ATK Reports FY12 Third Quarter Operating Results
ARLINGTON, Va., Feb. 2, 2012 /PRNewswire/ -- ATK (NYSE: ATK) today reported operating results for the third quarter of its Fiscal Year 2012, which ended on January 1, 2012. Fully diluted earnings per share (EPS) were $1.51, compared to $2.09 in the prior-year quarter, reflecting the impact of a $33 million ($25 million net of taxes or $0.77 per share) accrual regarding a previously disclosed lawsuit related to the manufacture of LUU flares (the LUU flares accrual) arising from events that predated the acquisition of the Thiokol Corporation in 2001. The company has reached a tentative agreement with the plaintiff and the Department of Justice (DOJ) to settle the claim. The company expects to finalize the agreement in the fourth quarter of the fiscal year.
The prior-year quarter included a $25 million ($15 million net of taxes, or $0.45 per share) reduction in sales, profit margins and EPS associated with a commercial aerospace structures program. Excluding the prior-year quarter sales and profit reduction, and the current quarter LUU flares accrual, third quarter EPS would be $2.28 compared to $2.54 in the prior-year quarter (see reconciliation table for details).
Third quarter orders of $701 million were in line with the company's expectations, with year-to-date orders totaling $2.8 billion and a total backlog of $6.1 billion. Third quarter sales of $1.1 billion were down approximately one percent from the prior-year quarter. Lower sales on NASA human spaceflight programs and lower modernization revenues within the Armament Systems group contributed to the decrease, which was partially offset by higher sales in commercial ammunition.
Margins in the third quarter of FY12 were 9.4 percent, compared to 11.2 percent in the prior-year quarter. Lower margins in the current quarter can be attributed to the LUU flares accrual and sales mix and higher commodity prices within the Security and Sporting group, partially offset by a reversal of the fiscal 2010-2012 long-term incentive accrual.
"Consumers purchased lower priced and lower margin ammunition products in the third quarter impacting the company's overall margin performance. However, ATK's continued focus on operating efficiencies and cost reductions supported margin improvement elsewhere in the business," said Mark DeYoung, President and CEO. "Margins in the sporting market have been at historically high levels and we expect to see some continued pressure on our sales mix and margins in this business."
SUMMARY OF REPORTED RESULTS
The following table presents the company's results for the third quarter of the fiscal year which ended January 1, 2012 (in thousands).
Sales:
Quarters Ended Nine Months Ended
-------------- -----------------
January January 2, January 1, January 2, %
1, 2012 2011 $ % Change 2012 2011 $ Change
-------- ----------- --- -------- ----------- ----------- --- -------
Change Change
------ ------
Aerospace
Systems $301,843 $321,288 $(19,445) (6.1)% $988,148 $1,067,020 $(78,872) (7.4)%
Armament
Systems 403,654 431,493 (27,839) (6.5)% 1,108,771 1,313,046 (204,275) (15.6)%
Missile
Products 168,926 167,875 1,051 0.6% 484,261 483,693 568 0.1%
Security and
Sporting 243,061 208,634 34,427 16.5% 720,977 676,917 44,060 6.5%
------- ------- ------ ------- ------- ------
Total sales $1,117,484 $1,129,290 $(11,806) (1.1)% $3,302,157 $3,540,676 $(238,519) (6.7)%
========== ========== ======== ========== ========== =========
Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):
Quarters Ended Nine Months Ended
-------------- -----------------
January January 2, January 1, January 2,
1, 2012 2011 $ % Change 2012 2011 $ % Change
-------- ----------- --- -------- ----------- ----------- --- --------
Change Change
------ ------
Aerospace
Systems $34,839 $23,935 $10,904 45.6% $115,060 $98,499 $16,561 16.8%
Armament
Systems 67,048 55,049 11,999 21.8% 190,415 158,185 32,230 20.4%
Missile
Products 23,515 19,389 4,126 21.3% 61,532 47,689 13,843 29.0%
Security and
Sporting 22,787 30,357 (7,570) (24.9)% 75,436 95,623 (20,187) (21.1)%
Corporate (42,765) (2,302) (40,463) (1,757.7)% (59,072) (6,157) (52,915) (859.4)%
------- ------ ------- ------- ------ -------
Total
operating
profit $105,424 $126,428 $(21,004) (16.6)% $383,371 $393,839 $(10,468) (2.7)%
======== ======== ======== ======== ======== ========
SEGMENT RESULTS
ATK currently operates in a four business group structure: Aerospace Systems; Armament Systems; Missile Products; and Security and Sporting.
