Balchem Corporation (NASDAQ:BCPC)
Exhibit 99.1
Balchem Corporation Announces 1st Quarter 2008 Results
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New Hampton, NY - May 8, 2008
BALCHEM CORPORATION (NASDAQ: BCPC)
reported as follows (unaudited) for the period ended March 31, 2008
($000 Omitted Except for Net Earnings Per Share)
For the Three Months Ended March 31,
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2008 2007
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Net sales $ 56,861 $ 27,599
Gross profit 13,483 9,741
Operating expenses 6,079 4,399
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Earnings from operations 7,404 5,342
Other expense (213) (28)
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Earnings before income tax expense 7,191 5,314
Income tax expense 2,550 1,873
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Net earnings $ 4,641 $ 3,441
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Basic net earnings per common share $ 0.26 $ 0.19
Diluted net earnings per common share $ 0.25 $ 0.19
Shares used in the calculation of diluted net
earnings per common share 18,853 18,385
New Record Quarter Results for Sales and Earnings
Record net sales of $56.9 million were achieved for the quarter ended
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March 31, 2008. This is an increase of 106% above the $27.6 million result of
the prior year comparable quarter and was derived from both organic and
acquisition growth. Record net earnings for the quarter were $4.6 million, an
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increase of $1.2 million, or 34.9% as compared with the same period last year.
The $4.6 million in net earnings generated diluted net earnings per common share
of $0.25 per share for the first quarter of 2008 versus $0.19 per share for the
prior year, an increase of 31.6%.
Effective with the quarter ending March 31, 2008, the Company has
realigned its business segment reporting structure to more appropriately reflect
the internal management of the businesses, largely due to the impact of the
recent acquisitions of 2007. Segment information from prior year periods
contained herein has been revised to reflect the comparative business segment
reporting. The Company will continue to report three segments: ARC Specialty
Products; Food, Pharma and Nutrition; and Animal Nutrition and Health. Changes
to the reporting segments are as follows: Chelated minerals and specialty
nutritional products for the animal health industry, formerly reported as a part
of the Encapsulated/Nutritional Products segment, are now combined with the
Choline business (formerly BCP Ingredients) into a consolidated Animal Nutrition
and Health segment. The Encapsulated/Nutritional Products segment has been
renamed Food, Pharma and Nutrition, focusing on human health. There are no
changes to the ARC Specialty Products segment.
Balchem Corporation (NASDAQ:BCPC) 2
Detailing the first quarter of 2008, the Animal Nutrition and Health
segment achieved record quarterly sales of $39.1 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 in 2007. These acquisitions contributed approximately $25 million
of the revenue increase over the prior year. Our specialty animal nutrition and
health products, targeted predominantly for ruminant animals, now included in
this segment, realized approximately 31.5% growth over the 2007 Q1 results with
strong sales of Reashure(R), Nitroshure(TM), Niashure(TM) and Chelated Minerals.
Earnings from operations for this segment improved 55.1% to $3.3 million as
compared to $2.1 million in the prior year comparable quarter. This segment's
current quarterly earnings result includes non-cash amortization expense of $0.7
million related to the Chinook acquisition. This segment was impacted
unfavorably by the continued rise in raw material costs, and while we did
experience some relief towards the end of the first quarter, overall raw
material costs have stayed firm. Sales of the Food, Pharma and Nutrition segment
were $9.3 million, an increase of 28.8% from the prior year comparable quarter.
This segment growth was organic, with continued strength in sales of human grade
choline, domestic and international food, as well as pharma calcium products.
Earnings from operations for this segment improved to $1.5 million, as compared
to $0.3 million in the prior year comparable quarter. The ARC Specialty Products
segment generated quarterly sales of $8.5 million, a 4.8% increase over the
prior year quarter, principally from increased volumes of ethylene oxide
products. Earnings in this segment declined $0.3 million principally due to
increases in the cost of petro-chemical raw materials and increased operating
expenses which impacted all business segments.
