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Kratos Defense & Security Solutions, Inc. (NAS:KTOS)
Beneish M-Score
-2.71 (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 -2.71 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -4.03   Max: -1.5
Current: -2.71

-4.03
-1.5

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions, Inc. was -1.50. The lowest was -4.03. And the median was -2.71.


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 * 0.9916+0.528 * 1.0526+0.404 * 0.9965+0.892 * 0.9803+0.115 * 1.0453
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0175+4.679 * -0.0482-0.327 * 1.0175
=-2.71

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $267.9 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 $194.4 Mil.
Total Current Liabilities was $251.0 Mil.
Long-Term Debt was $643.4 Mil.
Net Income was -7.4 + -9.9 + -9.6 + -10.3 = $-37.2 Mil.
Non Operating Income was -0.2 + 0.8 + 0.2 + -0.7 = $0.1 Mil.
Cash Flow from Operations was 10.3 + 2.6 + 3.3 + 5.1 = $21.3 Mil.
Accounts Receivable was $275.6 Mil.
Revenue was 263.6 + 276.3 + 219.8 + 209.5 = $969.2 Mil.
Gross Profit was 68 + 74.1 + 57.7 + 57.8 = $257.6 Mil.
Total Current Assets was $455.4 Mil.
Total Assets was $1,283.9 Mil.
Property, Plant and Equipment(Net PPE) was $85.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.0 Mil.
Selling, General & Admin. Expense(SGA) was $194.9 Mil.
Total Current Liabilities was $278.8 Mil.
Long-Term Debt was $648.8 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)
=(267.9 / 950.1) / (275.6 / 969.2)
=0.28197032 / 0.28435823
=0.9916

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)
=(52.3 / 969.2) / (61.5 / 950.1)
=0.26578622 / 0.25249974
=1.0526

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 - (430.3 + 84.8) / 1216.6) / (1 - (455.4 + 85.6) / 1283.9)
=0.57660694 / 0.57862762
=0.9965

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
=950.1 / 969.2
=0.9803

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))
=(58 / (58 + 85.6)) / (53.4 / (53.4 + 84.8))
=0.40389972 / 0.38639653
=1.0453

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)
=(194.4 / 950.1) / (194.9 / 969.2)
=0.20461004 / 0.20109369
=1.0175

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)
=((643.4 + 251) / 1216.6) / ((648.8 + 278.8) / 1283.9)
=0.73516357 / 0.72248617
=1.0175

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
=(-37.2 - 0.1 - 21.3) / 1216.6
=-0.0482

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 -2.71 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.09271.45140.61581.02970.81490.70141.32191.10520.81790.9911
GMI 0.98620.9751.27311.15650.80271.06950.92140.77051.00921.0511
AQI 1.83181.31871.26621.16920.91970.94361.05260.98460.97390.9965
SGI 1.29630.51421.00531.26451.47831.16881.22121.74761.35760.9808
DEPI 1.37241.30650.57451.13350.72050.80892.1090.78410.98621.0453
SGAI 0.72911.38361.07881.09890.61830.83460.98361.40411.01161.019
LVGI 1.28690.99231.33741.0971.07740.92661.37031.11091.0121.0175
TATA 0.0723-0.0146-0.1134-0.1077-0.3326-0.2806-0.0276-0.022-0.1319-0.0481
M-score -1.47-2.48-3.28-2.60-3.91-3.87-2.13-2.08-2.96-2.71

Kratos Defense & Security Solutions, Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.53071.10520.92710.99230.7650.81790.85830.8160.89830.9916
GMI 0.77510.77140.75360.82860.93031.00771.05561.05551.07541.0526
AQI 1.03940.98461.11240.98531.06610.97390.99481.08590.95820.9965
SGI 1.7121.74761.73071.58871.47921.35761.26471.21031.06420.9803
DEPI 1.00930.78410.48750.63860.73860.98621.06731.06171.02961.0453
SGAI 1.30751.37531.42471.28751.13541.02110.95680.96610.99431.0175
LVGI 1.03741.11091.02990.95870.95861.0121.00851.07591.09311.0175
TATA -0.0214-0.022-0.044-0.0452-0.0471-0.1319-0.1225-0.136-0.1222-0.0482
M-score -1.62-2.07-2.33-2.35-2.54-2.96-2.91-3.05-3.09-2.71
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