|
ý
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended October 2, 2016
|
||
|
||
OR
|
||
|
|
|
o
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|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
For the transition period from to
|
Delaware
(State or other jurisdiction of
incorporation or organization)
|
|
41-1672694
(I.R.S. Employer
Identification No.)
|
45101 Warp Drive
|
|
|
Dulles, Virginia
|
|
20166
|
(Address of principal executive offices)
|
|
(Zip Code)
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Large Accelerated Filer
ý
|
|
Accelerated Filer
o
|
|
Non-Accelerated Filer
o
(Do not check if a
smaller reporting company)
|
|
Smaller reporting company
o
|
|
|
|
Quarters Ended
|
|
Nine Months Ended
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||||||||||||
(Amounts in thousands except per share data)
|
|
October 2, 2016
|
|
October 4,
2015 |
|
October 2, 2016
|
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October 4, 2015
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||||||||
|
|
|
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(As Restated)
(1)
|
|
|
|
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||||||||
Sales
|
|
$
|
1,043,702
|
|
|
$
|
1,143,246
|
|
|
$
|
3,183,442
|
|
|
$
|
3,217,974
|
|
Cost of sales
|
|
833,403
|
|
|
934,429
|
|
|
2,466,496
|
|
|
2,563,023
|
|
||||
Gross profit
|
|
210,299
|
|
|
208,817
|
|
|
716,946
|
|
|
654,951
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
|
24,887
|
|
|
28,666
|
|
|
80,418
|
|
|
78,698
|
|
||||
Selling
|
|
28,099
|
|
|
28,137
|
|
|
82,140
|
|
|
81,549
|
|
||||
General and administrative
|
|
66,337
|
|
|
65,204
|
|
|
195,388
|
|
|
268,442
|
|
||||
Goodwill impairment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,300
|
|
||||
Gain on settlement
|
|
—
|
|
|
50,000
|
|
|
—
|
|
|
50,000
|
|
||||
Income from continuing operations, before interest, income taxes and noncontrolling interest
|
|
90,976
|
|
|
136,810
|
|
|
359,000
|
|
|
241,962
|
|
||||
Net interest expense
|
|
(17,614
|
)
|
|
(24,636
|
)
|
|
(51,193
|
)
|
|
(61,171
|
)
|
||||
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,626
|
)
|
||||
Income from continuing operations, before income taxes and noncontrolling interest
|
|
73,362
|
|
|
112,174
|
|
|
307,807
|
|
|
154,165
|
|
||||
Income taxes
|
|
13,181
|
|
|
37,980
|
|
|
79,765
|
|
|
61,563
|
|
||||
Income from continuing operations, before noncontrolling interest
|
|
60,181
|
|
|
74,194
|
|
|
228,042
|
|
|
92,602
|
|
||||
Less net (loss) income attributable to noncontrolling interest
|
|
(135
|
)
|
|
147
|
|
|
(311
|
)
|
|
72
|
|
||||
Income from continuing operations of Orbital ATK, Inc.
|
|
60,316
|
|
|
74,047
|
|
|
228,353
|
|
|
92,530
|
|
||||
Discontinued operations:
|
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations, before income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,504
|
|
||||
Income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
667
|
|
||||
Income from discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,837
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
60,316
|
|
|
$
|
74,047
|
|
|
$
|
228,353
|
|
|
$
|
109,367
|
|
Basic earnings per common share from:
|
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
$
|
1.04
|
|
|
$
|
1.26
|
|
|
$
|
3.92
|
|
|
$
|
1.69
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.31
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.04
|
|
|
$
|
1.26
|
|
|
$
|
3.92
|
|
|
$
|
2.00
|
|
Weighted-average number of common shares outstanding
|
|
57,927
|
|
|
58,746
|
|
|
58,213
|
|
|
54,807
|
|
||||
Diluted earnings per common share from:
|
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
|
$
|
1.04
|
|
|
$
|
1.25
|
|
|
$
|
3.89
|
|
|
$
|
1.68
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.30
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.04
|
|
|
$
|
1.25
|
|
|
$
|
3.89
|
|
|
$
|
1.98
|
|
Weighted-average number of diluted common shares outstanding
|
|
58,257
|
|
|
59,304
|
|
|
58,642
|
|
|
55,228
|
|
||||
Cash dividends per common share
|
|
$
|
0.30
|
|
|
$
|
0.26
|
|
|
$
|
0.90
|
|
|
$
|
0.84
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Orbital ATK, Inc. and noncontrolling interest
|
|
$
|
60,181
|
|
|
$
|
74,194
|
|
|
$
|
228,042
|
|
|
$
|
109,439
|
|
Comprehensive income (Loss):
|
|
|
|
|
|
|
|
|
||||||||
Pension and other postretirement benefit liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Reclassification of prior service credits for pension and postretirement benefit plans recorded to net income, net of tax (expense) benefit of $(12,500) and $2,691, $(7,547) and $8,258, respectively
|
|
20,215
|
|
|
(4,335
|
)
|
|
12,284
|
|
|
(13,291
|
)
|
||||
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax (expense) of $(11,146), $(14,196), $(35,578) and $(2,245), respectively
|
|
17,861
|
|
|
22,870
|
|
|
56,968
|
|
|
4,328
|
|
||||
Valuation adjustment for pension and postretirement benefit plans, net of tax (expense) benefit of $0, $0, $(648) and $139,583, respectively
|
|
—
|
|
|
—
|
|
|
1,025
|
|
|
(224,389
|
)
|
||||
Change in fair value of derivatives, net of tax (expense) benefit of $(563), $1,896, $(2,097) and $1,276 respectively
|
|
890
|
|
|
(2,996
|
)
|
|
3,315
|
|
|
(2,032
|
)
|
||||
Other, net of tax (expense) benefit of $(190), $55, $(292) and $93, respectively
|
|
472
|
|
|
(88
|
)
|
|
1,076
|
|
|
(153
|
)
|
||||
Change in cumulative translation adjustment, net of tax (expense) of $(9,650)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,381
|
)
|
||||
Total other comprehensive income (loss)
|
|
39,438
|
|
|
15,451
|
|
|
74,668
|
|
|
(256,918
|
)
|
||||
Comprehensive income (loss)
|
|
99,619
|
|
|
89,645
|
|
|
302,710
|
|
|
(147,479
|
)
|
||||
Less comprehensive (loss) income attributable to noncontrolling interest
|
|
(135
|
)
|
|
147
|
|
|
(311
|
)
|
|
72
|
|
||||
Comprehensive income (loss) attributable to Orbital ATK, Inc.
