Full Press Release Details
Phibro Animal Health Corporation Reports
Second Quarter and Updated Annual Financial Guidance
TEANECK, N.J., Feb. 05, 2018 (GLOBE
NEWSWIRE) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its second quarter
ended December 31, 2017.
Highlights for the December 2017 quarter (compared
to the December 2016 quarter)
"We are encouraged by the development
of our business, and as a result are increasing our financial guidance as compared with the guidance we provided in August,"
said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer. "We
are better positioned today than ever before to provide our customers around the world with the solutions and expertise they need
to care for their animals. Our strength today comes from the strategic decision we made to continue to invest in product development
and organization capabilities, in the face of near-term challenges due to regulatory and consumer driven changes around antibiotics
usage. We are seeing early returns on the investments we made and we now expect to see sales growth in the mid-to high single digit
range for the balance of the fiscal year. While we continue to strengthen our internal product development and organization capabilities,
we remain active in seeking business development opportunities."
Net sales of $205.9 million
for the three months ended December 31, 2017, increased $14.3 million, or 7%, as compared to the three months ended
December 31, 2016. Animal Health, Mineral Nutrition and Performance Products grew $9.2 million, $2.9 million and $2.2 million,
Net sales of $132.8 million
for the three months ended December 31, 2017, grew $9.2 million, or 7%. The growth was primarily due to volume increases
across all product groups within the segment. Nutritional specialty products grew $3.4 million, or 12%, primarily due to volume
growth of our products for the dairy and poultry industries in the United States and by penetration into various international
countries. Vaccines grew $1.3 million, or 7%, primarily due to volume growth in international markets; domestic growth was
moderate due to reduced disease pressure. MFAs and other grew $4.5 million, or 6%. International net sales of MFAs and other increased
$8.7 million due to growth across most regions, notably due to additional penetration in the cattle sector, and included the benefit
of a recent acquisition. Domestic net sales of MFAs and other declined $4.2 million due to $2.1 million lower sales of
medically important antimicrobials and due to unfavorable timing of certain customer orders. We believe domestic sales of medically
important antimicrobials have stabilized at current levels.
Net sales of $59.6 million
increased $2.9 million, or 5%, for the three months ended December 31, 2017. The increased revenue was due to favorable
product mix, plus higher average selling prices resulting from underlying raw material commodity price increases.
Performance Products
Net sales of $13.4 million
increased $2.2 million, or 19%, for the three months ended December 31, 2017, due to higher average selling prices of
copper-based products and higher volumes of copper-based and personal care products, partially offset by lower average selling
prices of personal care products.
Gross profit of $66.9 million
for the three months ended December 31, 2017, increased $3.4 million, or 5%, as compared to the three months ended December
31, 2016. Gross profit decreased to 32.5% of net sales for the three months ended December 31, 2017, as compared to 33.1%
for the three months ended December 31, 2016. The three months ended December 31, 2017, included $1.4 million of
acquisition-related cost of goods sold. Excluding the effects of the acquisition-related cost of goods sold, Animal Health gross
profit increased $3.9 million due to volume growth, higher average selling prices on selected products and lower unit costs
from improved operating efficiencies. Mineral Nutrition gross profit increased $0.9 million due to favorable product mix and
higher average selling prices, partially offset by higher raw material costs. Performance Products gross profit was equal to the
prior year as higher average selling prices of copper-based products and higher volumes of copper-based and personal care products
were offset by higher products costs of copper-based products.
Selling, general and administrative expenses
Selling, general and administrative expenses
("SG&A") of $43.0 million for the three months ended December 31, 2017, increased $2.1 million,
or 5%, as compared to the three months ended December 31, 2016. SG&A for the three months ended December 31, 2016, included
$1.7 million in costs relating to the partial settlement of the pension plan. Excluding these costs, SG&A increased $3.8 million
Animal Health SG&A increased $3.8 million
compared to the prior year, driven by investments in product and organization development. A recent acquisition also contributed
to the Animal Health SG&A increase. Mineral Nutrition and Performance Products SG&A increased less than $0.1 million
each. Corporate was level with last year, as reduced pension costs offset increases in other expenses.
During the three months
ended December 31, 2016, we recognized a partial settlement of the pension plan, which resulted in a charge to the
consolidated statement of operations of $1.7 million, which we recorded as a component of SG&A.
Interest expense, net
Interest expense, net of $3.1 million
for the three months ended December 31, 2017, decreased $0.8 million, or 21%, as compared to the three months ended
December 31, 2016. Interest expense decreased $1.0 million compared to the prior year, primarily due to lower interest rates
in the new Credit Facilities completed in June 2017. Interest income decreased $0.2 million due to less interest income
on deposits in foreign jurisdictions.
Foreign currency (gains) losses, net
Foreign currency (gains) losses, net for
the three months ended December 31, 2017, amounted to net gains of $0.3 million, as compared to $0.5 million in
net gains for the three months ended December 31, 2016. Foreign currency losses in the three months ended December 31,
2017, were primarily due to the movement of the Brazilian, South African and Mexican currencies relative to the U.S. dollar. Foreign
currency gains and losses primarily arise from intercompany balances.
Provision (benefit) for income taxes
The United States government
enacted comprehensive income tax legislation (the "Tax Act") in December 2017. The Tax Act makes 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 and changes to business-related exclusions, deductions and credits. The Tax Act also has consequences related to
our international operations.
We recorded an update to
the provision for income taxes to reflect a statutory 28.1% weighted-average federal income tax rate and other elements of the
Tax Act in effect for our fiscal year ending June 30, 2018. The statutory federal income tax rate will be 21.0% for our fiscal
year beginning July 1, 2018.
The provision for income taxes was $14.2 million
and $5.9 million for the three months ended December 31, 2017 and 2016, respectively. The effective income tax rates
for these periods were 66.8% and 30.5%, respectively. The provision for income taxes for the three months ended December 31,
2017 included the following discrete items:
The effective income tax rate for the three months
ended December 31, 2017, would have been 26.2% without these discrete items. This effective rate for the three months ended December
31, 2017, included the benefit of adjusting the year-to-date income tax provision to reflect the reduced statutory federal income
Net income of $7.0 million
for the three months ended December 31, 2017, decreased $6.4 million, as compared to net income of $13.4 million
for the three months ended December 31, 2016. The decrease was a result of the factors described above, primarily due to a
$8.3 million increase in income tax expense.
Diluted EPS was $0.17 for
the three months ended December 31, 2017, a decrease of $0.17, compared to $0.34 for the three months ended December 31, 2016,
as a result of the decrease in net income.
Adjusted EBITDA of $32.5 million
for the three months ended December 31, 2017, increased $1.3 million, or 4%, as compared to the three months ended
December 31, 2016. Animal Health Adjusted EBITDA increased $0.4 million, or 1%, due to sales growth and increased gross profit,
partially offset by increased SG&A. Mineral Nutrition Adjusted EBITDA increased $0.9 million, or 18%, due to favorable
product mix and higher average selling prices, partially offset by higher raw material costs. Performance Products Adjusted EBITDA