ALLIANT TECHSYSTEMS INC, 424B4, 1997-11-18

ALLIANT TECHSYSTEMS INC
424B4, 1997-11-18
ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES)

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<PAGE>
Filed Pursuant to Rule 424(B)(4)
Registration No. 333-38775
PROSPECTUS
ISSUED NOVEMBER 17, 1997

2,778,069 SHARES

ALLIANT TECHSYSTEMS INC.

COMMON STOCK
-----------------

OF THE 2,778,069 SHARES OF COMMON STOCK OF THE COMPANY (THE "COMMON STOCK")
OFFERED HEREBY (THE "OFFERING"), 2,222,455 SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 555,614 SHARES
ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS. ALL OF THE SHARES OFFERED HEREBY ARE BEING
SOLD BY HERCULES INCORPORATED, A DELAWARE CORPORATION ("HERCULES" OR
THE "SELLING STOCKHOLDER"), PURSUANT TO CERTAIN REGISTRATION RIGHTS
GRANTED BY THE COMPANY TO THE SELLING STOCKHOLDER UNDER AN
EXISTING STOCKHOLDER'S AGREEMENT BETWEEN THEM. SEE "SELLING
STOCKHOLDER." THE COMPANY WILL NOT RECEIVE ANY OF THE PROCEEDS
FROM THE SALE OF THE SHARES BY THE SELLING STOCKHOLDER. THE
COMMON STOCK IS TRADED ON THE NEW YORK STOCK EXCHANGE ("NYSE")
UNDER THE SYMBOL "ATK." ON NOVEMBER 17, 1997, THE LAST
REPORTED SALE PRICE OF THE COMMON STOCK ON THE NYSE WAS
$57 7/8 PER SHARE. SEE "PRICE RANGE
OF COMMON STOCK."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------

PRICE $57 5/8 A SHARE
-------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
DISCOUNTS AND SELLING
PRICE TO PUBLIC COMMISSIONS(1) STOCKHOLDER(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER SHARE................................................ $57.625 $2.30 $55.325
TOTAL.................................................... $160,086,226 $6,389,559 $153,696,667
</TABLE>

- ---------
(1) THE COMPANY AND THE SELLING STOCKHOLDER HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITERS."

(2) ESTIMATED OFFERING EXPENSES OF APPROXIMATELY $550,000 WILL BE PAID BY THE
COMPANY.

------------------------

THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT NOVEMBER 21, 1997 AT THE OFFICES
OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR
IN IMMEDIATELY AVAILABLE FUNDS.
-------------------

MORGAN STANLEY DEAN WITTER

SBC WARBURG DILLON READ INC.

NOVEMBER 17, 1997
<PAGE>
[PICTURE OF UNITED STATES MAP SHOWING LOCATIONS
OF THE COMPANY'S FACILITIES AND CERTAIN OF THE COMPANY'S
PRINCIPAL PRODUCTS]
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Available Information.................. 1
Incorporation of Certain Documents by
Reference............................ 1
Forward-Looking Statements............. 2
Prospectus Summary..................... 3
Risk Factors........................... 9
Price Range of Common Stock............ 15
Dividends and Dividend Policy.......... 16
Capitalization......................... 16
Selected Consolidated Financial
Information.......................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19

Business............................... 27
Selling Stockholder.................... 31
Certain Transactions and
Relationships........................ 32
Certain U.S. Federal Tax Considerations
for Non-U.S. Holders of Common
Stock................................ 35
Description of Capital Stock........... 37
Underwriters........................... 41
Legal Matters.......................... 44
Experts................................ 44
Index to Consolidated Financial
Statements........................... F-1
</TABLE>

------------------------

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN
THE COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THE PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

------------------------

NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY, THE
SELLING STOCKHOLDER OR ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF
THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY
JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED
STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE
COMPANY, THE SELLING STOCKHOLDER AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT
AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING AND THE DISTRIBUTION OF THIS
PROSPECTUS.

------------------------

IN THIS PROSPECTUS REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS, AND THE TERMS "UNITED STATES" AND "U.S." MEAN THE UNITED STATES OF
AMERICA, ITS STATES, ITS TERRITORIES, ITS POSSESSIONS AND ALL AREAS SUBJECT TO
ITS JURISDICTION.

------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
<PAGE>
AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement"), of which this Prospectus is a part, with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933 (the "Securities Act") with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the financial
schedules and exhibits filed therewith. Statements made in this Prospectus as to
the contents of any contract, agreement or other document that is filed as an
exhibit to the Registration Statement or otherwise with the Commission are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed with the Commission. Each such statement shall be deemed
qualified in its entirety by such reference. Copies of the Registration
Statement, including all exhibits and schedules thereto, may be examined or
obtained from the Commission as described below.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Commission. Reports,
proxy statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office,
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a Website that contains reports, proxy and information
statements and other information regarding registrants (such as the Company)
that file electronically with the Commission. The address of such site is:
http://www.sec.gov. Reports, proxy statements and other information concerning
the Company may also be inspected at the offices of the New York Stock Exchange
at 20 Broad Street, New York, New York 10005.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 (File No. 1-10582), the Company's Quarterly Report on Form 10-Q for the
period ended June 29, 1997, the Company's Quarterly Report on Form 10-Q for the
period ended September 28, 1997, the Company's Report on Form 8-K filed on
November 14, 1997 and all reports and other documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent
to the date of this Prospectus and prior to the termination of the Offering are
incorporated herein by reference.

Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified will not be deemed to
constitute a part of this Prospectus, except as so modified, and any statement
so superseded will not be deemed to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
(without exhibits other than exhibits specifically incorporated by reference) of
any or all documents incorporated by reference into this Prospectus. Requests
for such copies should be directed to Richard N. Jowett, Director of Investor
Relations, Alliant Techsystems Inc., 600 Second Street N.E., MN11-2015, Hopkins,
Minnesota 55343; telephone: 612-931-6080; e-mail: [email protected].

1
<PAGE>
FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact provided herein are
forward-looking statements and may contain information about financial results,
economic conditions, trends and known uncertainties. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, changes in governmental spending and budgetary policies,
governmental laws and other rules and regulations regarding various matters such
as environmental remediation, contract pricing and procurement policies,
changing economic and political conditions in the United States and in other
countries, international trade restrictions, customer product acceptance,
continued access to technical and capital resources, merger and acquisition
activity within the industry and the other factors discussed under "Risk
Factors." See "Risk Factors." Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's analysis,
judgment, belief or expectation only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. In addition to
the disclosure contained herein, readers should carefully review any disclosure
of risks and uncertainties contained in other documents the Company files or has
filed from time to time with the Commission pursuant to the Exchange Act.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL
STATEMENTS (INCLUDING NOTES THERETO) APPEARING OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. THE COMPANY'S FISCAL YEAR ENDS ON MARCH 31.

THE COMPANY

Alliant Techsystems Inc. ("Alliant" or the "Company") is a leading developer
and supplier of aerospace and defense technologies, products and systems to the
U.S. Government. The Company specializes in the production of high quality
products manufactured to meet exacting specifications designed to insure
consistent, reliable performance. The Company (including its predecessors) has
supplied products and services to the U.S. Government for more than 50 years.

The Company's principal business areas are conventional ammunition, solid
propulsion systems, smart weapons and composite structures. In the conventional
ammunition and solid propulsion businesses, the Company holds a number one or
two position in most major market segments. The Company is one of the top 15
defense contractors for the U.S. Government and is a major component and
subsystem supplier to the largest Department of Defense ("DoD") prime
contractors including Lockheed Martin, Boeing and Raytheon. For the fiscal year
ended March 31, 1997, the Company generated sales of approximately $1.1 billion,
operating income of $70.4 million and net income of $59.2 million.

The Company believes that its technical and manufacturing capabilities have
positioned it well to pursue new opportunities. In order to focus the Company's
development and production efforts and respond effectively to its customer base,
the Company is organized in the following business groups:

CONVENTIONAL MUNITIONS GROUP. The Company is one of two principal
suppliers of conventional ammunition to the DoD. Principal products and
services include conventional ammunition, propellants, solid propulsion
systems for tactical missiles, warheads, metal parts and composite
structures for weapons systems, infrared decoy flares and commercial gun
powder. The Group has four distinct business units: Ammunition Systems (tank
ammunition, medium caliber ammunition and warheads); Ordnance (military
propellants and commercial gun powders); Tactical Propulsion (solid
propulsion for tactical missiles, composite structures and warheads); and
Kilgore Operations (flares). The Conventional Munitions Group had fiscal
1997 sales of approximately $499.0 million, representing approximately 44%
of the Company's total sales during the year.

SPACE AND STRATEGIC SYSTEMS GROUP. The Company is a leading designer,
developer and manufacturer of solid rocket propulsion systems for space
launch vehicles and strategic missile systems and high performance composite
structures for military and commercial aircraft and spacecraft. In addition,
the Company provides operational and technical support services for space
launch activities. The Company is the world's leading producer of solid
rocket motors for unmanned expendable space launch vehicles and one of the
two leading developers and producers of solid propulsion systems for U.S.
strategic missile programs. The Company's Bacchus West production facility
located in Magna, Utah is one of the world's most modern and automated
propellant production facilities and represents a significant competitive
advantage for the Company. The Space and Strategic Systems Group had fiscal
1997 sales of approximately $339.0 million, representing approximately 30%
of the Company's total sales during the year.

DEFENSE SYSTEMS GROUP. The Company is a leading designer, developer and
manufacturer of tactical weapons systems, smart weapons, anti-tank and
demolition systems, unmanned aerial vehicles, fuzes, weapons test equipment
systems and targeting sensors. The Group has three distinct business units:
Tactical Systems (smart weapons, anti-tank and demolition systems, tactical
weapons systems, targeting sensors and fuzes); Defense Electronics Systems
(smart weapons systems, missile warning systems and weapons test equipment
systems); and Unmanned Aerial Vehicles (unmanned aerial vehicles ("UAVs")
and tactical ground control systems). The Defense Systems Group is
positioned to respond to the U.S. military's increasing demand for low-cost,
high quality precision weapons systems.

3
<PAGE>
The Defense Systems Group had fiscal 1997 sales of approximately $253.0
million, representing approximately 22% of the Company's total sales during
the year.

EMERGING BUSINESS GROUP. The Company's emerging business activities
include battery production, advanced technology applications, products and
services for environmental remediation/ facility management and safety
management services. The Emerging Business Group had fiscal 1997 sales of
approximately $41.0 million, representing approximately 4% of the Company's
total sales during the year. The Company is currently evaluating the merits
of consolidating some or all of the Group's programs into the other three
business groups to capture product synergies and realize additional cost
savings.

The Company's principal executive offices are located at 600 Second Street,
N.E., Hopkins, Minnesota 55343-8384 and its telephone number is (612) 931-6000.

RECENT DEVELOPMENTS

On October 24, 1997, the Company and the Selling Stockholder entered into an
agreement (the "New Agreement") which, upon consummation of the Offering, will
supersede the existing Stockholder's Agreement between the Company and the
Selling Stockholder (as amended in June 1997, the "Stockholder's Agreement"),
other than the registration rights granted to the Selling Stockholder in the
Stockholder's Agreement. The Selling Stockholder is offering 2,778,069 shares of
Common Stock pursuant to certain registration rights granted to the Selling
Stockholder by the Company under the Stockholder's Agreement. Such Agreement was
entered into at the time the Selling Stockholder acquired 3,862,069 shares of
Common Stock as partial consideration in connection with the sale of the
Hercules Aerospace Company division ("HAC") of Hercules to the Company (the
"Acquisition") in March 1995 pursuant to a Purchase and Sale Agreement dated
October 28, 1994 (the "Purchase Agreement"). The Selling Stockholder has the
right to sell to the Company and the Company has the right to purchase from the
Selling Stockholder during 1998 all or a portion of the 1,084,000 shares to be
owned by the Selling Stockholder following the consummation of the Offering
pursuant to a series of put and call options provided for in the New Agreement.
The put and call options may be exercised by either party at the price to the
public less underwriting discounts and commissions set forth on the cover page
of this Prospectus, plus simple interest at the rate of 6.25% per annum. The
Company presently intends to exercise its call rights in the event that the
Selling Stockholder does not exercise its put rights, although no definitive
decision has been made to do so. The New Agreement also contains certain
standstill provisions. The Company believes that the Offering and the repurchase
of shares from the Selling Stockholder pursuant to the put and call provisions
of the New Agreement will benefit the Company by permitting the orderly
distribution of these shares and increasing the liquidity of the market for the
Common Stock. See "Risk Factors--Controlling Stockholders; Relationship with
Selling Stockholder" and "Certain Transactions and Relationships--Future
Relationship with Selling Stockholder."

On October 27, 1997, the Company announced that upon completion of the
Offering it is expected that R. Keith Elliott, Chairman and Chief Executive
Officer of Hercules, and Vincent J. Corbo, President and Chief Operating Officer
of Hercules, will resign from the Company's Board of Directors. The Company also
announced that Michael T. Smith, Chairman and Chief Executive Officer of Hughes
Electronics Corporation, and Gilbert F. Decker, former Assistant Secretary of
the U.S. Army for Research, Development and Acquisition, have agreed to join the
Company's Board of Directors effective at the Company's regularly scheduled
January 1998 meeting of the Board of Directors.

On October 27, 1997, the Company also announced that its Board of Directors
had authorized the repurchase of up to 1.0 million shares of Common Stock (in
addition to the shares that the Company intends to repurchase from the Selling
Stockholder pursuant to the put and call provisions of the New Agreement) (the
"Repurchase Program"). Any such repurchases will be subject to prevailing market
conditions and the Company's compliance with certain covenants contained in
certain of the Company's debt agreements. As of September 28, 1997, these
covenants permitted the Company to spend up to approximately $69 million for all
share repurchases (among other permitted uses). The amount available

4
<PAGE>
for share repurchases will increase by 50% of the Company's cumulative
Consolidated Net Income (as defined in the debt agreements) for each fiscal
quarter beginning after September 28, 1997. No assurance can be given that the
Company will repurchase any or all of such shares. See "Risk
Factors--Restrictive Covenants," "Dividends and Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity, Capital Resources and Financial Condition."

In early 1997, the Company established an ICBM Prime Integration program
office to compete for the contract to become the prime integrator of the
Intercontinental Ballistic Missile ("ICBM") program for the U.S. Air Force. The
Air Force is currently transitioning from utilizing associated contractors to
the use of a prime integrator, which will be responsible for overall ICBM
program management. The Company submitted a proposal to act as prime integrator
in August 1997. The Company is one of two bidders for this contract, the award
of which is presently expected to be announced in December 1997. See "Risk
Factors--Risks Associated with ICBM Prime Integration Program."

STRATEGY

The Company is committed to enhancing its position as a leading developer
and supplier of aerospace and defense technologies, products and systems. Its
strategy to achieve this goal focuses on generating continued earnings growth
through establishing strategic alliances with prime contractors, pursuing new
program opportunities, expanding its composite structures business, improving
margins on its existing business base, reducing interest expense and utilizing
excess cash balances for stock repurchases and strategic acquisitions.

ESTABLISH STRATEGIC ALLIANCES WITH PRIME CONTRACTORS. Over the past few
years, a significant amount of consolidation has occurred within the prime
contractor ranks of the defense industry. The Company's strategy is to expand
its existing subcontractor relationships by establishing long-term strategic
supplier agreements with large prime contractors. The Company believes that
these agreements will increase the likelihood of the Company's participation on
major programs in the future.

PURSUE NEW PROGRAM OPPORTUNITIES. By identifying and pursuing subcontractor
and prime contractor program opportunities, the Company believes that it can
expand its business base over the next few years. The Company intends to pursue
subcontractor opportunities in its core areas of solid propulsion, conventional
ammunition and defense subsystems and prime contractor opportunities in niche
areas where it traditionally serves as systems integrator.

EXPAND COMPOSITE STRUCTURES BUSINESS. The principal markets for composite
structures are commercial and military aircraft, satellites and space launch
systems. Significant growth in these markets has resulted in composite sales
volume growth from approximately $18.0 million in fiscal 1993 to approximately
$50.0 million in fiscal 1997. The Company intends to continue expanding its
composites business base by leveraging its leading edge capabilities and
focusing management and marketing resources on high value product opportunities.

ACHIEVE MARGIN IMPROVEMENT. In recent years, the Company has made
significant progress in improving margins. Earnings before interest and taxes,
excluding nonrecurring charges ("EBIT") margins during fiscal years 1993 to 1995
were between 1.5% and 5.5%. In contrast, EBIT margins have exceeded 8% in each
of the past two fiscal years and during the first six months of fiscal 1998. The
Company believes that it can further improve EBIT margins through ongoing
facility consolidations, ongoing improvements in program and inventory
management and other operating expense reductions. Management's goal in future
years is to generate EBIT margins in excess of 10%.

REDUCE INTEREST EXPENSE. The Company has made significant progress in
lowering its debt-to-capitalization ratio from 78% in September 1995 to 50% in
September 1997 and expects to continue to lower its leverage ratios in the
future. Scheduled principal payments by the Company during the next four fiscal
years will repay all term loan indebtedness and the Company expects to refinance
its $150.0 million principal amount of 11 3/4% Senior Subordinated Notes due
2003 (the "Notes") as early as March 1999. These actions will significantly
reduce the Company's interest expense.

5
<PAGE>
UTILIZE EXCESS CASH FOR STOCK REPURCHASES AND STRATEGIC
ACQUISITIONS. Margin improvement initiatives and efficient working capital
management are expected to generate excess cash flow. This excess cash will be
targeted primarily for share repurchases and strategic acquisitions. Since 1995,
the Company has repurchased approximately 1.2 million shares of Common Stock and
the Board has recently approved the Repurchase Program for up to 1.0 million
additional shares (in addition to the shares that the Company intends to
repurchase from the Selling Stockholder pursuant to the New Agreement), subject
to market conditions and the Company's compliance with certain debt covenants.
See "--Recent Developments" and "Risk Factors--Restrictive Covenants." In
addition, the Company believes that there are industry consolidation
opportunities within its core business. The Company will target synergistic
acquisitions that strengthen its core businesses, offer consolidation
opportunities and fit strategically with its existing operations and new program
opportunities. The Company will also consider acquisitions in related businesses
that offer additional growth potential.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the
Selling Stockholder:

United States Offering.......... 2,222,455 shares
International Offering.......... 555,614 shares
---------
Total......................... 2,778,069 shares

Common Stock Outstanding
as of November 14, 1997......... 13,168,276 shares

Selling Stockholder............... The Selling Stockholder is offering 2,778,069 shares of
Common Stock pursuant to certain registration rights
under the Stockholder's Agreement, which was entered
into at the time the Selling Stockholder acquired
3,862,069 shares of Common Stock as partial
consideration in connection with the Acquisition. The
3,862,069 shares beneficially owned by the Selling
Stockholder immediately preceding the Offering represent
29.3% of the outstanding Common Stock. Immediately
following the Offering, the Selling Stockholder will
beneficially own 1,084,000 shares, or approximately 8.2%
of the outstanding Common Stock. See "Risk
Factors--Controlling Stockholders; Relationship with
Selling Stockholder."

Use of Proceeds................... The Company will not receive any of the proceeds of the
Offering.

NYSE Symbol....................... ATK
</TABLE>

6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated financial information is qualified in its
entirety by reference to, and should be read in conjunction with, "Selected
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements (including Notes thereto) included in this Prospectus. Results for
the six-month period ended September 28, 1997 are not necessarily indicative of
results for the full year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, ------------------------
----------------------------------------------------- SEPT. 29, SEPT. 28,
1993 1994 1995(1) 1996 1997 1996 1997
--------- --------- --------- --------- --------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.......................................... $ 752,612 $ 544,236 $ 504,190 $1,020,605 $1,089,397 $ 477,821 $ 518,593
Cost of sales.................................. 631,910 458,602 438,558 834,298 907,695 399,338 429,044
Research and development....................... 13,377 12,132 11,763 14,126 16,207 7,144 4,674
Selling, general and administrative............ 68,091 47,565 43,886 73,329 77,659 34,481 41,320
Nonrecurring charges(2)........................ 103,281 -- 73,639 -- 17,442 -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from operations.................. (64,047) 25,937 (63,656) 98,852 70,394 36,858 43,555
Interest expense, net.......................... (6,678) (2,800) (7,076) (37,427) (34,386) (18,070) (13,041)
Other income (expense), net.................... 1,872 (3,081) (2,332) 657 651 150 64
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing operations before
income taxes................................. (68,853) 20,056 (73,064) 62,082 36,659 18,938 30,578
Income tax provision (benefit)(3).............. (24,552) -- -- 13,658 -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing operations....... (44,301) 20,056 (73,064) 48,424 36,659 18,938 30,578
Income (loss) from discontinued operations, net
of income taxes.............................. (38,715) 12,418 456 5,617 4,819 3,793 --
Gain (loss) on disposal of discontinued
operations, net of income taxes.............. -- -- -- (6,240) 17,681 -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) before cumulative effect of
accounting change............................ (83,016) 32,474 (72,608) 47,801 59,159 22,731 30,578
Cumulative effect of accounting change, net of
income taxes................................. (31,181) -- (1,500) -- -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Net income (loss).............................. $(114,197) $ 32,474 $ (74,108) $ 47,801 $ 59,159 $ 22,731 $ 30,578
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Earnings (loss) per common and common
equivalent share:
Continuing operations........................ $ (4.58) $ 1.98 $ (7.27) $ 3.61 $ 2.73 $ 1.42 $ 2.28
Discontinued operations...................... (4.01) 1.23 .05 (.05) 1.68 .28 --
Cumulative effect of accounting change....... (3.23) -- (.15) -- -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Net income (loss).............................. $ (11.82) $ 3.21 $ (7.37) $ 3.56 $ 4.41 $ 1.70 $ 2.28
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------

OTHER OPERATING DATA:
EBITDA(4)...................................... $ 58,636 $ 38,179 $ 23,934 $ 158,132 $ 141,208 $ 63,866 $ 67,569
Depreciation and amortization.................. 17,530 15,323 16,283 58,623 52,721 26,858 23,950
Capital expenditures........................... 7,319 13,499 12,635 25,593 28,522 11,655 6,015
Cash provided by (used in) operating
activities................................... 43,577 59,673 (58,103) 89,081 92,110 (20,489) (11,596)
Cash provided by (used in) investing
activities................................... (1,432) (55,293) (322,306) (3,441) 112,830 (10,235) (7,857)
Cash provided by (used in) financing
activities................................... (35,310) (39,913) (360,320) (65,772) (127,981) (11,557) (16,430)
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
AS OF
AS OF MARCH 31, ------------------------
------------------------------------------------------------ SEPT. 29, SEPT. 28,
1993 1994 1995(1) 1996 1997 1996 1997
----------- ----------- ------------ --------- --------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................... $ 37,970 $ (16,489) $ 70,007 $ 42,978 $ 94,045 $ 29,952 $ 116,259
Property, plant and equipment, net....... 53,919 85,094 484,985 382,513 360,560 369,001 338,817
Total assets............................. 435,229 419,437 1,022,235 1,035,142 1,009,704 996,990 946,606
Long-term debt........................... 65,485 -- 395,000 350,000 237,071 325,000 221,108
Total equity............................. 65,595 91,980 140,370 157,477 218,792 180,734 249,385
</TABLE>

- ------------------------

(1) HAC was acquired from Hercules on March 15, 1995. For the fiscal year ended
March 31, 1995, results of operations include the HAC aerospace operations
from March 15, 1995, through March 31, 1995. For all periods thereafter,
results of operations include the HAC aerospace operations for the entire
year. See Note 21 to the Consolidated Financial Statements (including Notes
thereto).

(2) Nonrecurring charges include amounts expensed for the change in accounting
estimate for environmental liabilities, restructuring charges, change of
control payments and litigation settlements.

(3) The Company recorded reduced or no income tax expense in fiscal 1993 through
1997 due to the recognition of available tax loss carryforwards. Recognition
of such carryforwards is expected to continue to reduce future tax expense.
It is currently expected that taxes in fiscal 1998 and 1999 will continue to
be reduced due to such tax loss carryforwards.

