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ATK Reports Strong FY09 Year-End and Fourth-Quarter Operating Results, Raises FY10 Outlook

Posted on: Thursday, 7 May 2009, 06:30 CDT

Full Year Sales up 10 Percent to $4.6 Billion; Fourth Quarter Sales rise 11 Percent to More than $1.2 Billion

FY09 Orders of $5 Billion Represent a Book-to-Bill of 1.1 - Total Year-End Backlog of $7.0 Billion

Full Year Fully Diluted Earnings Per Share of $4.56, and Fourth Quarter Loss of $1.00 Per Share, Driven by $109 Million, Non-Cash Goodwill Impairment Charge

Excluding Goodwill Impairment, Full Year Fully Diluted Earnings Per Share Increased 23 percent to $7.75 and Fourth Quarter EPS rose 33 percent to $2.28

MINNEAPOLIS, May 7 /PRNewswire-FirstCall/ -- Alliant Techsystems (NYSE: ATK) today reported strong operating results for Fiscal Year 2009 (FY09), which ended on March 31, 2009. Based on the strength of continuing operations, expected revenues from the March 31, 2009 acquisition of Eagle Industries, and lower than expected pension expenses, the company is raising sales and earnings guidance for Fiscal Year 2010 (FY10).

Sales in FY09 increased 10 percent to $4.6 billion. Orders for the year were $5.0 billion, yielding a book-to-bill ratio of 1.1. The total year-end backlog was $7.0 billion. Full-year operating margins were 8.4 percent, reflecting the company's previously announced intention to take a $109 million, non-cash goodwill impairment charge. Prior to the charge, full-year margins were 10.8 percent compared to 10.3 percent in the prior year, in-line with the company's long-term expectations for margin improvement. FY09 fully diluted earnings per share (EPS), prior to the impairment, increased 23 percent to $7.75 from $6.32 in the prior year (see reconciliation tables for details). Year-end free cash flow was $313 million, a $31 million increase from the prior year, driven by strong operating results, partially offset by increased capital expenditures (see reconciliation table for details).

Sales in the fourth quarter of FY09 surpassed $1.2 billion, an 11 percent increase over the prior-year quarter. Fourth quarter orders reached $1.8 billion, driven by strong demand for commercial and military ammunition, international programs, and a substantial Airbus A350 composite structures award. Excluding the impairment charge, fully diluted fourth quarter EPS increased 33 percent to $2.28, compared to $1.72 in the prior-year quarter. Operating margins for the quarter were 2.9 percent. Excluding the charge, operating margins improved to 11.5 percent compared to 10.0 percent in the prior-year quarter (see reconciliation tables for details). The prior-year quarter included a $6.6 million charge related to an acquisition that was terminated.

"In FY09, ATK significantly expanded our opportunity for growth," said Dan Murphy, Chairman and CEO. "We established a new presence in commercial aerospace through the A350 program, significantly expanded our international ammunition business while delivering an unprecedented volume of ammunition to domestic commercial and government customers, captured a promising advanced missile target program, and pioneered new small satellite technologies. We are poised for continued growth and confident that we will deliver even greater value for our shareholders in the future."

SUMMARY OF REPORTED RESULTS

The following table presents the company's results for fiscal year 2009 and the fourth quarter ending March 31, 2009 (in thousands).

External Sales: Quarters Ended March 31, March 31, % 2009 2008 $Change Change ATK Armament Systems $435,306 $405,204 $30,102 7.4% ATK Mission Systems 372,636 329,350 43,286 13.1% ATK Space Systems 449,016 394,589 54,427 13.8% Total external sales $1,256,958 $1,129,143 $127,815 11.3% Years Ended March 31, March 31, % 2009 2008 $Change Change ATK Armament Systems $1,737,909 $1,476,716 $261,193 17.7% ATK Mission Systems 1,215,018 1,139,038 75,980 6.7% ATK Space Systems 1,630,297 1,555,971 74,326 4.8% Total external sales $4,583,224 $4,171,725 $411,499 9.9% Income before Interest, Income Taxes, and Minority Interest (Operating Profit): Quarters Ended March 31, March 31, % 2009 2008 $Change Change ATK Armament Systems $40,739 $41,283 $(544) (1.3)% ATK Mission Systems 48,920 41,012 7,908 19.3% ATK Space Systems (48,968) 44,371 (93,339) (210.4)% Corporate (4,496) (13,273) 8,777 66.1% Total $36,195 $113,393 $(77,198) (68.1)% Years Ended March 31, March 31, % 2009 2008 $Change Change ATK Armament Systems $171,563 $139,603 $31,960 22.9% ATK Mission Systems 153,341 129,028 24,313 18.8% ATK Space Systems 79,560 192,995 (113,435) (58.8)% Corporate (20,007) (31,098) 11,091 35.7% Total $384,457 $430,528 $(46,071) (10.7)%

SEGMENT RESULTS

In FY09, ATK operated three principal business groups: Armament Systems; Mission Systems; and Space Systems.

