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What changed in PHIBRO ANIMAL HEALTH CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PHIBRO ANIMAL HEALTH CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+395 added−373 removedSource: 10-K (2023-08-30) vs 10-K (2022-08-24)

Top changes in PHIBRO ANIMAL HEALTH CORP's 2023 10-K

395 paragraphs added · 373 removed · 325 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

104 edited+17 added−19 removed144 unchanged
Biggest changeNet sales by segments, species and regions were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segments ​ Change ​ Percentage of total For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Animal Health $ 607 $ 546 $ 527 $ 61 11 % $ 19 4 % 64 % 65 % 66 % Mineral Nutrition ​ 260 ​ 221 ​ 214 ​ 39 18 % 6 3 % 28 % 26 % 27 % Performance Products ​ 76 ​ 67 ​ 59 ​ 9 13 % 8 14 % 8 % 8 % 7 % Total ​ $ 942 ​ $ 833 ​ $ 800 ​ $ 109 13 % $ 33 4 % ​ ​ 6 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Species ​ Change ​ Percentage of total For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Poultry $ 319 $ 297 $ 301 $ 22 7 % $ (4) (1) % 34 % 36 % 38 % Dairy ​ ​ 186 ​ ​ 169 ​ ​ 163 ​ ​ 17 ​ 10 % ​ 6 ​ 4 % 20 % 20 % 20 % Cattle ​ ​ 127 ​ ​ 106 ​ ​ 94 ​ ​ 21 ​ 20 % ​ 12 ​ 13 % 13 % 13 % 12 % Swine ​ 80 ​ 79 ​ 81 ​ 1 1 % (2) (2) % 8 % 9 % 10 % Other (1) ​ 230 ​ 182 ​ 161 ​ 48 26 % 21 13 % 24 % 22 % 20 % Total ​ $ 942 ​ $ 833 ​ $ 800 ​ $ 109 13 % $ 33 4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regions (2) ​ Change ​ Percentage of total For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ United States $ 562 $ 495 $ 472 $ 67 13 % $ 23 5 % 60 % 59 % 59 % Latin America and Canada ​ ​ 191 ​ ​ 166 ​ ​ 159 ​ ​ 25 ​ 15 % ​ 7 ​ 4 % 20 % 20 % 20 % Europe, Middle East and Africa ​ ​ 122 ​ ​ 114 ​ ​ 112 ​ ​ 8 ​ 7 % ​ 2 ​ 2 % 13 % 14 % 14 % Asia Pacific ​ 67 ​ 58 ​ 57 ​ 9 15 % 1 2 % 7 % 7 % 7 % Total ​ $ 942 ​ $ 833 ​ $ 800 ​ $ 109 13 % $ 33 4 % ​ (1) Other includes sales related to: Performance Products customers; the ethanol industry; aquaculture and other animal species; adjuvants for animal vaccine manufacturers; and Mineral Nutrition other customers.
Biggest changeNet sales by segments, species and regions were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Segments ​ Change ​ Percentage of total For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Animal Health $ 660 $ 607 $ 546 $ 53 9 % $ 61 11 % 67 % 64 % 65 % Mineral Nutrition ​ 243 ​ 260 ​ 221 ​ (17) (6) % 39 18 % 25 % 28 % 26 % Performance Products ​ 75 ​ 76 ​ 67 ​ (0) (0) % 9 13 % 8 % 8 % 8 % Total ​ $ 978 ​ $ 942 ​ $ 833 ​ $ 36 4 % $ 109 13 % ​ ​ 6 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Species ​ Change ​ Percentage of total For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Poultry $ 331 $ 319 $ 297 $ 12 4 % $ 22 7 % 34 % 34 % 36 % Dairy ​ ​ 190 ​ ​ 186 ​ ​ 169 ​ ​ 4 ​ 2 % ​ 17 ​ 10 % 19 % 20 % 20 % Cattle ​ ​ 128 ​ ​ 127 ​ ​ 106 ​ ​ 1 ​ 1 % ​ 21 ​ 20 % 13 % 13 % 13 % Swine ​ 89 ​ 80 ​ 79 ​ 9 11 % 1 1 % 9 % 8 % 9 % Other (1) ​ 240 ​ 230 ​ 182 ​ 10 4 % 48 26 % 25 % 24 % 22 % Total ​ $ 978 ​ $ 942 ​ $ 833 ​ $ 36 4 % $ 109 13 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regions (2) ​ Change ​ Percentage of total For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ United States $ 579 $ 562 $ 495 $ 17 3 % $ 67 13 % 59 % 60 % 59 % Latin America and Canada ​ ​ 220 ​ ​ 191 ​ ​ 166 ​ ​ 29 ​ 15 % ​ 25 ​ 15 % 22 % 20 % 20 % Europe, Middle East and Africa ​ ​ 118 ​ ​ 122 ​ ​ 114 ​ ​ (5) ​ (4) % ​ 8 ​ 7 % 12 % 13 % 14 % Asia Pacific ​ 61 ​ 67 ​ 58 ​ (5) (8) % 9 15 % 6 % 7 % 7 % Total ​ $ 978 ​ $ 942 ​ $ 833 ​ $ 36 4 % $ 109 13 % ​ (1) Other includes sales related to: Performance Products customers; the ethanol industry; aquaculture and other animal species; adjuvants for animal vaccine manufacturers; and Mineral Nutrition other customers.
United States In the United States, governmental oversight of animal nutrition and health products is conducted primarily by the United States Department of Agriculture (“USDA”) and/or the FDA.
United States In the United States, governmental oversight of animal nutrition and health products is conducted primarily by the FDA and/or the United States Department of Agriculture (“USDA”).
There can be no assurance that we 20 Table of Contents will have sufficient resources to maintain our current competitive position, however, we believe the following strengths create sustainable competitive advantages that will enable us to continue our growth as a leader in our industry: Products Aligned with Need for Increased Protein Production Increased scarcity of natural resources is increasing the need for efficient production of food animals such as poultry, swine and cattle.
There can be no assurance that we will have sufficient resources to maintain our current competitive position, however, we believe the following strengths create sustainable competitive advantages that will enable us to continue our growth as a leader in our industry. 20 Table of Contents Products Aligned with Need for Increased Protein Production Increased scarcity of natural resources is increasing the need for efficient production of food animals such as poultry, swine and cattle.
The Denison Organization Culture survey was administered to all employees globally in 2017 and 2021, with at least a 75 percent response rate each time. Phibro employee engagement and commitment scores remained consistent in 2017 and 2021 at 82 percent favorable for engagement and 76 percent favorable for commitment. We are intently focused on maintaining these results across the organization.
The Denison Organization Culture survey was administered to all employees globally in 2021 and 2017, with at least a 75 percent response rate each time. Phibro employee engagement and commitment scores remained consistent at 82 percent favorable for engagement and 76 percent favorable for commitment. We are intently focused on maintaining these results across the organization.
We manufacture active pharmaceutical ingredients for certain of our antibacterial and anticoccidial products in Guarulhos, Brazil and Braganca Paulista, Brazil. We manufacture active pharmaceutical ingredients for certain of our anticoccidial and antimicrobial products in Neot Hovav, Israel. We produce vaccines in Beit Shemesh, Israel, Sligo, Ireland and Omaha, Nebraska. We produce adjuvants in Omaha, Nebraska.
We manufacture active pharmaceutical ingredients for certain of our antibacterial and anticoccidial products in Guarulhos, Brazil and Braganca Paulista, Brazil. We manufacture active pharmaceutical ingredients for certain of our anticoccidial and antimicrobial products in Neot Hovav, Israel. We produce vaccines in Beit Shemesh, Israel, Sligo, Ireland, Omaha, Nebraska, and Guarulhos, Brazil. We produce adjuvants in Omaha, Nebraska.
In addition, because we or our subsidiaries have closed several facilities that had been the subject of RCRA permits, we or our 24 Table of Contents subsidiaries have been and will be required to investigate and remediate certain environmental contamination conditions at these shutdown plant sites within the requirements of RCRA corrective action programs.
In addition, because we or our 24 Table of Contents subsidiaries have closed several facilities that had been the subject of RCRA permits, we or our subsidiaries have been and will be required to investigate and remediate certain environmental contamination conditions at these closed plant sites within the requirements of RCRA corrective action programs.
To date, such bills have not had sufficient support to become law. Should statutory, regulatory or other developments result in restrictions on the sale of our products, it could have a material adverse impact on our financial position, results of operations and cash flows. Virginiamycin.
To date, such bills have not had sufficient support to become law. Should statutory, regulatory or other developments result in restrictions on the sale of our products, it could have a material adverse impact on our financial position, results of operations and cash flows.
Our nutritional specialty product offerings such as OmniGen-AF and Animate are used increasingly in the global dairy industry, and Magni-Phi and Provia Prime/MicroLife Prime are rapidly becoming important products for poultry producers. Our vaccine products are effective against critical diseases in poultry, swine and cattle.
Our nutritional specialty product offerings such as OmniGen-AF and Animate are used increasingly in the global dairy industry, and Magni-Phi and Provia Prime/MicroLife Prime are rapidly becoming important products for poultry producers. Our vaccine products are effective against critical diseases in poultry, swine and beef and dairy cattle.
Certain of our Brazilian employees are covered by multi-employer regional industry-specific unions. Certain of our Israeli employees are covered by site-specific collective bargaining agreements. Certain employees are covered by individual employment agreements. We strive to nurture a strong culture that empowers team members and provides opportunities for growth and development.
Certain of our Brazilian employees are covered by multi-employer regional industry-specific unions. Certain of our Israeli employees are covered by site-specific collective bargaining agreements. Certain employees globally are covered by individual employment agreements. We strive to nurture a strong culture that empowers team members and provides opportunities for growth and development.
We consider a diverse set of livestock producers, including poultry and swine operations and beef and dairy farmers, to be the primary customers of our livestock products. We sell our animal health and mineral nutrition products directly to livestock and aquaculture producers and to distributors that typically re-sell the products to livestock producers.
We consider a diverse set of livestock producers, including poultry and swine operations and beef and dairy cattle farmers, to be the primary customers of our livestock products. We sell our animal health and mineral nutrition products directly to livestock and aquaculture producers and to distributors that typically re-sell the products to livestock producers.
Animal Health Our Animal Health business develops, manufactures and markets about 300 product lines, including: ● antibacterials, which inhibit the growth of pathogenic bacteria that cause infections in animals; anticoccidials, which inhibit the growth of coccidia (parasites) that damage the intestinal tract of animals; and related products (MFAs and other); ● nutritional specialty products, which support nutrition to help improve health and performance (nutritional specialties); and ● vaccines, which induce an increase in antibody levels against a specific virus or bacterium, thus preventing disease due to infection with wild strains of that virus or bacterium.
Animal Health Our Animal Health business develops, manufactures and markets about 270 product lines, including: ● antibacterials, which inhibit the growth of pathogenic bacteria that cause infections in animals; anticoccidials, which inhibit the growth of coccidia (parasites) that damage the intestinal tract of animals; and related products (MFAs and other); ● nutritional specialty products, which support nutrition to help improve health and performance (nutritional specialties); and ● vaccines, which induce an increase in antibody levels against a specific virus or bacterium, thus preventing disease due to infection with wild strains of that virus or bacterium (vaccines).
We also focus on innovation to produce new antigens or new presentations of antigens, and have developed new vaccines and related technologies, such as: ● MB-1 ® , a live attenuated vaccine for Infectious Bursal disease, developed from the M.B. strain, adapted for in-ovo or subcutaneous injection at the hatchery, 9 Table of Contents ● TAbic ® IBVAR206, a live attenuated virus vaccine for Infectious Bronchitis developed from a unique genotype 2 variant strain, ● The inactivated subunit Infectious Bursal Disease Virus, ● Salmin Plus ® , the first multi-variant inactivated vaccine containing Salmonella Enteritis, Salmonella Typhimurium and Salmonella Infantis, ● EASE ® (Enhanced Antigen Surface Expression), a new bacterial growth procedure to improve the performance of our vaccines, and ● pHi-Tech ® , a portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information.
We also focus on innovation to produce new antigens or new presentations of antigens, and have developed new vaccines and related technologies, such as: 9 Table of Contents ● MB-1 ® , a live attenuated vaccine for Infectious Bursal disease, developed from the M.B. strain, adapted for in-ovo or subcutaneous injection at the hatchery; ● TAbic ® IB VAR206, a live attenuated virus vaccine for Infectious Bronchitis developed from a unique genotype 2 variant strain; ● The inactivated subunit Infectious Bursal Disease Virus; ● Salmin Plus ® , the first multi-variant inactivated vaccine containing Salmonella Enteritis, Salmonella Typhimurium and Salmonella Infantis; ● EASE ® (Enhanced Antigen Surface Expression), a new bacterial growth procedure to improve the performance of our vaccines; and ● pHi-Tech ® , a portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information.
It has been used successfully under various management and climate conditions in many breeds of poultry. Tailor-Made ® vaccines are autogenous vaccines against either bacterial or viral diseases which contain antigens specific to each farm. We manufacture and sell these vaccines to U.S. veterinarians for use primarily in swine, poultry and cattle.
It has been used successfully under various management and climate conditions in many breeds of poultry. Tailor-Made ® vaccines are autogenous vaccines against either bacterial or viral diseases which contain antigens specific to each farm. We manufacture and sell these vaccines to U.S. veterinarians for use primarily in swine, poultry and beef and dairy cattle.
Experienced Sales Force and Technical Support Staff with Strong, Consultative Customer Relationships Within our Animal Health and Mineral Nutrition segments, utilizing both our sales, marketing and technical support organization of approximately 420 employees and a broad distribution network, we market our portfolio of more than 690 product lines to livestock producers and veterinarians in over 80 countries.
Experienced Sales Force and Technical Support Staff with Strong, Consultative Customer Relationships Within our Animal Health and Mineral Nutrition segments, utilizing both our sales, marketing and technical support organization of approximately 400 employees and a broad distribution network, we market our portfolio of more than 690 product lines to livestock producers and veterinarians in over 80 countries.
The risk assessment was initiated after approval of a human drug called Synercid ® (quinupristin/dalfopristin) for treating vancomycin-resistant Enterococcus faecium (VREf), which led to increased attention regarding the use of streptogramins in animals. Synercid and virginiamycin (the active ingredient in our Stafac product) are both members of the streptogramin class of antimicrobial drugs.
The risk assessment was initiated after approval of a human drug called Synercid ® (quinupristin/dalfopristin) for treating vancomycin-resistant Enterococcus faecium (“VREf”), which led to increased attention regarding the use of streptogramins in animals. Synercid and virginiamycin (the active ingredient in our Stafac product) are both members of the streptogramin class of antimicrobial drugs.
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. We market our nutritional specialty products in all regions in which we operate. Vaccines Our vaccine products are primarily focused on preventing diseases in poultry, swine, cattle and aquaculture.
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. We market our nutritional specialty products in all regions in which we operate. Vaccines Our vaccine products are primarily focused on preventing diseases in poultry, swine, beef and dairy cattle and aquaculture.
We sell animal health and mineral nutrition products either directly to integrated poultry, swine and cattle producers or through animal feed manufacturers, wholesalers, distributors and veterinarians. Our products include: ● Animal health products such as antibacterials, anticoccidials, nutritional specialty products and vaccines that help improve the animal’s health and therefore improve performance, food safety and animal welfare.
We sell animal health and mineral nutrition products either directly to integrated poultry, swine and cattle producers or through animal feed manufacturers, wholesalers, distributors and veterinarians. Our products include: ● Animal health products such as antibacterials, anticoccidials, nutritional specialty products, and vaccines and vaccine adjuvants that help improve the animal’s health and therefore improve performance, food safety and animal welfare.
We own, or have exclusive rights to use under license, approximately 315 patents or pending applications in more than 30 countries but we believe that no single patent is of material importance to our business and, accordingly, that the expiration or termination thereof would not materially affect our business.
We own, or have exclusive rights to use under license, approximately 282 patents or pending applications in more than 30 countries but we believe that no single patent is of material importance to our business and, accordingly, that the expiration or termination thereof would not materially affect our business.
We believe we are well positioned to grow our sales with our established network of sales, marketing and distribution professionals in markets in North America, Latin America, Asia Pacific, Europe and Africa. We are investing resources to develop future products for the companion animal sector. Our business is currently concentrated in the livestock sector.
We believe we are well positioned to grow our sales with our established network of sales, marketing and distribution professionals in markets in North America, Latin America, Asia Pacific, Europe and Africa. We are investing resources to further develop products for the companion animal sector. Our business is currently concentrated in the livestock sector.
Diversified and Complementary Product Portfolio with Strong Brand Name Recognition We market products across the three largest livestock species (poultry, cattle and swine) and aquaculture and in the major product categories (MFAs, vaccines and nutritional specialty products). We believe our diversity of species and product categories enhances our sales mix and lowers our sales concentration risk.
Diversified and Complementary Product Portfolio with Strong Brand Name Recognition We market products across the three largest livestock species (poultry, swine, and beef and dairy cattle) and aquaculture and in the major product categories (MFAs, vaccines and nutritional specialty products). We believe our diversity of species and product categories enhances our sales mix and lowers our sales concentration risk.
Our leading MFAs product franchise, Stafac/V-Max/Eskalin, is approved in over 30 countries for use in poultry, swine and cattle and is regarded as one of the leading MFA products for production animals. Our nicarbazin and amprolium MFAs are globally recognized anticoccidials.
Our leading MFAs product franchise, Stafac/V-Max/Eskalin, is approved in over 30 countries for use in poultry, swine and beef and dairy cattle and is regarded as one of the leading MFA products for production animals. Our nicarbazin and amprolium MFAs are globally recognized anticoccidials.
Competition We are engaged in highly competitive industries and, with respect to all our major products, face competition from a substantial number of global and regional competitors. Some competitors have greater financial, R&D, manufacturing and other resources than we have.
Competition We are engaged in highly competitive industries and, with respect to all our major products, face competition from a substantial and continually evolving number of global and regional competitors. Some competitors have greater financial, R&D, manufacturing and other resources than we have.
Virtually all animal drugs are “new animal drugs” within the meaning of the term in the Federal Food, Drug, and Cosmetic Act. An approved Abbreviated New Animal Drug Application (“ANADA”) is a generic equivalent of an NADA previously approved by the FDA. Both are regulated by the FDA.
Virtually all animal drugs are “new animal drugs” within the meaning of the Federal Food, Drug, and Cosmetic Act. An approved Abbreviated New Animal Drug Application (“ANADA”) is a generic equivalent of an NADA previously approved by the FDA. Both are regulated by the FDA.
With the exception of Australia, Canada, Japan and New Zealand, most other countries’ regulatory agencies will generally refer to the FDA, USDA, European Union and other international animal health entities, including the World Organization for Animal Health, Codex Alimentarius Commission, the recognized international standard-setting body for food (“Codex”), before establishing their own standards and regulations for veterinary pharmaceuticals and vaccines.
With the exception of Australia, Canada, Japan and New Zealand, most other countries’ regulatory agencies will generally refer to the FDA, USDA, European Union and other international animal health entities, including the World 19 Table of Contents Organization for Animal Health, Codex Alimentarius Commission, the recognized international standard-setting body for food (“Codex”), before establishing their own standards and regulations for veterinary pharmaceuticals and vaccines.
The regulatory approval process includes similar risks to those associated with the FDA and European Commission approvals set forth above. 19 Table of Contents Global policy and guidance Country-specific regulatory laws have provisions that include requirements for certain labeling, safety, efficacy and manufacturers’ quality procedures (to assure the consistency of the products), as well as company records and reports.
The regulatory approval process includes similar risks to those associated with the FDA and European Commission approvals set forth above. Global Policy and Guidance Country-specific regulatory laws have provisions that include requirements for certain labeling, safety, efficacy and manufacturers’ quality procedures (to assure the consistency of the products), as well as company records and reports.
MB-1 ® is a live attenuated vaccine for Infectious Bursal disease in poultry, developed from the M.B. strain, adapted for in-ovo or subcutaneous injection in the hatchery. pHi-Tech ® is new technology in the form of a portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information.
MB-1 ® is a live attenuated vaccine for Infectious Bursal disease in poultry, developed from the M.B. strain, adapted for in-ovo or subcutaneous injection in the hatchery. pHi-Tech ® is a portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information.
We develop, manufacture and market autogenous vaccines against animal diseases for swine, poultry and cattle in the United States. Our autogenous bacterial and viral vaccines enable us to produce custom vaccines for veterinarians that contain antigens specific to each farm, allowing Phibro to provide comprehensive and customized health management solutions to our customers.
We develop, manufacture and market autogenous vaccines against animal diseases for swine, poultry and beef and dairy cattle in the United States and Brazil. Our autogenous bacterial and viral vaccines enable us to produce custom vaccines for veterinarians that contain antigens specific to each farm, allowing Phibro to provide comprehensive and customized health management solutions to our customers.
