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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended MARCH 31, 1998 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 41-1672694
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 SECOND STREET N.E., HOPKINS, MINNESOTA 55343-8384
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 931-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------- ----------------------------------
Common Stock, par value $.01 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X]
As of May 31, 1998, 12,609,063 shares of the registrant's voting common stock
were outstanding (excluding 1,254,550 treasury shares). The aggregate market
value of such stock held by non-affiliates of the registrant on such date was
approximately $796.5 million.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Annual Report to stockholders for the fiscal year ended March
31, 1998 are incorporated by reference into Parts I, II and IV. Portions of the
definitive Proxy Statement for the 1998 Annual Meeting of stockholders are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Alliant Techsystems Inc. (the "Company" or the "Registrant") was
incorporated as a Delaware corporation and a wholly owned subsidiary of
Honeywell Inc. ("Honeywell") on May 2, 1990, in connection with Honeywell's plan
to spin off to its stockholders the following business operations (the
"Businesses") of Honeywell: Defense and Marine Systems Business; Test
Instruments Division (subsequently renamed Metrum Information Storage); and
Signal Analysis Center. On September 28, 1990, (i) Honeywell declared a
distribution (the "Spin-off") payable to the holders of record of Honeywell
common stock on October 9, 1990 (the "Record Date") of one share of the
Company's common stock, par value $.01 per share (the "Common Stock"), together
with the associated preferred stock purchase rights, for every four shares of
Honeywell common stock outstanding on the Record Date, and (ii) Honeywell
transferred to the Company substantially all of the assets and liabilities of
the Businesses. As a result of the Spin-off, 100% of the Company's Common Stock
was distributed to Honeywell's stockholders on a pro rata basis.
In January 1991, the Company changed its fiscal year end from December
31 to March 31, effective with the fiscal year that began April 1, 1991 and
ended March 31, 1992.
In December 1992, the Company divested the Metrum Information Storage
business.
In October 1993, the Company acquired Accudyne Corporation ("Accudyne")
and Kilgore Corporation ("Kilgore"), and in November 1993, the Company acquired
Ferrulmatic, Inc. ("Ferrulmatic"). Each of these acquisitions was accounted for
as a purchase, and the financial statements included in this report include the
acquired companies' assets and liabilities and their results of operations since
the date of their acquisition. Effective March 31, 1994, Accudyne, Kilgore and
Ferrulmatic were merged into the Company.
In March 1995, the Company acquired certain assets and operations of
the Hercules Aerospace Company division ("HAC") of Hercules Incorporated
("Hercules"). The acquisition of HAC (the "HAC Acquisition") was accounted for
as a purchase, and the financial statements included in this report include the
acquired operations' assets and liabilities and their results of operations
since the date of their acquisition.
In March 1996, Company management, after evaluating its strategic plans
for the future, elected to discontinue its role as an owner of foreign
demilitarization businesses located in the former Soviet republics of Ukraine
and Belarus. The Company subsequently completed its withdrawal from its Belarus
joint venture, and has an agreement with the government of Ukraine under which
the Company intends to transfer its ownership interest in its Ukraine joint
venture to the government of Ukraine or its representative if and when the joint
venture repays its debt to the Company.
In February 1997 the Company divested its Marine Systems Group. The
financial statements included in this report account for this divested business
as a discontinued operation.
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The Company's principal executive offices are located at 600 Second
Street N.E., Hopkins, Minnesota 55343-8384 (telephone number: (612) 931-6000).
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's business is conducted in a single industry segment.
Incorporated herein by reference are the following portions of the Company's
Annual Report to Stockholders (the "Annual Report") for the fiscal year ended
March 31, 1998 ("fiscal year 1998"):
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Note 18 of Notes to Financial Statements..................... 43
(c) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
During fiscal year 1998, the Company conducted its business through
four business groups: Conventional Munitions, Defense Systems, Space and
Strategic Systems, and Emerging Business. Effective April 1, 1998, the Company
reorganized its business into three business groups: Conventional Munitions,
Defense Systems, and Space and Strategic Systems. The description of the
Company's business that follows reflects the reorganized business structure
currently in effect.
CONVENTIONAL MUNITIONS
Conventional Munitions supplies, designs and develops medium caliber
ammunition, tank ammunition, munitions propellants, commercial gun powders,
solid rocket propulsion systems, flares, warheads, and composite structures for
the U.S. and allied governments as well as for commercial applications. It
operates in four business units: Ammunition Systems, Ordnance, Tactical
Propulsion and Kilgore Operations.
AMMUNITION SYSTEMS. The Ammunition Systems business unit produces,
designs, and develops medium caliber ammunition, tank ammunition, submunitions,
and advanced warhead systems for missiles and other weapon systems.
The Company is a leading supplier of medium caliber ammunition and
fuzes. Production programs include 25mm Bushmaster rounds for the U.S. Army's
Bradley Fighting Vehicle, the Marine Corps Light Armored Vehicle, the U.S.
Navy's shipboard defense systems, and platforms of the U.S. allies; the PGU-32
25mm round for the AV-8B aircraft; PGU-38 25mm enhanced combat rounds for the
U.S. Air Force's AC-130 gunship; Lightweight 30mm ammunition for the Apache
helicopter; and GAU-8/A 30mm family of armor-piercing, high-explosive
incendiary, and target practice rounds currently used by the U.S. Air Force's
A-10 aircraft. Development efforts include improving the performance of medium
caliber ammunition for the advanced threats of the future. The Company is also
the sole source producer of the M758/M759 fuze for medium caliber ammunition.
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In the tank ammunition area the Company produces and develops tactical
and training tank rounds which are used for the M1A1/M1A2 Abrams tanks of the
U.S. Army, Army Reserve, National Guard, Marine Corps, and U.S. allies. Such
rounds include the M830A1 multi-purpose round and the M831A1 and M865 training
rounds. The Company is the sole producer of the M830A1 multi-purpose round. The
Company is one of two suppliers to the U.S. Government for the M831A1 and M865
training rounds. Opportunities being pursued include advanced kinetic-energy
rounds, developed for future threats, and rounds that will meet specifications
for international sales.
In submunitions and advanced warhead systems, the Company currently has
contracts for the production of warheads for the following missiles: Hellfire,
Longbow and the Advanced Medium Range Air-to-Air Missile ("AMRAAM"), and a
contract for the development of the Brimstone warhead. The Company has teamed
with Raytheon in pursuit of a contract for the ordnance module for the
Follow-on-to-TOW program.
The business unit is also completing performance of certain ordnance
reclamation services contracts transferred from the former Emerging Business
Group. These contracts are with the Naval Underseas Warfare Center in Newport,
Rhode Island, to dispose of lithium-filled boilers that power the MK50 torpedo,
and with the U.S. Army at Rock Island, Illinois, for reclamation of six-inch and
eight-inch gun projectiles and M117 bombs.
Ammunition Systems operations are conducted at Hopkins, Elk River and
New Brighton, Minnesota, Totowa, New Jersey, and Wilmington, Illinois.
ORDNANCE. The Ordnance business unit has the capability to manufacture
annually over 100 million pounds of solid extruded propellant for ammunition and
rockets for the U.S. and foreign military services. The unit, through New River
Energetics, Inc., a wholly owned subsidiary, also manufactures and commercially
markets gun powders for both reloaders and manufacturers of sporting ammunition.
Primary production programs include propellants for multiple training
and war reserve 120mm tank rounds, for artillery propelling charges, and for
30mm ammunition and 25mm ammunition. The Company is also the sole source
supplier of Mk90 propellant grains for use in the HYDRA 70 rocket and launch
motors for the TOW II missile.
In addition to the military programs, the Company produces a wide range
of commercial gun powders and has activated stand-by military capacity for
commercial chemical commodity sales.
Development opportunities being pursued include improved smokeless gun
powders, modular charges for advanced artillery systems, and high explosive
energetic materials used in munitions.
Ordnance operations are conducted primarily at Radford Army Ammunition
Plant in Radford, Virginia, which is also the U. S. Army's Group Technology
Center for propellant development and production. The Company has also been
actively involved in relocating Company operations and several unrelated
commercial businesses onto the Radford facility under the Army Retooling and
Manufacturing Support Act (ARMS) initiative. The Ordnance business
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unit also manages the Sunflower Army Ammunition Plant in DeSoto, Kansas, where
it seeks commercial tenants for the property and provides general plant
management services, including maintenance or demolition of inactive facilities,
security and fire protection.
TACTICAL PROPULSION. The Tactical Propulsion business unit supplies and
develops solid propulsion systems for various U.S. Department of Defense ("DoD")
tactical weapons. Principal products include solid rocket motors, gas generators
and tactical missile warheads for the U.S. Army, Navy and Air Force. It also
develops and supplies high-strength, low-weight structures made of metals and
composites for use in products such as missile launch tubes and critical parts
for ammunition and military aircraft.
Current production programs include propulsion systems for AMRAAM,
AGM-130, Sparrow, Sensor Fuzed Weapon ("SFW"), Hellfire II/Longbow, Maverick and
TOW II. AMRAAM and SFW are the unit's largest production programs and have firm
funding support through the end of the decade. AGM-130 is an air-to-ground
stand-off attack missile used by the U.S. Air Force. Boeing North American is
the sole prime contractor for AGM-130 and the Company is the sole source
propulsion supplier. The SFW system is presently in Full Rate Production and has
become one of the unit's largest programs. The Company is the sole source
supplier on the SFW submunition propulsion deployment system. The unit has been
the U.S. Army's primary supplier of flight motors for TOW II since the program's
inception in 1981. Production programs in related areas include warheads for the
Maverick and AMRAAM missile systems, metal cases for the U.S. Army's Tactical
Missile System ("ATACMS") surface-to-surface missile, gas generators for the
Trident II (D5) and Tomahawk Cruise missiles, composite launch tubes for the
Army's Javelin anti-tank missile, and composite overwrapped pressure vessels for
use on satellites.
Major development programs include the propulsion systems for the
Evolved Sea Sparrow Missile ("ESSM"), the AIM-9X Evolved Sidewinder, the AMRAAM
Propulsion Enhancement Program ("PEP"), the Predator anti-tank system
("Predator"), and the advanced smart 120mm kinetic energy tank round
("TERM-KE"). The Company recently completed successful development tests on the
ESSM and AMRAAM PEP programs. The Company is co-developing the propulsion system
for the ESSM Program which is a NATO program involving 13 nations. Raytheon
Systems Company is the prime contractor. The Company is the sole developer of a
higher performance AMRAAM rocket motor, under contract from the U.S. Navy, with
production planned to commence in U.S. Government fiscal year 1998. The prime
contractor on Predator is Lockheed Martin Corporation, and the prime contractor
on TERM-KE is Alliant Defense Electronics Systems, Inc., a subsidiary of the
Company. The Company is the sole propulsion source on both Predator and TERM-KE.
The Company is developing and producing composite structures for the F-22
fighter being developed by Lockheed Martin Corporation. Other new business
opportunities being pursued include the Standard Missile Second Stage, the
Beyond Visual Range Air-to-Air Missile, and Follow-on-to-TOW.
The Tactical Propulsion business unit is located in Rocket Center, West
Virginia.
KILGORE OPERATIONS. The Kilgore Operations business unit produces and
develops infrared countermeasure flares, 20mm ammunition, and a wide spectrum of
pyrotechnic devices for the U.S. and foreign governments. It also makes
pyrotechnics for various commercial activities.
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Kilgore is the world's leading supplier of infrared countermeasure
products. Production programs include the MJU-7A/B, M206, MJU-10/B, MJU-32/B and
MJU-38/B U.S. countermeasures. In addition, Kilgore-designed flare products,
such as the 55mm KC-004/A flares, are routinely provided for export. Kilgore is
currently manufacturing an Israeli flare design under a Foreign Military Funding
contract. Kilgore has manufactured over six (6) million infrared flares over the
last decade. Kilgore was the original designer for the MJU-10/B and first
sequenced version of the MJU-7 and 1x1 inch flares. Kilgore has patented a
variety of advanced countermeasure designs. On-going development efforts include
sole source supplier to Lockheed Martin for the infrared flares for the F-22
aircraft and performing development efforts for advanced flares for the U.S.
Navy. Kilgore is also the only current producer of the MK 186 TORCH shipboard
countermeasure.
Kilgore has been one of the two suppliers for the U.S. Navy Phalanx
MK149 20mm ammunition as well as an international supplier of 20mm ammunition.
Current production programs include the M55 TP ammunition. New business
opportunities include the M56 high explosive series.
Over 100 different pyrotechnic products have been produced by Kilgore.
