LAS VEGAS, Aug. 5 NV-APFC-Q3-08-results
LAS VEGAS, Aug. 5 /PRNewswire-FirstCall/ -- American Pacific Corporation
(Nasdaq: APFC) today reported financial results for its third fiscal quarter
ended June 30, 2008.
We provide non-GAAP measures as a supplement to financial results based on
GAAP. A reconciliation of the non-GAAP measures to the most directly
comparable GAAP measures is included in the accompanying supplemental data.
FINANCIAL HIGHLIGHTS
Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30,
2007
-- Revenues increased 8% to $132.0 million from $122.2 million.
-- Operating income increased 5% to $15.0 million compared to $14.2
million.
-- Adjusted EBITDA decreased to $28.7 million compared to $29.2 million.
-- Net income increased to $4.6 million from $1.4 million.
-- Diluted earnings per share was $0.61 compared to $0.18.
The prior year nine-month period includes a charge of $0.21 per diluted
share related to our refinancing activities in February 2007.
Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007
-- Revenues decreased 16% to $36.7 million from $43.7 million.
-- Operating income declined 36% to $2.4 million compared to $3.7 million.
-- Adjusted EBITDA decreased to $6.6 million compared to $8.7 million.
-- Net income decreased to $0.1 million from $0.6 million.
-- Diluted earnings per share was $0.02 compared to $0.08.
CONSOLIDATED RESULTS OF OPERATIONS
Revenues -- Our revenue results for our fiscal 2008 third quarter compared
to the prior fiscal year third quarter include a decrease in our Fine
Chemicals segment revenues of 36% and an increase in our Specialty Chemicals
segment revenues of 36%. Because our Fine Chemicals segment accounts for a
larger component of our consolidated revenues, our consolidated revenues
declined 16%. The changes in revenues are primarily due to the timing of
customer orders between the quarterly periods.
For the nine months ended June 30, 2008, revenues increased 8% compared to
the prior fiscal year period.
See further discussion under our Segment Highlights.
Cost of Revenues and Gross Margins -- For our fiscal 2008 third quarter,
cost of revenues was $24.0 million compared to $30.4 million for the prior
fiscal year third quarter. The consolidated gross margin percentage was 35%
and 31% for our fiscal 2008 and 2007 third quarters, respectively. For the
nine months ended June 30, 2008, cost of revenues was $85.2 million compared
to $79.7 million for the prior fiscal year period. The consolidated gross
margin percentage was 35% in each of the fiscal 2008 and 2007 nine-month
periods.
One of the significant factors that affects, and should continue to
affect, the comparison of our consolidated gross margins from period to period
is the change in revenue mix between our two largest segments because our
Specialty Chemicals segment typically has higher gross margins than our Fine
Chemicals segment. The revenue contribution by each of our segments is
indicated in the following table.
Three Months Ended Nine Months Ended
June 30,June 30,
2008 2007 2008 2007
Fine Chemicals 53% 70%58% 58%
Specialty Chemicals 33% 20%31% 30%
Aerospace Equipment 9% 10% 9% 10%
Other Businesses 5% 0% 2% 2%
Total Revenues 100% 100% 100% 100%
In addition, consolidated gross margins for our fiscal 2008 third quarter
and nine-months ended June 30, 2008, reflect:
-- A decrease in Fine Chemicals segment gross margin percentage relating
primarily to changes in product mix.
-- Improvements in Specialty Chemicals segment gross margin percentage
primarily due to a reduction in amortization expense.
-- On a fiscal year-to-date basis, an increase in Aerospace Equipment
segment gross margin percentage.
See further discussion under our Segment Highlights.
Operating Expenses -- For our fiscal 2008 third quarter, operating
expenses increased $0.7 million to $10.4 million from $9.7 million in the
third quarter of fiscal year 2007. For the nine months ended June 30, 2008,
operating expenses increased $3.5 million to $31.8 million from $28.3 million
for the prior fiscal year period. The variances are primarily due to:
-- A decrease in Fine Chemicals segment operating expenses of $0.2 million
for the fiscal 2008 third quarter and an increase of $0.7 million for
the nine months ended June 30, 2008 due to changes in personnel related
costs.
