|
x
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|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended April 1, 2018
|
||
|
||
OR
|
||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
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For the transition period from to
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Delaware
(State or other jurisdiction of
incorporation or organization)
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|
41-1672694
(I.R.S. Employer
Identification No.)
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45101 Warp Drive
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|
Dulles, Virginia
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|
20166
|
(Address of principal executive offices)
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(Zip Code)
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|||||||||
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Large accelerated filer
|
x
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Accelerated filer
|
|
|
|
|
|
|
|
|
|
|
|
|
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Non-accelerated filer
|
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(Do not check if a smaller reporting company)
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|
Smaller reporting company
|
|
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||
|
|
|
|
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|
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Emerging growth company
|
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(Amounts in millions, except share data)
|
April 1, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
59
|
|
|
$
|
346
|
|
Accounts receivable, net
|
338
|
|
|
250
|
|
||
Unbilled receivables, net
|
1,364
|
|
|
1,643
|
|
||
Net inventories
|
248
|
|
|
221
|
|
||
Other current assets
|
173
|
|
|
82
|
|
||
Total current assets
|
2,182
|
|
|
2,542
|
|
||
Property, plant and equipment, net of accumulated depreciation of $1,247 at April 1, 2018 and $1,219 at December 31, 2017
|
967
|
|
|
934
|
|
||
Goodwill
|
1,832
|
|
|
1,832
|
|
||
Net intangibles
|
54
|
|
|
61
|
|
||
Deferred income taxes
|
222
|
|
|
155
|
|
||
Other noncurrent assets
|
128
|
|
|
142
|
|
||
Total assets
|
$
|
5,385
|
|
|
$
|
5,666
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt
|
$
|
40
|
|
|
$
|
40
|
|
Accounts payable
|
173
|
|
|
216
|
|
||
Contract loss reserve
|
145
|
|
|
152
|
|
||
Contract advances
|
271
|
|
|
330
|
|
||
Accrued compensation
|
100
|
|
|
137
|
|
||
Other current liabilities
|
573
|
|
|
585
|
|
||
Total current liabilities
|
1,302
|
|
|
1,460
|
|
||
Long-term debt
|
1,411
|
|
|
1,361
|
|
||
Pension and postemployment benefits
|
678
|
|
|
693
|
|
||
Other noncurrent liabilities
|
109
|
|
|
107
|
|
||
Total liabilities
|
3,500
|
|
|
3,621
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
||||
Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding—57,828,214 shares at April 1, 2018 and 57,686,214 shares at December 31, 2017
|
1
|
|
|
1
|
|
||
Additional paid-in-capital
|
2,163
|
|
|
2,175
|
|
||
Retained earnings
|
1,335
|
|
|
1,502
|
|
||
Accumulated other comprehensive loss
|
(768
|
)
|
|
(780
|
)
|
||
Common stock in treasury, at cost—11,106,810 shares held at April 1, 2018 and 11,248,810 shares held at December 31, 2017
|
(857
|
)
|
|
(864
|
)
|
||
Total Orbital ATK, Inc. stockholders' equity
|
1,874
|
|
|
2,034
|
|
||
Noncontrolling interest
|
11
|
|
|
11
|
|
||
Total equity
|
1,885
|
|
|
2,045
|
|
||
Total liabilities and equity
|
$
|
5,385
|
|
|
$
|
5,666
|
|
|
|
Quarters Ended
|
||||||
(Amounts in millions except per share data)
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Sales
|
|
$
|
1,312
|
|
|
$
|
1,085
|
|
Cost of sales
|
|
1,022
|
|
|
846
|
|
||
Gross profit
|
|
290
|
|
|
239
|
|
||
Operating expenses:
|
|
|
|
|
||||
Research and development
|
|
34
|
|
|
22
|
|
||
Selling
|
|
28
|
|
|
28
|
|
||
General and administrative
|
|
74
|
|
|
68
|
|
||
Operating Income
|
|
154
|
|
|
121
|
|
||
Other Expense:
|
|
|
|
|
||||
Net interest expense
|
|
(17
|
)
|
|
(17
|
)
|
||
Non-service pension and other postretirement benefit expense
|
|
(15
|
)
|
|
(10
|
)
|
||
Income before income taxes and noncontrolling interest
|
|
122
|
|
|
94
|
|
||
Income taxes
|
|
21
|
|
|
28
|
|
||
Income before noncontrolling interest
|
|
101
|
|
|
66
|
|
||
Less net income attributable to noncontrolling interest
|
|
—
|
|
|
—
|
|
||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
101
|
|
|
$
|
66
|
|
|
|
|
|
|
||||
Basic earnings per common share from:
|
|
|
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.76
|
|
|
$
|
1.16
|
|
Weighted-average number of common shares outstanding
|
|
57
|
|
|
57
|
|
||
Diluted earnings per common share from:
|
|
|
|
|
||||
Net income attributable to Orbital ATK, Inc.
