Table of Contents

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 September 30, 2023March 31, 2024

OR

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 NovemberMay 3, 2023,2024, 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 (Loss) 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

3237

Item 4.

Controls and Procedures

3338

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

3338

Item 1A.

Risk Factors

3338

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3338

Item 3.

Defaults Upon Senior Securities

3338

Item 4.

Mine Safety Disclosures

3338

Item 5.

Other Information

3438

Item 6.

Exhibits

3439

SIGNATURES

3540

2

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months

    

For the Periods Ended September 30

    

2023

    

2022

(unaudited)

(in thousands, except per share amounts)

Net sales

$

231,349

$

232,521

Cost of goods sold

 

163,623

 

163,875

Gross profit

 

67,726

 

68,646

Selling, general and administrative expenses

 

68,452

 

54,962

Operating (loss) income

 

(726)

 

13,684

Interest expense, net

 

4,564

 

3,067

Foreign currency losses, net

 

6,689

 

5,200

(Loss) income before income taxes

 

(11,979)

 

5,417

(Benefit) provision for income taxes

 

(3,964)

 

1,561

Net (loss) income

$

(8,015)

$

3,856

Net (loss) income per share

 

  

 

  

basic

$

(0.20)

$

0.10

diluted

$

(0.20)

$

0.10

Weighted average common shares outstanding

 

 

basic

 

40,504

 

40,504

diluted

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

3

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months

    

For the Periods Ended September 30

    

2023

    

2022

(unaudited)

(in thousands)

Net (loss) income

$

(8,015)

$

3,856

Change in fair value of derivative instruments

 

(1,891)

 

7,105

Foreign currency translation adjustment

 

(3,560)

 

(4,143)

Pension settlement recognition

10,425

Unrecognized net pension gains

 

644

 

176

Provision for income taxes

 

(2,264)

 

(1,820)

Other comprehensive income

 

3,354

 

1,318

Comprehensive (loss) income

$

(4,661)

$

5,174

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

4

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 

June 30, 

March 31, 

June 30

As of

    

2023

    

2023

    

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

$

43,153

$

41,281

$

50,225

$

41,281

Short-term investments

 

48,000

 

40,000

 

48,523

 

40,000

Accounts receivable, net

 

149,228

 

163,479

 

161,087

 

163,479

Inventories, net

 

279,154

 

277,570

 

282,289

 

277,570

Other current assets

 

64,889

 

63,393

 

55,056

 

63,393

Total current assets

 

584,424

 

585,723

 

597,180

 

585,723

Property, plant and equipment, net

 

193,359

 

195,568

 

202,061

 

195,568

Intangibles, net

 

52,184

 

54,987

 

48,239

 

54,987

Goodwill

 

53,251

 

53,274

 

54,644

 

53,274

Other assets

 

81,305

 

81,845

 

76,911

 

81,845

Total assets

$

964,523

$

971,397

$

979,035

$

971,397

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current portion of long-term debt

$

24,150

$

22,295

Current portion of long-term debt and other

$

29,811

$

22,295

Accounts payable

 

77,216

 

73,853

 

82,613

 

73,853

Accrued expenses and other current liabilities

 

70,989

 

79,852

 

76,648

 

79,852

Total current liabilities

 

172,355

 

176,000

 

189,072

 

176,000

Revolving credit facility

 

154,000

 

141,000

 

165,000

 

141,000

Long-term debt

 

304,717

 

311,541

 

291,008

 

311,541

Other liabilities

 

60,382

 

60,347

 

63,861

 

60,347

Total liabilities

 

691,454

 

688,888

 

708,941

 

688,888

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 September 30, 2023, and June 30, 2023; 30,000,000 Class B shares authorized, 20,166,034 shares issued and outstanding at September 30, 2023, and June 30, 2023

 

4

 

4

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

 

135,884

 

135,803

 

136,099

 

135,803

Retained earnings

 

248,037

 

260,912

 

247,995

 

260,912

Accumulated other comprehensive loss

 

(110,856)

 

(114,210)

 

(114,004)

 

(114,210)

Total stockholders’ equity

 

273,069

 

282,509

 

270,094

 

282,509

Total liabilities and stockholders’ equity

$

964,523

$

971,397

$

979,035

$

971,397

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

5

Table of Contents

PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months

For the Periods Ended September 30

    

2023

    

2022

(unaudited)

(in thousands)

OPERATING ACTIVITIES

 

  

 

  

Net (loss) income

$

(8,015)

$

3,856

Adjustments to reconcile net (loss) income to

 

 

net cash provided (used) by operating activities:

 

 

Depreciation and amortization

 

8,871

 

8,450

Amortization of debt issuance costs

 

260

 

147

Stock-based compensation

81

Deferred income taxes

 

(2,691)

 

(13)

Foreign currency losses, net

 

3,222

 

3,370

Pension settlement cost

10,425

Other

 

959

 

(309)

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

12,781

 

22,347

Inventories, net

 

(5,005)

 

(24,977)

Other current assets

 

(3,297)

 

(7,682)

Other assets

 

(191)

 

(31)

Accounts payable

 

4,603

 

(5,595)

Accrued expenses and other liabilities

 

(5,804)

 

(10,261)

Net cash provided (used) by operating activities

 

16,199

 

(10,698)

INVESTING ACTIVITIES

 

  

 

  

Purchases of short-term investments

 

(17,000)

 

Maturities of short-term investments

 

9,000

 

 

7,000

Capital expenditures

(7,476)

 

 

(23,176)

Other, net

 

124

 

27

Net cash used by investing activities

 

(15,352)

 

(16,149)

FINANCING ACTIVITIES

 

 

Revolving credit facility borrowings

 

51,000

 

62,000

Revolving credit facility repayments

 

(38,000)

 

(36,000)

Proceeds from long-term debt

12,000

Payments of long-term debt

 

(5,105)

 

(3,750)

Debt issuance costs

(71)

Payments of insurance premium financing

(1,739)

Dividends paid

 

(4,860)

 

(4,860)

Net cash provided by financing activities

 

1,296

 

29,319

Effect of exchange rate changes on cash

 

(271)

 

(440)

Net increase in cash and cash equivalents

 

1,872

 

2,032

Cash and cash equivalents at beginning of period

 

41,281

 

74,248

Cash and cash equivalents at end of period

$

43,153

$

76,280

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

6

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, 2023

    

40,503,608

$

4

$

$

135,803

$

260,912

$

(114,210)

$

282,509

Comprehensive (loss) income

(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

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

    

    

  

    

  

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

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

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

7

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 September 30,March 31, 2024 and 2023, and 2022, 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, 2023 (the “Annual Report”), filed with the Securities and Exchange Commission on August 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, 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 September 30, 2023,March 31, 2024, there have been no material changes to any of the significant accounting policies contained therein.

Net (Loss) Income per Share and Weighted Average Shares

Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the reporting period.

Diluted net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the reporting period after giving effect to dilutive common share equivalents, resulting from the assumed vesting of restricted stock units. The restricted stock units, have been excluded fromunless the computationeffect would be antidilutive. Common share equivalents were included in the calculation of diluted earningsnet income per share for the three and nine months ended September 30, 2023, as the effect would have been antidilutive.March 31, 2024.

