ATK Reports Strong FY11 First-Quarter Operating Results Raises Full-Year EPS Guidance and Narrows Sales Guidance to Upper End of Range

First-Quarter Fully-Diluted EPS Rises 7 Percent to $2.24

First Quarter Net Income Rises 8 percent

Higher Margins Driven By Company-Wide Cost Management and Efficiency Improvement Initiatives

MINNEAPOLIS, Aug. 5 /PRNewswire-FirstCall/ -- Alliant Techsystems (NYSE: ATK) today reported strong operating results for the first quarter of its Fiscal Year 2011, which ended on July 4, 2010.  Fully diluted earnings per share (EPS) rose 7.4 percent to $2.24, compared to $2.09 in the prior-year quarter.  Margins in the first quarter improved to 11.1 percent compared to 10.9 percent in the prior-year quarter, despite significantly higher pension expense.  The margin increase reflects benefits from cost-management initiatives and operating efficiency improvements across the company.  First quarter sales of $1.2 billion were in line with expectations and remained steady compared to the prior-year quarter.  First quarter net income rose 8 percent to $75 million, reflecting a lower tax rate, margin improvements, and lower interest expense.

Based on the strong results in the first quarter, and an improved outlook for both full-year tax rate and margins, ATK is raising its full-year EPS guidance.  ATK is narrowing its full-year sales forecast to the upper end of its previously announced range due to the encouraging outlook for the company's NASA business.

"I am pleased with our first quarter results.  The cost management and efficiency improvements we are implementing are beginning to drive margin improvement across the company," said Mark DeYoung, President and CEO. "The operating performance of our business groups is on track to deliver solid top-line and bottom-line results, and the outlook for our NASA business has significantly improved with growing support for accelerating the development of a next-generation heavy lift vehicle."

SUMMARY OF REPORTED RESULTS

The following table presents the company's results for the first quarter of the fiscal year which ended July 4, 2010 (in thousands).

Sales:


Quarters Ended


July 4, 2010

July 5, 2009

$
Change

%
Change

Aerospace Systems

$369,364

$  415,459

$(46,095)

(11.1)%

Armament Systems

438,900

401,988

36,912

9.2%

Missile Products

156,313

176,870

(20,557)

(11.6)%

Security and Sporting

237,574

214,817

22,757

10.6%

Total sales

$  1,202,151

$  1,209,134

$  (6,983)

(0.6)%



Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):


Quarters Ended


July 4, 2010

July 5, 2009

$ Change

% Change

Aerospace Systems

$35,799

$  40,866

$  (5,067)

(12.4)%

Armament Systems

49,641

42,645

6,996

16.4%

Missile Products

16,524

16,554

(30)

(0.2)%

Security and Sporting

32,976

22,383

10,593

47.3%

Corporate

(  1,887)

8,924

(10,811)

(121.1)%

Total operating profit

$133,053

$   131,372

$  1,681

1.3%



SEGMENT RESULTS

At the beginning of FY11, ATK realigned into a four business group structure: Aerospace Systems, Armament Systems; Missile Products; and Security and Sporting.

AEROSPACE SYSTEMS

As expected, first quarter sales in the Aerospace Systems group declined by 11 percent to $369 million, compared to $415 million in the prior-year period.  The decrease was driven by lower sales on the Space Shuttle's Reusable Solid Rocket Motor program as it completes its production run, lower volume on the Minuteman III program, and the cancellation of a government satellite program.  The decrease was partially offset by higher sales on the Ares I program, as well as military and commercial aircraft structures.  

Earnings before interest, taxes, and noncontrolling interest (operating profit) in the first quarter declined 12 percent to $36 million, compared to $41 million in the prior-year period.  The decrease reflects lower sales volume.  

ARMAMENT SYSTEMS

First quarter sales in the Armament Systems group increased 9 percent to $439 million, compared to $402 million in the prior-year quarter.  The increase was driven by continued strength in military small-caliber ammunition, higher sales of energetics products, and revenues from the group's precision mortar program.  The increase was partially offset by lower revenue on medium and large-caliber ammunition programs.

Operating profit in the first quarter rose 16 percent to $50 million, compared to $43 million in the prior-year quarter.  The additional sales volume, improved operating efficiencies, and cost-management initiatives contributed to the increase.

MISSILE PRODUCTS

First quarter sales in the Missile Products group of $156 million were 12 percent lower than the $177 million recorded in the prior-year quarter.   The decrease reflected lower sales on NASA's launch abort system and a missile interceptor program.  These declines were partially offset by higher sales on defense electronics programs.

