(Dollar amounts in thousands except share and per share data and unless otherwise indicated)

Forward-Looking Information is Subject to Risk and Uncertainty

Some of the statements made and information contained in this report, excluding historical information, are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Words such as "may," "will," "expected," "intend," "estimate," "anticipate," "believe," "project," or "continue," and similar expressions are used to identify forward-looking statements. From time to time, ATK also may provide oral or written forward-looking statements in other materials released to the public. Any or all forward-looking statements in this report and in any public statements ATK makes could be materially different. They can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Any change in the following factors may impact the achievement of results:

† reductions or changes in NASA or U.S. Government military spending and budgetary policies and sourcing strategy,

† increases in costs, which ATK may not be able to react to due to the nature of certain contracts or for other reasons,

†          the potential termination of U.S. Government contracts,

†          government laws and other rules and regulations applicable to ATK,
such as procurement and import-export control,

†          the novation of U.S. Government contracts,

†          other risks associated with U.S. Government contracts that might
expose ATK to adverse consequences,

†          changes in cost estimates and/or timing of programs,

†          costs of servicing ATK's debt, including cash requirements and
interest rate fluctuations,

†          intense competition,

†          performance of ATK's subcontractors,

†          supply, availability, and costs of raw materials and components,
including commodity price fluctuations,

†          development of key technologies and retention of a qualified
workforce,

†          fires or explosions at any of ATK's facilities,

†          environmental laws that govern past practices and rules and

† actual pension asset returns and assumptions regarding future returns, discount rates, service costs, mortality rates, and health care cost trend rates,

† capital market volatility and corresponding assumptions related to ATK's capital structure such as share count and interest rates,

†          risks associated with diversification into new markets,

†          impacts of financial market disruptions or volatility to ATK's
customers and vendors,

†          greater risk associated with international business,

†          results of acquisitions,

†          costs incurred for pursuits and proposed acquisitions that have not
yet or may not close, and

†          unanticipated changes in the tax provision or exposure to additional
tax liabilities.

This list of factors is not exhaustive and new factors may emerge or changes to the foregoing factors may occur that would impact ATK's business. ATK undertakes no obligation to update any forward-looking statements. A more detailed description of risk factors can be found in Item 1A, Risk Factors, of ATK's Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and in Item 1A of this Form 10-Q for the quarter ended December 28, 2008. Additional information regarding these factors may be contained in ATK's subsequent filings with the Securities and Exchange Commission, including Forms 8-K.

Overview

ATK is a supplier of aerospace and defense products to the U.S. Government, allied nations, and prime contractors. ATK is also a supplier of ammunition and related accessories to law enforcement agencies and commercial customers. ATK is headquartered in Minneapolis, Minnesota and has operating locations throughout the United States.

During the quarter ended June 29, 2008, ATK realigned its business operations. As a result of this realignment, ATK combined the Space division of ATK Mission Systems with ATK Launch Systems into a single group now known as ATK Space Systems. Following this realignment, ATK has three segments: ATK Armament Systems, ATK Mission Systems, and ATK Space Systems. The realignment is reflected in the information contained in this report.

† ATK Armament Systems, which generated 39% of ATK's external sales in the nine months ended December 28, 2008, develops and produces military ammunition and gun systems; commercial products; and propellant and energetic materials. It also operates the U.S. Army ammunition plants in Independence, Missouri and Radford, Virginia.

†

† ATK Mission Systems, which generated 25% of ATK's external sales in the nine months ended December 28, 2008, operates in two business lanes, Weapon Systems and Aerospace Systems, across the following market areas: large caliber direct fires, force protection, precision guided munitions, missiles, propulsion, missile defense, fuzes and warheads, composites, special mission aircraft, electronic warfare, military aircraft structures, commercial aircraft structures and launch structures.

