UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the fiscal year ended June 30, 2009
 Commission file number 000-04217
 
 ACETO CORPORATION
 (Exact name of registrant as specified in its charter)
 
 New York

11-1720520(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification
Number)One Hollow Lane, Lake Success, NY 11042(Address of principal executive offices)
 
 (516) 627-6000
 (Registrant's telephone number, including area code)
 
 Securities registered pursuant to Section 12 (b) of the Act:
 
 Common Stock, par value $.01 per share

The NASDAQ Global Select Market(Title of Class)

(Name of each exchange on which registered)
 
 Securities registered pursuant to Section 12 (g) of the Act:  None
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 Yes o  No x
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act.
 Yes o  No x
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).Yes oNo o
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x
 
 
 
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer o
Accelerated filer xNon-accelerated filer o
Smaller reporting company o
 
 Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes o  No x
 
 The aggregate market value of the voting stock of the Company held by non-affiliates of the Companybased on the closing price of the common stock on December 31, 2008 as reported on the NASDAQ Global Select Market, was
approximately $243,028,716.
 
 The Registrant has 24,770,678 shares of common stock outstanding as of September 3, 2009.
 
 Documents incorporated by reference:  The information required in response to Part III of this Annual Report on Form 10-K is hereby incorporated by reference to the specified portions of the Registrant’s definitive proxy statement for the annual meeting of shareholders to be held on December 3, 2009.
  2
  ACETO CORPORATION AND SUBSIDIARIES
 FORM 10-K
 FOR THE FISCAL YEAR ENDED JUNE 30, 2009
   TABLE OF CONTENTSPART I.Item 1.
Business
4Item 1A.
Risk Factors
6Item 1B.
Unresolved Staff Comments
13Item 2.
Properties
13Item 3.
Legal Proceedings
13Item 4.
Submission of Matters to a Vote of Security Holders
14PART II.Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
14Item 6.
Selected Financial Data
16Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
31Item 8.
Financial Statements and Supplementary Data
32Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
32Item 9A.
Controls and Procedures
32Item 9B.
Other Information
34PART III.Item 10.
Directors, Executive Officers and Corporate Governance
34Item 11.
Executive Compensation
34Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
34Item 13.
Certain Relationships and Related Transactions and Director Independence
34Item 14.
Principal Accountant Fees and Services
34PART IV.Item 15.
Exhibits, Financial Statement Schedules
34Signatures

67
 
 3
 
 PART I
 
 CAUTIONARY STATEMENT RELATING TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
 
 This Annual Report on Form 10-K and the information incorporated by reference includes “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  We intend those forward looking-statements to be covered by the safe harbor provisions
for forward-looking statements.  All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements.  Any such forward-looking statements are based on current expectations, estimates and projections about our industry and our business.  Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” or variations of those words and similar expressions are intended to identify such forward-looking statements.  Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward-looking statements.  Factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, unforeseen environmental
liabilities, international military conflicts, the mix of products sold and their profit margins, order cancellation or a reduction in orders from customers, competitive product offerings and pricing actions, the availability and pricing of key raw materials, dependence on key members of management, continued successful integration of acquisitions, receipt of regulatory approvals, risks of entering into new European markets, and economic and political conditions in the United States and abroad.  We
undertake no obligation to update any such forward-looking statements, other than as required by law.
 
 NOTE REGARDING DOLLAR AMOUNTS
 
 In this Annual Report, all dollar amounts are expressed in thousands, except share prices and per-share amounts.
 
 Item 1.  Business
 
 General
  Aceto Corporation, together with its consolidated subsidiaries, are referred to herein collectively as “Aceto”, “Company”, “we”, “us”, and “our” unless the content indicates otherwise.  Aceto was incorporated in 1947 in the State of New York.  We are a global leader
in the sourcing, quality assurance, regulatory support, marketing and distribution of chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals and crop protection products.  Our fiscal 2009 results were impacted by the economic environment that we operate in, which continues to be quite turbulent.  According to a June 16, 2009 Federal Reserve statistical release, domestic manufacturing output was more than 15% below its year-earlier level and decreased 1.0% in the month
of May.  Our business is organized along product lines into three principal segments: Health Sciences, Chemicals & Colorants and Crop Protection.
  The Health Sciences segment is our largest segment in terms of both sales and gross profits. Products that fall within this segment include active pharmaceutical ingredients (APIs), pharmaceutical intermediates, nutraceuticals and biopharmaceuticals.
  We typically partner with both customers and suppliers years in advance of a drug coming off patent to provide the generic equivalent.  We believe we have a pipeline of new APIs poised to reach commercial levels over the coming years as the patents on existing drugs expire, both in the United States and Europe. In addition, we continue
to explore opportunities to provide a second-source option for existing generic drugs with approved abbreviated new drug applications (ANDAs). The opportunities that we are looking for are to supply the APIs for the more mature generic drugs where pricing has stabilized following the dramatic decreases in price that these drugs experienced after coming off patent.  As is the case in the generic industry, the entrance into the market of other generic competition generally has a negative impact on the
pricing of the affected products.    By leveraging our worldwide sourcing, quality assurance and regulatory capabilities, we believe we can be an alternative lower cost, second-source provider of existing APIs to generic drug companies.
  According to an IMS Health press release on April 22, 2009, the value of the global pharmaceutical market is expected to grow 2.5% – 3.5% in 2009; two percentage points lower than previously indicated last October, as deterioration in the global economic environment continues to affect market demand.  The updated forecast predicts
global pharmaceutical sales decreasing 8.5% from the October 2008 forecast to $750 billion for the year, down from the $820 billion forecast in October 2008.  The sector will continue to feel the impact of the economic climate, but to a lesser extent than many other industries, through 2010 when a rebound is expected.
  4
  The Chemicals & Colorants segment is a major supplier to the many different industries that require outstanding performance from chemical raw materials and additives.  Products that fall within this segment include intermediates for dyes, pigments and agrochemicals.  We provide chemicals used to make plastics, surface
coatings, textiles, lubricants, flavors and fragrances. Many of our raw materials are also used in high-tech products like high-end electronic parts (circuit boards and computer chips) and binders for specialized rocket fuels. We are currently responding to the changing needs of our customers in the color producing industry by taking our resources and knowledge downstream as a supplier of select organic pigments. According to the Federal Reserve statistical release described above, the production index for durable
goods contracted at an annual rate of more than 30% for the quarter ended March 31, 2009.
  According to the American Chemistry Council, leading indicators of global industrial production continue to suggest a slowing down of activity.   Through April 2009, on a year-over-year basis, global chemical industry production decreased by 10.5%.
  The Crop Protection segment sells herbicides, fungicides, insecticides, and other agricultural chemicals to customers, primarily located in the United States and Western Europe.  In fiscal 2009, we continued to add products to our Crop Protection portfolio when we received EPA registrations for Halosulfuron and Glyphosate. Glyphosate
is the largest selling herbicide for both crop and non crop use sold in the United States.  We plan to begin marketing Glyphosate for the 2010 growing season. In addition, we have two other products that we have already filed with the EPA for registrations and several other products that we plan to file for registrations with the EPA in fiscal 2010. Our plan is to continue to develop this pipeline and bring to market additional products in a similar manner. In May 2008, we sold an insecticide product
to its patent owner in conjunction with litigation settlement involving an expired license.
  According to the US Department of Agriculture, total acreage planted in 2009 decreased by 1.2% to almost 321 million acres.  The number of peanut acres planted in 2009 was down sharply; almost 30% from 2008 levels, and sugar cane acreage was down 1.6% from 2008.
  Our main business strengths are sourcing, quality assurance, regulatory support, marketing and distribution. In fiscal 2009, we developed an industrial brand for Aceto called “Enabling Quality Worldwide” and are marketing this brand globally. With a physical presence in ten countries, we distribute over 1000 pharmaceuticals and
chemicals used principally as raw materials in the pharmaceutical, agricultural, color, surface coating/ink and general chemical consuming industries. We believe that we are currently the largest buyer of pharmaceutical and specialty chemicals for export from China, purchasing from over 500 different manufacturers.
 
 Our presence in China, Germany, France, the Netherlands, Singapore, India, Hong Kong, Japan, Vietnam, the United Kingdom andthe United States, along with strategically located warehouses worldwide, enable us to respond quickly to demands from customers worldwide, assuring that a
consistent, high-quality supply of pharmaceutical, biopharmaceutical, specialty chemicals and crop protection products are readily accessible.  We are able to offer our customers competitive pricing, continuity of supply, and quality control.  We believe our 60 plus years of experience, our reputation for reliability and stability, and our long-term relationships with suppliers have fostered loyalty among our customers.
 
 Long-lived assets by geographic region as of June 30, 2009, 2008, and 2007 were as follows:
 
 Long-lived assets2009


2008


2007United States

$
11,445


$
4,729


$
5,229Europe


3,120



3,734



3,967Asia-Pacific


3,063



3,252



2,847Total

$
17,628


$
11,715


$
12,043
  We remain confident about our business prospects.  We anticipate organic growth through our plans to enter the market for companion animal vaccines, the market for finished dosage form generic drugs,  the Japanese pharmaceutical market, the continued globalization of our Chemicals & Colorants business, the further globalization
of our nutraceutical business, the  expansion of our crop protection segment by acquisition of product lines and intellectual property, the continued enhancement of our sourcing operations in China and India, and the steady improvement of our quality assurance and regulatory capabilities.
  5
  We believe our track record of continuous product introductions demonstrates our commitment to be recognized by the worldwide generic pharmaceutical industry as an important, reliable supplier.  Our plans involve seeking strategic acquisitions that enhance our earnings and forming alliances with partners that add to our capabilities,
when possible.
 
 Information concerning revenue and gross profit attributable to each of our reportable segments is found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and in Note 18 to the Consolidated Financial Statements, Part II, Item 8, “Financial Statements and Supplementary
Data.”
 
 Products and Customers
 
 During the fiscal years ended June 30, 2009 and 2008, approximately 70% and 67%, respectively, of our purchases were from Asia and approximately 17% and 19%, respectively, were from Europe.
 
 Our customers are primarily located throughout the United States, Europe and Asia.  They include a wide range of companies in the industrial chemical, agricultural, and health science industries, and range from small trading companies to Fortune 500 companies.  During fiscal years 2009 and 2008, sales made to customers
in the United States totaled $158,696 and $165,287, respectively.  Sales made to customers outside the United States during fiscal years 2009 and 2008 totaled $163,950 and $194,304, respectively, of which, approximately 57% and 58%, respectively, were to customers located in Europe.
 
 The chemical industry is highly competitive.  We compete by offering high-quality products produced around the world by both large and small manufacturers at attractive prices.  Because of our long standing relationships with many suppliers as well as our sourcing operations in both China and India, we are able to ensure
that any given product is manufactured at a facility that is appropriate for that product.  For the most part, we store our inventory of chemicals in public warehouses strategically located throughout the United States, Europe, and Asia, and we can therefore fill orders rapidly from inventory.  We have developed ready access to key purchasing, research, and technical executives of our customers and suppliers.  This allows us to ensure that when necessary, sourcing decisions can be
made quickly.
 
 No single product or customer accounted for as much as 10% of net sales in fiscal years 2009, 2008 or 2007.  No single supplier accounted for as much as 10% of purchases in fiscal 2009 and 2008.
 
 We hold no patents, licenses, franchises or concessions that we consider material to our operations.
 
 A subsidiary of the Company markets certain agricultural chemicals which are subject to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).  FIFRA requires that test data be provided to the EPA to register, obtain and maintain approved labels for pesticide products. The EPA requires that follow-on registrants of these
products compensate the initial registrant for the cost of producing the necessary test data on a basis prescribed in the FIFRA regulations. Follow-on registrants do not themselves generate or contract for the data. However, when FIFRA requirements mandate that new test data be generated to enable all registrants to continue marketing a pesticide product, often both the initial and follow-on registrants establish a task force to jointly undertake the testing effort. The Company is presently a member of several
such task force groups, which requires payments for such memberships. In addition, in connection with our crop protection business, the Company plans to acquire product registrations and related data filed with the United States Environmental Protection Agency to support such registrations and other supporting data for three products. The acquisition of these product registrations and related data filed with the United States Environmental Protection Agency as well as payments to various task force groups could
approximate $6,300 over the next fiscal year.
 
 Employees
 
 At June 30, 2009, we had 221 employees, none of whom were covered by a collective bargaining agreement.
 
 Item 1A.  Risk factors
 
 You should carefully consider the following risk factors and other information included in this Annual Report.  The risks and uncertainties described below are not the only ones we face.  Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations.  If
any of the following risk factors occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
  6
  If we are unable to compete effectively with our competitors, many of which have greater market presence and resources than us, our profitability and financial condition will be adversely affected.
 
 Our financial condition and operating results are directly related to our ability to compete in the intensely competitive worldwide chemical market.  We face intense competition from global and regional distributors of chemical products, many of which are large chemical manufacturers as well as distributors.  Many of these
companies have substantially greater resources than us, including greater financial, marketing and distribution resources. We cannot assure you that we will be able to compete successfully with any of these companies. In addition, increased competition could result in price reductions, reduced margins and loss of market share for our services, all of which would adversely affect our business, results of operations and financial condition.
 
 Our distribution operations of APIs concentrate on generic products and therefore are subject to the risks of the generic industry.
 The ability of our business to provide consistent, sequential quarterly growth is affected, in large part, by our participation in the launch of new products by generic manufacturers and the subsequent advent and extent of competition encountered by these products. This competition can result in significant and rapid declines in pricing with
a corresponding decrease in net sales. Our margins can also be affected by the risks inherent to the generic industry.
 
 Healthcare reform and a reduction in the reimbursement levels by governmental authorities, HMOs, MCOs or other third-party payors may adversely affect our business.
 Third party payors increasingly challenge pricing of pharmaceutical products. The trend toward managed healthcare, the growth of organizations such as HMOs and MCOs and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of pharmaceutical products, resulting in lower prices
and a reduction in product demand. Such cost containment measures and healthcare reform could affect our ability to sell our products and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
 
 We may incur significant uninsured environmental and other liabilities inherent in the chemical distribution industry that would have a negative effect on our financial condition.
 
 The business of distributing chemicals is subject to regulation by numerous federal, state, local, and foreign governmental authorities.  These regulations impose liability for loss of life, damage to property and equipment, pollution and other environmental damage that may occur in our business.  Many of these regulations
provide for substantial fines and remediation costs in the event of chemical spills, explosions and pollution.  While we believe that we are in substantial compliance with all current laws and regulations, we can give no assurance that we will not incur material liabilities that exceed our insurance coverage or that such insurance will remain available on terms and at rates acceptable to us. Additionally, if existing environmental and other regulations are changed, or additional laws or regulations
are passed, the cost of complying with those laws may be substantial, thereby adversely affecting our financial performance.
 
 In fiscal years 2009, 2008 and 2007, the Company received letters from the Pulvair Site Group, a group of potentially responsible parties (PRP Group) who are working with the State of Tennessee (the State) to remediate a contaminated property in Tennessee called the Pulvair site. The PRP Group has alleged that Aceto shipped hazardous substances
to the site which were released into the environment.   The State had begun administrative proceedings against the members of the PRP Group and Aceto with respect to the cleanup of the Pulvair site and the group has begun to undertake cleanup. The PRP Group is seeking a settlement of approximately $1,700 from the Company for its share to remediate the site contamination. Although the Company acknowledges that it shipped materials to the site for formulation over twenty years ago, the Company believes
that the evidence does not show that the hazardous materials sent by Aceto to the site have significantly contributed to the contamination of the environment and thus believes that, at most, it is a de minimus contributor to the site contamination.  Accordingly, the Company believes that the settlement offer is unreasonable. The impact of the resolution of this matter on the Company's results of operations in a particular reporting period is not known.  However, management believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition or liquidity.
 
 Our subsidiary, Arsynco, has environmental remediation obligations in connection with its former manufacturing facility in Carlstadt, New Jersey. Estimates of how much it would cost to remediate environmental contamination at this site have increased since the facility was closed in 1993.  If the actual costs are significantly greater
than estimated, it could have a material adverse effect on our financial condition, operating results and cash flows.
  7
  In March 2006, Arsynco received notice from the EPA of its status as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a site described as the Berry’s Creek Study Area.   Arsynco is one of over 150 PRPs which have potential liability for the required investigation and remediation
of the site.  The estimate of the potential liability is not quantifiable for a number of reasons, including the difficulty in determining the extent of contamination and the length of time remediation may require.  In addition, any estimate of liability must also consider the number of other PRPs and their financial strength.  Based on prior practice in similar situations, it is possible that the State may assert a claim for natural resource damages with respect to the Arsynco site
itself, and either the federal government or the State (or both) may assert claims against Arsynco for natural resource damages in connection with Berry's Creek; any such claim with respect to Berry's Creek could also be asserted against the approximately 150 PRPs which the EPA has identified in connection with that site.  Any claim for natural resource damages with respect to the Arsynco site itself may also be asserted against BASF, the former owners of the Arsynco property. Since an amount of the
liability cannot be reasonably estimated at this time, no accrual is recorded for these potential future costs.  The impact of the resolution of this matter on the Company’s results of operations in a particular reporting period is not known.  However, management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s financial condition or liquidity.
  The distribution and sale of some of our products are subject to prior governmental approvals and thereafter ongoing governmental regulation.
  Our products are subject to laws administered by federal, state and foreign governments, including regulations requiring registration and approval of many of our products. More stringent restrictions could make our products less desirable, which would adversely affect our revenues and profitability. Some of our products are subject to the
EPA registration and re-registration requirements, and are registered in accordance with FIFRA. Such registration requirements are based, among other things, on data demonstrating that the product will not cause unreasonable adverse effects on human health or the environment when used according to approved label directions. Governmental regulatory authorities have required, and may require in the future, that certain scientific data requirements be performed on our products and this may require us on our behalf
or in joint efforts with other registrants to perform additional testing.  Responding to such requirements may cause delays in or the cessation of the sales of one or more of our products which would adversely affect our profitability. We can provide no assurance that any testing approvals or registrations will be granted on a timely basis, if at all, or that our resources will be adequate to meet the costs of regulatory compliance or that the economic benefit of complying with the requirement will
exceed our cost.
 
 Tax legislation and assessments by various tax authorities may be materially different than the amounts we have provided for in our consolidated financial statements.
 
 We are regularly audited by federal, state, and foreign tax authorities. From time to time, these audits may result in proposed assessments. While we believe that we have adequately provided for any such assessments, future settlements may be materially different than we have provided for and thereby adversely affect our earnings and cash
flows.
 
 We operate in various tax jurisdictions, and although we believe that we have provided for income and other taxes in accordance with the relevant regulations, if the applicable regulations were ultimately interpreted differently by a taxing authority, we may be exposed to additional tax liabilities. Our effective tax rate is based on our expected
geographic mix of earnings, statutory rates, intercompany transfer pricing, and enacted tax rules. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions on a worldwide basis. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. It is possible that these positions may be challenged by jurisdictional tax authorities and may have a significant impact
on our effective tax rate. In addition, from time to time, various legislative initiatives may be proposed that could adversely affect our tax positions. There can be no assurance that our effective tax rate will not be adversely affected by these initiatives.
 
 Changes in tax rules may adversely affect our future reported financial results or the way we conduct our business.
 
 Our future reported financial results may be adversely affected if tax or accounting rules regarding unrepatriated earnings change. The Obama administration recently announced several proposals to reform United States tax rules, including proposals that may result in a reduction or elimination of the deferral of United States tax on our unrepatriated
earnings, potentially requiring those earnings to be taxed at the United States federal income tax rate.
  8
  Our acquisition strategy is subject to a number of inherent risks, including the risk that our acquisitions may not be successful.
 
 We continually seek to expand our business through acquisitions of other companies that complement our own and through joint ventures, licensing agreements and other arrangements. Any decision regarding strategic alternatives would be subject to inherent risks, and we cannot guarantee that we will be able to identify the appropriate opportunities,
successfully negotiate economically beneficial terms, successfully integrate any acquired business, retain key employees, or achieve the anticipated synergies or benefits of the strategic alternative selected. Acquisitions can require significant capital resources and divert our management’s attention from our existing business. Additionally, we may issue additional shares in connection with a strategic transaction, thereby diluting the holdings of our existing common shareholders, incur debt or assume
liabilities, become subject to litigation, or consume cash, thereby reducing the amount of cash available for other purposes.
 
 Any acquisition that we make could result in a substantial charge to our earnings.
 We have previously incurred charges to our earnings in connection with acquisitions, and may continue to experience charges to our earnings for any acquisitions that we make, including impairment charges. These costs may also include substantial severance and other closure costs associated with eliminating duplicate or discontinued products,
employees, operations and facilities. These charges could have a material adverse effect on our results of operations for particular quarterly periods and they could possibly have an adverse impact on the market price of our common stock.
 
