ACETO Corporation (Nasdaq:ACET), an international company engaged
in the marketing, sale and distribution of Human Health products,
Pharmaceutical Ingredients and Performance Chemicals, announced
today financial results for the third quarter of fiscal 2016 ended
March 31, 2016.
Third Quarter Fiscal 2016 versus Third
Quarter Fiscal 2015
- Net sales of $157.9 million versus $145.8 million, an 8.3%
increase
- Gross profit of $38.3 million versus $36.6 million, a 4.6%
increase
- Net income of $10.4 million versus $8.4 million, a 23.9%
increase
- Diluted EPS of $0.35 versus $0.29, a 20.7% increase
- Non-GAAP Adjusted Net Income of $12.5 million versus $10.0
million, a 24.2% increase
- Non-GAAP Adjusted EPS of $0.42 versus $0.34, a 23.5%
increase
Management Commentary
“We are pleased with the results we achieved in
the third quarter of fiscal 2016. Consistent with our
performance for the first half of fiscal 2016 both GAAP and
non-GAAP Adjusted EPS growth for the third quarter were strong and
well ahead of net sales growth,” said Sal Guccione, Chief Executive
Officer of ACETO.
“Each of our business segments contributed to
the 8.3% increase in net sales. Human Health, our largest
segment, increased sales by 4.4% driven by growth in our Rising
Pharmaceuticals generic business. Pharmaceutical Ingredients
realized strong sales from international markets and grew by 13% in
the quarter, producing an above-average contribution to total
company net sales. Performance Chemicals, benefitting from
seasonally strong agricultural sales, also contributed to the
quarter’s sales growth. Gross profit for the quarter increased by
4.6% driven by growth in both the Pharmaceutical Ingredients and
Performance Chemicals segments partially offset by a modest
decrease in the Human Health segment,” Mr. Guccione added.
“As we enter the last quarter of our fiscal
year, we remain on track with our previous guidance for fiscal 2016
and expect to achieve a low single-digit increase in net sales, a
high single-digit to low double-digit increase in net income on a
GAAP basis, and low double-digit growth on a non-GAAP Adjusted
basis. This outlook for the balance of fiscal 2016 takes into
account increased competition in our Rising Pharmaceuticals
business and sales headwinds on specialty chemicals arising from
the devaluation of the Chinese currency. We continue to
invest in new products and, having spent $6.3 million in R&D
for the first nine months of fiscal 2016, we project our full year
spend to be approximately $8 million. We therefore expect to
deliver results for the fiscal year that continue to reflect our
strategy of transitioning towards Human Health,” Mr. Guccione
concluded.
Third Quarter Financial
Review
Net sales for the third quarter of fiscal 2016
were $157.9 million, an increase of 8.3% from $145.8 million
reported for the third quarter of fiscal 2015. Total Company gross
profit was $38.3 million, an increase of 4.6%, compared to $36.6
million for the third quarter of fiscal 2015. Gross margin for the
third quarter was 24.2% compared to 25.1% for the prior year
period.
Human Health segment sales were $58.8 million,
an increase of 4.4%, compared to $56.3 million for the third
quarter of fiscal 2015. The revenue increase was primarily due to
an increase in sales at Rising, which was partially offset by a
small sales decrease in the Nutritional business. Gross profit for
the Human Health segment was $19.1 million, a decrease of 4.2%,
compared to $20.0 million for the third quarter of fiscal 2015.
Gross margin for the third quarter was 32.5%, compared to 35.4% in
the prior year period. The decrease in gross profit and margin was
related to product mix, increased chargebacks and price protection
on certain finished dosage form generic products at Rising.
Pharmaceutical Ingredients segment sales were
$45.8 million, an increase of 13.1%, compared to $40.5 million for
the third quarter of fiscal 2015. The increase in sales was due
primarily to higher international sales of APIs and pharmaceutical
intermediates. Gross profit in the quarter was $8.6 million, a
29.6% increase compared to $6.7 million for the third quarter of
fiscal 2015. Gross margin for the third quarter was 18.9%, compared
to 16.5% in the prior year period. The increase in both gross
profit and margin was due to the higher international sales
achieved in both APIs and intermediates.
