SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
Commission file number 0-4217
ACETO CORPORATION
_______________________________________________________
(Exact name of registrant as specified in its charter)
New York 11-1720520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
One Hollow Lane, Suite 201 11042
Lake Success, New York
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (516) 627-6000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange
on which registered
None
___________________________________________________________
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.01
_______________________________________________________
(Title of Class)
_______________________________________________________
(Title of Class)
[Cover page 1 of 2 pages]
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 by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the close of the
period covered by this report. 5,187,967
The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant as of
September 2, 1996 was $58,404,295.
Documents incorporated by reference: Registrant's
Proxy Statement for the annual meeting of Registrant's
shareholders to be held on December 5, 1996. (See Part III
herein).
[Cover page 2 of 2 pages]
PART I
Item 1. Business
Registrant, which was incorporated in 1947, is primarily engaged in
the marketing of fine and industrial chemicals used principally in the
agricultural, color producing, pharmaceutical and surface coating industries.
Registrant sells over 600 chemicals used in these and other fields.
Most of the chemicals distributed by Registrant are purchased abroad mainly
for sale throughout the United States; to a minor extent, some chemicals
are sold abroad.
During the fiscal year ended June 30, 1996 approximately 55% of
Registrant's purchases of chemicals came from Europe and approximately 30%
from Asia.
There were no significant changes in the kinds of
products sold by Registrant or in the markets served or
methods of distribution used by it.
The chemical industry is highly competitive. Most of
the chemicals that Registrant sells are in competition with
the products of chemical manufacturers, including the
largest chemical companies, who have substantially greater
resources than Registrant. However, in Registrant's
opinion, based on reports from its customers and suppliers,
its competitive position is enhanced by the following: the
chemical products that it offers are prime quality products,
many produced by major chemical companies, some of whom are
the largest chemical companies in Europe and Asia, which
products are offered by Registrant at attractive and
competitive prices. For the most part Registrant warehouses
the inventories of the chemicals which it sells at public
warehouses strategically located throughout the United
States, and can therefore fill orders rapidly from
inventory. Registrant has developed ready access to key
purchasing, research and technical executives of both its
customers and suppliers, and therefore one of its salient
competitive strengths is its ability to obtain quick
decisions, when necessary, because of such access. The
technical support and services that Registrant provides to
its customers is also a strength. Registrant does not
consider itself to be a significant factor in the chemical
industry taken as a whole.
During fiscal year ended June 30, 1996, no single
chemical product accounted for as much as 10% of
Registrant's consolidated revenues; and no sales to any one
customer accounted for as much as 10% of Registrant's sales.
During the fiscal years ended June 30, 1995 and 1994, one
bulk pharmaceutical chemical product accounted for 10% and
11% of Registrant's consolidated revenues, respectively; and
sales of said product to Baker Norton Pharmaceuticals, Inc.
accounted for 10% of Registrant's sales for each year.
During fiscal years ended June 30, 1996, 1995 and 1994,
one of Registrant's suppliers accounted for 25%, 20% and 19%
of total purchases, respectively.
Certain of the chemicals purchased by Registrant are
supplied to it on an exclusive basis, including the
aforementioned bulk pharmaceutical product. Based on its
relationships with its vendors, Registrant believes its
vendors will continue to supply such chemicals on an
exclusive basis.
Registrant holds no patents, trademarks, licenses,
franchises or concessions which it considers to be material
to its operations.
Sales of certain of Registrant's chemicals are higher
in the last six months of the fiscal year. For the most
part, Registrant warehouses the products that it sells and
fills orders from inventory. It, therefore, does not
consider information concerning backlogs to be applicable.
A subsidiary of Registrant markets certain agricultural
chemicals and contracts for the manufacture of other
agricultural chemicals which are subject to the Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA). FIFRA
requires that test data be provided to the Evironmental
Protection Agency (EPA) to register, obtain and maintain
approved labels for pesticide products. The EPA requires
that follow-on registrants of these products compensate the
initial registrant for the cost of producing the necessary
test data on a basis prescribed in the FIFRA regulations.
Follow-on registrants do not themselves generate or contract
for the data. However, when FIFRA requirements mandate the
generation of new test data to enable all registrants to
continue marketing a pesticide product, often both the
initial and follow-on registants establish a task force to
jointly undertake the testing effort. Registrant is
presently a member of two such task force groups.
Registrant estimates the cost of test data at the time it is
first required, which estimates are amortized over a period
of up to five years, updated annually; and are included in
cost of sales.
Liability under FIFRA would arise if Registrant failed
to compensate the initial registrant for the cost of
producing the necessary test data. Since Registrant markets
no pesticide products which are not registered, and
compensates initial registrants for the cost of producing
test data, it believes it does not subject itself to
contingent liabilities in such regard.
Compliance with Federal, State and local provisions
which have been enacted or adopted regulating the discharge
of materials into the environment will have no material
effect on the capital expenditures and competitive position
of Registrant. During fiscal 1993 Registrant announced the
closing of its manufacturing subsidiary located in
Carlstadt, New Jersey. At the same time an environmental
consultant was engaged by Registrant to determine the extent
of contamination on the site and develop a plan of
remediation. Based on the initial estimates from the
consultant a liability was established in fiscal 1993 for
$1,500,000. At June 30, 1996 the balance of the current
liability was $790,000. Registrant believes it is possible
that such amount may not be sufficient to cover future
environmental remediation but does not believe there will be
a material adverse effect on the consolidated financial
position or consolidated cash flows of Registrant. However,
depending on the amount and timing of any required
remediation over and above the liability established, it is
possible that Registrant's future results could be
materially affected in a particular reporting period. Other
than the aforementioned remediation, Registrant is not aware
of any material environmental liabilities.
At June 30, 1996, Registrant employed approximately 75
persons, none of whom were covered by a collective
bargaining agreement.
Item 2. Properties
Registrant's general headquarters and main sales office
occupy approximately 20,000 square feet of leased space in a
modern office building in Lake Success, New York. The
present lease expires in April 2001.
Registrant's former manufacturing facility is located
on an 11-acre parcel in Carlstadt, New Jersey, owned by the
Registrant. This parcel contains one building with
approximately 5,000 square feet of office space. The
property is held for sale.
Registrant owns three parcels in Long Island City, New
York totalling 15,000 square feet. Two parcels, totalling
7,500 square feet, are currently leased to tenants, and all
three parcels are held for sale.
On June 19, 1996, Registrant sold the Waterbury,
Connecticut parcel it owned, along with the operation of its
Pfaltz & Bauer, Inc. subsidiary. This parcel comprised six
acres and contained a 65,000 square foot brick building.
Item 3. Legal Proceedings.
(None)
Item 4. Submission of Matters to a Vote of Security Holders.
(None)
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Registrant's common stock is traded in the
National Market System of NASDAQ (Symbol: ACET) and was
quoted at prices* ranging as follows:
FISCAL 1996 HIGH LOW
First Quarter 14 3/8 13
Second Quarter 16 3/8 14 1/4
Third Quarter 17 1/2 15 1/4
Fourth Quarter 17 1/2 15
FISCAL 1995 HIGH LOW
First Quarter 14 1/2 12 1/2
Second Quarter 13 3/8 12
Third Quarter 14 3/8 12 1/4
Fourth Quarter 14 1/4 13
*The above prices represent high and low prices for actual
transactions.
A 10% stock dividend was paid in January 1996. The above
prices have been adjusted for this dividend, as appropriate.
Cash dividends of $0.18 per common share were paid in
January and June of the fiscal years ended June 30, 1996 and
June 30, 1995.
As of September 1, 1996, there were approximately 800
holders of record of the Registrant's Common Stock.
Item 6. Selected Financial Data
(In thousands, except per share amounts)
Years Ended June 30 1996 1995 1994 1993 1992
Net sales $183,163 $164,783 $149,847 $155,267 $146,654
Net income 7,154 7,756 6,994 1,899(1) 5,870
Net income per common 1.34 1.38 1.23 0.33(1) 1.05
and common
equivalent
share (2)
Total Assets 87,302 86,116 81,798 76,352 77,256
Working capital 50,907 48,289 43,606 41,998 38,270
Long-term debt 1,000 1,500 2,000 2,500 3,000
Redeemable preferred 750 821 821 821 957
stock
Shareholders' equity 63,161 60,143 56,846 51,901 50,756
Number of common 5,188 5,324 5,506 5,526 5,435
shares outstanding
at year end (2)
Book value per common $12.17 $ 11.30 $ 10.32 $ 9.39 $ 9.34
share (2)
Cash dividends $0.36 $ 0.36 $ 0.32 $ 0.28 $ 0.28
declared per
common share
(1) Includes an after-tax charge of $4.8 million or $0.85(2) per
share to cover plant shut-down costs.
(2) Adjusted for all subsequent stock dividends, as appropriate.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES.
