|ACETO CORP filed this Form 10-K/A on 11/09/2017|
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The chemistry that makes much of the modern world possible is often done by building up simple molecules to sophisticated compounds in step-by-step chemical processes. The products that are incorporated in each step are known as intermediates and they can be as varied as the end uses they serve, such as crop protection products, dyes and pigments, textiles, fuel additives, electronics - essentially all things chemical.
Aceto provides various specialty chemicals for the food, flavor, fragrance, paper and film industries. Aceto’s raw materials are also used in sophisticated technology products, such as high-end electronic parts used for photo tooling, circuit boards, production of computer chips, and in the production of many of today's modern gadgets.
According to a July 14, 2017 Federal Reserve Statistical Release, in the second quarter of calendar year 2017, the index for consumer durables, which impacts the Specialty Chemicals business of the Performance Chemicals segment, is expected to increase at an annual rate of 1.3%.
Aceto’s agricultural protection products include herbicides, fungicides and insecticides, which control weed growth as well as the spread of insects and microorganisms that can severely damage plant growth. One of Aceto's most widely used agricultural protection products is a sprout inhibitor that extends the storage life of potatoes. Utilizing our global sourcing and regulatory capabilities, we identify and qualify manufacturers either producing the product or with knowledge of the chemistry necessary to produce the product, and then file an application with the U.S. EPA for a product registration. Aceto has an ongoing working relationship with manufacturers in China and India to determine which of the non-patented or generic, agricultural protection products they produce can be effectively marketed in the Western world. We have successfully brought numerous products to market. We have a strong pipeline, which includes future additions to our product portfolio. The combination of our global sourcing and regulatory capabilities makes the generic agricultural market a niche for us and we will continue to offer new product additions in this market. In the National Agricultural Statistics Services release dated June 30, 2017, the total crop acreage planted in the United States in 2017 decreased by .3% to 318 million acres from 319 million acres in 2016. The number of peanut acres planted in 2017 increased 8.8% from 2016 levels while sugarcane acreage harvested decreased 3.4% from 2016. In addition, the potato acreage harvested in 2017 increased approximately .7% from the 2016 level.
Research and Development Expenses
Research and development expenses (R&D) represent investment in our generic finished dosage form product pipeline. R&D expenses during fiscal years 2017, 2016 and 2015 were $7,898, $7,937 and $5,942 respectively.
Long-lived assets, excluding property held for sale, by geographic region as of June 30, 2017, 2016 and 2015 were as follows:
Suppliers and Customers
We will only purchase products from specifically approved plants that meet strict guidelines for quality. We regularly visit our suppliers to evaluate them not only on the basis of ability to deliver satisfactory products on a timely and cost efficient basis, but also on quality system, facilities and equipment system, materials system, production system, packaging and labeling system, and laboratory control system. During the fiscal years ended June 30, 2017 and 2016 approximately 62% and 56%, respectively, of our purchases were from Asia and approximately 17% and 22%, respectively, were from Europe.
Our customers are primarily located throughout the United States, Europe and Asia. We will continue our program of regular visits to our suppliers' plants, and will continue to educate them on the quality of product and service required by our customers. Aceto is uniquely able to do this, as many of our sales representatives are technically trained (chemists, chemical engineers, biologists, pharmacologists, etc.) most with in-plant or industrial laboratory experience that allows them to effectively communicate customer requirements to sourcing teams. Our customers include a wide range of companies in the industrial chemical, agricultural, and human health and pharmaceutical industries, and range from small trading companies to Fortune 500 companies. During fiscal years 2017, 2016 and 2015, sales made to customers in the United States totaled $465,879, $380,533 and $365,656, respectively. Sales made to customers outside the United States during fiscal years 2017, 2016 and 2015 totaled $172,439, $177,991 and $177,288, respectively, of which, approximately 56%, 56% and 62%, respectively, were to customers located in Europe. One customer (AmerisourceBergen Corporation) accounted for 12% of net sales in fiscal 2017, 14% of net sales in 2016 and 13% of net sales in fiscal 2015. Another customer (McKesson Corporation) accounted for 11% of net sales in fiscal 2017, 7% of net sales in 2016 and 6% of net sales in 2015. No single product accounted for as much as 10% of net sales in fiscal 2017, 2016 or 2015.
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