ATK Raises Full-Year EPS Guidance
ATK Reports Strong FY10 Third Quarter Financial Results
Third Quarter Fully Diluted EPS Climb 26 Percent to $2.33 as Sales Rise Three Percent to $1.1 Billion
Third Quarter Net Income up 28 Percent to $78 Million
Third Quarter Margins Reach 11.9 Percent
MINNEAPOLIS, Feb. 4 /PRNewswire-FirstCall/ -- Alliant Techsystems (NYSE: ATK) today reported that fully diluted earnings per share (EPS) in the third quarter of fiscal year 2010 (FY10), which ended on January 3, 2010, rose 26 percent to $2.33, compared to $1.85(1) in the prior-year quarter. The results were driven by improved operating margins and the benefit of a lower than expected tax rate primarily due to the favorable true-up of prior-year taxes. Based on its performance, better visibility into the remainder of the year, and the lower tax rate, the company is raising its full-year EPS guidance to a range of $8.80 - $8.90.
Sales for the quarter rose 3 percent to $1.1 billion, driven by continued strength in the company's Armament Systems and Mission Systems groups, partially offset by expected lower sales in the company's Space Systems group. Net income in the third quarter was up 28 percent to $78 million. Third quarter margins reached 11.9 percent. Orders in the quarter were $752 million, in line with expectations, and keeping the company on track for a full-year book-to-bill ratio in excess of one.
"I couldn't be more pleased with our earnings. Our aggressive focus on margin improvement continues to yield significant results, including another quarter of double-digit earnings growth," said John Shroyer, Senior Vice President and Chief Financial Officer. "Third quarter sales and orders were right on track with our expectations and we are on pace to generate strong free cash flow through the end of our fiscal year. We are raising full-year EPS guidance and will enter fiscal year 2011 with a solid backlog of orders, substantial cash on the balance sheet, and continued strong operating performance."
SUMMARY OF REPORTED RESULTS
The following table presents the company's results for the third quarter of fiscal year 2010, which ended on January 3, 2010 (in thousands).
Sales:
Quarters Ended
--------------
January 3, December 28, $ %
2010 2008 Change Change
---- ---- ------ ------
ATK Armament
Systems $509,112 $438,167 $70,945 16.2%
ATK Mission
Systems 306,560 285,336 21,224 7.4%
ATK Space
Systems 325,857 385,947 (60,090) (15.6)%
------- ------- -------
Total sales $1,141,529 $1,109,450 $32,079 2.9%
========== ========== =======
Nine Months Ended
-----------------
January 3, December 28, $ %
2010 2008 Change Change
---- ---- ------ ------
ATK Armament
Systems $1,615,496 $1,302,603 $312,893 24.0%
ATK Mission
Systems 903,503 842,381 61,122 7.3%
ATK Space
Systems 1,039,628 1,181,282 (141,564) (12.0)%
--------- --------- --------
Total sales $3,558,627 $3,326,266 $232,361 7.0%
========== ========== ========
Income before Interest, Income Taxes, and Noncontrolling Interest
(Operating Profit):
Quarters Ended
--------------
January 3, December 28, $ %
2010 2008 Change Change
---- ---- ------ ------
ATK Armament
Systems $63,413 $43,695 $19,718 45.1%
ATK Mission
Systems 33,979 35,802 (1,823) (5.1)%
ATK Space
Systems 44,781 44,303 478 1.1%
Corporate (5,773) (4,516) (1,257) (27.8)%
------ ------ ------
Total operating
profit $136,400 $119,284 $17,116 14.3%
======== ======== =======
Nine Months Ended
-----------------
January 3, December 28, $ %
2010 2008 Change Change
---- ---- ------ ------
ATK Armament
Systems $192,346 $130,824 $61,522 47.0%
ATK Mission
Systems 100,192 104,421 (4,229) (4.0)%
ATK Space
Systems 124,626 128,527 (3,901) (3.0)%
Corporate (14,518) (15,511) 993 6.4%
------- ------- ---
Total operating
profit $402,646 $348,261 $54,385 15.6%
======== ======== =======
SEGMENT RESULTS
ATK operates three principal business groups: Armament Systems; Mission Systems; and Space Systems.
ATK ARMAMENT SYSTEMS
Sales in the third quarter of FY10 increased 16 percent to $509 million, compared to $438 million in the prior-year quarter. The increase reflects strong sales of non-standard ammunition, modernization efforts at Lake City and Radford, and $18 million of additional sales from the acquisition of Eagle Industries. Organic sales increased 12 percent.
Earnings before interest, taxes, and noncontrolling interest (operating profit) in the third quarter rose 45 percent to $63 million, compared to $44 million in the prior-year quarter. The increase was driven by additional sales volume and improved profitability across Armament Systems. Demand for ATK's commercial ammunition brands and products remained strong. The higher operating profit was partially offset by the costs associated with the construction of an energetics facility for the Australian Ministry of Defense that was previously in the Space Systems group; and higher pension expense.
