Aerojet Rocketdyne Holdings
AEROJET ROCKETDYNE HOLDINGS, INC. (Form: 10-K/A, Received: 08/17/2016 06:01:40)


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  FORM 10-K/A
Amendment No. 1
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended: November 30, 2015
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                       to                        
Commission File Number 1-01520
   Aerojet Rocketdyne Holdings, Inc.
( Exact name of registrant as specified in its charte r)
Delaware
 
34-0244000
(State of Incorporation)
 
(I.R.S. Employer
Identification No.)
2001 Aerojet Road
Rancho Cordova, California
 
95742
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code
(916) 355-4000
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
 
Name of each exchange on which registered
 
Common Stock, $0.10 par value per share
 
New York Stock Exchange and
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ý    No   ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý       No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   ý       No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer   ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Yes   ¨       No  ý
The aggregate market value of the voting common equity held by nonaffiliates of the registrant as of May 31, 2015 was approximately $1.3 billion .
As of January 15, 2016 , there were 64.4 million  outstanding shares of the Company’s Common Stock, including redeemable common stock and unvested common shares, $0.10 par value.
Portions of the 2016 Proxy Statement of Aerojet Rocketdyne Holdings, Inc. relating to its annual meeting of stockholders scheduled to be held on April 27, 2016 are incorporated by reference into Part III of this Report.





Explanatory Note
In this Amendment No. 1 to the Annual Report on Form 10-K/A (the “Amended Filing”) for the year ended November 30, 2015, Aerojet Rocketdyne Holdings, Inc. (the “Company”) is updating the Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on February 16, 2016 (the “Original Filing”) to (i) reflect a revision to the disclosure on our assessment of internal controls over financial reporting in Item 9A and (ii) update Item 8 to reflect the revised “Report of Independent Registered Certified Public Accounting Firm” of PricewaterhouseCoopers LLP. These updates are a result of identifying an additional material weakness in the Company’s internal control over financial reporting related to the completeness and accuracy of the Company's accounting for income taxes. Except for the inclusion of new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), a revised report and new consent of the independent registered public accounting firm (and related amendment to the Exhibit Index to reflect the addition of such certifications and consent), and as required to reflect the change in Item 9A, this Amended Filing speaks only as of the date of the Original Filing and does not modify or update any other disclosures contained in our Original Filing. This Amended Filing should be read in conjunction with the Original Filing and reports filed with the SEC subsequent to the Original Filing.
PART II




Item 8.
Consolidated Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Aerojet Rocketdyne Holdings, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive (loss) income, of stockholders’ (deficit) equity, and of cash flows present fairly, in all material respects, the financial position of Aerojet Rocketdyne Holdings, Inc. and its subsidiaries as of November 30, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 2015 in conformity with accounting principles generally accepted in the United States of America. Management and we previously concluded that the Company did not maintain effective internal control over financial reporting as of November 30, 2015 because of the material weaknesses related to (a) the purchase accounting considerations for long-term customer contracts acquired as part of a business combination, and (b) the integration of the Company’s accounting policies, practices and controls applicable to the acquired Rocketdyne Business, including those over the segmentation criteria applicable to long-term contracts. However, management has subsequently determined that a material weakness in internal control over financial reporting related to the preparation and review of the financial information used in the calculation of the Company’s annual and quarterly income tax provision also existed as of November 30, 2015. Accordingly, Management’s Report on Internal Control over Financial Reporting and our opinion on the effectiveness of internal control over financial reporting has been restated to include this additional material weakness. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of November 30, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) because material weaknesses in internal control over financial reporting related to ineffective controls over (a) the purchase accounting considerations for long-term customer contracts acquired as part of a business combination, (b) the integration of the Company’s accounting policies, practices and controls applicable to the acquired Rocketdyne Business, including those over the segmentation criteria applicable to long-term contracts, and (c) the completeness and accuracy of the Company’s accounting for income taxes, including the income tax provision and related tax assets and liabilities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial statements, the Company has restated its 2014 and 2013 consolidated financial statements to correct for errors.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

3



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Sacramento, California
February 16, 2016, except with respect to our opinion on internal control over financial reporting insofar as it relates to the effects of the matter described in the penultimate paragraph of Management’s Report on Internal Control over Financial Reporting, as to which the date is August 16, 2016


4




Aerojet Rocketdyne Holdings, Inc.
Consolidated Statements of Operations
 
Year Ended
 
2015
 
2014
 
2013
 
 
 
As Restated
 
As Restated
 
(In millions, except per share amounts)
Net sales
$
1,708.3

 
$
1,602.2

 
$
1,378.1

Operating costs and expenses:
 
 
 
 
 
Cost of sales (exclusive of items shown separately below)
1,459.5

 
1,406.2

 
1,234.3

AR1 research and development (see Note 1)
32.1

 

 

Selling, general and administrative
49.0

 
38.2

 
53.6

Depreciation and amortization
65.1

 
63.7

 
43.5

Other expense, net:
 
 
 
 
 
Loss on debt repurchased
1.9

 
60.6

 
5.0

Legal settlement
50.0

 

 

Other
17.4

 
13.9

 
28.9

Total operating costs and expenses
1,675.0

 
1,582.6

 
1,365.3

Operating income
33.3

 
19.6

 
12.8

Non-operating (income) expense:
 
 
 
 
 
Interest income
(0.3
)
 
(0.1
)
 
(0.2
)
Interest expense
50.4

 
52.7

 
48.7

Total non-operating expense, net
50.1

 
52.6

 
48.5

Loss from continuing operations before income taxes
(16.8
)
 
(33.0
)
 
(35.7
)
Income tax provision (benefit)
0.3

 
16.3

 
(198.4
)
(Loss) income from continuing operations
(17.1
)
 
(49.3
)
 
162.7

Income (loss) from discontinued operations, net of income taxes
0.9

 
(0.7
)
 
0.2

Net (loss) income
$
(16.2
)
 
$
(50.0
)
 
$
162.9

(Loss) income per share of common stock
 
 
 
 
 
Basic:
 
 
 
 
 
(Loss) income per share from continuing operations
$
(0.28
)
 
$
(0.85
)
 
$
2.68

Income (loss) per share from discontinued operations, net of income taxes
0.01

 
(0.01
)
 

Net (loss) income per share
$
(0.27
)
 
$
(0.86
)
 
$
2.68

Diluted:
 
 
 
 
 
(Loss) income per share from continuing operations
$
(0.28
)
 
$
(0.85
)
 
$
2.05

Income (loss) per share from discontinued operations, net of income taxes
0.01

 
(0.01
)
 

Net (loss) income per share
$
(0.27
)
 
$
(0.86
)
 
$
2.05

Weighted average shares of common stock outstanding, basic
61.1

 
57.9

 
59.6

Weighted average shares of common stock outstanding, diluted
61.1

 
57.9

 
81.9

See Notes to Consolidated Financial Statements.

5



Aerojet Rocketdyne Holdings, Inc.
Consolidated Statements of Comprehensive (Loss) Income

 
Year Ended
 
2015
 
2014
 
2013
 
 
 
As Restated
 
As Restated
 
(In millions)
Net (loss) income
$
(16.2
)
 
$
(50.0
)
 
$
162.9

Other comprehensive (loss) income:
 
 
 
 
 
Amortization of net actuarial losses, net of $31.3 million, $20.4 million, and $1.2 million of income taxes in fiscal 2015, 2014, and 2013, respectively
49.4

 
31.1

 
91.3

Actuarial (losses) gains, net of $36.9 million, $89.8 million, and $1.1 million of income taxes in fiscal 2015, 2014, and 2013, respectively
(56.6
)
 
(136.0
)
 
167.6

Amortization of prior service credits, net of $0.4 million, $0.4 million and $0.1 million of income taxes in fiscal 2015, 2014, and 2013, respectively
(0.8
)
 
(0.5
)
 
(0.9
)
Comprehensive (loss) income
$
(24.2
)
 
$
(155.4
)
 
$
420.9


See Notes to Consolidated Financial Statements.

