Phibro Animal Health
Annual Report 2016

Plain-text annual report

PHIBRO ANIMAL HEALTH CORP FORM 10-K (Annual Report) Filed 08/29/16 for the Period Ending 06/30/16 Address GLENPOINTE CENTRE EAST, 3RD FLOOR 300 FRANK W. BURR BLVD., SUITE 21 TEANECK, NJ 07666 201-329-7300 0001069899 PAHC 2834 - Pharmaceutical Preparations Biotechnology & Drugs Telephone CIK Symbol SIC Code Industry Sector Healthcare Fiscal Year 06/30 http://www.edgar-online.com © Copyright 2016, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. ☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934TABLE OF CONTENTSUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549​FORM 10-K​(Mark One)For the fiscal year ended June 30, 2016ORFor the transition period from______ to______Commission File Number: 001-36410​Phibro Animal Health Corporation(Exact name of registrant as specified in its charter)​​Delaware13-1840497​​(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)​​Glenpointe Centre East, 3 Floor 300 Frank W. Burr Boulevard, Suite 21 Teaneck, New Jersey (Address of Principal Executive Offices)07666-6712 (Zip Code)​(201) 329-7300 (Registrant’s telephone number, including area code)​Securities registered pursuant to Section 12(b) of the Act:​Class A Common Stock, $0.0001 par value per share (Title of each class)NASDAQ Stock Market (Name of each exchange on which registered)​Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of Securities Act.  Yes  ☐  No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  ☐  No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ☒ No  ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files.)  Yes ☒ No  ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer☐Accelerated filer☒Non-accelerated filer☐Smaller reporting company☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No ☒The aggregate market value of the registrant’s Class A common stock and Class B common stock held by non-affiliates of the registrant was$548,903,338 as of December 31, 2015, the last business day of the registrant’s most recently completed second fiscal quarter based on the closing price of thecommon stock on the NASDAQ Stock Market. The registrant has no non-voting common stock.As of August 22, 2016, there were 18,519,757 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 20,887,811 shares ofthe registrant’s Class B common stock, par value $0.0001 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrant’s Proxy Statement for the 2016 Annual Meeting of Shareholders to be held on November 7, 2016 (hereinafter referred to asthe “2016 Proxy Statement”) are incorporated herein by reference in Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with theSecurities and Exchange Commission within 120 days of the registrant’s fiscal year ended June 30, 2016.rd Item 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesItem 15. Exhibits, Financial Statement SchedulesTABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION TABLE OF CONTENTSPageForward-Looking Statements3Emerging Growth Company Status4Market Ranking and Other Industry Data5Trademarks, Service Marks and Trade Names5PART I62649505050PART II5153557476112112113PART III114114114114114PART IV115SIGNATURES1162• perceived adverse effects on human health linked to the consumption of food derived from animalsthat utilize our products could cause a decline in the sales of those products;• restrictions on the use of antibacterials in food-producing animals may become more prevalent;• a material portion of our sales and gross profits are generated by antibacterials and other relatedproducts;• competition in each of our markets from a number of large and small companies, some of which havegreater financial, research and development (“R&D”), production and other resources than we have;• the impact of current and future laws and regulatory changes;• outbreaks of animal diseases could significantly reduce demand for our products;• our ability to successfully implement several of our strategic initiatives;• our business may be negatively affected by weather conditions and the availability of naturalresources;• the continuing trend toward consolidation of certain customer groups as well as the emergence oflarge buying groups;• our ability to control costs and expenses;• any unforeseen material loss or casualty;• exposure relating to rising costs and reduced customer income;• competition deriving from advances in veterinary medical practices and animal health technologies;• unanticipated safety or efficacy concerns;• our dependence on suppliers having current regulatory approvals;• our raw materials are subject to price fluctuations and their availability can be limited;• natural and man-made disasters, including but not limited to fire, snow and ice storms, flood, hail,hurricanes and earthquakes;• terrorist attacks, particularly attacks on or within markets in which we operate;• our reliance on the continued operation of our manufacturing facilities and application of ourintellectual property;TABLE OF CONTENTS ​Forward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements that are subject to risks anduncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to ourfinancial condition, results of operations, plans, objectives, future performance and business. You can identifyforward-looking statements by the fact that they do not relate strictly to historical or current facts. These statementsmay include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,”“project,” “projection,” “plan,” “intend,” “seek,” “believe,” “may,” “could,” “would,” “will,” “should,” “can,” “canhave,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with anydiscussion of the timing or nature of future operating or financial performance or other events. For example, allstatements we make relating to our estimated and projected earnings, revenues, costs, expenditures, cash flows,growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies, orthe expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from thosethat we expected. Examples of such risks and uncertainties include:3• adverse U.S. and international economic market conditions, including currency fluctuations;• the risks of product liability claims, legal proceedings and general litigation expenses;• our dependence on our Israeli and Brazilian operations;• our substantial level of indebtedness and related debt-service obligations;• restrictions imposed by covenants in our debt agreements;• the risk of work stoppages; and• other factors as described in “Risk Factors” in Item 1A. of this Annual Report on Form 10-K.TABLE OF CONTENTS ​While we believe that our assumptions are reasonable, we caution that it is very difficult to predict theimpact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.Important factors that could cause actual results to differ materially from our expectations, or cautionary statements,are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.” All forward-looking statements are expressly qualified in their entirety by these cautionarystatements. You should evaluate all forward-looking statements made in this report in the context of these risks anduncertainties.We caution you that the important factors referenced above may not contain all of the factors that areimportant to you. In addition, we cannot assure you that we will realize the results or developments we expect oranticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or ouroperations in the way we expect. The forward-looking statements included in this report are made only as of the datehereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of newinformation, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or otherforward-looking statements.Emerging Growth Company StatusWe are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the“Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, weare eligible to take advantage of certain exemptions from various reporting requirements that are applicable to otherpublic companies that are not “emerging growth companies.” These exemptions include, but are not limited to, (i)not being required to comply with the auditor attestation requirements of Section 404 (“Section 404”) of theSarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), (ii) reduced disclosure obligations regardingexecutive compensation in our periodic reports and proxy statements, and (iii) exemptions from the requirements ofholding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachutepayments not previously approved. We have taken, and plan to continue to take, advantage of some or all of theseexemptions. If we do continue to take advantage of any of these exemptions, we do not know if some investors willfind our Class A common stock less attractive as a result. If some investors find our Class A common stock lessattractive, there may be a less active trading market for our Class A common stock and our stock price may be morevolatile. We have elected to forego the extended transition period for complying with new or revised accountingstandards that emerging growth companies are permitted to take advantage of pursuant to Section 107 of the JOBSAct.Pursuant to Section 102 of the JOBS Act, our 2016 Proxy Statement will provide reduced executivecompensation disclosure.We will remain an emerging growth company until the earliest of  (a) the last day of the first fiscal year inwhich our annual gross revenues exceed $1 billion, (b) the date that we become a “large accelerated filer” as definedin Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur ifthe market value of our Class A common stock that is held by non-affiliates4TABLE OF CONTENTS ​ ​exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (c) the date onwhich we have issued more than $1 billion in non-convertible debt during the preceding three-year period, or (d)June 2019, which is the end of the fiscal year following the fifth anniversary of our initial public offering.Market, Ranking and Other Industry DataUnless otherwise indicated, information contained in this report concerning our industry and the marketsin which we operate, including our general expectations and market position, market opportunity and market share,is based on management estimates and on information from Vetnosis Limited (“Vetnosis”), a research andconsulting firm specializing in global animal health and veterinary medicine. The Vetnosis information cited in thisdocument was not prepared by Vetnosis on our behalf. Management estimates are derived from publicly availableinformation, our knowledge of our industry and assumptions based on such information and knowledge, which webelieve to be reasonable. We believe these estimates are reasonable as of the date of this report, or if an earlier dateis specified, as of such earlier date. However, this information may prove to be inaccurate because of the method bywhich we obtained some of the data for our estimates or because this information is subject to change and cannotalways be verified due to limits on the availability and reliability of independent sources, the voluntary nature of thedata gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. Inaddition, purchasing patterns and consumer preferences can and do change. As a result, you should be aware thatmarket share, ranking and other similar data set forth in this report, and estimates and beliefs based on such data,may not be reliable.Trademarks, Service Marks and Trade NamesThe following trademarks and service marks used throughout this report belong to, are licensed to, or areotherwise used by us in our business: Stafac ; Eskalin™; V-Max ; Terramycin ; Neo-Terramycin ; Neo-TM™; TM-50 ; TM-100™; Mecadox ; Nicarb ; Boviprol™; Bloat Guard ; Aviax ; Aviax II™; AviaxPlus™; Coxistac™; Posistac™; Banminth ; Cerditac™; Cerdimix™; Rumatel ; OmniGen-AF ; Animate ;Procreatin 7 ; Magni-Phi ; Chromax ; Provia 6086™; SRP ; Safmannan ; Biosaf ; AB20 ; Lactrol ;MJPRRS ; TAbic and V.H. 5® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ®• Animal health products such as antibacterials, anticoccidials and vaccines, which help prevent andmanage infectious disease in livestock and therefore improve food safety, and nutritional specialtyproducts, which enhance nutrition to help improve health and performance.• Mineral nutrition products that fortify the animal’s diet and help maintain optimal health.TABLE OF CONTENTS ​PART IItem 1. BusinessOverviewPhibro Animal Health Corporation is a leading global diversified animal health and mineral nutritioncompany. We are committed to providing livestock producers with value-based products and solutions to help themmaintain and enhance the health and productivity of their animals and meet the growing demand for animal protein.Our sales, marketing and technical support organization of approximately 300 employees sells more than 1,400product presentations in over 65 countries to approximately 3,000 customers. We develop, manufacture and marketproducts for a broad range of food animals including poultry, swine, beef and dairy cattle and aquaculture. Ourproducts help prevent, control and treat diseases, enhance nutrition to help improve health and performance andcontribute to balanced mineral nutrition. We sell animal health and mineral nutrition products either directly tointegrated poultry, swine and cattle integrators or through commercial animal feed manufacturers, wholesalers anddistributors.Our products include:We have focused our efforts in regions where the majority of livestock production is consolidated in largecommercial farms such as the United States, Brazil, China, Russia, Mexico, Australia, Turkey, Israel, Canada andEurope, and we believe we are well positioned to further accelerate our growth with our established network ofsales, marketing and distribution professionals in emerging markets in Latin America, Asia Pacific, Europe andAfrica.In addition to animal health and mineral nutrition products, we manufacture and market specificingredients for use in the personal care, automotive, industrial chemical and chemical catalyst industries. We sellperformance products directly to customers in the aforementioned industries.Unless otherwise indicated or the context requires otherwise, references in this report to “we,” “our,”“us,” “the Company,” “Phibro,” “PAHC” and similar expression refer to Phibro Animal Health Corporation and itssubsidiaries. We completed our initial public offering on April 16, 2014. Our Class A common stock trades on theNASDAQ Stock Market (“NASDAQ”) under the trading symbol “PAHC.” Our Class B common stock is not listedor traded on any stock exchange.Business SegmentsWe manage our business in three segments—Animal Health, Mineral Nutrition and Performance Products—each with its own dedicated management and sales team, for enhanced focus and accountability. Net sales bysegments, species and regions were:SegmentsChange​​Percentage of total​For the Years Ended June 302016201520142016 / 2015​​2015 / 2014​​201620152014​($ in millions)​​​Animal Health$486$471$431$153$409656362Mineral Nutrition217227202(10(52613293029Performance Products495159(2(4(9(14679Total$752$749$692$30$5786%%%%%))%%%%%))%))%%%%%%(1) Other includes the Performance Products segment, Mineral Nutrition sales to pet food and fertilizermanufacturers and sales to the ethanol industry(2) Net sales by region are based on country of destination(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Generaldescription of non-GAAP financial measures” for description of Adjusted EBITDA.(2) Before unallocated corporate costsTABLE OF CONTENTS​​SpeciesChange​Percentage of total​For the Years Ended June 30​​2016201520142016 / 2015​​2015 / 2014​201620152014​​​($ in millions)​​​Poultry$292$280$284$124$(4(2393741Swine10010290(1(11213131413Dairy1461351201291512191817Cattle9610083(4(41720131312Other 116132115(16(121715151817Total$752$749$692$30$578Regions ChangePercentage of total​For the Years Ended June 302016201520142016 / 20152015 / 2014201620152014​($ in millions)​​U.S. & Canada$493$483$445$92$389666564Brazil & Latin America10910792221517151413China & Asia Pacific616162(1(1(1(1889Israel & Other899793(8(844121313Total$752$749$692$30$578Certain reclassifications have been made to prior year amounts to conform to the current year presentations.Certain amounts and percentages may reflect rounding adjustments.Adjusted EBITDA by segment was:Adjusted EBITDA ChangePercentage of total ​For the Year Ended June 302016201520142016 / 20152015 / 2014201620152014​($ in millions)​​Animal Health$127$120$100$76$2020898886Mineral Nutrition15141214324101110Performance Products135(2(63(2(43124Corporate(29(27(26(2*(1*Total$114$110$91$44$1921Certain amounts and percentages may reflect rounding adjustments.Net identifiable assets by segment were:Net Identifiable AssetsChange​Percentage of total​As of June 302016201520142016 / 2015​​2015 / 2014​201620152014​($ in millions)​​​Animal Health$445$349$349$9527$10737174Mineral Nutrition585957(1(11291212Performance Products222223(0(2(1(5445Corporate8663432336204614139Total$610$493$472$11724$214Corporate includes all cash and cash equivalents and all income tax related assets.7%))%%%%))%%%%%%%%%%))%%%%%(1)))%%%%%%%(2)%%%%%%%%%%))%))%%%%))%%%%%%%(1)(2)%%%%%%%%%%))%))%%%%)))))%%%%%%%))%%%%%))%))%%%%%%%%%%%• antibacterials, which inhibit the growth of pathogenic bacteria that cause bacterial infections inanimals; anticoccidials, which inhibit the growth of coccidia (parasites) that damage the intestinaltract of animals; and related products (MFAs and other);• nutritional specialty products, which enhance nutrition to help improve health and performance(nutritional specialties); and• vaccines, which cause an increase in antibody levels against a specific virus or bacterium, thuspreventing infection from that viral or bacterial antigen (vaccines).(1) Net sales by region are based on country of destinationTABLE OF CONTENTSCertain reclassifications have been made to prior year amounts to conform to the current year presentations.Certain amounts and percentages may reflect rounding adjustments.Animal HealthOur Animal Health business develops, manufactures and markets more than 550 product presentations,including:Our animal health products help our customers prevent, control and treat diseases and enhance nutrition tohelp improve health and performance, enabling our customers to more efficiently produce high-quality, wholesomeanimal protein products for human consumption. We develop, manufacture and market animal health products for abroad range of food animals including poultry, swine, beef and dairy cattle and aquaculture. We provide technicaland product support directly to our customers to ensure the optimal use of our products. The animal health industryand demand for many of our animal health products in a particular region are affected by changing disease pressuresand by weather conditions, as usage of our products follows varying weather patterns and seasons. As a result, wemay experience regional and seasonal fluctuations in our animal health segment. Animal Health net sales by productgroup and regions were:Product GroupsChange​Percentage of total​For the Years Ended June 302016201520142016 / 2015​​2015 / 2014​201620152014​($ in millions)​​MFAs and other$340$336$327$41$93707176Nutritional specialties94826312151930191715Vaccines525341(1(21229111110Animal Health$486$471$431$153$409Regions ChangePercentage of total​For the Years Ended June 302016201520142016 / 2015​​2015 / 2014201620152014​($ in millions)​U.S. & Canada$235$219$195$178$2412484645Brazil & Latin America1049985661416212120China & Asia Pacific616162(1(1(1(1121314Israel & Other869289(6(734182021Total$486$471$431$153$409Certain amounts and percentages may reflect rounding adjustments.MFAs and OtherOur MFAs and other business primarily consists of concentrated medicated products that are administeredthrough animal feeds, commonly referred to as Medicated Feed Additives (“MFAs”). Our MFAs and other businessprimarily consists of the production and sale of antibacterials (including Stafac , Terramycin , Neo-Terramycinand Mecadox ) and anticoccidials (including Nicarb , Aviax , Aviax8%%%%%%%%%%))%%%%%%%(1)%%%%%%%%%%))%))%%%%))%%%%%%%® ® ® ® ® ® TABLE OF CONTENTSPlus™, Coxistac™ and amprolium). Growth in this business primarily stems from increased penetration intoemerging markets. MFAs and other also includes antibacterial products used to control bacterial infections, as wellas other processing aids, for the ethanol fermentation industry.Approximately 55% of our MFAs and other sales in fiscal year 2016 were to the poultry industry, withsales to swine, cattle, dairy and other customers accounting for the remainder. The principal regions we serveinclude the U.S. and Canada, Brazil and Latin America, China and Asia Pacific, and Israel and other, with thelargest region (as measured by net sales) accounting for less than half of total net sales.Nutritional SpecialtiesMany of our proprietary nutritional specialty products have been developed through basic research incooperation with private research companies or by leading universities with whom we collaborate and then furtherdevelop through commercial trials with customers. Our nutritional specialty products include OmniGen-AF , aunique, patented nutritional specialty product that has been shown in several studies to help maintain a cow’shealthy immune system, and Animate , a unique, patented anionic nutritional specialty product that helps optimizethe health and performance of the transition dairy cow. We sell OmniGen-AF in the United States, Canada, Mexico,Brazil, several European countries, Turkey, Israel, Japan, China and Australia. We sell Animate in the UnitedStates, Canada and Mexico. We sell Magni-Phi , a unique proprietary specialty product that has been shown inseveral studies to help improve immune response in poultry, which may lead to better health and performance, topoultry integrators in the United States.VaccinesOur vaccines products are primarily focused on preventing diseases in poultry and swine. We marketthese products in the United States, Israel, Turkey, China, South East Asia, India, East and Central Europe, Braziland other Latin American countries and various African countries. Our vaccine products protect animals from bothviral and bacterial disease challenges.We have developed and distribute over 25 vaccine presentations for prevention of disease in poultryincluding vaccines to protect against Infectious Bursal Disease, Infectious Bronchitis, and Newcastle Disease.In January 2016, we acquired the business and assets of MVP Laboratories, Inc. (“MVP”), whichdeveloped, manufactured and distributed autogenous vaccines against bacterial and viral diseases, adjuvants andother products. As a result of this acquisition, we became the manufacturer of the MJ Biologics, Inc. (“MJB”)autogenous vaccine against porcine reproductive and respiratory syndrome (“PRRS”), which we have exclusivelydistributed pursuant to an agreement entered into with MJB in January 2015. We and MJB have also agreed tocollaborate on the development of certain other animal vaccines. We have agreed to purchase MJB’s intellectualproperty and certain other assets comprising MJB’s animal vaccines business with an expected closing date ofJanuary 1, 2021.We are also the exclusive distributor of Epitopix’s autogenous vaccines protecting against variousdiseases including Salmonella and E. coli for chickens in the United States, containing their proprietary SRP technology, primarily for broiler breeders and table egg laying hens. Our autogenous vaccines allow us to producecustom vaccines for veterinarians that contain antigens specific to each farm, allowing Phibro to providecomprehensive health management solutions to our customers.We have developed TAbic , an innovative and proprietary delivery platform for vaccines. TAbic is apatented technology for formulation and delivery of vaccine antigens in effervescent tablets, packaged in sealedaluminum blister packages. The technology replaces the glass bottles that are in common use today, and offerssignificant advantages including storage requirements, customer handling and disposal. Several of our vaccineproducts are available in the patented TAbic format. We also focus on innovation to produce new antigens or newpresentations of antigens, and have developed new vaccines, such as the inactivated subunit Infectious BursalDisease Virus and Egg Drop Syndrome vaccines, being sold as monovalent vaccines or in combinations with otherantigens.9® ® ® ®® TABLE OF CONTENTSMineral NutritionOur Mineral Nutrition business manufactures and markets more than 400 formulations and concentrationsof trace minerals such as zinc, manganese, copper, iron and other compounds, with a focus on customers in NorthAmerica. Our customers use these products to fortify the daily feed requirements of their livestock’s diets andmaintain an optimal balance of trace elements in each animal. We manufacture and market mineral nutritionproducts for a broad range of food animals including poultry, swine and beef and dairy cattle. Volume growth in themineral nutrition sector is primarily driven by livestock production numbers, while pricing is largely based on costsof the underlying commodity metals. Demand for our mineral nutrition products can vary in different seasons of theyear and due to changes in weather conditions in a particular region, both of which may cause animal feedconsumption to fluctuate. As a result, we may experience regional and seasonal fluctuations in our Mineral Nutritionsegment.Performance ProductsOur Performance Products business manufactures and markets a number of specialty ingredients for usein the personal care, automotive, industrial chemical and chemical catalyst industries, predominantly in the UnitedStates.Our ProductsAnimal HealthMFAs and OtherOur MFAs and other business primarily consists of the production and sale of antibacterials (Stafac,Terramycin, Neo-Terramycin and Mecadox) and anticoccidials (Nicarb, Aviax, Aviax Plus, Coxistac andamprolium).Antibacterials and AnticoccidialsWe manufacture and market a broad range of antibacterials and other medicated products to the globallivestock industry. These products provide therapeutic benefits for the animals and increased feed conversionefficiency, which are proven drivers of profitability for animal producers. The table below presents our core MFAproducts:ProductActive IngredientMarket Entry of Active IngredientDescription​Terramycin /TM-50 /​TM-100™oxytetracycline1951Antibacterial with multipleapplications for a wide number ofspeciesNicarb nicarbazin1954Anticoccidial for poultryamproliumamprolium1960Anticoccidial for poultry and cattleBloat Guard poloxalene1967Anti-bloat treatment for cattleBanminth pyrantel tartrate1972Anthelmintic for livestockMecadox carbadox1972Antibacterial for swine to controlSalmonellosis and dysenteryStafac /Eskalin™/V-Max virginiamycin1975Antibacterial used to prevent andcontrol diseases in poultry, swineand cattleCoxistac™/Posistac™salinomycin1979Anticoccidial for poultry andcattle; disease preventative inswine10® ® ®®®®® ®• Oxytetracycline and Neomycin . Terramycin utilizes the active ingredient oxytetracycline and Neo-Terramycin combines the active ingredients neomycin and oxytetracycline to prevent, control andtreat a wide range of diseases in chickens, turkeys, cattle, swine and aquaculture. We sell Terramycinand/or Neo-Terramycin products primarily in the United States, Latin America, Mexico and Asia tolivestock and aquaculture producers, feed companies and distributors.• Virginiamycin . Virginiamycin is an antibacterial marketed under the brand names Stafac topoultry, swine and cattle producers, Eskalin™ to dairy cows and beef cattle producers and V-Max for beef cattle producers. Virginiamycin is used to prevent necrotic enteritis in chickens, treat andcontrol swine dysentery and aid in the prevention of liver abscesses in cattle. Our experience in thedevelopment and production of virginiamycin has enabled us to develop significant intellectualproperty through trade secret know-how, which has helped protect against competition from generics.We are the sole worldwide manufacturer and marketer of virginiamycin.• Carbadox . We market carbadox under the brand name Mecadox for use in swine feeds to controlswine Salmonellosis and swine dysentery and, as a result, improve animal health and performance.Mecadox is sold primarily in the United States to feed companies and large integrated swineproducers.• Nicarbazin . We produce and market nicarbazin under the trademark Nicarb and as an activepharmaceutical ingredient. Nicarbazin is a broad-spectrum anticoccidial used for coccidiosisprevention in chickens.• Amprolium . We produce and market amprolium as an active pharmaceutical ingredient. We alsohave received U.S. Food and Drug Administration (“FDA”) approval to sell amprolium asBoviprol™ 9.6% Oral Solution to cattle and calves and Coxiprol™ 9.6% Oral Solution to poultry.TABLE OF CONTENTSProductActive IngredientMarket Entry of Active IngredientDescription​Rumatel morantel tartrate1981Anthelmintic for livestockCerditac™/Cerdimix™oxibendazole1982Anthelmintic for livestockAviax /Aviax II™semduramicin1995Anticoccidial for poultryNeo-Terramycin /Neo-TM™oxytetracycline +neomycin1999Combination of two antibacterialswith multiple applications for awide number of speciesAviax Plus™semduramicin +nicarbazin2010Anticoccidial for poultryAntibacterials are biological or chemical products used in the animal health industry to treat or to preventbacterial diseases, thereby promoting more efficient livestock growth. Several factors contribute to limit theefficiency, weight gain and feed conversions of livestock production, including stress, poor nutrition, environmentaland management challenges and disease. Antibacterials help prevent, control and treat disease in livestock, whichcan also lead to improved overall health of the animals, improved rate of weight gain and more efficient feedconversion. Our antibacterial products include:Anticoccidials are produced through fermentation and chemical synthesis, and are primarily used toprevent and control the disease coccidiosis in poultry and cattle, thereby promoting more efficient livestock growth.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 andfeed companies in North America, Latin America and Asia, and to international animal health companies. Ouranticoccidial products include:11®® ® ® ® ® ®® ® • Salinomycin and Semduramicin . We produce and market Coxistac , Aviax /Aviax II™/AviaxPlus™ and Posistac™, which are in a class of compounds known as ionophores, to combatcoccidiosis and increase feed efficiency in poultry and swine. We market our salinomycin andsemduramicin products in Asia, Latin America and the Middle East and have received FDA approvalto sell Coxistac in the United States.TABLE OF CONTENTSAnthelmintics are used to treat infestations of parasitic intestinal worms. Our anthelmintic productsinclude Rumatel and Banminth , which are both marketed to control major internal nematode parasites in beefand dairy cattle and swine.Bloat Guard is an anti-bloat treatment used in cattle to control bloat in animals grazing on legume orwheat-pasture.Nutritional SpecialtiesOur primary nutritional specialty products have been identified, developed and commercialized by ourstaff of nutritionists working with private research companies, leading universities and customers with whom wecollaborate. For those of our nutritional specialty products that are not proprietary or exclusive to us, we typicallymaintain unique supply agreements or primary distributor status with the product developers giving us preferentialaccess to trademarks, territories and research data. Our nutritional specialty products include:ProductMarket EntryDescriptionAB20 1989Natural flow agent that improves overall feed qualityChromax 1992Source of organic chromium used to optimize swine production throughreproductive efficiencyBiosaf 1997Heat stable live-cell yeast that optimizes production efficiencyProcreatin 7 1997Live-cell yeast product for ruminant nutritionAnimate 1999Maintains proper blood calcium levels in dairy cows during critical transitionperiodSafmannan 2000Yeast cell wall components that inhibit pathogen proliferation in poultry andyoung livestockOmniGen-AF 2004Optimizes immune status in dairy cowsProvia 6086™2013Direct fed microbial for all classes of livestockMagni-Phi 2015Proprietary blend that improves immune response to enhance absorption andutilization of nutrients for poultryAB20 is a natural flow agent that, when added to feed, improves the overall feed quality. The product isone of the most thoroughly researched in the flow agent product category.Chromax , chromium tripicolinate, is a source of organic chromium used to optimize swine productionand is predominantly used in sows where it has been proven to improve reproductive efficiency and litter size.Chromax can result in a significant return on investment for swine producers because of its low cost relative to otherproduction costs and the reproductive and litter size improvements it promotes.Procreatin 7 is a branded live-cell yeast product specifically selected for ruminant nutrition. It is a singlestrain of saccharomyces cerevisiae DNA-verified yeast.Animate is a unique patented anionic mineral supplement that helps optimize the health andperformance of the transition dairy cow and improves profitability for dairy producers.OmniGen-AF is a proprietary nutritional specialty product manufactured and marketed exclusively byus that has been shown in various studies to help maintain a cow’s healthy immune system and improve their naturalresponse to potential environmental and health challenges.Magni-Phi is a proprietary blend of saponins, triterpenoids and polyphenols that improves immuneresponse to enhance the absorption and utilization of nutrients for poultry.12® ® ® ® ® ®®®®®®®®® ® ® ® ® ® TABLE OF CONTENTSOur other nutritional specialty products include Provia 6086™, a direct fed microbial, and Safmannan and Biosaf , yeast cell wall and protected live-cell yeast components, respectively, that optimize productionefficiency. We offer yeast culture products for all species of livestock.Nutritional specialty products are marketed to livestock producers by working through key influencers,such as animal nutritionists and veterinarians.VaccinesWe develop, manufacture and market vaccines primarily for poultry in Israel, Turkey, China, South EastAsia, India, East and Central Europe, Brazil and other Latin American countries and various African countries. Inaddition, we manufacture and market certain autogenous vaccines for chickens, swine and cattle in the UnitedStates. We produce vaccines that protect animals from both viral and bacterial disease challenges. Our vaccineproducts include:ProductMarket EntryDescriptionTAbic M.B.2004Live vaccine for the prevention of Infectious Bursal Disease in poultryTAbic IB VAR2009Live vaccine for the prevention of Infectious Bronchitis variant 1 strain 233Ain poultryTAbic IB VAR2062010Live vaccine for the prevention of Infectious Bronchitis variant 206 in poultryV.H. 1974Live vaccine for the prevention of Newcastle Disease in poultryMJPRRS 2007Autogenous vaccine for the prevention of PRRS in swineSRP AutogenousVaccines2014Autogenous vaccines using Epitopix’s proprietary SRP vaccine technologyfor prevention of various diseases in chickens including Salmonella and E.coli bacteriaThe M.B. strain of Gumboro vaccine is an intermediate virulence live vaccine strain used for theprevention of Infectious Bursal Disease in poultry. The intermediate strain was developed to provide protectionagainst the new field epidemic virus, which is more virulent than those previously encountered.TAbic IB VAR and TAbic IB VAR206 vaccines are intermediate virulence live vaccine strains used forthe prevention of infectious bronchitis in poultry. Both vaccines have become significant tools in the increasingfight against infectious bronchitis in regions throughout the world.The V.H. strain of Newcastle Disease vaccine is a pathogenic strain and is effective when applied byaerosol, coarse spray, drinking water or eye-drops. It has been used successfully under various management andclimate conditions in many breeds of poultry.In the United States, we also distribute Epitopix’s proprietary SRP autogenous vaccines for chickens.Several clinical challenge studies with Salmonella and E. coli bacteria (which are a focus of food safety) have beencompleted using SRP technology.We also focus on innovation to produce new antigens or new presentations of antigens, and havedeveloped new vaccines, such as the inactivated subunit Infectious Bursal Disease Virus and Egg Drop Syndromevaccines, being sold as monovalent vaccines or in combinations with other antigens.MJPRRS , an autogenous vaccine for swine, is administered to pregnant sows to protect their offspringfrom PRRS in the United States. This vaccine includes multiple PRRS isolates representing different groups ofPRRS viruses.Mineral NutritionOur mineral nutrition products principally include inorganic and organic compounds of copper, zinc,cobalt, iron, selenium, manganese, magnesium and iodine.Our major mineral nutrition customers are regional and national feed companies, distributors, co-ops,premixers, integrated swine, beef and poultry operations and pet food companies. The majority of our customershave nutrition staffs who determine their own formulae for custom trace mineral premixes.13®® ®®® ® ® TABLE OF CONTENTSTrace mineral costs fluctuate with commodity markets, and therefore, these products are price-sensitive.Their sale requires a focused effort on cost management, quality control, customer service, pricing and logisticsexecution to be profitable.Performance ProductsOur Performance Products business manufactures and markets products for use in the personal care,automotive, industrial chemical and chemical catalyst industries. We operate the business through our PhibroChem(a division of PAHC), Ferro Metal and Chemical Corporation Limited and Phibro-Tech, Inc. (“Phibro-Tech”)business units.Sales and MarketingOur sales organization includes sales, marketing and technical support employees. In markets where wedo not have a direct commercial presence, we generally contract with distributors that provide logistics and salesand marketing support for our products. Together, our Animal Health and Mineral Nutrition businesses have a sales,marketing and technical support organization of approximately 300 employees plus approximately 200 distributorswho market our portfolio of more than 1,300 product presentations to livestock producers, animal feed companiesand distributors in over 65 countries.In direct sales markets, we sell our animal health and mineral nutrition products through our local salesoffices, either directly to integrated poultry, swine and cattle integrators or through commercial animal feedmanufacturers, wholesalers and distributors. Our sales representatives visit our customers, including animal feedcompanies, distributors and livestock producers, to inform, promote and sell our products and services. In directservice markets, our technical operations specialists provide scientific consulting focused on disease managementand herd management, training and education on diverse topics, including responsible product use.We sell our Performance Products through our local sales offices to the personal care, automotive,industrial chemical and chemical catalyst industries. We market these products predominately in the United States.CustomersWe have approximately 3,000 customers, of which approximately 2,700 customers are served by ourAnimal Health and Mineral Nutrition businesses. We consider a diverse set of livestock producers, including poultryand swine operations and beef and dairy farmers, to be the primary customers of our livestock products. We sell ourproducts directly to livestock and aquaculture producers and to distributors that typically re-sell the products tolivestock producers. We do not consider the business to be dependent on a single customer or a few customers, andwe believe the loss of any one customer would not have a material adverse effect on our results.We typically sell pursuant to purchase orders from customers and generally do not enter into long-termdelivery contracts.Product Registrations, Patents and TrademarksWe own certain product registrations, patents, trade names and trademarks, and use know-how, tradesecrets, formulae and manufacturing techniques, which assist in maintaining the competitive positions of certain ofour products. We believe that technology is an important component of our competitive position, and it provides uswith low cost positions enabling us to produce high quality products. Patents protect some of our technology, but asignificant portion of our competitive advantage is based on know-how built up over many years of commercialoperation, which is protected as trade secrets. We own, or have exclusive rights to use under license, more than 160patents or pending applications in more than 40 countries but we believe that no single patent is of materialimportance to our business and, accordingly, that the expiration or termination thereof would not materially affectour business.We market our animal health products under hundreds of governmental product registrations approvingmany of our products with respect to animal drug safety and efficacy. The use of many of our medicated products iscontrolled by regulatory authorities that are specific to each country (e.g., the FDA14TABLE OF CONTENTSin the United States, Health Canada in Canada and EFSA/EMA in Europe). Because they regulate the safety andwholesomeness of the human food supply, their responsibility includes feed additives for animals from whichhuman food products are derived. Each of our medicated products is registered separately in each country where it issold. We continuously monitor, maintain and update the appropriate registration files pertaining to such regulationsand approvals. In certain countries where we work with a third party distributor, local regulatory requirements mayrequire registration in the name of such distributor. As of June 30, 2016, we had over 750 Animal Health productregistrations globally, including 450 MFA registrations and 300 vaccine registrations. Our MFA global registrationsincluded 88 registrations for virginiamycin.Additionally, many of our vaccine products are based on proprietary master seeds, proprietary adjuvantformulations or patented virus grouping technology. We actively seek to protect our proprietary information,including our trade secrets and proprietary know-how, by seeking to require our employees, consultants, advisorsand partners to enter into confidentiality agreements and other arrangements upon the commencement of theiremployment or engagement.We seek to file and maintain trademark registrations around the world based on commercial activities inmost regions where we have, or desire to have, a business presence for a particular product or service. We currentlymaintain, or have rights to use under license, more than 1,400 trademark registrations or pending applicationsglobally, identifying goods and services related to our business.Our technology, brands and other intellectual property are important elements of our business. We rely onpatent, trademark, copyright and trade secret laws, as well as non-disclosure agreements, to protect our intellectualproperty rights. Our policy is to vigorously protect, enforce and defend our rights to our intellectual property, asappropriate.RegulatoryMany of our animal health and mineral nutrition products require licensing by a governmental agencybefore marketing. To maintain compliance with these regulatory requirements, we have established processes,systems and dedicated resources with end-to-end involvement from product concept to launch and maintenance inthe market. Our regulatory function seeks to engage in dialogue with various global agencies regarding their policiesthat relate to animal health products. For products that are currently subject to formal licensing by governmentagencies, our business relies on the ongoing approval and/or periodic re-approval of those licenses. Failure tomaintain and, where applicable, renew those licenses for any reason including, but not limited to, changingregulations, more stringent technical, legal or regulatory requirements, or failure of the company or its agents tomake timely, complete or accurate submissions, could result in suspension or loss of the company’s rights to marketits products in one or more countries.United StatesIn the United States, governmental oversight of animal nutrition and health products is conductedprimarily by the United States Department of Agriculture (“USDA”) and/or the FDA. The United StatesEnvironmental Protection Agency (the “EPA”) has jurisdiction over certain products applied topically to animals orto premises to control external parasites and shares regulatory jurisdiction of ethanol manufactured in biofuelmanufacturing facilities with the FDA.The USDA and the FDA are primarily responsible for the safety and wholesomeness of the U.S. humanfood supply. The FDA regulates foods intended for human consumption and, through the Center for VeterinaryMedicine (“CVM”), regulates the manufacture and distribution of animal drugs that will be given to animals fromwhich human foods are derived. All manufacturers of animal health pharmaceuticals must show their products to besafe, effective and produced by a consistent method of manufacture as defined under the Federal Food, Drug, andCosmetic Act. To protect the food and drug supply for animals, the FDA develops technical standards for animaldrug safety and effectiveness and evaluates data necessary to support approvals of veterinary drugs. Drug sponsorsare required to file reports of certain product quality defects and adverse events in accordance with agencyrequirements.The main regulatory body in the United States for veterinary pesticides is the EPA. The EPA’s Office ofPesticide Programs is responsible for the regulation of pesticide products applied to animals. All manufacturers ofanimal health pesticides must show their products will not cause “unreasonable adverse15TABLE OF CONTENTSeffects to man or the environment” as stated in the Federal Insecticide, Fungicide, and Rodenticide Act. Within theUnited States, pesticide products that are approved by the EPA must also be approved by individual state pesticideauthorities before distribution in that state. Post-approval monitoring of products is required, with reports providedto the EPA and some state regulatory agencies.FDA approval of Type A/B/C Medicated Feed Articles and drugs is based on satisfactory demonstrationof safety, efficacy, manufacturing quality standards and appropriate labelling. Efficacy requirements are based onthe desired label claim and encompass all species for which label indication is desired. Safety requirements includetarget animal safety and, in the case of food animals, human food safety (HFS). HFS reviews encompass drugresidue levels and the safety of those residue levels. In addition to the safety and efficacy requirements for animaldrugs used in food-producing animals, environmental safety must be demonstrated. Depending on the compound,the environmental studies may be quite extensive and expensive. In many instances, the regulatory hurdles for adrug that will be used in food-producing animals are at least as stringent as, if not more so than, those required for adrug used in humans.The Office of New Animal Drug Evaluation is responsible for reviewing information submitted by drugsponsors who wish to obtain approval to manufacture and sell animal drugs. A new animal drug is deemed unsafeunless there is an approved New Animal Drug Application (“NADA”). Virtually all animal drugs are “new animaldrugs” within the meaning of the term in the Federal Food, Drug, and Cosmetic Act. An approved Abbreviated NewAnimal Drug Application (“ANADA”) is a generic equivalent of an NADA previously approved by the FDA. Bothare administered by the FDA. The drug development process for human therapeutics can be more involved than thatfor animal drugs. However, because human food safety and environmental safety are issues for food-producinganimals, the animal drug approval process for food-producing animals typically takes longer than for non-food-producing animals, such as companion animals.The FDA may deny an NADA or ANADA if applicable regulatory criteria are not satisfied, requireadditional testing or information, or require post-marketing testing and surveillance to monitor the safety or efficacyof a product. There can be no assurances that FDA approval of any NADA or ANADA will be granted on a timelybasis, or at all. Moreover, if regulatory approval of a product is granted, such approval may entail limitations on theindicated uses for which it may be marketed. Finally, product approvals may be withdrawn if compliance withregulatory standards is not maintained or if problems occur following initial marketing. Among the conditions forNADA or ANADA approval is the requirement that the prospective manufacturer’s quality control andmanufacturing procedures conform to FDA’s current Good Manufacturing Practice (“cGMP”) regulations. Amanufacturing facility is periodically inspected by the FDA for determination of compliance with cGMP after aninitial pre-approval inspection. Certain subsequent manufacturing changes must be approved by the FDA prior toimplementation. In complying with standards set forth in these regulations, manufacturers must continue to expendtime, monies and effort in the area of production and quality control to ensure compliance. The process of seekingFDA approvals can be costly, time consuming, and subject to unanticipated and significant delays. There can be noassurance that such approvals will be granted on a timely basis, or at all. Any delay in obtaining or any failure toobtain FDA or foreign government approvals, or the suspension or revocation of such approvals, would adverselyaffect our ability to introduce and market our products and to generate revenue.The issue of the potential for increased bacterial resistance to certain antibiotics used in certain food-producing animals is the subject of discussions on a worldwide basis and, in certain instances, has led to governmentrestrictions on the use of antibiotics in these food-producing animals. The sale of antibiotics is a material portion ofour business. Legislative bills are introduced in the United States Congress from time to time that, if adopted, couldhave an adverse effect on our business. One of these initiatives is a proposed bill called the Preservation ofAntibiotics for Medical Treatment Act, which has been introduced in every Congress since the mid 2000’s. To date,such bills have not had sufficient support to become law. Should statutory, regulatory or other developments resultin restrictions on the sale of our products, it could have a material adverse impact on our financial position, resultsof operations and cash flows.In November 2004, the CVM released a draft for comment of its risk assessment of streptograminresistance for treatment of certain infections in humans attributable to the use of streptogramins in animals16TABLE OF CONTENTS(the “risk assessment”). 