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 DECEMBER 31, 2000 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: 90
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 - 5,923,135
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Dec. 31 June 30
2000 2000
ASSETS
Current assets:
Cash and cash equivalents $ 4,941 $ 2,811
Short-term investments 1,096 2,153
Receivables:
Trade, less allowance for doubtful accounts:
(Dec., $204; June, $239) 25,844 25,257
Other 1,624 2,651
27,468 27,908
Inventory 34,386 38,453
Prepaid expenses 579 622
Deferred income tax benefit, net 1,503 1,436
Property held for sale 456 456
Total current assets 70,429 73,839
Long-term investments 5,266 7,263
Long-term notes receivable 850 895
Property and equipment:
Machinery and equipment 782 712
Leasehold improvements 978 872
Computer equipment 1,374 1,293
Furniture and fixtures 805 803
Automobiles 119 136
4,058 3,816
Less accumulated depreciation and amortization 2,474 2,527
1,584 1,289
Goodwill, less accumulated amortization 5,581 4,467
(Dec., $464; June, $269)
Other assets 296 328
Total assets $ 84,006 $ 88,081
See accompanying notes to consolidated financial statements.
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
Dec. 31 June 30
2000 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 377 $ 464
Current installments of
long-term liabilities 867 642
Accounts payable 3,128 2,788
Accrued merchandise purchases 7,140 12,021
Accrued compensation 3,083 3,171
Accrued environmental remediation 1,301 1,312
Accrued income taxes 1,034 1,147
Other accrued expenses 1,874 2,024
Dividend payable 891 -
Total current liabilities 19,695 23,569
Long-term liabilities, excluding current
installments 517 908
Shareholders' equity:
Common stock,$.01 par value per share;
Authorized 20,000 shares; Issued 9,001
shares; 90 90
Capital in excess of par value 57,108 57,054
Retained earnings 36,876 35,697
94,074 92,841
Less:
Cost of common stock held in treasury;
Dec.,3,078 shares; June, 2,967 shares 30,280 29,237
Total shareholders' equity 63,794 63,604
Commitments and contingencies
Total liabilities and shareholders' equity $ 84,006 $ 88,081
See accompanying notes to consolidated financial statements.
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Six Months Ended
DEC. 31
2000 1999
Net sales $ 78,560 $ 86,072
Cost of sales 66,368 74,692
Gross profit 12,192 11,380
Selling, general and administrative
expenses 9,473 7,875
Operating profit 2,719 3,505
Other income (expense):
Interest expense (1) (10)
Interest and other income 607 721
606 711
Income before income taxes 3,325 4,216
Provision for income taxes 1,255 1,673
Net income $ 2,070 $ 2,543
Net income per common share:
Basic $ 0.34 $ 0.40
Diluted 0.34 0.40
Weighted average shares outstanding:
Basic 6,004 6,235
Diluted 6,041 6,422
See accompanying notes to consolidated financial statements.
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
DEC. 31
2000 1999
Net sales $ 37,625 $ 48,254
Cost of sales 31,302 42,429
Gross profit 6,323 5,825
Selling, general and administrative
expenses 4,844 4,041
Operating profit 1,479 1,784
Other income (expense):
Interest expense (1) -
Interest and other income 306 448
305 448
Income before income taxes 1,784 2,232
Provision for income taxes 643 903
Net income $ 1,141 $ 1,329
Net income per common share:
Basic $ 0.19 $ 0.21
Diluted 0.19 0.21
Weighted average shares outstanding:
Basic 5,971 6,163
Diluted 5,991 6,311
See accompanying notes to consolidated financial statements.
