UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2023~~2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36410

Phibro Animal Health Corporation

(Exact name of registrant as specified in its charter)



Delaware	13-1840497
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

Glenpointe Centre East, 3rd Floor
300 Frank W. Burr Boulevard, Suite 21

Teaneck, New Jersey	07666-6712
(Address of Principal Executive Offices)	(Zip Code)

(201) 329-7300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per share		PAHC		Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~April 28, 2023,~~May 3, 2024, there were 20,337,574 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 20,166,034 shares of the registrant’s Class B common stock, par value $0.0001 per share, outstanding.

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Changes in Stockholders’ Equity	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2021
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3337
Item 4.	Controls and Procedures	3338
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3438
Item 1A.	Risk Factors	3438
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3438
Item 3.	Defaults Upon Senior Securities	3438
Item 4.	Mine Safety Disclosures	3438
Item 5.	Other Information	3438
Item 6.	Exhibits	3439
SIGNATURES		3540

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022

(unaudited)

(in thousands, except per share amounts)
Net sales

$
245,673

$
239,619

$
722,840

$
686,996
Cost of goods sold

170,133

167,993

501,269

480,020
Gross profit

75,540

71,626

221,571

206,976
Selling, general and administrative expenses

56,987

52,432

173,490

150,876
Operating income

18,553

19,194

48,081

56,100
Interest expense, net

3,871

2,925

10,822

8,767
Foreign currency (gains) losses, net

(422)

(10,564)

4,629

(12,625)
Income before income taxes

15,104

26,833

32,630

59,958
Provision for income taxes

5,062

9,144

11,522

18,270
Net income

$
10,042

$
17,689

$
21,108

$
41,688

Net income per share








basic and diluted

$
0.25

$
0.44

$
0.52

$
1.03
Weighted average common shares outstanding

basic and diluted

40,504

40,504

40,504

40,504


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023

	(unaudited)
	(in thousands, except per share amounts)
Net sales	$	263,223	$	245,673	$	744,515	$	722,840
Cost of goods sold		183,623		170,133		518,573		501,269
Gross profit		79,600		75,540		225,942		221,571
Selling, general and administrative expenses		59,676		56,987		191,043		173,490
Operating income		19,924		18,553		34,899		48,081
Interest expense, net		4,575		3,871		13,798		10,822
Foreign currency losses (gains), net		2,427		(422)		16,593		4,629
Income before income taxes		12,922		15,104		4,508		32,630
Provision for income taxes		4,517		5,062		2,844		11,522
Net income	$	8,405	$	10,042	$	1,664	$	21,108

Net income per share
basic	$	0.21	$	0.25	$	0.04	$	0.52
diluted	$	0.21	$	0.25	$	0.04	$	0.52
Weighted average common shares outstanding
basic		40,504		40,504		40,504		40,504
diluted		40,520		40,504		40,509		40,504

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022

(unaudited)

(in thousands)
Net income

$
10,042

$
17,689

$
21,108

$
41,688
Change in fair value of derivative instruments

(3,765)

14,958

1,804

19,739
Foreign currency translation adjustment

1,469

3,514

1,597

(13,761)
Unrecognized net pension gains

177

120

545

354
(Provision) benefit for income taxes

896

(3,770)

(587)

(5,023)
Other comprehensive income (loss)

(1,223)

14,822

3,359

1,309
Comprehensive income

$
8,819

$
32,511

$
24,467

$
42,997


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023

	(unaudited)
	(in thousands)
Net income	$	8,405	$	10,042	$	1,664	$	21,108
Change in fair value of derivative instruments		(1,793)		(3,765)		(8,407)		1,804
Foreign currency translation adjustment		(3,045)		1,469		(2,187)		1,597
Pension settlement recognition		—		—		10,674		—
Unrecognized net pension gains		92		177		837		545
(Provision) benefit for income taxes		357		896		(711)		(587)
Other comprehensive income (loss)		(4,389)		(1,223)		206		3,359
Comprehensive income	$	4,016	$	8,819	$	1,870	$	24,467

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31,		June 30,		March 31,		June 30,
As of	2023		2022		2024		2023







	(unaudited)				(unaudited)
	(in thousands, except share and per share amounts)				(in thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	37,238	$	74,248	$	50,225	$	41,281
Short-term investments		40,000		17,000		48,523		40,000
Accounts receivable, net		152,740		166,537		161,087		163,479
Inventories, net		292,833		259,158		282,289		277,570
Other current assets		62,672		49,289		55,056		63,393
Total current assets		585,483		566,232		597,180		585,723
Property, plant and equipment, net		188,939		165,490		202,061		195,568
Intangibles, net		56,901		63,861		48,239		54,987
Goodwill		53,243		53,226		54,644		53,274
Other assets		80,866		82,890		76,911		81,845
Total assets	$	965,432	$	931,699	$	979,035	$	971,397
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt	$	15,420	$	15,000
Current portion of long-term debt and other					$	29,811	$	22,295
Accounts payable		75,768		95,596		82,613		73,853
Accrued expenses and other current liabilities		74,120		80,236		76,648		79,852
Total current liabilities		165,308		190,832		189,072		176,000
Revolving credit facility		193,000		145,000		165,000		141,000
Long-term debt		273,016		272,925		291,008		311,541
Other liabilities		61,780		60,500		63,861		60,347
Total liabilities		693,104		669,257		708,941		688,888
Commitments and contingencies (Note 7)
Common stock, par value $0.0001 per share; 300,000,000 Class A shares authorized, 20,337,574 shares issued and outstanding at March 31, 2023, and June 30, 2022; 30,000,000 Class B shares authorized, 20,166,034 shares issued and outstanding at March 31, 2023, and June 30, 2022		4		4
Commitments and contingencies (Note 8)
Common stock, par value $0.0001 per share; 300,000,000 Class A shares authorized, 20,337,574 shares issued and outstanding at March 31, 2024, and June 30, 2023; 30,000,000 Class B shares authorized, 20,166,034 shares issued and outstanding at March 31, 2024, and June 30, 2023						4		4
Preferred stock, par value $0.0001 per share; 16,000,000 shares authorized, no shares issued and outstanding		—		—		—		—
Paid-in capital		135,803		135,803		136,099		135,803
Retained earnings		254,275		247,748		247,995		260,912
Accumulated other comprehensive loss		(117,754)		(121,113)		(114,004)		(114,210)
Total stockholders’ equity		272,328		262,442		270,094		282,509
Total liabilities and stockholders’ equity	$	965,432	$	931,699	$	979,035	$	971,397

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months
For the Periods Ended March 31

2023

2022

(unaudited)

(in thousands)
OPERATING ACTIVITIES




Net income

$
21,108

$
41,688
Adjustments to reconcile net income to

net cash (used) provided by operating activities:

Depreciation and amortization

25,438

24,300
Amortization of debt issuance costs

514

442
Acquisition-related items

—

78
Deferred income taxes

235

(120)
Foreign currency gains, net

(5,024)

(13,492)
Gain on sale of investment

—

(1,203)
Other

(1,201)

284
Changes in operating assets and liabilities, net of business acquisition:

Accounts receivable, net

14,985

(10,815)
Inventories, net

(30,458)

(30,548)
Other current assets

(7,481)

(1,879)
Other assets

(317)

(2,364)
Accounts payable

(19,718)

19,961
Accrued expenses and other liabilities

(5,009)

3,743
Net cash (used) provided by operating activities

(6,928)

30,075
INVESTING ACTIVITIES




Purchases of short-term investments

(40,000)

(54,100)
Maturities of short-term investments

17,000

75,000
Capital expenditures

(40,903)

(25,154)
Business acquisition

—

(10,786)
Sale of investment

—

1,353
Other, net

167

645
Net cash used by investing activities

(63,736)

(13,042)
FINANCING ACTIVITIES

Revolving credit facility borrowings

229,000

215,000
Revolving credit facility repayments

(181,000)

(186,000)
Proceeds from long-term debt

12,000

—
Payments of long-term debt

(11,460)

(5,625)
Debt issuance costs

(640)

—
Dividends paid

(14,581)

(14,581)
Payment of contingent consideration

—

(4,840)
Net cash provided by financing activities

33,319

3,954
Effect of exchange rate changes on cash

335

(451)
Net (decrease) increase in cash and cash equivalents

(37,010)

20,536
Cash and cash equivalents at beginning of period

74,248

50,212
Cash and cash equivalents at end of period

$
37,238

$
70,748


	Nine Months
For the Periods Ended March 31	2024		2023

	(unaudited)
	(in thousands)
OPERATING ACTIVITIES
Net income	$	1,664	$	21,108
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization		26,977		25,438
Amortization of debt issuance costs		780		514
Deferred income taxes		(6,806)		235
Foreign currency losses (gains), net		4,261		(5,024)
Acquisition-related items		1,033		—
Pension settlement cost		10,674		—
Brazil employment taxes		4,202		—
Stock-based compensation		296		—
Other		3,865		(1,201)
Changes in operating assets and liabilities, net of business acquisition:
Accounts receivable, net		3,045		14,985
Inventories, net		(5,891)		(30,458)
Other current assets		3,437		(7,481)
Other assets		624		(317)
Accounts payable		8,099		(19,718)
Accrued expenses and other liabilities		2,905		(5,009)
Net cash provided (used) by operating activities		59,165		(6,928)
INVESTING ACTIVITIES
Purchases of short-term investments		(65,523)		(40,000)
Maturities of short-term investments		57,000		17,000
Capital expenditures		(28,166)		(40,903)
Business acquisition, net of cash acquired		(3,282)		—
Other, net		888		167
Net cash used by investing activities		(39,083)		(63,736)
FINANCING ACTIVITIES
Revolving credit facility borrowings		155,000		229,000
Revolving credit facility repayments		(131,000)		(181,000)
Proceeds from long-term debt		—		12,000
Payments of long-term debt		(15,315)		(11,460)
Debt issuance costs		—		(640)
Proceeds from insurance premium financing and other short-term debt		2,694		—
Payments of insurance premium financing and other short-term debt		(5,353)		—
Dividends paid		(14,581)		(14,581)
Net cash (used) provided by financing activities		(8,555)		33,319
Effect of exchange rate changes on cash		(2,583)		335
Net increase (decrease) in cash and cash equivalents		8,944		(37,010)
Cash and cash equivalents at beginning of period		41,281		74,248
Cash and cash equivalents at end of period	$	50,225	$	37,238

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

Other

Shares of

Comprehensive

Common

Common

Preferred

Paid-in

Retained

Income


Stock

Stock

Stock

Capital

Earnings

(Loss)

Total

(unaudited)

(in thousands, except share and per share amounts)
As of June 30, 2022

40,503,608

$
4

$
—

$
135,803

$
247,748

$
(121,113)

$
262,442
Comprehensive income

—

—

—

—

3,856

1,318

5,174
Dividends declared ($0.12 per share)

—

—

—

—

(4,860)

—

(4,860)
As of September 30, 2022

40,503,608

$
4

$
—

$
135,803

$
246,744

$
(119,795)

$
262,756
Comprehensive income

—

—

—

—

7,210

3,264

10,474
Dividends declared ($0.12 per share)

—

—

—

—

(4,860)

—

(4,860)
As of December 31, 2022

40,503,608

$
4

$
—

$
135,803

$
249,094

$
(116,531)

$
268,370
Comprehensive income (loss)

—

—

—

—

10,042

(1,223)

8,819
Dividends declared ($0.12 per share)

—

—

—

—

(4,861)

—

(4,861)
As of March 31, 2023

40,503,608

$
4

$
—

$
135,803

$
254,275

$
(117,754)

$
272,328


										Accumulated
										Other
	Shares of									Comprehensive
	Common	Common		Preferred		Paid-in		Retained		Income
	Stock	Stock		Stock		Capital		Earnings		(Loss)		Total

	(unaudited)
	(in thousands, except share and per share amounts)
As of June 30, 2023	40,503,608	$	4	$	—	$	135,803	$	260,912	$	(114,210)	$	282,509
Comprehensive income (loss)	—		—		—		—		(8,015)		3,354		(4,661)
Dividends declared ($0.12 per share)	—		—		—		—		(4,860)		—		(4,860)
Stock-based compensation expense	—		—		—		81		—		—		81
As of September 30, 2023	40,503,608	$	4	$	—	$	135,884	$	248,037	$	(110,856)	$	273,069
Comprehensive income	—		—		—		—		1,274		1,241		2,515
Dividends declared ($0.12 per share)	—		—		—		—		(4,861)		—		(4,861)
Stock-based compensation expense	—		—		—		80		—		—		80
As of December 31, 2023	40,503,608	$	4	$	—	$	135,964	$	244,450	$	(109,615)	$	270,803
Comprehensive income (loss)	—		—		—		—		8,405		(4,389)		4,016
Dividends declared ($0.12 per share)	—		—		—		—		(4,860)		—		(4,860)
Stock-based compensation expense	—		—		—		135		—	—	—		135
As of March 31, 2024	40,503,608	$	4	$	—	$	136,099	$	247,995	$	(114,004)	$	270,094


										Accumulated													Accumulated
										Other													Other
	Shares of									Comprehensive				Shares of									Comprehensive
	Common	Common		Preferred		Paid-in		Retained		Income				Common	Common		Preferred		Paid-in		Retained		Income
	Stock	Stock		Stock		Capital		Earnings		(Loss)		Total		Stock	Stock		Stock		Capital		Earnings		(Loss)		Total

	(unaudited)
	(in thousands, except share and per share amounts)
As of June 30, 2021	40,503,608	$	4	$	—	$	135,803	$	218,015	$	(115,293)	$	238,529


















														(unaudited)
														(in thousands, except share and per share amounts)
As of June 30, 2022														40,503,608	$	4	$	—	$	135,803	$	247,748	$	(121,113)	$	262,442
Comprehensive income														—		—		—		—		3,856		1,318		5,174
Dividends declared ($0.12 per share)														—		—		—		—		(4,860)		—		(4,860)
As of September 30, 2022														40,503,608	$	4	$	—	$	135,803	$	246,744	$	(119,795)	$	262,756
Comprehensive income														—		—		—		—		7,210		3,264		10,474
Dividends declared ($0.12 per share)														—		—		—				(4,860)		—		(4,860)
As of December 31, 2022														40,503,608	$	4	$	—	$	135,803	$	249,094	$	(116,531)	$	268,370
Comprehensive income (loss)	—		—		—		—		6,534		(6,898)		(364)	—		—		—		—		10,042		(1,223)		8,819
Dividends declared ($0.12 per share)	—		—		—		—		(4,860)		—		(4,860)	—		—		—		—		(4,861)		—		(4,861)
As of September 30, 2021	40,503,608	$	4	$	—	$	135,803	$	219,689	$	(122,191)	$	233,305
Comprehensive income (loss)	—		—		—		—		17,465		(6,615)		10,850
Dividends declared ($0.12 per share)	—		—		—				(4,861)		—		(4,861)
As of December 31, 2021	40,503,608	$	4	$	—	$	135,803	$	232,293	$	(128,806)	$	239,294
Comprehensive income	—		—		—		—		17,689		14,822		32,511
Dividends declared ($0.12 per share)	—		—		—		—		(4,860)		—		(4,860)
As of March 31, 2022	40,503,608	$	4	$	—	$	135,803	$	245,122	$	(113,984)	$	266,945
As of March 31, 2023														40,503,608	$	4	$	—	$	135,803	$	254,275	$	(117,754)	$	272,328

The accompanying notes are an integral part of these consolidated financial statements

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(unaudited)

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 and companion animals including poultry, swine, beef and dairy cattle, aquaculture and dogs. The Company is also a manufacturer and marketer of performance products for use in the personal care, 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 and nine months ended March 31, ~~2023~~2024 and ~~2022,~~2023, 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, ~~2022~~2023 (the “Annual Report”), filed with the Securities and Exchange Commission on August ~~24, 2022~~30, 2023 (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, ~~2022~~2023, was derived from the audited consolidated financial statements, 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 from the consolidated financial statements. The decision to consolidate an entity requires consideration of majority voting interests, as well as effective control over the entity.

