BALCHEM CORPORATION (AMEX: BCP)
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Reported as follows (unaudited) for the quarter ended June 30, 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 June 30,
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2006 2005
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Net sales $ 25,100 $ 19,484
Gross profit 8,800 7,112
Operating expenses 3,930 2,833
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Earnings from operations 4,870 4,279
Other income (expense) (57) 67
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Earnings before income tax expense 4,813 4,346
Income tax expense 1,758 1,616
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Net earnings $ 3,055 $ 2,730
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Basic net earnings per common share $ 0.26 $ 0.24
Diluted net earnings per common share $ 0.25 $ 0.23
For the Six Months Ended June 30,
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2006 2005
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Net sales $ 49,697 $ 38,824
Gross profit 17,022 14,294
Operating expenses 7,683 5,984
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Earnings from operations 9,339 8,310
Other income (expense) (81) 105
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Earnings before income tax expense 9,258 8,415
Income tax expense 3,345 3,117
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Net earnings $ 5,913 $ 5,298
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Basic net earnings per common share $ 0.51 $ 0.46
Diluted net earnings per common share $ 0.49 $ 0.44
Balchem Corporation (AMEX: BCP) 2
Record net sales of $25.1 million were achieved for the quarter ended
June 30, 2006. This is an increase of 28.8% above the $19.5 million result of
the prior year comparable quarter. Record net earnings for the second quarter
were $3.1 million, an increase of $0.3 million, or 11.9% as compared with the
same period last year, and includes $0.2 million of expense to recognize the
impact of SFAS 123R (equity based compensation) which the Company adopted on
January 1, 2006. This $3.1 million in net earnings resulted in an increase in
diluted net earnings of 8.7% to $0.25 per share for the second quarter of 2006
versus $0.23 per share for the comparable quarter of the prior year.
In the second quarter of 2006, sales of the Encapsulated/Nutritional
Products segment were a record $10.5 million, an increase of 55.3% from the
prior year comparable quarter. This includes $2.5 million of sales from the
Chelated Minerals Corporation (CMC) and Loders Croklaan acquisitions. Additional
organic growth was derived principally from strength in sales of food,
nutritional and human choline products, which grew 18.6% over the prior year
comparable period. Earnings from operations for this segment improved 66.3% to
$1.01 million in the current period as compared to $0.61 million in the
comparable quarter of the prior year. The ARC Specialty Products segment
generated earnings from operations of $2.8 million on quarterly sales of $8.0
million, which were 5.3% higher than the prior year comparable quarter,
principally a result of increased sales of ethylene oxide products and propylene
oxide. Earnings from operations for this segment were 5.5% lower than the prior
year quarter, primarily a result of higher raw material costs and the inclusion
of $0.11 million for the aforementioned SFAS 123R expense. The BCP Ingredients
segment achieved quarterly sales of $6.6 million, increasing 28.6% over the
prior year comparable quarter, with continued strong sales volumes in dry and
aqueous choline products for the poultry and swine industries. The overall
increase in sales volume and a favorable product mix drove earnings from
operations for this segment, improving 46.9% to a record $1.1 million, as
compared to $0.74 million in the prior year comparable quarter.
Consolidated gross profit for the quarter ended June 30, 2006 was a
record $8.8 million, or an increase of 23.7% compared to $7.1 million for the
prior year comparable period, primarily due to the above noted increase in
sales. Operating (Selling, R&D, and Administrative) expenses increased 38.7% to
$3.9 million, as compared to $2.8 million for the prior year comparable quarter,
equaling 15.7% of net sales. This was an increase from the 14.5% of the prior
year, and was primarily due to the inclusion of $0.24 million of the SFAS 123R
expense, additional amortization and selling expense resulting principally from
the CMC acquisition and expenditures in support of our new pharmaceutical
initiative.
For the six months ended June 30, 2006, net sales have increased 28.0%
to $49.7 million compared to $38.8 million in the comparable prior year period.
Excluding the above noted acquisitions we have realized growth in the core
segments of 16.7%, year over year. Net earnings increased 11.6% to $5.9 million
or $0.49 per diluted share, from $5.3 million, or $0.44 per diluted share in the
prior year comparable period. Results for the six months ended June 30, 2006
includes SFAS 123R expense of $0.46 million, in this initial year of adoption.
Balance sheet ratios and our cash flow continue to be strong. Early in
the first quarter, we borrowed $10 million, the proceeds of which were used to
complete the funding of the CMC
Balchem Corporation (AMEX: BCP) 3
acquisition. On June 30, 2006, net cash and investments were $2.6 million,
reflecting second quarter pre-payments of $5.0 million of the previously noted
borrowings, reducing outstanding debt to $1.5 million at the end of the quarter.
