Full Press Release Details
Phibro Animal Health Corporation Reports
TEANECK, N.J., May 7, 2018 (GLOBE NEWSWIRE)
- Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its third quarter ended March
Highlights for the March 2018 quarter (compared
to the March 2017 quarter)
"We saw strong growth across the Company for the March
2018 quarter," said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer. "We are encouraged by
the international growth within the Animal Health segment; our international operations accounted for over 80% of the segment's
sales growth. Our strategy of international expansion of our existing portfolio is showing good results. Domestic Animal Health
sales growth was muted on the continued weak dairy industry and on low disease incidence that reduced vaccine demand. Our Mineral
Nutrition segment's profitability continued to improve on volume growth and operational execution around new initiatives.
We saw 12% growth in adjusted EBITDA, outpacing sales growth. Improved gross profit from favorable product mix allowed us to continue
to invest in product and organizational development, while still growing profitability."
"Looking forward, we are in discussions with third parties
to fund development and then commercialize and acquire promising new technologies and products. As part of our first entry into
the companion animal space, we have recently signed an agreement to develop a new product using a novel delivery method for a canine
Lyme disease vaccine. This and other opportunities targeting the nutritional and vaccine sectors for both production and companion
animals will require expense investment for the next 18 to 24 months before we see the commercial fruits of our investments. These
investments reinforce our belief in the bright future for our business."
Net sales of $208.9 million for
the three months ended March 31, 2018, increased $19.0 million, or 10%, as compared to the three months ended March 31,
2017. Animal Health, Mineral Nutrition and Performance Products grew $11.3 million, $5.8 million and $1.9 million, respectively.
Net sales of $132.3 million for
the three months ended March 31, 2018, grew $11.3 million, or 9%. Net sales of MFAs and other grew $6.6 million or 9%.
International net sales of MFAs and other increased $5.6 million due to growth across most regions, notably due to additional
penetration in the cattle sector, plus favorable seasonal demand for certain products and the incremental benefit of a recent acquisition.
Domestic net sales of MFAs and other increased $1.0 million due to volume growth of certain products. Domestic sales of medically
important antimicrobials were approximately level with the prior year. Net sales of nutritional specialty products grew $3.8 million,
or 14%, primarily due to volume growth of our products for the dairy and poultry industries in various international countries
and in the United States. Net sales of vaccines grew $1.0 million, or 6%, primarily due to volume growth in international markets;
domestic growth was moderate due to reduced disease pressure.
Net sales of $62.9 million increased
$5.8 million, or 10%, for the three months ended March 31, 2018. The increased revenue primarily was driven by higher average
selling prices, consistent with the underlying raw material commodity price increases.
Performance Products
Net sales of $13.7 million increased
$1.9 million, or 17%, for the three months ended March 31, 2018, due to increased volumes and higher average selling prices
of copper-based products.
Gross profit of $69.1 million for the three months
ended March 31, 2018, increased $8.4 million, or 14%, as compared to the three months ended March 31, 2017. Gross
profit increased to 33.1% of net sales for the three months ended March 31, 2018, as compared to 31.9% for the three months
ended March 31, 2017. Animal Health gross profit increased $7.5 million due to volume growth and favorable seasonal demand
for certain MFAs and other products, volume growth of nutritional specialty products and vaccines and overall lower unit costs
from improved manufacturing efficiencies for certain of our products. Mineral Nutrition gross profit increased $1.1 million, driven
by volume growth and higher average selling prices, partially offset by higher raw material costs. Performance Products gross profit
was in-line with the prior year as volume growth and increased pricing of copper-based products were offset by increased commodity
costs of copper-based products.
Selling, general and administrative expenses
Selling, general and administrative expenses
("SG&A") of $42.6 million for the three months ended March 31, 2018, increased $11.9 million, or 39%,
as compared to the three months ended March 31, 2017.
