Balchem Corporation Announces Third Quarter 2012 Results

Balchem Corporation Announces Third Quarter 2012 Results

NEW HAMPTON, N.Y., Nov. 2, 2012 (GLOBE NEWSWIRE) -- Balchem Corporation
(Nasdaq:BCPC) reported as follows (unaudited) for the period ended September
30, 2012.

($000 Omitted Except for Net Earnings per Share)
                                                                   
For the Three Months Ended September 30,
                                                                   
                                                          2012      2011
                                                          Unaudited
Net sales                                                 $ 75,116  $ 74,439
Gross margin                                               23,398    22,617
Operating expenses                                         7,158     7,442
Earnings from operations                                  16,240    15,175
Other (expense) income                                    (15)      63
Earnings before income tax expense                         16,225    15,238
Income tax expense                                        5,352     4,453
Net earnings                                              $ 10,873  $ 10,785
                                                                   
Diluted net earnings per common share                     $ 0.36    $ 0.36
                                                                   
Shares used in the calculation of diluted net earnings per 30,417    30,311
common share
                                                                   
For the Nine Months Ended September 30,
                                                                   
                                                          2012      2011
                                                          Unaudited
Net sales                                                 $ 230,333 $ 222,134
Gross margin                                               67,140    65,158
Operating expenses                                         22,400    22,626
Earnings from operations                                  44,740    42,532
Other (expense) income                                     (3)       434
Earnings before income tax expense                         44,737    42,966
Income tax expense                                        14,624    13,697
Net earnings                                              $ 30,113  $ 29,269
                                                                   
Diluted net earnings per common share                     $ 0.99    $ 0.97
                                                                   
Shares used in the calculation of diluted net earnings per 30,340    30,212
common share

Record Quarterly Results

For the quarter ended September 30, 2012, the company achieved record third
quarter net sales of $75.1 million, which is an increase of approximately 1%
above the $74.4 million result of the prior year comparative quarter. The
company also achieved record net earnings of $10.9 million, an increase of
approximately 1% over the prior year comparative quarter. The $10.9 million
generated diluted net earnings per common share of $0.36, equal to the prior
year comparable period.

In this third quarter of 2012, the Animal Nutrition & Health ("ANH") segment,
including specialties, choline and industrial derivative products, realized
sales of $51.9 million, an increase of 1.3%, or $0.7 million over the prior
year comparable quarter. Product mix was again significant in these results as
our ANH specialty ingredients, largely targeted to ruminant production animal
markets, realized approximately 25% sales growth, principally from sales of
Reashure^® and Aminoshure^® products, as well as chelated minerals. Dairy
economics continue to support strong demand for these products despite the
challenges of production animal feed/ration prices. Milk prices are currently
forecasted to remain strong, and the pace of dairy herd contraction is
occurring at a slower rate than projected earlier in the year. Current feed
and milk price indicators should support greater utilization of our products
as nutritionists and herd managers look to continue to maximize results of
production animals. As mentioned in a previous press release, a new
manufacturing facility in Virginia is being constructed to support expected
growth. This new facility will more than double output capacity for our rumen
stable products and is scheduled to be commissioned late in the fourth
quarter.

Our global feed grade choline sales were down 12.7% from the prior year
comparable quarter. Choline volumes sold, which track closely with broiler
chick placements and egg sets, were lower in North America in the third
quarter due to continued high grain prices, demand weakness in the U.S., and
lower exportation of finished birds. However, the current USDA forecast for
broiler meat production has improved slightly for the balance of 2012 due to a
slightly lower forecast for feed prices. In addition, sales of our European
produced product were unfavorably impacted by foreign currency fluctuations,
approximating $0.9 million or a 3.4% decline in global feed grade choline
sales. Sales of industrial grade products, including for fracking, were very
strong as sales were up 13.6% over the prior year quarter and also improved on
a sequential basis, particularly due to volume.

