ATK (Alliant Techsystems) today reported earnings per share from continuing operations for
the second quarter of fiscal year 2004 of 93 cents, an increase of 27 percent
over 73 cents a year ago. The current quarter includes seven cents per share
resulting from a lower tax rate due to the resolution of a tax matter during
the quarter.
Sales for the second quarter, which ended Sept. 28, rose 10 percent to
$567 million from $513 million last year on higher volume from core
ammunition, propulsion, and composite structure programs and new revenues from
acquired businesses. Organic sales growth during the quarter was greater than
6 percent.
Orders booked during the second quarter rose to $474 million from
$303 million a year ago, bringing year-to-date orders to $1.2 billion, up
50 percent over $769 million a year ago. Supplemental orders for
small-caliber ammunition and new contracts for missile defense propulsion
systems were major factors in the growth.
Paul David Miller (PDM), executive chairman, said the second-quarter
results keep ATK solidly on track to deliver another year of strong financial
and operational performance.
“A combination of factors – including strong orders and cash flow and
continued solid business execution – give us increasing confidence in our
prospects for FY04,” said PDM.
Looking beyond the current year, Dan Murphy, who became chief executive
officer on Oct. 1, said he is particularly encouraged by positive developments
in two key growth areas, missile defense and precision systems.
“We anticipate additional propulsion work on both the ground-based and
sea-based components of the nation’s missile defense system and on the
Minuteman III Intercontinental Ballistic Missile program,” said Murphy. “In
the precision-fire arena, we continue to achieve performance breakthroughs in
key technical demonstrations, most recently guided flight tests of two
Autonomous Naval Support Rounds, which flew more than 61 miles to within
20 meters of their designated targets. These are unprecedented results in the
multi-service pursuit of long-range precision gunnery.”
Murphy noted that recent developments in the Space Shuttle program provide
both a reaffirmation of the company’s sales and profit profile in the current
fiscal year and the potential for additional Shuttle-related business in the
future.
“These developments include last week’s successful test of a new five-
segment booster, a new contract to begin supplying booster separation motors,
an opportunity to support the Shuttle Service Life Extension Program, and a
promising composite-based solution for in-flight Shuttle repairs,” said
Murphy.
Among other key second-quarter financial measures, the EBIT margin rate
(earnings from continuing operations before interest and income taxes as a
percent of sales) was 12.3 percent versus 12.5 percent a year ago. Excluding
the effect of pension expense, which was approximately $8 million higher than
last year, the EBIT margin rate increased 1.2 percent over a year ago,
reflecting continued strong performance in core business operations. (See
reconciliation table at the end of this news release.)
Earnings per share from continuing operations for the first half of fiscal
year 2004 increased 42 percent to $1.77 from $1.25 a year ago on sales of
$1.1 billion, up from $1.0 billion last year. Net earnings for the period
were $1.77 versus $1.35 a year ago. Last year’s results included a gain of
10 cents per share due to the cumulative effect of the adoption of a new
accounting principle and a charge of 21 cents per share reflecting a non-cash
charge to interest expense for the early prepayment of debt.
Cash provided by operating activities less capital expenditures in the
first half was stronger than anticipated, totaling $51 million versus $76
million a year ago. The variance reflects sales growth as well as the receipt
of $17 million for a swap restructuring in the year-ago period.
FY04 and FY05 Guidance
Given the strength of first-half performance and added visibility into the
remainder of the year, ATK now expects FY04 sales to be at the high end of its
previous guidance of between $2.325 billion and $2.345 billion. FY04 earnings
per share from continuing operations are expected to be $3.63 or better.
Orders for FY04, which previously were expected to approach $2.0 billion,
are now projected to be approximately $2.2 billion due to continued strength
in small-caliber ammunition and missile defense programs. The company is also
raising its expectations for cash provided by operating activities less
capital expenditures to approximately $85 million from previous guidance of
between $65 million and $75 million.
Looking ahead to FY05, ATK is projecting sales to increase between 5
percent and 7 percent, driven primarily by organic sales growth. Earnings per
share from continuing operations are expected to be between $3.80 and $3.95,
which includes an estimated increase in pension expense in FY05 of $14 million
or 22 cents per share. Cash provided by operating activities less capital
expenditures is projected to be approximately $100 million.
“We will be working across multiple fronts to deliver on our commitment to
our shareholders,” said Murphy. “We will continue to pursue organic growth
opportunities in precision systems, missile defense propulsion, and
conventional ammunition, while seeking strategic acquisitions that enhance our
prospects for continued growth. On the financial front, we have the strategic
flexibility to focus on the most efficient deployment of our cash, whether it
is for acquisitions, share repurchases, debt repayment, or pension funding.
Continued solid business execution by the ATK team will provide a strong
foundation for all of these activities.”
Second-Quarter Operations Review
Second-quarter sales for the Precision Systems Group were $138 million,
compared with $137 million last year. New revenues from ATK Missile Systems,
which was acquired in 2002, were offset by lower sales of medium-caliber gun
systems due to the completion of several contracts. Year-to-date sales rose
10 percent to $267 million from $243 million a year ago on higher volume from
ordnance systems and missile systems programs.
