FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1997 COMMSSION FILE NO. 1-13648
BALCHEM CORPORATION
MARYLAND 13-2578432
- --------------------------------------------------------------------------------
(STATE OF OTHER JURISDICTION OF (I.R.S EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
PO BOX 175 SLATE HILL, NY 10973
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 355-5300
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT(1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES [ X ] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT.
3,155,047 SHARES COMMON STOCK
<PAGE>
<TABLE>
<CAPTION>
BALCHEM CORPORATION
BALANCE SHEET
ASSETS
6/30/97 6/30/96
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash & Investments .................................... 316,500 36,753
Accounts Receivable ................................... 3,274,577 2,935,914
Inventories ........................................... 2,315,320 1,998,383
Prepaid Expenses ...................................... 384,500 416,690
Deferred Income Taxes ................................. 174,685 137,145
---------- ----------
Total Current Assets ............................... 6,465,582 5,524,885
---------- ----------
PROPERTY,PLANT & EQUIPMENT
Land ................................................. 59,690 84,710
Building ............................................. 3,819,277 4,117,916
Equipment ............................................ 8,339,863 9,951,654
---------- ----------
Total ............................................... 12,218,830 14,154,280
Less:Accumulated Depreciation ............................. 4,822,352 6,586,303
---------- ----------
Net Property, Plant,Equipment ...................... 7,396,478 7,567,977
---------- ----------
OTHER ASSETS
Intangible Assets .................................... 2,369,298 873,085
Other ................................................ 52,083 57,071
---------- ----------
Total Other Assets ................................ 2,421,381 930,156
---------- ----------
TOTAL ASSETS .............................................. 16,283,441 14,023,018
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALCHEM CORPORATION
BALANCE SHEET
LIABILITIES & STOCKHOLDER EQUITY
6/30/97 6/30/96
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Payables (Trade & Accruals) .......................... 2,504,977 2,146,155
Notes Payable ........................................ 88,442
Short Term Revolver .................................. 155,000
Current Portion Of Long Term Debt .................... 746,787 467,474
Current Income Tax ................................... 64,078
---------- ----------
Total Current Liabilities .......................... 3,470,842 2,702,071
---------- ----------
Notes Payable Long Term .............................. 15,580 28,933
Long Term Debt ....................................... 1,000,000 2,098,000
Deferred Income Tax .................................. 512,004 711,164
Deferred Compensation ............................... 164,788 121,572
Other Long Term Obligations .......................... 145,950
---------- ----------
TOTAL LIABILITIES ......................................... 5,309,164 5,661,740
---------- ----------
STOCKHOLDERS EQUITY
Common Stock .......................................... 210,336 209,588
Paid In Capital ....................................... 1,923,920 1,768,887
Retained Earnings ..................................... 8,840,021 6,382,803
---------- ----------
Total Stockholders' Equity ......................... 10,974,277 8,361,278
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .................. 16,283,441 14,023,018
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALCHEM CORPORATION
SUMMARIZED FINANCIAL INFORMATION (UNAUDITED)
INCOME STATEMENT
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
--------------------------------------- --------------------------------------
6/30/97 6/30/96 % CHANGE 6/30/97 6/30/96 % CHANGE
---------- ---------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales & Other Revenues .... 14,143,067 12,921,301 9.5% 7,307,924 6,664,002 9.7%
Cost Of Sales .............. 7,826,117 7,451,923 4,061,212 3,871,162
% Of Sales ................ 55.34% 57.67% -2.34% 55.57% 58.09% -2.52%
Interest Expense ........... 84,293 143,320 41,580 69,127
% Of Sales ................ 0.60% 1.11% -0.51% 0.57% 1.04% -0.47%
Other Expenses ............. 3,851,770 3,922,987 1,953,180 1,988,525
% Of Sales ................ 27.23% 30.36% -3.13% 26.73% 29.84% -3.11%
---------- ---------- --------- ---------
Operating Costs And Expenses 11,762,180 11,518,230 6,055,972 5,928,814
