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, 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 - 5,189,236
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For Six Months Ended
Dec. 31st
1995 1994
Net sales $ 87,683 $ 74,460
Cost of sales 76,328 63,911
Gross profit 11,355 10,549
Selling, general and administrative
expenses 6,708 6,510
Operating profit 4,647 4,039
Other income net of interest expense 788 665
Income before income taxes 5,435 4,704
Provision for income taxes 2,108 1,807
Net income $ 3,327 $ 2,897
Net income per common and
common equivalent share: $ 0.62 $ 0.51
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
1995 1994
Net sales $ 47,294 $ 38,418
Cost of sales 40,699 32,518
Gross profit 6,595 5,900
Selling, general and administrative
expenses 3,509 3,304
Operating profit 3,086 2,596
Other income net of interest expense 430 358
Income before income taxes 3,516 2,954
Provision for income taxes 1,351 1,122
Net income $ 2,165 $ 1,832
Net income per common and
common equivalent share: $ 0.40 $ 0.32
See accompanying notes to condensed consolidated financial statements.
ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Dec. 31st June 30th
1995 1995
Assets
Current assets:
Cash and cash equivalents $ 1,560 $ 1,644
Short-term investments 8,328 9,669
Receivables:
Trade, less allowance for doubtful accounts:
(Dec. $234; June $204) 30,363 26,092
Other 429 1,161
30,792 27,253
Inventories 29,940 30,963
Prepaid expenses 1,155 227
Deferred income tax benefit 1,542 1,542
Property held for sale 608 619
Total current assets 73,925 71,917
Long-term investments 11,778 12,813
Long-term notes receivable 173 188
Property and equipment, at cost:
Land 140 140
Buildings and building improvements 886 886
Equipment 1,597 1,587
2,623 2,613
Less accumulated depreciation and
amortization 1,726 1,606
897 1,007
Other assets 191 191
Total assets $ 86,964 $ 86,116
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
1995 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 647 $ 929
Current installments on long-term debt 250 250
Accounts payable 4,239 2,580
Accrued merchandise purchases 10,631 11,355
Accrued compensation 3,962 3,593
Accrued plant shut-down costs 901 985
Other accrued expenses 1,838 2,255
Cash dividend distributable 934 --
Income taxes payable 891 1,681
Total current liabilities 24,293 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: Dec., 6,001 shares; June, 60 55
5,530 shares; outstanding: Dec.,
5,189 shares; June, 4,840 shares
Capital in excess of par value 57,480 50,168
Retained earnings 13,788 18,747
71,328 68,970
Less:
Cost of common stock held in treasury;
Dec., 812 shares; June, 690 shares 10,752 8,827
Total shareholders' equity 60,576 60,143
Total liabilities and shareholders' equity $ 86,964 $ 86,116
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.
1995 1994
Operating activities:
Net income $ 3,327 $ 2,897
Adjustments to reconcile net income to net
cash provided by(used in)operating activities:
Depreciation and amortization 132 146
Effect of market value over original
option price for options exercised 32 20
Increase in allowance for doubtful accounts 30 30
Changes in operating assets and liabilities:
Decrease in investments - trading securities 2,723 1,079
Increase in trade accounts receivable (4,301) (6,552)
Decrease in other receivables 732 233
Decrease (increase) in inventories 1,023 (668)
Decrease (increase) in prepaid expenses (928) 150
Decrease in notes receivable 15 15
Decrease in drafts and acceptances payable (282) (387)
Increase in accounts payable 1,659 1,845
Increase (decrease) in accrued merchandise
purchases (724) 715
Increase in accrued compensation 369 494
Decrease in accrued plant shut-down costs (84) (480)
Increase (decrease) in other accrued
expenses (417) 1,197
Decrease in income taxes payable (790) (742)
Net cash provided by (used in) operating activities 2,516 (8)
Investing activities:
Purchases of investments - held-to-maturity (2,724) (5,556)
Proceeds from investments - held-to-maturity 2,375 2,411
Purchases of equipment (9) (106)
Net cash used in investing activities (358) (3,251)
Financing activities:
Payments of long-term debt (250) (250)
Payments of cash dividends (38) (939)
Proceeds from exercise of stock options 77 68
Payments for purchases of treasury stock (2,031) (28)
Net cash used in financing activities (2,242) (1,149)
Net decrease in cash and cash equivalents (84) (4,408)
Cash and cash equivalents at beginning of period 1,644 5,122
Cash and cash equivalents at end of period $ 1,560 $ 714
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 December 31, 1995 and the consolidated
statements of income and cash flows for the six months ended December 31,
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 Dec. 31,
1995 and 1994, were 5,282,000 and 5,582,000 and included common stock
equivalents of 52,000 and 68,000, respectively. Weighted average common
shares outstanding for the six months ended December 31, 1995 and 1994,
were 5,317,000 and 5,585,000 and included common stock equivalents of
50,000 and 71,000, respectively. Shares issuable upon the assumed
conversion of preferred stock were excluded from the computation since
they were not dilutive during these six month periods.
