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ACETO Corporation Q4 net sales were $146.6 million, 5% better

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ACETO Corporation
ACETO Corporation   Total company gross profit was $41.2 million

ACETO Corporation announced financial results for the fourth quarter of fiscal 2015 ended June 30, 2015. Net sales were $146.6 million, an increase of 5% from $139.6 million reported in the fourth quarter of fiscal 2014.

Total company gross profit was $41.2 million, an increase of 41.8%, compared to $29.0 million in the fourth quarter of fiscal 2014. Gross margin for the fourth quarter was 28.1% compared to 20.8% in the prior year period.

Human Health segment sales were $64.5 million, an increase of 35% , compared to $47.8 million for the fourth quarter of fiscal 2014. The revenue increase was due to an increase in sales at Rising resulting from the acquisition of PACK Pharmaceuticals on April 30, 2014 and strong unit sales of two products which experienced recent price increases.

Nutritional product sales both in the U.S. and abroad were lower due to softer volumes from customers and the reduction of royalty income from a proprietary product. Gross profit for the Human Health segment was $24.9 million, an increase of 74.8%, compared to $14.3 million for the fourth quarter of fiscal 2014.

Gross margin for the fourth quarter was 38.7%, compared to 29.8% in the prior year period. The increase in gross margin was primarily due to the acquisition of PACK, as well as the realization of price increases on certain Rising products among other factors.

Pharmaceutical Ingredients segment sales were $38.2 million, a decrease of 10.5%, compared to $42.7 million for the fourth quarter of fiscal 2014. The segment's sales were adversely affected by the weakening of the Euro, offset in part by a re-order of a certain high-margin active pharmaceutical ingredient product.

The unfavorable impact of the Euro rate variance for the quarter compared to last year's quarter was $4.5 million in sales and $0.9 million in gross profit. Gross profit in the quarter was $6.9 million, an increase of 12.3%, compared to $6.2 million for the fourth quarter of fiscal 2014.

Gross margin for the fourth quarter was 18.2%, compared to 14.5% in the prior year period, reflecting a more favorable mix of active pharmaceutical ingredient products.

Performance Chemicals segment sales were $43.9 million, a decrease of 10.6%, compared to $49.1 million for the fourth quarter of fiscal 2014, primarily due to reduced sales of specialty chemicals for pigments, coatings and agricultural intermediates versus 2014.

Gross profit was $9.3 million, an increase of 8.3%, compared to $8.6 million for the fourth quarter of fiscal 2014. Gross margin was 21.2% for the fourth quarter compared to 17.5% in the prior year period reflecting a more favorable product mix and continued strong demand for fungicide products.

Total selling, general and administrative expenses were $16.8 million compared to $18.0 million in the same period last year, a 6.4% decrease. Selling, general and administrative expenses included $1.9 million of SG&A expenses from PACK Pharmaceuticals, of which $1.2 million was amortization expense related to acquired intangible assets.

The SG&A expense declined in the quarter as a result of a $3.5 million reduction of contingent consideration related to the acquisition of PACK Pharmaceuticals, which was partially offset by a $1.6 million environmental remediation charge related to the Arsynco property. Research and Development expenses in the fourth quarter totaled $2.7 million compared to $2 million in the prior year period.

The majority of R&D expenses are milestone based, and will fluctuate quarterly.

Operating income totaled $21.6 million, an increase of 139.2% versus the fourth quarter of fiscal 2014. A gain of $1.2 million, or approximately $0.02 per diluted share, was recorded in the quarter due to favorable foreign currency exchange related to the Euro.

Net income was $13.6 million, or $0.46 per diluted share, compared to net income of $5.6 million, or $0.19 per diluted share, for the comparable quarter of fiscal 2014.

Non-GAAP Adjusted Net Income was $14 million in the fourth quarter, compared to $7.6 million in the prior period, an 85.4% increase. Non-GAAP Adjusted Earnings per Share were $0.48, compared to $0.26 in the year ago fourth quarter, an 84.6% increase.

Full year financial review

Net sales for the twelve month period ended June 30, 2015 were $547.0 million, an increase of 7.2% from $510.2 million reported for the twelve month period ended June 30, 2014. On a constant currency basis, net sales increased by 10.1% in fiscal 2015.

Total company gross profit was $135.4 million compared to $114.7 million in fiscal 2014, an increase of 18.1%. Gross margin for fiscal 2015 was 24.8% compared to 22.5% in the prior year.

Human Health segment sales were $225.3 million, an increase of 40.6%, compared to $160.2 million for fiscal 2014. The sales increase was primarily due to an increase in sales at Rising resulting from the acquisition of PACK Pharmaceuticals on April 30, 2014.

Net sales were also positively impacted by a change in estimate for product returns due to the most recent returns experience, as well as price increases on certain products. Nutritional product sales both in the U.S. and abroad were lower due to soft reorders resulting from high customer inventory levels, as well as from increased competition.

Gross profit for the Human Health segment was $75.7 million, an increase of 56.2%, compared to $48.5 million for fiscal 2014. Gross margin in the 2015 year was 33.6%, compared to 30.3% in the prior year period.

The increase in gross margin was due to the acquisition of PACK, sales volume increases on certain product launches that occurred in the past two years, and price increases on certain products, offset somewhat by a decline in gross profit on lower nutritional product sales.

Pharmaceutical Ingredients segment sales were $149.3 million, a decrease of 15.4%, compared to $176.4 million for fiscal 2014. Gross profit was $26.7 million, a decrease of 27.1%, compared to $36.6 million for fiscal 2014. Gross margin for fiscal 2015 was 17.9%, compared to 20.8% in the prior year period.

The segment's sales and gross profit declines were primarily due to a drop in sales of the high-margin API that positively impacted fiscal 2014 results, the unfavorable impact of foreign exchange and a decrease in sales of two other active pharmaceutical ingredients versus last year.

Performance Chemicals segment sales were relatively unchanged at $172.4 million, compared to $173.5 million for fiscal 2014.

Gross profit was $33.0 million, an increase of 11.5%, compared to $29.6 million for fiscal 2014, due to a more favorable mix of both specialty chemical and agricultural product sales including a fungicide used to prevent disease on pecan crops.Gross margin was 19.1% for fiscal 2015 compared to 17.1% in the prior year.

Total selling, general and administrative expenses were $73.2 million compared to $65.2 million in the prior year, a 12.2% increase. As a percentage of sales, SG&A increased to 13.4% from 12.8%.

Selling, general and administrative expenses included $10.2 million of SG&A expenses from PACK Pharmaceuticals, of which $4.8 million was amortization expense related to acquired intangible assets. In addition, we recorded a $3.5 million reduction of contingent consideration related to the PACK acquisition.

Research and Development expenses in fiscal 2015 totaled $5.9 million compared to $5.2 million in the prior year.

Operating income totaled $56.3 million, an increase of 27.2% versus $44.3 million in fiscal 2014. Interest expense in fiscal 2015 was $4.0 million compared to $2.1 million in the prior year reflecting higher average balances outstanding under the credit agreement entered into in connection with the purchase of PACK Pharmaceuticals.

Net income was $33.5 million, or $1.14 per diluted share, compared to net income of $29.0 million, or $1.02 per diluted share, for fiscal 2014.

Non-GAAP Adjusted Net Income was $38.9 million compared to $34.7 million in the prior period, a 12% increase.

Non-GAAP Adjusted Earnings per Share were $1.33, compared to $1.22 in the year ago period, a 9% increase.


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