<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 29, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-10582
ALLIANT TECHSYSTEMS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-16726904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 SECOND STREET N.E.
HOPKINS, MINNESOTA 55343-8384
(Address of principal executive office) (Zip Code)
(612) 931-6000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed under Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
As of January 31, 1997, the number of shares of the registrant's common
stock, par value $.01 per share, outstanding was 13,063,809 (excluding 799,804
treasury shares).
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Income Statements (Unaudited)
<TABLE>
<CAPTION>
(In thousands except QUARTERS ENDED NINE MONTHS ENDED
per share data) --------------------------- ------------------------------
December 29 December 31 December 29 December 31
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 300,785 $ 257,097 $ 778,606 $ 732,604
Cost of sales 250,085 213,437 649,424 605,051
--------- ----------- ----------- -----------
Gross margin 50,700 43,660 129,182 127,553
Operating expenses
Research and development 4,625 3,342 11,769 8,866
Selling 8,978 8,515 24,196 24,321
General and administrative 12,026 8,756 31,289 31,289
--------- ----------- ----------- -----------
Total operating expenses 25,629 20,613 67,254 64,476
--------- ----------- ----------- -----------
Income from operations 25,071 23,047 61,928 63,077
Miscellaneous income 69 501 219 547
--------- ----------- ----------- -----------
Earnings before interest and taxes 25,140 23,548 62,147 63,624
Interest expense (8,948) (9,549) (27,334) (29,218)
Interest income 8 903 324 1,226
--------- ----------- ----------- -----------
Income from continuing operations
before income taxes 16,200 14,902 35,137 35,632
Income tax provision 3,278 7,839
--------- ----------- ----------- -----------
Income from continuing operations 16,200 11,624 35,137 27,793
Income from discontinued operations net of
income taxes 1,025 870 4,819 5,952
--------- ----------- ----------- -----------
Net income $ 17,225 $ 12,494 $ 39,956 $ 33,745
========= =========== =========== ===========
Earnings per common and common
equivalent share:
Continuing operations $ 1.20 $ .87 $ 2.62 $ 2.07
Discontinued operations .08 .06 .36 .44
--------- ----------- ----------- -----------
Net income $ 1.28 $ .93 $ 2.98 $ 2.51
========= =========== =========== ===========
Average number of common and
common equivalent shares (thousands) 13,472 13,366 13,411 13,449
========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
Balance Sheets (Unaudited)
<TABLE>
<CAPTION> ------------------ --------------
(In thousands except share data) December 29, 1996 March 31, 1996
------------------ --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 38,375 $ 45,532
Marketable securities 348 348
Receivables 188,654 178,475
Net inventory 76,401 87,602
Deferred income tax asset 25,867 28,462
Other current assets 11,314 3,819
------------------ --------------
Total current assets 340,959 344,238
Net property, plant, and equipment 364,226 382,513
Goodwill 124,219 125,033
Deferred charges 14,472 14,751
Other assets 27,980 30,997
Net assets of discontinued operations 75,236 73,114
------------------ --------------
Total assets $947,092 $970,646
================== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 48,750 $ 45,000
Notes payable 12,313 2,756
Accounts payable 71,492 77,453
Contract advances and allowances 41,600 40,636
Accrued compensation 24,536 28,672
Accrued income taxes 9,162 9,310
Restructuring liability - current 11,457 26,782
Other accrued liabilities 82,439 89,871
------------------ --------------
Total current liabilities 301,749 320,480
Long-term debt 312,500 350,000
Post-retirement and post-employment benefits liability 87,491 88,930
Pension and other long-term liabilities 40,403 43,219
Restructuring liability - long-term 181 2,040
Litigation settlement charges - long-term 4,500 8,500
------------------ --------------
Total liabilities 746,824 813,169
Stockholders' Equity:
Common stock - $.01 par value
Authorized - 20,000,000 shares
Issued and outstanding 13,052,433 shares at December
29, 1996 and 12,965,542 at March 31, 1996 130 130
Additional paid-in-capital 249,619 249,814
Retained earnings (deficit) (14,842) (54,798)
Unearned compensation (2,009) (2,552)
Pension liability adjustment (1,189) (1,189)
Common stock in treasury, at cost (811,180 shares held at
December 29, 1996 and 898,071 at March 31, 1996) (31,441) (33,928)