|
|
$
|
1.74
|
|
|
$
|
1.15
|
|
Weighted-average number of diluted common shares outstanding
|
|
58
|
|
|
58
|
|
||
Cash dividends per common share
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
|
|
Quarters Ended
|
||||||
(Amounts in millions)
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Net income
|
|
$
|
101
|
|
|
$
|
66
|
|
Other comprehensive income:
|
|
|
|
|
||||
Pension and other postretirement benefits:
|
|
|
|
|
||||
Prior service credits for pension and postretirement benefit plans recorded to net income, net of taxes of $1 and $3, respectively
|
|
(5
|
)
|
|
(4
|
)
|
||
Net actuarial loss for pension and postretirement benefit plans recorded to net income, net of taxes of $(9) and $(12), respectively
|
|
28
|
|
|
20
|
|
||
Change in derivatives, net of taxes of $4 and $0, respectively
|
|
(11
|
)
|
|
(2
|
)
|
||
Other comprehensive income, net of tax
|
|
12
|
|
|
14
|
|
||
Comprehensive income attributable to Orbital ATK, Inc.
|
|
$
|
113
|
|
|
$
|
80
|
|
|
|
Quarters Ended
|
||||||
(Amounts in millions)
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
101
|
|
|
$
|
66
|
|
Adjustments to reconcile net income to cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
36
|
|
|
42
|
|
||
Fixed asset impairment
|
|
3
|
|
|
—
|
|
||
Deferred income taxes
|
|
9
|
|
|
6
|
|
||
Stock-based plans expense
|
|
6
|
|
|
5
|
|
||
Other
|
|
4
|
|
|
(2
|
)
|
||
Change in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable, net
|
|
(89
|
)
|
|
(45
|
)
|
||
Unbilled receivables, net
|
|
(203
|
)
|
|
(129
|
)
|
||
Net inventories
|
|
12
|
|
|
(26
|
)
|
||
Accounts payable
|
|
(37
|
)
|
|
21
|
|
||
Contract loss reserve
|
|
(4
|
)
|
|
(14
|
)
|
||
Contract advances
|
|
(65
|
)
|
|
61
|
|
||
Accrued compensation
|
|
(38
|
)
|
|
31
|
|
||
Pension and postemployment benefits
|
|
17
|
|
|
12
|
|
||
Other assets and liabilities
|
|
11
|
|
|
(63
|
)
|
||
Cash flows used in operating activities
|
|
(237
|
)
|
|
(35
|
)
|
||
Investing Activities
|
|
|
|
|
||||
Capital expenditures
|
|
(71
|
)
|
|
(43
|
)
|
||
Cash flows used in investing activities
|
|
(71
|
)
|
|
(43
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Borrowings on revolving credit facilities
|
|
155
|
|
|
180
|
|
||
Payments on revolving credit facilities
|
|
(95
|
)
|
|
(105
|
)
|
||
Payment of long-term debt
|
|
(10
|
)
|
|
(10
|
)
|
||
Purchase of treasury shares
|
|
(11
|
)
|
|
(6
|
)
|
||
Dividends paid
|
|
(18
|
)
|
|
(18
|
)
|
||
Proceeds from employee stock compensation plans
|
|
—
|
|
|
4
|
|
||
Cash flows provided by financing activities
|
|
21
|
|
|
45
|
|
||
Decrease in cash and cash equivalents
|
|
(287
|
)
|
|
(33
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
346
|
|
|
200
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
59
|
|
|
$
|
167
|
|
|
|
|
|
|
||||
Supplemental Cash Flow Disclosures
|
|
|
|
|
||||
Noncash investing activity:
|
|
|
|
|
||||
Capital expenditures included in accounts payable
|
|
$
|
6
|
|
|
$
|
1
|
|
|
|
|
|
|
|
Balance at
December 31, 2017
|
|
Adjustments due to ASC 606 adoption
|
|
Balance at
January 1, 2018
|
||||||
Assets
|
|
|
|
|