-- A decrease in Specialty Chemicals segment operating expenses of $0.4
million for the fiscal 2008 third quarter primarily due to the timing
of employee benefit expenses. On a year-to-date basis, the lower
employee benefit costs were offset by increases in environmental
compliance related expenses and product development costs.
-- An increase in Aerospace Equipment operating expenses of $0.3 million
for the fiscal 2008 third quarter primarily due to additional research
and development and bid and proposal costs.
-- An increase in corporate operating expenses of $1.0 million for the
fiscal 2008 third quarter and $2.2 million for the nine months ended
June 30, 2008, which latter increase includes $0.8 million increase in
retirement benefit expenses, $0.7 million increase in salaries and
benefits, $0.4 million increase in corporate development costs, and
$0.3 million increase in Sarbanes-Oxley compliance costs.
SEGMENT HIGHLIGHTS
Fine Chemicals Segment
Our Fine Chemicals segment reflects the operating results of our
wholly-owned subsidiary Ampac Fine Chemicals LLC ("AFC").
Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007
-- Revenues were $19.7 million compared to revenues of $30.7 million.
-- Operating income was $0.6 million, or 3% of revenue, compared to $5.0
million, or 16% of revenue.
-- Segment EBITDA was $3.7 million, or 19% of revenue, compared to Segment
EBITDA of $8.4 million, or 27% of revenue.
Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30,
2007
-- Revenues were $76.9 million compared to revenues of $70.7 million.
-- Operating income was $9.4 million, or 12% of revenue, compared to $10.8
million, or 15% of revenue.
-- Segment EBITDA was $18.9 million, or 25% of revenue, compared to
Segment EBITDA of $20.9 million, or 30% of revenue.
The decrease is Fine Chemicals revenues for the third quarter of fiscal
2008 compared to the prior fiscal year third quarter is primarily due to the
timing of customer orders and of the related revenue recognition between the
fiscal 2008 quarterly periods. For the nine months ended June 30, 2008, Fine
Chemicals segment revenues increased 9% compared to the prior year period.
The growth over the prior fiscal year period reflects continued strength in
the segment's anti-viral products, offset partially by lower sales of oncology
products.
During the fiscal 2008 third quarter, our Fine Chemicals segment received
cash payment from one of its anti-viral product customers and recorded a
significant amount of deferred revenue. We currently anticipate that
substantially all of the deferred revenues as of June 30, 2008 will be
recognized in our fiscal 2008 fourth quarter.
For our fiscal 2008 full year, we continue to expect that our Fine
Chemicals segment will achieve double-digit revenue growth over fiscal year
2007.
Operating income was 3% of revenue for the fiscal 2008 third quarter
compared to 16% for the prior fiscal year quarter and 12% of revenue for the
nine-month period ended June 30, 2008 compared to 15% for the prior fiscal
year period. Segment operating income for fiscal 2008 periods reflects:
-- A decrease in the gross margin percentage of approximately seven points
for the fiscal 2008 third quarter and approximately three points for
the nine months ended June 30, 2008, each compared to the comparable
prior fiscal year period. There are several factors affecting Fine
Chemicals gross margin percentages. The primary factor is a change in
product mix, with the fiscal 2008 periods, and in particular the third
quarter of fiscal 2008, containing a greater percentage of lower-margin
products than the comparable fiscal 2007 periods. To a lesser extent,
gross margin percentages were also reduced by product scheduling and
maintenance issues which affected manufacturing efficiency.
-- A decrease in depreciation and amortization expense of $0.6 million for
the nine months ended June 30, 2008.
-- An increase in operating expenses of $0.7 million for the nine months
ended June 30, 2008 due to additional research and development and
business development personnel costs and the related recruiting and
relocation expenses.
-- A decrease in operating expenses of $0.2 million for the fiscal 2008
third quarter primarily due to lower employee benefit and workers
compensation expenses.
The Fine Chemicals segment operating margin percentage is expected to
increase significantly for our fiscal 2008 fourth quarter. For our full
fiscal 2008, we continue to expect that Fine Chemicals operating margins will
be less than fiscal 2007.
