Delaware
|
||
(State or other jurisdiction of incorporation)
|
||
001-34460
|
13-3818604
|
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
|
4820 Eastgate Mall, Suite 200, San Diego, CA
|
92121
|
|
(address of principal executive offices)
|
(Zip Code)
|
|
(858) 812-7300
|
||
(Registrant’s telephone number, including area code)
|
o
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
o
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
o
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
o
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Exhibit
No.
|
Description
|
|
99.1
|
November 8, 2012 Press Release by Kratos Defense & Security Solutions, Inc.
|
Kratos Defense & Security Solutions, Inc.
|
||||
Date: November 8, 2012
|
By:
|
/s/ Deanna H. Lund
|
||
Deanna H. Lund
|
||||
Executive Vice President, Chief Financial Officer
|
FOR IMMEDIATE RELEASE
|
Press Contact:
Yolanda White
858-812-7302 Direct
Investor Information:
877-934-4687
investor@kratosdefense.com
|
Kratos Defense & Security Solutions
|
||||||
Unaudited Condensed Consolidated Statements of Operations
|
||||||
(in millions, except per share data)
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
Service revenues
|
|
$ 125.6
|
$ 93.2
|
$ 339.8
|
$ 248.3
|
|
Product sales
|
150.7
|
113.4
|
365.8
|
252.2
|
||
Total revenues
|
276.3
|
206.6
|
705.6
|
500.5
|
||
Cost of service revenues
|
98.3
|
68.6
|
264.8
|
186.9
|
||
Cost of product sales
|
103.9
|
79.0
|
251.6
|
181.8
|
||
Total costs
|
202.2
|
147.6
|
516.4
|
368.7
|
||
Gross profit - services
|
27.3
|
24.6
|
75.0
|
61.4
|
||
Gross profit - products
|
46.8
|
34.4
|
114.2
|
70.4
|
||
Total gross profit
|
74.1
|
59.0
|
189.2
|
131.8
|
||
|
|
|
|
|||
Selling, general and administrative expenses
|
40.1
|
29.3
|
104.7
|
68.6
|
||
Unused office space expense and other
|
0.7
|
-
|
2.1
|
-
|
||
Merger and acquisition expenses
|
0.3
|
3.7
|
2.7
|
11.3
|
||
Research and development expenses
|
4.5
|
3.2
|
12.9
|
5.0
|
||
Depreciation
|
1.4
|
1.2
|
3.8
|
2.6
|
||
Amortization of intangible assets
|
13.0
|
11.9
|
32.4
|
24.5
|
||
Operating income
|
14.1
|
9.7
|
|
30.6
|
19.8
|
|
Interest expense, net
|
(17.6)
|
(15.0)
|
(49.9)
|
(34.8)
|
||
Other income, net
|
0.4
|
(0.3)
|
1.3
|
-
|
||
Loss from continuing operations before income taxes
|
(3.1)
|
(5.6)
|
(18.0)
|
(15.0)
|
||
Provision for income taxes
|
1.3
|
1.6
|
3.8
|
1.3
|
||
Loss from continuing operations
|
(4.4)
|
(7.2)
|
(21.8)
|
(16.3)
|
||
Income (loss) from discontinued operations, net of taxes
|
0.2
|
0.3
|
(2.6)
|
0.7
|
||
Net loss
|
$ (4.2)
|
$ (6.9)
|
$ (24.4)
|
$ (15.6)
|
||
|
|
|
|
|||
Basic income (loss) per common share:
|
|
|
|
|
||
Loss from continuing operations
|
$ (0.08)
|
$ (0.23)
|
$ (0.50)
|
$ (0.64)
|
||
Income (loss) from discontinued operations, net of taxes
|
0.01
|
0.01
|
(0.06)
|
0.02
|
||
Net loss
|
$ (0.07)
|
$ (0.22)
|
$ (0.56)
|
$ (0.62)
|
||
|
|
|
|
|||
Diluted income (loss) per common share:
|
|
|
|
|
||
Loss from continuing operations
|
$ (0.08)
|
$ (0.23)
|
$ (0.50)
|
$ (0.64)
|
||
Income (loss) from discontinued operations, net of taxes
|
0.01
|
0.01
|
(0.06)
|
0.02
|
||
Net loss
|
$ (0.07)
|
$ (0.22)
|
$ (0.56)
|
$ (0.62)
|
||
|
|
|
|
|||
Weighted average common shares outstanding
|
|
|
|
|
||
Basic
|
56.6
|
30.8
|
43.8
|
25.3
|
||
Diluted
|
56.6
|
30.8
|
43.8
|
25.3
|
||
Adjusted EBITDA (1)
|
$ 34.4
|
$ 29.2
|
$ 83.8
|
$ 64.5
|
||
|
||||||
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income (loss) plus (income) loss from discontinued
|
||||||
operations, interest expense, net, other (income) related to SWAP instruments, income taxes, depreciation and amortization,
|
||||||
stock compensation, amortization of intangible assets, unused office space expense, and other acquisition related expenses.