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 March 31, ~~2023,~~2024, 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 dilutive common share ~~equivalents. There were no common~~equivalents, resulting from the assumed vesting of restricted stock units, unless the effect would be antidilutive. Common share equivalents ~~in the periods~~were included in the ~~consolidated financial statements.~~calculation of diluted net income per share for the three and nine months ended March 31, 2024.

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022
Net income

$
10,042

$
17,689

$
21,108

$
41,688

Weighted average number of shares – basic and diluted

40,504

40,504

40,504

40,504

Net income per share - basic and diluted

$
0.25

$
0.44

$
0.52

$
1.03

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023
Net income	$	8,405	$	10,042	$	1,664	$	21,108

Weighted average number of shares – basic		40,504		40,504		40,504		40,504
Dilutive effect of restricted stock units		16		—		5		—
Weighted average number of shares - diluted		40,520		40,504		40,509		40,504

Net income per share
basic	$	0.21	$	0.25	$	0.04	$	0.52
diluted	$	0.21	$	0.25	$	0.04	$	0.52

New Accounting Standards

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) ~~2021-10,~~2023-07, ~~Government Assistance~~Segment Reporting (Topic ~~832),~~280): Improvements to Reportable Segment Disclosures, ~~by Business Entities about Government Assistance~~ ~~has established annual~~ requires the disclosure ~~requirements over transactions with a government~~of significant segment expenses that are accounted for by applying a grant accounting model. The disclosures include the nature of the transactions and the related accounting policy used to account for the transactions, the line items and amounts included in segment profit or loss and how the ~~consolidated balance sheet and consolidated statement of operations, and the significant terms and conditions of the transactions, including commitments and contingencies.~~segment measures are used for decision-making. The ~~disclosures are required~~ASU will be effective for ~~the annual periods beginning after December 15, 2021. We intend to include these disclosures for the~~Phibro’s fiscal year ending June 30, ~~2023.~~2025, including retrospective disclosure for all prior periods presented, and interim periods subsequent to June 30, 2025. We are evaluating both the impact to our segment disclosures and the possibility of early adoption of the ASU.

ASU ~~2020-04, 2021-01~~2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, enhances income tax disclosures primarily related to the rate reconciliation and ~~2022-06,~~ ~~Reference Rate Reform (Topic 848)~~, provide optional expedients to GAAP guidance if certain criteria are met for contracts, hedging relationships and derivative instruments that reference the London Interbank Offered Rate (“LIBOR”) plannedincome taxes paid information. The ASU outlines specific categories to be ~~discontinued~~provided in the rate reconciliation and requires additional information for those reconciling items that meet a quantitative threshold. The ASU requires disaggregated disclosure of federal, state and foreign income taxes paid, including disaggregation by ~~rate reform. In November 2022, we amended our 2021 Credit Agreement~~individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received). The ASU also requires disaggregated disclosure of federal, state and ~~our 2020 interest rate swap agreement to replace LIBOR as~~foreign income from continuing operations before income taxes. The enhanced disclosures will be applied on a prospective basis and are required for Phibro’s fiscal year ending June 30, 2026. We are evaluating the ~~interest rate benchmark with the Secured Overnight Financing Rate (“SOFR”), as provided for under ASU 2018-16,~~ ~~Derivatives and Hedging (Topic 815): Inclusion~~impact of the ~~SOFR Overnight Index Swap (OIS) Rate as a Benchmark for Hedge Accounting Purposes.~~ ~~We applied the optional expedients to treat the amendments as a continuation of existing contracts at the time the amendments were executed.~~additional income tax-related disclosures.

3. Statements of Operations—Additional Information

Disaggregated revenue, deferred revenue and customer payment terms

We develop, manufacture and market a broad range of products for food and companion animals including poultry, swine, beef and dairy cattle, aquaculture, and dogs. The products help prevent, control and treat diseases and ~~support~~enhance nutrition to help improve animal health and well-being. ~~The~~We sell animal health and mineral nutrition products ~~are sold~~ directly to integrated poultry, cattle and swine customers and through commercial animal feed manufacturers, ~~wholesalers,~~ distributors and veterinarians. The animal health industry and demand for many of the animal health products in a particular region are affected by changing disease pressures and by weather conditions, as product usage follows varying weather patterns and seasons. Our operations are primarily focused on regions where the majority of livestock production is consolidated in large commercial farms.

We have a diversified portfolio of products that are classified within our three business segments—Animal Health, Mineral Nutrition and Performance Products. Each segment has its own dedicated management and sales team.

Animal Health

The Animal Health business develops, manufactures and markets products in three main categories:

●

MFAs and other: MFAs and other products primarily consist of concentrated medicated products ~~that are~~ administered through animal feeds, commonly referred to as Medicated Feed Additives (“MFAs”). Specific product classifications include antibacterials, which inhibit the growth of pathogenic bacteria that cause bacterial infections in animals; anticoccidials, which inhibit the growth of coccidia (parasites) that damage the intestinal tract of animals; and other related products. The MFAs and other category also includes other antibacterial products and processing aids used in the ethanol fermentation industry.

●

~~Nutritional specialties: Nutritional specialty products enhance nutrition to help improve health and performance in areas such as immune system function and digestive health.~~We are also a developer, manufacturer and marketer of microbial products and bioproducts for a variety of applications serving animal health and nutrition, environmental, industrial and agricultural customers.

●

~~Vaccines:~~ Vaccine products are primarily focused on preventing diseases in poultry and swine. They protect animals from either viral or bacterial disease challenges. We develop, manufacture and market conventionally licensed and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

antibacterials, which inhibit the growth of pathogenic bacteria that cause bacterial infections in animals; anticoccidials, which inhibit the growth of coccidia (parasites) that damage the intestinal tract of animals; and other related products. The MFAs and other category also includes antibacterials and other processing aids used in the ethanol fermentation industry.

●

Nutritional specialties: Nutritional specialty products enhance nutrition to help improve health and performance in areas such as immune system function and digestive health.We are also a developer, manufacturer and marketer of microbial products and bioproducts for a variety of applications serving animal health and nutrition, environmental, industrial and agricultural customers.

●

Vaccines: Vaccine products are primarily focused on preventing diseases in poultry, swine, beef and dairy cattle and aquaculture. They protect animals from either viral or bacterial disease challenges. We develop, manufacture and market conventionally licensed and autogenous vaccine products, as well as adjuvants for animal vaccine manufacturers. We have ~~also~~ developed and market an innovative and proprietary delivery platform for vaccines.

Mineral Nutrition

The Mineral Nutrition business is comprised of formulations and concentrations of trace minerals such as zinc, manganese, copper, iron and other compounds, with a focus on customers in North America. Our customers use these products to fortify the daily feed requirements of their livestock’s diets and maintain an optimal balance of trace elements in each animal. We manufacture and market a broad range of mineral nutrition products for food animals including poultry, swine, and beef and dairy cattle.

Performance Products

The Performance Products business manufactures and markets specialty ingredients for use in the personal care, industrial chemical and chemical catalyst industries.

The following tables present our revenues disaggregated by major product category and geographic region:

Net Sales by Product Type


	Three Months				Nine Months				Three Months				Nine Months
For the Periods Ended March 31	2023		2022		2023		2022		2024		2023		2024		2023
Animal Health
MFAs and other	$	93,217	$	84,330	$	283,186	$	259,812	$	108,216	$	93,217	$	304,261	$	283,186
Nutritional specialties		45,016		41,394		127,926		114,721		40,194		45,016		121,840		127,926
Vaccines		26,201		22,865		71,984		65,987		32,923		26,201		88,866		71,984
Total Animal Health	$	164,434	$	148,589	$	483,096	$	440,520	$	181,333	$	164,434	$	514,967	$	483,096
Mineral Nutrition		62,922		69,033		184,212		190,120		64,228		62,922		181,601		184,212
Performance Products		18,317		21,997		55,532		56,356		17,662		18,317		47,947		55,532
Total	$	245,673	$	239,619	$	722,840	$	686,996	$	263,223	$	245,673	$	744,515	$	722,840

Net Sales by Region


	Three Months				Nine Months				Three Months				Nine Months
For the Periods Ended March 31	2023		2022		2023		2022		2024		2023		2024		2023
United States	$	148,529	$	146,820	$	433,716	$	412,284	$	159,314	$	148,529	$	431,083	$	433,716
Latin America and Canada		53,881		45,048		159,946		135,722		53,653		53,881		177,539		159,946
Europe, Middle East and Africa		28,174		29,931		85,518		90,889		33,175		28,174		89,572		85,518
Asia Pacific		15,089		17,820		43,660		48,101		17,081		15,089		46,321		43,660
Total	$	245,673	$	239,619	$	722,840	$	686,996	$	263,223	$	245,673	$	744,515	$	722,840

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Net sales by region are based on country of destination.

Deferred revenue was $1,479 and $2,051 as of March 31, 2023 and June 30, 2022, respectively. Accrued expenses and other current liabilities included $508 and $822 of the total deferred revenue as of March 31, 2023 and June 30, 2022, respectively. The deferred revenue resulted primarily from certain customer arrangements, including technology licensing fees and discounts on future product sales. The transaction price associated with our deferred revenue arrangements is generally based on the stand-alone sales prices of the individual products or services.

Our customer payment terms generally range from 30 to 120 days globally and ~~exclude~~do not include any significant financing components. Payment terms vary based on industry and business practices within the regions in which we operate. Our average worldwide collection period for accounts receivable is approximately 60 days after the revenue is recognized.

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Interest Expense, Net

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022
Interest expense, net

2021 Term A loan

$
1,450

$
2,208

$
4,836

$
6,745
Revolving credit facility

3,067

690

7,480

1,936
2022 Term loan

191

—

379

—
Amortization of debt issuance costs

188

147

514

442
Other

10

67

20

156
Interest expense

4,906

3,112

13,229

9,279
Interest income

(1,035)

(187)

(2,407)

(512)

$
3,871

$
2,925

$
10,822

$
8,767


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023
Interest expense, net
2021 Credit Facilities	$	5,127	$	4,517	$	15,421	$	12,316
2022 Term Loan		215		191		648		379
Amortization of debt issuance costs		260		188		780		514
Other		43		10		164		20
Interest expense		5,645		4,906		17,013		13,229
Interest income		(1,070)		(1,035)		(3,215)		(2,407)
	$	4,575	$	3,871	$	13,798	$	10,822

Depreciation and Amortization


	Three Months				Nine Months				Three Months				Nine Months
For the Periods Ended March 31	2023		2022		2023		2022		2024		2023		2024		2023
Depreciation and amortization
Depreciation of property, plant and equipment	$	6,067	$	6,214	$	18,177	$	17,792	$	6,770	$	6,067	$	19,638	$	18,177
Amortization of intangible assets		2,422		2,231		7,261		6,508		2,426		2,422		7,339		7,261
	$	8,489	$	8,445	$	25,438	$	24,300	$	9,196	$	8,489	$	26,977	$	25,438

Pension Settlement

In July 2023, we entered into an annuity purchase agreement to irrevocably transfer a portion of our pension benefit obligation to a third-party insurance company. The annuity purchase price was $26,381 and was approximately equal to the benefit obligation transferred. The annuity purchase was funded from pension assets. We recognized a partial settlement of the pension plan, resulting from the recognition of net pension losses previously included in Accumulated other comprehensive loss. We recorded $10,674 of expense in selling, general and administrative expenses in our consolidated statement of operations during the nine months ended March 31, 2024.

4. Balance Sheets—Additional Information

March 31,

June 30,
As of

2023

2022
Inventories


Raw materials

$
86,596

$
87,030
Work-in-process

20,113

15,468
Finished goods

186,124

156,660

$
292,833

$
259,158

March 31,

June 30,
As of

2023

2022
Other assets

ROU operating lease assets

$
36,452

$
37,680
Deferred income taxes

6,268

5,849
Deposits

6,162

5,905
Insurance investments

6,087

5,984
Equity method investments

5,463

4,362
Derivative instruments

9,926

12,976
Debt issuance costs

1,532

1,436
Other

8,976

8,698

$
80,866

$
82,890


	March 31,		June 30,
As of	2024		2023
Inventories
Raw materials	$	75,638	$	84,328
Work-in-process		26,110		22,350
Finished goods		180,541		170,892
	$	282,289	$	277,570

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31,

June 30,
As of

2023

2022
Accrued expenses and other current liabilities




Employee related

$
28,084

$
34,278
Current operating lease liabilities

6,215

6,051
Commissions and rebates

5,178

7,125
Professional fees

6,073

5,493
Income and other taxes

7,618

7,211
Insurance-related

1,354

1,174
Other

19,598

18,904

$
74,120

$
80,236


	March 31,		June 30,
As of	2024		2023
Other assets
ROU operating lease assets	$	37,100	$	35,759
Deferred income taxes		14,506		8,711
Deposits		2,338		6,617
Insurance investments		6,171		6,067
Equity method investments		5,081		5,027
Derivative instruments		2,733		10,225
Debt issuance costs		1,035		1,408
Other		7,947		8,031
	$	76,911	$	81,845

March 31,

June 30,
As of

2023

2022
Other liabilities

Long-term operating lease liabilities

$
30,060

$
31,508
Long-term and deferred income taxes

12,149

9,264
Supplemental retirement benefits, deferred compensation and other

7,210

7,368
U.S. pension plan

1,779

1,793
International retirement plans

4,441

4,620
Other long-term liabilities

6,141

5,947

$
61,780

$
60,500


	March 31,		June 30,
As of	2024		2023
Accrued expenses and other current liabilities
Employee related	$	30,908	$	29,359
Current operating lease liabilities		7,107		6,053
Commissions and rebates		5,953		5,833
Professional fees		7,581		5,032
Income and other taxes		5,294		8,663
Insurance-related		1,397		1,284
Insurance premium financing		661		4,769
Other		17,747		18,859
	$	76,648	$	79,852

