U.S. Markets open in 3 hrs 58 mins

Edited Transcript of ACET earnings conference call or presentation 28-Sep-18 1:00pm GMT

Q4 2018 Aceto Corp Earnings Call

Lake Success Oct 1, 2018 (Thomson StreetEvents) -- Edited Transcript of Aceto Corp earnings conference call or presentation Friday, September 28, 2018 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jody Burfening

Lippert/Heilshorn & Associates, Inc. - MD and Principal

* Rebecca A. Roof

Aceto Corporation - Interim CFO

* Steven Rogers

Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary

* William C. Kennally

Aceto Corporation - President, CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Leonard Euler Dunn

* Matthew Gregory Hewitt

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Richard Thomson

* Timothy John Stabosz

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Hello, and welcome to the ACETO Corporation Fourth Quarter Fiscal 2018 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded.

I would now like to turn the conference over to Jody Burfening. Ms. Burfening, please go ahead.

--------------------------------------------------------------------------------

Jody Burfening, Lippert/Heilshorn & Associates, Inc. - MD and Principal [2]

--------------------------------------------------------------------------------

Thank you, Keith. Good morning, everyone, and welcome to ACETO Corporation's Fourth Quarter Fiscal 2018 Earnings Conference Call. With me today and providing comments on this call are Bill Kennally, President and CEO; and Becky Roof, Chief Financial Officer. Frances Scally, Senior Vice President and Chief Accounting Officer; and Steve Rogers, Chief Legal Officer, are also with us today to participate in the Q&A session.

The company issued its fourth quarter earnings press release earlier this morning. 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 words such as belief, expects, anticipates, plans, projects, seeks and similar expressions that 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 that are set forth in the company's filings with the Securities and Exchange Commission and the factors outlined in the fiscal 2018 fourth quarter earnings press release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Also on today's call, management will be referring to certain non-GAAP financial measures. These measures, ACETO's adjusted net income and ACETO's adjusted earnings per share, are defined as net income excluding amortization and impairment of goodwill and other identifiable intangible assets, separation costs, amortization of debt discounts, debt issuance costs and deferred financing costs, transaction costs related to acquisitions and the impact of the Tax Cuts and Jobs Act and the impact of Accounting Standards Update 2016-09 and valuation analysis and its allowance on net U.S. deferred tax assets.

These non-GAAP measures allow investors to compare results of operations in the current period to prior period results based on the company's fundamental performance and analyze operating trends of the business.

Finally, before turning the call over to Bill, I'd like to remind everyone that the purpose of today's call is to review and discuss ACETO's financial performance and operating performance for the results for the fourth quarter. As a reminder, last April, the board initiated a strategic alternatives review process with the assistance of its financial and legal advisers, PJT Partners and Lowenstein Sandler, respectively.

The board has indicated it will not comment on the process until and unless it has approved the transaction or otherwise determined that future disclosure is appropriate or required by law. Therefore, it would be appropriate -- inappropriate rather, for management to comment on or respond to questions about the process, while it is underway. Again, we appreciate your understanding and patience.

With those housekeeping items out of the way, I would now like to turn the call over to Bill. Good morning, Bill.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, Jody. Good morning, everyone, on this rainy Friday, and thanks for joining us today for our fourth quarter call. Before starting my prepared remarks, I wanted to express my appreciation and the entire teams' appreciation for your patience in waiting for us to report our results. Changing our reporting date on short notice wasn't a decision that we made lightly, but it had to be done. We found ourselves in the position of having to file an extension at the 11th hour due to issues that arose around our deferred tax assets, and Becky will cover this matter in her prepared remarks in a few minutes.

As for our fourth quarter performance, we brought a difficult fiscal year to a close during the fourth quarter, but also laid the foundation for a reset and return to profitability in the future. Growth in sales and gross profit from our Pharmaceutical Ingredients and Performance Chemicals segments were overshadowed by declines from our Rising business. We're all familiar with the industry headwinds that have eroded profits at most generic companies in the industry, including ours, and conditions in the fourth quarter were no exception.

Several of our higher profit products were subject to increased competition, resulting in lower pricing. And our new product launches generated lower-than-expected returns.

Failure-to-supply penalties had an unfavorable impact on revenue and gross profit in the quarter as we continue to recover from supply interruptions with some of our products, although I will note that we have made significant progress here since earlier this year when we began to track this closely.

Our Pharmaceutical Ingredients and Performance Chemicals segments, once again, were reliable generators of operating cash flow. And as a result, we produced cash provided by operating activities of $45.4 million during the quarter, which amounted to 45% of the $101.8 million generated for all of fiscal 2018.

So let's look at the performance in each of our reporting segments. In Human Health, much like what has been seen in earlier quarters, competitive pressures and failure-to-supply claims with our Rising business negatively impacted revenue and gross profit. Our nutritionals business continue to perform well, generating a 10% increase in sales and gross margin expansion.

While generic industry headwinds have a negative impact on Rising's financial results, operationally, we accomplished a great deal during the fourth quarter and put in place procedures and disciplines that will help us to improve our performance and results for fiscal 2019.

We have built robust procedures and processes around the failure-to-supply notifications we get from customers, while significantly improving our product safety stock levels, which will put us in a much better position to adjudicate and reduce claims. The failure-to-supply claims we are getting from our customers are providing a significant revenue stream for them and are complicated to reconcile.

As an example, we recently received notification of a $3.2 million claim from 1 customer, yet after we concluded our research, $2.8 million was unwarranted. Adjudicating these claims involves hundreds of thousands of line item detail, which requires research and cross-functional teamwork from multiple stakeholders on the Rising team as well as with the reconciling process we go through with our customers.

