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10-K/A
ACETO CORP filed this Form 10-K/A on 11/09/2017
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ACETO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 2017, 2016 AND 2015

(in thousands, except per-share amounts)

 

The fair values of the net assets acquired were determined using discounted cash flow analyses and estimates made by management. The preliminary purchase price was allocated to intangible assets as follows: approximately $169,071 to goodwill, which is nonamortizable under generally accepted accounting principles and is deductible for income tax purposes; approximately $135,700 of product rights, amortizable over a period of approximately ten years; approximately $88,800 of customer relationships, amortizable over approximately eleven years; and approximately $350 of trademarks, amortizable over a period of approximately six months. Amortization of the acquired intangible assets is deductible for income tax purposes. Goodwill represents the excess of the preliminary purchase price paid over the fair value of the underlying net assets acquired and was allocated to the Human Health Segment.

 

As part of the product acquisition, the Company entered into an Administrative Services Agreement with the sellers in which excess cash payments may be made by either of the parties in connection with certain liabilities assumed upon the closing of the transaction related to rebates, chargebacks, commercial rebates and Medicaid and other government rebates. As of the closing date, the Company is responsible for the processing and administration of these related adjustments to sales completed prior to the closing date. In general, (i) if the amounts reserved for these liabilities underestimate the amounts that the Company is required to pay with respect to these items, the sellers will be required to reimburse the Company for the difference and (ii) if the amounts reserved for these liabilities overestimate the amounts that the Company is required to pay, the Company will be required to reimburse the sellers for the difference. Settlement is to be made two years after the closing date of December 21, 2016.

 

For the period from December 22, 2016 to June 30, 2017, net sales and income before income taxes from the product acquisition was approximately $122,118 and $7,437, respectively, which have been included in the Consolidated Statement of Income for the year ended June 30, 2017. The following represents unaudited pro forma operating results as if the operations of Rising Health and Acetris Health had been included in the Company’s consolidated statements of operations as of July 1, 2015.

 

   Year ended 
   June 30, 
   2017   2016 
         
Net sales  $739,318   $731,100 
Net income   24,166    30,469 
Net income per common share  $0.70   $0.89 
Diluted net income per common share  $0.69   $0.88 

 

The pro forma financial information includes business combination accounting effects from the product acquisition including amortization charges from acquired intangible assets of approximately $21,000 for both periods presented, increase in interest expense of approximately $13,200 for both periods presented associated with bank borrowings to fund the product acquisition and interest expense associated with the deferred payment to the sellers, $4,502 step-up in the fair value of the acquired inventory in the year ended June 30, 2016, reversal of acquisition related transaction costs of $8,818 and tax related effects in both periods. 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 product acquisition had taken place at the beginning of fiscal 2016.

 

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