<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 29, 1997 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, 1997, the number of shares of the registrant's common stock,
par value $.01 per share, outstanding was 12,994,785 (excluding 868,785 treasury
shares).
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Income Statements (Unaudited)
<TABLE>
<CAPTION>
(In thousands except QUARTERS ENDED
per share data) -------- --------
June 29 June 30
1997 1996
-------- --------
<S> <C> <C>
Sales $251,639 $230,173
Cost of sales 207,919 194,014
-------- --------
Gross margin 43,720 36,159
Operating expenses
Research and development 2,038 2,800
Selling 10,249 7,178
General and administrative 10,144 9,789
-------- --------
Total operating expenses 22,431 19,767
-------- --------
Income from operations 21,289 16,392
Miscellaneous income 98 248
-------- --------
Earnings before interest and taxes 21,387 16,640
Interest expense (7,556) (9,280)
Interest income 826 254
-------- --------
Income from continuing operations 14,657 7,614
Income from discontinued operations, net of
income taxes 2,290
-------- --------
Net income $ 14,657 $ 9,904
======== ========
Earnings per common and common
equivalent share:
Continuing operations $1.10 $ .57
Discontinued operations .17
-------- --------
Net income $1.10 $ .74
======== ========
Average number of common and
common equivalent shares (thousands) 13,299 13,350
======== ========
</TABLE>
See Notes to Financial Statements
<PAGE>
Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
-------------- --------------
(In thousands except share data) June 29, 1997 March 31, 1997
-------------- --------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 89,369 $ 122,491
Marketable securities 378 378
Receivables 191,160 191,675
Net inventory 77,417 68,125
Deferred income tax asset 37,244 37,244
Other current assets 7,598 5,329
-------- ----------
Total current assets 403,166 425,242
Net property, plant, and equipment 347,680 360,560
Goodwill 122,766 123,618
Deferred charges 10,531 10,925
Prepaid and intangible pension assets 81,746 80,569
Other assets 116 116
Net assets of discontinued operations 9,244 8,674
-------- ----------
Total assets $975,249 $1,009,704
======== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 29,749 $ 29,024
Notes payable 2,291 2,302
Accounts payable 52,370 85,451
Contract advances and allowances 86,308 64,500
Accrued compensation 26,581 28,392
Accrued income taxes 9,007 9,156
Restructuring liability 3,384 5,876
Other accrued liabilities 93,185 106,496
-------- ----------
Total current liabilities 302,875 331,197
Long-term debt 229,089 237,071
Post-retirement and post-employment benefits liability 141,757 143,373
Pension liability 34,359 37,079
Other long-term liabilities 38,034 42,192
-------- ----------
Total liabilities 746,114 790,912
Stockholders' Equity:
Common stock - $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding 12,980,307 shares at June
29, 1997 and 13,081,538 at March 31, 1997 130 131
Additional paid-in-capital 248,575 248,612
Retained earnings 19,019 4,361
Unearned compensation (1,138) (1,324)
Pension liability adjustment (2,304) (2,304)
Common stock in treasury, at cost (883,306 shares held at
June 29, 1997 and 782,075 at March 31, 1997) (35,147) (30,684)
-------- ----------
Total stockholders' equity 229,135 218,792
-------- ----------
Total liabilities and stockholders' equity $975,249 $1,009,704
======== ==========
</TABLE>
See Notes to Financial Statements
<PAGE>
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(In thousands) QUARTERS ENDED
----------------- -----------------
June 29, 1997 June 30, 1996
----------------- -----------------
Operating activities
<S> <C> <C>
Net income $ 14,657 $ 9,904
Adjustments to net income to arrive at cash
used for operations:
Depreciation 10,317 10,992
Amortization of intangible assets and unearned
compensation 1,544 1,954
Gain on disposal of property (21) (83)
Changes in assets and liabilities:
Receivables 515 (4,999)
Inventory (9,292) 1,799
Accounts payable (33,081) (24,977)
Contract advances and allowances 21,808 (3,967)
Accrued compensation (1,811) (1,422)
Accrued income taxes (149) (227)
Accrued restructure liability (2,492) (6,455)
Accrued environmental liability (273) (445)
Other assets and liabilities (19,550) (6,732)
Operating activities of discontinued operations (570) (5,019)
-------- --------
Cash used for operations (18,398) (29,677)
-------- --------
Investing activities
Capital expenditures (3,004) (3,721)
Proceeds from disposition of property, plant, and equipment 131 142
Investing activities of discontinued operations (582)
-------- --------
Cash used for investing activities (2,873) (4,161)
-------- --------
Financing activities
Net borrowings on line of credit 20,000
Payments made on long-term debt (7,256) (11,250)
Net purchase of treasury shares (5,015) (2,299)
Proceeds from exercised stock options 431 1,573
Other financing activities, net (11) (422)
-------- --------
Cash provided by (used for) financing activities (11,851) 7,602
-------- --------
Decrease in cash and cash equivalents (33,122) (26,236)
Cash and cash equivalents - beginning of period 122,491 45,532
-------- --------
Cash and cash equivalents - end of period $ 89,369 $ 19,296
======== ========
</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 $.4 million and $2.0 million of
underabsorbed operating expenses recorded in other current assets at June
29, 1997 and June 30, 1996, respectively. Unabsorbed expenses at June 29,
1997, will be absorbed over the remainder of fiscal 1998.
