MONTVALE, N.J., July 28, 2023 (GLOBE NEWSWIRE) -- Balchem Corporation (NASDAQ: BCPC) reported today second quarter net sales of $231.3 million for 2023, compared to net sales of $236.7 million in the prior year quarter. Second quarter net earnings were $30.1 million for 2023, compared to net earnings of $29.8 million for the second quarter 2022. Adjusted net earnings^(a) were $34.4 million for both the second quarter of 2023 and 2022. Quarterly adjusted EBITDA^(a) was $59.1 million, compared to $56.5 million in the prior year quarter.

Second Quarter 2023 Financial Highlights:

• Second quarter net sales were $231.3 million, a decrease of $5.4 million, or 2.3%, compared to the prior year.
• Record quarterly adjusted EBITDA was $59.1 million, an increase of $2.6 million, or 4.6%, from the prior year.
• GAAP net earnings were $30.1 million, an increase of $0.3 million, or 1.1% from the prior year. These net earnings resulted in GAAP earnings per share of $0.93.
• Adjusted net earnings were $34.4 million, flat with the prior year. These adjusted net earnings resulted in adjusted earnings per share^(a) of $1.06.
• The effective tax rate of 21.6% was 255 basis points lower than the prior year tax rate of 24.1%.
• Cash flows from operations were $35.0 million for the second quarter 2023, with quarterly free cash flow^(a) of $31.7 million.

Recent Highlights:

• We mechanically completed a new manufacturing unit for Vitacholine^®, Balchem’s leading brand of the essential nutrient choline for human nutrition, to support the worldwide growth in infant, toddler, and adult nutritional formulas as well as dietary supplement and food and beverage fortification applications.
• Cash flows in the second quarter enabled us to make repayments on our revolving debt of $26.0 million, bringing our net debt to $338.7 million, with an overall leverage ratio on a net debt basis of 1.5 times.

Ted Harris, Chairman, CEO, and President of Balchem said, “We delivered solid second quarter financials, and I am particularly pleased with our strong profitability and margin performance as we move forward from the highly inflationary period we experienced over the last two years.”

Mr. Harris added, “The broader economic outlook and market demand still shows a high degree of uncertainty and demand patterns have not yet fully normalized, but I believe Balchem’s strong market positions will enable us to continue to deliver solid financial results as the markets recover more broadly.”

Financial Results for the Second Quarter of 2023:

The Human Nutrition & Health segment generated quarterly sales of $135.7 million, an increase of $4.0 million, or 3.1%, compared to the prior year quarter. The increase was primarily driven by the contribution from recent acquisitions, partially offset by lower sales within food and beverage markets and the minerals and nutrients business. Record second quarter earnings from operations for this segment of $27.5 million increased $3.8 million, or 16.0%, compared to $23.7 million in the prior year quarter, primarily due to the aforementioned higher sales, lower manufacturing input costs, and favorable adjustments to transaction costs, partially offset by restructuring-related impairment and asset disposal charges, and incremental operating expenses and amortization related to the Kappa and Bergstrom acquisitions. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations^(a) for this segment were a record $31.7 million, compared to $27.7 million in the prior year quarter, an increase of 14.7%.

The Animal Nutrition & Health segment generated quarterly sales of $61.3 million, a decrease of $1.3 million, or 2.0%, compared to the prior year quarter. The decrease was driven by lower sales in monogastric markets, partially offset by higher sales in the ruminant species markets. Second quarter earnings from operations for this segment of $7.7 million increased $0.1 million, or 1.0%, compared to $7.6 million in the prior year quarter, primarily due to a favorable mix and a decrease in manufacturing input costs, partially offset by lower sales volumes. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations for this segment were $7.5 million compared to $7.7 million in the prior year quarter, a decrease of 2.2%.

