Animal Health International, Inc. (AHII)
F1Q2011 Earnings Call Transcript
November 15, 2010 10:00 am ET
Jim Robison – Chairman, President, and CEO
Bill Lacey – SVP and CFO
John Kreger – William Blair
Mark Arnold – Piper Jaffray
Jason Bernard [ph] – Robert W. Baird
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Greetings and welcome to the Animal Health International first quarter 2011 conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Robison, Chief Executive Officer for Animal Health International. Thank you, Mr. Robison. You may begin.
Thank you. Good morning, everybody. Bill Lacey is going to start off my reviewing our results for the first quarter and then I’m going to make comments and then we’re going to take questions. Bill?
Thanks, Jim. And good morning. Before we begin, I'd like to point out that today's conference call is being recorded and will be available for replay on our web page at ahii.com under Investor Relations.
In addition, I'd like to remind everyone that some of the information discussed on this call, particularly our guidance for fiscal year ‘11, our competitive position, future business prospects, revenue growth, and market opportunities for the coming fiscal year contain forward-looking statements that involve risk and uncertainty. These statements are based on current expectations. Actual results may differ materially from those set forth in such statements. Additional information concerning risk and other factors that may cause actual results to differ can be found in the company's filings with the SEC.
Please note that in addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results, including EBITDA or adjusted EBITDA. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release.
Finally, AHI has provided in its earnings release and will provide in this conference call forward-looking guidance. We will not provide any further guidance or updates on our performance during the year unless we do so in a public forum. AHI does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Before I talk about the first quarter, I’d like to point out that we refinanced – we completed the refinancing of our debt on November the 10th. We amended our existing asset-based loan revolver to basically a five-year extension. It expires on August 10th, 2015. It’s a $130 million facility. The amended revolver has interest rates based on the company‘s leverage ratio ranging from LIBOR plus 225 to LIBOR plus 300, or 3%. The New Term Note has a face amount of $43 million and matures on November 10, 2015. The cash interest rate is 2.25%, with 2.00% payment-in-kind and an original discount of 2%.
I will now provide you with the financial results of our first quarter of fiscal year 2011. Net sales compared to last year increased 9.4%. Net sales for the quarter were $176.5 million compared to $1613 million for the same period last year. Gross margin increased $1.4 million, with $2.4 million due to sales volume partially offset by an unfavorable shift in product mix. Margins in the first quarter were 15.5% of net sales compared to 16.1% in the first quarter last year.
Several things contributed to the margin making up the product mix and change, one of which was a Pfizer program, which began in July and runs until October. And we did not recognize any of the rebates associated with that. We won’t recognize those until the next quarter. So that drove down the Pfizer margins, which made up about 19% of our sales. Net sales were up 15%, but with lower margins due to the competition for the PVP sales. And also, if you recall, last year, this quarter was the last operating quarter of Fort Dodge, which carried some nice margins.
SG&A expenses were 14.1% of sales in both periods. SG&A expenses were $24.8 million compared to $22.8 million last year. Our provision for bad debt increased $400,000 in expenses associated with the acquisition of certain assets of a competitor's were $200,000. The remainder of the increase was volume-driven.
EBITDA was $3.2 million, which was a decrease of $0.2 million from the earlier quarter of $3.4 million. Net loss for the quarter was $0.5 million compared to the first quarter last year net loss of $0.7 million. Fully diluted loss per share was $0.02 versus $0.03 loss last year. Earnings per share without amortization or cash basis EPS was $0.02 per share.
At the end of June, we had 41.2 days of working capital. Our average for the last 12 months was 44.6. Capital expenditures were $0.8 million for the quarter. Fixed charge ratio was 3.6 times on a trailing 12-month basis. The company is in compliance with its bank covenants. And at June 30, 2010, the company's availability under its revolver totaled $27.5 million. We have not changed our guidance for the year. We still expect to be in the range of $25 million to $27 million of adjusted EBITDA.