(4) EBITDA reflects earnings before interest, income taxes, depreciation and
amortization and excludes nonrecurring charges ("EBITDA"). EBITDA is
presented to provide additional information about the Company's ability to
meet its future debt service, capital expenditures and working capital
requirements and is one of the measures which determines the Company's
ability to borrow under its debt agreements. EBITDA should not be considered
in isolation or as a substitute for operating income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with generally accepted accounting principles or as a measure
of the Company's profitability or liquidity.

8
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY
BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. SEE "FORWARD-LOOKING
STATEMENTS."

RISKS ASSOCIATED WITH ICBM PRIME INTEGRATION PROGRAM

The Company submitted a bid in August 1997 to serve as the prime integrator
for the ICBM Prime Integration program for the U.S. Air Force. The Air Force is
currently transitioning from utilizing associated contractors to the use of a
prime integrator, which will be responsible for overall program management. The
Company is one of two bidders for this contract, the award of which is presently
expected to be announced in December 1997. No assurance can be given that the
Company will be awarded this contract or, if awarded, that this contract would
be profitable for the Company. The financial and other information contained in
this Prospectus (other than that contained in the "Strategy" discussions under
"Prospectus Summary" and "Business") does not include or give effect to the
potential revenues which would be realized by the Company if it were awarded
this contract. There can be no assurance that the prevailing market price of the
Common Stock will not be materially adversely affected following the
announcement of the ICBM Prime Integration program award.

RISKS OF REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES

The Company's primary customers are the U.S. Army, Navy, Air Force and other
agencies of the DoD. Sales under contracts with the U.S. Government, or under
contracts with prime contractors that identified the U.S. Government as the
ultimate purchaser, represented approximately 85% of the Company's fiscal 1997
sales. The overall U.S. defense budget declined in real terms from the
mid-1980's through the early 1990's. Although U.S. defense budgets have recently
stabilized, future levels of defense spending cannot be predicted with certainty
and further declines in U.S. military expenditures could materially adversely
affect the Company's results of operations and financial condition. The impact
of possible further declines in the level of defense procurement on the
Company's results of operations and financial condition will depend upon the
timing and size of the changes and the Company's ability to mitigate their
impact with new business, business consolidations or cost reductions. The loss
or significant curtailment of a material program in which the Company
participates could materially adversely affect the Company's future results of
operations and financial condition. In view of the uncertainty regarding the
size, content and priorities of the annual DoD procurement schedule, the
historical financial performance of the Company may not be indicative of future
performance.

RISKS INHERENT IN U.S. GOVERNMENT CONTRACTS

A significant portion of the Company's sales is associated with long-term
contracts and programs for the U.S. Government in which there are significant
inherent risks, including risks particular to the defense industry. The primary
risks are the following:

CONTRACT TERMINATION. All of the Company's U.S. Government contracts are,
by their terms, subject to termination by the U.S. Government either for its
convenience or in the event of a default by the contractor. Termination for
convenience provisions provide only for the recovery by the Company of costs
incurred or committed, settlement expenses and profit on work completed prior to
termination. Termination for default provisions may render the contractor liable
for excess costs incurred by the U.S. Government in procuring undelivered items
from another source.

LOSS OF APPROPRIATIONS. In addition to the right of the U.S. Government to
terminate such contracts, U.S. Government contracts are conditioned upon the
continuing availability of Congressional appropriations. Congress usually
appropriates funds for a given program on a fiscal-year basis even though
contract performance may take more than one year. Consequently, at the outset of
a major program, the contract is usually partially funded, and additional monies
are normally committed to the contract by the procuring agency only as
appropriations are made by Congress for future fiscal years. In addition, most

9
<PAGE>
U.S. Government contracts are subject to modification in the event of changes in
funding. Any failure by Congress to appropriate additional funds to any program
in which the Company participates or any contract modification as a result of
funding changes could materially delay or terminate such program and, therefore
have a material adverse effect on the Company's results of operations or
financial condition.

PROCUREMENT AND OTHER RELATED LAWS AND REGULATIONS. The Company is subject
to extensive and complex U.S. Government procurement laws and regulations. These
laws and regulations provide for ongoing U.S. Government audits and reviews of
contract procurement, performance and administration. Failure to comply, even
inadvertently, with these laws and regulations and with laws governing the
export of munitions and other controlled products and commodities, and any
significant violations of any other federal law, could subject the Company or
one or more of its businesses to potential contract termination, civil and
criminal penalties, and under certain circumstances, suspension and debarment
from future U.S. Government contracts for a specified period of time. Any such
actions could have a material adverse effect on the Company's results of
operations or financial condition.

Additionally, under U.S. Government regulations, the Company, as a
government contractor, is subject to audit and review by the U.S. Government of
performance of, and the accounting and general practices relating to, U.S.
Government contracts. The costs and prices under such contracts may be subject
to adjustment based upon the results of such audits. To date, such audits have
not had a material effect on the Company's results of operations or financial
condition; however, no assurance can be given that future audits will not have a
material adverse effect on the Company's results of operations or financial
condition.

In addition, licenses are required from U.S. Government agencies for export
from the United States of many of the Company's products. Accordingly, certain
of the Company's products currently are not permitted to be exported.

COMPETITIVE BIDDING. The Company obtains military contracts through either
competitive bidding or sole-sourced procurement. Contracts from which the
Company has derived and expects to derive a significant portion of its sales
(including, without limitation, contracts relating to certain program
opportunities discussed in this Prospectus or the documents incorporated by
reference in this Prospectus) were or will be obtained through competitive
bidding in which, in many instances, numerous bidders participated or will
participate. There can be no assurance that the Company will continue to be
successful in having its bids accepted or, if accepted, that awarded contracts
will be profitable. Additionally, inherent in either procurement process is the
risk that if a bid is submitted and a contract is subsequently awarded, actual
performance costs may exceed the projected costs upon which the submitted bid or
contract price was based. To the extent that actual costs exceed the projected
costs on which bids or contract prices were based, the Company's profitability
could be materially adversely affected.

UNREIMBURSED COST OVERRUNS. The Company's U.S. Government business is
performed under cost-plus contracts and under fixed-price contracts (including
firm fixed-price, fixed-price incentive, or fixed-price-level-of-effort).
Fixed-price contracts accounted for approximately 64% of the Company's U.S.
Government revenues in fiscal year 1997; firm fixed-price contracts accounted
for approximately 55% of such revenues; and fixed-price incentive and
fixed-price-level-of-effort contracts accounted for approximately 9% of such
revenues. Under firm fixed-price contracts, the Company agrees to perform
certain work for a fixed price and, accordingly, realizes all of the benefit or
detriment resulting from decreases or increases in the costs of performing the
contract. Fixed-price incentive contracts are fixed-price contracts providing
for adjustment of profit and establishment of final contract prices by a formula
based on the relationship which final total costs bear to total target costs.
Fixed-price-level-of-effort contracts are generally structured with a fixed
price per labor hour subject to a cap. All fixed-price contracts present the
inherent risk of unreimbursed cost overruns which could have a material adverse
effect on the Company's results of operations or financial condition. In
addition, certain costs, including certain financing costs, portions of research
and development costs and certain marketing expenses are not reimbursable under
U.S. Government contracts.

10
<PAGE>
CERTAIN OTHER RISKS. In addition, the Company, like all defense businesses,
is subject to risks associated with uncertain cost factors related to scarce
technological skills and components, the frequent need to bid on programs in
advance of design completion (which may result in unforeseen technological
difficulties and/or cost overruns), the substantial time and effort required for
relatively unproductive design and development, design complexity, rapid
obsolescence and the potential need for design improvement.

RISKS ASSOCIATED WITH MANUFACTURING AND HANDLING OF EXPLOSIVE MATERIALS

Certain of the Company's products, including, without limitation, those
relating to propulsion systems, propellants, ammunition and artillery systems,
involve the manufacture and/or handling of a variety of explosive materials.
From time to time in the past, such manufacturing and/or handling has resulted
in explosive incidents which have temporarily shut down or otherwise disrupted
certain of the Company's manufacturing processes, thereby causing production
delays. There can be no assurance that the Company will not experience such
incidents in the future or that any such incidents will not result in production
delays or otherwise have a material adverse effect on the Company's results of
operations or financial condition.

SUPPLY OF KEY RAW MATERIALS

Key raw materials used in the Company's operations include aluminum, steel,
steel alloys, graphite fiber, hydroxy terminated polybutadiene, epoxy resins and
adhesives, nitrocellulose, diethylether, x-ray film, plasticizers and nitrate
esters and ammonium perchlorate. The Company also purchases chemicals,
electronic, electro-mechanical and mechanical components, subassemblies and
subsystems which are integrated with the Company's own manufactured parts for
final assembly into finished products and systems. The Company closely monitors
its sources of supply in order to assure an adequate supply of raw materials and
other supplies needed in its manufacturing processes. U.S. Government
contractors like the Company, however, are frequently limited to procuring
materials and components from sources of supply approved by the DoD. In
addition, as defense budgets contract, suppliers of specialty chemicals and
materials consider dropping low volume items from their product lines, which may
require (and, in the past, has required) qualification of new suppliers for raw
materials on several programs. Any such qualification could result in
incremental cost overruns and program delays and, accordingly, could materially
adversely affect the Company's results of operations or financial condition.

The supply of ammonium perchlorate, a principal raw material used in the
Company's operations, is limited to two third-party sources which supply the
entire domestic solid propellant industry. These two suppliers have recently
entered into an agreement to combine their ammonium perchlorate businesses. Any
disruption in the Company's supply of ammonium perchlorate could have a material
adverse effect on the Company's results of operations or financial condition.

Additionally, the Company presently relies on one supplier for its graphite
fiber requirements, which is used in the production of composite materials.
While other sources of fiber exist, the addition of a new supplier would require
the Company to qualify the new source for use on the Company's programs. Any
prolonged disruption in the supply of this material or any delay as a result of
the qualification of the new source could adversely affect the Company's results
of operations or financial condition.

COMPETITION

Approximately 85% of the Company's sales are derived from contracts with the
U.S. Government and its prime contractors. The Company encounters intense
competition for these contracts from numerous other companies. Some of these
companies, particularly those competitors outside the Company's core business
areas, have financial, technical, marketing, manufacturing, distribution and
other resources substantially greater than those of the Company. The Company's
ability to compete for these contracts depends to a large extent on the
effectiveness and innovativeness of its research and development programs, its
ability to offer better program performance than its competitors at a lower cost
to the U.S.

11
<PAGE>
Government customer, and its readiness in facilities, equipment and personnel to
undertake the programs for which it competes. In some instances, programs are
sole sourced or work directed by the U.S. Government to a single supplier. In
such cases there may be other suppliers who have the capacity to compete for the
programs involved, but they can only enter or reenter the market if the U.S.
Government should choose to reopen the particular program to competition.

ENVIRONMENTAL MATTERS

The Company's operations and ownership or use of real property are subject
to a number of federal, state and local environmental laws and regulations which
change frequently. To date, these environmental laws and regulations have not
had a material adverse effect on the Company's results of operations or
financial condition. It is difficult to predict whether and to what extent these
environmental laws and regulations may impact the Company's results of
operations or financial condition in the future. Due to the nature of the
Company's operations, the Company is involved from time to time in legal
proceedings involving remediation of environmental contamination from past or
present operations or use or ownership of real property, as well as compliance
with environmental requirements applicable to ongoing operations. The Company
may also be subject to fines and penalties, toxic tort suits or other third
party lawsuits due to its or its predecessors' present or past use of hazardous
substances or the alleged contamination of the environment through past or
present operations. There can be no assurance that material costs or liabilities
will not be incurred in connection with any such proceedings or claims. In
addition, as part of the Acquisition the Company generally assumed
responsibility for environmental remediation at certain HAC facilities that
could involve significant costs. While management believes that certain of the
compliance and remediation costs associated with the HAC facilities will be
reimbursable through forward pricing adjustments of future U.S. Government
contracts, and that some of those environmental remediation costs not covered
through such adjustments will be covered by Hercules under certain agreements
between the Company and Hercules entered into in conjunction with the
Acquisition, there can be no assurance that the U.S. Government or Hercules will
reimburse the Company for any particular environmental costs or do so in a
timely manner. The Company's liquidity and its quarterly and annual operating
results may be materially adversely affected unless and until such
reimbursements are received. In addition, certain of Hercules' environmental
indemnification obligations are subject to a total deductible of $1.0 million
for all claims (including non-environmental claims) that the Company may assert
under the Purchase Agreement. Hercules is not required to indemnify the Company
for any individual claims below $50,000. See "--Controlling Stockholders;
Relationship with Selling Stockholder" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity, Capital Resources
and Financial Condition."

LITIGATION RISK

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, intellectual property,
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. Although the Company believes such suits are either without merit or
covered by insurance or reserves and expects that none of the litigation in
which it is involved will have a material adverse effect on its results of
operations or financial condition, there can be no assurance as to what standard
a particular court will apply in any particular suit against the Company and,
therefore, whether such legal proceedings will have a material adverse effect on
the Company's results of operations or financial condition.

In addition, the Company is subject to "QUI TAM" (whistle-blower) suits
brought by the U.S. Government or private plaintiffs. A judgment against the
Company in a QUI TAM suit could cause the Company to be liable for substantial
damages (including treble damages) and could carry penalties of suspension or
debarment, which could make the Company ineligible to be awarded any U.S.
Government contracts for a period of up to three years and, thereby, could have
a material adverse effect on the

12
<PAGE>
Company's results of operations or financial condition. At present, the Company
is subject to three QUI TAM suits. These QUI TAM lawsuits involve former
employees or operations of HAC, and in two of these suits HAC had been a party
prior to the Acquisition. Although in connection with the Acquisition the
Company did not assume HAC's liabilities with respect to these two suits, the
Company agreed to indemnify and reimburse Hercules for a portion of the claims
arising out of or relating to these two suits. The Company's liability in these
two suits is limited to approximately $4 million plus 40% of certain legal costs
incurred from the date of the Acquisition. The Company and Hercules have also
agreed, in connection with the third QUI TAM action, to share equally legal fees
and related costs and expenses until such time as a determination is made as to
the applicability of certain indemnification provisions contained in the
Purchase Agreement. See "--Controlling Stockholders; Relationship with Selling
Stockholder."

In addition, the Company is a defendant in a patent infringement case
brought by Thiokol Corporation, which the Company believes is without merit. The
complaint does not quantify the amount of damages sought. Through its analysis
of an October 27, 1997 court filing, the Company believes that, based on an
economist's expert testimony, Thiokol may seek damages based on lost profits,
interest and costs which could amount to approximately $260 million. The Company
continues to defend the case vigorously and has filed a motion for summary
judgment asserting the invalidity of the subject patent based upon a sale of the
subject materials by Thiokol more than one year prior to the filing of its
patent application. Even if the Company is found liable, it believes that
damages should be based on a reasonable royalty of less than $5 million. In the
judgment of the Company's management, the case will not have a material adverse
effect upon the Company's future results of operations or financial condition.
However, there can be no assurance that the outcome of the case will not have a
material adverse effect on the Company. The case, captioned "Thiokol Corporation
vs. Alliant Techsystems Inc. and Hercules Incorporated," was filed in the United
States District Court for the District of Delaware on November 15, 1995 and a
non-jury trial is scheduled to commence in December 1997 if the Company's
summary judgment motion is not granted. Thiokol alleges that the rocket motor
insulation used by the Company in certain rocket motors infringes a patent owned
by Thiokol. The complaint also seeks a trebling of any damages that may be
awarded based upon an allegation of deliberate and willful infringement.

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.

RESTRICTIVE COVENANTS

The Company's Credit Agreement (as amended and restated on November 14,
1996, the "Credit Agreement") and its Indenture (the "Indenture" and, together
with the Credit Agreement, collectively, the "Debt Agreements") pursuant to
which its Notes were issued, contain covenants which restrict, among other
things, the ability of the Company and its subsidiaries to incur additional
indebtedness, pay dividends, repurchase its outstanding shares or make certain
other restricted payments, enter into transactions with affiliates, create
certain liens, engage in certain sale and leaseback transactions, make certain
asset dispositions and merge or consolidate with, or transfer substantially all
of its assets to, another person. For example, the Company's proposed
repurchases of shares from the Selling Stockholder pursuant to the New Agreement
and from its stockholders generally pursuant to the Repurchase Program are
subject to the Company's compliance with certain of these covenants. As of
September 28, 1997, these covenants permitted the Company to spend up to
approximately $69 million for all share repurchases (among other permitted
uses). The amount available for share repurchases will increase by 50% of the
Company's cumulative Consolidated Net Income (as defined in the Debt Agreements)
for each fiscal quarter beginning after September 28, 1997. No assurance can be
given that the Company will repurchase all or any portion of such shares or as
to the timing or terms of any such repurchases.

In addition, the Debt Agreements contain other restrictive covenants and
prohibit the Company from prepaying the Notes. Under the Debt Agreements, the
Company is required to maintain specified financial ratios, including minimum
consolidated net worth, consolidated debt to consolidated net worth,
consolidated debt to consolidated EBITDA and consolidated EBITDA to consolidated
interest charges.

13
<PAGE>
Substantially all of the Company's real and personal property has been pledged
to secure the Company's obligations under the Credit Agreement. The failure by
the Company to maintain such financial ratios or to comply with the restrictions
contained in the Debt Agreements could result in a default thereunder, which in
turn could cause such indebtedness (and by reason of cross-default provisions,
other indebtedness) to become immediately due and payable. No assurance can be
given that the Company's future operating results will be sufficient to enable
compliance with such covenants, or in the event of default, to remedy such
default. See "Dividends and Dividend Policy" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity, Capital
Resources and Financial Condition."

YEAR 2000 COMPLIANCE

The Company utilizes a significant number of computer software programs and
operating systems across its entire organization, including applications used in
manufacturing, product development, financial business systems and various
administrative functions. To the extent that the Company's software applications
contain source code that is unable to appropriately interpret the upcoming
calendar year "2000," some level of modification, or even possibly replacement
of such applications may be necessary. The Company is currently in the process
of completing its identification of applications that are not "Year 2000"
compliant. Given information known at this time about the Company's systems that
may have such problems, coupled with the Company's ongoing, normal
course-of-business efforts to upgrade or replace critical systems, as necessary,
it is currently not expected that these Year 2000 costs will have any material
adverse impact on the Company's liquidity or ongoing results of operations. No
assurance can be given, however, that any or all of the Company's systems are or
will be Year 2000 compliant or that the costs required to address the Year 2000
issue or that the impact of the Company's failure to achieve substantial Year
2000 compliance will not have a material adverse effect on the Company's future
liquidity or results of operations.

CONTROLLING STOCKHOLDERS; RELATIONSHIP WITH SELLING STOCKHOLDER

In connection with the Acquisition, the Company paid Hercules consideration
that included 3,862,069 shares of Common Stock, which presently represents
approximately 29.3% of the Company's outstanding Common Stock. The Selling
Stockholder is offering to sell 2,778,069 of these shares in the Offering
pursuant to certain registration rights granted by the Company to the Selling
Stockholder under the Stockholder's Agreement. Pursuant to the Stockholder's
Agreement, Hercules presently has three designees on the Company's ten-member
Board of Directors and Gotham Capital III, L.P. ("Gotham III") presently has
four designees on the Company's Board of Directors. See "Certain Transactions
and Relationships--Stockholder's Agreement."

In connection with the Offering, the Company and the Selling Stockholder
have entered into the New Agreement pursuant to which the Selling Stockholder
and the Company have granted each other reciprocal put and call options with
respect to the 1,084,000 shares of Common Stock to be owned by the Selling
Stockholder following the Offering. The Company presently intends to exercise
its call rights in the event that the Selling Stockholder does not exercise its
put rights, although no definitive decision has been made to do so. Pursuant to
the New Agreement, the Stockholder's Agreement will terminate upon the
consummation of the Offering (other than the registration rights granted to the
Selling Stockholder therein) and the standstill arrangements set forth therein
will be replaced by the standstill arrangements set forth in the New Agreement.
Following the consummation of the Offering, the Selling Stockholder will have
the right to designate only one director until the closing of the last put and
call installment, or, if such put and call is not exercised, until the Company's
1999 Annual Meeting of Stockholders (or later under certain circumstances).
Additionally, Gotham III will have the right to designate four directors. For a
summary of the provisions of the New Agreement, see "Certain Transactions and
Relationships--Future Relationship with Selling Stockholder."

14
<PAGE>
PRICE RANGE OF COMMON STOCK

The Common Stock is listed and traded on the NYSE under the symbol "ATK."
The following table sets forth the high and low sales prices of the Common Stock
for the periods indicated, as reported on the NYSE Composite Tape:

<TABLE>
<CAPTION>
COMMON
STOCK PRICE
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal year ended March 31, 1996
Quarter ended July 2, 1995................................................................ $41 3/4 $35 5/8
Quarter ended October 1, 1995............................................................. 47 1/2 41 1/2
Quarter ended December 31, 1995 .......................................................... 53 44 5/8
Quarter ended March 31, 1996.............................................................. 50 1/2 46 1/4

Fiscal year ended March 31, 1997
Quarter ended June 30, 1996............................................................... 49 1/8 43 3/4
Quarter ended September 29, 1996.......................................................... 53 1/2 46 1/4
Quarter ended December 29, 1996........................................................... 57 3/8 47 5/8
Quarter ended March 31, 1997.............................................................. 54 3/4 42

Fiscal year ended March 31, 1998
Quarter ended June 29, 1997............................................................... 52 7/8 40 1/2
Quarter ended September 28, 1997.......................................................... 69 51 7/16
Quarter ended December 28, 1997 (through November 17, 1997)............................... 65 11/16 56 1/2
</TABLE>

A recent reported last sale price for the Common Stock as reported on the
NYSE is set forth on the cover page of this Prospectus. The number of holders of
record of Common Stock as of September 28, 1997 was 12,459.

15
<PAGE>
DIVIDENDS AND DIVIDEND POLICY

The Company has never paid cash dividends. The Company's dividend policy
will be reviewed by the Board of Directors of the Company at such future times
as may be appropriate in light of relevant factors existing at such times,
including the extent to which the payment of cash dividends may be limited by
covenants contained in the Debt Agreements. The Credit Agreement currently
limits the aggregate sum of dividends payable to $50 million. The Notes limit
the Company's dividends and certain other restricted payments to an amount equal
to 50% of cumulative net income after March 15, 1995, provided that after such
payments the Company's ratio of earnings (before interest, taxes, depreciation
and amortization) to fixed charges equals or exceeds three to one. The Debt
Agreements also prohibit dividend payments if certain defaults exist or certain
financial ratios are not maintained. To the extent that the Company repurchases
shares in the Repurchase Program or from the Selling Stockholder pursuant to the
put and call arrangements contained in the New Agreement, the Company's ability
to pay cash dividends will be further limited. The Company does not expect to
pay cash dividends in the foreseeable future. See "Risk Factors--Restrictive
Covenants."

CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company,
including short-term debt, as of September 28, 1997. The table should be read in
conjunction with "Selected Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements (including Notes thereto) included in this
Prospectus.

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 28, 1997
------------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (including current
portion of long-term debt).............................................. $ 31,406

Long-term debt:
Bank debt............................................................ $ 71,108
11 3/4% Senior Subordinated Notes due 2003........................... 150,000
----------
Total long-term debt............................................... $ 221,108

Stockholders' equity:
Common Stock, $.01 par value, 20,000,000 shares authorized and
13,122,351 shares issued and outstanding (1)......................... $ 131
Additional paid-in capital............................................. 247,698
Unearned compensation.................................................. (1,570)
Pension liability adjustment........................................... (2,304)
Retained earnings...................................................... 34,939
Common Stock in treasury, at cost (741,262 shares
held at September 28, 1997).......................................... (29,509)
----------

Total stockholders' equity........................................... $ 249,385
----------

Total capitalization (including short-term debt)..................... $ 501,899
----------
----------
</TABLE>

- ------------------------

(1) Excludes 1,644,175 shares reserved for issuance upon the exercise of
outstanding stock options and under other benefit plans.

