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 September 30, 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 - 4,812,123
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
For Three Months Ended
Sept. 30th
1995 1994
Net sales $ 40,389 $ 36,043
Cost of sales 35,629 31,393
Gross profit 4,760 4,650
Selling, general and administrative
expenses 3,199 3,207
Operating profit 1,561 1,443
Other income (deductions):
Interest expense (40) (52)
Interest and other income (note 5) 398 360
358 308
Income before income taxes 1,919 1,751
Provision for income taxes 757 685
Net income $ 1,162 $ 1,066
Net income per common and common
equivalent share $ 0.24 $ 0.21
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Sept. 30th June 30th
1995 1995
Assets
Current assets:
Cash and cash equivalents $ 2,407 $ 1,644
Short-term investments 12,986 9,669
Receivables:
Trade, less allowance for doubtful accounts:
(Sept. $213; June $204) 23,465 26,092
Other 566 1,161
24,031 27,253
Inventories 30,289 30,963
Prepaid expenses 181 227
Deferred income tax benefit 1,542 1,542
Property held for sale 614 619
Total current assets 72,050 71,917
Long-term investments 10,715 12,813
Long-term notes receivable 179 188
Property and equipment, at cost:
Land 140 140
Buildings and building improvements 886 886
Equipment 1,589 1,587
2,615 2,613
Less accumulated depreciation and
amortization 1,666 1,606
949 1,007
Other assets 191 191
Total assets $ 84,084 $ 86,116
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
Sept. 30th June 30th
1995 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 1,040 $ 929
Current installments on long-term debt 500 250
Accounts payable 2,238 2,580
Accrued merchandise purchases 9,764 11,355
Accrued compensation 3,190 3,593
Accrued plant shut-down costs 949 985
Other accrued expenses 1,977 2,255
Income taxes payable 1,429 1,681
Total current liabilities 21,087 23,628
Long-term debt, excluding current installments 1,250 1,500
Deferred income taxes 24 24
Redeemable preferred stock 821 821
Shareholders' equity (note 2):
Common stock,$.01 par value per share;
Authorized 10,000 shares;
Issued: Sept., 5,530 shares; June, 55 55
5,530 shares; outstanding: Sept.,
4,812 shares; June, 4,840 shares
Capital in excess of par value 50,173 50,168
Retained earnings 19,908 18,747
70,136 68,970
Less:
Cost of common stock held in treasury;
Sept., 718 shares; June, 690 shares 9,234 8,827
Total shareholders' equity 60,902 60,143
Total liabilities and shareholders' equity $ 84,084 $ 86,116
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
September 30th
1995 1994
Operating activities:
Net income $ 1,162 $ 1,066
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 65 70
Effect of market value over original
option price for options exercised 9 2
Increase in allowance for doubtful accounts 8 15
Changes in operating assets and liabilities:
Decrease (increase) in investments -
trading securities (109) 1,171
Decrease in trade accounts receivable 2,618 57
Decrease in other receivables 595 417
Decrease in inventories 674 2,406
Increase in other assets - (2)
Decrease in prepaid expenses 46 39
Decrease in notes receivable 9 6
Increase (decrease) in drafts and
acceptances payable 111 (147)
Increase in current installments on
long-term debt 250 250
Increase (decrease) in accounts payable (342) 2,205
Decrease in accrued merchandise purchases (1,591) (2,872)
Decrease in accured compensation (403) (195)
Decrease in accrued plant shut-down costs (36) (171)
Decrease in other accrued expenses (278) (210)
Decrease in income taxes payable (252) (670)
Net cash provided by operating activities 2,536 3,437
Investing activities:
Purchases of investments - held-to-maturity (1,504) (5,406)
Proceeds from investments - held-to-maturity 394 2,293
Purchases of equipment (2) (75)
Net cash used in investing activities (1,112) (3,188)
Financing activities:
Payments of long-term debt (250) (250)
Proceeds from exercise of stock options 24 7
Payments for purchases of treasury stock (435) (28)
Net cash used in financing activities (661) (271)
Net increase (decrease) in cash and cash equivalents 763 (22)
Cash and cash equivalents at beginning of period 1,644 5,122
Cash and cash equivalents at end of period $ 2,407 $ 5,100
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:
The consolidated balance sheet as of September 30, 1995 and the consolidated
statements of income and cash flows for the three months ended September 30,
1995 and 1994 have been prepared in accordance with generally accepted
accounting principles by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in cash flows for all periods presented have been made. Interim
results are not necessarily indicative of results expected for the full year.
