SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 29, 1996 or / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 1-10582 ALLIANT TECHSYSTEMS INC. (Exact name of registrant as specified in its charter) DELAWARE 41-16726904 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 SECOND STREET N.E. HOPKINS, MINNESOTA 55343-8384 (Address of principal executive office) (Zip Code) (612) 931-6000 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year if changed from last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / As of October 31, 1996, the number of shares of the registrant's common stock, par value $.01 per share, outstanding was 13,021,876 (excluding 841,737 treasury shares). PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Income Statements (Unaudited) (In thousands except QUARTERS ENDED SIX MONTHS ENDED per share data) -------------------------- --------------------------- September 29 October 1 September 29 October 1 1996 1995 1996 1995 ------------ ----------- ------------ ----------- Sales $272,498 $267,650 $530,521 $560,598 Cost of sales 223,685 217,354 438,500 459,358 ------------ ----------- ------------ ----------- Gross margin 48,813 50,296 92,021 101,240 Operating expenses Research and development 4,686 3,336 7,674 6,781 Selling 9,499 9,539 18,164 20,208 General and administrative 10,595 10,914 21,778 25,221 ------------ ----------- ------------ ----------- Total operating expenses 24,780 23,789 47,616 52,210 ------------ ----------- ------------ ----------- Income from operations 24,033 26,507 44,405 49,030 Miscellaneous income (expense) (77) (122) 989 1,521 ------------ ----------- ------------ ----------- Earnings before interest and taxes 23,956 26,385 45,394 50,551 Interest expense (10,381) (11,735) (20,936) (22,604) Interest income 62 316 323 ------------ ----------- ------------ ----------- Income from continuing operations before income taxes 13,637 14,650 24,774 28,270 Income tax provision 3,223 6,219 ------------ ----------- ------------ ----------- Income from continuing operations 13,637 11,427 24,774 22,051 Loss from discontinued operations net of income taxes (241) (800) ------------- ----------- ------------ ----------- Net income $ 13,637 $ 11,186 $ 24,774 $ 21,251 ============= =========== ============ =========== Earnings per common and common equivalent share: Continuing operations $ 1.02 $ .86 $ 1.85 $ 1.64 Discontinued operations (.02) (.06) ------------ ----------- ------------ ----------- Net income $ 1.02 $ .84 $ 1.85 $ 1.58 ============= =========== ============ =========== Average number of common and common equivalent shares (thousands) 13,421 13,382 13,383 13,479 ============= =========== ============ =========== See Notes to Financial Statements Balance Sheets (Unaudited) ------------------ ------------------ (In thousands except share data) September 29, 1996 March 31, 1996 ------------------ ------------------ ASSETS Current assets: Cash and cash equivalents $ 4,368 $ 45,085 Marketable securities 348 348 Receivables 242,515 246,567 Net inventory 108,350 100,246 Deferred income tax asset 28,462 28,462 Other current assets 14,673 4,723 -------- ---------- Total current assets 398,716 425,431 Net property, plant, and equipment 399,050 413,541 Goodwill 130,826 132,623 Deferred charges 13,971 14,751 Other assets 27,272 31,063 -------- ---------- Total assets $969,835 $1,017,409 ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 47,500 $ 45,000 Notes payable 14,324 2,756 Accounts payable 55,535 82,285 Contract advances and allowances 57,780 56,837 Accrued compensation 27,470 31,908 Accrued income taxes 9,104 9,310 Restructuring liability - current 16,069 26,782 Other accrued liabilities 101,006 112,365 -------- ---------- Total current liabilities 328,788 367,243 Long-term debt 325,000 350,000 Post-retirement and post-employment benefits liability 87,866 88,930 Pension and other long-term liabilities 40,388 43,219 Restructuring liability - long-term 515 2,040 Litigation settlement charges - long-term 4,500 8,500 -------- ---------- Total liabilities 787,057 859,932 Stockholders' Equity: Common stock - $.01 par value Authorized - 20,000,000 shares Issued and outstanding 13,012,817 shares at September 29, 1996 and 12,965,542 at March 31, 1996 130 130 Additional paid-in-capital 249,367 249,814 Retained earnings (deficit) (30,024) (54,798) Unearned compensation (2,541) (2,552) Pension liability adjustment (1,189) (1,189) Common stock in treasury, at cost (850,796 shares held at September 29, 1996 and 898,071 at March 31, 1996) (32,965) (33,928) -------- ---------- Total stockholders' equity 182,778 157,477 -------- ---------- Total liabilities and stockholders' equity $969,835 $1,017,409 ======== ========== See Notes to Financial Statements Statements of Cash Flows (Unaudited) (In thousands) SIX