<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d)
-
of the Securities Exchange Act of 1934
For Quarterly Period Ended December 31, 1998
Commission File Number 1-8137
OR
Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
AMERICAN PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-6490478
(State or other jurisdiction (IRS Employer
of incorporation or Identification No.)
organization)
3770 Howard Hughes Parkway, Suite 300
Las Vegas, NV 89109
(Address of principal executive offices) (Zip Code)
(702) 735-2200
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ No / /
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 8,176,037 as of
January 31, 1999.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements
-------------------------------------------
The information required by Rule 10-01 of Regulation S-X is
provided on pages 4 through 9 of this Report on Form 10-Q.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------
Results of Operations
---------------------
The information required by Item 303 of Regulation S-K is provided on
pages 10 through 14 of this Report on Form 10-Q.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
None.
ITEM 2. Changes in Securities
---------------------
None.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
ITEM 5. Other Information
-----------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a) 10.1 Amended and Restated American Pacific Corporation Supplemental
Executive Retirement Plan, effective January 1, 1999.
27. Financial Data Schedules. This Exhibit is filed in connection
with the Registrant's electronic filing.
b) None.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN PACIFIC CORPORATION
Date: February 11, 1999 /s/ JOHN R. GIBSON
------------------
John R. Gibson
Chief Executive Officer and President
Date: February 11, 1999 /s/ DAVID N. KEYS
-----------------
David N. Keys
Executive Vice President,
Chief Financial Officer, Secretary
and Treasurer; Principal Financial
and Accounting Officer
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<PAGE>
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Statements of Operations
For the Three Months Ended December 31,
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales and Operating Revenues $18,854,000 $11,268,000
Cost of Sales 11,588,000 8,106,000
----------- -----------
Gross Profit 7,266,000 3,162,000
Operating Expenses 2,492,000 2,183,000
----------- -----------
Operating Income 4,774,000 979,000
Equity in Earnings of Real Estate Venture 300,000
Net Interest and Other Expense 1,473,000 713,000
----------- -----------
Income Before Provision for Income Taxes 3,301,000 566,000
Provision for Income Taxes ----------- -----------
Net Income $ 3,301,000 $ 566,000
----------- -----------
Basic Net Income Per Share $ .40 $.07
Average Shares Outstanding 8,189,000 8,138,000
----------- -----------
Diluted Net Income Per Share $ .40 $.07
----------- -----------
Diluted Shares 8,244,000 8,217,000
----------- -----------
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
December 31, September 30,
1998 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 30,109,000 $ 20,389,000
Accounts and Notes Receivable 4,744,000 8,927,000
Related Party Notes Receivable 510,000 536,000
Inventories 11,368,000 13,730,000
Prepaid Expenses and Other Assets 1,273,000 839,000
Restricted Cash 1,178,000 1,176,000
----------- ------------
Total Current Assets 49,182,000 45,597,000
Property, Plant and Equipment, Net 20,332,000 19,529,000
Intangible Assets, Net 37,228,000 38,252,000
Development Property 6,750,000 7,036,000
Real Estate Equity Investments 16,648,000 17,112,000
Other Assets, Net 3,067,000 3,233,000
----------- ------------
TOTAL ASSETS $133,207,000 $130,759,000
============ ============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
December 31, September 30,
1998 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities $ 9,279,000 $ 9,635,000
Current Portion of Long-Term Debt 1,178,000 1,176,000
------------ ------------
Total Current Liabilities 10,457,000 10,811,000
Long-Term Debt 70,000,000 70,000,000
Long-Term Payables 2,141,000 2,350,000
------------ ------------
TOTAL LIABILITIES 82,598,000 83,161,000
------------ ------------
Commitments and Contingencies
Warrants to Purchase Common Stock 3,569,000 3,569,000
Shareholders' Equity:
Common Stock 842,000 842,000
Capital in Excess of Par Value 79,488,000 79,488,000
Accumulated Deficit (31,417,000) (34,718,000)
Treasury Stock (1,786,000) (1,486,000)
Receivable from the Sale of Stock (87,000) (97,000)
------------ ------------
Total Shareholders' Equity 47,040,000 44,029,000
------------ ------------
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $133,207,000 $130,759,000
============ ============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
AMERICAN PACIFIC CORPORATION
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended December 31,
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Provided by (Used For) Operating Activities $11,261,000 $(5,470,000)
----------- -----------
Cash Flows Provided by (Used For) Investing Activities:
Capital Expenditures (1,705,000) (969,000)
Real estate equity investment capital activity 464,000 1,713,000
----------- -----------
Net Cash Provided by (Used For) Investing Activities (1,241,000) 744,000
----------- -----------
Cash Flows From Financing Activities:
Principal Payments on Debt (1,166,000)
Treasury Stock Acquired (300,000)
----------- -----------
Net Cash Used For Financing Activities (300,000) (1,166,000)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 9,720,000 (5,892,000)
Cash and Cash Equivalents, Beginning of Period 20,389,000 18,881,000
----------- -----------
Cash and Cash Equivalents, End of Period $30,109,000 $12,989,000
=========== ===========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
1. BASIS OF REPORTING
The accompanying Condensed Consolidated Financial Statements are unaudited
and do not include certain information and disclosures included in the
Annual Report on Form 10-K of American Pacific Corporation (the "Company").
The Condensed Consolidated Balance Sheet as of September 30, 1998 was
derived from the Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1998.
Such statements should therefore be read in conjunction with the
Consolidated Financial Statements and Notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1998.
In the opinion of Management, however, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation have been
included. The operating results and cash flows for the three-month period
ended December 31, 1998 are not necessarily indicative of the results that
will be achieved for the full fiscal year or for future periods.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates used by the Company include
estimated useful lives for depreciable and amortizable assets, the
estimated valuation allowance for deferred tax assets, and estimated cash
flows in assessing the recoverability of long-lived assets. Actual results
may differ from estimates.
