Introduction

Our management's discussion and analysis of financial condition and results of
operations ("MD&A") is provided to assist readers in understanding our
performance, as reflected in the results of our operations, our financial
condition and our cash flows. The following discussion summarizes the
significant factors affecting our consolidated operating results, financial
condition, liquidity and cash flows as of and for the periods presented below.
This MD&A should be read in conjunction with our consolidated financial
statements and related notes thereto included under the section entitled
"Financial Statements and Supplementary Data." Our future results could differ
materially from our historical performance as a result of various factors such
as those discussed in "Risk Factors" and "Forward-Looking Statements and Risk
Factors Summary."

Overview of our business

Phibro Animal Health Corporation is a leading global diversified animal health
and mineral nutrition company. We develop, manufacture and market a broad range
of products for food and companion animals including poultry, swine, beef and
dairy cattle, aquaculture and dogs. Our products help prevent, control and treat
diseases, and support nutrition

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to help improve animal health and well-being. In addition to animal health and
mineral nutrition products, we manufacture and market specific ingredients for
use in the personal care, industrial chemical and chemical catalyst industries.
We sell approximately 780 product lines in over 80 countries to approximately
3,790 customers.

Factors affecting our performance

Armed conflict between Russia and Ukraine

In response to the armed conflict between Russia and Ukraine that began in
February 2022, we and our employees have provided support to Ukraine in the form
of monetary donations, free product and humanitarian services. Our limited
intent for the Russian market is to continue to provide medicines and vaccines,
and related regulatory and technical support, to help existing customers combat
disease challenges in the production of food animals on their farms. We have no
production or direct distribution operations and no planned investments in
Russia.

Since the conflict began, the United States and other North Atlantic Treaty
Organization ("NATO") member states, as well as non-member states, announced
targeted economic sanctions on Russia, including certain Russian citizens and
enterprises. The continuation of the conflict may trigger additional economic
and other sanctions, as well as broader military conflict. The potential impacts
of any resulting bans, sanctions, boycotts or broader military conflicts on our
business is uncertain at the current time due to the fluid nature of the
conflict. The potential impacts could include supply chain and logistics
disruptions, macroeconomic impacts resulting from the exclusion of Russian
financial institutions from the global banking system, volatility in foreign
exchange rates and interest rates, inflationary pressures on raw materials and
energy as well as heightened cybersecurity threats. Our annual sales to Russia
and Ukraine represent approximately 1% of consolidated net sales.

We cannot know if the conflict could escalate and result in broader economic and
security concerns that could adversely affect our business, financial condition,
or results of operations.

Effects of the COVID-19 pandemic

The global food and animal production industry has experienced demand
disruption, production impacts, price volatility and currency volatility in
international markets due to the COVID-19 pandemic. The situation surrounding
the COVID-19 pandemic remains fluid. We are unable to predict the future impact
of COVID-19 on the economies where we manufacture and/or sell our products. We
continue to evaluate the nature and extent of the effects of COVID-19 on our
business, consolidated results of operations, financial condition and liquidity.
For additional considerations and risks associated with COVID-19 on our
business, please refer to Item 1A. "Risk Factors."

Industry growth

We believe global population growth, the growth of the global middle class and
the productivity improvements needed due to limitations of arable land and water
supplies have supported and will continue to support growth of the animal health
industry.

Regulatory Developments

Our business depends heavily on a healthy and growing livestock industry. Some
in the public perceive risks to human health related to the consumption of food
derived from animals that utilize certain of our products, including certain of
our MFA products. In particular, there is increased focus, in the United States
and other countries, on the use of medically important antimicrobials. As
defined by the FDA, medically important antimicrobials ("MIAs") include classes
that are prescribed in animal and human health and are listed in the Appendix of
the FDA-CVM Guidance for Industry (GFI) 152. Our products that contain
virginiamycin, oxytetracycline or neomycin are classified by the FDA as
medically important antimicrobials. In addition to the United States, the World
Health Organization (WHO), the E.U., Australia and Canada have promulgated
rating lists for antimicrobials that are used in veterinary medicine and that
include certain of our products.

The classification of our products as MIAs or similar listings may lead to a
decline in the demand for and production 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 of evolving consumer views of nutrition and health-related
concerns, animal rights and other concerns. Any reputational harm to the
livestock industry may also extend to companies in related industries, including
us. In addition, campaigns by interest groups,

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activists and others with respect to perceived risks associated with the use of
our products in animals, including position statements by livestock producers
and their customers based on non-use of certain medicated products in livestock
production, whether or not scientifically-supported, could affect public
perceptions and reduce the use of our products. Those adverse consumer views
related to the use of one or more of our products in animals could have a
material adverse effect on our financial condition and results of operations.

In April 2016, the FDA began initial steps to withdraw approval of carbadox (the
active ingredient in our Mecadox product) via a regulatory process known as a
Notice of Opportunity for Hearing ("NOOH"), due to concerns that certain
residues from the product may persist in animal tissues for longer than
previously determined. In the years following, Phibro has continued an ongoing
process of responding collaboratively and transparently to the FDA's Center for
Veterinary Medicine ("CVM") inquiries and has provided extensive and meticulous
research and data that confirmed the safety of carbadox. In July 2020, the FDA
announced it would not proceed to a hearing on the scientific concerns raised in
the 2016 NOOH, consistent with the normal regulatory procedure, but instead
announced that it was withdrawing the 2016 NOOH and issuing a proposed order to
review the regulatory method for carbadox. Phibro reiterated the safety of
carbadox and the appropriateness of the regulatory method and offered to work
with the CVM to generate additional data to support the existing regulatory
method or select a suitable alternative regulatory method.

In the event the FDA continues to assert that carbadox should be removed from
the market, we will argue that we are entitled to and expect to have a full
evidentiary hearing on the merits before an administrative law judge. Should we
be unable to successfully defend the safety of the product, the loss of carbadox
sales will have an adverse effect on our financial condition and results of
operations. Sales of Mecadox (carbadox) for the twelve months ended June 30,
2022, were $21 million. As of the date of this Annual Report on Form 10-K,
Mecadox continues to be available for use by swine producers.

See also "Business -  Compliance with Government Regulations  - United States
- Carbadox"; and "Business - Compliance with Government Regulations - Global
policy and guidance."

Our global sales of antibacterials, anticoccidials and other products were $361
million, $330 million and $322 million for the years ended June 30, 2022, 2021
and 2020, respectively.