MONTHS ENDED ------------------ --------------- September 29, 1996 October 1, 1995 ------------------ --------------- OPERATING ACTIVITIES Net income $ 24,774 $ 21,251 Adjustments to net income to arrive at cash used for operations: Depreciation 24,617 28,196 Amortization of intangible assets and unearned compensation 4,130 4,541 Gain on disposal of property (22) (353) Changes in assets and liabilities: Receivables 4,050 (1,505) Inventory (8,232) (19,629) Accounts payable (27,022) (7,733) Contract advances and allowances 944 (9,740) Accrued compensation (4,438) 5,337 Accrued income taxes (206) 5,716 Accrued restructure liability (12,238) (15,334) Other assets and liabilities (25,582) (28,130) ------------------ --------------- Cash used for operations (19,225) (17,383) ------------------ --------------- INVESTING ACTIVITIES Capital expenditures (12,614) (8,581) Business acquisition: Purchase price finalization 29,891 Accrued transaction fees paid (5,770) Proceeds from disposition of property, plant, and equipment 2,380 813 Other investing activities, net 301 410 ------------------ --------------- Cash provided by (used for) investing activities (9,933) 16,763 ------------------ --------------- FINANCING ACTIVITIES Net borrowings on line of credit 12,000 45,000 Payments made on long-term debt (22,500) (15,000) Net purchase of treasury shares (2,341) (36,261) Proceeds from exercised stock options 1,715 387 Other financing activities, net (433) (60) ------------------ --------------- Cash used for financing activities (11,559) (5,934) ------------------ --------------- Decrease in cash and cash equivalents (40,717) (6,554) Cash and cash equivalents - beginning of period 45,085 26,138 ------------------ --------------- Cash and cash equivalents - end of period $ 4,368 $ 19,584 ================== =============== See Notes to Financial Statements Notes to Financial Statements (Unaudited) 1. In interim accounting periods, the Company absorbs operating expenses based upon sales volume using the anticipated relationship of such costs to sales for the year. Accordingly, the Company had $7.2 million and $1.8 million of underabsorbed operating expenses recorded in other current assets at September 29, 1996 and October 1, 1995, respectively. 2. During the six month period ended September 29, 1996, the Company made principal payments on its Bank Term Loan of $22.5 million. Borrowings of $12.0 million were outstanding against its revolving line of credit at September 29, 1996. Letters of credit totaling $53.4 million reduced the available line of credit to $159.6 million. The remaining scheduled minimum loan payments on outstanding long-term debt are as follows: fiscal 1997, $22.5 million; fiscal 1998, $50.0 million; fiscal 1999, $55.0 million; fiscal 2000, $55.0 million; fiscal 2001 and thereafter, $190.0 million. 3. No income taxes were paid for the six months ended September 29, 1996, or October 1, 1995. The effective income tax rate of 0 percent in the current six month period reflects the utilization of $24.8 million of available federal and state loss carryforwards for tax purposes. 4. During fiscal 1996, the Company began a program to repurchase up to $50.0 million of its common stock. In connection with that program, the Company had repurchased approximately 1.05 million shares of common stock as of September 29, 1996, at an average price of $38.26 per share, for an aggregate amount of $40.4 million. 5. Contingencies: As a U.S. Government contractor, the Company is subject to defective pricing and cost accounting standards non-compliance claims by the government. Additionally, the Company has substantial government contracts and subcontracts, the prices of which are subject to adjustment. The Company believes that resolution of such claims and price adjustments made or to be made by the government for open fiscal years (1987 through 1996) will not materially exceed the amount provided in the accompanying balance sheets. The Company is subject to various local and national laws relating to protection of the environment and is in various stages of investigation or remediation of potential, alleged, or acknowledged contamination. The Company records environmental remediation-related liabilities when the event obligating the Company has occurred and the cost is both probable and reasonably estimable. As of September 29, 1996, the Company had reserves totaling $9.6 million available to cover all environmental clean- up costs. In future periods, new laws, rules and regulations, advances in technologies, outcomes of negotiations/litigations with regulatory authorities and other parties, additional information about the ultimate remedy selected at new and existing sites, changes in the extent and type of site utilization, the number of parties found liable