Balchem Corporation (NASDAQ: BCPC) today reported for the third
quarter 2019 net earnings of $20.7 million, compared to net
earnings of $19.2 million for the third quarter 2018. Third quarter
adjusted net earnings(a) were $26.3 million, compared to $23.7
million in the prior year quarter. Third quarter adjusted
EBITDA(a) was $40.4 million, compared to $38.4 million in the prior
year quarter.
Third Quarter 2019 Financial Highlights:
- Third quarter net sales of $158.6 million, an increase of $3.6
million, or 2.3%, compared to the prior year quarter.
- Year over year quarterly sales growth in three of the four
segments, with record third quarter sales in Human Nutrition and
Health and Specialty Products.
- Third quarter GAAP net earnings were $20.7 million, an increase
of $1.5 million, or 7.6% from the prior year. These net earnings
resulted in GAAP earnings per share of $0.64.
- Quarterly adjusted net earnings of $26.3 million increased $2.7
million or 11.2% from the prior year, resulting in adjusted
earnings per share(a) of $0.81.
- Third quarter adjusted EBITDA was $40.4 million, an increase of
$1.9 million, or 5.0%, from the prior year.
- Strong quarterly cash flows from operations were $42.7 million
for the third quarter 2019, an increase of 31.4% from the prior
year, with quarterly free cash flow(a) of $35.8 million, an
increase of 32.7% from the prior year.
Recent Highlights:
- In September, Balchem’s Board of Directors elected Ms. Joyce
Lee to fill a vacancy on the Board. Ms. Lee currently serves
as the President of North America for Bayer Animal Health.
From 2013 to 2017, Ms. Lee was Executive Vice President and Area
President of Canada and Latin America at Zoetis Inc., a global
leader in animal health medicines, vaccines and diagnostic
products. Prior to Zoetis, Ms. Lee held various senior
leadership positions at Pfizer. Ms. Lee brings important
Animal Health knowledge to the Balchem board, along with broad
business acumen and international expertise and she will serve on
the Audit Committee of the Board.
- On September 6, 2019, we divested our Reading, PA plant, and
its associated business dealings, resulting in no gain or loss on
the sale of this non-core asset.
- We repurchased approximately 230 thousand shares at an average
cost of $88.58 as part of our existing stock repurchase
program. This both offset dilution associated with our equity
incentive plan and provided a return of capital to our
shareholders.
Ted Harris, Chairman, President, and CEO of
Balchem said, “Our results in the third quarter reflected sales
growth in three of our four segments, improved margins, solid net
earnings growth, and strong cash conversion. Record third quarter
sales for Human Nutrition and Health and Specialty Products, and
continued improvement in Animal Nutrition and Health, were
significantly offset by lower Industrial Products sales to the oil
and gas fracking market.”
Mr. Harris added, “The particularly strong third
quarter cash flows allowed us to reduce revolver borrowings, while
also completing a modest dilution reducing stock repurchase
program, further strengthening our balance sheet and reducing our
overall leverage ratio on a net debt basis to approximately
1.0.”