 Our revenue stream and related gross profit is difficult to predict.
 
 Our revenue stream is difficult to predict because it is primarily generated as customers place orders and customers can change their requirements or cancel orders. Many of our sales orders are short-term and may be cancelled at any time. As a result, much of our revenue is not recurring from period to period, which contributes to the variability
of our results from period to period. In addition, certain of our products carry a higher gross margin than other products, particularly in the Health Sciences segment. Reduced sales of these higher margin products could have a significant impact on our operating results. We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance.
 
 Our operating results may fluctuate in future quarters, which may adversely affect the trading price of our common stock.
 
 Our operating results will fluctuate on a quarterly basis as a result of a number of factors, including the timing of contracts, orders, the delay or cancellation of a contract, and changes in government regulations. Any one of these factors could have a significant impact on our quarterly results. In some quarters, our revenue and operating
results may fall below the expectations of securities analysts and investors, which would likely cause the trading price of our common stock to decline.
 
 Failure to obtain products from outside manufacturers could adversely affect our ability to fulfill sales orders to our customers.
 
 We rely on outside manufacturers to supply products for resale to our customers.  Manufacturing problems, including manufacturing delays caused by plant shutdowns may occur with these and other outside sources. If such problems occur, we cannot assure that we will be able to deliver our products to our customers profitably or on
time.
 
 Our business is subject to a number of global economic risks.
 
 As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others.  Governments
have taken unprecedented actions intending to address extreme market conditions that include severely restricted credit and declines in values of certain assets.
 
 An economic downturn in the businesses or geographic areas in which we sell our products could reduce demand for our products and result in a decrease in revenue that could have a negative impact on our results of operations.  Continued volatility and disruption of financial markets in the United States, Europe and Asia could limit
our customers’ ability to obtain adequate financing or credit to purchase our products or to maintain operations, and result in a decrease in revenue that could have a negative impact on our results of operations.
 9
 
 Our potential liability arising from our commitment to indemnify our directors, officers and employees could adversely affect our earnings and financial condition.
 
 We have committed in our bylaws to indemnify our directors, officers and employees against the reasonable expenses incurred by these persons in connection with an action brought against him or her in such capacity, except in matters as to which he or she is adjudged to have breached a duty to us.  The maximum potential amount of
future payments we could be required to make under this provision is unlimited. While we have ”directors and officers” insurance policies that covers a portion of this potential exposure, we may be adversely affected if we are required to pay damages or incur legal costs in connection with a claim above our insurance limits.
 
 Our business may give rise to product liability claims not covered by insurance or indemnity agreements.
 
 The marketing, distribution and use of chemical products involves substantial risk of product liability claims. A successful product liability claim that we have not insured against, that exceeds our levels of insurance or that we are not indemnified for may require us to pay a substantial amount of damages. In the event that we are forced
to pay such damages, this payment may have a material adverse effect on our financial and operating results.
 
 Our business may be adversely affected by terrorist activities.
 
 Our business depends on the free flow of products and services through the channels of commerce.  Instability due to military, terrorist, political and economic actions in other countries could materially disrupt our overseas operations and export sales.  In fiscal years 2009 and 2008, approximately 52% and 54%, respectively,
of our revenues were attributable to operations conducted abroad and to sales generated from the United States to foreign countries.  In addition, in fiscal year 2009, approximately 70% and 17% of our purchases came from Asia and Europe, respectively.  In addition, in certain countries where we currently operate or export, intend to operate or export, or intend to expand our operations; we could be subject to other political, military and economic uncertainties, including labor unrest, restrictions
on transfers of funds and unexpected changes in regulatory environments.
  We derive many of our products from China and changes in the political and economic policies of China’s government could have a significant impact upon the business we may be able to conduct in China and our results of operations and financial condition.
  Our business operations may be adversely affected by the current and future political environment in China. China has operated as a socialist state since the mid-1900s and is controlled by the Communist Party of China. The Chinese government exerts substantial influence and control over the manner in which companies, such as ours, must conduct
our business activities in China. China has only permitted provincial and local economic autonomy and private economic activities since 1988. The government of China has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy, through regulation and state ownership. Our ability to conduct business in China may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials,
environmental regulations, land use rights, property and other matters. Under its current leadership, the government of China has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the government of China will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
  China’s laws and regulations governing our current business operations in China are sometimes vague and uncertain. Any changes in such laws and regulations may have a material and adverse effect on our business.
  China’s legal system is a civil law system based on written statutes, in which system decided legal cases have little value as precedents unlike the common law system prevalent in the United States. There are substantial uncertainties regarding the interpretation and application of China’s laws and regulations, including but not
limited to the laws and regulations governing the conduct of business in China, or the enforcement and performance of arrangements with customers and suppliers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new laws or regulations may
have on our business in China. If the relevant authorities find that we are in violation of China’s laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation: (i) levying fines and (ii) requiring that we discontinue any portion or all of our business in China.
  10
  The promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may adversely affect foreign businesses conducting business in China. However, the trend of legislation over the last 20 years has significantly enhanced the protection of foreign businesses in China. There can be no assurance
that a change in leadership, social or political disruption, or unforeseen circumstances affecting China’s political, economic or social life, will not affect China’s government’s ability to continue to support and pursue these reforms. Such a shift could have a material adverse effect on our business and prospects.
 
 Fluctuations in foreign currency exchange rates may adversely affect our results of operations and financial condition.
 
 A substantial portion of our revenue is denominated in currencies other than the U.S. dollar because certain of our foreign subsidiaries operate in their local currencies.  Our results of operations and financial condition may therefore be adversely affected by fluctuations in the exchange rate between foreign currencies and the
U.S. dollar.
 
 We rely heavily on key executives for our financial performance.
 
 Our financial performance is highly dependent upon the efforts and abilities of our key executives. The loss of the services of any of our key executives could therefore have a material adverse effect upon our financial position and operating results.  We do not maintain “key-man” insurance on any of our key executives.
 
 Violations of cGMP and other government regulations could have a material adverse affect on our business, financial condition and results of operations.
 
 All facilities and manufacturing techniques used to manufacture pharmaceutical products for clinical use or for commercial sale in the United States must be operated in conformity with current Good Manufacturing Practices ("cGMP") regulations as required by the FDA. Our suppliers’ facilities are subject to scheduled periodic regulatory
and customer inspections to ensure compliance with cGMP and other requirements applicable to such products. A finding that we had materially violated these requirements could result in one or more regulatory sanctions, loss of a customer contract, disqualification of data for client submissions to regulatory authorities and a mandated closing of our suppliers’ facilities, which in turn could have a material adverse effect on our business, financial condition and results of operations.
 
 Litigation may harm our business and our management and financial resources.
 
 Substantial, complex or extended litigation could cause us to incur large expenditures and could distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, or end-users of our products or services could be very costly and substantially disrupt our business. Disputes from time to time
with such companies or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes out of court or on favorable terms.
 
 The market price of our stock could be volatile.
 
 The market price of our common stock has been subject to volatility and may continue to be volatile in the future, due to a variety of factors, including:
 
 ●
quarterly fluctuations in our operating income and earnings per share results●
technological innovations or new product introductions by us or our competitors●
economic conditions●
disputes concerning patents or proprietary rights●
changes in earnings estimates and market growth rate projections by market research analysts●
sales of common stock by existing security holders●
loss of key personnel●
securities class actions or other litigation
 
 The market price for our common stock may also be affected by our ability to meet analysts' expectations. Any failure to meet such expectations, even slightly, could have an adverse effect on the market price of our common stock.  In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has
had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies.
  11
 Incidents related to hazardous materials could adversely affect our business.
 
 Portions of our operations require the controlled use of hazardous materials.  Although we are diligent in designing and implementing safety procedures to comply with the standards prescribed by federal, state, and local regulations, the risk of accidental contamination of property or injury to individuals from these materials cannot
be completely eliminated. In the event of such an incident, we could be liable for any damages that result, which could adversely affect our business.
 
 There are inherent uncertainties involved in estimates, judgments and assumptions used in preparing financial statements in accordance with U.S. generally accepted accounting principles.  Any changes in the estimates, judgments and assumptions we use could have a material adverse effect on our financial position
and results of operations.
 
 The consolidated financial statements included in the periodic reports we file with the SEC are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  Preparing financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of
assets, liabilities, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to change, and any such changes could result in corresponding changes to the reported amounts.
 
 Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have an adverse effect on our business and stock price.
  Section 404 of the Sarbanes-Oxley Act requires us to evaluate annually the effectiveness of our internal controls over financial reporting as of the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial reporting in our annual report. Section 404 also requires
our independent registered public accounting firm to report on our internal controls over financial reporting. If we fail to maintain the adequacy of our internal controls, we cannot assure you that we will be able to conclude in the future that we have effective internal controls over financial reporting. If we fail to maintain effective internal controls, we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission or NASDAQ.  Any such
action could adversely affect our financial results and the market price of our common stock and may also result in delayed filings with the Securities and Exchange Commission.
 
 Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
 
 Complying with changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations will require the Company to expend additional resources. We are committed to maintaining the highest standards of corporate governance and public disclosure. As a result,
we will continue to invest necessary resources to comply with evolving laws, regulations and standards, and this investment may result in increased expenses and a diversion of management time and attention from revenue-generating activities.
 
 Available information
 
 We file annual, quarterly, and current reports, proxy statements, and other information with the U.S. Securities and Exchange Commission.  You may read and copy any document we file at the SEC’s public reference room at 100 F Street, NE, Washington, D.C. 20549 on official business days between 10AM and 3PM.
 
 You may call the SEC at 1-800-SEC-0330 for information on the public reference room.  The SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including Aceto) file electronically with the SEC.  The SEC’s website is www.sec.gov.
 
 Our website is www.aceto.com.  We make available free of charge through our Internet site, via a link to the SEC’s website at www.sec.gov, our annual reports on Form 10-K; quarterly reports on Form
10-Q; current reports on Form 8-K; Forms 3, 4 and 5 filed on behalf of our directors and executive officers; and any amendments to those reports and forms.  We make these filings available as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into this Annual Report.
  12
 Item 1B.  Unresolved Staff Comments
 
 None.
 
 Item 2.  Properties
 
 Our general headquarters and main sales office occupy approximately 26,000 gross square feet of leased space in an office building in Lake Success, New York.  The lease expires in April 2011.
 
 In November 2007, we purchased approximately 2,300 gross square meters of land along with 12,000 gross square feet of office space in Mumbai, India.
 
 Arsynco’s former manufacturing facility is located on a 12-acre parcel in Carlstadt, New Jersey, that it owns.  This parcel contains one building with approximately 5,000 gross square feet of office space.
 
 In November 2004, we purchased approximately 1,300 gross square meters of office space located in Shanghai, China for our sales offices and investment purposes.
 
 We also lease office space in Hamburg, Germany; Düsseldorf, Germany; Heemskerk, the Netherlands; Paris, France; Lyon, France and Singapore.  These offices are used for sales and administrative purposes.
 
 We believe that our properties are generally well maintained, in good condition and adequate for our present needs.
 
 Item 3.  Legal Proceedings.
 
 We are subject to various claims that have arisen in the normal course of business.  We do not know what impact the final resolution of these matters will have on our results of operations in a particular reporting period.  We believe, however, that the ultimate outcome of such matters will not have a material adverse effect
on our financial condition or liquidity.
 
 In fiscal years 2009, 2008 and 2007, the Company received letters from the Pulvair Site Group, a group of potentially responsible parties (PRP Group) who are working with the State of Tennessee (the State) to remediate a contaminated property in Tennessee called the Pulvair site. The PRP Group has alleged that Aceto shipped hazardous substances
to the site which were released into the environment.   The State had begun administrative proceedings against the members of the PRP Group and Aceto with respect to the cleanup of the Pulvair site and the group has begun to undertake cleanup. The PRP Group is seeking a settlement of approximately $1,700 from the Company for its share to remediate the site contamination. Although the Company acknowledges that it shipped materials to the site for formulation over twenty years ago, the Company believes
that the evidence does not show that the hazardous materials sent by Aceto to the site have significantly contributed to the contamination of the environment and thus believes that, at most, it is a de minimus contributor to the site contamination.  Accordingly, the Company believes that the settlement offer is unreasonable. The impact of the resolution of this matter on the Company's results of operations in a particular reporting period is not known.  However, management believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition or liquidity.
 In March 2006, Arsynco received notice from the EPA of its status as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a site described as the Berry’s Creek Study Area.   Arsynco is one of over 150 PRPs which have potential liability for the required investigation and remediation
of the site.  The estimate of the potential liability is not quantifiable for a number of reasons, including the difficulty in determining the extent of contamination and the length of time remediation may require.  In addition, any estimate of liability must also consider the number of other PRPs and their financial strength.  Based on prior practice in similar situations, it is possible that the State may assert a claim for natural resource damages with respect to the Arsynco site
itself, and either the federal government or the State (or both) may assert claims against Arsynco for natural resource damages in connection with Berry's Creek; any such claim with respect to Berry's Creek could also be asserted against the approximately 150 PRPs which the EPA has identified in connection with that site.  Any claim for natural resource damages with respect to the Arsynco site itself may also be asserted against BASF, the former owners of the Arsynco property. Since an amount of the
liability cannot be reasonably estimated at this time, no accrual is recorded for these potential future costs.  The impact of the resolution of this matter on the Company’s results of operations in a particular reporting period is not known.  However, management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s financial condition or liquidity.
  13
 Item 4. Submission of Matters to a Vote of Security Holders.
 
 No matter was submitted to a vote of our security holders during the fourth quarter of the fiscal year covered by this Annual Report.
  PART II
 
 Item 5.  Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
 Our common stock is traded on the NASDAQ Global Select Market using the symbol “ACET.”  The following table states the fiscal year 2009 and 2008 high and low sales prices of our common stock as reported by the NASDAQ Global Select Market for the periods indicated.
 
 HIGH


LOWFISCAL YEAR 2009First Quarter

$
10.25


$
6.53Second Quarter


11.04



6.40Third Quarter


11.70



4.86Fourth Quarter


7.66



5.21FISCAL YEAR 2008First Quarter

$
9.82


$
8.28Second Quarter


9.39



7.51Third Quarter


8.43



5.79Fourth Quarter


8.52



6.60
 
 Cash dividends of $0.10 per common share were paid in January and June of fiscal 2009. Cash dividends of $0.10 per common share were paid in January 2008, cash dividends of $0.05 per common share were paid in March 2008 and cash dividends of $0.10 per common share were paid in June of 2008. Cash dividends of $0.075 per common share were paid
in January 2007 and cash dividends of $0.10 per common share were paid in June of 2007.
 
 As of September 3, 2009, there were 513 holders of record of our common stock.
 
 22,702 shares of our common stock were held by the nominee of the Depository Trust Company, the country's principal central depository.  For purposes of determining the number of owners of our common stock, those shares are considered
to be owned by one holder.  Additional individual holdings in street name result in a sizable number of beneficial owners being represented on our records as owned by various banks and stockbrokers.
  The following table states certain information with respect to our equity compensation plans at June 30, 2009:
 
 Plan category

Number of securities to
beissued upon exercise
ofoutstanding options


Weighted-average
exercise price of
outstanding options


Number of securities
remaining available for
future issuance under
equity compensation plansEquity compensation plansapproved by security holders


2,903


$
7.74



129Equity compensation plans notapproved by security holders


-



-



-Total


2,903


$
7.74



129
  14
 Performance Graph
 
 The following graph compares on a cumulative basisthe yearly percentage change, assuming dividend reinvestment, over the last five fiscal years in (a) the total shareholder return on our common stock with (b) the total return on the Standard & Poor’s 500 Index and (c)
the total return on a published line-of-business index – the Dow Jones U.S. Chemicals Index (the “Peer Group”).
 
 The following graph assumes that $100 had been invested in each of the Company, the Standard & Poor’s 500 Index and the Peer Group on June 30, 2004.  The stock price performance included in this graph is not necessarily indicative of future stock price performance.
 
 
 
 ASSUMES $100 INVESTED ON JUNE 30, 2004
 ASSUMES DIVIDEND REINVESTMENT
 FISCAL YEAR ENDING JUNE 30, 2009
  Aceto Corporation
S&P 500 Index
Dow Jones U.S.
ChemicalsJune 30, 2004
100
100
100June 30, 2005
65
106
110June 30, 2006
61
116
117June 30, 2007
83
139
154June 30, 2008
71
121
179June 30, 2009
64
89
117
  15
 Item 6.  Selected Financial Data
 (In thousands, except per-share amounts)
 
 Fiscal years ended June 30,

2009


2008


2007


2006


2005Net sales

$
322,646


$
359,591


$
313,473


$
297,328


$
313,431Operating income


11,893



21,377



15,064



12,429



11,590Income from continuing operations


8,629



13,473



10,212



9,264



10,625Net income


8,629



13,473



10,212



9,237



10,015At year endWorking capital

$
124,709


$
128,786


$
112,930


$
104,707


$
94,249Total assets


205,464



222,243



188,478



166,592



149,028Long-term liabilities


16,959



16,836



15,548



15,140



3,982Shareholders’ equity


141,568



140,409



124,827



115,053



107,655Income per common share(1)Basic income per common share from continuing operations

$
0.35


$
0.55


$
0.42


$
0.38


$
0.44Basic income per common share from net income

$
0.35


$
0.55


$
0.42


$
0.38


$
0.41Diluted income per common share from continuing operations

$
0.35


$
0.54


$
0.41


$
0.38


$
0.43Diluted income per common share from net income

$
0.35


$
0.54


$
0.41


$
0.38


$
0.41Cash dividends

$
0.20


$
0.25


$
0.175


$
0.15


$
0.15(1) Adjusted for stock splits, effected in the form of dividends, as appropriate.
 
 Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 Executive Summary
 
 The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide the readers of our financial statements with a narrative discussion about our business. The MD&A is provided as a supplement to and should be read in conjunction with our financial statements and the
accompanying notes.
 
 Our fiscal 2009 results were impacted by the economic environment that we operate in, which continues to be quite turbulent.  According to a June 16, 2009 Federal Reserve statistical release, domestic manufacturing output was more than 15% below its year-earlier level and decreased 1.0% in the month of May. We are reporting a $9,484
decrease in operating income to $11,893 for the year ended June 30, 2009 as compared to $21,377 for the prior year.  Net sales for fiscal 2009 were $322,646, a decrease of $36,945 from fiscal 2008.  This decrease in net sales also impacted our gross profit, which decreased $11,685 to $55,620 for fiscal 2009.  Our net income decreased to $8,629, or $0.35 per diluted share, a decrease of $4,844 or 36.0% compared to fiscal year 2008.
 
 Our financial position as of June 30, 2009, remains strong, as we had cash, cash equivalents and short-term investments of $58,302, working capital of $124,709, no long-term debt and shareholders’ equity of $141,568.
 
 Our business is separated into three principal segments:  Health Sciences, Chemicals & Colorants and Crop Protection.  The Health Sciences segment is our largest segment in terms of both sales and gross profits. Products that fall within this segment include APIs, pharmaceutical intermediates, nutraceuticals and biopharmaceuticals.
  16
  We typically partner with both customers and suppliers years in advance of a drug coming off patent to provide the generic equivalent.  We believe we have a pipeline of new APIs poised to reach commercial levels over the coming years as the patents on existing drugs expire, both in the United States and Europe. In addition, we continue
to explore opportunities to provide a second-source option for existing generic drugs with ANDAs. The opportunities that we are looking for are to supply the APIs for the more mature generic drugs where pricing has stabilized following the dramatic decreases in price that these drugs experienced after coming off patent.  As is the case in the generic industry, the entrance into the market of other generic competition generally has a negative impact on the pricing of the affected products. By leveraging
our worldwide sourcing, quality assurance and regulatory capabilities, we believe we can be an alternative lower cost, second-source provider of existing APIs to generic drug companies.
  The Chemicals & Colorants segment is a major supplier to the many different industries that require outstanding performance from chemical raw materials and additives.  Products that fall within this segment include intermediates for dyes, pigments and agrochemicals.  We provide chemicals used to make plastics, surface
coatings, textiles, lubricants, flavors and fragrances. Many of our raw materials are also used in high-tech products like high-end electronic parts (circuit boards and computer chips) and binders for specialized rocket fuels. We are currently responding to the changing needs of our customers in the color producing industry by taking our resources and knowledge downstream as a supplier of select organic pigments.
  The Crop Protection segment sells herbicides, fungicides, insecticides, and other agricultural chemicals to customers, primarily located in the United States and Western Europe.  In fiscal 2009, we continued to add products to our Crop Protection portfolio when we received EPA registrations for Halosulfuron and Glyphosate. Glyphosate
is the largest selling herbicide for both crop and non crop use sold in the United States.  We plan to begin marketing Glyphosate for the 2010 growing season. In addition, we have two other products that we have already filed with the EPA for registrations and several other products that we plan to file for registrations with the EPA in fiscal 2010. Our plan is to continue to develop this pipeline and bring to market additional products in a similar manner. In May 2008, we sold an insecticide product
to its patent owner in conjunction with litigation settlement involving an expired license.
  Our main business strengths are sourcing, quality assurance, regulatory support, marketing and distribution. In fiscal 2009, we developed an industrial brand for Aceto called “Enabling Quality Worldwide” and are marketing this brand globally. With a physical presence in ten countries, we distribute over 1000 pharmaceuticals and
chemicals used principally as raw materials in the pharmaceutical, agricultural, color, surface coating/ink and general chemical consuming industries. We believe that we are currently the largest buyer of pharmaceutical and specialty chemicals for export from China, purchasing from over 500 different manufacturers.
 
