> Investors > News Release

News Release

Printer Friendly Version View printer-friendly version
<< Back
ACETO Reports Fiscal 2017 First Quarter Results

Separately Company Announces Acquisition of Generic Products and Related Assets of Citron Pharma

Management to Host Conference Call on November 3, 2016 at 9:00 a.m. ET

PORT WASHINGTON, N.Y., Nov. 02, 2016 (GLOBE NEWSWIRE) -- ACETO Corporation (Nasdaq:ACET), focused on the global marketing, sale and distribution of Human Health products, Pharmaceutical Ingredients and Performance Chemicals, announced today financial results for the first quarter of fiscal 2017 ended September 30, 2016.

First Quarter Fiscal 2017 versus First Quarter Fiscal 2016

  • Net sales of $128.0 million versus $133.5 million, a 4.1% decrease
  • Gross profit of $30.8 million versus $34.6 million, a 10.8% decrease
  • Net income of $4.4 million versus $9.3 million, a 52.8% decrease
  • Diluted EPS of $0.15 versus $0.32, a 53.1% decrease
  • Non-GAAP Adjusted Net Income of $8.3 million versus $11.0 million, a 24.7% decrease
  • Non-GAAP Adjusted EPS of $0.28 versus $0.37, a 24.3% decrease

Management Commentary

“Our first quarter results fell below last year due to lower revenue and gross profit in our Human Health segment partially offset by gains in Pharmaceutical Ingredients and Performance Chemicals,” said Sal Guccione, Chief Executive Officer of ACETO.  “In our Human Health segment, Rising Pharmaceuticals experienced increased competition for certain products which began in the fourth quarter of fiscal 2016, while Pharmaceutical Ingredients benefited from favorable mix and Performance Chemicals saw a boost from increased agricultural protection product sales.”  

Mr. Guccione added, “Also in the first quarter, Rising experienced product launch delays and backorders of some products which have continued into the second quarter.  Nevertheless, we are maintaining our launch plans for fiscal 2017 and still plan to launch 12 to 15 new generic products during this fiscal year. Although we now expect to launch most of the new products and resolve the backorders in the second half of the year, the negative impact of these developments will weigh on our results for the first half of 2017.

“Regarding our fiscal 2017 full-year guidance, we have two crosscurrents at work:  the near-term headwinds at Rising and the longer-term tailwind we expect to benefit from following the completion of the just announced acquisition of generic products and related assets of Citron Pharma. Absent the acquisition, our fiscal 2017 outlook has changed.  We now expect ACETO’s fiscal year 2017 sales growth to be in the low-single digit percentage range and non-GAAP Adjusted EPS to be lower than last year by a mid-single digit percentage. On a GAAP basis, which will be negatively impacted by the aforementioned items as well as the transaction-related expenses, EPS is expected to be below last year by a low-double digit percentage. Including the contribution of Citron for the second half of fiscal 2017, we expect full-year sales growth to be in the 20% range, non-GAAP Adjusted EPS growth to be in the mid-single digit percentage range and GAAP EPS to be behind last year by approximately 20% reflecting deal-related costs and non-cash purchase accounting charges,” concluded Mr. Guccione.

First Quarter Financial Review

Net sales for the first quarter of fiscal 2017 were $128.0 million, a decrease of 4.1% from $133.5 million reported in the first quarter of fiscal 2016. Total Company gross profit was $30.8 million, a decrease of 10.8%, compared to $34.6 million in the first quarter of fiscal 2016. Gross margin for the first quarter was 24.1% compared to 25.9% in the prior year period.

Human Health segment sales were $47.9 million, a decrease of 16.7%, compared to $57.5 million for the first quarter of fiscal 2016. The revenue decrease was primarily due to increased competition and price erosion on certain products at Rising. Nutritional product sales also decreased in the first quarter versus the prior year’s period, with the decline primarily occurring abroad. Gross profit for the Human Health segment was $14.2 million, a decrease of 30.1%, compared to $20.3 million for the first quarter of fiscal 2016. Gross margin for the first quarter was 29.7%, compared to 35.3% in the prior year period. The decrease in gross margin was primarily due to the sales decline at Rising, which was primarily driven by increased competition on certain products, as well as an unfavorable product mix and back orders on select products.

Pharmaceutical Ingredients segment sales were $40.6 million, an increase of 5.9%, compared to $38.4 million for the first quarter of fiscal 2016. The segment’s sales increase was driven by higher volumes of intermediates sold abroad. Gross profit in the quarter was $7.0 million, a 13.7% increase compared to $6.1 million for the first quarter of fiscal 2016. Gross margin for the first quarter was 17.1%, compared to 15.9% in the prior year period. The increase in gross profit and margin was driven by higher international sales of intermediates and a more favorable product mix in APIs.

Performance Chemicals segment sales were $39.5 million, an increase of 4.9%, compared to $37.7 million for the first quarter of fiscal 2016, due to higher sales of agricultural protection products. Gross profit was $9.7 million, an increase of 18.7%, compared to $8.2 million for the first quarter of fiscal 2016. Gross margin was 24.5% for the first quarter, compared to 21.7% in the prior year period.  The increase in gross profit and margin was primarily due to increased sales volume and more favorable product mix within Agricultural Protection Products.

