ATK Reports First-Quarter Operating Results

ATK Delivers Strong Operating Margins of 12.1 Percent

ATK Increases Full-Year FY12 EPS Guidance

Aug 04, 2011, 07:00 ET from ATK

MINNEAPOLIS, Aug. 4, 2011 /PRNewswire/ -- ATK (NYSE: ATK) today reported operating results for the first quarter of its Fiscal Year 2012, which ended on July 3, 2011.  Fully diluted earnings per share were $2.13, compared to $2.24 in the prior-year period.  First quarter results included a one-time discrete tax benefit of $0.11 per share. Margins in the first quarter improved to 12.1 percent compared to 11.1 percent in the prior-year quarter.  The increase reflects a continued focus on efficiency improvements and cost management initiatives throughout the company, and a one-time gain related to the sale of a non-essential parcel of land.  

First quarter sales of $1.1 billion were down from the $1.2 billion recorded in the prior-year, reflecting lower sales on NASA's human space flight programs, as well as lower sales of non-standard ammunition and lower sales at the Radford Army Ammunition Plant.  Net income for the quarter was $72 million compared to $75 million in the prior-year quarter.

Based on sustainable margin improvements and a lower share count resulting from a $50 million share repurchase, the company is raising its full-year EPS guidance.

"Our aggressive focus on efficiency improvements and cost management contributed to the strength of our bottom-line results, even in the face of a challenging sales environment," said Mark DeYoung, President and CEO. "We are meeting key production and delivery milestones, executing on our programs of record, and winning new business including the recently-announced Joint Allied Threat Awareness System (JATAS) program."

SUMMARY OF REPORTED RESULTS

The following table presents the company's results for the first quarter of the fiscal year which ended July 3, 2011 (in thousands).

Sales:

Quarters Ended

July 3, 2011

July 4, 2010

$

Change

% Change

Aerospace Systems

$  353,647

$  369,364

$(15,717)

(4.3)%

Armament Systems

346,917

438,900

(91,983)

(21.0)%

Missile Products

145,432

156,313

(10,881)

(7.0)%

Security and Sporting

229,259

237,574

(8,315)

(3.5)%

Total sales

$  1,075,255

$  1,202,151

$(126,896)

(10.6)%

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

Quarters Ended

July 3, 2011

July 4, 2010

$

Change

% Change

Aerospace Systems

$  42,546

$  35,799

$  6,747

18.8%

Armament Systems

47,804

49,641

(1,837)

(3.7)%

Missile Products

17,081

16,524

557

3.4%

Security and Sporting

29,320

32,976

(3,656)

(11.1)%

Corporate

(6,211)

(1,887)

(4,324)

(229.1)%

Total operating profit

$  130,540

$  133,053

$  (2,513)

(1.9)%

SEGMENT RESULTS

ATK operates in a four business group structure: Aerospace Systems; Armament Systems; Missile Products; and Security and Sporting.

AEROSPACE SYSTEMS

First quarter sales fell four percent to $354 million, compared to $369 million in the prior-year period.  The decrease reflects lower revenue on NASA programs, partially offset by higher sales of commercial aircraft structures and flares/decoys.  

Earnings before interest, taxes, and noncontrolling interest (operating profit) in the quarter rose 19 percent to $43 million, compared to $36 million in the prior-year quarter.  The increase reflects a $5.4 million gain from the sale of a non-essential parcel of land to the State of Utah, additional profit generated by higher sales volumes of flares and decoys, and improved operating efficiencies.  These were partially offset by lower sales on the group's NASA human space flight programs.

ARMAMENT SYSTEMS

Sales in the first quarter declined by 21 percent to $347 million, compared to $439 million in the prior-year quarter.  The decrease was driven primarily by lower non-standard ammunition and weapons sales, and lower sales at the group's Radford, Virginia facility.

Operating profit for the quarter declined by four percent to $48 million, compared to $50 million in the prior-year quarter, driven by lower sales volume as noted above, partially offset by improved operating efficiencies.

