Balchem (AMEX:BCP)
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Balchem Corporation Releases Third Quarter Results
NEW HAMPTON, N.Y., Oct. 28 /PRNewswire-FirstCall/ --
Balchem Corporation (BCP - AMEX)
Reported as Follows (Unaudited) for the Quarter Ended September 30, 2003
($000 Omitted Except for Net Earnings Per Share)
For the Three Months Ended September 30,
2003 2002
Net Sales $15,791 $15,784
Gross Profit 4,657 5,998
Operating Expenses 3,260 2,594
Earnings from Operations 1,397 3,404
Other Expense 62 91
Earnings Before Income Tax Expense 1,335 3,313
Income Tax Expense 468 1,159
Net Earnings $867 $2,154
Basic Net Earnings Per Common Share $0.18 $0.45
Diluted Net Earnings Per Common Share $0.17 $0.43
For the Nine Months Ended September 30,
2003 2002
Net Sales $45,467 $45,842
Gross Profit 15,796 17,856
Operating Expenses 8,879 8,362
Earnings from Operations 6,917 9,494
Other Expense 206 270
Earnings Before Income Tax Expense 6,711 9,224
Income Tax Expense 2,470 3,427
Net Earnings $4,241 $5,797
Basic Net Earnings Per Common Share $0.88 $1.22
Diluted Net Earnings Per Common Share $0.85 $1.17
Net sales for the third quarter of 2003 and 2002 respectively were comparable at
$15.8 million. Net earnings for the third quarter of 2003 was $.9 million, or
$0.17 per diluted share, compared to net earnings of $2.2 million, or $0.43 per
diluted share, for the year-ago period.
The ARC Specialty Products segment generated a new quarterly record in net sales
of $6.7 million, an increase of 22.2% over the prior year comparable quarter.
This result was largely driven by increased sales volume of ethylene oxide for
medical device sterilization in both our drum cylinders and the new smaller
ethylene oxide canisters in support of a supply agreement with a Fortune 200
company. The BCP Ingredients Unencapsulated Feed Supplements segment generated
$3.1 million in net sales, for an increase of 15.9% over sales of the prior year
comparable quarter, principally as a result of increased sales volume in liquid
and dry choline chloride for the poultry and swine industries as well as other
derivative products. The Encapsulated/Nutritional Products segment continued to
experience slowness, with net sales of $6.0 million in the third quarter, a
decline of 21.2% from the prior year comparable quarter. This segment continued
to experience softness in the U.S. and International food markets, as well as
Animal Nutrition and Health, contributing to a quarter of lower volume and
relatively weak average prices due to product and customer mix.
The Encapsulated/Nutritional Products segment continues to see conservative
purchasing patterns as customers have reduced inventory levels on existing
product lines and postpone marketing expenditures on new product launches in the
U.S. food market. We continue to be impacted by domestic food customers who
have struggled with competition from less expensive store brands, which is
heightening the competitive nature of our business. Of particular significance,
the prior year quarter included substantial sales to a single domestic food
customer in support of a new product launch. While this customer's product
continues to be in distribution, the Company has not realized any additional
sales of its product to this customer since 2002. This accounted for
approximately 80% of the sales shortfall for the quarter ending September 2003.
During the quarter ended June 30, 2003 and continuing into the quarter ended
September 30, 2003, the U.S. dairy industry began to show signs of improvement.
However, sales of our Reashure(R) product for the animal nutrition and health
industry continued to be soft into the third quarter.
Consolidated gross profit in the quarter ended September 30, 2003 declined $1.3
million, or 22.4%, over the comparable prior year period due to the decline in
sales volume and lower margin product mix in the Encapsulated/Nutritional
Products segment as noted above. These lower sales levels, coupled with a
designed reduction in inventory levels in this one segment, negatively impacted
the company's gross margins due to the resulting reduced utilization of plant
manufacturing capacity. Operating (Selling, R&D, and Administrative) expenses
were $3.3 million in the quarter, or 20.6% of net sales, as compared to 16.4% of
net sales in the prior year quarter. During the quarter, the Company continued
to realize significant increases in employee medical claims under our
self-insurance program, as well as increases in the Company's general business
insurance premiums.
