Jody Burfening - IR, LHA Sal Guccione - President & CEO Doug Roth - CFO Walter Kaczmarek - Chief Operating Officer.

Matt Hewitt - Craig Hallum Capital Group Steve Schwartz - First Analysis Elliot Wilbur - Raymond James Greg Eisen - Singular Research Lester Patrice - Private Investor.

Good day. And welcome to the Aceto Third Quarter Fiscal 2017 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I will now like to turn the conference over to Jody Burfening of LHA. Please go ahead. .

Thank you, Nicole. Good morning, everyone, and welcome to Aceto Corporation's third quarter fiscal 2017 conference call. On today's call, Sal Guccione, President & CEO; and Doug Roth, Chief Financial Officer, they will lead the discussion about the quarterly financial results and business performance.

Walter Kaczmarek, Aceto's Chief Operating Officer is also with us today to participate in the Q&A session. Company issued its third quarter earnings press release yesterday after the market closed. For those of you who have not yet seen the release, a copy is available in the Investor Relations section of the company's website at www.aceto.com.

Before starting the call, I'd like to remind you that today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 that can be identified by words such as believe, expect, anticipate, plans, projects, seeks and similar expressions and involve numerous risks and uncertainties.

The company's actual results could differ materially from those anticipated or implied in these forward-looking statements as a result of certain factors that set forth in the company's filings with the Securities and Exchange Commission. Also on today’s call, management will refer 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 of intangible, debt extinguishment and amortization of debt discounts and debt issuance cost and cost related to acquisitions.

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

Good morning, Jody. Thank you, Jody, and good morning, everyone. Thank you for joining us on Aceto's third quarter fiscal 2017 earnings conference call. Our third quarter results reflect our first full quarter with the inclusion of the products acquired from Citron and Lucid.

That strategic acquisition enabled us to achieve solid double digit growth in sales and gross profits during the quarter. On our adjusted earnings per share basis, the third quarter came in just shy of our expectations.

With the addition of Citron and Lucid's generic product into our company, our Human Health and Pharmaceutical Ingredients segment together accounted for over 75% of total sales for the first time since we embarked on our strategy to transition the company towards Human Health.

Company net sales for the third quarter of fiscal 2017 were about $190 million, which is an increase of 20.5% from the $158 million reported in the third quarter of fiscal 2016. Our total gross profit rose 10.5% to $42.3 million from $38.3 million in the prior year's period.

Gross margin for the third quarter was 22.3%, compared to 24.2% in the prior year period. Doug Roth will give you performance details on the individual segments in a moment.

And I want to focus my comments on the performance of our Human Health segment where sales and gross profit excluding the contribution from Citron and Lucid were below those achieved last year.

This quarter we continue to see its competitive headwinds in the generic industry coming from new generic launches, as well as from continued pressure related to customer consolidation.

In particular, as previously discussed, Rising continue to see heighten competition for one of its important generic products that began to our last year's fourth quarter. In addition, some of our more matured products saw pricing pressure which we were able to partially offset through new product launches.

As the fiscal year progress, we've seen more frequent price and share negotiations which create more opportunities for the business mix to shift both positively and negatively. That said with Citron's products and Aurobindo's supply capability is now added to our company, we are now better equipped to deal with those industry dynamics.

From an operating perspective, we resolved the API supply issues that had previously impacted two of our Rising products. Those products are now back online commercially. We also made good progress in minimizing approval to launch time gaps for the new products.

During the quarter, we launched total of six new products, four from Rising and two from Citron. We now have two significant launches of products from Rising portfolio. One is called Zileuton Extended Release Tablets, that one Rising holds ANDA on and Capecitabine Tablets.

Zileuton is indicative for the treatment of Asthma and according to IMS Health has US sales of about $75 million for the 12 months ended December 2016. Capecitabine which is used for the treatment of metastatic breast cancer has sales of just under $400 million for the 2016 calendar year.

Our remaining product launches were Voriconazole Tablet and Paricalcitol from the Rising pipeline and [indiscernible] from the Citron pipeline. These six launches now bring our year-to-date total to 11.

Consistent with our previous guidance we still expect to launch 3 to 6 products from the Rising pipeline in the fourth quarter, bringing that total to 12 to 15.

