Orbital ATK [OA] on Thursday said net income in its first quarter swung to a profit helped by lower taxes and higher operating income and the company said its first re-engined Antares rocket is set for launch in July.

David Thompson, the company’s president and CEO, said on the earnings call that the Antares rocket will roll out next week to the launch pad in preparation for a hot fire test later this month. If all goes well, the rocket will perform a Cargo Resupply Services (CRS) mission to the International Space Station just after July 4, he said.

Orbital ATK Antares Launch Vehicle shown lifting off from Wallops Island, Va. Following a launch pad explosion in 2014, Antares is on track to resume flights in 2016. Photo: Orbital ATK
Orbital ATK Antares Launch Vehicle shown lifting off from Wallops Island, Va. Following a launch pad explosion in Oct. 2014, Antares is on track to resume flights in July. Photo: Orbital ATK

Last December the company said it hoped to return Antares to flight this May or June so the early July date for the launch represents a slight delay (Defense Daily, Dec. 17, 2015).

Another CRS mission is expected around November, Thompson said. In December Orbital ATK said this launch was planned for October.

An Antares launch vehicle exploded in 2014 during lift off from NASA’s Wallops Island, Va., launch facility. Orbital ATK is re-engining the Antares with Russian RD-181 engines, which are replacing Aerojet Rocketdyne [AJRD] AJ-26 engines, which are refurbished Russian NK-33 engines.

After 2016 and through the middle of the next decade, Thompson said the base level of launches for Antares will be two to three per year, which “gives us a solid foundation on which we can increase the market reach of the vehicle and flight rates as well.” He added that once Antares has a couple of successful flights, demand will pick up for the launch vehicle in the “broader market” beyond the CRS missions with the company able to support five to six launches per year.

Net income in the quarter was $69.8 million, $1.19 earnings per share (EPS), versus a $40.7 million (87 cents EPS) loss a year ago, as the first quarter results were boosted by the permanent extension of the federal research and development tax credit late in 2015, a swing to operating income in the Space Systems segment, and higher profits at the Flight Systems segment on strong profit margins in the Launch Vehicles division.

Excluding merger and transaction expenses related to the merger in February 2015 between Orbital Sciences and Alliant Techsystems, adjusted net income in the quarter was $76.9 million ($1.31 EPS), up 14 percent from $67.4 million ($1.14 EPS), in line with analysts’ estimates.

The company said the bottom line is also benefitting from cost savings synergies obtained through the more than year-old merger. So far 98 percent of the post-closing merger integration milestones are complete with $85 million in cost synergies in 2015 and more than $100 million targeted in savings this year. Orbital ATK also touted about $75 million in revenue synergies from the deal last year with between $150 million to $200 million targeted for this year and beyond.

Another $10 million in merger-related costs are still expected in 2016.

Sales in the quarter increased 10 percent to nearly $1.1 billion from $970 million a year ago. Adjusted sales, which combine revenues from Orbital Sciences and ATK as if their merger occurred on Jan. 1 2015 instead of the actual closing date of Feb. 9 that year, decreased 5 percent to just under $1.1 billion from just over $1.1 billion.

Adjusted sales were down double-digits in the Defense Systems Group on a drop in armaments products and off slightly in Flight Systems on propulsion systems.

Thompson called the lower adjusted sales combined with higher earnings and operating margin “somewhat mixed” results on the earnings call.

Orbital ATK enjoyed strong bookings in the quarter of $2.5 billion plus another $720 million in option exercises, and firm backlog stood at $8.6 billion, up 8 percent from a year ago.

Even though Orbital ATK expects to achieve merger-related cost synergies above targeted levels this year, the company maintained its financial guidance for 2016. Thompson said it’s still too early in the year to address potential changes to expectations until some things “pan out.”

Adjusted free cash flow was an $85.6 million outflow for the year, although the company returned $45 million to shareholders between stock repurchases and dividend payments. Company officials said they are on track to return more than $200 million in cash to shareholders this year versus $135 million in 2015.