2. During the three month period ended June 29, 1997, the Company made
principal payments on its Bank Term Loan of $7.3 million. No borrowings were
outstanding against its revolving line of credit at June 29, 1997. Letters
of credit totaling $38.5 million reduced the available line of credit to
$236.5 million.
The remaining scheduled minimum loan payments on outstanding long-term debt
are as follows: fiscal 1998, $21.8 million; fiscal 1999, $31.9 million;
fiscal 2000, $31.9 million; fiscal 2001, $23.2 million; fiscal 2002 and
thereafter, $150.0 million.
3. No income taxes were paid for the three months ended June 29, 1997, or June
30, 1996. The effective income tax rate of 0 percent on continuing
operations in the current three month period reflects the utilization of
$14.7 million of available federal and state loss carry forwards (gross) for
tax purposes.
4. During fiscal 1996, the Company began a program to repurchase up to $50.0
million of its common stock. During the quarter ended June 29, 1997, the
Company repurchased an additional 139,600 shares for approximately $6.0
million. As of June 29, 1997, the Company has substantially completed its
stock repurchase program, having repurchased approximately 1.26 million
shares of common stock over the life of the program, at an average price of
$39.09 per share, for an aggregate cost of $49.4 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 1997) 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 and the related ongoing monitoring
and maintenance liabilities when the event obligating the Company has
occurred and the cost is both probable and reasonably estimable. At June 29,
1997, the accrued liability for environmental remediation of $34.5 million
represents management's best estimate of the probable and reasonably
estimable costs related to the Company's known remediation obligations. It
is expected that a significant portion of the Company's environmental costs
will be reimbursed to the Company. As collection of those reimbursements is
estimated to be probable, the Company has recorded amounts receivable of
approximately $10.6 million at June 29, 1997. Such receivable primarily
represents the expected reimbursement of costs associated with the
operations acquired from Hercules Incorporated in March, 1995 (Aerospace
acquisition). As part of the Aerospace acquisition, the Company generally
assumed responsibility for environmental compliance at the acquired
facilities. It is expected that much of the compliance and remediation costs
associated with these facilities will be reimbursable under U.S. Government
contracts, and that those environmental remediation costs not covered
through such contracts will be covered by Hercules under various agreements.
The Company's accrual for
<PAGE>
environmental remediation liabilities and the associated receivable for
reimbursement have been discounted, and are recorded net of $10 million and
$3 million, respectively, to reflect the present value of the expected
future cash flows, using a discount rate, net of estimated inflation, of 5
percent. At June 29, 1997, the estimated discounted range of reasonably
possible costs of study and remediation is between $34 million and $70
million. The Company does not anticipate that resolution of the
environmental contingencies in excess of amounts accrued, net of recoveries,
will materially affect future operating results. In future periods, new
laws, rules and regulations, advances in technologies, outcomes of
negotiations/litigations with regulatory authorities and other parties,
additional information about the ultimate remedy selected at new and
existing sites, changes in the extent and type of site utilization, the
number of parties found liable at each site, and their ability to pay could
significantly change the Company's estimates.
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 three "qui tam" lawsuits brought by former
employees of the operations acquired from Hercules in March, 1995. One
involves allegations relating to submission of false claims and records,
delivery of defective products, and a deficient quality control program. The
second 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 acquired operations will be assumed by
the Company except for a few specific lawsuits and disputes 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 29, 1997. In the third qui tam lawsuit, the Company received a
partially unsealed complaint in March 1997 alleging labor mischarging on a
government contract. Damages are not specified. The government is currently
investigating the claim and has not determined whether it will join the
lawsuit. In late fiscal 1997, the Company was also served with two
complaints in civil actions alleging violations of the False Claims Act and
the Truth in Negotiations Act. The complaints allege defective pricing on
two separate government contracts. Damages in either case were not
specified.
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 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 three month periods ended June 29, 1997, and June
30, 1996, totaled $3.1 and $5.8 million, respectively.
The Company has entered into interest rate swap and cap agreements as
hedging transactions to protect against increases in market interest rates
on its long term debt. At June 29, 1997, the notional amount of amortizing
interest rate swap agreements was $65.0 million. Under the swap agreements,
the Company currently pays an average fixed rate of 6.7 percent and receives
interest at a rate equal to
<PAGE>
three-month LIBOR (5.7 percent at June 29, 1997). These agreements have
remaining terms of 12-18 months, with certain cancellation options. The
interest rate cap agreements limit the Company's LIBOR exposure to 7.0
percent and have a remaining term of 3 months. The notional amount of these
amortizing interest rate cap agreements was $15.0 million at June 29, 1997.