Of course, the best fix to the problem is to eliminate backorders; and as previously stated, we have made significant progress to that end goal. We previously communicated our expectations that supply penalties would be reduced in the fourth quarter. Capacity constraints, which we are managing through, along with the quality issue with 1 partner that led to 2 product discontinuations slowed our progress with our supply continuity in the quarter.

Recent analytics have shown approximately an 80% improvement in our safety stock since earlier this year, and we have forecasted 25% of what we paid out in fiscal year 2018 in failure-to-supply claims, most of which we expect to realize in the first half of this fiscal year.

And barring additional partner issues related to either capacity or quality, we feel very confident that we have a handle on our future. Failure-to-supply claims we receive from our customers because of the procedures and disciplines that have been put in place are really the reason for that.

Understanding that, eliminating backorders in a business of our scale is nearly impossible. A healthy supply chain turns failure-to-supply claims from being a significant drain on profitability to a less significant financial issue, and we are clearly moving in that direction.

We completed the installation of a new state-of-the-art ERP system unifying 3 disparate systems on budget, giving us uniform metrics and tools to better manage our business with relationships with customers and partners.

We remain on track to have our new expanded warehouse fully operational by the end of calendar 2018. We previously communicated that once we're up and running, we would begin to realize savings and we are now beginning to account for this.

To layer in more complex higher value ANDAs over the course of the next few years, we have made strategic decisions to rationalize and, substantially, reduce the number of products in our pipeline due to market conditions and technical challenges with a goal of concentrating on more differentiated product selections. We started this year with 133 pipeline products and ended the year with 87, having parked 35 products in fiscal 2018 and terminated 4 ANDAs.

We added 11 new products to the pipeline, products that provide high barriers to entry and are more differentiated and launched 18 products during fiscal 2018, which was in line with our goal of launching 15 to 20 products during the year. Since our third quarter call last May, when we reported a pipeline of 106 products, we launched 3 already approved products, parked 13 molecules and terminated 3 ANDAs. We ended the year with a commercialized portfolio of 125 products compared to 140 at the beginning of the year.

We currently have 29 ANDAs on file and 10 products approved for launch. In contrast, last quarter, we reported 37 ANDAs on file and 15 products approved for launch. In terms of ANDAs on file, since the third quarter call, 2 were approved, 2 were terminated and 8 were parked. We also filed 4 ANDAs.

The delta from 15 to 10 products approved for launch consists of 3 product launches, 4 parked products and 2 approved ANDAs. In total, we parked 13 products during the fourth quarter. In terms of ANDAs under development, we started the year with 54 and ended with 48. Four of the ANDAs were moved to file, 1 ANDA was parked and 1 product was terminated. The changes were due to market conditions and technical issues.

One final comment about Rising. On a positive note, last July, we received a favorable ruling from the Federal Claims court concerning the 11 contracts under which we had been supplying certain products to Department of Veterans Affairs. The ruling invalidated the VA's interpretation of the Buy American Trade Agreement clause. And without getting into the legal minutiae of the case and assuming the decision holds up on appeal, we will continue to be able to rebid on most of the contracts previously terminated.

Turning to Pharmaceutical Ingredients. Sales, gross profit and gross margin grew significantly over the last year's fourth quarter, continuing the third quarter rebound from a soft second quarter, and giving us a strong finish for the second half of the year compared to the first half. Strong demand for APIs out of our German subsidiaries in Singapore and an improved performance in the U.S. drove these gains.

In Performance Chemicals, we sustained our strong third quarter results posting sales at $50 million and gross profit of approximately $11 million, while Specialty Chemicals and ag protection products delivered higher sales and gross profit.

In Specialty Chemicals, the value of our sourcing relationships in China once again played a key role in a spike in sales of key product that was subject to an industry shortage due to supply chain challenges. And our team continues to do a great job of providing transparent channel of information to customers about plant shutdowns in China.

In ag protection products, we saw a surge in demand for a fungicide used to prevent disease on pecan crops due to a long period of rain in South Georgia. As inventory has cleared out of the channel, we're in good position to deliver strong sales of this product in fiscal 2019.

Turning to fiscal 2019 -- excuse me. We are focused on delivering sales growth across each of our businesses and restoring company-wide profitability through astute portfolio management and continued leveraging of our durable core competencies and regulatory support, quality assurance and sourcing relationships. For those parts of our business impacted by the 10% tariffs on Chinese imports that went into effect last week, we're implementing response plans designed to protect our margins. Should the administration follow through with an increase in tariffs on imports from China to 25% by year-end, we will conduct further analysis on portfolio profitability. We could -- but we could face some exposure there.

At Rising, we have made considerable strides towards rationalizing the portfolio and plan to launch another 15 to 20 generic products, adding new manufacturing partners and injecting more complexity into the commercialized portfolio. We plan to spend just under $8 million in R&D milestone payments.

During fiscal 2019, our new ERP system, expanded warehouse facility, proactive portfolio selection, and alliance management and enhanced supply chain procedures gives me great confidence that we now have established a platform to deliver growth to this business over the long term.

Most importantly, we have the right people in place in each of our business units to execute our plans in 2019, reset and move forward with our plans to balance our asset-light business model with more intellectual property.

So with that, I would like to turn the call over to Becky Roof, our CFO, to provide a more detailed review of our fourth quarter financial results. Becky?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [4]

--------------------------------------------------------------------------------

Thank you, Bill, and good morning, everyone. I'll start with a review of our consolidated results for the quarter.

Consolidated net sales for the fourth quarter of fiscal 2018 were $168.9 million, a decrease of 13.2% from the $194.6 million recorded for the fourth quarter of fiscal 2017.

Gross profit was $9.9 million compared to $36.8 million for the fourth quarter of fiscal 2017, and gross margin was 5.9% compared to 18.9% in the prior year period.