6



Aerojet Rocketdyne Holdings, Inc.
Consolidated Balance Sheets
 
As of November 30,
 
2015
 
2014
 
 
 
As Restated
 
(In millions, except per share amounts)
ASSETS
Current Assets
 
 
 
Cash and cash equivalents
$
211.1

 
$
265.9

Accounts receivable
171.5

 
170.5

Inventories
157.5

 
138.0

Recoverable from the U.S. government and other third parties for environmental remediation costs
24.0

 
19.4

Receivable from Northrop Grumman Corporation (“Northrop”)
6.0

 
6.0

Other current assets, net
61.5

 
38.6

Income taxes
2.9

 
2.1

Deferred income taxes
28.1

 
19.9

Total Current Assets
662.6

 
660.4

Noncurrent Assets
 
 
 
Property, plant and equipment, net
365.8

 
366.5

Real estate held for entitlement and leasing
86.2

 
94.4

Recoverable from the U.S. government and other third parties for environmental remediation costs
210.4

 
87.2

Receivable from Northrop
62.7

 
68.8

Deferred income taxes
286.7

 
261.4

Goodwill
158.1

 
158.1

Intangible assets
108.8

 
122.2

Income taxes
7.9

 
6.6

Other noncurrent assets, net
85.7

 
93.0

Total Noncurrent Assets
1,372.3

 
1,258.2

Total Assets
$
2,034.9

 
$
1,918.6

LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ DEFICIT
Current Liabilities
 
 
 
Short-term borrowings and current portion of long-term debt
$
5.3

 
$
5.3

Accounts payable
105.2

 
104.0

Reserves for environmental remediation costs
32.6

 
31.9

Postretirement medical and life insurance benefits
6.0

 
6.4

Advance payments on contracts
203.7

 
197.4

Other current liabilities
201.3

 
221.4

Total Current Liabilities
554.1

 
566.4

Noncurrent Liabilities
 
 
 
Senior debt
88.8

 
93.8

Second-priority senior notes
460.0

 
460.0

Convertible subordinated notes
84.8

 
133.8

Other debt
13.1

 
89.3

Reserves for environmental remediation costs
273.5

 
134.1

Pension benefits
566.2

 
482.8

Postretirement medical and life insurance benefits
45.5

 
51.7

Other noncurrent liabilities
94.4

 
80.6

Total Noncurrent Liabilities
1,626.3

 
1,526.1

Total Liabilities
2,180.4

 
2,092.5

Commitments and contingencies (Note 9)

 

Redeemable common stock, par value of $0.10; 0.1 million shares issued and outstanding as of November 30, 2015 and 2014
0.9

 
1.6

Stockholders’ Deficit
 
 
 
Preference stock, par value of $1.00; 15.0 million shares authorized; none issued or outstanding

 

Common stock, par value of $0.10; 150.0 million shares authorized; 62.9 million shares issued and outstanding as of November 30, 2015; 56.9 million shares issued and outstanding as of November 30, 2014
6.5

 
5.9

Other capital
340.1

 
287.4

Treasury stock at cost, 3.5 million shares as of November 30, 2015 and 2014
(64.5
)
 
(64.5
)
Accumulated deficit
(86.8
)
 
(70.6
)
Accumulated other comprehensive loss, net of income taxes
(341.7
)
 
(333.7
)
Total Stockholders’ Deficit
(146.4
)
 
(175.5
)
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit
$
2,034.9

 
$
1,918.6

See Notes to Consolidated Financial Statements.

7



Aerojet Rocketdyne Holdings, Inc.
Consolidated Statements of Stockholders’ (Deficit) Equity
 
Common Stock
 
 
 
 
 
 
 
Accumulated Other Comprehensive Loss
 
Total Stockholders' (Deficit) Equity
 
Shares
 
Amount
 
Other Capital
 
Treasury Stock
 
Accumulated Deficit
 
 
 
 
 
 
 
As Restated
 
 
 
As Restated
 
As Restated
 
As Restated
 
(In millions)
November 30, 2012
58.9

 
$
5.9

 
$
269.6

 
$

 
$
(183.5
)
 
$
(486.3
)
 
$
(394.3
)
Net income

 

 

 

 
162.9

 

 
162.9

Amortization of net actuarial losses, net of income taxes

 

 

 

 

 
91.3

 
91.3

Actuarial gains arising during the period, net of income taxes

 

 

 

 

 
167.6

 
167.6

Amortization of prior service credits, net of income taxes

 

 

 

 

 
(0.9
)
 
(0.9
)
Conversion of debt to common stock
0.2

 

 
1.6

 

 

 

 
1.6

Reclassification from redeemable common stock
0.4

 

 
3.7

 

 

 

 
3.7

Stock-based compensation and shares issued under equity plans and other, net
0.4

 

 
5.4

 

 

 

 
5.4

November 30, 2013
59.9

 
5.9

 
280.3

 

 
(20.6
)
 
(228.3
)
 
37.3

Net loss

 

 

 

 
(50.0
)
 

 
(50.0
)
Amortization of net actuarial losses, net of income taxes

 

 

 

 

 
31.1

 
31.1

Actuarial losses arising during the period, net of income taxes

 

 

 

 

 
(136.0
)
 
(136.0
)
Amortization of prior service credits, net of income taxes

 

 

 

 

 
(0.5
)
 
(0.5
)
Reclassification from redeemable common stock
0.1

 

 
(1.4
)
 

 

 

 
(1.4
)
Tax benefit from shares issued under equity plans

 

 
1.3

 

 

 

 
1.3

Purchase of treasury stock
(3.5
)
 

 

 
(64.5
)
 

 

 
(64.5
)
Stock-based compensation and shares issued under equity plans, net
0.4

 

 
7.2

 

 

 

 
7.2

November 30, 2014
56.9

 
5.9

 
287.4

 
(64.5
)
 
(70.6
)
 
(333.7
)
 
(175.5
)
Net loss

 

 

 

 
(16.2
)
 

 
(16.2
)
Amortization of net actuarial losses, net of income taxes

 

 

 

 

 
49.4

 
49.4

Actuarial losses and prior service costs arising during the period, net of income taxes

 

 

 

 

 
(56.6
)
 
(56.6
)
Amortization of prior service credits, net of income taxes

 

 

 

 

 
(0.8
)
 
(0.8
)
Reclassification from redeemable common stock
(0.1
)
 

 
0.7

 

 

 

 
0.7

Tax benefit from shares issued under equity plans

 

 
2.5

 

 

 

 
2.5

Conversion of debt to common stock
5.5

 
0.5

 
48.5

 

 

 

 
49.0

Repurchase of shares to satisfy tax withholding obligations
(0.3
)
 

 
(6.7
)
 

 

 

 
(6.7
)
Stock-based compensation and shares issued under equity plans, net
0.9

 
0.1

 
7.7

 

 

 

 
7.8

November 30, 2015
62.9

 
$
6.5

 
$
340.1

 
$
(64.5
)
 
$
(86.8
)
 
$
(341.7
)
 
$
(146.4
)
See Notes to Consolidated Financial Statements.

