-----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, AeTjeFQw7u5kNIr75koBg4237Ws+B0hVVMVa1qsUCkEMcI+cA+gSSaErZOGZooDy u1s3dBS6JHHTmMPo+B1ATQ== 0000002034-98-000002.txt : 19980514 0000002034-98-000002.hdr.sgml : 19980514 ACCESSION NUMBER: 0000002034-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: 98618277 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 March 31, 1998 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 - 6,742,118 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) Mar. 31st June 30th 1998 1997 ASSETS Current assets: Cash and cash equivalents $ 4,542 $ 4,142 Short-term investments 11,178 10,013 Receivables: Trade, less allowance for doubtful accounts: (Mar. $298; June $219) 29,943 24,627 Other 347 1,363 30,290 25,990 Inventories 27,653 31,210 Prepaid expenses 258 240 Deferred income tax benefit 1,267 1,267 Property held for sale 498 512 Total current assets 75,686 73,374 Long-term investments 5,993 11,212 Long-term notes receivable 915 948 Property and equipment: Computers 809 674 Furniture and fixtures 588 573 Automobiles 176 178 1,573 1,425 Less accumulated depreciation 1,190 1,125 383 300 Other assets 289 311 Total assets $ 83,266 $ 86,145 See accompanying notes to condensed consolidated financial statements. ACETO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except par value) (Unaudited) Mar. 31st June 30th 1998 1997 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Drafts and acceptances payable $ 537 $ 743 Current installments on long-term debt 500 250 Accounts payable 3,507 3,939 Accrued merchandise purchases 8,261 11,720 Accrued compensation 2,481 3,455 Accrued environmental remediation 1,378 1,387 Accrued income taxes 1,062 943 Other accrued expenses 1,885 2,010 Total current liabilities 19,611 24,447 Long-term debt, excluding current installments - 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: Mar., 9,001 shares; June, 90 60 6,001 shares; outstanding: Mar., 6,742 shares; June, 4,654 shares Capital in excess of par value 57,533 57,381 Retained earnings 25,859 21,079 83,482 78,520 Less: Cost of common stock held in treasury; Mar., 2,259 shares; June, 1,347 shares 20,591 18,086 Total shareholders' equity 62,891 60,434 Commitments and contingencies Total liabilities and shareholders' equity $ 83,266 $ 86,145 See accompanying notes to condensed consolidated financial statements. ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) For Nine Months Ended March 31st 1998 1997 Net sales $134,889 $122,396 Cost of sales 118,501 107,273 Gross profit 16,388 15,123 Selling, general and administrative expenses 9,286 9,806 Operating profit 7,102 5,317 Other income (expense): Interest expense (47) (84) Interest and other income 1,516 1,728 1,469 1,644 Income before income taxes 8,571 6,961 Provision for income taxes 2,952 2,713 Net income $ 5,619 $ 4,248 Net income per common share: Basic $ 0.83 $ 0.56 Diluted 0.80 0.56 Weighted average shares outstanding: Basic 6,735 7,482 Diluted 6,983 7,651 See accompanying notes to condensed consolidated financial statements. ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) For Three Months Ended March 31st 1998 1997 Net sales $ 50,453 $ 47,361 Cost of sales 44,763 41,549 Gross profit 5,690 5,812 Selling, general and administrative expenses 3,172 3,192 Operating profit 2,518 2,620 Other income (expense): Interest expense (12) (26) Interest and other income 580 712 568 686 Income before income taxes 3,086 3,306 Provision for income taxes 974 1,231 Net income $ 2,112 $ 2,075 Net income per common share: Basic $ 0.31 $ 0.28 Diluted 0.30 0.28 Weighted average shares outstanding Basic 6,731 7,346 Diluted 6,989 7,513 See accompanying notes to condensed consolidated financial statements. ACETO CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended March 31st. 1998 1997 Operating activities: Net income $ 5,619 $ 4,248 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 149 130 Gain on sale of assets - (198) Effect of market value over original option price for options exercised 204 33 Provision for doubtful accounts 79 43 Changes in operating assets and liabilities: Decrease (increase) in investments - trading securities (91) 50 Increase in trade accounts receivable (5,395) (4,028) Decrease (increase) in other receivables 1,016 (1,293) Decrease in inventories 3,557 3,797 Decrease (increase) in prepaid expenses (18) 47 Decrease (increase)in long-term notes receivable 33 (151) Decrease in other assets 22 - Decrease in deferred tax benefit - 206 Decrease in drafts and acceptances payable (206) (594) Increase in current installments on long-term debt 250 250 Increase (decrease) in accounts payable (432) 3,548 Increase (decrease )in accrued merchandise purchases (3,459) 1,026 Increase (decrease) in accrued compensation (974) 31 Increase (decrease)in environmental remediation (9) 634 Increase in income taxes payable 119 89 Decrease in other accrued expenses (125) (327) Net cash provided by operating activities 339 7,541 Investing activities: Purchases of investments - held-to-maturity 5,828 (5,802) Proceeds from investments - held-to-maturity (1,683) 5,619 Purchases of property and equipment (218) (78) Proceeds from sale of property - 258 Net cash provided by (used in) investing activities 3,927 (3) Financing activities: Payments of long-term debt (500) (500) Payments of cash dividends (840) (922) Proceeds from exercise of stock options 390 97 Payments for purchases of treasury stock (2,916) (4,835) Net cash used in