Press Release

ATK Reports Second Quarter Results

By SpaceRef Editor
November 3, 2006
Filed under , ,

Alliant Techsystems
(NYSE:) reported today that earnings per share in the second quarter rose
to $1.15. The second quarter results did not include a benefit for the R&D
tax credit. ATK’s prior EPS guidance of $1.17 included a benefit of five
cents per share for the R&D tax credit. The company believes that the R&D tax
credit will be extended retroactively prior to the end of its fiscal year.

Sales for the quarter, which ended October 1, climbed eight percent to
$833 million from $772 million in the prior year quarter. Sales were driven
entirely by organic growth. Orders in the quarter were up 44 percent to
$944 million from $656 million in the prior year period. The company’s second
quarter EBIT margin (earnings before interest and income taxes as a percent of
sales) was 9.8 percent — up from 9.7 percent in the first quarter and on
track for full-year EBIT performance of approximately 10 percent. Due in part
to the delay of the research and development tax credit extension, the
company’s tax rate for the quarter was 37.8 percent compared to 34.5 percent
in the prior year.

“I’m pleased with ATK’s strong second-quarter and believe we are well
positioned to finish the fiscal year with double digit earnings growth, a
strengthening orders profile and the momentum to sustain our growth,” said Dan
Murphy, Chairman and Chief Executive Officer. “We achieved several notable
successes in the quarter including significant new positions in commercial
aerospace and nuclear power generation,” said Murphy.

    Key order highlights:

    --  Multi-year, multi-million dollar award for composite containment cases
        on the GEnx aircraft engine
    --  An initial $10 million award for rotor tubes used in a centrifuge
        operation to enrich uranium for nuclear power generation
    --  $41 million to provide the U.K. with anti-tank barrier systems
    --  $83 million in medium-caliber ammunition
    --  $66 million in small-caliber ammunition

    Additional business highlights:

    --  Completed a $300 million convertible security offering which allows
        the company to fully fund its pension plan in FY07
    --  Completed the repurchase of 2.6 million shares of stock during the
        quarter for approximately $202 million.
    --  The company's senior secured debt was raised to investment grade
        status (Baa3) by Moody's Investors Services
    --  The successful test firing of a Kinetic Energy Interceptor (KEI) first
        stage motor
    --  The formation of an ATK, Lockheed Martin, and Pratt & Whitney
        Rocketdyne team to pursue the upper stage of the Ares I launch vehicle

Earnings per share for the first six months of fiscal year 2007 increased
nine percent to $2.24 compared to $2.06 a year ago. The prior year results
included tax benefits of 9 cents per share. Sales for the first half of
fiscal year 2007 rose more than eight percent to $1.66 billion from
$1.53 billion in the prior year. First half orders reached $1.56 billion, a
16 percent increase from $1.34 billion reported in the prior year.

Year-to-date operating cash is $5 million compared to $116 million in the
prior year quarter. The decrease reflects ATK’s previously announced capital
deployment strategy to fully fund its employee pension plan obligations.


The following table presents the company’s results for the year to date
and the quarter ending on October 1, 2006.

  Net Sales and Income before Interest, Income Taxes, and Minority Interest
                            (Dollars in Thousands)
                                            Quarters Ended
                             October 1,  October 2,
                                2006        2005     $ Change  % Change

    Mission Systems Group     $288,166    $270,415    $17,751     6.6%
    Ammunition Systems Group   282,653     252,009     30,644    12.2%
    Launch Systems Group       262,236     249,668     12,568     5.0%
    Total external sales      $833,055    $772,092    $60,963     7.9%

                                            Six Months Ended
                             October 1,  October 2,
                                2006        2005     $ Change % Change

    Mission Systems Group     $559,028    $543,362    $15,666     2.9%
    Ammunition Systems Group   569,587     499,014     70,573    14.1%
    Launch Systems Group       526,858     486,708     40,150     8.2%
    Total external sales    $1,655,473  $1,529,084   $126,389     8.3%