Three Months

For the Periods Ended September 30

    

2023

    

2022

    

Net (loss) income

$

(8,015)

$

3,856

Weighted average number of shares – basic

 

40,504

 

40,504

Dilutive effect of restricted stock units

Weighted average number of shares - diluted

40,504

40,504

Net (loss) income per share

basic

$

(0.20)

$

0.10

diluted

$

(0.20)

$

0.10

8

Table of Contents

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

We do not expectFinancial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requires the new accounting standardsdisclosure of significant segment expenses that are pendingincluded in segment profit or loss and how the segment measures are used for decision-making. The ASU will be effective for Phibro’s fiscal year ending June 30, 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 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU outlines specific categories to be 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 usindividual jurisdictions in which income taxes paid (net of refunds received) is equal to haveor greater than five percent of total income taxes paid (net of refunds received). The ASU also requires disaggregated disclosure of federal, state and foreign income from continuing operations before income taxes. The enhanced disclosures will be applied on a material effect on our consolidated financial statements.prospective basis and are required for Phibro’s fiscal year ending June 30, 2026. We are evaluating the impact of the 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 enhance nutrition to help improve animal health and well-being. We sell animal health and mineral nutrition products directly to integrated poultry, cattle and swine customers and through commercial animal feed manufacturers, 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 administered through animal feeds, commonly referred to as Medicated Feed Additives (“MFAs”). Specific product classifications include

9

Table of Contents

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 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.

9

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Net Sales by Product Type

Three Months

Three Months

Nine Months

For the Periods Ended September 30

    

2023

    

2022

For the Periods Ended March 31

    

2024

    

2023

    

2024

    

2023

Animal Health

  

 

  

 

  

 

  

  

 

  

MFAs and other

$

94,104

$

92,790

$

108,216

$

93,217

$

304,261

$

283,186

Nutritional specialties

 

40,210

 

39,054

 

40,194

 

45,016

 

121,840

 

127,926

Vaccines

 

26,216

 

23,015

 

32,923

 

26,201

 

88,866

 

71,984

Total Animal Health

$

160,530

$

154,859

$

181,333

$

164,434

$

514,967

$

483,096

Mineral Nutrition

 

56,026

 

59,646

 

64,228

 

62,922

 

181,601

 

184,212

Performance Products

 

14,793

 

18,016

 

17,662

 

18,317

 

47,947

 

55,532

Total

$

231,349

$

232,521

$

263,223

$

245,673

$

744,515

$

722,840

Net Sales by Region

Three Months

Three Months

Nine Months

For the Periods Ended September 30

    

2023

    

2022

For the Periods Ended March 31

    

2024

    

2023

    

2024

    

2023

United States

$

131,287

$

135,804

$

159,314

$

148,529

$

431,083

$

433,716

Latin America and Canada

 

58,703

 

52,246

 

53,653

 

53,881

 

177,539

 

159,946

Europe, Middle East and Africa

 

26,879

 

29,517

 

33,175

 

28,174

 

89,572

 

85,518

Asia Pacific

 

14,480

 

14,954

 

17,081

 

15,089

 

46,321

 

43,660

Total

$

231,349

$

232,521

$

263,223

$

245,673

$

744,515

$

722,840

 

10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Net sales by region are based on country of destination.

Our customer payment terms generally range from 30 to 120 days globally and 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.

Interest Expense

Three Months

For the Periods Ended September 30

    

2023

    

2022

    

Interest expense, net

2021 Credit Facilities

$

5,101

$

3,547

2022 Term Loan

216

Amortization of debt issuance costs

 

260

 

147

Other

 

68

 

1

Interest expense

 

5,645

 

3,695

Interest income

 

(1,081)

 

(628)

$

4,564

$

3,067

10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest Expense, Net

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

Three Months

Nine Months

For the Periods Ended September 30

    

2023

    

2022

For the Periods Ended March 31

    

2024

    

2023

    

2024

    

2023

Depreciation and amortization

 

 

  

 

 

  

 

 

  

Depreciation of property, plant and equipment

$

6,431

$

6,051

$

6,770

$

6,067

$

19,638

$

18,177

Amortization of intangible assets

 

2,440

 

2,399

 

2,426

 

2,422

 

7,339

 

7,261

$

8,871

$

8,450

$

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. During the three months ended September 30, 2023, weWe recognized a partial settlement of the pension plan, and recorded $10,425, in selling, general and administrative expenses in our consolidated statement of operations, 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

September 30, 

June 30, 

March 31, 

June 30, 

As of

    

2023

    

2023

    

2024

    

2023

Inventories

  

  

Raw materials

$

84,369

$

84,328

$

75,638

$

84,328

Work-in-process

25,159

22,350

26,110

22,350

Finished goods

169,626

170,892

180,541

170,892

$

279,154

$

277,570

$

282,289

$

277,570

 

    

September 30, 

June 30, 

As of

    

2023

    

2023

Other assets

ROU operating lease assets

$

36,320

 

$

35,759

Deferred income taxes

 

8,981

 

8,711

Deposits

 

6,518

 

6,617

Insurance investments

 

6,096

 

6,067

Equity method investments

 

5,814

 

5,027

Derivative instruments

8,500

10,225

Debt issuance costs

 

1,284

 

1,408

Other

7,792

8,031

$

81,305

 

$

81,845

    

September 30, 

    

June 30, 

As of

    

2023

    

2023

Accrued expenses and other current liabilities

 

  

 

  

Employee related

$

26,647

$

29,359

Current operating lease liabilities

 

6,452

 

6,053

Commissions and rebates

3,442

5,833

Professional fees

 

4,643

 

5,032

Income and other taxes

5,951

8,663

Insurance-related

 

1,364

 

1,284

Insurance premium financing

2,898

4,769

Other

 

19,592

 

18,859

$

70,989

$

79,852

11

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

    

September 30, 

    

June 30, 

As of

    

2023

    

2023

Other liabilities

Long-term operating lease liabilities

$

29,022

$

29,077

Long-term and deferred income taxes

 

12,823

12,146

Supplemental retirement benefits, deferred compensation and other

6,628

6,552

U.S. pension plan

 

1,687

 

2,286

International retirement plans

 

4,130

 

4,210

Other long-term liabilities

 

6,092

 

6,076

$

60,382

$

60,347

    

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

 

 

September 30, 

    

June 30, 

As of

    

2023

    

2023

Accumulated other comprehensive loss

  

  

Derivative instruments

$

22,698

$

24,589

Foreign currency translation adjustment

 

(118,622)

 

(115,062)

Unrecognized net pension losses

 

(12,927)

 

(23,996)

Income tax (provision) benefit

 

(2,005)

 

259

$

(110,856)

$

(114,210)

    

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

    

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

12

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”). 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 Secured Overnight Financing Rate (“SOFR”) as the reference for the fluctuating rate of interest on the 2021 Credit Facilities, replacing the London Interbank Offered Rate (“LIBOR”) reference rate. 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 Facilities”).

The 2021 Term A Loan and the 2023 Incremental Term Loan are repayable in quarterly installments, with the balances payable at maturity. The 2021 Revolver contains a letter of credit facility. The interest rate per annum applicable to the 2021 Revolver and the 2021 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%, 2.25%, 2.50% or 2.75%, in the case of adjusted SOFR rate loans and 1.00%, 1.25%, 1.50% or 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, as amended)Agreement). The 2021 Credit Facilities mature in April 2026.

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 ending September 30, 2023, December 31, 2023,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 September 30, 2023,March 31, 2024, we were in compliance with the financial covenants.

As of September 30, 2023,March 31, 2024, we had $154,000$165,000 in borrowings drawn under the 2021 Revolver and had outstanding letters of credit of $2,479,$2,294, leaving $153,521$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 are all less than one year.