The pyrotechnic product lines include impulse cartridges, marine location
markers, explosive squibs, colored smoke and signaling devices, screening
devices, and commercial day/night signals. Current programs include efforts for
NATO and non-NATO countries for improved signaling and screening devices as well
as standard pyrotechnic products.
Kilgore also supports a variety of intra-company production programs
such as primers and tracers for tank ammunition, flashtubes for the GAU-8/A, and
critical components for the TERM-KE program.
Kilgore operations are conducted in Toone, Tennessee.
DEFENSE SYSTEMS
Defense Systems develops and supplies smart munitions, fuzes,
electronic systems, unmanned vehicles, and batteries through four business
areas: Tactical Systems, Defense Electronics Systems, Unmanned Vehicle Systems
and Power Sources Center.
TACTICAL SYSTEMS. The Tactical Systems business area develops and
produces electronics and fuzes, demolition munitions, weapons systems, guided
weapons systems, and guided weapons.
In the electronics and fuzing area, the Company develops and
manufacturers stand-alone fuzes for mortar, artillery, and rocket munitions and
bombs; electronic systems; and battlefield management systems. Sole source fuze
production programs are the M734/M745 fuzes for mortar rounds; and the M732A2
proximity fuze for artillery. The Company is also developing the XM773
Multi-Option Fuze Artillery, which provides point detonation, delay, variable
time, and proximity functions. Other development and production programs include
the U.S. Air Force's Multiple Event Hard Target Fuze program and the FMU-139
Fuze program. During fiscal year 1998, the Company acquired part of Motorola's
military fuze business, which develops and manufactures high-quality electronic
fuzes for projectiles, air-delivered weapons and penetrating weapons. In
electronics, the
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Company has developed and is producing an automatic fire control system and
integrated on-board electronics for the Paladin self-propelled Howitzer, which
provides the Paladin with a "shoot and scoot" capability for increased
survivability and effectiveness. In the battlefield monitoring systems, the
Company has developed a Remote Sentry system that utilizes proprietary acoustic
sensor technology in combination with other sensors, signal processing and
hostile forces well behind enemy lines.
In the demolition munitions area, the Company develops and produces
munition systems, demolitions, and air delivered systems. In munition systems
the Company is currently working on advanced systems for delivery from
artillery, trucks, tracked vehicles and helicopters. Primary production programs
are the Volcano system, a modular system delivered from ground and air
platforms, and Shielder, a Vehicle-Launched Smart Anti-tank Munition System, for
which the Company is systems prime to the U.K.'s Ministry of Defence. The
Company is pursuing several other international opportunities in this area. The
Company is also producing the Selectable Lightweight Attack Munition (SLAM), a
hand-emplaced anti-materiel munition with multiple activation modes for the U.S.
Special Forces and the U.S. Army. The Company has developed the Penetration
Augmentation Munition (PAM) for applications such as concrete bridge abutments
and the Badger Fighting Position Excavator ("Badger") for U.S. and international
applications. The Badger allows the soldier to significantly reduce foxhole
digging time while increasing safety and effectiveness. In air-delivered
systems, the Company is the sole producer of the Gator air-delivered scatterable
munition system and provides tactical munitions dispensers (TMDs) for the
Combined Effects Munition, Gator and the Sensor Fuzed Weapon programs.
In the weapon systems area, the Company is developing the Objective
Individual Combat Weapon ("OICW") and is jointly pursuing the Cased Telescoped
Weapon System ("CTWS") with foreign partners. OICW is a lightweight,
shoulder-fired weapon to selectively replace the M16 rifle/M203 grenade
launcher. The OICW is the lethality element of the Force XXI Land Warrior. The
system consists of a combinatorial weapon, ballistic fire control system and
thermal sight, and both a 20mm high explosive ("HE") bursting munition with a
remote autonomous fuze and a 5.56mm kinetic energy round. The Company is
responsible for systems integration and development of the HE ammunition and won
the downselect phase of the contract in March 1998. CTWS is a non-developmental
item consisting of a medium caliber gun, ammunition and an ammunition handling
system. It is a candidate weapon system for the Future Scout and Cavalry System,
the Advanced Amphibious Assault Vehicle and the U.K.'s Tracer vehicle programs.
In the guided weapons area, the primary program is the Sense and
Destroy Armor ("SADARM") munition. SADARM is being developed by the Company
together with the prime contractor, Aerojet (a business segment of GenCorp.,
Inc.). SADARM has entered low rate initial production, and is presently the only
tube artillery smart munition in production. The SADARM munition is used on
155mm Howitzers and combines millimeter wave and infrared sensor and signal
processing technologies. In addition, SADARM is currently being evaluated for
potential application to air and rocket delivery systems. The Company is also
participating in a Northrop-Grumman competitive program to develop an improved
seeker for the Brilliant Anti Tank ("BAT") munition Preplanned Product
Improvement (BAT P3I) Program. The objective of the program is to demonstrate
systems performance against cold/stationary tank and armored combat vehicle
units and sparsely located Surface to Surface Transporter Erector Launcher
vehicles. BAT is a hit-to-kill guided submunition intended for delivery on the
battlefield by the
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ATACMS missile. Downselect for the Engineering/Manufacturing Development (EMD)
phase is scheduled during the fiscal year ending March 31, 1999 ("fiscal year
1999").
New business opportunities being pursued include Advanced Fuzing,
Sensors and Seekers for Smart Munitions, Scatterable Anti-Tank Systems, Next
Generation Alternatives to Land Mines and Advanced Gun Weapon Systems utilizing
case telescoped ammunition.
Tactical Systems operations are conducted at Hopkins and New Brighton,
Minnesota, and Janesville, Wisconsin.
DEFENSE ELECTRONICS SYSTEMS. The Defense Electronics business area is
conducted through Alliant Defense Electronics Systems, Inc., a wholly-owned
subsidiary of the Company. Principal products include millimeter wave and laser
radar ("LADAR") seeker technology and products, smart weapon systems, missile
warning systems, electronic warfare systems, test equipment, chaff and chaff
dispensing systems, and advanced imaging and document management software.
Principal customers are U.S. and foreign governments. Software capabilities are
marketed to both commercial and government customers.
Major programs include the XM-1007 smart tank cartridge, the AAR-47
Missile Warning System, the Common Munitions BIT/Reprogramming Equipment
("CMBRE"), Demonstration of Advanced Solid State Laser Radar (DASSL), and the
Analog-to-Digital Adaptable Recorder Input-Output (ADARIO).
The XM-1007 is currently in development for application to a Tank
Extended Range Munition (TERM) requirement that includes beyond line of sight
missions using scout vehicles for target location and target designation. The
Company is the sole development prime contractor for the XM-1007. Production is
anticipated to begin in 2006. The Company is bidding the XM-1007 design in a
competitive procurement for an Army-sponsored advanced technology application
program.
The AAR-47 Missile Warning system is a passive electro-optic threat
warning device used to protect low, slow flying helicopters and fixed wing
aircraft against attack from ground-to-air-missiles. The Company completed a
production contract for the system and is currently engaged in a Central
Processor Unit ("CPU") upgrade (both hardware and software) for improved
probabilities of detection, longer warning times, and lower false alarm rates.
Production deliveries of the upgraded CPU will begin in fiscal year 1999. The
Company will enter a competitive bid for an upgraded, higher performance sensor
to include laser warning capability early in fiscal year 1999.
The CMBRE is a portable field tester with a common interface to support
the growing U.S. inventory of smart weapons. The Company completed development
ahead of contract schedule and shipped the first production units in fiscal year
1998. Fiscal year 1999 production is on-going and is expected to continue for
eight years.
LADAR is the preferred seeker technology for future precision guided
weapons surpassing Imaging InfraRed ("IIR") and Synthetic Aperture Radar
("SAR"). It combines the active ranging capability of SAR with the optical
resolution of IIR at a cost less than either. The Company, teamed with prime
contractor, Raytheon Systems, is nearing completion of phase two
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of a four phase technology demonstration program for the U.S. Air Force. The
team intends to pursue a competitive program for the Low Cost Autonomous Attack
System (LOCAAS) during fiscal year 1999.
The Company, through its Advanced Imaging Strategies, provides a family
of software products known as DocMaestro(TM). These are state-of-the-art imaging
and document management tools that provide easy access and navigation to and
through electronic documents with automatic hyperlinks, and electronic documents
on demand through the internet/intranet.
New business opportunities being pursued include Sensors and Seekers
for Smart Munitions and guided projectile systems.
Defense Electronics Systems operations are conducted in Clearwater,
Florida.
UNMANNED VEHICLE SYSTEMS. The Unmanned Vehicle Systems business area is
the developer and producer of the Outrider(TM) Tactical Unmanned Aerial Vehicle
system. The Outrider system consists of four air vehicles, two ground control
stations, one air vehicle trailer, one auxiliary trailer, and one remote video
terminal. Outrider is designed to be readily deployed from land or ship deck. No
external pilot is required--takeoff and landing are completely autonomous.
Outrider provides real-time reconnaissance, surveillance, and target acquisition
information for the armed forces using the system. The military utility
assessment for Outrider is expected to be completed in the third quarter of
1998, and a decision regarding whether to proceed with low rate initial
production is expected in the fall of 1998.
Unmanned Vehicle Systems is also supporting the development of the
Tactical Control System (TCS), which is a DoD program to provide joint
warfighters with a surface command, control, communication and data
dissemination systems for unmanned aerial vehicles.
Unmanned Vehicle Systems operations are conducted in Hopkins, Minnesota
and Hondo, Texas.
POWER SOURCES CENTER. The Power Sources Center business area develops
and manufactures specialized disposable and rechargeable batteries for use in
the Company's own products, and for U.S. and foreign military and aerospace
customers.
Its principal disposable products are lithium reserve batteries, which
are used in such applications as anti-tank mines and fuzes that require
long-term storage capacity. The Company is developing a new miniature battery
production line capable of producing six million batteries per year for
artillery fuzes. The Company also produces specialty batteries, such as
space-qualified battery modules for space probes such as Galileo and Huygens.
Its principal rechargeable products are lithium-ion polymer batteries,
which offer very high energy density and packaging flexibility for use where
weight and space may be limited or where unique operational configurations are
required. The Company is also developing a flexible manufacturing line for
"wearable" lithium-ion polymer batteries for the U.S. Army. The Company has also
been awarded a contract by the U.S. Navy to supply large rechargeable batteries
for underwater vehicles. New business opportunities being pursued include high
density flexible power sources.
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Power Sources Center operations are conducted at Horsham, Pennsylvania.
SPACE AND STRATEGIC SYSTEMS
Space and Strategic Systems designs and produces solid rocket
propulsion systems for space launch vehicles, strategic missile systems,
provides reinforced composite structures and components for aircraft, spacecraft
and space launch vehicles, and provides safety management services.
The space propulsion business represents the largest portion of the
group's sales base and includes a broad product portfolio encompassing all
vehicle payload classes (small to heavy lift). The Company is presently
producing solid propulsion systems for Titan IVB, Delta II, Delta III,
Pegasus(R), and Taurus(R) launch vehicles. The Company produces the Titan SRMU
space booster for Lockheed Martin Corporation. The SRMU serves as the strap-on
propulsion system (two per vehicle) for the U.S. Air Force upgraded Titan IVB
heavy-lift launch vehicle. The Company also has a follow-on contract for Titan
launch operations support which extends into 2002. Delta II is a medium-lift
expendable launch vehicle developed for both government and commercial
applications. The Delta II launch vehicle family employs solid strap-on boosters
in multiple configurations using three, four and nine motors, all of which are
produced by the Company for The Boeing Company. During fiscal year 1998, Boeing
awarded the Company additional production quantities for Delta II. During fiscal
year 1998, the Company also completed development and is now producing, under
contract to Boeing, a new, larger strap-on GEM booster for the new, enhanced
medium-lift Delta III expendable launch vehicle. Each Delta III launch vehicle
employs nine solid strap-on boosters, all of which are produced by the Company.
The Pegasus(R) air launched vehicle is used to deploy small U.S. Government,
foreign government and commercial payloads. Each Pegasus(R) vehicle contains
three solid propulsion stages, all of which are produced by the Company for
Orbital Sciences Corporation. The Pegasus(R) motors are also used as upper
stages on Orbital Sciences' Taurus(R) ground launched vehicle. The Taurus(R) is
also used to deploy small U.S. Government and commercial payloads. During fiscal
year 1998, Orbital Sciences awarded the Company contracts for additional
quantities of Pegasus(R) and Taurus(R) motors that will extend production into
1999.
