<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-10582
ALLIANT TECHSYSTEMS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-16726904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 SECOND STREET N.E.
HOPKINS, MINNESOTA 55343-8384
(Address of principal executive office) (Zip Code)
(612) 931-6000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed under Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
As of July 31, 1996, the number of shares of the registrant's common stock,
par value $.01 per share, outstanding was 13,004,985 (excluding 858,628 treasury
shares).
<PAGE>
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
Income Statements (Unaudited)
(In thousands except QUARTERS ENDED
per share data) --------------------
June 30 July 2
1996 1995
--------- ---------
<S> <C> <C>
Sales $258,023 $292,948
Cost of sales 214,815 242,004
-------- --------
Gross margin 43,208 50,944
Operating expenses
Research and development 2,988 3,445
Selling 8,665 10,669
General and administrative 11,183 14,307
-------- --------
Total operating expenses 22,836 28,421
-------- --------
Income from operations 20,372 22,523
Miscellaneous income 1,066 1,643
-------- --------
Earnings before interest and taxes 21,438 24,166
Interest expense (10,555) (10,975)
Interest income 254 429
-------- --------
Income from continuing operations
before income taxes 11,137 13,620
Income tax provision 2,996
-------- --------
Income from continuing operations 11,137 10,624
Loss from discontinued operations net of
income taxes (559)
-------- --------
Net income $ 11,137 $ 10,065
======== ========
Primary and fully diluted earnings
per common and common equivalent share:
Continuing operations $ .83 $ .78
Discontinued operations (.04)
-------- --------
Net income $ .83 $ 74
======== ========
Average number of common and
common equivalent shares (thousands) 13,350 13,599
======== ========
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets (Unaudited)
(In thousands except share data) June 30, 1996 March 31, 1996
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,090 $ 45,085
Marketable securities 348 348
Receivables 249,620 246,567
Net inventory 102,143 100,246
Deferred income tax asset 28,462 28,462
Other current assets 12,771 4,723
-------- ----------
Total current assets 412,434 425,431
Net property, plant, and equipment 405,519 413,541
Goodwill 131,724 132,623
Deferred charges 14,144 14,751
Other assets 30,090 31,063
-------- ----------
Total assets $993,911 $1,017,409
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 46,250 $ 45,000
Notes payable 22,334 2,756
Accounts payable 56,534 82,285
Advance payments from customers 52,929 56,837
Accrued compensation 30,276 31,908
Accrued income taxes 9,083 9,310
Restructuring liability - current 19,215 24,782
Other accrued liabilities 116,084 114,365
-------- ----------
Total current liabilities 352,705 367,243
Long-term debt 337,500 350,000
Post-retirement and post-employment benefits liability 88,555 88,930
Pension and other long-term liabilities 41,077 43,219
Restructuring liability - long-term 1,152 2,040
Litigation settlement charges - long-term 4,500 8,500
-------- ----------
Total liabilities 825,489 859,932
Stockholders' Equity:
Common stock - $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding 12,996,711 shares at June 30,
1996, and 12,965,542 at March 31, 1996 130 130
Additional paid-in-capital 249,078 249,814
Retained earnings (deficit) (43,661) (54,798)
Unearned compensation (2,645) (2,552)
Pension liability adjustment (1,189) (1,189)
Common stock in treasury, at cost (866,902 shares held at
June 30, 1996 and 898,071 at March 31, 1996) (33,291) (33,928)
-------- ----------
Total stockholders' equity 168,422 157,477
-------- ----------
Total liabilities and stockholders' equity $993,911 $1,017,409
======== ==========
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows (Unaudited)
(In thousands) QUARTERS ENDED
---------------------------------------------------
June 30, 1996 July 2, 1995
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,137 $ 10,065
Adjustments to net income to arrive at cash
used for operations:
Depreciation 11,907 14,106
Amortization of intangible assets and unearned
compensation 2,028 2,900
Gain on disposal of property (75) (447)
Changes in assets and liabilities:
Receivables (3,054) (769)
Inventory (2,025) (8,452)
Accounts payable (26,023) (14,484)
Contract advances and allowances (3,908) (5,209)
Accrued compensation (1,632) (640)
Accrued income taxes (227) 2,751
Accrued restructure liability (6,455) (7,755)
Other assets and liabilities (10,935) 5,434
-------- --------
Cash used for operations (29,262) (2,500)
-------- --------
INVESTING ACTIVITIES
Capital expenditures (4,302) (4,503)
Business acquisition:
Purchase price finalization 10,311
Accrued transaction fees paid (5,321)
Proceeds from disposition of property, plant, and equipment 142 489
Other investing activities, net (175) 656
-------- --------
Cash provided by (used for) investing activities (4,335) 1,632
-------- --------
FINANCING ACTIVITIES
Net borrowings on line of credit 20,000 25,000
Payments made on long-term debt (11,250) (7,500)
Purchase of treasury shares (2,299) (32,659)
Proceeds from exercised stock options 1,573 243
Other financing activities, net (422) (30)
-------- --------
Cash provided by (used for) financing activities 7,602 (14,946)
-------- --------
Decrease in cash and cash equivalents (25,995) (15,814)
Cash and cash equivalents - beginning of period 45,085 26,138
-------- --------
Cash and cash equivalents - end of period $ 19,090 $ 10,324
======== ========
</TABLE>
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements (Unaudited)
1. In interim accounting periods, the Company absorbs operating expenses based
upon sales volume using the anticipated relationship of such costs to sales
for the year. Accordingly, the Company had $3.0 million of underabsorbed
operating expenses recorded in other current assets at June 30, 1996 compared
to $4.3 million of overabsorbed operating expenses at July 2, 1995.