Our experience in the development and production of virginiamycin has enabled us to develop significant intellectual property through trade secret know-how, which has helped protect against competition from generics. We are the sole worldwide manufacturer and marketer of virginiamycin. 11 Table of Contents ● Carbadox .
Our experience in the development and production of virginiamycin has enabled us to develop significant intellectual property through trade secret know-how, which has helped protect against competition from generics. We are the sole worldwide manufacturer and marketer of virginiamycin. ● Carbadox .
Coccidiosis is a disease of the digestive tract that has considerable health consequences to livestock and, as a result, is of great concern to livestock producers. We sell our anticoccidials primarily to integrated poultry producers and feed companies and to international animal health companies. Our anticoccidial products include: ● Nicarbazin .
Coccidiosis is a disease of the digestive tract that has considerable health consequences to livestock and, as a result, is of 11 Table of Contents great concern to livestock producers. We sell our anticoccidials primarily to integrated poultry producers and feed companies and to international animal health companies. Our anticoccidial products include: ​ ● Nicarbazin .
We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.
We actively seek to protect our proprietary information, including our trade 15 Table of Contents secrets and proprietary know-how, by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.
The EPA has entered into a settlement 25 Table of Contents 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 EPA.
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 EPA.
We continue to invest in a vaccine production facility in Sligo, Ireland to manufacture poultry vaccines, with our first commercial sale of product from this facility having occurred in February 2022, and longer-term expectations to add swine and cattle vaccines production at this facility.
We continue to invest in a vaccine production facility in Sligo, Ireland to manufacture poultry vaccines, with our first commercial sale of product from this facility having occurred in fiscal year 2022, and longer-term expectations to add swine and cattle vaccines production at this facility.
The European Medicines Agency (and its main veterinary scientific committee, the Committee for Medicinal Products for Veterinary Use) and the national authorities in the various E.U. Member States, are responsible for administering this regime. A separate E.U. regime applies to feed additives. It provides for a re-registration process for existing additives and this process is ongoing.
The European Medicines Agency (and its main veterinary scientific committee, the Committee for Medicinal Products for Veterinary Use) and the national authorities in the various E.U. Member States, are responsible for administering this regime. 18 Table of Contents A separate E.U. regime applies to feed additives. It provides for a re-registration process for existing additives and this process is ongoing.
Our capital expenditures relating to environmental, health and safety regulations were $2.7 million for the fiscal year ended June 30, 2022. See “Business — Environmental, Health and Safety Regulations” for further descriptions. Our environmental capital expenditure plans cover, among other things, the currently expected costs associated with known permit requirements relating to facility improvements.
Our capital expenditures relating to environmental, health and safety regulations were $2.4 million for the fiscal year ended June 30, 2023. See “Business — Environmental, Health and Safety Regulations” for further descriptions. Our environmental capital expenditure plans cover, among other things, the currently expected costs associated with known permit requirements relating to facility improvements.
Our operations in countries outside of the United States contributed approximately 59% of our Animal Health segment revenues for the year ended June 30, 2022. Leading Positions in High Growth Sub-sectors of the Animal Health Market We are a global leader in the development, manufacture and commercialization of MFAs and nutritional specialty products for the animal health market.
Our operations in countries outside of the United States contributed approximately 58% of our Animal Health segment revenues for the year ended June 30, 2023. Leading Positions in High Growth Sub-sectors of the Animal Health Market We are a global leader in the development, manufacture and commercialization of MFAs and nutritional specialty products for the animal health market.
TM 1974 Live vaccine for the prevention of Newcastle Disease in poultry Tailor-Made ® Vaccines 1982 Autogenous vaccines against either bacterial or viral diseases in poultry, swine and cattle MVP adjuvants ® 1982 Components of veterinary vaccines that enhance the immune response to a vaccine TAbic ® M.B. 2004 Live vaccine for the prevention of Infectious Bursal Disease in poultry MJPRRS ® 2007 Autogenous vaccine for the prevention of porcine reproductive and respiratory syndrome (“PRRS”) in swine TAbic ® IB VAR 2009 Live vaccine for the prevention of Infectious Bronchitis variant 1 strain 233A in poultry TAbic ® IB VAR206 2010 Live vaccine for the prevention of Infectious Bronchitis variant 206 in poultry MB-1 ® 2017 Live vaccine for the prevention of Infections Bursal Disease in the hatchery in poultry pHi-Tech ® 2019 Portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information Phivax ® SLE ​ 2019 ​ A live attenuated Salmonella Enteritidis vaccine for the control of Salmonella infection in chickens ​ The V.H. strain of Newcastle Disease vaccine is a pathogenic strain and is effective when applied by aerosol, coarse spray, drinking water or eye-drops.
MVP adjuvants ® 1982 Components of veterinary vaccines that enhance the immune response to a vaccine TAbic ® M.B. 2004 Live vaccine for the prevention of Infectious Bursal Disease in poultry MJPRRS ® 2007 Autogenous vaccine for the prevention of porcine reproductive and respiratory syndrome (“PRRS”) in swine TAbic ® IB VAR 2009 Live vaccine for the prevention of Infectious Bronchitis variant 1 strain 233A in poultry TAbic ® IB VAR206 2010 Live vaccine for the prevention of Infectious Bronchitis variant 206 in poultry MB-1 ® 2017 Live vaccine for the prevention of Infections Bursal Disease in the hatchery in poultry pHi-Tech ® 2019 Portable electronic vaccination device and software that ensures proper delivery of vaccines and provides health management information Phivax ® SLE ​ 2019 ​ A live attenuated Salmonella Enteritidis vaccine for the control of Salmonella infection in poultry Phi-Shield ® Vaccines ​ 2023 ​ Autogenous vaccines against either bacterial or viral diseases in poultry, swine and aquaculture in Brazil ​ The V.H. strain of Newcastle Disease vaccine is a pathogenic strain and is effective when applied by aerosol, coarse spray, drinking water or eye-drops.
In addition to traditional professional development, we offer a robust, cloud-based online training curriculum from one of the leading providers of development material for learning-focused organizations. Employee safety is paramount. In 2017, we launched the Road to Zero initiative, which utilizes teaming concepts to elevate employee involvement in project-based improvement activities. Participation drives a strong culture of safety and quality.
In addition to traditional professional development, we offer a robust, cloud-based online training curriculum from one of the leading providers of development material for learning-focused organizations. Employee safety is paramount. We have implemented our Road to Zero initiative, which utilizes teaming concepts to elevate employee involvement in project-based improvement activities. Participation drives a strong culture of safety and quality.
Unless otherwise indicated or the context requires otherwise, references in this report to “we,” “our,” “us,” “the Company,” “Phibro,” “PAHC” and similar expressions refer to Phibro Animal Health Corporation and its subsidiaries.
Unless otherwise indicated or the context requires otherwise, references in this report to “we,” “our,” “us,” the “Company,” “Phibro,” “PAHC” and similar expressions refer to Phibro Animal Health Corporation and its subsidiaries.
Under the terms of the sale of the former facility in Joliet, Illinois, Phibro-Tech remains responsible for any required investigation and remediation of the site attributable to conditions at the site at the time of the February 2011 sale date, and we believe we have sufficient reserves to cover the cost of the remediation. PRP at Omega Chemical Superfund Site.
Under the terms of the sale of the former facility in Joliet, Illinois, Phibro-Tech remains responsible for any required investigation and remediation of the site attributable to conditions at the site at the time of the February 2011 sale date, and we believe we have sufficient reserves to cover the cost of the remediation.
European Union European Union (“E.U.”) legislation requires that veterinary medicinal products must have a marketing authorization before they are placed on the market in the European Union. A veterinary medicinal product must meet 18 Table of Contents certain quality, safety, efficacy and environmental criteria to receive a marketing authorization.
European Union European Union (“E.U.”) legislation requires that veterinary medicinal products must have a marketing authorization before they are placed on the market in the European Union. A veterinary medicinal product must meet certain quality, safety, efficacy and environmental criteria to receive a marketing authorization.
For discussion regarding the impact of COVID-19 and the armed conflict between Russia and Ukraine on our financial results, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
For discussion regarding the impact of the ongoing armed conflict between Russia and Ukraine on our financial results, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We market our vaccine products in all regions in which we operate. We market our vaccine products to protect animals from either viral or bacterial disease challenges. We have developed and market over 320 licensed vaccine presentations for prevention of diseases in poultry, including vaccines to protect against Infectious Bursal Disease, Infectious Bronchitis, Newcastle Disease, Reovirus, Salmonella and Coryza.
We market our vaccine products to protect animals from either viral or bacterial disease challenges in all regions in which we operate. We have developed and market approximately 345 licensed vaccine presentations for the prevention of diseases in poultry, including vaccines to protect against Infectious Bursal Disease, Infectious Bronchitis, Newcastle Disease, Reovirus, Salmonella and Coryza.
Volume growth in the mineral nutrition sector is primarily driven by livestock production levels, while pricing is largely based on costs of the underlying commodity metals.
Volume growth in the mineral nutrition sector is primarily driven by livestock production and customer inventory levels, while pricing is largely based on costs of the underlying commodity metals.
Our autogenous vaccine products include the Tailor-Made ® line of vaccines and the MJPRRS ® vaccine. We also develop, manufacture and market adjuvants to animal vaccine manufacturers globally. We have developed TAbic ® , an innovative and proprietary delivery platform for vaccines.
Our autogenous vaccine products include the Tailor-Made ® and Phi-Shield ® lines of vaccines and the MJPRRS ® vaccine. We also develop, manufacture and market adjuvants to animal vaccine manufacturers globally. We have developed TAbic ® , an innovative and proprietary delivery platform for vaccines.
We sell our Performance Products through our local sales offices to the personal care, industrial chemical and chemical catalyst industries. We market these products predominately in the United States. Customers We have approximately 3,790 customers, of which approximately 3,500 customers are served by our Animal Health and Mineral Nutrition businesses.
We sell our Performance Products through our local sales offices to the personal care, industrial chemical and chemical catalyst industries. We market these products predominately in the United States. Customers We have approximately 4,000 customers, of which approximately 3,800 customers are served by our Animal Health and Mineral Nutrition businesses.
The “MFAs and other products” product group also includes antibacterial products and other processing aids, used in the ethanol fermentation industry. Approximately 47% of our MFAs and other sales in fiscal year 2022 were to the poultry industry, with sales to swine, cattle, dairy and other customers accounting for the remainder.
The “MFAs and other products” product group also includes antibacterial products and other processing aids used in the ethanol fermentation industry. Approximately 44% of our MFAs and other sales in the fiscal year 2023 were to the poultry industry, with sales to swine, beef and dairy cattle and other customers accounting for the remainder.
Outside of the United States, our global footprint reaches to key high growth regions (countries where the livestock production growth rate is expected to be higher than the average growth rate) including Brazil and other countries in South America, China, India and Southeast Asia, Russia and former CIS countries, Mexico, Turkey, Australia, Canada and South Africa and other countries in Africa.
Outside of the United States, our global footprint reaches to key high growth regions (countries where the livestock production growth rate is expected to be higher than the average growth rate) including Brazil and other countries in South America, China, India and Southeast Asia, Mexico, Turkey, Australia, Canada, Poland and other Eastern European countries and South Africa and other countries in Africa.
Our antibacterial products include: ● Oxytetracycline and Neomycin . Terramycin ® utilizes the active ingredient oxytetracycline and Neo-Terramycin ® combines the active ingredients neomycin and oxytetracycline to prevent, control and treat a wide range of diseases in chickens, turkeys, cattle, swine and aquaculture.
Terramycin ® utilizes the active ingredient oxytetracycline and Neo-Terramycin ® combines the active ingredients neomycin and oxytetracycline to prevent, control and treat a wide range of diseases in chickens, turkeys, cattle, swine and aquaculture.
We sell approximately 780 product lines in over 80 countries to approximately 3,790 customers. 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.
We market approximately 770 product lines in over 80 countries to approximately 4,000 customers. 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.
We have developed programs to identify requirements under and maintain compliance with Environmental Laws; however, we cannot predict with certainty the impact of increased and more stringent regulation on our operations, future capital expenditure requirements, or the cost of compliance.
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 impact of increased and more stringent regulation on our operations, future capital expenditure requirements, or the cost of compliance.
We have a strong management team with a proven track record of success at both the corporate and operating levels. The executive management team has diverse backgrounds and on average more than 30 years of experience the animal health or related industry. Human Capital As of June 30, 2022, we had approximately 1,860 employees in 55 locations spanning 26 countries.
We have a strong management team with a proven track record of success at both the corporate and operating levels. The executive management team has diverse backgrounds and on average more than 30 years of experience the animal health or related industry. Human Capital As of June 30, 2023, we had 1,920 employees in 52 locations spanning 33 countries.
Adjusted EBITDA by segment was: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA (1) ​ Change ​ Percentage of total (2) For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Animal Health $ 124 $ 124 $ 123 $ 0 0 % $ 1 1 % 79 % 82 % 87 % Mineral Nutrition ​ ​ 24 ​ ​ 17 ​ ​ 15 ​ ​ 7 ​ 40 % ​ 2 ​ 17 % 15 % 11 % 10 % Performance Products ​ ​ 9 ​ ​ 9 ​ ​ 5 ​ ​ (1) ​ (8) % ​ 5 ​ 108 % 6 % 6 % 3 % Corporate ​ (46) ​ (43) ​ (40) ​ (3) 7 % (2) 6 % ​ ​ ​ ​ ​ ​ Total ​ $ 111 ​ $ 108 ​ $ 102 ​ $ 3 3 % $ 6 6 % ​ (1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations General description of non-GAAP financial measures” for description of Adjusted EBITDA.
Adjusted EBITDA by segment was: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA (1) ​ Change ​ Percentage of total (2) For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ Animal Health $ 136 $ 124 $ 124 $ 12 10 % $ 0 0 % 84 % 79 % 82 % Mineral Nutrition ​ ​ 17 ​ ​ 24 ​ ​ 17 ​ ​ (7) ​ (28) % ​ 7 ​ 40 % 11 % 15 % 11 % Performance Products ​ ​ 9 ​ ​ 9 ​ ​ 9 ​ ​ 1 ​ 7 % ​ (1) ​ (8) % 6 % 6 % 6 % Corporate ​ (50) ​ (46) ​ (43) ​ (4) 10 % (3) 7 % ​ ​ ​ ​ ​ ​ Total ​ $ 113 ​ $ 111 ​ $ 108 ​ $ 2 2 % $ 3 3 % ​ (1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — General description of non-GAAP financial measures” for description of Adjusted EBITDA.
Certain subsequent manufacturing changes must be approved by the FDA prior to implementation. In complying with standards set forth in these regulations, manufacturers must continue to expend time, monies and effort in the area of production and quality control to ensure compliance. The process of seeking FDA approvals can be costly, time consuming and subject to unanticipated and significant delays.
In complying with standards set forth in these regulations, manufacturers must continue to expend time, monies and effort in the area of production and quality control to ensure compliance. The process of seeking FDA approvals can be costly, time consuming and subject to unanticipated and significant delays.
Installation of additional machinery and equipment is planned while we continue to submit necessary registrations on a country-by-country basis in order to obtain regulatory approvals needed to sell these products to a broader geographic market. ​ We are building a vaccine production facility in Guarulhos, Brazil to manufacture and market autogenous vaccines against animal diseases for swine, poultry and aquaculture. ​ Mineral Nutrition Our Mineral Nutrition business manufactures and markets approximately 400 formulations and concentrations of trace minerals such as zinc, manganese, copper, iron and other compounds, with a focus on customers in North America.
Installation of additional machinery and equipment is planned while we continue to submit necessary registrations on a country-by-country basis in order to obtain regulatory approvals needed to sell these products to a broader geographic market. ​ We recently completed construction of and received regulatory approval for a new vaccine production facility in Guarulhos, Brazil to manufacture and market autogenous vaccines that combat disease in swine, poultry and aquaculture. ​ Mineral Nutrition Our Mineral Nutrition business manufactures and markets approximately 420 formulations and concentrations of trace minerals such as zinc, manganese, copper, iron and other compounds, with a focus on customers in North America.
Should we be unable to successfully defend the safety of the product, the loss of carbadox sales will have an adverse effect on our financial condition and results of operations. Sales of Mecadox (carbadox) for the twelve months ended June 30, 2022, were $21 million.
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 year ended June 30, 2023 were approximately $20 million.
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 Phibro-Tech’s Santa Fe Springs, California facility.
Participating Responsible Parties (“PRPs”) at Omega Chemical Superfund Site. The EPA is investigating and planning for the remediation of offsite contaminated groundwater that has migrated from the Omega Chemical 25 Table of Contents Corporation Superfund Site (“Omega Chemical Site”), which is upgradient of Phibro-Tech’s Santa Fe Springs, California facility.
Instead of proceeding to a hearing on the scientific concerns raised in the 2016 NOOH, consistent with the normal regulatory procedure, the FDA announced that it was withdrawing the current NOOH, and issuing a proposed order to review the regulatory method for 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.
To protect employees, we have established health and safety policies, programs and processes at all our manufacturing sites. An external EHS audit is performed at each of our sites as needed based on the conditions at the respective sites.
The site managers are responsible for implementing the established EHS 26 Table of Contents controls. To protect employees, we have established health and safety policies, programs and processes at all our manufacturing sites. An external EHS audit is performed at each of our sites as needed based on the conditions at the respective sites.
Net identifiable assets by segment were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Identifiable Assets ​ Change ​ Percentage of total As of June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Animal Health $ 655 $ 595 $ 561 $ 60 10 % $ 34 6 % 70 % 71 % 71 % Mineral Nutrition ​ ​ 87 ​ ​ 68 ​ ​ 66 ​ ​ 19 ​ 29 % ​ 2 ​ 3 % 9 % 8 % 8 % Performance Products ​ ​ 39 ​ ​ 37 ​ ​ 31 ​ ​ 3 ​ 7 % ​ 6 ​ 19 % 4 % 4 % 4 % Corporate ​ 150 ​ 141 ​ 127 ​ 9 6 % 14 11 % 16 % 17 % 16 % Total ​ $ 932 ​ $ 841 ​ $ 784 ​ $ 91 11 % $ 57 7 % ​ ​ 7 Table of Contents Corporate assets include cash and cash equivalents, short-term investments, debt issuance costs, income tax related assets and certain other assets.
Net identifiable assets by segment were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Identifiable Assets ​ Change ​ Percentage of total As of June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Animal Health $ 699 $ 655 $ 595 $ 44 7 % $ 60 10 % 72 % 70 % 71 % Mineral Nutrition ​ ​ 76 ​ ​ 87 ​ ​ 68 ​ ​ (12) ​ (13) % ​ 19 ​ 29 % 8 % 9 % 8 % Performance Products ​ ​ 50 ​ ​ 39 ​ ​ 37 ​ ​ 10 ​ 26 % ​ 3 ​ 7 % 5 % 4 % 4 % Corporate ​ 147 ​ 150 ​ 141 ​ (3) (2) % 9 6 % 15 % 16 % 17 % Total ​ $ 971 ​ $ 932 ​ $ 841 ​ $ 40 4 % $ 91 11 % ​ ​ 7 Table of Contents Corporate assets include cash and cash equivalents, short-term investments, debt issuance costs, income tax related assets and certain other assets.
Animal Health net sales by product group and regions were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product Groups ​ Change ​ Percentage of total For the Years Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ MFAs and other $ 362 $ 330 $ 322 $ 32 10 % $ 8 2 % 60 % 60 % 61 % Nutritional specialties ​ 157 ​ 143 ​ 129 ​ 14 10 % 13 10 % 26 % 26 % 25 % Vaccines ​ 88 ​ 73 ​ 75 ​ 15 21 % (2) (3) % 15 % 13 % 14 % Animal Health ​ $ 607 ​ $ 546 ​ $ 527 ​ $ 61 11 % $ 19 4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regions (1) ​ Change ​ Percentage of total For the Years Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 2022 2021 2020 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ United States $ 248 $ 227 $ 214 $ 21 9 % $ 13 6 % 41 % 42 % 41 % Latin America and Canada ​ ​ 175 ​ ​ 151 ​ ​ 148 ​ ​ 24 ​ 16 % ​ 3 ​ 2 % 29 % 28 % 28 % Europe, Middle East and Africa ​ ​ 120 ​ ​ 110 ​ ​ 109 ​ ​ 10 ​ 9 % ​ 1 ​ 1 % 20 % 20 % 21 % Asia Pacific ​ 64 ​ 58 ​ 56 ​ 6 10 % 2 4 % 11 % 11 % 11 % Total ​ $ 607 ​ $ 546 ​ $ 527 ​ $ 61 11 % $ 19 4 % ​ (1) Net sales by region are based on country of destination.