    Income before Interest, Income Taxes, and Minority Interest (Operating

                             Quarters Ended              Six Months Ended
                     October 1, October 2,         October 1, October 2,
                        2006       2005    Change    2006       2005    Change

    Mission Systems
     Group             $26,385   $21,346   $5,039   $53,491   $43,331 $10,160
     Group              26,194    23,873    2,321    46,014    44,387   1,627
    Launch Systems
     Group              35,427    36,744   (1,317)   73,073    67,446   5,627
    Corporate           (6,087)   (3,699)  (2,388)  (11,281)   (6,719) (4,562)
    Total              $81,919   $78,264   $3,655  $161,297  $148,445 $12,852

Note: The net expense of Corporate primarily reflects expenses incurred
for administrative functions that are performed centrally at the corporate
headquarters (as well as stock option expenses and elimination of intercompany


ATK operates three principal business groups: Ammunition Systems Group;
Launch Systems Group; and Mission Systems Group.


Sales from the Ammunition Systems Group increased 12 percent to
$283 million from $252 million in the prior year quarter, led by an 18 percent
rise in civil ammunition sales and continued strength in the company’s
military small-caliber ammunition business. Based on the strength of the
Group’s civil ammunition sector through the first half of the year, ATK now
believes that sales growth for the Group will exceed 10 percent.

Second quarter earnings before interest and taxes (operating profit) for
the Ammunition Systems Group were $26 million, compared to $24 million in the
prior year quarter. This reflects the growth of civil ammunition and medium-
caliber ammunition. The company continues to expect full-year operating
margins in the Ammunition Systems Group of more than 9 percent.


Sales from the Launch Systems Group increased five percent to $262 million
versus $250 million in the prior year quarter. This increase reflects new
sales from NASA’s Ares I program. ATK continues to expect mid-single-digit
growth for the full year.

Second quarter operating profit for the Launch Systems Group was
$35 million compared to $37 million in the prior year. This reflects
reductions in sales and margins on ordnance programs and Orion motors,
partially offset by increased volume and favorable contract performance on
strategic programs. The company continues to expect full-year margins in the
Launch Systems Group of approximately 14 percent.


Mission Systems sales increased seven percent to $288 million compared to
$270 million in the prior year quarter. The increased sales were driven by
new sales from the recently announced GEnx contract, higher AAR-47 missile
warning system volumes, increases in sales from the company’s aircraft
integration business, and higher sales in large-caliber ammunition. These
were partially offset by expected lower sales from advanced weapons. ATK
expects that the Mission Systems Group will achieve mid single-digit organic
growth for the full year.

Second quarter operating profit was $26 million, up from $21 million in
the previous year. The increase reflects improved margins in electronic
warfare and fuzing programs as well as the elimination of fuze restructuring
costs associated with the consolidation of fuze operations in West Virginia.
The company continues to expect operating margins for the full year of more
than 9 percent.


Based on better visibility into the remainder of the fiscal year, ATK is
raising its full-year FY07 sales estimate and narrowing its EPS range to the
upper end of its previous guidance. ATK now expects sales to exceed
$3.45 billion. It previously expected sales to exceed $3.4 billion. ATK is
also raising its FY07 orders guidance to approximately $3.6 billion, up from
prior guidance of $3.3 billion. The company now expects full-year EPS in a
range of $4.95 – $5.05. The previous guidance range was $4.90 – $5.05. ATK
is raising its guidance related to cash flow from operations to $35 million,
from $25 million. ATK’s cash guidance includes the impact of the planned
$385 million pension contribution this year, partially offset by expected tax

The company expects average share count of less than 35 million in FY07.
The effective tax rate is expected to be approximately 35 percent (assuming
the research and development tax credit is extended retroactively to the
beginning of the company’s fiscal year). Pension expenses are expected to be
approximately $70 million.

ATK is a $3.4 billion advanced weapon and space systems company employing
approximately 15,000 people in 22 states. News and information can be found
on the Internet at .

