American Pacific Corporation (APFC) F4Q2010 Earnings Call Transcript December 16, 2010 4:30 pm ET Executives Linda Ferguson – VP, Administration and Corporate Secretary Joe Carleone – President and CEO Dana Kelley – CFO, VP, Treasurer Analysts Dennis O'Rourke – Regiment Capital Presentation Operator
All forward-looking statements remained 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 these non-GAAP measures to the most comparable GAAP measures.Our earnings release may be found in the News Release section of our website at apfc.com. I will now turn the call over to Joe. Joe Carleone Thank you, Linda. Good afternoon ladies and gentlemen and thank you for joining our conference call. AMPAC met or exceeded its latest guidance for fiscal year 2010 with results demonstrating $176 million of sales and $24 million of EBITDA. Our Specialty Chemicals segment produced strong results despite the very low volume of perchlorate material produced that resulted from reduced demand for NASA related programs. As we have forecast in our fiscal year 10 third quarter conference call however, our Fine Chemicals segment sales continued to be weak in the fourth quarter in fact somewhat weaker than we had predicted. Guidance for the full fiscal 2011 forecast of sales increased of roughly 10% and an EBITDA increase of 20% compared to 2010. The first two quarters however will be very weak and will continue to show a net loss caused primarily by weak sales in both Fine and Specialty Chemicals segments. Dana will give more details on fiscal 2010 results and fiscal 2011 guidance in her remarks. As you know from previous reports, 2010 was a year of repositioning the company to take advantage of emerging opportunities especially in the Fine Chemicals business and to improve our profitability. While improving bottom line performance will take the first two or perhaps three quarters of 2011. It is the actions we have taken in 2010 that will provide the infrastructure and cost basis for a successful growing business phase in the latter half of 2011 and beyond.
I would like to highlight some of the 2010 actions taken. We have for example repurchased and retired $5 million of our senior notes, purchased the former PPG Fine Chemicals facility in La Porte, Texas at an exceptionally attractive price, slowed our defined benefits pension plan, evaluated key professional services including the appointment of new auditors. Implemented and recommended corporate governance changes to align better with stockholders interest and also we have recently appointed two directors with pharmaceutical and healthcare backgrounds. These actions along with continued business development activities will enable profitable growth.Let us now discuss each of the business segments beginning with the Fine Chemicals segment. Our Fine Chemicals segment encountered a very difficult year in 2010 with sales down 27% from 2009 levels. In addition there were serious delays and expense associated with facilities improvements required as a result of an FDA audit. All facilities improvements are now in place. Furthermore, there were operational challenges associated with introducing new processes for one of our core products that delayed sales as well. These and several other reductions in product orders contributed to a fourth quarter that was Fine Chemicals weakest in over five years. One of this is behind us. Production is now at levels required to meet our plans. However there will be an overhang effect during the first half of 2011 while we are building up products and are able to ship products in serious quantities. On the positive side, major core product volumes are returning to higher levels in our anti-viral and oncology product lines. Furthermore the Fine Chemicals development product backlog continues to grow. Development product sales this year have the opportunity to reach as much as 20% of sales. This will significantly strengthen our pipeline of products. As we look into the future, we see that these development products offer several strong growth areas. Expansion into the controlled substance market continues to provide an excellent opportunity. Read the rest of this transcript for free on seekingalpha.com