Animal Health net sales by product group and regions were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product Groups ​ Change ​ Percentage of total For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ MFAs and other $ 387 $ 362 $ 330 $ 26 7 % $ 32 10 % 59 % 60 % 60 % Nutritional specialties ​ 173 ​ 157 ​ 143 ​ 15 10 % 14 10 % 26 % 26 % 26 % Vaccines ​ 100 ​ 88 ​ 73 ​ 12 13 % 15 21 % 15 % 15 % 13 % Animal Health ​ $ 660 ​ $ 607 ​ $ 546 ​ $ 53 9 % $ 61 11 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regions (1) ​ Change ​ Percentage of total For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 2023 2022 2021 ​ ​ ​ ​ ​ ($ in millions) ​ ​ ​ ​ ​ ​ ​ United States $ 277 $ 248 $ 227 $ 29 12 % $ 21 9 % 42 % 41 % 42 % Latin America and Canada ​ ​ 207 ​ ​ 175 ​ ​ 151 ​ ​ 32 ​ 18 % ​ 24 ​ 16 % 31 % 29 % 28 % Europe, Middle East and Africa ​ ​ 116 ​ ​ 120 ​ ​ 110 ​ ​ (4) ​ (3) % ​ 10 ​ 9 % 18 % 20 % 20 % Asia Pacific ​ 60 ​ 64 ​ 58 ​ (4) (6) % 6 10 % 9 % 11 % 11 % Total ​ $ 660 ​ $ 607 ​ $ 546 ​ $ 53 9 % $ 61 11 % ​ (1) Net sales by region are based on country of destination.
In addition, certain safety requirements relating to antimicrobial resistance must be met for antimicrobial products. The CVM Office of New Animal Drug Evaluation is responsible for reviewing information submitted by drug sponsors who wish to obtain approval to manufacture and sell animal drugs. A new animal drug is deemed unsafe unless there is an approved New Animal Drug Application (“NADA”).
The CVM Office of New Animal Drug Evaluation is responsible for reviewing information submitted by drug sponsors who wish to obtain approval to manufacture and sell animal drugs. A new animal drug is deemed unsafe unless there is an approved New Animal Drug Application (“NADA”).
The United States Environmental Protection Agency (the “EPA”) has jurisdiction over certain products applied topically to animals or to premises to control external parasites and shares regulatory jurisdiction of ethanol manufactured in biofuel manufacturing facilities with the FDA. The USDA and the FDA are the agencies responsible for the safety and quality of the U.S. human food supply.
The United States Environmental Protection Agency (the “EPA”) has jurisdiction over certain products applied topically to animals or to premises to control external parasites and shares regulatory jurisdiction of ethanol manufactured in biofuel manufacturing facilities with the FDA.
Our major mineral nutrition customers are regional and national feed companies, distributors, co-ops, pre-mixers, integrated swine, beef and poultry producers and pet food manufacturers. The majority of our customers have nutrition staffs who determine their specific formulas for custom trace mineral premixes. Trace mineral costs and our selling prices fluctuate with commodity markets, and therefore, these products are price sensitive.
Our major mineral nutrition customers are U.S. regional and national feed companies, distributors, co-ops, pre-mixers, integrated swine, beef and poultry producers and pet food manufacturers. The majority of our customers have nutrition staffs who determine their specific formulas for custom trace mineral premixes.
Prior to implementation of the revised VFD regulations, many approved antimicrobial products could be obtained and used without formal veterinary authorization. 17 Table of Contents In January 2017, the FDA and industry, including us, completed the process of label changes for MIA products to remove production claims and to limit the use of MIAs to those uses that are considered necessary for assuring animal health, namely for the prevention, control and/or treatment of disease, and that MIA use in food-producing animals should include veterinary oversight or consultation.
In January 2017, the FDA and industry, including us, completed the process of label changes for MIA products to remove production claims and to limit the use of MIAs to those uses that are considered necessary for assuring animal health, namely for the prevention, control and/or treatment of disease, and that MIA use in food-producing animals should include veterinary oversight or consultation.
Safety requirements include target animal safety and, in the case of food animals, human food safety (HFS). HFS reviews include drug residue levels and the safety of those residue levels. In addition to the safety and efficacy requirements for animal drugs used in food-producing animals, environmental safety must be demonstrated.
HFS reviews include drug residue levels and the safety of those residue levels. In addition to the safety and efficacy requirements for animal drugs used in food-producing animals, environmental safety must be demonstrated. Depending on the compound, the environmental studies may be quite extensive and expensive.
In September 2020, Phibro commented on the proposed order, reiterating the safety of carbadox and the appropriateness of the regulatory method, and further offered to work with the CVM to generate additional data to support the existing regulatory method or select a suitable alternative regulatory method.
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.
Potential Claims. In addition to cleanup obligations, we could also be held liable for all consequences arising out of human exposure to hazardous substances or other environmental damage, which liability may not be covered by insurance. Environmental Accruals and Financial Assurance.
In addition to cleanup obligations, we could also be held liable for all consequences arising out of human exposure to hazardous substances or other environmental damage, which liability may not be covered by insurance. Environmental Accruals and Financial Assurance. We have established environmental accruals to cover known remediation and monitoring costs at certain of our current and former facilities.
We market carbadox under the brand name Mecadox ® for use in swine feeds to control swine Salmonellosis and Swine Dysentery and, as a result, improve animal health and production efficiencies.
We market carbadox under the brand name Mecadox ® for use in swine feeds to control swine Salmonellosis and Swine Dysentery and, as a result, improve animal health and production efficiencies. Mecadox is sold primarily in the United States to feed companies and large integrated swine producers. ● Oxytetracycline and Neomycin .
We have requested that the FDA remove the streptogramin class of antimicrobials from GFI 152 to reflect that they are not “medically important” for human therapy, however, the FDA has declined our request.
We requested that the FDA remove the streptogramin class of antimicrobials from GFI 152 to reflect that they are not “medically important” for human therapy, however, the FDA declined our request. The FDA has recently issued a draft of GFI 152 and the streptogram class of antimicrobials was still included as medically important.
In markets where we do not have a direct commercial presence, we generally contract with distributors that provide logistics and sales and marketing support for our products.
(“Phibro-Tech”) business units. 14 Table of Contents Sales and Marketing Our sales organization includes sales, marketing and technical support employees. In markets where we do not have a direct commercial presence, we generally contract with distributors that provide logistics and sales and marketing support for our products.
We sell Terramycin and Neo-Terramycin products primarily to livestock and aquaculture producers, feed companies and distributors. ● Virginiamycin . Virginiamycin is an antibacterial marketed under the brand names Stafac ® to poultry, swine and cattle producers, Eskalin ® to dairy cows and beef cattle producers and V-Max ® for beef cattle producers.
Our antibacterial products include: ● Virginiamycin . Virginiamycin is an antibacterial marketed under the brand names Stafac ® to poultry, swine and cattle producers, Eskalin ® to dairy cows and beef cattle producers and V-Max ® for beef cattle producers.
Mecadox is sold primarily in the United States to feed companies and large integrated swine producers. ● Anticoccidials are produced through fermentation or chemical synthesis and are primarily used to prevent and control the disease coccidiosis in poultry and cattle, thereby promoting intestinal health, resulting in healthier animals.
We sell Terramycin and Neo-Terramycin products primarily to livestock and aquaculture producers, feed companies and distributors. ​ Anticoccidials are produced through fermentation or chemical synthesis and are primarily used to prevent and control the disease coccidiosis in poultry and cattle, thereby promoting intestinal health, resulting in healthier animals.
We seek to file and maintain trademark registrations around the world based on commercial activities in most regions where we have, or desire to have, a business presence for a particular product or service.
We seek to file and maintain trademark registrations around the world based on commercial activities in most regions where we have, or desire to have, a business presence for a particular product or service. We currently maintain, or have rights to use under license, approximately 3,700 trademark registrations or pending applications globally, identifying goods and services related to our business.
Such periodic and current reports, proxy statements and other information will be available to the public on the SEC’s website at www.sec.gov and through our website at www.pahc.com. 26 Table of Contents
Such periodic and current reports, proxy statements and other information will be available to the public on the SEC’s website at www.sec.gov and through our website at www.pahc.com. None of the information accessible on or through our website is incorporated into this Annual Report on Form 10-K.
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, including for odor releases in Guarulhos, Brazil.
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 to address contamination associated with historical operations.
Magni-Phi ® is a proprietary blend of saponins, triterpenoids and polyphenols (classes of phytogenic feed additives or natural botanicals) that helps improve intestinal health and immune response which may lead to improved absorption and utilization of nutrients for poultry.
OmniGen ® is a proprietary nutritional specialty product line designed to help maintain a cow’s healthy immune system, improve their natural response to potential environmental stressors and health challenges, and improve productivity. 12 Table of Contents Magni-Phi ® is a proprietary blend of saponins, triterpenoids and polyphenols (classes of phytogenic feed additives or natural botanicals) that helps improve intestinal health and immune response which may lead to improved absorption and utilization of nutrients for poultry.
For products that are currently subject to formal licensing by government agencies, our business relies on the ongoing approval and/or periodic re-approval of those licenses.
Our regulatory function seeks to engage in dialogue with various global agencies regarding their policies that relate to animal health products. For products that are currently subject to formal licensing by government agencies, our business relies on the ongoing approval and/or periodic re-approval of those licenses.
In many instances, it is difficult to predict the ultimate costs under Environmental Laws and the time period during which such costs are likely to be incurred. Governmental authorities have the power to enforce compliance with their regulations. Violators of Environmental Laws may be subject to civil, criminal and administrative penalties, injunctions or both.
We maintain accruals for costs and liabilities associated with Environmental Laws, which we currently believe are adequate. In many instances, it is difficult to predict the ultimate costs under Environmental Laws and the time period during which such costs are likely to be incurred. Governmental authorities have the power to enforce compliance with their regulations.
Post-approval monitoring of products is required, with reports provided to the EPA and some state regulatory agencies. FDA approval of Type A/B/C Medicated Feed Articles and drugs is based on satisfactory demonstration of safety, efficacy, manufacturing quality standards and appropriate labeling. Efficacy requirements are based on the desired label claim and encompass all species for which label indication is desired.
FDA approval of Type A/B/C Medicated Feed Articles and drugs is based on satisfactory demonstration of safety, efficacy, manufacturing quality standards and appropriate labeling. Efficacy requirements are based on the desired label claim and encompass all species for which label indication is desired. Safety requirements include target animal safety and, in the case of food animals, human food safety (“HFS”).
In March 2022, the FDA held a Part 15 virtual public hearing seeking data and information related to the safety of carbadox. Phibro has continued an ongoing process of responding collaboratively and transparently to CVM’s inquiries to provide extensive and meticulous research and data that confirm the safety of carbadox.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNo assurances can be given that such hedging activities will not result in, or will be successful in preventing, losses that could have an adverse effect on our financial condition or results of operations. There are times when we do not hedge against foreign currency fluctuations and therefore are subject to the risks associated with fluctuations in currency exchange rates.
Biggest changeSuch contracts generally are entered into with respect to anticipated costs denominated in foreign currencies for which timing of the payment can be reasonably estimated. No assurances can be given that such hedging activities will not result in, or will be successful in preventing, losses that could have an adverse effect on our financial condition or results of operations.
Our competitive position is also dependent upon unpatented trade secrets, which in some cases may be difficult to protect. Others may independently develop substantially equivalent proprietary information and techniques or may otherwise gain access to our trade secrets, trade secrets may be disclosed or we may not be able to protect our rights to unpatented trade secrets.
Our competitive position is also dependent upon unpatented trade secrets, which in some cases may be difficult to protect. Others may independently develop substantially equivalent proprietary information and techniques or may otherwise gain access to our trade secrets and trade secrets may be disclosed or we may not be able to protect our rights to unpatented trade secrets.
We are a party to certain contractual arrangements that are subject to change of control provisions. In this context, “change of control” is generally defined as including (a) any person or group, other than Mr. Jack C.
We are subject to change of control provisions. We are a party to certain contractual arrangements that are subject to change of control provisions. In this context, “change of control” is generally defined as including (a) any person or group, other than Mr. Jack C.
Under Nasdaq rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: ● the requirement that a majority of the Board consists of independent directors; ● the requirement that we have a nominating and corporate governance committee and that it is composed entirely of independent directors; ● the requirement that we have a compensation committee and that it is composed entirely of independent directors; and ● the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
Under Nasdaq rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: ● the requirement that a majority of the Board consists of independent directors; ● the requirement that we have a nominating and corporate governance committee and that it is composed entirely of independent directors; and ● the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
We may not be able to expand through acquisitions or integrate successfully the products, services and personnel of acquired businesses. From time to time, we may make selective acquisitions to expand our range of products and services and to expand the geographic scope of our business.
We may not be able to expand through acquisitions or successfully integrate the products, services and personnel of acquired businesses. From time to time, we may make selective acquisitions to expand our range of products and services and to expand the geographic scope of our business.
Further, if we succeed in identifying and consummating appropriate acquisitions on acceptable terms, we may not be able to integrate successfully the products, services and personnel of any acquired businesses on a basis consistent with our current business practice.
Further, if we succeed in identifying and consummating appropriate acquisitions on acceptable terms, we may not be able to successfully integrate the products, services and personnel of any acquired businesses on a basis consistent with our current business practice.
See also “ — We are subject to product registration and authorization regulations in many of the jurisdictions in which we operate and/or distribute our products, including the United States and member states of the European Union”; and “Business —Compliance with Government Regulations — United States — Carbadox”; and “Business — Compliance with Government Regulations — Global policy and guidance.” A material portion of our sales are generated by antibacterials and other related products.
See also “ — We are subject to product registration and authorization regulations in many of the jurisdictions in which we operate and/or distribute our products, including the United States and member states of the European Union”; “Business —Compliance with Government Regulation — United States — Carbadox”; and “Business — Compliance with Government Regulation — Global Policy and Guidance.” A material portion of our sales are generated by antibacterials and other related products.
If any of the following risks actually occurs, our business, financial condition, results of operation or cash flows could be materially adversely affected. In any such case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment. The risks below are not the only ones the Company faces.
If any of the following risks occurs, our business, financial condition, results of operation or cash flows could be materially adversely affected. In any such case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment. The risks below are not the only ones the Company faces.
In addition, international transactions may involve increased financial and legal risks due to differing legal systems and customs, as well as restrictions and sanctions that may be imposed on one or more persons and/or jurisdictions in which we operate, including those arising from the armed conflict between Russia and Ukraine.
In addition, international transactions may involve increased financial and legal risks due to differing legal systems and customs, as well as restrictions and sanctions that may be imposed on one or more persons and/or jurisdictions in which we operate, including those arising from the ongoing armed conflict between Russia and Ukraine.
Although presently all our manufacturing facilities are considered to be in good condition, the operation of our manufacturing facilities involves many risks which could cause product interruptions, including the breakdown, failure or substandard performance of equipment, construction delays, mislabeling, shortages of materials, labor problems, power outages, political and social instability, the improper installation or operation of equipment, natural disasters, terrorist activities, the outbreak of any highly contagious diseases, such as COVID-19 in humans or African Swine Fever in swine, near our production sites and the need to comply with environmental and other directives of governmental agencies.
Although presently all our manufacturing facilities are considered to be in good condition, the operation of our manufacturing facilities involves many risks which could cause product interruptions, including the breakdown, failure or substandard performance of equipment, construction delays, mislabeling, shortages of materials, labor problems, power outages, political and social instability, the improper installation or operation of equipment, natural disasters, terrorist activities, armed conflicts, the outbreak of any highly contagious diseases, such as COVID-19 in humans or African Swine Fever in swine, near our production sites and the need to comply with environmental and other directives of governmental agencies.
These provisions: ● authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of Class A common stock; ● prohibit, at any time after BFI and its affiliates cease to hold at least 50% of the combined voting power of all classes of our outstanding common stock, stockholder action by written consent, without the express prior consent of the Board of Directors; ● provide that the Board of Directors is expressly authorized to make, alter or repeal our amended and restated bylaws; ● establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and 48 Table of Contents ● establish a classified Board of Directors, as a result of which our Board of Directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new Board of Directors at an annual meeting; and require, at any time after BFI and its affiliates cease to hold at least 50% of the combined voting power of all classes of our outstanding common stock, the approval of holders of at least three quarters of the combined voting power of all classes of our outstanding common stock for stockholders to amend the amended and restated bylaws or amended and restated certificate of incorporation.
These provisions: ● authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of Class A common stock; ● prohibit, at any time after BFI and its affiliates cease to hold at least 50% of the combined voting power of all classes of our outstanding common stock, stockholder action by written consent, without the express prior consent of the Board of Directors; ● provide that the Board of Directors is expressly authorized to make, alter or repeal our amended and restated bylaws; ● establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and ● establish a classified Board of Directors, as a result of which our Board of Directors will be divided into three classes, with each class serving for staggered three-year terms, which prevents stockholders from electing an entirely new Board of Directors at an annual meeting; and require, at any time after BFI and its affiliates cease to hold at least 50% of the combined voting power of all classes of our outstanding common stock, the approval of holders of at least three quarters of the combined voting power of all classes of our outstanding common stock for stockholders to amend the amended and restated bylaws or amended and restated certificate of incorporation.
The public perception of the safety and efficacy of certain of our animal health products, whether or not these concerns are scientifically or clinically supported, may lead to product recalls, withdrawals, suspensions or declining sales as well as product liability and other claims.
The public perception of the safety, quality and efficacy of certain of our animal health products, whether or not these concerns are scientifically or clinically supported, may lead to product recalls, withdrawals, suspensions or declining sales as well as product liability and other claims.
In addition, demand for protein could be reduced because consumers may associate human health fears related to COVID-19 of other outbreaks with animal diseases, food, food production or food animals, whether or not it is scientifically valid.
In addition, demand for protein could be reduced because consumers may associate human health fears related to COVID-19 of other outbreaks with animal diseases, food, food production or food animals, whether it is scientifically valid.
Economic, business, political and financial disruptions from the armed conflict between Russia and Ukraine and the imposition of sanctions and business disruptions as well as inflation, could also have a material adverse effect on our operating results, financial condition, and liquidity.
Economic, business, political and financial disruptions from the ongoing armed conflict between Russia and Ukraine and the imposition of sanctions and business disruptions as well as inflation, could also have a material adverse effect on our operating results, financial condition, and liquidity.
For instance, it could: ● make it more difficult for us to satisfy our financial obligations, including those relating to the 2021 Credit Facilities; ● require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which will reduce funds available for other business purposes, including capital expenditures and acquisitions; ● increase our vulnerability to general adverse economic and industry conditions; ● limit our flexibility in planning for or reacting to changes in our business and the industry in which we operate; ● place us at a competitive disadvantage compared with some of our competitors that may have less debt and better access to capital resources; and ● limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes.
For instance, it could: ● make it more difficult for us to satisfy our financial obligations, including those relating to the 2021 Credit Facilities; 43 Table of Contents ● require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due under our debt, which will reduce funds available for other business purposes, including capital expenditures and acquisitions; ● increase our vulnerability to general adverse economic and industry conditions; ● limit our flexibility in planning for or reacting to changes in our business and the industry in which we operate; ● place us at a competitive disadvantage compared with some of our competitors that may have less debt and better access to capital resources; and ● limit our ability to obtain additional financing required to fund working capital and capital expenditures and for other general corporate purposes.
Inventory levels at our distributors may increase or decrease as a result of various factors, including end customer demand, new customer contracts, the influence of competition, political and socio-economic climate, contractual obligations related to minimum inventory levels, changing perceptions, including those of alternative 42 Table of Contents products, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, armed conflicts, unexpected customer behavior, proactive measures taken by us in response to shifting market dynamics and procedures and environmental factors beyond our control, including weather conditions or an outbreak of infectious disease such as COVID-19 or diseases carried by farm animals such as African Swine fever.
Inventory levels at our distributors may increase or decrease as a result of various factors, including end customer demand, new customer contracts, the influence of competition, political and socio-economic climate, contractual obligations related to minimum inventory levels, changing perceptions, including those of alternative products, our ability to renew distribution contracts with expected terms, our ability to implement commercial strategies, regulatory restrictions, armed conflicts, unexpected customer behavior, proactive measures taken by us in response to shifting market dynamics and procedures and environmental factors beyond our control, including weather conditions or an outbreak of infectious disease such as COVID-19 or diseases carried by farm animals such as African Swine fever.
In addition, we depend on positive perceptions of the safety and quality of our products, and animal health products generally, by our customers, veterinarians and end-users, and such concerns may harm our reputation.
In addition, we depend on positive perceptions of the safety, quality and efficacy of our products, and animal health products generally, by our customers, veterinarians and end-users, and such concerns may harm our reputation.
