UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): April 30, 2019
Aerojet Rocketdyne Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware | 1-01520 | 34-0244000 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
222 N. Pacific Coast Highway, Suite 500, El Segundo, California 90245 |
(Address of Principal Executive Offices) (Zip Code) |
(310) 252-8100
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On April 30, 2019, Aerojet Rocketdyne Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2019. A copy of the press release is attached to this Current Report on Form 8–K as Exhibit 99.1 and is incorporated herein by reference. The foregoing information (including Exhibit 99.1) is being furnished under “Item 2.02. Results of Operations and Financial Condition” and “Item 7.01. Regulation FD Disclosure.” Such information (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. The filing of this Report and the furnishing of this information pursuant to Items 2.02 and 7.01 (including Exhibit 99.1) do not mean that such information is material or that disclosure of such information is required.
Item 7.01. Regulation FD Disclosure.
See “Item 2.02. Results of Operations and Financial Condition” above.
Item 9.01. Financial Statements and Exhibits.
(d) ExhibitsExhibit No. Description 99.1 Aerojet Rocketdyne Holdings, Inc. press release dated April 30, 2019
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Aerojet Rocketdyne Holdings, Inc. | ||
Date: April 30, 2019 | By: | /s/ Paul R. Lundstrom |
Paul R. Lundstrom | ||
Vice President and Chief Financial Officer | ||
EXHIBIT 99.1
Aerojet Rocketdyne Holdings, Inc. Reports First Quarter 2019 Results
EL SEGUNDO, Calif., April 30, 2019 (GLOBE NEWSWIRE) -- Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) today reported results for the three months ended March 31, 2019.
Financial Overview
First quarter of 2019 compared with first quarter of 2018
_________
* The Company provides Non-GAAP measures as a supplement to financial results presented in accordance with accounting principles generally accepted in the United States (“GAAP”). A reconciliation of the Non-GAAP measures to the most directly comparable GAAP measures is included at the end of the release.
“We had a strong start to 2019 with Adjusted EBITDAP up more than 50% to $71 million and margins of 14.4%, up 480 bps from the first quarter of 2018. Our continued focus on program execution and operational excellence is reflected in our improving margins,” said Eileen Drake, CEO and President of Aerojet Rocketdyne Holdings, Inc. “Sales in the quarter were $492 million, flat with prior year despite the headwind from the expected sunset of the AJ60 solid rocket motor program.”
Operations Review
Aerospace and Defense Segment
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions, except percentage amounts) | |||||||
Net sales | $ | 490.0 | $ | 490.4 | |||
Segment performance | 69.7 | 34.3 | |||||
Segment margin | 14.2 | % | 7.0 | % | |||
Segment margin before environmental remediation provision adjustments, retirement benefits, net, and unusual items (Non-GAAP measure) | 13.2 | % | 7.5 | % | |||
Components of segment performance: | |||||||
Aerospace and Defense income | $ | 64.9 | $ | 36.6 | |||
Environmental remediation provision adjustments | (0.3 | ) | (1.3 | ) | |||
GAAP/Cost Accounting Standards ("CAS") retirement benefits expense difference | 5.4 | (1.0 | ) | ||||
Unusual items | (0.3 | ) | — | ||||
Aerospace and Defense total | $ | 69.7 | $ | 34.3 |
Net sales in the three months ended March 31, 2019, were comparable with the prior year period. A decrease of $9.0 million in space programs net sales was primarily driven by the RS-68 program and the winding down of the AJ60 solid rocket motor. The decrease in space programs net sales was offset by an increase of $8.6 million in defense programs net sales primarily driven by the Patriot Advanced Capability-3 (“PAC-3”) program partially offset by lower sales on the Standard Missile program.
The increase in segment margin before environmental remediation provision adjustments, retirement benefits, net and unusual items was primarily driven by performance issues during 2018 on the Commercial Crew Development program.
During the three months ended March 31, 2019, the Company had $13.4 million of favorable changes in contract estimates on operating results before income taxes compared with unfavorable changes of $(7.9) million during the three months ended March 31, 2018.
Real Estate Segment
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Net sales | $ | 1.7 | $ | 1.6 | |||
Segment performance | 0.5 | 0.6 |
Net sales and segment performance consist primarily of rental property operations.
Backlog
As of March 31, 2019, the Company’s total remaining performance obligations, also referred to as backlog, were $3.8 billion. The Company expects to recognize approximately 48%, or $1.8 billion, of the remaining performance obligations as sales over the next twelve months. A summary of the Company's backlog is as follows:
March 31, 2019 | December 31, 2018 | ||||||
(In billions) | |||||||
Funded backlog | $ | 1.8 | $ | 1.9 | |||
Unfunded backlog | 2.0 | 2.2 | |||||
Total backlog | $ | 3.8 | $ | 4.1 |
Total backlog includes both funded backlog (unfilled orders for which funding is authorized, appropriated and contractually obligated by the customer) and unfunded backlog (firm orders for which funding has not been appropriated). Indefinite delivery and quantity contracts and unexercised options are not reported in total backlog. Backlog is subject to funding delays or program restructurings/cancellations which are beyond the Company's control.