12

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interest Rates

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

    

Three Months

September 30,

June 30,

Ended September 30,

2023

2023

2023

2022

2021 Revolver

 

6.23

%

6.09

%

  

6.19

%

3.92

%

2021 Term A Loan

2.36

%

2.36

%

2.36

%

2.37

%

2023 Incremental Term Loan

7.66

%

7.44

%

7.57

%

2022 Term Loan

7.42

%

7.25

%

7.43

%

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.

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 this 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 designated the interest rate swap as a highly effective cash flow hedge. For additional details, see “Note 9 — Derivatives.”

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 SOFR plus 2.0%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 0.5%0.50%. The 2022 Term Loan is repayable in monthly installments of $35, with the balance payable at maturity.

MaturitiesInterest Rates

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

    

Nine Months

March 31, 

June 30, 

Ended March 31 

2024

2023

2024

2023

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.

13

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

    

September 30, 

June 30, 

    

March 31, 

June 30, 

As of

2023

2023

2024

2023

2021 Term A Loan due April 2026

$

270,000

$

273,750

$

262,500

$

273,750

2023 Incremental Term Loan due April 2026

48,750

50,000

46,250

50,000

2022 Term Loan due September 2027

 

11,580

 

11,685

11,370

11,685

Other

 

1,891

 

 

330,330

 

335,435

 

322,011

 

335,435

Unamortized debt issuance costs

 

(1,463)

 

(1,599)

 

(1,192)

 

(1,599)

 

328,867

 

333,836

 

320,819

 

333,836

Less: current maturities

 

(24,150)

 

(22,295)

$

304,717

$

311,541

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 $438$392 and $780$385 during the three months ended September 30,March 31, 2024 and 2023, and 2022,$1,209 and $1,561 during the nine months ended March 31, 2024 and 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.

13

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. Stock Incentive Plan

Restricted Stock Units

In July 2023, ourOur Board of Directors has approved the grantgrants of 300,000600,000 restricted stock units (“RSUs”) to an officercertain officers of the Company, pursuant to the Company's 2008 Incentive Plan and the RSU award agreement.agreements. Each RSU represents the right to receive a share of our common stock upon vesting. TheCertain RSUs are subject to time-based vesting, and certain RSUs are subject to performance-based vesting. The time-based RSUs willvest in five equal annual amounts on each anniversary of the February 2024 grant date. The performance-based RSUs vest on June 30, 2027,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 date,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 a Monte Carlo simulation modelmodels to determine the grant date fair valuevalues of the performance-based RSUs. Assumptions used by the modelmodels 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 closinggrant date share price of the underlying common stock.

14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The totalweighted-average grant date fair value of the RSUs granted in 2024 was $1,284, equivalent to $4.28$5.44 per share. We will recognize the total grant date fair value of the RSUs as stock-based compensation expense for the RSUs on a straight-line basis over the vesting period.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, was $81 for the three months ended September 30, 2023. We expect stock-based compensation expense related to the RSUswhich will be $321 in eachrecognized over a weighted-average period of the years ending June 30, 2024, 2025, 2026 and 2027.4.1 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.

14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 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

15

Table of Contents

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 Februaryaffiliates. 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.

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 the remaining liability for the OPOG lawsuit described in the preceding paragraph, to be approximately $8,531$4,270 and $8,505 at September 30, 2023March 31, 2024 and June 30, 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.

15

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

9.  Derivatives

We monitor our exposure to foreign currency exchange rates and interest rates and from time-to-time use derivatives to manage certain of these risks. We designate derivatives as a hedge of a forecasted transaction or of the variability of the cash flows to be received or paid in the future related to a recognized asset or liability (cash flow hedge). All changes in the fair value of a highly effective cash flow hedge are recorded in Accumulated other comprehensive loss.income (loss).

We routinely assess whether the derivatives used to hedge transactions are effective. If we determine that a derivative ceases to be an effective hedge, we discontinue hedge accounting in the period of the assessment for that derivative, and immediately recognize any unrealized gains or losses related to the fair value of that derivative in the consolidated statements of operations.

We record derivatives at fair value in the consolidated balance sheets. For additional details regarding fair value, see “Note 10 — Fair Value Measurements.”

In March 2020, we entered intoWe are a party to an interest rate swap agreement on $150,000$300,000 of notional principal that effectively convertedconverts the floating LIBORSOFR 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.

16

Table of 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 swapsswap 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:

September 30, 

June 30, 

March 31, 

June 30, 

As of

    

2023

    

2023

    

2024

    

2023

Other current assets

 

  

 

  

 

  

 

  

Brazil Real options, net

$

$

333

Foreign currency option contracts, net

$

467

$

333

Interest rate swap

 

14,198

 

14,031

 

13,080

 

14,031

Other assets

Interest rate swap

8,500

10,225

2,733

10,225

Total Fair Value

 

 

 

 

Brazil Real options, net

 

 

333

Foreign currency option contracts, net

 

467

 

333

Interest rate swap

 

22,698

 

24,256

 

15,813

 

24,256

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

September 30, 

March 31, 

As of

    

2023

    

2024

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

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The consolidated statements of operations and statements of comprehensive (loss) income for the periods ended September 30, 2023 and 2022 included the effects of derivatives as follows:

 

Three Months

For the Periods Ended September 30

    

2023

    

2022

Brazil Real options, net

  

 

  

(Income) expense recorded in consolidated statements of operations

$

(181)

$

438

Consolidated statement of operations - total cost of goods sold

$

163,623

$

163,875

Expense recorded in comprehensive (loss) income

$

333

$

168

Interest rate swap

 

 

Income recorded in consolidated statements of operations

$

(3,570)

$

(1,211)

Consolidated statement of operations - total interest expense, net

$

4,564

$

3,067

Expense (income) recorded in comprehensive (loss) income

$

1,558

$

(7,273)

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 September 30, 2023, included realized net gains of $1,182 related to matured contracts. We anticipate the net gains included in inventory will be recognized in cost of goods sold within the next twelve to eighteen months.

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 translationexchange rates.

Non-financial Assets

Our non-financial assets, which primarily consist of goodwill, other intangible assets, property and equipment, and lease-related 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.

17

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Assets (Liabilities)

As of

September 30, 2023

June 30, 2023

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

$

48,000

$

$

$

40,000

$

$

$

48,523

$

$

$

40,000

$

$

Foreign currency derivatives

$

$

$

$

$

333

$

$

$

467

$

$

$

333

$

Interest rate swap

$

$

22,698

$

$

$

24,256

$

$

$

15,813

$

$

$

24,256

$

 

There were no transfers between levels during the periods presented.

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 costs include certain costs related to executive management, business technology, legal, finance, human resources and business development. The accounting policies of our segments are the same as those described in the summary of significant accounting policies included herein.

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, (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.