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
DEC. 31
2000 1999
Operating activities:
Net income $ 2,070 $ 2,543
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 440 245
Gain on sale of assets - (10)
Provision (recovery) for doubtful accounts (35) 67
Income tax benefit on exercise of stock options 9 62
Deferred tax provision (67) (76)
Changes in assets and liabilities:
Investments - trading securities (91) (12)
Trade accounts receivable (552) (3,722)
Other receivables 1,027 (1,811)
Inventory 2,758 3,695
Prepaid expenses 43 34
Other assets 63 27
Drafts and acceptances payable (87) 185
Accounts payable 340 (1,130)
Accrued merchandise purchases (4,881) (1,272)
Accrued compensation (88) 395
Accrued environmental remediation (11) (9)
Accrued income taxes (113) (56)
Other accrued expenses (88) 193
Net cash provided by (used in) operating activities 737 (652)
Investing activities:
Purchases of investments - held-to-maturity (13) (2)
Proceeds from sale of investments - held-to-maturity 3,158 4,589
Payments received on notes receivable 45 37
Purchases of property and equipment (540) (232)
Proceeds from sale of property - 10
Payments for purchase of acquisitions - (650)
Net cash provided by investing activities 2,650 3,752
Financing activities:
Proceeds from exercise of stock options 181 204
Payments for purchases of treasury stock (1,332) (4,843)
Issuance of treasury stock to employees 60 53
Payments of cash dividends - (29)
Payment of long-term debt (166) -
Net cash used in financing activities (1,257) (4,615)
Net increase (decrease) in cash and cash equivalents 2,130 (1,515)
Cash and cash equivalents at beginning of period 2,811 3,991
Cash and cash equivalents at end of period $ 4,941 $ 2,476
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
Unaudited
Note 1: Basis of Presentation
The consolidated financial statements of Aceto Corporation and subsidiaries
included herein have been prepared by the Company and reflect all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows for all periods
presented. Interim results are not necessarily indicative of results which may
be achieved for the full year.
These consolidated financial statements do not include all disclosures
associated with consolidated financial statements prepared in accordance with
generally accepted accounting principles. Accordingly, these statements should
be read in conjunction with the Company's consolidated financial statements and
notes thereto contained in the Company's Form 10-K for the year ended June 30,
2000.
Note 2: Supplemental Cash Flow Information
Cash paid for interest and income taxes during the six months ended December
31, 2000 and 1999 was as follows:
2000 1999
Interest $ 1 $ 2
Income taxes 1,425 1,941
During the second quarter of fiscal 2001 the Company declared a cash
dividend on common stock payable in the third quarter for $891.
Note 3: Segment Information
The Company has six reportable segments which are organized by products: (1)
Agrochemicals, whose products include herbicides, fungicides and insecticides,
as well as a sprout inhibitor for potatoes, (2) Industrial Chemicals, whose
products include a variety of specialty chemicals used in adhesives, coatings,
food, fragrance, cosmetics and many other areas, (3) Organic Intermediates and
Colorants, whose products include dye and pigment intermediates used in the
color-producing industries like textiles, inks, paper and coatings, as well as
intermediates used in production of agrochemicals, (4) Pharmaceutical
Biochemicals and Nutritionals products, which include the active ingredients
for generic pharmaceuticals, vitamins and nutritional supplements, (5)
Pharmaceutical Intermediates and Custom Manufacturing products, used in
preparation of pharmaceuticals, primarily by major ethical drug companies and
(6) Institutional Sanitary Supplies and Other, whose products include cleaning
solutions, fragrances and deodorants used by commercial and industrial
establishments. The Company does not allocate assets by segments as they are
not provided to the chief operating decision maker. The Company evaluates
performance of the segments based on gross profit. Summarized financial
information for each of the segments for the three and six months ended
December 31, 2000 and 1999 follows:
Six Months Ended December 31, 2000 and 1999
Agro- Indus- Organic Pharma- Pharma- Other Consoli-
chemicals trial Inter- ceutical ceutical dated
Chemi- mediates Biochem- Inter- Totals
cals & Colorants chemicals & mediates &
Nutri- Custom Mfg.