8



Aerojet Rocketdyne Holdings, Inc.
Consolidated Statements of Cash Flows
 
Year Ended
 
2015
 
2014
 
2013
 
 
 
As Restated
 
As Restated
 
(In millions)
Operating Activities
 
 
 
 
 
Net (loss) income
$
(16.2
)
 
$
(50.0
)
 
$
162.9

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
 
 
(Income) loss  from discontinued operations, net of income taxes
(0.9
)
 
0.7

 
(0.2
)
Depreciation and amortization
65.1

 
63.7

 
43.5

Amortization of financing costs
2.7

 
3.6

 
4.5

Stock-based compensation
8.6

 
5.7

 
14.1

Retirement benefit expense
67.6

 
36.5

 
65.0

Loss on debt repurchased
1.9

 
60.6

 
5.0

Loss on bank amendment

 
0.2

 

Loss on disposal of long-lived assets
0.7

 
2.8

 

Gain on sale of technology
(1.0
)
 
(6.8
)
 

Tax benefit on stock-based awards
(2.5
)
 
(1.3
)
 
(0.2
)
Changes in assets and liabilities, net of effects from acquisition:
 
 
 
 
 
Accounts receivable
(1.0
)
 
28.9

 
(24.0
)
Inventories
(19.5
)
 
(32.0
)
 
(26.4
)
Other current assets, net
(22.8
)
 
(10.8
)
 
(4.4
)
Income tax receivable
(2.9
)
 
3.7

 
(11.8
)
Real estate held for entitlement and leasing
(7.8
)
 
(15.0
)
 
(4.4
)
Receivable from Northrop
6.1

 
(2.8
)
 
3.3

Recoverable from the U.S. government and other third parties for environmental remediation costs
(127.8
)
 
8.5

 
15.1

Other noncurrent assets
11.9

 
(24.1
)
 
(2.0
)
Accounts payable
(5.1
)
 
(18.2
)
 
49.7

Retirement benefits
(4.9
)
 
(5.3
)
 
(5.4
)
Advance payments on contracts
6.3

 
96.9

 
(47.8
)
Other current liabilities
(17.8
)
 
19.8

 
57.8

Deferred income taxes
(27.6
)
 
(7.1
)
 
(199.5
)
Reserves for environmental remediation costs
140.1

 
(5.3
)
 
(18.2
)
Other noncurrent liabilities and other
12.0

 
(0.2
)
 
0.9

Net cash provided by continuing operations
65.2

 
152.7

 
77.5

Net cash used in discontinued operations
(0.1
)
 
(2.1
)
 
(0.1
)
Net Cash Provided by Operating Activities
65.1

 
150.6

 
77.4

Investing Activities
 
 
 
 
 
Purchases of restricted cash investments

 

 
(470.0
)
Sale of restricted cash investments

 

 
470.0

Purchase of Rocketdyne Business

 
0.2

 
(411.2
)
Purchases of investments

 

 
(0.5
)
Proceeds from sale of technology
1.0

 
7.5

 

Capital expenditures
(36.8
)
 
(43.4
)
 
(63.2
)
Net Cash Used in Investing Activities
(35.8
)
 
(35.7
)
 
(474.9
)
Financing Activities
 
 
 
 
 
Proceeds from issuance of debt

 
189.0

 
460.0

Debt issuance costs

 
(4.2
)
 
(14.9
)
Debt repayments/repurchases
(81.2
)
 
(166.3
)
 
(12.8
)
Proceeds from shares issued under equity plans, net
1.3

 
0.2

 
0.7

Repurchase of shares to satisfy tax withholding obligations
(6.7
)
 
(2.1
)
 
(0.2
)
Purchase of treasury stock

 
(64.5
)
 

Tax benefit on stock-based awards
2.5

 
1.3

 
0.2

Net Cash (Used in) Provided by Financing Activities
(84.1
)
 
(46.6
)
 
433.0

Net (Decrease) Increase in Cash and Cash Equivalents
(54.8
)
 
68.3

 
35.5

Cash and Cash Equivalents at Beginning of Period
265.9

 
197.6

 
162.1

Cash and Cash Equivalents at End of Period
$
211.1

 
$
265.9

 
$
197.6

Supplemental disclosures of cash flow information
 
 
 
 
 
Cash paid for interest
$
49.3

 
$
46.9

 
$
33.7

Cash paid for income taxes, net
27.9

 
4.9

 
8.4

Conversion of debt to common stock
49.0

 

 
1.6

See Notes to Consolidated Financial Statements.

9



Aerojet Rocketdyne Holdings, Inc.
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies, (As Restated for fiscal 2014 and 2013)
a.  Basis of Presentation and Nature of Operations
The consolidated financial statements of Aerojet Rocketdyne Holdings, Inc. (“Aerojet Rocketdyne Holdings” or the “Company”) include the accounts of the parent company and its 100% owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to financial information for prior years to conform to the current year’s presentation.
The Company is a manufacturer of aerospace and defense products and systems with a real estate segment. The Company’s continuing operations are organized into two segments:
Aerospace and Defense — includes the operations of the Company’s wholly-owned subsidiary Aerojet Rocketdyne, Inc. (“Aerojet Rocketdyne”), a leading technology-based designer, developer and manufacturer of aerospace and defense products and systems for the United States (“U.S.”) government, including the Department of Defense (“DoD”), the National Aeronautics and Space Administration (“NASA”), major aerospace and defense prime contractors as well as portions of the commercial sector. Aerojet Rocketdyne is a world-recognized engineering and manufacturing company that specializes in the development and production of propulsion systems for defense and space applications, armament systems for precision tactical systems and munitions, and is considered a domestic market leader in launch propulsion, in-space propulsion, missile defense propulsion, tactical missile propulsion and hypersonic propulsion systems.
Real Estate — includes the activities of the Company’s wholly-owned subsidiary Easton Development Company, LLC (“Easton”) related to the re-zoning, entitlement, sale, and leasing of the Company’s excess real estate assets. The Company owns approximately 11,500 acres of land adjacent to U.S. Highway 50 between Rancho Cordova and Folsom, California east of Sacramento (“Sacramento Land”). The Company is currently in the process of seeking zoning changes and other governmental approvals on a portion of the Sacramento Land to optimize its value.
In July 2012, the Company signed a stock and asset purchase agreement (the “Original Purchase Agreement”) with United Technologies Corporation (“UTC”) to acquire the Pratt & Whitney Rocketdyne division (the “Rocketdyne Business”) from UTC for $550 million (the “Acquisition”). On June 12, 2013, the Company and UTC entered into an amended and restated stock and asset purchase agreement (the “Amended and Restated Purchase Agreement”), which amended and restated the Original Purchase Agreement, as amended. On June 14, 2013 , the Company completed the acquisition of substantially all of the Rocketdyne Business pursuant to the Amended and Restated Purchase Agreement. The aggregate consideration to UTC was $411 million which represents the initial purchase price of $550 million reduced by $55 million relating to the potential future acquisition of UTC’s 50% ownership interest of RD Amross, LLC ("RD Amross" a joint venture with NPO Energomash of Khimki, Russia which sells RD-180 engines to RD Amross) and the portion of the UTC business that markets and supports the sale of RD-180 engines (the “RDA Acquisition”). The acquisition of UTC’s 50% ownership interest of RD Amross and UTC’s related business was contingent upon certain conditions including receipt of certain Russian governmental regulatory approvals, which were not obtained. Pursuant to the terms of the Amended and Restated Purchase Agreement, on June 14, 2015, the Company’s obligations to consummate the RDA Acquisition expired. See Note 5 for additional information.
The Company’s fiscal year ends on November 30 of each year. The fiscal year of the Company’s subsidiary, Aerojet Rocketdyne, ends on the last Saturday of November. As a result of the 2013 calendar, Aerojet Rocketdyne had 53 weeks of operations in fiscal 2013 compared to 52 weeks of operations in fiscal 2015 and 2014. The additional week of operations, which occurred in the first quarter of fiscal 2013, accounted for $27.8 million in additional net sales.
On August 31, 2004, the Company completed the sale of its GDX Automotive business. On November 30, 2005, the Company completed the sale of the Fine Chemicals business. The remaining related subsidiaries after the sale of GDX Automotive and the Fine Chemicals business are classified as discontinued operations.
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Restatement
This Annual Report on Form 10-K for the year ended November 30, 2015 (“Form 10-K”) includes the restatement of certain of the Company's previously issued consolidated financial statements and selected financial data. It also amends previously filed management’s discussion and analysis of financial condition and results of operations and other disclosures for the periods presented in this Form 10-K. See Note 2.

