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Alliant Techsystems Inc. (NYSE:ATK)

Q1 FY09 Earnings Call

August 7, 2008, 10:00 AM ET

Executives

Steve Wold - Treasurer and VP, IR

Daniel J. Murphy - Chairman and CEO

John L. Shroyer - Sr. VP and CFO

Analysts

Troy Lahr - Stifel Nicolaus

Joseph Campbell, Jr. - Lehman Brothers

Adam Pasick - Citigroup

Gautam Khanna - Cowen & Co.

Herb Hardt - Monnes, Crespi, Hardt and Co., Inc.

Operator

Good day, everyone and welcome to today's First Quarter 2009 Earnings Conference Call. Today's call is being recorded. At this time, I would now like to turn the conference over to the ATK Vice President of Investor Relations, Mr. Steven Wold. Please go ahead sir.

Steve Wold - Treasurer and Vice President, Investor Relations

Thanks Jacquelyn. Good morning to all. Welcome to our first quarter fiscal '09 earnings call and webcast. With me today, I have Dan Murphy, ATK's Chairman and Chief Executive Officer; and John Shroyer, Senior Vice President and Chief Financial Officer.

During today's call we will be making several forward-looking statements regarding current projections for future results. These statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on our best estimates. They are made based on our understanding of information known to us today and are subject to the risks and uncertainties that face all businesses. Many of those risks and uncertainties are discussed in detail in our SEC filings, including our most recent 10-Qs, 10-Ks as well as the 8-Ks and I encourage you to review those filings.

Actual results could differ materially from the projections that we make today. Certain financial measures that we use today are considered non-GAAP financial measures. We include a reconciliation of these measures to the most comparable GAAP measures on our website at atk.com, where we provide other additional background and guidance data as well.

Dan will open up today's call with some brief context as to the quarter and comments on the outlook, and then John will discuss some of the financial details of the quarter. At that point, we will open up the phones for questions from the listeners. With all that said, I turn the call over to you Dan.

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you, Steve. Good morning everyone and thanks for joining the call today. ATK delivered strong performance during this quarter, generating double-digit sales growth. The majority of our Armament, Space and Mission businesses continue to have great visibility, significant backlog, strong bid pipelines and excellent program execution.

One exception to a terrific quarter was our Spacecraft Structures business. Here we experienced program execution issues. We're aggressively tackling these performance shortfalls by proactively rationalizing the operations and implementing improvements to drive profitability. We've taken the issues head on, as you'd come expect of ATK and we are confident in our ability to resolve them.

ATK's full year and long-term outlook remains solid. We are bullish on the remainder of fiscal year '09 across all financial metrics. We are raising sales guidance with continuing growth in armament systems, much more then offsetting the flatter near-term space outlook, pushing full year sales growth to greater than 9%. We've increased confidence in our EPS guidance and are narrowing the range to the upper end of prior guidance that represents 15% to 16% year-over-year earnings growth and we continue to see strong cash flow to support our capital deployment plans.

Beyond fiscal year '09, our long-term commitment is to continue delivering double-digit earnings growth, using all levers, top-line growth, margin improvement where we are driving to a 11% plus and opportunistic capital deployment. The long-term outlook is driven by an expanding opportunity set and bid pipeline. A couple of words and opportunities driving our growth.

On the Joint Strike Fighter, we are striving to nearly double our structures content from $1.2 million to $2 million per aircraft. Elsewhere in the Missions Systems group, several large opportunities are in varying stages of the bid-award process, including the Excalibur 1B Precision Artillery program which will be awarded this fall. JATAS, which stands for Joint Allied Threat Awareness System, the next-generation missile warning system, with a proposal submission this December and you may have noted our release that we are teamed with BAE on this program and various ISR that's Intelligent Surveillance and Reconnaissance programs that will very likely expand our aircraft integration business.

In Armament, our strategy is to move beyond the core ammunition business into adjacent markets, including integrated weapon systems, remote weapon stations, and tactical accessories. This strategy is succeeding. Additional growth in armament systems is from increased international sales, expected to be up more than 20% this year. This is our second consecutive year of 20 plus percent growth in this high-margin market.

Within Space Systems, we continue to see areas we want to ramp up and are positioning the capture content on the future ARIES-V cargo vehicle. Underpinning these growth areas, will be our ongoing long-term annuity businesses in propulsion and ammunition; both with long-term backlog.