2. During the quarter ended June 30, 1996, the Company made principal payments
on its Bank Term Loan of $11.25 million. Borrowings of $20.0 million were
outstanding against its revolving line of credit at June 30, 1996. Letters of
credit totaling $54.6 million reduced the available line of credit to $150.4
million.
The scheduled minimum loan payments on the remaining long-term debt are as
follows: fiscal 1997, $33.75 million; fiscal 1998, $50.0 million; fiscal
1999, $55.0 million; fiscal 2000, $55.0 million; fiscal 2001 and thereafter,
$190.0 million.
3. No income taxes were paid for the quarters ended June 30, 1996, or July 2,
1995. The effective income tax rate of 0 percent in the current quarter
reflects the utilization of $11.1 million of available federal and state loss
carryforwards for tax purposes.
4. The Company began a program to repurchase up to $50.0 million of its common
stock in the open market during fiscal 1996. In connection with that program,
the Company had repurchased approximately 1 million shares of common stock as
of June 30, 1996, at an average price of $38.12 per share for an aggregate
amount of $39.4 million.
5. Contingencies:
As a U.S. Government contractor, the Company is subject to defective pricing
and cost accounting standards non-compliance claims by the government.
Additionally, the Company has substantial government contracts and
subcontracts, the prices of which are subject to adjustment. The Company
believes that resolution of such claims and price adjustments made or to be
made by the government for open fiscal years (1987 through 1996) will not
materially exceed the amount provided in the accompanying balance sheets.
The Company is subject to various local and national laws relating to
protection of the environment and is in various stages of investigation or
remediation of potential, alleged, or acknowledged contamination. The Company
records environmental remediation-related liabilities when the event
obligating the Company has occurred and the cost is both probable and
reasonably estimable. As of June 30, 1996, the Company had reserves totaling
$10.6 million available to cover all environmental clean-up costs. In future
periods, new laws or regulations, advances in technologies, outcomes of
negotiations/litigations with regulatory authorities, additional information
about the ultimate remedy selected at new and existing sites, the number of
parties found liable at each site, and their ability to pay could
significantly change the Company's estimates.
As part of the acquisition of the Aerospace operations (Aerospace) from
Hercules, Inc. (Hercules), the Company has generally assumed responsibility
for environmental compliance at the Aerospace facilities. There may also be
significant environmental remediation costs associated with the Aerospace
facilities that will, at some locations, be initially funded by the Company.
<PAGE>
It is expected that most of the compliance and remediation costs associated
with the Aerospace facilities will be reimbursable under U.S. government
contracts and that the portion of those environmental remediation costs not
covered through such contracts will be covered by Hercules under various
agreements. The estimated nondiscounted range of these reasonably possible
costs of study and remediation in the Aerospace operations is between $0 and
$27 million. Where the Company is required to first conduct the remediation
and then seek reimbursement from the U.S. Government or Hercules, the
Company's working capital may be materially affected until the Company
receives such reimbursement.
The estimated nondiscounted study and remediation costs to be incurred,
generally over the next three years for sites not acquired through the
Aerospace acquisition, could range from $5.6 million to $27.7 million.