tionals
2000
Net
sales $5,408 24,509 23,072 17,795 5,234 2,542 $78,560
Gross
profit $2,301 4,656 3,064 3,443 435 897 $14,796
Unallo-
cated
cost
of sales (1)
Net gross profit 2,604
$12,192
1999
Net
sales $2,889 24,553 23,396 15,039 18,081 2,114 $86,072
Gross
profit $ 893 4,275 3,451 2,812 1,316 537 $13,284
Unallo-
cated
cost
of sales (1) 1,904
Net gross profit $11,380
Three Months Ended December 31, 2000 and 1999
Agro Indus Organic Pharma- Pharma- Other Consolidated
chemicals trial Inter- ceutical ceutical Totals
Chemi- mediates Biochem- Inter-
cals & Colorants icals & mediates &
Nutri- Custom Mfg.
2000
Net
sales $3,578 12,195 10,959 8,183 1,494 1,216 $37,625
Gross
profit $1,726 2,447 1,503 1,602 153 241 $ 7,672
Unallo-
cated
cost
of sales (1)
Net gross profit 1,349
$ 6,323
1999
Net
sales $1,477 12,167 11,714 6,586 15,293 1,017 $48,254
Gross
profit $ 414 2,246 1,725 1,189 978 225 $ 6,777
Unallo-
cated
cost
of sales (1) 952
Net gross profit $ 5,825
(1) Represents freight and storage costs that are not allocated to a segment.
Note 4: Interest and Other Income
Interest and other income earned during the six and three months ended December
31, 2000 and 1999 was comprised of the following:
Six Months Three Months
Ended Ended
December 31, December 31,
2000 1999 2000 1999
Dividends $ 19 $ 28 $ 7 $ 11
Interest 288 533 127 238
Net gain (loss) on investments 88 (144) 80 (71)
Net gain on sale of assets - 10 - -
Royalty income 150 258 69 245
Miscellaneous 62 36 23 25
$ 607 $ 721 $ 306 $ 448
Note 5: Net Income per Common Share
A reconciliation between the numerators and denominators of the basic and
diluted income per share computation for net income follows:
Six Months Three Months
Ended Ended
December 31, December 31,
2000 1999 2000 1999
Net Income 2,070 2,543 1,141 1,329
Preferred stock dividend - (29) - (29)
Net income available for common
shareholders $2,070 $ 2,514 $ 1,141 $ 1,300
Weighted average common shares 6,004 6,235 5,971 6,163
Effect of dilutive securities:
Stock options 37 81 20 76
Convertible preferred stock - 106 - 72
Weighted average common and
potential common shares
outstanding 6,041 6,422 5,991 6,311
Basic income per share $ 0.34 $ 0.40 $ 0.19 $ 0.21
Diluted income per share 0.34 0.40 0.19 0.21
For the three months ended December 31, 2000, September 30, 2000, December 31,
1999 and September 30, 1999, employee stock options of 287, 233, 240 and 220
shares, respectively, were not included in the net income per share
calculation because their effect would have been anti-dilutive.
Note 6: Accounting for Derivatives and Hedging Activities
Effective July 1, 2000, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133") which establishes new accounting and
reporting guidelines for derivative instruments and hedging activities.
SFAS No. 133 requires the recognition of all derivative financial instruments
as either assets or liabilities in the statement of financial condition and
measurement of those instruments at fair value. Changes in the fair values
of those derivatives will be reported in earnings or other comprehensive
income depending on the designation of the derivative and whether it
qualifies for hedge accounting. The accounting for gains and losses
associated with changes in the fair value of a derivative and the effect
on the consolidated financial statements will depend on its hedge
designation and whether the hedge is highly effective in achieving offsetting
changes in the fair value or cash flows of the asset or liability hedged.
Under the provisions of SFAS No. 133, the method that will be used for
assessing the effectiveness of a hedging derivative, as well as the
measurement approach for determining the ineffective aspects of the hedge,
must be established at the inception of the hedged instrument.