On a reporting segment basis, Human Health segment sales were $73.1 million, a decrease of $40.6 million or 35.7% from the fourth quarter of fiscal 2017 almost entirely due to lower sales at Rising that reflect pricing and competitive pressures; approximately $14.9 million in failure-to-supply charges, of which, $4.2 million was rebilled back to partners and partner reserves of approximately $9.2 million.

Gross profit was a negative $8.3 million compared to gross profit of $21.7 million last year, and gross margin was a negative 11.3% compared to 19.1% in the prior periods due to the factors I just mentioned.

Pharmaceutical Ingredients fourth quarter segment sales were $45.5 million, an increase of $9.3 million or 25.6% compared to $36.2 million for the fourth quarter of 2017. This improvement reflects higher sales of APIs, sold both abroad and domestically, and higher sales of Intermediates sold in France. Gross profit for the quarter was $7.4 million compared to $5.6 million in the fourth quarter of fiscal 2017, an increase of $1.8 million or 31.5%.

Gross margin was 16.2% compared to 15.5% for the fourth quarter last year, reflecting favorable product mix for both APIs and Intermediates.

Performance Chemicals fourth quarter segment sales were $50.3 million, an increase of $5.6 million or 12.5% compared to $44.7 million for the fourth quarter of 2017, resulting from higher sales of both specialty chemicals and agricultural protection products.

Gross profit was $10.8 million, an increase of 13.6% compared to $9.5 million for the fourth quarter of fiscal 2017, largely due to volume growth in both the specialty chemicals and agricultural protection products.

Gross margin was 21.5% compared to 21.3% for the prior year period with the improvement coming from favorable sales mix of agricultural protection products.

SG&A expenses were $35.1 million, an increase of $8.4 million or 31.5% compared to $26.7 million for the fourth quarter last year. The $8.4 million variance includes $4.2 million in fees paid to financial advisers, $1.7 million in higher payroll and benefits, $1.1 million in higher professional fees and $900,000 environmental remediation charge.

Research and development expenses for the fourth quarter were $1.7 million compared to $2.9 million for the prior year period. The combination of a substantial reduction in gross profit and higher SG&A expenses resulted in an operating loss of $26.9 million for the fourth quarter of 2018 versus operating income of $7.2 million in the fourth quarter last year.

On September 13, we disclosed that we needed to perform additional analysis to determine whether it would be appropriate to record an additional valuation allowance against some or all of our $76.5 million in domestic deferred tax assets. When we prepared our financial statements for the 3 and 9 months ended March 31, 2018, we believed, at the time, that it was more likely than not that this deferred tax asset would be realized in future periods.

In finalizing our consolidated financial statements for the 3 and 12 months ended June 30, 2018, we concluded that we should record a valuation allowance equal to the entire $76.5 million, and further, that $71.3 million (sic) [$71.4 million] of this amount should have been recognized in the third quarter.

As disclosed in an 8-K that we filed yesterday evening, we will file as soon as practicable an amended 10-Q. The recording of the valuation allowance in either Q3 or Q4 has no impact on our cash position or operating expenses.

Our lenders have granted us a waiver until October 19 to file our amended 10-Q.

We've included a detailed explanation of the valuation allowance for fiscal 2018 in our 10-K, which we are filing with the SEC later today.

Including the portion valuation allowance on U.S. deferred tax assets recorded in Q4, we are reporting a net loss for the fourth quarter of $34.7 million or $0.98 per share compared to net income of $2 million or $0.06 per share for the fourth quarter of last year. Non-GAAP net loss was $17 million or $0.48 per share for the fourth quarter compared to non-GAAP net income of $9.6 million or $0.27 per share last year.

Turning to the balance sheet. As of June 30, 2018, cash, cash equivalents and short-term investments totaled $103.9 million; working capital was $200.1 million; trade receivables were $247.3 million, a decrease of $30.2 million compared to $277.5 million as of June 30, 2017, which results primarily from the lower quarter of recorded sales for Rising, I just described.

Inventory was $137.1 million, essentially unchanged from $136.4 million as of June 30, 2017. As expected, inventory was lower as of June 30 compared to March 31, due to the shipments of agricultural protection products during the fourth quarter.

Our total debt stood at $317.4 million as of June 30, including $187 million under our senior credit facility.

As of June 30, 2018, we were not in compliance with our total net leverage ratio, senior secured net leverage ratio and debt service coverage ratio financial covenants. On September 11, we entered into a third amendment to our senior credit facility, which provided for a waiver for these covenants for the quarter ended June 30, 2018, and provides waivers of default on these covenants for each quarter of fiscal 2019.

We also reached an agreement with our lenders to allow for greater levels of investment and capital expenditures, while limiting quarterly dividends, increasing the interest rate payable and maintaining minimum liquidity levels and agreed to pay certain fees based upon the level of senior debt outstanding in April and June of next year.

Cash flow generation was positive for the quarter and fiscal 2018. For the fourth quarter, we generated $45.4 million in cash flow from operating activities, bringing a figure for the year to $101.8 million. Free cash flow, which we define to be cash flow from operating activities less net cash used in investing activities, was $93.5 million for fiscal 2018, well in excess of the $43.2 million we repaid in bank loans, including $20 million of prepayments.

I'd now like to turn this back over to Bill for additional comments.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [5]

--------------------------------------------------------------------------------

Okay. Thanks a lot, Becky. So you may have seen in an 8-K filing from last evening that Walt Kaczmarek, our Chief Operating Officer, resigned from the company to pursue other opportunities. We appreciate Walt's leadership these past 2 years and wish him well in his next role.

And before I turn it over for questions, I wanted to leave you with 3 key messages. First, we've rebuilt our Rising business adding and/or replacing 69 colleagues since June of 2017, and we have great senior leadership team and we are poised for growth. External factors around price declines are starting to normalize, and I feel this business is climbing out of the abyss the industry has experienced for past 2-plus years. I'm confident we'll continue to successfully address our needs that best position us to maximize revenue and gross profit and effectively manage to customer and partner expectations.

