|
Delaware
|
| |
13-1840497
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(I.R.S. Employer
Identification No.) |
|
|
Glenpointe Centre East, 3rd Floor
300 Frank W. Burr Boulevard, Suite 21 Teaneck, New Jersey (Address of Principal Executive Offices)
|
| |
07666-6712
(Zip Code)
|
|
| Large accelerated filer | | | ☐ | | | | | | Accelerated filer | | | ☒ | |
| Non-accelerated filer | | | ☐ | | | (Do not check if a smaller reporting company) | | |
Smaller reporting company
|
| | ☐ | |
| Emerging growth company | | | ☒ | | | | | | | | | | |
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Page
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PART I—FINANCIAL INFORMATION | | | |||||
| | | | 3 | | | |
| | | | 3 | | | |
| | | | 4 | | | |
| | | | 5 | | | |
| | | | 6 | | | |
| | | | 7 | | | |
| | | | 17 | | | |
| | | | 26 | | | |
| | | | 27 | | | |
PART II—OTHER INFORMATION | | | |||||
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 28 | | | |
| | | | 29 | | |
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
| | |
(unaudited)
(in thousands, except per share amounts) |
| |||||||||
Net sales
|
| | | $ | 193,412 | | | | | $ | 187,987 | | |
Cost of goods sold
|
| | | | 130,030 | | | | | | 126,988 | | |
Gross profit
|
| | | | 63,382 | | | | | | 60,999 | | |
Selling, general and administrative expenses
|
| | | | 40,995 | | | | | | 39,186 | | |
Operating income
|
| | | | 22,387 | | | | | | 21,813 | | |
Interest expense, net
|
| | | | 3,118 | | | | | | 3,907 | | |
Foreign currency (gains) losses, net
|
| | | | 325 | | | | | | 334 | | |
Income before income taxes
|
| | | | 18,944 | | | | | | 17,572 | | |
Provision (benefit) for income taxes
|
| | | | 3,052 | | | | | | 5,395 | | |
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | |
Net income per share | | | | ||||||||||
basic
|
| | | $ | 0.40 | | | | | $ | 0.31 | | |
diluted
|
| | | $ | 0.39 | | | | | $ | 0.31 | | |
Weighted average common shares outstanding | | | | ||||||||||
basic
|
| | | | 39,944 | | | | | | 39,408 | | |
diluted
|
| | | | 40,293 | | | | | | 39,906 | | |
Dividends per share
|
| | | $ | 0.10 | | | | | $ | 0.10 | | |
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
| | |
(unaudited)
(in thousands) |
| |||||||||
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | |
Change in fair value of derivative instruments
|
| | | | (622) | | | | | | 34 | | |
Foreign currency translation adjustment
|
| | | | 3,233 | | | | | | (893) | | |
Unrecognized net pension gains (losses)
|
| | | | 131 | | | | | | 7,169 | | |
(Provision) benefit for income taxes
|
| | | | 187 | | | | | | (2,750) | | |
Other comprehensive income (loss)
|
| | | | 2,929 | | | | | | 3,560 | | |
Comprehensive income
|
| | | $ | 18,821 | | | | | $ | 15,737 | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
| | |
(unaudited)
(in thousands, except share and per share amounts) |
| |||||||||
ASSETS | | | | ||||||||||
Cash and cash equivalents
|
| | | $ | 62,097 | | | | | $ | 56,083 | | |
Accounts receivable, net
|
| | | | 136,337 | | | | | | 125,847 | | |
Inventories, net
|
| | | | 170,928 | | | | | | 161,233 | | |
Other current assets
|
| | | | 25,193 | | | | | | 20,502 | | |
Total current assets
|
| | | | 394,555 | | | | | | 363,665 | | |
Property, plant and equipment, net
|
| | | | 131,242 | | | | | | 127,351 | | |
Intangibles, net
|
| | | | 64,457 | | | | | | 54,602 | | |
Goodwill
|
| | | | 23,982 | | | | | | 23,982 | | |
Other assets
|
| | | | 56,875 | | | | | | 53,797 | | |
Total assets
|
| | | $ | 671,111 | | | | | $ | 623,397 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | ||||||||||
Current portion of long-term debt
|
| | | $ | 7,895 | | | | | $ | 6,250 | | |
Accounts payable
|
| | | | 61,732 | | | | | | 56,894 | | |
Accrued expenses and other current liabilities
|
| | | | 51,480 | | | | | | 52,652 | | |
Total current liabilities
|
| | | | 121,107 | | | | | | 115,796 | | |
Revolving credit facility
|
| | | | 85,000 | | | | | | 65,000 | | |
Long-term debt
|
| | | | 238,959 | | | | | | 241,891 | | |
Other liabilities
|
| | | | 56,570 | | | | | | 49,553 | | |
Total liabilities
|
| | | | 501,636 | | | | | | 472,240 | | |
Commitments and contingencies (Note 8) | | | | ||||||||||
Common stock, par value $0.0001 per share; 300,000,000 Class A shares
authorized, 19,555,839 and 19,249,132 shares issued and outstanding at September 30, 2017, and June 30, 2017, respectively; 30,000,000 Class B shares authorized, 20,614,836 and 20,626,836 shares issued and outstanding at September 30, 2017, and June 30, 2017, respectively |
| | | | 4 | | | | | | 4 | | |
Preferred stock, par value $0.0001 per share; 16,000,000 shares authorized, no shares issued and outstanding
|
| | | | — | | | | | | — | | |
Paid-in capital
|
| | | | 127,326 | | | | | | 123,840 | | |
Retained earnings
|
| | | | 94,653 | | | | | | 82,750 | | |
Accumulated other comprehensive income (loss)
|
| | | | (52,508) | | | | | | (55,437) | | |
Total stockholders’ equity
|
| | | | 169,475 | | | | | | 151,157 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 671,111 | | | | | $ | 623,397 | | |
|
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
| | |
(unaudited)
(in thousands) |
| |||||||||
OPERATING ACTIVITIES | | | | ||||||||||
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | |
Adjustments to reconcile net income to net cash provided (used) by operating activities:
|
| | | ||||||||||
Depreciation and amortization
|
| | | | 6,644 | | | | | | 6,318 | | |
Amortization of debt issuance costs and debt discount
|
| | | | 221 | | | | | | 253 | | |
Acquisition-related cost of goods sold
|
| | | | 249 | | | | | | — | | |
Acquisition-related accrued compensation
|
| | | | 437 | | | | | | 420 | | |
Acquisition-related accrued interest
|
| | | | 253 | | | | | | 393 | | |
Deferred income taxes
|
| | | | 770 | | | | | | 1,706 | | |
Foreign currency (gains) losses, net
|
| | | | 345 | | | | | | 97 | | |
Other
|
| | | | 213 | | | | | | 87 | | |
Changes in operating assets and liabilities, net of business acquisition: | | | | ||||||||||
Accounts receivable, net
|
| | | | (8,386) | | | | | | 3,906 | | |
Inventories, net
|
| | | | (5,196) | | | | | | 4,544 | | |
Other current assets
|
| | | | (4,458) | | | | | | (2,430) | | |
Other assets
|
| | | | 332 | | | | | | 346 | | |
Accounts payable
|
| | | | 3,652 | | | | | | (5,004) | | |
Accrued expenses and other liabilities
|
| | | | (6,165) | | | | | | (1,357) | | |
Net cash provided (used) by operating activities
|
| | | | 4,803 | | | | | | 21,456 | | |
INVESTING ACTIVITIES | | | | ||||||||||
Capital expenditures
|
| | | | (4,998) | | | | | | (5,911) | | |
Business acquisition
|
| | | | (11,562) | | | | | | — | | |
Other, net
|
| | | | (272) | | | | | | 25 | | |
Net cash provided (used) by investing activities
|
