Welcome to the Aceto Fiscal 2015 First Quarter Financial Results Conference Call. My name is Lauren, and I will be your operator for today’s 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. I would now like to turn the call over to Ms. Jody Burfening. Ms. Burfening, you may begin.

Thank you, Lauren. Good morning, everyone, and welcome to Aceto Corporation’s first quarter fiscal 2015 earnings conference call. With me today are Sal Guccione, President and CEO; and Doug Roth, Chief Financial Officer. The Company issued its first quarter earnings press release yesterday after the market closed. For those of you who have not yet seen the release, a copy is available in the Investor Relations section of the Company’s website at www.aceto.com. Before starting the call, I’d like to remind you that today’s call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 that can be identified by such words as believe, expect, anticipate, plans, projects, seeks and similar expressions and involve numerous risks and uncertainties. The Company’s actual results could differ materially from those anticipated or implied by these forward-looking statements as a result of certain factors as set forth in the Company’s filings with the Securities and Exchange Commission. In addition, management will be referring to non-GAAP net income and earnings per share. Aceto defines these non-GAAP measures as excluding all transaction costs related to acquisitions. With those housekeeping items out of the way, I would now like to turn the call over to Sal. Good morning, Sal.

Good morning, Jody. Thank you, Jody. Good morning, everyone. Thank you for joining us on Aceto’s first quarter fiscal 2015 earnings call. As we had expected and previously indicated, Aceto’s first quarter gross profit and earnings are below last year’s first quarter primarily due to the tough comparison we have in our Pharmaceutical Ingredients segment related to our high value active pharmaceutical ingredients, which we’ve discussed before and we’ll talk about a little bit more in a little while. In total, net sales were $130.8 million for the quarter, which is a 1.2% increase from the first quarter of fiscal 2014. Gross profit was $27.7 million, which is a decrease of 18% from last year. On a GAAP basis, earnings were $0.17 per share compared to $0.40 per share in fiscal '14 first quarter. Non-GAAP adjusted EPS under our new methodology, which we introduced on last quarter’s call as well as in our shareholder letter, was $0.23 per share compared to $0.44 a share last year. In addition to the Pharma Ingredients decrease that I just mentioned, first quarter was also impacted by slower than expected performance in nutritional products as well as order timing differences within our Performance Chemicals segment. Looking at the segments, a highlight of our first quarter results is the 27% increase in Human Health sales to a level of $49.1 million in the quarter. Human Health segment is now our largest segment accounting for over 37% of our total sales and a little more than half of our gross profit. So that segment continues to grow the way we’ve planned. The increase in the quarter was driven by Rising Pharmaceuticals which benefited from the acquisition of PACK as well as from new generic drugs that we launched in fiscal 2014. I would note that thus…

Thank you, Sal and good morning, everyone. I will be commenting on the Q1 financial results. Net sales for the first quarter of fiscal 2015 were 130.8 million, an increase of 1.2% from 129.3 million reported in the first quarter of fiscal 2014. Total company gross profit was 27.7 million, a decrease of 18% compared to 33.7 million in the first quarter of fiscal 2014. Gross margin for the first quarter was 21.1% compared to 26.1% in the prior year period. On a reported segment basis, human health segment sales were 49.1 million, an increase of 26.8% from the first quarter of 2014. The sales increase was primarily due to an increase in the sales at Rising from both new drug launches -- new drugs launched in fiscal 2014 and the acquisition of PACK which closed on April 30, 2014. This increase was offset by a decline in nutritional product sales due to soft reorders resulting from high customer inventory levels. Human health gross profit was 14.5 million, an increase of 30.5% from the first quarter of fiscal 2014. Gross margin was 29.6 compared to 28.8 last year. Our pharmaceutical ingredients segment sales were 38 million, a decrease of 21.6% compared to the first quarter of fiscal 2014. The sales decline is due a lack of reorders this quarter of a high margin API compared to a large reorder in the first quarter of last year. Gross profit was 6.2 million, a decrease of almost 60% from the first quarter of fiscal 2014. Gross margin for the first quarter was 16.2 compared to 31.5 last year. Finally, our performance chemicals segment sales increased 3.8% to 43.7 million in the first quarter. This increase was primarily due to higher sales of seasonal herbicide in our agricultural protection segment plus a solid…

Thank you. We will now begin the questions-and-answer session. (Operator Instructions) And our first question comes from Daniel Rizzo from Sidoti. Please go ahead. Daniel Rizzo - Sidoti & Company: You indicated that the API order that was present last year but is coming back within this year in small quantities because it’s commercialized now, that’s correct, right, did I get that right?