7. 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 did not have a significant impact on the Company's
financial position or results of operations.
8. Earnings per common share are computed based upon the weighted average
number of common shares and common equivalent shares, consisting of the
dilutive effect of stock options outstanding during each year. Earnings per
common share assuming full dilution are substantially the same.
In February 1997, the Financial Accounting Standards board issued SFAS No.
128, "Earnings Per Share", which will require companies to present basic
earnings per share (EPS) and diluted earnings per share, instead of the
primary and fully diluted EPS that is currently required. The new standard
requires additional informational disclosures and also makes certain
modifications to the currently applicable EPS calculations defined in
Accounting Principles Board No. 15. The new standard is required to be
adopted by all public companies for reporting periods ending after December
15, 1997 (the Company's third quarter of fiscal 1998), and will require
restatement of EPS for all prior periods reported. Under the requirements of
SFAS No. 128, the Company's EPS would be as follows:
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------
June 29, 1997 June 30, 1996
- ----------------------------------------------------------------
<S> <C> <C>
Basic earnings per share:
Continuing operations 1.13 .58
Discontinued operations -- .18
- ----------------------------------------------------------------
Total Basic Earnings Per Share $1.13 $.76
================================================================
Diluted earnings per share:
Continuing operations 1.10 .57
Discontinued operations -- .17
- ----------------------------------------------------------------
Total Diluted Earnings Per Share $1.10 $.74
================================================================
</TABLE>
9. Certain reclassifications have been made to the fiscal 1997 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 three month periods ended
June 29, 1997, and June 30, 1996. The Company's accounting policies are
described in the notes to financial statements in its fiscal 1997 Annual
Report on Form 10-K.
11. On October 10, 1996, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 96-1 (SOP 96-1) entitled "Environmental
Remediation Liabilities." The SOP provides authoritative guidance on
specific accounting issues relative to recognition, measurement, display,
and disclosure of environmental remediation liabilities. The Company adopted
SOP 96-1 in the fourth quarter of fiscal 1997.
<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 29, 1997, totaled
$251.6 million, an increase of $21.4 million, or 9.3 percent, from $230.2
million for the comparable quarter in the prior year. Conventional Munitions
Group sales were $116.7 million for the quarter ended June 29, 1997, an increase
of $25.6 million, or 28.1 percent, compared to $91.1 million in the comparable
quarter of the prior year. The sales increase was primarily driven by an
increase in tank ammunition sales of approximately $32 million during the
quarter ended June 29, 1997, compared to the comparable quarter of the prior
year. The increase was largely the result of higher revenues due to increased
production of tank ammunition training rounds, up $19 million, compared to the
comparable quarter of the prior year. The remainder of the increase in tank
ammunition sales is attributable to resolution of the technical issues on the
M830A1 tactical tank round, which had delayed production and shipments through
early fiscal 1997. Space and Strategic Systems Group sales were $78.1 million
for the quarter ended June 29, 1997, a decrease of $.2 million, compared to
$78.3 million in the comparable quarter of the prior year. Increased sales from
the composite structures business, up approximately $10 million compared to the
comparable quarter of the prior year, completely offset the absence in fiscal
1998 of revenue recognized in fiscal 1997 on the Evolved Expendable Launch
Vehicle (EELV) program, which the Company completed in fiscal 1997. Defense
Systems Group sales were $50.6 million for the quarter ended June 29, 1997, a
decrease of $7.0 million, or 12.2 percent, compared to $57.6 million in the
comparable quarter of the prior year. The decrease is largely attributable to
decreased revenues on antitank mines and artillery fire control systems, down
approximately $14 million, which was partially offset by increased revenues
attributable to the Outrider program, awarded to the Company in the first
quarter of fiscal 1997. Emerging Business Group sales were $8.7 million for the
quarter ended June 29, 1997, an increase of $1.1 million, or 14.5 percent over
revenues of $7.6 million in the comparable quarter of the prior year. Company
sales for fiscal 1998 are expected to be approximately $1 billion.
Gross Margin
The Company's gross margin in the quarter ended June 29, 1997 was $43.7 million
or 17.4 percent of sales, compared to $36.2 million, or 15.7 percent of sales
for the comparable quarter of the prior year. The increase in gross margin was
due to a combination of factors, including improved cost performance on the
Titan rocket motor booster program and other Space and Strategic programs.
Fiscal 1998 gross margin, as a percent of sales, is expected to be in the 17.5
to 18.5 percent range.
Operating Expenses
The Company's operating expenses for the quarter ended June 29, 1997, totaled
$22.4 million, or 8.9 percent of sales, compared to $19.8 million, or 8.6
percent of sales for the comparable quarter in the prior year. Operating
expenses, stated as a percent of sales, were slightly higher in the quarter
ended June 29, 1997, as compared to the comparable quarter of the prior year.
