Operating Segment Information

6 Months Ended

Oct. 02, 2011

Operating Segment Information

Operating Segment Information

17.  Operating Segment Information

ATK operates its business structure within four operating groups. These operating segments are defined based on the reporting and review process used by ATK’s chief executive officer and other management.  The operating structure aligns ATK’s capabilities and resources with its customers and markets and positions the Company for long-term growth and improved profitability.  Each operating segment is described below:

· Aerospace Systems, which generated 30% of ATK’s external sales in the six months ended October 2, 2011, develops and produces rocket motor systems for human and cargo launch vehicles, conventional and strategic missiles, missile defense interceptors, small and micro-satellites, satellite components, structures and subsystems, lightweight space deployables and solar arrays, and provides engineering and technical services.  Additionally, Aerospace Systems operates in the military and commercial aircraft and launch structures markets.  Other products include ordnance, such as decoy and illuminating flares.

· Armament Systems, which generated 33% of ATK’s external sales in the six months ended October 2, 2011, develops and produces military small, medium, and large caliber ammunition, precision munitions, gun systems, and propellant and energetic materials.  It also operates the U.S. Army ammunition plants in Independence, MO and Radford, VA.

· Missile Products, which generated 15% of ATK’s external sales in the six months ended October 2, 2011, operates across the following market areas: strike weapons, tactical propulsion, in-space propulsion, hypersonic research, missile defense and missile interceptor capabilities, fuzes and warheads, composites, special mission aircraft, and electronic warfare.

· Security and Sporting, which generated 22% of ATK’s external sales in the six months ended October 2, 2011, develops and produces commercial products and tactical systems and equipment.

The military small-caliber ammunition contract, which is reported within Armament Systems, contributed approximately 14% and 14% of total external sales during the six months ended October 2, 2011 and October 3, 2010, respectively.

The following table summarizes ATK’s results by operating segment:

	Quarters Ended						Six Months Ended
	October 2, 2011			October 3, 2010			October 2, 2011			October 3, 2010
Sales to external customers:
Aerospace Systems	$	332,657		$	376,368		$	686,305		$	745,732
Armament Systems	358,201			442,653			705,118			881,553
Missile Products	169,903			159,505			315,335			315,818
Security and Sporting	248,657			230,709			477,915			468,283
Total external sales	1,109,418			1,209,235			2,184,673			2,411,386
Intercompany sales:
Aerospace Systems	4,080			3,095			7,455			5,960
Armament Systems	40,467			24,247			77,261			53,346
Missile Products	33,282			29,663			59,348			57,742
Security and Sporting	6,675			2,670			10,575			4,215
Eliminations	(84,504		)	(59,675		)	(154,639		)	(121,263		)
Total intercompany sales	—			—			—			—
Total sales	$	1,114,206		$	1,209,235		$	2,189,461		$	2,411,386
Income before interest, income taxes, and noncontrolling interest:
Aerospace Systems	$	37,673		$	38,765		$	80,219		$	74,564
Armament Systems	75,564			53,495			123,368			103,136
Missile Products	20,936			11,776			38,017			28,300
Security and Sporting	23,330			32,289			52,650			65,265
Corporate	(10,097		)	(1,967		)	(16,308		)	(3,854		)
Total income before interest, income taxes, and noncontrolling interest	$	147,406		$	134,358		$	277,946		$	267,411

Certain administrative functions are primarily managed by ATK at the corporate headquarters (“Corporate”). Some examples of such functions are human resources, pension and postretirement benefits, corporate accounting, legal, tax, and treasury. Significant assets and liabilities managed at Corporate include those associated with debt, pension and postretirement benefits, environmental liabilities, and income taxes.

Costs related to the administrative functions managed by Corporate are either recorded at Corporate or allocated to the business units based on the nature of the expense.  The difference between pension and postretirement benefit expense calculated under Financial Accounting Standards and the expense calculated under U.S. Cost Accounting Standards is recorded at the corporate level which provides for greater clarity on the operating results of the business segments. Administrative expenses such as corporate accounting, legal, and treasury costs, are allocated out to the business segments.  Environmental expenses are allocated to each segment based on the origin of the underlying environmental cost. Transactions between segments are recorded at the segment level, consistent with ATK’s financial accounting policies. Intercompany balances and transactions involving different segments are eliminated at ATK’s consolidated financial statements level. These eliminations are shown above in “Corporate” and were $7,988 and $5,639 for the quarters ended October 2, 2011 and October 3, 2010, respectively, and $15,633 and $10,642 for the six months ended October 2, 2011 and October 3, 2010, respectively.