2. NET INCOME PER COMMON SHARE
Basic per share amounts are computed by dividing net income by average
shares outstanding during the period. Diluted net income per share amounts
are computed by dividing net income by average shares outstanding plus the
dilutive effect of common share equivalents. The effect of stock options
and warrants outstanding to purchase approximately 3,160,000 and 3,229,000
shares of common stock were not included in diluted per share calculations
during the three-month periods ended December 31, 1998 and 1997,
respectively, since the average exercise price of such options and warrants
was greater than the average price of the Company's common stock during
these periods.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
Work-in-process $ 6,550,000 $ 8,685,000
Raw materials and supplies 4,818,000 5,045,000
----------- -----------
Total $11,368,000 $13,730,000
----------- -----------
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
Trace amounts of perchlorate chemicals have been found in Lake Mead. Clark
County, Nevada, where Lake Mead is situated, is the location of Kerr-McGee
Chemical Corporation's ("Kerr-McGee") ammonium perchlorate ("AP")
operations, and was the location of the Company's AP operations until May
1988. The Company is cooperating with State and local agencies, and with
Kerr-McGee and other interested firms, in the investigation and evaluation
of the source or sources of these trace amounts, possible environmental
impacts, and potential remediation
-8-
<PAGE>
methods. Until these investigations and evaluations have reached definitive
conclusions, it will not be possible for the Company to determine the
extent to which, if at all, the Company may be called upon to contribute to
or assist with future remediation efforts, or the financial impact, if any,
of such cooperation, contributions or assistance.
5. INCOME TAXES
The Company established a valuation allowance for deferred tax assets in
the amount of $10.4 million as of September 30, 1997. At September 30,
1998, the balance of the valuation allowance was $10,993,000. The
Company's effective tax rate will be 0% until its net operating losses
expire or the Company has taxable income in an amount sufficient to
eliminate the need for the valuation allowance.
6. REAL ESTATE EQUITY INVESTMENTS
The Company's interest in Gibson Ranch Limited Liability Company ("GRLLC")
is accounted for using the equity method. GRLLC operates on a calendar
year. The Company recognizes its share of the equity in GRLLC on a current
quarterly basis. Summarized financial information for GRLLC as of and for
the three-month period ended December 31, 1998 was as follows:
<TABLE>
<CAPTION>
As of and for the
Three-Month
Period Ended
December 31, 1998
-----------------
<S> <C>
Income Statement:
Revenues $13,550,000
Gross Profit 1,059,000
Operating Expenses 419,000
Net Income $ 662,000
Balance Sheet:
Assets $25,635,000
Liabilities 12,676,000
Equity $12,959,000
</TABLE>
GRLLC's balance sheet is not classified. Assets consist principally of
inventories and liabilities consist principally of Notes and accounts
payable. Inventories were $21,320,000 at December 31, 1998.
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company is principally engaged in the production of AP for the aerospace and
national defense industries. In addition, the Company produces and sells sodium
azide, the primary component of a gas generant used in automotive airbag safety
systems, and Halotron, a chemical used in fire suppression systems ranging from
portable fire extinguishers to airport firefighting vehicles. The perchlorate,
sodium azide and Halotron facilities are located on the Company's property in
Southern Utah and the chemicals produced and sold at these facilities
collectively represent the Company's specialty chemical segment. The Company's
other lines of business include the development of real estate in Nevada and the
production of environmental protection equipment, including waste and seawater
treatment systems.
The Company has incurred net losses during its last three fiscal years and an
operating loss during the fiscal year ended September 30, 1997. As a result,
pre-tax income has not been sufficient to recover interest charges.
The Company believes that North American AP demand is currently approximately 20
to 25 million pounds annually. However, supply capacity has historically been
substantially in excess of these estimated demand levels. In an effort to
rationalize the economics of the existing AP market, the Company entered into a
Purchase Agreement with Kerr-McGee. On March 12, 1998, the Company sold $75.0
million of unsecured senior notes (the "Notes"), consummated an acquisition (the
"Acquisition") of certain assets from Kerr-McGee and repurchased the remaining
$25.0 million principal amount balance outstanding of subordinated secured notes
(the "Azide Notes"). Upon consummation of the Acquisition, the Company
effectively became the sole North American producer of AP.
Sales and Operating Revenues. Sales of the Company's perchlorate chemical
- ----------------------------
products, consisting almost entirely of AP sales, accounted for approximately
66% and 50% of revenues during the three-month periods ended December 31, 1998
and 1997, respectively. In general, demand for AP is driven by a relatively
small number of DOD and NASA contractors; as a result, any one individual AP
customer usually accounts for a significant portion of the Company's revenues.
Sodium azide sales accounted for approximately 20% and 32% of revenues during
the three-month periods ended December 31, 1998 and 1997, respectively. In the
summer of 1998, shipments of sodium azide were negatively impacted by a labor
strike at certain General Motor's ("GM") facilities. Shipments of sodium azide
increased significantly in the first quarter of fiscal 1999 as compared to the
fourth quarter of fiscal 1998.
Sales of Halotron(TM) amounted to approximately 1% of revenues during the three-
month periods ended December 31, 1998 and 1997. Halotron(TM) is designed to
replace halon-based fire suppression systems. Accordingly, demand for
Halotron(TM) depends upon a number of factors including the willingness of
consumers to switch from halon-based systems, as well as existing and potential
governmental regulations.
Real estate and related sales amounted to approximately 9% and 15% of revenues
during the three-month periods ended December 31, 1998 and 1997, respectively.
The nature of real estate development and sales is such that the Company is
unable reliably to predict any pattern of future real estate sales or the
recognition of the equity in earnings of real estate ventures.