at each site, and their ability to pay could significantly change the Company's estimates. As part of the acquisition of the Aerospace operations (Aerospace) from Hercules, Inc. (Hercules), the Company has generally assumed responsibility for environmental compliance at the Aerospace facilities. There may also be significant environmental remediation costs associated with the Aerospace facilities that will, at some locations, be initially funded by the Company. It is expected that most of the compliance and remediation costs associated with the Aerospace facilities will be reimbursable under U.S. government contracts and that the portion of those environmental remediation costs not covered through such contracts will be covered by Hercules under various agreements. The estimated nondiscounted range of these reasonably possible costs of study and remediation in the Aerospace operations is between $0 and $27 million. Where the Company is required to first conduct the remediation and then seek reimbursement from the U.S. Government or Hercules, the Company's working capital may be materially affected until the Company receives such reimbursement. The estimated nondiscounted study and remediation costs to be incurred, generally over the next three years for sites not acquired through the Aerospace acquisition, could range from $4.6 million to $24.5 million. The Company is a defendant in numerous lawsuits that arise out of, and are incidental to, the conduct of its business. Such matters arise out of the normal course of business and relate to product liability, government regulations, including environmental issues, and other issues. Certain of the lawsuits and claims seek damages in very large amounts. In these legal proceedings, no director, officer, or affiliate is a party or a named defendant. The Company is involved in two "qui tam" lawsuits brought by former employees of the Aerospace operations acquired from Hercules. One involves allegations relating to submission of false claims and records, delivery of defective products, and a deficient quality control program. The other involves allegations of mischarging of work performed under Government contracts, misuse of Government equipment, other acts of financial mismanagement and wrongful termination claims. The Government did not join in either of these lawsuits. Under the terms of the agreements relating to the Aerospace acquisition, all litigation and legal disputes arising in the ordinary course of the Aerospace operations will be assumed by the Company except for a few specific lawsuits including the two qui tam lawsuits referred to above. The Company has agreed to indemnify and reimburse Hercules for a portion of litigation costs incurred, and a portion of damages, if any, awarded in these lawsuits. Under terms of the purchase agreement with Hercules, the Company's maximum settlement liability is approximately $4 million, for which the Company has fully reserved at September 29, 1996. While the results of litigation cannot be predicted with certainty, management believes, based upon the advice of counsel, that the actions seeking to recover damages against the Company either are without merit, are covered by insurance and reserves, do not support any grounds for cancellation of any contract, or are not likely to materially affect the financial condition or results of operations of the Company, although the resolution of any of such matters during a specific period could have a material effect on the quarterly or annual operating results for that period. It is reasonably possible that management's current estimates of liabilities for the above contingencies could change in the near term, as more definitive information becomes available. 6. Interest paid during the three and six month periods ended September 29, 1996 totaled $14.5 and $20.0 million, respectively. Interest paid during the three and six month periods ended October 1, 1995 totaled $14.1 and $20.0 million, respectively. The Company has entered into hedging transactions to protect against increases in market interest rates on its long term debt. At September 29, 1996, the notional amount of amortizing interest rate swap agreements was $143.75 million. Under the swap agreements, the Company currently pays an average fixed rate of 6.9 percent and receives interest at a rate equal to three-month LIBOR. The interest rate cap agreements limit the Company's LIBOR exposure to 7.0 percent. The notional amount of these amortizing interest rate cap agreements was $37.5 million at September 29, 1996. 7. Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the Company has elected to continue following the guidance of Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees" for measurement and recognition of stock-based transactions with employees, and therefore the adoption of SFAS No. 123 will not have a significant impact on the Company's financial position or results of operations. 