Results for Period Ended
September 30, 2019 (unaudited)(Dollars in thousands,
except per share data)
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
|
$ |
158,595 |
|
|
$ |
155,043 |
|
|
$ |
477,178 |
|
|
$ |
480,140 |
|
Gross margin |
|
54,008 |
|
|
48,002 |
|
|
157,021 |
|
|
152,927 |
|
Operating expenses |
|
27,978 |
|
|
22,479 |
|
|
78,109 |
|
|
73,061 |
|
Earnings from operations |
|
26,030 |
|
|
25,523 |
|
|
78,912 |
|
|
79,866 |
|
Other expense |
|
1,594 |
|
|
1,994 |
|
|
4,802 |
|
|
6,099 |
|
Earnings before income tax
expense |
|
24,436 |
|
|
23,529 |
|
|
74,110 |
|
|
73,767 |
|
Income tax expense |
|
3,760 |
|
|
4,315 |
|
|
14,822 |
|
|
15,528 |
|
Net earnings |
|
$ |
20,676 |
|
|
$ |
19,214 |
|
|
$ |
59,288 |
|
|
$ |
58,239 |
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per
common share |
|
$ |
0.64 |
|
|
$ |
0.59 |
|
|
$ |
1.82 |
|
|
$ |
1.79 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(a) |
|
$ |
40,367 |
|
|
$ |
38,438 |
|
|
$ |
120,026 |
|
|
$ |
119,708 |
|
Adjusted net earnings(a) |
|
$ |
26,309 |
|
|
$ |
23,653 |
|
|
$ |
75,285 |
|
|
$ |
72,601 |
|
Adjusted net earnings per
common share(a) |
|
$ |
0.81 |
|
|
$ |
0.73 |
|
|
$ |
2.32 |
|
|
$ |
2.24 |
|
|
|
|
|
|
|
|
|
|
Shares used in the
calculations of diluted and adjusted net earnings per common
share |
|
32,455 |
|
|
32,565 |
|
|
32,514 |
|
|
32,452 |
|
(a) |
See “Non-GAAP Financial Information” for a reconciliation of GAAP
and non-GAAP financial measures. |
Financial Results for the Third Quarter of
2019:
The Human Nutrition &
Health segment generated third quarter sales of $86.1
million, an increase of $0.3 million or 0.3% compared to the prior
year quarter. The increase was primarily driven by higher sales
within our Human Nutrition & Pharma business, partially offset
by lower Cereal Systems volumes. Quarterly earnings from operations
for this segment of $13.2 million increased $0.1 million or 0.7%
compared to $13.1 million in the prior year quarter, primarily due
to the aforementioned higher sales and mix, partially offset by
higher operating expenses resulting from the prior year benefiting
from the timing of an insurance recovery. Excluding the
effect of non-cash expense associated with amortization of acquired
intangible assets for the third quarter of 2019 and 2018 of $4.8
million and $5.4 million, respectively, adjusted earnings from
operations(a) for this segment were $18.0 million, compared to
$18.5 million in the prior year quarter.
The Animal Nutrition &
Health segment generated quarterly sales of $42.3 million,
an increase of $1.9 million or 4.6% compared to the prior year
quarter. The increase was primarily the result of higher
volumes in both the ruminant species and monogastric species
markets. Third quarter earnings from operations for this
segment of $6.1 million were up from the prior year comparable
quarter of $5.1 million, primarily due to the aforementioned higher
sales of ruminant animal feed market products and certain lower raw
material costs, partially offset by lower margins in the European
monogastric business as a result of increased competitive
activity. Excluding the effect of non-cash expense associated
with amortization of acquired intangible assets for the third
quarter of 2019 and 2018 of $0.2 million and $0.1 million
respectively, adjusted earnings from operations for this segment
were $6.3 million, compared to $5.2 million in the prior year
quarter.
The Specialty Products segment
generated third quarter sales of $24.9 million, an increase of $7.3
million or 41.2% compared to the prior year quarter, primarily due
to higher sales of ethylene oxide for the medical device
sterilization market due to both the contribution of Chemogas and
higher legacy product sales, partially offset by lower volumes in
the plant nutrition business. Third quarter earnings from
operations for this segment were $6.7 million, versus $5.8 million
in the prior year comparable quarter, an increase of $0.9 million
or 16.2%, primarily due to the aforementioned higher sales,
partially offset by mix and higher operating expenses due to the
acquisition of Chemogas. Excluding the effect of non-cash
expense associated with amortization of acquired intangible assets
for the third quarter of 2019 and 2018 of $1.7 million and $0.7
million, respectively, adjusted earnings from operations for this
segment were $8.4 million, compared to $6.5 million in the prior
year quarter.