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 increasedattention regarding the use of streptogramins in animals. Synercid and virginiamycin (the active ingredient in ourStafac product) are both members of the streptogramin class of antimicrobial drugs. The risk assessment was unableto produce any firm conclusions as to whether, and, if so, how much, the use of virginiamycin in food animalscontributes to the occurrence of streptogramin-resistant infections in humans via a foodborne pathway.In classifying virginiamycin in 2003 as a “medically important antimicrobial” (“MIA”) on the CVM’sGuidance for Industry (“GFI”) 152 list, a guidance document for evaluating the microbial safety of antimicrobialnew animal drugs on food for human consumption, the FDA’s stated concern was the potential impact on use ofSynercid for treating VREf in humans. In 2010, the U.S. label for Synercid was changed and the VREf indicationwas removed. The FDA determined that data submitted by the sponsor of Synercid failed to verify clinical benefit ofthe product for the treatment of VREf infections in humans. In September 2011, we requested that FDA remove thestreptogramin class of antimicrobials from GFI 152 to reflect that they are not “medically important” for humantherapy. In March 2012, the FDA declined our request, citing primarily the need to engage all stakeholders on anypossible changes to GFI 152 through the processes mandated by the FDA’s good guidance practices, includingissuing guidance revisions in draft and giving the public an opportunity to comment. There can be no assurance thatwe will be successful in the future in gaining the FDA’s agreement with our view that removal of the VREfindication for Synercid requires the FDA to remove virginiamycin from the GFI 152 list.In April 2012, the CVM released its GFI 209 (“The Judicious Use of Medically Important AntimicrobialDrugs in Food-Producing Animals”). In December 2013, the CVM released the final version of GFI 213 (“NewAnimal Drugs and New Animal Drug Combination Products Administered in or on Medicated Feed or DrinkingWater of Food-Producing Animals: Recommendations for Drug Sponsors for Voluntarily Aligning Product UseConditions with GFI #209”), and the proposed language relating to amending the current Veterinary Feed Directive(“VFD”) regulations. The two Guidance documents and the proposed revised VFD language are all relevant to theuse of MIAs in the feed or drinking water of food-producing animals. The two key principles of GFI 209 are thatMIAs should be limited to those uses that are considered necessary for assuring animal health, namely for theprevention, control, and/or treatment of disease, and that MIA use in food-producing animals should includeveterinary oversight/​consultation. GFI 213 outlines CVM’s proposal with respect to removing production claims forMIAs as well as the path a sponsor may take for new claims. These Guidance documents are not legally binding, butthey do reflect the FDA’s current thinking. These GFIs provide an opportunity for sponsors to seek to amendproduct claims to more accurately reflect the health function of antimicrobial products; however, there can be noassurance that if a sponsor presents a specific proposal to pursue such changes the FDA will agree with thatproposal or, even if the FDA does agree, that the execution of the work and the subsequent submission to the FDAwill successfully achieve the desired label amendments.In June 2015, the CVM issued final revisions to the existing VFD regulations, which include changes tothe control and use of antimicrobial products for use in animal feed. Prior to implementation of the revised VFDregulations, many approved antimicrobial products could be obtained and used without formal veterinaryauthorization. Under the new VFD regulations, affected antimicrobial products may only be used if authorized by aveterinarian in accordance with the VFD regulations. The current use of our antimicrobial products in the UnitedStates typically, but not always, involves veterinary oversight. However, the final VFD regulations may imposeadditional costs on some producers, which may discourage them from using our antimicrobial products. The FDAwould like companies to complete the process for label changes relating to the new GFI 213 by January 2017.In the United States, the antibacterial products within our poultry business, the largest portion of ourMFAs and other business in this region, as well as our cattle business, have both approved therapeutic and non-therapeutic indications. We believe, based on current producer usage patterns, that the large majority of use of ourproducts in these segments that have been classified by the FDA as medically important antibacterials is fortherapeutic purposes. We currently generate a portion of our revenues from antibacterial products sold for use inturkeys and swine in the United States where we do not currently have therapeutic claims that match our customers’usage patterns. We intend to ensure that our antibacterial17®TABLE OF CONTENTSproduct offerings are in alignment with the FDA’s guidance documents within the FDA’s three-year implementationperiod, and are pursuing both new and additional therapeutic claims for these products under the process providedby the FDA. However, there can be no assurance that we will be successful in obtaining such claims. While it isdifficult to predict exactly what impact the removal of non-therapeutic claims for our products that have beenclassified by the FDA as medically important antibacterials will ultimately have on our sales, we estimate that, hadwe voluntarily decided to withdraw all of our non-therapeutic claims in the United States, and did not add any newtherapeutic claims, our MFAs and other net sales for the fiscal year ended June 30, 2016, would have been reducedby approximately $7 million.In April 2016, the FDA began initial steps to withdraw approval of Mecadox (carbadox), due to concernsthat certain residues from the product may persist in tissues for longer than previously determined. This initialaction by the FDA does not prohibit the sale or use of Mecadox in the United States. Mecadox has been approvedand sold in the United States for more than 40 years and is a widely used treatment for controlling bacterial diseasesincluding Salmonella and swine dysentery. Mecadox is not used in human medicine and the class of drug is notconsidered a medically important antimicrobial. The approved Mecadox label requires a 42-day withdrawal periodpre-harvesting, and to date we have not seen any hazardous residues of carbadox being detected from pig meattreated in accordance with the approved label. We have complete confidence in the safety of Mecadox. In responseto FDA inquiries several years ago, we began rigorous new studies of the continued safety of the product when usedin accordance with the label. Our studies were completed in July 2016, and we submitted our data, analyses andinformation to the FDA that we believe support the continued safe use of Mecadox. The timing of the FDA’sresponse to our submission is not subject to a predetermined deadline. Our sales of Mecadox in the United Stateswere approximately $15 million for the year ended June 30, 2016. Should we be unable to successfully defend thesafety of the product, the loss of Mecadox sales would have a negative impact to the results of our operations.In February 2015, the FDA conducted a follow-up inspection at our Teaneck, NJ headquarters to verifychanges to and corrective actions related to various analytical test results and practices, expiration dating andreporting requirements regarding specification non-conformance. A Form 483 was issued, which contained oneinspectional observation citing two examples of the observed violation. The observation questioned whether or notwe are able to confirm that the drug components (of Type A medicated products) remain uniformly dispersed andstable under ordinary conditions of shipment, storage and use. We responded to the inspectional observation inwriting in March 2015. This inspectional observation has not impacted our ability to market products in the UnitedStates or any other country, and we expect the Form 483 observation will be satisfactorily addressed.In March 2016, the FDA conducted a cGMP audit of our manufacturing facility at Guarulhos, Brazil. TheFDA issued inspectional observations (Form 483) pertaining to six observations made during the inspection. Weresponded to the inspectional observations in May 2016 and have committed to provide additional data whenavailable. It is likely the FDA will require a follow up site inspection to review the actions we have taken. Such aninspection, if needed, could occur at any time, or may be incorporated with a routine cGMP audit. The timing ofsuch audits is determined by the FDA but is typically at approximately two year intervals. While we have takenactions to address our cGMP program and are working to implement the FDA’s remaining recommendations, therecan be no assurance that the FDA will concur. Failure to comply with cGMP standards could have a financiallymaterial impact on our business.While we have taken actions to address our cGMP program and are working with the FDA to implementthe FDA’s remaining recommendations, there can be no assurance that the FDA will concur. Failure to comply withcGMP standards could have a financially material impact on our business.European UnionEuropean Union (“E.U.”) legislation requires that veterinary medicinal products must have a marketingauthorization before they are placed on the market in the European Union. A veterinary medicinal product mustmeet certain quality, safety, efficacy and environmental criteria to receive a marketing authorization. The EuropeanMedicines Agency (and its main veterinary scientific committee,18TABLE OF CONTENTSthe Committee for Medicinal Products for Veterinary Use) and the national authorities in the various E.U. MemberStates, are responsible for administering this regime.A separate E.U. regime applies to feed additives. It provides for a re-registration process for existingadditives and this process is ongoing. For certain types of additives, the authorizations are not generic in nature (sothat they can be relied upon by any operator) but are limited to the company that obtained the marketingauthorization. They are known as Brand Specific Approvals (“BSA”). The system is similar to the U.S. system,where regulatory approval is for the formulated product or “brand.”The European Food Safety Authority (“EFSA”) is responsible for the E.U. risk assessment regarding foodand feed safety. In close collaboration with national authorities and in open consultation with its stakeholders, EFSAprovides independent scientific advice and communication on existing and emerging risks. EFSA may issue adviceregarding the process of adopting or revising European legislation on food or feed safety, deciding whether toapprove regulated substances such as pesticides and food additives, or developing new regulatory frameworks andpolicies, for instance, in the field of nutrition. EFSA aims to provide appropriate, consistent, accurate and timelycommunications on food safety issues to all stakeholders and the public at large, based on the Authority’s riskassessments and scientific expertise. One of the key areas of concern for the EFSA is the containment ofantimicrobial resistance.A number of manufacturers, including us, submitted dossiers in order to re-register various anticoccidialsfor the purpose of obtaining regulatory approval from the European Commission. The BSA for our nicarbazinproduct was published in October 2010. We sell nicarbazin under our own BSA and as an active ingredient foranother marketer’s product that has obtained a BSA and is sold in the European Union. Similarly, a BSA for oursemduramicin product, Aviax, was published in 2006 and requires reauthorization in October 2016. We havesubmitted a dossier for reauthorization in accordance with the requirements of the EFSA. There can be no guaranteethat these submissions will be reviewed favorably or in a timely manner. Failure to gain reauthorization in a timelymanner could have an adverse financial impact on our business.BrazilThe Ministry of Agriculture, Livestock Production and Supply (“MAPA”) is the regulatory body in Brazilresponsible for the regulation and control of pharmaceuticals, biologicals and medicinal feed additives for animaluse. MAPA’s regulatory activities are conducted through the Secretary of Agricultural Defense and its LivestockProducts Inspection Department. These activities include the inspection and licensing of both manufacturing andcommercial establishments for veterinary products, as well as the submission, review and approval ofpharmaceuticals, biologicals and medicinal feed additives.Rest of worldWe are also subject to regulatory requirements governing investigation, clinical trials and marketingapproval for animal drugs in many other countries in which our products are sold. The regulatory approval processincludes similar risks to those associated with FDA and European Commission approvals set forth above.Global policy and guidanceCountry-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 companyrecords and reports. 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 healthentities, including the World Organization for Animal Health, Codex Alimentarius Commission, the recognizedinternational standard-setting body for food (“Codex”), before establishing their own standards and regulations forveterinary pharmaceuticals and vaccines.The Joint FAO/WHO Expert Committee on Food Additives is an international expert scientific committeethat is administered jointly by the Food and Agriculture Organization of the United Nations and the World HealthOrganization. It provides risk assessments and safety evaluations of residues of veterinary drugs in animal productsas well as exposure and residue definition and maximum residue limit19TABLE OF CONTENTSproposals for veterinary drugs in traded food commodities. These internationally published references may also beused by national authorities when setting domestic standards. We work with the national authorities to establishacceptable safe levels of residual product in food-producing animals after treatment. This in turn enables thecalculation of appropriate withdrawal times for our products prior to an animal entering the food chain.In July 2014, the Codex adopted risk management advice language for a number of compounds includingcarbadox. The advice language states “authorities should prevent residues of carbadox in food. This can beaccomplished by not using carbadox in food producing animals.” The advice language is to provide advice only andis not binding on individual national authorities, and almost all national authorities already have long-establishedregulatory standards for carbadox, including prohibiting the use of carbadox in swine production within theirterritory, prohibiting the importation of pork from swine that are fed carbadox, or permitting the importation of porkfrom swine that are fed carbadox provided there is no detection of carbadox residues in the meat. The advicelanguage may be considered by national authorities in making future risk management determinations. To the extentadditional national authorities elect to follow the advice and prohibit the use of carbadox in food-producing animalsand/or the importation of pork from swine that are fed carbadox, such decisions could have an adverse effect on oursales of carbadox in those countries or in countries that produce meat for export to those countries.Advertising and promotion reviewPromotion of animal health products is controlled by regulations in many countries. These rules generallyrestrict advertising and promotion to those approved claims and uses that have been reviewed and endorsed by theapplicable agency. We conduct a review of promotion material for compliance with the local and regionalrequirements in the markets where we sell animal health products.Food Safety Inspection Service/Generally Recognized As SafeThe FDA is authorized to determine the safety of substances (including “generally recognized as safe”(“GRAS”) substances, and food and feed additives), as well as prescribing safe conditions of use. The FDA, whichhas the responsibility for determining the safety of substances, together with the Food Safety and Inspection Service,the food safety branch within the USDA, maintain the authority in the United States to determine that newsubstances and new uses of previously approved substances are suitable for use in meat, milk and poultry products.In 2008, the FDA announced that the agency required formal review of all additives used in theproduction of ethanol, including our Lactrol product (formulated virginiamycin), where the co-products may beused for animal feed. Virginiamycin has been certified by an independent expert panel convened by us as GRAS foruse as a processing aid in ethanol production and as related to the use of the resulting distiller’s co-products foranimal feed. We believe that this determination satisfies the FDA requirement. However, there can be no assurancewe will be successful in maintaining market access for our Lactrol product or other ethanol production additives thatwe sell.CompetitionWe are engaged in highly competitive industries and, with respect to all of our major products, facecompetition from a substantial number of global and regional competitors. Some competitors have greater financial,R&D, production and other resources than we have. Our competitive position is based principally on our productregistrations, customer service and support, breadth of product line, product quality, manufacturing technology,facility location, and product prices. We face competition in every market in which we participate. Some of ourprincipal competitors include Bayer AG, Ceva Santé Animale, Boehringer Ingelheim International GMBH, Eli Lillyand Company (Elanco Animal Health), Huvepharma Inc., Lallemand Inc., Merck & Co., Inc. (Merck Animal Healthand MSD Animal Health), Pharmgate LLC, Sanofi S.A. (Merial), Southeastern Minerals, Inc., Virbac and ZoetisInc. Many of our products face competition from products that may be used as an alternative or substitute.There continues to be consolidation in the animal health market, which could strengthen our competitors.Our competitors can be expected to continue to improve the design and performance of their products and tointroduce new products with competitive price and performance characteristics. There can20® TABLE OF CONTENTSbe no assurance that we will have sufficient resources to maintain our current competitive position, however, webelieve the following strengths create sustainable competitive advantages that will enable us to continue our growthas a leader in our industry:Products Aligned with Need for Increased Protein ProductionIncreased scarcity of natural resources is increasing the need for efficient production of food animals suchas poultry, swine and cattle. Our key animal health products, including our MFAs, vaccines and nutritional specialtyproducts, help prevent and manage disease outbreaks and enhance nutrition to help support natural defenses againstdiseases. These products are often critical to our customers’ efficient production of healthy animals. Our leadingproduct franchise, Stafac/V-Max/Eskalin, is approved in over 30 countries for use in poultry, swine and cattle and isregarded as one of the leading MFA products for production animals. Similarly, our nutritional specialty productofferings like OmniGen-AF and Animate are used increasingly in the global dairy industry.Global Presence with Existing Infrastructure in Key High-Growth MarketsWe have an established direct presence in many important emerging markets, and we believe we are aleader in many of the emerging markets in which we operate. Our existing operations and established sales,marketing and distribution network in over 65 countries, provide us with opportunities to take advantage of globalgrowth opportunities. 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 CIScountries, Mexico, Turkey, Australia, Canada and South Africa and other countries in Africa. Our operations incountries outside of the United States contributed approximately 53% of our Animal Health segment revenues forthe year ended June 30, 2016.Leading Positions in High Growth Sub-sectors of the Animal Health MarketWe are a global leader in the development, manufacture and commercialization of MFA products for theanimal health market. We believe we are well positioned in the fastest growing food animal species segments of theanimal health market with significant presence in poultry and swine, which are projected by Vetnosis to growglobally at compound annual rates from 2015 through 2020 of 6.2% and 5.1%, respectively. Our sales of MFAproducts were third largest in the animal health market. According to Vetnosis, MFA products are projected to growat a compound annual rate of approximately 4.0% between 2015 and 2020.Diversified and Complementary Product Portfolio with Strong Brand Name RecognitionWe market products across the three largest livestock species (poultry, cattle and swine) and aquacultureand in the major product categories (MFAs, vaccines and nutritional specialty products). We believe our diversity ofspecies and product categories enhances our sales mix and lowers our sales concentration risk. The complementarynature of our Animal Health and Mineral Nutrition portfolio provides us with unique cross-selling opportunities thatcan be used to gain access to new customers or deepen our relationships with existing customers. We believe wehave strong brand name recognition for the Phibro name and for many of our animal health and mineral nutritionproducts, and we believe Phibro vaccines are recognized as an industry standard in efficacy against highly virulentdisease challenges. Our diverse portfolio of products also allows us to address the distinct growing conditions oflivestock in different regions.Experienced Sales Force and Technical Support Staff with Strong, Consultative Customer RelationshipsWithin our Animal Health and Mineral Nutrition segments, utilizing both our sales, marketing andtechnical support organization of approximately 300 employees and a broad distribution network, we market ourportfolio of more than 1,300 product presentations to livestock producers and veterinarians in over 65 countries. Weinteract with customers at both their corporate and operating level, which we believe allows us to develop an in-depth understanding of their needs. Our technical support and research21TABLE OF CONTENTSpersonnel are also important contributors to our overall sales effort. We have a total of approximately 130 technical,field service and quality control/quality assurance personnel throughout the world. These professionals interfacedirectly with our key customers to provide practical solutions to derive optimum benefits from our products.Experienced, Committed Employees and Management TeamWe have a diverse and highly skilled team of animal health professionals, including technical and fieldservice personnel located in key countries throughout the world. These individuals have extensive field experienceand are vital to helping us maintain and grow our business. Many of our field team have more than 20 years ofexperience in the animal health industry and many have been with us for more than 10 years.We have a strong management team with a proven track record of success at both the corporate andoperating levels. The executive management team has diverse backgrounds and an average of approximately 17years of experience in the animal health industry.EmployeesAs of June 30, 2016, we had more than 1,300 employees. Employees at our Guarulhos, Brazil facility arecovered by a multi-employer regional industry-specific union. Certain of our Israeli employees are covered by site-specific collective bargaining agreements. Certain employees are covered by individual employment agreements.We believe our relations with union and non-union employees are good.ManufacturingThe Animal Health business segment manufactures many products internally and supplements thatproduction with contract manufacturing organizations (“CMOs”) as necessary.We manufacture active pharmaceutical ingredients for certain of our antibacterial and anticoccidialproducts at our facilities in Guarulhos, Brazil and Braganca Paulista, Brazil. We manufacture active pharmaceuticalingredients for certain of our anticoccidial products at our facility in Neot Hovav (formerly Ramat Hovav), Israel.We produce vaccines at our facilities in Beit Shemesh, Israel and Omaha, Nebraska. We produce pharmaceuticals,disinfectants and other animal health products at our facility in Petach Tikva, Israel. We produce certain of ourmajor nutritional specialty and mineral nutrition products at our facilities in Quincy, Illinois, and we produce certainof our mineral nutrition products at our facility in Omaha, Nebraska.We supplement internal manufacturing and production capabilities with CMOs. We purchase certainactive pharmaceutical ingredients for other medicated products from CMOs in China, India, Mexico and otherlocations. We then formulate the final dosage form in our facilities and in contract facilities located in the UnitedStates, Brazil, Canada, Mexico, Australia, China and Israel.We purchase certain raw materials necessary for the commercial production of our products from avariety of third-party suppliers. Such raw materials are generally available from multiple sources, are purchasedworldwide and are normally available in quantities adequate to meet the needs of the Company’s business.We believe that our existing facilities, as supplemented by CMOs, are adequate for our currentrequirements and for our operations in the foreseeable future.Research and DevelopmentMost of our manufacturing facilities have chemists and technicians on staff involved in productdevelopment, quality assurance, quality control and providing technical services to customers. Research,development and technical service efforts are conducted by our veterinarians (DVMs) and nutritionists at variousfacilities.We operate Animal Health R&D and product testing at our facilities in: Guarulhos, Brazil; Beit Shemesh,Israel; Neot Hovav (formerly Ramat Hovav), Israel; Quincy, Illinois; Corvallis, Oregon; State College,Pennsylvania; Manhattan, Kansas; St. Paul, Minnesota; Omaha, Nebraska; and Ma’ayan Tzvi, Israel.22TABLE OF CONTENTSThese facilities provide R&D services relating to: fermentation development and micro-biological strainimprovement; vaccine development; chemical synthesis and formulation development; nutritional specialty productdevelopment; and ethanol-related products.Our R&D expenses were $11.0 million, $9.5 million and $8.2 million for fiscal years 2016, 2015 and2014, respectively.Environmental, Health and SafetyOur operations and properties are subject to Environmental Laws (as defined below) and regulations. Wehave incurred, and will continue to incur, expenses to attain and maintain compliance with Environmental Laws.While we believe that our operations are currently in material compliance with Environmental Laws, we have, fromtime to time, received notices of violation from governmental authorities, and have been involved in civil orcriminal action for such violations, including for odor releases in Guarulhos, Brazil. Additionally, at various sites,our subsidiaries are engaged in continuing investigation, remediation and/or monitoring to address contaminationassociated with historical operations. We maintain accruals for costs and liabilities associated with EnvironmentalLaws, which we currently believe are adequate. In many instances, it is difficult to predict the ultimate costs underEnvironmental 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 ofEnvironmental Laws may be subject to civil, criminal and administrative penalties, injunctions or both. Failure tocomply with Environmental Laws may result in the temporary or permanent suspension of operations and/orpermits, limitations on production, or increased operating costs. In addition, private plaintiffs may initiate lawsuitsfor personal injury, property damage, diminution in property value or other relief as a result of our operations.Environmental Laws, and the interpretation or enforcement thereof, are subject to change and may become morestringent in the future, potentially resulting in substantial future costs or capital or operating expenses. We devoteconsiderable resources to complying with Environmental Laws and managing environmental liabilities. We havedeveloped 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, futurecapital expenditure requirements, or the cost of compliance. Based upon our experience to date, we believe that thefuture cost of compliance with existing Environmental Laws, and liabilities for known environmental claimspursuant to such Environmental Laws, will not have a material adverse effect on our financial position, results ofoperations, cash flows or liquidity.Environmental Health and Safety RegulationsThe following summarizes the principal Environmental Laws affecting our business.Waste Management. Our operations are subject to statutes and regulations addressing the contaminationby, and management of, hazardous substances and solid and hazardous wastes. In the United States, theComprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), alsoknown as the “Superfund” law, and comparable state laws, generally impose strict joint and several liability forcosts of investigation and remediation and related liabilities, on defined classes of  “potentially responsible parties”(“PRPs”). PRPs can be required to bear all of such costs regardless of fault, the legality of the original disposal orownership of the disposal site. We have been, and may become, subject to liability under CERCLA for cleanupcosts or investigation or clean up obligations or related third-party claims in connection with releases of hazardoussubstances at or from our current or former sites or offsite waste disposal facilities used by us, including thosecaused by predecessors or relating to divested properties or operations.We must also comply with the Resource Conservation and Recovery Act of 1976, as amended (“RCRA”),and comparable state laws regulating the treatment, storage, disposal, remediation and transportation of solid andhazardous wastes. These laws impose management requirements on generators and transporters of such wastes andon the owners and operators of treatment, storage and disposal facilities. As current or historic recyclers of chemicalwaste, certain of our subsidiaries have been, and are likely to be, the focus of extensive compliance reviews byenvironmental regulatory authorities under23TABLE OF CONTENTSRCRA. Our subsidiary Phibro-Tech currently has a RCRA operating permit for its Santa Fe Springs, Californiafacility, for which a renewal application is under review. Phibro-Tech initially submitted an application for renewalof its permit for the Santa Fe Springs facility in 1996. The State of California is expected to issue a draft permit in2016 for public review and comment. In addition, because we or our subsidiaries have closed several facilities thathad been the subject of RCRA permits, we or our subsidiaries have been and will be required to investigate andremediate certain environmental contamination conditions at these shutdown plant sites within the requirements ofRCRA corrective action programs.Federal Water Pollution Control Act, as amended. We must comply with regulations related to thedischarge of pollutants to the waters of the United States without governmental authorization, including thosepursuant to the Federal Water Pollution Control Act.Chemical Product Registration Requirements. We must comply with regulations related to the testing,manufacturing, labeling, registration and safety analysis of our products in order to distribute many of our products,including, for example, in the United States, the federal Toxic Substances Control Act and Federal Insecticide,Fungicide and Rodenticide Act, and in the European Union, the Regulation on Registration, Evaluation,Authorization and Restriction of Chemical Substances (“REACH”).Air Emissions. Our operations are subject to the U.S. Clean Air Act (the “CAA”) and comparable U.S.state and foreign statutes and regulations, which regulate emissions of various air pollutants and contaminants.Certain of the CAA’s regulatory programs are the subject of ongoing review and/or are subject to ongoing litigation,such as the rules establishing new Maximum Achievable Control Technology for industrial boilers; significantexpenditures may be required to meet current and emerging air quality standards. Regulatory agencies can alsoimpose administrative, civil and criminal penalties for non-compliance with air permits or other air qualityregulations. States may choose to set more stringent air emissions rules than those in the CAA. State, national andinternational authorities have also issued requirements focusing on greenhouse gas reductions. In the United States,the EPA has promulgated federal greenhouse gas regulations under the CAA affecting certain sources. In addition, anumber of state, local and regional greenhouse gas initiatives are also being developed or are already in place. InIsrael and Brazil, implementation of the Kyoto Protocol requirements regarding greenhouse gas emission reductionsconsists of energy efficiency regulations, carbon dioxide emissions allowances trading and renewable energyrequirements.Capital ExpendituresWe have incurred and expect to continue to incur costs to maintain compliance with environmental, healthand safety laws and regulations. Our capital expenditures relating to environmental, health and safety regulationswere $3.0 million for fiscal year 2016. We estimate that our capital expenditures for compliance will be $3.5 millionfor both fiscal years 2017 and 2018; however, these estimates are subject to change given the uncertainty of futureEnvironmental Laws and the interpretation and enforcement thereof, as further described in this Annual Report onForm 10-K. Our environmental capital expenditure plans cover, among other things, the currently expected costsassociated with known permit requirements relating to facility improvements.Contamination and Hazardous Substance RisksInvestigation, Remediation and Monitoring Activities . Certain of PAHC’s subsidiaries that are currentlyor were historically engaged in recycling and other activities involving hazardous materials have been required toperform site investigations at their active, closed and former facilities and neighboring properties. Contamination ofsoil, groundwater and other environmental media has been identified or is suspected at several of these locations,including Santa Fe Springs, California; Powder Springs, Georgia; Union, Illinois; Sewaren, New Jersey; Sumter,South Carolina; and Joliet, Illinois, and regulatory authorities have required, and will continue to require, furtherinvestigation, corrective action and monitoring over future years. These subsidiaries also have been, and in thefuture may be, required to undertake additional capital improvements as part of these actions. In addition, RCRAand other applicable statutes and regulations require these subsidiaries to develop closure and post-closure plans fortheir facilities and in the event of a facility closure, obtain a permit that sets forth a closure plan for24TABLE OF CONTENTSinvestigation, remediation and monitoring and requires post-closure monitoring and maintenance for up to 30 years.We believe we are in material compliance with these requirements and maintain adequate reserves to completeremediation and monitoring obligations at these locations.In connection with past acquisitions and divestitures, we have undertaken certain indemnificationobligations that require us, or may in the future require us, to conduct or finance environmental cleanups at sites weno longer own or operate. Under the terms of the sale of the former facility in Joliet, Illinois, Phibro-Tech remainsresponsible for any required investigation and remediation of the site attributable to conditions at the site at the timeof 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. The EPA is investigating and planning for the remediation ofoffsite 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. The EPA hasnamed Phibro-Tech and certain other subsidiaries of PAHC as PRPs due to groundwater contamination fromPhibro-Tech’s Santa Fe Springs facility that has allegedly commingled with contaminated groundwater from theOmega Chemical Site. In September 2012, the EPA notified approximately 140 PRPs, including Phibro-Tech andthe other subsidiaries, that they have been identified as potentially responsible for remedial action for thegroundwater plume affected by the Omega Chemical Site and for EPA oversight and response costs. Phibro-Techcontends that groundwater contamination at its site is due to historical operations that pre-date Phibro-Tech and/orcontaminated groundwater that has migrated from upgradient properties. In addition, a successor to a prior owner ofthe Phibro-Tech site has asserted that PAHC and Phibro-Tech are obligated to provide indemnification for itspotential liability and defense costs relating to the groundwater plume affected by the Omega Chemical Site. Phibro-Tech has vigorously contested this position and has asserted that the successor to the prior owner is required toindemnify Phibro-Tech for its potential liability and defense costs. Furthermore, a nearby property owner has filed acomplaint in the Superior Court of the State of California against many of the PRPs allegedly associated with thegroundwater plume affected by the Omega Chemical Site (including Phibro-Tech) for alleged contamination ofgroundwater underneath its property, and a group of companies that sent chemicals to the Omega Chemical Site forprocessing and recycling has filed a complaint under CERCLA, RCRA and the common law public nuisancedoctrine in the United States District Court for the Central District of California against many of the PRPs allegedlyassociated with the groundwater plume affected by the Omega Chemical Site (including Phibro-Tech) forcontribution toward past and future costs associated with the investigation and remediation of the groundwaterplume affected by the Omega Chemical Site. Due to the ongoing nature of the EPA’s investigation and Phibro-Tech’s dispute with the prior owner’s successor, at this time we cannot predict with any degree of certainty what, ifany, liability Phibro-Tech or the other subsidiaries may ultimately have for investigation, remediation and the EPAoversight and response costs associated with the affected groundwater plume.Potential Claims. In addition to cleanup obligations, we could also be held liable for any and allconsequences arising out of human exposure to hazardous substances or other environmental damage, whichliability may not be covered by insurance.Environmental Accruals and Financial Assurance. We have established environmental accruals to coverknown remediation and monitoring costs at certain of our current and former facilities. Our accruals forenvironmental liabilities are recorded by calculating our best estimate of probable and reasonably estimable futurecosts using current information that is available at the time of the accrual. Our accruals for environmental liabilitiestotaled $7.0 million and $6.8 million as of June 30, 2016 and 2015, respectively.In certain instances, regulatory authorities have required us to provide financial assurance for estimatedcosts of remediation, corrective action, monitoring and closure and post-closure plans. Our subsidiaries have, inmost instances, chosen to provide the required financial assurance by means of letters of credit issued pursuant toour revolving credit facility. As of June 30, 2016, the total outstanding balance of letters of credit providing suchfinancial assurance was $9.9 million.25TABLE OF CONTENTS ​Workplace Health and SafetyWe are committed to manufacturing safe products and achieving a safe workplace. Our EnvironmentalHealth and Safety (“EHS”) Global Director, along with regional and site-based EHS professionals, manageenvironmental, health and safety matters throughout the Company. The site managers are responsible forimplementing the established EHS 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 asneeded based on the conditions at the respective sites.Where You Can Find More informationWe are subject to the information and periodic and current reporting requirements of the Exchange Actand, in accordance therewith, will file periodic and current reports, proxy statements and other information with theSecurities and Exchange Commission (“SEC”). Such periodic and current reports, proxy statements and otherinformation will be available to the public on the SEC’s website at www.sec.gov and through our website atwww.pahc.com . You may also read or copy such periodic or current reports, proxy statements and otherinformation the Company files with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E., Washington,D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information.Item 1A. Risk FactorsYou should carefully consider all of the information set forth in this Annual Report on Form 10-K,including the following risk factors, before deciding to invest in our Class A common stock. If any of the followingrisks actually occurs, our business, financial condition, results of operation or cash flows could be materiallyadversely affected. In any such case, the trading price of our Class A common stock could decline, and you couldlose all or part of your investment. The risks below are not the only ones the Company faces. Additional risks notcurrently known to the Company or that the Company presently deems immaterial may also impair its businessoperations. This Annual Report on Form 10-K also contains forward-looking statements that involve risks anduncertainties. The Company’s results could materially differ from those anticipated in these forward-lookingstatements as a result of certain factors, including the risks it faces described below and elsewhere. See also“Forward-Looking Statements.”Risk Factors Relating to Our BusinessPerceived adverse effects on human health linked to the consumption of food derived from animals that utilizeour products could cause a decline in the sales of those products.Our business depends heavily on a healthy and growing livestock industry. Some in the public perceiverisks 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, primarily in the United States, on theuse of medically important antibacterials, as defined by the FDA. Medically important antibacterials include classesthat are prescribed in animal and human health and are listed in the Appendix of the FDA-CVM Guidance forIndustry (GFI) #152. Our products that contain virginiamycin, oxytetracycline or neomycin have previously beenclassified by the FDA as medically important antibacterials. This may lead to a decline in the demand for andproduction of food products derived from animals that utilize our products and, in turn, demand for our products.Livestock producers may experience decreased demand for their products or reputational harm as a result ofevolving consumer views of nutrition and health-related concerns, animal rights and other concerns. Anyreputational harm to the livestock industry may also extend to companies in related industries, including us. Inaddition, campaigns by interest groups, activists and others with respect to perceived risks associated with the use ofour products in animals, including position statements by livestock producers and their customers based on non-useof certain medicated products in livestock production, whether or not scientifically-supported, could affect publicperceptions and reduce the use of our products. Those adverse consumer views related to the use of one or more ofour products in animals could have a material adverse effect on our financial condition and results of operations.Our sales in the United States of products that have been classified by the FDA as medically important antibacterialswere approximately $37 million for the fiscal year ended June 30, 2016.26TABLE OF CONTENTSRestrictions on the use of antibacterials in food-producing animals may become more prevalent.The issue of the potential transfer of antibacterial resistance from bacteria from food-producing animals tohuman bacterial pathogens, and the causality and impact of that transfer, are the subject of global scientific andregulatory discussion. Antibacterials refer to molecules that can be used to treat or prevent bacterial infections andare a sub-categorization of the products that make up our medicated feed additives portfolios. In some countries, thisissue has led to government restrictions on the use of specific antibacterials in some food-producing animals,regardless of the route of administration (in feed, water, intramammary, topical, injectable or other route ofadministration). These restrictions are more prevalent in countries where animal protein is plentiful andgovernments are willing to take action even when there is scientific uncertainty. In December 2013, the FDAannounced a plan to phase out over a three-year period the production (non-therapeutic) uses of medically importantantibacterials administered in feed or water to food producing animals. Medically important antibacterials includeclasses that are prescribed in animal and human health and are listed in the Appendix of the FDA-CVM Guidancefor Industry (GFI) #152. The FDA plan objectives are described in GFI #209 and GFI #213 and provide for thecontinued use of medically important antibacterials in food-producing animals for treatment, control and preventionof disease (“therapeutic” use) under the supervision of a veterinarian. The FDA indicated that it took this action tohelp preserve the efficacy of medically important antibacterials to treat infections in humans. In the United States,the antibacterial products within our poultry business, the largest portion of our MFAs and other business in thisregion, as well as our cattle business, have approved therapeutic indications. We believe, based on current producerusage patterns, that the large majority of use of our products in these segments that have been classified by the FDAas medically important antibacterials is at therapeutic dosage levels. We currently generate a portion of our revenuesfrom antibacterial products sold for use in turkeys and swine in the United States where we do not currently havetherapeutic claims that match our customers’ usage patterns. We intend to ensure that our antibacterial productofferings are in alignment with the FDA’s guidance documents within the FDA’s three-year implementation period,and are pursuing both new and additional therapeutic claims for these products with the FDA. However, there canbe no assurance that we will be successful in obtaining such claims. While it is difficult to predict exactly whatimpact the removal of non-therapeutic claims for our products that have been classified by the FDA as medicallyimportant antibacterials will ultimately have on our sales, we estimate that, based on our customers’ usage patterns,had we voluntarily decided to withdraw all of our non-therapeutic claims for these products in the United States, anddid not add any new therapeutic claims for these products, our MFAs and other net sales would have been reducedby approximately $7 million for the year ended June 30, 2016.Our Mecadox (carbadox) product has been approved for use in food animals in the United States for over40 years. Certain regulatory bodies have raised concerns about the possible presence of certain residues of ourcarbadox product in meat from animals that consume the product. The product was banned for use in the EuropeanUnion in 1998 and has been banned in several other countries outside the United States. In July 2014, the Codexadopted risk management advice language for a number of compounds including carbadox. The advice languagestates “authorities should prevent residues of carbadox in food. This can be accomplished by not using carbadox infood producing animals.” The advice language is to provide advice only and is not binding on individual nationalauthorities, and almost all national authorities already have long-established regulatory standards for carbadox. Theadvice language may be considered by national authorities in making future risk management determinations. To theextent additional national authorities elect to follow the risk management advice and prohibit the use of carbadox infood-producing animals, those decisions could have an adverse effect on our sales of carbadox in those countries orin countries like the United States that produce meat for export to those countries.In April 2016, the FDA began initial steps to withdraw approval of Mecadox (carbadox), due to concernsthat certain residues from the product may persist in tissues for longer than previously determined. This initialaction by the FDA does not prohibit the sale or use of Mecadox in the United States. Mecadox has been approvedand sold in the United States for more than 40 years and is a widely used treatment for controlling bacterial diseasesincluding Salmonella and swine dysentery. Mecadox is not used in human medicine and the class of drug is notconsidered a medically important antimicrobial. The approved Mecadox label requires a 42-day withdrawal periodpre-harvesting, and to date we have not seen any hazardous residues of carbadox being detected from pig meattreated in accordance with the approved label. We have complete confidence in the safety of Mecadox. In responseto FDA inquiries several years27TABLE OF CONTENTSago, we began rigorous new studies of the continued safety of the product when used in accordance with the label.Key studies were completed in July 2016, and we submitted our data, analyses and information to the FDA that webelieve support the continued safe use of Mecadox. The timing of the FDA’s response to our submission is notsubject to a predetermined deadline. Our sales of Mecadox in the United States were approximately $15 million forthe