| | | | (16,832) | | | | | | (5,886) | | |
FINANCING ACTIVITIES | | | | ||||||||||
Revolving credit facility borrowings
|
| | | | 61,870 | | | | | | 34,000 | | |
Revolving credit facility repayments
|
| | | | (41,870) | | | | | | (41,000) | | |
Payments of long-term debt, capital leases and other
|
| | | | (1,652) | | | | | | (729) | | |
Proceeds from common shares issued
|
| | | | 3,486 | | | | | | — | | |
Dividends paid
|
| | | | (3,989) | | | | | | (3,941) | | |
Net cash provided (used) by financing activities
|
| | | | 17,845 | | | | | | (11,670) | | |
Effect of exchange rate changes on cash
|
| | | | 198 | | | | | | (90) | | |
Net increase (decrease) in cash and cash equivalents
|
| | | | 6,014 | | | | | | 3,810 | | |
Cash and cash equivalents at beginning of period
|
| | | | 56,083 | | | | | | 33,605 | | |
Cash and cash equivalents at end of period
|
| | | $ | 62,097 | | | | | $ | 37,415 | | |
|
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | |
Weighted average number of shares – basic
|
| | | | 39,944 | | | | | | 39,408 | | |
Dilutive effect of stock options
|
| | | | 349 | | | | | | 498 | | |
Weighted average number of shares – diluted
|
| | | | 40,293 | | | | | | 39,906 | | |
Net income per share | | | | ||||||||||
basic
|
| | | $ | 0.40 | | | | | $ | 0.31 | | |
diluted
|
| | | $ | 0.39 | | | | | $ | 0.31 | | |
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
Interest expense, net | | | | ||||||||||
Term loan
|
| | | $ | 2,033 | | | | | $ | 2,905 | | |
Revolving credit facility
|
| | | | 681 | | | | | | 955 | | |
Amortization of debt issuance costs and debt discount
|
| | | | 221 | | | | | | 253 | | |
Acquisition-related accrued interest
|
| | | | 253 | | | | | | 393 | | |
Other
|
| | | | 239 | | | | | | 81 | | |
Interest expense
|
| | | | 3,427 | | | | | | 4,587 | | |
Interest (income)
|
| | | | (309) | | | | | | (680) | | |
| | | | $ | 3,118 | | | | | $ | 3,907 | | |
Depreciation and amortization | | | | ||||||||||
Depreciation of property, plant and equipment
|
| | | $ | 5,183 | | | | | $ | 4,731 | | |
Amortization of intangible assets
|
| | | | 1,449 | | | | | | 1,528 | | |
Amortization of other assets
|
| | | | 12 | | | | | | 59 | | |
| | | | $ | 6,644 | | | | | $ | 6,318 | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
Inventories | | | | ||||||||||
Raw materials
|
| | | $ | 57,719 | | | | | $ | 54,861 | | |
Work-in-process
|
| | | | 12,014 | | | | | | 12,402 | | |
Finished goods
|
| | | | 101,195 | | | | | | 93,970 | | |
| | | | $ | 170,928 | | | | | $ | 161,233 | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
Accrued expenses and other current liabilities | | | | ||||||||||
Employee related
|
| | | $ | 21,030 | | | | | $ | 26,553 | | |
Commissions and rebates
|
| | | | 4,964 | | | | | | 6,443 | | |
Insurance related
|
| | | | 1,522 | | | | | | 1,515 | | |
Professional fees
|
| | | | 3,513 | | | | | | 3,823 | | |
Income and other taxes
|
| | | | 3,631 | | | | | | 3,035 | | |
Other
|
| | | | 16,820 | | | | | | 11,283 | | |
| | | | $ | 51,480 | | | | | $ | 52,652 | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
Accumulated other comprehensive income (loss) | | | | | | | | | | | | | |
Derivative instruments
|
| | | $ | 2,064 | | | | | $ | 2,686 | | |
Foreign currency translation adjustment
|
| | | | (40,323) | | | | | | (43,556) | | |
Unrecognized net pension gains (losses)
|
| | | | (17,928) | | | | | | (18,059) | | |
(Provision) benefit for income taxes on derivative instruments
|
| | | | (1,316) | | | | | | (1,553) | | |
(Provision) benefit for incomes taxes on long-term intercompany investments
|
| | | | 8,166 | | | | | | 8,166 | | |
(Provision) benefit for income taxes on pension gains (losses)
|
| | | | (3,171) | | | | | | (3,121) | | |
| | | | $ | (52,508) | | | | | $ | (55,437) | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
Term A Loan due June 2022
|
| | | $ | 248,438 | | | | | $ | 250,000 | | |
Capitalized lease obligations
|
| | | | 182 | | | | | | — | | |
| | | | | 248,620 | | | | | | 250,000 | | |
Unamortized debt issuance costs and debt discount
|
| | | | (1,766) | | | | | | (1,859) | | |
| | | | | 246,854 | | | | | | 248,141 | | |
Less: current maturities
|
| | | | (7,895) | | | | | | (6,250) | | |
| | | | $ | 238,959 | | | | | $ | 241,891 | | |
|
Instrument
|
| |
Hedge
|
| |
Notional
Amount at September 30, 2017 |
| |
Fair value as of
|
| ||||||||||||
|
Consolidated
Balance Sheet |
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||||||||||
Options
|
| |
Brazilian Real calls
|
| |
R$19,500
|
| |
Other current assets
|
| | | $ | 1,781 | | | | | $ | 2,686 | | |
Swap
|
| |
Interest rate swap
|
| |
$ 150,000
|
| | Other assets | | | | $ | 283 | | | | | $ | — | | |
Instrument
|
| |
Hedge
|
| |
Gain (loss) recorded in OCI
|
| |
Gain (loss) recognized in
consolidated statements of operations |
| |
Consolidated Statement
of Operations Line Item Total |
| ||||||||||||||||||||||||||||||
|
September 30,
2017 |
| |
September 30,
2016 |
| |
Consolidated
Statement of Operations |
| |
September 30,
2017 |
| |
September 30,
2016 |
| |
September 30,
2017 |
| |
September 30,
2016 |
| |||||||||||||||||||||||
Options
|
| | Brazilian Real calls |
| | | $ | (905) | | | | | $ | 34 | | | | Cost of goods sold |
| | | $ | 186 | | | | | $ | (1,135) | | | | | $ | 130,030 | | | | | $ | 126,988 | | |
Swap
|
| |
Interest rate
swap |
| | | $ | 283 | | | | | $ | — | | | | Interest expense, net |
| | | $ | — | | | | | $ | — | | | | | $ | 3,118 | | | | | $ | 3,907 | | |
As of
|
| |
September 30, 2017
|
| |
June 30, 2017
|
| ||||||||||||||||||||||||||||||
| | |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| ||||||||||||||||||
Derivatives asset
|
| | | $ | — | | | | | $ | 1,781 | | | | | $ | — | | | | | $ | — | | | | | $ | 2,686 | | | | | $ | — | | |
Interest rate swap
|
| | | $ | — | | | | | $ | 283 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Contingent consideration on
acquisitions |
| | | $ | — | | | | | $ | — | | | | | $ | (7,827) | | | | | $ | — | | | | | $ | — | | | | | $ | (7,644) | | |
|
Balance, June 30, 2017
|
| | | $ | (7,644) | | |
|
Acquisition-related accrued interest
|
| | | | (253) | | |
|
Payment
|
| | | | 70 | | |
|
Balance, September 30, 2017
|
| | | $ | (7,827) | | |
|
| | |
Three Months
|
| |||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| ||||||
Net sales | | | | ||||||||||
MFAs and other
|
| | | $ | 79,603 | | | | | $ | 83,419 | | |
Nutritional Specialties
|
| | | | 30,777 | | | | | | 26,304 | | |
Vaccines
|
| | | | 18,461 | | | | | | 14,778 | | |
Animal Health
|
| | | | 128,841 | | | | | | 124,501 | | |
Mineral Nutrition
|
| | | | 52,073 | | | | | | 51,592 | | |
Performance Products
|
| | | | 12,498 | | | | | | 11,894 | | |
Total segments
|
| | | $ | 193,412 | | | | | $ | 187,987 | | |
