Sales Increase 68 Percent on New Revenues From Thiokol Propulsion; FY02 Sales, EPS, Cash Guidance Increased
Summary — ATK reported solid gains in sales and earnings in the third
quarter of fiscal year 2002.
EPS from continuing operations increased
12 percent to 94 cents on a 68-percent rise in sales driven by new revenues
primarily from ATK Thiokol Propulsion and higher small-caliber ammunition
volume.
EBITDA cash flow through the first nine months of the year jumped
62 percent to $219 million.
The company is increasing its guidance for FY02
sales, EPS, and cash flow as it continues to benefit from strong operating
performance in core businesses and added sales and earnings from acquisitions.
— End summary.
ATK (Alliant Techsystems) (NYSE: ATK), the world’s leading supplier of
solid propulsion systems and the nation’s largest manufacturer of ammunition,
said earnings per share from continuing operations for the third quarter of
fiscal year 2002 rose 12 percent to 94 cents from 84 cents in the same period
a year ago.
(All per-share figures reflect a 3-for-2 common stock split
effective Sept. 7, 2001.)
Sales in the third quarter, which ended Dec. 30, rose 68 percent to
$464 million from $276 million last year.
New revenues from ATK Thiokol
Propulsion acquired in April 2001 and higher sales of small-caliber ammunition
were the primary factors in the sales growth.
“We are pleased to report continuing strong financial performance,” said
Paul David Miller (PDM), chairman and chief executive officer.
“The ATK team
is delivering results that are exceeding our targets for sales, profit, and
cash.
On the strategic front, we completed the acquisition of the ammunition
businesses of Blount International, Inc., which has strengthened our
ammunition lane of excellence.
As we enter the final quarter of FY02, we are
confident that we will deliver on our commitments.”
Cash flow as indicated by earnings before interest, taxes, depreciation,
and amortization (EBITDA) for the first three quarters of fiscal year 2002
rose to $219 million or $9.65 per share from $135 million or $6.43 per share
last year.
Free cash flow (cash from operations less capital expenditures)
generated during the nine-month period was $145 million versus $6 million a
year ago, reflecting excellent working capital management and the benefits of
income tax strategies.
The company’s investment in working capital was
reduced primarily through an increased focus on cash management at ATK Thiokol
Propulsion, which was acquired earlier this year.
It also benefited from
contract receipts in the third quarter, which historically were early
fourth-quarter receipts.
“As a result of our strong cash performance, we are well ahead of our debt
repayment schedule,” said PDM.
“So far this year, we have pre-paid
approximately $110 million of debt in addition to nearly $10 million in
scheduled debt payments.
This emphasis on cash generation gives us a great
deal of flexibility and confidence as we consider other accretive, strategic
growth options.”
For the nine months ended Dec. 30, earnings per share from continuing
operations rose 13 percent to $2.62 from $2.32 in the same period a year ago.
Sales for the period increased 57 percent to $1.3 billion from $818 million
last year.
Nine-month earnings before interest and income taxes were
$161.0 million, up 61 percent from $100.1 million a year ago.
Net earnings per share for the nine-month period were $1.93 versus $2.32
last year.
The current year’s results include one-time charges of 49 cents
per share resulting from a non-cash charge for the early extinguishment of
debt associated with the acquisition of Thiokol Propulsion, and 20 cents per
share stemming from litigation related to a previously discontinued business.
Both figures are net of income taxes.
As a result of continued strong operating performance, ATK is raising its
guidance for fiscal year 2002 earnings per share from continuing operations to
between $3.63 and $3.65.
The previous guidance was in the $3.60 to $3.63
range.
For the fourth quarter, which ends March 31, the company expects to
report earnings from continuing operations of between $1.01 and $1.03.
ATK is also raising its forecast for fiscal year 2002 sales to between
$1.760 billion and $1.775 billion from its previous guidance of between
$1.695 billion and $1.730 billion.
The increase reflects new revenues from
the acquisition of the Blount ammunition businesses, which was completed
earlier than anticipated, and higher than expected sales of small-caliber
ammunition.
The full-year EBIT margin rate is expected to be in the upper 12-percent
range, compared with an EBIT margin rate of 11.9 percent in FY01.
The
forecast for free cash flow has been raised from the $90 million to
$100 million range to approximately $115 million.
For fiscal year 2003, ATK continues to expect earnings per share from
continuing operations to be between $4.17 and $4.21.
Sales are projected to
be approximately $2 billion, while free cash flow is expected to be in excess
of $100 million.
Operations Review
The Aerospace Group posted third-quarter sales of $282 million versus
$120 million last year, while sales for the nine-month period increased to
$794 million from $376 million a year ago.