|
||||||
Unbilled receivables, net
|
$
|
1,643
|
|
|
$
|
(482
|
)
|
|
$
|
1,161
|
|
Net inventories
|
$
|
221
|
|
|
$
|
42
|
|
|
$
|
263
|
|
Other current assets
|
$
|
82
|
|
|
$
|
121
|
|
|
$
|
203
|
|
Deferred income taxes
|
$
|
155
|
|
|
$
|
80
|
|
|
$
|
235
|
|
Other noncurrent assets
|
$
|
142
|
|
|
$
|
(12
|
)
|
|
$
|
130
|
|
Liabilities
|
|
|
|
|
|
||||||
Contract loss reserve
|
$
|
152
|
|
|
$
|
(2
|
)
|
|
$
|
150
|
|
Equity
|
|
|
|
|
|
||||||
Retained earnings
|
$
|
1,502
|
|
|
$
|
(249
|
)
|
|
$
|
1,253
|
|
|
Quarter ended April 1, 2018
|
||||||||||
|
As Reported
|
|
Balances without adoption of ASC 606
|
|
Effect of Change
|
||||||
Higher/(Lower)
|
|||||||||||
Income statement
|
|
|
|
|
|
||||||
Sales
|
$
|
1,312
|
|
|
$
|
1,278
|
|
|
$
|
34
|
|
Cost of sales
|
$
|
1,022
|
|
|
$
|
992
|
|
|
$
|
30
|
|
Income taxes
|
$
|
21
|
|
|
$
|
20
|
|
|
$
|
1
|
|
Net income
|
$
|
101
|
|
|
$
|
98
|
|
|
$
|
3
|
|
Diluted EPS
|
$
|
1.74
|
|
|
$
|
1.68
|
|
|
$
|
0.06
|
|
|
April 1, 2018
|
||||||||||
|
|
|
Balances without adoption of ASC 606
|
|
Effect of Change
|
||||||
As Reported
|
Higher/(Lower)
|
||||||||||
Balance Sheet
|
|
|
|
|
|
||||||
Assets
|
|
|
|
|
|
||||||
Unbilled receivables, net
|
$
|
1,364
|
|
|
$
|
1,820
|
|
|
$
|
(456
|
)
|
Net inventories
|
$
|
248
|
|
|
$
|
229
|
|
|
$
|
19
|
|
Other current assets
|
$
|
173
|
|
|
$
|
59
|
|
|
$
|
114
|
|
Deferred income taxes
|
$
|
222
|
|
|
$
|
142
|
|
|
$
|
80
|
|
Other noncurrent assets
|
$
|
128
|
|
|
$
|
139
|
|
|
$
|
(11
|
)
|
Liabilities
|
|
|
|
|
|
||||||
Contract loss reserve
|
$
|
145
|
|
|
$
|
147
|
|
|
$
|
(2
|
)
|
Other current liabilities
|
$
|
573
|
|
|
$
|
572
|
|
|
$
|
1
|
|
Equity
|
|
|
|
|
|
||||||
Retained earnings
|
$
|
1,335
|
|
|
$
|
1,588
|
|
|
$
|
(253
|
)
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||||||||||
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
Fixed-rate debt
|
|
$
|
700
|
|
|
$
|
727
|
|
|
$
|
700
|
|
|
$
|
732
|
|
Variable-rate debt
|
|
$
|
760
|
|
|
$
|
756
|
|
|
$
|
710
|
|
|
$
|
706
|
|
|
|
Notional
|
|
Fair Value
|
|
Pay Fixed
|
|
Receive Floating
|
|
Maturity Date
|
||||||
Non-amortizing swap
|
|
$
|
100
|
|
|
$
|
—
|
|
|
1.69
|
%
|
|
1.88
|
%
|
|
August 2018
|
|
|
Number of Pounds
|
|
Copper
|
|
22
|
|
Zinc
|
|
8
|
|
|
|
Quantity Hedged
|
||
Euros sold
|
|
€
|
2
|
|
Euros purchased
|
|
25
|
|
|
|
Asset Derivatives
Fair Value
|
|
Liability Derivatives
Fair Value
|
||||||||||||
|
|
April 1, 2018
|
|
December 31, 2017
|
|
April 1, 2018
|
|
December 31, 2017
|
||||||||
Commodity forward contracts
(1)
|
|
$
|
2
|
|
|
$
|
11
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Foreign currency forward contracts
(1)
|
|
1
|
|
|
2
|
|
|
2
|
|
|
2
|
|
||||
Commodity forward contracts
(2)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Total
|
|
$
|
3
|
|
|
$
|
13
|
|
|
$
|
6
|
|
|
$
|
2
|
|
|
|
|
|
Quarters Ended
|
||||||
|
|
Location
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Commodity forward contracts
|
|
Cost of sales
|
|
$
|
4
|
|
|
$
|
(2
|
)
|
Foreign currency contracts
|
|
Cost of sales
|
|
$
|
1
|
|
|
$
|
—
|
|
|
April 1, 2018
|
|