Certain information discussed in this press release constitutes forward-
looking statements as defined in the Private Securities Litigation Reform Act
of 1995. Although ATK believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. Forward-looking information
is subject to certain risks, trends, and uncertainties that could cause actual
results to differ materially from those projected. Among these factors are:
delays in NASA’s Space Shuttle program; changes in governmental spending,
budgetary policies and product sourcing strategies; the company’s competitive
environment; risks inherent in the development and manufacture of advanced
technology; increases in commodity costs, energy prices, and production costs;
the terms and timing of awards and contracts; program performance; program
terminations; changes in cost estimates related to relocation of facilities;
the outcome of contingencies, including litigation and environmental
remediation; actual pension asset returns and assumptions regarding future
returns, discount rates and service costs; the availability of capital market
financing; changes to accounting standards; changes in tax rules or
pronouncements; economic conditions; and the company’s capital deployment
strategy, including debt repayment, share repurchases, pension funding,
mergers and acquisitions and any integration thereof. ATK undertakes no
obligation to update any forward-looking statements. For further information
on factors that could impact ATK, and statements contained herein, please
refer to ATK’s most recent Annual Report on Form 10-K and any subsequent
quarterly reports on Form 10-Q and current reports on Form 8-K filed with the
U.S. Securities and Exchange Commission.

                           ALLIANT TECHSYSTEMS INC.

    (In thousands except per share
     data)                           QUARTERS ENDED       SIX MONTHS ENDED
                                  October 1, October 2, October 1,  October 2,
                                     2006      2005       2006        2005

    Sales                          $833,055  $772,092  $1,655,473  $1,529,084
    Cost of sales                   672,852   621,647   1,343,912   1,245,236
    Gross profit                    160,203   150,445     311,561     283,848
    Operating expenses:
       Research and development      13,894    14,196      25,551      24,077
       Selling                       22,657    19,309      47,455      37,285
       General and administrative    41,733    38,676      77,258      74,041
       Total operating expenses      78,284    72,181     150,264     135,403
    Income before interest, income
     taxes, and minority interest    81,919    78,264     161,297     148,445
       Interest expense             (17,851)  (17,044)    (34,686)    (34,514)
       Interest income                  341       241         544         368
    Income before income taxes and
     minority interest               64,409    61,461     127,155     114,299
    Income tax provision             24,337    21,207      48,137      36,716
    Income before minority
     interest                        40,072    40,254      79,018      77,583
    Minority interest, net of
     income taxes                       145       102         218         211
    Net income                      $39,927   $40,152     $78,800     $77,372

    Earnings per common share:
       Basic                          $1.17     $1.08       $2.27       $2.09
       Diluted                         1.15      1.07        2.24        2.06

    Average number of common
     shares                          34,187    37,027      34,767      37,026
    Average number of common and
     dilutive shares                 34,612    37,646      35,196      37,625

                           ALLIANT TECHSYSTEMS INC.
                         CONSOLIDATED BALANCE SHEETS

    (In thousands except share data)        October 1, 2006     March 31, 2006
    Current assets:
        Cash and cash equivalents                  $12,614             $9,090
        Net receivables                            728,445            738,909
        Net inventories                            184,416            139,876
        Deferred income tax assets                  86,088             77,848
        Other current assets                        43,069             53,728
           Total current assets                  1,054,632          1,019,451
    Net property, plant, and equipment             447,859            453,958
    Goodwill                                     1,163,186          1,163,186
    Prepaid and intangible pension assets           78,771             82,254
    Deferred charges and other non-current
     assets                                        184,172            183,131
           Total assets                         $2,928,620         $2,901,980