Gross profit for the quarter ended December 31, 2007 was $13.5 million,
an increase of 38.4% compared to $9.7 million for the prior year comparable
period. The consolidated gross margin, as a percent of sales, at 23.7%, declined
in direct correlation to the proportional increase of the above noted
acquisition related sales. Despite the implementation of price increases, and
slight improvement sequentially over the fourth quarter, we were not able to
fully recover the cost increases in certain petro-chemical raw materials, which
continued or trended up within the quarter. On this note, our gross margin was
lower than expected in both the Animal Nutrition and Health and Specialty
Products segments, but the company anticipates improved gross margin results in
the near term. Operating (Selling, R&D, and Administrative) expenses increased
38.2% to $6.1 million, as compared to $4.4 million for the prior year comparable
quarter, but decreased as a percentage of sales to 10.7%, down from 15.9% in the
prior year quarter. This increase in operating expenses, over the prior year,
was primarily due to additional amortization and selling expenses associated
with the Chinook and Akzo acquisitions, higher research expenses for the
pharmaceutical initiatives, and higher G&A expenses due to increased audit, tax,
accounting and non-cash stock-based compensation recognition.
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 March 31,
2008, our outstanding borrowings were $25.8 million reflecting accelerated
payments of $11.0 million. We are well positioned to continue with an aggressive
debt reduction program.
Balchem Corporation (NASDAQ:BCPC) 3
Outlook
Commenting on 2008, Dino A. Rossi, President and CEO of Balchem said,
"The integrations of the 2007 acquisitions have gone well. This record first
quarter result does not yet reflect our full expectations of the acquisitions,
but they are contributing accretively to our earnings, even with the earlier
noted raw material cost increases and the high level of amortization expense
associated with the acquisition accounting. Rising raw material costs are likely
to continue being a challenge in the near term. We continue to take pricing
actions, as appropriate, to lessen the impact of these raw material cost
increases; however, actions taken by the Company in the first quarter, due
largely to their timing, did not offset all cost increases.
We continue to see improved results of our calcium products for the
pharmaceutical and OTC markets, with a couple of new calcium product launches
scheduled for the second quarter. The Animal Nutrition and Health segment is
realizing excellent global revenue growth in both the specialty and basic
choline product lines. Our pharmaceutical research efforts will continue to
generate milestone payments throughout the balance of the year. We expect 2008
to be another year of continuing quality double digit improvements in sales and
earnings, as we leverage our production capacity and business infrastructure."
Quarterly Conference Call
A quarterly conference call will be held on Thursday, May 8, 2008 at
2:00 PM Eastern Time (ET) to review first quarter 2008 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 five minutes prior to
the scheduled start time of the conference call. The conference call will be
available for digital replay through Wednesday, May 14. To access the replay of
the conference call, dial (877) 660-6853, use account #298 and conference
ID#283740. This press release, and its accompanying financial exhibits, will
also be available on the company website, www.balchem.com, prior to the
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conference call.
Segment Information
Balchem Corporation consists of three business segments: ARC Specialty
Products, Food, Pharma and Nutrition and Animal Nutrition and Health. Through
ARC Specialty Products, Balchem provides specialty-packaged chemicals for use in
healthcare and other industries. The Food, Pharma and Nutrition segment provides
proprietary microencapsulation, granulation and agglomeration solutions to a
variety of applications in the human food, pharmaceutical and nutrition
marketplaces. The Animal Nutrition and Health segment manufactures and supplies
products to numerous animal health markets and certain derivative products into
industrial applications.
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, 2007. 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
Balchem Corporation (NASDAQ:BCPC) 4
Selected Financial Data
($ in 000's)
Business Segment Net Sales:
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Three Months Ended
March 31
2008 2007
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ARC Specialty Products $ 8,450 $ 8,061
Food, Pharma and Nutrition 9,289 7,212
Animal Nutrition and Health 39,122 12,326
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Total $ 56,861 $ 27,599
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Business Segment Earnings (Loss):
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Three Months Ended
March 31,
2008 2007
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ARC Specialty Products $ 2,598 $ 2,903
Food, Pharma and Nutrition 1,528 326
Animal Nutrition & Health 3,278 2,113
Interest and other expense (213) (28)
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Total $ 7,191 $ 5,314
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Selected Balance Sheet Items
March 31, December 31,
2008 2007
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Cash $ 3,922 $ 2,307
Accounts Receivable 29,838 29,640
Inventories 18,841 15,680
Other Current Assets 3,999 4,842
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Total Current Assets 56,600 52,469
Property, Plant, & Equipment (net) 43,065 42,080
Other Assets 59,003 59,875
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Total Assets $ 158,668 $ 154,424
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Current Liabilities $ 36,895 $ 36,330
Long-Term Obligations 22,654 25,014
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Total Liabilities 59,549 61,344
Stockholders' Equity 99,119 93,080
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Total Liabilities and Stockholders' Equity $ 158,668 $ 154,424
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