The Company is a defendant in numerous lawsuits that arise out of, and are
incidental to, the conduct of its business. Such matters arise out of the
normal course of business and relate to product liability, government
regulations, including environmental issues, and other issues. Certain of the
lawsuits and claims seek damages in very large amounts. In these legal
proceedings, no director, officer, or affiliate is a party or a named
defendant.
The Company is involved in two "qui tam" lawsuits brought by former employees
of the Aerospace operations acquired from Hercules. One involves allegations
relating to submission of false claims and records, delivery of defective
products, and a deficient quality control program. The other involves
allegations of mischarging of work performed under Government contracts,
misuse of Government equipment, other acts of financial mismanagement and
wrongful termination claims. The Government did not join in either of these
lawsuits. Under the terms of the agreements relating to the Aerospace
acquisition, all litigation and legal disputes arising in the ordinary course
of the Aerospace operations will be assumed by the Company except for a few
specific lawsuits including the two qui tam lawsuits referred to above. The
Company has agreed to indemnify and reimburse Hercules for a portion of
litigation costs incurred, and a portion of damages, if any, awarded in these
lawsuits. Under terms of the purchase agreement with Hercules, the Company's
maximum settlement liability is approximately $4 million, for which the
Company has fully reserved at June 30, 1996.
While the results of litigation cannot be predicted with certainty,
management believes, based upon the advice of counsel, that the actions
seeking to recover damages against the Company either are without merit, are
covered by insurance and reserves, do not support any grounds for
cancellation of any contract, or are not likely to materially affect the
financial condition or results of operations of the Company, although the
resolution of any of such matters during a specific period could have a
material effect on the quarterly or annual operating results for that period.
It is reasonably possible that the management's current estimates of
liabilities for the above contingencies could change in the near term, as
more definitive information becomes available.
6. Interest paid during the quarter ended June 30, 1996 totaled $5.5 million.
Interest paid during the three month period ended July 2, 1995 totaled $5.9
million.
<PAGE>
7. Effective April 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments." This statement
requires disclosures about derivative financial instruments - futures,
forward, swap, and option contracts, and other financial instruments with
similar characteristics.
The Company has entered into hedging transactions to protect against
increases in market interest rates on its long term debt. At June 30, 1996,
the notional amount of amortizing interest rate swap agreements was
approximately $150 million. Under the swap agreements, the Company currently
pays an average fixed rate of 6.9 percent and receives interest at a rate
equal to three-month LIBOR. The interest rate cap agreements limit the
Company's LIBOR exposure to 7.0 percent. The notional amount of these
amortizing interest rate cap agreements was $45 million at June 30, 1996.
8. Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company has
elected to continue following the guidance of Accounting Principles Board
No. 25, "Accounting for Stock Issued to Employees" for measurement and
recognition of stock-based transactions with employees, and therefore the
adoption of SFAS No. 123 will not have a significant impact on the Company's
financial position or results of operations.
9. Certain reclassifications have been made to the fiscal year 1996 financial
statements, as previously reported, to conform to the current
classification. These reclassifications did not affect the net income from
operations, as previously reported.
10. The figures set forth in this quarterly report are unaudited but, in the
opinion of the Company, include all adjustments necessary for a fair
presentation of the results of operations for the quarters ended June 30,
1996, and July 2, 1995. The Company's accounting policies are described in
the notes to financial statements in its fiscal year 1996 Annual Report on
Form 10-K.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Sales
Sales from continuing operations for the quarter ended June 30, 1996, totaled
$258.0 million, a decrease of 34.9 million, or 11.9 percent from $292.9 million
for the comparable quarter in the prior year. Aerospace Systems Group sales were
$144.5 million for the quarter ended June 30, 1996, an increase of $3.5 million,
or 2.5 percent, compared to $140.9 million in the comparable quarter of the
prior year. Defense Systems Group sales were $83.3 million for the quarter ended
June 30, 1996, a decrease of $18.2 million, or 17.9 percent, compared to $101.5
million in the comparable quarter of the prior year. The sales decline was
primarily due to fiscal 1996 program completions resulting in a $22 million
decrease in volume on the Combined Effects Munitions (CEM) program, and a $7.2
million decrease on the Shoulder-launched Multi-Purpose Assault Weapons (SMAW)
program, compared to the prior year quarter. Additionally, technical issues
delayed production and shipments of the M830A1 tank ammunition round, which
resulted in a sales decrease in the quarter ended June 30, 1996, of
approximately $5 million when compared to the comparable quarter of the prior
year. These delayed shipments are expected to occur later in fiscal 1997. The
Company has reached agreement with the U.S. Government customer resolving the
technical issues, which has allowed production to resume. These sales declines
were partially offset by sales increases in the Volcano program (anti-tank
munitions dispensers) and various fuzing programs. Marine Systems Group sales
were $27.9 million for the quarter ended June 30, 1996, a decrease of $19.7
million, or 41.4%, compared to $47.6 million in the comparable quarter of the
prior year, due to the completion of the MK50 lightweight torpedo progam.