Competition

The animal health industry is highly competitive. We believe many of our
competitors are conducting R&D activities in areas served by our products and in
areas in which we are developing products. Our competitors include specialty
animal health businesses and the animal health businesses of large
pharmaceutical companies. In addition to competition from established
participants, there could be new entrants to the animal health medicines and
vaccines industry in the future. Principal methods of competition vary depending
on the region, species, product category or individual products, including
reliability, reputation, quality, price, service and promotion to veterinary
professionals and livestock producers.

Exchange

We conduct operations in many areas of the world, involving transactions
denominated in a variety of currencies. For the year ended June 30, 2022, we
generated approximately 40% of our revenues from operations outside the United
States. Although a portion of our revenues are denominated in various
currencies, the selling prices of the majority of our sales outside the United
States are referenced in U.S. dollars, and as a result, our revenues have not
been significantly affected by currency movements. We are subject to currency
risk to the extent that our costs are denominated in currencies other than those
in which we earn revenues. We manufacture some of our major products in Brazil
and Israel and production costs are largely denominated in local currencies,
while the selling prices of the products are largely set in U.S. dollars. As
such, we are exposed to changes in cost of goods sold resulting from currency
movements and may not be able to adjust our selling prices to offset such
movements. In addition, we incur selling and administrative expenses in various
currencies and are exposed to changes in such expenses resulting from currency
movements. For the year ended June 30, 2022, our expenses were not significantly
affected by currency movements. Because our financial statements are reported in
U.S. dollars, changes in currency exchange rates between the U.S. dollar and
other currencies have had, and will continue to have, an impact on our results
of operations.

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Climate

Adverse weather events and natural disasters may interfere with and negatively
impact operations at our manufacturing sites, research and development
facilities and offices, which could have a material adverse effect on our
financial condition and results of operations, especially if the impact of an
event or disaster is frequent or prolonged.

Our operations, and the activities of our customers, could be disrupted by
climate change. The physical changes caused by climate change may prompt changes
in regulations or consumer preferences which in turn could have negative
consequences for our and our customers' businesses. Climate change may
negatively impact our customers' operations, particularly those in the livestock
industry, through climate-related impacts such as increased air and water
temperatures, rising water levels and increased incidence of disease in
livestock. Potential physical risks from climate change may include altered
distribution and intensity of rainfall, prolonged droughts or flooding,
increased frequency of wildfires and other natural disasters, rising sea levels
and a rising heat index, any of which could cause negative impacts to our and
our customers' businesses. If such events affect our customers' businesses, they
may purchase fewer of our products, and our revenues may be negatively impacted.
Climate driven changes could have a material adverse effect on our financial
condition and results of operations.

There has been a broad range of proposed and promulgated state, national and
international regulations aimed at reducing the effects of climate change. Such
regulations could result in additional costs to maintain compliance and
additional income or other taxes. Climate change regulations continue to evolve,
and it is not possible to accurately estimate potential future compliance costs.

Product development initiatives

Our future success depends on our existing product portfolio, including
additional approvals for new claims for our products, for use of our products in
new markets, for use of our products with new species and for cross-clearances
enabling the use of our medicated products in conjunction with other products.
Our future success also depends on our pipeline of new products, including new
products that we may develop through joint ventures and products that we are
able to obtain through license or acquisition. The majority of our R&D programs
focus on product lifecycle development, which is defined as R&D programs that
leverage existing animal health products by adding new species or claims,
achieving approvals in new markets or creating new combinations and
reformulations. We commit substantial effort, funds and other resources to
expanding our product approvals and R&D, both through our own dedicated
resources and through collaborations with third parties. We also commit
significant resources to development of new vaccine technologies.

Our current strategic initiatives include several projects. We are working to
develop a vaccine for African Swine Fever, a virulent disease that is highly
lethal in swine. We have also developed pHi-Tech, a portable electronic
vaccination device and software that ensures proper delivery of vaccines and
provides health management information. We continue to invest in a vaccine
production facility in Sligo, Ireland to manufacture poultry vaccines, with our
first commercial sale of product realized in February 2022, and longer-term
expectations to add swine and cattle vaccines. We are developing microbial
products and bioproducts for a variety of applications serving animal health and
nutrition, environmental, industrial and agricultural customers. We are also
building a vaccine production facility in Guarulhos, Brazil to manufacture and
market autogenous vaccines against animal diseases for swine, poultry and
aquaculture. We continue to build our companion animal business and pipeline.
Our Rejensa joint supplement for dogs continues to gain customer acceptance. Our
companion animal development pipeline includes an early-stage atopic dermatitis
compound, a novel Lyme vaccine delivery system product, two early-stage oral
care compounds, and we entered into an agreement with Rejuvenate Bio, Inc. to
collaborate on the development and commercialization of a gene therapy for
MVD
in canines.

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Analysis of the consolidated statements of income

Summary Results of Operations

                                                                                   Change
For the Year Ended June
30                           2022         2021         2020           2022 / 2021           2021/ 2020

                                      (in thousands, except per share amounts and percentages)
Net sales                  $ 942,261    $ 833,350    $ 800,354    $ 108,911        13 %  $  32,996       4 %
Gross profit                 285,400      271,377      256,882       14,023         5 %     14,495       6 %
Selling, general and                                                                                       %
administrative expenses      206,414      196,509      187,688        9,905         5 %      8,821       5
Operating income              78,986       74,868       69,194        4,118         6 %      5,674       8 %
Interest expense, net         11,875       12,880       12,856      (1,005)       (8) %         24       0 %
Foreign currency             (5,216)      (4,480)          826                        *                    *
(gains), net                                                          (736)                (5,306)
Income before income
taxes                         72,327       66,468       55,512        5,859         9 %     10,956      20 %
Provision for income
taxes                         23,152       12,083       21,960       11,069        92 %    (9,877)    (45) %
Net income                 $  49,175    $  54,385    $  33,552    $ (5,210)      (10) %  $  20,833      62 %

Net income per share
Basic                      $    1.21    $    1.34    $    0.83    $  (0.13)              $    0.51
Diluted                    $    1.21    $    1.34    $    0.83    $  (0.13)              $    0.51

Weighted average number
of shares outstanding
Basic                         40,504       40,473       40,454
Diluted                       40,504       40,504       40,504

Ratio to net sales
Gross profit                    30.3 %       32.6 %       32.1 %
Selling, general and
administrative expenses         21.9 %       23.6 %       23.5 %
Operating income                 8.4 %        9.0 %        8.6 %
Income before income
taxes                            7.7 %        8.0 %        6.9 %
Net income                       5.2 %        6.5 %        4.2 %
Effective tax rate              32.0 %       18.2 %       39.6 %

Certain amounts and percentages may reflect rounding.