Performance Chemicals segment sales were $53.3
million, an increase of 8.9%, compared to $48.9 million for the
third quarter of fiscal 2015, due primarily to higher agricultural
protection products sales. Gross profit was $10.5 million, an
increase of 5.5%, compared to $10.0 million for the third quarter
of fiscal 2015. Gross margin was 19.7% for the third quarter
compared to 20.4% in the prior year period. Both specialty
chemicals and agricultural protection products contributed to the
increased gross profit compared to last year. The decline in the
gross margin was due to product mix.
Total selling, general and administrative
expenses were up modestly at $19.5 million compared to $19.1
million in the same period last year, a 2.3% increase.
Selling, general and administrative expenses included $1.2 million
of transaction costs related to a potential acquisition target.
Research and Development expenses in the third quarter totaled $2.3
million compared to $2.1 million in the prior year period. The
majority of R&D expenses are milestone based and can fluctuate
quarterly.
Operating income totaled $16.5 million, an
increase of 6.8% over the third quarter of fiscal 2015. Net income
was $10.4 million, or $0.35 per diluted share, compared to net
income of $8.4 million, or $0.29 per diluted share, for the
comparable quarter of fiscal 2015. Non-GAAP Adjusted Net Income was
$12.5 million in the third quarter, compared to $10.0 million in
the prior period, a 24.2% increase. Non-GAAP Adjusted Earnings per
Share were $0.42, compared to $0.34 in the year ago third quarter,
a 23.5% increase.
Conference Call
Management will host a conference call to
discuss the operating and financial results at 9:00am ET on Friday,
May 6, 2016. To participate in the conference call, please
dial (800) 446-1671 or (847) 619-7054 approximately 10 minutes
prior to the call. Please reference conference ID #
42245729.
A live webcast of the conference call will be
available in the Investor Relations section of the Company’s
website, www.aceto.com. Please access the website 15 minutes
prior to the start of the call to download and install any
necessary audio software.
A telephone replay of the conference call will
be available from 11:30 a.m. ET on May 6, 2016 until 11:59 p.m. ET
on May 13, 2016 and may be accessed by calling (888) 843-7419 and
referencing conference ID # 42245729. An archived replay of
the conference call will also be available in the investor
relations section of the Company’s website.
Use of Non-GAAP Financial
Information
In addition to U.S. GAAP results, this press
release also includes certain non-GAAP financial measures as
defined by the SEC. This measure, Adjusted Net Income, represents
net income excluding amortization of intangibles, debt
extinguishment, amortization of debt discount and debt issuance
costs and transaction costs related to acquisitions. These
items should not be reviewed in isolation or considered substitutes
of the Company’s financial results as reported in accordance with
GAAP. Due to the nature of these items, it is important to
identify these items and to review them in conjunction with the
Company’s financial results reported in accordance with GAAP.
The exclusion of these items also allows investors to compare
results of operations in the current period to prior periods’
results based on the Company’s fundamental business performance and
analyze the operating trends of the business. The exclusion
of these items also allows management to evaluate the performance
of its business units.
Pursuant to the requirements of Regulation G,
reconciliations of Adjusted Net Income to U.S. GAAP net income are
presented in the table Non-GAAP Reconciliation of this press
release.
About ACETO
ACETO Corporation, incorporated in 1947 and with
offices and operations in 10 countries, is engaged in the
marketing, sale and distribution of Human Health products (finished
dosage form generics and nutraceuticals), Pharmaceutical
Ingredients (pharmaceutical intermediates and active pharmaceutical
ingredients) and Performance Chemicals (specialty chemicals and
agricultural protection products).