March 31,

June 30,
As of

2023

2022
Accumulated other comprehensive loss




Derivative instruments

$
22,695

$
20,891
Foreign currency translation adjustment

(117,437)

(119,034)
Unrecognized net pension losses

(23,663)

(24,208)
Provision for income taxes on derivative instruments

(5,732)

(5,281)
Benefit for income taxes on long-term intercompany investments

8,166

8,166
Provision for income taxes on net pension losses

(1,783)

(1,647)

$
(117,754)

$
(121,113)


	March 31,		June 30,
As of	2024		2023
Other liabilities
Long-term operating lease liabilities	$	30,062	$	29,077
Long-term and deferred income taxes		15,106		12,146
Supplemental retirement benefits, deferred compensation and other		6,768		6,552
U.S. pension plan, net		1,644		2,286
International retirement plans		3,282		4,210
Other long-term liabilities		6,999		6,076
	$	63,861	$	60,347


	March 31,		June 30,
As of	2024		2023
Accumulated other comprehensive loss
Derivative instruments	$	16,182	$	24,589
Foreign currency translation adjustment		(117,249)		(115,062)
Unrecognized net pension losses		(12,485)		(23,996)
Income tax (provision) benefit		(452)		259
	$	(114,004)	$	(114,210)

5. Debt

Term Loans and Revolving Credit Facilities

In April 2021, we entered into an amended and restated credit agreement (the “2021 Credit Agreement”) under which we had a term A loan in an aggregate initial principal amount of $300,000 (the “2021 Term A Loan”) and a revolving credit facility under

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

which we could borrow up to an aggregate amount of $250,000, subject to the terms of the 2021 Credit Agreement (the “2021 Revolver” ~~and together with the 2021 Term A Loan, the “2021 Credit Facilities”~~). In November 2022, we amended the 2021 Credit Facilities to increase the revolving commitments under the 2021 Revolver to an aggregate amount of $310,000 and to adopt ~~SOFR~~Secured Overnight Financing Rate (“SOFR”) as the reference for the fluctuating rate of interest on the 2021 Credit Facilities, replacing the ~~LIBOR~~London Interbank Offered Rate (“LIBOR”) reference rate. ~~All other terms and conditions~~In June 2023, we obtained an additional incremental term loan (the “2023 Incremental Term Loan”) in the amount of $50,000 (the 2021 Revolver, the 2021 Term A Loan and the 2023 Incremental Term Loan are collectively referred to as the “2021 Credit ~~Agreement were unchanged.~~Facilities”).

The 2021 Term A Loan isand the 2023 Incremental Term Loan are repayable in quarterly installments, with the ~~balance~~balances payable at maturity. The 2021 Revolver ~~includes~~contains a letter of credit facility. The interest rate per annum applicable to the ~~loans under~~2021 Revolver and the 2021 ~~Credit Facilities~~Term A Loan is based on a fluctuating rate of interest plus an applicable rate equal to 1.50%, 1.75%, 2.00% or 2.25%, in the case of adjusted SOFR rate loans and 0.50%, 0.75%, 1.00% or 1.25%, in the case of base rate loans. The interest rate per annum applicable to the 2023 Incremental Term Loan is based on a fluctuating rate of interest plus an applicable rate equal to 2.00%, ~~1.75%~~2.25%, 2.50% or ~~1.50%~~2.75%, in the case of adjusted SOFR rate loans and 1.00%, ~~0.75%~~1.25%, 1.50% or ~~0.50%~~1.75%, in the case of base rate loans. The applicable rates are based on the First Lien Net Leverage Ratio (as defined in the 2021 Credit Agreement). The 2021 Credit Facilities mature in April 2026.

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

The 2021 Credit Agreement requires, among other things, compliance with financial covenants that permit: (i) a maximum First Lien Net Leverage Ratio of 4.00:1.00 (or, specifically with respect to the test periods ended March 31, 2024, and ending June 30, 2024, a maximum of 4.25:1.00); and (ii) a minimum interest coverage ratio of 3.00:1.00, each calculated on a trailing four-quarter basis. The 2021 Credit Agreement contains an acceleration clause should an event of default (as defined in the 2021 Credit Agreement) occur. As of March 31, ~~2023,~~2024, we were in compliance with the financial covenants.

As of March 31, ~~2023,~~2024, we had ~~$193,000~~$165,000 in borrowings drawn under the 2021 Revolver and had outstanding letters of credit of ~~$2,479,~~$2,294, leaving ~~$114,521~~$142,706 available for further borrowings and letters of credit under the 2021 Revolver, subject to restrictions in our 2021 Credit Facilities. 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 ~~extend~~are all less than one year.

In July 2017, we entered into an interest rate swap agreement on $150,000 of notional principal that effectively converted the floating LIBOR portion of our interest obligation on that amount of debt to a fixed interest rate of 1.83%. The agreement matured in ~~June 2022. We had designated the interest rate swap as a highly effective cash flow hedge. For additional details, see “Note 8 — Derivatives.”~~

In March 2020, we entered into an interest rate swap agreement on $150,000 of notional principal that effectively converted the floating LIBOR portion of our interest obligation on that amount of debt to a fixed rate of 0.62%. In July 2022, this agreement increased to a notional principal amount of $300,000. In November 2022, we amended the March 2020 interest rate swap agreement to convert the floating portion of our interest obligation to SOFR. The agreement effectively converts the floating portion of our interest obligation on $300,000 of debt to a fixed interest rate of 0.61% through ~~June 2025. We have designated the interest rate swap as a highly effective cash flow hedge. For additional details, see “Note 8 — Derivatives.”~~

As of March 31, 2023, the interest rates for the 2021 Revolver and the 2021 Term A Loan were 6.18% and 2.36%, respectively. The weighted-average interest rates for the 2021 Revolver were 5.07% and 1.87% for the nine months ended March 31, 2023 and 2022, respectively. The weighted-average interest rates for the 2021 Term A Loan were 2.37% and 2.98% for nine months ended March 31, 2023 and 2022, respectively.

Other Long-Term Debt

In September 2022, we entered into a credit agreement (the “2022 Term Loan”) in the amount of $12,000, collateralized by certain facilities. The 2022 Term Loan matures in September 2027. The interest rate per annum applicable to the 2022 Term Loan is based on a fluctuating rate of interest, at the Company’s election from time to time, equal to either (i) one-month ~~Adjusted~~adjusted SOFR plus ~~1.00%~~2.00%, or (ii) a base rate determined by reference to the greater of (a) the prime rate and (b) the Federal Funds Effective Rate plus 0.50%. The 2022 Term Loan is repayable in monthly installments of $35, with the balance payable at maturity. ~~The weighted-average interest rate was 6.07% for the period during which the 2022 Term Loan was outstanding in the nine months ended March 31, 2023.~~

~~Maturities~~Interest Rates

Interest rates as of ~~Long-Term Debt~~the balance sheet dates and the weighted-average rates for the periods presented were:


	March 31,		June 30,						Nine Months
As of	2023		2022
2021 Term A Loan due April 2026	$	277,500	$	288,750
2022 Term Loan due September 2027		11,790		-
		289,290		288,750	March 31,		June 30,		Ended March 31
Unamortized debt issuance costs		(854)		(825)
		288,436		287,925	2024		2023		2024		2023
Less: current maturities		(15,420)		(15,000)
	$	273,016	$	272,925
2021 Revolver					6.09	%	6.09	%	6.17	%	5.07	%
2021 Term A Loan					2.36	%	2.36	%	2.36	%	2.37	%
2023 Incremental Term Loan					7.69	%	7.44	%	7.63	%	—
2022 Term Loan					7.43	%	7.25	%	7.41	%	6.07	%

Interest rates as of the balance sheet dates are based on rates in effect as of those dates, including SOFR fluctuating rates of interest, applicable rates and the interest rate swap agreement.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We are a party to an interest rate swap agreement on $300,000 of notional principal that effectively converts the floating SOFR portion of our interest obligation on that amount of debt to a fixed rate of 0.61% through June 2025. We designated the interest rate swap as a highly effective cash flow hedge. For additional details, see “Note 9 — Derivatives.”

Debt Maturities


	March 31,		June 30,
As of	2024		2023
2021 Term A Loan due April 2026	$	262,500	$	273,750
2023 Incremental Term Loan due April 2026		46,250		50,000
2022 Term Loan due September 2027		11,370		11,685
Other		1,891		—
		322,011		335,435
Unamortized debt issuance costs		(1,192)		(1,599)
		320,819		333,836
Less: current maturities of long-term debt and other		(29,811)		(22,295)
Long-term debt	$	291,008	$	311,541

6. Related Party Transactions

Certain relatives of Jack C. Bendheim, our Chairman, President and Chief Executive Officer, provided services to the Company as employees or consultants and received aggregate compensation and benefits of approximately ~~$385~~$392 and ~~$465~~$385 during the three months ended March 31, 2024 and 2023, and ~~2022,~~$1,209 and $1,561 ~~and $1,765~~ during the nine months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Mr. Bendheim has sole authority to vote shares of our stock owned by BFI Co., LLC, an investment vehicle of the Bendheim family.

7. Stock Incentive Plan

Restricted Stock Units

Our Board of Directors has approved grants of 600,000 restricted stock units (“RSUs”) to certain officers of the Company, pursuant to the Company's 2008 Incentive Plan and the RSU award agreements. Each RSU represents the right to receive a share of our common stock upon vesting. Certain RSUs are subject to time-based vesting, and certain RSUs are subject to performance-based vesting. The time-based RSUs vest in five equal annual amounts on each anniversary of the February 2024 grant date. The performance-based RSUs vest on the fourth anniversary of the July 2023 grant and on the fifth anniversary of the February 2024 grant, subject to continuation of employment on such dates, in increments of 10% (but no less than 20%) (with linear interpolation between increments) based upon the arithmetic average of the Company’s closing stock price per share for each trading day in the 90-calendar day period ending on the vesting date (the “90-Day Average”). None of the RSUs will vest if the 90-Day Average is below $20, and 100% of the RSUs will vest if the 90-Day Average is $60 or above. In the event of a change in control of the Company, following which either (i) 100% of the shares of stock cease to be traded on a nationally recognized stock exchange and the Company is no longer listed on any such exchange or (ii) a Qualifying Termination occurs within 12 months, all unvested RSUs will immediately vest in full. All RSUs were unvested as of March 31, 2024.

We used Monte Carlo simulation models to determine the grant date fair values of the performance-based RSUs. Assumptions used by the models were based on information as of the grant date and included a risk-free rate of return, expected volatility and an expected dividend yield. The risk-free rate of return is based on U.S. treasury yields for bonds with similar maturities. Expected volatility is based on the historical volatility of the Company’s common stock. The expected dividend yield considers estimated annual dividends and the grant date share price of the underlying common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The weighted-average grant date fair value of the RSUs granted in 2024 was $5.44 per share. We recognize stock-based compensation expense for the RSUs on a straight-line basis over the vesting periods. Stock-based compensation expense for the three and nine months ended March 31, 2024, was $135 and $296, respectively. At March 31, 2024, there was $2,967 of unrecognized compensation expense related to the RSUs, which will be recognized over a weighted-average period of 4.1 years.

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 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 on our experience, 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 the Santa Fe Springs, California facility of our subsidiary, Phibro-Tech, Inc. (“Phibro-Tech”). The EPA has entered into a settlement agreement with a group of companies that sent chemicals to the Omega Chemical Site for processing and recycling (“OPOG”) to remediate the contaminated groundwater that has migrated from the Omega Chemical Site in accordance with a general remedy selected by the EPA. 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 any groundwater contamination at its site is localized and 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

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

groundwater plume affected by the Omega Chemical Site. PAHC and Phibro-Tech have vigorously contested this position and have asserted that the successor to the prior owner is required to indemnify Phibro-Tech for its potential liability and defense costs. In 2014, several members of OPOG filed a complaint under the Comprehensive Environmental Response, Compensation, and Liability Act

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(“CERCLA”) and the Resource Conservation and Recovery Act 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. In August 2022, the United States Department of Justice (the “DOJ”), on behalf of the EPA, sent Phibro-Tech and certain other PRPs a pre-litigation notice letter regarding potential CERCLA Sec. 107 cost recovery claims seeking unrecovered past costs related to the groundwater plume affected by the Omega Chemical Site, along with a declaration allocating liability for future costs.

In February 2023, the plaintiffs in the OPOG lawsuit and certain defendants in the OPOG lawsuit, including Phibro-Tech, signed a definitive settlement agreement that provides for a “cash-out” settlement, with contribution protection, for Phibro-Tech and its affiliates (as well as certain other defendants) releasing Phibro-Tech and its affiliates from liability for contamination of the groundwater plume affected by the Omega Chemical Site (with certain exceptions), including past and future EPA response costs that were the subject of the August 2022 pre-litigation notice letter sent by the DOJ on behalf of the EPA. As part of the settlement, Phibro-Tech also resolved all claims for indemnification and contribution between Phibro-Tech and the successor to the prior owner of the Phibro-Tech site. The definitive settlement agreement contemplates cash payments by Phibro-Tech and one of its ~~affiliates over a period ending in February~~affiliates. All cash payments have been made as of March 31, 2024. The definitive settlement agreement is subject to formal approval by the EPA, the DOJ and the district court. In the nine months ended March 31, 2023, we recognized expense for the definitive settlement agreement and other related costs, which is included in our consolidated statement of operations as selling, general and administrative expenses.

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, including ~~a portion of~~ the remaining liability for the OPOG lawsuit ~~referred to~~described in the preceding paragraph, to be approximately ~~$8,614~~$4,270 and ~~$4,287~~$8,505 at March 31, ~~2023,~~2024 and June 30, ~~2022,~~2023, 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 are 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 various 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.

~~Development Agreements~~

We have entered into various licensing agreements for the development, manufacture and commercialization of certain companion animal products. Under the agreements, we may be liable for future payments upon the achievement of certain development milestones and as a percentage of net sales.

8.9. 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~~Accumulated other comprehensive income (loss).

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

We routinely assess whether the derivatives used to hedge transactions are effective. If we determine that a derivative ~~no longer is~~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 “Note 910 — Fair Value Measurements.”

~~In July 2017, we entered into~~We are a party to an interest rate swap agreement on ~~the first $150,000~~$300,000 of notional principal that effectively ~~converted~~converts the floating ~~LIBOR portion of our interest obligation on that amount of debt to a fixed interest rate of 1.83%. The agreement matured in~~ ~~June 2022. In March 2020, we entered into an interest rate swap agreement on an additional $150,000 of notional principal that effectively converted the floating LIBOR~~SOFR portion of our interest obligation on that amount of debt to a fixed rate of 0.62%. In July 2022, this agreement increased to a notional principal amount of $300,000. In November 2022, we amended the March 2020 interest rate swap agreement to convert the floating portion of our interest obligation to SOFR. The agreement effectively converts the floating portion of our interest obligation on $300,000 of debt to a fixed interest rate of 0.61% through June 2025. We ~~have~~ designated the interest rate swap as a highly effective cash flow hedge.

