American Pacific Reports First Quarter Results
LAS VEGAS, Feb. 7 /PRNewswire/ -- American Pacific Corporation (Nasdaq: APFC) today reported financial results for its fiscal 2001 first quarter and provided information on the Company's operations.
Operating Activities. The Company reported a decrease in sales of $9.1 million, or 43%, in the first quarter compared to the same quarter last year. Sales were $11.9 million during the three-month period ended December 31, 2000, compared to $21.0 million during the same period last year. Net loss was $45,000, or $(0.01) diluted per share, compared to net income of $5.0 million, or $0.64 diluted per share, during the first quarter of fiscal 2000.
Perchlorate chemical sales decreased approximately 50% in the first quarter of fiscal 2001, compared to the first quarter of fiscal 2000. As previously announced, the Company expects sales volumes for ammonium perchlorate ("AP") in fiscal 2001 to range between 13.0 million and 15.0 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 $1.0 million, or 31%, in the first quarter compared to the same quarter last year. The decreases in perchlorate and sodium azide sales were partially offset by an increase in Halotron(TM) sales. Halotron(TM) sales increased $0.6 million, or 100%, in the first quarter of fiscal 2001, compared to the first quarter of fiscal 2000.
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 has 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, the Company received power bills from UP totaling $600,000 and $932,000, which were respectively, $432,000 and $771,000 in excess of average historical monthly amounts.
The Company believes that UP has improperly calculated replacement energy costs and has also breached the agreement by failing to comply with the advance notice provisions of the agreement. The Company is disputing the January 2001 (see below), and the November and December 2000 power bills, as well as those of earlier periods.
In the first quarter of fiscal 2001, the Company implemented a plan to reduce power consumption at its Utah plant operations. By the middle of January 2001, the Company had reduced power consumption by more than 50%. For the month of January 2001, the Company received a $410,000 power bill from UP. As part of this power consumption reduction, the Company has incurred additional costs, principally in the area of purchased raw materials. In order to reduce total costs, the Company is purchasing certain raw materials in lieu of producing such materials.
The Company is pursuing recovery of improper excess power charges from UP through negotiation or other alternatives and is seeking to cause UP to comply with the provisions of the agreement. The outcome of this process is uncertain. Absent recovery of the disputed charges and future compliance by UP with the agreement, the increases in power bills have had and would continue to have a material adverse effect on the Company's operating results and financial position.
Earnings before interest, taxes, depreciation, and amortization ("EBITDA") was approximately $2.1 million during the first quarter compared to EBITDA of approximately $8.6 million during the first quarter of last year. The decrease in EBITDA was primarily attributable to lower perchlorate and sodium azide sales and the significant increase in power costs discussed above.
Net interest expense was $0.7 million during the three-month period ended December 31, 2000, compared to $1.1 million during the same period last year. The decrease in interest expense relates principally to a lower average balance of the Company's Senior Unsecured Notes (the "Notes").
The Company's effective income tax rate during the first quarter of fiscal 2001 was approximately 37%. The Company's effective income tax rate was approximately 0% during the first quarter 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 in fiscal 2000.
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 senior unsecured notes (the "Notes"). The Company made no repurchases of Notes in the first quarter 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. In the first quarter of fiscal 2001, the Company expended approximately $0.1 million on the repurchase of its Common Stock. The Company may (but is not obligated to) continue to repurchase its Common Stock but is limited in its ability to use cash to repurchase stock by certain covenants contained in the Indenture associated with the Notes. |