The strategic propulsion business, which now consists of one large
production program and various operational service contracts, has been involved
with substantially all of the land and sea based strategic propulsion systems
since their inception. Currently, the principal strategic propulsion production
program is Trident II (D5), a submarine-launched intercontinental ballistic
missile composed of three solid propulsion stages. The Company, through a joint
venture with the Thiokol Propulsion unit of Cordant Technologies Inc., developed
and produced the first and second propulsion stages of the Trident II (D5)
missile under a contract with Lockheed Martin Corporation. In 1997, the joint
venture completed the qualification process to also produce the third stage of
the missile. In addition to the Trident II production contract, the Company has
contracts with Lockheed Martin to support both the U.S. Navy's existing fleet of
Trident I (C4) missiles and the operational D5 units. The Company developed and
produced the Peacekeeper third stage motor for the U.S. Air Force, and provides
some continuing aging and surveillance services support to the missile system.
The Company also continues to provide surveillance services to the U. S. Air
Force for Minuteman third stage motors it previously produced.
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The composite structures operation designs and fabricates a broad range
of structures from carbon/carbon, graphite, aramid, and glass fiber reinforced
composite materials. Applications include instrument benches and dimensionally
stable assemblies for satellites, space based antennae, aircraft and engine
components, space launch vehicle tanks and structures, and other specialty
structures. Target markets include both government and commercial users. Key
programs are concentrated primarily in the commercial and government satellite,
launch vehicle and aircraft segments. The Company is under contract to Lockheed
Martin to develop composite cryogenic liquid hydrogen fuel tanks for the NASA
X-33 Phase II reusable launch vehicle. It is also working jointly with Lockheed
Martin to build the fiber-placed liquid hydrogen tank for the full-scale
operational VentureStar(TM) when production begins in 2000. In addition, the
Company is presently under contract to develop the inlet bypass offtake screens
and composite pivot shafts on the U.S. Air Forces' F-22 fighter aircraft. The
Company is also under contract to produce a counterbalance mechanism for the
C-17 transport aircraft and the production of composite door springs for the
Boeing Company's 767 aircraft. Other programs and opportunities include
additional aircraft and engine structures, other components and assemblies for
spacecraft, military land vehicles, and various structures for reusable and
expendable launch vehicles.
The safety management services business assists customers in analyzing
and safeguarding against potential manufacturing hazards and in meeting both
internal and external safety requirements. Primary emphasis is placed on meeting
OSHA and EPA regulatory compliance.
Space and Strategic Systems operations are conducted in Magna and
Clearfield, Utah.
RAW MATERIALS
Key raw materials used in the Company's operations include aluminum,
steel, steel alloys, copper, depleted uranium, graphite fiber, hydroxy
terminated polybutadiene, epoxy resins and adhesives, nitrocellulose,
diethylether, x-ray film, plasticizers and nitrate esters, and ammonium
perchlorate. The Company also purchases chemicals, electronic,
electro-mechanical and mechanical components, subassemblies, and subsystems
which are integrated with the Company's own manufactured parts for final
assembly into finished products and systems.
The Company closely monitors its sources of supply in order to assure
an adequate supply of raw materials and other supplies needed in its
manufacturing processes. U.S. Government contractors like the Company are
frequently limited to procuring materials and components from sources of supply
approved by the DoD. In addition, as defense budgets contract, suppliers of
specialty chemicals and materials consider dropping low volume items from their
product lines, which may require (and in the past has required) qualification of
new suppliers for raw materials on key programs.
The supply of ammonium perchlorate, a principal raw material used in
the Company's operations, has been limited to two third-party sources which
supply the entire domestic solid propellant industry. These two suppliers have
recently entered into an agreement to combine their ammonium perchlorate
businesses. Any disruption in the Company's supply of ammonium perchlorate could
have a material adverse effect on the Company's results of operations or
financial condition.
10
The Company also presently relies on one primary supplier for its
graphite fiber, which is used in the production of composite materials. Although
other sources of fiber exist, the addition of a new supplier would require the
Company to qualify the new sources for use on the Company's programs. Any
prolonged disruption in the supply of this material or any delay as a result of
the qualification of a new source could have a material adverse effect on the
Company's results of operations or financial condition.
Current suppliers of some insulation materials used in rocket motors
have announced plans to close manufacturing plants and discontinue product
lines. As a result, the Company will need to find replacement materials or new
sources of supply for these materials, which are polymers and neoprene used in
EPDM rubber insulation, and aerospace rayon used in nozzles. Difficulty finding
replacement materials or new sources of supply could have a material adverse
effect on the Company's results of operations or financial condition.
MANUFACTURING AND HANDLING OF EXPLOSIVE MATERIALS
Certain of the Company's products, including those relating to
propulsion systems, propellants, ammunition and artillery systems, involve the
manufacture and/or handling of a variety of explosive materials. From time to
time in the past, such manufacturing and/or handling has resulted in explosive
incidents which have temporarily shut down or otherwise disrupted certain of the
Company's manufacturing processes, thereby causing production delays. There can
be no assurance that the Company will not experience such incidents in the
future or that any such incidents will not result in production delays or
otherwise have a material adverse effect on the Company's results of operations
or financial condition.
MAJOR CUSTOMERS - U.S. GOVERNMENT
The Company's sales are predominantly derived from contracts with
agencies of, and prime contractors to, the U.S. Government. The various U.S.
Government customers, which include the U.S. Army, Navy and Air Force, exercise
independent purchasing decisions, and sales to the U.S. Government generally are
not regarded as constituting sales to one customer, but instead, each
contracting entity is considered to be a separate customer.
U.S. Government sales, including sales to U.S. Government prime
contractors, for fiscal year 1998, fiscal year 1997 and fiscal year 1996, were
$879.1, $884.7 million, and $887.5 million, respectively. During fiscal year
1998, approximately 82 percent of the Company's sales were derived from
contracts with the U.S. Government or U.S. Government prime contractors.
Approximately 50% of the Company's fiscal year 1998 net sales were
derived from prime contractor activities and approximately 50% from
subcontractor activities. Approximately 43% of such sales were derived from
business with the U.S. Army, 20% from the U.S. Air Force, 11% from the U.S.
Navy, and 26% from other government, commercial or international sources. The
Company's top ten contracts accounted for approximately 61% of its fiscal year
1998 net sales. During fiscal year 1998, sales to each of Lockheed Martin
Corporation and The Boeing Company and their respective affiliates accounted for
more than 10% of the Company's sales. These sales related to multiple contracts
and, in the case of Boeing, included commercial contracts.
11
This significant reliance upon contracts related to U.S. Government
programs entails inherent risks, including risks particular to the defense
industry, which are summarized below.
REDUCTIONS OR CHANGES IN MILITARY EXPENDITURES. The overall U.S.
defense budget declined in real terms from the mid-1980's through the early
1990's. Although U.S. defense budgets have recently stabilized, future levels of
defense spending cannot be predicted with certainty and further declines in U.S.
military expenditures could materially adversely affect the Company's results of
operations and financial condition. The impact of possible further declines in
the level of defense procurement on the Company's results of operations and
financial condition will depend upon the timing and size of the changes and the
Company's ability to mitigate their impact with new business, business
consolidations or cost reductions. The loss or significant curtailment of a
material program in which the Company participates could materially adversely
affect the Company's future results of operations and financial condition.
CONTRACT TERMINATION. All of the Company's U.S. Government contracts
are, by their terms, subject to termination by the U.S. Government either for
its convenience or in the event of a default by the contractor. Cost-plus
contracts provide that, upon termination, the contractor is entitled to
reimbursement of its allowable costs, and, if the termination is for
convenience, payment of a total fee proportionate to the percentage of the work
completed under the contract. Fixed-price contracts provide for payment upon
termination for items delivered to and accepted by the U.S. Government, and, if
the termination is for convenience, for payment of fair compensation for work
performed plus the costs of settling and paying claims by terminated
subcontractors, other settlement expenses, and a reasonable profit on the costs
incurred or committed. If a contract termination is for default, however, (i)
the contractor is paid an amount agreed upon for completed and partially
completed products and services accepted by the U.S. Government, (ii) the U.S.
Government is not liable for the contractor's costs with respect to unaccepted
items, and is entitled to repayment of advance payments and progress payments,
if any, related to the terminated portions of the contract, and (iii) the
contractor may be liable for excess costs incurred by the U.S. Government in
procuring undelivered items from another source.
Termination for convenience provisions provide only for the recovery by
the Company of costs incurred or committed, settlement expenses and profit on
work completed prior to termination. Termination for default provisions may
render the contractor liable for excess costs incurred by the U.S. Government in
procuring undelivered items from another source.
LOSS OF APPROPRIATIONS. In addition to the right of the U.S. Government
to terminate contracts for convenience or default, such contracts are
conditioned upon the continuing availability of Congressional appropriations.
Congress usually appropriates funds for a given program on a fiscal year basis
even though contract performance may take more than one year. Consequently, at
the outset of a major program, the contract is usually partially funded, and
additional monies are normally committed to the contract by the procuring agency
only as appropriations are made by Congress for future fiscal years. In
addition, most U.S. Government contracts are subject to modification in the
event of changes in funding. Any failure by Congress to appropriate additional
funds to any program in which the Company participates, or any contact
modification as a result of funding changes could materially delay or terminate
such program and, therefore, have a material adverse effect on the Company's
results of operations or financial condition.
12
PROCUREMENT AND OTHER RELATED LAWS AND REGULATIONS. The Company is
subject to extensive and complex U.S. Government procurement laws and
regulations. These laws and regulations provide for ongoing U.S. Government
audits and reviews of contract procurement, performance and administration.
Failure to comply, even inadvertently, with these laws and regulations and with
laws governing the export of munitions and other controlled products and
commodities, and any significant violations of any other federal law, could
subject the Company or one or more of its businesses to potential contract
termination, civil and criminal penalties, and under certain circumstances,
suspension and debarment from future U.S. Government contracts for a specified
period of time. Any such actions could have a material adverse effect on the
Company's results of operations or financial condition.
Under U.S. Government regulations, the Company, as a government
contractor, is subject to audit and review by the U.S. Government of performance
of, and the accounting and general practices relating to, U. S. Government
contracts. The costs and prices under such contracts may be subject to
adjustment based upon the results of such audits. To date, such audits have not
had a material effect on the Company's results of operations or financial
condition; however, no assurance can be given that future audits will not have a
material adverse effect on the Company's results of operations or financial
condition.
In addition, licenses are required from U.S. Government agencies for
export from the United States of many of the Company's products. Accordingly,
certain of the Company's products currently are not permitted to be exported.
COMPETITIVE BIDDING. The Company obtains military contracts through
either competitive bidding or sole-sourced procurement. Contracts from which the
Company has derived and expects to derive a significant portion of its sales
were or will be obtained through competitive bidding in which, in many
instances, numerous bidders participated or will participate. There can be no
assurance that the Company will continue to be successful in having its bids
accepted or, if accepted, that awarded contracts will be profitable. In
addition, inherent in either procurement process is the risk that if a bid is
submitted and a contract is subsequently awarded, actual performance costs may
exceed the projected costs upon which the submitted bid or contract price was
based. To the extent that actual costs exceed the projected costs on which bids
or contract prices were based, the Company's profitability could be materially
adversely affected.
TYPES OF CONTRACTS. The Company's U.S. Government business is performed
under cost-plus contracts (cost-plus-fixed-fee, cost-plus-incentive-fee, or
cost-plus-award fee) and under fixed-price contracts (firm fixed-price,
fixed-price incentive, or fixed-price-level-of-effort), which accounted for the
following portions of the Company's U.S. Government business in fiscal year
1998:
13
COST-PLUS CONTRACTS:
Cost-plus-fixed-fee 20%
Cost-plus-incentive-fee/cost-plus-award-fee 17% 37%
FIXED-PRICE CONTRACTS:
Firm fixed-price 55%
Fixed-price incentive/fixed-price-level-of-effort 8% 63%
----
TOTAL .................................................. 100%
Cost-plus-fixed-fee contracts provide for reimbursement of costs, to
the extent that such costs are allowable, and the payment of a fixed fee.
Cost-plus-incentive-fee contracts and cost-plus-award-fee contracts provide for
increases or decreases in the contract fee, within specified limits, based upon
actual results as compared to contractual targets for such factors as cost,
quality, schedule and performance.
Under firm fixed-price contracts, the Company agrees to perform certain
work for a fixed price and, accordingly, realizes all the benefit or detriment
resulting from decreases or increases in the costs of performing the contract.
