ACETO Corporation (Nasdaq:ACET), an international company engaged
in the marketing, sale and distribution of Human Health products,
Pharmaceutical Ingredients and Performance Chemicals, announced
today financial results for the second quarter of fiscal 2016 ended
December 31, 2015.
Second Quarter Fiscal 2016 versus Second
Quarter Fiscal 2015
- Net sales of $131.7 million versus $123.8 million, a 6.4%
increase
- Gross profit of $35.9 million versus $30.0 million, a 19.5%
increase
- Net income of $8.3 million versus $6.6 million, a 25.2%
increase
- Diluted EPS of $0.28 versus $0.23, a 21.7% increase
- Non-GAAP Adjusted Net Income of $10.7 million versus $8.2
million, a 29.8% increase
- Non-GAAP Adjusted EPS of $0.36 versus $0.28, a 28.6%
increase
Management Commentary
“For the second quarter, EPS growth on both a
GAAP and non-GAAP basis outpaced net sales growth, demonstrating
the operating leverage of our business model and our ongoing
transition towards human health,” said Sal Guccione, Chief
Executive Officer of ACETO.
“Each of our three segments delivered mid-single
digit year-on-year sales growth while Human Health and Performance
Chemicals produced robust gross profit and gross margin
gains. Growth in our Human Health segment was led by sales
and gross profit gains in our Rising Pharmaceuticals
business. Pharmaceutical Ingredients’ sales increased on
higher sales of APIs although gross profit and gross margin
declined primarily due to mix within APIs. Increased sales in
Performance Chemicals reflected strong demand for agricultural
protection products, while gross profit and gross margin gains
reflected a continued shift towards higher-margin products as well
as some lower product cost related to the devaluation of the
Chinese currency.”
Mr. Guccione added, “For the first half of
fiscal 2016 we have produced solid results generally in line with
our expectations. Looking ahead to the full fiscal
year, for our top-line growth we are now forecasting a low
single-digit increase for fiscal 2016, down slightly from our prior
expectation of a mid-single digit increase. This change is due
primarily to a reduction in expected revenue in Performance
Chemicals arising from the devaluation of the Chinese currency and
lower than planned sales of certain specialty chemicals products.
Regarding earnings on a reported basis, we now anticipate GAAP net
income growth for the year to be in the high single-digit to low
double-digit range, versus the previous low double-digit estimate,
reflecting incremental non-cash interest expenses and other costs
associated with the convertible debt offering completed during the
second quarter and potential increased competition in our Rising
Pharmaceuticals business.”
“Nevertheless, on a non-GAAP adjusted basis, we
continue to expect to achieve earnings growth in the low
double-digit range,” Mr. Guccione concluded. “In addition,
consistent with previous projections, we continue to expect to
generate higher sales and gross profit in the second half of fiscal
2016 as compared to the first half of the fiscal year. Finally,
based on our pipeline of projects at Rising Pharmaceuticals, we
continue to expect R&D spending between $8 million and $10
million for the year.”
Second Quarter Financial
Review
Net sales for the second quarter of fiscal 2016
were $131.7 million, an increase of 6.4% from $123.8 million
reported in the second quarter of fiscal 2015. On a constant Euro
currency basis net sales increased by 9.6% compared to the same
quarter last year. Total Company gross profit was $35.9 million, an
increase of 19.5%, compared to $30.0 million in the second quarter
of fiscal 2015. Gross margin for the second quarter was 27.2%
compared to 24.3% in the prior year period.
Human Health segment sales were $59.0 million,
an increase of 6.5%, compared to $55.4 million for the second
quarter of fiscal 2015. The revenue increase was largely due to an
increase in sales at Rising which were partially offset by a sales
decrease in our Nutritional business. Gross profit for the Human
Health segment was $21.7 million, an increase of 33.1%, compared to
$16.3 million for the second quarter of fiscal 2015. Gross margin
for the second quarter was 36.8%, compared to 29.5% in the prior
year period. The increase in sales, gross profits and margin was
primarily related to price increases on certain Rising products
taken in fiscal 2015.
