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Press release from PR Newswire

ATK Reports FY13 Third Quarter Operating Results

Tuesday, February 05, 2013

ATK Reports FY13 Third Quarter Operating Results07:30 EST Tuesday, February 05, 2013ATK Increases FY13 Full-Year Sales and EPS GuidanceARLINGTON, Va., Feb. 5, 2013 /PRNewswire/ -- ATK (NYSE: ATK) today reported operating results for the third quarter of its Fiscal Year 2013, which ended on December 30, 2012.  Orders for the quarter were $1.4 billion, up from $701 million in the prior-year quarter, bringing the year-to-date book-to-bill ratio to 1.2, driven by strong orders in ATK's Aerospace and Sporting Groups. Third quarter year-over-year sales of $1.0 billion were down 5.5 percent, largely driven by the loss of the contract for operation and maintenance of the U.S. Army's Radford Army Ammunition Plant (RFAAP). Margins of 10.1 percent in the third quarter were up compared with the prior-year quarter of 9.4 percent. Excluding sales and associated profit from contracts at RFAAP and the absence of an accrual regarding a previously disclosed settlement related to the LUU flares litigation (the LUU flares accrual), FY13 third quarter margins as adjusted were 9.8 percent compared to 11.7 percent in the prior year quarter (see reconciliation table for details). The decrease was driven by higher pension expense and lower sales on higher margin programs in the energetics division and the lack of the reversal of the 2010-2012 long-term incentive accrual recorded in the prior year, partially offset by increased profit in the Sporting and Aerospace Groups. Fully diluted earnings per share were $1.93 compared to $1.51 in the prior-year period. Excluding sales and associated profit from the RFAAP contract and the LUU flares accrual, as adjusted fully diluted EPS was $1.84 compared to the prior-year quarter of $2.03 (see reconciliation table for details). Please see segment and corporate results below. Key contract awards for the company in the third quarter include NASA's Space Launch System and Advanced Booster projects, commercial aircraft business, a U.S. Air Force Weather Satellite study and spacecraft structures orders. The Defense Group also recorded key contract awards including the AAR-47 and the XM25 programs, and orders and sales volumes were strong in the Sporting Group, where ATK also continued its trend of improved operating margins."Our results this past quarter reflect ATK's strength in our core markets, expanding capabilities, improved competitiveness, and successful execution across the enterprise," said Mark DeYoung, ATK President and CEO. "We are focused on delivering sustainable revenues, improved earnings, free-cash flow and shareholder value."SUMMARY OF REPORTED RESULTSThe following table presents the company's results for the third quarter of the fiscal year, which ended December 30, 2012 (in thousands).Sales:Quarters EndedNine Months EndedDecember 30, 2012January 1, 2012$ Change% ChangeDecember 30, 2012January 1, 2012$ Change% ChangeAerospace Group$                301,123$ 301,843$  (720)(0.2)%$     906,078$  988,148$(82,070)(8.3)%Defense Group467,477572,580(105,103)(18.4)%1,466,0891,593,032(126,943)(8.0)%Sporting Group287,582243,06144,52118.3%836,104720,977115,12716.0%Total sales$ 1,056,182$ 1,117,484$ (61,302)(5.5)%$  3,208,271$ 3,302,157$(93,886)(2.8)% Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit):Quarters EndedNine Months EndedDecember 30, 2012January 1, 2012$ Change% ChangeDecember 30, 2012January 1, 2012$ Change% ChangeAerospace Group$     37,478$     34,839$   2,6397.6%$    109,506$ 115,060$  (5,554)(4.8)%Defense Group53,38987,000(33,611)(38.6)%209,295241,695(32,400)(13.4)%Sporting Group30,21522,7867,42932.6%76,14275,4367060.9%Corporate(14,223)(39,201)24,97863.7%(46,839)(48,820)1,9814.1%Total operating profit$   106,859$   105,424$   1,4351.4%$    348,104$ 383,371$(35,267)(9.2)% SEGMENT RESULTSATK operates in a three business group structure: the Aerospace Group, the Defense Group and the Sporting Group. AEROSPACE GROUPThird quarter sales were flat at $301 million compared to $302 million in the prior-year quarter reflecting strength in the space structures and components division, offset by lower sales in the space systems operations division. Operating profit in the quarter increased 8 percent to $37 million compared to $35 million in the prior-year quarter, reflecting higher award fees in ATK's propulsion business.DEFENSE GROUPSales in the third quarter decreased 