-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SG3ESH3QrINyn8W5wXsHRMQn8SW6U2RS/v9lZutrG63BC5HfgFAhU7AgEnnLxdzo vKn9GEy1SY2zh8kmF7vD5A== 0000002034-97-000009.txt : 19971114 0000002034-97-000009.hdr.sgml : 19971114 ACCESSION NUMBER: 0000002034-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACETO CORP CENTRAL INDEX KEY: 0000002034 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 111720520 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-04217 FILM NUMBER: 97712533 BUSINESS ADDRESS: STREET 1: ONE HOLLOW LANE CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 5166276000 MAIL ADDRESS: STREET 1: ONE HOLLOW LANE CITY: LAKE SUCCESS STATE: NY ZIP: 11042 FORMER COMPANY: FORMER CONFORMED NAME: ACETO CHEMICAL CO INC DATE OF NAME CHANGE: 19851203 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1997 Commission file number 0-4217 ACETO CORPORATION (Exact name of registrant as specified in its charter) New York 11-1720520 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) One Hollow Lane, Lake Success, NY 11042 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 627-6000 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 (Title of Class) Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No____ Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the close of the period covered by this report. Common Stock - 4,486,386 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) Sept. 30 June 30 1997 1997 Assets Current assets: Cash and cash equivalents $ 2,210 $ 4,142 Short-term investments 10,425 10,013 Receivables: Trade, less allowance for doubtful accounts: (Sept. $227; June $219) 24,991 24,627 Other 1,368 1,363 26,359 25,990 Inventory 27,209 31,210 Prepaid expenses 299 240 Deferred income tax benefit 1,267 1,267 Property held for sale 507 512 Total current assets 68,276 73,374 Long-term investments 9,210 11,212 Long-term notes receivable 937 948 Property and equipment: Computers 708 674 Furniture and fixtures 576 573 Automobilies 160 178 1,444 1,425 Less accumulated depreciation 1,125 1,125 319 300 Other assets 304 311 Total assets $ 79,046 $ 86,145 See accompanying notes to consolidated financial statements. ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except par value) (Unaudited) Sept. 30 June 30 1997 1997 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Drafts and acceptances payable $ 544 $ 743 Current installments on long-term debt 500 250 Accounts payable 2,494 3,939 Accrued merchandise purchases 7,494 11,720 Accrued compensation 2,737 3,455 Accrued environmental remediation 1,380 1,387 Accrued income taxes 1,301 943 Other accrued expenses 1,994 2,010 Total current liabilities 18,444 24,447 Long-term debt, excluding current installments 250 500 Deferred income taxes 14 14 Redeemable preferred stock 750 750 Shareholders' equity: Common stock,$.01 par value per share; Authorized 10,000 shares; Issued: Sept., 6001 shares; June, 60 60 6,001 shares; Outstanding: Sept., 4,486 shares; June, 4,654 shares Capital in excess of par value 57,412 57,381 Retained earnings 22,613 21,079 80,085 78,520 Less: Cost of common stock held in treasury; Sept., 1,515 shares; June, 1,347 shares 20,497 18,086 Total shareholders' equity 59,588 60,434 Commitments and contingencies Total liabilities and shareholders' equity $ 79,046 $ 86,145 See accompanying notes to consolidated financial statements. ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Three Months Ended Sept. 30 1997 1996 Net sales $ 43,764 $ 39,184 Cost of sales 38,595 34,805 Gross profit 5,169 4,379 Selling, general and administrative expenses 3,139 3,864 Operating profit 2,030 515 Other income (expense): Interest expense (17) (29) Interest and other income 487 468 470 439 Income before income taxes 2,500 954 Provision for income taxes 967 443 Net income $ 1,533 $ 511 Net income per common and common equivalent share $ 0.33 $ 0.10 See accompanying notes to consolidated financial statements. ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended September 30 1997 1996 Operating activities: Net income $ 1,533 $ 511 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 45 40 Gain on sale of assets (8) - Effect of market value over original option price for options exercised 26 3 Increase in provision for doubtful accounts 8 25 Changes in operating assets and liabilities: Increase in investments - trading securities (159) (227) Increase in trade accounts receivable (372) (120) Increase in other receivables (5) (90) Decrease in inventories 4,001 5,922 Decrease (increase) in prepaid expenses (59) 37 Decrease in long-term notes receivable 11 5 Decrease in other assets 7 - Decrease in drafts and acceptances payable (199) (340) Increase in current installments on long-term debt 250 250 Decrease in accounts payable (1,445) (740) Decrease in accrued merchandise purchases (4,226) (2,396) Decrease in accrued compensation (718) (347) Increase(decrease) in accrued environmental remediation (7) 780 Increase in income taxes payable 358 108 Decrease in other accrued expenses (16) (120) Net cash provided by (used in) operating activities (975) 3,301 Investing activities: Purchases of investments - held-to-maturity (1,207) (4,686) Proceeds from investments - held-to-maturity 2,955 4,575 Purchases of property and equipment (60) (46) Proceeds from sale of property 10 - Net cash provided by (used in) investing activities 1,698 (157) Financing activities: Payments of long-term debt (250) (250) Proceeds from exercise of stock options 79 8 Payments for purchases of treasury stock (2,484) (2,212) Net cash used in financing activities (2,655) (2,454) Net increase(decrease) in cash and cash equivalents (1,932) 690 Cash and cash equivalents at beginning of period 4,142 5,380 Cash and cash equivalents at end of period $ 2,210 $ 6,070 See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per share amounts) Unaudited Note 1: The consolidated financial statements of Aceto Corporation and subsidiaries included herein have been prepared by the Company and reflects all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented. Interim results are not necessarily indicative of results which may be achieved for the full year. These financial statements do not include all disclosures associated with financial statements prepared in accordance with generally accepted accounting principles. Accordingly, these statements should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Form 10-K for the year ended June 30, 1997. Note 2: 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 for the period. Weighted average common shares outstanding for the quarters ended Sept. 30, 1997 and 1996, were 4,602,000 and 5,159,000 and included common stock equivalents of 95,000 and 53,000, respectively. Shares issuable upon the