Full Press Release Details
Health Corporation Reports First Quarter Results
TEANECK, N.J., November 4, 2020 (Business
Wire) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its first quarter ended
Highlights for the September 30, 2020
quarter (compared to the September 2019 quarter)
results for the September 2020 quarter reflected the continuing recovery of the industry sectors we serve," said Jack Bendheim,
Phibro's Chairman, President and Chief Executive Officer. "We saw improved sales and profitability, compared with
the same quarter last year, and in particular, sequential improvement over the June 2020 quarterly results. As more fully described
in our earnings guidance, we are forecasting additional sequential improvement for our December 2020 quarter, as the industry
continues to adjust and move toward more typical operating levels. At the same time, we remain cautious in the face of ongoing
uncertainties resulting from the pandemic."
trends in sales and profitability for our core Animal Health segment. Customer demand continues to increase for our expanded offerings
in nutritional specialty products and vaccines. We see these categories as the future growth drivers of our business. At the same
time, we continue to invest in strategic initiatives to set the foundation for the future."
million for the three months ended September 30, 2020, increased $5.5 million, or 3%, as compared to the three months ended September
30, 2019. Animal Health and Performance Products increased $6.5 million and $0.2 million, respectively, while Mineral Nutrition
declined $1.2 million.
million for the three months ended September 30, 2020, increased $6.5 million, or 5%. Net sales of MFAs and other increased $3.7
million, or 5%, driven by increased international demand, primarily for poultry products, coupled with favorable timing of certain
customer orders. Net sales of nutritional specialty products grew $2.2 million, or 7%, due to international growth in dairy products,
while domestic sales were comparable to the prior year. Net sales of vaccines increased $0.7 million, or 4%, driven by increased
international demand for our poultry vaccines.
Net sales of $51.4 million for
the three months ended September 30, 2020, decreased $1.2 million, or 2%, as volume growth was offset by lower average selling
prices. The decline in average selling prices is correlated with the movement of the underlying raw material costs.
Performance Products
Net sales of $15.4 million for
the three months ended September 30, 2020, increased $0.2 million, or 1%. Increased sales of personal care product ingredients
were partially offset by lower sales of copper-based products.
Gross profit of $64.1 million for
the three months ended September 30, 2020, increased $6.5 million, or 11%, as compared to the three months ended September 30,
2019. Gross profit increased to 32.8% of net sales for the three months ended September 30, 2020, as compared to 30.4% for the
three months ended September 30, 2019. The three months ended September 30, 2019, included $0.3 million of acquisition-related
Animal Health gross profit increased $5.5
million due to sales growth, favorable product mix and favorable production costs, primarily related to foreign currency movements.
Mineral Nutrition gross profit decreased $0.5 million, driven primarily by unfavorable production costs. Performance Products
gross profit increased $1.1 million driven by favorable product mix and production costs.
Selling, general and administrative
Selling, general and administrative expenses
("SG&A") of $48.4 million for the three months ended September 30, 2020, increased $0.9 million, or 2%, as compared
to the three months ended September 30, 2019. SG&A for the three months ended September 30, 2019, included $0.4 million of
restructuring costs and $0.5 million of acquisition-related transaction costs. Excluding the effects of these costs, SG&A
increased $1.8 million, or 4%.
Animal Health SG&A increased $0.6
million, primarily due to increased professional fees to support the continued use of carbadox and costs associated with new products,
partially offset by the favorable effect of foreign currency movements and timing of marketing spending. Mineral Nutrition and
Performance Products SG&A were comparable to the prior year. Corporate SG&A increased $1.1 million due to increased costs
for strategic initiatives.
Interest expense, net
Interest expense, net of $2.8 million
for the three months ended September 30, 2020, decreased $0.5 million, or 16%, as compared to the three months ended September
30, 2019. Interest expense decreased due to favorable variable interest rates, partially offset by higher levels of debt outstanding.
Interest income from short-term investments was comparable to the prior year.
Foreign currency (gains) losses, net
currency (gains) losses, net for the three months ended September 30, 2020, amounted to net gains of $3.6 million, as compared
to $3.2 million in net losses for the three months ended September 30, 2019. Foreign currency gains primarily arose from intercompany
Provision for income taxes
The provision for income taxes was $4.2
million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively. The effective income tax rate was
25.5% and 29.6% for the three months ended September 30, 2020 and 2019, respectively. The provision for income taxes during the
three months ended September 30, 2020, included a $0.6 million benefit related to final regulations issued in July 2020 for the
Global Intangible Low-Taxed Income ("GILTI") tax for the year ended June 30, 2020, and a $0.6 million benefit for
the reversal of an uncertain tax position. The effective income tax rate, without these benefits, would have been 32.5% for the
three months ended September 30, 2020.
Net income of $12.3 million for the three
months ended September 30, 2020, increased $9.8 million, as compared to net income of $2.5 million for the three months ended
September 30, 2019. The increase was primarily due to a $5.5 million increase in operating income, decreased interest expense
of $0.5 million and favorable foreign currency comparisons of $6.9 million, partially offset by increased income tax expense of
$3.2 million. The increase in operating income was driven by increased gross profit in the Animal Health and Performance Product
segments, partially offset by a decline in Mineral Nutrition gross profit and higher SG&A costs.
Adjusted EBITDA of $24.3 million for the
three months ended September 30, 2020, increased $4.6 million, or 24%, as compared to the three months ended September 30, 2019.
Animal Health Adjusted EBITDA increased $5.0 million on higher gross profit, partially offset by increased SG&A costs. Mineral
Nutrition Adjusted EBITDA decreased $0.4 million, driven by a decline in gross profit. Performance Products Adjusted EBITDA increased
$1.1 million driven by increased gross profit. Corporate expenses increased $1.1 million, primarily due to investments in strategic
Adjusted provision for income taxes
The adjusted effective income tax rates
for the three months ended September 30, 2020 and 2019, were 31.0% and 28.0%, respectively.
Adjusted diluted EPS
Adjusted diluted EPS was $0.27
for the quarter, an increase of $0.08, as compared to $0.19 in the prior year. Increased gross profit and favorable interest expense
was partially offset by increased SG&A costs and a higher provision for income taxes. The increased gross profit was primarily
driven by sales growth, favorable product mix and favorable production costs in the Animal Health segment.
BALANCE SHEET AND CASH FLOWS
We continue to forecast only near-term
expectations, given the uncertainty of the future course of the pandemic and the ongoing difficult conditions in the industry.
The animal production industry continues to recover from the effects of the pandemic. We believe industry conditions will continue
to normalize as we progress through our fiscal year and the industry gradually will return to typical operating levels.
Our expected financial results for the
three months ending December 31, 2020 are:
We are encouraged by the improving trends
in our business. Compared to our financial results for the September 2020 quarter, our expected December 2020 quarterly net sales,
adjusted EBITDA and adjusted diluted EPS are expected to increase by $10 million, $1.7 million and $0.01, respectively.
Compared to the same period last year,
our expected December 2020 quarterly results are lower as our business continues to gradually recover from the effects of the
pandemic. Net sales, net income and diluted EPS are expected to be below last year by $9 million, $3 million and $0.06, respectively.
Adjusted EBITDA and adjusted diluted EPS are expected to be below last year by $2.5 million and $0.06, respectively.
Our guidance assumes no meaningful amount
of foreign currency gains or losses in the December 2020 quarter. We report foreign currency gains or losses separately in our
income statement and exclude them from adjusted EBITDA.