A summary of the impact to pretax income (loss) from continuing operations by reporting period is presented below (in millions): | | | | | | | | | | | | | | | | Income (loss) before income taxes | Reporting Period | | First nine months of fiscal 2015 | | Fiscal 2014 | | Fiscal 2013 | Purchase accounting for contracts acquired as part of the acquisition of the Rocketdyne Business (1) | | $ | (0.5 | ) | | $ | 3.1 |
| | $ | (7.8 | ) | Contract accounting related to subsequent modifications to one significant acquired Rocketdyne Business contract (2) | | 1.3 |
| | 2.9 |
| | — |
| Contract accounting related to improper recognition of sales incentives (3) | | — |
| | 1.9 |
| | (2.0 | ) | Other individually immaterial items | | (1.2 | ) | | (1.5 | ) | | 0.3 |
|
___________ (1) The Company's errors associated with purchase accounting primarily related to the following: (i) fair value assessment of Rocketdyne Business acquired customer contracts at the acquisition date following the close of the transaction. The Company failed to fair value three acquired contracts in purchase accounting; and (ii) the estimates of the Rocketdyne Business contracts' percentage of completion used to recognize net sales should have been based on its estimate of remaining effort on such contracts at the acquisition date instead of the inception date of the contract. (2) The Company did not appropriately account for one significant acquired Rocketdyne Business contract amendment. Instead of being accounted for as a modification, the amendment was accounted for as a new contract. (3) The Company immediately recognized incentives as sales based on the full amount received rather than on the percentage of completion of the related contract. The correction of the matters described above resulted in the following adjustments to the previously issued consolidated financial statements: (i) an increase of $0.3 million, or $0.00 loss per share, to net loss for the first nine months of fiscal 2015; (ii) a decrease of $3.0 million, or $0.06 loss per share, to net loss for fiscal 2014; and (iii) a decrease of $5.0 million, or $0.06 diluted income per share, to net income for fiscal 2013. A summary of the impact to the consolidated statements of operations by reporting period is presented below (in millions): | | | | | | Reporting Period | | Net (Loss) Income | First nine months of fiscal 2015 | | $ | (0.3 | ) | Fiscal 2014 | | 3.0 |
| Fiscal 2013 | | (5.0 | ) |
The Company also corrected previously disclosed immaterial out of period adjustments as part of this restatement and other balance sheet misclassifications. The Company concluded these errors were material in the aggregate to the prior reporting periods, and therefore, restatement of previously filed financial statements was necessary. The following tables present the unaudited condensed consolidated quarterly financial information for the first quarter of fiscal 2015: Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income | | | | | | | | | | | | | | Three Months Ended February 28, 2015 | | As Reported | | Adjustments | | As Restated | | (In millions, except per share amounts) | Net sales | $ | 318.6 |
| | $ | 4.4 |
| | $ | 323.0 |
| Operating costs and expenses: | | | | | | Cost of sales (exclusive of items shown separately below) | 282.8 |
| | 2.6 |
| | 285.4 |
| Selling, general and administrative | 15.5 |
| | 0.1 |
| | 15.6 |
| Depreciation and amortization | 16.0 |
| | 0.3 |
| | 16.3 |
| Other expense, net: | | | | | | Loss on debt repurchased | 0.2 |
| | — |
| | 0.2 |
| Other | 1.5 |
| | — |
| | 1.5 |
| Total operating costs and expenses | 316.0 |
| | 3.0 |
| | 319.0 |
| Operating income | 2.6 |
| | 1.4 |
| | 4.0 |
| Interest income | (0.1 | ) | | — |
| | (0.1 | ) | Interest expense | 13.4 |
| | — |
| | 13.4 |
| Total non-operating expense, net | 13.3 |
| | — |
| | 13.3 |
| Loss from continuing operations before income taxes | (10.7 | ) | | 1.4 |
| | (9.3 | ) | Income tax benefit | (6.6 | ) | | 0.8 |
| | (5.8 | ) | Loss from continuing operations | (4.1 | ) | | 0.6 |
| | (3.5 | ) | Income from discontinued operations, net of income taxes | 0.2 |
| | — |
| | 0.2 |
| Net loss | $ | (3.9 | ) | | $ | 0.6 |
| | $ | (3.3 | ) | Loss per share of common stock | | | | | | Basic and Diluted: | | | | | | Loss per share from continuing operations | $ | (0.07 | ) | | $ | 0.01 |