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information
of the Company. The information at March 31, 1997 and for each of the years in
the five year period ended March 31, 1997 has been derived from the Company's
audited consolidated financial statements (the last three years of which,
together with the related report of Deloitte & Touche LLP, independent auditors,
are contained in this Prospectus). All such financial information is qualified
in its entirety by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements (including Notes thereto)
included in this Prospectus. The unaudited information at September 29, 1996 and
September 28, 1997 and for the six months ended September 29, 1996 and September
28, 1997 is derived from the Company's unaudited consolidated financial
statements, which, in the opinion of management, include all adjustments
necessary, consisting only of normal recurring adjustments, for a fair
presentation of the information shown. Such unaudited information is qualified
in its entirety by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements (including Notes thereto)
included in this Prospectus. Results for the six-month period ended September
28, 1997 are not necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, SIX MONTHS ENDED
----------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPT. 29, SEPT. 28,
1993 1994 1995(1) 1996 1997 1996 1997
--------- --------- --------- --------- --------- ----------- -----------

<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.......................................... $ 752,612 $ 544,236 $ 504,190 $1,020,605 $1,089,397 $ 477,821 $ 518,593
Cost of sales.................................. 631,910 458,602 438,558 834,298 907,695 399,338 429,044
Research and development....................... 13,377 12,132 11,763 14,126 16,207 7,144 4,674
Selling, general and administrative............ 68,091 47,565 43,886 73,329 77,659 34,481 41,320
Nonrecurring charges(2)........................ 103,281 -- 73,639 -- 17,442 -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from operations.................. (64,047) 25,937 (63,656) 98,852 70,394 36,858 43,555
Interest expense, net.......................... (6,678) (2,800) (7,076) (37,427) (34,386) (18,070) (13,041)
Other income (expense), net.................... 1,872 (3,081) (2,332) 657 651 150 64
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing operations before
income taxes................................. (68,853) 20,056 (73,064) 62,082 36,659 18,938 30,578
Income tax provision (benefit)(3).............. (24,552) -- -- 13,658 -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing operations....... (44,301) 20,056 (73,064) 48,424 36,659 18,938 30,578
Income (loss) from discontinued operations, net
of income taxes.............................. (38,715) 12,418 456 5,617 4,819 3,793 --
Gain (loss) on disposal of discontinued
operations, net of income taxes.............. -- -- -- (6,240) 17,681 -- --
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) before cumulative effect of
accounting change............................ (83,016) 32,474 (72,608) 47,801 59,159 22,731 30,578
Cumulative effect of accounting change, net of
income taxes................................. (31,181) -- (1,500) -- -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Net income (loss).............................. $(114,197) $ 32,474 $ (74,108) $ 47,801 $ 59,159 $ 22,731 $ 30,578
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Earnings (loss) per common and common
equivalent share:
Continuing operations........................ $ (4.58) $ 1.98 $ (7.27) $ 3.61 $ 2.73 $ 1.42 $ 2.28
Discontinued operations...................... (4.01) 1.23 .05 (.05) 1.68 .28 --
Cumulative effect of accounting change....... (3.23) -- (.15) -- -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Net income (loss).............................. $ (11.82) $ 3.21 $ (7.37) $ 3.56 $ 4.41 $ 1.70 $ 2.28
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------

17
<PAGE>

- ------------------------

(2) Nonrecurring charges include amounts expensed for the change in accounting
estimate for environmental liabilities, restructuring charges, change of
control payments and litigation settlements.

(4) EBITDA reflects earnings before interest, income taxes, depreciation and
amortization and excludes nonrecurring charges. EBITDA is presented to
provide additional information about the Company's ability to meet its
future debt service, capital expenditures and working capital requirements
and is one of the measures which determines the Company's ability to borrow
under its Debt Agreements. EBITDA should not be considered in isolation or
as a substitute for operating income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with "Selected
Consolidated Financial Information," the Consolidated Financial Statements
(including Notes thereto) and the other information included or incorporated by
reference in this Prospectus. The Company's fiscal year ends on March 31 of each
year.

OVERVIEW

Effective April 1, 1997, the Company reorganized its operations into four
business groups: Conventional Munitions; Space and Strategic Systems; Defense
Systems; and Emerging Business. The discussion and analysis set forth below for
the six month periods are based on these new business groups. In prior periods,
the Company conducted its business through four different business groups:
Aerospace Systems; Defense Systems; Marine Systems (which was sold in February
1997); and Emerging Business.

SIX MONTHS ENDED SEPTEMBER 28, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 29,
1996

SALES. Sales from continuing operations for the six month period ended
September 28, 1997 totaled $518.6 million, an increase of $40.8 million, or
8.5%, from $477.8 million for the comparable period of the prior year.
Conventional Munitions Group sales for the six month period ended September 28,
1997 were $230.0 million, an increase of $34.0 million, or 17.3%, compared to
$196.0 million in the comparable period of the prior year. The sales increase
was attributable to increased tank ammunition sales, up approximately $44
million compared to the six month period of the prior year, due in large part to
the resolution of technical issues on the M830A1 tactical tank round, which had
delayed production and shipments through early fiscal 1997. Sales of the
tactical round were approximately $29 million higher for the six month period
ended September 28, 1997, when compared to the same period of the prior year.
The tank ammunition sales increase was also partially driven by production
increases of tank ammunition training rounds, up $15 million for the six month
period ended September 28, 1997, compared to the comparable period of the prior
year. The tank ammunition increases were partially offset by decreases in other
programs. Space and Strategic Systems Group sales were $174.0 million for the
six month period ended September 28, 1997, an increase of $18.9 million, or
12.2%, compared to $155.1 million in the comparable period of the prior year.
The sales increase was primarily driven by increases in solid rocket propulsion
systems and in the composite structures business, up approximately $19 million
and $17 million, respectively, compared to the comparable period of the prior
year. The sales increases in composite structures and solid rocket propulsion
completely offset the absence in fiscal 1998 of $11 million of revenue
recognized in the fiscal 1997 period on the Evolved Expendable Launch Vehicle
("EELV") program, which the Company completed in fiscal 1997, as well as
decreased Trident (D5) volume, down $9 million compared to the comparable six
month period of the prior year. Defense Systems Group sales were $102.3 million
for the six month period ended September 28, 1997, a decrease of $18.3 million,
or 15.2%, compared to $120.6 million in the comparable period of the prior year.
The decrease is largely attributable to decreased revenues on antitank mines and
artillery fire control systems, partially offset by a $20 million increase in
revenues attributable to the Outrider-TM- program. Emerging Business Group sales
were $17.2 million for the six month period ended September 28, 1997, an
increase of $.6 million or 3.6%, compared to $16.6 million for the comparable
period of the prior year.

GROSS MARGIN. Gross margin for the six month period ended September 28,
1997 totaled $89.5 million, or 17.3% of sales, compared to $78.5 million, or
16.4% of sales for the comparable period of the prior year. The increase in
gross margin for the six month period ended September 28, 1997 is reflective of
increased sales volume, as well as sales mix. Gross margin improved, as a
percent of sales, due to a combination of factors, the most significant being
improved margins in core programs due to improved performance relative to the
prior year, including rocket propulsion systems, composite structures and
ammunition programs, as well as the fact that gross margin results for the prior
year six month period

19
<PAGE>
ended September 29, 1996 were impacted by cost growth due to technical issues on
various tactical propulsion and fuzing programs.

OPERATING EXPENSES. Operating expenses for the six month period ended
September 28, 1997 totaled $46.0 million, or 8.9% of sales, compared to $41.6
million, or 8.7% of sales for the comparable period of the prior year. Reduced
research and development costs, due to the completion in fiscal 1997 of $1.8
million spending associated with EELV, were offset by increases in selling,
general and administrative costs, due in large part to the Company's costs of
approximately $5.6 million incurred in fiscal 1998 in pursuit of the ICBM Prime
Integration program.

INTEREST EXPENSE. Interest expense for the six month period ended September
28, 1997 was $14.9 million, a decrease of $3.5 million compared to $18.4 million
for the comparable six month period of the prior year. The decrease in the
current period was driven by significantly reduced borrowings outstanding in the
current year, as compared to the comparable period of the prior year. Total
borrowings outstanding (including notes payable, and the current and long-term
portions of long-term debt) at September 28, 1997, were $134.0 million less than
total borrowings outstanding at September 29, 1996, due to scheduled debt
repayments as well as an $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 six month period ended September
29, 1997 was $1.9 million, compared to $.3 million for the comparable period of
the prior year. The increase is driven by interest income earned on increased
average cash balances in the six month period.

INCOME TAXES. The six month periods ended September 28, 1997 and September
29, 1996 reflect an effective income tax rate of 0%. This tax rate differs from
statutory tax rates due to the utilization of available tax loss carryforwards.
Recognition of such carryforwards is expected to continue to reduce future tax
expense. It is currently expected that required payments for taxes in fiscal
1998 will continue to be reduced by such 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. To the extent that the AMT is
required to be paid currently, the resulting deferred tax asset can be carried
forward indefinitely, and can be recovered via reductions in tax payments on
future taxable income.

NET INCOME. Net income reported for the six month period ended September
28, 1997 was $30.6 million, compared to $22.7 million for the comparable period
of the prior year. The increase was due to a combination of increased sales
volume, improved gross margins and reduced interest costs in the current year
period ended September 28, 1997, as compared to the comparable period of the
prior year.

FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEARS ENDED MARCH 31, 1996
AND MARCH 31, 1995

THE YEAR-TO-YEAR COMPARISONS PRESENTED BELOW ARE BASED UPON THE COMPANY'S
FOUR BUSINESS GROUPS AS THEY EXISTED DURING THE FISCAL YEARS DISCUSSED.

SALES. Sales from continuing operations in fiscal 1997 were $1,089.4
million, an increase of $68.8 million or 6.7% from sales of $1,020.6 million in
fiscal 1996.

Aerospace Systems Group sales in fiscal 1997 were $593.3 million, an
increase of $24.7 million, or 4.3% from $568.6 million in fiscal 1996. The
increase was driven primarily by increased sales on the Delta III propulsion
program and composite structures programs.

Defense Systems Group sales in fiscal 1997 were $497.7 million, an increase
of $43.0 million or 9.5% from $454.7 million in fiscal 1996. The increase was
driven principally by increases in tank ammunition sales of approximately $89
million, primarily due to the resolution of technical issues which had delayed
fiscal 1996 shipments. Additionally, sales increased approximately $27 million
due to a fiscal 1997 contract award for the Outrider-TM- Tactical Unmanned
Aerial Vehicle ("TUAV"). These sales increases were partially offset by
decreases due to program completions in fiscal 1996 of approximately $40 million
on the

20
<PAGE>
Combined Effects Munition program ("CEM") and $19 million on the Shoulder
Launched Multipurpose Assault Weapon ("SMAW") program.

Emerging Business Group sales in fiscal 1997 were $41.4 million, an increase
of $10.4 million from $31.0 million in fiscal 1996, primarily attributable to
higher volume in the battery manufacturing operations.

Sales from continuing operations of $1,020.6 million in fiscal 1996
represented a $516.4 million increase over fiscal 1995 sales of $504.2 million.
Fiscal 1996 sales included $568.6 million generated by the aerospace operations,
which the Company acquired from Hercules on March 15, 1995, compared to fiscal
1995 aerospace sales by the Company of $20.3 million.

GROSS MARGIN. The Company's gross margin as a percentage of sales was
15.1%, 18.3% and 13.0% in fiscal 1997, 1996 and 1995, respectively. The
decreased gross margin in fiscal 1997 was largely attributable to the Company's
adoption of Statement of Position No. 96-1 ("SOP 96-1"), "Environmental
Remediation Liabilities" (see further discussion of SOP 96-1 below), which
resulted in a one-time, non-cash charge of $17.4 million. Fiscal 1997 gross
margin as a percentage of sales before adoption of SOP 96-1 was 16.7%, a
decrease of 1.6% compared to the fiscal 1996 gross margin rate of 18.3%. The
decrease was primarily attributable to cost growth of approximately $28 million
on certain tactical propulsion, fuzing, ammunition and ordnance reclamation
contracts. These decreases in gross margin were partially offset by improvements
on various ordnance programs, as well as by negotiated settlements reached with
the U.S. Government totaling approximately $12 million for reimbursement of
previously incurred costs on a rocket motor propulsion contract and another
contract that had been terminated by the U.S. Government due to an
arms-limitation treaty into which it had entered.

Fiscal 1996 gross margin as a percentage of sales was 18.3%, compared to
13.0% in fiscal 1995. The significant increase in fiscal 1996 was primarily
attributable to the Acquisition on March 15, 1995. Additionally, fiscal 1995
gross margin included gross margin write-offs (i.e., estimated costs of
completing a contract in excess of contract revenues) of approximately 1%,
representing cost growth on the SMAW and lightweight 30mm medium caliber
ammunition programs, and another 1% on other programs due to the identification
of financial and technical issues.

RESEARCH AND DEVELOPMENT. The Company's research and development
expenditures were $16.2 million or 1.5% of sales in fiscal 1997, compared with
$14.1 million, or 1.4% of sales in fiscal 1996, and $11.8 million, or 2.3% of
sales in fiscal 1995. The slight increase in research and development
expenditures as a percent of sales in fiscal 1997 compared to fiscal 1996 was
driven primarily by costs incurred on the Evolved Expendable Launch Vehicle
program. Fiscal 1996 expenditures of 1.4% of sales represented a decrease
compared to fiscal 1995 expenditures of 2.3% of sales due to a change in
executive management which resulted in a more focused approach to program
pursuits. The Company also spent $231.3 million on government-customer funded
research and development contracts in fiscal 1997, a decrease of $50.5 million
compared to expenditures of $281.8 million in fiscal 1996 and $117.7 million in
fiscal 1995. The decrease in fiscal 1997 compared to fiscal 1996 primarily
represents the completion of a rocket motor development program. The significant
increase in fiscal 1996 government-funded research compared to fiscal 1995 was
due primarily to the Acquisition.

SELLING EXPENSES. The Company's selling expenses totaled $35.8 million, or
3.3% of sales in fiscal 1997, compared with $33.1 million, or 3.2% of sales in
fiscal 1996. Fiscal 1997 selling costs include approximately $4 million of
expenditures for the Company's pursuit of the U.S. Government's ICBM Prime
Integration program, expected to be awarded in December 1997. Fiscal 1996
selling costs as a percentage of sales of 3.2% decreased significantly compared
to fiscal 1995 levels of 4.9%. The fiscal 1996 decline is attributed primarily
to the elimination of duplicative selling expenses, subsequent to the
Acquisition, as well a more focused approach to program pursuits.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative costs for
fiscal 1997 totaled $41.9 million, or 3.8% of sales, compared with $40.2
million, or 3.9% of sales in fiscal 1996, and $19.1 million, or

21
<PAGE>
3.8% of sales in fiscal 1995. Fiscal 1997 general and administrative costs as a
percent of sales decreased slightly from fiscal 1996 levels, reflecting ongoing
cost control efforts.

RESTRUCTURING CHARGES. The Company initiated a restructuring program in the
quarter ending March 31, 1995, which resulted in a fiscal 1995 fourth-quarter
pre-tax charge of $35.6 million. The program was designed to achieve greater
efficiency and competitiveness and improve margins. Approximately $12.2 million
of the non-cash portion of the charge consists of accruals for certain pension
related liabilities in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 88 "Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits."

In mid-fiscal 1996, various executive management changes were made within
the Defense Systems Group. The new management re-evaluated business strategies
for the Group, including its restructuring plans. While significant components
of the restructuring plan did not change, the anticipated timing of certain
severance and facility closure costs pushed into fiscal 1997. Cash expenditures
under this restructuring program, primarily for employee-related costs, totaled
approximately $9 million and $12 million in fiscal 1997 and fiscal 1996,
respectively. The balance of the reserve at March 31, 1997, represents
specifically identified incremental employee severance and facility closure
costs expected to be incurred in fiscal 1998. Amounts charged for restructuring
reserves include estimates of costs related to facility closure and employee
severance costs. These costs are subject to change, although not currently
anticipated, due to changes in assumptions and the period over which such costs
are expected to be incurred.

CHANGE OF CONTROL CHARGES. In August 1994, six new directors nominated by
Capstay Partners, L.P. (now Gotham III) were elected to the Company's Board of
Directors, resulting in a "change of control" as defined in the Company's
compensation and benefit plans and in agreements with certain employees. These
change of control agreements resulted in the Company incurring a charge of $23.0
million in fiscal 1995.

LITIGATION SETTLEMENT. The Company had been a defendant in a "qui tam"
lawsuit under the False Claims Act. On June 23, 1995, the Company and the
claimants reached an agreement to settle the lawsuit. Accordingly, the Company
recorded a charge of $15.0 million as of the fourth quarter of fiscal 1995.

INTEREST EXPENSE. Interest expense was $35.1 million in fiscal 1997, a
decrease of $4.2 million, compared to $39.3 million in fiscal 1996. Fiscal 1996
interest expense increased by $31.4 million from $7.9 million in fiscal 1995.
The decrease in fiscal 1997 interest expense compared to fiscal 1996 reflects
reduced average borrowings outstanding due to regularly scheduled paydowns, as
well as an $88.6 million prepayment of long-term debt with a portion of the sale
proceeds generated by the February 28, 1997, sale of the Marine Systems Group.
The significant increase interest expense in fiscal 1996 compared to fiscal 1995
reflects increased borrowings to fund the Acquisition.

The Company has entered into hedging transactions to protect against
increases in market interest rates on its long-term debt. At March 31, 1997, the
notional amount of interest rate swap agreements was approximately $83 million.
Under the swap agreements, the Company currently pays an average fixed rate of
6.7% and receives interest at a rate equal to the three-month London Interbank
Offered Rate ("LIBOR") (5.6% at March 31, 1997). These agreements have remaining
terms of one to two years, with certain cancellation options. The interest rate
cap agreements limit the Company's LIBOR exposure to 7.0%, and expired at the
end of the second quarter of fiscal 1998. The notional amount of amortizing
interest rate cap agreements at March 31, 1997 was $22.5 million.

INCOME TAXES. Fiscal 1997 taxes on income from continuing operations
reflect a 0% tax rate compared to a 22% tax rate in fiscal 1996. These rates
vary from statutory tax rates principally due to partial utilization of
available tax loss carryforwards. The fiscal 1997 income tax provision includes
a $12.1 million tax expense on income from discontinued operations. The fiscal
1996 income tax provision includes a tax benefit of $7.8 million for
discontinued operations. Fiscal 1995 taxes reflect a 0% tax rate. This varies
from statutory tax rates principally because SFAS No. 109 does not permit
current recognition of deferred tax benefits in excess of the amount more likely
than not to be realized.

22
<PAGE>
NET INCOME/(LOSS). The Company recorded net income of $59.2 million in
fiscal 1997, an increase of $11.4 million or 23.8% over net income of $47.8
million in fiscal 1996. Fiscal 1997 net income includes $22.5 million of income
from discontinued operations, compared to a $.6 million loss in fiscal 1996. The
fiscal 1997 increase in income from discontinued operations is reflective of the
Company's sale of the Marine Systems Group on February 28, 1997, which resulted
in an after-tax gain of $17.7 million. This increase in fiscal 1997 net income
was partially offset by the Company's adoption of SOP 96-1 "Environmental
Remediation Liabilities," which resulted in a $17.4 million reduction in net
income. Fiscal 1997 net income also benefited from the Company's ability to more
fully utilize previous tax loss carryforwards to reduce tax expense on
continuing operations in fiscal 1997 to 0%, compared to 22% in fiscal 1996. Net
income of $47.8 million in fiscal 1996 compares to a net loss of $74.1 million
in fiscal 1995. Fiscal 1996 results include a full year of the aerospace
operations, a significant contributor to the improved results. Additionally,
fiscal 1996 results were affected positively by improved gross margins in the
Defense Systems Group and reduced operating expenses as a percent of sales due
to a more focused approach to program pursuits and the synergistic benefits of
eliminating duplicative selling expenses as a result of the Acquisition. Fiscal
1995 results included $73.6 million in unusual charges associated with
litigation settlement, change of control and restructuring charges, as described
above.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POST-EMPLOYMENT
BENEFITS. Effective April 1, 1994, the Company changed its method of accounting
for post-employment benefit obligations to comply with SFAS No. 112, "Employers
Accounting for Post-Employment Benefits." This new rule requires such
obligations to be accounted for on an accrual basis rather than the
"pay-as-you-go" basis. An accrued liability was established for such obligations
as of April 1, 1994, resulting in a reduction of after-tax earnings for fiscal
1995 of $1.5 million or $.15 per share. Other than this cumulative effect
charge, earnings were not materially affected by this accounting change.

DISCONTINUED OPERATIONS

MARINE SYSTEMS GROUP. On December 22, 1996, the Company entered into an
agreement to sell its Marine Systems Group, including substantially all of the
assets of that business, to Hughes Aircraft Company for $141.0 million in cash.
The sale was completed on February 28, 1997, resulting in a pre-tax gain to the
Company of approximately $27.2 million ($17.7 million, after tax), which the
Company recognized in the fourth quarter of fiscal 1997. The Company has
accounted for the operations of the Marine Systems Group as discontinued
operations in its financial statements.

DEMILITARIZATION OPERATIONS. During fiscal 1994, the Company entered into
two joint ventures in Belarus and Ukraine, for the purpose of establishing
demilitarization operations in those countries. In March 1996, management, after
evaluating its strategic plans for the future, elected to discontinue its
ownership of foreign demilitarization businesses (the "Demilitarization
operations"). Accordingly, the Company began actions to transfer ownership of
the joint ventures to host country governments or their agents and in the fourth
quarter of fiscal 1996, the Company estimated and recorded a $6.2 million loss
on disposal of discontinued operations (net of tax benefit of $4.2 million).

During fiscal 1997, the Company stopped production efforts and completed its
withdrawal from the Belarus operation. In the fourth quarter of fiscal 1997, the
Company reached agreement with the Ukrainian government to transfer the
Company's interests in the operation to the Ukrainian government after payment
of a $19.8 million non-interest bearing long-term note receivable. Management's
best estimate of the value received for the net assets transferred under the
contractual obligation, after discounting for interest, was estimated to be
approximately $8.7 million and is recorded on the balance sheet as "Net assets
of discontinued operations" at March 31, 1997. No assurance can be given that
any of the amount represented by this long-term note receivable will be
recognized by the Company. The Company has also provided a letter of credit to
support approximately $2.5 million of bank borrowings of the Demilitarization
operations.

23
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Cash provided by operations during fiscal 1997 totaled $92.1 million,
compared with cash provided by operations of $89.1 million for fiscal 1996 and
cash used by operations of $58.1 million for fiscal 1995. Cash provided by
operations for fiscal 1997 reflects increased net income and improved working
capital management, partially offset by the decrease in net operating cash flow
from the Company's discontinued operations. Approximately $9 million was
expended under the Company's Defense Systems Group restructuring plan, primarily
for employee-related costs. Additional restructuring expenditures of
approximately $12 million were made in fiscal 1997, primarily for closure costs
in connection with the Company's closure of certain facilities acquired in the
Acquisition. Cash provided by operations for fiscal 1996 compared to cash used
by operations for fiscal 1995 primarily reflects increased fiscal 1996
profitability, as well as the fiscal 1995 impact of the restructuring programs,
change of control-related payments and increased working capital.

