Nov 11, 2009
MINNEAPOLIS, Nov. 11 /PRNewswire-FirstCall/ -- Alliant Techsystems (NYSE: ATK) today reported that fully diluted earnings per share (EPS) in the second quarter of fiscal year 2010 (FY10), which ended on October 4, 2009, rose 24 percent to $2.19, compared to $1.77(1) in the prior-year quarter. The results were driven by top line sales growth, improved operating margins, a reduced diluted share count, and reduced interest expense, partially offset by increased pension expense. Based on the strength of the company's performance through the first half of the year, ATK is raising its full-year EPS, sales and cash flow forecast.
Sales for the quarter rose 11 percent to $1.2 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 second quarter was up 18 percent to $73 million. Second quarter margins reached 11.2 percent. Orders in the quarter of $1.1 billion were in line with the company's expectations.
"ATK's second quarter performance was strong. We achieved double-digit sales and earnings growth, improved company-wide margins, and generated significant free cash flow," said John Shroyer, interim CEO, Senior Vice President, and CFO. "I am particularly pleased with the growth of our commercial businesses both in ammunition, aircraft structures and elsewhere across the company. We are well positioned for continued strength in the second half of the year and are raising our full-year guidance."
SUMMARY OF REPORTED RESULTS
The following table presents the company's results for the second quarter of fiscal year 2010, which ended on October 4, 2009 (in thousands).
Sales:
Quarters Ended
--------------
October 4, September 28, $ %
2009 2008 Change Change
------- --------- ------ ------
ATK Armament
Systems $553,969 $422,862 $131,107 31.0%
ATK Mission
Systems 304,392 280,542 23,850 8.5%
ATK Space
Systems 349,603 388,547 (38,944) (10.0)%
------- ------- -------
Total sales $1,207,964 $1,091,951 $116,013 10.6%
========== ========== ========
Six Months Ended
----------------
October 4, September 28, $ %
2009 2008 Change Change
---- ----- ------ ------
ATK Armament
Systems $1,106,384 $864,436 $241,948 28.0%
ATK Mission
Systems 596,943 557,045 39,898 7.2%
ATK Space
Systems 713,771 795,335 (81,564) (10.3)%
------- ------- -------
Total sales $2,417,098 $2,216,816 $200,282 9.0%
========== ========== ========
Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):
Quarters Ended
--------------
October 4, September 28, $ %
2009 2008 Change Change
------ ----- ------ ------
ATK Armament
Systems $67,718 $42,969 $24,749 57.6%
ATK Mission
Systems 32,962 35,785 (2,823) (7.9)%
ATK Space
Systems 38,722 47,982 (9,260) (19.3)%
Corporate (4,528) (6,091) 1,563 25.7%
------ ------ -----
Total operating
profit $134,874 $120,645 $14,229 11.8%
======== ======== =======
Six Months Ended
----------------
October 4, September 28, $ %
2009 2008 Change Change
------- --------- ------ ------
ATK Armament
Systems $128,933 $87,129 $41,804 48.0%
ATK Mission
Systems 66,213 68,619 (2,406) (3.5)%
ATK Space
Systems 79,845 84,224 (4,379) (5.2)%
Corporate (8,745) (10,995) 2,250 20.5%
------ ------- -----
Total operating
profit $266,246 $228,977 $37,269 16.3%
======== ======== =======
SEGMENT RESULTS
ATK operates three principal business groups: Armament Systems; Mission Systems; and Space Systems.
ATK ARMAMENT SYSTEMS
Sales in the second quarter of FY10 increased 31 percent to $554 million, compared to $423 million in the prior-year quarter. Eagle Industries, which is now the Tactical Systems division, contributed $14 million of sales in the quarter. Organic sales increased 28 percent, driven by the company's non-standard ammunition contract for Afghan Security Forces, higher military ammunition sales, higher sales volume in commercial ammunition across all channels (retail, law enforcement and international), and increased facility modernization funds.
Earnings before interest, taxes, and noncontrolling interest (operating profit) in the second quarter rose 58 percent to $68 million, compared to $43 million in the prior-year quarter. The increase was driven by additional sales volume and improved profitability across Armament Systems. Demand remained strong for ATK's commercial ammunition brands and products. The higher operating profit was partially offset by $11 million of non-cash charges primarily due to the early retirement of assets related to the company's TNT production facility, and higher pension expense.
