MINNEAPOLIS---ATK posted solid third-quarter financial results, with earnings per share rising 14 percent to $1.25 on a 13-percent sales increase driven by higher revenues from small-and medium-caliber ammunition programs.
Earnings before interest and income taxes (EBIT) advanced 17 percent to $35.5 million from $30.2 million last year, while EBIT margins rose to a record 12.8 percent. EBITDA cash flow per share increased 20 percent to $9.64 from $8.05 last year. The company remains confident it will meet or exceed the consensus earnings estimate of $4.74 per share for fiscal year 2001.
ATK (Alliant Techsystems), a leading aerospace and defense company and one of the nation's largest suppliers of military ammunition, said higher sales, record operating margins, and fewer shares outstanding helped boost third-quarter earnings per share 14 percent to $1.25 from $1.10 a year ago. (All per-share figures reflect a 3-for-2 common stock split effective Nov. 27, 2000.)
Sales in the third quarter, which ended Dec. 31, rose 13 percent to $276 million from $244 million last year. The growth was driven by revenues from a new contract to produce small-caliber ammunition at the Lake City Army Ammunition Plant in Independence, Mo., and higher sales of medium-caliber ammunition.
Third-quarter earnings before interest and income taxes (EBIT) increased 17 percent to $35.5 million from $30.2 million last year. Continued strong program performance and lower operating expenses drove the EBIT margin rate up to a record 12.8 percent from 12.4 percent a year ago.
Paul David Miller (PDM), chairman and chief executive officer, said ATK's third-quarter results reflect a continued trend of improving performance.
"We are carrying this momentum as we enter the final quarter of FY01, and are on track to hit all our targets for the year, including sales growth of approximately five percent driven by revenues from our small-caliber ammunition operations and the resolution of production issues in our medium-caliber ammunition and fuze programs,'' said PDM. "We also expect margin rates to stay robust. In summary -- we remain confident we will meet or exceed the consensus earnings estimate of $4.74 per share for fiscal year 2001.''
For the nine months ended Dec. 31, 2000, earnings per share were $3.49 versus $3.64 last year, which included a one-time gain of 61 cents per share from discontinued operations resulting from the resolution of an insurance settlement related to the company's former demilitarization operations in Ukraine. Earnings per share from continuing operations for the period rose 15 percent to $3.49 from $3.03 a year ago. Nine-month sales increased 6 percent to $818 million from $770 million last year. Earnings before interest and income taxes were $100.1 million, up 13 percent from $88.2 million a year ago.
Year-to-date cash flow as indicated by earnings before interest, taxes, depreciation, and amortization (EBITDA) was $135 million versus $125 million in the same period a year ago. EBITDA per share rose 20 percent to $9.64 from $8.05 last year. Free cash flow (cash from operations less capital expenditures) generated during the nine-month period was $5.9 million versus cash used of $2.1 million a year ago. The improvement in both measures is due to continued working capital management and the implementation of a cash-value added (CVA) performance metric. The company continues to expect full-year cash flow from operations and investing to be approximately $50 million to $60 million.
Third-quarter orders were up sharply to $233 million from $52 million last year, reflecting primarily new orders for launch vehicle composite structures, munitions propellant, and an anti-tank barrier system. Funded backlog at the end of the quarter was $2.2 billion or 23 months of sales. Total backlog, which includes multi-year contracts awarded but not yet funded, was $3.6 billion or 39 months of sales.
"New orders booked in the third quarter provide a clear picture of the strength and diversity of our business base,'' said PDM. "We have a good mix of development and production programs that enables us to run our operations effectively and retain critical technical skills. Our core capabilities -- munitions, solid propulsion, smart weapons/precision capabilities, and composite structures -- line up squarely with the changing needs of our military and commercial customers.''
Operations Review The Conventional Munitions segment posted third-quarter sales of $121 million, up 70 percent from $71 million a year ago. The increase reflects revenues from small-caliber ammunition production operations, higher sales of munitions propellant, and the resumption of medium-caliber ammunition production and deliveries following prior-year delays caused by the relocation of operations from Illinois to Virginia.
Year-to-date sales rose 50 percent to $353 million from $235 million last year. The company continues to expect Conventional Munitions sales for fiscal year 2001 to be between $470 million and $480 million.
ATK has signed an agreement to sell ATK Kilgore Flares Company, one of four operating units within the Conventional Munitions segment, to Chemring Group PLC of the United Kingdom. The transaction is expected to be completed in February. The sale of the company will enable Conventional Munitions to increase it focus on its core ammunition businesses.
Aerospace third-quarter sales were $120 million, compared with $131 million a year ago. The variance is due to the timing of production requirements on the Titan IV solid propulsion program. For the nine-month period, the segment reported sales of $376 million versus $392 million last year, reflecting lower sales of space propulsion products, which were partially offset by higher volume from composite structures, tactical missile, and strategic propulsion programs. Projections for fiscal year 2001 Aerospace sales remain at approximately $500 million.
Defense Systems reported third-quarter sales of $45 million versus $47 million last year. Sales began to strengthen in the third quarter, as the segment began to record revenues from a new development contract for the Objective Individual Combat Weapon program and fuze production resumed following delays in the prior quarter brought on by technical issues. Year-to-date sales for Defense Systems were $118 million versus $153 million a year ago. The decline reflects primarily lower sales from an anti-tank barrier system program that is completing production. The segment's sales forecast for the full year continues to be approximately $180 million.
Recent ATK business highlights include:
**A $50 million contract from a U.S. ally for a new anti-tank barrier system program.
**A $34 million contract to produce solid propulsion systems and warheads for the United Kingdom's Brimstone anti-armor missile system.
**A $14 million contract to supply lithium reserve batteries for the U.S. Army's Multi-Option Fuze for Artillery.
**Contracts with a combined value of $11.5 million to produce environmentally friendly artillery propellant for the U.S. Army's Modular Artillery Charge System.
**An $11 million contract to supply hardware for 25mm ammunition to be used by Canadian military light armored vehicles.
**A $7.5 million contract to continue production of composite launch tubes for the Javelin Anti-Tank Weapon System.
**Selection by the U.S. Army to be the system manager for production of 105mm high-explosive, rocket-assisted artillery ammunition under a contract valued at $4.1 million.
**A contract to produce composite aeroskirts for the new Boeing Delta IV launch vehicle, expanding a composite structures partnership with Boeing on the important Delta IV program.
**Selection by Lockheed Martin Space Systems-Astronautics Operations to produce composite structures for Lockheed Martin's new Atlas V family of launch vehicles.
PDM said he expects ATK's strong performance to continue in fiscal year 2002, as the company benefits from a favorable strategic position within what is becoming a more positive marketplace for aerospace and defense contractors.
"Given our performance momentum and the positive business outlook, we expect fiscal year 2002 earnings per share to be between $5.25 and $5.30, which is in line with the consensus estimate of $5.27,'' said PDM.
ATK is a $1.1 billion aerospace and defense company with leading market positions in munitions, smart weapons/precision capabilities, propulsion, and composite structures. The company, which is headquartered in Hopkins, Minn., employs approximately 6,400 people and has three business segments: Conventional Munitions, Aerospace, and Defense Systems.
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ATK Third-Quarter Earnings Per Share Rise 14 Percent on 13-Percent Sales Growth and Record Operating Margins
