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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) August 7, 1998
STARMET CORPORATION
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(Exact name of Registrant as Specified in its Charter)
MASSACHUSETTS 0-8836 04-2506761
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
2229 Main Street, Concord, Massachusetts 01742
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(Address of Principal Executive Offices) (Zip Code)
(978) 369-5410
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On August 7, 1998, Starmet Corporation (the "Company") announced that it
will restate its financial statements for fiscal years 1996 and 1997. The
restatement results in a decrease in net loss of approximately $650,000
($0.14 per diluted share) in fiscal 1996 and a decrease in net income of
approximately $1.0 million ($0.20 per diluted share) in fiscal 1997.
The restatement relates to the Company's accounting for inventory
reserves. In addition, the Company announced that it will classify inventory
that is not expected to be utilized within the next twelve months as a
non-current asset. This change resulted in the reclassification of
approximately $5.9 million of inventory at September 30, 1996 and at
September 30, 1997 from current inventory to non-current inventory.
The Company also announced that it expects to report third quarter
revenues of between $7.4 million and $7.7 million and to report a net loss of
between $2.5 million ($0.52 per diluted share) and $2.8 million ($0.58 per
diluted share). Included in the results of operations for the third quarter
will be a provision of between $1.0 million ($0.21 per diluted share) and
$1.3 million ($0.27 per diluted share) related to the amount by which the
estimated cost of remediating the holding basin at the Company's Concord,
Massachusetts facility is expected to exceed the amounts covered by the
Company's fixed price contract with the U.S. Army pursuant to which the
holding basin clean-up is being done.
On August 7, 1998 the Company issued a press release concerning such
restatement of its financial statements and the estimated third quarter
earnings, a copy of which is Exhibit 99 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit No. Exhibit
99 Press Release dated August 7, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned hereunto duly authorized.
STARMET CORPORATION
/s/ Robert E. Quinn
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Robert E. Quinn, President
Date: August 7, 1998
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STARMET CORPORATION
AUGUST 7, 1998
NEWS ITEM - FOR IMMEDIATE RELEASE
CONCORD, MASSACHUSETTS - STARMET ANNOUNCES RESTATEMENT OF FINANCIAL RESULTS FOR
1996 AND 1997 TO REFLECT CHANGE IN INVENTORY VALUATION AND ALSO ANNOUNCES
ESTIMATED RESULTS OF OPERATIONS FOR THE THIRD QUARTER ENDED JUNE 30, 1998
RESTATEMENT
Starmet Corporation (NASDAQ:STMT) today announced that it will
restate its financial statements for fiscal years 1996 and 1997. The
restatement results in a decrease in net loss of approximately $650,000
($0.14 per diluted share) in fiscal 1996 and a decrease in net income of
approximately $1.0 million ($0.20 per diluted share) in fiscal 1997.
The restatement relates to the Company's accounting for inventory
reserves. During the year ended September 30, 1996, the Company had provided
approximately $3.3 million of reserves for Depleted Uranium (DU) inventory of
which approximately $1.0 million of such reserves were reversed into income
during the year ended September 30, 1997, in each case based upon
management's estimate of future recoverability of DU inventory. After further
review, management of the Company has determined, based on consideration of
the applicable accounting literature and all of the relevant information
available at the time of the release of the Company's September 30, 1996
financial statements, that the reserves provided in 1996 should have been
lower by approximately $650,000 ($0.14 per diluted share) and that the
reversal of approximately $1.0 million ($0.20 per diluted share) of such
reserves in 1997 should not have been recorded. In the future, inventory
reserves will not be reversed until the related inventory is sold or disposed
of.
Starmet's decision to restate followed comments from and discussions
with the staff of the Securities and Exchange Commission (SEC). Based upon
its evaluation of relevant accounting literature and practice, the Company's
historical practice had been to adjust inventory reserves periodically as
additional information became available which changed management's estimate
of the degree of uncertainty of inventory utilization. However, based upon
discussions with the SEC staff, the Company restated its financial statements
for fiscal year 1996 and 1997 to treat inventory reserves as permanent
valuation adjustments or new cost basis adjustments. In addition, the Company
will classify inventory that is not expected to be utilized within the next
twelve months as a non-current asset. This change resulted in the
reclassification of approximately $5.9 million of inventory at September 30,
1996 and at September 30, 1997 from current inventory to non-current
inventory.
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The Company has included disclosures in past press releases, SEC
filings and financial statements regarding the impact on its results of
operations in connection with establishing and adjusting inventory reserves.
The following table summarizes the effects of the restatement on
statement of operations data for each of the fiscal years ended September 30,
1996 and 1997 and for the six- month periods ended March 31, 1997 and 1998
and balance sheet data as of September 30, 1996 and 1997 and as of March 31,
1997 and 1998.
