Aceto Announces Fiscal 2010 Second Quarter Results

Net sales for the fiscal 2010 second quarter were $70.9 million, a decrease of 4.5% from $74.2 million in the year ago quarter. Gross profit decreased 8.2% to $10.8 million in the 2010 fiscal quarter compared to $11.7 million in the 2009 quarter. SG&A expenses increased 36.5% to $14.2 million in the 2010 fiscal quarter compared to $10.4 million in the year ago comparable quarter. The fiscal 2010 quarter has been negatively impacted by three one-time, pre-tax, charges we have previously disclosed. The first charge of approximately $2.6 million represents costs associated with the separation of our former Chairman and CEO, principally for salary and other related compensation. The second charge, approximately $1.2 million, is related to the previously announced rationalization review of our SG&A. Absent these charges, our SG&A would have been approximately $10.4 million. The third charge negatively impacting the quarterly results is a $0.9 million non-cash charge to cost of sales related to a write-down of certain inventory items to estimated net realizable value. As a result, we ended the fiscal 2010 second quarter with a net loss of $2.5 million, or ($0.10) per diluted share compared to net income of $1.1 million or $0.04 per diluted share in the 2009 quarter.

Net sales for the six months ended December 31, 2009 were $141.5 million, a 15.8% decrease from $168.1 million for the fiscal 2009 comparable period. Gross profit for the first half of fiscal 2010 was $22.6 million, a decrease of 26.4% from $30.7 million in the first half of fiscal 2009. For the first half of fiscal 2010, we had a net loss of $1.5 million, or ($0.06) per diluted share, compared to net income of $5.6 million, or $0.23 per diluted share in the first half of fiscal 2009.

Albert Eilender, Non-Executive Chairman of Aceto stated, "We are pleased that both an SG&A rationalization review and the review of our inventory by product line are now behind us. Had it not been for the charges resulting from these reviews, and the costs related to the Companys separation with its prior Chairman and CEO, we would have reported net income of $0.03 for the quarter and $0.07 for the six month period ending December 31, 2009. With these charges behind us, we are now able to move forward with a newly invigorated organization."

Commenting on the Companys second quarter performance, Vincent Miata, CEO & President of Aceto stated, "During the quarter sales in our Health Sciences segment increased 3.4% from the comparable quarter. This increase was primarily due domestically to the realization of new products from our pipeline in the generics product group and the increased penetration of our customer base in the domestic nutraceuticals products group, and increased reorders of existing products in our foreign operations. These increases were partially offset by a decline in sales of domestic pharmaceutical intermediates. In order to more accurately portray the scope of its business activities, we have changed the name of our Chemicals & Colorants segment to Specialty Chemicals. In our Specialty Chemicals segment, sales declined 16.2% on the same quarter comparison basis largely due to the tough economic conditions continuing to affect all of the chemical consuming industries that the Specialty Chemicals segment serves. Sales in our Crop Protection segment declined 5.6% from the same quarter last year, largely due to a decline in the sales of a herbicide primarily used on peanuts due to the lower number of peanut acres planted."

Updating the current status of Acetos various business initiatives, Mr. Miata commented, "Regarding our animal vaccine project, the process with the USDA is still ongoing. Aceto was notified by the USDA this past November that testing of certain samples was unsatisfactory. They requested that we provide them with a new sample from the original lot of vaccine for retesting which was provided to them in December, and we are still awaiting their results. Retesting of the same sample submitted to the USDA by the product manufacturer confirmed its original test results that the vaccine is within all specifications submitted to the USDA. In addition, we did submit the compilation of our field safety testing data and at this point in time, have provided all of the information that the USDA has requested from us. Our Japanese initiative continues to gain traction and we continue to view this as a good, long-term, business opportunity for Aceto. This initiative represents a geographic expansion of an existing business model, not a new business for the Company, and as such, going forward we intend to treat Japan as another market within our Health Sciences business segment. Our effort to sell finished dosage form generic drugs continues to move forward and we are working on further enhancing our product pipeline. We continue to believe that this will prove to be a viable long-term business opportunity for Aceto."

"In our Crop Protection business, we have started to see the balance sheet effect of entering the Glyphosate market for the 2010 growing season. In the most recent quarter, our cash position declined while our inventory levels and accounts payable both increased, in large part due to our purchases of Glyphosate."

Mr. Miata continued, "During the past several months, we have conducted a comprehensive review of our operating structure, both here in the United States and globally. As a result, we have restructured the way Aceto conducts its international business operations into a management matrix that consists of international, regional and local leaders. This approach has been adopted from the successful implementation of our global nutraceutical business. I believe that these changes will result in Aceto being more focused than ever before and will lead to a more profitable company."