Registrant's primary source of liquidity is cash
provided from operating activities; $12.4 million in fiscal
1996 and $4.1 million in fiscal 1995. Cash and short-term
investments totaled $16.0 million and $11.3 million and
working capital was $50.9 million and $48.3 million at June
30, 1996 and 1995, respectively. In addition, Registrant's
long-term investments totaled $12.7 million and $12.8
million for the same periods. These investments are highly
liquid and can be used for working capital if needed.
Registrant has sufficient lines of credit available with
banks, should any additional funds be required.
Registrant's stock buyback program, which was extended
through May 24, 1999, resulted in the repurchase of 171,000
shares for $2.6 million during fiscal 1996 and 211,000
shares for $3.1 million during fiscal 1995.
In June 1996 Registrant ceased operations and sold
certain assets of its subsidiary, Pfaltz & Bauer, Inc. This
closure, along with the prior closings of the Registrant's
two manufacturing facilities, has reduced the need for
capital expenditures.
The Registrant records environmental liabilities as a
charge to operations at such time that the amount can be
reasonably estimated. The provision for environmental
remediation can be affected by various factors, such as the
stage of site evaluation. The Company adjusts its accruals
as new remediation information becomes available for which
reasonable estimates can be made. At June 30, 1996, the
Company's environmental accrual of $790,000 related to its
closed manufacturing facility at the former Arsynco, Inc.
site. Registrant does not anticipate any significant
environmental expenditures at any other site.
Any funds required for additional stock buybacks,
capital expenditures or environmental remediation will be
funded by the aforementioned sources of liquidity.
RESULTS OF OPERATIONS.
Net sales increased to $183.2 million or 11% in fiscal
1996, compared to the prior year. Most of the increase was
due to higher sales of specialty chemical intermediates used
in the manufacture of pharmaceuticals, dietary supplements
and industrial chemicals. Although the volume of products
sold was only slightly higher and selling prices of
individual products were relatively stable, an increase in
the sales of higher priced products led to the higher sales
level. The increase in net sales to $164.8 million in
fiscal 1995 compared to $149.8 million in fiscal 1994 can be
attributed to stronger sales of dye intermediates,
industrial chemicals and agricultural products. Fiscal 1994
included approximately $4.0 million of sales from
Registrant's manufacturing facility which ceased operations
during the early part of the year. Excluding these
manufacturing sales, the increases from fiscal 1994 to
fiscal 1995 were 13% in net sales and 24% in total volume.
Once again, although selling prices remained relatively
stable, the mix of products sold accounted for the
difference in the sales and volume increases.
Gross profit margins decreased to 13.0% in fiscal 1996,
down from 15.1% in fiscal 1995 and 15.2% in fiscal 1994.
Increased competition in many of our business areas
accounted for most of the decline in fiscal 1996. In
addition, sales of a marginally profitable agricultural
herbicide were higher in fiscal 1996 compared to both fiscal
1995 and 1994 which contributed to the lower margin in
fiscal 1996. Finally, demand for certain dye intermediate
products slowed, creating lower prices and consequently
lower margins on existing inventory.
Selling, general and administrative expenses were 3%
lower in fiscal 1996 compared to fiscal 1995. Several
components increased, including compensation and selling
expenses, but were partially offset by lower insurance and
telecommunication costs. Also, fiscal 1995 included non-
recurring costs of $400,000 relating to the preparation of
Registrant's Pfaltz & Bauer subsidiary for sale. The
increase in expenses by $1.5 million or 12% in fiscal 1995
compared to fiscal 1994 can be attributed to several
factors. Compensation and related expenses were higher by
$700,000 and the previously mentioned costs related to
improvements in Registrant's Pfaltz & Bauer subsidiary
totaled $400,000. In addition, fiscal 1994 expenses were
reduced by a $600,000 insurance recovery for property claims
incurred in fiscal 1992.
Interest expense, which primarily relates to long-term
debt, was $157,000, $196,000 and $245,000 in fiscal 1996,
1995 and 1994, respectively. The interest on long-term debt
continues to decline as scheduled payments reduce the
principal balance.
Other income decreased to $1.5 million in fiscal 1996
compared to $1.8 million in fiscal 1995. Although other
income is predominantly interest on investments, this
component, due to slightly lower investment rates, accounted
for only $80,000 of the decrease. A loss of $247,000
realized on the sale of certain assets of Registrant's
subsidiary, Pfaltz & Bauer, Inc., was the major factor in
the $300,000 decrease. The increase in fiscal 1995 to $1.8
million from $1.1 million in fiscal 1994 was the result of
several factors. Fiscal 1994 included losses on sales of
real estate and investments of $270,000. In addition,
higher levels of cash available for investment for most of
fiscal 1995, invested at higher rates, resulted in nearly a
$400,000 increase in interest income. Finally, commission
income increased by approximately $100,000 adding to the
overall increase.
The effective tax rates were 39.4%, 38.5% and 36.0% in
fiscal 1996, 1995 and 1994, respectively. The rate in
fiscal 1994 benefited from certain plant shut-down costs
which were not entirely deductible for state tax purposes in
fiscal 1993, but were available to offset fiscal 1994 state
taxes. Fiscal 1996 and 1995 were not affected by any
unusual tax circumstances and approximate Registrant's
traditional effective tax rate.
IMPACT OF NEW
ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards
Board issued Statement No. 123, "Accounting for Stock-Based
Compensation," which must be adopted by Registrant in fiscal
1997. Registrant has elected not to implement the fair
value based accounting method for employee stock options,
but has elected to disclose, commencing in fiscal 1997, the
pro forma net income and earnings per share as if such
method had been used to account for stock-based compensation
cost as described in the statement.
Item 8. Financial Statements and Supplementary Data.
The financial statements required by this item 8 are set forth
at the end of this report. The following is the applicable
supplementary data:
QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share amounts)
The following is a summary of the unaudited quarterly results of
operations for the years ended June 30, 1996 and 1995.
Year ended June 30, 1996
Quarter Ended
Sept.30,1995 Dec.31,1995 Mar.31,1996 June 30,1996
Net sales $40,389 $47,294 $52,218 $43,261
Gross profit 4,760 6,595 6,853 5,666
Net income 1,162 2,165 2,293 1,535
Net income per common and
common equivalent share* 0.22 0.40 0.43 0.28
Year ended June 30, 1995
Quarter Ended
Sept.30,1994 Dec.31,1994 Mar.31,1995 June 30,1995
Net sales $36,043 $38,418 $46,509 $43,814
Gross profit 4,649 5,900 6,964 7,321
Net income 1,066 1,832 2,590 2,269
Net income per common and
common equivalent share* 0.19 0.32 0.46 0.41
* Adjusted for all subsequent stock dividends, as appropriate.
Cost of sales during interim periods is determined by gross profit
rates based upon the mix of products sold during each quarter.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Registrant's proxy statement relating to the annual
meeting of the Registrant's shareholders to be held on
December 5, 1996, which will be filed with the Commission
not later than 120 days after the end of the fiscal year
covered by this Form 10-K (the "Proxy Statement"), is hereby
incorporated by reference.
Based solely on its review of the copies of such forms
received by it, Registrant believes that during the fiscal
year covered by this Form 10-K all filing requirements
applicable to its officers, directors, and greater than ten-
percent beneficial owners were complied with.
Item 11. Executive Compensation.
Registrant's Proxy Statement is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Registrant's Proxy Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
Registrant's Proxy Statement is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) See Index to Consolidated Financial Statements and
Schedules included elsewhere herein.
(b) No reports on Form 8-K were filed during the three
months ended June 30, 1996.
(c) Exhibits
3(i) Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4(a)(iii)
to Registration Statement No. 2-70623 on Form S-8
("S-8 2-70623")).
3(ii) Certificate of Amendment dated November 21, 1985 to
Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3(ii) to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30,
1986 ("1986 10-K")).
3(iii) By-laws (incorporated by reference to Exhibit 3(ii) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1981).
3(iii)(a) By-laws (incorporated by reference to Exhibit 1 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991).
3(iii)(b) By-laws as presently in effect.
10(i) Note Agreement dated December 10, 1987 with the
Prudential Insurance Company of America (incorporated
by reference to Exhibit 10(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended
June 30, 1987).
10(ii) Profit Sharing Plan, as amended and restated
effective July 1, 1984 (incorporated by reference to
Exhibit 10(ii) to 1986 10-K).
10(ii)(a) Profit Sharing Plan, as amended and restated
effective July 1, 1989 (incorporated by reference to
Exhibit 10(iii)(a) to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995).
10(iv) Excess Benefit Plan, effective June 30, 1985
(incorporated by reference to Exhibit 10(iv)
to Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1985).
10(iv)(a) Supplemental Executive Retirement Plan,
effective June 30, 1985, as amended and
restated, effective July 1, 1992 (incorporated
by reference to Exhibit 10(iv)(a) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 ("1993 10-K")).
10(v) 1980 Stock Option Plan (incorporated by reference to
Item 4(a)(ii) of S-8 2-70623).
10(v)(a) 1980 Stock Option Plan (as amended and
restated effective as of September 19, 1990)
(incorporated by reference to exhibit
4(c) to Registration Statement No. 33-38679 on
Form S-8).