Depreciation and amortization | | | | ||||||||||
Animal Health
|
| | | $ | 5,254 | | | | | $ | 4,898 | | |
Mineral Nutrition
|
| | | | 585 | | | | | | 542 | | |
Performance Products
|
| | | | 246 | | | | | | 218 | | |
Total segments
|
| | | $ | 6,085 | | | | | $ | 5,658 | | |
Adjusted EBITDA | | | | ||||||||||
Animal Health
|
| | | $ | 33,742 | | | | | $ | 32,619 | | |
Mineral Nutrition
|
| | | | 3,716 | | | | | | 3,988 | | |
Performance Products
|
| | | | 248 | | | | | | 742 | | |
Total segments
|
| | | $ | 37,706 | | | | | $ | 37,349 | | |
Reconciliation of income before income taxes to Adjusted EBITDA | | | | ||||||||||
Income before income taxes
|
| | | $ | 18,944 | | | | | $ | 17,572 | | |
Interest expense, net
|
| | | | 3,118 | | | | | | 3,907 | | |
Depreciation and amortization – Total segments
|
| | | | 6,085 | | | | | | 5,658 | | |
Depreciation and amortization – Corporate
|
| | | | 559 | | | | | | 660 | | |
Corporate costs
|
| | | | 7,589 | | | | | | 7,524 | | |
Acquisition-related cost of goods sold
|
| | | | 249 | | | | | | — | | |
Acquisition-related accrued compensation
|
| | | | 437 | | | | | | 420 | | |
Acquisition-related transaction costs
|
| | | | 400 | | | | | | 1,274 | | |
Foreign currency (gains) losses, net
|
| | | | 325 | | | | | | 334 | | |
Adjusted EBITDA – Total segments
|
| | | $ | 37,706 | | | | | $ | 37,349 | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| ||||||
Identifiable assets | | | | ||||||||||
Animal Health
|
| | | $ | 479,075 | | | | | $ | 442,521 | | |
Mineral Nutrition
|
| | | | 60,371 | | | | | | 55,184 | | |
Performance Products
|
| | | | 22,331 | | | | | | 23,681 | | |
Total segments
|
| | | | 561,777 | | | | | | 521,386 | | |
Corporate
|
| | | | 109,334 | | | | | | 102,011 | | |
Total
|
| | | $ | 671,111 | | | | | $ | 623,397 | | |
|
| | |
Three Months
|
| |||||||||||||||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| |
Change
|
| |||||||||||||||
| | |
(in thousands, except per share amounts and percentages)
|
| |||||||||||||||||||||
Net sales
|
| | | $ | 193,412 | | | | | $ | 187,987 | | | | | $ | 5,425 | | | | | | 3% | | |
Gross profit
|
| | | | 63,382 | | | | | | 60,999 | | | | | | 2,383 | | | | | | 4% | | |
Selling, general and administrative expenses
|
| | | | 40,995 | | | | | | 39,186 | | | | | | 1,809 | | | | | | 5% | | |
Operating income
|
| | | | 22,387 | | | | | | 21,813 | | | | | | 574 | | | | | | 3% | | |
Interest expense, net
|
| | | | 3,118 | | | | | | 3,907 | | | | | | (789) | | | | | | (20)% | | |
Foreign currency (gains) losses, net
|
| | | | 325 | | | | | | 334 | | | | | | (9) | | | | | | (3)% | | |
Income before income taxes
|
| | | | 18,944 | | | | | | 17,572 | | | | | | 1,372 | | | | | | 8% | | |
Provision (benefit) for income taxes
|
| | | | 3,052 | | | | | | 5,395 | | | | | | (2,343) | | | | | | (43)% | | |
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | | | | $ | 3,715 | | | | | | 31% | | |
Net income per share | | | | | | ||||||||||||||||||||
basic
|
| | | $ | 0.40 | | | | | $ | 0.31 | | | | | $ | 0.09 | | | | | | | | |
diluted
|
| | | $ | 0.39 | | | | | $ | 0.31 | | | | | $ | 0.08 | | | | | | | | |
Weighted average number of shares outstanding | | | | | | ||||||||||||||||||||
basic
|
| | | | 39,944 | | | | | | 39,408 | | | | | | | | | | | | | | |
diluted
|
| | | | 40,293 | | | | | | 39,906 | | | | | | | | | | | | | | |
Ratio to net sales | | | | | | ||||||||||||||||||||
Gross profit
|
| | | | 32.8% | | | | | | 32.4% | | | | | | | | | | | | | | |
Selling, general and administrative expenses
|
| | | | 21.2% | | | | | | 20.8% | | | | | | | | | | | | | | |
Operating income
|
| | | | 11.6% | | | | | | 11.6% | | | | | | | | | | | | | | |
Income before income taxes
|
| | | | 9.8% | | | | | | 9.3% | | | | | | | | | | | | | | |
Net income
|
| | | | 8.2% | | | | | | 6.5% | | | | | | | | | | | | | | |
Effective tax rate
|
| | | | 16.1% | | | | | | 30.7% | | | | | | | | | | | | | | |
| | |
Three Months
|
| |||||||||||||||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| |
Change
|
| |||||||||||||||
| | |
(in thousands, except percentages)
|
| |||||||||||||||||||||
Net sales | | | | | | ||||||||||||||||||||
MFAs and other
|
| | | $ | 79,603 | | | | | $ | 83,419 | | | | | $ | (3,816) | | | | |
|
(5)%
|
| |
Nutritional specialties
|
| | | | 30,777 | | | | | | 26,304 | | | | | | 4,473 | | | | |
|
17%
|
| |
Vaccines
|
| | | | 18,461 | | | | | | 14,778 | | | | | | 3,683 | | | | |
|
25%
|
| |
Animal Health
|
| | | | 128,841 | | | | | | 124,501 | | | | | | 4,340 | | | | |
|
3%
|
| |
Mineral Nutrition
|
| | | | 52,073 | | | | | | 51,592 | | | | | | 481 | | | | |
|
1%
|
| |
Performance Products
|
| | | | 12,498 | | | | | | 11,894 | | | | | | 604 | | | | |
|
5%
|
| |
Total
|
| | | $ | 193,412 | | | | | $ | 187,987 | | | | | $ | 5,425 | | | | |
|
3%
|
| |
Adjusted EBITDA | | | | | | ||||||||||||||||||||
Animal Health
|
| | | $ | 33,742 | | | | | $ | 32,619 | | | | | $ | 1,123 | | | | |
|
3%
|
| |
Mineral Nutrition
|
| | | | 3,716 | | | | | | 3,988 | | | | | | (272) | | | | |
|
(7)%
|
| |
Performance Products
|
| | | | 248 | | | | | | 742 | | | | | | (494) | | | | |
|
(67)%
|
| |
Corporate
|
| | | | (7,589) | | | | | | (7,524) | | | | | | (65) | | | | |
|
*
|
| |
Total
|
| | | $ | 30,117 | | | | | $ | 29,825 | | | | | $ | 292 | | | | |
|
1%
|
| |
Adjusted EBITDA ratio to segment net sales | | | | | | ||||||||||||||||||||
Animal Health
|
| | | | 26.2% | | | | | | 26.2% | | | | | ||||||||||
Mineral Nutrition
|
| | | | 7.1% | | | | | | 7.7% | | | | | ||||||||||
Performance Products
|
| | | | 2.0% | | | | | | 6.2% | | | | | ||||||||||
Corporate(1)
|
| | |
|
(3.9)%
|
| | | |
|
(4.0)%
|
| | | | ||||||||||
Total(1)
|
| | |
|
15.6%
|
| | | |
|
15.9%
|
| | | |
| | |
Three Months
|
| |||||||||||||||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| |
Change
|
| |||||||||||||||
| | |
(in thousands, except percentages)
|
| |||||||||||||||||||||
Net income
|
| | | $ | 15,892 | | | | | $ | 12,177 | | | | | $ | 3,715 | | | | |
|
31%
|
| |
Interest expense, net
|
| | | | 3,118 | | | | | | 3,907 | | | | | | (789) | | | | |
|
(20)%
|
| |
Provision (benefit) for income taxes
|
| | | | 3,052 | | | | | | 5,395 | | | | | | (2,343) | | | | |
|
(43)%
|
| |
Depreciation and amortization
|
| | | | 6,644 | | | | | | 6,318 | | | | | | 326 | | | | |
|
5%
|
| |
EBITDA
|
| | | | 28,706 | | | | | | 27,797 | | | | | | 909 | | | | |
|
3%
|
| |
Acquisition-related cost of goods sold
|
| | | | 249 | | | | | | — | | | | | | 249 | | | | |
|
*
|
| |
Acquisition-related accrued compensation
|
| | | | 437 | | | | | | 420 | | | | | | 17 | | | | |
|
4%
|
| |
Acquisition-related transaction costs
|
| | | | 400 | | | | | | 1,274 | | | | | | (874) | | | | |
|
(69)%
|
| |
Foreign currency (gains) losses, net
|
| | | | 325 | | | | | | 334 | | | | | | (9) | | | | |