Environmental protection equipment sales accounted for approximately 4% and 2%
of revenues during the three-month periods ended December 31, 1998 and 1997,
respectively. It is currently anticipated that sales of this segment will be
adversely affected in fiscal 1999 and perhaps beyond by the continuing adverse
economic developments and conditions in the Company's foreign markets
(particularly Asian markets).
Cost of Sales. The principal elements comprising the Company's cost of sales
- --------------
are raw materials, electric power, labor, manufacturing overhead and the basis
in real estate sold. The major raw materials used by the Company in its
production processes are graphite, sodium chlorate, ammonia, hydrochloric acid,
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<PAGE>
sodium metal, and nitrous oxide. Significant increases in the cost of raw
materials may have an adverse impact on margins if the Company is unable to pass
along such increases to its customers, although all the raw materials used in
the Company's manufacturing processes have historically been available in
commercial quantities, and the Company has had no difficulty obtaining necessary
raw materials.
Raw material, electric power and labor costs have not changed significantly
recently. The costs of operating the Company's specialty chemical plants are,
however, largely fixed. Accordingly, the Company believes that the additional
AP sales volume resulting from the Acquisition should continue to generate
significant incremental cash flow because of the operating leverage associated
with the perchlorate plant. However, amortization of the Acquisition costs is
estimated to amount to approximately $4.0 million annually.
Income Taxes. The Company's effective income tax rates were 0% during the
- ------------
three-month periods ended December 31, 1998 and 1997. The Company's effective
income tax rate decreased to 0% during these periods as a result of the
establishment of a $10.4 million deferred tax valuation allowance in the fourth
quarter of fiscal 1997. The Company's effective tax rate will be 0% until the
Company's net operating losses expire or the Company has taxable income in an
amount sufficient to eliminate the need for the valuation allowance.
Net Income. Although the Company's net income and diluted net income per common
- ----------
share have not been subject to seasonal fluctuations, they have been and are
expected to continue to be subject to variations from quarter to quarter and
year to year due to the following factors, among others: (i) as discussed in
Note 4 of Notes to Condensed Consolidated Financial Statements, the Company may
incur material costs associated with certain contingencies; (ii) timing of real
estate and related sales and equity in earnings of real estate ventures is not
predictable; (iii) the recognition of revenues from environmental protection
equipment orders not accounted for as long-term contracts depends upon orders
generated and the timing of shipment of the equipment; (iv) weighted average
common and common equivalent shares for purposes of calculating diluted net
income per common share are subject to significant fluctuations based upon
changes in the market price of the Company's Common Stock due to outstanding
warrants and options; and (v) the magnitude, pricing and timing of AP, sodium
azide, Halotron(TM), and environmental protection equipment sales in the future
is uncertain. (See "Forward Looking Statements/Risk Factors" below.)
Results of Operations
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31,
1997
Sales and Operating Revenues. Sales increased $7.6 million, or 67%, during the
- ----------------------------
three months ended December 31, 1998, to $18.9 million from $11.3 million in the
corresponding period of the prior year. This increase was principally
attributable to increased sales of specialty chemicals. Perchlorate chemical
sales increased approximately $6.9 million principally as a result of the
consummation of the Acquisition. Environmental protection equipment sales
increased approximately $0.5 million due primarily to the timing of the shipment
of certain equipment.
Cost of Sales. Cost of sales increased $3.5 million, or 43%, in the three
- -------------
months ended December 31, 1998, to $11.6 million from $8.1 million in the
corresponding period of the prior year. Such increase was principally due to an
increase in costs associated with perchlorate operations. The increase in
perchlorate costs was due to increased volumes and amortization of costs
associated with the Acquisition. As a percentage of sales, cost of sales
decreased in the three months ended December 31, 1998, to 62% as compared to 72%
in the corresponding period of the prior year. This decrease was due
principally to the increase in perchlorate sales volume.
Operating Expenses. Operating (selling, general and administrative) expenses
- ------------------
increased $0.3 million, or 14%, in the three months ended December 31, 1998, to
$2.5 million from $2.2 million in the corresponding period of 1997.
Net Interest Expense. Net interest and other expense increased to $1.5 million
- --------------------
in the three months ended December 31, 1998, from $0.7 million in the
corresponding period of the prior year as a result of the issuance of the Notes
in March 1998.
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<PAGE>
Equity in Earnings of Real Estate Venture. The Company's share of equity in its
- -----------------------------------------
Ventana Canyon joint venture was $0 million and $0.3 million during the three-
month periods ended December 31, 1998 and 1997, respectively. The joint venture
has historically operated at or near a break-even point on residential activity
and has generated net income on sales of improved land.
Segment Operating Income (Loss). Operating income (loss) of the Company's
- -------------------------------
industry segments during the three-month periods ended December 31, 1998 and
1997 was as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Specialty chemicals $3,713,000 $ 95,000
Environmental protection equipment (7,000) (164,000)
Real Estate 1,311,000 868,000
---------- ---------
Total $5,017,000 $ 799,000
========== =========
</TABLE>
The increase in operating income in the Company's specialty chemical industry
segment was attributable to the increase in perchlorate sales referred to above.
The decrease in environmental protection equipment segment operating loss was
primarily due to increased sales. The increase in real estate segment operating
income was attributable to improved margins on land sales.
Inflation
Inflation did not have a significant effect on the Company's sales and operating
revenues or costs during the three-month periods ended December 31, 1998 or
1997. Inflation may have an effect on gross profit in the future as certain of
the Company's agreements with AP and sodium azide customers require fixed
prices, although certain of such agreements contain escalation features that
should somewhat insulate the Company from increases in costs associated with
inflation.