------------------ --------------
Total stockholders' equity 200,268 157,477
------------------ --------------
Total liabilities and stockholders' equity $947,092 $970,646
================== ==============
</TABLE>
See Notes to Financial Statements
<PAGE>
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
(In thousands) NINE MONTHS ENDED
----------------- -----------------
December 29, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Operating activities
Net income $ 39,956 $ 33,745
Adjustments to net income to arrive at cash
provided by operations:
Depreciation 34,322 38,491
Amortization of intangible assets and unearned
compensation 6,029 6,635
Loss (gain) on disposal of property (380) 253
Changes in assets and liabilities:
Receivables (10,181) (24,151)
Inventory 11,073 (5,328)
Accounts payable (6,233) (3,754)
Contract advances and allowances 964 (3,823)
Accrued compensation (4,136) 1,369
Accrued income taxes (147) (220)
Accrued restructure liability (17,184) (23,502)
Other assets and liabilities (20,702) (10,207)
Operating activities of discontinued operations (845) (733)
----------------- -----------------
Cash provided by operations 32,536 8,775
----------------- -----------------
Investing activities
Capital expenditures (18,044) (14,089)
Business acquisition:
Purchase price finalization 29,115
Accrued transaction fees paid (5,997)
Proceeds from disposition of property, plant, and equipment 2,682 969
Investing activities of discontinued operations (1,277) (1,032)
----------------- -----------------
Cash provided by (used for) investing activities (16,639) 8,966
----------------- -----------------
Financing activities
Net borrowings on line of credit 10,000 18,000
Payments made on long-term debt (33,750) (22,500)
Net purchase of treasury shares (918) (36,261)
Proceeds from exercised stock options 2,058 796
Other financing activities, net (444) (268)
----------------- -----------------
Cash used for financing activities (23,054) (40,233)
----------------- -----------------
Decrease in cash and cash equivalents (7,157) (22,492)
Cash and cash equivalents - beginning of period 45,532 25,664
----------------- -----------------
Cash and cash equivalents - end of period $ 38,375 $ 3,172
================= =================
</TABLE>
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements (Unaudited)
1. In interim accounting periods, the Company absorbs operating expenses based
upon sales volume using the anticipated relationship of such costs to sales
for the year. Accordingly, the Company had $6.3 million and $.4 million of
underabsorbed operating expenses recorded in other current assets at
December 29, 1996 and December 31, 1995, respectively. Unabsorbed expenses
at December 29, 1996, will be absorbed over the remainder of fiscal 1997.
2. During the nine month period ended December 29, 1996, the Company made
principal payments on its Bank Term Loan of $33.8 million. Borrowings of
$10.0 million were outstanding against its revolving line of credit at
December 29, 1996. Letters of credit totaling $51.3 million reduced the
available line of credit to $213.7 million.
The remaining scheduled minimum loan payments on outstanding long-term debt
are as follows: fiscal 1997, $11.2 million; fiscal 1998, $50.0 million;
fiscal 1999, $55.0 million; fiscal 2000, $55.0 million; fiscal 2001 and
thereafter, $190.0 million.
3. No income taxes were paid for the nine months ended December 29, 1996, or
December 31, 1995. The effective income tax rate of 0 percent on continuing
operations in the current nine month period reflects the utilization of
$35.1 million of available federal and state loss carryforwards for tax
purposes.
4. During fiscal 1996, the Company began a program to repurchase up to $50.0
million of its common stock. In connection with that program, the Company
had repurchased approximately 1.05 million shares of common stock as of
December 29, 1996, at an average price of $38.26 per share, for an aggregate
amount of $40.4 million.
5. Contingencies:
As a U.S. Government contractor, the Company is subject to defective pricing
and cost accounting standards non-compliance claims by the Government.
Additionally, the Company has substantial government contracts and
subcontracts, the prices of which are subject to adjustment. The Company
believes that resolution of such claims and price adjustments made or to be
made by the government for open fiscal years (1987 through 1996) will not
materially exceed the amount provided in the accompanying balance sheets.
