-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SNYCJ0179OHtWZEA37bnffcdFerilI93ZMvBJIFkObD3y/XFLMIu8RKFg92QRQiZ Z2SPH8hq8OR5U5VCyiIPnw== 0000898430-96-000462.txt : 19960603 0000898430-96-000462.hdr.sgml : 19960603 ACCESSION NUMBER: 0000898430-96-000462 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PACIFIC CORP CENTRAL INDEX KEY: 0000350832 STANDARD INDUSTRIAL CLASSIFICATION: 2810 IRS NUMBER: 596490478 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21046 FILM NUMBER: 96516934 BUSINESS ADDRESS: STREET 1: 3770 HOWARD HUGHES PKWY STE 300 CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027352200 MAIL ADDRESS: STREET 1: 3770 HOWARD HUGHES PKWY STE 300 STREET 2: 3770 HOWARD HUGHES PKWY STE 300 CITY: LAS VEGAS STATE: NV ZIP: 89109 10-Q 1 FORM 10-Q DATED 12-31-95 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-8137 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 AMERICAN PACIFIC CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 59-6490478 (State or other jurisdiction (IRS Employer of incorporation or Identification No.) organization) 3770 HOWARD HUGHES PARKWAY, SUITE 300 LAS VEGAS, NV 89109 (Address of principal executive offices) (Zip Code) (702) 735-2200 (Registrant's telephone number, including area code) NOT APPLICABLE -------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X No --- --- Applicable Only to Corporate Issuers Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 8,105,621 AS OF JANUARY 31, 1996. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements -------------------- The information required by Rule 10-01 of Regulation S-X is provided on pages 4 through 9 of this Report on Form 10-Q. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations ------------- The information required by Item 303 of Regulation S-K is provided on pages 10 through 14 of this Report on Form 10-Q. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ----------------- The information required by Item 103 of Regulation S-K is provided on pages 8 through 9 of this Report on Form 10-Q. ITEM 2. through ITEM 5. Not applicable or none. ITEM 6. Exhibits and Reports on Form 8-K a) The following Exhibit is filed in connection with the Registrant's electronic filing: 27. Financial Statement Schedules b) None. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN PACIFIC CORPORATION Date: February 13, 1996 s/c C. Keith Rooker --------------------------- C. Keith Rooker Executive Vice President Date: February 13, 1996 s/c David N. Keys --------------------------- David N. Keys Vice President, Chief Financial Officer and Treasurer; Principal Financial and Accounting Officer 3 AMERICAN PACIFIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, (UNAUDITED)
1995 1994 ---------- ----------- Sales and Operating Revenues $9,776,000 $ 9,309,000 Cost of Sales 7,903,000 7,736,000 ---------- ----------- Gross Profit 1,873,000 1,573,000 Operating Expenses 2,350,000 2,608,000 ---------- ----------- Operating Loss (477,000) (1,035,000) Net Interest and Other Expense (Income) 415,000 (307,000) ---------- ----------- Loss Before Credit for Income Taxes (892,000) (728,000) Credit for Income Taxes (304,000) (248,000) ---------- ----------- Net Loss $ (588,000) $ (480,000) ---------- ----------- Net Loss Per Common Share $ (.07) $ (.06) ---------- ----------- Weighted Average Common and Common Equivalent Shares Outstanding 8,104,000 8,246,000 ---------- -----------
See the accompanying Notes to Condensed Consolidated Financial Statements. 4 AMERICAN PACIFIC CORPORATION Condensed Consolidated Balance Sheets (Unaudited)
December 31, September 30, 1995 1995 ------------ ------------- ASSETS Current Assets: Cash and Cash Equivalents $ 18,098,000 $ 24,540,000 Short-term Investments 2,000,000 2,000,000 Accounts and Notes Receivable 8,060,000 2,534,000 Income Tax Receivable 2,570,000 2,570,000 Related Party Notes Receivable 838,000 888,000 Inventories 7,629,000 7,094,000 Prepaid Expenses and Other Assets 1,372,000 986,000 ------------ ------------- Total Current Assets 40,567,000 40,612,000 Property, Plant and Equipment, Net 79,864,000 80,944,000 Development Property 10,041,000 10,296,000 Real Estate Equity Investments 18,720,000 17,725,000 Other Assets 4,321,000 4,469,000 Restricted Cash 4,613,000 3,743,000 ------------ ------------- TOTAL ASSETS $158,126,000 $157,789,000 ------------ -------------
See the accompanying Notes to Condensed Consolidated Financial Statements. 5 AMERICAN PACIFIC CORPORATION Condensed Consolidated Balance Sheets (Unaudited)
December 31, September 30, 1995 1995 ------------ ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable and Accrued Liabilities $ 6,812,000 $ 5,672,000 Notes Payable and Current Portion of Long-Term Debt 8,500,000 8,500,000 ------------ ------------ Total Current Liabilities 15,312,000 14,172,000 Long-Term Debt 34,133,000 34,054,000 Deferred Income Taxes 10,264,000 10,568,000 Minimum Pension Liability 1,175,000 1,175,000 ------------ ------------ TOTAL LIABILITIES 60,884,000 59,969,000 ------------ ------------ Commitments and Contingencies Warrants to Purchase Common Stock 3,569,000 3,569,000 SHAREHOLDERS' EQUITY: Common Stock 823,000 822,000 Capital in Excess of Par Value 78,323,000 78,285,000 Retained Earnings 15,601,000 16,189,000 Treasury Stock (818,000) (789,000) Receivable from the Sale of Stock (97,000) (97,000) Excess Additional Pension Liability (159,000) (159,000) ------------ ------------ Total Shareholders' Equity 93,673,000 94,251,000 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $158,126,000 $157,789,000 ------------ ------------