Specialty Chemicals Segment
Our Specialty Chemicals segment revenues include the operating results
from our perchlorate, sodium azide and Halotron product lines, with
perchlorates comprising 91% and 88% of Specialty Chemicals revenues in the
fiscal 2008 and 2007 nine-month periods, respectively.
Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007
-- Revenues increased 36% to $11.9 million from $8.8 million.
-- Operating income was $6.0 million, or 50% of revenues, compared to $1.9
million, or 22% of revenues.
-- Segment EBITDA was $6.3 million, or 53% of revenues, compared to $3.2
million, or 37% of revenues.
Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30,
2007
-- Revenues increased 10% to $40.3 million from $36.7 million.
-- Operating income was $16.8 million, or 42% of revenues, compared to
$11.8 million, or 32% of revenues.
-- Segment EBITDA was $19.2 million, or 48% of revenues, compared to $15.7
million, or 43% of revenues.
The variances in Specialty Chemicals revenues reflect the following
factors:
-- A 50% increase in perchlorate volume and a 3% decrease in the related
average price per pound in the fiscal 2008 third quarter.
-- A 27% increase in perchlorate volume, offset partially by a 11%
decrease in the related average price per pound for the nine months
ended June 30, 2008.
-- Sodium azide revenues decreased 68% in the fiscal 2008 nine-month
period compared to the prior year period.
-- Halotron revenues increased 10% in the fiscal 2008 nine-month period
compared to the prior year period.
The increases in Specialty Chemicals revenues for both the fiscal 2008
third quarter and nine-month period, as compared to the respective prior year
periods, are a reflection of the timing of customer orders within the fiscal
years. This is in line with our expectation that from quarter to quarter
revenues will vary, and on an annual basis demand for perchlorates and
perchlorate revenues for fiscal 2008 will be consistent with fiscal 2007. The
decreases in average price per pound in the fiscal 2008 periods also reflect
less specialized-blend materials than the comparable periods.
Over the longer term, we continue to expect demand for Grade I AP to be
within the ranges of fiscal years 2006 and 2007. In addition, Grade I AP
revenues are typically derived from a relatively few large orders. As a
result, quarterly revenue amounts can vary significantly depending on the
timing of individual orders throughout the year. Average price per pound may
continue to fluctuate somewhat in future periods, depending upon product mix
and volume.
The decrease in sodium azide revenues in the fiscal 2008 periods is due to
a reduction in volume for sodium azide used in a pharmaceutical application.
We do not anticipate an increase in demand for sodium azide in the near
future.
The increase in Halotron revenues is driven by timing of customer orders.
Halotron volumes are expected to be relatively consistent in fiscal 2008 as
compared to fiscal 2007.
Specialty Chemicals operating income for the nine months ended June 30,
2008 was 42% of Specialty Chemicals revenue compared to 32% for the prior year
period, and for the fiscal 2008 third quarter was 50% compared to 22% for the
fiscal 2007 third quarter, reflecting the following:
-- Specialty Chemicals segment gross margin percentage improved twenty
points for the fiscal 2008 third quarter and eight points for the nine
months ended June 30, 2008, compared to the respective prior year
periods, reflecting the following:
-- Mid fiscal 2008 second quarter, the Specialty Chemicals segment
completed the amortization of the value assigned to the
perchlorate customer list acquired in fiscal 1998. This reduction
in amortization expense improved the Specialty Chemical segment
gross margin percentage by eight points for the fiscal 2008 third
quarter and three points for the nine months ended June 30, 2008,
compared to the respective prior year periods.
-- The gross margin percentages in the fiscal 2008 periods benefited
from higher Grade I AP production quantities in fiscal 2008, and
the related improvement in fixed manufacturing costs absorption.
-- Specialty Chemicals segment operating expenses for the nine months
ended June 30, 2008 were consistent with the prior year period. For
the fiscal 2008 third quarter, Specialty Chemicals segment operating
expenses decreased $0.4 million compared to the prior fiscal year third
quarter, substantially due to lower employee benefits costs during the
quarter.
Aerospace Equipment Segment
Our Aerospace Equipment segment reflects the operating results of our
wholly-owned subsidiary Ampac-ISP Corp. ("ISP").
Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007
-- Revenues decreased 18% to $3.4 million from $4.1 million.
-- Operating loss was $0.3 million compared to operating income of $0.3
million.
Nine Months Ended June 30, 2008 Compared to Nine Months Ended June 30,
2007
-- Revenues decreased 10% to $11.4 million from $12.6 million.
-- Operating income was $0.2 compared to $0.6 million.
The decreases in Aerospace Equipment revenues during the fiscal 2008
periods reflect two primary factors:
-- The awards of new contracts are occurring later than we previously
anticipated.
-- During the fiscal 2008 third quarter, a component supplier for one of
the Aerospace Equipment segment's larger production contracts
experienced a quality issue with respect to their manufactured
component, which in turn resulted in a delay in delivery of these
components to our ISP facilities. The quality issue at the supplier
has been resolved and production under this contract has resumed.
Nonetheless, the delay did result in significant revenue declines
during the fiscal 2008 third quarter.
We are revising our 2008 growth expectations for this segment. We are
currently anticipating that the aforementioned revenue factors will continue
to place downward pressure on this segment's revenues in the fiscal 2008
fourth quarter resulting in revenue declines in this segment for fiscal 2008
compared to fiscal 2007.
The operating loss reported for the fiscal 2008 third quarter is a
function of the lower revenue levels which did not generate sufficient profits
to cover general and administrative overhead expenses.
Our Aerospace Equipment segment has enjoyed recent successes with new
contract awards. In June 2008, ISP received initial funding from General
Dynamics Advanced Information Systems to initiate the LDCM contract. The
expected value of the contract is approximately $4.0 million to deliver a
propulsion system for the Landsat satellite. This satellite is funded by NASA
Goddard and provides earth observation for land and water resource planning.
In July 2008, ISP was awarded a contract by Microsat Systems to provide 18
propulsion systems to be used on the Orbcomm OG2 program. The initial
multimillion dollar contract for 18 systems also has an option for another 30
systems. Orbcomm satellites provide GPS data for tracking and global satellite
data communications.
CAPITAL AND LIQUIDITY HIGHLIGHTS
Liquidity -- As of June 30, 2008, we had cash balances of $32.8 million
and no cash borrowings against our $20.0 million revolving credit line. In
addition, we were in compliance with the various covenants contained in our
credit agreements.
Operating Cash Flows -- Cash flows from operating activities during the
first nine months of fiscal 2008 improved by $1.2 million compared to the
prior fiscal year nine-month period. Operating activities provided cash of
$21.1 million for the nine months ended June 30, 2008 compared to providing
cash of $19.9 million for the prior fiscal year nine-month period.
Significant components of the change in cash flow from operating
activities include:
-- A decrease in cash provided by Adjusted EBITDA of $0.4 million.
-- An improvement in cash flow provided by working capital accounts of
$5.3 million, excluding the effects of interest and income taxes.
-- An increase in cash taxes paid of $3.5 million.
-- An increase in cash used for interest payments of $1.4 million.
-- A reduction in cash used for environmental remediation of $1.0 million.
-- Other decreases in cash used for operating activities of $0.2 million.
Cash provided by working capital accounts improved during the first nine
months of fiscal 2008 primarily due to early collection of accounts
receivable. In addition, the rate of inventory growth, primarily at AFC,
during the first nine months of fiscal 2008 has declined compared to the prior
fiscal year nine-month period. The improved cash flow from accounts
receivable and inventories was offset partially by reductions in accounts
payable, accrued liabilities and employee related liabilities.
As of June 30, 2008, our balance sheet reflects deferred revenues and
customer deposits of $23.2 million which primarily includes payments received
from our customers but for which we have not yet shipped product or recorded
revenue. We anticipate that substantially all of this balance will be
recorded as revenues during our fourth quarter of fiscal 2008.
We consider these working capital changes to be routine and within the
normal production cycle of our products. The production of certain fine
chemical products requires a length of time that exceeds one quarter.
Therefore, in any given quarter, work-in-progress inventory or deferred
revenues can increase or decrease significantly. We expect that our working
capital may vary normally by as much as $10.0 million from quarter to quarter.
