Balchem Corporation (Nasdaq:BCPC)
reported
as follows (unaudited) for the period ended March 31,
2011.
($000 Omitted Except for Net
Earnings per Share) |
|
|
|
For the
Three Months Ended March 31, |
|
|
|
|
2011 |
2010 |
|
|
|
Net sales |
$73,008 |
$59,903 |
Gross profit |
20,780 |
17,414 |
Operating expenses |
7,482 |
6,920 |
Earnings from
operations |
13,298 |
10,494 |
Other income (expense) |
78 |
167 |
Earnings before income tax
expense |
13,376 |
10,661 |
Income tax
expense |
4,464 |
3,632 |
Net earnings |
$8,912 |
$7,029 |
|
|
|
Basic net earnings per
common share |
$0.31 |
$0.25 |
Diluted net earnings per
common share |
$0.30 |
$0.24 |
|
|
|
Shares used in the
calculation of diluted net earnings per common share |
30,092 |
29,344 |
Record Quarterly Sales
Record net sales of $73.0 million were achieved for the quarter
ended March 31, 2011, as two of our business segments set new
quarterly sales records. This is an increase of 21.9% above
the $59.9 million result of the prior year comparative quarter.
Correspondingly, record first quarter net earnings were achieved of
$8.9 million, an increase of $1.9 million, or 26.8% as compared
with the same period last year. The $8.9 million generated diluted
net earnings of $0.30 per common share versus $0.24 per common
share for the prior year comparable period, an increase of
25.0%.
In this first quarter of 2011, sales of the Food, Pharma &
Nutrition segment were a record $11.0 million, which was a 10.7%
improvement over the prior year comparable quarter. The domestic
and international food sector sales were up approximately 9% this
quarter, as we again saw growth of encapsulated ingredients for
baking, prepared food, preservation and confection markets. We also
realized double digit growth in sales of our human choline and
VitaShure® products for nutritional enhancement. Earnings from
operations for this segment were a first quarter record of $2.5
million, versus the $2.0 million in the prior year comparable
quarter, largely due to a 12% improvement in sales volume.
The Animal Nutrition & Health ("ANH") segment, including
specialties, choline and industrial derivative product sales,
totaled a quarterly record $50.7 million, an increase of 25.9%, or
$10.4 million from the prior year comparable quarter. Our global
feed grade choline product sales were up double digit as volume
increased, particularly from our Italian operation, over the prior
year quarter. Data from USDA's Broiler Hatchery report, which
tracks the number of broiler chicks placed and eggs set, continues
to point toward gains in 2011, although recent forecasted
improvements were decreased slightly as poultry integrators have
slowed the placement of chicks in an attempt to lower inventory
levels and raise prices enough to cover the large increases that
have occurred in both feed and energy costs. The ANH specialty
ingredients, largely targeted to the ruminant animal markets,
realized approximately 26% sales growth from the prior year
comparable quarter, as regional US and certain export countries
showed improvement in dairy economics, supporting greater demand
for these products. Particularly strong were sales of
Aminoshure-L®, our rumen protected lysine. Sales of industrial
grade products again realized significant growth from the prior
year comparable quarter, comprising approximately 28% of the sales
in this segment for the quarter. This improvement came from sales
of various choline and choline derivatives for industrial
applications, notably from natural gas fracking, as well as
intermediate sales of our Italian-produced methylamines. Earnings
from operations for the entire ANH segment increased approximately
23% to a new quarterly record of $6.4 million as compared to $5.2
million in the prior year comparable quarter. This quarterly
earnings result particularly reflects favorable operating
efficiencies due to an overall 21% volume improvement in sales.
These earnings were, however, unfavorably impacted by increases in
petro-chemical commodities used to manufacture choline, and a
temporary operating inefficiency at one of our choline plants. Key
raw materials rose at a very swift pace in the quarter, and while
some increases were passed on to customers, our pricing initiatives
in the quarter were not enough to offset all of the cost increases.
Additional price increases have been, and will be, implemented in
the second quarter, where we are contractually able to do so, as
our businesses are likely to remain affected by these higher costs
for the balance of 2011.
The ARC Specialty Products segment generated quarterly sales of
$11.3 million, an increase of 16.8% from the comparable prior year
quarter. This increase was principally the result of strong sales
of ethylene oxide for medical device sterilization and propylene
oxide in support of the recent acquisition of the Aberco business,
which targets nut meat and spice fumigation. Earnings from
operations for this segment, at $4.4 million improved 32.1% from
the prior year comparable quarter, due to efficiencies from
increased volumes and a favorable product mix, which were partially
offset by increases in key petro-chemical commodities. We continue
to monitor raw material price escalation and seek to implement
price increases within contractual guidelines.
