Loss of shuttle affects Vegas company

Monday, Feb. 3, 2003 | 11:16 a.m.

A Las Vegas contractor to NASA's space shuttle program and the aerospace and automotive industries saw its stock fall today as investors anticipated its sales and profit would decline because of Saturday's Columbia disaster.

John Gibson, chief executive officer of American Pacific Corp., said his company would in some way be affected by Saturday's loss of the shuttle Columbia over Texas and the resulting suspension of shuttle flights. But just how much, he said, hasn't been determined.

"We really haven't had a chance to go over all the details of what we know and what we don't know," Gibson said. "I don't know what effect it will have, but obviously, I have been communicating with my people about it. A significant portion of our revenue and activity is involved in the space shuttle, but the company also is involved in other programs."

Gibson said American Pacific's manufacturing of ammonium perchlorate, which is used as an oxidizing agent in composite solid fuel for rockets, booster motors and missiles, has historically represented between 30 percent and 45 percent of the company's chemical production and sales. Gibson said that just over half of the ammonium perchlorate manufactured by the company is dedicated to the space shuttle program.

The booster motors are used on liftoff of the shuttle and are then jettisoned for retrieval and reloading with fuel.

A recent filing with the Securities and Exchange Commission by American Pacific indicates the company has produced between 16 million and 20 million pounds of perchlorate a year, with demand expected to be at that level over the next five years. Perchlorate sales nearly doubled in the first quarter of the company's 2003 fiscal year, which ended Dec. 31, compared with the corresponding quarter the previous year.

Last week, the company said that improved cash flows for the company would result in the allocation of funds for a stock buy-back program and the payment of dividends. The company said it plans to announce specifics in November at the end of the company's 2003 fiscal year and that the stock repurchase amount would depend on market conditions.

In addition to perchlorate, American Pacific also manufactures and sells sodium azide, the primary component of a gas used in car airbags, as well as Halotron, the company's trademarked chemical used in fire extinguishing systems ranging from portable fire extinguishers to airport firefighting vehicles.

While the status of the space shuttle program is uncertain, Wall Street anticipated downturns for several contractors of the National Aeronautics and Space Administration, including American Pacific. At midday, American Pacific's stock was down 15.1 percent to $8 after closing Friday at $9.42.

American Pacific's administrative office in Las Vegas, where 20 are employed, oversees contracts involving the space shuttle and the rest of the company's production, Gibson said.

All of American Pacific's chemical manufacturing operations are based in a plant about 15 miles west of Cedar City, Utah, where just under 200 employees work.

Gibson said it hasn't been determined whether there would be layoffs in Utah or Las Vegas, since the status of the space shuttle program is unknown.

Gibson said the 1986 explosion of the space shuttle Challenger had a dramatic impact on the company and other NASA contractors because the shuttle fleet was grounded for more than two years.

Experts in the industry say there's more pressure to keep shuttles launching now, since they are the primary supply vehicles for the construction of the International Space Station in orbit with two astronauts.

"The (Challenger disaster) was a dramatic event in '86 for all major contractors, including us," Gibson said. "Production was cut back and that lasted for a couple of years. Eventually, the program returned to what we see today."

Gibson said in 1986 "there were not major personnel problems" and workers in perchlorate production were moved to other chemical production lines.