Finally our confidence in ATK's long-term outlook is underscored by our Board's authorization to repurchase roughly 15% of the company's outstanding shares. In sum, ATK's fundamentals are strong. The opportunities for growth are expanding and we are sharply focused on shareholder value.

John over to you.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Thanks Dan. Good morning everyone. We are very pleased with the start to the year. The business has produced strong results, sales led by the biggest quarter in Armament System's history were up 17% year-over-year to more than $1.1 billion. Net income rose 10% to $58 million. EPS was 9% to $1.64.

Based on the strengths to the start of the fiscal year, we are raising sales guidance by $50 million and narrowing projections for EPS, to the upper end of the range at $7.25 to $7.35 a share. Orders were in line with expectations, but down from last year's first quarter due to the several large multiyear orders in the prior year quarter.

Dan mentioned several programs we are pursuing right now and we expect that order profile to fill in during the fiscal year. By the end of the year, we expect approximately $4 billion in orders. Backing out the large NASA contracts from last year, the book-to-bill will be in excess to one, again demonstrating the strength of our year performance expectations. In fact, just last week, we booked a follow-on order from NASA in excess of a 150 million for the development of additional motors in the test program, leading up to Aries-1 flight.

We remain on track for fiscal year-end free cash flow of approximately $260 million. As you saw in the release, we are holding a $260 million, even though we have increased our CapEx by $5 million. The additional expenditures will help us to drive operating efficiencies and support added sales volumes.

We continue to expect a 37% tax rate for the year, with the share price following the market down a little bit and the impact of dilution from the converts less mean, we now expect full year shares outstanding in the mid-$35 million.

We are disappointed by the charges required to address issues that surfaced in our Spacecraft Structures business. The $15 million in charges is a result of production issues, including scheduled delays and inefficiencies that our BUS structure manufacturing facility. We've already taken action to resolve the production issues and returned the site to profit ability for the longhaul. We are committed to this business and will drive for the same results from in Spacecraft Structures that we expect in all of our businesses.

One other thing, I want to mention before we get to the groups is the accounting guidance for convertible debt, that FASB issued in May that will be effective for our fiscal year 2010, and applied retrospectively. We expect the impact in fiscal year 2010 to be an additional 20 million of non-cash interest expense for approximately $0.34 per diluted share.

Okay, let's turn of the groups; I'll start with Space Systems. Sales in the group rose by 11% to $407 million. The increase was driven by recognizing a full quarter of sales from Swales Aerospace, higher volumes in NASA's Aries-1 program. These were offset by declines in Spacecraft Structures and lower volumes in flare production. We expect sales in the Space Systems group to grow by mid-single digits for the full year. The EBIT rate in Space was 8.9% compared to 13.9% a year earlier, driven in large part by the $15 million in charges to the Spacecraft Structures, as well as the timing of strategic programs which had a pick up in the first quarter last year.

For the year, we expect the EBIT rate to bounce to approximately 12%. I mentioned in my opening remarks that Armament Systems turned in a record-setting quarter. They really hit on all cylinders. Sales for the quarter were up 32% to $442 million compared to the first quarter last year, driven by increased volumes and commercial products in both military small and medium-caliber ammunition. As a reminder, part of the strong start is due to timing in medium-caliber ammunitions, which included $26 million in sales realized in the first quarter rather then later in the fiscal year. Even given that timing, an apples-to-apples comparison of the quarter yields about 24% in year-over-year growth. We now expect full year sales in the group to be up by low-teens over fiscal year 2008.

The EBIT rate for Armament Systems was 10% versus 8.6% a year ago, reflecting improved margins and commercial products, increased operating efficiencies in medium-caliber systems and improvements in energetics. For the year, we expect the EBIT rates at Armament Systems to be approximately 10%.

Sales in the Mission Systems were up 8% to $277 million led by additional revenue from NASA programs and higher volumes across several tactical rocket motor lines. We expect full year sales in the group to be up by approximately 10%.

EBIT for Mission Systems was 11.9% compared to 10.7% in the first quarter last year. The improvement reflects better performance in military aircraft structures and strong sales in tactical rocket motors and defense electronics. We continue to expect full year margins in the mid-11% range.