Cash used for operations totaled $11.6 million for the six month period
ended September 28, 1997, a decrease in cash usage of $8.9 million, when
compared with cash used for operations of $20.5 million in the comparable period
of the prior year. The lower level of cash usage in the period ended September
28, 1997 was primarily the result of lower interest expense. During the six
months ended September 28, 1997, the Company has spent approximately $11.7
million on its restructuring and facility consolidation programs. Approximately
$8.0 million of this spending represented severance and facility consolidation
costs associated with the Company's March, 1997 sale of its Marine Systems
Group. At September 28, 1997, the remaining accrued restructure and facility
consolidation liability primarily represents specifically identified reserves
for employee severance, related benefits and facility closure costs expected to
be incurred in the upcoming year. Cash used for investing activities for the six
month period ended September 28, 1997 was $7.9 million, a $2.4 million decrease
from cash used for investing activities of $10.2 million in the comparable six
month period of the prior year. This difference was primarily the result of
higher capital expenditures in the prior year period due to required tooling
expenditures in connection with a rocket propulsion contract. Additionally, in
connection with the Company's announced intention to acquire certain assets from
a division of Motorola, Inc., including patent and technology rights related to
military fuze production, the Company issued a $2.0 million deposit to the
seller. While negotiations have not been finalized, the asset purchase is
expected to be completed in the third quarter of fiscal 1998 for a purchase
price currently expected to be less than $15 million. Additional consideration
to the sellers may be required in the future based on the financial results of
the business acquired. Results from the proposed acquisition are not expected to
have a material impact on the Company's fiscal year 1998 results.

In June 1995, the Company and certain 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 a
nonrecurring charge of $15.0 million as of the fourth quarter of the fiscal year
ended March 31, 1995.

Net outlays for capital expenditures during fiscal 1997 were $28.5 million,
or 2.6% of sales, compared with fiscal 1996 outlays of $25.6 million, or 2.5% of
sales, and $12.6 million, or 2.5% of sales in fiscal 1995. Net outlays for
capital expenditures for the six month period ended September 28, 1997 totaled
$6.0 million, or 1.2% of sales, a decrease as a percentage of sales, compared to
capital expenditures of $11.7 million, or 2.4% of sales, in the comparable
period of the prior year. The increased expenditures for the prior year period
were primarily the result of increased tooling expenditures for a rocket
propulsion contract.

Principal payments made on the Company's long-term debt during fiscal 1997
and the first six months of fiscal 1998 totaled $128.9 million and $14.5
million, respectively, including, in fiscal 1997, the $88.6 million prepayment
resulting from the sale of the Marine Systems Group.

24
<PAGE>
At September 28, 1997, the Company had no borrowings outstanding against its
$275.0 million revolving line of credit. Outstanding letters of credit of $36.9
million reduced amounts available on this facility to $238.1 million at
September 28, 1997. The Company has outstanding $150.0 million principal amount
of 11 3/4% Senior Subordinated Notes due 2003, which are redeemable at the
option of the Company, in whole or in part, at any time after March 1, 1999 at
certain specified redemption prices. As of September 28, 1997, the Company also
had $101.6 million outstanding in bank term loans. The remaining scheduled
principal payments on the bank term loans are as follows: fiscal 1998, $14.6
million; fiscal 1999, $31.9 million; fiscal 2000, $31.9 million; and fiscal
2001, $23.2 million.

The Company's total debt (notes payable, current portion of long-term debt
and long-term debt) as a percentage of total book capitalization decreased to
50% on September 28, 1997, compared to 55% on March 31, 1997. This decrease
reflects scheduled principal repayments made during fiscal 1998, as well as
increased equity due primarily to fiscal 1998 net earnings to date.

The Company initiated a $50.0 million share repurchase program in fiscal
1996. In connection with that program, the Company repurchased 1,122,580 shares
of its Common Stock in the open market as of March 31, 1997, at an average price
of $38.69 per share, for an aggregate amount of $43.4 million, of which $6.6
million was repurchased in fiscal 1997. During the six months ended September
28, 1997, the Company repurchased an additional 139,600 shares for approximately
$6.0 million. As of September 28, 1997, the Company had substantially completed
its share repurchase program, having repurchased 1,262,205 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 Selling Stockholder has the right to sell to the Company and the Company
has the right to purchase from the Selling Stockholder during 1998 all or a
portion of the 1,084,000 shares to be owned by the Selling Stockholder following
the consummation of the Offering pursuant to a series of put and call options
provided for in the New Agreement. The put and call options may be exercised by
either party at the price to the public less underwriting discounts and
commissions set forth on the cover page of this Prospectus, plus simple interest
at the rate of 6.25% per annum. The Company presently intends to exercise its
call rights in the event that the Selling Stockholder does not exercise its put
rights, although no definitive decision has been made to do so.

On October 27, 1997, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 1.0 million shares of Common Stock
(in addition to the shares that the Company intends to repurchase from the
Selling Stockholder pursuant to put and call provisions of the New Agreement).
Any such repurchases will be subject to prevailing market conditions and the
Company's compliance with certain covenants contained in the Company's Debt
Agreements. As of September 28, 1997, these covenants permitted the Company to
spend up to approximately $69 million for all share repurchases (among other
permitted uses). The amount available for share repurchases will increase by 50%
of the Company's cumulative Consolidated Net Income (as defined in the Debt
Agreement) for each fiscal quarter beginning after September 28, 1997. No
assurance can be given that the Company will repurchase all or any portion of
such shares or as to the timing or terms of any such repurchases. See "Risk
Factors--Restrictive Covenants" and "Dividends and Dividend Policy."

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<PAGE>
adverse impact on the Company's liquidity or results of operations. See "Risk
Factors--Year 2000 Compliance."

The Company is subject to various local, state and federal 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 September 28, 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 environmental remediation obligations, but the
estimated discounted range of reasonably possible costs is between $34 million
and $70 million and there can be no assurance that additional material costs
will not be incurred in the future. While management believes that much of the
compliance and remediation costs associated with the HAC facilities will be
reimbursable through pricing adjustments in U.S. Government contracts, and that
those environmental remediation costs not covered through such adjustments will
be covered by Hercules under certain agreements between the Company and Hercules
entered into in conjunction with the Acquisition, there can be no assurance that
the U.S. Government or Hercules will reimburse the Company for any particular
environmental costs or do so in a timely manner. The Company's liquidity and its
quarterly and annual operating results may be materially adversely affected
unless and until such reimbursements are received. In addition, certain of
Hercules' environmental indemnification obligations are subject to a total
deductible of $1.0 million for all claims (including non-environmental claims)
that the Company may assert under the Purchase Agreement. Hercules is not
required to indemnify the Company for any individual claims below $50,000. See
"Risk Factors--Environmental Matters."

Based on the financial condition of the Company at September 28, 1997,
management believes that future operating cash flows of the Company 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, conduct the Repurchase Program and
purchase shares from the Selling Stockholder under the New Agreement.

INFLATION

In the opinion of management, inflation has not had a significant impact
upon the Company's results of 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.

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<PAGE>
BUSINESS

GENERAL

The Company is a leading developer and supplier of aerospace and defense
technologies, products and systems to the U.S. Government. The Company
specializes in the production of high quality products manufactured to meet
exacting specifications designed to insure consistent, reliable performance. The
Company (including its predecessors) has supplied products and services to the
U.S. Government for more than 50 years.

The Company's principal business areas are conventional ammunition, solid
propulsion systems, smart weapons and composite structures. In the conventional
ammunition and solid propulsion businesses, the Company holds a number one or
two position in most major market segments. The Company is one of the top 15
defense contractors for the U.S. Government and is a major component and
subsystem supplier to the largest DoD prime contractors including Lockheed
Martin, Boeing and Raytheon. For the fiscal year ended March 31, 1997, the
Company generated sales of approximately $1.1 billion, operating income of $70.4
million and net income of $59.2 million.

CONVENTIONAL MUNITIONS GROUP. The Company is one of two principal suppliers
of conventional ammunition to the DoD. Principal products and services include
conventional ammunition, propellants, solid propulsion systems for tactical
missiles, warheads, metal parts and composite structures for weapons systems,
infrared decoy flares and commercial gun powder. The Group has four distinct
business units: Ammunition Systems (tank ammunition, medium caliber ammunition
and warheads); Ordnance (military propellants and commercial gun powders);
Tactical Propulsion (solid propulsion for tactical missiles, composite
structures and warheads); and Kilgore Operations (flares). The Conventional
Munitions Group had fiscal 1997 sales of approximately $499.0 million,
representing approximately 44% of the Company's total sales during the year.

The Company's Ammunition Systems unit designs and manufactures tactical and
training rounds for use on the M1A1 and M1A2 Abrams tanks. Medium caliber
ammunition programs include 25mm ammunition for the Bradley Fighting Vehicle,
the AV-8B attack aircraft and the AC-130 gunship, and 30mm ammunition for the
Apache helicopter and the A-10 attack aircraft. The Company's Ordnance unit
produces propellants for tactical and training tank ammunition, medium caliber
ammunition and the HYDRA 70 rocket motor. In addition to military propellants,
the Company also produces a wide range of commercial gun powders for sale to
individual reloaders and manufacturers of sports ammunition. The Company's
Tactical Propulsion unit supplies solid rocket motors for key tactical missile
systems incuding the Maverick, Hellfire, AMRAAM, Sensor Fuzed Weapon, Evolved
SeaSparrow and AIM 9X programs. In addition to supplying solid propulsion
systems, the Company also produces metal cases for the ATACMS tactical missile
and composite launch tubes for the Javelin anti-tank missile.

Major new business opportunities which the Company intends to pursue include
the next generation kinetic energy tank ammunition, the Modular Artillery Charge
System ("MACS") for future artillery systems, lightweight high performance
composite structures for weapons systems and production of chemical ingredients
(HMX and RDX) for use in explosive products.

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<PAGE>
programs. The Space and Strategic Systems Group had fiscal 1997 sales of
approximately $339.0 million, representing approximately 30% of the Company's
total sales during the year.

The Company provides a full spectrum of solid propulsion motors for small to
heavy lift space launch vehicles. Major space propulsion programs include solid
propulsion systems for the Titan IVB, Delta III, Delta II,
Taurus-Registered Trademark- and Pegasus-Registered Trademark- expendable launch
vehicles. The Company also has a contract to provide launch support for the
Titan IVB vehicle. In strategic propulsion, the Company through a joint venture
with Thiokol Corporation manufactures all three solid propulsion stages for the
Trident II missile, the only U.S. strategic missile presently in production. In
addition to Trident II production, the Group also has contracts to supply
support services on the Trident I, Trident II and Peacekeeper missile programs.
The Company's space and strategic propulsion systems are manufactured at its
state-of-the-art Bacchus West production facility located in Magna, Utah. The
Bacchus facility is one of the world's most modern and automated propellant
production facilities and provides the Company with significant processing,
quality and cost advantages. The space propulsion market continues to benefit
from the growth in space-based communication and surveillance systems. The
Company believes that its technical and manufacturing capabilities position the
Company to continue to benefit from the positive space launch market trends.

The Company has excellent technical and production capabilities in high
technology, high performance composite structures and produces a variety of
products for the space and aircraft markets. Product applications include
aircraft and aircraft engine components, instrument benches and dimensionally
stable assemblies for satellites, space-based antennae and space launch vehicle
tanks and structures. The Company's current composite structures programs are
concentrated primarily in the commercial and government satellite, launch
vehicle and aircraft segments. Major programs include the development of liquid
hydrogen tanks for NASA's X-33 phase II reusable launch vehicle, the inlet duct
for Lockheed Martin's version of the Joint Strike Fighter, pivot shafts for the
F-22 fighter aircraft and composite door springs for Boeing's 767 airplane. With
the expected growth in new communication satellite systems and the ongoing
expansion of space launch services and aircraft, the Company expects to
experience continued growth in its composites business.

DEFENSE SYSTEMS GROUP. The Company is a leading designer, developer and
manufacturer of tactical weapons systems, smart weapons, anti-tank and
demolition systems, unmanned aerial vehicles, fuzes, weapons test equipment
systems, targeting sensors and document management software products. The Group
has three distinct business units: Tactical Systems (smart weapons, tactical
weapons systems, targeting sensors and fuzes); Defense Electronics Systems
(smart weapons systems, missile warning systems, weapons test equipment systems
and advanced imaging and document management software); and Unmanned Aerial
Vehicles (UAVs and tactical ground control systems). The Defense Systems Group
is positioned to respond to the U.S. military's increased demand for low-cost,
high-quality precision weapons systems. The Defense Systems Group had fiscal
1997 sales of approximately $253.0 million, representing approximately 22% of
the Company's total sales during the year.

The Company's Tactical Systems unit develops and produces tactical weapons,
smart weapons systems, anti-tank and demolition systems and electrical and
mechanical fuzes. The Company is currently competitively developing the
Objective Individual Combat Weapon ("OICW"), a lightweight, shoulder-fired
weapon to selectively replace the M16 rifle/M203 grenade launcher. The Company
is the sole source provider of the Volcano and Shielder antitank systems. In
electrical and mechanical fuzes, the Company is a leading producer of low cost
mortar and artillery fuzes. Demolition programs include the Selectable
Lightweight Attack Munition ("SLAM") and the Penetration Augmentation Munition
("PAM") for special operations forces. In the smart weapons area, the Company's
primary program is the Sense and Destroy Armor Munition ("SADARM") program and
the Company is competing to supply improved sensor capability on the Brilliant
Anti-tank ("BAT") munition program. The Company's Defense Electronics Systems
unit is the sole source developer of the Tank Extended Range Munition, a smart
tank round. Other programs include the AAR-47 missile warning system and the
Common Munitions BIT/ Reprogramming Equipment ("CMBRE") smart weapons test
equipment program.

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<PAGE>
The Company's Unmanned Aerial Vehicles unit is developing and testing the
Outrider-TM- Tactical Unmanned Aerial Vehicle system that will provide near-real
time reconnaissance, surveillance and target acquisition information to the U.S.
armed forces. Outrider-TM- is one of the principal UAVs currently being
developed and tested in the U.S. In conjunction with Outrider-TM-, the Company
is also under contract to develop the Tactical Control Systems ("TCS"), an
interoperable command, control and data receipt platform for all tactical UAVs.

Major opportunities being pursued in the Defense Systems Group are the
XM-982 guided projectile program, the Case Telescoped Weapon System ("CTWS") for
the Future Scout/Tracer infantry vehicle and the competitive downselects on the
OICW and BAT programs.

EMERGING BUSINESS GROUP. The Company's emerging business activities include
battery production, advanced technology applications, products and services for
environmental remediation/facility management and safety management services.
The Emerging Business Group had fiscal 1997 sales of approximately $41.0
million, representing approximately 4% of the Company's total sales during the
year. The Company is currently evaluating the merits of consolidating some or
all of the Group's programs into the other three business groups to capture
product synergies and realize additional cost savings.

ICBM PRIME INTEGRATION PROGRAM OFFICE. In early 1997, the Company
established the ICBM Prime Integration program office to compete for the
contract to become the prime integrator of the ICBM program for the U.S. Air
Force. The Air Force is currently transitioning from utilizing associated
contractors to the use of a prime integrator, which will be responsible for
overall ICBM program management. The Company submitted a proposal to act as
prime integrator in August 1997. The Company is one of two bidders for this
contract, the award of which is presently expected to be announced in December
1997. See "Risk Factors--Risks Associated with ICBM Prime Integration Program."

CUSTOMER AND PROGRAM BASE

Approximately 50% of the Company's fiscal 1997 net sales were derived from
prime contractor activities and approximately 50% from subcontractor activities.
Approximately 45% of the Company's fiscal 1997 net sales were derived from
business with the U.S. Army, 19% from the U.S. Air Force, 12% from the U.S. Navy
and 24% from other government, commercial or international sources. The
Company's top 10 programs accounted for approximately 55% of its fiscal 1997 net
sales; however, no single program accounted for more than 10% of the Company's
fiscal 1997 net sales.

STRATEGY

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<PAGE>
it traditionally serves as systems integrator. Major subcontractor opportunities
include propulsion systems for the National Missile Defense ("NMD") system,
propulsion systems for the next generation expendable space launch vehicles,
propulsion systems for tactical missiles, and the ammunition and gun systems for
the Future Scout/Tracer vehicle. Prime contractor program opportunities include
the U.S. Army's next generation kinetic energy tank ammunition, the XM-982
guided projectile, the OICW, UAV programs and the ICBM Prime Integration
program.

ACHIEVE MARGIN IMPROVEMENT. In recent years, the Company has made
significant progress in improving margins. EBIT margins during fiscal years 1993
to 1995 were between 1.5% and 5.5%. In contrast, EBIT margins have exceeded 8%
in each of the past two fiscal years and during the first six months of fiscal
1998. The Company believes that it can further improve EBIT margins through
ongoing facility consolidations, ongoing improvements in program and inventory
management and other operating expense reductions. Management's goal in future
years is to generate EBIT margins in excess of 10%.

REDUCE INTEREST EXPENSE. The Company has made significant progress in
lowering its debt-to-capitalization ratio from 78% in September 1995 to 50% in
September 1997 and expects to continue to lower its leverage ratios in the
future. Scheduled principal payments by the Company during the next four fiscal
years will repay all term loan indebtedness and the Company expects to refinance
its $150.0 million principal amount of Notes due 2003 as early as March 1999.
These actions will signficantly reduce the Company's interest expense.

UTILIZE EXCESS CASH FOR STOCK REPURCHASES AND STRATEGIC
ACQUISITIONS. Margin improvement initiatives and efficient working capital
management are expected to generate excess cash flow. This excess cash will be
targeted primarily for share repurchases and strategic acquisitions. Since 1995,
the Company has repurchased approximately 1.2 million shares of Common Stock and
the Board recently approved the Repurchase Program for up to 1.0 million
additional shares (in addition to the shares that the Company intends to
repurchase from the Selling Stockholder pursuant to the put and call provisions
of the New Agreement), subject to market conditions and the Company's compliance
with certain debt covenants. See "Prospectus Summary--Recent Developments" and
"Risk Factors--Restrictive Covenants." In addition, the Company believes that
there are industry consolidation opportunities within its core business. The
Company will target synergistic acquisitions that strengthen its core
businesses, offer consolidation opportunities and fit strategically with its
existing operations and new program opportunities. The Company will also
consider acquisitions in related businesses that offer additional growth
potential.

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<PAGE>
SELLING STOCKHOLDER

The following table sets forth certain information as to the ownership of
Common Stock as of November 17, 1997 by the Selling Stockholder. See "Risk
Factors--Controlling Stockholders; Relationship with Selling Stockholder" and
"Certain Transactions and Relationships."

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING OWNED AFTER OFFERING
----------------------- -------------------------
<S> <C> <C> <C> <C> <C>
PERCENT OF SHARES
COMMON BEING PERCENT OF
NAME OF BENEFICIAL OWNER NUMBER STOCK OFFERED NUMBER COMMON STOCK
- --------------------------------------------------- ---------- ----------- ---------- ---------- -------------
Hercules Incorporated.............................. 3,862,069 29.3% 2,778,069 1,084,000 8.2%
Hercules Plaza
Wilmington, DE 19894

</TABLE>

In connection with the Acquisition, the Company issued 3,862,069 shares of
Common Stock to Hercules, which presently represents approximately 29.3% of the
outstanding Common Stock. Immediately following the Offering, the Selling
Stockholder will beneficially own approximately 8.2% of the outstanding Common
Stock. The Selling Stockholder has the right to sell to the Company and the
Company has the right to purchase from the Selling Stockholder during 1998 all
or a portion of the remaining 1,084,000 shares to be owned by the Selling
Stockholder following the consummation of the Offering pursuant to a series of
put and call options set forth in the New Agreement. The put and call options
may be exercised by either party at the price to the public less underwriting
discounts and commissions set forth on the cover page of this Prospectus, plus
simple interest at the rate of 6.25% per annum. The Company presently intends to
exercise its call rights in the event that the Selling Stockholder does not
exercise its put rights, although no definitive decision has been made to do so.
See "Risk Factors--Controlling Stockholders; Relationship with Selling
Stockholder" and "Certain Transactions and Relationships--Future Relationship
with Selling Stockholder."

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<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS

STOCKHOLDER'S AGREEMENT

In connection with the Acquisition, the Company paid Hercules consideration
that included 3,862,069 shares of Common Stock, of which 2,778,069 are being
offered hereby pursuant to certain registration rights granted by the Company to
the Selling Stockholder under the Stockholder's Agreement. Pursuant to the
Stockholder's Agreement, Hercules presently has three designees on the Company's
ten-member Board of Directors and Gotham III presently has four designees on the
Company's Board of Directors. The Gotham III designees on the current Board are
Messrs. Joel M. Greenblatt, Jonathan G. Guss, Joseph F. Mazzella and Daniel L.
Nir; and the Hercules designees on the current Board are Messrs. R. Keith
Elliott, Vincent J. Corbo and Thomas L. Gossage. The Stockholder's Agreement
also subjects the Selling Stockholder to various voting restrictions and
standstill provisions. See "Risk Factors-- Controlling Stockholders;
Relationship with Selling Stockholder" and "--Future Relationship with Selling
Stockholder."

FUTURE RELATIONSHIP WITH SELLING STOCKHOLDER

In connection with the Offering, the Company and the Selling Stockholder
have entered into the New Agreement pursuant to which the Selling Stockholder
and the Company have granted each other reciprocal put and call options with
respect to the 1,084,000 shares of Common Stock to be owned by the Selling
Stockholder following the consummation of the Offering. Pursuant to the New
Agreement, the Stockholder's Agreement will terminate upon the consummation of
the Offering (except as to certain registration rights granted to the Selling
Stockholder therein) and the standstill arrangements set forth therein will be
replaced by the standstill arrangements set forth in the New Agreement and
described below. Following the consummation of the Offering, the Selling
Stockholder will have the right to designate only one director until the end of
the Protected Period (as defined herein) and Gotham III will have the right to
designate four directors. The "Protected Period" commences upon consummation of
the Offering and terminates upon consummation of the closing of the final put
and call installment, as described below, or, if such put and call are not
exercised, at the Company's 1999 Annual Meeting of Stockholders, unless the
Company is then in default of its obligations under the put and call provisions
of the New Agreement, in which case the Protected Period terminates upon cure of
such default. Following the consummation of the Offering, the New Agreement will
continue until March 15, 2000. The New Agreement may be terminated by the
Company or the Selling Stockholder if the Offering is not completed by January
15, 1998. Accordingly, there can be no assurance that the Offering or the
transactions contemplated by the New Agreement will be consummated. See "Risk
Factors--Controlling Stockholders; Relationship with Selling Stockholder."

PUT AND CALL OPTIONS. The Company has granted to the Selling Stockholder an
irrevocable option to sell the 1,084,000 shares to be owned by the Selling
Stockholder following the Offering (the "Option Shares") to the Company (the
"Put"), and the Selling Stockholder has granted to the Company an irrevocable
option to purchase the Option Shares from the Selling Stockholder (the "Call"),
in each case at a price per share ("Exercise Price") equal to the price to the
public less underwriting discounts and commissions set forth on the cover page
of this Prospectus (the "Offering Price"), plus simple interest at the rate of
6.25% per annum from the completion of the Offering to the closing of each
option exercise. The Put and the Call will each be exercisable in four equal
installments. The four installments may be exercised at any time during the two
calendar months ending on the following respective dates (each such two month
period, an "Exercise Period"): March 31, 1998; June 30, 1998; September 30,
1998; and December 31, 1998. The Company presently intends to exercise its Call
in the event that the Selling Stockholder does not exercise its Put, although no
definitive decision has been made to do so.

Notwithstanding the foregoing, (i) each Put installment or Call installment
may be exercised only in whole (and not in part); (ii) only one Put installment
or one Call installment may be exercised during any

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<PAGE>
Exercise Period; and (iii) any installment which is not exercised on a timely
basis will expire without any adjustment to any other installment or otherwise.
Moreover, during any Exercise Period, instead of exercising its Put installment,
the Selling Stockholder may exercise the right to sell such Put to the Company
(the "Cash Settlement Right") at a price per share (the "Cash Settlement Price")
equal to the greater of (i) $1.00 or (ii) the amount, if any, by which the
Exercise Price for such Put exceeds the average closing price of the Company's
Common Stock on the NYSE for the twenty business days immediately preceding the
day on which such Cash Settlement Right is exercised. Notwithstanding the
Selling Stockholder's exercise of its Cash Settlement Right with respect to any
Put installment, the Company may nonetheless exercise its corresponding
installment of the Call on or before the later of (i) the final day of such
Exercise Period or (ii) the fifteenth business day after such exercise of the
Cash Settlement Right (whether or not the relevant Exercise Period has then
expired). Upon such exercise by the Company, the Selling Stockholder's exercise
of such Cash Settlement Right will become null and void and a closing will be
held with regard to such Call installment. The Company presently expects to
utilize its ability to override any Cash Settlement Right in order to acquire
the Option Shares.

