NEW HAMPTON, N.Y., March 4, 2008 (PRIME NEWSWIRE) -- Balchem Corporation (Nasdaq:BCPC) reported as follows (unaudited) for the period ended December 31, 2007:
($000 Omitted Except for Net Earnings Per Share)
For the Three Months Ended December 31,
---------------------------------------
2007 2006
---- ----
Net sales $ 53,733 $ 26,086
Gross profit 12,398 8,311
Operating expenses 5,816 3,469
---------- ----------
Earnings from operations 6,582 4,842
Other income (expense) (206) 23
---------- ----------
Earnings before income tax expense 6,376 4,865
Income tax expense 2,221 1,651
---------- ----------
Net earnings $ 4,155 $ 3,214
========== ==========
Basic net earnings per common share $ 0.23 $ 0.18
Diluted net earnings per common share $ 0.22 $ 0.17
Shares used in the calculation of diluted
net earnings per common share 18,811 18,390
For the Twelve Months Ended December 31,
----------------------------------------
2007 2006
---- ----
Net sales $ 176,201 $ 100,905
Gross profit 46,930 34,006
Operating expenses 21,024 14,844
---------- ----------
Earnings from operations 25,906 19,162
Other income (expense) (1,077) (61)
---------- ----------
Earnings before income tax expense 24,829 19,101
Income tax expense 8,711 6,823
---------- ----------
Net earnings $ 16,118 $ 12,278
========== ==========
Basic net earnings per common share $ 0.91 $ 0.70
Diluted net earnings per common share $ 0.87 $ 0.67
Shares used in the calculation of diluted
net earnings per common share 18,611 18,247
New Record Quarter Results for Sales
Quarterly record net sales of $53.7 million were achieved for the period ended December 31, 2007. This is an increase of 106% above the $26.1 million result of the prior year comparable quarter, and was derived from both organic and acquisition growth. Net earnings for the quarter were $4.2 million, an increase of $.9 million, or 29.3% as compared with the same period last year. The $4.2 million in net earnings resulted in an increase in diluted earnings per share of 29.4%, or $0.22 per share for the fourth quarter of 2007 versus $0.17 per share for the prior year comparable quarter.
Detailing the fourth quarter of 2007, the BCP Ingredients segment achieved record quarterly sales of $31.6 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 $23.5 million of the revenue increase over the prior year quarter in this segment, meaning the core portion of this segment grew 13.1%. Earnings from operations for this segment were a bit soft, improving 36.1% to $1.1 million as compared to $0.81 million in the prior year comparable quarter. This segment's current quarterly earnings result includes non-cash amortization expense of $0.7 million related specifically to the Chinook acquisition. It also was impacted unfavorably by a significant, rapid increase in the cost of methanol in the quarter. Sales of the Encapsulated/Nutritional Products segment were $13.8 million, an increase of 26.7% from the prior year comparable quarter. This segment growth was organic only, as the human sector increased 30% with particular strength in sales of choline, domestic and international food, as well as pharma calcium products. Our specialty animal nutrition and health products, targeted predominantly for ruminant animals, realized approximately 21% growth over the 2006 Q4 results with continued strong sales of Reashure(r), Nitroshure(tm) and Niashure(tm). Earnings from operations for this segment improved 127.7% to $2.6 million, as compared to $1.1 million in the prior year comparable quarter. The ARC Specialty Products segment generated quarterly sales of $8.4 million, a 3.5% increase over the prior year quarter, principally from increased volumes of ethylene oxide products. Earnings from operations were flat due to increases in the cost of petro-chemical raw materials.