    Liabilities and Stockholders' Equity
    Current liabilities:
        Cash overdrafts                             $2,099            $63,036
        Current portion of long-term debt           27,000             29,596
        Line of credit borrowings                   37,000                  -
        Accounts payable                           172,056            165,955
        Contract advances and allowances            67,782             49,667
        Accrued compensation                        95,439            114,537
        Accrued income taxes                             -             23,710
        Other accrued liabilities                  164,153            224,443
           Total current liabilities               565,529            670,944
    Long-term debt                               1,382,500          1,096,000
    Deferred income tax liabilities                 78,829              2,909
    Postretirement and postemployment
     benefits liability                            173,396            175,314
    Minimum pension liability                      104,934            212,258
    Other long-term liabilities                    116,410            116,197
           Total liabilities                     2,421,598          2,273,622
    Common stock - $.01 par value
     Authorized - 90,000,000 shares
     Issued and outstanding 32,918,140
     shares at October 1,2006
     and 35,207,335 at March 31, 2006                  329                352
    Additional paid-in-capital                     459,556            472,861
    Retained earnings                            1,007,321            928,521
    Unearned compensation                              -               (2,760)
    Accumulated other comprehensive loss          (339,535)          (333,136)
    Common stock in treasury, at cost,
     8,636,921 shares held at
     October 1, 2006 and 6,347,726 at
     March 31, 2006                               (620,649)          (437,480)
           Total stockholders' equity              507,022            628,358
           Total liabilities and
            stockholders' equity                $2,928,620         $2,901,980

                           ALLIANT TECHSYSTEMS INC.

    (In thousands)                                   SIX MONTHS ENDED
                                           October 1, 2006    October 2, 2005
    Operating activities
          Net income                               $78,800            $77,372
          Adjustments to net income to
           arrive at cash provided by
           operating activities:
                Depreciation                        34,066             34,137
                Amortization of
                 intangible assets                   4,218              4,362
                Amortization of deferred
                 financing costs                     1,630              1,937
                Deferred income taxes               70,976              6,762
                (Gain) loss on disposal
                 of property                           (84)               266
                Minority interest
                 expense, net of income taxes          218                211
                Share-based plans expense           18,310             10,183
                Excess tax benefits from
                 share-based plans                  (2,049)                 -
                Changes in assets and
                      Net receivables               10,464             16,814
                      Net inventories              (44,540)           (20,227)
                      Accounts payable              12,887            (60,292)
                      Contract advances
                       and allowances               18,115             13,244
                       compensation                (18,243)            (8,471)
                      Accrued income
                       taxes                       (24,858)            36,318
                      Pension and other
                       benefits                   (180,253)            (9,604)
                      Other assets and
                       liabilities                  25,276             13,339
    Cash provided by operating
     activities                                      4,933            116,351
    Investing activities
          Capital expenditures                     (35,569)           (20,430)
          Proceeds from the disposition
           of property, plant, and
           equipment                                   510              1,371
    Cash used for investing activities             (35,059)           (19,059)
    Financing activities
          Change in cash overdrafts                (60,937)            (6,092)
          Net borrowings on line of
           credit                                   37,000                  -
          Payments made on bank debt               (13,500)          (280,053)
          Payments made to extinguish
           debt                                     (2,596)                 -
          Proceeds from issuance of
           long-term debt                          300,000            270,000
          Purchase of call options                 (50,850)                 -
          Sale of warrants                          23,220                  -
          Payments made for debt
           issuance costs                           (6,344)              (699)
          Net purchase of treasury
           shares                                 (208,027)           (69,908)
          Proceeds from employee stock
           compensation plans                       13,635             14,508
          Excess tax benefits from
           share-based plans                         2,049                  -
    Cash provided by (used for)
     financing activities                           33,650            (72,244)
    Increase in cash and cash
     equivalents                                     3,524             25,048
    Cash and cash equivalents -
     beginning of period                             9,090             12,772
    Cash and cash equivalents - end of
     period                                        $12,614            $37,820

    Media Contact:                           Investor Contact:

    Bryce Hallowell                          Steve Wold
    Phone:  952-351-3087                     Phone:  952-351-3056
    E-mail:          E-mail:

SpaceRef staff editor.