Annual Transition Report (10-kt/a)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
o
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
OR
 
 
 
ý

 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from April 1, 2015 to December 31, 2015   
Commission file number 1-10582
ORBITAL ATK, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
 
41-1672694
(I.R.S. Employer
Identification No.)
45101 Warp Drive
 
 
Dulles, Virginia
 
20166
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (703) 406-5000

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $.01
 
New York 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  o     No  ý
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  o     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  o     No  ý
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o     No  ý
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 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.
Large Accelerated Filer  ý
 
Accelerated Filer  o
 
Non-Accelerated Filer  o
  (Do not check if a
smaller reporting company)
 
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o     No  ý
At July 5, 2015, the aggregate market value of the registrant's voting common stock held by non-affiliates was approximately $4.235 billion (based upon the closing price of the common stock on the New York Stock Exchange on July 2, 2015).
At February 17, 2017, there were 57,546,630 shares of the registrant's voting common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement filed with the Commission on March 25, 2016 for the 2016 Annual Meeting of Stockholders are incorporated by reference into Part III.
 


EXPLANATORY NOTE TO AMENDMENT NO. 1
The purpose of this Amendment No. 1 to the Transition Report on Form 10-K (this "Amendment" or "Form 10-K/A") for the nine month period ending December 31, 2015, previously filed on March 15, 2016 ("Original Filing") with the Securities and Exchange Commission (the "SEC"), is to restate our previously issued consolidated financial statements and related disclosures in our Original Filing, as well as other financial statement information contained in certain previously filed Quarterly Reports on Form 10-Q.
In this Amendment, we have restated our consolidated financial statements for the nine-month transition period ended December 31, 2015 (“2015 transition period”), fiscal year ended March 31, 2015 (“fiscal 2015”), fiscal year ended March 31, 2014 ("fiscal 2014"), the quarters in the 2015 transition period and fiscal 2015 presented in Part II, Item 8 Financial Statements and Supplementary Data, and the unaudited selected financial data for the fiscal year ended March 31, 2013 ("fiscal 2013") presented in Part II, Item 6 Selected Financial Data. The impacts of the restatement on fiscal 2013 are reflected in the consolidated financial statements as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014. We refer to the misstatement corrections contained in the restated financial statements described herein collectively as the “Restatement.”
Description of the Restatement
As previously disclosed in the Company’s Current Reports on Form 8-K filed on August 10, 2016 and November 3, 2016, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after considering the recommendation of management, concluded that the Company’s previously issued financial statements for the periods mentioned above, as well as the quarters in fiscal 2014, the quarters in fiscal 2013 (except for the first quarter) and the quarter ended April 3, 2016, should no longer be relied upon as a result of misstatements resulting in the Restatement. The Restatement corrects misstatements primarily related to:
(i)
the estimation of contract costs at completion on the long-term contract (the “Lake City Contract”) with the U.S. Army to manufacture and supply small caliber ammunition at the Lake City Army Ammunition Plant in Independence, Missouri (the "LCAAP"). The Lake City Contract is within the Small Caliber Systems Division, a business unit within the Company’s Defense Systems Group. The Lake City Contract is a fixed price contract accounted for under the percentage of completion revenue recognition method. The misstatements in the estimation of contract costs at completion caused a forward loss provision to not be timely identified and recorded in prior periods; and

(ii)
the Company’s accounting policy, which resulted in the incorrect measurement of forward losses as a result of excluding general and administrative costs from the forward loss when general and administrative costs should be included in the measurement of a forward loss.
In addition to the matters in (i) and (ii) mentioned above, we also corrected for (iii) certain immaterial out of period adjustments previously recorded in the Original Filing related to misstatements in the application of purchase accounting with respect to acquired long-term contracts accounted for under the percentage of completion revenue recognition method (the "Prior Restatement"); and (iv) immaterial misstatements, including misstatements in certain footnotes, identified during an account review and analysis exercise, which related to the accounting for fixed assets, the spin-off and Distribution of the Company's former Sporting Group, revenue recognition and various other matters.
In view of the Restatement, management conducted a comprehensive and intensive review of all relevant material contracts throughout the Company. No material adjustment to the accounting for any of these contracts was required as a result of this review, nor were any circumstances similar to those at the Small Caliber Systems Division discovered.
Background
Before its merger with Orbital Sciences Corporation in 2015, the Company, then known as Alliant Techsystems Inc. or ATK, already had many years of experience with contracts involving operation and production of ammunition at U.S. Army ammunition plants. ATK had operated the LCAAP since 2000 and had operated the U.S. Army’s Radford, Virginia ammunition plant from 1995 to 2012.
In September 2012, ATK was awarded the Lake City Contract for the continued production of ammunition and continued operation and maintenance of the LCAAP. Anticipating strong price competition during the bid process in 2012, ATK submitted a significantly lower price to the U.S. Army than ATK had experienced under the predecessor contract for LCAAP. Based on its long experience in successfully and profitably managing U.S. Army ammunition contracts, ATK believed it would, among other things, be able to substantially reduce operating costs over the life of the Lake City Contract. While the Company did succeed in achieving significant cost reductions at the LCAAP, these cost reductions were not sufficient to achieve profitability over the life of the Lake City Contract.


The Lake City Contract has an initial term of seven years plus the possibility of an award term extension of an additional three years if by July 17, 2017 the Company does not provide written notice of rejection to the U.S. Army. It is probable that the Company will provide written notice of rejection to the U.S. Army. As a result, the Restatement presents the total estimated forward loss provision for the initial seven-year term.
Certain of the misstatements arising out of the Lake City Contract were initially identified by Orbital ATK senior management in 2016 in connection with our enterprise-wide business optimization program, which was recommended by the Board of Directors to be performed by management. This program includes working capital efficiency initiatives and ongoing efforts to enhance accounting controls and oversight, and is part of our remediation activities in response to material weaknesses identified in connection with the Prior Restatement. Senior management’s identification of these misstatements led to the internal investigation described below. Senior management identified that the prior period estimates of underlying contract costs estimated at completion for the Lake City Contract contained misstatements which, when corrected, resulted in the Lake City Contract’s estimated costs at completion exceeding the contracted revenues for the seven-year term. This necessitated a charge for the entire anticipated forward loss on the Lake City Contract in the period in which the loss became evident. The Company determined that $32 million of the loss should have been evident at contract signing (second quarter of fiscal 2013) and $342 million should have been evident at the time of first production (second quarter of fiscal 2014), and restated those periods and the consequential impact in subsequent periods. Due to the contract loss, we also recorded impairments to goodwill for the Small Caliber Systems Division reporting unit and the value of the long-lived assets within the LCAAP asset group in fiscal 2014. Subsequent to the impairments, costs incurred for the purchase or construction of additional long-lived assets related to this contract were expensed in the periods incurred, as such costs will not be recovered.
Internal Investigation
The Audit Committee of the Board of Directors, in consultation with senior management, determined that the Company should conduct an internal investigation, under its supervision, of the circumstances surrounding the misstatements in the accounting for the Lake City Contract and related matters. The investigation was undertaken by outside counsel, along with independent counsel for the Audit Committee. Counsel received assistance from outside forensic accountants. The investigation is complete.
The Board of Directors and management are fully committed to maintaining a strong internal control environment. The Company has taken and will continue to take significant and comprehensive remedial actions in response to the conduct and other factors that led to the Restatement, including actions to begin to remediate the material weaknesses in internal control over financial reporting identified by management that contributed to the misstatements.
For more information about the internal investigation, the specific material weaknesses in internal control over financial reporting and the Company’s remedial actions, please see Part II, Item 9A Controls and Procedures.
For more information regarding the Restatement, see Part II, Item 8, Financial Statements and Supplementary Data - Note 2. "Restatement," to the consolidated financial statements in this Amendment.
Amendment
This Form 10-K/A sets forth the Original Filing, as modified and superseded where necessary to reflect the Restatement and related matters (including the impact of the Restatement on our outstanding financing arrangements and legal proceedings related to the Restatement). The consolidated financial statements included in this Form 10-K/A have also been revised for the effects of the accounting standards adopted subsequent to the Original Filing requiring retrospective adoption.
Specifically, the following items of the Original Transition Report Form 10-K are amended by this Form 10-K/A to reflect the Restatement and related matters:
Part I - Item 1. Business
Part I - Item 1A. Risk Factors
Part I - Item 3. Legal Proceedings
Part II - Item 6. Selected Financial Data
Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II - Item 8. Financial Statements and Supplementary Data- including a revised “Report of Independent Registered Public Accounting Firm” of each of PricewaterhouseCoopers LLP and Deloitte & Touche LLP, an explanatory note describing the Restatement (Note 2) and updates to selected notes impacted by the Restatement in the Notes to the Consolidated Financial Statements.
Part II - Item 9A. Controls and Procedures
Part IV - Item 15. Exhibits and Financial Statement Schedules


This Form 10-K/A also amends the Original Filing to restate management’s report on internal control over financial reporting (included under Item 9A) to disclose the additional material weaknesses identified by management as a result of this Restatement and provide an update on our remediation efforts made to address the material weaknesses reported in the Original Filing and the additional material weaknesses reported in this Amendment. This Form 10-K/A also amends the Original Filing to include a restated report of PricewaterhouseCoopers LLP on the effectiveness of our internal control over financial reporting as of December 31, 2015.
In accordance with applicable SEC rules, this Form 10-K/A includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing.
Other than this Form 10-K/A, we do not intend to file any other amended reports with the SEC in connection with the Restatement of the consolidated financial statements for the 2015 transition period, the fiscal 2015 and 2014 periods and the quarterly periods in the 2015 transition period and fiscal 2015.
We expect to file a Form 10-Q/A for the quarter ended April 3, 2016 which will include restated consolidated financial statements for that period and the comparative prior period as soon as practical after the date hereof. Thereafter, we expect to file a Form 10-Q for each of the quarters ended July 3, 2016 and October 2, 2016 as soon as practicable.
Except as specifically set forth above, this Amendment does not reflect events that may have occurred after the Original Filing or modify or update any related or other disclosures. As such, this Amendment should be read in conjunction with the Company’s Current Reports on Form 8-K filed with the SEC since March 15, 2016 and all of the Company’s filings after the date hereof.
EXPLANATORY NOTE REGARDING THIS TRANSITION REPORT
In March 2015, we changed our fiscal year from the period beginning on April 1 and ending on March 31 to the period beginning on January 1 and ending on December 31. As a result, this report on Form 10-K/A is a transition report and includes financial information for the transition period from April 1, 2015 through December 31, 2015. Subsequent to this report, our reports on Form 10-K will cover the calendar year, January 1 to December 31, which is now our fiscal year. We refer in this report to the period beginning on April 1, 2015 and ending on December 31, 2015 as the “2015 transition period.” We refer in this report to the period beginning on April 1, 2014 and ending on March 31, 2015 as “fiscal 2015” and the period beginning on April 1, 2013 and ending on March 31, 2014 as “fiscal 2014.”



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Table of Contents

PART I
ITEM 1.    BUSINESS
Orbital ATK, Inc. (the "Company", "we", "us" or "our") is an aerospace and defense systems company and supplier of related products to the U.S. Government, allied nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems; satellites and associated components and services; composite aerospace structures; tactical missiles, subsystems and defense electronics; and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations throughout the United States. We were incorporated in Delaware in 1990.
On February 9, 2015, we completed a tax-free spin-off and distribution of our former Sporting Group to our stockholders (the “Distribution”) as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). Immediately following the Distribution, we combined with Orbital Sciences Corporation ("Orbital") through the merger of a Company subsidiary with Orbital (the "Merger"). Following the Distribution and Merger, we changed our name from Alliant Techsystems Inc. ("ATK") to Orbital ATK, Inc.
In connection with the Distribution, our stockholders received two shares of Vista Outdoor for each share of our common stock held. As a result of the Distribution, the Sporting Group is reported as a discontinued operation in the consolidated financial statements for all prior periods presented.
In connection with the Merger, Orbital stockholders received 0.449 shares of our stock for each share of Orbital common stock held. Both transactions were structured to be tax-free to U.S. stockholders of Orbital and our Company for U.S. federal income tax purposes. Immediately following the Merger, Orbital stockholders owned 46.2% of our common stock and our existing stockholders owned 53.8%. We used the acquisition method to account for the Merger; accordingly, the results of Orbital are included in our consolidated financial statements since the date of the Merger.
We conduct business in three segments: Flight Systems Group , Defense Systems Group and Space Systems Group , which are described in greater detail below. These Groups are further comprised of smaller operating units that we refer to as "divisions."
Flight Systems Group is well-positioned in its markets, as follows:
•
leading provider of small- and medium-class space launch vehicles for civil, military and commercial missions,
•
major supplier of interceptor boosters and target vehicles for missile defense applications,
•
premier producer of solid rocket propulsion systems and specialty energetic products, and
•
manufacturer of composite structures for commercial and military aircraft and launch vehicles.
Defense Systems Group is also well-positioned in its markets, as follows:
•
leader in propulsion and controls for air-, sea- and land-based tactical missiles and missile defense interceptors as well as fuzing and warheads for tactical missiles and munitions,
•
supplier of advanced defense electronics for next-generation strike weapon systems, missile-warning and aircraft survivability systems, and special-mission aircraft,
•
leading producer of medium- and large-caliber ammunition, medium-caliber gun systems and precision munitions guidance kits, and
•
leading U.S. producer of small-caliber ammunition.
Space Systems Group is also well-positioned in its markets, as follows:
•
leading provider of small- and medium-class commercial satellites used for global communications and high-resolution Earth imaging,
•
leading provider of small- and medium-class spacecraft that perform scientific research and national security missions for government customers,
•
provider of commercial cargo delivery services to the International Space Station and developer of advanced space systems, and
•
premier provider of spacecraft components and subsystems and specialized technical services.

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Table of Contents

Sales; income (loss) from continuing operations, before noncontrolling interest; and, other financial data for each segment for the nine-months ended December 31, 2015 and the years ended March 31, 2015 and 2014 are set forth in Note 17 to the consolidated financial statements, included in Item 8 of this report.
Flight Systems Group
Flight Systems Group develops rockets that are used as small- and medium-class space launch vehicles to place satellites into Earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The Group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally, the Group operates in the military and commercial aircraft and launch structures markets.
The following is a description of the operating units (“divisions”) within Flight Systems Group :
Launch Vehicles Division
The Launch Vehicles division includes both small- and medium-class rockets for government, civil and commercial payloads. Our innovative Pegasus® rocket is launched from our "Stargazer" L-1011 carrier aircraft and has proven to be the small space-launch workhorse for U.S. government customers and commercial customers, having conducted 45 missions from six different launch sites worldwide since 1990. Our Taurus launch vehicle combines our Pegasus upper-stage motors with a commercially-provided first stage propulsion system for increased performance. Our Minotaur I, IV and V rockets combine decommissioned Minuteman and Peacekeeper rocket motors with our proven upper stage motors, avionics and fairings to provide increased lifting capacity for government-sponsored payloads.
The division’s Antares rocket is a two-stage vehicle (with optional third stage) that provides low-Earth orbit ("LEO") launch capability for payloads weighing over 7,000 kg. The Antares rocket has been used in the execution of our Commercial Resupply Services ("CRS I") contract with NASA to deliver cargo to the International Space Station ("ISS"). The Antares design is being upgraded with newly-built RD-181 first stage engines to provide greater payload performance and increased reliability, and we currently are targeting two launches of the reconfigured Antares rocket in 2016 in connection with the CRS-I contract.
As the industry-leading provider of suborbital launch vehicles for the nation's missile defense systems, the division has conducted over 75 launches for the U.S. Missile Defense Agency, the U.S. Air Force, Army and Navy, and allied nations during the last 10 years. Additionally, the division is the sole provider of interceptor boosters for the U.S. Missile Defense Agency's Ground-based Midcourse Defense ("GMD") system designed to intercept and destroy long-range enemy missiles. We are also a primary supplier of highly-reliable target vehicles that serve as "threat simulators" to provide high-fidelity facsimiles of enemy missile threats in the testing and verification of missile defense systems.
Propulsion Systems Division
The Propulsion Systems division is the development and production center for our solid rocket motors for NASA's current and planned human spaceflight programs, including the Space Launch System ("SLS") heavy lift vehicle and the launch abort system ("LAS") motor for the Orion crew capsule that is designed to safely pull the crew capsule away from the launch vehicle in the event of an emergency during launch.
The division also produces medium-class solid rocket motors for the U.S. Navy's Trident II ("D5") Fleet Ballistic Missile program and conducts solid rocket propulsion sustainment activities for the U.S. Air Force's Minuteman III Intercontinental Ballistic Missile. These two programs provide the backbone of the United States' strategic deterrence program. Additional solid rocket motors being produced by the division include GEM 60 motors for the Delta IV, Orion® motors for our Pegasus, Taurus, and Minotaur launch vehicles and U.S. Missile Defense Agency targets, and CASTOR® motors for our Antares rocket and Taurus rocket. The division supplies Orion® motors for all three stages of the GMD system as well as other Orbital ATK launch vehicles. In addition, the division produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.
Aerospace Structures Division
The Aerospace Structures division is a provider of advanced composite aircraft components for military and commercial aircraft manufacturers, using highly automated composite fabrication techniques, including automated fiber placement and stiffener forming processes. It provides a wide variety of composite parts for the F-35 Lightning II Joint Strike Fighter, a fifth-generation fighter aircraft for the U.S. military and its allies. It also provides composite radomes and apertures for a number of military aircraft and provides wing stiffeners for the A400M military transport aircraft. The division provides very large fiber-placed and hand lay-up structures for the Atlas and Delta launch vehicles, and filament-wound composite cases for solid rocket motors and composite overwrapped pressure vessels.

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The division has a commercial aerospace composites center of excellence facility in Clearfield, Utah, to support its commercial aerospace customers, including Airbus, Rolls Royce, and Boeing. The division is under contract to produce the majority of the composite stringers and frames for the Airbus A350 XWB wide-body passenger jetliner. Additional major commercial programs include a partnership with Rolls Royce to produce the aft fan case for the Trent XWB engine, which will be used to power the Airbus A350 aircraft, and a contract to produce composite frames for the Boeing 787-9 and 787-10 commercial aircraft.
Defense Systems Group
Defense Systems Group develops and produces small-, medium-, and large-caliber ammunition, precision weapons and munitions, high-performance gun systems, and propellant and energetic materials. It operates the Lake City Army Ammunition Plant in Independence, MO ("LCAAP") and a Naval Sea Systems Command (“NAVSEA”) facility in Rocket Center, WV. Defense Systems Group is also a leader in tactical solid rocket motor development and production for a variety of air-, sea- and land-based missile systems. The Group serves a variety of domestic and international customers in the defense and security markets in a prime contractor, partner or supplier role.  Defense Systems Group also provides propulsion control systems that support Missile Defense Agency and NASA programs, airborne missile warning systems, advanced fuzes, and defense electronics.  The Group produces the U.S. Navy's Advanced Anti-Radiation Guided Missile (“AARGM”) and has developed advanced air-breathing propulsion systems and special-mission aircraft for defense applications.
The following is a description of the divisions within Defense Systems Group :
Armament Systems Division
The Armament Systems division is home to our precision weapons and medium- and large-caliber ammunition programs. The division is under contract to produce the Precision Guidance Kit ("PGK") for 155mm artillery and is the developer and producer of PGK units for 120mm mortars that are fielded as the U.S. Army's Advanced Precision Mortar Initiative. An additional program of note is the XM-25 Counter Defilade Target Engagement System under development for the U.S. Army. The division also produces the family of medium-caliber Bushmaster® chain guns and is a global systems designer and producer of medium-caliber ammunition for integrated gun systems. These gun systems are used on a variety of ground combat vehicles, helicopters and naval vessels, including the Bradley Fighting Vehicle, the Light Armored Vehicle, coastal patrol craft and Apache helicopters. New products include a link-fed variant of the Apache gun-system for ground and naval applications. Armament Systems also leads Defense Systems Group 's international co-production efforts and provides munitions support to allied nations.
Defense Electronic Division
The Defense Electronic division provides customers with advanced capabilities for offensive and defensive electronic warfare and specializes in weaponized airborne intelligence, surveillance and reconnaissance platforms and advanced anti-radiation homing missile systems, special-mission aircraft, missile warning systems, and mission support equipment. Key programs include the AARGM missile used by the U.S. Navy and NATO militaries, and AAR-47 missile warning system used by U.S. and allied fixed and rotor-wing aircraft to defeat incoming missile threats. The division also provides special-mission aircraft that integrate sensors, fire control software, gun systems and air-to-ground weapons capability for use in counterinsurgency, border/coastal surveillance and security missions.
Missile Products Division
The Missile Products division provides customers with high-performance tactical solid rocket motor propulsion for a variety of surface and air-launched missile systems including Hellfire, Maverick, Advanced Medium-Range Air-to-Air Missile and Sidewinder. The division also produces warheads, fuzing and sensors for various artillery, mortar, grenade and air-dropped weapons including the Hard Target Void Sensing Fuze. The division produces metal components for various medium-caliber ammunition and 120mm tank ammunition and also produces specialty composite and ceramic structures used on military platforms and in energy applications. The division provides customers with the third-stage propulsion on the Standard Missile defense interceptor.  Additional capabilities include the STAR™ family of satellite orbit insertion motors, high performance rocket boosters, and advanced air-breathing propulsion for platforms designed for Mach 3+ flight. It also continues to operate our New River Energetics facility located on the Radford Army Ammunition Plant (“RFAAP”) in Radford, VA, which provides load, assembly, and pack (LAP) of medium caliber munitions; and propellants and powders for the canister and commercial markets, individual re-loaders, and original equipment manufacturers.




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Small Caliber Systems Division
The Small Caliber Systems division is the largest producer of small-caliber ammunition in the U.S., covering 5.56, 7.62 and .50 caliber rounds. The division provides non-NATO munitions and weapons systems to the U.S. Army for use by allied security forces. The division also provides commercial ammunition to Vista Outdoor. Since 2000, the Company has operated and modernized the LCAAP. In September 2012, we were awarded new contracts for the continued production of ammunition and continued operation and maintenance of the LCAAP.
Space Systems Group
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research, and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for Earth-orbit and deep-space exploration, including delivering cargo to the ISS. This Group is also a provider of spacecraft components and subsystems and specialized engineering and operations services to U.S. government agencies.
The following is a description of the divisions within Space Systems Group :
Commercial Satellites Division
The Commercial Satellites division develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting and to collect imagery and other remotely-sensed data about the Earth. Our GEOStar™ -2 and -3 geostationary Earth orbit ("GEO") satellites are among the industry’s best-selling small- and medium-class communications satellites for 2 to 8 kilowatt missions. The world’s leading satellite communications service providers rely on our lower-cost, highly reliable GEOStar satellites for their broadband, television broadcasting, mobile communications, business data networks and other telecommunications missions. We are also an industry pioneer in the design and production of commercial imaging satellites as well as in the incorporation of civil and military hosted payloads on our commercial spacecraft.
Government Satellites Division
The Government Satellites division develops and produces small- and medium-class satellites that conduct space-related scientific research including astrophysics, earth science/remote sensing and heliophysics, carry out interplanetary and other deep-space exploration missions, and demonstrate new space technologies. It also provides human-rated space systems for Earth-orbit and deep-space exploration. This includes cargo missions to the ISS under the CRS I program using the Cygnus spacecraft. We are currently under contract to deliver cargo to the ISS through 2018 and were recently awarded a follow-on CRS II contract to provide additional cargo missions starting in 2019. This division also designs and produces small- and medium-class satellites used for national security space programs.
Space Components Division
The Space Components division is a major supplier of satellite mechanical components and structural assemblies for a wide variety of commercial, civil, and defense spacecraft programs. It has strong market positions in spacecraft composite primary and secondary structures, satellite fuel and oxidizer tanks, precision payload structures, solar power arrays, deployable structures, and thermal control systems.
Technical Services Division
The Technical Services division provides a full spectrum of cost-effective engineering, manufacturing and program management services to NASA and other civil government and military space agencies. The division manages high-profile NASA science programs including its scientific sounding rocket and high-altitude balloon activities.
Customers (as restated)
Our sales have come primarily from contracts with agencies of the U.S. Government and its prime contractors and subcontractors and from major domestic and international commercial satellite operators and aircraft manufacturers. As the various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA, and the U.S. Air Force, make independent purchasing decisions, we do not generally regard the U.S. Government as one customer. Instead, we view each agency as a separate customer.

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Sales by customer, as a percentage of total sales, were as follows:
 
 
Percentage of Sales (as restated)
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
 
March 31, 2015
 
March 31, 2014
Sales to:
 
 
 
 
 
 
U.S. Army
 
15
%
 
26
%
 
32
%
U.S. Navy
 
11

 
15

 
17

NASA
 
23

 
13

 
14

U.S. Air Force
 
4

 
7

 
7

Other U.S. Government customers
 
17

 
14

 
14

Total U.S. Government customers
 
70

 
75

 
84

Commercial and foreign customers
 
30

 
25

 
16

Total
 
100
%
 
100
%
 
100
%
Sales to the U.S. Government and its prime contractors (as restated) were as follows:
Period
U.S. Government
Sales
 
Percentage of
Sales
Nine Months Ended December 31, 2015
$
2,359
 million
 
70
%
Year Ended March 31, 2015
$
2,332
 million
 
75
%
Year Ended March 31, 2014
$
2,432
 million
 
84
%
Our CRS I contract with NASA, which is reported within Flight Systems Group and Space Systems Group , comprised 10% of our sales in the 2015 transition period . Our small-caliber ammunition contract with the U.S. Army, which is reported within Defense Systems Group , comprised 6% , 12% and 16% of our sales in the 2015 transition period, fiscal 2015 and fiscal 2014, respectively. No other single contract accounted for more than 10% of our sales in the 2015 transition period , fiscal 2015 , or fiscal 2014 . Our top five contracts accounted for approximately 29% of our sales in the 2015 transition period .
Sales to the U.S. Government as a prime contractor and as a subcontractor as a percentage of total U.S. Government sales in the 2015 transition period (as restated) were as follows:
Sales as a prime contractor
62
%
Sales as a subcontractor
38
%
Total
100
%
Other than the U.S. Government customers listed above, no single customer accounted for more than 10% of our sales in the 2015 transition period .
International sales (as restated) were as follows:
 
International Sales
 
Percentage of
Sales
Nine months ended December 31, 2015
$
766
 million
 
22.6
%
Year ended March 31, 2015
$
608
 million
 
19.5
%
Year ended March 31, 2014
$
348
 million
 
12.0
%
Sales to foreign governments and other international customers may require approval by the U.S. Department of Defense ("DoD") and the U.S. State Department or the U.S. Commerce Department. Our products are sold to U.S. allies directly, as well as through the U.S. Government. During the 2015 transition period , approximately 18% of these sales were in Flight Systems Group , 47% were in Defense Systems Group , and 35% were in Space Systems Group . No sales to an individual country outside the United States accounted for more than 4% of our sales in the 2015 transition period .

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Backlog (as restated)
Firm backlog is the estimated value of contracts for which orders have been recorded, but for which revenue has not yet been recognized. The total amount of firm backlog was approximately $8.3 billion at December 31, 2015 and $8.0 billion at March 31, 2015 . Approximately $2.2 billion of firm backlog was not yet funded at December 31, 2015 . We expect that approximately 39% of the December 31, 2015 firm backlog will be recognized as revenue in the following 12 months.
Total backlog, which includes firm backlog plus the value of unexercised options, was approximately $13.0 billion at December 31, 2015 and $11.6 billion at March 31, 2015 .
Seasonality
Our business is not seasonal.
Competition
We compete against other U.S. and foreign prime contractors and subcontractors, many of which have substantially more resources to deploy than we do in the pursuit of government and industry contracts. Our ability to compete successfully in this environment depends on a number of factors, including the creativity and effectiveness of research and development programs, our ability to offer better program performance than our competitors and/or at a lower cost, our readiness with respect to facilities, equipment, and personnel to undertake the programs for which we compete, and our past performance and demonstrated capabilities.
Additional information on the risks related to competition can be found under "Risk Factors" in Item 1A. of this report.
We generally face competition from a number of competitors in each business area, although no single competitor competes along all of our segments. Our principal competitors in each of our segments are as follows:
Flight Systems Group :     Aerojet-Rocketdyne Holdings, Inc.; Arianespace SA; Coleman Aerospace, a division of L-3 Communications Holdings, Inc.; Daher Group; GKN Aerospace Company; Harris Corporation Aerostructures; HITCO Aerostructures; Kilgore Flares Company, LLC, a subsidiary of Chemring North American; Kratos Defense & Security Solutions, Inc.; Lockheed Martin Corporation; Northrop Grumman Aerospace Systems; Space Exploration Technologies Corporation; Spirit Aerosystems Company; United Launch Alliance (a joint venture between Lockheed Martin Corporation and The Boeing Company); and Vought Aircraft, a division of Triumph Aerostructures.
Defense Systems Group :    Aerojet-Rocketdyne Holdings, Inc.; BAE Systems, Chemring Group; General Dynamics Corporation; L-3 Communications Holdings, Inc.; Lockheed Martin Corporation; Nammo AS; Northrop Grumman Corporation; Raytheon Company; and various international producers of ammunition and guns.
Space Systems Group : Airbus Defense and Space; Ball Aerospace and Technologies Corp.; Lockheed Martin Corporation; Mitsubishi Electric Corp.; Reshetnev Company - Information Satellite Systems; Sierra Nevada Corporation; Space Exploration Technologies Corp; Space Systems/Loral, a subsidiary of MacDonald, Dettwiler and Associates Ltd.; Surrey Satellite Technology Limited, a subsidiary of Airbus Group; Thales Alenia Space; and The Boeing Company.
Research and Development
We conduct extensive research and development ("R&D") activities. Company-funded R&D is primarily for the improvement of current products and for development of next-generation technology. Customer-funded R&D is comprised primarily of activities we conduct under contracts with the U.S. Government and its prime contractors. R&D expenditures were as follows:
 
Company-funded
 
Customer-funded
Nine months ended December 31, 2015
$
83.2
 million
 
$
358.6
 million
Year ended March 31, 2015
$
49.3
 million
 
$
499.0
 million
Year ended March 31, 2014
$
48.5
 million
 
$
495.1
 million
Raw Materials and Components
We use a broad range of raw materials in manufacturing our products, including aluminum, steel, copper, lead, graphite fiber, epoxy resins, zinc, and adhesives. We monitor the sources from which we purchase raw materials in an attempt to ensure there are adequate supplies to support our operations. We monitor the price of materials, particularly commodity metals like copper, which have fluctuated dramatically over the past several years.

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We also use sub-assemblies and instruments in our products and obtain parts and equipment that are used in the production of our products or in the provision of our services from domestic and foreign suppliers and the U.S. Government. Generally, we have not experienced material difficulty in obtaining product components or necessary parts and equipment and we believe that alternatives to our existing sources of supply are available in most cases.
We procure materials and components from a variety of sources. In the case of our government contracts, we are often required to purchase from sources approved by the U.S. Department of Defense. When our suppliers choose to eliminate certain materials or components we require from their product offering, we attempt to qualify other suppliers or replacement materials to ensure there are no disruptions to our operations.
We rely upon sole-source suppliers for many of our satellite and launch vehicle components, including our liquid-propellant rocket engines. The inability of our current suppliers to provide us with key components could result in significant contract delays, cost increases and loss of revenues due to the time, resources and effort that would be required to develop or adapt other engines or components for use in our products. For example, as a result of an Antares launch failure in October 2014, we discontinued use of the Aerojet-Rocketdyne AJ-26 engine and have transitioned to the RD-181 engine, which is manufactured in Russia for use in our Antares launch vehicle first stage. The transition to the RD-181 engine has required substantial testing and time and additional expense.
Additional information on the risks related to raw materials and components can be found under "Risk Factors" in Item 1A of this report.
Intellectual Property
At December 31, 2015 , we owned 425 U.S. patents and 284 foreign patents. We also had approximately 125 U.S. patent applications and approximately 156 foreign patent applications pending.
Although we manufacture various products covered by patents, we do not believe that any single existing patent, license, or group of patents is material to our success. We believe that unpatented research, development, and engineering skills also make an important contribution to our business. The U.S. Government typically receives royalty-free licenses to inventions made under U.S. Government contracts. Consistent with our policy to protect proprietary information from unauthorized disclosure, we ordinarily require employees to sign confidentiality agreements as a condition of employment.
As many of our products are complex and involve patented and other proprietary technologies, we face a risk of claims alleging that we have infringed upon third-party intellectual property rights. Such claims could result in costly and time-consuming litigation, the invalidation of our intellectual property rights, and/or increased licensing costs.
Regulatory Matters
U.S. Governmental Contracts
We are subject to the procurement policies and procedures set forth in the Federal Acquisition Regulation ("FAR"). The FAR governs all aspects of government contracting, including competition and acquisition planning; contracting methods and contract types; contractor qualifications; and acquisition procedures. Every government contract contains a list of FAR provisions that must be complied with in order for the contract to be awarded. The FAR provides for regular audits and reviews of contract procurement, performance, and administration. Failure to comply with the provisions of the FAR could result in contract termination.
The U.S. Government may terminate its contracts with its suppliers, either for convenience or in the event of a default as a result of our failure to perform under the applicable contract. If a cost-plus contract is terminated for convenience, we are entitled to reimbursement of our approved costs and payment of a total fee proportionate to the percentage of the work completed under the contract. If a fixed-price contract is terminated for convenience, we are entitled to payment for items delivered to and accepted by the U.S. Government and fair compensation for work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses, and a reasonable profit on the costs incurred or committed. If a contract termination is for default, we are paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. Government and may be liable to the U.S. Government for repayment of any advance payments and progress payments related to the terminated portions of the contract, as well as excess costs incurred by the U.S. Government in procuring undelivered items from another source. Additional information on the risks related to government contracts can be found under "Risk Factors" in Item 1A. of this report.
We also must comply with U.S. and foreign laws governing the export of munitions and other controlled products and commodities. These include regulations relating to import-export control, exchange controls, the Foreign Corrupt Practices Act, and the anti-boycott provisions of the U.S. Export Administration Act.

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Environmental
Our operations are subject to a number of federal, state and local environmental laws and regulations, as well as applicable foreign laws and regulations that govern the discharge, treatment, storage, remediation and disposal of certain materials and wastes, and restoration of damages to the environment. Compliance with these laws and regulations is a responsibility we take seriously. We believe that forward-looking, proper, and cost-effective management of air, land, and water resources is vital to the long-term success of our business. Our environmental policy identifies key objectives for implementing this commitment throughout our operations. Additional information on the risks related to environmental matters can be found under "Risk Factors" in Item 1A of this report.
Employees
At December 31, 2015 , we had approximately 12,300 employees. We have union-represented employees at five locations, comprising less than 20% of our total workforce.  One location has two separate bargaining units, each with its own collective bargaining agreement (“CBA”).  Our current CBAs expire in 2016, 2017, 2018 and 2019.
Executive Officers
The following table sets forth certain information with respect to our executive officers at December 31, 2015 :
Name
Age
 
Title
David W. Thompson
61
 
President and Chief Executive Officer
Blake E. Larson
56
 
Chief Operating Officer
Garrett E. Pierce
71
 
Chief Financial Officer
Antonio L. Elias
66
 
Executive Vice President and Chief Technical Officer
Frank L. Culbertson, Jr.
66
 
Executive Vice President and President, Space Systems Group
Michael A. Kahn
56
 
Executive Vice President and President, Defense Systems Group
Scott L. Lehr
55
 
Executive Vice President and President, Flight Systems Group
Thomas E. McCabe
61
 
Senior Vice President, General Counsel and Secretary
Christine A. Wolf
55
 
Senior Vice President, Human Resources
Each of the above individuals serves at the pleasure of the Board of Directors and is subject to reelection annually on the date of the Annual Meeting of Stockholders. No family relationship exists among any of the executive officers or among any of them and our directors. There are no outstanding loans from our company to any of these individuals. Information regarding the employment history (in each case with our Company unless otherwise indicated) of each of the executive officers is set forth below.
David W. Thompson has served in his present position since the Merger on February 9, 2015. Mr. Thompson has also been a director of our Company since the Merger. He co-founded Orbital and served as Chairman of the Board and Chief Executive Officer of Orbital from 1982 until the Merger. From 1982 until October 1999, he also served as President of Orbital, a role he resumed in mid-2011. Prior to founding Orbital, Mr. Thompson was employed by Hughes Electronics Corporation as special assistant to the President of its Missile Systems Group and by NASA at the Marshall Space Flight Center as a project manager and engineer, and also worked on the Space Shuttle’s autopilot design at the Charles Stark Draper Laboratory. Mr. Thompson is an Honorary Fellow of the American Institute of Aeronautics and Astronautics, a Fellow of the American Astronautical Society and the Royal Aeronautical Society, and is a member of the U.S. National Academy of Engineering. He also serves as a member of the Board of Trustees of the California Institute of Technology.
Blake E. Larson has served in his present position since the Merger on February 9, 2015. From April 2010 until February 9, 2015, he served as our Senior Vice President and President Aerospace Group. From 2009 to March 2010, he was Senior Vice President and President Space Systems. From 2008 to 2009, he was Executive Vice President Space Systems, and also General Manager Spacecraft Systems from August 2008 to January 2009. From 2006 to 2008, he was Executive Vice President of Mission Systems Group. Prior to that, Mr. Larson held a variety of key leadership positions in operations of several businesses within our aerospace and defense portfolio.
Garrett E. Pierce has served in his present position since the Merger on February 9, 2015. He was Vice Chairman and Chief Financial Officer of Orbital from 2002 until the Merger, and was Executive Vice President and Chief Financial Officer of Orbital from 2000 to 2002. From 1996 until 2000, he was Executive Vice President and Chief Financial Officer of Sensormatic Electronics Corp., a supplier of electronic security systems, where he was also named Chief Administrative Officer in July 1998. Prior to joining Sensormatic, Mr. Pierce was the Executive Vice President and Chief Financial Officer of California

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Microwave, Inc., a supplier of microwave, radio frequency, and satellite systems and products for communications and wireless networks. From 1980 to 1993, Mr. Pierce was employed by Materials Research Corporation, a provider of thin film equipment and high purity materials to the semiconductor, telecommunications and media storage industries, where he progressed from Chief Financial Officer to President and Chief Executive Officer. Materials Research Corporation was acquired by Sony Corporation in 1989. From 1972 to 1980, Mr. Pierce held various management positions with The Signal Companies. Mr. Pierce is a Director of Kulicke and Soffa Industries, Inc.
Antonio L. Elias has served in his present position since the Merger on February 9, 2015. He was Executive Vice President and Chief Technical Officer of Orbital from September 2012 until the Merger. From October 2001 to September 2012, he served as Orbital's Executive Vice President and General Manager, Advanced Programs Group, and was Orbital's Senior Vice President and General Manager, Advanced Programs Group from 1997 to 2001. From 1996 until 1997, Dr. Elias served as Senior Vice President and Chief Technical Officer of Orbital. From 1993 through 1995, he was Orbital's Senior Vice President for Advanced Projects, and was Orbital's Senior Vice President, Space Systems Division from 1990 to 1993. He was Vice President, Engineering of Orbital from 1989 to 1990 and was Orbital's Chief Engineer from 1986 to 1989. From 1980 to 1986, Dr. Elias was an Assistant Professor of Aeronautics and Astronautics at Massachusetts Institute of Technology. He was elected to the National Academy of Engineering in 2001.
Frank L. Culbertson, Jr. has served in his present position since the Merger on February 9, 2015. He was Orbital's Executive Vice President and General Manager, Advanced Programs Group from September 2012 until the Merger. From 2008 to 2012, he served as a Senior Vice President in Orbital's Advanced Program Group, where he headed human space systems efforts. Prior to joining Orbital, Mr. Culbertson was a Senior Vice President at Science Applications International Corporation from 2002 to 2008. Before entering the private sector, Mr. Culbertson served as a NASA astronaut for 18 years, flying three Space Shuttle missions, and began his career as a pilot in the U.S. Navy.
Michael A. Kahn has served in his present position since the Merger on February 9, 2015. From April 2012 until February 9, 2015, he served as our Senior Vice President and President Defense Group. From August 2010 through March 2012, he was Senior Vice President and President Missile Products Group. From 2009 to August 2010, he was Executive Vice President Aerospace Systems. From 2008 to 2009, he was Vice President and General Manager Launch Systems and, from 2001 to 2008, he was Vice President Space Launch Systems. From 1997 to 2001 he was Vice President Operations and played a key role in the integration of Thiokol and ATK. From 1989 to 1997, he held a number of senior leadership positions across a variety of programs and operations of our company. Prior to that he was with Rockwell International, Rocketdyne Division and held a number of positions across engineering, quality and reliability assurance, launch site operations, and rocket engine testing.
Scott L. Lehr  has held his present position since July 1, 2015. From April 2015 through June 2015, he was Senior Vice President Flight Systems Group. From April 2009 through March 2015, he served as Vice President and General Manager of Defense and Commercial Systems in the Aerospace Group.  From 2007 to 2009 he was Vice President Operations, and from 2004 to 2007, he was Vice President Air Force Programs within the Launch Systems Group. Prior to that, he held a number of senior leadership positions in engineering and program management as part of our propulsion business. He joined the company in 1984 and has more than 30 years of experience in the aerospace industry. 
Thomas E. McCabe has served in his present position since the Merger on February 9, 2015. He was Senior Vice President, General Counsel and Corporate Secretary of Orbital from January 2014 until the Merger. Before joining Orbital, he served from 2010 to 2014 as Senior Vice President, General Counsel and Secretary of Alion Science and Technology Corporation, a provider of advanced engineering and technology solutions. From 2008 to 2010 he served as Executive Vice President and General Counsel, and President of the Federal business, of Braintech, Inc., which provided automated vision systems for industrial and military robots. Earlier in his career, he was Vice President and Deputy General Counsel of XM Satellite Radio from 2005 through its merger with Sirius Satellite Radio in 2008. He also served as President, CEO and a director of software provider MicroBanx Systems from 2001 to 2005, and President, CEO and a director of its parent company, COBIS Corporation, from 2004 to 2005. From 1992 to 2000, he was a senior executive at GRC International, Inc., a provider of advanced software and technology solutions, serving as Senior Vice President, General Counsel, Secretary and Director of Corporate Development through its sale to AT&T in 2000. He was an attorney in private practice from 1982 to 1991. He began his career as judicial clerk for Judge Charles R. Richey at the United States District Court for the District of Columbia from 1981 to 1982.
Christine A. Wolf has held her present position since joining the company in March 2011. She has more than 30 years of experience in the Human Resources field. Prior to joining the company, she was the Senior Vice President and Chief Human Resources Officer for Fannie Mae from 2008 to March 2011. Prior to that, she was the Chief Human Resources Officer for E*Trade from 2004 to 2008.


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Available Information
Our reports filed with the Securities and Exchange Commission ("SEC") can be found on our Internet site at www.orbitalatk.com under the "Investors" heading free of charge. These include our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make these reports available as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
You can also obtain these reports from the SEC's Public Reference Room, which is located at 100 F Street NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room is available by phone (1-800-SEC-0330) or on the Internet ( www.sec.gov ). This site contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The content on any website referred to in this amended Transition Report is not incorporated by reference into this amended Transition Report on Form 10-K/A unless expressly noted.
ITEM 1A.    RISK FACTORS
We are subject to a number of risks, including those related to being a U.S. Government contractor and those related to domestic and international commercial sales. The material risks we are subject to are discussed below.
Our business could be adversely impacted by reductions or changes in NASA or U.S. Government military spending.
We depend on contracts with the U.S. Government and its prime contractors for a substantial portion of our sales. In addition, a significant portion of such sales come from a small number of contracts. Our CRS I contract with NASA, which is reported within Flight Systems Group and Space Systems Group , comprised 10% of our sales in the 2015 transition period (as restated). Our small-caliber ammunition contract with the U.S. Army, which is reported within Defense Systems Group , comprised 6% , 12% and 16% of our sales in the 2015 transition period, fiscal 2015 and fiscal 2014, respectively (all as restated). Our top five contracts, all of which are contracts with the U.S. Government, accounted for approximately 29% of sales in the 2015 transition period (as restated). The loss or significant reduction of a material U.S. Government program in which we participate could have a material adverse effect on our operating results, financial condition, or cash flows.
U.S. Government contracts are dependent on the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a fiscal year basis even though contract performance may take more than one year. As a result, at the outset of a major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future fiscal years. In addition, most U.S. Government contracts are subject to modification if funding is changed. Key programs in which we participate must compete with other programs for consideration during the federal budgeting and appropriation process, and support and funding for any U.S. Government program may be influenced by general economic conditions, political considerations and other factors. A decline in U.S. Government support and funding for programs in which we participate could result in contract terminations, delays in contract awards, the failure to exercise contract options, the cancellation of planned procurements and fewer new business opportunities, any of which could have a material adverse effect on our operating results, financial condition or cash flows.
We have several significant U.S. government contracts or subcontracts, including those discussed below and elsewhere in this Form 10-K/A, which could negatively impact our financial condition and operating results if they were canceled or funded at reduced levels.
One of our major programs is as the provider of solid rocket motors for NASA’s SLS program. In the event NASA were to cancel the SLS program, we believe that we will be reimbursed for certain amounts previously incurred by us, as well as amounts to be incurred by us, as part of that termination, ( e.g. , severance, environmental liabilities, and termination administration). There can be no assurance, however, that we would be successful in collecting reimbursement of any termination liability costs.
Our CRS I contract with NASA to deliver cargo to the ISS is a significant part of our business within Flight Systems Group and Space Systems Group. On October 28, 2014, the Antares launch vehicle that was carrying our unmanned Cygnus spacecraft on a cargo delivery mission to the ISS for NASA under the CRS I contract experienced a launch failure shortly after liftoff from the Wallops Flight Facility in Virginia. We continue to fulfill our obligations to deliver all remaining cargo to the ISS under the CRS I contract, in part with the use of certain launch services purchased from another company. However, there can be no assurance that planned future Cygnus missions will occur on the contemplated timetable or will be successful. Given the right of U.S. Government customers to terminate contracts for convenience, there can be no assurance that the remaining backlog for this contract will ultimately be recognized in the Company's revenue. NASA could cancel this contract for any

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reason, including as a result of reductions in appropriations or our failure to achieve milestones due to technical issues or delays. A cancellation of the CRS I contract could have a material adverse effect on our operating results, financial condition, and cash flows.
Our small-caliber ammunition operations for the U.S. military and U.S. allies are conducted at the LCAAP in Independence, Missouri. The LCAAP is the U.S. Army's principal small-caliber ammunition production facility and is the primary supplier of the U.S. military's small-caliber ammunition needs. We took over operation of this facility in 2000 and are responsible for the operation and management, including leasing excess space to third parties in the private sector. In September 2012, we were awarded new contracts for the continued production of ammunition and continued operation and maintenance of the LCAAP. The production contract has an initial term of seven years plus the possibility of an award term extension of an additional three years if the Company does not provide written notice of rejection to the U.S. Army. We presently believe that it is probable that we will provide written notice of rejection of the additional three-year award term. In addition, future levels of government spending for small-caliber ammunition and our costs of production under this contract may change and thus our production, sales and total loss under this contract may change.
We are subject to intense competition for U.S. Government contracts and programs and therefore may not be able to compete successfully.
We encounter competition for most contracts and programs, including in particular, U.S. government contracts. Some of our competitors have substantially greater financial, technical, marketing, manufacturing, distribution, and other resources. Our ability to compete for these contracts depends to a large extent upon:
•
the creativity and effectiveness of our research and development programs,
•
our ability to offer better program performance and/or at a lower cost than our competitors,
•
the readiness of our facilities, equipment and personnel to undertake the programs for which we compete, and
•
our past performance and demonstrated capabilities.
In some instances, the U.S. Government directs a program to a single supplier. In these cases, there may be other suppliers who have the capability to compete for the programs involved, but they can only enter or reenter the market if the U.S. Government chooses to open the particular program to competition and, as such, these types of programs are subject to risk of the U.S. Government providing new awards to other suppliers. Our sole-source contracts accounted for 46% of our U.S. Government sales in the 2015 transition period (as restated).
We may not be able to react to increases in our costs due to the nature of our U.S. Government contracts.
Our U.S. Government contracts can be categorized as either "cost-plus" or "fixed-price."
Cost-Plus Contracts.     Cost-plus contracts are cost-plus-fixed-fee, cost-plus-incentive-fee, or cost-plus-award-fee contracts. Cost-plus-fixed-fee contracts allow us to recover approved costs plus a fixed fee. Cost-plus-incentive-fee contracts and cost-plus-award-fee contracts allow us to recover approved costs plus a fee that can fluctuate based on actual results as compared to contractual targets for factors such as cost, quality, schedule, and performance. The award or incentive fees that are typically associated with these programs are subject to uncertainty and may be earned over extended periods. In these cases, the associated financial risks for cost-plus contracts are primarily in lower profit rates or program cancellation if cost, schedule, or technical performance issues arise.
Fixed-Price Contracts.     Fixed-price contracts are firm-fixed-price, fixed-price-incentive, or fixed-price-level-of-effort contracts. Under firm-fixed-price contracts, we agree to perform certain work for a fixed price and absorb any cost overruns. Fixed-price-incentive contracts are fixed-price contracts under which the final contract price may be adjusted based on total final costs compared to total target cost, and may be affected by schedule and performance. Fixed-price-level-of-effort contracts allow for a fixed price per labor hour, subject to a contract cap. All fixed-price contracts present the inherent risk of unreimbursed cost overruns. If the initial estimates used to calculate the contract price and the cost to perform the work prove to be incorrect, there could be a material adverse effect on operating results, financial condition, or cash flows. The LCAAP ammunition contract discussed above is a fixed-price contract, and as discussed elsewhere in this report, is expected to result in a net loss over the term of the contract. In addition, some contracts have specific provisions relating to cost, schedule, and performance. If we fail to meet the terms specified in those contracts, the cost to perform the work could increase or our price could be reduced, which would adversely affect our financial condition. The U.S. Government also regulates the accounting methods under which costs are allocated to U.S. Government contracts.

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The following table identifies the amount contributed to our U.S. Government business by contract type in the 2015 transition period (as restated):
Cost-plus contracts
36
%
Fixed-price contracts
64
%
   Total
100
%
We use estimates in accounting for our programs. Changes in estimates have affected our financial results and could affect them in the future.
Contract accounting requires judgment relative to assessing risks, estimating contract revenues, including the impact of scope change negotiations, estimating program costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complex and subject to many variables. Assumptions are made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. Similarly, many assumptions are made regarding the future impact of such things as the business base, efficiency initiatives, cost reduction efforts, contract changes and claim recovery. Incentives or penalties related to performance on contracts are considered in estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated performance. Estimates of award and incentive fees are also used in estimating revenue and profit rates based on actual and anticipated awards.
Because of the significance of the judgments and estimation processes described above, it is possible that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. For example, as described elsewhere in this Amendment, as part of the Restatement, we have now concluded that the Company’s costs will exceed expected revenues under its long-term contract with the U.S. Army to manufacture and supply small caliber ammunition at the LCAAP, resulting in a material net loss over the contract’s term. Changes in underlying assumptions, circumstances or estimates may adversely affect future period financial performance. Additional information on our accounting policies for revenue recognition can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Critical Accounting Policies" in Item 7 of this report.
Our U.S. Government contracts are subject to termination at any time, with or without cause.
Our direct and indirect contracts with the U.S. Government or its prime contractors may be terminated or suspended at any time, with or without cause, for the convenience of the government or in the event of a default by the contractor. If a cost-plus contract is terminated, the contractor is entitled to reimbursement of its approved costs. If the contractor would have incurred a loss had the entire contract been performed, then no profit is allowed by the U.S. Government.
If the termination is for convenience, the contractor is also entitled to receive payment of a total fee proportionate to the percentage of the work completed under the contract. If a fixed-price contract is terminated, the contractor is entitled to receive payment for items delivered to and accepted by the U.S. Government. If the termination is for convenience, the contractor is also entitled to receive fair compensation for work performed plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses, and a reasonable profit on the costs incurred or committed. While the contractor is entitled to these claims under either type of contract, there can be no assurance that these amounts will be recovered.
If a contract termination is for default:
•
the contractor is paid an amount agreed upon for completed and partially completed products and services accepted by the U.S. Government,
•
the U.S. Government is not liable for the contractor's costs for unaccepted items, and is entitled to repayment of any advance payments and progress payments related to the terminated portions of the contract, and
•
the contractor may be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source.
Other risks associated with U.S. Government contracts may expose us to adverse consequences.
Like all U.S. Government contractors, we are subject to possible losses on contracts due to risks associated with uncertain cost factors related to:
•
scarce technological skills and components,

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•
the frequent need to bid on programs in advance of design completion, which may result in unforeseen technological difficulties and/or cost overruns,
•
the substantial time and effort required for design and development,
•
design complexity,
•
rapid obsolescence, and
•
the potential need for design improvement.
Such factors can increase the costs associated with a program and delay performance, reducing our profitability and adversely impacting our customer relationships.
We are subject to procurement and other related laws and regulations, and non-compliance may expose us to adverse consequences.
We are subject to extensive and complex U.S. Government procurement laws and regulations, along with ongoing U.S. Government audits and reviews of contract procurement, performance, and administration. As a result, U.S. Government agencies, including the Defense Contract Audit Agency, various agency Inspectors General and the U.S. Department of Justice, routinely audit and investigate government contractors. In particular, these agencies often investigate our launch vehicle failures and other material occurrences relating to our products, including an ongoing DOJ/NASA investigation of the 2009 OCO and 2011 Glory failures involving the Taurus XL launch vehicle. These agencies review a contractor's performance under its contracts, cost structure and compliance with applicable laws, regulations and standards, including procurement integrity laws and the False Claims Act.
Charging practices relating to labor, research and development, and other costs that may be charged directly or indirectly to U.S. Government contracts are often scrutinized to determine that such costs are allowable under U.S. Government contracts and furthermore that such costs are reasonable. Any costs determined to be unallowable or unreasonable may not be reimbursed, and such costs already reimbursed may be subject to repayment. If the amount of such costs were significant, our results of operations, financial condition and cash flow could be materially adversely affected. We expect to recover a significant portion of our research and development expenses through billings under certain of our U.S. Government contracts in accordance with applicable regulations, but such billings could be reversed or rejected by the U.S. Government. Our inability to recover a significant portion of such expenses could materially adversely affect our operating results, financial condition or cash flows.
U.S. Government agencies also review the adequacy of, and a contractor's compliance with, its internal control systems and policies, including the contractor's purchasing, property, estimating, earned value, material management and accounting systems. Adverse findings relating to our systems could result in the U.S. Government customer withholding a percentage of payments and also could impact our ability to win new U.S. Government contracts or exercise contract options.
Responding to government audits, inquiries or investigations may involve significant expense and divert management attention. Also, if an audit or investigation were to uncover improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with the U.S. Government. In addition, we could suffer serious harm to our reputation if allegations of impropriety were to be made against us.
Decreases in demand for military and commercial ammunition could adversely affect our financial performance.
We sell military ammunition to DoD and commercial ammunition to Vista Outdoor under an ammunition supply agreement. Both the commercial and military markets for ammunition are subject to a number of risks and uncertainties that can cause demand to fluctuate unpredictably. Decreases in the demand for ammunition in either market could result in excess manufacturing capacity and increased overhead rates as a result, which could have a negative impact on our operating results. We experienced a continuing decrease in demand for ammunition in the 2015 transition period . Further declines could materially affect our business and results of operations. In addition, manufacturing costs for ammunition could rise as a result of a number of factors, including increases in commodity prices and other raw materials and increases in labor costs at our LCAAP, which could also have an adverse effect on our operating results and further increase our net loss under that contract.
We manufacture and sell products that create exposure to potential product liability, warranty liability or personal injury claims and litigation.
Our products may expose us to potential product liability, warranty liability or personal injury claims relating to the use of those products. The resolution of such claims is not expected to have a material adverse effect on our business, and we maintain

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insurance coverage to mitigate a portion of these risks, which we believe to be adequate. However, our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about its products.
We are exposed to risks associated with expansion into new and adjacent commercial markets.
Our long-term business growth strategy includes further expansion into new and adjacent markets. Such efforts involve a number of risks, including increased capital expenditures, market uncertainties, schedule delays, performance risk, extended payment terms, diversion of management attention, additional credit risk associated with new customers, and costs incurred in competing with companies with strong brand names and market positions. An unfavorable event or trend in any one or more of these factors could adversely affect our operating results, financial condition, or cash flows.
International sales are subject to greater risks that sometimes are associated with doing business in foreign countries.
A portion of our business is derived from international markets. In the 2015 transition period (as restated), approximately 23% of our sales were to foreign customers, compared to 20% in fiscal 2015 (as restated). We also procure certain key components from non-U.S. vendors. Our international business may pose greater risks than our business in the United States due to changes in economic, legal and political environments, as well as foreign government priorities and budgets. International transactions frequently involve increased financial and legal risks arising from differing legal systems and customs in other countries. In addition, some international customers require contractors to agree to offset programs that may require in-country purchases or manufacturing or financial support arrangements as a condition to awarding contracts. The contracts may include penalties in the event a company fails to perform in accordance with the offset requirements. Furthermore, international business may create difficulties and risks with respect to the maintenance of an integrated supply chain network. An unfavorable event or trend in any one or more of these factors could adversely affect our operating results, financial condition, or cash flows. Foreign sales subject us to numerous stringent U.S. and foreign laws and regulations, including regulations relating to import-export control, exchange controls, the Foreign Corrupt Practices Act and certain other anti-corruption laws, and the anti-boycott provisions of the U.S. Export Administration Act. Failure to comply with these laws and regulations could result in material adverse consequences to us.
Our products are subject to extensive regulation.
We are required to comply with extensive regulation of our products, including those rules and regulations administered by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the U.S. Department of Homeland Security, the U.S. Department of State and the U.S. Department of Commerce. These laws include, but are not limited to, the Foreign Corrupt Practices Act (FCPA), International Traffic in Arms Regulations (ITAR), and the Chemical Facility Anti-Terrorism Standards (CFATS). Compliance with these laws is costly and time consuming. A violation of these laws could result in significant fines and penalties and could have a material adverse effect on our business.
We are exposed to market risk from changes in foreign currency exchange rates which could negatively impact profitability.
Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our results of operations. Currency fluctuations may affect product demand and prices we pay for materials and, as a result, our operating margins may be negatively impacted. Fluctuations in exchange rates may give rise to translation gains or losses when financial statements of our non-U.S. businesses are translated into U.S. dollars. While we monitor our exchange rate exposures and seeks to reduce the risk of volatility through hedging activities, such activities bear a financial cost and are not always available or successful in mitigating such volatility.
We have restated our prior consolidated financial statements twice in 2016, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price. 
As discussed in the Explanatory Note and Note 2 to the consolidated financial statements in Part II, Item 8, our Audit Committee, after considering the recommendation of management, concluded that our previously issued consolidated financial statements for the 2015 transition period, fiscal 2015, fiscal 2014, fiscal 2013 and the quarters in each period (with the exception of the first quarter of fiscal 2013) should no longer be relied upon as a result of misstatements primarily related to the Company’s long-term contract with the U.S. Army to manufacture and provide small-caliber ammunition at LCAAP and correcting the Company’s accounting policy for measurement of forward loss provisions. Due to the accounting errors, the Audit Committee determined that in this Form 10-K/A we should restate our audited consolidated financial statements for the 2015 transition period, fiscal 2015, fiscal 2014, the quarters in the 2015 transition period and fiscal 2015 presented in Part II, Item 8 Financial Statements and Supplementary Data, and the unaudited selected financial data for the fiscal year ended March 31, 2013 ("fiscal 2013") presented in Item 6 Selected Financial Data. The impacts of the restatement on fiscal 2013 are reflected in the consolidated financial statements as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014.

