Business Combinations

12 Months Ended

Jun. 30, 2012

Business Combinations

(3) Business Combinations

On December 31, 2010, the Company acquired certain assets of Rising Pharmaceuticals, Inc. (“Rising”), a New Jersey based company that markets and distributes generic prescription and over the counter pharmaceutical products to leading wholesalers, chain drug stores, distributors, mass market merchandisers and others under its own label, throughout the United States.

This acquisition was an extension of the Company’s business model which will provide customers and suppliers additional opportunities to penetrate the end user segment of the pharmaceutical market. With the Rising brand label, the Company has been able to expand its direct involvement in the pharmaceutical manufacturing space through greater global awareness of its capabilities in the marketing of pharmaceutical intermediates, active ingredients and the ultimate end-products, finished dosage form generics.

The purchase was approximately $73,317 which was comprised of the issuance of 1,000 shares of Aceto common stock, valued at $9,000, cash payment of approximately $58,817 and approximately $5,500 liability subsequently paid to Rising to satisfy bulk sales tax obligation. The purchase agreement also calls for $8,000 of deferred consideration to be paid by Aceto over a four year period with annual installments of $1,500 not later than fifty-six days following each of the first three anniversaries of the Closing Date and $3,500 not later than fifty-six days following the fourth anniversary of the Closing Date. In addition, the agreement provides for the payment of additional contingent consideration equal to one-half of the three year cumulative Rising earnings before interest, taxes, deprecation and amortization in excess of $32,100, up to a maximum of $6,000. As of June 30, 2012, the Company has accrued $1,779 related to this contingent consideration. In the fourth quarter of fiscal 2012, the Company recorded additional contingent consideration of $761, which is included in selling, general and administrative expenses in the accompanying Consolidated Statement of Income for the fiscal year ended June 30, 2012. Any necessary future adjustments to this amount will be recorded as an income statement charge at that time.

The acquisition was accounted for using the purchase method of accounting. The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of December 31, 2010:

Cash and cash equivalents	$	106
Trade receivables		7,729
Inventory		2,348
Prepaid expenses and other current assets		700
Property and equipment		682
Goodwill		31,739
Intangible assets		43,200
Other assets		29
Total assets acquired		86,533
Accounts payable		501
Accrued expenses		5,115
Long-term liabilities, including contingent consideration		7,600
Net assets acquired	$	73,317

The fair values of the net assets acquired were determined using discounted cash flow analyses and estimates made by management. The purchase price was allocated to intangible assets as follows:  approximately $31,739 to goodwill, which is nonamortizable under generally accepted accounting principles and is deductible for income tax purposes; approximately $32,500 of product rights, amortizable over a period of seven to fourteen years; approximately $5,100 of license agreements, amortizable over six years; approximately $3,900 of customer relationships, amortizable over eleven years; and approximately $1,700 of trademarks, amortizable over a period of four years.  Amortization of the acquired intangible assets is deductible for income tax purposes. Goodwill acquired was allocated to the Human Health reportable segment.

For the period from December 31, 2010 to June 30, 2011, Rising’s net sales and income before income taxes was approximately $18,057 and $1,158, respectively, which have been included in the consolidated statement of income for the year ended June 30, 2011. The following represents unaudited pro forma operating results as if the operations of Rising had been included in the Company's consolidated statements of operations as of July 1, 2009:

	Year ended June 30,
	2011		2010
Net sales	$	432,810	$	395,093
Net income		12,788		10,330
Net income per common share	$	0.48	$	0.40
Diluted net income per common share	$	0.48	$	0.39

The pro forma financial information includes business combination accounting effects from the acquisition including amortization charges from acquired intangible assets of approximately $4,300 for both periods presented, increase in interest expense of approximately $1,800 for both periods presented associated with bank borrowings to fund the acquisition, reversal of acquisition related transaction costs of approximately $1,100 and tax related effects in the year ended 2011. In addition, the Company reversed approximately $2,600 of a tax charge related to the repatriation of earnings from certain foreign subsidiaries to assist with the funding of the acquisition in the year ended 2011. The unaudited pro forma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2010.