Fixed-price incentive contracts are fixed-price contracts providing for
adjustment of profit and establishment of final contract prices by a formula
based on the relationship which final total costs bear to total target cost. The
final contract price under a fixed-price incentive contract is a function of
cost, which may be affected by schedule and performance. Fixed-price-level-of-
effort contracts are generally structured with a fixed price per labor hour
subject to the customers' labor hour needs up to a contract cap. All fixed-price
contracts present the inherent risk of unreimbursed cost overruns which could
have a material adverse effect on the Company's results of operations or
financial condition. In addition, certain costs, including certain financing
costs, portions of research and development costs, and certain marketing
expenses related to the preparation of competitive bids and proposals and
international sales, are not reimbursable under U.S. Government contracts. The
U.S. Government also regulates the methods under which costs are allocated to
U.S. Government contracts.
OTHER. In addition, the Company, like all defense contractors, is
subject to risks associated with uncertain cost factors related to scarce
technological skills and components, the frequent need to bid on programs in
advance of design completion (which may result in unforeseen technological
difficulties and/or cost overruns), the substantial time and effort required for
relatively unproductive design and development, design complexity, rapid
obsolescence and the potential need for design improvement.
COMPETITION
The Company encounters intense competition for its contracts from
numerous other companies. Some of these companies, particularly those
competitors outside the Company's core business areas, have financial,
technical, marketing, manufacturing, distribution and other resources
substantially greater than those of the Company. The Company's ability to
compete for these contracts depends to a large extent on the effectiveness and
innovativeness of its research and development programs, its ability to offer
better program performance than its competitors at a lower cost, and its
readiness in facilities, equipment and personnel to undertake the programs for
which it competes. In some instances, programs are sole sourced or work directed
by the U.S. Government to a single supplier. In such cases, there may be other
suppliers who have the
14
capability to compete for the programs involved, but they can only enter or
reenter the market if the U.S. Government should choose to reopen the particular
program to competition. The Company's principal sole source contracts are for
the following programs: Trident (D5) missile (through the joint venture with the
Thiokol Propulsion unit of Cordant Technologies Inc.), Titan IV SRMU space
boosters, AGM-130 and SFW propulsion systems, M830A1 multi-purpose tank
ammunition round, Volcano mine and M758 fuze for medium caliber ammunition, the
M732A2 proximity fuze, and the M734/M735 mortar fuzes.
The Company generally faces competition from a number of competitors in
each business area. However, Primex Technologies, Inc. is the principal
competitor in the Conventional Munitions Ammunition Systems business area for
medium caliber ammunition and tank ammunition, and the sole domestic competitor
for commercial gun powders produced by the Conventional Munitions Ordnance
business unit. The Company shares the production of tank ammunition training
rounds with Primex, and Primex is currently the sole source for the M829A2
Kinetic Energy round, while the Company is the sole source for the M830A1
multi-purpose round. The Company also shares the 25mm and 30mm medium-caliber
ammunition market with Primex, its sole domestic competitor.
The downsizing of the munitions industrial base has resulted in a
reduction in the number of competitors, through consolidations and departures
from the industry. This has reduced the number of competitors for some programs,
but has strengthened the capabilities of some of the remaining competitors. In
addition, it is possible that there will be increasing competition from the
remaining competitors in business areas where they do not currently compete,
particularly in those business areas dealing with electronics.
NOVATION OF U.S. GOVERNMENT CONTRACTS
As required by federal procurement regulations providing for the U.S.
Government to recognize the Company as the successor in interest to Honeywell on
contracts between Honeywell and the U.S. Government, Honeywell has entered into
novation agreements with the Company and the U.S. Government which provide,
among other things, for Honeywell to directly or indirectly guarantee or
otherwise become liable for the performance of the Company's obligations under
such contracts (the "Guaranteed Contracts") which were transferred to the
Company in connection with the Spin-off. Such novation agreements provide that
the Company assumes all obligations under the Guaranteed Contracts and that the
U.S. Government recognizes the transfer of such Guaranteed Contracts and related
assets. While these Guaranteed Contracts are scheduled to be performed over a
period of time, it is not expected that they will be fully and finally
discharged for a number of years. The Company has agreed to perform all of its
obligations under each Guaranteed Contract and to indemnify Honeywell against
any liability Honeywell may incur under the novation agreements by reason of any
failure by the Company to perform such obligations.
The Company has entered into similar novation agreements in connection
with the divestiture of Metrum Information Storage ("MIS") and the former Marine
Systems Group. In these cases, however, the Company, as the seller, has
guaranteed performance of the buyer's obligations under the contracts
transferred to the buyer, and the buyers of MIS and Marine Systems,
respectively, rather than the Company, have the performance and indemnification
obligations described in the last sentence of the preceding paragraph.
15
The Company and Hercules have agreed to use all reasonable efforts to
enter into novation agreements with the U.S. Government, as required by federal
procurement regulations applicable to contracts between or relating to HAC and
the U.S. Government (the "Acquired Government Contracts") which were acquired by
the Company in the HAC Acquisition. Such novation agreements are expected to
provide, among other things, that the Company assumes all obligations under the
Acquired Government Contracts and that the U.S. Government recognizes the
transfer to the Company of the Acquired Government Contracts and related assets.
The Acquired Government Contracts are scheduled to be performed over time; it is
not expected that they will be fully and finally discharged for several years.
Hercules has agreed to indemnify the Company against any liability which the
Company may incur under such novation agreements by reason of any prior failure
by Hercules to perform its obligations under the novated contracts. The Company
has agreed to indemnify Hercules against any liability which Hercules may incur
under such novation agreements by reason of any failure by the Company to
perform its obligations under the novated contracts.
RESEARCH AND DEVELOPMENT
The expense incurred on Company-sponsored research and development
activities related to new products or services and the improvement of existing
products or services was $12.4, $16.2, and $14.1 million for fiscal year 1998,
fiscal year 1997, and fiscal year 1996, respectively. The expense incurred
during the same periods for research and development activities that were
customer-sponsored (primarily funded by the U.S. government) was $241.6, $231.3,
and $281.8, million, respectively.
BACKLOG
The aggregate amount of contracted backlog orders on April 1, 1998, and
April 1, 1997, was $1,700.7, and $1,438.9 million, respectively. It is expected
that approximately 78 percent of sales during the fiscal year ending March 31,
1999, will fill orders that were in backlog at April 1, 1998. The backlog
represents the value of contracts for which goods and services are yet to be
provided. The backlog consists of firm contracts and although they can be and
sometimes are modified or terminated, the amount of modifications and
terminations historically has been limited compared to total contract volume. In
May 1998, the Company received orders from Boeing aggregating $750 million for
the production of solid rocket boosters for Delta space launch vehicles. These
orders are not expected to have a material impact on fiscal year 1999 sales.
SEASONALITY
The Company's business is not seasonal in nature. However, since the
Company's sales on certain production contracts are not recorded until product
is delivered to the customer, extra effort is expended to complete and deliver
product prior to fiscal year end, which has typically resulted in higher sales
in the fourth fiscal quarter.
16
EXPORT SALES
Export sales from the United States to unaffiliated customers for the
Company were $33.2, $58.0, and $58.5 million, for fiscal year 1998, fiscal year
1997, and fiscal year 1996, respectively.
EMPLOYEES
As of March 31, 1998, the Company employed approximately 6,550 active
employees (including approximately 1,050 employees of government-owned
company-operated facilities), of which approximately 2,150 were covered by
collective bargaining agreements. Set forth below is a table indicating the
number of such agreements, the number of employees covered and the expiration
dates of the agreements:
NUMBER OF EXPIRATION NUMBER OF EMPLOYEES
LOCATION CONTRACTS DATE REPRESENTED
- -------- --------- ---- -----------
Rocket Center, WV............... 2 8/14/00 213
9/14/00 9
Magna, UT....................... 1 2/15/99 239
Janesville, WI.................. 1 3/21/01 356
Minneapolis, MN area............ 1 9/30/99 294
Radford, VA..................... 2 10/06/98 1,001
DeSoto, KS...................... 1 11/18/98 34
Although relations between the Company and its unionized and
non-unionized employees and their various representatives are generally
considered satisfactory, there can be no assurance that new labor contracts can
be concluded without work stoppages.
PATENTS
As of March 31, 1998, the Company owned approximately 265 U.S. patents,
approximately 210 foreign patents, and had approximately 55 U.S. patent
applications and 100 foreign patent applications pending. Although the conduct
of the Company's business involves the manufacture of various products that are
covered by patents, the Company's management does not believe that any one
single existing patent or license or group of patents is material to the success
of its business as a whole. Management believes that research, development and
engineering skills also make an important contribution to the Company's
business. The U.S. Government typically receives royalty-free licenses to
inventions made under U.S. Government contracts, with the Company retaining all
other rights, including all commercial rights, with respect to such inventions.
In addition, the Company's proprietary information is protected through the
requirement that employees execute confidentiality agreements as a condition of
employment, and the Company's policy of protecting proprietary information from
unauthorized disclosure.
ENVIRONMENTAL MATTERS
The Company's operations and ownership or use of real property are
subject to a number of federal, state and local environmental laws and
regulations. For example, under the federal
17
Clean Water Act (CWA), the Company's facilities may be required to obtain
permits and to construct pollution control equipment to reduce the levels of
pollutants being discharged into surface waters. Under the federal Clean Air Act
(CAA), the Company's facilities may be required to obtain permits and install
pollution control equipment to limit the emission of various kinds of air
pollutants. The Company may also be required to comply with the provisions of
the federal Resource Conservation and Recovery Act (RCRA) which regulates the
generation, storage, handling, transportation, treatment and disposal of
hazardous and solid wastes. In addition, the Company could be subject to the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), which imposes liability for the cleanup of releases of hazardous
substances. Such liability may involve, for example, releases at off-site
locations as well as at presently and formerly owned or leased facilities.
Environmental laws and regulations change frequently, and it is difficult to
predict what impact these environmental laws and regulations may have on the
Company in the future. When the Company becomes aware of environmental concerns
for which it is potentially liable, the Company works with the various
governmental agencies in investigating the situation, proposing remedial and/or
corrective action and performing the agreed-upon action without unreasonable
delay.
To date, these environmental laws and regulations have not had a
material adverse effect on the Company's results of operations or financial
condition. It is difficult to predict whether and to what extent these
environmental laws and regulations may impact the Company's results of
operations or financial condition in the future. Due to the nature of the
Company's operations, the Company is involved from time to time in legal
proceedings involving remediation of environmental contamination from past or
present operations or use or ownership of real property, as well as compliance
with environmental requirements applicable to ongoing operations. The Company
may also be subject to fines and penalties, toxic tort suits or other third
party lawsuits due to its or its predecessors' present or past use of hazardous
substances or the alleged contamination of the environment through past or
present operations. There can be no assurance that material costs or liabilities
will not be incurred in connection with any such proceedings or claims.
With respect to the disposal of material at environmental treatment,
recycling, storage, disposal, or similar sites that occurred prior to the
Spin-off, the Company has agreed to assume the liability and indemnify Honeywell
for the Company's proportional share of the costs of remedial and/or corrective
action allocated to Honeywell as a "potentially responsible party." The
Company's proportional share is the percentage that the volume of such material
generated by the Businesses bears to the total volume of such material generated
by Honeywell at each such site. The Company does not believe that its ultimate
contribution or liability relating to these matters, individually or in the
aggregate, would be reasonably likely to have a material adverse effect on the
business of the Company taken as a whole.
As part of the HAC Acquisition, the Company has generally assumed
responsibility for environmental compliance at the facilities utilized by the
operations acquired in the HAC Acquisition (the "Aerospace Facilities"). There
may also be significant environmental remediation costs associated with the
Aerospace Facilities that will, with respect to some facilities, be funded in
the first instance by the Company, subject to reimbursement or indemnification
as described below. Management believes that much of the compliance and
remediation costs associated with the Aerospace Facilities will be reimbursable
under U.S. Government contracts, and that those environmental remediation costs
not covered through such contracts will be covered by Hercules
18
under agreements entered into in connection with the HAC Acquisition (the
"Environmental Agreements"). Under the Environmental Agreements, Hercules has
agreed to indemnify the Company for environmental conditions relating to
releases or hazardous waste activities occurring prior to the closing of the HAC
Acquisition, fines relating to pre-closing environmental compliance,
environmental claims arising out of breaches of Hercules' representations and
warranties and certain compliance requirements at the Kenvil, New Jersey
facility ("Kenvil Facility"). The indemnity obligation is subject to a total
deductible of $1.0 million for all claims (including non-environmental claims)
that the Company may assert under the HAC Acquisition purchase agreement (the
"Purchase Agreement"). In addition, Hercules is not required to indemnify the
Company for any individual claims below $50,000. Hercules is obligated to
indemnify the Company for the lowest cost response of remediation required at
the facility. The limitations of Hercules' indemnification obligations do not
apply to amounts incurred by Hercules in connection with the performance of
remedial actions relating to preacquisition conditions at the Clearwater,
Florida facility ("Clearwater Facility") or in connection with its obligation to
comply with certain environmental regulations at the Kenvil Facility. Pursuant
to the Environmental Agreements, Hercules will be responsible for conducting any
remedial activities and seeking reimbursement from the U.S. Government with
respect to the Kenvil Facility and the Clearwater Facility.