The increase in the current quarter expenses is due primarily to the Company's
investment of
<PAGE>
approximately $3.5 million in pursuit of the U.S. government's Intercontinental
Ballistic Missile (ICBM) Prime Integration Program. Fiscal 1998 operating
expenses, as a percent of sales, are expected to be approximately 9.5 percent.
Interest Expense
The Company's interest expense for the quarter ended June 29, 1997 was $7.6
million, a decrease of $1.7 million compared to $9.3 million for the comparable
quarter in the prior year. The large decrease was driven by significantly
reduced borrowings outstanding in the current quarter, as compared to the
comparable quarter of the prior year. Total borrowings outstanding (including
notes payable, and the current and long-term portions of the long-term debt) at
June 29, 1997, were $145.0 million less than total borrowings outstanding at
June 30, 1996, due to scheduled debt repayments, as well as the $88.6 million
pre-payment of debt in late fiscal 1997, as a result of the sale of the
Company's former Marine Systems Group.
Interest Income
Interest income for the quarter ended June 29, 1997 was $.8 million, compared to
$.3 million for the comparable quarter of the prior year, an increase of $.5
million. The increase is driven by interest income earned on increased average
cash balances in the current quarter.
Income Taxes
The quarters ended June 29, 1997, and June 30, 1996, respectively, reflect an
effective income tax rate of 0 percent. This tax rate differs from statutory tax
rates due to the utilization of available tax loss carryforwards. Such carry
forwards are expected to reduce future tax expense. It is currently expected
that payments for taxes in fiscal 1998 will also be reduced due to the
aforementioned tax loss carryforwards. However, the Company may be subject to
the provisions of the Alternative Minimum Tax (AMT), in which case tax payments
could be required.
Net Income
Net income reported for the quarter ended June 29, 1997, was $14.7 million
($1.10 per share), an increase of $4.8 million, or 48.0 percent, when compared
with net income of $9.9 million ($.74 per share) for the comparable quarter of
the prior year. The increase was primarily due to a combination of increased
sales volume, improved gross margins, and reduced interest costs in the current
quarter ended June 29, 1997, as compared to the comparable quarter of the prior
year.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
- -----------------------------------------------------
Cash used by operations totaled $18.4 million for the quarter ended June 29,
1997, a reduction in cash usage of $11.3 million, when compared with cash used
by operations of $29.7 million in the comparable quarter of the prior year. The
reduced level of cash usage in the quarter ended June 29, 1997 resulted from a
combination of factors, the most significant of which included improved working
capital management and improved profitability for the quarter ended June 27,
1997, as compared to the comparable quarter of the prior year.
Cash used in investing activities for the quarter ended June 29, 1997, was $2.9
million, a $1.3 million decrease in cash used, compared to cash used by
investing activities of $4.2 million in the
<PAGE>
comparable quarter of the prior year. This difference primarily represented
reduced capital expenditures in the current year.
Net outlays for capital expenditures for the quarter ended June 29, 1997,
totaled $3.0 million, or 1.2 percent of sales, a decrease as a percentage of
sales, compared to capital expenditures of $3.7 million, or 1.6 percent of
sales, in the comparable quarter of the prior year. The Company expects capital
expenditures, as a percentage of sales, to be approximately 2.0 percent of sales
for fiscal 1998.
At June 29, 1997, the Company had no borrowings outstanding against its bank
revolving credit facility. Outstanding letters of credit of $38.5 million
reduced amounts available on this facility to $236.5 million at June 29, 1997.
During fiscal 1996, the Company began a program to repurchase up to $50.0
million of its common stock. During the quarter ended June 29, 1997, the Company
repurchased an additional 139,600 shares for approximately $6.0 million. As of
June 29, 1997, the Company has substantially completed its stock repurchase
program, having repurchased approximately 1.26 million shares of common stock
over the life of the program, at an average price of $39.09 per share, for an
aggregate cost of $49.4 million.
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 53 percent
on June 29, 1997, compared to 55 percent on March 31, 1997. This decrease
reflects principal repayments of $7.3 million on the bank term debt during the
quarter ended June 29, 1997, as well as increased equity, due primarily to
fiscal 1998 net earnings to date.
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, $3.0 million
and $4.0 million, made in June 1995, April 1996, and April 1997, respectively,
and payment to be made of $4.5 million, plus interest at the three year Treasury
Bill rate, in June 1998. 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 29, 1997, the Company
believes that future operating cash flows, combined with existing cash balances,
and 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 on cost-type contracts.
<PAGE>
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, governmental laws and other rules 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,
customer product acceptance, continued access to technical and capital
resources, and merger and acquisition activity within the industry. 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 the GAU-8/A contract for target practice rounds, the
registrant has been 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. The registrant has
been informed by the Department of Justice that both criminal and civil
investigations have been completed without further action to be taken.