Pre - Tax Operating Earnings 2,380,887 1,403,071 1,251,952 735,188
% Of Sales ................ 16.83% 10.86% 5.98% 17.13% 11.03% 6.10%
Income Taxes ............... 801,900 496,386 390,076 263,109
Net Income ................. 1,578,987 906,685 861,876 472,079
% Of Sales ................ 11.16% 7.02% 4.15% 11.79% 7.08% 4.71%
Weighted Average Number Of
Outstanding Shares ........ 3,153,697 3,143,828 3,154,257 3,143,828
Earnings Per Share 0.501 0.288 0.273 0.150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALCHEM CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDING JUNE 30, 1997 AND JUNE 30, 1996
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings .................................... 1,578,987 906,685
Adjustment To Reconcile Net Income To
Net Cash Provided By Operating Activities
Deferred Taxes .................................. (45,327) 18,390
Depreciation & Amortization ..................... 653,587 461,198
Changes In Assets & Liabilities
Accounts Receivable ............................. (304,708) 209,578
Inventories ..................................... (453,220) (125,545)
Prepaid Expenses ................................ 134,216 145,476
Accounts Payable ................................ (46,365) (348,964)
Income Tax Payable ............................. (45,966) (24,247)
Deferred Compensation ........................... 71,546 15,910
Other Long Term Obligation ...................... (20,000)
---------- ----------
Total Adjustments .................................... (56,237) 351,796
Net Cash Provided By (Used In)
Operating Activities ................................. 1,522,750 1,258,481
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures ............................ (773,506) (210,901)
Investments In Other Assets .................... (673,280) (259,320)
Proceeds From Sale of Property, Plant & Equipment 536,577
---------- ----------
Net Cash Used In Investing Activities ................ (910,209) (470,221)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALCHEM CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDING JUNE 30, 1997 AND JUNE 30, 1996
(continued)
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net Borrowings Under Short Term Revolver ........ 155,000
Notes Payable ................................... (265,326)
Note Payable Long Term .......................... (6,202) (5,586)
Principal Payment On Long Term Debt ............. (400,000) (528,000)
Stock Options ................................... 8,342 6,702
Dividends Payable ............................... (141,887) (109,976)
Net Cash Provided By (Used In)
---------- ----------
Financing Activities ................................. (384,747) (902,186)
---------- ----------
INCREASE (DECREASE) IN CASH .......................... 227,794 (113,926)
CASH BEGINNING ...................................... 88,706 150,679
CASH ENDING ......................................... 316,500 36,753
---------- ----------
</TABLE>
<PAGE>
Management's Discussion and Analysis
Revenues
Total revenues for the six months ended 6/30/97 were $14,143,067 as compared to
$12,921,301 for the six months ended 6/30/96, an increase of $1,221,766 or 9.5
%. The increase in revenue is attributable to increased volumes in the domestic
food encapsulation business and the specialty packaging business.
Revenues for the quarter ended 6/30/97 increased 9.7% or $643,922 as compared to
the quarter ended 6/30/96. The increase in revenue is primarily attributable to
increased revenues generated by the specialty packaging business.
Operational Costs and Expenses
Cost of sales decreased 2.34 % as a percentage of sales for the six months ended
6/30/97 as compared to the six months ended 6/30/96. The decrease in cost of
sales as a percentage of sales is partially attributable to volume efficiencies
and partially the result of an increase in the average selling price of products
sold during the six month period. These favorable factors were partially offset
by the reclassification of certain employees as well as employee benefit costs
previously classified as general and administrative to various production
departments.
Cost of sales decreased 2.52 % as a percentage of sales for the quarter ended
6/30/97 as compared to the quarter ended 6/30/96. The decrease in cost of sales
is partially attributable to volume efficiencies and partially a result of an
increase in the average selling price of products sold during the three month
period. These favorable factors were partially offset by the reclassification of
certain employees as well as employee benefit costs previously classified as
general and administrative to various production departments.