The Industrial Products segment
sales of $5.3 million decreased $5.8 million or 52.5% from the
prior year comparable quarter, primarily due to reduced sales
volumes of choline and choline derivatives used in shale fracking
applications. Earnings from operations for the Industrial Products
segment were $0.8 million, a decrease of $0.9 million or 51.9%
compared with the prior year comparable quarter, primarily due to
the aforementioned lower sales volumes.
Consolidated gross margin for the quarter ended
September 30, 2019 of $54.0 million increased by $6.0 million
or 12.5%, compared to $48.0 million for the prior year comparable
period. Gross margin as a percentage of sales was 34.1% as compared
to 31.0% in the prior year period, an increase of 310 basis points.
The increase was primarily due to mix and certain lower raw
material costs, partially offset by lower margins in the European
monogastric business within the Animal Nutrition and Health
segment. Operating expenses of $28.0 million for the quarter
increased $5.5 million from the prior year comparable quarter,
primarily due to incremental operating expenses related to the
Chemogas acquisition and the prior year benefiting from the timing
of an insurance recovery. Excluding non-cash operating expenses
associated with amortization of intangible assets of $6.1 million,
operating expenses were $21.8 million, or 13.8% of sales.
Interest expense was $1.7 million in the third
quarter of 2019. Our effective tax rates for the three months ended
September 30, 2019 and 2018 were 15.4% and 18.3%,
respectively. The decrease in the effective tax rate from the prior
year is primarily due to discrete items, in particular related to
research and development activities.
For the quarter ended September 30, 2019,
strong cash flows provided by operating activities were $42.7
million, and free cash flow was $35.8 million. The $167.9 million
of net working capital on September 30, 2019 included a cash
balance of $59.4 million, which reflects a third quarter 2019
reduction of revolving debt of $10.0 million, stock repurchases of
$20.6 million, and capital expenditures and intangible assets
acquired of $6.9 million. The Company continues to invest in
projects across all facilities to improve capabilities and
operating efficiencies.
Ted Harris said, “We are pleased with the sales
and net earnings growth as well as the strong cash flows delivered
in the quarter, particularly in light of the macro economic
challenges we have been facing, principally in our Industrial
Products segment.”
Mr. Harris went on to add, “In addition, the
Chemogas integration is progressing nicely, with synergies starting
to be realized, and is on track to meet our expectations. The
further improvement in our balance sheet over the course of the
quarter provides financial strength as we continue to progress our
strategic organic growth initiatives and seek value-creating
acquisitions.”
Quarterly Conference Call
A quarterly conference call will be held on
Tuesday, November 5, 2019, at 11:00 AM Eastern Time (ET) to review
third quarter 2019 results. Ted Harris, Chairman of the Board, CEO
and President and Martin Bengtsson, CFO 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 replay two hours after the
conclusion of the call through end of day Tuesday, November 19,
2019. To access the replay of the conference call, dial
1-877-660-6853 (local dial-in 1-201-612-7415), and use conference
ID #13695727.
Segment Information
Balchem Corporation reports four business
segments: Human Nutrition & Health; Animal Nutrition &
Health; Specialty Products; and Industrial Products. The Human
Nutrition & Health segment delivers customized food and
beverage ingredient systems, as well as key nutrients into a
variety of applications across the food, supplement and
pharmaceutical industries. The Animal Nutrition & Health
segment manufactures and supplies products to numerous animal
health markets. Through Specialty Products, Balchem provides
specialty-packaged chemicals for use in healthcare and other
industries, and also provides chelated minerals to the
micronutrient agricultural market. The Industrial Products segment
manufactures and supplies 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, 2018.
