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Exhibit 99.1

New Hampton, NY, November 10, 2014 – Balchem Corporation (NASDAQ: BCPC)

reported as follows (unaudited) for the period ended September 30, 2014.

($000 Omitted Except for Net Earnings per Share)

 

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Balchem Corporation (NASDAQ:BCPC)

 

·	For the quarter ended September 30, 2014, net sales increased 83.2% to $160.5 million.

§	Excluding the impact of the SensoryEffects acquisition, net sales were up 16.0% compared with third quarter 2013.

·	U.S. GAAP net earnings for the quarter of $15.2 million, or $0.49 per diluted share, compared to $11.7 million, or $0.38 per diluted share, for the third quarter of 2013, an increase of 30.2%.

·	Non-GAAP1 net earnings for the quarter of $20.3 million, or $0.65 per diluted share, compared to $12.3 million, or $0.40 per diluted share, for the third quarter of 2013, an increase of 57.5%.

·	Adjusted EBITDA1 increased 80.6% to $37.0 million for the third quarter of 2014, versus the $20.5M in comparable period of 2013.

¹See “Non-GAAP Financial Information” for a reconciliation of GAAP and non-GAAP financial measures.

The Animal Nutrition & Health (“ANH”) segment, including specialties, choline and industrial derivative products, realized sales of $75.0 million, an increase of approximately 19.4%, or $12.2 million over the prior year comparable quarter. Sales in the ANH specialty (ruminant) ingredients sector were very strong, increasing approximately 63% from the prior year comparable quarter primarily due to higher volumes sold, with particular strength in our rumen protected choline, urea and amino acids. The previously noted favorable dairy economics continue to support strong demand for our products as lower feed prices, along with continued strong demand for milk in Q3, were key drivers that should maintain producer profitability for the balance of 2014 and into 2015. Our monogastric product sales were flat with the prior year comparable quarter; however, lower feed prices, egg sets, and an increase in chicks placed for grow-out have resulted in the USDA broiler meat production forecast for 2015 being revised upward to indicate a 2.9% increase over the 2014 forecast.

Sales of industrial grade products, in this segment, were up approximately 27% from the prior year comparable quarter as volume sold of various choline and choline derivatives for industrial applications, notably for natural gas fracking in North America, increased appreciably. This sector comprised approximately 39% of the sales in the total ANH segment for the quarter, and the outlook for this sector remains strong for the balance of 2014.

Earnings from operations for the entire ANH segment increased approximately 25% to $11.7 million as compared to $9.4 million in the prior year comparable quarter.

The ARC Specialty Products segment generated third quarter sales of $13.7 million, which was a 9.9% improvement over the comparable prior year quarter, a result of increased sales of ethylene oxide for medical device sterilization and of propylene oxide for industrial applications. This growth was a result of increased volumes sold and higher average selling prices which were implemented in response to cost increases of certain key petrochemical raw materials. Earnings from operations for this segment, at $5.3 million, improved by 9.5% or $0.5 million over the prior year comparable quarter, primarily related to the revenue growth noted.

 

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Balchem Corporation (NASDAQ:BCPC)

Sales of the SensoryEffects segment, formerly the Food, Pharma & Nutrition segment, which now includes encapsulates, human choline, cereal and customized food and beverage solutions, were $71.8 million, an increase of $59.5 million over the comparable prior year quarter. Net sales from the acquisition of the SensoryEffects business contributed $58.9 million of this overall increase, as we also realized 13.3% growth in sales of legacy Balchem, with particular strength in encapsulated ingredients for baking and food preservation in both the domestic and international markets. Earnings from operations for this segment were $8.7 million, versus $2.8 million in the prior year comparable quarter. Excluding the effect of non-cash expense associated with amortization of SensoryEffects acquired intangible assets of $6.0 million, non-GAAP earnings from operations for this segment was $14.7 million, an increase of $11.9 million, comparatively.

Consolidated gross margin for the quarter ended September 30, 2014 increased 81% to $44.5 million, as compared to $24.5 million for the prior year comparable period. Gross margin for the three months ended September 30, 2014 reflects a decrease to 27.7% of sales as compared to 28.0% in the prior year comparative period. Margins now reflect a heavier product mix weighting toward the acquired SensoryEffects products and choline chloride products used in industrial applications. Partially offsetting the impact of the product mix was favorable efficiencies resulting from higher volumes. Operating (Selling, Research & Development, General & Administrative) expenses at $19.2 million for the third quarter were up significantly from the prior year comparable quarter principally due to SensoryEffects operating expenses, and integration costs and amortization expense related to the aforementioned acquisition. Excluding integration costs of $0.5 million and non-cash operating expense associated with amortization of intangible assets of $6.8 million, operating expenses were $11.9 million, or 7.4% of sales. Interest expense was $2.1 million in the third quarter of 2014, substantially all of which related to the debt financing of the SensoryEffects acquisition. Our effective tax rate for the three months ended September 30, 2014 and 2013 was 34.6% and 31.7%, respectively. This increase in the effective tax rate was primarily attributable to the impact of the SensoryEffects acquisition, a change in apportionment relating to state income taxes, income generation in jurisdictions with higher tax rates, and the timing of certain tax credits and deductions.