Designation is established at the inception of a derivative, but redesignation
is permitted. For derivatives designated as fair value hedges, changes in fair
value are recognized in earnings. If the fair value hedge is fully effective,
the change in fair value of the hedged item attributable to the hedged risk, is
adjusted to fair value and is recognized in earnings.
The Company operates internationally, therefore its earnings, cash flows and
financial positions are exposed to foreign currency risk from foreign currency
denominated receivables and payables. These items are denominated in various
foreign currencies, including Euros, British Pounds, Yen, and Deutsche Marks.
Management believes it is prudent to minimize the risk caused by foreign
currency fluctuation. Management minimizes the risk by hedging the majority of
all foreign currency obligations by purchasing future foreign currency
contracts (futures) with one of our financial institutions. Futures are traded
on regulated U.S. and international exchanges and represent commitments to
purchase or sell a particular foreign currency at a future date and at a
specific price. Since futures are purchased for the exact amount of foreign
currency needed to pay for specific purchase orders, the Company feels that it
eliminates all risks relating to foreign currency fluctuation. The Company
takes delivery of all futures, which have been designated as fair value hedges
under SFAS 133, to pay suppliers in the appropriate currency. The difference
between the fair value and nominal amounts of the foreign currency contracts
and the related commitments have been recorded as an asset with a corresponding
liability in the accompanying consolidated balance sheet at December 31, 2000.
The hedge contracts flow through cost of goods sold in the consolidated
statement of income. Senior management and members of the financial department
continually monitor foreign currency risks and the use of this derivative
instrument.
Note 7: Comprehensive Income
The Company has no items of other comprehensive income, therefore there is no
difference between the Company's comprehensive income and net income.
Note 8: Goodwill
During the quarter ended December 31, 2000, the Company recorded an adjustment
to increase goodwill in the amount of $1,309. This adjustment was recorded as
a result of the final determination of the value of inventory acquired in
connection with the Schweizerhall acquisition.
Note 9: Reclassifications
Certain reclassifications have been made to the prior consolidated financial
statements to conform to the current presentation.
Item 2. 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. In addition, the Company
had cash and both short and long term investments which totaled $11.3 million
and $12.2 million at December 31 and June 30, 2000, respectively. All of
these investments are highly liquid. The Company also has sufficient lines
of credit available should any additional funds be required.
Working capital increased slightly to $50.7 million at December 31, 2000 from
$50.3 million at June 30, 2000. The decrease in the total of cash and cash
equivalents, short term investments and long term investments was due primarily
to the Company's continued stock repurchase program. Inventory decreased to
$34.4 million from $38.5 million, and the total of drafts and acceptances
payable, accounts payable and accrued merchandise purchases decreased $4.6
million comparing the same periods. These decreases were primarily due to
lower sales in the second quarter and the timing of merchandise purchases.
RESULTS OF OPERATIONS
The Company acquired certain assets of Magnum Research Corp. and Schweizerhall
Inc. in October 1999 and January 2000, respectively. The results of
operations relating to these acquisitions are included in the consolidated
statements of income from the respective dates of the acquisitions.
