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Aceto Corporation (ACET)

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Industry: Consumer Durables
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Aceto Corporation

F4Q08 Earnings Call

September 5, 2008 10:00 am ET

Executives

Ted Ayvas – Director IR & Corporate Communications

Douglas Roth - CFO

Leonard Schwartz - Chairman, CEO and President

Hank Gracin – Securities Counsel of Lehman & Ellen

Analysts

Scott Nussbaum – Broadlawn Capital

Daniel Rizzo – Sidoti & Company

David Jordan – Axiom Capital Management

Christopher Schultz – York Asset Management

Steve Bush – South Paw Investment.

Gene Fox – Cardinal Capital Management

Roger Feldman – West Creek Capital

Lenny Dunn – Freedom Investors

Presentation

Operator

Welcome to the Aceto Corporation fiscal 2008 fourth quarter earnings results conference call. (Operator Instructions)

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 provision 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 may include but are not limited to statements regarding the Company’s strategic initiatives, including selling finished dosage form generic drugs, providing vaccines for companion animals, entering the Japanese pharmaceutical market, the globalization of our nutraceutical business, committing the necessary resources to grow the Company’s business in Vietnam, capitalizing on the sourcing opportunities in highly volatile markets, China and India, 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. Results that could 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.

Now I would like to turn today’s conference over to Mr. Ted Ayvas, Director of Investor Relations and Corporate Communication.

Ted Ayvas

Good morning and welcome to Aceto Corporation fiscal 2008 fourth quarter conference call and audio webcast. With me today is Leonard Schwartz, our Chairman, President, and CEO; Douglas Roth, our Chief Financial Officer; and Hand Gracin of Lehman & Ellen, our outside Securities Counsel.

During this call, Doug will give an overview of the Company’s results for the fiscal fourth quarter and year end June 30, 2008, and Len will discuss the performance of our business segment and provide an update on the strategic initiatives for growth. Following that we will open the call up for questions.

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

Douglas Roth

We are very pleased with the operating results that we have reported this quarter. Both our quarterly and fiscal year results represent record levels of sales, gross profit, net income, and earnings per share and in the case of the fiscal year, these results represent the second consecutive year of record sales and gross profits.

Now let’s take a look at the numbers, looking at the fourth quarter first. Sales increased 20% to $105 million compared to $87 million in the comparable 2007 quarter. Gross profit increased 47% to $24 million from $16.5 million last year. Operating income also increased 104% to $12 million from $5.8 million in the fiscal fourth quarter of 2007. Net income increased 90% to $8 million, the highest quarterly net income ever recorded at Aceto compared to $4.2 million for the 2007 comparable quarter. Earnings per diluted share were $0.32 in the fiscal fourth quarter, surpassing the $0.17 that we recorded last year and also this is compared to the guides at $0.21 per diluted share that we provided with our third quarter results.

Now looking at the full-year results for fiscal 2008, net sales were recorded at $360 million, a 14.7% increase over last year’s results of $313.5 million. Gross profit also increased 23.5% to $67 million compared to $55 million in 2007 comparable period and operating income of 42% to $21.4 million in 2008 compared to $15.1 million in fiscal 2007. The resulting net income was $13.5 million or $0.54 per diluted share compared to $10.2 million or $0.41 for the full-year fiscal 2007.

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

Leonard Schwartz

Obviously, we are very, very pleased with the results. We are really, really pleased. In the fourth quarter, all our business segments performed well, particularly our Health Sciences and Crop Protection segment as evidenced by the across-the-board increase in sales. Sales in our Health Sciences segment grew 35% largely the result of increased sales in both our foreign and domestic operations. We did [inaudible]. This segment was especially profitable for Aceto generating 71% of our fourth quarter gross profit.

This increase in sales can be attributed to the increased line of business for existing products, some of which were more profitable than others. Sales in our Crop Protection segment increased almost 20% from the 2007 comparable quarter, largely the result of increased sales of an herbicide using peanuts, as well as an increase in sales in our sprout inhibitor products, which are used on potato crops. This is a post-emerging prior.

Chemicals & Colorants sales showed modest growth of about 1%. I’d now like to provide you with an update on our current strategic initiatives. Our initiatives to provide vaccines to companion animals continues to move forward. The animal challenge retesting has been completed, and the results which confirm the results with the first set of testing that the vaccine if efficacious. These results have been fully submitted to the USDA. Some of you may recall that we had to redo the testing because the FDA made a mistake in the protocol, although the first set of results showed as efficacious, means it works.

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