There can be no assurance that the U.S. Government or Hercules will
reimburse the Company for any particular environmental costs or reimburse the
Company in a timely manner. U.S. Government reimbursements for non-CERCLA
cleanups are financed out of a particular agency's operating budget. The ability
of a particular governmental agency to make timely reimbursements for cleanup
costs will be subject to national budgetary constraints. 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.
YEAR 2000 COMPLIANCE
The Company utilizes a significant number of computer hardware and
software programs and operating systems across its entire organization,
including applications used in manufacturing, product development, financial
business systems and various administrative functions. To the extent that this
hardware and software contains source code that is unable to appropriately
interpret the upcoming calendar year 2000, some level of modification, or even
replacement, of such applications will be necessary.
The Company's process for becoming "Year 2000" compliant includes
activities to increase awareness of the issue across the Company, assess where
the Company has issues, determine proposed resolutions, validate those proposed
resolutions, and finally, implement the agreed-upon resolutions. The Company has
substantially completed its assessment of applications within the Company that
are not Year 2000 compliant and is in varying stages of determining appropriate
resolutions to the issues identified. The Company currently expects to complete
all relevant internal hardware and software modifications and testing by early
1999. In addition, the Company has initiated formal communications with all of
its significant suppliers and customers to determine their Year 2000 compliance
readiness and the extent to which the Company is vulnerable to any third party
Year 2000 issues. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be converted to Year 2000
19
compliant systems in a timely manner, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have a material adverse effect on the Company.
Given information known at this time about the Company's systems having
such issues, coupled with the Company's ongoing, normal course-of-business
efforts to upgrade or replace business critical systems and software
applications, as necessary, it is currently expected that Year 2000 costs, the
majority of which are expected to be incurred in fiscal year 1999, will not have
an impact exceeding a range of $5-10 million on the Company's liquidity or
results of operations. These costs include incremental personnel costs,
consulting costs, and costs for modification of existing hardware and software.
The costs of the project and the timing in which the Company believes it will
complete the necessary Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved, and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, success of the Company in
identifying systems and programs having Year 2000 issues, the nature and amount
of programming required to upgrade or replace the affected programs, the
availability and cost of personnel trained in this area, and the extent to which
the Company might be adversely impacted by the failure of third parties
(suppliers, customers, etc.) to remediate their own Year 2000 issues. Failure by
the Company and/or its suppliers and customers (in particular, the U.S.
Government, on which the Company is materially dependent) to complete Year 2000
compliance work in a timely manner could have a material adverse effect on the
Company's operations.
20
ADDITIONAL INFORMATION
Incorporated herein by reference are the following portions of the
Annual Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Conventional Munitions.......................................... 7-9
Space and Strategic Systems..................................... 11-13
Defense Systems................................................. 15-17
Selected Financial Data......................................... 18
Discontinued Operations......................................... 21
Contingencies--Environmental Matters............................ 23-24
Year 2000....................................................... 25-26
Risk Factors.................................................... 26
Long-Term Contracts............................................. 31
Environmental Remediation and Compliance........................ 31
Note 6 of Notes to Financial Statements......................... 33
Note 14 of Notes to Financial Statements........................ 40-41
Note 15 of Notes to Financial Statements........................ 41-42
Note 16 of Notes to Financial Statements........................ 42
Summary Business Group Descriptions (Business Overview; Sales
as a Percent of Total Company Revenues; Our Customers; Our Inside Back
Competitive Strengths; Our Major Programs and Products).... Cover Foldout
ITEM 2. PROPERTIES
At March 31, 1998, the Company occupied manufacturing/assembly,
warehouse, test, research and development and office properties having an
aggregate floor space of approximately 12 million square feet, which either is
owned or leased by the Company, or is occupied under facilities contracts with
the U.S. Government. The following table provides summary information regarding
these properties, and indicates whether they are used principally by
Conventional Munitions ("CM"), Defense Systems ("DS"), and/or Space and
Strategic Systems ("SSS"):
21
GOVERNMENT
OWNED LEASED OWNED (2) TOTAL
------- ------- ------- -------
PRINCIPAL PROPERTIES(1) (THOUSANDS OF SQUARE FEET)
-----------------------
Florida
Clearwater (DS) ........ -- 112 -- 112
Illinois
Wilmington (CM) ........ -- -- 440 440
Iowa
Burlington (CM) ........ -- 40 -- 40
Kansas
DeSoto (CM) ............ -- -- 730 730
Minnesota
Elk River (CM) ......... 143 -- -- 143
Hopkins (CM/DS)(3) ..... 536 -- -- 536
New Brighton (CM/DS) ... -- -- 1,522 1,522
New Jersey
Totowa (CM) ............ 93 20 -- 113
Pennsylvania
Horsham (DS) ........... -- 53 -- 53
Tennessee
Toone (CM) ............. 224 -- -- 224
Texas
Hondo (DS) ............. -- 27 -- 27
Utah
Clearfield (SSS) ....... -- 606 -- 606
Magna (SSS) ............ 1,810 -- 518 2,328
Tekoi (SSS) ............ -- 25 -- 25
Virginia
Radford (CM) ........... -- -- 3,809 3,809
West Virginia
Rocket Center (CM) ..... 96 -- 915 1,011
Wisconsin
Janesville (DS) ........ 212 -- -- 212
------- ------- ------- -------
Subtotal .. 3,114 883 7,934 11,931
OTHER PROPERTIES(4)
-------
CM/DS/SSS ..................... -- 27 -- 27
------- ------- ------- -------
Subtotal .. -- 27 -- 27
------- ------- ------- -------
TOTAL .................. 3,114 910 7,934 11,958
======= ======= ======= =======
(26%) (8%) (66%) (100%)
- ------------------------------------
(1) Excludes properties in the following states aggregating 276,100 square feet
of space that is owned or leased, but is no longer occupied by the Company:
Colorado (265,000 owned square feet, 170,100 square feet of which is
leased); and Virginia (11,100 leased square feet, which is subleased).
(2) These properties are occupied rent-free under five-year facilities
contracts that require the Company to pay for all utilities, services, and
maintenance costs.
22
(3) This facility also serves as the Company's corporate headquarters.
(4) Principally sales and other offices, each of which has less than 10,000
square feet of floor space.
In addition to the properties listed above, the Company owns proving
grounds totaling 3,045 acres, with several small storage and testing buildings,
in Elk River, Minnesota, and 1,200 acres of undeveloped land in Hot Springs,
South Dakota. The Company leases an aggregate of 1,400 acres of land in Socorro,
New Mexico for use as a test range and load-assemble-and-pack facilty, and 27
acres of land in Hondo, Texas for use as an airstrip for flight testing.
Since the Spin-off, the Company has implemented a significant program
of consolidating its operations and facilities, due in part to an
underutilization of facilities. The Company continues to explore opportunities
for further facility consolidations. The Company considers its properties to be
in generally good condition and adequate for the needs of its business.
Incorporated herein by reference are the following portions of the
Annual Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Restructuring and Facility Closure Charges..................... 20
Property and Depreciation...................................... 31
Note 4 of Notes to Financial Statements........................ 32
Note 11 of Notes to Financial Statements....................... 37
Note 12 of Notes to Financial Statements....................... 37
Facilities and Offices......................................... 47
ITEM 3. LEGAL PROCEEDINGS
At the time of its acquisition, HAC was involved in two lawsuits
alleging violations of the False Claims Act (known as "QUI TAM" actions) brought
by former employees who had been subject to a HAC reduction-in-force. The first
QUI TAM action captioned UNITED STATES EX REL., KATHERINE A. COLUNGA, ET. AL. V.
HERCULES INCORPORATED (the "Colunga Case") was filed in the U.S. District Court
for the District of Utah, Central Division. The first complaint was filed under
seal on October 24, 1989. The second amended complaint was filed on April 16,
1992. With respect to the first QUI TAM action, the alleged false claims appear
to be principally based on an allegedly deficient quality control program.
Hercules' management has advised the Company that it does not believe that
alleged recordkeeping violations provide a valid basis for statutory penalties
when viewing the integrity of the overall quality control process. The second
QUI TAM action captioned UNITED STATES EX REL., BENNY D. HULLINGER, ET. AL. V.
HERCULES INCORPORATED was filed under seal in the U.S. District Court for the
District of Utah, Central Division. The original complaint was filed under seal
on March 11, 1992, and removed from under seal on August 15, 1994. The first
amended complaint was filed on November 9, 1994. The complaint alleges various
causes of action, including labor and material mischarging and misuse of special
tooling and government property. Damages are not specified. The U.S. Government
investigated both QUI TAM cases and declined to take part in either lawsuit.
23
Pursuant to the terms of the Purchase Agreement, all liability
associated with and all responsibility for continuing defense of litigation
incurred in the ordinary course of business of HAC has been assumed by the
Company, except for the QUI TAM lawsuits described above. In addition, pursuant
to the terms of the Purchase Agreement, the Company has agreed to indemnify and
reimburse Hercules for a portion of the claims arising out of, relating to, or
incurred in connection with Hercules' QUI TAM lawsuits. Specifically, the
Company has agreed to indemnify and reimburse Hercules for a portion of the
claims (collectively, the "Litigation Claims") arising out of, relating to, or
incurred in connection with the above HAC QUI TAM actions (collectively, the
"Hercules Actions"). On May 15, 1998, Hercules announced an agreement to settle
the Colunga Case, subject to Court approval. The Company's liability to Hercules
for the Litigation Claims (other than with respect to Litigation Claims
consisting of external attorney's and investigative fees and related costs and
expenses (collectively, the "Legal Costs")) is limited to approximately $4
million. The Company also has agreed to reimburse Hercules for 40 percent of all
Legal Costs incurred from and after the closing of the HAC Acquisition with
respect to the Hercules Actions. The Company and Hercules have also entered into
a Joint Defense Agreement with respect to the Hercules Actions.
In March 1997 the Company received a partially unsealed complaint,
filed on an unknown date, in a QUI TAM action by a former employee alleging
violations of the False Claims Act. The action alleges labor mischarging to the
Intermediate Nuclear Force ("INF") contract and other contracts at the Company's
Bacchus Works facility in Magna, Utah. Damages are not specified. The Company
and Hercules have agreed to share equally the external attorney's fees and
investigative fees and related costs and expenses of this action until such time
as a determination is made as to the applicability of the indemnification
provisions of the Purchase Agreement. In March 1998, the Company and Hercules
settled with the Department of Justice on the portion of the complaint alleging
labor mischarging to the INF contract and agreed to pay $2.25 million each,
together with relator's attorney's fees of $150,000 each, which amounts were
paid in April 1998. As a result of this settlement, the Department of Justice
will not intervene in the remaining portion of the complaint.
The Company is a defendant in a patent infringement captioned THIOKOL
CORPORATION (NOW KNOWN AS CORDANT TECHNOLOGIES INC.) VS. ALLIANT TECHSYSTEMS
INC. AND HERCULES INCORPORATED, which was filed in the U.S. District Court for
the District of Delaware on November 15, 1995, and which the Company believes is
without merit. The plaintiff alleges that the rocket motor insulation used by
the Company in certain rocket motors infringes a patent owned by the plaintiff.
The complaint seeks trebling of any damages that may be awarded based upon an
allegation of deliberate and willful infringement. The complaint does not
quantify the amount of damages sought. Through an analysis of an October 27,
1997 court filing, the Company believes that, based upon an economist's expert
testimony, the plaintiff may seek lost profits, interest and costs of
approximately $240 million. Even if the Company is found liable, it believes
that damages should be based upon a reasonable royalty of less than $5 million.
The Company's motion for summary judgment in the case was denied by the court,
which bifurcated the trial, with the liability issue being tried first and, if
liability is found, the damages issue being tried second. The liability issue
was tried in January 1998, after which the court requested, and the parties
submitted, post-trial briefs. A decision on the liability issue is not expected
for several months. In the judgment of the Company's management, the case will
not have a material adverse effect upon the Company's future financial condition
or results of operations. However, there can be no assurance that the outcome of
the case will not have a material adverse effect on the Company.
24
The Company has also been served with a complaint in a civil action
captioned UNITED STATES V. ALLIANT TECHSYSTEMS INC. and filed in the U.S.