Second, our failure-to-supply has been a significant negative factor in our revenue and profitability. As I outlined earlier, we have taken several steps to improve failure-to-supply issues, including improving our inventory position by about 80%, instituting enhanced tracking, developing a robust supply and demand forecast and increased communications with suppliers. In addition, the company is accelerating the review on resolution of failure-to-supply claims. The great strides we have made here will be evident in forward quarters.

Third and last, our chemicals, ag protection, nutritional and pharm ingredients business continue to significantly contribute cash provided by operating activities and they remain healthy and robust businesses. These businesses all have experienced leaders and personnel and are well-poised to deal with external challenges, i.e. the China tariffs as well as the Blue Sky initiative initiated by China's Ministry and Ecology and Environment that has impacted supply shortages due to plant shutdowns.

And with that, I'd like to turn the call over to Keith to open the lines for questions. Keith, over to you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And the first question comes from Matt Hewitt with Craig-Hallum Capital Group.

--------------------------------------------------------------------------------

Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [2]

--------------------------------------------------------------------------------

Several questions for me, kind of hitting on each of the different revenue buckets. First, on the Human Health segment, I think I heard you, but I didn't catch the number. So of the $14.2 million in failure-to-deliver amounts, did I hear that you're going to be -- or $14.9 million, are you going to be passing some of that on to your partners? And if so, how much was that?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [3]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [4]

--------------------------------------------------------------------------------

$4.2 million?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [5]

--------------------------------------------------------------------------------

Of -- out of the approximately $14 million, we will rebill to our partners $4.2 million of that amount.

--------------------------------------------------------------------------------

Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [6]

--------------------------------------------------------------------------------

Okay. And it sounds like you've taken a number of steps to resolve the issues there, but as you look at those, and I am sure it's a case-by-case basis, but as you look at those different amounts, how much of those can you look at your partner, whether it's on the manufacturing side or whatever, and look at those and say okay, we had no control over this? And why wouldn't you be able to bill them a greater amount than the -- what is effectively, what, a quarter or so of the amount?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [7]

--------------------------------------------------------------------------------

Yes, so 2 things there, Matt. First of all, the -- each of the contracts that we have differ. So in some cases, we would bill the partner the entire amount if the fault lied completely with them. In many of our partner agreements, we have a 50-50 partner share, and that has to just basically do with the agreements that we have with our partners. So I think if you think through how we manage this whole process, the burden of proof really lies with Rising because we get hit by our customers. And then during that reconciliation process, we hand certain percentages over to our partners. Now it could also be that some additional monies out of that $14 million will come back our way. But at this point in time, we have, as you said, probably about 35% of that going back to our partners.

--------------------------------------------------------------------------------

Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [8]

--------------------------------------------------------------------------------

Okay, that's helpful. And then I guess one last on the Human Health segment. If you add the $14.9 million back in, you've got like a 9% gross margin. But then if you're supplying, I'm assuming it's even higher in that there is some positive margin from those products. Is it safe to -- as we look out in our models for next year, you get those failure-to-supply issues resolved, your gross margin should be back, at least for that segment, back high teens, low 20s? Is that -- or am I thinking about that right?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [9]

--------------------------------------------------------------------------------

I think you are, Matt.

--------------------------------------------------------------------------------

Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [10]

--------------------------------------------------------------------------------

Okay, that's great. And then moving down, Performance Chemicals, it sounds like a lot of strength there, but there was one industry shortage that you referenced a couple different times. Are you seeing that linger here into the -- this quarter? And how long do you anticipate that kind of lasting?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [11]

--------------------------------------------------------------------------------

I -- you know what, Matt, I'm going to have to get back with you on that specifically because I don't know if it's still a lingering issue. I do know that the team there has had a lot of success in kind of alleviating some of the supply shortages, and I'm just a little unsure as to whether that particular product is still a drain. So let me circle back with you on that.

--------------------------------------------------------------------------------

Matthew Gregory Hewitt, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [12]

--------------------------------------------------------------------------------

All right, fair enough. And then one last one, and then I'll hop back in the queue. On the API side, a very nice quarter. Maybe if you could talk a little bit about some of the market trends you're seeing there. We are continuing to see regulatory pressures, FDA inspections and all that kind of stuff that are weighing on pharmaceutical manufacturers. They're seeking alternatives. Are you benefiting from that? If so, maybe what's differentiating you and your ability to find some of these manufacturers versus what appears to be a problem from some of the rest of the industry?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [13]

--------------------------------------------------------------------------------

Yes, sure, Matt. Thanks. Look, I think I -- look a lot of credit has to go out to the team in India and China in terms of how we're sourcing our products, and that's I think one of the competitive advantages that ACETO brings to the table is our sourcing abilities. And I think we have done exactly that. So in addition to that, we've also tried to stay ahead of the Blue Sky initiative that we're seeing in China for plant shutdowns. I've referenced this in previous quarters, but we really, I think, do an excellent job in understanding what our customer needs are. And then we're able to deliver, whether it's the API or the intermediates, which, in this case, we had higher API sales here in Europe and higher intermediate sales in France. So we have been able to just capitalize based on boots on the ground. And again, I think it's a competitive advantage for us.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

(Operator Instructions) And the next question comes from Lenny Dunn with Mutual Trust of America.

