October 26, 2004
BALCHEM CORPORATION (AMEX: BCP)
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Reported as follows (unaudited) for the Quarter ended September 30, 2004
($000 Omitted Except for Net Earnings Per Share)
For the Three Months Ended September 30,
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2004 2003
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Net sales $17,356 $15,791
Gross profit 6,219 4,657
Operating expenses 2,789 3,260
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Earnings from operations 3,430 1,397
Other expense 39 62
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Earnings before income tax expense 3,391 1,335
Income tax expense 1,231 468
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Net earnings $ 2,160 $ 867
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Basic net earnings per common share $ 0.43 $ 0.18
Diluted net earnings per common share $ 0.42 $ 0.17
For the Nine Months Ended September 30,
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2004 2003
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Net sales $49,449 $45,467
Gross profit 17,855 15,796
Operating expenses 8,308 8,879
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Earnings from operations 9,547 6,917
Other expense 88 206
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Earnings before income tax expense 9,459 6,711
Income tax expense 3,482 2,470
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Net earnings $ 5,977 $ 4,241
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Basic net earnings per common share $ 1.20 $ 0.88
Diluted net earnings per common share $ 1.17 $ 0.85
Balchem Corporation (AMEX:BCP) Page 2
Record net sales were achieved for the quarter ended September 30, 2004 of
$17.4 million. This is an increase of 9.9%, as compared to $15.8 million for the
comparable prior year period and marks the first time the company has surpassed
sales of $17 million in a quarter. Net earnings for the third quarter were $2.2
million, an increase of $1.3 million, or 149% as compared with the same period
last year. This is largely due to the fact that we continued to operate the
Encapsulated/Nutritional Product segment profitably, reflecting our designed
turn-around, versus the loss incurred in the prior year comparable quarter. This
resulted in a diluted net earnings increase of 141.3% to $0.42 per share for the
third quarter of 2004 versus $0.17 per share for the comparable quarter of the
prior year.
In this third quarter of 2004, all three segments of the company reported
improved sales and earnings versus the prior year comparable period. The ARC
Specialty Products segment generated earnings from operations of approximately
$2.7 million on record quarterly sales of $7.2 million. Net sales were 7.3%
higher than the prior year comparable quarter and earnings from operations were
17.6% higher, driven by increased sales volume of packaged ethylene oxide and
sales of single use ethylene oxide canisters for use in medical device
sterilization. The BCP Ingredients segment realized record quarterly sales of
approximately $3.7 million, increasing 19.9% over the prior year comparable
quarter, with continued strong sales volumes in dry and aqueous choline products
for the poultry and swine industries. Earnings from operations for this sector
improved to approximately $0.39 million as compared to $0.17 million in the
prior year comparable quarter. Sales of the Encapsulated/Nutritional Products
segment were $6.5 million in the period, an increase of 7.7% from the prior year
comparable quarter, principally due to improvements in the domestic and
international food markets as well as sales in the most recent quarter of
Nitroshure, which is being sold into the animal health industry. Earnings from
operations for the encap segment were $0.34 million in the current quarterly
period as compared to a $1.07 million loss in the prior year comparable quarter.
Consolidated gross profit for the quarter ended September 30, 2004 was $6.2
million, an increase of 33.5%, compared to $4.7 million for the comparable year
period due to the above noted increase in sales and improvements in the
Encapsulated/Nutritional Product business operating result. Operating (Selling,
R&D, and Administrative) expenses were $2.8 million, approximately 16.0% of net
sales, improving from 20.6% of net sales in the prior year comparable quarter.
For the nine months ended September 30, 2004, net sales have increased 8.8%
to $49.4 million compared to $45.5 million in the comparable prior year period.
Net earnings have increased 40.9% to $6.0 million or $1.17 per diluted share,
compared to net earnings of $4.2 million, or $0.85 per diluted share in the
prior year comparable period.
Our balance sheet ratios and cash flow continued to be strong. During the
quarter ended September 30, 2004, the Company reduced long term debt, as
scheduled, by $0.5 million from $7.0 million to $6.5 million. Our cash balance
closed the quarter at $17.3 million, an increase of $8.1 million over the year
end balance of $9.2 million and approximately $12.7 million over the previous
year's September 30 level.
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 quarterly sales increased 2.0%
sequentially, as we continue to see signs of volume improvement, albeit
fluctuating, in the human food and nutrition market. We have responded to food
marketplace economic pressures by re-engineering products to enable us to reduce
price and, in some instances, lowered average selling prices. We are now also
beginning to feel the impact of raw material increases that could squeeze our
gross margins. Despite these issues, we do expect this segment to continue to
improve through 2004. Animal nutrition sales have contributed nicely, as
Reashure and Nitroshure sales growth is expected to continue. Based on the
foregoing, we expect modest consolidated sales and earnings growth, over this
third quarter result, to close out the balance of 2004.
Quarterly Conference Call
A quarterly conference call will be conducted on Tuesday, October 26, 2004,
at 2:00 PM Eastern Time (ET) to review third quarter 2004 results (for the
period ending September 30, 2004). Dino A. Rossi, President and CEO, and Frank
Fitzpatrick, Chief Financial Officer, will host the call. We invite you to
listen to the call by dialing 800-475-2151 five minutes prior to the scheduled
start time of the conference call. The conference call will be available for
digital replay through October 28, 2004. To access the replay of the conference
call, dial 877-519-4471, Pin #5265697. 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 BCP Ingredients.
Through ARC Specialty Products, Balchem provides specialty-packaged chemicals
for use in healthcare and other industries. The Encapsulated/Nutritional
Products segment provides proprietary microencapsulation solutions to a variety
of applications in the food and human nutrition marketplaces. BCP Ingredients
manufactures and supplies choline chloride and derivatives used primarily in the
poultry and swine industries.
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, 2003. 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: Deirdre Cocchia, Telephone: 845-326-5600
Balchem Corporation (AMEX: BCP) Page 4
Selected Financial Data
($ in 000's)
Business Segment Net Sales:
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Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
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Specialty Products $ 7,171 $ 6,682 $21,315 $19,004
Encap/Nutritional Products 6,504 6,039 18,527 17,943
BCP Ingredients 3,681 3,070 9,607 8,520
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Total $17,356 $15,791 $49,449 $45,467
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Business Segment Earnings (Loss):
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Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
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Specialty Products $ 2,697 $ 2,294 $ 7,795 $ 6,743
Encap/Nutritional Products 345 (1,066) 901 (291)
BCP Ingredients 388 169 851 465
Other expense (39) (62) (88) (206)
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Earnings bef. income taxes $ 3,391 $ 1,335 $ 9,459 $ 6,711
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Selected Balance Sheet Items
Sept 30, Dec 31,
2004 2003
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Cash $ 17,330 $ 9,239
Accounts Receivable 7,683 7,233
Inventories 7,120 5,961
Other Current Assets 1,014 1,197
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Current Assets 33,147 23,630
Property, Plant, & Equipment (net) 24,444 25,636
Other Assets 7,042 7,640
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Total Assets $ 64,633 $ 56,906
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Current Liabilities $ 6,968 $ 6,075
Long-Term Debt 6,532 7,839
Other Long-Term Obligations 3,354 3,211
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Total Liabilities 16,854 17,125
Stockholders' Equity 47,779 40,285
Less: Treasury Stock @ Cost -- (504)
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Net Stockholders Equity 47,779 39,781
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Total Liability and Stockholders' Equity $ 64,633 $ 56,906
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