ACETO Corporation (Nasdaq:ACET), a global leader in the marketing,
sale and distribution of products for Human Health, Pharmaceutical
Ingredients and Performance Chemicals, announced today financial
results for the second quarter of fiscal 2015 ended December 31,
2014.
Second Quarter Fiscal 2015 versus Second Quarter Fiscal
2014
- Net sales of $123.8 million versus $116.5 million, a 6.2%
increase
- Gross profit of $30.0 million versus $27.0 million, an 11.2%
increase
- Net income of $6.6 million versus $6.8 million, a 2.2%
decrease
- Diluted EPS of $0.23 versus $0.24, a 4.2% decrease
- Non-GAAP Adjusted Net Income of $8.2 million versus $7.8
million, a 5.3% increase
- Non-GAAP Adjusted EPS of $0.28 versus $0.27, a 3.7%
increase
Management Commentary
"Sales increased 6.2% to $123.8 million this quarter and gross
profits increased 11.2% to $30.0 million as compared to last year's
second quarter. On an adjusted basis, net income increased by 5.3%
in the second quarter. Human Health sales increased by 39.2%, with
growth primarily driven by the acquisition of PACK Pharmaceuticals,
partially offset by weakness in our Nutritional business. This
sales growth is after a $12.5 million adverse impact due to price
protection adjustments associated with price increases, the benefit
of which we should realize later this fiscal year and in future
periods. Pharmaceutical Ingredients saw lower sales and profits
primarily due to decreased sales of a high margin active
pharmaceutical ingredient as well as several other lower margin
products. Performance Chemicals profitability was up versus a year
ago due to improved product mix," said Sal Guccione, Chief
Executive Officer of ACETO.
"For the first half of fiscal 2015 our Human Health and
Pharmaceutical Ingredients business segments together accounted for
69% of total revenue and 76% of gross profits. Further reflecting
our long-term on-going strategy to transform ACETO towards a human
health-oriented company, a change in our SIC code to a wholesale
drug category was approved by the SEC during the second quarter,"
added Mr. Guccione.
"In the second half of fiscal 2015, partially in the third
quarter and more fully in the fourth quarter, we expect to realize
benefits of price increases and new product launches at Rising. We
currently have 97 total portfolio products in development with 52
ANDAs filed with the FDA. Of these, 24 ANDAs, with total annual
sales of $1.5 billion according to IMS, have been on file for over
24 months. We currently expect our R&D spend for 2015 to be
approximately $7.0 million, up from $5.2 million in 2014. We are
confident in our pipeline, but at the same time, the industry is
seeing slowness in FDA approvals. Also, the slowdown in Nutritional
products is more significant than previously expected and headwinds
related to the weakening euro are becoming more pronounced. Taking
these variables together, we now expect sales and earnings per
share growth to be in the mid-to-upper single digit range for
fiscal 2015."
Second Quarter Financial Review
Net sales for the second quarter of fiscal 2015 were $123.8
million, an increase of 6.2% from $116.5 million reported in the
second quarter of fiscal 2014. Total company gross profit was $30.0
million, an increase of 11.2%, compared to $27.0 million in the
second quarter of fiscal 2014. Gross margin for the second quarter
was 24.3% compared to 23.2% in the prior year period.
Human Health segment sales were $55.4 million, an increase of
39.2%, compared to $39.8 million for the second quarter of fiscal
2014. The sales increase was primarily due to an increase in sales
at Rising resulting from the acquisition of PACK Pharmaceuticals on
April 30, 2014 as well as new generic drugs launched in fiscal
2014. In addition, Rising's sales were negatively impacted by $12.5
million due to price protection adjustments associated with price
increases. Nutritional product sales in the U.S. and
internationally were lower due to soft reorders resulting from high
customer inventory levels. Gross profit for the Human Health
segment was $16.3 million, an increase of 25.4%, compared to $13.0
million for the second quarter of fiscal 2014. Nutritional results
were impacted by lower royalty income of $1.3 million from the sale
of certain proprietary ingredients. Gross margin for the second
quarter was 29.5% compared to 32.7% in the prior year period. The
decline in gross margin was primarily due to a $9.2 million net
impact of price protection adjustments and the slowdown in the
Nutritional products business noted above.
Pharmaceutical Ingredients segment sales were $32.6 million, a
decrease of 13.1%, compared to $37.5 million for the second quarter
of fiscal 2014. Gross profit was $6.9 million, a decrease of 10.9%,
compared to $7.8 million for the second quarter of fiscal 2014.
Gross margin for the second quarter was 21.3% compared to 20.7% in
the prior year period. The decline in sales and profits for the
quarter is primarily due to a decline in reorders on three
products, including a high-margin active pharmaceutical
ingredient.
