New Hampton, N.Y., Oct. 29, 2009 - Balchem Corporation reported as follows (unaudited) for the period ended September 30, 2009.
($000 Omitted Except for Net Earnings per Share)
For the Three Months Ended September 30,
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2009 2008
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Net sales $ 54,292 $ 58,235
Gross profit 16,399 12,712
Operating expenses 6,096 5,486
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Earnings from operations 10,303 7,226
Other income (expense) 20 (290)
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Earnings before income tax expense 10,323 6,936
Income tax expense 3,471 2,143
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Net earnings $ 6,852 $ 4,793
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Basic net earnings per common share $ 0.37 $ 0.27
Diluted net earnings per common share $ 0.36 $ 0.25
Shares used in the calculation of diluted net
earnings per common share 19,303 19,131
For the Nine Months Ended September 30,
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2009 2008
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Net sales $ 160,254 $ 177,997
Gross profit 50,001 39,146
Operating expenses 20,103 17,276
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Earnings from operations 29,898 21,870
Other expense (106) (742)
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Earnings before income tax expense 29,792 21,128
Income tax expense 9,973 6,970
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Net earnings $ 19,819 $ 14,158
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Basic net earnings per common share $ 1.09 $ 0.79
Diluted net earnings per common share $ 1.03 $ 0.75
Shares used in the calculation of diluted net
earnings per common share 19,172 18,987
Record Third Quarter Earnings
For the quarter ended September 30, 2009, the company achieved record third quarter net earnings of $6.9 million, an increase of $2.1 million, or 43.0%. The $6.9 million generated diluted net earnings per common share of $0.36 versus $0.25 for the prior year comparable period, an increase of 44.0%. Net sales of $54.3 million were approximately 6.8% below the $58.2 million result of the prior year comparable quarter; however, on a sequential basis, sales were 2.5% greater than the second quarter 2009 sales results.
Detailing this third quarter of 2009, Animal Nutrition and Health, including industrial choline and derivative product sales, totaled $36.5 million, a decrease of 7.7%, or $3.0 million from the prior year comparable quarter. This business segment continues to be affected by the well-publicized softness in the U.S. poultry and swine markets as well as weak dairy economics which resulted in lower demand for our products when compared to the prior year quarter; however, on a sequential basis, we did see improvement in sales to these end markets, as they appear to have stabilized, and are beginning to further improve in this fourth quarter. We also realized lower export sales from our North American choline plants, largely due to the stronger U.S. dollar and international political factors affecting poultry exports. Sales of industrial derivatives (both choline and methylamines) were negatively impacted principally by the general economic downturn; however, there was improvement on a sequential basis. Sales of our specialty animal nutrition and health products, targeted for ruminant production animals and companion animals, were up slightly from the prior year comparable quarter primarily due to improved sales of chelated mineral products and new sales generated from AminoShure(TM)-L., our rumen protected lysine. While the market activities fluctuated, earnings from operations for the entire Animal Nutrition and Health segment increased to $5.3 million as compared to $2.3 million in the prior year comparable quarter. Reductions in key raw materials and improved production/supply chain efficiencies in both the U.S. and Europe led to these improved results.
Sales of the Food, Pharma and Nutrition segment were $8.6 million, a decrease of 7.7% from the prior year comparable quarter. Quarterly comparative sales results for this segment continue to reflect the roller-coaster effect of pipeline fills, inventory level management, and some effects of the worldwide economic downturn. The domestic food sector was up again this quarter, as we continue to see growth of choline into new food applications, as well as growth in the tortilla and preservation markets. We also saw sustained strength in sales of our VitaShure(R) products for nutritional enhancement, as it again posted double digit growth. These results were offset by continued slowness of calcium products sold into the over-the-counter pharmaceutical markets, choline sales into the supplement market and weak quarterly sales into the international food market. Earnings from operations for this segment were $1.3 million, as compared to $1.6 million in the prior year comparable quarter, due to the noted softness in sales volume; however, this segment's earnings result reflects a 4.6% improvement sequentially from the second quarter of 2009.
The ARC Specialty Products segment generated third quarter sales of $9.1 million, a decrease of 1.9% from the comparable prior year quarter. This modest decline was principally a result of a decline in sales of propylene oxide in the quarter, a result of slowness and order timing of industrial end use markets. Earnings from operations for this segment, at $3.7 million, improved 8.7% over the prior year quarter, principally from reductions in the cost of key petro-chemical raw materials and distribution costs.