The Company is subject to various local and national laws relating to
protection of the environment and is in various stages of investigation or
remediation of potential, alleged, or acknowledged contamination. The
Company records environmental remediation-related liabilities when the event
obligating the Company has occurred and the cost is both probable and
reasonably estimable. As of December 29, 1996, the Company had reserves
totaling $7.2 million available to cover all environmental clean-up costs.
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.
As part of the acquisition of the Aerospace operations (Aerospace) from
Hercules, Inc. (Hercules), the Company has generally assumed responsibility
for environmental compliance at the Aerospace facilities. There may also be
significant environmental remediation costs associated with the Aerospace
facilities that will, at some locations, be initially funded by the Company.
It is expected that
<PAGE>
most of the compliance and remediation costs associated with the Aerospace
facilities will be reimbursable under U.S. government contracts and that the
portion of those environmental remediation costs not covered through such
contracts will be covered by Hercules under various agreements. The
estimated nondiscounted range of these reasonably possible costs of study
and remediation in the Aerospace operations is between $0 and $27 million.
Where the Company is required to first conduct the remediation and then seek
reimbursement from the U.S. Government or Hercules, the Company's working
capital may be materially affected until the Company receives such
reimbursement.
The estimated nondiscounted study and remediation costs to be incurred,
generally over the next three years, for sites not acquired through the
Aerospace acquisition could range from $2.2 million to $22.5 million.
The Company is a defendant in numerous lawsuits that arise out of, and are
incidental to, the conduct of its business. Such matters arise out of the
normal course of business and relate to product liability, government
regulations, including environmental issues, and other issues. Certain of
the lawsuits and claims seek damages in very large amounts. In these legal
proceedings, no director, officer, or affiliate is a party or a named
defendant.
The Company is involved in two "qui tam" lawsuits brought by former
employees of the Aerospace operations acquired from Hercules. One involves
allegations relating to submission of false claims and records, delivery of
defective products, and a deficient quality control program. The other
involves allegations of mischarging of work performed under Government
contracts, misuse of Government equipment, other acts of financial
mismanagement and wrongful termination claims. The Government did not join
in either of these lawsuits. Under the terms of the agreements relating to
the Aerospace acquisition, all litigation and legal disputes arising in the
ordinary course of the Aerospace operations will be assumed by the Company
except for a few specific lawsuits including the two qui tam lawsuits
referred to above. The Company has agreed to indemnify and reimburse
Hercules for a portion of litigation costs incurred, and a portion of
damages, if any, awarded in these lawsuits. Under terms of the purchase
agreement with Hercules, the Company's maximum settlement liability is
approximately $4 million, for which the Company has fully reserved at
December 29, 1996.
While the results of litigation cannot be predicted with certainty,
management believes, based upon the advice of counsel, that the actions
seeking to recover damages against the Company either are without merit, are
covered by insurance and reserves, do not support any grounds for
cancellation of any contract, or are not likely to materially affect the
financial condition or results of operations of the Company, although the
resolution of any of such matters during a specific period could have a
material effect on the quarterly or annual operating results for that
period.
It is reasonably possible that management's current estimates of liabilities
for the above contingencies could change in the near term, as more
definitive information becomes available.
6. Interest paid during the three and nine month periods ended December 29,
1996, totaled $4.8 and $24.9 million, respectively. Interest paid during the
three and nine month periods ended December 31, 1995, totaled $6.7 and $26.7
million, respectively.
The Company has entered into hedging transactions to protect against
increases in market interest rates on its long term debt. At December 29,
1996, the notional amount of amortizing interest rate swap agreements was
$137.5 million. Under the swap agreements, the Company currently pays an
average fixed rate of 6.9 percent and receives interest at a rate equal to
three-month LIBOR. The interest rate cap agreements limit the Company's
LIBOR exposure to 7.0 percent. The notional amount of these amortizing
interest rate cap agreements was $30.0 million at December 29, 1996.
<PAGE>
7. Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company has
elected to continue following the guidance of Accounting Principles Board
No. 25, "Accounting for Stock Issued to Employees" for measurement and
recognition of stock-based transactions with employees, and therefore the
adoption of SFAS No. 123 will not have a significant impact on the Company's
financial position or results of operations.
