Aceto Corp. Reports Operating Results (10-Q)
Aceto Corp. has a market cap of $204.7 million; its shares were traded at around $8 with a P/E ratio of 26 and P/S ratio of 0.5. The dividend yield of Aceto Corp. stocks is 2.5%. Aceto Corp. had an annual average earning growth of 5.8% over the past 10 years.ACET is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Chuck Royce of Royce& Associates.
Highlight of Business Operations:We are reporting net sales of $87,660 for the three months ended September 30, 2010, which represents a 24.1% increase from the $70,609 reported in the comparable prior period. Gross profit for the three months ended September 30, 2010 was $13,287 and our gross margin was 15.2% as compared to gross profit of $11,816 and gross margin of 16.7% in the comparable prior period. Our selling, general and administrative costs (SG&A) for the three months ended September 30, 2010 declined 5.4%, when compared to $10,140 we reported in the prior period. Our net income increased to $2,797, or $0.11 per diluted share, compared to $1,003, or $0.04 per diluted share in the prior period.
Net sales for the Health Sciences segment increased $4,956 or 12.6% to $44,296 for the three months ended September 30, 2010, when compared to the prior period. Overall, the domestic Health Sciences group had an increase of $3,173, when compared to the prior period, which represents increases in both our domestic generics product group of $1,878 and our domestic pharmaceutical intermediates of $1,707. The increase in our domestic generics product group is due to reorders of existing products. The increase in domestic pharmaceutical intermediates, which represent the complex chemical compounds that are the building blocks used in producing APIs, is due to the sale of certain new products. In addition, the Health Sciences segment saw an increase in sales from our international operations of $1,782 over the prior period, particularly in Germany.
Net sales for the Specialty Chemicals segment were $36,842 for the three months ended September 30, 2010, an increase of $9,010 from net sales of $27,832 for the prior period. Our chemical business consists of a variety of products, customers and consuming markets, most of which is affected by current economic conditions. As previously mentioned, the index for consumer durables, which impacts the Specialty Chemicals segment, expanded at an annual rate of 7.8%, resulting in increased sales of this segment. Sales of our chemicals used in surface coatings increased $3,709 from the prior period, as well as sales of agricultural, dye, pigment and miscellaneous intermediates which together increased $1,620. Both of these increases represent increased demand in sectors that are affected by general economic conditions. Chemicals used in aroma products had also risen by $642. In March 2010, the Company acquired certain assets of Andrews Paper & Chemical, Co., Inc., a supplier of diazos and couplers to the paper, film, and electronics industries. In this first quarter, we experienced sales of these products of $718, where there was no comparable amount in the prior period. In addition, we experienced an increase in sales of specialty chemicals from our international operations of $1,419.
For the three months ended September 30, 2010, operating income was $3,690 compared to $1,676 in the prior period, an increase of $2,014 or 120.2%. This increase was due to the overall increase in gross profit of $1,471 and the decline in SG&A of $543 from the comparable prior period.
At September 30, 2010, we had $40,113 in cash and cash equivalents, of which $30,786 was outside the United States, $402 in short-term investments and $5,550 in bank loans. Working capital was $128,573 at September 30, 2010 versus $120,924 at June 30, 2010. The $30,786 of cash held outside of the United States is fully accessible to meet any liquidity needs of Aceto in the particular countries outside of the United States in which it 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, 2010 increased $9,263 from the amount at June 30, 2010. Operating activities for the three months ended September 30, 2010 provided cash of $2,634, for this period, as compared to cash used in operations of $6,949 for the comparable period. The $2,634 was comprised of $2,797 in net income and $748 derived from adjustments for non-cash items less a net $911 decrease from changes in operating assets and liabilities. The non-cash items included $811 in depreciation and amortization expense and $220 in non-cash stock compensation expense. Trade accounts receivable decreased $18,423 during the three months ended September 30, 2010, due to decreased sales during the first quarter of 2011 as compared to the fourth quarter of 2010, as well as a decrease in days sales outstanding, from June 30, 2010. Accounts payable decreased by approximately $10,859 due primarily to the continuation of Crop Protection advance purchases of Glyphosate, for sales to occur in the fiscal 2011 growing season. Accrued expenses and other liabilities decreased $6,429 due to a decline in advance payments from customers and a decrease in accrued compensation as performance payments were made in September 2010 offset in part by an increase in Value Added Tax (VAT) for our foreign subsidiaries, particularly Germany. Other receivables increased $969 due to an increase in VAT taxes receivables in our German subsidiaries. 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, including $2,006 increase in trade accounts receivable due to an increase in days sales outstanding and a decrease in accrued expenses and other liabilities of $3,088.
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