Aerojet Rocketdyne Holdings reported results for the three months ended June 30 that surpassed analyst expectations thank to increase in net sales primarily driven by the Guided Multiple Launch Rocket System (“GMLRS”) and Medium Range Ballistic Missile (“MRBM”) programs partially offset by a decline in the Redesigned Exoatmospheric Kill Vehicle (“RKV”) program which was canceled in 2019.
“Q2 2020 was a great quarter for Aerojet Rocketdyne,” said Eileen Drake, CEO and President of Aerojet Rocketdyne Holdings, Inc. “Sales in the quarter were up 6% year over year primarily driven by growth in defense programs, including GMLRS and MRBM. Margins in the quarter were a solid 14.9%, reflecting a continued focus on strong program performance. Backlog has once again reached an all-time high – $6.8 billion at quarter end. Included in our backlog was the NASA contract modification award received in May to produce an additional 18 RS-25 engines in support of deep space exploration missions. Free cash flow of $131.5 million was excellent in the quarter, bringing year-to-date free cash generation to $111.4 million compared with $24.3 million in the first six months of 2019.”
“The safety protocols that were put in place during the first quarter to combat the potential disruption impact of COVID-19 continue,” Drake added. “The majority of our non-touch employees still work remotely and we continue to enforce various safety protocols for those employees who are on site. The safety and health of our employees is our number one priority and I couldn’t be more pleased with our employees’ demonstrated ability to maintain the focus on safety as well as on continuing to deliver excellent performance to our customers and drive improvements and efficiencies across our operations.”
The decrease in net income was impacted by risk retirements in the prior period on the Terminal High Altitude Area Defense (“THAAD”) and Standard Missile programs and higher retirement benefits expense, partially offset by lower stock-based compensation. The Company had $11.4 million of net favorable changes in contract estimates on net income in the current period compared with net favorable changes of $19.0 million in the second quarter of 2019.
As of June 30, 2020, the Company’s total remaining performance obligations, also referred to as backlog, totaled $6.8 billion compared with $5.4 billion as of December 31, 2019. The increase in backlog was due to a $1.8 billion contract modification for the production of an additional 18 RS-25 engines to support future deep space exploration missions. The Company expects to recognize approximately 30%, or $2.1 billion, of the remaining performance obligations as sales over the next twelve months, an additional 22% the following twelve months, and 48% thereafter.
In January, the U.S. Army awarded American rocket and missile propulsion manufacturer, Aerojet Rocketdyne, with a $76,8 million contract modification to support of Stinger missile system.
Aerojet is a world-recognized aerospace and defense leader principally serving the missile and space propulsion, defense and armaments markets.