EXHIBIT 99.1
BALCHEM CORPORATION (AMEX: BCP)
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Reported as follows (unaudited) for the quarter ended September 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 September 30,
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2006 2005
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Net sales $ 25,122 $ 21,145
Gross profit 8,673 7,649
Operating expenses 3,692 2,918
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Earnings from operations 4,981 4,731
Other income (expense) (3) 126
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Earnings before income tax expense 4,978 4,857
Income tax expense 1,827 1,833
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Net earnings $ 3,151 $ 3,024
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Basic net earnings per common share $ 0.27 $ 0.26
Diluted net earnings per common share $ 0.26 $ 0.25
For the Nine Months Ended September 30,
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2006 2005
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Net sales $ 74,819 $ 59,969
Gross profit 25,695 21,943
Operating expenses 11,375 8,902
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Earnings from operations 14,320 13,041
Other income (expense) (84) 231
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Earnings before income tax expense 14,236 13,272
Income tax expense 5,172 4,950
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Net earnings $ 9,064 $ 8,322
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Basic net earnings per common share $ 0.78 $ 0.72
Diluted net earnings per common share $ 0.75 $ 0.69
Balchem Corporation (AMEX:BCP) 2
Record net sales of $25.1 million were achieved for the quarter ended
September 30, 2006. This is an increase of 18.8% above the $21.1 million result
of the prior year comparable quarter. Record net earnings for the third quarter
were $3.2 million, an increase of $0.1 million, or 4.2% as compared with the
same period last year. This result includes $0.2 million of expense to recognize
the impact of SFAS 123R (equity based compensation), which the Company adopted
on January 1, 2006, and $0.2 million of expenses to support our recent
pharmaceutical initiative. The $3.2 million in net earnings resulted in an
increase in diluted net earnings of 4.0% to $0.26 per share for the third
quarter of 2006 versus $0.25 per share for the comparable quarter of the prior
year. Excluding the impact of the SFAS 123R charges, net earnings increased
11.0% quarter-over-quarter to $3.4 million, or $0.28 per diluted share. These
results are comparable to net earnings of $3.0 million, or $0.25 per diluted
share, for the previously reported third quarter of 2005, which did not require
recognition of SFAS 123R charges.
In the third quarter of 2006, sales of the Encapsulated/Nutritional
Products segment were $10.3 million, an increase of 21.7% from the prior year
comparable quarter. This includes $1.2 million of sales from the Chelated
Minerals Corporation (CMC) acquisition. Additional organic growth was derived
principally from strength in sales of food, nutritional and human choline
products, which grew 9.0% over the prior year comparable period. Earnings from
operations for this segment improved 8.7% to $1.0 million in the current period
as compared to $0.94 million in the comparable quarter of the prior year. The
ARC Specialty Products segment generated earnings from operations of $2.9
million on quarterly sales of $8.0 million, which were 8.4% higher than the
prior year comparable quarter, principally a result of increased sales of
ethylene oxide products. Earnings from operations for this segment were 0.6%
higher than the prior year quarter, primarily a result of the increased sales
being partially offset by higher raw material costs and the inclusion of $0.12
million for the aforementioned SFAS 123R expense. The BCP Ingredients segment
achieved quarterly sales of $6.8 million, increasing 28.7% 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 drove earnings from operations for this segment, improving 16.0% to
$1.1 million, as compared to $0.94 million in the prior year comparable quarter.
The positive impact of the increased sales volume was partially offset by higher
raw material costs in this segment also.
Consolidated gross profit for the quarter ended September 30, 2006 was
$8.7 million, or an increase of 13.4% compared to $7.6 million for the prior
year comparable period, primarily due to the above noted increase in sales.
Operating (Selling, R&D, and Administrative) expenses increased 26.5% to $3.7
million, as compared to $2.9 million for the prior year comparable quarter,
equaling 14.7% of net sales. This was an increase from the 13.8% 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 nine months ended September 30, 2006, net sales have increased
24.8% to $74.8 million compared to $60.0 million in the comparable prior year
period. Excluding the acquisition of CMC, as well as the acquisition of certain
assets of Loders Croklaan, we have realized growth in the core segments of
16.4%, year-over-year. Net earnings increased 8.9% to $9.1 million or $0.75 per
diluted share, from $8.3 million, or $0.69 per diluted share in the prior year
comparable
Balchem Corporation (AMEX:BCP) 3
period. Results for the nine months ended September 30, 2006 includes SFAS 123R
expense of $0.66 million, in this initial year of adoption. Excluding the impact
of the SFAS 123R charges, net earnings increased 16.9% year-over-year to $9.7
million, or $0.80 per diluted share. These results are comparable to net income
of $8.3 million, or $0.69 per diluted share, for the previously reported nine
months ended September 30, 2005, which did not require recognition of SFAS 123R
charges.
