Exhibit 99.1
News Release |
| Corporate Communications |
| Phone: 952-351-3087 |
|
| MN01-1030 |
| Fax: 952-351-3009 |
|
| 5050 Lincoln Drive |
|
|
|
| Edina, MN 55436 |
|
|
Media Contact: | Investor Contact: |
|
|
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 Increases FY08 Sales Guidance to in excess of $4.1 billion and EPS to $6.20 – $6.30
ATK Reports Strong Second Quarter Earnings – up 25 Percent to $1.44 Per Share
Second Quarter Sales Rise 24 Percent to Surpass $1 Billion; Organic Growth of 19 percent
Orders Nearly Triple to $2.57 Billion – Highlighted by NASA Ares I Work
Second Quarter Net income Rises 28 Percent to $51 Million
ATK Completes $100 million Share Repurchase in the Quarter
Minneapolis, November 1, 2007 – Alliant Techsystems (NYSE: ATK) reported today that earnings per share (EPS) in the second quarter of fiscal year 2008, which ended on September 30, rose 25 percent to $1.44 versus $1.15 in the prior-year quarter. Due to the appreciation of the company’s stock, ATK’s second quarter results included a $5.6 million pre-tax, $3.3 million after-tax ($.09), non-cash charge related to the accelerated write-off of unamortized debt issuance costs associated with the company’s convertible bonds due in 2024.
Sales rose 24 percent to surpass $1 billion, compared to $830 million in the prior-year quarter. Organic sales in the quarter increased 19 percent from the prior-year quarter. Orders nearly tripled to $2.57 billion, up from $944 million in the previous year’s quarter. The strong orders growth was driven in part by $1.6 billion booked by the company for future development work on the first stage of NASA’s Ares I launch vehicle. For the quarter, order bookings in all three business Groups exceeded sales.
Based on the strength of its performance through the first half of the fiscal year, and better visibility throughout the remainder of the year, the company is raising its full-year EPS guidance to a range of $6.20 -$6.30. The new guidance includes the nine-cent charge related to the accelerated write-off of debt issuance costs. The company’s previous guidance, which did not include the nine-cent charge, was in a range from $6.15 - $6.25. The company is also raising its sales guidance to in excess of $4.1 billion, up from its previous guidance of $4.0 - $4.1 billion.
The company reported improved margins of 10.2 percent versus 9.9 percent in the prior-year quarter and net income of $51 million, a 28 percent increase from $40 million in the prior-year quarter. The improved margins were due primarily to reduced pension expenses, as well as operating efficiencies. These improvements were partially offset by an increase in discretionary spending on strategic program pursuits.
“I could not be more pleased with the company’s performance through the first half of the fiscal year,” said Dan Murphy, Chairman and CEO. “Our strategic focus on margin improvement is benefiting the entire company and the Groups are winning new business based on affordable and innovative solutions.”
Earnings per share for the first six months of fiscal year 2008 increased 32 percent to $2.95 compared to $2.24 a year ago. Sales for the first half of fiscal year 2008 rose more than 20 percent to $1.99 billion compared to $1.65 billion in the prior year.
Year-to-date operating cash is $131 million compared to $5 million in the prior year period. The increase reflects the company’s previously announced decision to fully fund the pension plan which resulted in lower pension plan contributions, partially offset by cash used for working capital due to increasing sales and the timing of cash receipts. During the quarter the company repurchased 942,200 shares of stock for approximately $100 million at an average share price of slightly more than $106.
2
SUMMARY OF REPORTED RESULTS
The following table presents the company’s results for the year to date and second quarter ending September 30, 2007 (in millions).