Consolidated gross profit for the quarter ended September 30, 2009 was $16.4 million, as compared to $12.7 million for the prior year comparable period. This increase, from 21.8% of sales to 30.2% of sales, was a result of product mix, price increases, plant and logistics efficiencies, and declines in certain key raw material costs. We are also focused on volume growth of choline into export markets, capitalizing on our varied choline production capabilities, and new product launches. Operating (Selling, R&D, and Administrative) expenses at $6.1 million, increased $0.6 million over the prior year comparable quarter, as we had some modest increase of employee headcount. In addition, third quarter operating expenses in 2008 were prudently managed to lower levels, due to the decline in operating margins that had begun to occur in 2008.
For the Nine Months ended September 30, 2009, net sales have decreased 10.0% to $160.3 million from $178.0 million in the comparable prior year period. This is an improvement from the 11.5% decline we reported for the six months ended June 30, 2009. Net earnings have increased 40.0% to $19.8 million, generating $1.03 per diluted share, versus net earnings of $14.2 million, or $0.75 per diluted share, in the prior year comparable period, and they now exceed the entire twelve month result of 2008.
The company continues to maintain a healthy balance sheet with $52.9 million in working capital. Cash on hand amounted to $38.8 million at September 30, 2009, up from $27.1 million at June 30, 2009 and total debt was reduced to $7.3 million. Diligent working capital control, particularly effective inventory and accounts receivable management, has driven strong cash flow generation for the nine months ended September 30, 2009.
Commenting on 2009, Dino A. Rossi, Chairman, President and CEO of Balchem, said, "The third quarter revenues, while off approximately 7% from the third quarter of 2008, reflect sustained improvement in earnings, as discussed in the second quarter, with continuing difficult global economics. Notably, revenue increased 2.5% sequentially from the second quarter results of 2009, and impressively, we have sustained improved profitability utilizing new pricing models, leveraging off of multiple manufacturing/logistic capabilities, and we also benefitted from the lower cost of petro-chemical raw materials to serve our global customer base. We have launched new products, albeit with modest impact, but given the economically challenged marketplaces we serve, this uptake of new products is encouraging. In fact, our total volumes improved 3.5% sequentially from the second quarter, showing real growth, particularly in the Animal Nutrition and Health segment. We continue to focus on developing innovative, lower cost solutions to help customers and the markets we serve, deal with the continuing difficult global economic environment. We continue prudent management of our P&L and balance sheet, generating strong financial ratios and cash reserves as we search for other strategic opportunities. Year over year, given continued slowness in the global economy, we expect to see a single digit sales decline, but strong double digit improvement in earnings."
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Selected Financial Data
($ in 000's)
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Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
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Specialty Products $ 9,119 $ 9,298 $ 27,006 $ 26,564
Food, Pharma & Nutrition 8,639 9,362 26,034 28,122
Animal Nutrition & Health 36,534 39,575 107,214 123,311
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Total $ 54,292 $ 58,235 $160,254 $177,997
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Business Segment Earnings Before Income Taxes:
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Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
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Specialty Products $ 3,686 $ 3,391 $ 10,822 $ 8,709
Food, Pharma & Nutrition 1,342 1,565 3,584 4,763
Animal Nutrition & Health 5,275 2,270 15,492 8,398
Interest and other income
(expense) 20 (290) (106) (742)
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Total $ 10,323 $ 6,936 $ 29,792 $ 21,128
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Selected Balance Sheet Items
Sept. 30, Dec. 31,
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2009 2008
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Cash and Cash Equivalents $ 38,778 $ 3,422
Accounts Receivable 26,351 30,250
Inventories 14,679 16,618
Other Current Assets 2,852 4,961
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Total Current Assets 82,660 55,251
Property, Plant, & Equipment (net) 41,626 42,513
Other Assets 54,007 56,710
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Total Assets $ 178,293 $ 154,474
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Current Liabilities $ 29,730 $ 25,685
Long-Term Obligations 6,589 14,283
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Total Liabilities 36,319 39,968
Stockholders' Equity 141,974 114,506
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Total Liabilities and Stockholders' Equity $ 178,293 $ 154,474
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