Emerging Business Group sales from continuing operations were $7.6 million for
the quarter ended June 30, 1996, compared to $9.5 million in the comparable
quarter of the prior year. The Company expects sales for fiscal 1997 to be
approximately $1.2 billion.
Gross Margin
The Company's gross margin in the quarter ended June 30, 1996, was $43.2
million, or 16.7 percent of sales, compared to $50.9 million, or 17.4 percent of
sales for the comparable quarter of the prior year. The decrease in gross margin
was primarily attributable to volume decreases on the CEM, M830A1 tank
ammunition, and MK50 programs, as well as the sales mix for the quarter. Fiscal
1997 gross margin, as a percentage of sales, is expected to be in the 16.5 -17.5
percent range, down from 18.6% recorded in fiscal 1996, due to the likely
investment in certain significant program opportunities which are critical to
the Company's continued long term earnings growth.
<PAGE>
Operating Expenses
The Company's operating expenses totaled $22.8 million, 8.9 percent of sales, a
decrease of $5.6 million, or 19.7 percent, compared to $28.4 million, 9.7
percent of sales, in the comparable quarter of the prior year. The decrease, as
a percentage of sales, was primarily driven by decreased selling, and general
and administrative costs, as compared to the comparable quarter of the prior
year. These costs, as a percentage of sales, were lower in the quarter ended
June 30, 1996, due to a more complete realization of the synergistic benefits of
combining selling resources and in having a larger business base, both results
of the Aerospace acquisition. Operating expenses for fiscal 1997, as a
percentage of sales, are expected to be approximately 8.5 to 9.0 percent,
consistent with fiscal 1996.
Miscellaneous Income
The Company's miscellaneous income decreased approximately $.6 million in the
quarter ending June 30, 1996, compared to the comparable quarter of the prior
year, due primarily to decreased royalty income received on the Mk 46 commercial
torpedo program with Japan which is nearing completion.
Interest Expense
The Company's interest expense decreased approximately $.4 million during the
quarter ending June 30, 1996, primarily due to lower average balances borrowed,
as well as lower interest rates for the period, as compared to the comparable
quarter of the prior year.
Income Taxes
The quarter ended June 30, 1996, reflects an effective income tax rate of 0
percent compared to 22 percent for the comparable quarter of the prior fiscal
year. The tax rate for the quarter ended June 30, 1996, differs from statutory
tax rates due to the utilization of available tax loss carry forwards. Such
carry forwards are expected to reduce future tax expense and the associated tax
payments.
Net Income
Net income reported for the quarter ended June 30, 1996, was $11.1 million ($.83
per share), an increase of $1.1 million, or 10.7 percent, when compared with net
income of $10.1 million ($.74 per share) for the comparable quarter of the prior
year. Sales volume decreased in the quarter ended June 30, 1996; however, net
income rose as a result of decreased operating expenses and decreased tax
expense.
Adoption of Accounting Standard
Effective April 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." As
permitted by SFAS No. 123, the Company has elected to continue following the
guidance of Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees" for measurement and recognition of stock-based transactions with
employees, and therefore the adoption of SFAS No. 123 will not have a
significant impact on the Company's financial position or results of operations.
<PAGE>
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
- -----------------------------------------------------
Cash used by operations totaled $29.3 million for the quarter ended June 30,
1996, an increase in cash usage of $26.8 million, when compared with cash used
by operations of $2.5 million in the comparable quarter of the prior year. The
higher level of cash usage in the quarter ended June 30, 1996 resulted from cash
used for working capital, due primarily to lower Defense Systems sales related
to delayed shipments of the M830A1 tank ammunition round due to technical
issues. Additionally, cash flow from operations for the quarter ended June 30,
1996, was impacted by the timing of miscellaneous payments made in the quarter
for items not having similar cash flow impact to the comparable quarter of the
prior year. The most significant such payments were made for prepaid insurance,
approximately $5.0 million, and a $3.0 million payment for litigation settled in
June of the prior year.