The COVID-19 pandemic has adversely affected workforces, customers, suppliers, consumer sentiment, economies and financial markets and has led to an economic downturn in many countries in which we operate.
The COVID-19 pandemic adversely affected workforces, customers, suppliers, consumer sentiment, economies and financial markets and led to an economic downturn in many countries in which we operate.
The market price of our Class A common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including those described under “— Risk Factors Relating to Our Business” and the following: ● changes in financial estimates by any securities analysts who follow our Class A common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our Class A common stock; ● downgrades by any securities analysts who follow our Class A common stock; ● future sales of our Class A common stock by our officers, directors and significant stockholders; ● market conditions or trends in our industry or the economy as a whole and, in particular, in the animal health industry; ● investors’ perceptions of our prospects; ● announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments; and ● changes in key personnel.
The market price of our Class A common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including those described under “— Risk Factors Relating to Our Business” and the following: ● changes in financial estimates by any securities analysts who follow our Class A common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our Class A common stock; ● downgrades by any securities analysts who follow our Class A common stock; ● future sales of our Class A common stock by our officers, directors and significant stockholders; 47 Table of Contents ● market conditions or trends in our industry or the economy as a whole and, in particular, in the animal health industry; ● investors’ perceptions of our prospects; ● announcements by us or our competitors of significant contracts, acquisitions, joint ventures or capital commitments; and ● changes in key personnel.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, including the impact of the COVID-19 pandemic and the armed conflict between Russia and Ukraine, and the related economic downturn on the debt markets.
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, including the impact of the COVID-19 pandemic and the ongoing armed conflict between Russia and Ukraine, and the related economic downturn in the debt markets.
See “Business — Environmental, Health and Safety.” We cannot assure you that our operations or activities or those of certain of our subsidiaries, including with respect to compliance with Environmental Laws, will not result in civil or criminal enforcement actions or private actions, regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures or costs, revocation of required Environmental Permits, or fines, penalties or damages, which could have a material adverse effect on our business, financial condition and results of operations.
See “Business — Environmental, Health and Safety.” We cannot 37 Table of Contents assure you that our operations or activities or those of certain of our subsidiaries, including with respect to compliance with Environmental Laws, will not result in civil or criminal enforcement actions or private actions, regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial measures or costs, revocation of required Environmental Permits, or fines, penalties or damages, which could have a material adverse effect on our business, financial condition and results of operations.
If we suffer deficiencies or material weaknesses in our internal controls, we may be unable to report financial information in a timely and accurate manner and it could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis, which could cause investors to lose confidence in our financial reporting, negatively affect the trading price of our common stock and could cause a 50 Table of Contents default under the agreements governing our indebtedness.
If we suffer deficiencies or material weaknesses in our internal controls, we may be unable to report financial information in a timely and accurate manner and it could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis, which could cause investors to lose confidence in our financial reporting, negatively affect the trading price of our common stock and could cause a default under the agreements governing our indebtedness.
We cannot be certain that a competitor or other third party does not have or will not obtain rights to intellectual property that may prevent us from manufacturing, developing or marketing certain of our products, regardless of whether we believe such intellectual property rights are valid and 40 Table of Contents enforceable or we believe we would be otherwise able to develop a more commercially successful product, which may harm our financial condition and results of operations.
We cannot be certain that a competitor or other third party does not have or will not obtain rights to intellectual property that may prevent us from manufacturing, developing or marketing certain of our products, regardless of whether we believe such intellectual property rights are valid and enforceable or we believe we would be otherwise able to develop a more commercially successful product, which may harm our financial condition and results of operations.
We make a majority of our sales to integrated poultry, swine and cattle operations and to a number of regional and national feed companies, distributors, co-ops and blenders. Food animal producers, particularly, swine and poultry producers, and our distributors have seen recent consolidation in their industries.
We make a majority of our sales to integrated poultry, swine and beef and dairy cattle operations and to a number of regional and national feed companies, distributors, co-ops and blenders. Food animal producers, particularly, swine and poultry producers, and our distributors have seen recent consolidation in their industries.
The public perception of the safety and efficacy of certain of our animal health products may harm our reputation.
The public perception of the safety, quality and efficacy of certain of our animal health products may harm our reputation.
If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.
If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil 42 Table of Contents penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.
Although no single raw material accounted for more than 5% of our cost of goods sold for the year ended June 30, 2022, volatility in raw material costs can result in significant fluctuations in our costs of goods sold of the affected products.
Although no single raw material accounted for more than 5% of our cost of goods sold for the year ended June 30, 2023, volatility in raw material costs can result in significant fluctuations in our costs of goods sold of the affected products.
Foreign Corrupt Practices Act (“FCPA”) and similar non-U.S. laws and regulations; ● compliance with foreign labor laws; ● compliance with Environmental Laws; ● burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to environmental, health and safety requirements; ● changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers; ● political and social instability, including crime, civil disturbance, terrorist activities, outbreaks of disease and pandemics and armed conflicts, such as the recent conflict between Russia and Ukraine; ● trade restrictions, export controls and sanctions laws and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S.
Foreign Corrupt Practices Act (“FCPA”) and similar non-U.S. laws and regulations; ● compliance with foreign labor laws; ● compliance with Environmental Laws; ● burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to EHS requirements; ● changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers; ● political and social instability, including crime, civil disturbance, terrorist activities, outbreaks of disease and pandemics and armed conflicts, such as the ongoing conflict between Russia and Ukraine; ● trade restrictions, export controls and sanctions laws and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S.
The FDA objective, as described in GFI 209 and GFI 213, was to eliminate the production (non-therapeutic) uses of medically important antimicrobials administered in feed or water to food producing animals while providing for the continued use of medically important antimicrobials in food-producing animals for treatment, control and prevention of disease (“therapeutic” use) under the supervision of a veterinarian.
The FDA objective, as described in GFI 209 and GFI 213, was to eliminate the production (non-therapeutic) uses of medically important antimicrobials administered in feed or water to food producing animals while providing for the continued use of medically important antimicrobials in food-producing animals for treatment, control and prevention of disease (“therapeutic” use) under the 28 Table of Contents supervision of a veterinarian.
Realization of a gain on your investment will depend on the appreciation of the price of our Class A common stock. 49 Table of Contents General Risk Factors We face competition in each of our markets from a number of large and small companies, some of which have greater financial, R&D, production and other resources than we have.
Realization of a gain on your investment will depend on the appreciation of the price of our Class A common stock. General Risk Factors We face competition in each of our markets from a number of large and small companies, some of which have greater financial, R&D, production and other resources than we have.
Some in the public perceive risks to human health related to the consumption of food derived from animals that utilize certain of our products, including certain of our MFA products. In particular, there is increased focus in the United States, the E.U., China and other 27 Table of Contents countries on the use of antimicrobials in the livestock industry.
Some in the public perceive risks to human health related to the consumption of food derived from animals that utilize certain of our products, including certain of our MFA products. In particular, there is increased focus in the United States, the E.U., China and other countries on the use of antimicrobials in the livestock industry.
Failure by these providers to adequately service our operations or a change in control or insolvency of these providers could have an adverse effect on our business, which in turn may materially adversely affect our business, financial condition or results of operations. 44 Table of Contents We may be required to write down goodwill or identifiable intangible assets.
Failure by these providers to adequately service our operations or a change in control or insolvency of these providers could have an adverse effect on our business, which in turn may materially adversely affect our business, financial condition or results of operations. We may be required to write down goodwill or identifiable intangible assets.
The amount of shares of our Class A common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our Class A common stock. Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
The amount of shares of our Class A common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our Class A common stock. 48 Table of Contents Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.
Insurance is expensive and, in the future, may not be available on acceptable terms, if at all. A successful claim or series of claims brought against us in excess of our insurance coverage could have a materially adverse effect on our business, financial condition and results of operations.
Insurance is expensive and, in the future, may not be available on acceptable terms, if at all. A successful claim or series of claims brought against us in excess of our insurance coverage could have a materially adverse effect on our business, financial condition 38 Table of Contents and results of operations.
We maintain manufacturing facilities in Israel, which manufacture: ● anticoccidials and antimicrobials, most of which are exported; ● vaccines, a substantial portion of which are exported; and 35 Table of Contents ● animal health pharmaceuticals, nutritional specialty products and trace minerals for the domestic animal industry. A substantial portion of this production is exported from Israel to major world markets.
We maintain manufacturing facilities in Israel, which manufacture: ● anticoccidials and antimicrobials, most of which are exported; ● vaccines, a substantial portion of which are exported; and ● animal health pharmaceuticals, nutritional specialty products and trace minerals for the domestic animal industry. A substantial portion of this production is exported from Israel to major world markets.
Adverse economic and market conditions could also negatively impact our business by negatively affecting the parties with whom we do business, including among others, our customers, our manufacturers and our suppliers. We may not be able to realize the expected benefits of our investments in emerging markets.
Adverse economic and market conditions could also negatively impact our business by negatively affecting the parties with whom we do business, including among others, our customers, our manufacturers and our suppliers. 39 Table of Contents We may not be able to realize the expected benefits of our investments in emerging markets.
Moreover, certain transactions could adversely impact earnings as we incur development and other expenses related to the transactions and we could incur debt to complete these transactions. Debt instruments could contain contractual commitments and covenants that could adversely affect our cash flow and our ability to operate our business, financial condition and results of operations.
Moreover, certain transactions could adversely impact earnings as we incur development and other expenses related to the transactions and we could incur debt to complete these transactions. Debt instruments could contain 51 Table of Contents contractual commitments and covenants that could adversely affect our cash flow and our ability to operate our business, financial condition and results of operations.
Certain regulatory bodies have raised concerns about the possible presence of certain residues of our carbadox product in 28 Table of Contents meat from animals that consume the product. The product was banned for use in the European Union in 1998 and has been banned in several other countries outside the United States.
Certain regulatory bodies have raised concerns about the possible presence of certain residues of our carbadox product in meat from animals that consume the product. The product was banned for use in the European Union in 1998 and has been banned in several other countries outside the United States.
Our insurance may not be sufficient to cover any of these exposures, product, injury or damage claims. 37 Table of Contents Furthermore, regulatory agencies are showing increasing concern over the impact of animal health products and livestock operations on the environment.
Our insurance may not be sufficient to cover any of these exposures, product, injury or damage claims. Furthermore, regulatory agencies are showing increasing concern over the impact of animal health products and livestock operations on the environment.
In addition, variations in the pricing of our products in different jurisdictions may result in the unauthorized importation of our products between jurisdictions. While the impact of these factors is difficult to predict, any of them could materially 34 Table of Contents adversely affect our financial condition and results of operations.
In addition, variations in the pricing of our products in different jurisdictions may result in the unauthorized importation of our products between jurisdictions. While the impact of these factors is difficult to predict, any of them could materially adversely affect our financial condition and results of operations.
The FDA indicated that it took this action to help preserve the efficacy of medically important antimicrobials to treat infections in humans. Our global sales of antibacterials, anticoccidials and other products, including our Mecadox product, were $362 million, $330 million and $322 million for the years ended June 30, 2022, 2021 and 2020, respectively.
The FDA indicated that it took this action to help preserve the efficacy of medically important antimicrobials to treat infections in humans. Our global sales of antibacterials, anticoccidials and other products, including our Mecadox product, were $387 million, $362 million and $330 million for the years ended June 30, 2023, 2022 and 2021, respectively.
In recent years, outbreaks of African Swine Fever, primarily in China, have reduced animal populations and have reduced consumer demand for pork in the affected markets. In the past decade, there has been substantial publicity regarding H1N1, known as North American (or Swine) Influenza and, previously, H5N1, known as Highly Pathogenic Avian Influenza, in the human population.
In recent years, outbreaks of African Swine Fever, primarily in China, have reduced animal populations and have reduced consumer demand for pork in the affected markets. In the past decade, there has been substantial publicity regarding H1N1, known as North American (or Swine) Influenza and, H5N1, known as Highly Pathogenic Avian Influenza, in both the human population and among birds.
Also, the outbreak of any highly contagious disease near our main 29 Table of Contents production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere.
Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere.
In addition, negative publicity about us or our industry could harm our reputation. 36 Table of Contents Our operations, properties and subsidiaries are subject to a wide variety of complex and stringent federal, state, local and foreign environmental laws and regulations.
In addition, negative publicity about us or our industry could harm our reputation. Our operations, properties and subsidiaries are subject to a wide variety of complex and stringent federal, state, local and foreign environmental laws and regulations.
The costs of certain of our significant raw materials are 32 Table of Contents subject to considerable volatility, and we generally do not engage in activities to hedge the costs of our raw materials and our third-party contract manufacturers may demand price increases related to increases in the costs of raw materials.
The costs of certain of our significant raw materials are subject to considerable volatility, and we generally do not engage in activities to hedge the costs of our raw materials and our third-party contract manufacturers may demand price increases related to increases in the costs of raw materials.
Although it is our objective to remain in full conformance with U.S. cGMP standards, there can be no 30 Table of Contents assurance that future inspections will not raise adverse inspectional observations. Failure to comply with cGMP standards could have a material impact on our business and financial results.
Although it is our objective to remain in full conformance with U.S. cGMP standards, there can be no assurance that future inspections will not raise adverse inspectional observations. Failure to comply with cGMP standards could have a material impact on our business and financial results.
As a result, while we currently have a majority of independent directors: ● we may not have a majority of independent directors in the future; ● we will not have a nominating and corporate governance committee; ● our compensation committee will not consist entirely of independent directors; and ● we will not be required to have an annual performance evaluation of the compensation committee.
As a result, while we currently have a majority of independent directors: ● we may not have a majority of independent directors in the future; ● we will not have a nominating and corporate governance committee; and ● we will not be required to have an annual performance evaluation of the compensation committee.
In the event that BFI obtains business opportunities from which we might otherwise benefit but chooses not to present such opportunities to us, these provisions of our restated certificate of incorporation could have the effect of preventing us from pursuing transactions or relationships that would otherwise be in the best interests of our stockholders.
In the event that BFI obtains business opportunities from which we might otherwise benefit but chooses not to present such opportunities to us, these provisions of our certificate of incorporation could have the effect of 49 Table of Contents preventing us from pursuing transactions or relationships that would otherwise be in the best interests of our stockholders.
Subject to restrictions in our 2021 Credit Facilities, we may incur significant additional indebtedness. If we and our subsidiaries incur significant additional indebtedness, the related risks that we face could intensify. Our substantial debt may have important consequences.
Subject to restrictions in our 2021 Credit Facilities (as defined below), we may incur significant additional indebtedness. If we and our subsidiaries incur significant additional indebtedness, the related risks that we face could intensify. Our substantial debt may have important consequences.
If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our operating results.
If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail 50 Table of Contents to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements and harm our operating results.
Our Brazilian manufacturing facilities and local operations accounted for 12% and 10% of our consolidated assets, as of June 30, 2022 and 2021, respectively, and 15% and 16% of our consolidated net sales for the years ended June 30, 2022 and 2021, respectively. We maintain manufacturing facilities in Brazil, which manufacture virginiamycin, semduramicin, salinomycin and nicarbazin.
Our Brazilian manufacturing facilities and local operations accounted for 14% and 12% of our consolidated assets, as of June 30, 2023 and 2022, respectively, and 16% and 15% of our consolidated net sales for the years ended June 30, 2023 and 2022, respectively. We maintain manufacturing facilities in Brazil, which manufacture virginiamycin, semduramicin, salinomycin and nicarbazin.
As of August 19, 2022, BFI Co., LLC (“BFI”) beneficially owns 59,480 shares of our Class A common stock and 20,166,034 shares of our Class B common stock, which together represent approximately 90.9% of the combined voting power of all classes of our outstanding common stock.
As of August 25, 2023, BFI Co., LLC (“BFI”) beneficially owns 59,480 shares of our Class A common stock and 20,166,034 shares of our Class B common stock, which together represent approximately 90.9% of the combined voting power of all classes of our outstanding common stock.
Any such changes may trigger a “change of control” event that could result in us being forced to repay the 2021 Credit Facilities or lead to the termination of a significant contract to which we are a party. If any such event occurs, this may negatively affect our financial condition and operating results.
Any such changes may trigger a “change of control” event that could result in us being forced to repay the 2021 Credit Facilities (which includes our 2023 Incremental Term Loan) or lead to the termination of a significant contract to which we are a party. If any such event occurs, this may negatively affect our financial condition and operating results.
Our medicated products business is comprised of a relatively small number of compounds and accounted for approximately 40% of net sales for the years ended June 30, 2022 and 2021.
Our medicated products business is comprised of a relatively small number of compounds and accounted for approximately 40% of net sales for each of the years ended June 30, 2023 and 2022.
Certain of our product lines are manufactured at a single facility, and certain of our product lines are manufactured at a single facility with limited capacity at a second facility, and production would not be easily transferable to another site.
Certain of our product lines are 33 Table of Contents manufactured at a single facility, and certain of our product lines are manufactured at a single facility with limited capacity at a second facility, and production would not be easily transferable to another site.
It could take several years to realize the anticipated benefits from these initiatives, if any benefits are achieved at all. We may be unable to achieve expected gross margin improvements 51 Table of Contents on our products or technologies.
It could take several years to realize the anticipated benefits from these initiatives, if any benefits are achieved at all. We may be unable to achieve expected gross margin improvements on our products or technologies.
Climate change could have a material adverse impact on our operations and our customers’ businesses. Our operations, and the activities of our customers, could be disrupted by climate change. The physical impact of climate change may prompt shifts in regulations or consumer preferences which in turn could have negative consequences for our and our customers’ businesses.
Our operations, and the activities of our customers, could be disrupted by climate change. The physical impact of climate change may prompt shifts in regulations or consumer preferences which in turn could have negative consequences for our and our customers’ businesses.
We have a paid a quarterly dividend since September 2014 on our Class A and Class B common stock and our Board of Directors has declared a cash dividend of $0.12 per share on our Class A common stock and Class B common stock that is payable September 28, 2022.
We have a paid a quarterly dividend since September 2014 on our Class A and Class B common stock and our Board of Directors has declared a cash dividend of $0.12 per share on our Class A common stock and Class B common stock that is payable September 27, 2023.
Identifiable intangible assets consist primarily of developed technology rights and patents, customer relationships, distribution agreements and trade names and trademarks. Determining whether an impairment exists and the amount of the potential impairment involves quantitative data and qualitative criteria that are based on estimates and assumptions requiring significant management judgment.
Identifiable intangible assets consist primarily of developed technology rights and patents and customer relationships. Determining whether an impairment exists and the amount of the potential impairment involves quantitative data and qualitative criteria that are based on estimates and assumptions requiring significant management judgment.
Certain of our employees are covered by collective bargaining or other labor agreements. As of June 30, 2022, approximately 250 of our Israeli employees and 460 of our Brazilian employees were covered by collective bargaining agreements. We believe we have satisfactory relations with our employees.
Certain of our employees are covered by collective bargaining or other labor agreements. As of June 30, 2023, approximately 290 of our Israeli employees and 460 of our Brazilian employees were covered by collective bargaining agreements. We believe we have satisfactory relations with our employees.
The significant loss of antibacterial or other related product sales for any reason, including product bans or restrictions, public perception, competition or any of the other risks related to such products as described in this Annual Report on Form 10-K, could have a material adverse effect on our business. Outbreaks of animal diseases could significantly reduce demand for our products.
The significant loss of antibacterial or other related product sales for any reason, including product bans or restrictions, public perception, competition or any of the other risks related to such products as described in this Annual Report on Form 10-K, could have a material adverse effect on our business.
Any actual or perceived access, disclosure or other loss of information or any significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data or our failure to comply with federal, state, local and foreign privacy laws or contractual obligations with customers, vendors, payment processors and other third parties, could result in legal claims or proceedings, liability under laws or contracts that protect the privacy of personal information, regulatory penalties, disruption of our operations and damage to our reputation, all of which could materially adversely affect our business, revenue and competitive position. 45 Table of Contents We may be subject to information technology system failures, network disruptions and breaches in data security.
Any actual or perceived access, disclosure or other loss of information or any significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data or our failure to comply with federal, state, local and foreign privacy laws or contractual obligations with customers, vendors, payment processors and other 45 Table of Contents third parties, could result in legal claims or proceedings, liability under laws or contracts that protect the privacy of personal information, regulatory penalties, disruption of our operations and damage to our reputation, all of which could materially adversely affect our business, revenue and competitive position.
