BALCHEM CORPORATION (AMEX: BCP)
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Reported as follows (unaudited) for the Quarter ended December 31, 2003
($000 Omitted Except for Net Earnings Per Share)
For the Three Months Ended December 31,
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2003 2002
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Net sales $16,408 $14,356
Gross profit 5,356 5,454
Operating expenses 3,258 2,763
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Earnings from operations 2,098 2,691
Other expense 46 70
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Earnings before income tax expense 2,052 2,621
Income tax expense 654 1,002
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Net earnings $ 1,398 $ 1,619
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Basic net earnings per common share $ 0.29 $ 0.34
Diluted net earnings per common share $ 0.28 $ 0.33
For the Twelve Months Ended December 31,
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2003 2002
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Net sales $61,875 $60,197
Gross profit 21,152 23,310
Operating expenses 12,137 11,125
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Earnings from operations 9,015 12,185
Other expense 252 340
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Earnings before income tax expense 8,763 11,845
Income tax expense 3,125 4,429
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Net earnings $ 5,638 $ 7,416
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Basic net earnings per common share $ 1.17 $ 1.56
Diluted net earnings per common share $ 1.13 $ 1.50
Balchem Corporation (AMEX:BCP) Page 2
Net sales for the fourth quarter ending December 31, 2003 were a record
$16.4 million, an increase of 14.3%, as compared to $14.4 million reported for
the comparable period last year. Net earnings for the fourth quarter, however,
were $1.4 million, or $0.28 per diluted share, compared with net earnings of
$1.6 million, or $0.33 per diluted share, reported for the same period last
year. Net earnings for this quarter were negatively impacted by a one-time
organizational charge of approximately $0.4 million pre-tax that, if stated
without these charges, would reflect an earnings per diluted share of $0.33,
which would be flat with the prior year quarter.
The fourth quarter net sales closed the fiscal year ended December 31,
2003, at a record $61.9 million, an increase of 2.8% over the net sales of $60.2
million reported for the prior comparable period. While the fourth quarter net
earnings rebounded sequentially from the third quarter, they were not strong
enough to offset the shortfall of the second and particularly third quarter net
earnings. Net earnings for the fiscal year ended December 31, 2003 were $5.6
million, or $1.13 per diluted share, compared with net earnings of $7.4 million,
or $1.50 per diluted share, for the comparable prior year.
For the fourth quarter of 2003, the ARC Specialty Products segment
generated earnings from operations of approximately $2.7 million on record sales
of $7.2 million. Net sales were 24.7% higher than the prior year comparable
quarter and earnings from operations were 37.4% higher. These results were
largely driven by increased sales volume of ethylene oxide for medical device
sterilization and sales of single use ethylene oxide canisters for sterilization
use in medical facilities. The BCP Ingredients segment, which markets
unencapsulated choline supplements to the feed industry, recorded sales of $3.1
million in the fourth quarter of 2003, increasing 30.9% over sales of the prior
year comparable quarter, driven by increased sales volume in liquid and dry
choline as well as other derivative products. BCP Ingredients earned
approximately $0.10 million compared to $0.08 million earned in the prior year
quarter. Sales of the Encapsulated/ Nutritional Products segment declined
approximately $0.1 million to $6.1 million, a decline of 1.8% from the $6.2
million of sales in the prior year comparable quarter, while the earnings
declined $1.3 million from a $0.6 million profit in the fourth quarter of 2002
to a loss of $0.7 million in the current period.
The Encapsulated/Nutritional Products segment continues to be challenged.
Customers and prospects have postponed marketing launches of new products in the
U.S. food market. In addition, increased competition in both the Domestic and
International food markets during the quarter continue to result in lower
volumes sold and lower average selling prices which contributed to the erosion
in profit margins for this segment. We saw sales of the Reashure product by our
Animal Nutrition and Health group begin to move up with the improved state of
the dairy economy. As noted in an earlier press release, the Company has
responded to market conditions by making several organizational changes. These
changes were effected late in the fourth quarter in an effort to refocus our
commercial efforts, reduce operating expenses and improve the overall financial
performance of this segment.
Consolidated gross profit in the quarter ended December 31, 2003 declined
$0.1 million, or 1.8%, over the comparable prior year due largely to the decline
in sales volume and lower margin product mix in the Encapsulated/Nutritional
Products segment as noted above. Operating (Selling, R&D, and Administrative)
expenses were $3.3 million in the quarter, or 19.9% of net sales, as compared to
19.2% of net sales in the prior year quarter.