Cash used in investing activities for the quarter ended June 30, 1996 was $4.3
million, a $6.0 million decrease from cash provided by investing activities of
$1.6 million in the comparable quarter of the prior year. This difference was
primarily the result of a $10.3 million payment received in the prior year
quarter, which reflected a purchase price adjustment for the Aerospace
operations, acquired from Hercules Inc., related to accelerated receivables
collections, and was offset by $5.3 million in payments made by the Company in
the same quarter for accrued transaction fees related to the acquisition.
Net outlays for capital expenditures for the quarter ended June 30, 1996,
totaled $4.3 million, or 1.7 percent of sales, an increase as a percentage of
sales, compared to capital expenditures of $4.5 million, or 1.5 percent of
sales, in the comparable quarter of the prior year. The Company expects capital
expenditures, as a percentage of sales, to be approximately 2.5 percent of sales
for fiscal 1997.
At June 30, 1996, the Company had borrowings of $20.0 million outstanding
against its bank revolving credit facility. The borrowings were used primarily
to finance on-going operational needs. Outstanding letters of credit of $54.6
million further reduced amounts available on this facility to $150.4 million at
June 30, 1996.
The Company began a program to repurchase up to $50.0 million of its common
stock in the open market during fiscal 1996. In connection with that program,
the Company had repurchased approximately 1 million shares of common stock as of
June 30, 1996, at an average price of $38.12 per share for an aggregate amount
of $39.4 million.
<PAGE>
The Company's total debt (notes payable, current portion of long-term debt, and
long-term debt) as a percentage of total capitalization decreased to 70.7
percent on June 30, 1996, compared to 71.6 percent on March 31, 1996. This
decrease reflects principal repayments on the bank term debt during the quarter
ended June 30, 1996, of $11.25 million, offset by $20 million in borrowings
under the bank revolving credit facility.
In June 1995, the Company and claimants reached an agreement to settle the
Accudyne "qui tam" lawsuit. Terms of the agreement include payments by the
Company of $12.0 million, consisting of payments of $.5 million and $3.0
million, made in June 1995 and April 1996, respectively, and subsequent payments
to be made of $4.0 million and $4.5 million in April 1997 and June 1998,
respectively, plus interest at the three-year Treasury Bill rate. In addition,
legal costs of approximately $3.0 million have been paid. Accordingly, the
Company recorded an unusual charge of $15.0 million as of the fourth quarter of
the fiscal year ended March 31, 1995.
Based on the financial condition of the Company at June 30, 1996, the Company
believes that internal cash flows, combined with the availability of funding
under its line of credit, will be adequate to fund the future growth of the
Company, as well as to service its long-term debt obligations.
INFLATION
- ---------
In the opinion of management, inflation has not had a significant impact upon
the results of the Company's operations. The selling prices under contracts, the
majority of which are long term, generally include estimated costs to be
incurred in future periods. These cost projections can generally be negotiated
into new buys under fixed-price government contracts, while actual cost
increases are recoverable in cost-type contracts.
RISK FACTORS
- ------------
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involves risks and
uncertainties, including, but not limited to, changes in governmental spending
and budgetary policies, governmetal laws and regulations surrounding various
matters such as environmental remediation, contract pricing, changing economic
and political conditions in the United States and in other countries,
international trading restrictions, outcome of union negotiations, custmer
product acceptance, and continued access to capital markets. All forecasts and
projections in this report are "forward-looking statements" and are based on
management's current expectations of the Company's near term results, based on
current information available pertaining to the Company, including the
aforementioned risk factors. Actual results could differ materially.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
In connection with GAU-8/A contracts for 30mm target practice rounds, the
registrant was served with three grand jury subpoenas, dated February 4, 1991,
July 19, 1994 and October 27, 1994, for documents. All subpoenas were issued by
the U.S. District Court, Northern District of Illinois, Eastern Division. The
registrant supplied all documents requested in such subpoenas. The registrant
has been advised by the U.S. Department of Justice that (a) the criminal
investigation that was the subject of such subpoenas has been concluded, and
that no criminal action will be taken against the registrant, and (b) the matter
has been referred to the Department of Justice, Civil Division, Washington,
D.C., for investigation.
