Exhibit 99.1
News Release |
| Corporate Communications 7480 Flying Cloud Drive Minneapolis, MN 55344 |
| Phone: 952-351-3087 Fax: 952-351-3009 |
For Immediate Release
Media Contact: |
| Investor Contact: |
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|
Bryce Hallowell |
| Jeff Huebschen |
Phone: 952-351-3087 |
| Phone: 952-351-2929 |
E-mail: bryce.hallowell@atk.com |
| E-mail: jeff.huebschen@atk.com |
ATK Reports FY11 Second-Quarter Operating Results
ATK Raises Full-Year EPS Guidance to a Range of $8.90 - - $9.10
Second Quarter Fully-Diluted EPS Rises 33 Percent to $2.91
Minneapolis, November 4, 2010 — ATK (NYSE: ATK) today reported operating results for the second quarter of its Fiscal Year 2011, which ended on October 3, 2010. Fully diluted earnings per share (EPS) rose 33 percent to $2.91, compared to $2.19 in the prior-year quarter. The increase primarily reflects a lower effective tax rate resulting from the favorable settlement of IRS audits of the company’s FY07 and FY08 tax returns. Despite $15 million of higher pension expense, second quarter margins remained strong at 11.1 percent compared to 11.2 percent in the prior-year quarter. The margins benefitted from a continued focus across the company on cost management and efficiency improvement initiatives. Second quarter sales of $1.2 billion were in line with the prior-year quarter. Second quarter net income rose 34 percent to $97 million compared to $73 million in the prior-year quarter.
Based on the strength of the company’s performance during the first half of its fiscal year and continued strong margin performance, ATK is raising its full-year EPS guidance.
“I am pleased with our performance year-to-date. We are focused on margin improvement, driving organic growth domestically and internationally, and identifying strategic acquisitions to deliver long-term shareholder value,” said Mark DeYoung, President and CEO.
“We are very encouraged by the support Congress has expressed for our NASA business, our operating efficiency improvements and cost-management efforts are yielding results, and we are well positioned for the remainder of the year. “
SUMMARY OF REPORTED RESULTS
The following table presents the company’s results for the second quarter of the fiscal year which ended October 3, 2010 (in thousands).
Sales:
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| Quarters Ended |
| Six Months Ended |
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| October 3, |
| October 4, |
| $ |
| % |
| October 3, |
| October 4, |
| $ |
| % Change |
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Aerospace Systems |
| $ | 376,368 |
| $ | 417,411 |
| $ | (41,043 | ) | (9.8 | )% | $ | 745,732 |
| $ | 832,870 |
| $ | (87,138 | ) | (10.5 | )% |
Armament Systems |
| 442,653 |
| 415,457 |
| 27,196 |
| 6.5 | % | 881,553 |
| 817,445 |
| 64,108 |
| 7.8 | % | ||||||
Missile Products |
| 159,505 |
| 176,700 |
| (17,195 | ) | (9.7 | )% | 315,818 |
| 353,570 |
| (37,752 | ) | (10.7 | )% | ||||||
Security and Sporting |
| 230,709 |
| 198,396 |
| 32,313 |
| 16.3 | % | 468,283 |
| 413,213 |
| 55,070 |
| 13.3 | % | ||||||
Total sales |
| $ | 1,209,235 |
| $ | 1,207,964 |
| $ | 1,271 |
| 0.1 | % | $ | 2,411,386 |
| $ | 2,417,098 |
| $ | (5,712 | ) | (0.2 | )% |
Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):
|
| Quarters Ended |
| Six Months Ended |
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| October 3, |
| October 4, |
| $ |
| % |
| October 3, |
| October 4, |
| $ |
| % Change |
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Aerospace Systems |
| $ | 38,765 |
| $ | 40,529 |
| $ | (1,764 | ) | (4.4 | )% | $ | 74,564 |
| $ | 81,395 |
| $ | (6,831 | ) | (8.4 | )% |
Armament Systems |
| 53,495 |
| 29,246 |
| 24,249 |
| 82.9 | % | 103,136 |
| 71,891 |
| 31,245 |
| 43.5 | % | ||||||
Missile Products |
| 11,776 |
| 16,479 |
| (4,703 | ) | (28.5 | )% | 28,300 |
| 33,033 |
| (4,733 | ) | (14.3 | )% | ||||||
Security and Sporting |
| 32,289 |
| 37,721 |
| (5,432 | ) | (14.4 | )% | 65,265 |
| 60,104 |
| 5,161 |
| 8.6 | % | ||||||
Corporate |
| (1,967 | ) | 10,899 |
| (12,866 | ) | (118.0 | )% | (3,854 | ) | 19,823 |
| (23,677 | ) | (119.4 | )% | ||||||
Total operating profit |
| $ | 134,358 |
| $ | 134,874 |
| $ | (516 | ) | (0.4 | )% | $ | 267,411 |
| $ | 266,246 |
| $ | 1,165 |
| 0.4 | % |
SEGMENT RESULTS
ATK operates in a four business group structure: Aerospace Systems, Armament Systems; Missile Products; and Security and Sporting.
