ATK Raises FY08 EPS Guidance to $5.80 - $6.00 on Strength of Sales Now Expected to Reach $3.7 - $3.8 Billion

MINNEAPOLIS, Feb. 1 /PRNewswire-FirstCall/ -- Alliant Techsystems reported today that earnings per share in the third quarter rose 21 percent to $1.53, which includes 15 cents of EPS benefit due to the extension of the Federal research and development tax credit (11 cents of which pertained to prior quarters). Based on the strength of the quarter and better visibility into the remainder of the year, ATK is raising its FY07 EPS guidance to a range of $5.10 - $5.15. In addition, the company now expects FY07 sales of approximately $3.5 billion, up from its previous guidance of in excess of $3.45 billion.

Sales for the quarter, which ended December 31, rose 17 percent to $900 million from $770 million in the prior-year quarter. Orders were up 7 percent to $868 million from $812 million in the prior-year period. The company's third-quarter EBIT margin (earnings before interest and income taxes as a percent of sales) was 10.3 percent -- on track for full-year EBIT performance of approximately 10 percent.

"Clearly, this was an exceptional quarter for ATK and our shareholders," said Dan Murphy, Chairman and Chief Executive Officer. "The businesses performed well. We strengthened our order profile significantly and continued delivering on our commitment of double digit earnings growth. Because of the strong quarter and our confidence in the full year, we're raising guidance for EPS, sales, and orders," said Murphy.

Earnings per share for the first nine months of fiscal year 2007 increased 12 percent to $3.74, compared to $3.34 a year ago. Sales through the third quarter were up 11 percent to $2.56 billion, versus $2.30 billion in the previous year. Orders increased 13 percent to $2.42 billion from $2.15 billion in the prior year.

Year-to-date, the company has used $53 million in operating cash. In the prior-year period, the company's operations provided $145 million of operating cash. The decrease reflects ATK's previously announced capital deployment strategy to incrementally fund its pension obligations. Year-to-date, ATK has contributed approximately $313 million to the pension plan, compared to $26 million in the prior-year period. The increase reflects prepayments of $300 million to nearly fully-fund ATK's pension plan.

SUMMARY OF REPORTED RESULTS

The following table presents the company's results for the year-to-date and the quarter ending on December 31, 2006.

Net Sales and Income before Interest, Income Taxes, and Minority Interest (Dollars in Millions) External Sales: Quarters Ended Nine Months Ended December January December January 31, 1, % 31, 1, % 2006 2006 $ Change Change 2006 2006 $ Change Change Mission Systems Group $296.0 $269.5 $26.5 9.8% $855.0 $812.8 $42.2 5.2% Ammunition Systems Group 330.5 265.8 64.8 24.4% 900.1 764.8 135.3 17.7% Launch Systems Group 273.8 234.8 39.0 16.6% 800.6 721.5 79.1 11.0% Total external sales $900.3 $770.0 $130.3 16.9% $2,555.8 $2,299.1 $256.7 11.2% Income before Interest, Income Taxes, and Minority Interest (Operating Profit): Quarters Ended Nine Months Ended December January December January 31, 1, 31, 1, 2006 2006 Change 2006 2006 Change Mission Systems Group $30.1 $27.2 $2.8 $83.5 $70.6 $13.0 Ammunition Systems Group 32.5 31.4 1.1 78.5 75.8 2.7 Launch Systems Group 34.6 33.9 0.7 107.7 101.4 6.3 Corporate (4.8) (4.4) (0.4) (16.1) (11.1) (4.9) Total $92.4 $88.2 $4.3 $253.7 $236.6 $17.1 Note: The net expense of Corporate primarily reflects expenses incurred for administrative functions that are performed centrally at the corporate headquarters (as well as stock option expenses and elimination of intercompany profits.) QUARTERLY SEGMENT RESULTS

ATK operates three principal business groups: Mission Systems Group; Ammunition Systems Group; and Launch Systems Group.

MISSION SYSTEMS GROUP

Sales from the Mission Systems Group increased 10 percent to $296 million, compared to $269 million in the prior-year quarter. The increase reflects higher volume from the Standard Missile 3 program, additional aircraft integration business, and higher revenue from the Joint Strike Fighter program as it transitions into production. These increases were partially offset by lower sales in precision weapons, due primarily to the timing of program efforts. ATK continues to expect that the Mission Systems Group will achieve mid single-digit organic growth for the full year.

Third-quarter operating profit increased 10 percent to $30 million versus $27 million in the previous year, reflecting higher Group sales. The company continues to expect operating margins for the full year of more than 9 percent.

AMMUNITION SYSTEMS GROUP

Sales from the Ammunition Systems Group increased 24 percent to $331 million from $266 million in the prior-year quarter. "I was particularly pleased to see that our civil ammunition business grew by 25 percent in the quarter. We increased sales in the law enforcement market and announced new orders with the Department of Homeland Security," said Murphy. ATK now believes that sales growth for the Group will exceed 12 percent.