8. Earnings per common share are computed based upon the weighted average
number of common shares and common equivalent shares, consisting of the
dilutive effect of stock options outstanding during each year. Earnings per
common share, assuming full dilution, are substantially the same.
9. Certain reclassifications have been made to the fiscal year 1996 financial
statements, as previously reported, to conform to the current
classification. These reclassifications did not affect net income or
stockholder's equity, as previously reported.
10. The figures set forth in this quarterly report are unaudited but, in the
opinion of the Company, include all adjustments necessary for a fair
presentation of the results of operations for the three and nine month
periods ended December 29, 1996, and December 31, 1995. The Company's
accounting policies are described in the notes to financial statements in
its fiscal year 1996 Annual Report on Form 10-K.
11. On October 10, 1996, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 96-1 (SOP 96-1) entitled "Environmental
Remediation Liabilities." The SOP provides authoritative guidance on
specific accounting issues relative to recognition, measurement, display,
and disclosure of environmental remediation liabilities. The Company will be
required to adopt the rule on April 1, 1997, although earlier adoption would
be permitted. The Company is currently in the process of determining what
effect this new accounting rule may have on the Company's operating results
and financial condition. Adoption will have no impact on cash flow.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Sales
Sales from continuing operations (see separate discussion of
discontinued operations, below) for the quarter ended December 29,
1996, totaled $300.8 million, an increase of $43.7 million, or 17.0
percent, from $257.1 million for the comparable quarter of the prior
year. Aerospace Systems Group sales were $154.7 million for the
quarter ended December 29, 1996, an increase of $15.8 million, or 11.4
percent, compared to $138.9 million in the comparable quarter of the
prior year. The increase was due primarily to increased sales on the
Delta and Titan space launch vehicle programs. Defense Systems Group
sales were $155.4 million for the quarter ended December 29, 1996, an
increase of $30.0 million, or 23.9 percent, compared to $125.4 million
in the comparable quarter of the prior year. The increase was due
primarily to an increase in Tank Ammunition volume of approximately $46
million, due in large part to resuming production on a Tank Ammunition
program that had experienced technical problems in the comparable
quarter of the prior year. This increase was offset $16 million by
decreased sales in the current year quarter due to program completions
in the comparable quarter of fiscal 1996 on the Combined Effects
Munition (CEM) and Shoulder-Launched Multi-Purpose Assault Weapons
(SMAW) programs. Emerging Business Group sales from continuing
operations were $10.7 million for the quarter ended December 29, 1996,
an increase of $5.5 million over sales of $5.2 million for the
comparable quarter of the prior year. The increase was due primarily
to initial sales from a battery line contract.
Sales from continuing operations for the nine month period ended
December 29, 1996, totaled $778.6 million, an increase of $46.0
million, or 6.3 percent, from $732.6 million for the comparable period
in the prior year. Aerospace Systems Group sales for the nine month
period ended December 29, 1996, were $436.0 million, an increase of
$9.6 million, or 2.3 percent over sales of $426.4 million for the
comparable period of the prior year. Defense Systems Group sales for
the nine month period ended December 29, 1996, were $348.1 million, an
increase of $35.0 million, or 11.2 percent over sales of $313.1 million
for the comparable period of the prior year. The increase was
primarily attributable to a $53.0 million increase in Tank Ammunition
sales, due in large part to resolution of program technical problems
earlier in the current year. Additionally, sales from new programs,
especially Volcano (anti-tank munitions dispensers) and Tactical
Unmanned Aerial Vehicle (TUAV), helped to offset sales decreases of
approximately $59 million due to fiscal 1996 program completions on CEM
and SMAW. Emerging Business Group sales from continuing operations
were $27.3 million, an increase of $10.1 million, or 58.7 percent over
sales of $17.2 million for the comparable period of the prior year, due
primarily to increased sales on its Advanced Technology Applications
(ATA) information security and communications contracts. The Company
expects that sales from continuing operations will be approximately
$1.1 billion for fiscal 1997.
Gross Margin
The Company's gross margin for the quarter ended December 29, 1996, was
$50.7 million, or 16.9 percent of sales, compared to $43.7 million, or
17.0 percent of sales, for the comparable quarter of the prior year.
