{"id":731915,"date":"2023-02-15T16:46:04","date_gmt":"2023-02-15T21:46:04","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/aerojet-rocketdyne-holdings-inc-reports-2022-fourth-quarter-and-annual-results\/"},"modified":"2023-02-15T16:46:04","modified_gmt":"2023-02-15T21:46:04","slug":"aerojet-rocketdyne-holdings-inc-reports-2022-fourth-quarter-and-annual-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/aerojet-rocketdyne-holdings-inc-reports-2022-fourth-quarter-and-annual-results\/","title":{"rendered":"Aerojet Rocketdyne Holdings, Inc. Reports 2022 Fourth Quarter and Annual Results"},"content":{"rendered":"

\nRecord fourth quarter and annual sales of $648 million and $2,238 million, respectively
\n<\/h2>\n
\n

EL SEGUNDO, Calif., Feb. 15, 2023 (GLOBE NEWSWIRE) — Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) (the \u201cCompany\u201d) today reported results for the fourth quarter and year ended December 31, 2022.<\/p>\n

\n Financial Overview<\/strong>\n <\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/td>\n\n Three months ended December 31,<\/strong>\n <\/td>\n\u00a0<\/td>\n\n Year ended December 31,<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\n 2022<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n 2022<\/strong>\n <\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n\u00a0<\/td>\n<\/tr>\n
\u00a0<\/td>\n\n (In millions, except percentage and per share amounts)<\/strong>\n <\/td>\n<\/tr>\n
Net sales<\/td>\n$<\/td>\n648.2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n589.7<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n2,237.6<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n$<\/td>\n2,188.0<\/td>\n\u00a0<\/td>\n<\/tr>\n
Net income<\/td>\n\u00a0<\/td>\n16.1<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n41.0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n74.0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n146.6<\/td>\n\u00a0<\/td>\n<\/tr>\n
Net income as a percentage of net sales<\/td>\n\u00a0<\/td>\n2.5<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n7.0<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3.3<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.7<\/td>\n%<\/td>\n<\/tr>\n
Adjusted Net Income (Non-GAAP measure*)<\/td>\n\u00a0<\/td>\n25.2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n38.5<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n115.0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n164.5<\/td>\n\u00a0<\/td>\n<\/tr>\n
Adjusted Net Income (Non-GAAP measure*) as a percentage of net sales<\/td>\n\u00a0<\/td>\n3.9<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n6.5<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n5.1<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n7.5<\/td>\n%<\/td>\n<\/tr>\n
Earnings Per Share (\u201cEPS\u201d) – Diluted<\/td>\n\u00a0<\/td>\n0.20<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n0.50<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n0.90<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.78<\/td>\n\u00a0<\/td>\n<\/tr>\n
Adjusted EPS (Non-GAAP measure*)<\/td>\n\u00a0<\/td>\n0.31<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n0.46<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n1.39<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n2.00<\/td>\n\u00a0<\/td>\n<\/tr>\n
Adjusted EBITDAP (Non-GAAP measure*)<\/td>\n\u00a0<\/td>\n52.3<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n70.9<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n238.8<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n298.5<\/td>\n\u00a0<\/td>\n<\/tr>\n
Adjusted EBITDAP (Non-GAAP measure*) as a percentage of net sales<\/td>\n\u00a0<\/td>\n8.1<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n12.0<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n10.7<\/td>\n%<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n13.6<\/td>\n%<\/td>\n<\/tr>\n
Cash provided by (used in) operating activities<\/td>\n\u00a0<\/td>\n25.1<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n104.2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(48.7<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n199.6<\/td>\n\u00a0<\/td>\n<\/tr>\n
Free cash flow (Non-GAAP measure*)<\/td>\n\u00a0<\/td>\n8.6<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n84.2<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n(89.4<\/td>\n)<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n162.3<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/table>\n

_______
* The Company provides Non-GAAP measures as a supplement to financial results based on accounting principles generally accepted in the United States (\u201cGAAP\u201d). A reconciliation of the Non-GAAP measures to the most directly comparable GAAP measures is included at the end of the release.<\/p>\n

Aerojet Rocketdyne Holdings, Inc. reported a record high in quarterly sales of $648 million and full year sales of $2,238 million, which represents an increase of 9.9% for the quarter and 2.3% for the year. Book to bill for the year was 1.0, resulting in strong backlog of $6.8 billion, $2.3 billion of which is expected to convert to sales in the next 12 months. Free cash flow was positive in the quarter at $9 million bringing full year free cash flow to a negative $89 million. This was largely driven by working capital growth on large multi-year fixed price defense contracts, higher cash taxes related to tax legislation requiring the capitalization of research and development expenditures, and cash expenditures for the proxy contest, legal matters, and the terminated Lockheed Martin merger. Adjusted EBITDAP margins excluding changes in contract estimates were 8.3% in the quarter and 12.1% for the full year. Excluding accelerated and increased stock compensation expense related to the announced L3Harris Technologies, Inc. (\u201cL3Harris\u201d) transaction, Adjusted EBITDAP margins excluding changes in contract estimates were 12.0% and 13.2% for the quarter and full year, respectively.<\/p>\n

