Alliant Techsystems Inc., the largest supplier of ammunition and rocket motors to the U.S. military, said Thursday that first-quarter profit fell 16 percent on costs to close a plant, overruns on a jet program and higher pension expenses.
Net income for the three months ended July 4 fell to $27.6 million, or 72 cents a share, from $32.9 million, or 84 cents, a year earlier, Alliant said in a statement. Sales rose 15 percent to $644.4 million.
Alliant, based in Edina, Minn., has Utah operations in Magna, Clearfield and Promontory.
Alliant's ammunition sales are rising as the war in Iraq and more military training increase demand for small-caliber bullets to the highest level since the Vietnam War. It had an unexpected $7 million cost in the quarter because of "poor performance" on a program to make parts for Lockheed Martin Corp.'s F/A-22 fighter jet, chief executive Daniel Murphy said. The cost to close an ammunition plant was previously disclosed.
"Business execution, excluding one program, continues to be outstanding," Murphy, 56, said on a conference call. "We are addressing head-on poor performance. We have new leadership in place and anticipate rapid recovery."
The loss was recorded on a $10 million project to make a part called a horizontal stabilator out of composite materials for Lockheed's F/A-22 jet. The part is made at a plant in Utah, which is part of the company's advanced propulsion and space systems group. Murphy didn't provide exact details on the source of the problem.
Losses on the F/A-22 program marred what was otherwise "a solid operating performance," in the quarter, said Banc of America Securities analyst Robert Stallard, who rates the shares "buy" and doesn't own them. Banc of America has an investment banking relationship with Alliant, and its parent Bank of America Corp. owned 181,448 shares at the end of March.
"The numbers were more impressive when one takes into account this sizable F/A-22 charge," Stallard said. "We think this does add some risk going forward, and investors will be monitoring performance versus the new estimate to complete."
Shares of Alliant fell $1.90, or 3.1 percent, to close at $60.45 Thursday on the New York Stock Exchange. They have risen 14 percent in the past year.
Results for the quarter also included $5.1 million of costs, or 9 cents a share, to move production of ammunition for Apache helicopters and Bradley Fighting Vehicles to Rocket Center, W.V., from Arden Hills, Minn. The company had recorded $8 million of costs for the closing in its fiscal fourth quarter and at the time had announced it expected another $8 million of costs in the first half of fiscal 2005.
Pension expenses rose to 10 cents per share in the first quarter, from 6 cents a year earlier, the company said.
Alliant boosted its fiscal 2005 revenue forecast, saying sales will exceed $2.7 billion, the top of its forecast given in May. It maintained its fiscal 2005 profit forecast of $3.85 to $3.95 a share.
The company was expected to earn 72 cents a share in the first quarter and $3.94 for the year, according to the average estimates of at least 12 analysts surveyed by Thomson Financial.
"The combination of acquisitions, gains from the war on terror, particularly replenishment of ammunition, and the company's share repurchase strategy are going to drive earnings per share higher over the rest of the year," said Peter Arment, an analyst with JSA Research Inc., an aerospace-research company in Newport, R.I. "This is a great start to fiscal 2005."
Arment rates the shares 'buy" and doesn't own them.
Sales at Alliant's ammunition group rose 11 percent to $194 million in the first quarter, boosted by demand for small-caliber ammunition and rocket propellant, the company said.
Sales at the company's advanced propulsion and space systems unit rose 26 percent to $86 million. The precision systems unit increased sales by 13 percent to $127 million on increased orders for missile-warning systems and medium-caliber guns.
The only unit to report lower sales was rocket motor operations at ATK Thiokol in Utah, which dropped 4.6 percent to $209 million because of fewer commercial space launches. Sales of reusable solid rocket motors used on the U.S. space shuttle fleet and missile defense programs increased.
"Everything but Thiokol posted double-digit organic growth in the quarter, vindicating the policy of building up these areas," Stallard said.
The company today also said its board authorized the repurchase of as many as 2 million shares, or 5.3 percent, of its 37.6 million shares outstanding as of July 4. At Wednesday's closing price, repurchasing the full amount would cost $124.7 million.