The Specialty Products segment generated quarterly sales of $32.7 million, a decrease of $3.9 million, or 10.7%, compared to the prior year quarter, due to lower sales in both the plant nutrition and performance gases businesses. Earnings from operations for this segment were $9.3 million, compared to $9.9 million in the prior year comparable quarter, a decrease of $0.6 million, or 6.3%, primarily driven by lower sales volumes, partially offset by higher average selling prices and lower manufacturing input costs. Excluding the effect of non-cash expense associated with amortization of acquired intangible assets and other adjustments, adjusted earnings from operations for this segment were $10.4 million, compared to $11.0 million in the prior year quarter, a decrease of 5.7%.

Record second quarter consolidated gross margin of $77.3 million increased by $5.5 million or 7.6%, compared to $71.9 million for the prior year comparable period. Gross margin as a percentage of sales was 33.4% as compared to 30.4% in the prior year period, an increase of 308 basis points, primarily due to higher average selling prices and decreases in certain manufacturing input costs. Operating expenses of $34.5 million for the quarter increased $2.6 million from the prior year comparable quarter, primarily due to restructuring-related impairment and asset disposal charges, and incremental expenses and amortization related to the Kappa and Bergstrom acquisitions, partially offset by favorable adjustments to transaction costs. Excluding non-cash operating expenses associated with amortization of intangible assets of $6.3 million, operating expenses were $28.2 million, or 12.2% of sales.

Interest expense was $5.2 million and $1.0 million in the second quarters of 2023 and 2022, respectively. Our effective tax rates for the three months ended June 30, 2023 and 2022 were 21.6% and 24.1%, respectively. The lower effective tax rate was primarily due to certain lower state taxes and higher tax benefits from stock-based compensation.

Second quarter, cash flows provided by operating activities were $35.0 million, and free cash flow was $31.7 million. The $222.1 million of net working capital on June 30, 2023 included a cash balance of $66.9 million, which reflects quarterly repayments of the revolving loan of $26.0 million and quarterly capital expenditures and intangible assets acquired of $8.2 million.

Ted Harris said, “The Balchem team continues to execute well. We delivered another solid quarter which, once again, highlights the strength of our business model. As we continue to progress our strategic growth initiatives in 2023 and beyond, we remain confident in our ability to deliver long-term growth.”

Quarterly Conference Call

A quarterly conference call will be held on Friday, July 28, 2023, at 11:00 AM Eastern Time (ET) to review second quarter 2023 results. Ted Harris, Chairman, President and CEO 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 Friday, August 11, 2023. To access the replay of the conference call, dial 1-877-660-6853 (local dial-in 1-201-612-7415), and use conference ID #13740082.

Segment Information

Balchem Corporation reports three business segments: Human Nutrition & Health, Animal Nutrition & Health, and Specialty 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. Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated."

Forward-Looking Statements

This release contains forward-looking statements, within the meaning of the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect our expectation or belief concerning future events that involve risks and uncertainties. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "forecast," "outlook," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," or the negative thereof or variations thereon or similar expressions generally intended to identify forward-looking statements. Actions and performance could differ materially from what is contemplated by the forward-looking statements contained in this release. Factors that might cause differences from the forward-looking statements include those referred to or identified in Balchem’s Annual Report on Form 10-K for the year ended December 31, 2022 and other factors that may be identified elsewhere in this release or in our other SEC filings. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact: Jacqueline Yarmolowicz, Balchem Corporation (Telephone: 845-326-5600)

Selected Financial Data (unaudited)
($ in 000’s)

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 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. The non-GAAP financial measures disclosed by the company exclude certain business combination accounting adjustments and certain other items related to acquisitions, certain equity compensation, and certain one-time or unusual transactions. Detailed non-GAAP adjustments are described in the reconciliation tables below and also explained in the related footnotes. 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. Investors should not consider non-GAAP measures as alternatives to the related GAAP measures.

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

Table 1

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 six months ended June 30, 2023 and 2022.

Table 2
(unaudited)

The following table sets forth a reconciliation of our GAAP effective income tax rate to our non-GAAP effective income tax rate for the three and six months ended June 30, 2023 and 2022.

Table 3
(unaudited)

The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2023 and 2022.

Table 4
(unaudited)