On a Citron side, we had made strategic decision during the acquisition transition that the initial labeling process with our manufacturing parter Aurobindo would involve replacing the Citron labels and NDC number with Rising label and NDC numbers. This was done for two reasons.

First, any time an NDC label change occurs once the product is commercialized, that can be a catalyst for launch first circa rebate on that product to other suppliers. Second, we believe that leveraging the Rising brand in the marketplace is the best course of action for a long term value creation.

And then during the quarter, as we were preparing the launch schedule, we also made a decision to integrate the new serialization labeling protocol that would become a legal requirement this November. Because of that decision, Citron products will take an out of the queue and set back the launch cycle somewhat.

As a result, we now expect to launch seven Citron related products in the fourth quarter for a total of nine this fiscal year versus our prior plan of launching about 15 of those products. Launching the balance of the approved products acquired from Citron by the end of calendar 2017 remains a high priority for us.

Otherwise our integration activities have been proceeding as planned. We've been preparing to consolidate warehouses. We've been integrating our reorder pieces sums and we are on track to capture our fiscal 2018 planned synergies. The overall results from Citron and Lucid's products thus far are on track to meet our fiscal 2017 expectation.

We are generally pleased with how our work together is progressing. During the quarter, we reassessed our development projects in order gauge the future success on the pipeline. During this process, several projects were terminated due to market dynamic and to our technical challenges.

And with that pruning, that will allow us to redeploy those R&D dollars towards better projects. As of the end of April, we now have 154 projects in our development portfolio including 36 ANDAs currently on filed with FDA and 44 approved or tenably approved products.

Together having a total addressable market value of about $10 billion according to IMS data. Turning to balance of fiscal 2017. We are updating our outlook for sales and gross profit since the last time we discussed guidance on our second quarter call.

In part, this change reflects our revised launch schedule for the fourth quarter, and in part is due to competitive market dynamics that I described earlier. In some cases, we are not achieving the market share quickly as we've planned. In other cases, price erosion is greater than we anticipated.

On the other hand, some positive developments have also occurred. For example, current market dynamic suggest that pending new product launch force anticipated for this fourth quarter could produce substantially greater sales on profit that were previously model.

So pulling all these factors together, we now expect to see the fiscal 2017 sales growth to be in the low to mid-teen percentage range and non-GAAP adjusted EPS to be flat with to 10% below fiscal 2016's level.

On a GAAP basis which reflects the related cost and non cash purchase accounting charges, EPS is expected to be below last year by roughly 50% to 60%. Lastly, based on our current pipeline of project with Rising, we continue to project R&D spending of between $6 million and $8 million for the year.

We position the company to return to growth in fiscal 2018. We've been solving operational challenges. We are pushing forward with new product development as we continue to invest in and augment our current pipeline. We are integrating Citron's products into Rising. And we've added key personnel for the business.

Through the acquisition of Citron and Lucid products, we are in a strong position now with greater scale and streamline supply from Aurobindo to more effectively compete in the generic industry.

Longer term, we are enthusiastic about our growth prospects from our standard commercial portfolio, and from our standard pipeline of development product, and we remain committed to achieve a strategic transition towards Human Health.

With that I'll turn the call over to Doug for discussion of our financial results and then open the call up to questions.

Doug?.

Thank you, Sal, and good morning, everyone. Now I'll walk you through our financial results. As we closed the acquisition of the Citron and Lucid product lines and related assets on December 21, 2016. Our third quarter results including full period of Citron and Lucid sales and financial activities.

The consolidated net sales were $190.1 million, an increase of over 20.4% from the approximate $158 million reported in the third quarter of fiscal 2016. Gross profit was $42.3 million, an increase of 10.5%, compared to $38 million for the third quarter of fiscal 2016. Our gross margin was 22.3% compared to 24.2% in the prior year period.

On a reporting segment basis, Human Health segment sales were approximately $100 million, an increase of close to 70% from the third quarter of 2016. Our acquisition of the Citron and Lucid products contributed over $52 million to the segment sales.

Legacy Rising sale decreased by approximately $11 million, primarily due to the increased competition and price erosion on certain generic drugs in our portfolio, which were partially offset by the incremental sales from our new product launches towards the end of the quarter.

Sales of nutritional business rose modestly in the third quarter compared to the prior year's period. Gross profit in the Human Health segment rose to $25.3 million, a 32.3% from the prior year's quarter.