|
|
$
|
99,754
|
|
|
$
|
89,498
|
|
|
$
|
303,021
|
|
|
$
|
(147,551
|
)
|
(Amounts in thousands except share data)
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
63,011
|
|
|
$
|
104,032
|
|
Net receivables
|
|
1,864,826
|
|
|
1,670,821
|
|
||
Net inventories
|
|
230,087
|
|
|
213,212
|
|
||
Income taxes receivable
|
|
335
|
|
|
50,769
|
|
||
Other current assets
|
|
86,081
|
|
|
89,645
|
|
||
Total current assets
|
|
2,244,340
|
|
|
2,128,479
|
|
||
Net property, plant and equipment
|
|
769,450
|
|
|
761,694
|
|
||
Goodwill and net intangibles
|
|
1,940,635
|
|
|
1,975,522
|
|
||
Other noncurrent assets
|
|
411,667
|
|
|
458,000
|
|
||
Total assets
|
|
$
|
5,366,092
|
|
|
$
|
5,323,695
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Current portion of long-term debt
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
Accounts payable
|
|
170,756
|
|
|
130,812
|
|
||
Accrued compensation
|
|
117,790
|
|
|
127,928
|
|
||
Contract loss reserve
|
|
200,569
|
|
|
235,841
|
|
||
Other current liabilities
|
|
623,465
|
|
|
719,854
|
|
||
Total current liabilities
|
|
1,152,580
|
|
|
1,254,435
|
|
||
Long-term debt
|
|
1,542,642
|
|
|
1,435,836
|
|
||
Pension and other postretirement benefits
|
|
699,162
|
|
|
820,834
|
|
||
Other noncurrent liabilities
|
|
119,974
|
|
|
127,152
|
|
||
Total liabilities
|
|
3,514,358
|
|
|
3,638,257
|
|
||
Commitments and contingencies (Notes 13 and 16)
|
|
|
|
|
||||
Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 57,892,300 shares at October 2, 2016 and 58,729,995 shares at December 31, 2015
|
|
579
|
|
|
587
|
|
||
Additional paid-in-capital
|
|
2,173,099
|
|
|
2,187,940
|
|
||
Retained earnings
|
|
1,218,814
|
|
|
1,043,043
|
|
||
Accumulated other comprehensive loss
|
|
(711,209
|
)
|
|
(785,908
|
)
|
||
Common stock in treasury, at cost—11,042,724 shares held at October 2, 2016 and
10,205,029
shares held at December 31, 2015
|
|
(840,042
|
)
|
|
(771,029
|
)
|
||
Total Orbital ATK, Inc. stockholders' equity
|
|
1,841,241
|
|
|
1,674,633
|
|
||
Noncontrolling interest
|
|
10,493
|
|
|
10,805
|
|
||
Total equity
|
|
1,851,734
|
|
|
1,685,438
|
|
||
Total liabilities and equity
|
|
$
|
5,366,092
|
|
|
$
|
5,323,695
|
|
|
|
Nine Months Ended
|
||||||
(Amounts in thousands)
|
|
October 2, 2016
|
|
October 4, 2015
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
228,042
|
|
|
$
|
109,439
|
|
Net loss from discontinued operations
|
|
—
|
|
|
(16,837
|
)
|
||
Income from continuing operations
|
|
228,042
|
|
|
92,602
|
|
||
Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
|
|
|
|
|
||||
Depreciation and amortization
|
|
120,251
|
|
|
120,816
|
|
||
Amortization and write-off of deferred financing costs
|
|
1,806
|
|
|
12,481
|
|
||
Fixed asset impairment
|
|
4,809
|
|
|
14,833
|
|
||
Deferred income taxes
|
|
(12,110
|
)
|
|
(25,254
|
)
|
||
Goodwill impairment
|
|
—
|
|
|
34,300
|
|
||
Loss on the extinguishment of debt
|
|
—
|
|
|
26,626
|
|
||
Stock-based plans expense
|
|
17,516
|
|
|
28,369
|
|
||
Other
|
|
8,641
|
|
|
(2,884
|
)
|
||
Change in assets and liabilities:
|
|
|
|
|
||||
Net receivables
|
|
(203,151
|
)
|
|
19,407
|
|
||
Net inventories
|
|
(22,575
|
)
|
|
36,644
|
|
||
Income taxes receivable
|
|
50,434
|
|
|
37,388
|
|
||
Accounts payable
|
|
39,373
|
|
|
32,834
|
|
||
Contact loss reserve
|
|
(23,754
|
)
|
|
(37,368
|
)
|
||
Accrued compensation
|
|
(6,902
|
)
|
|
3,924
|
|
||
Pension and other postretirement benefits
|
|
(7,622
|
)
|
|
1,693
|
|
||
Other assets and liabilities
|
|
(88,146
|
)
|
|
(120,030
|
)
|
||
Cash flows provided by operating activities of continuing operations
|
|
106,612
|
|
|
276,381
|
|
||
Cash flows provided by operating activities of discontinued operations
|
|
—
|
|
|
10,741
|
|
||
Cash flows provided by operating activities
|
|
106,612
|
|
|
287,122
|
|
||
Investing Activities
|
|
|
|
|
||||
Capital expenditures
|
|
(105,535
|
)
|
|
(104,767
|
)
|
||
Cash acquired in Merger with Orbital
|
|
—
|
|
|
253,734
|
|
||
Cash dividend received from Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group
|
|
—
|
|
|
188,878
|
|
||
Other
|
|
—
|
|
|
145
|
|
||
Cash flows (used in) provided by investing activities of continuing operations
|
|
(105,535
|
)
|
|
337,990
|
|
||
Cash flows provided by investing activities of discontinued operations
|
|
—
|
|
|
49
|
|
||
Cash flows (used in) provided by investing activities
|
|
(105,535
|
)
|
|
338,039
|
|
||
Financing Activities
|
|
|
|
|
||||
Borrowings on revolving credit facilities
|
|
800,000
|
|
|
723,000
|
|
||
Payments on revolving credit facilities
|
|
(665,000
|
)
|
|
(773,000
|
)
|
||
Payment of long-term debt
|
|
(30,000
|
)
|
|
(44,998
|
)
|
||
Payments made to extinguish debt
|
|
—
|
|
|
(1,746,260
|
)
|
||
Proceeds from issuance of debt
|
|
—
|
|
|
1,287,000
|
|
||
Payments made for debt issuance costs
|
|
—
|
|
|
(9,078
|
)
|
||
Purchase of treasury shares
|
|
(94,992
|
)
|
|
(71,585
|
)
|
||
Dividends paid
|
|
(52,586
|
)
|
|
(41,214
|
)
|
||
Other
|
|
480
|
|
|
4,481
|
|
||
Cash flows used in financing activities
|
|
(42,098
|
)
|
|
(671,654
|
)
|
||
Effect of foreign exchange rate fluctuations on cash
|
|
—
|
|
|
(1,340
|
)
|
||
Decrease in cash and cash equivalents
|
|
(41,021
|
)
|
|
(47,833
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
104,032
|
|
|
112,920
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
63,011
|
|
|
$
|
65,087
|
|
