CONCORD, Mass., Aug. 17 /PRNewswire/ -- Starmet Corporation (Nasdaq: STMT)
a Concord, Massachusetts-based manufacturer of specialized metal products,
today announced financial results for the third quarter and nine months which
ended June 30, 1998. Both periods reflected net sales increases over the
prior comparable periods with sales for the third quarter increasing by
approximately 6% and net sales for nine months increasing by
approximately 33%. However, losses were reported for both the third quarter
and nine months. These losses were primarily a result of increased cost
estimates for environmental remediation at the Company's Concord,
Massachusetts facility, and continued expenses associated with the Company's
Beralcast(R) business and an increase in selling, general and administrative
expenses, both in anticipation of expected future business.
Third Quarter Ended June 30, 1998
Net income (loss) for the third quarter of fiscal 1998 was $(2,765,000),
or $(0.58) per diluted share, compared with $293,000, or $0.06 per diluted
share, for the same quarter a year earlier. Net sales increased by $416,000
or 6% to $7,429,000 in the third quarter of fiscal 1998 compared to the third
quarter of fiscal 1997. Net sales in the Uranium Services and Recycle segment
increased by $1,415,000, net sales in the Specialty Metal Products segment
decreased by $536,000 and net sales in the Depleted Uranium Penetrator segment
decreased by $464,000, compared to net sales in the comparable period of
fiscal 1997. The sales increase in the Uranium Services and Recycle segment
was due primarily to Atomic Vapor Laser Isotope Separation ("AVLIS") feedstock
production orders which were completed in the third quarter of fiscal 1998.
The sales decrease in the Specialty Metal Products segment was due primarily
to decreased sales of commercial Depleted Uranium ("DU"), principally medical
shielding products. The sales decrease in the Depleted Uranium Penetrator
segment was due primarily to a $958,000 decrease in revenue (such revenue
resulted in minimal gross profit in fiscal 1997) on the remediation of the
holding basin at the Company's Concord, Massachusetts facility pursuant to a
U.S. Army contract, as a result of a change in the estimate of the cost to
complete the remediation. This decrease was partially offset by a $461,000
increase in the production volume of DU penetrators and blanks, which
production the Company expects to discontinue after the second quarter of
fiscal 1999.
Gross profit in the third quarter of fiscal 1998 decreased by $1,785,000
to $617,000 or 74% from $2,402,000 in the third quarter of fiscal 1997. Gross
profit for the third quarter of fiscal 1998 was primarily affected by a
decrease in gross profit within the Depleted Uranium Penetrator segment of
$1,525,000, due primarily to an increase of $1,297,000 in the estimated excess
costs of remediating the holding basin, and also due to a reduction in gross
margins on sales of penetrators and blanks. As a percentage of sales, gross
profit was 8% for the third quarter of fiscal 1998 compared to 34% for the
third quarter of fiscal 1997.
The third quarter of fiscal 1998 also included a $671,000 decrease in
gross profit within the Specialty Metal Products segment primarily due to an
increase in losses on Beralcast(R) products, including an increase in losses
under a government contract for certain defense-related Beralcast(R)
components. (Revenue for the third quarter of fiscal 1998 does not include
approximately $1.0 million billed in July to a customer as a cumulative
adjustment of overhead rates attributable to work done through the end of the
third quarter. Such overhead rates are subject to government audit and the
timing of payment is uncertain; however, the Company believes that such audit
would not result in a material change in the amount which it expects to
receive.) The Company's gross margin in the Specialty Metal Products segment
in the third quarter also reflects substantial expenditures associated with
Company's efforts on Beralcast(R) projects in the product development and
pre-production phases during which the Company receives only minimal revenues.
Although the Company has received pre-production or tooling orders from
eighteen customers (primarily with respect to defense applications), the
Company has not received any full-scale production orders.
The decreases in the Depleted Uranium Penetrator segment and the Specialty
Metal Products segment were partially offset by a gross profit increase within
the Uranium Services and Recycle segment of $411,000 due primarily to
increased sales volumes of AVLIS feedstock, which was partially offset by a
gross profit decrease on the Company's counterweight business.
Selling, general and administrative expenses increased by $833,000 or 50%
in the third quarter of fiscal 1998 compared to the third quarter of fiscal
1997, primarily due to an increase in sales and administrative personnel in
expectation of growth in its business. As a percentage of sales, these
expenses were 34% in the third quarter of fiscal 1998 compared to 24% in the
third quarter of fiscal 1997. Interest expense and amortization of warrants
increased to $464,000 in the third quarter of fiscal 1998 from $87,000 for the
third quarter of fiscal 1997, primarily due to interest expense associated
with increased borrowings.