The increase in gross profit was primarily due to the contributions of $10.3 million from Citron and Lucid, which again more than offset a $4.5 million drop at legacy Rising caused by increased competition on certain products.

Included in our Human Health results and specifically in Citron's gross profit and gross margin this quarter were the non cash inventory step up adjustment of approximately $2.1 million, which was charged to the cost of good sold.

Just as the Sal note we expect the same charge or approximately the same level of charge in our fourth quarter and then that will be the end of the inventory step up. Pharmaceutical Ingredients segment sales were $43.8 million, a decrease of 4.4%, compared to the third quarter 2016 as we had modestly lower sales abroad both intermediate and APIs.

Our gross profit in the third quarter decreased 16% to 7.3% from $8.6 million a year earlier as a result of lower sales of our intermediates and APIs, as well as a drop of reorders of a certain API which typically yield a higher gross margin. Similarly, our gross margin in the period fell to 16.6% and 18.9% in the third quarter of 2016.

Our Performance Chemicals segment decreased 12.8% to $46 million due to lower sales of our agriculture protection products, which was slightly offset by $3 million in our sale gain in our specialty chemicals.

Agriculture protection products were down this quarter on a sales decline related to the timing and order timing for a wide range insecticide used on various crops, as well as lower sales of one of our herbicides.

Our gross profit fell 7.2% to $9.8 million, compared to 10.5% in the prior year's quarter, largely due to reduce sales of agriculture protection product. While our gross margin increased by 130 basis point to 21% due to higher sales of our specialty chemical and overall product mix.

Our SG&A expenses for the quarter of 2017 totaled $26.5 million, an increase of 36% over last year's level. The higher SG&A expenses can be attributed to $5.4 million of amortization expense plus $1.7 million of continued transition services associated with the Citron and Lucid product purchase.

Our R&D expenses represent investment in our generic pharma product pipeline and the majorities of these expenses are milestone based and therefore tend to fluctuate each quarter. We reported net income of $5.6 million, or $0.16 per diluted share, compared to net income of $10.4 million, or $0.35 per diluted share, for the third quarter of last year.

Non-GAAP adjusted net income which excludes among other things the amortization cost and inventory step up cost of the Citron acquisition, increased 8.7% to $13.6 million for the third quarter compared to $12.5 million last year.

And EPS level however because the increase number of shares -- this year we reported $0.39 per share against last year's $0.42 per share. Now turning over to the balance sheet as of March 31. We had cash and cash equivalent in short-term investment of just under $62 million.

Our working capital was right under $250 million and shareholders equity was approximately $402 million or [$13.36] per share. Our total bank inconvertible debt was $367 million, which included approximately $245 million under our amended and restated senior credit facility which is recently expanded to $375 million.

I'd now like to turn the call over to questions. Operator, please. .

[Operator Instructions] Our first question comes from Matt Hewitt of Craig Hallum Capital Group. Please go ahead..

Good morning, gentlemen. And thank you for taking our questions. First off, the key Rising product that's face incremental pressures with the past year.

Has that market stabilized yet or do they are continued to be the new entrance or new pricing dynamics or that could continue to erode over the near term?.

So as far we can tell Matt there has been no new entrance and we think one never know but we think it seems have to stabilize at this point. .

Okay. That's helpful. And then regarding the launch delays. It sounds like it's a labeling issue but could you walk through maybe the change -- it sounds like it was a regulatory change but walk through that a little bit and what that means as far as the timing to get back on pace with your original plan of launches. .

Yes, hey, Matt, this is Walter Kaczmarek. I'll take that question. So there is a new regulation that's going to be in effect starting this November, the DSCSA or serialization regulation is what it called.

So we made the strategic decision to have these new labels and barcodes of the Citron/Aurobindo products created with the new 2D labels and as a result we had to basically begin the process over with Aurobindo and get back in the queue. So as a result this is strictly a timing issue. It pushed out the launch from Q4 into Q1 of fiscal 2018.

So we are working to get quite frankly all of our products with the 2D serialization all squared away, but we want to go ahead and get these new products taking care of because we would have to revisit and get them done regardless. .

That's great. And I guess maybe a follow up to that.