Supplemental Cash Flow Disclosures
|
|
|
|
|
||||
Noncash investing and operating activity:
|
|
|
|
|
||||
Capital expenditures included in accounts payable
|
|
$
|
3,727
|
|
|
$
|
5,296
|
|
Noncash financing and operating activity:
|
|
|
|
|
||||
Debt issuance costs included in accounts payable
|
|
$
|
—
|
|
|
$
|
819
|
|
Treasury shares purchased included in accounts payable
|
|
$
|
2,859
|
|
|
$
|
2,159
|
|
|
|
Increase / (Decrease) Restatement Impact
|
||
|
|
Quarter ended
October 4, 2015
|
||
Lake City Contract Loss and Related Adjustments:
|
|
|
||
Sales
|
|
$
|
(8,121
|
)
|
Cost of sales
|
|
$
|
(8,809
|
)
|
Gross profit
|
|
$
|
688
|
|
Income before interest expense, income taxes and noncontrolling interest
|
|
$
|
688
|
|
Income before income taxes and noncontrolling interest
|
|
$
|
688
|
|
|
|
|
||
Contract Loss Reserve Adjustment:
|
|
|
||
Sales
|
|
$
|
—
|
|
Cost of sales
|
|
$
|
(646
|
)
|
Gross profit
|
|
$
|
646
|
|
Income before interest expense, income taxes and noncontrolling interest
|
|
$
|
646
|
|
Income before income taxes and noncontrolling interest
|
|
$
|
646
|
|
|
|
|
||
Account Review and Analysis and Other:
|
|
|
||
Sales
|
|
$
|
(2,250
|
)
|
Cost of sales
|
|
$
|
742
|
|
Gross profit
|
|
$
|
(2,992
|
)
|
Income before interest expense, income taxes and noncontrolling interest
|
|
$
|
(2,992
|
)
|
Income before income taxes and noncontrolling interest
|
|
$
|
(2,992
|
)
|
|
|
Quarter Ended October 4, 2015
|
||||||||||||||
Consolidated Statements of Comprehensive Income (Unaudited)
|
|
As Reported
|
|
First Restatement Adjustments
|
|
Second Restatement Adjustments
|
|
As Restated
|
||||||||
Sales
|
|
$
|
1,134,886
|
|
|
$
|
18,731
|
|
|
$
|
(10,371
|
)
|
|
$
|
1,143,246
|
|
Cost of sales
|
|
884,734
|
|
|
58,408
|
|
|
(8,713
|
)
|
|
934,429
|
|
||||
Gross profit
|
|
250,152
|
|
|
(39,677
|
)
|
|
(1,658
|
)
|
|
208,817
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Research and development
|
|
28,666
|
|
|
—
|
|
|
—
|
|
|
28,666
|
|
||||
Selling
|
|
28,137
|
|
|
—
|
|
|
—
|
|
|
28,137
|
|
||||
General and administrative
|
|
69,384
|
|
|
(4,180
|
)
|
|
—
|
|
|
65,204
|
|
||||
Gain on settlement
|
|
—
|
|
|
50,000
|
|
|
—
|
|
|
50,000
|
|
||||
Income before interest, income taxes and noncontrolling interest
|
|
123,965
|
|
|
14,503
|
|
|
(1,658
|
)
|
|
136,810
|
|
||||
Interest expense, net
|
|
(24,293
|
)
|
|
(343
|
)
|
|
—
|
|
|
(24,636
|
)
|
||||
Income before income taxes and noncontrolling interest
|
|
99,672
|
|
|
14,160
|
|
|
(1,658
|
)
|
|
112,174
|
|
||||
Income taxes
|
|
33,123
|
|
|
5,487
|
|
|
(630
|
)
|
|
37,980
|
|
||||
Net income before noncontrolling interest
|
|
66,549
|
|
|
8,673
|
|
|
(1,028
|
)
|
|
74,194
|
|
||||
Less net income attributable to noncontrolling interest
|
|
147
|
|
|
—
|
|
|
—
|
|
|
147
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
66,402
|
|
|
$
|
8,673
|
|
|
$
|
(1,028
|
)
|
|
$
|
74,047
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share from:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.13
|
|
|
|
|
|
|
$
|
1.26
|
|
||||
Weighted-average number of common shares outstanding
|
|
58,746
|
|
|
|
|
|
|
58,746
|
|
||||||
Diluted earnings per common share from:
|
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.12
|
|
|
|
|
|
|
$
|
1.25
|
|
||||
Weighted-average number of diluted common shares outstanding
|
|
59,304
|
|
|
|
|
|
|
59,304
|
|
||||||
Comprehensive income attributable to Orbital ATK, Inc.
|
|
$
|
81,853
|
|
|
$
|
8,673
|
|
|
$
|
(1,028
|
)
|
|
$
|
89,498
|
|
|
|
October 2, 2016
|
||||||||||
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Assets
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
—
|
|
|
$
|
3,188
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
—
|
|
|
$
|
2,700
|
|
|
$
|
—
|
|
|
|
December 31, 2015
|
||||||||||
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Assets
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
—
|
|
|
$
|
3,979
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
||||||
Derivatives
|
|
$
|
—
|
|
|
$
|
8,353
|
|
|
$
|
—
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||||||||||
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
Fixed-rate debt
|
|
$
|
700,000
|
|
|
$
|
732,750
|
|
|
$
|
700,000
|
|
|
$
|
712,500
|
|
Variable-rate debt
|
|
$
|
895,000
|
|
|
$
|
889,531
|
|
|
$
|
790,000
|
|
|
$
|
787,697
|
|
Purchase Price:
|
|
|
||
Value of common shares issued to Orbital shareholders
(1)
|
|
$
|
1,749,323
|
|
Value of replacement equity-based awards to holders of Orbital equity-based awards
(2)
|
|
8,654
|
|
|
Total purchase price
|
|
$
|
1,757,977
|
|
|
|
|
||
Value of assets acquired and liabilities assumed:
|
|
|
|
|
Cash
|
|
$
|
253,734
|
|
Net receivables
|
|
558,639
|
|
|
Net inventories
|
|
75,294
|
|
|
Intangibles
|
|
173,000
|
|
|
Property, plant and equipment
|
|
277,438
|
|
|
Deferred tax assets, net
|
|
64,821
|
|
|
Other assets
|
|
36,878
|
|
|
Goodwill
|
|
826,548
|
|
|
Accounts payable
|
|
(52,028
|
)
|
|
Contract fair value liabilities
|
|
(130,888
|
)
|
|
Other liabilities
|
|
(325,459
|
)
|
|
Total purchase price
|
|
$
|
1,757,977
|
|
(1)
|
Equals
27.4 million
Orbital ATK shares issued to Orbital shareholders multiplied by
$63.94
, the closing share price of the Company's common stock on the closing date of the Merger.
|
(2)
|
The fair value of replacement equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger.
