ACET

Aceto Corporation (ACET)

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Aceto Corporation (ACET)

F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

November 7, 2008, 10:00 am ET

Executives

Ted Ayvas – Director, Corporate Communications & IR

Doug Roth – CFO

Len Schwartz – Chairman, President & CEO

Analysts

Daniel Rizzo – Sidoti & Company

David Jordan – Axiom Capital Management

Eugene Fox – Cardinal Capital Management

John Roberts [ph]

Las Badri [ph]

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Aceto Corporation fiscal 2009 first quarter results conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.

This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. These 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 “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks” “estimates,” or “variations” of such words are intended to identify such forward-looking statements.

The forward-looking statements contained in this conference call include but are not limited to statements regarding the company's strategic initiatives, including selling of finished dosage from generic drugs, providing vaccines for companion animals, entering the Japanese pharmaceutical market, and prospects for long-term growth.

All forward-looking statements are made as of the date of this conference call and Aceto assumes no obligation to update them other than as required by law. Risks that can cause actual results to differ materially from those set forth or implied by any forward-looking statements can be found in Aceto's filings with the Securities and Exchange Commission which are available at www.sec.gov.

I will now turn the call over to Mr. Ted Ayvas, Director of Corporate Communications and Investor Relations for Aceto. Mr. Ayvas, you may begin.

Ted Ayvas

Thank you. Good morning, and welcome to Aceto Corporation's fiscal 2009 First Quarter Conference Call and Audio Webcast.

With me today are Leonard Schwartz, our Chairman, President and CEO; Douglas Roth, our Chief Financial Officer; and Hank Gracin of Lehman & Eileen, our outside securities counsel.

During this call, Doug will give an overview of the company's financial results for the fiscal first quarter ended September 30, 2008. Len will discuss the performance of our business segments and provide an update on our strategic initiatives for growth. Following that we will open the call for questions.

Now I’d like to turn the call over to Doug Roth. Doug?

Doug Roth

Thank you, Ted. And good morning, everyone. We are very happy with the operating results that we have reported this morning. Quarterly sales increased 18% to $94 million compared to $80 million in the comparable 2008 quarter. Gross profit increased 30% to $19 million from $15 million in the year ago quarter.

Operating income increased 87% to $7 million from $4 million in last year's first quarter. This resulted in our net income increasing 250% to $5 million compared to $1 million in 2008 comparable quarter. Earnings per share were $0.18 in the fiscal first quarter surpassing the $0.05 per diluted share that we reported in the first fiscal quarter of 2008.

Before I turn the call over to Len, I just want to take a minute to look at our cash position and to discuss our repatriation plan and the corresponding tax charge that we took in the first quarter.

As of September 30th we're reporting cash, cash equivalents and short-term investments of $43 million and not all that money is available to use in the U.S. because it's sitting in our foreign subs. As we discussed during our last earnings call, we expect our cash requirements to be approximately $12 million in our Crop Protection segment over the next 12 months to 18 months to pay for capital investments, namely data compensation and task force membership to support our entry into four new products.

We plan to repatriate $13 million from our foreign subsidiaries and we have recorded a tax charge accordingly of $250,000 in the first quarter results to cover the anticipated taxes associated with the repatriation. We anticipate actually putting everything in place and repatriating the cash in our fiscal third quarter. So that's – we hope to have it all done before March 30, 2009.

Now I’d like to turn the call back over to Len.

Len Schwartz

Thanks, Doug. Good morning, everyone. In the first quarter – looking at our business segments, in the first quarter sales in the Health Sciences segment were 21% largely the result of increased sales from our foreign operation, particularly our European operations and increasing sales in our nutritional products and an increase in sales in our domestic generic products group. The increase in sales in our domestic generic products can be attributed to increased volume of business for existing products.

Chemicals and Colorants sales grew 19% compared to the 2008 comparable quarter primarily due to increased domestic sales of pigment, dye and miscellaneous intermediates as well as an increase in sales from our foreign operations.

Unfortunately, sales in our Crop Protection segment decreased 23% from the 2008 comp quarter largely the result of decreased sales of our sprout inhibitor products, which are used on potato crops. These are post-harvest sprout inhibitors, not pre-harvest.

I'd now like to provide you with an update of our current and strategic initiatives. As you know we have three initiatives. The first one is to provide vaccines for companion animals. It's moving forward. During the first quarter we are very pleased to have received a letter from the USDA stating they have accepted the results of our challenge study and that our vaccine was at least as good as other currently available products.

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