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American Pacific CEO Discusses Q1 2011 Results - Earnings Call Transcript

Our major core products are now in full production at our California facility. We continue to expect our sales in this segment to exceed the fiscal 2010 sales by 25%. A good part of the sales increase is due to development products.

Development product sales for this first quarter have reached a record $7.7 million, with the year-end estimate approaching $20 million. Maturing and growing development products are responsible for this increase.

Our first major inspection by the Drug Enforcement Agency of our Controlled Substance facility went very well. We estimate the approval to become a certified manufacturer of these controlled pharmaceutical chemicals will take another six months or so.

Our other new product initiatives, including anti-viral building blocks and chemicals for anti-terrorism and the Department of Defense, are progressing well as represented by our forecasted growth and development product sales. We also made a major breakthrough in property taxes for our California facility. The Fine Chemicals team did a great job to reduce our taxes significantly going forward and negotiating a refund for previous years.

Now, moving on to the Specialty Chemicals segment. Our Specialty Chemicals segment performed well this quarter, despite lower production and sales volumes. The production team continues to adapt to lower demand in rocket-grade ammonium perchlorate. The NASA budget and direction continue to be a subject of debate.

Congress, both the House and Senate, are directing a heavy lift vehicle that will use large, shuttle like solid rockets. However, Congress also plans to cut overall budgets for NASA. It will take quite a while for this to be resolved. We are therefore forecasting no ammonium perchlorate for NASA applications in fiscal 2011.

While NASA is undecided, we continue to have a reliable user of rocket-grade perchlorate, the Department of Defense. DoD quantities have been lower then that used by NASA but they are consistent. Their strategic and tactical missiles must use solid rockets. The forecasted quantity of rocket-grade ammonium perchlorate for fiscal 2011 will be consumed by DoD products.

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