10(v)(b) Aceto Corporation Stock Option Plan (as Amended and
Restated effective as of September 19, 1990) (and as
further Amended effective June 9, 1992) (incorporated
by reference to Exhibit 10(v)(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1992).
10(vi) Lease between Aceto Corporation and M. Parisi
& Son Construction Co., Inc. for office
space at One Hollow Lane, Lake Success, New York
dated May 24, 1990 (incorporated by reference to
Exhibit 10(vi) to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1990).
10(vii) Arsynco, Inc. Severance Plan for employees
not covered by the Collective Bargaining
Agreement dated January 1993 (incorporated by
reference to Exhibit 10(vii) to 1993 10-K).
10(viii) Consulting agreement dated July 1, 1996
between Registrant and Robert E. Parsont.
21 Subsidiaries of Registrant (incorporated by
reference to Exhibit 21 to 1993 10-K).
24 Consent of KPMG Peat Marwick LLP.
Exhibit 3(iii)(b)
BY-LAWS OF ACETO CORPORATION
ARTICLE I
MEETING OF SHAREHOLDERS
Sec. 1. ANNUAL MEETINGS. Meetings of shareholders
shall be held at the principal office of the Corporation, or
at such place within or without the State of New York as the
Board of Directors shall authorize. The Annual Meeting of
the Shareholders shall be held within six (6) months from
the date of the close of the Corporation's fiscal year, at
such place and time as the Board of Directors shall
authorize. The meeting shall be for purpose of electing
officers and for the transaction of such business as may be
brought before it. Notice of such meeting shall be given by
the Secretary as required by law; by serving personally or
mailing not less than ten (10) days and not more than fifty
(50) days previous to such meeting, postage prepaid, a copy
of such notice, addressed to each shareholder entitled to
vote at such meeting. Any and all notices of such meeting
may be waived by any shareholder by written waiver or by
attendance thereat, whether in person, or by proxy.
Sec. 2. SPECIAL MEETINGS. Special meetings of the
shareholders may be called by the Board of Directors or by
the President, and shall be called by the Chairman of the
Board, the President or the Secretary at the request in
writing of a majority of the Board of Directors or at the
request in writing by shareholders owning a majority in
amount of the shares issued and outstanding. Such request
shall state the purposes of the proposed meeting. Business
transacted at a Special meeting shall be confined to the
purposes stated in the notice.
Sec. 3. NOTICE OF MEETING OF SHAREHOLDERS. Written
notice of the time, place, purpose or purposes of every
meeting of shareholders shall be given not less than ten
(10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail to each shareholder of
record entitled to vote at the meeting.
When a meeting is adjourned to another time or place,
it shall not be necessary to give notice of the adjourned
meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting only such
business is transacted as might have been transacted at the
original meeting. However, if after the adjournment the
Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled
to notice.
Sec. 4. FIXING THE RECORD DATE. For the purpose of
determining the shareholders entitled to notice or to vote
in any meeting of shareholders, or at any adjournment
thereof, or for the purpose of determining shareholders
entitled to receive payment of any dividend, or the
allotment of any right, or for the purpose of any other
action, the Board shall fix, in advance, a date as the
record date for such determination of shareholders. Such
date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting nor more than
sixty (60) days prior to any other action.
Sec. 5. VOTING LIST. The officer or agent having
charge of the stock transfer books for shares of the
Corporation shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or
any adjournment thereof.
Such list shall (i) be produced at the time and place
of the meeting, (ii) be subject to the inspection of any
shareholder during the whole time of the meeting, and (iii)
be prima facia evidence as who are the shareholders entitled
to examine such list or to vote at any meeting.
Sec. 6. PROXIES. Every shareholder entitled to vote
at a meeting of shareholders may authorize another person or
persons to act for such shareholder by proxy. Every proxy
shall be revocable at the pleasure of the shareholder
executing it, providing that the shareholder shall file
written notice of such revocation with the Secretary of the
meeting prior to the vote of such proxy.
Sec. 7. QUORUM. At any meeting of the shareholders,
the holders of one-third of the shares entitled to vote
thereat shall constitute a quorum for the transaction of any
business, provided that when a specified item or business is
required to be voted on by a class or series, voting as a
class, the holders of one-third of the shares of such class
or series shall constitute a quorum for the transaction of
such specified item of business. When a quorum is once
present to organize a meeting, it is not thereby broken by
the subsequent withdrawal of any shareholders. The
shareholders present may adjourn the meeting despite the
absence of a quorum.
Sec. 8. SELECTION OF INSPECTORS. (a) The person
presiding at a shareholders' meeting may, and on the request of
any shareholder entitled to vote thereat, shall appoint one or
more inspectors to act at the meeting or any adjournment thereof.
(b) The requirement for inspectors at any shareholders'
meeting is waived unless compliance therewith is requested
by a shareholder entitled to vote at such meeting.
(c) Each inspector before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting.
(d) No person shall be elected a Director at a meeting
at which he or she has served as an inspector.
Sec. 9. DUTIES OF INSPECTORS. The inspectors shall
determine the number of shares outstanding; the shares
represented at the meeting; the existence of a quorum; the
validity and effect of proxies; and shall receive votes or
consents; hear and determine all challenges and questions
arising with the right to vote; count and tabulate all votes
or consents; determine the result; and do such acts as are
proper to conduct the election or vote with fairness to all
shareholders.
Sec. 10. ELECTION OF DIRECTORS. Directors shall be
elected by a plurality of the votes cast at an election,
votes for Directors shall be non-cumulative.
Sec. 11. ORDER OF BUSINESS. The order of business at
all meetings of shareholders shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Designation of inspectors.
4. Reading of minutes of preceding meetings, unless
such reading is waived by the votes of a majority of
shareholders present at the meeting.
5. Reports of officers.
6. Election of directors.
7. Unfinished business.
8. New business.
ARTICLE II
DIRECTORS
Sec. 1. NUMBER. The affairs and business of this
Corporation shall be managed by a Board of nine (9)
directors, unless and until otherwise determined by vote of
a majority of the entire Board of Directors. The number of
Directors shall not be less than three (3). Directors need
not be shareholders.
Sec. 2. HOW ELECTED. At the annual meeting the
persons duly elected by the votes cast at the election held
thereat shall become Directors for the ensuing year.
Sec. 3. TERM OF OFFICE. The term of office of each of
the Directors shall be one year, and thereafter until his
successor has been elected.
Sec. 4. DUTIES OF DIRECTORS. The Board of Directors
shall have control and general management of the affairs and
business of the Corporation. Such Directors shall in all
cases act as a Board, regularly convened, by a majority and
they may adopt such rules and regulations for the conduct of
their meetings and the management of the Corporation, as
they may deem proper, not inconsistent with these By-Laws
and the Laws of the State of New York. The Board of
Directors, by resolution adopted by a majority of the entire
Board, may from time to time designate from among its
members and Executive Committee and such other committees,
and alternate members thereof, as they deem desirable, each
consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be
provided in much resolution. Each such committee shall
serve all the pleasure of the Board.
Sec. 5. DIRECTORS' MEETINGS. Regular meetings of the
Board of Directors shall be held immediately following the
annual meeting of the stockholders, and at such other times
as the Board of Directors may determine. Special meetings
of the Board of Directors may be called by the Chairman of
the Board or the President at any time, and shall be called
by the Chairman of the Board, the President or the Secretary
upon the written request of 2 Directors.
Sec. 6. NOTICE OF MEETINGS. Notice of meetings, other
than the regular annual meeting shall be given by service
upon each Director in person or by mailing to him or her at
his or her last known Post Office address, at least 10 days
before the date therein designated for such meeting,
including the day of mailing, or a written or printed notice
thereof specifying the time and place of such meeting, and
the business to be brought before the meeting and no
business other than that specified in such notice shall be
transacted at any special meeting. At any meeting at which
every member of the Board of Directors shall be present,
although held without notice, any business may be transacted
which might have been transacted if the meeting had been
duly called.
Sec. 7. QUORUM. At any meeting of the Board of
Directors, a majority of the Board shall constitute a quorum
for the transaction of business; but in the event of a
quorum not being present, a less number may adjourn the
meeting to some future time, not more than 30 days later.
Sec. 8. VOTING. At all meetings of the Board of
Directors, each Director is to have one vote, irrespective
of the number of shares of stock that he or she may hold.
Sec. 9. VACANCIES. Whenever a vacancy shall occur in
the Board of Directors by death, resignation, removal or
otherwise, the same shall be filled without undue delay by a
majority vote by ballot of the remaining members of the
Board at a Special Meeting which shall be called for that
purpose. Such election shall be held within sixty days
after the occurrence of such vacancy. The person so chosen
shall hold office until the next annual meeting or until his
or her successor shall have been chosen at a special meeting
of the stockholders.
Sec. 10. REMOVAL OF DIRECTORS. Any one of more of the
Directors may be removed either with or without cause, at
any time by a vote of the stockholders holding 51% of the
stock, at any special meeting called for the purpose, or at
the annual meeting.
