ACET - NASDAQ

Jody Burfening - IR, LHA Sal Guccione - President and CEO Doug Roth - CFO

Matt Hewitt - Craig-Hallum Capital Steve Schwartz - First Analysis Kevin McKenna - Main Line Capital Greg Eisen - Singular Research

Welcome to the ACETO Fiscal 2016 Fourth Quarter Financial Results Conference Call. My name is Paulette, and I’ll 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 will now turn the call over to Jody Burfening. You may begin.

Thank you, Paulette. Good morning, everyone, and welcome to ACETO Corporation’s fourth quarter fiscal 2016 conference call. This is Jody Burfening of LHA. With me today are Sal Guccione, President and CEO; and Doug Roth, Chief Financial Officer. Company issued its fourth quarter earnings press release yesterday afternoon 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 words such as believe, expect, anticipate, 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 in these forward-looking statements, as a result of certain risk factors as set forth in the Company's filings with the Securities and Exchange Commission. In addition, on today’s call, management will be referring to certain non-GAAP financial measures. These measures adjusted net income and adjusted earnings per share excludes amortization of intangible, cost associated with the Company's convertible debt, environmental remediation charges and transaction costs related to acquisitions. These non-GAAP measures allow us 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. With those housekeeping items out of the way, I would now like to turn the call over to Sal. Good morning, Sal.