financing activities (3,866) (6,160) Net increase in cash and cash equivalents 400 1,378 Cash and cash equivalents at beginning of period 4,142 5,380 Cash and cash equivalents at end of period $ 4,542 $ 6,758 See accompanying notes to condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands except amounts and par value per share) Note 1: The consolidated financial statements of Aceto Corporation and subsidiaries included herein have been prepared by the Company and reflect 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: Common Stock Split On March 18, 1998, the Board of Directors authorized a three for two stock split effected in the form of a stock dividend, which was payable April 13, 1998, to shareholders of record on March 30, 1998. In accounting for the stock split, an amount equal to the par value of the common shares issued was transferred from additional paid in capital to common stock. This transfer has been reflected on the consolidated balance sheet as of March 31, 1998. The share amounts presented in the consolidated balance sheet as of June 30, 1997 reflect the actual share amounts issued and outstanding at June 30, 1997. Par value remains unchanged at $.01 as well as the authorized shares of 10,000. All historical weighted average share and net income per share amounts have been restated to reflect the stock split. Note 3: Supplemental Cash Flow Information Cash paid for interest and income taxes during the nine months ended March 31, 1998 and 1997 were as follows: 1998 1997 Interest $ 47 $ 85 Income taxes 2,704 3,684 Note 4: Marketable Investment Securities Investments at March 31, 1998 and 1997 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 approximated their fair market value. Short-term investments consisted of $3,394 and $3,303 trading securities and $7,784 and $6,710 held-to-maturity securities at March 31, 1998 and June 30, 1997, respectively. Note 5: Interest and Other Income For Nine Months For Three Months Ended Ended March 31 March 31 1998 1997 1998 1997 Interest on investments $1,006 $1,281 $ 325 $ 443 Net gain on investments 107 66 23 19 Miscellaneous other income 403 381 232 250 $1,516 $1,728 $ 580 $ 712 Note 6: Environmental Remediation 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 March 31, 1998 the remaining liability was $1,378. 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. Note 7: Net Earnings per Common Share Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." In accordance with the requirements of SFAS No. 128, net earnings per common share amounts ("basic EPS") were computed by dividing net earnings after deducting preferred stock dividends on the Company's $2.50 cumulative redeemable preferred stock by the weighted average number of common shares outstanding and excluded any potential dilution. Net earnings per common share amounts -- assuming dilution ("diluted EPS") were computed by reflecting potential dilution from the exercise of stock options and conversion of preferred stock. SFAS No. 128 requires the presentation of both basic EPS and diluted EPS on the face of the income statement. Earnings per share amounts for the same prior-year periods have been restated to conform with the provisions of SFAS No. 128. A reconciliation between the numerators and denominators of the basic and diluted EPS computation for net earnings was as follows: NINE MONTHS ENDED MARCH 31, 1998 INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNTS Net earnings $5,619 Preferred stock dividends (35) BASIC EPS Net earnings attributable to common stock 5,584 6,735 $0.83 EFFECT OF DILUTIVE SECURITIES Stock options - 109 Convertible preferred stock 35 139 DILUTED EPS Net earnings attributable to common stock, assumed option exercises and conversion of preferred stock $5,619 6,983 $0.80 THREE MONTHS ENDED MARCH 31, 1998 INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNTS Net earnings $2,112 Preferred stock dividends - BASIC EPS Net earnings attributable to common stock 2,112 6,731 $0.31 EFFECT OF DILUTIVE SECURITIES Stock options - 119 Convertible preferred stock - 139 DILUTED EPS Net earnings attributable to common stock, assumed option exercises and conversion of preferred stock $2,112 6,989 $0.30 NINE MONTHS ENDED MARCH 31, 1997 INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNTS Net earnings $4,248 Preferred stock dividends (35) BASIC EPS Net earnings attributable to common stock 4,213 7,482 $0.56 EFFECT OF DILUTIVE SECURITIES Stock options - 30 Convertible preferred stock 35 139 DILUTED EPS Net earnings attributable to common stock, assumed option exercises and conversion of preferred stock $4,248 7,651 $0.56 THREE MONTHS ENDED MARCH 31, 1997 INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNTS Net earnings $2,075 Preferred stock dividends - BASIC EPS Net earnings attributable to common stock 2,075 7,346 $0.28 EFFECT OF DILUTIVE SECURITIES Stock options - 27 Convertible preferred stock - 139 DILUTED EPS Net earnings attributable to common stock, assumed option exercises and conversion of preferred stock $2,075 7,512 $0.28 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- term and long-term investments which totaled $21.7 million and $25.4 million at March 31, 1998 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. Some components of working capital had significant changes during the nine month period. Inventory decreased $3.5 million to $27.7 millon at March 31, 1998 from $31.2 million at June 30, 1997. This resulted in a