Sec. 11. DIRECTOR ACTION BY CONFERENCE TELEPHONE. Any
one or more members of the Board of Directors or of any
Committee of the Board of Directors may participate in a
meeting of such Board or Committee by means of a conference
telephone or similar equipment which allows all persons
participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence
in person at such a meeting.
Sec. 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall indemnify any person, made a party to
an action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she,
his or her testator or intestate, is or was a director,
officer, or employee of the Corporation, against the
reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him or her in connection with the
defense of such action, or in connection with an appeal
therein, except in relation to matters as to which such
director, officer, or employee is adjudged to have breached
his or her duty to the Corporation. The Corporation shall
indemnify any person, made, or threatened to be made, a
party to an action or proceeding other than one by or in the
right of the Corporation to procure a judgment in its favor,
whether civil or criminal, including an action by or in the
right of any other corporation of any type or kind, domestic
or foreign, which any director, officer, or employee of the
Corporation served in any capacity at the request of the
Corporation, by reason of the fact that he or she, his or
her testator or intestate, was a director, officer, or
employee of the Corporation, or served such other
Corporation in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses,
including attorneys' fees actually and necessarily incurred
as a result of such action or proceeding, or any appeal
therein, if such director, officer, or employee acted, in
good faith, for a purpose which he or she reasonably
believed to be in the best interests of the Corporation and,
in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his or her conduct was
unlawful. The foregoing right of indemnification shall not
be exclusive of other rights to which he or she may be
entitled.
The Corporation is empowered to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director of
another corporation against any liability asserted against
him or her and incurred by him or her in any such capacity
or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her
against such liability under the provisions of section 722
and 717 of the Business Corporation Law.
ARTICLE III
OFFICERS
Sec. 1. NUMBER OF OFFICERS. The Officers of the
Corporation shall be a Chairman of the Board, a Chief
Executive Officer, a Vice Chairman, a President, a First
Vice-President, one or more Vice Presidents, a Treasurer,
and a Secretary, and any Officer may hold more than one
office, except the same person may not hold the offices of
President and Secretary.
The Board of Directors may appoint such other officers,
agents and employees as in their sole discretion they shall
deem advisable, who shall be subject to recall at all times
by a majority vote of the Board of Directors.
Sec. 2. ELECTION OF OFFICERS. The Officers of the
Corporation shall be elected annually by the Board of
Directors at its meeting held immediately after the annual
meeting of shareholders and shall hold office for one year
and until their successors have been duly elected and
qualified.
Sec. 3. REMOVAL OF OFFICERS. Any officer elected by
the Board of Directors may be removed, with or without
cause, and a successor elected, by vote of the Board of
Directors, regularly convened at a regular or special
meeting.
Sec. 4. CHAIRMAN OF THE BOARD. The Chairman of the
Board shall, if present, preside at all meetings of the
Board of Directors and at all meetings of shareholders.
Sec. 5. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall have general charge of the business, affairs
and property of the Corporation, and shall have general
supervision of its officers and agents. He may do and
perform all acts incident to the office of Chief Executive
Officer of the Corporation.
Sec. 6. VICE CHAIRMAN. The Vice Chairman shall in the
absence or inability to act of the Chairman of the Board, if
present, preside at all meetings of shareholders and at all
meetings of the Board of Directors.
Sec. 7. PRESIDENT. The President shall be the Chief
Operating Officer of the Corporation and shall have general
charge of the operations thereof, subject to the direction
of the Board of Directors, and shall have general
supervision over its operating officers and agents. He
shall, if present, preside at all meetings of the Board of
Directors or shareholders in the absence of the Chairman of
the Board and Vice Chairman. He may do and perform all acts
incident to the office of President. In the absence or
inability of the Chief Executive Officer to act, the
President shall perform the duties and exercise the powers
of the Chief Executive Officer.
Sec. 8. VICE-PRESIDENTS. In the absence of or
inability of the President to act, the First Vice-President,
and if there by no First Vice President, any Vice President
designated by the Board shall perform the duties and
exercise the powers of the President and shall perform such
other functions as the Board of Directors may from time to
time designate.
Sec. 9. SECRETARY. The Secretary shall: a) Keep the
minutes of the meetings of the Board of Directors and of the
shareholders in appropriate books; b) Give and serve all
notice of all meetings of the Corporation; c) Be custodian
of the records and of the seal of the Corporation and affix
the latter to such instruments or documents as may be
authorized by the Board of Directors; d) Do and perform all
other duties incident to the office of Secretary.
Sec. 10. TREASURER. The Treasurer shall: a) Have the
care and custody of and be responsible for all of the funds
and securities of the Corporation and deposit of funds in
the name and to the credit of the Corporation in such banks
and safe deposit vaults as the Directors may designate; b)
Exhibit at all reasonable times his books and accounts to
any Director or shareholder of the Corporation upon
application at the office of the Corporation during business
hours; c) Render a statement of the condition of the
finances of the Corporation at each stated meeting of the
Board of Directors if called upon to do so. He shall keep
at the office of the Corporation correct books of account as
the Board of Directors may require. He shall do and perform
all other duties incident to the office of Treasurer.
Sec. 11. DUTIES OF OFFICERS MAY BE DELEGATED. In the
case of the absence of any officer of the Corporation, or
for any reason the Board or Chief Executive Officer may deem
sufficient, the Board or Chief Executive Officer may, except
as otherwise provided in these By-Laws, delegate the powers
or duties of such officers to any other officer or any
Director for the time being.
Sec. 12. VACANCIES - HOW FILLED. Should any vacancy
in any office occur by death, resignation, inability of an
officer to act, or otherwise, the same shall be filled,
without undue delay, by the Board of Directors at its next
annual meeting, or at a special meeting called for that
purpose.
Sec. 13. COMPENSATION OF OFFICERS. The Officers shall
receive such salary or compensation as may from time to time
be fixed and determined by the Board of Directors. Any
Officer may, with the concurrence of the Board of Directors,
work less than full time, or serve as a consultant to the
Corporation, upon such terms and such salaries, other
compensation or consultant's fees as may from time to time
be fixed and determined by the Board of Directors.
ARTICLE IV
Sec. 1. SEAL. The seal of the Corporation shall be
circular in form and bear the name of the Corporation, and
the words "Seal 1947 New York". The Seal may be used by
causing it to be impressed directly on the instrument or
writing to be sealed, or upon adhesive substance affixed
thereto. The seal on the certificates for shares or on any
corporate obligation for the payment of money may be a
facsimile, engraved or printed.
ARTICLE V
CERTIFICATE OF STOCK
Sec. 1. ISSUE OF CERTIFICATES REPRESENTING SHARES.
The Corporation shall cause to be issued to each shareholder
one or more certificates, under the seal of the Corporation,
signed by the Chairman of the Board, (or President) and the
Treasurer (or Secretary) certifying the number of shares
owned by such shareholder in the Corporation.
Sec. 2. TRANSFER OF STOCK. (a) Transfer of shares of
the Corporation shall be made on the share records of the
corporation only by the holder of record thereof, in person
or by duly authorized attorney, upon surrender for
cancellation of the certificate or certificates representing
such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with
such proof of the authenticity of the signature and of
authority to transfer and of payment of transfer taxes as
the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the
holder of record of any share or shares as the absolute
owner thereof for all purposes and, accordingly, shall not
be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares on the part of any
other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by
law.
ARTICLE VI
DIVIDENDS
Sec. 1. WHEN DECLARED. The Board of Directors shall
by vote declare dividends from the surplus profits of the
Corporation whenever, in their opinion, the condition of the
Corporation's affairs will render it expedient for such
dividends to be declared.
ARTICLE VII
BILLS, NOTES, ETC.
Sec. 1. HOW MADE. All bills payable, notes, checks or
other negotiable instruments of the Corporation shall be
made in the name of the Corporation, and shall be signed by
such officer or officers as the Board of Directors shall
from time to time direct. No officer or agent of the
Corporation, either singly or jointly with others, shall
have the power to make any bill payable, note, check, draft
or warrant or other negotiable instrument, or endorse the
same in the name of the Corporation, or contract or cause to
be contracted any debt or liability in the name or in behalf
of the Corporation, except as herein expressly prescribed
and provided.
ARTICLE VIII
AMENDMENTS
Sec. 1. HOW AMENDED. These By-Laws may be amended,
altered or added to by the vote of the Board of Directors of
this Corporation at any regular meeting of said Board, or at
a special meeting of Directors called for that purpose
provided a quorum of the Directors is present at such
regular or special meeting. These By-Laws, and any
amendments thereto and new By-Laws added by the Directors
may be amended, altered or replaced by the stockholders at
any annual or special meeting of the stockholders. Whenever
any provision of these By-Laws or any amendment thereto
shall conflict with a provision in the Certificate of
Incorporation (and amendment thereto then in effect), the
applicable provisions in such certificate (so amended) shall
prevail and control.