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 Amendment No. 1 to Stockholder's Agreement, dated March
15, 1995, between Alliant Techsystems Inc. and Hercules
Incorporated
10.2 Agreement and Confirmation Effective as of June 19, 1997
10.3 Non-Qualified Stock Option 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 29, 1997, 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 7, 1997 By: /s/ Charles H. Gauck
Name: Charles H. Gauck
Title: Secretary
(On behalf of the registrant)
Date: August 7, 1997 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 No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
10.1 Amendment No. 1 to Stockholder's Agreement,
dated March 15, 1995, between Alliant
Techsystems Inc. and Hercules
Incorporated............................... Filed herewith electronically
10.2 Agreement and Confirmation Effective
as of June 19, 1997........................ Filed herewith electronically
10.3 Non-Qualified Stock Option 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
AMENDMENT NO. 1 TO STOCKHOLDER'S AGREEMENT,
DATED MARCH 15, 1995, BETWEEN
ALLIANT TECHSYSTEMS INC.
AND
HERCULES INCORPORATED
______________________________________________
EFFECTIVE: JUNE 19, 1997
______________________________
WHEREAS, Alliant Techsystems Inc., a Delaware corporation (the "Company"),
and Hercules Incorporated, a Delaware corporation (the "Stockholder"), are
parties to that certain Stockholder's Agreement, dated March 15, 1995 (the
"Agreement").
WHEREAS, the Company and the Stockholder desire to amend the Agreement as
provided herein and, except as so amended, the Agreement as in effect on the
date hereof shall not be affected by this Amendment No. 1.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Section 3(a): Lines one through six on page 3 of the Agreement are
hereby amended to read as follows:
"(a) "During the Term, the Board of Directors of the Company (the
"Board") shall consist of not less than eight nor more than thirteen
members, of which (i) until the Company's 1998 Annual Meeting Of
Stockholders, four members (or such fewer members as may be agreed to by
Gotham Capital III, L.P. ("Gotham"), successor by merger to Capstay
Partners, L.P.) and, thereafter, three members (or such fewer members as
may be agreed to by Gotham), shall be designees of Gotham; (ii) no more
than two members shall be employees of the Company or its subsidiaries, one
of whom shall be the chief executive officer of the Company; and (iii)
until the Company's 1998 Annual Meeting Of Stockholders, three members (or
such fewer members as may be agreed to by the Stockholder) and, thereafter,
two members (or such fewer members as may be agreed to by the Stockholder)
shall be designees of the Stockholder."
2. The existing Section 7(b)(iv) on pages 8 and 9 of the Agreement shall
be replaced in its entirety with the following:
"(iv) Notwithstanding anything contained herein to the contrary (x)
if any purchaser or transferee acquiring Voting Securities from the
Stockholder fails to deliver to the Stockholder and the Company a written
representation that such purchaser or
<PAGE>
transferee is acquiring for "investment purposes only and not with a view
to seek control of the Company" and a written agreement that such purchaser
or transferee agrees to comply with Sections 4, 5 and 6 of the Agreement,
and if such purchaser or transferee would, after such acquisition, become
the beneficial holder of greater than fifteen percent (15%) of the Total
Voting Power, then the rights granted to the Company in Section 7(b)(ii)
above may be exercised in part, at the election of the Company, in an
amount that is not less than a number of Voting Securities representing
seven and one-half percent (7.5%) or more of the Total Voting Securities
and the closing date for such purchase by the Company shall be ten business
days after the Company's notice to purchaser, and (y) if such purchaser or
transferee has delivered the said written representation and written
agreement or if such purchaser or transferee is acquiring less than 15% of
the total Voting Power, then the right granted to the Company in Section
7(b)(ii) above may not be exercised in part and if exercised, the Company
must purchase all, but not less than all, of the Voting Securities
specified in a Stockholder Notice. Notwithstanding anything contained
herein, the Company shall not have the right to transfer its right of first
refusal contained herein to any person if the nature or identity of such
person is reasonably likely to delay the closing of a purchase or transfer
of Voting Securities for a longer period of time than if the Company were
the purchaser or transferee."
3. The existing Section 7(c) on page 9 of the Agreement shall be replaced
in its entirety with the following:
"(c) The Stockholder shall not, and shall cause its controlled
affiliates not to at any time during the Term, knowingly sell or transfer
Voting Securities to any Foreign Person. For purposes of this Agreement,
the term "Foreign Person" shall have the meaning given to it under the
Regulations Pertaining To Mergers, Acquisitions and Takeovers Buy Foreign
Persons, 56 Fed. Reg. 58,774 et seq (November 21, 1993) (31 C.F.R. Part
800)."