December 31, 2017
|
|
$ Change
|
|
% Change
|
|||||||
Unbilled receivables, net
|
$
|
1,364
|
|
|
$
|
1,643
|
|
|
$
|
(279
|
)
|
|
(17
|
)%
|
Contract advances
|
(271
|
)
|
|
(330
|
)
|
|
59
|
|
|
(18
|
)%
|
|||
Net contract assets (liabilities)
|
$
|
1,093
|
|
|
$
|
1,313
|
|
|
$
|
(220
|
)
|
|
(17
|
)%
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||
Raw materials
|
|
$
|
144
|
|
|
$
|
89
|
|
Work / contracts in process
|
|
79
|
|
|
113
|
|
||
Finished goods
|
|
25
|
|
|
19
|
|
||
Net inventories
|
|
$
|
248
|
|
|
$
|
221
|
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||
Derivatives
|
|
$
|
(4
|
)
|
|
$
|
7
|
|
Pension and other postretirement benefits
|
|
(766
|
)
|
|
(789
|
)
|
||
Available-for-sale securities
|
|
2
|
|
|
2
|
|
||
Total Accumulated Other Comprehensive Loss
|
|
$
|
(768
|
)
|
|
$
|
(780
|
)
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||
Senior Credit Facility:
|
|
|
|
|
||||
Term Loan A due 2020
|
|
$
|
700
|
|
|
$
|
710
|
|
Revolving Credit Facility due 2020
|
|
60
|
|
|
—
|
|
||
5.25% Senior Notes due 2021
|
|
300
|
|
|
300
|
|
||
5.50% Senior Notes due 2023
|
|
400
|
|
|
400
|
|
||
Principal amount of long-term debt
|
|
1,460
|
|
|
1,410
|
|
||
Unamortized debt issuance costs:
|
|
|
|
|
||||
Senior Credit Facility
|
|
4
|
|
|
4
|
|
||
5.25% Senior Notes due 2021
|
|
1
|
|
|
1
|
|
||
5.50% Senior Notes due 2023
|
|
4
|
|
|
4
|
|
||
Unamortized debt issuance costs
|
|
9
|
|
|
9
|
|
||
Long-term debt less unamortized debt issuance costs
|
|
1,451
|
|
|
1,401
|
|
||
Less: Current portion of long-term debt
|
|
40
|
|
|
40
|
|
||
Long-term debt
|
|
$
|
1,411
|
|
|
$
|
1,361
|
|
Remainder of 2018
|
|
$
|
30
|
|
2019
|
|
40
|
|
|
2020
|
|
690
|
|
|
2021
|
|
300
|
|
|
2022
|
|
—
|
|
|
Thereafter
|
|
400
|
|
|
Total
|
|
$
|
1,460
|
|
|
Quarter Ended April 1, 2018
|
|||||||||||||||||
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
|
Percent of Sales
|
|||||||||
U.S. Government:
|
|
|
|
|
|
|
|
|
|
|||||||||
DoD
(1)
|
$
|
245
|
|
|
$
|
357
|
|
|
$
|
139
|
|
|
$
|
741
|
|
|
56
|
%
|
NASA
(1)
|
135
|
|
|
7
|
|
|
101
|
|
|
243
|
|
|
19
|
%
|
||||
U.S. Government Total
|
380
|
|
|
364
|
|
|
240
|
|
|
984
|
|
|
75
|
%
|
||||
International
|
61
|
|
|
125
|
|
|
28
|
|
|
214
|
|
|
16
|
%
|
||||
U.S. Commercial and Other
|
38
|
|
|
66
|
|
|
10
|
|
|
114
|
|
|
9
|
%
|
||||
Total
|
$
|
479
|
|
|
$
|
555
|
|
|
$
|
278
|
|
|
$
|
1,312
|
|
|
100
|
%
|
|
Quarter Ended April 2, 2017
|
|||||||||||||||||
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
|
Percent of Sales
|
|||||||||
U.S. Government:
|
|
|
|
|
|
|
|
|
|
|||||||||
DoD
|
$
|
189
|
|
|
$
|
280
|
|
|
$
|
94
|
|
|
$
|
563
|
|
|
52
|
%
|
NASA
|
124
|
|
|
6
|
|
|
136
|
|
|
266
|
|
|
25
|
%
|
||||
U.S. Government Total
|
313
|
|
|
286
|
|
|
230
|
|
|
829
|
|
|
77
|
%
|
||||
International
|
28
|
|
|
107
|
|
|
30
|
|
|
165
|
|
|
15
|
%
|
||||
U.S. Commercial and Other
|
27
|
|
|
53
|
|
|
11
|
|
|
91
|
|
|
8
|
%
|
||||
Total
|
$
|
368
|
|
|
$
|
446
|
|
|
$
|
271
|
|
|
$
|
1,085
|
|
|
100
|
%
|
|
Quarter Ended April 1, 2018
|
||||||||||||||
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