18

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

    

Three Months

For the Periods Ended September 30

    

2023

    

2022

Net sales

 

 

 

 

 

 

Animal Health

$

160,530

$

154,859

Mineral Nutrition

 

56,026

 

59,646

Performance Products

 

14,793

 

18,016

Total segments

$

231,349

$

232,521

Depreciation and amortization

Animal Health

$

7,349

$

6,911

Mineral Nutrition

 

646

 

655

Performance Products

 

426

 

442

Total segments

$

8,421

$

8,008

Adjusted EBITDA

Animal Health

$

28,494

$

26,964

Mineral Nutrition

 

2,881

 

5,297

Performance Products

 

1,409

 

2,364

Total segments

$

32,784

$

34,625

Reconciliation of income before income taxes to Adjusted EBITDA

(Loss) income before income taxes

$

(11,979)

$

5,417

Interest expense, net

 

4,564

 

3,067

Depreciation and amortization – Total segments

 

8,421

 

8,008

Depreciation and amortization – Corporate

 

450

 

442

Corporate costs

14,133

12,491

Pension settlement cost

10,425

Stock-based compensation

81

Foreign currency losses, net

 

6,689

 

5,200

Adjusted EBITDA – Total segments

$

32,784

$

34,625

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

 

September 30, 

    

June 30, 

As of

    

2023

    

2023

Identifiable assets

 

  

 

  

Animal Health

$

679,935

$

698,522

Mineral Nutrition

 

74,060

 

75,814

Performance Products

 

49,939

 

49,678

Total segments

 

803,934

 

824,014

Corporate

 

160,589

 

147,383

Total

$

964,523

$

971,397

19

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 

    

June 30, 

As of

    

2024

    

2023

Identifiable assets

 

  

 

  

Animal Health

$

701,252

$

698,522

Mineral Nutrition

 

69,846

 

75,814

Performance Products

 

49,275

 

49,678

Total segments

 

820,373

 

824,014

Corporate

 

158,662

 

147,383

Total

$

979,035

$

971,397

 

The Animal Health segment includes all goodwill of the Company. Corporate assets include cash and cash equivalents, short-term investments, 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.

1920

Table of Contents

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

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.

21

Table of Contents

Armed 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 will bewere distributed to charities that offeroffered 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 nutritionals.nutritional products. In addition, we have an office location near Tel Aviv in Airport City. As of September 30, 2023,March 31, 2024, we had approximately 550500 employees located in Israel. While we haveinitially 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 impactsimpact 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 27%28% of our consolidated assets as of September 30, 2023,March 31, 2024, and 19%21% of our consolidated net sales for the threenine months ended September 30, 2023.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.

20

Table of Contents

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 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 representfor 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.

22

Table of Contents

Regulatory 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 March 2022, the FDA held a Part 15 virtual public hearing seeking data and information related to 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 through CVM, provided notice of a Federal Register publication issuingissued a final order to revoke the approved method for detecting residues of carbadox. The FDA has also provided notice of a secondin the Federal Register publication proposing to withdraw approval of all new animal drug applications (NADAs) providing for use of carbadox 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 edible tissues of the treated swine. Phibro intends to take appropriate action andis taking the next steps to continue to defend swine producers’ ability to use Mecadox, and we will argue that we are entitled to and expect toMecadox. 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 twelve12 months ended September 30, 2023,March 31, 2024 were approximately $20$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 with Government Regulation United States Carbadox”; and “Business Compliance with Government Regulation Global Policy and Guidance” in Item 1 of our Annual Report.

2123

Table of Contents

Analysis of the consolidated statements of operations

Summary Results of Operations

Three Months

Three Months

Nine Months

For the Periods Ended September 30

    

2023

    

2022

    

Change

For the Periods Ended March 31

   

2024

    

2023

    

Change

    

    

2024

    

2023

    

Change

(in thousands, except per share amounts and percentages)

(in thousands, except per share amounts and percentages)

Net sales

$

231,349

    

$

232,521

    

$

(1,172)

   

(1)

%

   

$

263,223

$

245,673

    

$

17,550

    

7

%

$

744,515

    

$

722,840

    

$

21,675

   

3

%

Gross profit

 

67,726

 

68,646

 

(920)

(1)

%

 

79,600

 

75,540

 

4,060

5

%

 

225,942

 

221,571

 

4,371

2

%

Selling, general and administrative expenses

 

68,452

 

54,962

 

13,490

25

%

 

59,676

 

56,987

 

2,689

5

%

 

191,043

 

173,490

 

17,553

10

%

Operating (loss) income

 

(726)

 

13,684

 

(14,410)

*

Operating income

 

19,924

 

18,553

 

1,371

7

%

 

34,899

 

48,081

 

(13,182)

*

Interest expense, net

 

4,564

 

3,067

 

1,497

49

%

 

4,575

 

3,871

 

704

18

%

 

13,798

 

10,822

 

2,976

27

%

Foreign currency losses, net

 

6,689

 

5,200

 

1,489

*

(Loss) income before income taxes

 

(11,979)

 

5,417

 

(17,396)

*

(Benefit) provision for income taxes

 

(3,964)

 

1,561

 

(5,525)

*

Net (loss) income

$

(8,015)

$

3,856

$

(11,871)

*

Foreign currency losses (gains), net

 

2,427

 

(422)

 

2,849

*

 

16,593

 

4,629

 

11,964

*

Income before income taxes

 

12,922

 

15,104

 

(2,182)

(14)

%

 

4,508

 

32,630

 

(28,122)

*

Provision for income taxes

 

4,517

 

5,062

 

(545)

(11)

%

 

2,844

 

11,522

 

(8,678)

*

Net income

$

8,405

$

10,042

$

(1,637)

(16)

%

$

1,664

$

21,108

$

(19,444)

*

Net (loss) income per share

 

  

 

 

Net income per share

 

  

 

 

 

 

  

 

 

Basic

$

(0.20)

$

0.10

$

(0.30)

*

$

0.21

$

0.25

$

(0.04)

(16)

%

$

0.04

$

0.52

$

(0.48)

*

Diluted

$

(0.20)

$

0.10

$

(0.30)

*

$

0.21

$

0.25

$

(0.04)

(16)

%

$

0.04

$

0.52

$

(0.48)

*

Weighted average number of shares outstanding

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

Basic

 

40,504

 

40,504

 

  

 

40,504

 

40,504

 

  

 

40,504

 

40,504

 

  

Diluted

40,504

40,504

40,520

40,504

40,509

40,504

Ratio to net sales

 

  

 

 

  

 

  

 

 

  

 

  

 

 

  

Gross profit

 

29.3

%

 

29.5

%

 

  

 

30.2

%

 

30.7

%

 

  

 

30.3

%

 

30.7

%

 

  

Selling, general and administrative expenses

 

29.6

%

 

23.6

%

 

  

 

22.7

%

 

23.2

%

 

  

 

25.7

%

 

24.0

%

 

  

Operating (loss) income

 

(0.3)

%

 

5.9

%

 

  

(Loss) income before income taxes

 

(5.2)

%

 

2.3

%

 

  

Net (loss) income

 

(3.5)

%

 

1.7

%

 

Operating income

 

7.6

%

 

7.6

%

 

  

 

4.7

%

 

6.7

%

 

  

Income before income taxes

 

4.9

%

 

6.1

%

 

  

 

0.6

%

 

4.5

%

 

  

Net income

 

3.2

%

 

4.1

%

 

  

 

0.2

%

 

2.9

%

 

Effective tax rate

 

33.1

%

 

28.8

%

 

  

 

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 (loss) 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

Table of Contents

Segment net sales and Adjusted EBITDA:

Three Months

Three Months

Nine Months

For the Periods Ended September 30

2023

    

2022

    

Change

For the Periods Ended March 31

    

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

$

94,104

$

92,790

$

1,314

1

%  

$

108,216

$

93,217

$

14,999

 

16

%  

$

304,261

$

283,186

$

21,075

7

%  

Nutritional specialties

 

40,210

 

39,054

 

1,156

3

%  

 

40,194

 

45,016

 

(4,822)

 

(11)

%  

 

121,840

 

127,926

 

(6,086)

(5)

%  

Vaccines

 

26,216

 

23,015

 

3,201

14

%  

 

32,923

 

26,201

 

6,722

 