The decision to reduce inventory levels, as previously mentioned in the
September 18, 2003 outlook, while generating unfavorable manufacturing
variances, strengthened the balance sheet of the Company. Cash flow continued
to be strong in the quarter, as the Company reduced long-term debt by $0.4
million and funded from operations $0.6 million of capital projects that are
focused on growth areas of the business. Our cash position has now improved
approximately $3.0 million over our December 2002 balance.
For the nine months ended September 30, 2003, net sales were $45.5 million
compared to $45.8 million in the same period last year. Net earnings for the
nine months ended September 30, 2003 was $4.2 million or $0.85 per diluted
share, compared to net earnings of $5.8 million, or $1.17 per diluted share, for
the comparable year-ago period. The strength of the ARC Specialty Products and
BCP Ingredients Unencapsulated Feed Supplements segments continues to be offset
by the weak performance of the Encapsulated/Nutritional Products segment.
Outlook
Commenting on the outlook for the fourth quarter and year-end 2003, Dino A.
Rossi, President and CEO of Balchem, said, "Strength in the ARC Specialty
Products and BCP Ingredients Unencapsulated Feed Supplements segments should
continue. Our Encapsulated/Nutritional Products segment is seeing signs of
volume improvement in the domestic food sector and improving dairy economics.
However, this segment's full year sales are not expected to generate results
equal to the full year results of 2002. We remain focused on exploiting our
technology, both product and process, as we look to develop positive momentum
through innovation/commercialization for the Encapsulation segment. As a
result, the Company does not expect consolidated earnings for the calendar 2003
year to reach 2002 levels."
Quarterly Conference Call
A quarterly conference call will be conducted on Tuesday, October 28, 2003, at
2:00 PM ET to review third quarter 2003 results. Dino A. Rossi, Balchem's
President and CEO, and Frank Fitzpatrick, Corporate Controller and Treasurer,
will host the call. We invite you to listen to the call by dialing 800-475-2151
ten minutes prior to the scheduled start time of the conference call. This
press release, and its accompanying financial exhibits, will also be available
on the Company website, http://www.balchem.com/, prior to the conference call.
Segment Information
Balchem Corporation consists primarily of three business segments: ARC Specialty
Products, Encapsulated/Nutritional Products, and Unencapsulated Feed
Supplements. Through ARC Specialty Products, Balchem provides
specialty-packaged chemicals for use in healthcare and other industries. The
Encapsulated/Nutritional segment provides proprietary microencapsulation
solutions to an expanding variety of applications. The Unencapsulated Feed
Supplements segment (through BCP Ingredients, Inc.) 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, 2002. 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.
Sales by Segment
($ in 000's)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
ARC Specialty Products $6,682 $5,468 $19,004 $16,287
Encapsulated/Nutritional
Products 6,039 7,668 17,943 21,781
Unencapsulated Feed
Supplements 3,070 2,648 8,520 7,774
Total $15,791 $15,784 $45,467 $45,842
Selected Balance Sheet Items
($ in 000's)
September 30, December 31,
2003 2002
Cash & Investments $4,624 $1,731
Accounts Receivable 7,211 7,159
Inventories 6,688 7,238
Other Current Assets 2,224 2,683
Current Assets 20,747 18,811
Property, Plant, & Equipment (net) 25,906 25,852
Other Assets 7,902 8,635
Total Assets $54,555 $53,298
Current Liabilities 5,059 7,927
Long-Term Debt 8,274 9,581
Other Long-Term Obligations 3,051 2,521
Total Liabilities 16,384 20,029
Stockholders' Equity 39,118 34,680
Less: Treasury Stock @ Cost (947) (1,411)
Net Stockholders Equity 38,171 33,269
Total Liability and Stockholders' Equity $54,555 $53,298
Contact:
Jackie Powell
Investor Relations Coordinator
Telephone: 845-326-5635
DATASOURCE: Balchem Corporation
CONTACT: Jackie Powell, Investor Relations Coordinator of Balchem
Corporation, +1-845-326-5635
Web site: http://www.balchem.com/