Exhibit 10(viii)
CONSULTING AGREEMENT
AGREEMENT DATED AS OF 7/1/96
BETWEEN ACETO CORP, A NEW YORK CORPORATION
(THE "COMPANY") AND ROBERT E. PARSONT (THE "CONSULTANT")
Whereas, Mr. Parsont retired from his position as President
of the Company on June 30, 1996; and
Whereas, the Company desires to retain his services as
Consultant, as an independent contractor and adviser to the
Company, and Consultant is willing to act in such capacity,
on the terms and conditions set forth herein:
Now therefore, in consideration of the promises and of the
mutual agreements set forth herein, the parties hereto agree
as follows:
1. Retention of Consultant. the Company hereby engages
Consultant, and Consultant hereby accepts such engagement
for a period of eighteen (18) months commencing on the date
hereof (the "Consulting Term"), subject to extension by the
written agreement of the parties as set forth in Section 8
below.
2. Services. (a) During the Consulting Term Consultant
shall render consulting and advisory services to the senior
executives of the Company.
(i) Consultant shall make himself available to the
Company for his services for up to 60 business days (as
hereinafter defined) during the Consulting Term at the
facilities of Aceto located at the principal offices of the
Company in Lake Success, NY or at such other locations as
the Company and Consultant may so agree.
For the purposes hereof the term business day shall
mean a weekday during the business hours of 9am to 5pm or
any part thereof.
(ii) The Company may also utilize Consultant's services
by telephone and/or fax. Such time expended by Consultant
shall be recorded in a log and submitted to the Company
within 5 days after the end of each month, or as soon
thereafter as Consultant's personal travel schedule permits.
Such time will be credited to Consultant's service
obligation to Company, using a formula where 8 such hours
shall be the equivalent of one business day.
(iii) Consultant agrees to remain on the Aceto Board of
Directors, if elected, and serve as its Vice-Chairman, if
elected, for the entire Consulting Term. Consultant fully
intends to attend all Board meetings during the Consulting
Term, subject only to the provisions of (b) below.
(b) The Company will give due consideration to the
convenience of Consultant in respect of the times and places
at which the Company shall request the performance of
Consultant's services hereunder. The failure or inability
of Consultant, by reason of temporary illness, reasonable
vacation time or other cause beyond his control, to respond
to any request made by the Company for his consulting
services hereunder shall not be deemed to constitute a
default on his part in the performance of his obligation to
render such services.
(c) Consultant shall perform advisory and consulting
services hereunder as an independent contractor, and not as
an employee, of the Company.
3. Consultant Fee. (a) As compensation for Consultant's
services specified above, the Company shall pay to
consultant a fee of $192,600, in installments of $10,700 for
each month for 18 months during the term of this Agreement.
The fee payable hereunder shall be paid on the 15th
of each month, whether or not the services of Consultant
shall have been rendered during that month. So long as
Consultant shall be willing and able to render his services
for the Consulting Term in accordance with the provisions of
this Agreement, the Company shall be required to pay
Consultant.
(b) In the event that Consultant renders service for
more than 60 business days, as defined in sections 2(a)(i)
and 2(a)(ii) above, Company shall pay Consultant an
additional fee at the rate of $3,000 per day. Such fees
shall be paid within 5 business days following the end of
the month in which Consultant shall have rendered such
additional services.
(c) As a member of the Board of Directors who is not
an employee of the Company, the Company will pay Consultant
the fee it deems appropriate for service on the Board by an
outside Director. As of this date, such fee is $7,500.
4. Expense reimbursement. The Company will promptly
reimburse Consultant for all his travel expenses incurred in
connection with his services rendered pursuant to Sections
2(a)(1), 2(a)(ii) and 2(a)(iii) hereof and shall reimburse
Consultant for all other travel and other reasonable
expenses or disbursements incurred in rendering his
consulting services hereunder. For such purposes,
Consultant shall submit to the Company reports of such
expenses or disbursements. However, no reimbursement will
be paid for travel to the Company's offices, or facilities
in the Metropolitan NY-NJ area, if the Consultant resides
within 50 miles of the Company's office.
5. Confidentiality. The Consultant covenants and agrees
with the Company that he will not at any time, except in the
performance of his obligations to the Company hereunder or
with the prior written consent of the Company, directly or
indirectly, disclose any Confidential Information that he
has obtained or may obtain by reason of his past or present
association with the Company or any of its subsidiaries and
affiliates. The term "Confidential Information" means any
information concerning or referring in any way to the
business of the Company disclosed to or acquired by the
Consultant through or as a consequence of the Consultant's
past or present association with the company. For purposes
of this Agreement, Confidential Information consists of
information proprietary to the Company which is not
generally known to the public and which in the ordinary
course of business is maintained by the Company as
confidential. By way of example and without limitation,
Confidential Information consists of trade secrets, patents,
inventions, copyrights, techniques, designs, and other
technical information in any way concerning or referring to
scientific, technical or mechanical aspects of the Company's
products, concepts, processes, machines, engineering,
research and development. Confidential Information also
includes, without limitation, information in any way
concerning or referring to the Company's business methods,
business plans, forecasts and projections, operations,
organizational structure, finances, customers, pricing,
costing, marketing, purchasing, merchandising, employees or
their compensation, data processing, and all other
information designated by the Company as "confidential".
6. Non-Competition. The Consultant agrees that during the
term of this Agreement and for a period of two years
thereafter, the Consultant shall not: (i) conspire, plan or
otherwise agree to organize or develop any business or
entity that directly or indirectly competes with the
Company; (ii) directly or indirectly organize, own, manage,
operate or control any entity in direct or indirect
competition with the Company, provided, however, that
ownership by the Consultant of not more than 2% of the
outstanding stock of an entity in direct or indirect
competition with the Company shall not violate this clause;
(iii) divert or attempt to divert any business enjoyed or
solicited by the Company during the term of this Agreement;
(iv) solicit or attempt to solicit, directly or indirectly,
any of the Company's employees for any competitive service
or business; (v) seek or accept any employment or other work
with any company or other entity which competes with the
Company.
7. Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall
be delivered personally or sent by registered mail, postage
prepaid, if to the Company to Aceto Corporation, One Hollow
Lane, Suite 201, Lake Success, New York 11042, Attention:
Arnold Frankel, Chairman, and if to Consultant, to Robert E.
Parsont, 6 Easthaven Lane, White Plains, New York 10605, or
to such other address as any party shall specify to the
other party in writing.
8. Termination. a) Death. In the event of the death of
Consultant during the Consulting Term, this Agreement shall
terminate as of the date of his death, without further
liability of any party, except in respect of liabilities
incurred or accrued up to and including the date of such
termination.
b) Permanent Disability. In the event the Consultant
becomes physically or mentally disabled so that he is unable
to render the services required by this Agreement for a
period of six consecutive months, or for shorter periods
aggregating six months during any twelve month period, the
Company may at any time after the last day of the six
consecutive months of disability, or the day on which
shorter periods of disability equal an aggregate of six
months, terminate this Agreement by written notice to the
Consultant. Thereafter, there shall be no further liability
of any party, except in respect of liabilities incurred or
accrued up to an including the date of termination. The
Consultant will use his best efforts to cooperate with any
physician engaged by the Company to determine whether or not
a Permanent Disability exists.
c) Cause. The Company may terminte this Agreement for
"cause" by written notice to the Consultant. Thereafter,
there shall be no further liability of any party, except in
respect of liabilities incurred or accrued up to and
including the date of termination. Cause shall include,
without limitation, intentional misconduct, dishonesty and
commission of a crime involving moral turpitude.
9. Arbitration. Any dispute over the interpretation,
application or claimed violation of any term or provision of
this agreement may be submitted to arbitration upon the
written request of either party delivered to the other party
within ten (10) days of the date that the party seeking
arbitration knew or reasonably should have known of the
existence of the dispute. The arbitrator shall be selected
and the hearing shall be conducted under the auspices of and
pursuant to the rules of the American Arbitration
Association.
10. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of
New York.
11. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
personal representatives, successors and assigns; provided,
however, that this Agreement shall not be assignable by
either party without the prior written consent of the other
party.
12. Severability. If a court of competent jurisdiction
determines that any term or provision hereof is invalid or
unenforceable: (i) the remaining terms and provisions
hereof shall be unimpaired; and (ii) such court shall have
the authority to replace such invalid or unenforceable term
or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision.
13. Entire Agreement. This Agreement, contains the entire
agreement among the parties hereto with respect to the
matters set forth herein and therein, and supersedes and
revokes all prior oral or written agreements and
understandings with respect thereto. This Agreement may be
amended or terminated, and the terms and conditions hereof
may be waived, only by a written instrument signed by the
parties hereto.
