Dear Fellow Shareholders:
OnbehalfoftheBoardofDirectorsandouremployeesonthreedifferentcontinentsweareverypleasedto presenttoyou withour fiscalyear ending June30,2013AnnualReportonForm10-Kandtheassociatedcorporate proxystatement.We achievedall timerecordlevelsintotal revenue,earnings pershare,andEBITDA, acommonly usedmetricinthefinancialcommunity,whilecontinuingtoexecuteupon ourstrategic plan.Thisperformance continues a 4-year growth trend in these importantmetrics. All three of our businesssegments, Human Health, Pharmaceutical Ingredients, and Specialty Chemicals achieved improvedsales and profitability on a year-on-year basis in 2013 andare important to our continuedprosperity.
Adjusted5YearSelectedFinancialData
(in millions,exceptpershare amounts) | 2013 | 2012 | 2011 | 2010 | 2009 |
NetSales | $499.7 | $444.4 | $412.4 | $346.6 | $322.6 |
EBITDA* | $46.9 | $36.0 | $25.1 | $17.9 | $14.7 |
EarningsPerShare(non-GAAP)* | $0.89 | $0.65 | $0.47 | $0.39 | $0.35 |
CashDividendsPerShare | $0.22 | $0.20 | $0.20 | $0.20 | $0.20 |
*AreconciliationtothemostdirectlycomparableUSGAAPmeasureisprovidedontheinternetatwww.aceto.com
Weachieved theseall-timerecordlevels ofperformancewhilecompleting atransitionwithintheC-suite,whichwasplannedandimplemented overthepasttwoyears.Asmany ofyouknow bynow,andcanbeseenfrom thesignatures atthebottom of this letter,effective this pastJanuary1st. I(SalvatoreGuccione) became theChief ExecutiveOfficer andI(Albert Eilender) retained the position of Chairmanof the Board.The BoardofDirectors hasfelt that the longer term goalofseparating the C-Suitefunctionswas desirable. From aGovernancestandpoint aswellas awaytomoresharplyfocus attention onboththe operationalandstrategic issuesfaced byacorporation in today’sever growing complexworld, a distinction in responsibilities isbeneficial.
Asourshareholder youhavewitnesseda fundamentalstrategicshift inthedirectionoftheCompany.Atthispoint intime63%ofourrevenueand72%ofourprofitsaregeneratedbybusinesssegmentsrelatedtoindustriesthat provideproductsfor directhumanconsumption and humanhealth benefit.Thisshiftin ourbusinessis astrategic,wellthoughtout planwhichwillcontinue. Evenas ourongoingemphasistowards productsfor human consumptioncontinueswithincreasingglobal demand adriverforgrowth,wehavenot howeverabandoned thefoundations ofwhatwas thecore chemicaldistributionsector.We continuetosupportthatarea of thecompany through geographicandproductlineexpansion, aswellas additionalhuman capital asisrequired to achieveour growth initiatives.
OurcommitmenttoQUALITYASSURANCEisthebasisofallourbusinessactivities.Theinteractionswithsuppliers andcustomersfocusonqualityandthat is somethingwithwhichthereisnocompromise.Withthat as apremise, coupledwiththeeffortsofourpersonnel inHamburgGermany,MumbaiIndia,andShanghaiChina,amongother companylocations,weareabletoleverageourcorebusinesscompetenciesofproductsourcing,logistics, technicalandregulatorysupportaskeystoourvalue-addedpropositionthatisthecornerstoneof the ACETOCorporation.
FINANCIALREVIEW
NetsalesforthefiscalyearendedJune30,2013were$499.7million,a12.4%increasefrom$444.4millionforfiscalyear2012.Grossprofitforfiscal2013was$98.3million,anincreaseof19.8%from$82.0millioninfiscal2012.Forfiscal2013,theCompany’snetincomeincreasedby31.5%to$22.3million, or$0.81perdilutedshare, comparedto$17.0million,or$0.63perdilutedshareinfiscal2012.Afteradjustingforcertainchargesin both years, ACETO’s netincome forfiscal2013was $24.3 million,or$0.89per diluted share,comparedto$17.5million, or $0.65 per diluted share, for fiscal2012.