Just a recap of the quarter, EPS was up 9% to $1.64, sales jumped 17%, to more than $1.1 billion and net income rose 10% to $58 million. We increased our full year sales guidance by $50 million to $4.55 billion and we narrowed EPS guidance to the upper end of the range at $7.25 to $7.35. We are pursuing significant new opportunities in markets we know well with customers who know us well. Organic growth remain strong, will pick up steam in our margins throughout the year which we expect to reach approximately 10.5% by year end, and we look forward to delivering an all of our commitments.

With that, I'll turn it back over to Dan

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you, John. I think at this we are ready for the Q&A. So, Jacquelyn don't you take charge here.

Question And Answer

Operator

[Operator Instructions]. We will go ahead and taken our first question from Troy Lahr with Stifel Nicolaus.

Troy Lahr - Stifel Nicolaus

Thanks. Just wondering if you guys can drill down a little bit on the problem at the spacecraft business. I mean this was a production type issue?

Daniel J. Murphy - Chairman and Chief Executive Officer

Yes that's right. ATK has a long history in composite components and structures for space flight actually, has a longest history in the industry, going back of probably 30 years. And so this is really an anomaly for us. The performance problem is really related to inability to properly manufacture a couple of components in support of prime satellite manufacturers. In essence we took our eye off the ball and basic blocking and tackling versus facility in Corona, California.

Concentration was managing... was sharply focused on integration of McDonald Dettwiler in the last half of last fiscal year. And there is some issues developing here that took a little long for us to get our arms around. So, exactly workmanship deficiencies put us in a gross margin loss on two programs and with that, we failed to win some anticipated follow-on business. Of course the two are absolutely related performance and follow-on opportunity.

And then the labor base relative to our foreseeable business became too high. So we taken actions needed to right size of the operation to refocus on the 80-K Class SS and we are very confident now that that we will have the ship righted within the next three or may be six months at the outset. The emphasis here is on restoration and profitability. Keeping in mind this is only about a $25 million sale base for the year, I would like to point out that elsewhere in the space business, we are doing exceptionally well.

I don't want to take away the view that this is representative. For example, 80-K space products are performing exceptionally right now. The FEMIS program, the five-tied together network satellites that we launched is responsible for NASA having discovered the cause of fluctuation in the Aurora Borealis, you may have read about that. That's a huge success in the first-ever use of netted satellites.

The Mars Lander which is active right now, uses our auxiliary power system and NASA is so pleased with the system that it has reported us, it expects that particular Lander to operate longer than it had been anticipated. And just very recently, we want to down select to 20 to just 4 competitors for the production of the future, standard satellite BUS for operational responses space. The contract itself is small but the potential is highly significant, actually providing the winner here, the key program upon which of the entire ORS system will be built.

Our performance for NASA in support of Aries-1 continues to just be home run and NASA is very pleased with this program. And than lastly, we won herein just in the last quarter for the first time, a full system approach contract to the U.S. Air force for a new sounding rocket, it's roughly $250 million, but again it shows how we are advancing up the food chain through subsystems and systems across the board from spacecraft down to launch vehicles and targets and missiles themselves. The strategy is working, we had a hiccup here. We will recognize it, are fixing it and moving on.

Troy Lahr - Stifel Nicolaus

Okay. And then just one another question on Armament System in your guidance for the full year. Even excluding the pull forward, I guess you guys did about 24%. Looks like you might do 7%, 8% in the back part of the year. Why the fall off from the first quarter level?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes Troy, we do expect continued strong sales for the balance of the three quarters. But in comparison to last year we also some very good comp quarters in that period. So it will still be good solid growth but it will be bring our overall rate down a little bit to low-teens level from the $24 million that we have in the first quarter.

Troy Lahr - Stifel Nicolaus

Okay, that's helpful. Thanks guys.

Operator

Our next question will come from Joe Nadol, with J.P. Morgan.

Unidentified Analyst

Hi good morning actually it's Seismann [ph] for Joe this morning. Just a couple of questions, a question about the guidance for margins in Mission System came in at strong 11.9% this quarter. I know you've talked in the past about additional bidding proposal in the first quarter. To get down to the guidance which is the mid-11% range, it looks like margins would have to come down for the rest for the year. But with that extra BMP costs in the front half, it might be they would up. If you could shed a little more light on that, that would be helpful?

John L. Shroyer - Senior Vice President and Chief Financial Officer

We did have strong margins in the first quarter driven particularly by the strong performance we had in our tactical rocket motor business for the quarter. Some of that will soften in the back half, but we do still expect a year for Mission Systems, approximately 11.5% margins that up from the approximately 11.3% a year ago and that's part of that margin improvement initiatives that we have discussing now for a couple of years, bearing fruit in that group.

