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, 1994 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 - 5,010,697
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For Six Months Ended
Dec. 31st
1994 1993
Net sales 74,460 $ 65,269
Cost of sales 63,911 56,094
Gross profit 10,549 9,175
Selling, general and administrative
expenses 6,510 5,557
Operating profit 4,039 3,618
Other income net of interest expense 665 385
Income before income taxes 4,704 4,003
Provision for income taxes 1,807 1,492
Net income $ 2,897 $ 2,511
Net income per common share:
Primary $ 0.56 $ 0.48
Fully diluted $ 0.56 $ 0.48
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
Dec. 31st
1994 1993
Net sales $ 38,418 $ 33,679
Cost of sales 32,518 28,705
Gross profit 5,900 4,974
Selling, general and administrative
expenses 3,304 2,908
Operating profit 2,596 2,066
Other income net of interest expense 358 287
Income before income taxes 2,954 2,353
Provision for income taxes 1,122 883
Net income $ 1,832 $ 1,470
Net income per common share:
Primary $ 0.35 $ 0.28
Fully diluted $ 0.35 $ 0.28
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Dec. 31st June 30th
1994 1994
Assets
Current assets:
Cash and cash equivalents $ 714 $ 5,122
Short-term investments 5,781 6,794
Receivables:
Trade, less allowance for doubtful accounts:
(Dec., $206; June $176) 30,101 23,579
Other 522 755
30,623 24,334
Inventories 27,281 26,613
Prepaid expenses 398 548
Deferred income tax benefit 1,652 1,652
Property held for sale 632 644
Total current assets 67,081 65,707
Long-term investments 17,696 14,617
Long-term notes receivable 198 213
Property and equipment, at cost:
Land 140 140
Buildings and building improvements 886 886
Equipment 1,524 1,462
2,550 2,488
Less accumulated depreciation and
amortization 1,508 1,418
1,042 1,070
Other assets 191 191
Total assets $ 86,208 $ 81,798
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
Dec. 31st June 30th
1994 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 963 $ 1,350
Current installments on long-term debt 250 250
Accounts payable 4,656 2,811
Accrued merchandise purchases 9,561 8,845
Accrued compensation 3,817 3,323
Accrued plant shut-down costs 1,190 1,670
Other accrued expenses 3,230 2,033
Income taxes payable 1,077 1,819
Total current liabilities 24,744 22,101
Long-term debt, excluding current installments 1,750 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: Dec., 5,530 shares; June, 55 55
5,530 shares; outstanding: Dec.,
5,011 shares; June, 5,005 shares
Capital in excess of par value 50,167 50,168
Retained earnings 14,799 12,842
65,021 63,065
Less:
Cost of common stock held in treasury;
Dec., 519 shares; June, 524 shares 6,158 6,219
Total shareholders' equity 58,863 56,846
Total liabilities and shareholders' equity $ 86,208 $ 81,798
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
Dec. 31st.
1994 1993
Operating activities:
Net income $ 2,897 $ 2,511
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 146 155
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 20 19
Increase in allowance for doubtful accounts 30 30
Changes in operating assets and liabilities:
Decrease in investments - trading securities 1,079 --
Increase in trade accounts receivable (6,552) (2,369)
Decrease in other receivables 233 132
Decrease (increase) in inventories (668) 6,390
Decrease (increase) in prepaid expenses 150 (248)
Decrease (increase) in notes receivable 15 (224)
Increase (decrease) in drafts and
acceptances payable (387) 7
Increase (decrease) in accounts payable 1,845 (539)
Increase (decrease) in accrued merchandise
purchases 715 (4,051)
Increase (decrease) in accrued compensation 494 (162)
Decrease in accrued plant shut-down costs (480) (1,260)
Increase (decrease) in other accrued expenses 1,197 (442)
Decrease in income taxes payable (742) (336)
Net cash used in operating activities (8) (81)
Investing activities:
Purchases of investments - held-to-maturity (5,556) (26,623)
Proceeds from investments - held-to-maturity 2,411 23,162
Purchases of equipment (106) (72)
Proceeds from sale of plant and equipment -- 301
Net cash used in investing activities (3,251) (3,232)
Financing activities:
Payments of long-term debt (250) (250)
Payments of cash dividends (939) (38)
Proceeds from exercise of stock options 68 71
Payments for purchases of treasury stock (28) --
Net cash used in financing activities (1,149) (217)
Net decrease in cash and cash equivalents (4,408) (3,530)
Cash and cash equivalents at beginning of period 5,122 5,616
Cash and cash equivalents at end of period $ 714 $ 2,086
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
December 31, 1994 and June 30, 1994 and the results of operations and statements
of cash flows for the six months ended December 31, 1994 and December 31, 1993.
The results are not necessarily indicative of those to be expected for the full
fiscal year.