|
||||||
Adjusted EBITDA as calculated by us may be calculated differently than EBITDA for other companies. We have provided Adjusted
|
||||||
EBITDA because we believe it is a commonly used measure of financial performance in comparable companies and is provided to help
|
||||||
investors evaluate companies on a consistent basis, as well as to enhance an understanding of our operating results. Adjusted
|
||||||
EBITDA should not be construed as either an alternative to net income or as an indicator of our operating performance or an alternative
|
||||||
to cash flows as a measure of liquidity. Please refer to the following table that reconciles GAAP net loss to Adjusted EBITDA:
|
||||||
Reconciliation of Net loss to Adjusted EBITDA is as follows:
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
Net loss
|
$ (4.2)
|
$ (6.9)
|
$ (24.4)
|
$ (15.6)
|
||
(Income) loss from discontinued operations
|
(0.2)
|
(0.3)
|
2.6
|
(0.7)
|
||
Acquisition expenses
|
0.3
|
3.7
|
2.7
|
11.3
|
||
Interest expense, net
|
17.6
|
15.0
|
49.9
|
34.8
|
||
Other income related to SWAP instruments
|
-
|
-
|
-
|
(0.3)
|
||
Provision for income taxes
|
1.3
|
1.6
|
3.8
|
1.3
|
||
Depreciation *
|
3.6
|
3.3
|
10.1
|
6.9
|
||
Stock compensation
|
2.3
|
0.9
|
4.6
|
2.3
|
||
Unused office space expense and other
|
0.7
|
-
|
2.1
|
-
|
||
Amortization of intangible assets
|
13.0
|
11.9
|
32.4
|
24.5
|
||
Adjusted EBITDA
|
$ 34.4
|
$ 29.2
|
$ 83.8
|
$ 64.5
|
||
* Includes depreciation reported in cost of service revenues and product sales.
|
||||||
Kratos Defense & Security Solutions
|
||||||
Unaudited Segment Data
|
||||||
(in millions)
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
Revenues:
|
||||||
Government Solutions
|
$ 223.5
|
$ 174.2
|
$ 568.2
|
$ 416.9
|
||
Public Safety & Security
|
52.8
|
32.4
|
137.4
|
83.6
|
||
Total revenues
|
$ 276.3
|
$ 206.6
|
$ 705.6
|
$ 500.5
|
||
Operating income (loss) from continuing operations:
|
||||||
Government Solutions
|
$ 14.0
|
$ 10.5
|
$ 32.4
|
$ 26.8
|
||
Public Safety & Security
|
3.3
|
3.7
|
7.3
|
6.6
|
||
Other activities
|
(3.2)
|
(4.5)
|
(9.1)
|
(13.6)
|
||
Total operating income from continuing operations
|
$ 14.1
|
$ 9.7
|
$ 30.6
|
$ 19.8
|
||
Note: Other activities in the three months ended September 30, 2012 and September 25, 2011 include acquisition expenses of $0.3 million and $3.7 million,
|
||||||
respectively, and for the nine months ended September 30, 2012 and September 25, 2011 include acquisition expenses of $2.7 million and $11.3 million, respectively.
