ATK Reports FY13 Third Quarter Operating Results ATK Increases FY13 Full-Year Sales and EPS Guidance PR Newswire ARLINGTON, Va., Feb. 5, 2013 ARLINGTON, 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 RESULTS The following table presents the company's results for the third quarter of the fiscal year, which ended December 30, 2012 (in thousands). Sales: Quarters Ended Nine Months Ended December January $ % December January $ % 30, 2012 1, 2012 Change 30, 2012 1, 2012 Change Change Change Aerospace $ $ $ Group $ 301,843 $ (720) (0.2)% 906,078 988,148 $(82,070) (8.3)% 301,123 Defense 467,477 572,580 (105,103) (18.4)% 1,466,089 1,593,032 (126,943) (8.0)% Group Sporting 287,582 243,061 44,521 18.3% 836,104 720,977 115,127 16.0% Group Total $ $ $ (5.5)% $ $ $(93,886) (2.8)% sales 1,056,182 1,117,484 (61,302) 3,208,271 3,302,157 Income before Interest, Income Taxes, and Noncontrolling Interest (Operating Profit): Quarters Ended Nine Months Ended December January $ % December January $ % 30, 2012 1, 2012 Change 30, 2012 1, 2012 Change Change Change Aerospace $ $ $ 7.6% $ $ $ (4.8)% Group 37,478 34,839 2,639 109,506 115,060 (5,554) Defense 53,389 87,000 (33,611) (38.6)% 209,295 241,695 (32,400) (13.4)% Group Sporting 30,215 22,786 7,429 32.6% 76,142 75,436 706 0.9% Group Corporate (14,223) (39,201) 24,978 63.7% (46,839) (48,820) 1,981 4.1% Total $ $ $ $ $ operating 106,859 105,424 1,435 1.4% 348,104 383,371 $(35,267) (9.2)% profit SEGMENT RESULTS ATK operates in a three business group structure: the Aerospace Group, the Defense Group and the Sporting Group. AEROSPACE GROUP Third 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 GROUP Sales 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 GROUP Third 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 OTHER In 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. OUTLOOK ATK 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 Measures Sales, Margins, and Earnings Per Share The 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 Ending December 30, 2012: Sales EBIT Margin Taxes After-tax EPS As reported $1,056,182 $106,859 10.1% $29,693 $63,231 $1.93 Radford (6,741) (4,259) (1,661) (2,598) (0.09) As adjusted $1,049,441 $102,600 9.8% $28,032 $60,633 $1.84 January 1, 2012: Sales EBIT Margin Taxes After-tax EPS As reported $1,117,484 $105,424 9.4% $36,085 $49,759 $1.51 Radford (46,275) (13,565) (5,290) (8,275) (0.25) LUU Flare Accrual 33,305 8,065 25,240 0.77 As adjusted $1,071,209 $125,164 11.7% $38,860 $66,724 $2.03 Defense Group for the Quarter Ending December 30, 2012: Sales EBIT Margin As reported $467,477 $53,389 11.4% Radford (6,741) (4,259) As adjusted $460,736 $49,130 10.7% January 1, 2012: Sales EBIT Margin As reported $572,580 $87,000 15.2% Radford (46,275) (13,565) As adjusted $526,305 $73,435 14.0% 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. Nine Months Nine Months Ended Ended Projected Year Ending December 30, January 1, March 31, 2013 2012 2012 Cash used for/provided by $ 118,400 $ 124,740 $275,000‒$300,000 operating activities Capital 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 ENDED NINE MONTHS ENDED (In thousands except December 30, January 1, December 30, January 1, per share data) 2012 2012 2012 2012 Sales $ 1,056,182 $ 1,117,484 $ 3,208,271 $ 3,302,157 Cost of sales 836,555 871,680 2,510,754 2,549,873 Gross profit 219,627 245,804 697,517 752,284 Operating expenses: Research and 13,947 14,624 43,869 41,711 development Selling 41,535 39,989 121,670 121,421 General and 57,286 85,767 183,874 205,781 administrative Income before interest, loss on extinguishment of 106,859 105,424 348,104 383,371 debt, income taxes, and noncontrolling interest Interest expense (14,074) (19,783) (51,986) (69,933) Interest income 139 203 326 431 Loss on extinguishment of - - (11,773) - debt Income before income taxes and 92,924 85,844 284,671 313,869 noncontrolling interest Income tax provision 29,693 36,085 85,330 112,308 Net income 63,231 49,759 199,341 201,561 Less net income attributable to 56 74 276 368 noncontrolling interest Net income attributable to $ 63,175 $ 49,685 $ 199,065 $ 201,193 Alliant Techsystems Inc. Alliant Techsystems Inc.'s earnings per common share: Basic $ 1.95 $ 1.52 $ 6.13 $ 6.10 Diluted 1.93 1.51 6.10 6.06 Cash dividends 0.26 0.20 0.66 0.60 paid per share Alliant Techsystems Inc.'s weighted-average number of common shares outstanding: Basic 32,454 32,781 32,493 32,966 Diluted 32,652 32,955 32,641 33,181 Net Income (from 63,231 49,759 199,341 201,561 above) Other comprehensive income (loss), net of tax: Pension and other postretirement benefit liabilities: Reclassification of prior service (credit) costs for pension and postretirement benefit plans (1,352) (1,346) (4,055) (4,039) recorded to net income (loss), net of tax (expense) benefit of $841, $844, $2,524, and $2,533 Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net 19,519 15,198 58,561 45,475 income (loss), net of tax benefit of $(12,279), $(9,569), $(36,897), and $(28,705) Valuation adjustment for pension and postretirement - - 1,268 - benefit plans, net of tax benefit of $0, $0, $(732), and $0 Change in fair value of derivatives, net of income taxes of (1,064) 6,061 (2,399) (32,056) $681, $(3,875), $1,534, and $20,495, respectively Change in fair value of available-for-sale securities, net of 41 (95) (191) (54) income taxes of $(26), $60, $122, and $34, respectively Total other $ $ comprehensive $ 17,144 $ 19,818 53,184 9,326 income(loss) Comprehensive 80,375 69,577 252,525 210,887 income Less comprehensive income attributable 56 74 276 368 to noncontrolling interest Comprehensive income attributable $ 80,319 $ $ 252,249 $ to Alliant 69,503 210,519 Techsystems Inc. ALLIANT TECHSYSTEMS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (preliminary and unaudited) (Amounts in thousands except share data) December 30, 2012 March 31, 2012 ASSETS Current assets: Cash and cash equivalents $ 361,921 $ 568,813 Net receivables 1,254,710 1,341,998 Net inventories 303,252 258,495 Income tax receivable 22,098 - Deferred income tax assets 108,123 101,720 Other current assets 48,192 51,512 Total current assets 2,198,296 2,322,538 Net property, plant, and equipment 581,055 604,498 Goodwill 1,251,536 1,251,536 Noncurrent deferred income tax assets 112,518 134,719 Deferred charges and other non‑current assets 216,523 228,455 Total assets $ 4,259,928 $ 4,541,746 LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $ 50,000 $ 30,000 Accounts payable 210,010 333,980 Contract advances and allowances 125,348 119,824 Accrued compensation 114,958 121,901 Accrued income taxes - 6,433 Other accrued liabilities 260,260 307,642 Total current liabilities 760,576 919,780 Long‑term debt 1,047,118 1,272,002 Postretirement and postemployment benefits 104,665 111,392 liabilities Accrued pension liability 763,689 878,819 Other long‑term liabilities 126,083 123,002 Total liabilities $ 2,802,131 $ 3,304,995 Commitments 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 328 332 March 31, 2012 Additional paid‑in‑capital 545,917 537,921 Retained earnings 2,419,213 2,241,711 Accumulated other comprehensive loss (857,414) (910,598) Common stock in treasury, at cost— 8,812,699 shares held at December 30, 2012 and (660,479) (642,571) 8,413,014 shares held at March 31, 2012 Total Alliant Techsystems Inc. 1,447,565 1,226,795 stockholders' equity Noncontrolling interest 10,232 9,956 Total equity 1,457,797 1,236,751 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, 2012 January 1, 2012 Operating activities Net income $ 199,341 $ 201,561 Adjustments to net income to arrive at cash used for operating activities: Depreciation 73,578 69,165 Amortization of intangible assets 8,400 8,357 Amortization of debt discount 5,116 10,651 Amortization of deferred financing costs 2,948 3,753 Deferred income taxes (17,655) (7,945) Loss on extinguishment of debt 11,773 - Loss (gain) on disposal of property 638 (4,679) Share-based plans expense 10,878 8,321 Excess tax benefits from share-based (2) (23) plans Changes in assets and liabilities: Net receivables 87,288 (112,251) Net inventories (44,757) (91,197) Accounts payable (113,411) (55,274) Contract advances and allowances 5,525 (1,289) Accrued compensation (7,076) (40,852) Accrued income taxes (22,976) 37,500 Pension and other postretirement benefits (30,975) 25,780 Other assets and liabilities (50,233) 73,162 Cash provided by operating activities 118,400 124,740 Investing activities Capital expenditures (61,351) (97,916) Proceeds from the disposition of 19 7,329 property, plant, and equipment Cash used for investing activities (61,332) (90,587) Financing activities Payments 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 3,056 3,943 plans Excess tax benefits from 2 23 share-based plans Cash used for financing activities (263,960) (380,946) Decrease in cash and cash equivalents (206,892) (346,793) Cash and cash equivalents - beginning of 568,813 702,274 period Cash and cash equivalents - end of period $ 361,921 $ 355,481 Supplemental Cash Flow Disclosure: Noncash investing activity: $ 4,418 $ 2,102 Capital expenditures included in accounts payable Media Contact: Investor Contact: Amanda Covington Steve Wold Phone: 703-412-3231 Phone: 952-351-3056 E-mail: firstname.lastname@example.org E-mail: email@example.com SOURCE ATK Website: http://www.atk.com
ATK Reports FY13 Third Quarter Operating Results
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