Merger and Divestiture

On February 9, 2015, the Company completed the spin-off and Distribution of its former Sporting Group to its stockholders and Merged with Orbital pursuant to a transaction agreement, dated April 28, 2014 (the "Transaction Agreement"). The Company completed the Merger with Orbital in order to create a global aerospace and defense Company with greater technical and industrial capabilities and increased financial resources. Both the Distribution and Merger were structured to be tax-free to U.S. stockholders for U.S. federal income tax purposes. Under the Transaction Agreement, a subsidiary of the Company merged with and into Orbital, with Orbital continuing as a wholly-owned subsidiary of the Company.

Pursuant to the Distribution, Company stockholders received 2 shares of Vista Outdoor for each share of Company common stock held. The Company distributed a total of approximately 63.9 million shares of Vista Outdoor common stock to its stockholders of record at the close of business on February 2, 2015 the record date for the Distribution. As a result of the Distribution, the Sporting Group is reported as a discontinued operation for all prior periods presented. Sales from discontinued operations totaled $1,595,589, $1,781,437 and $1,849,891 in the nine months ended December 28, 2014 and the years ended March 31, 2015 and March 31, 2014, respectively.

In connection with the Merger, each outstanding share of Orbital common stock was converted into the right to receive 0.449 shares of Company common stock. The Company issued approximately 27.4 million shares of common stock to Orbital stockholders. Immediately following the Merger, Orbital stockholders owned 46.2% of the common stock of the Company and existing stockholders owned 53.8%. Based on the closing price of the Company common stock following the Distribution on February 9, 2015 as reported on the New York Stock Exchange, the aggregate value of the consideration paid or payable to former holders of Orbital common stock was approximately $1.8 billion. The Company used the acquisition method to account for the Merger; accordingly, the results of Orbital have been included in the Company's consolidated financial statements since the date of the Merger. Orbital's sales and pre-tax income included in the Company's financial statements for the post-Merger period of February 9, 2015 through March 31, 2015 were approximately $191 million and $16 million, respectively. Transaction costs of $34,900 related to the Distribution and Merger were recorded as incurred in general and administrative expenses during fiscal 2015.

Valuation of Net Assets Acquired

The following amounts represent the preliminary determination (as of the Merger date) of the fair value of identifiable assets acquired and liabilities assumed in the Merger, including adjustments made to date during the one year measurement period from the date of the Merger:



Purchase Price:
Value of common shares issued to Orbital shareholders ⁽¹⁾	$	1,749,323
Value of replacement equity-based awards to holders of Orbital equity-based awards ⁽²⁾	8,654
Total purchase price	$	1,757,977

Value of assets acquired and liabilities assumed:
Cash	$	253,734
Net receivables	558,639
Net inventories	75,294
Intangibles	179,000
Property, plant and equipment	277,438
Deferred tax assets, net	62,466
Other assets	36,878
Goodwill	822,903
Accounts payable	(52,028		)
Contract fair value liabilities	(130,888		)
Other liabilities	(325,459		)
Total purchase price	$	1,757,977

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(1)	Equals 27.4 million Orbital ATK shares issued to Orbital shareholders multiplied by the Company's Merger-date share price of $63.94.


(2)	The fair value of replacement equity-based awards attributable to pre-Merger service was recorded as part of the consideration transferred in the Merger.

Estimated fair value for intangibles is not final and is subject to change. The final determination will be completed within the first quarter of 2016, which is the quarter in which the one year measurement period from the date of the Merger ends. Due to the significance of the Merger, the Company will use all of this measurement period to adequately analyze and assess the fair value the intangibles. This assessment includes the evaluation of the significant contractual and operational factors and assumptions associated with the fair values of the intangibles.

The consideration paid for Orbital's assets and liabilities was determined using the fair market value of the Company stock issued at the date of the Merger along with restricted stock awards granted to certain employees of Orbital.