District Court for the District of Minnesota, alleging violations of the False
Claims Act, the Truth in Negotiations Act, and common law and equitable theories
of recovery. The complaint was filed March 10, 1997, and relates to a contract
for the AT4 shoulder-fired weapon. The complaint alleges that the contract in
question was defectively priced. Based upon documents provided to the Company in
connection with the action, the Company believes that the U.S. Government may
seek damages and penalties of approximately $5 million.
Under the provisions of the False Claims Act, a civil penalty of
between $5,000 and $10,000 can be assessed for each claim, plus three times the
amount of any damages sustained by the U.S. Government. In addition to damages,
a judgment against the Company in such a suit or a finding of liability in a
separate criminal action could carry penalties of suspension or debarment which
would make some or all of the Company's operations ineligible to be awarded any
U.S. Government contracts for a period of up to three years. The amount of
damages, if any, involved in the above actions filed under the False Claims Act
cannot be determined at this time.
The Company is also a defendant in other suits and claims, some of
which are covered by insurance, and in other investigations of varying natures.
While the results of litigation and other proceedings cannot be predicted with
certainty, in the opinion of management, 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.
Incorporated herein by reference is the following portion of the Annual
Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Contingencies--Environmental Matters.......................... 23-24
Contingencies--Litigation..................................... 24-25
Environmental Remediation and Compliance...................... 31
Note 6 of Notes to Financial Statements....................... 33
Note 14 of Notes to Financial Statements...................... 40-41
Note 16 of Notes to Financial Statements...................... 42
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal year 1998.
25
SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages and positions (in
each case as of June 1, 1998) are as follows:
NAME (AGE) POSITION (DATE BECAME EXECUTIVE OFFICER)
Richard Schwartz (62)...... Chairman of the Board and Chief Executive Officer (January 9, 1995)
Peter A. Bukowick (54)..... President and Chief Operating Officer (March 15, 1995)
Robert E. Gustafson (49)... Vice President--Human Resources (July 22, 1996)
Galen K. Johnson (44)...... Vice President and Treasurer (May 27, 1992)
Richard N. Jowett (53)..... Vice President--Investor Relations and Public Affairs (May 11, 1998)
William R. Martin (57)..... Vice President--Washington, D.C. Operations (January 8, 1996)
Mark L. Mele (41).......... Vice President--Strategic Planning (May 11, 1998)
Scott S. Meyers (44)....... Vice President and Chief Financial Officer (March 1, 1996)
Paula J. Patineau (44)..... Vice President and Controller (January 29, 1997)
Paul A. Ross (61).......... Group Vice President--Space and Strategic Systems (April 1, 1997)
Don L. Sticinski (46)...... Group Vice President--Defense Systems (March 1, 1998)
Nicholas G. Vlahakis (50).. Group Vice President--Conventional Munitions (December 1, 1997)
Daryl L. Zimmer (55)....... Vice President and General Counsel (September 28, 1990)
Charles H. Gauck (59)...... Secretary (September 28, 1990)
Each of the above individuals serves at the pleasure of the Company's
Board of Directors, and is subject to reelection annually on the date of the
Company's Annual Meeting of stockholders. No family relationship exists between
any of the executive officers or between any of them and any director of the
Company. Information regarding the five-year employment history (in each case
with the Company unless otherwise indicated) of each of the executive officers
is set forth below.
Mr. Schwartz has been Chairman of the Board since January 1997 and
Chief Executive Officer since January 1995. He also served as President from
Janury 1995 until May 1998. Prior to joining the Company in January 1995, he was
Executive Vice President of Hercules since January 1991 and the President of HAC
since October 1989, in each case until January 1995. He also served as a
director of Hercules from 1989 until January 1995.
Mr. Bukowick has been President since May 1998, and Chief Operating
Officer since September 1997. From April 1997 until May 1998 he served as
Executive Vice President, and from March 1995 until April 1997, he was Group
Vice President - Aerospace Systems. Prior to that, he was President PRO TEMPORE
of HAC from January 1995 until March 1995, and Vice President, Technology of HAC
from 1992 until December 1994.
26
Mr. Gustafson has held his present position since July 1996. From the
Spin-off until July 1996 he served as Director of Compensation and Benefits.
Mr. Johnson has been Vice President since April 1997 and Treasurer
since May 1992.
Mr. Jowett has held his present position since May 1998. Prior to that
he was Director of Investor Relations since April 1993.
Mr. Martin has held his present position since January 1996. From March
1995 until January 1996, he served as Vice President - Business Development of
the Company's Aerospace Systems Group. From July 1991 until March 1995 he served
as Vice President - Business Development and Washington Office Operations of
HAC.
Mr. Mele has held his present position since May 1998. Prior to that he
was Director, Business Planning since March 1995. From February 1993 until March
1995, he served as Manager, New Product Development of HAC.
Mr. Meyers has held his present position since March 1996. Prior to
that, he was Executive Vice President and Chief Financial Officer of Magnavox
Electronic Systems Company since January 1990.
Ms. Patineau has held her present position since January 1997. From
June 1996 until January 1997, she served as acting Controller. From April 1992
until July 1996, she served as Director of Financial Reporting/Accounting
Services.
Mr. Ross has held his present position since April 1997. From April
1995 until April 1997, he served as Vice President and General Manager, Space
and Strategic Division, Aerospace systems Group. From August 1994 until March
1995, he was Vice President of Operations of HAC. Prior to joining HAC, he was
employed by Rockwell International, most recently as Vice President of
Production Operations, Rocketdyne Division, from June 1991 until August 1994.
Mr. Sticinski has held his present position since March 1998. From
April 1997 until March 1998, he served as Vice President - Operations of the
Company's Space and Strategic Systems Group. From March 1995 until April 1997,
he served as Vice President - Operations, Space and Strategic Division, of the
Company's Aerospace Systems Group. Prior to that, he was Vice President - Titan
Projects of HAC from April 1993 until March 1995.
Mr. Vlahakis has held his present position since December 1997. From
April 1997 until December 1997, he served as Vice President and General Manager
- - Ordnance of the Company's Conventional Munitions Group. From March 1995 until
April 1997, he served as Vice President and General Manager - Ordnance of the
Company's Aerospace Systems Group. From 1993 until March 1995, he was Vice
President and General Manager of HAC's tactical propulsion facility. From 1991
until 1993, he was Vice President of HAC's Expendable Launch Vehicle Group.
Mr. Zimmer has held his present position since the Spin-off.
Mr. Gauck has held his present position since the Spin-off.
27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Company Common Stock is listed and traded on the New York Stock
Exchange ("NYSE") under the symbol ATK. The following table sets forth the high
and low sales prices of the Common Stock for each full quarterly period within
the two most recent fiscal years, as reported on the NYSE Composite Tape:
PERIOD HIGH LOW
Fiscal year ended March 31, 1998:
Quarter ended June 29, 1997..................... $52.8125 $40.50
Quarter ended September 28, 1997................ 69.00 51.4375
Quarter ended December 28, 1997................. 65.6875 53.75
Quarter ended March 31, 1998.................... 65.00 55.00
Fiscal year ended March 31, 1997:
Quarter ended June 30, 1996..................... $49.125 $43.75
Quarter ended September 29, 1996................ 53.50 46.25
Quarter ended December 29, 1996................. 57.375 47.625
Quarter ended March 31, 1997.................... 54.75 42.00
The number of holders of record of Company Common Stock as of May 31,
1998, was 12,006.
The Company has not, since the Spin-off, paid cash dividends. The
Company's dividend policy will be reviewed by the Board of Directors of the
Company at such future times as may be appropriate in light of relevant factors
existing at such times, including the extent to which the payment of cash
dividends may be limited by covenants contained in its bank Credit Agreement
(the "Credit Agreement") and the Indenture pursuant to which its 11-3/4% Senior
Subordinated Notes due 2003 (the "Notes") were issued (collectively, the "Debt
Agreements"). The Credit Agreement, as amended and restated in November 1996,
currently limits the aggregate sum of dividends plus certain other restricted
payments incurred after March 31, 1995 to an amount equal to the sum of (i) $110
million, plus (ii) 50% of cumulative quarterly net income, as defined, after
March 31, 1997. The Notes limit the Company's dividends and certain other
restricted payments to an amount equal to 50% of cumulative quarterly net
income, as defined, after March 31, 1995, provided that after such payments the
Company's ratio of earnings (before interest, taxes, depreciation and
amortization) to fixed charges equals or exceeds three to one. The Debt
Agreements also prohibit dividend payments if loan defaults exist or certain
financial covenant ratios are not maintained.
28
Incorporated herein by reference are the following portions of the
Annual Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Consolidated Income Statements-- Basic and diluted earnings (loss)
per common and common equivalent share......................... 28
Earnings Per Share Data............................................. 32
Note 7 of Notes to Financial Statements............................. 33-34
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is the following portion of the Annual
Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Selected Financial Data....................................... 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is the following portion of the Annual
Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Management's Discussion and Analysis......................... 19-26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the following portions of the Annual
Report:
PAGE NUMBER(S)
PORTION OF ANNUAL REPORT IN ANNUAL REPORT
Financial Highlights.......................................... 1
Report of Independent Auditors................................ 27
Report of Management.......................................... 27
Consolidated Income Statements................................ 28
Consolidated Balance Sheets................................... 29
Consolidated Statements of Cash Flows......................... 30
Notes to the Consolidated Financial Statements................ 31-44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of the Company is set
forth following Item 4 in Part I of this Report. The other information required
by this Item will be included in the definitive proxy statement for the 1998
Annual Meeting of stockholders (the "Proxy Statement"), to be filed within 120
days after the Company's fiscal year ended March 31, 1998, and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
ANNUAL REPORT
PAGE FORM 10-K
NUMBER(S) PAGE NUMBER
1. FINANCIAL STATEMENTS (incorporated by reference
from the Annual Report):
Financial Highlights............................ 1
Report of Independent Auditors.................. 27
Consolidated Income Statements.................. 28
Consolidated Balance Sheets..................... 29
Consolidated Statements of Cash Flows........... 30
Notes to the Consolidated Financial Statements.. 31-44
2. FINANCIAL STATEMENT SCHEDULES (included
in this Report):
Independent Auditors' Report...................................... 39
Schedules:
II - Valuation Reserves.................................... 40
All schedules, other than indicated above, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the financial statements or notes thereto.
3. EXHIBITS. (The following exhibits are filed with this Report unless the
exhibit number is followed by an asterisk (*), in which case the exhibit is
incorporated by reference from the document listed. The applicable Securities
and Exchange Commission File Number is 1-10582 unless otherwise indicated.
Exhibit numbers followed by a pound sign (#) identify exhibits that are
either a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K. Excluded from this list of
exhibits, pursuant to Paragraph (b) (4) (iii) (A) of Item 601 of Regulation
S-K, may be one or more instruments defining the rights of holders of
long-term debt of the Registrant. The Registrant hereby agrees that it will,
upon request of the Securities and Exchange Commission, furnish to the
Commission a copy of any such instrument.)
31
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
3(i).1* Restated Certificate of Incorporation, effective July 20, 1990
(Exhibit 3.1 to Amendment No. 1 to Form 10 Registration Statement
filed with the Securities and Exchange Commission on July 20, 1990
(the "Form 10")).
3(i).2* Certificate of Correction, effective September 21, 1990 (Exhibit
3.1 to Registration Statement on Form S-4, File No. 33-91138, filed
with the Securities and Exchange Commission on April 13, 1995 (the
"Form S-4")).
3(i).3* Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Registrant, effective
September 28, 1990 (Exhibit 3.3 to the Form S-4).
3(ii)* By-Laws, as amended through May 27, 1992 (Exhibit 3.3 to Form 10-K
for the fiscal year ended March 31, 1992 (the "FY92 Form 10-K")).
4.1* Form of Certificate for common stock, par value $.01 per share
(Exhibit 4.1 to Amendment No. 1 to the Form 10).
4.2* Rights Agreement, dated as of September 24, 1990, between the
Registrant and Manufacturers Hanover Trust Company (Exhibit 4.2 to
Post-Effective Amendment No. 1 to the Form 10).
4.2.1* First Amendment to Rights Agreement, dated as of August 4, 1992,
between the Registrant and Chemical Bank (successor to
Manufacturers Hanover Trust Company) (Exhibit 4.2.1 to Form 10-K
for the fiscal year ended March 31, 1993 (the "FY93 Form 10-K")).
4.2.2* Rescission Agreement, dated as of May 26, 1993, between the
Registrant and Chemical Bank (Exhibit 4.2.2 to the FY93 Form 10-K).
4.2.3* Second Amendment to Rights Agreement, dated as of October 28, 1994,
between the Registrant and Chemical Bank (Exhibit 4 to Form 8-K
dated October 28, 1994 (the "October 1994 Form 8-K")).