||||||||
United States
|
$
|
418
|
|
|
$
|
430
|
|
|
$
|
250
|
|
|
$
|
1,098
|
|
Europe
|
61
|
|
|
14
|
|
|
26
|
|
|
101
|
|
||||
Middle East
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||
Asia/Pacific
|
—
|
|
|
45
|
|
|
1
|
|
|
46
|
|
||||
Other
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Total
|
$
|
479
|
|
|
$
|
555
|
|
|
$
|
278
|
|
|
$
|
1,312
|
|
|
Quarter Ended April 2, 2017
|
||||||||||||||
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
||||||||
United States
|
$
|
340
|
|
|
$
|
339
|
|
|
$
|
241
|
|
|
$
|
920
|
|
Europe
|
28
|
|
|
13
|
|
|
24
|
|
|
65
|
|
||||
Middle East
|
—
|
|
|
72
|
|
|
4
|
|
|
76
|
|
||||
Asia/Pacific
|
—
|
|
|
19
|
|
|
1
|
|
|
20
|
|
||||
Other
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
||||
Total
|
$
|
368
|
|
|
$
|
446
|
|
|
$
|
271
|
|
|
$
|
1,085
|
|
|
Quarter Ended April 1, 2018
|
|||||||||||||||
|
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
||||||||
Fixed-priced Contracts
|
|
$
|
254
|
|
|
$
|
493
|
|
|
$
|
161
|
|
|
$
|
908
|
|
Cost-plus Contracts
|
|
225
|
|
|
62
|
|
|
117
|
|
|
404
|
|
||||
Total
|
|
$
|
479
|
|
|
$
|
555
|
|
|
$
|
278
|
|
|
$
|
1,312
|
|
|
Quarter Ended April 2, 2017
|
|||||||||||||||
|
|
Flight Systems Group
|
|
Defense Systems Group
|
|
Space Systems Group
|
|
Total
|
||||||||
Fixed-priced Contracts
|
|
$
|
202
|
|
|
$
|
396
|
|
|
$
|
186
|
|
|
$
|
784
|
|
Cost-plus Contracts
|
|
166
|
|
|
50
|
|
|
85
|
|
|
301
|
|
||||
Total
|
|
$
|
368
|
|
|
$
|
446
|
|
|
$
|
271
|
|
|
$
|
1,085
|
|
|
|
Quarters Ended
|
|
||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
||||
Service cost
|
|
$
|
4
|
|
|
$
|
4
|
|
|
Interest cost
|
|
24
|
|
|
24
|
|
|
||
Expected return on plan assets
|
|
(40
|
)
|
|
(39
|
)
|
|
||
Amortization of unrecognized net loss
(1)
|
|
37
|
|
|
32
|
|
|
||
Amortization of unrecognized prior service cost
(1)
|
|
(5
|
)
|
|
(5
|
)
|
|
||
Net periodic benefit cost
|
|
$
|
20
|
|
|
$
|
16
|
|
|
|
|
Quarters Ended
|
|
||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
||||
Interest cost
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Expected return on plan assets
|
|
—
|
|
|
(1
|
)
|
|
||
Amortization of unrecognized net loss
(1)
|
|
—
|
|
|
—
|
|
|
||
Amortization of unrecognized prior service cost
(1)
|
|
(1
|
)
|
|
(2
|
)
|
|
||
Net periodic benefit income
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
•
|
up to
41,597
will become payable upon achievement of financial performance goals relating to absolute sales growth and return on investment of capital for the performance period beginning January 1, 2018 and ending December 31, 2020; and
|
•
|
up to
58,506
will become payable upon achievement of financial performance goals relating to absolute sales growth and return on investment of capital for the performance period beginning January 1, 2017 and ending December 31, 2019; and
|
•
|
up to
70,864
will become payable upon achievement of financial performance goals relating to absolute sales growth and return on investment of capital for the performance period beginning January 1, 2016 and ending December 31, 2018.
