ATK Reports Strong Growth in Second Quarter Earnings
MINNEAPOLIS, Oct. 25
Summary -- ATK completed the first half of fiscal year 2002 with strong gains in second-quarter sales and earnings. New revenues from Thiokol Propulsion boosted second-quarter sales 57 percent. EPS from continuing operations rose 12 percent to 86 cents, driven by higher sales and outstanding operating performance in core businesses. Earnings before interest and income taxes increased 63 percent to $54.3 million. The integration of Thiokol Propulsion was completed Oct. 1 -- ahead of schedule. Based on sales and earnings visibility, ATK is increasing its guidance for FY02 sales, EPS, and cash, and is on track to achieve its commitment of 15-percent annual EPS growth. -- End summary.
ATK (Alliant Techsystems) (NYSE:ATK), the world's leading supplier of solid propulsion systems and one of the nation's largest manufacturers of military ammunition, said earnings per share from continuing operations for the second quarter of fiscal year 2002 rose 12 percent to 86 cents from 77 cents in the same period a year ago. (All per-share figures reflect 3-for-2 common stock splits effective Nov. 27, 2000, and Sept. 7, 2001.)
Sales in the second quarter, which ended Sept. 30, rose 57 percent to $428 million from $272 million last year. New revenues from Thiokol Propulsion, which was acquired in April 2001, were the primary factor in the sales growth.
Second-quarter earnings before interest and income taxes (EBIT) were $54.3 million, up 63 percent from $33.4 million a year ago. The EBIT margin rate increased to 12.7 percent from 12.3 percent last year as strong core business performance and synergies from the integration of Thiokol contributed to improved profitability.
Paul David Miller (PDM), chairman and chief executive officer, said, "ATK's strong second-quarter results reflect continued outstanding operating performance in our core businesses. Our operations leadership team is focused squarely on delivering sales, cash flow, margin, and profit growth. Our performance also benefited from the successful combination of Thiokol and our ATK propulsion operations to form the world's leading supplier of solid propulsion systems -- ATK Thiokol Propulsion Company. This task was completed Oct. 1 -- ahead of schedule -- and richly deserves very high marks. This combination of solid core business performance and the Thiokol integration provides added sales and earnings visibility -- the combination gives us confidence that we are on track to deliver another year of outstanding performance in FY02."
Continued strong cash performance in the second quarter boosted cash flow as indicated by earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first half of fiscal year 2002 to $141 million or $6.31 per share, compared with $88 million or $4.21 per share in the same period last year. Free cash flow (cash from operations less capital expenditures) generated during the six-month period was $74 million versus cash used of $26 million a year ago, reflecting excellent working capital management and the benefits of income tax strategies.
"Cash flow continues to be ahead of plan, keeping debt reduction on glide path and enabling us to consider other strategic accretive acquisitions," said PDM.
Earnings per share from continuing operations for the first half of fiscal year 2002 rose 13 percent to $1.68 from $1.49 in the same period a year ago. Sales for the period increased 52 percent to $823 million from $542 million last year. First-half earnings before interest and income taxes were $103.1 million, up 59 percent from $64.7 million a year ago.
Net earnings per share in the first half were 99 cents versus $1.49 in the same period last year. The current year's results include one-time charges of 48 cents per share resulting from a non-cash charge for the early extinguishment of debt associated with the acquisition of Thiokol, and 21 cents per share stemming from litigation related to a previously discontinued business. Both figures are net of income taxes.
As a result of strong first-half performance and in anticipation of continued strength throughout the remainder of the year, ATK said it is raising its guidance for full-year earnings per share from continuing operations to between $3.60 and $3.63, excluding any non-recurring charges associated with the Thiokol acquisition and discontinued operations. The previous guidance was between $3.57 and $3.60. For the third quarter, which ends Dec. 30, ATK said it continues to expect earnings per share from continuing operations to be between 93 cents and 94 cents.
The company also said it is raising its forecast for fiscal year 2002 sales to between $1.645 billion and $1.665 billion from its previous guidance of between $1.625 billion and $1.650 billion. Expectations for full-year EBIT margins remain at between 13 percent and 14 percent. The forecast for free cash flow also has been raised from $80 million to the $90 million to $100 million range.
