Orbital ATK’s [OA] costs and schedule under its Cargo Resupply Services (CRS) contract with NASA remain on target four months after one of the company’s rockets exploded near the launch pad seconds into the start of a mission, the company’s chief executive said on Feb. 19.
David Thompson, president and CEO of Orbital ATK, said on an investor call the company remains on track to complete all deliveries to the International Space Station (ISS) by the end of 2016 as required under the CRS contract. The investor call was to discuss the way forward for Thompson’s company following the Feb. 9 merger of the defense and space operations of the former ATK with Orbital Sciences.
Orbital ATK will be ready by October to go with a launch of its enhanced Cygnus resupply craft aboard an Atlas V rocket supplied by United Launch Alliance, which is a joint venture between Boeing [BA] and Lockheed Martin [LMT]. Launch will take place Cape Canaveral Air Force Station, Fla. Thompson said that NASA may want the launch to take place in October or delay it until November depending on activities at the Space Station.
Then on March 1, 2016, Orbital ATK plans to launch Cygnus aboard an upgraded version of its Antares rocket from NASA’s Wallops Island, Va., launch pad, Thompson said.
“So far, the costs and all of the detailed schedules continue to look good,” Thompson said. “We are still on track to complete all of the deliveries as required under the original CRS-1 contract by the end of 2016 and we still see that being accomplished with no adverse financial impacts to the company.”
An Antares rocket equipped with a refurbished Russian engine failed during an Oct. 28 launch from Wallops, prompting Orbital ATK to seek out the Atlas rocket for its next CRS mission. The rocket failure is being attributed to the Russian engine and the upgraded Antares will feature a new main propulsion system.
Thomson said there won’t be a demonstration flight of the re-engined Antares but the company in January 2016 will test fire the first stage of the rocket with the new engine at the launch pad.
Orbital ATK and Space Exploration Technologies (SpaceX) each have contracts with NASA for CRS. The agency is hosting a new competition for CRS services. Boeing, Orbital ATK, and Lockheed Martin have said they are pursuing the CRS-2 contract while SpaceX has declined to comment.
On the Feb. 19 investor call Thompson said the new company will offer greater value for its customers and shareholders through cost reductions achieved from “greater vertical integration and merger-enabled overhead efficiencies.” Another new feature of the company will be “expanded revenue opportunities that will be pursued through greater systems engineering ‘knowhow’ and strengthened technical and industrial resources,” he said.
A third new feature of Orbital ATK will be a significant increase in the ability to deploy capital to boost investment returns, Thompson said. The company will continue investments in research and development and in capital expenditures, and expects to allocate its free cash flow to dividends, stock repurchases and required debt reductions.
The company last week said it expects to generate $1 billion in free cash flow during the next three years. As a merged entity, the company’s pro forma 2014 results included $4.4 billion in sales and net income of about $250 million, $4.20 earnings per share.
Orbital ATK hasn’t provided financial guidance for 2015 but is expected to do so when it reports its financial results in May. Thompson did provide the company’s largest revenue contributors for 2014, with about $430 million coming from small caliber ammunition contracts for the Army, just less than $300 million for NASA’s cargo delivery missions; about $250 million for the propulsion systems for NASA’s large class space launch system; $225 million for medium and large caliber ammunition for the Army and other military services and about $150 million each for the Ground-based Missile Defense interceptors for prime contractor Boeing and various tactical missile program work for prime contractor Raytheon [RTN].
Thompson also said that just less than 75 percent of the company’s work is through prime contracts and the rest as a tier one supplier.