Note 3: Stock Dividend
On December 7, 1995, the Company's Board of Directors declared a ten
percent stock divdend for holders of record on December 18, 1995 with a
payment date of January 2, 1996. Earnings per share and weighted average
common shares have been adjusted to include the ten percent stock dividend.
Outstanding shares at December 31, 1995 have also been adjusted.
Note 4: Supplemental Cash Flow Information
Cash paid for interest and income taxes during the six months ended
December 31, 1995 and 1994 are as follows:
1995 1994
Interest $ 81 $ 103
Income taxes 2,871 2,537
Note 5: Marketable Investment Securities
Investments at December 31, 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 December 31, 1995, short-term investments include $3,106 trading securities
and $5,222 held-to-maturity securities.
Note 6: Interest and Other Income
For Six Months For Three Months
Ended Ended
December 31 December 31
1995 1994 1995 1994
Dividends $ 9 $ 11 $ 9 $ 10
Interest on investments 750 760 371 390
Net gain (loss) on investments 57 (56) 52 25
Miscellaneous other
income (loss) 53 54 39 (16)
$ 869 $ 769 $ 471 $ 409
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 December 31,
1995 and June 30, 1995 cash and short-term investments totalled $9.9 million
and $11.3 million and working capital was $49.6 million and $48.3 million,
respectively. In addition, the Company had liquid long-term investments of
$11.8 million at December 31, 1995 and $12.8 million at June 30, 1995.
The total of cash and cash equivalents, short-term and long-term investments
was $21.7 million compared to $24.1 million at December 31, 1995 and June 30,
1995, respectively. The decrease of $2.4 million was mostly due to the
purchase of 131,000 shares of treasury stock during the six months ended
December 31, 1995 at a cost of $2.0 million.
The increase in receivables to $30.8 million at December 31, 1995 from $27.3
million at June 30, 1995 can be attributed to significantly higher sales during
the quarter and month ended December 31, 1995 compared to the same periods last
year. Prepaid expenses at December 31, 1995 included a payment of $.9 million
to our dividend disbursing agent to cover the cash dividend payable January 2,
1996. Accounts payable increased to $4.2 million at December 31, 1995 compared
to $2.6 million at June 30, 1995. The timing of payments for merchandise
purchases accounted for the increase. The decrease in income taxes payable
to $.9 million at December 31, 1995 compared to $1.7 million at June 30,
1995 related to the timing of estimated tax payments.
RESULTS OF OPERATIONS:
Net sales increased by 18% and 23% during the six and three months ended
December 31, 1995 compared to the same periods last year. Higher sales of
bulk pharmaceuticals, pharmaceutical intermediates and industrial chemicals
accounted for the significant increase in both periods.
Gross margins as a percentage of sales declined to 13.0% and 13.9% for the
six and three months ended December 31, 1995 from 14.2% and 15.4% for the
same periods last year. Sales of certain large volume products sold at less
than traditional margins accounted for most of the declines.
Selling, general and administrative expenses were only modestly higher in
both the six and three month periods ended December 31, 1995 compared to
December 31, 1994. The increases were mostly due to higher compensation and
legal costs somewhat offset by a reduction in the cost of liability insurance.
Interest income which is the predominant component of other income decreased
slightly in both comparable periods due to lower investment rates. The total
of net gains (losses) on sales of investments and miscellaneous other income
was $110,000 and $91,000 for the six and three months ended December 31, 1995
compared to ($2,000) and $9,000 for the same periods last year and accounted
for the total increases in other income.
The effective tax rates for the six and three month periods ranged from
38.0% to 38.8% and approximated the Company's traditional levels.
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 7, 1995, 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 4,445,437 4,919 27,367 -
Robert E. Parsont 4,445,437 4,919 27,367 -
Samuel I. Hendler 4,446,141 4,215 27,367 -
Anthony Baldi 4,445,469 4,887 27,367 -
Thomas Brunner 4,445,469 4,887 27,367 -
Donald Horowitz 4,445,469 4,887 27,367 -
Leonard Schwartz 4,445,181 5,175 27,367 -
Stephen M. Goldstein 4,442,703 7,653 27,367 -
Robert A. Wiesen 4,441,504 8,852 27,367 -
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 1, 1996 BY (signed) / by Donald Horowitz
Donald Horowitz, Chief Financial
Officer
DATE February 1, 1996 BY (signed) / by Robert E. Parsont
Robert E. Parsont, Chief Operating
Officer