ACETO CORPORATION
BY /s/ Arnold Frankel
Arnold Frankel, Chairman,
Board of Directors
CONSULTANT
/s/ Robert E. Parsont
Robert E. Parsont
Exhibit 24
Independent Auditors' Consent
The Board of Directors
Aceto Corporation:
We consent to incorporation by reference in the Registration
Statement (No. 33-38679) on Form S-8 of Aceto Corporation of
our report dated August 15, 1996, relating to the
consolidated balance sheets of Aceto Corporation and
subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and
cash flows and related financial statement schedule II for
each of the years in the three-year period ended June 30,
1996, which report appears in the June 30, 1996 annual
report on Form 10-K of Aceto Corporation.
KPMG PEAT MARWICK LLP
Jericho, New York
September 26, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 5 (d) 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)
By /s/Arnold J. Frankel /s/Donald Horowitz
Arnold J. Frankel Donald Horowitz
Chairman of the Board Secretary/Treasurer
(Chief Executive Officer) (Chief Financial Officer)
Date: September 26, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Signatures Title Date
/s/Arnold J. Frankel Chairman of the Board 9-26-96
Arnold J. Frankel and Director
(Chief Executive Officer)
/s/Robert E. Parsont Vice Chairman of the Board 9-26-96
Robert E. Parsont and Director
/s/Leonard S. Schwartz President and Director 9-26-96
Leonard S. Schwartz (Chief Operating Officer)
/s/Donald Horowitz Secretary/Treasurer 9-26-96
Donald Horowitz and Director
(Chief Financial Officer)
/s/Anthony Baldi Director 9-26-96
Anthony Baldi
/s/Thomas Brunner Director 9-26-96
Thomas Brunner
/s/Samuel I. Hendler Director 9-26-96
Samuel I. Hendler
ACETO CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
Independent Auditors' Report
Consolidated financial statements:
Consolidated balance sheets as of June 30, 1996 and 1995
Consolidated statements of income for the years ended
June 30, 1996, 1995 and 1994
Consolidated statements of shareholders' equity for the
years ended June 30, 1996, 1995 and 1994
Consolidated statements of cash flows for the years
ended June 30, 1996, 1995 and 1994
Notes to consolidated financial statements
Schedules:
II - Valuation and qualifying accounts
All other schedules are omitted because they are not
required or the information required is given in the
consolidated financial statements or notes thereto.
Independent Auditors' Report
The Board of Directors
Aceto Corporation:
We have audited the accompanying consolidated balance sheets
of the Aceto Corporation and subsidiaries as of June 30,
1996 and 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1996. In
connection with our audits of the consolidated financial
statements, we also have audited the financial statement
schedule II as listed in the accompanying index. These
consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Aceto Corporation and subsidiaries
at June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the
three-year period ended June 30, 1996, in conformity with
generally accepted accounting principles. Also in our
opinion, the related financial statement schedule II, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York
August 15, 1996
Aceto Corporation and Subsidiaries
Consolidated Balance Sheets
Years ended June 30, 1996 and 1995
Assets 1996 1995
(In thousands)
Current assets:
Cash and cash equivalents $ 5,380 $ 1,644
Short-term investments 10,595 9,669
Receivables:
Trade, less allowance for doubtful
accounts 1996,$207; 1995,$204 24,739 26,092
Other 590 1,161
25,329 27,253
Inventories 30,156 30,963
Prepaid expenses 104 227
Deferred income tax benefit (note 3) 1,125 1,542
Property held for sale 595 619
Total current assets 73,284 71,917
Long-term investments 12,737 12,813
Long-term notes receivable (note 9) 790 188
Property and equipment, at cost:
Land - 140
Buildings and building improvements - 886
Equipment 1,346 1,587
1,346 2,613
Less accumulated depreciation and
amortization 1,046 1,606
300 1,007
Other assets 191 191
Total Assets $87,302 $86,116
See accompanying notes to consolidated financial statements.
Aceto Corporation and Subsidiaries
Consolidated Balance Sheets
Years ended June 30, 1996 and 1995
Liabilities and Shareholders' Equity 1996 1995
(In thousands except par value)
Current liabilities:
Drafts and acceptances payable $ 1,002 $ 929
Current installments on long-term debt (note 2) 250 250
Accounts payable 3,047 2,580
Accrued merchandise purchases 11,202 11,355
Accrued compensation 3,330 3,593
Environmental liabilities (note 8) 790 985
Other accrued expenses 2,055 2,255
Income taxes payable 701 1,681
Total current liabilities 22,377 23,628
Long-term debt, excluding current
installments (note 2) 1,000 1,500
Deferred income taxes (note 3) 14 24
Redeemable preferred stock (note 4) 750 821
Commitments and contingencies (note 11)
Shareholders' equity (notes 4 and 6):
Common stock, $.01 par value per share;
Authorized 10,000 shares;
issued: 1996,6,001; 1995,5,530 60 55
outstanding: 1996,5,188; 1995,4,840
Capital in excess of par value 57,387 50,168
Retained earnings 16,646 18,747
74,093 68,970
Less:
Cost of common shares held in treasury;
1996,813 shares; 1995,690 shares 10,932 8,827
Total shareholders' equity 63,161 60,143
Total Liabilities and Shareholders' Equity $87,302 $86,116
See accompanying notes to consolidated financial statements.
Aceto Corporation and Subsidiaries
Consolidated Statements Of Income
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
(In thousands except per share amounts)
Net sales $183,163 $164,783 $149,847
Cost of sales 159,289 139,949 127,026
Gross profit 23,874 24,834 22,821
Selling, general and
administrative expenses 13,430 13,847 12,323
Provision for plant shut-down
costs (note 8) - - 395
Operating profit 10,444 10,987 10,103
Other income (deductions):
Interest expense (157) (196) (245)
Interest and other
income (note 7) 1,522 1,824 1,077
1,365 1,628 832
Income before income taxes 11,809 12,615 10,935
Income taxes (note 3):
Federal:
Current 3,603 4,016 2,601
Deferred 346 89 894
State and local:
Current 644 738 446
Deferred 62 16 -
4,655 4,859 3,941
Net Income $ 7,154 $ 7,756 $ 6,994
Net income per common and
common equivalent share: $ 1.34 $ 1.38 $ 1.23
See accompanying notes to consolidated financial statements.
Aceto Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended June 30, 1996, 1995 and 1994
1996 1995 1994
(In thousands)
Operating activities:
Net income $7,154 $7,756 $6,994
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 265 299 315
Write-down of property and equipment
to net realizable value -- -- 161
Loss on sale of assets 257 -- 145
Stock distribution to employees 3 1 12
Effect of market value over original
option price for options exercised 144 272 140
Increase (decrease) in allowance for
doubtful accounts 3 28 (10)
Decrease in deferred income taxes 407 104 894
Changes in operating assets and liabilities:
Decrease in investments-trading securities 2,965 1,044 -
Decrease (increase) in trade
accounts receivable 1,350 (2,540) (3,588)
Decrease (increase) in other receivables 576 (406) 131
Decrease (increase) in inventories 367 (4,350) (763)
Decrease (increase) in prepaid expenses 123 321 (393)
Decrease (increase) in notes receivable 28 25 (213)
Increase (decrease) in drafts &
acceptances payable 73 (421) 714
Increase (decrease) in accounts payable 467 (231) 746
Increase (decrease) in accrued
merchandise purchases (153) 2,510 982
Increase (decrease)in accrued compensation (263) 270 (91)
Decrease in accrued plant shut-down costs (195) (685) (1,175)
Increase (decrease) in other accrued
expenses (200) 222 (991)
Increase (decrease) in income taxes payable (980) (138) 800
Net cash provided by operating activities 12,391 4,081 4,810
Investing activities:
Purchases of investments - held-to-maturity (7,653) (7,083) (65,220)
Proceeds from investments - held-to-maturity 3,838 4,968 62,435
Purchases of equipment (77) (212) (119)
Proceeds from sale of equipment 92 -- 301
Net cash used in investing activities (3,800) (2,327) (2,603)
Financing activities:
Payments of long-term debt (500) (500) (500)
Payments of cash dividends (1,948) (1,851) (1,682)
Proceeds from exercise of stock options 223 258 274
Payments for purchases of treasury stock (2,630) (3,139) (793)
Net cash used in financing activities (4,855) (5,232) (2,701)
Net increase (decrease) in cash and
cash equivalents 3,736 (3,478) (494)
Cash and cash equivalents at beginning of year 1,644 5,122 5,616
Cash and cash equivalents at end of year $5,380 $1,644 $5,122
See accompanying notes to consolidated financial statements.