Department of the Treasury or an increase in trade restrictions as a result of the COVID-19 pandemic; ● government limitations on foreign ownership; ● government takeover or nationalization of business; ● changes in tax laws and tariffs; ● changes in the economic, business, competitive and regulatory environment, including changes in the value of foreign currencies relative to the U.S. dollar or high inflation; ● imposition of anti-dumping and countervailing duties or other trade-related sanctions; ● costs and difficulties and compliance risks in staffing, managing and monitoring international operations; ● corruption risk inherent in business arrangements and regulatory contacts with foreign government entities; ● longer payment cycles and increased exposure to counterparty risk; and ● additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
Department of the Treasury; ● government limitations on foreign ownership; 34 Table of Contents ● government takeover or nationalization of businesses; ● changes in tax laws and tariffs; ● changes in the economic, business, competitive and regulatory environment, including changes in the value of foreign currencies relative to the U.S. dollar or high inflation; ● imposition of anti-dumping and countervailing duties or other trade-related sanctions; ● costs and difficulties and compliance risks in staffing, managing and monitoring international operations; ● corruption risk inherent in business arrangements and regulatory contacts with foreign government entities; ● longer payment cycles and increased exposure to counterparty risk; and ● additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.
Our Israeli manufacturing facilities and local operations accounted for 28% and 30% of our consolidated assets, as of June 30, 2022 and 2021, and 19% and 22% of our consolidated net sales for the years ended June 30, 2022 and 2021, respectively.
Our Israeli manufacturing facilities and local operations accounted for 27% and 28% of our consolidated assets, as of June 30, 2023 and 2022, and 19% and 19% of our consolidated net sales for the years ended June 30, 2023 and 2022, respectively.
Under generally accepted accounting principles in the United States (“GAAP”), if we determine goodwill or identifiable intangible assets are impaired, we will be required to write down these assets and record a non-cash impairment charge. As of June 30, 2022, we had goodwill of $53.2 million and identifiable intangible assets, less accumulated amortization, of $63.9 million.
Under generally accepted accounting principles in the United States (“GAAP”), if we determine goodwill or identifiable intangible assets are impaired, we will be required to write down these assets and record a non-cash impairment charge. As of June 30, 2023, we had goodwill of $53.3 million and identifiable intangible assets, less accumulated amortization, of $55.0 million.
As of August 19, 2022, our other stockholders, collectively own interests representing approximately 9.1% of the combined voting power of all classes of our outstanding common stock.
As of August 25, 2023, our other stockholders collectively own interests representing approximately 9.1% of the combined voting power of all classes of our outstanding common stock.
Current U.S. and international economic and market conditions are uncertain. The COVID-19 pandemic has adversely affected international economic conditions and financial markets, and have led to an economic downturn in many countries in which we operate.
Current U.S. and international economic and market conditions are uncertain. The COVID-19 pandemic adversely affected international economic conditions and financial markets and led to economic downturns in many countries in which we operate.
The actual or purported intellectual property rights of third parties may negatively affect our business. A third party may sue us, our distributors or licensors, or otherwise make a claim, alleging infringement or other violation of the third-party’s patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights.
A third party may sue us, our distributors or licensors, or otherwise make a claim, alleging infringement or other violation of the third-party’s patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. The recent COVID-19 pandemic has contributed to significant volatility in stock and financial markets in the United States and globally.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. The COVID-19 pandemic and the ongoing armed conflict between Russia and Ukraine has contributed to significant volatility in stock and financial markets in the United States and globally.
As of June 30, 2022, we had manufacturing and direct sales operations in 23 countries and sold our products in over 80 countries.
As of June 30, 2023, we had manufacturing and direct sales operations in 25 countries and sold our products in over 80 countries.
As of August 19, 2022, we had 20,337,574 shares of Class A common stock and 20,166,034 shares of Class B common stock outstanding.
As of August 25, 2023, we had 20,337,574 shares of Class A common stock and 20,166,034 shares of Class B common stock outstanding.
Should we be unable to successfully defend the safety of the product, the loss of carbadox sales will have an adverse effect on our financial condition and results of operations. Sales of Mecadox (carbadox) for the twelve months ended June 30, 2022, were $21 million.
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 year ended June 30, 2023, were approximately $20 million.
Our revenues and operating results may be affected by uncertain or changing 38 Table of Contents economic and market conditions, including as a result of the COVID-19 pandemic and other challenges faced in the credit markets and financial services industry.
Our revenues and operating results may be affected by uncertain or changing economic and market conditions, including as a result of a resurgence of COVID-19 pandemic or other similar public health crises, and other challenges faced in the credit markets and financial services industry.
Our operations outside the United States accounted for 56% and 53% of our consolidated assets as of June 30, 2022 and 2021, respectively, and 40% of our consolidated net sales for each of the years ended June 30, 2022 and 2021.
Our operations outside the United States accounted for 58% and 56% of our consolidated assets as of June 30, 2023 and 2022, respectively, and 41% and 40% of our consolidated net sales for the years ended June 30, 2023 and 2022, respectively.
Companies in the animal health industry are subject to extensive and increasingly stringent regulations. If livestock producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd sizes or become less profitable and, as a result, they may reduce their use of our products, which may materially adversely affect our operating results and financial condition.
If livestock producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd sizes or become less profitable and, as a result, they may reduce their use of our products, which may materially adversely affect our operating results and financial condition.
We are increasingly dependent upon information technology systems and infrastructure to conduct critical operations and generally operate our business, which includes using information technology systems to process, transmit and store electronic information in our day-to-day operations, including customer, employee and company data.
We may be subject to information technology system failures, network disruptions and breaches in data security. We are increasingly dependent upon information technology systems and infrastructure to conduct critical operations and generally operate our business, which includes using information technology systems to process, transmit and store electronic information in our day-to-day operations, including customer, employee and company data.
We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not issue an unqualified opinion.
We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not issue an unqualified opinion. We cannot provide any assurance we will not identify material weaknesses in the future.
See also “Forward-Looking Statements and Risk Factors Summary.” Risk Factors Relating to Our Business A pandemic, epidemic, or outbreak of an infectious disease in humans, such as COVID-19, may materially and adversely affect our business and our financial results. Our business is exposed to risks associated with public health crises, including epidemics and pandemics such as the novel coronavirus (COVID-19).
A pandemic, epidemic, or outbreak of an infectious disease in humans, such as COVID-19, may materially and adversely affect our business and our financial results. Our business is exposed to risks associated with public health crises, including epidemics and pandemics such as the novel coronavirus and its variants (COVID-19).
Our Brazilian facilities also produce Stafac, Aviax, Aviax Plus, Coxistac, Nicarb, Kamoran ® , and Terramycin granular formulations. A substantial portion of the production is exported from Brazil to major world markets. Accordingly, our Brazilian operations are dependent on foreign markets and the ability to reach those markets.
Our Brazilian facilities also produce Stafac, Aviax, Aviax Plus, Coxistac, Nicarb, Kamoran ® , and Terramycin granular formulations. A substantial portion of the production is exported from Brazil to major world markets.
Our business, financial condition and results of operations in Brazil may be adversely affected by factors outside of our control, such as currency fluctuations, energy shortages and other political, social and economic developments in or affecting Brazil, including as a result of the impact of the COVID-19 pandemic in Brazil.
Accordingly, our Brazilian operations are dependent on foreign markets and the ability to reach those markets. 36 Table of Contents Our business, financial condition and results of operations in Brazil may be adversely affected by factors outside of our control, such as currency fluctuations, energy shortages and other political, social and economic developments in or affecting Brazil, including as a result of the impact of the COVID-19 pandemic in Brazil.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePaul, Minnesota Leased 5,000 Research Animal Health Omaha, Nebraska Owned 43,000 Manufacturing, Sales and Research Animal Health Corvallis, Oregon Owned 5,000 Research Animal Health State College, Pennsylvania Owned 13,000 Research Animal Health and Mineral Nutrition Quincy, Illinois Owned 306,000 Manufacturing, Sales, Research and Administrative Mineral Nutrition Omaha, Nebraska Owned 84,000 Manufacturing Performance Products Santa Fe Springs, California Owned 108,000 Manufacturing Corporate Teaneck, New Jersey Leased 50,000 Corporate and Administrative ​ ​ ​
Biggest changePaul, Minnesota Leased 5,000 Research Animal Health Omaha, Nebraska Owned 59,000 Manufacturing, Sales and Research Animal Health Corvallis, Oregon Owned 5,000 Research Animal Health State College, Pennsylvania Owned 13,000 Research Animal Health and Mineral Nutrition Quincy, Illinois Owned 306,000 Manufacturing, Sales, Research and Administrative Mineral Nutrition Omaha, Nebraska Owned 84,000 Manufacturing Performance Products Santa Fe Springs, California Owned 108,000 Manufacturing Corporate Teaneck, New Jersey Leased 50,000 Corporate and Administrative ​ ​ 52 Table of Contents ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−1 removed3 unchanged
Biggest changeHowever, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved.
Biggest changeHowever, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.
Item 8 on this Annual Report on Form 10-K, which is incorporated herein by reference, for further information on our legal proceedings. For an additional discussion of certain risks associated with legal proceedings see “Risk Factors” above. ​ Item 4. Mine Safety Disclosures Not applicable. ​ 53 Table of Contents PART II
See “Notes to Consolidated Financial Statements — Commitments and Contingencies” in Part II. Item 8 on this Annual Report on Form 10-K, which is incorporated herein by reference, for further information on our legal proceedings. For an additional discussion of certain risks associated with legal proceedings see “Risk Factors” above. ​ Item 4.
Removed
In 52 Table of Contents addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. See “Notes to Consolidated Financial Statements — Commitments and Contingencies” in Part II.
Added
Mine Safety Disclosures Not applicable. ​ 53 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAt June 30, 2022, there were 20,337,574 shares of Class A common stock outstanding. During the fiscal year ended June 30, 2022, we did not sell any unregistered securities nor did we purchase any of our equity securities.
Biggest changeAt June 30, 2023, there were 20,337,574 shares of Class A common stock outstanding. During the fiscal year ended June 30, 2023, we did not sell any unregistered securities nor did we purchase any of our equity securities.
The graph assumes that $100 was invested in our Class A common stock and each of the aforementioned indexes at the market close on June 30, 2017, and assumes dividends, if any, are reinvested.
The graph assumes that $100 was invested in our Class A common stock and each of the aforementioned indexes at the market close on June 30, 2018, and assumes dividends, if any, are reinvested.
Information about 5% beneficial owners of our common stock is incorporated by reference from the discussion in our 2022 Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management .
Information about 5% beneficial owners of our common stock is incorporated by reference from the discussion in our 2023 Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management .
As of August 19, 2022, there were 20,166,034 shares of our Class B common stock outstanding, which were held by one stockholder of record. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.
As of August 25, 2023, there were 20,166,034 shares of our Class B common stock outstanding, which were held by one stockholder of record. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.
Holders of Record As of August 19, 2022, there were 20,337,574 shares of our Class A common stock outstanding, which were held by one stockholder of record, not including beneficial owners of shares registered in nominee or street name.
Holders of Record As of August 25, 2023, there were 20,337,574 shares of our Class A common stock outstanding, which were held by one stockholder of record, not including beneficial owners of shares registered in nominee or street name.
The following graph shows a comparison from June 30, 2017 through June 30, 2022, of the cumulative stockholder return of our Class A common stock, the S&P 500 Index, the Nasdaq Composite Index, the Russell 2000 Index and the S&P Pharmaceuticals Index.
The following graph shows a comparison from June 30, 2018 through June 30, 2023, of the cumulative stockholder return of our Class A common stock, the S&P 500 Index, the Nasdaq Composite Index, the Russell 2000 Index and the S&P Pharmaceuticals Index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

87 edited+29 added−11 removed80 unchanged
Biggest changeThis quarterly financial data was prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and related notes included herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarters ​ Year ​ September 30, December 31, March 31, June 30, June 30, For the Periods Ended ​ 2021 ​ 2021 ​ 2022 ​ 2022 ​ 2022 ​ ​ (in thousands) Net sales ​ ​ ​ ​ ​ MFAs and other ​ $ 83,758 ​ $ 91,724 ​ $ 84,330 ​ $ 101,726 ​ $ 361,538 Nutritional Specialties ​ 35,997 ​ 37,330 ​ 41,394 ​ 42,475 ​ 157,196 Vaccines ​ 21,249 ​ 21,873 ​ 22,865 ​ 22,334 ​ 88,321 Animal Health ​ $ 141,004 ​ $ 150,927 ​ $ 148,589 ​ $ 166,535 ​ $ 607,055 Mineral Nutrition ​ 54,432 ​ 66,655 ​ 69,033 ​ 69,392 ​ 259,512 Performance Products ​ 19,229 ​ 15,130 ​ 21,997 ​ 19,338 ​ 75,694 Total net sales ​ 214,665 ​ 232,712 ​ 239,619 ​ 255,265 ​ 942,261 Cost of goods sold ​ 149,987 ​ 162,040 ​ 167,993 ​ 176,841 ​ 656,861 Gross profit ​ 64,678 ​ 70,672 ​ 71,626 ​ 78,424 ​ 285,400 Selling, general and administrative expenses ​ ​ 50,066 ​ ​ 48,378 ​ ​ 52,432 ​ ​ 55,538 ​ ​ 206,414 Operating income ​ ​ 14,612 ​ ​ 22,294 ​ ​ 19,194 ​ ​ 22,886 ​ ​ 78,986 Interest expense, net ​ 2,889 ​ 2,953 ​ 2,925 ​ 3,108 ​ 11,875 Foreign currency (gains) losses, net ​ 2,128 ​ (4,189) ​ (10,564) ​ 7,409 ​ (5,216) Income before income taxes ​ 9,595 ​ 23,530 ​ 26,833 ​ 12,369 ​ 72,327 Provision for income taxes ​ 3,061 ​ 6,065 ​ 9,144 ​ 4,882 ​ 23,152 Net income ​ $ 6,534 ​ $ 17,465 ​ $ 17,689 ​ $ 7,487 ​ $ 49,175 Net income per share ​ ​ ​ ​ ​ basic ​ $ 0.16 ​ $ 0.43 ​ $ 0.44 ​ $ 0.18 ​ $ 1.21 diluted ​ $ 0.16 ​ $ 0.43 ​ $ 0.44 ​ $ 0.18 ​ $ 1.21 Adjusted EBITDA ​ ​ ​ ​ ​ Animal Health ​ $ 27,637 ​ $ 33,696 ​ $ 29,232 ​ $ 33,541 ​ $ 124,106 Mineral Nutrition ​ 4,533 ​ 5,525 ​ 7,303 ​ 6,677 ​ 24,038 Performance Products ​ 2,138 ​ 1,324 ​ 2,865 ​ 2,379 ​ 8,706 Corporate ​ (11,842) ​ (11,453) ​ (11,404) ​ (11,068) ​ (45,767) Adjusted EBITDA ​ $ 22,466 ​ $ 29,092 ​ $ 27,996 ​ $ 31,529 ​ $ 111,083 Reconciliation of net income to Adjusted EBITDA ​ ​ ​ ​ ​ Net income ​ $ 6,534 ​ $ 17,465 ​ $ 17,689 ​ $ 7,487 ​ $ 49,175 Interest expense, net ​ 2,889 ​ 2,953 ​ 2,925 ​ 3,108 ​ 11,875 Provision for income taxes ​ 3,061 ​ 6,065 ​ 9,144 ​ 4,882 ​ 23,152 Depreciation and amortization ​ 7,854 ​ 8,001 ​ 8,445 ​ 8,405 ​ 32,705 EBITDA ​ ​ 20,338 ​ 34,484 ​ 38,203 ​ 23,882 ​ 116,907 Acquisition-related cost of goods sold ​ — ​ — ​ 78 ​ 238 ​ 316 Acquisition-related transaction costs ​ — ​ — ​ 279 ​ — ​ 279 Gain on sale of investment ​ ​ — ​ ​ (1,203) ​ ​ — ​ ​ — ​ ​ (1,203) Foreign currency (gains) losses, net ​ 2,128 ​ (4,189) ​ (10,564) ​ 7,409 ​ (5,216) Adjusted EBITDA ​ $ 22,466 ​ $ 29,092 ​ $ 27,996 ​ $ 31,529 ​ $ 111,083 ​ 67 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarters ​ Year ​ September 30, December 31, March 31, June 30, June 30, For the Periods Ended ​ 2020 ​ 2020 ​ 2021 ​ 2021 ​ 2021 ​ ​ (in thousands) Net sales ​ ​ ​ ​ ​ MFAs and other ​ $ 78,703 ​ $ 81,577 ​ $ 78,530 ​ $ 91,207 ​ $ 330,017 Nutritional Specialties ​ 32,600 ​ 36,394 ​ 36,978 ​ 36,788 ​ 142,760 Vaccines ​ 17,066 ​ 18,267 ​ 18,872 ​ 18,734 ​ 72,939 Animal Health ​ $ 128,369 ​ $ 136,238 ​ $ 134,380 ​ $ 146,729 ​ $ 545,716 Mineral Nutrition ​ 51,440 ​ 54,157 ​ 58,153 ​ 56,810 ​ 220,560 Performance Products ​ 15,385 ​ 15,754 ​ 19,196 ​ 16,739 ​ 67,074 Total net sales ​ 195,194 ​ 206,149 ​ 211,729 ​ 220,278 ​ 833,350 Cost of goods sold ​ 131,075 ​ 137,884 ​ 142,564 ​ 150,450 ​ 561,973 Gross profit ​ 64,119 ​ 68,265 ​ 69,165 ​ 69,828 ​ 271,377 Selling, general and administrative expenses ​ ​ 48,431 ​ ​ 48,375 ​ ​ 49,033 ​ ​ 50,670 ​ ​ 196,509 Operating income ​ ​ 15,688 ​ ​ 19,890 ​ ​ 20,132 ​ ​ 19,158 ​ ​ 74,868 Interest expense, net ​ 2,810 ​ 3,214 ​ 2,933 ​ 3,923 ​ 12,880 Foreign currency (gains) losses, net ​ (3,631) ​ 624 ​ (583) ​ (890) ​ (4,480) Income before income taxes ​ 16,509 ​ 16,052 ​ 17,782 ​ 16,125 ​ 66,468 Provision (benefit) for income taxes ​ 4,207 ​ 3,251 ​ 5,621 ​ (996) ​ 12,083 Net income ​ $ 12,302 ​ $ 12,801 ​ $ 12,161 ​ $ 17,121 ​ $ 54,385 Net income per share ​ ​ ​ ​ ​ basic ​ $ 0.30 ​ $ 0.32 ​ $ 0.30 ​ $ 0.42 ​ $ 1.34 diluted ​ $ 0.30 ​ $ 0.32 ​ $ 0.30 ​ $ 0.42 ​ $ 1.34 Adjusted EBITDA ​ ​ ​ ​ ​ Animal Health ​ $ 30,101 ​ $ 33,349 ​ $ 30,962 ​ $ 29,541 ​ $ 123,953 Mineral Nutrition ​ 3,047 ​ 4,185 ​ 5,232 ​ 4,652 ​ 17,116 Performance Products ​ 1,972 ​ 2,266 ​ 2,929 ​ 2,270 ​ 9,437 Corporate ​ (10,831) ​ (11,258) ​ (11,073) ​ (9,462) ​ (42,624) Adjusted EBITDA ​ $ 24,289 ​ $ 28,542 ​ $ 28,050 ​ $ 27,001 ​ $ 107,882 Reconciliation of net income to Adjusted EBITDA ​ ​ ​ ​ ​ Net income ​ $ 12,302 ​ $ 12,801 ​ $ 12,161 ​ $ 17,121 ​ $ 54,385 Interest expense, net ​ 2,810 ​ 3,214 ​ 2,933 ​ 3,923 ​ 12,880 Provision (benefit) for income taxes ​ 4,207 ​ 3,251 ​ 5,621 ​ (996) ​ 12,083 Depreciation and amortization ​ 8,036 ​ 8,088 ​ 7,918 ​ 7,843 ​ 31,885 EBITDA ​ ​ 27,355 ​ 27,354 ​ 28,633 ​ 27,891 ​ 111,233 Stock-based compensation ​ 565 ​ 564 ​ — ​ — ​ 1,129 Foreign currency (gains) losses, net ​ (3,631) ​ 624 ​ (583) ​ (890) ​ (4,480) Adjusted EBITDA ​ $ 24,289 ​ $ 28,542 ​ $ 28,050 ​ $ 27,001 ​ $ 107,882 ​ 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.