Operating profit of $17 million was flat compared to the prior-year quarter, reflecting lower sales volume, offset by improved operating efficiencies and cost management initiatives.

SECURITY AND SPORTING  

Sales in the Security and Sporting group grew by 11 percent to $238 million, compared to $215 million in the prior-year quarter.  The increase reflects significant demand for ATK's products in commercial, law enforcement, and international markets, and increased sales of accessories associated with the acquisition of Blackhawk.

Operating profit in the first quarter grew by 47 percent to $33 million, compared to $22 million in the prior-year quarter.  Higher sales volume and a continued focus on operating efficiencies contributed to the increase.

CORPORATE AND OTHER

In the first quarter, corporate and other expenses totaled $2 million, compared to income of $9 million in the prior-year quarter.  The decrease was the result of significantly higher pension expense, partially offset by cost-management initiatives.  The tax rate for the quarter was 35.2 percent compared to 37.1 percent in the prior-year quarter.  The improvement reflects an increased benefit from the Domestic Manufacturing Deduction and lower state tax expense.

OUTLOOK

Based on better visibility into the remainder of the year, a lower than expected full-year tax rate, and the positive impact of efficiency and margin-improvement initiatives, ATK is raising its full-year EPS guidance to a range of $8.50 - $8.80, up from previous guidance of $8.00 - $8.50.  Based on an improving outlook for the company's NASA business, ATK is also narrowing its sales guidance to the upper end of the previously announced range.  ATK now expects to generate full-year sales of $4.775 - $4.85 billion.

The company continues to expect to generate free cash flow in a range of $275 - $300 million, with capital expenditures of approximately $120 million (see reconciliation table for details).  Average share count is expected to be approximately 34 million.  The effective tax rate for the year is now expected to be approximately 30 percent, down from previous expectations of approximately 34 percent.  The lower tax rate, which anticipates the retroactive extension of the Federal R&D tax credit, is the result of favorable resolution of uncertain tax positions. Pension expenses are expected to be approximately $130 million, in-line with previous assumptions.

Reconciliation of Non-GAAP Financial Measures

Free Cash Flow

Free cash flow is defined as cash provided by (used for) operating activities less capital expenditures.  ATK management believes free cash flow provides investors with an important perspective on the cash available for debt repayment, share repurchase, and acquisitions after making the capital investments required to support ongoing business operations.  ATK management uses free cash flow internally to assess both business performance and overall liquidity.


Quarter
Ended
July 4, 2010


Projected Year
Ending
March 31, 2011





Cash (used for) provided by operating activities

$        (91,824)


$395,000 - $420,000

Capital expenditures

(34,991)


~(120,000)

Free cash flow

$      (126,815)


$275,000 - $300,000



ATK is a premier aerospace and defense company with more than 18,000 employees in 22 states, Puerto Rico and internationally, and revenues in excess of $4.8 billion.  News and information can be found on the Internet at www.atk.com.

Certain information discussed in this press release constitutes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  Although ATK believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected. Among these factors are: the challenges of developing new launch vehicles and the uncertainty regarding the Administration's proposed cancellation of NASA's Constellation program; changes in governmental spending, budgetary policies and product sourcing strategies; the company's competitive environment; risks inherent in the development and manufacture of advanced technology; risks associated with the diversification into new markets; increases in commodity costs, energy prices, and production costs; the terms and timing of awards and contracts; program performance; program terminations; changes in cost estimates related to relocation of facilities; the outcome of contingencies, including litigation and environmental remediation; actual pension asset returns and assumptions regarding future returns, discount rates and service costs; capital market volatility and corresponding assumptions related to the company's shares outstanding; the availability of capital market financing; changes to accounting standards; changes in tax rules or pronouncements; economic conditions; and the company's capital deployment strategy, including debt repayment, share repurchases, pension funding, mergers and acquisitions and any integration thereof. ATK undertakes no obligation to update any forward-looking statements. For further information on factors that could impact ATK, and statements contained herein, please refer to ATK's most recent Annual Report on Form 10-K and any subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with the U.S. Securities and Exchange Commission.