4.3* Indenture, dated as of March 1, 1995, between the Registrant and
First Bank National Association, as trustee (including a form of
Initial Note) (Exhibit 4.1 to the Form S-4).
4.4* Form of Exchange Note (Exhibit 4.2 to the Form S-4).
4.5* Registration Rights Agreement, dated as of March 14, 1995, among
the Registrant, the Lenders referred to therein, Morgan Guaranty
Trust Company of New York, as Documentation Agent, and Chemical
Bank, as Administrative Agent (Exhibit 4.3 to the Form S-4).
32
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
4.6* Amended and Restated Credit Agreement dated as of March 15, 1995
and amended and restated as of November 14, 1996 (the "Amended and
Restated Credit Agreement") among the Registrant, the Lenders
referred to therein, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and The Chase Manhattan Bank, as
Administrative Agent (including forms of Note, Assignment and
Assumption Agreement, and Amended and Restated Subsidiary Guaranty
Agreement (Exhibit 4 to Form 8-K dated November 14, 1996).
4.6.1* Amendment dated as of November 7, 1997 to the Amended and Restated
Credit Agreement (Exhibit 4 to Form 8-K dated October 27, 1997).
4.6.2 Waiver and Amendment No. 2 dated January 29, 1998 to the Amended
and Restated Credit Agreement.
4.7* Security Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (without
exhibits) (Exhibit 10.4 to the Form S-4).
4.8* Patent Security Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (without
exhibits) (Exhibit 10.5 to the Form S-4).
4.9* Pledge Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (Exhibit
10.6 to the Form S-4).
4.10* Purchase Agreement, dated March 7, 1995, among the Registrant and
the Initial Purchasers (Exhibit 10.37 to the Form S-4).
10.1* Distribution Agreement, dated as of September 24, 1990, between
Honeywell Inc. and the Registrant (Exhibit 10.1 to Amendment No. 2
to the Form 10).
10.2* Environmental Matters Agreement, dated as of September 24, 1990,
between Honeywell Inc. and the Registrant (Exhibit 10.3 to
Post-Effective Amendment No. 1 to the Form 10).
10.3* Intellectual Property Agreement, dated as of September 24, 1990,
between Honeywell Inc. and the Registrant (Exhibit 10.4 to
Amendment No. 2 to the Form 10).
10.3.1* Amendment No. 1 to Intellectual Property Agreement, dated as of
September 24, 1990 (Exhibit 10.4.1 to the FY92 Form 10-K).
10.3.2* Amendment No. 2 to Intellectual Property Agreement, dated as of
September 24, 1990 (Exhibit 10.4.2 to the FY92 Form 10-K).
33
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.3.3* Amendment No. 3 to Intellectual Property Agreement, dated July 30,
1992 (Exhibit 10.4.3 to Form 10-Q for the quarter ended October 3,
1993).
10.4* Tax Sharing Agreement, dated as of September 28, 1990, between
Honeywell Inc. and the Registrant (Exhibit 10.5 to Amendment No. 2
to the Form 10).
10.5* Government Subpoena Agreement between Honeywell Inc. and the
Registrant (Exhibit 10.11 to Amendment No. 2 to the Form 10).
10.6*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.3 to Form
10-Q for the quarter ended October 2, 1994 (the "FY95 Second
Quarter Form 10-Q")).
10.6.1*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.1 to Form
10-Q for the quarter ended July 4, 1994).
10.6.2*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.35 to Form
10-K for the fiscal year ended March 31, 1996 (the "FY96 Form
10-K")).
10.6.3*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.3 to Form
10-Q for the quarter ended June 29, 1997 (the "FY98 First Quarter
Form 10-Q")).
10.7*# Alliant Techsystems Inc. LSAR Option Loan Program (Exhibit 10.1 to
Form 10-Q for the quarter ended December 28, 1997 (the "FY98 Third
Quarter Form 10-Q")).
10.7.1*# Form of Promissory Note and Stock Pledge Agreement (Exhibit 10.2 to
the FY98 Third Quarter Form 10-Q).
10.8*# Form of Indemnification Agreement between the Registrant and its
directors and officers (Exhibit 10.6 to Amendment No. 1 to the Form
10).
10.9# Executive Split Dollar Life Insurance Plan.
10.9.1# Executive Life Insurance Agreement.
10.9.2# Split Dollar Life Insurance Agreement.
10.10*# Form of Retention Agreement between the Registrant and certain of
its officers (Exhibit 10.18 to Amendment No. 1 to the Form 10).
10.11*# Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive
Plan (Appendix D to Proxy Statement, dated February 11, 1995).
10.12*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.12 to Form
10-K for the fiscal year ended December 31, 1990 (the "1990 Form
10-K")).
10.13*# Form of Employment Restrictions Agreement (Exhibit 10.13 to the
1990 Form 10-K).
34
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.14*# Hercules Supplementary Employee Retirement Plan (SERP) (assumed by
the Registrant as to certain of its employees) (Exhibit 10.38 to
the Form S-4).
10.15*# Management Compensation Plan (Exhibit 10.14 to Amendment No. 1 to
the Form 10).
10.16*# Flexible Perquisite Account description. (Exhibit 10.1 to FY95
Second Quarter Form 10-Q).
10.17*# Restricted Stock Plan for Non-Employee Directors (Exhibit 10.13 to
Amendment No. 1 to Form 10).
10.17.1*# Non-Employee Restricted Stock Plan (Appendix B to Proxy Statement
dated July 3, 1996).
10.17.2*# Form of Restricted Stock Agreement (Exhibit 10.2 to Form 10-Q for
the quarter ended September 29, 1996).
10.18*# Deferred Fee Plan for Non-Employee Directors (as amended and
restated November 24, 1992) (Exhibit 10.18 to the FY93 Form 10-K).
10.19*# Non-employee director per diem arrangement (Exhibit 10.20 to the
FY92 Form 10-K).
10.20*# Income Security Plan (Exhibit 10.23 to Form 10-K for the fiscal
year ended March 31, 1997 (the "FY97 Form 10-K")).
10.20.1# Trust Under Income Security Plan, dated May 4, 1998 (effective
March 2, 1998), by and between the Registrant and U.S. Bank
National Association.
10.21*# Form of Employment Letter Agreement, dated October 27, 1994,
between the Registrant and Richard Schwartz (Exhibit 10.1 to Form
10-Q for the quarter ended January 1, 1995 (the "FY95 Third Quarter
Form 10-Q")).
10.21.1*# Indemnification Agreement, dated as of October 28, 1994, between
the Registrant and Richard Schwartz (Exhibit 10.2 to the FY95 Third
Quarter Form 10-Q).
10.22*# Compensation Arrangement between the Registrant and Scott S. Meyers
(Exhibit 10.32 to the FY96 Form 10-K).
10.23*# Arrangements with Executive (Exhibit 10 to Form 10-Q for the
quarter ended December 29, 1996).
10.23.1*# Arrangement with Executive (Exhibit 10 to Form 8-K dated February
28, 1997).
10.24*# Compensation Arrangement with Arlen D. Jameson (Exhibit 10.35 to
the FY97 Form 10-K).
35
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.24.1*# Performance Share Agreement between the Registrant and Arlen D.
Jameson (Exhibit 10.35.1 to the FY97 Form 10-K).
10.25*# Honeywell Supplementary Retirement Plan (SRP) (assumed by the
Registrant as to certain of its employees) (Exhibit 10.22 to the
FY92 Form 10-K).
10.26*# Honeywell Supplementary Executive Retirement Plan for Compensation
in Excess of $200,000 (assumed by the Registrant as to certain of
its employees (Exhibit 10.23 to FY92 Form 10-K).
10.27*# Honeywell Supplementary Executive Retirement Plan for CECP
Participants (assumed by the Registrant as to certain of its
employees formerly employed by Honeywell) (Exhibit 10.24 to the
FY92 Form 10-K).
10.28* Purchase and Sale Agreement, dated as of October 28, 1994, between
the Registrant and Hercules Incorporated (the "Purchase
Agreement"), including certain exhibits and certain schedules and a
list of schedules and exhibits omitted (Exhibit 2 to the October
1994 Form 8-K).
10.29* Master Amendment to Purchase Agreement, dated as of March 15, 1995,
between the Registrant and Hercules Incorporated, including
exhibits (Exhibit 2.2 to Form 8-K dated March 15, 1995).
10.29.1* Amendment No. 1 to Stockholder's Agreement, dated March 15, 1995,
between the Registrant and Hercules Incorporated (Exhibit 10.1 to
the FY98 First Quarter 10-Q).
10.30* Agreement and Confirmation Effective as of June 19, 1997 (Exhibit
10.2 to the FY98 First Quarter Form 10-Q).
10.31* Agreement dated October 24, 1997 between the Registrant and
Hercules Incorporated (Exhibit 10.43 to Amendment No. 1 to
Registration Statement on Form S-3, File No. 333-38775, filed with
the Securities and Exchange Commission on October 31, 1997).
10.32* Asset Purchase Agreement dated as of December 22, 1996 by and
between the Registrant and Hughes Aircraft Company (excluding
schedules and exhibits) (Exhibit 2.1 to Form 8-K dated February 28,
1997).
10.32.1* Amendment to Asset Purchase Agreement dated February 28, 1997 by
and between the Registrant and Hughes Aircraft Company (excluding
schedules and exhibits) (Exhibit 2.2 to Form 8-K dated February 28,
1997).
13 Annual Report (only those portions specifically incorporated herein
by reference shall be deemed filed with the Securities and Exchange
Commission).
36
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
During the quarter ended March 31, 1998, the Company filed no reports on Form
8-K.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: June 25, 1998 By /s/ Charles H. Gauck
----------------------
Charles H. Gauck
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE
/s/ Richard Schwartz Director, Chairman of the Board and Chief Executive
- ------------------------- Officer (Principal Executive Officer)
Richard Schwartz
/s/ Peter A. Bukowick Director, President and Chief Operating Officer
- -------------------------
Peter A. Bukowick
/s/ Scott S. Meyers Vice President and Chief Financial Officer (Principal
- ------------------------- Financial Officer)
Scott S. Meyers
/s/ Paula J. Patineau Vice President and Controller (Principal Accounting
- ------------------------- Officer)
Paula J. Patineau
* Director
- -------------------------
Gilbert F. Decker
* Director
- -------------------------
Thomas L. Gossage
* Director
- -------------------------
Joel M. Greenblatt
* Director
- -------------------------
Jonathan G. Guss
* Director
- -------------------------
David E. Jeremiah
* Director
- -------------------------
Gaynor N. Kelley
* Director
- -------------------------
Joseph F. Mazzella
* Director
- -------------------------
Daniel L. Nir
* Director
- -------------------------
Michael T. Smith
Date: June 25, 1998 *By /s/ Charles H. Gauck
-------------------------------
Charles H. Gauck
Attorney-in-Fact
38
INDEPENDENT AUDITORS' REPORT
Alliant Techsystems Inc.:
We have audited the consolidated financial statements of Alliant Techsystems
Inc. and subsidiaries as of March 31, 1998 and 1997, and for each of the years
ended March 31, 1998, March 31, 1997, and March 31, 1996 and have issued our
report thereon dated May 11, 1998; such financial statements and report are
included in your 1998 Annual Report to Stockholders (Exhibit 13) and are
incorporated herein by reference. Our audit also included the financial
statement schedule of Alliant Techsystems Inc., listed in Item 14. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
May 11, 1998
39
SCHEDULE II
ALLIANT TECHSYSTEMS INC.
VALUATION RESERVES
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
BALANCE BALANCE
BEGINNING PURCHASED ADDITIONS CHARGED DEDUCTIONS FROM AT CLOSE
OF PERIOD COMPANY TO INCOME RESERVES OF PERIOD
--------- ------- --------- -------- ---------
Reserves deducted from assets to
which they apply--reserve for
estimated loss on disposal of
discontinued operations:
NET ASSETS OF DISCONTINUED OPERATIONS
- -------------------------------------
Year ended March 31, 1998 ... $11,126 -- -- $11,126 (1) --
======= ======= =========== =========== =======
Year ended March 31, 1997 ... $13,700 -- -- $2,574 (1) $11,126
======= ======= =========== =========== =======
Year ended March 31, 1996 ... -- -- $ 13,700 -- $13,700
======= ======= =========== =========== =======
Reserves deducted from assets to
which they apply--allowance for
amortization of intangibles:
GOODWILL
--------
Year ended March 31, 1998 ... $ 7,255 -- $3,514 (2) -- $10,769
======= ======= =========== =========== =======
Year ended March 31, 1997 ... $ 3,940 -- $3,315 (2) -- $ 7,255
======= ======= =========== =========== =======
Year ended March 31, 1996 ... $ 621 -- $3,319 (2) -- $ 3,940
======= ======= =========== =========== =======
DEBT ISSUANCE COSTS
-------------------
Year ended March 31, 1998 ... $ 7,100 -- $1,469 (3) -- $ 8,569
======= ======= =========== =========== =======
Year ended March 31, 1997 ... $ 2,433 -- $4,667 (3) -- $ 7,100
======= ======= =========== =========== =======
Year ended March 31, 1996 ... -- -- $2,433 (3) -- $ 2,433
======= ======= =========== =========== =======
Notes: (1) Represents write-off of the associated assets.
