Exhibi 99.1
News Release | Corporate Communications | Phone: 952-351-3087 |
For Immediate Release
Media Contact: | Investor Contact: |
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Bryce Hallowell | Steve Wold |
Phone: 952-351-3087 | Phone: 952-351-3056 |
E-mail: bryce.hallowell@atk.com | E-mail: steve.wold@atk.com |
ATK REPORTS SECOND QUARTER RESULTS
ORDERS RISE 44 PERCENT TO $944 MILLION ON STRENGTH OF NEW COMPOSITE
CONTRACTS AND NASA BUSINESS
ATK NOW EXPECTS FY07 ORDERS OF APPROXIMATELY $3.6 BILLION
SALES UP 8 PERCENT TO $833 MILLION – ALL ORGANIC
ATK RAISES FY07 SALES FORECAST TO IN EXCESS OF $3.45 BILLION, INCREASES
CASH FLOW GUIDANCE AND NARROWS EPS RANGE TO $4.95-$5.05
Minneapolis, November 2, 2006 – Alliant Techsystems (NYSE: ATK) reported today that earnings per share in the second quarter rose to $1.15. The second quarter results did not include a benefit for the R&D tax credit. ATK’s prior EPS guidance of $1.17 included a benefit of five cents per share for the R&D tax credit. The company believes that the R&D tax credit will be extended retroactively prior to the end of its fiscal year.
Sales for the quarter, which ended October 1, climbed eight percent to $833 million from $772 million in the prior year quarter. Sales were driven entirely by organic growth. Orders in the quarter were up 44 percent to $944 million from $656 million in the prior year period. The company’s second quarter EBIT margin (earnings before interest and income taxes as a percent of sales) was 9.8 percent – up from 9.7 percent in the first quarter and on track for full-year EBIT performance of approximately 10 percent. Due in part to the delay of the research and development tax credit extension, the company’s tax rate for the quarter was 37.8 percent compared to 34.5 percent in the prior year.
“I’m pleased with ATK’s strong second-quarter and believe we are well positioned to finish the fiscal year with double digit earnings growth, a strengthening orders profile and the momentum to sustain our growth,” said Dan Murphy, Chairman and Chief Executive Officer. “We achieved several notable successes in the quarter including significant new positions in commercial aerospace and nuclear power generation.” said Murphy.
Key order highlights:
· Multi-year, multi-million dollar award for composite containment cases on the GEnx aircraft engine
· An initial $10 million award for rotor tubes used in a centrifuge operation to enrich uranium for nuclear power generation
· $41 million to provide the U.K. with anti-tank barrier systems
· $83 million in medium-caliber ammunition
· $66 million in small-caliber ammunition
Additional business highlights:
· Completed a $300 million convertible security offering which allows the company to fully fund its pension plan in FY07
· Completed the repurchase of 2.6 million shares of stock during the quarter for approximately $202 million.
· The company’s senior secured debt was raised to investment grade status (Baa3) by Moody’s Investors Services
· The successful test firing of a Kinetic Energy Interceptor (KEI) first stage motor
· The formation of an ATK, Lockheed Martin, and Pratt & Whitney Rocketdyne team to pursue the upper stage of the Ares I launch vehicle
Earnings per share for the first six months of fiscal year 2007 increased nine percent to $2.24 compared to $2.06 a year ago. The prior year results included tax benefits of 9 cents per share. Sales for the first half of fiscal year 2007 rose more than eight percent to $1.66 billion from $1.53 billion in the prior year. First half orders reached $1.56 billion, a 16 percent increase from $1.34 billion reported in the prior year.
Year-to-date operating cash is $5 million compared to $116 million in the prior year quarter. The decrease reflects ATK’s previously announced capital deployment strategy to fully fund its employee pension plan obligations.
SUMMARY OF REPORTED RESULTS
The following table presents the company’s results for the year to date and the quarter ending on October 1, 2006.
