Exhibit 99.1
[LOGO]
ACETO
FOR IMMEDIATE RELEASE
---------------------
ACETO CORPORATION ANNOUNCES SECOND QUARTER RESULTS
WITH SALES UP 12%
LAKE SUCCESS, NY - February 3, 2005 - Aceto Corporation (Nasdaq:ACET), a global
distributor of chemically-derived pharmaceuticals, biopharmaceuticals, specialty
chemicals and agrochemicals, today announced quarterly results of operations for
its fiscal 2005 second quarter and six months ended December 31, 2004.
For the second quarter, net sales increased 12% to $75.8 million, from $68.0
million in the second quarter of fiscal 2004. Gross profit increased 5% to $13.0
million from $12.3 million. Income from continuing operations was $2.5 million
or $0.10 per diluted share, compared to $3.2 million or $0.13 per diluted share
in the second quarter of last year. Net income was $2.0 million or $0.08 per
diluted share, versus $3.0 million or $0.12 per diluted share in the second
quarter of last year. Net income for the second quarter included losses from
discontinued operations of $0.5 million and $0.2 million in the 2005 and 2004
periods, respectively, net of income tax benefits, related to the Company's
planned sale of its Institutional Sanitary Supplies segment. The loss from
discontinued operations includes a non-cash impairment charge of $0.4 million,
net of income tax benefit, in the second quarter of fiscal 2005. (All per share
amounts have been adjusted for the January 10, 2005 3-for-2 stock split effected
in the form of a dividend.)
Net sales for the six months ended December 31, 2004 increased 12% to $155.2
million from $138.9 million in the same period of the prior year. Net income was
$5.3 million or $0.22 per diluted share for the first six months of fiscal 2005,
which included the aforementioned non-cash impairment charge of $0.4 million, as
compared to net income of $6.1 million or $0.25 per diluted share in the same
period of fiscal 2004.
Second quarter earnings from continuing operations were impacted by several
factors:
1) The Company experienced significant competitive pricing on two of its
important, mature, chemical-based APIs that it sells to European customers,
and accordingly lowered the price to maintain the business. This negatively
impacted gross profit by $0.4 million. The Company does not expect to
return to the higher pricing in the near-term.
2) Aceto encountered a production issue with a Chinese supplier regarding one
generic pharmaceutical product that the Company had not supplied since its
initial launch two years ago. As a result, Aceto's producer had
substantially scaled down production to a level to satisfy only the Chinese
market. The Company's customer had the opportunity to essentially re-launch
the product and placed a large order for delivery principally in the first
and second quarters of fiscal 2005, with a small amount to be delivered in
the third quarter. In scaling up production, delays unfortunately occurred.
Such delays are not uncommon in fine chemical and pharmaceutical
production, and Aceto was able to ship only a limited amount in its second
quarter. This impacted second quarter gross profit by $0.1 million. The
balance of the order will likely be delivered in the third fiscal quarter.
Aceto Corporation News Release Page 2
February 3, 2005
3) The Company incurred a bad debt expense of $0.2 million in the current
quarter as compared to a net recovery of $0.1 million in the comparable
period last year.
4) Selling, general and administrative expenses ("SG&A") increased to $9.6
million in the second quarter of 2005 compared to $8.4 million in the
second quarter of 2004. SG&A increased primarily due to the inclusion of
Aceto's Pharma Waldhof business, which was acquired in December 2003 and
added $0.6 million in expenses, a higher provision for bad debts as
discussed above and $0.3 million of costs associated with the Company's
Strategic Business Initiatives. The Company is taking steps to limit its
SG&A without adversely affecting ongoing and future business prospects.
Leonard S. Schwartz, Chairman, CEO and President of Aceto, stated, "While
certain factors outlined above are impacting the level of our current
profitability, we are not letting this diminish the efforts and energies that we
are putting into our Strategic Business Initiatives. We fully expect the success
of these initiatives will propel Aceto to a new, higher level in the future.
Most significant is our Biopharmaceutical Initiative, which now encompasses the
key components of the biopharmaceutical market: patented products for humans,
the emerging generic market, specialty vaccines for humans, and a segment of the
veterinary market. We have identified and are targeting certain products for
which regulatory pathways already exist. I will be presenting our
Biopharmaceutical Initiative in greater detail at the upcoming UBS Healthcare
Services Conference on February 16th in New York."