|
|
|
Nine Months Ended October 4, 2015
|
||
Sales
|
|
$
|
3,335,115
|
|
Income from continuing operations
|
|
$
|
103,418
|
|
Basic per common share from continuing operations
|
|
$
|
1.74
|
|
Diluted per common share from continuing operations
|
|
$
|
1.73
|
|
|
|
Nine Months Ended October 4, 2015
|
||
Amortization of acquired Orbital intangible assets
(1)
|
|
$
|
3,877
|
|
Interest expense adjustment
(2)
|
|
$
|
(6,069
|
)
|
Transaction fees for advisory, legal and accounting services
(3)
|
|
$
|
(19,134
|
)
|
|
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
||||||||
Balance, December 31, 2015
|
|
$
|
922,991
|
|
|
$
|
363,247
|
|
|
$
|
542,128
|
|
|
$
|
1,828,366
|
|
Measurement period adjustments
|
|
5,467
|
|
|
—
|
|
|
(1,822
|
)
|
|
3,645
|
|
||||
Balance, October 2, 2016
|
|
$
|
928,458
|
|
|
$
|
363,247
|
|
|
$
|
540,306
|
|
|
$
|
1,832,011
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
Amortizing intangibles:
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net Intangibles
|
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Net Intangibles
|
||||||||||||
Contract Backlog
|
|
$
|
173,000
|
|
|
$
|
(68,324
|
)
|
|
$
|
104,676
|
|
|
$
|
179,000
|
|
|
$
|
(36,696
|
)
|
|
$
|
142,304
|
|
Patented technology
|
|
11,018
|
|
|
(7,070
|
)
|
|
3,948
|
|
|
11,018
|
|
|
(6,206
|
)
|
|
4,812
|
|
||||||
Customer relationships and other
|
|
1,905
|
|
|
(1,905
|
)
|
|
—
|
|
|
24,294
|
|
|
(24,254
|
)
|
|
40
|
|
||||||
Net Intangibles
|
|
$
|
185,923
|
|
|
$
|
(77,299
|
)
|
|
$
|
108,624
|
|
|
$
|
214,312
|
|
|
$
|
(67,156
|
)
|
|
$
|
147,156
|
|
|
|
Contract Backlog
|
|
Patents
|
|
Total
|
||||||
Remainder of 2016
|
|
$
|
10,543
|
|
|
$
|
311
|
|
|
$
|
10,854
|
|
2017
|
|
35,882
|
|
|
1,180
|
|
|
37,062
|
|
|||
2018
|
|
25,609
|
|
|
1,120
|
|
|
26,729
|
|
|||
2019
|
|
21,760
|
|
|
1,072
|
|
|
22,832
|
|
|||
2020
|
|
10,882
|
|
|
265
|
|
|
11,147
|
|
|||
Thereafter
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
$
|
104,676
|
|
|
$
|
3,948
|
|
|
$
|
108,624
|
|
|
|
Quarter Ended
|
|
Nine Months Ended
|
||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
October 2, 2016
|
|
October 4, 2015
|
||||
Basic weighted-average number of shares outstanding
|
|
57,927
|
|
|
58,746
|
|
|
58,213
|
|
|
54,807
|
|
Dilutive common share equivalents - share-based equity awards
|
|
330
|
|
|
558
|
|
|
429
|
|
|
421
|
|
Diluted weighted-average number of shares outstanding
|
|
58,257
|
|
|
59,304
|
|
|
58,642
|
|
|
55,228
|
|
Anti-dilutive stock options excluded from the calculation of diluted shares
|
|
147
|
|
|
89
|
|
|
147
|
|
|
102
|
|
|
|
Number of Pounds
|
|
Copper
|
|
11,375
|
|
Zinc
|
|
3,830
|
|
|
|
Notional
|
|
Fair Value
|
|
Pay Fixed
|
|
Receive Floating
|
|
Maturity Date
|
||||||
Non-amortizing swap
|
|
$
|
100,000
|
|
|
$
|
(574
|
)
|
|
1.29
|
%
|
|
0.52
|
%
|
|
August 2017
|
Non-amortizing swap
|
|
$
|
100,000
|
|
|
$
|
(1,781
|
)
|
|
1.69
|
%
|
|
0.52
|
%
|
|
August 2018
|
Non-amortizing swap
|
|
$
|
50,000
|
|
|
$
|
(9
|
)
|
|
0.65
|
%
|
|
0.52
|
%
|
|
November 2016
|
Non-amortizing swap
|
|
$
|
50,000
|
|
|
$
|
(254
|
)
|
|
1.10
|
%
|
|
0.52
|
%
|
|
November 2017
|
|
|
Quantity Hedged
|
|
Euros sold
|
|
49,820
|
|
Euros purchased
|
|
3,207
|
|
|
|
|
|
Asset Derivatives
Fair Value
|
|
Liability Derivatives
Fair Value
|
||||||||||||
|
|
Location
|
|
October 2, 2016
|
|
December 31, 2015
|
|
October 2, 2016
|
|
December 31, 2015
|
||||||||
Commodity forward contracts
|
|
Other current assets /
other current liabilities |
|
$
|
1,557
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,445
|
|
Commodity forward contracts
|
|
Other noncurrent assets /
other noncurrent liabilities |
|
486
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency forward contracts
|
|
Other current assets /
other current liabilities |
|
1,126
|
|
|
2,875
|
|
|
81
|
|
|
1,442
|
|
||||
Foreign currency forward contracts
|
|
Other noncurrent assets /
other noncurrent liabilities |
|
19
|
|
|
1,095
|
|
|
—
|
|
|
18
|
|
||||
Interest rate contracts
|
|
Other current assets /
other current liabilities |
|
—
|
|
|
9
|
|
|
583
|
|
|
—
|
|
||||
Interest rate contracts
|
|
Other noncurrent assets /
other noncurrent liabilities |
|
—
|
|
|
—
|
|
|
2,036
|
|
|
2,448
|
|
||||
Total
|
|
|
|
$
|
3,188
|
|
|
$
|
3,979
|
|
|
$
|
2,700
|
|
|
$
|
8,353
|
|
|
|
Gain (Loss) Reclassified from AOCI
|
||||
|
|
Location
|
|
Amount
|
||
Quarter ended October 2, 2016
|
|
|
|
|
||
Commodity forward contracts
|
|
Cost of sales
|
|
$
|
137
|
|
Interest rate contracts
|
|
Interest expense
|
|
$
|
(673
|
)
|
Foreign currency forward contracts
|
|
Cost of sales
|
|
$
|
(110
|
)
|
Quarter ended October 4, 2015
|
|
|
|
|
||
Commodity forward contracts
|
|
Cost of sales
|
|
$
|
(919
|
)
|
Interest rate contracts
|
|
Interest expense
|
|
$
|
(1,011
|
)
|
Foreign currency forward contracts
|
|
Cost of sales
|
|
$
|
(834
|
)
|
|
|
|
|
|
||
Nine months ended October 2, 2016
|
|
|
|
|
||
Commodity forward contracts
|
|
Cost of sales
|
|
$
|
(3,595
|
)
|
Interest rate contracts
|
|
Interest expense
|
|
$
|
(2,179
|
)
|
Foreign currency forward contracts
|
|
Cost of sales
|
|
$
|
(74
|
)
|
Nine months ended October 4, 2015
|
|
|
|
|
||
Commodity forward contracts
|
|
Cost of sales
|
|
$
|
(3,727
|
)
|
Interest rate contracts
|
|
Interest expense
|
|
$
|
(3,041
|
)
|
Foreign currency forward contracts
|
|
Cost of sales
|
|
$
|
(10,527
|
)
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Derivatives
|
|
$
|
256
|
|
|
$
|
(3,059
|
)
|
Pension and other postretirement benefits
|
|
(713,986
|
)
|
|
(784,294
|
)
|
||
Available-for-sale securities
|
|
2,521
|
|
|
1,445
|
|
||
Total AOCI
|
|
$
|
(711,209
|
)
|
|
$
|
(785,908
|
)
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Billed receivables
|
|
$
|
378,641
|
|
|
$
|
217,522
|
|
Unbilled receivables
|
|
1,486,721
|
|
|
1,454,327
|
|
||
Less allowance for doubtful accounts
|
|
(536
|
)
|
|
(1,028
|
)
|
||
Net receivables
|
|
$
|
1,864,826
|
|
|
$
|
1,670,821
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Raw materials
|
|
$
|
80,767
|
|
|
$
|
88,365
|
|
Contracts in process
|
|
148,987
|
|
|
124,315
|
|
||
Finished goods
|
|
333
|
|
|
532
|
|
||
Net inventories
|
|
$
|
230,087
|
|
|
$
|
213,212
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Senior Credit Facility:
|
|
|
|
|
||||
Term Loan A due 2020
|
|
$
|
760,000
|
|
|
$
|
790,000
|
|
Revolving Credit Facility due 2020
|
|
135,000
|
|
|
—
|
|
||
5.25% Senior Notes due 2021
|
|
300,000
|
|
|
300,000
|
|
||
5.50% Senior Notes due 2023
|
|
400,000
|
|
|
400,000
|
|
||
Principal amount of long-term debt
|
|
1,595,000
|
|
|
1,490,000
|
|
||
Unamortized debt issuance costs:
|
|
|
|
|
||||
Senior Credit Facility
|
|
5,318
|
|
|
6,302
|
|
||
5.25% Senior Notes due 2021
|
|
1,668
|
|
|
1,915
|
|
||
5.50% Senior Notes due 2023
|
|
5,372
|
|
|
5,947
|
|
||
Unamortized debt issuance costs
|
|
12,358
|
|
|
14,164
|
|
||
Long-term debt less unamortized debt issuance costs
|
|
1,582,642
|
|
|
1,475,836
|
|
||
Less: Current portion of long-term debt
|
|
40,000
|
|
|
40,000
|
|
||
Long-term debt
|
|
$
|
1,542,642
|
|
|
$
|
1,435,836
|
|
•
|
if, as a result of the sale of its capital stock, such Subsidiary Guarantor ceases to be a Restricted Subsidiary;
|
•
|
if such Subsidiary Guarantor is designated as an "Unrestricted Subsidiary" with respect to the 5.25% Notes and the 5.50% Notes;
|
•
|
upon defeasance or satisfaction and discharge of the 5.25% Notes and the 5.50% Notes, as applicable; and
|
•
|
if such Subsidiary Guarantor has been released from its guarantees of indebtedness under the credit agreement governing the Senior Credit Facility (the "Credit Agreement") and all capital markets debt securities.
