ |
49.1 |
|
|
$ |
53.1 |
|
|
$ |
78.3 |
|
|
|
|
|
|
|
|
|
Diluted EPS |
$ |
0.20 |
|
|
$ |
0.54 |
|
|
$ |
0.53 |
|
|
$ |
0.77 |
|
Adjustments |
|
— |
|
|
|
0.05 |
|
|
|
0.10 |
|
|
|
0.19 |
|
Adjusted EPS |
$ |
0.20 |
|
|
$ |
0.59 |
|
|
$ |
0.63 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
Diluted weighted average
shares, as reported and adjusted |
|
85.9 |
|
|
|
82.5 |
|
|
|
85.8 |
|
|
|
81.3 |
|
_________
(1) The income
tax impact is calculated using the federal and state statutory
rates in the corresponding period.
Free Cash Flow
The Company also provides the Non-GAAP financial
measure of Free Cash Flow. Free Cash Flow is defined as cash flow
from operating activities less capital expenditures. Free Cash Flow
should not be considered in isolation, as a measure of residual
cash flow available for discretionary purposes, or as an
alternative to cash flows from operations presented in accordance
with GAAP. The Company uses Free Cash Flow, both in presenting its
results to stakeholders and the investment community, and in the
Company's internal evaluation and management of the business.
Management believes that this financial measure is useful because
it provides supplemental information to assist investors in viewing
the business using the same tools that management uses to evaluate
progress in achieving the Company's goals. The following table
summarizes Free Cash Flow:
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions) |
Net cash (used in) provided by operating activities |
$ |
(33.8 |
) |
|
$ |
89.6 |
|
|
$ |
(108.8 |
) |
|
$ |
20.2 |
|
Capital expenditures |
|
(9.3 |
) |
|
|
(8.5 |
) |
|
|
(11.5 |
) |
|
|
(12.3 |
) |
Free Cash Flow |
$ |
(43.1 |
) |
|
$ |
81.1 |
|
|
$ |
(120.3 |
) |
|
$ |
7.9 |
|
Because the Company's method for calculating
these Non-GAAP measures may differ from other companies’ methods,
the Non-GAAP measures presented above may not be comparable to
similarly titled measures reported by other companies. These
measures are not recognized in accordance with GAAP, and the
Company does not intend for this information to be considered in
isolation or as a substitute for GAAP measures.
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