AEROSPACE SYSTEMS
Second quarter sales in the Aerospace Systems group declined by 10 percent to $376 million, compared to $417 million in the prior-year period. The decrease primarily reflects lower
sales on the Space Shuttle’s Reusable Solid Rocket Motor program as the program nears completion, partially offset by higher sales on the Ares I program.
Earnings before interest, taxes, and noncontrolling interest (operating profit) in the second quarter declined four percent to $39 million, compared to $41 million in the prior-year period. The decrease primarily reflects lower sales volume, and the higher costs associated with commercial aircraft programs.
ARMAMENT SYSTEMS
Second quarter sales in the Armament Systems group increased 7 percent to $443 million, compared to $415 million in the prior-year quarter. The increase was driven by modernization funding at the group’s government-owned, ATK-operated facilities, new sales generated by precision weapons programs, and additional volume on the non-standard ammunition contract, partially offset by lower sales volume in medium and large-caliber ammunition.
Operating profit in the second quarter rose 83 percent to $54 million, compared to $29 million in the prior-year quarter. The prior-year quarter included $11 million of non-cash charges primarily due to the early retirement of assets related to the company’s TNT production facility. ATK initiated legal action against the designer of the TNT production line, which resulted in a favorable settlement, $6 million of which was recorded in the second quarter. The higher operating profit primarily reflects the absence of charges incurred in the prior-year quarter, the favorable settlement, and higher sales volume.
MISSILE PRODUCTS
Second quarter sales in the Missile Products group were down 10 percent to $160 million, compared to $177 million in the prior-year quarter. The decrease reflected lower sales on NASA’s launch abort system and special mission aircraft.
Operating profit decreased by 29 percent to $12 million, compared to $16 million in the prior-year quarter, reflecting lower sales volume and investments made in the group’s precision missile programs.
SECURITY AND SPORTING
Second quarter sales in the Security and Sporting group grew by 16 percent to $231 million, compared to $198 million in the prior-year quarter. The increase reflects the ability to meet demand for commercial ammunition as the result of new capacity coming on line, and $22 million of new sales from a recently acquired business.
Operating profit in the second quarter decreased by 14 percent to $32 million, compared to $38 million in the prior-year quarter. The decrease primarily reflects the reversal of approximately $6 million of bad debt reserves in the prior-year quarter from a vendor that emerged from bankruptcy, as well as the timing of general overhead expenditures.
CORPORATE AND OTHER
In the second quarter, corporate and other expenses totaled $2 million, compared to income of $11 million in the prior-year quarter. The decrease was the result of $15 million of higher pension expense, partially offset by cost-management initiatives. The tax rate for the quarter was 14.6 percent compared to 37.2 percent in the prior-year quarter. The improvement reflects the favorable settlement of IRS audits of the company’s FY07 and FY08 tax returns.
OUTLOOK
Based on better visibility into the remainder of the year, and continued strong margin performance, ATK is raising its full-year EPS guidance to a range of $8.90 - $9.10, up from previous guidance of $8.50 - $8.80. The new EPS guidance includes full-year interest expense that is expected to be $88 million, which reflects additional interest expense related to the company’s debt refinancing. ATK continues to expect full-year sales of $4.775 - $4.85 billion.
ATK continues to expect a full-year tax rate of approximately 30 percent, which assumes a retroactive extension of the Federal R&D tax credit. Pension expenses are still expected to be approximately $130 million. Average share count is expected to be approximately 34 million. The company continues to expect to generate free cash flow in a range of $275 - $300 million, with capital expenditures of approximately $120 million (see reconciliation table for details).
Reconciliation of Non-GAAP Financial Measures
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, 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.