* Calculation not significant

Changes in net sales from period to period primarily result from changes in
volumes and average selling prices. Although a portion of our net sales is
denominated in various currencies, the selling prices of the majority of our
sales outside the United States are referenced in U.S. dollars, and as a result,
currency movements have not significantly affected our revenues.

Our effective income tax rate has varied from period to period and from the
federal statutory rate, due to the mix of taxable profits in various
jurisdictions; changes in tax rates from period to period, including changes in
income tax legislation in the United States and various international
jurisdictions; and the effects of changes in uncertain tax positions and
valuation allowances. Our future effective income tax rate will vary due to the
relative amounts of taxable income in various jurisdictions, future changes in
tax rates and legislation and other factors. We intend to continue to reinvest
indefinitely the undistributed earnings of our foreign subsidiaries where we
could be subject to applicable non-U.S. income and withholding taxes if amounts
are repatriated to the U.S. See "Notes to Consolidated Financial
Statements - Income Taxes" for additional information.

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Net Sales, Adjusted EBITDA and Reconciliation of GAAP Net Income to Adjusted EBITDA

We report Net sales and Adjusted EBITDA by segment to understand the operating
performance of each segment. This enables us to monitor changes in net sales,
costs and other actionable operating metrics at the segment level. See "-
General description of non-GAAP financial measures" for descriptions of EBITDA
and Adjusted EBITDA.

Segment net revenue and adjusted EBITDA:

                                                                                       Change
For the Year Ended June 30        2022          2021          2020         2022 / 2021        2021 / 2020

Net sales                                                     (in thousands)
MFAs and other                 $  361,538    $  330,017    $  322,300    $  31,521    10 %  $   7,717     2 %
Nutritional specialties           157,196       142,760       129,264      
14,436    10 %     13,496    10 %
Vaccines                           88,321        72,939        75,340       15,382    21 %    (2,401)   (3) %
Animal Health                     607,055       545,716       526,904       61,339    11 %     18,812     4 %
Mineral Nutrition                 259,512       220,560       214,412       38,952    18 %      6,148     3 %
Performance Products               75,694        67,074        59,038      
 8,620    13 %      8,036    14 %
Total                          $  942,261    $  833,350    $  800,354    $ 108,911    13 %  $  32,996     4 %

Adjusted EBITDA
Animal Health                  $  124,106    $  123,953    $  123,106    $     153     0 %  $     847     1 %
Mineral Nutrition                  24,038        17,116        14,678        6,922    40 %      2,438    17 %
Performance Products                8,706         9,437         4,534        (731)   (8) %      4,903   108 %
Corporate                        (45,767)      (42,624)      (40,178)      (3,143)     7 %    (2,446)     6 %
Total                          $  111,083    $  107,882    $  102,140    $   3,201     3 %  $   5,742     6 %

Adjusted EBITDA ratio to
segment net sales
Animal Health                        20.4 %        22.7 %        23.4 %
Mineral Nutrition                     9.3 %         7.8 %         6.8 %
Performance Products                 11.5 %        14.1 %         7.7 %
Corporate(1)                        (4.9) %       (5.1) %       (5.0) %
Total(1)                             11.8 %        12.9 %        12.8 %

(1) Reflects the ratio of total net sales.

Certain amounts and percentages may reflect rounding.

* Calculation not meaningful


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A reconciliation of net income, as reported under GAAP, to Adjusted EBITDA:

                                                                                        Change
For the Year Ended June 30          2022         2021         2020          2022/ 2021          2021/ 2020

                                                                (in thousands)
Net income                        $  49,175    $  54,385    $  33,552    $ (5,210)   (10) %  $  20,833     62 %
Interest expense, net                11,875       12,880       12,856      (1,005)    (8) %         24      0 %
Provision for income taxes           23,152       12,083       21,960       11,069     92 %    (9,877)   (45) %
Depreciation and amortization        32,705       31,885       32,341      
   820      3 %      (456)    (1) %
EBITDA                              116,907      111,233      100,709        5,674      5 %     10,524     10 %
Gain on sale of investment          (1,203)            -            -      (1,203)      *            -      *
Acquisition-related cost of
goods sold                              316            -          280          316      *        (280)      *
Acquisition-related
transaction costs                       279            -          462          279      *        (462)      *
Acquisition-related other, net
(1)                                       -            -      (2,821)            -      *        2,821      *
Stock-based compensation                  -        1,129        2,259      (1,129)      *      (1,130)      *
Restructuring costs                       -            -          425            -      *        (425)      *
Foreign currency (gains)
losses, net                         (5,216)      (4,480)          826        (736)      *      (5,306)      *
Adjusted EBITDA                   $ 111,083    $ 107,882    $ 102,140    $   3,201      3 %  $   5,742      6 %

(1) Other net acquisition-related items mainly result from a reduction of the contingent consideration related to the acquisition.

Certain amounts and percentages may reflect rounding.

* Calculation not significant

Comparison of years ended June 30, 2022 and 2021

Net sales

Net sales of $942.3 million for the year ended June 30, 2022, increased $108.9
million, or 13%, as compared to the year ended June 30, 2021. Animal Health,
Mineral Nutrition and Performance Products increased $61.3 million, $39.0
million and $8.6 million, respectively.

animal health

Net sales of $607.1 million for the year ended June 30, 2022, increased $61.3
million, or 11%. Net sales of MFAs and other increased $31.5 million, or 10%,
due to increased demand for our MFAs, particularly in the Latin America and
Canada regions, and for processing aids used in the ethanol fermentation
industry, and due to higher average selling prices. Net sales of nutritional
specialty products grew $14.4 million, or 10%, due to domestic demand for dairy
products, international growth and volume growth in our companion animal
product. Net sales of vaccines increased $15.4 million, or 21%, with increased
demand in most regions.

Mineral Nutrition

Net sales of $259.5 million for the year ended June 30, 2022, increased $39.0
million, or 18%, primarily driven by higher average selling prices. The increase
in average selling prices is correlated with the movement of the underlying
raw
material costs.

Performance Products

Net sales of $75.7 million for the year ended June 30, 2022increase $8.6 millionor 13%, due to higher volumes of ingredients for personal care products and higher average selling prices for copper-based products.

Gross profit

Gross profit of $285.4 million for the year ended June 30, 2022increase $14.0 millionor 5%, compared to the year ended June 30, 2021. Gross margin decreased by 230 basis points to 30.3% of net sales for the year ended June 30th,

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2022, compared to 32.6% for the year ended June 30, 2021. The year ended June 30, 2022included $0.3 million the cost of acquiring the goods sold.

