Press Release

ATK Third-Quarter Earnings From Continuing Operations Increase 12 Percent To 94 Cents Per Share

By SpaceRef Editor
January 25, 2002
Filed under , ,

Sales Increase 68 Percent on New Revenues From Thiokol Propulsion; FY02 Sales, EPS, Cash Guidance Increased

Summary — ATK reported solid gains in sales and earnings in the third
quarter of fiscal year 2002.
EPS from continuing operations increased
12 percent to 94 cents on a 68-percent rise in sales driven by new revenues
primarily from ATK Thiokol Propulsion and higher small-caliber ammunition
EBITDA cash flow through the first nine months of the year jumped
62 percent to $219 million.
The company is increasing its guidance for FY02
sales, EPS, and cash flow as it continues to benefit from strong operating
performance in core businesses and added sales and earnings from acquisitions.
— End summary.

ATK (Alliant Techsystems) (NYSE: ATK), the world’s leading supplier of
solid propulsion systems and the nation’s largest manufacturer of ammunition,
said earnings per share from continuing operations for the third quarter of
fiscal year 2002 rose 12 percent to 94 cents from 84 cents in the same period
a year ago.
(All per-share figures reflect a 3-for-2 common stock split
effective Sept. 7, 2001.)

Sales in the third quarter, which ended Dec. 30, rose 68 percent to
$464 million from $276 million last year.
New revenues from ATK Thiokol
Propulsion acquired in April 2001 and higher sales of small-caliber ammunition
were the primary factors in the sales growth.

“We are pleased to report continuing strong financial performance,” said
Paul David Miller (PDM), chairman and chief executive officer.
“The ATK team
is delivering results that are exceeding our targets for sales, profit, and
On the strategic front, we completed the acquisition of the ammunition
businesses of Blount International, Inc., which has strengthened our
ammunition lane of excellence.
As we enter the final quarter of FY02, we are
confident that we will deliver on our commitments.”

Cash flow as indicated by earnings before interest, taxes, depreciation,
and amortization (EBITDA) for the first three quarters of fiscal year 2002
rose to $219 million or $9.65 per share from $135 million or $6.43 per share
last year.
Free cash flow (cash from operations less capital expenditures)
generated during the nine-month period was $145 million versus $6 million a
year ago, reflecting excellent working capital management and the benefits of
income tax strategies.
The company’s investment in working capital was
reduced primarily through an increased focus on cash management at ATK Thiokol
Propulsion, which was acquired earlier this year.
It also benefited from
contract receipts in the third quarter, which historically were early
fourth-quarter receipts.

“As a result of our strong cash performance, we are well ahead of our debt
repayment schedule,” said PDM.
“So far this year, we have pre-paid
approximately $110 million of debt in addition to nearly $10 million in
scheduled debt payments.
This emphasis on cash generation gives us a great
deal of flexibility and confidence as we consider other accretive, strategic
growth options.”

For the nine months ended Dec. 30, earnings per share from continuing
operations rose 13 percent to $2.62 from $2.32 in the same period a year ago.
Sales for the period increased 57 percent to $1.3 billion from $818 million
last year.
Nine-month earnings before interest and income taxes were
$161.0 million, up 61 percent from $100.1 million a year ago.

Net earnings per share for the nine-month period were $1.93 versus $2.32
last year.
The current year’s results include one-time charges of 49 cents
per share resulting from a non-cash charge for the early extinguishment of
debt associated with the acquisition of Thiokol Propulsion, and 20 cents per
share stemming from litigation related to a previously discontinued business.
Both figures are net of income taxes.

As a result of continued strong operating performance, ATK is raising its
guidance for fiscal year 2002 earnings per share from continuing operations to
between $3.63 and $3.65.
The previous guidance was in the $3.60 to $3.63
For the fourth quarter, which ends March 31, the company expects to
report earnings from continuing operations of between $1.01 and $1.03.

ATK is also raising its forecast for fiscal year 2002 sales to between
$1.760 billion and $1.775 billion from its previous guidance of between
$1.695 billion and $1.730 billion.
The increase reflects new revenues from
the acquisition of the Blount ammunition businesses, which was completed
earlier than anticipated, and higher than expected sales of small-caliber

The full-year EBIT margin rate is expected to be in the upper 12-percent
range, compared with an EBIT margin rate of 11.9 percent in FY01.
forecast for free cash flow has been raised from the $90 million to
$100 million range to approximately $115 million.

For fiscal year 2003, ATK continues to expect earnings per share from
continuing operations to be between $4.17 and $4.21.
Sales are projected to
be approximately $2 billion, while free cash flow is expected to be in excess
of $100 million.

Operations Review

The Aerospace Group posted third-quarter sales of $282 million versus
$120 million last year, while sales for the nine-month period increased to
$794 million from $376 million a year ago.
The gains in both periods
primarily reflect new revenues from ATK Thiokol Propulsion.