| | $ | (0.06 | ) | Income per share from discontinued operations, net of income taxes | — |
| | — |
| | — |
| Net loss per share | $ | (0.07 | ) | | $ | 0.01 |
| | $ | (0.06 | ) | Weighted average shares of common stock outstanding, basic and diluted | 58.9 |
| | — |
| | 58.9 |
|
| | | | | | | | | | | | | | Three Months Ended February 28, 2015 | | As Reported | | Adjustments | | As Restated | | (In millions) | Net loss | $ | (3.9 | ) | | $ | 0.6 |
| | $ | (3.3 | ) | Other comprehensive income: | | | | | | Amortization of actuarial losses and prior service credits, net of income taxes | 12.2 |
| | (0.1 | ) | | 12.1 |
| Comprehensive income | $ | 8.3 |
| | $ | 0.5 |
| | $ | 8.8 |
|
Unaudited Condensed Consolidated Balance Sheet | | | | | | | | | | | | | | February 28, 2015 | | As Reported | | Adjustments | | As Restated | | (In millions) | ASSETS | | | | | Current Assets | | | | | | Cash and cash equivalents | $ | 215.7 |
| | $ | — |
| | $ | 215.7 |
| Accounts receivable | 206.1 |
| | (16.1 | ) | | 190.0 |
| Inventories | 161.4 |
| | 0.1 |
| | 161.5 |
| Recoverable from the U.S. government and other third parties for environmental remediation costs | 23.5 |
| | — |
| | 23.5 |
| Receivable from Northrop | 6.0 |
| | — |
| | 6.0 |
| Other current assets, net | 42.5 |
| | 1.2 |
| | 43.7 |
| Income taxes | 1.9 |
| | 0.4 |
| | 2.3 |
| Deferred income taxes | 22.5 |
| | (3.8 | ) | | 18.7 |
| Total Current Assets | 679.6 |
| | (18.2 | ) | | 661.4 |
| Noncurrent Assets | | | | | | Property, plant and equipment, net | 358.8 |
| | (1.6 | ) | | 357.2 |
| Real estate held for entitlement and leasing | 81.5 |
| | — |
| | 81.5 |
| Recoverable from the U.S. government and other third parties for environmental remediation costs | 79.3 |
| | — |
| | 79.3 |
| Receivable from Northrop | 69.4 |
| | — |
| | 69.4 |
| Deferred income taxes | 254.5 |
| | 1.5 |
| | 256.0 |
| Goodwill | 164.4 |
| | (6.3 | ) | | 158.1 |
| Intangible assets | 118.8 |
| | — |
| | 118.8 |
| Assets held for sale | 14.2 |
| | — |
| | 14.2 |
| Other noncurrent assets, net | 76.3 |
| | 8.6 |
| | 84.9 |
| Total Noncurrent Assets | 1,217.2 |
| | 2.2 |
| | 1,219.4 |
| Total Assets | $ | 1,896.8 |
| | $ | (16.0 | ) | | $ | 1,880.8 |
| LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ DEFICIT | Current Liabilities | | | | | | Short-term borrowings and current portion of long-term debt | $ | 5.2 |
| | $ | — |
| | $ | 5.2 |
| Accounts payable | 84.5 |
| | 0.5 |
| | 85.0 |
| Reserves for environmental remediation costs | 38.3 |
| | — |
| | 38.3 |
| Postretirement medical and life insurance benefits | 6.4 |
| | — |
| | 6.4 |
| Advance payments on contracts | 224.0 |
| | (17.0 | ) | | 207.0 |
| Other current liabilities | 211.3 |
| | 2.2 |
| | 213.5 |
| Total Current Liabilities | 569.7 |
| | (14.3 | ) | | 555.4 |
| Noncurrent Liabilities | | | | | | Senior debt | 91.6 |
| | — |
| | 91.6 |
| Second-priority senior notes | 448.2 |
| | — |
| | 448.2 |
| Convertible subordinated notes | 99.4 |
| | — |
| | 99.4 |
| Other debt | 79.2 |
| | — |
| | 79.2 |
| Reserves for environmental remediation costs | 124.3 |
| | — |
| | 124.3 |
| Pension benefits | 479.1 |
| | — |
| | 479.1 |
| Postretirement medical and life insurance benefits | 50.6 |
| | — |
| | 50.6 |
| Other noncurrent liabilities | 81.1 |
| | 0.7 |
| | 81.8 |
| Total Noncurrent Liabilities | 1,453.5 |
| | 0.7 |
| | 1,454.2 |
| Total Liabilities | 2,023.2 |
| | (13.6 | ) | | 2,009.6 |
| Redeemable common stock | 0.1 |
| | — |
| | 0.1 |
| Stockholders’ Deficit | | | | | | Common stock | 6.3 |
| | — |
| | 6.3 |
| Other capital | 324.6 |
| | — |
| | 324.6 |
| Treasury stock | (64.5 | ) | | — |
| | (64.5 | ) | Accumulated deficit | (70.9 | ) | | (3.0 | ) | | (73.9 | ) | Accumulated other comprehensive loss, net of income taxes | (322.0 | ) | | 0.6 |
| | (321.4 | ) | Total Stockholders’ Deficit | (126.5 | ) | | (2.4 | ) | | (128.9 | ) | Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit | $ | 1,896.8 |
| | $ | (16.0 | ) | | $ | 1,880.8 |
|
Unaudited Condensed Consolidated Statement of Cash Flows | | | | | | | | | | | | | | Three Months Ended February 28, 2015 | | As Reported | | Adjustments | | As Restated | | (In millions) | Operating Activities | | | | | | Net loss | $ | (3.9 | ) | | $ | 0.6 |