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As described in Note 1 to the consolidated financial statements included in this Form 10-K/A, we previously restated the unaudited condensed consolidated financial statements for the quarterly periods ended July 5, 2015 and October 4, 2015 (the “Previously Restated Quarters”). The determination to restate the financial statements for the Previously Restated Quarters was made by our Audit Committee and management on February 27, 2016.

This Form 10-K/A reflects, among other things, both of these restatements. As a result of these restatements, we have become subject to a number of additional costs and risks, including unanticipated costs for accounting and legal fees in connection with or related to the restatements and the remediation of our ineffective disclosure controls and procedures and material weaknesses in internal control over financial reporting. We are also the subject of a non-public investigation by the Securities and Exchange Commission, securities class action litigation and shareholder demands and potentially other actions as a result of the Restatement. In addition, the attention of our management team has been diverted by these efforts. We could be subject to additional shareholder, governmental, or other actions in connection with the restatements or other matters. Any such proceedings will, regardless of the outcome, consume a significant amount of management’s time and attention and may result in additional legal, accounting, insurance and other costs. If we do not prevail in any such proceedings, we could be required to pay substantial damages or settlement costs. In addition, the restatements and related matters could impair our reputation or could cause our counterparties to lose confidence in us. Any of these occurrences could have a material adverse effect on our business, results of operations, financial condition and stock price.

We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. In Part II, Item 9A Controls and Procedures of this Form 10-K/A, our management identified several material weaknesses in our internal control over financial reporting.
As a result of the material weaknesses, our management concluded that our internal control over financial reporting was not effective as of December 31, 2015. The assessment was based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We are actively engaged in developing a remediation plan designed to address the material weaknesses, but our remediation efforts are not complete and are ongoing. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses in our internal control are discovered or occur in the future, it may materially adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner. If we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements, and may be required to seek additional waivers or repay amounts under these financing arrangements earlier than anticipated, which could adversely impact our liquidity and financial condition.
Although we review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting. The next time we evaluate our internal control over financial reporting, if we identify one or more new material weaknesses or are unable to timely remediate our existing weaknesses, we may be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.
Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital.
We did not file our Quarterly Reports on Form 10-Q for the quarters ended July 3, 2016 and October 2, 2016 within the timeframe required by the SEC. Because we have not remained current in our reporting requirements with the SEC, we are limited in our ability to access the public markets to raise debt or equity capital. Our limited ability to access the public markets could prevent us from pursuing transactions or implementing business strategies that we might otherwise believe are beneficial to our business. Even if we regain and maintain compliance with our SEC reporting obligations, we will be ineligible to use shorter and less costly registration forms, such as Form S-3, to register our securities for sale until approximately one year from the date we regain and maintain status as a current filer. Once we regain compliance, we may use Form S-1 to register a sale of our stock to raise capital or complete acquisitions, but doing so would likely take significantly longer than using a Form S-3, increase transaction costs and adversely impact our ability to raise capital or complete acquisitions of other companies in a timely manner.

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The restatement of our previously issued financial results could result in government enforcement actions and adverse determinations in litigation that could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows.
We are subject to a non-public investigation by the Securities and Exchange Commission, securities class action litigation and shareholder demands relating to the Restatement. For additional discussion of legal proceedings related to the Restatement, see Part II, Item 3 “Legal Proceedings” and Note 20, "Subsequent Events" to the Notes to our consolidated financial statements in Part II, Item 8 of this Form 10-K/A. We could also become subject to other investigations or litigation, or one or more government enforcement actions, arising out of the misstatements in our previously issued financial statements. Our management may be required to devote significant time and attention to these matters, and these and any additional matters that arise could have a material adverse impact on our results of operations, financial condition, liquidity and cash flows. While we cannot estimate our potential exposure in these matters at this time, we expect to expend significant amounts investigating the claims underlying and defending this litigation.
We have a substantial amount of debt, and the cost of servicing that debt could adversely affect our business and hinder our ability to make payments on our debt.
At December 31, 2015 , we had total debt of $1,490 million . In addition, we had $146.5 million of outstanding but undrawn letters of credit and, taking into account these letters of credit, an additional $853.5 million of availability under our revolving credit facility. Additional information on our debt can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Liquidity and Capital Resources" in Item 7 of this report.
We have demands on our cash resources in addition to interest and principal payments on our debt including, among others, operating expenses. These significant demands on our cash resources could:
•
make it more difficult for us to satisfy obligations,
•
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the amount of cash flow available for working capital, capital expenditures, acquisitions, share repurchases, dividends, and other general corporate purposes,
•
limit our flexibility in planning for, or reacting to, changes in the defense and aerospace industries,
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place us at a competitive disadvantage compared to competitors that have lower debt service obligations and significantly greater operating and financing flexibility,
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limit, along with the financial and other restrictive covenants applicable to our indebtedness, among other things, our ability to borrow additional funds,
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increase our vulnerability to general adverse economic and industry conditions, and
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result in a default event upon a failure to comply with financial covenants contained in our senior credit facilities which, if not cured or waived, could have a material adverse effect on our business, financial condition, or results of operations.
Our ability to pay interest on and repay our long-term debt and to satisfy our other liabilities will depend upon future operating performance and our ability to refinance our debt as it becomes due. Our future operating performance and ability to refinance will be affected by prevailing economic conditions at that time and financial, business and other factors, many of which are beyond our control.
If we are unable to service our indebtedness and fund operating costs, we will be forced to adopt alternative strategies that may include:
•
reducing or delaying expenditures for capital equipment and/or share repurchases,
•
seeking additional debt financing or equity capital,
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foregoing attractive acquisition opportunities,
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selling assets, or
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restructuring or refinancing debt.
There can be no assurance that any such strategies could be implemented on satisfactory terms, if at all.

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The level of returns on pension and postretirement plan assets, changes in interest rates and other factors could affect our earnings and cash flows.
Our earnings may be impacted by the amount of expense or income recorded for employee benefit plans, primarily pension plans and other postretirement plans. U.S. generally accepted accounting principles ("GAAP") require us to calculate income or expense for the plans using actuarial valuations. These valuations are based on assumptions made relating to financial market and other economic conditions. Changes in key economic indicators can result in changes in these assumptions. The key year-end assumptions used to estimate pension and postretirement benefit expense or income for the following year are the discount rate, the expected long-term rate of return on plan assets, the rate of increase in future compensation levels, mortality rates, and the health care cost trend rate. We are required to remeasure our plan assets and benefit obligations annually, which may result in a significant change to equity through other comprehensive income (loss). Our pension and other postretirement benefit income or expense can also be affected by legislation or other regulatory actions. Additional information on how our financial statements can be affected by pension plan accounting policies can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the section titled "Critical Accounting Policies" in Item 7 of this report.
Our business could be negatively impacted by security threats, including cyber security and other industrial, insider and physical security threats, and other disruptions.
As a U.S. defense contractor, we face cyber security threats, threats to the physical security of our facilities and employees, and terrorist acts, as well as the potential for business disruptions associated with information technology failures, natural disasters, or public health crises. We also face the risk of economic espionage, which involves the targeting or acquisition of sensitive financial, trade, proprietary or technological information.
We routinely experience cyber security threats, threats to our information technology infrastructure and attempts to gain access to sensitive information, as do our customers, suppliers, subcontractors and joint venture partners. We may experience similar security threats at customer sites that we operate and manage.
Prior cyber-attacks directed at us have not had a material impact on our financial results, and we believe that our threat detection and mitigation processes and procedures are generally adequate. The threats we face vary from attacks common to most industries to more advanced and persistent threats from highly-organized adversaries who target us because we protect national security information. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures and, as a result, our present and future business could be negatively impacted. Due to the evolving nature of these security threats, however, the impact of any future incident cannot be predicted.
Although we work cooperatively with our customers, suppliers, subcontractors and joint venture partners to minimize the impact of cyber threats, other security threats or business disruptions, we must rely on the safeguards put in place by these entities, which may in turn affect the security of our own information and that of other parties. The entities we work with have varying levels of cyber security expertise and safeguards and their relationships with government contractors, such as us, may increase the likelihood that they are targeted by the same cyber threats we face.
The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Occurrence of any of these events could adversely affect our internal operations, the services we provide to customers, loss of competitive advantages derived from our research and development efforts or other intellectual property, the obsolescence of our products and services, our financial results, our reputation and our stock price.
Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.
Key raw materials used in our operations include aluminum, steel, steel alloys, copper, zinc, lead, graphite fiber, prepreg, hydroxy terminated polybutadiene, epoxy resins and adhesives, ethylene propylene diene monomer rubbers, diethylether, x-ray film, plasticizers and nitrate esters, impregnated ablative materials, various natural and synthetic rubber compounds, polybutadiene, acrylonitrile, and ammonium perchlorate. We also purchase chemicals; electronic, electro-mechanical and mechanical components; subassemblies; and subsystems that are integrated with the manufactured parts for final assembly into finished products and systems.
We monitor sources of supply to attempt to assure that adequate raw materials and other supplies needed in manufacturing processes are available. As a U.S. Government contractor, we are frequently limited to procuring materials and components from sources of supply approved by the DoD. In addition, as changes occur in business conditions, the DoD budget, and Congressional allocations, suppliers of specialty chemicals and materials sometimes consider dropping low volume items from their product lines, which may require, as it has in the past, qualification of new suppliers for raw materials on key

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programs. The supply of ammonium perchlorate, a principal raw material used in our operations, is limited to a single source that supplies the entire domestic solid propellant industry. This single source, however, maintains two separate manufacturing lines a reasonable distance apart, which mitigates the likelihood of a fire, explosion, or other problem impacting all production. We may also rely on one primary supplier for other production materials. Although other suppliers of the same materials may exist, the addition of a new supplier may require us to qualify the new source for use. The qualification process may impact our profitability or ability to meet contract deliveries.
We also rely on sole source suppliers for a number of key components, including the rocket motors and engines we use on our launch vehicles. If we are unable to obtain such components in the future, due to a supplier's financial difficulties or a supplier's failure to perform as expected, we could have difficulty procuring such components in a timely or cost effective manner. A disruption in the procurement of key components could result in substantial cost increases, significant delays in the execution of certain contracts or our inability to complete certain contracts, any of which could result in a materially adverse impact on our financial results.
For example, as a result of the failure of Orbital's Antares launch vehicle in October 2014 and prior engine test failures, we have ceased using the AJ-26 rocket engine in our Antares product line. We are currently transitioning to a replacement engine, the RD-181, and the time, expense and effort associated with our recovery plan have resulted in additional costs and delays.
Certain suppliers of materials used in the manufacturing of rocket motors have discontinued the production of some materials. These materials include certain insulation and resin materials for rocket motor cases and aerospace-grade rayon for nozzles. We have qualified new replacement materials for some programs. For other programs, the we or our customers have procured sufficient inventory to cover current program requirements and are in the process of qualifying new replacement materials to be qualified in time to meet future production needs. Our profitability may be affected if unforeseen difficulties in developing and qualifying replacement materials occur.
We are also impacted by increases in the prices of raw materials used in production on commercial and fixed-price business. We have seen a significant fluctuation in the prices of commodity metals, including copper, lead, steel and zinc. The fluctuating costs of natural gas and electricity also have an impact on the cost of operating our factories.
Prolonged disruptions in the supply of any of our key raw materials or components, difficulty completing qualification of new sources of supply, implementing use of replacement materials, components or new sources of supply, or a continuing increase in the prices of raw materials, energy or components could have a material adverse effect on our operating results, financial condition, or cash flows.
Failure of our subcontractors to perform their contractual obligations could materially and adversely impact our prime contract performance and ability to obtain future business.
We rely on subcontracts with other companies to perform a portion of the services we provide our customers on many of our contracts. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontract, our failure to extend existing task orders or issue new task orders under a subcontract, or our hiring of personnel of a subcontractor. A failure by one or more of our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations as the prime contractor. Subcontractor performance deficiencies could result in a customer limiting payments or terminating a contract for default. A default termination could expose us to liability and have a material adverse effect on the ability to compete for future contracts and orders.
Failure to successfully negotiate or renew collective bargaining agreements, or strikes, slow-downs or other labor-related disruptions, could adversely affect our operations and could result in increased costs that impair our financial performance.
 A number of our employees are covered by collective bargaining agreements, which expire on various dates. Strikes, slow-downs or other labor-related disruptions could occur if we are unable to either negotiate or renew these agreements on satisfactory terms, which could adversely impact our operating results. The terms and conditions of new or renegotiated agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency. In certain instances, we may not be able to pass increased costs from new or renegotiated agreements on to our customers due to the fixed-price nature of many of our contracts, including our small-caliber ammunition contract with the U.S. Army that is performed at the LCAAP.

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Our future success and growth will depend significantly on our ability to develop new technologies and products that achieve market acceptance within acceptable margins while maintaining a qualified workforce to meet the needs of our customers.
Virtually all of the products produced and sold by us are highly engineered and require sophisticated manufacturing and system integration techniques and capabilities. Our commercial and government businesses both operate in global markets that are characterized by rapidly changing technologies, industry standards, market trends and customer demands. The product and program needs of our government and commercial customers change and evolve regularly. Accordingly, our future performance depends on its ability to identify emerging technological trends, develop and manufacture competitive products, enhance our products by adding innovative features that differentiate our products from those of our competitors, and bring those products to market quickly at cost-effective prices.
Our ability to develop new products based on technological innovation can affect our competitive position and requires the investment of significant resources. These development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new technologies or products on a timely basis or that meet the needs of our customers as fully as competitive offerings. In addition, the markets for our products may not develop or grow as we anticipate. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors could significantly reduce our revenues and adversely affect our competitive standing and prospects.
In addition, because of the highly specialized nature of our business, we must be able to hire and retain the skilled and appropriately qualified personnel necessary to perform the services required by our customers. Our operating results, financial condition, or cash flows may be adversely affected if we are unable to develop new products that meet customers' changing needs or successfully attract and retain qualified personnel.
There can be no assurance that our products will be successfully developed or manufactured or that they will perform as intended.
Most of the products we develop and manufacture are technologically advanced and sometimes include novel systems that must function under highly demanding operating conditions. From time to time, we experience product failures, cost overruns in developing and manufacturing our products, delays in delivery and other operational problems. We have experienced product and service failures, schedule delays and other problems in connection with certain of our launch vehicles, including the Antares launch vehicle, satellites, advanced space systems and other products. We may have similar occurrences in the future. For example, we expect that our Antares launch vehicle will return to flight in 2016 with new engines for its first-stage propulsion. Another failure of this launch vehicle could result in increased costs, delays, and potential contract termination, which could have a material adverse effect on our financial condition and results of operations.
Some of our satellite and launch services contracts impose monetary penalties on us for delays and for performance failures, which penalties could be significant. In addition to any costs resulting from product warranties or required remedial action, product failures or significant delays may result in increased costs or loss of revenues due to the postponement or cancellation of subsequently scheduled operations or product deliveries and may have a material adverse effect on our operating results, financial condition, or cash flows. Negative publicity from a product failure could damage our reputation and impair our ability to win new contracts.
Due to the volatile and flammable nature of our products, fires or explosions may disrupt our business.
Many of our products involve the manufacture and/or handling of a variety of explosive and flammable materials. From time to time, these activities have resulted in incidents which have temporarily shut down or otherwise disrupted some manufacturing processes, causing production delays and resulting in liability for workplace injuries and fatalities. We have safety and loss prevention programs which require detailed pre-construction reviews of process changes and new operations, along with routine safety audits of operations involving explosive materials, to mitigate such incidents, as well as a variety of insurance policies. However, we cannot ensure that we will not experience similar incidents in the future or that any similar incidents will not result in production delays or otherwise have a material adverse effect on our operating results, financial condition, or cash flows.
We are subject to environmental laws and regulations that govern both past practices and current compliance which may expose us to adverse consequences.
Our operations and ownership or use of real property are subject to a number of federal, state and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites, and restoration of damage to the environment. At certain sites that we own or operate or formerly owned or operated, there is known or potential contamination that we are required to investigate, remediate, or provide resource restoration. We could incur substantial costs, including remediation costs, resource restoration costs, fines, and

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penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.
We expect that a portion of our environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements.
Although we have environmental management programs in place to mitigate risks, and environmental laws and regulations have not had a material adverse effect on our operating results, financial condition, or cash flows in the past, it is difficult to predict whether they will have a material impact in the future.
Capital market volatility could adversely impact our earnings because of our capital structure.
We are exposed to the risk of fluctuation in interest rates. If interest rates increase, we may incur increased interest expense on variable interest-rate debt or short-term borrowings, which could have an adverse impact on our operating results and cash flows.
We may pursue or complete acquisitions, or other strategic transactions, which represent additional risk and could impact future financial results.
Our business strategy includes the potential for future acquisitions or other similar strategic transactions. Acquisitions involve a number of risks including negotiating an appropriate price, successfully integrating the acquired company with our operations, and unanticipated liabilities or contingencies related to the acquired company. We cannot ensure that the expected benefits of any future acquisitions or other transactions will be realized. Costs could be incurred on pursuits or proposed acquisitions that have not yet or may not close which could significantly impact our operating results, financial condition, or cash flows. Additionally, after the acquisition, unforeseen issues could arise which adversely affect the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price. Even after careful integration efforts, actual operating results may vary significantly from initial estimates. Furthermore, we may engage in other strategic business transactions. Such transactions could cause unanticipated costs and difficulties, may not achieve intended results, and may require significant time and attention from management which could have an adverse impact on our business, operating results, financial condition, or cash flows.
Our profitability could be impacted by unanticipated changes in our tax provisions or exposure to additional income tax liabilities.
Our business operates in many locations under government jurisdictions that impose income taxes. Changes in domestic or foreign income tax laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability of certain revenues or the deductibility of certain expenses, thereby affecting income tax expense and profitability. In addition, audits by income tax authorities could result in unanticipated increases in income tax expense.
We are involved in a number of legal proceedings. We cannot predict the outcome of litigation and other contingencies with certainty.
We are subject to lawsuits, investigations and disputes (some involving substantial amounts) that arise out of the conduct of our business including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, import and export matters, and environmental, health and safety matters. As noted in Part II, Item 3 Legal Proceedings and Note 20, "Subsequent Events" to the Notes to our consolidated financial statements in Part II, Item 8 of this Form 10-K/A, we are also subject to various claims related to the Restatement. Resolution of these matters can be prolonged and costly, and our business may be adversely affected by the ultimate outcome of these matters that cannot be predicted with certainty. Moreover, our potential liabilities are subject to change over time due to new developments, changes in settlement strategy, or the impact of evidentiary issues, and we may become subject to or be required to pay damage awards or settlements that could have a material adverse effect on our results of operations, cash flows, and financial condition.
We may not realize the growth opportunities and cost synergies that are anticipated from the Merger.
The success of the Merger depends, in part, on our ability to realize anticipated growth opportunities and cost synergies. Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on the successful integration of our business and operations. Even if we integrate our businesses and operations successfully, this integration may not result in the realization of the full benefits of the growth opportunities and cost synergies that we expect from this integration within the anticipated time frame or at all. We may be unable to eliminate duplicative costs, or the benefits from the Merger may be offset by costs incurred or delays in integrating the companies. In addition, integration expenses are difficult to estimate accurately, and may exceed current estimates.

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If the Distribution does not qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code (the "Code"), including as a result of subsequent acquisitions of our stock or Vista Outdoor, then we or our stockholders immediately prior to the Distribution may be required to pay substantial U.S. federal income taxes and we may be obligated to indemnify Vista Outdoor for such taxes imposed on Vista Outdoor.
The Distribution and the Merger are intended to qualify as tax-free to us, our stockholders, Vista Outdoor and Orbital for U.S. federal income tax purposes. However, there can be no assurance that the IRS or the courts will agree with the conclusion of the parties and their counsel regarding the tax treatment of the Distribution and Merger. If the Distribution or certain related transactions were taxable, our stockholders would recognize income on their receipt of Vista Outdoor stock in the Distribution, and we would be considered to have made a taxable sale of certain of our assets to Vista Outdoor.
The Distribution will be taxable to us pursuant to Section 355(e) of the Code if there is a 50% or more change in ownership of either us or Vista Outdoor, directly or indirectly, as part of a plan or series of related transactions that include the Distribution. Because our stockholders collectively owned more than 50% of our common stock following the Merger, the Merger alone will not cause the Distribution to be taxable to us under Section 355(e). However, Section 355(e) could apply if other acquisitions of our stock before or after the Merger, or of Vista Outdoor after the Merger, are considered to be part of a plan or series of related transactions that include the Distribution. If Section 355(e) were to apply, we would be considered to have made a taxable sale of certain assets to Vista Outdoor and could recognize a substantial taxable gain.
Under the tax matters agreement between us and Vista Outdoor (the "Tax Matters Agreement"), in certain circumstances, and subject to certain limitations, Vista Outdoor is required to indemnify us against taxes on the Distribution that arise as a result of actions or failures to act by Vista Outdoor, or as a result of Section 355(e) applying due to acquisitions of Vista Outdoor stock after the Distribution. In other cases, however, we might recognize taxable gain on the Distribution without being entitled to an indemnification payment under the Tax Matters Agreement. If such tax is imposed on Vista Outdoor, then we generally will be required to indemnify Vista Outdoor for that tax. The possibility of recognizing and not being indemnified for this gain may discourage, delay or prevent a third party from acquiring our stock during the two years after the Merger in a transaction that our stockholders might consider favorable.
We may be unable to take certain actions because such actions could jeopardize the tax-free status of the Distribution or the Merger, and such restrictions could be significant.
Pursuant to the Tax Matters Agreement between us and Vista Outdoor, we are prohibited from taking actions or omissions that could reasonably be expected to cause the Distribution to be taxable or to jeopardize the conclusions of the opinions of counsel received by us or Orbital in connection with the Merger.
In particular, for two years after the Distribution, we may not:
•
enter into any agreement, understanding or arrangement or engage in any substantial negotiations with respect to any transaction involving the acquisition, issuance, repurchase or change of ownership of any of our capital stock, together with options or other rights in respect of that capital stock, subject to certain limited exceptions;
•
cease to be engaged in the active conduct of, or sell or transfer more than 30% of the gross assets or gross consolidated assets of, certain businesses;
•
redeem or otherwise repurchase our capital stock, subject to certain limited exceptions; or
•
liquidate, whether by merger, consolidation or otherwise.
We may take any of the actions described above if we obtain an opinion of counsel that is reasonably acceptable to Vista Outdoor (or an IRS private letter ruling) to the effect that the action will not affect the tax-free status of the Distribution, the Merger or certain related transactions. Such rulings or opinions may not be obtainable, however. In addition, the receipt of any such opinion or IRS ruling in respect of an action we propose to take will not relieve us of any obligation we have to indemnify Vista Outdoor if such action causes the Distribution, Merger or certain related transactions to be taxable.
Because of these restrictions, for two years after the Merger, we are limited in the amount of capital stock we can issue to make acquisitions or to raise additional capital or in the amount of stock that we can repurchase from investors.


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ITEM 1B.    UNRESOLVED STAFF COMMENTS
There are no unresolved staff comments at the date of this report.
ITEM 2.    PROPERTIES
Facilities.     At December 31, 2015 , we occupied manufacturing, assembly, warehouse, test, research, development, and office facilities having a total floor space of approximately 16.7 million square feet. These facilities are either owned or leased, or are occupied under facilities-use contracts with the U.S. Government.
At December 31, 2015 , our operating segments had significant operations at the following locations (1) :
Flight Systems Group
 
Brigham City/ Promontory, UT; Clearfield, UT; Magna, UT; Chandler, AZ; Dulles, VA; Iuka, MS; Dayton, OH; Vandenberg Air Force Base, CA; Wallops Island, VA; Huntsville, AL
Defense Systems Group
 
Mesa, AZ; Northridge, CA; Elkton, MD; Elk River, MN; Plymouth, MN; Independence, MO; Fort Worth, TX; Radford, VA; Rocket Center, WV
Space Systems Group
 
Dulles, VA; Beltsville, MD; Gilbert, AZ; Greenbelt, MD; Commerce, CA; Goleta, CA; San Diego, CA; Wallops Island, VA; Palestine, TX; Pasadena CA
Corporate
 
Dulles, VA; Plymouth, MN; Minnetonka, MN
_________________________________________
(1)
We occupy a number of small facilities in countries around the world, which are not included above.
The following table summarizes the floor space, in thousands of square feet, occupied by each operating segment at December 31, 2015 :
 
Owned
 
Leased
 
Government
Owned (1)
 
Total
Flight Systems Group
5,153

 
3,443

 
551

 
9,147

Defense Systems Group
647

 
889

 
4,365

 
5,901

Space Systems Group
354

 
1,241

 
14

 
1,609

Corporate
—

 
80

 
—

 
80

Total
6,154

 
5,653

 
4,930

 
16,737

Percentage of total
37
%
 
34
%
 
29
%
 
100
%
_________________________________________
(1)
These facilities are occupied under facilities contracts that generally require us to pay for all utilities, services, and maintenance costs.
Land.     We also use land that we own or lease for assembly, test, and evaluation, in Brigham City, Corrine, and Magna, UT, which is used by Flight Systems Group ; and in Elk River, MN, and Socorro, NM, which are used by Defense Systems Group .
Our personnel occupy space at the following facilities that are not owned or operated by us: Marshall Space Flight Center, Huntsville, AL; Kennedy Space Center, Cape Canaveral, FL; Vandenberg Air Force Base, Vandenberg, CA; and Picatinny Arsenal, Picatinny, NJ. The square footage of these facilities is not included in the table above.
Our properties are well maintained and in good operating condition and are sufficient to meet our near-term operating requirements.
ITEM 3.    LEGAL PROCEEDINGS
From time to time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business.
On July 30, 2013, Raytheon Company filed a lawsuit against us in the Superior Court of the State of Arizona. The suit concerned our longstanding production of rocket motors used in Raytheon's Advanced Medium-Range Air-to-Air Missiles (AMRAAM). Raytheon’s primary allegation was that we breached certain of the production contracts by not delivering rocket motors. Raytheon claimed damages in excess of $100 million. The parties settled this matter on March 27, 2015. We paid $25 million to Raytheon, and the litigation was voluntarily dismissed on April 21, 2015.

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On November 4, 2013, we filed a lawsuit against Spirit Aerosystems Inc. in the Second District Court in Farmington, Utah. In our suit, we made various claims, including breach of contract, in relation to a contract with Spirit Aerosystems regarding the manufacture of aircraft parts. On September 18, 2015, the parties entered into a settlement agreement resolving all matters at issue in the litigation, and the case was dismissed.
Putative class action and derivative lawsuits challenging the merger of Orbital and our company were filed in the Court of Chancery of the State of Delaware in May 2014, naming Orbital, our company and Orbital's directors. On November 14, 2014, the lawsuits were consolidated by the court under the caption In Re Orbital Corporation Stockholder Litigation . The plaintiffs alleged, among other things, that the directors of Orbital breached their fiduciary duties in connection with the Merger, and alleged that we aided and abetted such breaches of fiduciary duty. On January 16, 2015, the parties entered into a memorandum of understanding (the “MOU”) regarding the settlement of this matter. Pursuant to the terms of the MOU, we and Orbital made additional information available to Orbital's stockholders in connection with the Merger vote. On February 2, 2016, the case was dismissed.
Environmental Liabilities.     Our operations and ownership or use of real property are subject to a number of federal, state, and local laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites, and restoration of damage to the environment. Due in part to their complexity and pervasiveness, such laws and regulations have resulted in our being involved with a number of related legal proceedings, claims, and remediation obligations. We routinely assess, based on in-depth studies, expert analyses, and legal reviews, our contingencies, obligations, and commitments for remediation of contaminated sites and past practices, including assessments of ranges and probabilities of recoveries from other responsible parties. Our policy is to accrue and charge to expense in the current period any identified exposures related to environmental liabilities based on estimates of investigation, cleanup, monitoring, and resource restoration costs to be incurred.
We have been identified as a potentially responsible party (“PRP”), along with other parties, in several regulatory agency actions associated with hazardous waste sites. As a PRP, we may be required to pay a share of the costs of the investigation and clean-up of these sites. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our operating results, financial condition, or cash flows.
We could incur substantial costs, including cleanup costs, resource restoration, fines, and penalties or third-party property damage or personal injury claims, as a result of violations or liabilities under environmental laws or non-compliance with environmental permits. While environmental laws and regulations have not had a material adverse effect on our operating results, financial condition, or cash flows in the past, and we have environmental management programs in place to mitigate these risks, it is difficult to predict whether they will have a material impact in the future.
The description of certain environmental matters contained in Part II, Item 7, \"Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Contingencies" is incorporated herein by reference.
SEC Investigation .    The SEC is conducting a non-public investigation relating to our historical accounting practices as a result of the prior restatement of the Company’s unaudited condensed consolidated financial statements for the quarterly periods ended July 5, 2015 and October 4, 2015 described in the Original Filing, and the Company also has voluntarily self-reported to the SEC regarding matters pertaining to the Restatement described in this Form 10-K/A. The Company is cooperating fully with the SEC in connection with these matters.
Other U.S. Government Investigations.     We are also subject to other U.S. Government investigations from which civil, criminal, or administrative proceedings could result. Such proceedings could involve claims by the U.S. Government for fines, penalties, compensatory and treble damages, restitution, and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon all available information, that the outcome of any such pending government investigations will not have a material adverse effect on our operating results, financial condition, or cash flows.
Securities Class Action.     On August 12, 2016, a putative class action complaint, naming the Company, our Chief Executive Officer and our Chief Financial Officer as defendants, was filed in the United States District Court for the Eastern District of Virginia ( Steven Knurr, et al. v. Orbital ATK, Inc., No. 16-cv-01031 (TSE-MSN) ). The class action complaint asserts claims on behalf of purchasers of Orbital ATK securities for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, arising out of allegedly false and misleading statements and the failure to disclose that: (i) the Company lacked effective control over financial reporting; and (ii) as a result, the Company failed to record an anticipated loss on its long-term contract with the U.S. Army to manufacture and supply small caliber ammunition at the U.S. Army’s Lake City Army Ammunition Plant. The complaint seeks a determination that this matter is a proper class action and

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certifying the plaintiff as the class representative, an award of damages, an award of reasonable costs and expenses at trial, including counsel and expert fees, and an award of such other relief as deemed appropriate by the Court. The Company intends to defend this action vigorously.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed and traded on the New York Stock Exchange under the symbol "OA". Prior to the Merger, our common stock was listed and traded on the New York Stock Exchange under the symbol "ATK". The following table presents the high and low sales prices of the common stock for the periods indicated:
Period
High
 
Low
Nine months ended December 31, 2015
 
 
 
Quarter ended December 31, 2015
$
92.99

 
$
74.50

Quarter ended October 4, 2015
81.06

 
56.06

Quarter ended July 5, 2015
78.06

 
71.78

Year ended March 31, 2015
 
 
 
Quarter ended March 31, 2015
$
140.61

 
$
60.23

Quarter ended December 28, 2014
132.33

 
100.36

Quarter ended September 28, 2014
139.89

 
122.97

Quarter ended June 29, 2014
158.13

 
118.11

Sales prices for the quarter ended March 31, 2015 and subsequent quarters reflect the effect of the Distribution and Merger, including the issuance of approximately 27.4 million shares of common stock to Orbital stockholders in connection with the Merger.
The number of holders of record of our common stock at February 22, 2016 was 4,924. This does not include 964 former holders of record of Orbital Sciences Corporation common stock who had not yet exercised their right to receive our common stock pursuant to the Transaction Agreement relating to the Merger.
During the 2015 nine-month transition period, April 1, 2015 to December 31, 2015, Orbital ATK (OA) paid three quarterly dividends of $0.26 per share, totaling $46.1 million . In February 2016, our Board of Directors approved a quarterly dividend to be paid in the first quarter of 2016 of $0.30 per share, totaling $17.7 million. During fiscal year 2015, April 1, 2014 to March 31, 2015 for legacy ATK, the Company paid four dividends of $0.32 per share totaling $41.1 million . We cannot be certain that we will continue to declare dividends in the future and, as such, the amount and timing of any future dividends are not determinable. Our dividend policy is reviewed by our Board of Directors in light of relevant factors, including our earnings, liquidity position, financial condition, capital requirements, and credit ratings, as well as the extent to which the payment of cash dividends may be restricted by covenants contained in our instruments, including our 5.25% Senior Notes due 2021, 5.50% Senior Notes due 2023 and Senior Credit Facility (as described under "Liquidity and Capital Resources" in Item 7 of this report).

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Equity Compensation Plan Information
The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under each of our existing equity compensation plans at December 31, 2015 :
Plan category
 
Number of securities to
be issued upon exercise of
outstanding options, warrants and rights (a)
 
Weighted-average exercise price of outstanding
options, warrants
and rights (b)
 
Number of securities
remaining available for
future issuance under equity
compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders:
 
 
 
 
 
 
1990 Equity Incentive Plan (1)
 
 
 
 
 
 
Deferred Compensation (2)
 
20,783

 
—

 
—

Non-Employee Director Restricted Stock Plan (1)
 
 

 
 

 


Deferred Compensation (2)
 
6,924

 
—

 
—

2005 Stock Incentive Plan (1)
 
 

 
 

 
—

Stock Options
 
228,790

 
$
48.16

 
—

Restricted Stock Units
 
96,384

 
—

 
—

Performance Awards (4)
 
156,463

 
—

 
—

Deferred Compensation (2)
 
68,414

 
—

 
—

2015 Stock Incentive Plan (3)
 
 
 
 
 
3,704,016

Stock Options
 
—

 
—

 
—

Performance Awards (4)
 
1,336

 
—

 
—

Deferred Compensation (2)
 
8,684

 
—

 
—

Equity compensation plans not approved by security holders:
 
 
 
 
 
 
Orbital Sciences 1997 Stock Option and Incentive Plan (1) (5)
 
 
 
 
 
 
Stock Options
 
4,490

 
$
28.91

 
—

Orbital Sciences Amended and Restated 2005 Stock Incentive Plan (1) (5)
 
 
 
 
 
 
Restricted Stock Units
 
202,563

 
—

 
—

Total
 
794,831

 
$
47.79

 
3,704,016

_________________________________________
(1)
No additional awards may be granted under this plan.
(2)
Shares reserved for payment of deferred stock units in accordance with the terms of the plan.
(3)
Under the 2015 Stock Incentive Plan, a total of 3,750,000 shares were authorized for awards. However, the plan includes a fungible share counting provision, under which “full-value awards" (i.e., awards other than stock options and stock appreciation rights) are counted against the reserve of shares available for issuance under the plan as 2.5 shares for every one share actually issued in connection with the award. No more than 5% of the shares available for awards under the plan may be granted to our non-employee directors in the aggregate.
(4)
Shares reserved for issuance in connection with outstanding performance awards. The amount shown assumes the maximum payout of the performance shares based on achievement of the highest level of performance. The actual number of shares to be issued depends on the performance levels achieved for the respective performance periods.
(5)
This plan was approved by the stockholders of Orbital prior to the Merger. Pursuant to the Transaction Agreement relating to the Merger, we assumed the obligation to issue shares under the terms of this plan.

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Table of Contents

ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number
of Shares
Purchased (1)
 
Average
Price Paid
per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Program (2)
 
Maximum Number of Additional Shares that May Be Purchased Under the Program  (3)
October 5 - November 1
91,407

 
$
79.03

 
87,417

 
 

November 2 - November 28
42,612

 
84.92

 
41,615

 
 

November 29 - December 31
53,427

 
85.55

 
53,427

 
 

Quarter ended December 31, 2015
187,446

 
$
82.23

 
182,459

 
1,949,909

_________________________________________
(1)
Includes shares repurchased during the quarter (see (2) below) and shares withheld to pay taxes upon vesting of shares of restricted stock and restricted stock units, or payment of performance shares that were granted under our incentive compensation plans.
(2)
During the 2015 transition period , the Board approved a stock repurchase program that currently authorizes the repurchase of up to the lesser of $250 million or 3.25 million shares through December 31, 2016. We repurchased 1,008,445 shares for $75.8 million during the 2015 transition period .
(3)
The maximum number of shares that may yet be repurchased under the program was calculated using our closing stock price of $89.34 on December 31, 2015 .
The discussion of limitations upon the payment of dividends as a result of the indentures governing our debt instruments as discussed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading " Long-term Debt and Credit Facilities " is incorporated herein by reference.

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Table of Contents

STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the Company's common stock during the period from March 31, 2011 through December 31, 2015 , with the Standard & Poor's Composite 500 Index, (a broad equity market index) and the Dow Jones U.S. Aerospace and Defense Index (a published industry index) for the same period.
The comparison assumes that on April 1, 2011, $100 was invested in the Company's common stock (at the closing price on the previous trading day) and in each of the indexes. The comparison assumes that all cash dividends, were reinvested and takes into account the value of the Vista Outdoor shares distributed to stockholders in the Distribution as if it occurred prior to March 31, 2011. The graph indicates the dollar value of each hypothetical $100 investment at March 31, 2012 , 2013 , 2014 and 2015 , and at December 31, 2015 .

A227201631828PM.JPG

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ITEM 6.    SELECTED FINANCIAL DATA
We have restated the selected financial data presented in this report as of and for the nine months ended December 31, 2015 and for each of the years ended March 31, 2015 and 2014 to reflect adjustments to our previously issued consolidated financial statements as more fully described in Note 2 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K/A and in the Explanatory Note to Amendment No.1. The impacts of the Restatement are shown in the table below in each of the applicable periods.
Results for the nine months ended December 31, 2015 and the year ended March 31, 2015 are not comparable to prior periods due to the Merger, as described in Note 5 to the accompanying consolidated financial statements in Part II, Item 8.
 
 
Nine Months Ended (6)
 
Years Ended March 31, ( 6 )
(Amounts in thousands except per share data)
 
December 31, 2015
 
2015
 
2014
 
2013
 
2012
 
 
(1)  (as restated)
 
(2)  (as restated)
 
(3)  (as restated)
 
(4)  (as restated)
 
(5)
Results of Operations:
 
 
 
 
 
 
 
 
 
 
Sales
 
$
3,391,384

 
$
3,112,659

 
$
2,890,711

 
$
3,206,096

 
$
3,610,579

Cost of sales
 
2,717,236

 
2,411,756

 
2,600,607

 
2,556,283

 
2,820,492

Gross profit
 
674,148

 
700,903

 
290,104

 
649,813

 
790,087

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development
 
83,209

 
49,349

 
48,536

 
55,958

 
58,906

Selling
 
88,177

 
89,941

 
87,554

 
90,219

 
106,065

General and administrative
 
220,157

 
304,590

 
209,199

 
200,568

 
234,922

Goodwill impairment
 
—

 
34,300

 
3,700

 


 
—

Gain on settlement
 
50,000

 
—

 
—

 
—

 
—

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
332,605

 
222,723

 
(58,885
)
 
303,068

 
390,194

Interest expense, net
 
(60,370
)
 
(88,848
)
 
(79,792
)
 
(65,386
)
 
(88,620
)
Loss on extinguishment of debt
 
—

 
(26,626
)
 
—

 
(11,773
)
 
—

Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
272,235

 
107,249

 
(138,677
)
 
225,909

 
301,574

Income taxes
 
86,913

 
37,299

 
(74,419
)
 
60,109

 
107,321

Income (loss) from continuing operations, before noncontrolling interest
 
185,322

 
69,950

 
(64,258
)
 
165,800

 
194,253

Less net income attributable to noncontrolling interest
 
143

 
99

 
171

 
436

 
592

Income (loss) from continuing operations of Orbital ATK, Inc.
 
$
185,179

 
$
69,851

 
$
(64,429
)
 
$
165,364

 
$
193,661

Basic earnings (loss) per common share from continuing operations
 
$
3.12

 
$
1.96

 
$
(2.03
)
 
$
5.10

 
$
5.89

Basic weighted-average number of common shares outstanding
 
59,358

 
35,469

 
31,671

 
32,447

 
32,874

Diluted earnings (loss) per common share from continuing operations
 
$
3.09

 
$
1.93

 
$
(1.97
)
 
$
5.07

 
$
5.85

Diluted weighted-average number of diluted common shares outstanding
 
59,915

 
36,140

 
32,723

 
32,608

 
33,112

Other Data:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization of intangible assets
 
$
122,745

 
$
82,106

 
$
72,304

 
$
80,935

 
$
84,302

Capital expenditures
 
$
104,634

 
$
112,704

 
$
105,730

 
$
73,494

 
$
100,820

Cash dividends per common share
 
$
0.78

 
$
1.28

 
$
1.10

 
$
0.92

 
$
0.80

Gross margin (gross profit as a percentage of sales)
 
19.9
%
 
22.5
%
 
10.0
%
 
20.3
%
 
21.9
%
(1)
The nine months period ended December 31, 2015 results include a $50,000 gain on settlement of a dispute with a supplier pertaining to the Antares rocket used in the CRS I contract.
(2)
Fiscal 2015 results includes $34,900 of transaction fees for advisory, legal and accounting services in connection with the Distribution and Merger and a $25,000 litigation charge pertaining to a Raytheon lawsuit settlement.
(3)
Fiscal 2014 results include a $342,000 forward loss contract reserve recorded in the second quarter as a result of the Restatement related to our long-term contract (the "Lake City Contract") with the U.S. Army to manufacture and supply small caliber ammunition at the U.S. Army’s Lake City Army Ammunition Plant.
(4)
Fiscal 2013 results include a $31,500 forward loss contract reserve recorded in the second quarter as a result of the Restatement related to the Lake City Contract.
(5)
Fiscal 2012 results include a $36,500 litigation charge pertaining to a LUU flares lawsuit settlement.
(6)
Presented for continuing operations only.

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Table of Contents

The account balances labeled “As Reported” in the following table for fiscal 2013 represent the previously reported selected financial data as presented in Part II, Item 6, Selected Financial Data, of the Original Filing. The net income impact of the Restatement in fiscal 2013 is reflected in this Amendment as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014. The errors in fiscal 2013 primarily related to the error in identifying a forward loss contract reserve of $31,500 associated with the Lake City Contract. The effects of the errors in fiscal 2013 on the financial data are as follows:
 
 
Year Ended March 31, 2013
(Amounts in thousands except per share data)
 
As reported
 
Adjustments
 
As restated
 
 
 
 
 
 
 
Sales
 
$
3,206,096

 
$
—

 
$
3,206,096

Cost of sales
 
2,521,277

 
35,006

 
2,556,283

Gross profit
 
684,819

 
(35,006
)
 
649,813

Operating expenses:
 
 
 
 
 
 
Research and development
 
55,958

 
—

 
55,958

Selling
 
90,219

 
—

 
90,219

General and administrative
 
200,568

 
—

 
200,568

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
338,074

 
(35,006
)
 
303,068

Interest expense, net
 
(65,386
)
 
—

 
(65,386
)
Loss on extinguishment of debt
 
(11,773
)
 
—

 
(11,773
)
Income from continuing operations, before income taxes and noncontrolling interest
 
260,915

 
(35,006
)
 
225,909

Income taxes
 
73,746

 
(13,637
)
 
60,109

Income from continuing operations, before noncontrolling interest
 
187,169

 
(21,369
)
 
165,800

Less net income attributable to noncontrolling interest
 
436

 
—

 
436

Income from continuing operations of Orbital ATK, Inc.
 
$
186,733

 
$
(21,369
)
 
$
165,364

 
 
 
 
 
 
 
Basic earnings per common share from continuing operations
 
$
5.76

 


 
$
5.10

Basic weighted-average number of common shares outstanding
 
32,447

 
 
 
32,447

Diluted earnings per common share from continuing operations
 
$
5.73

 


 
$
5.07

Diluted weighted-average number of diluted common shares outstanding
 
32,608

 
 
 
32,608



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(Amounts in thousands)
December 31, 2015
 
March 31, 2015
 
March 31, 2014
 
March 31, 2013
 
March 31, 2012
 
As Restated
 
As Restated
 
As Restated
 
As Restated
 
 
Financial Position:
 
 
 
 
 
 
 
 
 
Net current assets (1)
$
874,044

 
$
1,016,415

 
$
603,374

 
$
1,010,742

 
$
715,917

Net property, plant and equipment (1)
$
761,694

 
$
769,050

 
$
485,086

 
$
478,716

 
$
486,273

Total assets (1) (2)
$
5,323,695

 
$
5,477,532

 
$
3,490,706

 
$
3,618,285

 
$
3,767,208

Long-term debt (including current portion) (1) (2)
$
1,475,836

 
$
1,571,933

 
$
2,068,706

 
$
1,061,024

 
$
1,283,991

Total Orbital ATK, Inc. stockholders' equity
$
1,674,633

 
$
1,510,734

 
$
1,666,325

 
$
1,480,800

 
$
1,226,795

(1)
Presented for continuing operations only.
(2)
Reflects a reclassification of deferred financing costs related to the Company's debt from other noncurrent assets and total assets as a direct reduction from the carrying amount of the related debt due to the retrospective adoption of a new Accounting Standards Update ("ASU") in the first quarter ending April 3, 2016. The reclassification was $14,000, $17,000, $24,000, $13,000 and $18,000 for the 2015 transition period and fiscal years 2015 to 2012, respectively. See Item 8, Financial Statements and Supplemental Data — Note 1. "Summary of Significant Accounting Policies," of the notes to the consolidated financial statements for further discussion of the ASU adopted.


31

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(amounts in thousands except share and per share data or unless otherwise indicated)
Restatement of Previously Issued Consolidated Financial Statements
We have restated our consolidated financial statements for the nine-month transition period ended December 31, 2015 (“2015 transition period”), fiscal year ended March 31, 2015 (“fiscal 2015”), fiscal year ended March 31, 2014 (“fiscal 2014”), the quarters in the 2015 transition period and fiscal 2015 presented in Item 8 Financial Statements and Supplementary Data, and the unaudited selected financial data for the fiscal year ended March 31, 2013 ("fiscal 2013") presented in Item 6 Selected Financial Data to correct errors in prior periods. The impacts of the restatement on fiscal 2013 are reflected in the consolidated financial statements as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014. We refer to the corrections contained in the restated financial statements and information described herein collectively as the “Restatement.”
Description of the Restatement
The Restatement corrects misstatements primarily related to:
(i)
the estimation of contract costs at completion on the long-term contract (the “Lake City Contract”) with the U.S. Army to manufacture and supply small caliber ammunition at the Lake City Army Ammunition Plant in Independence, Missouri (the "LCAAP"). The Lake City Contract is within the Small Caliber Systems Division, a business unit within the Company’s Defense Systems Group. The Lake City Contract is a fixed price contract accounted for under the percentage of completion revenue recognition method. The misstatements in the estimation of contract costs at completion caused a forward loss provision to not be timely identified and recorded in prior periods; and

(ii)
the Company’s accounting policy, which resulted in the incorrect measurement of forward losses as a result of excluding general and administrative costs from the forward loss when general and administrative costs should be included in the measurement of a forward loss.

The Restatement necessitated a forward loss charge to be recorded for the entire anticipated forward loss on the Lake City Contract in the period in which the loss became evident. The Company determined that $31,500 of the loss was evident at contract signing (fiscal 2013) and $342,000 became evident at the time of initial production (fiscal 2014) and restated those periods and the consequential impact in subsequent periods.

The Company corrected its accounting policy from measurement of a forward loss provision based on gross profit to measurement based on gross profit along with general and administrative costs and adjusted the previously recorded forward loss provisions. The Company's prior accounting policy for measurement of a forward loss excluded general and administrative costs from the forward loss determination resulting in an incorrect measurement of a forward loss as these costs should be included in the measurement. The aggregate impact of this correction to the contract loss reserve liability, excluding the adjustment for the Lake City Contract, was an increase of $5,400 and $2,900 at December 31, 2015 and March 31, 2015, respectively. As part of the correction in accounting policy, the Company reclassified certain forward loss provisions recorded in net receivables to the contract loss reserve liability.

In addition to the matters in (i) and (ii) described above, the Company also corrected for immaterial errors resulting from account review and analysis and other adjustments.

The correction of the errors in the Restatement resulted in the following impact to net income (loss) attributable to Orbital ATK, Inc. to the previously issued consolidated financial statements:

Net income (loss) attributable to Orbital ATK, Inc.
Increase / (Decrease) Restatement Impact
Nine month period ending December 31, 2015
 
$
3,757

Fiscal 2015
 
$
(7,584
)
Fiscal 2014
 
$
(223,881
)

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Increase / (Decrease) Restatement Impact
 
 
Total Assets
 
Total Liabilities
As of December 31, 2015
 
$
(15,697
)
 
$
246,810

As of March 31, 2015
 
$
(10,302
)
 
$
255,962


As a result of the Restatement, the net income impact of the Restatement for fiscal 2013 is reflected in this Amendment as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014.

Like the other updated sections of this Form 10-K/A, unless otherwise specifically noted, the information included in this section is reflective of the Restatement, but does not reflect any subsequent information or events occurring after the date of the Original Filing or update any disclosure herein to reflect the passage of time since the date of the Original Filing.
See the Explanatory Note to Amendment No.1 to this Form 10-K/A and Note 2-"Restatement," in the Notes to Consolidated Financial Statements in Part II, Item 8— Financial Statements and Supplementary Data for additional information regarding the errors identified and the restatement adjustments made to the consolidated financial statements and information.
For information regarding our controls and procedures, see Part II Item 9A - Control and Procedures, of this Form
10-K/A.
Forward-Looking Information is Subject to Risk and Uncertainty
Some of the statements made and information contained in this report, excluding historical information, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Words such as "may," "will," "expected," "intend," "estimate," "anticipate," "believe," "project," or "continue," and similar expressions are used to identify forward-looking statements. From time to time, we also may provide oral or written forward-looking statements in other materials released to the public. Any or all forward-looking statements in this report and in any public statements we make could be materially different. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and you should not consider the following list to be a complete statement of all potential risks and uncertainties. Any change in the following factors may impact the achievement of results:
•
the effect of the Restatement of our previously issued financial results for the 2015 transition period, fiscal 2015, fiscal 2014 and fiscal 2013 as discussed in Explanatory Note to Amendment No. 1 and Note 2 to the restated consolidated financial statements, and any actual or unasserted claims, investigations or proceedings as a result of the Restatement,
•
our ability to remediate the material weaknesses in our internal controls over financial reporting described in Item 9A of this amended Transition Report,
•
reductions or changes in NASA or U.S. Government military spending, timing of payments and budgetary policies, including impacts of sequestration under the Budget Control Act of 2011, and sourcing strategies,
•
intense competition for U.S. Government contracts and programs,
•
increases in costs, which we may not be able to react to due to the nature of our U.S. Government contracts,
•
changes in cost and revenue estimates and/or timing of programs,
•
the potential termination of U.S. Government contracts and the potential inability to recover termination costs,
•
other risks associated with U.S. Government contracts that might expose us to adverse consequences,
•
government laws and other rules and regulations applicable to us, including procurement and import-export control,
•
reduction or change in demand and manufacturing costs for commercial ammunition,
•
the manufacture and sale of products that create exposure to potential product liability, warranty liability or personal injury claims and litigation,
•
risks associated with expansion into new and adjacent commercial markets,

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•
results of the Merger or other acquisitions or transactions, including our ability to successfully integrate acquired businesses and realize anticipated synergies, cost savings and other benefits, and costs incurred for pursuits and proposed acquisitions,
•
greater risk associated with international business, including foreign currency exchange rates and fluctuations in those rates,
•
federal and state regulation of defense products and ammunition,
•
costs of servicing our debt, including cash requirements and interest rate fluctuations,
•
actual pension and other postretirement plan asset returns and assumptions regarding future returns, discount rates, service costs, mortality rates, and health care cost trend rates,
•
security threats, including cyber security and other industrial and physical security threats, and other disruptions,
•
supply, availability, and costs of raw materials and components, including commodity price fluctuations,
•
performance of our subcontractors,
•
development of key technologies and retention of a qualified workforce,
•
the performance of our products,
•
fires or explosions at any of our facilities,
•
government investigations and audits,
•
environmental laws that govern past practices and rules and regulations, noncompliance with which may expose us to adverse consequences,
•
impacts of financial market disruptions or volatility to our customers and vendors,
•
unanticipated changes in the tax provision or exposure to additional tax liabilities, and
•
the costs and ultimate outcome of litigation matters, government investigations and other legal proceedings.
This list of factors is not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Additional information regarding these and other factors is contained in Item 1A of this report and may also be contained in our filings with the Securities and Exchange Commission on Forms 10-Q and 8-K. All such risk factors are difficult to predict, contain material uncertainties that may affect actual results, and may be beyond our control.
Executive Summary
We are an aerospace and defense products company and supplier of products to the U.S. Government, allied nations, prime contractors and other customers. Our main products include launch vehicles and related propulsion systems, satellites and associated components and services, composite aerospace structures, tactical missiles, subsystems and defense electronics and precision weapons, armament systems and ammunition. We are headquartered in Dulles, Virginia and have operating locations throughout the United States.
On February 9, 2015, we completed a tax-free spin-off and distribution of our former Sporting Group to our stockholders (the “Distribution”) as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). Immediately following the Distribution, we combined with Orbital Sciences Corporation ("Orbital") through the merger of a Company subsidiary with Orbital (the "Merger"). Following the Distribution and Merger, we changed our name from Alliant Techsystems Inc. to Orbital ATK, Inc.
We conduct business in three segments:
•
Flight Systems Group develops rockets that are used as small- and medium-class space launch vehicles to place satellites into Earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally, Flight Systems Group operates in the military and commercial aircraft and launch structures markets. In addition, the division produces advanced flares and decoys that provide illumination for search and rescue missions and countermeasures against missile attacks.