18 percent to $467 million compared to $573 million in the prior-year quarter. Absent sales related to RFAAP in the prior year, sales were $461 million compared to $526 million in the prior-year quarter (see reconciliation table for details). The decrease was driven by lower domestic and international sales in the small caliber systems and energetics divisions. Operating profit for the quarter fell 39 percent to $53 million compared to $87 million in the prior-year quarter. Absent sales and profit related to RFAAP, adjusted profit was down 33 percent (see reconciliation table for details), driven by lower sales and mix as noted above. SPORTING GROUPThird quarter sales increased by 18 percent to $288 million compared to $243 million in the prior-year quarter. The increase in sales was driven primarily by higher unit volume and a previously announced price increase for ammunition.Operating profit in the third quarter increased by 33 percent to $30 million compared to $23 million in the prior-year quarter, driven by increased sales as noted above. Margin performance in the third quarter continues the trend of improved margins year over year.CORPORATE AND OTHERIn the third quarter, corporate and other expenses totaled $14 million compared to $39 million in the prior-year quarter, reflecting the absence of the LUU flares accrual, partially offset by increased pension expense. The tax rate for the quarter was 31.9 percent compared to 42.0 percent in the prior year. The lower tax rate is primarily due to the absence of the impact of the non-deductible portion of the LUU flares accrual from the prior year and increased benefits from the Domestic Manufacturing Deduction. Interest expense was $14 million compared to $20 million in the prior-year quarter, reflecting lower rates and borrowings compared to the prior year. Year-to-date free cash flow was $57 million compared to $27 million in the prior-year period (see reconciliation table for details), reflecting collection of a significant receivable and lower capital expenditures, partially offset by higher pension contributions and tax payments.  OUTLOOKATK is raising its full-year FY13 sales guidance to a range of approximately $4.25 billion to $4.3 billion, up from previous guidance of $4.1 billion to $4.2 billion. Full-year FY13 EPS guidance is now $7.90 to $8.10, up from previous guidance of $7.40 to $7.70, reflecting the higher sales expectations as well as improved operating performance. Full-year FY13 free cash flow guidance remains in the range of $175 million to $200 million."ATK's outlook for the remainder of the fiscal year reflects strengthened revenue and profitability as well as continued strong free cash flow," said Neal Cohen, ATK Executive Vice President and Chief Financial Officer. On February 4, 2013, ATK announced it is changing the pension formula for affected employees who currently earn a benefit under ATK's defined benefit pension plans. Effective July 1, 2013, affected employees will earn benefits under a new cash balance pension formula and will also be eligible for an enhanced company match under the ATK 401(k) Plan. All of the changes are prospective and all benefits earned through June 30, 2013, will remain unchanged.   "In order to win new business and to remain competitive, ATK is making the change to better manage our benefit costs," said Cohen. "The new program provides an industry-competitive retirement benefit to our employees that allows the company to have predictable and sustainable benefit costs for the long run."The effective tax rate for the year is expected to be approximately 30 percent, consistent with previously reported expectations. This expected tax rate reflects the retroactive extension of the Federal R&D tax credit as a result of the American Taxpayer Relief Act of 2012, signed into law on January 2, 2013.Reconciliation of Non-GAAP Financial MeasuresSales, Margins, and Earnings Per ShareThe Sales, Margins, and Earnings Per Share (EPS) excluding the results of Radford and the LUU flares accrual are non-GAAP financial measures that ATK defines as Sales, Margins, and EPS excluding the impact of these items. ATK management is presenting these measures so a reader may compare Sales, Margins, and EPS excluding these items as the measures provide investors with an important perspective on the operating results of the Company. ATK management uses these measurements internally to assess business performance, and ATK's definition may differ from those used by other companies.Total