These financial statements do not include all disclosures associated with
annual statements. Accordingly, these statements should be read in
conjunction with the Company's financial statements and notes thereto
contained in the Company's Form 10-K for the year ended June 30, 1995.
Note 2: Income per Common Share
Income per common and common equivalent share is determined based on the
weighted average number of common and common equivalent shares outstanding.
Weighted average common shares outstanding for the quarters ended Sept. 30,
1995 and 1994, were 4,866,000 and 5,079,000 and included common stock
equivalents of 48,000 and 73,000, respectively. Shares issuable upon the
assumed conversion of preferred stock were excluded from the computation
since they were not dilutive during these three month periods.
Note 3: Supplemental Cash Flow Information
Cash paid for interest and income taxes during the three months ended
September 30, 1995 and 1994 are as follows:
1995 1994
Interest $ 40 $ 52
Income taxes 1,004 1,356
Note 4: Marketable Investment Securities
Investments at September 30, 1995 and 1994 consist of U.S. Treasury,
corporate debt and equity securities, and municipal obligations. The
Company classifies its investments as either trading or held-to-maturity
securities. Trading securities are bought and held principally for the
purpose of selling them in the short 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 their fair market value and are classified
as short-term investments. Unrealized 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 and are adjusted
for the amortization or accretion of premiums or discounts over the life of
the related security. The cost of held-to-maturity securities approximates
their fair market value.
At September 30, 1995, short-term investments include $5,941 trading
securities and $7,045 held-to-maturity securities.
Note 5: Interest and Other Income
For Three Months Ended
September 30th
1995 1994
Interest on investments $ 379 $ 370
Net gain (loss) on sale
of investments 5 (81)
Miscellaneous other
income 14 71
$ 398 $ 360
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 September 30,
1995 and June 30, 1995 cash and short-term investments totalled $15.4 million
and $11.3 million and working capital was $51.0 million and $48.3 million,
respectively. In addition, the Company had liquid long-term investments of
$10.7 million at September 30, 1995 and $12.8 million at June 30, 1995.
The total of cash and cash equivalents, short-term and long-term investments
was $26.1 million compared to $24.1 million at September 30, 1995 and June
30, 1995, respectively. The decrease in receivables to $24.0 million at
September 30, 1995 from $27.3 million at June 30, 1995 was due to the timing
of sales and accounts receivable collections which accounted for the increase
in the cash and investment balances. This increase was partially offset by
purchases of 30,000 shares of treasury stock during the quarter ended
September 30, 1995 at a cost of $435,000.
RESULTS OF OPERATIONS:
Net sales increased by 12% in the quarter ended September 30, 1995 compared
to the same period last year. The increase is attributed to improved sales
in most of our product areas.
Gross margins as a percentage of sales declined to 11.8% for the three months
ended September 30, 1995 compared to 12.9% for the same three month period
last year. Sales of certain agricultural products sold at less than
traditional margins accounted for most of the decline.
Selling, general and administrative expenses were $3.2 million for each of
the quarters ended September 30, 1995 and September 30, 1994 and none of the
components of expenses changed significantly.
Other income increased to $398,000 for the three months ended September 30,
1995 compared to $360,000 for the same period last year. The increase was
mostly due to a combined net gain (loss) on sales of investments and
miscellaneous other income in the quarter ended September 30, 1995 of $19,000
as compared to ($10,000) for the three months ended September 30, 1994.
The effective tax rates of 39.5% and 39.1% for the quarters ended September
30, 1995 and September 30, 1994, respectively, approximated the Company's
traditional levels.
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 November 8, 1995 BY (signed) / by Donald Horowitz
Donald Horowitz, Chief Financial
Officer
DATE November 8, 1995 BY (signed) / by Arnold Frankel
Arnold Frankel, Chief Executive
Officer