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/
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