\u201cAerojet Rocketdyne delivered record sales for the fourth quarter and for the full year and book to bill of 1.0, as we stayed focused on our business fundamentals and continued to build on our strong foundation. I commend our team\u2019s perseverance, which is reflected in our positive results,\u201d said Eileen P. Drake, Aerojet Rocketdyne CEO and president. \u201cThe highlight of the quarter was the central role we played in enabling humanity\u2019s next giant leap with the successful launch of NASA\u2019s super-heavy lift Space Launch System exploration rocket and the Orion spacecraft\u2019s splashdown after traveling more than 1.4 million miles on a nearly 26-day mission around and beyond the Moon. Aerojet Rocketdyne provided 39 propulsive elements for the Artemis\u00a0I mission, as well as 14 high pressure tanks. Additionally, an Aerojet Rocketdyne scramjet recently powered the Lockheed Martin version of DARPA\u2019s Hypersonic Airbreathing Weapon Concept (\u201cHAWC\u201d) missile through its second and final successful flight test, capping a program that accomplished its initial objectives and is providing critical data to inform Air Force Research Laboratory hypersonic technology maturation efforts. We also successfully tested our next generation large solid rocket motor, called eSR-19, which validated advanced motor technology while demonstrating the production maturity of new and upgraded facilities in both Camden, Arkansas and Huntsville, Alabama. Aerojet Rocketdyne has begun hiring for our third campus in Huntsville, Alabama, a 379,000 sq. ft. manufacturing facility that will enable increased manufacturing capacity for our nation\u2019s defense production needs. Finally, in December, we announced an agreement to be acquired by L3Harris in an all-cash transaction that will accelerate innovation and strengthen competition for national security and space exploration propulsion solutions. In addition to providing a premium value to our shareholders, the transaction with L3Harris provides tremendous benefits for our employees, customers, partners and the communities in which we operate.\u201d<\/p>\n

\n Fourth quarter of 2022 compared with fourth quarter of 2021<\/strong>\n <\/p>\n

The increase in net sales was primarily driven by an increase on the Next Generation Interceptor (\u201cNGI\u201d) and Standard Missile programs partially offset by lower volume in the Patriot Advanced Capability-3 (\u201cPAC-3\u201d) program. Further, as a result of the 2022 calendar, Aerojet Rocketdyne had 53 weeks of operations in 2022 compared with 52 weeks of operations in 2021. The additional week of operations, which occurred in the fourth quarter of 2022, and accounted for $42.3\u00a0million in additional net sales, is included in the discussion above regarding program changes.<\/p>\n

The decrease in net income was primarily driven by (i) higher merger-related expenses (discussed below) and (ii) an increase in stock-based compensation. These factors were partially offset by lower retirement benefits expense. The Company had $2.2 million of net unfavorable changes in contract estimates on net income in the current period compared with $0.6 million of net unfavorable changes in the fourth quarter of 2021.<\/p>\n

\n 2022 compared with 2021<\/strong>\n <\/p>\n

The increase in net sales was primarily driven by an increase on the NGI program partially offset by lower sales in the RS-25 program. Further, as a result of the 2022 calendar, Aerojet Rocketdyne had 53 weeks of operations in 2022 compared with 52 weeks of operations in 2021. The additional week of operations, which occurred in the fourth quarter of 2022, and accounted for $42.3\u00a0million in additional net sales, is included in the discussion above regarding program changes.<\/p>\n

The decrease in net income was primarily driven by: (i) costs associated with the proxy contest and associated litigation matters in the current period; (ii) cost growth from supply chain disruptions and necessary technical and manufacturing changes on a portion of the Standard Missile program; (iii) costs associated with legal matters in the current period; (iv) favorable contract performance on the RS-68 program in the prior year; (v) increased costs on debt settlements in the current period; and (vi) higher merger-related expenses in the current period. These factors were partially offset by lower retirement benefits expense. The Company had $23.1 million of net unfavorable changes in contract estimates on net income in 2022 compared with net favorable changes of $23.5 million in 2021.<\/p>\n

\n Backlog<\/strong>\n <\/p>\n

As of December\u00a031, 2022, the Company\u2019s total remaining performance obligations, also referred to as backlog, totaled $6.8 billion. The Company expects to recognize approximately 33%, or $2.3 billion, of the remaining performance obligations as sales over the next twelve months. A summary of the Company\u2019s backlog is as follows:<\/p>\n\n\n\n\n\n\n\n\n
\u00a0<\/td>\n\n As of December 31,<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\n 2022<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\n (In billions)<\/strong>\n <\/td>\n<\/tr>\n
Funded backlog<\/td>\n$<\/td>\n3.1<\/td>\n\u00a0<\/td>\n$<\/td>\n3.1<\/td>\n<\/tr>\n
Unfunded backlog<\/td>\n\u00a0<\/td>\n3.7<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n3.7<\/td>\n<\/tr>\n
Total backlog<\/td>\n$<\/td>\n6.8<\/td>\n\u00a0<\/td>\n$<\/td>\n6.8<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/table>\n