Pharmaceutical Ingredients segment sales were
$34.3 million, an increase of 5.3%, compared to $32.6 million for
the second quarter of fiscal 2015. The increase in sales was due
primarily to a rise in APIs sold abroad. Sales were adversely
affected by the weakness of the Euro versus the US dollar in this
quarter as compared to the prior year’s period. The unfavorable
impact of the Euro rate variance on the Pharmaceutical Ingredients
segment for the quarter compared to last year’s quarter was $2.6
million in sales and $0.5 million in gross profit. Gross profit in
the quarter was $6.1 million, an 11.8% decrease compared to $6.9
million for the second quarter of fiscal 2015. Gross margin for the
second quarter was 17.8%, compared to 21.3% in the prior year
period. The decline in both gross profits and margin was largely
the result of a drop in sales volume of a certain API which
typically yields a significantly higher gross margin.
Performance Chemicals segment sales were $38.3
million, an increase of 7.2%, compared to $35.8 million for the
second quarter of fiscal 2015, due primarily to higher agricultural
protection products sales. Gross profit was $8.0 million, an
increase of 18.6%, compared to $6.8 million for the second quarter
of fiscal 2015. Gross margin was 20.9% for the second quarter
compared to 18.9% in the prior year period. The increase in
gross profit and margin was primarily due to stronger gross profits
in Specialty Chemicals resulting from a reduction in sales of
certain lower margin products, select price increases and product
cost improvements resulting from the devaluation of the Chinese
Renminbi.
Total selling, general and administrative
expenses were relatively flat at $19.2 million compared to $19.0
million in the same period last year, a 1.5% increase. Research and
Development expenses in the second quarter totaled $2.5 million
compared to $0.4 million in the prior year period. The majority of
R&D expenses are milestone based and could fluctuate
quarterly.
Operating income totaled $14.1 million, an
increase of 32.0% over the second quarter of fiscal 2015. Net
income was $8.3 million, or $0.28 per diluted share, compared to
net income of $6.6 million, or $0.23 per diluted share, for the
comparable quarter of fiscal 2015. Non-GAAP Adjusted Net Income was
$10.7 million in the second quarter, compared to $8.2 million in
the prior period, a 29.8% increase. The non-GAAP Adjusted Net
Income included charges related to the issuance of the convertible
debt that were incurred, for the first time, in the current
quarter. Non-GAAP Adjusted Earnings per Share were $0.36,
compared to $0.28 in the year ago second quarter, a 28.6%
increase.
Conference Call
Management will host a conference call to
discuss the operating and financial results at 9:00am ET on Friday,
February 5, 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 #
41729737.
A live webcast of the conference call will be
available in 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.
A telephone replay of the conference call will
be available from 11:30 a.m. ET on February 5, 2016 until 11:59
p.m. ET on February 12, 2016 and may be accessed by calling (888)
843-7419 and referencing conference ID # 41729737. 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. This measure, Adjusted Net Income, represents
net income excluding amortization of intangibles, debt
extinguishment 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 to U.S. GAAP net income are
presented in the table Non-GAAP Reconciliation of this press
release.
