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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 2021
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
https://cdn.kscope.io/26912e6f0ade9248caf86f39fdab92fb-ajrd-20210930_g1.jpg
  Aerojet Rocketdyne Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 34-0244000
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
222 N. Pacific Coast Highway
Suite 500
El Segundo
California 90245
(Address of principal executive offices) (Zip Code)
310-252-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.10 par value AJRDNew York Stock Exchange
 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  ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒  No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.  
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No   
As of October 18, 2021, the Company had 80,500,624 outstanding common shares, including unvested common shares, $0.10 par value.



Aerojet Rocketdyne Holdings, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2021
Table of Contents 
Item
Number
 Page
1Financial Statements
2Management’s Discussion and Analysis of Financial Condition and Results of Operations
3Quantitative and Qualitative Disclosures About Market Risk
4Controls and Procedures
1Legal Proceedings
1ARisk Factors
2Unregistered Sales of Equity Securities and Use of Proceeds
3Defaults Upon Senior Securities
4Mine Safety Disclosures
5Other Information
6Exhibits
Signatures



Part I — FINANCIAL INFORMATION
Item 1. Financial Statements
Aerojet Rocketdyne Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited) 
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In millions, except per share amounts)
Net sales$545.3 $527.7 $1,598.3 $1,516.2 
Operating costs and expenses:
Cost of sales (exclusive of items shown separately below)446.5 441.6 1,310.6 1,251.7 
Selling, general and administrative expense5.2 11.2 27.8 31.0 
Depreciation and amortization13.5 15.1 44.4 49.7 
Other expense, net8.7 3.3 24.0 1.2 
Total operating costs and expenses473.9 471.2 1,406.8 1,333.6 
Operating income71.4 56.5 191.5 182.6 
Non-operating:
Retirement benefits expense8.5 9.1 25.4 27.4 
Loss on debt0.9  10.5  
Interest income(0.2)(0.5)(1.5)(4.7)
Interest expense4.9 7.2 15.1 23.0 
Total non-operating expense, net14.1 15.8 49.5 45.7 
Income before income taxes57.3 40.7 142.0 136.9 
Income tax provision 14.7 9.0 36.3 34.6 
Net income $42.6 $31.7 $105.7 $102.3 
Earnings per share of common stock
Basic earnings per share
$0.53 $0.40 $1.33 $1.30 
Diluted
Diluted earnings per share
$0.52 $0.38 $1.29 $1.23 
Weighted average shares of common stock outstanding, basic79.9 77.6 79.0 77.6 
Weighted average shares of common stock outstanding, diluted 82.3 81.9 81.5 82.4 
Cash dividends paid per share$ $ $5.00 $ 
See Notes to Unaudited Condensed Consolidated Financial Statements.
1


Aerojet Rocketdyne Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In millions)
Net income $42.6 $31.7 $105.7 $102.3 
Other comprehensive income:
Amortization of net actuarial losses and prior service costs, net of income taxes of $3.8 million, $3.3 million, $11.4 million, and $10.0 million
11.5 10.1 34.5 30.3 
Comprehensive income $54.1 $41.8 $140.2 $132.6 
See Notes to Unaudited Condensed Consolidated Financial Statements.
2