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\u2019s control.<\/p>\n

\n L3Harris Merger Agreement<\/strong>\n <\/p>\n

On December 17, 2022, the Company entered into an Agreement and Plan of Merger (the \u201cMerger Agreement\u201d), with L3Harris and Aquila Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of L3Harris (\u201cMerger Sub\u201d), pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company (the \u201cMerger\u201d) with the Company being the surviving corporation and a wholly-owned subsidiary of L3Harris.<\/p>\n

Subject to the terms and conditions set forth in the Merger Agreement, each share of the Company\u2019s common stock outstanding as of immediately prior to the effective time of the Merger will be canceled and converted into the right to receive $58.00 in cash, without interest, plus, if the closing occurs after September 17, 2023, $0.0025 for each calendar day elapsed after such date to and including the closing date.<\/p>\n

Closing of the Merger is anticipated to occur in 2023, subject to various customary conditions, including our stockholder approval and regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.<\/p>\n

In 2022, the Company recorded $25.3\u00a0million of costs associated with the Merger with L3Harris. The components of the Merger costs are as follows (in millions):<\/p>\n\n\n\n\n\n
Consulting and other professional costs<\/td>\n$<\/td>\n19.6<\/td>\n<\/tr>\n
Legal<\/td>\n\u00a0<\/td>\n4.0<\/td>\n<\/tr>\n
Internal labor (including $0.7\u00a0million of recurring employee costs)<\/td>\n\u00a0<\/td>\n1.7<\/td>\n<\/tr>\n
\u00a0<\/td>\n$<\/td>\n25.3<\/td>\n<\/tr>\n<\/table>\n

\n Retirement <\/strong>
\n Benefit Plans<\/strong>\n <\/p>\n

The Company\u2019s tax-qualified pension plan assets were as follows:<\/p>\n\n\n\n\n\n\n
\u00a0<\/td>\n\n As of December 31,<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\n 2022<\/strong>\n <\/td>\n\u00a0<\/td>\n\n 2021<\/strong>\n <\/td>\n<\/tr>\n
\u00a0<\/td>\n\n (In millions)<\/strong>\n <\/td>\n<\/tr>\n
Tax-qualified pension plan assets<\/td>\n$<\/td>\n706.9<\/td>\n\u00a0<\/td>\n$<\/td>\n1,005.0<\/td>\n<\/tr>\n
\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/table>\n

As of December\u00a031, 2022, the Company\u2019s unfunded pension obligation for the tax-qualified pension plan was $229.3 million. The changes in the pension obligation for the tax-qualified pension plan were as follows (in millions):<\/p>\n\n\n\n\n\n\n\n\n
Balance as of December 31, 2021<\/td>\n$<\/td>\n255.9<\/td>\n\u00a0<\/td>\n<\/tr>\n
Interest costs<\/td>\n\u00a0<\/td>\n35.1<\/td>\n\u00a0<\/td>\n<\/tr>\n
Loss on assets (1)<\/td>\n\u00a0<\/td>\n212.5<\/td>\n\u00a0<\/td>\n<\/tr>\n
Company contributions<\/td>\n\u00a0<\/td>\n(15.4<\/td>\n)<\/td>\n<\/tr>\n
Discount rate increase (2)<\/td>\n\u00a0<\/td>\n(239.9<\/td>\n)<\/td>\n<\/tr>\n
Other, net<\/td>\n\u00a0<\/td>\n(18.9<\/td>\n)<\/td>\n<\/tr>\n
Balance as of December 31, 2022<\/td>\n$<\/td>\n229.3<\/td>\n\u00a0<\/td>\n<\/tr>\n<\/table>\n

_______
(1) The Company\u2019s effective rate of return on plan assets was (21.6)% during 2022.
(2) The discount rate used to determine the Company\u2019s pension obligation was 5.56% as of December\u00a031, 2022, compared with 2.90% as of December 31, 2021.<\/p>\n

\n Revision of Previously Issued Consolidated Financial Statements<\/strong>\n <\/p>\n

During the three months ended March 31, 2022, the Company identified an error in its accounting for income taxes associated with its 2\u00bc% Notes. Upon issuance of the 2\u00bc% Notes in 2016, the Company did not record the applicable deferred tax liability associated with the conversion option that had been reflected in other capital, which resulted in an overstatement of other capital, an understatement of deferred tax liabilities and an error in income tax expense in subsequent periods. The Company evaluated the errors and concluded that the errors were not material, either individually or in the aggregate, to its current or previously issued consolidated financial statements. Accordingly, the accompanying financial tables have been revised to correct for such immaterial errors.<\/p>\n

\n Forward-Looking Statements<\/strong>\n <\/p>\n

This release contains certain \u201cforward-looking statements\u201d 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\u2019s management are based on management\u2019s 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\u2019s management that are not clearly historical in nature are forward-looking and the words \u201canticipate,\u201d \u201cbelieve,\u201d \u201cexpect,\u201d \u201cestimate,\u201d \u201cplan,\u201d 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\u2019s forward-looking statements. 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:<\/p>\n