Alliant Techsystems
(NYSE:) reported today that earnings per share in the second quarter rose
to $1.15. The second quarter results did not include a benefit for the R&D
tax credit. ATK’s prior EPS guidance of $1.17 included a benefit of five
cents per share for the R&D tax credit. The company believes that the R&D tax
credit will be extended retroactively prior to the end of its fiscal year.
Sales for the quarter, which ended October 1, climbed eight percent to
$833 million from $772 million in the prior year quarter. Sales were driven
entirely by organic growth. Orders in the quarter were up 44 percent to
$944 million from $656 million in the prior year period. The company’s second
quarter EBIT margin (earnings before interest and income taxes as a percent of
sales) was 9.8 percent — up from 9.7 percent in the first quarter and on
track for full-year EBIT performance of approximately 10 percent. Due in part
to the delay of the research and development tax credit extension, the
company’s tax rate for the quarter was 37.8 percent compared to 34.5 percent
in the prior year.
“I’m pleased with ATK’s strong second-quarter and believe we are well
positioned to finish the fiscal year with double digit earnings growth, a
strengthening orders profile and the momentum to sustain our growth,” said Dan
Murphy, Chairman and Chief Executive Officer. “We achieved several notable
successes in the quarter including significant new positions in commercial
aerospace and nuclear power generation,” said Murphy.
Key order highlights:
-- Multi-year, multi-million dollar award for composite containment cases
on the GEnx aircraft engine
-- An initial $10 million award for rotor tubes used in a centrifuge
operation to enrich uranium for nuclear power generation
-- $41 million to provide the U.K. with anti-tank barrier systems
-- $83 million in medium-caliber ammunition
-- $66 million in small-caliber ammunition
Additional business highlights:
-- Completed a $300 million convertible security offering which allows
the company to fully fund its pension plan in FY07
-- Completed the repurchase of 2.6 million shares of stock during the
quarter for approximately $202 million.
-- The company's senior secured debt was raised to investment grade
status (Baa3) by Moody's Investors Services
-- The successful test firing of a Kinetic Energy Interceptor (KEI) first
stage motor
-- The formation of an ATK, Lockheed Martin, and Pratt & Whitney
Rocketdyne team to pursue the upper stage of the Ares I launch vehicle
Earnings per share for the first six months of fiscal year 2007 increased
nine percent to $2.24 compared to $2.06 a year ago. The prior year results
included tax benefits of 9 cents per share. Sales for the first half of
fiscal year 2007 rose more than eight percent to $1.66 billion from
$1.53 billion in the prior year. First half orders reached $1.56 billion, a
16 percent increase from $1.34 billion reported in the prior year.
Year-to-date operating cash is $5 million compared to $116 million in the
prior year quarter. The decrease reflects ATK’s previously announced capital
deployment strategy to fully fund its employee pension plan obligations.
SUMMARY OF REPORTED RESULTS
The following table presents the company’s results for the year to date
and the quarter ending on October 1, 2006.
Net Sales and Income before Interest, Income Taxes, and Minority Interest
(Dollars in Thousands)
Sales:
Quarters Ended
October 1, October 2,
2006 2005 $ Change % Change
Mission Systems Group $288,166 $270,415 $17,751 6.6%
Ammunition Systems Group 282,653 252,009 30,644 12.2%
Launch Systems Group 262,236 249,668 12,568 5.0%
Total external sales $833,055 $772,092 $60,963 7.9%
Six Months Ended
October 1, October 2,
2006 2005 $ Change % Change
Mission Systems Group $559,028 $543,362 $15,666 2.9%
Ammunition Systems Group 569,587 499,014 70,573 14.1%
Launch Systems Group 526,858 486,708 40,150 8.2%
Total external sales $1,655,473 $1,529,084 $126,389 8.3%
Income before Interest, Income Taxes, and Minority Interest (Operating
Profit):
Quarters Ended Six Months Ended
October 1, October 2, October 1, October 2,
2006 2005 Change 2006 2005 Change
Mission Systems
Group $26,385 $21,346 $5,039 $53,491 $43,331 $10,160
Ammunition
Systems
Group 26,194 23,873 2,321 46,014 44,387 1,627
Launch Systems
Group 35,427 36,744 (1,317) 73,073 67,446 5,627
Corporate (6,087) (3,699) (2,388) (11,281) (6,719) (4,562)
Total $81,919 $78,264 $3,655 $161,297 $148,445 $12,852
Note: The net expense of Corporate primarily reflects expenses incurred
for administrative functions that are performed centrally at the corporate
headquarters (as well as stock option expenses and elimination of intercompany
profits.)
