Also Announces Estimated Results of Operations for the Third Quarter Ended
June 30, 1998
CONCORD, Mass., Aug. 7 /PRNewswire/ -- 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.
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.
Fiscal Year Ending September 30,
1996 1997
As Reported As Restated As Reported As Restated
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
As Reported As Restated As Reported As Restated
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
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 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.
SOURCE Starmet Corporation
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Related links:
http://www.starmet.com
CONTACT:
James M. Spiezio, Vice President, Finance of
Starmet, 978-369-5410
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