Aerojet Rocketdyne Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30,
2021
December 31, 2020
 (In millions, except per share amounts)
ASSETS
Current Assets
Cash and cash equivalents$624.9 $1,149.5 
Restricted cash3.0 3.0 
Marketable securities9.8 7.0 
Accounts receivable85.2 75.6 
Contract assets327.7 288.6 
Other current assets121.3 136.5 
Total Current Assets1,171.9 1,660.2 
Noncurrent Assets
Right-of-use assets47.3 46.8 
Property, plant and equipment, net409.5 423.1 
Recoverable environmental remediation costs229.5 227.7 
Deferred income taxes69.7 81.1 
Goodwill161.4 161.4 
Intangible assets36.5 44.8 
Other noncurrent assets237.0 254.8 
Total Noncurrent Assets1,190.9 1,239.7 
Total Assets$2,362.8 $2,899.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt$163.6 $299.9 
Accounts payable99.2 99.1 
Reserves for environmental remediation costs40.5 39.8 
Contract liabilities342.2 407.2 
Other current liabilities163.4 609.7 
Total Current Liabilities808.9 1,455.7 
Noncurrent Liabilities
Long-term debt303.6 324.4 
Reserves for environmental remediation costs262.8 260.8 
Pension benefits371.8 405.2 
Operating lease liabilities35.6 35.7 
Other noncurrent liabilities179.8 184.6 
Total Noncurrent Liabilities1,153.6 1,210.7 
Total Liabilities1,962.5 2,666.4 
Commitments and contingencies (Note 8)
Stockholders’ Equity
Preferred 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; 80.1 million shares issued and outstanding as of September 30, 2021; 76.8 million shares issued and outstanding as of December 31, 2020
8.0 7.7 
Other capital596.0 583.0 
Treasury stock at cost, 2.1 million shares as of September 30, 2021 and December 31, 2020
(64.4)(64.4)
Retained earnings (accumulated deficit)53.8 (65.2)
Accumulated other comprehensive loss, net of income taxes(193.1)(227.6)
Total Stockholders’ Equity400.3 233.5 
Total Liabilities and Stockholders’ Equity $2,362.8 $2,899.9 
See Notes to Unaudited Condensed Consolidated Financial Statements.
3


Aerojet Rocketdyne Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited) 
Common StockRetained EarningsAccumulated OtherTotal
SharesAmountOther
Capital
Treasury
Stock
(Accumulated Deficit)Comprehensive
Loss
Stockholders'
Equity
 (In millions)
June 30, 202077.6 $7.7 $577.6 $(13.2)$315.5 $(216.3)$671.3 
Net income— — — — 31.7 — 31.7 
Amortization of net actuarial losses and prior service costs, net of income taxes— — — — — 10.1 10.1 
Purchase of treasury stock(0.3)— — (11.8)— — (11.8)
Repurchase of shares for withholding taxes and option costs under equity plans — — (0.6)— — — (0.6)
Stock-based compensation and shares issued under equity plans0.1 — 8.2 — — — 8.2 
September 30, 202077.4 $7.7 $585.2 $(25.0)$347.2 $(206.2)$708.9 
December 31, 201977.3 $7.7 $573.3 $(12.7)$244.9 $(236.5)$576.7 
Net income— — — — 102.3 — 102.3 
Amortization of net actuarial losses and prior service costs, net of income taxes— — — — — 30.3 30.3 
Purchase of treasury stock(0.3)— — (12.3)— — (12.3)
Repurchase of shares for withholding taxes and option costs under equity plans (0.2)— (8.8)— — — (8.8)
Stock-based compensation and shares issued under equity plans0.6 — 20.7 — — — 20.7 
September 30, 202077.4 $7.7 $585.2 $(25.0)$347.2 $(206.2)$708.9 
June 30, 202179.8 $8.0 $588.9 $(64.4)$11.2 $(204.6)$339.1 
Net income— — — — 42.6 — 42.6 
Amortization of net actuarial losses and prior service costs, net of income taxes— — — — — 11.5 11.5 
Settlement of debt (see Note 11)0.2 — (0.1)— — — (0.1)
Repurchase of shares for withholding taxes and option costs under equity plans — — (0.5)— — — (0.5)
Stock-based compensation and shares issued under equity plans0.1 — 7.7 — — — 7.7 
September 30, 202180.1 $8.0 $596.0 $(64.4)$53.8 $(193.1)$400.3 
December 31, 202076.8 $7.7 $583.0 $(64.4)$(65.2)$(227.6)$233.5 
Net income— — — — 105.7 — 105.7 
Amortization of net actuarial losses and prior service costs, net of income taxes— — — — — 34.5 34.5 
Adjustment to dividends paid— — — — 13.3 — 13.3 
Settlement of debt (see Note 11)2.9 0.3 (4.2)— — — (3.9)
Repurchase of shares for withholding taxes and option costs under equity plans — — (4.5)— — — (4.5)
Stock-based compensation and shares issued under equity plans0.4 — 21.7 — — — 21.7 
September 30, 202180.1 $8.0 $596.0 $(64.4)$53.8 $(193.1)$400.3 
See Notes to Unaudited Condensed Consolidated Financial Statements.
4