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•
Defense Systems Group develops and produces small-, medium-, and large-caliber military ammunition, propulsion systems for tactical missiles and missile defense applications, strike weapons, precision weapons and munitions, high-performance gun systems, aircraft survivability systems, fuzes and warheads, energetic materials and special mission aircraft.
•
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research, and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for Earth-orbit and deep-space exploration, including cargo delivery to the ISS. This group is also a provider of spacecraft components and subsystems and specialized engineering and operations services to U.S. government agencies.
Fiscal Year
We changed our fiscal year to the calendar twelve months ending December 31, effective beginning with the period ended on December 31, 2015. As a result, the current fiscal period is a nine-month transition period ended on December 31, 2015. Accordingly, the current period financial results ended December 31, 2015 are for a nine-month period. All references herein to a fiscal year prior to December 31, 2015 refer to the twelve months ended March 31 of such year.
Outlook
U.S Government Funding — Our U.S. Government contracts are dependent on the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a government fiscal year ("GFY") basis even though contract performance may take more than one year. As a result, at the outset of a major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future GFY's. In addition, most U.S. Government contracts are subject to modification if funding is changed. Any failure by Congress to appropriate additional funds to any program in which we participate, or any contract modification as a result of funding changes, could materially delay or terminate the program. This could have a material adverse effect on our operating results, financial condition, or cash flows.
The government budget structure remains constrained by the 2011 Budget Control Act, which initially reduced the DoD topline budget by approximately $490 billion over 10 years starting in GFY 2012, and subsequent amendments that continue to limit DoD spending. However, the budget outlook for defense and space spending for GFY 2016 is generally positive. The Bipartisan Budget Act of 2015 has provided a greater level of certainty for defense spending over the next two years, with base budgets in excess of the limits that would have been imposed by the sequester caps set by the Budget Control Act. The Consolidated Appropriations Act of 2016, passed in December 2015, established federal funding for the remainder of GFY 2016 and generally abides by the adjustments to discretionary spending provided for in the Bipartisan Budget Act. Defense spending for GFY 2016 includes a $514 billion base budget with a $59 billion supplement for overseas contingency operations, in total an increase of approximately 2% from GFY 2015 levels.
Importantly, the GFY2016 defense budget includes major boosts in military procurement accounts; however, we do not expect this to translate into large immediate revenue gains. In civil government agencies, our major customer, NASA, received authorization for a $19.3 billion budget for GFY 2016, an increase of 7% from GFY 2015, maintaining the longstanding commitment to International Space Station operations and providing a significant increase in funding for the Space Launch System, two key areas in which we are involved as a prime contractor and supplier. The President's budget for GFY 2017 is consistent with the funding levels of the Bipartisan Budget Act. We continue to monitor potential impacts of the upcoming government fiscal year as the GFY17 Congressional budget review and annual appropriations process gets underway.
Commercial and International Business — We continued to emphasize international growth by establishing operations in Saudi Arabia, the United Arab Emirates, and Singapore, as defense spending by U.S. allies continues to present opportunities for us. Our commercial businesses, consisting primarily of communication satellite and aircraft structure sales as well as ammunition sales to Vista Outdoor, were generally flat in the 2015 transition period. Industry-wide, new orders for geosynchronous satellites were down considerably in 2015, with approximately 17 satellites sold, down from 23 in 2014. We do not expect this area to rebound in the near term.
The U.S. aerospace and defense industry has experienced significant changes over the years. Our management believes that the key to our continued success is to focus on providing innovative, reliable and affordable space, defense and aviation systems. We are positioning ourselves where management believes there will be continued strong defense and civil government funding, even as pressures mount on research and development and procurement accounts, including an emphasis on international defense business and other potential growth areas.


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Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following are our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
A substantial portion of our sales come from contracts with agencies of the U.S. Government and its prime contractors and subcontractors. As the various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA, and the U.S. Air Force, make independent purchasing decisions, we do not generally regard the U.S. Government as one customer. Instead, we view each agency as a separate customer.
Sales by customer were as follows:
 
Percentage of Sales (as restated)
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
March 31, 2015
 
March 31, 2014
Sales to:
 
 
 
 
 
U.S. Army
15
%
 
26
%
 
32
%
U.S. Navy
11

 
15

 
17

NASA
23

 
13

 
14

U.S. Air Force
4

 
7

 
7

Other U.S. Government customers
17

 
14

 
14

Total U.S. Government customers
70

 
75

 
84

Commercial and foreign customers
30

 
25

 
16

Total
100
%
 
100
%
 
100
%
Long-term Contracts —Substantially all of our sales are accounted for as long-term contracts. Sales under long-term contracts are accounted for under the percentage-of-completion method and include cost-plus and fixed-price contracts. Sales under cost-plus contracts are recognized as costs are incurred. Sales under fixed-price contracts are either recognized as the actual cost of work performed relates to the estimate at completion ("cost-to-cost") or based on results achieved, which usually coincides with customer acceptance ("units-of-delivery"). The majority of our total revenue is accounted for using the cost-to-cost method of accounting.
Profits expected to be realized on contracts are based on management's estimates of total contract sales value and costs at completion. Estimated amounts for contract changes, including scope and claims, are included in contract sales only when realization is estimated to be probable. Assumptions used for recording sales and earnings are adjusted in the period of change to reflect revisions in contract value and estimated costs. In the period in which it is determined that a loss will be incurred on a contract, the entire amount of the estimated loss, based on gross profit along with general and administrative costs, is charged to cost of sales. Changes in estimates of contract sales, costs or profits are recognized using the cumulative catch-up method of accounting. The cumulative effect of a change in estimate is recognized in the period a change in estimate occurs. The effect of the changes on future periods of contract performance is recognized as if the revised estimate had been used since contract inception or, in the case of contracts acquired in business combinations, from the date of acquisition.
Changes in contract estimates occur for a variety of reasons including changes in contract scope, unforeseen changes in contract cost estimates due to unanticipated cost growth or risks affecting contract costs and/or the resolution of contract risks at lower costs than anticipated, as well as changes in contract overhead costs over the performance period. Changes in estimates could have a material effect on our consolidated financial position or annual results of operations. Aggregate net changes in contract estimates recognized using the cumulative catch-up method of accounting increased operating income by approximately $38,000 (as restated) in the 2015 transition period , approximately $92,000 (as restated) in fiscal 2015 , and approximately $83,000 in fiscal 2014 (excluding the incremental loss on the Lake City Contract in 2014 that is disclosed

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separately). The aggregate net changes in contract estimates are reflective of the correction in accounting policy for determining a forward loss and any other resulting impact from the errors being corrected in the Restatement. The adjustments recorded during the 2015 transition period were primarily driven by higher profit expectations in the Propulsion Systems and Aerospace Structures divisions. The adjustments recorded during fiscal 2015 were primarily driven by higher profit expectations in the Defense Electronic , Armament Systems , Missile Products , Propulsion Systems and Small Caliber Systems divisions. The adjustments recorded during fiscal 2014 were primarily driven by higher profit expectations in the Small Caliber Systems division and for programs in the Propulsion Systems division.
Contracts may contain provisions to earn incentive and award fees if specified targets are achieved as well as penalty provisions related to performance. Incentive and award fees and penalties that can be reasonably estimated and are probable are recorded over the performance period of the contract. Incentive and award fees that cannot be reasonably estimated are recorded when awarded.
Other —Sales not recognized under the long-term contract method are recognized when persuasive evidence of an arrangement exists, the product has been delivered and legal title and all risks of ownership have been transferred, written contract and sales terms are complete, customer acceptance has occurred, and payment is reasonably assured. Sales are reduced for allowances and price discounts.
Employee Benefit Plans
Defined Benefit Pension Plans.     Our noncontributory defined benefit pension plans include the following legacy Alliant Techsystems, Inc. plans: "Alliant Techsystems, Inc. Pension and Retirement Plan" and "Thiokol Propulsion Pension Plan" (the “ATK Plans”). We acquired the following two pension plans applicable to legacy Orbital employees in connection with the Merger: "Fairchild Bargained Plan" and "Fairchild Space and Defense Plan" (the “Orbital Plans” and together with the ATK Plans, the “Plans”).
ATK Plans - The ATK Plans noncontributory defined benefit pension plans (the "Plans") cover substantially all Alliant Techsystems, Inc. employees hired prior to January 1, 2007. Eligible non-union employees hired on or after January 1, 2007 and certain union employees are not covered by a defined benefit plan but substantially all receive an employer contribution through a defined contribution plan. On January 31, 2013, the ATK Plans were amended to freeze the current pension formula benefits effective June 30, 2013 and to implement a new cash balance formula applicable to pay and service starting July 1, 2013. The cash balance formula provides each affected employee with pay credits based on the sum of that employee's age plus years of pension service as of December 31 of each calendar year, plus 4% annual interest credits. Prior to the effective date of the amendment, the Plans provided either pension benefits based on employee annual pay levels and years of credited service or based on stated amounts for each year of credited service. We fund the Plans in accordance with federal requirements calculated using appropriate actuarial methods. Plan assets for us are held in a trust and are invested in a diversified portfolio of equity investments, fixed income investments, real estate, timber, energy investments, hedge funds, private equity, and cash. For certain Plan assets where the fair market value is not readily determinable, estimates of the fair value are determined using the best available information including the most recent audited financial statements.
Orbital Plans - The Orbital Plans were acquired by Orbital in connection with a 1994 business acquisition and were frozen at that time. These plans currently are overfunded. We fund the defined benefit pension plans in accordance with federal requirements calculated using appropriate actuarial methods. Plan assets for us are held in trusts and are invested in a diversified portfolio of equity investments, fixed income investments, real estate, timber, energy investments, hedge funds, private equity, and cash. For certain plan assets where the fair market value is not readily determinable, estimates of the fair value are determined using the best available information including the most recent audited financial statements. By resolution of the Orbital ATK Pension and Retirement Committee on July 1, 2015, the Orbital Plans were merged into the Alliant Techsystems, Inc. Pension and Retirement Plan effective December 31, 2015 and the plan name of that plan changed to the Orbital ATK, Inc. Pension and Retirement Plan.
We also sponsor nonqualified supplemental executive retirement plans which provide certain executives and highly compensated employees the opportunity to receive pension benefits in excess of those payable through tax-qualified pension plans. We implemented similar changes as those noted above to our nonqualified supplemental executive retirement plans for certain highly compensated employees.
We recorded pension expense for the Plans of $82,448 in the 2015 transition period , a decrease of $2,538 from $84,986 of pension expense recorded in fiscal 2015 . The expense related to these Plans is calculated based upon a number of actuarial assumptions, including the expected long-term rate of return on plan assets, the discount rate, and the rate of compensation increase. The following table sets forth our assumptions used in determining pension expense:

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Projected
 
Nine Months Ended December 31, 2015
 
Years Ended
 
2016
 
 
March 31, 2015
 
March 31, 2014
Expected long-term rate of return on plan assets
7.25
%
 
7.25
%
 
7.25
%
 
7.25
%
Discount rate
4.40
%
 
3.90
%
 
4.50
%
 
4.35
%
Rate of compensation increase:
 
 
 
 
 
 
 
Union
3.13
%
 
3.66
%
 
3.22
%
 
3.23
%
Salaried
3.62
%
 
3.14
%
 
3.47
%
 
3.49
%
In developing the expected long-term rate of return assumption, we consider input from our actuaries and other advisors, annualized returns of various major indices over a long-term time horizon and our own historical investment returns. The expected long-term rate of return of 7.25% used in the 2015 transition period for the Plans was based on an asset allocation range of 20 - 45% in equity investments, 35 - 50% in fixed income investments, 0 - 10% in real estate/real asset investments, 15 - 30% collectively in hedge fund and private equity investments, and 0 - 6% in cash investments. The expected long-term rate of return assumed for 2016 is 7.25% . The actual return in any year will likely differ from our assumption, but we estimate the return based on long-term projections and historical results. Therefore, any variance in a given year does not necessarily indicate that the assumption should be changed.
In determining the discount rate, we use the current investment yields on high-quality corporate bonds (rated AA or better) that coincide with the cash flows of the estimated benefit payouts from our plans. The model uses a yield curve approach to discount each cash flow of the liability stream at an interest rate specifically applicable to the timing of the respective cash flow. The model totals the present values of all cash flows and calculates the equivalent weighted average discount rate by imputing the singular interest rate that equates the total present value with the stream of future cash flows. This resulting weighted average discount rate is then used in evaluating the final discount rate. The discount rate was 4.40% , 3.90% , and 4.50% at December 31, 2015 , March 31, 2015 , and March 31, 2014 , respectively. The discount rate at year end impacts the following year's pension expense.
Future actual pension expense can vary significantly depending on future investment performance, changes in future discount rates, legally required plan changes, and various other factors related to the populations participating in the Plans. If the assumptions of the discount rate, compensation increase, and/or expected rate of return for 2016 were different, the impact on 2016 expense would be as follows: each 0.25% change in the discount rate would change 2016 pension expense by approximately $5,500 ; each 0.25% change in the rate of compensation increase would change 2016 pension expense by approximately $100 ; and each 0.25% change in the expected rate of return on plan assets would change 2016 pension expense by approximately $5,600 .
We base our determination of pension expense or income on a market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded.
Effective January 1, 2016, we changed our estimate of the service and interest cost components of net periodic benefit cost for our pension and other postretirement benefit plans. Previously, we estimated the service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation. The new estimate utilizes a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The new estimate provides a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates. The change does not affect the measurement of our pension and postretirement benefit obligations and it is accounted for as a change in accounting estimate, which is applied prospectively. For 2016, the change in estimate is expected to reduce pension and postretirement net periodic benefit plan cost by approximately $25,000 when compared to the prior estimate.
We made contributions to the qualified pension trust of $72,000 during the 2015 transition period and are required to make contribution of $37,000 in 2016 . We distributed $1,845 under our supplemental executive retirement plans during the 2015 transition period , and expect to make distributions directly to retirees of $5,400 in 2016 . A substantial portion of our Plan contributions are recoverable from the U.S. Government as allowable indirect contract costs at amounts generally equal to the pension plan contributions, although not necessarily in the same year the contribution is made. Our funded pension status was approximately 74% at December 31, 2015 .

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Other Postretirement Benefits.     We also provide postretirement health care benefits and life insurance coverage to certain employees and retirees.
The following table sets forth our assumptions used to determine net periodic benefit cost for other postretirement benefit ("PRB") plans:
 
Projected
 
Nine Months Ended December 31, 2015
 
Years Ended
 
2016
 
 
March 31, 2015
 
March 31, 2014
Expected long-term rate of return on plan assets:
 
 
 
 
 
 
 
Held solely in fixed income investments
5.00
%
 
5.00% / 6.25%

 
5.00% / 6.25%

 
5.00% / 6.25%

Held in pension master trust and fixed income investments
6.25
%
 
6.25
%
 
6.25
%
 
6.25
%
Discount rate
3.98
%
 
3.55
%
 
3.95
%
 
3.80
%
Weighted-average initial health care cost trend rate
6.10
%
 
6.10
%
 
6.10
%
 
7.60
%
Health care cost trend rates are set specifically for each benefit plan and design. Health care cost trend rates used to determine the net periodic benefit cost for employees during the 2015 transition period were as follows: under age 65 was 7.5% ; over age 65 was 6.0% ; and the prescription drug portion was 6.5% .
The health care cost ultimate trend rates, which will be reached in 2027 for each category below, are as follows:
Health care cost trend rate for employees under 65
4.5
%
Health care cost trend rate for employees over 65
4.5
%
Health care cost trend rate for prescription drugs
4.5
%
Weighted-average health care cost trend rate
4.5
%
In developing the expected long-term rate of return assumption for other PRB plans, we consider input from actuaries, historical returns, and annualized returns of various major indices over long periods. At December 31, 2015 , approximately 44% of the assets were held in a 401(h) account held within the pension master trust and are invested in the same manner as the pension assets. The expected long-term rates of returns are based on the weighted average asset allocation between the assets held within the 401(h) and those held in fixed income investments.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage point increase or decrease in the assumed health care cost trend rates would have the following effects:
 
One Percentage
Point Increase
 
One Percentage
Point Decrease
Effect on total service and interest cost
$
286

 
$
(253
)
Effect on postretirement benefit obligation
6,888

 
(6,118
)
We made other PRB plan contributions of $5,644 in the 2015 transition period and expect to make contributions of approximately $7,552 in 2016 . A substantial portion of our PRB plan contributions are recoverable from the U.S. Government as allowable indirect costs at amounts generally equal to the plan contributions, although not necessarily in the same year the contribution is made.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") reduced our accumulated projected benefit obligation ("APBO") measured at December 31, 2005. One of our other PRB plans is actuarially equivalent to Medicare, but we do not believe that the subsidies it will receive under the Act will be significant. Because we believe that participation levels in our other PRB plans will decline, the impact to our results of operations in any period has not been and is not expected to be significant.
Income Taxes
Provisions for federal, state, and foreign income taxes are calculated based on reported pre-tax earnings and current tax law. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions. We periodically assess our liabilities and

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contingencies for all periods that are currently open to examination or have not been effectively settled based on the most current available information. Where it is not more likely than not that our tax position will be sustained, we record the entire resulting tax liability and when it is more likely than not of being sustained, we record our best estimate of the resulting tax liability. Any applicable interest and penalties related to these positions are also recorded in the consolidated financial statements. To the extent our assessment of the tax outcome of these matters changes, such change in estimate will impact the income tax provision in the period of the change. It is our policy to record any interest and penalties related to income taxes as part of the income tax expense for financial reporting purposes. Deferred tax assets related to carryforwards are reduced by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis we take into account the amount and character to determine if the carryforwards will be realized. Significant estimates are required for this analysis. Changes in the amounts of valuation allowance are recorded in the tax provision in the period when the change occurs.
Mergers and Acquisitions
The results of merged or acquired businesses are included in our consolidated financial statements from the date of merger or acquisition. We allocate the purchase price to the underlying tangible and intangible assets acquired and liabilities assumed based on their fair value. Estimates are used in determining the fair value and estimated remaining lives of intangible assets until the final purchase price allocation is completed. Actual fair values and remaining lives of intangible assets may vary from those estimates. The excess purchase price over the estimated fair value of the net assets acquired is recorded as goodwill.
On April 28, 2014, we entered into a Transaction Agreement (the “Transaction Agreement”) with Orbital, Vista SpinCo Inc., a wholly-owned Company subsidiary, and Vista Merger Sub Inc., a wholly-owned subsidiary of ours, providing for the Distribution of our Sporting Group as a new public company, Vista Outdoor, followed by our Merger with Orbital. The Distribution and Merger were completed on February 9, 2015, immediately following which we changed our name to Orbital ATK, Inc. Pursuant to the Distribution and Merger, our stockholders received two shares of Vista Outdoor for each share of our common stock held and Orbital stockholders received 0.449 shares of our stock for each share of Orbital common stock held. Both transactions were structured to be tax-free to our U.S. stockholders for U.S. federal income tax purposes. Immediately following the Merger, Orbital stockholders owned 46.2% of our common stock and our existing stockholders owned 53.8%. The Merger was accounted for using the purchase method of accounting with the Company as the accounting acquirer.
As noted, we divested the Sporting Group segment in the Distribution. Accordingly, the divested business is presented as a discontinued operation in the accompanying consolidated financial statements for all prior periods presented.
Accounting for Goodwill
We test goodwill for impairment on January 1 or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. We determined that the reporting units for our goodwill impairment review are our operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results. We may aggregate certain components or reporting units based upon an evaluation of the facts and circumstances, including the nature of products and services and the extent of shared assets and resources.
We identified our eleven divisions as components and we aggregated the Commercial Satellites Division, Government Satellites Division, and Technical Services Division based upon the similarities of products, production processes, personnel, and shared benefit from research and development efforts. As a result, we have nine reporting units that are subject to goodwill impairment testing.
The goodwill impairment test is performed using a two-step process. In the first step, we determine the estimated fair value of each reporting unit and compare it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its estimated fair value, an indication of impairment exists and the second step must be performed in order to determine the amount of the impairment. In the second step, we must determine the implied fair value of the reporting unit's goodwill which is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The implied fair value is compared to the carrying amount and if the carrying amount of the reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss must be recognized for the excess.
The fair value of each reporting unit was determined using both an income and market approach. The value estimated using a discounted cash flow model was generally weighted equally against the estimated value derived from a market approach that considers the guideline company and transaction methods if recent transactions were available for one of our nine reporting units. These market approach methods estimate the price reasonably expected to be realized from the sale of the company based on comparable companies and recent transactional data. The fair value for each reporting unit exceeded its carrying amount by at least 25%.

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In developing a discounted cash flow analysis, our assumptions about future revenues and expenses, capital expenditures, and changes in working capital are based on our three-year plan, as approved by our Board of Directors, and assumes a terminal growth rate thereafter. A separate discount rate is determined for each reporting unit and these cash flows are then discounted to determine the fair value of the reporting unit.
Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital, and the appropriate discount rate. The projections also take into account several factors including current and estimated economic trends and outlook, costs of raw materials, consideration of our market capitalization in comparison to the estimated fair values of our reporting units, and other factors which are beyond our control. If the current economic conditions were to deteriorate, or if we were to lose a significant contract or business, causing a reduction in estimated discounted cash flows, it is possible that the estimated fair value of certain reporting units could fall below their carrying value resulting in the necessity to conduct additional goodwill impairment tests in future periods. We continually monitor the reporting units for impairment indicators and updates assumptions used in the most recent calculation of the estimated fair value of a reporting unit as appropriate.
Results of Operations (as restated)
The following information should be read in conjunction with our consolidated financial statements. The key performance indicators that management uses in managing the business are sales, income before interest and income taxes, and cash flows.
Group Sales, Cost of Sales, and Income from Continuing Operations, Before Interest, Income Taxes and Noncontrolling Interest include intergroup sales and profit. Corporate and Eliminations includes intergroup sales and profit eliminations and corporate expenses.
As a general note, the increases in the results of Flight Systems Group and Space Systems Group discussed below for the nine months ended December 31, 2015 were primarily attributable to the inclusion of Orbital's results following the Merger. Our results for the nine months ended December 31, 2015 include Orbital; however, the results for the nine months ended December 28, 2014 do not include the results of Orbital since the Merger occurred after that period.
Nine Months Ended December 31, 2015 (as restated)
Sales (as restated)
 
 
Nine Months Ended
 
 
 
 
 
 
December 31, 2015
 
December 28, 2014
 
$ Change
 
% Change
 
 
 
 
(unaudited)
 
 
 
 
Flight Systems Group
 
$
1,142,375

 
$
766,132

 
$
376,243

 
49.1
 %
Defense Systems Group
 
1,320,252

 
1,332,982

 
(12,730
)
 
(1.0
)
Space Systems Group
 
976,879

 
222,635

 
754,244

 
338.8

Corporate and Eliminations
 
(48,122
)
 
(180,240
)
 
132,118

 
73.3

Total sales
 
$
3,391,384

 
$
2,141,509

 
$
1,249,875

 
58.4
 %
The fluctuation in sales was driven by program-related changes within the groups and the impact of the Merger as described below.
Flight Systems Group .    The increase in sales was primarily due to the inclusion of Orbital's former Launch Vehicles segment, now referred to as the Launch Vehicles division, in our sales for the nine months ended December 31, 2015, as a result of the Merger. Launch Vehicles division sales were approximately $430,000 in the nine months ended December 31, 2015. Intragroup revenue eliminations increased $48,000 primarily attributable to contract activity between the Launch Vehicles Division and the other divisions in Flight Systems Group.
Defense Systems Group .    The decrease in sales was driven primarily by reduced sales of $11,000 in Small Caliber Systems , $5,000 in Defense Electronic Division and $34,000 in Missile Products largely due to lower sales volumes. The decrease in sales was offset by an increase of $45,000 in Armament Systems revenues that reflected increased foreign sales.
Space Systems Group .     The increase in sales was primarily due to the inclusion of Orbital's former Advanced Space Programs and Satellite and Space Systems segments in our sales for the nine months ended December 31, 2015, as a result of the Merger. The legacy Orbital Advanced Space Programs and Satellite and Space Systems businesses generated sales of approximately $811,000 in the nine months ended December 31, 2015.

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Corporate and Eliminations. The change in corporate and eliminations was driven primarily by lower intergroup sales from Defense Systems Group , due to the spin-off of Vista Outdoor as a result of the Distribution.
Cost of Sales (as restated)
 
 
Nine Months Ended
 
 
 
 
 
 
December 31, 2015
 
December 28, 2014
 
$ Change
 
% Change
 
 
 
 
(unaudited)
 
 
 
 
Flight Systems Group
 
$
874,722

 
$
598,903

 
$
275,819

 
46.1
 %
Defense Systems Group
 
1,068,079

 
1,078,455

 
(10,376
)
 
(1.0
)
Space Systems Group
 
811,190

 
183,356

 
627,834

 
342.4

Corporate and Eliminations
 
(36,755
)
 
(196,835
)
 
160,080

 
81.3

Total cost of sales
 
$
2,717,236

 
$
1,663,879

 
$
1,053,357

 
63.3
 %
The fluctuation in cost of sales was driven by program-related changes within the groups and the impact of the Merger as described below.
Flight Systems Group .     The increase in cost of sales was primarily due to the inclusion of Orbital's former Launch Vehicles segment in our cost of sales for the nine months ended December 31, 2015, as a result of the Merger.
Defense Systems Group .     The decrease in cost of sales was driven primarily by lower sales volume in Small Caliber Systems, partially offset by an increase in Armament Systems cost of sales that reflected increased foreign sales.
Space Systems Group .     The increase in cost of sales was primarily due to the inclusion of Orbital's former Advanced Space Programs and Satellite and Space Systems segments in our cost of sales for the nine months ended December 31, 2015, as a result of the Merger.
Corporate and Eliminations. The change in Corporate and Eliminations was driven primarily by lower intergroup sales from Defense Systems Group , due to the spin-off of Vista Outdoor as a result of the Distribution.
Operating Expenses (as restated)
 
 
Nine Months Ended
 
 
 
 
December 31, 2015
 
As a % of Sales
 
December 28, 2014
 
As a % of Sales
 
Change
 
 
 
 
 
 
(unaudited)
 
 
 
 
Research and development
 
$
83,209

 
2.5
%
 
$
23,981

 
1.1
%
 
$
59,228

Selling
 
88,177

 
2.6

 
69,033

 
3.2

 
19,144

General and administrative
 
220,157

 
6.5

 
165,502

 
7.8

 
54,655

Total
 
$
391,543

 
11.6
%
 
$
258,516

 
12.1
%
 
$
133,027

Operating expenses increased by $133,000  in the nine months ended December 31, 2015 compared to the nine months ended December 28, 2014 primarily due to inclusion of Orbital's research and development costs, selling expenses and general and administrative expenses in the nine months ended December 31, 2015. Additionally, we recorded restructuring costs of $28,029 in the 2015 transition period principally in connection with the consolidation of corporate facilities.

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Income from Continuing Operations, Before Interest, Income Taxes and Noncontrolling Interest (as restated)
 
 
Nine Months Ended
 
 
 
 
December 31, 2015
 
December 28, 2014
 
Change
 
 
 
 
(unaudited)
 
 
Flight Systems Group
 
$
196,583

 
$
103,116

 
$
93,467

Defense Systems Group
 
125,736

 
127,858

 
(2,122
)
Space Systems Group
 
67,185

 
14,848

 
52,337

Corporate
 
(56,899
)
 
(26,708
)
 
(30,191
)
Total
 
$
332,605

 
$
219,114

 
$
113,491

The fluctuations in income from continuing operations, before interest, income taxes and noncontrolling interest are described as follows:
Flight Systems Group .     The increase in income from operations was primarily due to the inclusion of Orbital's former Launch Vehicles segment in our results for the nine months ended December 31, 2015, as a result of the Merger. In the nine months ended December 31, 2015, we recorded a $50,000 gain on settlement of a dispute with a supplier pertaining to the Antares rocket used in the CRS I contract.
Defense Systems Group .     The decrease in income from operations was driven primarily by reduced income in Defense Electronic principally due to lower volume offset by an increase in Armament Systems income that reflects increased foreign sales.
Space Systems Group .     The increase in income from operations was primarily due to the inclusion of Orbital's former Advanced Space Programs and Satellite and Space Systems segments in our results for the nine months ended December 31, 2015, as a result of the Merger. Segment income from operations for the nine months ended December 31, 2015 included $49,327 recognized in sales in connection with a reduction in Merger-related contract fair value liabilities as progress toward completion was realized on certain contracts acquired in the Merger.
Corporate.     Results reflect unallocated expenses incurred for administrative functions that are performed centrally at the corporate headquarters, the difference between pension and postretirement benefit expense calculated under FAS and the expense calculated under CAS, merger and acquisition transaction related costs, amortization of intangible assets recorded in connection with the Merger, and the elimination of intercompany profits. The increase in corporate expenses in the nine months ended December 31, 2015 compared to the nine months ended December 28, 2014 was primarily due to amortization expense recorded in the nine months ended December 31, 2015 related to the Merger.
Net Interest Expense (as restated)
Net interest expense for the 2015 transition period was $60,370 , a decrease of $7,727 compared to the 2014 comparable nine-month period. The decrease was primarily due to the impact of a decrease in outstanding debt as a result of the repayment of certain indebtedness in connection with the Distribution and Merger, partially offset by accelerated amortization of deferred debt issuance costs related to refinancing our debt during the nine months ended December 31, 2015.
Income Taxes (from Continuing Operations) (as restated)
 
 
Nine Months Ended
 
 
 
 
December 31, 2015
 
Effective Rate
 
December 28, 2014
 
Effective Rate
 
Change
 
 
 
 
 
 
(unaudited)
 
 
 
 
Income taxes
 
$
86,913

 
31.9
%
 
$
41,521

 
27.5
%
 
$
45,392

The increase in the current period tax rate is primarily due to the absence of favorable true-ups of prior year taxes in the prior-year period, partially offset by a discrete revaluation of deferred tax liabilities resulting from a change in state tax apportionment method in the current-year period.
Our provision for income taxes includes both federal and state income taxes. The effective tax rate for the 2015 transition period of 31.9% differs from the federal statutory rate of 35.0% due to the Domestic Manufacturing Deduction ("DMD"), the research and development ("R&D") tax credit, and true-up of prior year taxes, partially offset by the change in valuation allowance, state income taxes, and changes in prior-year contingent tax liabilities, which increased the rate.

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The effective tax rate for the 2014 comparable period of 27.5% differs from the federal statutory rate of 35.0% due to DMD, the R&D tax credit, a true-up to prior year taxes, and changes in prior year contingent tax liabilities, partially offset by the change in state income taxes, which increased the rate.
Income (Loss) From Continuing Operations, Before Noncontrolling Interest (as restated)
Net income (loss) before noncontrolling interest for the 2015 transition period was $185,300 , an increase of $75,800 compared to $109,500 in the 2014 comparable period . This increase was primarily due to the inclusion of Orbital results in the current year period due to the Merger.
Year Ended March 31, 2015 (as restated)
Sales (as restated)
 
 
Years Ended
 
 
 
 
 
 
March 31, 2015
 
March 31, 2014
 
$ Change
 
% Change
Flight Systems Group
 
$
1,093,466

 
$
911,232

 
$
182,234

 
20.0
 %
Defense Systems Group
 
1,832,526

 
1,916,258

 
(83,732
)
 
(4.4
)
Space Systems Group
 
410,737

 
371,200

 
39,537

 
10.7

Corporate and Eliminations
 
(224,070
)
 
(307,979
)
 
83,909

 
27.2

Total sales
 
$
3,112,659

 
$
2,890,711

 
$
221,948

 
7.7
 %
The fluctuation in sales was driven by the program-related changes within the operating segments as described below.
Flight Systems Group.    The increase in sales was driven primarily by increased sales volume in Aerospace Structures of $67,000 due to increased production on commercial aircraft programs, sales of $64,700 resulting from the inclusion of Orbital's former Launch Vehicles segment in our post-Merger fiscal 2015 results, and increased sales volume in Propulsion Systems of $41,300 driven by a termination settlement on a commercial rocket motor contract.
Defense Systems Group.    The decrease in sales was driven primarily by reduced sales of $92,200 in Small Caliber Systems largely due to lower volumes, a decrease in Missile Products of $23,600 primarily due to the absence of a favorable Radford Army Ammunition Plant ("RFAAP") pension segment adjustment recorded in fiscal 2014, partially offset by a favorable contract adjustment in fiscal 2015, and a decrease in Defense Electronics of $19,100 as a result of completing several contracts in fiscal 2015, partially offset by increased sales in Armament Systems of $41,300 resulting from increased foreign sales.
Space Systems Group.     The increase in sales was driven by additional sales in Government Satellites of $56,100, Commercial Satellites of $42,200 and Technical Services of $21,000, resulting from the inclusion of Orbital's former Advanced Space Programs and Satellite and Space Systems segments in our post-Merger fiscal 2015 results, primarily offset by lower activity on two major proprietary programs that were completed in the Space Components division.
Cost of Sales (as restated)
 
 
Years Ended
 
 
 
 
 
 
March 31, 2015
 
March 31, 2014
 
$ Change
 
% Change
Flight Systems Group
 
$
843,490

 
$
706,413

 
$
137,077

 
19.4
 %
Defense Systems Group
 
1,470,706

 
1,893,708

 
(423,002
)
 
(22.3
)
Space Systems Group
 
341,101

 
304,631

 
36,470

 
12.0

Corporate and Eliminations
 
(243,541
)
 
(304,145
)
 
60,604

 
19.9

Total cost of sales
 
$
2,411,756

 
$
2,600,607

 
$
(188,851
)
 
(7.3
)%
The fluctuation in cost of sales was driven by the program-related changes within the operating segments as described below.
Flight Systems Group.     The increase was driven by increased cost of sales in Aerospace Structures of $54,600 resulting from increased production on commercial aircraft programs, cost of sales of $47,500 from Orbital's former Launch Vehicles segment included in our post-Merger fiscal 2015 results, and increased costs of sales in Propulsion Systems of $27,700 driven by termination costs on a commercial rocket motor contract.

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Defense Systems Group.     The decrease was driven by lower cost of sales of $37,700 in Missile Products due primarily to a pension segment contract closing adjustment recorded in fiscal 2014 related to the RFAAP, lower cost of sales in Defense Electronics of $30,000 as a result of completing several contracts in fiscal 2015, and a decrease of $396,000 in Small Caliber Systems due primarily to lower sales volume and the forward loss reserve related to the Lake City Contract recorded in the prior year of $342,000, that did not recur in fiscal 2015. These decreases were partially offset by increased cost of sales of $35,700 in Armament Systems resulting from increased foreign sales.
Space Systems Group.     The increase in cost of sales was driven by additional cost of sales in Government Satellites of $42,700, Commercial Satellites of $39,700, and Technical Services of $19,300 resulting from the inclusion of Orbital's former Advanced Space Programs and Satellite and Space Systems segments in our post-Merger fiscal 2015 results, partially offset by lower activity on two major proprietary programs in Space Components.
Corporate. The change in Corporate and Eliminations was driven by a reduction in sales and cost of sales eliminations resulting from lower sales from the Defense Systems Group to the Sporting Group, reported in discontinued operations. Additionally, the change in Corporate cost of sales was impacted by increased intercompany profit eliminations resulting from post-Merger sales to business units that were formerly a part of Orbital.
Operating Expenses (as restated)
 
 
Years Ended
 
 
 
 
March 31, 2015
 
As a % of Sales
 
March 31, 2014
 
As a % of Sales
 
Change
Research and development
 
$
49,349

 
1.6
%
 
$
48,536

 
1.7
%
 
$
813

Selling
 
89,941

 
2.9
%
 
87,554

 
3.0
%
 
2,387

General and administrative
 
304,590

 
9.8
%
 
209,199

 
7.2
%
 
95,391

Goodwill impairment
 
34,300

 
1.1
%
 
3,700

 
0.1
%
 
30,600

Total
 
$
478,180

 
15.4
%
 
$
348,989

 
12.0
%
 
$
129,191

Operating expenses increased by $129,200 year-over-year primarily due to transaction costs, restructuring charges, and a fourth quarter fiscal 2015 goodwill impairment charge. During fiscal 2015 we incurred $34,900 of transaction fees for advisory, legal and accounting services in connection with the Distribution and Merger. Additionally, as a result of the Distribution and Merger we recorded restructuring costs of $25,600 in fiscal 2015 principally in connection with the consolidation of corporate facilities and personnel termination costs associated with management restructuring. The transaction costs and restructuring charges in fiscal 2015 were recorded in general and administrative expenses. During the fourth quarter of fiscal 2015, we recorded a goodwill impairment charge of $34,300 pertaining to our Space Components division in our Space Systems Group, in connection with our annual goodwill impairment analysis.
Income (loss) From Continuing Operations, Before Interest, Income Taxes and Noncontrolling Interest (as restated)
 
 
Years Ended
 
 
 
 
March 31, 2015
 
March 31, 2014
 
Change
Flight Systems Group
 
$
144,847

 
$
110,807

 
$
34,040

Defense Systems Group
 
185,295

 
(157,449
)
 
342,744

Space Systems Group
 
(5,859
)
 
31,117

 
(36,976
)
Corporate
 
(101,560
)
 
(43,360
)
 
(58,200
)
Total
 
$
222,723

 
$
(58,885
)
 
$
281,608

The fluctuations in income from continuing operations, before interest, income taxes and noncontrolling interest are described as follows:
Flight Systems Group.      Income from operations increased due to increased sales as noted above and profit from a contract termination within Propulsion Systems.
Defense Systems Group.     Income from operations increased due to the forward contract loss reserve related to the Lake City Contract recorded in the prior year of $342,000, that did not recur in fiscal 2015, as well as operating expenses decreased $7,400 in fiscal 2015 compared to fiscal 2014, due to lower research and development spending of $4,100 in Defense Electronics and $3,100 in Armament Systems.

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Space Systems Group.    Operating results decreased primarily due to an increase in operating expenses of $38,900, principally due to a goodwill impairment charge of $34,300 in Space Components, partially offset by decreased research and development costs of $4,600.
Corporate.     Results reflect expenses incurred for administrative functions that are performed centrally at the corporate headquarters, the difference between pension and postretirement benefit expense calculated under FAS and the expense calculated under CAS, transaction-related costs, amortization of intangible assets recorded in connection with the Merger, and the elimination of intercompany profits. The change from the prior year was driven primarily by costs associated with the Distribution and Merger including transaction costs of $34,900, restructuring costs of $25,600 and litigation settlement costs. These cost increases were partially offset by lower intercompany profit eliminations and the absence of the RFAAP pension segment close-out recorded in the prior year.
Net Interest Expense (as restated)
Net interest expense for fiscal 2015 was $88,900, an increase of $9,100 compared to $79,800 in fiscal 2014. The increase was primarily due to an increase in the average amount of debt outstanding, partially offset by a lower weighted-average interest rate.
Income Taxes (from Continuing Operations) (as restated)
 
 
Years Ended
 
 
 
 
March 31, 2015
 
Effective Rate
 
March 31, 2014
 
Effective Rate
 
Change
Income taxes
 
$
37,299

 
34.8
%
 
$
(74,419
)
 
53.7
%
 
$
111,718

The change in the current period tax rate was primarily due to the goodwill impairment and nondeductible transaction costs, partially offset by increased benefits from the DMD, true-up of prior-year taxes, change in valuation allowance and lower state income taxes.
Our provision for income taxes includes both federal and state income taxes. The effective tax rate for fiscal 2015 of 34.8% differs from the federal statutory rate of 35.0% due to the DMD, change in prior-year contingent tax liabilities, R&D tax credit, change in valuation allowance and true-up of prior-year taxes , partially offset by goodwill impairment and nondeductible transaction costs which increased the rate.
The effective tax rate for fiscal 2014 of 53.7% is a benefit due to pre-tax losses from continuing operations and differs from the federal statutory rate of 35.0% due to the revaluation of unrecognized tax benefits due to proposed IRS regulations, DMD, R&D tax credit, and state income taxes, partially offset by the true-up of prior year taxes.
Income (Loss) From Continuing Operations, Before Noncontrolling Interest (as restated)
Net income (loss) from continuing operations before noncontrolling interest for fiscal 2015 was $70,000, an increase of $134,200 compared to a loss of $64,200 in fiscal 2014. This increase was primarily due to a $410,800 increase in gross profit primarily attributable to the forward loss reserve related to the Lake City Contract recorded in fiscal 2014, that did not recur in fiscal 2015, as noted above. This increase was offset by an increase in operating expenses of $129,200, a loss on extinguishment of debt of $26,600 in the current year and a $111,700 increase in income tax expense.

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Liquidity and Capital Resources
We manage our business to maximize operating cash flows as the primary source of liquidity. In addition to cash on hand and cash generated by operations, sources of liquidity include a credit facility, long-term borrowings, and access to the public debt and equity markets. We use our cash to fund investments in our existing core businesses and for debt repayment, cash dividends, share repurchases, and acquisition or other activities.
Cash Flows Summary (as restated)
Our cash flows from continuing operations for operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows are summarized as follows (as restated):
 
 
Nine Months Ended
 
Years Ended
 
 
December 31, 2015
 
December 28, 2014
 
March 31, 2015
 
March 31, 2014
Cash provided by operating activities of continuing operations
 
$
303,402

 
$
44,451

 
$
190,855

 
$
161,961

Cash (used for) provided by investing activities of continuing operations
 
(111,094
)
 
(59,203
)
 
332,198

 
(100,242
)
Cash (used for) provided by financing activities of continuing operations
 
(227,529
)
 
(216,395
)
 
(737,317
)
 
903,254

Net cash flows (used for) provided by continuing operations
 
$
(35,221
)
 
$
(231,147
)
 
$
(214,264
)
 
$
964,973

Operating Activities (as restated)
Net cash provided by operating activities of continuing operations increased $258,951 in the 2015 transition period compared to the 2014 comparable period . This increase was primarily driven by the inclusion of Orbital's operating activities due to the Merger.
Net cash provided by operating activities of continuing operations increased $ 28,894 in fiscal 2015 compared to fiscal 2014. This increase was driven by increased net income of $134,208 and working capital of $51,333, offset by a decrease in adjustments for non-cash items of $156,647.
Investing Activities
Net cash used for investing activities of continuing operations increased $51,891 in the 2015 transition period compared to the 2014 comparable period , primarily driven by the inclusion of Orbital's capital expenditure due to the Merger.
Net cash provided by investing activities of continuing operations increased $432,440 in fiscal 2015 compared to fiscal 2014. This increase was driven primarily by the receipt of cash acquired in the Merger of $253,734 and a cash dividend of $214,383 paid by Vista Outdoor to us, less cash distributed to Vista Outdoor of $25,505 in connection with the Distribution.
Financing Activities
Net cash used for financing activities increased $11,134 in the 2015 transition period compared to the 2014 comparable period . This increase was due to increased share repurchases, dividends paid and higher debt payments of $1,063,000, partially offset by additional proceeds from issuance of debt in the 2015 transition period of $1,050,000.
Net cash used for financing activities in fiscal 2015 was $737,317 compared to cash provided by financing activities in fiscal 2014 of $903,254. This decrease of $1,640,571 was due to additional debt issued primarily to finance the acquisitions of Bushnell and Savage in fiscal 2014 of $1,410,000 and higher debt payments in fiscal 2015 of $287,206.
Liquidity
In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, repay debt, satisfy employee benefit obligations, repurchase shares, pay dividends and complete any strategic acquisitions. Our short-term cash requirements for operations are expected to consist mainly of capital expenditures to maintain and expand production facilities and working capital requirements. Our debt service requirements over the next two years consist of principal payments due under the Term Loan A of the Senior Credit Facility, as discussed further below. Our other debt service requirements consist of interest expense on outstanding debt.
During the 2015 transition period , we paid quarterly dividends of $0.26 per share for all three quarters totaling $46,103 . On February 2, 2016, the Board of Directors declared a quarterly cash dividend of $0.30 per share. The payment and amount of

47

any future dividends are at the discretion of the Board of Directors and will be based on a number of factors, including our earnings, liquidity position, financial condition, capital requirements, credit ratings and the availability and cost of obtaining new debt. We cannot be certain that we will continue to declare dividends in the future and, as such, the amount and timing of any future dividends are not determinable.
In September 2015, we issued $400,000 aggregate principal amount of our 5.50% Senior Notes due 2023 and we refinanced our then-existing senior credit facility (the "Former Credit Facility") with a new senior credit facility (the "Senior Credit Facility"), extending debt maturities and increasing our revolving debt capacity, which increased our liquidity. Based on our current financial condition, management believes that our cash position, combined with anticipated generation of cash flows and the availability of funding, if needed, through our revolving credit facilities, access to debt and equity markets, as well as potential future sources of funding including additional bank financing and debt markets, will be adequate to fund future growth as well as to service our currently anticipated long-term debt and pension obligations, make capital expenditures, and payment of dividends over the next 12 months. Capital expenditures for 2016 are expected to be approximately $215,000.
We do not expect that our access to liquidity sources will be materially impacted in the near future. There can be no assurance, however, that the cost or availability of future borrowings, if any, will not be materially impacted by capital market conditions.
Long-term Debt and Credit Facilities
At December 31, 2015 , we had actual total indebtedness of $1,490,000 , and a $1,000,000 revolving credit facility provided for the potential of additional borrowings up to $853,523 reduced for outstanding letters of credit of $146,477 . There were no outstanding borrowings under the revolving credit facility at December 31, 2015 .
Our indebtedness consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
Senior Credit Facility:
 
 
 
 
Term Loan A due 2020
 
$
790,000

 
$
—

Revolving Credit Facility due 2020
 
—

 
—

5.25% Senior Notes due 2021
 
300,000

 
300,000

5.50% Senior Notes due 2023
 
400,000

 
—

Former Senior Credit Facility:
 
 
 
 
Term A Loan due 2018
 
—

 
946,875

Term A Loan due 2019
 
—

 
144,375

Term B Loan due 2020
 
—

 
197,251

Carrying amount of long-term debt
 
1,490,000

 
1,588,501

Unamortized debt issuance costs:
 
 
 
 
Senior Credit Facility
 
6,302

 
14,408

5.25% Senior Notes due 2021
 
1,915

 
2,160

5.50% Senior Notes due 2013
 
5,947

 
—

Unamortized debt issuance costs
 
14,164

 
16,568

Long-term debt less unamortized debt issuance costs
 
1,475,836

 
1,571,933

Less: Current portion of long-term debt
 
40,000

 
59,997

Long-term debt
 
$
1,435,836

 
$
1,511,936

See Note 10 "Long-term Debt" to the consolidated financial statements in Part II, Item 8 for a detailed discussion of these borrowings.
Senior Credit Facility
In September 2015, we refinanced our Former Senior Credit Facility with the Senior Credit Facility, which is comprised of a term loan of $800,000 (the "Term Loan A") and a revolving credit facility of $1,000,000 (the "Revolving Credit Facility"), both of which mature in 2020. The Term Loan A is subject to quarterly principal payments of $10,000 , with the remaining balance due on September 29, 2020. Substantially all of our tangible and intangible assets and certain of our domestic subsidiaries, excluding real property, are pledged as collateral under the Senior Credit Facility. Borrowings under the Senior

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Credit Facility bear interest at a per annum rate equal to either the sum of a base rate plus a margin or the sum of a LIBOR rate plus a margin. Each margin is based on our total leverage ratio. Based on our current total leverage ratio, the current base rate margin is 0.25% and the current LIBOR margin is 1.25% . The weighted-average interest rate for the Term Loan A, after taking into account the interest rate swaps discussed below, was 2.06% at December 31, 2015 . We pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility based on its total leverage ratio. Based on our current total leverage ratio, this current fee is 0.2% . At December 31, 2015 , we had no borrowings outstanding under the Revolving Credit Facility and had outstanding letters of credit of $146,477 , which reduced amounts available on the Revolving Credit Facility to $853,523 .
5.25% Notes
In fiscal 2014 , we issued $300,000 aggregate principal amount of 5.25% Senior Notes (the "5.25% Notes") that mature in 2021. These notes are general unsecured obligations. Interest on these notes is payable on April 1 and October 1 of each year. We have the right to redeem some or all of these notes from time to time on or after October 1, 2016, at specified redemption prices. Prior to October 1, 2016, we may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to October 1, 2016, we may redeem up to 35% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 105.25% of their principal amount plus accrued and unpaid interest to the date of redemption.
5.50% Notes
In September 2015, we issued $400,000 aggregate principal amount of 5.50% Senior Notes (the "5.50% Notes") that mature in 2023. These notes are general unsecured obligations. Interest on these notes is payable on April 1 and October 1 of each year. We have the right to redeem some or all of these notes from time to time on or after October 1, 2018, at specified redemption prices. Prior to October 1, 2018, we may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to October 1, 2018, we may redeem up to 35% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 105.50% of their principal amount plus accrued and unpaid interest to the date of redemption.
Former Senior Credit Facility
In September 2015, we refinanced and paid off our Former Credit Facility which was comprised of a term loan of $1,160,000 , a term loan of $250,000 and a $700,000 revolving credit facility, all of which were to mature from 2018 to 2020.
Rank and Guarantees
The 5.50% Notes and the 5.25% Notes are our general unsecured and unsubordinated obligations and rank equally in right of payment to all of our existing and future unsecured and unsubordinated indebtedness, rank senior in right of payment to all of our existing and future subordinated indebtedness and are effectively subordinated to all existing and future senior secured indebtedness, including the Senior Credit Facility, to the extent of the collateral. The 5.25% Notes and the 5.50% Notes are guaranteed on an unsecured basis, jointly and severally and fully and unconditionally, by substantially all of our domestic subsidiaries. All of these guarantor subsidiaries are 100% owned by Orbital ATK, Inc. which has no independent operations or material assets.
Covenants
Our Senior Credit Facility imposes restrictions on us, including limitations on our ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity. In addition, the Senior Credit Facility limits our ability to enter into sale-and-leaseback transactions. The Senior Credit Facility also requires that we meet and maintain the following financial ratios:
 
 
Total Leverage
Ratio (1)
 
Interest Coverage
Ratio (2)
Requirement
 
4.00

 
3.00

Actual at December 31, 2015 (as restated)
 
2.41

 
8.86

_________________________________________
(1)
Not to exceed the required financial ratio
(2)
Not to be below the required financial ratio

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The Total Leverage Ratio is the sum of our total debt plus financial letters of credit, net of up to $100,000 of cash, divided by Covenant EBITDA (which includes adjustments for items such as non-recurring or extraordinary non-cash items, non-cash charges related to stock-based compensation, and intangible asset impairment charges, as well as inclusion of EBITDA of acquired companies on a pro forma basis) for the past four fiscal quarters.
The Interest Coverage Ratio is Covenant EBITDA divided by interest expense (excluding noncash charges).
Our debt agreements contain cross-default provisions so that non-compliance with the covenants within one debt agreement could cause a default under other debt agreements as well. Our ability to comply with these covenants and to meet and maintain the requisite financial ratios may be affected by events beyond our control. Borrowings under the Senior Credit Facility are subject to compliance with these covenants. The indentures governing the 5.25% Notes and the 5.50% Notes impose restrictions on us, including limitations on our ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity.
At December 31, 2015 , we were in compliance with the covenants in all of our debt agreements.
Impact of the Restatement on Credit Facility Covenants
As a result of the Restatement, the Company was unable to file its Quarterly Reports on Form 10-Q with the SEC for the fiscal quarters ended July 3, 2016 and October 2, 2016 ("the 2016 Quarterly Reports"). The Company has entered into an extension agreement with its Senior Credit Facility lender group to extend, until April 14, 2017, the deadline under the Senior Credit Facility for filing with the SEC the 2016 Quarterly Reports as well as an amended Form 10-Q for the fiscal quarter ended April 3, 2016 and the Company's Annual Report on Form 10-K for 2016. As a result of the extension, the Company is in compliance with the financial covenants as of the date of the filing of this Form 10-K/A based on the Company's restated financial results.
Share Repurchases
On March 11, 2015, our Board of Directors authorized us to repurchase up to the lesser of $75 million or 1.0 million shares of our common stock through December 31, 2015. On August 4, 2015, our Board of Directors increased the amount authorized for repurchase to the lesser of $100 million or 1.4 million shares. On October 29, 2015, our Board of Directors further increased the amount authorized for repurchase to the lesser of $250 million or 3.25 million shares and extended the repurchase period to December 31, 2016. Under the authorized repurchase program, shares of our common stock may be purchased from time to time in the open market, subject to compliance with applicable laws and regulations and our debt covenants, depending upon market conditions and other factors. We repurchased 1,008,445 shares for $75.8 million during the 2015 transition period .
In accordance with the Transaction Agreement entered into on April 28, 2014, we did not repurchase any outstanding shares prior to the closing of the Distribution and Merger during fiscal 2015.
We repurchased 609,922 shares for $52,130 during fiscal 2014 under the then-existing share repurchase program.
Authorized repurchases of our shares are subject to market conditions, our compliance with our debt covenants and the limitations imposed by the tax treatment of the Distribution and the related Tax Matters Agreement between us and Vista Outdoor. Our 5.25% Notes and 5.50% Notes limit the aggregate sum of dividends, share repurchases, and other designated restricted payments to an amount based on our net income, stock issuance proceeds, and certain other items since April 1, 2001, less restricted payments made since that date. At December 31, 2015 , the Senior Credit Facility allows us to make unlimited "restricted payments" (as defined in the Credit Agreement), which, among other items, allows payments for future share repurchases, as long as we maintain a certain amount of liquidity and maintain certain senior secured debt limits. When those requirements are not met, the limit is equal to $250,000 plus proceeds of any equity issuances plus 50% of net income since October 7, 2010. The Credit Agreement also prohibits dividend payments if loan defaults exist or the financial covenants contained in the agreement are not met.