Yes, that’s correct. And I’ll just note, we do not have any orders on the books right now, but we do expect to have some of that business in the second half of this year and it’s our expectation that will be at lower levels because it’s kind of looking to stay in commercial state now, correct. Daniel Rizzo - Sidoti & Company: So would that be something where you’d receive the order every year for the next several years at lower levels because it is now commercialized and you have the contract or is it something that can come and go in the future?

I don’t know the answer. I do think it will repeat in future years and I do think it will repeat at lower levels than we’ve seen. Whether it’s going to happen on a quarterly basis going forward or still kind of a lumpy basis, I’m not exactly sure. That will be subject for the customer needs on that. Daniel Rizzo - Sidoti & Company: And with the ANDAs you purchased earlier in the quarter or a couple of months ago, are those scheduled to be released by – is this not part of this year but is it part of next year, next fiscal year?

So they’re all filed. From memory, I think one of the three will be launched – or we anticipate it to be launched late this year and then the other two would I think be in next year’s launch projections. Daniel Rizzo - Sidoti & Company: And then last question, with regards to the cash flow you guys generate, your focus now is debt reduction or are you comfortable with where the debt level is or just a little color on what you plan on doing with that?

Dan, our debt level right now is about 108 million and it’s something less than two times our funded debt -- I mean our EBITDA. So as we’ve said, we’re always looking for new opportunities in terms of purchasing ANDAs and growing our generic business. So we have more room in the facility to do that. An example of that are the three ANDAs that we purchased from Par. So absent any investment opportunity then, yes, we’ll use the money to pay down debt. Daniel Rizzo - Sidoti & Company: And then, so going forward, you would be probably more inclined, or it's more likely I should say that you’ll be buying individual product or individual ANDAs versus doing something larger such as what you did with PACK and with Rising, is that accurate?

No, I wouldn’t say one way or the other, Dan. We’re equally happy to pursue either product volumes, ANDAs or entire companies. We’re comfortable with where the debt level is right now and we think we can do both. It’s really more a question of the availability and the opportunity which happens to come along that meets our investment requirements.

Thank you. And our next question comes from Steve Howard from Morgan Stanley. Please go ahead.

Quick question just on the Slide 8 you have in terms of quantifying the yearly launches. Was that taken out of the new slide deck as a result of kind of the slowness of the FDA and trying not to micromanage the overall timing of all the stuff?

A couple of things. On the one hand it was taken out because we think we look at what other folks are doing in the industry, frankly, and we think of maybe a better way to present it in the slides we've included which is more of an aging of the ANDAs and that allows us to speak towards how mature these products are in terms of their standing with the FDA. But certainly that does come back to the fact that we have seen slowness in the approval process. We've seen it go from like 30 months to 36 months to 49 months and now we are probably at 46 months to 48 months where our product is sitting with the FDA and we are waiting for approval. So rather than just putting numbers out there based on assumptions that we have, which we do have, we thought it might be more appropriate to give the aging and then folks can grow draw their own conclusions and conjunctions with what we tell them about what we are seeing at the FDA right now.

And is this something the broader generic community is and elsewhere is making Washington aware of to try to at least stabilize it and maybe get it down?

Yes, absolutely. And so there is two things, one is our industry in general is trying to make its voice heard that there are a lot of ANDAs that have been filed and are waiting for approval, so that's on the one hand, the industry speaking. And to be fair, the FDA itself has said it's got a plan for attacking the level of activity that's there and trying to bring down the approval time line. So the thought is as we go out in the next couple of years, we are going to see these extended time lines come back down. So it actually on both ends. Both the FDA and the industry are in agreement that there is a desire to try to reduce the time for approvals.

And then my final one would be just a little bit more detail perhaps on the impact of the consolidation in the distribution channel and the increased competition. I mean how much more magnified is the situation relative to where you were several quarters ago and how has it impacted your business plan?