Media Contact:  

Investor Contact:



Bryce Hallowell

Jeff Huebschen

Phone:  952-351-3087

Phone:  952-351-2929

E-mail:  bryce.hallowell@atk.com

E-mail:  jeff.huebschen@atk.com



ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)



QUARTERS ENDED



(In thousands except per share data)


July 4, 2010


July 5, 2009


Sales


$

1,202,151


$

1,209,134


Cost of sales


949,887


949,289


Gross profit


252,264


259,845


Operating expenses:






Research and development


13,888


15,378


Selling


40,361


45,094


General and administrative


64,962


68,001


Income before interest, income taxes, and noncontrolling interest


133,053


131,372


Interest expense


(17,699)


(20,935)


Interest income


70


86


Income before income taxes and noncontrolling interest


115,424


110,523


Income tax provision


40,647


41,040


Net income


74,777


69,483


Less net income attributable to noncontrolling interest


133


52


Net income attributable to Alliant Techsystems Inc.


$

74,644


$

69,431








Alliant Techsystems Inc.'s earnings per common share:






Basic


$

2.26


$

2.12


Diluted


2.24


2.09








Alliant Techsystems Inc.'s weighted-average number of
common shares outstanding:






Basic



33,001



32,728


Diluted


33,330


33,297





ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

(Amounts in thousands except share data)

July 4, 2010

March 31, 2010

ASSETS



Current assets:



 Cash and cash equivalents

$      91,987

$      393,893

 Net receivables

1,014,123

902,750

 Net inventories

256,619

236,074

 Deferred income tax assets

67,603

67,813

 Other current assets

84,742

118,448

   Total current assets

1,515,074

1,718,978

Net property, plant, and equipment

560,914

561,931

Goodwill

1,249,874

1,183,910

Deferred income tax assets

150,800

140,439

Deferred charges and other noncurrent assets

375,201

264,366

   Total assets

$  3,851,863

$  3,869,624




LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Current portion of long-term debt

$     17,188

$     13,750

 Accounts payable

221,734

273,718

 Contract advances and allowances

134,547

106,819

 Accrued compensation

115,071

172,630

 Accrued income taxes

25,508

14,609

 Other accrued liabilities

194,849

206,289

   Total current liabilities

708,897

787,815

Longterm debt

1,377,140

1,379,804

Postretirement and postemployment benefits liabilities

139,801

142,541

Accrued pension liability

617,256

622,576

Other longterm liabilities

137,374

129,466

   Total liabilities

2,980,468

3,062,202

Commitments and contingencies



Common stock$.01 par value:



 Authorized180,000,000 shares



 Issued and outstanding—33,225,636 shares at July 4, 2010 and 33,047,018 shares at March 31, 2010

332

330

Additional paidincapital

569,499

578,046

Retained earnings

1,773,820

1,699,176

Accumulated other comprehensive loss

(836,983)

(821,086)

Common stock in treasury, at cost— 8,329,813 shares held at July 4, 2010 and 8,508,431 shares held at
March 31, 2010

(644,234)

(657,872)

   Total Alliant Techsystems Inc. stockholders' equity

862,434

798,594

Noncontrolling interest

8,961

8,828

   Total stockholders' equity

871,395

807,422

   Total liabilities and stockholders' equity

$  3,851,863

$  3,869,624




ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)



QUARTERS ENDED


(In thousands)


July 4, 2010


July 5, 2009


Operating activities






Net income


$

74,777


$

69,483


Adjustments to net income to arrive at cash used for operating activities:






Depreciation


24,092


22,597


Amortization of intangible assets


2,789


1,240


Amortization of debt discount


4,211


6,228


Amortization of deferred financing costs


710


710


Deferred income taxes


566


633


Loss (gain) on disposal of property


1,352


(926)


Share-based plans expense


2,418


4,682


Excess tax benefits from share-based plans


(53)


(745)


Changes in assets and liabilities:






Net receivables


(162,009)


(49,313)


Net inventories


(20,619)


23,360


Accounts payable


(38,026)


(107,595)


Contract advances and allowances


27,728


5,638


Accrued compensation


(69,096)


(61,555)


Accrued income taxes


24,987


68,619


Pension and other postretirement benefits


11,820


(137,088)


Other assets and liabilities


22,529


3,696


Cash used for operating activities


(91,824)


(150,336)


Investing activities






Capital expenditures


(34,991)


(32,169)


Acquisition of business


(172,251)


-


Proceeds from the disposition of property, plant, and equipment


23


1,257


Cash used for investing activities


(207,219)


(30,912)


Financing activities






Payments made on bank debt


(3,437)


(3,438)


Proceeds from employee stock compensation plans


521


2,164


       Excess tax benefits from share-based plans


53


745


Cash used for financing activities


(2,863)


(529)


Decrease in cash and cash equivalents


(301,906)


(181,777)


Cash and cash equivalents - beginning of period


393,893


336,700


Cash and cash equivalents - end of period


$

91,987


$

154,923





SOURCE ATK



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