Liquidity and Capital Resources
In March 1998, the Company sold Notes in the principal amount of $75.0 million,
acquired certain assets from Kerr-McGee for a cash purchase price of $39.0
million and paid $28.2 million to repurchase the remaining $25.0 million
principal amount outstanding of the Azide Notes
Cash flows provided by operating activities were $11.3 million during the three-
months ended December 31, 1998. The Company used cash in operations of $5.5
million during the first quarter of last fiscal year. Cash flows from operating
activities increased in the first three months of fiscal 1998 principally as a
result of increased sales and margins in the Company's specialty chemical
operations. The Company believes that its cash flows from operations and
existing cash balances will be adequate for the foreseeable future to satisfy
the needs of its operations. However, the resolution of contingencies, and the
timing, pricing and magnitude of orders for AP, sodium azide and Halotron(TM),
may have an effect on the use and availability of cash.
Capital expenditures were $1.7 million during the three months ended December
31, 1998, compared to $1.0 million during the same period last year. Capital
expenditures are budgeted to amount to approximately $4.5 million in fiscal 1999
and relate principally to specialty chemical segment capital improvement
projects.
During the three-month period ended December 31, 1998, the Company received cash
of approximately $0.5 million relating to the return of capital invested in the
Ventana Canyon joint venture. The Company currently anticipates that cash
returns of invested capital and equity in earnings will continue through the
conclusion of the project currently projected to be the end of calendar 2001.
As a result of the contingencies discussed in Note 4 of Notes to Condensed
Consolidated Financial Statements, the Company has incurred legal and other
costs, and it may incur material legal and other costs associated with the
resolution of contingencies in future periods. Any such costs, to the extent
borne by the Company and not recovered through insurance, would adversely affect
the Company's
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<PAGE>
liquidity. The Company is currently unable to predict or quantify the amount or
range of such costs, if any, or the period of time over which such costs will be
incurred.
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations.
The Company is currently in the process of evaluating and resolving the problems
that might be associated with the Year 2000 issue. The Company's Year 2000
project has four major components:
1. Evaluation of all major manufacturing and business computing systems to
determine which systems are Year 2000 compliant.
2. For each computing system found not to be Year 2000 compliant, development
of a strategy to replace, modify or upgrade the system to a Year 2000
compliant system.
3. Evaluation of core vendors for Year 2000 compliance.
4. Preparation of contingency plans.
The Company's evaluation found that the most critical digital control system,
which is used in the manufacture of specialty chemical products, is Year 2000
compliant. The Company has received a letter of certification from its vendor,
and the Company has tested the system by turning the dates forward on the
computers to the year 2000, and all systems functioned normally.
The Company's accounting system is being upgraded to a Year 2000 compliant
version. This upgrade is in process, and should be completed in the second
quarter of fiscal 1999. New maintenance and manufacturing (MRP) software
packages are currently being implemented, and each is certified and tested as
Year 2000 compliant.
The majority of PC computers used by the Company are Pentium class, running
Microsoft's Windows 95 operating system, and are Year 2000 compliant. The
Company's file servers are running on Pentium computers with Microsoft NT 4.0,
and each of these is also certified Year 2000 compliant. The Company also uses
Microsoft's office suite, which is Year 2000 compliant.
During the evaluation phase of its Year 2000 project, the Company identified
certain potential issues related to many of its programmable logic controller
units used in the manufacturing process and certain of the Company's laboratory
instruments and the computers and software with which they operate. The Company
is in the process of updating the equipment that is not Year 2000 compliant.
The Company is also in the process of developing contingency plans for the Year
2000 issue.
The Company recently reevaluated its estimates and assumptions of the costs
directly associated with its Year 2000 project and currently estimates that
approximately $0.5 million in costs will be incurred that are directly
associated with the project. Through December 31, 1998, the Company had
incurred approximately $0.3 million in costs that were directly related to its
Year 2000 project.
Given the inherent risks for a project of this nature, the timing and costs
involved could differ materially from those anticipated by the Company. There
can be no assurance that the Year 2000 project will be completed on schedule or
within budget.
Forward-Looking Statements/Risk Factors
Certain matters discussed in this Report may be forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include, but are
not limited to, the risk factors set forth below.
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<PAGE>
The following risk factors, among others, may cause the Company's operating
results and/or financial position to be adversely affected from time to time:
1. (a) Declining demand or downward pricing pressure for the
Company's products as a result of general or specific economic
conditions, (b) governmental budget decreases affecting the DOD
or NASA that would cause a decrease in demand for AP, (c) the
results achieved by the Suspension Agreement resulting from the
Company's anti-dumping petition and the possible termination of
such agreement, (d) technological advances and improvements with
respect to existing or new competitive products causing a
reduction or elimination of demand for AP, sodium azide or
Halotron(TM), (e) the ability and desire of purchasers to change
existing products or substitute other products for the Company's
products based upon perceived quality, environmental effects and
pricing, and (f) the fact that perchlorate chemicals, sodium
azide, Halotron(TM) and the Company's environmental products have
limited applications and highly concentrated customer bases.
2. Competitive factors including, but not limited to, the Company's
limitations respecting financial resources and its ability to
compete against companies with substantially greater resources,
significant excess market supply in the AP and sodium azide
markets and the development or penetration of competing new
products, particularly in the propulsion, airbag inflation and
fire suppression businesses.
3. Underutilization of the Company's manufacturing facilities
resulting in production inefficiencies and increased costs, the
inability to recover facility costs and reductions in margins.
4. Risks associated with the Company's real estate activities,
including, but not limited to, dependence upon the Las Vegas
commercial, industrial and residential real estate markets,
changes in general or local economic conditions, interest rate
fluctuations affecting the availability and cost of financing,
the performance of the managing partner of its residential real
estate joint venture (Ventana Canyon Joint Venture) and
regulatory and environmental matters that may have a negative
impact on sales or costs.
5. The effects of, and changes in, trade, monetary and fiscal
policies, laws and regulations and other activities of
governments, agencies or similar organizations, including, but
not limited to, environmental, safety and transportation issues.