Gross Margin was impacted favorably during the current quarter due to a
settlement reached with the U.S. Government for reimbursement of $5.8
million relating to
<PAGE>
costs previously incurred on a contract that was terminated by the
Government due to an arms-limitation treaty it had entered. This margin
increase was offset due to sales mix, as well as cost growth due to
technical issues on certain programs in the Company's Tactical
Propulsion business unit and Emerging Business Group.
Gross margin for the nine month period ended December 29, 1996, totaled
$129.2 million, or 16.6 percent of sales, compared to $127.6 million,
or 17.4 percent of sales for the comparable period of the prior year.
The decrease in gross margin as a percent of sales was driven by fiscal
1997 sales mix, as well as by cost growth, primarily due to technical
issues on certain programs in the Company's Tactical Propulsion
business unit and on fuzing programs. These decreases were offset by a
$5.8 million contract termination claim settlement recognized in the
third quarter of fiscal 1997. Fiscal 1997 gross margin on continuing
operations, expressed as a percentage of sales, is expected to be
approximately 17 percent, down from 18.3 percent recorded in fiscal
1996, due largely to higher non-recurring claim settlements, as well as
contract completions in fiscal 1996.
Operating Expenses
The Company's operating expenses for the quarter ended December 29,
1996, totaled $25.6 million, 8.5 percent of sales, compared to $20.6
million, 8.0 percent of sales, in the comparable quarter of the prior
year. The increase, as a percent of sales, is largely due to the
timing of general and administrative costs, as well as due to
expenditures made in the current year in pursuit of the U.S.
Government's Evolved Expendable Launch Vehicle (EELV) program.
Operating expenses for the nine month period ended December 29, 1996,
totaled $67.3 million, or 8.6 percent of sales, compared to $64.5
million, or 8.8 percent of sales, for the comparable period of the
prior year. The decrease, as a percentage of sales, is reflective of
consistent selling and general and administrative costs being spread
over an increased base. This fiscal 1997 decrease was partially offset
by increased research and development spending in the period, due to
the Company's pursuit of the EELV program. Operating expenses for
fiscal 1997, as a percentage of sales, are expected to be approximately
9.0 percent, due to the likely investment in certain significant
program opportunities.
Miscellaneous Income
The Company's miscellaneous income for the three and nine month periods
ended December 29, 1996, of .1 and .2 million, respectively, decreased
slightly from the three and nine month periods of the prior year due to
the fiscal 1996 receipt of $.5 million in non-recurring income
associated with a litigation claim settlement.
Interest Expense
The Company's interest expense decreased approximately $.6 and $1.9
million during the three and nine month periods ended December 29,
1996, respectively, compared to the comparable periods of the prior
year. The decrease was primarily due to lower average balances
borrowed, as well as lower interest rates for the current year periods
compared to the prior year periods. Interest income decreased
approximately $.9 million for the quarter and nine month periods ended
December 29, 1996, compared to the respective periods one year earlier.
The decrease is driven by interest income recognized by the Company in
fiscal 1996 on amounts owed the Company for purchase price
reimbursement by Hercules Inc., as a result of the Aerospace
acquisition.
<PAGE>
Income Taxes
Continuing operations for the three and nine month periods ended
December 29, 1996, reflect an effective tax rate of 0 percent, compared
to 22 percent for the comparable periods of the prior fiscal year. The
tax rate for the periods ended December 29, 1996, differs from
statutory tax rates due to the utilization of available tax loss
carryforwards. Such carryforwards are expected to reduce future tax
expense and the associated tax payments.
Discontinued Operations
On December 22, 1996, the Company entered into an agreement to sell
it's Marine Systems Group, including substantially all of the assets of
that business, to Hughes Aircraft Company for $141 million in cash.
