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Press Release - American Pacific Corporation (APFC-Nasdaq) |
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“Investors should pay attention because we are in three areas where I believe the future of America is. There is no question that healthcare is a key to all of this. We are participating in sophisticated chemicals that are used to treat difficult diseases and that will become even more important in the future. As for aerospace equipment, I think the future is in space. It may sound corny but what Columbus looked at 600 years ago and wanted to cross the unknown ocean is today space and the practical use of space...” - John R. Gibson (APFC) (Interview published June 27, 2008) |
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American Pacific Reports Fiscal 2008 Results; Net Income Increases
80% LAS VEGAS, Dec. 11 /PRNewswire-FirstCall/ -- American Pacific Corporation (Nasdaq: APFC - News) today reported financial results for its fiscal 2008 fourth quarter and year ended September 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.
Quarter Ended September 30, 2008 Compared to Quarter Ended September 30, 2007
-- Revenues increased 15% to $71.2 million from $61.7 million.
-- Operating income increased 3% to $9.9 million compared to $9.6 million.
-- Adjusted EBITDA decreased to $14.1 million compared to $14.9 million.
-- Net income increased 19% to $4.3 million from $3.6 million.
-- Diluted earnings per share was $0.57 compared to $0.48.
Year Ended September 30, 2008 Compared to Year Ended September 30, 2007
-- Revenues increased 10% to $203.1 million from $183.9 million.
-- Operating income increased 4% to $24.9 million compared to
$23.9 million.
-- Adjusted EBITDA decreased to $42.8 million compared to $44.0 million.
-- Net income increased 80% to $9.0 million from $5.0 million.
-- Diluted earnings per share was $1.18 compared to $0.67.
The prior year includes a charge of $0.24 per diluted share related to our refinancing activities in February 2007.
Revenues -- For our fiscal 2008 fourth quarter, revenues increased 15%, reflecting a 40% increase in Fine Chemicals segment revenues offset by a 17% decrease in Specialty Chemicals segment revenues. Our revenues increased 10% in fiscal 2008 primarily due to a 19% increase in revenues for our Fine Chemicals segment. See further discussion under our Segment Highlights.
Three Months Ended Year Ended
September 30, September 30,
2008 2007 2008 2007
Fine Chemicals 66% 55% 61% 57%
Specialty Chemicals 24% 33% 28% 31%
Aerospace Equipment 7% 8% 8% 9%
Other Businesses 3% 4% 3% 3%
Total Revenues 100% 100% 100% 100%
In addition, consolidated gross margins for our fiscal 2008 fourth quarter and fiscal 2008 reflect:
-- A decrease in Fine Chemicals segment gross margin percentage relating
primarily to changes in product mix and a reduction in gross margin for
an anti-viral product.
-- Improvements in Specialty Chemicals segment gross margin percentage
primarily due to a reduction in amortization expense.
See further discussion under our Segment Highlights.
Operating Expenses -- For our fiscal 2008 fourth quarter, operating expenses decreased $0.6 million to $11.0 million from $11.6 million in the fourth quarter of the prior fiscal year primarily due to a reduction in incentive compensation expenses for our Fine Chemicals segment. For fiscal 2008, operating expenses increased $3.1 million to $42.9 million from $39.8 million for the prior fiscal year. The variances are primarily due to:
-- A decrease in Fine Chemicals segment operating expenses including a
decrease in incentive compensation of $0.7 million offset partially by
an increase in recruiting and personnel relocation expenses of
$0.5 million.
-- A $0.1 million decrease in Specialty Chemicals segment operating
expenses due to various individually insignificant changes in general
and administrative expenses.
-- A $0.5 million increase in Aerospace Equipment segment operating
expenses due to various individually insignificant changes in staffing
and marketing expenses.
-- An increase in corporate operating expenses including increases in
supplemental executive retirement expenses of $0.9 million, rent of
$0.4 million, and legal and professional services of $0.4 million.
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 September 30, 2008 Compared to Quarter Ended September 30, 2007
-- Revenues were $47.3 million compared to revenues of $33.7 million.
-- Operating income was $6.8 million, or 14% of revenue, compared to
$6.0 million, or 18% of revenue.
-- Segment EBITDA was $10.2 million, or 22% of revenue, compared to
Segment EBITDA of $9.5 million, or 28% of revenue.
Year Ended September 30, 2008 Compared to Year Ended September 30, 2007
-- Revenues were $124.2 million compared to revenues of $104.4 million.
