Quantcast
Last updated on April 18, 2014 at 21:21 EDT

ATK Reports FY12 Third Quarter Operating Results

February 2, 2012

ARLINGTON, Va., Feb. 2, 2012 /PRNewswire/ – ATK (NYSE: ATK) today reported operating results for the third quarter of its Fiscal Year 2012, which ended on January 1, 2012. Fully diluted earnings per share (EPS) were $1.51, compared to $2.09 in the prior-year quarter, reflecting the impact of a $33 million ($25 million net of taxes or $0.77 per share) accrual regarding a previously disclosed lawsuit related to the manufacture of LUU flares (the LUU flares accrual) arising from events that predated the acquisition of the Thiokol Corporation in 2001. The company has reached a tentative agreement with the plaintiff and the Department of Justice (DOJ) to settle the claim. The company expects to finalize the agreement in the fourth quarter of the fiscal year.

The prior-year quarter included a $25 million ($15 million net of taxes, or $0.45 per share) reduction in sales, profit margins and EPS associated with a commercial aerospace structures program. Excluding the prior-year quarter sales and profit reduction, and the current quarter LUU flares accrual, third quarter EPS would be $2.28 compared to $2.54 in the prior-year quarter (see reconciliation table for details).

Third quarter orders of $701 million were in line with the company’s expectations, with year-to-date orders totaling $2.8 billion and a total backlog of $6.1 billion. Third quarter sales of $1.1 billion were down approximately one percent from the prior-year quarter. Lower sales on NASA human spaceflight programs and lower modernization revenues within the Armament Systems group contributed to the decrease, which was partially offset by higher sales in commercial ammunition.

Margins in the third quarter of FY12 were 9.4 percent, compared to 11.2 percent in the prior-year quarter. Lower margins in the current quarter can be attributed to the LUU flares accrual and sales mix and higher commodity prices within the Security and Sporting group, partially offset by a reversal of the fiscal 2010-2012 long-term incentive accrual.

“Consumers purchased lower priced and lower margin ammunition products in the third quarter impacting the company’s overall margin performance. However, ATK’s continued focus on operating efficiencies and cost reductions supported margin improvement elsewhere in the business,” said Mark DeYoung, President and CEO. “Margins in the sporting market have been at historically high levels and we expect to see some continued pressure on our sales mix and margins in this business.”

SUMMARY OF REPORTED RESULTS

The following table presents the company’s results for the third quarter of the fiscal year which ended January 1, 2012 (in thousands).


    Sales:

                               Quarters Ended                                 Nine Months Ended
                               --------------                                 -----------------
                  January    January 2,                            January 1,    January 2,                   %
                  1, 2012        2011                $  % Change      2012           2011               $  Change
                 --------   -----------            ---  --------  -----------    -----------          ---  -------
                                              Change                                             Change
                                              ------                                             ------

    Aerospace
     Systems       $301,843     $321,288      $(19,445)    (6.1)%    $988,148     $1,067,020     $(78,872)   (7.4)%
    Armament
     Systems        403,654      431,493       (27,839)    (6.5)%   1,108,771      1,313,046     (204,275)  (15.6)%
    Missile
     Products       168,926      167,875         1,051       0.6%     484,261        483,693          568      0.1%
    Security and
     Sporting       243,061      208,634        34,427      16.5%     720,977        676,917       44,060      6.5%
                    -------      -------        ------                -------        -------       ------
    Total sales  $1,117,484   $1,129,290      $(11,806)    (1.1)%  $3,302,157     $3,540,676    $(238,519)   (6.7)%
                 ==========   ==========      ========             ==========     ==========    =========


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

                                      Quarters Ended                                          Nine Months Ended
                                      --------------                                          -----------------
                     January       January 2,                                     January 1,       January 2,
                     1, 2012           2011                 $    % Change            2012              2011            $  % Change
                    --------       -----------            ---    --------        -----------       -----------       ---  --------
                                                     Change                                                     Change
                                                     ------                                                     ------