8. Earnings per common share are computed based upon the weighted average number of common shares and common equivalent shares, consisting of the dilutive effect of stock options outstanding during each year. Earnings per common share assuming full dilution are substantially the same. 9. Certain reclassifications have been made to the fiscal year 1996 financial statements, as previously reported, to conform to the current classification. These reclassifications did not affect the net income from operations, as previously reported. 10. The figures set forth in this quarterly report are unaudited but, in the opinion of the Company, include all adjustments necessary for a fair presentation of the results of operations for the three and six month periods ended September 29, 1996, and October 1, 1995. The Company's accounting policies are described in the notes to financial statements in its fiscal year 1996 Annual Report on Form 10-K. 11. On October 10, 1996, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 96-1 (SOP 96-1) entitled "Environmental Remediation Liabilities." The SOP provides authoritative guidance on specific accounting issues relative to recognition, measurement, display, and disclosure of environmental remediation liabilities. The Company will be required to adopt the rule on April 1, 1997, although earlier adoption would be permitted. The Company is currently in the process of determining what effect this new accounting rule may have on the Company's operating results and financial condition. Adoption will have no impact on cash flow. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Sales Sales from continuing operations for the quarter ended September 29, 1996, totaled $272.5 million, an increase of 4.8 million, or 1.8 percent, from $267.7 million for the comparable quarter in the prior year. Aerospace Systems Group sales were $136.8 million for the quarter ended September 29, 1996, a decrease of $9.7 million, or 6.6 percent, compared to $146.5 million in the comparable quarter of the prior year. The decrease was due primarily to reduced Titan program sales in the current quarter compared to the same period of the prior year, as the program has transitioned from the development phase into the initial stages of production. Defense Systems Group sales were $109.5 million for the quarter ended September 29, 1996, an increase of $23.2 million, or 26.9 percent, compared to $86.3 million in the comparable quarter of the prior year. The sales increase was primarily due to higher volume from tank ammunition and medium caliber ammunition programs of $12 million and $6 million, respectively, compared to the comparable quarter of the prior year, as well as revenues from new programs, including sales of approximately $6 million from the Tactical Unmanned Aerial Vehicle (TUAV) contract awarded to the Company in the first quarter of fiscal 1997, and approximately $5 million of sales generated by the Vehicle Launched Smart Anti-tank Systems (VLSAS) program. These sales increases for the quarter ended September 29, 1996, were offset by approximately $10 million compared to the comparable quarter of the prior year due to the fiscal 1996 completion of the Combined Effects Munitions (CEM) program. Marine Systems Group sales were $24.9 million for the quarter ended September 29, 1996, a decrease of $7.2 million, or 22.4 percent, compared to $32.1 million in the comparable quarter of the prior year, due primarily to reduced international volume on the Mk 46 torpedo program. Emerging Business Group sales from continuing operations were $9.0 million for the quarter ended September 29, 1996, compared to $7.9 million in the comparable quarter of the prior year. Sales from continuing operations for the six month period ended September 29, 1996, totaled $530.5 million, a decrease of $30.1 million, or 5.4 percent, from $560.6 million for the comparable period in the prior year. Aerospace Systems Group sales were $281.3 million, a decrease of $6.2 million, or 2.2 percent, from $287.5 million for the comparable period of the prior year, due primarily to reduced Titan program sales in the current period compared to the same period of the prior year, as the program has transitioned from the development phase into the initial stages of production. Defense Systems Group sales were $192.8 million, an increase of $5.1 million, or 2.7 percent, from $187.7 million for the comparable period in the prior year. The increased sales were primarily the result of volume increases on tank ammunition and medium caliber ammunition totaling approximately $13 million, as well as sales increases provided by new programs including