Phibro Animal Health Corporation Reports Fourth Quarter and Fiscal Year Results, Presents Financial Guidance TEANECK, N.J.

Phibro Animal Health Corporation Reports

Fourth Quarter and Fiscal Year Results, Presents Financial Guidance

TEANECK, N.J., August 27, 2019 (Business

Newswire) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its fourth quarter

and fiscal year ended June 30, 2019 and presented financial guidance for the new fiscal year.

Highlights for the June 2019 quarter (compared

to the June 2018 quarter)

Highlights for the June 2019 year (compared

to the June 2018 year)

Guidance for the June 2020 year (compared

to the June 2019 year)

"The effects of African Swine Fever, as discussed last

quarter, have significantly impacted our performance in the June quarter and will have an even larger impact in the new fiscal

year," said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer. "We have made the strategic decision

to continue to accelerate our new product initiatives despite the challenges posed by ASF, recognizing the short-term impact on

our financial results.

Overall, we continue to be bullish on the long-term potential

of the animal health industry. That is why we have invested, and intend to continue to invest, in major strategic initiatives to

support future growth. Our recent acquisition of the Osprey Biotechnics business aligns with this belief, and we are excited by

this acquisition and confident that their products and expertise can drive profitable growth. While still far from certain, we

are encouraged by our ASF vaccine development project. Other initiatives include the continuing build-out of our Irish vaccine

facility, the introduction of an automated vaccine delivery system, our companion animal projects, and the launch of several new

products. These investments require significant P&L expense dollars and are a major factor in reduced profitability in fiscal

Net sales of $203.9 million for

the three months ended June 30, 2019, decreased $7.9 million, or 4%, as compared to the three months ended June 30, 2018. Animal

Health and Mineral Nutrition declined $5.7 million and $4.3 million, respectively. Performance Products grew $2.1 million, or 15%.

Net sales of $132.0 million for

the three months ended June 30, 2019, declined $5.7 million, or 4%. Net sales of MFAs and other declined $5.8 million, or

6%, due to reduced demand related to African Swine Fever in China and continued lower domestic demand from the poultry and swine

sectors. Continued volume growth in Latin America in cattle and poultry, coupled with increased penetration in other Asia Pacific

countries, were a partial offset. Net sales of nutritional specialty products grew $0.3 million, or 1%, as international volume

growth in dairy products offset continued negative domestic dairy conditions and reduced demand from poultry customers. Net sales

of vaccines declined $0.2 million, or 1%. The loss of a domestic distribution arrangement and the continued effects of turbulent

economic conditions in certain international countries offset volume growth in the Asia Pacific and Eastern European regions.

Net sales of $56.0 million for the

three months ended June 30, 2019, decreased $4.3 million, or 7%. Unfavorable product mix and lower average selling prices, correlated

with the movement of underlying raw material costs, offset increased volumes.

Performance Products

Net sales of $15.9 million for the

three months ended June 30, 2019, increased $2.1 million, or 15%, driven by increased volumes of personal care ingredients.

Gross profit of $65.3 million for the three months

ended June 30, 2019, decreased $2.2 million, or 3%, as compared to the three months ended June 30, 2018. Gross profit increased

to 32.0% of net sales for the three months ended June 30, 2019, as compared to 31.9% for the three months ended June 30, 2018.

Animal Health gross profit decreased $2.5 million due to volume declines in MFAs and other, partially offset by favorable vaccine

manufacturing costs. Mineral Nutrition gross profit was comparable to the prior year, as favorable raw material costs and product

mix offset the decline in average selling prices. Performance Products gross profit increased $0.3 million on increased volumes

of personal care ingredients, partially offset by unfavorable product mix.

Selling, general and administrative expenses

Selling, general and administrative expenses

("SG&A") of $53.2 million for the three months ended June 30, 2019, increased $11.8 million, or 29%, as

compared to the three months ended June 30, 2018. SG&A for the three months ended June 30, 2019 included $6.3 million of restructuring

costs, $0.6 million of stock-based compensation and $0.2 million of acquisition-related transaction costs. SG&A for the three

months ended June 30, 2018, included a gain of $0.5 million from the net effect of an acquisition-related adjustment to contingent

consideration, stock compensation expense of $0.3 million and acquisition-related compensation costs of $0.1 million. Excluding

the effects of these costs, SG&A increased $4.7 million, or 11%.

Animal Health SG&A increased $3.6 million,

including increased investments in product research and development. Mineral Nutrition and Performance Products SG&A were comparable

to the prior year. Corporate expenses increased $1.0 million, due to increased business development and public company costs, partially

offset by reduced variable compensation. The restructuring costs, stock-based compensation and acquisition-related costs resulted

in a net $7.1 million increase to SG&A.

During the three months ended June

30, 2019, we recorded pre-tax charges of $6.3 million for business restructuring activities related to productivity and cost

saving initiatives in the Animal Health segment. The charges included $3.5 million related to termination of a contract

manufacturing agreement and $2.8 million for employee separation costs. The charges are included in selling, general and

administrative expenses in our consolidated statements of operations. We expect to record an additional charge for employee

separation costs of an estimated $1.0 million and complete actions by December 31, 2019.

Interest expense, net

Interest expense, net of $3.0 million

for the three months ended June 30, 2019, increased $0.4 million, or 14%, as compared to the three months ended June 30, 2018.

Interest expense on the Term loan and Revolver increased $0.4 million due to higher debt levels and higher variable interest rates.

Interest expense for the three months ended June 30, 2018 included $0.3 million of acquisition-related accrued interest. Interest

income from short-term investments decreased $0.4 million.

Foreign currency (gains) losses, net

Foreign currency (gains) losses, net for

the three months ended June 30, 2019, amounted to net gains of $(0.2) million, as compared to $(0.1) million in net gains for the

three months ended June 30, 2018. Foreign currency gains and losses primarily arose from cash and intercompany balances.

Provision for income taxes

In December 2017, the United States government

enacted comprehensive income tax legislation (the "Tax Act"). The Tax Act made broad and complex changes to United

States income tax law and includes numerous elements that affect the Company, including a reduced federal corporate income tax

rate of 21%, creating a territorial tax system that includes a one-time mandatory transition tax on previously deferred foreign

earnings and changes to business-related exclusions, deductions and credits. Our provision for income taxes reflects a statutory

21.0 % and 28.1% weighted-average federal income tax rate for our fiscal years ending June 30, 2019 and 2018, respectively. The

Tax Act also has consequences related to our international operations.

The provision for income taxes, effective

income tax rate and certain income tax items for the three months ended June 30, 2019 and 2018, are reflected in the table

The mandatory toll charge on deemed repatriation

of undistributed earnings of foreign subsidiaries resulted from a one-time tax under the Tax Act.

The reduction of domestic deferred tax

assets resulted from the remeasurement of deferred tax assets and liabilities, to reflect the reduced federal statutory income

tax rate under the Tax Act.

The reduction of foreign deferred tax assets

resulted from the remeasurement of deferred tax assets, to reflect a reduced income tax rate in certain international jurisdictions.

The recognition of federal and foreign

prior-year tax credits resulted from the implementation of the Tax Act.

Net income of $8.8 million for the

three months ended June 30, 2019, decreased $13.3 million, as compared to net income of $22.1 million for the three months

ended June 30, 2018. Operating income declined $14.0 million, driven by lower gross profit of $2.2 million and increased SG&A

expenses of $11.8 million, including $6.3 million of restructuring costs. Interest expense increased $0.4 million. The provision