ATK MISSION SYSTEMS
Second quarter sales rose nine percent to $304 million compared to $281 million in the prior-year quarter. The increase reflects higher sales volume in commercial and military aircraft structures, and advanced weapons programs, partially offset by lower sales of special mission aircraft.
Operating profit of $33 million was down slightly from $36 million in the prior-year quarter. The decline was driven by additional investments made on advanced weapons programs, reduced incentive fees on a missile defense program, and higher pension expense, partially offset by higher volumes of commercial and military aircraft structures.
ATK SPACE SYSTEMS
Second quarter sales in the Space Systems group of $350 million were in line with the company's expectations, and down 10 percent from $389 million in the prior-year quarter. The decrease reflects the expected draw down of the Minuteman III program and the termination of the Kinetic Energy Interceptor, partially offset by higher sales in spacecraft structures and components.
Operating profit for the group was $39 million, also in-line with expectations, and down 19 percent from the prior-year quarter. The decrease reflects the draw down of the Minuteman III program and higher pension expense.
CORPORATE AND OTHER
In the second quarter, corporate and other expenses totaled $5.0 million compared to $6.0 million recorded in the prior-year quarter. The share count was 33.1 million, compared to 34.8 million in the prior-year quarter.
OUTLOOK
Based on the continued strong operating performance of the company, and better visibility into the remainder of the year, ATK is raising its full-year sales, EPS and free cash flow guidance. ATK now expects full-year FY10 fully diluted EPS in a range of $8.60 - $8.75, up from previous guidance of $8.45 - $8.60. Full-year sales are now expected to be in a range of $4.825 -$4.875 billion, up from previous expectations of $4.80 - $4.85 billion. The company now expects to generate free cash flow of approximately $150 million, up from previous expectations of $110 - $130 million. The free cash flow expectation includes the impact of the $150 million pension contribution made in the first quarter of FY10 (see reconciliation table for details). The company continues to expect an average share count of approximately 33.5 million, and an effective tax rate for the year of approximately 37 percent. Full-year pension expenses are expected to be approximately $70 million. Capital expenditures in FY10 are anticipated to be approximately $130 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 ~ $280,000
activities
Capital expenditures ~(130,000)
---------
Free cash flow ~ $150,000*
=========
* Includes the impact of the $150 million pension contribution made in
the first quarter of FY10
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 is 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 $11.718 million ($6.995 million net of tax, or $0.20 diluted EPS) for the quarter ended September 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: bryce.hallowell@atk.com E-mail: jeff.huebschen@atk.com
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
QUARTERS ENDED SIX MONTHS ENDED
------------------ -------------------
(In thousands except
per share data) October September October September
4, 2009 28, 2008(1) 4, 2009 28, 2008(1)
Sales $1,207,964 $1,091,951 $2,417,098 $2,216,816
Cost of sales 962,262 851,720 1,911,551 1,757,313
------- ------- --------- ---------
Gross profit 245,702 240,231 505,547 459,503
Operating expenses:
Research and development 15,886 25,419 31,264 47,140
Selling 45,202 39,121 90,296 77,808
General and administrative 49,740 55,046 117,741 105,578
------ ------ ------- -------
Income before interest,
income taxes, and
noncontrolling interest 134,874 120,645 266,246 228,977
Interest expense (19,361) (22,727) (40,296) (45,277)
Interest income 124 232 210 599
--- --- --- ---
Income before income taxes
and noncontrolling interest 115,637 98,150 226,160 184,299
Income tax provision 43,020 36,672 84,060 68,339
------ ------ ------ ------
Net income 72,617 61,478 142,100 115,960
Less net income attributable
to noncontrolling interest 107 16 159 106
--- -- --- ---
Net income attributable
to Alliant Techsystems Inc. $72,510 $61,462 $141,941 $115,854
======= ======= ======== ========
Alliant Techsystems Inc.'s
earnings per common share:
Basic $2.21 $1.87 $4.33 $3.53
Diluted 2.19 1.77 4.28 3.31
Alliant Techsystems Inc.'s
weighted-average number of
common shares outstanding:
Basic 32,829 32,819 32,793 32,823
Diluted 33,139 34,796 33,151 34,994
(1) Restated due to the adoption of new accounting standards
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share data)
October 4, March 31,
2009 2009(1)
------- -----
ASSETS
Current assets:
Cash and cash equivalents $224,979 $336,700
Net receivables 932,860 899,543
Net inventories 192,893 238,600
Income tax receivable 10,966 34,835
Deferred income tax assets 47,583 29,223
Other current assets 52,487 39,843
------ ------
Total current assets 1,461,768 1,578,744
Net property, plant, and
equipment 529,583 540,041
Goodwill 1,190,984 1,195,986
Deferred income tax assets 35,796 69,582
Deferred charges and other
non-current assets 266,804 192,992
------- -------
Total assets $3,484,935 $3,577,345
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of
long-term debt $13,750 $289,859
Accounts payable 165,009 294,971
Contract advances and
allowances 95,955 86,080
Accrued compensation 119,127 168,059
Other accrued liabilities 193,080 166,341
------- -------
Total current liabilities 586,921 1,005,310
Long-term debt 1,378,520 1,097,744
Postretirement and
postemployment benefits
liabilities 118,698 121,689
Accrued pension liability 421,292 552,671
Other long-term
liabilities 127,013 125,362
------- -------
Total liabilities 2,632,444 2,902,776
Contingencies
Common stock - $.01 par
value Authorized - 90,000,000
shares Issued and outstanding -
32,927,959 shares at
October 4, 2009 and
32,783,496 at March 31, 2009 329 328
Additional paid-in-capital 577,786 574,674
Retained earnings 1,562,403 1,420,462
Accumulated other
comprehensive loss (629,767) (651,652)
Common stock in treasury,
at cost - 8,627,489
shares held at October 4,
2009 and 8,771,565 shares
held at March 31, 2009 (667,017) (677,841)
-------- --------
Total Alliant Techsystems
Inc. stockholders' equity 843,734 665,971
Noncontrolling interest 8,757 8,598
----- -----
Total equity 852,491 674,569
------- -------
Total liabilities and
equity $3,484,935 $3,577,345
========== ==========
(1) Restated due to the adoption of new accounting standards
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
----------------
(In thousands) October 4, September 28,
2009 2008(1)
---- ------
Operating activities
Net income $142,100 $115,960
Adjustments to net income
to arrive at cash used for
operating activities:
Depreciation 49,571 38,148
Amortization of intangible
assets 2,479 2,808
Amortization of debt
discount 11,708 11,718
Amortization of deferred
financing costs 1,419 1,438
Asset impairment 11,405 3,753
Deferred income taxes 1,365 (18)
Gain on disposal of
property (483) (3,439)
Share-based plans expense 8,580 9,718
Excess tax benefits from
share-based plans (981) (3,151)
Changes in assets and
liabilities:
Net receivables (33,317) (147,178)
Net inventories 45,707 2,934
Accounts payable (113,315) (10,063)
Contract advances and
allowances 9,875 (6,036)
Accrued compensation (54,405) (32,606)
Accrued income taxes 33,260 (17,003)
Pension and other
postretirement benefits (124,960) 13,435
Other assets and
liabilities (37,442) 51,168
------- ------
Cash (used for) provided by
operating activities (47,434) 31,586
Investing activities
Capital expenditures (67,147) (59,000)
Acquisition of business,
net 5,002 (7,511)
Proceeds from the
disposition of property,
plant, and equipment 1,267 321
----- ---
Cash used for investing
activities (60,878) (66,190)
Financing activities
Payments made on bank debt (7,041) -
Payments made for debt
issue costs - (5)
Net purchase of treasury
shares - (31,616)
Proceeds from employee
stock compensation plans 2,651 6,454
Excess tax benefits from
share-based plans 981 3,151
--- -----
Cash used for financing
activities (3,409) (22,016)
------ -------
Decrease in cash and cash
equivalents (111,721) (56,620)
Cash and cash equivalents -
beginning of period 336,700 119,773
------- -------
Cash and cash equivalents -
end of period $224,979 $63,153
======== =======
Supplemental Cash Flow
Disclosure:
Noncash investing activity:
Capital expenditures
included in accounts payable $3,891 $3,387
====== ======
Acquisition costs included
in other accrued liabilities $- $7,500
== ======
(1) Restated due to the adoption of new accounting standards
SOURCE: ATK
Web site: http://www.atk.com/