 In this MD&A, we explain our general financial condition and results of operations, including the following:
 
 ●
factors that affect our business●
our earnings and costs in the periods presented●
changes in earnings and costs between periods●
sources of earnings●
the impact of these factors on our overall financial condition
 
 As you read this MD&A, refer to the accompanying consolidated statements of income, which present the results of our operations for the three years ended June 30, 2009.  We analyze and explain the differences between periods in the specific line items of the consolidated statements of income.
 
 Critical Accounting Estimates and Policies
 
 This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.  In preparing these financial statements, we were required to make estimates and assumptions that affect the
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  We regularly evaluate our estimates including those related to allowances for bad debts, inventories, goodwill and indefinite-life intangible assets, long-lived assets, environmental and other contingencies, income taxes and stock-based compensation.  We base our estimates on various factors, including historical experience, advice from outside subject-matter experts, and various
assumptions that we believe to be reasonable under the circumstances, which together form the basis for our making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.
 
 We believe the following critical accounting policies affected our more significant judgments and estimates used in preparing these consolidated financial statements.
 
 17
 
 Revenue Recognition
 
 We recognize revenue from sales of any product when it is shipped and title and risk of loss pass to the customer.  We have no acceptance or other post-shipment obligations and we do not offer product warranties or services to our customers.
 
 Sales are recorded net of returns of damaged goods from customers, which historically have been immaterial, and sales incentives offered to customers.  Sales incentives consist primarily of volume incentive rebates.  We record volume incentive rebates as the underlying revenue transactions that result in progress by
the customer in earning the rebate are recorded, in accordance with Emerging Issues Task Force (EITF) 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products).”
 
 Allowance for Doubtful Accounts
 
 We maintain allowances for doubtful accounts relating to estimated losses resulting from customers being unable to make required payments.  Allowances for doubtful accounts are based on historical experience and known factors regarding specific customers and the industries in which those customers operate.  If the financial
condition of our customers were to deteriorate, resulting in their ability to make payments being impaired, additional allowances would be required.
 
 Inventories
 
 Inventories, which consist principally of finished goods, are stated at the lower of cost (first-in first-out method) or market.  We write down our inventories for estimated excess and obsolete goods by an amount equal to the difference between the carrying cost of the inventory and the estimated market value based upon assumptions
about future demand and market conditions.  A significant sudden increase in demand for our products could result in a short-term increase in the cost of inventory purchases, while a significant decrease in demand could result in an increase in the excess inventory quantities on-hand.  Additionally, we may overestimate or underestimate the demand for our products which would result in our understating or overstating, respectively, the write-down required for excess and obsolete inventory.  Although
we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of our inventory and reported operating results.
 
 Goodwill and Other Indefinite-Lived  Intangible Assets
 
 Goodwill is calculated as the excess of the cost of purchased businesses over the value of their underlying net assets.  Other indefinite-lived intangible assets principally consist of trademarks.  Goodwill and other indefinite-lived intangible assets are not amortized.
 
 In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” we test goodwill and other indefinite-lived intangible assets for impairment on at least an annual basis.  To determine the fair value of these intangible assets, we use many assumptions and estimates
that directly impact the results of the testing.  In making these assumptions and estimates, we use industry-accepted valuation models and set criteria that are reviewed and approved by various levels of management.  If our estimates or our related assumptions change in the future, we may be required to record impairment charges for these assets.
 
 Long-Lived Assets
 
 In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Identifiable intangible assets principally
consist of customer relationships, product rights and related intangibles, EPA registrations and related data, patent license and covenants not to compete.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability of assets held for sale is measured by comparing the carrying amount of the assets to their estimated fair value.  If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
 
 18
 
 Environmental and Other Contingencies
 
 We establish accrued liabilities for environmental matters and other contingencies when it is probable that a liability has been incurred and the amount of the liability can reasonably be estimated.  If the contingency is resolved for an amount greater or less than the accrual, or our share of the contingency increases or decreases,
or other assumptions relevant to the development of the estimate were to change, we would recognize an additional expense or benefit in income in the period that the determination was made.
 
 Taxes
 
 We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.”  SFAS No. 109 establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years.  It requires an asset-and-liability
approach to financial accounting and reporting of income taxes.
 
 As of June 30, 2009, we had current net deferred tax assets of $507 and non-current net deferred tax assets of $1,875.  These net deferred tax assets have been recorded based on our projecting that we will have sufficient future earnings to realize these assets, and the net deferred tax assets have been provided for at currently
enacted income tax rates.  If we determine that we will not be able to realize a deferred tax asset, an adjustment to the deferred tax asset will result in a reduction of net income at that time.
 
 Deferred taxes have not been provided on the majority of undistributed earnings of foreign subsidiaries since substantially all of these earnings are expected to be permanently reinvested in our foreign operations.  A deferred tax liability is recognized when we expect that we will recover those undistributed earnings in a taxable
manner, such as through receipt of dividends or sale of the investments.  In June 2009, we repatriated $6,000 of earnings from certain foreign subsidiaries resulting in a tax charge of approximately $159. At this time, we do not expect any further repatriation of earnings from our foreign subsidiaries. Determination of the amount of the unrecognized U.S. income tax liability on undistributed earnings is not practical because of the complexities of the hypothetical calculation.  In addition,
unrecognized foreign tax credit carryforwards would be available to reduce a portion of such U.S. tax liability.
 
 Stock-based Compensation
 
 With the adoption of SFAS No. 123(R) on July 1, 2005, we are required to record the fair value of stock-based compensation awards as an expense.  In order to determine the fair value of stock options on the date of grant, we apply the Black-Scholes option-pricing model, including an estimate of forfeitures.  Inherent in this model
are assumptions related to expected stock-price volatility, risk-free interest rate, expected life and dividend yield.  Expected stock-price volatility is based on the historical daily price changes of the underlying stock which are obtained from public data sources. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. We use historical data to estimate expected dividend yield, expected life and forfeiture rates. In fiscal 2007, we utilized
the “simplified” method prescribed in SEC Staff Accounting Bulletin No. 107 to estimate the expected life. For stock option grants issued during fiscal 2009, we used an expected stock-price volatility of 48.0% and an expected life of 5.6 years.
 
 19
 
 Results of Operations
 
 Fiscal Year Ended June 30, 2009 Compared to Fiscal Year Ended June 30, 2008


Net Sales by Segment
Year ended June 30,Comparison 20092009


2008


Over/(Under) 2008% of





% of


$


%Segment

Net sales


total


Net sales


Total


change


changeHealth Sciences

$
187,569



58.1
%

$
211,481



58.8
%

$
(23,912
)


(11.3
)%Chemicals & Colorants


116,906



36.3



129,662



36.1



(12,756
)


(9.8
)Crop Protection


18,171



5.6



18,448



5.1



(277
)


(1.5
)Net sales

$
322,646



100.0
%

$
359,591



100.0
%

$
(36,945
)


(10.3
)%
  Gross Profit by Segment
Year ended June 30,Comparison 20092009


2008


Over/(Under) 2008Gross


% of


Gross


% of


$


%Segment

Profit


Sales


Profit


sales


Change


changeHealth Sciences

$
33,619



17.9
%

$
44,612



21.1
%

$
(10,993
)


(24.6
)%Chemicals & Colorants


17,631



15.1



18,782



14.5



(1,151
)


(6.1
)Crop Protection


4,370



24.0



3,911



21.2



459



11.7Gross profit

$
55,620



17.2
%

$
67,305



18.7
%

$
(11,685
)


(17.4
)%





20





Net Sales





Net sales decreased $36,945, or 10.3%, to $322,646 for the year ended June 30, 2009, compared with $359,591 for the prior year.  We reported sales decreases in each of our three segments, as explained below.





Health Sciences





Net sales for the Health Sciences segment decreased by $23,912 for the year ended June 30, 2009, to $187,569, which represents an 11.3% decrease over net sales of $211,481 for the prior year.  This decrease is due to various factors including decreased sales from our foreign operations of $13,336, specifically our German and Singapore
operations, due primarily to certain customers controlling inventory spending due to the economic recession. Sales of domestic pharmaceutical intermediates, which represent key components used in the manufacture of certain drug products declined by $5,472.  Sales in our domestic generics product group decreased by $8,820. As previously mentioned, the forecast for global pharmaceutical sales has declined from the prior prediction.  In addition, we saw a decrease in reorders of existing products.
We expect this difficult market to continue into the upcoming months. The overall decrease in sales for the Health Sciences segment is offset, in part, by an increase in sales of $3,522 of our domestic nutraceutical products, which represent raw materials used in the production of nutritional supplements.





Chemicals & Colorants





Net sales for the Chemicals & Colorants segment were $116,906 for the year ended June 30, 2009, compared to $129,662 for the prior year.  Our chemical business is diverse in terms of products, customers and consuming markets and is directly impacted by the overall difficult market conditions we are facing which resulted in our
sales in the Chemicals and Colorants segment to decline 9.8% from the prior year. The decrease in sales from this segment is attributable to decreased sales of $3,644 in chemicals used in aroma products, a decline of $1,956 in sales of color pigments, a $3,636 drop in chemicals used to produce surface coatings, a $1,224 decrease in miscellaneous organic chemicals and reduced sales of agricultural, dye, pigment and other intermediates which together decreased $3,968. Sales of Chemicals and Colorants from our foreign
operations also declined by $993 due to reduced demand. These decreases are partially offset by an increase of $1,498 in sales of chemicals utilized in the food, beverage and cosmetic industries and a $1,250 increase in sales of polymer additives.





Crop Protection





Net sales for the Crop Protection segment decreased to $18,171 for the year ended June 30, 2009, a slight decrease of $277, or 1.5%, over net sales of $18,448 for the prior year.  The decrease over the prior year is due to a decline in sales of a herbicide which is primarily used on peanuts as the peanut acreage has decreased from
2008.  Sales in the Crop Protection segment also declined due to decreased sales of our sprout inhibitor products, which are utilized on potato crops, as well as an insecticide in which we were involved in an antitrust case related to certain licensed technology.   In May 2008, we sold this insecticide product to its patent owner in conjunction with litigation settlement involving an expired license. The decrease in Crop Protection sales is offset in part, by the launch of Halosulfuron,
a herbicide used to control sedge on rice, vegetables and turf and ornamental grasses and an increase in sales of Asulam, a herbicide used on sugar cane.





Gross Profit





Gross profit by segment decreased $11,685 to $55,620 (17.2% of net sales) for the year ended June 30, 2009, as compared to $67,305 (18.7% of net sales) for the prior year.





Health Sciences





Health Sciences’ gross profit of $33,619 for the year ended June 30, 2009 decreased by $10,993, or 24.6%, over the prior year. The gross margin declined to 17.9% for the year ended June 30, 2009 compared to 21.1% for the prior period.  The decrease in gross profit was attributable to the overall decline in sales volume and
the decrease in gross margin primarily related to unfavorable product mix on both our domestic pharmaceutical intermediates and domestic nutraceutical products, as well as on our Health Sciences products sold by our foreign operations, specifically Germany and Singapore. Gross profit for the domestic pharmaceutical intermediates declined by $1,139 and gross profit for our domestic nutraceutical products declined by $455. Our foreign operations experienced a drop in gross profit of $7,792 over the prior year.





21





Chemicals & Colorants





Gross profit for the year ended June 30, 2009, decreased by $1,151, or 6.1%, over the prior year. The decrease in the gross profit is due to primarily sales volume decline in our domestic operations.  Gross margin was 15.1% for the year ended June 30, 2009 compared to 14.5% for the prior period.





Crop Protection





Gross profit for the Crop Protection segment increased to $4,370 for the year ended June 30, 2009, versus $3,911 for the prior year, an increase of $459 or 11.7%.  Gross margin for the year ended June 30, 2009 was 24.0% compared to the prior year gross margin of 21.2%. This increase primarily relates to Halosulfuron, in which the
Company first commenced sales on this product in the third quarter of 2009.





Selling, General and Administrative Expenses


Selling, general and administrative expenses (SG&A) decreased $1,848, or 4.1%, to $43,574 for the year ended June 30, 2009 compared to $45,422 for the prior year. As a percentage of sales, SG&A increased to 13.5% for the year ended June 30, 2009 versus 12.6% for the prior year. The decrease in SG&A is partially attributed to a
decrease of $1,343 in legal expenses from the prior year for which there is no comparable amount in the current year. These legal costs in the prior year related to an antitrust case that we previously commenced against the owner of certain licensed technology used with one of our crop protection products, which was settled in May 2008. SG&A experienced a $590 drop in sales and marketing expenses, which is directly related to the decline in sales. In addition, in connection with the environmental remediation
obligation for Arsynco, in July 2009, the Company entered into a settlement agreement with the former owners of the Arsynco property. Accordingly, the Company recorded a gain of $550, which is included in SG&A, related to past environmental costs. These decreases in SG&A are partially offset by higher bad debt expense of $309 as a result of additional reserves.





Research and Development Expenses





Research and development expenses (R&D) decreased $353 over the prior period to $153 for the year ended  June 30, 2009 due to the abandonment of R&D related to two finished dosage form generic pharmaceutical products that were to be distributed in Europe.





Operating Income





Fiscal 2009 operating income was $11,893 compared to $21,377 in the prior year, a decrease of $9,484 or 44.4%.  This decrease was due to the overall decrease in gross profit of $11,685 offset by a $2,201 decline in R&D expenses and SG&A.





Interest and Other Income, Net





Interest and other income, net was $937 for the year ended June 30, 2009, which was relatively consistent to the amount of $957 that was in the prior year.





Provision for Income Taxes





The effective tax rate for fiscal 2009 decreased to 32.2% from 39.3% for fiscal 2008.  The decrease in the effective tax rate was primarily due to German tax reform, which was enacted in August 2007, that reduced the German corporate headline tax rate for businesses from 40% to 30%, as well as implementing a cap on interest deductions
and tightening the tax basis for trade tax income. This tax rate reduction became effective for tax years ending after January 1, 2008. Due to the future reduction in the overall German tax rate, the deferred income tax asset was revalued during the month of enactment of the tax reform, which was in the first quarter of fiscal 2008, and therefore was reduced by approximately $1,429. The decrease in the effective tax rate from the prior period is partially offset by charges, including an approximate $159 tax charge
related to the repatriation of earnings from certain foreign subsidiaries.  At this time, we do not expect any further repatriation of earnings from our foreign subsidiaries.





22





Results of Operations





Fiscal Year Ended June 30, 2008 Compared to Fiscal Year Ended June 30, 2007





Net Sales by Segment
Year ended June 30,Comparison 20082008


2007


Over/(Under) 2007% of





% of


$


%Segment

Net sales


total


Net sales


Total


change


changeHealth Sciences

$
211,481



58.8
%

$
170,691



54.5
%

$
40,790



23.9
%Chemicals & Colorants


129,662



36.1



123,299



39.3



6,363



5.2Crop Protection


18,448



5.1



19,483



6.2



(1,035
)


(5.3
)Net sales

$
359,591



100.0
%

$
313,473



100.0
%

$
46,118



14.7
%Gross Profit by Segment
Year ended June 30,Comparison 20082008


2007

Over/(Under) 2007Gross


% of


Gross


% of


$


%Segment

Profit


Sales


Profit


sales


Change


changeHealth Sciences

$
44,612



21.1
%

$
33,007



19.3
%

$
11,605



35.2
%Chemicals & Colorants


18,782



14.5



16,556



13.4



2,226



13.4Crop Protection


3,911



21.2



4,930



25.3



(1,019
)


(20.7
)Gross profit

$
67,305



18.7
%

$
54,493



17.4
%

$
12,812



23.5
%




23





Net Sales





Net sales increased $46,118, or 14.7%, to $359,591 for the year ended June 30, 2008, compared with $313,473 for the prior year.  We reported sales increases in our Health Sciences and Chemicals & Colorants segments, which were partially offset by a slight sales decrease in our Crop Protection segment.





Health Sciences





Net sales for the Health Sciences segment increased by $40,790 for the year ended June 30, 2008, to $211,481, which represents a 23.9% increase over net sales of $170,691 for the prior year.  This increase is due to various factors including increased sales from our foreign operations of $23,475, specifically our European operations
and a $4,679 rise in sales of our pharmaceutical intermediates. In addition, our domestic generics product group experienced an increase in sales of $12,004. The domestic sales increase for the year ended June 30, 2008 was due to the volume of re-orders for existing products as well as realization of new products from our pipeline. We expect the volume of re-orders for existing products to continue at a similar rate through the next fiscal year.





Chemicals & Colorants





Net sales for the Chemicals & Colorants segment were $129,662 for the year ended June 30, 2008, compared to $123,299 for the prior year.  Our chemical business is diverse in terms of products, customers and consuming markets.  The increase in sales from this segment is partially attributable to an increase of $5,049
in sales for chemicals used in aroma products, $5,723 in sales of pigment and dye intermediates, and a $1,032 rise in sales of chemicals used to make surface coatings.  In addition, the increase in sales is due to a rise in prices in the chemical industry due to increased demand for chemical products in China. This increase is offset in part by a $4,967 decline in sales of our products sold to the food, beverage and cosmetics industries as a result of the slowdown in the economy.





Crop Protection





Net sales for the Crop Protection segment decreased to $18,448 for the year ended June 30, 2008, a decrease of $1,035, or 5.3%, over net sales of $19,483 for the prior year.  The overall decrease in net sales was mainly attributable to decreased sales of an herbicide used for sugar cane as well as decreased sales related to an insecticide
in which we were  involved in an antitrust case related to certain licensed technology.   These decreases were partially offset by an increase in sales of an herbicide which is primarily used on peanuts as the peanut acreage has increased from 2007.




Gross Profit





Gross profit by segment increased $12,812 to $67,305 (18.7% of net sales) for the year ended June 30, 2008, as compared to $54,493 (17.4% of net sales) for the prior year.





Health Sciences





Health Sciences’ gross profit of $44,612 for the year ended June 30, 2008, was $11,605 or 35.2 % higher than the prior year. This increase in gross profit was attributable to an $8,084 increase in gross profit primarily from our European operations as well as the overall increase in sales volume.  Gross margin increased to
21.1% in fiscal 2008 compared to a gross margin of 19.3% for the prior fiscal year due primarily to favorable product mix in our domestic nutraceutical products, as well as products sold by our European operations, which were more profitable than other products.





Chemicals & Colorants





Gross profit for the year ended June 30, 2008, increased by $2,226, or 13.4%, over the prior year.  Gross margin was 14.5% for the year ended June 30, 2008 compared to 13.4% for the prior period.   The increase in the gross profit and gross margin percentage primarily relates to the increase in sales volume and positive
product mix on aroma chemicals. In addition, there was a $330 settlement of an anti-dumping claim included in the prior year cost of sales.





Crop Protection





Gross profit for the Crop Protection segment decreased to $3,911 for the year ended June 30, 2008, versus $4,930 for the prior year, a decrease of $1,019 or 20.7%.  Gross margin for the year ended June 30, 2008 was 21.2% compared to the prior period gross margin of 25.3%.The primary reason for the decrease in the gross profit and
gross margin percentage primarily relates to a decline in sales volume of a particular herbicide and insecticide as described above in the Crop Protection net sales section.




24


Selling, General and Administrative Expenses


Selling, general and administrative expenses (SG&A) increased $6,004, or 15.2%, to $45,422 for the year ended June 30, 2008 compared to $39,418 for the prior year.  As a percentage of sales, SG&A remained consistent at 12.6% for fiscal 2008.  The increase in SG&A is partially attributed to an increase of $1,300
in legal expenses, the majority of which was incurred relating to an antitrust case that the Company previously commenced against the owner of certain licensed technology used with one of our crop protection products, which was settled in May 2008. SG&A also increased due to a $3,590 rise in personnel related costs, of which $1,849 relates to our foreign operations and $1,741 relates to various factors including annual salary increases, stock-based compensation and increased bonus expense as a result of increased
profitability.   In addition, commission expense increased by $505 due to increased sales. Additionally, the prior year amount was reduced by $243 of proceeds received from credit insurance, of which there was no comparable amount received during the year ended June 30, 2008.