Unidentified Analyst

Okay, great, thanks. And I guess John in the past you've helped us outlook for some quarterly, some insight into next quarter and some quarterly guidance. Last quarter you had said EPS for this first quarter would be 21% to 22% in the year. Any similar like you shed for this next quarter, second quarter coming up?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes, consistent with past years, we do expect about 45% of our full year EPS in the first two quarters and that's what we will expect again this year.

Unidentified Analyst

Great. And then just finally there has been a fair amount of press lately about ISR being a priority for Secretary Gates. There has been a $1.2 billion reprogramming request for more focused, on ISR assets and there is a talk of $1 billion more. Is there any application here for your aircraft integration business and is that in the guidance and might there be some upside?

Daniel J. Murphy - Chairman and Chief Executive Officer

There is some upside there, we very much are involved right now in discussions and partnering with others in the industry to respond to this urgent need. So we are right in the game. Yes.

Unidentified Analyst

Great. Thanks very much.

Operator

Our next question will come from Joseph Campbell with the Lehman Brothers.

Joseph Campbell, Jr. - Lehman Brothers

Good morning Dan, John and Steve.

Daniel J. Murphy - Chairman and Chief Executive Officer

Hi Joe.

Joseph Campbell, Jr. - Lehman Brothers

Hi. I have a question about the share repurchase announcement and the wording there is as Dan pointed out a very large 15% of the outstanding shares, but the document sort of says will, and the primary purpose is to offset share creep from benefit, but you might used it for other purposes. So, can you just clear up how many shares might really be needed to offset benefits over the next couple of years and I wouldn't have thought it would be anything close to $5 million, but we have been looking.

Daniel J. Murphy - Chairman and Chief Executive Officer

No, no. Joe clearly minimal and John has the number. I am sure, I'll ask him to provide it but, what we done in the past successfully over the course of the company's entire history has been to established a buyback plan that can cover a number of years and then, we are react to market conditions and repurchase a time to think that its provides the optimal deployment for our cash relative to acquisitions or debt pay down.

So, there's really nothing different here and actually if you look back at the standard language we've used in releases in the past it's... this is consistence but let me turn it over to John to respond to that specific question.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes Joe, typically for the portion that would cover the benefit shares if you will that's typically for us in the $30 million to $40 million a year range that we issue in terms of performance-related stock.

Joseph Campbell, Jr. - Lehman Brothers

I noticed also that you included the reference to repurchases that wouldn't your option the 10-B5. So I cant recall whether in the past you have used these sort of programs that take the share repurchase out of your hands or whether it was more like Dan alluded to when the market soars up and expensive ATK you get a bit more aggressive. What you would be thinking for the way A) the way in which you all do it, more like win opportunistically or more or like some program that will kind of run steady and is there any guidance at all about what we should be thinking about how long, I mean just for modeling purposes what should we do with about $500 million worth of share repurchases and thinking of how much comes back over the next two or three years?

John L. Shroyer - Senior Vice President and Chief Financial Officer

I think Joe, as Dan mention it's very consistent with our path to authorization. So I think you should view it consistent with that in terms of as we look to this year and over the next few years. We do typically have a 10-B5 filed to allow us to execute during blackout periods, should be as Dan mentioned a share value and other alternatives lead us towards making a share repurchase during that period.

Joseph Campbell, Jr. - Lehman Brothers

I see but it sounds like maybe I should just model 18 months or 24 months. Just seemed reasonable?

John L. Shroyer - Senior Vice President and Chief Financial Officer

I think Joe just like I reiterated earlier, just look at our history and I think that plan

Joseph Campbell, Jr. - Lehman Brothers

I should go back and look and see how long it took you to do that, couple $100 million a couple year ago?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes.

Daniel J. Murphy - Chairman and Chief Executive Officer

That's a fair statement.

Joseph Campbell, Jr. - Lehman Brothers

Alright great. Thanks very much and I though it was a pretty good quarter even despite a little slip.

Daniel J. Murphy - Chairman and Chief Executive Officer

Well, thank you Joe.

Operator

[Operator Instructions]. We will take the next question from Sara Thompson with Lehman Brothers.