Since everyone kind of have to go through this and it sounds like you maybe going moving ahead a little bit earlier than some of your peers, will that create an opportunity for you as we move through fiscal 2018 maybe where you've done this ahead of time and therefore while others are catching up, it creates opportunities in the market to pickup incremental share or anything along those lines?.

Yes. At this point, it's really hard to say. It's so unclear at this point in time I'd say that no. I would not certainly model anything of that nature into fiscal 2018. We just want to make sure that we are ready and we'll see what the rest of the market does. .

Okay. And Wal maybe one more for you.

As you look at these portfolios that you acquired, how are you determining what products or what markets you want to launching to first? Is it based upon the number of competitors currently in the market? Is it based upon maybe a product has a history of having supply constraints or challenges so you could come in and be the reliable supplier and gives you a leg up on the competition? Is it based upon margins -- how are you determining which products and markets you want to launch first?.

Well, pretty simple. The one where we can make most the money on we want to get out first.

That's where we are going to pay most of the attention to but as we saw technical challenges and as products become available we are going to launch them as it becomes situation sequentially where we have -- albeit it's a lovely problem to have if you have so many products to launch. You have to start gating them.

Then we are going to do that based on the revenue and gross profit evaluation..

Okay. And then maybe one last one then I'll hop back in the queue.

Our gross margins -- could you walk through again? It sounds like there were some specific issues related to this quarter but what was the impact and how should we think about that improving as we get through Q4 and maybe even in the next year?.

So what we saw from Q3, 2016 to Q3, 2017 was predominately driven as Sal said by one product and actually we have another product that's a sole source in the market, it's a very high value, very low volume product that has lumpiness in the supply and demand.

So we are the only one in the market on it but there is fluctuation relative to timing from quarter-to-quarter that can cause some variances that even out over the course of the year.

But when you take those two products in particular as compared to once again to 2016 versus 2017 and in this quarter we are discussing, those two products were predominately the one that were affecting the revenue and the gross profit compared to --.

Okay. One more if I could sneak in here. One of your peers recently, he was talking about the new McKesson Walmart relationship, it's actually almost a year old but it sounds like they have been going out and requesting new pricing numbers from vendors. Have you seen that impact at all in any of your business? Thank you..

What's currently going on and the name of the group is Clara's One which currently going on as the entire industry including Rising/Citron is negotiating the terms and conditions and until we do that we really can't even get to a point where we are discussing pricing because we just don't know what the entire terms and conditions are there business portfolio is going to look like.

So we really don't have an accurate gauge to let you know relative to how that process is going. .

Our next question comes from Steve Schwartz of First Analysis. Please go ahead..

Hi, good morning, everyone. Hey, So Sal in your prepared remarks you made a comment about Aurobindo potentially being a better partner for you in this current environment.

And it makes me wonder are you doing more a legacy Rising work through Aurobindo now? What did you mean by that statement?.

No. We are not doing legacy Rising work through Aurobindo. So it's two things. We got the original Rising model which works fine and it's a partnership based model with many let say smaller formulating and manufacturing company. And that continues.

The relation with Aurobindo is only related at this point to the acquired Citron products and what I meant was it -- they are much larger, much more deeply, vertically integrated than our current -- than most of our current partners, which allows us to I think better compete with respect to the Citron type products than we were previously able to do so.

So if we are in a position to fight on price for example, how the competitor is positioned, we feel that we are in a pretty good position given the vertical integration. .

Yes, okay. And with respect to Citron, Lucid I think when you originally announced the deal in one of your quarterly presentations you had projected 2016 calendar revenue for the two businesses to be about $195 million.

So calendar 2016, I am just wondering for calendar 2017, is that number going to be higher or with the current dynamics are we looking at maybe a down calendar year?.

Yes, almost for calendar 2017 -- [Multiple Speakers].

Steve, one thing that Sal did mention is that so far Citron and Lucid the acquired products are tracking very close to or a little bit better than our own internal expectations. So we can see to through our fiscal 2017 but we are just putting the final touches on or starting to put the final touches on our 2018. So we can't speak to that just yet. .

Got you. But that answers my question and saying that it's tracking to your expectations. So and with respect to the pipeline pruning, just to be clear that the pruning occurred in the legacy Rising pipeline right. You didn't prune anything out of Citron. .

It's in both but mostly in the legacy Rising products. I think we do this time to time and this is just now appeared to having completed the acquisition of the Citron products. We took a thorough look through and terminated some -- I think some 15 projects. .