FORWARD LOOKING STATEMENTS
This news release contains forward-looking
statements as that term is defined in the federal securities
laws. The events described in forward-looking statements
contained in this news release may not occur. Generally,
these statements relate to our business plans or strategies,
projected or anticipated benefits or other consequences of ACETO’s
plans or strategies, financing plans, projected or anticipated
benefits from acquisitions that ACETO may make, or a projection
involving anticipated revenues, earnings or other aspects of
ACETO’s operating results or financial position, and the outcome of
any contingencies. Any such forward-looking statements are
based on current expectations, estimates and projections of
management. ACETO intends for these forward-looking statements to
be covered by the safe-harbor provisions for forward-looking
statements. Words such as "may," "will," "expect," "believe,"
"anticipate," "project," "plan," "intend," "estimate," and
"continue," and their opposites and similar expressions are
intended to identify forward-looking statements. The
forward-looking statements contained in this press release include,
but are not limited to, statements regarding the Company’s
strategic initiatives including selling finished dosage form
generic drugs, and statements regarding the prospects for long-term
growth. ACETO cautions you that these statements are
not guarantees of future performance or events and are subject to a
number of uncertainties, risks and other influences, many of which
are beyond ACETO’s control, which may influence the accuracy of the
statements and the projections upon which the statements are
based. Factors that could cause actual results to differ
materially from those set forth or implied by any forward-looking
statement include, but are not limited to, risks and uncertainties
discussed in ACETO’s reports filed with the Securities and Exchange
Commission, including, but not limited to, ACETO’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2015 and other
filings. Copies of these filings are available at www.sec.gov.
Any one or more of these uncertainties, risks
and other influences could materially affect ACETO’s results of
operations and whether forward-looking statements made by ACETO
ultimately prove to be accurate. In addition, periodic
high-margin product sales may have a positive material financial
impact in a given quarter that may be non-recurring in future
quarters, thereby rendering one quarter's performance not useful as
a predictor of future quarters' results. ACETO’s actual
results, performance and achievements could differ materially from
those expressed or implied in these forward-looking
statements. ACETO undertakes no obligation to publicly
update or revise any forward-looking statements, whether from new
information, future events or otherwise.
(Financial Tables Follow)
Aceto Corporation and
Subsidiaries |
Consolidated Statements
of Income |
(in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
(unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
Net sales |
|
$ |
157,926 |
|
$ |
145,796 |
|
|
$ |
423,100 |
|
$ |
400,364 |
|
Cost of sales |
|
|
119,637 |
|
|
109,198 |
|
|
|
314,362 |
|
|
306,096 |
|
Gross profit |
|
|
38,289 |
|
|
36,598 |
|
|
|
108,738 |
|
|
94,268 |
|
Gross profit % |
|
|
24.24 |
% |
|
25.10 |
% |
|
|
25.70 |
% |
|
23.55 |
% |
|
|
|
|
|
|
Selling, general
and |
|
|
|
|
|
|
administrative
expenses |
|
|
19,498 |
|
|
19,067 |
|
|
|
56,377 |