|
||||||
Reconciliation of consolidated Adjusted EBITDA to Adjusted EBITDA by segment is as follows:
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
KGS
|
$ 30.2
|
$ 24.8
|
$ 73.9
|
$ 56.0
|
||
% of revenue
|
13.5%
|
14.2%
|
13.0%
|
13.4%
|
||
PSS
|
4.2
|
4.4
|
9.9
|
8.5
|
||
% of revenue
|
8.0%
|
13.6%
|
7.2%
|
10.2%
|
||
Total
|
$ 34.4
|
$ 29.2
|
$ 83.8
|
$ 64.5
|
||
% of revenue
|
12.5%
|
14.1%
|
11.9%
|
12.9%
|
||
Kratos Defense & Security Solutions
|
||||||
Unaudited Condensed Consolidated Balance Sheet
|
||||||
(in millions)
|
||||||
As of
|
||||||
September 30,
|
December 25,
|
|||||
2012
|
2011
|
|||||
Assets
|
||||||
Current assets:
|
||||||
Cash and cash equivalents
|
$ 37.6
|
$ 69.6
|
||||
Restricted cash
|
5.6
|
1.1
|
||||
Accounts receivable, net
|
281.4
|
245.3
|
||||
Inventoried costs
|
99.9
|
76.6
|
||||
Prepaid expenses
|
17.6
|
12.7
|
||||
Other current assets
|
14.5
|
15.7
|
||||
Total current assets
|
456.6
|
421.0
|
||||
Property and equipment, net
|
84.6
|
72.5
|
||||
Goodwill
|
678.5
|
571.6
|
||||
Intangibles, net
|
132.2
|
124.6
|
||||
Other assets
|
21.0
|
26.3
|
||||
Total assets
|
$ 1,372.9
|
$ 1,216.0
|
||||
Liabilities and Stockholders’ Equity
|
||||||
Current liabilities:
|
||||||
Accounts payable
|
$ 81.0
|
$ 48.8
|
||||
Accrued expenses
|
51.7
|
50.7
|
||||
Accrued compensation
|
41.9
|
39.8
|
||||
Accrued interest
|
21.7
|
5.1
|
||||
Billings in excess of costs and earnings on uncompleted contracts
|
44.0
|
36.2
|
||||
Other current liabilities
|
33.8
|
33.2
|
||||
Total current liabilities
|
274.1
|
213.8
|
||||
Long-term debt principal, net of current portion
|
630.0
|
630.8
|
||||
Long-term debt premium
|
19.7
|
22.8
|
||||
Other long-term liabilities
|
36.5
|
36.0
|
||||
Total liabilities
|
960.3
|
903.4
|
||||
Commitments and contingencies
|
||||||
Stockholders’ equity:
|
||||||
Preferred stock, 5,000,000 shares authorized, $.001 par value, no shares outstanding at December 25, 2011 and September 30, 2012.
|
-
|
-
|
||||
Common stock, $.001 par value, 195,000,000 shares authorized; 32,421,135 and 56,554,000 shares issued and outstanding at December 25, 2011 and September 30, 2012, respectively.
|
-
|
-
|
||||
Additional paid-in capital
|
845.4
|
720.6
|
||||
Accumulated other comprehensive loss
|
(0.6)
|
(0.2)
|
||||
Accumulated deficit
|
(432.2)
|
(407.8)
|
||||
Total stockholders’ equity
|
412.6
|
312.6
|
||||
Total liabilities and stockholders’ equity
|
$ 1,372.9
|
$ 1,216.0
|
||||
Kratos Defense & Security Solutions
|
||||||
Unaudited Condensed Consolidated Statement of Cash Flows
|
||||||
(in millions)
|
||||||
Nine Months Ended
|
||||||
September 30,
|
September 25,
|
|||||
2012
|
2011
|
|||||
Operating activities:
|
||||||
Net loss
|
$ (24.4)
|
$ (15.6)
|
||||
Less: Income (loss) from discontinued operations
|
(2.6)
|
0.7
|
||||
Loss from continuing operations
|
(21.8)
|
(16.3)
|
||||
Adjustments to reconcile loss from continuing operations to net cash provided by operating activities from continuing operations:
|
||||||
Depreciation and amortization
|
42.5
|
31.4
|
||||
Deferred income taxes
|
1.4
|
0.2
|
||||
Stock‑based compensation
|
4.6
|
2.3
|
||||
Mark to market on swaps
|
-
|
(0.3)
|
||||
Amortization of deferred financing costs
|
3.8
|
2.5
|
||||
Amortization of premium on Senior Secured Notes
|
(3.1)
|
-
|
||||
Provision for doubtful accounts
|
0.4
|
0.3