Forward-Looking Statements
This release may contain certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such statements in this release and in subsequent discussions with the Company’s management are based on management’s current expectations and are subject to risks, uncertainty and changes in circumstances, which could cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. All statements contained herein and in subsequent discussions with the Company’s management that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions are generally intended to identify forward-looking statements. A variety of factors could cause actual results or outcomes to differ materially from those expected and expressed in the Company’s forward-looking statements. Some important risk factors that could cause actual results or outcomes to differ from those expressed in the forward-looking statements include, but are not limited to, the following:
About Aerojet Rocketdyne Holdings, Inc.
Aerojet Rocketdyne Holdings, Inc., headquartered in El Segundo, California, is an innovative technology-based manufacturer of aerospace and defense products and systems, with a real estate segment that includes activities related to the entitlement, sale, and leasing of the company’s excess real estate assets. More information can be obtained by visiting the Company’s websites at www.rocket.com or www.aerojetrocketdyne.com.
Contact information:
Investors: Kelly Anderson, investor relations 310.252.8155
(Tables to follow)
Aerojet Rocketdyne Holdings, Inc. | |||||||
Unaudited Condensed Consolidated Statement of Operations | |||||||
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions, except per share amounts) | |||||||
Net sales | $ | 491.7 | $ | 492.0 | |||
Operating costs and expenses: | |||||||
Cost of sales (exclusive of items shown separately below) | 397.6 | 426.8 | |||||
Selling, general and administrative expense | 12.2 | 6.7 | |||||
Depreciation and amortization | 17.5 | 17.7 | |||||
Other expense, net | 1.1 | 1.2 | |||||
Total operating costs and expenses | 428.4 | 452.4 | |||||
Operating income | 63.3 | 39.6 | |||||
Non-operating (income) expense: | |||||||
Retirement benefits expense | 6.5 | 14.4 | |||||
Interest income | (4.0 | ) | (1.6 | ) | |||
Interest expense | 9.0 | 8.1 | |||||
Total non-operating expense, net | 11.5 | 20.9 | |||||
Income before income taxes | 51.8 | 18.7 | |||||
Income tax provision | 13.1 | 4.7 | |||||
Net income | $ | 38.7 | $ | 14.0 | |||
Earnings Per Share of Common Stock | |||||||
Basic | |||||||
Basic earnings per share | $ | 0.49 | $ | 0.19 | |||
Diluted | |||||||
Diluted earnings per share | $ | 0.47 | $ | 0.18 | |||
Weighted average shares of common stock outstanding, basic | 77.1 | 73.7 | |||||
Weighted average shares of common stock outstanding, diluted | 80.6 | 74.7 |
Aerojet Rocketdyne Holdings, Inc. | |||||||
Unaudited Operating Segment Information | |||||||
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Net Sales: | |||||||
Aerospace and Defense | $ | 490.0 | $ | 490.4 | |||
Real Estate | 1.7 | 1.6 | |||||
Total Net Sales | $ | 491.7 | $ | 492.0 | |||
Segment Performance: | |||||||
Aerospace and Defense | $ | 64.9 | $ | 36.6 | |||
Environmental remediation provision adjustments | (0.3 | ) | (1.3 | ) | |||
GAAP/CAS retirement benefits expense difference | 5.4 | (1.0 | ) | ||||
Unusual items | (0.3 | ) | — | ||||
Aerospace and Defense Total | 69.7 | 34.3 | |||||
Real Estate | 0.5 | 0.6 | |||||
Total Segment Performance | $ | 70.2 | $ | 34.9 | |||
Reconciliation of segment performance to income before income taxes: | |||||||
Segment performance | $ | 70.2 | $ | 34.9 | |||
Interest expense | (9.0 | ) | (8.1 | ) | |||
Interest income | 4.0 | 1.6 | |||||
Stock-based compensation | (5.3 | ) | (1.5 | ) | |||
Corporate retirement benefits | (1.8 | ) | (3.3 | ) | |||
Corporate and other | (6.3 | ) | (4.9 | ) | |||
Income before income taxes | $ | 51.8 | $ | 18.7 |
The Company evaluates its operating segments based on several factors, of which the primary financial measure is segment performance. Segment performance represents net sales less applicable costs, expenses and unusual items relating to the segment operations. Segment performance excludes corporate income and expenses, unusual items not related to the segment operations, interest expense, interest income, and income taxes. The Company believes that segment performance provides information useful to investors in understanding its underlying operational performance. Specifically, the Company believes the exclusion of the items listed above permits an evaluation and a comparison of results for ongoing business operations. It is on this basis that management internally assesses the financial performance of its segments.