Incorporated herein by reference is note 5 of Notes to Financial Statements
included in Item 1 of Part I of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description
----------- -----------
10.1 Split Dollar Life Insurance Plan
10.2 Form of Performance Share Agreement
11 Computation of Earnings Per Common
and Common Equivalent Share
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarterly period ended June 30, 1996, the registrant filed
no reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANT TECHSYSTEMS INC.
Date: August 8, 1996 By: /s/ Charles H. Gauck
Name: Charles H. Gauck
Title: Secretary
(On behalf of the registrant)
Date: August 8, 1996 By: /s/ Scott S. Meyers
Name: Scott S. Meyers
Title: Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
ALLIANT TECHSYSTEMS INC.
FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
<S> <C> <C>
10.1 Split Dollar Life Insurance Plan. Filed herewith
electronically
10.2 Form of Performance Share
Agreement . . . . . . . . . . . . Filed herewith
electronically
11 Computation of Earnings Per
Common and Common Equivalent
Share . . . . . . . . . . . . . . Filed herewith
electronically
27 Financial Data Schedule . . . . . Filed herewith
electronically
</TABLE>
<PAGE>
Exhibit 10.1
[Alliant Techsystems Logo]
_____________________
SPLIT DOLLAR
LIFE INSURANCE PLAN
Administered by
Nevin Executive Benefits
4390 First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
May 1996
<PAGE>
SPLIT DOLLAR LIFE INSURANCE PLAN
INTRODUCTION
Alliant Techsystems Inc. has implemented a Split Dollar Life Insurance Plan for
certain key executives. This plan replaces any executive life insurance
arrangement previously in effect, and limits the coverage of company provided
basic life insurance to $50,000.
While the company is pleased to offer you this benefit, doing so does not imply
or create a contract of employment. Also, your plan may be continued, changed,
or eliminated in the future at the company's option.
PLAN OVERVIEW
Under this plan, a life insurance policy is purchased for you by the company
which provides a substantial death benefit to your beneficiary(s) should you die
during employment with Alliant Techsystems Inc. In addition, the ownership and
cash surrender value of the policy may be transferred to you at retirement,
subject to your continued employment until retirement from Alliant Techsystems
Inc.
This is a split dollar life insurance plan, which simply means that the
costs and benefits are shared between you and the company. While actively
employed, the company, as owner of the policy, pays the premiums required for
your coverage and owns the policy. You designate a beneficiary(s) for the death
benefit; such beneficiary(s) is eligible to receive the stated death benefit
should you die while employed before reaching retirement. Because of the
complexities of estate planning, you should seek professional advice before
naming your beneficiaries.
The cost to you during your employment will be the tax on the imputed income
resulting from the company's payment of the annual premiums. This imputed income
is known as the PS58 cost, discussed in the tax section on the next page. The
company will provide you with an annual statement showing the amount of imputed
income and tax withholding.
At retirement, assuming terms mutually agreeable to you and the company, Alliant
Techsystems will give the life insurance policy to you, plus an additional cash
payment to cover the income tax resulting from the value of this gift. After
retirement, you will have the option to continue the coverage, convert the
policy's cash surrender value to an annuity, some combination of both, or
surrender the policy.
<PAGE>
BENEFIT AMOUNT
For the face value of the life insurance purchased on your life, please see the
page entitled "Benefit Amount" accompanying this plan description. The payments
made by the company cover the premium for term insurance, plus an accumulating
cash surrender value which provides paid up life insurance after you retire.
According to the plan the company will make insurance premium payments while you
are employed, until you reach age 60. This plan is designed so that the coverage
amount remains in effect until age 70, then drops to 2/3 of the covered amount
from age 70 to approximately age 95, at which time coverage ends. However, the
actual coverage amount and age at which coverage ends may be altered by you at
any time following retirement. Any cost for increased coverage after retirement
is your obligation. Coverage may be maintained at the pre-retirement level and
end sooner, or may be reduced to lower levels and likely remain in force past
age 95. Contact Jeff Nevin at Nevin Executive Benefits (address follows) to
discuss details further. Nevin Executive Benefits is our agent coordinating this
benefit.