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: Mary Ann Brush, Balchem Corporation (Telephone:
845-326-5600)
Selected Financial Data (unaudited)($
in 000’s)
Business Segment Net Sales:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Human Nutrition & Health |
|
$ |
86,142 |
|
|
$ |
85,890 |
|
|
$ |
257,163 |
|
|
$ |
253,966 |
|
Animal Nutrition &
Health |
|
42,286 |
|
|
40,410 |
|
|
129,127 |
|
|
128,587 |
|
Specialty Products |
|
24,888 |
|
|
17,629 |
|
|
68,219 |
|
|
58,233 |
|
Industrial Products |
|
5,279 |
|
|
11,114 |
|
|
22,669 |
|
|
39,354 |
|
Total |
|
$ |
158,595 |
|
|
$ |
155,043 |
|
|
$ |
477,178 |
|
|
$ |
480,140 |
|
Business Segment Earnings Before Income
Taxes:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Human Nutrition & Health |
|
$ |
13,193 |
|
|
$ |
13,107 |
|
|
$ |
39,234 |
|
|
$ |
35,724 |
|
Animal Nutrition &
Health |
|
6,122 |
|
|
5,100 |
|
|
16,423 |
|
|
19,607 |
|
Specialty Products |
|
6,699 |
|
|
5,767 |
|
|
22,275 |
|
|
19,476 |
|
Industrial Products |
|
842 |
|
|
1,751 |
|
|
3,390 |
|
|
6,843 |
|
Transaction and integration
costs, ERP implementation costs, and unallocated legal fees |
|
(688 |
) |
|
(202 |
) |
|
(2,253 |
) |
|
(1,784 |
) |
Unallocated amortization
expense |
|
(138 |
) |
|
— |
|
|
(157 |
) |
|
— |
|
Interest and other
expense |
|
(1,594 |
) |
|
(1,994 |
) |
|
(4,802 |
) |
|
(6,099 |
) |
Total |
|
$ |
24,436 |
|
|
$ |
23,529 |
|
|
$ |
74,110 |
|
|
$ |
73,767 |
|
Selected Balance Sheet
Items |
|
September 30, |
|
December 31, |
|
|
2019 |
|
2018 |
Cash and Cash Equivalents |
|
$ |
59,404 |
|
|
$ |
54,268 |
|
Accounts Receivable, net |
|
93,995 |
|
|
99,545 |
|
Inventories |
|
73,830 |
|
|
67,187 |
|
Other Current Assets |
|
12,720 |
|
|
5,314 |
|
Total Current Assets |
|
239,949 |
|
|
226,314 |
|
|
|
|
|
|
Property, Plant &
Equipment, net |
|
200,805 |
|
|
190,919 |
|
Goodwill |
|
504,094 |
|
|
447,995 |
|
Intangible Assets with Finite
Lives, net |
|
134,397 |
|
|
109,405 |
|
Right of Use Assets |
|
6,601 |
|
|
— |
|
Derivative Assets |
|
2,171 |
|
|
— |
|
Other Assets |
|
8,611 |
|
|
6,722 |
|
Total Assets |
|
$ |
1,096,628 |
|
|
$ |
981,355 |
|
|
|
|
|
|
Current Liabilities |
|
$ |
72,023 |
|
|
$ |
82,056 |
|
Revolving Loan |
|
218,569 |
|
|
156,000 |
|
Deferred Income Taxes |
|
57,008 |
|
|
44,309 |
|
Derivative Liabilities |
|
2,475 |
|
|
— |
|
Long-Term Obligations |
|
12,967 |
|
|
7,372 |
|
Total Liabilities |
|
363,042 |
|
|
289,737 |
|
|
|
|
|
|
Stockholders' Equity |
|
733,586 |
|
|
691,618 |
|
|
|
|
|
|
Total Liabilities and
Stockholders' Equity |
|
$ |
1,096,628 |
|
|
$ |
981,355 |
|
Balchem
CorporationCondensed Consolidated Statements of
Cash Flows(Dollars in thousands)(unaudited)
|
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
Cash flows from
operating activities: |
|
|
|
|
Net earnings |
|
$ |
59,288 |
|
|
$ |
58,239 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
|
Depreciation and
amortization |
|
33,485 |
|
|
33,460 |
|
Stock compensation
expense |
|
5,717 |
|
|
5,208 |
|
Other adjustments |
|
(2,387 |
) |
|
(1,708 |
) |
Changes in assets and
liabilities |
|
(4,609 |
) |
|
(16,014 |
) |
Net cash
provided by operating activities |
|
91,494 |
|
|
79,185 |
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
Cash paid for
acquisition, net of cash acquired |
|
(94,690 |