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Contractual Obligations and Commercial Commitments
The following table summarizes our contractual obligations and commercial commitments at December 31, 2015 (as restated):
 
Total
 
Less than
1 Year
 
1 - 3 Years
 
3 - 5 Years
 
More than
5 Years
Contractual obligations - by payment period:
 
 
 
 
 
 
 
 
 
Long-term debt
$
1,490,000

 
$
40,000

 
$
80,000

 
$
670,000

 
$
700,000

Interest on debt (1)
337,080

 
53,734

 
104,751

 
96,845

 
81,750

Operating leases
371,823

 
72,822

 
116,244

 
91,824

 
90,933

Environmental remediation costs, net
23,588

 
2,484

 
580

 
4,196

 
16,328

Pension and other postretirement plan contributions
556,800

 
53,900

 
224,200

 
150,300

 
128,400

Total contractual obligations, net
$
2,779,291

 
$
222,940

 
$
525,775

 
$
1,013,165

 
$
1,017,411

Other commercial commitments - by expiration period:
 
 
 
 
 
 
 
 
 
Letters of credit
$
146,477

 
$
63,830

 
$
37,719

 
$
9,323

 
$
35,605

_________________________________________
(1)
Includes interest on variable rate debt calculated based on interest rates at December 31, 2015 . Variable rate debt was 53% of our total debt at December 31, 2015 .
The total liability for uncertain tax positions at December 31, 2015 was $82,643 (see Note 12), $3,015 of which could be paid within 12 months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the noncurrent uncertain tax position obligations.
Pension plan contributions are an estimate of our minimum funding requirements through 2025 to provide pension benefits for employees based on expected actuarial estimated service accruals through 2025 pursuant to the Employee Retirement Income Security Act, although we may make additional discretionary contributions. These estimates may change significantly depending on the actual rate of return on plan assets, discount rates, discretionary pension contributions, and regulations. A substantial portion of our Plan contributions are recoverable from the U.S. Government as allowable indirect contract costs at amounts generally equal to the pension plan contributions, although not necessarily in the same year the contribution is made.
Contingencies
Litigation.     From time to time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular quarter, to be material to our business or likely to result in a material adverse effect on our future operating results, financial condition, or cash flows.
On July 30, 2013, Raytheon Company filed a lawsuit against us in the Superior Court of the State of Arizona.  The suit concerned the Company's longstanding production of rocket motors used in Raytheon's Advanced Medium-Range Air-to-Air Missiles (AMRAAM).  Raytheon’s primary allegation was that we breached certain of the production contracts by not delivering rocket motors.  Raytheon claimed damages in excess of $100,000 . The parties settled this matter on March 27, 2015, with the Company paying $25,000 to Raytheon, and the litigation was voluntarily dismissed on April 21, 2015.
Putative class action and derivative lawsuits challenging the merger of Orbital and our company were filed in the Court of Chancery of the State of Delaware in May 2014, naming Orbital, our company and Orbital’s directors.  On November 14, 2014, the lawsuits were consolidated by the court under the caption In Re Orbital Corporation Stockholder Litigation .  The plaintiffs alleged, among other things, that the directors of Orbital breached their fiduciary duties in connection with the Merger and alleged that we aided and abetted such breaches of fiduciary duty.  On January 16, 2015, the parties entered into a memorandum of understanding (the “MOU”) regarding the settlement of this matter. Pursuant to the terms of the MOU, we and Orbital made additional information available to Orbital's stockholders in connection with the Merger vote. On February 2, 2016, the case was dismissed.

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On August 12, 2016, a putative class action complaint, naming the Company, our Chief Executive Officer and our Chief Financial Officer as defendants, was filed in the United States District Court for the Eastern District of Virginia (Steven Knurr v. Orbital ATK, Inc., et al., No. 16-cv-01031 (TSE-MSN)). The class action complaint asserts claims on behalf of purchasers of Orbital securities for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, arising out of allegedly false and misleading statements and the failure to disclose that: (i) the Company lacked effective control over financial reporting; and (ii) as a result, the Company failed to record an anticipated loss on its long-term contract with the U.S. Army to manufacture and supply small caliber ammunition at the U.S. Army’s Lake City Army Ammunition Plant. The complaint seeks a determination that this matter is a proper class action and certifying the plaintiff as the class representative, an award of damages, an award of reasonable costs and expenses of trial, including counsel and expert fees, and an award of such other relief as deemed appropriate by the Court. The Company intends to defend this action vigorously.
Environmental Liabilities.     Our operations and ownership or use of real property are subject to a number of federal, state, and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites, and restoration of damage to the environment. At certain sites that we own or operate or formerly owned or operated, there is known or potential contamination that we are required to investigate or remediate. We could incur substantial costs, including remediation costs, resource restoration costs, fines, and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.
The liability for environmental remediation represents management's best estimate of the present value of the probable and reasonably estimable costs related to known remediation obligations. The receivable represents the present value of the amount that we expect to recover, as discussed below. Both the liability and receivable have been discounted to reflect the present value of the expected future cash flows, using a discount rate of 0.70% and 0.50% at December 31, 2015 and March 31, 2015 , respectively. Our discount rate is calculated using the 20-year Treasury constant maturities rate, net of an estimated inflationary factor of 1.9% , rounded to the nearest quarter percent. The following is a summary of the amounts recorded for environmental remediation:
 
December 31, 2015
 
March 31, 2015
 
Liability
 
Receivable
 
Liability
 
Receivable
Amounts (payable) receivable
$
(41,824
)
 
$
18,236

 
$
(51,749
)
 
$
26,506

Unamortized discount
1,718

 
(568
)
 
1,624

 
(750
)
Present value amounts (payable) receivable
$
(40,106
)
 
$
17,668

 
$
(50,125
)
 
$
25,756

At December 31, 2015 , the estimated discounted range of reasonably possible costs of environmental remediation was $40,106 to $78,920 .
We expect that a portion of the environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements, as described below.
•
As part of our acquisition of the Hercules Aerospace Company in fiscal 1995, we generally assumed responsibility for environmental compliance at the facilities acquired from Hercules (the "Hercules Facilities"). We believe that a portion of the compliance and remediation costs associated with the Hercules Facilities will be recoverable under U.S. Government contracts. If we were unable to recover those environmental remediation costs under these contracts, we believe these costs will be covered by Hercules Incorporated, a subsidiary of Ashland Inc., ("Hercules") under environmental agreements entered into in connection with the Hercules acquisition. Under these agreements, Hercules has agreed to indemnify us for environmental conditions relating to releases or hazardous waste activities occurring prior to our purchase of the Hercules Facilities as long as they were identified in accordance with the terms of the agreement; fines relating to pre-acquisition environmental compliance; and environmental claims arising out of breaches of Hercules' representations and warranties. Hercules is not required to indemnify us for any individual claims below $50. Hercules is obligated to indemnify us for the lowest cost response of remediation required at the facility that is acceptable to the applicable regulatory agencies. We are not responsible for conducting any remedial activities with respect to the Clearwater, FL facility. In accordance with our agreement with Hercules, we notified Hercules of all known contamination on non-federal lands on or before March 31, 2000, and on federal lands on or before March 31, 2005.
•
We generally assumed responsibility for environmental compliance at the Thiokol Facilities acquired from Alcoa Inc. ("Alcoa") in fiscal 2002. We expect that a portion of the compliance and remediation costs associated with the acquired Thiokol Facilities will be recoverable under U.S. Government contracts. In accordance with our agreement with Alcoa, we notified Alcoa of all known environmental remediation issues at January 30, 2004. Of

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these known issues, we are responsible for any costs not recovered through U.S. Government contracts at Thiokol Facilities up to $14,000, we and Alcoa have agreed to split evenly any amounts between $14,000 and $34,000, and we are responsible for any payments in excess of $34,000. At this time, we believe that costs not recovered through U.S. Government contracts will be immaterial.
We cannot ensure that the U.S. Government, Hercules, Alcoa, or other third parties will reimburse us for any particular environmental costs or reimburse us in a timely manner or that any claims for indemnification will not be disputed. U.S. Government reimbursements for cleanups are financed out of a particular agency's operating budget and the ability of a particular governmental agency to make timely reimbursements for cleanup costs will be subject to national budgetary constraints. Our failure to obtain full or timely reimbursement from the U.S. Government, Hercules, Alcoa, or other third parties could have a material adverse effect on our operating results, financial condition, or cash flows. While we have environmental management programs in place to mitigate these risks, and environmental laws and regulations have not had a material adverse effect on our operating results, financial condition, or cash flows in the past, it is difficult to predict whether they will have a material impact in the future.
The following table summarizes the estimated payments for the aggregate undiscounted environmental remediation costs, net of expected recoveries:
2016
$
2,484

2017
297

2018
283

2019
2,354

2020
1,842

Thereafter
16,328

Total
$
23,588

There were no material insurance recoveries related to environmental remediation during any of the periods presented.
Factors that could significantly change the estimates described in this section on environmental liabilities include:
•
the adoption, implementation, and interpretation of new laws, regulations, or cleanup standards,
•
advances in technologies,
•
outcomes of negotiations or litigation with regulatory authorities and other parties,
•
additional information about the ultimate remedy selected at new and existing sites,
•
adjustment of our share of the cost of such remedies,
•
changes in the extent and type of site utilization,
•
the discovery of new contamination,
•
the number of parties found liable at each site and their ability to pay,
•
more current estimates of liabilities for these contingencies, or
•
liabilities associated with resource restoration as a result of contamination from past practices.
New Accounting Pronouncements
See Note 1 to the consolidated financial statements in Item 8 of this report for discussion of new accounting pronouncements.
Inflation
In management's opinion, inflation has not had a significant impact upon the results of our operations. The selling prices under contracts, the majority of which are long term, generally include estimated costs to be incurred in future periods. These cost projections can generally be negotiated into new buys under fixed-price government contracts, while actual cost increases are recoverable on cost-type contracts.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure primarily relates to changes in interest rates, foreign currency exchange rates and certain commodity prices. To mitigate the risks from interest rate exposure, we occasionally enter into hedging transactions, mainly interest rate swaps, through derivative financial instruments that have been authorized pursuant to corporate policies. We also use derivatives to hedge foreign currency exchange rates and commodity price risks but do not use derivative financial instruments for trading or other speculative purposes, and we are not a party to leveraged financial instruments. Additional information regarding financial instruments is contained in Notes  1 and 4 to the consolidated financial statements.
Currently, our primary interest rate exposures relate to variable rate debt. We measure market risk related to changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair values, cash flows, and earnings based on a hypothetical change (increase and decrease) in interest rates. We use current market rates on our debt portfolio to perform the sensitivity analysis. The potential change in fair values is based on an assumed immediate change in the net present values of interest rate-sensitive exposures resulting from a 100 basis point change in interest rates. The potential change in cash flows and earnings is based on the change in the net interest income/expense over a one-year period due to the change in rates. Based on our analysis, a 100 basis point change in interest rates would not have a material impact on the fair values or our results of operations or cash flows.
With respect to our ammunition business, we have a strategic sourcing and price strategy to mitigate risk from commodity price fluctuation. We will continue to evaluate the need for future price changes in light of these trends, our competitive landscape, and our financial results. If commodity costs increase, and if we are unable to offset these increases with ongoing manufacturing efficiencies and price increases, our future results from operations and cash flows would be materially impacted.
Significant increases in commodities prices can negatively impact operating results with respect to our firm fixed-price contract to supply the DoD's small-caliber ammunition needs and our sales within commercial ammunition. Accordingly, we have entered into futures contracts in order to reduce the impact of metal price fluctuations. The majority of the impact has been mitigated on the contract with the U.S. Army by the terms within that contract. We have entered into futures contracts and purchase orders for the current expected production requirements for both the small-caliber ammunition supply contract and the production of commercial ammunition, thereby mitigating near term market risk; however, if metal prices exceed pre-determined levels, Defense Systems Group 's operating results could be adversely impacted.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Orbital ATK, Inc.
In our opinion, the accompanying consolidated balance sheet as of December 31, 2015 and the related consolidated statements of comprehensive income (loss), of equity, and of cash flows for the nine months then ended present fairly, in all material respects, the financial position of Orbital ATK, Inc. and its subsidiaries at December 31, 2015, and the results of their operations and their cash flows for the nine months then ended 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 December 31, 2015 because of the material weaknesses related to (i) an ineffective control environment, as the Company did not establish and maintain accounting policies and procedures related to complex transactions, (ii) not maintaining a sufficient complement of personnel with appropriate levels of accounting and controls knowledge, experience, and training, (iii) not designing and maintaining appropriate controls to ensure completeness and accuracy of purchase accounting, specifically related to the percentage of completion used to recognize revenue, and (iv) not maintaining controls over the integration of accounting operations of combined businesses including the preparation, analysis and review of accounts. However, management has subsequently determined that material weaknesses in internal control over financial reporting related to (v) an ineffective control environment at its Defense Systems Group and its Small Caliber Systems Division, and (vi) not designing and maintaining controls at the Small Caliber Systems Division related to the preparation, review and approval of costs incurred and contract estimates used to determine revenue recognition also existed as of December 31, 2015. Accordingly, management’s report and our opinion on the effectiveness of internal control over financial reporting have been restated to include these additional material weaknesses. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 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 existed as of that date related to (i) an ineffective control environment, as the Company did not establish and maintain accounting policies and procedures related to complex transactions, (ii) not maintaining a sufficient complement of personnel with appropriate levels of accounting and controls knowledge, experience, and training, (iii) not designing and maintaining appropriate controls to ensure completeness and accuracy of purchase accounting, specifically related to the percentage of completion used to recognize revenue, (iv) not maintaining controls over the integration of accounting operations of combined businesses including the preparation, analysis and review of accounts, (v) an ineffective control environment at its Defense Systems Group and its Small Caliber Systems Division, and (vi) not designing and maintaining controls at the Small Caliber Systems Division related to the preparation, review and approval of costs incurred and contract estimates used to determine revenue recognition. 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 audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 audit 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 audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

As discussed in Note 2 to the consolidated financial statements, the Company has restated its consolidated financial statements as of and for the nine-months ended December 31, 2015 to correct misstatements.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it classifies debt issue costs in 2016 and the manner in which it classifies deferred income taxes in 2015.

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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.

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

McLean, Virginia
March 15, 2016, except for the effects of the restatement discussed in Note 2 to the consolidated financial statements, the matter discussed in the penultimate paragraph of Management’s Report on Internal Control over Financial Reporting, and the effects of the change in the manner in which the Company classifies debt issue costs as discussed in Note 1, as to which the date is February 23, 2017

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Orbital ATK, Inc.:
We have audited the accompanying consolidated balance sheet of Orbital ATK, Inc. and subsidiaries (the "Company") as of March 31, 2015, and the related consolidated statements of comprehensive income (loss), equity, and cash flows for each of the two years in the period ended March 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Orbital ATK, Inc. and subsidiaries at March 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended March 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, the accompanying financial statements have been restated to correct misstatements.

/s/ DELOITTE & TOUCHE LLP
McLean, Virginia
May 29, 2015 (February 23, 2017 as to the effects of the restatement discussed in Note 2)


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ORBITAL ATK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
Nine Months Ended
Years Ended
(Amounts in thousands except per share data)
 
December 31, 2015
 
March 31, 2015
 
March 31, 2014
 
 
As Restated  (1)
 
As Restated  (1)
 
As Restated  (1)
Sales
 
$
3,391,384

 
$
3,112,659

 
$
2,890,711

Cost of sales
 
2,717,236

 
2,411,756

 
2,600,607

Gross profit
 
674,148

 
700,903

 
290,104

Operating expenses:
 
 
 
 
 
 
Research and development
 
83,209

 
49,349

 
48,536

Selling
 
88,177

 
89,941

 
87,554

General and administrative
 
220,157

 
304,590

 
209,199

Goodwill impairment
 
—

 
34,300

 
3,700

Gain on settlement
 
50,000

 
—

 
—

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
332,605

 
222,723

 
(58,885
)
Interest expense, net
 
(60,370
)
 
(88,848
)
 
(79,792
)
Loss on extinguishment of debt
 
—

 
(26,626
)
 
—

Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
272,235

 
107,249

 
(138,677
)
Income taxes
 
86,913

 
37,299

 
(74,419
)
Income (loss) from continuing operations, before noncontrolling interest
 
185,322

 
69,950

 
(64,258
)
Less net income attributable to noncontrolling interest
 
143

 
99

 
171

Income (loss) from continuing operations of Orbital ATK, Inc.
 
185,179

 
69,851

 
(64,429
)
Discontinued operations:
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
205,463

 
288,349

Income taxes
 
(1,008
)
 
80,414

 
106,886

Income from discontinued operations
 
1,008

 
125,049

 
181,463

Net income attributable to Orbital ATK, Inc.
 
$
186,187

 
$
194,900

 
$
117,034

 
 
 
 
 
 
 
Basic earnings (loss) per common share from:
 
 
 
 
 
 
Continuing operations
 
$
3.12

 
$
1.96

 
$
(2.03
)
Discontinued operations
 
0.02

 
3.53

 
5.73

Net income attributable to Orbital ATK, Inc.
 
$
3.14

 
$
5.49

 
$
3.70

Weighted-average number of common shares outstanding
 
59,358

 
35,469

 
31,671

Diluted earnings (loss) per common share from:
 
 
 
 
 
 
Continuing operations
 
$
3.09

 
$
1.93

 
$
(1.97
)
Discontinued operations
 
0.02

 
3.46

 
5.55

Net income attributable to Orbital ATK, Inc.
 
$
3.11

 
$
5.39

 
$
3.58

Weighted-average number of diluted common shares outstanding
 
59,915

 
36,140

 
32,723

Cash dividends paid per common share
 
$
0.78

 
$
1.28

 
$
1.10

Comprehensive income:
 
 
 
 
 
 
Net income attributable to: Orbital ATK, Inc. and noncontrolling interest
 
$
186,330

 
$
194,999

 
$
117,205

Other comprehensive income (loss), net of tax (expense) benefit:
 
 
 
 
 
 
Pension and other postretirement benefits:
 
 
 
 
 
 
Prior service credits for pension and postretirement benefit plans recorded to net income, net of taxes of $8,073, $11,740 and $11,240, respectively
 
(13,004
)
 
(18,906
)
 
(18,125
)
Net actuarial loss for pension and postretirement benefit plans recorded to net income, net of taxes of $(43,887), $(8,186) and $(56,791), respectively
 
70,550

 
13,841

 
91,387

Valuation adjustment for pension and postretirement benefit plans, net of taxes of $(2,924), $139,583, and $(48,772), respectively
 
4,805

 
(224,389
)
 
78,522

Change in fair value of derivatives, net of taxes of $624, $(1,866) and $1,771, respectively
 
(986
)
 
2,949

 
(2,830
)
Other, net of taxes of $(231), $(151) and $(29), respectively
 
375

 
238

 
46

Change in cumulative translation adjustment, net of taxes of $0, $0 and $942, respectively
 
—

 
(36,796
)
 
(1,505
)
Total other comprehensive income (loss)
 
61,740

 
(263,063
)
 
147,495

Comprehensive income (loss)
 
248,070

 
(68,064
)
 
264,700

Less comprehensive income attributable to noncontrolling interest
 
143

 
99

 
171

Comprehensive income (loss) attributable to Orbital ATK, Inc.
 
$
247,927

 
$
(68,163
)
 
$
264,529

Note: earnings per share amounts may not recalculate due to rounding.
(1) See Note 2 - Restatement
See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
 
December 31, 2015
 
March 31, 2015
 
 
As Restated (1)
 
As Restated (1)
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
104,032

 
$
139,253

Net receivables
 
1,670,821

 
1,696,529

Net inventories
 
213,212

 
196,114

Income taxes receivable
 
50,769

 
31,415

Deferred income taxes
 
—

 
211,721

Other current assets
 
89,645

 
118,491

Total current assets
 
2,128,479

 
2,393,523

Net property, plant, and equipment
 
761,694

 
769,050

Goodwill
 
1,828,366

 
1,862,255

Net intangibles
 
147,156

 
165,207

Deferred income taxes
 
318,538

 
145,036

Other noncurrent assets
 
139,462

 
142,461

Total assets
 
$
5,323,695

 
$
5,477,532

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt
 
$
40,000

 
$
59,997

Accounts payable
 
130,812

 
158,137

Contract-related liabilities
 
381,712

 
358,518

Contract loss reserve
 
235,841

 
262,324

Contract advances and allowances
 
172,046

 
173,198

Accrued compensation
 
127,928

 
144,185

Other current liabilities
 
166,096

 
220,749

Total current liabilities
 
1,254,435

 
1,377,108

Long-term debt
 
1,435,836

 
1,511,936

Postretirement and postemployment benefits
 
59,202

 
74,658

Pension
 
761,632

 
851,001

Other noncurrent liabilities
 
127,152

 
141,433

Total liabilities
 
3,638,257

 
3,956,136

Commitments and contingencies (Notes 11, 13 and 14)
 

 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 58,729,995 shares held December 31, 2015 and 59,427,942 shares at March 31, 2015
 
587

 
594

Additional paid-in-capital
 
2,187,940

 
2,182,814

Retained earnings
 
1,043,043

 
894,008

Accumulated other comprehensive loss
 
(785,908
)
 
(847,648
)
Common stock in treasury, at cost— 10,205,029 shares held at December 31, 2015 and 9,507,082 shares held at March 31, 2015
 
(771,029
)
 
(719,034
)
Total Orbital ATK, Inc. stockholders' equity
 
1,674,633

 
1,510,734

Noncontrolling interest
 
10,805

 
10,662

Total equity
 
1,685,438

 
1,521,396

Total liabilities and equity
 
$
5,323,695

 
$
5,477,532

(1) See Note 2 - Restatement
See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Nine Months Ended
 
Years Ended
(Amounts in thousands)
 
December 31, 2015
 
March 31, 2015
 
March 31, 2014
 
 
As Restated (1)
 
As Restated (1)
 
As Restated (1)
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
186,330

 
$
194,999

 
$
117,205

Net income from discontinued operations
 
(1,008
)
 
(125,049
)
 
(181,463
)
Income (loss) from continuing operations
 
185,322

 
69,950

 
(64,258
)
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
89,374

 
72,843

 
69,192

Amortization of intangible assets
 
33,371

 
9,263

 
3,112

Amortization of debt discount
 
—

 
3,212

 
7,364

Amortization and write-off of deferred financing costs
 
12,666

 
5,157

 
10,222

Goodwill impairment
 
—

 
34,300

 
3,700

Fixed Asset impairment
 
7,619

 
17,559

 
23,369

Loss on the extinguishment of debt
 
—

 
26,626

 
—

Deferred income taxes
 
57,587

 
12,378

 
(113,001
)
Forward loss
 
—

 
—

 
342,000

Loss on disposal of property
 
11,197

 
2,114

 
594

Share-based plans expense
 
19,589

 
25,325

 
12,701

Excess tax benefits from share-based plans
 
(4,997
)
 
(7,004
)
 
(833
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
16,839

 
9,736

 
79,827

Net inventories
 
(15,598
)
 
13,570

 
(63,437
)
Accounts payable
 
(29,276
)
 
55,710

 
(71,314
)
Contract advances and allowances
 
(1,152
)
 
(5,635
)
 
(44,107
)
Contract loss reserve
 
(26,697
)
 
(74,468
)
 
(45,060
)
Accrued compensation
 
(10,243
)
 
(31,293
)
 
(16,362
)
Contract-related liabilities
 
(19,435
)
 
94,520

 
(13,725
)
Pension and other postretirement benefits
 
(3,736
)
 
(41,569
)
 
70,750

Other assets and liabilities
 
(19,028
)
 
(101,439
)
 
(28,773
)
 Cash provided by operating activities of continuing operations
 
303,402

 
190,855

 
161,961

 Cash provided by operating activities of discontinued operations
 
—

 
120,476

 
226,060

 Cash provided by operating activities
 
303,402

 
311,331

 
388,021

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(104,634
)
 
(112,704
)
 
(105,730
)
Cash acquired in Merger with Orbital
 
—

 
253,734

 
—

Cash dividend (refunded to) received from Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group
 
(6,500
)
 
188,878

 
—

Proceeds from the disposition of property plant and equipment
 
40

 
2,290

 
5,488

 Cash (used for) provided by investing activities of continuing operations
 
(111,094
)
 
332,198

 
(100,242
)
 Cash used for investing activities of discontinued operations
 
—

 
(30,585
)
 
(1,341,747
)
 Cash (used for) provided by investing activities
 
(111,094
)
 
301,613

 
(1,441,989
)
Financing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Credit facility borrowings
 
745,000

 
878,000

 
280,000

Credit facility payments
 
(745,000
)
 
(878,000
)
 
(280,000
)
Payments made on bank debt
 
(24,999
)
 
(58,249
)
 
(38,263
)
Payments made to extinguish debt
 
(1,273,502
)
 
(777,220
)
 
(510,000
)
Proceeds from issuance of long-term debt
 
1,200,000

 
150,000

 
1,560,000


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Payments made for debt issue costs
 
(10,262
)
 
(1,008
)
 
(21,641
)
Purchase of treasury shares
 
(81,344
)
 
(16,788
)
 
(53,270
)
Dividends paid
 
(46,103
)
 
(41,056
)
 
(35,134
)
Proceeds from employee stock compensation plans
 
3,684

 
—

 
729

Excess tax benefits from share-based plans
 
4,997

 
7,004

 
833

Cash (used for) provided by financing activities of continuing operations
 
(227,529
)
 
(737,317
)
 
903,254

Effect of foreign currency exchange rate fluctuations on cash
 
—

 
(3,006
)
 
58

Decrease in cash and cash equivalents
 
(35,221
)
 
(127,379
)
 
(150,656
)
Cash and cash equivalents at beginning of period
 
139,253

 
266,632

 
417,288

Cash and cash equivalents at end of period
 
$
104,032

 
$
139,253

 
$
266,632

 
 
 
 
 
 
 
Supplemental Cash Flow Disclosures
 
 
 
 
 
 
Cash paid for interest, net
 
$
40,900

 
$
77,630

 
$
54,426

Cash paid for income taxes, net
 
26,458

 
143,108

 
136,295

Noncash financing activity:
 
 
 
 
 
 
Issuance of shares for noncash assets and liabilities of Orbital
 
$
—

 
$
1,504,243

 
$
—

Noncash investing activity:
 
 
 
 
 
 
Capital expenditures included in accounts payable of continuing operations
 
$
4,515

 
$
2,567

 
$
8,645

(1) See Note 2 - Restatement
   See Notes to the Consolidated Financial Statements.

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ORBITAL ATK, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Amounts in thousands except share data)
 
Common Stock $.01 Par Value
 
Additional
Paid-in-capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive Loss
 
Treasury
Stock
 
Noncontrolling
Interest
 
Total
Equity
 
Shares
 
Amount
 
 
 
 
 
 
Balance, March 31, 2013 (as restated) (1)
 
32,318,295

 
$
323

 
$
534,137

 
$
2,462,114

 
$
(828,304
)
 
$
(687,470
)
 
$
10,392

 
$
1,491,192

Comprehensive income (As Restated) (1)
 
—

 
—

 
—

 
117,034

 
147,495

 
—

 
171

 
264,700

Exercise of stock options
 
13,173

 
—

 
(252
)
 
—

 
—

 
981

 
—

 
729

Restricted stock grants
 
116,533

 
—

 
(9,517
)
 
—

 
—

 
9,517

 
—

 
—

Share-based compensation
 
—

 
—

 
12,701

 
—

 
—

 
—

 
—

 
12,701

Treasury stock purchased
 
(609,922
)
 
—

 
—

 
—

 
—

 
(52,130
)
 
—

 
(52,130
)
Shares issued net of treasury stock withheld
 
34,138

 
—

 
(3,856
)
 
—

 
—

 
2,450

 
—

 
(1,406
)
Tax benefit related to share based plans and other
 
—

 
—

 
94

 
—

 
—

 
—

 
—

 
94

Dividends
 
—

 
—

 
—

 
(35,134
)
 
—

 
—

 
—

 
(35,134
)
Employee benefit plans and other
 
(29,575
)
 
(5
)
 
708

 
—

 
—

 
(4,561
)
 
—

 
(3,858
)
Balance, March 31, 2014 (as restated) (1)
 
31,842,642

 
318

 
534,015

 
2,544,014

 
(680,809
)
 
(731,213
)
 
10,563

 
1,676,888

Comprehensive income (loss) (as restated) (1)
 
—

 
—

 
—

 
194,900

 
(263,063
)
 
—

 
99

 
(68,064
)
Restricted stock grants
 
128,316

 
—

 
(10,850
)
 
—

 
—

 
10,850

 
—

 
—

Share-based compensation
 
—

 
—

 
25,325

 
—

 
—

 
—

 
—

 
25,325

Shares issued net of treasury stock withheld
 
150,658

 
—

 
(19,381
)
 
—

 
—

 
8,766

 
—

 
(10,615
)
Tax benefit related to share based plans and other
 
—

 
—

 
6,445

 
—

 
—

 
—

 
—

 
6,445

Dividends
 
—

 
—

 
—

 
(56,507
)
 
—

 
—

 
—

 
(56,507
)
Employee benefit plans and other
 
(73,179
)
 
2

 
1,264

 
—

 
—

 
(7,437
)
 
—

 
(6,171
)
Convertible debt premium, net of tax of $43,170
 
20,678

 
—

 
(111,707
)
 
—

 
—

 
—

 
—

 
(111,707
)
Distribution of Sporting Group (as restated)
 
—

 
—

 
—

 
(1,788,399
)
 
96,224

 
—

 
—

 
(1,692,175
)
Merger with Orbital
 
27,358,827

 
274

 
1,757,703

 
—

 
—

 
—

 
—

 
1,757,977

Balance, March 31, 2015 (as restated)
 
59,427,942

 
594

 
2,182,814

 
894,008

 
(847,648
)
 
(719,034
)
 
10,662

 
1,521,396

Comprehensive income (as restated) (1)
 
—

 
—

 
—

 
186,187

 
61,740

 
—

 
143

 
248,070

Exercise of stock options
 
121,477

 
—

 
(5,502
)
 
—

 
—

 
9,186

 
—

 
3,684

Restricted stock grants
 
67,529

 
—

 
(6,509
)
 
—

 
—

 
6,509

 
—

 
—

Share-based compensation
 
—

 
—

 
19,589

 
—

 
—

 
—

 
—

 
19,589

Treasury stock purchased
 
(1,008,445
)
 
—

 
—

 
—

 
—

 
(75,795
)
 
—

 
(75,795
)
Shares issued net of treasury stock withheld
 
125,717

 
—

 
(15,127
)
 
—

 
—

 
9,904

 
—

 
(5,223
)
Tax benefit related to share based plans and other
 
—

 
—

 
11,188

 
—

 
—

 
—

 
—

 
11,188

Distribution of Sporting Group
 
—

 
—

 
—

 
(6,500
)
 
—

 
—

 
—

 
(6,500
)
Dividends
 
—

 
—

 
—

 
(30,652
)
 
—

 
—

 
—

 
(30,652
)
Employee benefit plans and other
 
(4,225
)
 
(7
)
 
1,487

 
—

 
—

 
(1,799
)
 
—

 
(319
)
Balance, December 31, 2015 (as restated) (1)
 
58,729,995

 
$
587

 
$
2,187,940

 
$
1,043,043

 
$
(785,908
)
 
$
(771,029
)
 
$
10,805

 
$
1,685,438

(1) See Note 2 - Restatement
See Notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)
1. Summary of Significant Accounting Policies
Nature of Operations.   Orbital ATK, Inc. (the "Company") is an aerospace and defense systems company and supplier of related products to the U.S. Government, allied nations and prime contractors. The Company is headquartered in Dulles, Virginia and has operating locations throughout the United States. The Company was incorporated in Delaware in 1990.
On February 9, 2015, the Company completed a tax-free spin-off of and distribution of its former Sporting Group to its stockholders (the "Distribution") as a new public company called Vista Outdoor Inc. ("Vista Outdoor"). Immediately following the Distribution, the Company combined with Orbital Sciences Corporation ("Orbital") through the merger of a Company subsidiary with Orbital (the "Merger"). These transactions are discussed in greater detail in Note 5. Following the Distribution and Merger, the Company changed its name from Alliant Techsystems Inc. to Orbital ATK, Inc.
As a result of the Distribution, the Sporting Group is reported as a discontinued operation for all prior periods presented. The Company used the acquisition method to account for the Merger; accordingly, the results of Orbital are included in the Company's consolidated financial statements since the date of the Merger.
Basis of Presentation.   The consolidated financial statements of the Company include all majority-owned affiliates. Intercompany transactions and accounts have been eliminated. The business formerly comprising Sporting Group is presented as discontinued operations - See Note 5.
Fiscal Year.   The Company changed its fiscal year from the period beginning on April 1 and ending on March 31 to the period beginning on January 1 and ending on December 31, beginning January 1, 2016. As a result, the current fiscal period is a nine-month transition period ended on December 31, 2015. In these consolidated statements, including the notes thereto, the current period financial results ended December 31, 2015 are for a nine-month period. Audited results for the twelve months ended March 31, 2015 and 2014 are both for twelve-month periods. In addition, the Company's consolidated statements of comprehensive income (loss) and consolidated statements of cash flows include unaudited comparative amounts for the nine-month period ended December 28, 2014. All references herein to a fiscal year prior to December 31, 2015 refer to the twelve months ended March 31 of such year.
Use of Estimates.   The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.
Restatement of Previously Issued Consolidated Financial Statements. In this Amended Transition Report on Form 10-K/A, the Company restated its consolidated financial statements for the nine-month transition period ended December 31, 2015 ("2015 transition period"), fiscal year ended March 31, 2015 ("fiscal 2015"), fiscal year ended March 31, 2014 ("fiscal 2014"), the quarters in the 2015 transition period and fiscal 2015 to correct errors in prior periods primarily related to (i) errors identified in estimating contract costs at completion on a certain long-term contract accounted for under the percentage of completion revenue recognition method causing a forward loss provision to not be identified timely and recorded in prior periods; (ii) correcting the Company’s accounting policy for measurement of forward loss provisions; and (iii) certain other immaterial misstatements. In the consolidated financial statements, the impacts of the restatement for fiscal 2013 are reflected in this Amendment as an adjustment to the beginning retained earnings for fiscal 2014.
See Note 2-"Restatement," for additional information regarding the errors identified in this Amended Transition Report and the restatement adjustments made to the Consolidated Financial Statements. These newly identified errors further restate the unaudited periods that were restated in the Company's Transition Report on Form 10-K for the nine month period ending December 31, 2015, previously filed on March 15, 2016 ("Original Filing").
In the Original Filing, certain financial information for the quarters ended July 5, 2015 and October 4, 2015 was restated. The restated financial information related to the following errors: (i) acquisition adjustments - corrections resulting from the application of purchase accounting with respect to certain long-term contracts, which are accounted for under the percentage-of-completion method that should be based on the estimate of remaining effort on such contracts at the acquisition date instead of the inception-to-date progress of each contract. These errors further resulted in reporting the settlement gain on the CRS1 contract as a discrete component of income from continuing operations and (ii) accounting review and analysis adjustments - corrections resulting from the reconciliation and analysis of certain accounts.
Revenue Recognition. The Company's sales come primarily from contracts with agencies of the U.S. Government and its prime contractors and subcontractors. The various U.S. Government customers, including the U.S. Navy, U.S. Army, NASA, and the U.S. Air Force, make independent purchasing decisions. Consequently, each agency is regarded as a separate customer.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Sales by customer were as follows:
 
 
Percentage of Sales
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
 
March 31, 2015
 
March 31, 2014
 
 
As Restated
 
As Restated
 
As Restated
Sales to:
 
 
 
 
 
 
U.S. Army
 
15
%
 
26
%
 
32
%
U.S. Navy
 
11

 
15

 
17

NASA
 
23

 
13

 
14

U.S. Air Force
 
4

 
7

 
7

Other U.S. Government customers
 
17

 
14

 
14

Total U.S. Government customers
 
70

 
75

 
84

Commercial and foreign customers
 
30

 
25

 
16

Total
 
100
%
 
100
%
 
100
%
Long-term Contracts —Substantially all of the Company's sales are accounted for as long-term contracts. Sales under long-term contracts are accounted for under the percentage-of-completion method and include cost-plus and fixed-price contracts. Sales under cost-plus contracts are recognized as costs are incurred. Sales under fixed-price contracts are either recognized as the actual cost of work performed relates to the estimate at completion ("cost-to-cost") or based on results achieved, which usually coincides with customer acceptance ("units-of-delivery"). The majority of the Company's total revenue is accounted for using the cost-to-cost method of accounting.
Profits expected to be realized on contracts are based on management's estimates of total contract sales value and costs at completion. Estimated amounts for contract changes, including scope and claims, are included in contract sales only when realization is estimated to be probable. Assumptions used for recording sales and earnings are adjusted in the period of change to reflect revisions in contract value and estimated costs. In the period in which it is determined that a loss will be incurred on a contract, the entire amount of the estimated loss, based on gross profit along with general and administrative costs, is charged to cost of sales. Changes in estimates of contract sales, costs or profits are recognized using the cumulative catch-up method of accounting. The cumulative effect of a change in estimate is recognized in the period a change in estimate occurs. The effect of the changes on future periods of contract performance is recognized as if the revised estimate had been used since contract inception or, in the case of contracts acquired in business combinations, from the date of acquisition.
Changes in contract estimates occur for a variety of reasons including changes in contract scope, unforeseen changes in contract cost estimates due to unanticipated cost growth or risks affecting contract costs and/or the resolution of contract risks at lower costs than anticipated, as well as changes in contract overhead costs over the performance period. Changes in estimates could have a material effect on the Company's consolidated financial position or annual results of operations. Aggregate net changes in contract estimates recognized using the cumulative catch-up method of accounting increased operating income by approximately $38,000 (as restated) in the 2015 transition period , approximately $92,000 (as restated) in fiscal 2015 , and approximately $83,000 in fiscal 2014 (excluding the incremental loss on the Lake City Contract in 2014 that is disclosed separately). The aggregate net changes in contract estimates are reflective of the correction in accounting policy for determining a forward loss and any other resulting impact from the errors being corrected in the Restatement (see section above "Restatement of Previously issued Consolidated Financial Statements"). The adjustments recorded during the 2015 transition period were primarily driven by higher profit expectations in the Propulsion Systems and Aerospace Structures divisions. The adjustments recorded during fiscal 2015 were primarily driven by higher profit expectations in the Defense Electronic , Armament Systems , Missile Products , Propulsion Systems and Small Caliber Systems divisions. The adjustments recorded during fiscal 2014 were primarily driven by higher profit expectations in the Small Caliber Systems division and for programs in the Propulsion Systems division. Estimated costs to complete on loss contracts at December 31, 2015 and March 31, 2015 are $1,392,218 and $1,505,084 , respectively.
Contracts may contain provisions to earn incentive and award fees if specified targets are achieved as well as penalty provisions related to performance. Incentive and award fees and penalties that can be reasonably estimated and are probable are recorded over the performance period of the contract. Incentive and award fees that cannot be reasonably estimated are recorded when awarded.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Other —Sales not recognized under the long-term contract method are recognized when persuasive evidence of an arrangement exists, the product has been delivered and legal title and all risks of ownership have been transferred, written contract and sales terms are complete, customer acceptance has occurred, and payment is reasonably assured. Sales are reduced for allowances and price discounts.
Operating Expenses.     Research and development, selling and general and administrative costs are expensed in the year incurred. Research and development costs include costs incurred for experimentation and design testing. Selling costs include bid and proposal efforts related to products and services. Costs that are incurred pursuant to contractual arrangements are recorded over the period that revenue is recognized, consistent with the Company's contract accounting policy.
Environmental Remediation and Compliance.     Costs associated with environmental compliance, restoration, and preventing future contamination that are estimable and probable are accrued and expensed, or capitalized as appropriate. Expected remediation, restoration, and monitoring costs relating to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are accrued and expensed in the period that such costs become estimable. Liabilities are recognized for remedial and resource restoration activities when they are probable and the cost can be reasonably estimated. The Company expects that a portion of its environmental remediation costs will be recoverable under U.S. Government contracts and has recorded a receivable equal to the present value of the amounts the Company expects to recover.
The Company's engineering, financial, and legal specialists estimate, based on current law and existing technologies, the cost of each environmental liability. Such estimates are based primarily upon the estimated cost of investigation and remediation required and the likelihood that other potentially responsible parties ("PRPs") will be able to fulfill their commitments at the sites where the Company may be jointly and severally liable. The Company's estimates for environmental obligations are dependent on, and affected by, the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site, methods of remediation available, the technology that will be required, the outcome of discussions with regulatory agencies and other PRPs at multi-party sites, the number and financial viability of other PRPs, changes in environmental laws and regulations, future technological developments, and the timing of expenditures; accordingly, the Company periodically evaluates and revises such estimates based on expenditures against established reserves and the availability of additional information.
Cash Equivalents.     Cash equivalents are all highly liquid cash investments purchased with original maturities of 3 months or less.
Marketable Securities.     Investments in a common collective trust that primarily invests in fixed income securities are classified as available-for-sale securities and are recorded at fair value within other current assets and deferred charges and other noncurrent assets on the consolidated balance sheet. Unrealized gains and losses are recorded in other comprehensive (loss) income ("OCI"). When such investments are sold, the unrealized gains or losses are reversed from OCI and recognized in the consolidated income statement.
Net Inventories.     Inventories are stated at the lower of cost or market. Inventoried costs relating to contracts in progress are stated at actual production costs, including factory overhead, initial tooling, and other related costs incurred to date, reduced by amounts associated with recognized sales. Recorded amounts for raw materials, work in process and finished goods are generally determined using the average cost method.
Net inventories consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
 
Raw materials
 
$
88,365

 
$
69,112

Work/contracts in process
 
124,315

 
126,038

Finished goods
 
532

 
964

Net inventories
 
$
213,212

 
$
196,114

Progress payments received from customers relating to the uncompleted portions of contracts are offset against unbilled receivable balances or applicable inventories. Any remaining progress payment balances are classified as contract advances.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Changes in allowances for excess and obsolete inventory were as follows (as restated):
Balance, March 31, 2014
 
$
13,257

Expense
 
993

Write-offs
 
652

Other adjustments
 
2,110

Balance, March 31, 2015
 
17,012

Expense
 
3,082

Other adjustments
 
3,613

Balance, December 31, 2015
 
$
23,707

Accounting for Goodwill and Identifiable Intangible Assets.
Goodwill —The Company tests goodwill for impairment on January 1 or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. The Company determined that the reporting units for its goodwill impairment review are its operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results.
The impairment test is performed using a two -step process. In the first step, the Company estimates the fair value of each reporting unit and compares it to the carrying value of the reporting unit, including goodwill. If the carrying amount of a reporting unit is higher than its fair value, an indication of goodwill impairment exists and the second step is performed in order to determine the amount of the goodwill impairment. In the second step, the Company determines the implied fair value of the reporting unit's goodwill which it determines by allocating the estimated fair value of the reporting unit in a manner similar to a purchase price allocation. The implied fair value is compared to the carrying amount and if the carrying amount of the reporting unit's goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized for the excess.
Identifiable Intangible Assets —The Company's primary identifiable intangible assets consist of contract backlog intangible assets recorded as part of the Orbital merger transaction, discussed in Note 5. Identifiable intangible assets with finite lives are amortized and evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangibles with indefinite lives are not amortized and are tested for impairment annually on January 1, or more frequently if events warrant.
Treasury Stock. Under the Company’s share repurchase program, the Company can repurchase common stock to be held in treasury. Treasury stock is accounted for using the cost method. Shares held in treasury may be reissued to satisfy (i) the payment of performance awards, total stockholder return performance awards ("TSR awards") and restricted stock units, (ii) the grant of restricted stock and (iii) the exercise of stock options. When treasury stock is reissued, the value is determined using a weighted-average basis.
Stock-based Compensation.     The Company's stock-based compensation plans, which are described more fully in Note 15, provide for the grant of various types of stock-based incentive awards, including performance awards, TSR awards, restricted stock, and options to purchase common stock. The types and mix of stock-based incentive awards are evaluated on an ongoing basis and may vary based on the Company's overall strategy regarding compensation, including consideration of the impact of expensing stock awards on the Company's results of operations.
Performance awards are valued at the fair value of the Company stock at the grant date and expense is recognized based on the number of shares expected to vest under the terms of the award under which they are granted. The Company uses an integrated Monte Carlo simulation model to determine the fair value of the TSR awards and the calculated fair value is recognized in income over the vesting period. Restricted stock issued vests over periods ranging from 1 to 3 years and is valued based on the market value of the Company stock on the grant date. The estimated grant date fair value of stock options is recognized in income on a straight-line basis over the requisite service period, generally one to three years. The estimated fair value of each option is calculated using the Black-Scholes option-pricing model. See Note 15 for further details.
Income Taxes.     Provisions for federal, state and foreign income taxes are calculated based on reported pre-tax earnings and current tax law. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income taxes and evaluating tax positions. The Company periodically assesses its liabilities and contingencies for all periods that are currently open to examination or have not been effectively settled based on the most

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

current available information. Where it is not more likely than not that the Company's tax position will be sustained, the Company records the entire resulting tax liability and when it is more likely than not of being sustained, the Company records its best estimate of the resulting tax liability. Any applicable interest and penalties related to those positions are also recorded in the consolidated financial statements. To the extent the Company's assessment of the tax outcome of these matters changes, such change in estimate will impact income taxes in the period of the change. It is the Company's policy to record any interest and penalties related to income taxes as part of the income taxes for financial reporting purposes. Deferred tax assets related to carryforwards are reduced by a valuation allowance when it is not more likely than not that the amount will be realized before expiration of the carryforward period. As part of this analysis the Company takes into the account the amount and character of the income to determine if the carryforwards will be realized. Significant estimates and judgments are required for this analysis. Changes in the amounts of valuation allowance are recorded in tax expense in the period when the change occurs.
Derivative Instruments and Hedging Activities.     From time to time, the Company uses derivative instruments, consisting mainly of commodity forward contracts to hedge forecasted purchases of certain commodities, foreign currency exchange contracts to hedge forecasted transactions denominated in a foreign currency and interest rate swaps to manage interest rate risk on debt. The Company does not hold or issue derivatives for trading purposes. At the inception of each derivative instrument, the Company documents the relationship between the derivative instrument and the hedged item, as well as its risk-management objectives and strategy for undertaking the hedge transaction. The Company assesses, both at the derivative's inception and on an ongoing basis, whether the derivative instrument is highly effective in offsetting changes in the fair value of the hedged item. Derivatives are recognized on the balance sheet at fair value. The effective portion of changes in fair value of derivatives designated as cash flow hedges are recorded to accumulated OCI and recognized in earnings in the same account in which the hedged item is recognized when the hedged item impacts earnings, and the cash flows from the effective portion of cash flow hedges are classified in the same section of the cash flows as the hedged item. The ineffective portion of derivatives designated as cash flow hedges and changes in fair value of derivative instruments not designated in a qualifying hedging relationship are reflected in current earnings, and the cash flows from the ineffective portion of cash flow hedges are classified as investing activities. The Company's current derivatives are designated as cash flow hedges. See Note  4 for further details.
Earnings Per Share Data.     Basic earnings per share ("EPS") is computed based upon the weighted-average number of common shares outstanding for each period. Diluted EPS is computed based on the weighted-average number of common shares and common equivalent shares outstanding for each period. Common equivalent shares represent the effect of stock-based awards (see Note  15 ) and contingently issuable shares related to the Company's Convertible Senior Subordinated Notes (see Note  10 ) during each period presented, which, if exercised, earned, or converted, would have a dilutive effect on earnings per share.
Weighted-average shares outstanding were determined as follows:
 
 
Nine Months Ended
December 31, 2015
 
Years Ended
In thousands
 
 
March 31, 2015
 
March 31, 2014
Basic
 
59,358

 
35,469

 
31,671

Dilutive effect of stock-based awards
 
557

 
377

 
376

Dilutive effect of contingently issuable shares
 
—

 
294

 
676

Diluted
 
59,915

 
36,140

 
32,723

Anti-dilutive stock options excluded from the calculation of diluted earnings per share
 
91

 
73

 
45


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Accumulated Other Comprehensive Income (Loss) ("AOCI").     Changes in AOCI, net of income taxes, were as follows:
 
 
Nine Months Ended December 31, 2015
 
Year Ended March 31, 2015
 
 
Derivatives
 
Pension and Other Post-
retirement Benefits
 
Available-for-sale Securities
 
Total
 
Derivatives
 
Pension and Other Post-
retirement Benefits
 
Available-for-sale Securities
 
Cumulative Translation Adjustment
 
Total
Beginning of period unrealized gain (loss) in AOCI
 
$
(2,073
)
 
$
(846,645
)
 
$
1,070

 
$
(847,648
)
 
$
(5,022
)
 
$
(675,114
)
 
$
832

 
$
(1,505
)
 
$
(680,809
)
Net decrease in fair value of derivatives
 
(5,654
)
 
—

 
—

 
(5,654
)
 
(8,097
)
 
—

 
—

 
—

 
(8,097
)
Net losses reclassified from AOCI, offsetting the price paid to suppliers (1)
 
4,668

 
—

 
—

 
4,668

 
11,046

 
—

 
—

 
—

 
11,046

Net losses reclassified from AOCI, due to ineffectiveness (1)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Net actuarial losses reclassified from AOCI (2)
 
—

 
70,550

 
—

 
70,550

 
—

 
13,841

 
—

 
—

 
13,841

Prior service costs reclassified from AOCI (2)
 
—

 
(13,004
)
 
—

 
(13,004
)
 
—

 
(18,906
)
 
—

 
—

 
(18,906
)
Valuation adjustment for pension and postretirement benefit plans (2)
 
—

 
4,805

 
—

 
4,805

 
—

 
(224,389
)
 
—

 
—

 
(224,389
)
Net change in cumulative translation adjustment
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(36,796
)
 
(36,796
)
Other
 
—

 
—

 
375

 
375

 
—

 
—

 
238

 
—

 
238

Distribution of Sporting (3)
 
—

 
—

 
—

 
—

 
—

 
57,923

 
—

 
38,301

 
96,224

End of period unrealized gain (loss) in AOCI
 
$
(3,059
)
 
$
(784,294
)
 
$
1,445

 
$
(785,908
)
 
$
(2,073
)
 
$
(846,645
)
 
$
1,070

 
$
—

 
$
(847,648
)
_________________________________________
(1)
Amounts related to derivative instruments that were reclassified from AOCI and recorded as a component of cost of sales or interest expense for each period presented.
(2)
Amounts related to pension and other postretirement benefits that were reclassified from AOCI and recorded as a component of net periodic benefit cost for each period presented (Note 11).
(3)
Amounts related to Sporting Group prior to the Distribution (Note 5).
There was no ineffectiveness recognized in earnings for these contracts during any fiscal year presented. The Company expects that any unrealized gains and losses will be realized and reported in cost of sales as the cost of the commodities is included in cost of sales. Estimated and actual gains or losses will change as market prices change.
Fair Value of Non-financial Instruments. The carrying amounts of receivables, inventory, accounts payable, accrued liabilities and other current assets and liabilities, approximate fair values due to the short maturity of these instruments. See Note  3 for additional disclosure regarding fair value of financial instruments.
New Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-02, Leases (Topic 842), which requires leasees to recognize lease assets and lease liabilities for those leases classified as operating leases under previous generally accepted accounting principles in the United States ("U.S. GAAP"). The new standard is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. The Company currently is evaluating the potential changes from this ASU to its future financial reporting and disclosures.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires all deferred income tax assets and liabilities to be classified as noncurrent on the balance sheet. The new standard is effective for annual reporting periods beginning after December 15, 2016 with early adoption permitted. The Company has elected to early adopt this requirement prospectively in the current period, and accordingly, prior periods were not retrospectively adjusted.
In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement to restate prior period financial statements for measurement period adjustments in purchase

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

accounting. The new standard requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. This new standard is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company has elected to early adopt this new standard as of December 31, 2015. See Note 5.
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Such investments should be disclosed separate from the fair value hierarchy. This ASU will be effective retrospectively for the Company for interim and annual periods beginning after December 15, 2015. The adoption of this new standard is not expected to have an impact on the Company's consolidated financial statements but will impact certain disclosures. The Company adopted this ASU on a retrospective basis during the Company's first quarter ended April 3, 2016 and the retrospective application of the ASU is being reflected in this amended filing. The new standard removed the fair value hierarchy disclosure for the Company's investment in marketable securities.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. and in August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.” These ASUs more closely align the treatment of debt issuance costs with debt discounts and premiums and requires debt issuance costs related to be presented as a direct deduction from the carrying amount of the related debt. The amendments in these ASUs are effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The adoption of these new standards will impact the presentation of the net debt issuance costs included in Note 10. The Company adopted this ASU on a retrospective basis during the Company's first quarter ended April 3, 2016 and the retrospective application of the ASU is being reflected in this amended filing. This resulted in a reclassification of debt issuance costs related to the Company's notes of $14,000 from "Other noncurrent assets" to "Long-term debt, net of current portion" in the Company's consolidated balance sheets as of December 31, 2015 and reclassification of $17,000 from "Other noncurrent assets" to "Long-term debt, net of current portion" in the Company's consolidated balance sheets as of March 31, 2015.
In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which simplifies the consolidation evaluation process by placing more emphasis on risk of loss when determining a controlling financial interest. This new standard is effective for interim and annual periods beginning after December 15, 2015. The Company adopted this ASU during the Company's first quarter ended April 3, 2016 and the adoption did not have a material impact on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606) which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, and provide companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Under the new standard, the Company expects to continue using the cost-to-cost percentage of completion method to recognize revenue for most of its long-term contracts. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company has not yet selected a transition method. The Company currently is evaluating the potential changes from this ASU to its future financial reporting and disclosures. In July 2015, the FASB approved the deferral of the new standard's effective date by one year. The new standard now will be effective for annual reporting periods beginning after December 15, 2017. The FASB will permit companies to adopt the new standard early, but not before the original effective date of annual reporting periods beginning after December 15, 2016.
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU changed the criteria for reporting discontinued operations to be a disposal of a component of an entity that represents a strategic shift with major effects on operations and financial results. The ASU also requires additional disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations. The Company adopted this standard for the 2015 transition period, and it did not have a material impact on the Company’s consolidated financial statements.
Other new pronouncements issued but not effective for the Company until after December 31, 2015 are not expected to have a material impact on the Company's continuing financial position, results of operations or liquidity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

2. Restatement
The Company restated its consolidated financial statements for the 2015 transition period, fiscal 2015, fiscal 2014, the quarters in the 2015 transition period and fiscal 2015 (the "Restatement"). The Restatement corrects misstatements primarily related to (i) the estimation of contract costs at completion on the long-term contract (the “Lake City Contract”) with the U.S. Army to manufacture and supply small caliber ammunition at the Lake City Army Ammunition Plant ("LCAAP") causing a forward loss provision to not be identified timely and recorded in prior periods; and (ii) correcting the Company’s accounting policy for measurement of forward loss provisions. In the consolidated financial statements, the impacts of the restatement for fiscal 2013 are reflected in this Amendment as an adjustment to the beginning retained earnings for fiscal 2014.
The Audit Committee of the Board of Directors, in consultation with senior management, determined that the Company should conduct an internal investigation, under its supervision, of the circumstances surrounding the misstatements in the accounting for the Lake City Contract and related matters. The investigation was undertaken by outside counsel, along with independent counsel for the Audit Committee. Counsel received assistance from outside forensic accountants. The investigation is complete.
Based on the internal investigation, the Audit Committee and senior management concluded as follows: Certain personnel at the Small Caliber Systems Division and, in some cases, Defense Systems Group, acted inappropriately and failed to adhere to the high standards established in the Company’s policies and expected by senior management and the Board of Directors. Specifically, with respect to the Lake City Contract: (a) there likely was a bias toward maintaining a targeted profit rate; (b) in some cases, there appears to have been inappropriate use of management reserves to maintain the targeted profit rate; (c) some members of the Small Caliber Systems Division finance staff failed to follow up and inquire further into indicators that cost overruns were occurring, and if such inquiries had been made, it could have led to further contemporaneous discussion and an earlier conclusion that the Lake City Contract was in a forward loss position; and (d) negative information was suppressed, and concerns at the Small Caliber Systems Division about cost overruns were not escalated appropriately to higher-level Company management or finance staff, nor were they communicated to the Audit Committee, the Board of Directors or the independent registered public accounting firms.