26

%  

 

88,866

 

71,984

 

16,882

23

%  

Animal Health

 

160,530

 

154,859

 

5,671

4

%  

 

181,333

 

164,434

 

16,899

 

10

%  

 

514,967

 

483,096

 

31,871

7

%  

Mineral Nutrition

 

56,026

 

59,646

 

(3,620)

(6)

%  

 

64,228

 

62,922

 

1,306

 

2

%  

 

181,601

 

184,212

 

(2,611)

(1)

%  

Performance Products

 

14,793

 

18,016

 

(3,223)

(18)

%

 

17,662

 

18,317

 

(655)

 

(4)

%

 

47,947

 

55,532

 

(7,585)

(14)

%

Total

$

231,349

$

232,521

$

(1,172)

(1)

%

$

263,223

$

245,673

$

17,550

 

7

%

$

744,515

$

722,840

$

21,675

3

%

Adjusted EBITDA

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Animal Health

$

28,494

$

26,964

$

1,530

6

%  

$

36,524

$

34,217

$

2,307

 

7

%  

$

104,317

$

98,240

$

6,077

6

%  

Mineral Nutrition

 

2,881

 

5,297

 

(2,416)

(46)

%  

 

4,665

 

3,859

 

806

 

21

%  

 

11,053

 

13,555

 

(2,502)

(18)

%  

Performance Products

 

1,409

 

2,364

 

(955)

(40)

%  

 

2,371

 

2,413

 

(42)

 

(2)

%  

 

4,597

 

7,069

 

(2,472)

(35)

%  

Corporate

 

(14,133)

 

(12,491)

 

(1,642)

13

%  

 

(13,856)

 

(13,122)

 

(734)

 

6

%  

 

(42,160)

 

(38,451)

 

(3,709)

10

%  

Total

$

18,651

$

22,134

$

(3,483)

(16)

%  

$

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

 

17.7

%  

 

17.4

%  

 

  

 

20.1

%  

 

20.8

%  

 

  

 

  

 

20.3

%  

 

20.3

%  

 

  

Mineral Nutrition

 

5.1

%  

 

8.9

%  

 

  

 

7.3

%  

 

6.1

%  

 

  

 

  

 

6.1

%  

 

7.4

%  

 

  

Performance Products

 

9.5

%  

 

13.1

%  

 

  

 

13.4

%  

 

13.2

%  

 

  

 

  

 

9.6

%  

 

12.7

%  

 

  

Corporate (1)

 

(6.1)

%  

 

(5.4)

%  

 

  

 

(5.3)

%  

 

(5.3)

%  

 

  

 

  

 

(5.7)

%  

 

(5.3)

%  

 

  

Total (1)

 

8.1

%  

 

9.5

%  

 

  

 

11.3

%  

 

11.1

%  

 

  

 

  

 

10.5

%  

 

11.1

%  

 

  

(1)Reflects ratio to total net sales

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

Three Months

    

Three Months

Nine Months

For the Periods Ended September 30

2023

    

2022

    

Change

For the Periods Ended March 31

    

2024

    

2023

    

Change

    

2024

    

2023

    

Change

(in thousands, except percentages)

Net (loss) income

$

(8,015)

$

3,856

$

(11,871)

    

*

(in thousands, except percentages)

Net income

$

8,405

$

10,042

$

(1,637)

(16)

%

$

1,664

$

21,108

$

(19,444)

    

*

Interest expense, net

4,564

3,067

1,497

49

%

4,575

3,871

704

18

%

13,798

10,822

2,976

27

%

(Benefit) provision for income taxes

(3,964)

1,561

(5,525)

*

Provision for income taxes

4,517

5,062

(545)

(11)

%

2,844

11,522

(8,678)

*

Depreciation and amortization

8,871

8,450

421

5

%

9,196

8,489

707

8

%

26,977

25,438

1,539

6

%

EBITDA

1,456

16,934

(15,478)

(91)

%

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

10,425

 

 

10,425

*

 

 

 

 

*

10,674

 

 

10,674

*

Brazil employment taxes

*

4,202

4,202

*

Insurance proceeds

(274)

(274)

*

(274)

(274)

*

Stock-based compensation

81

81

*

135

135

 

*

296

296

*

Foreign currency losses, net

6,689

 

5,200

 

1,489

*

Environmental remediation costs

325

(325)

 

*

6,894

(6,894)

*

Foreign currency losses (gains), net

2,427

 

(422)

 

2,849

 

*

16,593

 

4,629

 

11,964

*

Adjusted EBITDA

$

18,651

$

22,134

$

(3,483)

(16)

%

$

29,704

$

27,367

$

2,337

 

9

%

$

77,807

$

80,413

$

(2,606)

(3)

%

Certain amounts may reflect rounding adjustments.

* Calculation not meaningful

25

Table of Contents

Adjusted net (loss) income

We report adjusted net (loss) income to portray the results of our operations prior to considering certain income statement elements. See “—General description of non-GAAP financial measures.”

A The table below sets forth a reconciliation of net (loss) income, as reported under GAAP, to adjusted net income:

23

Table of Contents

Three Months

 

Three Months

Nine Months

 

For the Periods Ended September 30

2023

    

2022

    

Change

 

For the Periods Ended March 31

    

2024

    

2023

    

Change

    

2024

    

2023

    

Change

 

(in thousands, except per share amounts and percentages)

 

Net (loss) income

$

(8,015)

$

3,856

$

(11,871)

 

*

(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 (1)(2)

 

1,673

 

1,657

 

16

 

1

%

 

756

 

761

 

(5)

 

(1)

%

 

2,325

 

2,281

 

44

 

2

%

Acquisition-related intangible amortization (2)

 

766

 

739

 

27

 

4

%

Acquisition-related cost of goods sold (1)

211

211

*

521

521

*

Acquisition-related other (2)

512

512

*

512

512

*

Pension settlement cost (2)

10,425

10,425

 

*

*

10,674

10,674

 

*

Brazil employment taxes (2)

*

4,202

4,202

*

Insurance proceeds (2)

(274)

(274)

*

(274)

(274)

*

Stock-based compensation (2)

81

81

*

135

135

*

296

296

*

Foreign currency losses, net (3)

 

6,689

 

5,200

 

1,489

 

29

%

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)

 

(6,079)

 

(3,126)

 

(2,953)

 

*

 

(1,145)

 

(722)

 

(423)

 

*

 

(9,830)

 

(6,131)

 

(3,699)

 

*

Adjusted net income

$

5,540

$

8,326

$

(2,786)

 

(33)

%

$

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)

$

161,950

$

162,218

$

(268)

 

(0)

%

$

181,742

$

168,474

$

13,268

 

8

%

$

513,038

$

496,296

$

16,742

 

3

%

Adjusted gross profit

 

69,399

 

70,303

 

(904)

(1)

%

 

81,481

 

77,199

 

4,282

 

6

%

 

231,477

 

226,544

 

4,933

2

%

Adjusted selling, general and administrative (2)

 

57,180

 

54,223

 

2,957

 

5

%

 

58,546

 

55,901

 

2,645

 

5

%

 

173,308

 

164,315

 

8,993

 

5

%

Adjusted interest expense, net

 

4,564

 

3,067

 

1,497

 

49

%

 

4,576

 

3,871

 

705

 

18

%

 

13,798

 

10,822

 

2,976

 

27

%

Adjusted income before income taxes

 

7,655

 

13,013

 

(5,358)

 

(41)

%

 

18,359

 

17,427

 

932

 

5

%

 