MISSILE PRODUCTS

Sales in the first quarter declined by seven percent to $145 million, compared to $156 million in the prior-year quarter. The decrease primarily reflects lower sales volume in defense electronics due primarily to the timing of awards.

Operating profit of $17 million remained consistent with the prior-year quarter.  A continued focus on improving operating efficiencies and a higher profit rate on tactical rocket motor programs offset lower sales volumes.  

SECURITY AND SPORTING

First quarter sales decreased by four percent to $229 million, compared to $238 million in the prior-year quarter.  The decrease in sales volume was primarily the result of advanced sales of commercial ammunition in the fourth quarter of FY11 due to the price increase implemented in the first quarter of FY12.

Operating profit in the first quarter decreased by 11 percent to $29 million, compared to $33 million in the prior-year quarter, reflecting lower sales volume in commercial ammunition products and increased raw material costs.

CORPORATE AND OTHER

In the first quarter, corporate and other expenses totaled $6 million, compared to expenses of $2 million in the prior-year quarter, reflecting increased pension expense and higher inter-company profit eliminations which are recorded within corporate. The tax rate for the quarter was 31.2 percent compared to 35.2 percent in the prior-year quarter, which reflects a one-time benefit from a recent state tax law change.  Interest expense was $26.3 million compared to $17.6 million in the prior-year quarter, which reflects the additional debt issued in October, 2010.  Free cash flow of negative $193 million in the first quarter reflects a normal seasonal increase in working capital, and pension contributions of approximately $62 million (see reconciliation table for details). During the quarter, the company repurchased $50 million of common stock and retired $50 million of the convertible notes due in September, 2011.

OUTLOOK

Based on better visibility into the remainder of the year, the company is raising its full-year FY12 EPS guidance to a range of $8.50 to $9.00 from the previously announced range of $8.00 to $8.60.  ATK continues to expect full-year sales in a range from $4.6 to $4.8 billion.

ATK now expects an average share count for the full year of approximately 33.5 million. The company continues to expect a tax rate for the full year of approximately 34 percent and pension expense of approximately $135 million. ATK continues to expect FY12 cash provided by operating activities in a range of $355 million to $380 million, which includes the impact of a first quarter pension contribution of approximately $62 million.  The company expects capital expenditures of approximately $130 million and free cash flow in a range of $225 million$250 million (see reconciliation table for details).

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 acquisitions, debt repayment, cash dividends, and share repurchase 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 3,

2011

Projected Year

Ending March 31, 2012

Cash provided by operating activities

$  (151,479)

$355,000-$380,000

Capital expenditures

(41,564)

~(130,000)

Free cash flow

$  (193,043)

$225,000-$250,000

ATK is an aerospace, defense, and commercial products company with operations in 22 states, Puerto Rico, and internationally, and revenues of approximately $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 profitability of current commercial aerospace structures programs; uncertainties related to the development of NASA's new Space Launch System; 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, dividend payments; 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

(preliminary and unaudited)

QUARTERS ENDED

(Amounts in thousands except per share data)

July 3, 2011

July 4, 2010

Sales

$

1,075,255

$

1,202,151

Cost of sales

830,031

949,887

Gross profit

245,224

252,264

Operating expenses:

Research and development

12,202

13,888

Selling

39,426

40,361

General and administrative

63,056

64,962

Income before interest, income taxes, and noncontrolling interest

130,540

133,053

Interest expense

(26,452)

(17,699)

Interest income

152

70

Income before income taxes and noncontrolling interest

104,240

115,424

Income tax provision

32,546

40,647

Net income

71,694

74,777

Less net income attributable to noncontrolling interest

176

133

Net income attributable to Alliant Techsystems Inc.