Net Sales and Income before Interest, Income Taxes, and Minority Interest
(Dollars in Thousands)
Sales:
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| Quarters Ended |
| Six Months Ended |
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| October 1, |
| October 2, |
| $ Change |
| % |
| October 1, |
| October 2, |
| $ Change |
| % |
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Mission Systems Group |
| $ | 288,166 |
| $ | 270,415 |
| $ | 17,751 |
| 6.6 | % | $ | 559,028 |
| $ | 543,362 |
| $ | 15,666 |
| 2.9 | % |
Ammunition Systems Group |
| 282,653 |
| 252,009 |
| 30,644 |
| 12.2 | % | 569,587 |
| 499,014 |
| 70,573 |
| 14.1 | % | ||||||
Launch Systems Group |
| 262,236 |
| 249,668 |
| 12,568 |
| 5.0 | % | 526,858 |
| 486,708 |
| 40,150 |
| 8.2 | % | ||||||
Total external sales |
| $ | 833,055 |
| $ | 772,092 |
| $ | 60,963 |
| 7.9 | % | $ | 1,655,473 |
| $ | 1,529,084 |
| $ | 126,389 |
| 8.3 | % |
Income before Interest, Income Taxes, and Minority Interest (Operating Profit):
| Quarters Ended |
| Six Months Ended |
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| October 1, |
| October 2, |
| Change |
| October 1, |
| October 2, |
| Change |
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Mission Systems Group |
| $ | 26,385 |
| $ | 21,346 |
| $ | 5,039 |
| $ | 53,491 |
| $ | 43,331 |
| $ | 10,160 |
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Ammunition Systems Group |
| 26,194 |
| 23,873 |
| 2,321 |
| 46,014 |
| 44,387 |
| 1,627 |
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Launch Systems Group |
| 35,427 |
| 36,744 |
| (1,317 | ) | 73,073 |
| 67,446 |
| 5,627 |
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Corporate |
| (6,087 | ) | (3,699 | ) | (2,388 | ) | (11,281 | ) | (6,719 | ) | (4,562 | ) | ||||||
Total |
| $ | 81,919 |
| $ | 78,264 |
| $ | 3,655 |
| $ | 161,297 |
| $ | 148,445 |
| $ | 12,852 |
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Note: The net expense of Corporate primarily reflects expenses incurred for administrative functions that are performed centrally at the corporate headquarters (as well as stock option expenses and elimination of intercompany profits.)
QUARTERLY SEGMENT RESULTS
ATK operates three principal business groups: Ammunition Systems Group; Launch Systems Group; and Mission Systems Group.
AMMUNITION SYSTEMS
Sales from the Ammunition Systems Group increased 12 percent to $283 million from $252 million in the prior year quarter, led by an 18 percent rise in civil ammunition sales and continued
strength in the company’s military small-caliber ammunition business. Based on the strength of the Group’s civil ammunition sector through the first half of the year, ATK now believes that sales growth for the Group will exceed 10 percent.
Second quarter earnings before interest and taxes (operating profit) for the Ammunition Systems Group were $26 million, compared to $24 million in the prior year quarter. This reflects the growth of civil ammunition and medium-caliber ammunition. The company continues to expect full-year operating margins in the Ammunition Systems Group of more than 9 percent.
LAUNCH SYSTEMS
Sales from the Launch Systems Group increased five percent to $262 million versus $250 million in the prior year quarter. This increase reflects new sales from NASA’s Ares I program. ATK continues to expect mid-single-digit growth for the full year.
Second quarter operating profit for the Launch Systems Group was $35 million compared to $37 million in the prior year. This reflects reductions in sales and margins on ordnance programs and Orion motors, partially offset by increased volume and favorable contract performance on strategic programs. The company continues to expect full-year margins in the Launch Systems Group of approximately 14 percent.
MISSION SYSTEMS
Mission Systems sales increased seven percent to $288 million compared to $270 million in the prior year quarter. The increased sales were driven by new sales from the recently announced GEnx contract, higher AAR-47 missile warning system volumes, increases in sales from the company’s aircraft integration business, and higher sales in large-caliber ammunition. These were partially offset by expected lower sales from advanced weapons. ATK expects that the Mission Systems Group will achieve mid single-digit organic growth for the full year.
Second quarter operating profit was $26 million, up from $21 million in the previous year. The increase reflects improved margins in electronic warfare and fuzing programs as well as the elimination of fuze restructuring costs associated with the consolidation of fuze operations in West Virginia. The company continues to expect operating margins for the full year of more than 9 percent.
OUTLOOK
Based on better visibility into the remainder of the fiscal year, ATK is raising its full-year FY07 sales estimate and narrowing its EPS range to the upper end of its previous guidance. ATK now expects sales to exceed $3.45 billion. It previously expected sales to exceed $3.4 billion. ATK is also raising its FY07 orders guidance to approximately $3.6 billion, up from prior guidance of $3.3 billion. The company now expects full-year EPS in a range of $4.95 - $5.05. The previous guidance range was $4.90 - $5.05. ATK is raising its guidance related to cash flow from operations to $35 million, from $25 million. ATK’s cash guidance includes the impact of the planned $385 million pension contribution this year, partially offset by expected tax benefits.
