American Pacific Reports Second Quarter Results
LAS VEGAS, May 10 American Pacific Corporation
today reported financial results for its fiscal 2001 second
quarter and provided information on the Company's operations.
Operating Activities. The Company reported a decrease in sales of
$1.5 million, or 9%, in the second quarter compared to the same quarter last
year. Sales were $14.8 million during the three-month period ended
March 31, 2001, compared to $16.3 million during the same period last year.
Net income before extraordinary losses was $1.1 million or $0.16 diluted per
share, compared to $1.2 million or $0.16 diluted per share, during the second
quarter of fiscal 2000. After an extraordinary loss on debt extinguishment of
$0.6 million, net income was $0.6 million or $0.8 diluted per share, in the
second quarter of fiscal 2000.
For the first six months of this year, sales decreased $10.6 million, or
28%, to $26.7 million from $37.3 million in the first six months of fiscal
2000. Net income before extraordinary losses was $1.1 million or
$0.15 diluted per share, compared to $6.3 million or $0.81 diluted per share,
during the same period last year. After extraordinary losses, net income
during the six-month period ended March 31, 2000 was $5.6 million or
$0.73 diluted per share.
Perchlorate chemical sales decreased approximately 28% in the first half
of fiscal 2001, compared to the first half of fiscal 2000. As previously
announced, the Company estimates sales volumes for ammonium perchlorate ("AP")
in fiscal 2001 to range between 13.0 million and 14.0 million pounds. The
recent weakness in sales volumes is primarily attributable to lower
requirements for applications in certain commercial space launch vehicles used
primarily in satellite launches, particularly telecommunication satellites.
In addition, purchases of AP for use in the solid rocket motors for the Space
Shuttle have declined recently as a result of excess inventory levels. The
Company believes that such excess should be reduced over the next few years
considering the number of shuttle flights planned for the construction and
servicing of the International Space Station. The Company also understands
that existing plans call for significant AP requirements over the next several
years for use in the Minuteman program. Accordingly, the Company believes
that the estimated future AP requirements for these two programs should bring
North American demand for AP back to an annual level of between 16.0 million
and 20.0 million pounds over the next few years, although there can be no
assurance given with respect to these estimates. The Company has no ability
to influence the demand for AP.
Sodium azide sales decreased approximately $1.7 million, or 28%, during
the first six months of this year compared to the same period last year. The
decreases in perchlorate and sodium azide sales were partially offset by an
increase in Halotron(TM) sales. Halotron(TM) sales increased $1.0 million, or
83%, during the six-month period ended March 31, 2001, compared to the same
period in fiscal 2000.
Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
was approximately $4.0 million during the second quarter compared to EBITDA of
approximately $4.2 million during the second quarter of last year. EBITDA was
approximately $6.1 million in the first six months of this year compared to
$12.8 million during the same period last year. The decrease in EBITDA was
primarily attributable to lower sales and the significant increase in power
costs (particularly in the first quarter of this year) discussed below.
Net interest expense was $0.7 million during the three-month period ended
March 31, 2001, compared to $1.0 million during the same period last year.
Net interest expense was $1.3 million during the first six months of this
year, compared to $2.1 million during the same period last year. The
decreases in net interest expense were primarily attributable to lower average
outstanding balances of the Company's Senior Unsecured Notes (the "Notes").
The Company's effective income tax rate during the first six months of
fiscal 2001 was approximately 37%. The Company's effective income tax rate
was approximately 0% during the first half of fiscal 2000, as the result of
the establishment of a deferred tax valuation allowance. During the fourth
quarter of fiscal 2000 and in accordance with the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," the
Company released its deferred tax valuation allowance and recognized the
benefits of its net deferred tax assets. As a result, the Company recorded a
credit for income taxes of approximately $15.4 million in fiscal 2000.
Electrical Power Developments
Electric energy is one of the Company's primary raw material costs for the
production of AP. The Company is a party to an agreement with Utah Power
("UP") for its electrical requirements. The agreement provided for the supply
of power for a minimum of a ten-year period, which began in 1989. This
agreement had a three year notice of termination provision and, on
April 7, 1999, UP provided written notice of termination, effective
April 7, 2002.