Aerojet Rocketdyne Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
 20212020
 (In millions)
Operating Activities
Net income $105.7 $102.3 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization44.4 49.7 
Amortization of debt discount and deferred financing costs4.5 7.4 
Stock-based compensation10.6 13.2 
Retirement benefits, net10.2 18.9 
Loss on debt10.5  
Other, net(0.9)0.2 
Changes in assets and liabilities:
Accounts receivable(9.6)(69.9)
Contract assets (39.1)(49.2)
Other current assets15.3 7.3 
Recoverable environmental remediation costs(1.8)6.0 
Other noncurrent assets16.9 6.9 
Accounts payable(2.8)(33.6)
Contract liabilities(65.0)81.1 
Other current liabilities2.9 (12.0)
Deferred income taxes 4.2 
Reserves for environmental remediation costs2.7 (5.1)
Other noncurrent liabilities and other(9.1)11.2 
Net Cash Provided by Operating Activities 95.4 138.6 
Investing Activities
Purchases of marketable securities(1.9)(26.5)
Sales of marketable securities 25.0 
Capital expenditures(17.3)(31.0)
Net Cash Used in Investing Activities(19.2)(32.5)
Financing Activities
Dividend payments(428.5) 
Debt repayments(175.5)(14.7)
Repurchase of shares for withholding taxes and option costs under equity plans (4.5)(8.8)
Proceeds from shares issued under equity plans7.7 7.1 
Purchase of treasury stock (12.3)
Net Cash Used in Financing Activities(600.8)(28.7)
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash(524.6)77.4 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period1,152.5 935.6 
Cash, Cash Equivalents and Restricted Cash at End of Period$627.9 $1,013.0 
Supplemental disclosures of cash flow information
Cash paid for interest$9.8 $13.5 
Cash paid for income taxes, net of refunds19.5 35.5 
See Notes to Unaudited Condensed Consolidated Financial Statements.
5