Research and Development Expenses





Research and development expenses (R&D) increased $495 over the prior year to $506 for the year ended June 30, 2008. R&D relates to the development of two finished dosage form generic pharmaceutical products to be distributed in Europe.





Operating Income





Fiscal 2008 operating income was $21,377 compared to $15,064 in the prior year, an increase of $6,313 or 41.9%.  This increase was due to the overall increase in gross profit of $12,812 offset in part by the $6,499 increase in SG&A and R&D expenses.





Interest and Other Income, Net





Interest and other income, net was $957 for fiscal 2008 versus $532 for fiscal 2007. The primary reason for this fluctuation is due to changing the functional currency of our Chinese subsidiaries from the Chinese Renminbi to the U.S. Dollar, since these subsidiaries primarily generate and expend cash in the U.S. Dollar.  As a result,
we recorded a correction of an error in the third quarter of 2008, which resulted in additional interest and other income, net of approximately $559, which represented approximately $389 after tax profit. We did not deem this adjustment to be material to any prior quarters in fiscal 2008 based upon both quantitative and qualitative factors.  In addition, this adjustment does not impact the 2008 year-to-date reported results. This matter was not corrected for periods prior to June 30, 2007 due to the
immateriality of the effects of this in earlier years.  Beginning in 2006, the Chinese government began to revalue the Chinese Renminbi against other currencies, including the U.S. Dollar. The decision by the Chinese government to no longer peg the Renminbi to the U.S. Dollar has caused a reduction in value of dollar denominated assets held in China, which was particularly experienced in fiscal 2008. The increase in interest and other income, net was partially offset by a $115 decrease in other income
related to a government subsidy paid annually for doing business in a free trade zone in Shanghai, China and a $186 increase in unrealized loss on trading securities.





Provision for Income Taxes





The effective tax rate for fiscal 2008 increased to 39.3% from 33.8% for fiscal 2007.  The increase in the effective tax rate was primarily due to German tax reform, which was enacted in August 2007, that reduced the corporate headline tax rate for businesses from 40% to 30%, as well as implementing a cap on interest deductions and
tightening the tax basis for trade tax income. This tax rate reduction became effective for tax years ending after January 1, 2008. Due to the future reduction in the overall German tax rate, the deferred income tax asset was revalued during the month of enactment of the tax reform, which was in the first quarter of fiscal 2008, and therefore was reduced by approximately $1,429, which is reflected in the consolidated financial statements for the year ended June 30, 2008.  Without this adjustment, the
fiscal 2008 effective tax rate would have been 32.8%. Additionally, tax reform has taken place in China and effective January 1, 2008, the corporate headline tax rate was increased to 25% from 15%.




25





Liquidity and Capital Resources





Cash Flows





At June 30, 2009, we had $57,761 in cash, of which $30,372 was outside the United States, $541 in short-term investments and no outstanding bank loans.  The $30,372 of cash held outside of the United States is fully accessible to meet any liquidity needs of the countries in which Aceto operates. The majority of the cash located outside
of the United States is held by our European operations and can be transferred into the United States. Although these amounts are fully accessible, transferring these amounts into the United States or any other countries could have certain tax consequences. A deferred tax liability will be recognized when we expect that we will recover undistributed earnings of our foreign subsidiaries in a taxable manner, such as through receipt of dividends or sale of the investments. A portion of our cash is held in operating
accounts that are with third party financial institutions. These balances exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor daily the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our operating accounts.





Our cash position at June 30, 2009 increased $11,246 from the amount at June 30, 2008.  Operating activities for the year ended June 30, 2009 provided cash of $22,511 as compared to cash provided by operations of $15,418 for the comparable 2008 period. The $22,511 was comprised of $8,629 in net income, $4,359 derived from adjustments
for non-cash items and a net $9,523 increase from changes in operating assets and liabilities. The non-cash items included $1,866 in depreciation and amortization expense, $1,560 in stock compensation, $528 for the provision for doubtful accounts and $191 for the deferred income taxes provision.  Trade accounts receivable decreased $18,448 during the year ended June 30, 2009, due to decreased sales during the fourth quarter of 2009 as compared to the fourth quarter of 2008, as well as a significant
improvement in days sales outstanding. Inventories and accounts payable decreased by approximately $14,771 and $17,299, respectively, due primarily to a reduction of inventories in both our domestic Health Sciences and Chemicals and Colorants segments as a result of the Company carrying less inventory due to the current market conditions of the economy. In addition, the Company carried more stock as of June 30, 2008 for certain products of both the Chemicals and Colorants and Health Sciences segments that were
purchased from China, due to a supplier interruption related to the Olympics that were held in China in August of 2008. Some of this additional stock did not ship until the first and second quarters of 2009.  Our European operations also experienced a decline in inventory from June 30, 2008 due to a ramp-up in orders during the fourth quarter of 2008 that did not ship until the first and second quarters of 2009. Accrued expenses and other liabilities decreased $1,991 during the year ended June 30, 2009,
due primarily to a decrease in accrued compensation and a decline in accrued income tax payable, due to the timing of income tax payments partially offset by an increase in accrued expenses related to an increase in Value Added Tax (VAT) for our foreign subsidiaries. Other receivables increased $4,192 due to an increase in VAT taxes receivables in our European subsidiaries and increased receivables related to certain Crop Protection products.   Our cash position at June 30, 2008 increased $14,195
from the amount at June 30, 2007.  Operating activities for the year ended June 30, 2008 provided cash of $15,418 as compared to cash provided by operations of $4,163 for the comparable 2007 period.  The $15,418 was comprised of $13,473 in net income and $5,602 derived from adjustments for non-cash items, offset by a net $3,657 decrease from changes in operating assets and liabilities. The primary reason for the increase in cash provided by operations from 2007 to 2008 relates to the increase
in net income, as well as the inventories increased more during the 2007 year compared to 2008, as a result of a ramp-up in orders for products to be shipped in the first quarter of 2008 and an increase in products in which we have decided, at that time, to carry stock.  Our cash position at June 30, 2007 decreased $1,412 from the amount at June 30, 2006.  Operating activities for the year ended June 30, 2007 provided cash of $4,163 as compared to cash provided by operations of $16,028 for
the comparable 2006 period. The $4,163 was comprised of $10,212 in net income and $3,878 derived from adjustments for non-cash items, offset by a net $9,927 decrease from changes in operating assets and liabilities, the majority of which related to inventory.





Investing activities for the year ended June 30, 2009 used cash of $4,063 primarily related to the purchase of investments of $10,173, the acquisition of $2,114 of product registrations and related data filed with the United States Environmental Protection Agency and payments to various task force groups related to certain Crop Protection
products, $2,020 of the issuance of a notes receivable related to a supplier agreement and $557 related to purchases of property and equipment.  We expect capital expenditures will be between $1,000 and $1,500 during fiscal 2010.    In addition, the lease for our general headquarters and sales office expires in April 2011. The Company is contemplating a buy versus lease decision with regards to a new building. If we were to purchase a new facility, the amount expended in the next
fiscal year could approximate $5,000 for this new facility. Cash used in investing activities is offset in part by $9,964 of maturities of investments, $437 from payments of notes receivable and proceeds from sale of intangible assets of $400. Investing activities for the year ended June 30, 2008 provided cash of $1,404 primarily related to maturities and sale of investments of $2,200 and proceeds from sale of intangible assets of $400. Cash provided by investing activities is offset in part by the purchases
of property and equipment of $1,197. Investing activities for the year ended June 30, 2007 used cash of $2,591 primarily related to purchases of investments of $6,274 and purchases of property and equipment and intangibles of $704 and $2,468, respectively, including $2,000 for the Asulam product registration and related data filed with the United States Environmental Protection Agency and state regulatory agencies to support such registrations and other supporting data. The amount of cash used for investing activities
is offset in part by $6,779 of maturities of investments.




26




Financing activities for the year ended June 30, 2009 used cash of $4,261 primarily from the payment of $4,949 of dividends and a $500 payment of a note payable partly offset by proceeds from the exercise of stock options of $1,020. Financing activities for the year ended June 30, 2008 used cash of $6,030 primarily from the payments of dividends
of $6,110. Financing activities for the year ended June 30, 2007 used cash of $3,991 primarily from the payments of dividends of $4,257.





Credit Facilities





We have available credit facilities with certain foreign financial institutions.  These facilities provide us with a line of credit of $20,330, as of June 30, 2009.  We are not subject to any financial covenants under these arrangements.





In June 2007, we amended our revolving credit agreement with a financial institution that expires June 30, 2010, and provides for available credit of $10,000.  At June 30, 2009, we had utilized $185 in letters of credit, leaving $9,815 of this facility unused.  Under the credit agreement, we may obtain credit through direct
borrowings and letters of credit.  Our obligations under the credit agreement are guaranteed by certain of our subsidiaries and are secured by 65% of the capital of certain of our non-domestic subsidiaries.  There is no borrowing base on the credit agreement.  Interest under the credit agreement is at LIBOR plus 1.50%.  The credit agreement contains several covenants requiring, among other things, minimum levels of debt service and tangible net worth.  We are
also subject to certain restrictive debt covenants, including covenants governing liens, limitations on indebtedness, guarantees, sale of assets, sales of receivables, and loans and investments.  We were in compliance with all covenants at June 30, 2009.





Working Capital Outlook





Working capital was $124,709 at June 30, 2009, versus $128,786 at June 30, 2008.  The decrease in working capital was primarily attributable to the acquisition of product registrations and related data filed with the United States Environmental Protection Agency and payments to various task force groups related to certain crop protection
products. We continually evaluate possible acquisitions of or investments in businesses that are complementary to our own, and such transactions may require the use of cash.    In connection with our crop protection business, we plan to continue to acquire product registrations and related data filed with the United States Environmental Protection Agency as well as payments to various task force groups, which could approximate $6,300 over the next fiscal year.    In addition,
the lease for our general headquarters and sales office expires in April 2011. The Company is contemplating a buy versus lease decision with regards to a new building. If we were to purchase a new facility, the amount expended in the next fiscal year could approximate $5,000. We believe that our cash, other liquid assets, operating cash flows, borrowing capacity and access to the equity capital markets, taken together, provide adequate resources to fund ongoing operating expenditures and the anticipated continuation
of semi-annual cash dividends for the next twelve months.  We are currently looking into obtaining additional credit facilities to enhance our liquidity.




27


Off-Balance Sheet Arrangements and Commitments and Contingencies





We have no material financial commitments other than those under operating lease agreements, letters of credit and unconditional purchase obligations.  We have certain contractual cash obligations and other commercial commitments that will affect our short and long-term liquidity.  At June 30, 2009, we had no significant
obligations for capital expenditures.  At June 30, 2009, contractual cash obligations and other commercial commitments were as follows:





Payments Due and/orAmount of Commitment(Expiration per Period)Total


Less than
1 year


1-3
Years


4-5
Years


After
5 yearsOperating leases

$
4,030


$
1,720


$
1,840


$
298


$
172Commercial letters of credit


185



185



-



-



-Standby letters of credit


284



284



-



-



-Unconditional purchase obligations


48,807



48,807



-



-



-Total

$
53,306


$
50,996


$
1,840


$
298


$
172





Other significant commitments and contingencies include the following:





1.
A subsidiary of the Company markets certain agricultural chemicals which are subject to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).  FIFRA requires that test data be provided to the EPA to register, obtain and maintain approved labels for pesticide products. The EPA requires that follow-on registrants of these
products compensate the initial registrant for the cost of producing the necessary test data on a basis prescribed in the FIFRA regulations. Follow-on registrants do not themselves generate or contract for the data. However, when FIFRA requirements mandate that new test data be generated to enable all registrants to continue marketing a pesticide product, often both the initial and follow-on registrants establish a task force to jointly undertake the testing effort. The Company is presently a member of several
such task force groups, which requires payments for such memberships. In addition, in connection with our crop protection business, the Company plans to acquire product registrations and related data filed with the United States Environmental Protection Agency to support such registrations and other supporting data for three products. The acquisition of these product registrations and related data filed with the United States Environmental Protection Agency as well as payments to various task force groups could
approximate $6,300 over the next fiscal year.2.
We, together with our subsidiaries, are subject to pending and threatened legal proceedings that have arisen in the normal course of business.  We do not know how the final resolution of these matters will affect our results of operations in a particular reporting period. Our management is of the opinion, however, that the ultimate
outcome of such matters will not have a material adverse effect upon our financial condition or liquidity.3.
The Company has environmental remediation obligations in connection with Arsynco, Inc. (Arsynco), a subsidiary formerly involved in manufacturing chemicals located in Carlstadt, New Jersey, which was closed in 1993 and is currently held for sale.  During fiscal 2009, based on continued monitoring of the contamination at the site
and the approved plan of remediation, the Company received an estimate from an environmental consultant stating that the costs of remediation could be between $8,400 and $10,200.  As of June 30, 2009 and 2008, a liability of $8,400 and $7,846, respectively, is included in the accompanying consolidated balance sheet for this matter.  In accordance with EITF Issue 90-8, “Capitalization of Costs to Treat Environmental Contamination”, management believes that the majority of costs
incurred to remediate the site will be capitalized in preparing the property which is currently classified as held for sale.  An appraisal of the fair value of the property by a third-party appraiser supports the assumption that the expected fair value after the remediation is in excess of the amount required to be capitalized. However, these matters, if resolved in a manner different from those assumed in current estimates, could have a material adverse effect on the Company’s financial condition,
operating results and cash flows when resolved in a future reporting period.





28





In connection with the environmental remediation obligation for Arsynco, in July 2009, the Company entered into a settlement agreement with BASF Corporation (BASF), the former owners of the Arsynco property. According to the settlement agreement, BASF will pay for a portion of the prior remediation costs and going forward, will co-remediate
the property with the Company. The contract states that BASF, within twenty days of establishing a Trust Account, will pay the Company $550 related to past response costs and pay a proportionate share of the future remediation costs. Accordingly, the Company has recorded a gain of $550, which is included in selling, general and administrative expenses in the accompanying consolidated statement of income for the year ended June 30, 2009. This $550 gain relates to the partial reimbursement of costs of approximately
$1,200 that the Company had previously expensed. The Company also recorded an additional receivable from BASF, with an offset against property held for sale, for $3,780, representing its estimated portion of the future remediation costs, which is included in the accompanying consolidated balance sheet as of June 30, 2009.4.
In March 2006, Arsynco received notice from the EPA of its status as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a site described as the Berry’s Creek  Study Area. Arsynco is one of over 150 PRPs which have potential liability for the required investigation and remediation
of the site.  The estimate of the potential liability is not quantifiable for a number of reasons, including the difficulty in determining the extent of contamination and the length of time remediation may require.  In addition, any estimate of liability must also consider the number of other PRPs and their financial strength.  Based on prior practice in similar situations, it is possible that the State may assert a claim for natural resource damages with respect to the Arsynco site
itself, and either the federal government or the State (or both) may assert claims against Arsynco for natural resource damages in connection with Berry's Creek; any such claim with respect to Berry's Creek could also be asserted against the approximately 150 PRPs which the EPA has identified in connection with that site.  Any claim for natural resource damages with respect to the Arsynco site itself may also be asserted against BASF, the former owners of the Arsynco property. Since an amount of the
liability cannot be reasonably estimated at this time, no accrual is recorded for these potential future costs.  The impact of the resolution of this matter on the Company’s results of operations in a particular reporting period is not known.  However, management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s financial condition or liquidity.5.
In fiscal years 2009, 2008 and 2007, the Company received letters from the Pulvair Site Group, a group of potentially responsible parties (PRP Group) who are working with the State of Tennessee (the State) to remediate a contaminated property in Tennessee called the Pulvair site. The PRP Group has alleged that Aceto shipped hazardous substances
to the site which were released into the environment.   The State had begun administrative proceedings against the members of the PRP Group and Aceto with respect to the cleanup of the Pulvair site and the group has begun to undertake cleanup. The PRP Group is seeking a settlement of approximately $1,700 from the Company for its share to remediate the site contamination. Although the Company acknowledges that it shipped materials to the site for formulation over twenty years ago, the Company believes
that the evidence does not show that the hazardous materials sent by Aceto to the site have significantly contributed to the contamination of the environment and thus believes that, at most, it is a de minimus contributor to the site contamination.  Accordingly, the Company believes that the settlement offer is unreasonable. The impact of the resolution of this matter on the Company's results of operations in a particular reporting period is not known.  However, management believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition or liquidity.





Related Party Transactions





Certain of our directors are affiliated with law firms that serve as our legal counsel on various corporate matters.  During fiscal years 2009, 2008 and 2007, we incurred legal fees of $350, $342 and $329, respectively, for services rendered to the Company by those law firms.  We believe that the fees charged by those firms
were at rates comparable to rates obtainable from other firms for similar services.





During fiscal 2009, repayment of a $500 note payable to a related joint venture was made.




29


Impact of New Accounting Pronouncements





Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF No. 06-11) became effective in the first quarter of fiscal 2009.  EITF No. 06-11 requires that the tax benefit received on dividends associated with share-based awards that are charged
to retained earnings should be recorded in additional paid-in-capital (APIC) and included in the APIC pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards.  The adoption of EITF No. 06-11 did not have a material impact on the Company’s consolidated financial statements.





In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51” (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in
a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
Early adoption is prohibited. The Company must adopt these new requirements in its first quarter of fiscal 2010.  The adoption of this statement will impact the manner in which the Company presents noncontrolling interests, but will not impact its consolidated financial position or results of operations.





In December 2007, the FASB approved the issuance of SFAS No. 141 (revised 2007) “Business Combinations” (SFAS No. 141R). SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed,
and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The provisions for SFAS No. 141R are effective for fiscal years beginning after December 15, 2008 and are applied prospectively to business combinations completed on or after that date.  Early
adoption is not permitted. SFAS No. 141R is effective for the Company beginning in the first quarter of fiscal 2010,which will change our accounting treatment for business combinations on a prospective basis.





In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for certain items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). The Company is currently assessing the impact of SFAS No. 157 on its condensed consolidated financial statements for items within the scope of FSP 157-2, which will become effective beginning with our first quarter of fiscal 2010.





In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities— An Amendment of FASB Statement No. 133” (SFAS No. 161). SFAS No. 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts
of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 became effective in the third quarter of fiscal 2009. The adoption of SFAS No. 161 did not have a material impact on the Company’s consolidated financial statements.


In June 2008, the FASB issued Staff Position EITF No. 03-06-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-06-1). FSP EITF 03-06-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method in SFAS No. 128, “Earnings per Share”. The Company will adopt FSP EITF 03-06-1 effective July 1, 2009. The Company is currently assessing the impact of FSP EITF 03-06-1 on its consolidated financial statements.





In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board (APB) 28-1 “Interim Disclosures about Fair Value of Financial Instruments,” which requires disclosures about fair value of financial instruments for interim reporting periods and amends APB Opinion No. 28 “Interim Financial Reporting”
to require those disclosures in summarized financial information at interim reporting periods. The FSP is effective for interim reporting periods ending after June 15, 2009. The FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. As this FSP provides only disclosure requirements, the adoption of this standard will not have a material impact on the Company’s financial condition or operating results.




30




In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (SFAS No. 165).  SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company adopted SFAS No. 165 during the fourth quarter of 2009. In
accordance with SFAS No. 165, the Company has evaluated subsequent events through the date and time the financial statements were issued on September 11, 2009.





In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (SFAS No. 168), and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. SFAS No. 168 will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (SEC), which are sources of authoritative GAAP, for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS No. 168 will become effective in the first quarter of 2010 and as SFAS No. 168 was not intended to change or alter existing GAAP, it will not
have any impact on the Company’s consolidated financial statements.


Item 7A.  Quantitative and Qualitative Disclosures about Market Risk





Market Risk Sensitive Instruments





The market risk inherent in our market-risk-sensitive instruments and positions is the potential loss arising from adverse changes in investment market prices, foreign currency exchange-rates and interest rates.





Investment Market Price Risk





We had short-term investments of $541 at June 30, 2009.  Those short-term investments consisted of time deposits and corporate equity securities.  Time deposits are short-term in nature and are accordingly valued at cost plus accrued interest, which approximates fair value. Corporate equity securities are recorded at fair
value and have exposure to price risk.  If this risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in prices quoted by stock exchanges, the effect of that risk would be $33 as of June 30, 2009.  Actual results may differ.





