Though Alliant Techsystems Inc is running its ammunition plant 24/7 and its order backlog is thinning as retailers cancel duplicate orders, it will take the company many months to catch up with demand, its president and CEO said last week.
“It's many, many, many, many, many months of backlog still in our ammunition products, so we have lots of work to do,” said ATK President and CEO Mark DeYoung.
On Thursday, ATK reported sustained demand for pistol and rim-fire ammunition helped boost organic sales and profits at its Sporting Group by 13 and 50 percent respectively in the fiscal first quarter. DeYoung said the order backlog for some types of ammo was thinning as sporting goods retailers canceled duplicate orders placed with its more than half dozen ammunition brands during last’s year’s ammo shortage. The company’s ammunition brands include Federal Premium, CCI, Fusion, Speer, Estate Cartridge and Blazer.
Total sales for the Sports Group increased 57.3 percent to $442.2 million in the quarter ended June 29, including revenues from Bushnell Group Holdings Inc. and Savage Sports Corp. ATK acquired both companies last year as part of a strategy to become a one-stop shop for gun dealers. Sales from Savage and Bushnell were $42 million and $125 million, respectively in the quarter.
Demand remained strong for nearly all types of rim fire ammo, while demand for center-fire rifle products weakened as sporting goods retailers canceled duplicate orders placed during last year’s ammo boom. Small rifle ammunitions in the .223- and .556-caliber were particularly soft.
DeYoung said Bushnell’s 2014 sales are expected to fall short of the $600 million ATK forecast when it announced its
plans to acquire the company, due in part to some weakness in the optics market and a lack of new products.
“One of the things that is impacting us here in our first couple of quarters of operation is really a lack of exciting new products post-acquisition,” said DeYoung. “We are fixing that. We have a very strong focus on innovation and affordable innovation.”
DeYoung said he remains confident Bushnell can grow its EBIT margin, which was just below 10 percent at the time of the acquisition, to the high teens once integration is completed.
Group operating profit in the first quarter increased 79 percent to $79.0 million compared to $44.1 million in the prior-year quarter. Organic operating profit increased 50 percent, driven by additional sales, product mix, and the absence of prior-year restructuring and inventory write-offs for military accessories. Operating profit from Savage and Bushnell was $8.0 million and $5.0 million, respectively, including transition costs for Bushnell, which was acquired in November, 2013. DeYoung said a decline in long gun sales lowered margins at Savage to 18 from 20 percent.
“I will take every 18 percent business I can get,” he said. “Savage is way outpacing our anticipated valuation model that we put together with the acquisition.”
In April, ATK announced plans to spin off its Sports Group in a tax-free distribution to shareholders as part of a larger merger of its Defense and Aerospace groups with Orbital Sciences Corporation. The transaction is expected to close in the fourth quarter.
Bushnell owns 19 outdoor brands in optics, outdoor accessories, and performance eyewear, while Savage making center-fire and rim-fire riles, shotguns and other products for hunting and recreational shooting. In addition to its ammunition brands ATK also owns accessories brands Blackhawk! , Eagle, Alliant Powder, RCBS, Champion Target, Gunslick Pro, Outers, and Weaver Optics.