Third-quarter earnings before interest and taxes (operating profit) for the Ammunition Systems Group rose four percent to $32.5 million from $31.4 million in the prior year quarter. The growth reflects higher sales across the Group and improved margins on medium-caliber ammunition programs. Higher raw material costs and lower than planned volume on the company's TNT production line partially offset the Group's operating profit. The company continues to expect full-year operating margins in the Ammunition Systems Group of approximately 9 percent.

LAUNCH SYSTEMS

Sales from the Launch Systems Group increased 17 percent to $274 million versus $235 million in the prior year quarter. This reflects new sales from NASA's Ares I program, increased demand for flares and decoys, and the timing of material purchases for the Space Shuttle rocket motor program. Based on sales strength through the first three quarters, ATK is raising its expectations for full-year growth to upper single digits, from its previous expectation of mid-single digit growth.

Third-quarter operating profit for the Launch Systems Group rose to $35 million from $34 million in the prior-year period. This reflects profit from increased sales and favorable contract performance on strategic missile programs. The increase was partially offset by the absence of a flight incentive on the Titan program and the closeout of the Orion rocket motor program in the previous year. The company continues to expect full-year margins in the Launch Systems Group of approximately 14 percent.

OUTLOOK

Based on the strength of sales across all three business Groups and outstanding program performance, ATK is raising its full-year FY07 EPS, sales, and orders guidance. ATK expects full-year EPS in a range of $5.10-$5.15, up from its previous guidance of $4.95-$5.05. The company is raising its sales expectations to $3.5 billion. It previously expected sales to exceed $3.45 billion. ATK is also raising its FY07 orders guidance to approximately $3.8 billion, up from prior guidance of $3.6 billion. ATK continues to expect negative full-year free cash flow of approximately $40 million, reflecting the impact of the $300 million prepayment to the company's defined benefit plan. (see reconciliation table at the end of this release).

The company expects average share count of less than 35 million in FY07. The effective tax rate is expected to be approximately 35 percent while pension expenses are expected to remain at approximately $70 million.

ATK is raising its EPS guidance for FY08 to a range of $5.80 - $6.00, up from its previous guidance of $5.65 - $5.80. The company expects FY08 sales of $3.7 - $3.8 billion and free cash flow in excess of $260 million (see reconciliation table).

ATK is a $3.5 billion advanced weapon and space systems company employing approximately 15,000 people in 21 states. News and information can be found on the Internet at http://www.atk.com/ .

Certain information discussed in this press release constitutes forward- looking statements as defined in the Private Securities Litigation Reform Act of 1995. Although ATK believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected. Among these factors are: delays in NASA's Space Shuttle program; changes in governmental spending, budgetary policies and product sourcing strategies; the company's competitive environment; risks inherent in the development and manufacture of advanced technology; increases in commodity costs, energy prices, and production costs; the terms and timing of awards and contracts; program performance; program terminations; changes in cost estimates related to relocation of facilities; the outcome of contingencies, including litigation and environmental remediation; actual pension asset returns and assumptions regarding future returns, discount rates and service costs; the availability of capital market financing; changes to accounting standards; changes in tax rules or pronouncements; economic conditions; and the company's capital deployment strategy, including debt repayment, share repurchases, pension funding, mergers and acquisitions and any integration thereof. ATK undertakes no obligation to update any forward-looking statements. For further information on factors that could impact ATK, and statements contained herein, please refer to ATK's most recent Annual Report on Form 10-K and any subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with the U.S. Securities and Exchange Commission.

Reconciliation of Non-GAAP Financial Measures Free Cash Flow

Free cash flow is defined as cash provided by operating activities less capital expenditures. ATK management believes free cash flow provides investors with an important perspective on the cash available for debt repayment, share repurchase, pension funding, and acquisitions after making the capital investments required to support ongoing business operations. ATK management uses free cash flow internally to assess both business performance and overall liquidity.