~~We have entered into foreign currency option contracts to hedge cash flows related to monthly inventory purchases. The individual option contracts mature monthly through~~ 16

~~August 2023. The forecasted inventory purchases are probable~~Table of ~~occurring and the individual option contracts were designated as highly effective cash flow hedges.~~Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The consolidated balance sheet includes the net fair values of our outstanding foreign currency option contracts within the respective line items, based on the net financial position and maturity date of the individual contracts. The consolidated balance sheet includes the net fair values of our outstanding interest rate swap within the respective balance sheet line items, based on the expected timing of the cash flows. The consolidated balance sheet includes assets and liabilities for the fair values of outstanding derivatives that are designated and effective as cash flow hedges as follows:


	March 31,		June 30,		March 31,		June 30,
As of	2023		2022		2024		2023
Other current assets
Brazil Real options, net	$	536	$	498
Foreign currency option contracts, net					$	467	$	333
Interest rate swap		12,233		7,417		13,080		14,031
Other assets
Brazil Real options, net		—		104
Interest rate swap		9,926		12,871		2,733		10,225
Total Fair Value
Brazil Real options, net		536		602
Foreign currency option contracts, net						467		333
Interest rate swap		22,159		20,288		15,813		24,256

Notional amounts of the derivatives as of the balance sheet date were:


	March 31,		March 31,
As of	2023		2024
Brazil Real call options	R$	25,000
Brazil Real put options	R$	(25,000)
Interest rate swap	$	300,000	$	300,000
Brazil Real-USD call options			R$	18,000
Brazil Real-USD put options			R$	(18,000)
USD-Israel shekel call options			$	(10,872)
USD-Israel shekel put options			$	10,872

The consolidated statements of operations and statements of comprehensive income for the periods ended March 31, 2024 and 2023 included the effects of derivatives as follows:


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023
Foreign currency option contracts, net
(Income) expense recorded in consolidated statements of operations	$	(183)	$	368	$	(754)	$	1,161
Consolidated statement of operations - total cost of goods sold	$	183,623	$	170,133	$	518,573	$	501,269
Consolidated statement of operations - total selling, general and administrative expenses	$	59,676	$	56,987	$	191,043	$	173,490
(Income) expense recorded in comprehensive income	$	875	$	(83)	$	(35)	$	67
Interest rate swap
(Income) recorded in consolidated statements of operations	$	(3,646)	$	(2,994)	$	(10,859)	$	(6,502)
Consolidated statement of operations - total interest expense, net	$	4,575	$	3,871	$	13,798	$	10,822
(Income) expense recorded in comprehensive income	$	918	$	3,848	$	8,442	$	(1,871)

We recognize gains and losses related to certain foreign currency derivatives as a component of cost of goods sold at the time the hedged item is sold. Inventory as of March 31, 2024, included realized net gains of $1,426 related to matured contracts. We anticipate the net gains included in inventory will be recognized in cost of goods sold within the next 18 months.

1617

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

~~The consolidated statements of operations and statements of other comprehensive income (“OCI”) for the periods ended March 31, 2023 and 2022 included the effects of derivatives as follows:~~

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022
Brazil Real options, net








Expense recorded in consolidated statements of operations

$
368

$
155

$
1,161

$
682
Consolidated statement of operations - total cost of goods sold

$
170,133

$
167,993

$
501,269

$
480,020
Expense (income) recorded in OCI

$
(83)

$
(2,058)

$
67

$
(1,651)
Interest rate swap

Expense (income) recorded in consolidated statements of operations

$
(2,994)

$
814

$
(6,502)

$
2,556
Consolidated statement of operations - total interest expense, net

$
3,871

$
2,925

$
10,822

$
8,767
Expense (income) recorded in OCI

$
3,848

$
(12,900)

$
(1,871)

$
(18,088)

We recognize gains and losses related to foreign currency derivatives as a component of cost of goods sold at the time the hedged item is sold. Inventory as of March 31, 2023 included realized net gains of $532 related to matured contracts. We anticipate the net gains included in inventory will be recognized in cost of goods sold within the next eighteen months.

9.10. Fair Value Measurements

Short-term Investments

Our short-term investments consist of cash deposits held at financial institutions. We consider the carrying amounts of these short-term investments to be representative of their fair value.

Current Assets and Liabilities

We consider the carrying amounts of current assets and current liabilities to be representative of their fair value because of the current nature of these items.

Debt

We record debt, including term loans and revolver balances, at amortized cost in our consolidated financial statements. We believe the carrying value of the debt is approximately equal to its fair value, due to the variable nature of the instruments and our evaluation of estimated market prices.

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~~exchange rates.

Non-financial Assets

Our non-financial assets, which primarily consist of goodwill, other intangible assets, property and equipment, and lease-related ~~ROU~~right-of-use (“ROU”) assets, are not required to be measured at fair value on a recurring basis, and instead are reported at carrying value in the consolidated balance sheet. Assets and liabilities may be required to be measured at fair value on a non-recurring basis, either upon initial recognition or for subsequent accounting or reporting, including the initial recognition of net assets acquired in a business combination. These fair value measurements involve unobservable inputs that reflect estimates and assumptions that represent Level 3 inputs.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

Fair Value of Assets (Liabilities)


As of	March 31, 2023						June 30, 2022						March 31, 2024						June 30, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Short-term investments	$	40,000	$	—	$	—	$	17,000	$	—	$	—	$	48,523	$	—	$	—	$	40,000	$	—	$	—
Foreign currency derivatives	$	—	$	536	$	—	$	—	$	602	$	—	$	—	$	467	$	—	$	—	$	333	$	—
Interest rate swap	$	—	$	22,159	$	—	$	—	$	20,288	$	—	$	—	$	15,813	$	—	$	—	$	24,256	$	—

There were no transfers between levels during the periods presented.

~~10.~~11. Business Segments

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 ~~includes~~costs include certain costs related to executive management, business technology, legal, finance, human resources and business development.

We evaluate performance of our segments based on Adjusted EBITDA. We calculate 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, and (d) other expense or less other income, as separately reported on our consolidated statements of operations, including foreign currency (gains) losses, net and 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We evaluate performance of our segments based on Adjusted EBITDA. We calculate Adjusted EBITDA as net income plus (a) interest expense, net, (b) provision for income taxes or less benefit for income taxes, (c) depreciation and amortization, (d) other expense or less other income as separately reported on our consolidated statements of operations, including foreign currency (gains) losses, net and (e) certain items that we consider to be unusual, non-operational or non-recurring.


	Three Months				Nine Months
For the Periods Ended March 31	2024		2023		2024		2023
Net sales
Animal Health	$	181,333	$	164,434	$	514,967	$	483,096
Mineral Nutrition		64,228		62,922		181,601		184,212
Performance Products		17,662		18,317		47,947		55,532
Total segments	$	263,223	$	245,673	$	744,515	$	722,840

Depreciation and amortization
Animal Health	$	7,695	$	6,888	$	22,392	$	20,733
Mineral Nutrition		601		671		1,907		1,985
Performance Products		432		453		1,291		1,348
Total segments	$	8,728	$	8,012	$	25,590	$	24,066
Adjusted EBITDA
Animal Health	$	36,524	$	34,217	$	104,317	$	98,240
Mineral Nutrition		4,665		3,859		11,053		13,555
Performance Products		2,371		2,413		4,597		7,069
Total segments	$	43,560	$	40,489	$	119,967	$	118,864
Reconciliation of income before income taxes to Adjusted EBITDA
Income before income taxes	$	12,922	$	15,104	$	4,508	$	32,630
Interest expense, net		4,575		3,871		13,798		10,822
Depreciation and amortization – Total segments		8,728		8,012		25,590		24,066
Depreciation and amortization – Corporate		468		477		1,387		1,372
Corporate costs		13,856		13,122		42,160		38,451
Acquisition-related cost of goods sold		211		—		521		—
Acquisition-related other		512		—		512		—
Pension settlement cost		—		—		10,674		—
Brazil employment taxes		—		—		4,202		—
Insurance proceeds		(274)		—		(274)		—
Stock-based compensation		135		—		296		—
Environmental remediation costs		—		325		—		6,894
Foreign currency losses (gains), net		2,427		(422)		16,593		4,629
Adjusted EBITDA – Total segments	$	43,560	$	40,489	$	119,967	$	118,864

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Three Months

Nine Months
For the Periods Ended March 31

2023

2022

2023

2022
Net sales

Animal Health

$
164,434

$
148,589

$
483,096

$
440,520
Mineral Nutrition

62,922

69,033

184,212

190,120
Performance Products

18,317

21,997

55,532

56,356
Total segments

$
245,673

$
239,619

$
722,840

$
686,996

Depreciation and amortization

Animal Health

$
6,888

$
6,935

$
20,733

$
19,872
Mineral Nutrition

671

661

1,985

1,960
Performance Products

453

436

1,348

1,292
Total segments

$
8,012

$
8,032

$
24,066

$
23,124
Adjusted EBITDA

Animal Health

$
34,217

$
29,232

$
98,240

$
90,565
Mineral Nutrition

3,859

7,303

13,555

17,361
Performance Products

2,413

2,865

7,069

6,327
Total segments

$
40,489

$
39,400

$
118,864

$
114,253
Reconciliation of income before income taxes to Adjusted EBITDA

Income before income taxes

$
15,104

$
26,833

$
32,630

$
59,958
Interest expense, net

3,871

2,925

10,822

8,767
Depreciation and amortization – Total segments

8,012

8,032

24,066

23,124
Depreciation and amortization – Corporate

477

413

1,372

1,176
Corporate costs

13,122

11,404

38,451

34,699
Environmental remediation costs

325

—

6,894

—
Gain on sale of investment

—

—

—

(1,203)
Acquisition-related cost of goods sold

—

78

—

78
Acquisition-related transaction costs

—

279

—

279
Foreign currency (gains) losses, net

(422)

(10,564)

4,629

(12,625)
Adjusted EBITDA – Total segments

$
40,489

$
39,400

$
118,864

$
114,253


	March 31,		June 30,		March 31,		June 30,
As of	2023		2022		2024		2023
Identifiable assets
Animal Health	$	686,510	$	654,862	$	701,252	$	698,522
Mineral Nutrition		91,205		87,379		69,846		75,814
Performance Products		47,522		39,490		49,275		49,678
Total segments		825,237		781,731		820,373		824,014
Corporate		140,195		149,968		158,662		147,383
Total	$	965,432	$	931,699	$	979,035	$	971,397

The Animal Health segment includes all goodwill of the Company. Corporate assets include cash and cash equivalents, short-term investments, ~~interest rate swap agreement,~~ debt issuance costs, income tax-related assets and certain other assets.

12. Subsequent Event – Agreement to Acquire an MFA product portfolio and related assets

In April 2024, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Zoetis Inc. to acquire Zoetis’ medicated feed additive (MFA) product portfolio, certain water soluble products and related assets. The purchase price is $350,000 subject to certain adjustments set forth in the Purchase Agreement, payable in cash at closing. The closing of the transaction is subject to certain customary conditions.

We plan to finance the transaction with approximately $325,000 of new debt and, to the extent necessary, balance sheet cash. In connection with the Purchase Agreement, we entered into a debt commitment letter pursuant to which certain financial institutions have committed to provide a senior secured incremental first lien term loan facility in an aggregate principal amount of $325,000. The funding of the incremental first lien term loan facility is contingent on the satisfaction of certain customary conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Our management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided to assist readers in understanding our performance, as reflected in the results of our operations, our financial condition and our cash flows. The following discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and cash flows as of and for the periods presented below. This MD&A should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Our future results could differ materially from our historical performance as a result of various factors such as those discussed in “Risk Factors” in Item 1A of our Annual Report and “Forward-Looking Statements.”

Overview of our business

Phibro Animal Health Corporation is a leading global diversified animal health and mineral nutrition company. We develop, manufacture and market a broad range of products for food and companion animals including poultry, swine, beef and dairy cattle, aquaculture, and dogs. Our products help prevent, control and treat diseases, and support nutrition to help improve animal health and well-being. In addition to animal health and mineral nutrition products, we manufacture and market specific ingredients for use in the personal care, industrial chemical and chemical catalyst industries.

Agreement to acquire an MFA product portfolio and related assets

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Armed ~~Conflict between~~ Conflicts

Hamas and Israel

On October 7, 2023, Hamas militants crossed into Israel from Gaza in a large-scale, surprise terrorist attack. Hamas terrorists invaded Israel, first firing rockets into the country and then carrying out attacks inflicting mass casualties with hundreds more taken hostage. In order to provide immediate assistance to the victims of the attacks and their families, we and our employees provided monetary donations that were distributed to charities that offered relief services, welfare, equipment, food and other necessities.

We have three manufacturing sites in Israel. A manufacturing plant in Neot Hovav that produces active pharmaceutical ingredients for certain of our anticoccidial and antimicrobial products, a facility in Beit Shemesh that produces vaccines and a plant in Petah Tikvah that manufactures premix products and nutritional products. In addition, we have an office location near Tel Aviv in Airport City. As of March 31, 2024, we had approximately 500 employees located in Israel. While we initially had some disruption to our operations at the onset of the Israel-Hamas conflict, at the current time, we have confidence in our ability to meet our supply commitment to customers and maintain sufficient inventory to continue regional support. A significant escalation of the tensions in Israel occurred on April 13, 2024, when Iran launched more than 300 drones and missiles against Israel, but we had no material disruption to our business. While the situation surrounding the ongoing conflict remains fluid, our operations in Israel have navigated numerous challenging situations over the years.

The prolonged continuation or escalation of this conflict may trigger bans, economic and other sanctions, as well as broader military conflict, which could include neighboring nations. The potential impact of the current conflict, or escalation thereof, on our business is unclear but may include, without limitation, the possible disruption of our operations, particularly at our facilities in Israel, supply chain and logistics disruptions, personnel and raw material shortages, and other consequences, including as a result of the actions of, or disruption of the operations of, certain regulatory and governmental authorities and of certain of our suppliers, collaborative partners, licensees, manufacturing sites, distributors and customers. Our Israeli manufacturing facilities and local operations account for 28% of our consolidated assets as of March 31, 2024, and 21% of our consolidated net sales for the nine months ended March 31, 2024.

Russia and Ukraine

In response to the armed conflict between Russia and Ukraine that began in February 2022, we and our employees ~~have~~ provided support to Ukraine in the form of monetary donations, free products and humanitarian services. Our limited intent for the Russian market is to continue to provide medicines and vaccines, and related regulatory and technical support, to help existing customers combat disease challenges in the production of food animals on their farms. We have no production or direct distribution operations and no planned investments in Russia.