Foreign Currency Exchange Risk





In order to reduce the risk of foreign currency exchange rate fluctuations, we hedge some of our transactions denominated in a currency other than the functional currencies applicable to each of our various entities.  The instruments used for hedging are short-term foreign currency contracts (futures).  The changes in market
value of such contracts have a high correlation to price changes in the currency of the related hedged transactions.  At June 30, 2009, we had foreign currency contracts outstanding that had a notional amount of $36,424.  The difference between the fair market value of the foreign currency contracts and the related commitments at inception and the fair market value of the contracts and the related commitments at June 30, 2009, was not material.





We are subject to risk from changes in foreign exchange rates for our subsidiaries that use a foreign currency as their functional currency and are translated into U.S. dollars.  These changes result in cumulative translation adjustments, which are included in accumulated other comprehensive income (loss).  On June 30,
2009, we had translation exposure to various foreign currencies, with the most significant being the Euro.  The potential loss as of June 30, 2009, resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates amounted to $7,282.  Actual results may differ.





Interest rate risk





Due to our financing, investing and cash-management activities, we are subject to market risk from exposure to changes in interest rates.  We utilize a balanced mix of debt maturities along with both fixed-rate and variable-rate debt to manage our exposure to changes in interest rates.  Our financial instrument holdings
at year-end were analyzed to determine their sensitivity to interest rate changes.  In this sensitivity analysis, we used the same change in interest rate for all maturities.  All other factors were held constant.  If there were an adverse change in interest rates of 10%, the expected effect on net income related to our financial instruments would be immaterial.  However, there can be no assurances that interest rates will not significantly affect our results of operations.





31





Item 8.  Financial Statements and Supplementary Data.





The financial statements and supplementary data required by this Item 8 are set forth later in this report.





Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.





None.





Item 9A. Controls and Procedures





Evaluation of Disclosure Controls and Procedures




Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer, with assistance
from other members of our management, have reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2009 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective.




Changes in Internal Control over Financial Reporting





There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Management’s Report on Internal Control over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive and principal financial officers, we assessed, as of June
30, 2009, the effectiveness of our internal control over financial reporting. This assessment was based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our assessment using those criteria, management concluded that our internal control over financial reporting as of June 30, 2009, was effective.





Our internal control over financial reporting as of June 30, 2009, has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in their report, which is included herein.





Internal control over financial reporting is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:





●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;●
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.




A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met.  Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any,
within a company have been detected.





32





Report of Independent Registered Public Accounting Firm








The Board of Directors and Shareholders


Aceto Corporation:





We have audited Aceto Corporation's internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Aceto Corporation's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.





We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.





A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.





In our opinion, Aceto Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on the COSO criteria.





We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Aceto Corporation as of June 30, 2009 and 2008, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the three years
in the period ended June 30, 2009 and our report dated September 11, 2009, expressed an unqualified opinion thereon.





/s/ BDO Seidman, LLP





Melville, New York


September 11, 2009





33





Item 9B.  Other Information





None.





PART III





Item 10.  Directors, Executive Officers and Corporate Governance





Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to our annual meeting of shareholders scheduled to be held on December 3, 2009.





Item 11.  Executive Compensation





Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to our annual meeting of shareholders scheduled to be held on December 3, 2009.





Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters





Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to our annual meeting of shareholders scheduled to be held on December 3, 2009.





Item 13.  Certain Relationships and Related Transactions, and Director Independence





Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to our annual meeting of shareholders scheduled to be held on December 3, 2009.





Item 14.  Principal Accountant Fees and Services





Incorporated herein by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission with respect to our annual meeting of shareholders scheduled to be held on December 3, 2009.





PART IV





Item 15.  Exhibits and Financial Statement Schedules





The following documents are filed as part of this Report:





(a)
The financial statements listed in the Index to Consolidated Financial Statements are filed as part of this Annual Report.All financial statement schedules have been included in the Consolidated Financial Statements or Notes thereto.(b)
Exhibits




Exhibit Number
Description3.1

Restated Certificate of Incorporation (incorporated by reference to Exhibit 4(a)(iii) to Registration
Statement No. 2-70623 on Form S-8 (S-8 2-70623)).3.2

Certificate of Amendment dated November 21, 1985 to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3(ii) to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1986).3.3

Amended and restated by-laws of Aceto Corporation, effective as of February 2, 2005 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K dated February 2, 2005).3.4

Amended and restated by-laws of Aceto Corporation, effective as of December 6, 2007 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K dated December 6, 2007).  34
  10.1

Aceto Corporation 401(k) Retirement Plan, effective August 1, 1997, as amended and restated as of July 1, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2004).10.2

Supplemental Executive Retirement Plan, as amended and restated, effective June 30, 2004 and frozen as of December 31, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s annual report on Form   10-K for the fiscal year ended June 30, 2004).10.3

Aceto Corporation Stock Option Plan (as Amended and Restated effective as of September 19, 1990) (and as further Amended effective June 9, 1992) (incorporated by reference to Exhibit 10(v)(b) to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1992).10.4

1998 Aceto Corporation Omnibus Equity Award Plan (incorporated by reference to Exhibit 10(v) to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 1999).10.5

Aceto Corporation 2002 Stock Option Plan (incorporated by reference to Exhibit 4(i) to Registration Statement No. 333-110653 on Form S-8).10.6

Lease between Aceto Corporation and M. Parisi & Son Construction Co., Inc. for office space at One Hollow Lane, Lake Success, NY dated April 28, 2000 (incorporated by reference to Exhibit 10(vi) to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2000).10.7

Lease between Aceto Corporation and M. Parisi & Son Construction Co., Inc. for office space at One Hollow Lane, Lake Success, NY dated April 28, 2000 (incorporated by reference to Exhibit 10(vi)(b) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.8

Lease between CDC Products Corp. and Seaboard Estates for manufacturing and office space at 1801 Falmouth Avenue, New Hyde Park, NY dated October 31, 1999 (incorporated by reference to Exhibit 10(vi)(c) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.9

Stock Purchase Agreement among Windham Family Limited Partnership, Peter H. Kliegman, CDC Products Corp. and Aceto Corporation (incorporated by reference to Exhibit 10(vii) to the Company’s annual report on Form 10-K for the year ended June 30, 1999).10.10

Asset Purchase Agreement among Magnum Research Corporation, CDC Products Corp., Roy Gross and Aceto Corporation (incorporated by reference to Exhibit 10 (viii) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.11

Asset Purchase Agreement between Schweizerhall, Inc. and Aceto Corporation (incorporated by reference to Exhibit 10(ix) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.12

Purchase and Sale Agreement among Schweizerhall Holding AG, Chemische Fabrik Schweizerhall, Schweizerhall, Inc., Aceto Corporation and Aceto Holding B.V., I.O. (incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K dated April 4, 2001).10.13

Loan Guarantee between Aceto Corporation and subsidiaries and Deutsche Bank AG dated March 22, 2001 (incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K for the year ended June 30, 2001).10.14

Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated May 10, 2002 (incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K for the year ended June 30, 2002).10.15

Amendment and Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated June 29, 2004 (incorporated by reference to Exhibit 10.15 to the Company’s annual report on Form 10-K for the year ended June 30, 2004).  35
  10.16

Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated August 31, 2004 (incorporated by reference to Exhibit 10.16 to the Company’s annual report on Form 10-K for the year ended June 30, 2004).10.17

Share Purchase Agreement dated as of December 12, 2003 between Aceto Holding GmbH and Corange Deutschland Holding GmbH (incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K dated December 31, 2003).10.18

Aceto Corporation Supplemental Executive Deferred Compensation Plan, effective March 14, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K dated March 14, 2005).10.19

Form of purchase agreement between Shanghai Zhongjin Real Estate Development Company Limited and Aceto (Hong Kong) Limited dated November 10, 2004 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended December 31, 2004).10.20

Amendment and Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated June 26, 2007.10.21

Aceto Corporation 2007 Long-Term Performance Incentive Plan (incorporated by reference to Exhibit 4(i) to Registration Statement No. 333-149586 on Form S-8).10.22*

Aceto Corporation Supplemental Executive Deferred Compensation Plan, Amended and Restated, effective December  8,  2008.10.23

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Leonard S. Schwartz (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K dated March 27, 2009).10.24

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Douglas Roth (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K dated March 27, 2009).10.25

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Vincent Miata (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K dated March 27, 2009).10.26

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Frank DeBenedittis (incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K dated March 27, 2009).10.27

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Michael Feinman (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K dated March 27, 2009).21.1*

Subsidiaries of the Company.23.1*

Consent of BDO Seidman, LLP.31.1*

Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*

Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





*Filed herewith





36





ACETO CORPORATION AND SUBSIDIARIES


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





Report of Independent Registered Public Accounting FirmConsolidated financial statements:Consolidated balance sheets as of June 30, 2009 and 2008Consolidated statements of income for the years ended June 30, 2009, 2008 and 2007Consolidated statements of cash flows for the years ended June 30, 2009, 2008 and 2007Consolidated statements of shareholders’ equity and comprehensive income for the years ended June 30, 2009, 2008 and 2007Notes to consolidated financial statementsSchedules:II - Valuation and qualifying accountsAll other schedules are omitted because they are not required or the information required is given in the consolidated financial statements or notes thereto.





37




Report of Independent Registered Public Accounting Firm





The Board of Directors and Shareholders


Aceto Corporation:





We have audited the accompanying consolidated balance sheets of Aceto Corporation and subsidiaries as of June 30, 2009 and 2008 and the related consolidated statements of income, shareholders' equity and comprehensive income, and cash flows for each of the three years in the period ended June 30, 2009.  In connection with our audits
of the consolidated financial statements, we have also audited the schedule as listed in the accompanying index.  These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aceto Corporation and subsidiaries at June 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2009, in conformity with
accounting principles generally accepted in the United States of America.





Also, in our opinion, the financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.





We also have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Aceto Corporation and subsidiaries’ internal control over financial reporting as of June 30, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) and our report dated September 11, 2009 expressed an unqualified opinion thereon.











/s/ BDO Seidman, LLP





Melville, New York


September 11, 2009





38




ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND 2008
(in thousands, except per-share amounts)2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
57,761


$
46,515Investments


541



548Trade receivables:  less allowance for doubtful accounts (2009, $976;2008, $477)


46,996



68,220Other receivables


9,361



4,819Inventory


54,402



71,109Prepaid expenses and other current assets


1,006



817Deferred income tax asset, net


1,579



1,756Total current assets


171,646



193,784Long-term notes receivable


1,000



347Property and equipment, net


4,249



4,307Property held for sale


3,752



6,978Goodwill


1,861



1,987Intangible assets, net


11,518



5,421Deferred income tax asset, net


2,366



4,098Other assets


9,072



5,321TOTAL ASSETS

$
205,464


$
222,243LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Accounts payable

$
25,126


$
43,480Note payable – related party


-



500Accrued expenses


20,739



19,948Deferred income tax liability


1,072



1,070Total current liabilities


46,937



64,998Long-term liabilities


8,545



7,034Environmental remediation liability


7,451



7,578Deferred income tax liability


491



1,751Minority interest


472



473Total liabilities


63,896



81,834Commitments and contingencies (Note 15)Shareholders’ equity:Common stock, $.01 par value, 40,000 shares authorized; 25,644 shares issued; 24,771 and 24,446 shares outstanding at June 30, 2009 and 2008, respectively


256



256Capital in excess of par value


56,767



56,832Retained earnings


85,450



81,778Treasury stock, at cost, 873 and 1,198 shares at June 30, 2009 and 2008,  respectively


(8,430
)


(11,571
)Accumulated other comprehensive income


7,525



13,114Total shareholders’ equity


141,568



140,409TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$
205,464


$
222,243





See accompanying notes to consolidated financial statements.


39





ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007
(in thousands, except per-share amounts)2009


2008


2007Net sales

$
322,646


$
359,591


$
313,473Cost of sales


267,026



292,286



258,980Gross profit


55,620



67,305



54,493Selling, general and administrative expenses


43,574



45,422



39,418Research and development expenses


153



506



11Operating income


11,893



21,377



15,064Other income (expense):Interest expense


(98
)


(145
)


(173
)Interest and other income, net


937



957



532839



812



359Income from continuing operations before income taxes


12,732



22,189



15,423Provision for income taxes


4,103



8,716



5,211Net income

$
8,629


$
13,473


$
10,212Net income per common share

$
0.35


$
0.55


$
0.42Diluted income per common share

$
0.35


$
0.54


$
0.41Weighted average shares outstanding:Basic


24,487



24,346



24,305Diluted


24,978



24,800



24,711





See accompanying notes to consolidated financial statements.


40


ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007
(in thousands)2009


2008


2007Operating activities:Net income

$
8,629


$
13,473


$
10,212Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


1,866



2,378



1,791Provision for doubtful accounts


528



98



132Non-cash stock compensation


1,560



1,285



443Unrealized loss (gain) on trading securities


214



6



(180
)Deferred income taxes


191



1,835



1,692Changes in assets and liabilities:Investments – trading securities


-



324



-Trade accounts receivable


18,448



(7,326
)


(6,973
)Other receivables


(4,192
)


(1,647
)


(1,726
)Inventory


14,771



(7,989
)


(12,565
)Prepaid expenses and other current assets


(209
)


345



(96
)Other assets


(5
)


(1,832
)


(636
)Accounts payable


(17,299
)


9,615



7,884Accrued expenses and other liabilities


(1,991
)


4,853



4,185Net cash provided by operating activities


22,511



15,418



4,163Investing activities:Purchases of investments


(10,173
)


-



(6,274
)Proceeds from sale of investments


-



1,000



-Maturities of investments


9,964



1,200



6,779Payments received on notes receivable


437



98



151Issuance of notes receivable


(2,020
)


-



(75
)Proceeds from sale of intangible assets


400



400



-Purchase of intangible assets


(2,114
)


(97
)


(2,468
)Purchases of property and equipment, net


(557
)


(1,197
)


(704
)Net cash (used in) provided by investing activities


(4,063
)


1,404



(2,591
)Financing activities:Proceeds from exercise of stock options


1,020



87



217Excess income tax benefit on exercise of stock options


168



18



24Payment of cash dividends


(4,949
)


(6,110
)


(4,257
)Payment of note payable-related party


(500
)


-



-(Repayments) borrowings of short-term bank loans


-



(25
)


25Net cash used in financing activities


(4,261
)


(6,030
)


(3,991
)Effect of foreign exchange rate changes on cash


(2,941
)


3,403



1,007Net increase (decrease) in cash and cash equivalents


11,246



14,195



(1,412
)Cash and cash equivalents at beginning of period


46,515



32,320



33,732Cash and cash equivalents at end of period

$
57,761


$
46,515


$
32,320





See accompanying notes to consolidated financial statements.


41


ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30, 2009, 2008 AND 2007
(in thousands, except per-share amounts)Capital in
Excess of
Par Value








Accumulated
Other
Comprehensive
IncomeCommon Stock




Retained
Earnings


Treasury Stock




TotalShares


Amount


Shares


AmountBalance at June 30, 2006


25,644


$
256


$
56,691


$
68,464



(1,366
)

$
(13,198
)

$
2,840


$
115,053Net income


-



-



-



10,212



-



-



-



10,212Other comprehensive income:Change in fair value of cross  currency interest rate swap


-



-



-



-



-



-



161



161Foreign currency translation adjustments


-



-



-



-



-



-



2,900



2,900Unrealized gain on available for sale investments
-



-



-



-



-



-



52



52Comprehensive income:






























13,325Adjustment to adopt SFAS No. 158, net of tax of $25
-



-



-



-



-



-



38



38Stock issued pursuant to employee stock incentive plans
-



-



(44
)


-



15



142



-



98Dividends declared ($0.175 per share)


-



-



-



(4,257
)


-



-



-



(4,257
)Share-based compensation


-



-



329



-



-



-



-



329Exercise of stock options


-



-



(146
)


-



37



363



-



217Tax benefit from exercise of stock options


-



-



24



-



-



-



-



24Balance at June 30, 2007


25,644



256



56,854



74,419



(1,314
)


(12,693
)


5,991



124,827Net income


-



-



-



13,473



-



-



-



13,473Other comprehensive income:Change in fair value of cross  currency interest rate swap
-



-



-



-



-



-



75



75Foreign currency translation adjustments


-



-



-



-



-



-



6,944



6,944Unrealized gain on available for sale investments
-



-



-



-



-



-



42



42Defined benefit plans, net of tax of $29


-



-



-



-



-



-



62



62Comprehensive income:






























20,596Stock issued pursuant to employee stock incentive plans
-



-



(20
)


-



15



150



-



130Issuance of restricted stock, net of forfeitures


-



-



(821
)


-



85



821



-



-Dividends declared ($0.25 per share)


-



-



-



(6,114
)


-



-



-



(6,114
)Share-based compensation


-



-



865



-



-



-



-



865Exercise of stock options


-



-



(64
)


-



16



151



-



87Tax benefit from exercise of stock options


-



-



18



-



-



-



-



18Balance at June 30, 2008


25,644



256



56,832



81,778



(1,198
)


(11,571
)


13,114



140,409Net income


-



-



-



8,629



-



-



-



8,629Other comprehensive income:Foreign currency translation adjustments


-



-



-



-



-



-



(5,689
)


(5,689
)Defined benefit plans, net of tax of $47


-



-



-



-



-



-



100



100Comprehensive income:






























3,040Stock issued pursuant to employee stock incentive plans
-



-



(23
)


-



11



109



-



86Issuance of restricted stock, including dividends and net of forfeitures
-



-



(1,056
)


-



144



1,388



-



332Dividends declared ($0.20 per share)


-



-



-



(4,957
)


-



-



-



(4,957
)Share-based compensation


-



-



1,470



-



-



-



-



1,470Exercise of stock options


-



-



(624
)


-



170



1,644



-



1,020Tax benefit from employee stock incentive plans


-



-



168



-



-



-



-



168Balance at June 30, 2009


25,644


$
256


$
56,767


$
85,450



(873
)

$
(8,430
)

$
7,525


$
141,568





See accompanying notes to consolidated financial statements.


42




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(1) Description of Business





Aceto Corporation and subsidiaries (“Aceto” or the “Company”) is primarily engaged in the sourcing, quality assurance, regulatory support, marketing and distribution of chemically derived pharmaceuticals, biopharmaceuticals, specialty chemicals and crop protection products used principally as raw materials in the agricultural,
color, pharmaceutical, surface coating/ink and general chemical consuming industries. Most of the chemicals distributed by the Company are purchased from companies located outside the United States.  The Company’s customers are primarily located throughout the United States, Europe and Asia.





(2) Summary of Significant Accounting Policies





Principles of Consolidation





The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. In addition, the financial statements of S.R.F.A. LLC, a joint-venture entity which is 50% owned by the Company and commenced operations in April 2004, are included in the consolidated financial statements in accordance
with FASB Interpretation 46R, “Consolidation of Variable Interest Entities” (FIN 46R).  All significant inter-company balances and transactions are eliminated in consolidation.





Use of Estimates





The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements and the disclosure of contingent assets and liabilities at the date
of the financial statements. These judgments can be subjective and complex, and consequently actual results could differ from those estimates and assumptions.  The Company’s most critical accounting policies relate to revenue recognition; allowance for doubtful accounts; inventory; goodwill and other indefinite-life intangible assets; long-lived assets; environmental matters and other contingencies; income taxes; and stock-based compensation.





Cash Equivalents





The Company considers all highly liquid debt instruments with original maturities at the time of purchase of three months or less to be cash equivalents.


Investments





The Company classifies investments in marketable securities as trading, available-for-sale or held-to-maturity at the time of purchase and periodically re-evaluates such classifications.  Trading securities are carried at fair value, with unrealized holding gains and losses included in earnings.  Held-to-maturity securities
are recorded at cost and are adjusted for the amortization or accretion of premiums or discounts over the life of the related security. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss) until realized.  In determining realized gains and losses, the cost of securities sold is based on the specific identification method. Interest and dividends on the investments are accrued
at the balance sheet date.





Inventories





Inventories, which consist principally of finished goods, are stated at the lower of cost (first-in first-out method) or market.  The Company writes down its inventories for estimated excess and obsolete goods by an amount equal to the difference between the carrying cost of the inventory and the estimated market value based upon
assumptions about future demand and market conditions.





Environmental and Other Contingencies





The Company establishes accrued liabilities for environmental matters and other contingencies when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable.  If the contingency is resolved for an amount greater or less than the accrual, or the Company’s share of the contingency
increases or decreases, or other assumptions relevant to the development of the estimate were to change, the Company would recognize an additional expense or benefit in the consolidated statements of income in the period such determination was made.