See the accompanying Notes to Condensed Consolidated Financial Statements. 6 AMERICAN PACIFIC CORPORATION Condensed Consolidated Statements of Cash Flows For the Three Months ended December 31, (Unaudited)
1995 1994 ------------ ----------- Cash Provided by (Used For) Operating Activities $(5,058,000) $ 53,000 ----------- ----------- Cash Flows Used for Investing Activities: Capital Expenditures, Development Property Additions and Real Estate Equity Investments (1,394,000) (2,604,000) Treasury Stock Acquired (29,000) (370,000) ----------- ----------- Net Cash Used For Investing Activities (1,423,000) (2,974,000) ----------- ----------- Cash Flows From Financing Activities: Issuance of Common Stock 39,000 26,000 ----------- ----------- Net Cash Provided By Financing Activities 39,000 26,000 ----------- ----------- Net Decrease in Cash and Cash Equivalents (6,442,000) (2,895,000) Cash and Cash Equivalents, Beginning of Period 24,540,000 22,884,000 ----------- ----------- Cash and Cash Equivalents, End of Period $18,098,000 $19,989,000 ----------- -----------
See the accompanying Notes to Condensed Consolidated Financial Statements. 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: 1. BASIS OF REPORTING The accompanying Condensed Consolidated Financial Statements are unaudited and do not include certain information and disclosures included in the Annual Report on Form 10-K of American Pacific Corporation (the "Company"). The Condensed Consolidated Balance Sheet as of September 30, 1995 was derived from the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. The Condensed Consolidated Financial Statements for the three-month periods ended December 31, 1995 and 1994 are unaudited. Such statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. In the opinion of Management, however, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. 2. NET LOSS PER COMMON SHARE Net loss per common share for the three-month periods ended December 31, 1995 and 1994 is determined based upon the weighted average number of common and common equivalent shares (if such shares are dilutive) outstanding. Common share equivalents consist of outstanding stock options and warrants. 3. INVENTORIES Inventories consist of the following:
December 31, September 30, 1995 1995 ------------ ------------- Work-in-process $4,379,000 $3,828,000 Raw materials and supplies 3,250,000 3,266,000 ---------- ---------- Total $7,629,000 $7,094,000 ---------- ----------
4. COMMITMENTS AND CONTINGENCIES In fiscal 1993, three shareholder lawsuits, purporting to be class actions, were filed in the United States District Court for the District of Nevada against the Company and certain of its directors and officers. The complaints, which were consolidated, alleged that the Company's public statements violated Federal securities laws by inadequately disclosing information concerning its agreements with Thiokol Corporation ("Thiokol") and the Company's operations. On November 27, 1995, the U.S. District Court granted in part the Company's motion for summary judgment ruling that the Company had not violated the federal securities laws in relation to disclosures concerning the Company's agreements with Thiokol. The remaining claims, which related to allegedly misleading or inadequate disclosures regarding Halotron, were the subject of a jury trial that ended on January 17, 1996. The jury reached a unanimous verdict that neither the Company nor its directors and officers made misleading or inadequate statements regarding Halotron. The summary 8 judgment ruling and the results of the trial relating to Halotron are expected to be subject to post-verdict motions and appeals. As a result of the above-described shareholder lawsuits, the Company has incurred legal and other costs and may incur material legal and other costs associated with the ultimate resolution of the shareholder lawsuits in future periods. Certain of these costs may be reimbursable under policies providing for insurance coverage. The Company has adopted certain policies in its Charter and Bylaws as a result of which the Company may have the obligation to indemnify its affected officers and directors to the extent, if at all, the existing insurance coverages are insufficient. The Company's insurance carriers have reserved the right to exclude or disclaim coverage under certain circumstances. The Company is currently unable to predict or quantify the amount or the range of such costs, if any, or the period of time during which such costs will be incurred. The Company was served with a complaint on December 10, 1993 in a lawsuit brought by limited partners in a partnership of which one of the Company's former subsidiaries, divested in 1985, was a general partner. The plaintiffs allege that the Company is liable to them in the amount of approximately $5.9 million on a guarantee executed in 1982. The Company believes that the claim against it is wholly without merit. The Company and its subsidiaries are also involved in other lawsuits. The Company believes that these other lawsuits, individually or in the aggregate, will not have a material adverse effect on the Company or any of its subsidiaries. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SALES AND OPERATING REVENUES AND GROSS PROFIT Sales and operating revenues were $9,776,000 and $9,309,000 during the three- month periods ended December 31, 1995 and 1994. Gross profit as a percentage of sales and operating revenues was 19 percent in the first quarter of fiscal 1996 compared to 17 percent in the first quarter of fiscal 1995. A discussion of sales and operating revenues and gross profit percentages relating to the Company's principal operating activities is provided below. PERCHLORATE CHEMICAL OPERATIONS In May 1994, Western Electrochemical Company ("WECCO"), an indirect wholly-owned subsidiary of the Company, and Thiokol executed an amendment (the "Amendment") to an existing long-term purchase contract for the sale of ammonium perchlorate ("AP"). The Amendment confirmed that the purchase contract had a continuous term commencing with the first production of AP at the WECCO plant in August 1989 and ending September 30, 1996, (approximately two months subsequent to the estimated original term of the Advance Agreement). The Amendment provides for WECCO to receive revenues from sales of AP of approximately $33 million, $28 million and $20 million during the fiscal years ended and ending September 30, 1994, 1995 and 1996, respectively. Sales of all perchlorate chemicals amounted to approximately $5,145,000 and $7,100,000 during the three-month periods ended December 31, 1995 and 1994, respectively. In October 1995, WECCO received a purchase order for the delivery of AP from October 1996 through 1999 having a value in the range of $8 million to $10 million. This contract includes options that could increase the total order substantially during the 1997-1999 period, and that could extend the contract to the year 2005. Other than this purchase order, WECCO has no significant backlog of perchlorate chemical sales subsequent to September 30, 1996. SODIUM AZIDE OPERATIONS Sodium azide sales (net of a five percent royalty and certain commissions) were $3,345,000 and $1,111,000 during the three-month periods ended December 31, 1995 and 1994, respectively. Commercial shipments of sodium azide began in April 1994. The level of sodium azide sales has not been sufficient to absorb operational costs associated with the production and sale of sodium azide. The Company's plans with respect to its sodium azide project continue to be grounded in the Company's objective of becoming the primary supplier to the U.S. automotive airbag inflator market. The Company believes that the level of sodium azide sales will continue to increase. There can be no assurance in that regard however, and, as a consequence, the Company cannot predict over what period of time, if at all, such increases in sales levels will occur. In addition, by reason of a highly competitive market environment there appears to be considerable market pressure on the price of sodium azide. At the time the Company began this project in 1990, prices for sodium azide to the airbag market were approximately $8.00 per pound. Prices currently appear to be in the range of $4.50 to $6.00 per pound. The Company believes the price reduction in sodium azide is due to the unlawful pricing practices of Japanese producers. 10 In response to such practices, in January 1996, the Company filed an antidumping petition with the United States International Trade Commission and the United States Department of Commerce. Depreciation expense relating to sodium azide production increased in the third quarter of fiscal 1995 as the sodium azide facility completed its transition from construction to production activities. On an annualized basis, cost of sales associated with sodium azide activities increased by approximately $3 million beginning April 1, 1995 as a result of this increase in depreciation expense. The Company expects depreciation expense related to sodium azide production to approximate $6 million in fiscal 1996. REAL ESTATE OPERATIONS The Company's real estate development properties consist of approximately 4,700 acres in Iron County, Utah near Cedar City, Utah and a 420-acre tract (Gibson Business Park) in Clark County, Nevada. All development property is held in fee simple. Substantially all of the Gibson Business Park land is pledged as collateral for certain debt (the "Azide Notes"). The Company is actively marketing its Nevada property for sale and development. About 240 acres of its Clark County land has