The Company continues to maintain and grow a solid financial structure. Diligent working capital controls contribute strongly to the business performance. The $83.4 million of net working capital on September 30, 2014 included a cash balance of $25.4 million, which reflects principal payments on long-term debt and the revolving loan of $58.8 million in the quarter, along with $5.9 million of capital expense funding year-to-date. Total outstanding debt at September 30, 2014 was $341.3 million.

Commenting further, Dino A. Rossi, Chairman, CEO and President of Balchem said, “These record quarter results reflect the first full quarter of the SensoryEffects acquisition.  It still includes approximately $0.5 million of integration expenses, which should be significantly reduced going forward. The legacy Balchem business realized a 16% revenue and an 18% operating earnings increase in Q3 vs. Q3 2013, with each segment achieving record revenue and earnings results for the quarter.  We continue to work diligently to achieve a number of integration programs, including organizational structure, combining sales efforts and greater in-depth knowledge transfers to facilitate the expected cross-selling synergies. With our solid third quarter results, we expect continued strong growth in sales and earnings for the balance of 2014 and believe we are well positioned to continue to generate strong sustainable sales growth and improved earnings results in fiscal year 2015.

 

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Balchem Corporation (NASDAQ:BCPC)

 

The U.S. GAAP results are reflected in the initial page of this announcement; however, the reconciliation of non-GAAP measures at the end of this announcement gives greater recognition to the economic benefit of the acquisition wherein we show that the non-GAAP net earnings and EPS are up 64% and 63%, respectively, over the comparable Q3 results of 2013. We are pleased with the performance of both the legacy Balchem and acquired SensoryEffects businesses.”

Quarterly Conference Call

A quarterly conference call will be held on Monday, November 10, 2014, at 11:00 AM Eastern Time (ET) to review Third Quarter 2014 results. Dino A. Rossi, Chairman, President and CEO, and Bill Backus, 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 digital replay two hours after the conclusion of the call through end of day Monday, November 24, 2014. To access the replay of the conference call, dial 1-877-660-6853 (local dial-in 1-201-612-7415), and use conference ID #13594688.

Segment Information

Balchem Corporation consists of three business segments: ARC Specialty Products; SensoryEffects (formerly Food, Pharma & Nutrition); and Animal Nutrition & Health. Through ARC Specialty Products, Balchem provides specialty-packaged chemicals for use in healthcare and other industries. The SensoryEffects segment provides customized food and beverage ingredient systems and 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, 2013. 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:  Karin McCaffery, Balchem Corporation

Telephone: 845-326-5600

 

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Balchem Corporation (NASDAQ:BCPC)

Selected Financial Data

($ in 000’s)

Business Segment Net Sales:

Business Segment Earnings:

 

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Balchem Corporation (NASDAQ:BCPC)

 

Balchem Corporation

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)

 

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Balchem Corporation (NASDAQ:BCPC)

 

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 expenses related to acquisitions. 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 non-GAAP consolidated operating income, non-GAAP consolidated net income and the related per diluted share amounts, and non-GAAP adjusted EBITDA.  Non-GAAP financial measure adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation and acquisition-related expenses.

Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

 

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Balchem Corporation (NASDAQ:BCPC)

 

Reconciliation of Non-GAAP Measures to GAAP

(Dollars in thousands, except per share data)

(unaudited)

¹ Inventory valuation adjustment: Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment to our cost of sales excludes the expected profit margin component that is recorded under business combination accounting principles. We believe the adjustment is useful to investors as an additional means to reflect cost of sales and gross margin trends of our business.

² 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.

 

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Balchem Corporation (NASDAQ:BCPC)
 

³ Transaction and integration costs: Transaction and integration costs related to acquisitions are expensed in our GAAP financial statements.  Management excludes these items for the purposes of calculating EBITDA, adjusted net income, and adjusted earnings per share.  We believe that excluding these expenses from our non-GAAP financial measures is useful to investors because these are expenses associated with each transaction, and are inconsistent in amount and frequency causing comparison of current and historical financial results to be difficult.

⁴ Income taxes: For purposes of calculating non-GAAP net income and non-GAAP diluted earnings per share, we adjust the provision for (benefit from) income taxes to tax effect the non-GAAP adjustments described above as they have a significant impact on our income tax (benefit) provision.

 

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, 2014 and 2013.

EBITDA is a non-GAAP financial measure. Management believes the presentation of this measure provides useful information to investors to more effectively evaluate the year-over-year results of operations of the Company.

 

 

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