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AR1 Research and Development
Company-sponsored research and development ("R&D") expenses (reported as a component of cost of sales) are generally allocated among all contracts and programs in progress under U.S. government contractual arrangements (see Note 1(r)). The Company's newest large liquid booster engine development project, the AR1, recorded $16.1 million of such costs during fiscal 2015. In the third quarter of fiscal 2015, the Company began separately reporting the portion of the engine development expenses associated with the AR1 project which are currently not allocated across all contracts and programs in progress under U.S. governmental contractual arrangements.  The total of these costs not charged to the U.S. governmental contractual arrangements amounted to $32.1 million in fiscal 2015 bringing the aggregate total AR1 R&D costs incurred during fiscal 2015 to $48.2 million .
b.  Cash and Cash Equivalents
All highly liquid debt instruments purchased with a remaining maturity at the date of purchase of three months or less are considered to be cash equivalents. The Company aggregates its cash balances by bank, and reclassifies any negative balances, if applicable, to accounts payable.

c.  Fair Value of Financial Instruments
The accounting standards use a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following are measured at fair value:
 
 
 
Fair value measurement at November 30, 2015
 
Total
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Money market funds
$
187.2

 
$
187.2

 
$

 
$

 
 
 
Fair value measurement at November 30, 2014
 
Total
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
(In millions)
Money market funds
$
233.4

 
$
233.4

 
$

 
$

As of November 30, 2015, a summary of cash and cash equivalents and the grantor trust by investment type is as follows:
 
Total
 
Cash and
Cash Equivalents
 
Money Market
Funds
 
(In millions)
Cash and cash equivalents
$
211.1

 
$
33.8

 
$
177.3

Grantor trust (included as a component of other current and noncurrent assets)
9.9

 

 
9.9

 
$
221.0

 
$
33.8

 
$
187.2

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued compensation, and other accrued liabilities, approximate fair value because of their short maturities.
The estimated fair value and principal amount for the Company’s outstanding debt is presented below:

11



 
Fair Value
 
Principal Amount
 
November 30, 2015
 
November 30, 2014
 
November 30, 2015
 
November 30, 2014
 
(In millions)
Term loan
$
93.8

 
$
98.8

 
$
93.8

 
$
98.8

7.125% Second-Priority Senior Secured Notes (“7  1 / 8 % Notes”)
480.1

 
483.6

 
460.0

 
460.0

4  1 / 16 % Convertible Subordinated Debentures (“4  1 / 16 % Debentures”)
164.0

 
248.2

 
84.6

 
133.6

Delayed draw term loan
13.0

 
89.0

 
13.0

 
89.0

Other debt
0.6

 
0.8

 
0.6

 
0.8

 
$
751.5

 
$
920.4

 
$
652.0

 
$
782.2

The fair values of the 7  1 / 8 % Notes and 4  1 / 16 % Debentures were determined using broker quotes that are based on open markets for the Company’s debt securities as of November 30, 2015 and 2014 (both Level 2 securities), respectively. The fair value of the term loans and other debt was determined to approximate carrying value.
d.  Accounts Receivable
Accounts receivable associated with long-term contracts consist of billed and unbilled amounts. Billed amounts include invoices presented to customers that have not been paid. Unbilled amounts relate to revenues that have been recorded and billings that have not been presented to customers. Amounts for overhead disallowances or billing decrements are reflected in unbilled receivables and primarily represent estimates of potential overhead costs which may not be successfully negotiated and collected.
Other receivables represent amounts billed where revenues were not derived from long-term contracts.
e.  Inventories
Inventories are stated at the lower of cost or market, generally using the average cost method. Costs on long-term contracts and programs in progress represent recoverable costs incurred for production, contract-specific facilities and equipment, allocable operating overhead, advances to suppliers, environmental expenses and, in the case of contracts with the U.S. government, allocable costs deemed allowable under U.S. government procurement regulations for bid and proposal, research and development, and general and administrative expenses. The Company capitalizes costs incurred in advance of contract award or funding in inventories if it determines that contract award or funding is probable. Amounts previously capitalized are expensed when a contract award or funding is no longer probable. Pursuant to contract provisions, agencies of the U.S. government and certain other customers have title to, or a security interest in, inventories related to such contracts as a result of performance-based and progress payments. Such progress payments are reflected as an offset against the related inventory balances.
The acquired Rocketdyne Business inventory was recorded at fair value on the date of Acquisition. The fair value adjustment of $6.3 million was not allocable to the Company’s U.S. government contracts and is being expensed to cost of sales as the inventory is delivered to the customer (see Note 5). The Company expensed $0.3 million , $3.2 million , and $2.2 million to cost of sales in fiscal 2015, 2014, and 2013, respectively, related to the inventory fair value adjustment.
f.  Income Taxes
The Company files a consolidated U.S. federal income tax return with its 100% owned consolidated subsidiaries. The deferred tax assets and/or liabilities are determined by multiplying the differences between the financial reporting and tax reporting bases for assets and liabilities by the enacted tax rates expected to be in effect when such differences are recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the period of the enactment date of the change.
The carrying value of the Company’s deferred tax assets is dependent upon its ability to generate sufficient taxable income in the future. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence is considered, including the Company’s past and future performance, the market environment in which it operates, the utilization of tax attributes in the past, the length of carryback and carryforward periods, and evaluation of potential tax planning strategies.
Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, the Company believes that certain positions are likely to be challenged by taxing authorities. Settlement of any challenge can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. The Company’s tax reserves reflect the difference between the tax benefit claimed on tax returns and the amount recognized in the financial statements. The accounting standards provide guidance for the recognition and measurement in financial statements for uncertain tax positions

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taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process, the first step being recognition. The Company determines whether it is more likely than not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on only the technical merits of the position. The technical merits of a tax position are derived from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution with a taxing authority. As the examination process progresses with tax authorities, adjustments to tax reserves may be necessary to reflect taxes payable upon settlement. Tax reserve adjustments related to positions impacting the effective tax rate affect the provision for income taxes. Tax reserve adjustments related to positions impacting the timing of deductions impact deferred tax assets and liabilities.
g.  Property, Plant and Equipment, net
Property, plant and equipment are recorded at cost. Refurbishment costs are capitalized in the property accounts, whereas ordinary maintenance and repair costs are expensed as incurred. Depreciation is computed principally by accelerated methods based on the following useful lives:  
Buildings and improvements
9 - 40  years
Machinery and equipment
5 - 19  years
Costs related to software acquired, developed or modified solely to meet the Company's internal requirements and for which there are no substantive plans to market are capitalized in accordance with the authoritative guidance on accounting for the costs of computer software developed or obtained for internal use. Only costs incurred after the preliminary planning stage of the project and after management has authorized and committed funds to the project are eligible for capitalization.
The acquired Rocketdyne Business property, plant and equipment were recorded at fair value on the date of Acquisition. The fair value adjustment of $81.9 million is not allocable to the Company’s U.S. government contracts and is being depreciated using a weighted average life of approximately 15 years (see Note 5).
h.  Real Estate Held for Entitlement and Leasing
The Company capitalizes all costs associated with the real estate entitlement and leasing process. The Company classifies activities related to the entitlement, sale, and leasing of its excess real estate assets as operating activities in the consolidated statements of cash flows.
i.  Goodwill
Goodwill represents the excess of the purchase price of an acquired enterprise or assets over the fair values of the identifiable assets acquired and liabilities assumed. Tests for impairment of goodwill are performed on an annual basis, or at any other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. The Company evaluated goodwill for impairment as of September 1, 2015 and 2014, and determined that goodwill was no t impaired.
All of the Company’s recorded goodwill resides in the Aerospace and Defense reporting unit. As of September 1, 2015, the Company evaluated goodwill using a “Step Zero" analysis and determined that it was more likely than not that the fair value of the Aerospace and Defense reporting unit exceeded its carrying amount. As of September 1, 2014, the Company performed a “Step One” analysis to evaluate goodwill impairment and determined that the fair value of the Aerospace and Defense reporting unit exceeded its carrying amount.
To determine the fair value of the Company’s Aerospace and Defense reporting unit, the Company primarily relies upon a discounted cash flow analysis which requires significant assumptions and estimates about future operations, including judgments about expected revenue growth and operating margins, and timing and amounts of expected future cash flows. The cash flows employed in the discounted cash flow analysis are based on five -year financial forecasts developed by management. The analysis also involves discounting the future cash flows to a present value using a discount rate that properly accounts for the risk and nature of the reporting unit cash flows and the rates of return debt and equity holders would require to invest their capital in the Aerospace and Defense reporting unit. In assessing the reasonableness of the Company’s estimated fair value of the Aerospace and Defense reporting unit, the Company evaluates the results of the discounted cash flow analysis in light of what investors are paying for similar interests in comparable aerospace and defense companies as of the valuation date. The Company also ensures that the reporting unit fair value is reasonable given the market value of the entire Company as of the valuation date.