|
|
|
Quarters Ended
|
|
||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
||
Basic weighted-average number of shares outstanding
|
|
57.53
|
|
|
57.33
|
|
|
Dilutive common share equivalents - share-based equity awards
|
|
0.56
|
|
|
0.45
|
|
|
Diluted weighted-average number of shares outstanding
|
|
58.09
|
|
|
57.78
|
|
|
Anti-dilutive stock options and other stock awards excluded from the calculation of diluted shares
|
|
0.08
|
|
|
0.38
|
|
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||||||||||
|
|
Liability
|
|
Receivable
|
|
Liability
|
|
Receivable
|
||||||||
Current
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
3
|
|
Noncurrent
|
|
27
|
|
|
10
|
|
|
28
|
|
|
10
|
|
||||
Total
|
|
$
|
30
|
|
|
$
|
13
|
|
|
$
|
33
|
|
|
$
|
13
|
|
•
|
Flight Systems Group develops launch vehicles 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. Additionally, Flight Systems Group operates in the military and commercial aircraft and launch structures markets.
|
•
|
Defense Systems Group develops and produces small-, medium- and large-caliber 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.
|
|
|
Quarters Ended
|
|
||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
||||
Sales to external customers:
|
|
|
|
|
|
||||
Flight Systems Group
|
|
$
|
479
|
|
|
$
|
368
|
|
|
Defense Systems Group
|
|
555
|
|
|
446
|
|
|
||
Space Systems Group
|
|
278
|
|
|
271
|
|
|
||
Total external sales
|
|
1,312
|
|
|
1,085
|
|
|
||
Intercompany sales:
|
|
|
|
|
|
||||
Flight Systems Group
|
|
3
|
|
|
3
|
|
|
||
Defense Systems Group
|
|
4
|
|
|
5
|
|
|
||
Space Systems Group
|
|
38
|
|
|
30
|
|
|
||
Corporate
|
|
(45
|
)
|
|
(38
|
)
|
|
||
Total intercompany sales
|
|
—
|
|
|
—
|
|
|
||
Total sales
|
|
$
|
1,312
|
|
|
$
|
1,085
|
|
|
|
|
|
|
|
|
||||
Operating Income:
|
|
|
|
|
|
||||
Flight Systems Group
|
|
$
|
61
|
|
|
$
|
41
|
|
|
Defense Systems Group
|
|
54
|
|
|
42
|
|
|
||
Space Systems Group
|
|
22
|
|
|
27
|
|
|
||
Corporate
|
|
17
|
|
|
11
|
|
|
||
Total Operating Income
|
|
$
|
154
|
|
|
$
|
121
|
|
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||
Total assets:
|
|
|
|
|
||||
Flight Systems Group
|
|
$
|
1,962
|
|
|
$
|
2,262
|
|
Defense Systems Group
|
|
1,480
|
|
|
1,337
|
|
||
Space Systems Group
|
|
1,341
|
|
|
1,256
|
|
||
Corporate
|
|
602
|
|
|
811
|
|
||
Total assets
|
|
$
|
5,385
|
|
|
$
|
5,666
|
|
•
|
the risk that the pending acquisition by Northrop Grumman may not be completed in a timely manner or at all, which may adversely affect our business and the price of our common stock;
|
•
|
the failure to satisfy any of the conditions to the consummation of the pending acquisition, including the receipt of certain governmental and regulatory approvals;
|
•
|
the occurrence of any circumstance that could give rise to the termination of the Merger Agreement;
|
•
|
reductions or changes in programs administered by the National Aeronautics and Space Administration ("NASA") or in U.S. Government military spending, timing of payments and budgetary policies, 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;
|
•
|
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;
|
•
|
the financial condition of the Company's commercial customers and vendors;
|
•
|
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, including as a result of recent tax legislation, the Tax Cuts and Job Acts (the "Tax Act") signed into law in December 2017 and
|
•
|
costs and ultimate outcome of litigation matters, government investigations and other legal proceedings.