43





ACETO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2009, 2008 AND 2007
(in thousands, except per-share amounts)





Pension Benefits





In connection with certain historical acquisitions in Germany, the Company assumed defined benefit pension plans covering certain employees who meet certain eligibility requirements.  The net pension benefit obligations recorded and the related periodic costs are based on, among other things, assumptions of the discount rate, estimated
return on plan assets, salary increases and the mortality of participants.  The obligation for these claims and the related periodic costs are measured using actuarial techniques and assumptions.  Actuarial gains and losses are deferred and amortized over future periods.  The Company’s plans are funded in conformity with the funding requirements of applicable government regulations.





Accumulated Other Comprehensive Income





The components of accumulated other comprehensive income as of June 30, 2009 and 2008 are as follows:





2009


2008Cumulative foreign currency translation adjustments

$
7,325


$
13,014Defined benefit plans


200



100Total

$
7,525


$
13,114


The foreign currency translation adjustments for the year ended June 30, 2009 primarily relates to the fluctuation of the conversion rate of the Euro. The currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-US subsidiaries.





Common Stock





On May 4, 2005, the Board of Directors of the Company authorized the extension of the Company’s stock repurchase program for an additional three years, which expired in May 2008.  On September 4, 2008, the Board of Directors of the Company authorized the continuation of the Company’s stock repurchase program, expiring
in May 2011.  Under the stock repurchase program, the Company is authorized to purchase up to an additional 4,051 shares of common stock in open market or private transactions, at prices not to exceed the market value of the common stock at the time of such purchase.





Stock Options





SFAS No.  123(R), “Share-Based Payment”,   requires that all stock-based compensation be recognized as an expense in the financial statements and that such costs be measured at the fair value of the award.  SFAS No. 123(R) also requires that excess tax benefits related to stock option exercises
be reflected as financing cash inflows.   The Company’s policy is to satisfy stock-based compensation awards with treasury shares.





In order to determine the fair value of stock options on the date of grant, the Company uses the Black-Scholes option-pricing model, including an estimate of forfeiture rates. Inherent in this model are assumptions related to expected stock-price volatility, risk-free interest rate, expected life and dividend yield.  Expected stock-price
volatility is based on the historical daily price changes of the underlying stock which are obtained from public data sources. The risk-free interest rate is based on U.S. Treasury issues with a term equal to the expected life of the option. The Company uses historical data to estimate expected dividend yield, expected life and forfeiture rates. In fiscal 2007, the Company utilized the “simplified” method prescribed in SEC Staff Accounting Bulletin No. 107 to estimate the expected life.





Revenue Recognition





The Company recognizes revenue from product sales at the time of shipment and passage of title and risk of loss to the customer.  The Company has no acceptance or other post-shipment obligations and does not offer product warranties or services to its customers.




44




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




Sales are recorded net of returns of damaged goods from customers, which historically have been immaterial, and sales incentives offered to customers.  The Company’s sales incentives consist primarily of volume incentive rebates.  The Company records such volume incentive rebates as the underlying revenue transactions
that result in progress by the customer in earning the rebate are recorded, in accordance with EITF 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products).”





Shipping and Handling Fees and Costs





All amounts billed to a customer in a sales transaction related to shipping and handling represent revenues earned and are included in net sales.  The costs incurred by the Company for shipping and handling are reported as a component of cost of sales.  Cost of sales also includes inbound freight, receiving, inspection,
warehousing, distribution network, and customs and duty costs.





Net Income Per Common Share





Basic income per common share is based on the weighted average number of common shares outstanding during the period.  Diluted income per common share includes the dilutive effect of potential common shares outstanding.  The following table sets forth the reconciliation of weighted average shares outstanding and diluted
weighted average shares outstanding for the fiscal years ended June 30, 2009, 2008 and 2007:





2009


2008


2007Weighted average shares outstanding


24,487



24,346



24,305Dilutive effect of stock options and restricted stock awards and units


491



454



406Diluted weighted average shares outstanding


24,978



24,800



24,711





There were 1,703, 1,534 and 1,443 common equivalent shares outstanding as of June 30, 2009, 2008 and 2007, respectively that were not included in the calculation of diluted income per common share because their effect would have been anti-dilutive.


Income Taxes





Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.





Property and Equipment





Property and equipment are stated at cost and are depreciated using the straight line method over the estimated useful lives of the related asset.  Expenditures for improvements that extend the useful life of an asset are capitalized.  Ordinary repairs and maintenance are expensed as incurred.  When assets are
retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any related gains or losses are included in income.





45





ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


The components of property and equipment were as follows:




June 30, 2009


June 30, 2008


Estimated useful
life (years)Machinery and equipment

$
1,051


$
1,140


3-7Leasehold improvements


373



378


Shorter of asset life or lease termComputer equipment and software


4,072



3,772


3-5Furniture and fixtures


1,217



1,138


5-10Automobiles


249



411


3Building


3,240



3,221


20Land


233



280


-$
10,435


$
10,340Accumulated depreciation and amortization


6,186



6,033$
4,249


$
4,307





Property held for sale represents land and land improvements of $3,752 and $6,978 at June 30, 2009 and 2008, respectively.  See Note 7, “Environmental Remediation” for further discussion on property held for sale





Depreciation and amortization of property and equipment amounted to $824, $1,174 and $1,067 for the years ended June 30, 2009, 2008, and 2007, respectively.





Goodwill and Other Intangibles





Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets.  Other intangible assets principally consist of customer relationships, patent license, EPA registrations and related data, trademarks, product rights and related intangibles and covenants not to compete.  Goodwill
and other intangible assets that have an indefinite life are not amortized.





In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company tests goodwill and other intangible assets for impairment on at least an annual basis.  Goodwill impairment exists if the net book value of a reporting unit exceeds its estimated fair value.  The impairment testing is performed
in two steps: (i) the Company determines impairment by comparing the fair value of a reporting unit with its carrying value, and (ii) if there is an impairment, the Company measures the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill.  To determine the fair value of these intangible assets, the Company uses many assumptions and estimates that directly impact the results of the testing.  In making these assumptions and estimates,
the Company uses industry accepted valuation models and set criteria that are reviewed and approved by various levels of management.





Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of





In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability of assets held for sale is measured by comparing the carrying amount of the assets to their estimated fair value.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.  Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell.





Accounting for Derivatives and Hedging Activities





The Company accounts for derivatives and hedging activities under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, which establishes accounting and reporting guidelines for derivative instruments and hedging activities.  SFAS No. 133 requires the recognition of
all derivative financial instruments as either assets or liabilities in the statement of financial condition and measurement of those instruments at fair value.  Changes in the fair values of those derivatives are reported in earnings or other comprehensive income depending on the designation of the derivative and whether it qualifies for hedge accounting.  The accounting for gains and losses associated with changes in the fair value of a derivative and the effect on the consolidated financial
statements depends on its hedge designation and whether the hedge is highly effective in achieving offsetting changes in the fair value or cash flows of the asset or liability hedged.  Under the provisions of SFAS No. 133, the method that is used for assessing the effectiveness of a hedging derivative, as well as the measurement approach for determining the ineffective aspects of the hedge, is established at the inception of the hedged instrument.




46




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




The Company operates internationally, therefore its earnings, cash flows and financial positions are exposed to foreign currency risk from foreign-currency-denominated receivables and payables, which, in the U.S., have been denominated in various foreign currencies, including Euros, British Pounds, Japanese Yen, Singapore Dollars and Chinese
Renminbi and at certain foreign subsidiaries in U.S. dollars and other non-local currencies.





Management believes it is prudent to minimize the risk caused by foreign currency fluctuation.  Management minimizes the currency risk on its foreign currency receivables and payables by purchasing future foreign currency contracts (futures) with one of its financial institutions.  Futures are traded on regulated U.S. and
international exchanges and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.   Since futures are purchased for the amount of the foreign currency receivable or for the amount of foreign currency needed to pay for specific purchase orders, and the futures mature on the due date of the related foreign currency vendor invoices or customer receivables, the Company believes that it eliminates risks relating to foreign currency fluctuation.  The
Company takes delivery of all futures to pay suppliers in the appropriate currency.  The gains or losses for the changes in the fair value of the foreign currency contracts are recorded in cost of sales (sales) and offset the gains or losses associated with the impact of changes in foreign exchange rates on trade payables (receivables) denominated in foreign currencies.  Senior management and members of the financial department continually monitor foreign currency risks and the use of this
derivative instrument.





Foreign Currency





The financial statements of the Company’s foreign subsidiaries are translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency Translation." Where the functional currency of a foreign subsidiary is its local currency, balance sheet accounts are translated at the current exchange rate and income statement items are
translated at the average exchange rate for the period.   Exchange gains or losses resulting from the translation of financial statements of foreign operations are accumulated in other comprehensive income.  Where the local currency of a foreign subsidiary is not its functional currency, financial statements are translated at either current or historical exchange rates, as appropriate.





In the third quarter of 2008, the Company changed the functional currency of its Chinese subsidiaries from the Chinese Renminbi to the U.S. Dollar, since these subsidiaries primarily generate and expend cash in the U.S. Dollar.  As a result, the Company recorded a correction of an error in the third quarter of 2008, which resulted
in additional interest and other income, net of approximately $559, which represented approximately $389 after tax profit. The Company did not deem this adjustment to be material to any prior quarters in fiscal 2008 based upon both quantitative and qualitative factors.  In addition, this adjustment does not impact the 2008 year-to-date reported results. This matter was not corrected for periods prior to June 30, 2008 due to the immateriality of the effects of this in earlier years.





Reclassifications





Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current year presentation.




47


ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




(3) Investments





A summary of short-term investments was as follows:





June 30, 2009


June 30, 2008Fair Value


Cost Basis


Fair Value


Cost BasisTrading securitiesCorporate equity securities

$
334


$
14


$
548


$
14Held to Maturity InvestmentsTime deposits

$
207


$
207


$
-


$
-$
541






$
548


The Company has classified all investments with maturity dates of greater than three months as current since it has the ability to redeem them within the year and is available for current operations.





Unrealized (losses) gains on trading securities were ($214), ($6) and $180 for fiscal 2009, 2008 and 2007, respectively.





(4) Fair Value Measurements





The Company adopted SFAS No. 157, “Fair Value Measurements” (SFAS No. 157) on July 1, 2008. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. The adoption of SFAS No. 157 did not have any
impact on the Company’s consolidated financial statements.  SFAS No. 157 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).  The hierarchy consists of three levels:





Level 1 –   Quoted market prices in active markets for identical assets or liabilities;





Level 2 –   Inputs other than Level 1 inputs that are either directly or indirectly observable; and





Level 3 –   Unobservable inputs that are not corroborated by market data.





On a recurring basis, Aceto measures at fair value certain financial assets and liabilities, which consist of cash equivalents, investments and foreign currency contracts. The Company classifies cash equivalents and investments within Level 1 if quoted prices are available in active markets.  Level 1 assets include instruments valued
based on quoted market prices in active markets which generally include corporate equity securities publicly traded on major exchanges.  Time deposits are very short-term in nature and are accordingly valued at cost plus accrued interest, which approximates fair value, and are classified within Level 2 of the valuation hierarchy. The Company uses foreign currency forward contracts (futures) to minimize the risk caused by foreign currency fluctuation on its foreign currency receivables and payables by
purchasing futures with one of its financial institutions.  Futures are traded on regulated U.S. and international exchanges and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price.   Aceto’s foreign currency derivative contracts are classified within Level 2 as the fair value of these hedges is primarily based on observable forward foreign exchange rates. At June 30, 2009, the Company had foreign currency contracts outstanding
that had a notional amount of $36,424. Unrealized gains (losses) on hedging activities for the years ended June 30, 2009, 2008, and 2007, amounted to $715, $5, and ($20), respectively, and are included in interest and other income, net, in the consolidated statements of income. The contracts have varying maturities of less than one year.




48




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




The following table summarizes the valuation of the Company’s investments and the financial instruments which were determined by using the following inputs at June 30, 2009:


Fair Value Measurements at June 30, 2009 UsingQuoted Prices
in Active
Markets
(Level 1)


Significant
Other
Observable
Input (Level 2)


Significant
Unobservable
inputs
(Level 3)


TotalCash equivalents:Time deposits


-


$
2,442



-


$
2,442Investments:Trading securities

$
334



-



-



334Time deposits


-



207



-



207Foreign currency contracts-assets (1)


-



1,183



-



1,183Foreign currency contracts-liabilities (2)


-



455



-



455




(1)
Included in “Other receivables” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2009.(2)
Included in “Accrued expenses” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2009.





The Company did not hold financial assets and liabilities which were recorded at fair value in the Level 3 category as of June 30, 2009.





In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (SFAS No. 159). SFAS No. 159 allows companies the choice to measure financial instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to adopt the fair value option under SFAS 159 for its existing instruments.





49




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(5)  Goodwill and Other Intangible Assets





Goodwill of $1,861 and $1,987 as of June 30, 2009 and June 30, 2008, respectively, relates to the Health Sciences segment and reporting unit.





Intangible assets subject to amortization as of June 30, 2009 and 2008 were as follows:





Gross
Carrying
Value


Accumulated
Amortization


Net Book
ValueJune 30, 2009Customer relationships

$
3,087


$
2,426


$
661Product rights and related intangibles


96



24



72Patent license


838



286



552EPA registrations and related data


10,149



879



9,270Non-compete agreements


257



257



-$
14,427


$
3,872


$
10,555Gross
Carrying
Value


Accumulated
Amortization


Net Book
ValueJune 30, 2008Customer relationships

$
3,468


$
2,229


$
1,239Product rights and related intangibles


96



4



92Patent license


838



209



629EPA registrations and related data


2,733



384



2,349Non-compete agreements


290



261



29$
7,425


$
3,087


$
4,338





Intangible assets with definitive useful lives are amortized using the straight-line method over their estimated useful lives. The estimated useful lives of customer relationships, product rights and related intangibles, patent license, EPA registrations and related data and non-compete agreements are 7 years, 3 years, 11 years, 10 years and
5 years, respectively.





As of June 30, 2009 and June 30, 2008, the Company also had $963 and $1,083, respectively, of intangible assets pertaining to trademarks which have indefinite lives and are not subject to amortization.





In fiscal 2009 and 2008, changes in goodwill and trademarks are attributable to foreign currency exchange rates used to translate the financial statements of foreign subsidiaries. In fiscal 2009 and 2008, changes in the gross carrying value of customer relationships are attributable to foreign currency exchange rates used to translate the
financial statements of foreign subsidiaries.





Amortization expense for intangible assets subject to amortization amounted to $1,042, $1,204 and $724 for the years ended June 30, 2009, 2008 and 2007, respectively.  The estimated aggregate amortization expense for intangible assets subject to amortization for each of the succeeding years ended June 30, 2010 through June 30, 2015
are as follows:  2010: $1,597; 2011: $1,373; 2012: $1,136; 2013: $1,125; 2014: $1,125 and 2015 and thereafter: $4,199.





50




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(6) Accrued Expenses





The components of accrued expenses as of June 30, 2009 and 2008 were as follows:





2009


2008Accrued compensation

$
3,827


$
4,399Accrued environmental remediation costs-current portion


949



268Accrued income taxes payable


1,789



5,248Accrued product registrations and task force groups


3,888



-Accrued value added tax


3,910



1,585Other accrued expenses


6,376



8,448$
20,739


$
19,948





(7) Environmental Remediation





In fiscal years 2009, 2008 and 2007, the Company received letters from the Pulvair Site Group, a group of potentially responsible parties (PRP Group) who are working with the State of Tennessee (the State) to remediate a contaminated property in Tennessee called the Pulvair site. The PRP Group has alleged that Aceto shipped hazardous substances
to the site which were released into the environment.   The State had begun administrative proceedings against the members of the PRP Group and Aceto with respect to the cleanup of the Pulvair site and the group has begun to undertake cleanup. The PRP Group is seeking a settlement of approximately $1,700 from the Company for its share to remediate the site contamination. Although the Company acknowledges that it shipped materials to the site for formulation over twenty years ago, the Company believes
that the evidence does not show that the hazardous materials sent by Aceto to the site have significantly contributed to the contamination of the environment and thus believes that, at most, it is a de minimus contributor to the site contamination.  Accordingly, the Company believes that the settlement offer is unreasonable. The impact of the resolution of this matter on the Company's results of operations in a particular reporting period is not known.  However, management believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition or liquidity.





The Company has environmental remediation obligations in connection with Arsynco, Inc. (Arsynco), a subsidiary formerly involved in manufacturing chemicals located in Carlstadt, New Jersey, which was closed in 1993 and is currently held for sale.  During fiscal 2009, based on continued monitoring of the contamination at the site
and the approved plan of remediation, the Company received an estimate from an environmental consultant stating that the costs of remediation could be between $8,400 and $10,200.  As of June 30, 2009 and 2008, a liability of $8,400 and $7,846, respectively, is included in the accompanying consolidated balance sheet for this matter. In accordance with EITF Issue 90-8, “Capitalization of Costs to Treat Environmental Contamination”, management believes that the majority of costs incurred to
remediate the site will be capitalized in preparing the property which is currently classified as held for sale.  An appraisal of the fair value of the property by a third-party appraiser supports the assumption that the expected fair value after the remediation is in excess of the amount required to be capitalized. However, these matters, if resolved in a manner different from those assumed in current estimates, could have a material adverse effect on the Company’s financial condition, operating
results and cash flows when resolved in a future reporting period.





In connection with the environmental remediation obligation for Arsynco, in July 2009, the Company entered into a settlement agreement with BASF Corporation (BASF), the former owners of the Arsynco property. According to the settlement agreement, BASF will pay for a portion of the prior remediation costs and going forward, will co-remediate
the property with the Company. The contract states that BASF, within twenty days of establishing a Trust Account, will pay the Company $550 related to past response costs and pay a proportionate share of the future remediation costs. Accordingly, the Company has recorded a gain of $550, which is included in selling, general and administrative expenses in the accompanying consolidated statement of income for the year ended June 30, 2009. This $550 gain relates to the partial reimbursement of costs of approximately
$1,200 that the Company had previously expensed. The Company also recorded an additional receivable from BASF, with an offset against property held for sale, for $3,780, representing its estimated portion of the future remediation costs, which is included in the accompanying consolidated balance sheet as of June 30, 2009.




51




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




In March 2006, Arsynco received notice from the EPA of its status as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a site described as the Berry’s Creek Study Area.   Arsynco is one of over 150 PRPs which have potential liability for the required investigation and remediation
of the site.  The estimate of the potential liability is not quantifiable for a number of reasons, including the difficulty in determining the extent of contamination and the length of time remediation may require.  In addition, any estimate of liability must also consider the number of other PRPs and their financial strength.  Based on prior practice in similar situations, it is possible that the State may assert a claim for natural resource damages with respect to the Arsynco site
itself, and either the federal government or the State (or both) may assert claims against Arsynco for natural resource damages in connection with Berry's Creek; any such claim with respect to Berry's Creek could also be asserted against the approximately 150 PRPs which the EPA has identified in connection with that site.  Any claim for natural resource damages with respect to the Arsynco site itself may also be asserted against BASF, the former owners of the Arsynco property. Since an amount of the
liability cannot be reasonably estimated at this time, no accrual is recorded for these potential future costs.  The impact of the resolution of this matter on the Company’s results of operations in a particular reporting period is not known.  However, management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s financial condition or liquidity.


(8) Financing Arrangements





The Company has a revolving credit agreement with a financial institution that expires June 30, 2010 and provides for available credit of $10,000.  Under the credit agreement, the Company may obtain credit through direct borrowings and letters of credit.  The obligations of the Company under the credit agreement are guaranteed
by certain of the Company’s subsidiaries and are secured by 65% of the capital of certain non-domestic subsidiaries which the Company owns.  There is no borrowing base on the credit agreement.  Interest under the credit agreement is at LIBOR plus 1.50%, which was 1.81%, 3.96% and 6.82% at June 30, 2009, 2008 and 2007, respectively.  The credit agreement contains several financial covenants requiring, among other things, minimum levels of debt service and tangible net worth.  The
Company is also subject to certain restrictive debt covenants including liens, limitations on indebtedness, guarantees, sale of assets, sales of receivables, and loans and investments.  The Company was in compliance with all covenants at June 30, 2009.





At June 30, 2009 and 2008, the Company had available lines of credit with foreign financial institutions totaling $20,330 and $22,844, respectively.  The Company has issued a cross corporate guarantee to the foreign banks.  Short term loans under these agreements bear interest at LIBOR plus 0.75%, which was 1.06%, 3.21%
and 6.07% at June 30, 2009, 2008 and 2007, respectively.  The Company is not subject to any financial covenants under these arrangements.