    Aerospace
     Systems         $34,839           $23,935        $10,904         45.6%         $115,060           $98,499   $16,561      16.8%
    Armament
     Systems          67,048            55,049         11,999         21.8%          190,415           158,185    32,230      20.4%
    Missile
     Products         23,515            19,389          4,126         21.3%           61,532            47,689    13,843      29.0%
    Security and
     Sporting         22,787            30,357         (7,570)      (24.9)%           75,436            95,623   (20,187)   (21.1)%
    Corporate       (42,765)            (2,302)       (40,463)   (1,757.7)%          (59,072)           (6,157)  (52,915)  (859.4)%
                     -------            ------        -------                        -------            ------   -------
    Total
     operating
     profit         $105,424          $126,428       $(21,004)      (16.6)%         $383,371          $393,839  $(10,468)    (2.7)%
                    ========          ========       ========                       ========          ========  ========

SEGMENT RESULTS

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

AEROSPACE SYSTEMS

Third quarter sales in the Aerospace Systems group declined by six percent to $302 million compared to $321 million in the prior-year quarter. The decrease was primarily driven by lower sales in NASA human space flight programs, and partially offset by the absence of the $25 million sales reduction recorded in the prior-year quarter.

Earnings before interest, taxes, and noncontrolling interest (operating profit) in the third quarter increased 46 percent to $35 million, compared to $24 million in the prior-year quarter. The increase reflects the absence of the previously mentioned profit reduction taken in the prior-year quarter, partially offset by lower sales volume in human space flight programs.

ARMAMENT SYSTEMS

Third quarter sales in the Armament Systems group decreased six percent to $404 million, compared to $431 million in the prior-year quarter. The decrease was primarily driven by the absence of modernization funding at the Radford Army Ammunition Plant; lower modernization funding at the Lake City Army Ammunition Plant; and lower sales of medium-caliber guns, partially offset by higher energetics sales.

Operating profit in the third quarter rose 22 percent to $67 million, compared to $55 million in the prior-year quarter. The higher operating profit primarily reflects a favorable change in the sales mix across the group and operating efficiencies in advanced weapons and energetics businesses.

MISSILE PRODUCTS

Third quarter sales in the Missile Products group increased slightly to $169 million, compared to $168 million in the prior-year quarter. The increase reflects additional sales associated with the production ramp-up of the Advanced Anti-Radiation Guided Missile (AARGM) program, partially offset by lower tactical rocket motor sales.

Operating profit in the third quarter rose by 21 percent to $24 million, compared to $19 million in the prior-year quarter, primarily reflecting the benefit of operating efficiencies.

SECURITY AND SPORTING

Third quarter sales in the Security and Sporting group grew by 17 percent to $243 million, compared to $209 million in the prior-year quarter. The increase primarily reflects stronger domestic and international demand for the company’s commercial ammunition.

Operating profit in the third quarter decreased by 25 percent to $23 million compared to $30 million in the prior-year quarter. The decrease primarily reflects a continued shift in demand toward lower-margin ammunition, and higher raw materials costs.

CORPORATE AND OTHER

In the third quarter, corporate and other expenses totaled $43 million, compared to $2 million in the prior-year quarter. The increase primarily reflects costs associated with the LUU flares accrual, increased pension expense and higher inter-company eliminations. The effective tax rate for the quarter was 42.0 percent compared to 30.7 percent in the prior-year quarter. The higher rate primarily reflects the non-deductible portion of the LUU flares accrual, the absence of the benefit in the prior year from the retroactive extension of the Federal research and development (R&D) tax credit and a smaller benefit recorded this year for the Domestic Manufacturing Deduction.

REALIGNMENT

ATK announced it will operate in a three-group structure at the beginning of Fiscal Year 2013. These three operating units will be the Aerospace Group, the Defense Group, and the Sporting Group.

“The three-group structure demonstrates our ongoing commitment to competitiveness and long-term growth,” said DeYoung. “This alignment will maximize efficiency, reduce cost, support customer needs, leverage our investments, and improve overall agility within our markets.”