Thank you, Jody, and good morning, everyone. Thank you for joining us on ACETO's fourth quarter and full year 2016 earnings conference call. Fiscal 2016 was another successful year for ACETO on several levels. We achieved records for sales, gross profits, operating profit, net income and earnings per share. We increased our total Company gross margin to 25.6%, up from 24.8% last year. At the same time, gross profits increased in all three of our business segments. For the full year, our Human Health and Pharmaceutical Ingredients business segments collectively accounted for 70% of our total sales and 75% of our total gross profit. During the year, we completed a $144 million convertible senior notes offering at very attractive rates. That offering allowed us to bulk up our balance sheet and put us in better position to execute on our external growth plans, the acquisition of products, assets and/or entire businesses. Consistent with our external growth activities, in fiscal 2016, we acquired six FDA approved ANDAs, three from Nexus Pharmaceuticals and three from Endo International. The latter purchase was strategically important for us as it was the first time we'd gone through the complete process for acquiring products from an FTC regulatory driven divestiture. And that hopefully opens the doors for ACETO to future similar opportunities now that the regulatory authorities recognize ACETO and Rising as a viable acquirer of such products. We continued to invest in our internal product development pipeline in fiscal 2016 with R&D spend up 34% to a level of $7.9 million. During the year, we launched seven new finished dosage form products, which was within our expected range of 6 to 10 product launches for the year. We also added eight new products to the pipeline over the course of the year. In terms of development, we currently have 103 total projects in our pipeline, which includes 47 ANDAs currently on file with the FDA. Those 47 ANDAs have -- currently have total IMS estimated end-market sales of about $6 billion. Of the ANDAs on file, 37 have been with the FDA for over 24 months; and of those, 16 have been on file for over 36 months. This information compares with 107 projects in the pipeline at the end of the third quarter of fiscal 2016 and 49 ANDAs on file at that time. Looking at the full year numbers for fiscal 2016, net sales were $559 million, which is an increase of 2% over fiscal 2015. Gross profit was just under a $143 million, which is an increase of 5%, and GAAP net income was $34.8 million or increase of 4% versus last year. GAAP EPS increased by about 3.5% to $1.18 a share. Finally, on a non-GAAP basis, our non-GAAP adjusted EPS increased by 13% to $1.50 a share, that compares to $1.33 a share in fiscal 2015. So overall, we’re pleased with our development efforts and our operating performance for the full year. Regarding our fourth quarter 2016, in contrast to last year’s period of record results, this year’s final quarter was a more challenging one. As you may recall, in last year’s fourth quarter, we reported very strong results, in particular in our Human Health segment, which was driven by solid overall performance, as well as $9.5 million sales adjustment and $3.5 million earn-out adjustment. In this year’s quarter, in addition to facing a difficult year-over-year performance comparison, we also encountered intensified competition at Rising, which turned out ultimately greater than what we had previously anticipated. Further, we were not able to recover any of the larger than normal chargebacks that we discussed on our third quarter call. And in the quarter, we also recorded and unanticipated $1.3 million charge related to remediation work at Arsynco property. All that together, we reported an 80% decrease in sales, and 37% decrease in non-GAAP adjusted EPS in the quarter. Turning to the individual segments, I’ll touch on some highlights and then Doug will provide more details on that, as well as review our fourth quarter financial results. In our Human Health segment, sales grew in fiscal 2016 by 1% to a level of $228 million and gross profit increased by 3% to just under $78 million. Our Rising Pharmaceutical business saw modest gains in sales while our Nutritionals business had essentially flat top-line results versus the prior year. With respect to gross profit, we saw similar dynamics within the Human Health segment, which resulted in the full year gross profit gain of about 3%. Our Pharma Ingredients and Performance Chemicals businesses experienced trend that were fairly constant throughout the year. For Pharma Ingredients, sales were $161 million in fiscal 2016, which is an 8% increased over 2015, had some stronger sales of APIs internationally. API gains more than offset lower sales in intermediates during the year. Our gross margin in the segment remained stable at 17.9%. And as a result, gross profit in the segment increased by 8% to $28.8 million. So overall, a nice year by the Pharma Ingredients business. In Performance Chemicals, sales dropped by 2% to just under $170 million. Gross profit however grew by 10% to $36.2 million. That growth is a result of favorable product mix, both in our ag products business, as well as specialty chemicals business, and also due to decline in costs within specialty chemicals for products sourced from China. Given that, gross margin in this segment rose by over 200 basis points in a year to a level of 21.3%. That business has seen steady margin improvement, over the last number of years. Looking ahead to fiscal 2017, we have robust new product launch plans for the year, expecting to launch between 12 and 15 new products at Rising during this fiscal year; if we do that that will be approximately twice the number of products launched in fiscal 2016; and included in that estimate is the Fluocinolone products that we launched earlier this week -- that we announced earlier this week. In addition, we currently have nine ANDAs that are currently approved or tentatively approved, pending launching in our pipeline. Our launches are expected to occur over the course of the year and therefore their associated revenue and gross profit gain should build as the year progresses. That said, we do expect that those gains will be moderated by the heightened competition that we are seeing on our existing commercial products. All factors considered, we do expect that fiscal 2017 will be another year of growth for ACETO. We are currently projecting that sales and non-GAAP adjusted earnings per share growth for fiscal 2017 will be in a mid single-digit percentage range and GAAP EPS is expected to grow at a slower rate than that, and that's primarily due to the full year interest expense impact of our 2016 convertible debt offering. As we'll be launching a number of new generic products over the course of fiscal 2017, we expect that our second half performance will come in stronger than that which we will achieve in the first half of the year. Finally, before I turn the call over to Doug, I would like to make one closing point, which is that in each of the last six years as we have steadily transformed ACETO in to an increasingly human health oriented company, we've leveraged the top line gains into stronger bottom line increases. And although our fiscal 2017 guidance anticipates more moderate growth, our objective remains to enhance our business infrastructure and grow profits while continuing to transition towards human health. And to that end, we continue to prepare for a future larger ACETO, and the Chief Operating Officer position to our senior executive team is an important step toward preparing for this future. With the addition of Walt Kaczmarek, we have brought on a seasoned industry veteran who possesses experience across the entire human health value chain from development to manufacturing to sales and marketing. He has experience, good for us in both APIs as well as finished dose generics and very excited to have Walt on our team. In addition to human capital, we are making significant investments in IT to bring a new state of the art ERP system aligned at Rising. This will address generic industry needs for better access to data and FDA mandated improvements in drug distribution, label and serialization. So expanding the management team and bolstering our IT systems at Rising are just two examples of steps we're taking in fiscal 2017 to help ensure that we are properly positioned to successfully generate and mange growth over the long term. So with that, I will turn the call over to Doug and then, we'll pick up with questions. Doug?