Note 2: Interest and Other Income
For Six Months For Three Months
Ended Ended
December 31 December 31
1994 1993 1994 1993
Dividends $ 11 $ 28 $ 10 $ 27
Interest on investments 760 647 390 328
Net gain (loss) on
investments (56) (87) 25 (47)
Miscellaneous other
income (loss) 54 (76) (16) 43
$ 769 $ 512 $ 409 $ 351
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 5,075 and 5,107 fully
diluted, 5,170 and 5,203 for the quarters ended Dec. 31,1994 and Dec. 31, 1993,
respectively; primary 5,077 and 5,108 fully diluted, 5,172 and 5,204 for the six
months ended Dec. 31, 1994 and Dec. 31, 1993, 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 December
31, 1994 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
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 six months ended December 31,
1994 and 1993 are as follows:
1994 1993
Interest $ 103 $ 130
Income taxes 2,537 1,830
Note 6: Investments
Investments at December 31, 1994 and 1993 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 December 31, 1994, short-term investments consisted of $5,557 trading
securities and $224 held-to-maturity securities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
At December 31, 1994 and June 30, 1994 the Company's cash and short-term
investments totalled $6.5 million and $11.9 million and working capital was
$42.3 million and $43.6 million, respectively. Additionally, the Company had
liquid long-term investments of $17.7 million at December 31, 1994 and $14.6
million at June 30, 1994. The significant working capital position and the
ability to generate cash from operations are considered adequate to cover both
short-term and long-term liquidity.
Cash and cash equivalents were $0.7 million and $5.1 million and trade
receivables were $30.1 million and $23.6 million at December 31, 1994 and June
30, 1994, respectively. The granting of extended payment terms for sales of
some of our agricultural products to meet competition was the major reason for
the increase in trade receivables and decrease in cash and cash equivalents.
The shutdown 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 $17.7 million at December 31, 1994 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.
The increases in accounts payable and accrued merchandise purchases to $4.7
million and $9.6 million at December 31, 1994 compared to $2.8 and $8.8 million
at June 30, 1994 was primarily due to the timing of payments for inventory
purchases. The decrease in income taxes payable to $1.1 million at December 31,
1994 compared to $1.8 million at June 30, 1994 related to the timing of
estimated tax payments.
RESULTS OF OPERATIONS:
The increase in net sales of $9.2 million (14%) in the six months ended December
31, 1994 compared to the same period last year can be attributed to improved
sales levels in most of our product areas. The increase of $4.7 million (14%)
in the three month comparable periods was mostly the result of stronger sales of
our agricultural products.
Although gross profit margins for the comparable six month periods were at
similar levels, the margins for the three months ended December 31, 1994
improved to 15.4% compared to 14.8% for the same period last year. The increase
in sales of our agricultural products, some of which are sold at higher margins,
accounted for the improvement.
Selling, general and administrative expenses were $6.5 million and $3.3 million
for the six and three months ended December 31, 1994 compared to $5.6 million
and $2.9 million for the same periods last year. Although recurring expenses
increased by approximately 6%, mostly attributable to higher compensation, an
insurance recovery of $0.6 million received in September 1993 was the major
factor for the lower level of expenses in the prior year's six months ended
December 31, 1993. The increase of $0.4 million in the three month comparable
periods again can be attributed mostly to higher compensation.
The increases in other income for both the six and three months ended December
31, 1994 compared to the same periods last year resulted from higher levels of
cash available for investment in addition to higher investment rates. During
the prior year's three months ended Sept. 30, 1993, the Company recognized a
loss on the sale of real estate of $145,000 which also contributed to the lower
level in last years six month period.
The effective tax rates increased slightly to 38.4% and 38.0% from 37.3% and
37.5% in the six and three months ended December 31, 1994 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.
Item 4: 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 1, 1994, the matter of the election of nine 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: Arnold Frankel; Robert E. Parsont; Samuel I.
Hendler; Anthony Baldi; Thomas Brunner; Donald Horowitz; Leonard Schwartz;
Stephen M. Goldstein; and Robert A. Wiesen. 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
Arnold Frankel 4,561,004 5,903 29,062 -
Robert E. Parsont 4,562,012 4,895 29,062 -
Samuel I. Hendler 4,549,349 17,558 29,062 -
Anthony Baldi 4,560,451 6,456 29,062 -
Thomas Brunner 4,560,655 6,252 29,062 -
Donald Horowitz 4,560,535 6,372 29,062 -
Leonard Schwartz 4,560,233 6,674 29,062 -
Stephen M. Goldstein 4,557,547 9,360 29,062 -
Robert A. Wiesen 4,557,867 9,040 29,062 -
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
(Registrant)
1/31/95 Donald Horowitz
(Signature)
1/31/95 Arnold Frankel
(Signature)