Animal Health gross profit increased $7.9 million due to increased sales,
partially offset by increases in material costs. Mineral Nutrition gross profit
increased $7.3 million, driven by increases in average selling prices, partially
offset by increases in raw material costs. Performance Products gross profit
decreased $0.8 million, driven by higher raw material and production costs.
Acquisition-related cost of goods sold reduced gross profit by $0.3 million.

Selling, general and administrative expenses

SG&A expenses of $206.4 million for the year ended June 30, 2022, increased $9.9
million, or 5%, as compared to the year ended June 30, 2021. SG&A for the year
ended June 30, 2022, included a $1.2 million gain on sale of investment and $0.3
million of acquisition-related transaction costs. SG&A for the year ended June
30, 2021, included $1.1 million of stock-based compensation. Excluding these
items, SG&A increased $12.2 million, or 6%.

Animal Health SG&A increased $8.7 million, primarily due to increases in
employee and related costs, marketing, product development and travel. Mineral
Nutrition and Performance Products SG&A were comparable to the prior year.
Corporate expenses increased $3.1 million, driven by investments in strategic
initiatives. The gain on sale of investment, acquisition-related transaction
costs and stock-based compensation accounted for a $2.1 million decrease in
SG&A.

Interest expense, net

Interest expense, net of $11.9 million for the year ended June 30, 2022decreased by $1.0 million compared to the year ended June 30, 2021. Interest expense for the year ended June 30, 2021included $1.0 million expenses related to April 2021 refinancing.

Exchange (gains) losses, net

Foreign currency gains, net for the year ended June 30, 2022, were $5.2 million,
as compared to net gains of $4.5 million for the year ended June 30, 2021.
Foreign currency gains, net primarily arose from intercompany balances, driven
by the movement of the Brazilian and Turkish currencies relative to the U.S.
dollar.

Provision for income taxes
The provision for income taxes was $23.2 million and $12.1 million for the years
ended June 30, 2022 and 2021, respectively. The effective income tax rate was
32.0% and 18.2% for the years ended June 30, 2022 and 2021, respectively. Our
effective income tax rate has varied from period to period and from the federal
statutory rate, due to the mix of income in the various jurisdictions where we
have operations, changes in tax rates from period to period and the effects of
certain other items. The provision for income taxes during the year ended June
30, 2022, included (i) a $2.6 million benefit from the reversal of uncertain tax
positions related to settlements and the lapse of statute of limitations of
prior years, (ii) a $4.1 million expense related to increases to reserves for
uncertain tax positions due to the complex nature of tax law in various
jurisdictions and related interpretations of tax law, (iii) a $1.0 million
benefit from the release of a valuation allowance, and (iv) a $0.3 million
expense related to a detailed analysis of various other items. The effective
income tax rate, without these items, would have been 30.9% for the year ended
June 30, 2022.

Net income

Net income of $49.2 million for the year ended June 30, 2022, decreased $5.2
million, as compared to net income of $54.4 million for the year ended June 30,
2021. The decrease was a result of a $11.1 million increase in the provision for
income taxes and increased SG&A costs of $9.9 million. These decreases were
partially offset by higher operating income of $4.1 million, lower interest
expense, net, of $1.0 million and increased foreign currency gains of $0.7
million. SG&A costs increased due to employee and related costs, marketing,
product development, travel and incremental investments relating to strategic
initiatives.

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Adjusted EBITDA

Adjusted EBITDA of $111.1 million for the year ended June 30, 2022, increased
$3.2 million, or 3%, as compared to the year ended June 30, 2021. Animal Health
Adjusted EBITDA increased $0.2 million, driven by higher gross profit, mostly
offset by higher SG&A expenses. Mineral Nutrition Adjusted EBITDA increased $6.9
million driven by increases in average selling prices, partially offset by
increases in raw material costs. Performance Products Adjusted EBITDA decreased
by $0.7 million, or 8%, due to higher raw material and production costs.
Corporate expenses increased $3.1 million because of incremental investments
relating to strategic initiatives.

Comparison of years ended June 30, 2021 and 2020

For a comparison of our results of operations for the years ended June 30, 2021
and 2020, and an analysis of our financial condition, liquidity and capital
resources for the year ended June 30, 2021, see "Part II. Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our
Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with
the SEC on August 25, 2021.

Analysis of the financial situation, liquidity and capital resources

The net increase (decrease) in cash and cash equivalents was:

                                                                                              Change
For the Year Ended June 30                  2022          2021          

2020 2022/ 2021 2021/ 2020

                                                                    (in 

thousands)

Cash provided (used) by:
Operating activities                     $   31,649    $   48,306    $    59,348    $  (16,657)    $  (11,042)
Investing activities                       (22,582)      (18,580)      (120,390)        (4,002)        101,810
Financing activities                         16,343      (16,995)         40,936         33,338       (57,931)
Effect of exchange-rate changes on
cash and cash equivalents                   (1,374)         1,138        (1,124)        (2,512)          2,262
Net increase in cash and cash
equivalents                              $   24,036    $   13,869    $  

(21,230) $10,167 $35,099

Net cash provided by operating activities consisted of:

                                                                                                Change
For the Year Ended June 30                   2022          2021          2020        2022 / 2021      2021 / 2020

                                                                       (in thousands)
EBITDA                                    $  111,083    $  111,233    $  100,709    $       (150)    $      10,524
Adjustments:
Gain on sale of investment                   (1,203)             -             -          (1,203)                -
Acquisition-related cost of goods sold           316             -           280              316            (280)
Acquisition-related transaction costs            279             -           462              279            (462)
Acquisition-related other, net                     -             -       (2,821)                -            2,821
Stock-based compensation                           -         1,129         2,259          (1,129)          (1,130)
Restructuring costs                                -             -           425                -            (425)
Foreign currency (gains), net                (5,216)       (4,480)           826            (736)          (5,306)
Interest paid, net                          (11,159)      (10,808)      (11,577)            (351)              769
Income taxes paid                           (17,854)      (19,395)      (20,866)            1,541            1,471
Changes in operating assets and
liabilities and other items                 (44,597)      (29,373)      (10,349)         (15,224)         (19,024)
Net cash provided by operating
activities                                $   31,649    $   48,306    $   

59,348 ($16,657) $(11,042)

Some amounts may reflect rounding adjustments.