Defense Group sales in the third quarter rose 14 percent to $190 million
from $166 million last year, reflecting higher volume from small-caliber
ammunition programs and new revenues from the former Blount businesses.
Year-to-date sales rose 11 percent to $520 million from $470 million last year
on higher volume from small-caliber ammunition and tactical barrier systems as
well as new sales from the Blount acquisition.
Those gains more than offset
the loss of revenues from the sale of the group’s infrared flare business in
February 2001.

New business from ATK Thiokol Propulsion boosted third-quarter orders to
$365 million, up from $233 million a year ago.
Contracted backlog at the end
of the quarter was $3.4 billion.
Total backlog, which includes contracts
awarded but for which the company is not yet authorized to incur costs, plus
the value of unexercised options, was approximately $5.7 billion.

Major orders expected to be booked in the fourth quarter include the
annual portion of multi-year awards for small-caliber ammunition,
medium-caliber ammunition, and tank ammunition, and contracts for next
generation tank ammunition and propulsion systems for the Trident II (D-5)
Fleet Ballistic Missile, the Space Shuttle, and a national missile defense
alternative booster.

Recent operating highlights include:

  • A one-year contract option worth $191 million from TRW, Inc. to the ATK
    Thiokol Propulsion/Pratt & Whitney Space and Missile Propulsion team
    for the Minuteman Intercontinental Ballistic Missile propulsion
    replacement program.
    ATK will receive approximately 60 percent of the
    total contract value for its work as the lead contractor.

  • Two contracts with a combined value of $25 million for production of
    Sparrow missile rocket motors.

  • A $9 million contract for initial production of sensor upgrade kits for
    a missile warning system.

  • A contract with a potential value of up to $4 million awarded to
    Federal Cartridge to produce ammunition for a new U.S. Marine Corps
    shotgun weapon system.
    Federal Cartridge is one of the former Blount
    ammunition businesses.

  • A $3 million contract to make the U.S. military’s current high-
    explosive mortar round safer and more lethal through the use of
    insensitive munitions.
    ATK is teamed with Canadian defense firm SNC on
    the two-year development program.

  • Successful launches of the Space Shuttle Endeavour and Delta II and
    Titan IV B rockets powered by ATK solid propulsion motors.

  • Successful test firings of medium-caliber ammunition and the Objective
    Individual Combat Weapon 20-millimeter round using advanced air-burst
    fuze technology, demonstrating ATK’s leadership in the emerging air-
    bursting military weapons and ammunition market.

  • A second successful series of gun-launch tests of an independently
    developed long-range naval precision-guided projectile, strengthening
    ATK’s precision capabilities.

  • U.S. Navy certification of an electronic bomb fuze, clearing the way
    for shipment of the product to international customers.

ATK is a $2 billion aerospace and defense company with leading positions
in propulsion, composite structures, munitions, and precision capabilities.
The company, which is headquartered in Edina, Minn., employs approximately
11,200 people and has two business groups:
Aerospace and Defense.
ATK news
and information can be found on the Internet at

The forecasts, projections, expectations, and opportunities for
anticipated earnings per share, sales, orders, EBIT margins, and cash flow
included in this news release are “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995.
Such forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from anticipated results, including changes in governmental
spending and budgetary policies, economic conditions, the company’s
competitive environment, the timing of awards and contracts, the outcome of
contingencies, including litigation and environmental remediation, program
performance, and sales projections, in addition to other factors identified in
ATK’s filings with the Securities and Exchange Commission.

Webcast Information:
ATK will webcast its investor conference call on
third-quarter results at 10:00 a.m. Eastern Standard Time today.
The live
audio web cast will be available on the investor relations page of ATK’s web
site at .
Information about downloading free RealPlayer
software, which is required to access the webcast, is available on the
For those who cannot participate in the live webcast, a telephone
recording of the conference call will be available for one month after the
The telephone number is 719-457-0820, and the confirmation code is


    (In thousands except              QUARTERS ENDED       NINE MONTHS ENDED
     per share data)                December  December   December    December
                                       30        31         30          31
                                      2001      2000       2001        2000

    Sales                           $464,128  $276,349  $1,286,911   $818,052
    Cost of sales                    366,833   215,612   1,022,485    648,153
    Gross margin                      97,295    60,737     264,426    169,899
    Operating expenses:
      Research and development         4,962     3,221      14,315      7,004
      Selling                         10,273     5,611      27,558     18,409
      General and administrative      24,205    16,445      61,599     44,346
      Total operating expenses        39,440    25,277     103,472     69,759
    Earnings before interest and
     income taxes                     57,855    35,460     160,954    100,140

      Interest expense               (21,696)   (8,625)    (64,077)   (26,570)
      Interest income                    289       184         829        636
    Earnings from continuing
     operations before income taxes   36,448    27,019      97,706     74,206

    Income tax provision              13,850     9,294      37,128     25,433
    Minority interest expense, net
     of income taxes                     568                 1,240
    Income from continuing
     operations                       22,030    17,725      59,338     48,773

    Loss on disposal of discontinued
     operations, net of income taxes                        (4,650)
    Income before extraordinary loss  22,030    17,725      54,688     48,773

    Extraordinary loss on early
     extinguishments of debt, net
     of income taxes                    (383)              (10,992)
    Net income                       $21,647   $17,725     $43,696    $48,773