The Lake City Contract is within the Small Caliber Systems Division, a business unit within the Company’s Defense Systems Group, and is a fixed price contract accounted for under the percentage of completion revenue recognition method. The Lake City Contract was entered into in September 2012. It has an initial term of seven years plus the possibility of an award term extension of an additional three years if by July 17, 2017 the Company does not provide written notice of rejection to the U.S. Army. It is probable that the Company will provide written notice of rejection to the U.S. Army. As a result, the Restatement presents the total estimated forward loss provision for the initial seven-year term.

Management identified that the underlying contract costs estimated at completion for the Lake City Contract in prior periods contained misstatements which, when corrected, resulted in the Lake City Contract’s estimated costs at completion exceeding the contracted revenues. This necessitated a forward loss charge for the seven-year term of the Lake City Contract to be recorded for the entire anticipated forward loss on the contract in the period in which the loss became evident. The Company determined that $31,500 of the loss was evident at contract signing (second quarter of fiscal 2013) and $342,000 became evident at the time of initial production (second quarter of fiscal 2014) and restated those periods and the consequential impact in subsequent periods. The $31,500 loss recorded at contract signing was the projected operating loss at that time after the inclusion of the related risks and opportunities on the Lake City Contract. The remaining $342,000 loss recorded at the time of first production was the result of updated estimates when it should have been apparent at that time that the previously expected cost reductions would not be fully realized.

As a result of this contract loss, the Company determined that the goodwill for the Small Caliber Systems reporting unit of $3,700 was impaired due to the implied fair value of the reporting unit being less than the carrying value and has written down the entire carrying value of the goodwill to zero in fiscal 2014. Additionally due to the contract loss identified at the Lake City facility, the Company recognized an impairment charge for the long lived assets capitalized for the Lake City Ammunition Plant asset group in fiscal 2014. Subsequent to the impairments, costs incurred for the purchase or construction of additional long-lived assets related to this contract were expensed in the periods incurred, as such costs will not be recovered, and the depreciation expense recorded in subsequent periods was revised. The impairment charge recognized on long lived assets was $7,619 , $17,559 and $23,369 in the 2015 transition period, fiscal 2015 and fiscal 2014, respectively.
The Company corrected its accounting policy from measurement of a forward loss provision based on gross profit to measurement based on gross profit along with general and administrative costs and adjusted the previously recorded forward loss provisions. The Company's prior accounting policy for measurement of a forward loss excluded general and administrative

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

costs from the forward loss determination resulting in an incorrect measurement of a forward loss as these costs should be included in the measurement. The aggregate impact of this correction to the contract loss reserve liability, excluding the adjustment for the Lake City Contract, was an increase of $5,419 and $2,945 at December 31, 2015 and March 31, 2015, respectively. As part of the correction in accounting policy, the Company also reclassified certain forward loss provisions recorded in net receivables to the contract loss reserve liability.
In addition to the matters in (i) and (ii) described above, the Company also corrected for (iii) certain immaterial out of period adjustments previously recorded in the Original Filing that related to misstatements in the application of purchase accounting with respect to acquired long-term contracts accounted for under the percentage of completion revenue recognition method as well as purchase price allocation misstatements; and (iv) immaterial misstatements, including misstatements in certain footnotes, identified during an account review and analysis exercise.
The immaterial out of period adjustments referred to in (iii) above were previously recorded in the Original Filing and primarily relate to errors in the application of purchase accounting. In the Original Filing, the Company recorded the correction of certain immaterial errors related to fiscal 2015 as an out of period adjustment in the restatement adjustment for the quarter ending July 5, 2015 (during the 2015 transition period); this Restatement reflects the out of period adjustments in the appropriate period (fiscal 2015). The effect of this adjustment resulted in a decrease of $8,471 for fiscal 2015 in Income (Loss) from Continuing Operations before Taxes and Noncontrolling Interest and a corresponding increase for the 2015 transition period. Additionally, the Company reflected purchase accounting allocation balance sheet adjustments that were recorded in the Original Filing in the restatement adjustment for the quarter ending July 5, 2015 (during the 2015 transition period) in the appropriate period (fiscal 2015) in this Restatement.
The immaterial account review and analysis adjustments referred to in (iv) above were made in the Restatement and related to post acquisition accounting for fixed assets, the spin-off and Distribution of the Company's former Sporting Group, revenue recognition and various other matters, including footnote disclosures.

71
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

A summary of the impact of these matters on income (loss) from continuing operations, before income taxes and noncontrolling interest is presented below:
 
 
Increase / (Decrease) Restatement Impact
 
 
Nine Months Ended December 31,
 2015
 
Years Ended March 31,
 
 
 
2015
 
2014
Lake City Contract Loss and Related Adjustments:
 
 
 
 
 
 
Sales
 
$
(12,995
)
 
$
(58,008
)
 
$
(34,526
)
Cost of sales
 
$
(24,911
)
 
$
(57,567
)
 
$
322,495

Gross profit
 
$
11,916

 
$
(441
)
 
$
(357,021
)
Income (loss) from continuing operations, before interest expense, income taxes and noncontrolling interest
 
$
11,916

 
$
(441
)
 
$
(360,721
)
Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
$
11,916

 
$
(441
)
 
$
(360,721
)
 
 
 
 
 
 
 
Contract Loss Reserve Adjustment:
 
 
 
 
 
 
Sales
 
$
—

 
$
—

 
$
—

Cost of sales
 
$
2,474

 
$
(743
)
 
$
182

Gross profit
 
$
(2,474
)
 
$
743

 
$
(182
)
Income (loss) from continuing operations, before interest expense, income taxes and noncontrolling interest
 
$
(2,474
)
 
$
743

 
$
(182
)
Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
$
(2,474
)
 
$
743

 
$
(182
)
 
 
 
 
 
 
 
Account Review and Analysis and Other:
 
 
 
 
 
 
Sales
 
$
5,290

 
$
(3,300
)
 
$
—

Cost of sales
 
$
9,775

 
$
201

 
$
(9
)
Gross profit
 
$
(4,485
)
 
$
(3,501
)
 
$
9

General and administrative
 
$
(5,261
)
 
$
6,031

 
$
(52
)
Income (loss) from continuing operations, before interest expense, income taxes and noncontrolling interest
 
$
776

 
$
(9,532
)
 
$
61

Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
$
(2,431
)
 
$
(9,704
)
 
$
61



72
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

A summary of the impact of these matters on the consolidated balance sheets is presented below, excluding any associated tax effect from the restatement adjustments in the aggregate:
 
Increase / (Decrease)
 Restatement Impact
 
 
December 31, 2015
 
March 31,
 2015
Lake City Contract Loss and Related Adjustments:
 
 
 
 
Net receivables
 
$
(105,529
)
 
$
(92,534
)
Total current assets
 
$
(105,529
)
 
$
(92,534
)
Net property, plant & equipment
 
$
(41,855
)
 
$
(37,594
)
Total assets
 
$
(151,084
)
 
$
(133,828
)
Contract loss reserve
 
$
229,663

 
$
258,834

Total current liabilities
 
$
229,663

 
$
258,834

Total liabilities
 
$
229,663

 
$
258,834


 

 

Contract Loss Reserve Adjustment:
 

 

Net receivables
 
$
759

 
$
545

Total current assets
 
$
759

 
$
545

Net property, plant & equipment
 
$
—

 
$
—

Total assets
 
$
759

 
$
545

Contract loss reserve
 
$
6,178

 
$
3,490

Total current liabilities
 
$
6,178

 
$
3,490

Total liabilities
 
$
6,178

 
$
3,490


 

 

Account Review and Analysis and Other:
 

 

Net receivables
 
$
(8,843
)
 
$
(5,038
)
Total current assets
 
$
(7,174
)
 
$
(7,631
)
Net property, plant and equipment
 
$
(2,639
)
 
$
(413
)
Goodwill
 
$
—

 
$
(9,314
)
Other noncurrent assets
 
$
(6,773
)
 
$
(7,005
)
Total assets
 
$
(15,671
)
 
$
(30,380
)
Contract-related liabilities
 
$
40,824

 
$
1,222

Accrued compensation
 
$
2,650

 
$
8,657

Total current liabilities
 
$
51,634

 
$
18,000

Other noncurrent liabilities
 
$
(40,434
)
 
$
(24,173
)
Total liabilities
 
$
11,200

 
$
(6,173
)

73
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The restatement adjustments related to fiscal 2013 are reflected in the beginning retained earnings in the consolidated financial statements for fiscal 2014. The cumulative impact of these adjustments decreased retained earnings by approximately $21,000 at the beginning of fiscal 2014. The restatement adjustments were tax effected and any tax adjustments reflected in the consolidated financial statements relate entirely to the tax effect on the restatement adjustments. The correction of the errors described above resulted in the following summary of impact by period to the previously issued consolidated financial statements:
Net income (loss) attributable to Orbital ATK, Inc.
Increase / (Decrease) Restatement Impact
Nine month period ending December 31, 2015
 
$
3,757

Fiscal 2015
 
$
(7,584
)
Fiscal 2014
 
$
(223,881
)
 
 
Increase / (Decrease) Restatement Impact
(including the associated tax effect from the restatement adjustments)
 
Total Assets
 
Total Liabilities
As of December 31, 2015
 
$
(15,697
)
 
$
246,810

As of March 31, 2015
 
$
(10,302
)
 
$
255,962


The account balances labeled “As Reported” in the following tables for the 2015 transition period, fiscal 2015 and fiscal 2014 represent the previously reported financial statements as presented in the Original Filing. The effects of these prior period errors on the consolidated financial statements are as follows:

74
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
December 31, 2015
Consolidated Balance Sheets
 
As Reported
 
Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
104,032

 
$
—

 
$
104,032

Net receivables
 
1,784,434

 
(113,613
)
 
1,670,821

Net inventories
 
211,712

 
1,500

 
213,212

Income taxes receivable
 
50,769

 
—

 
50,769

Other current assets
 
89,495

 
150

 
89,645

Total current assets
 
2,240,442

 
(111,963
)
 
2,128,479

Net property, plant, and equipment
 
806,187

 
(44,493
)
 
761,694

Goodwill
 
1,832,066

 
(3,700
)
 
1,828,366

Net intangibles
 
147,156

 
—

 
147,156

Deferred income taxes
 
209,861

 
108,677

 
318,538

Other noncurrent assets (1)
 
103,680

 
35,782

 
139,462

Total assets
 
$
5,339,392

 
$
(15,697
)
 
$
5,323,695

LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current portion of long-term debt
 
$
40,000

 
$
—

 
$
40,000

Accounts payable
 
129,312

 
1,500

 
130,812

Contract-related liabilities
 
340,888

 
40,824

 
381,712

Contract loss reserves
 
—

 
235,841

 
235,841

Contract advances and allowances
 
172,046

 
—

 
172,046

Accrued compensation
 
125,278

 
2,650

 
127,928

Other current liabilities
 
159,455

 
6,641

 
166,096

Total current liabilities
 
966,979

 
287,456

 
1,254,435

Long-term debt (1)
 
1,435,836

 
—

 
1,435,836

Postretirement and postemployment benefits
 
59,202

 
—

 
59,202

Pension
 
761,632

 
—

 
761,632

Other noncurrent liabilities
 
167,798

 
(40,646
)
 
127,152

Total liabilities
 
3,391,447

 
246,810

 
3,638,257

Commitments and contingencies
 

 

 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 58,729,995 shares held December 31, 2015
 
587

 
—

 
587

Additional paid-in-capital
 
2,187,940

 
—

 
2,187,940

Retained earnings
 
1,305,550

 
(262,507
)
 
1,043,043

Accumulated other comprehensive loss
 
(785,908
)
 
—

 
(785,908
)
Common stock in treasury, at cost— 10,205,029 shares held at December 31, 2015
 
(771,029
)
 
—

 
(771,029
)
Total Orbital ATK, Inc. stockholders' equity
 
1,937,140

 
(262,507
)
 
1,674,633

Noncontrolling interest
 
10,805

 
—

 
10,805

Total equity
 
1,947,945

 
(262,507
)
 
1,685,438

Total liabilities and equity
 
$
5,339,392

 
$
(15,697
)
 
$
5,323,695

(1) The As Reported amounts includes a reclassification of debt issuance costs related to the Company's notes of $14,000 from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.


75
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
March 31, 2015
Consolidated Balance Sheets
 
As Reported
 
Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
139,253

 
$
—

 
$
139,253

Net receivables
 
1,793,556

 
(97,027
)
 
1,696,529

Net inventories
 
196,114

 
—

 
196,114

Income taxes receivable
 
31,415

 
—

 
31,415

Deferred income taxes
 
107,484

 
104,237

 
211,721

Other current assets
 
121,084

 
(2,593
)
 
118,491

Total current assets
 
2,388,906

 
4,617

 
2,393,523

Net property, plant, and equipment
 
807,057

 
(38,007
)
 
769,050

Goodwill
 
1,875,269

 
(13,014
)
 
1,862,255

Net intangibles
 
165,207

 
—

 
165,207

Deferred income taxes
 
140,321

 
4,715

 
145,036

Other noncurrent assets  (1)
 
111,074

 
31,387

 
142,461

Total assets
 
$
5,487,834

 
$
(10,302
)
 
$
5,477,532

LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current portion of long-term debt
 
$
59,997

 
$
—

 
$
59,997

Accounts payable
 
158,137

 
—

 
158,137

Contract-related liabilities
 
357,296

 
1,222

 
358,518

Contract loss reserves
 
—

 
262,324

 
262,324

Contract advances and allowances
 
173,198

 
—

 
173,198

Accrued compensation
 
135,528

 
8,657

 
144,185

Other current liabilities
 
212,628

 
8,121

 
220,749

Total current liabilities
 
1,096,784

 
280,324

 
1,377,108

Long-term debt (1)
 
1,511,936

 
—

 
1,511,936

Postretirement and postemployment benefits
 
74,658

 
—

 
74,658

Pension
 
851,001

 
—

 
851,001

Other noncurrent liabilities
 
165,795

 
(24,362
)
 
141,433

Total liabilities
 
3,700,174

 
255,962

 
3,956,136

Commitments and contingencies
 

 

 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 59,427,942 shares at March 31, 2015
 
594

 
—

 
594

Additional paid-in-capital
 
2,182,814

 
—

 
2,182,814

Retained earnings
 
1,160,272

 
(266,264
)
 
894,008

Accumulated other comprehensive loss
 
(847,648
)
 
—

 
(847,648
)
Common stock in treasury, at cost - 9,507,082 shares held at March 31, 2015
 
(719,034
)
 
—

 
(719,034
)
Total Orbital ATK, Inc. stockholders' equity
 
1,776,998

 
(266,264
)
 
1,510,734

Noncontrolling interest
 
10,662

 
—

 
10,662

Total equity
 
1,787,660

 
(266,264
)
 
1,521,396

Total liabilities and equity
 
$
5,487,834

 
$
(10,302
)
 
$
5,477,532

(1) The As Reported amounts include a reclassification of debt issuance costs related to the Company's notes of $17,000 from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.


76
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Nine Months Ended December 31, 2015
Consolidated Statements of Comprehensive Income
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Sales
 
$
3,399,089

 
$
(7,705
)
 
$
3,391,384

Cost of sales
 
2,729,898

 
(12,662
)
 
2,717,236

Gross profit
 
669,191

 
4,957

 
674,148

Operating expenses:
 
 
 
 
 
 
Research and development
 
83,209

 
—

 
83,209

Selling
 
88,177

 
—

 
88,177

General and administrative
 
225,418

 
(5,261
)
 
220,157

Gain on settlement
 
50,000

 
—

 
50,000

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
322,387

 
10,218

 
332,605

Interest expense, net
 
(57,163
)
 
(3,207
)
 
(60,370
)
Income from continuing operations, before income taxes and noncontrolling interest
 
265,224

 
7,011

 
272,235

Income taxes
 
83,659

 
3,254

 
86,913

Income from continuing operations, before noncontrolling interest
 
181,565

 
3,757

 
185,322

Less net income attributable to noncontrolling interest
 
143

 
—

 
143

Income from continuing operations of Orbital ATK, Inc.
 
181,422

 
3,757

 
185,179

Discontinued operations:
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
—

 
—

Income taxes
 
(1,008
)
 
—

 
(1,008
)
Income from discontinued operations
 
1,008

 
—

 
1,008

Net income attributable to Orbital ATK, Inc.
 
$
182,430

 
$
3,757

 
$
186,187

 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
3.06

 
 
 
$
3.12

Discontinued operations
 
0.02

 
 
 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
3.07

 
 
 
$
3.14

Weighted-average number of common shares outstanding
 
59,358

 
 
 
59,358

Diluted earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
3.03

 
 
 
$
3.09

Discontinued operations
 
0.02

 
 
 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
3.04

 
 
 
$
3.11

Weighted-average number of diluted common shares outstanding
 
59,915

 
 
 
59,915

Comprehensive income attributable to Orbital ATK, Inc.
 
$
244,171

 
$
3,756

 
$
247,927


Note: earnings per share amounts may not recalculate due to rounding.

77
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Year Ended March 31, 2015
Consolidated Statements of Comprehensive Income
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Sales
 
$
3,173,967

 
$
(61,308
)
 
$
3,112,659

Cost of sales
 
2,469,865

 
(58,109
)
 
2,411,756

Gross profit
 
704,102

 
(3,199
)
 
700,903

Operating expenses:
 
 
 
 
 
 
Research and development
 
49,349

 
—

 
49,349

Selling
 
89,941

 
—

 
89,941

General and administrative
 
298,559

 
6,031

 
304,590

Goodwill impairment
 
34,300

 
—

 
34,300

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
231,953

 
(9,230
)
 
222,723

Interest expense, net
 
(88,676
)
 
(172
)
 
(88,848
)
Loss on extinguishment of debt
 
(26,626
)
 
—

 
(26,626
)
Income from continuing operations, before income taxes and noncontrolling interest
 
116,651

 
(9,402
)
 
107,249

Income taxes
 
39,117

 
(1,818
)
 
37,299

Income from continuing operations, before noncontrolling interest
 
77,534

 
(7,584
)
 
69,950

Less net income attributable to noncontrolling interest
 
99

 
—

 
99

Income from continuing operations of Orbital ATK, Inc.
 
77,435

 
(7,584
)
 
69,851

Discontinued operations:
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
205,463

 
—

 
205,463

Income taxes
 
80,414

 
—

 
80,414

Income from discontinued operations
 
125,049

 
—

 
125,049

Net income attributable to Orbital ATK, Inc.
 
$
202,484

 
$
(7,584
)
 
$
194,900

 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
2.18

 
 
 
$
1.96

Discontinued operations
 
3.53

 
 
 
3.53

Net income attributable to Orbital ATK, Inc.
 
$
5.71

 
 
 
$
5.49

Weighted-average number of common shares outstanding
 
35,469

 
 
 
35,469

Diluted earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
2.14

 
 
 
$
1.93

Discontinued operations
 
3.46

 
 
 
3.46

Net income attributable to Orbital ATK, Inc.
 
$
5.60

 
 
 
$
5.39

Weighted-average number of diluted common shares outstanding
 
36,140

 
 
 
36,140

Comprehensive loss attributable to Orbital ATK, Inc.
 
$
(60,579
)
 
$
(7,584
)
 
$
(68,163
)


78
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Year Ended March 31, 2014
Consolidated Statements of Comprehensive Income
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Sales
 
$
2,925,237

 
$
(34,526
)
 
$
2,890,711

Cost of sales
 
2,277,939

 
322,668

 
2,600,607

Gross profit
 
647,298

 
(357,194
)
 
290,104

Operating expenses:
 
 
 
 
 
 
Research and development
 
48,536

 
—

 
48,536

Selling
 
87,554

 
—

 
87,554

General and administrative
 
209,251

 
(52
)
 
209,199

Goodwill impairment
 
—

 
3,700

 
3,700

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
301,957

 
(360,842
)
 
(58,885
)
Interest expense, net
 
(79,792
)
 
—

 
(79,792
)
Income (loss) from continuing operations, before income taxes and noncontrolling interest
 
222,165

 
(360,842
)
 
(138,677
)
Income taxes
 
62,542

 
(136,961
)
 
(74,419
)
Income (loss) from continuing operations, before noncontrolling interest
 
159,623

 
(223,881
)
 
(64,258
)
Less net income attributable to noncontrolling interest
 
171

 
—

 
171

Income (loss) from continuing operations of Orbital ATK, Inc.
 
159,452

 
(223,881
)
 
(64,429
)
Discontinued operations:
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
288,349

 
—

 
288,349

Income taxes
 
106,886

 
—

 
106,886

Income from discontinued operations
 
181,463

 
—

 
181,463

Net income attributable to Orbital ATK, Inc.
 
$
340,915

 
$
(223,881
)
 
$
117,034

 
 
 
 
 
 
 
Basic earnings (loss) per common share from:
 
 
 
 
 
 
Continuing operations
 
$
5.03

 
 
 
$
(2.03
)
Discontinued operations
 
5.73

 
 
 
5.73

Net income attributable to Orbital ATK, Inc.
 
$
10.76

 
 
 
$
3.70

Weighted-average number of common shares outstanding
 
31,671

 
 
 
31,671

Diluted earnings (loss) per common share from:
 
 
 
 
 
 
Continuing operations
 
$
4.87

 
 
 
$
(1.97
)
Discontinued operations
 
5.55

 
 
 
5.55

Net income attributable to Orbital ATK, Inc.
 
$
10.42

 
 
 
$
3.58

Weighted-average number of diluted common shares outstanding
 
32,723

 
 
 
32,723

Comprehensive income attributable to Orbital ATK, Inc.
 
$
488,410

 
$
(223,881
)
 
$
264,529





79
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Nine Months Ended December 31, 2015
Consolidated Statements of Cash Flows
 
As Reported
 
Adjustments
 
As Restated
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
182,573

 
$
3,757

 
$
186,330

Net income from discontinued operations
 
(1,008
)
 
—

 
(1,008
)
Income from continuing operations
 
181,565

 
3,757

 
185,322

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
90,507

 
(1,133
)
 
89,374

Amortization of intangible assets
 
33,371

 
—

 
33,371

Amortization and write-off of deferred financing costs
 
12,666

 
—

 
12,666

Fixed asset impairment
 
—

 
7,619

 
7,619

Deferred income taxes
 
51,295

 
6,292

 
57,587

Loss on disposal of property
 
11,197

 
—

 
11,197

Share-based plans expense
 
19,589

 
—

 
19,589

Excess tax benefits from share-based plans
 
(4,997
)
 
—

 
(4,997
)
Changes in assets and liabilities:
 
 
 
 
 

Net receivables
 
5,122

 
11,717

 
16,839

Net inventories
 
(15,598
)
 
—

 
(15,598
)
Accounts payable
 
(29,276
)
 
—

 
(29,276
)
Contract advances and allowances
 
(1,152
)
 
—

 
(1,152
)
Contract loss reserve
 
—

 
(26,697
)
 
(26,697
)
Accrued compensation
 
(10,243
)
 
—

 
(10,243
)
Contract-related liabilities
 
(16,408
)
 
(3,027
)
 
(19,435
)
Pension and other postretirement benefits
 
(3,736
)
 
—

 
(3,736
)
Other assets and liabilities
 
(20,500
)
 
1,472

 
(19,028
)
 Cash provided by operating activities of continuing operations
 
303,402

 
—

 
303,402

 Cash provided by operating activities of discontinued operations
 
—

 
—

 
—

 Cash provided by operating activities
 
303,402

 
—

 
303,402

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(104,634
)
 
—

 
(104,634
)
Cash dividend refunded to Vista Outdoor in conjunction with the Distribution of Sporting Group
 
(6,500
)
 
—

 
(6,500
)
Proceeds from the disposition of property plant and equipment
 
40

 
—

 
40

 Cash used for investing activities of continuing operations
 
(111,094
)
 
—

 
(111,094
)
 Cash used for investing activities of discontinued operations
 
—

 
—

 
—

 Cash used for investing activities
 
(111,094
)
 
—

 
(111,094
)
Financing Activities
 
 
 
 
 
 
Credit Facility Borrowings
 
1,040,000

 
(295,000
)
 
745,000

Credit Facility Payments
 
(1,040,000
)
 
295,000

 
(745,000
)
Cash used for financing activities of continuing operations
 
(227,529
)
 
—

 
(227,529
)
Effect of foreign currency exchange rate fluctuations on cash
 
—

 
—

 
—

Decrease in cash and cash equivalents
 
(35,221
)
 
—

 
(35,221
)
Cash and cash equivalents at beginning of period
 
139,253

 
—

 
139,253

Cash and cash equivalents at end of period
 
$
104,032

 
$
—

 
$
104,032


80
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Year Ended March 31, 2015
Consolidated Statements of Cash Flows
 
As Reported
 
Adjustments
 
As Restated
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
202,583

 
$
(7,584
)
 
$
194,999

Net income from discontinued operations
 
(125,049
)
 
—

 
(125,049
)
Income from continuing operations
 
77,534

 
(7,584
)
 
69,950

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
75,764

 
(2,921
)
 
72,843

Amortization of intangible assets
 
9,263

 
—

 
9,263

Amortization of debt discount
 
3,212

 
—

 
3,212

Amortization and write-off of deferred financing costs
 
5,157

 
—

 
5,157

Goodwill impairment
 
34,300

 
—

 
34,300

Fixed asset impairment
 
—

 
17,559

 
17,559

Loss on the extinguishment of debt
 
26,626

 
—

 
26,626

Deferred income taxes
 
(6,119
)
 
18,497

 
12,378

Loss on disposal of property
 
2,114

 
—

 
2,114

Share-based plans expense
 
25,325

 
—

 
25,325

Excess tax benefits from share-based plans
 
(7,004
)
 
—

 
(7,004
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(55,243
)
 
64,979

 
9,736

Net inventories
 
13,570

 
—

 
13,570

Accounts payable
 
55,710

 
—

 
55,710

Contract advances and allowances
 
27,123

 
(32,758
)
 
(5,635
)
Contract loss reserve
 
—

 
(74,468
)
 
(74,468
)
Accrued compensation
 
(39,950
)
 
8,657

 
(31,293
)
Contract-related liabilities
 
93,298

 
1,222

 
94,520

Pension and other postretirement benefits
 
(41,569
)
 
—

 
(41,569
)
Other assets and liabilities
 
(108,256
)
 
6,817

 
(101,439
)
 Cash provided by operating activities of continuing operations
 
190,855

 
—

 
190,855

 Cash provided by operating activities of discontinued operations
 
120,476

 
—

 
120,476

 Cash provided by operating activities
 
311,331

 
—

 
311,331

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(112,704
)
 
—

 
(112,704
)
Cash acquired in Merger with Orbital
 
253,734

 
—

 
253,734

Cash dividend received from Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group
 
188,878

 
—

 
188,878

Proceeds from the disposition of property plant and equipment
 
2,290

 
—

 
2,290

 Cash provided by investing activities of continuing operations
 
332,198

 
—

 
332,198

 Cash used for investing activities of discontinued operations
 
(30,585
)
 
—

 
(30,585
)
 Cash provided by investing activities
 
301,613

 
—

 
301,613

Financing Activities
 
 
 
 
 
 
Credit Facility Borrowings
 
798,000

 
80,000

 
878,000

Credit Facility Payments
 
(798,000
)
 
(80,000
)
 
(878,000
)
Cash used for financing activities of continuing operations
 
(737,317
)
 
—

 
(737,317
)
Effect of foreign currency exchange rate fluctuations on cash
 
(3,006
)
 
—

 
(3,006
)
Decrease in cash and cash equivalents
 
(127,379
)
 
—

 
(127,379
)
Cash and cash equivalents at beginning of period
 
266,632

 
—

 
266,632

Cash and cash equivalents at end of period
 
$
139,253

 
$
—

 
$
139,253



81
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Year Ended March 31, 2014
Consolidated Statements of Cash Flows
 
As Reported
 
Adjustments
 
As Restated
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
341,086

 
$
(223,881
)
 
$
117,205

Net income from discontinued operations
 
(181,463
)
 
—

 
(181,463
)
Income (loss) from continuing operations
 
159,623

 
(223,881
)
 
(64,258
)
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
69,192

 
—

 
69,192

Amortization of intangible assets
 
3,112

 
—

 
3,112

Amortization of debt discount
 
7,364

 
—

 
7,364

Amortization and write-off of deferred financing costs
 
10,222

 
—

 
10,222

Goodwill impairment
 
—

 
3,700

 
3,700

Fixed asset impairment
 
—

 
23,369

 
23,369

Deferred income taxes
 
6,828

 
(119,829
)
 
(113,001
)
 Forward loss
 
—

 
342,000

 
342,000

Loss on disposal of property
 
594

 
—

 
594

Share-based plans expense
 
12,701

 
—

 
12,701

Excess tax benefits from share-based plans
 
(833
)
 
—

 
(833
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
5,533

 
74,294

 
79,827

Net inventories
 
(63,437
)
 
—

 
(63,437
)
Accounts payable
 
(71,314
)
 
—

 
(71,314
)
Contract advances and allowances
 
(39,465
)
 
(4,642
)
 
(44,107
)
Contract loss reserve
 
—

 
(45,060
)
 
(45,060
)
Accrued compensation
 
(16,362
)
 
—

 
(16,362
)
Contract-related liabilities
 
(13,725
)
 
—

 
(13,725
)
Pension and other postretirement benefits
 
70,750

 
—

 
70,750

Other assets and liabilities
 
21,178

 
(49,951
)
 
(28,773
)
 Cash provided by operating activities of continuing operations
 
161,961

 
—

 
161,961

 Cash provided by operating activities of discontinued operations
 
226,060

 
—

 
226,060

 Cash provided by operating activities
 
388,021

 
—

 
388,021

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(105,730
)
 
—

 
(105,730
)
Proceeds from the disposition of property plant and equipment
 
5,488

 
—

 
5,488

 Cash used for investing activities of continuing operations
 
(100,242
)
 
—

 
(100,242
)
 Cash used for investing activities of discontinued operations
 
(1,341,747
)
 
—

 
(1,341,747
)
 Cash used for investing activities
 
(1,441,989
)
 
—

 
(1,441,989
)
Financing Activities
 
 
 
 
 
 
Cash provided by financing activities of continuing operations
 
903,254

 
—

 
903,254

Effect of foreign currency exchange rate fluctuations on cash
 
58

 
—

 
58

Decrease in cash and cash equivalents
 
(150,656
)
 
—

 
(150,656
)
Cash and cash equivalents at beginning of period
 
417,288

 
—

 
417,288

Cash and cash equivalents at end of period
 
$
266,632

 
$
—

 
$
266,632



Restatement information related to unaudited quarterly periods
The following tables present the unaudited condensed consolidated interim financial statements for the quarters in the 2015 transition period and fiscal 2015. For the interim financial statements for the quarters ended July 5, 2015 and October 4, 2015, the columns labeled First Restatement Adjustments and Second Restatement Adjustments represents the restatement

82
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

adjustments reported in the Original Filing and the restatement adjustments being reported in this Amended Transition Report for the 2015 transition period, respectively. The effects of these prior period errors on the consolidated financial statements are as follows:
 
 
October 4, 2015
Consolidated Balance Sheets (Unaudited)
 
As Reported
 
First Restatement Adjustments
 
Second Restatement Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
65,087

 
$
—

 
$
—

 
$
65,087

Net receivables
 
1,882,675

 
15,986

 
(108,698
)
 
1,789,963

Net inventories
 
175,317

 
—

 
—

 
175,317

Deferred income taxes
 
107,466

 
—

 
104,221

 
211,687

Other current assets
 
129,427

 
—

 
(2,612
)
 
126,815

Total current assets
 
2,359,972

 
15,986

 
(7,089
)
 
2,368,869

Net property, plant, and equipment
 
797,524

 
(4,200
)
 
(43,244
)
 
750,080

Goodwill
 
1,875,269

 
(9,314
)
 
(3,700
)
 
1,862,255

Net intangibles
 
139,284

 
—

 
—

 
139,284

Deferred income taxes
 
121,319

 
(4,579
)
 
10,780

 
127,520

Other noncurrent assets (1)
 
102,026

 
—

 
29,328

 
131,354

Total assets
 
$
5,395,394

 
$
(2,107
)
 
$
(13,925
)
 
$
5,379,362

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
40,000

 
$
—

 
$
—

 
$
40,000

Accounts payable
 
227,051

 
—

 
—

 
227,051

Contract-related liabilities
 
268,129

 
(13,274
)
 
21,586

 
276,441

Contract advances and allowances
 
154,845

 
—

 
—

 
154,845

Contract loss reserve
 
—

 
—

 
242,744

 
242,744

Accrued compensation
 
140,800

 
—

 
2,650

 
143,450

Other current liabilities
 
144,192

 
15,875

 
7,391

 
167,458

Total current liabilities
 
975,017

 
2,601

 
274,371

 
1,251,989

Long-term debt (1)
 
1,481,746

 
—

 
—

 
1,481,746

Postretirement and postemployment benefits
 
70,342

 
—

 
—

 
70,342

Pension
 
811,459

 
—

 
—

 
811,459

Other noncurrent liabilities
 
150,619

 
6,254

 
(25,722
)
 
131,151

Total liabilities
 
3,489,183

 
8,855

 
248,649

 
3,746,687

Commitments and contingencies
 

 

 
 
 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 58,898,248 shares
 
589

 
—

 
—

 
589

Additional paid-in-capital
 
2,181,288

 
—

 
—

 
2,181,288

Retained earnings
 
1,284,063

 
(10,962
)
 
(262,574
)
 
1,010,527

Accumulated other comprehensive loss
 
(813,594
)
 
—

 
—

 
(813,594
)
Common stock in treasury, at cost— 10,036,776 shares held
 
(757,061
)
 
—

 
—

 
(757,061
)
Total Orbital ATK, Inc. stockholders' equity
 
1,895,285

 
(10,962
)
 
(262,574
)
 
1,621,749

Noncontrolling interest
 
10,926

 
—

 
—

 
10,926

Total equity
 
1,906,211

 
(10,962
)
 
(262,574
)
 
1,632,675

Total liabilities and equity
 
$
5,395,394

 
$
(2,107
)
 
$
(13,925
)
 
$
5,379,362


(1) The As Reported amounts includes a reclassification of debt issuance costs related to the Company's notes of $15,000 from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.


83
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
July 5, 2015
Consolidated Balance Sheets (Unaudited)
 
As Reported
 
First Restatement Adjustments
 
Second Restatement Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
49,595

 
$
—

 
$
—

 
$
49,595

Net receivables
 
1,891,338

 
(13,719
)
 
(102,904
)
 
1,774,715

Net inventories
 
182,276

 
—

 
—

 
182,276

Income taxes receivable
 
—

 
—

 
19

 
19

Deferred income taxes
 
107,466

 
—

 
104,229

 
211,695

Other current assets
 
130,922

 
—

 
(2,612
)
 
128,310

Total current assets
 
2,361,597

 
(13,719
)
 
(1,268
)
 
2,346,610

Net property, plant, and equipment
 
802,134

 
(2,100
)
 
(41,214
)
 
758,820

Goodwill
 
1,875,269

 
(9,314
)
 
(3,700
)
 
1,862,255

Net intangibles
 
152,184

 
—

 
—

 
152,184

Deferred income taxes
 
129,220

 
3,286

 
10,756

 
143,262

Other noncurrent assets (1)
 
106,962

 
—

 
28,716

 
135,678

Total assets
 
$
5,427,366

 
$
(21,847
)
 
$
(6,710
)
 
$
5,398,809

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
59,997

 
$
—

 
$
—

 
$
59,997

Accounts payable
 
168,827

 
—

 
—

 
168,827

Contract-related liabilities
 
314,642

 
(27,783
)
 
25,286

 
312,145

Contract advances and allowances
 
178,182

 
—

 
—

 
178,182

Contract loss reserve
 
—

 
—

 
253,410

 
253,410

Accrued compensation
 
99,458

 
—

 
2,650

 
102,108

Other current liabilities
 
167,847

 
15,616

 
2,910

 
186,373

Total current liabilities
 
988,953

 
(12,167
)
 
284,256

 
1,261,042

Long-term debt (1)
 
1,497,958

 


 
—

 
1,497,958

Postretirement and postemployment benefits
 
72,353

 
—

 
—

 
72,353

Pension
 
845,562

 
—

 
—

 
845,562

Other noncurrent liabilities
 
149,797

 
9,955

 
(29,420
)
 
130,332

Total liabilities
 
3,554,623

 
(2,212
)
 
254,836

 
3,807,247

Commitments and contingencies
 
 
 
 
 
 
 
 
Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 59,274,189 shares
 
593

 
—

 
—

 
593

Additional paid-in-capital
 
2,187,768

 
—

 
—

 
2,187,768

Retained earnings
 
1,233,006

 
(19,635
)
 
(261,546
)
 
951,825

Accumulated other comprehensive loss
 
(829,045
)
 
—

 
—

 
(829,045
)
Common stock in treasury, at cost— 9,660,835 shares held
 
(730,358
)
 
—

 
—

 
(730,358
)
Total Orbital ATK, Inc. stockholders' equity
 
1,861,964

 
(19,635
)
 
(261,546
)
 
1,580,783

Noncontrolling interest
 
10,779

 
—

 
—

 
10,779

Total equity
 
1,872,743

 
(19,635
)
 
(261,546
)
 
1,591,562

Total liabilities and equity
 
$
5,427,366

 
$
(21,847
)
 
$
(6,710
)
 
$
5,398,809


(1) The As Reported amounts includes a reclassification of debt issuance costs related to the Company's notes of $16,000 from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.


84
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
December 28, 2014
 
September 28, 2014
Consolidated Balance Sheets (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
As Reported
 
Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
112,920

 
$
—

 
$
112,920

 
$
42,668

 
$
—

 
$
42,668

Net receivables
 
1,352,062

 
(96,688
)
 
1,255,374

 
1,288,281

 
(71,919
)
 
1,216,362

Net inventories
 
134,241

 
—

 
134,241

 
130,962

 
—

 
130,962

Income taxes receivable
 
37,388

 
—

 
37,388

 
—

 
—

 
—

Deferred income taxes
 
48,999

 
126,764

 
175,763

 
83,701

 
126,764

 
210,465

Other current assets
 
71,531

 
(117
)
 
71,414

 
39,401

 
(117
)
 
39,284

Current assets of discontinued operations
 
832,311

 
—

 
832,311

 
898,640

 
—

 
898,640

Total current assets
 
2,589,452

 
29,959

 
2,619,411

 
2,483,653

 
54,728

 
2,538,381

Net property, plant, and equipment
 
508,583

 
(29,578
)
 
479,005

 
506,083

 
(27,174
)
 
478,909

Goodwill
 
1,043,463

 
(3,700
)
 
1,039,763

 
1,043,463

 
(3,700
)
 
1,039,763

Net intangibles
 
8,148

 
—

 
8,148

 
8,922

 
—

 
8,922

Deferred income taxes
 
70,611

 
6,702

 
77,313

 
79,269

 
6,702

 
85,971

Other noncurrent assets (1)
 
86,756

 
22,198

 
108,954

 
89,420

 
20,655

 
110,075

Noncurrent assets of discontinued operations
 
1,491,312

 
—

 
1,491,312

 
1,612,176

 
—

 
1,612,176

Total assets
 
$
5,798,325

 
$
25,581

 
$
5,823,906

 
$
5,822,986

 
$
51,211

 
$
5,874,197

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
159,997

 
$
—

 
$
159,997

 
$
159,997

 
$
—

 
$
159,997

Accounts payable
 
218,321

 
—

 
218,321

 
185,779

 
—

 
185,779

Contract advances and allowances
 
142,742

 
—

 
142,742

 
118,600

 
—

 
118,600

Contract loss reserve
 
—

 
279,874

 
279,874

 
—

 
302,716

 
302,716

Accrued compensation
 
78,965

 
—

 
78,965

 
66,096

 
—

 
66,096

Accrued income taxes
 
—

 
—

 
—

 
14,996

 
—

 
14,996

Other current liabilities
 
181,880

 
—

 
181,880

 
182,619

 
—

 
182,619

Current liabilities of discontinued operations
 
277,977

 
—

 
277,977

 
274,512

 
—

 
274,512

Total current liabilities
 
1,059,882

 
279,874

 
1,339,756

 
1,002,599

 
302,716

 
1,305,315

Long-term debt (1)
 
1,887,109

 
—

 
1,887,109

 
1,901,421

 
—

 
1,901,421

Noncurrent deferred income tax liabilities
 
—

 
—

 
—

 
—

 
—

 
—

Postretirement and postemployment benefits
 
64,657

 
—

 
64,657

 
66,117

 
—

 
66,117

Pension
 
439,469

 
—

 
439,469

 
490,664

 
—

 
490,664

Other noncurrent liabilities
 
102,011

 
(105
)
 
101,906

 
100,637

 
(99
)
 
100,538

Noncurrent liabilities of discontinued operations
 
196,050

 
—

 
196,050

 
255,689

 
—

 
255,689

Total liabilities
 
3,749,178

 
279,769

 
4,028,947

 
3,817,127

 
302,617

 
4,119,744

Commitments and contingencies
 

 

 

 

 

 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 31,938,188 shares at December 28, 2014 and 31,931,354 shares held at September 28, 2014
 
319

 
—

 
319

 
319

 
—

 
319

Additional paid-in-capital
 
435,746

 
—

 
435,746

 
431,967

 
—

 
431,967

Retained earnings
 
2,984,960

 
(254,188
)
 
2,730,772

 
2,949,533

 
(251,406
)
 
2,698,127

Accumulated other comprehensive loss
 
(652,900
)
 
—

 
(652,900
)
 
(656,538
)
 
—

 
(656,538
)
Common stock in treasury, at cost— 9,638,009 shares held at December 28, 2014 and 9,644,843 shares held at September 28, 2014
 
(729,832
)
 
—

 
(729,832
)
 
(730,135
)
 
—

 
(730,135
)
Total Orbital ATK, Inc. stockholders' equity
 
2,038,293

 
(254,188
)
 
1,784,105

 
1,995,146

 
(251,406
)
 
1,743,740

Noncontrolling interest
 
10,854

 
—

 
10,854

 
10,713

 
—

 
10,713

Total equity
 
2,049,147

 
(254,188
)
 
1,794,959

 
2,005,859

 
(251,406
)
 
1,754,453

Total liabilities and equity
 
$
5,798,325

 
$
25,581

 
$
5,823,906

 
$
5,822,986

 
$
51,211

 
$
5,874,197


85
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

(1) The As Reported amounts includes a reclassification of debt issuance costs related to the Company's notes of $21,000 and $22,000 at December 28, 2014 and September 28, 2014, respectively, from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.
 
 
June 29, 2014
Consolidated Balance Sheets (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
132,739

 
$
—

 
$
132,739

Net receivables
 
1,290,540

 
(49,648
)
 
1,240,892

Net inventories
 
148,056

 
—

 
148,056

Deferred income taxes
 
41,880

 
126,764

 
168,644

Other current assets
 
47,440

 
(117
)
 
47,323

Current assets of discontinued operations
 
879,439

 
—

 
879,439

Total current assets
 
2,540,094

 
76,999

 
2,617,093

Net property, plant, and equipment
 
505,947

 
(25,165
)
 
480,782

Goodwill
 
1,043,463

 
(3,700
)
 
1,039,763

Net intangibles
 
9,695

 
—

 
9,695

Deferred income taxes
 
78,609

 
6,702

 
85,311

Other noncurrent assets (1)
 
90,750

 
18,793

 
109,543

Noncurrent assets of discontinued operations
 
1,631,911

 
—

 
1,631,911

Total assets
 
$
5,900,469

 
$
73,629

 
$
5,974,098

LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current portion of long-term debt
 
$
247,666

 
$
—

 
$
247,666

Accounts payable
 
185,930

 
—

 
185,930

Contract-related liabilities
 
—

 
—

 
—

Contract advances and allowances
 
120,032

 
—

 
120,032

Contract loss reserve
 
—

 
321,807

 
321,807

Accrued compensation
 
70,076

 
—

 
70,076

Accrued income taxes
 
35,425

 
—

 
35,425

Other current liabilities
 
174,829

 
—

 
174,829

Current liabilities of discontinued operations
 
272,835

 
—

 
272,835

Total current liabilities
 
1,106,793

 
321,807

 
1,428,600

Long-term debt (1)
 
1,820,653

 
—

 
1,820,653

Postretirement and postemployment benefits
 
69,194

 
—

 
69,194

Pension
 
518,744

 
—

 
518,744

Other noncurrent liabilities
 
101,471

 
(92
)
 
101,379

Noncurrent liabilities of discontinued operations
 
259,926

 
—

 
259,926

Total liabilities
 
3,876,781

 
321,715

 
4,198,496

Commitments and contingencies
 

 

 

Common stock—$.01 par value: authorized—180,000,000 shares; issued and outstanding— 31,934,727 shares at June 29, 2014
 
319

 
—

 
319

Additional paid-in-capital
 
540,080

 
—

 
540,080

Retained earnings
 
2,864,643

 
(248,086
)
 
2,616,557

Accumulated other comprehensive loss
 
(662,219
)
 
—

 
(662,219
)
Common stock in treasury, at cost— 9,641,470 shares held at June 29, 2014
 
(729,767
)
 
—

 
(729,767
)
Total Orbital ATK, Inc. stockholders' equity
 
2,013,056

 
(248,086
)
 
1,764,970

Noncontrolling interest
 
10,632

 
—

 
10,632

Total equity
 
2,023,688

 
(248,086
)
 
1,775,602

Total liabilities and equity
 
$
5,900,469

 
$
73,629

 
$
5,974,098

(1) The As Reported amounts includes a reclassification of debt issuance costs related to the Company's notes of $23,000 from Other noncurrent assets to Long-term debt, net of current portion due to the retrospective adoption of ASU 2015-03 and ASU 2015-15.


86
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Three Months Ended December 31, 2015
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Sales
 
$
1,138,238

 
$
6,322

 
$
1,144,560

Cost of sales
 
900,383

 
1,707

 
902,090

Gross profit
 
237,855

 
4,615

 
242,470

Operating expenses:
 
 
 
 
 
 
Research and development
 
29,879

 
—

 
29,879

Selling
 
27,536

 
—

 
27,536

General and administrative
 
90,853

 
(50
)
 
90,803

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
89,587

 
4,665

 
94,252

Interest expense, net
 
(16,571
)
 
(3,379
)
 
(19,950
)
Income from continuing operations, before income taxes and noncontrolling interest
 
73,016

 
1,286

 
74,302

Income taxes
 
19,908

 
1,219

 
21,127

Income from continuing operations, before noncontrolling interest
 
53,108

 
67

 
53,175

Less net loss attributable to noncontrolling interest
 
(121
)
 
—

 
(121
)
Income from continuing operations of Orbital ATK, Inc.
 
53,229

 
67

 
53,296

Discontinued operations:
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
—

 
—

Income taxes
 
(1,008
)
 
—

 
(1,008
)
Income from discontinued operations
 
1,008

 
—

 
1,008

Net income attributable to Orbital ATK, Inc.
 
$
54,237

 
$
67

 
$
54,304

 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
0.90

 
 
 
$
0.90

Discontinued operations
 
0.02

 
 
 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
0.92

 
 
 
$
0.92

Weighted-average number of common shares outstanding
 
59,054

 
 
 
59,054

Diluted earnings per common share from:
 
 
 
 
 
 
Continuing operations
 
$
0.89

 
 
 
$
0.89

Discontinued operations
 
0.02

 
 
 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
0.91

 
 
 
$
0.91

Weighted-average number of diluted common shares outstanding
 
59,574

 
 
 
59,574

Comprehensive income attributable to Orbital ATK, Inc.
 
$
81,924

 
$
67

 
$
81,991



87
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Three Months Ended October 4, 2015
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
First Restatement Adjustments
 
Second Restatement Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
Sales
 
$
1,134,886

 
$
18,731

 
$
(10,371
)
 
$
1,143,246

Cost of sales
 
884,734

 
58,408

 
(8,713
)
 
934,429

Gross profit
 
250,152

 
(39,677
)
 
(1,658
)
 
208,817

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
28,666

 
—

 
—

 
28,666

Selling
 
28,137

 
—

 
—

 
28,137

General and administrative
 
69,384

 
(4,180
)
 
—

 
65,204

Gain on settlement
 
—

 
50,000

 
—

 
50,000

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
123,965

 
14,503

 
(1,658
)
 
136,810

Interest expense, net
 
(24,293
)
 
(343
)
 
—

 
(24,636
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
 
Income from continuing operations, before income taxes and noncontrolling interest
 
99,672

 
14,160

 
(1,658
)
 
112,174

Income taxes
 
33,123

 
5,487

 
(630
)
 
37,980

Income from continuing operations, before noncontrolling interest
 
66,549

 
8,673

 
(1,028
)
 
74,194

Less net income attributable to noncontrolling interest
 
147

 
—

 
—

 
147

Income from continuing operations of Orbital ATK, Inc.
 
66,402

 
8,673

 
(1,028
)
 
74,047

Discontinued operations:
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
—

 
—

 
—

Income taxes
 
—

 
—

 
—

 
—

Income from discontinued operations
 
—

 
—

 
—

 
—

Net income attributable to Orbital ATK, Inc.
 
$
66,402

 
$
8,673

 
$
(1,028
)
 
$
74,047

 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.13

 
 
 
 
 
$
1.26

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
1.13

 
 
 
 
 
$
1.26

Weighted-average number of common shares outstanding
 
58,746

 
 
 
 
 
58,746

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.12

 
 
 
 
 
$
1.25

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
1.12

 
 
 
 
 
$
1.25

Weighted-average number of diluted common shares outstanding
 
59,304

 
 
 
 
 
59,304

Comprehensive income attributable to Orbital ATK, Inc.
 
$
81,853

 
$
8,673

 
$
(1,028
)
 
$
89,498



88
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Six Months Ended October 4, 2015
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
First Restatement Adjustments
 
Second Restatement Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
Sales
 
$
2,264,842

 
$
(3,992
)
 
$
(14,027
)
 
$
2,246,823

Cost of sales
 
1,760,265

 
69,249

 
(14,369
)
 
1,815,145

Gross profit
 
504,577

 
(73,241
)
 
342

 
431,678

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
53,330

 
—

 
—

 
53,330

Selling
 
60,641

 
—

 
—

 
60,641

General and administrative
 
140,847

 
(6,282
)
 
(5,211
)
 
129,354

Gain on settlement
 
—

 
50,000

 
—

 
50,000

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
249,759

 
(16,959
)
 
5,553

 
238,353

Interest expense, net
 
(39,655
)
 
(938
)
 
172

 
(40,421
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
—

Income from continuing operations, before income taxes and noncontrolling interest
 
210,104

 
(17,897
)
 
5,725

 
197,932

Income taxes
 
70,685

 
(6,935
)
 
2,035

 
65,785

Income from continuing operations, before noncontrolling interest
 
139,419

 
(10,962
)
 
3,690

 
132,147

Less net income attributable to noncontrolling interest
 
264

 
—

 
—

 
264

Income from continuing operations of Orbital ATK, Inc.
 
139,155

 
(10,962
)
 
3,690

 
131,883

Discontinued operations:
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
—

 
—

 
—

Income taxes
 
—

 
—

 
—

 
—

Income from discontinued operations
 
—

 
—

 
—

 
—

Net income attributable to Orbital ATK, Inc.
 
$
139,155

 
$
(10,962
)
 
$
3,690

 
$
131,883

 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
2.36

 
 
 
 
 
$
2.24

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
2.36

 
 
 
 
 
$
2.24

Weighted-average number of common shares outstanding
 
58,944

 
 
 
 
 
58,944

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
2.34

 
 
 
 
 
$
2.22

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
2.34

 
 
 
 
 
$
2.22

Weighted-average number of diluted common shares outstanding
 
59,526

 
 
 
 
 
59,526

Comprehensive income attributable to Orbital ATK, Inc.
 
$
173,209

 
$
(10,962
)
 
$
3,690

 
$
165,937



89
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Three Months Ended July 5, 2015
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
First Restatement Adjustments
 
Second Restatement Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
Sales
 
$
1,129,957

 
$
(22,723
)
 
$
(3,656
)
 
$
1,103,578

Cost of sales
 
875,532

 
10,841

 
(5,656
)
 
880,717

Gross profit
 
254,425

 
(33,564
)
 
2,000

 
222,861

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
24,664

 
—

 
—

 
24,664

Selling
 
32,504

 
—

 
—

 
32,504

General and administrative
 
71,463

 
(2,102
)
 
(5,211
)
 
64,150

Gain on settlement
 
—

 
—

 
—

 
—

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
125,794

 
(31,462
)
 
7,211

 
101,543

Interest expense, net
 
(15,361
)
 
(595
)
 
172

 
(15,784
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
—

Income from continuing operations, before income taxes and noncontrolling interest
 
110,433

 
(32,057
)
 
7,383

 
85,759

Income taxes
 
37,563

 
(12,422
)
 
2,665

 
27,806

Income from continuing operations, before noncontrolling interest
 
72,870

 
(19,635
)
 
4,718

 
57,953

Less net income attributable to noncontrolling interest
 
117

 
—

 
—

 
117

Income from continuing operations of Orbital ATK, Inc.
 
72,753

 
(19,635
)
 
4,718

 
57,836

Discontinued operations:
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
—

 
—

 
—

 
—

Income taxes
 
—

 
—

 
—

 
—

Income from discontinued operations
 
—

 
—

 
—

 
—

Net income attributable to Orbital ATK, Inc.
 
$
72,753

 
$
(19,635
)
 
$
4,718

 
$
57,836

 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.23

 
 
 
 
 
$
0.98

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
1.23

 
 
 
 
 
$
0.98

Weighted-average number of common shares outstanding
 
59,144

 
 
 
 
 
59,144

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.22

 
 
 
 
 
$
0.97

Discontinued operations
 
—

 
 
 
 
 
—

Net income attributable to Orbital ATK, Inc.
 
$
1.22

 
 
 
 
 
$
0.97

Weighted-average number of diluted common shares outstanding
 
59,749

 
 
 
 
 
59,749

Comprehensive income attributable to Orbital ATK, Inc.
 