6. The cost and effects of legal and administrative proceedings,
settlements and investigations, particularly those investigations
described in Note 4 of Notes to Condensed Consolidated Financial
Statements and claims made by or against the Company relative to
patents or property rights.
7. Integration of new customers and the ability to meet additional
production and delivery requirements resulting from the
Acquisition.
8. The results of the Company's periodic review of impairment issues
under the provisions of SFAS No. 121.
9. The dependence upon a single facility for the production of most
of the Company's products.
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<PAGE>
EXHIBIT 10.1
AMERICAN PACIFIC CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Article I
---------
ESTABLISHMENT & PURPOSE
-----------------------
1.1 Establishment. Effective as of January 1, 1999, American Pacific
-------------
Corporation (the "Company"), has amended and restated this supplemental
executive retirement plan known as the American Pacific Corporation
Supplemental Executive Retirement Plan (the "Plan") for the benefit of a
select group of highly compensated employees and their Beneficiaries.
The rights and benefits of Participants who are active Participants in the
Plan on or after the Effective Date of this restated Plan shall be as
provided herein, except as specifically provided or changed by subsequent
amendment.
1.2 Purpose. The purpose of the Plan is to provide retirement income and
-------
supplemental death and disability benefits for eligible Participants to
supplement benefits payable under the American Pacific Corporation Defined
Benefit Pension Plan and to enable the Company to attract and retain
certain key executives.
Article II
----------
DEFINITIONS
-----------
Definitions. As used herein, the following words and phrases have the meanings
- -----------
ascribed to them in Article II unless a different meaning is plainly required by
the context. Some of the words and phrases used in the Plan are not defined in
this Article II, but, for convenience, are defined as they are introduced into
the text. Words in the masculine gender shall be deemed to include the feminine
gender and words in the feminine gender shall be deemed to include the masculine
gender. Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter any of the terms of the Plan.
2.1 "Accrued Benefit" as of a specified date with respect to a Participant
---------------
means a monthly benefit equal to (a) minus (b) below (but not less than
zero) where
(a) means an annual benefit equal to sixty percent (60%) of Final Average
Compensation.
Notwithstanding the above, for the sole Participant who was a Participant
before the Effective Date of this restated Plan, (a) means an annual
benefit equal to three percent (3%) of Final Average Compensation
multiplied by his years of Credited Service (not to exceed 15) plus one
and one-half percent (1.5%) of Final Average Compensation times his years
of Credited Service (exceeding 15, but not to exceed 35).
Except as follows, the benefit described in this subsection (a) shall be
expressed as a Life Annuity commencing at the Participant's Normal
Retirement Date. If the Participant's Annuity Starting Date precedes his
Normal Retirement Date, such benefit shall be expressed as a Life Annuity
commencing at his Annuity Starting Date and shall be reduced as provided
in Section 4.1 of the Plan. If the Participant's Annuity Starting Date
is later than his Normal Retirement Date, such benefit shall be expressed
as a Life Annuity commencing at his Annuity Starting Date and shall be
increased as provided in Section 4.14 (added by the Fourth Amendment) of
the Qualified Plan.
1
<PAGE>
(b) means the vested benefit payable to the Participant under the Qualified
Plan. Except as follows, the amount described in this subsection shall
be expressed as a Life Annuity commencing on the Participant's Normal
Retirement Date. If the Participant's Annuity Starting Date precedes his
Normal Retirement Date, the benefit described in this subsection shall be
expressed as a Life Annuity commencing at his Annuity Starting Date and
shall be reduced as provided in Section 4.03 or 4.04 (as applicable) of
the Qualified Plan. If the Participant's Annuity Starting Date is later
than his Normal Retirement Date, such benefit shall be expressed as a
Life Annuity commencing at his Annuity Starting Date and shall be
increased as provided in Section 4.14 (added by the Fourth Amendment) of
the Qualified Plan.
2.2 "Actuarial Equivalent" shall mean a benefit or benefits which are of equal
--------------------
value at the date of determination to the benefits for which they are to be
substituted. Actuarial Equivalence shall be based on the interest and
mortality tables used to determine actuarial equivalence under Section 1.01
of the Qualified Plan.
2.3 "Affiliated Group" shall mean the Company and all other entities aggregated
----------------
with the Company under Sections 414(b), (c), (m), or (o) of the Code but
only in the period during which such other entity is so aggregated with the
Company.
2.4 "Annuity Starting Date" shall mean the first day of the first period for
---------------------
which an amount is payable as an annuity, or in the case of a benefit not
payable in the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such a benefit.
2.5 "Beneficiary" shall have the same meaning as set forth in Section 1.04 of
-----------
the Qualified Plan.
2.6 "Board of Directors" shall mean the Board of Directors of American Pacific
------------------
Corporation.
2.7 "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference
----
to a section of the Code shall include that section and any comparable
section or sections of any future legislation that amends, supplements, or
supersedes such section.
2.8 "Company" shall mean American Pacific Corporation.
-------
2.9 "Compensation" shall mean the Participant's total wages and salary.
------------
Bonuses are included in the year earned (even though payment might not
occur until the following calendar year) and are prorated over the months
worked during that year. Earnings after Normal Retirement Age are not
included.
2.10 "Credited Service" shall mean the sum of all Credited Service earned under
----------------
the Qualified Plan determined as set forth in Section 1.12 of the Qualified
Plan, including full and partial years. A partial year is calculated in
terms of completed calendar months.
2.11 "Early Retirement Date" shall mean the first day of the month next
---------------------
following the date the participant elects to receive his Retirement Benefit
under the Plan where such date is after the Participant has both reached
age fifty-five (55) and completed at least ten (10) years of Vesting
Service but is prior to the Participant's attainment of his Normal
Retirement Age.
2.12 "Effective Date" shall mean January 1, 1999.
--------------
2.13 "Employer" shall mean American Pacific Corporation and any member of the
--------
Affiliated Group which adopts this Plan.