That is a good question. So a couple of things. On the industry consolidation, just to be clear on that, we are talking about -- some folks may understand this, some may not. Essentially, a lot of our business goes to wholesalers and the wholesalers then distribute to the pharmacy chains that are out there. And each of the large wholesalers has kind of partnered up with one of the large pharmacy chains. For example, AmerisourceBergen and Walgreens have teamed up and Cardinal Health and CVS have teamed up and they're [indiscernible] date. So what that has done is really caused two things. One is let's say a temporary impact on margins, which we saw in this quarter in the first quarter, we will probably see a little bit in the second quarter. And as they consolidate their inventory, they see they've got too much inventory because they are closing warehouses. The way the industry works, that inventory gets sent back – has got sent back to us and basically we have to accept it. So there is a kind of a margin squeeze that I think is temporary and then should fade away as they can get their new operations going. So that's one. The second is, just by virtue of these larger purchasing partnerships, so to speak, they have stronger purchasing power. That we think will be continuing. We don't know the exact impact. Our estimates are maybe 100 basis points to 200 basis points of margin impact on an ongoing basis. So that's kind of the best take that we have at this moment and we will keep you posted going forward.

Thank you. And our next question comes from Kevin McKenna from Main Line Capital Markets. Please go ahead.

It seems that you had yet another steady quarter in that performance chemicals segment. We call that the old Aceto. The new Aceto is more of the human health and generic drugs. Is there any consideration that that industry is also going through a pretty significant consolidation right now that that might be an asset that you could use to reduce your debt?

It's always a topic that comes up both from outsiders and it is a topic that does get discussed at a Board level. As I mentioned on the last quarter, at this moment in time we've decided that it's an important part of Aceto from a cash flow perspective, from absorbing some of the infrastructure and backbone of the company. So at this moment, it's with us and I'd say that's kind of where we are at at this time. Anything in the future can change, but right now that's where we are with it.

Could you give just any color on how that unit is operating here in this quarter?

So in the quarter that just completed, again, it operated with slow growth which is what we've expected. It was a mixed bag in that it's got kind of two pieces. Specialty chem actually grew in the quarter, ag grew in the quarter, but had really a poor mix effect and so net-net the margins were down. But as I mentioned, we do expect the mix effect to change as about the year ago. So I’d say from the top line, on course with our expectations. And from a profit point of view, we’d expect better going forward.

Thank you. And our next question comes from Andy Summers from Janus Capital. Please go ahead.

A couple of questions for you. Regarding the price increases that you took in the quarter, they look fairly material to us. Should we expect a fallacy in the fourth quarter for you guys for breaking your credit contract with the channel?

Should we see a -- penalty, okay. First of all, you threw me off when you said in the fourth quarter, because we’re a fiscal company. So normally you would see a, what you call, a shelf stock charge in the quarter that you have the price increase.

Just to clarify. So we're June 30, fiscal year end. So we just completed our first quarter going in the second quarter.

So yes, to your point, we do expect to have additional cost in our Rising and our Human Health business in this current quarter, yes, which is our second fiscal quarter.

And the net effect of the price increases relative to the competitive pressures you cited earlier, I’m guessing it's a net positive for the company. Can you clarify that?

Well, I think that’s more than that. We probably can’t say. But we are and we have raised prices selectively. As I mentioned, we've also got for share replaces and the net of the various actions should be a net positive.

And are there other products within your portfolio where you feel like you might have pricing power going forward or do you feel like you sort of pulled that lever to be extent that you can?

It’s one of those things where we look all the time throughout the portfolio. We do -- we want to decentralize the operation so we leave that to the team at Rising to looking for those things. So I don’t have an answer for you specifically other than we continue to look for opportunities.

And then one last question from me. The receivable days that increased over 20 days year-over-year, any color on that?

Andy, the reason for the increase in the DSOs compared to last year is the inclusion of PACK now in our formula. So PACK wasn’t here last year, but we acquired it in April. And when you compare PACK, their DSOs to the Rising DSOs, just as an indicator, there was a little bit more -- their DSOs were a little bit larger than PACK's because of their customer mix, if you will. So now that Rising impact, we're consolidating the contracts with our customers, we expect the DSOs of that segment to come down a little bit. But when we compare to last year, they will be up.

Because it looks like they're up quarter-over-quarter as well pretty significantly.

But again, our last quarter only had two months worth of activity.

Thank you. (Operator Instructions) And our next question comes from Lester Petruzzi. Please go ahead.