The gains in both periods
primarily reflect new revenues from ATK Thiokol Propulsion.
Defense Group sales in the third quarter rose 14 percent to $190 million
from $166 million last year, reflecting higher volume from small-caliber
ammunition programs and new revenues from the former Blount businesses.
Year-to-date sales rose 11 percent to $520 million from $470 million last year
on higher volume from small-caliber ammunition and tactical barrier systems as
well as new sales from the Blount acquisition.
Those gains more than offset
the loss of revenues from the sale of the group’s infrared flare business in
February 2001.
New business from ATK Thiokol Propulsion boosted third-quarter orders to
$365 million, up from $233 million a year ago.
Contracted backlog at the end
of the quarter was $3.4 billion.
Total backlog, which includes contracts
awarded but for which the company is not yet authorized to incur costs, plus
the value of unexercised options, was approximately $5.7 billion.
Major orders expected to be booked in the fourth quarter include the
annual portion of multi-year awards for small-caliber ammunition,
medium-caliber ammunition, and tank ammunition, and contracts for next
generation tank ammunition and propulsion systems for the Trident II (D-5)
Fleet Ballistic Missile, the Space Shuttle, and a national missile defense
alternative booster.
Recent operating highlights include:
- A one-year contract option worth $191 million from TRW, Inc. to the ATK
Thiokol Propulsion/Pratt & Whitney Space and Missile Propulsion team
for the Minuteman Intercontinental Ballistic Missile propulsion
replacement program.
ATK will receive approximately 60 percent of the
total contract value for its work as the lead contractor. - Two contracts with a combined value of $25 million for production of
Sparrow missile rocket motors. - A $9 million contract for initial production of sensor upgrade kits for
a missile warning system. - A contract with a potential value of up to $4 million awarded to
Federal Cartridge to produce ammunition for a new U.S. Marine Corps
shotgun weapon system.
Federal Cartridge is one of the former Blount
ammunition businesses. - A $3 million contract to make the U.S. military’s current high-
explosive mortar round safer and more lethal through the use of
insensitive munitions.
ATK is teamed with Canadian defense firm SNC on
the two-year development program. - Successful launches of the Space Shuttle Endeavour and Delta II and
Titan IV B rockets powered by ATK solid propulsion motors. - Successful test firings of medium-caliber ammunition and the Objective
Individual Combat Weapon 20-millimeter round using advanced air-burst
fuze technology, demonstrating ATK’s leadership in the emerging air-
bursting military weapons and ammunition market. - A second successful series of gun-launch tests of an independently
developed long-range naval precision-guided projectile, strengthening
ATK’s precision capabilities. - U.S. Navy certification of an electronic bomb fuze, clearing the way
for shipment of the product to international customers.
ATK is a $2 billion aerospace and defense company with leading positions
in propulsion, composite structures, munitions, and precision capabilities.
The company, which is headquartered in Edina, Minn., employs approximately
11,200 people and has two business groups:
Aerospace and Defense.
ATK news
and information can be found on the Internet at http://www.atk.com
The forecasts, projections, expectations, and opportunities for
anticipated earnings per share, sales, orders, EBIT margins, and cash flow
included in this news release are “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995.
Such forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from anticipated results, including changes in governmental
spending and budgetary policies, economic conditions, the company’s
competitive environment, the timing of awards and contracts, the outcome of
contingencies, including litigation and environmental remediation, program
performance, and sales projections, in addition to other factors identified in
ATK’s filings with the Securities and Exchange Commission.
Webcast Information:
ATK will webcast its investor conference call on
third-quarter results at 10:00 a.m. Eastern Standard Time today.
The live
audio web cast will be available on the investor relations page of ATK’s web
site at http://www.atk.com .