Cash tax payments have increased due to our improved profitability.
Cash used for interest increased primarily due to the timing of our
interest payments. Our current debt instruments require semi-annual interest
payments in February and August compared to the debt instruments in place
through February of the prior fiscal year period which required interest
payments at the end of each quarter.
Cash used for environmental remediation decreased because during the
fiscal 2007 first quarter we were in the construction phase of our Henderson,
Nevada remediation project compared to the lower cash requirements of the
operating and maintenance phase which began in the fiscal 2007 second quarter.
Capital Expenditures -- Cash used for capital expenditures increased for
the nine months ended June 30, 2008 primarily associated with capital spending
for our Fine Chemicals segment that included the upgrade of an existing
production line to better handle new projects and the installation of
equipment in support of a long-term program.
OUTLOOK
Our consolidated results for fiscal 2008 to date remain on track with our
overall expectations. For fiscal 2008, we are maintaining our guidance for
consolidated revenues of at least $195.0 million. We are increasing our
guidance for Adjusted EBITDA to at least $41.5 million and net income to at
least $7.5 million. The increase in our fiscal 2008 Adjusted EBITDA guidance
reflects better than expected interest and other income and no change in our
annual performance expectations from our operations. Our fiscal 2008 guidance
for Adjusted EBITDA is computed by adding estimated amounts for depreciation
and amortization of $17.0 million, interest expense of $11.0 million and
income taxes of $6.0 million to estimated net income of $7.5 million. We are
anticipating our capital expenditures for fiscal year 2008 to be approximately
$16.0 million.
INVESTOR TELECONFERENCE
We invite you to participate in a teleconference with our executive
management covering our fiscal 2008 third quarter financial results. The
investor teleconference will be held Tuesday August 5, 2008 at 1:30 p.m.,
Pacific Daylight Time. The teleconference will include a presentation by
management followed by a question and answer session. The teleconference can
be accessed by dialing (973) 582-2852 between 1:15 and 1:30 p.m., Pacific
Daylight Time. Please reference conference ID# 58118598. As is our customary
practice, a live webcast of the teleconference is being provided by Thomson
Financial's First Call Events. A link to the webcast and the earnings release
is available at our website at http://www.apfc.com, and will be available for
replay until a few days before our next quarterly investor teleconference.
RISK FACTORS/FORWARD-LOOKING STATEMENTS
Statements contained in this earnings release that are not purely
historical are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, including without
limitation statements concerning or relating to our future financial results
and guidance, statements regarding factors that will affect our consolidated
gross margins, statements regarding our expectations for revenue growth in our
Fine Chemicals segment, statements regarding our beliefs about future demand,
average prices and related revenues for perchlorates, in particular Grade I
AP, statements regarding our expectations for demand for sodium azide,
statements regarding our expectations for Halotron volumes, statements
relating to our expectations for revenue declines in our Aerospace Equipment
segment, statements regarding the anticipated timing of the recognition of
certain of our deferred revenues, statements regarding our working capital
changes and future variations, and all statements in the "Outlook" section of
this earnings release. Words such as "anticipate", "expect", "should", "may",
"can", "will" and similar expressions are intended to identify forward-looking
statements. The inclusion of forward-looking statements should not be
regarded as a representation by the Company that any of its expectations will
be achieved. Actual results may differ materially from those set forth in the
release due to risks and uncertainties inherent in the Company's business.
Factors that might cause such differences include, but are not limited to, the
following:
-- We depend on a limited number of customers for most of our sales in our
Specialty Chemicals, Aerospace Equipment and Fine Chemicals segments
and the loss of one or more of these customers could have a material
adverse affect on our revenues.
-- The inherent limitations of our fixed-price or similar contracts may
impact our profitability.
-- The numerous and often complex laws and regulations and regulatory
oversight to which our operations and properties are subject, the cost
of compliance, and the effect of any failure to comply could reduce our
profitability and liquidity.
-- A significant portion of our business depends on contracts with the
government or its prime contractors and these contracts are impacted by
governmental priorities and are subject to potential fluctuations in
funding or early termination, including for convenience, any of which
could material adversely effect our operating results, financial
condition or cash flows.