AEROSPACE SYSTEMS
Third quarter sales in the Aerospace Systems group declined by six percent to $302 million compared to $321 million in the prior-year quarter. The decrease was primarily driven by lower sales in NASA human space flight programs, and partially offset by the absence of the $25 million sales reduction recorded in the prior-year quarter.
Earnings before interest, taxes, and noncontrolling interest (operating profit) in the third quarter increased 46 percent to $35 million, compared to $24 million in the prior-year quarter. The increase reflects the absence of the previously mentioned profit reduction taken in the prior-year quarter, partially offset by lower sales volume in human space flight programs.
ARMAMENT SYSTEMS
Third quarter sales in the Armament Systems group decreased six percent to $404 million, compared to $431 million in the prior-year quarter. The decrease was primarily driven by the absence of modernization funding at the Radford Army Ammunition Plant; lower modernization funding at the Lake City Army Ammunition Plant; and lower sales of medium-caliber guns, partially offset by higher energetics sales.
Operating profit in the third quarter rose 22 percent to $67 million, compared to $55 million in the prior-year quarter. The higher operating profit primarily reflects a favorable change in the sales mix across the group and operating efficiencies in advanced weapons and energetics businesses.
MISSILE PRODUCTS
Third quarter sales in the Missile Products group increased slightly to $169 million, compared to $168 million in the prior-year quarter. The increase reflects additional sales associated with the production ramp-up of the Advanced Anti-Radiation Guided Missile (AARGM) program, partially offset by lower tactical rocket motor sales.
Operating profit in the third quarter rose by 21 percent to $24 million, compared to $19 million in the prior-year quarter, primarily reflecting the benefit of operating efficiencies.
SECURITY AND SPORTING
Third quarter sales in the Security and Sporting group grew by 17 percent to $243 million, compared to $209 million in the prior-year quarter. The increase primarily reflects stronger domestic and international demand for the company's commercial ammunition.
Operating profit in the third quarter decreased by 25 percent to $23 million compared to $30 million in the prior-year quarter. The decrease primarily reflects a continued shift in demand toward lower-margin ammunition, and higher raw materials costs.
CORPORATE AND OTHER
In the third quarter, corporate and other expenses totaled $43 million, compared to $2 million in the prior-year quarter. The increase primarily reflects costs associated with the LUU flares accrual, increased pension expense and higher inter-company eliminations. The effective tax rate for the quarter was 42.0 percent compared to 30.7 percent in the prior-year quarter. The higher rate primarily reflects the non-deductible portion of the LUU flares accrual, the absence of the benefit in the prior year from the retroactive extension of the Federal research and development (R&D) tax credit and a smaller benefit recorded this year for the Domestic Manufacturing Deduction.
REALIGNMENT
ATK announced it will operate in a three-group structure at the beginning of Fiscal Year 2013. These three operating units will be the Aerospace Group, the Defense Group, and the Sporting Group.
"The three-group structure demonstrates our ongoing commitment to competitiveness and long-term growth," said DeYoung. "This alignment will maximize efficiency, reduce cost, support customer needs, leverage our investments, and improve overall agility within our markets."
CAPITAL DEPLOYMENT
The Board of Directors approved the previously announced $.20 per share dividend for the quarter and authorized a share repurchase program of up to $200 million, which the company expects to execute over the next two years.
"ATK is determined to deliver value to our shareholders," DeYoung said. "We will continue to execute a balanced capital deployment program, including a cash dividend, a share repurchase program, capital expenditures, debt management, and responsible growth strategies."
The shares may be purchased from time to time in open market, block purchase, or negotiated transactions, subject to compliance with applicable laws and regulations and the company's debt covenants, depending upon market conditions and other factors. The new repurchase authorization also allows the company to make repurchases under Rule 10b5-1 of the Securities Exchange Act of 1934. This share repurchase program replaces the prior program authorized in 2008.
FY12 FULL-YEAR UPDATE AND INITIAL FY13 OUTLOOK
ATK now expects full-year sales of approximately $4.6 billion, compared to its previous guidance of $4.6-$4.7 billion. Due primarily to the $33 million LUU flares accrual and lower margins within the Security and Sporting group, ATK now expects full-year EPS in a range of $7.65 - $7.75, compared to its previous range of $8.50-$9.00.
Due to the non-deductible portion of the LUU flares accrual, the company now expects a full-year tax rate of approximately 35.5 percent. For Fiscal Year 2012, ATK continues to expect pension expense of approximately $135 million, free cash flow in a range of $225 - $250 million (despite the now-expected cash payment for the LUU flares accrual), and capital expenditures of approximately $130 million (see reconciliation table for details).