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 the
acquired CMC business. In the second quarter, we recognized a 7% sequential
gross margin improvement from the first quarter of 2006, due to the product mix
and 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
the successful integration of the recent CMC acquisition. Our operating expenses
increased as planned by approximately $1.1 million from the prior year
comparable quarter as we added additional technical and sales personnel with the
acquisition of CMC. We also spent approximately $0.3 million targeted at our
efforts in the pharmaceutical market and $0.24 million was from SFAS 123R. 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,
and positioning for sustainable growth, going forward".
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. These non-GAAP condensed consolidated statements of operations are
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 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 earnings for the three and six months ended June 30,
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 second quarter and June 30th year-to-date non-GAAP presentations.
Excluding the impact of the SFAS 123R charges, net earnings increased 19.4%
quarter-over-quarter to $3.3 million, or $0.27 per diluted share. These results
are comparable to net earnings of $2.7 million, or $0.23 per diluted share, for
the previously reported second quarter of 2005, which did not require
recognition of SFAS 123R charges. Excluding the impact of the SFAS 123R charges,
net earnings increased 20.3% year-over-year to $6.4 million, or $0.52 per
diluted share. These results are comparable to net income of $5.3 million, or
$0.44 per diluted share, for the previously reported six months ended June 30,
2005, which did not require recognition of SFAS 123R charges.
Balchem Corporation (AMEX: BCP) 4
Reconciliation of non-GAAP Earnings
(in 000's, except per share data)
Three Months Ended June 30, 2006
GAAP FAS 123R Non-GAAP
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Basis Pro-Forma
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Net sales
$ 25,100 $ -- $ 25,100
Gross profit
8,800 27 8,827
Operating expenses 3,930 (235) 3,695
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Earnings from operations 4,870 262 5,132
(57) -- (57)
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Earnings before income tax expense 4,813 262 5,075
1,758 57 1,815
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Net earnings $ 3,055 $ 205 $ 3,260
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Basic net earnings per common share $ 0.26 $ 0.02 $ 0.28
Diluted net earnings per common share $ 0.25 $ 0.02 $ 0.27
Six Months Ended June 30, 2006
GAAP FAS 123R Non-GAAP
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Basis Pro-Forma
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Net sales
$ 49,697 $ -- $ 49,697
Gross profit
17,022 54 17,076
Operating expenses 7,683 (470) 7,213
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Earnings from operations 9,339 524 9,863
(81) -- (81)
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Earnings before income tax expense 9,258 524 9,782
3,345 65 3,410
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Net earnings $ 5,913 $ 459 $ 6,372
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Basic net earnings per common share $ 0.51 $ 0.04 $ 0.55
Diluted net earnings per common share $ 0.49 $ 0.03 $ 0.52
Quarterly Conference Call
A quarterly conference call will be held on Tuesday, August 1, 2006 at
2:00 PM Eastern Daylight Savings Time (EDT) to review second 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
Balchem Corporation (AMEX: BCP) 5
to the scheduled start time of the conference call. The conference call will be
available for digital replay through August 5, 2006, by dialing toll-free (877)
660-6853, or local (201) 612-7415, and using account #298 and conference ID
#208354. This press release, and its accompanying financial exhibits, will also
be available on the company website, www.balchem.com, prior to the conference
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call.
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, human and animal 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
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Specialty Products $ 8,009 $ 7,603 $ 15,960 $ 14,736
Encap/Nutritional Products 10,539 6,787 20,328 14,628
BCP Ingredients 6,552 5,094 13,409 9,460
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Total $ 25,100 $ 19,484 $ 49,697 $ 38,824
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Business Segment Earnings (Loss):
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Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
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Specialty Products $ 2,764 $ 2,926 $ 5,536 $ 5,531
Encap/Nutritional Products 1,013 609 2,052 1,486
BCP Ingredients 1,093 744 1,751 1,293
Other income (expense) (57) 67 (81) 105
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Earnings bef. income taxes $ 4,813 $ 4,346 $ 9,258 $ 8,415
- --------------------------------------------------------------------------------
Balchem Corporation (AMEX: BCP) 6
Selected Balance Sheet Items
June 30, December 31,
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2006 2005
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Cash $ 2,580 $12,996
Accounts Receivable 12,140 11,521
Inventories 9,454 8,540
Other Current Assets 1,757 2,209
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Current Assets 25,931 35,266
Property, Plant, & Equipment (net) 25,540 24,400
Other Assets 32,391 15,475
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Total Assets $83,862 $75,141
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Current Liabilities $ 8,366 $ 9,150
Other Long-Term Obligations 7,454 5,058
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Total Liabilities 15,820 14,208
Stockholders' Equity 68,042 60,933
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Total Liabilities and Stockholders' Equity $83,862 $75,141
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