Mr. Schwartz continued, "We are also leveraging our successful trials of
Landfill Odorend. We launched a very aggressive marketing campaign in early
January immediately after completing our technical and regulatory support work.
It is aimed at landfills in our target market areas, namely major
waste-management companies and governmental agencies responsible for the
regulation of landfills. One major landfill in the Northeast with a significant
odor problem has agreed to conduct a commercial-scale trial. A technical report
about Landfill Odorend is available upon request."
"Our three other Strategic Business Initiatives (expansion of our Agrochemicals
business, organic color pigments, and development of business in Eastern Europe)
are all going well and already beginning to provide revenues to the Company.
"We acquired office space in a building under construction in Shanghai, which
will be completed next month. The new facility provides significant room for
growth in China to support our business and technical activities and at the same
time sends a strong signal to the Chinese market and government that Aceto
continues to expand and maintain its commitment to China. Our staff in China is
expected to increase from 24 to 28 people to support the growing business in the
region. All of our Strategic Business Initiatives will be discussed during our
conference call this morning."
Mr. Schwartz concluded, "Our strong financial position serves as a solid
foundation to support these initiatives. At December 31, 2004, we had working
capital of $91.7 million, no long-term debt and shareholders' equity of $106.8
million. In terms of financial guidance, due to continued competitive pricing
mentioned earlier and higher expenses related to new business initiatives, we
anticipate earnings of approximately $0.09 - $0.11 per diluted share in the
third quarter. Again, we remain very optimistic about the Company's long-term
business prospects."
Aceto Corporation News Release Page 3
February 3, 2005
CONFERENCE CALL
Leonard S. Schwartz, Chairman, CEO, and President, and Douglas Roth, CFO, will
conduct a conference call at 10:00 a.m. ET on Thursday, February 3, 2005.
Interested parties may participate in the call by dialing 888-787-0577
(706-679-3204 for international callers) - please call in 10 minutes before the
call is scheduled to begin. The conference call will also be broadcast live over
the Internet via the Investor Relations section (Conference Calls) of the
Company's website. To listen to the live call please go to the website at least
15 minutes early to register, download and install any necessary audio software.
The conference call will be archived on the Company's website, and a recorded
phone replay of the call will be available from 1:00 p.m. on Thursday, February
3, 2005 until 5:00 p.m. ET on Friday, February 4, 2005. Dial 800-642-1687
(706-645-9291 for international callers) and enter the code 3230586 for the
phone replay.
ABOUT ACETO
Aceto Corporation, which was incorporated in 1947, is a global leader in the
distribution and marketing of biopharmaceuticals, chemically-derived
pharmaceuticals, specialty chemicals and agrochemicals used principally as raw
materials in the agricultural, color, pharmaceutical, surface coating/ink and
general chemical consuming industries. With offices in ten countries, Aceto
Corporation distributes over 1,000 chemicals in these and other fields.
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements are
based on current expectations, estimates and projections made by management. The
Company intends for the forward-looking statements to be covered by the
safe-harbor provisions for forward-looking statements. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
or variations of such words are intended to identify such forward-looking
statements. The forward looking statements contained in this press release
include, but are not limited to, the Company's expectations regarding pricing of
certain of its chemical-based APIs, the effects of problems encountered by a
Chinese supplier in manufacturing a particular generic pharmaceutical product,
the Company's expectations regarding its China operations and the earnings
guidance for the Company's third quarter of fiscal 2005. All forward-looking
statements in this press release are made as of the date hereof, and the Company
assumes no obligation to update these forward-looking statements whether as a
result of new information, future events or otherwise, other than as required by
law. The forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth or implied
by any forward-looking statements. These uncertainties include, but are not
limited to, the mix of products sold and the profit margins thereon, order
cancellation or a reduction in orders from customers, competitive product
offerings and pricing actions, the availability and pricing of key raw
materials, dependence on key members of management, risk of entering into new
European markets, continued successful integration of acquisitions, economic and
political conditions in the United States and abroad, as well as other risks
detailed in the Company's SEC reports, including the Company's Form 10-K and
other filings. Copies of these filings are available at WWW.SEC.GOV.
CONTACT: -OR- INVESTOR RELATIONS COUNSEL:
Aceto Corporation The Equity Group Inc.