Thank you, Sal and good morning everyone. I will walk you through our financial results for the fourth quarter and then the fiscal year. As Sal mentioned, our net sales for the fourth quarter were $135 million a decrease of 7.6% from $146.6 million in the fourth quarter of fiscal 2015. Our gross profit was $34 million, a decrease of 17.3% compared to $41 million in the fourth quarter of fiscal 2015. Gross margin for the fourth quarter was 25.1%, as compared to 28% in the prior year period. On a reporting segment basis, Human Health segment sales were $52.7 million, decrease of 18% from the fourth quarter of fiscal 2015. Rising Pharmaceuticals accounted for essentially all of the sales decline, primarily due to increased competition in this business and the fact that last year’s fourth quarter benefited from a favorable sales adjustment of approximately $9.5 million, as we had a change in estimate related to our returns accrual. On the Nutritional front, sales for both the U.S. and abroad were relatively flat versus the prior year fourth quarter. Gross profit for Human Health segment decreased 33% to $16.7 million, reflecting the drop and rising sales and again last year’s very difficult comp due to the aforementioned favorable sales adjustment. Our Pharmaceutical Ingredients segment sales were $42.6 million, an increase of 11.3%, compared to fourth quarter 2015. Our gross profit for the fourth quarter increased 13.7% to $7.9 million from $6.9 million in the fourth quarter of 2015, due to a more favorable product mix. Our Performance Chemicals segment decreased 8.6% or sales rather decreased 8.6% to $40.2 million from $43.9 million in the fourth quarter 2015, largely due to reduced specialty chemicals sales of pigments, coatings and agricultural intermediates. However, our gross profit edged up slightly by 1.5% to $9.5 million, reflecting an improved product mix in our agricultural protection products and a decline in costs for specialty chemical products sourced from China, primarily due to the devaluation of the Chinese currency. Our SG&A for the fourth quarter increased from $16.8 million to $20.4 million or 15% of sales. The absolute and percentage increases in the quarter were 100% due to the fact that the prior year’s quarter benefited from 3.5% earn-out adjustment related to the PACK acquisition. Our investment in research and development for the fourth quarter totaled $1.7 million, compared that $2.7 million in the comparable period last year, as milestone achievement and project initiatives remained lumpy on a quarter-to-quarter basis. Our lower gross profits combined with higher SG&A led to a sharp drop in operating income to $11.9 million versus $21.6 million. Our net income was $6.8 million or $0.23 per share, compared to net income of $13.6 million or $0.46 per share for the fourth quarter of last year. Our non-GAAP adjusted net income was $10.3 million or $0.35 a share for the fourth quarter, compared to $14 million or $0.48 per diluted share last year. Our EBITDA for the fourth quarter was $15.7 million, a decrease of $10.3 million or 40% over the same quarter last year. Most of that decrease was driven by the two adjustments I spoke about in terms of last year, the sales adjustment related to the returns accrual and the PACK adjustment related to the contingent consideration of the earn-out. For the 12 months ended June 30, 2016, our net sales were a record of $58.5 million (sic) [$558.5 million], a 2.1% increase from the $547 million for fiscal 2015. On a constant euro currency basis, fiscal 2016 net sales increased by 4.1% over last year. For the full year, segment sales in Human Health were $228 million, an increase of 1.2%; our Pharmaceutical Ingredient segment sales were $161 million, an increase of 7.8%; and our pharmaceutical chemical sales were $169.5 million, a slight increase of 1.7%. Our gross profit was a $142.8 million, an increase of 5.4% compared to gross profit of $135.4 million for the prior year. Our full year gross margin expanded to 25.6%, an increase of 80 basis points. Gross profit for Human Health was $77.9 million, an increase of 2.8%; Pharmaceutical Ingredient gross profit increased 7.8% to just under $29 million; and our Performance Chemicals gross profit increased 9.5% to $36.2 million. Turning to SG&A, our SG&A expenses were $76.8 million, a 5% increase. Included in fiscal 2016 SG&A expenses were increased stock-based compensation expenses, corporate business development expenses, and again, we had a $2.4 million less of a favorable adjustment related to the PACK earn-out when you compare 2016 to 2015. Our research and development expenses were $7.9 million compared to $5.9 million last year and our operating income is $58 million compared to $56.3 million last year, a 3% increase. For the full year, we reported net income, was a record $34.8 million or a $1.18 per diluted share compared to $33.5 million or a $1.14 per diluted share for 2015, increases of 4% and 3.5% respectively. Our non-GAAP net income was $44.5 million compared to $38.9 million last year, a 14.3% increase. Non-GAAP earnings per share were a $1.50 compared to a $1.33, a 12.8% increase. Finally, our EBITDA for the full year was $73.5 million, an increase of $3.9 million for fiscal 2016. Now, turning to the balance sheet, as of June 30, 2016, our cash and cash equivalents, short-term investments were $67.7 million, our working capital was just under $253 million, and shareholders’ equity of $304 million or $10.29 per share. As a result of our convertible debt offering, our long-term debt was just under $119 million and we had no outstanding balances under our senior credit facility. Our trade receivables increased by $6.1 million for the year ended June 30, 2016. And our DSOs increased from 77 days as of June 30, 2015 to 83 days as of June 30, 2016. The increase in DSOs reflects the trend towards longer term and our specialty chemical business and Rising. Financially, ACETO remains strong with ample capital resources to support our future growth plans. I would now like to open up the call for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Matt Hewitt from Craig-Hallum Capital. Please go ahead.