|
|
56,320 |
|
Research and
development expenses |
|
|
2,319 |
|
|
2,101 |
|
|
|
6,280 |
|
|
3,223 |
|
Operating
income |
|
|
16,472 |
|
|
15,430 |
|
|
|
46,081 |
|
|
34,725 |
|
|
|
|
|
|
|
Other expense, net of
interest expense |
|
|
(928 |
) |
|
(1,804 |
) |
|
|
(2,461 |
) |
|
(2,969 |
) |
|
|
|
|
|
|
Income before income
taxes |
|
|
|
15,544 |
|
|
13,626 |
|
|
|
43,620 |
|
|
31,756 |
|
Income tax
provision |
|
|
5,120 |
|
|
5,215 |
|
|
|
15,628 |
|
|
11,909 |
|
Net income |
|
$ |
10,424 |
|
$ |
8,411 |
|
|
$ |
27,992 |
|
$ |
19,847 |
|
|
|
|
|
|
|
Net income per common
share |
|
$ |
0.36 |
|
$ |
0.29 |
|
|
$ |
0.96 |
|
$ |
0.69 |
|
|
|
|
|
|
|
Diluted net income per
common share |
|
$ |
0.35 |
|
$ |
0.29 |
|
|
$ |
0.95 |
|
$ |
0.68 |
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
|
29,158 |
|
|
28,773 |
|
|
|
29,085 |
|
|
28,710 |
|
Diluted |
|
|
29,620 |
|
|
29,267 |
|
|
|
29,536 |
|
|
29,216 |
|
|
|
|
|
|
Aceto Corporation and
Subsidiaries |
|
Consolidated Balance Sheets |
|
(in thousands, except per-share
amounts) |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
March 31, 2016 |
|
|
June 30, 2015 |
|
|
|
|
|
|
Assets |
|
Current Assets: |
|
Cash and cash
equivalents |
$ |
53,093 |
|
|
|
$ |
34,020 |
|
|
Investments |
|
2,394 |
|
|
|
|
3,416 |
|
|
Trade
receivables: less allowance for doubtful |
|
|
|
|
|
accounts:
March 31, 2016 $509; and June 30, 2015 $691 |
|
176,777 |
|
|
|
|
161,521 |
|
|
Other
receivables |
|
12,459 |
|
|
|
|
10,611 |
|
|
Inventory |
|
100,314 |
|
|
|
|
95,596 |
|
|
Prepaid expenses
and other current assets |
|
3,726 |
|
|
|
|
3,096 |
|
|
Deferred income
tax asset, net |
|
2,511 |
|
|
|
|
2,050 |
|
|
|
|
|
|
|
|
Total current assets |
|
351,274 |
|
|
|
|
310,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
10,151 |
|
|
|
|
10,456 |
|
|
Property held for
sale |
|
6,574 |
|
|
|
|
6,574 |
|
|
Goodwill |
|
67,893 |
|
|
|
|
67,870 |
|
|
Intangible assets,
net |
|
81,647 |
|
|
|
|
78,997 |
|
|
Deferred income tax
asset, net |
|
19,664 |
|
|
|
|
9,972 |
|
|
Other assets |
|
7,397 |
|
|
|
|
5,595 |
|
|
|
Total Assets |
$ |
544,600 |
|
|
|
$ |
489,774 |
|
|
|
Liabilities and
Shareholders' Equity |
|
|
Current
liabilities: |
|
Current portion
of long-term debt |
$ |
197 |
|
|
|
$ |
10,197 |
|
|
Accounts
payable |
|
60,860 |
|
|
|
|
54,962 |
|
|
Accrued
expenses |
|
49,284 |
|
|
|
|
59,841 |
|
|
Total current liabilities |
|
110,341 |
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
Long-term debt,
net |
|
117,229 |
|
|
|
|
99,960 |
|
|
Long-term
liabilities |
|
6,365 |
|
|
|
|
7,542 |
|
|
Environmental
remediation liability |
|
2,236 |
|
|
|
|
2,995 |
|
|
Deferred income tax
liability |
|
9,578 |
|
|
|
|
66 |
|
|
Total liabilities |
|
245,749 |
|
|
|
|
235,563 |
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
Preferred stock,
2,000 shares authorized; no shares issued and outstanding |
|
- |
|
|
|
|
- |
|
|
Common stock,
$.01 par value: |
|
|
|
|
|
(75,000
shares authorized at March 31, 2016 and 40,000 shares authorized at
June 30, 2015; |
|
|
|
|
|
29,585
and 29,147 shares issued and outstanding at March 31, 2016 and June
30, 2015, respectively) |
|
296 |
|
|
|
|
292 |
|
|
Capital in
excess of par value |
|
113,793 |
|
|
|
|
93,807 |
|
|
Retained
earnings |
|
189,849 |
|
|
|
|
167,208 |
|
|
Accumulated
other comprehensive loss |
|
(5,087 |
) |
|
|
|
(7,096 |
) |
|
Total shareholders' equity |
|
298,851 |
|
|
|
|
254,211 |
|
|
|
Total liabilities and
shareholders' equity |
$ |
544,600 |
|
|
|
$ |
