Aceto Corp. (ACET) filed Quarterly Report for the period ended 2009-09-30.
ACETO CORP. is engaged in the distribution and marketing of fine and industrial chemicals used principally in the agricultural color producingpharmaceutical and surface coating industries. Aceto Corp. has a market cap of $143.1 million; its shares were traded at around $5.78 with a P/E ratio of 16.9 and P/S ratio of 0.4. The dividend yield of Aceto Corp. stocks is 3.5%. Aceto Corp. had an annual average earning growth of 4.5% over the past 10 years.
Highlight of Business Operations:
We are reporting net sales of $70,609 for the three months ended September 30, 2009, which represents a 24.8% decrease from the $93,839 reported in the comparable prior period. Gross profit for the three months ended September 30, 2009 was $11,816 and our gross margin was 16.7% as compared to gross profit of $18,937 and gross margin of 20.2% in the comparable prior period. Our selling, general and administrative costs (SG&A) for the three months ended September 30, 2009 declined 16.8%, when compared to $12,185 we reported in the prior period. Our net income decreased to $1,003, or $0.04 per diluted share, compared to $4,551, or $0.18 per diluted share in the prior period.
Net sales for the Chemicals & Colorants segment were $27,832 for the three months ended September 30, 2009, a decrease of $5,910 from net sales of $33,742 for the prior period. Our chemical business is diverse in terms of products, customers and consuming markets, including the automotive and housing markets, and is directly impacted by the overall difficult market conditions we are facing which resulted in our sales in the Chemicals and Colorants segment declining 17.5% from the prior period. The decrease in sales from this segment is attributable to a decline in sales of $1,027 in chemicals used in aroma products, $1,539 in chemicals used to produce surface coatings, and $2,881 of dye, pigment and other intermediates. Sales of Chemicals and Colorants from our foreign operations also declined by $817 due to reduced demand.
SG&A decreased $2,045 or 16.8%, to $10,140 for the three months ended September 30, 2009 compared to $12,185 for the prior period. As a percentage of sales, SG&A increased to 14.4% for the three months ended September 30, 2009 versus 13.0% for the prior period. The decrease in SG&A relates primarily to a decline of $804 in personnel related costs due predominantly to decreased accrued bonus expense as a result of decreased profitability. SG&A also decreased due to a $280 drop in sales and marketing expenses, which is directly related to the decline in sales for the first quarter of fiscal 2010 and a $296 decrease in bad debt expense due to additional reserves recorded in the prior period, where there was no comparable amount in the current period. In addition, in the prior period, we had $271 in research and development expenses (“R&D”) with no comparable amount in the three months ended September 30, 2009 due to the abandonment in fiscal 2009 of R&D related to two finished dosage form generic pharmaceutical products that were to be distributed in Europe.
For the three months ended September 30, 2009, operating income was $1,676 compared to $6,752 in the prior period, a decrease of $5,076 or 75.2%. This decrease was due to the overall decrease in gross profit of $7,121 offset by the $2,045 decrease in SG&A.
At September 30, 2009, we had $50,732 in cash and cash equivalents, of which $29,308 was outside the United States, $590 in short-term investments and no outstanding bank loans. Working capital was $127,022 at September 30, 2009 versus $124,709 at June 30, 2009. The $29,308 of cash held outside of the United States is fully accessible to meet any liquidity needs of the countries in which Aceto operates. 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. A deferred tax liability would 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. These balances exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. 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.
Our cash position at September 30, 2009 decreased $7,029 from the amount at June 30, 2009. Operating activities for the three months ended September 30, 2009 used cash of $6,949, for this period, as compared to cash used in operations of $3,038 for the comparable 2008 period. The $6,949 was comprised of $1,003 in net income and $913 derived from adjustments for non-cash items less a net $8,865 decrease from changes in operating assets and liabilities. The non-cash items included $612 in depreciation and amortization expense and $345 in non-cash stock compensation expense. Trade accounts receivable increased $2,006 during the three months ended September 30, 2009, due to an increase in days sales outstanding, from June 30, 2009. Accounts payable decreased by approximately $2,734 due primarily to the Company accelerating payments for inventory purchases from Nufarm during its acquisition of the remaining noncontrolling interest of S.R.F.A. In addition, we have experienced a reduction of inventories in both our domestic Health Sciences and Crop Protection segments as a result of the Company carrying less inventory due to the current market conditions of the economy and thus have been able to make more timely payments on our inventory purchases. Other accrued expenses and liabilities decreased $3,088 during the three months ended September 30, 2009, due primarily to a decrease in accrued compensation as performance payments were made in September 2009 and a decline in accrued income tax payable, due to the timing of income tax payments partially offset by an increase in accrued expenses related to an increase in Value Added Tax (VAT) for our foreign subsidiaries. Other receivables increased $1,279 due to an increase in VAT taxes receivables in our European subsidiaries and increased receivables related to an advance payment to a supplier. We do not anticipate any significant impact on our liquidity and capital resources to fund ongoing operating expenditures and the continuation of semi-annual cash dividends for the next twelve months due to the decline in our cash position. Our cash position at September 30, 2008 decreased $14,040 from the amount at June 30, 2008. Operating activities for the three months ended September 30, 2008 used cash of $3,038, for this period, as compared to cash provided by operations of $4,007 for the comparable 2007 period. The $3,038 was comprised of $4,551 in net income and $2,099 derived from adjustments for non-cash items less a net $9,688 decrease from changes in operating assets and liabilities. The primary reason for the increase in cash used during the three months ended September 30, 2008 relates to the timing of payments of accounts payable for inventory purchases.
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