Orbital Sciences [ORB] on Thursday posted a slight rise in net income in the second quarter despite a modest decline in sales as an insurance recovery related to a an anomaly with one of its communications satellites that was launched in March helped boost results.
Net income was up a percent to $16.5 million, 27 cents earnings per share (EPS), from $16.3 million (27 cents EPS) a year ago. The quarter’s results were hindered by a $4.2 million after-tax expense related to the ongoing merger between Orbital and ATK [ATK]. Absent the merger costs, adjusted net income was $20.7 million (34 cents EPS), which topped consensus estimates of 30 cents per share.
David Thompson, Orbital’s chairman and CEO, said Orbital and ATK are making good progress on concluding their merger, which is expected to occur in the fourth quarter. The companies have already settled on a list of the first and second level management appointments, he said on Thursday’s earnings call.
Sales dipped 5 percent to $318.1 million as revenues fell in each of the company’s business segments. Orbital attributed the decline to lower revenues from space launch and target vehicles, science and remote sensing satellites, national security satellites and the Commercial Resupply Services contract with NASA.
The company’s results were aided by a $12 million insurance recovery related to the Amazonas 4 satellite launch in March. Orbital had forecast about a $6.5 million recovery.
At the segment level, Advanced Space Systems, and Launch Vehicles both recorded higher operating profit due to the completion of key milestones on a national security satellite contract and profit improvement on missile defense interceptors. Profit at Satellites and Space Systems was down 75 percent to $2.7 million due to the completion last year of a science and remote sensing satellite and lower income from communications satellites.
Orbital lowered its sales guidance for the year by $50 million to $75 million to $1.4 billion due to delays in several GEOstar communications satellite contracts that had been expected earlier in the year but are now ramping up, Thompson said. Earnings guidance, adjusted for merger costs, remains unchanged at between $1.10 to $1.20 EPS as do expectations for free cash flow, which is still estimated to be between $130 million and $150 million.
Free cash flow in the quarter was $16.7 million. Bookings in the quarter were $550 million and total backlog stood at $4.8 billion, with $2.3 billion of the backlog firm. At the end of 2013 total backlog stood at $5.2 billion of which $2.2 billion was firm.