Consolidated gross margin for the quarter ended March 31, 2011
improved to $20.8 million, as compared to $17.4 million for the
prior year comparable period. Gross margin percentage declined
slightly to 28.5% of sales as compared to 29.1% in the prior year
comparative period, principally due to the cost increases of
certain key raw materials and the choline plant inefficiency, as
mentioned above. We did, however, realize a $3.4 million increase
after giving effect to these cost increases, which was principally
a result of a 20% increase in sales volumes. We continue to
leverage our plant capabilities, driving efficiencies from core
volume growth, broadening product applications of our human and
animal health specialty products into both the domestic and
international markets, as well as capitalizing logistically on our
varied choline production capabilities. We continue to make
strategic technology and capacity investments in our manufacturing
facilities as required to keep pace with the growing, sustainable
demand for certain products. Operating (Selling, R&D, and
General and Administrative) expenses at $7.5 million were
sequentially flat with the fourth quarter of 2010, but up 8.1% from
the prior year comparable quarter, particularly related to
increased amortization expense related to the Aberco acquisition,
an increase of employee headcount, other payroll related expenses
and consultancy fees.
The company continues to maintain a healthy balance sheet with
diligent working capital controls, particularly effective inventory
and accounts receivable management. The $111 million of net working
capital on March 31, 2011 included a cash balance of $82.1 million,
up from $77.3 million at December 31, 2010, reflecting continued
strong cash flows. During the first quarter, we also paid our
annual dividend which totaled $4.3 million and, as mentioned above,
made further capital investments in our plants totaling $1.8
million.
Commenting on 2011, Dino A. Rossi, Chairman, President and CEO
of Balchem said, "This first quarter was a great start to 2011, as
we continue to record very strong sales growth, particularly driven
by 20% overall volume improvement from the first quarter of 2010.
All three segments set new first quarter sales records, with ANH
and FPN achieving new all-time record quarterly results. While we
realized a slight decline in gross margin percentage due to
escalating raw materials and a particular operating plant
inefficiency, know that we have taken appropriate corrective
actions. We continue to see strong global demand for our products
and are leveraging off of our diverse production locations and
strong supply chain logistics to maintain and grow our leadership
positions. We have completed the previously announced
expansion of our choline capacity at St. Gabriel in this second
quarter, and will soon launch a new/improved encapsulate product
for the ANH market. Our balance sheet continues to strengthen,
further positioning us to capitalize on global strategic
opportunities."
Quarterly Conference Call
A quarterly conference call will be held on Tuesday, May 3, 2011
at 11:00 AM Eastern Time (ET) to review first quarter 2011 results.
Dino A. Rossi, Chairman, President and CEO, and Frank Fitzpatrick,
Chief Financial Officer, will host the call. We invite you to
listen to the conference by calling toll-free 1-877-407-8289 (local
dial-in 1-201-689-8341), five minutes prior to the scheduled start
time of the conference call. The conference call will be available
for digital replay through Tuesday, May 10, 2011. To access the
replay of the conference call, dial 1-877-660-6853 (local dial-in
1-201-612-7415), and use account #298 and replay ID #371411. Both
account and replay ID numbers are required for replay access.
Segment Information
Balchem Corporation consists of three business segments: ARC
Specialty Products; Food, Pharma & Nutrition; and Animal
Nutrition & Health. Through ARC Specialty Products, Balchem
provides specialty-packaged chemicals for use in healthcare and
other industries. The Food, Pharma & Nutrition segment provides
proprietary microencapsulation solutions to a variety of
applications in the human food, pharmaceutical and nutrition
marketplaces. The Animal Nutrition & 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, 2010. 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 |
|
March 31, |
|
2011 |
2010 |
ARC Specialty Products |
$ 11,293 |
$ 9,668 |
Food, Pharma &
Nutrition |
11,030 |
9,966 |
Animal Nutrition &
Health |
50,685 |
40,269 |
Total |
$ 73,008 |
$ 59,903 |
|
|
|
|
|
|
Business Segment
Earnings (Loss): |
|
Three Months Ended |
|
March 31, |
|
2011 |
2010 |
ARC Specialty Products |
$ 4,376 |
$ 3,312 |
Food, Pharma &
Nutrition |
2,512 |
1,981 |
Animal Nutrition &
Health |
6,410 |
5,201 |
Other income
(expense) |
78 |
167 |
Total |
$ 13,376 |
$ 10,661 |
|
|
|
Selected Balance Sheet
Items |
|
March 31, |
December 31, |
|
2011 |
2010 |
Cash and Cash Equivalents |
$ 82,052 |
$ 77,253 |
Accounts Receivable |
36,312 |
32,050 |
Inventories |
18,441 |
15,720 |
Other Current Assets |
3,554 |
4,629 |
Total Current Assets |
140,359 |
129,652 |
|
|
|
Property, Plant, & Equipment
(net) |
44,627 |
43,388 |
Other Assets |
54,596 |
55,584 |
Total Assets |
$ 239,582 |
$ 228,624 |
|
|
|
Current Liabilities |
$ 28,962 |
$ 29,508 |
Long-Term Obligations |
10,960 |
11,649 |
Total Liabilities |
39,922 |
41,157 |
|
|
|
Stockholders' Equity |
199,660 |
187,467 |
|
|
|
Total Liabilities and Stockholders'
Equity |
$ 239,582 |
$ 228,624 |
CONTACT: Karin McCaffery, Balchem Corporation
Telephone: 845-326-5635
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