External Sales:
|
| Quarters Ended |
| Six Months Ended |
| ||||||||||||||||||
|
| September 30, |
| October 1, |
| $ Change |
| % |
| September 30, |
| October 1, |
| $ Change |
| % |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ammunition Systems Group |
| $ | 354.7 |
| $ | 282.7 |
| $ | 72.0 |
| 25.5 | % | $ | 690.2 |
| $ | 569.6 |
| $ | 120.6 |
| 21.2 | % |
Launch Systems Group |
| 318.2 |
| 262.2 |
| 56.0 |
| 21.3 | % | 623.3 |
| 526.9 |
| 96.5 |
| 18.3 | % | ||||||
Mission Systems Group |
| 356.4 |
| 285.5 |
| 70.9 |
| 24.9 | % | 674.2 |
| 556.4 |
| 117.8 |
| 21.2 | % | ||||||
Total external sales |
| $ | 1,029.3 |
| $ | 830.4 |
| $ | 199.0 |
| 24.0 | % | $ | 1,987.7 |
| $ | 1,652.9 |
| $ | 334.8 |
| 20.3 | % |
Income before Interest, Income Taxes, and Minority Interest (Operating Profit):
|
| Quarters Ended |
| Six Months Ended |
| ||||||||||||||
|
| September 30, |
| October 1, |
| Change |
| September 30, |
| October 1, |
| Change |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ammunition Systems Group |
| $ | 32.2 |
| $ | 26.2 |
| $ | 6.0 |
| $ | 61.1 |
| $ | 46.0 |
| $ | 15.0 |
|
Launch Systems Group |
| 43.3 |
| 35.4 |
| 7.9 |
| 88.2 |
| 73.1 |
| 15.1 |
| ||||||
Mission Systems Group |
| 35.0 |
| 26.4 |
| 8.6 |
| 68.5 |
| 53.5 |
| 15.0 |
| ||||||
Corporate |
| (5.4 | ) | (6.1 | ) | 0.7 |
| (11.1 | ) | (11.3 | ) | 0.1 |
| ||||||
Total |
| $ | 105.1 |
| $ | 81.9 |
| $ | 23.2 |
| $ | 206.6 |
| $ | 161.3 |
| $ | 45.3 |
|
SEGMENT RESULTS
ATK operates three principal business groups: Ammunition Systems Group; Launch Systems Group; and Mission Systems Group.
AMMUNITION SYSTEMS GROUP
Sales in the Ammunition Systems Group increased by 25 percent to $355 million compared to $283 million in the prior-year quarter. The increase reflects strong sales growth in the civil ammunition business as well as increased sales in military small and medium-caliber ammunition.
Earnings before interest and taxes (operating profit) rose 23 percent to $32 million from $26 million in the prior-year quarter. This reflects higher sales volume, lower pension expenses, and operating efficiencies. These were partially offset by the Group’s sales mix. For the full-year, ATK continues to expect margins in the Ammunition Systems Group in the mid-nine percent range.
LAUNCH SYSTEMS GROUP
Sales in the Launch Systems Group rose by 21 percent to $318 million compared to $262 million in the prior-year quarter. Higher sales from NASA’s Ares I program contributed to the increase, which was partially offset by the anticipated lower sales in space shuttle program.
Operating profit in the Launch Systems Group rose by 22 percent to $43 million from $35 million in the prior-year quarter. The increase reflects additional Ares I work and lower pension expenses, partially offset by increased investment in strategic program pursuits. ATK continues to expect margins for the full year in the Launch Systems Group to approach 14 percent.
3
MISSION SYSTEMS GROUP
Sales in the Mission Systems Group rose 25 percent to $356 million from $285 million in the prior-year quarter. Organic sales rose 12 percent, driven by strong sales in the Group’s aircraft integration and space structures businesses. Sales from the acquisition of Swales Aerospace added $39 million to revenue.
Operating profit increased 33 percent to $35 million from $26 million in the prior-year quarter. The increase reflects increased sales volume, including the Swales Aerospace acquisition, and lower pension expense. ATK continues to expect full-year margins in the Mission Systems Group of approximately 10 percent.
CORPORATE AND OTHER
In the second quarter, corporate and other expenses totaled $5.4 million compared to $6.1 million in the prior-year period.
OUTLOOK
Based on the strength of sales across all three business Groups, ATK is raising its full-year FY08 sales guidance to in excess of $4.1 billion, up from its previous guidance of $4.0 - $4.1 billion. The company is also raising EPS guidance to $6.20 - $6.30, up from its previous of $6.15 - $6.25. This guidance includes the $0.09 debt issue cost charge taken in the second quarter which was not included in previous guidance.
For the year, the company now expects an average share count of approximately 35.5 million, up from previous expectations of 35 million. The increase reflects the appreciation of the company’s stock price and the corresponding share count dilution from the company's convertible notes, offset by the completion of the company’s $100 million share repurchase. The effective tax rate for the year is expected to be approximately 36 percent while pension expenses are expected to be approximately $50 million. ATK continues to expect full-year free-cash flow of approximately $260 million which includes capital expenditures approaching $100 million (see reconciliation table for details).
4
Reconciliation of Non-GAAP Financial Measure
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 |
| |
|
| (in thousands) |
| |
Cash provided by operating activities |
| $ | 360,000 |
|
Capital expenditures |
| ~100,000 |
| |
Free cash flow |
| $ | 260,000 |
|
ATK is a $4.1 billion advanced weapon and space systems company employing approximately 16,500 people in 21 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 human-rated launch programs; 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.