About ACETO
ACETO Corporation, incorporated in 1947 and with
offices and operations in 10 countries, is engaged in the
marketing, sale and distribution of Human Health products (finished
dosage form generics and nutraceuticals), Pharmaceutical
Ingredients (pharmaceutical intermediates and active pharmaceutical
ingredients) and Performance Chemicals (specialty chemicals and
agricultural protection products). ACETO's global operations,
including more than 35 employees in China and 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, 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, statements regarding the Company’s
strategic initiatives including selling finished dosage form
generic drugs, and statements regarding the prospects for long-term
growth. 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, 2015 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) |
|
|
(unaudited) |
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
December 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Net sales |
|
$ |
131,674 |
|
|
$ |
123,765 |
|
|
$ |
265,174 |
|
|
$ |
254,568 |
|
Cost of sales |
|
|
95,806 |
|
|
|
93,746 |
|
|
|
194,725 |
|
|
|
196,898 |
|
Gross profit |
|
|
35,868 |
|
|
|
30,019 |
|
|
|
70,449 |
|
|
|
57,670 |
|
Gross profit % |
|
|
27.24 |
% |
|
|
24.25 |
% |
|
|
26.57 |
% |
|
|
22.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative
expenses |
|
|
19,246 |
|
|
|
18,970 |
|
|
|
36,879 |
|
|
|
37,253 |
|
Research and
development expenses |
|
|
2,531 |
|
|
|
377 |
|
|
|
3,961 |
|
|
|
1,122 |
|
Operating
income |
|
|
14,091 |
|
|
|
10,672 |
|
|
|
29,609 |
|
|
|
19,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net of
interest expense |
|
|
(998 |
) |
|
|
(187 |
) |
|
|
(1,533 |
) |
|
|
(1,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
|
|
13,093 |
|
|
|
10,485 |
|
|
|
28,076 |
|
|
|
18,130 |
|
Income tax
provision |
|
|
4,823 |
|
|
|
3,877 |
|
|
|
10,508 |
|
|
|
6,694 |
|
Net income |
|
$ |
8,270 |
|
|
$ |
6,608 |
|
|
$ |
17,568 |
|
|
$ |
11,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share |
|
$ |
0.28 |
|
|
$ |
0.23 |
|
|
$ |
0.60 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
Diluted net income per
common share |
|
$ |
0.28 |
|
|
$ |
0.23 |
|
|
$ |
0.60 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
29,115 |
|
|
|
28,740 |
|
|
|
29,049 |
|
|
|
28,679 |
|
Diluted |
|
|
29,599 |
|
|
|
29,204 |
|
|
|
29,495 |
|
|
|
29,191 |
|
|
|
|
|
|
|
Aceto Corporation and
Subsidiaries |
|
Consolidated Balance Sheets |
|
(in thousands, except per-share
amounts) |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
December |
|
|
June 30, |
|
|
31, 2015 |
|
|
2015 |
|
|
|
|
|
|
Assets |
|
Current Assets: |
|
Cash and cash
equivalents |
$ |
54,349 |
|
|
|
$ |
34,020 |
|
|
Investments |
|
2,396 |
|
|
|
|
3,416 |
|
|
Trade
receivables: less allowances for doubtful |
|
|
|
|
|
accounts:
December 31, 2015 $610; and June 30, 2015 $691 |
|
152,196 |
|
|
|
|
161,521 |
|
|
Other
receivables |
|
9,026 |
|
|
|
|
10,611 |
|
|
Inventory |
|
105,575 |
|
|
|
|
95,596 |
|
|
Prepaid expenses
and other current assets |
|
3,482 |
|
|
|
|
3,096 |
|
|
Deferred income
tax asset, net |
|
2,153 |
|
|
|
|
2,050 |
|
|
|
|
|
|
|
|
Total current assets |
|
329,177 |
|
|
|
|
310,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
10,376 |
|
|
|
|
10,456 |
|
|
Property held for
sale |
|
6,574 |
|
|
|
|
6,574 |
|
|
Goodwill |
|
67,853 |
|
|
|
|
67,870 |
|
|
Intangible assets,
net |
|
83,387 |
|
|
|
|
78,997 |
|
|
Deferred income tax
asset, net |
|
20,532 |
|
|
|
|
9,972 |
|
|
Other assets |
|
6,495 |
|
|
|
|
5,595 |
|
|
|
Total Assets |
$ |
524,394 |
|
|
|
$ |
489,774 |
|
|
|
Liabilities and
Shareholders' Equity |
|
|
Current