Goodwill recognized from the Merger primarily relates to the expanded market opportunities, expected synergies and benefits of increased scale and scope of combined human, physical and financial resources attributable to merging the operations of the two companies. As stated above, the Merger was a tax-free transaction and as such, there is no goodwill that is deductible for tax purposes.

In determining the fair value of identifiable assets acquired and liabilities assumed, a review was conducted for any significant contingent assets or liabilities existing at the Merger date. There were no significant contingencies identified related to any legal or government action.

Measurement Period Adjustments (as restated)

In accordance with the Company's adoption of ASU 2015-16 (see Note 1), measurement period adjustments pertaining to the Merger were recorded during the 2015 transition period and were not retroactively reclassified to prior periods. In addition, income statement amounts that would have been recorded in previous periods had the measurement period adjustments been recorded at the date of the Merger were recorded in the last quarter of the 2015 transition period. Such income statement amounts that were included in the results for the 2015 transition period were not material.

Supplemental Pro Forma Data

The following unaudited supplemental pro forma data for the years ended March 31, 2015 and March 31, 2014 present consolidated information as if the Merger had been completed on April 1, 2013. The pro forma results were calculated by combining the results from continuing operations of the Company with the stand-alone results of Orbital for the pre-Merger periods, which were adjusted to eliminate historical sales between the companies and to account for certain costs which would have been incurred during this pre-Merger period:



	Year Ended March 31, 2015		Year Ended March 31, 2014
	As Restated		As Restated
Sales	$	4,167,728	$	4,165,628
Income (loss) from continuing operations	154,868		(56,847		)
Basic earnings (loss) per common share from continuing operations	$	2.46	$	(0.96	)
Diluted earnings (loss) per common share from continuing operations	2.43		(0.94		)

The unaudited supplemental pro forma data above includes the following significant adjustments made to account for certain costs which would have been incurred if the Merger had been completed on April 1, 2013, as adjusted for the applicable income tax impact:



	Year Ended March 31, 2015			Year Ended March 31, 2014
Amortization of acquired Orbital intangible assets ⁽¹⁾	$	27,215		$	31,116
Interest expense adjustment ⁽²⁾	(25,678		)	(19,237		)
Transaction fees for advisory, legal and accounting services ⁽³⁾	(37,119		)	37,119

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(1) Added the amortization of acquired Orbital intangible assets recognized at fair value in purchase accounting and eliminated historical Orbital intangible asset amortization expense.

(2) Reduced interest expense for the net reduction in debt of the Company and Orbital.

(3) Added transaction fees for advisory, legal and accounting services to the first quarter of fiscal 2014. Costs were recorded in general and administrative expense.

The unaudited supplemental pro forma data above does not reflect the potential realization of cost savings related to the integration of the two companies. Further, the pro forma data should not be considered indicative of the results that would have occurred if the Merger had been completed on April 1, 2013, nor are they indicative of future results.

Ongoing Business with Vista Outdoor

In conjunction with the Distribution, the Company entered into two supply agreements and one Transition Services Agreement ("TSA") with Vista Outdoor. The supply agreements call for Vista Outdoor to purchase certain minimum quantities of ammunition and gun powder from the Company through 2017 or 2018, as applicable. The supply agreements expire in 2017 (powder) and 2018 (ammunition) and may be extended in one-to-three year increments and are priced at arms-length. Under the terms of the TSA, the Company provides various administrative services to Vista Outdoor for up to 12 months following the Distribution and tax assistance services for 18 months following the Distribution, extendable to 30 months. Fees for services under the TSA are charged to Vista Outdoor.

Sales to Vista Outdoor under the two supply agreements were $137,815 (as restated) for the 2015 transition period and $18,928 for the period from the date of the Distribution to March 31, 2015. Sales to Sporting Group, previously reported as intercompany sales and eliminated in consolidation (see Operating Segment Information Note 17) were $170,818 for the period April 1, 2014 through February 8, 2015 and $273,246 for fiscal 2014.