    Basic earnings per common share:
      Income from continuing
       operations                      $0.98     $0.86       $2.74      $2.38
      Discontinued operations                                (0.21)
      Extraordinary loss                (.01)                (0.51)
    Basic earnings per common share     $.97     $0.86       $2.02      $2.38
    Diluted earnings per common share:
      Income from continuing
       operations                      $0.94     $0.84       $2.62      $2.32
      Discontinued operations                                (0.20)
      Extraordinary loss                (.02)                (0.49)
    Diluted earnings per common share   $.92     $0.84       $1.93      $2.32

    Average number of common shares
     (thousands)                      22,421    20,684      21,684     20,532
    Average number of common and
     dilutive shares
     (thousands)                      23,404    21,219      22,654     20,980

                         CONSOLIDATED BALANCE SHEETS

    (In thousands except share data)        December 30, 2001   March 31, 2001
    Current assets:
      Cash and cash equivalents                  $81,829            $27,163
      Receivables                                380,219            214,724
      Net inventory                              136,369             54,136
      Deferred income tax asset                   16,478             16,478
      Other current assets                        26,194             20,322
         Total current assets                    641,089            332,823
    Net property, plant, and equipment           485,528            303,188
    Goodwill                                     784,983            117,737
    Prepaid and intangible pension assets        304,220            106,048
    Other assets and deferred charges             69,889             19,708
         Total assets                         $2,285,709           $879,504
    Liabilities and Stockholders' Equity
    Current liabilities:
      Current portion of long-term debt           $6,300            $69,200
      Accounts payable                            77,028             71,758
      Contract advances and allowances            52,126             34,494
      Accrued compensation                        78,195             38,487
      Accrued income taxes                        46,155             11,873
      Other accrued liabilities                  129,882             66,151
         Total current liabilities               389,686            291,963
    Long-term debt                               928,391            207,909
    Deferred income tax liability                132,312             28,636
    Post-retirement and post-employment
     benefits liability                          245,159            108,203
    Other long-term liabilities                  112,204             44,461
         Total liabilities                     1,807,752            681,172
    Common stock - $.01 par value
      Authorized - 60,000,000 shares
      Issued and outstanding 24,671,437
       shares at December 30, 2001 and
       14,070,569 at March 31, 2001                  287                185
    Additional paid-in-capital                   461,164            231,598
    Retained earnings                            308,876            265,180
    Unearned compensation                         (5,859)            (3,854)
    Other comprehensive income                   (24,241)            (6,140)
    Common stock in treasury, at cost
     4,009,077 shares held at
     December 30, 2001 and 4,426,202 at
     March 31, 2001                             (262,270)          (288,637)
         Total stockholders' equity              477,957            198,332
         Total liabilities and
          stockholders' equity                $2,285,709           $879,504


    (In thousands)                                NINE MONTHS ENDED
                                          December 30, 2001  December 31, 2000
    Operating activities
    Net income                                  $43,696            $48,773
    Adjustments to net income to arrive
     at cash provided by operating activities
      Depreciation                               39,353             28,337
      Amortization of intangible assets and
       unearned compensation                     18,381              6,377
      Deferred income tax                          (291)
      Loss on disposal of property                  512                637
      Minority interest expense,
       net of income taxes                        1,240
      Loss on disposal of discontinued
       operations, net of income taxes            4,650
      Extraordinary loss on early extinguishment
       of debt, net of income taxes              10,992
      Changes in assets and liabilities:
        Receivables                              47,584              4,779
        Inventory                                  (972)            (2,232)
        Accounts payable                        (28,861)           (20,337)
        Contract advances and allowances         15,091            (25,398)
        Accrued compensation                     (7,391)            (1,661)
        Accrued income taxes                     34,196              6,181
        Accrued environmental                    (2,199)              (433)
        Pension and post-retirement benefits    (25,727)           (17,689)
        Other assets and liabilities             18,809             (6,570)
    Cash provided by operating activities       169,063             20,764
    Investing activities
    Capital expenditures                        (24,221)           (14,841)
    Acquisition of business                    (712,353)            (1,400)
    Proceeds from sale of a portion of a
     subsidiary                                   5,455
    Proceeds from sale of property,
     plant, and equipment                           265              4,528
    Cash used for investing activities         (730,854)           (11,713)
    Financing activities
    Net borrowings on line of credit                                11,000
    Payments made on bank debt                 (390,618)           (41,737)
    Payments made to extinguish debt           (276,800)
    Proceeds from issuance of long-term debt  1,325,000
    Payments made for debt issue costs          (43,985)
    Payments made for stock issue costs          (8,090)
    Net purchase of treasury shares              (1,801)            (4,601)
    Proceeds from employee stock
     compensation plans                          12,751             11,770
    Cash provided by (used for) financing
     activities                                 616,457            (23,568)
    Increase (decrease) in cash and cash
     equivalents                                 54,666            (14,517)
    Cash and cash equivalents - beginning
     of period                                   27,163             45,765
    Cash and cash equivalents - end of
     period                                     $81,829            $31,248

SpaceRef staff editor.