liabilities: |
|
Current portion
of long-term debt |
$ |
197 |
|
|
|
$ |
10,197 |
|
|
Accounts
payable |
|
57,441 |
|
|
|
|
54,962 |
|
|
Accrued
expenses |
|
44,956 |
|
|
|
|
59,841 |
|
|
Total current
liabilities |
|
102,594 |
|
|
|
|
125,000 |
|
|
|
|
|
|
|
|
Long-term debt,
net |
|
115,885 |
|
|
|
|
99,960 |
|
|
Long-term
liabilities |
|
7,336 |
|
|
|
|
7,542 |
|
|
Environmental
remediation liability |
|
2,487 |
|
|
|
|
2,995 |
|
|
Deferred income tax
liability |
|
10,235 |
|
|
|
|
66 |
|
|
Total liabilities |
|
238,537 |
|
|
|
|
235,563 |
|
|
|
|
|
|
|
|
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 at December 31, 2015 and 40,000 shares authorized at
June 30, 2015; |
|
|
|
|
|
29,551 and
29,147 shares issued and outstanding at December 31, 2015 and June
30, 2015, respectively) |
|
296 |
|
|
|
|
292 |
|
|
Capital in
excess of par value |
|
111,630 |
|
|
|
|
93,807 |
|
|
Retained
earnings |
|
181,215 |
|
|
|
|
167,208 |
|
|
Accumulated
other comprehensive loss |
|
(7,284 |
) |
|
|
|
(7,096 |
) |
|
Total shareholders'
equity |
|
285,857 |
|
|
|
|
254,211 |
|
|
|
Total liabilities and
shareholders' equity |
$ |
524,394 |
|
|
|
$ |
489,774 |
|
|
|
Aceto Corporation |
Diluted Net Income Per Common Share Excluding
Charges (Non-GAAP Reconciliation) |
(in thousands, except per share
amounts) |
|
|
(unaudited) Three Months Ended December 31,
2015 |
|
(unaudited)
Diluted Net Income Per Common Share Three Months Ended
December 31, 2015 |
|
(unaudited) Three Months Ended December 31,
2014 |
|
(unaudited)
Diluted Net Income Per Common Share Three Months Ended
December 31, 2014 |
|
(unaudited) Six Months Ended December 31,
2015 |
|
(unaudited)
Diluted Net Income Per Common Share Six Months Ended
December 31, 2015 |
|
(unaudited) Six Months Ended December 31,
2014 |
|
(unaudited)
Diluted Net Income Per Common Share Six Months Ended
December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as
reported |
|
|
$ |
8,270 |
|
|
$ |
0.28 |
|
|
$ |
6,608 |
|
|
$ |
0.23 |
|
|
|
$ |
17,568 |
|
|
$ |
0.60 |
|
|
$ |
11,436 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible
assets |
|
|
|
2,726 |
|
|
|
0.09 |
|
|
|
2,597 |
|
|
|
0.09 |
|
|
|
|
5,442 |
|
|
|
0.18 |
|
|
|
5,162 |
|
|
|
0.18 |
|
|
Amortization of debt
discount (non-cash interest expense) |
|
|
|
587 |
|
|
|
0.02 |
|
|
|
- |
|
|
|
- |
|
|
|
|
587 |
|
|
|
0.02 |
|
|
|
- |
|
|
|
- |
|
|
Amortization of debt
issuance costs |
|
|
|
104 |
|
|
|
0.00 |
|
|
|
- |
|
|
|
- |
|
|
|
|
104 |
|
|
|
0.00 |
|
|
|
- |
|
|
|
- |
|
|
Termination of interest rate
swap |
|
|
|
420 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
|
|
420 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
Separation and relocation
costs |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
99 |
|
|
|
0.00 |
|
|
Step-up of inventory |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
209 |
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income
excluding charges |
|
|
|
12,107 |
|
|
|
0.40 |
|
|
|
9,205 |
|
|
|
0.32 |
|
|
|
|
24,121 |
|
|
|
0.81 |
|
|
|
16,906 |
|
|
|
0.58 |
|
|
Adjustments to
provision for income taxes |
|
|
|
1,439 |
|
|
|
0.04 |
|
|
|
987 |
|
|
|
0.04 |
|
|
|
|
2,457 |
|
|
|
0.08 |
|
|
|
2,079 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(Non-GAAP) |
|
|
$ |
10,668 |
|
|
$ |
0.36 |
|
|
$ |
8,218 |
|
|
$ |
0.28 |
|
|
|
$ |
21,664 |
|
|
$ |
0.73 |
|
|
$ |
14,827 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding |
|
|
|
29,599 |
|
|
|
29,599 |
|
|
|
29,204 |
|
|
|
29,204 |
|
|
|
|
29,495 |
|
|
|
29,495 |
|
|
|
29,191 |
|
|
|
29,191 |
|
|
|
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. |
Investor Relations Contact:
LHA
Jody Burfening
jburfening@lhai.com
(212) 838-3777