By Calvin Biesecker

ATK [ATK] yesterday said it swung to a profit in the fourth quarter despite relatively flat sales due in part to hefty charges a year ago that caused a net loss and strong results in its ammunition business.

Net income swung to a $58.4 million profit, $1.73 earnings per share (EPS), compared to a loss of $36.4 million ($1.12 EPS) a year ago. Both periods include non-cash impairment charges.

Excluding those charges, ATK’s operating profits increased 13 percent to $2.44 EPS, which beat consensus estimates by 16 cents, due largely to sales and profit gains in commercial and military small caliber ammunition. Also excluding the charges, operating margins in the quarter were 11.8 percent, level with a year ago.

Sales in the quarter declined 1 percent to above $1.2 billion from just below $1.3 billion a year ago, as increases at Armament Systems were offset by decreases at Space Systems and to a lesser extent Mission systems.

The Armament business benefited from higher sales of military and commercial ammunition, non-standard ammunition and energetic programs, which along with higher profit margins, contributed to strong profit growth.

Space Systems on the other hand saw its sales decline due to reduced volume on the Space Shuttle and Minuteman III ballistic missile program. The segment swung to a profit as the impact from charges a year ago led to a loss at Space Systems at that time.

Sales and profits at the Mission Systems segment declined on lower volume on composite structures for a centrifuge program for nuclear power plants, and fewer sales on tank ammunition and upgrades for special mission aircraft and a charge in the fourth quarter.

For the year, ATK’s net income nearly doubled to $278.7 million ($8.33 EPS) from $140.8 million ($4.14 EPS). Excluding charges in both years, net income rose 23 percent to $9.04 EPS.

Sales for the year increased 5 percent to $4.8 billion, again driven by the Armament Systems group, from $4.6 billion a year ago.

Backlog at the end of ATK’s FY ’10 was $7.1 billion, and bookings in the fourth quarter were a robust $1.7 billion. The strong orders were driven by work on the F-35 Joint Strike Fighter, and military and commercial ammunition. Free cash flow for the year was $50 million, including the contributions of $30 million to pension plans.

ATK initiated guidance for FY ’11, with sales and earnings expected to be relatively flat at the mid-point of projections, which the company had previously indicated. Sales are expected to be right around $4.8 billion and earnings between $8 and $8.50, which is below analysts’ estimates. Free cash flow is expected to range between $275 million and $300 million.

Beyond FY ’11, the company will be focused on continuing to increase international sales, developing advanced products and systems at good prices, further expanding lean manufacturing and business process improvements, and transitioning development programs into production, Mark DeYoung, ATK’s president and CEO, said on yesterday’s earnings call. He also said that acquisitions will continue to be part of the company’s strategy.