UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  February 5, 2015
   
Aceto Corporation
(Exact Name of Registrant as Specified in its Charter)
 
New York
(State or Other Jurisdiction of Incorporation)
 
 000-04217 11-1720520
(Commission File Number) (IRS Employer Identification Number)
 
4 Tri Harbor Court, Port Washington, New York, 11050
(Address of Principal Executive Offices) (Zip Code)
 
(516) 627-6000
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
   
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))
   
☐ Pre-commencement communications pursuant to Rule 13-e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 


Item 2.02 Results of Operations and Financial Condition.

On February 5, 2015, Aceto Corporation, a New York corporation (the “Registrant”), issued the attached press release that included financial information for its second quarter ended December 31, 2014.  A copy of the press release is attached as Exhibit 99.1 to this Report on Form 8-K.  The information in this Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01     Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1     Press Release issued by Aceto Corporation dated February 5, 2015
 
 
 

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
       
  ACETO CORPORATION  
  (Registrant)  
       
Dated:  February 6, 2015
By:
/s/ Salvatore Guccione  
    Salvatore Guccione  
    President and CEO  
 
 
 

 

 
EXHIBIT INDEX
       
Exhibit No.   Exhibits.  
       
99.1
  
Press Release issued by Aceto Corporation dated February 5, 2015
 


Exhibit 99.1
 
(aceto logo)
ACETO Corporation
4 Tri Harbor Court
Port Washington, New York 11050
“Sourcing and Supplying Quality Products Worldwide” 
NEWS RELEASE
 
ACETO Reports Second Quarter Fiscal 2015 Results
 
PORT WASHINGTON, N.Y., February 5, 2015 -- 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.”
 
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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.
 
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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.
 
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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.
 
Investor Relations Contact:
LHA
Jody Burfening
jburfening@lhai.com
(212) 838-3777
 
(Financial Tables Follow)
 
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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  
                                 
 
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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  
 
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Aceto Corporation
Diluted Net Income Per Common Share Excluding Charges (Non-GAAP Reconciliation)
(in thousands, except per share amounts)
                                                 
   
(unaudited)
Three Months
Ended
December 31,
2014
    
(unaudited)
Diluted Net
Income Per
Common Share
Three Months
Ended
December 31,
2014
    
(unaudited)
Three Months
Ended
December 31,
2013
    
(unaudited)
Diluted Net
Income Per
Common Share
Three Months
Ended
December 31,
2013
    
(unaudited) Six
Months Ended
December 31,
2014
    
(unaudited)
 Diluted Net
Income Per
Common Share
Six Months
Ended
December 31,
2014
    
(unaudited) Six
Months Ended
December 31,
2013
    
(unaudited)
Diluted Net
Income Per
Common Share
Six Months
Ended
December 31,
 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  

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.
 
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