--------------------------------------------------------------------------------

Leonard Euler Dunn, [15]

--------------------------------------------------------------------------------

The numbers were pretty much where I expected them. They don't alarm me, and obviously, we have selling pressure from the delisting from the S&P 600, which takes place on Tuesday. But that also doesn't alarm me because that will pass. But it would seem like you had enough time to make some decisions on what we're going to be going forward. And can we expect relatively soon? Are we going to continue to be, I'm going to use the word conglomerate, I don't think that, that's the right word, but where we have 2 very distinct parts of the business? Or will some of this be sold off to reduce debt? Can you give me a little clarity, please?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [16]

--------------------------------------------------------------------------------

Yes, Lenny, thanks. This is Bill Kennally. I appreciate the question. Unfortunately, because we're -- we have communicated previously that we won't be commenting on the strategic review process that the board has assigned, I really can't provide any comment beyond that. So I wish I could provide more detail, but I, unfortunately, cannot. So I'm sorry about that.

--------------------------------------------------------------------------------

Leonard Euler Dunn, [17]

--------------------------------------------------------------------------------

But do you think we'll have some answers in a reasonable time frame, perhaps, by the next time you report?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [18]

--------------------------------------------------------------------------------

Oh, well, again, I think what we have announced previously is that when the strategic alternative process is completed, we will make an announcement.

--------------------------------------------------------------------------------

Leonard Euler Dunn, [19]

--------------------------------------------------------------------------------

Yes, that I understand, but that could be years. I don't think it will be, but certainly a quarter more would be more than adequate time. I mean, am I being unrealistic in hoping for an announcement with the next earnings report?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [20]

--------------------------------------------------------------------------------

I -- well, I can't really pinpoint a time. I can tell you it won't be years. But as soon as we have something to report, then we certainly would do that. And look, I understand that there a lot of people out there that are waiting on this process to complete. It doesn't -- it's not -- it doesn't fall on deaf ears, trust me. So we're going to do our best to complete this process in a timely manner and then make an announcement. Hopefully, that will work with your expectations. And let's have the same conversation on the next conference call in the event that we don't have anything to announce.

--------------------------------------------------------------------------------

Leonard Euler Dunn, [21]

--------------------------------------------------------------------------------

Okay. And then the last thing, it's just a comment. Your CFO is doing a terrific job, so no question about that. But she's also extremely high paid and a drain on earnings. Is there a potential maybe to retain her and not pay quite as much? Or are there any plans in that direction?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [22]

--------------------------------------------------------------------------------

Well, first of all, Lenny, I'm going to have you negotiate that with Becky directly, if that's okay with you. No, kidding aside, you're right. Becky has -- and her team have done a phenomenal job here. We're really happy to have her. We really appreciate all that she and the team is doing. And as we move through this process, we'll be making some decisions on our personnel, including Becky, and we'll certainly keep you posted on that. But I echo your comments that she is doing an outstanding job and love having her on the team.

--------------------------------------------------------------------------------

Leonard Euler Dunn, [23]

--------------------------------------------------------------------------------

Oh, no, no, I'm not questioning that at all. It's just the amount of money for the size of the company. That's all.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [24]

--------------------------------------------------------------------------------

Right. Yes, I appreciate your comments. And right now, I would tell you that she's worth every penny, so -- but we'll...

--------------------------------------------------------------------------------

Leonard Euler Dunn, [25]

--------------------------------------------------------------------------------

Up until now, yes. And...

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [26]

--------------------------------------------------------------------------------

Yes, we're keeping an eye on it.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

And the next question comes from Richard Thompson with Värde.

--------------------------------------------------------------------------------

Richard Thomson, [28]

--------------------------------------------------------------------------------

A couple of questions. Maybe just starting on the free cash flow, as you mentioned, the big source of cash this quarter. Just curious what enabled you to push payables and accrued expenses that much. And of that change, how much of it is timing, whether it's deferral of paying the failure to pay? How much of it is, I mean, just getting to normalized levels on those items?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [29]

--------------------------------------------------------------------------------

So yes. So thank you for the question. And yes, the generation of our cash from operating activities is very heavily tied to the timing of our gross-to-net adjustments on Rising. It's much more stable on our non-Rising business units. And we encountered a situation at the end of June where we were able to accrue a number of the charge-back credits, particularly in the form of rebates and defer that payment into later quarters. When we file our K later today, you will find the specifics and the notes to our financial statements of exactly which balances are deferred. And then you can make a judgment as to when those will actually come out of our cash account. We work very, very closely with our wholesale customers on the timing and when these items are taken. With regards to the failure to supply, anything that we are disputing, we accrue for, but we do not pay until the dispute is resolved.

--------------------------------------------------------------------------------

Richard Thomson, [30]

--------------------------------------------------------------------------------

Okay. So I guess -- and I'll look in the 10-K, but just directionally or conceptually, is most of -- is a lot of the 48 do you -- or the 45 do you expect will, I guess, be a cash outflow in the coming quarter or 2? Or is that not the case?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [31]

--------------------------------------------------------------------------------

There will be some outflow in the next couple of quarters. I'm not sure I could comment on the timing because a lot of that is wholesaler- or customer-driven as to when they take the credit against future payments.

--------------------------------------------------------------------------------

Richard Thomson, [32]

--------------------------------------------------------------------------------

Okay. And then from a gross margin standpoint, I know it was asked earlier, but obviously pretty significant gross margin contraction in the quarter for Rising. I guess just helpful to understand some of the factors that you think enabled you to get back to roughly, call it, 20% gross margin. And then second, kind of, if assumed you can get back to 25% gross margin, are you able to cut OpEx materially since right now, at a 20% gross margin, EBITDA for that segment is still going to be probably close to zero?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [33]

--------------------------------------------------------------------------------

I don't know that I'm in a position to comment on getting back to 25% gross margin since we've been instructed by our board that we are not going to be providing guidance. I can tell you that minimizing or greatly reducing the FTS claims will have a significant impact on our gross margin. And we are always looking for ways in our operating expenses to make reductions and have been very active about doing that.