Net Sales By Segment
Six Months Ended December 31
Segment 2000 1999
% of % of
$ THOUSAND TOTAL $ THOUSAND TOTAL
Agrochemicals 5,408 6.9 2,889 3.4
Industrial
Chemicals 24,509 31.2 24,553 28.5
Organic
Intermediates &
Colorants 23,072 29.4 23,396 27.2
Pharmaceutical
Biochemicals &
Nutritionals 17,795 22.6 15,039 17.5
Pharmaceutical
Intermediates &
Custom Mfg. 5,234 6.7 18,081 21.0
Institutional
Sanitary
Supplies &
Other 2,542 3.2 2,114 2.4
TOTAL NET SALES
78,560 100.0 86,072 100.0
Gross Profit By Segment
Six Months Ended December 31
Segment 2000 1999
% of % of
$ THOUSAND TOTAL $ THOUSAND TOTAL
Agrochemicals 2,301 15.6 893 6.7
Industrial
Chemicals 4,656 31.4 4,275 32.2
Organic
Intermediates &
Colorants 3,064 20.7 3,451 26.0
Pharmaceutical
Biochemicals &
Nutritionals 3,443 23.3 2,812 21.2
Pharmaceutical
Intermediates &
Custom Mfg. 435 2.9 1,316 9.9
Institutional
Sanitary
Supplies &
Other 897 6.1 537 4.0
TOTAL GROSS
PROFIT BEFORE
FREIGHT AND
STORAGE COSTS 14,796 100.0 13,284 100.0
Net Sales By Segment
Three Months Ended December 31
Segment 2000 1999
% of % of
$ THOUSAND TOTAL $ THOUSAND TOTAL
Agrochemicals 3,578 9.5 1,477 3.1
Industrial
Chemicals 12,195 32.4 12,167 25.2
Organic
Intermediates &
Colorants 10,959 29.1 11,714 24.3
Pharmaceutical
Biochemicals &
Nutritionals 8,183 21.8 6,586 13.6
Pharmaceutical
Intermediates &
Custom Mfg. 1,494 4.0 15,293 31.7
Institutional
Sanitary
Supplies &
Other 1,216 3.2 1,017 2.1
TOTAL NET SALES
37,625 100.0 48,254 100.0
Gross Profit By Segment
Three Months Ended December 31
Segment 2000 1999
% of % of
$ THOUSAND TOTAL $ THOUSAND TOTAL
Agrochemicals 1,726 22.5 414 6.1
Industrial
Chemicals 2,447 31.9 2,246 33.2
Organic
Intermediates &
Colorants 1,503 19.6 1,725 25.5
Pharmaceutical
Biochemicals &
Nutritionals 1,602 20.9 1,189 17.5
Pharmaceutical
Intermediates &
Custom Mfg. 153 2.0 978 14.4
Institutional
Sanitary
Supplies &
Other 241 3.1 225 3.3
TOTAL GROSS
PROFIT BEFORE
FREIGHT AND
STORAGE COSTS 7,672 100.0 6,777 100.0
SALES AND GROSS PROFIT
Sales decreased 9% for the six months ended December 31, 2000 compared with
the same period in 1999.
In October 2000 the Company and the Company's largest supplier terminated their
supply arrangement regarding pharmaceutical products, while continuing to
supply certain industrial chemicals. This supplier accounted for 21% of the
Company's purchases in fiscal 2000. The loss of sales of this supplier's
products was the primary cause of the decline in sales.
Sales of the Pharmaceutical Intermediates and Custom Manufacturing segment fell
71%. The above mentioned supplier was the primary supplier to this segment and
the sales decrease is directly related to this situation.
The Pharmaceutical Biochemicals and Nutritionals segment was also affected by
the loss of the supply arrangement, but to a lesser extent. The inclusion of
sales of the United States distribution business of Schweizerhall, though
somewhat offset by significantly declining prices in Nutraceuticals more
than made up for the loss of sales, resulting in an 18% increase in sales
for the segment.
Sales of Agrochemicals increased 87%, attributable to increased sales of
several products, as well as the timing of certain sales. Sales of the
Institutional Sanitary Supplies and Other segment rose 20% because of the
inclusion of Magnum Research Corp., purchased in October 1999, for the entire
period. The other segments were basically unchanged.
Gross profit by segment before freight and storage costs for the entire
corporation increased 11%. Generally, each segment's performance mirrored that
of sales, but there were some differences. Agrochemicals increased 157%; the
increased sales were in very high gross profit items.
Sales of Magnum Research Corp. products also have a very high gross profit,
therefore the Institutional Sanitary Supplies and Other segment gross margin
showed a higher increase than sales. Industrial Chemicals increased 9% and
Organic Intermediates and Colorants decreased 11%, both on basically flat
sales. Both of these variations are due to the mix of products sold during
the period.
Sales for the three months ended December 31, 2000 declined 22% compared with
the same period in 1999. As in the six months, the decline was caused
primarily by the loss of sales relating to the aforementioned supplier.