Operational activities

Operating activities provided $31.6 million net cash for the year ended June 30, 2022. Free cash flow from operating activities was boosted by strong business performance, resulting in cash flow from profit or loss and non-cash items

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items, including depreciation and amortization, of $76.3 million, offset by cash
used in the ordinary course of business for changes in operating assets and
liabilities of $44.6 million. Changes in operating assets and liabilities
included $23.6 million of cash used to fund a build of accounts receivable
correlated with strong growth in net sales, particularly in the fourth quarter,
$47.0 million of cash used to replenish inventory levels during a period when
inflation was driving higher costs of material and labor, offset by $26.4
million of cash provided by accounts payable related to the timing of payments
to suppliers, with the remaining $0.4 million of cash used to fund changes in
other current assets, other assets and accrued expenses and other liabilities.

Operating activities provided $48.3 million of net cash for the year ended June
30, 2021. Profitable business performance resulted in cash provided by net
income and non-cash items, including depreciation and amortization, of $78.2
million. Cash used in the ordinary course of business for changes in operating
assets and liabilities was $29.9 million. Accounts receivable used $18.2 million
of cash due to increased sales and timing of collections. Cash used for
inventory was $12.5 million, primarily due to forecasted future demand and
internal production schedules. For certain products, we are maintaining safety
stocks to mitigate potential disruptions in production. Other current assets and
other assets used $1.6 million and $1.9 million of cash, respectively. Accounts
payable provided $3.2 million of cash due to timing of payments. Accrued
expenses and other liabilities provided cash of $1.2 million due to timing of
payments for employee-related liabilities.

Investing activities

Investing activities used $22.6 million of net cash for the year ended June 30,
2022. Capital expenditures were $37.0 million as we continued to invest in
expanding production capacity and productivity improvements. Net proceeds from
maturities of short-term investments were $26.0 million. We used $13.5 million
for the acquisition of a business in Brazil, which develops, manufacturers and
markets processing aids used in the ethanol industry. Other investing activities
provided $2.0 million of cash.

Investing activities used $18.6 million of net cash for the year ended June 30,
2021. Capital expenditures were $29.3 million as we continued to invest in
expanding production capacity and productivity improvements. Net proceeds from
maturities of short-term investments were $12.0 million. Other investing
activities used $1.3 million of cash.

Fundraising activities

Financing activities provided $16.3 million of net cash for the year ended June
30, 2022. Net borrowings on our 2021 Revolver provided $50.0 million. We paid
$19.4 million in dividends to holders of our Class A and Class B common stock.
We paid $9.4 million in scheduled debt maturities. We paid $4.8 million for
acquisition-related contingent consideration.

Financing activities used $17.0 million of net cash for the year ended June 30,
2021. We used proceeds from the April 2021 refinancing to pay all outstanding
term loan and revolving credit balances under the 2017 Credit Facilities. We
paid $2.9 million in debt issuance costs relating to the refinancing. We paid
$19.4 million in dividends to holders of our Class A and Class B common stock.

Cash and capital resources

We believe our cash on hand, our operating cash flows and our financing
arrangements, including the availability of borrowings under the 2021 Revolver
and foreign credit lines, will be sufficient to support our ongoing cash needs.
We have considered the current and potential future effects of the macroeconomic
market conditions in the financial markets. At this time, we expect adequate
liquidity for at least the next twelve months. However, we can provide no
assurance that our liquidity and capital resources will be adequate for future
funding requirements. We believe we will be able to comply with the terms of the
covenants under the 2021 Credit Facilities and foreign credit lines based on our
operating plan. In the event of adverse operating results and/or violation of
covenants under the facilities, there can be no assurance we would be able to
obtain waivers or amendments. Other risks to our meeting future funding
requirements include global economic conditions and macroeconomic, business and
financial disruptions that could arise, including those caused by COVID-19.
There can be no assurance that a challenging economic environment or an economic
downturn would not affect our liquidity or our ability to obtain future
financing or fund operations or investment opportunities. In addition, our debt
covenants may restrict our ability to invest. Certain relevant measures of our
liquidity and capital resources follow:

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                                                                                              Change
As of June 30                                2022         2021         2020

2022 / 2021 2021 / 2020

                                                               (in thousands, except ratios)
Cash and cash equivalents and
short-term investments                     $  91,248    $  93,212    $  91,343    $     (1,964)    $       1,869
Working capital                              299,152      250,956      222,006           48,196           28,950
Ratio of current assets to current
liabilities                                   2.70:1       2.62:1       

2.60:1

We define working capital as total current assets (excluding cash and cash equivalents and short-term investments) minus total current liabilities (excluding the current portion of long-term debt). We calculate the ratio of current assets to current liabilities based on this definition.

At June 30, 2022, we had $145.0 million in outstanding borrowings under the 2021
Revolver. We had outstanding letters of credit and other commitments of $2.5
million, leaving $102.5 million available for borrowings and letters of credit,
subject to restriction in our 2021 Credit Facilities.

We currently intend to pay quarterly dividends on our Class A and Class B common
stock, subject to approval from the Board of Directors. Our Board of Directors
has declared a cash dividend of $0.12 per share on Class A common stock and
Class B common stock, payable on September 28, 2022. Our future ability 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 our Board of Directors deems relevant. Additionally, the
terms of our current and any future agreements governing our indebtedness could
limit our ability to pay dividends or make other distributions.

We do not expect to contribute to the national pension scheme in 2023, based on the funded status at June 30, 2022.

To June 30, 2022our cash and cash equivalents and our short-term investments included $88.5 million held by our international subsidiaries. There are no restrictions on cash distributions to PAHC from our international subsidiaries.

Contractual obligations

Our contractual obligations include maturities under the 2021 Credit Facilities,
including future interest accruals, operating lease commitments, and certain
purchase obligations. See "Notes to Consolidated Financial Statements - Debt,
Leases, and Commitment and Contingencies."

Analysis of consolidated balance sheets

                                                                                              Change
As of June 30                                2022         2021         2020        2022 / 2021      2021 / 2020

                                                                      (in thousands)
Accounts receivable - trade                $ 166,537    $ 146,852    $ 126,522    $      19,685    $      20,330
DSO                                               59           60           61


Payment terms outside the U.S. are typically longer than in the United States.
We regularly monitor our accounts receivable for collectability, particularly in
countries where economic conditions remain uncertain. We believe that our
reserve for credit losses is appropriate. Our assessment is based on such
factors as past due history, historical and expected collection patterns, the
financial condition of our customers, the robust nature of our credit and
collection practices and the economic environment. We calculate DSO based on a
360-day year and compare accounts receivable with sales for the quarter ending
at the balance sheet date.

                                                                    Change
As of June 30      2022         2021         2020        2022 / 2021      2021 / 2020

                                            (in thousands)
Inventories      $ 259,158    $ 216,312    $ 196,659    $      42,846    $      19,653

Inventory increased by $42.8 million in 2022, mainly due to rising raw material and production costs.