The Company recently experienced unusual increases in its monthly power
bills at its Utah production facilities as compared to average historical
monthly amounts. For the months of November and December 2000, and
January 2001, the Company received power bills from UP totaling approximately
$1.9 million, which were approximately $1.5 million in excess of average
historical monthly amounts. The Company claimed that UP improperly calculated
replacement energy costs and breached the agreement by failing to comply with
the advance notice provisions of the agreement. Accordingly, the Company
disputed all power bills received from UP since January 1999, claiming it had
been overcharged by approximately $2.9 million through January 2001.
A partial settlement of this dispute has been reached in which the Company
and UP have entered into an amendment of the electric supply agreement dated
February 21, 2001. Under the terms of the amendment, the Company has been
placed on the equivalent of Utah's Electric Service Schedule No. 9. Under
this rate schedule, the Company's estimated monthly power bills will be
approximately 20% to 30% higher than historical monthly amounts prior to the
dispute. As a result, the Company will experience an estimated annual
increase in power costs that could be as much as $0.6 million. This amendment
has been approved by the Utah Public Service Commission.
In May 2001, the Company and UP reached a settlement on the remaining
disputed matters. The settlement includes both a cash payment from UP to the
Company and a demand curtailment arrangement under Utah's Electric Service
Schedule No. 71. Under the curtailment, the Company has accepted UP's offer
to curtail demand during the months of June, July and August 2001. As a
result of the Company's lower perchlorate sales volumes expected in fiscal
2001, the Company believes it can operate at lower total and peak electric
energy consumption levels during these months and, at the same time, operate
efficiently and meet its customer's product delivery requirements. The
Company estimates that the settlement and curtailment arrangement will result
in approximately an additional $2.0 million in cash flow (over the amount
which will otherwise be expended on monthly power bills under the
February 21, 2001 amendment described above) to the Company. However, there
can be no assurances given with respect to this estimate. The ultimate amount
of incremental cash flow to the Company will depend upon the Company's ability
to effectively operate under the curtailment arrangement.
Financing and Investing Activities. During the fiscal year ended
September 30, 2000, the Company repurchased and retired approximately
$22.8 million in principal amount of its Notes. The Company made no
repurchases of Notes during the first six months of fiscal 2001.
During fiscal 2000, the Company expended approximately $6.7 million on the
repurchase of its Common Stock. Shares outstanding decreased approximately
10% during the twelve-month period ended September 30, 2000. During the first
six months of fiscal 2001, the Company expended approximately $0.2 million on
the repurchase of its Common Stock. The Company may (but is not obligated to)
continue to repurchase its Common Stock and is limited in its ability to use
cash to repurchase stock by certain covenants contained in the Indenture
associated with the Notes.
Contingencies. Trace amounts of perchlorate chemicals have been found in
Lake Mead. Clark County, Nevada, where Lake Mead is situated, is the location
of Kerr-McGee Chemical Corporation's ("Kerr-McGee") AP operations, and was the
location of the Company's AP operations until May 1988. The Company is
cooperating with State and local agencies, and with Kerr-McGee and other
interested firms, in the investigation and evaluation of the source or sources
of these trace amounts, possible environmental impacts, and potential
remediation methods. Until these investigations and evaluations have reached
definitive conclusions, it will not be possible for the Company to determine
the extent to which, if at all, the Company may be called upon to contribute
to or assist with future remediation efforts, or the financial impacts, if
any, of such cooperation, contributions or assistance. Accordingly, no
accrual for potential costs has been made in the Company's financial
statements.