Generally, each segments' performance for the three months was comparable to
the six months results, but certain segments showed more exaggerated
differences, as most of the significant events occurred in the three month
period ending December 31, 2000. Agrochemicals showed a 142% increase in the
three month comparison. The aforementioned sales increases occurred primarily
in the second quarter. Likewise, the decrease of sales in the Pharmaceutical
Intermediates and Custom Manufacturing segment was entirely in the December
quarter. The other segments' results were in line with the six months.
Gross profit by segment before freight and storage costs for the three months
increased 13%, similar to the 11% increase for the six months. The sales lost
from the one large supplier were, in most cases, low gross profit items while
the segment showing a large increase, Agrochemicals, added sales of very high
gross profit margins. Otherwise, the same factors apply to the six months.
Selling, general and administrative expenses for the six months ended December
31, 2000 increased by $1,598,000 or 20% compared to the same period last year.
The inclusion of Schweizerhall and Magnum in the consolidated financial
statements accounted for a significant part of this increase. CDC was also a
major factor in this increase. In July 2000 CDC moved into their new and
larger facility taking on additional overhead. Rent, real estate taxes,
utilities, salaries, fringe benefits, insurance, selling expenses,
advertising and depreciation all rose sharply as we prepare to expand
the sanitary supply business.
Magnum, our other subsidiary in the sanitary supply business also moved into
this new facility in July 2000 which offset some of these increases by
eliminating common overhead expenses. Legal fees were unusually high due to an
ongoing arbitration with the former owner of CDC. The implementation of a
website application along with renovations at our corporate headquarters caused
a significant increase in depreciation expense. Selling expenses also
increased due to a general increase in travel. Telephone and advertising costs
and agency and consulting fees increased slightly. Offsetting some of these
increases was a slight decrease in commercial insurance and overhead in our
foreign offices. For the three months there was an increase of $803,000, or
20% in selling, general and administrative expenses, compared to the same
period last year. The same factors as the six months caused the increase, with
only slight differences in the impact on each period.
Interest and other income decreased to $607,000 and $306,000 for the six and
three months ended December 31, 2000 from $721,000 and $448,000 for the same
periods last year. During both periods, interest on investments decreased
significantly due to a decrease in funds available for investment. The
decrease in cash available for investments was primarily due to the Company's
ongoing stock repurchase program, recent acquisitions and working capital to
support these new acquisitions. Offsetting some of these decreases, was a gain
on marketable securities of $88,000 and $80,000 during the six and three months
ended December 31, 2000 compared to a loss of $144,000 and $71,000 during the
same period last year.
The effective tax rate decreased to 37.7% and 36.0% for the six months and
three months ended December 31, 2000 from 39.7% and 40.5% for the same periods
last year. In comparing the six month periods, the effective tax rates are
within the range of the Company's traditional levels. In comparing the three
month periods, a non-deductible loss from a foreign subsidiary caused an
unusually high effective tax rate at December 31, 1999.
RECENT DEVELOPMENTS
The Company announced on January 29, 2001 that it has reached an agreement with
Schweizerhall Holding AG, Basel, Switzerland, to purchase the Distribution
Business of the Schweizerhall Pharma division of Schweizerhall Holding AG,
Basel, Switzerland.
Schweizerhall Pharma's Distribution Business is an international pharmaceutical
distribution business with offices located in Hamburg, Germany, Amsterdam, The
Netherlands, Paris, France, Piscataway, NJ, Singapore, Mumbai, India and Hong
Kong. Its principal activities are the supply of Active Pharmaceutical
Ingredients (API's) and Advanced Intermediates.
The estimated purchase price of approximately $25 million includes 600,000
shares of Aceto Corporation's common stock, or approximately 10% of Aceto
Corporation's current outstanding shares. It is expected that this acquisition
will add continuing annual sales of approximately $90 million and be
immediately accretive to Aceto Corporation's net earnings per share.