$
91,356

 
$
(19,635
)
 
$
4,718

 
$
76,439



90
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
 
 
Three Months Ended March 31, 2015
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 
 
 
 
 
 
 
$
969,539

 
$
1,611

 
$
971,150

Cost of sales
 
 
 
 
 
 
 
756,998

 
(9,121
)
 
747,877

Gross profit
 
 
 
 
 
 
 
212,541

 
10,732

 
223,273

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
 
 
 
 
 
25,368

 
—

 
25,368

Selling
 
 
 
 
 
 
 
20,908

 
—

 
20,908

General and administrative
 
 
 
 
 
 
 
133,057

 
6,031

 
139,088

Goodwill impairment
 
 
 
 
 
 
 
34,300

 
—

 
34,300

(Loss) income from continuing operations, before interest, income taxes and noncontrolling interest
 
 
 
 
 
 
 
(1,092
)
 
4,701

 
3,609

Interest expense, net
 
 
 
 
 
 
 
(20,579
)
 
(172
)
 
(20,751
)
Loss on extinguishment of debt
 
 
 
 
 
 
 
(26,626
)
 
—

 
(26,626
)
Loss from continuing operations, before income taxes and noncontrolling interest
 
 
 
 
 
 
 
(48,297
)
 
4,529

 
(43,768
)
Income taxes
 
 
 
 
 
 
 
(7,398
)
 
3,175

 
(4,223
)
Loss from continuing operations, before noncontrolling interest
 
 
 
 
 
 
 
(40,899
)
 
1,354

 
(39,545
)
Less net income attributable to noncontrolling interest
 
 
 
 
 
 
 
(192
)
 
—

 
(192
)
Loss from continuing operations of Orbital ATK, Inc.
 
 
 
 
 
 
 
(40,707
)
 
1,354

 
(39,353
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
 
 
 
 
 
 
17,504

 
—

 
17,504

Income taxes
 
 
 
 
 
 
 
667

 
—

 
667

Income from discontinued operations
 
 
 
 
 
 
 
16,837

 
—

 
16,837

Loss attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
(23,870
)
 
$
1,354

 
$
(22,516
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
 
$
(0.87
)
 
 
 
$
(0.84
)
Discontinued operations
 
 
 
 
 
 
 
0.36

 
 
 
0.36

Net loss attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
(0.51
)
 
 
 
$
(0.48
)
Weighted-average number of common shares outstanding
 
 
 
 
 
 
 
46,465

 
 
 
46,465

Diluted earnings (loss per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
 
$
(0.87
)
 
 
 
$
(0.84
)
Discontinued operations
 
 
 
 
 
 
 
0.36

 
 
 
0.36

Net loss attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
(0.51
)
 
 
 
$
(0.48
)
Weighted-average number of diluted common shares outstanding
 
 
 
 
 
 
 
46,928

 
 
 
46,928

Comprehensive loss attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
(314,841
)
 
$
1,354

 
$
(313,487
)


91
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Consolidated Statements of
 
Three Months Ended December 28,2014
 
Nine Months Ended December 28, 2014
Comprehensive Income (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$
746,866

 
$
(22,325
)
 
$
724,541

 
$
2,204,428

 
$
(62,919
)
 
$
2,141,509

Cost of sales
 
581,339

 
(17,994
)
 
563,345

 
1,712,867

 
(48,988
)
 
1,663,879

Gross profit
 
165,527

 
(4,331
)
 
161,196

 
491,561

 
(13,931
)
 
477,630

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
9,876

 
—

 
9,876

 
23,981

 
—

 
23,981

Selling
 
22,745

 
—

 
22,745

 
69,033

 
—

 
69,033

General and administrative
 
51,947

 
—

 
51,947

 
165,502

 
—

 
165,502

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
80,959

 
(4,331
)
 
76,628

 
233,045

 
(13,931
)
 
219,114

Interest expense, net
 
(21,366
)
 
—

 
(21,366
)
 
(68,097
)
 
—

 
(68,097
)
Income from continuing operations, before income taxes and noncontrolling interest
 
59,593

 
(4,331
)
 
55,262

 
164,948

 
(13,931
)
 
151,017

Income taxes
 
14,297

 
(1,549
)
 
12,748

 
46,514

 
(4,993
)
 
41,521

Income from continuing operations, before noncontrolling interest
 
45,296

 
(2,782
)
 
42,514

 
118,434

 
(8,938
)
 
109,496

Less net income attributable to noncontrolling interest
 
141

 
—

 
141

 
291

 
—

 
291

Income from continuing operations of Orbital ATK, Inc.
 
45,155

 
(2,782
)
 
42,373

 
118,143

 
(8,938
)
 
109,205

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
23,812

 
—

 
23,812

 
187,958

 
—

 
187,958

Income taxes
 
23,320

 
—

 
23,320

 
79,748

 


 
79,748

Income from discontinued operations
 
492

 
—

 
492

 
108,210

 
—

 
108,210

Net income attributable to Orbital ATK, Inc.
 
$
45,647

 
$
(2,782
)
 
$
42,865

 
$
226,353

 
$
(8,938
)
 
$
217,415

 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.42

 
 
 
$
1.33

 
$
3.73

 
 
 
$
3.44

Discontinued operations
 
0.02

 
 
 
0.02

 
3.42

 
 
 
3.42

Net income attributable to Orbital ATK, Inc.
 
$
1.44

 
 
 
$
1.35

 
$
7.15

 
 
 
$
6.86

Weighted-average number of common shares outstanding
 
31,693

 
 
 
31,693

 
31,676

 
 
 
31,676

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.41

 
 
 
$
1.32

 
$
3.64

 
 
 
$
3.37

Discontinued operations
 
0.02

 
 
 
0.02

 
3.34

 
 
 
3.34

Net income attributable to Orbital ATK, Inc.
 
$
1.43

 
 
 
$
1.34

 
$
6.98

 
 
 
$
6.71

Weighted-average number of diluted common shares outstanding
 
31,998

 
 
 
31,998

 
32,410

 
 
 
32,410

Comprehensive income attributable to Orbital ATK, Inc.
 
$
49,285

 
$
(2,782
)
 
$
46,503

 
$
254,262

 
$
(8,938
)
 
$
245,324



92
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Consolidated Statements of
 
Three Months Ended September 28, 2014
 
Six Months Ended September 28, 2014
Comprehensive Income (Unaudited)
 
As reported
 
Adjustments
 
As restated
 
As reported
 
Adjustments
 
As restated
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$
743,202

 
$
(21,190
)
 
$
722,012

 
$
1,457,562

 
$
(40,594
)
 
$
1,416,968

Cost of sales
 
579,818

 
(16,001
)
 
563,817

 
1,131,528

 
(30,994
)
 
1,100,534

Gross profit
 
163,384

 
(5,189
)
 
158,195

 
326,034

 
(9,600
)
 
316,434

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
8,942

 
—

 
8,942

 
14,105

 
—

 
14,105

Selling
 
23,213

 
—

 
23,213

 
46,288

 
—

 
46,288

General and administrative
 
50,962

 
—

 
50,962

 
113,555

 
—

 
113,555

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
80,267

 
(5,189
)
 
75,078

 
152,086

 
(9,600
)
 
142,486

Interest expense, net
 
(23,340
)
 
—

 
(23,340
)
 
(46,731
)
 
—

 
(46,731
)
Loss on extinguishment of debt
 
—

 
—

 
—

 
—

 
—

 
—

Income from continuing operations, before income taxes and noncontrolling interest
 
56,927

 
(5,189
)
 
51,738

 
105,355

 
(9,600
)
 
95,755

Income taxes
 
15,632

 
(1,869
)
 
13,763

 
32,218

 
(3,444
)
 
28,774

Income from continuing operations, before noncontrolling interest
 
41,295

 
(3,320
)
 
37,975

 
73,137

 
(6,156
)
 
66,981

Less net income attributable to noncontrolling interest
 
81

 
—

 
81

 
150

 
—

 
150

Income from continuing operations of Orbital ATK, Inc.
 
41,214

 
(3,320
)
 
37,894

 
72,987

 
(6,156
)
 
66,831

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
80,411

 
—

 
80,411

 
164,147

 
—

 
164,147

Income taxes
 
26,516

 
—

 
26,516

 
56,427

 
—

 
56,427

Income from discontinued operations
 
53,895

 
—

 
53,895

 
107,720

 
—

 
107,720

Net income attributable to Orbital ATK, Inc.
 
$
95,109

 
$
(3,320
)
 
$
91,789

 
$
180,707

 
$
(6,156
)
 
$
174,551

 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.30

 
 
 
$
1.20

 
$
2.31

 
 
 
$
2.11

Discontinued operations
 
1.70

 
 
 
1.70

 
3.40

 
 
 
3.40

Net income attributable to Orbital ATK, Inc.
 
$
3.00

 
 
 
$
2.90

 
$
5.71

 
 
 
$
5.51

Weighted-average number of common shares outstanding
 
31,689

 
 
 
31,689

 
31,666

 
 
 
31,666

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.29

 
 
 
$
1.18

 
$
2.24

 
 
 
$
2.05

Discontinued operations
 
1.68

 
 
 
1.68

 
3.30

 
 
 
3.30

Net income attributable to Orbital ATK, Inc.
 
$
2.97

 
 
 
$
2.86

 
$
5.54

 
 
 
$
5.35

Weighted-average number of diluted common shares outstanding
 
32,058

 
 
 
32,058

 
32,605

 
 
 
32,605

Comprehensive income attributable to Orbital ATK, Inc.
 
$
100,790

 
$
(3,320
)
 
$
97,470

 
$
204,978

 
$
(6,156
)
 
$
198,822



93
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
 
 
 
 
 
 
Three Months Ended June 29, 2014
Consolidated Statements of Comprehensive Income (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 
 
 
 
 
 
 
$
714,360

 
$
(19,404
)
 
$
694,956

Cost of sales
 
 
 
 
 
 
 
551,710

 
(14,993
)
 
536,717

Gross profit
 
 
 
 
 
 
 
162,650

 
(4,411
)
 
158,239

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
 
 
 
 
 
5,163

 
—

 
5,163

Selling
 
 
 
 
 
 
 
23,075

 
—

 
23,075

General and administrative
 
 
 
 
 
 
 
62,593

 
—

 
62,593

Income from continuing operations, before interest, income taxes and noncontrolling interest
 
 
 
 
 
 
 
71,819

 
(4,411
)
 
67,408

Interest expense, net
 
 
 
 
 
 
 
(23,391
)
 
—

 
(23,391
)
Income from continuing operations, before income taxes and noncontrolling interest
 
 
 
 
 
 
 
48,428

 
(4,411
)
 
44,017

Income taxes
 
 
 
 
 
 
 
16,586

 
(1,575
)
 
15,011

Income from continuing operations, before noncontrolling interest
 
 
 
 
 
 
 
31,842

 
(2,836
)
 
29,006

Less net income attributable to noncontrolling interest
 
 
 
 
 
 
 
69

 
—

 
69

Income from continuing operations of Orbital ATK, Inc.
 
 
 
 
 
 
 
31,773

 
(2,836
)
 
28,937

Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, before income taxes
 
 
 
 
 
 
 
83,736

 
—

 
83,736

Income taxes
 
 
 
 
 
 
 
29,911

 
—

 
29,911

Income from discontinued operations
 
 
 
 
 
 
 
53,825

 
—

 
53,825

Net income attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
85,598

 
$
(2,836
)
 
$
82,762

 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
 
$
1.01

 
 
 
$
0.91

Discontinued operations
 
 
 
 
 
 
 
1.70

 
 
 
1.70

Net income attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
2.71

 
 
 
$
2.61

Weighted-average number of common shares outstanding
 
 
 
 
 
 
 
31,640

 
 
 
31,640

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
 
 
 
 
 
 
$
0.96

 
 
 
$
0.87

Discontinued operations
 
 
 
 
 
 
 
1.63

 
 
 
1.63

Net income attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
2.59

 
 
 
$
2.50

Weighted-average number of diluted common shares outstanding
 
 
 
 
 
 
 
33,108

 
 
 
33,108

Comprehensive income attributable to Orbital ATK, Inc.
 
 
 
 
 
 
 
$
104,188

 
$
(2,836
)
 
$
101,352





94
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Six Months Ended October 4, 2015
Consolidated Statements of Cash Flows (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
139,419

 
$
(7,272
)
 
$
132,147

Net income from discontinued operations
 
—

 
—

 
—

Income from continuing operations
 
139,419

 
(7,272
)
 
132,147

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
63,057

 
3,566

 
66,623

Amortization of intangible assets
 
26,241

 
—

 
26,241

Amortization and write-off of deferred financing costs
 
11,211

 
—

 
11,211

Fixed asset impairment
 
—

 
5,871

 
5,871

Deferred income taxes
 
(2,076
)
 
(1,470
)
 
(3,546
)
Loss on disposal of property
 
802

 
—

 
802

Share-based plans expense
 
15,049

 
—

 
15,049

Excess tax benefits from share-based plans
 
(4,460
)
 
—

 
(4,460
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(89,119
)
 
(5,197
)
 
(94,316
)
Net inventories
 
20,797

 
—

 
20,797

Accounts payable
 
64,703

 
—

 
64,703

Contract advances and allowances
 
(18,353
)
 
—

 
(18,353
)
Contract loss reserve
 
—

 
(19,818
)
 
(19,818
)
Accrued compensation
 
12,184

 
—

 
12,184

Contract-related liabilities
 
(89,167
)
 
7,090

 
(82,077
)
Pension and other postretirement benefits
 
17,303

 
—

 
17,303

Other assets and liabilities
 
(37,614
)
 
17,230

 
(20,384
)
 Cash provided by operating activities of continuing operations
 
129,977

 
—

 
129,977

 Cash provided by operating activities of discontinued operations
 
—

 
—

 
—

 Cash provided by operating activities
 
129,977

 
—

 
129,977

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(53,424
)
 
—

 
(53,424
)
Proceeds from the disposition of property plant and equipment
 
13

 
—

 
13

 Cash used for investing activities of continuing operations
 
(53,411
)
 
—

 
(53,411
)
 Cash used for investing activities of discontinued operations
 
—

 
—

 
—

 Cash used for investing activities
 
(53,411
)
 
—

 
(53,411
)
Financing Activities
 
 
 
 
 
 
Credit Facility Borrowings
 
775,000

 
(295,000
)
 
480,000

Credit Facility Payments
 
(725,000
)
 
295,000

 
(430,000
)
Cash used for financing activities of continuing operations
 
(150,732
)
 
—

 
(150,732
)
Effect of foreign currency exchange rate fluctuations on cash
 
—

 
—

 
—

Decrease in cash and cash equivalents
 
(74,166
)
 
—

 
(74,166
)
Cash and cash equivalents at beginning of period
 
139,253

 
—

 
139,253

Cash and cash equivalents at end of period
 
$
65,087

 
$
—

 
$
65,087






95
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Three Months Ended July 5, 2015
Consolidated Statements of Cash Flows (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
72,870

 
$
(14,917
)
 
$
57,953

Net income from discontinued operations
 
—

 
—

 
—

Income from continuing operations
 
72,870

 
(14,917
)
 
57,953

Adjustments to reconcile income from continuing operations to cash used for operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
31,955

 
1,731

 
33,686

Amortization of intangible assets
 
13,023

 
—

 
13,023

Amortization of deferred financing costs
 
1,021

 
—

 
1,021

Fixed asset impairment
 
—

 
3,576

 
3,576

Deferred income taxes
 
(422
)
 
(9,319
)
 
(9,741
)
Loss on disposal of property
 
93

 
—

 
93

Share-based plans expense
 
9,003

 
—

 
9,003

Excess tax benefits from share-based plans
 
(2,508
)
 
—

 
(2,508
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(97,782
)
 
18,637

 
(79,145
)
Net inventories
 
13,838

 
—

 
13,838

Accounts payable
 
9,739

 
—

 
9,739

Contract advances and allowances
 
4,984

 
—

 
4,984

Contract loss reserve
 
—

 
(9,075
)
 
(9,075
)
Accrued compensation
 
(26,942
)
 
—

 
(26,942
)
Contract-related liabilities
 
(42,654
)
 
(3,719
)
 
(46,373
)
Pension and other postretirement benefits
 
23,376

 
—

 
23,376

Other assets and liabilities
 
(20,615
)
 
13,086

 
(7,529
)
 Cash used for operating activities of continuing operations
 
(11,021
)
 
—

 
(11,021
)
 Cash used for operating activities of discontinued operations
 
—

 
—

 
—

 Cash used for operating activities
 
(11,021
)
 
—

 
(11,021
)
Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(26,180
)
 
—

 
(26,180
)
Cash acquired in Merger with Orbital
 
—

 
—

 
—

Cash dividend (refunded to) received from Vista Outdoor, net of cash transferred to Vista Outdoor in conjunction with the Distribution of Sporting Group
 
—

 
—

 
—

Proceeds from the disposition of property plant and equipment
 
6

 
—

 
6

 Cash used for investing activities of continuing operations
 
(26,174
)
 
—

 
(26,174
)
 Cash used for investing activities of discontinued operations
 
—

 
—

 
—

 Cash used for investing activities
 
(26,174
)
 
—

 
(26,174
)
Financing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Credit Facility Borrowings
 
325,000

 
(100,000
)
 
225,000

Credit Facility Payments
 
(325,000
)
 
100,000

 
(225,000
)
Cash used for financing activities of continuing operations
 
(52,463
)
 
—

 
(52,463
)
Effect of foreign currency exchange rate fluctuations on cash
 
—

 
—

 
—

Decrease in cash and cash equivalents
 
(89,658
)
 
—

 
(89,658
)
Cash and cash equivalents at beginning of period
 
139,253

 
—

 
139,253

Cash and cash equivalents at end of period
 
$
49,595

 
$
—

 
$
49,595



96
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Nine Months Ended December 28, 2014
Consolidated Statements of Cash Flows (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
226,644

 
$
(8,938
)
 
$
217,706

Net income from discontinued operations
 
(108,210
)
 
—

 
(108,210
)
Income from continuing operations
 
118,434

 
(8,938
)
 
109,496

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
54,221

 
(2,388
)
 
51,833

Amortization of intangible assets
 
2,321

 
—

 
2,321

Amortization of debt discount
 
3,212

 
—

 
3,212

Amortization of deferred financing costs
 
3,887

 
—

 
3,887

Fixed asset impairment
 
—

 
8,597

 
8,597

Deferred income taxes
 
34,086

 
—

 
34,086

Loss on disposal of property
 
1,319

 
—

 
1,319

Share-based plans expense
 
12,005

 
—

 
12,005

Excess tax benefits from share-based plans
 
(6,983
)
 
—

 
(6,983
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(168,627
)
 
64,640

 
(103,987
)
Net inventories
 
(2,277
)
 
—

 
(2,277
)
Accounts payable
 
87,579

 
—

 
87,579

Contract advances and allowances
 
36,955

 
(32,758
)
 
4,197

Contract loss reserve
 
—

 
(56,918
)
 
(56,918
)
Accrued compensation
 
(23,033
)
 
—

 
(23,033
)
Pension and other postretirement benefits
 
(25,959
)
 
—

 
(25,959
)
Other assets and liabilities
 
(82,689
)
 
27,765

 
(54,924
)
 Cash provided by operating activities of continuing operations
 
44,451

 
—

 
44,451

 Cash provided by operating activities of discontinued operations
 
109,735

 
—

 
109,735

 Cash provided by operating activities
 
154,186

 
—

 
154,186

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(61,361
)
 
—

 
(61,361
)
Proceeds from the disposition of property plant and equipment
 
2,158

 
—

 
2,158

 Cash (used for) provided by investing activities of continuing operations
 
(59,203
)
 
—

 
(59,203
)
 Cash used for investing activities of discontinued operations
 
(30,634
)
 
—

 
(30,634
)
 Cash (used for) provided by investing activities
 
(89,837
)
 
—

 
(89,837
)
Financing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Cash used for financing activities of continuing operations
 
(216,395
)
 
—

 
(216,395
)
Effect of foreign currency exchange rate fluctuations on cash
 
(1,666
)
 
—

 
(1,666
)
Decrease in cash and cash equivalents
 
(153,712
)
 
—

 
(153,712
)
Cash and cash equivalents at beginning of period
 
266,632

 
—

 
266,632

Cash and cash equivalents at end of period
 
$
112,920

 
$
—

 
$
112,920



97
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Six Months Ended September 28, 2014
Consolidated Statements of Cash Flows (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
180,857

 
$
(6,156
)
 
$
174,701

Net income from discontinued operations
 
(107,720
)
 
—

 
(107,720
)
Income from continuing operations
 
73,137

 
(6,156
)
 
66,981

Adjustments to reconcile income from continuing operations to cash provided by operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
35,317

 
(674
)
 
34,643

Amortization of intangible assets
 
1,547

 
—

 
1,547

Amortization of debt discount
 
3,212

 
—

 
3,212

Amortization and write-off of deferred financing costs
 
2,698

 
—

 
2,698

Fixed asset impairment
 
—

 
4,479

 
4,479

Deferred income taxes
 
(7,353
)
 
—

 
(7,353
)
Loss on disposal of property
 
1,008

 
—

 
1,008

Share-based plans expense
 
7,927

 
—

 
7,927

Excess tax benefits from share-based plans
 
(6,783
)
 
—

 
(6,783
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(107,869
)
 
39,871

 
(67,998
)
Net inventories
 
4,847

 
—

 
4,847

Accounts payable
 
54,635

 
—

 
54,635

Contract advances and allowances
 
12,813

 
(32,758
)
 
(19,945
)
Contract loss reserve
 
—

 
(34,076
)
 
(34,076
)
Accrued compensation
 
(36,126
)
 
—

 
(36,126
)
Pension and other postretirement benefits
 
5,365

 
—

 
5,365

Other assets and liabilities
 
(4,264
)
 
29,314

 
25,050

 Cash provided by operating activities of continuing operations
 
40,111

 
—

 
40,111

 Cash used for operating activities of discontinued operations
 
(15,596
)
 
—

 
(15,596
)
 Cash provided by operating activities
 
24,515

 
—

 
24,515

Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(39,346
)
 
—

 
(39,346
)
Proceeds from the disposition of property plant and equipment
 
2,158

 
—

 
2,158

 Cash used for investing activities of continuing operations
 
(37,188
)
 
—

 
(37,188
)
 Cash used for investing activities of discontinued operations
 
(20,337
)
 
—

 
(20,337
)
 Cash used for investing activities
 
(57,525
)
 
—

 
(57,525
)
Financing Activities
 
 
 
 
 
 
Cash used for financing activities of continuing operations
 
(190,325
)
 
—

 
(190,325
)
Effect of foreign currency exchange rate fluctuations on cash
 
(629
)
 
—

 
(629
)
Decrease in cash and cash equivalents
 
(223,964
)
 
—

 
(223,964
)
Cash and cash equivalents at beginning of period
 
266,632

 
—

 
266,632

Cash and cash equivalents at end of period
 
$
42,668

 
$
—

 
$
42,668




98
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Three Months Ended June 29, 2014
Consolidated Statements of Cash Flows (Unaudited)
 
As Reported
 
Adjustments
 
As Restated
 
 
 
 
 
 
 
Operating Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Net income
 
$
85,667

 
$
(2,836
)
 
$
82,831

Net income from discontinued operations
 
(53,825
)
 
—

 
(53,825
)
Income from continuing operations
 
31,842

 
(2,836
)
 
29,006

Adjustments to reconcile income from continuing operations to cash used for operating activities of continuing operations:
 
 
 
 
 
 
Depreciation
 
17,644

 
(317
)
 
17,327

Amortization of intangible assets
 
775

 
—

 
775

Amortization of debt discount
 
1,927

 
—

 
1,927

Amortization of deferred financing costs
 
1,174

 
—

 
1,174

Fixed asset impairment
 
—

 
2,113

 
2,113

Deferred income taxes
 
1,745

 
—

 
1,745

Loss on disposal of property
 
771

 
—

 
771

Share-based plans expense
 
3,861

 
—

 
3,861

Excess tax benefits from share-based plans
 
(6,739
)
 
—

 
(6,739
)
Changes in assets and liabilities:
 
 
 
 
 
 
Net receivables
 
(110,743
)
 
17,600

 
(93,143
)
Net inventories
 
(15,127
)
 
—

 
(15,127
)
Accounts payable
 
52,300

 
—

 
52,300

Contract advances and allowances
 
14,245

 
(32,758
)
 
(18,513
)
Contract loss reserve
 
—

 
(14,985
)
 
(14,985
)
Accrued compensation
 
(32,340
)
 
—

 
(32,340
)
Pension and other postretirement benefits
 
13,813

 
—

 
13,813

Other assets and liabilities
 
2,480

 
31,183

 
33,663

 Cash used for operating activities of continuing operations
 
(22,372
)
 
—

 
(22,372
)
 Cash used for operating activities of discontinued operations
 
(69,108
)
 
—

 
(69,108
)
 Cash used for operating activities
 
(91,480
)
 
—

 
(91,480
)
Investing Activities
 
 
 
 
 
 
Continuing operations:
 
 
 
 
 
 
Capital expenditures
 
(18,473
)
 
—

 
(18,473
)
Proceeds from the disposition of property plant and equipment
 
2,153

 
—

 
2,153

 Cash used for investing activities of continuing operations
 
(16,320
)
 
—

 
(16,320
)
 Cash used for investing activities of discontinued operations
 
(11,013
)
 
—

 
(11,013
)
 Cash used for investing activities
 
(27,333
)
 
—

 
(27,333
)
Financing Activities
 
 
 
 
 
 
Cash used for financing activities of continuing operations
 
(15,329
)
 
—

 
(15,329
)
Effect of foreign currency exchange rate fluctuations on cash
 
249

 
—

 
249

Decrease in cash and cash equivalents
 
(133,893
)
 
—

 
(133,893
)
Cash and cash equivalents at beginning of period
 
266,632

 
—

 
266,632

Cash and cash equivalents at end of period
 
$
132,739

 
$
—

 
$
132,739






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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

3. Fair Value of Financial Instruments
The current authoritative guidance on fair value clarifies the definition of fair value, prescribes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The valuation techniques required by the current authoritative literature are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3—Significant inputs to the valuation model are unobservable.
The following section describes the valuation methodologies used by the Company to measure its financial instruments at fair value.
Investments in marketable securities —The Company's investments in marketable securities represent investments held in a common collective trust ("CCT") that primarily invests in fixed income securities which are used to pay benefits under a nonqualified supplemental executive retirement plan for certain executives and highly compensated employees. Investments in a collective investment vehicle are valued by multiplying the investee company's net asset value per share with the number of units or shares owned at the valuation date as determined by the investee company. Net asset value per share is determined by the investee company's custodian or fund administrator by deducting from the value of the assets of the investee company all its liabilities and the resulting number is divided by the outstanding number of shares or units. Investments held by the CCT, including collateral invested for securities on loan, are valued on the basis of valuations furnished by a pricing service approved by the CCT's investment manager, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the CCT's investment manager. The fair value of these securities is included within other current assets and deferred charges and other noncurrent assets on the consolidated balance sheet. The fair value of these securities, not subject to leveling, is measured on a recurring basis and was $12,065 and $10,327 at December 31, 2015 and March 31, 2015, respectively.
Derivative financial instruments and hedging activities —In order to manage its exposure to commodity pricing and foreign currency risk, the Company periodically utilizes commodity and foreign currency derivatives, which are considered Level 2 instruments. As discussed further in Note  4 , the Company has outstanding commodity forward contracts that were entered into to hedge forecasted purchases of copper and zinc, as well as outstanding foreign currency forward contracts that were entered into to hedge forecasted transactions denominated in a foreign currency. Commodity derivatives are valued based on prices of futures exchanges and recently reported transactions in the marketplace. During fiscal 2014, the Company entered into five interest rate swaps. These swaps are valued based on future LIBOR, and the established fixed rate is based primarily on quotes from banks. Foreign currency derivatives are valued based on observable market transactions of spot currency rates and forward currency prices.
Long-term Debt —The fair value of the variable-rate long-term debt is calculated based on current market rates for debt of the same risk and maturities. The fair value of the fixed-rate debt is based on market quotes for each issuance. The Company considers these to be Level 2 instruments.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Fair value of financial assets and liabilities that are measured at fair value on a recurring basis were as follows:
 
 
December 31, 2015
 
 
Fair Value Measurements
Using Inputs Considered as
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
Derivatives
 
—

 
$
3,979

 
—

Liabilities:
 
 
 
 
 
 
Derivatives
 
—

 
8,353

 
—

 
 
March 31, 2015
 
 
Fair Value Measurements
Using Inputs Considered as
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
Derivatives
 
—

 
$
7,823

 
—

Liabilities:
 
 
 
 
 
 
Derivatives
 
—

 
11,137

 
—

Carrying amount and fair value of financial assets and liabilities that are not measured at fair value on a recurring basis were as follows:
 
 
December 31, 2015
 
March 31, 2015
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Fixed rate debt
 
$
700,000

 
$
712,500

 
$
300,000

 
$
306,000

Variable rate debt
 
790,000

 
787,697

 
1,288,501

 
1,283,539

4 . Derivative Financial Instruments
The Company is exposed to market risks arising from adverse changes in commodity prices affecting the cost of raw materials and energy; interest rates and foreign exchange risks. In the normal course of business, these risks are managed through a variety of strategies, including the use of derivative instruments. Commodity forward contracts are periodically used to hedge forecasted purchases of certain commodities, foreign currency exchange contracts are used to hedge forecasted transactions denominated in a foreign currency, and the Company periodically uses interest rate swaps to hedge forecasted interest payments and the risk associated with variable interest rates on long-term debt.
The Company entered into forward contracts for copper and zinc during the 2015 transition period , and the years ended March 31, 2015 and March 31, 2014 . The contracts essentially establish a fixed price for the underlying commodity and are designated and qualify as effective cash flow hedges of purchases of the commodity. Ineffectiveness is calculated as the amount by which the change in the fair value of the derivatives exceeds the change in the fair value of the anticipated commodity purchases.
The Company entered into interest rate swaps during fiscal 2014 requiring fixed rate payments on a total notional amount of $400,000 and receive one-month LIBOR. The fair value of interest rate swap agreements approximates the amount at which they could be settled, based on future LIBOR, and the established fixed rate is based primarily on quotes from banks. The Company performs assessments of the effectiveness of hedge instruments on a quarterly basis and during the 2015 transition period determined the hedges to be highly effective. The counterparties to the interest rate swap agreements expose the Company to credit risk in the event of nonperformance. However, at December 31, 2015 , four of the outstanding swap agreements were in a net liability position which would require the Company to make the net settlement payments to the counterparties. The Company does not anticipate nonperformance by counterparties and does not hold or issue derivative financial instruments for trading purposes.
The Company entered into foreign currency forward contracts during fiscal 2015 to hedge forecasted cash receipts from a customer and forecasted inventory purchases and subsequent payments. The Company did not enter into any foreign currency

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

forward contracts during fiscal 2014 or 2013. Contracts entered into prior to fiscal 2013 were used to hedge forecasted customer receivables and inventory purchases and subsequent payments, denominated in foreign currencies. These transactions were designated and qualified as effective cash flow hedges. Ineffectiveness with respect to forecasted inventory purchases or customer cash receipts was calculated based on changes in the forward rate until the anticipated purchase or cash receipt occurs; ineffectiveness of the hedge of the accounts payable was evaluated based on the change in fair value of its anticipated settlement.
The fair value of the commodity and foreign currency forward contracts is recorded within other assets or liabilities, as appropriate, and the effective portion is reflected in accumulated other comprehensive income (loss) in the financial statements. The gains or losses on the commodity forward contracts are recorded in inventory as the commodities are purchased and in cost of sales when the related inventory is sold. The gains or losses on the foreign currency forward contracts are recorded in earnings when the related inventory is sold or customer cash receipts are received.
Commodity forward contracts outstanding that hedge forecasted commodity purchases were as follows:
(Amounts in thousands of pounds)
 
December 31, 2015
 
March 31, 2015
Copper
 
7,750

 
16,475

Zinc
 
1,750

 
4,840

At December 31, 2015 , the Company had three outstanding interest rate swap contracts with notional amounts of $100,000 each with maturity dates in August 2016, 2017 and 2018, as well as two interest rate swap contracts with notional amounts of $50,000 each with maturity dates in November 2016 and 2017 as follows (See Note 10 for additional information):
 
 
Notional
 
Fair Value
 
Pay Fixed
 
Receive Floating
 
Maturity Date
Non-amortizing swap
 
$
100,000

 
$
(200
)
 
0.87
%
 
0.42
%
 
August 2016
Non-amortizing swap
 
100,000

 
(668
)
 
1.29
%
 
0.42
%
 
August 2017
Non-amortizing swap
 
100,000

 
(1,441
)
 
1.69
%
 
0.42
%
 
August 2018
Non-amortizing swap
 
50,000

 
9

 
0.65
%
 
0.42
%
 
November 2016
Non-amortizing swap
 
50,000

 
(139
)
 
1.10
%
 
0.42
%
 
November 2017
The amount to be paid or received under these swaps is recorded as an adjustment to interest expense.
As of December 31, 2015, the Company had the following outstanding Euro currency forward contracts in place:
(Amounts in thousands)
 
December 31, 2015
 
March 31, 2015
Euros Sold
 
67,780

 
98,580

Euros Purchased
 
12,589

 
33,354


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Derivative instruments designated as hedging instruments in the consolidated balance sheets were as follows:
 
 
 
 
Asset Derivatives
Fair Value
 
Liability Derivatives
Fair Value
 
 
Location
 
December 31, 2015
 
March 31, 2015
 
December 31, 2015
 
March 31, 2015
Commodity forward contracts
 
Other current assets /
Other current liabilities
 
$
—

 
$
1,054

 
$
4,445

 
$
899

Commodity forward contracts
 
Other noncurrent assets /
Other noncurrent liabilities
 
—

 
271

 
—

 
2

Foreign currency forward contracts
 
Other current assets /
Other current liabilities
 
2,875

 
2,664

 
1,442

 
5,101

Foreign currency forward contracts
 
Other noncurrent assets /
Other noncurrent liabilities
 
1,095

 
3,834

 
18

 
897

Interest rate swap contracts
 
Other current assets /
Other current liabilities
 
9

 
—

 
—

 
—

Interest rate swap contracts
 
Other noncurrent assets /
Other noncurrent liabilities
 
—

 
—

 
2,448

 
4,238

Total
 
 
 
$
3,979

 
$
7,823

 
$
8,353

 
$
11,137

Due to the nature of the Company's business, the benefits associated with the commodity contracts may be passed on to the customer and not realized by the Company.
Derivative gains and losses in the consolidated statements of comprehensive income (loss) were as follows:
 
 
Gain (Loss) Reclassified from AOCI
 
Gain (Loss) Recognized in Income
(ineffective portion and amount excluded from effectiveness testing)
 
 
Location
 
Amount
 
Location
 
Amount
Nine months ended December 31, 2015
 
 
 
 
 
 
 
 
Commodity forward contracts  (1)
 
Cost of sales
 
$
(2,825
)
 
Cost of sales
 
$
—

Interest rate swap contracts
 
Interest expense
 
(3,028
)
 
Interest expense
 
—

Foreign currency forward contracts
 
Cost of sales
 
(1,768
)
 
Cost of sales
 
—

Year ended March 31, 2015
 
 
 
 
 
 
 
 
Commodity forward contracts
 
Cost of sales
 
(5,515
)
 
Cost of sales
 
—

Interest rate swap contracts
 
Interest expense
 
(4,020
)
 
Interest expense
 
—

Foreign currency forward contracts
 
Cost of sales
 
(9,182
)
 
Cost of sales
 
—

_________________________________________
(1)
As restated.
All derivatives used by the Company during the periods presented were designated as hedging instruments.
The Company expects that any unrealized losses will be realized and reported in cost of sales when the cost of the commodities is included in cost of sales. Estimated and actual gains or losses will change as market prices change.
5. Merger and Divestiture
On February 9, 2015, the Company completed the spin-off and Distribution of its former Sporting Group to its stockholders and Merged with Orbital pursuant to a transaction agreement, dated April 28, 2014 (the "Transaction Agreement"). The Company completed the Merger with Orbital in order to create a global aerospace and defense Company with greater technical and industrial capabilities and increased financial resources. Both the Distribution and Merger were structured to be tax-free to U.S. stockholders for U.S. federal income tax purposes. Under the Transaction Agreement, a subsidiary of the Company merged with and into Orbital, with Orbital continuing as a wholly-owned subsidiary of the Company.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Pursuant to the Distribution, Company stockholders received 2 shares of Vista Outdoor for each share of Company common stock held. The Company distributed a total of approximately 63.9 million shares of Vista Outdoor common stock to its stockholders of record at the close of business on February 2, 2015 the record date for the Distribution. As a result of the Distribution, the Sporting Group is reported as a discontinued operation for all prior periods presented. Sales from discontinued operations totaled $1,595,589 , $1,781,437 and $1,849,891 in the nine months ended December 28, 2014 and the years ended March 31, 2015 and March 31, 2014 , respectively.
In connection with the Merger, each outstanding share of Orbital common stock was converted into the right to receive 0.449 shares of Company common stock. The Company issued approximately 27.4 million shares of common stock to Orbital stockholders. Immediately following the Merger, Orbital stockholders owned 46.2% of the common stock of the Company and existing stockholders owned 53.8% . Based on the closing price of the Company common stock following the Distribution on February 9, 2015 as reported on the New York Stock Exchange, the aggregate value of the consideration paid or payable to former holders of Orbital common stock was approximately $1.8 billion. The Company used the acquisition method to account for the Merger; accordingly, the results of Orbital have been included in the Company's consolidated financial statements since the date of the Merger. Orbital's sales and pre-tax income included in the Company's financial statements for the post-Merger period of February 9, 2015 through March 31, 2015 were approximately $191 million and $16 million, respectively. Transaction costs of $34,900 related to the Distribution and Merger were recorded as incurred in general and administrative expenses during fiscal 2015.
Valuation of Net Assets Acquired
The following amounts represent the preliminary determination (as of the Merger date) of the fair value of identifiable assets acquired and liabilities assumed in the Merger, including adjustments made to date during the one year measurement period from the date of the Merger:
Purchase Price:
 
 
Value of common shares issued to Orbital shareholders (1)
 
$
1,749,323

Value of replacement equity-based awards to holders of Orbital equity-based awards (2)
 
8,654

Total purchase price
 
$
1,757,977

 
 
 
Value of assets acquired and liabilities assumed:
 


Cash
 
$
253,734

Net receivables
 
558,639

Net inventories
 
75,294

Intangibles
 
179,000

Property, plant and equipment
 
277,438

Deferred tax assets, net
 
62,466

Other assets
 
36,878

Goodwill
 
822,903

Accounts payable
 
(52,028
)
Contract fair value liabilities
 
(130,888
)
Other liabilities
 
(325,459
)
Total purchase price
 
$
1,757,977

_________________________________________
(1)
Equals 27.4 million Orbital ATK shares issued to Orbital shareholders multiplied by the Company's Merger-date share price of $63.94 .
(2)
The fair value of replacement equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger.
Estimated fair value for intangibles is not final and is subject to change. The final determination will be completed within the first quarter of 2016, which is the quarter in which the one year measurement period from the date of the Merger ends. Due to the significance of the Merger, the Company will use all of this measurement period to adequately analyze and assess the fair

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

value the intangibles. This assessment includes the evaluation of the significant contractual and operational factors and assumptions associated with the fair values of the intangibles.
The consideration paid for Orbital's assets and liabilities was determined using the fair market value of the Company stock issued at the date of the Merger along with restricted stock awards granted to certain employees of Orbital.
Goodwill recognized from the Merger primarily relates to the expanded market opportunities, expected synergies and benefits of increased scale and scope of combined human, physical and financial resources attributable to merging the operations of the two companies. As stated above, the Merger was a tax-free transaction and as such, there is no goodwill that is deductible for tax purposes.
In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing at the Merger date. There were no significant contingencies identified related to any legal or government action.
Measurement Period Adjustments (as restated)
In accordance with the Company's adoption of ASU 2015-16 (see Note 1), measurement period adjustments pertaining to the Merger were recorded during the 2015 transition period and were not retroactively reclassified to prior periods. In addition, income statement amounts that would have been recorded in previous periods had the measurement period adjustments been recorded at the date of the Merger were recorded in the last quarter of the 2015 transition period . Such income statement amounts that were included in the results for the 2015 transition period were not material.
Supplemental Pro Forma Data
The following unaudited supplemental pro forma data for the years ended March 31, 2015 and March 31, 2014 present consolidated information as if the Merger had been completed on April 1, 2013. The pro forma results were calculated by combining the results from continuing operations of the Company with the stand-alone results of Orbital for the pre-Merger periods, which were adjusted to eliminate historical sales between the companies and to account for certain costs which would have been incurred during this pre-Merger period:
 
 
Year Ended
March 31, 2015
 
Year Ended
March 31, 2014
 
 
As Restated
 
As Restated
Sales
 
$
4,167,728

 
$
4,165,628

Income (loss) from continuing operations
 
154,868

 
(56,847
)
Basic earnings (loss) per common share from continuing operations
 
$
2.46

 
$
(0.96
)
Diluted earnings (loss) per common share from continuing operations
 
2.43

 
(0.94
)
The unaudited supplemental pro forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the Merger had been completed on April 1, 2013, as adjusted for the applicable income tax impact:

 
Year Ended
March 31, 2015
 
Year Ended
March 31, 2014
Amortization of acquired Orbital intangible assets (1)
 
$
27,215

 
$
31,116

Interest expense adjustment (2)
 
(25,678
)
 
(19,237
)
Transaction fees for advisory, legal and accounting services (3)
 
(37,119
)
 
37,119

_________________________________________
(1) Added the amortization of acquired Orbital intangible assets recognized at fair value in purchase accounting and eliminated historical Orbital intangible asset amortization expense.
(2) Reduced interest expense for the net reduction in debt of the Company and Orbital.
(3) Added transaction fees for advisory, legal and accounting services to the first quarter of fiscal 2014. Costs were recorded in general and administrative expense.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The unaudited supplemental pro forma data above does not reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro forma data should not be considered indicative of the results that would have occurred if the Merger had been completed on April 1, 2013, nor are they indicative of future results.
Ongoing Business with Vista Outdoor
In conjunction with the Distribution , the Company entered into two supply agreements and one Transition Services Agreement ("TSA") with Vista Outdoor. The supply agreements call for Vista Outdoor to purchase certain minimum quantities of ammunition and gun powder from the Company through 2017 or 2018, as applicable. The supply agreements expire in 2017 (powder) and 2018 (ammunition) and may be extended in one -to- three year increments and are priced at arms-length. Under the terms of the TSA, the Company provides various administrative services to Vista Outdoor for up to 12 months following the Distribution and tax assistance services for 18 months following the Distribution, extendable to 30 months. Fees for services under the TSA are charged to Vista Outdoor.
Sales to Vista Outdoor under the two supply agreements were $137,815 (as restated) for the 2015 transition period and $18,928 for the period from the date of the Distribution to March 31, 2015. Sales to Sporting Group, previously reported as intercompany sales and eliminated in consolidation (see Operating Segment Information Note 17) were $170,818 for the period April 1, 2014 through February 8, 2015 and $273,246 for fiscal 2014.
6. Net Receivables
Net receivables, including amounts due under long-term contracts consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Billed receivables
 
 
 
 
U.S. Government contracts
 
$
121,756

 
$
186,430

Commercial and other
 
95,766

 
88,601

Unbilled receivables
 
 
 
 
U.S. Government contracts
 
807,778

 
866,709

Commercial and other
 
646,549

 
559,481

Less allowance for doubtful accounts
 
(1,028
)
 
(4,692
)
Net receivables
 
$
1,670,821

 
$
1,696,529

Receivable balances are shown net of customer progress payments received of $584,325 at December 31, 2015 and $585,932 at March 31, 2015 .
Unbilled receivables represent the balance of recoverable costs and accrued profit, comprised principally of revenue recognized on contracts for which billings have not been presented to the customer because the amounts were earned but not contractually billable at the balance sheet date. These amounts include expected additional billable general overhead costs and fees on flexibly priced contracts awaiting final rate negotiations.
At December 31, 2015 and March 31, 2015 , the aggregate amount of contract-related unbilled receivables the Company does not expect to collect within the next 12 months was $311,600 and $298,900 , respectively.
The Company records an allowance for doubtful accounts, reducing the receivables balance to an amount the Company estimates is collectible from customers. Estimates used in determining the allowance for doubtful accounts are based on current trends, aging of accounts receivable, periodic credit evaluations of customers’ financial condition and historical collection experience.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Changes in the allowance for doubtful accounts were as follows:
Balance, March 31, 2013
 
$
4,801

Expense
 
609

Write-offs
 
(626
)
Other adjustments
 
107

Balance, March 31, 2014
 
4,891

Expense
 
599

Write-offs
 
(17
)
Other adjustments
 
(781
)
Balance, March 31, 2015
 
4,692

Expense
 
12

Write-offs
 
(3,737
)
Other adjustments
 
61

Balance, December 31, 2015
 
$
1,028

7. Net Property, Plant and Equipment
Property, plant and equipment is stated at cost and depreciated over estimated useful lives. Machinery and equipment is depreciated using the double declining balance method at most of the Company's facilities, and using the straight-line method at other Company facilities. Other depreciable property is depreciated using the straight-line method. Machinery and equipment is depreciated over 1 to 30  years and buildings and improvements is depreciated over 1 to 45  years. Depreciation expense was $89,374 in the 2015 transition period (as restated), $72,843 in fiscal 2015 (as restated) and $69,192 in fiscal 2014 .
Property, plant and equipment is reviewed for impairment when indicators of potential impairment are present. When such impairment is identified, it is recorded as a loss in that period. Maintenance and repairs are charged to expense as incurred. Major improvements that extend useful lives are capitalized and depreciated. The cost and accumulated depreciation of property, plant and equipment retired or otherwise disposed of are removed from the related accounts, and any residual values are charged or credited to income.
Net property, plant and equipment consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Land and land improvements
 
$
47,907

 
$
41,597

Buildings and other improvements
 
355,687

 
339,929

Machinery, equipment and other
 
1,289,721

 
1,234,968

Property not yet in service
 
134,234

 
139,662

Gross property, plant and equipment
 
1,827,549

 
1,756,156

Less accumulated depreciation
 
(1,065,855
)
 
(987,106
)
Net property, plant and equipment
 
$
761,694

 
$
769,050


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

8. Goodwill, Net Intangibles and Other Noncurrent Assets
Changes in goodwill by segment were as follows:
 
 
Flight Systems Group
 
Defense Systems Group
 
Space Systems Group
 
Total
 
 
As Restated
 
As Restated
 
As Restated
 
As Restated
Balance, March 31, 2014
 
$
530,869

 
$
363,247

 
$
145,647

 
$
1,039,763

Merger
 
266,657

 
—

 
590,135

 
856,792

Impairment
 
—

 
—

 
(34,300
)
 
(34,300
)
Balance, March 31, 2015
 
$
797,526

 
$
363,247

 
$
701,482

 
$
1,862,255

Measurement period adjustments
 
125,465

 
—

 
(159,354
)
 
(33,889
)
Balance, December 31, 2015
 
$
922,991

 
$
363,247

 
$
542,128

 
$
1,828,366

The results of the Company's annual goodwill impairment test in fiscal 2015 indicated that the net book value of Space Systems Group 's, Space Components division exceeded the implied fair market value. The fair value of the reporting unit was determined using both an income and market approach. The value estimated using a discounted cash flow model was weighted against the estimated value derived from the guideline company market approach method. This market approach method estimated the price reasonably expected to be realized from the sale of the business based on comparable companies. As the net book value of the division exceeded fair market value, the second step analysis was performed and the fair value of goodwill was determined based on the allocation of the reporting unit's assets, in a manner similar to purchase price allocation. As a result of this second step, the Company recorded an impairment of $34,300 in the fourth quarter of fiscal 2015 . The impairment was primarily driven by a reduction in near-term estimated cash flows compared to the prior year forecast, resulting from, among other things, government budget constraints and increased competitive pressures in the satellite and spacecraft manufacturing market. Goodwill recorded within Space Systems Group is presented net of accumulated impairment losses totaling $142,800 .
Goodwill recorded within Defense Systems Group is presented net of accumulated impairment losses totaling $3,700 (see Note 2-"Restatement", for further discussion).
Other noncurrent assets consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Parts inventory
 
$
10,303

 
$
9,973

Environmental remediation receivable
 
15,145

 
23,771

Derivative contracts
 
1,105

 
4,105

Tax refund receivable
 
42,555


38,392

Other noncurrent assets
 
70,354


66,220

Total other noncurrent assets
 
$
139,462

 
$
142,461

Net intangibles consisted of the following amortizing intangibles:
 
 
December 31, 2015
 
March 31, 2015
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Total
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Total
Contract Backlog
 
$
179,000

 
$
(36,696
)
 
$
142,304

 
$
164,000

 
$
(6,167
)
 
$
157,833

Patented technology
 
11,018

 
(6,206
)
 
4,812

 
10,700

 
(5,350
)
 
5,350

Customer relationships and other
 
24,294

 
(24,254
)
 
40

 
24,294

 
(22,270
)
 
2,024

Net intangibles
 
$
214,312

 
$
(67,156
)
 
$
147,156

 
$
198,994

 
$
(33,787
)
 
$
165,207


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The contract backlog asset in the table above is being amortized as underlying costs are recognized under the contract. The other assets in the table above are being amortized using a straight-line method. The weighted-average remaining period of amortization of total net intangibles above is 2.9 years . Amortization expense related to these assets was $33,371 in the 2015 transition period , $9,263 in fiscal 2015 and $3,112 in fiscal 2014 .
Scheduled amortization is as follows:
 
 
Contract Backlog
 
Patents and Customer Relationships
 
Total
2016
 
$
42,495

 
$
1,220

 
$
43,715

2017
 
41,005

 
1,180

 
42,185

2018
 
33,045

 
1,120

 
34,165

2019
 
19,184

 
1,072

 
20,256

2020
 
6,575

 
260

 
6,835

Total
 
$
142,304

 
$
4,852

 
$
147,156

9. Other Current and Noncurrent Liabilities
Other current liabilities consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Employee benefits, insurance, pension and other postretirement benefits
 
$
62,034

 
$
53,588

Deferred lease obligation
 
12,222

 
30,857

Interest
 
10,300

 
7,801

Other
 
81,540

 
128,503

Total other current liabilities
 
$
166,096

 
$
220,749

Other noncurrent liabilities consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Environmental remediation
 
$
35,100

 
$
43,326

Income taxes
 
19,429

 
34,041

Deferred lease obligation
 
13,795

 
5,705

Management nonqualified deferred compensation plan
 
14,864

 
14,853

Other
 
43,964

 
43,508

Total other noncurrent liabilities
 
$
127,152

 
$
141,433

During the 2015 transition period , the Company recorded a $50,277 (as restated) reduction in Merger-related contract fair value liabilities in connection with the recognition of this amount in sales as progress toward completion was realized on certain contracts acquired in the Merger.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

10. Long-term Debt
Long-term debt, including the current portion, consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
Senior Credit Facility:
 
 
 
 
Term Loan A due 2020
 
$
790,000

 
$
—

Revolving Credit Facility due 2020
 
—

 
—

5.25% Senior Notes due 2021
 
300,000

 
300,000

5.50% Senior Notes due 2023
 
400,000

 
—

Former Senior Credit Facility:
 
 
 
 
Term A Loan due 2018
 
—

 
946,875

Term A Loan due 2019
 
—

 
144,375

Term B Loan due 2020
 
—

 
197,251

Carrying amount of long-term debt
 
1,490,000

 
1,588,501

Unamortized debt issuance costs:
 
 
 
 
   Senior Credit Facility
 
6,302

 
14,408

   5.25% Senior Notes due 2021
 
1,915

 
2,160

   5.50% Senior Notes due 2023
 
5,947

 
—

Unamortized debt issuance costs
 
14,164

 
16,568

Long-term debt less unamortized debt issuance costs
 
1,475,836

 
1,571,933

Less: Current portion of long-term debt
 
40,000

 
59,997

Long-term debt
 
$
1,435,836

 
$
1,511,936

Senior Credit Facility
In September 2015, the Company refinanced its former senior credit facility with a new senior credit facility (the "Senior Credit Facility"), which is comprised of a term loan of $800,000 (the "Term Loan A") and a revolving credit facility of $1,000,000 (the "Revolving Credit Facility"), both of which mature in 2020. The Term Loan A is subject to quarterly principal payments of $10,000 , with the remaining balance due on September 29, 2020. Substantially all tangible and intangible assets of the Company and certain domestic subsidiaries, excluding real property, are pledged as collateral under the Senior Credit Facility. Borrowings under the Senior Credit Facility bear interest at a per annum rate equal to either the sum of a base rate plus a margin or the sum of a LIBOR rate plus a margin. Each margin is based on the Company's total leverage ratio. Based on the Company's current total leverage ratio, the current base rate margin is 0.25% and the current LIBOR margin is 1.25% . The weighted-average interest rate for the Term Loan A, after taking into account the interest rate swaps discussed below, was 2.06% at December 31, 2015 . The Company pays a quarterly commitment fee on the unused portion of the Revolving Credit Facility based on its total leverage ratio. Based on the Company's current total leverage ratio, this current fee is 0.2% . At December 31, 2015 , the Company had no borrowings outstanding on the Revolving Credit Facility and had outstanding letters of credit of $146,477 , which reduced amounts available on the Revolving Credit Facility to $853,523 . As a result of this refinancing, the Company recorded a charge of $10,301 , reported in net interest expense, to write off a portion of the unamortized debt issuance costs associated with the Former Senior Credit Facility. The remaining unamortized debt issuance costs associated with the Former Senior Credit Facility of $3,361 are being amortized to interest expense along with $3,306 of debt issuance costs incurred related to the Senior Credit Facility over five years , the term of the Senior Credit Facility.
5.25% Notes
In fiscal 2014 , the Company issued $300,000 aggregate principal amount of 5.25% Senior Notes (the "5.25% Notes") that mature on October 1, 2021. These notes are general unsecured obligations. Interest on these notes is payable on April 1 and October 1 of each year. The Company has the right to redeem some or all of these notes from time to time on or after October 1, 2016, at specified redemption prices. Prior to October 1, 2016, the Company may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to October 1, 2016, the Company may redeem up to 35% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 105.25% of their principal amount plus accrued

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

and unpaid interest to the date of redemption. Debt issuance costs of $2,625 related to these notes are being amortized to interest expense over eight years , the term of the notes.
5.50% Notes
In September 2015, the Company issued $400,000 aggregate principal amount of 5.50% Senior Notes (the "5.50% Notes") that mature on October 1, 2023. These notes are general unsecured obligations. Interest on these notes is payable on April 1 and October 1 of each year. The Company has the right to redeem some or all of these notes from time to time on or after October 1, 2018, at specified redemption prices. Prior to October 1, 2018, the Company may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to October 1, 2018, the Company may redeem up to 35% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 105.50% of their principal amount plus accrued and unpaid interest to the date of redemption. Debt issuance costs of $6,136 (as restated) related to these notes are being amortized to interest expense over eight years , the term of the notes.
Former Senior Credit Facility
As noted above, in September 2015 the Company refinanced and paid off its former senior credit facility (the "Former Senior Credit Facility") which was comprised of a term loan of $1,160,000 (the "Former Term A Loan"), a term loan of $250,000 (the "Former Term B Loan") and a $700,000 revolving credit facility (the "Former Revolving Credit Facility"), all of which were to mature from 2018 to 2020. The Former Term A Loan and the Former Term B loan were subject to quarterly principal payments of $14,500 and $499 , respectively. Substantially all domestic tangible and intangible assets of the Company and its subsidiaries were pledged as collateral under the Former Senior Credit Facility. Borrowings under the Former Senior Credit Facility were charged interest at a rate equal to either the sum of a base rate plus a margin or the sum of a Eurodollar rate plus a margin. Each margin was based on the Company's senior secured credit ratings. The Company paid an annual commitment fee on the unused portion of the Former Revolving Credit Facility based on its senior secured credit ratings.
Loss on Extinguishment of Debt
In fiscal 2015 the Company recorded a $ 26,626 loss on extinguishment of debt pertaining to the redemption of its former 6.875% senior subordinated notes in connection with the Distribution and Merger.
Interest Rate Swaps
In fiscal 2014 the Company entered into floating-to-fixed interest rate swap agreements in order to hedge the Company’s forecasted interest payments on its outstanding variable rate debt, which has included the term loans associated with the Senior Credit Facility and Former Senior Credit Facility.
At December 31, 2015 , the Company had the following cash flow hedge interest rate swaps in place:
 