If the Put and Call installments for any Exercise Period expire unexercised,
or the Selling Stockholder's Cash Settlement Right is exercised and closed, the
Selling Stockholder will be entitled to retain the Option Shares previously
subject to such Put and Call installment, free and clear of all Calls, but
subject to the restrictions on transfer described below.

In the event of any change in the Common Stock by reason of a stock
dividend, split-up, merger, recapitalization, combination, exchange of shares or
similar transaction, the type and number of shares or securities subject to the
Put and the Call, and the Exercise Price therefor, will be adjusted
appropriately, so that, upon the future exercise of an installment of the Put or
the Call or a Cash Settlement Right, the Company and the Selling Stockholder
will receive the same result as if the option installment or Cash Settlement
Right had been exercised immediately prior to such event or the record date
therefor, as applicable.

RESTRICTIONS ON SELLING STOCKHOLDER. If the Offering is consummated, until
March 15, 2000, the Selling Stockholder will not, and will cause each of its
controlled affiliates not to, individually or as part of a group: (i) sell,
pledge, transfer or otherwise dispose of any of the Option Shares, nor subject
any of the Option Shares to any lien, except pursuant to the terms of the New
Agreement; (ii) acquire, offer or propose to acquire, or agree to acquire,
directly or indirectly, beneficial ownership of any voting securities (or
securities exercisable for or convertible into voting securities of) the
Company; or (iii) take any action which is described under the standstill
provisions below.

Any Option Shares which are no longer subject to the Put or the Call may be
sold, pledged, transferred or otherwise disposed of by the Selling Stockholder
without restriction, provided that the Selling Stockholder must make all
reasonable efforts to avoid disposing of such shares to any person which
(together with its affiliates and any other members of any group of which such
person is a member), would, after giving effect to such acquisition,
beneficially own voting securities representing 10% or more of the total
combined voting power (in the general election of directors) of all the voting
securities of the Company then outstanding.

DESIGNATED DIRECTORS. At the request of the Nominating Committee of the
Company's Board of Directors (the "Nominating Committee"), the Selling
Stockholder will use all reasonable efforts to cause such director designees of
the Selling Stockholder as requested by the Nominating Committee to resign
effective as of the consummation of the Offering. On October 27, 1997, the
Company announced that upon completion of the Offering it is expected that R.
Keith Elliott, Chairman and Chief Executive Officer of Hercules, and Vincent J.
Corbo, President and Chief Operating Officer of Hercules, will resign from the
Company's Board of Directors. The Company also announced that Michael T. Smith,
Chairman and Chief Executive Officer of Hughes Electronics Corporation, and
Gilbert F. Decker, former Assistant Secretary of the U.S. Army for Research,
Development and Acquisition, have agreed to join the Company's Board of

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<PAGE>
Directors effective at the Company's regularly scheduled January 1998 meeting of
the Board of Directors. During the Protected Period, the Company will use all
reasonable efforts to cause the Nominating Committee to recommend for election
as a director, at each annual election of directors, a person designated by the
Company who is then a member of the Selling Stockholder's Board of Directors but
not an officer or employee, or former officer or employee, of the Selling
Stockholder (the "Designated Director"). Gaynor N. Kelley will be the Designated
Director for so long as he is a member of the Selling Stockholder's Board of
Directors. During the Protected Period, if a Designated Director ceases to serve
as a director for any reason, the Company will use all reasonable efforts to
cause the vacancy created thereby to be filled by another Designated Director.
The Company will continue to be bound by the terms of the existing
indemnification agreements between the Company and each of Messrs. Elliott,
Corbo, Gossage and Kelley pursuant to which the Company has agreed to indemnify
each of such individuals for any expenses (including attorneys' fees),
judgments, fines or amounts paid in settlement which he incurs by reason of the
fact he was a director.

STANDSTILL PROVISIONS. During the term of the New Agreement, without the
prior written consent of the Company duly authorized by the Board of Directors,
the Selling Stockholder will not, and will cause each of its controlled
affiliates not to, singly or as part of a "group", directly or indirectly,
through one or more intermediaries (i) make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act) with respect to the voting
securities of the Company (the "Voting Securities"), including by the execution
of actions by written consent, become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange Act) with
respect to the Company or seek to advise or influence any person or entity with
respect to the voting of any Voting Securities; (ii) initiate, propose or
participate in the solicitation of stockholders for the approval of, one or more
stockholder proposals with respect to the Company as described in Rule 14a-8
under the Exchange Act or induce any other individual or entity to initiate any
stockholder proposal relating to the Company; (iii) form, join, influence or
participate in a "group," act in concert with any other person or entity or
otherwise become a "person," for the purpose of acquiring, holding, voting or
disposing of any Voting Securities or taking any other actions prohibited by
these standstill provisions; (iv) make any proposal or, except as may be
required by law, any public announcement relating to a tender or exchange offer
for any Voting Securities, or a merger, business combination, sale of assets,
liquidation, restructuring, recapitalization or other extraordinary corporate
transaction relating to the Company or its material assets; (v) act, alone or in
concert with others (including by providing financing for another party), to
seek or offer to "control" the Company; (vi) deposit any Voting Securities in a
voting trust or subject any Voting Securities to any arrangement or agreement
with respect to the voting thereof; (vii) disclose any intention, plan or
arrangement inconsistent with the foregoing prohibitions or advise or assist any
other person in connection with the foregoing prohibitions; or (viii) seek,
request or propose any waiver, modification, amendment or termination of any
standstill provision of the New Agreement.

CERTAIN OTHER TRANSACTIONS AND RELATIONSHIPS WITH SELLING STOCKHOLDER

In connection with the Acquisition, the Company agreed to assume, indemnify
Hercules against, or contribute to, and Hercules agreed to indemnify the Company
against, certain liabilities associated with the assets and operations of HAC
acquired in the Acquisition. See "--Controlling Stockholders; Relationship with
Selling Stockholder," "--Environmental Matters" and "--Litigation Risk" under
"Risk Factors."

Except as described in the following sentence, the Company has agreed to pay
the costs and expenses of the Offering (estimated at $550,000). The Selling
Stockholder will pay underwriting discounts and commissions and any applicable
agent fees and transfer taxes payable in connection with the sale of the shares
of Common Stock offered hereby. The Company has agreed to indemnify the Selling
Stockholder

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<PAGE>
and the Underwriters against certain liabilities, including liabilities under
the Securities Act. See "Underwriters."

CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
OF COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a foreign
estate or trust.

This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances and does not address any tax consequences arising under the laws
of any state, local or foreign jurisdiction. Prospective holders should consult
their tax advisors with respect to the particular tax consequences to them of
owning and disposing of Common Stock, including the consequences under the laws
of any state, local or foreign jurisdiction.

DIVIDENDS

Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
See "Dividends and Dividend Policy." For purposes of determining whether tax is
to be withheld at a 30% rate or at a reduced rate as specified by an income tax
treaty, the Company ordinarily will presume that dividends paid on or before
December 31, 1998 to an address in a foreign country are paid to a resident of
such country absent knowledge that such presumption is not warranted.

Under the recently finalized United States Treasury Regulations applicable
to dividends paid after December 31, 1998 (the "Final Regulations"), to obtain a
reduced rate of withholding under a treaty, a Non-U.S. Holder will generally be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-U.S. Holder's entitlement to benefits under a treaty. The Final Regulations
also provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.

There will be no withholding tax on dividends paid to a Non-U.S. Holder that
are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States if a Form 4224 stating that the dividends are
so connected is filed with the Company. Instead, the effectively connected
dividends will be subject to regular U.S. income tax in the same manner as if
the Non-U.S. Holder were a U.S. resident. A non-U.S. corporation receiving
effectively connected dividends may also be subject to an additional "branch
profits tax" which is imposed, under certain circumstances, at a rate of 30% (or
such lower rate as may be specified by an applicable treaty) of the non-U.S.
corporation's effectively connected earnings and profits, subject to certain
adjustments. Under the Final Regulations, Form W-8 will replace Form 4224.

Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.

Dividends paid to a Non-U.S. Holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the Non-U.S.
Holder fails to establish that it is entitled to an

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<PAGE>
exemption or to provide a correct taxpayer identification number and certain
other information to the Company.

Under current United States federal income tax law, backup withholding
imposed at a rate of 31% generally will not apply to dividends paid on or before
December 31, 1998 to a Non-U.S. Holder at an address outside the United States
(unless the payer has knowledge that the payee is a U.S. person). Under the
Final Regulations, however, a Non-U.S. Holder will be subject to backup
withholding unless applicable certification requirements are met.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States, (ii) in the case of certain Non-U.S. Holders who
are non-resident alien individuals and hold Common Stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) the Company is or has been a "U.S. real property holding
corporation" within the meaning of Section 897(c)(2) of the Code at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. The Company is not, and does not anticipate becoming, a
U.S. real property holding corporation.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK

Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock effected by or through a U.S. office of a broker
unless the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is either (i) a U.S. person, (ii) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes, and the
broker fails to maintain documentary evidence that the holder is a Non-U.S.
Holder and that certain conditions are met, or that the holder otherwise is
entitled to an exemption, or (iv) effective after December 31, 1998, certain
brokers that are partnerships with U.S. partners or that are engaged in a U.S.
trade or business.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.

FEDERAL ESTATE TAX

An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the Common Stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.

36
<PAGE>
DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Under the Company's Restated Certificate of Incorporation (the "Restated
Certificate"), the total number of shares of all classes of stock that the
Company has authority to issue is 25,000,000, of which 5,000,000 are shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"), and
20,000,000 are shares of Common Stock. As of November 14, 1997, 13,168,276
shares of Common Stock and no shares of Preferred Stock were outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, and the holders of such shares possess all
voting power, except as otherwise required by law or provided in any resolution
adopted by the Board of Directors of the Company with respect to any series of
Preferred Stock of the Company. Subject to any preferential or other rights of
any outstanding series of Preferred Stock of the Company that may be designated
by the Board of Directors of the Company, the holders of Common Stock are
entitled to such dividends as may be declared from time to time by the Board of
Directors of the Company from funds available therefor, and upon liquidation are
entitled to receive pro rata all assets of the Company available for
distribution to such holders. See "Risk Factors-- Restrictive Covenants" and
"Dividends and Dividend Policy."

PREFERRED STOCK

The Restated Certificate authorizes the Board of Directors of the Company to
establish one or more series of Preferred Stock and to determine, with respect
to any series of Preferred Stock, the terms and rights of such series, including
the following: (i) the designation of such series; (ii) the rate and time of,
and conditions and preferences with respect to, dividends, and whether such
dividends are cumulative; (iii) the voting rights, if any, of shares of such
series; (iv) the price, timing and conditions regarding the redemption of shares
of such series and whether a sinking fund should be established for such series;
(v) the rights and preferences of shares of such series in the event of
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; and (vi) the right, if any, to convert or exchange shares of
such series into or for stock or securities of any other series or class. See
"--Purposes and Effects of Certain Provisions of the Company's Restated
Certificate of Incorporation and the Rights Agreement."

PREEMPTIVE RIGHTS

No holder of any stock of the Company of any class has any preemptive right
to subscribe to any securities of the Company of any kind or class.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. ("CMSS").

PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION AND THE RIGHTS AGREEMENT

GENERAL. The Restated Certificate and the Second Amendment to the Rights
Agreement, dated as of October 28, 1994, between the Company and CMSS (the
"Rights Agreement"), contain certain provisions that could make more difficult
the acquisition of control of the Company by means of a tender offer, open
market purchases, a proxy contest or otherwise. Set forth below is a description
of such provisions in the Restated Certificate and the Rights Agreement. Such
description is intended as a summary only and is

37
<PAGE>
qualified in its entirety by reference to the Restated Certificate and the
Rights Agreement, the forms of which are included as exhibits to the
Registration Statement of which this Prospectus forms a part.

PREFERRED STOCK. The Company believes that the availability of the
Preferred Stock under the Restated Certificate will provide the Company with
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. Having
such authorized shares available for issuance will allow the Company to issue
shares of Preferred Stock without the expense and delay of a special
stockholders' meeting. The authorized shares of Preferred Stock, as well as
shares of Common Stock, will be available for issuance without further action by
the Company's stockholders, unless such action is required by applicable law or
the rules of any stock exchange on which the Company's securities may be listed.
Although the Board of Directors of the Company has no intention at the present
time of doing so, it would have the power (subject to applicable law) to issue a
series of Preferred Stock that could, depending on the terms of such series,
impede the completion of a merger, tender offer or other takeover attempt. For
instance, subject to applicable law, such series of Preferred Stock might impede
a business combination by including class voting rights which would enable the
holder to block such a transaction. The Board of Directors will make any
determination to issue such shares based on its judgment as to the best
interests of the Company and its stockholders. The Board of Directors, in so
acting, could issue Preferred Stock having terms which could discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock. See "--Rights Agreement."

FAIR PRICE PROVISION. Article TENTH of the Restated Certificate requires
the approval of a majority of the outstanding shares of voting stock of the
Company, excluding voting stock held by any Interested Stockholder (as defined
therein generally as the beneficial owner of more than 10% of the voting stock
of the Company), in addition to any class vote required by law or otherwise, as
a condition of certain "Business Combination" (as defined therein) transactions
with or for the benefit of an Interested Stockholder, except in cases in which
either certain price criteria and procedural standards are satisfied or the
transaction is approved by a majority of the directors of the Company who are
not affiliated with an Interested Stockholder and each of whom either was a
director of the Company prior to the time any Interested Stockholder became an
Interested Stockholder or was recommended or elected by a majority of such
directors. The price criteria under Article TENTH relate to the minimum value to
be paid to the holders of the Company's Common Stock and the procedural
standards relate to (i) the preservation of the dividend rate on the Company's
Common Stock, (ii) limitations on an Interested Stockholder's acquisition of
additional shares of capital stock of the Company and the receipt of loans,
financial assistance or tax advantages from the Company, (iii) disclosure to the
Company's stockholders in connection with a proposed Business Combination
transaction and (iv) limitations on major changes in the Company's business or
equity capital structure.

RIGHTS AGREEMENT. For each share of Common Stock outstanding as of October
9, 1990, the Company also has outstanding one associated right (a "Right") to
purchase Series A Junior Participating Preferred Stock. The description and
terms of the Rights are set forth in the Rights Agreement.

The Rights remain non-exercisable, non-transferable and non-separable from
the Company's Common Stock until the earlier of 10 business days after (i) a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of the Company's
Common Stock (the "Stock Acquisition Date"), (ii) the commencement of a tender
offer or exchange offer that upon consummation would result in a person being a
beneficial owner of 20% or more of the Common Stock or (iii) the Board of
Directors determines that any person, alone or together with its affiliates and
associates, has become the beneficial owner of an amount of Common Stock which
the Board of Directors determines to be substantial (in no event less than 10%
of the outstanding shares of Common Stock) and at least a

38
<PAGE>
majority of the Board of Directors who are not officers of the Company,
determines that (a) such beneficial ownership by such person is intended to
cause the Company to repurchase the Common Stock beneficially owned by such
person or to cause pressure on the Company to take action or enter into a
transaction (or series of transactions) intended to provide such person with
short-term financial gain under circumstances which the Board of Directors
determines that the best long-term interests of the Company and its stockholders
would not be served by taking any such actions at that time or (b) such
beneficial ownership is causing or reasonably likely to cause a material adverse
impact on the business or prospects of the Company (any such person being
referred to as an "Adverse Person").

In the event that (i) a person becomes the beneficial owner of 20% or more
of the then outstanding shares of the Common Stock (except pursuant to an offer
for all outstanding shares of Common Stock that the independent directors of the
Company determine to be fair to and otherwise in the best interests of the
Company and its stockholders (an "Approved Offer")), or (ii) the Board of
Directors determines that a person is an Adverse Person, each holder of a Right
will thereafter have the right to receive (only after the Rights are no longer
redeemable by the Company as set forth herein), upon exercise, such number of
shares of Common Stock as equals the result obtained by (i) multiplying the
Purchase Price (as defined in the Rights Agreement) by the number of
one-hundredths of a share of Series A Junior Participating Preferred Stock for
which a Right was exercisable prior to the triggering event and (ii) dividing
that product by 50% of the current market price per share of Common Stock on the
triggering date (or, in certain circumstances, cash, property or other
securities of the Company of equivalent value). Each Right, when exercisable,
currently entitles the registered holder to purchase from the Company one one-
hundredth of a share of Series A Junior Participating Preferred Stock at a price
of $80.00, subject to adjustment, upon the occurrence of such events. In the
event that, at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation (other than a merger that follows an
Approved Offer and meets certain other requirements) or (ii) more than 50% of
the Company's assets, cash flow or earning power is sold or transferred, each
holder of a Right shall thereafter have the right to receive (only after Rights
are no longer redeemable by the Company as set forth below), upon exercise, such
number of shares of Common Stock as equals the result obtained by (i)
multiplying the Purchase Price by the number of one-hundredths of a share of
Series A Junior Participating Preferred Stock for which a Right was exercisable
prior to the triggering event and (ii) dividing that product by 50% of the
current market price per share of Common Stock on the triggering date.

In general, at any time prior to their expiration on September 28, 2000 or
until 10 business days following the Stock Acquisition Date, the Board of
Directors in its discretion may redeem the Rights in whole, but not in part, at
a price of $.01 per Right. Under certain circumstances, the decision to redeem
shall require the concurrence of a majority of directors, each of whom generally
was a member of the Board of Directors prior to the date of the Rights Agreement
or was recommended for or approved as a director by a majority of such members
and who are not an Acquiring Person, an Adverse Person or an associate,
affiliate or representative of either. The Company may not redeem the Rights if
the Board of Directors has previously declared a person to be an Adverse Person.

Each share of Series A Junior Participating Preferred Stock, when issued,
will be nonredeemable and entitled to cumulative dividends and will rank junior
to any series of Preferred Stock senior to it. Dividends are payable on the
Series A Junior Participating Preferred Stock in an amount equal to the greater
of (i) $1.00 per share or (ii) 100 times the aggregate per share amount of all
cash and noncash dividends (other than dividends payable in Common Stock)
declared on the Common Stock since the last quarterly dividend payment date or,
with respect to the first such date, since the first issuance of the Series A
Junior Participating Preferred Stock. Each share of Series A Junior
Participating Preferred Stock will entitle the holder (subject to adjustment) to
100 votes on all matters submitted to a vote of the stockholders of the
Company. The number of shares constituting the series of Series A Junior
Participating Preferred Stock is 200,000.

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<PAGE>
The Rights may have certain anti-takeover effects, including deterring
someone from acquiring control of the Company in a manner or on terms not
approved by the Board of Directors. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors, because
the Rights may be redeemed generally at any time by the Company as set forth
above, except in the case of a declaration by the Board of Directors that the
person seeking a merger or business combination is an Adverse Person.

SECTION 203 OF THE DGCL

The Company is subject to Section 203 of the Delaware General Corporation
Law (the "DGCL"). Section 203 prohibits publicly held Delaware corporations from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the time of the transaction in which the person
or entity became an interested stockholder, unless (i) prior to such time,
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder is approved by the Board of
Directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock of the
corporation (excluding for this purpose certain shares owned by persons who are
directors and also officers of the corporation and by certain employee benefit
plans) or (iii) at or after such time the business combination is approved by
the Board of Directors of the corporation and by the affirmative vote (and not
by written consent) of at least 66-2/3% of the outstanding voting stock which is
not owned by the interested stockholder. For the purposes of Section 203, a
"business combination" is broadly defined to include mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the immediately preceding three years
did own) 15% or more of the corporation's voting stock.

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<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated and SBC
Warburg Dillon Read Inc. are acting as U.S. Representatives, and the
International Underwriters named below for whom Morgan Stanley & Co.
International Limited and Swiss Bank Corporation, acting through its division
SBC Warburg Dillon Read are acting as International Representatives, have
severally agreed to purchase, and the Selling Stockholder has agreed to sell to
them, severally, the respective number of shares of Common Stock set forth
opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................................ 736,228
SBC Warburg Dillon Read Inc.................................................. 736,227
Bear, Stearns & Co. Inc...................................................... 60,000
BT Alex. Brown Incorporated.................................................. 60,000
Cowen & Company.............................................................. 30,000
Credit Suisse First Boston Corporation....................................... 60,000
Credit Lyonnais Securities (USA) Inc......................................... 60,000
A.G. Edwards & Sons, Inc..................................................... 60,000
EVEREN Securities, Inc....................................................... 30,000
Furman Selz LLC.............................................................. 60,000
Jefferies & Company, Inc..................................................... 30,000
Edward D. Jones & Co., L.P................................................... 30,000
Ladenburg, Thalmann & Co. Inc................................................ 30,000
Lehman Brothers Inc.......................................................... 60,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................... 60,000
Monness, Crespi, Hardt & Co. Inc............................................. 30,000
Piper Jaffray Inc............................................................ 30,000
Smith Barney Inc............................................................. 60,000
----------
Subtotal..................................................................... 2,222,455
----------
International Underwriters:
Morgan Stanley & Co. International Limited................................... 277,807
Swiss Bank Corporation, acting through its division
SBC Warburg Dillon Read.................................................... 277,807
----------
Subtotal..................................................................... 555,614
----------
Total...................................................................... 2,778,069
----------
----------
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby if any such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the shares of Common Stock
outside the United States or Canada or to anyone other than a United States or
Canadian Person. Pursuant to the Agreement between U.S. and International
Underwriters, each International Underwriter has represented and agreed that,
with certain exceptions:

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<PAGE>
(i) it is not purchasing any Shares for the account of any United States or
Canadian Person and (ii) it has not offered or sold, and will not offer or sell,
directly or indirectly, any Shares or distribute any prospectus relating to the
Shares in the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is a U.S. Underwriter and an
International Underwriter, the foregoing representations and agreements (i) made
by it in its capacity as a U.S. Underwriter apply only to it in its capacity as
a U.S. Underwriter and (ii) made by it in its capacity as an International
Underwriter apply only to it in its capacity as an International Underwriter.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between U.S. and
International Underwriter. As used herein, "United States or Canadian Person"
means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of Shares as may be mutually agreed. The per share price of any Shares so
sold shall be the public offering price set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof, and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

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<PAGE>
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $1.38 a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $.10 a
share to other Underwriters or to certain other dealers. After the initial
offering of the Shares, the offering price and other selling terms may from time
to time be varied by the Representatives.

Each of the Company and the Company's directors and executive officers (for
so long as they remain in such capacities) and the Selling Stockholder, has
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, it will not during the period ending
90 days after the date of this Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not apply to (A) the
sale of the Shares to the Underwriters pursuant to the Underwriting Agreement,
(B) the issuance by the Company of shares of Common Stock upon the exercise of
an option or warrant or the conversion of a security outstanding on the date of
this Prospectus of which the Underwriters have been advised in writing, (C) the
grant by the Company of shares of Common Stock or options to purchase Common
Stock under employee benefit arrangements, (D) transactions by any person other
than the Company relating to shares of common stock or other securities acquired
in open market transactions after the completion of the Offering of the Shares,
or (E) the sales by the Selling Stockholder and purchases by the Company
pursuant to the Put and Call provisions of the New Agreement of the 1,084,000
shares of Common Stock to be held by the Selling Stockholder following the
consummation of the Offering.

In order to facilitate the offering of the Shares, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Common Stock. Specifically, to stabilize the price of the Common Stock, the
Underwriters may bid for, and purchase, shares of Common Stock in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing the Common Stock in the
Offering, if the syndicate repurchases previously distributed Common Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

43
<PAGE>
From time to time, certain of the Underwriters and their affiliates have
provided, and continue to provide, investment banking services to the Company.