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The Company evaluates qualitative factors (including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance) to determine whether it is necessary to perform the first step of the two-step goodwill test. This step is referred to as the “Step Zero" analysis. If it is determined that it is more likely than not (a likelihood of more than 50% ) that the fair value of a reporting unit is less than its carrying amount, the Company will need to proceed to the first step (“Step One”) of the two-step goodwill impairment test. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, relevant events and circumstances as discussed below shall be assessed. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the first and second steps of the impairment test are unnecessary.
Circumstances that could trigger an impairment test include but are not limited to: a significant adverse change in the business climate or legal factors; adverse cash flow trends; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; decline in stock price; and results of testing for recoverability of a significant asset group within a reporting unit. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded.
There can be no assurance that the Company’s estimates and assumptions made for purposes of its goodwill impairment testing will prove to be accurate predictions of the future. If the Company’s assumptions and estimates are incorrect, the Company may be required to record goodwill impairment charges in future periods.
j.  Intangible Assets
Identifiable intangible assets, such as patents, trademarks, and licenses are recorded at cost or when acquired as part of a business combination at estimated fair value. Identifiable intangible assets are amortized based on when they provide the Company economic benefit, or using the straight-line method, over their estimated useful life. Amortization periods for identifiable intangible assets range from 3 years to 30 years .
k.  Environmental Remediation
The Company expenses, on a current basis, recurring costs associated with managing hazardous substances and contamination in ongoing operations. The Company accrues for costs associated with the remediation of environmental contamination when it becomes probable that a liability has been incurred, and the amount can be reasonably estimated. In most cases only a range of reasonably probable costs can be estimated. In establishing the Company’s reserves, the most probable estimated amount is used when determinable, and the minimum amount is used when no single amount in the range is more probable. The Company’s environmental reserves include the costs of completing remedial investigation and feasibility studies, remedial and corrective actions, regulatory oversight costs, the cost of operation and maintenance of the remedial action plan, and employee compensation costs for employees who are expected to devote a significant amount of time to remediation efforts. Calculation of environmental reserves is based on the evaluation of currently available information with respect to each individual environmental site and considers factors such as existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. Such estimates are based on the expected costs of investigation and remediation and the likelihood that other potentially responsible parties will be able to fulfill their commitments at sites where the Company may be jointly or severally liable. At the time a liability is recorded for future environmental costs, the Company records an asset for estimated future recoveries that are estimable and probable. Some of the Company’s environmental costs are eligible for future recovery in the pricing of its products and services to the U.S. government and under existing third party agreements. The Company considers the recovery probable based on the Global Settlement Agreement, Northrop Agreement, government contracting regulations, and its long history of receiving reimbursement for such costs (see Notes 9(c) and (d)).
l.  Retirement Benefits
The Company's defined benefit pension plan future benefit accrual was discontinued in fiscal 2009. In addition, the Company provides medical and life insurance benefits (“postretirement benefits”) to certain eligible retired employees, with varied coverage by employee group. Annual charges are made for the cost of the plans, including administrative costs, interest costs on benefit obligations, and net amortization and deferrals, increased or reduced by the return on assets. The Company also sponsors a defined contribution 401(k) plan and participation in the plan is available to substantially all employees (see Note 8).
m.  Conditional Asset Retirement Obligations
Conditional asset retirement obligations (“CAROs”) are legal obligations associated with the retirement of long-lived assets. These liabilities are initially recorded at fair value and the related asset retirement costs are capitalized by increasing the carrying amount of the related assets by the same amount as the liability. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the Company records period-to-period changes in the CARO liability resulting from the passage of time and revisions to either the timing or the amount of the estimate of the undiscounted cash flows.

14



The Company’s estimate of CAROs associated with owned properties relates to estimated costs necessary for the legally required removal or remediation of various regulated materials, primarily asbestos disposal and radiological decontamination of an ordnance manufacturing facility. For CAROs that are not expected to be retired in the next 15  years, the Company estimated the retirement date of such asset retirement obligations to be 30  years from the date of adoption of the applicable accounting standard. For leased properties, such obligations relate to the estimated cost of contractually required property restoration.
The changes in the carrying amount of CAROs since November 30, 2012 were as follows (in millions):
Balance as of November 30, 2012
$
20.8

Rocketdyne Business Acquisition
1.2

Additions and other, net
(0.6
)
Accretion
1.5

Balance as of November 30, 2013
22.9

Additions and other, net
(0.2
)
Accretion
1.7

Balance as of November 30, 2014
24.4

Additions and other, net
3.0

Accretion
1.9

Balance as of November 30, 2015
$
29.3

n.  Advance Payments on Contracts
The Company receives advances from customers which may exceed costs incurred on certain contracts. Such advances or billings in excess of cost and estimated earnings, other than those reflected as a reduction of inventories as progress payments, are classified as current liabilities.
o.  Loss Contingencies
The Company is currently involved in certain legal proceedings and, as required, has accrued its estimate of the probable costs and recoveries for resolution of these claims. These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations or cash flows for any particular period could be materially affected by changes in estimates or the effectiveness of strategies related to these proceedings.
p.  Warranties
The Company provides product warranties in conjunction with certain product sales. The majority of the Company’s warranties are a one -year standard warranty for parts, workmanship, and compliance with specifications. On occasion, the Company has made commitments beyond the standard warranty obligation. While the Company has contracts with warranty provisions, there is not a history of any significant warranty claims experience. A reserve for warranty exposure is made on a product by product basis when it is both estimable and probable. These costs are included in the program’s estimate at completion and are expensed in accordance with the Company’s revenue recognition methodology as allowed under GAAP for that particular contract.
q.  Revenue Recognition
In the Company’s Aerospace and Defense segment, recognition of profit on long-term contracts requires the use of assumptions and estimates related to the contract value or total contract revenue, the total cost at completion and the measurement of progress towards completion. Due to the nature of the programs, developing the estimated total cost at completion requires the use of significant judgment. Estimates are continually evaluated as work progresses and are revised as necessary. Factors that must be considered in estimating the work to be completed include labor productivity, the nature and technical complexity of the work to be performed, availability and cost volatility of materials, subcontractor and vendor performance, warranty costs, volume assumptions, anticipated labor agreements and inflationary trends, schedule and performance delays, availability of funding from the customer, and the recoverability of costs incurred outside the original contract included in any estimates to complete. The Company reviews contract performance and cost estimates for some contracts at least monthly and for others at least quarterly and more frequently when circumstances significantly change. When a change in estimate is determined to have an impact on contract profit, the Company will record a positive or negative adjustment to the statement of operations. Changes in estimates and assumptions related to the status of certain long-term contracts may have a material effect on the Company’s operating results. The following table summarizes the impact from changes in estimates and assumptions on the statements of operations on contracts, representing 83% of the Company’s