Good morning, gentlemen. Thank you for the update.

Good morning, Matt. Thank you.

A handful of questions; the first of which, so, you were able to launch seven new products in fiscal 2016. On the last call, you had talked about the potential launch up to four more before the end of the fiscal year, so before June 30th. It appears that those launches got pushed out. What would impact the timing of a launch? Is it with the CMOs, is it related to packaging or insert? Help us understand why the launches are being delayed a little bit.

Sure. In fact, I think on the call we had we said -- the products we announced this week, the Fluocinolones for example, at that time, we were expecting that they would get in say in June. They got delayed by a little bit. Generally, as you know, we don’t manufacture, so it’s usually some sort of slowness at the CMO level for one reason or another, maybe a validation that’s happened; maybe a test that kind of went not right; maybe equipment that hasn’t -- that was expected to be available and now has gotten used for something else. So, it’s a variety of things, but it’s generally at the CMO level of that point.

Okay. And then, as we think about -- so you’ve gotten two already approved. What’s the split in the nine other products that have been approved that are ready, you can launch immediately versus tentatively approved?

Sure, I understand the question. So, we’ve got nine approved. Our schedule right now is that the majority of those should be launched over the course of first the -- and mostly second quarter but first half of this year.

Okay. That’s helpful. Obviously, the quickly you get those out, obviously that helps the back end of the year. Regarding the rest of the portfolio, I think, you said last quarter of the 47 ANDAs that you had on file with the FDA; 30 of those had target action dates or PDUFA dates. So, is that still the case or have you received some more since then?

We received a few more, we’ve also launched a few. So the number is generally right around that same -- the same amount, I think it might still be 30, right there.

Okay. You touched on this briefly in the prepared remarks. The rebates, I don’t if this is a proper term, but the double dipping that occurred last quarter, it sounds like you were not successful in calling back some of that. Is there still hope that that could happen or have you just basically said, it was part of doing business and maybe they will get us back at some point in the future?

It’s somewhere in between, Matt, yes. We’ve had a lot of dialog with our customers and we’re trying to exchange that data to try to compel them to the CR [ph] point. And we’re not yet successful, but we are vigorously trying to work through it.

Okay, how frustrating. Couple of more items and then I will hop back in the queue. Regarding the margin, the gross profit margin for the Human Health segment in Q4, obviously it dipped even versus Q3 the competition coming in. How should we think about it; I mean, is that kind of kind of a low watermark as you look out over the next four quarters. Should we build off of that or does it may be take one more step down here in Q1 before rebounding as you get some of these new products launched?

I think as we look into Q1, there probably might be one another little bit dip down and then we expect this Q2, Q3 and Q4 go on that we should start to see the pick up again.

Okay. And then, may be one last one from me. Maybe talk a little bit about the M&A landscape. Obviously you guys have bolstered your balance sheet for a purpose. What are you seeing from opportunity standpoint; is there anything out there? Not getting into specifics, are you seeing some opportunities that you could may be deploy some of that capital to augment your R&D pipeline? Thank you.

Thank you. So, a lot like the last time when we spoke, which is we're actively looking; it's competitive market and also it's a market in which companies and the size range, and what we're looking for there aren't loads of targets. So, I would say, we're going to continue to look real hard and we're also going to focus not only on entire companies but more and more product line and the type acquisitions. We've got the money, so we're going to be aggressive looking this year.

And our next question comes from Steve Schwartz from First Analysis. Please go ahead.

Good morning, everyone.

Good morning.

Hi Steve.

Can you characterize the nature of the generics competition for us? Is it across a lot of products, is it one specific product, what's the impact to mix, is it going after or is it impacting you on higher margin product or lower margin product, if you could give us some color in that regard?