--------------------------------------------------------------------------------

Richard Thomson, [34]

--------------------------------------------------------------------------------

Okay. Of this 36% sales decline, how much, or maybe talk in dollars, of the $40 million -- approximately $40 million decline in Human Health, how much of that was the elimination of Lucid versus just broader headwinds in the segment?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [35]

--------------------------------------------------------------------------------

Yes, a good percentage of that, Rich, was due to the VA revenue loss that we had. In addition to that, we had some products that didn't perform as expected, and we also took a hit with some of our higher-margin products. So I don't have it ballparked within those segments in terms of percentages. But that was the majority of the decrease that you saw in the fourth quarter, combination of all 3.

--------------------------------------------------------------------------------

Richard Thomson, [36]

--------------------------------------------------------------------------------

Okay. And then if you could just talk a little bit about the tariff exposure that you'd referenced in terms of which segments, kind of, what's the worst case in terms of what it would mean from a margin or profitability standpoint?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [37]

--------------------------------------------------------------------------------

Yes, sure. Thanks for that question. I appreciate it, Rich. So look, in the event that the tariffs stay at 10%, we think we can manage through that with our customers. If it goes to the 25%...

--------------------------------------------------------------------------------

Richard Thomson, [38]

--------------------------------------------------------------------------------

And which are the tariffs on, sorry?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [39]

--------------------------------------------------------------------------------

I beg -- so the tariffs are hitting the Performance Chemicals segment and the Nutritional segment. The pharm intermediates is exempt from those. So on those 2 businesses, the plan right now is to pass those tariffs on to the customers. And the customers, for the most part, are on board with that. So we're actually seeing an uplift in our performance as it relates to that. However, if it goes to 25%, we're going to have to lay it out to the customers in terms of how we pass that on to them. But we have some mitigating factors that may help us there. So rebates certainly could participate there. The currency devaluation over in China may play a role in how this will play out. And then as I said earlier, the Blue Sky initiative continues to create market shortages that are also absorbed by customers when costs go up. So there's really a lot of factors in the Chinese market that makes it very interesting and fluid. And we believe that we'll be able to manage through it. But we could see a hit to some of the early gains that we're seeing as a result of the 10% tariff increase should customers choose to go elsewhere.

--------------------------------------------------------------------------------

Richard Thomson, [40]

--------------------------------------------------------------------------------

Right. And generally speaking, are they -- do you feel as though they have a lot of options domestically that would avoid those tariffs? Or are most producers supplying from international, from China?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [41]

--------------------------------------------------------------------------------

Yes. Well, look, it's certainly a competitive environment here in the U.S. But again, as I referenced earlier, I have a lot of confidence in the strength of the team. We've been able to participate in the markets that we're participating in, and doing a really good job. A lot of really strong relationships have been established. It's a really important component. At the end of the day, it does become a cost business. But similar costs are being passed on by other folks, and we just have to do the best we can to hang on to the business. We're not going to get all of it, but we feel confident that due to the strength of the team that we'll get -- we'll retain and potentially gain additional business to offset any potential losses we might see.

--------------------------------------------------------------------------------

Richard Thomson, [42]

--------------------------------------------------------------------------------

Okay. And then maybe just lastly, as you look at the numbers for Q4 for the API and Performance Chemicals segments, I guess, would you -- with all of what we discussed as the backdrop, do you see those EBITDA or gross margin numbers as generally representative of run rate? Or is there seasonality such that looking at those numbers and multiplying it by 4 is not the right approach?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [43]

--------------------------------------------------------------------------------

Well, there is a bit of seasonality in the Performance Chemicals segment. However, I think that what you're seeing for the fourth quarter is going to be representative of what you can expect to see down the road.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

And the next question comes from Timothy Stabosz from Stabosz Asset Management.

--------------------------------------------------------------------------------

Timothy John Stabosz, [45]

--------------------------------------------------------------------------------

I'm one of the company's larger shareholders with above 4% ownership. I got on the call late, so forgive me. I'll try not to ask a repeat question hopefully. But do you see -- I see in the press release, you talked about the Performance Chemicals and Pharmaceutical Ingredients being stable. And it looks like from disclosures in the slide deck that I think you disclosed gross profit. As we talk specifically about the stability of EBITDA, I heard the previous caller talking about that, to the degree that we look at that separately in those divisions. Could you comment a little bit more on the stability of those divisions because, obviously, ultimately, they represent the value in the business to potentially explore strategic alternatives and pay down debt? Are those businesses completely stable as you would see? And are you highly content with the way they are performing and the way it looks for the future? You've obviously partially answered that with the previous caller, but can you flesh it out a bit more, please?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [46]

--------------------------------------------------------------------------------

Sure, Timothy, and thank you very much for your ownership of our stock. So I have a very high degree of confidence that the Performance Chemicals, nutritionals, ag protection business and pharm intermediates -- ingredients business will continue to provide steady and stable cash contributions to the company. Historically, those businesses have performed well. And our view on the businesses down the road is that, that is going to continue. And again, it's based on some comments that I made earlier, we feel that we have great boots on the ground in India and China. It's really valuable. We're also participating in markets that aren't large markets. So we strategically go after selected product size to -- and we're really good, I think, at sourcing at that level. And we try to stay within the goalposts, if you will, and try not to deviate from what works successfully for us. So I feel very confident that those businesses all will continue to provide stable growth as I described. Now look, there's always the Blue Sky initiative, right. I mean, we've stay ahead of it, but there's threats out there, competitive threats and then there's environmental threats that could always get in the way. But that notwithstanding, I'm highly confident. And I would want to add that we've made a lot of changes on the Rising side over the last year. We've essentially rebuilt this business. We have suffered from failure to supply, but as I stated on the call earlier, and you'll be able to see in the prepared comments online that we really feel we got a handle on this and we're poised for growth. So I think going forward, the businesses are stable and we are ready to go. I hope that helps.

