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Article Excerpt
UNIDENTIFIED PARTICIPANT: Okay, everyone, we are going to get started with our final session -- company session of the day. There will be a military presentation at four o'clock in this room, but our final company presentation is Alliant Tech Systems, better known as ATK.
I would like to welcome John Shroyer, who is the Senior Vice President and Chief Financial Office or of the Company. Thanks for coming.
JOHN SHROYER, CFO, ALLIANT TECHSYSTEMS, INC.: Thank you. I appreciate it. Good afternoon, everyone. Thanks for coming to the conference. Usually, I bring the cold weather from Minnesota to the East Coast, I actually think it's a lot colder here today, so I'm already ready to go home.
I want to start out a little bit, give you a brief update on our last quarter, in case you didn't get a chance to listen to our earnings call. But we are well on our way to our fourth year of double-digit organic revenue growth for the Company. We turned in another solid quarter.
EPS for the quarter was up year-over-year. We are on track to achieve 17% to 19% year-over-year EPS growth for the Company.
From a cash flow perspective, we are starting out a little slow, as we always do in the first couple of quarters, but we are very confident in our ability to generate the $260 million free cash that we are focusing on for the year.
Most importantly, from my perspective, for the quarter, we hit 11% operating margins or EBIT margins for the Company, which was our goal that we set out at the beginning of the year to hit that and achieve that next year, which really gives us our confidence to continue that double-digit earnings growth on out into the future.
Just on the cash flow, as long as we are there too, in terms of liquidity, I know that's on everybody's mind and I will hit that a little bit later in a few charts. But I want to spend a little bit of time on the pension expense that we talked about on the call.
We do have a roughly $2 billion pension plan. As you know, the markets obviously haven't performed very well. Through September, our results were down 9% for the six months, versus our expected 9% return that we have for the year.
The good news is that the discount rates are way up. In fact, there are well over 8% at that time. That will help offset the impact of those returns through September.
Now, we don't measure our pension results until March 31, so there's a lot of things that will change, as you know, between now and then, including asset returns as well as discount rates. But as we sit here today and we model out next year through September, we do not see a significant change in our financial pension expense for our fiscal year end. Now, from a cash perspective, we do see some modest growth in the funding requirements of about $30 million of pension funding for next year.
Just on the sensitivity there a little bit, for every 1% change in our actual returns, another $700,000 of expense or benefit, depending on which direction it goes from that 9%, and every 0.25 basis change in the discount rate is about a $6.5 million impact to pension expense or benefit to pension expense, depending on which direction it goes. So again, just through September results, based on what we see, we do not see a significant change from our $40 million of pension expense that we are in recurring this fiscal year, as things stand today.
So with that, let's go to the next slide there, Jeff. This is what I mentioned early on, the strong performance of this company year in and year out for the 15 years or 17 years that I've been with this company. We keep delivering on our commitments and on our expectations there. You see the sales bars up four years in a row, year-over-year organic growth double digits.
More importantly, on the EPS side, over double-digit growth year-over-year, driven by that strong sales growth, plus our margin improvement initiatives as well as our capital deployment strategy, which continues to look at our three levers of capital deployment -- acquisitions, debt paydown, and share repurchase.
We did announce another share repurchase plan coming out of our last quarter, 5 million shares. We did do a small portion in the second quarter to buy back the overhang of about 30 million on our benefits plan. That's still a very attractive lever to us. (inaudible) we get through the picture, especially in Mission Systems with some of our commercial opportunities we are also looking at potentially some internal investments as another lever to focus on to continue this double-digit EPS growth that you've all become used to.
The next slide -- this breaks down our business into really the two big pieces -- our core franchise. About two thirds of the business is our leading position, solid propulsion. We have about 85% to 90% of that market in the US, as well as, on the ammunition front, both military and commercial sporting and law enforcement. We are the leader in ammunition in this country. That doesn't have huge growth that goes with it, even out into the next three years, but it is a very solid business. It generates a lot of profit, a lot of cash, and gives us a lot of flexibility to continue to generate that double-digit EPS growth.
We've got quite a few growth accelerators. We have a few of those listed up there in...
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