|
Remainder of 2016
|
|
$
|
10,000
|
|
Calendar 2017
|
|
40,000
|
|
|
Calendar 2018
|
|
40,000
|
|
|
Calendar 2019
|
|
40,000
|
|
|
Calendar 2020
|
|
765,000
|
|
|
Thereafter
|
|
700,000
|
|
|
Total
|
|
$
|
1,595,000
|
|
|
|
Pension Benefits
|
||||||||||||||
|
|
Quarter Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
October 2, 2016
|
|
October 4, 2015
|
||||||||
Service cost
|
|
$
|
4,556
|
|
|
$
|
4,815
|
|
|
$
|
13,645
|
|
|
$
|
14,445
|
|
Interest cost
|
|
25,360
|
|
|
30,348
|
|
|
76,186
|
|
|
90,866
|
|
||||
Expected return on plan assets
|
|
(40,578
|
)
|
|
(40,117
|
)
|
|
(121,733
|
)
|
|
(119,867
|
)
|
||||
Amortization of unrecognized net loss
|
|
31,355
|
|
|
37,690
|
|
|
94,167
|
|
|
112,989
|
|
||||
Amortization of unrecognized prior service cost
|
|
(5,151
|
)
|
|
(5,213
|
)
|
|
(15,453
|
)
|
|
(15,638
|
)
|
||||
Net periodic benefit cost
|
|
15,542
|
|
|
27,523
|
|
|
46,812
|
|
|
82,795
|
|
||||
Special termination benefit cost / curtailment
|
|
—
|
|
|
—
|
|
|
1,673
|
|
|
—
|
|
||||
Net periodic benefit cost
|
|
$
|
15,542
|
|
|
$
|
27,523
|
|
|
$
|
48,485
|
|
|
$
|
82,795
|
|
|
|
Other Postretirement Benefits
|
||||||||||||||
|
|
Quarter Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
October 2, 2016
|
|
October 4, 2015
|
||||||||
Service cost
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
|
841
|
|
|
1,126
|
|
|
2,523
|
|
|
3,446
|
|
||||
Expected return on plan assets
|
|
(780
|
)
|
|
(922
|
)
|
|
(2,405
|
)
|
|
(2,732
|
)
|
||||
Amortization of unrecognized net loss
|
|
364
|
|
|
495
|
|
|
1,091
|
|
|
1,393
|
|
||||
Amortization of unrecognized prior service cost
|
|
(1,291
|
)
|
|
(1,813
|
)
|
|
(3,871
|
)
|
|
(5,706
|
)
|
||||
Net periodic benefit income
|
|
$
|
(866
|
)
|
|
$
|
(1,113
|
)
|
|
$
|
(2,661
|
)
|
|
$
|
(3,598
|
)
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||||||||||
|
|
Liability
|
|
Receivable
|
|
Liability
|
|
Receivable
|
||||||||
Amounts (payable) receivable
|
|
$
|
(43,939
|
)
|
|
$
|
19,762
|
|
|
$
|
(41,824
|
)
|
|
$
|
18,236
|
|
Unamortized discount
|
|
524
|
|
|
(179
|
)
|
|
1,718
|
|
|
(568
|
)
|
||||
Present value amounts (payable) receivable
|
|
$
|
(43,415
|
)
|
|
$
|
19,583
|
|
|
$
|
(40,106
|
)
|
|
$
|
17,668
|
|
•
|
Flight Systems Group develops rockets that are used as small- and medium-class space launch vehicles to place satellites into Earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, mi
|
•
|
Defense Systems Group develops and produces small-, medium-, and large-caliber ammunition, precision weapons and munitions, high performance gun systems, and propellant and energetic materials. It operates the Lake City Army Ammunition Plant in Independence, Missouri ("LCAAP") and a Naval Sea Systems Command ("NAVSEA") facility in Rocket Center, West Virginia. Defense Systems Group is also a leader in tactical solid rocket motor development and production for a variety of air-, sea- and land-based missile systems. The group serves a variety of domestic and international customers in the defense and security markets in a prime contractor, partner or supplier role. Defense Systems Group also provides propulsion control systems that support Missile Defense Agency and NASA programs, airborne missile warning systems, advanced fuzes and defense electronics. The group produces the U.S. Navy's Advanced Anti-Radiation Guided Missile ("AARGM") and has developed advanced air-breathing propulsion systems and special-mission aircraft for defense applications.
|
•
|
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for Earth-orbit and deep-space exploration, including delivering cargo to the International Space Station. This Group is also a provider of spacecraft components and subsystems and specialized engineering and operations services to U.S. Government agencies.