ATK ARMAMENT SYSTEMS

For the full-year, sales in the Armament Systems group increased 18 percent to $1.7 billion, compared to $1.5 billion in the prior year, reflecting strong demand for commercial and military ammunition.

Earnings before interest, taxes, and minority interest (operating profit) for the year rose 23 percent to $172 million from $140 million in the prior year, reflecting higher revenues across all divisions, lower pension costs, and operating efficiencies.

Sales in the fourth quarter rose seven percent to $435 million compared to $405 million in the prior-year quarter, driven by continued strength in commercial ammunition and initial deliveries of non-standard ammunition for the Afghan Security Forces. Operating profit for the quarter remained steady at $41 million compared to the prior-year quarter, reflecting higher profits in commercial ammunition, offset by a $6 million write off of an accounts receivable related to a customer bankruptcy filing.

ATK MISSION SYSTEMS

Full year sales in the Mission Systems group rose seven percent to $1.2 billion, compared to $1.1 billion in the prior year. The increase reflects higher sales of composite structures, propulsion systems, and special mission aircraft. These were partially offset by lower sales of tank ammunition. Full-year operating profit rose 19 percent to $153 million compared to $129 million in the prior year, reflecting higher sales in composite structures, and special mission aircraft, as well as lower pension expenses.

Sales in the quarter rose 13 percent to $373 million, compared to $329 million in the prior-year quarter. The increase was driven by higher sales volume in composite structures including the Airbus A350, tactical rocket motors, and the ramp up of advanced weapons programs, partially offset by a decline in the sales of tank ammunition. Operating profit increased to $49 million, a 19 percent rise from the $41 million recorded in the prior-year quarter. The increase was primarily driven by higher volumes in the group's composite structures business.

ATK SPACE SYSTEMS

Full year sales in the Space Systems group rose nearly five percent to more than $1.6 billion. Full-year operating profit was $80 million compared to $193 million in the prior year. Excluding the non-cash, non-deductible $109 million goodwill impairment charge, operating profit was $188 million (see reconciliation table for details). The decrease primarily reflects the charges taken in the first quarter related to the group's Spacecraft Systems division.

Fourth quarter sales in the Space Systems group rose 14 percent to $449 million compared to $395 million in the prior-year quarter. The increase reflects higher sales in NASA programs due in part to the timing of program requirements, as well as increased sales of commercial launch programs and missile defense systems. The group reported an operating loss in the quarter of $49 million, compared to an operating profit in the prior-year quarter of $44 million. Excluding the non-cash, non-deductible goodwill impairment charge, operating profit for the quarter was $60 million, reflecting higher sales volume, added incentive fees in the group's NASA programs, and improved operating performance in the Spacecraft Systems division (see reconciliation table for details).

CORPORATE AND OTHER

For the full year, corporate and other expenses totaled $20 million, compared to $31 million in the prior year. Fourth quarter corporate and other expenses totaled $5 million compared to $13 million in the prior-year period. The changes in full year and quarterly results were driven primarily by the charges related to an acquisition that was terminated in the prior year. The effective tax rate for the year was 51.8 percent, reflecting the non-deductibility for tax purposes of the non-cash goodwill impairment, and a $5.9 million valuation allowance related to capital loss carryovers. Excluding these items, the effective tax rate was 37.3 percent (see reconciliation table for details).

OUTLOOK

ATK is raising its FY10 EPS guidance to a range of $8.05 - $8.25, up from its previous expectations of $7.40 - $7.60. Due to U.S. GAAP accounting changes related to the company's outstanding convertible debt that took effect on April 1, 2009, the company will be required to retrospectively adopt the new accounting provision for all affected reporting periods. In FY10, the company expects this accounting change to result in a $0.35 impact per share, which is reflected in its current guidance range. As reflected in the chart below, the accounting change will impact FY09 results by $0.42 per share.

FY09 EPS - Current Accounting Standards $7.75* Impact of New Accounting Standards ($0.42) FY09 EPS - New Accounting Standards $7.33 * FY09 EPS of $7.75 excludes the goodwill impairment charge (see reconciliation table for details).