|
•
|
Flight Systems Group develops launch vehicles 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. Additionally, Flight Systems Group operates in the military and commercial aircraft and launch structures markets.
|
•
|
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
|
•
|
Quarterly sales of
$1.31 billion
.
|
•
|
Diluted earnings per share of
$1.74
.
|
•
|
New firm and option contract bookings of
$2.0 billion
and option exercises of $1.1 billion under existing contracts.
|
•
|
Total firm and option backlog of
$16.6 billion
, at
April 1, 2018
.
|
•
|
Operating income as a percentage of sales of
11.7%
.
|
•
|
Effective income tax rate of
17.4%
.
|
•
|
Paid quarterly dividend of $0.32 on March 1, 2018, to stockholders of record on February 12, 2018.
|
|
|
Quarters Ended
|
||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Gross favorable adjustments
|
|
$
|
70
|
|
|
$
|
76
|
|
Gross unfavorable adjustments
|
|
(53
|
)
|
|
(67
|
)
|
||
Net adjustments
|
|
$
|
17
|
|
|
$
|
9
|
|
|
|
Quarters Ended
|
|||||||||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
Change
|
|
Percent Change
|
|||||||
Flight Systems Group
|
|
$
|
482
|
|
|
$
|
371
|
|
|
$
|
111
|
|
|
29.9
|
%
|
Defense Systems Group
|
|
559
|
|
|
451
|
|
|
108
|
|
|
23.9
|
%
|
|||
Space Systems Group
|
|
316
|
|
|
301
|
|
|
15
|
|
|
5.0
|
%
|
|||
Corporate and Eliminations
|
|
(45
|
)
|
|
(38
|
)
|
|
(7
|
)
|
|
(18.4
|
)%
|
|||
Total sales
|
|
$
|
1,312
|
|
|
$
|
1,085
|
|
|
$
|
227
|
|
|
20.9
|
%
|
|
|
Quarters Ended
|
|||||||||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
|
Change
|
|
Percent Change
|
|||||||
Flight Systems Group
|
|
$
|
368
|
|
|
$
|
288
|
|
|
$
|
80
|
|
|
27.8
|
%
|
Defense Systems Group
|
|
458
|
|
|
368
|
|
|
90
|
|
|
24.5
|
%
|
|||
Space Systems Group
|
|
269
|
|
|
253
|
|
|
16
|
|
|
6.3
|
%
|
|||
Corporate and Eliminations
|
|
(73
|
)
|
|
(53
|
)
|
|
(20
|
)
|
|
(37.7
|
)%
|
|||
Total cost of sales
|
|
$
|
1,022
|
|
|
$
|
856
|
|
|
$
|
166
|
|
|
19.4
|
%
|
|
|
Quarters Ended
|
||||||||||||||||
|
|
April 1, 2018
|
|
Percent of Sales
|
|
April 2, 2017
|
|
Percent of Sales
|
|
Change
|
||||||||
Research and development
|
|
$
|
34
|
|
|
2.6
|
%
|
|
$
|
22
|
|
|
2.0
|
%
|
|
$
|
12
|
|
Selling
|
|
28
|
|
|
2.1
|
%
|
|
28
|
|
|
2.6
|
%
|
|
—
|
|
|||
General and administrative
|
|
74
|
|
|
5.7
|
%
|
|
68
|
|
|
6.3
|
%
|
|
6
|
|
|||
Total operating expenses
|
|
$
|
136
|
|
|
10.4
|
%
|
|
$
|
118
|
|
|
10.9
|
%
|
|
$
|
18
|
|
|
|
Quarters Ended
|
||||||||||||||||
|
|
April 1, 2018
|
|
Effective Rate
|
|
April 2, 2017
|
|
Effective Rate
|
|
Change
|
||||||||
Income taxes
|
|
$
|
21
|
|
|
17.4
|
%
|
|
$
|
28
|
|
|
29.3
|
%
|
|
$
|
(7
|
)
|
|
|
Quarters Ended
|
||||||
|
|
April 1, 2018
|
|
April 2, 2017
|
||||
Cash used in operating activities
|
|
$
|
(237
|
)
|
|
$
|
(35
|
)
|
Cash used in investing activities
|
|
(71
|
)
|
|
(43
|
)
|
||
Cash provided by financing activities
|
|
21
|
|
|
45
|
|
||
Net cash flows
|
|
$
|
(287
|
)
|
|
$
|
(33
|
)
|
|
|
April 1, 2018
|
|
December 31, 2017
|
||||
