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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.88 (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 -2.88 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -6   Max: 2.78
Current: -2.88

-6
2.78

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was 2.78. The lowest was -6.00. And the median was -2.54.


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 * 0.9929+0.528 * 1.0376+0.404 * 1.015+0.892 * 0.8863+0.115 * 0.8845
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0221+4.679 * -0.0634-0.327 * 1.0198
=-2.88

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

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $248.0 Mil.
Revenue was 200.1 + 235.7 + 226.4 + 235.2 = $897.4 Mil.
Gross Profit was 52.6 + 61.5 + 52.3 + 60.4 = $226.8 Mil.
Total Current Assets was $413.3 Mil.
Total Assets was $1,196.4 Mil.
Property, Plant and Equipment(Net PPE) was $84.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $72.9 Mil.
Selling, General & Admin. Expense(SGA) was $181.1 Mil.
Total Current Liabilities was $244.1 Mil.
Long-Term Debt was $642.0 Mil.
Net Income was -15 + -7.4 + -9.9 + -9.6 = $-41.9 Mil.
Non Operating Income was 0.2 + -0.2 + 0.8 + 0.2 = $1.0 Mil.
Cash Flow from Operations was 1.2 + 26.1 + 2.6 + 3.1 = $33.0 Mil.
Accounts Receivable was $281.8 Mil.
Revenue was 252.8 + 263.6 + 276.3 + 219.8 = $1,012.5 Mil.
Gross Profit was 65.7 + 68 + 74.1 + 57.7 = $265.5 Mil.
Total Current Assets was $455.1 Mil.
Total Assets was $1,270.6 Mil.
Property, Plant and Equipment(Net PPE) was $84.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.6 Mil.
Selling, General & Admin. Expense(SGA) was $199.9 Mil.
Total Current Liabilities was $275.6 Mil.
Long-Term Debt was $647.2 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)
=(248 / 897.4) / (281.8 / 1012.5)
=0.27635391 / 0.27832099
=0.9929

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)
=(61.5 / 1012.5) / (52.6 / 897.4)
=0.26222222 / 0.25273011
=1.0376

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 - (413.3 + 84) / 1196.4) / (1 - (455.1 + 84) / 1270.6)
=0.58433634 / 0.57571226
=1.015

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
=897.4 / 1012.5
=0.8863

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))
=(58.6 / (58.6 + 84)) / (72.9 / (72.9 + 84))
=0.41093969 / 0.46462715
=0.8845

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)
=(181.1 / 897.4) / (199.9 / 1012.5)
=0.20180522 / 0.1974321
=1.0221

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)
=((642 + 244.1) / 1196.4) / ((647.2 + 275.6) / 1270.6)
=0.74063858 / 0.72627105
=1.0198

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
=(-41.9 - 1 - 33) / 1196.4
=-0.0634

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 -2.88 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 1.09271.45140.61581.02970.81490.70141.32191.10520.81790.9833
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 0.72911.38361.07881.09890.61830.83460.98361.40411.01160.8078
LVGI 1.28690.99231.33741.0971.07740.92661.37031.11091.0121.0174
TATA 0.0723-0.0146-0.1134-0.1077-0.3326-0.2806-0.0276-0.022-0.1319-0.0481
M-score -1.47-2.48-3.28-2.60-3.91-3.87-2.13-2.08-2.96-2.68

Kratos Defense & Security Solutions Inc Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 1.10520.92710.99230.7650.81790.85830.8160.89830.98380.9929
GMI 0.77140.75360.82860.93031.00771.05561.05551.07541.05261.0376
AQI 0.98461.11240.98531.06610.97390.99481.08590.95820.99651.015
SGI 1.74761.73071.58871.47921.35761.26471.21031.06420.98030.8863
DEPI 0.78410.48750.63860.73860.98621.06731.06171.02960.84580.8845
SGAI 1.37531.42471.28751.13541.02110.95680.96610.99430.97821.0221
LVGI 1.11091.02990.95870.95861.0121.00851.07591.09311.01741.0198
TATA -0.022-0.044-0.0452-0.0471-0.1319-0.1226-0.136-0.1222-0.0612-0.0634
M-score -2.07-2.33-2.35-2.54-2.96-2.91-3.05-3.09-2.79-2.88
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