The company is raising its FY10 sales guidance to a range of $4.73 - $4.80 billion, up from previous expectations of $4.55 - $4.65 billion. The guidance increases reflect additional sales and EPS expected from the company's acquisition of Eagle Industries, lower than anticipated pension expenses, and the strength of ongoing operations. The company expects FY10 operating margins to be approximately 11 percent.

ATK expects to generate free cash flow of $110 - $130 million in FY10, reflecting a $150 million pension pre-payment contribution made in the first quarter of FY10 (see reconciliation table for details). Average share count is expected to be approximately 33.5 million. The effective tax rate for the year is expected to be approximately 37 percent. The tax rate assumes that the Federal R&D tax credit will be extended. 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

Earnings per Share

Earnings per share excluding the impact of the non-cash goodwill impairment charge is a non-GAAP financial measure that ATK defines as earnings per share less the impact of the goodwill impairment charge. ATK management believes earnings per share excluding the impact of the non-cash goodwill impairment charge provides investors with an important perspective on the operating results of the Company. ATK management uses this measurement internally to assess business performance.

Quarter Ended Year Ended March 31, 2009 March 31, 2009 Net Net (Loss) Income* EPS Income* EPS As reported $(32,753) $(1.00) $155,119 $4.56 Goodwill impairment 108,500 $3.28 108,500 $3.19 As adjusted $75,747 $2.28 $263,619 $7.75 * the non-cash goodwill impairment charge is non-deductible for tax purposes so pre-tax and after-tax income are equal

EBIT Margin

The EBIT margin excluding the effect of the non-cash goodwill impairment charge is a non-GAAP financial measure that ATK defines as income before interest, income taxes, and minority interest excluding the effect of the non-cash goodwill impairment charge as a percent of sales. ATK management is presenting this measure so that a reader may compare EBIT margin excluding this item. ATK's definition may differ from that used by other companies.

Total ATK: Quarter Ended Year Ended March 31, 2009 March 31, 2009 Sales EBIT Margin Sales EBIT Margin As reported $1,256,958 $36,195 2.9% $4,583,224 $384,457 8.4% Goodwill impairment 108,500 108,500 As adjusted $1,256,958 $144,695 11.5% $4,583,224 $492,957 10.8% ATK Space Systems Quarter Ended Year Ended March 31, 2009 March 31, 2009 Sales EBIT Margin Sales EBIT Margin As reported $449,016 $(48,968) -10.9% $1,630,297 $79,560 4.9% Goodwill impairment 108,500 108,500 As adjusted $449,016 $59,532 13.3% $1,630,297 $188,060 11.5%

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 Year Ended Ending March 31, 2009 March 31, 2010 Cash provided by operating activities $424,987 $240,000 - $260,000 * Capital expenditures (111,481) ~(130,000) Free cash flow $313,506 $110,000 - $130,000 * FY10 estimate includes the impact of $150 million discretionary prepayment contribution to pension plan (total FY10 contribution estimated at $160 million)

Effective Tax Rate

The effective tax rate excluding the effect of the non-deductibility for tax purposes of the non-cash goodwill impairment charge and the $5.9 million valuation allowance related to capital loss carryovers is a non-GAAP financial measure. ATK management is presenting this measure so that a reader may compare the effective tax rate excluding these items. ATK's definition may differ from that used by other companies.

Year Ended March 31, 2009 Pre-tax Tax Expense Tax Rate As reported $321,970 $166,664 51.8% Goodwill impairment 108,500 Valuation allowance (5,929) As adjusted $430,470 $160,735 37.3%

ATK is a premier aerospace and defense company with more than 19,000 employees in 22 states, Puerto Rico and internationally, and revenues in excess of $4.6 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: delays in NASA's human-rated launch programs; challenges faced in restoring profitability to the company's spacecraft structures business, 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.