Aerospace Group second-quarter sales rose 14 percent to $241 million from
$212 million last year, reflecting higher volume from the Space Shuttle
propulsion program as well as other propulsion programs, increased sales of
composite products, and new revenues from Composite Optics, Inc. (COI),
acquired in January 2003. Sales for the six-month period increased 9 percent
to $503 million from $463 million a year ago, boosted by growth in core
propulsion programs, including the Space Shuttle, and core composite structure
programs, as well as new COI sales.
Ammunition and Related Products Group sales in the second quarter
increased 18 percent to $197 million from $167 million a year ago, driven by
higher sales of small-caliber ammunition. Six-month sales were $373 million,
up 10 percent from $339 million in the same period last year – again
reflecting higher volume from small-caliber ammunition programs.
Contracted backlog, which represents the estimated value of contracts for
which ATK is authorized to incur costs but for which revenue has not yet been
recognized, was $3.4 billion at the end of the second quarter. Total backlog,
which includes contracted backlog plus the value of unexercised options, was
$5.1 billion at the end of the quarter.
Recent business highlights include:
- A five-year contract worth up to $130 million to supply ordnance
energetic material for the U.S. armed forces. - A $92 million contract to supply propulsion systems to support the
initial deployment of the STANDARD Missile-3 for the sea-based missile defense
program. - Contract modifications worth $75 million to produce additional small-
caliber ammunition to meet Department of Defense training and war reserve
requirements. - A $13 million contract to begin supplying booster separation motors for
the Space Shuttle, expanding the company’s presence on future Shuttle
missions. - Contracts from the Department of Homeland Security that provide the
opportunity to compete for more than $130 million worth of ammunition business
over the next five years. - A successful flight test of an ATK-provided three-stage rocket for an
Orbital Sciences Corporation interceptor boost vehicle being developed for the
ground-based missile defense system. - A contract to supply four composite tail cones for UH-60 Black Hawk
helicopters for testing and qualification. - Delivery of advanced solid rocket motors for the U.S. Army’s Line-of-
Sight Antitank (LOSAT) weapon system, opening the way for the start of
production in 2004. - Propulsion and composite structures support for successful missions by
Pegasus, Delta II, Delta IV, and Titan IV B launches vehicles.
ATK is a $2.2 billion aerospace and defense company with strong positions
in propulsion, composite structures, munitions, precision capabilities, and
civil and sporting ammunition. The company, which is headquartered in Edina,
Minn., employs approximately 12,200 people and has three business groups:
Precision Systems, Aerospace, and Ammunition and Related Products. ATK news
and information can be found at www.atk.com .
Certain information discussed in this press release regarding FY04 and
FY05 guidance, and developments in ATK’s propulsion, missile defense,
precision systems, and Space Shuttle businesses 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: unforeseen
delays in NASA’s Space Shuttle program, changes in governmental spending,
budgetary policies, product sourcing strategies, economic conditions, equity
and corporate bond market returns, the company’s competitive environment, the
timing of awards and contracts, the outcome of contingencies, including
litigation and environmental remediation, program performance, program
terminations, and financial performance projections. ATK undertakes no
obligation to update any forward-looking statements. For further information
on factors that could impact ATK, and statements contained herein, reference
should be made to ATK’s filings with the Securities and Exchange Commission,
including quarterly reports on Form 10-Q, current reports on Form 8-K and
annual reports on Form 10-K.
Reconciliation of Non-GAAP Financial Measure Quarter Ended
(in thousands) Sept 28, 2003 Sept 29, 2002
Income from continuing operations before
interest and income taxes $69,680 $64,107
Less: Pension expense (income) 3,250 (4,225)
Income from continuing operations before
interest and income taxes excluding the
effect of pension expense 72,930 59,882
Sales 566,551 513,145
Income from continuing operations before
interest and income taxes excluding the
effect of pension expense as a percent of sales 12.9% 11.7%
Webcast Information: ATK will webcast its investor conference call on
FY04 second-quarter results at 10:00 a.m. Eastern Time today. The live audio
webcast will be available on the Investor Relations page of ATK’s web site at
www.atk.com. Information about downloading free Windows Media Player
software, which is required to access the webcast, is available on the
website. For those who cannot participate in the live webcast, a telephone
recording of the conference call will be available for one month after the
call. The telephone number is 719-457-0820, and the confirmation code is
685996.