-- Operating income was $16.2 million, or 13% of revenue, compared to
$16.8 million, or 16% of revenue.
-- Segment EBITDA was $29.1 million, or 23% of revenue, compared to
Segment EBITDA of $30.4 million, or 29% of revenue.
The increase in Fine Chemicals revenues for the fourth quarter of fiscal 2008 compared to the prior fiscal year fourth quarter is primarily due to the timing of the completion of customer orders and satisfaction of the related revenue recognition criteria, as well as the factors affecting the fiscal 2008 revenue increases discussed below. Fine Chemicals segment revenues increased $19.7 million, or 19%, in fiscal 2008 compared to the prior fiscal year primarily driven by increased volume for anti-viral products. Specifically,
-- The volume for our largest (measured in terms of revenues) anti-viral
product increased by 45% to support our customer's increase in safety
stock inventory of the final drug.
-- Volume for our second largest anti-viral product increased by 21% in
support of increases in demand for our customer's end product.
-- Volume for our largest oncology product declined in fiscal 2008 because
fiscal 2007 included additional quantities purchased by our customer to
build on-hand safety stock quantities.
Operating income was 14% of revenue for the fiscal 2008 fourth quarter compared to 18% for the prior fiscal year quarter and 13% of revenue for fiscal 2008 compared to 16% for the prior fiscal year period. Segment operating income for fiscal 2008 periods reflects:
-- A decrease in the gross margin percentage of approximately eight points
for the fiscal 2008 fourth quarter and approximately five points for
fiscal 2008, each compared to the comparable prior fiscal year periods.
There are several factors affecting Fine Chemicals gross margin
percentages. In particular,
-- Our product mix changed such that fiscal 2008 periods contained a
greater percentage of lower-margin products than fiscal 2007
periods.
-- During the fourth quarter of fiscal 2008, we implemented a new
process for a large-volume anti-viral product and experienced
start-up difficulties. This negatively impacted margins. While we
have made progress toward our expectations for the new process, the
effects are expected to continue into the early part of fiscal 2009.
-- 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 $0.8 million for
fiscal year 2008.
-- A decrease in operating expenses of $0.8 million for the fiscal 2008
fourth quarter primarily due to a decrease in incentive compensation.
-- A consistent level of operating expenses in fiscal 2008 compared to
fiscal 2007 including a decrease in incentive compensation of
$0.7 million, offset partially by an increase in recruiting and
personnel relocation expenses of $0.5 million.
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 89% of Specialty Chemicals revenues in fiscal 2008 and fiscal 2007, respectively. Quarter Ended September 30, 2008 Compared to Quarter Ended September 30, 2007
-- Revenues declined 17% to $16.8 million from $20.4 million.
-- Operating income was $6.4 million, or 38% of revenues, compared to
$6.4 million, or 31% of revenues.
-- Segment EBITDA was $6.8 million, or 40% of revenues, compared to
$7.7 million, or 38% of revenues.
Year Ended September 30, 2008 Compared to Year Ended September 30, 2007
-- Revenues were $57.1 million for each year.
-- Operating income was $23.1 million, or 41% of revenues, compared to
$18.2 million, or 32% of revenues.
-- Segment EBITDA was $26.0 million, or 45% of revenues, compared to
$23.4 million, or 41% of revenues.
The variances in Specialty Chemicals revenues reflect the following factors:
-- A 13% increase in perchlorate volume in fiscal 2008 and a 10% decline
in the related average price per pound.
-- A 13% decrease in perchlorate volume and a 5% decrease in the related
average price per pound in the fiscal 2008 fourth quarter.
-- Sodium azide revenues decreased 63% in fiscal 2008 compared to the
prior fiscal year.
-- Halotron revenues increased 4% in fiscal 2008 compared to the prior
fiscal year.