Unidentified Analyst

Yes good morning it's Doris Koenig [ph] for Sara, just a very quick question on working capital, it look you guys were significant user working capital in the quarter. I was hoping if you could provide a little color on what's going on there and what your expectation are for the remainder of the year?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes typically that the first quarter is a higher used quarter as we build up a little inventory and the supporting ammunition and in particular getting ready for the fall hunting season, as well as this year the timing of the... our cash tax payments, were a little bit higher in the quarter, as well as we did have very large June revenue month and so just the timing of clearing all that we expect that to turnaround here early in the second quarter. And we continued to drive to a 5% year-over-year improvement in working capital that would put day sales roughly to 59 mark at the end of this year versus the 63 that we executed last year.

Unidentified Analyst

Okay great. Thank you very much

Operator

We move along to George Shapiro with Citi.

Adam Pasick - Citigroup

this is Adam [indiscernible] for George, you gave us some more granularity for armament, even excluding that mid-caliber pull forward it's up 3% sequential while historically it's down from 4Q to 1Q about 10% historically. So I was wondering if you can give me sort of growth rates for our mid caliber, small caliber and commercial in the quarter?

John L. Shroyer - Senior Vice President and Chief Financial Officer

We don't give all the details by a specific product lines but it was an excellent quarter for medium cal; even absent, of the $26 million in timing it was a very good year-over-year growth in that particular product line. That's driven by a lot of new business opportunities that have presented itself over the last year and we expect that performance to continue. And that's why we have the confidence increasing the sales guidance for that group to the low teens for the fiscal year.

Adam Pasick - Citigroup

Okay and the one follow up; if I look at the business those transferred from mission to launch for now space; the margin went through the quarters from 10%, 7% of 4%. Now is that the business that has the issues during the quarter?

John L. Shroyer - Senior Vice President and Chief Financial Officer

That's correct.

Adam Pasick - Citigroup

So I guess those are obviously a negative margin this quarter.

John L. Shroyer - Senior Vice President and Chief Financial Officer

That's correct.

Adam Pasick - Citigroup

Okay, alright. Thank you.

Operator

We'll move to Gautam Khanna with Cowen & Co.

Gautam Khanna - Cowen & Co.

Hey guys, thanks for taking my question. Let me ask on the civilian side I know you mentioned you are up flow with the fall hunting seasons, you're seeing some growth. But are you seeing any sort of signs of weakness, given kind of general economic conditions high price of gas etcetera?

Daniel J. Murphy - Chairman and Chief Executive Officer

None. As a matter of fact the exchange rate between the dollar and the rest of world currency is helping us, is quite substantially in international sales and that's throughout Europe, Southeast, America, globally frankly. So, we are not seeing a down turn as a consequence of higher gasoline prices but the flipside though were seeing significant upside relating to the weak dollar.

Gautam Khanna - Cowen & Co.

Would you still characterized your expectation in '09 for 12% or 15%, growth, or do you think there is upside to that given the international?

Daniel J. Murphy - Chairman and Chief Executive Officer

I think it is upside frankly. And again we're expanding in this area outside the basic ammunition itself to broaden the market that's available to us. And as we talked about civil is up a little bit more than 20%, in the quarter and we see no reason to believe that the sustained growth here is a going to take a lot many times.

Gautam Khanna - Cowen & Co.

Okay and on a small caliber ammo side you have that new contract, I think kicks in '10. But have you had any opportunity to renegotiate sort the terms that the margins get a little better, I know copper ranges at 350 something a pound. Right now you are eating that on the old contract, are you guys going to get some relief so we could actually see margins continue to improve on that part of line?

Daniel J. Murphy - Chairman and Chief Executive Officer

We are negotiating with the Army right now. So; I think it would probably not be appropriate for me to go into details other than to say we are confident that the commodity issue will be behind us.

Gautam Khanna - Cowen & Co.

On composites; you talked about this being a very high growth area over the next two years. You mentioned the JSF. Is there anything that gives you a paused given some of the slips in the commercial aerospace programs, 787 specifically which I know you are targeting. Would you still think this is a business that could double over the next three years?

Daniel J. Murphy - Chairman and Chief Executive Officer

Across military and civil, yes we are very strong. We have no content on the 787, our content is through General Electrics and the engines being produced for the 747/8 cargo aircraft and that's subject to any concern of slippage at the moment. And then we broke into the competitive field for the Airbus A350 with our unique-in-the-industry product of low cost manufacture of stiffeners and strainers in composite material and we are very encouraged by the receptivity that we received from Airbus to the performance of the prototype such that we provided earlier in the year

Gautam Khanna - Cowen & Co.