44,371

 

51,407

 

(7,036)

 

(14)

%

Adjusted provision for income taxes (4)

 

2,115

 

4,687

 

(2,572)

 

(55)

%

 

5,662

 

5,784

 

(122)

 

(2)

%

 

12,674

 

17,653

 

(4,979)

 

(28)

%

Adjusted net income

$

5,540

$

8,326

$

(2,786)

 

(33)

%

$

12,697

$

11,643

$

1,054

 

9

%

$

31,697

$

33,754

$

(2,057)

 

(6)

%

 

 

 

  

 

  

 

 

 

 

  

 

 

 

  

 

  

Adjusted net income per share

 

 

 

  

 

  

 

 

 

 

  

 

 

 

  

 

  

diluted

$

0.14

$

0.21

$

(0.07)

 

(33)

%

$

0.31

$

0.29

$

0.02

 

9

%

$

0.78

$

0.83

$

(0.05)

 

(6)

%

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

Weighted average common shares outstanding

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

diluted

 

40,504

 

40,504

 

  

 

  

 

40,520

 

40,504

 

  

 

  

 

40,509

 

40,504

 

  

 

  

 

 

 

  

 

 

 

 

  

 

  

 

 

 

  

 

Ratio to net sales

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

Adjusted gross profit

 

30.0

%  

 

30.2

%  

 

  

 

  

 

31.0

%

 

31.4

%

 

 

  

 

31.1

%

 

31.3

%

 

  

 

  

Adjusted selling, general and administrative

 

24.7

%  

 

23.3

%  

 

  

 

  

 

22.2

%

 

22.8

%

 

  

 

  

 

23.3

%

 

22.7

%

 

  

 

  

Adjusted (loss) income before income taxes

 

3.3

%  

 

5.6

%  

 

  

 

  

Adjusted net (loss) income

 

2.4

%  

 

3.6

%  

 

  

 

  

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

 

27.6

%  

 

36.0

%  

 

  

 

  

 

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, andBrazil 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

Comparison of three months ended September 30, 2023 and 2022

Net sales

Net sales of $231.3 million for the three months ended September 30, 2023, decreased $1.2 million, or 1%, as compared to the three months ended September 30, 2022. Animal Health increased $5.7 million, while Mineral Nutrition and Performance Products decreased $3.6 million and $3.2 million, respectively.

2426

Table of Contents

Comparison of three months ended March 31, 2024 and 2023

Net sales

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

Animal Health

Net sales of $160.5$181.3 million for the three months ended September 30, 2023,March 31, 2024, increased $5.7$16.9 million, or 4%10%. Net sales of MFAs and other increased $1.3$15.0 million, or 1%16%, primarily driven bydue to increased sales of processing aids useddemand for our MFAs in the ethanol fermentation industry.both domestic and international regions. Net sales of nutritional specialty products increased $1.2decreased $4.8 million, or 3%11%, with increased volumes in poultry customers, primarily domestic.mostly due to lower demand for microbial and dairy products. Net sales of vaccines increased $3.2$6.7 million, or 14%26%, primarily due to poultry product introductions in Latin America, plus an increase in both domestic and growth in the U.S. swine sector, partially offset by timing of deliveries in other international regions.demand.

Mineral Nutrition

Net sales of $56.0$64.2 million for the three months ended September 30, 2023, decreased $3.6March 31, 2024, increased $1.3 million, or 6%2%, due to declines in theincreased sales volume, partially offset by decreased average selling prices and reduced volumes due to reduced demand.price.

Performance Products

Net sales of $14.8$17.7 million for the three months ended September 30, 2023,March 31, 2024, decreased $3.2$0.7 million, or 18%4%, asdue to a result of lowerdecrease in demand for the ingredients used in personal care products.product ingredients and industrial chemicals.

Gross profit

Gross profit of $67.7$79.6 million for the three months ended September 30, 2023, decreased $0.9March 31, 2024, increased $4.1 million, or 1%5%, as compared to the three months ended September 30, 2022.March 31, 2023. Gross margin decreased 50 basis points to 29.3%30.2% of net sales for the three months ended September 30, 2023,March 31, 2024, as compared to 29.5%30.7% for the three months ended September 30, 2022.March 31, 2023, due to unfavorable product mix.

Animal Health gross profit increased $2.4$3.5 million, primarily driven by higher sales volume.volume, partially offset by unfavorable product mix. Mineral Nutrition gross profit decreased $2.3increased $0.9 million, driven by lowerincreased sales and higher costs.volumes. Performance Products gross profit decreased $1.1 million as a resultwas comparable to the prior year’s quarter. Acquisition-related cost of lower sales volumes of ingredients for personal care products, along with increased costs for these products.goods sold reduced gross profit by $0.2 million.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) of $68.5$59.7 million for the three months ended September 30, 2023,March 31, 2024, increased $13.5$2.7 million, or 25%5%, as compared to the three months ended September 30, 2022.March 31, 2023. SG&A for the three months ended September 30, 2023,March 31, 2024, included $10.4$0.5 million of pension settlement costin acquisition-related costs and $0.1 million of stock-based compensation.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 $3.0 million.$2.6 million, or 5%.

Animal Health SG&A increased $1.3$2.0 million, primarily due to an increase in employeeemployee-related costs to support increased demand and employee-related costs.new product launches in Latin America. Mineral Nutrition increased $0.2 million, whileand Performance Products decreased $0.1 million.SG&A was comparable to the prior year. Corporate costs increased by $1.6$0.7 million, due to strategic investments andan increase in employee-related costs.

Interest expense, net

Interest expense, net of $4.6 million for the three months ended September 30, 2023,March 31, 2024, increased by $1.5$0.7 million, as compared to the three months ended September 30, 2022,March 31, 2023, as a result of the increased debt with the issuance of 2023 Incremental Term Loan and the higher variable interest rates.rates and increased debt levels.

27

Table of Contents

Foreign currency losses (gains), net

Foreign currency losses, net for the three months ended September 30, 2023,March 31, 2024, were $6.7$2.4 million, as compared to $5.2$0.4 million of net lossesgains for the three months ended September 30, 2022.March 31, 2023. Current period losses were driven by fluctuations in certain currencies related to the U.S. dollar,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 Argentinathe Animal Health segment. SG&A increased due to higher employee-related costs. Interest expense, net increased $0.7 million and Brazil.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.

2528

Table of Contents

(Benefit) provisionAdjusted 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 $2.6 million and $7.6 million, respectively.

Animal Health

Net sales of $515.0 million for the nine months ended March 31, 2024, increased $31.9 million, or 7%. Net sales of MFAs and other increased $21.1 million, or 7%, due to increased volumes in all regions and higher demand for processing aids used in the ethanol fermentation industry. Net sales of nutritional specialty products decreased $6.1 million, or 5%, driven by decreased demand for domestic dairy and microbial products. Net sales of vaccines increased $16.9 million, or 23%, due primarily to poultry product introductions in Latin America, plus an increase in domestic demand.

Mineral Nutrition

Net sales of $181.6 million for the nine months ended March 31, 2024, decreased $2.6 million, or 1%, driven by lower average selling prices, partially offset by an increase in sales volume.

Performance Products

Net sales of $47.9 million for the nine months ended March 31, 2024, decreased $7.6 million, or 14%, driven by decreased demand for personal care product ingredients and industrial chemicals.

Gross profit

Gross profit of $225.9 million for the 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 due to unfavorable product mix.