Yes. And then with respect serialization if we could go back to that discussion that Matt started. From an industry outsider if you want to call me that, I see FiercePharma all the blogs and perhaps I am just seeing too many banner ads but it just sounds like that serialization topic has just been at the forefront for so long.

I am just surprised to hear that you went into Citron not recognizing that this would need to be done.

Is it something you had in the works with Rising and why was it not something you saw coming with Citron?.

Yes, Steve. This is Wal. Let me take a crack at that. This date is certainly been out there for a while. And it's a very complicated scenario and situation. We are on the Rising side and we are dealing with multiple partners and vendors. So we got to get each and everyone of those vendors agreeing upon the exact format for these barcodes.

So it's not a black and white situation. So, yes, the entire industry is absolutely aware of it. There is a certain stuffs that in the industry that thinks that we can -- you can start six months ahead of time and get these label all taken care of. So it becomes a matter of timing and sequencing once again.

So that is really more of the issue with the timing and the sequencing. And when Citron prior to the acquisition had these products in the queue with Aurobindo, they were just going with their normal labeling, when we acquired these assets we've made the decisions strategically that let just go ahead and rip the band-aid off and it get it done. .

Yes, okay. No doubt Walter that the tone you described people thinking that it could be done very quickly is certainly something a tone that I picked up in a number of pieces I've read by advisors to the industry. So it sounds like that's not uncommon. Anyway gentlemen, thank you for taking the questions. .

Our next question comes from line Elliot Wilbur of Raymond James. Please go ahead..

Thanks. Good morning. First question for Sal. Sal, if you were to sort of categorize or I guess more accurately kind of rank order the element that had led to the revision in financial expectations between the ways into product launches pricing pressure on the existing base and then some of the new dynamics I guess in the distribution channel.

How would you -- is there any one of those that had a much more pronounced impact than the other? And then I want to follow up with question for Wal, it sounds like based on your commentary that the Clara's One venture that some other companies has suggested has had a negative impact on their business already may not in fact to have actually impacted your business.

I just want to make sure that I interpret your commentary earlier on that dynamic.

And then follow up to that obviously McKesson I guess is important customer to everyone but if we think about sort of the combination of McKesson and Walmart, how important is that combined business to been to the company historically?.

Okay. So I'll take the first question and then I'll turn it over to Wal for the Clara's One question.

Again, it's mixed bag, my assessment I'd say for the fourth quarter is more shared that we maybe thought we can get by now and pricing so competitive dynamics as opposed to the launches would be the majority of the impact for the update for the guidance. And again as I mentioned, it's always a combination.

It's always lot going on so those are some negatives. On the other hand, we got some positive with respect to some of the products that also serve to mitigate some of the downsize. So its mixed bag but I'd say in this quarter but in the past it probably a little bit more in the one side.

The expectation is probably a little bit slowness versus our pricing and share assumptions. .

So okay Elliot, let me current topic your question on Clara's One.

So normally these events with these consortiums that come together, they start with what they loving refer to as a harmonization process, which is a nice way of saying that they get to legally view all the contract price between Walmart, between [Rideate] and between McKesson one stock.

And then what of course they like to do is go to the lowest common denominator. So we did see some of that activity. The pricing parity was generally in line with our books of business across those customers base. So we didn't see a lot of significant impact from the harmonization process.

So really what we are waiting for are the terms and conditions and to see of Clara's one is going to quite frankly how much of their portfolio they are going to put on a bid. .

Okay.

And have they given any indication as to the timeframe in which that may happen?.

As far as the terms and conditions to getting completed?.

As far as establishing some sort of timeline for potentially putting out competitive bids..

Yes. They want to get their terms and conditions done as soon as possible. So this is going to be what I'd refer to as relatively M&A event. .

Okay. And then do you have -- do they actually notify you in advance? Do you have visibility into what products may actually be put out for bid or do they just come back to you with the price and say that you want to keep the businesses --.

Normally it's a formalized process. .

And our next question comes from Greg Eisen from Singular Research. Please go ahead. .

Thank you and good morning. So with Citron you launched two products this quarter and there are seven planned for the June quarter, that's nine. There were 31 products in the pipeline that were approved that you could already launch.