been transferred to a limited liability corporation for the purpose of residential development, construction, and sale. The Iron County site is primarily dedicated to the Company's growth and diversification. Real estate and related sales amounted to $992,000 and $42,000 during the three-month periods ended December 31, 1995 and 1994, respectively. The nature of real estate development and sales is such that the Company is unable reliably to predict any pattern of future real estate sales. ENVIRONMENTAL PROTECTION EQUIPMENT OPERATIONS Environmental protection equipment sales were approximately $132,000 and $992,000 during the three-month periods ended December 31, 1995 and 1994, respectively. The Company is continuing its evaluation of future operating activities in this business segment. Effective December 31, 1994, the Company laid off the work force associated with assembly activities (approximately four hourly employees) and terminated the assembly facility lease (saving $67,000 in annual operating rents). Operating activities in this segment are now being conducted at the Company's Iron County facilities. As of January 31, 1996, this segment had a backlog of approximately $2,500,000. In addition, the Company has submitted a number of bids, although there can be no assurance that any of these bids will result in future orders. HALOTRON OPERATIONS Sales of Halotron amounted to approximately $93,000 in the first quarter of fiscal 1996 compared to $31,000 in the first quarter of fiscal 1995. In December 1995, the Company, in concert with Buckeye Fire Equipment Company, successfully completed Underwriters Laboratories (UL) fire tests of a line of portable fire extinguishers using Halotron I. Domestic distribution of the Buckeye Halotron extinguisher line should begin early in 1996. The Company and Buckeye recently signed an agreement that calls for the Company to supply Buckeye's requirements of Halotron I during calendar 1996. This agreement includes Buckeye's estimate of its requirements, which approximate sales of Halotron I of $2.2 million per calendar quarter, although actual requirements may be more or less than these estimates. 11 OPERATING EXPENSES Operating expenses were $2,350,000 and $2,608,000 during the three-month periods ended December 31, 1995 and 1994, respectively. The decrease is primarily due to the Company's implementation of cost control, containment and reduction measures. During the third quarter of fiscal 1995, the Company reduced total full-time employee equivalents by approximately ten percent through involuntary terminations and an offering of enhanced retirement benefits to a certain class of employees. The Company recognized a charge to operating expense of approximately $226,000 as a result of these terminations and the acceptance of the offer of enhanced retirement benefits by certain employees. NET INTEREST AND OTHER EXPENSE (INCOME) The increase in net interest and other expense in the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995 is primarily due to the fact that interest capitalization ceased on the remaining portion of the sodium azide facility undergoing construction activities in the third quarter of fiscal 1995. CREDIT FOR INCOME TAXES The Company's effective income tax rates were approximately 34% during the three-month periods ended December 31, 1995 and 1994. NET INCOME (LOSS) PER COMMON SHARE AND OPERATING RESULTS Although the Company's net income (loss) and net income (loss) per common share have not been subject to seasonal fluctuations, they have been and are expected to continue to be subject to variations from quarter to quarter and year to year due to the following factors, among others; (i) as discussed in Note 4, the Company may incur material legal and other costs associated with litigation; (ii) the timing of real estate and related sales is not predictable; (iii) the recognition of revenues from environmental protection equipment orders not accounted for as long-term contracts depends upon the timing of shipment of the equipment; (iv) weighted average common and common equivalent shares for purposes of calculating net income (loss) per common share are subject to significant fluctuations based upon changes in the market price of the Company's Common Stock due to outstanding warrants and options; and (v) as discussed above, the magnitude of AP orders for periods subsequent to September 30, 1996 is uncertain. The Company's efforts to produce, market and sell Halotron I and Halotron II are dependent upon the political climate and environmental regulations that exist and may vary from country to country. Halotron I has been extensively and successfully tested. These products continue to undergo testing. Although the Company is satisfied with the progress and performance characteristics of Halotron I and Halotron II, the magnitude of orders received, if any, in the future will be dependent to a large degree upon political issues and environmental regulations that are not within the Company's control, as well as additional testing and qualification in certain jurisdictions and the ultimate extent of market acceptance. 