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SEC Filings

10-Q
ACETO CORP filed this Form 10-Q on 11/03/2017
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Selling, General and Administrative Expenses

 

SG&A of $31,149 for the three months ended September 30, 2017 increased $10,125 or 48.2% from $21,024 reported for the prior period. As a percentage of sales, SG&A increased to 16.8% for the three months ended September 30, 2017 versus 16.4% in the prior period. SG&A for the current period included $5,379 of amortization expense associated with the purchased intangible assets related to the product purchase. We recorded $4,064 of one-time costs associated with the separation of the Company’s former Chief Executive Officer, including $2,017 of stock-based compensation. In addition, SG&A increased due to a $902 environmental charge related to Arsynco. The increase in SG&A is also due in part to approximately $325 of consulting services provided by former Citron and Lucid employees in connection with the Transition Services Agreement associated with the product purchase agreement, as well as approximately $680 of outsourcing fees related to the accounting processes of Rising Health and Acetris Health. SG&A for the prior period included $1,809 of transaction costs related to the product purchase agreement.

 

Research and Development Expenses

 

Research and development expenses (“R&D”) increased to $1,615 for the three months ended September 30, 2017 compared to $1,050 for the prior period. R&D expenses represent investment in our generic finished dosage form product pipeline. The majority of the R&D expenses are milestone based, which was the primary cause for such increase and will likely cause fluctuation from quarter to quarter.

 

Operating Income

 

For the three months ended September 30, 2017 operating income was $7,219 compared to $8,765 in the prior period, a decrease of $1,546 or 17.6%.

 

Interest Expense

 

Interest expense was $5,355 for the three months ended September 30 2017, an increase of $3,122 or 139.8% from the prior period. The increase was primarily due to interest expense associated with the Second Amended and Restated Credit Agreement, which was entered into on December 21, 2016 to help fund our product acquisition, as well as additional interest associated with the $50,000 unsecured deferred payment related to the product acquisition.

 

Provision for Income Taxes

 

The effective tax rate for the three months ended September 30, 2017 increased to 78.8% compared to 35.3% for the prior period. For the three months ended September 30, 2017, we recorded $1,128 of additional income tax expense associated with net tax deficiencies under ASU 2016-09, which was adopted in the first quarter of fiscal 2018.

 

Liquidity and Capital Resources

 

Cash Flows

 

At September 30, 2017, we had $72,100 in cash, of which $47,050 was outside the United States, $3,048 in short-term investments, all of which is held outside the United States, and $331,579 in long-term debt (including the current portion), all of which is an obligation in the United States. Working capital was $240,551 at September 30, 2017 compared to $248,750 at June 30, 2017. The $47,050 of cash held outside of the United States is fully accessible to meet any liquidity needs of our business located in any of the countries in which we operate. The majority of the cash located outside of the United States is held by our European operations and can be transferred into the United States. Although these amounts are fully accessible, transferring these amounts into the United States or any other countries could have certain tax consequences. We intend to indefinitely reinvest these undistributed earnings and have no plan for further repatriation. A deferred tax liability will be recognized when we expect that we will recover undistributed earnings of our foreign subsidiaries in a taxable manner, such as through receipt of dividends or sale of the investments. A portion of our cash is held in operating accounts that are with third party financial institutions. While we monitor daily the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our operating accounts.

 

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