ATK for the Quarter EndingDecember 30, 2012:SalesEBITMarginTaxesAfter-taxEPSAs reported$1,056,182$106,85910.1%$29,693$63,231$1.93Radford(6,741)(4,259)(1,661)(2,598)(0.09)As adjusted$1,049,441$102,6009.8%$28,032$60,633$1.84January 1, 2012:SalesEBITMarginTaxesAfter-taxEPSAs reported$1,117,484$105,4249.4%$36,085$49,759$1.51Radford(46,275)(13,565)(5,290)(8,275)(0.25)LUU Flare Accrual33,3058,06525,2400.77As adjusted$1,071,209$125,16411.7%$38,860$66,724$2.03 Defense Group for the Quarter EndingDecember 30, 2012:SalesEBITMarginAs reported$467,477$53,38911.4%Radford(6,741)(4,259)As adjusted$460,736$49,13010.7%January 1, 2012:SalesEBITMarginAs reported$572,580$87,00015.2%Radford(46,275)(13,565)As adjusted$526,305$73,43514.0% Free Cash FlowFree cash flow is defined as cash provided by (used for) operating activities less capital expenditures. ATK management believes free cash flow provides investors with an important perspective on the cash available for debt repayment, cash dividends, share repurchases and acquisitions after making the capital investments required to support ongoing business operations. ATK management uses free cash flow internally to assess both business performance and overall liquidity.Nine Months Ended December 30, 2012Nine Months Ended January 1, 2012Projected Year Ending March 31, 2013Cash used for/provided by operating activities$   118,400$   124,740$275,000?$300,000Capital expenditures(61,351)(97,916)~(100,000) Free cash flow$     57,049$     26,824$175,000?$200,000 ATK is an aerospace, defense, and commercial products company with operations in 21 states, Puerto Rico, and internationally. 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 commercial aerospace structures programs; uncertainties related to the development of NASA's new Space Launch System; demand for commercial and military ammunition; changes in federal and state firearms and ammunition regulation; changes in governmental spending, budgetary policies, including the impacts of potential sequestration under the Budget Control Act of 2011, and product sourcing strategies; the company's competitive environment; risks inherent in the development and manufacture of advanced technology; risks associated with diversification into new markets; assumptions regarding the company's long-term growth strategy; assumptions regarding 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 STATEMENT OF COMPREHENSIVE INCOME(preliminary and unaudited)QUARTERS ENDEDNINE MONTHS ENDED(In thousands except per share data)December 30, 2012January 1, 2012December 30, 2012January 1, 2012Sales$1,056,182$1,117,484$3,208,271$3,302,157Cost of sales836,555871,6802,510,7542,549,873Gross profit219,627245,804697,517752,284Operating expenses:Research and development13,94714,62443,86941,711Selling41,53539,989121,670121,421General and administrative57,28685,767183,874205,781Income before interest, loss on extinguishment of debt, income taxes, and noncontrolling interest106,859105,424348,104383,371Interest expense(14,074)(19,783)(51,986)(69,933)Interest income139203326431Loss on extinguishment of debt--(11,773)-Income before income taxes and noncontrolling interest92,92485,844284,671313,869Income tax provision29,69336,08585,330112,308Net income 63,23149,759199,341201,561Less net income attributable to noncontrolling interest5674276368Net income attributable to Alliant Techsystems Inc.$63,175$49,685$199,065$201,193Alliant Techsystems Inc.'s earnings per common share:Basic$1.95$1.52$6.13$6.10Diluted1.931.516.106.06    Cash dividends paid per share0.260.200.660.60Alliant Techsystems Inc.'s weighted-average number of common shares outstanding:Basic32,45432,78132,49332,966Diluted32,65232,95532,64133,181Net Income (from above)63,23149,759199,341201,561Other comprehensive income (loss), net of tax:Pension and other postretirement benefit liabilities:Reclassification of prior service (credit) costs for pension and postretirement benefit plans recorded to net income (loss), net of tax (expense) benefit of $841, $844, $2,524, and $2,533(1,352)(1,346)(4,055)(4,039)Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income (loss), net of tax benefit of $(12,279), $(9,569), $(36,897), and $(28,705)19,51915,19858,56145,475Valuation adjustment for pension and postretirement benefit plans, net of tax benefit of $0, $0, $(732), and $0--1,268-Change in fair value of derivatives, net of income taxes of $681, $(3,875), $1,534, and $20,495, respectively(1,064)6,061(2,399)(32,056)Change in fair value of available-for-sale securities, net of income taxes of $(26), $60, $122, and $34, respectively41(95)(191)(54)Total other comprehensive income(loss)$      17,144$      19,818$      53,184$             9,326Comprehensive income80,37569,577252,525210,887Less comprehensive income attributable to noncontrolling interest5674276368Comprehensive income attributable to Alliant Techsystems Inc.