Full Press Release Details
Phibro Animal Health Corporation Reports
Fourth Quarter and Fiscal Year Results, Provides Guidance for Its Fiscal First Quarter
N.J., August 26, 2020 (Business Wire) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its
financial results for its fourth quarter and fiscal year ended June 30, 2020.
Highlights for the June 2020 quarter (compared to the June 2019
diluted EPS of $0.17, a decrease of $0.16, or 48%
Highlights for the June 2020 year (compared to the June 2019
| - | Adjusted EBITDA of $102 million, a decrease of $16 million, or 13% | |
| - | Adjusted diluted EPS of $1.08, a decrease of $0.45, or 29% |
Guidance for the first quarter ending September 2020 (compared
to the September 2019 quarter)
"As expected, our fourth quarter
was a challenging one due to Covid-19," said Jack Bendheim, Phibro's Chairman, President and Chief Executive
Officer. "The industries we serve - especially our swine and cattle customers - faced a host of unprecedented issues,
ranging from lack of processing availability, to wild commodity price swings to sudden drops in demand. Despite these
extraordinary times, our strategy of enhancing our Nutritional Specialties and Vaccines offerings continues to bear fruit, as
we were able to grow those segments even in the face of the pandemic. We believe the worst is over, and as we move into our
new financial year, we expect our markets to progressively improve over the course of the year."
Net sales of $185.9 million for the
three months ended June 30, 2020, decreased $18.0 million, or 9%, as compared to the three months ended June 30, 2019.
Animal Health, Mineral Nutrition and Performance Products declined $9.6 million, $6.1 million and $2.3 million, respectively.
During the quarter ended June 30, 2020,
we experienced a short-term decline in demand for our products due to the COVID-19 pandemic, primarily in the Animal Health segment.
The animal production industry faced unprecedented demand disruptions, production impacts, price declines and currency volatility
in international markets. Animal producers rapidly adjusted the number of animals and amount of milk being produced.
Net sales of $122.4 million for the three
months ended June 30, 2020, decreased $9.6 million, or 7%. Net sales of MFAs and other declined $13.7 million, or 16%, due
to lower sales volume in China, South America and other international regions. The decline in China was driven by the continued
effects of African Swine Fever and regulatory changes effective January 1, 2020. Net sales of nutritional specialty products
grew $2.6 million, or 9%, primarily due to the Osprey acquisition. Sales of other nutritional specialty products were comparable
to the prior year quarter. Net sales of vaccines increased $1.5 million, or 8%, on higher international volume.
Net sales of $49.9 million for the
three months ended June 30, 2020, decreased $6.1 million, or 11%, due to a decline in average selling prices coupled with
lower overall unit volume. The decline in average selling prices is correlated with the movement of the underlying raw material
Performance Products
Net sales of $13.6 million for the
three months ended June 30, 2020, decreased $2.3 million, or 14%, driven by lower volumes of copper-based and industrial chemical
Gross profit of $60.6 million for
the three months ended June 30, 2020, decreased $4.7 million, or 7%, as compared to the three months ended June 30, 2019.
Gross profit as a percentage of net sales increased to 32.6% of net sales for the three months ended June 30, 2020, as compared
to 32.0% for the three months ended June 30, 2019.
Animal Health gross profit decreased $3.9
million due to volume declines in MFAs and other, partially offset by increased volumes in nutritional specialty and vaccine products.
Mineral Nutrition gross profit decreased $0.3 million, as declines in average selling prices outpaced favorable raw material costs.
Favorable product mix in both the Animal Health and Mineral Nutrition segments during the quarter contributed to the improvement
in the gross profit percentage. Performance Products gross profit decreased $0.5 million on lower overall volume.
Selling, general and administrative expenses
Selling, general and administrative
expenses ("SG&A") of $42.4 million for the three months ended June 30, 2020, declined $10.8
million, or 20%, as compared to the three months ended June 30, 2019. SG&A for the three months ended June 30,
2020, included a $3.0 million benefit from acquisition-related other, as a result of a reduction to acquisition-related
contingent consideration. SG&A for the three months ended June 30, 2019, included $6.3 million of restructuring
costs and $0.2 million of acquisition-related transaction costs. Excluding the effects of these items, SG&A decreased
$1.3 million, or 3%.