ATK MISSION SYSTEMS
Third quarter sales rose seven percent to $307 million compared to $285 million in the prior-year quarter. The increase reflects higher sales volume in military and commercial aircraft structures, defense electronics, tactical rocket motors, and missile programs, partially offset by lower sales of tank ammunition, missile defense, and special mission aircraft.
Operating profit of $34 million was in line with expectations and down five percent from $36 million in the prior-year quarter. The quarter benefited from higher sales volume and profit improvements in defense electronics but was offset by a lower incentive fee on the SM-3 program than in the prior-year quarter, and higher pension expense.
ATK SPACE SYSTEMS
Third quarter sales in the Space Systems group of $326 million were in line with the company's expectations, and down 16 percent from $386 million in the prior-year quarter. Strengthening sales profiles for Ares I and spacecraft structures were negated by lower sales on the Space Shuttle and Minuteman III programs, and the termination of the Kinetic Energy Interceptor.
Operating profit for the group was $45 million, up slightly from the prior-year quarter. Higher sales volume on Ares I, the timing of an incentive fee on the Space Shuttle program, and profit improvements in the space structures business were offset by lower total sales volume and higher pension expense.
CORPORATE AND OTHER
In the third quarter, corporate and other expenses totaled $5.8 million compared to $4.5 million recorded in the prior-year quarter. The share count was 33.5 million, compared to 33.1 million in the prior-year quarter.
OUTLOOK
Based on the continued strong operating performance of the company, better visibility into the remainder of the year, and a lower expected tax rate, ATK is raising its full-year EPS guidance. ATK now expects full-year FY10 fully diluted EPS in a range of $8.80 - $8.90, up from previous guidance of $8.60 - $8.75. The company continues to expect full-year sales to be in a range of $4.825 -$4.875 billion, and free cash flow of approximately $150 million (see reconciliation table for details). The company continues to expect an average share count of approximately 33.5 million. An expected effective tax rate for the year in the mid-36 percent range is slightly lower than previous expectations of approximately 37 percent, due primarily to the favorable true-up of prior-year taxes. The company continues to expect full-year pension expenses of approximately $70 million, and it now believes that capital expenditures will be approximately $140 million.
Reconciliation of Non-GAAP Financial Measures
Free Cash Flow
Free cash flow is defined as cash provided by 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.
Projected Year
Ending
March 31, 2010
--------------
Cash provided by operating
activities ~ $290,000
Capital expenditures ~(140,000)
----------
Free cash flow ~ $150,000
===========
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: assumptions related to the Ares I and Ares V programs for NASA; 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; 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.
(1) At the beginning of the company’s fiscal year on April 1, 2009, ATK retrospectively adopted FSP APB14-1 “Accounting for Convertible Debt Instruments that may be settled in cash upon conversion” (FSP 14-1) and was required to restate certain financial information for all prior periods. The adoption resulted in an increase to non-cash interest expense of $6.033 million ($3.614 million net of tax, or $0.11 diluted EPS) for the quarter ended December 28, 2008. All fiscal 2009 financial amounts included in this press release have been restated to reflect the adoption of FSP 14-1.
Media Contact: |
Investor Contact: |
|
Bryce Hallowell |
Jeff Huebschen |
|
Phone: 952-351-3087 |
Phone: 952-351-2929 |
|
E-mail: [email protected] |
E-mail: [email protected] |
|
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(In thousands QUARTERS ENDED NINE MONTHS ENDED
except per share -------------- -----------------
data) January 3, December 28, January 3, December 28,
2010 2008 (1) 2010 2008 (1)
Sales $1,141,529 $1,109,450 $3,558,627 $3,326,266
Cost of sales 891,148 879,866 2,802,699 2,637,179
------- ------- --------- ---------
Gross profit 250,381 229,584 755,928 689,087
Operating expenses:
Research and
development 16,057 16,105 47,321 63,245
Selling 35,134 39,584 125,430 117,392
General and
administrative 62,790 54,611 180,531 160,189
------ ------ ------- -------
Income before
interest, income
taxes, and
noncontrolling
interest 136,400 119,284 402,646 348,261
Interest expense (17,918) (21,551) (58,214) (66,828)
Interest income 164 142 374 741
--- --- --- ---
Income before
income taxes and
noncontrolling
interest 118,646 97,875 344,806 282,174
