Full Press Release Details
Phibro Animal Health Corporation Reports
TEANECK, N.J., November 9, 2016 (GLOBE
NEWSWIRE) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its first quarter
ended September 30, 2016.
Highlights for the September 2016 quarter
(compared to the September 2015 quarter)
Health segment delivered solid top and bottom line results this quarter," said Jack Bendheim, Phibro's Chairman, President
and Chief Executive Officer, "and in light of some of the headwinds we faced, our performance really is a testament to the
strength of our category as a whole and our business plan in particular. This quarter's performance came despite challenging
economics in Brazil, one of our largest markets, continued weakness in the worldwide dairy market and the ongoing consumer driven
transition away from certain antibacterials in the United States. Double digit sales growth in our nutritional specialty
products and vaccines resulted in 4% overall sales growth in Animal Health. Our other business segments also contributed
good profitability improvements. We view our fiscal year 2017 as a transition year, as we work with our customers as they respond
to changing consumer preferences in the production of protein. We remain active in looking for business development opportunities
to strengthen our product offerings and expand geographically."
Net sales of $188.0 million
for the three months ended September 30, 2016, increased $0.9 million, or less than 1%, as compared to the three months ended
September 30, 2015. Animal Health grew $4.4 million, while Mineral Nutrition and Performance Products declined $2.9 million
and $0.6 million, respectively.
million for the three months ended September 30, 2016, grew $4.4 million, or 4%. The growth was primarily due to volume increases
in the nutritional specialty and vaccine product groups within the segment. Nutritional specialty products grew $3.9 million, or
18%, primarily due to U.S. volume growth of our products for the dairy and poultry industries. Vaccines grew $2.5 million, or 21%,
principally from volume growth, including products acquired from MVP Laboratories, Inc. in January 2016. Medicated feed additives
("MFAs") and other declined $2.1 million, or 2%, primarily due to domestic volume declines resulting from adverse views
regarding medically important antibacterials, partially offset by domestic growth in other products. International net sales declined
slightly due to economic conditions in Brazil, partially offset by growth in other regions.
million decreased $2.9 million, or 5%, for the three months ended September 30, 2016. Stable volumes from demand for trace
mineral products were offset by lower average selling prices due to underlying raw material commodity price declines.
Performance Products
million decreased $0.6 million, or 5%, for the three months ended September 30, 2016, due to lower average selling prices
of personal care ingredients and lower volumes of copper-based products and chemical catalyst products. Higher average selling
prices of copper-based products partially offset the declines.
Gross profit of $61.0
million for the three months ended September 30, 2016, increased $1.8 million, or 3%, as compared to the three months ended
September 30, 2015. Gross profit increased to 32.4% of net sales for the three months ended September 30, 2016, as compared
to 31.6% for the three months ended September 30, 2015. Animal Health gross profit increased $0.5 million due to volume growth
in nutritional specialty and vaccine products, as well as lower unit costs from improved operating efficiencies. Current year Animal
Health gross profit was reduced by $0.3 million of increased acquisition-related intangible amortization and $0.7 million of increased
depreciation expense due to recent capital expenditures. Mineral Nutrition gross profit increased $0.7 million due to lower material
costs, partially offset by lower average selling prices. Performance Products gross profit increased $0.5 million due to higher
volumes of personal care ingredients and higher average selling prices of copper-based products, partially offset by lower average
selling prices of personal care ingredients.
Selling, general and administrative expenses
Selling, general and administrative
("SG&A") expenses of $39.2 million for the three months ended September 30, 2016, increased $1.8 million,
or 5%, as compared to the three months ended September 30, 2015.
During the three months
ended September 30, 2016, we incurred $1.3 million in acquisition-related transaction costs for professional fees and other items
in the evaluation and negotiation of an unsuccessful acquisition. Excluding these costs, SG&A used in calculating adjusted
EBITDA increased $0.6 million, or 2%.
Animal Health accounted
for $0.4 million of the increase, driven by increased sales force and development costs. Mineral Nutrition SG&A decreased $0.2
million due to one-time costs in the prior year. Corporate expenses accounted for $0.4 million of the increase due to increased
compensation and benefit costs.
Interest expense, net
Interest expense, net
of $3.9 million for the three months ended September 30, 2016, increased $0.1 million, or 2%, compared to the three
months ended September 30, 2015. Interest expense increased $0.7 million due to increased borrowings under our Revolver, compared
to the same three-month period last year, and increased acquisition-related accrued interest. Interest income increased $0.6 million
from interest on deposits in foreign jurisdictions.
Foreign currency (gains) losses, net
Foreign currency (gains)
losses, net for the three months ended September 30, 2016, amounted to net losses of $0.3 million, as compared to $5.5 million
in net gains for the three months ended September 30, 2015. Foreign currency losses in the three months ended September 30,
2016, were primarily due to the movement of Brazil and Israel currencies relative to the U.S. dollar. Foreign currency gains and
losses primarily arise from intercompany balances.
Provision for income taxes
The provision for income
taxes was $5.4 million and $4.7 million for the three months ending September 30, 2016, and September 30, 2015, respectively. The
effective income tax rates for these periods were 30.7% and 20.2%, respectively. The increase of 10.5% during the three months
ended September 30, 2016, was primarily due to the benefit of a valuation allowance during the three months ended September 30,
2015, which offset the majority of our domestic income tax provision. In addition, we recognized an income tax benefit related
to certain discrete items during the three months ended September 30, 2015. Excluding the benefits of the prior year valuation
allowance and discrete items, the effective income tax rate for the three months ended September 30, 2015, was approximately 33%.
Our effective tax rate
may be impacted due to the effects of various discrete items, the fluctuation in tax rates in foreign jurisdictions, as well as
the amount of income earned in our foreign subsidiaries, some of which may have significant net operating loss carryforwards. As
of September 30, 2016, we maintained a full valuation allowance against the deferred tax assets related to our foreign net operating
loss carryforwards. We review the realizability of our deferred tax assets and evaluate our valuation allowances on a quarterly
basis, or whenever events or changes in circumstances indicate that a review is required. We will continue to evaluate the necessity
of these foreign valuation allowances in future periods, and to the extent that a positive earnings trend continues, a significant
portion of these allowances may be released in future periods.
Net income of $12.2 million
for the three months ended September 30, 2016, decreased $6.6 million, compared to net income of $18.8 million for
the three months ended September 30, 2015. The decrease was a result of the factors described above, including a $5.8 million decline
in foreign currency (gains) losses, net and a $0.7 million increase in income tax expense.
Diluted EPS was $0.31
for the three months ended September 30, 2016, an decrease of $0.16, compared to $0.47 for the three months ended September 30,
2015, as a result of the decrease in net income.
Adjusted EBITDA of $29.8
million for the three months ended September 30, 2016, increased $2.1 million, or 8%, as compared to the three months ended
September 30, 2015. Animal Health Adjusted EBITDA increased $1.1 million, or 4%, due to sales growth and increased gross profit,
partially offset by increased SG&A expenses. Mineral Nutrition increased $0.8 million, or 26%, due to improved operating margins
from lower material costs, partially offset by lower average selling prices. Performance Products increased $0.7 million, due to
higher volumes and lower product costs, partially offset by lower average selling prices. Corporate expenses increased $0.5 million
due to increased compensation and benefit costs.
Adjusted diluted EPS
Adjusted diluted EPS was
$0.36 for the quarter, an increase of $0.02 compared to $0.34 last year. Sales growth and an improved gross profit ratio, partially
offset by SG&A growth and a higher effective income tax rate, were the primary contributors to the improvement.