Nine Months Ended June 30, 1998
Net income (loss) for the first nine months of fiscal 1998 was
$(4,051,000), or $(0.85) per share basic, compared with $171,000, or $0.04 per
share basic, for the same period a year earlier. Net sales increased by
$6,571,000 or 33% to $26,198,000 in the first nine months of fiscal 1998
compared to the first nine months of fiscal 1997, including a $2,848,000
increase in revenue recognized in the first nine months of fiscal 1998
compared to the first nine months of fiscal 1997 on the remediation of the
holding basin.
Gross profit in the first nine months of fiscal 1998 decreased by
$1,513,000 to $4,861,000 or 24% from $6,374,000 in the first nine months of
fiscal 1997. As a percentage of sales, gross profit was 19% for the first
nine months of fiscal 1998 compared to 32% for the first nine months of fiscal
1997. Gross profit in the first nine months of fiscal 1998 was primarily
affected by a gross profit decrease of $2,179,000 within the Depleted Uranium
Penetrator segment primarily due to a provision for a $1,297,000 increase in
the estimate of the cost to complete the remediation of the holding basin and
a $1,071,000 decrease in gross profit related to sales of penetrators and
blanks. The first nine months of fiscal 1998 also included a $51,000 decrease
in gross profit within the Uranium Services and Recycle segment due to a
decrease of $444,000 on the Company's counterweight business and the absence
of a reserve reduction for waste disposal of $670,000, which was partially
offset by a gross profit increase of $1,000,000 related to increased sales
volumes of AVLIS feedstock. The gross profit decreases in the Depleted
Uranium Penetrator and Uranium Services and Recycle segments were partially
offset by a gross profit increase within the Specialty Metal Products segment
of $717,000 due to an increase in gross profit of $492,000 on medical powders
and $431,000 on Beralcast(R) products which was partially offset by a gross
profit decrease on sales of other products in the Specialty Metal Products
segment.
Selling, general and administrative expenses increased by $2,034,000 or
41% in the first nine months of fiscal 1998, primarily due to an increase in
sales and administrative personnel. As a percentage of sales, these expenses
were 27% in the first nine months of fiscal 1998 compared to 25% in the first
nine months of fiscal 1997. Interest expense increased to $953,000 in the
first nine months of fiscal 1998 from $206,000 for the first nine months of
fiscal 1997, primarily due to interest expense associated with increased
borrowings.
Backlog as of June 30, 1998, was $31.4 million as compared to
$27.7 million as of September 30, 1997.
THIRD QUARTER ENDED NINE MONTHS ENDED
June 30, June 30, June 30, June 30, June 30,
1997 1998 1997 1997 1998
(as reported) (as restated)
Net Sales $7,013,000 $7,429,000 $19,627,000 $19,627,000 $26,198,000
Net Income
(Loss) $293,000 $(2,765,000) $911,000 $171,000$(4,051,000)
Basic
Earnings
(Loss)
Per Share $0.06 $(0.58) $0.18 $0.04 $(0.85)
Weighted Average
Number
of Shares 4,974,000 4,791,000 4,938,000 4,938,000 4,788,000
Backlog $30,900,000 $31,400,000 $30,900,000 $30,900,000 $31,400,000
Note Concerning Restatement
In August 1998, the Company restated its September 30, 1996 and
September 30, 1997 consolidated financial statements. The restatement related
to the Company's accounting for inventory reserves. The restatement resulted
in a decrease in net income of approximately $740,000 ($0.15 per diluted
share) for the nine months ended June 30, 1997. The restatement had no impact
on the third quarter ended June 30, 1997. The restatement also included 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 results of operations during fiscal 1997 are discussed in this
press release on an as restated basis. The effect of the restatement is set
forth in the Company's Annual Report on Form 10-K/A (Second Amendment) filed
on August 11, 1998. For additional information describing the restatement,
see the Company's Current Report on Form 8-K filed on August 10, 1998. The
Company has also filed a Quarterly Report on Form 10-Q with respect to the
third quarter ended June 30, 1998.
NOTE: Certain statements in this press release, including, without
limitation, the Company's expectations concerning (i) expected future business
(ii) estimated and actual excess costs of remediation of the holding basin,),
(iii) backlog and anticipated fulfillment, and (iv) 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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CONTACT:
James M. Spiezio, Vice President, Finance of
Starmet, 978-369-5410
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