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands except per share
data) QUARTERS ENDED SIX MONTHS ENDED
September September September September
28, 29, 28, 29,
2003 2002 2003 2002
Sales $566,551 $513,145 $1,125,689 $1,033,035
Cost of sales 445,812 398,321 883,855 804,882
Gross profit 120,739 114,824 241,834 228,153
Operating expenses:
Research and development 8,294 5,656 16,375 10,631
Selling 16,328 15,717 30,736 30,955
General and administrative 26,437 29,344 57,031 55,868
Total operating expenses 51,059 50,717 104,142 97,454
Income from continuing
operations before interest
and income taxes 69,680 64,107 137,692 130,699
Interest expense (15,133) (16,819) (30,178) (48,545)
Interest income 168 169 368 429
Income from continuing
operations before income
taxes 54,715 47,457 107,882 82,583
Income tax provision 17,873 18,983 38,076 33,033
Income from continuing
operations before minority
interest expense 36,842 28,474 69,806 49,550
Minority interest expense, net
of income taxes 195 - 255 -
Income from continuing
operations 36,647 28,474 69,551 49,550
Cumulative effect of change in
accounting principle, net of
income taxes - - - 3,767
Net income $36,647 $28,474 $69,551 $53,317
Basic earnings per common
share:
Income from continuing
operations $0.95 $0.75 $1.80 $1.30
Cumulative effect of change
in accounting principle - - - 0.10
Net income 0.95 $0.75 $1.80 $1.40
Diluted earnings per common
share:
Income from continuing
operations $0.93 $0.73 $1.77 $1.25
Cumulative effect of change
in accounting principle - - - 0.10
Net income $0.93 $0.73 $1.77 $1.35
Average number of common
shares 38,583 38,130 38,572 38,142
Average number of common and
dilutive shares 39,293 39,266 39,290 39,362
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data) Sept 28, March 31,
Assets 2003 2003
Current assets:
Cash and cash equivalents $46,114 $14,383
Net receivables 442,196 464,966
Net inventory 149,169 137,849
Deferred income tax asset 69,460 69,460
Other current assets 18,900 25,658
Total current assets 725,839 712,316
Net property, plant, and equipment 451,770 463,736
Goodwill 839,893 839,893
Prepaid and intangible pension assets 310,490 281,941
Deferred income tax asset 60,742 62,537
Deferred charges and other non-
current assets 117,679 118,841
Total assets $2,506,413 $2,479,264
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $4,080 $4,331
Accounts payable 98,280 115,704
Contract advances and allowances 38,331 48,386
Accrued compensation 82,722 110,693
Accrued income taxes 58,440 23,107
Other accrued liabilities 127,269 125,832
Total current liabilities 409,122 428,053
Long-term debt 795,536 820,856
Post-retirement and post-employment
benefits liability 221,908 234,037
Additional minimum pension liability 379,999 379,856
Other long-term liabilities 143,121 138,538
Total liabilities 1,949,686 2,001,340
Contingencies
Common stock - $.01 par value
Authorized - 90,000,000 shares
Issued and outstanding 38,618,811
shares at September 28, 2003 and
38,486,630 at March 31, 2003 416 416
Additional paid-in-capital 468,727 470,158
Retained earnings 528,345 458,794
Unearned compensation (1,773) (2,650)
Accumulated other comprehensive income (244,010) (246,878)
Common stock in treasury, at cost,
2,938,287 shares held at
September 28, 2003 and 3,070,468
at March 31, 2003 (194,978) (201,916)
Total stockholders' equity 556,727 477,924
Total liabilities and
stockholders' equity $2,506,413 $2,479,264
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) SIX MONTHS ENDED
Sept 28, Sept 29,
Operating activities 2003 2002
Net income $69,551 $53,317
Adjustments to net income to arrive
at cash provided by operating activities:
Depreciation 30,811 32,116
Amortization of intangible assets and
unearned compensation 2,675 3,044
Deferred income tax - (6,819)
(Gain) loss on disposal of property (497) 216
Minority interest expense, net
of income taxes 255 -
Cumulative effect of change in
accounting principle, net of income
taxes - (3,767)
Changes in assets and liabilities:
Net receivables 22,770 19,875
Net inventory (11,320) (27,412)
Accounts payable (17,424) (3,854)
Contract advances and allowances (10,055) 9,035
Accrued compensation (18,700) (13,069)
Accrued income taxes 35,333 15,711
Accrued environmental (643) 1,458
Pension and post-retirement
benefits (40,535) (33,444)
Other assets and liabilities 7,422 47,597
Cash provided by operating activities 69,643 94,004
Investing activities
Capital expenditures (19,103) (17,734)
Acquisition of businesses - (44,526)
Proceeds from sale of property,
plant, and equipment 1,627 4,009
Cash used for investing activities (17,476) (58,251)
Financing activities
Net borrowings on line of credit
Payments made on bank debt (25,571) (32,633)
Payments made to extinguish debt - (472,220)
Proceeds from issuance of long-term debt - 525,000
Payments made for debt issue costs - (2,053)
Net purchase of treasury shares (2,426) (1,427)
Proceeds from employee stock
compensation plans 7,561 9,424
Cash (used for) provided by financing
activities (20,436) 26,091
Increase in cash and cash equivalents 31,731 61,844
Cash and cash equivalents - beginning
of period 14,383 8,513
Cash and cash equivalents - end of period $46,114 $70,357