For fiscal 2008, our largest programs were the Minuteman III propulsion replacement program, the Space Shuttle Reusable Solid Rocket Motor (RSRM), the Guided Multiple Launch Rocket System (GMLRS) missile and the ARES next-generation space exploration vehicles. The average price per pound of perchlorate sold in fiscal 2008 decreased compared to fiscal 2007 due to higher total sales volume of Grade I AP in fiscal 2008 compared to fiscal 2007. We expect Grade I AP demand in fiscal 2009 to be less than fiscal 2008, primarily due to the completion of the three year Minuteman III propulsion replacement program. The expected decline in volume is not expected to have a corresponding effect on revenues due to the pricing under our contractual price-volume matrix. Over the longer term, we expect annual demand for Grade I AP to be within the range of 6 million to 9 million pounds based on current NASA and U.S. Department of Defense production programs. However, AP demand could increase if there is an extension of the Space Shuttle program and/or an acceleration of the Ares program,
Increases in Halotron revenues are driven by volume changes which have been and are expected to be consistent year over year. Specialty Chemicals operating income for fiscal 2008 was 41% of Specialty Chemicals revenue compared to 32% for the prior fiscal year, and for the fiscal 2008 fourth quarter was 38% compared to 31% for the fiscal 2007 fourth quarter, reflecting the following:
-- Specialty Chemicals segment gross margin percentage improved eight
points for both the fiscal 2008 fourth quarter and fiscal 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 Chemicals segment gross
margin percentage by four points for fiscal 2008.
-- The remaining improvement in the Specialty Chemicals segment gross
margin percentage reflects better absorption of fixed manufacturing
costs due to the higher production volume in fiscal 2008.
-- Specialty Chemicals segment operating expenses for both the fiscal 2008
fourth quarter and fiscal 2008 were consistent with the prior year
periods.
Aerospace Equipment Segment Our Aerospace Equipment segment reflects the operating results of our wholly-owned subsidiary Ampac-ISP Corp. ("ISP").
Year Ended September 30, 2008 Compared to Year Ended September 30, 2007
-- Revenues decreased 5% to $16.4 million from $17.3 million.
-- Operating income was $0.7 compared to $1.5 million.
Quarter Ended September 30, 2008 Compared to Quarter Ended September 30, 2007
-- Revenues increased 6% to $5.1 million from $4.8 million.
-- Operating income was $0.5 million compared to $0.9 million.
The decreases in Aerospace Equipment revenues during fiscal 2008 is primarily due to the awards of new contracts occurring in the later part of fiscal 2008, and accordingly did not produce as much revenue within fiscal 2008. The increase in revenues for the fiscal 2008 fourth quarter reflects the inception of revenue generated from these new contract awards. Aerospace Equipment segment gross margin percentage was the same in fiscal 2008 and fiscal 2007. Aerospace Equipment segment operating expenses increased $0.5 million due to various individually insignificant increases in staffing and marketing expenses.
Liquidity -- As of September 30, 2008, we had cash balances of $26.9 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 fiscal 2008 decreased by $3.8 million compared to the prior fiscal year. Operating activities provided cash of $20.3 million for fiscal 2008 compared to providing cash of $24.1 million for the prior fiscal year. Significant components of the change in cash flow from operating activities include:
-- A decrease in cash provided by Adjusted EBITDA of $1.2 million.
-- An improvement in cash used to fund working capital accounts of
$1.7 million, excluding the effects of interest and income taxes.
-- An increase in cash taxes paid of $4.1 million.
-- An increase in cash used for interest payments of $1.4 million.
-- A reduction in cash used for environmental remediation of $0.9 million.
-- Other decreases in cash used for operating activities of $0.3 million.
Cash used by working capital accounts improved during fiscal 2008 primarily due to reductions in inventory levels, primarily at AFC. The benefit to cash from reductions in inventory levels was partially offset by reductions in accrued liabilities and deferred revenues. 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 the improvement in our pre-tax income and the negative effects of tax-basis inventory adjustments. 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 2007 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 -- Capital expenditures increased by $6.9 million in fiscal 2008. This includes an increase in capital expenditures at our corporate offices of $2.2 million primarily due to the relocation of our headquarters and an increase in capital expenditures by 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 project.
Looking to fiscal 2009 and beyond, we believe our long-term growth opportunities remain strong. We remain committed to our strategy to provide long-term value through the growth of our Fine Chemicals and Aerospace Equipment segments. For fiscal 2009, we expect consolidated revenue of at least $195.0 million, reflecting the following:
-- Fine Chemicals segment revenues are anticipated to decline by
approximately 10% as compared to fiscal 2008. The expected decline
reflects an approximately 85% reduction in volume for the anti-viral
product that was our largest product in fiscal 2008. The fiscal 2009
decline in volume for this product is due to our customer's supply
chain strategy and their desire to reduce their current levels of
inventory. Over the longer term, we believe that the pharmaceutical
fine chemicals market will continue to present growth opportunities.
The trend toward more outsourcing by the pharmaceutical industry
continues and AFC's pipeline of new products continues to grow. We
believe that the key to enabling our growth in this segment is
investment through strategic acquisitions and to a lesser extent
investment in our facilities.
