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MIXED RESULTS FROM MID CAPS

MIXED RESULTS FROM MID CAPS
By Julian Nettlefold

In line with results from the U.S. majors we reported last week, the mid-cap sector has also produced a mixed bag of results reflecting the current state of the industry. (See: BATTLESPACE UPDATE Vol.12 ISSUE 43, 01 November 2012, MAJORS RESULTS SHOW SIGNS OF WEAKNESS – SEQUESTRATION NEXT? By Julian Nettlefold)

Companies mentioned:
ATK
Booz Allen Hamilton Holding Corporation
CACI International
DigitalGlobe
Eaton Corporation
FLIR Systems, Inc.
Harris Corporation
ITT Exelis
Kaman
The KEYW Holding Corporation
L-3 Communications Holdings, Inc.
ManTech
Moog Inc.
RTI International Metals
Stratasys
Triumph Group, Inc.
VSE Corporation

ATK

01 Nov 12. ATK (ATK) reported operating results for the second quarter of its Fiscal Year 2013, which ended on September 30, 2012. Orders for the quarter were $1.3bn, representing a book-to-bill ratio of more than 1.2, driven by strong orders across all business groups. Second quarter year-over-year sales were down 4 percent at $1.1bn. Excluding sales related to the Radford Army Ammunition Plant (RFAAP) and the absence of a favorable contract resolution in FY12, both within the ATK Defense Group, sales increased 2 percent to $1.1bn compared to $1.0bn.

Margins of 10.3 percent in the second quarter were down compared with the prior-year quarter at 13.3 percent. Excluding sales and associated profit from contracts at RFAAP and the absence of the favorable contract resolution, FY12 second quarter margins as adjusted were 11.5 percent. Margin rates were primarily impacted by increased pension expense and sales mix in the ATK Defense Group in the current period. Net income for the quarter was down 19 percent to $65m compared to $80m in the prior-year quarter. Fully-diluted earnings per share were $2.00 compared to $2.43 in the prior-year period. Excluding sales and profit relating to RFAAP, the absence of the prior-year contract resolution, loss on early extinguishment of debt, and the favorable settlement of the IRS audit of the company’s FY09 and FY10 tax returns, as adjusted fully-diluted EPS was $1.86 compared to the prior-year quarter of $1.92.

Second quarter results included key strategic contract wins such as the continued operation and maintenance of the Lake City Army Ammunition Plant, a contract for full-rate production of the Advanced Anti-Radiation Guided Missile, engineering and development as part of the Advanced Concept Booster Development for NASA’s Space Launch System, and expanded aerostructures programs.

“We’re pleased by the strategic programs we’ve secured in the quarter across all of our business groups, reflecting our commitment to provide affordable, innovative products to our customers,” said Mark DeYoung, President and Chief Executive Officer.

Based on this increased confidence, ATK’s Board of Directors has declared a 30 percent increase in its quarterly cash dividend to $0.26 per share. The dividend will be payable December 13, 2012, to stockholders of record as of November 21, 2012.

SEGMENT RESULTS

ATK operates in a three business group structure: the Aerospace Group, the Defense Group and the Sporting Group.

AEROSPACE GROUP

Second quarter sales declined 7 percent to $310m compared to $333m in the prior-year quarter. The decrease primarily reflects lower NASA revenue in the space systems operations division and lower revenue in commercial aerospace structures.

Operating profit in the quarter decreased 2 percent to $37m compared to
$38m in the prior-year quarter, reflecting reduced sales as noted above, partially offset by improved operating performance in the space components division.

DEFENSE GROUP

Sales in the second quarter fell by 8 percent to $484m compared to $528m in the prior-year quarter. Absent sales related to RFAAP and a favorable
contract resolution in the prior year, sales were up 5 percent, driven by increased sales volume in the sm

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