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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.75 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Kratos Defense & Security Solutions Inc has a M-score of -2.75 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -4.19   Max: -1.45
Current: -2.75

-4.19
-1.45

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was -1.45. The lowest was -4.19. And the median was -2.86.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Kratos Defense & Security Solutions Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 0.9746+0.528 * 1.0044+0.404 * 1.0376+0.892 * 0.9136+0.115 * 1.2027
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9829+4.679 * -0.0414-0.327 * 1.062
=-2.75

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $131.6 Mil.
Revenue was 221.5 + 217.1 + 229.3 + 200.1 = $868.0 Mil.
Gross Profit was 56.2 + 53 + 56.4 + 52.6 = $218.2 Mil.
Total Current Assets was $374.9 Mil.
Total Assets was $1,138.8 Mil.
Property, Plant and Equipment(Net PPE) was $82.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $39.1 Mil.
Selling, General & Admin. Expense(SGA) was $173.4 Mil.
Total Current Liabilities was $226.1 Mil.
Long-Term Debt was $663.0 Mil.
Net Income was -2.2 + -10.9 + -49.9 + -15 = $-78.0 Mil.
Non Operating Income was 0.6 + -0.4 + -38.9 + 0.2 = $-38.5 Mil.
Cash Flow from Operations was 25.9 + -7.9 + -11.5 + 1.2 = $7.7 Mil.
Accounts Receivable was $147.8 Mil.
Revenue was 235.7 + 226.4 + 235.2 + 252.8 = $950.1 Mil.
Gross Profit was 61.5 + 52.3 + 60.4 + 65.7 = $239.9 Mil.
Total Current Assets was $430.3 Mil.
Total Assets was $1,216.6 Mil.
Property, Plant and Equipment(Net PPE) was $84.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $53.4 Mil.
Selling, General & Admin. Expense(SGA) was $193.1 Mil.
Total Current Liabilities was $251.0 Mil.
Long-Term Debt was $643.4 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(131.6 / 868) / (147.8 / 950.1)
=0.1516129 / 0.15556257
=0.9746

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(53 / 950.1) / (56.2 / 868)
=0.25249974 / 0.25138249
=1.0044

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (374.9 + 82.6) / 1138.8) / (1 - (430.3 + 84.8) / 1216.6)
=0.59826133 / 0.57660694
=1.0376

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=868 / 950.1
=0.9136

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(53.4 / (53.4 + 84.8)) / (39.1 / (39.1 + 82.6))
=0.38639653 / 0.32128184
=1.2027

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(173.4 / 868) / (193.1 / 950.1)
=0.19976959 / 0.20324176
=0.9829

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((663 + 226.1) / 1138.8) / ((643.4 + 251) / 1216.6)
=0.78073411 / 0.73516357
=1.062

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-78 - -38.5 - 7.7) / 1138.8
=-0.0414

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Kratos Defense & Security Solutions Inc has a M-score of -2.75 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Kratos Defense & Security Solutions Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.45790.58991.02680.84690.69761.31061.11580.81650.55420.9751
GMI 0.9751.27311.15650.80271.06950.92140.77051.00921.05111.0043
AQI 1.31871.26621.16920.91970.94361.05260.98460.97390.99651.0376
SGI 0.51421.00531.26451.47831.16881.22121.74761.35760.98080.9131
DEPI 1.30650.57451.13350.72050.80892.1090.78410.98621.04531.2027
SGAI 1.38361.07881.09890.61830.83460.98361.40411.01161.0190.9839
LVGI 0.99231.33741.0971.07740.92661.37031.11091.0121.01751.062
TATA -0.0146-0.1134-0.1077-0.3326-0.2806-0.0276-0.022-0.1319-0.0492-0.0414
M-score -2.47-3.30-2.61-3.88-3.88-2.14-2.07-2.96-3.12-2.75

Kratos Defense & Security Solutions Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.7650.81650.85830.8160.89830.55450.99291.20891.05130.9746
GMI 0.93031.00771.05561.05551.07541.05261.03761.0440.99451.0044
AQI 1.06610.97390.99481.08590.95820.99651.0150.99711.03221.0376
SGI 1.47921.35761.26471.21031.06420.98030.88630.86730.9020.9136
DEPI 0.73860.98621.06731.06171.02961.04531.11831.2011.18691.2027
SGAI 1.13541.02110.95680.960.98781.01071.05711.04161.02430.9829
LVGI 0.95861.0121.00851.07591.09311.01751.01981.07271.05611.062
TATA -0.0471-0.1319-0.1226-0.136-0.1222-0.0492-0.0513-0.041-0.0326-0.0414
M-score -2.54-2.96-2.91-3.04-3.09-3.11-2.80-2.58-2.66-2.75
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