This planned acquisition does not include, nor have any interest in the
Schweizerhall Development Company and/or Schweizerhall Manufacturing Company,
Greenville, S.C. nor any interest in Chemische Fabrik Schweizerhall AG, Basel,
Switzerland.
This acquisition, which will make Aceto Corporation a truly global
pharmaceutical and chemical distribution company, will also propel Aceto
Corporation to be the largest independent distributor of pharmaceutical and
nutritional chemicals in the United States and one of the three largest in
the world.
This acquisition is expected to close on March 26, 2001 and is conditioned on
Aceto Corporation's continuing due diligence. Subsequent to closing, it is
expected that Dr. H.P. Schar, Chairman of Schweizerhall Holding AG, and a long
established Senior Executive in the European Chemical Industry will become a
member of Aceto's Board of Directors.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 provides the SEC staff's views in applying generally
accepted accounting principles to revenue recognition in the financial
statements. SAB No. 101B delayed the implementation date for registrants to
adopt the accounting guidance contained in SAB No. 101 by no later than the
fourth fiscal quarter of the fiscal year beginning after December 15, 1999.
Management of the Company does not believe that applying the accounting
guidance of SAB No. 101 will have a material effect on its financial position
or results of operations.
MARKET RISK
The Company maintains foreign currency contracts solely to hedge open purchase
commitments. It has established policies, procedures and internal processes
governing the management of this hedging to reduce market risks inherent in
foreign exchange. Also, the Company has interest rate exposure relating to
short and long term investments and minimal exposure in the equity markets.
Any change in these markets would not materially affect the consolidated
financial position, results of operations or cash flows of the Company.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements relating
to such matters as anticipated financial performance and business prospects.
When used in this Quarterly Report, the words "anticipates," "expects,"
"may," "intend" and similar expressions are intended to be among the
statements that identify forward-looking statements. From time to time, the
Company may also publish forward-looking statements. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors, including, but not limited to,
foreign currency risks, political instability, changes in foreign laws,
regulations and tariffs, new technologies, competition, customer and vendor
relationships, seasonality, inventory obsolescence and inventory
availability, could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements.
Item 3: Submission of Matters to a Vote of Security Holders
During the period covered by this report, at an annual meeting of stockholders
held on December 7, 2000, the matter of the election of eight directors to hold
office until the next annual meeting of stockholders or until their successors
are elected and qualified, was submitted to a vote of security-holders, through
the solicitation of proxies pursuant to Regulation 14 under the Securities Act
of 1933, as amended.
The nominees for directors were: Leonard S. Schwartz; Samuel I. Hendler;
Richard Amitrano; Robert A. Wiesen; Albert L. Eilender; Stanley H. Fischer
and John H. Schlesinger. The election of said nominees was uncontested.
The following tabulation shows with respect to each such nominee the number of
votes cast for, against or withheld, the number of abstentions and broker non-
votes:
VOTES
VOTES AGAINST OR BROKER
NOMINEE FOR WITHHELD ABSTENTIONS NON-VOTES
Leonard S. Schwartz 4,773,240 338,612 - -
Samuel I. Hendler 4,954,981 156,871 - -
Richard Amitrano 4,956,070 155,782 - -
Robert A. Wiesen 4,950,593 161,259 - -
Albert L. Eilender 4,812,811 299,041 - -
Stanley H. Fischer 4,807,189 304,663 - -
John H. Schlesinger 4,812,811 299,041 - -
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits - Exhibit 27. Financial Data Schedule
(a) Reports on Form 8-K. There were no reports on Form 8-K filed
during the quarter for which this report is filed.
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: FEBRUARY 9, 2001 BY (SIGNED)/ BY DONALD HOROWITZ
Donald Horowitz, Chief Financial
Officer
DATE: FEBRUARY 9, 2001 BY (SIGNED)/ BY LEONARD S. SCHWARTZ
Leonard S. Schwartz, Chief Executive
Officer