year ended June 30, 2016. Should we be unable to successfully defend the safety of the product, the loss ofMecadox sales would have a negative impact to the results of our operations.In 2008, the FDA announced that the agency required formal review of all additives used in theproduction of ethanol, including our Lactrol product (formulated virginiamycin), where the co-products may be usedfor animal feed. Virginiamycin has been certified by an independent expert panel convened by us as “generallyrecognized as safe” (“GRAS”) for use as a processing aid in ethanol production and as related to the use of theresulting distiller’s co-products for animal feed. We believe that this certification satisfies the FDA requirement.However, there can be no assurance we will be successful in maintaining market access for our Lactrol product orother ethanol production additives that we sell.Our global sales of antibacterials and other related products were approximately $340 million for the yearended June 30, 2016. We cannot predict whether resistance concerns with antibacterials will result in additionalrestrictions, expanded regulations or public pressure to discontinue or reduce use of antibacterials in food-producinganimals, which could materially adversely affect our operating results and financial condition.A material portion of our sales are generated by antibacterials and other related products.Our medicated products business is comprised of a relatively small number of compounds and accountedfor 45% and 45% of net sales for the years ended June 30, 2016 and 2015, respectively. The significant loss ofantibacterial or other related product sales for any reason, including competition, product bans or restrictions, publicperception or any of the other risks related to such products as described in this Annual Report on Form 10-K, couldhave a material adverse effect on our business.We face competition in each of our markets from a number of large and small companies, some of which havegreater financial, R&D, production and other resources than we have.Many of our products face competition from alternative or substitute products. We are engaged in highlycompetitive industries and, with respect to all of our major products, face competition from a substantial number ofglobal and regional competitors. We believe many of our competitors are conducting R&D activities in areas servedby our products and in areas in which we are developing products. Some competitors have greater financial, R&D,production and other resources than we have. Some of our principal competitors include Bayer AG, Ceva SantéAnimale, Boehringer Ingelheim International GmbH, Eli Lilly and Company (Elanco Animal Health), HuvepharmaInc., Lallemand Inc., Merck & Co., Inc. (Merck Animal Health and MSD Animal Health), Pharmgate LLC, SanofiS.A. (Merial), Southeastern Minerals, Inc., Virbac and Zoetis Inc. To the extent these companies or new entrantsoffer comparable animal health, mineral nutrition or performance products at lower prices, our business could beadversely affected. New entrants could substantially reduce our market share or render our products obsolete.In certain countries, because of our size and product mix, we may not be able to capitalize on changes incompetition and pricing as fully as our competitors. In recent years, there have been new generic medicatedproducts introduced to the livestock industry, particularly in the United States.There continues to be consolidation in the animal health market, which could strengthen our competitors.Our competitors can be expected to continue to improve the formulation and performance of their products and tointroduce new products with competitive price and performance characteristics. There can be no assurance that wewill have sufficient resources to maintain our current competitive position or market share.Outbreaks of animal diseases could significantly reduce demand for our products.The demand for our products could be significantly affected by outbreaks of animal diseases, and suchoccurrences may have a material adverse impact on the sale of our products and our financial condition and resultsof operations. The outbreaks of disease are beyond our control and could28TABLE OF CONTENTSsignificantly affect demand for our products and consumer perceptions of certain meat products. An outbreak ofdisease could result in governmental restrictions on the import and export of chicken, pork, beef or other products toor from our customers. This could also create adverse publicity that may have a material adverse effect on ourability to sell our products successfully and on our financial condition and results of operations. In addition,outbreaks of disease carried by animals may reduce regional or global sales of particular animal-derived foodproducts or result in reduced exports of such products, either due to heightened export restrictions or importprohibitions, which may reduce demand for our products due to reduced herd or flock sizes.There has been substantial publicity regarding H1N1, known as North American (or Swine) Influenzaand, previously, H5N1, known as Highly Pathogenic Avian Influenza, in the human population. There have alsobeen concerns relating to E. coli in beef and Salmonella in poultry and other food poisoning micro-organisms inmeats and other foods. Consumers may associate human health fears with animal diseases, food, food production orfood animals whether or not it is scientifically valid, which may have an adverse impact on the demand for animalprotein. Occurrences of this type could significantly affect demand for animal protein, which in turn could affect thedemand for our products in a manner that has a significant adverse effect on our financial condition and results ofoperations. Also, the outbreak of any highly contagious disease near our main production sites could require us toimmediately halt production of our products at such sites or force us to incur substantial expenses in procuring rawmaterials or products elsewhere.Outbreaks of an exotic or highly contagious disease in a country where we produce our products(particularly vaccines produced at our Israeli facility) may result in other countries halting importation of ourproducts for fear that our product may be contaminated with the exotic organism.Our business may be negatively affected by weather conditions and the availability of natural resources.The animal health industry and demand for many of our animal health products in a particular region areaffected by changing disease pressures and by weather conditions, as usage of our products follows varying weatherpatterns and weather-related pressures from diseases. As a result, we may experience regional and seasonalfluctuations in our results of operations.In addition, livestock producers depend on the availability of natural resources, including abundantrainfall to sustain large supplies of drinking water, grasslands and grain production. Their animals’ health and theirability to operate could be adversely affected if they experience a shortage of fresh water due to human populationgrowth or floods, droughts or other weather conditions. In the event of adverse weather conditions or a shortage offresh water, livestock producers may purchase less of our products.Our operations could be subject to the effects of climate change.Our operations and customers may be subject to potential physical impacts of climate change, includingchanges in weather patterns and the potential for extreme weather events, which could affect the manufacture anddistribution of our products, agricultural yields and the demand for our products and result in additional regulationthat increase our operating costs.The testing, manufacturing, and marketing of certain of our products are subject to extensive regulation bynumerous government authorities in the United States and other countries, including, but not limited to, theFDA.Among other requirements, FDA approval of antibacterials and other medicated products, including themanufacturing processes and facilities used to produce such products, is required before such products may bemarketed in the United States. Further, cross-clearance approvals are generally required for such products to be usedin combination in animal feed. Similarly, marketing approval by a foreign governmental authority is typicallyrequired before such products may be marketed in a particular foreign country. In addition to approval of theproduct and its labeling, regulatory authorities typically require approval and periodic inspection of themanufacturing facilities. In order to obtain FDA approval of a new29TABLE OF CONTENTSanimal health product, we must, among other things, demonstrate to the satisfaction of the FDA that the product issafe and effective for its intended uses and that we are capable of manufacturing the product with procedures thatconform to FDA’s current cGMP regulations, which must be followed at all times.In February 2015, the FDA conducted an inspection at our Teaneck, NJ headquarters to verify changes toand corrective actions related to various analytical test results and practices, expiration dating and reportingrequirements regarding specification non-conformance. A Form 483 was issued, which contained one inspectionalobservation citing two examples of the observed violation. The observation questioned whether or not we are able toconfirm that the drug components (of Type A medicated products) remain uniformly dispersed and stable underordinary conditions of shipment, storage and use. We responded to the inspectional observation in writing inMarch 2015. This inspectional observation has not impacted our ability to market products in the United States orany other country, and we expect the Form 483 observation will be satisfactorily addressed.In March 2016, the FDA conducted a cGMP audit of our manufacturing facility at Guarulhos, Brazil. TheFDA issued inspectional observations (Form 483) pertaining to six observations made during the inspection. Weresponded to the inspectional observations in May 2016 and have committed to provide additional data whenavailable. It is likely the FDA will require a follow up site inspection to review the actions we have taken. Such aninspection, if needed, could occur at any time, or may be incorporated with a routine cGMP audit. The timing ofsuch audits is determined by the FDA but is typically at approximately two year intervals. While we have takenactions to address our cGMP program and are working to implement the FDA’s remaining recommendations, therecan be no assurance that the FDA will concur. Failure to comply with cGMP standards could have a financiallymaterial impact on our business.The process of seeking FDA approvals can be costly, time consuming, and subject to unanticipated andsignificant delays. There can be no assurance that such approvals will be granted to us on a timely basis, or at all.Any delay in obtaining or any failure to obtain FDA or foreign government approvals or the suspension orrevocation of such approvals would adversely affect our ability to introduce and market medicated feed additiveproducts and to generate product revenue. For more information on FDA and foreign government approvals andcGMP issues, see “Business—Regulatory.”We may experience declines in the sales volume and prices of our products as the result of the continuing trendtoward consolidation of certain customer groups as well as the emergence of large buying groups.We make a majority of our sales to integrated poultry, swine and cattle operations and to a number ofregional and national feed companies, distributors, co-ops and blenders. Significant consolidation of our customersmay result in these groups gaining additional purchasing leverage and consequently increasing the product pricingpressures facing our business. Additionally, the emergence of large buying groups potentially could enable suchgroups to attempt to extract price discounts on our products. Moreover, if, as a result of increased leverage,customer pressures require us to reduce our pricing such that our gross margins are diminished, we could decide notto sell our products to a particular customer, which could result in a decrease in our revenues. Consolidation amongour customer base may also lead to reduced demand for our products and replacement of our products by thecombined entity with those of our competitors. The result of these developments could have a material adverseeffect on our business, financial condition and results of operations.Our business is subject to risk based on customer exposure to rising costs and reduced customer income.Livestock producers may experience increased feed, fuel, transportation and other key costs or mayexperience decreased animal protein prices or sales. Either of these trends could cause deterioration in the financialcondition of our livestock producer customers, potentially inhibiting their ability to purchase our products or pay usfor products delivered. Our livestock producer customers may offset rising costs by reducing spending on ourproducts, including by switching to lower-cost alternatives to our products.Generic products may be viewed as more cost-effective than our products.We face competition from products produced by other companies, including generic alternatives to certainof our products. We depend primarily on trade secrets to provide us with competitive advantages for many of ourproducts. The protection afforded is limited by the availability of new competitive products30TABLE OF CONTENTSor generic versions of existing products that can successfully compete with our products. As a result, we may facecompetition from new competitive products or lower-priced generic alternatives to many of our products. Genericcompetitors are becoming more aggressive in terms of pricing, and generic products are an increasing percentage ofoverall animal health sales in certain regions. If animal health customers increase their use of new or existinggeneric products, our financial condition and results of operations could be materially adversely affected.Advances in veterinary medical practices and animal health technologies could negatively affect the market forour products.The market for our products could be impacted negatively by the introduction and/or broad marketacceptance of newly developed or alternative products that address the diseases and conditions for which we sellproducts, including “green” or “holistic” health products or specially bred disease-resistant animals. In addition,technological breakthroughs by others may obviate our technology and reduce or eliminate the market for ourproducts. Introduction or acceptance of such products or technologies could materially adversely affect our business,financial condition and results of operations.The misuse or extra-label use of our products may harm our reputation or result in financial or other damages.Our products have been approved for use under specific circumstances for, among other things, theprevention, control and/or treatment of certain diseases and conditions in specific species, in some cases subject tocertain dosage levels or minimum withdrawal periods prior to the slaughter date. There may be increased risk ofproduct liability if livestock producers or others attempt any extra-label use of our products, including the use of ourproducts in species for which they have not been approved, or at dosage levels or periods prior to withdrawal thathave not been approved. If we are deemed by a governmental or regulatory agency to have engaged in thepromotion of any of our products for extra-label use, such agency could request that we modify our training orpromotional materials and practices and we could be subject to significant fines and penalties. The imposition ofthese sanctions could also affect our reputation and position within the industry. Even if we were not responsible forhaving promoted the extra-label use, concerns could arise about the safety of the resulting meat in the human foodsupply. Any of these events could materially adversely affect our financial condition and results of operations.The public perception of the safety and efficacy of certain of our animal health products may harm ourreputation.The public perception of the safety and efficacy of certain of our animal health products, whether or notthese concerns are scientifically or clinically supported, may lead to product recalls, withdrawals, suspensions ordeclining sales as well as product liability and other claims.In addition, we depend on positive perceptions of the safety and quality of our products, and animal healthproducts generally, by our customers, veterinarians and end-users, and such concerns may harm our reputation. Insome countries, these perceptions may be exacerbated by the existence of counterfeit versions of our products,which, depending on the legal and law enforcement recourse available in the jurisdiction where the counterfeitingoccurs, may be difficult to police or stop. These concerns and the related harm to our reputation could materiallyadversely affect our financial condition and results of operations, regardless of whether such reports are accurate.We are dependent on suppliers having current regulatory approvals, and the failure of those suppliers tomaintain these approvals or challenges in replacing any of those suppliers could affect our supply of materials oraffect the distribution or sale of our products.Suppliers and third party contract manufacturers for our animal health and mineral nutrition products, likeus, are subject to extensive regulatory compliance. If any one of these third parties discontinues its supply to usbecause of significant regulatory violations or otherwise, or an adverse event occurs at one of their facilities, theinterruption in the supply of these materials could decrease sales of our affected products. In this event, we mayseek to enter into agreements with third parties to purchase raw materials or products or to lease or purchase newmanufacturing facilities. We may be unable to find a third party willing or able to provide the necessary products orfacilities suitable for manufacturing31• volatility in the international financial markets;• compliance with governmental controls;• difficulties enforcing contractual and intellectual property rights;TABLE OF CONTENTSpharmaceuticals on terms acceptable to us or the cost of those pharmaceuticals may be prohibitive. If we have toobtain substitute materials or products, additional regulatory approvals will likely be required, as approvals aretypically specific to a single product produced by a specified manufacturer in a specified facility. As such, the use ofnew facilities also requires regulatory approvals. While we take measures where economically feasible and availableto secure back-up suppliers, the continued receipt of active ingredients or products from a sole source supplier couldcreate challenges if a sole source was interrupted. We may not be able to provide adequate and timely product toeliminate any threat of interruption of supply of our products to customers and these problems may materiallyadversely impact our business.The raw materials used by us in the manufacture of our products can be subject to price fluctuations and theiravailability can be limited.While the selling prices of our products tend to increase or decrease over time with the cost of rawmaterials, such changes may not occur simultaneously or to the same degree. The costs of certain of our significantraw materials are subject to considerable volatility, and we generally do not engage in activities to hedge the costs ofour raw materials. Although no single raw material accounted for more than 4% of our cost of goods sold for theyear ended June 30, 2016, volatility in raw material costs can result in significant fluctuations in our costs of goodssold of the affected products. The costs of raw materials used by our Mineral Nutrition business are particularlysubject to fluctuations in global commodities markets and cost changes in the underlying commodities marketstypically lead directly to a corresponding change in our revenues. Although we attempt to adjust the prices of ourproducts to reflect significant changes in raw material costs, we may not be able to pass any increases in rawmaterial costs through to our customers in the form of price increases. Significant increases in the costs of rawmaterials, if not offset by product price increases, could have a material adverse effect on our financial conditionand results of operations. The supply of certain of our raw materials is dependent on third party suppliers. There isno guarantee that supply shortages of such raw materials will not occur. In addition, if any one of these third partiesdiscontinues its supply to us, or an adverse event occurs at one of their facilities, the interruption in the supply ofthese materials could decrease sales of our affected products. In the event that we cannot procure necessary majorraw materials from other suppliers, the occurrence of any of these may have an adverse impact on our business.Our revenues are dependent on the continued operation of our various manufacturing facilities.Although presently all our manufacturing facilities are considered to be in good condition, the operationof our manufacturing facilities involves many risks, including the breakdown, failure or substandard performance ofequipment, construction delays, shortages of materials, labor problems, power outages, the improper installation oroperation of equipment, natural disasters, terrorist activities, the outbreak of any highly contagious diseases near ourproduction sites and the need to comply with environmental and other directives of governmental agencies. Inaddition, regulatory authorities such as the FDA typically require approval and periodic inspection of themanufacturing facilities to confirm compliance with applicable regulatory requirements, and those requirementsmay be enforced by various means, including seizures and injunctions. Certain of our product lines aremanufactured at a single facility, and certain of our product lines are manufactured at a single facility with limitedcapacity at a second facility, and production would not be easily transferable to another site. The occurrence ofmaterial operational problems, including but not limited to the above events, may adversely affect our financialcondition and results of operations.A significant portion of our operations are conducted in foreign jurisdictions and are subject to the economic,political, legal and business environments of the countries in which we do business.Our international operations could be limited or disrupted by any of the following:32• compliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt PracticesAct (“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, includingthose relating to environmental, health and safety requirements;• changes in laws, regulations, government controls or enforcement practices with respect to ourbusiness and the businesses of our customers;• political and social instability, including crime, civil disturbance, terrorist activities and armedconflicts;• trade restrictions, export controls and sanctions laws and restrictions on direct investments by foreignentities, including restrictions administered by the Office of Foreign Assets Control of the U.S.Department of the Treasury;• changes in tax laws and tariffs;• costs and difficulties in staffing, managing and monitoring international operations; and• longer payment cycles and increased exposure to counterparty risk.TABLE OF CONTENTSThe multinational nature of our business subjects us to potential risks that various taxing authorities maychallenge the pricing of our cross-border arrangements and subject us to additional tax, adversely impacting oureffective tax rate and our tax liability.In addition, international transactions may involve increased financial and legal risks due to differing legalsystems and customs. Compliance with these requirements may prohibit the import or export of certain products andtechnologies or may require us to obtain a license before importing or exporting certain products or technology. Afailure to comply with any of these laws, regulations or requirements could result in civil or criminal legalproceedings, monetary or non-monetary penalties, or both, disruptions to our business, limitations on our ability toimport and export products and services, and damage to our reputation. In addition, variations in the pricing of ourproducts 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 financialcondition and results of operations. Changes in any of these laws, regulations or requirements, or the politicalenvironment in a particular country, may affect our ability to engage in business transactions in certain markets,including investment, procurement and repatriation of earnings.We are subject to product registration and authorization regulations in many of the jurisdictions in which weoperate and/or distribute our products, including the United States and member states of the European Union.We are subject to regulations related to testing, manufacturing, labeling, registration, and safety analysisin order to lawfully distribute many of our products, including for example, in the United States, the federal ToxicSubstances Control Act and the Federal Insecticide, Fungicide, and Rodenticide Act, and in the European Union, theRegulation on REACH. We are also subject to similar requirements in many of the other jurisdictions in which weoperate and/or distribute our products. In some cases, such registrations are subject to periodic review by relevantauthorities. Such regulations may lead to governmental restrictions or cancellations of, or refusal to issue, certainregistrations or authorizations, or cause us or our customers to make product substitutions in the future. Suchregulations may also lead to increased third party scrutiny and personal injury or product liability claims.Compliance with these regulations can be difficult, costly and time consuming and liabilities or costs relating tosuch regulations could have a material adverse effect on our business, financial condition and results of operations.We have significant assets located outside the United States and a significant portion of our sales and earnings isattributable to operations conducted abroad.As of June 30, 2016, we had manufacturing and direct sales operations in 14 countries and sold ourproducts in over 65 countries. Our operations outside the United States accounted for 48% and 50% of33• nicarbazin and amprolium anticoccidials, most of which are exported from Israel to major worldmarkets;• vaccines, a substantial portion of which are exported to international markets; and• animal health pharmaceuticals and trace minerals and nutritional specialty products for the localanimal feed industry.TABLE OF CONTENTSour consolidated assets as of June 30, 2016 and 2015, respectively, and 37% and 36% of our consolidated net salesfor the years ended June 30, 2016 and 2015, respectively. Our foreign operations are subject to currency exchangefluctuations and restrictions, political instability in some countries, and uncertainty of, and governmental controlover, commercial rights.Changes in the relative values of currencies take place from time to time and could in the future adverselyaffect our results of operations as well as our ability to meet interest and principal obligations on our indebtedness.To the extent that the U.S. dollar fluctuates relative to the applicable foreign currency, our results are favorably orunfavorably affected. We may from time to time manage this exposure by entering into foreign currency contracts.Such contracts generally are entered into with respect to anticipated costs denominated in foreign currencies forwhich timing of the payment can be reasonably estimated. No assurances can be given that such hedging activitieswill not result in, or will be successful in preventing, losses that could have an adverse effect on our financialcondition or results of operations. There are times when we do not hedge against foreign currency fluctuations andtherefore are subject to the risks associated with fluctuations in currency exchange rates.In addition, international manufacturing, sales and raw materials sourcing are subject to other inherentrisks, including possible nationalization or expropriation, labor unrest, political instability, price and exchangecontrols, limitation on foreign participation in local enterprises, health-care regulation, export duties and quotas,domestic and international customs and tariffs, compliance with export controls and sanctions laws, the ForeignCorrupt Practices Act and other laws and regulations governing international trade, unexpected changes inregulatory environments, difficulty in obtaining distribution and support, and potentially adverse tax consequences.Although such risks have not had a material adverse effect on us in the past, these factors could have a materialadverse impact on our ability to increase or maintain our international sales or on our results of operations in thefuture.We have manufacturing facilities located in Israel and a portion of our net sales and earnings is attributable toproducts produced and operations conducted in Israel.Our Israeli manufacturing facilities and local operations accounted for 22% of our consolidated assets asof each of June 30, 2016 and 2015, and 20% of our consolidated net sales for each of the years ended June 30, 2016and 2015. We maintain manufacturing facilities in Israel, which manufacture:A substantial portion of this production is exported from Israel to major world markets. Accordingly, ourIsraeli operations are dependent on foreign markets and the ability to reach those markets. Hostilities between Israeland its neighbors may hinder Israel’s international trade. This, in turn, could have a material adverse effect on ourbusiness, financial condition and results of operations.Certain countries, companies and organizations continue to participate in a boycott of Israeli firms andother companies doing business in Israel or with Israeli companies. We do not believe that the boycott has had amaterial adverse effect on us, but we cannot provide assurance that restrictive laws, policies or practices directedtoward Israel or Israeli businesses will not have an adverse impact on our operations or expansion of our business.Our business, financial condition and results of operations in Israel may be adversely affected by factors outside ofour control, such as currency fluctuations, energy shortages and other political, social and economic developmentsin or affecting Israel.We have manufacturing facilities located in Brazil and a portion of our sales and earnings is attributable toproducts produced and operations conducted in Brazil.Our Brazilian manufacturing facilities and local operations accounted for 16% and 15% of ourconsolidated assets, as of June 30, 2016 and 2015, respectively, and 21% of our consolidated net sales for the yearsended June 30, 2016 and 2015. We maintain manufacturing facilities in Brazil, which manufacture34TABLE OF CONTENTSvirginiamycin, semduramicin and nicarbazin. Our Brazilian facilities also produce Stafac, Aviax, Aviax Plus,Coxistac, Nicarb and Terramycin granular formulations. A substantial portion of the production is exported fromBrazil to major world markets. Accordingly, our Brazilian operations are dependent on foreign markets and theability to reach those markets.Our business, financial condition and results of operations in Brazil may be adversely affected by factorsoutside of our control, such as currency fluctuations, energy shortages and other political, social and economicdevelopments in or affecting Brazil.Certain of our employees are covered by collective bargaining or other labor agreements.As of June 30, 2016, approximately 207 of our Israeli employees and 388 of our Brazilian employeeswere covered by collective bargaining agreements. We believe we have satisfactory relations with our employees.There can be no assurance that we will not experience a work stoppage or strike at our manufacturing facilities. Aprolonged work stoppage or strike at any of our manufacturing facilities could have a material adverse effect on ourbusiness, financial condition and results of operations.The loss of key personnel may disrupt our business and adversely affect our financial results.Our operations and future success are dependent on the continued efforts of our senior executive officersand other key personnel. Although we have entered into employment agreements with certain executives, we maynot be able to retain all of our senior executive officers and key employees. These senior executive officers andother key employees may be hired by our competitors, some of which have considerably more financial resourcesthan we do. The loss of the services of any of our senior executive officers or other key personnel, or the inability tohire and retain qualified employees, could have a material adverse effect on our business, financial condition andresults of operations.Our R&D relies on evaluations in animals, which may become subject to bans or additional regulations.As a company that produces animal health medicines and vaccines, evaluation of our existing and newproducts in animals is required in order to be able to register our products. Animal testing in certain industries hasbeen the subject of controversy and adverse publicity. Some organizations and individuals have attempted to bananimal testing or encourage the adoption of additional regulations applicable to animal testing. To the extent that theactivities of such organizations and individuals are successful, our R&D, and by extension our financial conditionand results of operations, could be materially adversely affected. In addition, negative publicity about us or ourindustry 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.We are subject to environmental, health and safety laws and regulations, including those governingpollution; protection of the environment; the use, management and release of hazardous materials, substances andwastes; air emissions; greenhouse gas emissions; water use, supply, and discharges; the investigation andremediation of contamination; the manufacture, distribution and sale of regulated materials, including pesticides; theimporting, exporting and transportation of products; and the health and safety of our employees and the public(collectively, “Environmental Laws”). See “Business—Environmental, Health and Safety.”Pursuant to Environmental Laws, certain of our subsidiaries are required to obtain and maintain numerousgovernmental permits, licenses, registrations, authorizations and approvals, including “RCRA Part B” hazardouswaste permits, to conduct various aspects of their operations (collectively “Environmental Permits”), any of whichmay be subject to suspension, revocation, modification, termination or denial under certain circumstances or whichmay not be renewed upon their expiration for various reasons, including noncompliance. See “Business—Environmental, Health and Safety.” These Environmental Permits can be difficult, costly and time consuming toobtain and may contain conditions that limit our operations. Additionally, any failure to obtain and maintain suchEnvironmental Permits could restrict or otherwise prohibit certain aspects of our operations, which could have amaterial adverse effect on our business, financial condition and results of operations.35TABLE OF CONTENTSWe have expended, and may be required to expend in the future, substantial funds for compliance withEnvironmental Laws. As recyclers of hazardous metal-containing chemical wastes, certain of our subsidiaries havebeen, and are likely to be, the focus of extensive compliance reviews by environmental regulatory authorities underEnvironmental Laws, including those relating to the generation, transportation, treatment, storage and disposal ofsolid and hazardous wastes under the RCRA. In the past, some of our subsidiaries have paid fines and entered intoconsent orders to address alleged environmental violations. See “Business—Environmental, Health and Safety.” Wecannot assure you that our operations or activities or those of certain of our subsidiaries, including with respect tocompliance 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 ofpollution 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 ofoperations. In addition, we cannot predict the extent to which Environmental Laws, and the interpretation orenforcement thereof, may change or become more stringent in the future, each of which may affect the market forour products or give rise to additional capital expenditures, compliance costs or liabilities that could be material.Our operations or products may impact the environment or cause or contribute to contamination or exposure tohazardous substances.Given the nature of our current and former operations, particularly at our chemical manufacturing sites,we have incurred, are currently incurring and may in the future incur liabilities under CERCLA, or under otherfederal, state, local and foreign Environmental Laws related to releases of or contamination by hazardoussubstances, with respect to our current or former sites, adjacent or nearby third-party sites, or offsite disposallocations. See “Business—Environmental, Health and Safety.” Certain Environmental Laws, including CERCLA,can impose strict, joint, several, and retroactive liability for the cost of investigation and cleanup of contaminatedsites on owners and operators of such sites, as well as on persons who dispose of or arrange for disposal ofhazardous substances at such sites. Accordingly, we could incur liability, whether as a result of governmentenforcement or private claims, for known or unknown liabilities at, or caused by migration from or hazardous wastetransported from, any of our current or former facilities or properties, including those owned or operated bypredecessors or third parties. See “Business—Environmental, Health and Safety.” Such liability could have amaterial adverse effect on our business, financial condition and results of operations.The nature of our current and former operations also exposes us to the risk of claims under EnvironmentalLaws. We could be subject to claims by environmental regulatory authorities, individuals and other third partiesseeking damages for alleged personal injury, property damage, and damages to natural resources resulting fromhazardous substance contamination or human exposure caused by our operations, facilities or products, and therecan be no assurance that material costs and liabilities will not be incurred in connection with any such claims. Ourinsurance may not be sufficient to cover any of these exposure, product, injury or damage claims.Furthermore, regulatory agencies are showing increasing concern over the impact of animal healthproducts and livestock operations on the environment. This increased regulatory scrutiny may necessitate thatadditional time and resources be spent to address these concerns for both new and existing products and could affectproduct sales and materially adversely affect our business, financial condition or results of operations.We cannot assure you that our liabilities arising from past or future releases of, or exposure to, hazardoussubstances will not materially adversely affect our business, financial condition or results of operations.We have been and may continue to be subject to claims of injury from direct exposure to certain of our productsthat constitute or contain hazardous substances and from indirect exposure when such substances areincorporated into other companies’ products.Because certain of our products constitute or contain hazardous substances, and because the production ofcertain chemicals involves the use, handling, processing, storage and transportation of hazardous substances, fromtime to time we are subject to claims of injury from direct exposure to such36TABLE OF CONTENTSsubstances and from indirect exposure when such substances are incorporated into other companies’ products. Therecan be no assurance that as a result of past or future operations, there will not be additional claims of injury byemployees or members of the public due to exposure, or alleged exposure, to such substances. We are also party to anumber of claims and lawsuits arising out of the normal course of business, including product liability claims andallegations of violations of governmental regulations, and face present and future claims with respect to workplaceexposure, workers’ compensation and other matters. In most cases, such claims are covered by insurance and, whereapplicable, workers’ compensation insurance, subject to policy limits and exclusions; however, our insurancecoverage, to the extent available, may not be adequate to protect us from all liabilities that we might incur inconnection with the manufacture, sale and use of our products. Insurance is expensive and in the future may not beavailable on acceptable terms, if at all. A successful claim or series of claims brought against us in excess of ourinsurance coverage could have a materially adverse effect on our business, financial condition and results ofoperations. In addition, any claims, even if not ultimately successful, could adversely affect the marketplace’sacceptance of our products.We are subject to risks from litigation that may materially impact our operations.We face an inherent business risk of exposure to various types of claims and lawsuits. We are involved invarious legal proceedings that arise in the ordinary course of our business. Although it is not possible to predict withcertainty the outcome of every pending claim or lawsuit or the range of probable loss, we believe these pendinglawsuits and claims will not individually or in the aggregate have a material adverse impact on our results ofoperations. However, we could in the future be subject to various lawsuits, including intellectual property, productliability, personal injury, product warranty, environmental or antitrust claims, among others, and incur judgments orenter into settlements of lawsuits and claims that could have a material adverse effect on our results of operations inany particular period.We are subject to risks that may not be covered by our insurance policies.In addition to pollution and other environmental risks, we are subject to risks inherent in the animalhealth, mineral nutrition and performance products industries, such as explosions, fires, spills or releases. Anysignificant interruption of operations at our principal facilities could have a material adverse effect on us. Wemaintain general liability insurance, pollution legal liability insurance, and property and business interruptioninsurance with coverage limits that we believe are adequate. Because of the nature of industry hazards, it is possiblethat liabilities for pollution and other damages arising from a major occurrence may not be covered by our insurancepolicies or could exceed insurance coverages or policy limits or that such insurance may not be available atreasonable rates in the future. Any such liabilities, which could arise due to injury or loss of life, severe damage toand destruction of property and equipment, pollution or other environmental damage or suspension of operations,could have a material adverse effect on our business.Adverse U.S. and international economic and market conditions may adversely affect our product sales andbusiness.Current U.S. and international economic and market conditions are uncertain. Our revenues and operatingresults may be affected by uncertain or changing economic and market conditions, including the challenges faced inthe credit markets and financial services industry. If domestic and global economic and market conditions remainuncertain or persist or deteriorate further, we may experience material impacts on our business, financial conditionand results of operations. Adverse economic conditions impacting our customers, including, among others,increased taxation, higher unemployment, lower customer confidence in the economy, higher customer debt levels,lower availability of customer credit, higher interest rates and hardships relating to declines in the stock markets,could cause purchases of meat products to decline, resulting in a decrease in purchases of our products, which couldadversely affect our financial condition and results of operation. Adverse economic and market conditions couldalso negatively impact our business by negatively affecting the parties with whom we do business, including amongothers, our customers, our manufacturers and our suppliers.We may not be able to realize the expected benefits of our investments in emerging markets.We have been taking steps to take advantage of the rise in global demand for animal protein in emergingmarkets, including by expanding our manufacturing presence, sales, marketing and distribution in37TABLE OF CONTENTSthese markets. Failure to continue to maintain and expand our business in emerging markets could also materiallyadversely affect our operating results and financial condition.Some countries within emerging markets may be especially vulnerable to periods of local, regional orglobal economic, political or social instability or crisis. For example, our sales in certain emerging markets havesuffered from extended periods of disruption due to natural disasters. Furthermore, we have also experienced lowerthan expected sales in certain emerging markets due to local, regional and global restrictions on banking andcommercial activities in those countries. For all these and other reasons, sales within emerging markets carrysignificant risks.We may not be able to expand through acquisitions or integrate successfully the products, services and personnelof acquired businesses.From time to time, we may make selective acquisitions to expand our range of products and services andto expand the geographic scope of our business. However, we may be unable to identify suitable targets, andcompetition for acquisitions may make it difficult for us to consummate acquisitions on acceptable terms or at all.We may not be able to locate any complementary products that meet our requirements or that are available to us onacceptable terms or we may not have sufficient capital resources to consummate a proposed acquisition. In addition,assuming we identify suitable products or partners, the process of effectively entering into these arrangementsinvolves risks that our management’s attention may be diverted from other business concerns. Further, if we succeedin identifying and consummating appropriate acquisitions on acceptable terms, we may not be able to integratesuccessfully the products, services and personnel of any acquired businesses on a basis consistent with our currentbusiness practice. In particular, we may face greater than expected costs, time and effort involved in completing andintegrating acquisitions and potential disruption of our ongoing business. Furthermore, we may realize fewer, if any,synergies than envisaged. Our ability to manage acquired businesses may also be limited if we enter into jointventures or do not acquire full ownership or a controlling stake in the acquired business. In addition, continuedgrowth through acquisitions may significantly strain our existing management and operational resources. As aresult, we may need to recruit additional personnel, particularly at the level below senior management, and we maynot be able to recruit qualified management and other key personnel to manage our growth. Moreover, certaintransactions could adversely impact earnings as we incur development and other expenses related to the transactionsand we could incur debt to complete these transactions. Debt instruments could contain contractual commitmentsand covenants that could adversely affect our cash flow and our ability to operate our business, financial conditionand results of operations.We may not successfully implement our business strategies or achieve expected gross margin improvements.We are pursuing and may continue to pursue strategic initiatives that management considers critical to ourlong-term success, including, but not limited to, increasing sales in emerging markets, base revenue growth throughnew product development and value added product lifecycle development; improving operational efficiency throughmanufacturing efficiency improvement and other programs; and expanding our complementary products andservices. There are significant risks involved with the execution of these types of initiatives, including significantbusiness, economic and competitive uncertainties, many of which are outside of our control. Accordingly, wecannot predict whether we will succeed in implementing these strategic initiatives. It could take several years torealize the anticipated benefits from these initiatives, if any benefits are achieved at all. We may be unable toachieve expected gross margin improvements on our products or technologies. Additionally, our business strategymay change from time to time, which could delay our ability to implement initiatives that we believe are importantto our business.Our product approval, R&D, acquisition and licensing efforts may fail to generate new products and productlifecycle developments.Our future success depends on both our existing product portfolio, including our ability to obtain cross-clearances enabling the use of our medicated products in conjunction with other products, approval for use of ourproducts with new species, approval for new claims for our products, approval of our products in new markets, andour pipeline of new products, including new products that we may develop through joint ventures and products thatwe are able to obtain through license or acquisition. The majority38TABLE OF CONTENTSof our R&D programs focus on product lifecycle development, which is defined as R&D programs that leverageexisting animal health products by adding new species or claims, achieving approvals in new markets or creatingnew combinations and reformulations. We commit substantial effort, funds and other resources to expanding ourproduct approvals and R&D, both through our own dedicated resources and through collaborations with thirdparties.We may be unable to determine with accuracy when or whether any of our expanded product approvalsfor our existing product portfolio or any of our products now under development will be approved or launched, orwe may be unable to obtain expanded product approvals or develop, license or otherwise acquire product candidatesor products. In addition, we cannot predict whether any products, once launched, will be commercially successful orwill achieve sales and revenues that are