Phibro(PAHC) - 2022 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for Phibro Animal Health Corporation Item 1. Financial Statements This section presents Phibro Animal Health Corporation's unaudited consolidated financial statements, including statements of operations, balance sheets, and cash flows, for the specified periods Consolidated Statements of Operations This section details the company's consolidated statements of operations, highlighting net sales, gross profit, operating income, net income, and diluted EPS Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2022 | Nine Months Ended Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $239,619 | $211,729 | $686,996 | $613,072 | | Gross profit | $71,626 | $69,165 | $206,976 | $201,549 | | Operating income | $19,194 | $20,132 | $56,100 | $55,710 | | Net income | $17,689 | $12,161 | $41,688 | $37,264 | | Diluted EPS | $0.44 | $0.30 | $1.03 | $0.92 | Consolidated Balance Sheets This section presents the company's consolidated balance sheets, detailing assets, liabilities, and stockholders' equity at specific periods Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Total current assets | $546,477 | $498,909 | | Total assets | $916,181 | $841,325 | | Total current liabilities | $187,102 | $164,116 | | Total liabilities | $649,236 | $602,796 | | Total stockholders' equity | $266,945 | $238,529 | Consolidated Statements of Cash Flows This section outlines the company's consolidated cash flow activities, including operating, investing, and financing cash flows Consolidated Cash Flow Highlights (Nine Months Ended Mar 31, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $30,075 | $45,236 | | Net cash used by investing activities | ($13,042) | ($11,390) | | Net cash provided (used) by financing activities | $3,954 | ($21,632) | | Net increase in cash and cash equivalents | $20,536 | $12,760 | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, including segment information, acquisitions, and contingencies - The company operates in three business segments: Animal Health, Mineral Nutrition, and Performance Products[33] Net Sales by Product Type (in thousands) | Product Type | Three Months 2022 | Three Months 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Animal Health | $148,589 | $134,380 | $440,520 | $398,987 | | Mineral Nutrition | $69,033 | $58,153 | $190,120 | $163,750 | | Performance Products | $21,997 | $19,196 | $56,356 | $50,335 | | Total | $239,619 | $211,729 | $686,996 | $613,072 | Net Sales by Region (in thousands) | Region | Three Months 2022 | Three Months 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $146,820 | $129,370 | $412,284 | $370,446 | | Latin America and Canada | $45,048 | $37,386 | $135,722 | $115,808 | | Europe, Middle East and Africa | $29,931 | $27,802 | $90,889 | $84,959 | | Asia Pacific | $17,820 | $17,171 | $48,101 | $41,859 | | Total | $239,619 | $211,729 | $686,996 | $613,072 | - In February 2022, the company acquired a business for $13.7 million that develops processing aids for the ethanol fermentation industry, included in the MFAs and other product category under the Animal Health segment[43][44] - The company is involved in an environmental investigation by the EPA regarding groundwater contamination at the Omega Chemical Corporation Superfund Site, with potential liability uncertain[57][58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial condition and operational results, discussing sales growth, segment performance, and the impact of external factors like geopolitical events and regulatory reviews Overview and Key Trends This section provides an overview of key trends and external factors impacting the company, including geopolitical conflicts, regulatory reviews, and the ongoing pandemic - Sales to Russia and Ukraine represent approximately 1% of annual consolidated net sales, and the company intends to continue providing medicines and vaccines to existing customers in Russia[84][85] - The FDA is reviewing the safety of carbadox (Mecadox), and its potential withdrawal could adversely affect financial results[91][93] - Sales of Mecadox totaled $20 million for the twelve months ended March 31, 2022[93] - The company continues to navigate the COVID-19 pandemic, maintaining operations and employee safety despite some cost increases from supply chain disruptions[87][88][89] Results of Operations This section details the company's operational performance, including net sales, gross profit, operating income, and net income, with segment-level analysis Q3 FY2022 vs Q3 FY2021 Performance (in thousands) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $239,619 | $211,729 | $27,890 | 13% | | Gross Profit | $71,626 | $69,165 | $2,461 | 4% | | Operating Income | $19,194 | $20,132 | ($938) | (5)% | | Net Income | $17,689 | $12,161 | $5,528 | 45% | - For the three months ended March 31, 2022, net sales increased 13% year-over-year, driven by growth in Animal Health (+11%), Mineral Nutrition (+19%), and Performance Products (+15%)[99][100][101][102] - For the nine months ended March 31, 2022, net sales increased 12% year-over-year, driven by growth in Animal Health (+10%), Mineral Nutrition (+16%), and Performance Products (+12%)[112][113][114][115] - Gross margin for Q3 FY2022 decreased to 29.9% from 32.7% in the prior year, primarily due to increased raw material and logistics costs[103][104] - Adjusted EBITDA for Q3 FY2022 remained flat at $28.0 million, with an increase in Mineral Nutrition Adjusted EBITDA offset by a decrease in Animal Health Adjusted EBITDA[111] Liquidity and Capital Resources This section discusses the company's liquidity position, cash flow from operating, investing, and financing activities, and available capital resources - Net cash provided by operating activities for the nine months ended March 31, 2022, was $30.1 million, a decrease from $45.2 million in the prior year, primarily due to increased use of cash for inventory and receivables[125][127] - Investing activities used $13.0 million, including $25.2 million for capital expenditures and $10.8 million for a business acquisition, partially offset by a $20.9 million net reduction in short-term investments[128] - As of March 31, 2022, the company held $92.8 million in cash, cash equivalents, and short-term investments, with $123.3 million available under its 2021 Revolver facility[131][132] - The Board of Directors declared a quarterly cash dividend of $0.12 per share, payable on June 22, 2022[133] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risk exposures, including interest rates and foreign currency, from prior disclosures, utilizing derivatives for hedging - There were no material changes in the Company's financial market risks related to interest rates and foreign currency exchange rates from the risks disclosed in the Annual Report[152] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[153] - There were no changes during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[154] PART II—OTHER INFORMATION This section covers other required information, including legal proceedings, risk factors, and other miscellaneous disclosures Item 1. Legal Proceedings This section incorporates by reference information on legal proceedings from the commitments and contingencies notes in the financial statements - Refers to 'Notes to the Consolidated Financial Statements—Commitments and Contingencies' for information on legal proceedings[155] Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report - There were no material changes in the Company's risk factors from the risks disclosed in the Annual Report[157] Other Items (2, 3, 4, 5) This section confirms no unregistered sales of equity securities, no defaults on senior securities, and no other reportable information - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information) are all reported as 'None'[158][159][161] - Item 4 (Mine Safety Disclosures) is reported as 'Not applicable'[160]