|
||||
Changes in assets and liabilities, net of acquisitions:
|
||||||
Accounts receivable
|
(6.3)
|
(10.6)
|
||||
Inventoried costs
|
(10.4)
|
3.3
|
||||
Prepaid expenses and other assets
|
(1.9)
|
10.3
|
||||
Accounts payable
|
22.8
|
(42.4)
|
||||
Accrued compensation
|
(1.5)
|
1.1
|
||||
Accrued expenses
|
(5.2)
|
17.3
|
||||
Accrued interest payable
|
16.6
|
20.6
|
||||
Billings in excess of costs and earnings on uncompleted contracts
|
(4.7)
|
(5.9)
|
||||
Income tax receivable and payable
|
(0.8)
|
1.0
|
||||
Other liabilities
|
(1.3)
|
(2.2)
|
||||
Net cash provided by operating activities from continuing operations
|
35.1
|
12.6
|
||||
Investing activities:
|
||||||
Cash paid for acquisitions, net of cash acquired
|
(149.4)
|
(373.8)
|
||||
Decrease in restricted cash
|
0.5
|
3.3
|
||||
Capital expenditures
|
(12.0)
|
(5.3)
|
||||
Net cash used in investing activities from continuing operations
|
(160.9)
|
(375.8)
|
||||
Financing activities:
|
||||||
Proceeds from the issuance of long-term debt
|
-
|
427.5
|
||||
Proceeds from the issuance of common stock
|
97.0
|
61.1
|
||||
Cash paid for contingent acquisition consideration
|
(2.5)
|
-
|
||||
Borrowings under line of credit
|
40.0
|
-
|
||||
Repayment of debt
|
(40.8)
|
(2.5)
|
||||
Debt issuance costs
|
(1.2)
|
(20.6)
|
||||
Other
|
(0.9)
|
1.5
|
||||
Net cash provided by financing activities from continuing operations
|
91.6
|
467.0
|
||||
Net cash flows from continuing operations
|
(34.2)
|
103.8
|
||||
Net operating cash flows from discontinued operations
|
2.1
|
(5.3)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
0.1
|
(0.2)
|
||||
Net increase in cash and cash equivalents
|
(32.0)
|
98.3
|
||||
Cash and cash equivalents at beginning of period
|
69.6
|
10.8
|
||||
Cash and cash equivalents at end of period
|
$ 37.6
|
$ 109.1
|
||||
Kratos Defense & Security Solutions
|
||||||
Unaudited Non-GAAP Measures
|
||||||
Adjusted Earnings Before Amortization and Acquisition Related Expenses
|
||||||
(in millions, except per share data)
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
Loss from continuing operations before taxes
|
$ (3.1)
|
$ (5.6)
|
|
$ (18.0)
|
$ (15.0)
|
|
Add: Amortization of intangible assets
|
13.0
|
11.9
|
|
32.4
|
24.5
|
|
Add: Unused office space expense and other
|
0.7
|
-
|
2.1
|
-
|
||
Add: Merger and acquisition expenses
|
0.3
|
3.7
|
|
2.7
|
11.3
|
|
Adjusted income from continuing operations before income taxes
|
$ 10.9
|
$ 10.0
|
|
$ 19.2
|
$ 20.8
|
|
Estimated cash tax provision
|
0.9
|
0.7
|
2.7
|
2.3
|
||
Adjusted income from continuing operations before acquisition and amortization expenses
|
$ 10.0
|
$ 9.3
|
$ 16.5
|
$ 18.5
|
||
Diluted income per common share:
|
||||||
Adjusted income from continuing operations
|
$ 0.18
|
$ 0.30
|
$ 0.38
|
$ 0.73
|
||
Weighted average common shares outstanding
|
||||||
Diluted
|
56.6
|
30.8
|
|
43.8
|
25.3
|
|
Adjusted Cash Flows From Operations
|
||||||
(in millions)
|
||||||
Three Months Ended
|
Nine Months Ended
|
|||||
September 30,
|
September 25,
|
September 30,
|
September 25,
|
|||
2012
|
2011
|
2012
|
2011
|
|||
Net cash provided by operating activities from continuing operations
|
$ 25.3
|
$ 22.8
|
$ 35.1
|
$ 12.6
|
||
Add: Acquisition related items
|
0.2
|
7.1
|
3.1
|
20.9
|
||
Adjusted cash flows from operations
|
$ 25.5
|
$ 29.9
|
$ 38.2
|
$ 33.5
|
||
-end-
|