consistent with our expectations. The animal health industry is subject toregional and local trends and regulations and, as a result, products that are successful in some of our markets maynot achieve similar success when introduced into new markets. Furthermore, the timing and cost of our R&D mayincrease, and our R&D may become less predictable. For example, changes in regulations applicable to our industrymay make it more time-consuming and/or costly to research, test and develop products.Products in the animal health industry are sometimes derived from molecules and compounds discoveredor developed as part of human health research. We may enter into collaboration or licensing arrangements with thirdparties to provide us with access to compounds and other technology for purposes of our business. Such agreementsare typically complex and require time to negotiate and implement. If we enter into these arrangements, we may notbe able to maintain these relationships or establish new ones in the future on acceptable terms or at all. In addition,any collaboration that we enter into may not be successful, and the success may depend on the efforts and actions ofour collaborators, which we may not be able to control. If we are unable to access human health-generatedmolecules and compounds to conduct R&D on cost-effective terms, our ability to develop new products could belimited.We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws or trade control laws, aswell as other laws governing our operations. If we fail to comply with these laws, we could be subject to civil orcriminal penalties, other remedial measures, and legal expenses, which could adversely affect our business,financial condition and results of operations.Our operations are subject to anti-corruption laws, including the FCPA and other anti-corruption laws thatapply in countries where we do business. The FCPA, UK Bribery Act and other laws generally prohibit us and ouremployees and intermediaries from bribing, being bribed or making other prohibited payments to governmentofficials or other persons to obtain or retain business or gain some other business advantage. We operate in anumber of jurisdictions that pose a high risk of potential FCPA violations, and we participate in relationships withthird parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws. Inaddition, we cannot predict the nature, scope or effect of future regulatory requirements to which our internationaloperations might be subject or the manner in which existing laws might be administered or interpreted.We are also subject to other laws and regulations governing our international operations, includingregulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S.Department of Treasury’s Office of Foreign Asset Control, and various non-U.S. government entities, includingapplicable export control regulations, economic sanctions on countries and persons, customs requirements, currencyexchange regulations and transfer pricing regulations (collectively, the “Trade Control laws”).There is no assurance that we will be completely effective in ensuring our compliance with all applicableanticorruption laws, including the FCPA or other legal requirements, including Trade Control laws. If we are not incompliance with the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal andcivil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have anadverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigationof any potential violations of the FCPA other anti- corruption laws or Trade Control laws by U.S. or foreignauthorities could also have an adverse impact on our reputation, business, financial condition and results ofoperations.39• pay monetary damages;• obtain a license in order to continue manufacturing or marketing the affected products, which maynot be available on commercially reasonable terms, or at all; or• stop activities, including any commercial activities, relating to the affected products, which couldinclude a recall of the affected products and/or a cessation of sales in the future.TABLE OF CONTENTSThe actual or purported intellectual property rights of third parties may negatively affect our business.A third party may sue us 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.If we do not prevail in this type of litigation, we may be required to:The costs of defending an intellectual property claim could be substantial and could materially adverselyaffect our operating results and financial condition, even if we successfully defend such claims.The intellectual property positions of animal health medicines and vaccines businesses frequently involvecomplex legal and factual questions, and an issued patent does not guarantee us the right to practice the patentedtechnology or develop, manufacture or commercialize the patented product. We cannot be certain that a competitoror other third party does not have or will not obtain rights to intellectual property that may prevent us frommanufacturing, developing or marketing certain of our products, regardless of whether we believe such intellectualproperty rights are valid and enforceable or we believe we would be otherwise able to develop a more commerciallysuccessful product, which may harm our financial condition and results of operations.If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage ofour R&D efforts. We are also dependent upon trade secrets, which generally are difficult to protect.Our long-term success largely depends on our ability to market technologically competitive products. Werely and expect to continue to rely on a combination of intellectual property, including patent, trademark, tradedress, copyright, trade secret and domain name protection laws, as well as confidentiality and license agreementswith our employees and others, to protect our intellectual property and proprietary rights. If we fail to obtain andmaintain adequate intellectual property protection, we may not be able to prevent third parties from using ourproprietary technologies or from marketing products that are very similar or identical to ours. Our currently pendingor future patent applications may not result in issued patents, or be approved on a timely basis, or at all. Similarly,any term extensions that we seek may not be approved on a timely basis, if at all. In addition, our issued patents maynot contain claims sufficiently broad to protect us against third parties with similar technologies or products orprovide us with any competitive advantage, including exclusivity in a particular product area. The scope of ourpatent claims also may vary between countries, as individual countries have their own patent laws. For example,some countries only permit the issuance of patents covering a novel chemical compound itself, and its first use, andthus further methods of use for the same compound, may not be patentable. We may be subject to challenges bythird parties regarding our intellectual property, including claims regarding validity, enforceability, scope andeffective term. The validity, enforceability, scope and effective term of patents can be highly uncertain and ofteninvolve complex legal and factual questions and proceedings. Our ability to enforce our patents also depends on thelaws of individual countries and each country’s practice with respect to enforcement of intellectual property rights.In addition, if we are unable to maintain our existing license agreements or other agreements pursuant to which thirdparties grant us rights to intellectual property, including because such agreements expire or are terminated, ourfinancial condition and results of operations could be materially adversely affected.In addition, patent law reform in the United States and other countries may also weaken our ability toenforce our patent rights, or make such enforcement financially unattractive. For instance, in September 2011, theUnited States enacted the America Invents Act, which will permit enhanced third-party actions for challengingpatents and implement a first-to-invent system, and, in April 2012, Australia enacted the Intellectual Property LawsAmendment (Raising the Bar) Act, which provides higher standards for obtaining patents. These reforms couldresult in increased costs to protect our intellectual property or limit our ability to patent our products in thesejurisdictions.40TABLE OF CONTENTSAdditionally, certain foreign governments have indicated that compulsory licenses to patents may begranted in the case of national emergencies, which could diminish or eliminate sales and profits from those regionsand materially adversely affect our operating results and financial condition.Likewise, in the United States and other countries, we currently hold issued trademark registrations andhave trademark applications pending, any of which may be the subject of a governmental or third party objection,which could prevent the maintenance or issuance of the same and thus create the potential need to rebrand or relabela product. As our products mature, our reliance on our trademarks to differentiate us from our competitors increasesand as a result, if we are unable to prevent third parties from adopting, registering or using trademarks and tradedress that infringe, dilute or otherwise violate our trademark rights, our business could be materially adverselyaffected.Our competitive position is also dependent upon unpatented trade secrets, which generally may bedifficult to protect. Others may independently develop substantially equivalent proprietary information andtechniques or may otherwise gain access to our trade secrets, trade secrets may be disclosed or we may not be ableto protect our rights to unpatented trade secrets.Many of our vaccine products and other products are based on or incorporate proprietary information,including proprietary master seeds and proprietary or patented adjuvant formulations. We actively seek to protectour proprietary information, including our trade secrets and proprietary know-how, by requiring our employees,consultants, other advisors and other third parties to execute confidentiality agreements upon the commencement oftheir employment, engagement or other relationship. Despite these efforts and precautions, we may be unable toprevent a third party from copying or otherwise obtaining and using our trade secrets or our other intellectualproperty without authorization and legal remedies may not adequately compensate us for the damages caused bysuch unauthorized use. Further, others may independently and lawfully develop substantially similar or identicalproducts that circumvent our intellectual property by means of alternative designs or processes or otherwise.The misappropriation and infringement of our intellectual property, particularly in foreign countries wherethe laws may not protect our proprietary rights as fully as in the United States, may occur even when we take stepsto prevent it. In the future, we may be party to patent lawsuits and other intellectual property rights claims that areexpensive and time consuming, and if resolved adversely, could have a significant impact on our business andfinancial condition. In the future, we may not be able to enforce intellectual property that relates to our products forvarious reasons, including licensor restrictions and other restrictions imposed by third parties, and that the costs ofdoing so may outweigh the value of doing so, and this could have a material adverse impact on our business andfinancial condition.Increased regulation or decreased governmental financial support for the raising, processing or consumption offood animals could reduce demand for our animal health products.Companies in the animal health industry are subject to extensive and increasingly stringent regulations. Iflivestock producers are adversely affected by new regulations or changes to existing regulations, they may reduceherd sizes or become less profitable and, as a result, they may reduce their use of our products, which maymaterially adversely affect our operating results and financial condition. Furthermore, adverse regulations related,directly or indirectly, to the use of one or more of our products may injure livestock producers’ market position.More stringent regulation of the livestock industry or our products could have a material adverse effect on ouroperating results and financial condition. Also, many industrial producers, including livestock producers, benefitfrom governmental subsidies, and if such subsidies were to be reduced or eliminated, these companies may becomeless profitable and, as a result, may reduce their use of our products.We have substantial debt and interest payment requirements that may restrict our future operations and impairour ability to meet our obligations under our indebtedness. Restrictions imposed by our outstanding indebtedness,including the restrictions contained in our Credit Facilities, may limit our ability to operate our business and tofinance our future operations or capital needs or to engage in other business activities.As of June 30, 2016, we had $284.2 million of outstanding indebtedness under our Term B loan (reflectsthe principal amount), $69.0 million of outstanding borrowings under our revolving credit facility (together with theTerm B loan, the “Credit Facilities”) and $14.2 million of outstanding letters of credit.41• make it more difficult for us to satisfy our financial obligations, including those relating to the CreditFacilities;• require us to dedicate a substantial portion of any cash flow from operations to the payment ofinterest and principal due under our debt, which will reduce funds available for other businesspurposes, 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 whichwe operate;• place us at a competitive disadvantage compared with some of our competitors that may have lessdebt and better access to capital resources; and• limit our ability to obtain additional financing required to fund working capital and capitalexpenditures and for other general corporate purposes.TABLE OF CONTENTSSubject to restrictions in our Credit Facilities, we may incur significant additional indebtedness. If we and oursubsidiaries incur significant additional indebtedness, the related risks that we face could intensify.Our substantial debt may have important consequences. For instance, it could:Our ability to satisfy our obligations and to reduce our total debt depends on our future operatingperformance and on economic, financial, competitive and other factors, many of which are beyond our control. Ourbusiness may not generate sufficient cash flow, and future financings may not be available to provide sufficient netproceeds, to meet these obligations or to successfully execute our business strategy.The terms of the Credit Facilities contain certain covenants that limit our ability and that of oursubsidiaries to create liens, merge or consolidate, dispose of assets, incur indebtedness and guarantees, repurchase orredeem capital stock and indebtedness, make certain investments or acquisitions, enter into certain transactions withaffiliates or change the nature of our business. As a result of these covenants and restrictions, we will be limited inhow we conduct our business, and we may be unable to raise additional debt or equity financing to competeeffectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incurcould include more restrictive covenants. We may not be able to maintain compliance with the covenants in any ofour debt instruments in the future and, if we fail to do so, we may not be able to obtain waivers from the lendersand/ or amend the covenants.We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take otheractions to satisfy our obligations under our indebtedness, which may not be successful.Our ability to make scheduled payments on or refinance our debt obligations depends on our financialcondition and operating performance, which are subject to prevailing economic and competitive conditions and tocertain financial, business, legislative, regulatory and other factors beyond our control. We may be unable tomaintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest onour indebtedness.If our cash flows and capital resources are insufficient to fund our debt service obligations, we could facesubstantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or todispose of material assets or operations, alter our dividend policy, seek additional debt or equity capital orrestructure or refinance our indebtedness. We may not be able to effect any such alternative measures oncommercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meetour scheduled debt service obligations. The instruments that govern our indebtedness may restrict our ability todispose of assets and may restrict the use of proceeds from those dispositions and may also restrict our ability toraise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able toconsummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligationswhen due.In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of ourindebtedness will depend on the generation of cash flow by our subsidiaries, including our international subsidiaries,and their ability to make such cash available to us, by dividend, debt repayment or otherwise.42TABLE OF CONTENTSOur subsidiaries may not have any obligation to pay amounts due on our indebtedness or to make funds availablefor that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us tomake payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and under certaincircumstances, legal, tax and contractual restrictions may limit our ability to obtain cash from our subsidiaries ormay subject any transfer of cash from our subsidiaries to substantial tax liabilities. In the event that we do notreceive distributions from our subsidiaries, we may be unable to make required principal and interest payments onour indebtedness.Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance ourindebtedness on commercially reasonable terms or at all, may materially adversely affect our operating results,financial condition and liquidity and our ability to satisfy our obligations under our indebtedness or pay dividendson our common stock.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 thiscontext, “change of control” is generally defined as including (a) any person or group, other than Mr. Jack C.Bendheim and his family and affiliates (the current holders of approximately 91.9% of the combined voting powerof all classes of our outstanding common stock), becoming the beneficial owner of more than 50% of the totalvoting power of our stock, and (b) a change in any twelve month period in the majority of the members of the Boardthat is not approved by Mr. Bendheim and/or his family and affiliates or by the majority of directors in office at thestart of such period.Mr. Bendheim and his family and affiliates may choose to dispose of part or all of their stakes in us and/ormay cease to exercise the current level of control they have over the appointment and removal of members of ourBoard. Any such changes may trigger a “change of control” event that could result in us being forced to repay theCredit 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. In addition, we may not have sufficientfunds to finance repayment of any of such indebtedness upon any such “change in control.”We depend on sophisticated information technology and infrastructure.We rely on various information systems to manage our operations, and we increasingly depend on thirdparties and applications on virtualized, or “cloud,” infrastructure to operate and support our information technologysystems. These third parties include large established vendors as well as small, privately owned companies. Failureby these providers to adequately service our operations or a change in control or insolvency of these providers couldhave an adverse effect on our business, which in turn may materially adversely affect our business, financialcondition or results of operations.We may be required to write down goodwill or identifiable intangible assets.Under GAAP, if we determine goodwill or identifiable intangible assets are impaired, we will be requiredto write down these assets and record a non-cash impairment charge. As of June 30, 2016, we had goodwill of $21.1 million and identifiable intangible assets, less accumulated amortization, of  $60.1 million. Identifiableintangible assets consist primarily of developed technology rights and patents, customer relationships, distributionagreements and trade names and trademarks.Determining whether an impairment exists and the amount of the potential impairment involvesquantitative data and qualitative criteria that are based on estimates and assumptions requiring significantmanagement judgment. Future events or new information may change management’s valuation of goodwill or anintangible asset in a short amount of time. The timing and amount of impairment charges recorded in ourconsolidated statements of operations and write-downs recorded in our consolidated balance sheets could vary ifmanagement’s conclusions change. Any impairment of goodwill or identifiable intangible assets could have amaterial adverse effect on our financial condition and results of operations.We may be unable to adequately protect our customers’ privacy or we may fail to comply with privacy laws.The protection of customer, employee and company data is critical and the regulatory environmentsurrounding information security, storage, use, processing, disclosure and privacy is43• 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 iscomposed entirely of independent directors;• the requirement that we have a compensation committee and that it is composed entirely ofindependent directors; and• the requirement for an annual performance evaluation of the nominating and corporate governanceand compensation committees.• 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.TABLE OF CONTENTSdemanding, with the frequent imposition of new and changing requirements. In addition, our customers expect thatwe will adequately protect their personal information. Any actual or perceived significant breakdown, intrusion,interruption, cyber-attack or corruption of customer, employee or company data or our failure to comply withfederal, state, local and foreign privacy laws could damage our reputation and result in lost sales, fines and lawsuits.Despite our considerable efforts and technology to secure our computer network, security could be compromised,confidential information could be misappropriated or system disruptions could occur. Such failures could materiallyadversely affect our financial condition and results of operation.Risks Related to Ownership of Our Class A Common StockOur multiple class structure and the concentration of our voting power with certain of our stockholders will limityour ability to influence corporate matters, and conflicts of interest between certain of our stockholders and us orother investors could arise in the future.As of August 22, 2016, BFI Co., LLC (“BFI”) beneficially owns 72,425 shares of our Class A commonstock and 20,887,811 shares of our Class B common stock, which together represent approximately 91.9% of thecombined voting power of all classes of our outstanding common stock. As of August 22, 2016, our otherstockholders, collectively own interests representing approximately 8.1% of the combined voting power of allclasses of our outstanding common stock. Because of our multiple class structure and the concentration of votingpower with BFI, BFI will continue to be able to control all matters submitted to our stockholders for approval for solong as BFI holds common stock representing greater than 50% of the combined voting power of all classes of ouroutstanding common stock. BFI will therefore have significant influence over management and affairs and controlthe approval of all matters requiring stockholder approval, including the election of directors and significantcorporate transactions, such as a merger or other sale of the Company or its assets, for the foreseeable future.We are classified as a “controlled company” and, as a result, we qualify for, and intend to rely on, exemptionsfrom certain corporate governance requirements. You will not have the same protections afforded to stockholdersof companies that are subject to such requirements.BFI controls a majority of the combined voting power of all classes of our outstanding common stock. Asa result, we are a “controlled company” within the meaning of the NASDAQ corporate governance standards. UnderNASDAQ rules, a company of which more than 50% of the voting power is held by an individual, group or anothercompany is a “controlled company” and may elect not to comply with certain corporate governance requirements,including:We utilize and intend to continue to utilize these exemptions. As a result, while we currently have amajority of independent directors:Accordingly, you will not have the same protections afforded to stockholders of companies that aresubject to all of the NASDAQ corporate governance requirements.44• changes in financial estimates by any securities analysts who follow our Class A common stock, ourfailure to meet these estimates or failure of those analysts to initiate or maintain coverage of ourClass 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 theanimal health industry;• investors’ perceptions of our prospects;• announcements by us or our competitors of significant contracts, acquisitions, joint ventures orcapital commitments; and• changes in key personnel.• the election of our Board of Directors and the appointment and removal of our officers;• mergers and other business combination transactions, including proposed transactions that wouldresult in our stockholders receiving a premium price for their shares;• other acquisitions or dispositions of businesses or assets;• incurrence of indebtedness and the issuance of equity securities;• repurchase of stock and payment of dividends; and• the issuance of shares to management under our equity incentive plans.TABLE OF CONTENTSOur stock price may be volatile or may decline regardless of our operating performance.The market price of our Class A common stock may fluctuate significantly in response to a number offactors, many of which we cannot control, including those described under “—Risks Related to Our Business” and“—Risks Related to Our Indebtedness” and the following:In addition, the stock markets have experienced extreme price and volume fluctuations that have affectedand continue to affect the market prices of equity securities of many companies. In the past, stockholders haveinstituted securities class action litigation following periods of market volatility. If we were involved in securitieslitigation, we could incur substantial costs, and our resources and the attention of management could be divertedfrom our business.Our majority stockholder has the ability to control significant corporate activities and our majority stockholder’sinterests may not coincide with yours.As of August 22, 2016, approximately 91.9% of the combined voting power of all classes of ouroutstanding common stock is held by BFI. As a result of its ownership, so long as it holds a majority of thecombined voting power of all classes of our outstanding common stock, BFI will have the ability to control theoutcome of matters submitted to a vote of stockholders and, through our Board of Directors, the ability to controldecision-making with respect to our business direction and policies. Matters over which BFI, directly or indirectly,exercises control include:Even if BFI’s ownership of our shares falls below a majority of the combined voting power of all classesof our outstanding common stock, it may continue to be able to influence or effectively control our decisions.Future sales of our Class A common stock, or the perception in the public markets that these sales may occur,may depress our stock price.Sales of substantial amounts of our Class A common stock in the public market, or the perception thatthese sales could occur, could adversely affect the price of our Class A common stock and could impair our abilityto raise capital through the sale of additional shares. In addition, subject to certain45TABLE OF CONTENTSrestrictions on converting Class B common stock into Class A common stock, all of our outstanding shares of ClassB common stock may be converted into Class A common stock and sold in the public market by existingstockholders. As of August 22, 2016, we had 18,519,757 shares of Class A common stock and 20,887,811 shares ofClass B common stock outstanding.BFI, which holds all of our outstanding Class B common stock, has the right to require us to register thesales of their shares under the Securities Act, under the terms of an agreement between us and the holders of thesesecurities. In the future, we may also issue our securities in connection with investments or acquisitions. The amountof shares of our Class A common stock issued in connection with an investment or acquisition could constitute amaterial portion of our then-outstanding shares of our Class A common stock.As an emerging growth company under the JOBS Act we are eligible to take advantage of certain exemptionsfrom various reporting requirements.We are an emerging growth company, as defined in the JOBS Act, and we are eligible to take advantageof certain exemptions from various reporting requirements that are applicable to other public companies that are notemerging growth companies. These exemptions include, but are not limited to, (i) not being required to comply withthe auditor attestation requirements of Section 404, (ii) reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements, and (iii) exemptions from the requirements of holding anonbinding advisory vote on executive compensation and stockholder approval of any golden parachute paymentsnot previously approved. We have taken, and plan to continue to take, advantage of some or all of these exemptions.If we do continue to take advantage of any of these exemptions, we do not know if some investors will find ourClass A common stock less attractive as a result. The result may be a less active trading market for our securitiesand our security prices may be more volatile. We could remain an emerging growth company until the earliest of  (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that webecome a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if themarket value of our common stock held by nonaffiliates exceeds $700 million as of the last business day of our mostrecently completed second fiscal quarter, (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period or (iv) June 2019, which is the end of the fiscal yearfollowing the fifth anniversary of our initial public offering.Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to theeffectiveness of our internal control over financial reporting pursuant to Section 404 for so long as we are an“emerging growth company.”Section 404 requires annual management assessments of the effectiveness of our internal control overfinancial reporting, starting with the annual report for the year ending June 30, 2015, that we file with the SEC, andgenerally requires in the same report a report by our independent registered public accounting firm on theeffectiveness of our internal control over financial reporting. However, under the JOBS Act, our independentregistered public accounting firm will not be required to attest to the effectiveness of our internal control overfinancial reporting pursuant to Section 404 until we are no longer an “emerging growth company.” We could remainan emerging growth company until the earliest of   (i) the last day of the first fiscal year in which our annual grossrevenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 underthe Exchange Act, which would occur if the market value of our common stock held by nonaffiliates exceeds $700million as of the last business day of our most recently completed second fiscal quarter, (iii) the date on which wehave issued more than $1 billion in non-convertible debt during the preceding three year period or (iv) June 2019,which is the end of the fiscal year following the fifth anniversary of our initial public offering.As a public company, we are subject to financial and other reporting and corporate governance requirementsthat did not previously apply to us and that may be difficult for us to satisfy and may divert management’sattention from our business.As a public company, we are required to file annual and quarterly reports and other information pursuantto the Exchange Act with the SEC. We are required to ensure that we have the ability to prepare consolidatedfinancial statements that comply with SEC reporting requirements on a timely basis. We are46• prepare and distribute periodic reports and other stockholder communications in compliance with ourobligations under the federal securities laws and applicable stock exchange rules;• maintain compliance and internal audit functions that are more comprehensive;• maintain effective disclosure controls and procedures;• evaluate and maintain an effective system of internal control over financial reporting, and report onmanagement’s assessment thereof, in compliance with the requirements of Section 404 and therelated rules and regulations of the SEC and the Public Company Accounting Oversight Board;• continue to enhance our investor relations function;• maintain internal policies, including those relating to disclosure controls and procedures; and• involve and retain outside legal counsel and accountants in connection with the activities listedabove.• We did not maintain effective internal controls to ensure processing and reporting of validtransactions are complete, accurate, and timely. Specifically, we have not designed and implementedformal accounting policies and procedures that define how transactions across the business cyclesshould be initiated, recorded, processed and reported and appropriately authorized and approved.• We did not maintain effective internal controls that restrict access to key financial systems andrecords to appropriate users and ensure appropriate segregation of duties is maintained. Certainpersonnel had access to financial application, programs and data beyond that needed to perform theirindividual job responsibilities and without independent monitoring. In addition, certain financialpersonnel had incompatible duties that allowed for the creation, review and processing of certainfinancial data without independent review and authorization.TABLE OF CONTENTSalso subject to other reporting and corporate governance requirements, including the applicable stock exchangelisting standards and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder,which impose significant compliance obligations upon us. Specifically, we are required to:As a public company, we are required to commit significant resources and management time and attentionto the above-listed requirements, which cause us to incur significant costs and which may place a strain on oursystems and resources. As a result, our management’s attention might be diverted from other business concerns.Compliance with these requirements place significant demands on our legal, accounting and finance staff and on ouraccounting, financial and information systems and increase our legal and accounting compliance costs as well as ourcompensation expense as we have been or may be required to hire additional accounting, tax, finance and legal staffwith the requisite technical knowledge, particularly after we are no longer an “emerging growth company.”Our management and independent registered public accounting firm have determined that there are materialweaknesses in our internal controls over financial reporting. If we fail to maintain an effective system of internalcontrols over financial reporting, we may not be able to accurately report our financial results.Our management and independent registered public accounting firm have identified material weaknessesin our internal controls over financial reporting and our audit committee has agreed with the assessment of ourmanagement and independent registered public accounting firm. A material weakness is a deficiency, or acombination of deficiencies, in internal control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the annual or interim financial statements will not be prevented or detected on atimely basis. Our management and independent registered public accounting firm have identified the followingmaterial weaknesses in our internal controls over financial reporting:Each of these material weaknesses could result in a material misstatement of our annual or interimfinancial statements that possibly would not be prevented or detected on a timely basis. We are currently evaluatingthe controls and procedures we will design and put in place to address these weaknesses47• authorize the issuance of undesignated preferred stock, the terms of which may be established and theshares 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 ClassA common stock;• prohibit, at any time after BFI and its affiliates cease to hold at least 50% of the combined votingpower of all classes of our outstanding common stock, stockholder action by written consent, withoutthe express prior consent of the Board of Directors;• provide that the Board of Directors is expressly authorized to make, alter or repeal our amended andrestated bylaws;• establish advance notice requirements for nominations for elections to our Board of Directors or forproposing matters that can be acted upon by stockholders at stockholder meetings;• establish a classified Board of Directors, as a result of which our Board of Directors will be dividedinto three classes, with each class serving for staggered three-year terms, which preventsstockholders from electing an entirely new Board of Directors at an annual meeting; andTABLE OF CONTENTSand plan to implement appropriate measures as part of this effort. The measures may include additional staffing andother resources to strengthen internal controls and financial reporting. Failure to maintain an effective system ofinternal controls over financial reporting could have a material adverse effect on our business, financial conditionand our results of operations. If we are unsuccessful in remediating the material weakness, or if we suffer otherdeficiencies or material weaknesses in our internal controls in the future, we may be unable to report financialinformation in a timely and accurate manner and it could result in a material misstatement of our annual or interimfinancial statements that would not be prevented or detected on a timely basis, which could cause investors to loseconfidence in our financial reporting, negatively affect the trading price of our common stock, and could cause adefault under the agreements governing our indebtedness.Failure to comply with requirements to design, implement and maintain effective internal controls could have amaterial adverse effect on our business and stock price.As a public company, we have significant requirements for enhanced financial reporting and internalcontrols. The process of designing and implementing effective internal controls is a continuous effort that requiresus to anticipate and react to changes in our business and the economic and regulatory environments and to expendsignificant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations asa public company. If we are unable to establish or maintain appropriate internal financial reporting controls andprocedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in materialmisstatements in our consolidated financial statements and harm our operating results. In addition, we are required,pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internalcontrol over financial reporting. This assessment includes disclosure of any material weaknesses identified by ourmanagement in our internal control over financial reporting and a statement that our auditors have issued anattestation report on the effectiveness of our internal controls, provided that, as long as we are an “emerging growthcompany,” our independent registered public accounting firm will not be required to attest to the effectiveness ofour internal control over financial reporting pursuant to Section 404. Testing and maintaining internal controls maydivert our management’s attention from other matters that are important to our business. We may not be able toconclude on an ongoing basis that we have effective internal control over financial reporting in accordance withSection 404 or our independent registered public accounting firm may not issue an unqualified opinion. If either weare unable to conclude that we have effective internal control over financial reporting or our independent registeredpublic accounting firm is unable to provide us with an unqualified opinion, investors could lose confidence in ourreported financial information, which could have a material adverse effect on the trading price of our stock.Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisitionattempts for us that you might consider favorable.Our certificate of incorporation and bylaws contain provisions that may make the acquisition of theCompany more difficult without the approval of our Board of Directors. These provisions:48• require, at any time after BFI and its affiliates cease to hold at least 50% of the combined votingpower of all classes of our outstanding common stock, the approval of holders of at least threequarters of the combined voting power of all classes of our outstanding common stock forstockholders to amend the amended and restated bylaws or amended and restated certificate ofincorporation.TABLE OF CONTENTS ​These anti-takeover provisions and other provisions under Delaware law could discourage, delay orprevent a transaction involving a change in control of the Company, even if doing so would benefit ourstockholders. These provisions could also discourage proxy contests and make it more difficult for you and otherstockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole andexclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, whichcould limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,officers or employees.Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of theState of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on ourbehalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or otheremployees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision ofthe Delaware General Corporation Law, our certificate of incorporation or our by-laws, or (iv) any other actionasserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing orotherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to haveconsented to the provisions of our certificate of incorporation described above. This choice of forum provision maylimit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or ourdirectors, officers or other employees, which may discourage such lawsuits against us and our directors, officers andemployees. Alternatively, if a court were to find these provisions of our restated certificate of incorporationinapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we mayincur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect ourbusiness, financial condition and results of operations.Provisions of our certificate of incorporation could have the effect of preventing us from having the benefit ofcertain business opportunities that we would otherwise be entitled to pursue.Our certificate of incorporation provides that BFI and its affiliates are not required to offer corporateopportunities of which they become aware to us and could, therefore, offer such opportunities instead to othercompanies including affiliates of BFI. In the event that BFI obtains business opportunities from which we mightotherwise benefit but chooses not to present such opportunities to us, these provisions of our restated certificate ofincorporation could have the effect of preventing us from pursuing transactions or relationships that wouldotherwise be in the best interests of our stockholders.We may not pay cash dividends in the future and, as a result, you may not receive any return on investmentunless you are able to sell your Class A common stock for a price greater than your initial investment.Though we have a paid a quarterly dividend of  $0.10 per share since September 2014 on our Class A andClass B common stock and our Board of Directors has declared a cash dividend of   $0.10 per share on Class Acommon stock and Class B common stock that is payable on September 28, 2016, any determination to paydividends in the future will be at the discretion of our Board of Directors and will depend upon results of operations,financial condition, contractual restrictions, and our ability to obtain funds from our subsidiaries to meet ourobligations. Accordingly, realization of a gain on your investment will depend on the appreciation of the price of ourClass A common stock.Item 1B. Unresolved Staff CommentsNone.49TABLE OF CONTENTS ​ ​ ​Item 2. PropertiesThe following table lists our material properties:Business Segment(s)LocationOwned/LeasedApprox. sq. FootagePurpose(s)​Animal HealthBeit Shemesh, IsraelOwned/landlease56,000Manufacturing andResearchAnimal HealthBraganca Paulista, BrazilOwned44,000Manufacturing andAdministrativeAnimal HealthCorvallis, OregonOwned5,000ResearchAnimal HealthGuarulhos, BrazilOwned1,294,000Manufacturing, Sales,Premixing, Research andAdministrativeAnimal HealthNeot Hovav, IsraelOwned/landlease140,000Manufacturing andResearchMineral NutritionOmaha, NebraskaOwned84,000ManufacturingAnimal HealthOmaha, NebraskaOwned36,000Manufacturing, Sales andResearchAnimal HealthPetach Tikva, IsraelOwned60,000ManufacturingAnimal Health andMineral NutritionQuincy, IllinoisOwned325,000Manufacturing, Sales,Research andAdministrativePerformanceProductsSanta Fe Springs,CaliforniaOwned108,000ManufacturingAnimal HealthState College,PennsylvaniaOwned13,000ResearchAnimal HealthSt. Paul, MinnesotaLeased4,000ResearchCorporateTeaneck, New JerseyLeased50,000Corporate andAdministrativeIn addition to the above facilities, we maintain sales offices throughout the world in countries includingthe United States, Canada, Mexico, Brazil, Argentina, Chile, the United Kingdom, Belgium, Turkey, Israel, SouthAfrica, China, Malaysia and Australia.Item 3. Legal ProceedingsWe are from time to time subject to claims and litigation arising in the ordinary course of business. Theseclaims and litigation may include, among other things, allegations of violation of United States and foreigncompetition law, labor laws, consumer protection laws, and Environmental Laws and regulations, as well as claimsor litigation relating to product liability, intellectual property, securities, breach of contract and tort. We operate inmultiple jurisdictions and, as a result, a claim in one jurisdiction may lead to claims or regulatory penalties in otherjurisdictions.We do not believe that the ultimate resolution of existing claims and litigation will have a materialadverse effect on our financial position, results of operations, liquidity or capital resources. However, one or moreunfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period inwhich 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 4. Mine Safety DisclosuresNone. 50Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity SecuritiesTABLE OF CONTENTS ​PART IIMarket Information for Common StockOur Class A common stock has traded on NASDAQ under the trading symbol “PAHC” since April 11,2014. Our Class B common stock is not listed or traded on any stock exchange. At June 30, 2016, there were18,519,757 Class A common shares outstanding, and the closing sales price of our Class A common stock was$18.66. The table below sets forth the high and low sales prices of our common stock for the quarters indicated.Quarter EndedHighLow​September 30, 2014$23.12$17.82December 31, 2014$33.89$21.01March 31, 2015$37.56$26.95June 30, 2015$39.14$31.29Quarter EndedSeptember 30, 2015$40.54$30.11December 31, 2015$34.65$29.75March 31, 2016$35.69$23.21June 30, 2016$27.99$16.80During the fiscal year ended June 30, 2016, we did not sell any unregistered securities nor did wepurchase any of our equity securities.Holders of RecordAs of August 22, 2016, there were 18,519,757 shares of our Class A common stock outstanding, whichwere held by 1 stockholder of record, not including beneficial owners of shares registered in nominee or streetname. As of August 22, 2016, there were 20,887,811 shares of our Class B common stock outstanding, which wereheld by one stockholder of record. Each share of Class B common stock is convertible at any time at the option ofthe holder into one share of Class A common stock. Information about 5% beneficial owners of our common stockis incorporated by reference from the discussion under the heading Security Ownership of Certain BeneficialOwners and Management in our 2016 Proxy Statement.Dividend PolicyDuring fiscal year 2016, we paid quarterly dividends of  $0.10 per share to holders of our Class A andClass B common stock. We intend to pay regular quarterly dividends to holders of our Class A and Class B commonstock out of assets legally available for this purpose. On July 25, 2016, our Board of Directors declared a $0.10 pershare quarterly dividend to holders of record as of September 7, 2016 of our Class A and Class B common stock,payable September 28, 2016. Any future determination to pay dividends will depend upon our results of operations,financial condition, capital requirements, our ability to obtain funds from our subsidiaries and other factors that ourBoard of Directors deems relevant. Additionally, the terms of our current and any future agreements governing ourindebtedness could limit our ability to pay dividends or make other distributions.Stock Performance GraphThis performance graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to beincorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or theExchange Act.The following graph shows a comparison from April 11, 2014 (the date our Class A common stockcommenced trading on NASDAQ) through June 30, 2016, of the cumulative stockholder return of our Class Acommon stock, the S&P 500 Index, the NASDAQ Composite Index, the Russell 2000 Index51TABLE OF CONTENTSand S&P Pharmaceuticals Index. The graph assumes that $100 was invested in our Class A common stock and eachof the aforementioned indexes at the market close on April 11, 2014, and assumes dividends, if any, are reinvested.The stock price performance shown on the graph is not necessarily indicative of future stock price performance, andwe do not make any projections of future stockholder returns.52TABLE OF CONTENTS ​Item 6. Selected Financial DataThe following table presents our selected consolidated financial data and certain other financial data. Thebalance sheet data as of June 30, 2016, 2015, 2014, 2013 and 2012 and the cash flows data for the years then endedwere derived from our consolidated financial statements. The results of operations data for the years ended June 30,2016, 2015 and 2014 were derived from our consolidated financial statements. As discussed in the notes to theconsolidated financial statements, we have revised previously issued financial statements for the fiscal years endedJune 30, 2015 and 2014, to correct errors in the classification of amortization expense related to product-relatedintangible assets within the consolidated statement of operations. We also have revised the results of operations datato correct errors in the classification of amortization expense for the years ended June 30, 2013 and 2012 of  $2.1million and $1.1 million, respectively. The consolidated financial data and other financial data presented belowshould be read in conjunction with our consolidated financial statements and the related notes thereto, under thesections entitled “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.”For the Years Ended June 30​​2016​​2015201420132012​(in thousands, except per share amounts)Results of operations dataNet sales$751,526$748,591$691,914$653,151$654,101Cost of goods sold512,494515,311487,500476,307491,045Gross profit239,032233,280204,414176,844163,056Selling, general and administrative expenses153,288145,612140,620120,113113,731Operating income85,74487,66863,79456,73149,325Interest expense, net16,59214,30532,96235,62935,419Foreign currency (gains) losses, net(7,609(5,4001,7533,1031,192Loss on extinguishment of debt——22,771——Other (income) expense, net———151(400Income before income taxes76,76178,7636,30817,84813,114Provision (benefit) for income taxes(5,96718,4839,435(7,0436,138Net income (loss)$82,728$60,280$(3,127$24,891$6,976Net income (loss) per sharebasic$2.11$1.55$(0.10$0.82$0.23diluted$2.07$1.51$(0.10$0.82$0.23Weighted average common shares outstandingbasic39,25438,96932,19330,45830,458diluted39,96239,81532,19330,45830,458Dividends per share$0.40$0.40$0.82$0.10$—Other financial dataAdjusted EBITDA $114,060$110,019$90,597$75,754$66,852Cash provided (used) by operating activities 37,21868,704(7121,43731,988Capital expenditures36,35220,05819,84619,94714,824As of June 3020162015201420132012​(in thousands)Balance sheet dataCash and cash equivalents$33,605$29,216$11,821$27,369$53,900Working capital 203,356175,988177,999153,677127,472Total assets610,373493,318472,323474,142440,908Total debt 352,710289,518289,391365,604350,121Long-term debt and other liabilities411,220352,357344,736427,676403,271Total stockholders’ equity (deficit)90,48029,62815,149(68,938(88,22853))))))))(1)(2))(3)(4)))(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Generaldescription of non-GAAP financial measures” for descriptions of EBITDA and Adjusted EBITDA.