Total selling, general and administrative expenses were $21.0 million compared to $17.6 million in the same period last year, a 19.2% increase, with $1.8 million of the increase attributable to transaction costs associated with the announced acquisition of products from Citron Pharma and the remainder related to key management additions and annual compensation adjustments. Research and Development expenses in the first quarter totaled $1.0 million compared to $1.4 million in the prior year period. The majority of R&D expenses are milestone based and fluctuate quarterly.

Operating income totaled $8.8 million, a decrease of 43.5% from the first quarter of fiscal 2016. Net income was $4.4 million, or $0.15 per diluted share, compared to net income of $9.3 million, or $0.32 per diluted share, for the comparable quarter of fiscal 2016. Non-GAAP Adjusted Net Income was $8.3 million in the first quarter, compared to $11.0 million in the prior period, a 24.7% decrease. Non-GAAP Adjusted Earnings per Share were $0.28, compared to $0.37 in the year ago first quarter, a 24.3% decrease.

Conference Call

Management will host a conference call to discuss the operating and financial results at 9:00 a.m. ET on Thursday, November 3, 2016.  To participate in the conference call, please dial (800) 446-1671 or (847) 413-3362 approximately 10 minutes prior to the call.  Please reference conference ID # 43519926. 

The call is also being webcast with an accompanying presentation, which can be accessed through the investor relations section of the Company’s website, www.aceto.com.  Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software and download the presentation.

A telephone replay of the conference call will be available from 11:30 a.m. ET on November 3, 2016 until 11:59 p.m. ET on November 11, 2016 and may be accessed by calling (888) 843-7419 and referencing conference ID # 43519926.  An archived replay of the conference call will also be available in the investor relations section of the Company’s website.

Use of Non-GAAP Financial Information

In addition to U.S. GAAP results, this press release also includes certain non-GAAP financial measures as defined by the SEC. These measures, Adjusted Net Income and Adjusted EPS, are based upon net income excluding amortization of intangibles, debt extinguishment, amortization of debt discount and debt issuance costs and transaction costs related to acquisitions. These items should not be reviewed in isolation or considered substitutes of the Company’s financial results as reported in accordance with GAAP.  Due to the nature of these items, it is important to identify these items and to review them in conjunction with the Company’s financial results reported in accordance with GAAP.  The exclusion of these items also allows investors to compare results of operations in the current period to prior periods’ results based on the Company’s fundamental business performance and analyze the operating trends of the business.  The exclusion of these items also allows management to evaluate the performance of its business units.

Pursuant to the requirements of Regulation G, reconciliations of Adjusted Net Income and Adjusted EPS to U.S. GAAP net income and GAAP EPS are presented in the table Non-GAAP Reconciliation of this press release.

About ACETO

ACETO Corporation, incorporated in 1947, is focused on the global marketing, sale and distribution of Human Health products (finished dosage form generics and nutraceutical products), Pharmaceutical Ingredients (pharmaceutical intermediates and active pharmaceutical ingredients) and Performance Chemicals (specialty chemicals and agricultural protection products). With business operations in nine countries, ACETO distributes over 1,100 chemical compounds used principally as finished products or raw materials in the pharmaceutical, nutraceutical, agricultural, coatings and industrial chemical industries. ACETO's global operations, including a staff of 25 in China and 12 in India, are distinctive in the industry and enable its worldwide sourcing and regulatory capabilities.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements as that term is defined in the federal securities laws.  The events described in forward-looking statements contained in this news release may not occur.  Generally, these statements relate to our business plans or strategies, projected or anticipated benefits or other consequences of ACETO’s plans or strategies, financing plans, projected or anticipated benefits from acquisitions that ACETO may make including the recently announced acquisition of products from Citron Pharma, LLC, or a projection involving anticipated revenues, earnings or other aspects of ACETO’s operating results or financial position, and the outcome of any contingencies.  Any such forward-looking statements are based on current expectations, estimates and projections of management. ACETO intends for these forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements. Words such as "may," "will," "expect," "believe," "anticipate," "project," "plan," "intend," "estimate," and "continue," and their opposites and similar expressions are intended to identify forward-looking statements.  The forward-looking statements contained in this press release include, but are not limited to, the Company’s sales and earnings guidance and statements regarding the expected impact of the pending acquisition, product launches and the resolution of backorders.   ACETO cautions you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond ACETO’s control, which may influence the accuracy of the statements and the projections upon which the statements are based.  Factors that could cause actual results to differ materially from those set forth or implied by any forward-looking statement include, but are not limited to, risks and uncertainties discussed in ACETO’s reports filed with the Securities and Exchange Commission, including, but not limited to, ACETO’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 and other filings. Copies of these filings are available at www.sec.gov

Any one or more of these uncertainties, risks and other influences could materially affect ACETO’s results of operations and whether forward-looking statements made by ACETO ultimately prove to be accurate. In addition, periodic high-margin product sales may have a positive material financial impact in a given quarter that may be non-recurring in future quarters, thereby rendering one quarter's performance not useful as a predictor of future quarters' results.  ACETO’s actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements.  ACETO undertakes no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

