Full Press Release Details
Phibro Animal Health Corporation Reports
Second Quarter Results
TEANECK, N.J., February 6, 2019 (GLOBE
NEWSWIRE) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its second quarter
ended December 31, 2018.
Highlights for the December 2018 quarter (compared
to the December 2017 quarter)
"We are encouraged by the continued
progress of our Animal Health business in the face of numerous economic and market challenges," said Jack Bendheim, Phibro's
Chairman, President and Chief Executive Officer. "Growth in international markets demonstrates the strength of our portfolio
and has more than offset domestic sales declines from the ongoing difficult dairy sector and the loss of a vaccine distribution
arrangement. Overall, international regions grew despite unfavorable currency and economic conditions in certain countries. Our
Mineral Nutrition business showed encouraging progress in the quarter, even though profitability continues to be below last year."
"We continue to invest operating expense
dollars to develop future growth opportunities. At the same time, we have minimized operational spending as much as possible to
protect current year profitability," said Mr. Bendheim.
Net sales of $218.2 million for the
three months ended December 31, 2018, increased $12.3 million, or 6%, as compared to the three months ended December 31, 2017.
Animal Health, Mineral Nutrition and Performance Products grew $6.7 million, $2.7 million and $2.9 million, respectively.
Net sales of $139.6 million for the
three months ended December 31, 2018, increased $6.7 million, or 5%. Net sales of MFAs and other increased $11.0 million, or 13%,
driven by continued international volume growth, particularly in the Asia Pacific and Latin America regions. Reduced selling prices
in certain countries due to unfavorable exchange rate movements partially offset the international growth. Net sales of domestic
MFAs and other declined slightly from the prior year. Net sales of nutritional specialty products declined by $3.2 million, or
10%, due to volume declines from continued negative dairy industry conditions and reduced demand from poultry customers. Net sales
of vaccines declined $1.2 million, or 6%, due to turbulent economic conditions in certain international countries and the loss
of a domestic distribution arrangement; volume growth in other international markets partially offset the reductions.
Net sales of $62.3 million for the
three months ended December 31, 2018, increased $2.7 million, or 5%. Higher average selling prices, plus increased volumes, were
the drivers of the increase. Our selling prices of mineral nutrition products generally move in direct correlation with the underlying
Performance Products
Net sales of $16.3 million for the
three months ended December 31, 2018, increased $2.9 million, or 22%, due to volume growth of copper-based and personal care
Gross profit of $68.6 million for
the three months ended December 31, 2018, increased $1.7 million, or 3%, as compared to the three months ended December 31,
2017. Gross profit decreased to 31.5% of net sales for the three months ended December 31, 2018, as compared to 32.5% for the three
months ended December 31, 2017. Gross profit for the three months ended December 31, 2017 included $1.4 million of acquisition-related
Animal Health gross profit increased $0.8
million due to volume growth of MFAs and other, mostly offset by volume declines in the nutritional specialty and vaccine categories
and increased vaccine manufacturing costs. Mineral Nutrition gross profit decreased $1.5 million, primarily due to unfavorable
product mix and constrained pricing in a competitive environment. Performance Products gross profit increased $1.0 million, primarily
due to volume growth. Gross profit increased $1.4 million due to acquisition-related cost of goods sold included in the three months
ended December 31, 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses
("SG&A") of $42.9 million for the three months ended December 31, 2018, was approximately equal to the three
months ended December 31, 2017. SG&A for the three months ended December 31, 2018, included $0.6 million of stock-based compensation
and a $1.5 million benefit from the cancellation of a certain business arrangement. SG&A for the three months ended December
31, 2017, included $0.5 million in acquisition-related compensation costs. Excluding the effects of these costs, SG&A increased
$1.4 million, or 3%.
Animal Health, Mineral Nutrition and Performance
Products SG&A were each little changed from the prior year. Corporate costs increased $1.4 million due to increased business
development expenses. The stock-based compensation, cancellation of the business arrangement and acquisition-related compensation
costs resulted in a $1.4 million reduction in SG&A.
Interest expense, net
Interest expense, net of $3.0 million
for the three months ended December 31, 2018, was approximately equal to the three months ended December 31, 2017.
Foreign currency (gains) losses, net
Foreign currency (gains) losses, net for
the three months ended December 31, 2018, amounted to net losses of $2.6 million, as compared to $0.3 million in net gains
for the three months ended December 31, 2017. Foreign currency net losses for the three months ended December 31, 2018, were
primarily due to the movement of the Turkish and Brazilian currencies relative to the U.S. dollar. Foreign currency gains and losses
primarily arose from cash and intercompany balances.
Provision for income taxes
The provision for income taxes was $5.3
million and $14.2 million for the three months ended December 31, 2018 and 2017, respectively. The effective income tax rate was
26.5% and 66.8% for the three months ended December 31, 2018 and 2017, respectively. The provision for income taxes for the three
months ended December 31, 2018 included a $0.7 million benefit from an adjustment to the previously recorded mandatory toll charge
on deemed repatriation of undistributed earnings of foreign subsidiaries and a $0.1 million benefit from the exercise of employee
stock options. The effective income tax rate, without these benefits, would have been 30.5% for the three months ended December 31,
2018, including a $0.3 million provision for the U.S. federal Global Intangible Low-Taxed Income (GILTI) aspects of the comprehensive
U.S. income tax legislation. The effective income tax rate reflects the statutory 21% U.S. federal income tax rate.
The effective income tax rate for the three
months ended December 31, 2017, would have been 26.2% without the discrete items listed below. 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 statutory
28.1% weighted-average U.S. federal income tax rate. The provision for income taxes for the three months ended December 31, 2017
included the effects of the Tax Act and other discrete items:
Net income of $14.8 million for the
three months ended December 31, 2018, increased $7.7 million, as compared to net income of $7.0 million for the three
months ended December 31, 2017. A $2.9 million increase in foreign currency losses offset a $1.8 million improvement in operating
income, resulting in a $1.1 million decrease in income before income taxes. The provision for income taxes decreased by $8.9 million,
primarily because the three months ended December 31, 2017, included additional expense from the initial application of the comprehensive
U.S. income tax legislation and other discrete items.
Adjusted EBITDA of $31.6 million for
the three months ended December 31, 2018, decreased $0.9 million or 3%, as compared to the three months ended December 31, 2017.
Mineral Nutrition Adjusted EBITDA decreased $1.5 million, or 27%, due to the effect of unfavorable product mix and constrained
pricing in a competitive environment. Corporate expenses increased $1.5 million due to increased business development expenses.
Performance Products and Animal Health Adjusted EBITDA increased $1.2 million and $0.9 million, respectively, due to sales growth
and increased gross profit.
Adjusted provision for income taxes
The adjusted effective income tax rate for
the three months ended December 31, 2018, was 29.0%, compared to 27.3% for the three months ended December 31, 2017.
The current period rate included the effects of the Global Intangible Low-Tax Income (GILTI) provisions of the new federal income
Adjusted diluted EPS
Adjusted diluted EPS was $0.41 for the quarter,
a decrease of $0.03 as compared to $0.44 last year, primarily due to increased SG&A expenses. The increase in SG&A was
primarily due to higher business development expenses and investment in future growth opportunities.
We expect that our annual performance will
be at the lower end of our annual guidance for major line items, including sales, Adjusted ebitda,
and adjusted diluted earnings per share. Headwinds continue to affect us, including African Swine Fever (ASF) outbreaks in China,