(2) Cash provided (used) by operating activities:(3) We define working capital as total current assets (excluding cash & cash equivalents) less total currentliabilities (excluding current portion of long-term debt). Working capital in 2016 excludes deferred tax assetsdue to the adoption of Accounting Standards Update (“ASU”) 2015-17, Balance Sheet Classification ofDeferred Taxes .(4) Total debt includes revolving credit facility, current and long-term portions of long-term debt and capitalizedlease obligations.TABLE OF CONTENTSFor the Years Ended June 30​​2016​2015201420132012​(in thousands)Net income (loss)$82,728$60,280$(3,127$24,891$6,976Plus:Interest expense, net16,59214,30532,96235,62935,419Provision (benefit) for income taxes(5,96718,4839,435(7,0436,138Depreciation and amortization23,45221,60421,45319,02317,527EBITDA116,805114,67260,72372,50066,060Acquisition-related cost of goods sold2,566————Acquisition-related accrued compensation1,680747———Acquisition-related transaction costs618————Loss on insurance claim——5,350——Foreign currency (gains) losses, net(7,609(5,4001,7533,1031,192Loss on extinguishment of debt——22,771——Other (income) expense, net———151(400Adjusted EBITDA$114,060$110,019$ 90,597$ 75,754$ 66,852For the Years Ended June 30​​2016​​2015​201420132012​(in thousands)EBITDA$116,805$114,672$60,723$72,500$66,060Acquisition-related cost of goods sold2,566————Acquisition-related accrued compensation1,680747———Acquisition-related transaction costs618————Loss on insurance claim——5,350——Foreign currency (gains) losses, net(7,609(5,4001,7533,1031,192Loss on extinguishment of debt——22,771——Payment of premiums and costs onextinguished debt——(17,205——Other (income) expense, net———151(400Interest paid(14,215(12,912(45,370(33,824(34,059Income taxes paid(16,828(10,780(12,207(7,061(7,217Changes in operating assets and liabilities andother items(45,799(17,623(16,527(33,4326,412Net cash provided (used) by operating activities$37,218$68,704$(712$1,437$31,98854)))))))))))))))))))))))))TABLE OF CONTENTS ​Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsIntroductionOur management’s discussion and analysis of financial condition and results of operations (“MD&A”) isprovided to assist readers in understanding our performance, as reflected in the results of our operations, ourfinancial condition and our cash flows. The following discussion summarizes the significant factors affecting ourconsolidated operating results, financial condition, liquidity and cash flows as of and for the periods presentedbelow. This MD&A should be read in conjunction with the “Selected Financial Data” and our consolidated financialstatements and related notes thereto included under the section entitled “Financial Statements and SupplementaryData.” Our future results could differ materially from our historical performance as a result of various factors suchas those discussed in “Risk Factors” and “Forward-Looking Statements.”Overview of our businessPhibro Animal Health Corporation is a global diversified animal health and mineral nutrition company.We develop, manufacture and market products for a broad range of food animals including poultry, swine, beef anddairy cattle and aquaculture. Our products help prevent, control and treat diseases, enhance nutrition to help improvehealth and performance and contribute to balanced mineral nutrition. In addition to animal health and mineralnutrition products, we manufacture and market specific ingredients for use in the personal care, automotive,industrial chemical and chemical catalyst industries. We sell more than 1,400 product presentations in over 65countries to approximately 3,000 customers.Factors affecting our performanceIndustry growthAccording to Vetnosis, a research and consulting firm specializing in global animal health and veterinarymedicine, the global livestock animal health sector represented approximately $19.8 billion of sales in 2015. Themarket grew at a compound annual growth rate of 3.3% between 2010 and 2015 and the market is projected to growat a compound annual growth rate of approximately 5.0% per year between 2015 and 2020. We believe globalpopulation growth, the growth of the global middle class and the productivity improvements needed due tolimitations of arable land and water supplies have supported and will continue to support this growth.Regulatory DevelopmentsOur business depends heavily on a healthy and growing livestock industry. Some in the public perceiverisks 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, primarily in the United States, on theuse of medically important antibacterials, as defined by the FDA. Medically important antibacterials include classesthat are prescribed in animal and human health and are listed in the Appendix of the FDA-CVM Guidance forIndustry (GFI) #152. Our products that contain virginiamycin, oxytetracycline or neomycin have previously beenclassified by the FDA as medically important antibacterials. This may lead to a decline in the demand for andproduction of food products derived from animals that utilize our products and, in turn, demand for our products.Livestock producers may experience decreased demand for their products or reputational harm as a result ofevolving consumer views of nutrition and health-related concerns, animal rights, and other concerns. Anyreputational harm to the livestock industry may also extend to companies in related industries, including us. Inaddition, campaigns by interest groups, activists and others with respect to perceived risks associated with the use ofour products in animals, including position statements by livestock producers and their customers based on non-useof certain medicated products in livestock production, whether or not scientifically-supported, could affect publicperceptions and reduce the use of our products. Those adverse consumer views related to the use of one or more ofour products in animals could have a material adverse effect on our financial condition and results of operations.Our sales in the United States of products that have been classified by the FDA as medically important antibacterialswere approximately $37 million for the year ended June 30, 2016.55TABLE OF CONTENTSOur business is subject to product registration and authorization regulations. Changes in the regulationscould have a material impact on our business. In April 2016, the FDA began initial steps to withdraw approval ofMecadox (carbadox), due to concerns that certain residues from the product may persist in tissues for longer thanpreviously determined. This initial action by the FDA does not prohibit the sale or use of Mecadox in the UnitedStates. Mecadox has been approved and sold in the United States for more than 40 years and is a widely usedtreatment for controlling bacterial diseases including Salmonella and swine dysentery. Mecadox is not used inhuman medicine and the class of drug is not considered a medically important antimicrobial. The approvedMecadox label requires a 42-day withdrawal period pre-harvesting, and to date we have not seen any hazardousresidues of carbadox being detected from pig meat treated in accordance with the approved label. We have completeconfidence in the safety of Mecadox. In response to FDA inquiries several years ago, we began rigorous new studiesof the continued safety of the product when used in accordance with the label. Our studies were completed inJuly 2016, and we submitted our data, analyses and information to the FDA that we believe support the continuedsafe use of Mecadox. The timing of the FDA’s response to our submission is not subject to a predetermineddeadline. Our sales of Mecadox in the United States were approximately $15 million for the year ended June 30,2016. Should we be unable to successfully defend the safety of the product, the loss of Mecadox sales would have anegative impact to the results of our operations.CompetitionThe animal health industry is highly competitive. We believe many of our competitors are conductingR&D activities in areas served by our products and in areas in which we are developing products. Our competitorsinclude the animal health businesses of large pharmaceutical companies and specialty animal health businesses. Inaddition to competition from established participants, there could be new entrants to the animal health medicinesand vaccines industry in the future. Principal methods of competition vary depending on the region, species, productcategory or individual products, including reliability, reputation, quality, price, service and promotion to veterinaryprofessionals and livestock producers.Foreign exchangeWe conduct operations in many areas of the world, involving transactions denominated in a variety ofcurrencies. In fiscal year 2016, we generated approximately 37% of our revenues from operations outside the U.S.Although a portion of our revenues are denominated in various currencies, the selling prices of the majority of oursales outside the United States are referenced in U.S. dollars, and as a result, our revenues have not beensignificantly directly affected by currency movements. We are subject to currency risk to the extent that our costsare denominated in currencies other than those in which we earn revenues. We manufacture some of our majorproducts in Brazil and Israel and production costs are largely denominated in local currencies, while the sellingprices of the products are largely set in U.S. dollars. As such, we are exposed to changes in cost of goods soldresulting from currency movements and may not be able to adjust our selling prices to offset such movements. Inaddition, we incur selling and administrative expenses in various currencies and are exposed to changes in suchexpenses resulting from currency movements. Because our financial statements are reported in U.S. dollars, changesin currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, animpact on our results of operations.ClimateThe animal health industry and demand for many of our animal health products in a particular region areaffected by changing disease pressures and by weather conditions, as usage of our products follows varying weatherpatterns and weather-related pressures from diseases. As a result, we may experience regional and seasonalfluctuations in our results of operations.In addition, livestock producers depend on the availability of natural resources, including abundantrainfall to sustain large supplies of drinking water, grasslands and grain production. Their animals’ health and theirability to operate could be adversely affected if they experience a shortage of fresh water due to human populationgrowth or floods, droughts or other weather conditions. In the event of adverse weather conditions or a shortage offresh water, livestock producers may purchase less of our products.56TABLE OF CONTENTSProduct development initiativesOur future success depends on both our existing product portfolio, including our ability to obtain cross-clearances enabling the use of our medicated products in conjunction with other products, approval for use of ourproducts with new species, approval for new claims for our products, approval of our products in new markets, andour pipeline of new products, including new products that we may develop through joint ventures and products thatwe are able to obtain through license or acquisition. The majority of our R&D programs focus on product lifecycledevelopment, which is defined as R&D programs that leverage existing animal health products by adding newspecies or claims, achieving approvals in new markets or creating new combinations and reformulations. Wecommit substantial effort, funds and other resources to expanding our product approvals and R&D, both through ourown dedicated resources and through collaborations with third parties.Recent DevelopmentsMVP AcquisitionIn January 2016, we purchased the assets of MVP. MVP was a developer, manufacturer and marketer oflivestock vaccines, vaccine adjuvants and other products. We acquired all of the assets and assumed certainliabilities used in MVP’s business, including working capital, intellectual property, manufacturing equipment, realproperty and facilities. The purchase price of approximately $46.6 million was paid in cash primarily at closing. Weincurred $0.6 million in transaction expenses in connection with the acquisition, which are included in selling,general and administrative expenses.See “Notes to Consolidated Financial Statements—Acquisition” for additional information.Pension Plan and Retirement Savings Plan ChangesIn July 2016, we amended the domestic noncontributory defined benefit pension plan to eliminate creditfor future service and compensation increases, effective as of September 30, 2016. The amendment will result in anestimated $6.7 million pension curtailment gain. The consolidated financial statements for the quarter endedSeptember 30, 2016, will include the gain in other comprehensive income with an offsetting reduction in theliability for pension benefits included in other liabilities. Effective October 1, 2016, the 401(k) retirement savingsplan will include, for all domestic employees, a non-elective Company contribution of 3% of compensation and anadditional discretionary contribution of up to 4% of compensation, depending on the employee’s age and years ofservice.In August 2016, we offered a lump sum payment option to certain pension plan participants who are nolonger active employees and who do not currently receive benefits. We expect to recognize a partial settlement ofthe pension plan that will result in a charge to the consolidated statement of operations for the quarter endingDecember 31, 2016. Depending on the participants who elect the option, we estimate the expense will be up to $3.0million.57* Calculation not meaningfulTABLE OF CONTENTSAnalysis of the consolidated statements of operationsSummary Results of Operations​​​​Change​For the Years Ended June 30​​2016​​2015​​2014​​2016 / 2015​​2015 / 2014​(in thousands, except per share)Net sales$751,526$748,591$691,914$2,9350$56,6778Gross profit239,032233,280204,4145,752228,86614Selling, general and administrativeexpenses153,288145,612140,6207,67654,9924Operating income85,74487,66863,794(1,924(223,87437Interest expense, net16,59214,30532,9622,28716(18,657(57Foreign currency (gains) losses, net(7,609(5,4001,753(2,209*(7,153*Loss on extinguishment of debt——22,771—*(22,771*Income before income taxes76,76178,7636,308(2,002(372,4551149Provision (benefit) for income taxes(5,96718,4839,435(24,450*9,04896Net income (loss)$82,728$60,280$(3,127$22,44837$63,407*Net income (loss) per sharebasic$2.11$1.55$(0.10$0.56$1.65diluted$2.07$1.51$(0.10$0.56$1.61Weighted average number of sharesoutstandingbasic39,25438,96932,193diluted39,96239,81532,193Ratio to net salesGross profit31.831.229.5Selling, general and administrative expenses20.419.520.3Operating income11.411.79.2Income before income taxes10.210.50.9Net income (loss)11.08.1(0.5Effective tax rate(7.823.5149.6Certain amounts and percentages may reflect rounding adjustments.Changes in net sales from period to period primarily result from changes in volumes and average sellingprices. Although a portion of our net sales is denominated in various currencies, the selling prices of the majority ofour sales outside the United States are referenced in U.S. dollars, and as a result, our revenues have not beensignificantly directly affected by currency movements.Our effective income tax rate has varied significantly from period to period and from the federal statutoryrate, due to the mix of income tax provisions on profitable foreign jurisdictions; the effect of the release of thevaluation allowance against domestic deferred income taxes during fiscal year 2016; minimal income tax provisionor benefit being recorded on domestic pre-tax income or losses prior to fiscal year 2016; and the effect of discreteitems. Accordingly, we expect our normalized effective tax rate in the future periods to approximate 30%. Weintend to continue to reinvest indefinitely the undistributed earnings of our foreign subsidiaries.58%%%%%%))%%%))%)))))))%%))%)%))%%%%%%%%%%%%%%)%)%%%(1) reflects ratio to total net salesTABLE OF CONTENTSSee “Notes to Consolidated Financial Statements—Income Taxes” for additional information.Net sales, Adjusted EBITDA and reconciliation of GAAP net income to Adjusted EBITDAWe report Net sales and Adjusted EBITDA by segment to understand the operating performance of eachsegment. This enables us to monitor changes in net sales, costs and other actionable operating metrics at the segmentlevel. See “—General description of non-GAAP financial measures” for descriptions of EBITDA and AdjustedEBITDA.Segment net sales and Adjusted EBITDA:​​​Change​For the Years Ended June 30​​2016​​2015​20142016 / 20152015 / 2014​(in thousands)Net salesMFAs and other$339,916$335,735$326,568$4,1811$9,1673Nutritional specialties94,08481,70263,06812,3821518,63430Vaccines52,14053,36341,417(1,223(211,94629Animal Health486,140470,800431,05315,340339,7479Mineral Nutrition216,685227,102201,599(10,417(525,50313Performance Products48,70150,68959,262(1,988(4(8,573(14Total$751,526$748,591$691,914$2,9350$56,6778Adjusted EBITDAAnimal Health$127,442$120,259$100,280$7,1836$19,97920Mineral Nutrition14,97114,42911,63654242,79324Performance Products9702,6464,626(1,676(63(1,980(43Corporate(29,323(27,315(25,945(2,008*(1,370*Total$114,060$110,019$90,597$4,0414$19,42221Adjusted EBITDA ratio tosegment net salesAnimal Health26.225.523.3Mineral Nutrition6.96.45.8Performance Products2.05.27.8Corporate (3.9(3.6(3.7Total 15.214.713.159%%%%))%%%%))%%))%))%%%%%%%))%))%)))))%%%%%%%%%%%(1))%)%%)(1)%%%TABLE OF CONTENTSA reconciliation of net income, as reported under GAAP, to Adjusted EBITDA:​​​​​Change​For the Years Ended June 30​​2016​​2015​​2014​​2016 / 2015​2015 / 2014​(in thousands)Net income (loss)$82,728$60,280$(3,127$22,44837$63,407*Interest expense, net16,59214,30532,9622,28716(18,657(57Provision (benefit) for income taxes(5,96718,4839,435(24,450*9,04896Depreciation and amortization23,45221,60421,4531,84891511EBITDA116,805114,67260,7232,133253,94989Acquisition-related cost ofgoods sold2,566——2,566*—*Acquisition-related accruedcompensation1,680747—933125747*Acquisition-related transactioncosts618——618*—*Loss on insurance claim——5,350—*(5,350*Foreign currency (gains) losses,net(7,609(5,4001,753(2,209*(7,153*Loss on extinguishment of debt——22,771—*(22,771*Adjusted EBITDA$114,060$110,019$90,597$4,0414$19,42221Comparison of fiscal years ended June 30, 2016 and 2015Our results for the fiscal year ended June 30, 2015 included $8.0 million of revenue and income frommilestone payments for licensing of vaccine delivery technology. For a better understanding of underlying trends,we also present comparisons with 2015 that exclude the prior year milestone payments.Net salesNet sales of  $751.5 million for the year ended June 30, 2016 increased $2.9 million, or less than 1%, ascompared to the year ended June 30, 2015. Animal Health grew $15.3 million, while Mineral Nutrition andPerformance Products declined $10.4 million and $2.0 million, respectively.Excluding the prior year $8.0 million of vaccine licensing milestone revenue, net sales increased $10.9million, or 1%.Animal HealthNet sales of  $486.1 million for the year ended June 30, 2016 grew $15.3 million, or 3%. The growth wasprimarily due to volume increases across all product groups within the segment. Nutritional specialty products grew$12.4 million, or 15%, primarily due to U.S. and E.U. volume growth of our products for the dairy and poultryindustries. MFAs and other grew $4.2 million, or 1%, primarily due to volume growth in international markets,which offset declines in domestic volumes. Vaccines declined $1.2 million, or 2%, due to the $8.0 million invaccine licensing milestone revenue recorded in the prior year. Excluding the prior year $8.0 million in vaccinelicensing milestone revenue, vaccines grew $6.8 million, or 15%, principally from volume growth, including salesof MVP products.Excluding the prior year $8.0 million of vaccine licensing milestone revenue, net sales grew $23.3million, or 5%.60)%%))%))%%%%%%))))))%%TABLE OF CONTENTSMineral NutritionNet sales of  $216.7 million decreased $10.4 million, or 5%, for the year ended June 30, 2016. Thedecrease is due to lower average selling prices due to underlying raw material commodity price declines. Increasedvolumes from improved demand for trace mineral products partially offset the lower average selling prices.Performance ProductsNet sales of  $48.7 million decreased $2.0 million, or 4%, for the year ended June 30, 2016, due to loweraverage selling prices of copper-based products and personal care ingredients and lower volumes of chemicalcatalyst products.Gross profitGross profit of  $239.0 million for the year ended June 30, 2016 increased $5.8 million, or 2%, ascompared to the year ended June 30, 2015. Gross profit increased to 31.8% of net sales for the year ended June 30,2016 as compared to 31.2% for the year ended June 30, 2015. Animal Health gross profit increased $6.8 million dueto volume growth, lower unit costs from improved operating efficiencies and favorable currency movements.Current year Animal Health gross profit was reduced by $2.6 million of acquisition-related cost of goods sold,unfavorable vaccine manufacturing costs related to production interruptions, $1.2 million of acquisition-relatedintangible amortization and $1.1 million of increased depreciation expense due to recent capital expenditures.Excluding the prior year $8.0 million of vaccine licensing milestone revenue and gross profit and excluding thecurrent year $2.6 million of acquisition-related cost of goods sold, Animal Health gross profit increased $17.4million, or 9%. Mineral Nutrition gross profit increased $0.3 million due to lower material costs, partially offset bylower average selling price. Performance Products gross profit decreased $1.3 million due to lower average sellingprices of copper-based products and personal care ingredients, partially offset by lower material costs.Excluding the prior year $8.0 million of vaccine licensing milestone revenue and gross profit, the currentyear $2.6 million of acquisition-related cost of goods sold and acquisition-related amortization for each year, grossprofit increased $17.6 million, or 8%.Selling, general and administrative expensesSelling, general and administrative (“SG&A”) expenses of  $153.3 million for the year ended June 30,2016 increased $7.7 million, or 5%, as compared to the year ended June 30, 2015. Animal Health accounted for $4.9million of the increase, driven by increased acquisition-related accrued compensation and increased sales force andproduct development costs. Performance Products account for $0.6 of the increase due to higher environmentalremediation costs. Corporate expenses accounted for $2.4 million of the increase, due to acquisition-relatedtransaction costs and increased compensation and office-related costs.Excluding acquisition-related intangible amortization, accrued compensation and transaction costs foreach year, SG&A increased $6.4 million, or 4%.Interest expense, netInterest expense, net of  $16.6 million for the year ended June 30, 2016, increased $2.3 million or 16%,compared to the year ended June 30, 2015. The increase is due to interest on increased borrowings under ourRevolver and increased acquisition-related accrued interest of  $0.9 million.Excluding acquisition-related accrued interest for each year, interest expense, net increased $1.4 millionor 10%.Foreign currency (gains) losses, netForeign currency (gains) losses, net for the year ended June 30, 2016 amounted to net gains of $7.6million, as compared to $5.4 million in net gains for the year ended June 30, 2015. Foreign currency gains in theyear ended June 30, 2016 were primarily due to the movement of Brazil, Mexico, South Africa and Argentinacurrencies relative to the U.S. dollar. Foreign currency gains and losses primarily arise from intercompany balances.61TABLE OF CONTENTSProvision for income taxesThe provision for income taxes for the year ended June 30, 2016 included a benefit of  $19.6 million fromthe release of the valuation allowance for domestic deferred taxes and $4.8 million from the recognition ofpreviously unrecognized tax benefits. As a result, the provision for income taxes for the year ended June 30, 2016was a benefit of  $6.0 million, an effective tax rate was (7.8)%. Excluding the benefit from these discrete items, theprovision for income taxes was an effective tax rate of 24.0%. The provision for income taxes for the year endedJune 30, 2015 was $18.5 million, an effective tax rate of 23.5%. The provision for income taxes for the year endedJune 30, 2015 included a benefit of  $1.2 million from the recognition of previously unrecognized tax benefits;excluding the benefit of this discrete item, the provision for income taxes was an effective tax rate of 25.0%.During the year ended June 30, 2016, based on continued domestic profitability, we concluded that it wasmore likely than not that the value of domestic deferred tax assets would be realized, and it was no longer necessaryto maintain a valuation allowance. Prior to releasing the valuation allowance, our domestic provision for incometaxes was substantially offset by the utilization of domestic net operating losses that previously had been offset by avaluation allowance. As a result of the release of the valuation allowance, we expect our income tax provision infuture periods to increase as we record an income tax provision on our domestic pre-tax income.Net income (loss)Net income of  $82.7 million for the year ended June 30, 2016, increased $22.4 million, compared to netincome of  $60.3 million for the year ended June 30, 2015, as a result of the factors described above.Adjusted EBITDAAdjusted EBITDA of  $114.1 million for the year ended June 30, 2016 increased $4.0 million, or 4%, ascompared to the year ended June 30, 2015. Animal Health adjusted EBITDA increased $7.2 million, or 6%, due tosales growth and increased gross profit, partially offset by increased SG&A expenses. Excluding the prior year $8.0million of vaccine licensing milestone revenue, Animal Health adjusted EBITDA increased $15.2 million, or 14%.Mineral Nutrition increased $0.5 million, or 4%, due to improved operating margins from lower material costs,partially offset by lower average selling prices. Performance Products decreased $1.7 million, or 63%, due to loweraverage selling prices and higher SG&A costs. Corporate expenses increased $2.0 million due to increasedcompensation and office-related costs.Excluding the prior year $8.0 million of vaccine licensing milestone revenue, adjusted EBITDA increased$12.0 million, or 12%.Comparison of fiscal years ended June 30, 2015 and 2014Net salesNet sales of $748.6 million increased $56.7 million, or 8%, for the year ended June 30, 2015, as comparedto the year ended June 30, 2014, due to growth in Animal Health and Mineral Nutrition of  $39.7 million and $25.5million, respectively, offset by declines in Performance Products of $8.6 million.The consolidated statement of operations for the year ended June 30, 2015 included $8.0 million ofrevenue and gross profit related to milestone payments under a license agreement with a global animal healthcompany to share in the use of our proprietary vaccine delivery technology. We recognized the revenue and profitduring the period because certain contractual and regulatory milestones were achieved by the licensee, and we hadno remaining performance obligations under the agreement. Excluding the $8.0 million in vaccine licensingmilestone revenue, net sales growth was $48.7 million, or 7%.Animal HealthNet sales of $470.8 million grew $39.7 million, or 9%, for the year ended June 30, 2015, primarily due tovolume growth across all product groups. Excluding the $8.0 million in vaccine licensing milestone revenue, netsales growth was $31.7 million, or 7%. MFAs and other grew $9.2 million, or 3%, primarily due62TABLE OF CONTENTSto volume growth in international markets. Nutritional specialty products grew $18.6 million, or 30%, for the yearended June 30, 2015, primarily due to U.S. volume growth of our products for the dairy industry and theirintroduction in select European countries. Excluding the effect of the $8.0 million in vaccine licensing milestonerevenue, vaccines grew $3.9 million, or 10%, for the year ended June 30, 2015, principally from volume growth,including sales of MJB products from the January 2015 date of our Collaboration and Distribution Agreement withMJB, which was entered into as part of the MJB transactions.Mineral NutritionNet sales of $227.1 million increased $25.5 million, or 13%, for the year ended June 30, 2015. Increasedvolumes accounted for approximately three quarters of the sales growth, as current market conditions improveddemand for certain trace mineral products. The remainder of the sales increase was due to increased average sellingprices primarily due to higher underlying raw material commodity prices.Performance ProductsNet sales of $50.7 million decreased $8.6 million, or 14%, for the year ended June 30, 2015, due to lowervolumes and average selling prices of copper-based products and lower volumes of personal care products.Gross profitGross profit of $233.3 million increased $28.9 million, or 14%, to 31.2% of net sales, for the year endedJune 30, 2015, with most of the improvement coming from Animal Health. Gross profit growth was $20.9 million,or 10%, for the year ended June 30, 2015, excluding the effect of the $8.0 million in vaccine licensing milestonerevenue. Animal Health gross profit increased $20.3 million, excluding the effect of the vaccine licensing milestonerevenue, due to volume growth and reduced production costs from favorable currency movements. Within AnimalHealth, MFAs and other contributed $9.6 million of the increase due to volume growth, nutritional specialtyproducts contributed $10.7 million of the increase primarily due to volume growth, higher average selling prices andlower unit costs from improved operating efficiencies and, excluding the vaccine licensing milestone revenue,vaccines gross profit was equal to the prior year as volume growth was offset by unfavorable product mix. MineralNutrition gross profit increased $3.2 million due to higher volumes and higher average selling prices, partially offsetby higher product costs. Performance Products gross profit decreased $2.8 million due to lower average sellingprices and lower volumes.Selling, general and administrative expensesSG&A expenses of $145.6 million increased $5.0 million, or 4%, for the year ended June 30, 2015. In2014 we recognized a $5.4 million loss in our consolidated statement of operations on an insurance claim previouslyrecorded as an asset. Excluding this amount, SG&A expenses increased $10.3 million, or 8%. Animal Healthaccounted for $9.0 million of the increase, driven by increased selling headcount and related marketing costs tosupport MFA and vaccine initiatives and the expansion of our products to the dairy industry and by developmentspending focused on product lifecycle extensions. Animal Health SG&A also increased due to $0.7 million ofacquisition-related accrued compensation related to the MJB transactions. Corporate expenses accounted for $1.4million of the increase due to salary and wage-related costs and professional fees, in part related to the costs ofbeing a public company.Interest expense, netInterest expense, net, of  $14.3 million decreased $18.7 million for the year ended June 30, 2015, due tothe net result of issuing new Credit Facilities in April 2014, retiring the Mayflower Limited Partnership(“Mayflower”) Term Loan, the BFI Term Loan and our former Domestic Senior Credit Facility in April 2014 andredeeming our 9.25% Senior Notes in May 2014. Interest expense also increased due to $0.6 million of acquisition-related accrued interest in connection with the MJB transactions.63TABLE OF CONTENTSForeign currency (gains) losses, netForeign currency (gains) losses, net for the year ended June 30, 2015, amounted to net gains of $5.4million, as compared to $1.8 million in net losses for the year ended June 30, 2014. Foreign currency gains in thecurrent period were primarily due to the movement of Brazil, Israel, Turkey and E.U. currencies relative to the U.S.dollar. Foreign currency gains and losses primarily arise from intercompany balances.Provision for income taxesIncome tax expense was $18.5 million for the year ended June 30, 2015, compared with $9.4 million for2014. Our effective tax rate was 23.5% for the current year. Our consolidated tax provisions are primarily comprisedof income taxes relating to profitable foreign jurisdictions. For the year ended June 30, 2015, we generated domestictaxable income and, because we maintained a full valuation allowance against domestic net deferred tax assets, theprovision for income taxes did not include expense related to domestic taxable income. For the year ended June 30,2014, we generated a domestic taxable loss and, because we maintained a full valuation allowance against domesticnet deferred tax assets, the provision for income taxes did not include a benefit related to the domestic taxable loss.The expense for 2014 included a discrete item of  $3.2 million of foreign withholding tax expense incurred inconnection with the repatriation of certain foreign earnings. We paid $10.8 million of cash income taxes in the yearended June 30, 2015, compared with $12.2 million in 2014. Payments in 2014 included $3.2 million related to theforeign withholding taxes.Net income (loss)Net income of  $60.3 million for the year ended June 30, 2015, increased $63.4 million, compared to a netloss of  $3.1 million for the year ended June 30, 2014, as a result of the factors described above.Adjusted EBITDAAdjusted EBITDA of $110.0 million increased $19.4 million, or 21%, for the year ended June 30, 2015.Adjusted EBITDA growth was $11.4 million, or 13%, for the year ended June 30, 2015, excluding the $8.0 millionin vaccine licensing milestone revenue. Animal Health adjusted EBITDA increased $12.0 million, or 12%, for theyear ended June 30, 2015, excluding the vaccine licensing milestone revenue, due to sales growth and increasedgross profit, partially offset by increased SG&A expenses. Mineral Nutrition increased $2.8 million, or 24%, due tohigher sales volumes and improved operating margins. Performance Products decreased $2.0 million, or 43%, dueto lower sales volumes. Corporate expenses increased $1.4 million due to increases in salary and wage-related costsand professional fees, in part related to the costs of being a public company.Analysis of financial condition, liquidity and capital resourcesNet increase (decrease) in cash and cash equivalents was:​​​Change​For the Years Ended June 30​​2016​​2015​​2014​2016 / 20152015 / 2014​(in thousands)Cash provided by/(used in):Operating activities$37,218$68,704$(712$(31,486$69,416Investing activities(82,791(34,464(19,412(48,327(15,052Financing activities50,380(15,3514,77965,731(20,130Effect of exchange-rate changes on cash and cash equivalents(418(1,494(2031,076(1,291Net increase/(decrease) in cash and cash equivalents$4,389$17,395$(15,548$(13,006$32,94364)))))))))))))))TABLE OF CONTENTSNet cash provided (used) by operating activities was comprised of:​​​Change​For the Years Ended June 30​2016​​2015​​2014​​2016 / 2015​​2015 / 2014​(in thousands)EBITDA$116,805$114,672$60,723$2,133$53,949Acquisition-related cost of goods sold2,566——2,566—Acquisition-related accrued compensation1,680747—933747Acquisition-related transaction costs618——618—Loss on insurance claim——5,350—(5,350Foreign currency (gains) losses, net(7,609(5,4001,753(2,209(7,153Loss on extinguishment of debt——22,771—(22,771Payment of premium and costs on extinguished debt——(17,205—17,205Interest paid(14,215(12,912(45,370(1,30332,458Income taxes paid(16,828(10,780(12,207(6,0481,427Changes in operating assets and liabilities and otheritems(45,799(17,623(16,527(28,176(1,096Net cash provided (used) by operating activities$37,218$68,704$(712$(31,486$69,416Certain amounts may reflect rounding adjustments.Operating activitiesFor the year ended June 30, 2016, net cash provided by operating activities was $37.2 million, primarilyattributable to operating profit of  $85.7 million. Increased inventories used $16.4 million of cash due to timing ofpurchases and production. Accounts receivable used $13.1 million due to sales growth, the proportion ofinternational sales and the timing of customer orders. Other assets used $6.5 million mainly due to an increase inlong-term deposits. Accrued expenses and other liabilities used $7.2 million principally due to funding of retirementplans.For the year ended June 30, 2015, net cash provided by operating activities was $68.7 million, primarilyattributable to operating profit of  $87.7 million. Increased inventories used $19.4 million of cash due to timing ofpurchases and production. Accounts receivable used $1.9 million due to sales growth. Accrued expenses used $3.7million of cash, including $5.3 million paid to customers related to damages to their poultry resulting from the useof one of our products in fiscal year 2010.Investing activitiesFor year ended June 30, 2016, net cash used in investing activities was $82.8 million. Capitalexpenditures were $36.4 million as we continued to invest in our existing asset base and for capacity expansion andproductivity improvements. The MVP acquisition used $46.6 million of cash.For year ended June 30, 2015, net cash used in investing activities was $34.5 million. Capitalexpenditures were $20.1 million as we continued to invest in our existing asset base and for capacity expansion andproductivity improvements. As part of the MJB transactions, the Company made a $5.0 million upfront paymentand a $5.0 million loan. Other acquisitions and other items used $4.4 million of cash.Financing activitiesFor the year ended June 30, 2016, net cash provided by financing activities was $50.4 million. We had netborrowings from our Revolving Credit Facility of  $66.0 million. We received $4.0 million from the issuance ofcommon shares related to exercise of stock options. Partially offsetting the cash provided were $15.7 million individends paid to holders of our Class A and Class B common stock, $2.9 million in scheduled payments on ourTerm B Loan and $1.0 million in payments for deferred consideration.65))))))))))))))))))))))TABLE OF CONTENTSFor the year ended June 30, 2015, net cash used by financing activities was $15.4 million. We paid $15.6million in dividends to holders of our Class A and Class B common stock. In addition, we made $2.9 million inscheduled payments on our Term B Loan. Partially offsetting the cash used was $3.0 million in net borrowings fromour Revolving Credit Facility. We received $1.3 million from the issuance of common shares related to exercise ofstock options.Liquidity and capital resourcesWe believe our cash on hand, our operating cash flows and our financing arrangements, including theavailability of borrowings under the Revolving Credit Facility and foreign credit lines, will be sufficient to supportour future cash needs. Our operating plan projects adequate liquidity throughout the year. However, we can provideno assurance that our liquidity and capital resources will be adequate for future funding requirements. We believewe will be able to comply with the terms of the covenants under the Revolving Credit Facility and foreign creditlines based on our operating plan. In the event of adverse operating results and/or violation of covenants under thefacilities, there can be no assurance we would be able to obtain waivers or amendments. Other risks to our meetingfuture funding requirements include global economic conditions and macroeconomic, business and financialdisruptions that could arise. There can be no assurance that the challenging economic environment or an economicdownturn would not impact our liquidity or our ability to obtain future financing. In addition, our debt covenantsmay restrict our ability to invest. During fiscal year 2016, we spent approximately $36.4 million on capitalexpenditures, primarily on the expansion of our production capacity. We expect our capital expenditures will totalapproximately $30 million in fiscal year 2017, primarily for the continued expansion of production capacity andcost reductions in our Animal Health segment.Certain relevant measures of our liquidity and capital resources follow:​​Change​As of June 30​​2016201520142016 / 20152015 / 2014​(in thousands)Cash and cash equivalents$33,605$29,216$11,821$4,389$17,395Working capital$203,356$175,988$177,999$27,368$(2,011Ratio of current assets to current liabilities2.92:12.62:12.63:1We define working capital as total current assets (excluding cash and cash equivalents) less total currentliabilities (excluding current portion of long-term debt). We calculate the ratio of current assets to current liabilitiesbased on this definition.At June 30, 2016, we had $69.0 million in outstanding borrowings under the Revolving Credit Facility.We had outstanding letters of credit and other commitments of  $14.2 million, leaving $116.8 million available forborrowings and letters of credit. In addition, we had availability totaling $7.8 million under our Israeli loanagreements.We currently intend to pay quarterly dividends, representing $15.8 million annually on our Class A andClass B common stock, subject to approval from the Board of Directors. Our Board of Directors has declared a cashdividend of  $0.10 per share on Class A common stock and Class B common stock that is payable on September 28,2016. Our future ability to pay dividends will depend upon our results of operations, financial condition, capitalrequirements, our ability to obtain funds from our subsidiaries and other factors that our Board of Directors deemsrelevant. Additionally, the terms of our current and any future agreements governing our indebtedness could limitour ability to pay dividends or make other distributions.At June 30, 2016, our cash and cash equivalents included $33.6 million held by our internationalsubsidiaries. There are no restrictions on cash distributions to PAHC from our international subsidiaries. Based onour operating plan, we consider these funds to be indefinitely reinvested in our international operations. Should ourplans change and we decide to repatriate some or all of the remaining cash held by our international subsidiaries, theamounts repatriated would be subject to federal and state income taxes at statutory rates, with the potential forpartial offsetting credits for taxes paid to international jurisdictions.66)TABLE OF CONTENTSAnalysis of the consolidated balance sheetsChange​As of June 302016201520142016 / 20152015 / 2014​(in thousands)Accounts receivable, net$123,790$111,099$113,858$12,691$(2,759DSO595456Payment terms outside the U.S. are typically longer than in the United States. For the periods presented,we have maintained our overall average accounts receivables DSO between 54 and 59 days. We regularly monitorour accounts receivable for collectability, particularly in countries where economic conditions remain uncertain. Webelieve that our allowance for doubtful accounts is appropriate. Our assessment is based on such factors as past duehistory, historical and expected collection patterns, the financial condition of our customers, the robust nature of ourcredit and collection practices and the economic environment. We calculate DSO based on a 360-day year andcompare accounts receivable with sales for the quarter ending at the balance sheet date.Change​As of June 302016201520142016 / 20152015 / 2014​(in thousands)Inventories$167,691$149,786$143,184$17,905$6,602Inventory increased by $17.9 million in 2016, primarily due to increases in the Animal Health segmentfrom the timing of purchases and production and the acquisition of MVP.Contractual obligationsPayments due under contractual obligations as of June 30, 2016, were:Years​​​Within 1Over 1 to 3Over 3 to 5Over 5Total​(in thousands)Long-term debt (including current portion)$2,907$5,800$275,500$—$284,207Revolving credit facility—69,000——69,000Interest payments14,54028,06119,583—62,184Lease commitments4,6657,8326,4272,79321,717Deferred consideration on acquisitions1,3531228,77517210,422Total contractual obligations$23,465$110,815$310,285$2,965$447,530Excluded from the contractual obligations table is the liability for unrecognized tax benefits totaling $5.3million. This liability for unrecognized tax benefits has been excluded because we cannot make a reliable estimateof the periods in which the liability will be realized.Our Board of Directors declared a cash dividend of  $0.10 per share on Class A common stock and ClassB common stock, representing $3.9 million, payable on September 28, 2016.The Company expects to contribute approximately $5.9 million to the pension plan during 2017.Off-balance sheet arrangementsWe do not currently use off-balance sheet arrangements for the purpose of credit enhancement, hedgingtransactions, investment or other financial purposes.In the ordinary course of business, we may indemnify our counterparties against certain liabilities thatmay arise. These indemnifications typically pertain to environmental matters. If the indemnified party were to makea successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. Theseindemnifications generally are subject to certain restrictions and limitations.67)TABLE OF CONTENTSSelected Quarterly Financial Data (Unaudited)To facilitate quarterly comparisons, the following unaudited information presents the quarterly results ofoperations, including segment data, for the years ended June 30, 2016 and 2015. This quarterly financial data wasprepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statementsand related notes included herein. As discussed in the notes to the consolidated financial statements, we haverevised previously issued financial statements for the fiscal years ended June 30, 2015 and 2014 to correct theclassification of amortization expense related to product-related intangible assets within the consolidated statementof operations. We originally recorded such amortization expense in selling, general and administrative expensesinstead of recording it in cost of goods sold. As a result, cost of goods sold was understated and gross profit andselling, general and administrative expenses were overstated. We also have revised the quarterly financial data. Therevisions increased cost of goods sold and reduced gross profit and selling, general and administrative expenses by$1.0 million, $1.0 million and $1.2 million for the three months ended September 30, 2015, December 31, 2015, andMarch 31, 2016, respectively; by $1.9 million and $3.1 million for the six and nine months ended December 31,2015 and March 31, 2016, respectively; by $0.7 million, $0.7 million, $0.9 million and $0.9 million for the threemonths ended September 30, 2014, December 31, 2014, March 31, 2015 and June 30, 2015, respectively; and, by$1.4 million and $2.2 million for the six and nine months ended December 31, 2014 and March 31, 2015,respectively. We concluded the errors were not material to any previously issued financial statements.Quarters​​Six Months​​Nine Months​​Year​For the Periods EndedSeptember 30, 2015December 31, 2015March 31, 2016June 30, 2016​​December 31, 201 5​​March 31, 201 6​​June 30, 2016​(in thousands)Net salesAnimal Health$120,134$121,504$118,328$126,174$241,638$359,966$486,140Mineral Nutrition54,46958,85353,02950,334113,322166,351216,685Performance Products12,51711,41612,10412,66423,93336,03748,701Total net sales187,120191,773183,461189,172378,893562,354751,526Cost of goods sold127,913130,311124,671129,599258,224382,895512,494Gross profit59,20761,46258,79059,573120,669179,459239,032Selling, general and administrative expenses37,34938,84137,61939,47976,190113,809153,288Operating income21,85822,62121,17120,09444,47965,65085,744Interest