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aerospace and defense segment net sales over the last three fiscal years, accounted for under the percentage-of-completion method of accounting:
 
Year Ended
 
2015
 
2014
 
2013
 
(In millions, except per share amounts)
Favorable effect of the changes in contract estimates on loss from continuing operations before income taxes
$
41.2

 
$
9.2

 
$
23.2

Favorable effect of the changes in contract estimates on net (loss) income
24.7

 
5.5

 
13.6

Favorable effect of the changes in contract estimates on basic net (loss) income per share
0.40

 
0.10

 
0.22

Favorable effect of the changes in contract estimates on diluted net (loss) income per share
0.40

 
0.10

 
0.16

The fiscal 2015 favorable changes in contract estimates were primarily driven by the following (i) better than expected performance on space launch systems and missile defense programs primarily due to affordability initiatives and lower overhead costs and (ii) unexpected favorable contract performance on close-out activities on the J-2X program. The fiscal 2014 favorable changes in contract estimates were primarily driven by better than expected performance on a space launch system program due to favorable contract negotiations and affordability initiatives partially offset by unanticipated inefficiencies and cost growth on the Antares AJ-26 program. The fiscal 2013 favorable changes in contract estimates were primarily driven by better than expected performance on tactical systems programs due to manufacturing efficiencies and lower overhead costs. The improvements in fiscal 2013 were offset by unexpected cost growth on the Antares AJ-26 program.
The Company considers the nature of the individual underlying contract and the type of products and services provided in determining the proper accounting for a particular contract. Each method is applied consistently to all contracts having similar characteristics, as described below. The Company typically accounts for its contracts using the percentage-of-completion method, and progress is measured on a cost-to-cost or units-of-delivery basis. Sales are recognized using various measures of progress depending on the contractual terms and scope of work of the contract. The Company recognizes revenue on a units-of-delivery basis when contracts require unit deliveries on a frequent and routine basis. Sales using this measure of progress are recognized at the contractually agreed upon unit price. Where the scope of work on contracts principally relates to research and/or development efforts, or the contract is predominantly a development effort with few deliverable units, the Company recognizes revenue on a cost-to-cost basis. In this case, sales are recognized as costs are incurred and include estimated earned fees or profits calculated on the basis of the relationship between costs incurred and total estimated costs at completion. Revenue on service or time and material contracts is recognized when performed. If at any time expected costs exceed the value of the contract, the loss is recognized immediately.
If change orders are in dispute or are unapproved in regard to both scope and price they are evaluated as claims. The Company recognizes revenue on claims when recovery of the claim is probable and the amount can be reasonably estimated. Revenue on claims is recognized only to the extent that contract costs related to the claims have been incurred and when it is probable that the claim will result in a bona fide addition to contract value that can be reliably estimated. No profit is recognized on a claim until final settlement occurs.
Certain government contracts contain cost or performance incentive provisions that provide for increased or decreased fees or profits based upon actual performance against established targets or other criteria. Incentive and award fees, which are generally awarded at the discretion of the customer, are included in estimated contract revenue at the time the amounts can be reasonably determined and are reasonably assured based on historical experience and anticipated performance. The Company continually evaluates its performance and incorporates any anticipated changes in penalties and incentives into its revenue and earnings calculations.
Revenue from real estate asset sales is recognized when a sufficient down-payment has been received, financing has been arranged and title, possession and other attributes of ownership have been transferred to the buyer. The allocation to cost of sales on real estate asset sales is based on a relative fair market value computation of the land sold which includes the basis on the Company’s book value, capitalized entitlement costs, and an estimate of the Company’s continuing financial commitment.
Revenue that is not derived from long-term development and production contracts, or real estate asset transactions, is recognized when persuasive evidence of a final agreement exists, delivery has occurred, the selling price is fixed or determinable and payment from the customer is reasonably assured. Sales are recorded net of provisions for customer pricing allowances.
r.  Research and Development
Company-sponsored R&D expenses were $74.4 million in fiscal 2015, $51.9 million in fiscal 2014, and $42.9 million in fiscal 2013. Company-sponsored R&D expenses include the costs of technical activities that are useful in developing new

16



products, services, processes, or techniques, as well as expenses for technical activities that may significantly improve existing products or processes. These expenses are generally allocated among all contracts and programs in progress under U.S. government contractual arrangements. From time to time, the Company believes it is in its best interests to self-fund and not allocate costs for certain R&D activities to the U.S. government contracts.  In fiscal 2015, Company-sponsored R&D expenses included $48.2 million of AR-1 R&D expenses of which $32.1 million was not allocated to U.S. government contracts.
Customer-sponsored R&D expenditures, which are funded under U.S. government contracts, totaled $485.8 million in fiscal 2015, $481.2 million in fiscal 2014, and $335.9 million in fiscal 2013. Expenditures under customer-sponsored R&D funded government contracts are accounted for as sales and cost of products sold.
s.  Stock-based Compensation
The Company recognizes stock-based compensation in the statements of operations at the grant-date fair value of stock awards issued to employees and directors over the vesting period. The Company also grants Stock Appreciation Rights (“SARS”) awards which are similar to the Company’s employee stock options, but are settled in cash rather than in shares of common stock, and are classified as liability awards. Compensation cost for these awards is determined using a fair-value method and remeasured at each reporting date until the date of settlement. The Company utilizes the short-cut method for determining the historical pool of windfall tax benefits and the tax law ordering approach for purposes of determining whether an excess tax benefit has been realized.
t.  Impairment or Disposal of Long-Lived Assets
Impairment of long-lived assets is recognized when events or circumstances indicate that the carrying amount of the asset, or related groups of assets, may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; or a current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the Company determines that an asset is not recoverable, then the Company would record an impairment charge if the carrying value of the asset exceeds its fair value.
A long-lived asset classified as “held for sale” is initially measured at the lower of its carrying amount or fair value less costs to sell. In the period that the “held for sale” criteria are met, the Company recognizes an impairment charge for any initial adjustment of the long-lived asset amount. Gains or losses not previously recognized resulting from the sale of a long-lived asset are recognized on the date of sale.
u.  Foreign Currency Transactions
Foreign currency transaction gains and (losses) were $0.1 million in fiscal 2015, $0.3 million in fiscal 2014, and ($0.2) million in fiscal 2013, and are reported as a component of discontinued operations. The Company’s foreign currency transactions were associated with the Company’s former GDX business which is classified as discontinued operations in these consolidated financial statements and notes to consolidated financial statements.
v.   Concentrations
Dependence upon government programs and contracts
Sales to the U.S. government and its agencies, including sales to the Company’s significant customers discussed below, were as follows (dollars in millions):
 
U.S. Government
Sales
 
Percentage of Net
Sales
Fiscal 2015
$
1,529.2

 
90
%
Fiscal 2014
1,478.6

 
92
%
Fiscal 2013
1,305.9

 
95
%
The Standard Missile program, which is included in the U.S. government sales, represented 14% , 12% , and 22% of net sales for fiscal 2015, 2014, and 2013, respectively. The Terminal High Altitude Area Defense (“THAAD”) program, which is included in the U.S. government sales, represented 13% , 12% , and 3% of net sales for fiscal 2015, 2014, and 2013, respectively. The demand for certain of the Company’s services and products is directly related to the level of funding of government programs.