-- Stable revenues from our Specialty Chemicals segment.
-- Substantial growth from our Aerospace Equipment segment reflecting both
the benefits from this segment's success with contract awards in fiscal
2008 and the addition of our recently acquired European operations by
ISP.
Our guidance for fiscal 2009 Adjusted EBITDA is at least $37.0 million and net income of at least $6.0 million. Our fiscal 2009 guidance for Adjusted EBITDA is computed by adding estimated amounts for depreciation and amortization of $15.0 million, interest expense of $11.0 million, share-based compensation expense of $1.0 million and income taxes of $4.0 million to estimated net income of $6.0 million. We are anticipating our capital expenditures for fiscal 2009 to be approximately $14.0 million.
We invite you to participate in a teleconference with our executive management covering our fiscal 2008 financial results. The investor teleconference will be held Thursday, December 11, 2008 at 1:30 p.m., Pacific Standard 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 Standard Time. Please reference conference ID# 76570053. 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.
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 regarding factors that will affect our consolidated gross margins, statements regarding the effects on margins resulting from our Fine Chemicals segment's implementation of a new process for a large-volume anti-viral product, statements regarding our beliefs about future demand, 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 regarding our working capital changes and future variations, and all statements in the "Outlook" section of this earnings release. Words such as "anticipate", "expect", "could", "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 have a material adverse effect on 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 June 30, 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 year ended September 30, 2008 and cash flows for the year ended September 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 Ended Year Ended
September 30, September 30,
2008 2007 2008 2007
Revenues $71,152 $61,728 $203,129 $183,928
Cost of Revenues 50,200 40,514 135,388 120,230
Gross Profit 20,952 21,214 67,741 63,698
Operating Expenses 11,041 11,577 42,865 39,841
Operating Income 9,911 9,637 24,876 23,857
Interest and Other Income, Net 145 279 1,366 644
Interest Expense 2,730 2,827 10,803 11,996
Debt Repayment Charges - 202 - 2,916
Income before Income Tax 7,326 6,887 15,439 9,589
Income Tax Expense 2,999 3,266 6,488 4,605
Net Income $4,327 $3,621 $8,951 $4,984
Earnings per Share:
Basic $0.58 $0.49 $1.20 $0.68
Diluted $0.57 $0.48 $1.18 $0.67
Weighted Average Shares
Outstanding:
Basic 7,478,000 7,423,000 7,451,000 7,365,000
Diluted 7,612,000 7,565,000 7,599,000 7,471,000
AMERICAN PACIFIC CORPORATION
Consolidated Balance Sheets
(Unaudited, Dollars in Thousands, Except per Share Amounts)
September 30,
2008 2007
ASSETS
Current Assets:
Cash and Cash Equivalents $26,893 $21,426
Accounts Receivable, Net 27,445 25,236
Inventories 40,357 47,023
Prepaid Expenses and Other Assets 3,392 1,882
Income Taxes Receivable 1,804 376
Deferred Income Taxes 6,859 2,101
Total Current Assets 106,750 98,044
Property, Plant and Equipment, Net 118,608 116,965
Intangible Assets, Net 3,013 5,767
Deferred Income Taxes 13,849 19,385
Other Assets 9,193 9,246
TOTAL ASSETS $251,413 $249,407
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $10,554 $10,784
Accrued Liabilities 5,526 7,829
Accrued Interest 1,650 1,686
Employee Related Liabilities 6,917 7,222
Income Taxes Payable 111 83
Deferred Revenues and Customer
Deposits 3,091 7,755
Current Portion of Environmental
Remediation Reserves 996 726
Current Portion of Long-Term Debt 254 252
Total Current Liabilities 29,099 36,337
Long-Term Debt 110,120 110,373
Environmental Remediation Reserves 13,282 14,697
Pension Obligations and Other Long-
Term Liabilities 15,950 12,311
Total Liabilities 168,451 173,718
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 88,496 87,513
Retained Earnings 15,956 7,296
Treasury Stock - 2,045,950 and
2,034,870 shares (17,175) (16,982)
Accumulated Other Comprehensive