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

Selling, general and administrative expenses

SG&A of $191.0 million for the nine months ended March 31, 2024, increased $17.6 million, or 10%, as compared to the nine months ended March 31, 2023. SG&A for the nine months ended March 31, 2024, included $10.7 million 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 $0.5 million and $0.3 million of stock-based compensation, slightly offset by a gain from insurance proceeds of $0.3 million. SG&A for the nine months ended March 31, 2023, included $6.9 million of environmental remediation costs. Excluding these items, SG&A increased $9.0 million, or 5%.

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

29

Table of Contents

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

Interest expense, net

Interest expense, net of $13.8 million for the nine months ended March 31, 2024, increased $3.0 million, or 27%, as compared to the nine months ended March 31, 2023, as a result of higher variable interest rates and increased debt levels, partially offset by higher returns on short-term investments.

Foreign currency losses, net

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

Provision for income taxes

The benefitprovision for income taxes was $4.0$2.8 million and $11.5 million for the threenine months ended September 30,March 31, 2024 and 2023, compared to the provision forrespectively. The effective income taxes of $1.6 milliontax rates were 63.1% and 35.3% for the threenine months ended September 30, 2022.March 31, 2024 and 2023, respectively. The effective income tax rate was 33.1% and 28.8% for the threenine months ended September 30, 2023 and 2022, respectively.March 31, 2024, was unfavorably affected by the relatively greater effect of certain items such as GILTI on reduced pre-tax income. The benefitprovision for income taxes duringfor the threenine months ended September 30, 2023,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 IRSInternal Revenue Service (“IRS”) guidance provided subsequent to our fiscal year-end, and (ii) a $0.2$0.5 million benefit related to the release of certain valuation allowances on non-U.S. companies and (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 threenine months ended September 30, 2022,March 31, 2023, included (i) a $0.9 million benefit related to exchange rate differences on intercompany dividends and (ii) a $0.2 million expense from changes in uncertain tax positions related to prior years. The effective income tax rate, without these items, would have been 24.8 % and 42.8%37.5% for the threenine months ended September 30, 2023 and 2022, respectively.March 31, 2023.

Net (loss) income

Net lossincome of $8.0$1.7 million for the threenine months ended September 30, 2023, represented a decrease of $11.9March 31, 2024, decreased $19.4 million, as compared to net income of $3.9$21.1 million for the threenine months ended September 30, 2022.March 31, 2023. Operating lossincome decreased $13.2 million 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.

30

Table of $14.4 million, driven mostly by higher SG&A, which included the $10.4 million pension settlement cost. Interest expense, net increased $1.5 million due to the issuance of new debt and higher variable interest rates. Foreign currency losses, net also increased by $1.5 million. Income tax expense decreased by $5.5 million.Contents

Adjusted EBITDA

Adjusted EBITDA of $18.7$77.8 million for the threenine months ended September 30, 2023,March 31, 2024, decreased $3.5$2.6 million, or 3%, as compared to the threenine months ended September 30, 2022.March 31, 2023. Animal Health Adjusted EBITDA increased $1.5$6.1 million, due toresulting from higher sales and increased gross profit, partially offset by increasedhigher SG&A. Mineral Nutrition Adjusted EBITDA decreased $2.4$2.5 million, due to lower sales.decreased sales and gross profit. Performance Products Adjusted EBITDA decreased $1.0$2.5 million, due to lowerdriven by decreased sales and gross profit. Corporate expenses increased $1.6$3.7 million due to increased strategic investmentsinvestment 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 threenine months ended September 30,March 31, 2024 and 2023, were 28.6% and 2022, were 27.6% and 36.0%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 international earnings and the benefit of recently implemented tax savings strategies.pre-tax income.

Adjusted net income

Adjusted net income of $5.5$31.7 million for the threenine months ended September 30, 2023,March 31, 2024, decreased $2.8$2.1 million, or 33.0%6%, as compared to the prior year. The decrease was driven by lower gross profit, higher adjusted SG&A expenses and higher adjusted interest expense, partially offset by a lower tax provision. The lowerhigher gross profit resultsand a partial benefit from lower sales.a reduced adjusted provision for income taxes. Adjusted SG&A expenses increased due to increased strategic investments and employee-related costs and adjusted interest expense, net, increased employee-related costs.due to higher variable interest rates.

Adjusted diluted earnings per share

Adjusted diluted earnings per share was $0.14$0.78 for the quarter,nine months ended March 31, 2024, a decrease of $0.07,$0.05, or 33.0%6%, as compared to the adjusted diluted earnings per share of $0.21$0.83 in the prior year.

Analysis of financial condition, liquidity and capital resources

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

    

Nine Months

For the Periods Ended March 31 

    

2024

    

2023

    

Change

(in thousands)

Cash provided (used) by:

Operating activities

$

59,165

$

(6,928)

$

66,093

Investing activities

 

(39,083)

 

(63,736)

 

24,653

Financing activities

 

(8,555)

 

33,319

 

(41,874)

Effect of exchange-rate changes on cash and cash equivalents

 

(2,583)

 

335

 

(2,918)

Net increase (decrease) in cash and cash equivalents

$

8,944

$

(37,010)

$

45,954

Certain amounts may reflect rounding adjustments.

2631

Table of Contents

Analysis of financial condition, liquidity and capital resources

Net increase in cash and cash equivalents was:

    

Three Months

For the Periods Ended September 30

    

2023

    

2022

    

Change

(in thousands)

Cash provided (used) by:

Operating activities

$

16,199

$

(10,698)

$

26,897

Investing activities

 

(15,352)

 

(16,149)

 

797

Financing activities

 

1,296

 

29,319

 

(28,023)

Effect of exchange-rate changes on cash and cash equivalents

 

(271)

 

(440)

 

169

Net increase in cash and cash equivalents

$

1,872

$

2,032

$

(160)

Certain amounts may reflect rounding adjustments.

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

    

Three Months

    

Nine Months

For the Periods Ended September 30

    

2023

    

2022

    

Change

For the Periods Ended March 31

    

2024

    

2023

    

Change

(in thousands)

(in thousands)

EBITDA

$

1,456

$

16,934

$

(15,478)

$

45,283

$

68,890

$

(23,607)

Adjustments:

 

 

 

 

 

 

Acquisition-related cost of goods sold

521

521

Acquisition-related other

512

512

Pension settlement cost

10,425

10,425

10,674

10,674

Brazil employment taxes

4,202

4,202

Insurance proceeds

(274)

(274)

Stock-based compensation

 

81

 

 

81

 

296

 

 

296

Environmental remediation costs

6,894

(6,894)

Foreign currency losses, net

 

6,689

 

5,200

 

1,489

 

16,593

 

4,629

 

11,964

Interest paid, net

 

(4,304)

 

(2,906)

 

(1,398)

 

(13,018)

 

(10,289)

 

(2,729)

Income taxes paid

 

(4,658)

 

(3,802)

 

(856)

 

(11,567)

 

(16,163)

 

4,596

Changes in operating assets and liabilities and other items

 

6,510

 

(26,124)

 

32,634

 

5,943

 

(60,889)

 

66,832

Net cash provided (used) by operating activities

$

16,199

$

(10,698)

$

26,897

$

59,165

$

(6,928)

$

66,093

Certain amounts may reflect rounding adjustments.