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| Projected Year |
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Cash provided by operating activities |
| $395,000 - $420,000 |
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Capital expenditures |
| ~(120,000) |
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Free cash flow |
| $275,000 - $300,000 |
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ATK is a premier aerospace and defense company with operations in 24 states, Puerto Rico and internationally, and revenues in excess of $4.8 billion. News and information can be found on the Internet at www.atk.com.
Certain information discussed in this press release constitutes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Although ATK believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected. Among these factors are: the challenges of developing new launch vehicles and the uncertainty regarding the Administration’s next-generation heavy lift vehicle architecture; 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; 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.
# # #
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)
|
| QUARTERS ENDED |
| SIX MONTHS ENDED |
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(In thousands except per share data) |
| October 3, 2010 |
| October 4, 2009 |
| October 3, 2010 |
| October 4, 2009 |
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Sales |
| $ | 1,209,235 |
| $ | 1,207,964 |
| $ | 2,411,386 |
| $ | 2,417,098 |
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Cost of sales |
| 958,145 |
| 962,262 |
| 1,908,032 |
| 1,911,551 |
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Gross profit |
| 251,090 |
| 245,702 |
| 503,354 |
| 505,547 |
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Operating expenses: |
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Research and development |
| 15,767 |
| 15,886 |
| 29,655 |
| 31,264 |
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Selling |
| 38,889 |
| 45,202 |
| 79,250 |
| 90,296 |
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General and administrative |
| 62,076 |
| 49,740 |
| 127,038 |
| 117,741 |
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Income before interest, income taxes, and noncontrolling interest |
| 134,358 |
| 134,874 |
| 267,411 |
| 266,246 |
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Interest expense |
| (20,345 | ) | (19,361 | ) | (38,044 | ) | (40,296 | ) | ||||
Interest income |
| 58 |
| 124 |
| 128 |
| 210 |
| ||||
Income before income taxes and noncontrolling interest |
| 114,071 |
| 115,637 |
| 229,495 |
| 226,160 |
| ||||
Income tax provision |
| 16,686 |
| 43,020 |
| 57,333 |
| 84,060 |
| ||||
Net income |
| 97,385 |
| 72,617 |
| 172,162 |
| 142,100 |
| ||||
Less net income attributable to noncontrolling interest |
| 139 |
| 107 |
| 272 |
| 159 |
| ||||
Net income attributable to Alliant Techsystems Inc. |
| $ | 97,246 |
| $ | 72,510 |
| $ | 171,890 |
| $ | 141,941 |
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Alliant Techsystems Inc.’s earnings per common share: |
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Basic |
| $ | 2.93 |
| $ | 2.21 |
| $ | 5.19 |
| $ | 4.33 |
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Diluted |
| 2.91 |
| 2.19 |
| 5.14 |
| 4.28 |
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Alliant Techsystems Inc.’s weighted-average number of common shares outstanding: |
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Basic |
| 33,162 |
| 32,718 |
| 33,104 |
| 32,681 |
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Diluted |
| 33,426 |
| 33,139 |
| 33,413 |
| 33,151 |
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ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands except share data) |
| October 3, 2010 |
| March 31, 2010 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 265,660 |
| $ | 393,893 |
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Net receivables |
| 1,052,048 |
| 902,750 |
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Net inventories |
| 268,165 |
| 236,074 |
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Income tax receivable |
| 23,032 |
| — |
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Deferred income tax assets |
| 68,766 |
| 67,813 |
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Other current assets |
| 85,564 |
| 118,448 |
| ||
Total current assets |
| 1,763,235 |
| 1,718,978 |
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Net property, plant, and equipment |
| 553,158 |
| 561,931 |
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Goodwill |
| 1,249,874 |
| 1,183,910 |
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Deferred income tax assets |
| 126,737 |
| 140,439 |
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Deferred charges and other non-current assets |
| 410,813 |
| 264,366 |
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Total assets |
| $ | 4,103,817 |
| $ | 3,869,624 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 300,000 |
| $ | 13,750 |
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Accounts payable |
| 271,917 |
| 273,718 |
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Contract advances and allowances |
| 118,464 |
| 106,819 |
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Accrued compensation |
| 137,075 |