ELIGIBILITY FOR BENEFITS
To be considered for a post-retirement benefit under this plan, you must be at
least age 55 and have at least 5 years of credited service (as defined in the
Alliant Techsystems Inc. Retirement Plan). If your employment should be
terminated by you or the company for any reason after reaching age 55 with at
least 5 years of Credited Service, the contract states that there is no
requirement to deliver the cash surrender value; however the company may, at its
discretion, direct to you the accumulated cash surrender value. Finally, should
you retire from employment after age 55 and 5 or more years of credited Service
under terms agreeable to you and the company, the full cash surrender value
accrued at that time will be delivered to you in the form of paid up life
insurance.
TAX ISSUES
Although the company is paying the premiums for the insurance on your behalf,
you will be taxed on the policy's "economic benefit". The economic benefit is
the value of the term insurance, also known as the PS58 cost. The balance of the
company's payment is an accumulating cash surrender value which is owned by the
company pre-retirement.
<PAGE>
The tax on this PS58 cost is your responsibility. Projected PS58 costs are in
the enclosed summary provided by Nevin Executive Benefits. These costs are based
on the insurer's (Northwestern Mutual Life) published rates. Annual payment of
the tax withholding on the PS58 cost needs to be collected from you via personal
check. At retirement, assuming terms mutually agreeable to you and the company,
the accumulated cash surrender value is given to you. This gift is taxable. To
assist you with this added tax burden, Alliant Techsystems will provide you a
one time cash payment gross-up to cover the taxes resulting from the gift of the
insurance policy. This benefit provides you with maximum flexibility in managing
your post-retirement insurance needs.
RETIREMENT OPTIONS
At retirement, assuming mutually agreeable terms, ownership of the life
insurance policy and its cash surrender value is transferred to you. It is
expected, but not guaranteed, that sufficient funds will then have accumulated
in the insurance policy to provide continued insurance (as displayed on insert
entitled "Benefit Amount"), with no further annual premiums required. Generally,
a retirement prior to age 60 will result in a reduced cash surrender value and
subsequent benefit duration. The amount and duration of the post-retirement
coverage will depend on your age, the actual amount of money in the policy, and
other factors that may change over time. Your options include:
1. Maintain insurance coverage at full face value to age 70; coverage drops to
2/3 of original value at age 70, and continues to approximately age 95;
2. Use the cash surrender value to supplement retirement income;
3. Keep the coverage at full value past age 70 by paying additional premiums
or allowing the policy to expire prior to age 95;
4. Increase coverage beyond the original face value by providing insurability
and paying additional premiums;
5. Any combination of the above.
ADMINISTRATION
Questions on this plan may be addressed to Alliant Techsystems Executive
Compensation department at (612) 931-5964, or may be directed to
<PAGE>
Nevin Executive Benefits
4390 First Bank Place
601 Second Avenue South
Minneapolis, MN 55402
(612) 344-1888
INSURANCE CARRIER
This life insurance is underwritten by the Northwestern Mutual Life Insurance
Company. Northwestern Mutual is currently rated A++ (Excellent) by A. M. Best's
and has a Standard and Poor's Claims Paying Ability Rating of AAA (Superior)
SUMMARY
Alliant Techsystems Inc. is pleased to add this valuable benefit to your
Executive Compensation program. An official policy will be available in the
Executive Compensation department for your review. This summary brochure is
offered for your convenience only, and if it differs from the policy or
contracts, the policy or contracts prevail.
Contact:
Jeffrey R. Nevin
612/344-1888
Fax 612/344-1890
4390 First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
[Nevin Executive Benefits Logo]
<PAGE>
Exhibit 10.2
PERFORMANCE SHARE AGREEMENT [Alliant Techsystems Logo]
Number of Social
Performance Measuring Security
Granted To Grant Date Shares Period Number
- ---------- ---------- ------ ------ ------
1. THE GRANT. Alliant Techsystems Inc., a Delaware corporation (the "Company")
hereby grants to the individual named above (the "Employee"), as of the
above Grant Date, the above Number of Performance Shares (the "Shares"), on
the terms and conditions set forth in this Performance Share Agreement
(this "Agreement") and in the Alliant Techsystems Inc. 1990 Equity
Incentive Plan (the "Plan").
2. MEASURING PERIOD. The Shares shall be payable, in the form provided in
Paragraph 4 below, and to the extent provided in Paragraph 3 below, as soon
as practical after the end of the above Measuring Period.
3. PERFORMANCE GOALS. Up to 100% of the Shares shall be payable, depending
upon if, the Business Unit achieves the Performance Goals set forth in the
accompanying Performance Accountability Chart.