-- We may be subject to potentially material costs and liabilities in
connection with environmental liabilities.
-- Although we have established an environmental reserve for remediation
at our Henderson, Nevada site, given the many uncertainties involved in
assessing such liabilities, our environmental-related risks may from
time to time exceed any related reserves.
-- For each of our Specialty Chemicals, Fine Chemicals and Aerospace
Equipment segments, most production is conducted in a single facility
and any significant disruption or delay at a particular facility could
have a material adverse effect on our business, financial position and
results of operations.
-- The release or explosion of dangerous materials used in our business
could disrupt our operations and cause us to incur additional costs and
liability.
-- Disruptions in the supply of key raw materials and difficulties in the
supplier qualification process, as well as increases in prices of raw
materials, could adversely impact our operations.
-- Each of our Specialty Chemicals, Fine Chemicals and Aerospace Equipment
segments may be unable to comply with customer specifications and
manufacturing instructions or may experience delays or other problems
with existing or new products, which could result in increased costs,
losses of sales and potential breach of customer contracts.
-- Successful commercialization of pharmaceutical products and product
line extensions is very difficult and subject to many uncertainties. If
a customer is not able to successfully commercialize its products for
which AFC produces compounds or if a product is subsequently recalled,
then the operating results of AFC may be negatively impacted.
-- A strike or other work stoppage, or the inability to renew collective
bargaining agreements on favorable terms, could have a material adverse
effect on the cost structure and operational capabilities of AFC.
-- The pharmaceutical fine chemicals industry is a capital-intensive
industry and if AFC does not have sufficient financial resources to
finance the necessary capital expenditures, its business and results of
operations may be harmed.
-- We may be subject to potential product liability claims that could
affect our earnings and financial condition and harm our reputation.
-- Technology innovations in the markets that we serve may create
alternatives to our products and result in reduced sales.
-- We are subject to competition in certain industries where we
participate and therefore may not be able to compete successfully.
-- Due to the nature of our business, our sales levels may fluctuate
causing our quarterly operating results to fluctuate.
-- The volatility of the chemical industry affects our capacity
utilization and causes fluctuations in our results of operations.
-- A loss of key personnel or highly skilled employees could disrupt our
operations.
-- We may continue to expand our operations through acquisitions, which
could divert management's attention and expose us to unanticipated
liabilities and costs. We may experience difficulties integrating the
acquired operations, and we may incur costs relating to acquisitions
that are never consummated.
-- We have a substantial amount of debt, and the cost of servicing that
debt could adversely affect our ability to take actions, our liquidity
or our financial condition.
-- If we are unable to generate sufficient cash flow to service our debt
and fund our operating costs, our liquidity may be adversely affected.
-- Our shareholder rights plan, Restated Certificate of Incorporation, as
amended, and Amended and Restated By-laws discourage unsolicited
takeover proposals and could prevent stockholders from realizing a
premium on their common stock.
-- Our proprietary rights may be violated or compromised, which could
damage our operations.
Readers of this earnings release are referred to our Annual Report on Form
10-K for the year ended September 30, 2007, our Form 10-Q for the quarter
ended March 31, 2008 and our other filings with the Securities and Exchange
Commission for further discussion of these and other factors that could affect
our future results. The forward-looking statements contained in this earnings
release are made as of the date hereof and we assume no obligation to update
for actual results or to update the reasons why actual results could differ
materially from those projected in the forward-looking statements, except as
required by law. In addition, the operating results for the three-months and
nine-months ended June 30, 2008 and cash flows for the nine-months ended June
30, 2008 are not necessarily indicative of the results that will be achieved
for future periods.
ABOUT AMERICAN PACIFIC CORPORATION
American Pacific Corporation is a leading manufacturer of specialty and
fine chemicals within its focused markets, as well as propulsion products sold
to defense, aerospace and pharmaceutical end markets. Our products provide
access to, and movement in, space via solid fuel and propulsion thrusters and
represent the registered or active pharmaceutical ingredient in drug
applications such as HIV, epilepsy and cancer. We also produce specialty
chemicals utilized in various applications such as fire extinguishing systems,
as well as manufacture water treatment equipment. Our products are designed to
meet customer specifications and often must meet certain governmental and
regulatory approvals. Additional information about us can be obtained by
visiting our web site at http://www.apfc.com.