CAPITAL DEPLOYMENT

The Board of Directors approved the previously announced $.20 per share dividend for the quarter and authorized a share repurchase program of up to $200 million, which the company expects to execute over the next two years.

“ATK is determined to deliver value to our shareholders,” DeYoung said. “We will continue to execute a balanced capital deployment program, including a cash dividend, a share repurchase program, capital expenditures, debt management, and responsible growth strategies.”

The shares may be purchased from time to time in open market, block purchase, or negotiated transactions, subject to compliance with applicable laws and regulations and the company’s debt covenants, depending upon market conditions and other factors. The new repurchase authorization also allows the company to make repurchases under Rule 10b5-1 of the Securities Exchange Act of 1934. This share repurchase program replaces the prior program authorized in 2008.

FY12 FULL-YEAR UPDATE AND INITIAL FY13 OUTLOOK

ATK now expects full-year sales of approximately $4.6 billion, compared to its previous guidance of $4.6-$4.7 billion. Due primarily to the $33 million LUU flares accrual and lower margins within the Security and Sporting group, ATK now expects full-year EPS in a range of $7.65 – $7.75, compared to its previous range of $8.50-$9.00.

Due to the non-deductible portion of the LUU flares accrual, the company now expects a full-year tax rate of approximately 35.5 percent. For Fiscal Year 2012, ATK continues to expect pension expense of approximately $135 million, free cash flow in a range of $225 – $250 million (despite the now-expected cash payment for the LUU flares accrual), and capital expenditures of approximately $130 million (see reconciliation table for details).

ATK’s operating results in FY13 will be impacted by the recent loss of the Radford Army Ammunition Plant, which is expected to reduce FY13 sales by approximately $170 million. The company also expects continued pressure in its NASA and military ammunition businesses due to the constrained federal budget. FY13 pension expense is expected to be approximately $180 million, while pension contributions are expected to be approximately $160 million compared to the $62 million the company was required to contribute in FY12. FY13 margins in the new Sporting Group are expected to be consistent with the FY12 third quarter results of the Security and Sporting group, reflecting continued demand for lower-priced and lower-margin ammunition products.

Reconciliation of Non-GAAP Financial Measures

Earnings Per Share

The Earnings Per Share (EPS) excluding the effect of the LUU flares accrual and the commercial aerospace sales and profit reduction is a non-GAAP financial measure that ATK defines as earnings per share less the impact of the LUU flares accrual and the commercial aerospace sales and profit reduction. ATK management is presenting this measure so that a reader may compare EPS excluding these items as this measure provides investors with an important perspective on the operating results of the Company. ATK management uses this measurement internally to assess business performance and ATK’s definition may differ from that used by other companies.

Total ATK for the Quarter Ending


    January 1, 2012:

                         Sales     EBIT    Margin   Taxes   After-tax  EPS
                         -----     ----    ------   -----   ---------  ---
    As reported        $1,117,484 $105,424     9.4% $36,085    $49,685   $1.51
    LUU flares accrual              33,305            8,065     25,240   $0.77
                                    ------            -----     ------   -----
    As adjusted        $1,117,484 $138,729    12.4% $44,150    $74,925   $2.28
                       ========== ========    ====  =======    =======   =====


    January 2, 2011:

                       Sales     EBIT    Margin   Taxes   After-tax  EPS
                       -----     ----    ------   -----   ---------  ---
    As reported      $1,129,290 $126,428    11.2% $31,108    $70,181   $2.09
    Commercial           25,000   25,000           10,000     15,000   $0.45
    aerospace sales      ------   ------           ------     ------   -----
    and profit
     reduction
    As adjusted      $1,154,290 $151,428    13.1% $41,108    $85,181   $2.54
                     ========== ========    ====  =======    =======   =====

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 debt repayment, cash dividends, share repurchases, 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, 2012
                                              --------------