Projected Projected Year Ending Year Ending March 31, 2007 March 31, 2008 Cash provided by operating activities $~35,000 $~345,000 Capital expenditures (~75,000) >(80,000) Free cash flow $~(40,000) $>260,000 ALLIANT TECHSYSTEMS INC. CONSOLIDATED INCOME STATEMENTS (In thousands except per share data) QUARTERS ENDED NINE MONTHS ENDED December January December January 31, 1, 31, 1, 2006 2006 2006 2006 Sales $900,301 $770,029 $2,555,774 $2,299,113 Cost of sales 733,151 614,315 2,077,063 1,859,551 Gross profit 167,150 155,714 478,711 439,562 Operating expenses: Research and development 13,461 11,024 39,012 35,101 Selling 19,882 19,527 67,337 56,812 General and administrative 41,381 37,001 118,639 111,042 Total operating expenses 74,724 67,552 224,988 202,955 Income before interest, income taxes, and minority interest 92,426 88,162 253,723 236,607 Interest expense (19,555) (17,189) (54,241) (51,703) Interest income 199 573 743 941 Income before income taxes and minority interest 73,070 71,546 200,225 185,845 Income tax provision 21,734 24,323 69,871 61,039 Income before minority interest 51,336 47,223 130,354 124,806 Minority interest, net of income taxes 106 124 324 335 Net income $51,230 $47,099 $130,030 $124,471 Earnings per common share: Basic $1.55 $1.28 $3.81 $3.39 Diluted 1.53 1.26 3.74 3.34 Average number of common shares 32,953 36,714 34,169 36,716 Average number of common and dilutive shares 33,556 37,283 34,749 37,306 ALLIANT TECHSYSTEMS INC. CONSOLIDATED BALANCE SHEETS (In thousands except share data) December 31, March 31, 2006 2006 Assets Current assets: Cash and cash equivalents $18,675 $9,090 Net receivables 802,255 738,909 Net inventories 177,804 139,876 Deferred income tax assets 75,689 77,848 Other current assets 26,974 53,728 Total current assets 1,101,397 1,019,451 Net property, plant, and equipment 447,756 453,958 Goodwill 1,163,186 1,163,186 Prepaid and intangible pension assets 79,093 82,254 Deferred charges and other non- current assets 184,115 183,131 Total assets $2,975,547 $2,901,980 Liabilities and Stockholders' Equity Current liabilities: Cash overdrafts $1,540 $63,036 Current portion of long-term debt 27,000 29,596 Line of credit borrowings 125,000 - Accounts payable 145,291 165,955 Contract advances and allowances 76,382 49,667 Accrued compensation 99,879 114,537 Accrued income taxes 32,318 23,710 Other accrued liabilities 165,188 224,443 Total current liabilities 672,598 670,944 Long-term debt 1,375,750 1,096,000 Deferred income tax liabilities 49,754 2,909 Postretirement and postemployment benefits liability 170,733 175,314 Minimum pension liability 20,344 212,258 Other long-term liabilities 117,011 116,197 Total liabilities 2,406,190 2,273,622 Contingencies Common stock - $.01 par value Authorized - 90,000,000 shares Issued and outstanding 32,955,299 shares at December 31, 2006 and 35,207,335 at March 31, 2006 330 352 Additional paid-in-capital 468,844 472,861 Retained earnings 1,058,551 928,521 Unearned compensation - (2,760) Accumulated other comprehensive loss (340,356) (333,136) Common stock in treasury, at cost, 8,599,762 shares held at December 31, 2006 and 6,347,726 at March 31, 2006 (618,012) (437,480) Total stockholders' equity 569,357 628,358 Total liabilities and stockholders' equity $2,975,547 $2,901,980 ALLIANT TECHSYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) NINE MONTHS ENDED December 31, 2006 January 1, 2006 Operating activities Net income $130,030 $124,471 Adjustments to net income to arrive at cash (used for) provided by operating activities: Depreciation 51,347 52,377 Amortization of intangible assets 5,537 6,554 Amortization of deferred financing costs 2,814 2,901 Deferred income taxes 53,184 5,459 Loss on disposal of property 124 296 Minority interest, net of income taxes 324 335 Share-based plans expense 27,268 15,735 Excess tax benefits from share-based plans (2,114) - Changes in assets and liabilities: Net receivables (63,346) (19,694) Net inventories (37,928) (36,433) Accounts payable (13,906) (42,187) Contract advances and allowances 26,715 7,209 Accrued compensation (14,219) (3,306) Accrued income taxes 13,336 30,311 Pension and other postretirement benefits (267,828) (1,422) Other assets and liabilities 35,961 2,191 Cash (used for) provided by operating activities (52,701) 144,797 Investing activities Capital expenditures (52,990) (36,694) Proceeds from the disposition of property, plant, and equipment 572 1,623 Cash used for investing activities (52,418) (35,071) Financing activities Change in cash overdrafts (61,496) (6,092) Net borrowings on line of credit 125,000 - Payments made on bank debt (20,250) (20,250) Payments made to extinguish debt (2,596) (266,553) Proceeds from issuance of long- term debt 300,000 270,000 Purchase of call options (50,850) - Sale of warrants 23,220 - Payments made for debt issue costs (7,478) (728) Net purchase of treasury shares (208,027) (78,498) Proceeds from employee stock compensation plans 15,067 18,846 Excess tax benefits from share- based plans 2,114 - Cash provided by (used for) financing activities 114,704 (83,275) Increase in cash and cash equivalents 9,585 26,451 Cash and cash equivalents - beginning of period 9,090 12,772 Cash and cash equivalents - end of period $18,675 $39,223 Media Contact: Investor Contact: Bryce Hallowell Steve Wold Phone: 952-351-3087 Phone: 952-351-3056 E-mail: bryce.hallowell@atk.com E-mail: steve.wold@atk.com