The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon by
Jones, Day, Reavis & Pogue, New York, New York and certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

The consolidated balance sheets as of March 31, 1997 and 1996 and the
related consolidated statements of income and of cash flows for each of the
years ended March 31, 1997, 1996 and 1995 included in this Prospectus and the
financial statements and the related financial statement schedule incorporated
in this Prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended March 31, 1997 have been audited by Deloitte & Touche,
independent auditors, as stated in their reports, which are included and
incorporated herein by reference, and have been so included and incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

44
<PAGE>
ALLIANT TECHSYSTEMS INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Public Accountants............................................. F-2

Consolidated Income Statements for the fiscal years ended March 31, 1997, 1996 and
1995............................................................................... F-3

Consolidated Balance Sheets as of March 31, 1997 and March 31, 1996.................. F-4

Consolidated Statements of Cash Flows for the fiscal years ended March 31, 1997, 1996
and 1995........................................................................... F-5

Notes to Consolidated Financial Statements........................................... F-6

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Income Statements (Unaudited) for the quarters and six months ended
September 28, 1997 and September 29, 1996.......................................... F-26

Consolidated Balance Sheets as of September 28, 1997 (unaudited) and March 31,
1997............................................................................... F-27

Consolidated Statements of Cash Flows (Unaudited) for the six months ended September
28, 1997 and September 29, 1996.................................................... F-28

Notes to Consolidated Financial Statements (Unaudited)............................... F-29
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholders of Alliant Techsystems:

We have audited the accompanying consolidated balance sheets of Alliant
Techsystems Inc. and subsidiaries as of March 31, 1997, and 1996, and the
related consolidated statements of income and of cash flows for each of the
years ended March 31, 1997, 1996, and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Alliant Techsystems Inc. and
subsidiaries at March 31, 1997, and 1996, and the consolidated results of its
operations and its cash flows for each of the years ended March 31, 1997, 1996,
and 1995, in conformity with generally accepted accounting principles.

As discussed in Note 10 to the financial statements, effective April 1,
1994, the Company changed its method of accounting for post-employment benefit
costs to conform with Statement of Financial Accounting Standards No. 112.

Deloitte & Touche LLP
Minneapolis, Minnesota
May 14, 1997

F-2
<PAGE>
CONSOLIDATED INCOME STATEMENTS

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE DATA)
Sales............................................................... $ 1,089,397 $ 1,020,605 $ 504,190
Cost of sales....................................................... 907,695 834,298 438,558
Change in accounting estimate--environmental liabilities............ 17,442 -- --
-------------- -------------- --------------
Gross margin........................................................ 164,260 186,307 65,632
Operating expenses:
Research and development.......................................... 16,207 14,126 11,763
Selling........................................................... 35,778 33,143 24,820
General and administrative........................................ 41,881 40,186 19,066
Restructuring charges............................................. -- -- 35,600
Change of control charges......................................... -- -- 23,039
Litigation settlement charges..................................... -- -- 15,000
-------------- -------------- --------------
Total operating expenses.......................................... 93,866 87,455 129,288
-------------- -------------- --------------
Income (loss) from operations..................................... 70,394 98,852 (63,656)
-------------- -------------- --------------
Other income (expense):
Interest expense.................................................. (35,102) (39,279) (7,919)
Interest income................................................... 716 1,852 843
Other, net........................................................ 651 657 (2,332)
-------------- -------------- --------------
Total other expense............................................... (33,735) (36,770) (9,408)
-------------- -------------- --------------
Income (loss) from continuing operations before income taxes........ 36,659 62,082 (73,064)
Income tax provision................................................ -- 13,658 --
-------------- -------------- --------------
Income (loss) from continuing operations............................ 36,659 48,424 (73,064)
Discontinued operations:
Income from discontinued operations, net of
income taxes.................................................... 4,819 5,617 456
Gain (loss) on disposal of discontinued operations, net of income
taxes........................................................... 17,681 (6,240) --
-------------- -------------- --------------
Income (loss) before cumulative effect of
accounting change................................................. 59,159 47,801 (72,608)
Cumulative effect of accounting change net of
income taxes...................................................... -- -- (1,500)
-------------- -------------- --------------
Net income (loss)................................................... $ 59,159 $ 47,801 $ (74,108)
-------------- -------------- --------------
Primary and fully diluted earnings (loss) per common and common
equivalent share:
Continuing operations............................................. $ 2.73 $ 3.61 $ (7.27)
Discontinued operations........................................... 1.68 (.05) .05
Cumulative effect of accounting change............................ -- -- (.15)
-------------- -------------- --------------
Net income (loss)................................................... $ 4.41 $ 3.56 $ (7.37)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
(AMOUNTS IN THOUSANDS
EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 122,491 $ 45,532
Marketable securities.......................................................... 378 348
Receivables.................................................................... 191,675 178,475
Net inventory.................................................................. 68,125 87,602
Deferred income tax asset...................................................... 37,244 40,393
Other current assets........................................................... 5,329 3,819
-------------- --------------
Total current assets......................................................... 425,242 356,169
Net property, plant, and equipment............................................... 360,560 382,513
Goodwill......................................................................... 123,618 125,033
Deferred charges................................................................. 10,925 12,316
Prepaid and intangible pension assets............................................ 80,569 85,142
Other assets..................................................................... 116 855
Net assets of discontinued operations............................................ 8,674 73,114
-------------- --------------
Total assets................................................................. $ 1,009,704 $ 1,035,142
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............................................. $ 29,024 $ 45,000
Notes payable.................................................................. 2,302 2,756
Accounts payable............................................................... 85,451 77,453
Contract advances and allowances............................................... 64,500 40,636
Accrued compensation........................................................... 28,392 28,672
Accrued income taxes........................................................... 9,156 9,310
Restructuring liability........................................................ 5,876 26,782
Other accrued liabilities...................................................... 106,496 82,582
-------------- --------------
Total current liabilities.................................................... 331,197 313,191
Long-term debt................................................................... 237,071 350,000
Post-retirement and post-employment benefits liability........................... 143,373 143,930
Pension liability................................................................ 37,079 42,184
Other long-term liabilities...................................................... 42,192 28,360
-------------- --------------
Total liabilities............................................................ 790,912 877,665
Contingencies (see Notes 15 and 19)
Stockholders' equity:
Common stock--$.01 par value
Authorized--20,000,000 shares
Issued and outstanding 13,081,538 and 12,965,542 shares at March 31, 1997,
and 1996, respectively................................................... 131 130
Additional paid-in-capital....................................................... 248,612 249,814
Retained earnings (deficit)...................................................... 4,361 (54,798)
Unearned compensation............................................................ (1,324) (2,552)
Pension liability adjustment..................................................... (2,304) (1,189)
Common stock in treasury, at cost (782,075 and 898,071 shares held at March 31,
1997, and 1996, respectively).................................................. (30,684) (33,928)
-------------- --------------
Total stockholders' equity................................................... 218,792 157,477
-------------- --------------
Total liabilities and stockholders' equity................................... $ 1,009,704 $ 1,035,142
-------------- --------------
-------------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Operating Activities
Net income (loss)............................................... $ 59,159 $ 47,801 $ (74,108)
Adjustments to net income (loss) to arrive at cash provided by
(used for) operations:
Restructuring charges--non-cash portion..................... -- -- 18,433
Change of control charges--non-cash portion................. -- -- 7,991
Litigation settlement charges--non-cash portion............. -- -- 15,000
Cumulative effect of accounting change--net of income
taxes..................................................... -- -- 1,500
Depreciation................................................ 45,114 49,855 13,824
Amortization of intangible assets and earned compensation... 7,607 8,768 2,459
(Gain) loss on disposition of discontinued operations, net
of taxes.................................................. (17,681) 6,240 --
Loss on sale of marketable securities....................... -- -- 1,562
(Gain) loss on disposition of property...................... (72) (135) 1,005
Changes in assets and liabilities:
Receivables............................................... (13,201) (409) (32,870)
Inventories............................................... 19,349 11,947 2,751
Accounts payable.......................................... 7,726 29,564 (5,412)
Contract advances and allowances.......................... 23,863 (21,409) 7,862
Accrued compensation...................................... (280) 3,382 (7,716)
Accrued income taxes...................................... (154) (115) 1,127
Accrued restructure liability............................. (22,946) (35,471) (4,800)
Accrued environmental liability........................... 13,180 (178) 3,279
Other assets and liabilities.............................. (24,914) (29,167) (8,944)
Operating activities of discontinued operations............. (4,640) 18,408 (1,046)
-------------- -------------- --------------
Cash provided by (used for) operations.......................... 92,110 89,081 (58,103)
-------------- -------------- --------------
Investing Activities
Capital expenditures............................................ (28,522) (25,593) (12,635)
Acquisition of businesses....................................... -- -- (305,891)
Purchase price finalization..................................... -- 29,115 --
Accrued transaction fees paid................................... -- (6,000) --
Proceeds from sale of discontinued operations................... 141,000 -- --
Proceeds from the disposition of property....................... 2,835 929 149
Investing activities of discontinued operations................. (2,483) (2,306) (6,700)
Proceeds from sale of marketable securities..................... -- -- 3,759
Other investing activities, net................................. -- 414 (988)
-------------- -------------- --------------
Cash provided by (used for) investing activities................ 112,830 (3,441) (322,306)
-------------- -------------- --------------
Financing Activities
Proceeds from issuance of long-term debt........................ -- -- 425,000
Payments made on long-term debt and notes payable............... (128,905) (30,000) (53,465)
Payments made for debt issue costs.............................. -- -- (12,997)
Net purchase of treasury shares................................. (2,616) (36,859) --
Proceeds from exercised stock options........................... 3,995 1,773 1,793
Other financing activities, net................................. (455) (686) (11)
-------------- -------------- --------------
Cash (used for) provided by financing activities................ (127,981) (65,772) 360,320
-------------- -------------- --------------
Increase (decrease) in cash and cash equivalents................ 76,959 19,868 (20,089)
Cash and cash equivalents at beginning of period................ 45,532 25,664 45,753
-------------- -------------- --------------
Cash and cash equivalents at end of period...................... $ 122,491 $ 45,532 $ 25,664
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION--The consolidated financial statements of the Company
include all wholly owned subsidiaries. Intercompany balances and transactions
between entities included in these financial statements have been eliminated.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may differ from those estimates.

LONG-TERM CONTRACTS--Sales under long-term contracts are accounted for under
the percentage of completion method and include cost reimbursement and
fixed-price contracts. Sales under cost reimbursement contracts are recognized
as costs are incurred. Sales under fixed-price contracts are either recognized
as the actual cost of work performed relates to the estimate at completion
(cost-to-cost) or based on results achieved, which usually coincides with
customer acceptance (units of delivery).

Profits expected to be realized on contracts are based on the Company's
estimates of total contract sales value and costs at completion. Estimated
amounts for contract changes and claims are included in contract sales only when
realization is estimated to be probable. Assumptions used for recording sales
and earnings are adjusted in the period of change to reflect revisions in
contract value and estimated costs. In the period in which it is determined that
a loss will be incurred on a contract, the entire amount of the estimated loss
is charged to income.

Research and development, selling, and general and administrative costs are
expensed in the year incurred.

ENVIRONMENTAL REMEDIATION AND COMPLIANCE--Costs associated with
environmental compliance and preventing future contamination that are estimable
and probable are accrued and expensed, or capitalized as appropriate. Expected
remediation and monitoring costs relating to the remediation of an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are accrued and expensed in the period that such
costs become estimable. Liabilities are recognized for remedial activities when
they are probable and the remediation cost can be reasonably estimated.

The cost of each environmental liability is estimated by engineering,
financial, and legal specialists within the Company based on current law and
existing technologies. Such estimates are based primarily upon the estimated
cost of investigation and remediation required and the likelihood that other
potentially responsible parties (PRPs) will be able to fulfill their commitments
at the sites where the Company may be jointly and severally liable. The
Company's estimates for environmental obligations are dependent on and affected
by changes in environmental laws and regulations, the nature and extent of
historical information and physical data relating to a contaminated site, the
complexity of the site, methods of remediation available, the technology that
will be required, the outcome of discussions with regulatory agencies and other
PRPs at multi-party sites, the number and financial viability of other PRPs,
future technological developments, and the timing of expenditures. Accordingly,
such estimates could change materially as the Company periodically evaluates and
revises such estimates based on expenditures against established reserves and
the availability of additional information.

CASH EQUIVALENTS--Cash equivalents are all highly liquid temporary cash
investments purchased with original maturities of three months or less. The fair
market value of such investments at March 31, 1997, approximates cost.

F-6
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES--Marketable securities sold during fiscal 1995
represent available-for-sale investments in a diversified mutual fund whose
portfolio consists of U.S. Treasury bills, bonds, and other government-backed
obligations and are recorded at estimated market value. There were no gross
realized gains recorded in fiscal 1997, 1996, and 1995. Gross realized losses
for the same periods were $0, $0, and $1,562, respectively, calculated using the
specific identified cost basis. Unrealized gains and losses were negligible at
March 31, 1997, and 1996, respectively.

INVENTORIES--Inventoried costs relating to long-term contracts and programs
are stated at actual production costs, including factory overhead, initial
tooling, and other related nonrecurring costs incurred to date, reduced by
amounts identified with sales recognized on units delivered or progress
completed. Inventoried costs relating to long-term contracts and programs are
reduced by charging any amounts in excess of estimated realizable value to cost
of sales. Progress payments received from customers relating to the uncompleted
portions of contracts are offset first against unbilled receivable balances,
then against applicable inventories. Any remaining progress payment balances are
classified as advance payments.

PROPERTY AND DEPRECIATION--Property, plant, and equipment is stated at cost
and depreciated over estimated useful lives. Machinery and test equipment is
depreciated using the double declining balance method, converting to
straight-line depreciation for the last third of the asset's life. All other
depreciable property is depreciated using the straight-line method.

GOODWILL--Goodwill represents the excess of the cost of purchased businesses
over the fair value of their net assets at date of acquisition and is being
amortized on a straight-line basis over periods up to 40 years. The
recoverability of the carrying value of goodwill is periodically evaluated by
comparison with the estimated future undiscounted cash flows from related
operations.

INCOME TAXES--Deferred income taxes result from temporary differences
between the basis of assets and liabilities recognized for differences between
the financial statement and tax basis thereon, and for the expected future tax
benefits to be derived from tax losses and tax credit carryforwards. A valuation
allowance is recorded to reflect the likelihood of realization of deferred tax
assets.

FINANCIAL INSTRUMENTS AND HEDGING--The Company uses interest rate swap and
cap agreements to manage interest costs and the risk associated with changing
interest rates. As interest rates change, the differential paid or received is
recognized in interest expense of the period.

EARNINGS PER SHARE DATA--For the fiscal years ended March 31, 1997, 1996,
and 1995, primary and fully diluted earnings (loss) per share is computed based
on weighted average common and common equivalent shares outstanding of
13,402,000, 13,431,000, and 10,052,000, respectively. Common stock equivalents
are excluded from the earnings (loss) per share calculation for fiscal 1995
because the effect would be antidilutive. Common stock equivalents used in
computing earnings per share relate to stock options which, if exercised, would
have a dilutive effect on earnings per share for fiscal 1997 and 1996.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (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

F-7
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for all prior periods reported. Under the requirements of SFAS No. 128, the
Company's EPS would be as follows:

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Basic earnings (loss) per share:
Continuing operations........................................... $ 2.82 $ 3.72 $ (7.27)
Discontinued operations......................................... 1.73 (.05) .05
Cumulative effect of accounting change.......................... -- -- (.15)
--------- --------- ---------
Net income (loss)................................................... $ 4.55 $ 3.67 $ (7.37)
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share:
Continuing operations........................................... $ 2.73 $ 3.61 $ (7.27)
Discontinued operations......................................... 1.68 (.05) .05
Cumulative effect of accounting change.......................... -- -- (.15)
--------- --------- ---------
Net income (loss)................................................... $ 4.41 $ 3.56 $ (7.37)
--------- --------- ---------
--------- --------- ---------
</TABLE>

RECLASSIFICATIONS--Certain reclassifications have been made to the 1996 and
1995 financial statements to conform to the 1997 classification.

2. RECEIVABLES

Receivables, including amounts due under long-term contracts (contract
receivables), are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
MAR. 31, MAR. 31,
1997 1996
------------ ------------
<S> <C> <C>
Contract receivables
Billed receivables........................................... $ 74,063 $ 67,003
Unbilled receivables......................................... 114,801 110,511
Other receivables................................................ 2,811 961
------------ ------------
$ 191,675 $ 178,475
------------ ------------
------------ ------------
</TABLE>

Receivable balances are shown net of reductions of $301,385 and $307,090 as
of March 31, 1997, and 1996, respectively, for progress payments received from
customers relating to completed portions of contracts.

Unbilled receivables represent the balance of recoverable costs and accrued
profit comprised principally of revenue recognized on contracts for which
billings have not been presented to the customer because the amounts were earned
but not billable as of the balance sheet date under the contractual terms. These
amounts include expected additional billable general overhead costs and fees on
flexibly priced contracts awaiting final rate negotiations, and are generally
billable and collectible within one year.

3. INVENTORIES

Inventory balances are shown net of reductions of $18,933 and $84,233 as of
March 31, 1997, and 1996, respectively, for progress payments received from
customers relating to uncompleted portions of contracts.

F-8
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. PROPERTY, PLANT, AND EQUIPMENT

The major categories of property consist of the following:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
MAR. 31, MAR. 31,
1997 1996
------------ ------------
<S> <C> <C>
Land............................................................. $ 23,624 $ 24,165
Buildings and improvements....................................... 164,225 160,717
Machinery and equipment.......................................... 324,625 319,610
Property not yet in service...................................... 10,701 5,985
------------ ------------
523,175 510,477
Less accumulated depreciation.................................... (162,615) (127,964)
------------ ------------
$ 360,560 $ 382,513
------------ ------------
------------ ------------
</TABLE>

5. GOODWILL AND DEFERRED CHARGES

Goodwill and deferred charges consist of the following:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
MAR. 31, MAR. 31,
1997 1996
------------ ------------
<S> <C> <C>
Goodwill, net of accumulated amortization:
1997--$7,255, 1996--$3,940..................................... $ 123,618 $ 125,033
------------ ------------
Debt issuance costs, net of accumulated amortization:
1997--$7,099, 1996--$2,433..................................... $ 7,721 $ 11,098
Other............................................................ 3,204 1,218
------------ ------------
$ 10,925 $ 12,316
------------ ------------
------------ ------------
</TABLE>

6. OTHER ACCRUED LIABILITIES

The major categories of other current and long-term accrued liabilities are
as follows:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
MAR. 31, MAR. 31,
1997 1996
------------ ------------
<S> <C> <C>
Employee benefits and insurance.................................. $ 46,950 $ 38,201
Legal accruals................................................... 25,041 27,657
Other accruals................................................... 34,505 16,724
------------ ------------
Other accrued liabilities -- current............................. $ 106,496 $ 82,582
Litigation settlement -- long-term............................... $ 4,500 $ 8,500
Environmental remediation liability.............................. 19,169 7,289
Deferred tax liability........................................... 18,462 9,496
Other long-term.................................................. 61 3,075
------------ ------------
Other long-term liabilities...................................... $ 42,192 $ 28,360
</TABLE>

The increase in other current accrued liabilities is driven in large part by
severance and closure costs to be incurred in connection with the Company's sale
of the Marine Systems Group (see Note 18). The increase in other long-term
liabilities is primarily reflective of the Company's adoption of SOP 96-1
"Environmental Remediation Liabilities" (see Note 19).

F-9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. LONG-TERM DEBT

The components of the Company's long-term debt are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
MAR. 31, MAR. 31,
1997 1996
------------ ------------
<S> <C> <C>
Bank term loan with quarterly principal and interest payments
through March 2001............................................. $ 116,095 $ 245,000
11.75% Senior Subordinated Notes with semi-annual interest
payments, maturing 2003........................................ 150,000 150,000
------------ ------------
Total long-term debt............................................. 266,095 395,000
Less current portion............................................. (29,024) (45,000)
------------ ------------
Long-term portion................................................ $ 237,071 $ 350,000
------------ ------------
------------ ------------
</TABLE>

In connection with the Aerospace acquisition (see Note 21), the Company
entered into a six-year, $500,000 bank credit facility which was comprised of a
$275,000 term loan and a $225,000 revolving working capital (revolver) and
letter of credit facility. In November 1996, this facility was amended to
increase the revolver and letter of credit facility from $225,000 to $275,000,
and to reduce the Company's borrowing interest rate margins. Outstanding letters
of credit totaling $51,448 reduced the available line of credit to $223,552 at
March 31, 1997. The Company is required to pay a commitment fee (0.275% at March
31, 1997) on the $275,000 revolver, and is also charged for outstanding letters
of credit, in addition to an issuance fee, which varies and is negotiated with
each bank. The revolver and letter of credit fees are subject to adjustment
based on the Company's long-term debt rating. The interest rate charged for
borrowings under the bank credit facility is at the option of the Company,
either a floating rate based on a defined prime rate or a fixed rate related to
the London Interbank Offered Rate (LIBOR) plus a margin based on the Company's
debt rating. As of March 31, 1997, the unhedged interest rate on outstanding
borrowings under this facility was approximately 6.5%. Borrowings are secured by
substantially all of the assets of the Company. Amounts outstanding under this
agreement at March 31, 1997, based on current rates for similar instruments with
the same maturities, approximate fair market value. There were no outstanding
borrowings against the revolving line of credit at March 31, 1997.

In addition to the bank credit facility, the Company has $150,000 of 11.75%
senior subordinated notes outstanding. The senior subordinated notes are
redeemable at the option of the Company, in whole or in part, at any time on or
after March 1, 1999, at certain defined redemption prices. The estimated fair
value of the Company's senior subordinated notes, based on bank quotes, is
approximately $162.8 million. The Company's bank credit facility and senior
subordinated notes limit the payment of dividends and contain certain covenants
with respect to the Company's consolidated net worth, leverage, and debt and
interest coverage. Additionally, the Company's debt agreements impose certain
restrictions on the incurrence of additional indebtedness, sale of assets,
mergers and consolidations, transactions with affiliates, creation of liens, and
certain other matters. In connection with the sale of its Marine Systems Group
in February 1997 (see Note 18), the Company prepaid $88.6 million of its
long-term debt in accordance with the terms of the bank credit facility. At
March 31, 1997, the Company was in compliance with all covenants and
restrictions specified in its debt agreements.

At March 31, 1997, the aggregate maturities due over the next five fiscal
years under the bank term loan and the senior subordinated notes are $29,024 in
1998, $31,926 in 1999, $31,926 in 2000, $23,219 in 2001, and $0 in 2002. Amounts
due thereafter total $150,000.

The company's weighted average interest rate on short-term borrowings during
fiscal 1997 and 1996 was 7.2% and 7.3%, respectively.

F-10
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. LONG-TERM DEBT (CONTINUED)
The Company has entered into hedging transactions to protect against
increases in market interest rates on its long-term debt. At March 31, 1997, the
notional amount of interest rate swap agreements was $83,000. Under the swap
agreements, the Company currently pays an average fixed rate of 6.7%, and
receives interest at a rate equal to three-month LIBOR (5.6% at March 31, 1997).
These agreements have remaining terms of one to two years, with certain
cancellation options. Fair value of the interest rate swap agreements at March
31, 1997, is $(.7) million. The interest rate cap agreements limit the Company's
LIBOR exposure to 7.0%, and expire on October 1, 1997. The notional amount of
amortizing interest rate cap agreements at March 31, 1997, was $22,500. The
recorded value of the interest rate cap agreements approximates fair value at
March 31, 1997. Counter parties to the interest rate swap and cap agreements are
major financial institutions who also participate in the Company's bank credit
facilities. Credit loss from counterparty non-performance is not anticipated.
The estimated fair market value amounts have been determined using available
market information or other appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop
estimates of fair value. Therefore, the estimates are not necessarily indicative
of the amounts that could be realized or would be paid in a current market
exchange. The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts.