Operating activities

Operating activities provided $16.2$59.2 million of net cash for the threenine months ended September 30, 2023.March 31, 2024. Cash provided by net (loss) income, andadjusted for the non-cash items, including depreciation and amortization, was $13.1$46.9 million. We paid $13.0 million of net interest expense and $11.6 million in income taxes, net. Cash provided in the ordinary course of business forfrom changes in operating assets and liabilities and other items was $3.1$5.9 million. CashAccounts receivable provided by receivables was $12.8$3.0 million as a result of quarterly variations in sales levels. Cash used for inventory was $5.0 millioncash due to timing of sales and an improvement in days sales outstanding. Inventories used $5.9 million of cash due to increased cost for raw material and production costs, and increased quantities on hand due to forecasted future demand and internal production schedules. Other current assets used $3.3 million of cash, primarily due to prepayment of taxes. Accounts payable provided $4.6$8.1 million of cash due to timing of purchases and payments. Accrued expenses and other liabilities usedprovided cash of $5.8$2.9 million, primarily due to employee-related liabilitiestiming of incurrence and payments of commissions and rebates.for professional fees.

Investing activities

Investing activities used $15.4$39.1 million of net cash for the threenine months ended September 30, 2023.March 31, 2024. Capital expenditures totaled $7.5$28.2 million, as we continue to invest in expanding production capacity and productivity improvements. Net purchases and maturities of our short-term investments used $8.0$8.5 million in cash.

27

Table We acquired a business for $3.3 million, net of Contentscash acquired.

Financing activities

Financing activities provided $1.3used $8.6 million of net cash for the threenine months ended September 30, 2023.March 31, 2024. Net borrowings on our 2021 Revolver provided $13.0$24.0 million in cash. We paid $6.8$15.3 million in scheduled long-term debt maturitiesmaturities. Insurance premium financing and other short-term debt provided $2.7 million of cash, while we paid $5.4 million in insurance premium financing.financing and other short-term debt. We also paid $4.9$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

32

Table of Contents

of the macroeconomic market conditions in the financial markets. At this time, we expect adequate liquidity for at least the next twelve12 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. There can be no assurance that a challenging economic environment or an economic downturn would not affect our 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:

    

September 30, 

    

June 30, 

    

March 31, 

    

June 30, 

As of

    

2023

    

2023

    

2024

    

2023

(in thousands, except ratios)

(in thousands, except ratios)

Cash and cash equivalents and short-term investments

$

91,153

$

81,281

$

98,748

$

81,281

Working capital

 

345,066

 

350,737

 

339,171

 

350,737

Ratio of current assets to current liabilities

 

3.33:1

 

3.28:1

 

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 September 30, 2023,March 31, 2024, we had $154.0$165.0 million in outstanding borrowings under the 2021 Revolver and had outstanding letters of credit and other commitments of $2.5$2.3 million, leaving $153.5$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 December 20, 2023.June 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 September 30, 2023,March 31, 2024, our cash and cash equivalents and short-term investments included $89.6$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 September 30, 2023,March 31, 2024, there were no material changes in payments due under contractual obligations from those disclosed in the Annual Report.

28

Table of Contents

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.

33

Table of Contents

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 definedcalculate EBITDA as net (loss) income plus (i) interest expense, net, (ii) provision for income taxes or less benefit for income taxes and (iii) depreciation and amortization. We 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) losses, net 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(loss) income.net 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:

senior management receives a monthly analysis of our operating results that is prepared on an Adjusted EBITDA basis;
our annual budgets are prepared on an Adjusted EBITDA basis; and
other goal settinggoal-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 (loss) 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 (loss) income and adjusted diluted earnings per share to portray the results of our operations prior to considering certain income statement elements. We have definedcalculate adjusted net income as net (loss) 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 (loss) income adjustments and certain income tax items. Adjusted diluted earnings per share is calculated using the adjusted net income

29

Table of Contents

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 (loss) 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 (loss) income, may not be comparable to the calculation of

34

Table of Contents

similar measures of other companies. Adjusted net (loss) 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, adjusted 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.”

Critical Accounting Policies

Our significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended June 30, 2023, included in our Annual Report on Form 10-K filed with the Securities Exchange Commission on August 30, 2023. There have been no significant changes in our critical accounting estimates 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:

outbreaks of animal diseases could significantly reduce demand for our products or availability of raw materials;
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;
restrictions on the use of antibacterials in food-producing animals may become more prevalent;

30

Table of Contents

the potential FDA withdrawal of approval of our Mecadox® (carbadox) product;
a material portion of our sales and gross profits are generated by antibacterials and other related products;

35

Table of Contents

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;
our business may be negatively affected by weather conditions and the availability of natural resources;
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;
climate change could have a material adverse impact on our operations and our customers’ businesses;
actions of regulatory bodies, including obtaining approvals related to the testing, manufacturing and marketing of certain of our products;
the continuing trend toward consolidation of certain customer groups as well as the emergence of large buying groups;
our ability to control costs and expenses;
any unforeseen material loss or casualty;
misuse or extra-label use of our products;
exposure relating to rising costs and reduced customer income;
heightened competition, including those from generics and those deriving from advances in veterinary medical practices and animal health technologies;
unanticipated safety or efficacy concerns;
our dependence on suppliers having current regulatory approvals;
our raw materials are subject to price fluctuations and their availability can be limited;
natural and man-made disasters, including but not limited to fire, snow and ice storms, flood, hail, hurricanes and earthquakes;
business interruption from political and social instability, including crime, civil disturbance, terrorist activities, outbreaks of disease and pandemics and armed conflicts, such as the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas;
terrorist attacks, particularly attacks on or within markets in which we operate, including the recent terrorist attack on Israel by Hamas militants and the ongoing related conflict;
risks related to changes in tax rates and exposure;
our ability to successfully implement our strategic initiatives;
our reliance on the continued operation of our manufacturing facilities and application of our intellectual property;

31

Table of Contents

adverse U.S. and international economic market conditions, including currency fluctuations;
failure of our product approval, R&D, acquisition and licensing efforts to generate new products;

36

Table of Contents

the risks of product liability claims, legal proceedings and general litigation expenses;
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;
modification of foreign trade policy may harm our food animal product customers;
our dependence on our Israeli and Brazilian operations;
impact of increased or decreased inventory levels at our direct customers or channel distributors;
our substantial level of indebtedness and related debt-service obligations;
restrictions imposed by covenants in our debt agreements;
the risk of work stoppages; and
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.

3237

Table of Contents

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, as amended)amended (the “Exchange Act”)). Based upon that evaluation as of September 30, 2023,March 31, 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 September 30, 2023.March 31, 2024.

PART II—OTHER INFORMATION

Item 1.Legal Proceedings

Information required by this Item is incorporated herein by reference to “Notes to Consolidated Financial Statements—Commitments and 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 “Risk Factors” in 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

On February 12, 2024, BFI Co., LLC (“BFI”) adopted a 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 Directors, President and Chief Executive Officer, has sole authority to vote shares of our stock owned by BFI.

3338

Table of Contents

Item 5. Other Information

None.

Item 6.Exhibits

Exhibit 10.1

Executive Long-Term Incentive Agreement dated July 5, 2023 by and between Phibro Animal Health Corporation and Larry L. Miller (incorporated by reference to Exhibit 10.18 to Phibro Animal Health Corporation’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on August 30, 2023 (File No. 001-36410)).

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 .INS101.INS

Inline XBRL Instance 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)

3439

Table of Contents

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

NovemberMay 8, 20232024

By:

/s/ Jack C. Bendheim

Jack C. Bendheim

Chairman, President and Chief Executive Officer

NovemberMay 8, 20232024

By:

/s/ Richard G. JohnsonGlenn C. David

Richard G. JohnsonGlenn C. David

 

Chief Financial Officer

3540