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
October 2, 2016
|
|
October 4, 2015
|
||||||||
|
|
|
|
(As Restated)
|
|
|
|
|
||||||||
Sales to external customers:
|
|
|
|
|
|
|
|
|
||||||||
Flight Systems Group
|
|
$
|
360,531
|
|
|
$
|
356,131
|
|
|
$
|
1,081,513
|
|
|
$
|
1,040,076
|
|
Defense Systems Group
|
|
451,286
|
|
|
440,749
|
|
|
1,326,076
|
|
|
1,355,703
|
|
||||
Space Systems Group
|
|
231,885
|
|
|
346,366
|
|
|
775,853
|
|
|
822,195
|
|
||||
Total external sales
|
|
1,043,702
|
|
|
1,143,246
|
|
|
3,183,442
|
|
|
3,217,974
|
|
||||
Intercompany sales:
|
|
|
|
|
|
|
|
|
||||||||
Flight Systems Group
|
|
2,463
|
|
|
7,173
|
|
|
9,542
|
|
|
42,041
|
|
||||
Defense Systems Group
|
|
4,668
|
|
|
1,488
|
|
|
14,396
|
|
|
18,892
|
|
||||
Space Systems Group
|
|
16,661
|
|
|
5,021
|
|
|
37,497
|
|
|
14,532
|
|
||||
Corporate
|
|
(23,792
|
)
|
|
(13,682
|
)
|
|
(61,435
|
)
|
|
(75,465
|
)
|
||||
Total intercompany sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total sales
|
|
$
|
1,043,702
|
|
|
$
|
1,143,246
|
|
|
$
|
3,183,442
|
|
|
$
|
3,217,974
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, before interest, income taxes and noncontrolling interest:
|
|
|
|
|
|
|
|
|
||||||||
Flight Systems Group
|
|
$
|
43,886
|
|
|
$
|
94,015
|
|
|
$
|
151,454
|
|
|
$
|
186,247
|
|
Defense Systems Group
|
|
33,066
|
|
|
34,299
|
|
|
126,437
|
|
|
130,778
|
|
||||
Space Systems Group
|
|
19,347
|
|
|
20,986
|
|
|
95,766
|
|
|
30,293
|
|
||||
Corporate
|
|
(5,323
|
)
|
|
(12,490
|
)
|
|
(14,657
|
)
|
|
(105,356
|
)
|
||||
Total income from continuing operations, before interest, income taxes and noncontrolling interest
|
|
$
|
90,976
|
|
|
$
|
136,810
|
|
|
$
|
359,000
|
|
|
$
|
241,962
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Total assets:
|
|
|
|
|
||||
Flight Systems Group
|
|
$
|
2,307,885
|
|
|
$
|
2,223,787
|
|
Defense Systems Group
|
|
1,287,290
|
|
|
1,184,071
|
|
||
Space Systems Group
|
|
1,242,167
|
|
|
1,272,425
|
|
||
Corporate
|
|
528,750
|
|
|
643,412
|
|
||
Total assets
|
|
$
|
5,366,092
|
|
|
$
|
5,323,695
|
|
•
|
the effect of the Restatement of our previously issued financial results, and any actual or unasserted claims, investigations or proceedings as a result of the Restatement,
|
•
|
our ability to remediate the material weaknesses in our internal controls over financial reporting described in Part I, Item 4, Controls and Procedures, of this Form 10-Q,
|
•
|
reductions or changes in NASA or U.S. Government military spending, timing of payments and budgetary policies, including impacts of sequestration under the Budget Control Act of 2011 and sourcing strategies,
|
•
|
intense competition for U.S. Government contracts and programs,
|
•
|
increases in costs, which the Company may not be able to react to due to the nature of its U.S. Government contracts,
|
•
|
changes in cost and revenue estimates and/or timing of programs,
|
•
|
potential termination of U.S. Government contracts and the potential inability to recover termination costs,
|
•
|
other risks associated with U.S. Government contracts that might expose the Company to adverse consequences,
|
•
|
government laws and other rules and regulations applicable to the Company, including procurement and import-export control,
|
•
|
reduction or change in demand and manufacturing costs for military and commercial ammunition,
|
•
|
the manufacture and sale of products that create exposure to potential product liability, warranty liability or personal injury claims and litigation,
|
•
|
risks associated with expansion into new and adjacent commercial markets,
|
•
|
results of the Merger or other acquisitions or transactions, including our ability to successfully integrate acquired businesses and realize anticipated synergies, cost savings and other benefits, and costs incurred for pursuits and proposed acquisitions,
|
•
|
greater risk associated with international business, including foreign currency exchange rates and fluctuations in those rates,
|
•
|
federal and state regulation of defense products and ammunition,
|
•
|
costs of servicing the Company's debt, including cash requirements and interest rate fluctuations,
|
•
|
actual pension and other postretirement plan asset returns and assumptions regarding future returns, discount rates, service costs, mortality rates and health care cost trend rates,
|
•
|
security threats, including cyber-security and other industrial and physical security threats, and other disruptions,
|
•
|
supply, availability and costs of raw materials and components, including commodity price fluctuations,
|
•
|
performance of the Company's subcontractors,
|
•
|
development of key technologies and retention of a qualified workforce,
|
•
|
performance of our products,
|
•
|
fires or explosions at any of the Company's facilities,
|
•
|
government investigations and audits,
|
•
|
environmental laws that govern current and past practices and rules and regulations, noncompliance with which may expose the Company to adverse consequences,
|
•
|
impacts of financial market disruptions or volatility to the Company's customers and vendors,
|
•
|
unanticipated changes in income taxes or exposure to additional tax liabilities, and
|
•
|
costs and ultimate outcome of litigation matters, government investigations and other legal proceedings.
|
•
|
Flight Systems Group develops rockets that are used as small- and medium-class space launch vehicles to place satellites into Earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. In addition, the division produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.
|
•
|
Defense Systems Group develops and produces small-, medium-, and large-caliber military ammunition, propulsion systems for tactical missiles and missile defense applications, strike weapons, precision weapons and munitions, high-performance gun systems, aircraft survivability systems, fuzes and warheads, energetic materials and special mission aircraft.
|
•
|
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for Earth-orbit and deep-space exploration, including cargo delivery to the International Space Station. This group is also a provider of spacecraft components and subsystems and specialized engineering and operations services to U.S. government agencies.
|
•
|
Quarterly sales of
$1.04 billion
.
|
•
|
Diluted earnings per share of
$1.04
.
|
•
|
New firm and option contract bookings of
$1.7 billion
and option exercises of $0.3 billion under existing contracts.
|
•
|
Total backlog of
$14.7 billion
, at October 2, 2016.
|
•
|
Income from continuing operations, before interest, income taxes and noncontrolling interest as a percentage of sales of
8.7%
.
|
•
|
Effective income tax rate of
18.0%
.
|
•
|
Paid quarterly dividend of $0.30 on September 22, 2016 to stockholders of record on September 7, 2016.
|
•
|
Repurchased
576,407
shares for $43,800.