4. Section 8(a)(i) on pages 11 and 12 of the Agreement is hereby amended
in its entirety as follows:
"(a) (i) At any time commencing 270 days after the date hereof and
continuing thereafter until the date on which the Stockholder and its
controlled affiliates own Voting Securities representing less than 5% of
the Total Voting Power, the Stockholder shall have the right to make
written demand upon the Company (each, a "Stockholder Demand"), on not more
than five separate occasions (subject to the provisions of this Section 8),
to register under the Securities Act all or any portion of the shares of
Voting Securities issued to it pursuant to the Transaction Agreement and
owned by the Stockholder or its controlled affiliates (the shares subject
to such demand hereunder being referred to as the "Subject Stock"), which
Stockholder Demand shall specify the intended method or methods of
disposition of such Subject Stock and the Company shall use its best
efforts to cause such shares to be registered under the Securities Act as
soon as reasonably practicable so as to permit promptly the disposition
thereof in accordance with the intended method or methods of disposition
stated in the Stockholder Demand
<PAGE>
(including, but not limited to, an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule) under the Securities Act
(a "Rule 415 Offering") if the Company is then eligible to register such
Subject Stock on Form S-3 (or a successor form); so long as at the time of
the Stockholder Demand relating to such Rule 415 Offering, the Stockholder
represents to the Company that it has a present intention to sell all of
the Subject Stock included in such Stockholder Demand); provided, however,
that each such demand shall cover at least 500,000 shares of Subject Stock
(subject to adjustment for stock splits, reverse stock splits and stock
dividends after the date hereof). In connection therewith, the Company
shall prepare, and as promptly as practicable (and in any event within 45
days of the receipt of the request), file, on Form S-3 if permitted or
otherwise on the appropriate form, a registration statement under the
Securities Act to effect such registration. The Stockholder agrees to
provide all such information and materials and to take all such action as
may be reasonably required in order to permit the Company to comply with
all applicable requirements of the Securities Act and the Securities and
Exchange Commission (the "Commission") and to obtain any desired
acceleration of the effective date of such registration statement. If the
offering to be registered is to be underwritten, the managing underwriters
shall be a nationally recognized investment banking organization selected
by the Stockholder and be subject to the approval of the Company (which
approval shall not be unreasonably withheld or delayed), and the Company,
the Stockholder and such underwriters shall enter into an underwriting
agreement containing customary terms and conditions."
5. Section 8(a)(ii): Lines one through seven on page 12 of the Agreement
are hereby amended to read as follows:
"(ii) Notwithstanding the foregoing, the Company (w) shall not be
obligated to cause a registration statement pursuant to this Section 8(a)
to become effective prior to the first anniversary of the date hereof, (x)
shall not be obligated to prepare or file more than three registration
statements pursuant to this Section 8(a) during any twelve-month period,
(y) shall not be obligated to cause any special audit to be undertaken in
connection with any such registration and (z) shall be entitled to postpone
for a reasonable period of time, but not in excess of 90 days, the filing
of any registration statement otherwise required to be prepared and filed"
6. Section 10 on page 21 of the Agreement is amended in its entirety as
follows:
"10. Rights Plan. The Company agrees that, during the Term, so long
as the Stockholder is in compliance with its obligations under Sections 5
and 6 of this Agreement, the Company shall not declare the Stockholder, or
any purchaser or transferee approved by the Company, which approval shall
not be unreasonably withheld, and who agrees in writing to comply with
Sections 5 and 6 of this Agreement (an "Acceptable Purchaser"), to be an
"Adverse Person" under the Rights Plan or take other action under the
Rights Plan, or a successor plan, which would treat the Stockholder or any
such Acceptable Purchaser as an "Acquiring Person" or similar entity under
the Rights Plan or a successor plan. For purposes of this Agreement, the
term "Rights Plan" shall mean the
<PAGE>
Rights Agreement, dated as of September 28, 1990, between the Company and
Manufacturers Hanover Trust Company, now operating under the name of
ChaseMellon Shareholder Services, as amended."
7. Except as amended by this Amendment No. 1, the Agreement as in effect
on the date hereof shall be unaffected by this Amendment No. 1.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of June 19, 1997.
ALLIANT TECHSYSTEMS INC. HERCULES INCORPORATED
By: /s/ Richard Schwartz 6-23-97 By: /s/ R. Keith Elliott
------------------- --------------------
Name Printed: Richard Schwartz Name Printed: R. Keith Elliott
Title: Chairman, President Title: Chairman and Chief Executive
and Chief Executive Officer Officer
<PAGE>
Exhibit 10.2
AGREEMENT AND CONFIRMATION
EFFECTIVE AS OF JUNE 19, 1997
In connection with the Stockholder's Agreement, dated March 15, 1995, and
amended June 19, 1997, between Alliant Techsystems Inc. ("Alliant") and Hercules
Incorporated ("Hercules") (the "Agreement") the parties hereto agree to, approve
and confirm the following:
(1) the nomination and election of Vincent J. Corbo to the Alliant Board of
Directors with such election being effective as of Alliant's 1997 Annual
Meeting of Stockholders;
(2) the Amendment No. 1 to the Stockholder's Agreement, dated March 15, 1995,
between Alliant and Hercules Incorporated, which amendment is effective as
of June 19, 1997;
(3) Section 3(a) of the Agreement provides for Gotham (successor by merger to
Capstay Partners, L.P.) to designate four members of the Alliant Board of
Directors until Alliant's 1998 Annual Meeting of Stockholders; the four
members so designated by Gotham are Joel M. Greenblatt, Joseph F. Mazzella,
Daniel L. Nir, and Jonathan G. Guss with Mr. Guss being the fourth member;
(4) Section 3(a) of the Agreement provides for Hercules to designate three
members of the Alliant Board of Directors until Alliant's 1998 Annual
Meeting of Stockholders; the three members so designated by Hercules are R.
