Full Press Release Details
Phibro Animal Health Corporation Reports
TEANECK, N.J., May 8, 2017 (GLOBE NEWSWIRE)
- Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its third quarter ended March
Highlights for the March 2017 quarter (compared
to the March 2016 quarter)
"On balance, our third
quarter performance was encouraging" said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer.
"We were able to grow our Animal Health sales and gross profit despite reduced demand in the U.S. for medically important
antibacterials and a challenging economic environment in Brazil. The continued double-digit growth in vaccines and nutritional
specialties has enabled us to report overall Animal Health sales growth. To position ourselves for future growth, we increased
spending on Animal Health product development and organization capabilities which tempered the profitability of the segment. Our
Mineral Nutrition business contributed another solid quarter of income growth on consistent demand for our products."
million for the three months ended March 31, 2017, increased $6.4 million, or 3%, as compared to the three months ended March 31,
2016. Animal Health and Mineral Nutrition grew $2.6 million and $4.1 million, respectively, while Performance Products declined
million for the three months ended March 31, 2017, grew $2.6 million, or 2%. The growth was primarily due to volume increases in
the nutritional specialty and vaccine product groups within the segment. Nutritional specialty products grew $4.8 million, or 21%,
primarily due to volume growth of our products for the U.S. poultry and dairy industries. Vaccines grew $3.9 million, or 30%, primarily
due to volume growth of our products for the poultry and swine industries. Medicated feed additives ("MFAs") and other
declined $6.1 million, or 7%, primarily due to volume declines. Domestic net sales of MFAs and other declined $4.3 million, primarily
due to reduced volumes of medically important antibacterials. International net sales declined $1.8 million, primarily due to economic
conditions in Brazil.
Net sales of $57.2 million
increased $4.1 million, or 8%, for the three months ended March 31, 2017. The increased revenue was due to increased volumes and
higher average selling prices resulting from underlying raw material commodity price increases.
Performance Products
Net sales of $11.7 million
decreased $0.4 million, or 3%, for the three months ended March 31, 2017, due to lower average selling prices of personal care
ingredients and copper-based products and lower volumes of copper-based products. Higher volumes of personal care ingredients partially
offset the declines.
Gross profit of $60.6
million for the three months ended March 31, 2017, increased $1.8 million, or 3%, as compared to the three months ended March 31,
2016. Gross profit decreased to 31.9% of net sales for the three months ended March 31, 2017, as compared to 32.0% for the three
months ended March 31, 2016. The three months ended March 31, 2016, included $1.6 million of acquisition-related cost of goods
sold. Depreciation expense included in cost of goods sold increased $1.0 million due to recent capital expenditures. Excluding
the effects of the acquisition-related cost of goods sold and increased depreciation, Animal Health gross profit increased $1.2
million due to volume growth in nutritional specialty and vaccine products, as well as lower unit costs from improved operating
efficiencies. Mineral Nutrition gross profit increased $0.3 million due to volume growth and higher average selling prices, partially
offset by higher raw material costs. Performance Products gross profit decreased $0.3 million due lower average selling prices
of personal care ingredients and copper-based products, partially offset by higher volumes of personal care ingredients.
Selling, general and administrative expenses
Selling, general and administrative
expenses ("SG&A") of $30.6 million for the three months ended March 31, 2017, decreased $7.0 million, or
19%, as compared to the three months ended March 31, 2016. During the three months ended March 31, 2017, we recorded a $7.5 million
gain in SG&A resulting from a payment to us by an insurance carrier. The payment reflected the settlement of our claims against
the carrier under our liability insurance policies, which arose from damages incurred in fiscal year 2010 by certain customers
resulting from the use of one of our animal health products. We previously paid our customers for the damages and recognized the
cost in the consolidated statement of operations prior to fiscal year 2017. SG&A for the three months ended March 31, 2016,
included $0.6 million of acquisition-related transaction costs. Without the effects of the gain on the insurance settlement and
the acquisition-related transaction costs, SG&A increased $1.1 million, or 3%. Animal Health accounted for $1.6 million of
the increase, driven by timing of spending.
Interest expense, net
Interest expense, net of $3.9
million for the three months ended March 31, 2017, decreased $0.3 million, or 8%, as compared to the three months ended March 31,
2016. Interest income increased $0.3 million from interest on deposits in foreign jurisdictions. Interest expense decreased $0.1
million due to decreased borrowings under our Revolver, compared to the three months ended March 31, 2016.
Foreign currency (gains) losses, net
Foreign currency (gains) losses,
net for the three months ended March 31, 2017, amounted to net gains of $0.4 million, as compared to $2.2 million in net
gains for the three months ended March 31, 2016. Foreign currency gains in the three months ended March 31, 2017, were primarily
due to the movement of the Brazilian, Argentinian 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 provision for income taxes
was $2.8 million for the three months ended March 31, 2017, as compared to $0.6 million for the three months ended March 31, 2016.
The effective income tax rates for these periods were 10.6% and 3.0%, respectively. During the three months ended March 31, 2017,
we concluded it was more likely than not that the value of deferred tax assets related to a foreign subsidiary would be realized,
and it was no longer necessary to maintain a valuation allowance. The provision for income taxes for the three months ended March
31, 2017, included a $3.8 million benefit from the valuation allowance release and also included a $1.4 million benefit related
to the exercise of employee stock options. Without the benefit of the valuation allowance release and the benefit related to employee
stock options, the effective income tax rate was 30.4% for the three months ended March 31, 2017. The provision for income taxes
for the three months ended March 31, 2016, included a $2.5 million benefit from the release of a domestic valuation allowance and
a $2.1 million benefit related to previously unrecognized tax benefits. Without these benefits, the effective income tax rate was
27.2% for the three months ended March 31, 2016.
Our future effective income
tax rate may fluctuate due to various factors, including the relative amounts of income earned in different taxing jurisdictions,
changes in statutory tax rates, potential strategies to reduce our overall income tax expense, discrete items, the benefit of employee
stock option exercises and certain non-deductible items.
million for the three months ended March 31, 2017, increased $5.1 million, as compared to net income of $18.6 million for
the three months ended March 31, 2016. The increase was a result of the factors described above, including the $7.5 million gain
on insurance settlement.
Diluted EPS was $0.59 for the
three months ended March 31, 2017, an increase of $0.13, compared to $0.46 for the three months ended March 31, 2016, as a result
of the increase in net income.
Adjusted EBITDA of $29.7
million for the three months ended March 31, 2017, increased $0.1 million, or less than 1%, as compared to the three months ended
March 31, 2016. Animal Health Adjusted EBITDA decreased $0.3 million, or 1%, due to increased SG&A, partially offset by sales
growth and increased gross profit. Mineral Nutrition increased $0.3 million, or 8%, due to improved operating margins from volume
growth and from higher average selling prices, partially offset by higher raw material costs. Performance Products decreased less
than $0.1 million, as lower average selling prices were offset by higher volumes. Corporate expenses decreased $0.1 million due
to lower compensation costs and lower professional fees.
Adjusted diluted EPS
Adjusted diluted EPS was $0.37
for the quarter, a decrease of $0.03 compared to $0.40 last year. A lower gross profit ratio, SG&A growth and a higher effective
income tax rate, were the primary contributors to the decline.
BALANCE SHEET AND CASH FLOWS
We have updated our financial guidance for the
fiscal year 2017. The guidance is shown in detail on the schedule included with this press release.
WEBCAST & CONFERENCE CALL DETAILS
Phibro Animal Health Corporation
will host a webcast and conference call during which the company will review its financial results and respond to questions.