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
|
Percent Change
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
|
Percent Change
|
||||||||||||||
|
|
|
|
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Flight Systems Group
|
|
$
|
362,994
|
|
|
$
|
363,304
|
|
|
$
|
(310
|
)
|
|
(0.1
|
)
|
|
$
|
1,091,055
|
|
|
$
|
1,082,117
|
|
|
$
|
8,938
|
|
|
0.8
|
%
|
Defense Systems Group
|
|
455,954
|
|
|
442,237
|
|
|
13,717
|
|
|
3.1
|
%
|
|
1,340,472
|
|
|
1,374,595
|
|
|
(34,123
|
)
|
|
(2.5
|
)%
|
||||||
Space Systems Group
|
|
248,546
|
|
|
351,387
|
|
|
(102,841
|
)
|
|
(29.3
|
)%
|
|
813,350
|
|
|
836,727
|
|
|
(23,377
|
)
|
|
(2.8
|
)%
|
||||||
Corporate/Eliminations
|
|
(23,792
|
)
|
|
(13,682
|
)
|
|
(10,110
|
)
|
|
(73.9
|
)%
|
|
(61,435
|
)
|
|
(75,465
|
)
|
|
14,030
|
|
|
18.6
|
%
|
||||||
Total sales
|
|
$
|
1,043,702
|
|
|
$
|
1,143,246
|
|
|
$
|
(99,544
|
)
|
|
(8.7
|
)%
|
|
$
|
3,183,442
|
|
|
$
|
3,217,974
|
|
|
$
|
(34,532
|
)
|
|
(1.1
|
)%
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
|
Percent Change
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
|
Percent Change
|
||||||||||||||
|
|
|
|
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Flight Systems Group
|
|
$
|
278,045
|
|
|
$
|
279,005
|
|
|
$
|
(960
|
)
|
|
(0.3
|
)%
|
|
$
|
812,889
|
|
|
$
|
824,336
|
|
|
$
|
(11,447
|
)
|
|
(1.4
|
)%
|
Defense Systems Group
|
|
379,696
|
|
|
366,130
|
|
|
13,566
|
|
|
3.7
|
%
|
|
1,087,106
|
|
|
1,111,785
|
|
|
(24,679
|
)
|
|
(2.2
|
)%
|
||||||
Space Systems Group
|
|
207,751
|
|
|
299,664
|
|
|
(91,913
|
)
|
|
(30.7
|
)%
|
|
647,838
|
|
|
693,498
|
|
|
(45,660
|
)
|
|
(6.6
|
)%
|
||||||
Corporate/Eliminations
|
|
(32,089
|
)
|
|
(10,370
|
)
|
|
(21,719
|
)
|
|
(209.4
|
)%
|
|
(81,337
|
)
|
|
(66,596
|
)
|
|
(14,741
|
)
|
|
(22.1
|
)%
|
||||||
Total cost of sales
|
|
$
|
833,403
|
|
|
$
|
934,429
|
|
|
$
|
(101,026
|
)
|
|
(10.8
|
)%
|
|
$
|
2,466,496
|
|
|
$
|
2,563,023
|
|
|
$
|
(96,527
|
)
|
|
(3.8
|
)%
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||||||
|
|
October 2, 2016
|
|
Percent of Sales
|
|
October 4, 2015
|
|
Percent of Sales
|
|
Change
|
|
October 2, 2016
|
|
Percent of Sales
|
|
October 4, 2015
|
|
Percent of Sales
|
|
Change
|
||||||||||||||||
|
|
|
|
|
|
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Research and development
|
|
$
|
24,887
|
|
|
2.4
|
%
|
|
$
|
28,666
|
|
|
2.5
|
%
|
|
$
|
(3,779
|
)
|
|
$
|
80,418
|
|
|
2.5
|
%
|
|
$
|
78,698
|
|
|
2.4
|
%
|
|
$
|
1,720
|
|
Selling
|
|
28,099
|
|
|
2.7
|
%
|
|
28,137
|
|
|
2.5
|
%
|
|
(38
|
)
|
|
82,140
|
|
|
2.6
|
%
|
|
81,549
|
|
|
2.5
|
%
|
|
591
|
|
||||||
General and administrative
|
|
66,337
|
|
|
6.4
|
%
|
|
65,204
|
|
|
5.7
|
%
|
|
1,133
|
|
|
195,388
|
|
|
6.1
|
%
|
|
268,442
|
|
|
8.3
|
%
|
|
(73,054
|
)
|
||||||
Goodwill impairment
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
34,300
|
|
|
1.1
|
%
|
|
(34,300
|
)
|
||||||
Total operating expenses
|
|
$
|
119,323
|
|
|
11.5
|
%
|
|
$
|
122,007
|
|
|
10.7
|
%
|
|
$
|
(2,684
|
)
|
|
$
|
357,946
|
|
|
11.2
|
%
|
|
$
|
462,989
|
|
|
14.3
|
%
|
|
$
|
(105,043
|
)
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
|
October 2, 2016
|
|
October 4, 2015
|
|
Change
|
||||||||||||
|
|
|
|
(
As Restated
)
|
|
|
|
|
|
|
|
|
|
|||||||||||
Flight Systems Group
|
|
$
|
43,886
|
|
|
$
|
94,015
|
|
|
$
|
(50,129
|
)
|
|
$
|
151,454
|
|
|
$
|
186,247
|
|
|
$
|
(34,793
|
)
|
Defense Systems Group
|
|
33,066
|
|
|
34,299
|
|
|
(1,233
|
)
|
|
126,437
|
|
|
130,778
|
|
|
(4,341
|
)
|
||||||
Space Systems Group
|
|
19,347
|
|
|
20,986
|
|
|
(1,639
|
)
|
|
95,766
|
|
|
30,293
|
|
|
65,473
|
|
||||||
Corporate/Eliminations
|
|
(5,323
|
)
|
|
(12,490
|
)
|
|
7,167
|
|
|
(14,657
|
)
|
|
(105,356
|
)
|
|
90,699
|
|
||||||
Total
|
|
$
|
90,976
|
|
|
$
|
136,810
|
|
|
$
|
(45,834
|
)
|
|
$
|
359,000
|
|
|
$
|
241,962
|
|
|
$
|
117,038
|
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||||||
|
|
October 2, 2016
|
|
Effective Rate
|
|
October 4, 2015
|
|
Effective Rate
|
|
Change
|
|
October 2, 2016
|
|
Effective Rate
|
|
October 4, 2015
|
|
Effective Rate
|
|
Change
|
||||||||||||||||
|
|
|
|
|
|
(
As Restated
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Income taxes
|
|
$
|
13,181
|
|
|
18.0
|
%
|
|
$
|
37,980
|
|
|
33.9
|
%
|
|
$
|
(24,799
|
)
|
|
$
|
79,765
|
|
|
25.9
|
%
|
|
$
|
61,563
|
|
|
39.9
|
%
|
|
$
|
18,202
|
|
|
|
Nine Months Ended
|
||||||
|
|
October 2, 2016
|
|
October 4, 2015
|
||||
Cash provided by operating activities of continuing operations
|
|
$
|
106,612
|
|
|
$
|
276,381
|
|
Cash (used in) provided by investing activities of continuing operations
|
|
(105,535
|
)
|
|
337,990
|
|
||
Cash used in financing activities of continuing operations
|
|
(42,098
|
)
|
|
(671,654
|
)
|
||
Net cash flows from continuing operations
|
|
$
|
(41,021
|
)
|
|
$
|
(57,283
|
)
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||
Senior Credit Facility:
|
|
|
|
|
||||
Term Loan A due 2020
|
|
$
|
760,000
|
|
|
$
|
790,000
|
|
Revolving Credit Facility due 2020
|
|
135,000
|
|
|
—
|
|
||
5.25% Senior Notes due 2021
|
|
300,000
|
|
|
300,000
|
|
||
5.50% Senior Notes due 2023
|
|
400,000
|
|
|
400,000
|
|
||
Principal amount of long-term debt
|
|
1,595,000
|
|
|
1,490,000
|
|
||
Unamortized debt issuance costs:
|
|
|
|
|
||||
Senior Credit Facility
|
|
5,318
|
|
|
6,302
|
|
||
5.25% Senior Notes due 2021
|
|
1,668
|
|
|
1,915
|
|
||
5.50% Senior Notes due 2023
|
|
5,372
|
|
|
5,947
|
|
||
Unamortized debt issuance costs
|
|
12,358
|
|
|
14,164
|
|
||
Long-term debt less unamortized debt issuance costs
|
|
1,582,642
|
|
|
1,475,836
|
|
||
Less: Current portion of long-term debt
|
|
40,000
|
|
|
40,000
|
|
||
Long-term debt
|
|
$
|
1,542,642
|
|
|
$
|
1,435,836
|
|
|
|
Total Leverage Ratio
(1)
|
|
Interest Coverage Ratio
(2)
|
||
Requirement
|
|
4.00
|
|
|
3.00
|
|
Actual at October 2, 2016
|
|
2.46
|
|
|
15.08
|
|
|
|
October 2, 2016
|
|
December 31, 2015
|
||||||||||||
|
|
Liability
|
|
Receivable
|
|
Liability
|
|
Receivable
|
||||||||
Amounts (payable) receivable
|
|
$
|
(43,939
|
)
|
|
$
|
19,762
|
|
|
$
|
(41,824
|
)
|
|
$
|
18,236
|
|
Unamortized discount
|
|
524
|
|
|
(179
|
)
|
|
1,718
|
|
|
(568
|
)
|
||||
Present value amounts (payable) receivable
|
|
$
|
(43,415
|
)
|
|
$
|
19,583
|
|
|
$
|
(40,106
|
)
|
|
$
|
17,668
|
|
•
|
We evaluated our accounting organization and augmented our team with additional professionals with the appropriate levels of accounting and controls knowledge, experience and training. Our evaluation included benchmarking key accounting functions and resulted in the identification of a number of areas where the team needed to be augmented. As a result of this evaluation in the second and third quarters of fiscal 2016, we hired 11 additional accounting and controls professionals in key areas of technical accounting, general accounting oversight, business unit accounting, external reporting and controls. Each of these 11 new professionals is a CPA and 9 of the 11 have experience with a “Big 4” accounting firm. We will continue to evaluate our accounting organization and augment the team as appropriate.
