Breeze-Eastern Corporation Completes Move To New Facility, Takes Reserve Charges
Breeze-Eastern Corporation (NYSE Amex: BZC) announced today that it has completed its move from Union, New Jersey to Whippany, New Jersey; the move has been underway in stages since December, 2009. President and CEO Mike Harlan said: "I am very pleased that we have been able to complete this move and still meet all of our delivery commitments to our customers. Despite the extra challenges involved in relocating all of our operations, we still finished our Fiscal Year 2010 with total revenue at the upper end of the $65-70 million range we presented to the investment community during our Fiscal Third Quarter earnings teleconference. Our customers are conducting their on-site quality audits of our new facility, with positive results, and we are ramping up production. Our new facility incorporates many modern advantages over our previous facility, which enable greater efficiencies and facilitate teamwork."
The Company also announced that during its Fiscal Year end reviews, it has determined that it must adjust its estimates of inventory obsolescence and environmental reserves. These changes will impact Fiscal Fourth Quarter earnings as follows:
1) Inventory Reserve - In the process of moving, the Company reviewed its inventory and identified $2.2 million of items which would cost more to move and restock than their current or projected future market value; these items have been scrapped. Since this amount was more than was expected, the Company's management reassessed the methodology used for estimating inventory obsolescence and determined that a modification was warranted. This change in methodology will increase the Company's estimate of inventory obsolescence to $2.5 million at the end of March, 2010. The combination of these two events will result in a one-time (non-cash) pretax charge of approximately $3.3 million ($1.9 million after tax or $0.20 per share) against Fiscal Fourth Quarter earnings.
2) Environmental Reserve - During the past several months, the Company received and evaluated new information regarding several of its environmental sites which triggered a reassessment of its environmental liability estimates. To support this reassessment, the Company retained the services of WSP Environment and Energy (WSP), a nationally recognized environmental consulting firm. Based upon the new information and WSP’s analysis and recommendations, the Company has determined that its best estimate of its Reserves for Environmental Liabilities is now about $14.5 million (before offsetting cost-sharing of about $1.5 million), which will result in a one-time (non-cash) pretax charge of approximately $8.2 million ($4.7 million after tax or $0.50 per share) against Fiscal Fourth Quarter earnings.These charges are due to sites related to previously divested businesses (not the Union or Whippany sites), and involve a combination of previously-unforeseen work that is now required and extensions of the timeframes required to complete previously-agreed remediation and monitoring plans. Although this is a significant increase, and calculating potential environmental liabilities is inherently imprecise, the Company believes that this increase will bring its best estimate of Reserves for Environmental Liabilities to a level which is reasonable in light of all the factors known at this time.
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