Under the above financing arrangements, the Company had $185 in letters of credit leaving an unused facility of $30,145 at June 30, 2009.  At June 30, 2008 the Company had $663 in letters of credit leaving an unused facility of $32,181.


(9)  Stock Based Compensation Plans





At the annual meeting of shareholders of the Company held December 6, 2007, the shareholders approved the Aceto Corporation 2007 Long-Term Performance Incentive Plan (2007 Plan). The Company has reserved 700 shares of common stock for issuance under the 2007 Plan to the Company’s employees and non-employee directors. There are five types
of awards that may be granted under the 2007 Plan-options to purchase common stock, stock appreciation rights, restricted stock, restricted stock units and performance incentive units.


In September 2002, the Company adopted the Aceto Corporation 2002 Stock Option Plan (2002 Plan), which was ratified by the Company’s shareholders in December 2002.  Under the 2002 Plan, restricted stock or options to purchase up to 1,688 shares of the Company’s common stock may be granted by the Company to officers, directors,
employees and agents of the Company.  The exercise price per share shall not be less than the market value of Aceto common stock on the date of grant and each option may not become exercisable less than six months from the date it is granted.  Restricted stock may be granted to an eligible participant in lieu of a portion of any annual cash bonus earned by such participant.  Such award may include additional shares of restricted stock (premium shares) greater than the portion of
bonus paid in restricted stock.  The restricted stock award is vested at issuance and the restrictions lapse ratably over a period of years as determined by the Board of Directors, generally three years.  The premium shares vest when all the restrictions lapse, provided that the participant remains employed by the Company at that time.




52




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


In December 2008, the Company granted 222 options to employees at an exercise price of $8.62 per share.  These options vest over one year and will expire ten years from the date of grant.





In December 2007, the Company granted 239 options to non-employee directors and employees at an exercise price of $8.05 per share.  These options vest on the first anniversary of the date of grant and expire ten years from the date of grant.





During the year ended June 30, 2007, the Company granted 65 options to certain employees and directors at a weighted average exercise price of $8.25 per share. The options vest on the first anniversary of the date of grant and expire ten years from the date of grant.





All options granted were at exercise prices equal to the market value of the common stock on the date of grant.  As of June 30, 2009, there were 44 and 85 shares of common stock available for grant under the 2007 and 2002 Plans, respectively.





In December 1998, the Company adopted the Aceto Corporation 1998 Omnibus Equity Award Plan (1998 Plan).  In accordance with the 1998 Plan the Company’s Board of Directors (Board) may grant up to 1,688 shares of common stock in the form of stock options or restricted stock to eligible participants.  The exercise price
per share, determined by the Board, for options granted cannot be less than the market value of the stock on the date of grant.  The options vest as determined by the Board and expire no later than ten years from the date of grant.  Restricted stock may be granted to an eligible participant in lieu of a portion of any annual cash bonus earned by such participant.  Such restricted stock award may include premium shares greater than the portion of bonus paid in restricted stock.  The
restricted stock award is vested at issuance and the restrictions lapse ratably over a period of years as determined by the Board.  The premium shares vest when the restrictions lapse, provided that the participant remains employed by the Company at that time.  The 1998 Plan expired in December 2008.  Outstanding options survive the expiration of the 1998 Plan.





Under the terms of the Company’s 1980 Stock Option Plan, as amended (1980 Plan), options may be issued to officers and key employees. The exercise price per share can be greater or less than the market value of the stock on the date of grant. The options vest either immediately or over a period of years as determined by the Board of
Directors and expire no later than five or ten years from the original date they are fully vested.  The 1980 Plan expired September 2005.  Outstanding options survive the expiration of the 1980 Plan.





The following summarizes the shares of common stock under options for all plans at June 30, 2009, 2008 and 2007, and the activity with respect to options for the respective years then ended:





Shares subject to
option


Weighted average
exercise price per
share


Aggregate
Intrinsic
ValueBalance at June 30, 2006


2,743


$
7.62Granted


65



8.25Exercised


(38
)


6.02Forfeited (including cancelled options)


(70
)


10.26Balance at June 30, 2007


2,700


$
7.58Granted


239



8.05Exercised


(16
)


5.57Forfeited (including cancelled options)


(44
)


10.07Balance at June 30, 2008


2,879


$
7.59Granted


222



8.62Exercised


(170
)


5.99Forfeited (including cancelled options)


(28
)


10.06Balance at June 30, 2009


2,903


$
7.74


$
2,959Options exercisable at June 30, 2009


2,682


$
7.67


$
2,959





The total intrinsic value of stock options exercised during the years ended June 30, 2009, 2008 and 2007 was approximately $695, $48 and $106, respectively.   At June 30, 2009, outstanding options had expiration dates ranging from December 2,
2009 to December 4, 2018.




53




ACETO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS ENDED JUNE 30, 2009, 2008 AND 2007


(in thousands, except per-share amounts)




Under the 2002 Plan and the 1998 Plan, compensation expense is recorded for the market value of the restricted stock awards in the year the related bonus is earned and over the vesting period for the market value at the date of grant of the premium shares granted.  In fiscal 2009, 2008 and 2007, restricted stock awarded and premium
shares vested of 11, 15, and 15 common shares, respectively, were issued from treasury stock under employee incentive plans, which increased stockholders’ equity by $86, $130 and $98, respectively.  The related non-cash compensation expense related to the restricted stock granted and the vesting of premium shares during the year, which are issuable only when fully vested, was $90, $92 and $114 in fiscal 2009, 2008 and 2007, respectively.  Additionally, non-cash compensation expense of
$724, $540 and $329 was recorded in fiscal 2009, 2008 and 2007, respectively, relating to stock option grants, which is included in selling, general and administrative expenses. As of June 30, 2009, the total unrecognized compensation cost related to option awards is $300, and the related weighted average period over which it is expected that such unrecognized compensation cost will be recognized is approximately five months.


The following summarizes the non-vested stock options at June 30, 2009 and the activity with respect to non-vested options for the year ended June 30, 2009:





Shares
subject to
option


Weighted
average grant
date fair valueNon-vested at June 30, 2008


236


$
3.01Granted


222



3.26Vested


(234
)


3.01Forfeited


(3
)


3.10Non-vested at June 30, 2009


221


$
3.26





The per-share weighted-average fair value of stock options granted during 2009, 2008 and 2007 was $3.26, $3.01 and $3.96, respectively, on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:





2009


2008


2007Expected life

5.6 years


5.6 years


5.5 yearsExpected volatility


48.0
%


46.0
%


57.0
%Risk-free interest rate


2.42
%


3.55
%


4.43
%Dividend yield


2.32
%


2.50
%


1.86
%





In December 2008, the Company granted 97 shares of restricted common stock and 23 restricted stock units. These shares of restricted common stock and restricted stock units vest over three years. In accordance with SFAS No. 123(R), the Company granted 41 shares of restricted common stock and 3 restricted stock units in September 2008, whereby
the service inception date, which occurred in fiscal 2008, preceded the grant date, which was in fiscal 2009. Since these shares of restricted common stock and restricted stock units were issued in fiscal 2009, the Company recorded a liability as of June 30, 2008 for such awards.  These awards will vest in September 2009.  In December 2007, the Company granted 86 shares of restricted common stock and 20 restricted stock units. These shares of restricted common stock and restricted stock units
vest over three years.  In accordance with SFAS No. 123(R), compensation expense is recognized on a straight-line basis over the employee's vesting period or to the employee's retirement eligibility date, if earlier, for restricted stock awards and units.   For the year ended June 30, 2009, the Company recorded non-cash stock-based compensation expense of approximately $746, which is included in selling, general and administrative expenses, for these shares of restricted common stock
and restricted stock units, of which $246 of compensation expense related to retiree eligibility.   For the year ended June 30, 2008, the Company recorded non-cash stock-based compensation expense of approximately $325, which is included in selling, general and administrative expenses, for these shares of restricted common stock and restricted stock units, of which $186 of compensation expense related to retiree eligibility.





The remaining stock-based compensation expense for restricted stock awards and units is approximately $839 at June 30, 2009 and the related weighted average period over which it is expected that such unrecognized compensation cost will be recognized is approximately 2.4 years.




54




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




A summary of restricted stock awards including restricted stock units as of June 30, 2009, is presented below:





Shares


Weighted
average grant
date fair valueNon-vested at beginning of year


105


$
8.05Granted


164



8.59Vested


(35
)


8.05Forfeited


(2
)


8.05Non-vested at June 30, 2009


232


$
8.43





(10)  Interest and Other Income


Interest and other income during fiscal 2009, 2008 and 2007 was comprised of the following:





2009


2008


2007Dividends

$
27


$
58


$
64Interest


919



1,124



1,045Net (loss) gain on investments


(214
)


( 8
)


174Foreign government subsidies received


7



37



152Minority interest


(27
)


(125
)


(70
)Foreign currency gains (losses)


142



(42
)


(770
)Miscellaneous


83



(87
)


(63
)$
937


$
957


$
532





(11) Income Taxes





The components of income from continuing operations before the provision for income taxes are as follows:





2009


2008


2007Domestic operations

$
622


$
3,882


$
2,988Foreign operations


12,110



18,307



12,435$
12,732


$
22,189


$
15,423





The components of the provision for income taxes are as follows:





2009


2008


2007Federal:Current

$
751


$
1,167


$
788Deferred


(727
)


128



208State and local:Current


122



201



270Deferred


97



19



6Foreign:Current


3,039



5,216



2,461Deferred


821



1,985



1,478$
4,103


$
8,716


$
5,211




Income taxes payable, which is included in accrued expenses, was $1,789 and $5,248 at June 30, 2009 and 2008, respectively.





55




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at June 30, 2009 and 2008 are presented below:




2009


2008Deferred tax assets:Accrued environmental remediation liabilities not currently deductible

$
457


$
482Accrued deferred compensation


2,228



1,984Additional inventoried costs for tax purposes


194



204Allowance for doubtful accounts receivable


266



143Depreciation and amortization


37



15Foreign tax credit carryforward


-



478Domestic net operating loss carryforwards


220



245Foreign net operating loss carryforwards


2,470



4,924Total gross deferred tax assets


5,872



8,475Valuation allowances


(1,011
)


(1,534
)4,861



6,941Deferred tax liabilities:Foreign deferred tax liabilities


(1,561
)


(2,821
)Domestic deferred tax liabilities


(2
)


-Unrealized gain on investments


(89
)


(250
)Goodwill


(182
)


(168
)Installment gain on sale of assets


(398
)


(608
)Other


(247
)


(61
)Total gross deferred tax liabilities


(2,479
)


(3,908
)Net deferred tax assets

$
2,382


$
3,033





The following table shows the current and non current deferred tax assets (liabilities) at June 30, 2009 and 2008:





2009


2008Current deferred tax assets, net

$
1,579


$
1,756Non-current deferred tax assets, net


2,366



4,098Current deferred tax liabilities


(1,072
)


(1,070
)Non current deferred tax liabilities


(491
)


(1,751
)Net deferred tax assets

$
2,382


$
3,033




The net change in the total valuation allowance for the year ended June 30, 2009 was a decrease of $523, which was primarily due to the utilization of a foreign tax credit carryover in fiscal 2009. The net change in the total valuation allowance for the year ended June 30, 2008 was a decrease of $968, which was primarily due to the disallowance
of a tax deduction in Aceto France that had been fully reserved at June 30, 2007. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.  The Company has established valuation allowances primarily for net operating loss carryforwards in certain foreign countries.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets are not expected to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which net operating loss carryforwards are utilizable and temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the net deferred tax assets recognized
at June 30, 2009, the Company will need to generate future taxable income of approximately $5,400.




56




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


Based upon the level of historical taxable income and projections for taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences.  There can be no assurance, however, that the Company will generate
any earnings or any specific level of continuing earnings in the future.  The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.





Deferred taxes have not been provided on undistributed earnings of foreign subsidiaries amounting to approximately $80,200 at June 30, 2009 since substantially all of these earnings are expected to be permanently reinvested in foreign operations.  A deferred tax liability will be recognized when the Company expects that it will recover
these undistributed earnings in a taxable manner, such as through the receipt of dividends or sale of the investments.  In June 2009, the Company repatriated $6,000 of earnings from certain foreign subsidiaries resulting in a tax charge of approximately $159. At this time, the Company does not expect any further repatriation of earnings from its foreign subsidiaries. Determination of the amount of unrecognized deferred U.S. income tax liabilities is not practical to calculate because of the complexity
of this hypothetical calculation.  In addition, unrecognized foreign tax credit carryforwards would be available to reduce a portion of such U.S. tax liability.





We operate in various tax jurisdictions, and although we believe that we have provided for income and other taxes in accordance with the relevant regulations, if the applicable regulations were ultimately interpreted differently by a taxing authority, we may be exposed to additional tax liabilities.





A reconciliation of the statutory federal income tax rate and the effective tax rate for continuing operations for the fiscal years ended June 30, 2009, 2008 and 2007 follows:




2009


2008


2007Federal statutory tax rate


34.0
%


34.0
%


34.0
%State and local taxes, net of federal income tax benefit


0.8



0.6



1.1Increase in valuation allowance


0.0



0.0



0.4Foreign tax rate differential


(2.8
)


(2.2
)


(2.1
)Change in foreign tax rate effect


-



6.4



-Other


0.2



0.5



0.4Effective tax rate


32.2
%


39.3
%


33.8
%





At June 30, 2009, the Company had foreign net operating loss carryforwards of approximately $5,500 which are available to offset future foreign taxable income and which have no expiration date.





In June 2006, the FASB issued FASB Interpretation (FIN) No. 48 “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109”. FIN No. 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on
a tax return. FIN No.  48 was effective for fiscal years beginning after December 15, 2006. The Company adopted FIN No. 48 on July 1, 2007 and determined that the adoption of FIN No. 48 did not have a material impact on its consolidated financial statements. In addition, there are no material unrecognized tax benefits included in the consolidated balance sheet that would, if recognized, have a material effect on the Company’s effective tax rate. The Company is continuing its practice of recognizing
interest and penalties related to income tax matters in income tax expense. The total accrual for interest and penalties related to uncertain tax positions was approximately $20 and $122 as of June 30, 2009 and June 30, 2008, respectively. The Company did not recognize interest and penalties during the year ended June 30, 2009. The Company recognized interest and penalties of $53 related to income taxes during the year ended June 30, 2008. The Company files U.S. federal, U.S. state, and foreign
tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2006 (in the case of certain foreign tax returns, fiscal year 2004).





57





ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(12)  Supplemental Cash Flow Information





Cash paid for interest and income taxes during fiscal 2009, 2008 and 2007 was as follows:





2009


2008


2007Interest

$
108


$
115


$
167Income taxes, net of refunds

$
6,505


$
3,127


$
3,822




The Company had non-cash items excluded from the Consolidated Statements of Cash Flows during the years ended June 30, 2009 , 2008, and 2007 of $3,226, $1,710 and $737, respectively, related to capitalized environmental remediation costs and property held for sale and $5,300 during the year ended June 30, 2009 related to the purchase of intangible
assets.





(13) Retirement Plans





Defined Contribution Plans





The Company has defined contribution retirement plans in which certain employees are eligible to participate, including deferred compensation plans (see below). The Company's annual contribution per employee, which is at management's discretion, is based on a percentage of the employee’s compensation. The Company's provision for these
defined contribution plans amounted to $1,284, $1,237 and $1,209 in fiscal 2009, 2008 and 2007, respectively.





Defined Benefit Plans





The Company sponsors certain defined benefit pension plans covering certain employees of its German subsidiaries who meet the plan’s eligibility requirements.  In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS No. 158).  SFAS
No. 158 requires that employers recognize on a prospective basis the funded status of their defined benefit pension and other postretirement plans on their consolidated balance sheet and recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost.





The accrued pension liability as of June 30, 2009 was $747.  The accrued pension liability recorded as of June 30, 2008 amounted to $933.  Net periodic pension costs, which consists principally of interest cost and service cost was $74 in fiscal 2009, $80 in fiscal 2008 and $73 in fiscal 2007.  The Company’s
plans are funded in conformity with the funding requirements of the applicable government regulations.  An assumed weighted average discount rate of 6.5%, 6.0% and 5.1% and a compensation increase rate of 0.7%, 4.0% and 3.2% were used in determining the actuarial present value of benefit obligations as of June 30, 2009, 2008 and 2007, respectively.





Deferred Compensation Plans





To comply with the requirements of the American Jobs Creation Act of 2004, as of December 2004, the Company froze its non-qualified Supplemental Executive Retirement Plan (the Frozen Plan) and has not allowed any further deferrals or contributions to the Frozen Plan after December 31, 2004.  All of the earned benefits of the participants
in the Frozen Plan as of December 31, 2004, will be preserved under the existing plan provisions.





On March 14, 2005, the Company’s Board of Directors adopted the Aceto Corporation Supplemental Executive Deferred Compensation Plan (the Plan).  The Plan is a non-qualified deferred compensation plan intended to provide certain qualified executives with supplemental benefits beyond the Company’s 401(k) plan, as well as
to permit additional deferrals of a portion of their compensation.  The Plan is intended to comply with the provisions of section 409A of the Internal Revenue Code of 1986, as amended, and is designed to provide comparable benefits to those under the Frozen Plan.  Substantially all compensation deferred under the Plan, as well as Company contributions, is held by the Company in a grantor trust, which is considered an asset of the Company.  The assets held by the grantor trust are
in life insurance policies.




58




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)




As of June 30, 2009 and 2008, the Company recorded a liability under the Plans of $4,323 and $3,909 respectively, (included in long-term liabilities) and an asset (included in other assets) of $3,996 and $3,284, respectively, primarily representing the cash surrender value of policies owned by the Company.





(14) Financial Instruments





Derivative Financial Instruments





The Company is exposed to credit losses in the event of non-performance by the financial institutions, who are the counter parties, on its future foreign currency contracts.  The Company anticipates, however, that the financial institutions will be able to fully satisfy their obligations under the contracts.  The Company
does not obtain collateral to support financial instruments, but monitors the credit standing of the financial institutions.





Off-Balance Sheet Risk





Commercial letters of credit are issued by the Company during the ordinary course of business through major banks as requested by certain suppliers.  The Company had open letters of credit of approximately $185 and $663 as of June 30, 2009 and 2008, respectively.  The terms of these letters of credit are all less than one
year.  No material loss is anticipated due to non-performance by the counter parties to these agreements.





Fair Value of Financial Instruments





The carrying values of all financial instruments classified as a current asset or current liability are deemed to approximate fair value because of the short maturity of these instruments.  The difference between the fair value of long-term notes receivable and their carrying value at both June 30, 2009 and 2008 was not material.  The
fair value of the Company’s notes receivable was based upon current rates offered for similar financial instruments to the Company.





Business and Credit Concentration





Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables. The Company’s customers are dispersed across many industries and are located throughout the United States as well as in Mexico, Brazil, Malaysia, France, Canada, Germany, Vietnam, Greece, Australia,
the United Kingdom, the Netherlands and other countries. The Company estimates an allowance for doubtful accounts based upon the credit worthiness of its customers as well as general economic conditions. Consequently, an adverse change in those factors could affect the Company’s estimate of this allowance. The Company as a policy does not require collateral from its customers.  At June 30, 2009 and 2008, no single customer accounted for as much as 10% of net trade accounts receivable.





No single product or customer accounted for as much as 10% of net sales in fiscal 2009, 2008 or 2007.




During the fiscal years ended June 30, 2009, 2008 and 2007, approximately 70%, 67% and 65%, respectively, of the Company’s purchases came from Asia and approximately 17%, 19% and 21%, respectively, came from Europe.





The Company maintains operations located outside of the United States.  Net assets located in Europe and Asia approximated $67,481 and $37,074, respectively at June 30, 2009.  Net assets located in Europe and Asia approximated $45,919 and $34,307, respectively at June 30, 2008.




(15) Commitments and Contingencies





As of June 30, 2009, the Company has outstanding purchase obligations totaling $48,807 with suppliers to the Company’s domestic and foreign operations to acquire certain products for resale to third party customers.





The Company and its subsidiaries are subject to various claims which have arisen in the normal course of business. The impact of the final resolution of these matters on the Company’s results of operations in a particular reporting period is not known. Management is of the opinion, however, that the ultimate outcome of such matters will
not have a material adverse effect upon the Company's financial condition or liquidity.