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
For the three months For the six months
ended March 31, ended March 31,
2001 2000 2001 2000
Sales and
Operating
Revenues $14,830,000 $16,319,000 $26,709,000 $37,295,000
Cost of Sales 9,756,000 11,294,000 18,921,000 23,697,000
Gross Profit 5,074,000 5,025,000 7,788,000 13,598,000
Operating
Expenses 2,626,000 2,815,000 4,746,000 5,240,000
Operating
Income 2,448,000 2,210,000 3,042,000 8,358,000
Net Interest
and Other
Expense 654,000 984,000 1,320,000 2,108,000
Income Before
Income Taxes 1,794,000 1,226,000 1,722,000 6,250,000
Income Taxes 664,000 637,000
Net Income
Before
Extraordinary
Loss 1,130,000 1,226,000 1,085,000 6,250,000
Extraordinary
Loss - Debt
Extinguishment 614,000 614,000
Net Income $1,130,000 $612,000 $1,085,000 $5,636,000
Basic Net
Income Per
Share:
Income Before
Extraordinary
Loss $.16 $.16 $.15 $.83
Extraordinary
Loss $(.08) $(.08)
Net Income $.16 $.08 $.15 $.75
Average Shares
Outstanding 7,044,000 7,315,000 7,058,000 7,559,000
Diluted Net
Income Per
Share:
Income Before
Extraordinary
Loss $.16 $.16 $.15 $.81
Extraordinary
Loss $(.08) $(.08)
Net Income $.16 $.08 $.15 $.73
Diluted Shares 7,045,000 7,473,000 7,060,000 7,673,000
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, September 30,
2001 2000
ASSETS
Current Assets:
Cash and Cash Equivalents $29,665,000 $30,128,000
Accounts and Notes Receivable 11,196,000 9,461,000
Related Party Notes and Accrued Interest
Receivable 449,000 477,000
Inventories 15,016,000 10,875,000
Prepaid Expenses and Other Assets 881,000 661,000
Deferred Income Taxes 591,000 650,000
Total Current Assets 57,798,000 52,252,000
Property, Plant and Equipment, Net 6,715,000 7,064,000
Intangible Assets, Net 27,613,000 29,805,000
Real Estate Equity Investments 3,654,000 6,838,000
Development Property 5,397,000 5,482,000
Deferred Income Taxes 14,178,000 14,756,000
Other Assets, Net 1,233,000 1,393,000
TOTAL ASSETS $116,588,000 $117,590,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $6,508,000 $8,494,000
Total Current Liabilities 6,508,000 8,494,000
Long-Term Debt 44,175,000 44,175,000
SERP Obligation and Other Non-Current
Liabilities 1,850,000 1,743,000
TOTAL LIABILITIES 52,533,000 54,412,000
Commitments and Contingencies
Warrants to Purchase Common Stock 3,569,000 3,569,000
Shareholders' Equity:
Common Stock 852,000 852,000
Capital in Excess of Par Value 80,094,000 80,094,000
Accumulated Deficit (8,463,000) (9,548,000)
Treasury Stock (11,930,000) (11,722,000)
Receivable from the Sale of Stock (67,000) (67,000)
Total Shareholders' Equity 60,486,000 59,609,000
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $116,588,000 $117,590,000
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Cash Flow Statements
(Unaudited)
For the three months For the six months
ended March 31, ended March 31,
2001 2000 2001 2000
Cash Flows From
Operating
Activities $(2,160,000) $2,578,000 $(3,046,000) $10,627,000
Cash Flows From
Investing
Activities:
Capital
Expenditures (293,000) (989,000) (393,000) (1,155,000)
Return of
Capital on
Real Estate
Equity
Investments 1,294,000 1,077,000 3,184,000 2,694,000
Net Cash Flows
From Investing
Activities 1,001,000 88,000 2,791,000 1,539,000
Cash Flows From
Financing
Activities:
Debt Related
Payments (9,127,000) (10,322,000)
Issuance of
Common Stock 21,000 342,000
Treasury Stock
Acquired (101,000) (5,946,000) (208,000) (6,688,000)
Net Cash Flows
From Financing
Activities (101,000) (15,052,000) (208,000) (16,668,000)
Net Change in
Cash and Cash
Equivalents (1,260,000) (12,386,000) (463,000) (4,502,000)
Cash and Cash
Equivalents,
Beginning of
Period 30,925,000 48,318,000 30,128,000 40,434,000
Cash and Cash
Equivalents,
End of Period $29,665,000 $35,932,000 $29,665,000 $35,932,000
Supplemental
Disclosure
of Cash Flow
Information:
Interest Paid $2,045,000 $3,050,000 $2,045,000 $3,050,000