Aceto Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in thousands)
Capital in Common Stock
Common Stock Excess of Retained Held in
Issued Par Value Earnings Treasury Total
Balance at June 30, 1993 $55 $50,188 $ 7,530 $(5,872) $51,901
Net income - - 6,994 - 6,994
Stock distribution to
employees (750 shares) 3 - 9 12
Cash dividends:
Common stock - - (1,605) - (1,605)
Preferred stock - - (77) - (77)
Exercise of stock options
(38,000 shares) - (136) - 437 301
Federal income tax benefit
from 1980 stock option
plan - 113 - - 113
Purchase of treasury stock
(57,000 shares) - - - (793) (793)
Balance at June 30, 1994 55 50,168 12,842 (6,219) 56,846
Net income - - 7,756 - 7,756
Stock distribution to
employees (100 shares) - - - 1 1
Cash dividends:
Common stock - - (1,774) - (1,774)
Preferred stock - - (77) - (77)
Exercise of stock options
(45,000 shares) - (136) - 530 394
Federal income tax benefit
from 1980 stock option
plan - 136 - - 136
Purchase of treasury stock
(211,000 shares) - - - (3,139) (3,139)
Balance at June 30, 1995 55 50,168 18,747 (8,827) 60,143
Net income - - 7,154 - 7,154
Stock distribution to
employees (175 shares) - 1 - 2 3
Stock dividend paid
(471,000 shares) 5 7,303 (7,313) - (5)
Cash dividends:
Common stock - - (1,869) - (1,869)
Preferred stock - - (73) - (73)
Exercise of stock options
(36,000 shares) - (159) - 400 241
Federal income tax benefit
from 1980 stock option
plan - 126 - - 126
Purchase of treasury stock
(171,000 shares) - - - (2,630) (2,630)
Conversion of redeemable
preferred stock
(11,000 shares) - (52) - 123 71
Balance at June 30, 1996 $60 $57,387 $16,646 $(10,932) $63,161
See accompanying notes to consolidated financial statements.
Aceto Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended June 30, 1996, 1995 and 1994
(Dollars in thousands except amounts and par value per share)
(1) Summary of Significant Accounting Policies
Description of Business
The Company is primarily engaged in the marketing of fine
and industrial chemicals used principally in the
agricultural, color producing, pharmaceutical and surface
coating industries. Most of the chemicals distributed by
the Company are purchased abroad mainly for sale throughout
the United States; to a minor extent, some chemicals are
sold abroad.
Principles of Consolidation
The consolidated financial statements include the accounts
of Aceto Corporation and all subsidiaries. All significant
intercompany accounts and transactions are eliminated in
consolidation.
Revenue Recognition
Revenue is recognized at the time goods are sold and
shipped.
Inventories
Inventories consist of finished goods and are stated at the
lower of cost (principally specific identification) or
market (net realizable value). These goods are sold on a
specific identification basis.
Property and Equipment
The Company depreciates buildings and equipment using
principally the straight-line method. The range of
estimated useful lives used in depreciating buildings and
equipment is as follows:
Buildings and building improvements 18 to 20 years
Equipment 3 to 10 years
The costs of additions and improvements which significantly
extend the useful life of existing buildings and equipment
are capitalized. Maintenance and repair costs are charged
to expense as incurred. Effects on income arising from
sales or retirements are reflected in income, except for
trade-ins, in which case the cost of the newly acquired
asset is adjusted for any gain or loss.
Income Taxes
The Company and its wholly owned subsidiaries file a
consolidated Federal income tax return. Deferred tax assets
and liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those differences are expected to reverse.
Income Per Common and Common Equivalent 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 fiscal years ended June 30, 1996,
1995 and 1994 were 5,299,000, 5,545,000 and 5,605,000,
respectively, after giving retroactive effect to the 10%
stock dividend paid in January 1996 and included common
stock equivalents of 62,000, 63,000 and 82,000,
respectively. Shares issuable upon the assumed conversion
of preferred stock were excluded from the computation since
they were not materially dilutive during the three year
period.
Cash and Cash Equivalents
There were no cash equivalents at June 30, 1996. Cash
equivalents of $990 at June 30, 1995 consisted of commercial
paper. The Company considers all highly liquid debt
instruments with original maturities of three months or less
to be cash equivalents.
Marketable Investment Securities
Investments at June 30, 1996 and 1995 consisted of U.S.
Treasury, corporate debt and equity securities, and
municipal obligations. As of July 1, 1994, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investment in Debt
and Equity Securities, and the cumulative effect of the
change in the method of accounting for investments was
immaterial. Under Statement 115, the Company classifies its
debt and 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 short
term. Held-to-maturity are those securities in which the
Company has the ability and intent to hold until maturity.
Trading securities were recorded at their fair market value
of $2,866 and $5,831 at June 30, 1996 and 1995,
respectively, and were classified as short-term investments.
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 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
approximated their fair market value.
Held-to-maturity securities at June 30, 1996 and 1995
consisted of:
Due after
Due in one year
less than through
one year three years
1996 1995 1996 1995
U.S. Treasury securities 1,994 223 1,967 4,019
Corporate debt securities 4,763 3,015 10,770 8,794
Municipal obligations 972 600 --- ---
7,729 3,838 12,737 12,813
Fair Value of Financial Instruments
The carrying values of all financial instruments classified
as a current asset or current liability are deemed to
approximate fair value because of the short maturity of
these instruments. The fair value of foreign currency
contracts (used for hedging purposes) was estimated by
obtaining quotes from brokers and the difference between the
fair value and contract value was immaterial (see note 11c).
The difference between the fair value of long-term financial
instruments and their carrying value at June 30, 1996 was
not material. The fair value of the Company's long-term
debt and notes receivable were based upon current rates
offered for similar financial instruments to the Company.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results
could differ from those estimates.
(2) Long-term Debt
(a) Long-term debt outstanding at June 30, 1996 and 1995 was
as follows:
1996 1995
Note payable to the Prudential
Insurance Company of America
in equal semi-annual installments
of $250 maturing Jan. 1, 1999,
plus interest at 9.10% payable
quarterly. $1,250 $1,750
Less current installments 250 250
$1,000 $1,500
(b) The agreement underlying the long-term debt contains
certain defined restrictive covenants, including limitations
on corporate acquisitions and mergers and additional debt,
minimum working capital and debt/equity ratios and the
acquisition of the Company's stock.
(c) In addition to the long-term debt, the Company has
lines of credit available which provide for short-term loans
and/or commercial credits totaling $13,000 as of June 30,
1996. The lines of credit are with two banks in which
operating balances are maintained. The credit arrangements
do not: (i) restrict withdrawals of funds; (ii) have a
formal requirement relating to compensating balances for
either credit utilized or available; or (iii) provide for
commitment fees. However, there are informal arrangements
under which the Company maintains compensating balances.
The compensating balance arrangements at June 30, 1996 and
for the year then ended were satisfied by collected
balances.
There were no short-term loans outstanding at any time
during the fiscal years ended June 30, 1996, 1995 and 1994.
(3) Income Taxes
The tax effects of temporary differences that give rise to a
significant portion of the deferred tax assets and
liabilities at June 30, 1996 and 1995 are presented below:
1996 1995
Deferred tax assets:
Accrued environmental liabilities
not currently deductible $ 316 $ 394
Accrued compensation 450 596
Additional costs inventoried for
tax purposes pursuant to the
Tax Reform Act of 1986 234 331
Allowance for doubtful accounts
receivable 83 82
Other 42 139
Net deferred tax asset $1,125 $1,542
Deferred tax liabilities:
Differences in depreciation
and amortization of property
and equipment $ (14) $ (24)
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income
during the periods in which those temporary differences
become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this
assessment. In order to fully realize the deferred tax
asset, the Company will need to generate future taxable
income of approximately $2,900. Taxable income for the
years ended June 30, 1996 and 1995 was $12,840 and $12,168,
respectively. Based upon the level of historical taxable
income and projections for taxable income over the periods
which the deferred tax assets are deductible, management
believes it is more likely than not the Company will realize
the benefits of these deductible differences.
Reconciliation of the statutory Federal income tax rate and
the effective tax rate for the fiscal years ended June 30,
1996, 1995 and 1994 is as follows:
1996 1995 1994
Federal statutory tax rate 34.0% 34.0% 34.0%
State and local taxes, net
of Federal income tax
benefit 3.9 3.9 2.7
Other 1.5 0.6 (0.7)
Effective tax rate 39.4% 38.5% 36.0%
(4) Redeemable Preferred Stock
The Company has 2,000,000 authorized shares of redeemable
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. All of the outstanding preferred stock is
held by the Aceto Corporation Profit Sharing Plan.
Redeemable preferred stock outstanding at June 30, 1996 and
1995 consisted of the following:
1996 1995
Shares Par Value Shares Par Value
Second series - $ - 28,000 $ 71
Third series 100,000 250 100,000 250
Fourth series 40,000 100 40,000 100
Fifth series 40,000 100 40,000 100
Sixth series 40,000 100 40,000 100
Seventh series 40,000 100 40,000 100
Eighth series 40,000 100 40,000 100
$750 $821
(a) 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.
(b) On April 9, 1996 the Aceto Corporation Profit Sharing
Plan converted 28,000 shares of second series preferred
stock of Aceto Corporation into 11,000 shares of Aceto
Corporation common stock.