AMERICAN PACIFIC CORPORATION
Consolidated Statements of Operations
(Unaudited, Dollars in Thousands, Except per Share Amounts)
Three Months EndedNine Months Ended
June 30, June 30,
20082007 2008 2007
Revenues $36,740$43,723 $131,977 $122,200
Cost of Revenues 23,990 30,358 85,188 79,716
Gross Profit 12,750 13,365 46,789 42,484
Operating Expenses 10,377 9,660 31,824 28,264
Operating Income 2,373 3,705 14,965 14,220
Interest and Other Income, Net575181 1,221365
Interest Expense2,682 2,709 8,073 9,169
Debt Repayment Charges - - - 2,714
Income before Income Tax266 1,177 8,113 2,702
Income Tax Expense138571 3,489 1,339
Net Income $128 $606 $4,624 $1,363
Earnings per Share:
Basic $0.02 $0.08 $0.62 $0.19
Diluted $0.02 $0.08 $0.61 $0.18
Weighted Average Shares
Outstanding:
Basic 7,452,000 7,378,000 7,442,000 7,345,000
Diluted 7,607,000 7,523,000 7,594,000 7,439,000
AMERICAN PACIFIC CORPORATION
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands, Except per Share Amounts)
June 30, September 30,
20082007
ASSETS
Current Assets:
Cash and Cash Equivalents $32,770 $21,426
Accounts Receivable, Net 21,396 25,236
Inventories57,947 47,023
Prepaid Expenses and Other Assets 4,247 2,258
Deferred Income Taxes 7,594 2,101
Total Current Assets123,954 98,044
Property, Plant and Equipment, Net 118,283 116,965
Intangible Assets, Net3,322 5,767
Deferred Income Taxes16,924 19,385
Other Assets 9,068 9,246
TOTAL ASSETS $271,551$249,407
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $12,041 $10,867
Accrued Liabilities 6,280 7,829
Accrued Interest4,124 1,686
Employee Related Liabilities6,838 7,222
Deferred Revenues and Customer Deposits23,243 7,755
Current Portion of Environmental Remediation
Reserves 557 726
Current Portion of Long-Term Debt 254 252
Total Current Liabilities53,337 36,337
Long-Term Debt 110,163 110,373
Environmental Remediation Reserves 14,109 14,697
Pension Obligations and Other Long-Term Liabilities 15,534 12,311
Total Liabilities 193,143 173,718
Commitments and Contingencies
Shareholders' Equity
Preferred Stock - $1.00 par value; 3,000,000
authorized; none outstanding - -
Common Stock - $0.10 par value; 20,000,000 shares
authorized, 9,523,541 and 9,463,541 issued 952 946
Capital in Excess of Par Value 88,240 87,513
Retained Earnings 11,629 7,296
Treasury Stock - 2,045,950 shares (17,175)(16,982)
Accumulated Other Comprehensive Loss (5,238) (3,084)
Total Shareholders' Equity 78,408 75,689
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $271,551$249,407
AMERICAN PACIFIC CORPORATION
Consolidated Statements of Cash Flow
(Unaudited, Dollars in Thousands)
Nine Months Ended
June 30,
2008 2007
Cash Flows from Operating Activities:
Net Income $4,624 $1,363
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and amortization 12,472 14,502
Non-cash interest expense 4781,975
Share-based compensation 90 67
Non-cash component of debt repayment charges-2,309
Excess tax benefit from stock option exercises (244)(203)
Deferred income taxes(447) -
Gain on sale of assets (418) -
Changes in operating assets and liabilities:
Accounts receivable, net 3,800 (1,055)
Inventories (10,924) (17,872)
Prepaid expenses and other current assets(1,766)(253)
Accounts payable (154)(308)
Accrued liabilities (1,011) 800
Accrued interest 2,4383,857
Employee related liabilities (384) 1,107
Deferred revenues and customer deposits 15,488 16,597
Environmental remediation reserves (757) (1,800)
Pension obligations, net (199)(351)
Other(1,945)(853)
Net Cash Provided by Operating Activities 21,141 19,882