Leonard S. Schwartz, Chairman/CEO/President Loren G. Mortman
Douglas Roth, CFO (212) 836-9604, lmortman@equityny.com
(516) 627-6000 Lauren Barbera
www.aceto.com (212) 836-9610, lbarbera@equityny.com
www.theequitygroup.com
Aceto Corporation News Release Page 4
February 3, 2005
ACETO CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ --------------------------
2004 2003 2004 2003
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Net sales $ 75,808 $ 67,954 $ 155,167 $ 138,890
Cost of sales 62,810 55,632 128,996 114,986
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Gross profit 12,998 12,322 26,171 23,904
Gross profit % 17.15% 18.13% 16.87% 17.21%
Selling, general and
administrative expenses 9,565 8,380 18,380 15,672
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Operating income 3,433 3,942 7,791 8,232
Other income, net of
interest expense 286 463 815 820
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Income from continuing operations before income taxes 3,719 4,405 8,606 9,052
Provision for income taxes 1,218 1,245 2,467 2,717
---------- ---------- ---------- ----------
Income from continuing operations 2,501 3,160 6,139 6,335
Loss from discontinued operations, net of taxes (548) (197) (811) (253)
---------- ---------- ---------- ----------
Net income 1,953 2,963 5,328 6,082
========== ========== ========== ==========
Basic income per common share (a):
Income from continuing operations $ 0.10 $ 0.13 $ 0.25 $ 0.27
Loss from discontinued operations $ (0.02) $ (0.01) $ (0.03) $ (0.01)
Net income $ 0.08 $ 0.12 $ 0.22 $ 0.26
Diluted income per common share (a):
Income from continuing operations $ 0.10 $ 0.13 $ 0.25 $ 0.26
Loss from discontinued operations $ (0.02) $ (0.01) $ (0.03) $ (0.01)
Net income $ 0.08 $ 0.12 $ 0.22 $ 0.25
Weighted average shares outstanding (a):
Basic 24,163 23,783 24,145 23,732
Diluted 24,722 24,314 24,690 24,353
(a) The number of shares outstanding and the per-share information have been
adjusted for a 3-for-2 stock split, effected in the form of a dividend,
paid January 10, 2005.
Aceto Corporation News Release Page 5
February 3, 2005
ACETO CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Dec. 31, 2004 June 30, 2004
--------------- ---------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 27,139 $ 32,330
Short-term investments 4,311 888
Receivables:
Trade, less allowance for doubtful
accounts: December, $1,079; June $ 1,033 47,826 53,084
Other 2,073 1,504
--------------- ---------------
49,899 54,588
Inventory 50,148 41,784
Prepaid expenses and other current assets 1,257 1,165
Assets held for sale 2,656 -
Income taxes receivable - 606
Deferred income tax benefit, net 1,841 1,613
--------------- ---------------
Total current assets 137,251 132,974
Long-term notes receivable 696 747
Property and equipment 8,817 7,044
Less accumulated depreciation and amortization 3,739 4,390
--------------- ---------------
5,078 2,654
Goodwill 2,347 3,179
Intangible assets,net 3,852 3,701
Deferred income tax benefit, net 3,443 4,579
Other assets 2,517 1,863
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Total Assets $ 155,184 $ 149,697
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Drafts and acceptances payable $ 3,486 $ 4,610
Accounts payable 26,604 31,292
Note payable - related party 500 1,000
Accrued compensation 2,728 2,836
Accrued environmental remediation 1,246 1,326
Other accrued expenses 10,587 6,070
Liabilities related to assets held for sale 434 -
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Total current liabilities 45,585 47,134
Long-term liabilites 2,714 2,140
Minority interest 131 157
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Total liabilities 48,430 49,431
Shareholders' equity:
Common stock, $.01 par value:
(40,000 shares authorized; 25,644
shares issued; 24,220 and 24,118
shares outstanding at December 31,
2004 and June 30, 2004, respectively) 256 256
Capital in excess of par value 57,245 57,111
Retained earnings 59,998 56,490
Treasury stock, at cost:
(1,424 and 1,526 shares at December
31, 2004 and June 30, 2004, respectively) (14,118) (15,135)
Accumulated other comprehensive income 3,373 1,544
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Total shareholders' equity 106,754 100,266
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Total liabilities and shareholders' equity $ 155,184 $ 149,697
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