$

71,518

$

74,644

Alliant Techsystems Inc.'s earnings per common share:

Basic

$

2.15

$

2.26

Diluted

2.13

2.24

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

Basic

33,302

33,001

Diluted

33,578

33,330

ALLIANT TECHSYSTEMS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(preliminary and unaudited)

(Amounts in thousands except share data)

July 3, 2011

March 31, 2011

ASSETS

Current assets:

 Cash and cash equivalents                                                         

$      405,985

$      702,274

 Net receivables                                                                   

1,007,074

945,611

 Net inventories                                                                   

315,359

242,028

 Income tax receivable                                                             

-

22,228

 Deferred income tax assets                                                         

60,889

65,843

 Other current assets                                                              

67,091

81,249

   Total current assets                                                            

1,856,398

2,059,233

Net property, plant, and equipment                                                     

594,192

587,749

Goodwill                                                                          

1,251,536

1,251,536

Deferred income tax assets                                                           

105,869

100,519

Deferred charges and other non-current assets                                           

483,449

444,808

   Total assets                                                                   

$  4,291,444

$  4,443,845

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Current portion of long-term debt                                                     

$     269,573

$     320,000

 Accounts payable                                                                

222,040

292,281

 Contract advances and allowances                                                  

109,159

121,927

 Accrued compensation                                                            

112,634

135,442

 Accrued income taxes                                                             

8,156

-

 Other accrued liabilities                                                            

219,810

193,836

   Total current liabilities                                                           

941,372

1,063,486

Long-term debt                                                                     

1,289,708

1,289,709

Postretirement and postemployment benefits liabilities                                       

123,504

126,012

Accrued pension liability                                                             

618,715

671,356

Other long-term liabilities                                                             

124,936

127,160

   Total liabilities                                                                 

3,098,235

3,277,723

Commitments and contingencies

Common stock$.01 par value:

 Authorized180,000,000 shares

 Issued and outstanding—32,948,214 shares at July 3, 2011 and 33,519,072 shares at March 31, 2011

330

335

Additional paid-in-capital                                                             

552,252

559,279

Retained earnings                                                                   

2,070,432

2,005,651

Accumulated other comprehensive loss                                                 

(781,365)

(787,077)

Common stock in treasury, at cost— 8,607,235 shares held at July 3, 2011 and 8,036,377 shares held at March 31, 2011

(657,980)

(621,430)

   Total Alliant Techsystems Inc. stockholders' equity                                    

1,183,669

1,156,758

Noncontrolling interest

9,540

9,364

   Total stockholders' equity                                                        

1,193,209

1,166,122

   Total liabilities and stockholders' equity                                             

$  4,291,444

$  4,443,845

ALLIANT TECHSYSTEMS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(preliminary and unaudited)

THREE MONTHS ENDED

(Amounts in thousands)

July 3, 2011

July 4, 2010

Operating activities

Net income

$

71,694

$

74,777

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

Depreciation

23,474

24,092

Amortization of intangible assets

2,784

2,789

Amortization of debt discount

4,999

4,211

Amortization of deferred financing costs

1,432

710

Deferred income taxes

(3,942)

566

(Gain) loss on disposal of property

(5,215)

1,352

Share-based plans expense

3,344

2,418

Excess tax benefits from share-based plans

(23)

(53)

Changes in assets and liabilities:

Net receivables

(100,701)

(162,009)

Net inventories

(73,331)

(20,619)

Accounts payable

(59,829)

(38,026)

Contract advances and allowances

(12,768)

27,728

Accrued compensation

(29,182)

(69,096)

Accrued income taxes

35,659

24,987

Pension and other postretirement benefits

(32,612)

11,820

Other assets and liabilities

22,738

22,529

Cash used for operating activities

(151,479)

(91,824)

Investing activities

Capital expenditures

(41,564)

(34,991)

Acquisition of business

-

(172,251)

Proceeds from the disposition of property, plant, and equipment

6,364

23

Cash used for investing activities

(35,200)

(207,219)

Financing activities

Payments made on bank debt

(5,000)

(3,437)

Payments made to extinguish debt

(50,427)

-

Purchase of treasury shares

(49,991)

-

Dividends paid

(6,737)

-

Proceeds from employee stock compensation plans

2,522

521

Excess tax benefits from share-based plans

23

53

Cash used for financing activities

(109,610)

(2,863)

Decrease in cash and cash equivalents

(296,289)

(301,906)

Cash and cash equivalents - beginning of period

702,274

393,893

Cash and cash equivalents - end of period

$

405,985

$

91,987

SOURCE ATK



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