) |
|
(17,399 |
) |
Capital expenditures
and intangible assets acquired |
|
(21,669 |
) |
|
(13,691 |
) |
Proceeds from
insurance, sale of assets, and sale of business |
|
14,250 |
|
|
4,741 |
|
Purchase of convertible
note |
|
(1,000 |
) |
|
— |
|
Net cash used
in investing activities |
|
(103,109 |
) |
|
(26,349 |
) |
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
Proceeds from revolving
loan |
|
123,569 |
|
|
210,750 |
|
Principal payments on
long-term and revolving debt |
|
(61,000 |
) |
|
(252,250 |
) |
Principal payments on
acquired debt |
|
(12,222 |
) |
|
(19 |
) |
Proceeds from stock
options exercised |
|
3,734 |
|
|
8,133 |
|
Dividends paid |
|
(15,135 |
) |
|
(13,428 |
) |
Purchase of treasury
stock |
|
(21,321 |
) |
|
(1,223 |
) |
Other |
|
— |
|
|
(1,374 |
) |
Net cash
provided by (used in) financing activities |
|
17,625 |
|
|
(49,411 |
) |
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
(874 |
) |
|
(1,170 |
) |
|
|
|
|
|
Increase in cash and
cash equivalents |
|
5,136 |
|
|
2,255 |
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period |
|
54,268 |
|
|
40,416 |
|
Cash and cash
equivalents, end of period |
|
$ |
59,404 |
|
|
$ |
42,671 |
|
Non-GAAP Financial Information
In addition to disclosing financial results in
accordance with United States (U.S.) generally accepted accounting
principles (GAAP), this earnings release contains non-GAAP
financial measures that we believe are helpful in understanding and
comparing our past financial performance and our future results.
The non-GAAP financial measures disclosed by the company exclude
certain business combination accounting adjustments and certain
other items related to acquisitions, certain unallocated equity
compensation, and certain one-time or unusual transactions. These
non-GAAP financial measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with GAAP, and the financial results calculated in accordance with
GAAP and reconciliations from these results should be carefully
evaluated. Management believes that these non-GAAP measures provide
useful information about the Company's core operating results and
thus are appropriate to enhance the overall understanding of the
Company's past financial performance and its prospects for the
future. The non-GAAP financial measures in this press release
include adjusted gross margin, adjusted earnings from operations,
adjusted net earnings and the related adjusted per diluted share
amounts, EBITDA, adjusted EBITDA, adjusted income tax expense, and
free cash flow. EBITDA is defined as earnings before interest,
other expense/income, taxes, depreciation and amortization.
Adjusted EBITDA is defined as earnings before interest, other
expense/income, taxes, depreciation, amortization, stock-based
compensation, transaction and integration costs, indemnification
settlements, legal settlements, ERP implementation costs,
unallocated legal fees and the fair valuation of acquired
inventory. Adjusted income tax expense is defined as income
tax expense adjusted for the impact of ASU 2016-09. Free cash
flow is defined as net cash provided by operating activities less
capital expenditures and capitalized ERP implementation costs.
Set forth below are reconciliations of the
non-GAAP financial measures to the most directly comparable GAAP
financial measures.