Information about downloading free RealPlayer
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
441981.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(In thousands except QUARTERS ENDED NINE MONTHS ENDED
per share data) December December December December
30 31 30 31
2001 2000 2001 2000
Sales $464,128 $276,349 $1,286,911 $818,052
Cost of sales 366,833 215,612 1,022,485 648,153
Gross margin 97,295 60,737 264,426 169,899
Operating expenses:
Research and development 4,962 3,221 14,315 7,004
Selling 10,273 5,611 27,558 18,409
General and administrative 24,205 16,445 61,599 44,346
Total operating expenses 39,440 25,277 103,472 69,759
Earnings before interest and
income taxes 57,855 35,460 160,954 100,140
Interest expense (21,696) (8,625) (64,077) (26,570)
Interest income 289 184 829 636
Earnings from continuing
operations before income taxes 36,448 27,019 97,706 74,206
Income tax provision 13,850 9,294 37,128 25,433
Minority interest expense, net
of income taxes 568 1,240
Income from continuing
operations 22,030 17,725 59,338 48,773
Loss on disposal of discontinued
operations, net of income taxes (4,650)
Income before extraordinary loss 22,030 17,725 54,688 48,773
Extraordinary loss on early
extinguishments of debt, net
of income taxes (383) (10,992)
Net income $21,647 $17,725 $43,696 $48,773
Basic earnings per common share:
Income from continuing
operations $0.98 $0.86 $2.74 $2.38
Discontinued operations (0.21)
Extraordinary loss (.01) (0.51)
Basic earnings per common share $.97 $0.86 $2.02 $2.38
Diluted earnings per common share:
Income from continuing
operations $0.94 $0.84 $2.62 $2.32
Discontinued operations (0.20)
Extraordinary loss (.02) (0.49)
Diluted earnings per common share $.92 $0.84 $1.93 $2.32
Average number of common shares
(thousands) 22,421 20,684 21,684 20,532
Average number of common and
dilutive shares
(thousands) 23,404 21,219 22,654 20,980
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share data) December 30, 2001 March 31, 2001
Assets
Current assets:
Cash and cash equivalents $81,829 $27,163
Receivables 380,219 214,724
Net inventory 136,369 54,136
Deferred income tax asset 16,478 16,478
Other current assets 26,194 20,322
Total current assets 641,089 332,823
Net property, plant, and equipment 485,528 303,188
Goodwill 784,983 117,737
Prepaid and intangible pension assets 304,220 106,048
Other assets and deferred charges 69,889 19,708
Total assets $2,285,709 $879,504
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $6,300 $69,200
Accounts payable 77,028 71,758
Contract advances and allowances 52,126 34,494
Accrued compensation 78,195 38,487
Accrued income taxes 46,155 11,873
Other accrued liabilities 129,882 66,151
Total current liabilities 389,686 291,963
Long-term debt 928,391 207,909
Deferred income tax liability 132,312 28,636
Post-retirement and post-employment
benefits liability 245,159 108,203
Other long-term liabilities 112,204 44,461
Total liabilities 1,807,752 681,172
Contingencies
Common stock - $.01 par value
Authorized - 60,000,000 shares
Issued and outstanding 24,671,437
shares at December 30, 2001 and
14,070,569 at March 31, 2001 287 185
Additional paid-in-capital 461,164 231,598
Retained earnings 308,876 265,180
Unearned compensation (5,859) (3,854)
Other comprehensive income (24,241) (6,140)
Common stock in treasury, at cost
4,009,077 shares held at
December 30, 2001 and 4,426,202 at
March 31, 2001 (262,270) (288,637)
Total stockholders' equity 477,957 198,332
Total liabilities and
stockholders' equity $2,285,709 $879,504
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) NINE MONTHS ENDED
December 30, 2001 December 31, 2000
Operating activities
Net income $43,696 $48,773
Adjustments to net income to arrive
at cash provided by operating activities
Depreciation 39,353 28,337
Amortization of intangible assets and
unearned compensation 18,381 6,377
Deferred income tax (291)
Loss on disposal of property 512 637
Minority interest expense,
net of income taxes 1,240
Loss on disposal of discontinued
operations, net of income taxes 4,650
Extraordinary loss on early extinguishment
of debt, net of income taxes 10,992
Changes in assets and liabilities:
Receivables 47,584 4,779
Inventory (972) (2,232)
Accounts payable (28,861) (20,337)
Contract advances and allowances 15,091 (25,398)
Accrued compensation (7,391) (1,661)
Accrued income taxes 34,196 6,181
Accrued environmental (2,199) (433)
Pension and post-retirement benefits (25,727) (17,689)
Other assets and liabilities 18,809 (6,570)
Cash provided by operating activities 169,063 20,764
Investing activities
Capital expenditures (24,221) (14,841)
Acquisition of business (712,353) (1,400)
Proceeds from sale of a portion of a
subsidiary 5,455
Proceeds from sale of property,
plant, and equipment 265 4,528
Cash used for investing activities (730,854) (11,713)
Financing activities
Net borrowings on line of credit 11,000
Payments made on bank debt (390,618) (41,737)
Payments made to extinguish debt (276,800)
Proceeds from issuance of long-term debt 1,325,000
Payments made for debt issue costs (43,985)
Payments made for stock issue costs (8,090)
Net purchase of treasury shares (1,801) (4,601)
Proceeds from employee stock
compensation plans 12,751 11,770
Cash provided by (used for) financing
activities 616,457 (23,568)
Increase (decrease) in cash and cash
equivalents 54,666 (14,517)
Cash and cash equivalents - beginning
of period 27,163 45,765
Cash and cash equivalents - end of
period $81,829 $31,248