So at least 22, I think I understand the labeling issue but how many of these 22 do you think you can achieve launching in fiscal 2018?.

So again as Doug mentioned our budgets are not baked yet but we think we can get majority of those out by the end of this calendar -- the end of calendar 2017. Again, at this point as we get the label and the NDC and the serialization basically in place then it's a question of scheduling and gets them out the door. .

Understood. I know you've been to -- you have expectations of launching seven -- nine total products from Citron this year. So that's actually -- does that implies then that you essentially taking care and updated the labeling on those nine products? But you just have to --.

Yes. It's in process. But those will be later in this quarter as opposed to earlier when we got the deal earlier in this quarter. .

Right.

My point being that you are saying that those nine have the labeling solved but you just haven't gotten to the remaining 22 yet?.

Correct. .

Understood. Okay, and if I could ask you to repeat one number that was announced earlier in the call? I just didn't hear it. You said inventory step up in bases was accounted for an increase in cost of good sold this quarter and next quarter.

How much was that again?.

The total inventory step up for this fiscal year will be $4.5 million and we had approximately I believe it was $2.1 million -- yes $2.1 million in this quarter. .

Great.

And then after next quarter you are done with that, correct?.

Correct. That was a brought about as part of the purchase accounting. .

Our next question comes from [Lester Patrice] of Private Investor. Please go ahead. .

Yes, guys, it's great to be able to hear from our chief operating officer, Wal. Can I ask you a question? Thank you. It sounds like the fourth quarter is some effi elements in it but it sounds like you are guiding us to fourth quarter sort of hockey stick shape again quarter which is disproportionately larger than the prior three quarters.

As we start to model 2018, should we think of that fourth quarter result or whatever it is as a sort of one off touch up fluke or should we start to consider that as more of the normalized sort of base level of earnings that company can produce in future quarters? Thank you. .

Yes, Lester. Certainly Q4, we are excited about but it's just way too early in the game to take that number and multiply by four. So that is certainly something that we shouldn't do.

We've got new products that are launching at -- and we see them go through via process during the next fiscal year, there is going to be obviously market events that occur and it's going -- it will make it an interesting type of scenario so it's very, very difficult at this point in time to pinpoint exactly how those will look. .

Okay. But you won't rule it out that we perform at much sort of normalized prior quarter before this most recent two quarters of weakness. It's not beyond the realm of the possible to start to return to that level of base -- quarterly base result. .

Lester, I love your optimism but it's just tough to say that right now. Where we are somewhere in the earlier phases of our budget in for next year. And that occurs -- that's going to occur now over June, July event. The end of May, June, July and we have a lot better feel that but so like to defer on that. .

Our next question is a follow up question from Matt Hewitt of Craig Hallum Capital Group. Please go ahead..

Hi, thanks. One follow-up for Doug. The receivables balance, obviously there has been an uptick I think a lot of it's probably related to the Citron and Lucid acquisition.

But is your expectation and drive to bring those dollars back into our cash equivalence and maybe utilize some of that to pay down the debt and how quickly do you think you could do that. .

That's a very good point, Matt. I appreciate. You bringing up the topic, our DSOs did increase during the quarter, yes; some of it was related to our Rising business including the new elements of Citron and Lucid. But our Aceto Corp, our specialty chemical and our Ag the other -- our other segments also increased because of the timing of the sales.

We had a disproportional amount of sales occurred in March. So their DSOs and non Rising DSOs also went up. So to answer your question, right now on a trailing 12 months basis, on a consolidated basis we are a little north of a 100 days. We fully expect that to come down. Now specifically in the non- generic business.

The generic business has been a little bit more stubborn and we are putting a few -- we are putting a few processes or few strategies in place to ultimately bring those down also.

But in order to do so we might have to have some changes to our -- what's known as our whack price which may cause a little short term pain before we start to see the benefit at the reduced DSO.

So to answer your question, yes, the DSOs were higher than normal and yes, we do expect them to come down and the first place that excess where the cash will be applying it against our debt. As a matter of fact this quarter we are able -- when you see our cash flow we paid down $60 million of debt this quarter.

So we expect to use that money to pay down debt. .

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Guccione for any closing remarks. .

Okay. Well, thank you everyone. Again, as always we definitely appreciate your questions and comments and support that you showed to Aceto and we look forward to speaking again with you later this summer. So thank you and see you. .

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