8. EMPLOYEE BENEFIT PLANS

The Company's noncontributory defined benefit pension plans cover
substantially all employees. Plans provide either pension benefits of stated
amounts for each year of credited service, or pension benefits based on employee
yearly pay levels and years of credited service. The Company funds the plans in
accordance with Federal requirements calculated using appropriate actuarial
methods.

Plan assets for the Company are held in a trust and are invested in a
diversified portfolio of equity securities and fixed income investments.

The sale of the Marine Systems Group resulted in curtailments as defined by
SFAS No. 88, "Employer's Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits." The net impact of the
curtailments was a credit to fiscal 1997 gain on disposal of discontinued
operations of $304, and a decrease in the accumulated benefit obligation as of
March 31, 1997, of $24,079. The workforce reduction associated with the fiscal
1995 restructuring program also resulted in curtailments as defined by SFAS No.
88. The impact of the fiscal 1995 curtailments was a charge to income of
$12,243, and an increase in the accumulated benefit obligation as of March 31,
1995, of $7,665.

The components of the Company's net periodic pension cost are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
MAR. 31, MAR. 31, MAR. 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost of benefits earned during the period.... $ 14,337 $ 13,662 $ 9,766
Interest cost of projected benefit obligation........ 44,563 45,871 22,388
Return on assets..................................... (73,506) (110,907) 15,590
Net amortization and deferral........................ 25,250 64,612 (32,307)
------------ ------------ ------------
Net pension cost..................................... $ 10,644 $ 13,238 $ 15,437
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-11
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. EMPLOYEE BENEFIT PLANS (CONTINUED)

The plans' funded status and amounts recognized in the Company's balance
sheets for its pension plans are summarized below:

<TABLE>
<CAPTION>
PLANS WHOSE ACCUMULATED
BENEFITS EXCEED ASSETS
--------------------------
<S> <C> <C>
MAR. 31, MAR. 31,
1997 1996
------------ ------------
Actuarial present value of benefit obligations:
Vested benefit obligation..................................... $ (294,386) $ (296,277)
------------ ------------
Accumulated benefit obligation................................ (302,285) (300,779)
------------ ------------
Projected benefit obligation.................................. (318,356) (324,480)
Plan assets at fair value....................................... 272,111 272,649
------------ ------------
Projected benefit obligation (in excess of) plan assets......... (46,245) (51,831)
Remaining unrecognized net transition obligation (asset)........ (2,624) (3,472)
Unrecognized prior service cost................................. 12,125 15,067
Unrecognized net loss........................................... 4,846 2,336
Accrued contribution to plans................................... 2,861 3,496
Adjustment to recognize minimum liability....................... (8,042) (7,780)
------------ ------------
Unfunded pension liability recognized in balance sheet.......... $ 37,079 $ 42,184
------------ ------------
------------ ------------
</TABLE>

<TABLE>
<CAPTION>
PLANS WHOSE ASSETS
EXCEED ACCUMULATED
BENEFITS
--------------------------
<S> <C> <C>
MAR. 31, MAR. 31,
1997 1996
------------ ------------
Actuarial present value of benefit obligations:
Vested benefit obligation..................................... $ (448,931) $ (416,094)
------------ ------------
Accumulated benefit obligation................................ (462,835) (429,466)
------------ ------------
Projected benefit obligation.................................. (519,750) (512,722)
Plan assets at fair value....................................... 643,463 628,656
------------ ------------
Funded status................................................... 123,713 115,934
Remaining unrecognized net transition obligation (asset)........ -- --
Unrecognized prior service cost................................. -- --
Unrecognized net gain........................................... (48,085) (38,739)
Accrued contribution to plans................................... -- --
Adjustment to recognize minimum liability....................... -- --
------------ ------------
Prepaid premium expense recognized in balance sheet............. $ 75,628 $ 77,195
------------ ------------
------------ ------------
</TABLE>

F-12
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Assumptions used in the accounting for defined benefit plans were:

<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------
MAR. 31, 1997 MAR. 31, 1996 MAR. 31, 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Discount rate used in determining present
values.......................................... 7.50% 7.50% 8.25%
Annual increase in future compensation levels..... 4.25% 4.25% 4.75%
Expected long-term rate of return on assets....... 8.75% 8.75% 8.25%
</TABLE>

The Company also sponsors a number of defined contribution plans.
Participation in one of these plans is available to substantially all employees.
The two principal defined contribution plans are Company-sponsored 401(K) plans
to which employees may contribute up to 18 percent of their pay. The Company
contributes in Company stock or cash amounts equal to 50 percent of employee
contributions up to 4 or 6 percent of the employee's pay. The amount expensed
for the Company match provision of the plans was $5,881, $5,780, and $3,606 in
fiscal 1997, 1996, and 1995, respectively. The significant increase in fiscal
1996 over amounts expensed in fiscal 1995 reflects the addition of the Aerospace
employees on March 15, 1995. The Company employs approximately 1,975 employees
(29 percent of its total employees) covered by collective bargaining agreements,
220 of whom are covered under agreements expected to be renegotiated during
fiscal 1998 due to current agreement expirations.

9. POST-RETIREMENT BENEFITS

Generally, employees retiring from the Company after attaining age 55 who
have had at least five years of service are entitled to post-retirement health
care benefits and life insurance coverage until the retiree reaches age 65. The
portion of the premium cost born by the Company for such benefits is dependent
on the employee's years of service. Further contributions from retirees are also
required based on plan deductibles and co-payment provisions.

Post-retirement benefit costs, other than those related to pensions, in the
fiscal years ended March 31, 1997, 1996, and 1995, included the following
components:

<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------
MAR. 31, 1997 MAR. 31, 1996 MAR. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Service cost of benefits earned during the year... $ 899 $ 842 $ 366
Interest cost on accumulated post-retirement
benefit obligation.............................. 7,341 7,603 2,112
Net amortization and deferral..................... 378 (25) --
Curtailment gain.................................. (45) (1,120) (25)
------ ------------- ------
Net post-retirement benefit cost.................. $ 8,573 $ 7,300 $ 2,453
------ ------------- ------
------ ------------- ------
</TABLE>

Curtailment gains recognized in fiscal 1996 were the result of the reduction
in employment in connection with restructuring programs.

F-13
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. POST-RETIREMENT BENEFITS (CONTINUED)
The Company's post-retirement benefit obligations other than pensions
generally are not prefunded. The following table sets forth the status of the
retiree benefit obligations at March 31, 1997, and 1996:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
<S> <C> <C>
MAR. 31, MAR. 31,
1997 1996
------------ ------------
Actuarial present value of benefits attributed to:
Retirees....................................................... $ 112,449 $ 120,638
Fully eligible active employees................................ 11,676 11,973
Other active employees......................................... 18,550 17,197
------------ ------------
Accumulated post-retirement benefit obligation................... $ 142,675 $ 149,808
Plan assets at fair value........................................ (4,797) (1,394)
------------ ------------
Projected post-retirement benefit obligation..................... $ 137,878 $ 148,414
Unrecognized net actuarial gain (loss)........................... 2,979 (6,644)
Unrecognized prior service cost.................................. 180 245
------------ ------------
Post-retirement benefit liability recognized in the balance
sheet.......................................................... $ 141,037 $ 142,015
------------ ------------
------------ ------------
</TABLE>

An assumed discount rate of 7.5 percent was used to determine
post-retirement benefit costs other than pensions for fiscal 1997. The 1997
weighted average annual assumed rate of increase in the per capita cost of
covered benefits (health care cost trend rates) is 5.0 percent. Increasing this
rate by one percentage point in each year would have increased the accumulated
post-retirement benefit obligation as of March 31, 1997, by $9,739 and increased
the aggregate of the service and interest cost components of post-retirement
benefit costs for fiscal 1997 by $586.

10. POST-EMPLOYMENT BENEFITS

The Company provides certain disability and workers' compensation benefits
to former or inactive employees. Effective April 1, 1994, the Company adopted
SFAS No. 112, "Employers' Accounting for Post-Employment Benefits." This
statement requires recognition of these benefits on an accrual basis. Prior to
April 1, 1994, certain disability benefits were expensed as claims were
reported. The effect of adopting SFAS No. 112 was recognized immediately in
fiscal 1995 as the effect of a change in accounting principle and resulted in a
charge of $1,500 net of taxes, or $0.15 per share against fiscal 1995 income.

11. INCOME TAXES

The components of the Company's income tax provision consist of:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
<S> <C> <C> <C>
MAR. 31, MAR. 31, MAR. 31,
1997 1996 1995
------------ ------------ ------------
Current:
Federal......................................... $ -- $ -- $ --
State........................................... -- -- --
Deferred.......................................... 12,115 16,801 --
------------ ------------ ------------
Income tax provision.............................. $ 12,115 $ 16,801 $ 0
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-14
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
The items responsible for the differences between the federal statutory rate
and the Company's effective rate are shown as follows:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
MAR. 31, MAR. 31, MAR. 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes computed at statutory federal rate... $ 24,946 $ 26,729 $ (25,938)
State income taxes--net of federal impact......... 3,564 2,838 (3,705)
Permanent non-deductible costs.................... 1,462 4,450 2,019
Unrecorded (recorded) tax benefits................ (17,857) (17,216) 27,624
------------ ------------ ------------
Income tax provision.............................. $ 12,115 $ 16,801 $ 0
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and operating loss and
tax credit carryforwards. Significant items comprising the net deferred tax
asset shown on the statement of financial position are:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
<S> <C> <C>
MAR. 31, MAR. 31,
1997 1996
------------ ------------
Deferred sales.................................................. $ (17,442) $ (18,363)
Accelerated depreciation........................................ (39,217) (29,994)
------------ ------------
Deferred income tax liabilities................................. (56,659) (48,357)
------------ ------------
Reserves for employee benefits.................................. 49,954 53,285
Restructuring and environmental reserves........................ 21,033 15,124
Research tax credits............................................ 22,400 --
Net operating loss carryforwards................................ 23,973 33,683
Other reserves.................................................. 32,427 45,957
------------ ------------
Deferred income tax assets...................................... 149,787 148,049
Valuation allowance............................................. (74,346) (68,795)
------------ ------------
Net deferred income tax asset................................... $ 18,782 $ 30,897
------------ ------------
Current deferred income tax asset............................... 37,244 40,393
Noncurrent deferred income tax (liability)...................... (18,462) (9,496)
------------ ------------
Net deferred income tax asset................................... $ 18,782 $ 30,897
------------ ------------
------------ ------------
</TABLE>

During fiscal 1997, the deferred tax asset valuation allowance increased by
$5,551. This increase is primarily the result of the Company's analysis of the
likelihood of realizing the future tax benefit of tax loss carryforwards and
additional temporary differences. Realization of the net deferred tax asset (net
of recorded valuation allowance) is dependent on profitable operations and
future reversals of existing taxable temporary differences. Although realization
is not assured, the Company believes it is more likely than not that the net
recorded benefits will be realized through the reduction of future taxable
income. The amount of the net deferred tax assets considered realizable,
however, could be reduced in the near

F-15
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
term if actual future taxable income is lower than estimated, or if there are
differences in the timing or amount of future reversals of existing taxable
temporary differences.

Federal and state operating loss carryforwards for tax purposes available to
offset future taxable income are $59,933 at March 31, 1997. These carryforwards
begin to expire in 2008. Research tax credits available to offset future
payments are $22,400, and begin to expire in 2006.

12. LEASES

The Company leases land, buildings, and equipment under various operating
leases which generally have renewal options of one to five years. Rental expense
for the years ended March 31, 1997, 1996, and 1995, was $11,264, $11,417, and
$12,244, respectively.

Minimum rental commitments payable under noncancellable lease commitments
outstanding at March 31, 1997, are $10,874, $6,926, $4,890, $3,073, and $924,
respectively, for the fiscal years ending March 31, 1998, 1999, 2000, 2001, and
2002. Approximately $2,000 of these lease commitments remain accrued at March
31, 1997, as part of the restructuring charges referred to in Note 13.

13. RESTRUCTURING CHARGES

The Company initiated a restructuring program in the quarter ending March
31, 1995, which resulted in a fiscal 1995 fourth-quarter pre-tax charge of
$35,600. The program was designed to achieve greater efficiency and
competitiveness, and to improve margins. Approximately $12,200 of the non-cash
portion of the charge consists of accruals for certain pension-related
liabilities in accordance with SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits."

In mid-fiscal 1996, various executive management changes were made in the
Defense Systems Group. As a result of these changes, new management re-evaluated
business strategies for the Group, including its restructure plans and, while
the significant components of the restructure plan did not change, the
anticipated timing of certain severance and facility closure costs pushed into
fiscal 1997. Cash expenditures under this restructuring program totaled
approximately $9,000 and $12,000 in fiscal 1997 and fiscal 1996, respectively,
primarily for employee-related costs. The Company experienced lower than
expected severance costs under the restructure plan due to higher than expected
employee attrition. As a result, the Company recorded credits of $1,900 and
$3,200 in the fourth quarters of fiscal 1997 and 1996, respectively, to reduce
the restructure accrual. The balance of the reserve at March 31, 1997,
represents specifically identified incremental employee severance and facility
closure costs expected to be incurred in fiscal 1998. Amounts charged for
restructuring reserves include estimates of costs related to facility closure
and employee severance costs which are subject to change in the near term
(although not currently anticipated) due to changes in assumptions and the
period over which such costs are expected to be incurred.

F-16
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. STOCKHOLDERS' EQUITY

Changes in stockholders' equity are summarized below:
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR ADDITIONAL RETAINED PENSION UNEARNED COST
(AMOUNTS IN THOUSANDS ---------------------- PAID-IN EARNINGS LIABILITY COMPEN- TREASURY
EXCEPT SHARE DATA) SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT SATION SHARES
- ------------------------------------ --------- ----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1994............. 9,818,416 $ 98 $ 128,014 $ (28,491) $ (7,085) $ (556) $ --
Net loss.......................... (74,108)
Treasury shares received.......... (61,784) (519) 52 (1,351)
Pension liability adjustment...... 4,519
Exercise of stock options......... 136,060 1 946 1,275
Restricted stock grants........... 67,600 1 2,209 (2,235) 25
Amortization of restricted
stock........................... 1,188
Issuance to Hercules, Inc......... 3,862,069 39 111,961
Stock value guarantees............ 3,606
Stock options issued.............. 3,241 (3,241)
Other net issuances............... 27,091 730 51
--------- ----- ----------- --------- ----------- ----------- -----------
Balance, March 31, 1995............. 13,849,452 139 250,188 (102,599) (2,566) (4,792) --
Net income........................ 47,801
Treasury shares received.......... (983,333) (10) 43 (37,080)
Pension liability adjustment...... 1,377
Exercise of stock options......... 80,223 1 (759) 2,701
Restricted stock grants........... 19,200 385 (836) 451
Amortization of restricted
stock........................... 3,033
--------- ----- ----------- --------- ----------- ----------- -----------
Balance, March 31, 1996............. 12,965,542 130 249,814 (54,798) (1,189) (2,552) (33,928)
Net income........................ 59,159
Treasury shares received.......... (158,387) (2) (7,195)
Pension liability adjustment...... (1,115)
Exercise of stock options......... 157,023 2 (1,985) 5,978
Restricted stock grants........... 27,000 247 (1,246) 999
Amortization of restricted
stock........................... 1,894
Other net issuances............... 90,360 1 536 580 3,462
--------- ----- ----------- --------- ----------- ----------- -----------
Balance, March 31, 1997............. 13,081,538 $ 131 $ 248,612 $ 4,361 $ (2,304) $ (1,324) $ (30,684)
--------- ----- ----------- --------- ----------- ----------- -----------
--------- ----- ----------- --------- ----------- ----------- -----------

(AMOUNTS IN THOUSANDS
EXCEPT SHARE DATA) TOTAL
- ------------------------------------ ---------
<S> <C>
Balance, March 31, 1994............. $ 91,980
Net loss.......................... (74,108)
Treasury shares received.......... (1,818)
Pension liability adjustment...... 4,519
Exercise of stock options......... 2,222
Restricted stock grants...........
Amortization of restricted
stock........................... 1,188
Issuance to Hercules, Inc......... 112,000
Stock value guarantees............ 3,606
Stock options issued..............
Other net issuances............... 781
---------
Balance, March 31, 1995............. 140,370
Net income........................ 47,801
Treasury shares received.......... (37,047)
Pension liability adjustment...... 1,377
Exercise of stock options......... 1,943
Restricted stock grants...........
Amortization of restricted
stock........................... 3,033
---------
Balance, March 31, 1996............. 157,477
Net income........................ 59,159
Treasury shares received.......... (7,197)
Pension liability adjustment...... (1,115)
Exercise of stock options......... 3,995
Restricted stock grants...........
Amortization of restricted
stock........................... 1,894
Other net issuances............... 4,579
---------
Balance, March 31, 1997............. $ 218,792
---------
---------
</TABLE>

The Company has authorized 5,000,000 shares of preferred stock, par value
$1.00, none of which has been issued.

The Company has authorized up to 2,620,679 shares to be granted under the
1990 Equity Incentive Plan of which 281,302 were available at March 31, 1997,
for future grants. Stock options are granted periodically at the fair market
value of the Company's common stock on the date of grant, and are generally
exercisable from one to three years from the date of grant. Stock options
covering an aggregate of 387,000 shares were issued on March 15, 1995, at $30.00
per share, pursuant to agreements entered into on October 27, 1994. This plan
also provides for the issuance of 250,000 stock appreciation rights which may be
issued in tandem with stock options. Restricted stock issued to non-employee
directors and certain key employees totaled 27,000, 19,200, and 67,600 for the
fiscal years ended March 31, 1997, 1996, and 1995, respectively. All restricted
stock granted before August 10, 1994, became fully vested as of that date due to
the change of control (see Note 16). Shares issued subsequent to that date total
101,700 and vest over periods of one to four years from the date of award. In
fiscal 1997 net restricted shares of up to 16,800 shares were reserved for
certain key officers which will vest on achievement of certain financial
performance goals through fiscal 1999.

F-17
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. STOCKHOLDERS' EQUITY (CONTINUED)

In fiscal 1997, 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 APB 25 for measurement and recognition of
stock-based transactions with employees. Accordingly, compensation cost has not
been recognized for the awards made in the form of stock options. If
compensation cost for the Company's stock-based compensation plan had been
determined based on the fair value at the grant dates for awards under the plan
(consistent with the method provided in SFAS No. 123), the Company's net income
and earnings per share would have been reduced to the proforma amounts indicated
below:

<TABLE>
<CAPTION>
YEARS ENDED
--------------------------
<S> <C> <C> <C>
MAR. 31, MAR. 31,
1997 1996
------------ ------------
Net income..................... As reported.................... $ 59,159 $ 47,801
Proforma....................... $ 57,032 $ 47,057
Earnings per share............. As reported.................... $ 4.41 $ 3.56
Proforma....................... $ 4.26 $ 3.50
</TABLE>

A summary of the Company's stock option activity is as follows:

<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------------------------------------------------------
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
----------------------------- ---------------------------- -----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- --------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year........................... 991,210 $ 30.23 852,433 $ 27.36 729,360 $ 14.43
Granted.......................... 150,650 46.28 232,340 39.08 701,271 30.36
Exercised........................ (157,023) 25.43 (80,223) 24.21 (136,060) 16.34
Canceled......................... (88,504) 32.77 (13,340) 37.38 (442,138) 14.14
---------- ------ --------- ------ ---------- ------
Outstanding at end of year....... 896,333 $ 33.49 991,210 $ 30.23 852,433 $ 27.36
Options exercisable at year
end............................ 532,815 29.64 482,210 25.80 275,062 18.06
---------- ------ --------- ------ ---------- ------
Weighted average fair value of
options granted during the
year........................... $ 21.88 $ 18.29
------ ------
------ ------
</TABLE>

The weighted average fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model and represents the
difference between fair market value on the date of grant and the estimated
market value on the expected exercise date. The following weighted average
assumptions were used for grants in fiscal 1997 and 1996, respectively:
risk-free interest rates of 6.5 and 6.1 percent, expected volatility of 31.5
percent in both years, and expected lives of seven years in both years.

F-18
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock options outstanding at March 31, 1997, is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE CONTRACTUAL EXERCISE EXERCISE
PRICES SHARES LIFE PRICE SHARES PRICE
- --------- --------- ----------- ----------- --------- -----------
$ 10-$24 156,179 7.4 yrs $ 18.63 156,179 $ 18.63
$ 25-$30 273,000 13.0 yrs 30.00 145,000 30.00
$ 31-$40 279,504 7.9 yrs 36.47 221,636 36.37
$ 41-$52 187,650 9.1 yrs 46.49 10,000 47.25
</TABLE>

In fiscal 1995, limited stock appreciation rights (LSARs) were attached to
623,253 stock options, which became exercisable at the time of change of control
(see Note 16). The Company offered to certain executive officers a note
receivable and one stock option in exchange for deferring the LSAR payment
through November 8, 1997. This offer was accepted for 152,371 LSARs and 282,767
LSARs were exercised. Non-executive officers were offered a Stock Value
Guarantee (SVG) in exchange for their LSARs, in which the Company agreed to pay
any holder the excess, if any, of the guaranteed minimum price of $34.75 over
the amount that the holder receives upon the exercise of the stock option, and
the simultaneous market transaction sale of the stock received upon such
exercise, prior to the expiration date of June 30, 1997. SVGs were accepted on
188,115 shares of stock and 50,899 LSARs were exercised by non-executive
officers.

The Company initiated a $50,000 share repurchase plan in fiscal 1996. In
connection with that plan, the Company has repurchased 1,122,580 shares of the
Company's stock in the open market as of March 31, 1997, at an average price of
$38.69 per share, for an aggregate amount of $43,400.

In accordance with SFAS No. 87, "Employer's Accounting for Pensions," the
Company has recognized the minimum liability for underfunded pension plans equal
to the excess of the accumulated benefit obligation over plan assets. A
corresponding amount is recognized as an intangible asset to the extent of any
unrecognized prior service cost, with the remaining balance recorded as
reduction to equity. As of March 31, 1997, the minimum pension liability in
excess of the unrecognized prior service cost was $2,304.

15. CONTINGENCIES

As a U.S. Government contractor, the Company is subject to defective pricing
and cost accounting standards noncompliance 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.

F-19
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. CONTINGENCIES (CONTINUED)
The Company is involved in three "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 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 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 $4,000, for which the Company has fully reserved at March 31,
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 and other proceedings cannot be predicted
with certainty, in the opinion of management, 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.

16. CHANGE OF CONTROL

In August 1994, six new directors nominated by Capstay Partners, L.P. were
elected to the Company's Board of Directors, resulting in a "change of control"
as defined in the Company's compensation and benefit plans and in agreements
with certain employees. These change of control agreements resulted in the
Company incurring an "unusual charge" totaling $23,039 in fiscal 1995.

17. LITIGATION SETTLEMENT

The Company had been a defendant in a "qui tam" lawsuit by claimants,
including present and former employees of Accudyne Corporation, alleging
violations of the False Claims Act. The alleged violations occurred prior to the
acquisition of Accudyne by the Company in October 1993.

To avoid the expense and disruption of protracted litigation, on June 23,
1995, the Company and claimants reached agreement to settle the lawsuit. Terms
of the agreement include payment by the Company of $12,000, consisting of
payments of $500 and $3,000 in 1995 and 1996, respectively, and payments to be
made of $4,000 in April 1997 and $4,500 in June 1998, plus interest at the
three-year Treasury Bill rate. Accordingly, the Company recorded an unusual
charge of $15,000 as of the fourth

F-20
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. LITIGATION SETTLEMENT (CONTINUED)
quarter of fiscal 1995, which includes legal costs of approximately $3,000 which
were agreed to be paid for by the Company.