Biggest changeThis quarterly financial data was prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and related notes included herein. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarters ​ Year ​ September 30, December 31, March 31, June 30, June 30, For the Periods Ended ​ 2022 ​ 2022 ​ 2023 ​ 2023 ​ 2023 ​ ​ (in thousands) Net sales ​ ​ ​ ​ ​ MFAs and other ​ $ 92,790 ​ $ 97,179 ​ $ 93,217 ​ $ 104,163 ​ $ 387,349 Nutritional Specialties ​ 39,054 ​ 43,856 ​ 45,016 ​ 44,578 ​ 172,504 Vaccines ​ 23,015 ​ 22,768 ​ 26,201 ​ 28,014 ​ 99,998 Animal Health ​ $ 154,859 ​ $ 163,803 ​ $ 164,434 ​ $ 176,755 ​ $ 659,851 Mineral Nutrition ​ 59,646 ​ ​ 61,644 ​ ​ 62,922 ​ 58,444 ​ 242,656 Performance Products ​ 18,016 ​ ​ 19,199 ​ ​ 18,317 ​ 19,850 ​ 75,382 Total net sales ​ 232,521 ​ 244,646 ​ 245,673 ​ 255,049 ​ 977,889 Cost of goods sold ​ 163,875 ​ ​ 167,261 ​ ​ 170,133 ​ 178,383 ​ 679,652 Gross profit ​ 68,646 ​ 77,385 ​ 75,540 ​ 76,666 ​ 298,237 Selling, general and administrative expenses ​ ​ 54,962 ​ ​ 61,541 ​ ​ 56,987 ​ ​ 52,900 ​ ​ 226,390 Operating income ​ ​ 13,684 ​ ​ 15,844 ​ ​ 18,553 ​ ​ 23,766 ​ ​ 71,847 Interest expense, net ​ 3,067 ​ ​ 3,884 ​ ​ 3,871 ​ 4,499 ​ 15,321 Foreign currency (gains) losses, net ​ 5,200 ​ ​ (149) ​ ​ (422) ​ (2,174) ​ 2,455 Income before income taxes ​ 5,417 ​ 12,109 ​ 15,104 ​ 21,441 ​ 54,071 Provision for income taxes ​ 1,561 ​ ​ 4,899 ​ ​ 5,062 ​ 9,943 ​ 21,465 Net income ​ $ 3,856 ​ $ 7,210 ​ $ 10,042 ​ $ 11,498 ​ $ 32,606 Net income per share ​ ​ ​ ​ ​ basic ​ $ 0.10 ​ $ 0.18 ​ $ 0.25 ​ $ 0.28 ​ $ 0.81 diluted ​ $ 0.10 ​ $ 0.18 ​ $ 0.25 ​ $ 0.28 ​ $ 0.81 Adjusted EBITDA ​ ​ ​ ​ ​ Animal Health ​ $ 26,964 ​ $ 37,059 ​ $ 34,217 ​ $ 37,899 ​ $ 136,139 Mineral Nutrition ​ 5,297 ​ 4,399 ​ 3,859 ​ 3,862 ​ 17,417 Performance Products ​ 2,364 ​ 2,292 ​ 2,413 ​ 2,277 ​ 9,346 Corporate ​ (12,491) ​ (12,838) ​ (13,122) ​ (11,698) ​ (50,149) Adjusted EBITDA ​ $ 22,134 ​ $ 30,912 ​ $ 27,367 ​ $ 32,340 ​ $ 112,753 Reconciliation of net income to Adjusted EBITDA ​ ​ ​ ​ ​ Net income ​ $ 3,856 ​ $ 7,210 ​ $ 10,042 ​ $ 11,498 ​ $ 32,606 Interest expense, net ​ 3,067 ​ 3,884 ​ 3,871 ​ 4,499 ​ 15,321 Provision for income taxes ​ 1,561 ​ 4,899 ​ 5,062 ​ 9,943 ​ 21,465 Depreciation and amortization ​ 8,450 ​ ​ 8,499 ​ ​ 8,489 ​ 8,574 ​ 34,012 EBITDA ​ ​ 16,934 ​ 24,492 ​ 27,464 ​ 34,514 ​ 103,404 Environmental remediation costs ​ — ​ 6,569 ​ 325 ​ — ​ 6,894 Foreign currency (gains) losses, net ​ 5,200 ​ (149) ​ (422) ​ (2,174) ​ 2,455 Adjusted EBITDA ​ $ 22,134 ​ $ 30,912 ​ $ 27,367 ​ $ 32,340 ​ $ 112,753 ​ 70 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarters ​ Year ​ September 30, December 31, March 31, June 30, June 30, For the Periods Ended ​ 2021 ​ 2021 ​ 2022 ​ 2022 ​ 2022 ​ ​ (in thousands) Net sales ​ ​ ​ ​ ​ MFAs and other ​ $ 83,758 ​ $ 91,724 ​ $ 84,330 ​ $ 101,726 ​ $ 361,538 Nutritional Specialties ​ 35,997 ​ 37,330 ​ 41,394 ​ 42,475 ​ 157,196 Vaccines ​ 21,249 ​ 21,873 ​ 22,865 ​ 22,334 ​ 88,321 Animal Health ​ $ 141,004 ​ $ 150,927 ​ $ 148,589 ​ $ 166,535 ​ $ 607,055 Mineral Nutrition ​ 54,432 ​ 66,655 ​ 69,033 ​ 69,392 ​ 259,512 Performance Products ​ 19,229 ​ 15,130 ​ 21,997 ​ 19,338 ​ 75,694 Total net sales ​ 214,665 ​ 232,712 ​ 239,619 ​ 255,265 ​ 942,261 Cost of goods sold ​ 149,987 ​ 162,040 ​ 167,993 ​ 176,841 ​ 656,861 Gross profit ​ 64,678 ​ 70,672 ​ 71,626 ​ 78,424 ​ 285,400 Selling, general and administrative expenses ​ ​ 50,066 ​ ​ 48,378 ​ ​ 52,432 ​ ​ 55,538 ​ ​ 206,414 Operating income ​ ​ 14,612 ​ ​ 22,294 ​ ​ 19,194 ​ ​ 22,886 ​ ​ 78,986 Interest expense, net ​ 2,889 ​ 2,953 ​ 2,925 ​ 3,108 ​ 11,875 Foreign currency (gains) losses, net ​ 2,128 ​ (4,189) ​ (10,564) ​ 7,409 ​ (5,216) Income before income taxes ​ 9,595 ​ 23,530 ​ 26,833 ​ 12,369 ​ 72,327 Provision (benefit) for income taxes ​ 3,061 ​ 6,065 ​ 9,144 ​ 4,882 ​ 23,152 Net income ​ $ 6,534 ​ $ 17,465 ​ $ 17,689 ​ $ 7,487 ​ $ 49,175 Net income per share ​ ​ ​ ​ ​ basic ​ $ 0.16 ​ $ 0.43 ​ $ 0.44 ​ $ 0.18 ​ $ 1.21 diluted ​ $ 0.16 ​ $ 0.43 ​ $ 0.44 ​ $ 0.18 ​ $ 1.21 Adjusted EBITDA ​ ​ ​ ​ ​ Animal Health ​ $ 27,637 ​ $ 33,696 ​ $ 29,232 ​ $ 33,541 ​ $ 124,106 Mineral Nutrition ​ 4,533 ​ 5,525 ​ 7,303 ​ 6,677 ​ 24,038 Performance Products ​ 2,138 ​ 1,324 ​ 2,865 ​ 2,379 ​ 8,706 Corporate ​ (11,842) ​ (11,453) ​ (11,404) ​ (11,068) ​ (45,767) Adjusted EBITDA ​ $ 22,466 ​ $ 29,092 ​ $ 27,996 ​ $ 31,529 ​ $ 111,083 Reconciliation of net income to Adjusted EBITDA ​ ​ ​ ​ ​ Net income ​ $ 6,534 ​ $ 17,465 ​ $ 17,689 ​ $ 7,487 ​ $ 49,175 Interest expense, net ​ 2,889 ​ 2,953 ​ 2,925 ​ 3,108 ​ 11,875 Provision (benefit) for income taxes ​ 3,061 ​ 6,065 ​ 9,144 ​ 4,882 ​ 23,152 Depreciation and amortization ​ 7,854 ​ 8,001 ​ 8,445 ​ 8,405 ​ 32,705 EBITDA ​ ​ 20,338 ​ 34,484 ​ 38,203 ​ 23,882 ​ 116,907 Acquisition-related cost of goods sold ​ — ​ — ​ 78 ​ 238 ​ 316 Acquisition-related transaction costs ​ — ​ — ​ 279 ​ — ​ 279 Gain on sale of investment ​ ​ — ​ ​ (1,203) ​ ​ — ​ ​ — ​ ​ (1,203) Foreign currency (gains) losses, net ​ ​ 2,128 ​ (4,189) ​ (10,564) ​ 7,409 ​ ​ (5,216) Adjusted EBITDA ​ $ 22,466 ​ $ 29,092 ​ $ 27,996 ​ $ 31,529 ​ $ 111,083 ​ 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 continue to invest in a vaccine production facility in Sligo, Ireland to manufacture poultry vaccines, with our first commercial sale of product realized in February 2022, and longer-term expectations to add swine and cattle vaccines. We are developing microbial products and bioproducts for a variety of applications serving animal health and nutrition, environmental, industrial and agricultural customers.
We continue to invest in a vaccine production facility in Sligo, Ireland to manufacture poultry vaccines, with our first commercial sale of product realized in 2022, and longer-term expectations to add swine and cattle vaccines. We are developing microbial products and bioproducts for a variety of applications serving animal health and nutrition, environmental, industrial and agricultural customers.
If our initial assessment does not result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit if: (i) there are changes in tax law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not;” (ii) the statute of limitations expires; or (iii) there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency.
If our initial assessment does not result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the tax benefit if: (i) there are changes in tax law or there is new information that sufficiently raise the likelihood of prevailing on the technical merits of the position to “more likely than not”; (ii) the statute of limitations expires; or (iii) there is a completion of an audit resulting in a favorable settlement of that tax year with the appropriate agency.
We may elect to assess our goodwill for impairment using a qualitative or a quantitative approach, to determine whether it is more likely than not that the fair value of goodwill is greater than its carrying value. During the three months ended June 30, 2022, we tested goodwill using a quantitative approach and determined goodwill was not impaired.
We may elect to assess our goodwill for impairment using a qualitative or a quantitative approach, to determine whether it is more likely than not that the fair value of goodwill is greater than its carrying value. During the three months ended June 30, 2023, we tested goodwill using a quantitative approach and determined goodwill was not impaired.
The assets underlying a $2.7 million equity investment are currently idle; we have concluded the investment is not impaired, based on expected future operating cash flows and/or disposal value. Income Taxes The provision for income taxes includes U.S. federal, state and foreign income taxes and foreign withholding taxes.
The assets underlying a $2.8 million equity investment are currently idle; we have concluded the investment is not impaired, based on expected future operating cash flows and/or disposal value. Income Taxes The provision for income taxes includes U.S. federal, state and foreign income taxes and foreign withholding taxes.
The Adjusted EBITDA measure is not, and should not be viewed as, a substitute for GAAP reported net income. 68 Table of Contents 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 Adjusted EBITDA measure is not, and should not be viewed as, a substitute for GAAP reported net income. 71 Table of Contents 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.
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 of the conflict may trigger additional economic and other sanctions, as well as broader military conflict.
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.
Foreign exchange We conduct operations in many areas of the world, involving transactions denominated in a variety of currencies. For the year ended June 30, 2022, we generated approximately 40% of our revenues from operations outside the United States.
Foreign exchange We conduct operations in many areas of the world, involving transactions denominated in a variety of currencies. For the year ended June 30, 2023, we generated approximately 40% of our revenues from operations outside the United States.
Our effective income tax rate has varied from period to period and from the federal statutory rate, due to the mix of income in the various jurisdictions where we have operations, changes in tax rates from period to period and the effects of certain other items.
Our effective income tax rate has varied from period to period from a federal statutory rate perspective due to the mix of income in the various jurisdictions where we have operations, changes in tax rates from period to period and the effects of certain other items.
In addition, campaigns by interest groups, 56 Table of Contents activists and others with respect to perceived risks associated with the use of our products in animals, including position statements by livestock producers and their customers based on non-use of certain medicated products in livestock production, whether or not scientifically-supported, could affect public perceptions and reduce the use of our products.
In addition, campaigns by interest groups, activists and others with respect to perceived risks associated with the use of our products in animals, including position statements by livestock producers and their customers based on non-use of certain medicated products in livestock production, whether or not scientifically-supported, could affect public perceptions and reduce the use of our products.
Comparison of the years ended June 30, 2021 and 2020 For a comparison of our results of operations for the years ended June 30, 2021 and 2020, and an analysis of our financial condition, liquidity and capital resources for the year ended June 30, 2021, see “Part II. Item 7.
Comparison of the years ended June 30, 2022 and 2021 For a comparison of our results of operations for the years ended June 30, 2022 and 2021, and an analysis of our financial condition, liquidity and capital resources for the year ended June 30, 2022, see “Part II. Item 7.
Investing activities Investing activities used $22.6 million of net cash for the year ended June 30, 2022. Capital expenditures were $37.0 million as we continued to invest in expanding production capacity and productivity improvements. Net proceeds from maturities of short-term investments were $26.0 million.
Other investing activities provided $0.8 million of cash. Investing activities used $22.6 million of net cash for the year ended June 30, 2022. Capital expenditures were $37.0 million as we continued to invest in expanding production capacity and productivity improvements. Net proceeds from maturities of short-term investments were $26.0 million.
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 generally included within operating results.
Under certain circumstances, we might be required to curtail operations until a particular problem is remedied. Known costs and expenses under Environmental 75 Table of Contents Laws incidental to ongoing operations, including the cost of litigation proceedings relating to environmental matters, are generally included within operating results.
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 55 Table of Contents to help improve animal health and well-being.
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.
Net cash provided by operating activities was driven by strong business performance, resulting in cash provided by net income and non-cash 63 Table of Contents items, including depreciation and amortization, of $76.3 million, offset by cash used in the ordinary course of business for changes in operating assets and liabilities of $44.6 million.
Net cash provided by operating activities was driven by strong business performance, resulting in cash provided by net income and non-cash items, including depreciation and amortization, of $76.3 million, offset by cash used in the ordinary course of business for changes in operating assets and liabilities of $44.6 million.
Should our plans change and 71 Table of Contents we decide to repatriate some or all of the remaining cash held by our international subsidiaries, the amounts repatriated could be subject to applicable non-U.S. income and withholding taxes in international jurisdictions.
Should our plans change and we decide to repatriate some or all of the remaining cash held by our international subsidiaries, the amounts repatriated could be subject to applicable non-U.S. income and withholding taxes in international jurisdictions.
We have not recorded any goodwill impairment charges in the periods included in the consolidated financial statements. 70 Table of Contents We evaluate our investments in equity method investees for impairment if circumstances indicate that the fair value of the investment may be impaired.
We have not recorded any goodwill impairment charges in the periods included in the consolidated financial statements. We evaluate our investments in equity method investees for impairment if circumstances indicate that the fair value of the investment may be impaired.
If such events affect our customers’ businesses, they may purchase fewer of our products, and our revenues may be negatively impacted. Climate driven changes could have a material adverse effect on our financial condition and results of operations.
If such events affect our customers’ businesses, they may purchase fewer of our products, and 57 Table of Contents our revenues may be negatively impacted. Climate driven changes could have a material adverse effect on our financial condition and results of operations.
We have defined 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 and losses, and (c) certain items that we consider to be unusual, non-operational or non-recurring.
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) certain items that we consider to be unusual, non-operational or non-recurring.
Determining the useful life of an intangible asset also requires judgment. Our estimates of the useful lives of intangible assets primarily are based on a number of factors including the competitive environment, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the products are sold. Intangible assets are amortized over their estimated lives.
Determining the useful life of an intangible asset also requires judgment. Our estimates of the useful lives of intangible assets primarily are based on a number of factors including the competitive environment, underlying product life cycles, operating plans and the macroeconomic environment of the countries in which the products are sold.
These indemnifications generally are subject to certain restrictions and limitations. 66 Table of Contents Selected Quarterly Financial Data (Unaudited) To facilitate quarterly comparisons, the following unaudited information presents the quarterly results of operations, including segment data, for the years ended June 30, 2022 and 2021.
These indemnifications generally are subject to certain restrictions and limitations. 69 Table of Contents Selected Quarterly Financial Data (Unaudited) To facilitate quarterly comparisons, the following unaudited information presents the quarterly results of operations, including segment data, for the years ended June 30, 2023 and 2022.
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.
Phibro reiterated the safety of carbadox and the appropriateness of the regulatory method and offered to work 56 Table of Contents with the CVM to generate additional data to support the existing regulatory method or select a suitable alternative regulatory method.
We currently intend to pay quarterly dividends on our Class A and Class B common stock, subject to approval from the Board of Directors. Our Board of Directors has declared a cash dividend of $0.12 per share on Class A common stock and Class B common stock, payable on September 28, 2022.
We currently intend to pay quarterly dividends on our Class A and Class B common stock, subject to approval from the Board of Directors. Our Board of Directors has declared a cash dividend of $0.12 per share on Class A common stock and Class B common stock, payable on September 27, 2023.
In April 2016, the 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 April 2016, the FDA began initial steps to withdraw approval of carbadox (the active ingredient in our Mecadox product) via a regulatory process known as a NOOH, due to concerns that certain residues from the product may persist in animal tissues for longer than previously determined.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the SEC on August 25, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on August 24, 2022.
We calculate the ratio of current assets to current liabilities based on this definition. At June 30, 2022, we had $145.0 million in outstanding borrowings under the 2021 Revolver. We had outstanding letters of credit and other commitments of $2.5 million, leaving $102.5 million available for borrowings and letters of credit, subject to restriction in our 2021 Credit Facilities.
We calculate the ratio of current assets to current liabilities based on this definition. At June 30, 2023, we had $141.0 million in outstanding borrowings under the 2021 Revolver. We had outstanding letters of credit and other commitments of $2.5 million, leaving $166.5 million available for borrowings and letters of credit, subject to restriction in our 2021 Credit Facilities.
Not all accounting policies require management to make difficult, subjective or complex judgments or estimates. In presenting our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (GAAP), we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Not all accounting policies require management to make difficult, subjective or complex judgments or estimates. In presenting our consolidated financial statements in accordance with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Net sales include shipping and handling fees billed to customers. The associated costs are considered fulfillment activities, not additional promised services to the customer, and are included in costs of goods sold when the related revenue is recognized in the consolidated statements of operations. Net sales exclude value-added and other taxes based on sales.
The associated costs are considered fulfillment activities, not additional promised services to the customer, and are included in costs of goods sold when the related revenue is recognized in the consolidated statements of operations. Net sales exclude value-added and other taxes based on sales.
See also “Business — Compliance with Government Regulations — United States — Carbadox”; and “Business — Compliance with Government Regulations — Global policy and guidance.” Our global sales of antibacterials, anticoccidials and other products were $361 million, $330 million and $322 million for the years ended June 30, 2022, 2021 and 2020, respectively.
See also “Business — Compliance with Government Regulation — United States — Carbadox”; and “Business — Compliance with Government Regulation — Global Policy and Guidance.” Our global sales of antibacterials, anticoccidials and other products were $387 million, $361 million and $330 million for the years ended June 30, 2023, 2022 and 2021, respectively.
The provision for income taxes during the year ended June 30, 2022, included (i) a $2.6 million benefit from the reversal of uncertain tax positions related to settlements and the lapse of statute of limitations of prior years, (ii) a $4.1 million expense related to increases to reserves for uncertain tax positions due to the complex nature of tax law in various jurisdictions and related interpretations of tax law, (iii) a $1.0 million benefit from the release of a valuation allowance, and (iv) a $0.3 million expense related to a detailed analysis of various other items.
The provision for income taxes for the year ended June 30, 2022, included a net cost of $0.8 million for certain items including (i) a benefit from the reversal of uncertain tax positions related to settlements and the lapse of statute of limitations of prior years, (ii) an expense related to increases to reserves for uncertain tax positions due to the complex nature of tax law in various jurisdictions and related interpretations of tax law, (iii) a benefit from the release of a valuation allowance, and (iv) an expense related to a detailed analysis of various other items.
For additional details, see “Notes to Consolidated Financial Statements — Commitments and Contingencies.” For additional details, see “Business — Environmental, Health and Safety.” 72 Table of Contents ​
For additional details, see “Notes to Consolidated Financial Statements — Commitments and Contingencies.” For additional details, see “Business — Environmental, Health and Safety.” ​
Should we be unable to successfully defend the safety of the product, the loss of carbadox sales will have an adverse effect on our financial condition and results of operations. Sales of Mecadox (carbadox) for the twelve months ended June 30, 2022, were $21 million.
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 year ended June 30, 2023, were approximately $20 million.
See “Notes to Consolidated Financial Statements – Debt, Leases, and Commitment and Contingencies.” Analysis of the consolidated balance sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2022 2021 2020 2022 / 2021 2021 / 2020 ​ ​ (in thousands) Accounts receivable - trade ​ $ 166,537 ​ $ 146,852 ​ $ 126,522 ​ $ 19,685 ​ $ 20,330 DSO ​ 59 ​ 60 ​ 61 ​ ​ ​ Payment terms outside the U.S. are typically longer than in the United States.
