American Pacific Corporation (APFC)
Q4 2009 Earnings Call
December 22, 2009 4:30 pm ET
John Gibson – Chief Executive Officer
Joseph Carleone – President, Chief Operation Officer
Dana Kelley – Vice President, Chief Financial Officer
[Bruce Bauman – Franklin]
[Alex Hesman – Wells Capital Management]
[George Gets – Private Investor]
» American Pacific F4Q08 (Qtr End 09/30/2008) Earnings Call Transcript
» American Pacific Corporation Q4 2009 Earnings Call Transcript
Good afternoon. Welcome to our review of the financial results for the fourth quarter and full fiscal year of 2009. Joe Carleone, our President and Chief Officer and Dana Kelley our Vice President and Chief Financial Officer are with me.
After my brief and general remarks, Dana will provide a more detailed review of the quarter and year. We’ll be happy to take your questions when Dana is finished.
Today’s call includes forward-looking statements. These forward-looking statements are not historical facts and are subject to risks and uncertainties. Our actual results may differ materially. For a description of the factors that may cause actual results to differ materially from our forward-looking statements please refer to our most recent quarterly report on Form 10-Q and other filings we have made with the SEC. All forward-looking statements are made as of the date hereof and we assume no obligation to update these statements except as required by law.
In addition, we will be referring to both GAAP and non-GAAP financial measures. Our recently published earnings release contains definitions of these non-GAAP measures and a reconciliation of the most recently comparable GAAP measures to the non-GAAP measures.
The earnings release can be found in the investors section of our website under News Releases at apfc.com.
As is noted in our earnings release, revenue declined approximately 3% in2009. The decline is accounted for in Fine Chemicals while both Specialty Chemicals and Aerospace exhibited gains compared to 2008. We believe that we have dealt with our operating issues in Fine Chemicals and that we are responding to a changing market.
There is a significant one time charge associated with 2009 and that is in the area of environmental remediation. We now have the experience of operating our remediation plant for several years. It has been successful and we are effectively decomposing in the ground water with the plant located at the toe of the plume.
The development which has made the new charge necessary is a more accurate understanding of the rate of flow of the ground water from south to north. We now understand that that flow is slower than originally estimated which in turn affects how long it will take to remove all Perchlorate.
Without modification to our earlier remediation efforts, it would take many more years than we had originally anticipated to fully remediate the ground water. Therefore, we are adding withdrawal wells farther south and thus we hope to shorten the total time of remediation. This change will be accomplished at a cost of $13.7 million and we have maintained an excellent relationship with the regulating agencies.
As we have previously indicated, we will continue to examine opportunities to grow our company through acquisition. We believe that we are well prepared for the new year. As a positive note for our company, Joe Carleone who is with us today will become CEO on January 1, just a few days away.
While I will miss the challenges of leading our company, I want to assure you that with Joe, it will be in excellent hands.
We concluded fiscal 2009 with revenues of $59.7 million and adjusted EBITDA of $32.6 million which is line with our guidance for the fiscal year. While total revenues represented a slight increase compared to 2008, adjusted EBITDA represented a significant decrease year over year.
As discussed during last quarter’s conference call, this decrease in revenue is primarily due to a decrease in demand for our Fine Chemical products. Increases in sales, especially Chemical products and the doubling of Aerospace Equipment products offset most of the Fine Chemical revenue decline.
The adjusted EBITDA decrease also results from the Fine Chemical decline in revenues compounded by increased costs during start up of our new Fine Chemical process. This new chemical process is now under control and margins on that product during recent quarters have increased considerably.
Specialty revenues decreased in adjusted EBITDA was offset by improved performance in the other two sectors. The net loss for the year was $6 million as a result of an after tax environmental remediation charge of $8.2 million.
In 2006 we began full scale remediation of ground water containing ammonium chlorate in Henderson, Nevada as a result of our historical operations which were there from 1955 to 1988. As John indicated, within the last few months conducted by our third party experts indicates that the progression of ground water towards our remediation is occurring much more slowly than originally estimated.
If no additional action is taken, the life of the project would have been well in excess of 50 years. We believe that we can reduce the project life significantly by installing additional equipment in more concentrated areas. This change resulted in a charge of $13.7 million to fiscal 2008 and 2009 earnings.
We believe that the benefit of overall comp reception as a result of reduced process life fully supports our investment in the additional equipment.