17



Major customers
Customers that represented more than 10% of net sales for the fiscal years presented are as follows:
 
Year Ended
 
2015
 
2014
 
2013
Lockheed Martin Corporation ("Lockheed Martin")
29
%
 
28
%
 
23
%
Raytheon Company ("Raytheon")
20

 
17

 
33

United Launch Alliance ("ULA")
19

 
25

 
18

NASA
11

 
11

 
*

__________
*
Less than 10% .
The Company's sales to each of the major customers listed above involve several product lines and programs.
Credit Risk
Aside from investments held in the Company’s defined benefit pension plan, financial instruments that could potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and trade receivables. The Company’s cash and cash equivalents are held and managed by recognized financial institutions and are subject to the Company’s investment policy. The investment policy outlines minimum acceptable credit ratings for each type of investment and limits the amount of credit exposure to any one security issue. The Company does not believe significant concentration of credit risk exists with respect to these investments.
Customers that represented more than 10% of accounts receivable for the periods presented are as follows:
 
 
As of November 30,  
 
 
2015
 
2014
 
 
 
 
Lockheed Martin
31
%
 
21
%
ULA
23

 
31

Raytheon
18

 
22

NASA
11

 
*

Boeing
*

 
12

_____
* Less than 10%
Dependence on Single Source and Other Third Party Suppliers
The Company uses a significant quantity of raw materials that are highly dependent on market fluctuations and government regulations. Further, as a U.S. government contractor, the Company is often required to procure materials from suppliers capable of meeting rigorous customer and government specifications. As market conditions change for these companies, they often discontinue materials with low sales volumes or profit margins. The Company is often forced to either qualify new materials or pay higher prices to maintain the supply. To-date the Company has been successful in establishing replacement materials and securing customer funding to address specific qualification needs of the programs. Prolonged disruptions in the supply of any of the Company’s key raw materials, difficulty qualifying new sources of supply, implementing use of replacement materials or new sources of supply, and/or a continuing volatility in the prices of raw materials could have a material adverse effect on the Company’s operating results, financial condition, and/or cash flows.
Workforce
As of November 30, 2015 , 15% of the Company’s 4,823 employees were covered by collective bargaining agreements.

w.  Related Parties
The chairman of the Company’s board of directors is executive chairman of Steel Partners Holdings L.P. (“Steel Holdings”). Steel Holdings owns 100% of SP Corporate Services LLC ("SP Corporate"). The Company received services of $1.1 million in fiscal 2015 from SP Corporate primarily for the use of an aircraft for business travel. As of November 30, 2015, the Company had a payable due to SP Corporate of $0.5 million .

18



x.  Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. The Company adopted this guidance beginning in the first quarter of fiscal 2014. As the accounting standard only impacted presentation, the new standard did not have an impact on the Company’s financial position, results of operations, or cash flows.
In April 2014, the FASB issued authoritative guidance which specifies that only disposals, such as a disposal of a major line of business, representing a strategic shift in operations should be presented as discontinued operations. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company adopted this guidance in the fourth quarter of fiscal 2014. An entity should not apply the amendments in this new guidance to a component of an entity that is classified as held for sale before the effective date even if the component of an entity is disposed of after the effective date. As the accounting standard only impacted presentation, the new standard did not have an impact on the Company’s financial position, results of operations, or cash flows.
In May 2015, the FASB issued amended guidance on disclosures for investments in certain entities that calculate net asset value per share (“NAV”) or its equivalent. The new guidance requires the investments for which fair value is measured at NAV (or its equivalent) to be removed from fair value hierarchy.  The Company adopted this guidance as of November 30, 2015.  The new guidance was applied retrospectively to all periods presented.  As the accounting standard only impacted presentation, the new standard did not have an impact on the Company’s financial position, results of operations, or cash flows.
Recently Issued Accounting Pronouncements
In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB deferred the effective date for this guidance by one year to December 15, 2017 for annual reporting periods beginning after that. Earlier application of this guidance is permitted but not before the original date of December 15, 2016. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently evaluating the impact of these amendments and the transition alternatives on its consolidated financial statements.
In August 2014, the FASB issued an amendment to the accounting guidance related to the evaluation of an entity to continue as a going concern. The amendment establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern in connection with preparing financial statements for each annual and interim reporting period. The update also gives guidance to determine whether to disclose information about relevant conditions and events when there is substantial doubt about an entity’s ability to continue as a going concern. The guidance is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. The new guidance is not expected to have an impact on the Company’s financial position, results of operations, or cash flows.
In April 2015, the FASB issued an amendment to the accounting guidance related to the presentation of debt issuance costs. The amendment requires that debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts or premiums. The guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.
In July 2015, the FASB issued guidance to change the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.
In November 2015, FASB issued guidance that requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheet. The standard will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for financial statements that have not been previously issued. The standard may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

19



Note 2. Restatement
The Company corrected errors in prior periods primarily related to the following matters: (i) purchase accounting associated with contracts acquired as part of the acquisition of the Rocketdyne Business; (ii) contract accounting related to subsequent modifications to one significant acquired contract; (iii) contract accounting related to the improper recognition of sales associated with incentives; and (iv) other individually immaterial items. 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 Company also corrected previously disclosed immaterial out of period adjustments as part of this restatement and other balance sheet misclassifications.
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 concluded these errors were material in the aggregate to the prior reporting periods, and therefore, restatement of previously filed financial statements was necessary to the Company's previously issued fiscal 2014 and 2013 consolidated financial statements and each of the quarterly 2015 and 2014 unaudited condensed consolidated financial statements.
The account balances labeled “As Reported” in the following tables for the years ended November 30, 2014 and 2013 represent the previously reported financial statements as presented in the Company's Annual Report on Form 10-K for the year ended November 30, 2014. The effects of these prior period errors on the consolidated financial statements are as follows:





20



Consolidated Balance Sheet
 
November 30, 2014
 
As Reported
 
Adjustments
 
As Restated
 
(In millions)
ASSETS
 
 
 
 
Current Assets
 
 
 
 
 
Cash and cash equivalents
$
265.9

 
$

 
$
265.9

Accounts receivable
172.9

 
(2.4
)
 
170.5

Inventories
139.0

 
(1.0
)
 
138.0

Recoverable from the U.S. government and other third parties for environmental remediation costs
19.4

 

 
19.4

Receivable from Northrop
6.0

 

 
6.0

Other current assets, net
35.9

 
2.7

 
38.6

Income taxes
2.1

 

 
2.1

Deferred income taxes
25.3

 
(5.4
)
 
19.9

Total Current Assets
666.5

 
(6.1
)
 
660.4

Noncurrent Assets
 
 
 
 
 
Property, plant and equipment, net
367.5

 
(1.0
)
 
366.5

Real estate held for entitlement and leasing
94.4

 

 
94.4

Recoverable from the U.S. government and other third parties for environmental remediation costs
81.2

 
6.0

 
87.2

Receivable from Northrop
74.8

 
(6.0
)
 
68.8

Deferred income taxes
259.0

 
2.4

 
261.4

Goodwill
164.4

 
(6.3
)
 
158.1

Intangible assets
122.2

 

 
122.2

Income taxes

 
6.6

 
6.6

Other noncurrent assets, net
91.6

 
1.4

 
93.0

Total Noncurrent Assets
1,255.1

 
3.1

 
1,258.2

Total Assets
$
1,921.6

 
$
(3.0
)
 
$
1,918.6

LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ DEFICIT
 
 
 
 
Current Liabilities
 
 
 
 
 
Short-term borrowings and current portion of long-term debt
$
5.3

 
$

 
$
5.3

Accounts payable
103.5

 
0.5

 
104.0

Reserves for environmental remediation costs
31.9

 

 
31.9

Postretirement medical and life insurance benefits
6.4

 

 
6.4

Advance payments on contracts
198.5

 
(1.1
)
 
197.4

Other current liabilities
221.7

 
(0.3
)
 
221.4

Total Current Liabilities
567.3

 
(0.9
)
 
566.4

Noncurrent Liabilities
 
 
 
 
 
Senior debt
93.8

 

 
93.8

Second-priority senior notes
460.0

 

 
460.0

Convertible subordinated notes
133.8

 

 
133.8

Other debt
89.3

 

 
89.3

Reserves for environmental remediation costs
134.1

 

 
134.1

Pension benefits
482.8

 

 
482.8

Postretirement medical and life insurance benefits
51.7

 