Aerojet Rocketdyne Holdings, Inc. | |||||||
Unaudited Condensed Consolidated Balance Sheet | |||||||
March 31, 2019 | December 31, 2018 | ||||||
(In millions) | |||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 706.6 | $ | 735.3 | |||
Restricted cash | 5.0 | 5.0 | |||||
Accounts receivable, net | 146.2 | 141.2 | |||||
Contract assets | 235.7 | 235.1 | |||||
Other current assets, net | 124.0 | 117.7 | |||||
Total Current Assets | 1,217.5 | 1,234.3 | |||||
Noncurrent Assets | |||||||
Right-of-use assets | 53.8 | — | |||||
Property, plant and equipment, net | 392.1 | 399.7 | |||||
Recoverable environmental remediation costs | 246.9 | 251.1 | |||||
Deferred income taxes | 133.9 | 116.9 | |||||
Goodwill | 161.3 | 161.3 | |||||
Intangible assets | 68.4 | 71.8 | |||||
Other noncurrent assets, net | 259.3 | 255.0 | |||||
Total Noncurrent Assets | 1,315.7 | 1,255.8 | |||||
Total Assets | $ | 2,533.2 | $ | 2,490.1 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Current portion of long-term debt | $ | 275.8 | $ | 273.1 | |||
Accounts payable | 97.3 | 88.7 | |||||
Reserves for environmental remediation costs | 40.2 | 39.8 | |||||
Contract liabilities | 209.2 | 272.6 | |||||
Other current liabilities | 220.0 | 204.1 | |||||
Total Current Liabilities | 842.5 | 878.3 | |||||
Noncurrent Liabilities | |||||||
Long-term debt | 367.9 | 352.3 | |||||
Reserves for environmental remediation costs | 283.0 | 288.1 | |||||
Pension benefits | 373.5 | 376.7 | |||||
Operating lease liabilities | 46.4 | — | |||||
Other noncurrent liabilities | 153.7 | 173.4 | |||||
Total Noncurrent Liabilities | 1,224.5 | 1,190.5 | |||||
Total Liabilities | 2,067.0 | 2,068.8 | |||||
Commitments and contingencies | |||||||
Stockholders’ Equity | |||||||
Common stock | 7.7 | 7.7 | |||||
Other capital | 561.0 | 561.8 | |||||
Treasury stock at cost | (12.7 | ) | (12.7 | ) | |||
Retained earnings | 142.6 | 103.9 | |||||
Accumulated other comprehensive loss, net of income taxes | (232.4 | ) | (239.4 | ) | |||
Total Stockholders’ Equity | 466.2 | 421.3 | |||||
Total Liabilities and Stockholders’ Equity | $ | 2,533.2 | $ | 2,490.1 |
Aerojet Rocketdyne Holdings, Inc. | |||||||
Unaudited Condensed Consolidated Statements of Cash Flows | |||||||
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Operating Activities | |||||||
Net income | $ | 38.7 | $ | 14.0 | |||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Depreciation and amortization | 17.5 | 17.7 | |||||
Amortization of debt discount and deferred financing costs | 2.3 | 2.1 | |||||
Stock-based compensation | 5.3 | 1.5 | |||||
Retirement benefits, net | 5.4 | 3.3 | |||||
Other, net | 0.2 | (1.9 | ) | ||||
Changes in assets and liabilities, net of effects from acquisition in 2019: | |||||||
Accounts receivable, net | (4.9 | ) | (76.2 | ) | |||
Contract assets | (0.6 | ) | (20.4 | ) | |||
Other current assets, net | (6.1 | ) | (17.4 | ) | |||
Recoverable environmental remediation costs | 4.2 | 3.0 | |||||
Other noncurrent assets | (5.6 | ) | (3.9 | ) | |||
Accounts payable | 6.2 | 29.8 | |||||
Contract liabilities | (63.4 | ) | (30.8 | ) | |||
Other current liabilities | 1.6 | (21.9 | ) | ||||
Deferred income taxes | (19.3 | ) | 9.0 | ||||
Reserves for environmental remediation costs | (4.7 | ) | (3.0 | ) | |||
Other noncurrent liabilities and other | 5.5 | (0.3 | ) | ||||
Net Cash Used in Operating Activities | (17.7 | ) | (95.4 | ) | |||
Investing Activities | |||||||
Insurance proceeds | — | 1.9 | |||||
Capital expenditures | (1.5 | ) | (4.1 | ) | |||
Net Cash Used in Investing Activities | (1.5 | ) | (2.2 | ) | |||
Financing Activities | |||||||
Debt repayments | (5.5 | ) | (5.1 | ) | |||
Repurchase of shares for withholding taxes and option costs under employee equity plans | (6.2 | ) | (1.6 | ) | |||
Proceeds from shares issued under equity plans | 2.2 | 2.1 | |||||
Net Cash Used in Financing Activities | (9.5 | ) | (4.6 | ) | |||
Net Decrease in Cash, Cash Equivalents and Restricted Cash | (28.7 | ) | (102.2 | ) | |||
Cash, Cash Equivalents and Restricted Cash at Beginning of Year | 740.3 | 535.0 | |||||
Cash, Cash Equivalents and Restricted Cash at End of Year | $ | 711.6 | $ | 432.8 |
Use of Unaudited Non-GAAP Financial Measures