decrease of $4.1 million in the total of drafts and acceptances, accounts payable and accrued purchases payable 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. Receivables increased by $4.3 million to $30.3 million at March 31, 1998 from $26.0 million at June 30, 1997 due to higher sales in March 1998 compared to June 1997. Cash and cash equivalents, short-term investments and long-term investments decreased by a total of $3.7 million to $21.7 million at March 31, 1998 from $25.4 million at June 30, 1997. The decrease was due primarily to the repurchase of 198,000 shares of the Company's common stock (prior to the three for two stock split) for $2.9 million. Accrued compensation was $2.5 million at March 31, 1998 compared to $3.5 million at June 30, 1997. The retirement of three senior executives on June 30, 1997 was the primary reason for the decrease. The Company announced a 3 for 2 stock split on March 18, 1998 with a record date of March 30, 1998, paid April 13, 1998. RESULTS OF OPERATIONS: Net sales increased by 10.2% and 6.5% for the nine and three months ended March 31, 1998, respectively, compared to the same periods last year. For the nine months, increases in sales of color intermediates and non-generic pharmaceutical products, especially a new product introduced in fiscal 1997, somewhat offset by decreases in sales of agrochemicals and bulk generic pharmaceuticals, accounted for the increase. For the three months, the significant sales of the aforementioned new pharmaceutical product, tempered by a decline in agrochemicals sales, resulted in the increase. Volume increased by 15.9% and 3.3%, respectively, for the same periods over the prior year. Price erosion in some of our product lines, especially color intermediates and certain industrial chemicals, offset by increased sales of the higher-priced pharmaceutical product previously mentioned, accounted for the greater increase in volume than sales for the nine months. For the three months, the slight difference between the sales increase and the volume increase can be attributed to the mix of products sold during the quarter. Gross margins as a percentage of sales decreased to 12.1% and 11.3% for the nine and three months ended March 31, 1998 compared with 12.4% and 12.3% for the same periods in the prior year. The decreases can be attributed to increased freight and warehousing costs, in addition to the significant sales of the pharmaceutical product referred to earlier, which is lower margin business. The greater decrease for the three months is because sales of the aforementioned product accounted for a greater percentage of corporate sales in the three month period than the nine month period. Selling, general and administrative expenses for the nine months ended March 31, 1998 decreased by $520,000 or 5.3% compared to the same period last year. Selling expenses increased by $388,000 to $1,037,000 from $649,000. This was the result of an increase in the cost of business travel along with the continued development of our international sales activities. Consulting fees increased by $280,000 primarily due to consulting agreements with recently retired senior executives. In addition, there were modest increases in office and telephone expense. In spite of these increases, an $800,000 charge for environmental remediation, as well as a $225,000 settlement of a violation, both recorded during the nine months ended March 31, 1997, caused the decrease in expenses this year. Lower compensation, in addition to a decrease in medical and business insurance expense contributed to the decrease. For the three months ended March 31, 1998 there was a slight decrease in selling, general and administrative expenses compared to the same period last year. Increases in selling expenses, consulting fees and bank fees were more than offset by decreases in compensation expense and in the cost of medical and business insurance. Other income decreased to $1,516,000 and $580,000 for the nine and three months ended March 31, 1998 from $1,728,000 and $712,000 for the same periods last year. Lower cash available for investments due to the Company's stock repurchase program, along with lower interest rates, caused a significant decrease in interest income on investments. This was partially offset by an increase in profits from valuation of securities when comparing the nine month periods. The effective tax rate decreased to 34.4% and 31.6% for the nine and three months ended March 31, 1998 from 39.0% and 37.2% for the same periods last year. The aforementioned settlement of a violation, of which a significant portion was not deductible for tax purposes, increased the tax rate for the nine months ended March 31, 1997. Significant payments from the Company's non-qualified retirement plan, which are deductible for tax purposes on the date of distribution, caused an unusually low tax rate for the nine and three months ended March 31, 1998. 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 March 31, 1998 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 May 1, 1998 BY (signed) / by Donald Horowitz Donald Horowitz, Chief Financial Officer DATE May 1, 1998 BY (signed) / by Leonard S. Schwartz Leonard S. Schwartz, President EX-27 2
5 1000 9-MOS JUN-30-1998 MAR-31-1998 4,542 11,178 30,241 298 27,653 75,686 1,573 1,190 83,266 19,611 0 90 0 750 62,801 83,266 134,889 134,889 118,501 118,501 0 0 47 8,571 2,952 5,619 0 0 0 5,619 .83 .80
-----END PRIVACY-ENHANCED MESSAGE-----