|
(3)%
|
| |
Adjusted EBITDA
|
| | | $ | 30,117 | | | | | $ | 29,825 | | | | | $ | 292 | | | | |
|
1%
|
| |
|
| | |
Three Months
|
| |||||||||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| |
Change
|
| |||||||||
| | |
(in thousands)
|
| |||||||||||||||
Cash provided by/(used in): | | | | | |||||||||||||||
Operating activities
|
| | | $ | 4,803 | | | | | $ | 21,456 | | | | | $ | (16,653) | | |
Investing activities
|
| | | | (16,832) | | | | | | (5,886) | | | | | | (10,946) | | |
Financing activities
|
| | | | 17,845 | | | | | | (11,670) | | | | | | 29,515 | | |
Effect of exchange-rate changes on cash and cash equivalents
|
| | | | 198 | | | | | | (90) | | | | | | 288 | | |
Net increase/(decrease) in cash and cash equivalents
|
| | | $ | 6,014 | | | | | $ | 3,810 | | | | | $ | 2,204 | | |
|
| | |
Three Months
|
| |||||||||||||||
For the Periods Ended September 30
|
| |
2017
|
| |
2016
|
| |
Change
|
| |||||||||
| | |
(in thousands)
|
| |||||||||||||||
EBITDA
|
| | | $ | 28,706 | | | | | $ | 27,797 | | | | | $ | 909 | | |
Acquisition-related cost of goods sold
|
| | | | 249 | | | | | | — | | | | | | 249 | | |
Acquisition-related accrued compensation
|
| | | | 437 | | | | | | 420 | | | | | | 17 | | |
Acquisition-related transaction costs
|
| | | | 400 | | | | | | 1,274 | | | | | | (874) | | |
Foreign currency (gains) losses, net
|
| | | | 325 | | | | | | 334 | | | | | | (9) | | |
Interest paid
|
| | | | (2,679) | | | | | | (3,770) | | | | | | 1,091 | | |
Income taxes paid
|
| | | | (4,039) | | | | | | (3,717) | | | | | | (322) | | |
Changes in operating assets and liabilities and other items
|
| | | | (18,196) | | | | | | 392 | | | | | | (18,588) | | |
Cash used for acquisition-related transaction costs
|
| | | | (400) | | | | | | (1,274) | | | | | | 874 | | |
Net cash provided (used) by operating activities
|
| | | $ | 4,803 | | | | | $ | 21,456 | | | | | $ | (16,653) | | |
|
As of
|
| |
September 30,
2017 |
| |
June 30,
2017 |
| |
Change
|
| |||||||||
| | |
(in thousands, except ratios)
|
| |||||||||||||||
Cash and cash equivalents
|
| | | $ | 62,097 | | | | | $ | 56,083 | | | | | $ | 6,014 | | |
Working capital
|
| | | | 219,246 | | | | | | 198,036 | | | | | | 21,210 | | |
Ratio of current assets to current liabilities
|
| | | | 2.94:1 | | | | | | 2.81:1 | | | | | | | | |
| | | | Exhibit 31.1 Chief Executive Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | |
| | | | Exhibit 31.2 Chief Financial Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section 302 | |
| | | | Exhibit 32.1 Chief Executive Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | |
| | | | Exhibit 32.2 Chief Financial Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section 906 | |
| | | | Exhibit 101.INS* XBRL Instance Document | |
| | | | Exhibit 101.SCH* XBRL Taxonomy Extension Schema Document | |
| | | | Exhibit 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document | |
| | | | Exhibit 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document | |
| | | | Exhibit 101.LAB* XBRL Taxonomy Extension Label Linkbase Document | |
| | | | Exhibit 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document | |
| | | | Phibro Animal Health Corporation | | |||
| November 6, 2017 | | | By: | | |
/s/ Jack C. Bendheim
Jack C. Bendheim
Chairman, President and Chief Executive Officer |
|
| November 6, 2017 | | | By: | | |
/s/ Richard G. Johnson
Richard G. Johnson
Chief Financial Officer |
|
| Dated: November 6, 2017 | | |
/s/ Jack C. Bendheim
Jack C. Bendheim
Chairman, President and Chief Executive Officer |
|
| Dated: November 6, 2017 | | |
/s/ Richard G. Johnson
Richard G. Johnson
Chief Financial Officer |
|
| Dated: November 6, 2017 | | |
/s/ Jack C. Bendheim
Jack C. Bendheim
Chairman, President and Chief Executive Officer |
|
| Dated: November 6, 2017 | | |
/s/ Richard G. Johnson
Richard G. Johnson
Chief Financial Officer |
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 30, 2017 |
|
Entity Registrant Name | PHIBRO ANIMAL HEALTH CORP | |
Entity Central Index Key | 0001069899 | |
Trading Symbol | pahc | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 19,581,889 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 20,602,836 |
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||
Net sales | $ 193,412 | $ 187,987 |
Cost of goods sold | 130,030 | 126,988 |
Gross profit | 63,382 | 60,999 |
Selling, general and administrative expenses | 40,995 | 39,186 |
Operating income | 22,387 | 21,813 |
Interest expense, net | 3,118 | 3,907 |
Foreign currency (gains) losses, net | 325 | 334 |
Income before income taxes | 18,944 | 17,572 |
Provision (benefit) for income taxes | 3,052 | 5,395 |
Net income | $ 15,892 | $ 12,177 |
Net income per share | ||
basic (in dollars per share) | $ 0.40 | $ 0.31 |
diluted (in dollars per share) | $ 0.39 | $ 0.31 |
Weighted average common shares outstanding | ||
basic (in shares) | 39,944 | 39,408 |
diluted (in shares) | 40,293 | 39,906 |
Dividends per share (in dollars per share) | $ 0.10 | $ 0.10 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 15,892 | $ 12,177 |
Change in fair value of derivative instruments | (622) | 34 |
Foreign currency translation adjustment | 3,233 | (893) |
Unrecognized net pension gains (losses) | 131 | 7,169 |
(Provision) benefit for income taxes | 187 | (2,750) |
Other comprehensive income (loss) | 2,929 | 3,560 |
Comprehensive income | $ 18,821 | $ 15,737 |
CONSOLIDATED BALANCE SHEETS (Parentheticals) (unaudited) - $ / shares |
Sep. 30, 2017 |
Jun. 30, 2017 |
---|---|---|
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 16,000,000 | 16,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A common stock | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 19,555,839 | 19,249,132 |
Common stock, shares outstanding | 19,555,839 | 19,249,132 |
Class B common stock | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 20,614,836 | 20,626,836 |
Common stock, shares outstanding | 20,614,836 | 20,626,836 |
Description of Business |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Description Of Business [Abstract] | |
Description of Business | 1. Description of Business
Phibro Animal Health Corporation (“Phibro” or “PAHC”) and its subsidiaries (together, the “Company”) is a diversified global developer, manufacturer and marketer of a broad range of animal health and mineral nutrition products for food animals including poultry, swine, cattle, dairy and aquaculture. The Company is also a manufacturer and marketer of performance products for use in the personal care, automotive, industrial chemical and chemical catalyst industries. Unless otherwise indicated or the context requires otherwise, references in this report to “we,” “our,” “us,” and similar expressions refer to Phibro and its subsidiaries.