TUAV, Volcano (anti-tank munitions dispensers) and VLSAS. These increases were offset by decreased sales of $30 million due to the fiscal 1996 program completion of CEM. Marine Systems Group sales were $52.7 million, a decrease of $27.0 million, or 33.9 percent, from $79.7 million for the comparable period in the prior year. The decrease was driven primarily by a $20 million sales decrease on the MK50 light weight torpedo program and an $8 million decrease on the Mine Neutralization System (MNS) program, due to completion of those programs. Emerging Business Group sales from continuing operations were $16.6 million, compared to $17.4 million for the comparable period in the prior year. The Company expects sales for fiscal 1997 to be approximately $1.2 billion. Gross Margin The Company's gross margin for the quarter ended September 29, 1996, was $48.8 million, or 17.9 percent of sales, compared to $50.3 million, or 18.8 percent of sales, for the comparable quarter of the prior year. Gross Margin for the quarter decreased compared to the prior year quarter due to sales mix, as well as cost growth, primarily due to technical issues on certain programs in the Company's tactical propulsion business unit and on medium caliber ammunition and fuzing programs. As a result of ongoing negotiations, these decreases were offset by $3 million, which represents recognition of the reimbursement received from a customer for indirect costs allocated to cost reimbursable contracts in the Aerospace group. Gross Margin for the six month period ended September 29, 1996, totaled $92.0 million, or 17.3 percent of sales, compared to $101.2 million, or 18.1 percent of sales for the comparable period of the prior year. The decrease in gross margin dollars was primarily driven by reduced volume on programs which were substantially completed in fiscal 1996, primarily the MK50 torpedo program. Margin rate decreased slightly due to sales mix, as well as cost growth, primarily due to technical issues on certain programs in the Company's tactical propulsion business unit and on medium caliber ammunition and fuzing programs. As a result of ongoing negotiations, these gross margin decreases were offset by $3 million, which represents recognition of the reimbursement received from a customer for indirect costs allocated to cost reimbursable contracts in the Aerospace group. Fiscal 1997 gross margin, as a percentage of sales, is expected to be in the 16.5 - 17.5 percent range, down from 18.6% recorded in fiscal 1996, due to the likely investment in certain significant program opportunities which are critical to the Company's continued long term earnings growth. Operating Expenses The Company's operating expenses for the quarter ended September 29, 1996, totaled $24.8 million, 9.1 percent of sales, an increase of $1.0 million, or 4.2 percent, compared to $23.8 million, 8.9 percent of sales, in the comparable quarter of the prior year. The increase, as a percentage of sales, was primarily driven by increased research and development costs, as compared to the same quarter of the prior year. These costs, as a percentage of sales, were higher in the quarter ended September 29, 1996, due to increased research and development spending associated with the Company's pursuit of the U.S. Government's Evolved Expendable Launch Vehicle (EELV) program. Operating expenses for the six month period ended September 29, 1996, totaled $47.6 million, 9.0 percent of sales, a decrease of $4.6 million, or 8.8 percent, compared to $52.2 million, 9.3 percent of sales, in the comparable six month period of the prior year. The decrease, as a percentage of sales, was primarily driven by decreased selling, and general and administrative costs as compared to the comparable period of the prior year. These costs, as a percentage of sales, were lower in the current period due to a more complete realization of the synergistic benefits of combining selling resources and in having a larger business base, both results of the Aerospace acquisition. Operating expenses for fiscal 1997, as a percentage of sales, are expected to be approximately 8.5 to 9.0 percent, consistent with fiscal 1996. Miscellaneous Income The Company's miscellaneous income decreased approximately $.5 million in the six month period ending September 29, 1996, compared to the comparable period of the prior year, due primarily to decreased royalty income received on the Mk 46 commercial torpedo program with Japan, which is nearing completion. Interest Expense The Company's interest expense decreased approximately $1.3 million during the quarter ending September 29, 1996, primarily due to lower average balances borrowed, as well as lower interest rates for the period, as compared to the comparable quarter of the prior year. The Company's interest expense