Gross profit for the quarter ended December 31, 2007 was $12.4 million, or an increase of 49.2% compared to $8.3 million for the prior year comparable period. The consolidated gross margin, as a percent of sales, at 23.1% declined in direct correlation to the proportional increase of the BCP Ingredient sales levels. This gross margin was lower than expected, due to certain petro-chemical raw material cost increases, which negatively affected the BCP Ingredients and Specialty Products segments that could not be offset with timely price increases. We had begun to implement price increases, but the rate of raw material cost increases, and more importantly, the frequency of these increases did create considerable challenges to mitigating the short term unfavorable impact. Operating (Selling, R&D, and Administrative) expenses increased 67.7% to $5.8 million, as compared to $3.5 million for the prior year comparable quarter, but decreased as a percentage of sales to 10.8%, down from 13.3% in the prior year quarter. This increase in operating expenses, over the prior year, was primarily due to the additional amortization and selling expenses associated with the Chinook and Akzo acquisitions.
For the twelve months ended December 31, 2007, net sales have increased 74.6% to $176.2 million compared to $100.9 million in the comparable prior year period. Net earnings have increased 31.3% to $16.1 million, generating $0.87 per diluted share, versus net earnings of $12.3 million, or $0.67 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 December 31, 2007, our outstanding borrowings were $28.0 million reflecting accelerated payments of $9.0 million. We have quality accounts receivable of $29.6 million and 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. This fourth quarter result does not reflect our expectations of the impact from the acquisitions due to raw material increases, nor are all of the synergies achieved for our choline platforms, but we have made significant progress. The acquisitions continue to contribute accretively to our earnings even with the earlier noted raw material cost increases and the 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. 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, due largely to their timing, did not offset these cost increases , but will have more impact on 2008. With that said, 2007 results were very strong with sales up 75% and net earnings up 31%. We have implemented additional price increases effective January 1, 2008, to pass on the raw material increases noted earlier. With this action and our continued growth plans, we expect 2008 to be another year of continuing quality double digit improvements in sales and earnings, pending global economic issues."
Quarterly Conference Call
A quarterly conference call will be held on Tuesday, March 4, 2008 at 2:00 PM Eastern Time (ET) to review fourth 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 five minutes prior to the scheduled start time of the conference call. The conference call will be available for digital replay through Friday, March 7. To access the replay of the conference call, dial (877) 660-6853, use account #298 and conference ID#275712. This press release, and its accompanying financial exhibits, will also be available on the company website, www.balchem.com, prior 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 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.
Selected Financial Data
($ in 000's)
Business Segment Net Sales:
---------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
---------------------------------------------------------------------
Specialty Products $ 8,380 $ 8,099 $ 33,057 $ 32,026
Encap/Nutritional Products 13,793 10,889 49,919 41,565
BCP Ingredients 31,560 7,098 93,225 27,314
---------------------------------------------------------------------
Total $ 53,733 $ 26,086 $176,201 $100,905
---------------------------------------------------------------------
Business Segment Earnings (Loss):
---------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
---------------------------------------------------------------------
Specialty Products $ 2,932 $ 2,915 $ 11,824 $ 11,315
Encap/Nutritional Products 2,553 1,121 7,194 4,200
BCP Ingredients 1,097 806 6,888 3,647
Other income (expense) (206) 23 (1,077) (61)
---------------------------------------------------------------------
Earnings bef. income taxes $ 6,376 $ 4,865 $ 24,829 $ 19,101
---------------------------------------------------------------------
Selected Balance Sheet Items
December 31, December 31,
----------- -----------
2007 2006
---- ----
Cash $ 2,307 $ 5,189
Accounts Receivable 29,640 11,578
Inventories 15,680 9,918
Other Current Assets 4,842 2,170
-------- --------
Total Current Assets 52,469 28,855
Property, Plant, & Equipment (net) 42,080 31,313
Other Assets 59,875 32,165
-------- --------
Total Assets $154,424 $ 92,333
======== ========
Current Liabilities $ 36,330 $ 9,560
Long-Term Obligations 25,014 7,411
-------- --------
Total Liabilities 61,344 16,971
Stockholders' Equity 93,080 75,362
-------- --------
Total Liabilities and Stockholders'
Equity $154,424 $ 92,333
======== ========