2
<PAGE>
2.14 "Final Average Compensation" shall mean the average annualized
--------------------------
Compensation earned during the Participant's thirty-six (36) consecutive
months of employment with the Company that produces the highest average.
2.15 "Hour of Service" shall have the same meaning as set forth in Section 1.21
---------------
of the Qualified Plan.
2.16 "Late Retirement Date" shall mean the first day of the month coinciding
--------------------
with or next following the date a Participant terminates employment, where
such date is after his Normal Retirement Date.
2.17 "Life Annuity" shall mean a series of monthly installments which will
------------
continue for the lifetime of the Participant and will cease upon his
death.
2.18 "Normal Retirement Date" shall have the same meaning as set forth in
----------------------
Section 1.33 of the Qualified Plan.
2.19 "Participant" shall mean any employee of an Employer who becomes eligible
-----------
to participate in the Plan pursuant to Article III and who continues to be
entitled to any benefits under the Plan.
2.20 "Plan" shall mean the American Pacific Corporation Supplemental Executive
----
Retirement Plan.
2.21 "Plan Year" shall mean the twelve (12) consecutive month period beginning
---------
on January 1 and ending on the next following December 31.
2.22 "Qualified Plan" shall mean the American Pacific Corporation Defined
--------------
Benefit Pension Plan. In the event that the Qualified Plan is subsequently
amended, reference to a Section of the Qualified Plan shall be deemed to
refer to the operational successor of such Section.
2.23 "Rabbi Trust" shall mean a trust described in Code Section 671, which
-----------
shall be established in connection with this Plan.
2.24 "Retirement" shall mean termination of employment with all Employers at a
----------
time when the Participant is eligible for an Early, Normal, Late, or
Disability Retirement Benefit.
2.25 "Retirement Date" shall mean the Participant's Normal, Early, or Late
---------------
Retirement Date.
2.26 "Spouse" shall mean the person to whom the Participant is legally married
------
on his Annuity Starting Date, or, if earlier on his date of death.
2.27 "Vesting Service" shall mean the Participant's "Continuous Employment" as
---------------
that term is defined in Section 6.01 of the Qualified Plan
Article III
-----------
PLAN PARTICIPATION
------------------
3.1 Eligibility to Participate in the Plan. Each individual (and only such
--------------------------------------
individuals) designated in Appendix A shall be eligible to participate in
the Plan.
3.2 Participation. A Participant shall remain a Participant so long as he is
-------------
entitled to current or contingent benefits under the Plan, but shall cease
to be a Participant if he terminates employment with all Employers prior to
the date he becomes eligible for a vested benefit under Article IV of the
Plan. If a Participant ceases to be an employee after becoming eligible for
a vested benefit, he
3
<PAGE>
shall continue to be a Participant only with respect to his vested Accrued
Benefit determined at his termination of employment. If he is subsequently
reemployed, he shall only accrue an additional benefit or earn additional
Vesting Service if he is again designated in Appendix A. Should a
Participant cease to be an employee before earning a vested benefit, but
later become re-employed by an Employer, he shall again become a
Participant only if he is again designated in Appendix A.
3.3 Select Group of Employees. The Plan is intended to qualify as a plan
-------------------------
maintained by the Employers primarily for the purpose of providing deferred
compensation for a select group of highly compensated employees, and, as
such, to be exempt from certain provisions of the Employee Retirement
Income Security Act of 1974, as amended. If the Company determines based on
subsequent authority or if an agency or court of competent jurisdiction
determines that the Plan benefits any person other than a member of the
select group of highly compensated employees, the participation of each
employee who is determined not to be included in such group shall be
terminated immediately and such employee shall cease to accrue any benefit
under the Plan. Provided, that in the case of a determination by an agency
or court, the employee's participation shall terminate only after the
period for appeal of such determination has elapsed. As soon as practicable
after such determination, each such employee shall receive a single sum
distribution equal to the Actuarial Equivalent of the benefit he would
receive at his Normal Retirement Date if his employment terminated on the
date his participation terminates.
Article IV
----------
BENEFITS
--------
4.1 Retirement Benefits. Except as otherwise provided herein, retirement
-------------------
benefits will be computed and paid as follows:
(a) Normal Retirement Benefit shall be equal to the Participant's Accrued
-------------------------
Benefit determined at the Participant's Normal Retirement Date and
commencing on such date.
(b) Early Retirement Benefit shall be equal to the Participant's Accrued
------------------------
Benefit determined at the Participant's Early Retirement Date and
commencing on such date, reduced as follows:
(i) with respect to the sole Participant who was a Participant prior
to the Effective Date of this restated Plan, the early Retirement
benefit shall be reduced five percent (5%) for each year that
payments begin before age sixty-two (62) (prorated for fractional
years) and
(ii) with respect to all other participants, the Early Retirement
Benefit shall be reduced as provided in Section 4.03 or 4.04 (as
applicable) of the Qualified Plan.
(c) Late Retirement Benefit shall be equal to the Participant's Accrued
-----------------------
Benefit (after any applicable increase under Section 2.1 of the Plan)
determined at the Participant's Late Retirement Date and commencing on
such date.
4.2 Termination of Service. A Participant shall be entitled to his monthly
----------------------
retirement benefit if he terminates before he is eligible to receive a
Retirement Benefit, provided that the Participant meets the vesting
requirements of Article V. The Participant's benefit on his termination of
employment shall be the Participant's vested Accrued Benefit determined at
the date of termination of employment, commencing as provided in Section
4.5.
4
<PAGE>
4.3 Form of Retirement Benefit. Except as provided below, the Accrued Benefit
--------------------------
under Section 4.1 or 4.2 of this Plan shall be paid in the form elected by
the Participant for payment of his benefit under the Qualified Plan.
