SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995 Commission file number 0-
4217
ACETO CORPORATION
(Exact name of registrant as specified in its charter)
New York 11-1720520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
One Hollow Lane, Lake Success, NY 11042
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(516) 627-6000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of Class)
Indicate by check mark whether the registrant(1) has filed all
reports required to be filed by Section 13 or 15(d)of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____
Indicate the number of shares outstanding of each of the
issuer's class of common stock, as of the close of the period
covered by this report.
Common Stock - 4,988,783
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For Nine Months Ended
March 31st
1995 1994
Net sales $120,969 $109,541
Cost of sales 103,456 93,398
Gross profit 17,513 16,143
Selling, general and administrative
expenses 9,713 8,870
Operating profit 7,800 7,273
Other income net of interest expense 1,130 612
Income before income taxes 8,930 7,885
Provision for income taxes 3,443 2,846
Net income $ 5,487 $ 5,039
Net income per common share:
Primary $ 1.07 $ 0.98
Fully diluted $ 1.06 $ 0.97
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For Three Months Ended
March 31st
1995 1994
Net sales $ 46,509 $44,272
Cost of sales 39,545 37,304
Gross profit 6,964 6,968
Selling, general and administrative
expenses 3,203 3,313
Operating profit 3,761 3,655
Other income net of interest expense 464 226
Income before income taxes 4,225 3,881
Provision for income taxes 1,635 1,354
Net income $ 2,590 $ 2,527
Net income per common share:
Primary $ 0.51 $ 0.50
Fully diluted $ 0.50 $ 0.49
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Mar. 31st June 30th
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 1,578 $ 5,122
Short-term investments 6,096 6,794
Receivables:
Trade, less allowance for doubtful accounts:
(March $221; June $176) 29,684 23,579
Other 342 755
30,026 24,334
Inventories 28,062 26,613
Prepaid expenses 155 548
Deferred income tax benefit 1,281 1,652
Property held for sale 625 644
Total current assets 67,823 65,707
Long-term investments 16,418 14,617
Long-term notes receivable 192 213
Property and equipment, at cost:
Land 140 140
Buildings and building improvements 886 886
Equipment 1,539 1,462
2,565 2,488
Less accumulated depreciation and amortization 1,576 1,418
989 1,070
Other assets 191 191
Total assets $ 85,613 $ 81,798
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
Mar. 31st June 30th
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 1,372 $ 1,350
Current installments on long-term debt 500 250
Accounts payable 3,832 2,811
Accrued merchandise purchases 8,323 8,845
Accrued compensation 3,676 3,323
Accrued plant shut-down costs 956 1,670
Other accrued expenses 1,921 2,033
Income taxes payable 1,630 1,819
Total current liabilities 22,210 22,101
Long-term debt, excluding current installments 1,500 2,000
Deferred income taxes 30 30
Redeemable preferred stock (note 4) 821 821
Shareholders' equity (note 3):
Common stock,$.01 par value per share;
Authorized 10,000 shares;
Issued: Mar., 5,530 shares; June, 55 55
5,530 shares; outstanding: Mar.,
4,989 shares; June, 5,005 shares
Capital in excess of par value 50,163 50,168
Retained earnings 17,389 12,842
67,607 63,065
Less:
Cost of common stock held in treasury;
Mar., 541 shares; June, 524 shares 6,555 6,219
Total shareholders' equity 61,052 56,846
Total liabilities and shareholders' equity $ 85,613 $ 81,798
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
Mar. 31st.
1995 1994
Operating activities:
Net income $ 5,487 $ 5,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 220 234
Write-down of assets to net realizable value -- 161
Loss on sale of assets -- 145
Effect of market value over original
option price for options exercised 240 133
Increase in provision for
losses on accounts receivable 45 102
Changes in operating assets and liabilities:
Decrease in investments - trading securities 1,003 --
Increase in trade accounts receivable (6,150) (11,994)
Decrease in other receivables 413 358
Decrease(increase)in inventories (1,449) 5,746
Decrease(increase)in prepaid expenses 393 (403)
Decrease(increase)in notes receivable 21 (218)
Decrease in deferred tax benefit 371 --
Increase in drafts and acceptances payable 22 67
Increase in current installments on
long-term debt 250 250
Increase in accounts payable 1,021 2,537
Increase in accrued compensation 353 164
Increase (decrease) in accrued merchandise
purchases (522) 271
Decrease in accrued plant shut-down costs (714) (1,675)
Decrease in other accrued expenses (112) (655)
Increase(decrease)in current taxes payable (189) 808
Net cash provided by operating activities 703 1,070
Investing activities:
Purchases of investments - held-to-maturity (5,784) (42,589)
Proceeds from investments - held-to-maturity 3,678 43,032
Purchases of equipment (120) (92)
Proceeds from sale of plant and equipment -- 301
Net cash provided by (used in) investing activities (2,226) 652
Financing activities:
Payments of long-term debt (500) (500)
Payments of cash dividends (940) (843)
Proceeds from exercise of stock options 158 254
Payments for purchases of treasury stock (739) (793)
Net cash used in financing activities (2,021) (1,882)
Net decrease in cash and cash equivalents (3,544) (160)
Cash and cash equivalents at beginning of period 5,122 5,616
Cash and cash equivalents at end of period $ 1,578 $ 5,456
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except amounts and par value per share)
Note 1:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements included all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the financial
position at March 31, 1995 and June 30, 1994 and the results of operations
and statements of cash flows for the nine months ended March 31, 1995 and March
31, 1994. The results are not necessarily indicative of those to be expected
for the full fiscal year.