59




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


In fiscal years 2009, 2008 and 2007, the Company received letters from the Pulvair Site Group, a group of potentially responsible parties (PRP Group) who are working with the State of Tennessee (the State) to remediate a contaminated property in Tennessee called the Pulvair site. The PRP Group has alleged that Aceto shipped hazardous substances
to the site which were released into the environment.   The State had begun administrative proceedings against the members of the PRP Group and Aceto with respect to the cleanup of the Pulvair site and the group has begun to undertake cleanup. The PRP Group is seeking a settlement of approximately $1,700 from the Company for its share to remediate the site contamination. Although the Company acknowledges that it shipped materials to the site for formulation over twenty years ago, the Company believes
that the evidence does not show that the hazardous materials sent by Aceto to the site have significantly contributed to the contamination of the environment and thus believes that, at most, it is a de minimus contributor to the site contamination.  Accordingly, the Company believes that the settlement offer is unreasonable. The impact of the resolution of this matter on the Company's results of operations in a particular reporting period is not known.  However, management believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's financial condition or liquidity.


The Company has environmental remediation obligations in connection with Arsynco, Inc. (Arsynco), a subsidiary formerly involved in manufacturing chemicals located in Carlstadt, New Jersey, which was closed in 1993 and is currently held for sale.  During fiscal 2009, based on continued monitoring of the contamination at the site
and the approved plan of remediation, the Company received an estimate from an environmental consultant stating that the costs of remediation could be between $8,400 and $10,200.  As of June 30, 2009 and 2008, a liability of $8,400 and $7,846, respectively, is included in the accompanying consolidated balance sheet for this matter.  In accordance with EITF Issue 90-8, “Capitalization of Costs to Treat Environmental Contamination”, management believes that the majority of costs
incurred to remediate the site will be capitalized in preparing the property which is currently classified as held for sale.  An appraisal of the fair value of the property by a third-party appraiser supports the assumption that the expected fair value after the remediation is in excess of the amount required to be capitalized. However, these matters, if resolved in a manner different from those assumed in current estimates, could have a material adverse effect on the Company’s financial condition,
operating results and cash flows when resolved in a future reporting period.





In connection with the environmental remediation obligation for Arsynco, in July 2009, the Company entered into a settlement agreement with BASF Corporation (BASF), the former owners of the Arsynco property. According to the settlement agreement, BASF will pay for a portion of the prior remediation costs and going forward, will co-remediate
the property with the Company. The contract states that BASF, within twenty days of establishing a Trust Account, will pay the Company $550 related to past response costs and pay a proportionate share of the future remediation costs. Accordingly, the Company has recorded a gain of $550, which is included in selling, general and administrative expenses in the accompanying consolidated statement of income for the year ended June 30, 2009. This $550 gain relates to the partial reimbursement of costs of approximately
$1,200 that the Company had previously expensed. The Company also recorded an additional receivable from BASF, with an offset against property held for sale, for $3,780, representing its estimated portion of the future remediation costs, which is included in the accompanying consolidated balance sheet as of June 30, 2009.





In March 2006, Arsynco received notice from the EPA of its status as a PRP under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) for a site described as the Berry’s Creek Study Area.   Arsynco is one of over 150 PRPs which have potential liability for the required investigation and remediation
of the site.  The estimate of the potential liability is not quantifiable for a number of reasons, including the difficulty in determining the extent of contamination and the length of time remediation may require.  In addition, any estimate of liability must also consider the number of other PRPs and their financial strength.  Based on prior practice in similar situations, it is possible that the State may assert a claim for natural resource damages with respect to the Arsynco site
itself, and either the federal government or the State (or both) may assert claims against Arsynco for natural resource damages in connection with Berry's Creek; any such claim with respect to Berry's Creek could also be asserted against the approximately 150 PRPs which the EPA has identified in connection with that site.  Any claim for natural resource damages with respect to the Arsynco site itself may also be asserted against BASF, the former owners of the Arsynco property. Since an amount of the
liability cannot be reasonably estimated at this time, no accrual is recorded for these potential future costs.  The impact of the resolution of this matter on the Company’s results of operations in a particular reporting period is not known.  However, management believes that the ultimate outcome of this matter will not have a material adverse effect on the Company’s financial condition or liquidity.


60




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


A subsidiary of the Company markets certain agricultural chemicals which are subject to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).  FIFRA requires that test data be provided to the EPA to register, obtain and maintain approved labels for pesticide products. The EPA requires that follow-on registrants of these
products compensate the initial registrant for the cost of producing the necessary test data on a basis prescribed in the FIFRA regulations. Follow-on registrants do not themselves generate or contract for the data. However, when FIFRA requirements mandate that new test data be generated to enable all registrants to continue marketing a pesticide product, often both the initial and follow-on registrants establish a task force to jointly undertake the testing effort. The Company is presently a member of several
such task force groups, which requires payments for such memberships. In addition, in connection with our crop protection business, the Company plans to acquire product registrations and related data filed with the United States Environmental Protection Agency to support such registrations and other supporting data for three products. The acquisition of these product registrations and related data filed with the United States Environmental Protection Agency as well as payments to various task force groups could
approximate $6,300 over the next fiscal year, of which $3,888 has been accrued as of June 30, 2009.





The Company leases office facilities in the United States, the Netherlands, Germany, France, China and Singapore expiring at various dates between September 2009 and October 2014.  In addition, a domestic subsidiary leases a manufacturing facility under an operating lease expiring December 2009.





At June 30, 2009, the future minimum lease payments for office facilities and equipment for each of the five succeeding years and in the aggregate are as follows:





Fiscal year

Amount2010

$
1,7202011


1,4442012


3962013


1582014


140Thereafter


172$
4,030





Total rental expense amounted to $1,805, $1,868 and $1,672 for fiscal 2009, 2008 and 2007, respectively.





(16) Related Party Transactions





Certain directors of the Company are affiliated with law firms that serve as legal counsel to the Company on various corporate matters.  During fiscal 2009, 2008 and 2007, the Company incurred legal fees of $350, $342 and $329, respectively, for services rendered to the Company by those law firms.  The Company believes
that the fees charged by those firms were at rates comparable to rates obtainable from other firms for similar services.





In November 2003, the Company formed a joint venture with Nufarm Americas, Inc. (Nufarm), a subsidiary of Australia-based Nufarm Limited.  Each company owns 50% of the joint venture, named S.R.F.A., LLC. In June 2004, Nufarm and the Company each loaned $1,000 to S.R.F.A., with those loans being evidenced by demand notes that bear
interest at 3.0% per annum.  During fiscal 2005, S.R.F.A. repaid $500 of principal to each of Nufarm and the Company.  During fiscal 2009, S.R.F.A. repaid the remaining $500 of principal to each of Nufarm and the Company.  In July 2009, the Company purchased the remaining 50% of S.R.F.A for $250 and thus owns 100% of this entity in the first quarter of fiscal 2010.




61





ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(17) Other Recent Accounting Pronouncements





Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF No. 06-11) became effective in the first quarter of fiscal 2009.  EITF No. 06-11 requires that the tax benefit received on dividends associated with share-based awards that are charged
to retained earnings should be recorded in additional paid-in-capital (APIC) and included in the APIC pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards.  The adoption of EITF No. 06-11 did not have a material impact on the Company’s consolidated financial statements.





In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51” (SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in
a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.
Early adoption is prohibited. The Company must adopt these new requirements in its first quarter of fiscal 2010.  The adoption of this statement will impact the manner in which the Company presents noncontrolling interests, but will not impact its consolidated financial position or results of operations.





In December 2007, the FASB approved the issuance of SFAS No. 141 (revised 2007) “Business Combinations” (SFAS No. 141R). SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed,
and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The provisions for SFAS No. 141R are effective for fiscal years beginning after December 15, 2008 and are applied prospectively to business combinations completed on or after that date.  Early
adoption is not permitted. SFAS No. 141R is effective for the Company beginning in the first quarter of fiscal 2010, which will change our accounting treatment for business combinations on a prospective basis.





In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for certain items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). The Company is currently assessing the impact of SFAS No. 157 on its condensed consolidated financial statements for items within the scope of FSP 157-2, which will become effective beginning with our first quarter of fiscal 2010.





In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities— An Amendment of FASB Statement No. 133” (SFAS No. 161). SFAS No. 161 requires enhanced qualitative disclosures about objectives
and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 became effective in the third quarter of fiscal 2009. The adoption of SFAS No. 161 did not have a material impact on the Company’s consolidated financial statements.




In June 2008, the FASB issued Staff Position EITF No. 03-06-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-06-1). FSP EITF 03-06-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method in SFAS No. 128, “Earnings per Share”. The Company will adopt FSP EITF 03-06-1 effective July 1, 2009. The Company is currently assessing the impact of FSP EITF 03-06-1 on its consolidated financial statements.





In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board (APB) 28-1 “Interim Disclosures about Fair Value of Financial Instruments,” which requires disclosures about fair value of financial instruments for interim reporting periods and amends APB Opinion No. 28 “Interim Financial Reporting” to
require those disclosures in summarized financial information at interim reporting periods. The FSP is effective for interim reporting periods ending after June 15, 2009. The FSP does not require disclosures for earlier periods presented for comparative purposes at initial adoption. As this FSP provides only disclosure requirements, the adoption of this standard will not have a material impact on the Company’s financial condition or operating results.




62




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (SFAS No. 165).  SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company adopted SFAS No. 165 during the fourth quarter of 2009. In
accordance with SFAS No. 165, the Company has evaluated subsequent events through the date and time the financial statements were issued on September 11, 2009.





In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (SFAS No. 168), and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. SFAS No. 168 will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (SEC), which are sources of authoritative GAAP, for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS No. 168 will become effective in the first quarter of 2010 and as SFAS No. 168 was not intended to change or alter existing GAAP, it will not
have any impact on the Company’s consolidated financial statements.


(18) Segment Information




The Company's business is organized along product lines into three principal segments: Health Sciences, Chemicals & Colorants and Crop Protection.




Health Sciences - includes the active ingredients for generic pharmaceuticals, vitamins, and nutritional supplements, as well as products used in preparing pharmaceuticals, primarily by major innovative drug companies, and biopharmaceuticals.




Chemicals & Colorants - includes a variety of specialty chemicals used in plastics, resins, adhesives, coatings, food, flavor additives, fragrances, cosmetics, metal finishing, electronics, air-conditioning systems and many other areas. Dye and pigment intermediates are used in the
color-producing industries such as textiles, inks, paper, and coatings. Organic intermediates are used in the production of agrochemicals.




Crop Protection - includes herbicides, fungicides and insecticides that control weed growth as well as control the spread of insects and other microorganisms that can severely damage plant growth. The Crop Protection segment also includes a sprout inhibitor for potatoes and an herbicide
for sugar cane. The Company changed the name of this segment from Agrochemicals to Crop Protection in 2007 to more accurately portray the markets in which it does business.




63




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


The Company's chief operating decision maker evaluates performance of the segments based on net sales and gross profit. The Company does not allocate assets by segment because the chief operating decision maker does not review the assets by segment to assess the segments' performance, as the assets are managed on an entity-wide basis.





Health
Sciences


Chemicals &
Colorants


Crop
Protection


Consolidated
Totals2009Net sales

$
187,569


$
116,906


$
18,171


$
322,646Net gross profit


33,619



17,631



4,370



55,6202008Net sales

$
211,481


$
129,662


$
18,448


$
359,591Net gross profit


44,612



18,782



3,911



67,3052007Net sales

$
170,691


$
123,299


$
19,483


$
313,473Net gross profit


33,007



16,556



4,930



54,493





Net sales and gross profit by source country for the years ended June 30, 2009, 2008 and 2007 were as follows:





Net Sales


Gross Profit2009


2008


2007


2009


2008


2007United States

$
185,223


$
207,839


$
184,391


$
29,769


$
33,785


$
29,779Germany


62,934



72,077



68,484



17,493



24,296



17,371Netherlands


16,362



12,215



8,579



1,980



1,826



1,594France


25,398



26,286



16,812



2,546



2,919



1,973Asia-Pacific


32,729



41,174



35,207



3,832



4,479



3,776Total

$
322,646


$
359,591


$
313,473


$
55,620


$
67,305


$
54,493





Sales generated from the United States to foreign countries amounted to $30,237, $44,844 and $35,540 for the fiscal years ended June 30, 2009, 2008 and 2007, respectively.





Long-lived assets by geographic region as of June 30, 2009 and June 30, 2008 were as follows were as follows:





Long-lived assets2009


2008United States

$
11,445


$
4,729Europe


3,120



3,734Asia-Pacific


3,063



3,252Total

$
17,628


$
11,715




64




ACETO CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED JUNE 30, 2009, 2008 AND 2007
 (in thousands, except per-share amounts)


(19)  Unaudited Quarterly Financial Data





The following is a summary of the unaudited quarterly results of operations for the years ended June 30, 2009 and 2008.





For the quarter endedFiscal year ended June 30, 2009

September 30,
2008


December 31,
2008


March 31,
2009


June 30,
2009 (1)Net sales

$
93,839


$
74,215


$
79,800


$
74,792Gross profit


18,937



11,745



13,255



11,683Net income


4,551



1,092



1,935



1,051Net income per diluted share

$
0.18


$
0.04


$
0.08


$
0.04For the quarter endedFiscal year ended June 30, 2008

September 30,
2007


December 31,
2007


March 31,
2008


June 30,
2008Net sales

$
79,528


$
77,105


$
98,255


$
104,703Gross profit


14,563



12,479



16,043



24,220Net income


1,294



908



3,294



7,977Net income per diluted share

$
0.05


$
0.04


$
0.13


$
0.32





The net income per common share calculation for each of the quarters is based on the weighted average number of shares outstanding in each period.  Therefore, the sum of the quarters in a year does not necessarily equal the year’s net income per common share.





(1) Includes gain related to partial reimbursement of past response costs. See Note 7, "Environmental Remediation".





65


Schedule II





ACETO CORPORATION AND SUBSIDIARIES





Valuation and Qualifying Accounts





For the years ended June 30, 2009, 2008 and 2007
(dollars in thousands)Description

Balance at
beginning of
year


Charged to
costs and
expenses


Charged to
other
accounts


Deductions


Balance at
end of yearYear ended June 30, 2009Allowance for doubtful accounts

$
477


$
528


-


$
29
(a)

$
976Year ended June 30, 2008Allowance for doubtful accounts

$
491


$
98


-


$
112
(a)

$
477Year ended June 30, 2007Allowance for doubtful accounts

$
416


$
132


-


$
57
(a)

$
491





(a)  Specific accounts written off as uncollectible.





66




SIGNATURES








Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





ACETO CORPORATIONBy
/s/Leonard S. SchwartzLeonard S. SchwartzChairman and Chief Executive OfficerDate:   September 11, 2009





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.





Signatures

Title

Date/s/Leonard S. Schwartz

Chairman and

09-11-09Leonard S. Schwartz

Chief Executive Officer(Principal Executive Officer)/s/Douglas Roth

Secretary/Treasurer and

09-11-09Douglas Roth

Chief Financial Officer(Principal Financial andAccounting Officer)/s/Stanley Fischer

Director

09-11-09Stanley Fischer/s/Robert Wiesen

Director

09-11-09Robert Wiesen/s/Albert L. Eilender

Director

09-11-09Albert L. Eilender/s/Hans C. Noetzli

Director

09-11-09Hans C. Noetzli/s/William Britton

Director

09-11-09William Britton/s/ Richard P. Randall

Director

09-11-09Richard P. Randall





67





EXHIBIT INDEX





Exhibit Number
Description3.1

Restated Certificate of Incorporation (incorporated by reference to Exhibit 4(a)(iii) to RegistrationStatement No. 2-70623 on Form S-8 (S-8 2-70623)).3.2

Certificate of Amendment dated November 21, 1985 to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3(ii) to the Company's annual report on Form 10-K for the fiscal year ended June 30, 1986).3.3

Amended and restated by-laws of Aceto Corporation, effective as of February 2, 2005 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K dated February 2, 2005).3.4

Amended and restated by-laws of Aceto Corporation, effective as of December 6, 2007 (incorporated by reference to Exhibit 3.1 to the Company’s current report on Form 8-K dated December 6, 2007).10.1

Aceto Corporation 401(k) Retirement Plan, effective August 1, 1997, as amended and restated as of July 1, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2004).10.2

Supplemental Executive Retirement Plan, as amended and restated, effective June 30, 2004 and frozen as of December 31, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s annual report on Form   10-K for the fiscal year ended June 30, 2004).10.3

Aceto Corporation Stock Option Plan (as Amended and Restated effective as of September 19, 1990) (and as further Amended effective June 9, 1992) (incorporated by reference to Exhibit 10(v)(b) to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1992).10.4

1998 Aceto Corporation Omnibus Equity Award Plan (incorporated by reference to Exhibit 10(v) to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 1999).10.5

Aceto Corporation 2002 Stock Option Plan (incorporated by reference to Exhibit 4(i) to Registration Statement No. 333-110653 on Form S-8).10.6

Lease between Aceto Corporation and M. Parisi & Son Construction Co., Inc. for office space at One Hollow Lane, Lake Success, NY dated April 28, 2000 (incorporated by reference to Exhibit 10(vi) to the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2000).10.7

Lease between Aceto Corporation and M. Parisi & Son Construction Co., Inc. for office space at One Hollow Lane, Lake Success, NY dated April 28, 2000 (incorporated by reference to Exhibit 10(vi)(b) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.8

Lease between CDC Products Corp. and Seaboard Estates for manufacturing and office space at 1801 Falmouth Avenue, New Hyde Park, NY dated October 31, 1999 (incorporated by reference to Exhibit 10(vi)(c) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.9

Stock Purchase Agreement among Windham Family Limited Partnership, Peter H. Kliegman, CDC Products Corp. and Aceto Corporation (incorporated by reference to Exhibit 10(vii) to the Company’s annual report on Form 10-K for the year ended June 30, 1999).10.10

Asset Purchase Agreement among Magnum Research Corporation, CDC Products Corp., Roy Gross and Aceto Corporation (incorporated by reference to Exhibit 10 (viii) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).10.11

Asset Purchase Agreement between Schweizerhall, Inc. and Aceto Corporation (incorporated by reference to Exhibit 10(ix) to the Company’s annual report on Form 10-K for the year ended June 30, 2000).  68
  10.12

Purchase and Sale Agreement among Schweizerhall Holding AG, Chemische Fabrik Schweizerhall, Schweizerhall, Inc., Aceto Corporation and Aceto Holding B.V., I.O. (incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K dated April 4, 2001).10.13

Loan Guarantee between Aceto Corporation and subsidiaries and Deutsche Bank AG dated March 22, 2001 (incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K for the year ended June 30, 2001).10.14

Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated May 10, 2002 (incorporated by reference to Exhibit 10.13 to the Company’s annual report on Form 10-K for the year ended June 30, 2002).10.15

Amendment and Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated June 29, 2004 (incorporated by reference to Exhibit 10.15 to the Company’s annual report on Form 10-K for the year ended June 30, 2004).10.16

Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated August 31, 2004 (incorporated by reference to Exhibit 10.16 to the Company’s annual report on Form 10-K for the year ended June 30, 2004).10.17

Share Purchase Agreement dated as of December 12, 2003 between Aceto Holding GmbH and Corange Deutschland Holding GmbH (incorporated by reference to Exhibit 2.1 to the Company’s current report on Form 8-K dated December 31, 2003).10.18

Aceto Corporation Supplemental Executive Deferred Compensation Plan, effective March 14, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K dated March 14, 2005).10.19

Form of purchase agreement between Shanghai Zhongjin Real Estate Development Company Limited and Aceto (Hong Kong) Limited dated November 10, 2004 (incorporated by reference to Exhibit 10.1 to the Company’s quarterly report on Form 10-Q for the quarter ended December 31, 2004).10.20

Amendment and Waiver to Credit Agreement between Aceto Corporation and subsidiaries and JPMorgan Chase Bank dated June 26, 2007.10.21

Aceto Corporation 2007 Long-Term Performance Incentive Plan (incorporated by reference to Exhibit 4(i) to Registration Statement No. 333-149586 on Form S-8).10.22*

Aceto Corporation Supplemental Executive Deferred Compensation Plan, Amended and Restated, effective December  8,  2008.10.23

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Leonard S. Schwartz (incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K dated March 27, 2009).10.24

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Douglas Roth (incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K dated March 27, 2009).10.25

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Vincent Miata (incorporated by reference to Exhibit 10.3 to the Company’s current report on Form 8-K dated March 27, 2009).10.26

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Frank DeBenedittis (incorporated by reference to Exhibit 10.4 to the Company’s current report on Form 8-K dated March 27, 2009).  69
  10.27

Employment Agreement, effective March 24, 2009, between Aceto Corporation and Michael Feinman (incorporated by reference to Exhibit 10.5 to the Company’s current report on Form 8-K dated March 27, 2009).21.1*

Subsidiaries of the Company.23.1*

Consent of BDO Seidman, LLP.31.1*

Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*

Certification pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





*Filed herewith




70