# # #
5
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED INCOME STATEMENTS
|
| QUARTERS ENDED |
| SIX MONTHS ENDED |
| ||||||||
|
| September 30, |
| October 1, |
| September 30, |
| October 1, |
| ||||
(In thousands except per share data) |
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Sales |
| $ | 1,029,345 |
| $ | 830,374 |
| $ | 1,987,717 |
| $ | 1,652,868 |
|
Cost of sales |
| 830,976 |
| 669,155 |
| 1,597,158 |
| 1,335,044 |
| ||||
Gross profit |
| 198,369 |
| 161,219 |
| 390,559 |
| 317,824 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Research and development |
| 17,325 |
| 13,894 |
| 30,008 |
| 25,551 |
| ||||
Selling |
| 30,861 |
| 23,167 |
| 60,791 |
| 48,782 |
| ||||
General and administrative |
| 45,108 |
| 42,239 |
| 93,181 |
| 82,194 |
| ||||
Total operating expenses |
| 93,294 |
| 79,300 |
| 183,980 |
| 156,527 |
| ||||
Income before interest, income taxes, and minority interest |
| 105,075 |
| 81,919 |
| 206,579 |
| 161,297 |
| ||||
Interest expense |
| (26,055 | ) | (17,851 | ) | (45,352 | ) | (34,686 | ) | ||||
Interest income |
| 416 |
| 341 |
| 700 |
| 544 |
| ||||
Income before income taxes and minority interest |
| 79,436 |
| 64,409 |
| 161,927 |
| 127,155 |
| ||||
Income tax provision |
| 28,171 |
| 24,337 |
| 58,084 |
| 48,137 |
| ||||
Income before minority interest |
| 51,265 |
| 40,072 |
| 103,843 |
| 79,018 |
| ||||
Minority interest, net of income taxes |
| 90 |
| 145 |
| 264 |
| 218 |
| ||||
Net income |
| $ | 51,175 |
| $ | 39,927 |
| $ | 103,579 |
| $ | 78,800 |
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per common share: |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 1.55 |
| $ | 1.17 |
| $ | 3.12 |
| $ | 2.27 |
|
Diluted |
| 1.44 |
| 1.15 |
| 2.95 |
| 2.24 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Average number of common shares |
| 33,120 |
| 34,187 |
| 33,193 |
| 34,767 |
| ||||
Average number of common and dilutive shares |
| 35,450 |
| 34,612 |
| 35,157 |
| 35,196 |
|
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data) |
| September 30, 2007 |
| March 31, 2007 |
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 23,629 |
| $ | 16,093 |
|
Net receivables |
| 821,342 |
| 733,304 |
| ||
Net inventories |
| 213,087 |
| 170,602 |
| ||
Deferred income tax assets |
| 64,221 |
| 75,333 |
| ||
Other current assets |
| 32,016 |
| 33,686 |
| ||
Total current assets |
| 1,154,295 |
| 1,029,018 |
| ||
Net property, plant, and equipment |
| 456,437 |
| 454,748 |
| ||
Goodwill |
| 1,236,309 |
| 1,163,186 |
| ||
Prepaid and intangible pension assets |
| 58,034 |
| 27,998 |
| ||
Deferred charges and other non-current assets |
| 192,170 |
| 199,732 |
| ||
Total assets |
| $ | 3,097,245 |
| $ | 2,874,682 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Cash overdrafts |
| $ | 17,388 |
|
|
| |
Current portion of long-term debt |
| 480,000 |
|
|
| ||
Accounts payable |
| 175,480 |
| $ | 153,572 |
| |
Contract advances and allowances |
| 79,859 |
| 80,904 |
| ||
Accrued compensation |
| 111,806 |
| 123,696 |
| ||
Accrued income taxes |
| 17,388 |
| 11,791 |
| ||
Other accrued liabilities |
| 169,488 |
| 133,309 |
| ||
Total current liabilities |
| 1,051,409 |
| 503,272 |
| ||
Long-term debt |
| 1,050,000 |
| 1,455,000 |
| ||
Deferred income tax liabilities |
| 49,025 |
| 22,278 |
| ||
Postretirement and postemployment benefits liabilities |
| 157,343 |
| 163,709 |
| ||
Accrued pension liability |
| 63,861 |
| 89,383 |
| ||
Other long-term liabilities |
| 100,506 |
| 83,159 |
| ||