The company expects average share count of less than 35 million in FY07. The effective tax rate is expected to be approximately 35 percent (assuming the research and development tax credit is extended retroactively to the beginning of the company’s fiscal year.). Pension expenses are expected to be approximately $70 million.
ATK is a $3.4 billion advanced weapon and space systems company employing approximately 15,000 people in 22 states. 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 Space Shuttle program; 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; 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.
# # #
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED INCOME STATEMENTS
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| QUARTERS ENDED |
| SIX MONTHS ENDED |
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| October 1, |
| October 2, |
| October 1, |
| October 2, |
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(In thousands except per share data) |
| 2006 |
| 2005 |
| 2006 |
| 2005 |
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Sales |
| $ | 833,055 |
| $ | 772,092 |
| $ | 1,655,473 |
| $ | 1,529,084 |
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Cost of sales |
| 672,852 |
| 621,647 |
| 1,343,912 |
| 1,245,236 |
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Gross profit |
| 160,203 |
| 150,445 |
| 311,561 |
| 283,848 |
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Operating expenses: |
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Research and development |
| 13,894 |
| 14,196 |
| 25,551 |
| 24,077 |
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Selling |
| 22,657 |
| 19,309 |
| 47,455 |
| 37,285 |
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General and administrative |
| 41,733 |
| 38,676 |
| 77,258 |
| 74,041 |
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Total operating expenses |
| 78,284 |
| 72,181 |
| 150,264 |
| 135,403 |
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Income before interest, income taxes, and minority interest |
| 81,919 |
| 78,264 |
| 161,297 |
| 148,445 |
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Interest expense |
| (17,851 | ) | (17,044 | ) | (34,686 | ) | (34,514 | ) | ||||
Interest income |
| 341 |
| 241 |
| 544 |
| 368 |
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Income before income taxes and minority interest |
| 64,409 |
| 61,461 |
| 127,155 |
| 114,299 |
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Income tax provision |
| 24,337 |
| 21,207 |
| 48,137 |
| 36,716 |
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Income before minority interest |
| 40,072 |
| 40,254 |
| 79,018 |
| 77,583 |
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Minority interest, net of income taxes |
| 145 |
| 102 |
| 218 |
| 211 |
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Net income |
| $ | 39,927 |
| $ | 40,152 |
| $ | 78,800 |
| $ | 77,372 |
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Earnings per common share: |
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Basic |
| $ | 1.17 |
| $ | 1.08 |
| $ | 2.27 |
| $ | 2.09 |
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Diluted |
| 1.15 |
| 1.07 |
| 2.24 |
| 2.06 |
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Average number of common shares |
| 34,187 |
| 37,027 |
| 34,767 |
| 37,026 |
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Average number of common and dilutive shares |
| 34,612 |
| 37,646 |
| 35,196 |
| 37,625 |
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ALLIANT TECHSYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data) |
| October 1, 2006 |
| March 31, 2006 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 12,614 |
| $ | 9,090 |
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Net receivables |
| 728,445 |
| 738,909 |
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Net inventories |
| 184,416 |
| 139,876 |
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Deferred income tax assets |
| 86,088 |
| 77,848 |
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Other current assets |
| 43,069 |
| 53,728 |
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Total current assets |
| 1,054,632 |
| 1,019,451 |
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Net property, plant, and equipment |
| 447,859 |
| 453,958 |
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Goodwill |
| 1,163,186 |
| 1,163,186 |
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Prepaid and intangible pension assets |
| 78,771 |
| 82,254 |
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Deferred charges and other non-current assets |
| 184,172 |
| 183,131 |
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Total assets |
| $ | 2,928,620 |
| $ | 2,901,980 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Cash overdrafts |
| $ | 2,099 |
| $ | 63,036 |
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Current portion of long-term debt |
| 27,000 |
| 29,596 |
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Line of credit borrowings |
| 37,000 |
| — |
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Accounts payable |
| 172,056 |
| 165,955 |
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Contract advances and allowances |
| 67,782 |
| 49,667 |
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Accrued compensation |
| 95,439 |
| 114,537 |
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Accrued income taxes |
| — |
| 23,710 |
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Other accrued liabilities |
| 164,153 |
| 224,443 |
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Total current liabilities |
| 565,529 |
| 670,944 |
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Long-term debt |
| 1,382,500 |
| 1,096,000 |