The unaudited consolidated financial information for the three months ended September 30, 2017 and 2016, is presented on the same basis as the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017 (the “Annual Report”), filed with the Securities and Exchange Commission on August 30, 2017 (File no. 001-36410). In the opinion of management, these financial statements include all adjustments necessary for a fair statement of the financial position, results of operations and cash flows of the Company for the interim periods, and the adjustments are of a normal and recurring nature. The financial results for any interim period are not necessarily indicative of the results for the full year. The consolidated balance sheet information as of June 30, 2017, was derived from the audited consolidated financial statements, which include the accounts of Phibro and its consolidated subsidiaries, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The unaudited consolidated financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report.
The consolidated financial statements include the accounts of Phibro and its consolidated subsidiaries. Intercompany balances and transactions have been eliminated in the consolidated financial statements. The decision whether or not to consolidate an entity requires consideration of majority voting interests, as well as effective control over the entity.
|
Summary of Significant Accounting Policies and New Accounting Standards |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies and New Accounting Standards | 2. Summary of Significant Accounting Policies and New Accounting Standards
Our significant accounting policies are described in the notes to the consolidated financial statements included in our Annual Report. As of September 30, 2017, there have been no material changes to any of the significant accounting policies contained therein.
Net Income per Share and Weighted Average Shares
Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period.
Diluted net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period after giving effect to potential dilutive common shares resulting from the assumed exercise of stock options. For the three months ended September 30, 2017 and 2016, all common share equivalents were included in the calculation of diluted net income per share.
Dividends
We declared and paid quarterly cash dividends of $0.10 per share, totaling $3,989 during the three months ended September 30, 2017, to holders of our Class A common stock and Class B common stock.
New Accounting Standards
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities simplifies the application of hedge accounting guidance and improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. During the three months ended September 30, 2017, we elected early adoption of this guidance and applied the qualitative method, and it did not have a material effect on our consolidated financial statements. For additional details, see “—Derivatives.”
ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, provides specific guidance for the classification of certain transactions within the statement of cash flows. The issues addressed by this guidance include, but are not limited to, debt prepayments or debt extinguishment costs, contingent consideration payments made after a business combination and proceeds from the settlement of insurance claims. This ASU is effective for annual reporting periods beginning after December 15, 2017. Early application is permitted, as long as all provisions under the guidance are applied simultaneously. The provisions of this guidance are to be applied using a retrospective transition approach. We do not expect adoption of this guidance to have a material effect on our consolidated financial statements.
ASU 2016-02, Leases (Topic 842), supersedes the current lease accounting guidance, requires an entity to recognize assets and liabilities for both financing and operating leases on the balance sheet and requires additional qualitative and quantitative disclosures regarding leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018. We are evaluating the effect of adoption of this guidance on our consolidated financial statements.
ASU 2015-11, Inventory (Topic 330), requires entities to measure inventory at the lower of cost and net realizable value (“NRV”). NRV is defined as “the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” We applied this guidance during the three months ended September 30, 2017, and it did not have a material effect on our consolidated financial statements.
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), establishes principles for the recognition of revenue from contracts with customers. The underlying principle is to identify the performance obligations of a contract, allocate the revenue to each performance obligation and then to recognize revenue when the company satisfies a specific performance obligation of the contract. ASU 2014-09 and its amendments are effective for our consolidated financial statements beginning July 1, 2018. We expect to apply the new standard using the modified retrospective method. We continue to evaluate the effect that the adoption of this guidance may have on our consolidated financial statements.
|
Statements of Operations-Additional Information |
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Supplemental Income Statement Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statements of Operations-Additional Information | 3. Statements of Operations—Additional Information
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Balance Sheets-Additional Information |
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Balance Sheets Additional Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheets-Additional Information | 4. Balance Sheets—Additional Information
In September 2017, we acquired a business for approximately $15,000, including approximately $3,500 paid subsequent to September 30, 2017. The business develops, manufactures and markets animal health products. We accounted for the acquisition as a business combination in accordance with ASC 805, Business Combinations. Pro forma information giving effect to the acquisition has not been provided because the results are not material to the consolidated financial statements. Net assets acquired included accounts receivable, inventories, property, plant and equipment, intangible assets, accounts payable and accrued expenses. We expect to refine the valuation of certain assets and liabilities during the measurement period. The business is included in the Animal Health segment.
Goodwill balances did not change during the three months ended September 30, 2017.
We evaluate our investments in equity method investees for impairment if circumstances indicate that the fair value of the investment may be impaired. The assets underlying a $3,802 equity investment are currently idled; we have concluded the investment is not currently impaired, based on expected future operating cash flows and/or disposal value.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | 5. Debt
Term Loans and Revolving Credit Facilities
Pursuant to a credit agreement (the “Credit Agreement”), we have a revolving credit facility (the “Revolver”), where we can borrow up to $250,000, subject to the terms of the agreement, and a term A loan with an aggregate initial principal amount of $250,000 (the “Term A Loan,” and together with the Revolver, the “Credit Facilities”). The Credit Facilities have applicable margins equal to 2.00%, 1.75% or 1.50%, in the case of LIBOR and Eurodollar rate loans and 1.00%, 0.75% or 0.50%, in the case of base rate loans; the applicable margins are based on the First Lien Net Leverage Ratio. The libor rate is subject to a floor of 0.00%.
The Credit Facilities require, among other things, the maintenance of (i) a maximum consolidated first lien net debt to consolidated EBITDA leverage ratio and (ii) a minimum consolidated interest coverage ratio, each calculated on a trailing four quarter basis, and contain an acceleration clause should an event of default (as defined in the agreement governing the Credit Facilities) occur. As of September 30, 2017, we were in compliance with the covenants of the Credit Facilities. The Credit Facilities mature on June 29, 2022.
As of September 30, 2017, we had $85,000 in borrowings under the Revolver and had outstanding letters of credit of $4,651, leaving $160,349 available for borrowings and letters of credit under the Revolver. We obtain letters of credit in connection with certain regulatory and insurance obligations, inventory purchases and other contractual obligations. The terms of these letters of credit are one year or less.
The weighted-average interest rates for the Revolver and Term A Loan were 2.98% and 3.22%, respectively, for the three months ended September 30, 2017.
In July 2017, we entered into an interest rate swap agreement on $150 million of notional principal that effectively converts the floating LIBOR or base rate portion of our interest obligation on that amount of debt, to a fixed interest rate of 1.8325% plus the applicable rate. The agreement matures concurrent with the Credit Agreement. The interest rate swap has been designated as a highly effective cash flow hedge. For additional details, see “—Derivatives.”