| 172,630 |
| ||
Accrued income taxes |
| — |
| 14,609 |
| ||
Other accrued liabilities |
| 204,180 |
| 206,289 |
| ||
Total current liabilities |
| 1,031,636 |
| 787,815 |
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Long-term debt |
| 1,190,743 |
| 1,379,804 |
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Postretirement and postemployment benefits liabilities |
| 136,810 |
| 142,541 |
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Accrued pension liability |
| 627,650 |
| 622,576 |
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Other long-term liabilities |
| 114,878 |
| 129,466 |
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Total liabilities |
| 3,101,717 |
| 3,062,202 |
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Commitments and contingencies |
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Common stock - $.01 par value |
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Authorized - 180,000,000 shares |
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Issued and outstanding 33,290,652 shares at October 3, 2010 and 33,047,018 shares at March 31, 2010 |
| 333 |
| 330 |
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Additional paid-in-capital |
| 567,500 |
| 578,046 |
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Retained earnings |
| 1,871,066 |
| 1,699,176 |
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Accumulated other comprehensive loss |
| (806,764 | ) | (821,086 | ) | ||
Common stock in treasury, at cost, 8,264,797 shares held at October 3, 2010 and 8,508,431 at March 31, 2010 |
| (639,135 | ) | (657,872 | ) | ||
Total Alliant Techsystems Inc. stockholders’ equity |
| 993,000 |
| 798,594 |
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Noncontrolling interest |
| 9,100 |
| 8,828 |
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Total stockholders’ equity |
| 1,002,100 |
| 807,422 |
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Total liabilities and stockholders’ equity |
| $ | 4,103,817 |
| $ | 3,869,624 |
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ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
| SIX MONTHS ENDED |
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(In thousands) |
| October 3, 2010 |
| October 4, 2009 |
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Operating activities |
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Net income |
| $ | 172,162 |
| $ | 142,100 |
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Adjustments to net income to arrive at cash provided by (used for) operating activities: |
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Depreciation |
| 47,416 |
| 49,571 |
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Amortization of intangible assets |
| 5,500 |
| 2,479 |
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Amortization of debt discount |
| 8,439 |
| 11,708 |
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Amortization of deferred financing costs |
| 2,405 |
| 1,419 |
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Asset impairment |
| — |
| 11,405 |
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Deferred income taxes |
| 4,344 |
| 1,365 |
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Loss (gain) on disposal of property |
| 2,727 |
| (483 | ) | ||
Share-based plans expense |
| 5,269 |
| 8,580 |
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Excess tax benefits from share-based plans |
| (170 | ) | (981 | ) | ||
Changes in assets and liabilities: |
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Net receivables |
| (221,485 | ) | (90,798 | ) | ||
Net inventories |
| (32,165 | ) | 45,707 |
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Accounts payable |
| 12,398 |
| (113,315 | ) | ||
Contract advances and allowances |
| 11,645 |
| 9,875 |
| ||
Accrued compensation |
| (48,423 | ) | (54,405 | ) | ||
Accrued income taxes |
| (47,358 | ) | 33,260 |
| ||
Pension and other postretirement benefits |
| 39,101 |
| (124,960 | ) | ||
Other assets and liabilities |
| 50,422 |
| 20,039 |
| ||
Cash provided by (used for) operating activities |
| 12,227 |
| (47,434 | ) | ||
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Investing activities |
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Capital expenditures |
| (53,174 | ) | (67,147 | ) | ||
Acquisition of business, net |
| (172,251 | ) | 5,002 |
| ||
Proceeds from the disposition of property, plant, and equipment |
| 45 |
| 1,267 |
| ||
Cash used for investing activities |
| (225,380 | ) | (60,878 | ) | ||
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Financing activities |
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Payments made on bank debt |
| (3,438 | ) | (7,041 | ) | ||
Payments made to extinguish debt |
| (257,813 | ) | — |
| ||
Proceeds from issuance of long-term debt |
| 350,000 |
| — |
| ||
Payments made for debt issue costs |
| (5,819 | ) | — |
| ||
Proceeds from employee stock compensation plans |
| 1,820 |
| 2,651 |
| ||
Excess tax benefits from share-based plans |
| 170 |
| 981 |
| ||
Cash provided by (used for) financing activities |
| 84,920 |
| (3,409 | ) | ||
Decrease in cash and cash equivalents |
| (128,233 | ) | (111,721 | ) | ||
Cash and cash equivalents - beginning of year |
| 393,893 |
| 336,700 |
| ||
Cash and cash equivalents - end of year |
| $ | 265,660 |
| $ | 224,979 |
|