 
Notional
 
Fair Value
 
Pay Fixed
 
Receive Floating
 
Maturity Date
Non-amortizing swap
 
$
100,000

 
$
(200
)
 
0.87
%
 
0.42
%
 
August 2016
Non-amortizing swap
 
$
100,000

 
$
(668
)
 
1.29
%
 
0.42
%
 
August 2017
Non-amortizing swap
 
$
100,000

 
$
(1,441
)
 
1.69
%
 
0.42
%
 
August 2018
Non-amortizing swap
 
$
50,000

 
$
9

 
0.65
%
 
0.42
%
 
November 2016
Non-amortizing swap
 
$
50,000

 
$
(139
)
 
1.10
%
 
0.42
%
 
November 2017
The amount to be paid or received under these swaps is recorded as an adjustment to interest expense.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Rank and Guarantees
The 5.25% Notes and the 5.50% Notes are the Company’s general unsecured and unsubordinated obligations and rank equally in right of payment with all of the Company’s existing and future unsecured and unsubordinated indebtedness, rank senior in right of payment to all of the Company’s existing and future subordinated indebtedness and are effectively subordinated to all existing and future senior secured indebtedness, including the Senior Credit Facility, to the extent of the collateral. The 5.25% Notes and the 5.50% Notes are guaranteed on an unsecured basis, jointly and severally and fully and unconditionally, by substantially all of the Company's domestic subsidiaries. The Senior Credit Facility obligations are guaranteed on a secured basis, jointly and severally and fully and unconditionally, by substantially all of the Company's domestic subsidiaries. All of these guarantor subsidiaries are 100% owned by the Company. The Company, exclusive of these guarantor subsidiaries, has no independent operations or material assets. The guarantee by any Subsidiary Guarantor of the Company's obligations in respect of the 5.25% Notes and the 5.50% Notes will be released in each of the following circumstances:
•
if, as a result of the sale of its capital stock, such Subsidiary Guarantor ceases to be a Restricted Subsidiary;
•
if such Subsidiary Guarantor is designated as an "Unrestricted Subsidiary" with respect to the 5.25% Notes and the 5.50% Notes;
•
upon defeasance or satisfaction and discharge of the 5.25% Notes and the 5.50% Notes, as applicable; and
•
if such Subsidiary Guarantor has been released from its guarantees of indebtedness under the credit agreement governing the Senior Credit Facility (the "Credit Agreement") and all capital markets debt securities.
Scheduled Minimum Loan Payments
Scheduled minimum loan payments are as follows (as restated):
2016
$
40,000

2017
40,000

2018
40,000

2019
40,000

2020
630,000

Thereafter
700,000

Total
$
1,490,000

Covenants and Default Provisions
The Company's Senior Credit Facility and the indentures governing the 5.25% Notes and the 5.50% Notes impose restrictions on the Company, including limitations on its ability to incur additional debt, enter into capital leases, grant liens, pay dividends and make certain other payments, sell assets, or merge or consolidate with or into another entity. In addition, the Senior Credit Facility limits the Company's ability to enter into sale-and-leaseback transactions. The 5.25% Notes and 5.50% Notes limit the aggregate sum of dividends, share repurchases, and other designated restricted payments to an amount based on the Company’s net income, stock issuance proceeds, and certain other items since April 1, 2001, less restricted payments made since that date. The Senior Credit Facility allows the Company to make unlimited "restricted payments" (as defined in the Credit Agreement), which, among other items, would allow payments for future stock repurchases, as long as the Company maintains a certain amount of liquidity and maintains certain senior secured debt limits, with a limit, when those senior secured debt limits are not met, of $250,000 plus proceeds of any equity issuances plus 50% of net income since October 7, 2010. The Senior Credit Facility also requires the Company to meet and maintain specified financial ratios, including a minimum interest coverage ratio and a maximum consolidated total leverage ratio. The Company's debt agreements contain cross-default provisions so that noncompliance with the covenants within one debt agreement could cause a default under other debt agreements as well. The Company's ability to comply with these covenants and to meet and maintain the financial ratios may be affected by events beyond its control. Borrowings under the Senior Credit Facility are subject to compliance with these covenants. As of December 31, 2015 , the Company was in compliance with the financial covenants.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

11. Employee Benefit Plans
The Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. The Company has tax-qualified defined benefit plans, a supplemental (nonqualified) defined benefit pension plan, a defined contribution plan and a supplemental (non-qualified) defined contribution plan. A qualified plan meets the requirements of certain sections of the Internal Revenue Code and, generally, contributions to qualified plans are tax deductible. A qualified plan typically provides benefits to a broad group of employees and may not discriminate in favor of highly compensated employees in coverage, benefits or contributions. In addition, the Company provides medical and life insurance benefits to certain retirees and their eligible dependents through its postretirement plans.
In connection with the Distribution, the Company transferred its obligation for pension benefits and other postretirement benefit ("PRB") plans for all current and former employees of Sporting Group to Vista Outdoor. The transfer of this obligation reduced the Company's pension liabilities by $223,790 , pension assets by $163,034 and accumulated other comprehensive loss for pension benefits by $97,764 . The transfer of this obligation also reduced the Company's PRB liabilities by $1,963 and accumulated other comprehensive gain for PRB benefits by $1,727 .
Defined Benefit Plans
The Company's noncontributory defined benefit pension plans include the following legacy Alliant Techsystems, Inc. plans: "Alliant Techsystems, Inc. Pension and Retirement Plan" and "Thiokol Propulsion Pension Plan" (the “ATK Plans”). The Company acquired the following two pension plans applicable to legacy Orbital employees in connection with the Merger: "Fairchild Bargained Plan" and "Fairchild Space and Defense Plan" (the “Orbital Plans” and together with the ATK Plans, the “Plans”). The Orbital Plans were merged into the Alliant Techsystems, Inc. Pension and Retirement Plan on December 31, 2015 and the combined plan's name was changed to the Orbital ATK, Inc. Pension and Retirement Plan.
The Company is required to reflect the funded status of the pension and PRB plans on the consolidated balance sheet. The funded status of the Plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. The Company has recognized the aggregate of all underfunded plans within the accrued pension liability and postretirement and postemployment benefits liabilities. The Company has recognized the aggregate of all overfunded plans within other noncurrent assets. The portion of the amount by which the actuarial present value of benefits included in the projected benefit obligation exceeds the fair value of plan assets, payable in the next 12 months , is reflected in other accrued liabilities.
Previously unrecognized differences between actual amounts and estimates based on actuarial assumptions are included in accumulated other comprehensive loss in the consolidated balance sheet and the difference between actual amounts and estimates based on actuarial assumptions has been recognized in other comprehensive income in the period in which they occur.
The Company's measurement date for remeasuring its plan assets and benefit obligations is December 31.
Pension Plans.     The ATK Plans are qualified noncontributory defined benefit pension plans that cover substantially all legacy ATK employees hired prior to January 1, 2007. Eligible legacy ATK non-union employees hired on or after January 1, 2007 and certain union employees are not covered by a defined benefit plan but substantially all do receive an employer contribution through a defined contribution plan, discussed below. Effective with certain collective bargaining agreements on April 1, 2016, additional union pension benefits were frozen and the new cash balance formula applicable to pay and service was implemented. As a result of this plan amendments the projected benefit obligation was reduced by $2,295 . The ATK Plan is a cash balance formula that provides each affected employee with pay credits based on the sum of that employee's age plus years of pension service at December 31 of each calendar year, plus 4% annual interest credits. Prior to July 1, 2013 (January 1, 2014 and April 1, 2016 for certain union groups), the ATK Plans provided either pension benefits based on employee annual pay levels and years of credited service or stated amounts for each year of credited service. The Company funds the ATK Plans in accordance with federal requirements calculated using appropriate actuarial methods. Depending on the plan they are covered by, employees generally vest after three or five years. The Orbital Plans are frozen and no benefits are being accrued by employees. These plans currently are overfunded.
The Company also sponsors a nonqualified supplemental executive retirement plan which provides certain executives and highly compensated employees the opportunity to receive pension benefits in excess of those payable through tax-qualified pension plans. The benefit obligation of these plans is included in the pension information below.
Other Postretirement Benefit Plans.     Generally, employees who terminated employment from the Company on or before January 1, 2004 and were at least age 50 or 55 with at least five or ten years of service, depending on the provisions of the

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

pension plan they are eligible for, are entitled to a pre- and/or post-65 health care company subsidy and retiree life insurance coverage. Employees who terminated employment after January 1, 2004, but before January 1, 2006, are eligible only for a pre-65 company subsidy. The portion of the health care premium cost borne by the Company for such benefits is based on the pension plan the employees are eligible for, years of service and age at termination.
The following table shows changes in the benefit obligation, plan assets and funded status of the Company's qualified and non-qualified pension plans and other PRB plans, including Orbital Plans. Benefit obligation balances presented below reflect the projected benefit obligation ("PBO") for pension plans and accumulated PRB obligations ("APBO") or other PRB plans.
 
 
Pension Benefits
 
Other Postretirement Benefits
 
 
Nine Months Ended
December 31, 2015
 
Year Ended
March 31, 2015
 
Nine Months Ended
December 31, 2015
 
Year Ended
March 31, 2015
Change in benefit obligation:
 
 
 
 
 
 
 
 
Benefit obligation at beginning of period
 
$
3,199,221

 
$
2,988,288

 
$
131,620

 
$
128,065

Service cost
 
14,445

 
23,182

 
1

 
3

Interest cost
 
91,044

 
129,236

 
3,378

 
4,803

Plan Amendments
 
(2,295
)
 
—

 
—

 
—

Actuarial loss (gain) (1)
 
(211,581
)
 
465,524

 
(13,106
)
 
12,255

Retiree contributions
 
—

 
—

 
3,302

 
4,729

Benefits paid
 
(138,166
)
 
(192,756
)
 
(10,858
)
 
(16,272
)
Impact of Distribution
 
—

 
(223,790
)
 
—

 
(1,963
)
Merger with Orbital Sciences
 
—

 
9,537

 
—

 
—

Benefit obligation at end of period
 
2,952,668

 
3,199,221

 
114,337

 
131,620

Change in plan assets:
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of period
 
2,348,795

 
2,426,013

 
63,678

 
61,055

Actual return on plan assets
 
(94,573
)
 
177,776

 
(1,716
)
 
4,397

Retiree contributions
 
—

 
—

 
3,302

 
4,729

Employer contributions
 
73,844

 
87,150

 
5,644

 
9,769

Benefits paid
 
(138,166
)
 
(192,756
)
 
(10,858
)
 
(16,272
)
Fair value of assets at February 9, 2015, transferred to Vista Outdoor (2)
 
—

 
(163,034
)
 
—

 
—

Merger with Orbital Sciences
 
—

 
13,646

 
—

 
—

Fair value of plan assets at end of period
 
2,189,900

 
2,348,795

 
60,050

 
63,678

Funded status
 
$
(762,768
)
 
$
(850,426
)
 
$
(54,287
)
 
$
(67,942
)
_________________________________________
(1)
The mortality projection scale was updated from MP-2014 to MP-2015 at December 31, 2015. This change resulted in an actuarial gain of $50,000 and $4,000 for the Pension Benefits and Other Postretirement Benefits, respectively. The mortality table assumption was changed to the RP-2014 Aggregate table (employee and annuitant) with generational projection using Scale MP-2014 at March 31, 2015 resulting in actuarial losses of $189,000 and $13,000 for the Pension Benefits and Other Postretirement Benefits, respectively.
(2)
The actual amount transferred to Vista Outdoor on February 9, 2015 was determined to be $158,514 . The difference between this amount and the fair value of these assets at the time of transfer of $163,034 was treated as gain/loss on plan assets.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Pension Benefits
 
Other Postretirement Benefits
 
 
December 31, 2015
 
March 31, 2015
 
December 31, 2015
 
March 31, 2015
Noncurrent assets
 
$
4,264

 
$
4,318

 
$
—

 
$
—

Other current liabilities
 
(5,400
)
 
(3,743
)
 
(3,381
)
 
(3,436
)
Postretirement and postemployment benefit liabilities
 
—

 
—

 
(50,906
)
 
(64,506
)
Pension liabilities
 
(761,632
)
 
(851,001
)
 
—

 
—

Net amount recognized
 
$
(762,768
)
 
$
(850,426
)
 
$
(54,287
)
 
$
(67,942
)
Accumulated other comprehensive loss (income) related to:
 
 
 
 
 
 
 
 
Unrecognized net actuarial losses
 
$
1,407,947

 
$
1,520,459

 
$
15,795

 
$
25,906

Unrecognized prior service benefits
 
(131,068
)
 
(144,410
)
 
(9,724
)
 
(15,163
)
Accumulated other comprehensive loss (income)
 
$
1,276,879

 
$
1,376,049

 
$
6,071

 
$
10,743

The estimated amount that will be amortized from AOCI into net periodic benefit cost in 2016 is as follows:
 
 
Pension
 
Other
Postretirement
Benefits
Recognized net actuarial losses
 
$
123,195

 
$
1,589

Amortization of prior service benefits
 
(20,605
)
 
(5,162
)
Total
 
$
102,590

 
$
(3,573
)
The accumulated benefit obligation for all defined benefit pension plans was $2,952,599 at December 31, 2015 and $3,197,143 at March 31, 2015 .
 
 
December 31, 2015
 
March 31, 2015
Information for pension plans with an accumulated benefit obligation in excess of plan assets:
 
 
 
 
Projected benefit obligation
 
$
2,952,668

 
$
3,189,805

Accumulated benefit obligation
 
$
2,952,599

 
$
3,187,727

Fair value of plan assets
 
$
2,189,900

 
$
2,335,060


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Components of net periodic benefit cost were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
Nine Months Ended December 31,
 2015
 
Years Ended
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
March 31, 2015
 
March 31, 2014
 
 
March 31, 2015
 
March 31, 2014
Components of net periodic benefit cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
14,445

 
$
23,182

 
$
34,763

 
$
1

 
$
3

 
$
9

Interest cost
91,044

 
129,236

 
130,253

 
3,378

 
4,803

 
5,207

Expected return on plan assets
(120,352
)
 
(165,780
)
 
(161,111
)
 
(2,767
)
 
(3,553
)
 
(3,419
)
Amortization of unrecognized net loss
112,949

 
118,163

 
145,891

 
1,488

 
1,629

 
2,288

Amortization of unrecognized prior service cost
(15,638
)
 
(22,284
)
 
(20,984
)
 
(5,439
)
 
(8,362
)
 
(8,381
)
Net periodic benefit cost before special termination benefits cost / curtailment
82,448

 
82,517

 
128,812

 
(3,339
)
 
(5,480
)
 
(4,296
)
Special termination benefits cost / curtailment
—

 
2,469

 
—

 
—

 
—

 
—

Net periodic benefit cost
$
82,448

 
$
84,986

 
$
128,812

 
$
(3,339
)
 
$
(5,480
)
 
$
(4,296
)
Amounts reported in:
 
 
 
 
 
 
 
 
 
 
 
Continuing operations
$
82,448

 
$
81,038

 
$
120,812

 
$
(3,339
)
 
$
(5,496
)
 
$
(4,340
)
Discontinued operations
—

 
3,948

 
8,000

 
—

 
16

 
44

Net periodic benefit cost
$
82,448

 
$
84,986

 
$
128,812

 
$
(3,339
)
 
$
(5,480
)
 
$
(4,296
)
During fiscal 2015, the Company recorded a settlement expense of $2,469 to recognize the impact of lump sum benefit payments made in the non-qualified supplemental executive retirement plan.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") reduced the Company's APBO measured at December 31, 2005. One of the Company's other PRB plans is actuarially equivalent to Medicare, but the Company does not believe that the subsidies it will receive under the Act will be significant. Because the Company believes that participation levels in its other PRB plans will decline, the impact to the Company's results of operations in any period has not been and is not expected to be significant.
At the end of the 2015 transition period , the Company changed the approach used to measure service and interest costs for pension and other postretirement benefits. For the 2015 transition period , the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, the Company elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. The Company has accounted for this change as a change in accounting estimate and, accordingly, has accounted for it on a prospective basis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Assumptions
 
Pension Benefits
 
Other Postretirement Benefits
 
Nine Months Ended December 31,
 2015

 
Years Ended
 
Nine Months
Ended
December 31,
 2015

 
Years Ended
 
 
March 31, 2015
 
March 31, 2014
 
 
March 31, 2015
 
March 31, 2014
Weighted-average assumptions used to determine benefit obligations at the end of each period
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.40
%
 
3.90
%
 
4.50
%
 
3.98
%
 
3.55
%
 
3.95
%
Rate of compensation increase:
 
 
 
 
 
 
 
 
 
 
 
Union
3.13
%
 
3.66
%
 
3.22
%
 
 

 
 
 
 
Salaried
3.62

 
3.14

 
3.47

 
 

 
 
 
 
 
Pension Benefits
 
Other Postretirement Benefits
 
Nine Months Ended December 31, 2015
 
Years Ended
 
Nine Months
Ended
December 31, 2015
 
Years Ended
 
 
March 31, 2015
 
March 31, 2014
 
 
March 31, 2015
 
March 31, 2014
Weighted-average assumptions used to determine net periodic benefit cost for each period
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.90
%
 
4.50
%
 
4.35
%
 
3.55
%
 
3.95
%
 
3.80
%
Expected long-term rate of return on plan assets
7.25

 
7.25

 
7.25

 
5.00% / 6.25%

 
5.00% / 6.25%

 
5.00% / 6.25%

Rate of compensation increase:
 
 
 
 
 
 
 
 
 
 
 
Union
3.66
%
 
3.22
%
 
3.23
%
 
 

 
 
 
 
Salaried
3.14

 
3.47

 
3.49

 
 

 
 
 
 
In developing the expected long-term rate of return assumption, the Company considers input from its actuaries and other advisors, annualized returns of various major indices over a long-term time horizon and the Company's own historical 5 -year and 10 -year compounded investment returns. The expected long-term rate of return of 7.25% used in the 2015 transition period for the Plans was based on an asset allocation range of 20 - 45% in equity investments, 35 - 50% in fixed income investments, 0 - 10% in real estate/real asset investments, 15 - 30% collectively in hedge fund and private equity investments and 0 - 6% in cash investments. The actual return in any fiscal year will likely differ from the Company's assumption, but the Company estimates its return based on long-term projections and historical results. Therefore, any variance in a given year does not necessarily indicate that the assumption should be changed.
In developing the expected long-term rate of return assumption for other PRB plans, the Company considers input from actuaries, historical returns and annualized returns of various major indices over long periods. The expected long-term rates of returns are based on the weighted average asset allocation between the assets held within the 401(h) and those held in fixed income investments.
Assumed Health Care Cost Trend Rates Used to Measure Expected Cost of Benefits
 
 
December 31, 2016
 
December 31, 2015
Weighted average health care cost trend rate
 
6.10
%
 
6.10
%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
 
4.50
%
 
4.50
%
Fiscal year that the rate reaches the ultimate trend rate
 
2027

 
2027

Since fiscal 2006, health care cost trend rates have been set specifically for each benefit plan and design. Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage point increase or decrease in the assumed health care cost trend rates would have the following effects:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
One Percentage
Point Increase
 
One Percentage
Point Decrease
Effect on total of service and interest cost
 
$
286

 
$
(253
)
Effect on postretirement benefit obligation
 
$
6,888

 
$
(6,118
)
Plan Assets
Pension.     Pension plan weighted-average asset allocations:
 
 
Anticipated 2016
 
Actual
 
 
Low
 
High
 
December 31, 2015
 
March 31, 2015
Asset Category:
 
 
 
 
 
 
 
 
Domestic equity
 
10.0
%
 
25.0
%
 
19.9
%
 
20.7
%
International equity
 
10.0
%
 
20.0
%
 
13.1
%
 
13.7
%
Fixed income
 
35.0
%
 
50.0
%
 
40.5
%
 
42.5
%
Real estate
 
—
%
 
10.0
%
 
5.0
%
 
4.8
%
Hedge funds/private equity
 
15.0
%
 
30.0
%
 
16.8
%
 
14.8
%
Other investments/cash
 
—
%
 
6.0
%
 
4.7
%
 
3.5
%
The Company has a committee which, assisted by outside consultants, evaluates the objectives and investment policies concerning its long-term investment goals and asset allocation strategies. Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term. The investment goals are (1) to meet or exceed the assumed actuarial rate of return over the long term within reasonable and prudent levels of risk, and (2) to preserve the real purchasing power of assets to meet future obligations. The nature and duration of benefit obligations, along with assumptions concerning asset class returns and return correlations, are considered when determining an appropriate asset allocation to achieve the investment objectives. Pension plan assets for the Company's qualified pension plans are held in a trust for the benefit of the plan participants and are invested in a diversified portfolio of equity investments, fixed income investments, real asset investments, hedge funds, private equity and cash. Risk targets are established and monitored against acceptable ranges. All investment policies and procedures are designed to ensure that the plans' investments are in compliance with the Employee Retirement Income Security Act. Guidelines are established defining permitted investments within each asset class.
During the 2015 transition period , the Company implemented an investment strategy derived from the asset-liability study conducted during fiscal 2013. The results of the asset-liability study reinforced the emphasis on managing the volatility of pension assets relative to pension liabilities while still achieving a competitive investment return, achieving diversification between and within various asset classes and managing other risks. In order to manage the volatility between the value of pension assets and liabilities, the Company has maintained an allocation to long-duration fixed income investments. The Company regularly reviews its actual asset allocation and periodically rebalances its investments to the targeted allocation when considered appropriate. Target allocation ranges are guidelines, not limitations, and occasionally due to market conditions and other factors actual asset allocation may vary above or below a target.
The implementation of the investment strategy discussed above is executed through a variety of investment structures such as: direct share or bond ownership, common/collective trusts, or registered investment companies. Valuation methodologies differ for each of these structures. The valuation methodologies used for these investments structures are as follows:
U.S. Government Securities, Corporate Debt, Common and Preferred Stock, Other Investments and Registered Investment Companies:     Investments are valued at the closing price reported on the active market on which the individual securities are traded.
Common/Collective Trusts:     Investments in a collective investment vehicle are valued by multiplying the investee company's net asset value per share with the number of units or shares owned at the valuation date as determined by the investee company. Net asset value per share is determined by the investee company's custodian or fund administrator by deducting from the value of the assets of the investee company all of its liabilities and the resulting number is divided by the outstanding number of shares or units. Investments held by the CCT, including collateral invested for securities on loan, are valued on the basis of valuations furnished by a pricing service approved by the CCT's investment manager, which determines

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders, or at fair value as determined in good faith by the CCT's investment manager.
Partnership/Joint Venture Interests:     Given the inherent illiquidity of many partnership/joint venture investments, these investments are generally valued based on unobservable inputs that reflect the reporting entity's own assumptions about the assumptions that market participants would use pricing the asset. While the valuation methodologies may differ among each entity, the method for valuing these assets is primarily net asset values; other methods may include, but are not limited to, discounted cash flow analysis and comparable trading data for similar investments.
Funds in Insurance Company Accounts:     These investments are valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Fair Value: Pension plan investments using the fair value hierarchy discussed in Note  3 at December 31, 2015 consisted of the following:
 
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Interest-bearing cash
 
$
—

 
$
33,271

 
$
—

 
$
33,271

U.S. Government securities
 
62,428

 
5,939

 
—

 
68,367

Corporate debt
 
—

 
405,898

 
95

 
405,993

Common stock
 
88,928

 
6,842

 
—

 
95,770

Partnership/joint venture interest
 
—

 
—

 
709,251

 
709,251

Other investments
 
156

 
1,940

 
—

 
2,096

Common/collective trusts
 
—

 
609,852

 
—

 
609,852

Registered investment companies
 
59,366

 
164,696

 
—

 
224,062

Value of funds in insurance company accounts
 
—

 
40,195

 
1,043

 
41,238

Total
 
$
210,878

 
$
1,268,633

 
$
710,389

 
$
2,189,900



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Pension plan investments using the fair value hierarchy discussed in Note  3 at March 31, 2015 consisted of the following:
 
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Interest-bearing cash
 
$
—

 
$
3,279

 
$
—

 
$
3,279

U.S. Government securities
 
158,938

 
11,546

 
—

 
170,484

Corporate debt
 
—

 
410,035

 
187

 
410,222

Common stock
 
110,932

 
5,289

 
—

 
116,221

Partnership/joint venture interest
 
—

 
—

 
746,305

 
746,305

Other investments
 
5

 
3,121

 
—

 
3,126

Common/collective trusts
 
—

 
743,960

 
—

 
743,960

Registered investment companies
 
131,251

 
145,649

 
—

 
276,900

Value of funds in insurance company accounts
 
—

 
42,190

 
1,076

 
43,266

Total
 
401,126

 
1,365,069

 
747,568

 
2,513,763

Fair value of assets at March 31, 2015 transferred to Vista Outdoor
 
(26,324
)
 
(89,584
)
 
(49,060
)
 
(164,968
)
Fair Value of plan assets at end of year
 
$
374,802

 
$
1,275,485

 
$
698,508

 
$
2,348,795

Changes in Level 3 assets consisted of the following:
 
 
Corporate Debt
 
Insurance
Contracts
 
Partnerships/
Joint Ventures
Balance, March 31, 2014
 
$
199

 
$
1,131

 
$
689,073

Realized (losses) gains
 
—

 
6

 
38,614

Net unrealized (losses) gains
 
1

 
(2
)
 
(5,558
)
Net purchases, issuances, and settlements
 
(13
)
 
(59
)
 
24,176

Net transfers into (out of) Level 3
 
—

 
—

 
—

Balance, March 31, 2015
 
187

 
1,076

 
746,305

Realized (losses) gains
 
1

 
16

 
24,088

Net unrealized (losses) gains
 
1

 
(7
)
 
(37,868
)
Net purchases, issuances and settlements
 
(94
)
 
(42
)
 
(23,274
)
Net transfers into (out of) Level 3
 
—

 
—

 
—

Balance, December 31, 2015
 
$
95

 
$
1,043

 
$
709,251

There was no direct ownership of the Company common stock included in plan assets at any of the periods presented.
Other Postretirement Benefits.     The Company's other PRB obligations were 52.5% and 48.4% pre-funded at December 31, 2015 and March 31, 2015 , respectively.
Portions of the assets are held in a 401(h) account held within the pension master trust and are invested in the same manner as the pension assets. Approximately 44% and 44% of the assets were held in the 401(h) account at December 31, 2015 and March 31, 2015 , respectively. The remaining assets are in fixed income investments. The Company's investment objective for the other PRB plan assets is the preservation and safety of capital.
Contributions
During the 2015 transition period , the Company contributed $72,000 directly to the ATK Plans' pension trust and $1,845 directly to retirees under its supplemental (nonqualified) executive retirement plan. The Company also contributed $5,644 to its other PRB plans. The Company is required to make contributions of $37,000 to meet its legally required minimum contributions for 2016 . The Company also expects to distribute approximately $5,400 directly to retirees under its supplemental executive retirement plans and to contribute approximately $7,552 to its other postretirement benefit plans in 2016 .

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Expected Future Benefit Payments
The following benefit payments, which reflect expected future service, are expected to be paid in the years ending December 31. The pension benefits will be paid primarily out of the pension trust. The postretirement benefit payments are shown net of the expected subsidy for the Medicare prescription drug benefit under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 which are not material to be presented separately.
 
 
Pension
Benefits
 
Other
Postretirement
Benefits
2016
 
$
189,200

 
$
10,547

2017
 
191,900

 
10,359

2018
 
195,800

 
10,106

2019
 
200,800

 
9,801

2020
 
204,400

 
9,482

2021 through 2025
 
1,043,300

 
41,164

Termination
In the event the Company terminates any of the plans under conditions in which the plan's assets exceed that plan's obligations, U.S. Government regulations require that a fair allocation of any of the plan's assets based on plan contributions that were reimbursed under U.S. Government contracts will be returned to the U.S. Government.
Defined Contribution Plan
Through December 31, 2015, the Company also sponsored two defined contribution plans - the Alliant Techsystems Inc. 401(k) Plan and the Deferred Salary and Profit Sharing Plan for Employees of Orbital Sciences Corporation (the "Orbital Sciences 401(k) Plan"). Participation in these plans was available to substantially all U.S. employees. Effective January 1, 2016, the Orbital Sciences 401(k) Plan merged into the Alliant Techsystems Inc. 401(k) Plan, and the Alliant Techsystems Inc. 401(k) Plan was renamed the Orbital ATK, Inc. 401(k) Plan.
The Orbital ATK, Inc. 401(k) Plan (formerly named the Alliant Techsystems Inc. 401(k) Plan) is a 401(k) plan, with an employee stock ownership ("ESOP") feature, to which employees may contribute up to 50% of their pay (highly compensated employees are subject to limitations). Employee contributions are invested, at the employees' direction, among a variety of investment alternatives including a Company common stock fund. Participants may transfer amounts into and out of the investment alternatives at any time, except for the Company common stock fund. Any dividends declared on the Company common stock can be either reinvested within the Company common stock fund or provided as a cash payment. Effective January 1, 2013 employees no longer had the option to invest in the Company common stock fund, other than for the reinvestment of dividends paid on the Company common stock in participants' accounts. Balances in the fund prior to January 1, 2013 remain in the fund unless distributed or transferred. Effective January 1, 2004, the Company matching contribution and non-elective contribution to this plan depends on a participant's years of service, pension plan participation and certain other factors. Participants may receive:
•
a matching contribution of 100% of the first 3% of the participant's contributed pay plus 50% of the next 2% of the participant's contributed pay, or
•
a matching contribution of 50% of the first 6% of the participant's contributed pay, or
•
a matching contribution of 100% of the first 3% of the participant's contributed pay plus 50% of the next 3% of the participant's contributed pay (subject to one -year vesting) and a non-elective contribution based on recognized compensation, age and service (subject to three -year vesting), or
•
an automatic enrollment of a 6% pre-tax contribution rate (of which the participant can either change or opt out) along with a matching contribution of 100% of the first 3% of the participant's contributed pay plus 50% of the next 3% of the participant's contributed pay (subject to one -year vesting) and a non-elective contribution based on recognized compensation, age and service (subject to three -year vesting), or
•
a non-elective contribution based on the recognized compensation, age and service (subject to three-year vesting), or
•
no matching contribution

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The Company's contributions to the plan were $41,028 in the 2015 transition period , $51,205 in fiscal 2015 and $48,379 in fiscal 2014 .
At December 31, 2015 , the Company had approximately nine thousand U.S. employees eligible under the plan. The Company has union-represented employees at five locations, comprising less than 20% of its total workforce. One location has two separate bargaining units, each with its own collective bargaining agreement (“CBA”). One location is currently negotiating its initial CBA with the Company.  The Company’s current CBAs expire in 2016 and 2017.
The Deferred Salary and Profit Sharing Plan for Employees of Orbital Sciences Corporation, which merged with the Orbital ATK, Inc. 401(k) Plan effective January 1, 2016, was a 401(k) plan to which legacy Orbital employees could contribute up to 30% of their pay (highly compensated employees were subject to limitations). Employee contributions were invested, at the employees' direction, among a variety of investment alternatives including the Company common stock fund. Participants could transfer amounts into and out of the investment alternatives at any time, except for the Company common stock fund. Any dividends declared on the Company common stock could be reinvested within the Company common stock fund. Effective February 9, 2015, employees no longer had the option to invest in the Company common stock fund, other than for the reinvestment of dividends paid on the Company common stock in participants' accounts. Balances in the fund prior to February 9, 2015 remained in the fund unless distributed or transferred. Participants received a matching contribution of 100% of the first 5% of the participant's contributed pay. The Company could also make an annual discretionary profit sharing contribution based on the participant’s compensation. The Company's contributions to the plan were $2,778 in fiscal 2015 .
12. Income Taxes
Income taxes consisted of the following:
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
 
March 31, 2015
 
March 31, 2014
 
 
As Restated
 
As Restated
 
As Restated
Current:
 
 
 
 
 
 
Federal
 
$
27,068

 
$
21,321

 
$
43,358

State
 
2,258

 
3,508

 
1,562

Deferred:
 
 
 
 
 
 
Federal
 
55,301

 
17,314

 
(110,792
)
State
 
2,286

 
(4,844
)
 
(8,547
)
Income taxes
 
$
86,913

 
$
37,299

 
$
(74,419
)
Differences between the federal statutory rate and the Company's effective rate related to the following:
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
 
March 31, 2015
 
March 31, 2014
 
 
As Restated
 
As Restated
 
As Restated
Statutory federal income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal impact
 
2.1

 
(0.1
)
 
7.2

Domestic manufacturing deduction
 
(1.5
)
 
(5.6
)
 
3.9

Goodwill impairment
 
—

 
11.2

 
—

Research and development tax credit
 
(5.2
)
 
(3.2
)
 
2.7

Change in prior year contingent tax liabilities
 
1.0

 
(3.7
)
 
7.1

Nondeductible transaction costs
 
—

 
7.2

 
—

Other
 
(1.1
)
 
(3.3
)
 
(1.9
)
Change in valuation allowance
 
1.6

 
(2.7
)
 
(0.3
)
Income tax provision
 
31.9
 %
 
34.8
 %
 
53.7
 %



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Deferred Income Taxes
Deferred income taxes arise because of temporary differences in the timing of the recognition of income and expense items for financial statement reporting and income tax purposes. As discussed in Note 1, as of December 31, 2015 the Company prospectively adopted a new accounting standard which requires all deferred income tax assets and liabilities to be classified as noncurrent on the balance sheet. Accordingly, net deferred income taxes are classified as noncurrent assets at December 31, 2015. Net deferred income taxes at March 31, 2015 are classified as current or noncurrent assets based upon the classification of the related assets and liabilities, or, if there is no corresponding balance on the balance sheet, the expected period of reversal, and were not retrospectively adjusted.
In December 2015, the Protecting Americans from Tax Hikes (PATH) Act was enacted to permanently reinstate the Research & Development tax credit (R&D tax credit) which had expired on December 31, 2014. The impact of this extension was included in the tax rate for the period ended December 31, 2015. In addition, we recorded additional R&D tax credit during the acquisition accounting measurement period.
Deferred income tax assets and liabilities resulting from temporary differences related to the following:
 
 
Years Ended
 
 
December 31, 2015
 
March 31, 2015
 
 
As Restated
 
As Restated
Deferred income tax assets:
 
 
 
 
Retirement benefits
 
$
306,008

 
$
344,674

  Federal carryforwards
 
35,957

 
10,269

Other
 
42,733

 
49,082

Other reserves
 
25,676

 
28,697

Accruals for employee benefits
 
41,719

 
46,691

Inventory
 
14,206

 
10,893

Contract method of revenue recognition
 
108,513

 
134,329

Total deferred income tax assets before valuation allowance
 
574,812

 
624,635

Valuation allowance
 
(13,190
)
 
(8,836
)
Total deferred income tax assets
 
561,622

 
615,799

Deferred income tax liabilities:
 
 
 
 
Intangible assets
 
(98,300
)
 
(114,598
)
Property, plant and equipment
 
(129,188
)
 
(123,154
)
Debt-related
 
(15,596
)
 
(21,290
)
Total deferred income tax liabilities
 
(243,084
)
 
(259,042
)
Net deferred income tax assets
 
$
318,538

 
$
356,757

The Company believes it is more likely than not that the recorded deferred benefits will be realized through the reduction of future taxable income. The Company's recorded valuation allowance of $13,190 at December 31, 2015 relates to certain capital loss, tax credits and net operating losses that are not expected to be realized before their expiration.
Included in the net deferred tax asset are net operating loss and credit carryovers of $35,539 (as restated), net of valuation allowances, which expire in years ending from December 31, 2016 through December 31, 2036, and $8,799 that may be carried over indefinitely.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The following summarizes activity related to valuation allowances for deferred tax assets:
 
 
Nine Months Ended
December 31, 2015
 
Years Ended
 
 
 
 March 31, 2015
 
 March 31, 2014
Beginning Balance
 
$
8,836

 
$
2,771

 
$
3,849

Additions, charged to expense
 
4,655

 
84

 
123

Additions, due to the Merger
 
—

 
6,974

 
—

Deductions
 
(301
)
 
(993
)
 
(1,201
)
Ending Balance
 
$
13,190

 
$
8,836

 
$
2,771

The Company has significant deferred tax assets in the U.S. against which valuation allowances have been established to reduce such deferred tax assets to an amount that is more likely than not to be realized. The establishment of valuation allowances requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. While the Company believes positive evidence exists with regard to the realizability of these deferred tax assets, it is not considered sufficient to outweigh the objectively verifiable negative evidence.
Unrecognized Tax Benefits
Unrecognized tax benefits consist of the carrying value of the Company's recorded uncertain tax positions as well as the potential tax benefits that could result from other tax positions that have not been recognized in the financial statements under current authoritative guidance. At December 31, 2015 and March 31, 2015 , unrecognized tax benefits that have not been recognized in the financial statements amounted to $82,643 and $35,549 , respectively (as restated), of which $78,988 and $32,185 , respectively (as restated), would affect the effective tax rate, if recognized. The remaining balance is related to deferred tax items which only impact the timing of tax payments. Although the timing and outcome of audit settlements are uncertain, it is reasonably possible that a $3,015 reduction of the uncertain tax benefits will occur in the next 12 months . The settlement of these unrecognized tax benefits could result in earnings from $0 to $2,599 .
Changes in unrecognized tax benefits, excluding interest and penalties, were as follows:
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 
 
 
March 31, 2015
 
March 31, 2014
 
 
As Restated
 
As Restated
 
As Restated
Unrecognized tax benefits, beginning of period
 
$
33,784

 
$
32,232

 
$
25,657

Gross increases—tax positions in prior periods
 
42,264

 
21,369

 
15,412

Gross decreases—tax positions in prior periods
 
(1,147
)
 
(16,721
)
 
(13,172
)
Gross increases—current-period tax positions
 
5,818

 
1,469

 
4,488

Settlements
 
—

 
(2,786
)
 
—

Lapse of statute of limitations
 
(74
)
 
(1,779
)
 
(153
)
Unrecognized tax benefits, end of period
 
$
80,645

 
$
33,784

 
$
32,232

The Company reports income tax-related interest income within income taxes. Penalties and tax-related interest expense are also reported as a component of income taxes. At December 31, 2015 and March 31, 2015 , $1,690 and $1,476 of income tax-related interest (as restated) and $307 and $289 of penalties (as restated) were included in accrued income taxes, respectively.
The Company or one of its subsidiaries files income tax returns in the U.S. federal, various U.S. state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2008. The IRS has completed the audits of the Company through fiscal 2012 and is currently auditing the Company's tax returns for fiscal 2013 and 2014. The Company believes appropriate provisions for all outstanding issues have been made for all remaining open years in all jurisdictions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

13. Commitments
The Company leases land, buildings and equipment under various operating leases, which generally have renewal options of one to five years. Rent expense was $68,839 in the 2015 transition period , $72,826 in fiscal 2015 and $67,972 in fiscal 2014 .
Scheduled operating lease payments are as follows (as restated):
2016
$
72,822

2017
60,757

2018
55,487

2019
50,389

2020
41,435

Thereafter
90,933

Total
$
371,823

The Company currently leases its facility in Magna, Utah from a private party. This facility is used in the production and testing of some of the Company's rocket motors. The current lease extends through September 2022. The lease requires the Company to surrender the property back to its owner in its original condition. While the Company currently anticipates operating this facility indefinitely, the Company could incur significant costs if the Company were to terminate this lease.
The Company has known conditional asset retirement obligations, such as contractual lease restoration obligations, to be performed in the future, that are not reasonably estimable due to insufficient information about the timing and method of settlement of the obligation. Accordingly, these obligations have not been recorded in the consolidated financial statements. A liability for these obligations will be recorded in the period when sufficient information regarding timing and method of settlement becomes available to make a reasonable estimate of the liability's fair value.
14. Contingencies
Litigation.     From time to time, the Company is subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of the Company's business. The Company does not consider any of such proceedings that are currently pending, individually or in the aggregate, notwithstanding that the unfavorable resolution of any matter may have a material effect on net earnings in any particular quarter, to be material to its business or likely to result in a material adverse effect on its operating results, financial condition, or cash flows.
On July 30, 2013, Raytheon Company filed a lawsuit against the Company in the Superior Court of the State of Arizona.  The suit concerned the Company's longstanding production of rocket motors used in Raytheon's Advanced Medium-Range Air-to-Air Missiles (AMRAAM).  Raytheon's primary allegation was that the Company breached certain of the production contracts by not delivering rocket motors.  Raytheon claimed damages in excess of $100,000 . The parties settled this matter on March 27, 2015. The Company paid $25,000 to Raytheon, and the litigation was voluntarily dismissed on April 21, 2015.
On November 4, 2013, the Company filed a lawsuit against Spirit Aerosystems Inc. in the Second District Court in Farmington, Utah. In the lawsuit, the Company made various claims, including breach of contract, in relation to a contract with Spirit Aerosystems regarding the manufacture of aircraft parts. On September 18, 2015, the parties entered into a settlement agreement resolving all matters at issue in the litigation, and the case was dismissed.
U.S. Government Investigations.     The Company is also subject to U.S. Government investigations from which civil, criminal, or administrative proceedings could result. Such proceedings could involve claims by the U.S. Government for fines, penalties, compensatory and treble damages, restitution, and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. The Company believes, based upon all available information, that the outcome of any such pending government investigations will not have a material adverse effect on its operating results, financial condition, or cash flows.
Claim Recovery.     Profits expected to be realized on contracts are based on management's estimates of total contract sales value and costs at completion. Estimated amounts for contract changes and claims are included in contract sales only when realization is estimated to be probable. At December 31, 2015 and March 31, 2015 , based on progress to date on certain contracts, there is $25,042 and $42,055 included in unbilled receivables for contract claims.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Environmental Liabilities.     The Company's operations and ownership or use of real property are subject to a number of federal, state and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those for discharge of hazardous materials, remediation of contaminated sites and restoration of damage to the environment. At certain sites that the Company owns or operates or formerly owned or operated, there is known or potential contamination that the Company is required to investigate or remediate. The Company could incur substantial costs, including remediation costs, resource restoration costs, fines and penalties, or third party property damage or personal injury claims, as a result of liabilities associated with past practices or violations of environmental laws or non-compliance with environmental permits.
The Company has been identified as a potentially responsible party (“PRP”), along with other parties, in several regulatory agency actions associated with hazardous waste sites. As a PRP, the Company may be required to pay a share of the costs of the investigation and clean-up of these sites. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, the Company has concluded that these matters, individually or in the aggregate, will not have a material adverse effect on operating results, financial condition, or cash flows.
The Company could incur substantial costs, including cleanup costs, resource restoration, fines and penalties or third-party property damage or personal injury claims, as a result of violations or liabilities under environmental laws or non-compliance with environmental permits. While environmental laws and regulations have not had a material adverse effect on the Company's operating results, financial condition, or cash flows in the past and the Company has environmental management programs in place to mitigate these risks, it is difficult to predict whether they will have a material impact in the future.
The liability for environmental remediation represents management's best estimate of the present value of the probable and reasonably estimable costs related to known remediation obligations. The receivable represents the present value of the amount that the Company expects to recover, as discussed below. Both the liability and receivable have been discounted to reflect the present value of the expected future cash flows, using a discount rate of 0.7% and 0.5% at December 31, 2015 and March 31, 2015 , respectively. The Company's discount rate is calculated using the 20 -year Treasury constant maturities rate, net of an estimated inflationary factor of 1.9% , rounded to the nearest quarter percent.
Environmental remediation consisted of the following:
 
 
December 31, 2015
 
March 31, 2015
 
 
Liability
 
Receivable
 
Liability
 
Receivable
Amounts (payable) receivable
 
$
(41,824
)
 
$
18,236

 
$
(51,749
)
 
$
26,506

Unamortized discount
 
1,718

 
(568
)
 
1,624

 
(750
)
Present value amounts (payable) receivable
 
$
(40,106
)
 
$
17,668

 
$
(50,125
)
 
$
25,756

Amounts expected to be paid or received in periods more than one year from the balance sheet date are classified as noncurrent. Of the total discounted liability at December 31, 2015 , $5,006 was recorded within other current liabilities and $35,100 was recorded within other long-term liabilities. Of the total discounted receivable, the Company recorded $2,523 within other current assets and $15,145 within other noncurrent assets. At December 31, 2015 , the estimated discounted range of reasonably possible costs of environmental remediation was $40,106 to $78,920 .
The Company expects that a portion of its environmental compliance and remediation costs will be recoverable under U.S. Government contracts. Some of the remediation costs that are not recoverable from the U.S. Government that are associated with facilities purchased in a business acquisition may be covered by various indemnification agreements, as described below.
•
As part of its acquisition of the Hercules Aerospace Company in fiscal 1995, the Company generally assumed responsibility for environmental compliance at the facilities acquired from Hercules ("the Hercules Facilities"). The Company believes that a portion of the compliance and remediation costs associated with the Hercules Facilities will be recoverable under U.S. Government contracts. If the Company were unable to recover those environmental remediation costs under these contracts, the Company believes that these costs will be covered by Hercules Incorporated, a subsidiary of Ashland Inc., ("Hercules") under environmental agreements entered into in connection with the Hercules acquisition. Under these agreements, Hercules has agreed to indemnify the Company for environmental conditions relating to releases or hazardous waste activities occurring prior to the Company's purchase of the Hercules Facilities as long as they were identified in accordance with the terms of the agreement; fines relating to pre-acquisition environmental compliance; and environmental claims arising out of breaches of Hercules' representations and warranties. Hercules is not required to indemnify the Company for any individual

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

claims below $50 . Hercules is obligated to indemnify the Company for the lowest cost response of remediation required at the facility that is acceptable to the applicable regulatory agencies. The Company is not responsible for conducting any remedial activities with respect to the Clearwater, FL facility. In accordance with its agreement with Hercules, the Company notified Hercules of all known contamination on non-federal lands on or before March 31, 2000, and on federal lands on or before March 31, 2005.
•
The Company generally assumed responsibility for environmental compliance at the Thiokol Facilities acquired from Alcoa Inc. ("Alcoa") in fiscal 2002. The Company expects that a portion of the compliance and remediation costs associated with the acquired Thiokol Facilities will be recoverable under U.S. Government contracts. In accordance with its agreement with Alcoa, the Company notified Alcoa of all known environmental remediation issues at January 30, 2004. Of these known issues, the Company is responsible for any costs not recovered through U.S. Government contracts at Thiokol Facilities up to $14,000 , the Company and Alcoa have agreed to split evenly any amounts between $14,000 and $34,000 , and the Company is responsible for any payments in excess of $34,000 . At this time, the Company believes that costs not recovered through U.S. Government contracts will be immaterial.
The Company cannot ensure that the U.S. Government, Hercules, Alcoa, or other third parties will reimburse it for any particular environmental costs or reimburse the Company in a timely manner or that any claims for indemnification will not be disputed. U.S. Government reimbursements for cleanups are financed out of a particular agency's operating budget and the ability of a particular governmental agency to make timely reimbursements for cleanup costs will be subject to national budgetary constraints. The Company's failure to obtain full or timely reimbursement from the U.S. Government, Hercules, Alcoa, or other third parties could have a material adverse effect on its operating results, financial condition, or cash flows. While the Company has environmental management programs in place to mitigate these risks, and environmental laws and regulations have not had a material adverse effect on the Company's operating results, financial condition, or cash flows in the past, it is difficult to predict whether they will have a material impact in the future.
In December 2001, the Company received notice from the State of Utah of a potential claim against the Company under Section 107(f) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for natural resource damages at Bacchus, one of the Hercules Facilities, in Magna, Utah. The notice letter, which was issued to preserve the State's rights under CERCLA, also expressly acknowledged the State's willingness to allow the Company to go forward with its currently-planned monitoring and remediation program. The State's preliminary estimate of damages contained in this claim was $139,000 , which is based on known and alleged groundwater contamination at and near Bacchus and is related to Hercules' manufacturing operations at the site. The Company entered into a tolling agreement with the State in fiscal 2002 (the “Bacchus Tolling Agreement”). In fiscal 2003, the Company entered into a similar tolling agreement with the State regarding the Promontory facility that was acquired from Alcoa in the acquisition of Thiokol (the “Promontory Tolling Agreement”). Also in fiscal 2003, the Company and Kennecott Utah Copper LLC (Kennecott) entered into a tolling agreement due the presence of perchlorate in Kennecott’s Section 21 Well Field. Both parties continue to monitor the quality of the water in the Section 21 Well Field and the Company has agreed to continue to supply bottled water to Kennecott for the areas potentially affected by the Section 21 Well Field. These agreements allow the Company time to continue to identify and address the contamination by the normal and planned regulatory remediation processes in Utah. The Bacchus Tolling Agreement expires in January 2016 and the Promontory Tolling Agreement has been extended to September 2017. The Kennecott tolling agreement was extended in fiscal 2014 and expires in September 2018. Although the Company has previously made accruals for its best estimate of the probable and reasonably estimable costs related to the remediation obligations known to the Company with respect to the affected areas, the Company cannot yet predict if or when a suit may be filed against it, nor can the Company determine any additional costs that may be incurred in connection with this matter.
Expected aggregate undiscounted environmental remediation payments, net of expected recoveries, are as follows:
2016
$
2,484

2017
297

2018
283

2019
2,354

2020
1,842

Thereafter
16,328

Total
$
23,588

There were no material insurance recoveries related to environmental remediation during any of the periods presented.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

15. Stockholders' Equity
The Company has authorized 5,000,000 shares of preferred stock, par value $1.00 , none of which has been issued.
The Company sponsors six stock-based incentive plans, including: the Orbital ATK, Inc. 2015 Stock Incentive Plan (the "2015 Stock Incentive Plan"); three legacy ATK plans (the Alliant Techsystems Inc. 2005 Stock Incentive Plan, the Non-Employee Director Restricted Stock Plan and the 1990 Equity Incentive Plan); and two legacy Orbital plans, under which the Company assumed the obligation to issue Company common stock pursuant to the terms of the Transaction Agreement relating to the Merger (the Orbital Sciences Corporation 2005 Amended and Restated Stock Incentive Plan and the Orbital Sciences Corporation 1997 Stock Option and Incentive Plan). At December 31, 2015 , the Company has authorized up to 3,750,000 common shares under the ATK 2015 Stock Incentive Plan, of which 3,704,016 common shares are available to be granted. No new grants will be made out of the other five plans.
There are five types of awards outstanding under the Company's stock incentive plans: performance awards, TSR awards, restricted stock units, restricted stock and stock options. The Company issues treasury shares upon (i) the payment of performance awards, TSR awards and restricted stock units, (ii) the grant of restricted stock, and (iii) the exercise of stock options.
Pursuant to the terms of the Transaction Agreement and under the terms of the ATK 2005 Stock Incentive Plan, all of the performance awards and TSR awards outstanding at February 9, 2015 were converted into time-vesting restricted stock units in connection with the Distribution, with vesting periods corresponding to the respective performance periods. At December 31, 2015 , there were 40,707 shares reserved for the vesting of restricted stock units for the fiscal 2014-2016 performance period on March 31, 2016 and 55,677 shares reserved for the vesting of restricted stock units for the fiscal 2015-2017 performance period on March 31, 2017.
At December 31, 2015 , there were up to 157,799 shares reserved for performance and TSR awards for executive officers and key employees. Performance shares are valued at the fair value of the Company stock at the grant date and expense is recognized based on the number of shares expected to vest under the terms of the award under which they are granted. Of these performance shares:
•
up to 50% will become payable only upon achievement of a financial performance goal relating to absolute earnings per share growth for the performance period beginning April 1, 2015 and ending December 31, 2017;
•
up to 50% will become payable only upon achievement of a performance goal relating to absolute sales growth for the performance period beginning April 1, 2015 and ending December 31, 2017.
The weighted average fair value of TSR awards granted was $94.93 during the nine months ended December 31, 2015 and fiscal 2015. The Company used an integrated Monte Carlo simulation model to determine the fair value of these awards. The Monte Carlo model calculates the probability of satisfying the market conditions stipulated in the award. This probability is an input into the trinomial lattice model used to determine the fair value of the awards as well as the assumptions of other variables, including the risk-free interest rate and expected volatility of the Company's stock price in future periods. The risk-free rate is based on the U.S. dollar-denominated U.S. Treasury strip rate with a remaining term that approximates the life assumed at the date of grant.
Weighted-average assumptions used in estimating the value of the TSR award were as follows:
 
 
Nine Months Ended December 31, 2015
 
Year Ended March 31, 2015
Risk-free rate
 
1.02
%
 
1.02
%
Expected volatility
 
22.81
%
 
22.81
%
Expected dividend yield
 
1.78
%
 
1.78
%
Expected award life
 
3

 
3

Restricted stock granted to non-employee directors and certain key employees totaled 86,108 shares in the 2015 transition period , 139,093 shares in fiscal 2015 , and 127,425 shares in fiscal 2014 . Restricted shares vest over periods generally ranging from one to three years from the date of award and are valued at the fair value of the Company's common stock at the grant date.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

Stock options may be granted periodically, with an exercise price equal to the fair market value of the Company's common stock on the date of grant, and generally vest from one to three years from the date of grant. Options are generally granted with seven -year or ten -year terms.
The weighted-average fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model and represents the difference between fair market value on the date of grant and the estimated market value on the expected exercise date. The option pricing model requires the Company to make assumptions. The risk-free rate is based on U.S. Treasury zero-coupon issues with a remaining term that approximates the expected life assumed at the date of grant. Expected volatility is based on the historical volatility of the Company's stock over the past seven years. The expected option life is based on the contractual term of the stock option and expected employee exercise and post-vesting employment termination trends. The weighted-average fair value of options granted was $20.80 , $39.81 and $35.34 during the 2015 transition period and the years ended March 31, 2015 and March 31, 2014 , respectively.
Weighted-average assumptions used in estimating the value of the grants were as follows:
 
 
Nine Months Ended December 31, 2015
 
Years Ended
 

 
March 31, 2015
 
March 31, 2014
Risk-free rate

1.99%
 
1.82%
 
1.86%-2.07%
Expected volatility

27.91%
 
27.67%
 
25.95%-26.71%
Expected dividend yield

1.17%
 
0.99%
 
1.27%-1.58%
Expected option life

7 years
 
7 years
 
7 years
Total pre-tax stock-based compensation expense of $19,521 , $25,325 and $12,701 was recognized during the 2015 transition period , fiscal 2015 and fiscal 2014 , respectively. The total income tax benefit recognized in the statement of comprehensive income for share-based compensation was $7,544 , $8,761 and $4,874 during the 2015 transition period , fiscal 2015 and fiscal 2014 , respectively.
The Company's stock option activity was as follows:
 
 
Shares
 
Weighted Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
(in years)
 
Aggregate Intrinsic
Value
(per option)
Outstanding, March 31, 2013
 
262,248

 
$
61.72

 
2.7
 
$
—

Granted
 
47,490

 
130.86

 
 
 
 
Exercised
 
(13,173
)
 
55.32

 
 
 
 
Forfeited/expired
 
(26,160
)
 
62.34

 
 
 
 
Outstanding, March 31, 2014
 
270,405

 
$
74.11

 
8.3
 
$
68.04

Granted
 
73,100

 
72.06

 
 
 
 
Converted in conjunction with the Merger
 
11,225

 
27.45

 
 
 
 
Outstanding, March 31, 2015
 
354,730

 
$
41.83

 
7.8
 
$
34.80

Granted
 
1,443

 
73.13

 
 
 
 

Exercised
 
(122,893
)
 
30.90

 
 
 
 

Outstanding, December 31, 2015
 
233,280

 
$
47.79

 
7.7
 
$
41.55

Options exercisable at:
 
 
 
 
 
 
 
 
December 31, 2015
 
109,509

 
$
32.43

 
6.6
 
$
56.91

March 31, 2015
 
230,715

 
$
64.32

 
7.0
 
$
44.99

March 31, 2014
 
114,083

 
$
61.63

 
8.0
 
$
80.52

The total intrinsic value of options exercised was $5,363 (as restated) and $295 during the 2015 transition period and fiscal 2014 , respectively. There were no options exercised in fiscal 2015. Total cash received from options exercised during the 2015 transition period and fiscal 2014 was $3,684 and $729 , respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

The Company's nonvested stock-based compensation awards activity was as follows:
 
 
Performance Share
and
TSR Awards
 
Restricted Stock
Units
 
Restricted Stock
Awards
 
Combined
Weighted Average
Grant Date
Fair Value
Nonvested, March 31, 2013
 
491,016

 
—

 
267,426

 
$
65.42

Granted
 
113,212

 
—

 
127,451

 
114.65

Canceled/forfeited
 
(200,557
)
 
—

 
(13,526
)
 
68.65

Vested
 
(95,579
)
 
—

 
(98,407
)
 
66.60

Nonvested, March 31, 2014
 
308,092

 
—

 
282,944

 
$
83.91

Granted
 
161,661

 
—

 
139,094

 
81.88

Converted in conjunction with the Merger
 
—

 
647,436

 
—

 
71.29

Canceled/forfeited
 
(309,223
)
 
—

 
(13,521
)
 
87.05

Vested
 
—

 
(146,497
)
 
(195,882
)
 
72.50

Nonvested, March 31, 2015
 
160,530

 
500,939

 
212,635

 
$
77.02

Granted
 
2,976

 
—

 
86,108

 
74.88

Canceled/forfeited
 
(5,374
)
 
(10,908
)
 
(9,914
)
 
80.88

Vested
 
(333
)
 
(191,084
)
 
(17,806
)
 
43.87

Nonvested, December 31, 2015
 
157,799

 
298,947

 
271,023

 
$
75.57

At December 31, 2015 , the total unrecognized compensation cost related to nonvested stock-based compensation awards was $29,320 and is expected to be realized over a weighted average period of 2.2  years.
Share Repurchases
On March 11, 2015, the Company's Board of Directors authorized the Company to repurchase up to the lesser of $75,000 or 1.0 million shares of its common stock through December 31, 2015. On August 4, 2015, the Board of Directors increased the amount authorized for repurchase to the lesser of $100,000 or 1.4 million shares of the Company's common stock. On October 29, 2015, the Board of Directors increased the amount authorized for repurchase to the lesser of $250,000 or 3.25 million shares. Under the authorized repurchase program, shares of the Company common stock may be purchased from time to time in the open market, subject to compliance with applicable laws and regulations and the Company’s debt covenants, depending upon market conditions and other factors. The Company repurchased 1,008,445 shares for $75,795 in the 2015 transition period , $0 during fiscal 2015 and 609,922 shares for $52,130 during fiscal 2014.
In accordance with the Transaction Agreement entered into on April 28, 2014, the Company did not repurchase any outstanding shares prior to the closing of the Distribution and Merger during fiscal 2015.
16. Restructuring Costs
During fiscal 2015 and the 2015 transition period , the Company executed business restructuring initiatives aimed at reducing the Company's fixed cost structure.
In May 2014, the Company consolidated a portion of its Eden Prairie, Minnesota corporate facility. In conjunction with that consolidation, the Company incurred restructuring charges in the first quarter of fiscal 2015 related primarily to the fair value of the remaining lease rentals, asset impairment charges, and costs associated with facility reconfiguration. In the fourth quarter of fiscal 2015 , the Company incurred termination costs for management restructuring. Additionally, in the fourth quarter of fiscal 2015 the Company consolidated a portion of its Arlington, Virginia corporate facility, incurring charges related primarily to the fair value of the remaining lease rentals and asset impairment charges.
In the last quarter of the 2015 transition period , the Company consolidated the remaining portion of its Eden Prairie, Minnesota corporate facility and a further portion of its Arlington, Virginia corporate facility, incurring charges related primarily to the fair value of the remaining lease rentals and asset impairment charges. In addition, in the last quarter of the 2015 transition period the Company incurred termination costs for management restructuring.
The Company had no restructuring liability at March 31, 2014 .