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Off-balance sheet arrangements

We do not currently use off-balance sheet arrangements for credit enhancement, hedging, investing or other financial purposes.

In the ordinary course of business, we may indemnify our counterparties against
certain liabilities that may arise. These indemnifications typically pertain to
environmental matters. If the indemnified party were to make a successful claim
pursuant to the terms of the indemnification, we would be required to reimburse
the loss. These indemnifications generally are subject to certain restrictions
and limitations.

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Selected quarterly financial data (unaudited)

To facilitate quarterly comparisons, the following unaudited information
presents the quarterly results of operations, including segment data, for
the years ended June 30, 2022 and 2021. This quarterly financial data was
prepared on the same basis as, and should be read in conjunction with, the
audited consolidated financial statements and related notes included herein.

                                                                      Quarters                                   Year
                                           September 30,       December 31,      March 31,      June 30,      June 30,
For the Periods Ended                           2021               2021             2022           2022          2022

                                                                          (in thousands)
Net sales
MFAs and other                            $         83,758    $        91,724    $    84,330    $  101,726    $  361,538
Nutritional Specialties                             35,997             37,330         41,394        42,475       157,196
Vaccines                                            21,249             21,873         22,865        22,334        88,321
Animal Health                             $        141,004    $       150,927    $   148,589    $  166,535    $  607,055
Mineral Nutrition                                   54,432             66,655         69,033        69,392       259,512
Performance Products                                19,229             15,130         21,997        19,338        75,694
Total net sales                                    214,665            232,712        239,619       255,265       942,261
Cost of goods sold                                 149,987            162,040        167,993       176,841       656,861
Gross profit                                        64,678             70,672         71,626        78,424       285,400
Selling, general and administrative
expenses                                            50,066             48,378         52,432        55,538       206,414
Operating income                                    14,612             22,294         19,194        22,886        78,986
Interest expense, net                                2,889              2,953          2,925         3,108        11,875
Foreign currency (gains) losses, net                 2,128            (4,189)       (10,564)         7,409       (5,216)
Income before income taxes                           9,595             23,530         26,833        12,369        72,327
Provision for income taxes                           3,061              6,065          9,144         4,882        23,152
Net income                                $          6,534    $        17,465    $    17,689    $    7,487    $   49,175
Net income per share
basic                                     $           0.16    $          0.43    $      0.44    $     0.18    $     1.21
diluted                                   $           0.16    $          0.43    $      0.44    $     0.18    $     1.21
Adjusted EBITDA
Animal Health                             $         27,637    $        33,696    $    29,232    $   33,541    $  124,106
Mineral Nutrition                                    4,533              5,525          7,303         6,677        24,038
Performance Products                                 2,138              1,324          2,865         2,379         8,706
Corporate                                         (11,842)           (11,453)       (11,404)      (11,068)      (45,767)
Adjusted EBITDA                           $         22,466    $        29,092    $    27,996    $   31,529    $  111,083
Reconciliation of net income to
Adjusted EBITDA
Net income                                $          6,534    $        17,465    $    17,689    $    7,487    $   49,175
Interest expense, net                                2,889              2,953          2,925         3,108        11,875
Provision for income taxes                           3,061              6,065          9,144         4,882        23,152
Depreciation and amortization                        7,854              8,001          8,445         8,405        32,705
EBITDA                                              20,338             34,484         38,203        23,882       116,907
Acquisition-related cost of goods sold                   -                  -             78           238           316
Acquisition-related transaction costs                    -                  -            279             -           279
Gain on sale of investment                               -            (1,203)              -             -       (1,203)
Foreign currency (gains) losses, net                 2,128            (4,189)       (10,564)         7,409       (5,216)
Adjusted EBITDA                           $         22,466    $        29,092    $    27,996    $   31,529    $  111,083


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                                                                    Quarters                                   Year
                                         September 30,       December 31,      March 31,      June 30,      June 30,
For the Periods Ended                         2020               2020             2021           2021          2021

                                                                        (in thousands)
Net sales
MFAs and other                          $         78,703    $        81,577    $    78,530    $   91,207    $  330,017
Nutritional Specialties                           32,600             36,394         36,978        36,788       142,760
Vaccines                                          17,066             18,267         18,872        18,734        72,939
Animal Health                           $        128,369    $       136,238    $   134,380    $  146,729    $  545,716
Mineral Nutrition                                 51,440             54,157         58,153        56,810       220,560
Performance Products                              15,385             15,754         19,196        16,739        67,074
Total net sales                                  195,194            206,149        211,729       220,278       833,350
Cost of goods sold                               131,075            137,884        142,564       150,450       561,973
Gross profit                                      64,119             68,265         69,165        69,828       271,377
Selling, general and administrative
expenses                                          48,431             48,375         49,033        50,670       196,509
Operating income                                  15,688             19,890         20,132        19,158        74,868
Interest expense, net                              2,810              3,214          2,933         3,923        12,880
Foreign currency (gains) losses, net             (3,631)                624          (583)         (890)       (4,480)
Income before income taxes                        16,509             16,052         17,782        16,125        66,468
Provision (benefit) for income taxes               4,207              3,251          5,621         (996)        12,083
Net income                              $         12,302    $        12,801    $    12,161    $   17,121    $   54,385
Net income per share
basic                                   $           0.30    $          0.32    $      0.30    $     0.42    $     1.34
diluted                                 $           0.30    $          0.32    $      0.30    $     0.42    $     1.34
Adjusted EBITDA
Animal Health                           $         30,101    $        33,349    $    30,962    $   29,541    $  123,953
Mineral Nutrition                                  3,047              4,185          5,232         4,652        17,116
Performance Products                               1,972              2,266
         2,929         2,270         9,437
Corporate                                       (10,831)           (11,258)       (11,073)       (9,462)      (42,624)
Adjusted EBITDA                         $         24,289    $        28,542    $    28,050    $   27,001    $  107,882
Reconciliation of net income to
Adjusted EBITDA
Net income                              $         12,302    $        12,801    $    12,161    $   17,121    $   54,385
Interest expense, net                              2,810              3,214          2,933         3,923        12,880
Provision (benefit) for income taxes               4,207              3,251          5,621         (996)        12,083
Depreciation and amortization                      8,036              8,088          7,918         7,843        31,885
EBITDA                                            27,355             27,354         28,633        27,891       111,233
Stock-based compensation                             565                564              -             -         1,129
Foreign currency (gains) losses, net             (3,631)                624
         (583)         (890)       (4,480)
Adjusted EBITDA                         $         24,289    $        28,542    $    28,050    $   27,001    $  107,882

General Description of Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is an alternative view of performance used by management as our
primary operating measure, and we believe that investors' understanding of our
performance is enhanced by disclosing this performance measure. We report
Adjusted EBITDA to reflect the results of our operations prior to considering
certain 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 defined
Adjusted EBITDA as EBITDA plus (a) (income) loss from, and disposal of,
discontinued operations, (b) other expense or less other income, as separately
reported on our consolidated statements of operations, including foreign
currency gains and losses, and (c) certain items that we consider to be unusual,
non-operational or non-recurring. The Adjusted EBITDA measure is not, and should
not be viewed as, a substitute for GAAP reported net income.