Given the company's strong backlog, anticipated new orders, and earnings visibility, ATK said it expects earnings per share from continuing operations for fiscal year 2003 to be at the high end of its previous guidance of between $4.07 and $4.17.
Operations Review
The Aerospace Group posted second-quarter sales of $270 million versus $130 million last year, while sales for the first half increased to $512 million from $256 million a year ago. The gains in both periods reflect new revenues from Thiokol Propulsion, which offset expected lower sales of Titan IV B rocket motors as that program nears completion.
Defense Group sales in the second quarter rose 11 percent to $168 million from $152 million last year, reflecting higher volume from small-caliber ammunition and precision fuze programs. Year-to-date sales rose 9 percent to $333 million from $305 million last year on higher volume from medium-caliber ammunition, tactical barrier system, and precision fuze products, which offset the loss of revenues from the sale of the group's infrared flare business in February 2001.
Orders booked during the second quarter totaled $179 million, compared with $250 million a year ago. Last year's orders included a $95 million contract to continue production of the Objective Individual Combat Weapon. Contracted backlog at the end of the second quarter was $3.5 billion or 25 months of sales. 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 $6 billion or 43 months of sales. During the second half of the year, the company expects to book major orders for small-caliber ammunition, current and next generation tank ammunition, replacement propellant for the Minuteman strategic missile fleet, propulsion for a national missile defense alternative booster, and an electronic missile warning system.
Recent operating highlights include:
- Successful launches of the Space Shuttle and the Athena I, Delta II, and Titan IV B rockets powered by ATK solid propulsion motors for a 100-percent mission success rate in the first half of FY02.
- Successful performance of an ATK solid propulsion motor during the first flight of the ground-based missile defense prototype interceptor.
- Submission of proposals to supply solid rocket motors to all three contractor teams competing to build an alternative booster vehicle for the ground-based missile defense program.
- The first gun-launch test of an independently developed long-range naval precision-guided projectile.
- A $14 million contract for the design, development, and production of an advanced electronic time fuze for mortar ammunition.
- Successful qualification testing of the M829E3 next generation armor- piercing tank ammunition round, clearing the way for the start of low-rate initial production later this year.
ATK is a $1.6 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 9,600 people and has two business groups: Aerospace and Defense. ATK news and information can be found on the Internet at www.atk.com
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 second-quarter results at 10:00 a.m. Eastern Daylight Time today. The live audio webcast will be available on the investor relations page of ATK's web site at www.atk.com . Information about downloading free RealPlayer software, which is required to access the webcast, is available on the website. For those who cannot participate in the live webcast, a telephone recording of the conference call will be available one hour after its completion. The telephone number is 719-457-0820, and the confirmation code is 633046. The recording will be available for one week.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Quarters Ended Six Months Ended
(In thousands except
per share data) September 30 October 1 September 30 October 1
2001 2000 2001 2000
Sales $427,567 $271,619 $822,783 $541,703
Cost of sales 340,251 216,050 655,652 432,541
Gross margin 87,316 55,569 167,131 109,162
Operating expenses:
Research and
development 5,337 2,250 9,353 3,783
Selling 8,363 6,061 17,285 12,798
General and
administrative 19,303 13,815 37,394 27,901
Total operating
expenses 33,003 22,126 64,032 44,482
Earnings before
interest and
income taxes 54,313 33,443 103,099 64,680
Interest expense (22,707) (9,237) (42,381) (17,945)
Interest income 224 238 540 452
Earnings from
continuing
operations before
income taxes 31,830 24,444 61,258 47,187
Income tax provision 12,095 8,360 23,278 16,138
Minority interest
expense, net of
income taxes 417 -- 672 --
Income from
continuing
operations 19,318 16,084 37,308 31,049
Loss on disposal
of discontinued
