Kratos Rating Lowered

With multiple contract awards delayed or under protest, Kratos Defense & Security Solutions is facing reduced sales projections and a lowered credit rating.

The company said Thursday that its business was "adversely impacted by an increased number of competitor protests of new contracts awarded to Kratos" as well as delays in contract awards and work starts.

For instance, the company said, in the third quarter, it was awarded a $46 million contract by a U.S. government customer that was protested. It was also anticipating a $9.5 million award, but the procurement was canceled after a competitor protest (a new procurement was eventually awarded to Kratos). A $30 million international order for unmanned drone systems was anticipated in the fourth quarter but has been delayed.

The company said it now expects sales of $870 million to $890 million for fiscal 2014, down significantly from the $920 million to $960 million it forecast in August. In its most recent quarter, Kratos reported a loss of $10.9 million, up from the $9.9 million loss it reported in the same three-month period a year earlier.

Standard & Poor's said Friday that it has lowered its corporate credit rating for Kratos to B-, down from B. The ratings service said it has also lowered its earning forecast for the company "because of a higher number of competitor protests and intense price competition for new awards, which are hurting revenues and profits."

"The developing outlook reflects the possibility that we could raise the rating if the recently announced strategic review results in material debt reduction but also the possibility that we could lower the ratings further if conditions worsen such that we no longer believe the company's capital structure is sustainable in the long term or its liquidity profile deteriorates," S&P added.