Alliant Techsystems' CEO Discusses F3Q2012 Results - Earnings Call Transcript

Alliant Techsystems Inc. ( ATK)

F3Q2012 (Qtr End 01/01/2012) Earnings Call

February 2, 2012 10:00 am ET

Executives

Steve Wold - VP, Treasurer & IR

Mark DeYoung - President & CEO

Tom Sexton - VP & Interim CFO

Analysts

Troy Lahr - Stifel Nicolaus

Robert Spingarn - Credit Suisse

Robert Stallard - Royal Bank of Canada

Kevin Ciabattoni - KeyBanc Capital Markets

Gautam Khanna - Cowen & Company

George Shapiro - Access 342

Joe Nadol - JPMorgan

Alex Cook - Voyant Advisors

Herb Hardt - Monness

Howard Rubel - Jefferies

Mayur Manmohansingh - Barclays Capital

David Strauss - UBS

Presentation

Operator

Good day, everyone and welcome to the ATK third quarter and fiscal year 2012 earnings results conference call. Today's call is being recorded. At this time, I would like to turn the call over to ATK Director of Treasury and Vice President of Investor Relations, Mr. Steve Wold. Please go ahead, sir.

Steve Wold

Thanks Lara. Good morning and thank you for joining us today for our third quarter fiscal 2012 earnings call. With me I have Mark DeYoung, our President and Chief Executive Officer; and Tom Sexton, Vice President and Interim Chief Financial Officer.

Before we begin, I'd like to remind everyone that during today's call, we will make several forward-looking statements. These statements we make under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 and we make these statements based on our best estimates which are based on our understanding of information known to us today, and they are subject to the risks and uncertainties that face all businesses. We encourage you to review today's press releases and our SEC filings for more information on those risks and uncertainties. Please also note that we have posted charts to our website at atk.com, which supplement our comments this morning and include a reconciliation of several non-GAAP financial measures.

With that said, I'll turn the call to you, Mark.

Mark DeYoung

Okay, Steve, thank you. Good morning everyone and thanks for joining us today. This morning we will be discussing our third quarter results. We will also talk about a shift in our capital deployment strategy and we want to introduce our move to a streamlined operating structure in our next fiscal year which is our fiscal year 2013.

In addition, we have announced and you’ve probably where Neal Cohen will serve as ATK’s Executive Vice President and Chief Financial Officer beginning on February 13th. Tom Sexton has served as our Interim CFO. I want to thank Tom for all he has done to ensure a seamless transition during this period. I worked with Tom for many years. He never disappoints, he is a very valuable member of our management team, he did a great job and I look forward to his continued contributions to the company as our Controller.

First, we recently reached a tentative agreement to settle a longstanding claim against the company. This claim originated from events that occurred prior to our acquisition of Thiokol in 2001. It’s been carried and disclosed for obviously many years. Getting this litigation behind us was the right thing to do for the company and for our shareholders.

A new share repurchase authorization has been approved by the Board of Directors of ATK. We’ve been authorized to repurchase up to $200 million worth of ATK common stock over the next two years as part of our balance capital deployment strategy.

Given our liquidity and cash flow, we have the capacity for a range of capital deployment initiatives. Despite the federal budget challenges facing ATK and the defense industry, the foundation of our core businesses remained strong. We received a draft of the Undefinitized Contract Action for the space launch system which establishes a stable base for our Solid Rocket Motor business.

We are performing on our Airbus A350 program, third quarter results were in line with our expectations, we’re successfully transitioning from prototype to production in our Aerospace Composites business and we see long-term growth in this business from the A350 production ramp up.

We submitted a proposal on January 3rd for the operation in Lake City Army Ammunition Plant. We expect the army to award the contract in the fall of this year. Our expertise in operating this facility has been widely acknowledged over the years. We are confident that we have prepared a winning proposal for this important competition. We are entering production on a number of new and innovative weapon programs.

During the quarter we started to work on the lot pre-buy of AARGM and we expect the program to achieve initial operating capability this spring. We recently completed the sixth consecutive successful flight test of this new system. So that’s a great milestone for us.

The XM25, our Precision Motor Solution and the Precision Guidance Kit all provide the war fighter with new and advanced capabilities. I am encouraged by the positive response from army leaders on the capability and performance of these new systems. These innovative products are the types of solutions that will become even more important in our emerging DoD environment.

While the government 2013 Defense Budget will not be released in detail until February 13th as you know. ATK’s focus and outlook is consistent with Secretary Panetta’s statements last week. The Secretary made clear that while we will have a smaller force, it will be well trained, it will be armed more lethal and it will be battle hardened.

ATK is well positioned to support the Secretary’s vision for this force. Secretary Panetta also spoke to the imperative of greater efficiency in the department and ATK is actively working with many segments within DoD but also within NASA to identify opportunities to improve efficiency and reduce cost.

We are determined, not only to support the initiatives articulated by the Secretary Panetta, but we believe we have incorporated priorities and values into this company’s operating and business cultures that will lead to our continued success.

The success of our Commercial Ammunition and Accessories business has been a testament to ATK’s ability to respond to customer demands and do so on a variety of markets. Our strategy is working in this group. We continue to gain market share. Even though some customers have migrated to lower-priced offerings, we again achieved outstanding year-over-year sales in the third quarter.

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