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The Adjusted EBITDA measure is an important internal measure for us. We measure our overall performance on this basis in conjunction with other performance measures. Here are examples of how our Adjusted EBITDA measure is used:

? senior management receives a monthly analysis of our operating results which is

prepared on an adjusted EBITDA basis;

? our annual budgets are prepared on the basis of adjusted EBITDA; and

? other goal setting and performance metrics are prepared on an adjusted basis

EBITDA basis.


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 assesses performance.

We also recognize that as an internal measure of performance, the Adjusted EBITDA measure has limitations, and we do not limit our performance management process to this measure alone. A limitation of the Adjusted EBITDA measure is that it provides a view of our operations without including all events that occurred during a period, such as amortization of property, plant and equipment or amortization of acquired intangible assets, and does not provide a comparable view of our performance to other companies.

Certain significant elements

Adjusted EBITDA is calculated prior to considering certain items. We evaluate
such items on an individual basis. Such evaluation considers both the
quantitative and the qualitative aspect of their unusual or non-operational
nature. Unusual, in this context, may represent items that are not part of our
ongoing business; items that, either as a result of their nature or size, we
would not expect to occur as part of our normal business on a regular basis.

We consider acquisition-related activities and business restructuring costs
related to productivity and cost saving initiatives, including employee
separation costs, to be unusual items that we do not expect to occur as part of
our normal business on a regular basis. We consider foreign currency gains and
losses to be non-operational because they arise principally from intercompany
transactions and are largely non-cash in nature.

New accounting standards

For a discussion of the new accounting standards, see “Notes to the Consolidated Financial Statements – Summary of Significant Accounting Policies and New Accounting Standards”.

Critical accounting conventions

Critical accounting policies are those that require application of management's
most difficult, subjective and/or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods. Not all accounting policies require
management to make difficult, subjective or complex judgments or estimates. In
presenting our consolidated financial statements in accordance with generally
accepted accounting principles in the United States of America (GAAP), we are
required to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. Actual results that differ from our
estimates and assumptions could have an unfavorable effect on our financial
position and results of operations.

The following is a summary of the accounting policies that we consider essential to the consolidated financial statements.

Revenue recognition

We recognize revenue from product sales when control of the products passes to the customer, generally when title and risk of loss pass to the customer. Some of our businesses have terms where control of the underlying product passes to the customer upon shipment, while others have terms where control passes to the customer upon delivery.

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Revenue reflects the total consideration to which we expect to be entitled, in
exchange for delivery of products or services, net of variable consideration.
Variable consideration includes customer programs and incentive offerings,
including pricing arrangements, rebates and other volume-based incentives. We
record reductions to revenue for estimated variable consideration at the time we
record the sale. Our estimates for variable consideration reflect the amount by
which we expect variable consideration to affect the revenue recognized. Such
estimates are based on contractual terms and historical experience, and are
adjusted to reflect future expectations as new information becomes available.
Historically, we have not had significant adjustments to our estimates of
customer incentives. Sales returns and product recalls have been insignificant
and infrequent due to the nature of the products we sell.

Net sales include shipping and handling fees billed to customers. The associated
costs are considered fulfillment activities, not additional promised services to
the customer, and are included in costs of goods sold when the related revenue
is recognized in the consolidated statements of operations. Net sales exclude
value-added and other taxes based on sales.

Business combinations

Our consolidated financial statements reflect the operations of an acquired
business beginning as of the date 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 may be required to
determine the fair values of certain tangible and intangible assets and in
assigning their respective useful lives. Significant judgment also may be
required to determine the fair values of contingent consideration, if any. We
typically utilize third-party valuation specialists to assist us in determining
fair values of significant tangible and intangible assets and contingent
consideration. The fair values are based on available historical information and
on future expectations and assumptions deemed reasonable by management, but are
inherently uncertain. We typically use an income method to measure the fair
value of intangible assets, based on forecasts of the expected future cash flows
attributable to the respective assets. Significant estimates and assumptions
inherent in the valuations reflect consideration of other marketplace
participants, and include the amount and timing of future cash flows,
specifically the expected revenue growth rate applied to the cash flows.
Unanticipated market or macroeconomic events and circumstances could affect the
accuracy or validity of the estimates and assumptions. Determining the useful
life of an intangible asset also requires judgment. Our estimates of the useful
lives of intangible assets primarily are based on a number of factors including
the competitive environment, underlying product life cycles, operating plans and
the macroeconomic environment of the countries in which the products are sold.
Intangible assets are amortized over their estimated lives. Intangible assets
associated with acquired in-process research and development activities
("IPR&D") are not amortized until a product is available for sale and regulatory
approval is obtained.

Long-lived assets and Good will

We periodically review our long-lived and amortizable intangible assets for
impairment and assess whether significant events or changes in business
circumstances indicate that the carrying value of the assets may not be
recoverable. Such circumstances may include a significant decrease in the market
price of an asset, a significant adverse change in the manner in which the asset
is being used or in its physical condition or a history of operating or cash
flow losses associated with the use of an asset. We recognize an impairment loss
when the carrying amount of an asset exceeds the anticipated future undiscounted
cash flows expected to result from the use of the asset and its eventual
disposition. The amount of the impairment loss is the excess of the asset's
carrying value over its fair value. In addition, we periodically reassess the
estimated remaining useful lives of our long-lived and amortizable intangible
assets. Changes to estimated useful lives would affect the amount of
depreciation and amortization recorded in the consolidated statements of
operations.

Goodwill represents the excess of the purchase price over the fair value of the
identifiable net assets acquired in a business combination. We assess goodwill
for impairment annually during the fourth quarter, or more frequently if
impairment indicators exist. Impairment exists when the carrying amount of
goodwill exceeds its implied fair value. We may elect to assess our goodwill for
impairment using a qualitative or a quantitative approach, to determine whether
it is more likely than not that the fair value of goodwill is greater than its
carrying value. During the three months ended June 30, 2022, we tested goodwill
using a quantitative approach and determined goodwill was not impaired. We have
not recorded any goodwill impairment charges in the periods included in the
consolidated financial statements.