<TABLE>
<CAPTION>
Fiscal Year Ending September 30,
1996 1997
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As Reported As Restated As Reported As Restated
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales and contract revenues
$28,694 $28,694 $28,062 $28,062
Cost of sales 25,053 24,403 19,136 20,136
Gross profit 3,641 4,291 8,926 7,926
Operating income (loss) (2,560) (1,910) 1,811 811
Interest expense, net 387 387 296 296
Net income (loss) (3,037) (2,387) 1,482 482
Basic net income (loss) per share
$ (0.64) $ (0.50) $ 0.31 $ 0.10
Basic weighted average shares outstanding
4,779 4,779 4,738 4,783
Diluted net income (loss) per share
$ (0.64) $ (0.50) $ 0.30 $ 0.10
Diluted weighted average shares outstanding
4,779 4,779 4,959 4,959
BALANCE SHEET DATA:
Working capital $9,249 $4,048 $10,743 $4,542
Total assets 35,118 35,768 34,704 34,354
Total Liabilities 10,748 10,748 8,608 8,608
Stockholders' equity 24,370 25,020 26,096 25,746
Six Months Ended March 31,
1997 1998
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As Reported As Restated As Reported As Restated
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales and contract revenues
$12,613 $12,613 $18,769 $18,769
Cost of sales 7,902 8,642 14,526 14,526
Gross profit 4,711 3,971 4,243 4,243
Operating income (loss) 739 (1) (799) (799)
Interest expense, net 119 119 489 489
Net income (loss) 618 (122) (1,288) (1,288)
Basic net income (loss) per share
$ 0.13 $ (0.03) $ (0.27) $ (0.27)
Basic weighted average shares outstanding
4,783 4,782 4,787 4,787
Diluted net income (loss) per share
$ 0.13 $ (0.03) $ (0.27) $ (0.27)
Diluted weighted average shares outstanding
4,928 4,782 4,787 4,787
BALANCE SHEET DATA:
Working capital $9,949 $4,008 $7,928 $1,727
Total assets 33,509 33,419 38,540 38,190
Total Liabilities 8,517 8,517 13,382 13,382
Stockholders' equity 24,992 24,902 25,158 24,808
</TABLE>
ESTIMATED THIRD QUARTER RESULTS OF OPERATIONS
For the quarter ended June 30, 1998, the Company expects to report
revenues of between $7.4 million and $7.7 million and to report a net loss of
between $2.5 million ($0.52 per diluted share) and $2.8 million ($0.58 per
diluted share). Included in the results of operations for the third quarter
will be a provision of between $1.0 million ($0.21 per diluted share) and
$1.3 million ($0.27 per diluted share) related to the amount by which the
estimated cost of remediating the holding basin at the Company's Concord,
Massachusetts facility is expected to exceed the amounts covered by the
Company's fixed price contract with the U.S. Army (the "Army Contract")
pursuant to which the holding basin clean-up is being done. The exact amount
of the excess costs presently is unknown, but the Company believes the
potential range of such costs is between $1.0 million and $3.4 million. The
Company believes that such costs, subject to confirmation, are recoverable as
allowable overheads on future government contracts which the Company expects
to be awarded. Alternatively, the Company believes that all or a certain
portion of such excess costs may also be recoverable pursuant to a contract
modification request or pursuant to an additional application for relief
under Public Law 85-804, pursuant to which the Army Contract was granted.
Revenue for the third quarter does not
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include approximately $1.0 million billed in July to a customer reflecting an
adjustment of overhead rates attributable to work done through the end of the
third quarter. Such overhead rates are subject to government audit, however,
the Company believes that such audit would not result in a material change in
the amount which it expects to receive.
As of June 30, 1998, the Company was not in compliance with certain
financial covenants contained in its bank credit facility. The Company and
its principal bank lender have agreed upon modifications to the bank credit
facility pursuant to which the Company is in compliance with such financial
covenants and prior non-compliance has been waived.
NOTE:
CERTAIN STATEMENTS IN THIS PRESS RELEASE, INCLUDING, WITHOUT
LIMITATION, THE COMPANY'S EXPECTATIONS CONCERNING (i) THE TIMING OF UTILIZATION
OF ITS INVENTORY, (ii) REVENUES AND NET LOSS EXPECTED TO BE REPORTED FOR THE
THIRD QUARTER, (iii) ESTIMATED AND ACTUAL EXCESS COSTS OF REMEDIATION OF ITS
CONCORD, MASSACHUSETTS HOLDING BASIN, (iv) THE RECOVERABILITY OF EXCESS COSTS
RELATED TO THE HOLDING BASIN AS ALLOWABLE OVERHEAD OR OTHERWISE AND (v) THE
OUTCOME OF A GOVERNMENT AUDIT RELATED TO ITS ADJUSTMENT OF OVERHEAD RATES, AS
DESCRIBED ABOVE, CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS CONCERNING THE
COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE AND FINANCIAL CONDITION. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN EXHIBIT 99 TO THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
FISCAL QUARTER ENDED MARCH 31, 1998. THE WORDS "BELIEVE," "EXPECT,"
"ANTICIPATE," "INTEND" AND "PLAN" AND SIMILAR EXPRESSIONS IDENTIFY
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THE STATEMENT WAS
MADE.
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FOR FURTHER INFORMATION, PLEASE CONTACT:
JAMES M. SPIEZIO, VICE PRESIDENT, FINANCE
978-369-5410
VISIT OUR WEBSITE AT: HTTP:\\WWW.STARMET.COM