†

† ATK Space Systems, which generated 36% of ATK's external sales in the nine months ended December 28, 2008, produces rocket motor systems for human and cargo launch vehicles, conventional and strategic missiles, missile defense interceptors, small and micro-satellites, satellite components, structures, and subsystems, lightweight space deployables and solar arrays, and provides engineering and technical services. Other products include ordnance, such as decoy and illuminating flares.

The majority of ATK's sales are recognized as costs are incurred. ATK's customers pay ATK cash based on costs incurred and profit earned, upon achievement of program milestones, or upon delivery of the product.

As a supplier to the U.S. aerospace and defense industry, ATK is dependent on funding levels of the U.S. Department of Defense (DoD) and NASA. The U.S. defense industry has experienced significant changes over the past few years. During the 1990s, the DoD budget declined, but that trend has reversed during the 2000s due to continuing geopolitical uncertainties. While the DoD's budget for procurement and research, development, test, and evaluation continues to grow each year, the degree of future growth is not known and it may slow or even contract. However, ATK believes it is well positioned in this budget environment to maintain or even increase its relative participation in the DoD budget, as it derives the majority of its DoD sales from products that are consumed (and then reprocured) in both tactical and training operations. ATK anticipates that, to the extent that future budget pressures mount, the majority of budget cuts would come in the areas where the DoD is developing new "platforms" - the vehicles used to deliver the weapons, including ships, aircraft, tanks and helicopters. Much of ATK's product portfolio is "platform independent," meaning it can be used in the legacy platforms of today, as well as in the platforms being developed for future use. Therefore, if and when these future platform development programs come under budget pressures, ATK believes that it has limited exposure, relative to its industry peers.

ATK management believes that the key to ATK's continued success is to focus on performance, simplicity, and affordability, and that ATK's future lies in being a leading provider of advanced weapon and space systems. ATK is positioning itself where management believes there will be continued strong defense funding, even as pressures on procurement and research and development accounts mount. ATK will concentrate on developing the systems that will extend the life and improve the capability of existing platforms. ATK anticipates budget pressures will increasingly drive the life extension of platforms such as ships, aircrafts, and main battle tanks. ATK's transformational weapons such as its Advanced Anti-Radiation Guided Missile and the Precision Guidance Kit are aimed squarely at this growing market. At the same time, ATK believes it is on the leading edge of technologies essential to "generation after next" weapons and platforms - advanced sensor/seeker integration, directed energy, weapon data links, high-speed, long-range projectiles, thermal-resistant materials, reactive materials, and scramjet engines are examples.

Critical Accounting Policies

ATK's significant accounting policies are described in Note 1 to the consolidated financial statements included in ATK's Annual Report on Form 10-K for the year ended March 31, 2008 (fiscal 2008). The accounting policies used in preparing ATK's interim fiscal 2009 consolidated financial statements are the same as those described in ATK's Annual Report, except as described in this report in Note 2, New Accounting Pronouncements, to the unaudited condensed consolidated financial statements.

In preparing the consolidated financial statements, ATK follows accounting principles generally accepted in the United States. The preparation of these financial statements requires ATK to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. ATK re-evaluates its estimates on an on-going basis. ATK's estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

ATK believes its critical accounting policies are those related to:

†          revenue recognition,

†          environmental remediation and compliance,

†          employee benefit plans,

†          income taxes, and

†          acquisitions and goodwill.

More information on these policies can be found in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of ATK's Annual Report on Form 10-K for the fiscal year ended March 31, 2008.

Results of Operations

Acquisitions

There were no material acquisitions during the quarter or nine months ended December 28, 2008.

On June 8, 2007, ATK acquired Swales Aerospace (Swales), a provider of satellite components and subsystems, small spacecraft and engineering services for NASA, Department of Defense and commercial satellite customers, for $101,195, net of cash acquired. ATK believes that the acquisition strengthened ATK's satellite components, subsystems and small spacecraft portfolios and further increased ATK's position as a supplier to the U.S. Government and industry. ATK also believes the acquisition enhanced ATK's systems engineering as ATK pursues strategic initiatives in space exploration programs. Headquartered in Beltsville, Maryland, Swales employs approximately 629 people and is included in ATK Space Systems.