Performance Chemicals segment sales were $35.8 million, a
decrease of 8.8%, compared to $39.2 million for the second quarter
of fiscal 2014 primarily due to lower sales of an insecticide
versus 2014. Gross profit was $6.8 million, an increase of 9.4%,
compared to $6.2 million for the second quarter of fiscal 2014, due
to a more favorable product mix.Gross margin was 18.9% for the
second quarter compared to 15.8% in the prior year period.
Total selling, general and administrative expenses were $19.0
million compared to $15.1 million in the same period last year, a
25.9% increase. Selling, general and administrative expenses
included $3.1 million of SG&A expenses from PACK
Pharmaceuticals, of which $1.2 million was amortization expense
related to acquired intangible assets. Research and Development
expenses in the second quarter totaled $0.4 million compared to
$1.2 million in the prior year period. The majority of R&D
expenses are milestone based, and will fluctuate quarterly.
Operating income totaled $10.7 million, even with the second
quarter of fiscal 2014. Interest expense was $1.0 million compared
to $0.4 million in the prior year period reflecting higher average
balances outstanding under the credit agreement entered into in
connection with the purchase of PACK Pharmaceuticals. Net income
was $6.6 million, or $0.23 per diluted share, compared to net
income of $6.8 million, or $0.24 per diluted share, for the
comparable quarter of fiscal 2014. Non-GAAP Adjusted Net Income was
$8.2 million in the second quarter compared to $7.8 million in the
prior period, a 5.3% increase. Non-GAAP Adjusted earnings per share
were $0.28 compared to $0.27 in the year ago second quarter, a 3.7%
increase.
Conference Call
Management will host a conference call to discuss the operating
and financial results at 9:00am EST on Friday, February 6, 2015. To
participate in the conference call, please dial (888) 895-5271 or
(847) 619-6547 approximately 10 minutes prior to the call. Please
reference conference ID # 38818311.
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. EST on February 6, 2015 until 11:59 p.m. EST on February
13, 2015 and may be accessed by calling (888) 843-7419 and
reference conference ID # 38818311. 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 and transaction
cost related to acquisitions. These items should not be
reviewed in isolation or considered substitutes of the Company's
financial results as reporting 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, is a global leader in
the marketing, sale and distribution of products for Human Health
(finished dosage form generics and nutraceutical products),
Pharmaceutical Ingredients (pharmaceutical intermediates and active
pharmaceutical ingredients) and Performance Chemicals (specialty
chemicals and agricultural protection products). With business
operations in nine countries, ACETO distributes over 1,100 chemical
compounds used principally as finished products or raw materials in
the pharmaceutical, nutraceutical, agricultural, coatings and
industrial chemical industries. ACETO's global operations,
including a staff of 25 in China and 12 in India, are distinctive
in the industry and enable its worldwide sourcing and regulatory
capabilities.
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 or Form 10-K for the fiscal year ended June
30, 2014 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 |
Six Months
Ended |
|
December
31, |
December
31, |
|
2014 |
2013 |
2014 |
2013 |
Net sales |
$ 123,765 |
$ 116,508 |
$ 254,568 |
$ 245,769 |
Cost of sales |
93,746 |
89,524 |
196,898 |
185,051 |
Gross profit |
30,019 |
26,984 |
57,670 |
60,718 |
Gross profit % |
24.25% |
23.16% |
22.65% |
24.71% |
|
|
|
|
|
Selling, general and administrative
expenses |
18,970 |
15,067 |
37,253 |
30,831 |
Research and development expenses |
377 |
1,174 |
1,122 |
1,728 |
Operating income |
10,672 |
10,743 |
19,295 |
28,159 |
|
|
|
|
|
Other (expense) income, net of interest
expense |
(187) |
(13) |
(1,165) |
145 |
|
|
|
|
|
Income before income taxes |
10,485 |
10,730 |
18,130 |
28,304 |
Income tax provision |