(2) Represents amounts included in cost of sales.
(3) Represents amounts included in interest expense.
40
ALLIANT TECHSYSTEMS INC.
FORM 10-K
EXHIBIT INDEX
The following exhibits are filed electronically with this report unless the
exhibit number is followed by an asterisk (*), in which case the exhibit is
incorporated by reference from the document listed. The applicable Securities
and Exchange Commission File Number is 1-10582 unless otherwise indicated.
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
3(i).1* Restated Certificate of Incorporation, effective July 20, 1990
(Exhibit 3.1 to Amendment No. 1 to Form 10 Registration Statement
filed with the Securities and Exchange Commission on July 20, 1990
(the "Form 10")).
3(i).2* Certificate of Correction, effective September 21, 1990 (Exhibit
3.1 to Registration Statement on Form S-4, File No. 33-91138, filed
with the Securities and Exchange Commission on April 13, 1995 (the
"Form S-4")).
3(i).3* Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Registrant, effective
September 28, 1990 (Exhibit 3.3 to the Form S-4).
3(ii)* By-Laws, as amended through May 27, 1992 (Exhibit 3.3 to Form 10-K
for the fiscal year ended March 31, 1992 (the "FY92 Form 10-K")).
4.1* Form of Certificate for common stock, par value $.01 per share
(Exhibit 4.1 to Amendment No. 1 to the Form 10).
4.2* Rights Agreement, dated as of September 24, 1990, between the
Registrant and Manufacturers Hanover Trust Company (Exhibit 4.2 to
Post-Effective Amendment No. 1 to the Form 10).
4.2.1* First Amendment to Rights Agreement, dated as of August 4, 1992,
between the Registrant and Chemical Bank (successor to
Manufacturers Hanover Trust Company) (Exhibit 4.2.1 to Form 10-K
for the fiscal year ended March 31, 1993 (the "FY93 Form 10-K")).
4.2.2* Rescission Agreement, dated as of May 26, 1993, between the
Registrant and Chemical Bank (Exhibit 4.2.2 to the FY93 Form 10-K).
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
4.2.3* Second Amendment to Rights Agreement, dated as of October 28, 1994,
between the Registrant and Chemical Bank (Exhibit 4 to Form 8-K
dated October 28, 1994 (the "October 1994 Form 8-K")).
4.3* Indenture, dated as of March 1, 1995, between the Registrant and
First Bank National Association, as trustee (including a form of
Initial Note) (Exhibit 4.1 to the Form S-4).
4.4* Form of Exchange Note (Exhibit 4.2 to the Form S-4).
4.5* Registration Rights Agreement, dated as of March 14, 1995, among
the Registrant, the Lenders referred to therein, Morgan Guaranty
Trust Company of New York, as Documentation Agent, and Chemical
Bank, as Administrative Agent (Exhibit 4.3 to the Form S-4).
4.6* Amended and Restated Credit Agreement dated as of March 15, 1995
and amended and restated as of November 14, 1996 (the "Amended and
Restated Credit Agreement") among the Registrant, the Lenders
referred to therein, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and The Chase Manhattan Bank, as
Administrative Agent (including forms of Note, Assignment and
Assumption Agreement, and Amended and Restated Subsidiary Guaranty
Agreement (Exhibit 4 to Form 8-K dated November 14, 1996).
4.6.1* Amendment dated as of November 7, 1997 to the Amended and Restated
Credit Agreement (Exhibit 4 to Form 8-K dated October 27, 1997).
4.6.2 Waiver and Amendment No. 2 dated January 29, 1998 to the Amended
and Restated Credit Agreement.
4.7* Security Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (without
exhibits) (Exhibit 10.4 to the Form S-4).
4.8* Patent Security Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (without
exhibits) (Exhibit 10.5 to the Form S-4).
4.9* Pledge Agreement, dated as of March 15, 1995, between the
Registrant and J.P. Morgan Delaware, as Collateral Agent (Exhibit
10.6 to the Form S-4).
4.10* Purchase Agreement, dated March 7, 1995, among the Registrant and
the Initial Purchasers (Exhibit 10.37 to the Form S-4).
10.1* Distribution Agreement, dated as of September 24, 1990, between
Honeywell Inc. and the Registrant (Exhibit 10.1 to Amendment No. 2
to the Form 10).
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.2* Environmental Matters Agreement, dated as of September 24, 1990,
between Honeywell Inc. and the Registrant (Exhibit 10.3 to
Post-Effective Amendment No. 1 to the Form 10).
10.3* Intellectual Property Agreement, dated as of September 24, 1990,
between Honeywell Inc. and the Registrant (Exhibit 10.4 to
Amendment No. 2 to the Form 10).
10.3.1* Amendment No. 1 to Intellectual Property Agreement, dated as of
September 24, 1990 (Exhibit 10.4.1 to the FY92 Form 10-K).
10.3.2* Amendment No. 2 to Intellectual Property Agreement, dated as of
September 24, 1990 (Exhibit 10.4.2 to the FY92 Form 10-K).
10.3.3* Amendment No. 3 to Intellectual Property Agreement, dated July 30,
1992 (Exhibit 10.4.3 to Form 10-Q for the quarter ended October 3,
1993).
10.4* Tax Sharing Agreement, dated as of September 28, 1990, between
Honeywell Inc. and the Registrant (Exhibit 10.5 to Amendment No. 2
to the Form 10).
10.5* Government Subpoena Agreement between Honeywell Inc. and the
Registrant (Exhibit 10.11 to Amendment No. 2 to the Form 10).
10.6*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.3 to Form
10-Q for the quarter ended October 2, 1994 (the "FY95 Second
Quarter Form 10-Q")).
10.6.1*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.1 to Form
10-Q for the quarter ended July 4, 1994).
10.6.2*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.35 to Form
10-K for the fiscal year ended March 31, 1996 (the "FY96 Form
10-K")).
10.6.3*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.3 to Form
10-Q for the quarter ended June 29, 1997 (the "FY98 First Quarter
Form 10-Q")).
10.7*# Alliant Techsystems Inc. LSAR Option Loan Program (Exhibit 10.1 to
Form 10-Q for the quarter ended December 28, 1997 (the "FY98 Third
Quarter Form 10-Q")).
10.7.1*# Form of Promissory Note and Stock Pledge Agreement (Exhibit 10.2 to
the FY98 Third Quarter Form 10-Q).
10.8*# Form of Indemnification Agreement between the Registrant and its
directors and officers (Exhibit 10.6 to Amendment No. 1 to the Form
10).
10.9# Executive Split Dollar Life Insurance Plan.
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.9.1# Executive Life Insurance Agreement.
10.9.2# Split Dollar Life Insurance Agreement.
10.10*# Form of Retention Agreement between the Registrant and certain of
its officers (Exhibit 10.18 to Amendment No. 1 to the Form 10).
10.11*# Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive
Plan (Appendix D to Proxy Statement, dated February 11, 1995).
10.12*# Form of Non-Qualified Stock Option Agreement (Exhibit 10.12 to Form
10-K for the fiscal year ended December 31, 1990 (the "1990 Form
10-K")).
10.13*# Form of Employment Restrictions Agreement (Exhibit 10.13 to the
1990 Form 10-K).
10.14*# Hercules Supplementary Employee Retirement Plan (SERP) (assumed by
the Registrant as to certain of its employees (Exhibit 10.38 to the
Form S-4).
10.15*# Management Compensation Plan (Exhibit 10.14 to Amendment No. 1 to
the Form 10).
10.16*# Flexible Perquisite Account description. (Exhibit 10.1 to the FY95
Second Quarter Form 10-Q).
10.17*# Restricted Stock Plan for Non-Employee Directors (Exhibit 10.13 to
Amendment No. 1 to Form 10).
10.17.1*# Non-Employee Restricted Stock Plan (Appendix B to Proxy Statement
dated July 3, 1996).
10.17.2*# Form of Restricted Stock Agreement (Exhibit 10.2 to Form 10-Q for
the quarter ended September 29, 1996).
10.18*# Deferred Fee Plan for Non-Employee Directors (as amended and
restated November 24, 1992) (Exhibit 10.18 to the FY93 Form 10-K).
10.19*# Non-employee director per diem arrangement (Exhibit 10.20 to the
FY92 Form 10-K).
10.20*# Income Security Plan (Exhibit 10.23 to Form 10-K for the fiscal
year ended March 31, 1997 (the "FY97 Form 10-K")).
10.20.1# Trust Under Income Security Plan, dated May 4, 1998 (effective
March 2, 1998), by and between the Registrant and U.S. Bank
National Association.
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.21*# Form of Employment Letter Agreement, dated October 27, 1994,
between the Registrant and Richard Schwartz (Exhibit 10.1 to Form
10-Q for the quarter ended January 1, 1995 (the "FY95 Third Quarter
Form 10-Q")).
10.21.1*# Indemnification Agreement, dated as of October 28, 1994, between
the Registrant and Richard Schwartz (Exhibit 10.2 to the FY95 Third
Quarter Form 10-Q).
10.22*# Compensation Arrangement between the Registrant and Scott S. Meyers
(Exhibit 10.32 to the FY96 Form 10-K).
10.23*# Arrangements with Executive (Exhibit 10 to Form 10-Q for the
quarter ended December 29, 1996).
10.23.1*# Arrangement with Executive (Exhibit 10 to Form 8-K dated February
28, 1997).
10.24*# Compensation Arrangement with Arlen D. Jameson (Exhibit 10.35 to
the FY97 Form 10-K).
10.24.1*# Performance Share Agreement between the Registrant and Arlen D.
Jameson (Exhibit 10.35.1 to the FY97 Form 10-K).
10.25*# Honeywell Supplementary Retirement Plan (SRP) (assumed by the
Registrant as to certain of its employees) (Exhibit 10.22 to the
FY92 Form 10-K).
10.26*# Honeywell Supplementary Executive Retirement Plan for Compensation
in Excess of $200,000 (assumed by the Registrant as to certain of
its employees (Exhibit 10.23 to the FY92 Form 10-K).
10.27*# Honeywell Supplementary Executive Retirement Plan for CECP
Participants (assumed by the Registrant as to certain of its
employees formerly employed by Honeywell) (Exhibit 10.24 to the
FY92 Form 10-K).
10.28* Purchase and Sale Agreement, dated as of October 28, 1994, between
the Registrant and Hercules Incorporated (the "Purchase
Agreement"), including certain exhibits and certain schedules and a
list of schedules and exhibits omitted (Exhibit 2 to the October
1994 Form 8-K).
10.29* Master Amendment to Purchase Agreement, dated as of March 15, 1995,
between the Registrant and Hercules Incorporated, including
exhibits (Exhibit 2.2 to Form 8-K dated March 15, 1995).
10.29.1* Amendment No. 1 to Stockholder's Agreement, dated March 15, 1995,
between the Registrant and Hercules Incorporated (Exhibit 10.1 to
the FY98 First Quarter 10-Q).
EXHIBIT DESCRIPTION OF EXHIBIT (AND DOCUMENT FROM
NUMBER WHICH INCORPORATED BY REFERENCE, IF APPLICABLE)
10.30* Agreement and Confirmation Effective as of June 19, 1997 (Exhibit
10.2 to the FY98 First Quarter Form 10-Q).
10.31* Agreement dated October 24, 1997 between the Registrant and
Hercules Incorporated (Exhibit 10.43 to Amendment No. 1 to
Registration Statement on Form S-3, File No. 333-38775, filed with
the Securities and Exchange Commission on October 31, 1997).
10.32* Asset Purchase Agreement dated as of December 22, 1996 by and
between the Registrant and Hughes Aircraft Company (excluding
schedules and exhibits) (Exhibit 2.1 to Form 8-K dated February 28,
1997).
10.32.1* Amendment to Asset Purchase Agreement dated February 28, 1997 by
and between the Registrant and Hughes Aircraft Company (excluding
schedules and exhibits) (Exhibit 2.2 to Form 8-K dated February 28,
1997).
13 Annual Report (only those portions specifically incorporated herein
by reference shall be deemed filed with the Securities and Exchange
Commission).
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.