Exhibit 99.1
Balchem Corporation Announces 3rd Quarter 2007 Results
New Hampton, NY - November 5, 2007
BALCHEM CORPORATION (NASDAQ: BCPC)
reported as follows (unaudited) for the period ended September 30, 2007
($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, 2006.
For the Three Months Ended September 30,
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2007 2006
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Net sales $ 50,498 $ 25,122
Gross profit 12,609 8,673
Operating expenses 5,416 3,692
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Earnings from operations 7,193 4,981
Other income (expense) (421) (3)
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Earnings before income tax expense 6,772 4,978
Income tax expense 2,315 1,827
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Net earnings $ 4,457 $ 3,151
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Basic net earnings per common share $ 0.25 $ 0.18
Diluted net earnings per common share $ 0.24 $ 0.17
Shares used in the calculation of diluted net earnings per
common share 18,657 18,224
For the Nine Months Ended September 30,
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2007 2006
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Net sales $122,468 $ 74,819
Gross profit 34,532 25,695
Operating expenses 15,208 11,375
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Earnings from operations 19,324 14,320
Other income (expense) (871) (84)
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Earnings before income tax expense 18,453 14,236
Income tax expense 6,490 5,172
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Net earnings $ 11,963 $ 9,064
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Basic net earnings per common share $ 0.67 $ 0.52
Diluted net earnings per common share $ 0.65 $ 0.50
Shares used in the calculation of diluted net earnings per
common share 18,544 18,233
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Balchem Corporation (NASDAQ:BCPC) 2
New Record Quarter Results for Sales and Earnings
Record net sales of $50.5 million were achieved for the quarter ended
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September 30, 2007. This is an increase of 101% above the $25.1 million result
of the prior year comparable quarter and was derived from both organic and
acquisition growth. Record net earnings for the quarter were $4.5 million, an
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increase of $1.3 million, or 41.4% as compared with the same period last year.
The $4.5 million in net earnings resulted in an increase in diluted earnings per
share of 41.2%, or $0.24 per share for the third quarter of 2007 versus $0.17
per share for the prior year comparable quarter.
Detailing the third quarter of 2007, the BCP Ingredients segment
achieved record quarterly sales of $29.4 million. This result reflects sales
derived from the acquisitions of the customer list of Chinook Group Limited
("Chinook") and certain assets of Akzo Nobel Chemicals S.p.A. ("Akzo"), both
completed earlier in 2007. These acquisitions contributed approximately $21.3
million of the revenue increase over the prior year quarter in this segment,
meaning the core portion of this segment grew 18.5%. The overall increase in
sales volume and product mix drove improved segment earnings to $2.1 million, up
90.2% compared to the $1.1 million in the prior year comparable quarter. This
segment's quarterly earnings result also includes non-cash amortization expense
of $0.7 million derived from the Chinook acquisition. Sales of the
Encapsulated/Nutritional Products segment were $12.9 million, an increase of
24.5% from the prior year comparable quarter. This strong double-digit sales
growth was driven principally by improved volume globally of human choline
products, and continued strong sales of REASHURE(R), NiashureTM, and KeyshureTM,
our specialty animal nutrition and health products targeted predominantly for
ruminant animals. The Food sector was up slightly as domestic market increases
were offset with soft international food sales in the quarter. Earnings from
operations for this segment improved 112.6% to $2.2 million, as compared to $1.0
million in the prior year comparable quarter. The ARC Specialty Products segment
generated consistent quarterly earnings from operations which were $2.9 million,
up 2.5%, on quarterly sales of $8.2 million. This 3.5% increase in sales, over
the prior year quarter, principally occurred from increased volumes sold of
ethylene oxide products.
Gross profit for the quarter ended September 30, 2007 was $12.6
million, or an increase of 45.4% compared to $8.7 million for the prior year
comparable period. The consolidated gross margin, as a percent of sales, has
declined in direct correlation to the proportional increase of the BCP
Ingredient sales levels. This gross margin was also slightly lower than
expected, due to certain petro-chemical raw material cost increases, incurred in
the period, that could not be offset with timely price increases. We have begun
to implement price increases, but the rate of raw material cost increases, and
more importantly, the frequency of these increases are creating considerable
challenges to mitigating the short term unfavorable impact. Also in the quarter,
our results reflect typical seasonality associated with the summer holiday
period in Europe, and were quite unfavorable from a manufacturing variance
standpoint at the Marano Ticino facility, but we have rebounded nicely in the
following periods. Operating (Selling, R&D, and Administrative) expenses
increased 46.6% to $5.4 million, as compared to $3.7 million for the prior year
comparable quarter, and were comparable to the quarter ending June 30, 2007,
decreasing to 10.7% of net sales, down from 14.7% in the prior year quarter.
