Interim Results for the 6 Months Ended 31-12-2009
11 February 2010 - 6:00PM
UK Regulatory
TIDMPAHC
RNS Number : 9732G
Phibro Animal Health Corporation
11 February 2010
PHIBRO ANIMAL HEALTH CORPORATION INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2009
RIDGEFIELD PARK, New Jersey, 11 February 2010 - Phibro Animal Health Corporation
("Phibro" or the "Company") today announced its interim results for the six
months ended 31 December 2009. For additional information, the Company's
Interim Report is available at www.pahc.com.
Financial Highlights
($millions)
+--------+------+---------+----------+---------+----------+------------+----------+----------+
| | | 2009 | | 2008 | | Increase | | % |
| | | | | | | | |Increase |
+--------+------+---------+----------+---------+----------+------------+----------+----------+
| Sales | | $288.1 | | $264.0 | | $24.1 | | 9% |
| | | | | | | | | |
+--------+------+---------+----------+---------+----------+------------+----------+----------+
| Adjusted | | | | | | | 35% |
| ebitda | $34.1 | | $25.2 | | $8.9 | | |
+--------+------+---------+----------+---------+----------+------------+----------+----------+
Net sales of $288.1 million increased $24.1 million, or 9%. Animal Health &
Nutrition sales of $248.1 million grew $30.4 million, or 14%, due to recent
acquisitions and unit volume growth and higher average selling prices of
antibiotics and other medicated products. Reduced average sales prices of trace
minerals, due to lower underlying commodity costs and market conditions, and
reduced volumes of other nutritional products partially offset the increases.
Distribution sales of $28.7 million decreased $4.1 million, or 12%, as
improvement in the U.S. ethanol market was offset by other declines. Industrial
Chemicals sales of $11.3 million decreased by $2.2 million, or 16%, due to
reduced unit volumes of copper related products and lower average sales prices.
Gross profit of $76.6 million increased $15.7 million, to 26.6% of net sales.
Animal Health & Nutrition gross profit improved primarily due to increased unit
volumes and improved selling prices of antibiotics and other medicated products
and the benefit of recent acquisitions, offset by reduced margins in sales of
trace minerals. Distribution gross profit approximated the prior year with sales
growth of higher margin products offset by lower unit volumes.
Selling, general and administrative expenses of $49.7 million increased $9.0
million, or 22%, primarily due to the recent acquisitions, including increased
depreciation and amortization expense.
Operating income of $26.7 million increased $6.8 million, or 34%. Animal Health
& Nutrition operating income increased by $7.4 million due to sales growth and
margin improvements of antibiotics and other medicated products, plus the
benefit of recent acquisitions, offset in part by higher selling, general and
administrative expenses. Distribution operating income increased $0.3 million
due to lower operating costs. Industrial Chemicals operating income increased
$0.8 million due to lower operating expenses.
Adjusted EBITDA of $34.1 million, after adjustments for $0.2 million of Prince
Agri Products plant consolidation expenses, increased $8.9 million, or 35%.
Interest expense, net of $17.3 million increased $2.7 million, or 19%, primarily
due to additional debt related to recent acquisitions.
Foreign currency (gains) losses, net amounted to a net gain of $6.3 million in
2009 and a net loss of $19.8 million in 2008. These (gains) losses are primarily
non-cash and result from inter-company balances across currencies. Foreign
currency gains in the current period primarily were due to the movement of
Brazilian, European, Israeli, Mexican and Canadian currencies relative to the
U.S. dollar.
Income taxes of $2.7 million were recorded on consolidated pre-tax income from
continuing operations of $15.6 million. The tax rate reflects income tax
provisions in profitable foreign jurisdictions, for state income taxes, and for
the federal AMT. We have recorded valuation allowances related to substantially
all deferred tax assets. We will continue to evaluate the likelihood of
recoverability of these deferred tax assets based upon actual and expected
operating performance.
Sale of Wood Preservative Business
On 6 October 2009, the Company sold its wood preservative business to Osmose,
Inc. The Company operated the business as part of its Industrial Chemicals
segment through its PhibroWood subsidiary, and sold its wood preservative
product under the Sustain brand.