Table 1
Reconciliation of Non-GAAP Measures to
GAAP(Dollars in thousands, except per share
data)(unaudited)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Reconciliation of
adjusted gross margin |
|
|
|
|
|
|
|
|
GAAP gross margin |
|
$ |
54,008 |
|
|
$ |
48,002 |
|
|
$ |
157,021 |
|
|
$ |
152,927 |
|
Amortization of intangible
assets (1) |
|
616 |
|
|
765 |
|
|
2,011 |
|
|
2,362 |
|
Adjusted gross margin |
|
$ |
54,624 |
|
|
$ |
48,767 |
|
|
$ |
159,032 |
|
|
$ |
155,289 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
adjusted earnings from operations |
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
|
$ |
26,030 |
|
|
$ |
25,523 |
|
|
$ |
78,912 |
|
|
$ |
79,866 |
|
Amortization of intangible
assets (1) |
|
6,753 |
|
|
6,208 |
|
|
18,723 |
|
|
18,680 |
|
Transaction and integration
costs, ERP implementation costs, and unallocated legal fees
(2) |
|
688 |
|
|
202 |
|
|
2,253 |
|
|
1,784 |
|
Adjusted earnings from
operations |
|
$ |
33,471 |
|
|
$ |
31,933 |
|
|
$ |
99,888 |
|
|
$ |
100,330 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
adjusted net earnings |
|
|
|
|
|
|
|
|
GAAP net earnings |
|
$ |
20,676 |
|
|
$ |
19,214 |
|
|
$ |
59,288 |
|
|
$ |
58,239 |
|
Amortization of intangible
assets (1) |
|
6,823 |
|
|
6,278 |
|
|
18,935 |
|
|
19,290 |
|
Transaction and integration
costs, ERP implementation costs, and unallocated legal fees
(2) |
|
688 |
|
|
202 |
|
|
2,253 |
|
|
1,784 |
|
Income tax adjustment (3) |
|
(1,878 |
) |
|
(2,041 |
) |
|
(5,191 |
) |
|
(6,712 |
) |
Adjusted net earnings |
|
$ |
26,309 |
|
|
$ |
23,653 |
|
|
$ |
75,285 |
|
|
$ |
72,601 |
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings per
common share - diluted |
|
$ |
0.81 |
|
|
$ |
0.73 |
|
|
$ |
2.32 |
|
|
$ |
2.24 |
|
(1)
Amortization of intangible assets: Amortization of intangible
assets consists of amortization of customer relationships,
trademarks and trade names, developed technology, regulatory
registration costs, patents and trade secrets, and other
intangibles acquired primarily in connection with business
combinations. We record expense relating to the amortization of
these intangibles in our GAAP financial statements. Amortization
expenses for our intangible assets are inconsistent in amount and
are significantly impacted by the timing and valuation of an
acquisition. Consequently, our non-GAAP adjustments exclude these
expenses to facilitate an evaluation of our current operating
performance and comparisons to our past operating performance. |
(2)
Transaction and integration costs, ERP implementation costs and
unallocated legal fees: Transaction and integration costs related
to acquisitions and divestitures are expensed in our GAAP financial
statements. ERP implementation costs related to a company-wide ERP
system implementation are expensed in our GAAP financial
statements. Unallocated legal fees for transaction-related
non-compete agreement disputes are expensed in our GAAP financial
statements. Management excludes these items for the purposes of
calculating Adjusted EBITDA and other non-GAAP financial measures.
We believe that excluding these items from our non-GAAP financial
measures is useful to investors because these are items associated
with each transaction and are inconsistent in amount and frequency
causing comparison of current and historical financial results to
be difficult. |
(3)
Income tax adjustment: For purposes of calculating adjusted net
earnings and adjusted diluted earnings per share, we adjust the
provision for (benefit from) income taxes to tax effect the taxable
and deductible non-GAAP adjustments described above as they have a
significant impact on our income tax (benefit) provision.
Additionally, the income tax adjustment is adjusted for the impact
of adopting ASU 2016-09, “Improvements to Employee Share-Based
Payment Accounting” and uses our non-GAAP effective rate applied to
both our GAAP earnings before income tax expense and non-GAAP
adjustments described above. See Table 3 for the calculation of our
non-GAAP effective tax rate. |
The following table sets forth a reconciliation
of Net Income calculated using amounts determined in accordance
with GAAP to EBITDA and to Adjusted EBITDA for the three and nine
months ended September 30, 2019 and 2018.