Long-Term Debt
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Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions | 6. Related Party Transactions
Certain relatives of Jack C. Bendheim, our Chairman, President and Chief Executive Officer, provided services to us as employees or consultants and received aggregate compensation and benefits of approximately $720 and $603 during the three months ended September 30, 2017 and 2016. Mr. Bendheim has sole authority to vote shares of our stock owned by BFI Co., LLC, an investment vehicle of the Bendheim family.
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Employee Benefit Plans |
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Sep. 30, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | 7. Employee Benefit Plans
The Company maintains a noncontributory defined benefit pension plan for all domestic nonunion employees employed on or prior to December 31, 2013, who meet certain requirements of age, length of service and hours worked per year. Plan benefits are based upon years of service and average compensation, as defined.
In July 2016, we amended the domestic noncontributory defined benefit pension plan to eliminate credit for future service and compensation increases, effective as of September 30, 2016. The amendment resulted in a curtailment of the pension plan. During the three months ended September 30, 2016, we recorded a pension curtailment gain of $6,822 in other comprehensive income and an offsetting reduction in the liability for pension benefits included in other liabilities.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 8. Commitments and Contingencies
Environmental
Our operations and properties are subject to extensive federal, state, local and foreign laws and regulations, including those governing pollution; protection of the environment; the use, management, and release of hazardous materials, substances and wastes; air emissions; greenhouse gas emissions; water use, supply and discharges; the investigation and remediation of contamination; the manufacture, distribution, and sale of regulated materials, including pesticides; the importing, exporting and transportation of products; and the health and safety of our employees (collectively, “Environmental Laws”). As such, the nature of our current and former operations exposes us to the risk of claims with respect to such matters, including fines, penalties, and remediation obligations that may be imposed by regulatory authorities. Under certain circumstances, we might be required to curtail operations until a particular problem is remedied. Known costs and expenses under Environmental Laws incidental to ongoing operations, including the cost of litigation proceedings relating to environmental matters, are included within operating results. Potential costs and expenses may also be incurred in connection with the repair or upgrade of facilities to meet existing or new requirements under Environmental Laws or to investigate or remediate potential or actual contamination and from time to time we establish reserves for such contemplated investigation and remediation costs. In many instances, the ultimate costs under Environmental Laws and the time period during which such costs are likely to be incurred are difficult to predict.
While we believe that our operations are currently in material compliance with Environmental Laws, we have, from time to time, received notices of violation from governmental authorities, and have been involved in civil or criminal action for such violations. Additionally, at various sites, our subsidiaries are engaged in continuing investigation, remediation and/or monitoring efforts to address contamination associated with historic operations of the sites. We devote considerable resources to complying with Environmental Laws and managing environmental liabilities. We have developed programs to identify requirements under, and maintain compliance with Environmental Laws; however, we cannot predict with certainty the effect of increased and more stringent regulation on our operations, future capital expenditure requirements, or the cost of compliance.
The nature of our current and former operations exposes us to the risk of claims with respect to environmental matters and we cannot assure we will not incur material costs and liabilities in connection with such claims. Based upon our experience to date, we believe that the future cost of compliance with existing Environmental Laws, and liabilities for known environmental claims pursuant to such Environmental Laws, will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.
The United States Environmental Protection Agency (the “EPA”) is investigating and planning for the remediation of offsite contaminated groundwater that has migrated from the Omega Chemical Corporation Superfund Site (“Omega Chemical Site”), which is upgradient of a facility in Santa Fe Springs, California, operated by our subsidiary Phibro-Tech, Inc. (“Phibro-Tech”). The EPA has named Phibro-Tech and certain other subsidiaries of PAHC as potentially responsible parties (“PRPs”) due to groundwater contamination from Phibro-Tech’s Santa Fe Springs facility that has allegedly commingled with contaminated groundwater from the Omega Chemical Site. In September 2012, the EPA notified approximately 140 PRPs, including Phibro-Tech and the other subsidiaries, that they have been identified as potentially responsible for remedial action for the groundwater plume affected by the Omega Chemical Site and for EPA oversight and response costs. Phibro-Tech contends that groundwater contamination at its site is due to historical operations that pre-date Phibro-Tech and/or contaminated groundwater that has migrated from upgradient properties. In addition, a successor to a prior owner of the Phibro-Tech site has asserted that PAHC and Phibro-Tech are obligated to provide indemnification for its potential liability and defense costs relating to the groundwater plume affected by the Omega Chemical Site. Phibro-Tech has vigorously contested this position and has asserted that the successor to the prior owner is required to indemnify Phibro-Tech for its potential liability and defense costs. Furthermore, a nearby property owner has filed a complaint in the Superior Court of the State of California against many of the PRPs allegedly associated with the groundwater plume affected by the Omega Chemical Site (including Phibro-Tech) for alleged contamination of groundwater underneath its property, and a group of companies that sent chemicals to the Omega Chemical Site for processing and recycling has filed a complaint under CERCLA, RCRA and the common law public nuisance doctrine in the United States District Court for the Central District of California against many of the PRPs allegedly associated with the groundwater plume affected by the Omega Chemical Site (including Phibro-Tech) for contribution
toward past and future costs associated with the investigation and remediation of the groundwater plume affected by the Omega Chemical Site. Due to the ongoing nature of the EPA’s investigation and Phibro-Tech’s dispute with the prior owner’s successor, at this time we cannot predict with any degree of certainty what, if any, liability Phibro-Tech or the other subsidiaries may ultimately have for investigation, remediation and the EPA oversight and response costs associated with the affected groundwater plume.
Based upon information available, to the extent such costs can be estimated with reasonable certainty, we estimated the cost for further investigation and remediation of identified soil and groundwater problems at operating sites, closed sites and third-party sites, and closure costs for closed sites, to be approximately $6,898 and $7,211 at September 30, 2017, and June 30, 2017, respectively, which is included in current and long-term liabilities on the consolidated balance sheets. However, future events, such as new information, changes in existing Environmental Laws or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. For all purposes of the discussion under this caption and elsewhere in this report, it should be noted that we take and have taken the position that neither PAHC nor any of our subsidiaries is liable for environmental or other claims made against one or more of our other subsidiaries or for which any of such other subsidiaries may ultimately be responsible.
Claims and Litigation
PAHC and its subsidiaries are party to a number of claims and lawsuits arising out of the normal course of business including product liabilities, payment disputes and governmental regulation. Certain of these actions seek damages in various amounts. In many cases, such claims are covered by insurance. We believe that none of the claims or pending lawsuits, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, cash flows or liquidity.
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Derivatives |
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Derivatives | 9. Derivatives
We monitor our exposure to foreign currency exchange rates and interest rates and from time-to-time use derivatives to manage certain of these risks. We designate derivatives as a hedge of a forecasted transaction or of the variability of the cash flows to be received or paid in the future related to a recognized asset or liability (cash flow hedge). All changes in the fair value of a highly effective cash flow hedge are recorded in accumulated other comprehensive income (loss).
We routinely assess whether the derivatives used to hedge transactions are effective. If we determine a derivative ceases to be an effective hedge, we discontinue hedge accounting in the period of the assessment for that derivative, and immediately recognize any unrealized gains or losses related to the fair value of that derivative in the consolidated statements of operations.
We record derivatives at fair value in the consolidated balance sheets. For additional details regarding fair value, see “—Fair Value Measurements.”