assumed conversion of preferred stock were excluded from the computation since they were not dilutive during these three month periods. Note 3: Supplemental Cash Flow Information Cash paid for interest and income taxes during the three months ended September 30, 1997 and 1996 was as follows: 1997 1996 Interest $ 17 $ 29 Income taxes 593 1,614 Note 4: Marketable Investment Securities Investments at September 30, 1997 and 1996 consisted of U.S. Treasury, corporate debt and equity securities, and municipal obligations. The Company classifies its investments as either trading or held-to-maturity securities. Trading securities are bought and held principally for the purpose of selling them in the short term. Held-to-maturity are those securities in which the Company has the ability and intent to hold until maturity. Trading securities are recorded at their fair market value and are classified as short-term investments. Unrealized gains and losses on trading securities are included in earnings. Dividend and interest income are recognized when earned. Held-to-maturity securities are recorded at cost and are adjusted for the amortization or accretion of premiums or discounts over the life of the related security. The cost of held-to-maturity securities approximates their fair market value. At September 30 and June 30, 1997, short-term investments included $3,462 and $3,303 trading securities, and $6,963 and $6,710 held-to-maturity securities, respectively. Note 5: Interest and Other Income For Three Months Ended September 30 1997 1996 Interest on investments $ 364 $ 415 Net gain (loss) on investments 74 (3) Miscellaneous other income 49 56 $ 487 $ 468 Note 6: It is the policy of the Company to accrue and charge against earnings environmental remediation 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, NJ. 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. During fiscal 1997 after additional testing was completed, the Company received a revised estimate from the Consultant. As a result, the Company reported an additional liability of $800 in the quarter ended September 30, 1996. At September 30, 1997 the remaining liability was $1,400. The Company believes it is possible that such amount may not be sufficient to cover future environmental remdiation but does not believe there will be a material adverse effect on the financial position or liquidity of the Company. However, depending upon 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES: The Company's ability to generate cash from operations is considered adequate to cover both short-term and long-term liquidity. In addition, the Company had cash and both short and long term investments which totaled $21.8 million and $25.4 million at September 30 and June 30, 1997, respectively. All of these investments are highly liquid. The Company also has sufficient lines of credit available should any additional funds be required. Working capital increased slightly, to $49.8 million at September 30, 1997 from $48.9 million at June 30, 1997. Inventory levels decreased significantly to $27.2 million at September 30, 1997 from $31.2 million at June 30, 1997, while accounts payable and accrued purchases payable decreased $5.7 million during the same period. These decreases were due primarily to the timing of merchandise purchases and were not the result of a change in the trend of business. The reduction of cash and cash equivalents was due primarily to the repurchase of 175,000 shares of the Company's common stock for $2.5 million. RESULTS OF OPERATIONS: Net sales increased 12% to $43.8 million in the three months ended September 30, 1997 compared with the same period in the prior year. Increased sales of dye and pigment intermediates, agricultural chemicals and pharmaceutical intermediates somewhat offset by a decline in sales to the generic pharmaceutical industry accounted for the increase. Volume increased by 23%; the aforementioned increase in sales of dye and pigment intermediates, which tend to be lower priced, accounted for the greater increase in volume than sales dollars. Gross profit margins increased to 11.8% from 11.2% for the three months ended September 30, 1997 compared with the same period last year. Increased sales of certain higher margin agricultural chemicals accounted for virtually all the increase. Selling, general and administrative expenses decreased $725,000, or 19% compared to the same period last year. Selling expenses and consulting fees both increased by $100,000 compared to the same period last year. This was more than offset by an $800,000 charge for environmental remediation, as well as a $225,000 settlement of a violation, both recorded during the quarter ended September 30, 1996. Other income increased to 487,000 for the three months ended September 30, 1997 from $468,000 for the same period last year. Gains on trading securities due to fair market valuation increased by $80,000 which was mostly offset by lower interest income due to lower levels of cash available for investment. The effective tax rate decreased to 38.7% for the three months ended September 30, 1997 from 46.4% for the same period last year. A significant portion of the aforementioned $225,000 settlement was not tax deductible which caused an unusually high tax rate during the quarter ended September 30, 1996. IMPACT OF NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board has issued Statement 128, "Earnings per Share" ("Statement 128"). Statement 128 establishes standards for computing and presenting earnings per share ("EPS"). The statement simplifies the standards for computing EPS and makes them comparable to international EPS standards. The provisions of Statement 128 are effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The statement does not permit early application and requires restatement of all prior period EPS data presented. Adoption of Statement 128 will not materially affect the Company's consolidated financial position, results of operations, or previously reported EPS data. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - Exhibit 27. Financial Data Schedule. (b) Reports on Form 8-K. During the three months ended September 30, 1997 the Company did not file any reports on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACETO CORPORATION DATE November 6, 1997 BY (signed) / by Donald Horowitz Donald Horowitz, Chief Financial Officer DATE November 6, 1997 BY (signed) / by Leonard S. Schwartz Leonard S. Schwartz,Chief Executive Officer EX-27 2
5 3-MOS JUN-30-1998 SEP-30-1997 2,210 10,425 25,218 227 27,209 68,276 1,444 1,125 79,046 18,444 250 60 0 750 59,528 79,046 43,764 43,764 38,595 38,595 0 0 17 2,500 967 1,533 0 0 0 1,533 .33 .33
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