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We evaluate our investments in equity method investees for impairment if
circumstances indicate that the fair value of the investment may be impaired.
The assets underlying a $2.7 million equity investment are currently idle; we
have concluded the investment is not impaired, based on expected future
operating cash flows and/or disposal value.

Income taxes

The provision for income taxes includes U.S. federal, state and foreign income
taxes and foreign withholding taxes. Our annual effective income tax rate is
determined based on our income, statutory tax rates and tax planning
opportunities available in the various jurisdictions in which we operate and the
tax impacts of items treated differently for tax purposes than for financial
reporting purposes. Tax law requires certain items be included in the tax return
at different times than the items are reflected in the financial statements.
Some of these differences are 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 and liabilities. Deferred tax assets generally represent the
tax effect of items that can be used as a tax deduction or credit in
future years for which we have already recorded the tax benefit in our income
statement. Deferred tax liabilities generally represent the tax effect of items
recorded as tax expense in our income statement for which payment has been
deferred, the tax effect of expenditures for which a deduction has already been
taken in our tax return but has not yet been recognized in our income statement
or the tax effect of assets recorded at fair value in business combinations for
which there was no corresponding tax basis adjustment.

The recognition and measurement of a tax position is based on management's best
judgment given the facts, circumstances and information available at the
reporting date. Inherent in determining our annual effective income tax rate are
judgments regarding business plans, planning opportunities and expectations
about future outcomes. Realization of certain deferred tax assets, primarily net
operating loss carryforwards, is dependent upon generating sufficient future
taxable income in the appropriate jurisdiction prior to the expiration of the
carryforward periods. We establish valuation allowances for deferred tax assets
when the amount of expected future taxable income is not likely to support the
use of the deduction or credit.

We may take tax positions that management believes are supportable, but are
potentially subject to successful challenge by the applicable taxing authority
in the jurisdictions where we operate. We evaluate our tax positions and
establish liabilities in accordance with the applicable accounting guidance on
uncertainty in income taxes. We review these tax uncertainties in light of
changing facts and circumstances, such as the progress of tax audits, and adjust
them accordingly.

We account for income tax contingencies using a benefit recognition model. If
our initial assessment does not result in the recognition of a tax benefit, we
regularly monitor our position and subsequently recognize the tax benefit if:
(i) there are changes in tax law or there is new information that sufficiently
raise the likelihood of prevailing on the technical merits of the position to
"more likely than not;" (ii) the statute of limitations expires; or (iii) there
is a completion of an audit resulting in a favorable settlement of that tax year
with the appropriate agency. We regularly re-evaluate our tax positions based on
the results of audits of federal, state and foreign income tax filings, statute
of limitations expirations, and changes in tax law or receipt of new information
that would either increase 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 have been deemed reasonable by management, but our estimates of
unrecognized tax benefits and potential tax benefits may not be representative
of actual outcomes, and variation from such estimates could materially affect
our financial statements in the period of settlement or when the statutes of
limitations expire. Finalizing audits with the relevant taxing authorities can
include formal administrative and legal proceedings, and, as a result, it is
difficult to estimate the timing and range of possible changes 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 components of 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 effective income tax rate.

We consider undistributed earnings of foreign subsidiaries to be indefinitely
reinvested in our international operations. The undistributed earnings of
foreign subsidiaries were subject to the U.S. one-time mandatory toll charge and
are eligible to be repatriated to the U.S. without additional U.S. tax under the
Tax Act. Should our plans change and

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we decide to repatriate all or part of the remaining cash held by our international subsidiaries, the amounts repatriated could be subject to non-WE income taxes and withholding taxes in international jurisdictions.

For more information regarding our significant accounting policies, estimates
and assumptions, see "Notes to Consolidated Financial Statements - Summary of
Significant Accounting Policies and New Accounting Standards."

Contingencies

Legal Affairs

We are subject to numerous contingencies arising in the ordinary course of
business, such as product liability and other product-related litigation,
commercial litigation, environmental claims and proceedings and government
investigations. 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 of matters,
but litigation is inherently unpredictable and excessive verdicts do occur. We
do not believe that any of these 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 developments could have a material adverse effect on our results of
operations or cash flows in the period in which the amounts are paid and/or
accrued.

We have accrued for losses that are both probable and reasonably estimable.
Substantially all of these contingencies are subject to significant
uncertainties and, therefore, determining the likelihood of a loss and/or the
measurement of any loss can be complex. Consequently, we are unable to estimate
the range of reasonably possible loss in excess of amounts accrued. Our
assessments are based on estimates and assumptions that have been deemed
reasonable by management, but the assessment process relies heavily on estimates
and assumptions that may prove to be incomplete or inaccurate, and unanticipated
events and circumstances may occur that might cause us to change those estimates
and assumptions.

Environmental

Our operations and properties are subject to Environmental Laws and regulations.
As such, the nature of our 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 under Environmental
Laws incidental to ongoing operations, including the cost of litigation
proceedings relating to environmental matters, are generally included within
operating results. Potential costs and expenses may also be incurred in
connection with the repair or upgrade of facilities to meet existing or new
requirements under Environmental Laws or to investigate or remediate potential
or actual contamination and from time to time we establish reserves for such
contemplated investigation and remediation costs. In many instances, the
ultimate costs under Environmental Laws and the time period during which such
costs are likely to be incurred are difficult to predict.

While we believe that our operations are currently in material compliance with
Environmental Laws, we have, from time to time, received notices of violation
from governmental authorities, and have been involved in civil or criminal
action for such violations. Additionally, at various sites, our subsidiaries are
engaged in continuing investigation, remediation and/or monitoring efforts to
address contamination associated with historic operations of the sites. We
devote considerable resources to complying with Environmental Laws and managing
environmental liabilities. We have developed programs to identify requirements
under, and maintain compliance with Environmental Laws; however, we cannot
predict with certainty the impact of increased and more stringent regulation on
our operations, future capital expenditure requirements, or the cost of
compliance.

The nature of our current and former operations exposes us to the risk of claims
with respect to environmental matters and we cannot assure we will not incur
material costs and liabilities in connection with such claims. Based upon our
experience to date, we believe that the future cost of compliance with existing
Environmental Laws, and liabilities for known environmental claims pursuant to
such Environmental Laws, will not have a material adverse effect on our
financial position, results of operations, cash flows or liquidity.

For more details, see “Notes to the consolidated financial statements – Commitments and contingencies”.

For more details, see “Company – Environment, health and safety”.

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