expense, net3,8193,9674,2654,5417,78612,05116,592Foreign currency (gains) losses, net(5,4532,557(2,243(2,470(2,896(5,139(7,609Income before income taxes23,49216,09719,14918,02339,58958,73876,761Provision (benefit) for income taxes4,739(14,0815722,803(9,342(8,770(5,967Net income$18,753$30,178$18,577$15,220$48,931$67,508$82,728Net income per sharebasic$0.48$0.77$0.47$0.39$1.25$1.72$2.11diluted$0.47$0.75$0.46$0.38$1.22$1.69$2.07Adjusted EBITDAAnimal Health$31,476$32,351$32,151$31,464$63,827$95,978$127,442Mineral Nutrition3,1604,1894,0123,6107,34911,36114,971Performance Products86(849040278568970Corporate(7,015(8,098(6,987(7,223(15,113(22,100(29,323Adjusted EBITDA$27,707$28,434$29,666$28,253$56,141$85,807$114,060Reconciliation of net income to Adjusted EBITDANet income$18,753$30,178$18,577$15,220$48,931$67,508$82,728Interest expense, net3,8193,9674,2654,5417,78612,05116,592Provision (benefit) for income taxes4,739(14,0815722,803(9,342(8,770(5,967Depreciation and amortization5,4295,3935,8566,77410,82216,67823,452EBITDA32,74025,45729,27029,33858,19787,467116,805Acquisition-related cost of goods sold——1,601965—1,6012,566Acquisition-related accrued compensation4204204204208401,2601,680Acquisition-related transaction costs——618——618618Foreign currency (gains) losses, net(5,4532,557(2,243(2,470(2,896(5,139(7,609Adjusted EBITDA$27,707$28,434$29,666$28,253$56,141$85,807$114,06068))))))))))))))))))))))))))))TABLE OF CONTENTSQuartersSix MonthsNine MonthsYear​For the Periods EndedSeptember 30, 2014December 31, 2014March 31, 2015June 30, 2015December 31, 201 4March 31, 201 5June 30, 2015​(in thousands)Net salesAnimal Health$117,225$118,785$117,346$117,444$236,010$353,356$470,800Mineral Nutrition55,44758,74257,32055,593114,189171,509227,102Performance Products14,78611,16112,82911,91325,94738,77650,689Total net sales187,458188,688187,495184,950376,146563,641748,591Cost of goods sold127,817133,283129,245124,966261,100390,345515,311Gross profit59,64155,40558,25059,984115,046173,296233,280Selling, general andadministrative expenses34,53635,61836,43739,02170,154106,591145,612Operating income25,10519,78721,81320,96344,89266,70587,668Interest expense, net3,4903,5153,6023,6987,00510,60714,305Foreign currency (gains)losses, net(1,204(1,018(4,6331,455(2,222(6,855(5,400Income before income taxes22,81917,29022,84415,81040,10962,95378,763Provision (benefit) for income taxes3,8873,0426,1485,4066,92913,07718,483Net income$18,932$14,248$16,696$10,404$33,180$49,876$60,280Net income per sharebasic$0.49$0.37$0.43$0.27$0.85$1.28$1.55diluted$0.48$0.36$0.42$0.26$0.84$1.25$1.51Adjusted EBITDAAnimal Health$32,454$28,296$29,629$29,880$60,750$90,379$120,259Mineral Nutrition3,4793,7543,7613,4357,23310,99414,429Performance Products1,0361629944541,1982,1922,646Corporate(6,511(7,184(6,888(6,732(13,695(20,583(27,315Adjusted EBITDA$30,458$25,028$27,496$27,037$55,486$82,982$110,019Reconciliation of net income to Adjusted EBITDANet income$18,932$14,248$16,696$10,404$33,180$49,876$60,280Interest expense, net3,4903,5153,6023,6987,00510,60714,305Provision (benefit) forincome taxes3,8873,0426,1485,4066,92913,07718,483Depreciation andamortization5,3535,2415,3565,65410,59415,95021,604EBITDA31,66226,04631,80225,16257,70889,510114,672Acquisition-related accrued compensation——327420—327747Foreign currency (gains)losses, net(1,204(1,018(4,6331,455(2,222(6,855(5,400Adjusted EBITDA$30,458$25,028$27,496$27,037$55,486$82,982$110,019General description of non-GAAP financial measuresAdjusted EBITDAAdjusted EBITDA is an alternative view of performance used by management as our primary operatingmeasure, and we believe that investors’ understanding of our performance is enhanced by disclosing thisperformance measure. We report Adjusted EBITDA to portray the results of our operations prior to consideringcertain income statement elements. We have defined EBITDA as net income (loss) plus (i) interest expense, net, (ii)provision for income taxes or less benefit for income taxes, and (iii) depreciation and amortization. We have definedAdjusted EBITDA as EBITDA plus (a) (income) loss from, and69)))))))))))))))))))• senior management receives a monthly analysis of our operating results that is prepared on anAdjusted EBITDA basis;• our annual budgets are prepared on an Adjusted EBITDA basis; and• other goal setting and performance measurements are prepared on an Adjusted EBITDA basis.TABLE OF CONTENTSdisposal of, discontinued operations, (b) other expense or less other income, as separately reported on ourconsolidated statements of operations, including foreign currency gains and losses and loss on extinguishment ofdebt, and (c) certain items that we consider to be unusual, non-operational or non-recurring. The Adjusted EBITDAmeasure is not, and should not be viewed as, a substitute for GAAP reported net income.The Adjusted EBITDA measure is an important internal measurement for us. We measure our overallperformance on this basis in conjunction with other performance metrics. The following are examples of how ourAdjusted EBITDA measure is utilized:Despite the importance of this measure to management in goal setting and performance measurement,Adjusted EBITDA is a non-GAAP financial measure that has no standardized meaning prescribed by GAAP and,therefore, has limits in its usefulness to investors. Because of its non-standardized definition, Adjusted EBITDA,unlike GAAP net income, may not be comparable to the calculation of similar measures of other companies.Adjusted EBITDA is presented to permit investors to more fully understand how management assessesperformance.We also recognize that, as an internal measure of performance, the Adjusted EBITDA measure haslimitations, and we do not restrict our performance management process solely to this metric. A limitation of theAdjusted EBITDA measure is that it provides a view of our operations without including all events during a period,such as the depreciation of property, plant and equipment or amortization of purchased intangibles, and does notprovide a comparable view of our performance to other companies.Certain significant itemsAdjusted EBITDA is calculated prior to considering certain items. We evaluate such items on anindividual basis. Such evaluation considers both the quantitative and the qualitative aspect of their unusual or non-operational nature. Unusual, in this context, may represent items that are not part of our ongoing business; itemsthat, either as a result of their nature or size, we would not expect to occur as part of our normal business on aregular basis. An example of an unusual item is the loss on extinguishment of debt incurred in fiscal year 2014. Weconsider foreign currency gains and losses to be non-operational because they arise principally from intercompanytransactions and are largely non-cash in nature.New accounting standardsFor discussion of new accounting standards, see “Notes to Consolidated Financial Statements—Summaryof Significant Accounting Policies and New Accounting Standards.”Significant accounting policies and application of critical accounting estimatesIn presenting our financial statements in conformity with GAAP, we are required to make estimates andassumptions that affect the reported amounts of assets, liabilities, net sales, costs and expenses and relateddisclosures.We believe that the following accounting policies are critical to an understanding of our consolidatedfinancial statements as they require the application of the most difficult, subjective and complex judgments and,therefore, could have the greatest impact on our financial statements.Acquisitions, Intangible Assets and GoodwillOur consolidated financial statements reflect the operations of an acquired business beginning as of thedate of acquisition. Assets acquired and liabilities assumed are recorded at their fair values at the date of acquisition;goodwill is recorded for any excess of the purchase price over the fair values of the net assets acquired.70TABLE OF CONTENTSSignificant judgment is required to determine the fair value of certain tangible and intangible assets and inassigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuationspecialists for significant tangible and intangible assets. The fair values are based on available historical informationand on future expectations and assumptions deemed reasonable by management, but are inherently uncertain. Wetypically use an income method to measure the fair value of intangible assets, which is based on forecasts of theexpected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in thevaluations reflect a consideration of other marketplace participants, and include the amount and timing of futurecash flows (including expected growth rates and profitability), the underlying product or technology life cycles,economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomicevents and circumstances could affect the accuracy or validity of the estimates and assumptions. Determining theuseful life of an intangible asset also requires judgment. Our estimates of the useful lives of intangible assets areprimarily based on a number of factors including competitive environment, underlying product life cycles, operatingplans and the macroeconomic environment of the countries in which the products are sold. Intangible assets areamortized over their estimated lives. Intangible assets associated with acquired in-process research and developmentactivities (“IPR&D”) are not amortized until a product is available for sale and regulatory approval is obtained.Long-Lived Assets and GoodwillWe periodically review our long-lived and amortizable intangible assets for impairment and assesswhether significant events or changes in business circumstances indicate that the carrying value of the assets maynot be recoverable. Such circumstances may include a significant decrease in the market price of an asset, asignificant adverse change in the manner in which the asset is being used or in its physical condition or a history ofoperating or cash flow losses associated with the use of an asset. An impairment loss is recognized when thecarrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the useof the asset and its eventual disposition. The amount of the impairment loss is the excess of the asset’s carryingvalue over its fair value. In addition, we periodically reassess the estimated remaining useful lives of our long-livedand amortizable intangible assets. Changes to estimated useful lives would affect the amount of depreciation andamortization recorded in the consolidated statements of operations. We have not experienced significant changes inthe carrying value or estimated remaining useful lives of our long-lived or amortizable intangible assets in theperiods included in the consolidated financial statements.We periodically review our indefinite life intangible assets associated with acquired IPR&D forimpairment and assess whether significant events or changes in business circumstances indicate that the carryingvalue of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of an assetexceeds the anticipated future discounted cash flows expected to result from the use of the asset and its eventualdisposition. The amount of the impairment loss is the excess of the asset’s carrying value over its fair value. Duringthe fourth quarter of each year, absent any prior impairment indicators, we perform an annual impairmentassessment. We elected to apply certain accounting guidance that allows an initial qualitative analysis of the fairvalue of the indefinite life intangible asset. We have determined the fair value of our IPR&D was not impaired.Goodwill represents the excess of the purchase price over the fair value of the identifiable net assetsacquired in a business combination. We test goodwill for impairment annually during the fourth quarter, or morefrequently if impairment indicators exist. Impairment exists when the carrying amount of goodwill exceeds itsimplied fair value. During the fourth quarter of 2016, we tested goodwill by applying certain accounting guidancethat allows an initial qualitative analysis of the fair value of goodwill. We have determined our goodwill was notimpaired. We have not recorded any impairment charges since the goodwill was initially recorded.We evaluate our investments in equity method investees for impairment if circumstances indicate that thefair value of the investment may be impaired. The assets underlying a $4.1 million equity investment are currentlyidled; we have concluded the investment is not currently impaired, based on expected future operating cash flowsand/or disposal value.71TABLE OF CONTENTSEnvironmental LiabilitiesOur operations and properties are subject to extensive federal, state, local and foreign environmental,health and safety laws and regulations, including those governing pollution; protection of the environment; the use,management and release of hazardous materials, substances and wastes; air emissions; greenhouse gas emissions;water use, supply and discharge; the investigation and remediation of contamination; the manufacture, distribution,and sale of regulated materials, including pesticides; the importing, exporting and transportation of products; and thehealth and safety of our employees and the public. As such, the nature of our current and former operations andthose of our subsidiaries expose us and our subsidiaries to the risk of claims with respect to such matters, includingfines, penalties and remediation obligations that may be imposed by regulatory authorities. We record accruals forcontingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated.These accruals are adjusted periodically as assessments change or additional information becomes available.Pension LiabilitiesThe measurement of our pension and postretirement benefit obligations are dependent on a variety ofassumptions determined by management and used by our actuaries. These assumptions affect the amount and timingof future contributions and expenses. The Company reassesses its benefit plan assumptions on a regular basis. Thediscount rate is evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio ofhigh-quality fixed-income debt instruments that would provide the future cash flows needed to pay the benefitsincluded in the benefit obligation as they come due. At June 30, 2016, the discount rate for the Company’s U.S.pension plan was 3.9% compared to 4.6% at June 30, 2015. The expected rate of return on plan assets of 6.1%represents the average rate of return expected to be earned on plan assets over the period the benefit obligations areexpected to be paid. In developing the expected rate of return, the Company considers long-term compoundannualized returns of historical market data as well as actual returns on the Company’s plan assets.Revenue RecognitionWe recognize revenue for sales of our goods upon transfer of title and when risk of loss passes to thecustomer. Certain of our businesses have terms where title and risk of loss transfer on shipment. Certain of ourbusinesses have terms where title and risk of loss transfer on delivery. Additional conditions for recognition ofrevenue are that persuasive evidence of an arrangement exists, the selling price is fixed or determinable, collectionsof sales proceeds are reasonably assured and we have no further performance obligations. We record estimatedreductions to revenue for customer programs and incentive offerings, including pricing arrangements and othervolume-based incentives, at the time the sale is recorded. Royalty and licensing income from licensing agreementsare recognized when earned under the terms of the related agreements, and all performance obligations have beenmet, and are included in net sales in the consolidated statements of operations. Net sales include shipping andhandling fees billed to customers. Delivery costs to our customers are included in cost of goods sold in theconsolidated statements of operations. Net sales exclude value-added and other taxes based on sales.Income TaxesThe provision for income taxes includes U.S. federal, state, and foreign income taxes and foreignwithholding taxes. Our annual effective income tax rate is determined based on our income, statutory tax rates andtax planning opportunities available in the various jurisdictions in which we operate and the tax impacts of itemstreated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be includedin the tax return at different times than the items are reflected in the financial statements. Some of these differencesare permanent, such as expenses that are not deductible in our tax return, and some differences are temporary,reversing over time, such as depreciation expense. These temporary differences give rise to deferred tax assets andliabilities. Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or creditin future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilitiesgenerally represent the tax effect of items recorded as tax expense in our income statement for which payment hasbeen deferred, the tax effect72TABLE OF CONTENTSof expenditures for which a deduction has already been taken in our tax return but has not yet been recognized inour income statement or the tax effect of assets recorded at fair value in business combinations for which there wasno corresponding tax basis adjustment.Significant judgment is required in determining our income tax provision and in evaluating our taxpositions. The recognition and measurement of a tax position is based on management’s best judgment given thefacts, circumstances and information available at the reporting date. Inherent in determining our annual effectiveincome tax rate are judgments regarding business plans, planning opportunities and expectations about futureoutcomes. Realization of certain deferred tax assets, primarily net operating loss carryforwards, is dependent upongenerating sufficient future taxable income in the appropriate jurisdiction prior to the expiration of the carryforwardperiods. We establish valuation allowances for deferred tax assets when the amount of expected future taxableincome is not likely to support the use of the deduction or credit.We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain ofthese jurisdictions, we may take tax positions that management believes are supportable, but are potentially subjectto successful challenge by the applicable taxing authority. We evaluate our tax positions and establish liabilities inaccordance with the applicable accounting guidance on uncertainty in income taxes. We review these taxuncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust themaccordingly.We account for income tax contingencies using a benefit recognition model. If our initial assessment doesnot result in the recognition of a tax benefit, we regularly monitor our position and subsequently recognize the taxbenefit if: (i) there are changes in tax law or there is new information that sufficiently raise the likelihood ofprevailing 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 regularly re-evaluate our tax positions based on the results of audits of federal, state and foreign income taxfilings, statute of limitations expirations, and changes in tax law or receipt of new information that would eitherincrease or decrease the technical merits of a position relative to the “more-likely-than-not” standard.Our assessments concerning uncertain tax positions are based on estimates and assumptions that havebeen deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefitsmay not be representative of actual outcomes, and variation from such estimates could materially affect ourfinancial statements in the period of settlement or when the statutes of limitations expire, as we treat these events asdiscrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formaladministrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possiblechanges related to our uncertain tax positions, and such changes could be significant.Because there are a number of estimates and assumptions inherent in calculating the various componentsof our income tax provision, certain future events such as changes in tax legislation, geographic mix of earnings,completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effectiveincome tax rate.We have not provided for United States or additional foreign taxes on certain undistributed earnings offoreign subsidiaries, which earnings have been or are intended to be indefinitely reinvested.For more information regarding our significant accounting policies, estimates and assumptions, see“Notes to Consolidated Financial Statements—Summary of Significant Accounting Policies and New AccountingStandards.”ContingenciesLegal mattersWe are subject to numerous contingencies arising in the ordinary course of business, such as productliability and other product-related litigation, commercial litigation, environmental claims and proceedings andgovernment investigations.73TABLE OF CONTENTS ​Certain of these contingencies could result in losses, including damages, fines and/or civil penalties,and/or criminal charges, which could be substantial. We believe that we have strong defenses in these types ofmatters, but litigation is inherently unpredictable and excessive verdicts do occur. We do not believe that any ofthese matters will have a material adverse effect on our financial position. However, we could incur judgments,enter into settlements or revise our expectations regarding the outcome of certain matters, and such developmentscould have a material adverse effect on our results of operations or cash flows in the period in which the amountsare paid and/or accrued.We have accrued for losses that are both probable and reasonably estimable. Substantially all of thesecontingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or themeasurement of any loss can be complex. Consequently, we are unable to estimate the range of reasonably possibleloss in excess of amounts accrued. Our assessments are based on estimates and assumptions that have been deemedreasonable by management, but the assessment process relies heavily on estimates and assumptions that may proveto be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to changethose estimates and assumptions.EnvironmentalOur operations and properties are subject to Environmental Laws and regulations. As such, the nature ofour current and former operations exposes us to the risk of claims with respect to such matters, including fines,penalties, and remediation obligations that may be imposed by regulatory authorities. Under certain circumstances,we might be required to curtail operations until a particular problem is remedied. Known costs and expenses underEnvironmental Laws incidental to ongoing operations, including the cost of litigation proceedings relating toenvironmental matters, are generally included within operating results. Potential costs and expenses may also beincurred in connection with the repair or upgrade of facilities to meet existing or new requirements underEnvironmental Laws or to investigate or remediate potential or actual contamination and from time to time weestablish reserves for such contemplated investigation and remediation costs. In many instances, the ultimate costsunder Environmental Laws and the time period during which such costs are likely to be incurred are difficult topredict.While we believe that our operations are currently in material compliance with Environmental Laws, wehave, from time to time, received notices of violation from governmental authorities, and have been involved in civilor criminal action for such violations. Additionally, at various sites, our subsidiaries are engaged in continuinginvestigation, remediation and/or monitoring efforts to address contamination associated with historic operations ofthe sites. We devote considerable resources to complying with Environmental Laws and managing environmentalliabilities. We have developed programs to identify requirements under, and maintain compliance withEnvironmental Laws; however, we cannot predict with certainty the impact of increased and more stringentregulation on our operations, future capital expenditure requirements, or the cost of compliance.The nature of our current and former operations exposes us to the risk of claims with respect toenvironmental matters and we cannot assure we will not incur material costs and liabilities in connection with suchclaims. Based upon our experience to date, we believe that the future cost of compliance with existingEnvironmental Laws, and liabilities for known environmental claims pursuant to such Environmental Laws, will nothave a material adverse effect on our financial position, results of operations, cash flows or liquidity.For additional details, see “Notes to Consolidated Financial Statements—Commitments andContingencies.”For additional details, see “Business—Environmental, Health and Safety.”Item 7A. Quantitative and Qualitative Disclosures about Market RiskForeign exchange riskPortions of our net sales and costs are exposed to changes in foreign exchange rates. Our products are soldin more than 65 countries and, as a result, our revenues are influenced by changes in foreign exchange rates. As weoperate in multiple foreign currencies, changes in those currencies relative to the U.S.74TABLE OF CONTENTSdollar may impact our revenue and expenses, and consequently, net income. Exchange rate fluctuations may alsohave an impact beyond our reported financial results and directly impact operations. These fluctuations may affectthe ability to buy and sell our goods and services in markets affected by significant exchange rate variances.Our primary foreign currency exposures are the Brazilian and Israeli currencies. From time to time, wemanage foreign exchange risk through the use of foreign currency derivative contracts. These contracts are used tooffset the potential earnings effects from exposure to foreign currencies.Our foreign currency derivative contracts at June 30, 2016, were analyzed to determine their sensitivity toforeign exchange rate changes. The fair values of these instruments were determined using Level 2 inputs. As ofJune 30, 2016, the sensitivity analysis of changes in the fair value of all foreign currency derivative contractsindicates that if the U.S. dollar were to appreciate or depreciate by 10%, the fair value of these contracts would,decrease by $1.9 million or increase by $2.7 million. For additional details, see “Notes to Consolidated FinancialStatements—Derivatives.”Interest rate riskSubstantially all of our outstanding debt is floating rate debt. Our Revolving Credit Facility and Term BLoan carry floating interest rates that are tied to LIBOR and the Prime Rate; therefore, our profitability and cashflows are exposed to interest rate fluctuations. Based on our outstanding debt balances as of June 30, 2016, a 100basis point increase in LIBOR would increase annual interest expense and decrease cash flows by $2.0 million. Foradditional details, see “Notes to the Consolidated Financial Statements—Debt.”75Item 8. Financial Statements and Supplementary DataTABLE OF CONTENTS ​ ​PHIBRO ANIMAL HEALTH CORPORATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm77Consolidated Statements of Operations for the fiscal years ended June 30, 2016, 2015 and 201478Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended June 30, 2016, 2015 and201479Consolidated Balance Sheets as of June 30, 2016 and 201580Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2016, 2015 and 201481Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the fiscal years ended June 30,2016, 2015 and 201482Notes to Consolidated Financial Statements for the fiscal years ended June 30, 2016, 2015 and 20148376TABLE OF CONTENTS ​REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders of Phibro Animal Health Corporation:In our opinion, the accompanying consolidated balance sheets and the related consolidated statements ofoperations, comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows present fairly, inall material respects, the financial position of Phibro Animal Health Corporation and its subsidiaries at June 30,2016 and 2015 and the results of their operations and their cash flows for each of the three years in the period endedJune 30, 2016, in conformity with accounting principles generally accepted in the United States of America. Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits. We conducted our audits of these statements inaccordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.As discussed in Note 2 to the consolidated financial statements, in the year ended June 30, 2016 theCompany has changed the manner in which it accounts for deferred income taxes and the manner in which itaccounts for employee share-based payments.Florham Park, New Jersey August 29, 201677TABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFor the Years Ended June 30201620152014​(in thousands, except per share amounts)Net sales$751,526$748,591$691,914Cost of goods sold512,494515,311487,500Gross profit239,032233,280204,414Selling, general and administrative expenses153,288145,612140,620Operating income85,74487,66863,794Interest expense, net16,59214,30529,770Interest expense, stockholders——3,192Foreign currency (gains) losses, net(7,609(5,4001,753Loss on extinguishment of debt——22,771Income before income taxes76,76178,7636,308Provision (benefit) for income taxes(5,96718,4839,435Net income (loss)$82,728$60,280$(3,127Net income (loss) per sharebasic$2.11$1.55$(0.10diluted$2.07$1.51$(0.10Weighted average common shares outstandingbasic39,25438,96932,193diluted39,96239,81532,193Dividends per share$0.40$0.40$0.82The accompanying notes are an integral part of these consolidated financial statements78))))))TABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For the Years Ended June 30201620152014​(in thousands)Net income (loss)$82,728$60,280$(3,127Change in fair value of derivative instruments4,197(1,9281,025Foreign currency translation adjustment(9,181(31,3141,110Unrecognized net pension gains (losses)(11,093(3,221(4,423(Provision) benefit for income taxes5,8924,923—Other comprehensive income (loss)(10,185(31,540(2,288Comprehensive income (loss)$72,543$28,740$(5,415The accompanying notes are an integral part of these consolidated financial statements79)))))))))))TABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAs of June 30​​20162015​(in thousands, except share and per share amounts)ASSETSCash and cash equivalents$33,605$29,216Accounts receivable, net123,790111,099Inventories, net167,691149,786Other current assets17,74523,627Total current assets342,831313,728Property, plant and equipment, net127,323104,414Intangibles, net60,09537,281Goodwill21,12112,613Other assets59,00325,282Total assets$610,373$493,318LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent portion of long-term debt$2,803$2,809Accounts payable60,16763,061Accrued expenses and other current liabilities45,70345,463Total current liabilities108,673111,333Revolving credit facility69,0003,000Long-term debt280,907283,709Other liabilities61,31365,648Total liabilities519,893463,690Commitments and contingencies (Note 12)Common stock, par value $0.0001; 300,000,000 Class A shares authorized, 18,519,757 and 17,747,793 shares issued and outstanding at June 30, 2016 and June 30, 2015, respectively; 30,000,000 Class B shares authorized, 20,887,811 and 21,320,275 shares issued and outstanding at June 30, 2016 and June 30, 2015, respectively44Preferred stock, par value $0.0001; 16,000,000 shares authorized, no shares issued and outstanding——Paid-in capital118,299118,192Retained earnings (accumulated deficit)33,962(36,968Accumulated other comprehensive income (loss)(61,785(51,600Total stockholders’ equity90,48029,628Total liabilities and stockholders’ equity$610,373$493,318The accompanying notes are an integral part of these consolidated financial statements80)))TABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended June 30​​2016​​2015​2014​(in thousands)OPERATING ACTIVITIESNet income (loss)$82,728$60,280$(3,127Adjustments to reconcile net income (loss) to net cash provided (used)by operating activities:Depreciation and amortization23,45221,60421,453Amortization of deferred financing costs and debt discount9899671,448Acquisition-related cost of goods sold2,566——Acquisition-related accrued compensation1,680747—Acquisition-related accrued interest1,476613—Deferred income taxes(22,2444,7611,289Foreign currency (gains) losses, net(7,725(3,3761,429Other35461(538Loss on extinguishment of debt——22,771Payment of premiums and costs on extinguished debt——(17,205Changes in operating assets and liabilities, net of business acquisitions:Accounts receivable, net(13,086(1,877(14,683Inventories, net(16,439(19,354(3,186Other current assets4577,416(31Other assets(6,547(4,2365,103Accounts payable(3,2454,7961,682Accrued interest6290(13,813Accrued expenses and other liabilities(7,260(3,788(3,304Net cash provided (used) by operating activities37,21868,704(712INVESTING ACTIVITIESCapital expenditures(36,352(20,058(19,846Business acquisition(46,576(10,377—Other, net137(4,029434Net cash provided (used) by investing activities(82,791(34,464(19,412FINANCING ACTIVITIESRevolving credit facility borrowings255,50038,000175,500Revolving credit facility repayments(189,500(35,000(209,500Proceeds from long-term debt——289,275Payments of long-term debt, capital leases and other(3,929(4,090(335,374Debt issuance costs——(4,551Proceeds from common shares issued4,0171,334114,429Dividends paid(15,708(15,595(25,000Net cash provided (used) by financing activities50,380(15,3514,779Effect of exchange rate changes on cash(418(1,494(203Net increase (decrease) in cash and cash equivalents4,38917,395(15,548Cash and cash equivalents at beginning of period29,21611,82127,369Cash and cash equivalents at end of period$33,605$29,216$11,821Supplemental cash flow informationInterest paid$14,215$12,912$45,370Income taxes paid, net16,82810,78012,207Non-cash investing and financing activitiesBusiness acquisition—4,156—Property, plant and equipment and capital lease additions1,4381,1932,637The accompanying notes are an integral part of these consolidated financial statements81)))))))))))))))))))))))))))))))))))))))))))))TABLE OF CONTENTS ​PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)​​Shares of Common Stock​​Common Stock​​Preferred Stock​​Paid-in Capital​​Retained Earnings (Accumulated Deficit)​​Accumulated Other Comprehensive Income (Loss)​​Total​(in thousands, except share amounts)As of June 30, 201330,458,220$ 7$ —$42,948$(94,121$(17,772$(68,938Comprehensive income (loss)————(3,127(2,288(5,415Issuance of common stock, net ofissuance costs8,333,3331—114,428——114,429Conversion of common stockcertificate and effect of stock split—(4—4———Dividends paid———(25,000——(25,000Stock-based compensation expense———73——73As of June 30, 201438,791,553$4$—$132,453$(97,248$(20,060$15,149Comprehensive income (loss)————60,280(31,54028,740Exercise of stock options andwarrant276,515——1,334——1,334Dividends paid———(15,595——(15,595As of June 30, 201539,068,068$4$—$118,192$(36,968$(51,600$29,628Comprehensive income (loss)————82,728(10,18572,543Exercise of stock options339,500——4,017——4,017Dividends paid———(3,910(11,798—(15,708As of June 30, 201639,407,568$4$—$118,299$33,962$(61,785$90,480The accompanying notes are an integral part of these consolidated financial statements82)))))))))))))))))))))1. Description of Business2. Summary of Significant Accounting Policies and New Accounting StandardsTABLE OF CONTENTS ​NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)Phibro Animal Health Corporation (“Phibro” or “PAHC”) and its subsidiaries (together, the “Company”)is a diversified global developer, manufacturer and marketer of a broad range of animal health and mineral nutritionproducts to the poultry, swine, cattle, dairy, aquaculture and ethanol markets. The Company is also a manufacturerand marketer of performance products for use in the personal care, automotive, industrial chemical and chemicalcatalyst industries. Unless otherwise indicated or the context requires otherwise, references in this report to “we,”“our,” “us,” “the Company” and similar expressions refer to Phibro and its subsidiaries.On April 16, 2014, we completed our initial public offering (“IPO”) of 14,657,200 shares of Class Acommon stock at a price to the public of $15.00 per share. In connection with the IPO, we issued and sold 8,333,333shares of Class A common stock. The proceeds to us from the IPO were $114,429, after deducting underwritingdiscounts of  $8,438 and net offering expenses payable by us of  $2,133. In connection with the IPO, MayflowerLimited Partnership (“Mayflower”), a limited partnership that is managed by 3i Investments plc and advised by 3iCorporation, and whose sole limited partner is 3i Group plc, the ultimate parent company of both 3i Investments plcand 3i Corporation, sold 6,323,867 shares of Class A common stock. We did not receive any proceeds from sharessold by Mayflower.Principles of Consolidation and Basis of PresentationThe consolidated financial statements have been prepared in accordance with accounting principlesgenerally accepted in the United States (“GAAP”) and include the accounts of Phibro and its consolidatedsubsidiaries. Intercompany balances and transactions have been eliminated from the consolidated financialstatements. The decision whether or not to consolidate an entity requires consideration of majority voting interests,as well as effective control over the entity.We present our financial statements on the basis of our fiscal year ending June 30. All references to yearsin these consolidated financial statements refer to the fiscal year ending or ended on June 30 of that year.Revisions of previously issued financial statementsDuring the fourth quarter of fiscal 2016, the Company determined that amortization expense related toproduct-related intangible assets should be recorded in cost of goods sold rather than in selling, general andadministrative expense within the consolidated statement of operations. The Company has revised its prior yearfinancial statements to correct the classification of amortization expense to increase cost of goods sold and reducegross profit and selling, general and administrative expenses by $3,092 and $3,361 for the fiscal years ended June30, 2015 and 2014, respectively. These revisions had no impact on the Company's previously reported net income(loss) or cash flows. The Company evaluated the impact of the revisions on prior periods, assessing materialityquantitatively and qualitatively, and concluded the errors were not material to any previously issued financialstatements.Risks, Uncertainties and LiquidityThe issue of the potential for increased bacterial resistance to certain antibiotics used in certain food-producing animals is the subject of discussions on a worldwide basis and, in certain instances, has led to governmentrestrictions on or banning of the use of antibiotics in food-producing animals. The sale of antibiotics andantibacterials is a material portion of our business. Should regulatory or other developments result in restrictions onthe sale of such products, it could have a material adverse effect on our financial position, results of operations andcash flows.The testing, manufacturing, and marketing of certain of our products are subject to extensive regulation bynumerous government authorities in the United States and other countries.83TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  We have significant assets in Israel, Brazil and other locations outside of the United States and asignificant portion of our sales and earnings are attributable to operations conducted abroad. Our assets, results ofoperations and future prospects are subject to currency exchange fluctuations and restrictions, energy shortages,other economic developments, political or social instability in some countries, and uncertainty of, and governmentalcontrol over, commercial rights, which could result in a material adverse effect on our financial position, results ofoperations and cash flows.  We are subject to environmental laws and regulations governing the use, storage, handling, generation,treatment, emission, release, discharge and disposal of certain materials and wastes, the remediation of contaminatedsoil and groundwater, the manufacture, sale and use of regulated materials, including pesticides, and the health andsafety of employees. As such, the nature of our current and former operations and those of our subsidiaries exposePhibro and our subsidiaries to the risk of claims with respect to such matters.Use of EstimatesPreparation of the consolidated financial statements requires management to make certain estimates andassumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Actualresults could differ from these estimates. Significant estimates include valuation of intangible assets, depreciationand amortization periods of long-lived and intangible assets, recoverability of long-lived and intangible assets andgoodwill, realizability of deferred income tax and value-added tax assets, legal and environmental matters andactuarial assumptions related to our pension plans. We regularly evaluate our estimates and assumptions usinghistorical experience and other factors. Our estimates are based on complex judgments, probabilities andassumptions that we believe to be reasonable.Revenue RecognitionWe recognize revenue for sales of our goods upon transfer of title and when risk of loss passes to thecustomer. Certain of our businesses have terms where title and risk of loss transfer on shipment. Certain of ourbusinesses have terms where title and risk of loss transfer on delivery. Additional conditions for recognition ofrevenue are that persuasive evidence of an arrangement exists, the selling price is fixed or determinable, collectionsof sales proceeds are reasonably assured and we have no further performance obligations. We record estimatedreductions to revenue for customer programs and incentive offerings, including pricing arrangements and othervolume-based incentives, at the time the sale is recorded. Royalty and licensing income from licensing agreementsare recognized when earned under the terms of the related agreements, and all performance obligations have beenmet, and are included in net sales in the consolidated statements of operations. Net sales include shipping andhandling fees billed to customers. Delivery costs to our customers are included in cost of goods sold in theconsolidated statements of operations. Net sales exclude value-added and other taxes based on sales.Cash and Cash EquivalentsCash equivalents include highly liquid investments with maturities of three months or less whenpurchased. Cash and cash equivalents held at financial institutions may at times exceed federally insured amounts.We believe we mitigate such risk by investing in or through major financial institutions.Accounts Receivable and Allowance for Doubtful AccountsTrade accounts receivable are recorded at the invoiced amount and do not bear interest. We grant creditterms in the normal course of business and generally do not require collateral or other security to support creditsales. Our ten largest customers represented, in aggregate, approximately 27% and 26% of accounts receivable atJune 30, 2016 and 2015, respectively.The allowance for doubtful accounts is our best estimate of the probable credit losses in existing accountsreceivable. We monitor the financial performance and creditworthiness of our customers so that we can properlyassess and respond to changes in their credit profile. We also monitor domestic and84TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  international economic conditions for the potential effect on our customers. Past due balances are reviewedindividually for collectability. Account balances are charged against the allowance when we determine it is probablethe receivable will not be recovered.InventoriesInventories are valued at the lower of cost or market. Cost is determined principally under weightedaverage and standard cost methods, which approximate first-in, first-out (FIFO) cost. Obsolete and unsalableinventories, if any, are reflected at estimated net realizable value. Inventory costs include materials, direct labor andmanufacturing overhead.Property, Plant and EquipmentProperty, plant and equipment are stated at cost.Depreciation is charged to results of operations using the straight-line method based upon the assets’estimated useful lives ranging from 2 to 30 years for buildings and improvements, and 1 to 17 years for machineryand equipment.We capitalize costs that extend the useful life or productive capacity of an asset. Repair and maintenancecosts are expensed as incurred. In the case of disposals, the assets and related accumulated depreciation are removedfrom the accounts, and the net amounts, less proceeds from disposal, are included in the consolidated statements ofoperations.Capitalized Software CostsWe capitalize costs to obtain, develop and implement software for internal use in accordance with FASBAccounting Standards Codification (“ASC”) 350-40, Internal Use Software . Amounts paid to third parties and costsof internal employees who are directly associated with the software project are also capitalized, depending on thestage of development. We expense software costs that do not meet the capitalization criteria. Capitalized softwarecosts are included in property, plant and equipment on the consolidated balance sheets and are amortized on astraight-line basis over 3 to 7 years.Deferred Financing CostsCosts and original issue discounts or premiums related to issuance or modification of our debt aredeferred on the consolidated balance sheet and amortized over the lives of the respective debt instruments.Amortization of deferred financing costs is included in interest expense in the consolidated statements of operations.Acquisitions, Intangible Assets and GoodwillOur consolidated financial statements reflect the operations of an acquired business beginning as of thedate of acquisition. Assets acquired and liabilities assumed are recorded at their fair values at the date of acquisition;goodwill is recorded for any excess of the purchase price over the fair values of the net assets acquired.Significant judgment is required to determine the fair value of certain tangible and intangible assets and inassigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuationspecialists for significant tangible and intangible assets. The fair values are based on available historical informationand on future expectations and assumptions deemed reasonable by management, but are inherently uncertain. Wetypically use an income method to measure the fair value of intangible assets, which is based on forecasts of theexpected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in thevaluations reflect a consideration of other marketplace participants, and include the amount and timing of futurecash flows (including expected growth rates and profitability), the underlying product or technology life cycles,economic barriers to entry and the discount rate applied to the cash flows. Unanticipated market or macroeconomicevents and circumstances could affect the accuracy or validity of the estimates and assumptions. Determining the85TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  useful life of an intangible asset also requires judgment. Our estimates of the useful lives of intangible assets arebased on factors including competitive environment, underlying product life cycles, operating plans and themacroeconomic environment of the countries in which the products are sold. Intangible assets are amortized overtheir estimated lives. Intangible assets associated with acquired in-process research and development activities(“IPR&D”) are not amortized until a product is available for sale.Long-Lived Assets and GoodwillWe periodically review our long-lived and amortizable intangible assets for impairment and assesswhether significant events or changes in business circumstances indicate that the carrying value of the assets maynot be recoverable. Such circumstances may include a significant decrease in the market price of an asset, asignificant adverse change in the manner in which the asset is being used or in its physical condition or a history ofoperating or cash flow losses associated with the use of an asset. An impairment loss is recognized when thecarrying amount of an asset exceeds the anticipated future undiscounted cash flows expected to result from the useof the asset and its eventual disposition. The amount of the impairment loss is the excess of the asset’s carryingvalue over its fair value. In addition, we periodically reassess the estimated remaining useful lives of our long-livedand amortizable intangible assets. Changes to estimated useful lives would affect the amount of depreciation andamortization recorded in the consolidated statements of operations. We have not experienced significant changes inthe carrying value or estimated remaining useful lives of our long-lived or amortizable intangible assets in theperiods included in the consolidated financial statements.We periodically review our indefinite life intangible assets associated with acquired IPR&D forimpairment and assess whether significant events or changes in business circumstances indicate that the carryingvalue of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of an assetexceeds the anticipated future discounted cash flows expected to result from the use of the asset and its eventualdisposition. The amount of the impairment loss is the excess of the asset’s carrying value over its fair value. Duringthe fourth quarter of each year, absent any prior impairment indicators, we perform an annual impairmentassessment. We elected to apply certain accounting guidance that allows an initial qualitative analysis of the fairvalue of the indefinite life intangible asset. We have determined the fair value of our IPR&D was not impaired.Goodwill represents the excess of the purchase price over the fair value of the identifiable net assetsacquired in a business combination. We test goodwill for impairment annually during the fourth quarter, or morefrequently if impairment indicators exist. Impairment exists when the carrying amount of goodwill exceeds itsimplied fair value. During the fourth quarter of 2016, we tested goodwill by applying certain accounting guidancethat allows an initial qualitative analysis of the fair value of goodwill. We have determined our goodwill was notimpaired. We have not recorded any impairment charges since the goodwill was initially recorded.Foreign Currency TranslationWe generally use local currency as the functional currency to measure the financial position and results ofoperations of each of our international subsidiaries. We translate assets and liabilities of these operations at theexchange rates in effect at the balance sheet date. We translate income statement accounts at the average rates ofexchange prevailing during the period. Translation adjustments that arise from the use of differing exchange ratesfrom period to period are included as a component of accumulated other comprehensive income (loss) instockholders’ equity.Certain of our Israeli operations have designated the U.S. dollar as their functional currency. Gains andlosses arising from remeasurement of local currency accounts into U.S. dollars are included in determining netincome.Comprehensive Income (Loss)Comprehensive income (loss) consists of net income (loss) and the changes in: (i) the fair value ofderivative instruments that qualify for hedge accounting; (ii) foreign currency translation adjustments;(iii) unrecognized net pension gains (losses); and (iv) the related (provision) benefit for income taxes.86TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Derivative Financial InstrumentsWe record all derivative financial instruments on the consolidated balance sheets at fair value. Changes inthe fair value of derivatives are recorded in results of operations or accumulated other comprehensive income (loss),depending on whether a derivative is designated and effective as part of a hedge transaction and, if so, the type ofhedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive income(loss) are included in the results of operations in the periods in which operations are affected by the underlyinghedged item.From time to time, we use forward contracts and options to mitigate exposure to changes in foreigncurrency exchange rates and as a means of hedging forecasted operating costs. To qualify a derivative as a hedge,we document the nature and relationships between hedging instruments and hedged items, the prospectiveeffectiveness of the hedging instrument as well as the ultimate effectiveness, the risk-management objectives, thestrategies for undertaking the various hedge transactions and the methods of assessing hedge effectiveness. Wehedge forecasted transactions for periods not exceeding the next twenty-four months. We do not engage in tradingor other speculative uses of financial instruments.Environmental LiabilitiesExpenditures for ongoing compliance with environmental regulations are expensed or capitalized asappropriate. We capitalize expenditures made to extend the useful life or productive capacity of an asset, includingexpenditures that prevent future environmental contamination. Other expenditures are expensed as incurred and arerecorded in selling, general and administrative expenses in the consolidated statements of operations. We record theexpense and related liability in the period an environmental assessment indicates remedial efforts are probable andthe costs can be reasonably estimated. Estimates of the liability are based upon currently available facts, existingtechnology and presently enacted laws and regulations taking into consideration the likely effects of inflation andother societal and economic factors. All available evidence is considered, including prior experience in remediationof contaminated sites, other companies’ experiences and data released by the U.S. Environmental Protection Agencyand other organizations. The estimated liabilities are not discounted. We record anticipated recoveries under existinginsurance contracts if probable.Income TaxesThe provision for income taxes includes U.S. federal, state, and foreign income taxes and foreignwithholding taxes. Our annual effective income tax rate is determined based on our income, statutory tax rates andtax planning opportunities available in the various jurisdictions in which we operate and the tax effects of itemstreated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be includedin the tax return at different times than the items are reflected in the financial statements. Some of these differencesare permanent, such as expenses that are not deductible in our tax return, and some differences are temporary,reversing over time, such as depreciation expense. These temporary differences give rise to deferred tax assets andliabilities. Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or creditin future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilitiesgenerally represent the tax effect of items recorded as tax expense in our income statement for which payment hasbeen deferred, the tax effect of expenditures for which a deduction has already been taken in our tax return but hasnot yet been recognized in our income statement or the tax effect of assets recorded at fair value in businesscombinations for which there was no corresponding tax basis adjustment. During 2016, we elected early applicationof Accounting Standards Update (“ASU”) 2015-17, Balance Sheet Classification of Deferred Taxes , which requiresthat all deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. We appliedthe guidance prospectively; periods prior to December 31, 2015 were not adjusted.Significant judgment is required in determining our income tax provision and in evaluating our taxpositions. The recognition and measurement of a tax position is based on management’s best judgment given thefacts, circumstances and information available at the reporting date. Inherent in determining our87TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  annual effective income tax rate are judgments regarding business plans, planning opportunities and expectationsabout future outcomes. Realization of certain deferred tax assets, primarily net operating loss carryforwards, isdependent upon generating sufficient future taxable income in the appropriate jurisdiction prior to the expiration ofthe carryforward periods. We establish valuation allowances for deferred tax assets when the amount of expectedfuture taxable income is not likely to support the use of the deduction or credit.We operate in multiple jurisdictions with complex tax policy and regulatory environments. In certain ofthese jurisdictions, we may take tax positions that management believes are supportable, but are potentially subjectto successful challenge by the applicable taxing authority. We evaluate our tax positions and establish liabilities inaccordance with the applicable accounting guidance on uncertainty in income taxes. We review these taxuncertainties in light of changing facts and circumstances, such as the progress of tax audits, and adjust themaccordingly.Because there are a number of estimates and assumptions inherent in calculating the various componentsof our income tax provision, future events such as changes in tax legislation, the geographic mix of earnings,completion of tax audits or earnings repatriation plans could have an effect on those estimates and our effectiveincome tax rate.AdvertisingAdvertising and marketing costs are expensed as incurred and are reflected in selling, general andadministrative expenses.Research and Development ExpendituresResearch and development expenditures are expensed as incurred and are recorded in selling, general andadministrative expenses in the consolidated statements of operations. Most of our manufacturing facilities havechemists and technicians on staff involved in product development, quality assurance, quality control and providingtechnical services to customers. Research, development and technical service efforts are conducted at variousfacilities. Our animal health research and development activities relate to: fermentation development and micro-biological strain improvement; vaccine development; chemical synthesis and formulation development; nutritionalspecialties development; and ethanol-related products.Stock-Based CompensationAll stock-based compensation to employees, including grants of stock options, is expensed over therequisite service period based on the grant date fair value of the awards. We determine the fair value of stock-basedawards using the Black-Scholes option-pricing model that uses both historical and current market data to estimatethe fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility,expected dividend yield and expected life of the options.Net Income per Share and Weighted Average SharesBasic net income per share is calculated by dividing net income by the weighted average number ofcommon shares outstanding during the reporting period.Diluted net income per share is calculated by dividing net income by the weighted average number ofcommon shares outstanding during the reporting period after giving effect to potential dilutive common sharesresulting from the assumed exercise of stock options and warrants. For the years ended June 30, 2016 and 2015, allcommon share equivalents were included in the calculation of diluted net income per share. For the year endedJune 30, 2014, because there was a net loss, 296,162 net shares of stock options and warrants were excluded fromthe calculation of diluted net income per share because of the anti-dilutive effect from the assumed exercise of theseoptions and warrants.88TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  For the Years Ended June 30201620152014​Net income (loss)$82,728$60,280$(3,127Weighted average number of shares–basic39,25438,96932,193Dilutive effect of stock options and warrant708846—Weighted average number of shares–diluted39,96239,81532,193Net income (loss) per sharebasic$2.11$1.55$(0.10diluted$2.07$1.51$(0.10New Accounting StandardsThe Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Improvements to EmployeeShare-Based Payment Accounting, amends Compensation—Stock Compensation (Topic 718) . This new standardsimplifies the accounting for share-based payments. The ASU requires that excess income tax benefits/deficienciesassociated with share-based payments be recognized in the provision for income taxes rather than in additional paid-in capital as currently required. The ASU also requires accounting for minimum statutory tax withholdingrequirements and forfeitures. ASU 2016-09 is effective for annual reporting periods beginning after December 15,2016. Early application is permitted and should be applied on a modified retrospective basis. We elected earlyapplication and recognized approximately $3,520 of income tax benefit in our 2016 consolidated statement ofoperations. The benefit previously was recorded as a component of deferred taxes, representing the cumulativewindfall tax benefit related to exercises of stock options.ASU 2016-02, Leases (Topic 842) , supersedes the current lease accounting guidance and requires anentity to recognize assets and liabilities for both financing and operating leases on the balance sheet and requiresadditional qualitative and quantitative disclosures regarding leasing arrangements. This ASU is effective for annualreporting periods beginning after December 15, 2018. We are evaluating the impact of adoption of this guidance onour consolidated financial statements.ASU 2015-17, Balance Sheet Classification of Deferred Taxes , requires entities to classify deferred taxassets and liabilities as noncurrent on the consolidated balance sheet. The guidance is effective for annual periodsbeginning after December 15, 2016. We elected early application of this ASU during the quarter endedDecember 31, 2015 to simplify the presentation of deferred tax assets and liabilities. We applied the guidanceprospectively; periods prior to December 31, 2015 were not adjusted. The application of this guidance did not havea material impact on our consolidated balance sheet.ASU 2015-12, Plan Accounting , modifies certain disclosure requirements and asset valuationmeasurements. Plan Investment Disclosures (Part II) eliminates the requirements to disclose individual investmentsthat represent 5 percent or more of net assets available for benefits and the net appreciation or depreciation forinvestments by general type. The net appreciation or depreciation in investments for the period still will be requiredto be presented in the aggregate. Measurement Date Practical Expedient (Part III) is applicable for fully benefit-responsive investment contracts only, and will allow for the contract value to be the only required method ofmeasurement for these contracts. Under the current guidance these contracts are required to be measured at fairvalue. The guidance is effective for annual periods beginning after December 15, 2015. Retrospective application ofthe provisions of this guidance will be required. We are evaluating the impact of adoption of this guidance on ourconsolidated financial statements.ASU 2015-11, Inventory (Topic 330) , requires entities to measure inventory at the lower of cost and netrealizable value (“NRV”). NRV is defined as “the estimated selling prices in the ordinary course of business, lessreasonably predictable costs of completion, disposal, and transportation.” The guidance is effective for annualperiods beginning after December 15, 2016, and interim periods within those years. We are evaluating the impact ofadoption of this guidance on our consolidated financial statements.ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) providesguidance regarding the treatment of cloud computing arrangements and if an arrangement includes a softwarelicense. ASU 2015-05 requires that if there is an element of a license in the arrangement89)))3. Statements of Operations—Additional InformationTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  that a company account for that software license element consistent with the treatment of a direct acquisition of asoftware license. Otherwise the arrangement is to be accounted for as a service contract. This guidance does notchange the existing guidance relevant to service contracts. This guidance is effective for annual reporting periodsbeginning after December 15, 2015, and interim periods within those years. We do not expect adoption of thisguidance to have a material effect on our consolidated financial statements.ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30) , intends to simplify presentation ofdebt issuance costs. The ASU requires debt issuance costs related to a recorded debt liability be presented in thebalance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the treatmentrequired of debt discounts. The current treatment is to record the costs of debt issuance as an asset. The provisionsof ASU 2015-03 are effective for annual reporting periods beginning after December 15, 2015, and interim periodswithin those years. The adoption of this guidance will not have a material effect on our consolidated financialstatements.ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ,requires management to assess an entity’s ability to continue as a going concern, within one year after the issuancedate of the financial statements, and to provide related footnote disclosures in certain circumstances. Managementwill need to consider relevant conditions that are known and reasonably knowable at the issuance date. Substantialdoubt exists if it is probable that the entity will be unable to meet its obligations within one year after the issuancedate. Under the new standard, the definition of substantial doubt incorporates a likelihood threshold of  ”probable”similar to the current use of that term in GAAP for loss contingencies. ASU 2014-15 will be effective for annualperiods ending after December 15, 2016. We do not expect adoption of this guidance to have a material effect onour consolidated financial statements.ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , establishes principles for therecognition of revenue from contracts with customers. The underlying principle is to identify the performanceobligations of a contract, allocate the revenue to each performance obligation and then to recognize revenue whenthe company satisfies a specific performance obligation of the contract. ASU 2015-14, Deferral of the EffectiveDate , amended ASU 2014-09, resulting in a one year deferral of the effective date. ASU 2016-08, Principal versusAgent Considerations ; ASU 2016-10, Identifying Performance Obligations and Licensing ; and ASU 2016-12,Narrow-Scope Improvements and Practical Expedients also amended ASU 2014-09 . The amendments are effectiveconcurrent with the effective date for ASU 2014-09 for annual periods beginning after December 15, 2017, andinterim periods within those years. We are evaluating the impact of adoption of this guidance on our consolidatedfinancial statements.For the Years Ended June 30201620152014​Interest expense, netTerm B Loan$11,631$11,717$2,419Revolving credit facility2,257918171Domestic senior credit facility——1,328Senior notes——24,281Mayflower and BFI term loans——3,051Acquisition-related accrued interest1,476613—Amortization of deferred financing fees and debt discount9899671,448Other495339383Interest expense16,84814,55433,081Interest (income)(256(249(119$16,592$14,305$32,96290)))4. Balance Sheets—Additional InformationTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  For the Years Ended June 30201620152014​Depreciation and amortizationDepreciation of property, plant and equipment$17,659$16,813$16,439Amortization of intangible assets5,5594,5604,897Amortization of other assets234231117$23,452$21,604$21,453Depreciation of property, plant and equipment includes amortization of capitalized software costs of $2,915, $2,905 and $2,657 during 2016, 2015 and 2014, respectively.Amortization of intangible assets is expected to be $5,833; $5,675; $5,640; $5,473; $5,024 and $30,872for 2017, 2018, 2019, 2020, and 2021 and thereafter, respectively.For the Years Ended June 30201620152014​Research and development expenditures$11,029$9,511$8,212As of June 3020162015​Accounts receivable, netTrade accounts receivable$128,743$114,477Allowance for doubtful accounts(4,953(3,378$123,790$111,099As of June 30201620152014​Allowance for doubtful accountsBalance at beginning of period$3,378$1,235$658Provision for bad debts1,7742,587226Effect of changes in exchange rates(132(218351Bad debt write-offs (recovery)(67(226—Balance at end of period$4,953$3,378$1,235As of June 3020162015​InventoriesRaw materials$51,369$40,012Work-in-process8,0747,617Finished goods108,248102,157$167,691$149,786As of June 3020162015​Property, plant and equipment, netLand$9,612$9,130Buildings and improvements64,26550,276Machinery and equipment196,480171,797270,357231,203Accumulated depreciation(143,034(126,789$127,323$104,414Certain facilities in Israel are on land leased for a nominal amount from the Israel Land Authority. Thelease expires in July 2062. Certain facilities in Israel are on leased land. The leases expire in November 2035.Net equipment under capital leases was $12 and $48 at June 30, 2016 and 2015, respectively, includingaccumulated depreciation of  $10 and $42, respectively.91))))))))TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Property, plant and equipment, net includes internal-use software costs, net of accumulated depreciation,of $5,180 and $6,747 at June 30, 2016 and 2015, respectively.Machinery and equipment includes construction-in-progress of $5,595 and $5,748 at June 30, 2016 and2015, respectively.As of June 30​Weighted- Average Useful Life (Years)20162015​Intangibles, netCostMedicated feed additive product registrations10$11,744$11,753Amprolium international marketing rights104,2924,292Customer relationships1310,60610,615Technology1366,96038,580Distribution agreements43,2753,298Trade names, trademarks and other52,7402,740In-process research and development1,5791,579101,19672,857Accumulated amortizationMedicated feed additive product registrations(10,846(10,669Amprolium international marketing rights(4,292(4,292Customer relationships(6,303(5,267Technology(13,877(9,741Distribution agreements(3,275(3,298Trade names, trademarks and other(2,508(2,309(41,101(35,576$60,095$37,281As of June 3020162015​Goodwill roll-forwardBalance at beginning of period$12,613$12,613MVP acquisition8,508—Balance at end of period$21,121$12,613As of June 3020162015​Other assetsAcquisition-related note receivable$5,000$5,000Equity method investments4,5804,725Insurance investments4,8334,788Deferred financing fees3,6024,335Deferred income taxes28,019221Deposits5,992532Other6,9775,681$59,003$25,282We evaluate our investments in equity method investees for impairment if circumstances indicate that thefair value of the investment may be impaired. The assets underlying a $4,076 equity investment are currently idled;we have concluded the investment is not currently impaired, based on expected future operating cash flows and/ordisposal value.92))))))))))))))5. AcquisitionsTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  As of June 3020162015​Accrued expenses and other current liabilitiesEmployee related$ 21,712$ 22,273Commissions and rebates3,7224,148Insurance related1,7801,368Professional fees3,5733,543Income and other taxes1,910817Deferred consideration on acquisitions1,2501,196Fair value of derivatives—1,542Other11,75610,576$45,703$45,463Other liabilitiesU.S. pension plan$21,371$18,573International retirement plans5,6004,893Supplemental retirement benefits, deferred compensation and other8,9847,443Long term and deferred income taxes8,20519,098Deferred consideration on acquisitions9,1727,266Other long term liabilities7,9818,375$61,313$65,648As of June 3020162015​Accumulated other comprehensive income (loss)Derivative instruments$2,655$(1,542Foreign currency translation adjustment(41,904(32,723Unrecognized net pension gains (losses)(30,977(19,884(Provision) benefit for income taxes on derivative instruments(1,54863(Provision) benefit for incomes taxes on long-term intercompanyinvestments8,1664,923(Provision) benefit for income taxes on pension gains (losses)1,823(2,437$(61,785$(51,600MVPIn January 2016, we purchased the assets of MVP Laboratories, Inc. (“MVP”). MVP was a developer,manufacturer and marketer of livestock vaccines vaccine, adjuvants and other products. We acquired all of theassets and assumed certain liabilities used in MVP’s business, including working capital, intellectual property,manufacturing equipment, real property and facilities. The purchase price of approximately $46,576 was paid incash primarily at closing. We incurred $618 in transaction expenses in connection with the acquisition, which areincluded in selling, general and administrative expenses.The acquisition was accounted for as a business combination in accordance with ASC 805, BusinessCombinations . Pro forma information giving effect to the acquisition has not been provided because the results arenot material to the consolidated financial statements. The fair values of the acquired assets and liabilities as of theacquisition date were:93)))))))))6. DebtTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Working capital, net$4,914Property, plant and equipment4,774Definite-lived intangible assets28,380Goodwill8,508Net assets acquired$46,576We may further refine the determination of certain assets during the measurement period. The definite-lived intangible assets relate to developed products and will be amortized over an estimated useful life of 15 years.The business is included in the Animal Health segment and the goodwill is deductible for tax purposes.MJBIn January 2015, we entered into multiple agreements with MJ Biologics, Inc. (“MJB”). The agreementsprovided for exclusivity to license, manufacture and distribute certain animal vaccine products, as well ascollaboration on the development of animal vaccines with MJB. Unless otherwise terminated due to material breachor bankruptcy, the agreements are anticipated to continue until the expected January 1, 2021 closing date (the“Closing” or the “Closing Date”) of the purchase of intellectual property and certain other assets comprising MJB’sbusiness relating to animal vaccines.Under the terms of the Purchase Agreement, we made an upfront payment to MJB of  $5,000 and agreedto pay MJB a “Closing Payment” at Closing in an amount to be calculated based on the worldwide net sales ofMJB’s vaccines for the twelve months immediately prior to the Closing Date. The Closing Payment will not be lessthan $10,000, subject to offset in certain limited circumstances. Acquisition-related accrued interest for thiscontingent liability was $1,476 for the year ended June 30, 2016.The acquisition was accounted for as a business combination in accordance with ASC 805. Pro formainformation giving effect to the acquisition was not provided because the results were not material to theconsolidated financial statements. We recorded intangible assets of  $9,156, including $7,577 of technology-relatedassets and $1,579 of IPR&D. The definite-lived intangible assets relate to developed products and will be amortizedover an estimated useful life of 15 years. We recorded a long-term liability of  $4,156, net of the upfront payment.The long-term liability is payable at the Closing Date and over a subsequent earn-out period. The Closing Paymentwill also include $5,040 (pro-rated on a monthly basis), conditional upon continuing service of a key employeethrough January 2018; this amount is being recognized as compensation expense over the service period.Acquisition-related accrued compensation was $1,680 for the year ended June 30, 2016. The business is included inthe Animal Health segment.Retirement of 9.25% Senior Notes, Mayflower Term Loan, BFI Term Loan and Domestic Senior Credit FacilityIn connection with our IPO, in April 2014, we retired a $24,000 term loan payable to Mayflower dueDecember 31, 2016, a $10,000 term loan payable to BFI Co., LLC (“BFI”), a Bendheim family investment vehicle,due August 1, 2014 and $36,000 of outstanding borrowings under our domestic senior credit facility. In addition, inMay 2014, we retired $300,000 of 9.25% senior notes, which were due July 1, 2018 (the “Senior Notes”). Primarilyas the result of the retirement of the Senior Notes, our consolidated statement of operations for the year endedJune 30, 2014 included a $22,771 loss on extinguishment of debt.Revolving Credit Facility and Term B LoanIn April 2014, Phibro, together with certain of its subsidiaries acting as guarantors, entered into a CreditAgreement (the “Credit Agreement”) with lenders from time to time party thereto. Under the Credit Agreement, thelenders agreed to extend credit to the Company in the form of  (i) a Term B loan in an94TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  aggregate principal amount equal to $290,000 (the “Term B Loan”) and (ii) a revolving credit facility in anaggregate principal amount of  $100,000 (the “Revolver,” and together with the Term B Loan, the “CreditFacilities”). The Revolver was undrawn at closing and contains a letter of credit facility. We issued the Term BLoan at 99.75% of par value.In January 2016, we amended the agreements governing our Credit Facilities to, among other things,increase the commitment available to us under the Revolver from $100,000 to $200,000. All other material termsand conditions were unchanged.Borrowings under the Credit Facilities bear interest based on a fluctuating rate equal to the sum of anapplicable margin and, at the Company’s election from time to time, either (1) a Eurocurrency rate determined byreference to LIBOR with a term as selected by the Company, of one day or one, two, three or six months (or twelvemonths or any shorter amount of time if consented to by all of the lenders under the applicable loan), or (2) a baserate determined by reference to the highest of  (a) the rate as publicly announced from time to time by Bank ofAmerica as its “prime rate,” (b) the federal funds effective rate plus 0.50% and (c) one-month LIBOR plus 1.00%.The Revolver has applicable margins equal to 1.50% or 1.75%, in the case of base rate loans, and 2.50% or 2.75%,in the case of LIBOR loans; the margins are based on the First Lien Net Leverage Ratio. The Term B Loan hasapplicable margins equal to 2.00%, in the case of base rate loans, and 3.00%, in the case of LIBOR loans. TheLIBOR rate on the Term B Loan is subject to a floor of 1.00%.Indebtedness under the Credit Facilities is collateralized by a first priority lien on substantially all assetsof Phibro and certain of our domestic subsidiaries. The Term B Loan requires, among other things, mandatoryquarterly principal payments of  $725 beginning September 2014. The maturity dates of the Revolver and the TermB Loan are April 2019 and April 2021, respectively.Pursuant to the terms of the Credit Agreement, the Credit Facilities are subject to various covenants that,among other things and subject to the permitted exceptions described therein, restrict us and our subsidiaries withrespect to: (i) incurring additional debt; (ii) making certain restricted payments or making optional redemptions ofother indebtedness; (iii) making investments or acquiring assets; (iv) disposing of assets (other than in the ordinarycourse of business); (v) creating any liens on our assets; (vi) entering into transactions with affiliates; (vii) enteringinto merger or consolidation transactions; and (viii) creating guarantee obligations; provided, however, that we arepermitted to pay distributions to stockholders out of available cash subject to certain annual limitations and so longas no default or event of default under the Credit Facilities shall have occurred and be continuing at the time suchdistribution is declared.The Revolver requires, among other things, the maintenance of a maximum consolidated first lien net debtto consolidated EBITDA leverage ratio, calculated on a trailing four quarter basis, and contains an accelerationclause should an event of default (as defined in the agreement) occur. The permitted maximum leverage ratio4.25:1.00. As of June 30, 2016, we were in compliance with the covenants of the Credit Facilities.As of June 30, 2016, we had $69,000 in borrowings under the Revolver and had outstanding letters ofcredit of  $14,242, leaving $116,758 available for borrowings and letters of credit under the Revolver. We obtainletters of credit in connection with certain regulatory and insurance obligations, inventory purchases and othercontractual obligations. The terms of these letters of credit are all less than one year.The weighted-average interest rate on the Revolver was 3.04% for the year ended June 30, 2016, and2.80% for the year ended June 30, 2015. The weighted-average interest rate on the Term B loan was 4.00% for theyears ended June 30, 2016 and 2015.Foreign Short-Term DebtOur Israel subsidiaries have aggregate credit facilities available of approximately $7.8 million (the “IsraelCredit Facility”). As of June 30, 2016, we had no outstanding borrowings or other commitments outstanding underthe Israel Credit Facility. Interest rate elections under the Israel Credit Facility are LIBOR plus 2.25% or Prime Rateplus 0.5%. The Israel Credit Facility matures in February 2017.957. Common Stock, Warrant, Preferred Stock and DividendsTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Long-Term DebtAs of June 3020162015​Term B loan due April 2021$284,200$287,100Capitalized lease obligations718284,207287,118Unamortized debt discount(497(600283,710286,518Less: current maturities(2,803(2,809$280,907$283,709Aggregate Maturities of Long-Term DebtFor the Years Ended June 302017$2,90720182,90020192,90020202,9002021272,600Total$284,207Preferred stock and common stock at June 30, 2016 and 2015 were:20162015​​20162015​As of June 30Authorized SharesPar valueIssued and outstanding shares​Preferred stock16,000,00016,000,000$0.0001——Common stock−Class A300,000,000300,000,000$0.000118,519,75717,747,793Common stock−Class B30,000,00030,000,000$0.000120,887,81121,320,275Common Stock and Common Stock WarrantGeneralExcept as otherwise provided by our amended and restated certificate of incorporation or applicable law,the holders of our Class A common stock and Class B common stock shall vote together as a single class. There areno cumulative voting rights.Holders of our Class A common stock and Class B common stock are entitled to receive dividends whenand if declared by our Board of Directors out of funds legally available therefore, subject to any statutory orcontractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed bythe terms of any outstanding preferred stock.Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in fullof all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, ifany, the holders of our Class A common stock and Class B common stock will be entitled to receive our remainingassets available for distribution.Class A Common StockHolders of our Class A common stock are entitled to one vote for each share held of record on all matterssubmitted to a vote of stockholders.Holders of our Class A common stock do not have preemptive, subscription or conversion rights. OurClass A common stock is not convertible and there are no redemption or sinking fund provisions96))))8. Stock Option PlanTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  applicable to our Class A common stock. Unless our Board of Directors determines otherwise, we will issue all ofour capital stock in uncertificated form.Class B Common StockHolders of our Class B common stock are entitled to 10 votes for each share held of record on all matterssubmitted to a vote of stockholders. BFI holds all of our outstanding Class B common stock.Holders of our Class B common stock do not have preemptive or subscription rights. There are noredemption or sinking fund provisions applicable to our Class B common stock.Each share of Class B common stock is convertible at any time at the option of the holder into one shareof Class A common stock. In addition, each share of Class B common stock will convert automatically into oneshare of Class A common stock upon any transfer, whether or not for value, except for certain transfers by andamong BFI, its affiliates and certain Bendheim family members, as described in the amended and restated certificateof incorporation. Once transferred and converted into Class A common stock, the Class B common stock will not bereissued. In addition, all shares of Class B common stock will automatically convert to shares of Class A commonstock when the outstanding shares of Class B common stock and Class A common stock held by BFI, its affiliatesand certain Bendheim family members, together, is less than 15% of the total outstanding shares of Class Acommon stock and Class B common stock, taken as a single class.Holders of our Class B common stock have the right to require us to register the sales of their sharesunder the Securities Act, under the terms of an agreement between us and the holders.Class B Common Stock WarrantOn August 1, 2014, a common stock purchase warrant for the purchase of 386,750 shares of Class Bcommon stock, held by BFI, was automatically exercised. BFI paid the exercise price of  $11.83 per share on acashless basis, resulting in a net issuance of 163,675 shares of Class B common stock to BFI.Preferred StockWe do not have any preferred stock outstanding. Our Board of Directors has the authority to issue sharesof preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or moreseries and to fix the designations, preferences, privileges, and restrictions of preferred stock, including dividendrights, conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms, and thenumber of shares constituting any series or the designation of any series to the fullest extent permitted by theGeneral Corporation Law of the State of Delaware.DividendsWe declared and paid quarterly cash dividends totaling $15,708 for the year ended June 30, 2016, toholders of our Class A common stock and Class B common stock.In March 2008, our Board of Directors and stockholders adopted the 2008 Incentive Plan (the “IncentivePlan”). The Incentive Plan provides directors, officers, employees and consultants to the Company withopportunities to purchase common stock pursuant to options that may be granted, and receive grants of restrictedstock and other stock-based awards granted, from time to time by the Board of Directors or a committee approvedby the Board. The Incentive Plan provides for grants of stock options, stock awards and other incentives for up to6,630,000 shares. There were 5,131,620 Class A shares available for grant pursuant to the Incentive Plan as ofJune 30, 2016.In February 2009 and April 2013, PAHC’s Compensation Committee awarded stock options with anexercise price of $11.83 per share, pursuant to the Incentive Plan. In connection with the grants, we obtained thirdparty valuation reports and determined that the exercise price per share was not less than the979. Related Party Transactions10. Employee Benefit PlansTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  fair value of the common stock at the grant date. The weighted-average grant-date fair value of stock options was$0.99. The awards granted were non-qualified stock options that vested at various dates through March 2014. Theoptions expire in February 2019. All stock options are exercisable for Class A common stock.The Company recognized compensation expense for the options over the vesting period in selling, generaland administrative expenses. Expense related to stock options for 2016, 2015 and 2014, was $0, $0 and $73,respectively. Stock option activity was:OptionsSharesWeighted- Average Exercise Price Per Share​Outstanding, June 30, 20151,385,540$11.83Exercised(339,500$11.83Outstanding, June 30, 20161,046,040$11.83Exercisable, June 30, 20161,046,040$11.83At June 30, 2016, exercisable options had a weighted-average remaining contractual life of 2.7 years andhad a $7,144 aggregate intrinsic value, based on the market price as of that date, less the exercise price.The Mayflower term loan and the BFI term loan were related party transactions for the periodsoutstanding. For additional details, see “—Debt.”Certain relatives of Jack C. Bendheim provided services to us as employees or consultants and receivedaggregate compensation and benefits of approximately $1,910, $1,927 and $1,764 during 2016, 2015 and 2014. Mr.Bendheim has sole authority to vote shares of our stock owned by BFI Co., LLC, an investment vehicle of theBendheim family.The Company maintains a noncontributory defined benefit pension plan for all domestic nonunionemployees employed on or prior to December 31, 2013, who meet certain requirements of age, length of service andhours worked per year. Plan benefits are based upon years of service and average compensation, as defined. Themeasurement dates for the pension plan were as of June 30, 2016, 2015 and 2014.Changes in the projected benefit obligation, plan assets and funded status were:For the Years Ended June 3020162015​Change in projected benefit obligationProjected benefit obligation at beginning of year$62,605$57,599Service cost2,9392,954Interest cost2,8932,618Benefits paid(1,271(1,116Actuarial (gain) loss8,498550Projected benefit obligation at end of year$75,664$62,60598)))TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  For the Years Ended June 3020162015​Change in plan assetsFair value of plan assets at beginning of year$44,032$39,581Actual return on plan assets(1,202(1,248Employer contributions12,7346,815Benefits paid(1,271(1,116Fair value of plan assets at end of year$54,293$44,032Funded status at end of year$(21,371$(18,573The funded status is included in other liabilities in the consolidated balance sheets. At June 30, 2016 and2015, the accumulated benefit obligation was $68,403 and $56,904, respectively.The Company expects to contribute approximately $5,851 to the pension plan during 2017. We seek tomaintain an asset balance that meets the long-term funding requirements identified by actuarial projections whilealso satisfying ERISA fiduciary responsibilities.Accumulated other comprehensive (income) loss related to the pension plan was:For the Years Ended June 3020162015​Accumulated Other Comprehensive (Income) Loss Related toPension PlanBalance at beginning of period$19,884$16,663Amortization of net actuarial loss and prior service costs(1,784(1,405Current period net actuarial loss12,8774,626Net change11,0933,221Balance at end of period$ 30,977$ 19,884Amortization of unrecognized net actuarial loss and prior service costs will be approximately $2,862during 2017.Net periodic pension expense was:For the Years Ended June 30201620152014​Service cost−benefits earned during the year$2,939$2,954$2,457Interest cost on benefit obligation2,8932,6182,333Expected return on plan assets(3,177(2,828(2,334Amortization of net actuarial loss and prior service costs1,7841,405904Net periodic pension expense$4,439$4,149$3,360Significant actuarial assumptions for the plan were:For the Years Ended June 30201620152014Discount rate for service and interest4.6%​4.5%​5.0%​Expected rate of return on plan assets6.1%​6.7%​7.0%​Rate of compensation increase3.0%–6.0%​3.0%–6.0%​3.0%–4.5%​Discount rate for year-end benefit obligation3.9%​4.6%​4.5%​The plan used the Aon Hewitt AA Bond Universe as a benchmark for its discount rate as of June 30,2016, 2015 and 2014. The discount rate is determined by matching the pension plan’s timing and amount ofexpected cash outflows to a bond yield curve constructed from a population of AA-rated corporate bond issues thatare generally non-callable and have at least $250 million par value outstanding. From this, the discount rate thatresults in the same present value is calculated.99)))))))))))(1) The global asset allocation/risk parity category consists of a variety of asset classes including, but not limitedto, global bonds, global equities, real estate and commodities.TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Estimated future benefit payments, including benefits attributable to future service, are:For the Years Ended June 302017$1,93420182,19620192,48020202,78020213,0812022–202619,684The plan’s target asset allocations for 2017 and the weighted-average asset allocation of plan assets as ofJune 30, 2016 and 2015 are:Target AllocationPercentage of Plan Assets​For the years ended June 30201720162015​Debt securities10%–35%​1919Equity securities25%–55%​4335Global asset allocation/risk parity 15%–35%​2635Other0%–25%​1211The expected long-term rate of return for the plan’s total assets is generally based on the plan’s asset mix.In determining the rate to use, we consider the expected long-term real returns on asset categories, expectations forinflation, estimates of the effect of active management and actual historical returns.The investment policy and strategy is to earn a long term investment return sufficient to meet theobligations of the plans, while assuming a moderate amount of risk in order to maximize investment return. In orderto achieve this goal, assets are invested in a diversified portfolio consisting of equity securities, debt securities, andother investments in a manner consistent with ERISA’s fiduciary requirements.The fair values of the Company’s plan assets by asset category were:Fair Value Measurements UsingAs of June 30, 2016Level 1Level 2Level 3Total​Cash and cash equivalents$713$—$—$713Common-collective fundsGlobal large cap equities—11,9636,59618,559Fixed income securities—7,583—7,583Global asset allocations/risk parity—4,878—4,878Mutual fundsGlobal Equities4,611——4,611Fixed income securities1,366——1,366Global asset allocations/risk parity2,667——2,667OtherFixed income securities——1,4341,434Global asset allocations/risk parity——6,5546,554Other——5,9295,929$9,357$24,424$20,513$54,294100%%%%(1)%%%%• Cash and cash equivalents are valued at $1 per unit;• Common-collective funds are determined based on current market values of the underlying assets ofthe fund;• Mutual funds and foreign currency deposits are valued using quoted market prices in active markets;and• For Level 3 managed assets, business appraisers use a combination of valuations and appraisalmethodologies, as well as a number of assumptions to create a price that brokers evaluate. For Level3 non-managed assets, pricing is provided by various sources, such as issuer or investment manager.TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Fair Value Measurements UsingAs of June 30, 2015​​Level 1​​Level 2​​Level 3​​Total​​​​​​​​​Cash and cash equivalents$129$—$—$129Common-collective fundsGlobal large cap equities—10,995—10,995Fixed income securities—8,565—8,565Global asset allocations/risk parity—6,685—6,685Mutual fundsGlobal equities4,366——4,366Global asset allocations/risk parity4,303——4,303OtherGlobal asset allocations/risk parity——4,2514,251Other——4,7384,738$8,798$26,245$8,989$44,032The table below provides a summary of the changes in the fair value of Level 3 assets:Change in Fair Value Level 3 assets20162015​Balance at beginning of period$8,989$10,031Redemptions(3,656(2,026Purchases15,6951,280Change in fair value(515(296Balance at end of period$20,513$8,989The following outlines the valuation methodologies used to estimate the fair value of our pension planassets:Our consolidated balance sheets include other liabilities of  $14,898 and $12,438 as of June 30, 2016 and2015, respectively, for other retirement benefits, including international retirement plans, supplemental retirementbenefits and other employee benefit plans. Expense under these plans was $5,239, $3,286, and $3,832 for 2016,2015 and 2014, respectively.We provide a 401(k) retirement savings plan, under which United States employees may make pre-taxcontributions. We make a matching contribution equal to 100% of the first 1% of an employee’s contribution andmake a matching contribution equal to 50% of the next 5% of an employee’s contribution. Employees hired on orafter January 1, 2014, receive a non-elective Company contribution of 3% of compensation and are eligible toreceive an additional discretionary contribution of up to 4% of compensation, depending on the employee’s age andyears of service, provided that such payments comply with mandatory non-discrimination testing. Participants arefully vested in employer contributions after two years of service. Our contribution expense was $2,309, $1,583, and$1,281 in 2016, 2015 and 2014, respectively.101))))11. Income TaxesTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Subsequent EventsIn July 2016, we amended the domestic noncontributory defined benefit pension plan to eliminate creditfor future service and compensation increases, effective as of September 30, 2016. The amendment will result in anestimated $6,700 pension curtailment gain. The consolidated financial statements for the quarter endedSeptember 30, 2016, will include the gain in other comprehensive income with an offsetting reduction in theliability for pension benefits included in other liabilities. Effective October 1, 2016, the 401(k) retirement savingsplan will include, for all domestic employees, a non-elective Company contribution of 3% of compensation and anadditional discretionary contribution of up to 4% of compensation, depending on the employee’s age and years ofservice.In August 2016, we offered a lump sum payment option to certain pension plan participants who are nolonger active employees and who do not currently receive benefits. We expect to recognize a partial settlement ofthe pension plan that will result in a charge to the consolidated statement of operations for the quarter endingDecember 31, 2016. Depending on the participants who elect the option, we estimate the expense will be up to$3,000.Income (loss) before income taxes was:For the Years Ended June 30201620152014​Domestic$2,027$15,937$(26,226Foreign74,73462,82632,534Income (loss) before income taxes$76,761$78,763$6,308Components of the provision for income taxes were:For the Years Ended June 30201620152014​Current provision (benefit):Federal$(2,889$(468$(673State and local(474(48(268Foreign20,16813,8689,087Total current provision16,80513,3528,146Deferred provision (benefit):Federal(2,9856,157(1,632State and local9111,311(1,877Foreign(9895,933966Change in valuation allowance–domestic(19,588(7,4683,509Change in valuation allowance–foreign(121(802323Total deferred provision(22,7725,1311,289Provision (benefit) for income taxes$(5,967$18,483$9,435During 2016, based on continued domestic profitability, we concluded that it was more likely than notthat the value of domestic deferred tax assets would be realized, and it was no longer necessary to maintain avaluation allowance. Accordingly we released our domestic valuation allowance. We continue to maintain valuationallowances against deferred tax assets related to certain foreign jurisdictions. We review the realizability of ourdeferred tax assets when circumstances indicate a review is required.During 2016, we elected early application of ASU 2016-09, Improvements to Employee Share-BasedPayment Accounting . Under the standard, the 2016 provision (benefit) for income taxes includes $3,520 of deferredincome tax benefit arising from the exercise of employee stock options.102)))))))))))))))))TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Reconciliations of the federal statutory rate to the Company’s effective tax rate were:For the Years Ended June 30201620152014​Federal income tax rate35.035.035.0State and local taxes, net of federal benefit0.20.2(0.9Change in federal valuation allowance(27.8(7.843.6Foreign income tax rates and change in foreignvaluation allowance(5.5(2.2(67.2Foreign withholding tax0.10.336.5Foreign incentive tax rates(4.5(4.1(30.1Domestic tax on foreign income2.70.913.6Change in liability for uncertain tax positions(4.91.5(34.9Repatriation of foreign earnings——138.7Permanent items1.5(0.618.8Exercise of employee stock options(4.6——Other—0.3(3.5Effective tax rate(7.823.5149.6We have not provided for United States or additional foreign taxes on approximately $176,281 ofundistributed earnings of foreign subsidiaries, which earnings have been or are intended to be indefinitelyreinvested. It is not practicable at this time to determine the amount of income tax liability that would result shouldsuch earnings be repatriated. Taxes are not provided for foreign currency translation adjustments relating toinvestments in international subsidiaries that will be held indefinitely.During 2014, we reviewed the ongoing cash needs of our foreign subsidiaries and determined $25,000was not needed for reinvestment. Based on this review, we changed our indefinite reinvestment assertion solely withrespect to those earnings and recorded $3,160 of foreign withholding taxes in the provision for income taxes. Ourdomestic operations received a $25,000 repatriation of foreign earnings in 2014.The tax effects of significant temporary differences that comprise deferred tax assets and liabilities were:As of June 3020162015​Deferred tax assets:Employee related accruals$12,603$9,778Inventory2,5733,889Environmental remediation2,2082,155Net operating loss carry forwards–domestic13,76813,641Net operating loss carry forwards–foreign4,3464,127Other7,5665,41843,06439,008Valuation allowance(4,614(26,62238,45012,386Deferred tax liabilities:Property, plant and equipment and intangible assets(9,725(11,088Other(1,956(461(11,681(11,549Net deferred tax