During the three months ended March 31,
2017, we recorded a $7.5 million gain in SG&A resulting from a payment to us in settlement of our claims against an insurance
carrier under our liability insurance policies. Without the effects of the gain on the insurance settlement, SG&A increased
$4.4 million or 12%.
Animal Health SG&A increased $2.8 million
as compared to the prior year, driven by investments in product and organization development. A recent acquisition also contributed
to the Animal Health increase. Mineral Nutrition and Performance Products SG&A were approximately level with the prior year.
Excluding the prior-year insurance settlement, Corporate expense increased $1.6 million primarily due to increased employee-related
costs and higher professional fees.
Interest expense, net
Interest expense, net of $3.1 million
for the three months ended March 31, 2018, decreased $0.9 million, or 22%, as compared to the three months ended March 31,
2017. 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 $0.1 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 March 31, 2018, amounted to net gains of $1.0 million, as compared to net gains of $0.4 million
for the three months ended March 31, 2017. The strengthening of the Mexican currency relative to the U.S. dollar was the primary
reason for the foreign currency gains during the three months ended March 31, 2018. Foreign currency gains and losses primarily
arise from intercompany balances.
Provision (benefit) for income taxes
The provision for income taxes, effective
income tax rate and certain income tax items for the three months ended March 31, 2018 and 2017, are reflected in the table
| For the Three Months Ended March 31 | 2018 | 2017 | ||||||
| (in thousands, except percentages) | ||||||||
| Provision (benefit) for income taxes | $ | 4,548 | $ | 2,805 | ||||
| Effective income tax rate | 18.6 | % | 10.6 | % | ||||
| Certain income tax items | ||||||||
| Benefit from exercised employee stock options | $ | (1,038 | ) | $ | (1,442 | ) | ||
| Release of unrecognized tax benefits | (758 | ) | - | |||||
| Release of foreign valuation allowance | - | (3,780 | ) | |||||
| Total | $ | (1,796 | ) | $ | (5,222 | ) | ||
| Provision (benefit) for income taxes, excluding certain items | $ | 6,344 | $ | 8,027 | ||||
| Effective income tax rate, excluding certain items | 26.0 | % | 30.4 | % |
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,
resulting in the release of a foreign valuation allowance.
Net income of $19.8 million for
the three months ended March 31, 2018, decreased $3.8 million, as compared to net income of $23.6 million for the three
months ended March 31, 2017. The decrease primarily was driven by a $3.5 million decline in operating income, partially offset
by lower interest expense of $0.9 million and increased foreign currency gains of $0.6 million, and a $1.7 million increase in
the income tax provision. The decline in operating income primarily was influenced by the prior-year $7.5 million insurance settlement
gain. Excluding this gain, operating income would have increased $4.0 million or 18%, driven by sales growth and gross profit expansion.
was $0.49 for the three months ended March 31, 2018, a decrease of $0.10, compared to $0.59 for the three months ended March 31,
2017, as a result of the decrease in net income.
Adjusted EBITDA of $33.4 million for the
three months ended March 31, 2018, increased $3.7 million, or 12%, as compared to the three months ended March 31,
2017. Animal Health Adjusted EBITDA increased $4.5 million, or 14%, due to sales growth and increased gross profit, partially offset
by increased SG&A. Mineral Nutrition Adjusted EBITDA increased $1.0 million, or 24%, due to volume growth and higher average
selling prices, partially offset by higher raw material costs. Performance Products Adjusted EBITDA was similar to the prior year
as higher volumes and selling prices were offset by higher raw material costs. Corporate expenses increased $1.8 million as compared
to the prior year, primarily due to increased employee-related costs and higher professional fees.
Adjusted provision for income taxes
effective income tax rate for the three months ended March 31, 2018 was 26.8%, and included the benefit of a reduced statutory
federal income tax rate.
Adjusted diluted EPS
EPS was $0.46 for the quarter, an increase of $0.09 compared to $0.37 last year. Higher gross profit, lower interest expense, net,
and a lower effective income tax rate, were the primary contributors to the improvement.
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