The following tables detail the Company’s outstanding derivatives that are designated and effective as cash flow hedges as of September 30, 2017:
The foreign currency derivatives generally have an expiration or maturity of two years or less and are intended to hedge cash flows related to the purchase of inventory. These forecasted transactions are probable of occurring. As the hedged item is sold, we recognize the gain or loss recorded in accumulated other comprehensive income (loss) to the consolidated statements of operations on the same line where the hedged item is charged when released/sold. The fair values of the foreign currency options as of September 30, 2017, are unrealized and will fluctuate based on future exchange rates until the derivative contracts mature. Accumulated other comprehensive income (loss) at September 30, 2017 included $1,781 of net unrecognized gains on derivative instruments; we estimate the entire amount will be recognized in earnings within the next twelve months. At September 30, 2017, realized gains of $1,622 related to matured contracts were recorded as a component of inventory. We anticipate these gains will be recognized as an offset to cost of goods sold within the next twelve months. At June 30, 2017, net realized gains of $966 related to matured contracts were recorded as a component of inventory. We recognized $186 of these gains in cost of goods sold during the three months September 30, 2017, and anticipate we will recognize the remaining $780 of these gains in costs of goods sold in the next six months. We recognize gains (losses) related to these derivative instruments as a component of cost of goods sold at the time the hedged item is sold.
In July 2017, we entered into an interest rate swap agreement on $150,000 of notional principal that effectively converts the floating LIBOR or base rate portion of our interest obligation on that amount of debt, to a fixed interest rate of 1.8325% plus the applicable rate. The agreement matures concurrent with the Credit Agreement. The forecasted transactions are probable of occurring, and the interest rate swap has been designated as a highly effective cash flow hedge. The fair value of the interest rate swap agreement is recorded as an asset or liability with a corresponding amount included in accumulated other comprehensive income (loss).
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Fair Value Measurements | 10. Fair Value Measurements
Contingent Consideration on Acquisitions
We determine the fair value of contingent consideration on acquisitions based on contractual terms, our current forecast of performance factors related to the acquired business and an applicable discount rate.
Derivatives
We determine the fair value of derivative instruments based upon pricing models using observable market inputs for these types of financial instruments, such as spot and forward currency translation rates, and interest rate curves.
Fair Value of Assets (Liabilities)
The table below provides a summary of the changes in the fair value of Level 3 assets (liabilities):
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Business Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | 11. Business Segments
The Animal Health segment manufactures and markets a broad range of products for food animals, including poultry, swine, cattle, dairy and aquaculture. The business includes net sales of medicated feed additives and other related products, nutritional specialty products and vaccines. The Mineral Nutrition segment manufactures and markets a broad range of trace minerals for food animals. The Performance Products segment manufactures and markets a variety of products for use in the personal care, automotive, industrial chemical and chemical catalyst industries.
We evaluate performance and allocate resources based on the Animal Health, Mineral Nutrition and Performance Products segments. Certain of our costs and assets are not directly attributable to these segments and we refer to these items as Corporate. We do not allocate Corporate costs or assets to the segments because they are not used to evaluate the segments’ operating results or financial position. Corporate costs include certain costs related to executive management, business technology, legal, finance, human resources and business development. Corporate assets include cash and cash equivalents, certain debt issue costs, income tax related assets and certain other assets.
We evaluate performance of our segments based on Adjusted EBITDA. We define Adjusted EBITDA as income before income taxes plus (a) interest expense, net, (b) depreciation and amortization, (c) (income) loss from, and disposal of, discontinued operations, (d) other expense or less other income, as separately reported on our consolidated statements of operations, including foreign currency gains and losses and loss on extinguishment of debt, and (e) certain items that we consider to be unusual, non-operational or non-recurring.
The accounting policies of our segments are the same as those described in the summary of significant accounting policies included herein.
The Animal Health segment includes all goodwill of the Company. The Animal Health segment includes advances to and investment in an equity method investee of $3,802 and $3,719 as of September 30, 2017 and June 30, 2017, respectively. The Performance Products segment includes an investment in equity method investee of $559 and $516 as of September 30, 2017 and June 30, 2017, respectively. Corporate assets include cash and cash equivalents, certain debt issuance costs, income tax related assets and certain other assets.
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Summary of Significant Accounting Policies and New Accounting Standards (Policies) |
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Net Income per Share and Weighted Average Shares | Net Income per Share and Weighted Average Shares
Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period.
Diluted net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period after giving effect to potential dilutive common shares resulting from the assumed exercise of stock options. For the three months ended September 30, 2017 and 2016, all common share equivalents were included in the calculation of diluted net income per share.
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Dividends | Dividends
We declared and paid quarterly cash dividends of $0.10 per share, totaling $3,989 during the three months ended September 30, 2017, to holders of our Class A common stock and Class B common stock.
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New Accounting Standards | New Accounting Standards
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities simplifies the application of hedge accounting guidance and improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. During the three months ended September 30, 2017, we elected early adoption of this guidance and applied the qualitative method, and it did not have a material effect on our consolidated financial statements. For additional details, see “—Derivatives.”
ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, provides specific guidance for the classification of certain transactions within the statement of cash flows. The issues addressed by this guidance include, but are not limited to, debt prepayments or debt extinguishment costs, contingent consideration payments made after a business combination and proceeds from the settlement of insurance claims. This ASU is effective for annual reporting periods beginning after December 15, 2017. Early application is permitted, as long as all provisions under the guidance are applied simultaneously. The provisions of this guidance are to be applied using a retrospective transition approach. We do not expect adoption of this guidance to have a material effect on our consolidated financial statements.
ASU 2016-02, Leases (Topic 842), supersedes the current lease accounting guidance, requires an entity to recognize assets and liabilities for both financing and operating leases on the balance sheet and requires additional qualitative and quantitative disclosures regarding leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018. We are evaluating the effect of adoption of this guidance on our consolidated financial statements.
ASU 2015-11, Inventory (Topic 330), requires entities to measure inventory at the lower of cost and net realizable value (“NRV”). NRV is defined as “the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” We applied this guidance during the three months ended September 30, 2017, and it did not have a material effect on our consolidated financial statements.
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), establishes principles for the recognition of revenue from contracts with customers. The underlying principle is to identify the performance obligations of a contract, allocate the revenue to each performance obligation and then to recognize revenue when the company satisfies a specific performance obligation of the contract. ASU 2014-09 and its amendments are effective for our consolidated financial statements beginning July 1, 2018. We expect to apply the new standard using the modified retrospective method. We continue to evaluate the effect that the adoption of this guidance may have on our consolidated financial statements.