Sure. So, in general, we've seen and we've talked about this little bit in the past too that across the board in the generic industry, you are seeing more approvals by the FDA, which leads to products in the market, which leads to more competition generally. And so, we see that. In our case though, the dip that we are seeing right now is really isolated to a few products and probably one product in particular, which happens to be one of our more profitable products. And that's the way it kind of goes in the generic industry; also, it's a little bit of an open book with IMS data and things like this. And so, folks look for where competitors have less competition and better market position, and those are the products they go after. So that's what’s happened with us. And so, I think we need to ride through this hurdle right now where the competition has come after one of our best products frankly.

Okay. And Sal, if you could just give us an idea with respect to this one product that’s facing competition, and I ask this to get a flavor of what your product rollouts may ramp like. But in terms of this one product that’s facing competition, when did your competition come out or get the approval, when did they start to market the drug; how quickly has it taken them to have this kind of impact on you?

I don’t have the exact dates on that, but I’d say, the impact has been here in the fourth quarter.

Okay. And then with respect to the Performance Chemicals business, you’re noting that you had lower costs coming out of China. And admittedly even though that’s FX, I wonder to what extent will you have to pass those through eventually? Did you have a short-term price cost benefit that’s going to evaporate in coming quarters?

That’s good question. I don’t know if it’s going to evaporate or not. Right now, our thought is things should continue. We have been over the course of the year passing that on to our customers. And you try to hold on to what you can. So that’s the dynamic that we’ve seen, which is for us lower costs; we try to hold on to some; a lot of that part of business distribution. So, we pass some of that on to our customers. And the net effect is lower top-line sales, which we’ve seen, but higher profits, and had higher margins and higher profits. So, I don’t know if it’s short-lived; we’re trying to manage it, so that it’s more of a permanent part of our business.

Okay. And then, if I could ask one last question. And this is just in the context of the M&A discussion and your balance sheet, if you can add to that, what is your free cash flow outlook for fiscal 2017 and even fiscal 2018? Can you give us a general idea of how much cash the business might generate?

Well, Steve, if you -- in our prepared remarks, we said that our EBITDA was, call it $80 million, was a little bit short of that, but just for easy math, right? So against that, you’ll have taxes paid and CapEx. But this year, as compared to last year, when you took a look at our working capital, our working capital was influenced by an increase in DSOs. But we believe that the DSOs is at a high watermark, so won’t increase from here. So everything being equal, again, it should be -- proxy would be, it would be our EBITDA less taxes and CapEx.

And I would add CapEx obviously for our business is essentially must, [ph] it’s R&D. We’re also spending money on dividend that we just announced and things like that. We don’t have facilities that we -- substantial facility reinvestment.

That’s right. Okay. No, that’s helpful. Okay. Thanks to both of you.

Thank you.

Thank you.

Our next question comes from Kevin McKenna from Main Line Capital. Please go ahead.

Hi. Good morning, gentlemen. Historically, you’ve been reporting past Labor Day for this quarter, sometime late in the first week or early second week of September. Are you now going to change your reporting cycle, this is a new normal?

Well, Kevin, yes, it is a new normal. And the reason is because we’re now considered a large accelerated filer, because of our market cap size as of December 31, 2015. So, this is our new normal. So, we have a 60 days report as opposed to before we had 75 days.

Okay. So, we should expect that each reports two to three weeks earlier than they normally come?

Only annually; in another words, quarterly, it’s the same.

Okay. So, -- all right.

So, our fourth quarter will be in and around this time next year.

All right. Thank you very much.

You're welcome.

[Operator Instructions] And our next question comes from Greg Eisen from Singular Research. Please go ahead.

Thanks and good morning. I would like to go back to the subject of -- in the Human Health, the one product where you saw the competition start to come in and affect your margin, I think you said in Q4. Should we expect a continued annualization effect for that one product’s margin affecting your overall Human Health margin for the next three quarters, should that factor into Human Health?

Yes, I think. So, the way it works in the generic industry, unless the competitors run into some sort of supply issue or something like that, they're going to grab their market share and they're now part of the new dynamic. So, this will be with us through most of 2017 and obviously Q1, Q2 and Q3 and then come Q4, we’ll be lapping the comparison on that competition. So, what we're trying to see is we'll have the negative impact of that throughout the first three quarters of this year. And then as our new product launches take effect, those will be offsetting that and that is how we end up with the forecast we have.