Senior Credit Facility:
|
|
|
|
|
||||
Term Loan A due 2020
|
|
$
|
700
|
|
|
$
|
710
|
|
Revolving Credit Facility due 2020
|
|
60
|
|
|
—
|
|
||
5.25% Senior Notes due 2021
|
|
300
|
|
|
300
|
|
||
5.50% Senior Notes due 2023
|
|
400
|
|
|
400
|
|
||
Principal amount of long-term debt
|
|
1,460
|
|
|
1,410
|
|
||
Unamortized debt issuance costs:
|
|
|
|
|
||||
Senior Credit Facility
|
|
4
|
|
|
4
|
|
||
5.25% Senior Notes due 2021
|
|
1
|
|
|
1
|
|
||
5.50% Senior Notes due 2023
|
|
4
|
|
|
4
|
|
||
Unamortized debt issuance costs
|
|
9
|
|
|
9
|
|
||
Long-term debt less unamortized debt issuance costs
|
|
1,451
|
|
|
1,401
|
|
||
Less: Current portion of long-term debt
|
|
40
|
|
|
40
|
|
||
Long-term debt
|
|
$
|
1,411
|
|
|
$
|
1,361
|
|
|
|
Total Leverage Ratio
(1)
|
|
Interest Coverage Ratio
(2)
|
||
Requirement
|
|
4.00
|
|
|
3.00
|
|
Actual at April 1, 2018
|
|
1.92
|
|
|
12.36
|
|
Period
|
Total Number
of Shares
Purchased
(1)
|
|
Average
Price Paid
per Share
|
|
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Program
(2)
|
|
Amount
Available for
Future Share
Repurchases
Under the Plans
or Programs
(in millions)
|
||||||
January 1 - January 28
|
755
|
|
|
$
|
132.54
|
|
|
—
|
|
|
|
|
|
January 29 - February 25
|
41,009
|
|
|
$
|
131.81
|
|
|
—
|
|
|
|
|
|
February 26 - April 1
|
42,692
|
|
|
$
|
131.92
|
|
|
—
|
|
|
|
|
|
Quarter ended April 1, 2018
|
84,456
|
|
|
$
|
131.87
|
|
|
—
|
|
|
$
|
227
|
|
(1)
|
The
84,456
shares purchased include shares withheld to pay taxes upon vesting of shares of restricted stock or payment of performance shares that were granted under our incentive compensation plans.
|
(2)
|
During 2015, the Board of Directors 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, which was subsequently increased during 2016 to the lesser of $300 million or 4 million shares through March 2017. In February 2017, the Board of Directors further increased the amount authorized for repurchase to $450 million, removed the share quantity limitation and extended the repurchase period through March 31, 2018. The Company did not repurchase shares under its share repurchase program during the quarters ended April 1, 2018 and April 2, 2017. In connection with the Merger, the Company halted its share repurchase program.
|
Exhibit
Number
|
|
Description of Exhibit (and document from which incorporated by reference, if applicable)
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32
|
|
|
|
|
|
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.
|
||||
|
By:
|
|
/s/ David W. Thompson
|
||
|
Name:
|
|
David W. Thompson
|
||
|
Title:
|
|
President and Chief Executive Officer
|
||
|
|
|
(
duly authorized and principal executive officer)
|
||
|
|
|
|
|
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.
|
May 3, 2018
|
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.
|
May 3, 2018
|
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
April 1, 2018
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.
|
May 3, 2018
|
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
|
|
|
|
|