18. DISCONTINUED OPERATIONS

MARINE SYSTEMS GROUP--On December 22, 1996, the Company entered into an
agreement to sell its Marine Systems Group, including substantially all assets
of that business, to Hughes Aircraft Company for $141,000 in cash. The sale was
completed on February 28, 1997, resulting in a pre-tax gain to the Company of
approximately $27,200 ($17,681, after tax), which the Company recognized in the
fourth quarter. The Company has accounted for the operations of the Marine
Systems Group as discontinued operations in these financial statements.

DEMILITARIZATION OPERATIONS--During fiscal 1994, the Company entered into
two joint ventures in Belarus and Ukraine for the purpose of establishing
demilitarization operations in those countries. In March 1996, Company
management, after evaluating its strategic plans for the future, elected to
discontinue its ownership of foreign demilitarization businesses
("Demilitarization operations"). Accordingly, the Company began actions to
transfer ownership of the joint ventures to host country governments or their
agents and in the fourth quarter of fiscal 1996, the Company estimated and
recorded a $6,240 loss on disposal of discontinued operations (net of tax
benefit of $4,160).

During fiscal 1997, the Company stopped production efforts, and completed
its withdrawal from the Belarus operation. In the fourth quarter of fiscal 1997,
the Company reached agreement with the Ukrainian government to transfer the
Company's interests in the operation to the Ukrainian government after payment
of a $19.8 million non-interest bearing long-term note receivable. Management's
best estimate of the value received for the net assets transferred under the
contractual obligation, after discounting for interest, is currently estimated
to be approximately $8.7 million, and is recorded on the balance sheet as "Net
assets of discontinued operations" at March 31, 1997. The Company has also
provided a letter of credit to support approximately $2,500 of bank borrowings
of the demilitarization operations. Amounts estimated and recorded as net assets
of discontinued operations include significant assumptions made with regard to
the ultimate proceeds expected to be received and the timing that such proceeds
are expected to be received. These estimates are subject to changes in the near
term (although are not currently expected to) due to changes in assumptions.
Those changes could have a material impact on the Company's results in that
period.

The consolidated income statements of the Company reflect the operating
results and the gain (loss) on disposal of discontinued operations separately
from continuing operations. The components of the loss from discontinued
operations are summarized as follows:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
<S> <C> <C> <C>
MAR. 31, MAR. 31, MAR. 31,
1997 1996 1995
------------ ------------ ------------
Sales............................................. $ 107,746 $ 186,677 $ 284,872
Income from discontinued operations............... 7,415 5,071 456
Gain (loss) on disposal of assets................. 27,200 (10,400) --
Income tax (expense) benefit...................... (12,115) 4,706 --
Gain (loss) from discontinued operations.......... $ 22,500 $ (623) $ 456
</TABLE>

F-21
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. ENVIRONMENTAL REMEDIATION LIABILITIES

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. In October
1996, the AICPA issued SOP 96-1 "Environmental Remediation Liabilities," which
required a change in, and provided clarification to, the manner in which
companies measure and recognize costs associated with environmental remediation
liabilities. Under the provisions of the SOP, the most significant change in
accounting for the Company is that all future anticipated ongoing monitoring and
maintenance costs associated with known remediation sites is required to be
accrued. Such costs were previously expensed as incurred. The Company elected to
adopt the provisions of the new rule early, as is permitted under the SOP, which
resulted in a non-cash charge of $17.4 million in the fourth quarter of fiscal
1997. The charge is classified in cost of sales expenses in the Company's
consolidated income statement for the quarter ending March 31, 1997. At March
31, 1997, the accrued liability for environmental remediation of $34.8 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 March 31, 1997. Such receivable primarily represents the
reimbursement of costs associated with the Aerospace operations. As part of the
Aerospace acquisition, the Company generally assumed responsibility for
environmental compliance at Aerospace operations 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
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%. It is expected
the fiscal 1998 environmental expenditures, net of expected recoveries, will
approximate $5.2 million. Amounts payable/receivable in periods beyond fiscal
1998 have been classified as non-current on the Company's March 31, 1997,
balance sheet. At March 31, 1997, the estimated aggregate undiscounted amounts
payable for environmental remediation costs, net of expected reimbursements, are
approximately $5.2, $5.0, $3.3, $1.7, and $1.4 million for the fiscal years
ending March 31, 1998, 1999, 2000, 2001, and 2002, respectively. Estimated
amounts payable thereafter total $14.6 million. At March 31, 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.

20. SUPPLEMENTAL CASH FLOW INFORMATION

Net income taxes paid (refunded) in the fiscal years ended March 31, 1997,
1996, and 1995, totaled $107, $100, and $(1,100), respectively.

Amounts paid for interest were $39,015, $40,736, and $8,715 for fiscal 1997,
1996, and 1995, respectively. Amounts received for interest in those same
periods were $689, $1,789, and $564, respectively. The significant change in
interest paid during fiscal 1996, compared to fiscal 1995, reflects payments of
interest on debt issued in connection with the March 15, 1995, acquisition of
the Aerospace operations.

F-22
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21. ACQUISITION

On March 15, 1995, the Company acquired the Aerospace operations (Aerospace
acquisition) of Hercules for $276,776 in cash (net of a $29,115 purchase price
reimbursement received by the Company in fiscal 1996 from Hercules, reflecting
finalization of the purchase price), and 3.86 million shares of Common Stock
valued at $112,000, for an aggregate purchase price of approximately $388,776.
Unaudited pro forma results of operations of the Company for the year ended
March 31, 1995, as if the acquisition had been completed at the beginning of the
period are:

<TABLE>
<CAPTION>
YEAR ENDED
MAR. 31,
1995
------------
<S> <C>
Sales........................................................................... $1,120,822
Income (loss) before cumulative effect of accounting change..................... $ (7,306)
Income (loss) per share from continuing operations.............................. $ (.78)
</TABLE>

The unaudited pro forma results of operations are not necessarily indicative
of the results of operations that would have occurred had the businesses
actually been combined during the period presented nor is this information
indicative of expected future results of operations.

The Company used the purchase method of accounting to account for the
Aerospace acquisition. Accordingly, the purchase price was allocated to the
assets acquired and liabilities assumed based on fair value. The excess of
purchase price over the estimated fair value of the assets acquired,
approximately $118,000, has been recorded as goodwill, and is being amortized
over 40 years.

22. BUSINESS SEGMENT INFORMATION

The Company operates one business segment which is involved in the
production of various types of defense systems. The Aerospace Systems Group
designs, develops, and manufactures launch vehicle systems, solid propulsion
systems, munitions propellants, composite structures, and decoy flares. The
Defense Systems Group designs, develops, and manufactures ammunition, fuzes,
shoulder-fired weapons, smart weapons/ munitions, antitank mines, warheads,
air-delivered munition, artillery fire control, battlefield monitoring systems,
unmanned aerial vehicles, and defense electronics systems. The Emerging Business
Group consists of three primary business units: Global Environmental Solutions,
Power Sources Center, and Advanced Technology Applications.

The Company's sales are predominantly derived from contracts with agencies
of, and prime contractors to, the U.S. Government. The various U.S. Government
customers exercise independent purchasing decisions, and sales to the U.S.
Government generally are not regarded as constituting sales to one customer, but
instead, each contracting entity is considered to be a separate customer. During
fiscal 1997, approximately 85% of the Company's sales were derived from
contracts with the U.S. Government or U.S. Government prime contractors. Export
sales to customers were $75,014, $71,929, and $51,975 in fiscal years 1997,
1996, and 1995, respectively.

F-23
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

22. BUSINESS SEGMENT INFORMATION (CONTINUED)
The following summarizes the Company's sales to the U.S. Government and
total sales by business group.

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
MAR. 31, MAR. 31, MAR. 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
U.S. Government contract sales.................... $ 927,068 $ 887,502 $ 441,166
------------ ------------ ------------
Sales by business group:
Aerospace Systems............................... $ 593,269 $ 568,568 $ 20,269(1)
Defense Systems................................. 497,715 454,694 472,931
Emerging Business............................... 41,448 30,985 10,990
Intercompany sales eliminations................. (43,035) (33,642) --
------------ ------------ ------------
Total............................................. $1,089,397 $1,020,605 $ 504,190
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

- ------------------------

(1) Represents operations from March 15, 1995, through March 31, 1995, from the
Aerospace acquisition.

23. QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial data is summarized for the years ended March 31, 1997,
and 1996 as follows:

<TABLE>
<CAPTION>
FISCAL YEAR 1997 QUARTER ENDED
----------------------------------------------
<S> <C> <C> <C> <C>
JUNE 30 SEP. 29 DEC. 29 MAR. 31
---------- ---------- ---------- ----------
Sales........................................ $ 230,173 $ 247,648 $ 300,785 $ 310,791
Gross margin................................. 36,159 42,323 50,700 35,078
Income from continuing operations............ 7,614 11,323 16,200 1,522
Per share................................ .57 .85 1.20 .11
Net income................................... 9,904 12,827 17,225 19,203
Per share................................ .74 .96 1.28 1.43
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR 1996 QUARTER ENDED
----------------------------------------------
<S> <C> <C> <C> <C>
JULY 2 OCT. 1 DEC. 31 MAR. 31
---------- ---------- ---------- ----------
Sales........................................ $ 242,786 $ 232,721 $ 257,097 $ 288,001
Gross margin................................. 41,049 42,845 43,660 58,753
Income from continuing operations............ 6,595 9,574 11,624 20,631
Per share................................ .48 .72 .87 1.54
Net income................................... 10,065 11,186 12,494 14,056
Per share................................ .74 .84 .93 1.05
</TABLE>

The adoption of SOP 96-1, which relates to accounting for environmental
remediation liabilities, resulted in a charge to income from continuing
operations of $17,442 in the fourth quarter of fiscal 1997 (see Note 19).

The Company completed the sale of its Marine Systems Group to Hughes
Aircraft Company on February 28, 1997. As a result, the Company recorded a gain
on the sale of discontinued operations, net of income taxes, of $17,681 during
the fourth quarter of fiscal 1997 (see Note 18).

F-24
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
Income from the results of discontinued operations, net of income taxes, was
$2,290, $1,504, and $1,025 for the first, second, and third quarters of fiscal
1997, respectively. Fourth-quarter fiscal 1997 net operating results of the
Marine Systems Group are reflected as a component of the gain on the sale of the
discontinued operations.

Income (loss) from discontinued operations, net of income taxes was $3,470,
$1,612, $870, and $(335) for the first, second, third, and fourth quarters of
fiscal 1996, respectively. The fourth-quarter results for fiscal 1996 were
additionally affected by an after-tax charge of $6,240 for the estimated loss on
disposal of discontinued operations.

Following is a summary of the Company's stock price for the past three
years.

<TABLE>
<CAPTION>
COMMON STOCK PRICE
--------------------
<S> <C> <C>
QUARTER ENDED HIGH LOW
- ------------------------------------------------------- --------- ---------
March 31, 1997......................................... $ 54.75 $ 42.00
December 29, 1996...................................... 57.38 47.63
September 29, 1996..................................... 53.50 46.25
June 30, 1996.......................................... 49.13 43.75
March 31, 1996......................................... 50.50 46.25
December 31, 1995...................................... 53.00 44.63
October 1, 1995........................................ 47.50 41.50
July 2, 1995........................................... 41.75 35.63
March 31, 1995......................................... 40.38 34.88
January 1, 1995........................................ 40.63 27.25
October 2, 1994........................................ 33.63 28.50
July 3, 1994........................................... 29.75 21.75
March 31, 1994......................................... 29.75 23.75
</TABLE>

The Company does not currently pay dividends on its common stock.

F-25
<PAGE>
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 28 SEPTEMBER 29 SEPTEMBER 28 SEPTEMBER 29
1997 1996 1997 1996
------------ ------------ ------------ ------------

<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.................................................. $ 266,954 $ 247,648 $ 518,593 $ 477,821
Cost of sales.......................................... 221,125 205,325 429,044 399,338
------------ ------------ ------------ ------------
Gross margin........................................... 45,829 42,323 89,549 78,483
Operating expenses
Research and development............................. 2,636 4,344 4,674 7,144
Selling.............................................. 8,801 8,040 19,049 15,218
General and administrative........................... 12,127 9,475 22,271 19,263
------------ ------------ ------------ ------------
Total operating expenses......................... 23,564 21,859 45,994 41,625
------------ ------------ ------------ ------------
Income from operations................................. 22,265 20,464 43,555 36,858
Miscellaneous income (expense)....................... (36) (96) 64 150
------------ ------------ ------------ ------------
Earnings before interest and taxes..................... 22,229 20,368 43,619 37,008
Interest expense..................................... (7,380) (9,106) (14,937) (18,386)
Interest income...................................... 1,071 61 1,896 316
------------ ------------ ------------ ------------
Income from continuing operations...................... 15,920 11,323 30,578 18,938
Income from discontinued operations, net of income
taxes................................................ -- 1,504 -- 3,793
------------ ------------ ------------ ------------
Net income............................................. $ 15,920 12,827 30,578 22,731
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common and common equivalent share:
Continuing operations................................ $ 1.18 .85 2.28 1.42
Discontinued operations.............................. -- .11 -- .28
------------ ------------ ------------ ------------
Net income........................................... $ 1.18 .96 2.28 1.70
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Average number of common and common equivalent shares
(thousands).......................................... 13,496 13,421 13,407 13,383
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).

F-26
<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 28, 1997 MARCH 31, 1997
------------------ --------------
<S> <C> <C>
(IN THOUSANDS EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 86,608 $ 122,491
Marketable securities....................................................... 378 378
Receivables................................................................. 190,294 191,675
Net inventory............................................................... 59,233 68,125
Deferred income tax asset................................................... 37,244 37,244
Other current assets........................................................ 7,437 5,329
-------- --------------
Total current assets...................................................... 381,194 425,242
Net property, plant, and equipment............................................ 338,817 355,560
Goodwill...................................................................... 121,917 123,618
Deferred charges.............................................................. 10,107 10,925
Prepaid and intangible pension assets......................................... 82,896 80,569
Other assets.................................................................. 2,021 116
Net assets of discontinued operations......................................... 9,654 8,674
-------- --------------
Total assets.............................................................. $ 946,606 $ 1,004,704
-------- --------------
-------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................... $ 30,475 29,024
Notes payable............................................................... 931 2,302
Accounts payable............................................................ 67,704 85,451
Contract advances and allowances............................................ 46,336 64,500
Accrued compensation........................................................ 23,366 28,392
Accrued income taxes........................................................ 7,049 9,156
Accrued restructuring and facility consolidation............................ 11,776 23,414
Other accrued liabilities................................................... 77,298 83,958
-------- --------------
Total current liabilities................................................. 264,935 326,197
Long-term debt................................................................ 221,108 237,071
Post-retirement and post-employment benefits liability........................ 139,868 143,373
Pension liability............................................................. 33,408 37,079
Other long-term liabilities................................................... 37,902 42,192
-------- --------------
Total liabilities......................................................... 697,221 785,912
Stockholders' Equity:
Common stock--$.01 par value
Authorized--20,000,000 shares
Issued and outstanding 13,122,351 shares at September 28, 1997 and
13,081,538 at March 31, 1997.............................................. 131 131
Additional paid-in-capital.................................................... 247,698 248,612
Retained earnings............................................................. 34,939 4,361
Unearned compensation......................................................... (1,570) (1,324)
Pension liability adjustment.................................................. (2,304) (2,304)
Common stock in treasury, at cost (741,262 shares held at September 28, 1997
and 782,075 at March 31, 1997).............................................. (29,509) (30,684)
-------- --------------
Total stockholders' equity................................................ 249,385 218,792
-------- --------------
Total liabilities and stockholders' equity................................ $ 946,606 $ 1,004,704
-------- --------------
-------- --------------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).

F-27
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------------
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------ ------------------
<S> <C> <C>
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income................................................................ $ 30,578 $ 22,731
Adjustments to net income to arrive at
cash used for operations:
Depreciation.......................................................... 20,839 22,876
Amortization of intangible assets
and unearned compensation........................................... 3,111 3,982
Loss (gain) on disposal of property................................... 76 (90)
Changes in assets and liabilities:
Receivables......................................................... 1,381 (3,776)
Inventory........................................................... 8,892 (989)
Accounts payable.................................................... (17,747) (24,780)
Contract advances and allowances.................................... (18,164) 2,124
Accrued compensation................................................ (5,026) (3,632)
Accrued income taxes................................................ (2,107) (206)
Accrued restructuring and facility consolidation.................... (11,638) (12,238)
Accrued environmental liability..................................... (324) (1,335)
Other assets and liabilities........................................ (20,487) (13,136)
Operating activities of discontinued operations....................... (980) (12,020)
------- -------
Cash used for operations.................................................. (11,596) (20,489)
------- -------
INVESTING ACTIVITIES
Capital expenditures...................................................... (6,015) (11,655)
Acquisition of business................................................... (2,000)
Proceeds from disposition of property, plant, and equipment............... 158 2,380
Investing activities of discontinued operations........................... -- (960)
------- -------
Cash used for investing activities........................................ (7,857) (10,235)
------- -------
FINANCING ACTIVITIES
Net borrowings on line of credit.......................................... -- 12,000
Payments made on long-term debt........................................... (14,512) (22,500)
Net purchase of treasury shares........................................... (5,054) (2,341)
Proceeds from exercised stock options..................................... 4,508 1,715
Other financing activities, net........................................... (1,372) (431)
------- -------
Cash used for financing activities........................................ (16,430) (11,557)
------- -------
Decrease in cash and cash equivalents..................................... (35,883) (42,281)
Cash and cash equivalents--beginning of period............................ 122,491 45,532
------- -------
Cash and cash equivalents--end of period.................................. $ 86,608 $ 3,251
------- -------
------- -------
</TABLE>

See Notes to Consolidated Financial Statements (Unaudited).

F-28
<PAGE>
NOTES TO CONSOLIDATED 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 $2.2 million and $4.8 million
of underabsorbed operating expenses recorded in other current assets at
September 28, 1997, and September 29, 1996, respectively. Unabsorbed expenses at
September 28, 1997, will be absorbed over the remainder of fiscal 1998.

2. During the six months ended September 28, 1997, the Company made
principal payments on its Bank Term Loan of $14.5 million. No borrowings were
outstanding against its revolving line of credit at September 28, 1997. Letters
of credit totaling $36.9 million reduced the available line of credit to $238.1
million.

The remaining scheduled minimum loan payments on outstanding long-term debt
are as follows: fiscal 1998, $14.6 million; fiscal 1999, $31.9 million; fiscal
2000, $31.9 million; fiscal 2001, $23.2 million; fiscal 2002 and thereafter,
$150.0 million.

3. The major categories of other current and long-term accrued liabilities
are as follows:

<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------
<S> <C> <C>
SEPTEMBER 28, 1997 MARCH 31, 1997
------------------- --------------
Employee benefits and insurance............................................... 32,199 35,546
Legal accruals................................................................ 21,266 25,041
Other accruals................................................................ 23,833 23,371
------ -------
Other accrued liabilities-current............................................. 77,298 83,958
------ -------
------ -------
Litigation settlement--long-term.............................................. -- 4,500
Environmental remediation liability........................................... 18,844 19,169
Deferred tax liability........................................................ 18,462 18,462
Other long-term............................................................... 596 61
------ -------
Other long-term liabilities................................................... 37,902 42,192
------ -------
------ -------
</TABLE>

The decrease in other accrued liabilities since March 31, 1997 primarily
represents payments made for legal settlement and litigation matters, including
the $4.0 million installment paid in April 1997 in connection with the Accudyne
"qui tam" settlement, reached in June 1995.

4. Alternative minimum taxes of $2.1 million were paid during the six-month
period ended September 28, 1997. No taxes were paid for the comparable period of
the prior year. The effective income tax rate of 0% on continuing operations in
the current six-month period reflects recognition and utilization of $30.6
million of available federal and state loss carryforwards (gross) for tax
purposes.

5. During fiscal 1996, the Company began a program to repurchase up to
$50.0 million of its common stock. During the six-months ended September 28,
1997, the Company repurchased an additional 139,600 shares for approximately
$6.0 million. 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.

On October 24, 1997, the Company entered into an agreement with Hercules
Incorporated providing for the disposition of the 3.86 million shares of Alliant
common stock held by Hercules. The shares represent the stock issued by the
Company in connection with the March 15, 1995 acquisition of the Hercules
Aerospace Company operations from Hercules.

Under the agreement with Hercules, Alliant will register for public offering
approximately 2.81 million shares held by Hercules. No new shares will be issued
in the offering, and Alliant will not receive

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<PAGE>
any of the proceeds of the offering. The remaining shares held by Hercules will
be subject to a put/call arrangement under which Hercules can require the
Company to purchase the shares in four equal installments during 1998, and the
Company can require Hercules to sell the shares to the Company in four equal
installments during 1998. The price for shares purchased under the put/call
arrangement will be equal to the per share net proceeds realized by Hercules in
the secondary public offering, plus simple interest at a rate of 6.25%. The
Company's present intention is to purchase the shares covered by the put/ call
arrangement.

On October 27, 1997, the Company announced that its Board of Directors had
authorized the repurchase of up to an additional 1.0 million shares of common
stock on the open market. It is currently expected that any purchases made under
this buy-back plan would be subject to market conditions and the Company's
compliance with its debt covenants. The Company's debt covenants currently
permit it to spend up to approximately $60 million for share repurchases. The
Company intends to seek to amend its bank credit agreement covenants to permit
the additional share repurchases. There can be no assurance that the Company
will repurchase all or any portion of the shares or as to the timing or terms
thereof.

6. 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 (1994 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 September 28, 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
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 September 28,
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
with respect to these facilities will be reimbursable through pricing
adjustments in 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 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%. At September 28, 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.

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<PAGE>
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 September 28, 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 of which one has subsequently been settled during the quarter,
without material impact to the Company. The remaining complaint alleges
defective pricing on a government contract. Damages 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.

7. Interest paid during the three and six-month periods ended September 28,
1997 totaled $11.4 and $14.4 million, respectively. Interest paid during the
three and six-month periods ended September 29, 1996 totaled $14.3 and $20.1
million, respectively.

The Company has entered into interest rate swap agreements as hedging
transactions to protect against increases in market interest rates on its
floating rate bank financing. At September 28, 1997, the notional amount of
interest rate swap agreements was $50.0 million. Under the swap agreements, the
Company currently pays an average fixed rate of 6.3% and receives interest at a
rate equal to three-month LIBOR (5.7% at September 28, 1997). These agreements
have a remaining term of 9 months.

During the quarter, the Company entered into treasury rate-lock agreements
to hedge against increases in market interest rates on the anticipated
refinancing of its senior subordinated notes, which are callable on March 1,
1999. These agreements provide for a rate lock of 6.15% on the then most
recently issued U.S. 10-year treasury note between now and March 1, 1999, on a
notional amount of $100 million. The Company's actual refinancing rate will
depend on its credit rating and respective borrowing margin over the treasury
rate at that time.

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

F-31
<PAGE>
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.

9. 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 (FASB) 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
------------------------------------------
<S> <C> <C>
SEPTEMBER 28, 1997 SEPTEMBER 29, 1996
------------------- ---------------------
Basic earnings per share:
Continuing operations................................................... 1.22 .87
Discontinued operations................................................. -- .12
----- ---
Total Basic Earnings Per Share............................................ $ 1.22 $ .99
----- ---
----- ---
Diluted earnings per share:
Continuing operations................................................... 1.18 .85
Discontinued operations................................................. -- .11
----- ---
Total Diluted Earnings Per Share.......................................... $ 1.18 $ .96
----- ---
----- ---
</TABLE>

10. 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.

11. 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 and six month periods
ended September 28, 1997, and September 29, 1996. The Company's accounting
policies are described in the notes to financial statements in its fiscal 1997
Annual Report on Form 10-K.

12. 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.

13. In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income," which requires businesses to disclose comprehensive income and its
components in the Company's general-purpose financial statements. Additionally,
the FASB also issued SFAS No. 131 "Disclosures About Segments of an Enterprise
and Related Information." Both statements require additional disclosure only,
and as such, are expected to have no financial impacts to the Company. The
statements are effective for the Company's fiscal year ended March 31, 1999.

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