Benefits payable under this section other than as a Life Annuity shall be
the Actuarial Equivalent of the benefit payable in the form of a Life
Annuity. However, for the sole Participant who was a Participant prior to
the Effective Date of this restated Plan, the Accrued Benefit under Section
4.1 of this Plan shall be paid in the form of an annuity for the life of
the Participant.
Notwithstanding the above, a Participant who separates from service or
retires with a vested Accrued Benefit shall be paid the Actuarial
Equivalent of such benefit in a single sum if such Actuarial Equivalent
does not exceed $5,000. If the Participant subsequently resumes
participation in the Plan, such Participant's benefit at his later date of
termination shall be reduced by his prior Accrued Benefit determined as of
the date of his previous retirement or termination.
4.4 Death Benefit. If death occurs before the Participant's Annuity Starting
-------------
Date but after having satisfied the requirements for vested benefit under
Section 5.1 of this Plan, and the Participant has a surviving spouse, a
monthly benefit for life equal to 50% of the vested benefit the Participant
would have received had he retired immediately before his death, without
any reduction for early payment, shall be paid to the surviving spouse. If
the surviving spouse is more than five (5) years younger than the
Participant, benefits will be reduced two percent (2%) for each full year
that the age difference exceeds five (5) years.
4.5 Time of Payment. Payment of a Participant's benefit under this Plan shall
---------------
commence on the same day that the Participant's (or his Beneficiary's)
benefit commences under the Qualified Plan.
4.6 Reemployment Following Retirement or Termination of Employment. If a
--------------------------------------------------------------
Participant begins to receive a benefit following termination of employment
or retirement and is subsequently reemployed on a full-time basis by the
Employer, benefit payments shall cease during the period of reemployment.
If a Participant begins to receive a benefit following retirement pursuant
to Section 4.1 or 4.2, and is subsequently reemployed by the Employer on a
part-time basis, as defined by personnel practices as uniformly and
consistently applied, he shall continue receiving benefit payments. Upon
the resumption of employment with the Employer, benefits shall continue to
accrue in accordance with the terms of the Plan but only if the Participant
is again designated in Appendix A. Future benefits paid to such Participant
shall be adjusted on an Actuarial Equivalent basis to reflect the value of
any benefits previously paid.
Article V
---------
VESTING
-------
5.1 Vesting. A Participant shall be vested in his Accrued Benefit in
-------
accordance with the schedule below that provides the lower Vested
Percentage.
<TABLE>
<CAPTION>
Schedule A Schedule B
---------- -----------
Vesting Service Vested Percentage Age + Vesting Service Vested Percentage
<S> <C> <C> <C>
5 50% 50 50%
6 60% 51 60%
7 70% 52 70%
8 80% 53 80%
9 90% 54 90%
10 100% 55 100%
</TABLE>
5
<PAGE>
Article VI
----------
PLAN ADMINISTRATION
-------------------
6.1 Administration of the Plan. The Plan shall be administered by a Plan
--------------------------
Administrator, which shall be appointed by the Board of Directors, subject,
however, to any action taken by the Board of Directors in respect to the
Plan. The Plan Administrator shall be responsible for the administration of
the Plan and shall have all of the powers and duties allocated to the Plan
Administrator set forth in Article VII of the Qualified Plan including,
without limitation, the discretionary power to determine eligibility for
participation in the Plan and to construe the terms of the Plan. The Plan
Administrator shall file with the Department of Labor and distribute to the
Participants any reports and other information required by applicable law
and shall be entitled to rely conclusively upon all tables, valuations,
certificates, opinions and reports furnished by any actuary, accountant,
controller, counsel or other person employed or engaged by it with respect
to the Plan.
Article VII
-----------
AMENDMENT AND TERMINATION
-------------------------
7.1 Amendment and Termination of the Plan. The Board of Directors may amend or
-------------------------------------
terminate the Plan at any time. However, no such amendment or termination
shall deprive any Participant or Beneficiary of any portion of any
Retirement or Death Benefit which has become vested prior to the effective
date of such amendment or termination or which would be payable if the
Participant terminated for any reason, including death, on such effective
date.
Article VIII
------------
GENERAL PROVISIONS
------------------
8.1 Nature of Company's Obligation. Benefits under this Plan shall be paid
------------------------------
solely from the general assets of the Company. The Company's obligation
under this Plan shall be limited to an unfunded and unsecured promise to
pay. The rights of a Participant and his or her spouse or Beneficiary with
respect to benefits under this Plan are the same of those of an unsecured
creditor of the Company, and neither the Participant nor his or her spouse
or Beneficiary shall have a secured interest in any assets that may be
designated by the Company to pay such benefits.
8.2 Rabbi Trust. The Company shall establish a trust described in Code Section
-----------
671 with respect to which the Company is the grantor (the "Rabbi Trust") to
hold assets in connection with this Plan. However, the Company shall not be
obligated to make contributions to the Rabbi Trust or otherwise fund its
financial obligations under the Plan.
8.3 Nonalienation of Benefits under this Plan. Except for claims of
-----------------------------------------
indebtedness owing to an Employer, the interests of Participants and their
Beneficiaries are not subject to claims, indebtedness, attachment,
execution, garnishment, or other legal or equitable process and such
interests may not be voluntarily or involuntarily sold, transferred or
assigned. Any attempt by a Participant or his Beneficiary or any other
person to sell, transfer, alienate, assign, pledge, anticipate, encumber,
charge, or otherwise dispose of any right to benefits payable hereunder
shall be void. The restrictions set out in the preceding subsection shall
not apply to an order determined to be qualified domestic relations order
as defined in Section 414(p) of the Code.
8.4 Plan not a Contract of Employment. This Plan shall not be deemed to
---------------------------------
constitute a contract between any Employer and any Participant or to be a
consideration or an inducement for the employment of any Participant or
Employee. Nothing contained in this Plan shall be deemed to
6
<PAGE>
give any Participant or Employee the right to be retained in the service of
any Employer or to interfere with the right of any Employer to discharge
any Participant or employee at any time regardless of the effect which such
discharge shall have upon such individual as a Participant in the Plan.