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Deferred income tax liabilities |
| 78,829 |
| 2,909 |
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Postretirement and postemployment benefits liability |
| 173,396 |
| 175,314 |
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Minimum pension liability |
| 104,934 |
| 212,258 |
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Other long-term liabilities |
| 116,410 |
| 116,197 |
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Total liabilities |
| 2,421,598 |
| 2,273,622 |
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Contingencies |
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Common stock - $.01 par value |
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Authorized - 90,000,000 shares Issued and outstanding 32,918,140 shares at October 1, 2006 and 35,207,335 at March 31, 2006 |
| 329 |
| 352 |
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Additional paid-in-capital |
| 459,556 |
| 472,861 |
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Retained earnings |
| 1,007,321 |
| 928,521 |
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Unearned compensation |
| — |
| (2,760 | ) | ||
Accumulated other comprehensive loss |
| (339,535 | ) | (333,136 | ) | ||
Common stock in treasury, at cost, 8,636,921 shares held at |
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October 1, 2006 and 6,347,726 at March 31, 2006 |
| (620,649 | ) | (437,480 | ) | ||
Total stockholders’ equity |
| 507,022 |
| 628,358 |
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Total liabilities and stockholders’ equity |
| $ | 2,928,620 |
| $ | 2,901,980 |
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ALLIANT TECHSYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| SIX MONTHS ENDED |
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(In thousands) |
| October 1, 2006 |
| October 2, 2005 |
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Operating activities |
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Net income |
| $ | 78,800 |
| $ | 77,372 |
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Adjustments to net income to arrive at cash provided by operating activities: |
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Depreciation |
| 34,066 |
| 34,137 |
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Amortization of intangible assets |
| 4,218 |
| 4,362 |
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Amortization of deferred financing costs |
| 1,630 |
| 1,937 |
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Deferred income taxes |
| 70,976 |
| 6,762 |
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(Gain) loss on disposal of property |
| (84 | ) | 266 |
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Minority interest expense, net of income taxes |
| 218 |
| 211 |
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Share-based plans expense |
| 18,310 |
| 10,183 |
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Excess tax benefits from share-based plans |
| (2,049 | ) | — |
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Changes in assets and liabilities: |
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Net receivables |
| 10,464 |
| 16,814 |
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Net inventories |
| (44,540 | ) | (20,227 | ) | ||
Accounts payable |
| 12,887 |
| (60,292 | ) | ||
Contract advances and allowances |
| 18,115 |
| 13,244 |
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Accrued compensation |
| (18,243 | ) | (8,471 | ) | ||
Accrued income taxes |
| (24,858 | ) | 36,318 |
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Pension and other postretirement benefits |
| (180,253 | ) | (9,604 | ) | ||
Other assets and liabilities |
| 25,276 |
| 13,339 |
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Cash provided by operating activities |
| 4,933 |
| 116,351 |
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Investing activities |
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Capital expenditures |
| (35,569 | ) | (20,430 | ) | ||
Proceeds from the disposition of property, plant, and equipment |
| 510 |
| 1,371 |
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Cash used for investing activities |
| (35,059 | ) | (19,059 | ) | ||
Financing activities |
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Change in cash overdrafts |
| (60,937 | ) | (6,092 | ) | ||
Net borrowings on line of credit |
| 37,000 |
| — |
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Payments made on bank debt |
| (13,500 | ) | (280,053 | ) | ||
Payments made to extinguish debt |
| (2,596 | ) | — |
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Proceeds from issuance of long-term debt |
| 300,000 |
| 270,000 |
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Purchase of call options |
| (50,850 | ) | — |
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Sale of warrants |
| 23,220 |
| — |
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Payments made for debt issuance costs |
| (6,344 | ) | (699 | ) | ||
Net purchase of treasury shares |
| (208,027 | ) | (69,908 | ) | ||
Proceeds from employee stock compensation plans |
| 13,635 |
| 14,508 |
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Excess tax benefits from share-based plans |
| 2,049 |
| — |
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Cash provided by (used for) financing activities |
| 33,650 |
| (72,244 | ) | ||
Increase in cash and cash equivalents |
| 3,524 |
| 25,048 |
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Cash and cash equivalents - beginning of period |
| 9,090 |
| 12,772 |
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Cash and cash equivalents - end of period |
| $ | 12,614 |
| $ | 37,820 |
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