And thus, your statement that Q1 could see a dip step down before rising again in Q2. Okay that makes sense.

Right.

I understand that. Moving on, I guess still in Human Health, did you say you’re starting to implement a new ERP system just in the Human Health segment or is it companywide?

Just in the Human Health segment, specifically in Rising, our generic business.

Just in Rising and when did you start this?

We did not commence the -- we commenced our selection process in fiscal 2016 but we will start the implementation project in 2017.

Okay. And are there…

And Greg, just to add a little color to this, as Sal mentioned in his commentary, the requirement for access to data and visibility to data and to slice it many different ways is more important now than ever. And then also he mentioned that there is going to be changes in terms of what's called in the industry track and trades or serialization in terms of being able to follow each bottle basically. So, we need to make an investment in our infrastructure in order to accommodate our current Rising business; and then, we'll have a robust enough platform if we do other transactions or build the business, we’ll be able to accommodate the growth.

I understand that. Can you estimate how long that period of implementation will be; how many quarters, and what you think the incremental costs you will have in the SG&A line? I guess it's companywide; you don't report by segment, but what would be the implementation cost for that?

Okay. In the implementation cost, I just want to -- the entire project from cradle-to-grave is, call it $2 million. Okay? But some of that -- most of that is capitalized. So, for this year, what we have in our budget, we have approximately $500,000 to $900,000 during the course of this year from additional cost related to our serialization project that we can’t capitalize and employees to support the process and consultants and all that. So, it’s going to run between -- $750,000, $800,000 in this fiscal year. And we should -- I mean, this project is a large project and we’re not going to get all the functionality within one year, there will be probably an 18-month phase in, but in terms of being able to conduct our normal business, we should be able to do that by the end of this fiscal year. And then, in terms of serialization the requirement for that is to be on line with that or be in compliance rather with it in November of 2017. So, that’s like the second leg of this project.

Understood. And you’re not a high capital spending business. But that said, some of this cost is being capitalized. Do you have an estimate for total capital spending for the year that would be -- is it any different from what this year was materially?

As you said, we’re not a high CapEx Company. If I could find our cash flow, it’s normally historically within -- in terms of CapEx, it’s normally less than $1 million dollars or 1 million and change. When I say that, I’m not including capital expenditures for like finished dosage products in terms of business development, but just literally computer equipment and hard assets; it’s less than $1 million a year. So, the project that we’re seeking to in terms of the ERP and serialization will be in and around between $2 million and $2.5 million. But that spend will occur and like I just said before, over the let’s say the next 18 months.

Okay. So, $2 million to $2.5 million total cap spend for this over 18 months.

Correct.

And should we expect any -- one-off question, should we expect anything different on the tax rate line this year versus 2016 for effective tax rate, any changes there?

Well, it really depends on jurisdictional mix. If you take a look at our tax rate this year, it was less than last year, and primarily, because there was more profit here in our foreign subs on a weighted average. So, it will be within -- if you try to triangulate the last two years, that’s where we’ll be. No fundamental change.

Got it. Okay.

We can follow up offline, if you want.

Sure. Thank you.

Thanks Greg.

And we have a follow-up question from Matt Hewitt from Craig-Hallum Capital. Please go ahead.

Hi. Just one follow-up for me. This past quarter, it seemed like there the FDA has increased their enforcement actions on API manufacturers, particularly in Europe. And I’m curious if you saw any benefit with your third-party partners may be picking up some business. Have you had incremental outreach by pharma companies to you saying, hey, we've had facility shutdown, can you help us out? Did that help in Q4 or more importantly I guess can that help in FY17? Thank you.

Sure. I’d answer like this. I can't really quantify or say that we've had a substantial or even a noticeable change in our business because of that. I would say, Matt, that we have seen that step up and we have seen situations where some competitors are getting kind of short-term outages and things like this. It could help us in the future, but we're not really seeing anything substantial from that yet.

Okay, great. Thank you.

Thank you.

[Operator Instructions] And I am showing no further questions. I will now turn the call back to Sal Guccione for closing comments.

Okay. Well, thank you everyone for joining us on this call. Appreciate your time and your questions and interest and we look forward to fiscal 2017 and reporting to you at the first quarter. Thanks so much. Bye, bye.