3,877 |
3,975 |
6,694 |
10,214 |
Net income |
$ 6,608 |
$ 6,755 |
$ 11,436 |
$ 18,090 |
|
|
|
|
|
Net income per common share |
$ 0.23 |
$ 0.24 |
$ 0.40 |
$ 0.65 |
|
|
|
|
|
Diluted net income per common share |
$ 0.23 |
$ 0.24 |
$ 0.39 |
$ 0.64 |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic |
28,740 |
27,873 |
28,679 |
27,790 |
Diluted |
29,204 |
28,467 |
29,191 |
28,404 |
|
|
|
|
|
|
|
|
|
|
Aceto Corporation and
Subsidiaries |
Consolidated Balance
Sheets |
(in thousands, except
per-share amounts) |
|
|
|
|
(unaudited) |
|
|
December 31, 2014 |
June 30, 2014 |
|
|
|
Assets |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 37,216 |
$ 42,897 |
Investments |
1,799 |
746 |
Trade receivables: less
allowances for doubtful accounts: December 31, 2014 $697; and June
30, 2014 $517 |
148,004 |
122,694 |
Other receivables |
5,515 |
5,288 |
Inventory |
93,108 |
100,683 |
Prepaid expenses and other
current assets |
4,569 |
3,556 |
Deferred income tax asset,
net |
926 |
490 |
|
|
|
Total current
assets |
291,137 |
276,354 |
|
|
|
|
|
|
Property and equipment, net |
11,136 |
11,573 |
Property held for sale |
5,848 |
5,848 |
Goodwill |
67,963 |
66,516 |
Intangible assets, net |
83,614 |
87,955 |
Deferred income tax asset, net |
11,765 |
11,605 |
Other assets |
8,337 |
8,133 |
|
|
|
Total Assets |
$ 479,800 |
$ 467,984 |
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
Current liabilities: |
|
|
Current portion of long-term
debt |
$ 9,197 |
$ 8,343 |
Accounts payable |
49,086 |
48,716 |
Accrued expenses |
68,161 |
61,464 |
Total current
liabilities |
126,444 |
118,523 |
|
|
|
Long-term debt |
99,059 |
97,158 |
Long-term liabilities |
10,223 |
11,634 |
Environmental remediation liability |
5,374 |
7,079 |
Deferred income tax liability |
35 |
6 |
Total liabilities |
241,135 |
234,400 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Shareholders' equity: |
|
|
Common stock, $.01 par value:
(40,000 shares authorized; 29,105 and 28,772 shares issued and
outstanding at December 31, 2014 and June 30, 2014,
respectively) |
291 |
288 |
Capital in excess of par
value |
91,112 |
87,156 |
Retained earnings |
148,694 |
140,768 |
Accumulated other comprehensive
income |
(1,432) |
5,372 |
Total
shareholders' equity |
238,665 |
233,584 |
|
|
|
Total liabilities and shareholders'
equity |
$ 479,800 |
$ 467,984 |
|
|
|
|
|
|
Aceto
Corporation |
Diluted Net Income Per
Common Share Excluding Charges (Non-GAAP
Reconciliation) |
(in thousands, except
per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
Diluted Net |
|
Diluted Net |
|
Diluted Net |
|
Diluted Net |
|
|
Income Per |
|
Income Per |
|
Income Per |
|
Income Per |
|
(unaudited) |
Common Share |
(unaudited) |
Common Share |
|
Common Share |
|
Common Share |
|
Three Months |
Three Months |
Three Months |
Three Months |
(unaudited) Six |
Six Months |
(unaudited) Six |
Six Months |
|
Ended |
Ended |
Ended |
Ended |
Months Ended |
Ended |
Months Ended |
Ended |
|
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
|
2014 |
2014 |
2013 |
2013 |
2014 |
2014 |
2013 |
2013 |
|
|
|
|
|
|
|
|
|
Net income, as reported |
$6,608 |
$ 0.23 |
$6,755 |
$ 0.24 |
$11,436 |
$ 0.39 |
$18,090 |
$ 0.64 |
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
2,597 |
0.09 |
1,461 |
0.05 |
5,162 |
0.18 |
2,901 |
0.10 |
Transaction costs related to
acquisitions |
-- |
-- |
229 |
0.01 |
-- |
-- |
600 |
0.02 |
Separation and relocation
costs |
-- |
-- |
-- |
-- |
99 |
0.00 |
-- |
-- |
Step-up of inventory |
-- |
-- |
-- |
-- |
209 |
0.01 |
-- |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income excluding charges |
9,205 |
0.32 |
8,445 |
0.30 |
16,906 |
0.58 |
21,591 |
0.76 |
Adjustments to provision for income
taxes |
987 |
0.04 |
642 |
0.03 |
2,079 |
0.07 |
1,330 |
0.05 |
|
|
|
|
|
|
|
|
|
Adjusted net income (Non-GAAP) |
$ 8,218 |
$ 0.28 |
$ 7,803 |
$ 0.27 |
$ 14,827 |
$ 0.51 |
$ 20,261 |
$ 0.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding |
29,204 |
29,204 |
28,467 |
28,467 |
29,191 |
29,191 |
28,404 |
28,404 |
|
CONTACT: Investor Relations Contact:
LHA
Jody Burfening
jburfening@lhai.com
(212) 838-3777