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(Amounts in thousands except share and per share data and unless otherwise indicated)

Changes in restructuring liabilities were as follows (as restated):
 
 
Termination
Benefits
 
Remaining Lease Rentals
 
Asset
Impairment
 
Facility Closure and Other Costs
 
Total
Balance, March 31, 2014
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Expense
 
9,595

 
11,473

 
3,166

 
1,385

 
25,619

Payments
 
(1,263
)
 
(1,046
)
 
—

 
(1,385
)
 
(3,694
)
Noncash settlements
 
—

 
—

 
(3,166
)
 
—

 
(3,166
)
Balance, March 31, 2015
 
8,332

 
10,427

 
—

 
—

 
18,759

Expense
 
3,798

 
18,018

 
6,213

 
—

 
28,029

Payments
 
(8,541
)
 
(2,291
)
 
—

 
—

 
(10,832
)
Noncash settlements
 
—

 
—

 
(6,213
)
 
—

 
(6,213
)
Balance, December 31, 2015
 
$
3,589

 
$
26,154

 
$
—

 
$
—

 
$
29,743

17. Operating Segment Information
The Company operates its business structure within three operating groups. These operating segments (“groups”) are defined based on the reporting and review process used by the Company's chief executive officer and other management.  The operating structure aligns the Company's capabilities and resources with its customers and markets and positions the company for long-term growth and improved profitability. At December 31, 2015 , the Company's three operating groups were:
•
Flight Systems Group develops rockets that are used as small- and medium-class space launch vehicles to place satellites into Earth orbit and escape trajectories, interceptor and target vehicles for missile defense systems and suborbital launch vehicles that place payloads into a variety of high-altitude trajectories. The group also develops and produces medium- and large-class rocket propulsion systems for human and cargo launch vehicles, strategic missiles, missile defense interceptors and target vehicles. Additionally, Flight Systems Group operates in the military and commercial aircraft and launch structures markets. Other products include illuminating flares and aircraft countermeasures.
•
Defense Systems Group develops and produces military small-, medium-, and large-caliber ammunition, small-caliber commercial ammunition, propulsion systems for tactical missiles and missile defense applications, strike weapons, precision weapons and munitions, high-performance gun systems, aircraft survivability systems, fuzes and warheads, energetic materials and special mission aircraft.
•
Space Systems Group develops and produces small- and medium-class satellites that are used to enable global and regional communications and broadcasting, conduct space-related scientific research, and perform other activities related to national security. In addition, Space Systems Group develops and produces human-rated space systems for Earth-orbit and deep-space exploration, including re-supplying the ISS. This group is also a provider of spacecraft components and subsystems and specialized engineering and operations services to U.S. Government agencies.
The Company derives the majority of its sales from contracts with, and prime contractors to, the U.S. Government. Sales to the U.S. Government and U.S. Government prime contractors were as follows:
 
 
U.S. Government Sales
 
Percentage of sales
 
 
As Restated
 
As Restated
Nine months ended December 31, 2015
 
$
2,359,302

 
70
%
Year ended March 31, 2015
 
$
2,332,297

 
75
%
Year ended March 31, 2014
 
$
2,431,704

 
84
%
The CRS I contract with NASA, which is reported within Flight Systems Group and Space Systems Group , comprised 10% (as restated) of total sales in the 2015 transition period .
The Company's small-caliber ammunition contract with the U.S. Army, which is reported within Defense Systems Group , comprised 6% (as restated), 12% (as restated), and 16% (as restated), of total sales in the 2015 transition period, fiscal 2015 and fiscal 2014, respectively. No other single contract accounted for more than 10% of the Company's sales in the 2015 transition period , fiscal 2015 or fiscal 2014 .

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(Amounts in thousands except share and per share data and unless otherwise indicated)

No single commercial customer accounted for 10% or more of the Company's sales in the 2015 transition period , fiscal 2015 , or fiscal 2014 .
The Company's international sales were $766,441 (as restated) in the 2015 transition period , $608,140 (as restated) in fiscal 2015 and $347,502 (as restated) in fiscal 2014 . During the 2015 transition period , 47% of these sales were in Defense Systems Group , 35% were in Space Systems Group and 18% of these sales were in Flight Systems Group . Sales to no individual country outside the United States accounted for more than 4% , 6% , or 5% (as restated) of the Company's sales in the 2015 transition period , fiscal 2015 and fiscal 2014, respectively. Substantially all of the Company's assets are held in the United States.
Operating results and total assets by segment were as follows:
 
 
Nine Months Ended December 31, 2015
 
 
Flight Systems Group
 
Defense Systems Group
 
Space Systems Group
 
Corporate
 
Total
 
 
As Restated
 
As Restated
 
As Restated
 
As Restated
 
As Restated
Sales:
 
 
 
 
 
 
 
 
 
 
External customers
 
$
1,115,404

 
$
1,313,764

 
$
962,216

 
$
—

 
$
3,391,384

Intercompany
 
26,971

 
6,488

 
14,663

 
(48,122
)
 
—

Total
 
$
1,142,375

 
$
1,320,252

 
$
976,879

 
$
(48,122
)
 
$
3,391,384

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
$
196,583

 
$
125,736

 
$
67,185

 
$
(56,899
)
 
$
332,605

Capital expenditures
 
$
48,342

 
$
22,443

 
$
31,217

 
$
2,632

 
$
104,634

Depreciation
 
$
39,183

 
$
15,308

 
$
23,825

 
$
11,058

 
$
89,374

Amortization of intangibles
 
$
410

 
$
514

 
$
54

 
$
32,393

 
$
33,371

Total assets
 
$
2,223,787

 
$
1,184,071

 
$
1,272,425

 
$
643,412

 
$
5,323,695


 
 
Year Ended March 31, 2015
 
 
Flight Systems Group
 
Defense Systems Group
 
Space Systems Group
 
Corporate
 
Total
 
 
As Restated
 
As Restated
 
As Restated
 
As Restated
 
As Restated
Sales:
 
 
 
 
 
 
 
 
 
 
External customers
 
$
1,064,316

 
$
1,654,292

 
$
394,051

 
$
—

 
$
3,112,659

Intercompany
 
29,150

 
178,234

 
16,686

 
(224,070
)
 
—

Total
 
$
1,093,466

 
$
1,832,526

 
$
410,737

 
$
(224,070
)
 
$
3,112,659

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
$
144,847

 
$
185,295

 
$
(5,859
)
 
$
(101,560
)
 
$
222,723

Capital expenditures
 
$
48,861

 
$
44,243

 
$
5,718

 
$
13,882

 
$
112,704

Depreciation
 
$
34,930

 
$
19,793

 
$
11,029

 
$
7,091

 
$
72,843

Amortization of intangibles
 
$
1,232

 
$
1,864

 
$
—

 
$
6,167

 
$
9,263

Total assets
 
$
2,044,201

 
$
1,173,336

 
$
1,454,344

 
$
805,651

 
$
5,477,532


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
 
Year Ended March 31, 2014
 
 
Flight Systems Group
 
Defense Systems Group
 
Space Systems Group
 
Corporate
 
Total
 
 
As Restated
 
As Restated
 
As Restated
 
As Restated
 
As Restated
Sales:
 
 
 
 
 
 
 
 
 
 
External customers
 
$
902,683

 
$
1,633,181

 
$
354,847

 
$
—

 
$
2,890,711

Intercompany
 
8,549

 
283,077

 
16,353

 
(307,979
)
 
—

Total
 
$
911,232

 
$
1,916,258

 
$
371,200

 
$
(307,979
)
 
$
2,890,711

Income (loss) from continuing operations, before interest, income taxes and noncontrolling interest
 
$
110,807

 
$
(157,449
)
 
$
31,117

 
$
(43,360
)
 
$
(58,885
)
Capital expenditures
 
$
54,660

 
$
42,061

 
$
6,760

 
$
2,249

 
$
105,730

Depreciation
 
$
34,490

 
$
20,110

 
$
8,173

 
$
6,419

 
$
69,192

Amortization of intangibles
 
$
1,248

 
$
1,864

 
$
—

 
$
—

 
$
3,112

Total assets
 
$
1,361,544

 
$
1,143,050

 
$
285,019

 
$
701,093

 
$
3,490,706

During fiscal 2015 , the Company recognized a goodwill impairment charge in Space Systems Group of $34,300 . Defense Systems Group had sales to Vista Outdoor for the 2015 transition period of $137,815 (as restated) and for the period from Distribution to March 31, 2015 of $18,928 , in conjunction with two supply agreements. Sales to Sporting Group were previously reported as intercompany sales and eliminated in consolidation and totaled $170,818 for the period April 1, 2014 through February 8, 2015 and $273,246 for fiscal 2014 .
During fiscal 2014 , the Company's Defense Systems Group recorded sales and EBIT of $27,400 in the fourth quarter for a pension segment close out associated with the Radford facility contract.
Certain administrative functions are primarily managed by the Company at the corporate headquarters ("Corporate"). Some examples of such functions are human resources, pension and postretirement benefits, corporate accounting, legal, tax and treasury. Significant assets and liabilities managed at Corporate include those associated with debt, restructuring, pension and postretirement benefits, environmental liabilities, litigation liabilities, strategic growth costs and income taxes.
Costs related to the administrative functions managed by Corporate are either recorded at Corporate or allocated to the business units based on the nature of the expense. The difference between pension and postretirement benefit expense calculated under Financial Accounting Standards and the expense calculated under U.S. Cost Accounting Standards is recorded at the corporate level which provides for greater clarity on the operating results of the business segments. Administrative expenses such as corporate accounting, legal and treasury costs are allocated out to the business segments. Environmental expenses are allocated to each segment based on the origin of the underlying environmental cost. Transactions between segments are recorded at the segment level, consistent with the Company's financial accounting policies. Intercompany balances and transactions involving different segments are eliminated at the Company's consolidated financial statements level and are shown above in Corporate. The amortization expense related to purchase accounting attributed to the acquisition of Orbital is also recorded in Corporate.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

18. Transition Period Comparative Data
The following table presents certain financial information for the nine months ended December 31, 2015 and 2014 respectively:
 
Nine Months Ended
(Amounts in thousands except per share data)
December 31, 2015
 
December 28, 2014
 
As Restated
 
As Restated
 
 
 
(unaudited)
Sales
$
3,391,384

 
$
2,141,509

Gross profit
$
674,148

 
$
477,630

Income from continuing operations
$
185,179

 
$
109,205

Income from discontinued operations
$
1,008

 
$
108,210

Net income attributable to Orbital ATK, Inc.
$
186,187

 
$
217,415

Basic earnings per common share
 
 
 
Income from continuing operations
$
3.12

 
$
3.44

Income from discontinued operations
0.02

 
3.42

Net income attributable to Orbital ATK, Inc.
$
3.14

 
$
6.86

Diluted earnings per common share
 
 
 
Income from continuing operations
$
3.09

 
$
3.37

Income from discontinued operations
0.02

 
3.34

Net income attributable to Orbital ATK, Inc.
$
3.11

 
$
6.71

Note: earnings per share amounts may not recalculate due to rounding.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

19. Quarterly Financial Data (unaudited)
Quarterly Financial Data (Unaudited). As discussed in Note 2, the Company has restated its quarters in the 2015 transition period and fiscal 2015. The quarterly unaudited financial results presented in the table below reflect the impact of the restatement and the restatement adjustments are presented in Note 2:
 
 
Nine Months Ended December 31, 2015
 
 
Quarter Ended
 
 
July 5
 
October 4
 
December 31
 
 
As Restated
 
As Restated
 
As Restated
Sales
 
$
1,103,578

 
$
1,143,246

 
$
1,144,560

Gross profit
 
$
222,861

 
$
208,817

 
$
242,470

Income from continuing operations
 
$
57,836

 
$
74,047

 
$
53,296

Income from discontinued operations
 
$
—

 
$
—

 
$
1,008

Net income attributable to Orbital ATK, Inc.
 
$
57,836

 
$
74,047

 
$
54,304

 
 
 
 
 
 
 
Basic earnings per common share from: (1)
 
 
 
 
 
 
Continuing operations
 
$
0.98

 
$
1.26

 
$
0.90

Discontinued operations
 
—

 
—

 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
0.98

 
$
1.26

 
$
0.92

Diluted earnings per common share from: (1)
 
 
 
 
 
 
Continuing operations
 
$
0.97

 
$
1.25

 
$
0.89

Discontinued operations
 
—

 
—

 
0.02

Net income attributable to Orbital ATK, Inc.
 
$
0.97

 
$
1.25

 
$
0.91

Cash dividends per common share:
 
 
 
 
 
 
Declared
 
$
—

 
$
0.26

 
$
0.26

Paid
 
$
0.26

 
$
0.26

 
$
0.26


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data and unless otherwise indicated)

 
Year Ended March 31, 2015
 
Quarter Ended
 
June 29
 
September 28
 
December 28
 
March 31
 
As Restated
 
As Restated
 
As Restated
 
As Restated
Sales
$
694,956

 
$
722,012

 
$
724,541

 
$
971,150

Gross profit
$
158,239

 
$
158,195

 
$
161,196

 
$
223,273

Income (loss) from continuing operations
$
28,937

 
$
37,894

 
$
42,373

 
$
(39,353
)
Income from discontinued operations
$
53,825

 
$
53,895

 
$
492

 
$
16,837

Net income (loss) attributable to Orbital ATK, Inc.
$
82,762

 
$
91,789

 
$
42,865

 
$
(22,516
)
Basic earnings (loss) per common share from: (1)
 
 
 
 
 
 
 
Continuing operations
$
0.91

 
$
1.20

 
$
1.33

 
$
(0.84
)
Discontinued operations
1.70

 
1.70

 
0.02

 
0.36

Net income (loss) attributable to Orbital ATK, Inc.
$
2.61

 
$
2.90

 
$
1.35

 
$
(0.48
)
Diluted earnings (loss) per common share from: (1)
 
 
 
 
 
 
 
Continuing operations
$
0.87

 
$
1.18

 
$
1.32

 
$
(0.84
)
Discontinued operations
1.63

 
1.68

 
0.02

 
0.36

Net income (loss) attributable to Orbital ATK, Inc.
$
2.50

 
$
2.86

 
$
1.34

 
$
(0.48
)
Cash dividends per common share:
 
 
 
 
 
 
 
Declared
$
0.32

 
$
0.32

 
$
0.32

 
$
0.58

Paid
$
0.32

 
$
0.32

 
$
0.32

 
$
0.32

_________________________________________
(1)
Quarterly earnings (loss) per common share amounts may not total to annual earnings per common share amounts because quarterly and annual earnings per share are calculated separately based on earnings and basic and diluted weighted-average common shares outstanding during the respective periods.
In the fourth quarter of fiscal 2015 , the Company completed the Distribution and Merger. Accordingly, the results of continuing operations include the results of Orbital from the date of the Merger. In addition, the Company recorded $34,900 of transaction fees for advisory, legal and accounting services in connection with the Distribution and Merger.
In the fourth quarter of fiscal 2015 , the Company also recorded a $25,000 litigation charge pertaining to a Raytheon lawsuit settlement, a $34,300 goodwill impairment charge and a $26,626 loss on extinguishment of debt.
In the quarter ended October 4, 2015, the Company recorded a $50,000 gain on settlement of a dispute with a supplier pertaining to the Antares rocket used in the CRS I contract.
20. Subsequent Events (unaudited)
As a result of the Restatement, the Company was unable to file its Quarterly Reports on Form 10-Q with the SEC for the fiscal quarters ended July 3, 2016 and October 2, 2016 ("the 2016 Quarterly Reports"). The Company has entered into an extension agreement with its Senior Credit Facility lender group to extend, until April 14, 2017, the deadline under the Senior Credit Facility for filing with the SEC the 2016 Quarterly Reports, as well as an amended Form 10-Q for the fiscal quarter ended April 3, 2016 and the Company's Annual Report on Form 10-K for 2016. As a result of the extension, the Company is in compliance with the financial covenants as of the date of the filing of this Form 10-K/A based on the Company's restated financial results.
On August 12, 2016, a putative class action complaint, naming the Company, our Chief Executive Officer and our Chief Financial Officer as defendants, was filed in the United States District Court for the Eastern District of Virginia (Steven Knurr v. Orbital ATK, Inc., et al., No. 16-cv-01031 (TSE-MSN)).  The class action complaint asserts claims on behalf of purchasers of Orbital securities for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, arising out of allegedly false and misleading statements and the failure to disclose that: (i) the Company lacked effective control over financial reporting; and (ii) as a result, the Company failed to record an anticipated loss on its long-term contract with the

136

U.S. Army to manufacture and supply small caliber ammunition at the U.S. Army’s Lake City Army Ammunition Plant. The complaint seeks a determination that this matter is a proper class action and certifying the plaintiff as the class representative, an award of damages, an award of reasonable costs and expenses of trial, including counsel and expert fees, and an award of such other relief as deemed appropriate by the Court. The Company intends to defend this action vigorously.
SEC Investigation
The SEC is conducting a non-public investigation relating to our historical accounting practices as a result of the prior restatement of the Company’s unaudited condensed consolidated financial statements for the quarterly periods ended July 5, 2015 and October 4, 2015 described in the Original Filing, and the Company also has voluntarily self-reported to the SEC regarding matters pertaining to the Restatement described in this Form 10-K/A. The Company is cooperating fully with the SEC in connection with these matters.



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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A.    CONTROLS AND PROCEDURES
Internal Investigation
As described in the Explanatory Note to this Form 10-K/A, we have restated our consolidated financial statements for the 2015 transition period, fiscal 2015, fiscal 2014, the quarters in the 2015 transition period and fiscal 2015 presented in Item 8 Financial Statements and Supplementary Data, and the unaudited selected financial data for the fiscal year ended March 31, 2013 ("fiscal 2013") presented in Item 6 Selected Financial Data. The impacts of the restatement on fiscal 2013 are reflected in the consolidated financial statements as an adjustment to the beginning retained earnings in the consolidated financial statements for fiscal 2014. For more information regarding the Restatement, see Note 2 "Restatement" of the notes to consolidated financial statements contained in Part II, Item 8, Financial Statements and Supplementary Data, in this Form 10-K/A. See also Note 19 Quarterly Financial Data (Unaudited) of the notes to consolidated financial statements contained in Part II, Item 8 in this Form 10-K/A for further information regarding the previously reported restatement of the quarterly periods in the 2015 transition period. Capitalized terms used in this Item 9A have been defined in the Explanatory Note.
The Audit Committee of the Board of Directors, in consultation with senior management, determined that the Company should conduct an internal investigation, under its supervision, of the circumstances surrounding the misstatements in the accounting for the Lake City Contract and related matters. The investigation was undertaken by outside counsel, along with independent counsel for the Audit Committee. Counsel received assistance from outside forensic accountants. The investigation is complete.
Based on the internal investigation, the Audit Committee and senior management concluded as follows: Certain personnel at the Small Caliber Systems Division and, in some cases, Defense Systems Group, acted inappropriately and failed to adhere to the high standards established in the Company’s policies and expected by senior management and the Board of Directors. Specifically, with respect to the Lake City Contract: (a) there likely was a bias toward maintaining a targeted profit rate; (b) in some cases, there appears to have been inappropriate use of management reserves to maintain the targeted profit rate; (c) some members of the Small Caliber Systems Division finance staff failed to follow up and inquire further into indicators that cost overruns were occurring, and if such inquiries had been made, it could have led to further contemporaneous discussion and an earlier conclusion that the Lake City Contract was in a forward loss position; and (d) negative information was suppressed, and concerns at the Small Caliber Systems Division about cost overruns were not escalated appropriately to higher-level Company management or finance staff, nor were they communicated to the Audit Committee, the Board of Directors or the independent registered public accounting firms. The Lake City Contract is in a forward loss position, which means that it will result in a net loss over its total contract life. In addition to the investigation findings above, the Company’s identification of the forward loss was also delayed by a number of other factors which obscured the actual performance of the Lake City Contract, including migration to a new plant-wide software system at LCAAP, the unionization of employees at the LCAAP, and other factors. In response to the findings of the internal investigation, the Company has taken and will continue to take significant and comprehensive remedial actions which are described below under “ Remediation Efforts to Address Material Weaknesses. ”
In view of the Restatement, management conducted a comprehensive and intensive review of all relevant material contracts throughout the Company. No material adjustment to the accounting for any of these contracts was required as a result of this review, nor were any circumstances similar to those at the Small Caliber Systems Division discovered.
Disclosure Controls and Procedures
The Company has established disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) to ensure that information required to be disclosed by the Company in reports that the Company files or submits under the Securities Exchange Act of 1934 is accurately recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports the Company files or submits is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
In connection with the Original Filing on March 15, 2016, management of the Company, with the participation of its CEO and CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2015. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2015 because of the material weaknesses in our internal control over financial reporting that were identified in connection with the preparation of the Original Filing and which are described below.
In the Quarterly Reports on Form 10-Q for the quarterly periods ended July 5, 2015 and October 4, 2015, the CEO and CFO had concluded that the Company's disclosure controls and procedures were effective for such quarterly periods. In light of

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the material weaknesses in our internal control over financial reporting that were identified in connection with the preparation of the Original Filing and that are described below, the CEO and CFO re-evaluated their conclusions regarding the Company’s disclosure controls and procedures for the quarterly periods ended July 5, 2015 and October 4, 2015 and concluded and disclosed in the Original Filing that the Company’s disclosure controls and procedures were also not effective as of July 5, 2015 and October 4, 2015 because of the material weaknesses in our internal control over financial reporting described below that existed at that time.
Subsequent to the evaluation made in connection with the Original Filing in March 2016 and in connection with the preparation and filing of the Restatement and this Form 10-K/A, our CEO and CFO re-evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2015. The re-evaluation concluded additional material weaknesses existed, which are described below. As a result of the material weaknesses, our CEO and CFO re-affirmed the conclusion that our disclosure controls and procedures were not effective as of July 5, 2015, October 4, 2015 and December 31, 2015.
Management's Report on Internal Control over Financial Reporting (Restated)
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
The assessment of the effectiveness of the Company’s internal control over financial reporting was based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.
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 Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Material Weaknesses Identified in the Original Filing.
In connection with preparing the Original Filing, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2015 because of material weaknesses in our control environment related to (i) establishing and maintaining accounting policies and procedures related to complex transactions and (ii) maintaining a sufficient complement of personnel with appropriate levels of accounting and controls knowledge, experience and training commensurate with the nature and complexity of our business and contract activity.
These material weaknesses in our control environment contributed to material weaknesses at the control activity level where we (iii) did not design appropriate controls to ensure completeness and accuracy of purchase accounting, specifically we did not maintain controls over measurement period adjustments and controls over the calculation of acquired contracts’ percentage of completion used to recognize revenue. In addition, we (iv) did not maintain controls over the integration of accounting operations of the two merged companies and over the preparation, analysis and review of accounts of the combined business.
These material weaknesses resulted in misstatements that were corrected in the restatement of the Company’s unaudited interim consolidated financial statements for the three months ended July 5, 2015 and October 4, 2015, included in the Original Filing and corrected in the Restatement included in this Form 10-K/A. Additionally, these material weaknesses could have resulted in a misstatement of account balances or disclosures that would have resulted in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Additional Material Weaknesses Identified in this Form 10-K/A .
As part of management’s re-evaluation of our internal control over financial reporting in connection with preparing this Form 10-K/A, management identified two additional material weaknesses in our internal control over financial reporting as of December 31, 2015: (v) the Company did not maintain an effective control environment at our Defense Systems Group and its Small Caliber Systems Division. Specifically, the Small Caliber Systems Division did not maintain a control environment where procedures to escalate accounting issues to Defense Systems Group or Corporate management were followed, which led to the suppression of information by Small Caliber Systems Division management related to cost overruns and the override of certain controls due to pressure to achieve cost savings and maintain a targeted profit rate; and (vi) the material weakness in our control environment contributed to a material weakness at the Small Caliber Systems Division, where the Small Caliber

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Systems Division did not design and maintain controls related to the preparation, review and approval of costs incurred and contract estimates used to determine revenue.
Collectively, the material weaknesses identified in the Original Filing and the additional material weaknesses identified in this Form 10-K/A resulted in misstatements in multiple accounts and the related footnote disclosures for the quarterly and annual periods in the 2015 transition period, fiscal 2015, fiscal 2014 and fiscal 2013. These misstatements were corrected through restatement of the consolidated financial statements and other financial information for those periods, which are described in Part II, Item 8, Financial Statements and Supplementary Data - Note 2. "Restatement," of the notes to consolidated financial statements in this Amendment. Additionally, these material weaknesses could have resulted in a material misstatement of account balances or disclosures that would have resulted in additional material misstatements to the annual or interim consolidated financial statements that would not be prevented or detected.
In Management’s Report on Internal Control over Financial Reporting included in the Original Filing, our management, including our CEO and CFO, concluded that we did not maintain effective internal control over financial reporting as of December 31, 2015 because of the material weaknesses described above in Material Weaknesses Identified in the Original Filing . Management subsequently concluded that the material weaknesses described above in Additional Material Weaknesses Identified in this Form 10-K/A also existed as of December 31, 2015. As a result, management has re-affirmed the conclusion that we did not maintain effective internal control over financial reporting as of December 31, 2015. Accordingly, management has restated its report on internal control over financial reporting to include these additional material weaknesses.
Our internal control over financial reporting at December 31, 2015, was audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Remediation Efforts to Address Material Weaknesses
The Board of Directors and management are fully committed to maintaining a strong internal control environment. The Company has taken and will continue to take significant and comprehensive remedial actions in response to the conduct and other factors that led to the Restatement, including actions to begin to remediate the material weaknesses in internal control over financial reporting.
Remediation to Address the Material Weaknesses Identified in the Original Filing
In the Original Filing, we stated that we would augment our accounting, finance and controls oversight functions with additional professionals to provide increased oversight, appropriate maintenance of policies and procedures related to complex transactions and integration of accounting operations and analysis of accounts of the combined business with particular focus on corporate personnel.
Further, we are performing an enterprise-wide controls improvement program for evaluation of controls across all significant locations utilizing a risk-based approach. We combined the two legacy companies’ controls frameworks and validated that where a risk of a material misstatement existed, key controls were identified to address the risk. In addition, we have taken meaningful steps to implement a number of key controls and processes to increase the oversight of the Company’s multiple businesses. We have taken the following specific remediation initiatives in response to the material weaknesses identified in the Original Filing:
•
Control Environment .
•
We evaluated our accounting organization and augmented our team with additional professionals with the appropriate levels of accounting and controls knowledge, experience and training. Our evaluation included benchmarking key accounting functions and resulted in the identification of a number of areas where the team needed to be augmented. As a result of this evaluation, we have hired 11 additional accounting and controls professionals in key areas of technical accounting, general accounting oversight, business unit accounting, external reporting and controls. Each of these 11 new professionals is a CPA and 9 of the 11 have experience with a “Big 4” accounting firm. We will continue to evaluate our accounting organization and augment the team as appropriate.
•
We revised our accounting policy for loss contracts to include general and administrative costs in the measurement of loss contracts.
•
We designed an enterprise-wide process to timely identify, track and appropriately resolve and conclude on complex transactions and disclosures.
•
Control-Activity Level .
•
We redesigned, developed and implemented processes and controls over the execution of purchase accounting.
•
We revised our account reconciliation policy and controls, including the timing of reconciliations, thresholds for review and the process for resolving reconciling items. We continue to monitor the reconciliation control execution and will make further changes as necessary. In addition, we implemented an enhanced company-

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wide balance sheet review process to perform a more detailed analysis of accounts, including balance composition, fluctuation and trend analysis, which is performed at a segment level.
We believe the remediation steps outlined above have improved and will continue to improve the effectiveness of our internal control over financial reporting. While we have made meaningful progress on strengthening our internal controls relative to the original material weaknesses (i), (ii), and (iv) which were identified in the Original Filing, we have not fully tested all our remediation actions to verify the effectiveness of their design or operation.
Regarding material weakness (iii), which was identified in the Original Filing as a material weakness in our internal control over financial reporting as of December 31, 2015, we have subsequently concluded that the Company completed the design and implementation of new purchase accounting controls, which have subsequently remediated material weakness (iii) during the quarter ended December 31, 2016.
Remediation to Address the Additional Material Weaknesses Identified in this Form 10-K/A
In addition to continuing to implement the remediation initiatives described above in response to the material weaknesses identified in the Original Filing, we are implementing the following remedial actions in response to the conduct and other factors that led to the Restatement, including actions to remediate the additional material weaknesses in internal control over financial reporting identified in this Form 10-K/A:
Control Environment .
•
Certain Small Caliber Systems Division personnel responsible for the inappropriate behaviors described under “Internal Investigation” above are no longer employed by the Company. In addition, certain members of the Defense Systems Group leadership will receive appropriate training, adverse compensation action and additional supervision.
•
Additional accounting, controls and financial reporting personnel have been added to the Small Caliber Systems Division to take responsibility for its financial data forming part of the basis for preparation of these restated consolidated financial statements .
•
We are increasing communication and training to employees regarding internal control over financial reporting, disclosure controls and procedures, and emphasizing the importance of adherence to our policies and procedures.
Control Activity-Level .
•
We completed a detailed review of the Lake City Contract and the underlying estimates for its percentage of completion revenue recognition accounting model and developed extensive analysis and procedures to develop our management estimates going forward.
•
We are designing and implementing enhancements to the internal controls related to the reconciliation and analysis of unbilled accounts receivable.
The Board of Directors and management believe that the Company’s remediation actions will provide an appropriate control environment going forward once the material weaknesses disclosed herein are remediated and other actions described herein have been taken.
While we have taken measures to strengthen our internal controls related to these additional material weaknesses, we have not fully completed our assessment of these additional controls.
As our management continues to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting, we may determine to take additional measures to address these deficiencies or determine to modify certain of the remediation measures described above.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the quarter ended December 31, 2015.
ITEM 9B.    OTHER INFORMATION
None.

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PART III
The information required by Item 10, other than the information presented below, as well as the information required by Items 11 through 14 is incorporated by reference from the Company's definitive Proxy Statement for the Company's 2016 Annual Meeting (the "2016 Proxy Statement") pursuant to General Instruction G(3) to Form 10-K. The Company filed the 2016 Proxy Statement with the SEC on March 25, 2016.
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding the Company's directors is incorporated by reference from the section entitled Proposal 1—Election of Directors in the Company's 2016 Proxy Statement. Information regarding the Company's executive officers is set forth under the heading Executive Officers in Item 1 of Part I of this Form 10-K/A and is incorporated by reference in this Item 10.
Information about compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference from the section entitled Section 16(a) Beneficial Ownership Reporting Compliance in the 2016 Proxy Statement.
Information regarding the Company's code of ethics (the Company's Code of Ethics and Business Conduct ), which the Company has adopted for all directors, officers and employees, is incorporated by reference from the section entitled Corporate Governance—Code of Ethics and Business Conduct in the 2016 Proxy Statement. The Company's Code of Ethics and Business Conduct is available on our website at www.orbitalatk.com by selecting Investors and then Corporate Governance .
Information regarding the Company's Audit Committee, including the Audit Committee's financial experts, is incorporated by reference from the section entitled Corporate Governance—Meetings of the Board and Board Committees—Audit Committee in the 2016 Proxy Statement.
ITEM 11.    EXECUTIVE COMPENSATION
Information about compensation of the Company's named executive officers is incorporated by reference from the section entitled Executive Compensation in the 2016 Proxy Statement. Information about compensation of the Company's directors is incorporated by reference from the section entitled Director Compensation in the 2016 Proxy Statement. Information about compensation committee interlocks is incorporated by reference from the section entitled Corporate Governance—Compensation Committee Interlocks and Insider Participation in the 2016 Proxy Statement.
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information about security ownership of certain beneficial owners and management is incorporated by reference from the section entitled Security Ownership of Certain Beneficial Owners and Management in the 2016 Proxy Statement. Information regarding securities authorized for issuance under equity compensation plans is set forth under the heading Equity Compensation Plan Information in Item 5 of Part II of this Form 10-K/A and is incorporated by reference in this Item 12.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding transactions with related persons is incorporated by reference from the section entitled Certain Relationships and Related Transactions in the 2016 Proxy Statement.
Information about director independence is incorporated by reference from the section entitled Corporate Governance—Director Independence in the 2016 Proxy Statement.
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information about principal accountant fees and services as well as related pre-approval policies and procedures is incorporated by reference from the section entitled Fees Paid to Independent Registered Public Accounting Firm in the 2016 Proxy Statement.

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PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)   Documents filed as part of this Report
1.     Financial Statements
The following is a list of all of the Consolidated Financial Statements included in Item 8 of Part II.
 
Page
2.     Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because of the absence of the conditions under which they are required or because the information required is shown in the financial statements or notes thereto.
3.     Exhibits
See Exhibit Index at the end of this Report.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ORBITAL ATK, INC.
Date: February 23, 2017
 
By:
 
/s/ David W. Thompson
 
 
 
 
Name:
 
David W. Thompson
 
 
 
 
Title:
 
President and Chief Executive Officer
 
 
 
 
 
 
( duly authorized and principal executive officer)


 
 
 
Date: February 23, 2017
 
By:
 
/s/ Garrett E. Pierce
 
 
 
 
Name:
 
Garrett E. Pierce
 
 
 
 
Title:
 
Chief Financial Officer
 
 
 
 
 
 
(duly authorized and principal financial officer)





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ORBITAL ATK, INC.
FORM 10-K FOR THE NINE-MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2015
EXHIBIT INDEX
The following exhibits are filed electronically with this report unless the exhibit number is followed by an asterisk (*), in which case the exhibit is incorporated by reference from the document listed. Exhibit numbers followed by two asterisks (**) were filed with the Registrant's original Form 10-K for the nine-month transition period ended December 31, 2015 filed on March 15, 2016. The applicable Securities and Exchange Commission File Number is 1-10582 unless otherwise indicated. Exhibit numbers followed by a pound sign (#) identify exhibits that are either a management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K/A. Excluded from this list of exhibits, pursuant to Paragraph (b) (4) (iii) (A) of Item 601 of Regulation S-K, may be one or more instruments defining the rights of holders of long-term debt of the Registrant. The Registrant hereby agrees that it will, upon request of the Securities and Exchange Commission, furnish to the Commission a copy of any such instrument.

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Exhibit
Number
 
Description of Exhibit (and document from which incorporated by reference, if applicable)
2.1*
 
Transaction Agreement, dated at April 28, 2014 among ATK, Vista SpinCo Inc., Vista Merger Sub Inc. and Orbital Sciences (Exhibit 2.1 to Form 8-K dated April 28, 2014).
 
 
 
3(i).1*
 
Restated Certificate of Incorporation of the Registrant, effective July 20, 1990, including Certificate of Correction effective September 21, 1990 (Exhibit 3(i).1 to Form 10-Q for the quarter ended September 28, 2008).
 
 
 
3(i).2*
 
Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of the Registrant, effective September 28, 1990 (Exhibit 3(i).2 to Form 10-Q for the quarter ended September 28, 2008).
 
 
 
3(i).3*
 
Certificate of Amendment of Restated Certificate of Incorporation, effective August 8, 2001 (Exhibit 3(i).3 to Form 10-Q for the quarter ended September 28, 2008).
 
 
 
3 (i).4*
 
Certificate of Amendment of Restated Certificate of Incorporation, effective August 7, 2002 (Exhibit 3(i).4 to Form 10-Q for the quarter ended September 28, 2008).
 
 
 
3 (i).5*
 
Certificate of Amendment of Restated Certificate of Incorporation, effective August 5, 2008 (Exhibit 3(i).5 to Form 10-Q for the quarter ended September 28, 2008).
 
 
 
3 (i).6*
 
Certificate of Amendment of Restated Certificate of Incorporation, effective February 9, 2015 (Exhibit 3.1 to Form 8-K dated February 9, 2015).
 
 
 
3(ii).1*
 
Bylaws of the Registrant, as Amended and Restated Effective March 10, 2015 (Exhibit 3.1 to Form 8-K dated March 10, 2015).
 
 
 
4.1.1*
 
Indenture, dated at November 1, 2013, among the Registrant, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to Form 8-K dated November 1, 2013).
 
 
 
4.1.2*
 
Supplemental Indenture, dated at November 1, 2013, among the Registrant, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.2 to Form 8-K dated November 1, 2013).
 
 
 
4.1.3*
 
Second Supplemental Indenture, dated at February 20, 2015, among the Registrant, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1.3 to the Form 10-K for the year ended March 31, 2015 (the "Fiscal 2015 Form 10-K")).
 
 
 
4.1.4*
 
Form of 5.25% Senior Notes due 2021 (Exhibit A to Exhibit 4.1 to Form 8-K dated November 1, 2013).
 
 
 
4.1.5*
 
Registration Rights Agreement, dated November 1, 2013, by and among the Registrant, the subsidiaries of the Registrant party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers named therein (Exhibit 4.4 to Form 8-K dated November 1, 2013).
 
 
 
4.2.1*
 
Indenture, dated as of September 29, 2015, among the Registrant, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to Form 8-K dated September 29, 2015).
 
 
 
4.2.2*
 
Form of 5.50% Senior Notes due 2023 (Exhibit A to Exhibit 4.1 to Form 8-K dated September 29, 2015).
 
 
 
4.2.3*
 
Registration Rights Agreement, dated September 29, 2015, by and among the Registrant, the subsidiaries of the Registrant party thereto and Wells Fargo Securities, LLC, as representative of the several initial purchasers named therein (Exhibit 4.3 to Form 8-K dated September 29, 2015).
 
 
 
Exhibit
Number
 
Description of Exhibit (and document from which incorporated by reference, if applicable)

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10.1*
 
Credit Agreement, dated as of September 29, 2015, by and among the Registrant, as Borrower, the subsidiaries of the Borrower party thereto as Guarantors, the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, Wells Fargo Bank, National Association, Citibank, N.A., Bank of America, N.A., JPMorgan Chase Bank, N.A., U.S. Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Issuing Lenders, Wells Fargo Bank, National Association and U.S. Bank, National Association, as Swingline Lenders, Wells Fargo Securities, LLC, CitiGroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, U.S. Bank, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and SunTrust Robinson Humphrey, Inc., as Joint Lead Arrangers and Joint Bookrunners, CitiGroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as Co-Syndication Agents, and U.S. Bank, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and SunTrust Bank, as Co-Documentation Agents (Exhibit 10.1 to Form 8-K dated September 29, 2015).
 
 
 
10.2*
 
Security and Pledge Agreement, dated as of September 29, 2015, among the Registrant, the other Obligors party thereto and Wells Fargo Bank, National Association, as Administrative Agent (Exhibit 10.2 to Form 8-K dated September 29, 2015).
 
 
 
10.3*
 
Tax Matters Agreement, dated at February 9, 2015, between the Registrant and Vista Outdoor Inc (Exhibit 10.1 to Form 8-K dated February 9, 2015).
 
 
 
10.4.1*
 
Purchase and Sale Agreement, dated at October 28, 1994, between the Registrant and Hercules Incorporated (the "Purchase Agreement"), including certain exhibits and certain schedules and a list of schedules and exhibits omitted (Exhibit 2 to Form 8-K dated October 28, 1994).
 
 
 
10.4.2*
 
Master Amendment to Purchase Agreement, dated at March 15, 1995, between the Registrant and Hercules Incorporated, including exhibits (Exhibit 2.2 to Form 8-K dated March 15, 1995).
 
 
 
10.5.1*
 
Environmental Agreement, dated at October 28, 1994, between the Registrant and Hercules Incorporated (Exhibit 10.2.1 to the Form 10-K for the year ended March 31, 2003 (the "Fiscal 2003 Form 10-K")).
 
 
 
10.5.2*
 
Amendment to Environmental Agreement, dated March 15, 1995 (Exhibit 10.2.2 to the Fiscal 2003 Form 10-K).
 
 
 
10.6*#
 
Form of Indemnification Agreement between the Registrant and its directors and officers (Exhibit 10.5 to the Fiscal 2015 Form 10-K).
 
 
 
10.7*#
 
Description of non-employee Directors' cash and equity compensation ("Director Compensation—Summary Compensation Information" on pages 22-23 of Schedule 14A filed on June 24, 2015).
 
 
 
10.8*#
 
Non-Employee Director Stock Program under the Orbital ATK, Inc. 2015 Stock Incentive Plan (Exhibit 10.4 to Form 10-Q for the quarter ended October 4, 2015).
 
 
 
10.9.1*#
 
Non-Employee Director Restricted Stock Award and Stock Deferral Program (as amended and restated October 30, 2007) Under the Alliant Techsystems Inc. 2005 Stock Incentive Plan (Exhibit 10.1 to Form 8-K dated October 29, 2007).
10.9.2*#
 
Amendment No. 1 (effective July 31, 2013) to Non-Employee Director Restricted Stock Award and Stock Deferral Program (as amended and restated October 30, 2007) Under the Alliant Techsystems Inc. 2005 Stock Incentive Plan (Exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 2013).
 
 
 
10.10*#
 
Amended and Restated Non-Employee Director Restricted Stock Plan, Amended and Restated at October 30, 2007 (Exhibit 10.3 to Form 8-K dated October 29, 2007).
 
 
 
10.11*#
 
Deferred Fee Plan for Non-Employee Directors, as amended and restated October 30, 2007 (Exhibit 10.2 to Form 8-K dated October 29, 2007).
 
 
 
10.12*#
 
Description of compensation arrangement for Blake E. Larson, the Registrant's Chief Operating Officer, (Item 5.02 of Form 8-K dated September 11, 2014).

 
 
 
10.13*#
 
Alliant Techsystems Inc. Executive Officer Incentive Plan (As Amended and Restated Effective August 2, 2011) (Exhibit 10.1 to Form 8-K dated August 1, 2011).
 
 
 
10.14.1*#
 
Orbital ATK, Inc. 2015 Stock Incentive Plan (Exhibit 4.2 to the Registration Statement on Form S-8 (File No. 333-206123 filed August 6, 2015).
 
 
 
10.14.2**#
 
Form of Non-Qualified Stock Option Award Agreement (Installment Vesting) under the Orbital ATK, Inc. 2015 Stock Incentive Plan.
 
 
 

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Table of Contents

Exhibit
Number
 
Description of Exhibit (and document from which incorporated by reference, if applicable)
10.14.3**#
 
Form of Performance Share Award Agreement under the Orbital ATK, Inc. 2015 Stock Incentive Plan for the three-fiscal-year period beginning January 1, 2016.
 
 
 
10.14.4**#
 
Form of Restricted Stock Award Agreement (Installment Vesting) under the Orbital ATK, Inc. 2015 Stock Incentive Plan.
 
 
 
10.15.1*#
 
Alliant Techsystems Inc. 2005 Stock Incentive Plan (As Amended and Restated Effective August 7, 2012) (Exhibit 10.1 to Form 8-K dated August 7, 2012).
 
 
 
10.15.2*#
 
Form of Non-Qualified Stock Option Award Agreement (Installment Vesting) under the Alliant Techsystems Inc. 2005 Stock Incentive Plan, for option grants in the years ended March 31, 2012 and March 31, 2013 (Exhibit 10.13.3 to the Form 10-K for the year ended March 31, 2012).
 
 
 
10.15.3*#
 
Form of Non-Qualified Stock Option Award Agreement (Installment Vesting) under the Alliant Techsystems Inc. 2005 Stock Incentive Plan, for option grants in the year ended March 31, 2014 (Exhibit 10.12.4 to the Form 10-K for the year ended March 31, 2014 (the "Fiscal 2014 Form 10-K")).
 
 
 
10.15.4*#
 
Amendment to ATK Non-Qualified Stock Option Award Agreement (applicable to options outstanding at February 9, 2015) (Exhibit 10.13.5 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.5*#
 
Form of Non-Qualified Stock Option Award Agreement (Installment Vesting) under the Alliant Techsystems Inc. 2005 Stock Incentive Plan, for option grants in the year ended March 31, 2015 (Exhibit 10.13.6 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.6*#
 
Form of Performance Growth Award Agreement under the Alliant Techsystems Inc. 2005 Stock Incentive Plan for the Fiscal Year 2014-2016 Performance Period (Exhibit 10.12.7 to the Form 10-K for the year ended March 31, 2013).
 
 
 
10.15.7*#
 
Form of Performance Growth Award Agreement under the Alliant Techsystems Inc. 2005 Stock Incentive Plan for the Fiscal Year 2015-2017 Performance Period (Exhibit 10.12.8 to the Fiscal 2014 Form 10-K).
 
 
 
10.15.8*#
 
Amendment to ATK Performance Growth Award Agreement (for certain corporate officers remaining with Orbital ATK, Inc.) (Exhibit 10.13.9 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.9*#
 
Amendment to ATK Performance Growth Award Agreement (for Michael A. Kahn and Blake E. Larson) (Exhibit 10.13.10 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.10*#
 
Form of Performance Growth Award Agreement under the Alliant Techsystems Inc. 2005 Stock Incentive Plan for the three-fiscal-year period beginning April 1, 2015 (Exhibit 10.13.11 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.11*#
 
Form of Restricted Stock Award Agreement under the Alliant Techsystems Inc. 2005 Stock Incentive Plan (Exhibit 10.1 to Form 8-K dated January 30, 2012).
 
 
 
10.15.12*#
 
Form of Restricted Stock Award Agreement (Installment Vesting) under the Alliant Techsystems Inc. 2005 Stock Incentive Plan, for restricted stock grants in the year ended March 31, 2014 (Exhibit 10.12.11 to the Fiscal 2014 Form 10-K).
 
 
 
10.15.13*#
 
Amendment to ATK Restricted Stock Award Agreement (for restricted stock awards outstanding as of February 9, 2015) (Exhibit 10.13.14 to the Fiscal 2015 Form 10-K).
 
 
 
10.15.14*#
 
Form of Restricted Stock Award Agreement (Installment Vesting) under the Alliant Techsystems Inc. 2005 Stock Incentive Plan, for restricted stock grants in the year ended March 31, 2015 (Exhibit 10.13.15 to the Fiscal 2015 Form 10-K).
 
 
 
10.16.1*#
 
Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan (Exhibit 10.16.1 to the Form 10-K for the year ended March 31, 2007).
 
 
 
10.16.2*#
 
Amendment No. 1 to Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan effective May 8, 2001 (Exhibit 10.7.2 to the Form 10-K for the year ended March 31, 2002 (the "Fiscal 2002 Form 10-K")).
 
 
 
10.16.3*#
 
Amendment No. 2 to Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan effective March 19, 2002 (Exhibit 10.7.3 to the Fiscal 2002 Form 10-K).
 
 
 

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Exhibit
Number
 
Description of Exhibit (and document from which incorporated by reference, if applicable)
10.16.4*#
 
Amendment No. 3 to Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan effective October 29, 2002 (Exhibit 10.6.4 to the Form 10-K for the year ended March 31, 2004).
 
 
 
10.16.5*#
 
Amendment No. 4 to Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan effective October 29, 2002 (Exhibit 10.3 to Form 8-K dated January 30, 2007).
 
 
 
10.17.1**#
 
Orbital ATK, Inc. Nonqualified Deferred Compensation Plan, as Amended and Restated February 16, 2016.
 
 
 
10.17.2*#
 
Trust Agreement for Nonqualified Deferred Compensation Plan effective January 1, 2003 (Exhibit 10.9.2 to the Fiscal 2003 Form 10-K).
 
 
 
10.18*#
 
Alliant Techsystems Inc. Executive Severance Plan as amended effective October 29, 2007 (Exhibit 10.7 to Form 8-K dated October 29, 2007).
 
 
 
10.19*#
 
Alliant Techsystems Inc. Defined Benefit Supplemental Executive Retirement Plan, as Amended and Restated effective February 9, 2015 (Exhibit 10.17 to the Fiscal 2015 Form 10-K).
 
 
 
10.20.1*#
 
Alliant Techsystems Inc. Defined Contribution Supplemental Executive Retirement Plan, as Amended and Restated effective July 1, 2013 (Exhibit 10.2 to Form 8-K dated January 31, 2013).
 
 
 
10.20.2*#
 
First Amendment, effective at February 9, 2015, to the Alliant Techsystems Inc. Defined Contribution Supplemental Executive Retirement Plan, as Amended and Restated effective July 1, 2013 (Exhibit 10.18.2 to the Fiscal 2015 Form 10-K).
 
 
 
10.21**#
 
Orbital ATK, Inc. Income Security Plan Effective May 5, 2015.
 
 
 
10.22*#
 
Alliant Techsystems Inc. Income Security Plan, As Amended and Restated, Effective July 1, 2013 (Exhibit 10.1 to Form 8-K dated July 30, 2013).
 
 
 
10.23.1*#
 
Trust Under Income Security Plan dated May 4, 1998 (effective March 2, 1998), by and between the Registrant and U.S. Bank National Association (Exhibit 10.20.1 to the Form 10-K for the fiscal year ended March 31, 1998).
 
 
 
10.23.2*#
 
First Amendment to the Trust Under the Income Security Plan effective December 4, 2001, by and between the Registrant and U.S. Bank National Association (Exhibit 10.17.2 to the Fiscal 2002 Form 10-K).
 
 
 
10.24*#
 
Executive Severance Agreement, dated November 30, 2007, between Orbital Sciences Corporation and Garrett E. Pierce (Exhibit 10.5 to Form 8-K dated February 9, 2015).
 
 
 
10.25.1*#
 
Orbital Sciences Corporation Amended and Restated 2005 Stock Incentive Plan, assumed by the Registrant in the Merger (Exhibit 99.2 to the Registrant's Registration Statement on Form S-8 dated February 9, 2015).
 
 
 
10.25.2*#
 
2012 Form of Restricted Stock Unit Agreement of Orbital Sciences Corporation under the Orbital Sciences Corporation Amended and Restated 2005 Stock Incentive Plan, assumed by the Registrant in the Merger (Exhibit 10.22.2 to the Fiscal 2015 Form 10-K).
 
 
 
10.25.3*#
 
2014 Form of Restricted Stock Unit Agreement of Orbital Sciences Corporation under the Orbital Sciences Corporation Amended and Restated 2005 Stock Incentive Plan, assumed by the Registrant in the Merger (Exhibit 10.22.3 to the Fiscal 2015 Form 10-K).
 
 
 
10.26.1*#
 
Orbital Sciences Corporation Nonqualified Management Deferred Compensation Plan, assumed by the Registrant in the Merger (Exhibit 10.13 to Orbital Sciences Corporation's Annual Report on Form 10-K for the year ended December 31, 2006).
 
 
 
10.26.2**#
 
Amendment Number One to the Orbital Sciences Corporation Nonqualified Management Deferred Compensation Plan, effective January 1, 2011.
12**
 
Computation of Ratio of Earnings to Fixed Charges (as restated).
 
 
 
14*
 
The Registrant's Code of Ethics and Business Conduct is available on the Corporate Governance  page of the Registrant's website at http://phx.corporate-ir.net/phoenix.zhtml?c=81036&p=irol-govHighlights by selecting the Code of Conduct link.
 
 
 
21**
 
Subsidiaries of the Registrant as of December 31, 2015.
 
 
 

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Exhibit
Number
 
Description of Exhibit (and document from which incorporated by reference, if applicable)
 
 
 
23.1
 
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
 
 
 
23.2
 
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
 
 
 
31.1
 
Certification of Chief Executive Officer.
 
 
 
31.2
 
Certification of Chief Financial Officer.
 
 
 
32
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101.INS
 
XBRL Instance Document.
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
101.LAB
 
XBRL Taxonomy Extension Labels Linkbase Document.
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.


151