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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.58 (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 -2.58 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -5.34   Max: -0.9
Current: -2.58

-5.34
-0.9

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was -0.90. The lowest was -5.34. And the median was -2.62.


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 * 1.2089+0.528 * 1.044+0.404 * 0.9971+0.892 * 0.8673+0.115 * 1.201
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0488+4.679 * -0.0398-0.327 * 1.0727
=-2.58

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $265.9 Mil.
Revenue was 229.3 + 200.1 + 235.7 + 226.4 = $891.5 Mil.
Gross Profit was 56.4 + 52.6 + 61.5 + 52.3 = $222.8 Mil.
Total Current Assets was $398.5 Mil.
Total Assets was $1,172.1 Mil.
Property, Plant and Equipment(Net PPE) was $84.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $44.9 Mil.
Selling, General & Admin. Expense(SGA) was $184.2 Mil.
Total Current Liabilities was $246.9 Mil.
Long-Term Debt was $662.9 Mil.
Net Income was -49.9 + -15 + -7.4 + -9.9 = $-82.2 Mil.
Non Operating Income was -38.9 + 0.2 + -0.2 + 0.8 = $-38.1 Mil.
Cash Flow from Operations was -11.5 + 1.2 + 10.3 + 2.6 = $2.6 Mil.
Accounts Receivable was $253.6 Mil.
Revenue was 235.2 + 252.8 + 263.6 + 276.3 = $1,027.9 Mil.
Gross Profit was 60.4 + 65.7 + 68 + 74.1 = $268.2 Mil.
Total Current Assets was $417.8 Mil.
Total Assets was $1,222.3 Mil.
Property, Plant and Equipment(Net PPE) was $83.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $59.9 Mil.
Selling, General & Admin. Expense(SGA) was $202.5 Mil.
Total Current Liabilities was $238.6 Mil.
Long-Term Debt was $645.9 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)
=(265.9 / 891.5) / (253.6 / 1027.9)
=0.29826136 / 0.24671661
=1.2089

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)
=(52.6 / 1027.9) / (56.4 / 891.5)
=0.26092032 / 0.24991587
=1.044

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 - (398.5 + 84.2) / 1172.1) / (1 - (417.8 + 83.5) / 1222.3)
=0.58817507 / 0.58987155
=0.9971

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
=891.5 / 1027.9
=0.8673

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))
=(59.9 / (59.9 + 83.5)) / (44.9 / (44.9 + 84.2))
=0.41771269 / 0.34779241
=1.201

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)
=(184.2 / 891.5) / (202.5 / 1027.9)
=0.20661806 / 0.1970036
=1.0488

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)
=((662.9 + 246.9) / 1172.1) / ((645.9 + 238.6) / 1222.3)
=0.77621363 / 0.72363577
=1.0727

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
=(-82.2 - -38.1 - 2.6) / 1172.1
=-0.0398

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 -2.58 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 0.90460.86911.22741.16150.81760.69911.32191.11450.81110.9911
GMI 1.28520.9421.37630.99990.81560.9660.94030.82891.00161.0511
AQI 1.4221.2761.25491.21920.91580.94751.05260.98420.97440.9965
SGI 1.51410.94530.87340.59061.53561.12511.22121.77011.34030.9808
DEPI 1.23061.0051.05690.87240.75250.7542.16650.78740.98221.0453
SGAI 1.20070.95331.04081.43790.62930.90770.9771.27781.0111.019
LVGI 1.75560.95111.3961.09651.07740.92661.37031.11061.01251.0174
TATA -0.0027-0.0158-0.1185-0.1077-0.007-0.2666-0.0278-0.0222-0.1319-0.0481
M-score -2.06-2.62-2.77-3.23-2.32-3.92-2.11-2.00-2.98-2.71

Kratos Defense & Security Solutions Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.91040.97540.76180.80650.87410.83010.90830.99720.99291.2089
GMI 0.79850.8590.95061.00531.04171.04241.06311.04711.03761.044
AQI 1.11240.98531.06610.97440.99481.08590.95820.99651.0150.9971
SGI 1.76241.61621.48521.34791.24191.18971.05240.97480.88630.8673
DEPI 0.4870.63860.73860.98221.06951.06171.02961.04531.11721.201
SGAI 1.2721.15141.05870.96530.93740.94980.96961.01431.06411.0488
LVGI 1.02990.95870.95861.01251.00851.07591.09311.01741.01981.0727
TATA -0.048-0.0455-0.0487-0.1319-0.1191-0.136-0.1204-0.0482-0.0502-0.0398
M-score -2.28-2.30-2.52-2.97-2.90-3.06-3.09-2.71-2.80-2.58
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