Finalization of the transaction, including obtaining required
regulatory approvals, is expected to be completed during the Company's
fourth fiscal quarter. The Company has accounted for the operations of
the Marine Systems Group as discontinued operations in these financial
statements. The transaction, as well as the results of operations
during the disposal period, are expected to result in a net gain to the
Company. Accordingly, recognition of such gain will be deferred until
the transaction is completed. Net income from discontinued operations
for the three and nine month periods ended December 29, 1996 was $1.0
million and $4.8 million respectively (net of tax expense of $.6 and
$2.6 million) compared to $.9 and $6.0 million (net of tax expense of
(.7) and $.5 million respectively) for the comparable periods of the
prior year. Results in the current year reflect decreased Marine
Systems Group operating income due to reduced sales volume. Results
for the comparable three and nine month periods in the prior year
reflect operating income from Marine Systems, offset by losses incurred
in the Company's foreign demilitarization business, which was
discontinued in the fourth quarter of fiscal 1996. Sales from
discontinued operations for the nine month period ended December 29,
1996, were $82.4 million, compared to $138.6 million for the comparable
period in the prior year. The decrease in fiscal 1997 sales was
primarily reflective of program completions on the MK50 lightweight
torpedo program, as well as the absence in fiscal 1997 of sales from
the Company's former foreign demilitarization business (discontinued in
fiscal 1996). Net assets of the Company's discontinued operations are
approximately $75.2 million and consist of approximately $40.0 million
in net working capital. The balance of the assets are non-current,
primarily property, plant, and equipment.
Adoption of Accounting Standard
Effective April 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." As permitted by SFAS No. 123, the Company has elected
to continue following the guidance of Accounting Principles Board No.
25, "Accounting for Stock Issued to Employees" for measurement and
recognition of stock-based transactions with employees, and therefore
the adoption of SFAS No. 123 will not have a significant impact on the
Company's financial position or results of operations.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
-----------------------------------------------------
Cash provided by operations totaled $32.5 million for the nine month
period ended December 29, 1996, an increase in cash provided by
operations of $23.8 million, when compared to $8.8 million provided by
operations in the comparable period of the prior year. The fiscal 1997
improvement was driven by improvement in working capital, particularly
through the relative reductions of cash
<PAGE>
resources used for accounts receivable and inventory assets. Cash used in
investing activities for the nine month period ended December 29, 1996 was $16.6
million, an increased use of $25.6 million compared to cash provided by
investing activities of $9.0 million in the comparable nine month period of the
prior year. This increased use was primarily indicative of the $29.1 million
payment received in the prior year period, which reflected a purchase price
adjustment for the acquisition of the Aerospace operations, acquired from
Hercules Inc., related to accelerated receivables collections. This was offset
by $6.0 million in payments made by the Company in the same prior year period
for accrued fees related to the transaction.
Net outlays for capital expenditures for the nine month period ended December
29, 1996, totaled $18.0 million, or 2.3 percent of sales, an increase as a
percentage of sales, compared to capital expenditures of $14.1 million, or 1.9
percent of sales, in the comparable period of the prior year. The increased
expenditures in the current period were primarily the result of increased
tooling expenditures required on an Aerospace contract. The Company expects
capital expenditures, as a percentage of sales, to be approximately 2.7 percent
of sales for fiscal 1997.
Effective November 14, 1996, the Company's bank credit facility was amended to
increase amounts available under the revolving working capital facility
(revolver) from $225 million to $275 million, and to reduce the Company's
borrowing interest rate margins relative to the London InterBank Offered Rate
(LIBOR). Additionally, certain restrictions related to revolver usage, use of
asset sale proceeds, and restricted payments were removed.
At December 29, 1996, the Company had borrowings of $10.0 million outstanding
against its bank revolving credit facility. The borrowings were used primarily
to finance interim working capital needs. Outstanding letters of credit of $51.3
million further reduced amounts available on this facility to $213.7 million at
December 29, 1996.
The Company's total debt (notes payable, current portion of long-term debt, and
long-term debt) as a percentage of total capitalization decreased to 65.1
percent on December 29, 1996, compared to 71.6 percent on March 31, 1996. This
decrease reflects principal repayments on the bank term debt during fiscal 1997
of $33.8 million offset by $10.0 million in borrowings under the bank revolving
credit facility, as well as increased equity due to fiscal 1997 earnings.
In connection with the anticipated sale of the Company's Marine Systems Group to
Hughes Aircraft Company, currently expected to be completed in the fourth
quarter of fiscal 1997, the Company expects to receive cash proceeds of
approximately $141.0 million. Under the terms of the Company's debt agreements,
approximately $90.0 million of the sale proceeds will be utilized for the
prepayment of debt. The balance of the cash proceeds will be available for
further debt repayment, continued share repurchases or for other strategic
initiatives. As a result of the debt prepayment, each future minimum required
payment under the Bank Term Loan facility (as discussed in Note 2 of the Notes
to Financial Statements) is expected to be reduced by approximately 40 percent.