489,774 |
|
|
|
Aceto Corporation |
Diluted Net Income Per Common Share Excluding
Charges (Non-GAAP Reconciliation) |
(in thousands, except per share
amounts) |
|
|
(unaudited) Three
Months Ended March 31,
2016 |
|
(unaudited) Diluted
Net Income Per Common Share Three Months Ended March 31,
2016 |
|
(unaudited) Three Months Ended March 31,
2015 |
|
(unaudited) Diluted
Net Income Per Common Share Three Months Ended March 31,
2015 |
|
(unaudited) Nine Months Ended March 31,
2016 |
|
(unaudited)Diluted Net Income
Per Common Share Nine Months Ended March 31, 2016 |
|
(unaudited) Nine Months Ended March 31,
2015 |
|
(unaudited)Diluted Net Income
Per Common Share Nine Months Ended March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as
reported |
|
|
$ |
10,424 |
|
|
$ |
0.35 |
|
|
$ |
8,411 |
|
|
$ |
0.29 |
|
|
|
$ |
27,992 |
|
|
$ |
0.95 |
|
|
$ |
19,847 |
|
|
$ |
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets |
|
|
|
2,883 |
|
|
|
0.10 |
|
|
|
2,564 |
|
|
|
0.08 |
|
|
|
|
8,325 |
|
|
|
0.29 |
|
|
|
7,726 |
|
|
|
0.26 |
|
|
Amortization of debt discount (non-cash interest expense) |
|
|
1,184 |
|
|
|
0.04 |
|
|
|
- |
|
|
|
- |
|
|
|
|
1,771 |
|
|
|
0.06 |
|
|
|
- |
|
|
|
- |
|
|
Amortization of
debt issuance costs |
|
|
|
209 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
|
|
313 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
Termination of
interest rate swap |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
420 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
Contingent
consideration |
|
|
|
(1,074 |
) |
|
|
(0.04 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
(1,074 |
) |
|
|
(0.04 |
) |
|
|
- |
|
|
|
- |
|
|
Separation and
relocation costs |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
99 |
|
|
|
0.00 |
|
|
Step-up of
inventory |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
209 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income
excluding charges |
|
|
|
13,626 |
|
|
|
0.46 |
|
|
|
10,975 |
|
|
|
0.37 |
|
|
|
|
37,747 |
|
|
|
1.28 |
|
|
|
27,881 |
|
|
|
0.95 |
|
|
Adjustments to
provision for income taxes |
|
|
|
1,152 |
|
|
|
0.04 |
|
|
|
934 |
|
|
|
0.03 |
|
|
|
|
3,609 |
|
|
|
0.12 |
|
|
|
3,013 |
|
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(Non-GAAP) |
|
|
$ |
12,474 |
|
|
$ |
0.42 |
|
|
$ |
10,041 |
|
|
$ |
0.34 |
|
|
|
$ |
34,138 |
|
|
$ |
1.16 |
|
|
$ |
24,868 |
|
|
$ |
0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding |
|
|
|
29,620 |
|
|
|
29,620 |
|
|
|
29,267 |
|
|
|
29,267 |
|
|
|
|
29,536 |
|
|
|
29,536 |
|
|
|
29,216 |
|
|
|
29,216 |
|
|
|
NOTE: Items identified in the above table are not in
accordance with, or an alternative method for, generally accepted
accounting principles (GAAP) in the United States. These items
should not be reviewed in isolation or considered substitutes of
the Company's financial results as reported in accordance with
GAAP. Due to the nature of these items, it is important to identify
these items and to review them in conjunction with the Company's
financial results reported in accordance with GAAP. The exclusion
of these items also allows investors to compare results of
operations in the current period to prior period’s results based on
the Company’s fundamental business performance and analyze the
operating trends of the business. The exclusion of these items also
allows management to evaluate performance of its business
units. |
|
|
|
Investor Relations Contact:
LHA
Jody Burfening
jburfening@lhai.com
(212) 838-3777