BALCHEM CORPORATION (AMEX: BCP)
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Reported as follows (unaudited) for the quarter ended March 31, 2006
($000 Omitted Except for Net Earnings Per Share)
All per share information has been adjusted to reflect the three for two stock
split effected in the form of a 50% stock dividend
declared on December 15, 2005.
For the Three Months Ended March 31,
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2006 2005
---- ----
Net sales $ 24,597 $ 19,340
Gross profit 8,222 7,182
Operating expenses 3,753 3,151
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Earnings from operations 4,469 4,031
Other income (expense) (24) 38
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Earnings before income tax expense 4,445 4,069
Income tax expense 1,587 1,501
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Net earnings $ 2,858 $ 2,568
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Basic net earnings per common share $ 0.25 $ 0.23
Diluted net earnings per common share $ 0.24 $ 0.21
Record net sales of $24.6 million were achieved for the quarter ended
March 31, 2006. This is an increase of 27.2% above the $19.3 million result of
the prior year comparable quarter. Net earnings for the first quarter were $2.9
million, an increase of $0.3 million, or 11.3% as compared with the same period
last year, and includes a $0.25 million expense recognizing the impact of SFAS
123R (equity based compensation) for the first time. This $2.9 million net
earnings resulted in an increase in diluted net earnings of 14.3% to $0.24 per
share for the first quarter of 2006 versus $0.21 per share for the comparable
quarter of the prior year.
In the first quarter of 2006, sales of the Encapsulated/Nutritional
Products segment were $9.8 million, an increase of 24.8% from the prior year
comparable quarter. This includes $1.0 million of sales from the Loders Croklaan
acquisition and $.88 million of sales from the Chelated Minerals Corporation
(CMC) acquisition completed in February, 2006. Additional growth was driven
principally by strength in sales of food ingredients and human choline products.
Earnings from operations for this segment improved 18.5% to $1.04 million in the
current period as compared to $0.88 million in the comparable quarter of the
prior year. The ARC Specialty Products segment generated earnings from
operations of $2.8 million on record quarterly sales of
BALCHEM CORPORATION (AMEX: BCP) 2
$8.0 million. Net sales were 11.5% higher than the prior year comparable
quarter, principally a result of increased sales of 100% ethylene oxide,
ethylene oxide canisters and propylene oxide. Earnings from operations for this
segment were 6.4% higher than the prior year quarter. The BCP Ingredients
segment realized another record sales quarter of $6.9 million, increasing 57.1%
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 segment improved 19.9% to $0.66 million as compared to
$0.55 million in the prior year comparable quarter. Earnings from this segment,
while increasing, were unfavorably impacted by a scheduled plant turnaround that
idled production of liquid choline for one week, but this action also increased
our production capacity by approximately 15% going forward.
Consolidated gross profit for the quarter ended March 31, 2006 was $8.2
million, an increase of 14.5% compared to $7.2 million for the prior year
comparable period, due largely to the above noted increase in sales. Operating
(Selling, R&D, and Administrative) expenses increased 19.1% to $3.8 million, as
compared to $3.2 million for the prior year comparable quarter, equaling 15.3%
of net sales, a reduction from the 16.3% of the prior year.
Balance sheet ratios and our cash flow continue to be strong. Early in the
quarter, we borrowed $10 million, the proceeds of which were used to fund the
previously noted acquisition of CMC, in part. The remaining balance of the $17.4
million purchase price of the acquisition was funded through Balchem's cash on
hand. Our March 31, 2006 balance sheet reflects total net cash and investments
of $6.3 million after recognition of the aforementioned acquisition and the
re-payment of $2.8 million of the previously noted borrowings.
Outlook
Commenting on 2006, Dino A. Rossi, President and CEO of Balchem, said "We
are very pleased with the growth of all segments of the business, and are
especially pleased with the integration and the accretive results of both the
acquired Loders Croklaan assets and the CMC business. In the first quarter, we
recognized a 4% sequential gross margin improvement from the fourth quarter of
2005, due to the previously discussed price increases, which were put in place
to offset raw material cost increases. We also realized improvement at this
level due to successful integration of the noted acquisitions. Our operating
expenses increased by approximately $0.6 million from the prior year comparable
quarter, of which $0.2 million was from SFAS 123R, additional technical and
sales personnel from the acquisition of CMC, and we also spent approximately
$0.2 million toward our targeted efforts into the pharmaceutical market. With
these increases, we still reduced operating expenses from 16% to 15% of net
sales. We expect to continue building on our larger business and human capital
base throughout 2006, achieving double digit growth in sales and earnings over
2005".