Since the conflict began, the United States and other North Atlantic Treaty Organization (“NATO”) member states, as well as non-member states, announced targeted economic sanctions on Russia, including certain Russian citizens and enterprises. The continuation or escalation of the conflict may trigger additional economic and other sanctions, as well as broader military conflict. The potential impacts of any resulting bans, sanctions, boycotts or broader military conflicts on our business ~~is uncertain at the current time due to the fluid nature of the conflict.~~are uncertain. The potential impacts could include supply chain and logistics disruptions, macroeconomic impacts resulting from the exclusion of Russian financial institutions from the global banking system, volatility in foreign exchange rates and interest rates, inflationary pressures on raw materials and energy as well as heightened cybersecurity threats. Our ~~annual~~ sales to Russia and Ukraine ~~represent~~for the 12 months ended March 31, 2024, represented approximately 1% of consolidated net sales.

We cannot know if the conflict could escalate and result in broader economic and security concerns that could adversely affect our business, financial condition, or results of operations.

~~Effects of the COVID-19 pandemic~~

The global food and animal production industry has experienced demand disruption, production impacts, price volatility and currency volatility in international markets due to the COVID-19 pandemic. The situation surrounding the COVID-19 pandemic remains fluid. We are unable to predict the future impact of COVID-19 on the economies where we manufacture and/or sell our products. We continue to evaluate the nature and extent of the effects of COVID-19 on our business, consolidated results of operations, financial condition and liquidity. For additional considerations and risks associated with COVID-19 on our business, see “Risk Factors” in Item 1A of our Annual Report.

2022

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Regulatory ~~Developments~~developments

In April 2016, the Food and Drug Administration (“FDA”) began initial steps to withdraw approval of carbadox (the active ingredient in our Mecadox product) via a regulatory process known as a Notice of Opportunity for Hearing (“NOOH”), due to concerns that certain residues from the product may persist in animal tissues for longer than previously determined. In the years following, Phibro has continued an ongoing process of responding collaboratively and transparently to the FDA’s Center for Veterinary Medicine (“CVM”) inquiries and has provided extensive and meticulous research and data that confirmed the safety of carbadox. In July 2020, the FDA announced it would not proceed to a hearing on the scientific concerns raised in the 2016 NOOH, consistent with the normal regulatory procedure, but instead announced that it was withdrawing the 2016 NOOH and issuing a proposed order to review the regulatory method for carbadox. Phibro reiterated the safety of carbadox and the appropriateness of the regulatory method and offered to work with the CVM to generate additional data to support the existing regulatory method or select a suitable alternative regulatory method.

In ~~the event~~March 2022, the FDA ~~continues~~held a Part 15 virtual public hearing seeking data and information related to ~~assert~~the safety of carbadox in which Phibro participated and again detailed the extensive research and data that confirm the safety of carbadox. In November 2023, the FDA issued a final order to revoke the approved method for detecting residues of carbadox. The FDA also provided notice in the Federal Register proposing to withdraw approval of all new animal drug applications (NADAs) providing for use of carbadox ~~should be removed from~~in medicated swine feed and announcing an opportunity for Phibro to request a hearing on this proposal. This second action is based on CVM’s determination that there is no approved regulatory method to detect carbadox residues in the ~~market, we will argue that we are entitled~~edible tissues of the treated swine. Phibro is taking the next steps to ~~and expect~~continue to defend swine producers’ ability to use Mecadox. We have formally requested a full evidentiary hearing on the merits before an administrative law judge. In January 2024, Phibro filed a lawsuit in the D.C. Federal District Court asking the court to invalidate the order which revoked the regulatory method for carbadox. Should we be unable to successfully defend the safety of the product, the loss of carbadox sales will have an adverse effect on our financial condition and results of operations. Sales of Mecadox (carbadox) for the ~~twelve~~12 months ended March 31, ~~2023~~2024 were ~~$20.8~~approximately $20.0 million. As of the date of the filing of this Quarterly Report on Form 10-Q, Mecadox continues to be available for use by swine producers. For additional information, see also ~~“Business-Compliance~~“Business — Compliance with Government ~~Regulations-United States-Carbadox”~~Regulation — United States — Carbadox”; and ~~“Business-Compliance~~“Business — Compliance with Government ~~Regulations-Global policy~~Regulation — Global Policy and ~~guidance”~~Guidance” in Item 1 of our Annual Report.

2123

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Analysis of the consolidated statements of operations

Summary Results of Operations


	Three Months										Nine Months										Three Months										Nine Months
For the Periods Ended March 31	2023			2022			Change				2023			2022			Change				2024			2023			Change				2024			2023			Change

























					(in thousands, except per share amounts and percentages)																(in thousands, except per share amounts and percentages)
Net sales	$	245,673		$	239,619		$	6,054	3	%	$	722,840		$	686,996		$	35,844	5	%	$	263,223		$	245,673		$	17,550	7	%	$	744,515		$	722,840		$	21,675	3	%
Gross profit		75,540			71,626			3,914	5	%		221,571			206,976			14,595	7	%		79,600			75,540			4,060	5	%		225,942			221,571			4,371	2	%
Selling, general and administrative expenses		56,987			52,432			4,555	9	%		173,490			150,876			22,614	15	%		59,676			56,987			2,689	5	%		191,043			173,490			17,553	10	%
Operating income		18,553			19,194			(641)	(3)	%		48,081			56,100			(8,019)	(14)	%		19,924			18,553			1,371	7	%		34,899			48,081			(13,182)	*
Interest expense, net		3,871			2,925			946	32	%		10,822			8,767			2,055	23	%		4,575			3,871			704	18	%		13,798			10,822			2,976	27	%
Foreign currency (gains) losses, net		(422)			(10,564)			10,142	*			4,629			(12,625)			17,254	*
Foreign currency losses (gains), net																						2,427			(422)			2,849	*			16,593			4,629			11,964	*
Income before income taxes		15,104			26,833			(11,729)	(44)	%		32,630			59,958			(27,328)	(46)	%		12,922			15,104			(2,182)	(14)	%		4,508			32,630			(28,122)	*
Provision for income taxes		5,062			9,144			(4,082)	(45)	%		11,522			18,270			(6,748)	(37)	%		4,517			5,062			(545)	(11)	%		2,844			11,522			(8,678)	*
Net income	$	10,042		$	17,689		$	(7,647)	(43)	%	$	21,108		$	41,688		$	(20,580)	(49)	%	$	8,405		$	10,042		$	(1,637)	(16)	%	$	1,664		$	21,108		$	(19,444)	*

Net income per share
basic and diluted	$	0.25		$	0.44		$	(0.19)	(43)	%	$	0.52		$	1.03		$	(0.51)	(49)	%
Basic																					$	0.21		$	0.25		$	(0.04)	(16)	%	$	0.04		$	0.52		$	(0.48)	*
Diluted																					$	0.21		$	0.25		$	(0.04)	(16)	%	$	0.04		$	0.52		$	(0.48)	*

Weighted average number of shares outstanding
basic and diluted		40,504			40,504							40,504			40,504
Basic																						40,504			40,504							40,504			40,504
Diluted																						40,520			40,504							40,509			40,504

Ratio to net sales
Gross profit		30.7	%		29.9	%						30.7	%		30.1	%						30.2	%		30.7	%						30.3	%		30.7	%
Selling, general and administrative expenses		23.2	%		21.9	%						24.0	%		22.0	%						22.7	%		23.2	%						25.7	%		24.0	%
Operating income		7.6	%		8.0	%						6.7	%		8.2	%						7.6	%		7.6	%						4.7	%		6.7	%
Income before income taxes		6.1	%		11.2	%						4.5	%		8.7	%						4.9	%		6.1	%						0.6	%		4.5	%
Net income		4.1	%		7.4	%						2.9	%		6.1	%						3.2	%		4.1	%						0.2	%		2.9	%
Effective tax rate		33.5	%		34.1	%						35.3	%		30.5	%						35.0	%		33.5	%						63.1	%		35.3	%

Certain amounts and percentages may reflect rounding adjustments.

*	Calculation not meaningful

Net sales, Adjusted EBITDA and reconciliation of GAAP net income to Adjusted EBITDA

We report Net sales and Adjusted EBITDA by segment to understand the operating performance of each segment. This enables us to monitor changes in net sales, costs and other actionable operating metrics at the segment level. See “—General description of non-GAAP financial measures.”

2224

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Segment net sales and Adjusted EBITDA:


	Three Months										Nine Months										Three Months										Nine Months
For the Periods Ended March 31	2023			2022			Change				2023			2022			Change				2024			2023			Change				2024			2023			Change

Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales
Net sales						(in thousands, except percentages)															(in thousands, except percentages)
MFAs and other	$	93,217		$	84,330		$	8,887	11	%	$	283,186		$	259,812		$	23,374	9	%	$	108,216		$	93,217		$	14,999	16	%	$	304,261		$	283,186		$	21,075	7	%
Nutritional specialties		45,016			41,394			3,622	9	%		127,926			114,721			13,205	12	%		40,194			45,016			(4,822)	(11)	%		121,840			127,926			(6,086)	(5)	%
Vaccines		26,201			22,865			3,336	15	%		71,984			65,987			5,997	9	%		32,923			26,201			6,722	26	%		88,866			71,984			16,882	23	%
Animal Health		164,434			148,589			15,845	11	%		483,096			440,520			42,576	10	%		181,333			164,434			16,899	10	%		514,967			483,096			31,871	7	%
Mineral Nutrition		62,922			69,033			(6,111)	(9)	%		184,212			190,120			(5,908)	(3)	%		64,228			62,922			1,306	2	%		181,601			184,212			(2,611)	(1)	%
Performance Products		18,317			21,997			(3,680)	(17)	%		55,532			56,356			(824)	(1)	%		17,662			18,317			(655)	(4)	%		47,947			55,532			(7,585)	(14)	%
Total	$	245,673		$	239,619		$	6,054	3	%	$	722,840		$	686,996		$	35,844	5	%	$	263,223		$	245,673		$	17,550	7	%	$	744,515		$	722,840		$	21,675	3	%

Adjusted EBITDA
Animal Health	$	34,217		$	29,232		$	4,985	17	%	$	98,240		$	90,565		$	7,675	8	%	$	36,524		$	34,217		$	2,307	7	%	$	104,317		$	98,240		$	6,077	6	%
Mineral Nutrition		3,859			7,303			(3,444)	(47)	%		13,555			17,361			(3,806)	(22)	%		4,665			3,859			806	21	%		11,053			13,555			(2,502)	(18)	%
Performance Products		2,413			2,865			(452)	(16)	%		7,069			6,327			742	12	%		2,371			2,413			(42)	(2)	%		4,597			7,069			(2,472)	(35)	%
Corporate		(13,122)			(11,404)			(1,718)	15	%		(38,451)			(34,699)			(3,752)	11	%		(13,856)			(13,122)			(734)	6	%		(42,160)			(38,451)			(3,709)	10	%
Total	$	27,367		$	27,996		$	(629)	(2)	%	$	80,413		$	79,554		$	859	1	%	$	29,704		$	27,367		$	2,337	9	%	$	77,807		$	80,413		$	(2,606)	(3)	%

Adjusted EBITDA as a percentage of segment net sales
Animal Health		20.8	%		19.7	%						20.3	%		20.6	%						20.1	%		20.8	%						20.3	%		20.3	%
Mineral Nutrition		6.1	%		10.6	%						7.4	%		9.1	%						7.3	%		6.1	%						6.1	%		7.4	%
Performance Products		13.2	%		13.0	%						12.7	%		11.2	%						13.4	%		13.2	%						9.6	%		12.7	%
Corporate⁽¹⁾		(5.3)	%		(4.8)	%						(5.3)	%		(5.1)	%						(5.3)	%		(5.3)	%						(5.7)	%		(5.3)	%
Total⁽¹⁾		11.1	%		11.7	%						11.1	%		11.6	%						11.3	%		11.1	%						10.5	%		11.1	%

(1)	Reflects ratio to total net sales

The table below sets forth a reconciliation of net income, as reported under GAAP, to Adjusted EBITDA:


	Three Months									Nine Months								Three Months								Nine Months
For the Periods Ended March 31	2023		2022			Change				2023		2022		Change				2024		2023		Change				2024		2023		Change

























					(in thousands, except percentages)													(in thousands, except percentages)
Net income	$	10,042	$	17,689		$	(7,647)	(43)	%	$	21,108	$	41,688	$	(20,580)	(49)	%	$	8,405	$	10,042	$	(1,637)	(16)	%	$	1,664	$	21,108	$	(19,444)	*
Interest expense, net		3,871		2,925			946	32	%		10,822		8,767		2,055	23	%		4,575		3,871		704	18	%		13,798		10,822		2,976	27	%
Provision for income taxes		5,062		9,144			(4,082)	(45)	%		11,522		18,270		(6,748)	(37)	%		4,517		5,062		(545)	(11)	%		2,844		11,522		(8,678)	*
Depreciation and amortization		8,489		8,445			44	1	%		25,438		24,300		1,138	5	%		9,196		8,489		707	8	%		26,977		25,438		1,539	6	%
EBITDA		27,464		38,203			(10,739)	(28)	%		68,890		93,025		(24,135)	(26)	%		26,693		27,464		(771)	(3)	%		45,283		68,890		(23,607)	(34)	%
Acquisition-related cost of goods sold																			211		—		211	*			521		—		521	*
Acquisition-related other																			512		—		512	*			512		—		512	*
Pension settlement cost																			—		—		—	*			10,674		—		10,674	*
Brazil employment taxes																			—		—		—	*			4,202		—		4,202	*
Insurance proceeds																			(274)		—		(274)	*			(274)		—		(274)	*
Stock-based compensation																			135		—		135	*			296		—		296	*
Environmental remediation costs		325		—			325	*			6,894		—		6,894	*			—		325		(325)	*			—		6,894		(6,894)	*
Gain on sale of investment		—		—			—	*			—		(1,203)		1,203	*
Acquisition-related cost of goods sold		—		78			(78)	*			—		78		(78)	*
Acquisition-related transaction costs		—		279			(279)	*			—		279		(279)	*
Foreign currency (gains) losses, net		(422)		(10,564)			10,142	*			4,629		(12,625)		17,254	*
Foreign currency losses (gains), net																			2,427		(422)		2,849	*			16,593		4,629		11,964	*
Adjusted EBITDA	$	27,367	$	27,996		$	(629)	(2)	%	$	80,413	$	79,554	$	859	1	%	$	29,704	$	27,367	$	2,337	9	%	$	77,807	$	80,413	$	(2,606)	(3)	%

Certain amounts may reflect rounding adjustments.