$      80,319$        69,503$    252,249$             210,519 ALLIANT TECHSYSTEMS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(preliminary and unaudited)(Amounts in thousands except share data)December 30, 2012March 31, 2012ASSETSCurrent assets:     Cash and cash equivalents$      361,921$     568,813     Net receivables 1,254,7101,341,998     Net inventories303,252258,495     Income tax receivable22,098-     Deferred income tax assets108,123101,720     Other current assets48,19251,512          Total current assets2,198,2962,322,538Net property, plant, and equipment581,055604,498Goodwill1,251,5361,251,536Noncurrent deferred income tax assets112,518134,719Deferred charges and other non?current assets216,523228,455          Total assets$    4,259,928$  4,541,746LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$         50,000$       30,000     Accounts payable210,010333,980     Contract advances and allowances125,348119,824     Accrued compensation114,958121,901     Accrued income taxes-6,433     Other accrued liabilities260,260307,642          Total current liabilities760,576919,780Long?term debt1,047,1181,272,002Postretirement and postemployment benefits liabilities104,665111,392Accrued pension liability763,689878,819Other long?term liabilities126,083123,002          Total liabilities$    2,802,131$  3,304,995Commitments and contingencies (Note 14)Common stock?$.01 par value:     Authorized?180,000,000 shares     Issued and outstanding?32,742,750 shares at December 30, 2012 and 33,142,408 shares at March 31, 2012328332Additional paid?in?capital545,917537,921Retained earnings2,419,2132,241,711Accumulated other comprehensive loss(857,414)(910,598)Common stock in treasury, at cost? 8,812,699 shares held at December 30, 2012 and 8,413,014 shares held at March 31, 2012(660,479)(642,571)          Total Alliant Techsystems Inc. stockholders' equity1,447,5651,226,795Noncontrolling interest10,2329,956          Total equity1,457,7971,236,751          Total liabilities and equity$    4,259,928$  4,541,746 ALLIANT TECHSYSTEMS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(preliminary and unaudited)NINE MONTHS ENDED(In thousands)December 30, 2012January 1, 2012Operating activitiesNet income$199,341$201,561Adjustments to net income to arrive at cash used for operating activities:Depreciation73,57869,165Amortization of intangible assets 8,4008,357Amortization of debt discount5,11610,651Amortization of deferred financing costs2,9483,753Deferred income taxes(17,655)(7,945)Loss on extinguishment of debt11,773-Loss (gain) on disposal of property638(4,679)Share-based plans expense10,8788,321Excess tax benefits from share-based plans(2)(23)Changes in assets and liabilities:Net receivables87,288(112,251)Net inventories(44,757)(91,197)Accounts payable(113,411)(55,274)Contract advances and allowances5,525(1,289)Accrued compensation(7,076)(40,852)Accrued income taxes(22,976)37,500Pension and other postretirement benefits(30,975)25,780Other assets and liabilities(50,233)73,162Cash provided by operating activities118,400124,740Investing activitiesCapital expenditures(61,351)(97,916)Proceeds from the disposition of property, plant, and equipment197,329Cash used for investing activities(61,332)(90,587)Financing activitiesPayments made on bank debt(10,000)(15,000)Payments made to extinguish debt(409,000)(300,000)Proceeds from issuance of long-term debt 200,000-Payments made for debt issue costs(1,458)-Purchase of treasury shares(24,997)(49,991)Dividends paid(21,563)(19,921)Proceeds from employee stock compensation plans3,0563,943        Excess tax benefits from share-based plans223Cash used for financing activities(263,960)(380,946)Decrease in cash and cash equivalents(206,892)(346,793)Cash and cash equivalents - beginning of period568,813702,274Cash and cash equivalents - end of period$361,921$355,481Supplemental Cash Flow Disclosure:      Noncash investing activity:        Capital expenditures included in accounts payable           $4,418$2,102Media Contact:Investor Contact:Amanda CovingtonSteve WoldPhone: 703-412-3231Phone: 952-351-3056E-mail: amanda.covington@atk.comE-mail: steve.wold@atk.comSOURCE ATK