The Company began a program to repurchase up to $50.0 million of its common
stock during fiscal 1996. In connection with that program, the Company had
repurchased approximately 1.05 million shares of common stock as of December 29,
1996, at an average price of $38.26 per share for an aggregate amount of $40.4
million. Under the repurchase program, cash expenditures during the nine month
period ended December 29, 1996, were $3.6 million.
<PAGE>
In June 1995, the Company and claimants reached an agreement to settle the
Accudyne "qui tam" lawsuit. Terms of the agreement include payments by the
Company of $12.0 million, consisting of payments of $.5 million and $3.0
million, made in June 1995 and April 1996, respectively, and subsequent payments
to be made of $4.0 million and $4.5 million in April 1997 and June 1998,
respectively, plus interest at the three-year Treasury Bill rate.
Based on the financial condition of the Company at December 29, 1996, the
Company believes that internal cash flows, combined with the availability of
funding under its line of credit, will be adequate to fund the future growth of
the Company, as well as to service its long-term debt obligations.
INFLATION
- ---------
In the opinion of management, inflation has not had a significant impact upon
the results of the Company's operations. The selling prices under contracts, the
majority of which are long term, generally include estimated costs to be
incurred in future periods. These cost projections can generally be negotiated
into new buys under fixed-price government contracts, while actual cost
increases are recoverable in cost-type contracts.
RISK FACTORS
- ------------
Except for the historical information contained herein, certain of the matters
discussed in this report are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties, including, but not limited to, changes in governmental spending
and budgetary policies, governmental laws and other rules and regulations
surrounding various matters such as environmental remediation, contract pricing,
changing economic and political conditions in the United States and in other
countries, international trading restrictions, outcome of union negotiations,
customer product acceptance, the Company's success in program pursuits,
continued access to capital markets, and merger and acquisition activity within
the industry. All forecasts and projections in this report are "forward-looking
statements" and are based on management's current expectations of the Company's
near term results, based on current information available pertaining to the
Company, including the aforementioned risk factors. Actual results could differ
materially.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
Incorporated herein by reference is note 5 of Notes to Financial Statements
included in Item 1 of Part I of this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
10 Arrangements with Executive
11 Computation of Earnings Per Common and Common Equivalent Share
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
During the quarterly period ended December 29, 1996, the registrant
filed the following reports on Form 8-K:
<TABLE>
<CAPTION>
Date of Report Items Reported
-------------- --------------
<S> <C>
November 14, 1996 Item 5. Other Events
Item 7(c). Exhibits
December 23, 1996 Item 5. Other Events
Item 7(c). Exhibits
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANT TECHSYSTEMS INC.
Date: February 7, 1997 By: /s/ Charles H. Gauck
Name: Charles H. Gauck
Title: Secretary
(On behalf of the registrant)
Date: February 7, 1997 By: /s/ Scott S. Meyers
Name: Scott S. Meyers
Title: Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
ALLIANT TECHSYSTEMS INC.
FORM 10-Q
EXHIBIT INDEX
The following exhibits are filed herewith electronically or incorporated herein
by reference. The applicable Securities and Exchange Commission File Number is
1-10582.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Method of Filing
- ------ ---------------------- ----------------
<S> <C> <C>
10 Arrangements with Executive............... Filed herewith electronically
11 Computation of Earnings Per Common and Common
Equivalent Share.......................... Filed herewith electronically
27 Financial Data Schedule................... Filed herewith electronically
</TABLE>
<PAGE>
Exhibit 10
Arrangements with Executive
In November 1996, the registrant entered into an arrangement with Lawrence
H. Tveten ("Executive") in connection with pending negotiations to sell
registrant's Marine Systems Group (the "Sale Transaction"), of which Executive
was the Group Vice President. In connection with Executive's expected retirement
from registrant, and in consideration for Executive's continued service to
registrant during the pendency of the Sale Transaction, it was agreed that:
. Executive shall be entitled to participate in registrant's Management
Incentive Plan for the fiscal year ending March 31, 1997, through the
earliest of the closing of the Sale Transaction, discontinuance of
Executive's services to registrant, or March 31, 1997.