Could you comment on what the Aries-1 sales were in this quarter?

Daniel J. Murphy - Chairman and Chief Executive Officer

Given me a second to look that up.

Gautam Khanna - Cowen & Co.

Okay.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Gautamwe mention... we will get the specific number in just a moment and will give you a shot on the call here yet.

Gautam Khanna - Cowen & Co.

Okay than I'd just ask one last one. You mentioned booking is still expected $4 billion for the year approximately, if there is no DoD project in place, come October 1 and maybe it stretched out till February, how does that affect that bookings expectation

Daniel J. Murphy - Chairman and Chief Executive Officer

Not very sensitive at all to a continuing resolution situation which is really what you are referencing because of the long term multiyear nature of most of our contracts they are carried forward in a continuing resolution.

Gautam Khanna - Cowen & Co.

So it wouldn't change your expectation.

Daniel J. Murphy - Chairman and Chief Executive Officer

Correct.

Gautam Khanna - Cowen & Co.

Okay, I appreciate it. Thanks guys.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Hey Gautam before you leave the, reason we are struggling, those sales come across two of our divisions and it would be about a $100 million in the quarter between the launch of support system as well as the underlying Aeries-1 program.

Gautam Khanna - Cowen & Co.

Do you have the slit between the two?

John L. Shroyer - Senior Vice President and Chief Financial Officer

7 million of that is the launch related, what is now space segment and the other 15 to 16 is in the Mission Systems segment.

Gautam Khanna - Cowen & Co.

Does that compare to like 53 to 87 compares to like 53 a year ago?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes.

Gautam Khanna - Cowen & Co.

And then the 15 to 16 is compares to what like zero?

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes a year ago, we hadn't started on that yet.

Gautam Khanna - Cowen & Co.

Yes alright. Okay. Well I appreciate it, thank a lot.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Yes, thanks.

Operator

[Operator Instructions]. We will move along to Herb Hardt with Monnes.

Herb Hardt - Monnes, Crespi, Hardt and Co., Inc.

Good morning.

John L. Shroyer - Senior Vice President and Chief Financial Officer

Good morning, Herb.

Herb Hardt - Monnes, Crespi, Hardt and Co., Inc.

I notice both R&D and selling were up pretty sharply. Were they just timing issues or is there a difference in the budget amounts for this year?

Daniel J. Murphy - Chairman and Chief Executive Officer

There is a difference in the budget amounts because of the expanded opportunities that we have right now, principally centered in the Mission Systems but we have never been as flesh with competitive award opportunities as we are right now. And it's really the results of the strategy that we have putt into place a good five years ago, to move into systems-level content and we have done that successfully as far in guide munitions from the ARGM program of course the Advanced Air to Ground Program which we anticipate will go into production here by the end of the year. We only have one test left to complete very successfully.

We are performing very well right through SDD on the precision guidance kit for the 155 and expanding beyond on nickel we have flight-tested a 105 mm variant in anticipation of a competition that the Army will hold to bring precision to the 105. This gives us an incredibly strong position because there is almost no modification necessary between the 155 and the 105 certainly not in the material sense. We are we will be bidding the joint allied threat awareness system which through production is easily a $1 billion dollar program. I mentioned that we are team with BAE there and so we have cranked up money on that bid and proposal. And then Excalibur 1B, we have completed the proposal on that and we're expecting award there this fall, thee is probably on or two those... another is that supersonic target for the Navy, we are waiting on and that award decision and what am I leaving out...

John L. Shroyer - Senior Vice President and Chief Financial Officer

The other one were still finalized our launch vehicles that we expect to launch later in the fall that's another big driver to the R&D re growth in commercial product civil ammo is really driving some of our selling costs as we introduce new product in all those areas.

Herb Hardt - Monnes, Crespi, Hardt and Co., Inc.

Okay, thank you.

Operator

It appears we have no further questions at this time. Mr. Murphy I will give back the conference over to you.

Daniel J. Murphy - Chairman and Chief Executive Officer

Thank you Jacquelyn and than you too for your interest today in good questions and we look forward to keeping you posted on how we are doing. Again thank you. Good bye.

Operator

This now conclude today's conference call. We thank you for participating and hope that you have a great day.

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Source: Alliant Techsystems, Inc. F1Q09 (Qtr. End 06/30/08) Earnings Call Transcript
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