Cash Flows from Investing Activities:
Capital expenditures (10,027) (3,930)
Earnout payment for acquisition of AFC Business - (6,000)
Discontinued operations - collection of note
receivable -7,510
Net Cash Used by Investing Activities (10,027) (2,420)
Cash Flows from Financing Activities:
Proceeds from the issuance of long-term debt- 110,000
Payments of long-term debt (208)(108,533)
Debt issuance costs - (4,677)
Issuances of common stock, net387 572
Excess tax benefit from stock option exercises244 203
Purchases of treasury stock (193) -
Net Cash Provided (Used) by Financing
Activities 230 (2,435)
Net Change in Cash and Cash Equivalents 11,344 15,027
Cash and Cash Equivalents, Beginning of Period 21,4266,872
Cash and Cash Equivalents, End of Period$32,770 $21,899
AMERICAN PACIFIC CORPORATION
Supplemental Data
(Unaudited, Dollars in Thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
2008 2007 2008 2007
Operating Segment Data:
Revenues:
Fine Chemicals $19,654 $30,736 $76,920 $70,693
Specialty Chemicals 11,9428,78040,27836,702
Aerospace Equipment 3,3804,11911,35012,560
Other Businesses 1,764 88 3,429 2,245
Total Revenues $36,740 $43,723 $131,977 $122,200
Segment Operating Income (Loss):
Fine Chemicals$621 $4,950$9,426 $10,795
Specialty Chemicals 5,9981,93516,76811,846
Aerospace Equipment (330) 310 248 607
Other Businesses 341 (183) 340 564
Total Segment Operating Income 6,6307,01226,78223,812
Corporate Expenses(4,257) (3,307) (11,817) (9,592)
Operating Income $2,373 $3,705 $14,965 $14,220
Depreciation and Amortization:
Fine Chemicals $3,1153,401$9,50510,146
Specialty Chemicals3021,290 2,392 3,858
Aerospace Equipment 60 38 156 104
Other Businesses 33 9 9
Corporate 155 127 410 385
Total Depreciation and
Amortization $3,635 $4,859 $12,472 $14,502
Segment EBITDA (a):
Fine Chemicals $3,736 $8,351 $18,931 $20,941
Specialty Chemicals 6,3003,22519,16015,704
Aerospace Equipment (270) 348 404 711
Other Businesses 344 (180) 349 573
Total Segment EBITDA10,110 11,74438,84437,929
Less: Corporate Expenses, Excluding
Depreciation (4,102) (3,180) (11,407) (9,207)
Plus: Share-based Compensation37-9067
Plus: Interest Income575 181 1,221 365
Adjusted EBITDA (b) $6,620 $8,745 $28,748 $29,154
Reconciliation of Net Income to
Adjusted EBITDA (b):
Net Income $128 $606$4,624$1,363
Add Back:
Income Tax Expense 138 571 3,489 1,339
Interest Expense 2,6822,709 8,073 9,169
Debt repayment charges -- - 2,714
Depreciation and Amortization3,6354,85912,47214,502
Share-based Compensation37-9067
Adjusted EBITDA $6,620 $8,745 $28,748 $29,154
(a) Segment EBITDA is defined as segment operating income (loss) plus
depreciation and amortization.
(b) Adjusted EBITDA is defined as net income before income tax expense,
interest expense, debt repayment charges, depreciation and
amortization, and share-based compensation.
Segment EBITDA and Adjusted EBITDA are not financial measures calculated
in accordance with GAAP and should not be considered as an alternative to
income from operations as performance measures. Each EBITDA measure is
presented solely as a supplemental disclosure because management believes that
each is a useful performance measure that is widely used within the industry.
In addition, EBITDA measures are significant measurements for covenant
compliance under our credit facility. Each EBITDA measure is not calculated
in the same manner by all companies and, accordingly, may not be an
appropriate measure for comparison.
SOURCE American Pacific Corporation