* Calculation not meaningful

2325

Table of Contents

Adjusted net income

We report adjusted net income to portray the results of our operations prior to considering certain income statement elements. See “—General description of non-GAAP financial measures.” The table below sets forth a reconciliation of net income, as reported under GAAP, to adjusted net income:


	Three Months										Nine Months
For the Periods Ended March 31	2024			2023			Change				2024			2023			Change

	(in thousands, except per share amounts and percentages)
Net income	$	8,405		$	10,042		$	(1,637)	(16)	%	$	1,664		$	21,108		$	(19,444)	*
Acquisition-related intangible amortization ⁽¹⁾		1,670			1,659			11	1	%		5,014			4,973			41	1	%
Acquisition-related intangible amortization⁽²⁾		756			761			(5)	(1)	%		2,325			2,281			44	2	%
Acquisition-related cost of goods sold ⁽¹⁾		211			—			211	*			521			—			521	*
Acquisition-related other ⁽²⁾		512			—			512	*			512			—			512	*
Pension settlement cost ⁽²⁾		—			—			—	*			10,674			—			10,674	*
Brazil employment taxes ⁽²⁾		—			—			—	*			4,202			—			4,202	*
Insurance proceeds ⁽²⁾		(274)			—			(274)	*			(274)			—			(274)	*
Stock-based compensation ⁽²⁾		135			—			135	*			296			—			296	*
Environmental remediation costs ⁽²⁾		—			325			(325)	*			—			6,894			(6,894)	*
Foreign currency losses (gains), net ⁽³⁾		2,427			(422)			2,849	*			16,593			4,629			11,964	*
Adjustments to income taxes ⁽⁴⁾		(1,145)			(722)			(423)	*			(9,830)			(6,131)			(3,699)	*
Adjusted net income	$	12,697		$	11,643		$	1,054	9	%	$	31,697		$	33,754		$	(2,057)	(6)	%

Statement of Operations Line Items - adjusted
Adjusted cost of goods sold ⁽¹⁾	$	181,742		$	168,474		$	13,268	8	%	$	513,038		$	496,296		$	16,742	3	%
Adjusted gross profit		81,481			77,199			4,282	6	%		231,477			226,544			4,933	2	%
Adjusted selling, general and administrative ⁽²⁾		58,546			55,901			2,645	5	%		173,308			164,315			8,993	5	%
Adjusted interest expense, net		4,576			3,871			705	18	%		13,798			10,822			2,976	27	%
Adjusted income before income taxes		18,359			17,427			932	5	%		44,371			51,407			(7,036)	(14)	%
Adjusted provision for income taxes ⁽⁴⁾		5,662			5,784			(122)	(2)	%		12,674			17,653			(4,979)	(28)	%
Adjusted net income	$	12,697		$	11,643		$	1,054	9	%	$	31,697		$	33,754		$	(2,057)	(6)	%

Adjusted net income per share
diluted	$	0.31		$	0.29		$	0.02	9	%	$	0.78		$	0.83		$	(0.05)	(6)	%

Weighted average common shares outstanding
diluted		40,520			40,504							40,509			40,504

Ratio to net sales
Adjusted gross profit		31.0	%		31.4	%						31.1	%		31.3	%
Adjusted selling, general and administrative		22.2	%		22.8	%						23.3	%		22.7	%
Adjusted income before income taxes		7.0	%		7.1	%						6.0	%		7.1	%
Adjusted net income		4.8	%		4.7	%						4.3	%		4.7	%
Adjusted effective tax rate		30.8	%		33.2	%						28.6	%		34.3	%

Certain amounts and percentages may reflect rounding adjustments.

* Calculation not meaningful

⁽¹⁾ Adjusted cost of goods sold excludes acquisition-related intangible amortization and acquisition-related cost of goods sold

⁽²⁾Adjusted selling, general and administrative excludes acquisition-related intangible amortization, pension settlement cost, Brazil employment taxes, acquisition-related other, insurance proceeds, stock-based compensation and environmental remediation costs

⁽³⁾ Foreign currency losses (gains), net are excluded from adjusted net income

⁽⁴⁾ Adjusted provision for income taxes excludes the income tax effect of pre-tax income adjustments and certain income tax items

Table of Contents

Comparison of three months ended March 31, ~~2023~~2024 and ~~2022~~2023

Net sales

Net sales of ~~$245.7~~$263.2 million for the three months ended March 31, ~~2023,~~2024, increased ~~$6.1~~$17.6 million, or 3%7%, as compared to the three months ended March 31, ~~2022.~~2023. Animal Health and Mineral Nutrition increased ~~$15.8~~$16.9 million and $1.3 million, respectively. Performance Products decreased $0.7 million.

Animal Health

Net sales of $181.3 million for the three months ended March 31, 2024, increased $16.9 million, or 10%. Net sales of MFAs and other increased $15.0 million, or 16%, due to increased demand for our MFAs in both domestic and international regions. Net sales of nutritional specialty products decreased $4.8 million, or 11%, mostly due to lower demand for microbial and dairy products. Net sales of vaccines increased $6.7 million, or 26%, primarily due to poultry product introductions in Latin America, plus an increase in both domestic and international demand.

Mineral Nutrition

Net sales of $64.2 million for the three months ended March 31, 2024, increased $1.3 million, or 2%, due to increased sales volume, partially offset by decreased average selling price.

Performance Products

Net sales of $17.7 million for the three months ended March 31, 2024, decreased $0.7 million, or 4%, due to a decrease in demand for personal care product ingredients and industrial chemicals.

Gross profit

Gross profit of $79.6 million for the three months ended March 31, 2024, increased $4.1 million, or 5%, as compared to the three months ended March 31, 2023. Gross margin decreased 50 basis points to 30.2% of net sales for the three months ended March 31, 2024, as compared to 30.7% for the three months ended March 31, 2023, due to unfavorable product mix.

Animal Health gross profit increased $3.5 million, primarily driven by higher sales volume, partially offset by unfavorable product mix. Mineral Nutrition gross profit increased $0.9 million, driven by increased sales volumes. Performance Products gross profit was comparable to the prior year’s quarter. Acquisition-related cost of goods sold reduced gross profit by $0.2 million.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) of $59.7 million for the three months ended March 31, 2024, increased $2.7 million, or 5%, as compared to the three months ended March 31, 2023. SG&A for the three months ended March 31, 2024, included $0.5 million in acquisition-related costs and $0.1 million of stock-based compensation, partially offset by a gain from insurance proceeds of $0.3 million. SG&A for the three months ended March 31, 2023, included $0.3 million of environmental remediation costs. Excluding these items, SG&A increased $2.6 million, or 5%.

Animal Health SG&A increased $2.0 million, primarily due to an increase in employee-related costs to support increased demand and new product launches in Latin America. Mineral Nutrition and Performance Products SG&A was comparable to the prior year. Corporate costs increased by $0.7 million, due to an increase in employee-related costs.

Interest expense, net

Interest expense, net of $4.6 million for the three months ended March 31, 2024, increased by $0.7 million, as compared to the three months ended March 31, 2023, as a result of higher variable interest rates and increased debt levels.

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Foreign currency losses (gains), net

Foreign currency losses, net for the three months ended March 31, 2024, were $2.4 million, as compared to $0.4 million of net gains for the three months ended March 31, 2023. Current period losses were driven by fluctuations in certain currencies related to the U.S. dollar.

Provision for income taxes

The provision for income taxes was $4.5 million and $5.1 million for the three months ended March 31, 2024 and 2023, respectively. The effective income tax rates were 35.0% and 33.5% for the three months ended March 31, 2024 and 2023, respectively. The effective income tax rate for the three months ended March 31, 2024, increased due to the relatively greater effect of certain items such as Global Intangible Low-Taxed Income (“GILTI”) on reduced pre-tax income.

Net income

Net income of $8.4 million for the three months ended March 31, 2024, decreased $1.6 million, as compared to net income of $10.0 million for the three months ended March 31, 2023. Operating income increased $1.4 million, driven by favorable gross profit, partially offset by higher SG&A. Gross profit increased primarily as a result of higher product demand in the Animal Health segment. SG&A increased due to higher employee-related costs. Interest expense, net increased $0.7 million and foreign currency exchange resulted in increased losses of $2.8 million. This was partially offset by a $0.5 million decrease in income tax expense.

Adjusted EBITDA

Adjusted EBITDA of $29.7 million for the three months ended March 31, 2024, increased $2.3 million, or 9%, as compared to the three months ended March 31, 2023. Animal Health Adjusted EBITDA increased $2.3 million due to gross profit from increased sales, partially offset by higher SG&A. Mineral Nutrition Adjusted EBITDA increased $0.8 million, driven by higher gross profit. Performance Products Adjusted EBITDA remained relatively the same. Corporate expenses increased $0.7 million, driven by increased employee-related costs.

Adjusted provision for income taxes

The adjusted provision for income taxes was $5.7 million and $5.8 million for the three months ended March 31, 2024 and 2023, respectively. The adjusted effective income tax rates were 30.8% and 33.2% for the three months ended March 31, 2024 and 2023, respectively. The improvement in our adjusted effective income tax rate for the three months ended March 31, 2024 was driven by a favorable mix of pre-tax income.

Adjusted net income

Adjusted net income of $12.7 million for the three months ended March 31, 2024, increased $1.1 million, or 9%, as compared to the prior year. Increased adjusted gross profit, driven by sales growth, was partially offset by higher adjusted SG&A and higher adjusted interest expense, net, with a partial benefit from a reduced adjusted provision for income taxes. Adjusted SG&A increased due to increased employee-related costs and adjusted interest expense, net, increased due to higher variable interest rates.

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Adjusted diluted earnings per share

Adjusted diluted earnings per share was $0.31 for the quarter, an increase of $0.02, or 9% as compared to the adjusted diluted earnings per share of $0.29 in the prior year.

Comparison of nine months ended March 31, 2024 and 2023

Net sales

Net sales of $744.5 million for the nine months ended March 31, 2024, increased $21.7 million, or 3%, as compared to the nine months ended March 31, 2023. Animal Health sales increased $31.9 million. Mineral Nutrition and Performance Products sales decreased ~~$6.1~~$2.6 million and ~~$3.7~~$7.6 million, respectively.

Animal Health

Net sales of ~~$164.4~~$515.0 million for the ~~three~~nine months ended March 31, ~~2023,~~2024, increased ~~$15.8~~$31.9 million, or ~~11%~~7%. Net sales of MFAs and other increased ~~$8.9~~$21.1 million, or ~~11%~~7%, due to increased volumes in all regions and higher demand for ~~our MFAs in the U.S., Latin America and Canada and for our~~ processing aids used in the ethanol fermentation industry. Net sales of nutritional specialty products ~~increased $3.6~~decreased $6.1 million, or 9%5%, ~~due mostly to higher~~driven by decreased demand for domestic ~~demand~~dairy and ~~higher average selling prices for dairy products, along with growth in the companion animal product.~~microbial products. Net sales of vaccines increased ~~$3.3~~$16.9 million, or ~~15%~~23%, due primarily to poultry product introductions in Latin America, plus an increase in domestic ~~and international demand, along with new product launches in Latin America.~~demand.

Mineral Nutrition

Net sales of ~~$62.9~~$181.6 million for the ~~three~~nine months ended March 31, ~~2023,~~2024, decreased ~~$6.1~~$2.6 million, or 9%1%, driven by ~~a decrease in demand for trace minerals as customers reduced purchases with the higher costs of capital,~~lower average selling prices, partially offset by ~~higher average selling prices. The~~an increase in ~~average selling prices is correlated to the movement of the underlying raw material costs.~~sales volume.

Performance Products

Net sales of ~~$18.3~~$47.9 million for the ~~three~~nine months ended March 31, ~~2023,~~2024, decreased ~~$3.7~~$7.6 million, or ~~17%~~14%, driven by decreased demand for ~~both~~ personal care product ingredients and ~~copper-related products, partially offset by higher average selling prices for these products.~~industrial chemicals.

Gross profit

Gross profit of ~~$75.5~~$225.9 million for the ~~three~~nine months ended March 31, 2024, increased $4.4 million, as compared to the nine months ended March 31, 2023. Gross margin decreased 40 basis points to 30.3% of net sales for the nine months ended March 31, 2024, as compared to 30.7% for the nine months ended March 31, 2023 increased $3.9 million, or 5%, as compared to the three months ended March 31, 2022. Gross margin increased 80 basis points to 30.7% of net sales for the three months ended March 31, 2023, as compared to 29.9% for the three months ended March 31, 2022, due to ~~higher~~unfavorable product ~~demand and favorable product and geographical~~ mix.

Animal Health gross profit increased ~~$7.5~~$10.0 million ~~primarily driven by~~as a result of higher ~~sales volumes and favorable production costs.~~product demand. Mineral Nutrition gross profit decreased ~~$3.4~~$2.4 million, driven by lower sales volume and an increase in raw material costs. Performance Products gross profit decreased ~~$0.2~~$2.7 million ~~as a result of~~due to lower ~~product~~ demand and ~~higher costs for raw materials.~~unfavorable product mix. Acquisition-related cost of goods sold reduced gross profit by $0.5 million.

Selling, general and administrative expenses

~~Selling, general and administrative expenses (“~~SG~~&A”)~~&A of $57.0 million for the three months ended March 31, 2023, increased $4.6 million, or 9%, as compared to the three months ended March 31, 2022. SG&A for the three months ended March 31, 2023, included $0.3 million of additional environmental remediation costs. SG&A for the three months ended March 31, 2022, included $0.3 million of acquisition-related transaction costs. Excluding these items, SG&A increased $4.5 million.

Animal Health SG&A increased $2.3 million, primarily due to an increase in employee-related costs. Mineral Nutrition SG&A was comparable to the prior year. Performance Products SG&A increased $0.3 million. Corporate costs increased by $1.8 million, driven by the planned increase in strategic investments.

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~~Interest expense, net~~

Interest expense, net of $3.9 million for the three months ended March 31, 2023, increased by $0.9 million, as compared to the three months ended March 31, 2022, due to increased debt outstanding and higher floating interest rates on portions of debt outstanding, partially offset by increased interest income and a lower average fixed rate from our interest rate swap agreements.

~~Foreign currency gains, net~~

Foreign currency gains, net for the three months ended March 31, 2023, were $0.4 million, as compared to $10.6 million of net gains for the three months ended March 31, 2022. Prior period gains were driven by fluctuations in certain currencies relative to the U.S. dollar.

~~Provision for income taxes~~

The provision for income taxes was $5.1 million and $9.1 million for the three months ended March 31, 2023 and 2022, respectively. The effective income tax rate was 33.5% and 34.1% for the three months ended March 31, 2023 and 2022, respectively. The current provision for income taxes was impacted by the final foreign tax credit regulations that were in effect during the three months ended March 31, 2023, in addition to losses generated in international jurisdictions where no tax benefit is being recognized.