decreased approximately $1.7 million during the six month period ending September 29, 1996, also due to lower average balances borrowed, as well as lower interest rates for the period as compared to the comparable six month period of the prior year. Income Taxes The three and six month periods ended September 29, 1996, reflect an effective income tax rate of 0 percent compared to 22 percent for the comparable periods of the prior fiscal year. The tax rate for the periods ended September 29, 1996, differs from statutory tax rates due to the utilization of available tax loss carry forwards. Such carry forwards are expected to reduce future tax expense and the associated tax payments. Adoption of Accounting Standard Effective April 1, 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the Company has elected to continue following the guidance of Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees" for measurement and recognition of stock-based transactions with employees, and therefore the adoption of SFAS No. 123 will not have a significant impact on the Company's financial position or results of operations. LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION - ----------------------------------------------------- Cash used by operations totaled $19.2 million for the six month period ended September 29, 1996, an increase in cash usage of $1.8 million, when compared with cash used by operations of $17.4 million in the comparable period of the prior year. The slightly higher level of cash usage in the period ended September 29, 1996 resulted from increased cash used for working capital. Cash used in investing activities for the six month period ended September 29, 1996 was $9.9 million, a $26.7 million decrease from cash provided by investing activities of $16.8 million in the comparable six month period of the prior year. This difference was primarily the result of a $29.9 million payment received in the prior year period, which reflected a purchase price adjustment for the Aerospace operations, acquired from Hercules Inc., related to accelerated receivables collections, and was offset by $5.8 million in payments made by the Company in the same period for accrued transaction fees related to the acquisition. Net outlays for capital expenditures for the six month period ended September 29, 1996, totaled $12.6 million, or 2.4 percent of sales, an increase as a percentage of sales, compared to capital expenditures of $8.6 million, or 1.5 percent of sales, in the comparable period of the prior year. The increased expenditures in the current period were primarily the result of increased tooling expenditures for an Aerospace contract. The Company expects capital expenditures, as a percentage of sales, to be approximately 2.5 percent of sales for fiscal 1997. At September 29, 1996, the Company had borrowings of $12.0 million outstanding against its bank revolving credit facility. The borrowings were used primarily to finance on-going operational needs. Outstanding letters of credit of $53.4 million further reduced amounts available on this facility to $159.6 million at September 29, 1996. The Company began a program to repurchase up to $50.0 million of its common stock during fiscal 1996. In connection with that program, the Company had repurchased approximately 1.05 million shares of common stock as of September 29, 1996, at an average price of $38.26 per share for an aggregate amount of $40.4 million. Cash expenditures during the six month period ended September 29, 1996, were $3.6 million. The Company's total debt (notes payable, current portion of long-term debt, and long-term debt) as a percentage of total capitalization decreased to 67.9 percent on September 29, 1996, compared to 71.6 percent on March 31, 1996. This decrease reflects principal repayments on the bank term debt during the six month period ended September 29, 1996, of $22.5 million, offset by $12 million in borrowings under the bank revolving credit facility. In June 1995, the Company and claimants reached an agreement to settle the Accudyne "qui tam" lawsuit. Terms of the agreement include payments by the Company of $12.0 million, consisting of payments of $.5 million and $3.0 million, made in June 1995 and April 1996, respectively, and subsequent payments to be made of $4.0 million and $4.5 million in April 1997 and June 1998, respectively, plus interest at the three-year Treasury Bill rate. In addition, legal costs of approximately $3.0 million have been paid. Accordingly, the Company recorded an unusual charge of $15.0 million as of the fourth quarter of the fiscal year ended March 31, 1995. Based on the financial condition of the Company at September 29, 1996, the Company believes that internal cash flows, combined with the availability of funding under its line of credit, will