Aerojet Rocketdyne Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Basis of Presentation and Nature of Operations
Aerojet Rocketdyne Holdings, Inc. ("Aerojet Rocketdyne Holdings" or the "Company") has prepared the accompanying unaudited condensed consolidated financial statements, including the accounts of the Company and its 100% owned and majority owned subsidiaries, in accordance with the instructions to Form 10-Q. The December 31, 2020, condensed consolidated balance sheet was derived from audited financial statements, but does not include all of the disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Certain reclassifications have been made to financial information for prior years to conform to the current year’s presentation.
The Company believes the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring accruals, necessary for a fair statement of its financial position, results of operations, and cash flows for the periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In addition, the operating results for interim periods may not be indicative of the results of operations for a full year.
The Company’s 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"), and major aerospace and defense prime contractors.
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 fiscal year of the Company's subsidiary, Aerojet Rocketdyne, ends on the last Saturday in December.
A detailed description of the Company’s significant accounting policies can be found in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2020.
Merger
On December 20, 2020, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Lockheed Martin Corporation ("Lockheed Martin") and Mizar Sub, Inc., a wholly-owned subsidiary of Lockheed Martin ("Merger Sub"), pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company (the "Merger") with the Company being the surviving corporation and a wholly-owned subsidiary of Lockheed Martin. Subject to the terms and conditions set forth in the Merger Agreement, each share of common stock outstanding as of immediately prior to the effective time of the Merger will be automatically converted into the right to receive cash in an amount equal to $51.00 per share (adjusted from $56.00 following the payment of the Pre-Closing Dividend, as discussed below).
In December 2020, the Company’s Board of Directors declared a one-time cash dividend of $5.00 per share (including shares underlying the 2.25% Convertible Senior Notes ("2¼% Notes") participating on an as-converted basis) (the "Pre-Closing Dividend"). On March 24, 2021, the Company paid the Pre-Closing Dividend to holders of record as of March 10, 2021. Payment of the Pre-Closing Dividend was made in connection with the anticipated acquisition of the Company by Lockheed Martin. Under the terms of the Merger Agreement, the Company's payment of the Pre-Closing Dividend adjusted the consideration to be paid by Lockheed Martin at closing from $56.00 per share to $51.00 per share.
On February 18, 2021, the Company received a request for additional information ("second request") from the Federal Trade Commission ("FTC") as part of the regulatory review process for the acquisition of the Company by Lockheed Martin.
On March 9, 2021, the stockholders of the Company voted in favor of approving the Merger Agreement at a special meeting.
As part of the regulatory review process of the transaction, on September 24, 2021, the Company and Lockheed Martin each certified substantial compliance with the FTC’s second request, and the parties continue to engage with the FTC. Subject to satisfactory completion of the regulatory review process and satisfaction of the other closing conditions specified in the Merger Agreement, closing is anticipated to occur in the first quarter of 2022. As previously disclosed, under the Merger Agreement, the “outside” date that gives rise to certain termination rights will automatically be extended from December 21, 2021, to March 21, 2022, in circumstances where all conditions have been satisfied but for the receipt of regulatory approvals.
Coronavirus ("COVID-19") Pandemic
During the nine months ended September 30, 2021, the Company’s financial results and operations were not materially adversely impacted by the COVID-19 pandemic. As a defense industrial-base U.S. government contractor, the Company is considered an essential business by the U.S. and state governments and it continues to operate as such during the COVID-19 pandemic. The extent to which the Company’s future financial results could be impacted by the COVID-19 pandemic depends on future developments that are highly uncertain and cannot be predicted at this time. The Company is not aware of any specific
6


event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board issued guidance which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is effective for the Company beginning in the first quarter of 2022 and must be applied using either a modified or full retrospective approach. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
Note 2. Earnings Per Share ("EPS") of Common Stock
The following table reconciles the numerator and denominator used to calculate basic and diluted EPS of common stock:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In millions, except per share amounts)
Numerator:
Net income $42.6 $31.7 $105.7 $102.3 
Income allocated to participating securities(0.3)(0.3)(0.7)(1.3)
Net income for basic and diluted EPS$42.3 $31.4 $105.0 $101.0 
Denominator:
Basic weighted average shares79.9 77.6 79.0 77.6 
Effect of:
21/4% Notes
2.4 4.2 2.5 4.7 
Awards issued under equity plans
 0.1  0.1 
Diluted weighted average shares82.3 81.9 81.5 82.4 
Basic
Basic EPS$0.53 $0.40 $1.33 $1.30 
Diluted
Diluted EPS$0.52 $0.38 $1.29 $1.23 
Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.
Note 3. Revenue Recognition
In the Company’s Aerospace and Defense segment, the majority of revenue is earned from long-term contracts to design, develop, and manufacture aerospace and defense products for, and provide related services to, the Company’s customers, including the U.S. government and major aerospace and defense prime contractors.
The Company evaluates the contract value and cost estimates for performance obligations at least quarterly and more frequently when circumstances significantly change. Factors considered in estimating the work to be completed include, but are not limited to: 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, 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. When the Company’s estimate of total costs to be incurred to satisfy a performance obligation exceeds the expected revenue, the Company recognizes the loss immediately. When the Company determines that a change in estimates has an impact on the associated profit of a performance obligation, the Company records the cumulative 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 of the changes in significant contract accounting estimates on the Company’s Aerospace and Defense segment operating results:
7


Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In millions, except per share amounts)
Net favorable effect of the changes in contract estimates on net sales$11.4 $3.2 $35.2 $20.4 
Net favorable effect of the changes in contract estimates on income before income taxes10.8 3.2 32.4 21.4 
Net favorable effect of the changes in contract estimates on net income 8.0 2.7 24.1 16.0 
Net favorable effect of the changes in contract estimates on basic EPS0.10 0.03 0.30 0.20 
Net favorable effect of the changes in contract estimates on diluted EPS0.10 0.03 0.29 0.19 
For the nine months ended September 30, 2021, net favorable changes in contract estimates were primarily driven by improved performance and risk retirements on the RS-68, Patriot Advanced Capability-3 ("PAC-3"), and Terminal High Altitude Area Defense ("THAAD") programs partially offset by cost growth on a portion of the Standard Missile and Commercial Crew program. For the nine months ended September 30, 2020, net favorable changes in contract estimates were primarily driven by improved performance and risk retirements on the THAAD, RS-68, RL-10, and PAC-3 programs partially offset by cost growth on a portion of the Standard Missile and Commercial Crew program.
In the Company’s Aerospace and Defense segment, the timing of revenue recognition, customer invoicing, and collections produces accounts receivable, contract assets, and contract liabilities in the unaudited condensed consolidated balance sheets. The following table summarizes contract assets and liabilities:
September 30, 2021December 31, 2020
 (In millions)
Contract assets$332.2 $294.3 
Reserve for overhead rate disallowance(4.5)(5.7)
Contract assets, net of reserve327.7 288.6 
Contract liabilities342.2 407.2 
Net contract liabilities, net of reserve$(14.5)$(118.6)
Net contract liabilities decreased by $104.1 million from December 31, 2020, primarily due to a decrease in contract advances and an increase in unbilled receivables. During the nine months ended September 30, 2021, the Company recognized sales of $329.4 million that were included in the Company's contract liabilities as of December 31, 2020.
As of September 30, 2021, the Company’s total remaining performance obligations, also referred to as backlog, totaled $7.0 billion. The Company expects to recognize approximately 32%, or $2.3 billion, of the remaining performance obligations as sales over the next twelve months, an additional 26% the following twelve months, and 42% thereafter.
The Company's contracts are largely categorized as either "fixed-price" (largely used by the U.S. government for production-type contracts) or "cost-reimbursable" (largely used by the U.S. government for development-type contracts). Fixed-price contracts present the risk of unreimbursed cost overruns, potentially resulting in lower than expected contract profits and margins. This risk is generally lower for cost-reimbursable contracts which, as a result, generally have a lower margin. The following table summarizes the percentages of net sales by contract type:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
Fixed-price57 %60 %56 %61 %
Cost-reimbursable43 40 44 39 
The principal end user customers are primarily agencies of the U.S. government as illustrated in the following table:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
U.S. government96 %96 %97 %96 %
Non U.S. government4 4 3 4 
The Company's Real Estate segment represented less than 1% of the Company's net sales for the three and nine months ended September 30, 2021 and 2020.

8


Note 4. Stock-Based Compensation
The following table summarizes stock-based compensation expense by type of award:
Three months ended September 30,Nine months ended September 30,
 2021202020212020
 (In millions)
Stock Appreciation Rights
$(3.5)$0.6 $(3.8)$(1.3)
Stock options 0.1  0.3 
Restricted stock and restricted stock units, service based1.5 1.5 4.5 4.7 
Restricted stock and restricted stock units, performance based2.5 3.0 9.4 8.7 
Employee stock purchase plan  0.3 0.5 0.8 
Total stock-based compensation expense $0.5 $5.5 $10.6 $13.2 
Note 5. Balance Sheet Accounts
a. Fair Value of Financial Instruments
Financial instruments are classified using a three-tiered 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.
 Fair value measurement as of September 30, 2021
 TotalQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)
 (In millions)
Money market funds$328.6 $328.6 $ $ 
Registered investment companies1.6 1.6   
Commercial paper10.0  10.0  
Equity securities9.8 9.8   
Total$350.0 $340.0 $10.0 $ 
 Fair value measurement as of December 31, 2020
 TotalQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)
 (In millions)
Money market funds$569.3 $569.3 $ $ 
Registered investment companies2.5 2.5   
Commercial paper232.0  232.0  
Equity securities7.0 7.0   
Total$810.8 $578.8 $232.0 $ 
As of September 30, 2021 and December 31, 2020, the total estimated fair value for commercial paper was classified as cash and cash equivalents as the remaining maturity at date of purchase was less than three months.
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued compensation, and other accrued liabilities, approximate fair value because of their short maturities.
The following table summarizes the estimated fair value and principal amount for outstanding debt obligations excluding finance lease obligations:
9