8.5 Required Notification to Plan Administrator. Each Participant entitled to
-------------------------------------------
benefits hereunder shall file with the Plan Administrator from time to time
in writing his post office address and each change of post office address,
and any check representing payment hereunder and any communication
addressed to a Participant or a former Participant hereunder at his last
address filed with the Plan Administrator, or if no such address has been
filed, then at his last address as indicated on the records of the Company
shall be binding on such person for all purposes of the Plan, and neither
the Plan Administrator nor the Company or other payor shall be obliged to
search for or ascertain the location of any such person. If the Plan
Administrator for any reason is in doubt as to the address of any
Participant or former Participant entitled to benefits hereunder or as to
whether benefit payments are being received by the person entitled thereto,
it shall, by registered mail addressed to the person concerned at his
address last known to the Plan Administrator, notify such person that:
(a) All unmailed and future retirement income payments shall be henceforth
withheld until he provides the Plan Administrator with evidence of his
continued life and his proper mailing address; and
(b) His right to any retirement income whatsoever shall, at the option of
the Plan Administrator, be canceled forever, if, at the expiration of
two (2) years from the date of such mailing, he shall not have
provided the Plan Administrator with evidence of his continued life
and his proper mailing address.
8.6 Successors. The provisions of this Plan shall be binding upon each
----------
Employer, and their successors and assigns and upon each Participant and
his heirs, spouses, estates, and legal representatives.
8.7 Facility of Payment. Whenever and as often as any person entitled to
-------------------
payments hereunder shall be under a legal disability, or in the sole
judgment of the Plan Administrator shall otherwise be unable to apply such
payments to his own best interest and advantage, the Plan Administrator, in
the exercise of its discretion, may direct all or any portion of such
payments to be made to any person receiving benefits on behalf of the
Participant or other Beneficiary under Section 10.09 of the Qualified Plan.
8.8 Required Information to Plan Administrator. Each Participant will furnish
------------------------------------------
to the Plan Administrator such information as the Plan Administrator
considers necessary or desirable for purposes of administering the Plan,
and the provisions of the Plan respecting any payments thereunder are
conditional upon the Participant's furnishing promptly such true, full and
complete information as the Plan Administrator may request. Each
Participant will submit proof of his age to the Plan Administrator at such
time as required by the Plan Administrator. The Plan Administrator will, if
such proof of age is not submitted as required, use as conclusive evidence
thereof such information as is deemed by it to be reliable, regardless of
the lack of proof, or the misstatement of the age of persons entitled to
benefits hereunder, by the Participant or otherwise, will be in such manner
as the Plan Administrator deems equitable. Any notice or information which,
according to the terms of the Plan or the rules of the Plan Administrator,
must be filed with the Plan Administrator, shall be deemed so filed if
addressed and either delivered in person or mailed to and received by the
Plan Administrator, in care of the Company at:
7
<PAGE>
American Pacific Corporation
Suite 300
3770 Howard Hughes Parkway
Las Vegas, NV 89109
8.9 Claims Procedure. In the event that any claim for benefits, which must
----------------
initially be submitted in writing to the Plan Administrator, is denied (in
whole or in part) hereunder, the claimant shall receive from the Company
notice in writing, written in a manner calculated to be understood by the
claimant, setting forth the specific reasons for denial, with specific
reference to pertinent provisions of this Agreement. Such notice shall be
provided within 90 days of the Participant's claim for benefits. Any
disagreements about such interpretations and construction may be appealed
within 90 days to the Board of Directors. The Board shall respond to such
appeal within 60 days with a notice in writing fully disclosing its
decision and the reasons therefore. No member of the Board of Directors
shall be liable to any person for any action taken hereunder except those
actions undertaken with lack of good faith.
8.10 Controlling State Law. To the extent not superseded by the laws of the
---------------------
United States, the Plan will be construed and enforced according to the
laws of the State of Delaware.
8.11 Severability. In case any provision of this Plan shall be held illegal or
------------
invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and
enforced as if such illegal and invalid provisions had never been set
forth.
8.12 Adoption of Plan. Any Employer may adopt this Plan for all or a portion
----------------
of its employees, provided that the Board of Directors of the Company
approves such participation. The administrative powers and control of the
Company as provided in the Plan shall not be deemed diminished under the
Plan by reason of the participation of other companies in the Plan.
IN WITNESS WHEREOF, American Pacific Corporation has adopted this plan on this
12th day of January , 1999.
- ---- --------------------
ATTEST (SEAL): AMERICAN PACIFIC CORPORATION
By /s/ DAVID N. KEYS
---------------------
8
<PAGE>
APPENDIX A
----------
PLAN PARTICIPANTS
Participant Social Security Number
- ----------- ----------------------
Fred D. Gibson, Jr. ###-##-####
(sole Participant prior to January 1, 1999)
John R. Gibson ###-##-####
David Keys ###-##-####
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 30,109,000
<SECURITIES> 0
<RECEIVABLES> 5,254,000
<ALLOWANCES> 0
<INVENTORY> 11,368,000
<CURRENT-ASSETS> 49,182,000
<PP&E> 27,262,000
<DEPRECIATION> 7,340,000
<TOTAL-ASSETS> 133,207,000
<CURRENT-LIABILITIES> 10,457,000
<BONDS> 70,000,000
0
0
<COMMON> 842,000
<OTHER-SE> 46,198,000
<TOTAL-LIABILITY-AND-EQUITY> 133,207,000
<SALES> 18,854,000
<TOTAL-REVENUES> 18,854,000
<CGS> 1,588,000
<TOTAL-COSTS> 14,080,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,473,000
<INCOME-PRETAX> 3,301,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,301,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,301,000
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