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Summary of Significant Accounting Policies and New Accounting Standards (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Income per Share and Weighted Average Shares |
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Statements of Operations-Additional Information (Tables) |
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Supplemental Income Statement Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of additional information of statements of operations |
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Balance Sheets-Additional Information (Tables) |
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Balance Sheets Additional Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of additional information of balance sheets |
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term debt |
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Derivatives (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of significant outstanding derivatives employed to manage market risk and designated as cash flow hedges |
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value derivatives, assets and liabilities |
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Schedule of changes in the fair value of Level 3 assets |
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Business Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of information regarding reportable segments |
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Summary of Significant Accounting Policies and New Accounting Standards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
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Sep. 30, 2017 |
Sep. 30, 2016 |
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Accounting Policies [Abstract] | ||
Net income | $ 15,892 | $ 12,177 |
Weighted average number of shares - basic (in shares) | 39,944 | 39,408 |
Dilutive effect of stock options | 349 | 498 |
Weighted average number of shares - diluted (in shares) | 40,293 | 39,906 |
Net income per share | ||
basic (in dollars per share) | $ 0.40 | $ 0.31 |
diluted (in dollars per share) | $ 0.39 | $ 0.31 |
Summary of Significant Accounting Policies and New Accounting Standards (Detail Textuals) $ / shares in Units, $ in Thousands |
3 Months Ended |
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Sep. 30, 2017
USD ($)
$ / shares
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Accounting Policies [Abstract] | |
Cash dividends per share amount (in dollars per share) | $ / shares | $ 0.10 |
Cash dividends | $ | $ 3,989 |
Statements of Operations-Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Sep. 30, 2017 |
Sep. 30, 2016 |
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Interest expense, net | ||
Amortization of debt issuance costs and debt discount | $ 221 | $ 253 |
Acquisition-related accrued interest | 253 | 393 |
Other | 239 | 81 |
Interest expense | (3,427) | (4,587) |
Interest (income) | (309) | (680) |
Interest expense, net | 3,118 | 3,907 |
Depreciation and amortization | ||
Depreciation of property, plant and equipment | 5,183 | 4,731 |
Amortization of intangible assets | 1,449 | 1,528 |
Amortization of other assets | 12 | 59 |
Depreciation and amortization | 6,644 | 6,318 |
Term loan | ||
Interest expense, net | ||
Interest expense | 2,033 | 2,905 |
Revolving credit facility | ||
Interest expense, net | ||
Interest expense | $ 681 | $ 955 |
Balance Sheets-Additional Information (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
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Inventories | ||
Raw materials | $ 57,719 | $ 54,861 |
Work-in-process | 12,014 | 12,402 |
Finished goods | 101,195 | 93,970 |
Inventory, net | $ 170,928 | $ 161,233 |
Balance Sheets-Additional Information (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
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Accrued expenses and other current liabilities | ||
Employee related | $ 21,030 | $ 26,553 |
Commissions and rebates | 4,964 | 6,443 |
Insurance related | 1,522 | 1,515 |
Professional fees | 3,513 | 3,823 |
Income and other taxes | 3,631 | 3,035 |
Other | 16,820 | 11,283 |
Accrued expenses and other current liabilities, total | 51,480 | 52,652 |
Accumulated other comprehensive income (loss) | ||
Derivative instruments | 2,064 | 2,686 |
Foreign currency translation adjustment | (40,323) | (43,556) |
Unrecognized net pension gains (losses) | (17,928) | (18,059) |
(Provision) benefit for income taxes on derivative instruments | (1,316) | (1,553) |
(Provision) benefit for incomes taxes on long-term intercompany investments | 8,166 | 8,166 |
(Provision) benefit for income taxes on pension gains (losses) | (3,171) | (3,121) |
Accumulated other comprehensive income (loss) | $ (52,508) | $ (55,437) |
Balance Sheets-Additional Information (Detail Textuals) $ in Thousands |
3 Months Ended |
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Sep. 30, 2017
USD ($)
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Balance Sheets Additional Information [Abstract] | |
Equity method investments | $ 3,802 |
Amount of acquired business approximately | 15,000 |
Payments to acquire business subsequent to reporting date | $ 3,500 |
Debt - Summary of long-term debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
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Debt Instrument [Line Items] | ||
Long-term debt including current maturities | $ 248,620 | $ 250,000 |
Unamortized debt issuance costs and debt discount | (1,766) | (1,859) |
Long-term debt after debt issuance costs | 246,854 | 248,141 |
Less: current maturities | (7,895) | (6,250) |
Long-term debt | 238,959 | 241,891 |
Capitalized lease obligations | ||
Debt Instrument [Line Items] | ||
Capitalized lease obligations | 182 | 0 |
Term A Loan due June 2022 | ||
Debt Instrument [Line Items] | ||
Term A Loan due June 2022 | $ 248,438 | $ 250,000 |
Related Party Transactions (Detail Textuals) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
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Relatives of Jack C. Bendheim | Compensation and benefit for services provided | ||
Related Party Transaction [Line Items] | ||
Aggregate compensation and benefits | $ 720 | $ 603 |
Employee Benefit Plans (Detail Textuals) $ in Thousands |
3 Months Ended |
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Sep. 30, 2016
USD ($)
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Compensation and Retirement Disclosure [Abstract] | |
Pension curtailment gain | $ 6,822 |
Commitments and Contingencies (Detail Textuals) $ in Thousands |
1 Months Ended | 3 Months Ended | 12 Months Ended |
---|---|---|---|
Sep. 30, 2012
PRPs
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Sep. 30, 2017
USD ($)
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Jun. 30, 2017
USD ($)
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Commitments And Contingencies [Line Items] | |||
Number of potentially responsible parties | PRPs | 140 | ||
Current and long-term liabilities | |||
Commitments And Contingencies [Line Items] | |||
Accrual for environmental loss contingencies payments | $ | $ 6,898 | $ 7,211 |
Derivatives (Details) - Cash flow hedges BRL in Thousands, $ in Thousands |
Sep. 30, 2017
USD ($)
|
Sep. 30, 2017
BRL
|
Jun. 30, 2017
USD ($)
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---|---|---|---|
Options | Brazilian Real calls | |||
Derivative [Line Items] | |||
Notional amount | BRL | BRL 19,500 | ||
Options | Brazilian Real calls | Other current assets | |||
Derivative [Line Items] | |||
Fair value | $ 1,781 | $ 2,686 | |
Swap | Interest rate swap | |||
Derivative [Line Items] | |||
Notional amount | 150,000 | ||
Swap | Interest rate swap | Other assets | |||
Derivative [Line Items] | |||
Fair value | $ 283 |
Derivatives (Details 1) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
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Derivative [Line Items] | ||
Cost of goods sold | $ 130,030 | $ 126,988 |
Interest expense, net | 3,118 | 3,907 |
Options | Cash flow hedges | Brazilian Real calls | Cost of goods sold | ||
Derivative [Line Items] | ||
Gain (loss) recognized in consolidated statements of operations | 186 | (1,135) |
Options | Cash flow hedges | Brazilian Real calls | Other comprehensive income (loss) | ||
Derivative [Line Items] | ||
Gain (loss) recorded in OCI | (905) | $ 34 |
Swap | Interest rate swap | Cash flow hedges | Other comprehensive income (loss) | ||
Derivative [Line Items] | ||
Gain (loss) recorded in OCI | $ 283 |
Derivatives (Detail Textuals) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2017 |
Jul. 31, 2017 |
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Options | Cash flow hedges | Cost of goods sold | ||||
Derivative [Line Items] | ||||
Gain (loss) on matured contracts, record to Inventory | $ 1,622 | $ 966 | ||
Recognize gains in costs of goods sold in next six months | 780 | |||
Options | Cash flow hedges | Cost of goods sold | Brazilian Real calls | ||||
Derivative [Line Items] | ||||
Realized losses on hedging derivatives recognized in cost of goods sold | 186 | $ (1,135) | ||
Options | Cash flow hedges | Other comprehensive income (loss) | ||||
Derivative [Line Items] | ||||
Fair value of foreign currency option that is included accumulated other comprehensive income | $ 1,781 | |||
Interest rate swap | ||||
Derivative [Line Items] | ||||
Percentage of interest rate | 1.8325% | |||
Derivative, notional amount | $ 150,000 |
Fair Value Measurements (Details) - Fair values - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
---|---|---|
Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivatives asset | $ 1,781 | $ 2,686 |
Interest rate swap | 283 | |
Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Contingent consideration on acquisitions | $ (7,827) | $ (7,644) |
Fair Value Measurements (Details 1) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Business Combination Contingent Consideration Liability [Roll Forward] | ||
Acquisition-related accrued interest | $ (253) | $ (393) |
Fair values | Level 3 | ||
Business Combination Contingent Consideration Liability [Roll Forward] | ||
Balance, June 30, 2017 | (7,644) | |
Acquisition-related accrued interest | (253) | |
Payment | 70 | |
Balance, September 30, 2017 | $ (7,827) |
Business Segments (Detail Textuals) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Equity method investments | $ 3,802 | |
Animal Health | ||
Segment Reporting Information [Line Items] | ||
Equity method investments | 3,802 | $ 3,719 |
Performance Products | ||
Segment Reporting Information [Line Items] | ||
Equity method investments | $ 559 | $ 516 |
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