QUARTERLY SEGMENT RESULTS
ATK operates three principal business groups: Ammunition Systems Group;
Launch Systems Group; and Mission Systems Group.
AMMUNITION SYSTEMS
Sales from the Ammunition Systems Group increased 12 percent to
$283 million from $252 million in the prior year quarter, led by an 18 percent
rise in civil ammunition sales and continued strength in the company’s
military small-caliber ammunition business. Based on the strength of the
Group’s civil ammunition sector through the first half of the year, ATK now
believes that sales growth for the Group will exceed 10 percent.
Second quarter earnings before interest and taxes (operating profit) for
the Ammunition Systems Group were $26 million, compared to $24 million in the
prior year quarter. This reflects the growth of civil ammunition and medium-
caliber ammunition. The company continues to expect full-year operating
margins in the Ammunition Systems Group of more than 9 percent.
LAUNCH SYSTEMS
Sales from the Launch Systems Group increased five percent to $262 million
versus $250 million in the prior year quarter. This increase reflects new
sales from NASA’s Ares I program. ATK continues to expect mid-single-digit
growth for the full year.
Second quarter operating profit for the Launch Systems Group was
$35 million compared to $37 million in the prior year. This reflects
reductions in sales and margins on ordnance programs and Orion motors,
partially offset by increased volume and favorable contract performance on
strategic programs. The company continues to expect full-year margins in the
Launch Systems Group of approximately 14 percent.
MISSION SYSTEMS
Mission Systems sales increased seven percent to $288 million compared to
$270 million in the prior year quarter. The increased sales were driven by
new sales from the recently announced GEnx contract, higher AAR-47 missile
warning system volumes, increases in sales from the company’s aircraft
integration business, and higher sales in large-caliber ammunition. These
were partially offset by expected lower sales from advanced weapons. ATK
expects that the Mission Systems Group will achieve mid single-digit organic
growth for the full year.
Second quarter operating profit was $26 million, up from $21 million in
the previous year. The increase reflects improved margins in electronic
warfare and fuzing programs as well as the elimination of fuze restructuring
costs associated with the consolidation of fuze operations in West Virginia.
The company continues to expect operating margins for the full year of more
than 9 percent.
OUTLOOK
Based on better visibility into the remainder of the fiscal year, ATK is
raising its full-year FY07 sales estimate and narrowing its EPS range to the
upper end of its previous guidance. ATK now expects sales to exceed
$3.45 billion. It previously expected sales to exceed $3.4 billion. ATK is
also raising its FY07 orders guidance to approximately $3.6 billion, up from
prior guidance of $3.3 billion. The company now expects full-year EPS in a
range of $4.95 – $5.05. The previous guidance range was $4.90 – $5.05. ATK
is raising its guidance related to cash flow from operations to $35 million,
from $25 million. ATK’s cash guidance includes the impact of the planned
$385 million pension contribution this year, partially offset by expected tax
benefits.
The company expects average share count of less than 35 million in FY07.
The effective tax rate is expected to be approximately 35 percent (assuming
the research and development tax credit is extended retroactively to the
beginning of the company’s fiscal year). Pension expenses are expected to be
approximately $70 million.
ATK is a $3.4 billion advanced weapon and space systems company employing
approximately 15,000 people in 22 states. News and information can be found
on the Internet at http://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:
delays in NASA’s Space Shuttle 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; 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; 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.