operations, net of
income taxes -- -- (4,650) --
Income before
extraordinary loss 19,318 16,084 32,658 31,049
Extraordinary loss
on early
extinguishment of
debt, net of income
taxes (409) -- (10,609) --
Net income $18,909 $16,084 $22,049 $31,049
Basic earnings per
common share:
Income from
continuing
operations $0.90 $0.78 $1.75 $1.52
Discontinued
operations -- -- (0.22) --
Extraordinary loss (.02) -- (0.50) --
Basic earnings per
common share $0.88 $0.78 $1.03 $1.52
Diluted earnings per
common share:
Income from
continuing
operations $0.86 $0.77 $1.68 $1.49
Discontinued
operations -- -- (0.21) --
Extraordinary
loss (.01) -- (0.48) --
Diluted earnings
per common share $0.85 $0.77 $0.99 $1.49
Average number of
common shares 21,388 20,572 21,317 20,487
Average number of
common and dilutive
shares 22,357 21,013 22,271 20,898
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands except share data) September 30, 2001 March 31, 2001
Assets
Current assets:
Cash and cash equivalents $48,253 $27,163
Receivables 340,843 214,724
Net inventory 80,128 54,136
Deferred income tax asset 16,478 16,478
Other current assets 27,014 20,322
Total current assets 512,716 332,823
Net property, plant, and equipment 423,435 303,188
Goodwill 687,439 117,737
Prepaid and intangible pension assets 296,605 106,048
Other assets and deferred charges 69,929 19,708
Total assets $1,990,124 $879,504
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $8,759 $69,200
Accounts payable 75,211 71,758
Contract advances and allowances 37,231 34,494
Accrued compensation 67,640 38,487
Accrued income taxes 36,315 11,873
Other accrued liabilities 106,505 66,151
Total current liabilities 331,661 291,963
Long-term debt 948,415 207,909
Deferred income tax liability 132,905 28,636
Post-retirement and post-employment
benefits liability 244,187 108,203
Other long-term liabilities 124,798 44,461
Total liabilities 1,781,966 681,172
Contingencies
Common stock - $.01 par value
Authorized - 60,000,000 shares
Issued and outstanding 21,534,892 shares
at September 30,2001 and 21,105,854 at
March 31, 2001 256 185
Additional paid-in-capital 225,357 231,598
Retained earnings 287,229 265,180
Unearned compensation (7,003) (3,854)
Other comprehensive income (29,827) (6,140)
Common stock in treasury, at cost
4,096,842 shares held at September 30,
2001 and 4,426,202 at March 31, 2001 (267,854) (288,637)
Total stockholders' equity 208,158 198,332
Total liabilities and stockholders'
equity $1,990,124 $879,504
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
(In thousands) September 30, October 1,
2001 2000
Operating activities
Net income $22,049 $31,049
Adjustments to net income to arrive at cash
provided by (used for) operating activities:
Depreciation 25,892 19,095
Amortization of intangible assets and
unearned compensation 11,538 4,235
Deferred income tax 303 --
(Gain) loss on disposal of property (39) 650
Minority interest expense, net of income taxes 672 --
Loss on disposal of discontinued operations,
net of income taxes 4,650 --
Extraordinary loss on early extinguishments
of debt, net of income taxes 10,609 --
Changes in assets and liabilities:
Receivables 19,255 (17,526)
Inventory (6,689) 14,627
Accounts payable (16,295) (20,828)
Contract advances and allowances 195 (24,164)
Accrued compensation 560 (4,195)
Accrued income taxes 24,356 (2,608)
Accrued environmental (1,060) (412)
Pension and post-retirement benefits (19,125) (11,585)
Other assets and liabilities 12,799 (4,815)
Cash provided by (used for) operating activities 89,670 (16,477)
Investing activities
Capital expenditures (15,809) (9,406)
Acquisition of businesses (704,000) --
Proceeds from sale of a portion of a
subsidiary 5,455 --
Proceeds from sale of property, plant, and
equipment 262 (2)
Cash used for investing activities (714,092) (9,408)
Financing activities
Net borrowings on line of credit -- 32,000
Payments made on bank debt (368,135) (28,125)
Payments made to extinguish debt (276,800) --
Proceeds from issuance of long-term debt 1,325,000 --
Payments made for debt issue costs (43,768) --
Net purchase of treasury shares (852) (3,693)
Proceeds from employee stock compensation
plans 10,067 5,083
Cash provided by financing activities 645,512 5,265
Increase (decrease) in cash and cash
equivalents 21,090 (20,620)
Cash and cash equivalents - beginning of
period 27,163 45,765
Cash and cash equivalents - end of period $48,253 $25,145
SOURCE Alliant Techsystems
CONTACT: Media, Rod Bitz, +1-952-351-3063, rod_bitz@atk.com , or Investors, Steve Wold, +1-952-351-3056, steve_wold@atk.com , both of Alliant Techsystems