Note 2: Interest and Other Income
For Nine Months For Three Months
Ended Ended
March 31 March 31
1995 1994 1995 1994
Dividends $ 15 $ 29 $ 4 $ 1
Interest on investments 1,154 965 394 319
Net gain (loss) on
investments (17) (166) 39 (80)
Miscellaneous other
income (loss) 127 (29) 73 46
$1,279 $ 799 $ 510 $ 286
Note 3: Income per Common Share
Income per common share is determined based on the weighted average number
of common and common equivalent shares outstanding (primary 5,068 and 5,087
fully diluted, 5,165 and 5,187 for the quarters ended March 31,1995 and March
31, 1994, respectively; primary 5,074 and 5,101 fully diluted, 5,170 and
5,198 for the nine months ended March 31, 1995 and March 31, 1994,
respectively). Fully diluted income per share calculations also include the
shares issuable upon conversion of preferred stock, if dilutive.
Note 4: Redeemable Preferred Stock
The Company has 2,000,000 authorized shares of convertible preferred stock
with a par value of $2.50 per share. The stock is redeemable at the option of
either the holder or issuer at par. Redeemable preferred stock outstanding at
March 31, 1995 and June 30, 1994 consists of the following:
Shares Par Value
Second series 28,316 $ 71
Third series 100,000 250
Fourth series 40,000 100
Fifth series 40,000 100
Sixth series 40,000 100
Seventh series 40,000 100
Eighth series 40,000 100
$ 821
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The second, third, fourth, fifth, sixth, seventh and eighth series of
preferred stock are convertible beginning on the date of issue into the
Company's common stock at ratios of 8.4, 6.4, 6.4, 5.1, 6.0, 6.0 and 4.2
shares of preferred stock to 1 share of common stock, respectively, subject
to antidilution provisions. The second, third and sixth series pay 10%,
the fourth and fifth series pay 8%, the seventh series pays 9.5% and the eighth
series pays 9% annual cumulative cash dividends on par value. All series have
voting rights. In the event of liquidation of the Company, all series share
ratably in the remaining proceeds.
Note 5: Supplemental Cash Flow Information
Cash paid for interest and income taxes during the nine months ended March 31,
1995 and 1994 are as follows:
1995 1994
Interest $ 150 $ 190
Income taxes 3,152 1,916
Note 6: Investments
Investments at March 31, 1995 and 1994 consist of U.S.Treasury, corporate debt
and equity securities. The Company adopted the provision of Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investment in
Debt and Equity Securities as of July 1, 1994. Under Statement 115, the
Company classifies its debt and marketable equity securities as either trading
or held-to-maturity securities. Trading securities are bought and held
principally for the purpose of selling them in the near term. Held-to-maturity
are those securities in which the Company has the ability and intent to hold
until maturity.
Trading securities are recorded at fair value. Unrealized holding gains and
losses on trading securities are included in earnings. Dividend and interest
income are recognized when earned. Held-to-maturity securities are recorded at
cost, adjusted for the amortization or accretion of premiums or discounts over
the life of the related security.
At March 31, 1995, short-term investments consisted of $5,873 trading
securities and $223 held-to-maturity securities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's ability to generate cash from operations is
considered adequate to cover both short-term and long-term
liquidity. At March 31, 1995 and June 30, 1994 the
Company's cash and short-term investments totaled $7.7
million and $11.9 million and working capital was $45.6
million and $43.6 million, respectively. Additionally, the
Company had liquid long-term investments of $16.4 million at
March 31, 1995 and $14.6 million at June 30, 1994.