Interest expense decreased .51% as a percent of sales or 41.1% for the six
months ended 6/30/97 as compared to the six months ended 6/30/96. The reduction
in interest expense is a result of additional principal payments made against
the long term debt obligation during the second quarter of 1997, the second and
third quarters of 1996 and a rate reduction obtained during the forth quarter of
1996.
Other expenses decreased 1.8% or 3.13% as a percentage of sales for the six
months ended 6/30/97 as compared to the six months ended 6/30/96. The decrease
is partially the result of the reclassification of certain employee benefit
costs previously classified as general and administrative to various production
departments, a decrease in recruiting and relocation expense and a decrease in
office and computer expenses associated with the development of a local area
network. These decreases were partially offset by an increase in the cost of
health insurance and other employee benefit expenses.
Other expenses decreased 1.8% or 3.11% as a percentage of sales for the quarter
ended 6/30/97 as compared to the quarter ended 6/30/96. The decrease is
partiallly the result of the reclassification of certain employee benefit costs
previously classified as general anad administrative to various production
departments. The decrease can also be attributed to a decrease in office and
consulting expenses associated with the development of a local area network. The
decreases were partially offset by an increase in the cost of health insurance
and other employee benefit expenses.
<PAGE>
Pre-Tax Earnings
Pre-tax earnings increased 69.7% or 5.98% as a percentage of sales for the six
months ended 6/30/97 as compared to the six months ended 6/30/96 and increased
70.3% or 6.10% as a percentage of sales for the quarter ended 6/30/97 as
compared to the quarter ended 6/30/96. The increases are a direct result of the
business conditions previously described.
Inventories
Inventories as stated for the period 6/30/97 and 6/30/96 were $2,315,320 and
$1,998,383 respectively, inclusive of the following breakdown:
1997 1996
---------- ----------
Raw Materials $1,220,469 $1,171,271
Finished Goods 1,094,851 827,112
---------- ----------
Total Inventory $2,315,320 $1,998,383
Adjustments
In the opinion of management, the accompanying statements are representative of
all the adjustments to fairly present the consolidated position as of June 30,
1997 and June 30, 1996. Note that certain prior year balances have been
reclassified to conform with current year presentation.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of Registrant was held on June 27, 1997.
The directors elected at the meeting were Donald Alguire, Kenneth Mitchell and
Israel Sheinberg as Class 2 directors and Raymond A. Reber as a Class 1
director. The other directors continuing in office are John E. Beebe, Francis X.
McDermott, Paul F. Mosher, Carl Pacifico and Leonard J. Zweifler.
The meeting voted on an amendment to Section 5 of the Stock Option Plan for
Directors to change the method of determining the number of options to be
granted annually to each director and director emeritus. The vote on the
amendment was: (i) for the amendment 2,174,574 shares, (ii) against the
amendment 122,362 shares and (iii) abstaining 14,666 shares.
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934 THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREWITH DULY AUTHORIZED.
BALCHEM CORPORATION
(REGISTRANT)
BY /S/ DINO A. ROSSI
-----------------
DINO A. ROSSI
VICE-PRESIDENT/
CHIEF FINANCIAL OFFICER
DATED: JULY 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 316,500
<SECURITIES> 0
<RECEIVABLES> 3,274,577
<ALLOWANCES> 0
<INVENTORY> 2,315,320
<CURRENT-ASSETS> 6,465,582
<PP&E> 12,218,830
<DEPRECIATION> 4,822,353
<TOTAL-ASSETS> 16,283,440
<CURRENT-LIABILITIES> 3,470,842
<BONDS> 0
0
0
<COMMON> 210,336
<OTHER-SE> 10,763,940
<TOTAL-LIABILITY-AND-EQUITY> 16,283,440
<SALES> 14,143,067
<TOTAL-REVENUES> 14,143,067
<CGS> 7,826,117
<TOTAL-COSTS> 11,762,180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,380,887
<INCOME-TAX> 801,900
<INCOME-CONTINUING> 1,578,987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,578,987
<EPS-PRIMARY> .501
<EPS-DILUTED> .501
</TABLE>