    Cash provided by operating
     activities                              $355,000-$380,000
    Capital expenditures                            ~(130,000)
    Free cash flow                           $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; demand for commercial and military ammunition; 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; assumptions regarding the company’s long-term growth strategy; assumptions regarding the growth opportunities in international and commercial 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 – including the related costs 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.
                                CONDENSED
                               CONSOLIDATED
                                  INCOME
                                STATEMENTS
                               (preliminary
                                    and
                                unaudited)

                                                             NINE
                               QUARTERS                     MONTHS
                                ENDED                                                 ENDED
                              ---------                    -------
    (In thousands       January                       January
     except per share       1,            January          1,          January
     data)                 2012              2,                     2012            2,
                                               2011                         2011
    Sales               $1,117,484        $1,129,290    $3,302,157      $3,540,676
    Cost of sales          871,680           896,490     2,549,873       2,804,521
                           -------           -------     ---------       ---------
    Gross profit           245,804           232,800       752,284         736,155
    Operating expenses:
      Research and
       development          14,624            12,733        41,711          42,388
      Selling               39,989            39,011       121,421         118,262
      General and
       administrative       85,767            54,628       205,781         181,666
                            ------
    Income before
     interest, income
     taxes, and
     noncontrolling
     interest            105,424           126,428       383,371         393,839
     Interest expense      (19,783)          (25,234)      (69,933)        (63,278)
     Interest income           203               190           431             318
                               ---               ---           ---             ---
    Income before
     income taxes and
     noncontrolling
     interest               85,844           101,384       313,869         330,879
    Income tax
     provision              36,085            31,108       112,308          88,440
                            ------            ------       -------          ------
    Net income              49,759            70,276       201,561         242,439
      Less net income
       attributable to
       noncontrolling
       interest                 74                95           368             367
                               ---               ---           ---             ---
    Net income
     attributable to
     Alliant
     Techsystems Inc.      $49,685           $70,181      $201,193        $242,072
                           =======           =======      ========        ========

    Alliant Techsystems
     Inc.'s earnings
     per common share:
      Basic                  $1.52             $2.11         $6.10           $7.28
      Diluted                 1.51              2.09          6.06            7.21

    Alliant Techsystems
     Inc.'s weighted-
     average number of
     common shares
     outstanding:
      Basic                 32,781            33,320        32,966          33,267
      Diluted               32,955            33,625        33,181          33,586


                                    ALLIANT TECHSYSTEMS INC.
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (preliminary and unaudited)

                                                                   January 1,   March 31,
    (Amounts in thousands except share data)                          2012      2011
                                                                  -----------  ----------
    ASSETS
    Current assets:
        Cash and cash equivalents                                    $355,481    $702,274
        Net receivables                                               961,184     945,611
        Net inventories                                               333,226     242,028
        Income tax receivable                                               -      22,228
        Deferred income tax assets                                     70,990      65,843
        Other current assets                                           52,631      81,249
                                                                       ------      ------
            Total current assets                                    1,773,512   2,059,233
    Net property, plant, and equipment                                601,343     587,749
    Goodwill                                                        1,251,536   1,251,536
    Deferred income tax assets                                         97,673     100,519
    Deferred charges and other non-current
     assets                                                           527,003     444,808
                                                                      -------     -------
            Total assets                                           $4,251,067  $4,443,845
                                                                   ==========  ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Current portion of long-term debt                                 $25,000    $320,000
        Accounts payable                                              224,991     292,281
        Contract advances and allowances                              120,638     121,927
        Accrued compensation                                          105,195     135,442
        Accrued income taxes                                           19,066           -
        Other accrued liabilities                                     281,974     193,836
                                                                      -------     -------
            Total current liabilities                                 776,864   1,063,486
    Long-term debt                                                  1,280,360   1,289,709
    Postretirement and postemployment
     benefits liabilities                                             118,868     126,012
    Accrued pension liability                                         636,671     671,356
    Other long-term liabilities                                       118,006     127,160
                                                                      -------     -------
            Total liabilities                                       2,930,769   3,277,723
    Commitments and contingencies
    Common stock-$.01 par value:
        Authorized-180,000,000 shares
        Issued and outstanding-32,976,504 shares
         at January 1, 2012 and 33,519,072 shares
         at March 31, 2011                                                330         335
    Additional paid-in-capital                                        556,808     559,279
    Retained earnings                                               2,186,923   2,005,651
    Accumulated other comprehensive loss                             (777,751)   (787,077)
    Common stock in treasury, at cost-
     8,578,945 shares held at January 1, 2012
     and 8,036,377 shares held at March 31,
     2011                                                            (655,744)   (621,430)
                                                                     --------    --------
            Total Alliant Techsystems Inc.
             stockholders' equity                                   1,310,566   1,156,758
    Noncontrolling interest                                             9,732       9,364
                                                                        -----       -----
            Total stockholders' equity                              1,320,298   1,166,122
                                                                    ---------   ---------
            Total liabilities and stockholders'
             equity                                                $4,251,067  $4,443,845
                                                                   ==========  ==========