The significant increase in trade receivables to $29.7
million at March 31, 1995 from $23.6 million at June 30,
1994 can be attributed mostly to the granting of extended
payment terms for sales of some of our agricultural products
to meet competition. This increase in trade receivables is
reflected somewhat in the decrease in cash and cash
equivalents to $1.6 million at March 31, 1995 compared to
$5.1 million at June 30, 1994.
The shut-down of the Company's manufacturing facility has
reduced the amount of cash required for working capital and
capital expenditures. As a result, the increase in long-
term investments to $16.4 million at March 31, 1995 compared
to $14.6 million at June 30, 1994 can be attributed
partially to the reduced capital requirement allowing a
small shift of short-term investments to longer maturities.
Expenditures relating mostly to environmental compliance
accounted for the decrease in accrued plant shut-down costs
to $1.0 million at March 31, 1995 compared to $1.7 million
at June 30, 1994.
RESULTS OF OPERATIONS:
The increase in net sales of $11.4 million (10%) for the
nine month period ended March 31, 1995 compared to the same
period last year was the result of stronger sales of our
agricultural, dye intermediate and industrial chemical
products. The $2.2 million (5%) improvement in the three
month comparable periods can be attributed to increased
sales of agricultural and dye intermediate products.
Gross profit margins declined slightly to 14.5% and 15.0%
from 14.7% and 15.7% for the nine and three months ended
March 31, 1995 compared to the same periods last year.
Increased sales of a low margin agricultural herbicide
accounted for the declines.
Selling, general and administrative expenses were $9.7
million and $8.9 million for the nine months ended March 31,
1995 compared to March 31, 1994. An insurance recovery of
$0.6 million received in September 1993 was the major factor
for the lower level of expenses during last year's nine
month period. The balance of expenses other than this non-
recurring item were only slightly higher. For the three
months ended March 31, 1995 expenses actually declined from
the same period last year. Reductions in the amount accrued for
compensation and prior period accruals for claims resulted in the
decrease in expenses. Without these two adjustments expenses were
virtually unchanged in the comparable three month periods.
Realized and unrealized gains on trading securities of
$55,000 and $53,000 for the nine and three months ended
March 31, 1995 compared to losses of $166,000 and $75,000
for the same periods last year were the major factors for
the increase in other income for both comparable periods.
In addition, last year's nine month period included a loss
on the sale of real estate of $145,000 which contributed to
last year's lower level.
The effective tax rates increased to 38.6% and 38.7% from
36.1% and 35.0% in the nine and three months ended March 31,
1995 compared to the same periods last year. The lower
rates last year were due primarily to the use of state
carryover tax losses by certain subsidiary companies. In
addition, both the nine and three months ended March 31,
1994 included an adjustment of the prior year's tax accrual
which was also a factor in last year's lower effective tax
rate.
Item 5: Other Information
On February 10, 1995, the U.S. Department of Justice sent a
letter and a draft complaint to Pfaltz & Bauer, Inc., a
wholly owned subsidiary of Aceto Corporation, alleging that
Pfaltz & Bauer had violated the Resource Conservation and
Recovery Act (RCRA) with respect to the storage of certain
hazardous wastes at Pfaltz & Bauer's Waterbury, Connecticut
facility in 1991 - 1993. The letter indicated that if a
settlement was not reached the government contemplated
filing a lawsuit against Pfaltz & Bauer seeking civil
penalties. The draft complaint did not allege that Pfaltz &
Bauer's actions resulted in any discharge of hazardous
materials to the environment, or in any harm to human health
or the environment. While Pfaltz & Bauer believes that it
has defenses to the allegations in the draft complaint, it
has begun negotiations with the government to settle the
matter. Negotiations are continuing, and the government has
not filed its complaint with a court.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ACETO CORPORATION
DATE April 28, 1995 BY (signed) / by Donald Horowitz
Donald Horowitz, Chief Financial Officer
DATE April 28, 1995 BY (signed) / by Arnold Frankel
Arnold Frankel, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,578
<SECURITIES> 6,096
<RECEIVABLES> 29,905
<ALLOWANCES> 221
<INVENTORY> 28,062
<CURRENT-ASSETS> 67,823
<PP&E> 2,565
<DEPRECIATION> 1,576
<TOTAL-ASSETS> 85,613
<CURRENT-LIABILITIES> 22,210
<BONDS> 1,500
<COMMON> 55
0
821
<OTHER-SE> 60,997
<TOTAL-LIABILITY-AND-EQUITY> 85,613
<SALES> 120,969
<TOTAL-REVENUES> 120,969
<CGS> 103,456
<TOTAL-COSTS> 103,456
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 8,930
<INCOME-TAX> 3,443
<INCOME-CONTINUING> 5,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,487
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
</TABLE>