. Executive shall be entitled to participate in registrant's Flexible
Perquisite Account Program and registrant's financial counseling
program, in each case through the earlier of the discontinuance of
Executive's services to registrant, or March 31, 1997.
. A stock option installment of 2,667 shares, exercisable at $37.375 per
share, that would otherwise be forfeited in connection with Executive's
retirement, would be allowed to vest and become exercisable on June 1,
1997; and a stock option installment of 1,000 shares, exercisable at
$46.125 per share, that would otherwise be forfeited in connection with
Executive's retirement, would be allowed to vest and become exercisable
on May 21, 1997.
In December 1996, the registrant also entered into an incentive arrangement
with Executive in connection with the Sale Transaction. In consideration for
Executive's agreement to, among other things, maximize the value to registrant
of the Sale Transaction, the registrant agreed to pay Executive an amount equal
to one percent of the amount by which the purchase price paid by the buyer in
the Sale Transaction exceeds $140,000,000.
<PAGE>
Exhibit 11
Computation of Earnings per Common and Common Equivalent Share
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
December 29 December 31 December 29 December 31
1996 1995 1996 1995
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Primary calculation:
Net income $ 17,225 $ 12,494 $ 39,956 $ 33,745
=========== ============= =========== ===========
Weighted average shares outstanding 13,029 12,932 12,994 13,062
during the period
Shares issuable in connection with stock
plans less shares purchasable with proceeds
using the average per share purchase price
for the respective periods as shown below 443 434 417 387
----------- ------------ ----------- -----------
Total common and common equivalent shares -
primary 13,472 13,366 13,411 13,449
=========== ============ =========== ===========
Primary earnings per common and common $ 1.28 $ .93 $ 2.98 $ 2.51
equivalent share =========== ============ =========== ===========
Average share price for the period $ 51.90 $ 46.72 $ 49.44 $ 43.74
=========== ============ =========== ===========
Fully diluted calculation:
Net income $ 17,225 $ 12,494 $ 39,956 $ 33,745
=========== ============ =========== ===========
Weighted average shares outstanding during
the period 13,029 12,932 12,994 13,062
Shares issuable in connection with stock
plans less shares purchasable with proceeds
using the higher of the average or period
end share price as shown below 462 492 466 477
----------- ------------ ----------- -----------
Total common and common equivalent shares -
fully diluted 13,491 13,424 13,460 13,539
=========== ============ =========== ===========
Fully diluted earnings per common and
common equivalent share $ 1.28 $ .93 $ 2.97 $ 2.49
=========== ============ =========== ===========
Higher of average or period end share price $ 53.38 $ 50.63 $ 53.38 $ 50.63
=========== ============ =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
10-Q filing for the quarter ending 12-29-96 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-START> SEP-30-1996 OCT-02-1995
<PERIOD-END> DEC-29-1996 DEC-31-1995
<CASH> 38,375 45,532
<SECURITIES> 348 348
<RECEIVABLES> 188,654 178,475
<ALLOWANCES> 58 380
<INVENTORY> 76,401 87,602
<CURRENT-ASSETS> 340,959 344,238
<PP&E> 530,115 514,725
<DEPRECIATION> 165,889 132,212
<TOTAL-ASSETS> 947,092 970,646
<CURRENT-LIABILITIES> 301,749 320,480
<BONDS> 312,500 350,000
<COMMON> 130 130
0 0
0 0
<OTHER-SE> 200,138 157,347
<TOTAL-LIABILITY-AND-EQUITY> 947,092 970,646
<SALES> 778,606 732,604
<TOTAL-REVENUES> 778,606 732,604
<CGS> 649,424 605,051
<TOTAL-COSTS> 649,424 605,051
<OTHER-EXPENSES> 11,769 8,866
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 27,334 29,218
<INCOME-PRETAX> 35,137 35,632
<INCOME-TAX> 0 7,839
<INCOME-CONTINUING> 35,137 27,793
<DISCONTINUED> 4,819 5,952
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 39,956 33,745
<EPS-PRIMARY> 2.98 2.51
<EPS-DILUTED> 2.97 2.49
</TABLE>