ATK used the purchase method of accounting to account for the Swales acquisition and, accordingly, the results of Swales are included in ATK's consolidated financial statements since the date of acquisition.

Sales

The military small-caliber ammunition contract, which is reported within ATK Armament Systems, contributed approximately 13% and 12% of total external sales during the nine months ended December 28, 2008 and December 30, 2007, respectively.

The following is a summary of each operating segment's external sales:

                                          Quarters Ended                                         Nine Months Ended
                        December 28,     December 30,                   %        December 28,     December 30,                  %
                            2008             2007        $ Change     Change         2008             2007        $ Change    Change

ATK Armament Systems   $      438,167   $      381,313   $  56,854      14.9 %  $    1,302,603   $    1,071,512   $ 231,091     21.6 %
ATK Mission Systems           285,336          279,650       5,686       2.0 %         842,381          809,688      32,693      4.0 %
ATK Space Systems             385,947          393,902      (7,955 )    (2.0 )%      1,181,282        1,161,382      19,900      1.7 %
Total external sales   $    1,109,450   $    1,054,865   $  54,585       5.2 %  $    3,326,266   $    3,042,582   $ 283,684      9.3 %

Quarter.

ATK Armament Systems. The increase in sales was driven by:

† an increase of $22,500 in commercial products due to an increase in volume of law enforcement and international sales,

†        a $20,000 increase in propellant and energetic materials, and

†        a $10,300 increase in medium-caliber ammunition primarily due to higher
volume.

ATK Mission Systems. The increase in sales was driven by:

† an increase of $17,600 due to higher volume in aircraft integration across numerous programs as well as the new contract for the attitude control motor on the Orion Crew Exploration Vehicle (CEV) launch abort system.

These increases were partially offset by:

† a $17,900 decrease in defense electronics and technical services due to reduced volume across numerous programs.

ATK Space Systems. The decrease in sales was driven by:

† a decrease in Minuteman volume of $20,100 due to the contract nearing successful completion, and

† a $12,400 decrease in Spacecraft Systems due to performance issues, schedule delays, and scheduled contract completions.

These decreases were partially offset by an increase of $27,200 on the ARES I and Space Shuttle programs.

Nine Months.

The increase in sales was due to organic growth as well as the acquisition of Swales late in the first quarter of fiscal 2008, as discussed above, which is reported within ATK Space Systems.

ATK Armament Systems. The increase in sales was driven by:

† a $109,400 increase in medium-caliber systems due to higher volume across multiple ammunition programs as well as higher demand in medium-caliber guns,

† an increase of $87,400 in commercial products due to an increase in volume of law enforcement, international, and government sales,

† a $19,800 increase in military small-caliber ammunition sales at the Lake City Army Ammunition Plant as a result of continued strong customer requirements, and

† an increase of $19,500 in propellant and energetic materials relating to modernization project sales and MK90.

ATK Mission Systems. The increase in sales was driven by:

† an increase of $29,100 in tactical rocket motors due to higher volume across numerous programs,

† a $23,000 increase due to the new contract for the attitude control motor on the Orion Crew Exploration Vehicle (CEV) launch abort system,

†          an increase of $20,000 due to higher volume in aircraft integration,
and

†          a new composites program which added $10,400.

These increases were partially offset by:

† a decrease of $18,300 in apertures and radomes due to lower tooling efforts on classified programs over the prior year period,

† a $15,100 decline in technical services due to less volume across all lines of services

† a $12,000 decrease in missiles due to the ramp down of system design and development on the Advanced Anti-Radiation Guided Missile (AARGM) program, and

† a $13,400 decrease resulting from the successful completion of the Shielder Canister program and reduced volume on the Standard Missile-3 program.