This increase in operating expenses was primarily due to additional amortization
and selling expenses associated with the Chinook and Akzo acquisitions.
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Balchem Corporation (NASDAQ:BCPC) 3
For the nine months ended September 30, 2007, net sales have increased
63.7% to $122.5 million compared to $74.8 million in the comparable prior year
period. Net earnings have increased 32.0% to $12 million, generating $0.65 per
diluted share, versus net earnings of $9.1 million, or $0.50 per diluted share,
in the prior year comparable period.
Balance sheet ratios and our cash flow continue to be strong. Late in
the first quarter of 2007, we borrowed $39 million; the proceeds of which were
used to complete the funding of the Chinook and Akzo acquisitions. At September
30, 2007, our outstanding long term debt was $33.8 million reflecting
accelerated payments of $2.5 million, and with $5.5 million in cash and quality
accounts receivable of $27.4 million, we are well positioned to continue with an
aggressive debt reduction program.
Outlook
Commenting on 2007, Dino A. Rossi, President and CEO of Balchem said,
"The integrations of the Chinook and Akzo acquisitions have gone well and as
planned. While this third quarter result does not yet reflect all of the
synergies that we expect for our choline platforms, we have made significant
progress. The acquisitions continue to contribute accretively to our earnings
even with the earlier noted high level of amortization expense associated with
acquisition accounting. We have improved the results of our calcium products for
the pharmaceutical and OTC markets as we discussed last quarter and expect this
result to continue.
Raw material costs have been, and will continue to be, a challenge in the near
term. Results for the fourth quarter will likely be impacted due to certain
recently announced raw material price increases and forecasted trends for the
coming months. We are taking pricing actions, as appropriate, to lessen the
impact of these raw material cost increases; however, actions taken by the
Company in the fourth quarter are not expected to have a full impact until 2008.
With that said, we do expect the fourth quarter to reflect continued positive
results, supporting, with slight moderation, our previously noted expectation of
concluding the year with excellent double digit growth in sales and earnings."
Quarterly Conference Call
A quarterly conference call will be held on Monday, November 5, 2007 at
2:00 PM Eastern Time (ET) to review third quarter 2007 results. Dino A. Rossi,
President and CEO, and Frank Fitzpatrick, CFO, will host the call. We invite you
to listen to the call by dialing toll-free (877) 407-8289 (Event #8) five
minutes prior to the scheduled start time of the conference call. The conference
call will be available for digital replay through Friday, November 9. To access
the replay of the conference call, dial (877) 660-6853, use account #298 and
conference ID#259297. This press release, and its accompanying financial
exhibits, will also be available on the company website, www.balchem.com, prior
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to the conference 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
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Balchem Corporation (NASDAQ:BCPC) 4
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, 2006. 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
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Balchem Corporation (NASDAQ:BCPC) 5
Selected Financial Data
($ in 000's)
<table>
<caption>
Business Segment Net Sales:
- ------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Specialty Products $ 8,248 $ 7,966 $ 24,676 $ 23,927
Encap/Nutritional Products 12,880 10,349 36,126 30,676
BCP Ingredients 29,370 6,807 61,666 20,216
- ------------------------------------------------------------------------------------
Total $ 50,498 $ 25,122 $ 122,468 $ 74,819
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<caption>
Business Segment Earnings (Loss):
- ------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
- ------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Specialty Products $ 2,935 $ 2,863 $ 8,891 $ 8,400
Encap/Nutritional Products 2,186 1,028 4,642 3,079
BCP Ingredients 2,072 1,090 5,791 2,841
Other income (expense) (421) (3) (871) (84)
- ------------------------------------------------------------------------------------
Earnings bef. income taxes $ 6,772 $ 4,978 $ 18,453 $ 14,236
====================================================================================
</table>
Selected Balance Sheet Items
September 30 December 31,
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2007 2006
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Cash $ 5,501 $ 5,189
Accounts Receivable 27,395 11,578
Inventories 14,995 9,918
Other Current Assets 5,168 2,170
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Total Current Assets 53,059 28,855
Property, Plant, & Equipment (net) 40,762 31,313
Other Assets 60,670 32,165
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Total Assets $ 154,491 $ 92,333
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Current Liabilities $ 30,680 $ 9,560
Other Long-Term Obligations 33,961 7,411
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Total Liabilities 64,641 16,971
Stockholders' Equity 89,850 75,362
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Total Liabilities and Stockholders' Equity $ 154,491 $ 92,333
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