See “Notes to Consolidated Financial Statements – Debt, Leases, and Commitment and Contingencies.” Analysis of the consolidated balance sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2023 2022 2021 2023 / 2022 2022 / 2021 ​ ​ (in thousands) Accounts receivable - trade ​ $ 163,479 ​ $ 166,537 ​ $ 146,852 ​ $ (3,058) ​ $ 19,685 DSO ​ 58 ​ 59 ​ 60 ​ ​ ​ Payment terms outside the U.S. are typically longer than in the United States.
Certain significant items Adjusted EBITDA is 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.
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.
We used $13.5 million for the acquisition of a business in Brazil, which develops, manufacturers and markets processing aids used in the ethanol industry. Other investing activities provided $2.0 million of cash. Investing activities used $18.6 million of net cash for the year ended June 30, 2021.
We used $13.5 million for the acquisition of a business in Brazil, which develops, manufacturers and markets processing aids used in the ethanol industry. Other investing activities provided $2.0 million of cash. 67 Table of Contents Financing activities Financing activities provided $27.0 million of net cash for the year ended June 30, 2023.
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 the years following, Phibro has continued an ongoing process of responding collaboratively and transparently to the CVM inquiries and has provided extensive and meticulous research and data that confirmed the safety of carbadox.
Intangible assets associated with acquired in-process research and development activities (“IPR&D”) are not amortized until a product is available for sale and regulatory approval is obtained.
Intangible assets are amortized over their estimated lives. 73 Table of Contents Intangible assets associated with acquired in-process research and development activities (“IPR&D”) are not amortized until a product is available for sale and regulatory approval is obtained.
Our products that contain virginiamycin, oxytetracycline or neomycin are classified by the FDA as medically important antimicrobials. In addition to the United States, the World Health Organization (WHO), the E.U., Australia and Canada have promulgated rating lists for antimicrobials that are used in veterinary medicine and that include certain of our products.
In addition to the United States, the World Health Organization (WHO), the E.U., Australia and Canada have promulgated rating lists for antimicrobials that are used in veterinary medicine and that include certain of our products.
We are also building a vaccine production facility in Guarulhos, Brazil to manufacture and market autogenous vaccines against animal diseases for swine, poultry and aquaculture. We continue to build our companion animal business and pipeline. Our Rejensa joint supplement for dogs continues to gain customer acceptance.
We began operations at a new vaccine production facility in Guarulhos, Brazil that manufactures and markets autogenous vaccines against animal diseases for swine, poultry and aquaculture. We continue to build our companion animal business and pipeline. Our Rejensa joint supplement for dogs continues to gain customer acceptance.
Certain relevant measures of our liquidity and capital resources follow: 64 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2022 2021 2020 2022 / 2021 2021 / 2020 ​ ​ (in thousands, except ratios) Cash and cash equivalents and short-term investments ​ $ 91,248 ​ $ 93,212 ​ $ 91,343 ​ $ (1,964) ​ $ 1,869 Working capital ​ 299,152 ​ 250,956 ​ 222,006 ​ 48,196 ​ 28,950 Ratio of current assets to current liabilities ​ 2.70:1 ​ 2.62:1 ​ 2.60:1 ​ ​ ​ 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).
Certain relevant measures of our liquidity and capital resources follow: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2023 2022 2021 2023 / 2022 2022 / 2021 ​ ​ (in thousands, except ratios) Cash and cash equivalents and short-term investments ​ $ 81,281 ​ $ 91,248 ​ $ 93,212 ​ $ (9,967) ​ $ (1,964) Working capital ​ 350,737 ​ 299,152 ​ 250,956 ​ 51,585 ​ 48,196 Ratio of current assets to current liabilities ​ 3.28:1 ​ 2.70:1 ​ 2.62:1 ​ ​ ​ 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).
Net borrowings on our 2021 Revolver provided $50.0 million. We paid $19.4 million in dividends to holders of our Class A and Class B common stock. We paid $9.4 million in scheduled debt maturities. We paid $4.8 million for acquisition-related contingent consideration. Financing activities used $17.0 million of net cash for the year ended June 30, 2021.
We paid $19.4 million in dividends to holders of our Class A common stock and Class B common stock. Financing activities used $16.3 million of net cash for the year ended June 30, 2022. Net borrowings on our 2021 Revolver provided $50.0 million. We paid $19.4 million in dividends to holders of our Class A and Class B common stock.
Factors affecting our performance Armed Conflict between 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 product and humanitarian services.
We market approximately 770 product lines in over 80 countries to approximately 4,000 customers. 55 Table of Contents Factors affecting our performance Armed conflict between 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.
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 Critical accounting policies are those that require application of management’s most difficult, subjective and/or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
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. 72 Table of Contents 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 Critical accounting policies are those that require application of management’s most difficult, subjective and/or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Operating activities Operating activities provided $31.6 million of net cash for the year ended June 30, 2022.
Operating activities Operating activities provided $13.3 million of net cash for the year ended June 30, 2023.
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. We sell approximately 780 product lines in over 80 countries to approximately 3,790 customers.
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.
Net sales of MFAs and other increased $31.5 million, or 10%, due to increased demand for our MFAs, particularly in the Latin America and Canada regions, and for processing aids used in the ethanol fermentation industry, and due to higher average selling prices.
Net sales of MFAs and other increased $25.8 million, or 7%, due to increased demand for our MFAs, particularly in the U.S. and Latin America regions, and for processing aids used in the ethanol fermentation industry.
We paid $19.4 million in dividends to holders of our Class A and Class B common stock. ​ Liquidity and capital resources We believe our cash on hand, our operating cash flows and our 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 paid $9.4 million in scheduled debt maturities. We paid $4.8 million for acquisition-related contingent consideration. Liquidity and capital resources We believe our cash on hand, our operating cash flows and our financing arrangements, including the availability of borrowings under the 2021 Revolver and foreign credit lines, will be sufficient to support our ongoing cash needs.
Our companion animal development pipeline includes an early-stage atopic dermatitis compound, a novel Lyme vaccine delivery system product, two early-stage oral care compounds, and we entered into an agreement with Rejuvenate Bio, Inc. to collaborate on the development and commercialization of a gene therapy for MVD in canines. 58 Table of Contents Analysis of the consolidated statements of operations Summary Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 ​ 2022 2021 2020 2022 / 2021 2021/ 2020 ​ ​ (in thousands, except per share amounts and percentages) Net sales ​ $ 942,261 $ 833,350 $ 800,354 $ 108,911 ​ 13 % $ 32,996 4 % Gross profit ​ 285,400 ​ 271,377 ​ 256,882 ​ 14,023 ​ 5 % 14,495 6 % Selling, general and administrative expenses ​ 206,414 ​ 196,509 ​ 187,688 ​ 9,905 ​ 5 % 8,821 5 % Operating income ​ 78,986 ​ 74,868 ​ 69,194 ​ 4,118 ​ 6 % 5,674 8 % Interest expense, net ​ 11,875 ​ 12,880 ​ 12,856 ​ (1,005) ​ (8) % 24 0 % Foreign currency (gains), net ​ (5,216) ​ (4,480) ​ 826 ​ (736) ​ ​ * (5,306) ​ * Income before income taxes ​ 72,327 ​ 66,468 ​ 55,512 ​ 5,859 ​ 9 % 10,956 20 % Provision for income taxes ​ 23,152 ​ 12,083 ​ 21,960 ​ 11,069 ​ 92 % (9,877) (45) % Net income ​ $ 49,175 ​ $ 54,385 ​ $ 33,552 ​ $ (5,210) ​ (10) % $ 20,833 62 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per share ​ ​ ​ ​ ​ ​ Basic ​ $ 1.21 ​ $ 1.34 ​ $ 0.83 ​ $ (0.13) ​ ​ ​ ​ $ 0.51 ​ Diluted ​ $ 1.21 ​ $ 1.34 ​ $ 0.83 ​ $ (0.13) ​ ​ ​ ​ $ 0.51 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding ​ ​ ​ ​ ​ ​ Basic 40,504 ​ 40,473 ​ 40,454 ​ ​ ​ ​ Diluted 40,504 ​ 40,504 ​ 40,504 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio to net sales ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit 30.3 % 32.6 % 32.1 % ​ ​ ​ Selling, general and administrative expenses 21.9 % 23.6 % 23.5 % ​ ​ ​ Operating income 8.4 % 9.0 % 8.6 % ​ ​ ​ Income before income taxes 7.7 % 8.0 % 6.9 % ​ ​ ​ Net income 5.2 % 6.5 % 4.2 % ​ ​ ​ Effective tax rate 32.0 % 18.2 % 39.6 % ​ ​ ​ Certain amounts and percentages may reflect rounding adjustments. * Calculation not meaningful Changes in net sales from period to period primarily result from changes in volumes and average selling prices.
Our companion animal development pipeline includes an early-stage atopic dermatitis compound, a novel Lyme vaccine delivery system product, a potential treatment for mitral heart valve disease in dogs, a pain product and two early-stage oral care compounds. 58 Table of Contents Analysis of the consolidated statements of operations Summary Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 ​ 2023 2022 2021 2023 / 2022 2022/ 2021 ​ ​ ​ (in thousands, except per share amounts and percentages) Net sales ​ $ 977,889 $ 942,261 $ 833,350 $ 35,628 ​ 4 % $ 108,911 13 % Gross profit ​ 298,237 ​ 285,400 ​ 271,377 ​ 12,837 ​ 4 % 14,023 5 % Selling, general and administrative expenses ​ 226,390 ​ 206,414 ​ 196,509 ​ 19,976 ​ 10 % 9,905 5 % Operating income ​ 71,847 ​ 78,986 ​ 74,868 ​ (7,139) ​ (9) % 4,118 6 % Interest expense, net ​ 15,321 ​ 11,875 ​ 12,880 ​ 3,446 ​ 29 % (1,005) (8) % Foreign currency (gains) losses, net ​ 2,455 ​ (5,216) ​ (4,480) ​ 7,671 ​ ​ * (736) ​ * Income before income taxes ​ 54,071 ​ 72,327 ​ 66,468 ​ (18,256) ​ (25) % 5,859 9 % Provision for income taxes ​ 21,465 ​ 23,152 ​ 12,083 ​ (1,687) ​ (7) % 11,069 92 % Net income ​ $ 32,606 ​ $ 49,175 ​ $ 54,385 ​ $ (16,569) ​ (34) % $ (5,210) (10) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per share ​ ​ ​ ​ ​ ​ Basic ​ $ 0.81 ​ $ 1.21 ​ $ 1.34 ​ $ (0.40) ​ ​ ​ ​ $ (0.13) ​ Diluted ​ $ 0.81 ​ $ 1.21 ​ $ 1.34 ​ $ (0.40) ​ ​ ​ ​ $ (0.13) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding ​ ​ ​ ​ ​ ​ Basic 40,504 ​ 40,504 ​ 40,473 ​ ​ ​ ​ Diluted ​ ​ 40,504 ​ ​ 40,504 ​ ​ 40,504 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio to net sales ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit 30.5 % 30.3 % 32.6 % ​ ​ ​ Selling, general and administrative expenses 23.2 % 21.9 % 23.6 % ​ ​ ​ Operating income 7.3 % 8.4 % 9.0 % ​ ​ ​ Income before income taxes 5.5 % 7.7 % 8.0 % ​ ​ ​ Net income 3.3 % 5.2 % 6.5 % ​ ​ ​ Effective tax rate 39.7 % 32.0 % 18.2 % ​ ​ ​ Certain amounts and percentages may reflect rounding adjustments. * Calculation not meaningful Changes in net sales from period to period primarily result from changes in volumes and average selling prices.
Because our financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations. ​ 57 Table of Contents Climate Adverse weather events and natural disasters may interfere with and negatively impact operations at our manufacturing sites, research and development facilities and offices, which could have a material adverse effect on our financial condition and results of operations, especially if the impact of an event or disaster is frequent or prolonged.
Climate Adverse weather events and natural disasters may interfere with and negatively impact operations at our manufacturing sites, research and development facilities and offices, which could have a material adverse effect on our financial condition and results of operations, especially if the impact of an event or disaster is frequent or prolonged.
We review these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We account for income tax contingencies using a benefit recognition model.
We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes. We review 74 Table of Contents these tax uncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly. We account for income tax contingencies using a benefit recognition model.
The potential impacts of any resulting bans, sanctions, boycotts or broader military conflicts on our business is uncertain at the current time due to the fluid nature of the conflict.
The potential impacts of any resulting bans, sanctions, boycotts or broader military conflicts on our business are uncertain.
Revenue Recognition We recognize revenue from product sales when control of the products has transferred to the customer, typically when title and risk of loss transfer to the customer.
Revenue Recognition We recognize revenue from product sales when control of the products has transferred to the customer, typically when title and risk of loss transfer to the customer. Certain of our businesses have terms where control of the underlying product transfers to the customer on shipment, while others have terms where control transfers to the customer on delivery.
We do not expect to contribute to the domestic pension plan during 2023, based on the funded status at June 30, 2022. At June 30, 2022, our cash and cash equivalents and short-term investments included $88.5 million held by our international subsidiaries. There are no restrictions on cash distributions to PAHC from our international subsidiaries.
We do not expect to contribute to the domestic pension plan during 2024. At June 30, 2023, our cash and cash equivalents and short-term investments included $79.0 million held by our international subsidiaries.
Animal Health, Mineral Nutrition and Performance Products increased $61.3 million, $39.0 million and $8.6 million, respectively. Animal Health Net sales of $607.1 million for the year ended June 30, 2022, increased $61.3 million, or 11%.
Animal Health sales increased $52.8 million. Mineral Nutrition and Performance Products sales decreased by $16.9 million and $0.3 million, respectively. Animal Health Net sales of $659.9 million for the year ended June 30, 2023, increased $52.8 million, or 9%.
Segment net sales and Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 Net sales ​ (in thousands) MFAs and other ​ $ 361,538 ​ $ 330,017 ​ $ 322,300 ​ $ 31,521 10 % $ 7,717 2 % Nutritional specialties ​ 157,196 ​ 142,760 ​ 129,264 ​ 14,436 10 % 13,496 10 % Vaccines ​ 88,321 ​ 72,939 ​ 75,340 ​ 15,382 21 % (2,401) (3) % Animal Health ​ 607,055 ​ 545,716 ​ 526,904 ​ 61,339 11 % 18,812 4 % Mineral Nutrition ​ 259,512 ​ 220,560 ​ 214,412 ​ 38,952 18 % 6,148 3 % Performance Products ​ 75,694 ​ 67,074 ​ 59,038 ​ 8,620 13 % 8,036 14 % Total ​ $ 942,261 ​ $ 833,350 ​ $ 800,354 ​ $ 108,911 13 % $ 32,996 4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA ​ ​ ​ ​ ​ ​ Animal Health ​ $ 124,106 ​ $ 123,953 ​ $ 123,106 ​ $ 153 0 % $ 847 1 % Mineral Nutrition ​ 24,038 ​ 17,116 ​ 14,678 ​ 6,922 40 % 2,438 17 % Performance Products ​ 8,706 ​ 9,437 ​ 4,534 ​ (731) (8) % 4,903 108 % Corporate ​ (45,767) ​ (42,624) ​ (40,178) ​ (3,143) 7 % (2,446) 6 % Total ​ $ 111,083 ​ $ 107,882 ​ $ 102,140 ​ $ 3,201 3 % $ 5,742 6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA ratio to segment net sales ​ ​ ​ ​ ​ ​ Animal Health ​ 20.4 % 22.7 % 23.4 % ​ ​ Mineral Nutrition ​ 9.3 % 7.8 % 6.8 % ​ ​ Performance Products ​ 11.5 % 14.1 % 7.7 % ​ ​ Corporate (1) ​ (4.9) % (5.1) % (5.0) % ​ ​ Total (1) ​ 11.8 % 12.9 % 12.8 % ​ ​ (1) Reflects ratio to total net sales.
Segment net sales and Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 Net sales ​ (in thousands, except percentages) MFAs and other ​ $ 387,349 ​ $ 361,538 ​ $ 330,017 ​ $ 25,811 7 % $ 31,521 10 % Nutritional specialties ​ 172,504 ​ 157,196 ​ 142,760 ​ 15,308 10 % 14,436 10 % Vaccines ​ 99,998 ​ 88,321 ​ 72,939 ​ 11,677 13 % 15,382 21 % Animal Health ​ 659,851 ​ 607,055 ​ 545,716 ​ 52,796 9 % 61,339 11 % Mineral Nutrition ​ 242,656 ​ 259,512 ​ 220,560 ​ (16,856) (6) % 38,952 18 % Performance Products ​ 75,382 ​ 75,694 ​ 67,074 ​ (312) (0) % 8,620 13 % Total ​ $ 977,889 ​ $ 942,261 ​ $ 833,350 ​ $ 35,628 4 % $ 108,911 13 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA ​ ​ ​ ​ ​ ​ Animal Health ​ $ 136,139 ​ $ 124,106 ​ $ 123,953 ​ $ 12,033 10 % $ 153 0 % Mineral Nutrition ​ 17,417 ​ 24,038 ​ 17,116 ​ (6,621) (28) % 6,922 40 % Performance Products ​ 9,346 ​ 8,706 ​ 9,437 ​ 640 7 % (731) (8) % Corporate ​ (50,149) ​ (45,767) ​ (42,624) ​ (4,382) 10 % (3,143) 7 % Total ​ $ 112,753 ​ $ 111,083 ​ $ 107,882 ​ $ 1,670 2 % $ 3,201 3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA as a percentage of segment net sales ​ ​ ​ ​ ​ ​ Animal Health ​ 20.6 % 20.4 % 22.7 % ​ ​ Mineral Nutrition ​ 7.2 % 9.3 % 7.8 % ​ ​ Performance Products ​ 12.4 % 11.5 % 14.1 % ​ ​ Corporate (1) ​ (5.1) % (4.9) % (5.1) % ​ ​ Total (1) ​ 11.5 % 11.8 % 12.9 % ​ ​ (1) Reflects ratio to total net sales.
The effective income tax rate was 32.0% and 18.2% for the years ended June 30, 2022 and 2021, respectively.
Provision for income taxes The provision for income taxes was $21.5 million and $23.2 million for the years ended June 30, 2023 and 2022, respectively. The effective income tax rate was 39.7% and 32.0% for the years ended June 30, 2023 and 2022, respectively.
Variable consideration includes customer programs and incentive offerings, including pricing arrangements, rebates and other volume-based incentives. We record reductions to revenue for estimated variable consideration at the time we record the sale. Our estimates for variable consideration reflect the amount by which we expect variable consideration to affect the revenue recognized.
Revenue reflects the total consideration to which we expect to be entitled, in exchange for delivery of products or services, net of variable consideration. Variable consideration includes customer programs and incentive offerings, including pricing arrangements, rebates and other volume-based incentives. We record reductions to revenue for estimated variable consideration at the time we record the sale.
Such estimates are based on contractual terms and historical experience, and are adjusted to reflect future expectations as new information becomes available. Historically, we have not had significant adjustments to our estimates of customer incentives. Sales returns and product recalls have been insignificant and infrequent due to the nature of the products we sell.
Our estimates for variable consideration reflect the amount by which we expect variable consideration to affect the revenue recognized. Such estimates are based on contractual terms and historical experience, and are adjusted to reflect future expectations as new information becomes available. Historically, we have not had significant adjustments to our estimates of customer incentives.
In particular, there is increased focus, in the United States and other countries, on the use of medically important antimicrobials. As defined by the FDA, medically important antimicrobials (“MIAs”) include classes that are prescribed in animal and human health and are listed in the Appendix of the FDA-CVM Guidance for Industry (GFI) 152.
As defined by the FDA, medically important antimicrobials (“MIAs”) include classes that are prescribed in animal and human health and are listed in the Appendix of the FDA-CVM Guidance for Industry (GFI) 152. Our products that contain virginiamycin, oxytetracycline or neomycin are classified by the FDA as medically important antimicrobials.