--------------------------------------------------------------------------------

Timothy John Stabosz, [47]

--------------------------------------------------------------------------------

One other question and try to be as generous in answering as you can. I understand you've said you won't say any more about strategic alternatives until there's something to announce. As far as the background to the situation, what is the break -- have you done analysis as to the ready breakup ability of the 3 businesses? Or -- and can we continue with 1 or 2 of them? One of them, 2 of them in part? Are they readily breakup-able? Are we finding that the companies be sold in whole and cannot be sold in part or can very readily be sold in part without additional loss of synergies, internal synergies?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [48]

--------------------------------------------------------------------------------

Yes. I hear you, Timothy. And look, if I were to able to comment on that, I would, but I can't. So these are all options that I think are being considered by the company as we review our strategic alternatives going forward. I just really can't comment...

--------------------------------------------------------------------------------

Timothy John Stabosz, [49]

--------------------------------------------------------------------------------

Let me ask the question this way, have we completed our homework? And do we fully understand the ramifications around that aspect, the relationship between the 3 businesses and their -- do we fully have a handle on that at this point, 3, 4 months later, whatever it is, after the initial announcement that we've had? Or do you feel we've got our arms around that specific notion at this point?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [50]

--------------------------------------------------------------------------------

I think we're well in control, yes.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

And the next question comes from [Lester Pastrezzi from JHJ Partners].

--------------------------------------------------------------------------------

Unidentified Shareholder, [52]

--------------------------------------------------------------------------------

I think the gentleman made a mistake. He's ascribing me to some partnership and, of course, you all know me for the last 15 years. I've been a shareholder, and I've attended all of the annual shareholders' meeting and some 60 quarterly conference calls. And you know that I represent just myself. I'm an individual passive investor, so I just want to correct that. I don't know how he got those signals crossed. My question is just a very simple one. I'm disappointed, just as we all are, but specifically disappointed that another C-suite executive departure has occurred. I know you won't shed more color on it, but my question is simply is it your intention to soon replace our COO, Walter Kaczmarek?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [53]

--------------------------------------------------------------------------------

Yes, thanks, Lester. I appreciate the comment. And look, we did lose Walt to -- he chose to pursue other opportunities. We're going to miss him here. He did a great job in really building the Rising business up and getting our ERP systems up and running, and a lot of the thanks go to him for his contributions there and elsewhere around the company. Whenever you have someone of his caliber that leaves the organization, it gives you time to reflect on other potential changes that might be needed within the company. And in the interim, Walt's reports are going to report into me, and I'll have an opportunity to dig down a little deeper from an operational standpoint to -- in the manner that Walt was running this business. And then we're going to make some decisions based on the needs of the company in the future and try to tie that in with our strategic alternative process. So we'll certainly keep you posted and everyone else on any future changes that -- or additions that take place. And I hope that answers your question, Lester, and nice to hear from you.

--------------------------------------------------------------------------------

Unidentified Shareholder, [54]

--------------------------------------------------------------------------------

Yes. Just as a follow-up, actually a follow-on to the last gentleman's question. And I'll respect your request not to ask questions about the strategic review. But in a related matter, to the long-standing agreement in place, I'm talking about the Change in Control Agreement. The gentleman was pressing you about whether you sell the company in total or in pieces or not at all, I suppose, is an option. But clearly, if the total organization was sold, there would be a change in control trigger tripped and a payment, a significant payment to senior management, and I presume, the board. But what if just a significant division were to be sold? Would that also trip Change in Control Agreements or partial payments?

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [55]

--------------------------------------------------------------------------------

I think...

--------------------------------------------------------------------------------

Unidentified Shareholder, [56]

--------------------------------------------------------------------------------

Maybe Steven could add something, some color to that or Becky if you don't have the answer, please.

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [57]

--------------------------------------------------------------------------------

The senior management of...

--------------------------------------------------------------------------------

Unidentified Shareholder, [58]

--------------------------------------------------------------------------------

Is this Steven?

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [59]

--------------------------------------------------------------------------------

Yes, this is Steve Rogers, Chief Legal Officer. The Change in Control Agreements held by the senior management of ACETO Corporation would require, with a double trigger, a change of control at ACETO. There are some senior managers who worked for a particular division, specifically Rising, who, under certain circumstances, a double trigger with respect to Rising, could result in triggering that agreement. But the senior management of ACETO would require ACETO Corporation change.

--------------------------------------------------------------------------------

Operator [60]

--------------------------------------------------------------------------------

And the next question is a follow-up from Rich Thompson with Värde.

--------------------------------------------------------------------------------

Richard Thomson, [61]

--------------------------------------------------------------------------------

Just on the capital structure side and thanks for taking the follow-up. What's the seniority relative to the other items in the capital structure of the promissory note?

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [62]

--------------------------------------------------------------------------------

So the promissory note -- it's not actually a promissory note, but rather it's a deferred payment due under the original transaction documents. So it is at the bottom of the capital structure compared to the rest of the company's debt.

--------------------------------------------------------------------------------

Richard Thomson, [63]

--------------------------------------------------------------------------------

So the promissory note would be junior to the convertible notes?

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [64]

--------------------------------------------------------------------------------

Yes. And again, it's not a promissory note, it's a deferred payment.

--------------------------------------------------------------------------------

Richard Thomson, [65]

--------------------------------------------------------------------------------

The deferred payment, I guess...

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [66]

--------------------------------------------------------------------------------

So yes, junior.

--------------------------------------------------------------------------------

Operator [67]

--------------------------------------------------------------------------------

And we also have a follow-up question from Timothy Stabosz.