| | $ | (3.3 | ) | Adjustments to reconcile net loss to net cash used in by operating activities: | | | | | | Income from discontinued operations, net of income taxes | (0.2 | ) | | — |
| | (0.2 | ) | Depreciation and amortization | 16.0 |
| | 0.3 |
| | 16.3 |
| Amortization of financing costs | 0.7 |
| | — |
| | 0.7 |
| Stock-based compensation | 5.3 |
| | — |
| | 5.3 |
| Retirement benefit expense | 16.6 |
| | 0.2 |
| | 16.8 |
| Loss on debt repurchased | 0.2 |
| | — |
| | 0.2 |
| Loss on disposal of long-lived assets | 0.2 |
| | — |
| | 0.2 |
| Tax benefit on stock-based awards | (1.4 | ) | | — |
| | (1.4 | ) | Changes in assets and liabilities, net of effects from acquisition: | | | | | | Accounts receivable | (33.2 | ) | | 13.7 |
| | (19.5 | ) | Inventories | (22.4 | ) | | (1.1 | ) | | (23.5 | ) | Other current assets, net | (6.2 | ) | | 0.9 |
| | (5.3 | ) | Real estate held for entitlement and leasing | (1.5 | ) | | — |
| | (1.5 | ) | Receivable from Northrop | 5.4 |
| | (6.0 | ) | | (0.6 | ) | Recoverable from the U.S. government and other third parties for environmental remediation costs | (2.2 | ) | | 6.0 |
| | 3.8 |
| Other noncurrent assets | 14.3 |
| | (0.9 | ) | | 13.4 |
| Assets held for sale | (14.2 | ) | | — |
| | (14.2 | ) | Accounts payable | (19.0 | ) | | — |
| | (19.0 | ) | Retirement benefits | (1.6 | ) | | — |
| | (1.6 | ) | Advance payments on contracts | 25.5 |
| | (15.9 | ) | | 9.6 |
| Other current liabilities | (11.3 | ) | | 3.4 |
| | (7.9 | ) | Deferred income taxes | (0.3 | ) | | (0.8 | ) | | (1.1 | ) | Reserves for environmental remediation costs | (3.4 | ) | | — |
| | (3.4 | ) | Other noncurrent liabilities and other | 1.0 |
| | (0.4 | ) | | 0.6 |
| Net cash used in continuing operations | (35.6 | ) | | — |
| | (35.6 | ) | Net cash used in discontinued operations | — |
| | — |
| | — |
| Net Cash Used in Operating Activities | (35.6 | ) | | — |
| | (35.6 | ) | Investing Activities | | | | | | Capital expenditures | (4.3 | ) | | — |
| | (4.3 | ) | Net Cash Used in Investing Activities | (4.3 | ) | | — |
| | (4.3 | ) | Financing Activities | | | | | | Debt repayments/repurchases | (9.3 | ) | | — |
| | (9.3 | ) | Repurchase of shares to satisfy tax withholding obligations | (2.4 | ) | | — |
| | (2.4 | ) | Tax benefit on stock-based awards | 1.4 |
| | — |
| | 1.4 |
| Net Cash Used in Financing Activities | (10.3 | ) | | — |
| | (10.3 | ) | Net Decrease in Cash and Cash Equivalents | (50.2 | ) | | — |
| | (50.2 | ) | Cash and Cash Equivalents at Beginning of Period | 265.9 |
| | — |
| | 265.9 |
| Cash and Cash Equivalents at End of Period | $ | 215.7 |
| | $ | — |
| | $ | 215.7 |
|
A summary of the impact to pretax income (loss) from continuing operations by reporting period is presented below (in millions): | | | | | | | | | | | | | | | | Income (loss) before income taxes | Reporting Period | | First nine months of fiscal 2015 | | Fiscal 2014 | | Fiscal 2013 | Purchase accounting for contracts acquired as part of the acquisition of the Rocketdyne Business (1) | | $ | (0.5 | ) | | $ | 3.1 |
| | $ | (7.8 | ) | Contract accounting related to subsequent modifications to one significant acquired Rocketdyne Business contract (2) | | 1.3 |
| | 2.9 |
| | — |
| Contract accounting related to improper recognition of sales incentives (3) | | — |
| | 1.9 |
| | (2.0 | ) | Other individually immaterial items | | (1.2 | ) | | (1.5 | ) | | 0.3 |
|
___________ (1) The Company's errors associated with purchase accounting primarily related to the following: (i) fair value assessment of Rocketdyne Business acquired customer contracts at the acquisition date following the close of the transaction. The Company failed to fair value three acquired contracts in purchase accounting; and (ii) the estimates of the Rocketdyne Business contracts' percentage of completion used to recognize net sales should have been based on its estimate of remaining effort on such contracts at the acquisition date instead of the inception date of the contract. (2) The Company did not appropriately account for one significant acquired Rocketdyne Business contract amendment. Instead of being accounted for as a modification, the amendment was accounted for as a new contract.
|