Earnings from operations for the entire ANH segment were a record $8.1
million, an increase of 11% compared to $7.3 million in the prior year
comparable quarter, reflecting the previously noted strong sales of specialty
ingredient products in addition to a modest reduction in the cost of certain
petro-chemical commodities. This result reflects unfavorable manufacturing
variances from our Italian facility, due to the traditional European summer
holiday schedule. This facility has now returned to normalized levels.

The ARC Specialty Products segment generated quarterly sales of $12.3 million,
an increase of 1.0% from the comparable prior year quarter. This increase was
principally the result of continued sales strength of ethylene oxide for
medical device sterilization. Sales of propylene oxide, in particular for
industrial applications, were soft in the quarter, largely due to ordering
patterns. Earnings from operations for this segment, at $5.2 million, did
improve 12.1% from the prior year comparable quarter, due to a favorable
product mix and a reduction in the cost of certain petro-chemical commodities.

Sales of the Food, Pharma & Nutrition segment were $10.9 million, effectively
equal to the $11.0 million of the prior year comparable quarter. We realized
continued strength in sales of our human choline products; however, we also
realized a comparative quarter decline in the international food sector of
encapsulated ingredients for the prepared food, preservation and confection
markets, which had realized a particularly strong third quarter in 2011.
Earnings from operations for this segment decreased by approximately 8.0%, or
$0.25 million, to $2.9 million, reflecting an unfavorable product mix and
slightly lower volumes sold.

Consolidated gross margin for the quarter ended September 30, 2012 improved to
$23.4 million, as compared to $22.6 million for the prior year comparable
period. Gross margin percentage improved slightly to 31.1% of sales as
compared to 30.4% in the prior year comparative period, principally due to the
previously mentioned raw material cost decreases and favorable product mix.
Operating (Selling, R&D, and General and Administrative) expenses at $7.2
million were down approximately 3.8% from the prior year comparable quarter,
declining as a percentage of sales to 9.5% from 10.0%, as we continue to
prudently exercise tight controls on these expenses. The other income decline
of $78,000 on the quarterly comparative is primarily the result of the less
favorable fluctuations in foreign currency exchange rates between the U.S.
dollar (the reporting currency) and functional foreign currencies. Our
effective tax rate for the three months ended September 30, 2012 and 2011 was
33.0% and 29.2%, respectively. This increase in the effective tax rate is
primarily attributable to a change in apportionment relating to state income
taxes and the expiration of the U.S. R&D tax credit.

The company continues to maintain and grow a solid financial structure.
Diligent working capital controls, particularly effective inventory and
accounts receivable management, contribute strongly to the business
performance. The $179.1 million of net working capital on September 30, 2012
included a cash balance of $147.2 million, up from $114.8 million at December
31, 2011, and reflects the early pay-down of the Italian long-term debt and
capital expense funding of the Virginia site.

Commenting further, Dino A. Rossi, Chairman, CEO and President of Balchem
said, "These record third quarter achievements are a reflection of strong
underlying focus on generating sustainable sales growth in our core business
segments, and the value of our diversified portfolio. As noted previously,
certain fluctuations of any particular segment or product line will occur,
like our food encapsulates or feed grade choline, which were neatly offset by
continued strength in ANH Specialties, ARC and industrial grade products.
Staying focused on macro-economic market trends allows us to respond to
cautious actions by our customers in these economically challenging times, but
also gives us insight to focus on development efforts of pipeline products and
prospects. We continue to focus on operating expense management, new
production and supply chain capabilities, including but not limited to
logistics and currency, to deliver cost competitive or advantaged solutions to
our customers. Our balance sheet has continued to strengthen, as we continue
to seek out strategic acquisitions or partnership ventures to complement the
organic growth."

Quarterly Conference Call

A quarterly conference call will be held on Friday, November 2, 2012 at 10:30
AM Eastern Time (ET) to review third quarter 2012 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 two hours after the conclusion of the call
through end of day Wednesday, November 21, 2012. To access the replay of the
conference call, dial 1-877-660-6853 (local dial-in 1-201-612-7415), and use
conference ID #402087.