ATK Space Systems. The increase in sales was driven by:

† a net increase of $75,600 on ARES I and Space Shuttle programs, and

† an increase of $33,900 due to the inclusion of Swales which was acquired late in the first quarter of fiscal 2008.

These increases were partially offset by:

† a decrease in Minuteman volume of $33,800 due to the contract nearing successful completion,

† a decrease of $21,500 due to lower customer demand and production delays in decoys and flares,

† a $13,500 decrease in bus structures due to performance issues and schedule delays,

† a decrease in solar arrays of $12,000 as a result of decreased volume and performance issues, and

† a $9,800 decrease on the Launch Abort System due to funding limitations.

Gross Profit



                                         Quarters Ended                                                      Nine Months Ended
                December 28,    As a %       December 30,     As a %                 December 28,     As a %      December 30,     As a %
                    2008        of Sales         2007        of Sales     Change         2008        of Sales         2007        of Sales     Change

Gross profit $ 229,584 20.7 % $ 212,664 20.2 % $ 16,920 $ 689,087 20.7 % $ 603,223 19.8 % $ 85,864

Quarter and Nine Months. The increase in gross profit was driven by higher sales and increased operating efficiencies.

Operating Expenses

                                           Quarters Ended                                                       Nine Months Ended
                  December 28,     As a %       December 30,     As a %                 December 28,     As a %       December 30,     As a %
                      2008        of Sales          2007        of Sales     Change         2008        of Sales          2007        of Sales      Change

Research and
development      $       16,105        1.5 %   $       14,360        1.4 %   $ 1,745   $       63,245        1.9 %   $       44,368        1.5 %   $ 18,877
Selling                  39,584        3.6 %           31,639        3.0 %     7,945          117,392        3.5 %           92,430        3.0 %     24,962
General and
administrative           54,611        4.9 %           56,109        5.3 %    (1,498 )        160,189        4.8 %          149,290        4.9 %     10,899
Total            $      110,300       10.0 %   $      102,108        9.7 %   $ 8,192   $      340,826       10.2 %   $      286,088        9.4 %   $ 54,738

Operating expenses for the quarter and nine months increased primarily due to higher selling expenses consistent with higher sales over the prior year period, as well as increased program proposal efforts within ATK Mission Systems and ATK Space Systems. Research and development expenses were up due to increased spending on major launch vehicle programs within ATK Space Systems. General and administrative (G&A) expenses for the quarter decreased primarily due to lower share-based compensation expenses compared to the prior year period. G&A expenses for the nine months increased as a result of increased spending to support increasing sales, partially offset by a decrease related to share-based compensation expense.

Income before Interest, Income Taxes, and Minority Interest

                                       Quarters Ended                                  Nine Months Ended
                         December 28,      December 30,                   December 28,      December 30,
                             2008              2007          Change           2008              2007          Change

ATK Armament Systems    $       43,695    $       37,261    $   6,434    $      130,824    $       98,320    $  32,504
ATK Mission Systems             35,802            30,684        5,118           104,421            88,016       16,405
ATK Space Systems               44,303            49,299       (4,996 )         128,527           148,624      (20,097 )

The increase in income before interest, income taxes, and minority interest was due to higher sales as well as program-related changes within the operating segments as described below.

Quarter.

ATK Armament Systems. The increase primarily relates to higher overall sales volume and efficiencies within medium caliber ammunition.

ATK Mission Systems. The increase was primarily driven by improved program performance on aircraft integration, large caliber direct fires, and missile defense, partially offset by lower sales volume on the AAR-47 missile warning system.

ATK Space Systems. The decrease was primarily driven by lower sales and lower profit in the Spacecraft Structures business, along with the favorable resolution of an overhead rate matter in the comparable period of the prior year, partially offset by increased profit on the Ares I and Space Shuttle programs.