I want to start by just thanking you for those new slides you put up overnight, particularly in the corporate presentation Slide 9 and 10. Those are very illuminating and very helpful. So thanks very much for that. I just want to -- I know you’re not going to give guidance out beyond which you’ve already indicated, the double-digit top and bottom line, but could you give us just a hint as to the second quarter? It's going to be [indiscernible] you clearly are intimating that the second half is where you’re going to catch up. But could you at least tell us will the second quarter be sequentially a little stronger than the first?

Les, I appreciate the question. We don’t give the specific guidance like that, as you know. I would say though, again on a qualitative basis as I mentioned, quarters three and four are the ones where we would expect to see substantial differentiation from what we saw here in the first quarter.

I'll try to squeeze two very quickly here. In most recent Chemical Week cover story, actually it was a week ago, it was on chemical distribution. I’m sure you guys have read it word by word. Everyone notes the fury of M&A in the chemical distribution space from the small to the mid-sized to the majors like Brenntag and Univar buying even small, little $10 million and $20 million and $30 million revenue specialty chemical distribution companies. I think you've answered the question as to your intention short term with those assets. But in the recent Univar public offering filings, there is some commentary about growth rates of chemical distribution sales worldwide. And again, Univar is a multi-billion dollar, multinational chemical distributor from commodities to specialties down to the size of Aceto performance business. But in there, they project the continued growth rate above the GDP for chemical sales through distribution. And in fact I think they said from 2014, I'm quoting, through 2018 they see a top line growth rate of 5.6%. Of course that's overall commodities as well as specialty chemical distribution. So is there any reason you would think we would lag that or exceed that? Could you just comment on how you feel going forward, not quarter-to-quarter but over the next five years? Do you envision the sales and net performance to grow at a stronger clip than GDP?

Truthfully, we don't. We hope and we're trying and we've put our action plans in place. But looking at it honestly, we don't see that. And partially to begin just from pure infrastructure, we are very different than Univar obviously and I think that might be part of it. So there could be pockets where we do a little bit better as we talked about in the past. We are very small in Europe. So if we can have some success in establishing a foothold there, maybe we can get pocket the way we get unusually larger than GDP growth. But on the average, we are not counting on [indiscernible].

And to be fair, this is a Red Herring documents I their IPO filings and of course they're going to be optimistic and bullish. So maybe they will not grow at that strong a clip. I was surprised too. But they do talk about the multiples paid for the privatization of these assets 10 to 12 times EBITDA. It's just astounding. It's at record highs. I'd just encourage you to continue. As you say, you have at the Board level to evaluate the timing of maybe making an architectural change like that. Just item last and I promise I'll get off the oxygen. The business, anyone who has found the business understands the inherent lumpiness. I think it has to do with the fact that what appears in the business, you have many products, you did have one product, one customer payers, in other words like the big drug that's causing the difficulty this quarter. You source the one product and you sell it to the one customer under contract like many of the intermediates that are in the pharmaceutical ingredients, even the API, some of them are only for one, whether it's generic or of course ethical. Would you just, sort of back of the envelop, what percentage of our total revenue, is it 30%? Maybe if you exclude the generic drug and the human nutritional, what percentage of our business is tightly by one product, one customer payer which is causing this lumpiness that Wall Street just doesn't understand other than giving us the opportunity to continue to buy shares cheaper on days like today? What percentage, will you just give me like a rough idea? Do you have a sense?

I don't know the number, Les. But what I would say is if we look at it, both the human health, human health group for sure, that's not the situation. So we've got the products going to multiple customers. Performance chemicals, it's pretty broad. So within the pharmaceutical ingredients where you get a lot of kind of this one-on-one type activity, so, and that business is roughly 30% of our total company. So I'd say on the high side it's 30%, maybe it's 20% just a guess sitting here. I don't know the number, but just from a logic point of view you could kind of look into the pharma ingredients segment.

So I will summarize back to the first point I made about the slides in your presentation. That's excellent. And I think how I would summarize this as nothing has changed. Other than a difficult and tough comparison, the investment thesis is intact if we are a more patient investor.

Thank you. Well said and that's our feeling about it. The change I guess is that human health continues to become a larger and larger piece of Aceto. But from a strategy point of view, it's all same.

Thank you. I would now turn the call over to Sal Guccione, CEO, for closing remarks. Please go ahead.

Okay. Again, thank you again for joining us here today. As we just said, we feel good and confident about the fact that Aceto remains on track for long-term growth. We will look forward to speaking with you again in February and wish you all happy holidays or the December, or November December time frame. See you in February. Thank you.

Thank you. And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.