--------------------------------------------------------------------------------

Timothy John Stabosz, [68]

--------------------------------------------------------------------------------

Yes, what's the idea behind maintaining the penny-a-quarter dividend? I personally appreciate that not because I want the penny, but because I think it's wise on management's part with regard to not forcing out shareholders who have to have dividends to own the stock and further depressing it. And is that a fundamental kind of commentary on the basic financial strengths of the company that banks are saying yes, you can maintain a token penny-a-quarter dividend? We essentially believe in the value of these assets versus the debt. Can you comment on that, the penny dividends?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [69]

--------------------------------------------------------------------------------

So Tim, I think you just said it better than I probably would have.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [70]

--------------------------------------------------------------------------------

And Tim, look, we've had a history of paying -- well, look we've had a history of paying dividends in this company for many years. And I think we appreciate the shareholder base that we have and understand that paying a dividend is important. And I think to your point, the banks do have confidence in us in terms of cash flow. We wish that the dividend would be higher, and we aspire to get to a higher amount down the road. But every quarter, the board votes on this, and we plan to continue that, subject to significant changes that occur down the road. But I think we're pleased to be able to pay it. So thanks for bringing that up.

--------------------------------------------------------------------------------

Timothy John Stabosz, [71]

--------------------------------------------------------------------------------

The confidence in the cash flow, I presume the confidence was actually in the asset value and perhaps the strategic alternatives process as providing a good chance they'll get their money. But the penny a share could also be that they have confidence that the value of this company over the long run will be growing because it is going to be a cash flow positive -- free cash flow positive company. That's part of the confidence is the value of the businesses is the cash-generating entity?

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [72]

--------------------------------------------------------------------------------

Yes, well, we all want to answer. And I would say as the Chief Legal Officer, what the banks think, the banks think and we don't speak for them. But the fact that it had to be approved by the banks and the banks specifically authorized it speaks for itself what that means.

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [73]

--------------------------------------------------------------------------------

And it is not a controversial ask at all.

--------------------------------------------------------------------------------

Timothy John Stabosz, [74]

--------------------------------------------------------------------------------

Okay. One other question and that is the nature of the amendments gets us into mid-to-late next year, I guess, it is. Is that a signal? I mean, someone take that as okay, they're going to get something done by then. Is there a reason that to the degree that we might remain 100% in control of our operations, all of our operations perhaps, that, that waiver -- that extension or amended extended, whatever you call it, didn't go out even further?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [75]

--------------------------------------------------------------------------------

I think that you have to look at the waiver in the context of the maturity of the bank debt, which is 2021. I think that first of all, I think it's a very favorable waiver, and we were pleased with the final terms. But I think that it also gives the banks the protection to adopt a wait and see approach and give us the opportunity to demonstrate what we can do as an ongoing entity, while we consider other alternatives as well. And so I don't want to speak for the banks, but that was the general tenor of the discussions.

--------------------------------------------------------------------------------

Timothy John Stabosz, [76]

--------------------------------------------------------------------------------

Okay. I've got one more actually, and hopefully, you can explain some of this. You announced back September 12, September 13, about the amendments. You filed an NTK, a late Form 10-K, on the 13th, I think, it was, that said there's going to be a $30 million roughly loss predisclosed. The stock was hovered around $3 generally, went up little bit and then hovered around $3-ish. Then we had the announcement of the S&P's 600 small cap a few days ago that we're being removed from that index. The stock has since plunged to as low as about $2.10 today. Yet, since you predisclosed the earnings back in September 13, it doesn't seem to me like there's any material news other than the S&P 600 kickout, so to speak. Am I missing something? Or is there something that's come out, other than the Chief Operating Officer departing, which appears to be friendly as opposed to firing? He's staying on another the month. What -- am I missing something here? Normally I don't like to ask about commenting on the stock price, but obviously it's so unusual is, can you comment?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [77]

--------------------------------------------------------------------------------

Well, we are not aware of anything else other than what we have disclosed. I'm not sure that any of us are in a position to speak as to what might be in the minds of certain shareholders, but we're certainly not aware of anything that we haven't discussed.

--------------------------------------------------------------------------------

Timothy John Stabosz, [78]

--------------------------------------------------------------------------------

Since September 12 or 13, right?

--------------------------------------------------------------------------------

Steven Rogers, Aceto Corporation - Senior VP, Chief Legal Officer & Corporate Secretary [79]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [80]

--------------------------------------------------------------------------------

That correct. Other than the S&P small cap index delisting that you just referred to.

--------------------------------------------------------------------------------

Timothy John Stabosz, [81]

--------------------------------------------------------------------------------

Okay. And do you have any estimate of the number of shares that are attributable to funds at hold because of that listing of that index?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [82]

--------------------------------------------------------------------------------

I don't believe we are.

--------------------------------------------------------------------------------

Timothy John Stabosz, [83]

--------------------------------------------------------------------------------

Or a percent or total or anything?

--------------------------------------------------------------------------------

Rebecca A. Roof, Aceto Corporation - Interim CFO [84]

--------------------------------------------------------------------------------

Not to my knowledge.

--------------------------------------------------------------------------------

Timothy John Stabosz, [85]

--------------------------------------------------------------------------------

Okay. Good luck with the -- I'd like to see you sell assets and unlock value.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [86]

--------------------------------------------------------------------------------

Thanks, Timothy, I appreciate your thought, your questions and comments.

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

As that was the last question, I would like to return the conference to Bill Kennally for any closing comments.

--------------------------------------------------------------------------------

William C. Kennally, Aceto Corporation - President, CEO & Director [88]

--------------------------------------------------------------------------------

Yes, thanks, everyone. We appreciate your time and attention this morning and look forward to being with you on next quarter's conference call. Have a great weekend coming up. Thank you.

--------------------------------------------------------------------------------

Operator [89]

--------------------------------------------------------------------------------

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.