Keith Elliott, Vincent J. Corbo, and Thomas L. Gossage with Mr. Gossage
being the third member;
(5) Section 3(a) of the Agreement provides that effective as of Alliant's 1998
Annual Meeting of Stockholders, the number of Board members designated by
Gotham shall be reduced from four to three and those designated by Hercules
shall be reduced from three to two; and
(6) in the event of the reductions contemplated in (iii) above, Messrs. Gossage
and Guss will leave the Alliant Board of Directors or not stand for re-
election as the case may be.
<PAGE>
AGREEMENT AND CONFIRMATION
EFFECTIVE AS OF JUNE 19, 1997
Page 2
IN WITNESS WHEREOF, the parties hereto (including Gotham Capital III, L.P.,
successor by merger to Capstay Partners, L.P.) have caused this Agreement and
Confirmation to be duly executed, all as of the date first written above.
ALLIANT TECHSYSTEMS INC. HERCULES INCORPORATED
By: /s/ Richard Schwartz 6-23-97 By: /s/ R. Keith Elliott
-------------------- --------------------
Richard Schwartz R. Keith Elliott
Chairman, President and Chairman and
Chief Executive Officer Chief Executive Officer
GOTHAM CAPITAL III, L.P.
By: /s/ Daniel L. Nir
-----------------
Daniel L. Nir
Managing Member
<PAGE>
Exhibit 10.3
NON-QUALIFIED STOCK OPTION [ALLIANT TECHSYSTEMS LOGO]
AGREEMENT
NUMBER OF SHARES OPTION PRICE SOCIAL SECURITY
GRANTED TO GRANT DATE OF COMMON STOCK PER SHARE NUMBER
---------- ---------- --------------- --------- ------
EXPIRATION
DATE
----
1. The Option. Alliant Techsystems Inc., a Delaware corporation (the "Company")
hereby grants to the individual named above (the "Employee"), as of the above
Grant Date, an option, without limited stock appreciation rights (LSARs) (the
"Option"), to purchase the above Number of Shares of Common Stock of the
Company, for the above Option Price Per Share, on the terms and conditions set
forth in this Non-Qualified Stock Option Agreement (this "Agreement"), in the
amended and restated Alliant Techsystems Inc. 1990 Equity Incentive Plan (the
"Plan"), and in the Addendum on the reverse side hereof.
2. Exercise of Option. The exercise of the Option is subject to the following
conditions and restrictions:
(a) The Option may be exercised only by the Employee (or by appropriate
representatives in the event of the Employee's death), in whole or in part
from time to time as provided in Paragraph 2(b) below, during the period
commencing on the dates set forth in Paragraph 2(b) below and ending on the
earlier of (i) the above Expiration Date, or (ii) the expiration of the
applicable period following the date of the Employee's termination of
employment with the Company or one of its subsidiaries, as provided in
Paragraph 4 below. In no event, however, may the Option be exercised to any
extent after the Expiration Date.
(b) The Option shall become exercisable to the extent of one third of the
above Number of Shares of Common Stock on each of the first, second, and
third anniversaries of the Grant Date. Once the Option has become
exercisable, it may be exercised to the extent set forth in the preceding
sentence at any time thereafter, subject to the provisions of Paragraph
2(a) above.
3. Manner of Exercise. The Option shall be exercised by the delivery of written
notice of exercise (the "Notice") to the Director, Compensation and Benefits of
the Company at its executive office. The Notice shall be on such form as the
Company may prescribe, and shall specify the number of shares of Common Stock of
the Company as to which the Option is being exercised (the "Shares"), and shall
be accompanied by payment of the purchase price of the Shares either in cash
(certified or cashier's check payable to the Company) or by the delivery of
Common Stock of the Company, or both. If requested by the Company, the Notice
shall contain or be accompanied by a representation that the Shares are being
acquired for investment and not with a view to
<PAGE>
distribution or resale. The Notice shall also be accompanied by such other
information and documents as the Company, in its discretion, may request.