|
•
|
We revised our accounting policy for loss contracts to include general and administrative costs in the measurement of loss contracts.
|
•
|
We designed an enterprise-wide process to timely identify, track and appropriately resolve and conclude on complex transactions and disclosures during the quarter ended October 2, 2016.
|
•
|
Certain Small Caliber Systems Division personnel responsible for the inappropriate behaviors described under “Internal Investigation” above are no longer employed by the Company. In addition, certain members of the Defense Systems Group leadership will receive appropriate training, adverse compensation action and additional supervision.
|
•
|
Additional accounting, controls and financial reporting personnel have been added to the Small Caliber Systems Division to take responsibility for its financial data forming part of the basis for preparation of these consolidated financial statements.
|
•
|
We are increasing communication and training to employees regarding internal control over financial reporting, disclosure controls and procedures, and emphasizing the importance of adherence to our policies and procedures.
|
•
|
We redesigned, developed and implemented processes and controls over the execution of purchase accounting.
|
•
|
We revised our account reconciliation policy and controls, including the timing of reconciliations, thresholds for review and the process for resolving reconciling items during the quarter ended October 2, 2016. We continue to monitor the reconciliation control execution and will make further changes as necessary. In addition, we implemented an enhanced company-wide balance sheet review process during the quarter ended October 2, 2016 to perform a more detailed analysis of accounts, including balance composition, fluctuation and trend analysis, which is performed at a segment level.
|
•
|
We completed a detailed review of the Lake City Contract and the underlying estimates for its percentage-of-completion revenue recognition accounting model and developed extensive analysis and procedures to develop our management estimates going forward.
|
•
|
We are designing and implementing enhancements to the internal controls related to the reconciliation and analysis of unbilled accounts receivable.
|
Period
|
Total Number
of Shares
Purchased
(1)
|
|
Average
Price Paid
per Share
|
|
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Program
(2)
|
|
Maximum
Number of
Shares that
May Yet Be
Purchased Under
the Program
(3)
|
|||||
July 4 - July 31
|
99,188
|
|
|
$
|
86.05
|
|
|
54,584
|
|
|
|
|
August 1 - August 28
|
198,775
|
|
|
74.31
|
|
|
198,569
|
|
|
|
|
|
August 29 - October 2
|
323,782
|
|
|
75.29
|
|
|
323,254
|
|
|
|
|
|
Quarter ended October 2, 2016
|
621,745
|
|
|
76.69
|
|
|
576,407
|
|
|
1,130,966
|
|
(1)
|
The
621,745
shares purchased include shares purchased during the quarter and shares withheld to pay taxes upon vesting of shares of restricted stock and restricted stock units or payment of performance shares that were granted under our incentive compensation plans.
|
(2)
|
During 2015, the Board approved a stock repurchase program that authorized the repurchase of up to the lesser of
$250 million
or
3.25 million
shares through December 31, 2016. We repurchased
576,407
shares for
$43,750
during the quarter ended October 2, 2016.
|
(3)
|
The maximum number of shares that may yet be purchased under the program was calculated using the Orbital ATK closing stock price of
$76.23
on September 30, 2016.
|
Exhibit
Number
|
|
Description of Exhibit (and document from which incorporated by reference, if applicable)
|
|
|
|
3(i).1
|
|
Restated Certificate of Incorporation of the Registrant, effective August 3, 2016.
|
|
|
|
3(i).2
|
|
Certificate of Elimination of Series A Junior Participating Preferred Stock of the Registrant dated August 3, 2016 (Exhibit 3.1 to Form 8-K dated August 3, 2016).
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer.
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer.
|
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
ORBITAL ATK, INC.
|
||||
April 7, 2017
|
By:
|
|
/s/ David W. Thompson
|
||
|
Name:
|
|
David W. Thompson
|
||
|
Title:
|
|
President and Chief Executive Officer
|
||
|
|
|
(
duly authorized and principal executive officer)
|
||
|
|
|
|
April 7, 2017
|
By:
|
|
/s/ Garrett E. Pierce
|
||
|
Name:
|
|
Garrett E. Pierce
|
||
|
Title:
|
|
Chief Financial Officer
|
||
|
|
|
(principal financial officer)
|
||
|
|
|
|
I, David W. Thompson, certify that:
|
||
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Orbital ATK, Inc.;
|
|
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
|
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
April 7, 2017
|
By:
|
|
/s/ David W. Thompson
|
|
Name:
|
|
David W. Thompson
|
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
|
I, Garrett E. Pierce, certify that:
|
||
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Orbital ATK, Inc.;
|
|
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
|
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
April 7, 2017
|
By:
|
|
/s/ Garrett E. Pierce
|
|
Name:
|
|
Garrett E. Pierce
|
|
Title:
|
|
Chief Financial Officer
|
|
|
|
|
(1)
|
the Quarterly Report on Form 10-Q for the period ended
October 2, 2016
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
April 7, 2017
|
By:
|
|
/s/ David W. Thompson
|
|
Name:
|
|
David W. Thompson
|
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Garrett E. Pierce
|
|
Name:
|
|
Garrett E. Pierce
|
|
Title:
|
|
Chief Financial Officer
|
|
|
|
|