be adequate to fund the future growth of the Company, as well as to service its long-term debt obligations. INFLATION - --------- In the opinion of management, inflation has not had a significant impact upon the results of the Company's operations. The selling prices under contracts, the majority of which are long term, generally include estimated costs to be incurred in future periods. These cost projections can generally be negotiated into new buys under fixed-price government contracts, while actual cost increases are recoverable in cost-type contracts. RISK FACTORS - ------------ Except for the historical information contained herein, certain of the matters discussed in this report are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties, including, but not limited to, changes in governmental spending and budgetary policies, governmental laws and other rules and regulations surrounding various matters such as environmental remediation, contract pricing, changing economic and political conditions in the United States and in other countries, international trading restrictions, outcome of union negotiations, customer product acceptance, continued access to capital markets, and merger and acquisition activity within the industry. All forecasts and projections in this report are "forward-looking statements" and are based on management's current expectations of the Company's near term results, based on current information available pertaining to the Company, including the aforementioned risk factors. Actual results could differ materially. PART II -- OTHER INFORMATION ITEM 2. LEGAL PROCEEDINGS Incorporated herein by reference is note 5 of Notes to Financial Statements included in Item 1 of Part I of this report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On August 6, 1996, the registrant held its annual meeting of stockholders. (b) At the above meeting, the following persons were elected directors to serve until the next annual meeting of stockholders: R. Keith Elliott; Thomas L. Gossage; Joel M. Greenblatt; Jonathan G. Guss; David E. Jeremiah; Gaynor N. Kelley; Joseph F. Mazzella; Daniel L. Nir; and Richard Schwartz. (c) At the above annual meeting, the stockholders voted upon the following proposals: (1) election of directors; (2) ratification of the selection of Deloitte & Touche as independent accountants for the fiscal year ending March 31, 1997; and (3) approval of a Non-Employee Director Restricted Stock Plan. The votes cast on each of the above proposals were as follows: Proposal Number (1): ------------------- Votes Cast ---------- For Withheld ---------- -------- R. Keith Elliott 11,771,453 365,398 Thomas L. Gossage 11,770,925 365,926 Joel M. Greenblatt 11,749,225 387,626 Jonathan G. Guss 11,763,272 373,579 David E. Jeremiah 11,659,701 477,150 Gaynor N. Kelley 11,777,682 359,169 Joseph F. Mazzella 11,651,261 485,590 Daniel L. Nir 11,757,249 379,602 Richard Schwartz 11,766,393 370,458 Broker non-votes: None Proposal Number (2): ------------------- Votes Cast ---------- For Against Abstain ---------- ------- ------- 12,070,421 46,598 19,832 Broker non-votes: None Proposal Number (3): ---------------------- Votes Cast ---------- For Against Abstain ---------- --------- ---------- 10,791,282 1,280,888 64,681 Broker non-votes: None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit No. Description of Exhibit ----------- ---------------------- 10.1 Alliant Techsystems Inc. Non-Employee Director Restricted Stock Plan 10.2 Form of Restricted Stock Agreement 11 Computation of Earnings Per Common and Common Equivalent Share 27 Financial Data Schedule (b) Reports on Form 8-K. During the quarterly period ended September 29, 1996, the registrant filed no reports on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALLIANT TECHSYSTEMS INC. Date: November 8, 1996 By: /s/ Charles H. Gauck Name: Charles H. Gauck Title: Secretary (On behalf of the registrant) Date: November 8, 1996 By: /s/ Scott S. Meyers Name: Scott S. Meyers Title: Vice President and Chief Financial Officer (Principal Financial Officer) ALLIANT TECHSYSTEMS INC. FORM 10-Q EXHIBIT INDEX The following exhibits are filed herewith electronically or incorporated herein by reference. The applicable Securities and Exchange Commission File Number is 1-10582. Exhibit Number Description of Exhibit Method of Filing ------- ------------------------ ---------------- 10.1 Alliant Techsystems Inc. Incorporated herein by Non-Employee Director reference to Appendix B Restricted Stock Plan to Proxy Statement dated ........................ July 3, 1996 10.2 Form of Restricted Filed herewith Stock Agreement......... electronically 11 Computation of Earnings Per Common and Common Filed herewith Equivalent Share........ electronically 27 Financial Data Schedule. Filed herewith electronically