4. Termination of Employment. Subject to the provisions of Paragraph 2(a) above,
the Option may be exercised as provided in the Plan to the following extent for
the following period after the Employee's Termination of Employment (as defined
in the Plan):
(a) For three years following death prior to Termination of Employment to
the extent exercisable on the date of death, and for 180 days following
death after Termination of Employment to the extent exercisable on the date
of Termination of Employment;
(b) For three years after layoff or retirement to the extent exercisable on
the date of Termination of Employment;
(c) For three years after Disability (as defined in the Plan) to the extent
exercisable on the date of Termination of Employment; or
(d) For 90 days after Termination of Employment for any other reason, other
than for cause, to the extent exercisable on the date of Termination of
Employment.
The Option may not be exercised following Termination of Employment for cause.
5. Income Taxes. The Employee is liable for any federal, state and local income
taxes applicable upon the grant or exercise of the Option or the disposition 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 an amount necessary to pay, any income
withholding taxes required by the Company to be collected in connection with the
exercise of the Option or the disposition of the Shares. For federal income tax
purposes, the Option shall not be eligible for treatment as a qualified or
incentive stock option.
6. Acknowledgment. The Option may not be exercised in whole or in part until the
Employee dates and signs the form of Acknowledgment below and returns a copy of
this Agreement to the Company. 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.
_________________________ ____________________________
EMPLOYEE'S SIGNATURE Richard Schwartz
_________________________ Chairman of the Board, President and
DATE Chief Executive Officer
_________________________
SOCIAL SECURITY NUMBER
<PAGE>
ADDENDUM TO
NON-QUALIFIED STOCK OPTION AGREEMENT
The terms and conditions set forth in this Addendum are applicable to the Option
grant referred in Paragraph 1 of the Agreement on the reverse side hereof.
Capitalized terms used in this Addendum, and not otherwise defined herein, shall
have the meaning attributed to them in the Agreement.
Notwithstanding any provisions of the Plan and/or the Agreement to the contrary,
and in consideration for the Employee's being a participant in the Alliant
Techsystems Inc. Income Security Plan, or a successor plan so identified therein
(the "Income Security Plan"), at any point in time that the Employee is a
Participant (as defined in the Income Security Plan) in the Income Security
Plan, the provisions of the Plan with respect to the effects on the Option of a
Change of Control (as defined in the Plan) shall be inapplicable, and the
provisions of the Income Security Plan with respect to the Obligations of
Company Upon Qualifying Termination (as currently set forth in Section 4 of the
Income Security Plan), shall apply instead.
ALLIANT TECHSYSTEMS INC.
_______________________________ By:_________________________
Employee's Signature Richard Schwartz, Chairman of
the Board, President and Chief
_______________________________ Executive Officer
Date
<PAGE>
Exhibit 11
Computation of Earnings per Common and Common Equivalent Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended
June 29 June 30
1997 1996
Primary calculation: -------- -------
<S> <C> <C>
Net income $14,657 $ 9,904
======= =======
Weighted average shares outstanding during the period 13,005 12,949
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 294 401
------- -------
Total common and common equivalent shares - primary 13,299 13,350
======= =======
Primary earnings per common and common equivalent share $ 1.10 $ .74
======= =======
Average share price for the period $ 46.03 $ 46.89
======= =======
Fully diluted calculation:
Net income $14,657 $ 9,904
======= =======
Weighted average shares outstanding during the period 13,005 12,949
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 374 404
------- -------
Total common and common equivalent shares - fully diluted 13,379 13,353
======= =======
Fully diluted earnings per common and common equivalent
share $ 1.10 $ .74
======= =======
Higher of average or period end share price $ 52.69 $ 47.13
======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-Q filing for the quarter ended June 29, 1997 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-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> JUN-29-1997 JUN-30-1997
<CASH> 89,369 122,491
<SECURITIES> 378 378
<RECEIVABLES> 191,160 191,675
<ALLOWANCES> 121 107
<INVENTORY> 77,417 68,125
<CURRENT-ASSETS> 403,166 425,242
<PP&E> 519,500 523,175
<DEPRECIATION> 171,820 162,615
<TOTAL-ASSETS> 975,249 1,009,704
<CURRENT-LIABILITIES> 302,875 331,197
<BONDS> 229,089 237,071
0 0
0 0
<COMMON> 130 131
<OTHER-SE> 229,005 218,661
<TOTAL-LIABILITY-AND-EQUITY> 975,249 1,009,704
<SALES> 251,639 230,173
<TOTAL-REVENUES> 251,639 230,173
<CGS> 207,919 194,014
<TOTAL-COSTS> 207,919 194,014
<OTHER-EXPENSES> 2,038 2,800
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,556 9,280
<INCOME-PRETAX> 14,657 7,614
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 14,657 7,614
<DISCONTINUED> 0 2,290
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,657 9,904
<EPS-PRIMARY> 1.10 .74
<EPS-DILUTED> 1.10 .74
</TABLE>
