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BALCHEM CORPORATION Reports Operating Results (10-K)

February 29, 2012 | About:
10qk

10qk

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BALCHEM CORPORATION (BCPC) filed Annual Report for the period ended 2011-12-31.

Balchem Cp Cl-b has a market cap of $1.03 billion; its shares were traded at around $27.49 with a P/E ratio of 27.6 and P/S ratio of 4.1. The dividend yield of Balchem Cp Cl-b stocks is 0.5%. Balchem Cp Cl-b had an annual average earning growth of 19.6% over the past 10 years. GuruFocus rated Balchem Cp Cl-b the business predictability rank of 4.5-star.

Highlight of Business Operations:

Gross margin for 2011 increased to $86,001 compared to $78,037 for 2010, an increase of 10.2%. This $7,964 increase was principally a result of a 6.1% increase in sales volumes. Gross margin percentage for 2011 decreased to 29.5%, as compared to 30.6% in the prior year comparative period, primarily due to increases in certain key raw material costs. Gross margin percentage for the Specialty Products segment was even with the prior year. Gross margin percentage in the Food, Pharma & Nutrition segment increased by 0.7% primarily due to the sale of the non-core calcium carbonate product line in the fourth quarter of 2010. Gross margin percentage in the Animal Nutrition and Health segment decreased by 1.2%, principally from increases in the cost of certain petro-chemical raw materials used to manufacture choline, and temporary operating inefficiencies at certain of the Company s choline plants.

Operating expenses for 2011 were $29,776, as compared to $28,267 for 2010, an increase of $1,509 or 5.3%. This increase was primarily due to increased amortization and consulting costs totaling approximately $180 related to the 2010 Aberco acquisition, a modest increase of employee headcount and additional compensation-related expenses totaling approximately $758, increased consultancy fees of approximately $111, primarily incurred to study acquisition opportunities, and increased outside contract research expense of $237, partially offset by a reduction in recruiting and relocation fees of $201 and patent expense of $51. Operating expenses were 10.2% of sales or 0.9 percentage points less than the operating expenses as a percent of sales in last year's comparable period. During 2011 and 2010, the Company spent $2,890 and $3,190 respectively, on research and development programs, substantially all of which pertained to the Company s Food, Pharma & Nutrition and Animal Nutrition & Health segments.

Earnings from operations for 2011 increased to $56,225 as compared to $49,770 for 2010, an increase of $6,455 or 13.0%. This increase was principally driven by increased sales volumes over the prior year comparable period, partially offset by higher raw material costs, increased operating expenses, and temporary operating inefficiencies at certain of the Company s choline plants. Earnings from operations as a percentage of sales (“operating margin”) for 2011 decreased to 19.3% from 19.5% for 2010. The Company is continuing to focus on leveraging its plant capabilities, driving efficiencies from core volume growth, broadening product applications of human and animal health specialty products into both the domestic and international markets, as well as capitalizing logistically on the Company s varied choline production capabilities. Earnings from operations for the Specialty Products segment were $18,636, an increase of $2,692 or 16.9%, primarily due to the above-noted higher sales of ethylene oxide and propylene oxide, operating efficiencies from increased volumes and a favorable product mix, partially offset by the aforementioned higher raw material costs and certain costs related to the Aberco acquisition. Earnings from operations for Food, Pharma & Nutrition were $11,113, an increase of $1,365 or 14.0%, due largely to the above-noted increased sales of human choline products and the sale of the non-core calcium carbonate product line in the fourth quarter of 2010, partially offset by lower sales volumes in the domestic food market. Earnings from operations for Animal Nutrition & Health increased by $2,398 to $26,476, a 10.0% increase from the prior year comparable period, principally due to the aforementioned increased sales volumes. This was partially offset by increases in the cost of certain petro-chemical raw materials used to manufacture choline, and temporary operating inefficiencies at certain of the Company s choline plants.

Operating expenses for 2010 were $28,267, as compared to $26,299 for 2009, an increase of $1,968 or 7.5%. This increase was primarily due to increased amortization and consulting costs totaling approximately $411 related to the Aberco acquisition, increased recruiting and relocation fees of approximately $258, a modest increase of employee headcount and additional compensation-related expenses totaling approximately $1,078, and increased consultancy fees of approximately $239 primarily incurred to study acquisition opportunities, partially offset by a reduction in outside contract research expense of approximately $81, principally due to the timing of these activities, and accounts receivable reserves for international accounts that were an expense/reserve item in the prior year comparable period totaling approximately $425. Operating expenses were 11.1% of sales or 0.9 percentage points less than the operating expenses as a percent of sales in last year's comparable period. During 2010 and 2009, the Company spent $3,190 and $3,298 respectively, on research and development programs, substantially all of which pertained to the Company s Food, Pharma & Nutrition and Animal Nutrition & Health segments.

Earnings from operations for 2010 increased to $49,770 compared to $40,659 for 2009, an increase of $9,111 or 22.4%. This increase was principally driven by increased sales volumes over the prior year comparable period, partially offset primarily by higher petro-chemical based raw material costs. Earnings from operations as a percentage of sales (“operating margin”) for 2010 increased to 19.5% compared to 18.5% for 2009, principally a result of the aforementioned higher sales volumes being partially offset by higher petro-chemical based raw material costs. The Company is continuing to focus on volume growth with new product launches into both domestic and international markets, as well as capitalizing on its varied choline production capabilities. Earnings from operations for the Specialty Products segment were $15,944, an increase of $1,694 or 11.9%, primarily due to increased sales volumes being offset by higher petro-chemical based raw material costs and increased expenses related to development work on our ERC technology for repackaging, distribution and delivery of a product for the fruit ripening industry. Earnings from operations for Food, Pharma & Nutrition were $9,748, an increase of $4,719 or 93.8%, due largely to the aforementioned increased sales volumes, favorable product mix and plant efficiencies. Earnings from operations for Animal Nutrition & Health increased by $2,698 to $24,078, a 12.6% increase from the prior year comparable period, principally from favorable operating variances due to the volume improvement in both sales and production. Also contributing to the improvement was the aforementioned reduction in outside contract research expense and accounts receivable reserves for international accounts that were an expense/reserve item in last year s comparable period. These improvements were partially offset by increases in the cost of certain petro-chemical raw materials used to manufacture choline.

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