                      ALLIANT TECHSYSTEMS INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH
                                FLOWS
                     (preliminary and unaudited)

                                          NINE MONTHS
                                              ENDED
                                         ------------
                                          January         January
                                              1,               2,
    (In thousands)                           2012             2011
                                           --------         --------
    Operating activities
      Net income                            $201,561         $242,439
      Adjustments to net income
       to arrive at cash used for
       operating activities:
        Depreciation                          69,165           71,683
        Amortization of intangible
         assets                                8,357            8,388
        Amortization of debt
         discount                             10,651           12,795
        Amortization of deferred
         financing costs                       3,753            3,766
        Deferred income taxes                 (7,945)          14,703
        (Gain) loss on disposal of
         property                             (4,679)           2,560
        Share-based plans expense              8,321            7,648
        Excess tax benefits from
         share-based plans                       (23)            (465)
        Changes in assets and
         liabilities:
         Net receivables                    (112,251)        (221,033)
         Net inventories                     (91,197)         (33,496)
         Accounts payable                    (55,274)         (28,094)
         Contract advances and
          allowances                          (1,289)          15,698
         Accrued compensation                (40,852)         (61,438)
         Accrued income taxes                 37,500          (41,384)
         Pension and other
          postretirement benefits             25,780           66,638
         Other assets and
          liabilities                         73,162           66,297
                                              ------           ------
    Cash provided by operating
     activities                              124,740          126,705
    Investing activities
        Capital expenditures                 (97,916)         (72,986)
        Acquisition of business                   -         (172,251)
        Proceeds from the
         disposition of property,
         plant, and equipment                  7,329              333
                                               -----              ---
    Cash used for investing
     activities                              (90,587)        (244,904)
    Financing activities
        Payments made on bank debt           (15,000)          (8,438)
        Payments made to extinguish
         debt                               (300,000)        (537,576)
        Proceeds from issuance of
         long-term debt                           -          750,000
        Payments made for debt
         issue costs                              -          (19,893)
        Purchase of treasury shares          (49,991)              -
        Dividends paid                       (19,921)              -
        Proceeds from employee
         stock compensation plans              3,943            7,645
        Excess tax benefits from
         share-based plans                        23              465
                                                 ---              ---
    Cash (used for) provided by
     financing activities                   (380,946)         192,203
                                            --------          -------
    (Decrease) Increase in cash
     and cash equivalents                   (346,793)          74,004
    Cash and cash equivalents -
     beginning of period                     702,274          393,893
                                             -------          -------
    Cash and cash equivalents -
     end of period                          $355,481         $467,897
                                            ========         ========


    Media Contact:                            Investor Contact:

    Amanda Covington                          Steve Wold
    Phone:  703-412-3231                      Phone:  952-351-3056
    E-mail:  amanda.covington@atk.com         E-mail:  steve.wold@atk.com

SOURCE ATK


Source: PR Newswire