Total liabilities |
| 2,472,144 |
| 2,316,801 |
| ||
Contingencies |
|
|
|
|
| ||
Common stock - $.01 par value |
|
|
|
|
| ||
Authorized - 90,000,000 shares |
|
|
|
|
| ||
Issued and outstanding 32,699,217 shares at September 30, 2007 and 33,075,268 at March 31, 2007 |
| 327 |
| 331 |
| ||
Additional paid-in-capital |
| 452,775 |
| 477,554 |
| ||
Retained earnings |
| 1,197,154 |
| 1,112,649 |
| ||
Accumulated other comprehensive loss |
| (365,273 | ) | (424,075 | ) | ||
Common stock in treasury, at cost, 8,855,844 shares held at September 30, 2007 and 8,479,793 at March 31, 2007 |
| (659,882 | ) | (608,578 | ) | ||
Total stockholders’ equity |
| 625,101 |
| 557,881 |
| ||
Total liabilities and stockholders’ equity |
| $ | 3,097,245 |
| $ | 2,874,682 |
|
ALLIANT TECHSYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| SIX MONTHS ENDED |
| ||||
(In thousands) |
| September 30, 2007 |
| October 1, 2006 |
| ||
Operating activities |
|
|
|
|
| ||
Net income |
| $ | 103,579 |
| $ | 78,800 |
|
Adjustments to net income to arrive at cash provided by operating activities: |
|
|
|
|
| ||
Depreciation |
| 34,980 |
| 34,066 |
| ||
Amortization of intangible assets |
| 2,865 |
| 4,218 |
| ||
Amortization of deferred financing costs |
| 2,441 |
| 1,630 |
| ||
Write-off of debt issuance costs associated with convertible notes |
| 5,600 |
| — |
| ||
Deferred income taxes |
| 4,184 |
| 70,976 |
| ||
Loss (gain) on disposal of property |
| 1,610 |
| (84 | ) | ||
Minority interest, net of income taxes |
| 264 |
| 218 |
| ||
Share-based plans expense |
| 11,770 |
| 18,310 |
| ||
Excess tax benefits from share-based plans |
| (8,062 | ) | (2,049 | ) | ||
Changes in assets and liabilities: |
|
|
|
|
| ||
Net receivables |
| (49,882 | ) | 10,464 |
| ||
Net inventories |
| (40,327 | ) | (44,540 | ) | ||
Accounts payable |
| 16,203 |
| 12,887 |
| ||
Contract advances and allowances |
| (1,045 | ) | 18,115 |
| ||
Accrued compensation |
| (36,478 | ) | (18,243 | ) | ||
Accrued income taxes |
| 38,486 |
| (24,858 | ) | ||
Pension and other postretirement benefits |
| 17,243 |
| (186,031 | ) | ||
Other assets and liabilities |
| 27,826 |
| 31,054 |
| ||
Cash provided by operating activities |
| 131,257 |
| 4,933 |
| ||
Investing activities |
|
|
|
|
| ||
Capital expenditures |
| (34,595 | ) | (35,569 | ) | ||
Acquisition of business |
| (101,195 | ) | — |
| ||
Proceeds from the disposition of property, plant, and equipment |
| 319 |
| 510 |
| ||
Cash used for investing activities |
| (135,471 | ) | (35,059 | ) | ||
Financing activities |
|
|
|
|
| ||
Change in cash overdrafts |
| 17,388 |
| (60,937 | ) | ||
Net borrowings on line of credit |
| 75,000 |
| 37,000 |
| ||
Payments made on bank debt |
| — |
| (13,500 | ) | ||
Payments made to extinguish debt |
| — |
| (2,596 | ) | ||
Proceeds from issuance of long-term debt |
| — |
| 300,000 |
| ||
Purchase of call options |
| — |
| (50,850 | ) | ||
Sale of warrants |
| — |
| 23,220 |
| ||
Payments made for debt issue costs |
| (105 | ) | (6,344 | ) | ||
Net purchase of treasury shares |
| (100,068 | ) | (208,027 | ) | ||
Proceeds from employee stock compensation plans |
| 11,473 |
| 13,635 |
| ||
Excess tax benefits from share-based plans |
| 8,062 |
| 2,049 |
| ||
Cash provided by financing activities |
| 11,750 |
| 33,650 |
| ||
Increase in cash and cash equivalents |
| 7,536 |
| 3,524 |
| ||
Cash and cash equivalents - beginning of period |
| 16,093 |
| 9,090 |
| ||
Cash and cash equivalents - end of period |
| $ | 23,629 |
| $ | 12,614 |
|