In addition to segment performance (discussed above), the Company provides the Non-GAAP financial measures of its performance called Adjusted EBITDAP, Adjusted Net Income, and Adjusted EPS. The Company uses these metrics to measure its operating and total Company performance. The Company believes that for management and investors to effectively compare core performance from period to period, the metrics should exclude items that are not indicative of, or are unrelated to, results from the ongoing business operations such as retirement benefits (pension and postretirement benefits), significant non-cash expenses, the impacts of financing decisions on earnings, and items incurred outside the ordinary, ongoing and customary course of business. Accordingly, the Company defines Adjusted EBITDAP as GAAP net income adjusted to exclude interest expense, interest income, income taxes, depreciation and amortization, retirement benefits net of amounts that are recoverable under the Company’s U.S. government contracts, and unusual items which the Company does not believe are reflective of such ordinary, ongoing and customary activities. Adjusted Net Income and Adjusted EPS exclude retirement benefits net of amounts that are recoverable under its U.S. government contracts and unusual items which the Company does not believe are reflective of such ordinary, ongoing and customary activities. Adjusted Net Income and Adjusted EPS do not represent, and should not be considered an alternative to, net income or diluted EPS as determined in accordance with GAAP.
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions, except per share and percentage amounts) | |||||||
Net income | $ | 38.7 | $ | 14.0 | |||
Interest expense | 9.0 | 8.1 | |||||
Interest income | (4.0 | ) | (1.6 | ) | |||
Income tax provision | 13.1 | 4.7 | |||||
Depreciation and amortization | 17.5 | 17.7 | |||||
GAAP retirement benefits expense | 6.5 | 14.4 | |||||
CAS recoverable retirement benefits expense | (10.1 | ) | (10.1 | ) | |||
Unusual items | 0.3 | — | |||||
Adjusted EBITDAP | $ | 71.0 | $ | 47.2 | |||
Net income as a percentage of net sales | 7.9 | % | 2.8 | % | |||
Adjusted EBITDAP as a percentage of net sales | 14.4 | % | 9.6 | % | |||
Net income | $ | 38.7 | $ | 14.0 | |||
GAAP retirement benefits expense | 6.5 | 14.4 | |||||
CAS recoverable retirement benefits expense | (10.1 | ) | (10.1 | ) | |||
Unusual items | 0.3 | — | |||||
Income tax impact of adjustments (1) | 0.9 | (1.2 | ) | ||||
Adjusted Net Income | $ | 36.3 | $ | 17.1 | |||
Diluted EPS | $ | 0.47 | $ | 0.18 | |||
Adjustments | (0.03 | ) | 0.04 | ||||
Adjusted EPS | $ | 0.44 | $ | 0.22 | |||
Diluted weighted average shares, as reported and adjusted | 80.6 | 74.7 |
_________
(1) The income tax impact is calculated using the federal and state statutory rates in the corresponding period.
The Company also provides the Non-GAAP financial measure of Free Cash Flow. Free Cash Flow, a Non-GAAP financial measure, is defined as cash flow from operating activities less capital expenditures. Free Cash Flow should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to cash flows from operations presented in accordance with GAAP. The Company uses Free Cash Flow, both in presenting its results to stakeholders and the investment community, and in the Company’s internal evaluation and management of the business. Management believes that this financial measure is useful because it provides supplemental information to assist investors in viewing the business using the same tools that management uses to evaluate progress in achieving the Company’s goals (including under the annual cash and long-term compensation incentive plans).
Three months ended March 31, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Net cash used in operating activities | $ | (17.7 | ) | $ | (95.4 | ) | |
Capital expenditures | (1.5 | ) | (4.1 | ) | |||
Free Cash Flow (1) | $ | (19.2 | ) | $ | (99.5 | ) |
_________
(1) Free Cash Flow, a Non-GAAP financial measure, is defined as cash flow from operating activities less capital expenditures.
Because the Company’s method for calculating these Non-GAAP measures may differ from other companies’ methods, the Non-GAAP measures presented above may not be comparable to similarly titled measures reported by other companies. These measures are not recognized in accordance with GAAP, and the Company does not intend for this information to be considered in isolation or as a substitute for GAAP measures.