ATK's operating results in FY13 will be impacted by the recent loss of the Radford Army Ammunition Plant, which is expected to reduce FY13 sales by approximately $170 million. The company also expects continued pressure in its NASA and military ammunition businesses due to the constrained federal budget. FY13 pension expense is expected to be approximately $180 million, while pension contributions are expected to be approximately $160 million compared to the $62 million the company was required to contribute in FY12. FY13 margins in the new Sporting Group are expected to be consistent with the FY12 third quarter results of the Security and Sporting group, reflecting continued demand for lower-priced and lower-margin ammunition products.
Reconciliation of Non-GAAP Financial Measures
Earnings Per Share
The Earnings Per Share (EPS) excluding the effect of the LUU flares accrual and the commercial aerospace sales and profit reduction is a non-GAAP financial measure that ATK defines as earnings per share less the impact of the LUU flares accrual and the commercial aerospace sales and profit reduction. ATK management is presenting this measure so that a reader may compare EPS excluding these items as this measure provides investors with an important perspective on the operating results of the Company. ATK management uses this measurement internally to assess business performance and ATK's definition may differ from that used by other companies.
Total ATK for the Quarter Ending
January 1, 2012:
Sales EBIT Margin Taxes After-tax EPS
----- ---- ------ ----- --------- ---
As reported $1,117,484 $105,424 9.4% $36,085 $49,685 $1.51
LUU flares accrual 33,305 8,065 25,240 $0.77
------ ----- ------ -----
As adjusted $1,117,484 $138,729 12.4% $44,150 $74,925 $2.28
========== ======== ==== ======= ======= =====
January 2, 2011:
Sales EBIT Margin Taxes After-tax EPS
----- ---- ------ ----- --------- ---
As reported $1,129,290 $126,428 11.2% $31,108 $70,181 $2.09
Commercial 25,000 25,000 10,000 15,000 $0.45
aerospace sales ------ ------ ------ ------ -----
and profit
reduction
As adjusted $1,154,290 $151,428 13.1% $41,108 $85,181 $2.54
========== ======== ==== ======= ======= =====
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, cash dividends, share repurchases, and acquisitions after making the capital investments required to support ongoing business operations. ATK management uses free cash flow internally to assess both business performance and overall liquidity.
Projected Year
Ending
March 31, 2012
--------------
Cash provided by operating
activities $355,000-$380,000
Capital expenditures ~(130,000)
Free cash flow $225,000-$250,000
=================
ATK is an aerospace, defense, and commercial products company with operations in 22 states, Puerto Rico, and internationally, and revenues of approximately $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: assumptions related to the profitability of current commercial aerospace structures programs; uncertainties related to the development of NASA's new Space Launch System; demand for commercial and military ammunition; 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; assumptions regarding the company's long-term growth strategy; assumptions regarding the growth opportunities in international and commercial 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, dividend payments, share repurchases, pension funding, mergers and acquisitions - including the related costs 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
(preliminary
and
unaudited)
NINE
QUARTERS MONTHS
ENDED ENDED
--------- -------
(In thousands January January
except per share 1, January 1, January
data) 2012 2, 2012 2,
2011 2011
Sales $1,117,484 $1,129,290 $3,302,157 $3,540,676
Cost of sales 871,680 896,490 2,549,873 2,804,521
------- ------- --------- ---------
Gross profit 245,804 232,800 752,284 736,155
Operating expenses:
Research and
development 14,624 12,733 41,711 42,388
Selling 39,989 39,011 121,421 118,262
General and
administrative 85,767 54,628 205,781 181,666
------
Income before
interest, income
taxes, and
noncontrolling
interest 105,424 126,428 383,371 393,839
Interest expense (19,783) (25,234) (69,933) (63,278)
Interest income 203 190 431 318
--- --- --- ---
Income before
income taxes and
noncontrolling
interest 85,844 101,384 313,869 330,879
Income tax
provision 36,085 31,108 112,308 88,440
------ ------ ------- ------
Net income 49,759 70,276 201,561 242,439
Less net income
attributable to
noncontrolling
interest 74 95 368 367
--- --- --- ---
Net income
attributable to