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. CONSOLIDATED INCOME STATEMENTS QUARTERS ENDED YEARS ENDED (In thousands except per share data) March 31, March 31, March 31, March 31, 2009 2008 2009 2008 Sales $1,256,958 $1,129,143 $4,583,224 $4,171,725 Cost of sales 970,134 886,051 3,607,312 3,325,410 Gross profit 286,824 243,092 975,912 846,315 Operating expenses: Research and development 18,284 23,965 81,529 68,333 Selling 44,413 38,638 161,805 131,068 General and administrative 79,432 67,096 239,621 216,386 Total operating expenses 142,129 129,699 482,955 415,787 Goodwill impairment 108,500 - 108,500 - Income before interest, income taxes, and minority interest 36,195 113,393 384,457 430,528 Interest expense (14,315) (17,567) (63,392) (81,578) Interest income 164 425 905 1,431 Income before income taxes and minority interest 22,044 96,251 321,970 350,381 Income tax provision 54,655 35,858 166,664 127,658 Income before minority interest (32,611) 60,393 155,306 222,723 Minority interest, net of income taxes 142 (45) 187 376 Net income (loss) $(32,753) $60,438 $155,119 $222,347 Earnings per Common share: Basic $(1.00) $1.85 $4.74 $6.75 Diluted (1.00) 1.72 4.56 6.32 Weighted-average number of common shares outstanding: Basic 32,647 32,682 32,730 32,924 Diluted 32,647* 35,112 34,013 35,208 * Excludes 620 shares that are anti-dilutive ALLIANT TECHSYSTEMS INC. CONSOLIDATED BALANCE SHEETS March 31 (Amounts in thousands except share data) 2009 2008 ASSETS Current assets: Cash and cash equivalents $336,700 $119,773 Net receivables 899,543 798,468 Net inventories 238,600 205,825 Income tax receivable 34,835 - Deferred income tax assets 30,751 88,282 Other current assets 39,843 35,568 Total current assets 1,580,272 1,247,916 Net property, plant, and equipment 540,041 492,336 Goodwill 1,195,986 1,236,196 Prepaid pension assets - 25,280 Deferred income tax assets 83,872 Deferred charges and other non-current assets 192,992 194,466 Total assets $3,593,163 $3,196,194 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $293,679 - Accounts payable 294,971 $215,755 Contract advances and allowances 86,080 81,624 Accrued compensation 168,059 147,287 Accrued income taxes - 41,681 Other accrued liabilities 175,697 144,540 Total current liabilities 1,018,486 630,887 Long-term debt 1,160,703 1,455,000 Deferred income tax liabilities - 38,316 Postretirement and postemployment benefits liabilities 121,689 138,378 Accrued pension liability 552,671 84,267 Other long-term liabilities 124,604 108,238 Total liabilities 2,978,153 2,455,086 Commitments and contingencies Common stock-$.01 par value: Authorized-90,000,000 shares Issued and outstanding-32,783,496 shares at March 31, 2009 and 32,795,800 shares at March 31, 2008 328 328 Additional paid-in-capital 473,132 467,857 Retained earnings 1,471,043 1,315,924 Accumulated other comprehensive loss (651,652) (376,636) Common stock in treasury, at cost-8,771,565 shares held at March 31, 2009 and 8,759,261 shares held at March 31, 2008 (677,841) (666,365) Total stockholders' equity 615,010 741,108 Total liabilities and stockholders' equity $3,593,163 $3,196,194 ALLIANT TECHSYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended March 31 (Amounts in thousands) 2009 2008 Operating Activities Net income $155,119 $222,347 Adjustments to net income to arrive at cash provided by operating activities: Depreciation 80,137 71,511 Amortization of intangible assets 5,616 5,975 Amortization of deferred financing costs 2,857 3,851 Impairment of goodwill 108,500 - Write-off of debt issuance costs associated with convertible notes - 5,600 Write-off of acquisition related costs - 6,567 Deferred income taxes 113,999 (15,742) Loss on disposal of property 9,030 2,505 Minority interest, net of income taxes 187 376 Share-based plans expense 18,952 23,415 Excess tax benefits from share-based plans (3,287) (9,459) Changes in assets and liabilities: Net receivables (94,239) (27,508) Net inventories (15,610) (33,608) Accounts payable 64,345 49,066 Contract advances and allowances 4,456 720 Accrued compensation 15,312 (1,143) Accrued income taxes (66,096) 52,138 Pension and other postretirement benefits 23,306 33,865 Other assets and liabilities 2,403 (7,725) Cash provided by operating activities 424,987 382,751 Investing Activities Capital expenditures (111,481) (100,709) Acquisition of business (75,615) (103,685) Proceeds from the disposition of property, plant, and equipment 569 362 Cash used for investing activities (186,527) (204,032) Financing Activities Payments made to extinguish debt (618) - Payments made for debt issue costs (5) (740) Net purchase of treasury shares (31,609) (100,068) Proceeds from employee stock compensation plans 7,412 16,310 Excess tax benefits from share-based plans 3,287 9,459 Cash (used for) provided by financing activities (21,533) (75,039) Increase (decrease) in cash and cash equivalents 216,927 103,680 Cash and cash equivalents at beginning of year 119,773 16,093 Cash and cash equivalents at end of year $336,700 $119,773

SOURCE ATK

Source: PR Newswire

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