asset$26,769$837103%%%)))))))))))))))%%%))))))))TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  Deferred taxes are included in the consolidated balance sheets as follows:As of June 3020162015​Prepaid expenses and other current assets$—$7,456Other assets28,019222Other liabilities(1,250(6,841$26,769$837During 2016, we elected early application of ASU 2015-17, Balance Sheet Classification of DeferredTaxes, which requires classification of all deferred tax assets and liabilities as non-current in the consolidatedbalance sheet. We applied the guidance prospectively; periods prior to December 31, 2015 were not adjusted.The valuation allowances for deferred tax assets were:As of June 30201620152014​Balance at beginning of period$26,622$32,892$27,753Provision for income taxes(19,709(6,2705,139Net operating loss utilization(2,299——Balance at end of period$4,614$26,622$32,892The valuation allowance for deferred tax assets as of June 30, 2016, is solely related to foreignjurisdictions.The Company has approximately $33,302 of domestic federal net operating loss carry forwards thatexpire in 2028 through 2035 and approximately $42,895 of state net operating loss carry forwards that will expire in2016 through 2035. In addition, the Company has approximately $13,243 of foreign net operating loss carryforwards, most of which are in jurisdictions that have no expiration.As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our taxpositions will be sustained upon audit. Tax liabilities associated with uncertain tax positions represent unrecognizedtax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amountstaken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of theseunrecognized tax benefits, if recognized, would impact our effective income tax rate. The reconciliation of thebeginning and ending amounts of gross unrecognized tax benefits follows:As of June 30201620152014​Unrecognized tax benefits–beginning of period$8,078$7,420$12,261Tax position changes–prior periods188(241,276Tax position changes–current period4721,9451,036Settlements with tax authorities——(2,215Lapse of statute of limitations(3,700(907(5,157Translation(92(356219Unrecognized tax benefits–end of period4,9468,0787,420Interest and penalties–end of period3081,3261,344Total liabilities related to uncertain tax positions$5,254$9,404$8,764We recognize interest and penalties associated with uncertain tax positions as a component of theprovision for income taxes. We recognized interest and penalties expense (income) of $(980), $66 and $(661) for2016, 2015 and 2014, respectively.During 2017, we potentially will reverse $658 of uncertain tax positions as a result of the lapse of thestatute of limitations, with a corresponding benefit to the provision for income taxes.104))))))))))))• U.S. federal and significant states, through June 30, 2006;• Brazil, through December 31, 2010;• Israel, through June 30, 2011 for certain subsidiaries and through June 30, 2012 for certainsubsidiaries.12. Commitments and ContingenciesTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  During 2016, one of our international subsidiaries was subject to an income tax examination for the years2013 and 2014. The examination is ongoing and is expected to be completed during 2017. We are unable todetermine the impact, if any, of the results of the examination on the provision for income taxes.During 2014, certain of our foreign subsidiaries reached a settlement regarding tax examinations, resultingin a $2,614 payment to the tax authorities, a $572 reduction in our provision for income taxes and a $2,215reduction in previously unrecognized tax benefits.Income tax returns for the following periods are no longer subject to examination by the relevant taxauthorities:LeasesWe lease land and office, warehouse and manufacturing equipment and facilities for minimum annualrentals, plus certain cost escalations. We record rent expense on a straight line basis over the term of the lease. AtJune 30, 2016, we had the following future minimum lease commitments:For the Years Ended June 30Capital leasesNon-cancellable operating leases​2017$7$4,6652018—4,2002019—3,6322020—3,4252021—3,002Thereafter—2,793Total minimum lease payments$7$21,717Rent expense under operating leases was $8,131, $7,240, and $6,958 for 2016, 2015 and 2014,respectively.EnvironmentalOur operations and properties are subject to extensive federal, state, local and foreign laws andregulations, including those governing pollution; protection of the environment; the use, management, and release ofhazardous materials, substances and wastes; air emissions; greenhouse gas emissions; water use, supply anddischarges; the investigation and remediation of contamination; the manufacture, distribution, and sale of regulatedmaterials, including pesticides; the importing, exporting and transportation of products; and the health and safety ofour employees (collectively, “Environmental Laws”). As such, the nature of our current and former operationsexposes us to the risk of claims with respect to such matters, including fines, penalties, and remediation obligationsthat may be imposed by regulatory authorities. Under certain circumstances, we might be required to curtailoperations until a particular problem is remedied. Known costs and expenses under Environmental Laws incidentalto ongoing operations, including the cost of litigation proceedings relating to environmental matters, are includedwithin operating results. Potential costs and expenses may also be incurred in connection with the repair or upgradeof facilities to meet existing or new requirements under Environmental Laws or to investigate or remediate potentialor actual contamination and from time to time we establish reserves for such contemplated investigation andremediation costs. In many instances, the ultimate costs under Environmental Laws and the time period duringwhich such costs are likely to be incurred are difficult to predict.105TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  While we believe that our operations are currently in material compliance with Environmental Laws, wehave, from time to time, received notices of violation from governmental authorities, and have been involved in civilor criminal action for such violations. Additionally, at various sites, our subsidiaries are engaged in continuinginvestigation, remediation and/or monitoring efforts to address contamination associated with historic operations ofthe sites. We devote considerable resources to complying with Environmental Laws and managing environmentalliabilities. We have developed programs to identify requirements under, and maintain compliance withEnvironmental Laws; however, we cannot predict with certainty the effect of increased and more stringentregulation on our operations, future capital expenditure requirements, or the cost of compliance.The nature of our current and former operations exposes us to the risk of claims with respect toenvironmental matters and we cannot assure we will not incur material costs and liabilities in connection with suchclaims. Based upon our experience to date, we believe that the future cost of compliance with existingEnvironmental Laws, and liabilities for known environmental claims pursuant to such Environmental Laws, will nothave a material adverse effect on our financial position, results of operations, cash flows or liquidity.The United States Environmental Protection Agency (the “EPA”) is investigating and planning for theremediation of offsite contaminated groundwater that has migrated from the Omega Chemical CorporationSuperfund Site (“Omega Chemical Site”), which is upgradient of Phibro-Tech’s Santa Fe Springs, Californiafacility. The EPA has named Phibro-Tech and certain other subsidiaries of PAHC as potentially responsible parties(“PRPs”) due to groundwater contamination from Phibro-Tech’s Santa Fe Springs facility that has allegedlycommingled with contaminated groundwater from the Omega Chemical Site. In September 2012, the EPA notifiedapproximately 140 PRPs, including Phibro-Tech and the other subsidiaries, that they have been identified aspotentially responsible for remedial action for the groundwater plume affected by the Omega Chemical Site and forEPA oversight and response costs. Phibro-Tech contends that groundwater contamination at its site is due tohistorical operations that pre-date Phibro-Tech and/or contaminated groundwater that has migrated from upgradientproperties. In addition, a successor to a prior owner of the Phibro-Tech site has asserted that PAHC and Phibro-Techare obligated to provide indemnification for its potential liability and defense costs relating to the groundwaterplume affected by the Omega Chemical Site. Phibro-Tech has vigorously contested this position and has assertedthat the successor to the prior owner is required to indemnify Phibro-Tech for its potential liability and defensecosts. Furthermore, a nearby property owner has filed a complaint in the Superior Court of the State of Californiaagainst many of the PRPs allegedly associated with the groundwater plume affected by the Omega Chemical Site(including Phibro-Tech) for alleged contamination of groundwater underneath its property, and a group ofcompanies that sent chemicals to the Omega Chemical Site for processing and recycling has filed a complaint underCERCLA, RCRA and the common law public nuisance doctrine in the United States District Court for the CentralDistrict of California against many of the PRPs allegedly associated with the groundwater plume affected by theOmega Chemical Site (including Phibro-Tech) for contribution toward past and future costs associated with theinvestigation and remediation of the groundwater plume affected by the Omega Chemical Site. Due to the ongoingnature of the EPA’s investigation and Phibro-Tech’s dispute with the prior owner’s successor, at this time we cannotpredict with any degree of certainty what, if any, liability Phibro-Tech or the other subsidiaries may ultimately havefor investigation, remediation and the EPA oversight and response costs associated with the affected groundwaterplume.Based upon information available, to the extent such costs can be estimated with reasonable certainty, weestimated the cost for further investigation and remediation of identified soil and groundwater problems at operatingsites, closed sites and third-party sites, and closure costs for closed sites, to be approximately $7,024 and $6,827 atJune 30, 2016 and 2015, respectively, which is included in current and long-term liabilities on the consolidatedbalance sheets. However, future events, such as new information, changes in existing Environmental Laws or theirinterpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additionalexpenditures or liabilities that could be material. For all purposes of the discussion under this caption and elsewherein this report, it should be noted that we take and have taken the position that neither PAHC nor any of oursubsidiaries is liable for environmental or10613. DerivativesTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  other claims made against one or more of our other subsidiaries or for which any of such other subsidiaries mayultimately be responsible.Claims and LitigationPAHC and its subsidiaries are party to a number of claims and lawsuits arising out of the normal course ofbusiness including product liabilities, payment disputes and governmental regulation. Certain of these actions seekdamages in various amounts. In many cases, such claims are covered by insurance. We believe that none of theclaims or pending lawsuits, either individually or in the aggregate, will have a material adverse effect on ourfinancial position, results of operations, cash flows or liquidity.Employment and Severance AgreementsWe have entered into employment agreements with certain executive management and other employeesthat specify severance benefits of up to 15 months of the employee’s compensation.We monitor our exposure to commodity prices and foreign currency exchange rates and use derivatives tomanage certain of these risks. These derivatives generally have an expiration/maturity of two years or less and areintended to hedge cash flows related to the purchase of inventory. We designate derivatives as a hedge of aforecasted transaction or of the variability of the cash flows to be received or paid in the future related to arecognized asset or liability (cash flow hedge). We record the portion of the changes in the value of the derivative,related to a hedged asset or liability (the effective portion), in accumulated other comprehensive income (loss). Asthe hedged item is sold, we recognize the gain or loss recorded in accumulated other comprehensive income (loss)to the consolidated statements of operations on the same line where the hedged item is charged when released/sold.We immediately recognize in the consolidated statements of operations in the same line as the hedged item, theportion of the changes in fair value of derivatives used as cash flow hedges that is not offset by changes in theexpected cash flows related to a recognized asset or liability (the ineffective portion).We routinely assess whether the derivatives used to hedge transactions are effective. If we determine aderivative ceases to be an effective hedge, we discontinue hedge accounting in the period of the assessment for thatderivative, and immediately recognize any unrealized gains or losses related to the fair value of that derivative in theconsolidated statements of operations.We record derivatives at fair value in the consolidated balance sheets. For additional details regarding fairvalue, see “—Fair Value Measurements.”The following table details the Company’s outstanding derivatives that are designated and effective ascash flow hedges as of June 30, 2016:InstrumentHedgeNotional amount at June 30, 2016Fair value as of June 30,20162015OptionsBrazilian Real calls​R$ 117,000​$3,027$493OptionsBrazilian Real puts​R$ 117,000​$(372$(2,035The unrecognized gains (losses) at June 30, 2016, are unrealized and will fluctuate based on futureexchange rates until the derivative contracts mature. Other comprehensive income (loss) included $4,197 ofunrecognized gains for the twelve months ended June 30, 2016. Accumulated other comprehensive income (loss) atJune 30, 2016 included $2,655 of net unrecognized gains on derivative instruments; we anticipate that $7 of thosegains will be recognized in earnings within the next twelve months. We realized losses of $2,733 related to contractsthat matured during 2016, and recorded the amount as a component of inventory. Of this amount recorded asinventory, we recognized $1,205 of losses in earnings, as a component of cost of goods sold, during 2016. Weanticipate $1,528 of realized losses will be recognized in107))14. Fair Value MeasurementsLevel 1— Quoted prices in active markets for identical assets or liabilities.Level 2— Significant observable inputs, other than quoted prices included within Level 1, that areobservable for the asset or liability, either directly or indirectly through corroboration withobservable market data.Level 3— Unobservable inputs for which there is little or no market data available, and that are significantto the overall fair value measurement, are employed that require the reporting entity to developits own assumptions.TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  the consolidated statement of operations in 2017. We recognize gains (losses) related to these derivative instrumentsas a component of cost of goods sold at the time the hedged item is sold. We hedge forecasted transactions forperiods not exceeding twenty-four months.Fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability.Fair value is a market-based measurement that should be determined using assumptions that market participantswould use in pricing an asset or liability. Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level withinthe hierarchy of a particular asset or liability depends on the inputs used in the valuation as of the measurement date,notably the extent to which the inputs are market-based (observable) or internally derived (unobservable).Observable inputs are inputs that market participants would use in pricing the asset or liability developed based onmarket data obtained from independent sources. Unobservable inputs are inputs based on a company’s ownassumptions about market participant assumptions developed based on the best information available in thecircumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:In assessing the fair value of financial instruments at June 30, 2016 and 2015, we used a variety ofmethods and assumptions that were based on estimates of market conditions and risks existing at the time.Current Assets and LiabilitiesWe consider the carrying amounts of current assets and current liabilities to be representative of their fairvalue because of the current nature of these items.Letters of CreditWe obtain letters of credit in connection with certain regulatory and insurance obligations, inventorypurchases and other contractual obligations. The carrying values of these letters of credit are considered to berepresentative of their fair values because of the nature of the instruments.Long Term DebtWe record the Term B Loan and the Revolver at book value in our consolidated financial statements. Webelieve the carrying value of the Term B Loan is approximately equal to the fair value, based on quoted brokerprices that are Level 2 inputs. We believe the carrying value of the Revolver is approximately equal to the fair valuedue to the variable nature of the instrument.Deferred Consideration on AcquisitionsWe estimated the fair value of the deferred consideration on acquisitions using the income approach,based on the Company’s current sales forecast related to the acquired business.10815. Business SegmentsTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  DerivativesWe determine the fair value of derivative instruments based upon pricing models using observable marketinputs for these types of financial instruments, such as spot and forward currency translation rates.As of June 3020162015​Level 1Level 2Level 3Level 1Level 2Level 3​Derivatives$—$2,655$—$—$(1,542$—Deferred consideration onacquisitions——6,745——5,465The table below provides a summary of the changes in the fair value of Level 3 assets:20162015Balance at beginning of period$5,465$1,015MJB Acquisition—4,769Acquisition-related accrued interest1,476216Payment and other(196(535Balance at end of period$6,745$5,465For a detailed discussion on the fair value of our pension plan assets and the applicable hierarchy for thevarious components, see “—Employee Benefit Plans.”The Animal Health segment manufactures and markets products for the poultry, swine, cattle, dairy,aquaculture and ethanol markets. The business includes net sales of medicated feed additives and other relatedproducts, nutritional specialty products and vaccines. The Mineral Nutrition segment manufactures and marketstrace minerals for the cattle, swine, poultry and pet food markets. The Performance Products segment manufacturesand markets a variety of products for use in the personal care, automotive, industrial chemical and chemical catalystindustries.We evaluate performance and allocate resources based on the Animal Health, Mineral Nutrition andPerformance Products segments. Certain of our costs and assets are not directly attributable to these segments. Wedo not allocate such items to the principal segments because they are not used to evaluate their operating results orfinancial position. Corporate costs include the departmental operating costs of the Board of Directors, the Chairman,President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Senior VicePresident and General Counsel, the Senior Vice President of Human Resources, the Chief Information Officer andthe Executive Vice President of Corporate Strategy. Costs include the executives and their staffs and includecompensation and benefits, outside services, professional fees and office space. Assets include cash and cashequivalents, debt issue costs, all income tax related assets and certain other assets.We evaluate performance of our segments based on Adjusted EBITDA. We define Adjusted EBITDA asincome before income taxes plus (a) interest expense, net, (b) depreciation and amortization, (c) (income) loss from,and disposal of, discontinued operations, (d) other expense or less other income, as separately reported on ourconsolidated statements of operations, including foreign currency gains and losses and loss on extinguishment ofdebt, and (e) certain items that we consider to be unusual, non-operational or non-recurring.The accounting policies of our segments are the same as those described in the summary of significantaccounting policies included herein.109)))TABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  For the Years Ended June 30201620152014​Net salesMFAs and other$339,916$335,735$326,568Nutritional Specialties94,08481,70263,068Vaccines52,14053,36341,417Animal Health486,140470,800431,053Mineral Nutrition216,685227,102201,599Performance Products48,70150,68959,262Total segments$751,526$748,591$691,914Depreciation and amortizationAnimal Health$17,149$15,430$15,484Mineral Nutrition2,4672,4682,368Performance Products807577412Total segments$20,423$18,475$18,264Adjusted EBITDAAnimal Health$127,442$120,259$100,280Mineral Nutrition14,97114,42911,636Performance Products9702,6464,626Total segments$143,383$137,334$116,542Reconciliation of income before income taxes toAdjusted EBITDAIncome before income taxes$76,761$78,763$6,308Interest expense, net16,59214,30532,962Depreciation and amortization – Total segments20,42318,47518,264Depreciation and amortization – Corporate3,0293,1293,189Corporate costs29,32327,31525,945Acquisition-related cost of goods sold2,566——Acquisition-related accrued compensation1,680747—Acquisition-related transaction costs618——Loss on insurance claim——5,350Foreign currency (gains) losses, net(7,609(5,4001,753Loss on extinguishment of debt——22,771Adjusted EBITDA – Total segments$143,383$137,334$116,542As of June 3020162015​Identifiable assetsAnimal Health$444,751$349,345Mineral Nutrition57,93958,722Performance Products21,55721,888Total segments524,247429,955Corporate86,12663,363Total$610,373$493,318110))16. Geographic InformationTABLE OF CONTENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)  The Animal Health segment includes all goodwill. The Animal Health segment includes advances to andinvestment in equity method investee of  $4,076 and $4,364 as of June 30, 2016 and 2015, respectively. ThePerformance Products segment includes an investment in equity method investee of $504 and $361 as of June 30,2016 and 2015, respectively.The following is information about our geographic operations. Information is attributed to the geographicareas based on the locations of our subsidiaries.For the Years Ended June 30201620152014Net salesUnited States$473,247$475,942$435,414Israel89,99993,45989,739Latin America and Canada105,66799,57884,775Europe and Africa36,17736,39738,563Asia/Pacific46,43643,21543,423$751,526$748,591$691,914As of June 3020162015​Property, plant and equipment, netUnited States$56,735$43,775Israel46,70636,367Brazil22,72022,767Other1,1621,505$127,323$104,414111• We did not maintain effective internal controls to ensure processing and reporting of validtransactions is complete, accurate, and timely. Specifically, we have not designed and implemented asufficient level of formal accounting policies and procedures that define how transactions across thebusiness cycles should be initiated, recorded, processed and reported and appropriately authorizedand approved.• We did not maintain effective internal control that restricts access to key financial systems andrecords to appropriate users and ensures that appropriate segregation of duties is maintained. Certainpersonnel had access to financial application, programs and data beyond that needed to perform theirindividual job responsibilities and without independent monitoring. InTABLE OF CONTENTS ​ ​Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresManagement of the Company, with the participation of its Chief Executive Officer and Chief FinancialOfficer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2016.The Company’s disclosure controls and procedures are designed to ensure that information required to bedisclosed by the issuer in the reports that it files or submits under the Exchange Act of 1934, as amended, isrecorded, processed, summarized and reported, within the time periods specified in the Commission’s rules andforms, and that such information is accumulated and communicated to management of the Company, including itsChief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding requireddisclosure.Based on their evaluation, as of the end of the period covered by this Annual Report on Form 10-K, theCompany’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosurecontrols and procedures were not effective because of the material weaknesses in our internal control over financialreporting described below.Management’s Report on Internal Control over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financialreporting, as such term is defined in the Exchange Act Rule 13a-15(f). Internal control over financial reporting is aprocess designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer andeffected by our Board of Directors, management and other personnel to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatement. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.Management has assessed the effectiveness of our internal control over financial reporting as of June 30,2016. In making its assessment of internal control over financial reporting, we used the criteria described in InternalControl—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).A material weakness is a deficiency, or combination of deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of our annual or interimconsolidated financial statements will not be prevented or detected on a timely basis.Based upon that evaluation, we have identified the following deficiencies as of June 30, 2016 in ourinternal control over financial reporting:112TABLE OF CONTENTS ​addition, certain financial personnel had incompatible duties that allowed for the creation, review andprocessing of certain financial data without independent review and authorization. This materialweakness affects substantially all financial statement accounts.Each of the control deficiencies described above could result in a misstatement that would result in amaterial misstatement of the annual or interim consolidated financial statements that would not be prevented ordetected. Accordingly, our management has determined that these control deficiencies constitute materialweaknesses.Because of these material weaknesses, our management concluded that we did not maintain effectiveinternal control over financial reporting as of June 30, 2016, based on criteria in Internal Control—IntegratedFramework (2013) issued by the COSO.Due to a transition period established by the rules of the SEC for emerging growth companies, thisAnnual Report on Form 10-K does not include an attestation report of our registered public accounting firm.Material Weakness Remediation EffortsWe have begun implementing changes to our internal control over financial reporting to remediate thematerial weaknesses described above. Our remediation plan includes (i) designing and implementing additionalformal accounting policies and procedures and (ii) restricting access to key financial systems and records toappropriate users to ensure that appropriate segregation of duties is maintained. Recent actions taken to addressmaterial weaknesses include the design and implementation of certain formal accounting policies and procedures, aswell as restricting certain access to users of key financial systems and records. We will continue to build on theprogress we have made in our remediation plan. We cannot determine when our remediation plan will be fullycompleted, and we cannot provide any assurance that these remediation efforts will be successful or that our internalcontrol over financial reporting will be effective as a result of these efforts.Remediation of Prior Period Material WeaknessManagement previously identified and disclosed a material weakness in internal control over financialreporting relating to maintaining effective internal controls over the accounting for and disclosures of technicalaccounting matters in the consolidated financial statements. Specifically, we had not maintained a sufficientcomplement of resources with an appropriate level of accounting knowledge, experience and training commensuratewith our structure and financial reporting requirements. We have made certain accounting hires with the appropriatelevel of accounting knowledge, experience and training. These accounting hires have been integrated into theCompany’s accounting and financial operations. As a result of our efforts, we have remediated the previouslyidentified material weakness as of June 30, 2016.Changes in Internal Control over Financial ReportingOther than as described in the Remediation of Prior Period Material Weakness section above, there havebeen no changes in internal control over financial reporting during the quarter ended June 30, 2016 that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationNone.113TABLE OF CONTENTS ​ ​ ​ ​ ​PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this item is incorporated by reference to our 2016 Proxy Statement to be filedwith the SEC within 120 days of the year ended June 30, 2016.Our Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all officers,directors and employees, which is available on our website ( investors.pahc.com ) under “Corporate Governance.”Item 11. Executive CompensationThe information required by this item is incorporated by reference to our 2016 Proxy Statement to be filedwith the SEC within 120 days of the year ended June 30, 2016.Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder MattersThe information required by this item is incorporated by reference to our 2016 Proxy Statement to be filedwith the SEC within 120 days of the year ended June 30, 2016.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference to our 2016 Proxy Statement to be filedwith the SEC within 120 days of the year ended June 30, 2016.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to our 2016 Proxy Statement to be filedwith the SEC within 120 days of the year ended June 30, 2016.114(1) Consolidated Financial Statements:(2) Schedules: None(3) The exhibits filed are listed in the Index to Exhibits immediately following the signature page of thisAnnual Report on Form 10-K.TABLE OF CONTENTS ​PART IVItem 15. Exhibits, Financial Statement SchedulesWe have filed the following documents as part of this Form 10-K:Report of Independent Registered Public Accounting FirmConsolidated Statements of Operations for the fiscal years ended June 30, 2016, 2015 and 2014Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended June 30, 2016,2015 and 2014Consolidated Balance Sheets at June 30, 2016 and 2015Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2016, 2015 and 2014Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the fiscal years endedJune 30, 2016, 2015 and 2014Notes to Consolidated Financial Statements115TABLE OF CONTENTS ​SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused thisAnnual Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.Phibro Animal Health CorporationAugust 29, 2016By:/s/ Jack C. BendheimJack C. Bendheim Chairman, President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-Khas been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.Phibro Animal Health CorporationAugust 29, 2016By:/s/ Jack C. BendheimJack C. Bendheim Chairman, President and Chief Executive OfficerAugust 29, 2016By:/s/ Richard G. JohnsonRichard G. Johnson Chief Financial OfficerAugust 29, 2016By:/s/ Daniel M. BendheimDaniel M. Bendheim Director and Executive Vice President, Corporate StrategyAugust 29, 2016By:/s/ Gerald K. CarlsonGerald K. Carlson DirectorAugust 29, 2016By:/s/ E. Thomas CorcoranE. Thomas Corcoran DirectorAugust 29, 2016By:/s/ Sam GejdensonSam Gejdenson DirectorAugust 29, 2016By:/s/ George GunnGeorge Gunn DirectorAugust 29, 2016By:/s/ Mary Lou MalanoskiMary Lou Malanoski DirectorAugust 29, 2016By:/s/ Carol A. WrennCarol A. Wrenn Director116* This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject tothe liability of that section, nor shall it be deemed incorporated by reference into any filing under the SecuritiesAct of 1933, as amended, or the Exchange Act.** Furnished with this Annual Report on Form 10-K. Pursuant to Rule 406T of Regulation S-T, these interactivedata files are deemed not filed for purposes of sections 11 or 12 of the Securities Act of 1933 and are deemednot filed for purposes of section 18 of the Securities and Exchange Act of 1934.TABLE OF CONTENTSEXHIBIT INDEXExhibit 10.35Amendment to Amended and Restated Employment Agreement dated May 31, 2016, byand between Phibro Animal Health Corporation and Gerald K. CarlsonExhibit 23Consent of Independent Registered Public Accounting FirmExhibit 31.1Chief Executive Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section302Exhibit 31.2Chief Financial Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section302Exhibit 32.1*Chief Executive Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section906Exhibit 32.2*Chief Financial Officer—Certification pursuant to Sarbanes-Oxley Act of 2002 Section906Exhibit 101.INS**XBRL Instance DocumentExhibit 101.SCH**XBRL Taxonomy Extension Schema DocumentExhibit 101.CAL**XBRL Taxonomy Extension Calculation Linkbase DocumentExhibit 101.DEF**XBRL Taxonomy Extension Definition Linkbase DocumentExhibit 101.LAB**XBRL Taxonomy Extension Label Linkbase DocumentExhibit 101.PRE**XBRL Taxonomy Extension Presentation Linkbase Document117 Exhibit 10.35 Execution Version AMENDMENT TO AMENDED ANDRESTATED EMPLOYMENT AGREEMENT This AMENDMENT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Amendment ”) is made as of May 31, 2016 byPhibro Animal Health Corporation , a Delaware corporation (the “ Company ”) and Gerald K. Carlson (the “ Employee ”). WITNESSETH. WHEREAS, the Company and the Employee entered into that certain Amended and Restated Employment Agreement, dated as of March 27, 2014 (the “Employment Agreement ”); and WHEREAS, the parties hereto desire to amend the Employment Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, the parties agree as follows: 1.Section 5 of the Employment Agreement is amended by adding the following Section 5(e) to the end thereof: (e) RETIREE MEDICAL . The parties acknowledge that upon termination of employment, Employee (and his eligible spouse) would be eligible forbenefits under the Company’s Retirement Health Care Plan (“Retiree Health Plan”) as such Retiree Health Plan may be amended from time to time by theCompany. Inasmuch as the Employee and his spouse desire to waive all rights to future benefits under the Retiree Health Plan, and, in lieu thereof, forEmployee to receive a cash payment upon Employee’s retirement from the Company, the parties have agreed that as consideration for Employee’s waiver ofany and all future benefits under the Retiree Health Plan, which waiver shall be consented to by his spouse, the Company agrees that upon Employee’sretirement from the Company, he shall be paid a lump sum cash payment in the amount of $350,000.00; such cash payment shall be paid as soon as practicableafter the execution and delivery of the general release and the spousal release described in section 8 of this Agreement, but in no event later than March 15thof the calendar year following the year in which his severance from service occurs. 2.Section 7(d) of the Employment Agreement is hereby amended by added the following Section 7(d)(vi) before the last paragraph of Section 7(d): “(vi) a lump sum payment of an amount equal to onethird (1/3) of Employee’s annual Base Salary, provided that such termination must occur prior toDecember 31, 2016 and, in such event, such payment shall be paid as soon as practicable after the execution and delivery of the general release described insection 8 of this Agreement by Employee, but in no event later than March 15, 2017.”  3.Section 8 of the Employment Agreement is hereby deleted in its entirety and replaced with the following: 8. RELEASE . Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the Accrued Benefitsshall only be payable if the Employee delivers to the Company and does not revoke a general release of claims in favor of the Company reasonablysatisfactory to the Company substantially in the form attached hereto as Exhibit A . Such release shall be executed and delivered (and no longer subject torevocation, if applicable) within sixty (60) days following termination. Any and all amounts payable pursuant to Section 5(e) of this Agreement shall only bepayable if the Employee’s spouse delivers to the Company and does not revoke the Spousal Consent set forth as Exhibit B to this Agreement, which SpousalConsent shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination. In no event however,may the Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a“deferral of compensation” within the meaning of Section 409A. In addition, to the extent payments under this Agreement that are contingent on theEmployee’s execution of the Release described in this paragraph constitute deferred compensation for purposes of Section 409A and the Release’s executionperiod shall commence in one tax year and end in the subsequent tax year, the payments under this Agreement shall be made solely in the subsequent tax year. 4.Section 23(b)(i) of the Employment Agreement is hereby deleted in its entirety and replaced with the following: (b)SECTION 409A COMPLIANCE. (i)The intent of the parties is that payments and benefits under this Agreement shall, (i) to the extent possible, be exempt from therestrictions of Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “ CodeSection 409A ”) or, (ii) to the extent no exemption from Code Section 409A is available or satisfied, then to comply with that CodeSection, and, with respect to (i) or (ii), to the maximum extent permitted, this Agreement shall be interpreted to be either exempt fromCode Section 409A as available or to be in compliance therewith. To the extent that any provision hereof is modified in order to beexempt from or to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extentreasonably possible, maintain the original intent and economic benefit to the Employee and the Company of the applicable provisionwithout violating the provisions of Code Section 409A. In no event whatsoever shall the Company be liable for any additional tax,interest or penalty that may be imposed on the Employee by Code Section 409A or damages for failing to comply with Code Section409A. 2  5.Exhibit A to the Employment Agreement is hereby deleted in its entirety and replaced with Exhibit A to this Amendment. 6.The Employment Agreement is hereby amended by the addition of Exhibit B hereto as Exhibit B to the Employment Agreement. 7.Except as specifically set forth herein, the Employment Agreement and all of its terms and conditions remain in full force and effect, and the EmploymentAgreement is hereby ratified and confirmed in all respects, except that on or after the date of this Amendment all references in the Employment Agreement to“this Agreement,” “hereto,” “hereof,” “hereunder,” or words of like import shall mean the Employment Agreement as amended by thisAmendment. Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms in the Employment Agreement. 8.This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and such counterpart together shall constitute oneand the same instrument. 9.This Amendment, including the validity, interpretation, construction and performance of this Amendment, shall be governed by and construed in accordancewith the laws of the State of New Jersey applicable to agreements made and to be performed in such State, without regard to such State’s conflicts of lawprinciples. 10.This Amendment shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. TheEmployment Agreement, as amended by this Amendment, embodies the entire agreement and understanding between the parties hereto and supersedes allprior agreements and understandings relating to the subject matter hereof. [remainder of page intentionally left blank; signature page follows] 3  SIGNATURE PAGE TO AMENDMENT TO THE AMENDEDAND RESTATED EMPLOYMENT AGREEMENT IN WITNESS WHEREOF , the parties hereto have executed this Amendment as of the date first written above. PHIBRO ANIMAL HEALTH CORPORATION By: /s/ Jack C. Bendheim Name: Jack C. Bendheim Title: Chairman and Chief Executive Officer EMPLOYEE /s/Gerald K. Carlson Gerald K. Carlson  EXHIBIT A GENERAL RELEASE I, ________________________, in consideration of and subject to the performance by Phibro Animal Health Corporation (together with its subsidiaries, the “Company ”), of its obligations under the Employment Agreement dated as of March 27, 2014, as amended on May 31, 2016 (the “ Agreement ”), do hereby releaseand forever discharge as of the date hereof the Company and its respective affiliates and all present, former and future managers, directors, officers, employees,successors and assigns of the Company and its affiliates and direct or indirect owners (collectively, the “ Released Parties ”) to the extent provided below (this “General Release ”). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each ofthem in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shallhave the meanings given to them in the Agreement. 1. I understand that any payments or benefits paid or granted to me under Sections 5(e) and 7 of the Agreement represent, in part, consideration for signingthis General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive certain of the payments andbenefits specified in Sections 5(e) and 7 of the Agreement unless I execute this General Release and do not revoke this General Release within the time periodpermitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangementmaintained or hereafter established by the Company or its affiliates. 2. Except as provided in paragraphs 3 and 4 below and except for the provisions of the Agreement which expressly survive the termination of myemployment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge theCompany and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, crossclaims, counterclaims, demands, debts,compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any naturewhatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known orunknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns,may have, which arise out of or are connected with my employment with, or my separation or termination from, the Company (including, but not limited to, anyallegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination inEmployment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans withDisabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement IncomeSecurity Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, stateor local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or undercommon law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction ofemotional distress, defamation; or any claim for costs, A- 1  fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “ Claims ”). 3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above. 4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with theterms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in EmploymentAct of 1967). 5. I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever inrespect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I furtheracknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrativecharge or participate in an administrative investigation or proceeding; provided , however , that I disclaim and waive any right to share or participate in anymonetary award resulting from the prosecution of such charge or investigation or proceeding. Additionally, I am not waiving (i) any right to the Accrued Benefitsor any severance benefits to which I am entitled and have not waived under the Agreement, (ii) any claim relating to directors’ and officers’ liability insurancecoverage or any right of indemnification under the Company’s organizational documents or otherwise, or (iii) my rights as an equity or security holder in theCompany or its affiliates. 6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned orimplied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, includingthose relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release ofunknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agreethat this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of theAgreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against theCompany in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximumextent permitted by law. I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this GeneralRelease. 7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be anadmission by the Company, any Released Party or myself of any improper or unlawful conduct. A- 2  8. I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against thesuit incurred by the Released Parties, including reasonable attorneys’ fees. 9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Releaseor the Agreement, except to my immediate family and any tax, legal or other counsel I have consulted regarding the meaning or effect hereof or as required by law,and I will instruct each of the foregoing not to disclose the same to anyone. 10. Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this GeneralRelease or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), anyother self-regulatory organization or any governmental entity. 11. I hereby acknowledge that Sections 7 through 13, 18 through 21 and 23 of the Agreement shall survive my execution of this General Release. 12. I represent that I am not aware of any claim by me other than the claims that are released by this General Release. I acknowledge that I may hereafterdiscover claims or facts in addition to or different than those which I now know or believe to exist with respect to the subject matter of the release set forth inparagraph 1 above and which, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and mydecision to enter into it. 13. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights orclaims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof. 14. Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but ifany provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, suchinvalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed andenforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. A- 3  BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT: 1.I HAVE READ IT CAREFULLY; 2.I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITEDTO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVILRIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990; ANDTHE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED; 3.I VOLUNTARILY CONSENT TO EVERYTHING IN IT; 4.I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTERCAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION; 5.I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT, AND THE CHANGESMADE SINCE MY RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOTRESTART THE REQUIRED 21-DAY PERIOD; 6.I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THISRELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED; 7.I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSELRETAINED TO ADVISE ME WITH RESPECT TO IT; AND 8.I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIEDEXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME. SIGNED: DATED: A- 4  EXHIBIT B SPOUSAL CONSENT I, ________________________, am the lawful spouse of Gerald K. Carlson. I agree and consent to my spouse’s election to waive any and all future benefits under the Phibro Animal Health Corporation Retirement Health Care Plan(“Retiree Health Plan”). I understand and acknowledge that: 1.As a result of this consent, I will not receive any benefits under the Retiree Health Plan. 2.My spouse’s waiver of benefits under the Retiree Health Plan is being made in return for a cash payment under his Employment Agreement and I herebyacknowledge that such payment constitutes consideration for my waiver under this Spousal Consent also. Date: Signed: Exhibit 23​CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-198809) of Phibro Animal Health Corporation of our report dated August 29, 2016 relating to the financialstatements, which appears in this Form 10-K.Florham Park, New Jersey August 29, 2016EXHIBIT 31.1​CERTIFICATIONSI, Jack C. Bendheim, certify that:1. I have reviewed this Annual Report on Form 10-K for the year ended June 30, 2016, of Phibro AnimalHealth Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controlover financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the caseof an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s boardof directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.Dated: August 29, 2016/s/ Jack C. BendheimJack C. Bendheim Chairman, President and Chief Executive OfficerEXHIBIT 31.2​CERTIFICATIONSI, Richard G. Johnson, certify that:1. I have reviewed this Annual Report on Form 10-K for the year ended June 30, 2016, of Phibro AnimalHealth Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in thisreport, fairly present in all material respects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controlover financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and proceduresto be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the caseof an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s boardof directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.Dated: August 29, 2016/s/ Richard G. JohnsonRichard G. Johnson Chief Financial OfficerEXHIBIT 32.1​CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that thisperiodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934 and that information contained in this periodic report fairly presents, in all material respects, the financialcondition and results of operations of the issuer.Dated: August 29, 2016/s/ Jack C. BendheimJack C. Bendheim Chairman, President and Chief Executive OfficerEXHIBIT 32.2​CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that thisperiodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934 and that information contained in this periodic report fairly presents, in all material respects, the financialcondition and results of operations of the issuer.Dated: August 29, 2016/s/ Richard G. JohnsonRichard G. Johnson Chief Financial Officer

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