Alliant
Techsystems Inc. $49,685 $70,181 $201,193 $242,072
======= ======= ======== ========
Alliant Techsystems
Inc.'s earnings
per common share:
Basic $1.52 $2.11 $6.10 $7.28
Diluted 1.51 2.09 6.06 7.21
Alliant Techsystems
Inc.'s weighted-
average number of
common shares
outstanding:
Basic 32,781 33,320 32,966 33,267
Diluted 32,955 33,625 33,181 33,586
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(preliminary and unaudited)
January 1, March 31,
(Amounts in thousands except share data) 2012 2011
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $355,481 $702,274
Net receivables 961,184 945,611
Net inventories 333,226 242,028
Income tax receivable - 22,228
Deferred income tax assets 70,990 65,843
Other current assets 52,631 81,249
------ ------
Total current assets 1,773,512 2,059,233
Net property, plant, and equipment 601,343 587,749
Goodwill 1,251,536 1,251,536
Deferred income tax assets 97,673 100,519
Deferred charges and other non-current
assets 527,003 444,808
------- -------
Total assets $4,251,067 $4,443,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $25,000 $320,000
Accounts payable 224,991 292,281
Contract advances and allowances 120,638 121,927
Accrued compensation 105,195 135,442
Accrued income taxes 19,066 -
Other accrued liabilities 281,974 193,836
------- -------
Total current liabilities 776,864 1,063,486
Long-term debt 1,280,360 1,289,709
Postretirement and postemployment
benefits liabilities 118,868 126,012
Accrued pension liability 636,671 671,356
Other long-term liabilities 118,006 127,160
------- -------
Total liabilities 2,930,769 3,277,723
Commitments and contingencies
Common stock-$.01 par value:
Authorized-180,000,000 shares
Issued and outstanding-32,976,504 shares
at January 1, 2012 and 33,519,072 shares
at March 31, 2011 330 335
Additional paid-in-capital 556,808 559,279
Retained earnings 2,186,923 2,005,651
Accumulated other comprehensive loss (777,751) (787,077)
Common stock in treasury, at cost-
8,578,945 shares held at January 1, 2012
and 8,036,377 shares held at March 31,
2011 (655,744) (621,430)
-------- --------
Total Alliant Techsystems Inc.
stockholders' equity 1,310,566 1,156,758
Noncontrolling interest 9,732 9,364
----- -----
Total stockholders' equity 1,320,298 1,166,122
--------- ---------
Total liabilities and stockholders'
equity $4,251,067 $4,443,845
========== ==========
ALLIANT TECHSYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(preliminary and unaudited)
NINE MONTHS
ENDED
------------
January January
1, 2,
(In thousands) 2012 2011
-------- --------
Operating activities
Net income $201,561 $242,439
Adjustments to net income
to arrive at cash used for
operating activities:
Depreciation 69,165 71,683
Amortization of intangible
assets 8,357 8,388
Amortization of debt
discount 10,651 12,795
Amortization of deferred
financing costs 3,753 3,766
Deferred income taxes (7,945) 14,703
(Gain) loss on disposal of
property (4,679) 2,560
Share-based plans expense 8,321 7,648
Excess tax benefits from
share-based plans (23) (465)
Changes in assets and
liabilities:
Net receivables (112,251) (221,033)
Net inventories (91,197) (33,496)
Accounts payable (55,274) (28,094)
Contract advances and
allowances (1,289) 15,698
Accrued compensation (40,852) (61,438)
Accrued income taxes 37,500 (41,384)
Pension and other
postretirement benefits 25,780 66,638
Other assets and
liabilities 73,162 66,297
------ ------
Cash provided by operating
activities 124,740 126,705
Investing activities
Capital expenditures (97,916) (72,986)
Acquisition of business - (172,251)
Proceeds from the
disposition of property,
plant, and equipment 7,329 333
----- ---
Cash used for investing
activities (90,587) (244,904)
Financing activities
Payments made on bank debt (15,000) (8,438)
Payments made to extinguish
debt (300,000) (537,576)
Proceeds from issuance of
long-term debt - 750,000
Payments made for debt
issue costs - (19,893)
Purchase of treasury shares (49,991) -
Dividends paid (19,921) -
Proceeds from employee
stock compensation plans 3,943 7,645
Excess tax benefits from
share-based plans 23 465
--- ---
Cash (used for) provided by
financing activities (380,946) 192,203
-------- -------
(Decrease) Increase in cash
and cash equivalents (346,793) 74,004
Cash and cash equivalents -
beginning of period 702,274 393,893
------- -------
Cash and cash equivalents -
end of period $355,481 $467,897
======== ========
Media Contact: Investor Contact:
Amanda Covington Steve Wold
Phone: 703-412-3231 Phone: 952-351-3056
E-mail: amanda.covington@atk.com E-mail: steve.wold@atk.com
SOURCE ATK