Table 2(unaudited)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income - as reported |
|
$ |
20,676 |
|
|
$ |
19,214 |
|
|
$ |
59,288 |
|
|
$ |
58,239 |
|
Add back: |
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
3,760 |
|
|
4,315 |
|
|
14,822 |
|
|
15,528 |
|
Other expense |
|
1,594 |
|
|
1,994 |
|
|
4,802 |
|
|
6,099 |
|
Depreciation and
amortization |
|
11,683 |
|
|
10,964 |
|
|
33,273 |
|
|
32,850 |
|
EBITDA |
|
37,713 |
|
|
36,487 |
|
|
112,185 |
|
|
112,716 |
|
Add back certain items: |
|
|
|
|
|
|
|
|
Non-cash compensation expense
related to equity awards |
|
1,966 |
|
|
1,749 |
|
|
5,588 |
|
|
5,208 |
|
Transaction and integration
costs, ERP implementation costs, and unallocated legal fees |
|
688 |
|
|
202 |
|
|
2,253 |
|
|
1,784 |
|
Adjusted EBITDA |
|
$ |
40,367 |
|
|
$ |
38,438 |
|
|
$ |
120,026 |
|
|
$ |
119,708 |
|
The following table sets forth a reconciliation
of our GAAP effective income tax rate to our non-GAAP effective
income tax rate for the nine months ended September 30, 2019
and 2018.
Table 3(unaudited)
|
|
Nine Months Ended September 30, |
|
2019 |
|
Effective Tax Rate |
|
2018 |
|
Effective Tax Rate |
GAAP Income Tax Expense |
|
$ |
14,822 |
|
|
20.0 |
% |
|
$ |
15,528 |
|
|
21.1 |
% |
Impact of ASU 2016-09
adoption(4) |
|
741 |
|
|
|
|
1,770 |
|
|
|
Adjusted Income Tax
Expense |
|
$ |
15,563 |
|
|
21.0 |
% |
|
$ |
17,298 |
|
|
23.4 |
% |
(4)
Impact of ASU 2016-09 adoption: In March 2016, the FASB issued ASU
No. 2016-09, “Improvements to Employee Share-Based Payment
Accounting” (“ASU 2016-09”), which addresses the accounting for
share-based payment transactions, including the income tax
consequences, classification of awards as either equity or
liabilities, and classification on the statement of cash flows. The
Company adopted ASU 2016-09 on January 1,
2017 prospectively (prior periods have not been
restated). The primary impact of adoption was the recognition
during the three and nine months ended September 30, 2019 and
2018, of excess tax benefits as a reduction to the provision
for income taxes and the classification of these excess tax
benefits in operating activities in the consolidated statement of
cash flows instead of financing activities. The presentation
requirements for cash flows related to employee taxes paid for
withheld shares had no impact to any of the periods presented in
the consolidated statement of cash flows, since such cash flows
have historically been presented in financing activities. The
Company also elected to continue estimating forfeitures when
determining the amount of stock-based compensation costs to be
recognized in each period. No other provisions of ASU 2016-09 had a
material impact on the Company’s financial statements or
disclosures. |
The following table sets forth a reconciliation
of net cash provided by operating activities to free cash flow for
the three and nine months ended September 30, 2019 and
2018.
Table 4(unaudited)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net cash provided by operating activities |
|
$ |
42,682 |
|
|
$ |
32,489 |
|
|
$ |
91,494 |
|
|
$ |
79,185 |
|
Capital expenditures and
capitalized ERP implementation costs |
|
(6,927 |
) |
|
(5,553 |
) |
|
(21,615 |
) |
|
(13,253 |
) |
Free cash flow |
|
$ |
35,755 |
|
|
$ |
26,936 |
|
|
$ |
69,879 |
|
|
$ |
65,932 |
|
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