Our balance sheet ratios and cash flow continued to be strong in the
quarter. For the fiscal year ended December 31, 2003, the Company reduced long
term debt, as scheduled, by $1.7 million from $9.5 million to $7.8 million. As
previously noted, we continued to reduce inventory levels, ending the year at
$6.0 million. Our cash balance closed at $9.2 million, an increase of $7.5
million for the year.
Balchem Corporation (AMEX:BCP) Page 3
Outlook
Commenting on the outlook for 2004, Dino A. Rossi, President and CEO of
Balchem, said "Strength in the ARC Specialty Products and BCP Ingredients
Unencapsulated Feed Supplements segments should continue. Our
Encapsulated/Nutritional Products segment sees signs of some volume improvement
in the domestic food sector and a rebounding dairy economy. This segment should
improve in early 2004 compared to the first six months of 2003. With the recent
organizational changes, we expect to see improved market focus and intend to
continue our efforts to exploit our technology in each business segment. We now
expect modest consolidated earnings growth for the early part of 2004 compared
to 2003, with more significant growth later in the year coinciding with
continued improvement in the Encapsulated/Nutritional Products segment."
Quarterly Conference Call
A quarterly conference call will be conducted on Thursday, February 12,
2004, at 2:00 PM ET to review fourth quarter 2003 results. Dino A. Rossi,
Balchem's President and CEO, and Frank Fitzpatrick, Chief Financial Officer,
will host the call. We invite you to listen to the call by dialing 888-896-0863
ten minutes prior to the scheduled start time of the conference call. This press
release, and its accompanying financial exhibits, will also be available on the
Company website, www.balchem.com, prior to the conference call.
Segment Information
Balchem Corporation consists primarily of three business segments: ARC
Specialty Products, Encapsulated/Nutritional Products, and Unencapsulated Feed
Supplements. Through ARC Specialty Products, Balchem provides specialty-packaged
chemicals for use in healthcare and other industries. The
Encapsulated/Nutritional segment provides proprietary microencapsulation
solutions to an expanding variety of applications. The Unencapsulated Feed
Supplements segment (through BCP Ingredients, Inc.) manufactures and supplies
choline chloride and derivatives used primarily in the poultry and swine
industries.
Use of Non-GAAP Financial Measures
This press release includes a financial measure for earnings per share that
excludes certain, tax-effected, one-time organizational changes. The Company is
providing this non-GAAP financial measure as the Company believes that this
measurement provides a consistent basis for comparison between quarters. The
presentation of this additional non-GAAP financial information is not intended
to be considered in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP.
Forward Looking Statements
This release contains forward-looking statements, which reflect Balchem's
expectation or belief concerning future events that involve risks and
uncertainties. Balchem can give no assurance that the expectations reflected in
forward looking statements will prove correct and various factors could cause
results to differ materially from Balchem's expectations, including risks and
factors identified in Balchem's annual report on Form 10-K for the year ended
December 31, 2002. Forward-looking statements are qualified in their entirety by
the above cautionary statement . Balchem assumes no duty to update its outlook
or other forward-looking statements as of any future date.
Contact: Jackie Powell, Investor Relations Coordinator, Telephone: 845-326-5635
Balchem Corporation (AMEX:BCP) Page 4
Selected Financial Data
($ in 000's)
Business Segment Net Sales:
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Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
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ARC Specialty Products $ 7,159 $ 5,741 $ 26,163 $ 22,028
Encap/Nutritional Products 6,100 6,209 24,043 27,990
BCP Ingredients, Inc 3,149 2,406 11,669 10,179
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Total $ 16,408 $ 14,356 $ 61,875 $ 60,197
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Business Segment Earnings (Loss):
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Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
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ARC Specialty Products $ 2,666 $ 1,941 $ 9,409 $ 7,240
Encap/Nutritional Products (671) 666 (962) 5,118
BCP Ingredients, Inc 103 84 568 (173)
Other income (expense) (46) (70) (252) (340)
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Total $ 2,052 $ 2,621 $ 8,763 $ 11,845
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Selected Balance Sheet Items
December 31, December 31,
2003 2002
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Cash & Investments $ 9,239 $ 1,731
Accounts Receivable 7,233 7,159
Inventories 5,961 7,238
Other Current Assets 1,198 2,683
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Current Assets 23,631 18,811
Property, Plant, & Equipment (net) 25,636 25,852
Other Assets 7,639 8,635
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Total Assets $ 56,906 $ 53,298
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Current Liabilities $ 6,075 $ 7,927
Long-Term Debt 7,839 9,581
Other Long-Term Obligations 3,211 2,521
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Total Liabilities 17,125 20,029
Stockholders' Equity 40,285 34,680
Less: Treasury Stock @ Cost (504) (1,411)
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Net Stockholders Equity 39,781 33,269
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Total Liability and Stockholders' Equity $ 56,906 $ 53,298
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