The sale price was $40.6 million in cash for the assets used in the business,
including patents, patent applications, trademarks and trade names, certain
manufacturing equipment, certain accounts receivable and inventories, and
included the settlement of certain ongoing intellectual property disputes
between the parties. The Company's Sumter, South Carolina manufacturing facility
that supported the business has ceased operations.
The wood preservative business has been reclassified as discontinued operations
in the consolidated statements of operations. The Company has reported a pre-tax
gain of $30.0 million on the divestiture in the period ending 31 December 2009.
Animal Health & Nutrition
Net sales of $248.1 million increased $30.4 million, or 14%. Sales increased due
to the recent acquisitions and unit volume growth and higher average selling
prices of antibiotics and other medicated products. Reduced average sales prices
of trace minerals, due to lower underlying commodity costs and market
conditions, and reduced volumes of other nutritional products partially offset
the increases.
Operating income of $28.4 million increased $7.4 million, or 35%. Operating
income improved due to sales growth and margin improvements of antibiotics and
other medicated products, plus the benefit of recent acquisitions, offset in
part by higher selling, general and administrative expenses.
Adjusted EBITDA of $35.0 million, after adjustment for $0.2 million of Prince
Agri Products plant consolidation expenses, increased $9.4 million, or 37%.
Performance Products
Distribution net sales of $28.7 million decreased $4.1 million, or 12%. Net
sales decreased as improvement in the U.S. ethanol market was offset by other
declines. Distribution operating income of $8.1 million increased $0.3 million,
or 3%, due to lower operating costs. Adjusted EBITDA increased by $0.3 million
for the same reason.
Industrial Chemicals net sales of $11.3 million decreased by $2.2 million, or
16%, due to reduced unit volumes of copper related products and lower average
sales prices. The breakeven operating income increased $0.8 million due to lower
operating expenses. Adjusted EBITDA improved by $0.5 million for the same
reasons.
Corporate and Other
Corporate and other expense was $9.7 million, an increase of $1.6 million over
the prior year.
Liquidity and Capital Resources
Cash flow from operating activities was $17.2 million for the current period,
including a $4.4 million use of cash by working capital and other items,
payments of $15.6 million for interest and an income tax net refund of $3.1
million.
Net cash provided (used) by investing activities for the current period was
$36.2 million. The sale of the wood preservative business provided funds of
$40.6 million. Capital expenditures were $5.9 million and included spending for
the new consolidated U.S trace minerals manufacturing facilities, purchase and
implementation of computer software, maintenance of our existing asset base and
for environmental, health and safety projects.
Odda Smelteverk A.S. (Norway) ("Odda"), a subsidiary, filed for bankruptcy in
2003 and we accounted for Odda as a discontinued operation. During 2009, we
received $1.4 million from the bankruptcy estate.
Working capital as of 31 December 2009 was $120.5 million compared to $127.4
million at 30 June 2009, a decrease of $6.9 million. We define working capital
as total current assets (excluding cash and cash equivalents and assets held for
sale) less total current liabilities (excluding loans payable to banks, current
portion of long-term debt and liabilities held for sale). Working capital
decreased primarily due to higher levels of current liabilities.
At 31 December 2009 we had no outstanding borrowings but had outstanding letters
of credit and other commitments of $15.0 million, leaving $60.0 million
available for borrowings and letters of credit under the domestic senior credit
facility (of which $5.0 million is subject to an availability reserve under
which borrowings from such reserve are subject to approval by the lenders). In
addition, our Koffolk (Israel) subsidiary had availability totaling $10.5
million under its loan agreements. The Company expects to utilize the proceeds
from the sale of the wood preservative business to fund its operating plan and
for general corporate purposes. We estimate we will incur $2.0 million for plant
decommissioning and closure during the second half of fiscal 2010. The expense
will be included in discontinued operations as it is incurred.
Debt at 31 December 2009 totaled $293.7 million and consisted of $240.0 million
of senior notes and senior subordinated notes, and $53.7 million of other debt,
including amounts owed to Mayflower (an affiliate of 3i), Teva and BFI. Cash at
period end was $67.4 million.
Outlook
The Company's expectations are for its business to continue at similar or
improving levels for the remainder of our fiscal year. Revenues subsequent to
our interim results have continued at recent historical levels.
PAHC is a diversified global developer, manufacturer and marketer of a broad
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