Income tax
provision 40,245 36,528 124,305 104,867
------ ------ ------- -------
Net income 78,401 61,347 220,501 177,307
Less net income
(loss)
attributable to
noncontrolling
interest 30 (61) 189 45
--- --- --- ---
Net income
attributable to
Alliant
Techsystems Inc. $78,371 $61,408 $220,312 $177,262
======= ======= ======== ========
Alliant Techsystems
Inc.’s earnings
per common share:
Basic $2.38 $1.88 $6.71 $5.41
Diluted 2.33 1.85 6.60 5.17
Alliant Techsystems
Inc.’s weighted-
average number of
common shares
outstanding:
Basic 32,878 32,628 32,818 32,758
Diluted 33,603 33,117 33,367 34,283
(1) Restated due to the adoption of new accounting standards
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except January 3, March 31,
share data) 2010 2009(1)
-------- ------
ASSETS
Current assets:
Cash and cash equivalents $385,754 $336,700
Net receivables 895,658 899,543
Net inventories 213,140 238,600
Income tax receivable - 34,835
Deferred income tax assets 69,028 29,223
Other current assets 114,066 39,843
------- ------
Total current assets 1,677,646 1,578,744
Net property, plant, and
equipment 533,082 540,041
Goodwill 1,186,233 1,195,986
Deferred income tax assets 10,305 69,582
Deferred charges and other
non-current assets 298,784 192,992
------- -------
Total assets $3,706,050 $3,577,345
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of
long-term debt $13,750 $289,859
Accounts payable 214,580 294,971
Contract advances and
allowances 100,159 86,080
Accrued compensation 122,695 168,059
Accrued income taxes 18,264 -
Other accrued liabilities 214,672 166,341
------- -------
Total current liabilities 684,120 1,005,310
Long-term debt 1,379,154 1,097,744
Postretirement and
postemployment benefits
liabilities 116,868 121,689
Accrued pension liability 415,026 552,671
Other long-term
liabilities 139,847 125,362
------- -------
Total liabilities 2,735,015 2,902,776
Contingencies
Common stock -$.01 par value
Authorized – 90,000,000
shares
Issued and outstanding –
33,015,889 shares at
January 3, 2010 and
32,783,496 at March 31, 2009 330 328
Additional paid-in-capital 581,430 574,674
Retained earnings 1,640,774 1,420,462
Accumulated other
comprehensive loss (600,028) (651,652)
Common stock in treasury,
at cost – 8,539,560
shares held at January 3,
2010 and 8,771,565 shares
held at March 31, 2009 (660,258) (677,841)
-------- --------
Total Alliant Techsystems
Inc. stockholders’ equity 962,248 665,971
Noncontrolling interest 8,787 8,598
----- -----
Total equity 971,035 674,569
------- -------
Total liabilities and
equity $3,706,050 $3,577,345
========== ==========
(1) Restated due to the adoption of new accounting standards
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
-----------------
January 3, December 28,
(In thousands) 2010 2008(1)
-------- ---------
Operating activities
Net income $220,501 $177,307
Adjustments to net income
to arrive at cash provided
by operating activities:
Depreciation 74,202 57,412
Amortization of intangible
assets 3,757 4,213
Amortization of debt
discount 15,779 17,751
Amortization of deferred
financing costs 2,129 2,148
Asset impairment 11,405 3,753
Deferred income taxes (13,447) 18,431
Gain on disposal of
property (1,885) (3,422)
Share-based plans expense 13,447 14,753
Excess tax benefits from
share-based plans (1,549) (3,235)
Changes in assets and
liabilities:
Net receivables (71,839) (121,375)
Net inventories 23,075 295
Accounts payable (63,309) (16,299)
Contract advances and
allowances 14,079 1,385
Accrued compensation (49,271) (24,075)
Accrued income taxes 64,053 (32,051)
Pension and other
postretirement benefits (128,349) 19,744
Other assets and
liabilities 26,948 40,779
------ ------
Cash provided by operating
activities 139,726 157,514
Investing activities
Capital expenditures (99,274) (80,352)
Acquisition of business, net 5,002 (13,560)
Proceeds from the
disposition of property,
plant, and equipment 5,496 489
----- ---
Cash used for investing activities (88,776) (93,423)
Financing activities
Payments made on bank debt (10,479) -
Payments made to extinguish
debt - (10)
Payments made for debt
issue costs - (5)
Net purchase of treasury
shares - (31,609)
Proceeds from employee
stock compensation plans 7,034 6,617
Excess tax benefits from
share-based plans 1,549 3,235
----- -----
Cash used for financing
activities (1,896) (21,772)
------ -------
Increase in cash and cash
equivalents 49,054 42,319
Cash and cash equivalents -
beginning of period 336,700 119,773
------- -------
Cash and cash equivalents -
end of period $385,754 $162,092
======== ========
Supplemental Cash Flow
Disclosure:
Noncash investing activity:
Capital expenditures
included in accounts
payable $3,455 $7,091
====== ======
(1) Restated due to the adoption of new accounting standards
SOURCE ATK
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