Corporate. The net expense of Corporate primarily reflects expenses incurred for administrative functions that are performed centrally at the corporate headquarters, and the elimination of intercompany profits.

Nine Months.

ATK Armament Systems. The increase primarily relates to higher overall sales volume as well as improved margins in commercial products and medium-caliber guns and ammunition programs.

ATK Mission Systems. The increase was primarily driven by higher sales within aircraft integration, tactical rocket motors, space launch vehicles, and space stage motors, partially offset by margin declines within force protection and fuze operations due to technical issues on the FMU-139 bomb fuze program, as well as lower sales volume on the AAR-47 missile warning system..

ATK Space Systems. The decrease was primarily driven by performance issues and schedule delays in the Spacecraft Structures business. These items were partially offset by higher sales volume.

Corporate. The net expense of Corporate primarily reflects expenses incurred for administrative functions that are performed centrally at the corporate headquarters, and the elimination of intercompany profits.

Net Interest Expense

Quarter.

Net interest expense for the quarter ended December 28, 2008 was $15,376, a decrease of $2,977 compared to $18,353 in the comparable quarter of fiscal 2008 primarily due to a decrease in the average borrowing rate and average outstanding debt balance.

Nine Months.

Net interest expense for the nine months ended December 28, 2008 was $48,336, a decrease of $14,669 compared to $63,005 in the comparable quarter of fiscal 2008 primarily due to the accelerated noncash write-off of $5,600 of debt issuance costs which was the result of the 3.00% Convertible Senior Subordinated Notes and the 2.75% Convertible Senior Subordinated Notes due 2024 becoming convertible in the second quarter of fiscal 2008 as well as a decrease in the average borrowing rate and average outstanding debt balance.

As discussed in Note 2, New Accounting Pronouncements, to the unaudited condensed consolidated financial statements, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP No. APB 14-1). The provisions of this FSP apply to ATK's $200,000 aggregate principal amount of 3.00% Convertible Notes, the $280,000 aggregate principal amount of 2.75% Convertible Notes due 2024, and the $300,000 aggregate principal amount of 2.75% Convertible Notes due 2011, discussed in Note 8, Long-Term Debt and Interest Rate Swaps. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years (ATK's fiscal 2010), and shall be applied retrospectively to all periods presented. Early adoption is not permitted. ATK estimates that adoption of the FSP will result in an increase to fiscal 2005 through fiscal 2009 non-cash interest expense in the range of $9,300 to $23,800 per year. The impact to fiscal 2010 non-cash interest expense is expected to be an increase of approximately $19,900 with a declining impact in future fiscal years.

Income Tax Provision



                                      Quarters Ended                                                       Nine Months Ended
             December 28,    Effective     December 30,    Effective               December 28,    Effective     December 30,    Effective
                 2008          Rate            2007          Rate       Change         2008          Rate            2007          Rate        Change

Income
tax
provision   $       38,947        37.5 %  $       33,716        36.6 %  $ 5,231   $      112,009        37.3 %  $       91,800        36.1 %  $ 20,209

ATK's provision for income taxes includes both federal and state income taxes. Income tax provisions for interim periods are based on estimated effective annual income tax rates.

Quarter.

The income tax provisions for the quarters ended December 28, 2008 and December 30, 2007 represent effective tax rates of 37.5% and 36.6%, respectively. The increase in the rate for the quarter ended December 28, 2008 from the prior year period is primarily due to a change in the benefit related to the Domestic Manufacturing Deduction (DMD) and nondeductible losses on life insurance policies related to our nonqualified deferred compensation plans, offset by the extension of the federal research and development (R&D) credit and nonrecurring tax charges.

Nine Months.

The income tax provisions for the nine months ended December 28, 2008 and December 30, 2007 represent effective tax rates of 37.3% and 36.1%, respectively. The increase in the rate for the nine months ended December 28, 2008 from the prior year period is primarily due to a change in the benefit . . .