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, 2011. 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  Nine Months Ended
                             September 30,       September 30,
                            2012      2011      2012       2011
ARC Specialty Products       $ 12,318 $ 12,197 $37,032  $35,516
Food, Pharma & Nutrition     10,893    10,993    33,406     32,920
Animal Nutrition & Health    51,905    51,249    159,895    153,698
Total                        $ 75,116 $ 74,439 $ 230,333 $ 222,134
                                                        
Business Segment Earnings:                                                
                            Three Months Ended  Nine Months Ended
                             September 30,       September 30,
                            2012      2011      2012       2011
ARC Specialty Products       $5,245  $4,677  $14,823  $13,595
Food, Pharma & Nutrition     2,898     3,151     8,996      8,495
Animal Nutrition & Health    8,097     7,347     20,921     20,442
Interest and other(expense) (15)      63        (3)        434
income
Total                        $ 16,225 $ 15,238 $44,737  $42,966

                                                       
Selected Balance Sheet Items                            
                                          September 30, December 31,
                                           2012          2011
Cash and Cash Equivalents                  $ 147,182    $ 114,781
Accounts Receivable                       36,931        34,433
Inventories                               20,311        18,637
Other Current Assets                      3,028         7,889
Total Current Assets                      207,452       175,740
                                                       
Property, Plant, & Equipment (net)        47,468        44,282
Other Assets                              48,736        51,695
Total Assets                              $ 303,656    $ 271,717
                                                       
Current Liabilities                        $28,334     $30,913
Long-Term Obligations                      8,040         8,795
Total Liabilities                          36,374        39,708
                                                       
Stockholders' Equity                       267,282       232,009
                                                       
Total Liabilities and Stockholders' Equity $ 303,656    $ 271,717

                                                          
Condensed Consolidated Statements of Cash Flows            Nine Months Ended
                                                           September 30,
                                                          2012      2011
                                                                   
                                                                   
Cash flows from operating activities:                               
Net earnings                                               $ 30,113  $ 29,269
                                                                   
Adjustments to reconcile net earnings to net cash provided          
by operating activities:
Depreciation and amortization                              7,213     6,872
Stock compensation expense                                 2,933     2,840
Shares issued under employee benefit plans                 310       398
Deferred income tax expense                                (1,155)   (716)
Foreign currency transaction loss                          74        180
Loss on impairment of assets                               --      92
Changes in assets and liabilities                                   
Accounts receivable                                        (2,759)   (4,270)
Inventories                                                (1,712)   (2,652)
Prepaid expenses and other current assets                  735       960
Accounts payable and accrued expenses                      2,067     (800)
Income taxes                                               6,237     1,157
Other                                                     305       750
Net cash provided by operating activities                  44,361    34,080
                                                                   
Cash flows from investing activities:                               
Capital expenditures                                       (7,493)   (4,851)
Proceeds from sale of property, plant and equipment        --        28
Intangible assets acquired                                 (11)      (23)
Net cash used in investing activities                      (7,504)   (4,846)
                                                                   
Cash flows from financing activities:                               
Proceeds from long-term debt                               178       --
Principal payments on long-term debt                       (1,377)   (1,182)
Proceeds from stock options exercised and restricted       1,312     2,600
shares purchased
Excess tax benefits from stock compensation                1,668     1,392
Dividends paid                                             (5,237)   (4,310)
Purchase of treasury stock                                (964)     (108)
Net cash used in financing activities                      (4,420)   (1,608)
                                                                   
Effect of exchange rate changes on cash                    (36)      (7)
                                                                   
Increase in cash and cash equivalents                      32,401    27,619
                                                                   
Cash and cash equivalents beginning of period              114,781   77,253
Cash and cash equivalents end of period                    $ 147,182 $ 104,872

CONTACT: Karin McCaffery, Balchem Corporation
         Telephone: 845-326-5635