Phibro Animal Health (PAHC) risk factors, FY2025 10-K

Risk Factors Relating to Our Business

1. 01Outbreaks of animal diseases could significantly reduce demand for our products
2. 02Perceived adverse effects on human health linked to the consumption of food derived from animals that utilize our products could cause a decline in the sales of those products
3. 03Restrictions on the use of antibacterials in food-producing animals may become more prevalent, including limitation of use related to implementation and compliance with FDA Guidance 273 and similar initiatives globally
4. 04If the FDA withdraws approval of our Mecadox (carbadox) product, the loss of sales of such product could have a material adverse effect on our business, financial condition and results of operations
5. 05A material portion of our sales are generated by antibacterials and other related products
6. 06Our business may be negatively affected by weather conditions and the availability of natural resources
7. 07A pandemic, epidemic, or outbreak of an infectious disease in humans, such as COVID-19, may materially and adversely affect our business and our financial results
8. 08Climate change could have a material adverse impact on our operations and our customers’ businesses
9. 09The testing, manufacturing and marketing of certain of our products are subject to extensive regulation by numerous government authorities in the United States and other countries, including, but not limited to, the FDA
10. 10We may experience declines in the sales volume and prices of our products as the result of the continuing trend toward consolidation of certain customer and distributor groups as well as the emergence of large buying groups
11. 11Our business is subject to risk based on customer exposure to rising costs and reduced customer income
12. 12Generic products may be viewed as more cost-effective than certain of our products
13. 13Advances in veterinary medical practices and animal health technologies could negatively affect the market for our products
14. 14The misuse or extra-label use of our products may harm our reputation or result in financial or other damages
15. 15The public perception of the safety, quality and efficacy of certain of our animal health products may harm our reputation
16. 16We are dependent on suppliers having current regulatory approvals, and the failure of those suppliers to maintain these approvals or other challenges in replacing any of those suppliers could affect our supply of materials or affect the distribution or sale of our products
17. 17The raw materials used by us and our third-party contract manufacturers in the manufacture of our products can be subject to price fluctuations and their availability can be limited
18. 18Our revenues are dependent on the continued operation of our various manufacturing facilities
19. 19We could be subject to changes in our tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities
20. 20A 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
21. 21We are subject to product registration and authorization regulations in many of the jurisdictions in which we operate and/or distribute our products, including the United States and member states of the E.U
22. 22We have significant assets located outside the United States and a significant portion of our sales and earnings is attributable to operations conducted abroad that may be adversely affected by foreign currency exchange rate fluctuations and other inherent risks
23. 23We have manufacturing facilities located in Israel and a portion of our net sales and earnings is attributable to products produced and operations conducted in Israel
24. 24We have manufacturing facilities located in Brazil and a portion of our sales and earnings is attributable to products produced and operations conducted in Brazil
25. 25Certain of our employees are covered by collective bargaining or other labor agreements
26. 26The loss of key personnel may disrupt our business and adversely affect our financial results
27. 27Our R&D relies on evaluations in animals, which may become subject to bans or additional regulations
28. 28Our operations, properties and subsidiaries are subject to a wide variety of complex and stringent federal, state, local and foreign environmental laws and regulations
29. 29Our operations or products may impact the environment or cause or contribute to contamination or exposure to hazardous substances
30. 30We have been and may continue to be subject to claims of injury from direct exposure to certain of our products that constitute or contain hazardous substances and from indirect exposure when such substances are incorporated into other companies’ products
31. 31We are subject to risks from litigation that may materially impact our operations
32. 32We are subject to risks that may not be covered by our insurance policies
33. 33We may fail to achieve the anticipated benefits from the acquisition of certain Zoetis products and assets
34. 34Adverse U.S. and international economic and market conditions may adversely affect our product sales and business
35. 35We may not be able to realize the expected benefits of our investments in emerging markets
36. 36Tariffs, trade protection measures or other modifications of foreign trade policy may harm our food animal product customers
37. 37Our product approval, R&D, acquisition and licensing efforts may fail to generate new products and product lifecycle developments
38. 38The actual or purported intellectual property rights of third parties may negatively affect our business
39. 39If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage of our R&D efforts. We are also dependent upon trade secrets, which in some cases may be difficult to protect
40. 40We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws or trade control laws, as well as other laws governing our international operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, financial condition and results of operations
41. 41Increased regulation or decreased governmental financial support for the raising, processing or consumption of food animals could reduce demand for our animal health products
42. 42Increased or decreased inventory levels at our channel distributors can lead to fluctuations in our revenues and variations in payment terms extended to our distributors can impact our cash flows
43. 43We have substantial debt and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations under our indebtedness. Restrictions imposed by our outstanding indebtedness, including the restrictions contained in our 2024 Credit Facilities, may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities
44. 44We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
45. 45We are subject to change of control provisions
46. 46We use machine learning and artificial intelligence (AI) in our business, and challenges with properly managing its use could result in operational, competitive or reputational harm
47. 47We depend on sophisticated information technology and infrastructure
48. 48We may be required to write down goodwill or identifiable intangible assets
49. 49We may be unable to adequately protect our customers’ privacy or we may fail to comply with privacy laws
50. 50We may be subject to information technology system failures, network disruptions and breaches in data security
51. 51Implementing new business lines or offering new products and services may subject us to additional risks

Risks Related to Ownership of Our Class A Common Stock

1. 52Our multiple class structure and the concentration of our voting power with certain of our stockholders will limit your ability to influence corporate matters, and conflicts of interest between certain of our stockholders and us or other investors could arise in the future
2. 53We are classified as a “controlled company” and, as a result, we qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements
3. 54Our stock price may be volatile or may decline regardless of our operating performance
4. 55Our majority stockholder has the ability to control significant corporate activities and our majority stockholder’s interests may not coincide with yours
5. 56Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price
6. 57Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable
7. 58Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees
8. 59Provisions of our certificate of incorporation could have the effect of preventing us from having the benefit of certain business opportunities that we would otherwise be entitled to pursue
9. 60We may not pay cash dividends in the future and, as a result, you may not receive any return on investment unless you are able to sell your Class A common stock for a price greater than your initial investment

General Risk Factors

1. 61We face competition in each of our markets from a number of large and small companies, some of which have greater financial, R&D, production and other resources than we have
2. 62Failure to comply with requirements to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price
3. 63As a public company, we are subject to financial and other reporting and corporate governance requirements that may be difficult for us to satisfy and may divert management’s attention from our business
4. 64We may not be able to expand through acquisitions or successfully integrate the products, services and personnel of acquired businesses
5. 65We may not successfully implement our business strategies or achieve expected gross margin improvements