(5) Supplemental Cash Flow Information
Cash paid for interest and income taxes during the years
ended June 30, 1996, 1995 and 1994 were as follows:
1996 1995 1994
Interest $ 156 $ 196 $ 245
Income taxes 3,736 4,762 2,122
In June 1996, the Company received notes aggregating $635 in
connection with the sale of certain assets and real
property. (see note 9)
(6) Stock Option Plan
(a) Under the Company's 1980 stock option plan, the option
price is determined by the Board of Directors and can be
greater or less than the market value of the stock on the
date the options are granted. These options become
exercisable in whole or in part, as determined by the Board
of Directors, beginning on the date of the grant, and must
be exercised no later than five years after the date they
become exercisable.
Through June 30, 1996, options were granted to officers and
key employees who own less than 10% of the Company's stock.
At June 30, 1996, options to purchase 151,000 shares were
available for grant.
(b) The following tabulations summarize the shares of
common stock under option at June 30, 1996, 1995 and 1994 as
adjusted only for stock dividends, if any, occurring in that
year, and the activity with respect to options for the
respective years then ended.
No. of Option Price
Shares Per Share
Shares under option
and exercisable:
June 30, 1996 122,000 $6.89 - 14.25
June 30, 1995 110,000 2.27 - 12.50
June 30, 1994 110,000 2.27 - 12.50
Shares under option
but not exercisable:
June 30, 1996 106,000 $11.67
June 30, 1995 -- --
June 30, 1994 32,000 5.85
Options granted during
year ended:
June 30, 1996 146,000 $11.91
June 30, 1995 13,000 12.50
June 30, 1994 12,000 13.50
Options exercised during
year ended:
June 30, 1996 36,000 $2.07 - 14.25
June 30, 1995 45,000 2.27 - 12.50
June 30, 1994 38,000 2.24 - 12.50
At June 30, 1996, the average option price for the 228,000
option shares outstanding under the 1980 stock option plan
was $10.62 with expiration dates ranging from December 31,
1996 to December 31, 2004.
(c) Under the Company's 1980 stock option plan, upon
exercise of options, the excess of the option price over the
par value is credited to capital in excess of par value.
When treasury stock is issued upon the exercise of options,
the difference between the option price and the cost of
treasury stock is recorded in capital in excess of par
value.
Under the plan, during the period options become
exercisable, compensation is charged to operations for the
excess of fair market value over the option price at the date of grant.
Such charges to operations were $128, $86 and $89 in fiscal 1996,
1995 and 1994, respectively.
(7) Interest and Other Income
Interest and other income earned during the fiscal years
ended June 30, 1996, 1995 and 1994 was comprised of the
following:
1996 1995 1994
Dividends $ 14 $ 20 $ 34
Interest 1,469 1,547 1,156
Net gain (loss) on investments 44 (5) (125)
Misc. other income (loss) (5) 262 12
$1,522 $1,824 $1,077
(8) Environmental Liabilities
It is the policy of the Company to accrue and charge against
earnings environmental cleanup costs at the time it is
determined that a liability has been incurred and the amount
of that liability can be reasonably estimated. During
fiscal 1993 the Company announced the closing of its
manufacturing subsidiary located in Carlstadt, New Jersey.
At the same time an environmental consultant was engaged by
the Company to determine the extent of contamination on the
site and develop a plan of remediation. Based on the
initial estimates from the consultant a liability was
established in fiscal 1993 for $1,500. At June 30, 1996 the
balance of the current liability was $790. The Company
believes it is possible that such amount may not be
sufficient to cover future environmental remediation but
does not believe there will be a material adverse effect on
the consolidated financial position or consolidated cash
flows of the Company. However, depending on the amount and
timing of any required remediation over and above the
liability established, it is possible that the Company's
future results could be materially affected in a particular
reporting period. Other than the aforementioned
remediation, the Company is not aware of any material
environmental liabilities.
(9) Notes Receivable
In June 1996, the Company sold certain assets and real
property of its Pfaltz & Bauer, Inc. subsidiary for $726,
which included two notes receivable aggregating $635. One
note, in the amount of $460, matures in twenty-five years
and bears interest at 9.25%. The other note, in the amount
of $175, matures in seven years and bears interest at prime
plus 1%. The note for $460 is payable monthly and is
secured by a first mortgage on the real property. The note
for $175 is payable quarterly and is collateralized by a
security interest in the assets sold and contract rights.
In connection with this sale of assets, the Company recorded
a $247 loss.
Additionally, the Company has agreed to maintain $275 of
unencumbered funds for a period of seven years to secure the
purchaser's rights and the Company's obligations under the
terms of the agreement, including indemnification for
certain environmental matters, if any arise. The
unencumbered balance may be reduced to $100 if certain
environmental certifications are maintained. The payments
on the notes are also subject to the purchaser's right of
set off as provided in the agreement which are identical to
those affecting the unencumbered funds.
In addition to the aforementioned notes, the Company holds a
ten-year note in the amount of $256 secured by a first
mortgage on the real property it sold in September 1993.
This note is payable monthly and bears interest at prime
plus 3% for the first three years and prime plus 2 1/2% for
the balance of the term.
(10) Profit-Sharing Plans
The Company has profit-sharing plans in which employees of
the parent company and subsidiaries are eligible to
participate. The Company's annual contribution per
employee, which is at management's discretion, is based on a
percentage of compensation paid. The Company's provisions
for profit sharing contribution amounted to $664, $668 and
$534 in fiscal 1996, 1995 and 1994, respectively.
(11) Commitments and Contingencies
(a) A subsidiary of the Company markets certain agricultural
chemicals which are subject to the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA). FIFRA requires that
test data be provided to the Environmental Protection Agency
(EPA) to register, obtain and maintain approved labels for
pesticide products. The EPA requires that follow-on
registrants of these products compensate the initial
registrant for the cost of producing the necessary test data
on a basis prescribed in the FIFRA regulations. Follow-on
registrants do not themselves generate or contract for the
data. However, when FIFRA requirements mandate the
generation of new test data to enable all registrant's to
continue marketing a pesticide product, often both the
initial and follow-on registrants establish a task force to
jointly undertake the testing effort. The Company is
presently a member of two such task force groups. The
Company estimates the cost of test data at the time it is
first required, which estimates are amortized over a period
of up to five years, updated annually; and are included in
cost of sales.
Liability under FIFRA would arise if the Company marketed
pesticide products not registered under FIFRA, or failed to
compensate the initial registrant for the cost of producing
the necessary test data. Since the Company markets no
pesticide products which are not registered, and compensates
initial registrants for the cost of producing test data, it
believes it does not subject itself to contingent
liabilities in such regard.
(b) The Company and its subsidiaries are subject to various
claims which have arisen in the course of their business.
While any claim has an element of uncertainty, it is the
opinion of management that the ultimate outcome of such
matters will not have a material effect, if any, upon the
Company's financial condition.
(c) The Company enters into foreign exchange contracts
entirely as hedges relating to foreign inventory purchase
commitments. These financial instruments are designed to
minimize exposure and reduce risk from exchange rate
fluctuations in the regular course of business. Gains and
losses on the foreign exchange contracts are reported as a
component of the related transaction. At June 30, 1996 the
Company had contracts maturing at various dates through June
6, 1997 to purchase approximately $16,500 in foreign currencies
(primarily British Pounds, Belgian Francs and Japanese Yen).
(d) At June 30, 1996, the Company had non-negotiated letters
of credit of approximately $4,000.
(e) The Company currently leases an office facility under an
operating lease expiring April 2001. The minimum annual
payment under this lease is as follows:
Fiscal year
ending
June 30 Amount
1997 $507
1998 507
1999 507
2000 507
2001 402
Total rental expense relating to the current office facility
amounted to approximately $470 for each of the years in the
three-year period ended June 30, 1996. The Company has no
capitalized leases as defined by Financial Accounting
Standards Board Statement No. 13.
(12) Impact of New Accounting Standards
In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation", which must be adopted by the Company in
fiscal 1997. The Company has elected not to implement the
fair value based accounting method for employee stock
options, but has elected to disclose, commencing in fiscal
1997, the pro forma net income and earnings per share as if
such method had been used to account for stock-based
compensation cost as described in the Statement.
(13) Segment Information
The Company's operations, which principally consist of the
marketing of chemicals, are considered to be one industry
segment as defined by Financial Accounting Standards Board
Statement No. 14. One of the Company's customers accounted
for 10% of revenues in fiscal 1995 and 11% in fiscal 1994.
None of the Company's customers accounted for as much as 10%
of revenues in fiscal 1996. One of the Company's suppliers
accounted for 25%, 20% and 19% of total purchases in fiscal
1996, 1995 and 1994, respectively.
Schedule II
ACETO CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended June 30, 1996, 1995 and 1994
Balance at Charged to Balance
beginning costs and Deduc- at end
Description of year expenses tions of year
Year ended June 30, 1996:
Allowance for doubtful
accounts $ 204,366 95,509 92,509(a) $ 207,366
Year ended June 30, 1995:
Allowance for doubtful
accounts $ 176,366 111,191 83,191(a) $ 204,366
Year ended June 30, 1994:
Allowance for doubtful
accounts $ 186,366 91,718 101,718(a) $ 176,366
(a) Specific accounts written off as uncollectible.