 
51.7

Other noncurrent liabilities
79.7

 
0.9

 
80.6

Total Noncurrent Liabilities
1,525.2

 
0.9

 
1,526.1

Total Liabilities
2,092.5

 

 
2,092.5

Commitments and contingencies (Note 9)

 

 

Redeemable common stock
1.6

 

 
1.6

Stockholders’ Deficit
 
 

 
 
Preference stock

 

 

Common stock
5.9

 

 
5.9

Other capital
287.3

 
0.1

 
287.4

Treasury stock
(64.5
)
 

 
(64.5
)
Accumulated deficit
(67.0
)
 
(3.6
)
 
(70.6
)
Accumulated other comprehensive loss, net of income taxes
(334.2
)
 
0.5

 
(333.7
)
Total Stockholders’ Deficit
(172.5
)
 
(3.0
)
 
(175.5
)
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit
$
1,921.6

 
$
(3.0
)
 
$
1,918.6


21




Consolidated Statements of Operations and Comprehensive (Loss) Income
 
Year Ended 2014
 
As Reported
 
Adjustments
 
As Restated
 
(In millions, except per share amounts)
Net sales
$
1,597.4

 
$
4.8

 
$
1,602.2

Operating costs and expenses:
 
 
 
 
 
Cost of sales (exclusive of items shown separately below)
1,408.1

 
(1.9
)
 
1,406.2

Selling, general and administrative
37.9

 
0.3

 
38.2

Depreciation and amortization
63.7

 

 
63.7

Other expense, net:
 
 

 
 
Loss on debt repurchased
60.6

 

 
60.6

Other
13.9

 

 
13.9

Total operating costs and expenses
1,584.2

 
(1.6
)
 
1,582.6

Operating income
13.2

 
6.4

 
19.6

Non-operating (income) expense:
 
 
 
 
 
Interest income
(0.1
)
 

 
(0.1
)
Interest expense
52.7

 

 
52.7

Total non-operating expense, net
52.6

 

 
52.6

Loss from continuing operations before income taxes
(39.4
)
 
6.4

 
(33.0
)
Income tax provision
12.9

 
3.4

 
16.3

Loss from continuing operations
(52.3
)
 
3.0

 
(49.3
)
Loss from discontinued operations, net of income taxes
(0.7
)
 

 
(0.7
)
Net loss
$
(53.0
)
 
$
3.0

 
$
(50.0
)
Loss per share of common stock
 
 
 
 
 
Basic and Diluted:
 
 
 
 
 
Loss per share from continuing operations
$
(0.91
)
 
$
0.06

 
$
(0.85
)
Loss per share from discontinued operations, net of income taxes
(0.01
)
 

 
(0.01
)
Net loss per share
$
(0.92
)
 
$
0.06

 
$
(0.86
)
Weighted average shares of common stock outstanding, basic and diluted
57.9

 

 
57.9

 
Year Ended 2014
 
As Reported
 
Adjustments
 
As Restated
 
(In millions)
Net loss
$
(53.0
)
 
$
3.0

 
$
(50.0
)
Other comprehensive loss:
 
 
 
 
 
Amortization of net actuarial losses, net of income taxes
30.7

 
0.4

 
31.1

Actuarial losses, net of income taxes
(142.0
)
 
6.0

 
(136.0
)
Amortization of prior service credits, net of income taxes
(0.5
)
 

 
(0.5
)
Comprehensive loss
$
(164.8
)
 
$
9.4

 
$
(155.4
)


22



 
Year Ended 2013
 
As Reported
 
Adjustments
 
As Restated
 
(In millions, except per share amounts)
Net sales
$
1,383.1

 
$
(5.0
)
 
$
1,378.1

Operating costs and expenses:
 
 
 
 
 
Cost of sales (exclusive of items shown separately below)
1,229.6

 
4.7

 
1,234.3

Selling, general and administrative
53.6

 

 
53.6

Depreciation and amortization
43.8

 
(0.3
)
 
43.5

Other expense, net:
 
 

 
 
Loss on debt repurchased
5.0

 

 
5.0

Other
28.8

 
0.1

 
28.9

Total operating costs and expenses
1,360.8

 
4.5

 
1,365.3

Operating income
22.3

 
(9.5
)
 
12.8

Non-operating (income) expense:
 
 
 
 
 
Interest income
(0.2
)
 

 
(0.2
)
Interest expense
48.7

 

 
48.7

Total non-operating expense, net
48.5

 

 
48.5

Loss from continuing operations before income taxes
(26.2
)
 
(9.5
)
 
(35.7
)
Income tax benefit
(193.9
)
 
(4.5
)
 
(198.4
)
Income from continuing operations
167.7

 
(5.0
)
 
162.7

Income from discontinued operations, net of income taxes
0.2

 

 
0.2

Net income
$
167.9

 
$
(5.0
)
 
$
162.9

Income per share of common stock
 
 
 
 
 
Basic:
 
 
 
 
 
Income per share from continuing operations
$
2.76

 
$
(0.08
)
 
$
2.68

Income per share from discontinued operations, net of income taxes

 

 

Net income per share
$
2.76

 
$
(0.08
)
 
$
2.68

Diluted:
 
 
 
 
 
Income per share from continuing operations
$
2.11

 
$
(0.06
)
 
$
2.05

Income per share from discontinued operations, net of income taxes

 

 

Net income per share
$
2.11

 
$
(0.06
)
 
$
2.05

Weighted average shares of common stock outstanding, basic
59.6

 

 
59.6

Weighted average shares of common stock outstanding, diluted
81.9

 

 
81.9

 
Year Ended 2013
 
As Reported
 
Adjustments
 
As Restated
 
(In millions)
Net income
$
167.9

 
$
(5.0
)
 
$
162.9

Other comprehensive income:
 
 

 
 
Amortization of actuarial losses, net of income taxes
91.3

 

 
91.3

Actuarial gains, net of income taxes
173.5

 
(5.9
)
 
167.6

Amortization of prior service credits, net of income taxes
(0.9
)
 

 
(0.9
)
Comprehensive income
$
431.8

 
$
(10.9
)
 
$
420.9



23



Consolidated Statements of Cash Flows
 
Year Ended 2014
 
As Reported
 
Adjustments
 
As Restated
 
(In millions)
Operating Activities
 
 
 
 
 
Net loss
$
(53.0
)
 
$
3.0

 
$
(50.0
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Loss from discontinued operations, net of income taxes
0.7

 

 
0.7

Depreciation and amortization
63.7

 

 
63.7

Amortization of financing costs
3.6

 

 
3.6

Stock-based compensation
5.7

 

 
5.7

Retirement benefit expense
35.6

 
0.9

 
36.5

Loss on debt repurchased
60.6

 

 
60.6

Loss on bank amendment
0.2

 

 
0.2

Loss on disposal of long-lived assets
2.8

 

 
2.8

Gain on sale of technology
(6.8
)
 

 
(6.8
)
Tax benefit on stock-based awards
(1.5
)
 
0.2

 
(1.3
)
Changes in assets and liabilities, net of effects from acquisition:
 
 
 
 
 
Accounts receivable
41.0

 
(12.1
)
 
28.9

Inventories
(33.9
)
 
1.9

 
(32.0
)
Other current assets, net
(12.8
)
 
2.0

 
(10.8
)
Income tax receivable
11.1

 
(7.4
)
 
3.7

Real estate held for entitlement and leasing
(15.0
)
 

 
(15.0
)
Receivable from Northrop
(2.8
)
 

 
(2.8
)
Recoverable from the U.S. government and other third parties for environmental remediation costs
8.5

 

 
8.5

Other noncurrent assets
(24.3
)
 
0.2

 
(24.1
)
Accounts payable
(19.0
)
 
0.8

 
(18.2
)
Retirement benefits
(5.3
)
 

 
(5.3
)
Advance payments on contracts
94.1

 
2.8

 
96.9

Other current liabilities
22.0

 
(2.2
)