(Financial Tables Follow)

 
Aceto Corporation and Subsidiaries
 Consolidated Statements of Income
(in thousands, except per share amounts)
           
           
      (unaudited)
  Three Months Ended
  September 30,
    2016       2015  
Net sales   $ 128,018     $ 133,500  
Cost of sales     97,179       98,919  
Gross profit     30,839       34,581  
Gross profit %     24.09 %     25.90 %
       
Selling, general and        
administrative expenses     21,024       17,633  
Research and development expenses     1,050       1,430  
Operating income     8,765       15,518  
       
Other expense, net of interest expense     (1,985 )     (535 )
       
Income before income taxes       6,780       14,983  
Income tax provision     2,395       5,685  
Net income   $ 4,385     $ 9,298  
       
Net income per common share   $ 0.15     $ 0.32  
       
Diluted net income per common share   $ 0.15     $ 0.32  
       
Weighted average shares outstanding:        
Basic     29,518       28,983  
Diluted     29,840       29,392  
       

 

Aceto Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per-share amounts)
         
         
  (unaudited)      
  September 30,
2016
  June 30,
2016
Assets                
Current Assets:  
Cash and cash equivalents $ 73,142       $ 66,828  
Investments   1,910         881  
Trade receivables: less allowance for doubtful        
accounts: September 30, 2016 $456; and June 30, 2016 $513   158,744         167,612  
Other receivables   11,638         12,650  
Inventory   104,456         98,107  
Prepaid expenses and other current assets   4,324         3,339  
Deferred income tax asset, net   1,843         3,244  
                 
Total current assets   356,057         352,661  
         
         
Property and equipment, net   10,216         10,044  
Property held for sale   6,868         6,868  
Goodwill   67,880         67,871  
Intangible assets, net   77,884         79,071  
Deferred income tax asset, net   17,594         18,053  
Other assets   8,196         6,210  
                 
Total Assets $ 544,695       $ 540,778  
                 
Liabilities and Shareholders' Equity  
 
Current liabilities:  
Current portion of long-term debt $ 197       $ 197  
Accounts payable   49,271         46,034  
Accrued expenses   43,729         52,675  
Total current liabilities   93,197         98,906  
         
Long-term debt, net   119,975         118,592  
Long-term liabilities   6,651         6,344  
Environmental remediation liability   6,372         3,352  
Deferred income tax liability   8,677         9,142  
Total liabilities   234,872         236,336  
         
Commitments and contingencies        
         
Shareholders' equity:        
Preferred stock, 2,000 shares authorized; no shares issued and outstanding   -         -  
Common stock, $.01 par value:        
(75,000 shares authorized; 30,049 and 29,595 shares issued  
and outstanding at September 30, 2016 and June 30, 2016, respectively)   300         296  
Capital in excess of par value   118,053         115,667  
Retained earnings   197,235         194,804  
Accumulated other comprehensive loss   (5,765 )       (6,325 )
Total shareholders' equity   309,823         304,442  
                 
Total liabilities and shareholders' equity $ 544,695       $ 540,778  
                 

 

Aceto Corporation
Diluted Net Income Per Common Share Excluding Charges (Non-GAAP Reconciliation)
(in thousands, except per share amounts)
 
  (unaudited) Three
Months Ended
September 30,
2016
  (unaudited) 
Diluted Net
Income Per
Common Share
Three Months
Ended
September 30,
2016
  (unaudited) Three
Months Ended
September 30,
2015
  (unaudited) 
Diluted Net
Income Per
Common Share
Three Months
Ended
September 30,
2015
               
Net income, as reported     $ 4,385     $ 0.15     $ 9,298     $ 0.32  
                   
Adjustments:                  
                   
Amortization of intangible assets       2,791       0.09       2,716       0.09  
Transaction costs related to acquisitions       1,809       0.06       -       -  
Amortization of debt discount (non-cash interest expense)     1,223       0.04       -       -  
Amortization of debt issuance costs       209       0.01       -       -  
Environmental remediation charge       170       0.01       -       -  
                   
Adjusted income excluding charges       10,587       0.36       12,014       0.41  
Adjustments to provision for income taxes       2,310       0.08       1,019       0.04  
                   
Adjusted net income (Non-GAAP)     $ 8,277     $ 0.28     $ 10,995     $ 0.37  
                   
                   
Diluted weighted average shares outstanding       29,840       29,840       29,392       29,392  
 
NOTE:  Items identified in the above table are not in accordance with, or an alternative method for, generally accepted accounting principles (GAAP) in the United States. These items should not be reviewed in isolation or considered substitutes of the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with GAAP. The exclusion of these items also allows investors to compare results of operations in the current period to prior period’s results based on the Company’s fundamental business performance and analyze the operating trends of the business. The exclusion of these items also allows management to evaluate performance of its business units.  The Company does not provide reconciliations of GAAP and non-GAAP projections as such projections are intended for directional purposes only.
 


Investor Relations Contact:
LHA
Jody Burfening
jburfening@lhai.com
(212) 838-3777

Primary Logo

ACETO CORPORATION

top