4. FORM OF PAYMENT. Any shares payable pursuant to Paragraph 3 above shall be
paid in shares of Common Stock of the Company ("Stock"), except to the
extent that the Personnel and Compensation Committee of the Company's Board
of Directors, in its discretion, determines that cash be paid in lieu of
some or all of such shares of Stock.
5. FORFEITURE. As of the Employee's death or Termination of Employment (as
defined in the Plan), the Employee shall forfeit all Shares for which the
Measuring Period has not ended prior to or as of such Termination of
Employment. If the Employee's death or Termination of Employment occurs at
or after the end of the Measuring Period, the Shares shall be payable to
the extent herein provided, as if such death or Termination of Employment
had not occurred.
<PAGE>
6. RIGHTS. Nothing herein shall be deemed to grant the Employee any rights as
a holder of Stock unless and until certificates for shares of Stock are
actually issued in the name of the Employee as provided herein.
7. INCOME TAXES. The Employee is liable for any federal, state and local
income taxes applicable upon payment of the Shares. Upon demand by the
Company, the Employee shall promptly pay to the Company in cash and/or the
Company may withhold from the Employee's compensation or from the shares of
Stock or any cash payable in lieu of some or all of such shares of Stock,
an amount necessary to pay, any income withholding taxes required by the
Company to be collected upon such payment.
8. ACKNOWLEDGMENT. This grant will not be effective until the Employee dates
and signs the form of Acknowledgment below and returns to the Company a
signed copy of this Agreement. By signing the Acknowledgment, the Employee
agrees to the terms and conditions referred to in Paragraph 1 above and
acknowledges receipt of a copy of the Prospectus related to the Plan.
ACKNOWLEDGMENT: ALLIANT TECHSYSTEMS INC.
___________________________ Richard Schwartz
Employee's Signature President and Chief
Executive Officer
___________________________
Date
___________________________
Social Security Number
<PAGE>
Exhibit 11
Computation of Earnings Per Common and Common Equivalent Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended
June 30 July 2
1996 1995
<S> <C> <C>
Primary calculation:
Net income $ 11,137 $ 10,065
========= =========
Weighted average shares outstanding during the period 12,949 13,312
Shares issuable in connection with stock plans less shares
purchasable with proceeds using the average per share purchase
price for the respective periods as shown below 401 287
--------- ---------
Total common and common equivalent shares - primary 13,350 13,599
========= =========
Primary earnings per common and common equivalent share $ .83 $ .74
========= =========
Average share price for the period $ 46.89 $ 37.63
========= =========
Fully diluted calculation:
Net income $ 11,137 $ 10,065
========= =========
Weighted average shares outstanding during the period 12,949 13,312
Shares issuable in connection with stock plans less shares
purchasable with proceeds using the higher of the
average or period end share price as shown below 404 353
--------- ---------
Total common and common equivalent shares - fully diluted 13,353 13,665
========= =========
Fully diluted earnings per common and common equivalent share .83 .74
Higher of average or period end share price $ 47.13 $ 41.75
========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-Q filing
for qtr. ending 6/30/96 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-START> APR-01-1996 APR-01-1995
<PERIOD-END> JUN-30-1996 JUL-02-1995
<CASH> 19,090 45,085
<SECURITIES> 348 348
<RECEIVABLES> 249,620 246,567
<ALLOWANCES> 365 380
<INVENTORY> 102,143 100,246
<CURRENT-ASSETS> 412,434 425,431
<PP&E> 575,056 571,171
<DEPRECIATION> 169,537 157,630
<TOTAL-ASSETS> 993,911 1,017,409
<CURRENT-LIABILITIES> 352,705 367,243
<BONDS> 337,500 350,000
<COMMON> 130 130
0 0
0 0
<OTHER-SE> 168,292 157,347
<TOTAL-LIABILITY-AND-EQUITY> 993,911 1,017,409
<SALES> 258,023 292,948
<TOTAL-REVENUES> 258,023 292,948
<CGS> 214,815 242,004
<TOTAL-COSTS> 214,815 242,004
<OTHER-EXPENSES> 2,988 3,445
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,555 10,975
<INCOME-PRETAX> 11,137 13,620
<INCOME-TAX> 0 2,996
<INCOME-CONTINUING> 11,137 10,624
<DISCONTINUED> 0 (559)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,137 10,065
<EPS-PRIMARY> .83 .74
<EPS-DILUTED> .83 .74
</TABLE>