~~Net income~~

Net income of $10.0 million for the three months ended March 31, 2023, decreased $7.6 million, as compared to net income of $17.7 million for the three months ended March 31, 2022. Operating income decreased $0.6 million, driven by higher SG&A, partially offset by favorable gross profit. The increase in gross profit was due to higher product demand and higher average selling prices. Interest expense, net increased $0.9 million and foreign currency gains, net decreased $10.1 million. Income tax expense decreased by $4.1 million.

~~Adjusted EBITDA~~

Adjusted EBITDA of $27.4 million for the three months ended March 31, 2023, decreased $0.6 million, or 2%, as compared to the three months ended March 31, 2022. Animal Health Adjusted EBITDA increased $5.0 million due to gross profit from increased sales, partially offset by higher SG&A. Mineral Nutrition Adjusted EBITDA decreased $3.4 million, driven by lower gross profit. Performance Products Adjusted EBITDA decreased $0.5 million due to lower gross profit and higher SG&A. Corporate expenses increased $1.7 million, driven by increased strategic investments.

~~Comparison of nine months ended March 31, 2023 and 2022~~

~~Net sales~~

~~Net sales of $722.8~~$191.0 million for the nine months ended March 31, ~~2023,~~2024, increased ~~$35.8~~$17.6 million, or 5%10%, as compared to the nine months ended March 31, ~~2022. Animal Health sales increased by $42.6 million. Mineral Nutrition and Performance Products sales decreased $5.9 million and $0.8 million, respectively.~~

~~Animal Health~~

~~Net sales of $483.1 million~~2023. SG&A for the nine months ended March 31, ~~2023, increased $42.6~~2024, included $10.7 million ~~or 10%. Net sales~~pension settlement costs, a $4.2 million cost for an unfavorable litigation result related to Brazil employment taxes paid from January 2013 through December 2015, acquisition-related costs of ~~MFAs~~$0.5 million and ~~other increased $23.4~~$0.3 million ~~or 9%, due to higher demand for MFAs primarily in U.S., Latin America and Canada and for processing aids used in the ethanol fermentation industry. Net sales~~ of nutritional specialty products increased $13.2 million, or 12%, driven by strong demand in dairy products and increased sales of our companion animal product. Net sales of vaccines increased $6.0 million, or 9%, due to increased domestic and international volumes.

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~~Mineral Nutrition~~

~~Net sales of $184.2 million for the nine months ended March 31, 2023, decreased $5.9 million, or 3%, driven~~stock-based compensation, slightly offset by a ~~decrease in demand for trace minerals, partially offset by higher average selling prices. The increase in average selling prices is correlated to the movement~~gain from insurance proceeds of ~~the underlying raw material costs.~~

~~Performance Products~~

Net sales of $55.5 million for the nine months ended March 31, 2023, decreased $0.8 million, or 1%, driven by decreased demand in personal care product ingredients and copper-related products, partially offset by higher average selling prices for these products.

~~Gross profit~~

Gross profit of $221.6 million for the nine months ended March 31, 2023, increased $14.6 million, or 7%, as compared to the nine months ended March 31, 2022. Gross margin increased 60 basis points to 30.7% of net sales for the nine months ended March 31, 2023, as compared to 30.1% for the nine months ended March 31, 2022.

Animal Health gross profit increased $16.4 million as a result of higher product demand, partially offset by higher raw material and logistics costs. Mineral Nutrition gross profit decreased $3.6 million, driven by lower sales volume and an increase in raw material costs. Performance Products gross profit increased $1.8 million due to higher sales, partially offset by higher raw material costs.

~~Selling, general and administrative expenses~~

~~SG&A of $173.5 million for the nine months ended March 31, 2023, increased $22.6 million, or 15%, as compared to the nine months ended March 31, 2022.~~$0.3 million. SG&A for the nine months ended March 31, 2023, included $6.9 million of environmental remediation costs mostly related to the definitive settlement agreement related to the Omega Chemical Site. SG&A for the nine months ended March 31, 2022, included a $1.2 million gain on sale of investment and $0.3 million acquisition-related transaction costs. Excluding these items, SG&A increased ~~$14.8~~$9.0 million, or ~~10%~~5%.

Animal Health SG&A increased ~~$9.4~~$5.6 million primarily due to an increase in employee-related ~~costs.~~costs and new product launches in Brazil. Mineral Nutrition SG&A ~~increased $0.3 million.~~remained relatively flat. Performance Products SG&A ~~increased $1.1~~decreased $0.3 million, ~~mainly due to an increase~~with a

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reduction in ~~employee-related costs.~~spending. Corporate expenses increased ~~$4.0~~$3.7 million due to an increase in strategic investments and employee-related ~~costs and strategic investments.~~costs.

Interest expense, net

Interest expense, net of ~~$10.8~~$13.8 million for the nine months ended March 31, ~~2023,~~2024, increased ~~$2.1~~$3.0 million, or ~~23%~~27%, as compared to the nine months ended March 31, ~~2022. Interest expense increased~~2023, as a result of higher variable interest rates and increased debt ~~outstanding and higher floating interest rates on portions of debt outstanding,~~levels, partially offset by ~~increased interest income and a lower average fixed rate from our interest rate swap agreements.~~higher returns on short-term investments.

Foreign currency ~~(gains)~~ losses, net

Foreign currency ~~(gains)~~ losses, net for the nine months ended March 31, ~~2023, amounted~~2024, were $16.6 million, as compared to net losses of $4.6 ~~million, as compared to net gains of $12.6~~ million for the nine months ended March 31, ~~2022.~~2023. Current period losses were driven by fluctuations in certain currencies relative to the U.S. ~~dollar.~~dollar, primarily related to a major devaluation in Argentina.

Provision for income taxes

The provision for income taxes was ~~$11.5~~$2.8 million and ~~$18.3~~$11.5 million for the nine months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. The effective income tax ~~rate was~~rates were 63.1% and 35.3% ~~and 30.5%~~ for the nine months ended March 31, 2024 and 2023, respectively. The effective income tax rate for the nine months ended March 31, 2024, was unfavorably affected by the relatively greater effect of certain items such as GILTI on reduced pre-tax income. The provision for income taxes for the nine months ended March 31, 2024, included (i) a $1.2 million benefit related to the determination of whether a foreign tax is eligible for a U.S. foreign tax credit related to our fiscal year 2023, based on Internal Revenue Service (“IRS”) guidance provided subsequent to our fiscal year-end, (ii) a $0.5 million benefit related to the release of certain valuation allowances on non-U.S. companies and ~~2022, respectively.~~(iii) a $1.1 million expense from changes in uncertain tax positions related to prior years. The effective income tax rate, without these items, would have been 78.5% for the nine months ended March 31, 2024. The provision for income taxes for the nine months ended March 31, 2023, included a $0.9 million benefit related to exchange rate differences on intercompany dividends and a $0.2 million expense from changes in uncertain tax positions related to prior years. The

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effective income tax rate, without these items, would have been 37.5% for the nine months ended March 31, 2023. ~~The provision for~~

Net income ~~taxes~~

Net income of $1.7 million for the nine months ended March 31, ~~2022, included a $0.5~~2024, decreased $19.4 million, ~~expense for a change in deferred taxes, a $0.6 million expense from changes in uncertain tax positions related~~as compared to prior years, and a $0.2 million benefit related to final regulations for the GILTI tax. The effective income tax rate, without these items, would have been 29.0% for the nine months ended March 31, 2022.

~~Net income~~

~~Net~~net income of $21.1 million for the nine months ended March 31, ~~2023,~~2023. Operating income decreased ~~$20.6~~$13.2 million ~~as compared to~~driven by higher SG&A, slightly offset by higher gross profit. SG&A increased by $17.6 million, which included pension settlement costs of $10.7 million, Brazil employment taxes of $4.2 million, acquisition-related costs of $0.5 million and stock-based compensation of $0.3 million, slightly offset by a gain from insurance proceeds of $0.3 million. Changes in interest expense, net and foreign currency losses resulted in a $3.0 million and $12.0 million reduction in income before income taxes, respectively. This was partially offset by a $8.7 million decrease in income tax expense.

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Adjusted EBITDA

Adjusted EBITDA of $77.8 million for the nine months ended March 31, ~~2022. Operating income~~2024, decreased $8.0 million driven by higher SG&A, partially offset by higher gross profit. The increase in gross profit was driven by higher product demand in Animal Health, partially offset by higher raw material cost and production costs. SG&A expenses increased by $22.6 million due to environmental remediation costs, higher employee-related costs and strategic investments. The change in foreign currency (gains) losses resulted in a $4.6 million reduction in income before income taxes for the nine months ended March 31, 2023. Income tax expense decreased $6.7 million.

~~Adjusted EBITDA~~

~~Adjusted EBITDA of $80.4 million for the nine months ended March 31, 2023, increased $0.9~~$2.6 million, or 1%3%, as compared to the nine months ended March 31, ~~2022.~~2023. Animal Health Adjusted EBITDA increased ~~$7.7~~$6.1 million, resulting from higher sales and increased gross profit, partially offset by higher SG&A. ~~Performance Products Adjusted EBITDA increased $0.7 million, driven by higher sales and gross profit, partially offset by an increase in SG&A.~~ Mineral Nutrition Adjusted EBITDA decreased ~~$3.8 million.~~$2.5 million, due to decreased sales and gross profit. Performance Products Adjusted EBITDA decreased $2.5 million, driven by decreased sales and gross profit. Corporate expenses increased ~~$3.8~~$3.7 million due to increased strategic investment and employee-related costs.

Adjusted provision for income taxes

The adjusted provision for income taxes was $12.7 million and $17.7 million for the nine months ended March 31, 2024 and 2023, respectively. The adjusted effective income tax rates for the nine months ended March 31, 2024 and 2023, were 28.6% and 34.3%, respectively. The improvement in our adjusted effective income tax rate during the nine months ended March 31, 2024 was primarily driven by a favorable mix of pre-tax income.

Adjusted net income

Adjusted net income of $31.7 million for the nine months ended March 31, 2024, decreased $2.1 million, or 6%, as compared to the prior year. The decrease was driven by higher adjusted SG&A and higher adjusted interest expense, partially offset by higher gross profit and a partial benefit from a reduced adjusted provision for income taxes. Adjusted SG&A increased due to increased strategic investments and employee-related costs and ~~strategic investments.~~adjusted interest expense, net, increased due to higher variable interest rates.

Adjusted diluted earnings per share

Adjusted diluted earnings per share was $0.78 for the nine months ended March 31, 2024, a decrease of $0.05, or 6%, as compared to the adjusted diluted earnings per share of $0.83 in the prior year.

Analysis of financial condition, liquidity and capital resources

Net increase (decrease) ~~increase~~ in cash and cash equivalents was:


	Nine Months						Nine Months
For the Periods Ended March 31	2023		2022		Change		2024		2023		Change

	(in thousands)
Cash (used) provided by:








							(in thousands)
Cash provided (used) by:
Operating activities	$	(6,928)	$	30,075	$	(37,003)	$	59,165	$	(6,928)	$	66,093
Investing activities		(63,736)		(13,042)		(50,694)		(39,083)		(63,736)		24,653
Financing activities		33,319		3,954		29,365		(8,555)		33,319		(41,874)
Effect of exchange-rate changes on cash and cash equivalents		335		(451)		786		(2,583)		335		(2,918)
Net (decrease) increase in cash and cash equivalents	$	(37,010)	$	20,536	$	(57,546)
Net increase (decrease) in cash and cash equivalents							$	8,944	$	(37,010)	$	45,954

Certain amounts may reflect rounding adjustments.

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Net cash provided (used) ~~provided~~ by operating activities was comprised of:


	Nine Months						Nine Months
For the Periods Ended March 31	2023		2022		Change		2024		2023		Change

	(in thousands)








							(in thousands)
EBITDA	$	68,890	$	93,025	$	(24,135)	$	45,283	$	68,890	$	(23,607)
Adjustments:
Acquisition-related cost of goods sold								521		—		521
Acquisition-related other								512		—		512
Pension settlement cost								10,674		—		10,674
Brazil employment taxes								4,202		—		4,202
Insurance proceeds								(274)		—		(274)
Stock-based compensation								296		—		296
Environmental remediation costs		6,894		—		6,894		—		6,894		(6,894)
Gain on sale of investment		—		(1,203)		1,203
Acquisition-related cost of goods sold		—		78		(78)
Acquisition-related transaction costs		—		279		(279)
Foreign currency (gains) losses, net		4,629		(12,625)		17,254
Foreign currency losses, net								16,593		4,629		11,964
Interest paid, net		(10,289)		(8,220)		(2,069)		(13,018)		(10,289)		(2,729)
Income taxes paid		(16,163)		(13,432)		(2,731)		(11,567)		(16,163)		4,596
Changes in operating assets and liabilities and other items		(60,889)		(27,827)		(33,062)		5,943		(60,889)		66,832
Net cash (used) provided by operating activities	$	(6,928)	$	30,075	$	(37,003)
Net cash provided (used) by operating activities							$	59,165	$	(6,928)	$	66,093

Certain amounts may reflect rounding adjustments.

Operating activities

Operating activities ~~used $6.9~~provided $59.2 million of net cash for the nine months ended March 31, ~~2023.~~2024. Cash provided by net income, ~~and~~adjusted for the non-cash items, including depreciation and amortization, was ~~$41.1~~$46.9 million. We paid $13.0 million of net interest expense and $11.6 million in income taxes, net. Cash ~~used~~provided in the ordinary course of business ~~for~~from changes in operating assets and liabilities and other items was ~~$60.9~~$5.9 million. ~~Cash~~Accounts receivable provided ~~by receivables was $15.0~~$3.0 million ~~as a result~~ of ~~an increase in net~~cash due to timing of sales and ~~a favorable reduction~~an improvement in days sales outstanding. ~~Cash~~Inventories used ~~for inventory was $30.5~~$5.9 million of cash due to increased raw material and production costs, ~~product mix, lower~~and increased quantities on hand due to forecasted future demand ~~in Mineral Nutrition,~~ and ~~a projected increase in demand.~~internal production schedules. Accounts payable ~~used $19.7~~provided $8.1 million of cash due to timing of purchases and payments. Accrued expenses and other liabilities ~~used~~provided cash of ~~$5.0~~$2.9 million, primarily due to ~~changes in employee-related liabilities~~timing of incurrence and ~~lease payments.~~payments for professional fees.

Investing activities

Investing activities used ~~$63.7~~$39.1 million of net cash for the nine months ended March 31, ~~2023.~~2024. Capital expenditures totaled ~~$40.9~~$28.2 million, ~~related primarily~~as we continue to ~~continued investments~~invest in ~~expanded~~expanding production capacity and productivity ~~improvements, and the $15.0 million purchase of additional land and building at an operating facility.~~improvements. Net purchases and maturities of our short-term investments used ~~$23.0 million.~~$8.5 million in cash. We acquired a business for $3.3 million, net of cash acquired.

