-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LX6pkRe1G/K7dYAoX4Gc1CTxeIBnT0ubd4t38pLm9PpwgaQGDbzxztdb4uSDrlGj dnYKZSoC2pV9EnAjNcLU2A== 0000950131-97-000719.txt : 19970221 0000950131-97-000719.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950131-97-000719 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961229 FILED AS OF DATE: 19970211 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANT TECHSYSTEMS INC CENTRAL INDEX KEY: 0000866121 STANDARD INDUSTRIAL CLASSIFICATION: ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480] IRS NUMBER: 411672694 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10582 FILM NUMBER: 97523445 BUSINESS ADDRESS: STREET 1: 600 2ND ST NE CITY: HOPKINS STATE: MN ZIP: 55343-8384 BUSINESS PHONE: 6129316000 MAIL ADDRESS: STREET 1: 600 2ND ST NE CITY: HOPKINS STATE: MN ZIP: 55343-8384 10-Q 1 FORM 10-Q 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). PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Income Statements (Unaudited)
(In thousands except QUARTERS ENDED NINE MONTHS ENDED per share data) --------------------------- ------------------------------ December 29 December 31 December 29 December 31 1996 1995 1996 1995 ------------ ----------- ----------- ----------- 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 ========== =========== =========== ===========
See Notes to Financial Statements Balance Sheets (Unaudited)
------------------ -------------- (In thousands except share data) December 29, 1996 March 31, 1996 ------------------ -------------- 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 ================== ==============
See Notes to Financial Statements Statements of Cash Flows (Unaudited)
(In thousands) NINE MONTHS ENDED ----------------- ----------------- December 29, 1996 December 31, 1995 ----------------- ----------------- 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 ================= =================
See Notes to Financial Statements 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 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. 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. 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 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. 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 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. 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. 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.
Exhibit No. Description of Exhibit ----------- ---------------------- 10 Arrangements with Executive 11 Computation of Earnings Per Common and Common Equivalent Share 27 Financial Data Schedule
(b) Reports on Form 8-K. During the quarterly period ended December 29, 1996, the registrant filed the following reports on Form 8-K:
Date of Report Items Reported -------------- -------------- November 14, 1996 Item 5. Other Events Item 7(c). Exhibits December 23, 1996 Item 5. Other Events Item 7(c). Exhibits
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) 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.
Exhibit Number Description of Exhibit Method of Filing - ------ ---------------------- ---------------- 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
EX-10 2 ARRANGEMENTS WITH EXECUTIVE 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. EX-11 3 COMPUTATION OF EARNINGS PER COMMON SHARE Exhibit 11 Computation of Earnings per Common and Common Equivalent Share (In thousands except per share amounts)
Quarters Ended Nine Months Ended December 29 December 31 December 29 December 31 1996 1995 1996 1995 ----------- ------------ ----------- ----------- 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 =========== ============ =========== ===========
EX-27 4 FINANCIAL DATA SCHEDULE
5 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. 1,000 9-MOS 9-MOS MAR-31-1997 MAR-31-1996 SEP-30-1996 OCT-02-1995 DEC-29-1996 DEC-31-1995 38,375 45,532 348 348 188,654 178,475 58 380 76,401 87,602 340,959 344,238 530,115 514,725 165,889 132,212 947,092 970,646 301,749 320,480 312,500 350,000 130 130 0 0 0 0 200,138 157,347 947,092 970,646 778,606 732,604 778,606 732,604 649,424 605,051 649,424 605,051 11,769 8,866 0 0 27,334 29,218 35,137 35,632 0 7,839 35,137 27,793 4,819 5,952 0 0 0 0 39,956 33,745 2.98 2.51 2.97 2.49
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