Loss (5,267) (3,084)
Total Shareholders' Equity 82,962 75,689
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $251,413 $249,407
AMERICAN PACIFIC CORPORATION
Consolidated Statements of Cash Flow
(Unaudited, Dollars in Thousands)
Year Ended
September 30,
2008 2007
Cash Flows from Operating
Activities:
Net Income $8,951 $4,984
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization 16,454 19,461
Non-cash interest expense 637 2,142
Share-based compensation 127 75
Non-cash component of debt
repayment charges - 2,309
Excess tax benefit from stock
option exercises (481) (32)
Deferred income taxes 3,355 2,102
Gain on sale of assets (416) 22
Changes in operating assets
and liabilities:
Accounts receivable, net (2,317) (5,712)
Inventories 6,666 (7,622)
Prepaid expenses and other
current assets (1,510) (292)
Accounts payable (349) 238
Income taxes (919) (63)
Accrued liabilities (1,765) 2,621
Accrued interest (36) 1,637
Employee related liabilities (431) 2,622
Deferred revenues and customer
deposits (4,664) 2,072
Environmental remediation
reserves (1,145) (2,088)
Pension obligations, net 277 1,677
Other (2,101) (2,015)
Net Cash Provided by Operating
Activities 20,333 24,138
Cash Flows from Investing Activities:
Capital expenditures (15,284) (8,421)
Earnout payment for acquisition of
AFC Business - (6,000)
Discontinued operations - collection of
note receivable - 7,510
Net Cash Used by Investing
Activities (15,284) (6,911)
Cash Flows from Financing Activities:
Proceeds from the issuance of
long-term debt - 110,000
Payments of long-term debt (251) (108,586)
Debt issuance costs - (4,814)
Issuances of common stock, net 381 695
Excess tax benefit from stock
option exercises 481 32
Purchases of treasury stock (193) -
Net Cash Provided (Used) by
Financing Activities 418 (2,673)
Net Change in Cash and Cash
Equivalents 5,467 14,554
Cash and Cash Equivalents, Beginning
of Period 21,426 6,872
Cash and Cash Equivalents, End of
Period $26,893 $21,426
AMERICAN PACIFIC CORPORATION
Supplemental Data
(Unaudited, Dollars in Thousands)
Three Months Ended Year Ended
September 30, September 30,
2008 2007 2008 2007
Operating Segment Data:
Revenues:
Fine Chemicals $47,267 $33,748 $124,187 $104,441
Specialty Chemicals 16,819 20,386 57,097 57,088
Aerospace Equipment 5,085 4,788 16,435 17,348
Other Businesses 1,981 2,806 5,410 5,051
Total Revenues $71,152 $61,728 $203,129 $183,928
Segment Operating Income:
Fine Chemicals $6,820 $5,995 $16,246 $16,790
Specialty Chemicals 6,360 6,377 23,128 18,223
Aerospace Equipment 488 851 736 1,458
Other Businesses 682 646 1,022 1,210
Total Segment Operating Income 14,350 13,869 41,132 37,681
Corporate Expenses (4,439) (4,232) (16,256) (13,824)
Operating Income $9,911 $9,637 $24,876 $23,857
Depreciation and Amortization:
Fine Chemicals $3,371 3,491 $12,876 13,637
Specialty Chemicals 433 1,301 2,825 5,159
Aerospace Equipment 66 38 222 142
Other Businesses 3 3 12 12
Corporate 109 126 519 511
Total Depreciation and
Amortization $3,982 $4,959 $16,454 $19,461
Segment EBITDA (a):
Fine Chemicals $10,191 $9,486 $29,122 $30,427
Specialty Chemicals 6,793 7,678 25,953 23,382
Aerospace Equipment 554 889 958 1,600
Other Businesses 685 649 1,034 1,222
Total Segment EBITDA 18,223 18,702 57,067 56,631
Less: Corporate Expenses, Excluding
Depreciation (4,330) (4,106) (15,737) (13,313)
Plus: Share-based Compensation 37 8 127 75
Plus: Interest Income 145 279 1,366 644
Adjusted EBITDA (b) $14,075 $14,883 $42,823 $44,037
Reconciliation of Net Income to
Adjusted EBITDA (b):
Net Income $4,327 $3,621 $8,951 $4,984
Add Back:
Income Tax Expense 2,999 3,266 6,488 4,605
Interest Expense 2,730 2,827 10,803 11,996
Debt repayment charges - 202 - 2,916
Depreciation and Amortization 3,982 4,959 16,454 19,461
Share-based Compensation 37 8 127 75
Adjusted EBITDA $14,075 $14,883 $42,823 $44,037
(a) Segment EBITDA is defined as segment operating income 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 industries in which we operate. In addition, EBITDA measures are significant measurements for covenant compliance under our revolving 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
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