ATK Keeps Major Contract for Lake City Plant

by: Matthew Potter
October 2, 2012

Category: Alliant Techsystems, atk, Business Line, Companies, Contract Additions, Contract Awards, Events, logistics, production program, Services, U.S. Army | RSS 2.0

Alliant Techsystems (ATK) is a mid-sized defense contractor. It primarily manufactures ammunition, pyrotechnics and rocket motors. The company is experiencing some struggles due to the ending of the fighting in Iraq and Afghanistan and the potential defense budget cuts. It has made several changes recently to adjust to these new market conditions but key to the company’s near term success was retention of the contract from the U.S. Army to manage the Lake City ammunition plant operations.

Last year the company lost the contract for the Radford Plant in Virginia to BAE Systems (BAE:LSE). BAE was also aggressively targeting the Lake City contract as well. ATK had run these plants responsible for large amounts of ammunition and explosives for the U.S. military for several years and they were a core part of their revenue and earnings. Short term the loss of the Lake City contract would have been a blow to the company.

Yesterday it as announced that the Army had decided to award the contract to ATK again. The initial contract is for seven years but it has options for a further three. No value has been reported yet.

To indicate the size of the production at Lake City in September the company and Army celebrated the delivery of 2 billion 7.62mm rounds from the plant. Due to the demands of the last ten years of combat ATK had expanded the plant to produce over 1.5 billion rounds annually of 5.56mm as well as other sizes.

The winning of this contract gives ATK more time to continue its adjustments and reorganization to address the changing market it finds itself in and establish a good foundation for future performance.

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