Financing activities

Financing activities ~~provided $33.3~~used $8.6 million of net cash for the nine months ended March 31, ~~2023.~~2024. Net borrowings on our 2021 Revolver provided ~~$48.0 million. Proceeds from the 2022 Term Loan provided $12.0 million.~~$24.0 million in cash. We paid ~~$11.5~~$15.3 million in scheduled long-term debt maturities. Insurance premium financing and other short-term debt provided $2.7 million of cash, while we paid $5.4 million in insurance premium financing and other short-term debt. We paid $14.6 million in dividends to holders of our Class A common stock and Class B common stock.

Liquidity and capital resources

We believe our cash on hand, operating cash flows and financing arrangements, including the availability of borrowings under the 2021 Revolver, ~~and foreign credit lines,~~ will be sufficient to support our ongoing cash needs. We are aware of the current and potential future effects

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of the macroeconomic market conditions in the financial markets. At this time, we expect adequate liquidity for at least the next ~~twelve~~12 months. ~~However, we~~

Our future cash is expected to be impacted by the Purchase Agreement entered with Zoetis Inc. and our intent to finance the transaction with new debt in the amount of $325.0 million. See “Notes to Consolidated Financial Statements – Subsequent Event – Agreement to Acquire an MFA product portfolio and related assets.”

We can provide no assurance that our liquidity and capital resources will be adequate for future funding requirements. We believe we will comply with the terms of the covenants under the 2021 Credit Facilities ~~and foreign credit lines~~ based on our operating plan. In the event of adverse operating results and/or violation of covenants under the facilities, there can be no assurance we would be able to obtain waivers or amendments. Other risks to our meeting future funding requirements include global economic conditions and macroeconomic, business and financial disruptions that could ~~arise, including those caused by COVID-19.~~arise. There can be no assurance that a challenging economic environment or an economic downturn would not affect our

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liquidity or ability to obtain future financing or fund operations or investment opportunities. In addition, our debt covenants may restrict our ability to invest.

Certain relevant measures of our liquidity and capital resources follow:


	March 31,		June 30,		March 31,		June 30,
As of	2023		2022		2024		2023

	(in thousands, except ratios)





					(in thousands, except ratios)
Cash and cash equivalents and short-term investments	$	77,238	$	91,248	$	98,748	$	81,281
Working capital		358,357		299,152		339,171		350,737
Ratio of current assets to current liabilities		3.39:1		2.70:1		3.13:1		3.28:1

We define working capital as total current assets (excluding cash and cash equivalents and short-term investments) less total current liabilities (excluding current portion of long-term debt). We calculate the ratio of current assets to current liabilities based on this definition.

As of March 31, ~~2023,~~2024, we had ~~$193.0~~$165.0 million in outstanding borrowings under the 2021 Revolver and outstanding letters of credit and other commitments of ~~$2.5~~$2.3 million, leaving ~~$114.5~~$142.7 million available for further borrowings and letters of credit, subject to restrictions in our 2021 Credit Facilities.

We currently intend to pay quarterly dividends on our Class A common stock and Class B common stock, subject to approval from the Board of Directors. Our Board of Directors declared a cash dividend of $0.12 per share on Class A common stock and Class B common stock, payable on June ~~28, 2023.~~26, 2024. Our future ability to pay dividends will depend upon our results of operations, financial condition, capital requirements, our ability to obtain funds from our subsidiaries and other factors that our Board of Directors deems relevant. Additionally, the terms of our current and any future agreements governing our indebtedness could limit our ability to pay dividends or make other distributions.

As of March 31, ~~2023,~~2024, our cash and cash equivalents and short-term investments included ~~$75.6~~$97.8 million held by our international subsidiaries. There are no restrictions on cash distributions to PAHC from our international subsidiaries. Distributions may be subject to taxation by U.S. or non-U.S. taxing authorities.

Contractual obligations

As of March 31, ~~2023,~~2024, there were no material changes in payments due under contractual obligations from those disclosed in the Annual Report.

Off-balance sheet arrangements

We do not currently use off-balance sheet arrangements for the purpose of credit enhancement, hedging transactions, investment or other financial purposes.

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In the ordinary course of business, we may indemnify our counterparties against certain liabilities that may arise. These indemnifications typically pertain to environmental matters. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications generally are subject to certain restrictions and limitations.

General description of non-GAAP financial measures

Adjusted EBITDA

Adjusted EBITDA is an alternative view of performance used by management as our primary operating measure, and we believe that investors’ understanding of our performance is enhanced by disclosing this performance measure. We report Adjusted EBITDA to reflect the results of our operations prior to considering certain income statement ~~elements.~~elements and to make financial and operating decisions. We ~~have defined~~calculate EBITDA as net income ~~(loss)~~ plus (i) interest expense, net, (ii) provision for income taxes or less benefit for income taxes and (iii) depreciation

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and amortization. We ~~have defined~~calculate Adjusted EBITDA as EBITDA plus (a) ~~(income) loss from, and disposal of, discontinued operations, (b)~~ other expense or less other income, as separately reported on our consolidated statements of operations, including foreign currency ~~gains~~(gains) losses, net and ~~losses, and (c)~~(b) certain items that we consider to be unusual, non-operational or non-recurring. The Adjusted EBITDA measure is not, and should not be viewed as, a substitute for GAAP reported net ~~income.~~income and should not be considered as a measure of liquidity.

The Adjusted EBITDA measure is an important internal measurement for us. We measure our overall performance on this basis in conjunction with other performance metrics. The following are examples of how our Adjusted EBITDA measure is utilized:

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senior management receives a monthly analysis of our operating results that is prepared on an Adjusted EBITDA basis;

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our annual budgets are prepared on an Adjusted EBITDA basis; and

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other ~~goal setting~~goal-setting and performance measurements are prepared on an Adjusted EBITDA basis.

Despite the importance of this measure to management in goal setting and performance measurement, Adjusted EBITDA is a non-GAAP financial measure that has no standardized meaning prescribed by GAAP and, therefore, has limits in its usefulness to investors. Because of its non-standardized definition, Adjusted EBITDA, unlike GAAP net income, may not be comparable to the calculation of similar measures of other companies. Adjusted EBITDA is presented to permit investors to more fully understand how management assesses performance.

We also recognize that, as an internal measure of performance, the Adjusted EBITDA measure has limitations, and we do not restrict our performance management process solely to this metric. A limitation of the Adjusted EBITDA measure is that it provides a view of our operations without including all events during a period, such as the depreciation of property, plant and equipment or amortization of acquired intangibles, and does not provide a comparable view of our performance to other companies.

Adjusted net income and adjusted diluted earnings per share

Adjusted net income and adjusted diluted earnings per share represent alternative views of performance and we believe investors’ understanding of our performance is enhanced by disclosing these performance measures. We report adjusted net income and adjusted diluted earnings per share to portray the results of our operations prior to considering certain income statement elements. We calculate adjusted net income as net income plus (i) 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, (ii) amortization of acquired intangibles and other acquisition-related costs, such as accrued compensation and accrued interest, (iii) stock-based compensation, (iv) certain items that we consider to be unusual or non-recurring and (v) the income tax effect of pre-tax income adjustments and certain income tax items. Adjusted diluted earnings per share is calculated using the adjusted net income divided by the diluted weighted average number of shares. The adjusted net income and adjusted diluted earnings per share measures are not, and should not be viewed as, a substitute for GAAP reported net income.

Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measure that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of its non-standardized definition, adjusted net income and adjusted diluted earnings per share, unlike GAAP net income, may not be comparable to the calculation of

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similar measures of other companies. Adjusted net income and adjusted diluted earnings per share are presented to permit investors to more fully understand how management assesses performance.

Certain significant items

Adjusted EBITDA, isadjusted net income and adjusted diluted earnings per share are calculated prior to considering certain items. We evaluate such items on an individual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual or non-operational nature. Unusual, in this context, may represent items that are not part of our ongoing business; items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis.

We consider acquisition-related activities and business restructuring costs related to productivity and cost saving initiatives, including employee separation costs, to be unusual items that we do not expect to occur as part of our normal business on a regular basis. We consider foreign currency gains and losses to be non-operational because they arise principally from intercompany transactions and are largely non-cash in nature.

New accounting standards

For discussion of new accounting standards, see “Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies and New Accounting Standards.”

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Critical Accounting Policies

~~Critical~~Our significant accounting policies, which include management’s best estimates and judgments, are ~~those that require application of management’s most difficult, subjective and/or complex judgments, often as a result of~~included in Note 2 to the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all accounting policies require management to make difficult, subjective or complex judgments or estimates. In presenting our consolidated financial statements for the year ended June 30, 2023, included in ~~accordance~~our Annual Report on Form 10-K filed with ~~generally accepted~~the Securities Exchange Commission on August 30, 2023. There have been no significant changes in our critical accounting ~~principles in the United States of America (GAAP), we are required to make~~ estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results that differ from our estimates and assumptions could have an unfavorable effect on our financial position and results of operations. Critical accounting policies include revenue recognition, business combinations, long-lived assets, goodwill, and income taxes.since June 30, 2023.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Examples of such risks and uncertainties include:

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~~the negative effects~~outbreaks of ~~a pandemic, epidemic,~~animal diseases could significantly reduce demand for our products or ~~outbreak~~availability of ~~an infectious disease in humans, such as COVID-19, on our business, financial results, manufacturing facilities and supply chain, as well as our customers, protein processors and markets;~~raw materials;

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perceived adverse effects on human health linked to the consumption of food derived from animals that utilize our products could cause a decline in the sales of those products;

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restrictions on the use of antibacterials in food-producing animals may become more prevalent;

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the potential FDA withdrawal of approval of our Mecadox^® (carbadox) product;

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a material portion of our sales and gross profits are generated by antibacterials and other related products;

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competition in each of our markets from a number of large and small companies, some of which have greater financial, research and development (“R&D”), production and other resources than we have;

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~~outbreaks of animal diseases could significantly reduce demand for our products;~~

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our business may be negatively affected by weather conditions and the availability of natural resources;

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the negative effects of a pandemic, epidemic, or outbreak of an infectious disease in humans, such as COVID-19; on our business, financial results, manufacturing facilities and supply chain, as well as our customers, protein processors and markets;

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climate change could have a material adverse impact on our operations and our customers’ businesses;

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actions of regulatory bodies, including obtaining approvals related to the testing, manufacturing and marketing of certain of our products;

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the continuing trend toward consolidation of certain customer groups as well as the emergence of large buying groups;

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our ability to control costs and expenses;

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any unforeseen material loss or casualty;

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misuse or extra-label use of our products;

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exposure relating to rising costs and reduced customer income;

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heightened competition, including those from generics and those deriving from advances in veterinary medical practices and animal health technologies;

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unanticipated safety or efficacy concerns;

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our dependence on suppliers having current regulatory approvals;

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our raw materials are subject to price fluctuations and their availability can be limited;

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natural and man-made disasters, including but not limited to fire, snow and ice storms, flood, hail, hurricanes and earthquakes;

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business interruption from political and social instability, including crime, civil disturbance, terrorist activities, outbreaks of disease and pandemics and armed conflicts, such as the ~~current~~ongoing armed ~~conflict~~conflicts between Russia and ~~Ukraine;~~Ukraine and Israel and Hamas;

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terrorist attacks, particularly attacks on or within markets in which we ~~operate;~~operate, including the recent terrorist attack on Israel by Hamas militants and the ongoing related conflict;

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risks related to changes in tax rates and exposure;

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our ability to successfully implement our strategic initiatives;

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our reliance on the continued operation of our manufacturing facilities and application of our intellectual property;

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adverse U.S. and international economic market conditions, including currency fluctuations;

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failure of our product approval, R&D, acquisition and licensing efforts to generate new products;

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the risks of product liability claims, legal proceedings and general litigation expenses;

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the impact of current and future laws and regulatory changes, including risks related to the protection of our customers’ privacy and risks related to environmental, health and safety laws and regulations;

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modification of foreign trade policy may harm our food animal product customers;

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our dependence on our Israeli and Brazilian operations;

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impact of increased or decreased inventory levels at our direct customers or channel distributors;

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our substantial level of indebtedness and related debt-service obligations;

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restrictions imposed by covenants in our debt agreements;

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the risk of work stoppages; and

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other factors as described in “Risk Factors” in Item 1A of our Annual Report.

While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

In the normal course of operations, we are exposed to market risks arising from adverse changes in interest rates, foreign currency exchange rates and commodity prices. As a result, future earnings, cash flows and fair values of assets and liabilities are subject to uncertainty. We use, from time to time, foreign currency contracts and interest rate swaps as a means of hedging exposure to foreign currency risks and fluctuating interest rates, respectively. We do not utilize derivative instruments for trading or speculative purposes. We do not hedge our exposure to market risks in a manner that eliminates the effects of changing market conditions on earnings, cash flows and fair values. We monitor the financial stability and credit standing of our major counterparties.

For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Qualitative and Quantitative Disclosures about Market Risk” section in the Annual Report and to the notes to the consolidated financial statements included therein. As of the date of this report, there were no material changes in the Company’s financial market risks from the risks disclosed in the Annual Report.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of ~~1934)~~1934, as amended (the “Exchange Act”)). Based upon that evaluation as of March 31, ~~2023,~~2024, our Chief Executive Officer and Chief Financial Officer each concluded that, as of the end of such period, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter ended March 31, ~~2023.~~2024.

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PART II—OTHER INFORMATION

Item 1.Legal Proceedings

Information required by this Item is incorporated herein by reference to “Notes to ~~the~~ Consolidated Financial Statements—Commitments and ~~Contingencies~~”Contingencies” in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in ~~the~~ “Risk Factors” ~~section~~ in ~~the~~Item 1A of our Annual Report, which could materially affect our business, financial condition or future results.

There were no material changes in the Company’s risk factors from the risks disclosed in the Annual Report.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5. Other ~~Information~~Information

On ~~May 1, 2023, Mr. Gerald K. Carlson,~~February 12, 2024, BFI Co., LLC (“BFI”) adopted a ~~member~~Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act for the sale of up to 528,000 shares of Class A common stock through November 15, 2024. Jack C. Bendheim, our Chairman of the Board of ~~the~~ Directors, President and Chief Executive Officer, has sole authority to vote shares of the Company (the “Board”), informed the Company that he intended to resign his position as Director of the Company effective immediately. Mr. Carlson was a Class II director of the Company. Mr. Carlson’s resignation was not the result of any disagreement with the Company. The Board has not filled the vacancy leftour stock owned by ~~Mr. Carlson’s resignation.~~BFI.

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Item 6.Exhibits


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~~101.INS		Inline XBRL Instance Document ~~– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the XBRL document~~
Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Phibro Animal Health Corporation

May ~~3, 2023~~8, 2024	By:	/s/ Jack C. Bendheim
		Jack C. Bendheim
		Chairman, President and Chief Executive Officer

May ~~3, 2023~~8, 2024	By:	/s/ ~~Damian Finio~~Glenn C. David
		~~Damian Finio~~Glenn C. David
		Chief Financial Officer

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