In its final earnings report before the merger of its aerospace and defense groups with Orbital Sciences Corp. [ORB] next month, ATK [ATK] on Wednesday posted mixed results with its commercial sporting business, which will be spun of into a separate company, weighing on earnings and sales while its government businesses were solid.
Net income in the company’s third quarter tumbled 43 percent to $46 million, $1.43 earnings per share (EPS), from $80 million ($2.46 EPS) a year ago, due largely to a $48 million ($1.50 EPS) non-cash impairment charge related to the company’s previous acquisition of sporting rifle maker Savage Arms. ATK said the charge is due to a market correction impacting demand for firearms.
Adjusting for the charge and costs associated with the pending merger, adjusted earnings were $3.02 EPS, six cents above analysts’ estimates.
The charge caused a steep drop in operating profits at the Sporting Group, down 77 percent to $18.3 million. ATK’s Defense Group’s profit was also down 9 percent to $48.6 million on lower sales of small caliber ammunition.
The Aerospace Group posted a strong 20 percent rise in operating earnings to $40 million on higher sales, particularly for aerospace structures.
Sales in the quarter increased 2 percent to $1.3 billion from $1.2 billion driven by gains in the Aerospace and Defense Groups, which were both up 2 percent to $324.6 million and $466 million respectively. The Sporting Group, which will become the publicly traded company Vista Outdoor once the rest of ATK merges with Orbital, was down 3 percent to $506.9 million.
The overall sales were the highest ever for ATK in the third quarter.
ATK didn’t host an earnings call nor did it issue financial guidance due to the pending merger, which is set to close on Feb. 9.
Orders in the quarter were $1 billion and free cash flow was $72.3 million.
“In the Aerospace and Defense Groups, we achieved year-over-year revenue increases and maintained double-digit margins,” ATK’s president and CEO, Mark DeYoung, said in a statement. “Our Aerospace Group continues to secure new programs and deliver strong results, while strategically positioning the company for the future with key wins in commercial aerospace and space exploration.”
DeYoung will become the chief of Vista Outdoor following the spin-off of the Sporting Group.