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands except per share
data) QUARTERS ENDED SIX MONTHS ENDED
October 1, October 2, October 1, October 2,
2006 2005 2006 2005
Sales $833,055 $772,092 $1,655,473 $1,529,084
Cost of sales 672,852 621,647 1,343,912 1,245,236
Gross profit 160,203 150,445 311,561 283,848
Operating expenses:
Research and development 13,894 14,196 25,551 24,077
Selling 22,657 19,309 47,455 37,285
General and administrative 41,733 38,676 77,258 74,041
Total operating expenses 78,284 72,181 150,264 135,403
Income before interest, income
taxes, and minority interest 81,919 78,264 161,297 148,445
Interest expense (17,851) (17,044) (34,686) (34,514)
Interest income 341 241 544 368
Income before income taxes and
minority interest 64,409 61,461 127,155 114,299
Income tax provision 24,337 21,207 48,137 36,716
Income before minority
interest 40,072 40,254 79,018 77,583
Minority interest, net of
income taxes 145 102 218 211
Net income $39,927 $40,152 $78,800 $77,372
Earnings per common share:
Basic $1.17 $1.08 $2.27 $2.09
Diluted 1.15 1.07 2.24 2.06
Average number of common
shares 34,187 37,027 34,767 37,026
Average number of common and
dilutive shares 34,612 37,646 35,196 37,625
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data) October 1, 2006 March 31, 2006
Assets
Current assets:
Cash and cash equivalents $12,614 $9,090
Net receivables 728,445 738,909
Net inventories 184,416 139,876
Deferred income tax assets 86,088 77,848
Other current assets 43,069 53,728
Total current assets 1,054,632 1,019,451
Net property, plant, and equipment 447,859 453,958
Goodwill 1,163,186 1,163,186
Prepaid and intangible pension assets 78,771 82,254
Deferred charges and other non-current
assets 184,172 183,131
Total assets $2,928,620 $2,901,980
Liabilities and Stockholders' Equity
Current liabilities:
Cash overdrafts $2,099 $63,036
Current portion of long-term debt 27,000 29,596
Line of credit borrowings 37,000 -
Accounts payable 172,056 165,955
Contract advances and allowances 67,782 49,667
Accrued compensation 95,439 114,537
Accrued income taxes - 23,710
Other accrued liabilities 164,153 224,443
Total current liabilities 565,529 670,944
Long-term debt 1,382,500 1,096,000
Deferred income tax liabilities 78,829 2,909
Postretirement and postemployment
benefits liability 173,396 175,314
Minimum pension liability 104,934 212,258
Other long-term liabilities 116,410 116,197
Total liabilities 2,421,598 2,273,622
Contingencies
Common stock - $.01 par value
Authorized - 90,000,000 shares
Issued and outstanding 32,918,140
shares at October 1,2006
and 35,207,335 at March 31, 2006 329 352
Additional paid-in-capital 459,556 472,861
Retained earnings 1,007,321 928,521
Unearned compensation - (2,760)
Accumulated other comprehensive loss (339,535) (333,136)
Common stock in treasury, at cost,
8,636,921 shares held at
October 1, 2006 and 6,347,726 at
March 31, 2006 (620,649) (437,480)
Total stockholders' equity 507,022 628,358
Total liabilities and
stockholders' equity $2,928,620 $2,901,980
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) SIX MONTHS ENDED
October 1, 2006 October 2, 2005
Operating activities
Net income $78,800 $77,372
Adjustments to net income to
arrive at cash provided by
operating activities:
Depreciation 34,066 34,137
Amortization of
intangible assets 4,218 4,362
Amortization of deferred
financing costs 1,630 1,937
Deferred income taxes 70,976 6,762
(Gain) loss on disposal
of property (84) 266
Minority interest
expense, net of income taxes 218 211
Share-based plans expense 18,310 10,183
Excess tax benefits from
share-based plans (2,049) -
Changes in assets and
liabilities:
Net receivables 10,464 16,814
Net inventories (44,540) (20,227)
Accounts payable 12,887 (60,292)
Contract advances
and allowances 18,115 13,244
Accrued
compensation (18,243) (8,471)
Accrued income
taxes (24,858) 36,318
Pension and other
postretirement
benefits (180,253) (9,604)
Other assets and
liabilities 25,276 13,339
Cash provided by operating
activities 4,933 116,351
Investing activities
Capital expenditures (35,569) (20,430)
Proceeds from the disposition
of property, plant, and
equipment 510 1,371
Cash used for investing activities (35,059) (19,059)
Financing activities
Change in cash overdrafts (60,937) (6,092)
Net borrowings on line of
credit 37,000 -
Payments made on bank debt (13,500) (280,053)
Payments made to extinguish
debt (2,596) -
Proceeds from issuance of
long-term debt 300,000 270,000
Purchase of call options (50,850) -
Sale of warrants 23,220 -
Payments made for debt
issuance costs (6,344) (699)
Net purchase of treasury
shares (208,027) (69,908)
Proceeds from employee stock
compensation plans 13,635 14,508
Excess tax benefits from
share-based plans 2,049 -
Cash provided by (used for)
financing activities 33,650 (72,244)
Increase in cash and cash
equivalents 3,524 25,048
Cash and cash equivalents -
beginning of period 9,090 12,772
Cash and cash equivalents - end of
period $12,614 $37,820
Media Contact: Investor Contact:
Bryce Hallowell Steve Wold
Phone: 952-351-3087 Phone: 952-351-3056
E-mail: bryce.hallowell@atk.com E-mail: steve.wold@atk.com