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 acquisition. On September 30, 2006, net cash and
investments were $2.7 million, reflecting third quarter payments of $1.5 million
of the previously noted borrowings, resulting in no outstanding debt at the end
of the quarter.
Outlook
Commenting on 2006, Dino A. Rossi, President and CEO of Balchem, said
"We are pleased with the overall performance of the business, and especially
with our sequentially sustained level of profitability. We have successfully
implemented price increases in select markets to deal with the persistent,
elevated costs of raw materials, and we continue to position the company to grow
solidly going forward. Our recent acquisitions are integrated, and while some
areas of their cost structures are challenged, they are contributing
consistently to our strategic direction. Outside acquisition funding has been
completely retired, and we have initiated a number of cost reduction capital
projects at our plant facilities to improve our cost position going forward. As
noted in the last few earnings press releases, we do expect to deliver 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. 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 nine months ended September
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 third quarter and September 30th year-to-date
non-GAAP presentations.
Balchem Corporation (AMEX:BCP) 4
Reconciliation of non-GAAP Earnings
(in 000's, except per share data)
Three Months Ended September 30, 2006
GAAP FAS 123R Non-GAAP
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Basis Pro-Forma
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Net sales $ 25,122 $ -- $ 25,122
Gross profit 8,673 27 8,700
Operating expenses 3,692 (235) 3,457
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Earnings from operations 4,981 262 5,243
Other income (expense) (3) -- (3)
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Earnings before income tax expense 4,978 262 5,240
Income tax expense 1,827 56 1,883
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Net earnings $ 3,151 $ 206 $ 3,357
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Basic net earnings per common share $ 0.27 $ 0.02 $ 0.29
Diluted net earnings per common share $ 0.26 $ 0.02 $ 0.28
Nine Months Ended September 30, 2006
GAAP FAS 123R Non-GAAP
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Basis Pro-Forma
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Net sales $ 74,819 $ -- $ 74,819
Gross profit 25,695 81 25,776
Operating expenses 11,375 (705) 10,670
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Earnings from operations 14,320 786 15,106
Other income (expense) (84) -- (84)
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Earnings before income tax expense 14,236 786 15,022
Income tax expense 5,172 121 5,293
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Net earnings $ 9,064 $ 665 $ 9,729
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Basic net earnings per common share $ 0.78 $ 0.06 $ 0.84
Diluted net earnings per common share $ 0.75 $ 0.05 $ 0.80
Quarterly Conference Call
A quarterly conference call will be held on Tuesday, October 31, 2006
at 2:00 PM Eastern Standard Time (EST) to review third quarter and YTD 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, five minutes prior to the scheduled start time
of the conference call. The conference call will be available for digital replay
through November 3, 2006, by dialing toll-free (877) 660-6853, and using account
#298 and conference ID #216842. 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) 5
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 Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
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Specialty Products $ 7,967 $ 7,352 $ 23,927 $ 22,088
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Encap/Nutritional Products 10,348 8,503 30,676 23,131
BCP Ingredients 6,807 5,290 20,216 14,750
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Total $ 25,122 $ 21,145 $ 74,819 $ 59,969
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Business Segment Earnings (Loss):
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Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
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Specialty Products $ 2,864 $ 2,846 $ 8,400 $ 8,377
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Encap/Nutritional Products 1,027 945 3,079 2,431
BCP Ingredients 1,090 940 2,841 2,233
Other income (expense) (3) 126 (84) 231
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Earnings bef. income taxes $ 4,978 $ 4,857 $ 14,236 $ 13,272
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Balchem Corporation (AMEX:BCP) 5
Selected Balance Sheet Items
September 30, December 31,
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2006 2005
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Cash $ 2,660 $ 12,996
Accounts Receivable 11,283 11,521
Inventories 8,716 8,540
Other Current Assets 996 2,209
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Current Assets 23,655 35,266
Property, Plant, & Equipment (net) 30,970 24,400
Other Assets 32,225 15,475
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Total Assets $ 86,850 $ 75,141
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Current Liabilities $ 7,853 $ 9,150
Other Long-Term Obligations 7,449 5,058
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Total Liabilities 15,302 14,208
Stockholders' Equity 71,548 60,933
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Total Liabilities and Stockholders' Equity $ 86,850 $ 75,141
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