Analysis of financial condition, liquidity and capital resources Net increase (decrease) in cash and cash equivalents was: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2022 2021 2020 2022/ 2021 2021/ 2020 ​ ​ (in thousands) Cash provided (used) by: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 31,649 ​ $ 48,306 ​ $ 59,348 ​ $ (16,657) ​ $ (11,042) Investing activities ​ (22,582) ​ (18,580) ​ (120,390) ​ (4,002) ​ 101,810 Financing activities ​ 16,343 ​ (16,995) ​ 40,936 ​ 33,338 ​ (57,931) Effect of exchange-rate changes on cash and cash equivalents ​ (1,374) ​ 1,138 ​ (1,124) ​ (2,512) ​ 2,262 Net increase in cash and cash equivalents ​ $ 24,036 ​ $ 13,869 ​ $ (21,230) ​ $ 10,167 ​ $ 35,099 ​ Net cash provided by operating activities was comprised of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2022 2021 2020 2022 / 2021 2021 / 2020 ​ ​ (in thousands) EBITDA ​ $ 111,083 ​ $ 111,233 ​ $ 100,709 ​ $ (150) ​ $ 10,524 Adjustments: ​ ​ ​ ​ ​ Gain on sale of investment ​ (1,203) ​ — ​ — ​ (1,203) ​ — Acquisition-related cost of goods sold ​ 316 ​ — ​ 280 ​ 316 ​ (280) Acquisition-related transaction costs ​ 279 ​ — ​ 462 ​ 279 ​ (462) Acquisition-related other, net ​ — ​ — ​ ​ (2,821) ​ — ​ 2,821 Stock-based compensation ​ ​ — ​ ​ 1,129 ​ ​ 2,259 ​ ​ (1,129) ​ ​ (1,130) Restructuring costs ​ ​ — ​ ​ — ​ ​ 425 ​ ​ — ​ ​ (425) Foreign currency (gains), net ​ (5,216) ​ (4,480) ​ 826 ​ (736) ​ (5,306) Interest paid, net ​ (11,159) ​ (10,808) ​ (11,577) ​ (351) ​ 769 Income taxes paid ​ (17,854) ​ (19,395) ​ (20,866) ​ 1,541 ​ 1,471 Changes in operating assets and liabilities and other items ​ (44,597) ​ (29,373) ​ (10,349) ​ (15,224) ​ (19,024) Net cash provided by operating activities ​ $ 31,649 ​ $ 48,306 ​ $ 59,348 ​ $ (16,657) ​ $ (11,042) ​ Certain amounts may reflect rounding adjustments.
Analysis of financial condition, liquidity and capital resources Net increase (decrease) in cash and cash equivalents was: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2023 2022 2021 2023/ 2022 2022/ 2021 ​ ​ (in thousands) Cash (used) provided by: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 13,310 ​ $ 31,649 ​ $ 48,306 ​ $ (18,339) ​ $ (16,657) Investing activities ​ (74,018) ​ (22,582) ​ (18,580) ​ (51,436) ​ (4,002) Financing activities ​ 26,987 ​ 16,343 ​ (16,995) ​ 10,644 ​ 33,338 Effect of exchange-rate changes on cash and cash equivalents ​ 754 ​ (1,374) ​ 1,138 ​ 2,128 ​ (2,512) Net (decrease) increase in cash and cash equivalents ​ $ (32,967) ​ $ 24,036 ​ $ 13,869 ​ $ (57,003) ​ $ 10,167 ​ 66 Table of Contents Net cash provided by operating activities was comprised of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2023 2022 2021 2023 / 2022 2022 / 2021 ​ ​ (in thousands) EBITDA ​ $ 103,404 ​ $ 116,907 ​ $ 111,233 ​ $ (13,503) ​ $ 5,674 Adjustments: ​ ​ ​ ​ ​ Environmental remediation costs ​ ​ 6,894 ​ ​ — ​ ​ — ​ ​ 6,894 ​ ​ — Gain on sale of investment ​ — ​ (1,203) ​ — ​ 1,203 ​ (1,203) Acquisition-related cost of goods sold ​ — ​ 316 ​ — ​ (316) ​ 316 Acquisition-related transaction costs ​ — ​ 279 ​ — ​ (279) ​ 279 Stock-based compensation ​ — ​ — ​ ​ 1,129 ​ — ​ (1,129) Foreign currency (gains) losses, net ​ 2,455 ​ (5,216) ​ (4,480) ​ 7,671 ​ (736) Interest paid, net ​ (14,575) ​ (11,159) ​ (10,808) ​ (3,416) ​ (351) Income taxes paid ​ (20,410) ​ (17,854) ​ (19,395) ​ (2,556) ​ 1,541 Changes in operating assets and liabilities and other items ​ (64,458) ​ (50,421) ​ (29,373) ​ (14,037) ​ (21,048) Net cash provided by operating activities ​ $ 13,310 ​ $ 31,649 ​ $ 48,306 ​ $ (18,339) ​ $ (16,657) ​ Certain amounts may reflect rounding adjustments.
Certain amounts and percentages may reflect rounding adjustments. * Calculation not meaningful 60 Table of Contents A reconciliation of net income, as reported under GAAP, to Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2022 2021 2020 2022/ 2021 2021/ 2020 ​ ​ (in thousands) Net income ​ $ 49,175 ​ $ 54,385 ​ $ 33,552 ​ $ (5,210) (10) % $ 20,833 62 % Interest expense, net ​ 11,875 ​ 12,880 ​ 12,856 ​ (1,005) (8) % 24 0 % Provision for income taxes ​ 23,152 ​ 12,083 ​ 21,960 ​ 11,069 92 % (9,877) (45) % Depreciation and amortization ​ 32,705 ​ 31,885 ​ 32,341 ​ 820 3 % (456) (1) % EBITDA ​ 116,907 ​ 111,233 ​ 100,709 ​ 5,674 5 % 10,524 10 % Gain on sale of investment ​ (1,203) ​ — ​ — ​ (1,203) * ​ — * ​ Acquisition-related cost of goods sold ​ 316 ​ — ​ 280 ​ 316 * ​ (280) * ​ Acquisition-related transaction costs ​ 279 ​ — ​ 462 ​ 279 * ​ (462) * ​ Acquisition-related other, net (1) ​ — ​ — ​ (2,821) ​ — * ​ 2,821 * ​ Stock-based compensation ​ — ​ 1,129 ​ 2,259 ​ (1,129) * ​ (1,130) * ​ Restructuring costs ​ ​ — ​ ​ — ​ ​ 425 ​ ​ — * ​ ​ (425) ​ * ​ Foreign currency (gains) losses, net ​ (5,216) ​ (4,480) ​ 826 ​ (736) * ​ (5,306) * ​ Adjusted EBITDA ​ $ 111,083 ​ $ 107,882 ​ $ 102,140 ​ $ 3,201 3 % $ 5,742 6 % ​ (1) Acquisition-related other, net was primarily a result of a reduction to acquisition-related contingent consideration.
Certain amounts and percentages may reflect rounding adjustments. * Calculation not meaningful 60 Table of Contents A reconciliation of net income, as reported under GAAP, to Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change For the Year Ended June 30 2023 2022 2021 2023/ 2022 2022/ 2021 ​ ​ (in thousands, except percentages) Net income ​ $ 32,606 ​ $ 49,175 ​ $ 54,385 ​ $ (16,569) (34) % $ (5,210) (10) % Interest expense, net ​ 15,321 ​ 11,875 ​ 12,880 ​ 3,446 29 % (1,005) (8) % Provision for income taxes ​ 21,465 ​ 23,152 ​ 12,083 ​ (1,687) (7) % 11,069 92 % Depreciation and amortization ​ 34,012 ​ 32,705 ​ 31,885 ​ 1,307 4 % 820 3 % EBITDA ​ 103,404 ​ 116,907 ​ 111,233 ​ (13,503) (12) % 5,674 5 % Environmental remediation costs ​ ​ 6,894 ​ ​ — ​ ​ — ​ ​ 6,894 * ​ ​ — * ​ Gain on sale of investment ​ — ​ (1,203) ​ — ​ 1,203 * ​ (1,203) * ​ Acquisition-related cost of goods sold ​ — ​ 316 ​ — ​ (316) * ​ 316 * ​ Acquisition-related transaction costs ​ — ​ 279 ​ — ​ (279) * ​ 279 * ​ Stock-based compensation ​ — ​ — ​ 1,129 ​ — * ​ (1,129) * ​ Foreign currency (gains) losses, net ​ 2,455 ​ (5,216) ​ (4,480) ​ 7,671 * ​ (736) * ​ Adjusted EBITDA ​ $ 112,753 ​ $ 111,083 ​ $ 107,882 ​ $ 1,670 2 % $ 3,201 3 % ​ Certain amounts and percentages may reflect rounding adjustments. * Calculation not meaningful Adjusted net income We report adjusted net income to portray the results of our operations prior to considering certain income statement elements.
Operating activities provided $48.3 million of net cash for the year ended June 30, 2021. Profitable business performance resulted in cash provided by net income and non-cash items, including depreciation and amortization, of $78.2 million. Cash used in the ordinary course of business for changes in operating assets and liabilities was $29.9 million.
Net cash provided by operating activities was driven by business performance, resulting in cash provided by net income and non-cash items, including depreciation and amortization, of $54.4 million, offset by cash used in the ordinary course of business for changes in operating assets and liabilities of $41.1 million.
For additional considerations and risks associated with COVID-19 on our business, please refer to Item 1A. “Risk Factors.” Industry growth We believe global population growth, the growth of the global middle class and the productivity improvements needed due to limitations of arable land and water supplies have supported and will continue to support growth of the animal health industry.
Industry growth We believe global population growth, the growth of the global middle class and the productivity improvements needed due to limitations of arable land and water supplies have supported and will continue to support growth of the animal health industry. Regulatory developments Our business depends heavily on a healthy and growing livestock industry.
Realization of certain deferred tax assets, primarily net operating loss carryforwards, is dependent upon generating sufficient future taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods. We establish valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit.
Realization of certain deferred tax assets, including research and development costs capitalized for income tax purposes and net operating loss carryforwards, is dependent upon generating sufficient future taxable income in the appropriate jurisdiction prior to the expiration of the amortization or carryforward periods.
Mineral Nutrition Net sales of $259.5 million for the year ended June 30, 2022, increased $39.0 million, or 18%, primarily driven by higher average selling prices. The increase in average selling prices is correlated with the movement of the underlying raw material costs.
Mineral Nutrition Net sales of $242.7 million for the year ended June 30, 2023, decreased $16.9 million, or 6%, primarily driven by a decrease in demand for trace minerals, partially offset by higher average selling prices. The increase in average selling prices is correlated to the movement of the underlying raw material costs.
We cannot know if the conflict could escalate and result in broader economic and security concerns that could adversely affect our business, financial condition, or results of operations. Effects of the COVID-19 pandemic The global food and animal production industry has experienced demand disruption, production impacts, price volatility and currency volatility in international markets due to the COVID-19 pandemic.
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.
Net sales of nutritional specialty products grew $14.4 million, or 10%, due to domestic demand for dairy products, international growth and volume growth in our companion animal product. Net sales of vaccines increased $15.4 million, or 21%, with increased demand in most regions.
Net sales of nutritional specialty products grew $15.3 million, or 10%, due to strong demand in dairy products and increased sales of Rejensa ® , our companion animal product. Net sales of vaccines increased $11.7 million, or 13%, with an increase in domestic and international demand, along with new product launches in Latin America.
SG&A for the year ended June 30, 2022, included a $1.2 million gain on sale of investment and $0.3 million of acquisition-related transaction costs. SG&A for the year ended June 30, 2021, included $1.1 million of stock-based compensation. Excluding these items, SG&A increased $12.2 million, or 6%.
SG&A for the year ended June 30, 2023, included $6.9 million of environmental remediation costs mostly related to the definitive settlement agreement related to the Omega Chemical Site. SG&A for the year ended June 30, 2022, included a $1.2 million gain on sale of investment and $0.3 million of acquisition-related transaction costs.
We calculate DSO based on a 360-day year and compare accounts receivable with sales for the quarter ending at the balance sheet date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2022 2021 2020 2022 / 2021 2021 / 2020 ​ ​ (in thousands) Inventories ​ $ 259,158 ​ $ 216,312 ​ $ 196,659 ​ $ 42,846 ​ $ 19,653 ​ Inventory increased by $42.8 million in 2022, primarily due to higher raw material and production costs. 65 Table of Contents Off-balance sheet arrangements We currently do not use off-balance sheet arrangements for the purpose of credit enhancement, hedging transactions, investment or other financial purposes.
We calculate DSO based on a 360-day year and compare accounts receivable with sales for the quarter ending at the balance sheet date. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As of June 30 2023 2022 2021 2023 / 2022 2022 / 2021 ​ ​ (in thousands) Inventories ​ $ 277,570 ​ $ 259,158 ​ $ 216,312 ​ $ 18,412 ​ $ 42,846 ​ Inventory increased by $18.4 million in 2023, due to increased raw material and production costs, product mix, lower demand for our Mineral Nutrition products and a projected increase in future demand of other products in our portfolio.
Gross profit Gross profit of $285.4 million for the year ended June 30, 2022, increased $14.0 million, or 5%, as compared to the year ended June 30, 2021.
Gross profit Gross profit of $298.2 million for the year ended June 30, 2023, increased $12.8 million, or 4%, as compared to the year ended June 30, 2022. Gross margin increased 20 basis points to 30.5% of net sales for the year ended June 30, 2023, as compared to 30.3% for the year ended June 30, 2022.
Regulatory Developments Our business depends heavily on a healthy and growing livestock industry. Some in the public perceive risks to human health related to the consumption of food derived from animals that utilize certain of our products, including certain of our MFA products.
Some in the public perceive risks to human health related to the consumption of food derived from animals that utilize certain of our products, including certain of our MFA products. In particular, there is increased focus, in the United States and other countries, on the use of medically important antimicrobials.
Contractual obligations Our contractual obligations include maturities under the 2021 Credit Facilities, including future interest accruals, operating lease commitments, and certain purchase obligations.
There are no restrictions on cash distributions to PAHC from our international subsidiaries. 68 Table of Contents Contractual obligations Our contractual obligations include maturities under the 2021 Credit Facilities and the 2022 Term Loan, including future interest accruals, operating lease commitments, and certain purchase obligations.
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.
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.
Performance Products Net sales of $75.7 million for the year ended June 30, 2022, increased $8.6 million, or 13%, as a result of higher volumes of ingredients for personal care products and increases in average-selling prices of copper-based products.
Performance Products Net sales of $75.4 million for the year ended June 30, 2023, decreased $0.3 million, or less than 1%, as a result of decreased demand for both personal care product ingredients and copper-related products, partially offset by higher average selling prices for these products.
Interest expense for the year ended June 30, 2021, included $1.0 million of expense related to the April 2021 refinancing. Foreign currency (gains) losses, net Foreign currency gains, net for the year ended June 30, 2022, were $5.2 million, as compared to net gains of $4.5 million for the year ended June 30, 2021.
Foreign currency (gains) losses, net Foreign currency losses, net for the year ended June 30, 2023, were $2.5 million, as compared to net gains of $5.2 million for the year ended June 30, 2022. Current period losses were driven by fluctuations in certain currencies related to the U.S. dollar.
Animal Health Adjusted EBITDA increased $0.2 million, driven by higher gross profit, mostly offset by higher SG&A expenses. Mineral Nutrition Adjusted EBITDA increased $6.9 million driven by increases in average selling prices, partially offset by increases in raw material costs. Performance Products Adjusted EBITDA decreased by $0.7 million, or 8%, due to higher raw material and production costs.
Mineral Nutrition Adjusted EBITDA decreased $6.6 65 Table of Contents million, driven by lower sales volume and higher raw material costs. Performance Products Adjusted EBITDA increased by $0.6 million due to higher gross profit, partially offset by an increase in SG&A. Corporate expenses increased $4.4 million due to increased employee-related costs and strategic investments.
Other risks to our meeting future funding requirements include global economic conditions and macroeconomic, business and financial disruptions that could arise, including those caused by COVID-19. There can be no assurance that a challenging economic environment or an economic downturn would not affect our liquidity or our ability to obtain future financing or fund operations or investment opportunities.
There can be no assurance that a challenging economic environment or an economic downturn would not affect our liquidity or our ability to obtain future financing or fund operations or investment opportunities. In addition, our debt covenants may restrict our ability to invest.
Acquisition-related cost of goods sold reduced gross profit by $0.3 million. Selling, general and administrative expenses SG&A expenses of $206.4 million for the year ended June 30, 2022, increased $9.9 million, or 5%, as compared to the year ended June 30, 2021.
Performance Products gross profit increased $1.7 million, due primarily to more favorable product mix. Selling, general and administrative expenses SG&A expenses of $226.4 million for the year ended June 30, 2023, increased $20.0 million, or 10%, as compared to the year ended June 30, 2022.
We may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority in the jurisdictions where we operate. We evaluate our tax positions and establish liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes.
We establish valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. We may take tax positions that management believes are supportable, but are potentially subject to successful challenge by the applicable taxing authority in the jurisdictions where we operate.
Capital expenditures were $29.3 million as we continued to invest in expanding production capacity and productivity improvements. Net proceeds from maturities of short-term investments were $12.0 million. Other investing activities used $1.3 million of cash. Financing activities Financing activities provided $16.3 million of net cash for the year ended June 30, 2022.
Investing activities Investing activities used $74.0 million of net cash for the year ended June 30, 2023. Capital expenditures were $51.8 million, related primarily to continued investments in expanded production capacity and productivity improvements, and the $15.0 million purchase of additional land and building at an operating facility. Net purchases and maturities of short-term investments were $23.0 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−3 removed3 unchanged
Biggest changeTherefore, our profitability and cash flows are exposed to interest rate fluctuations. Our interest rates also include variable applicable rates in addition to the LIBOR portion of our interest obligation. The applicable rates vary from 1.50% to 2.00%, based on the First Lien Net Leverage Ratio, as defined in the 2021 Credit Facilities.
Biggest changeThe applicable rates vary from 1.50% to 2.75%, based on the First Lien Net Leverage Ratio, as defined in the 2021 Credit Facilities.
We use these contracts to mitigate the potential earnings effects from exposure to foreign currencies. We analyzed our foreign currency derivative contracts at June 30, 2022 to determine their sensitivity to exchange rate changes.
We use these contracts to mitigate the potential earnings effects from exposure to foreign currencies. We analyzed our foreign currency derivative contracts at June 30, 2023 to determine their sensitivity to exchange rate changes.
The analysis indicates that if the U.S. dollar were to appreciate or depreciate by 10%, the fair value of these contracts would decrease by $0.3 million or increase by $1.8 million.
The analysis indicates that if the U.S. dollar were to appreciate or depreciate by 10%, the fair value of these contracts would decrease or increase by $0.2 million.
For additional details, see “Notes to the Consolidated Financial Statements — Debt” and “Notes to the Consolidated Financial Statements — Derivatives.” ​ 73 Table of Contents
For additional details, see “Notes to Consolidated Financial Statements — Debt” and “Notes to Consolidated Financial Statements — Derivatives.” ​ 77 Table of Contents
For additional details, see “Notes to Consolidated Financial Statements — Derivatives.” Interest rate risk We have effectively converted $300 million of our outstanding debt to fixed interest rates through June 2025, through the use of interest rate swap agreements.
For additional details, see “Notes to Consolidated Financial Statements — Derivatives.” Interest rate risk We have effectively converted $300 million of our outstanding debt to fixed interest rates through June 2025, through the use of an interest rate swap agreement. Our debt is subject to floating interest rates to the extent not effectively converted to fixed interest rate debt.
Based on our outstanding debt balances and the applicable rate in effect as of June 30, 2022, and considering the interest rate swap agreement, a 100-basis point increase in LIBOR would increase annual interest expense and decrease cash flows by $1.4 million.
We designated the interest rate swap as a highly effective cash flow hedge. 76 Table of Contents Based on our outstanding debt balances and the applicable rate in effect as of June 30, 2023, and considering the interest rate swap agreement, a 100-basis point increase in SOFR would increase annual interest expense and decrease cash flows by $1.8 million.
In March 2020, we entered into an interest rate swap agreement on an additional $150 million of notional principal that effectively converts the floating LIBOR portion of our interest obligation on that amount of debt to a fixed rate of 0.62%.
In March 2020, and amended in November 2022, we entered into an interest rate swap agreement that effectively converted the floating SOFR portion of our interest obligation to a fixed rate of 0.61% on a $300 million principal amount.
Removed
Our debt in excess of $300 million and all debt after the maturity of the interest rate swap agreements is floating interest rate debt. Our 2021 Credit Facilities carry floating interest rates based on LIBOR and the Prime Rate, to the extent not effectively converted to fixed interest rate debt.
Added
Our 2021 Credit Facilities carry floating interest rates based on the Secured Overnight Financing Rate (“SOFR”) (previously the London Interbank Offered Rate (“LIBOR”)) or the Prime Rate. Therefore, our profitability and cash flows are exposed to interest rate fluctuations. Our interest rates also include variable applicable rates in addition to the SOFR portion of our interest obligation.
Removed
In July 2017, we entered into an interest rate swap agreement on $150 million of notional principal that effectively converts the floating LIBOR portion of our interest obligation on that amount of debt to a fixed interest rate of 1.8325%. The agreement matured in June 2022.
Removed
On the maturity of the July 2017 agreement, the March 2020 agreement increased to a notional principal amount of $300 million through June 2025, and effectively converts the floating LIBOR portion of our interest obligation on $300 million of debt to a fixed interest rate of 0.62%. We designated the interest rate swaps as highly effective cash flow hedges.

Other PAHC 10-K year-over-year comparisons