 Fair ValuePrincipal Amount
 September 30, 2021December 31, 2020September 30, 2021December 31, 2020
 (In millions)
Term loan$281.9 $306.5 $288.8 $308.5 
21/4% Notes
246.4 609.5 145.9 300.0 
Total$528.3 $916.0 $434.7 $608.5 
The fair value of the 2¼% Notes was determined using broker quotes that are based on open markets for the Company's debt securities (Level 2 securities). The fair value of the term loan was estimated based on a third-party model used to derive a relative value price using comparable corporate loans within a similar industry, credit quality, and currency.
b. Accounts Receivable
September 30, 2021December 31, 2020
 (In millions)
Billed receivables under long-term contracts$84.8 $75.3 
Other trade receivables0.4 0.3 
Accounts receivable$85.2 $75.6 
c. Other Current Assets
September 30, 2021December 31, 2020
 (In millions)
Deferred costs recoverable from the U.S. government $40.2 $41.0 
Income tax receivable30.1 46.9 
Inventories11.5 10.0 
Prepaid expenses17.5 18.0 
Other22.0 20.6 
Other current assets$121.3 $136.5 
d. Property, Plant and Equipment, net
September 30, 2021December 31, 2020
 (In millions)
Land$71.1 $71.2 
Buildings and improvements471.8 433.4 
Machinery and equipment, including capitalized software486.0 471.3 
Construction-in-progress71.2 105.5 
1,100.1 1,081.4 
Less: accumulated depreciation(690.6)(658.3)
Property, plant and equipment, net$409.5 $423.1 
e. Other Noncurrent Assets
September 30, 2021December 31, 2020
 (In millions)
Real estate held for entitlement and leasing$103.4 $101.8 
Deferred costs recoverable from the U.S. government 55.0 54.7 
Receivable from Northrop Grumman Corporation for environmental remediation costs36.0 40.5 
Other42.6 57.8 
Other noncurrent assets$237.0 $254.8 
10


f. Other Current Liabilities
September 30, 2021December 31, 2020
 (In millions)
Accrued compensation and employee benefits$115.1 $118.0 
Dividend payable1.7 447.8 
Other 46.6 43.9 
Other current liabilities$163.4 $609.7 
Note 6. Income Taxes
Nine months ended September 30,
 20212020
 (In millions)
Income tax provision $36.3 $34.6 
In the nine months ended September 30, 2021, the income tax provision was $36.3 million for an effective tax rate of 25.6%. The Company’s effective tax rate differed from the 21% statutory federal income tax rate primarily due to state income taxes and certain expenditures which are permanently not deductible for tax purposes, partially offset by the impact of Research and Development ("R&D") credits.
In the nine months ended September 30, 2020, the income tax provision was $34.6 million for an effective tax rate of 25.3%. The Company’s effective tax rate differed from the 21% statutory federal income tax rate primarily due to state income taxes and certain expenditures which are permanently not deductible for tax purposes, partially offset by the impact of R&D credits.
A valuation allowance is required when it is more-likely-than-not that all or a portion of deferred tax assets may not be realized. Assessing the need for a valuation allowance requires management to evaluate, on a quarterly basis, all available evidence, both positive and negative. As of September 30, 2021, the Company continues to believe that the weight of the positive evidence outweighed the negative evidence regarding the realization of its net deferred tax assets.
Note 7. Long-term Debt