Non-GAAP Disclosures
Certain disclosures prepared in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) included in this release are accompanied by
disclosures that are not prepared in conformity with GAAP. Management has
determined that inclusion of these disclosures provides investors a meaningful
presentation of the company's operating results in addition to the GAAP
disclosure. This non-GAAP condensed consolidated statement of operations is
provided to enhance overall understanding of our current financial performance
and how management views operating results. The presentation of this non-GAAP
information is not intended to be considered in isolation or as a substitute for
results prepared in accordance with GAAP and is not
BALCHEM CORPORATION (AMEX: BCP) 3
necessarily comparable to non-GAAP results published by other companies. This
non-GAAP disclosure and management's rationale for providing it is as follows:
The reported net income for the quarter ended March 31, 2006 includes
expenses related to the expensing of stock options and restricted stock awards
in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R
"Share Based Payments," which the Company adopted on January 1, 2006. Given the
significance and non-cash nature of this expense relative to the operating
results for the periods presented, this expense has been excluded from the
following first quarter non-GAAP presentation. Excluding the impact of the SFAS
123R charges, net earnings increased 21.2% year-over-year to $3.1 million, or
$0.26 per diluted share. These results equally compare to net income of $2.6
million, or $0.21 per diluted share, for the previously reported first quarter
of 2005, which did not require recognition of SFAS 123R charges.
Reconciliation of non-GAAP Earnings
(in 000's, except per share data)
Quarter Ended March 31, 2006
GAAP FAS 123R Non-GAAP
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Basis Pro-Forma
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Net sales $ 24,597 $ -- $ 24,597
Gross profit 8,222 27 8,249
Operating expenses 3,753 (235) 3,518
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Earnings from operations 4,469 262 4,731
Other income (expense) (24) -- (24)
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Earnings before income tax expense 4,445 262 4,707
Income tax expense 1,587 8 1,595
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Net earnings $ 2,858 $ 254 $ 3,112
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Basic net earnings per common share $ 0.25 $ 0.02 $ 0.27
Diluted net earnings per common share $ 0.24 $ 0.02 $ 0.26
Quarterly Conference Call
A quarterly conference call will be held on Monday, May 1, 2006 at 2:00 PM
Eastern Daylight Savings Time (EDT) to review first quarter 2006 results. 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 toll-free
(877) 407-8289, or local (201) 689-8341, five minutes prior to the scheduled
start time of the conference call. The conference call will be available for
digital replay through May 5, 2006, by dialing toll-free (877) 660-6853, or
local (201) 612-7415, and using account #298 and conference ID #191201. This
press release, and its accompanying financial exhibits, will also be available
on the company website, www.balchem.com, prior to the conference call.
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BALCHEM CORPORATION (AMEX: BCP) 4
Segment Information
Balchem Corporation consists 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 and agglomeration solutions to a variety
of applications in the food, pharmaceutical 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, 2005. 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: Karin McCaffery, Telephone: 845-326-5635
Selected Financial Data
($ in 000's)
Business Segment Net Sales:
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Three Months Ended
March 31,
2006 2005
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Specialty Products $ 7,951 $ 7,133
Encap/Nutritional Products 9,789 7,841
BCP Ingredients 6,857 4,366
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Total $24,597 $19,340
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Business Segment Earnings (Loss):
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Three Months Ended
March 31,
2006 2005
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Specialty Products $ 2,772 $ 2,605
Encap/Nutritional Products 1,039 877
BCP Ingredients 658 549
Other income (expense) (24) 38
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Earnings bef. income taxes $ 4,445 $ 4,069
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BALCHEM CORPORATION (AMEX: BCP) 5
Selected Balance Sheet Items
March 31, December 31,
2006 2005
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Cash $ 6,346 $ 12,996
Accounts Receivable 11,754 11,521
Inventories 8,803 8,540
Other Current Assets 1,682 2,209
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Current Assets 28,585 35,266
Property, Plant, & Equipment (net) 25,905 24,400
Other Assets 32,266 15,475
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Total Assets $ 86,756 $ 75,141
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Current Liabilities $ 9,607 $ 9,150
Long Term Debt 5,250 --
Other Long-Term Obligations 7,427 5,058
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Total Liabilities 22,284 14,208
Stockholders' Equity 64,472 60,933
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Total Liabilities and Stockholders' Equity $ 86,756 $ 75,141
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