TheCompanyendedfiscal2013withastrongbalancesheetwithover$35.0millionincash,cashequivalentsandshortterminvestments.Ourstrongoperatingperformanceallowedustoreduceourbankdebtby$13.7million during 2013 to $32 million, leavingus withessentially zeronet debt at the end of the fiscal year.
ALOOKAHEAD
Webegin fiscal2014withpositivemomentumand wearewellpositionedtoinvestinourgrowthinitiatives.As we continuetogrowthecompanywewilldosobyfocusingonbothinternalandexternalactivities.
Theinwardfocusistocontinuetoseekadditionalproductsandmarketstoexpandourproductofferings.Thekey questionthatisaskedoneverysalescallis…”whatadditionalproductsorneedsdoyouhavenow orwillyouhave intheforeseeablefuture?” OurinternalbusinesspipelinesintheHumanHealthandPharmaceuticalIngredients areascontinue todevelopandwill,inpart,be the basis forgrowthin the yearsahead.PerformanceChemicals has twobusiness unitsassociatedwithinthissegment. Inthehistoricalchemical distributionbusinessweare activelyengaged inseeking additional products, productlines andgeographic opportunities toenhancethatbusiness.In theAgriculturalProtectionProductscomponentwecontinually interactwithourmajorfarmdistributionpartners tosearchout new product opportunitieswherewe canprofitablyenter newmarkets. We areof course always cognizant of theneed to control costs; our attention to the bottom line isunwavering.
Ontheexternalside,weareinterested,whereprudent,inacceleratingourgrowthbymakingacquisitionswhich addtoourstrategicbusinessvision.We havethispastyearlookedatandevaluatedanumberofacquisition opportunitieswhich,foronereasonor another,eitherdid notmeetour long-term objectives orwound upbeingmore costlythanwefeltwasappropriateforour company.We continuetoexploreexternal growthinitiativesas an ongoingprocess, butthereisnoway of predictingwhen or ifwewill beabletobringanexternalacquisition tofruition. Ourguidingprinciple in thisregard,isthat ourlong-termfinancialwell-beingshould notbe putatriskfor anyacquisitionand that the firstfullyearpost acquisitionshouldbeaccretive.
CLOSING
Aswasmentionedinlastyear’sshareholderletter,wehavecontinuedtobeactivethispastyearinouroutreachto bothcurrentandpotentialshareholders,andatsponsoredfinancialinstitutionalconferences.Ourobjectiveis twofold:to increase the awareness of ourCompanywithin thefinancial and investmentcommunities and to potentially bring our company to the attention of thosewhomight have interest ineither partnering or divesting theircompanies,productlinesorinsomeothermannerengagingwithusinabusinessrelationship.Weare alwaysseekingnewvenuesandopportunitiestotellthe ACETOstoryandshareourvisionforthe Company’sfuture.
Thisfiscalyearourstockpriceincreasedby54%afterseeinga35%increaselastyear.Webeganthefiscalyear tradingat $9.03pershareand closed ourfiscalyear onJune30,2013at$13.93pershare.Wefirmly believethat, ultimately,itisourfinancial performancewhichwillindicatehowwearetrulyperceivedandvaluedbythe investment communityand in thatregard, performanceisboth our driving and guiding force.
Wearepleasedtohaveannounceda9%increaseinthequarterlydividendbringingtheprojectedyearly distributionamountto$0.24/share.ThisincreasereflectsourstrongconfidenceinthefutureofourCompanyand thestrengthof ourfinancialposition. Ourshared objectiveis tocontinue to buildlong-termshareholdervalue throughsustainable topandbottom line growth.
Ourappreciationisongoingtoallouremployees,customers,suppliersandstakeholdersfortheirsupport, contributionsandcommitmentaswecontinuallystrivetoimproveyourcompany.
Lastly,wewouldberemissifwedidnotconveyoursincereappreciationtoRobertWiesenwho,for20yearsasamemberoftheACETOBoardofDirectors,providedvaluableguidanceonawiderangeofissues.RobwillnotbestandingforelectionatourAnnualMeeting.Rob’spastcontributionstoAceto,aswellasthepastandcontinuing guidanceandadviceprovidedby the entire Aceto Board of Directorsarevery muchappreciated.
Sincerely,
Albert L. Eilender | Salvatore J. Guccione |
Chairman of the Board | Chief Executive Officer |