Animal Health SG&A decreased $1.6 million
due to lower variable compensation and employee-related costs, partially offset by the effect of the Osprey acquisition. Mineral
Nutrition and Performance Products SG&A increased $0.1 million and $0.2 million, respectively. Corporate expenses were comparable
to the prior year. The restructuring costs, acquisition-related transaction costs and acquisition-related other items resulted
in a net $9.5 million decrease to SG&A.
Interest expense, net
Interest expense, net of $2.8 million
for the three months ended June 30, 2020, decreased $0.2 million, or 8%, as compared to the three months ended June 30,
2019. The decrease in interest expense was primarily driven by the benefit of lower variable interest rates. Interest income from
short-term investments was comparable to the prior year.
Foreign currency (gains) losses, net
Foreign currency (gains) losses, net for
the three months ended June 30, 2020, amounted to net gains of $1.1 million, as compared to net gains of $0.2 million for
the three months ended June 30, 2019. Foreign currency gains from intercompany transactions were partially offset by foreign
currency losses from the effects of currency devaluations, driven by currency volatility during the three months ended June 30,
Provision for income taxes
In March 2020, in response to economic
instability prompted by the COVID-19 pandemic, the United States government enacted the Coronavirus Aid, Relief and Economic Security
("CARES") Act. The CARES act established various stimulus measures, including certain tax provisions. We have utilized
certain CARES Act provisions, including modifications to the interest deduction limitation, technical corrections to tax depreciation
methods for qualified improvement property and deferral of employer social security payments.
The provision for income taxes was $10.7
million and $0.4 million for the three months ended June 30, 2020 and 2019, respectively. The effective income tax rates were
65.6% and 4.4% for the three months ended June 30, 2020 and 2019, respectively, in part reflecting updated calculations for
full year amounts. The effective tax rate for the three months ended June 30, 2020 was substantially higher than the federal
statutory rate primarily due to income tax expense for:
Net income of $5.6 million for the
three months ended June 30, 2020, decreased $3.2 million, as compared to net income of $8.8 million for the three months
ended June 30, 2019. Increased operating income of $6.0 million and favorable interest expense and foreign currency
movement of $0.2 million and $0.9 million, respectively, were more than offset by a $10.3 million increase in the provision
for income taxes. The increased operating income was driven by the favorable effects of certain SG&A expenses, including
a $6.3 million restructuring charge recorded during the three months ended June 30, 2019 and a $3.0 million benefit
recognized during the three months ended June 30, 2020 related to a reduction to acquisition-related contingent
consideration. The decline in SG&A expenses was partially offset by a $4.7 million decline in gross profit, primarily
driven by lower sales volume. The increase in the tax provision was due to the aforementioned effects of GILTI, changes in
uncertain tax positions and increased valuation allowances in certain international jurisdictions.
Adjusted EBITDA of $23.9 million for
the three months ended June 30, 2020, decreased $2.5 million, or 9%, as compared to the three months ended June 30, 2019.
Animal Health Adjusted EBITDA decreased $1.6 million due to the sales and related gross profit declines, partially offset by lower
SG&A costs. Mineral Nutrition and Performance Products Adjusted EBITDA declined $0.3 million and $0.4 million, respectively,
driven primarily by lower gross profit in both segments. Corporate expenses were comparable to the prior year.
Adjusted provision for income taxes
adjusted effective income tax rates for the three months ended June 30, 2020 and 2019, were 55.4% and 23.2%, respectively.
The tax provision and related income tax rate for the three months ended June 30, 2020 were significantly higher than the
prior year quarter due to the effects of GILTI, changes in uncertain tax positions and increased valuation allowances in
certain international jurisdictions.
Adjusted diluted EPS