12 As a result of the uncertainties with respect to volume and price of sodium azide referred to above, the Company may experience significant variations in sodium azide sales and related operating results from quarter to quarter. The Company continues to believe, however, that, notwithstanding these uncertainties, revenues and associated cash flows from its sodium azide operations will be sufficient to recover the Company's investment in its sodium azide facility, although there can be no assurance in that regard. LITIGATION See Note 4 of Notes to Condensed Consolidated Financial Statements for a discussion of litigation. INFLATION Inflation did not have a significant effect on the Company's sales and operating revenues or costs during the three-month periods ended December 31, 1995 or 1994. The Company does not expect inflation to have a material effect on gross profit in the future, because any increases in production costs should be recovered through increases in product prices, although there can be no assurance in that regard. LIQUIDITY AND CAPITAL RESOURCES On July 29, 1994, the Board of Directors of the Company authorized the repurchase of up to 1.5 million shares of the Company's common stock through open market purchases and private transactions. Such authorization was briefly suspended. As of January 31, 1996, the Company had repurchased approximately 116,000 shares through this program. As a result of the litigation described in Note 4 of Notes to Condensed Consolidated Financial Statements, the Company may incur material legal and other costs associated with the resolution of this matter in future periods. Certain of these costs may be reimbursable under policies providing for insurance coverage. The Company has adopted certain policies in its Charter and Bylaws as a result of which the Company may be required to indemnify its affected officers and directors to the extent, if at all, that existing insurance coverages are insufficient. The Company has in force substantial insurance covering this risk. The Company's insurance carriers have reserved the right to exclude or disclaim coverage under certain circumstances. Defense costs and any potential settlement or judgment costs associated with this litigation, to the extent borne by the Company and not recovered through insurance, would adversely affect the Company's liquidity. The Company is currently unable to predict or quantify the amount or range of such costs, if any, or the period of time that such costs will be incurred. Cash flows provided by (used for) operating activities were ($5,058,000) during the first quarter of fiscal 1996 compared to $53,000 during the first quarter of fiscal 1995. The decrease in cash flows is principally due to an increase in accounts receivable balances of approximately $5,526,000. Substantially all of the receivables relating to this increase were collected in January 1996. The Company believes that its cash flows from operations and existing cash balances will be adequate for the foreseeable future to satisfy the needs of its operations. However, the satisfactory resolution of the lawsuits discussed in Note 4, the timing, pricing and magnitude of the receipt of orders for AP, sodium azide and Halotron, and the Company's ability to achieve cost reductions may have an effect on the use and availability of cash. 13 In February 1992, the Company concluded a $40,000,000 financing for the design, construction and start-up of a sodium azide facility. As a result of the Company's decision to increase the production capacity of the plant and construction cost overruns, the Company's cost estimates for the sodium azide facility increased significantly during the construction process. The majority of the increase relates to the Company's decision to increase the productive capacity of the plant, as discussed above. In addition, certain estimates increased throughout the construction process as a result of the highly automated and technical nature of the operation. Design and construction also occurred over a longer period of time than was originally estimated, which increased actual expenditures. Although production and sales have recently increased, the facility has not been operated at significant production levels in comparison to capacity and greater-than-expected capital costs have been and may continue to be incurred. Subject to the ongoing receipt and magnitude of orders for sodium azide and the avoidance of further erosion of the selling price per pound of sodium azide, the Company believes that the increased costs associated with the sodium azide facility will be recovered through future sodium azide sales, although there can be no assurance in this regard. 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1995 DEC-31-1995 18,098 2,000 10,630 0 7,659 40,567 88,721 8,857 158,126 15,312 0 0 0 823 0 158,126 9,776 9,776 7,903 10,253 0 0 778 (892) (304) (588) 0 0 0 (588) (.07) (.07)
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