NEW HAMPTON, N.Y., Aug. 05, 2016 (GLOBE NEWSWIRE) -- Balchem Corporation (NASDAQ:BCPC) today reported for the
second quarter net earnings of $14.2 million, compared to net earnings of $14.9 million and $11.9 million for the second quarter
2015 and sequentially from the first quarter 2016, respectively. All-time record quarterly adjusted EBITDA(a) was $39.5
million, compared to adjusted EBITDA of $35.0 million and $35.5 million for the second quarter 2015 and sequentially from the first
quarter 2016, respectively. For the six months ended June 30, 2016, net earnings were $26.0 million with record adjusted EBITDA of
$75.0 million, compared to net earnings and adjusted EBITDA of $30.1 million and $71.1 million, respectively, in the prior year.
Adjusted EBITDA margin was strong, increasing in the second quarter 2016 to 28.5% from 26.0% and 26.2% in the prior year quarter
and first quarter 2016, respectively, and this was a significant contributor to these results in a challenging macroeconomic
environment.
Second Quarter 2016 Financial Highlights:
- Net sales of $138.8 million, an increase of 3% compared to the second quarter of 2015, with the contribution from Albion and
volume increases in Human Nutrition & Health (HNH; formerly SensoryEffects)(b), Animal Nutrition & Health (ANH), and
Specialty Products(c), offsetting the continued lower oil & gas sales in Industrial Products, weak dairy markets, and
lower average selling prices.
- All-time record quarterly sales and earnings for our Specialty Products segment.
- All-time record quarterly adjusted EBITDA of $39.5 million increased $4.5 million or 12.9% from the prior year.
- Adjusted EBITDA margin improved to 28.5% versus 26.0% in the second quarter 2015 and 26.2% sequentially from the first
quarter 2016 principally due to improved product mix and lower raw material costs.
- All-time record quarterly adjusted net earnings(a) of $21.1 million increased $1.6 million or 8.3% from the prior
year, and was up $2.7 million or 14.5% sequentially, while record second quarter adjusted earnings per share(a) of
$0.66 increased $0.04 or 6.5% from the prior year.
- Record second quarter cash flows from operations generated of $26.6 million.
- Principal payments made, including accelerated payments, of $28.8 million on long-term debt and the revolving loan.
Recent Highlights:
- The Food and Drug Administration (FDA) issued the food nutrition labeling Final Rule. In it, the FDA recognized choline as an
essential nutrient and established a Reference Dietary Intake (RDI) for choline for foods and supplement products that include
the nutrient. Products with claims on choline content or benefits will now show choline and its percent Daily Value (DV) on the
label, providing consumers with a highly visible measure of the choline content of foods. In providing for choline labeling on
foods and dietary supplements, the FDA has taken an important step towards helping consumers ensure they get sufficient choline
in their diets.
Ted Harris, CEO and President of Balchem said, “Our second quarter 2016 results included all-time record
adjusted EBITDA and record second quarter cash flows from operations, which we leveraged into accelerated debt payments.
These results validate our team’s efforts and the business model that we have built, especially when viewed in light of the global
macroeconomic challenges.”
|
Results for Period Ended June 30, 2016
(unaudited) |
($000 Omitted Except for Net Earnings per
Share) |
|
For the Three Months Ended June 30, |
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Net sales |
|
$ |
138,794 |
|
$ |
134,773 |
|
Gross margin |
|
|
46,449 |
|
|
41,867 |
|
Operating expenses |
|
|
23,116 |
|
|
18,093 |
|
Earnings from operations |
|
|
23,333 |
|
|
23,774 |
|
Other expense |
|
|
1,950 |
|
|
1,607 |
|
Earnings before income tax expense |
|
|
21,383 |
|
|
22,167 |
|
Income tax expense |
|
|
7,233 |
|
|
7,251 |
|
Net earnings |
|
$ |
14,150 |
|
$ |
14,916 |
|
|
|
|
|
|
|
|
|
Diluted net earnings per common share |
|
$ |
0.44 |
|
$ |
0.47 |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
39,512 |
|
$ |
34,998 |
|
Adjusted net earnings |
|
$ |
21,093 |
|
$ |
19,476 |
|
Adjusted net earnings per common share |
|
$ |
0.66 |
|
$
|
0.62
|
|
Shares used in the calculations of diluted and adjusted net earnings per common
share |
|
|
31,875 |
|
|
31,632 |
|
|
For the Six Months Ended June 30, |
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Net sales |
|
$ |
273,935 |
|
$ |
279,635 |
|
Gross margin |
|
|
89,273 |
|
|
84,997 |
|
Operating expenses |
|
|
45,972 |
|
|
36,185 |
|
Earnings from operations |
|
|
43,301 |
|
|
48,812 |
|
Other expense |
|
|
3,937 |
|
|
3,560 |
|
Earnings before income tax expense |
|
|
39,364 |
|
|
45,252 |
|
Income tax expense |
|
|
13,328 |
|
|
15,164 |
|
Net earnings |
|
$ |
26,036 |
|
$ |
30,088 |
|
|
|
|
|
|
|
|
|
Diluted net earnings per common share |
|
$ |
0.82 |
|
$ |
0.95 |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
74,975 |
|
$ |
71,079 |
|
Adjusted net earnings |
|
$ |
39,517 |
|
$ |
39,095 |
|
Adjusted net earnings per common share |
|
$ |
1.24 |
|
$ |
1.24 |
|
|
|
|
|
Shares used in the calculation of diluted and adjusted net earnings per common
share |
|
|
31,843 |
|
|
31,525 |
|
|
|
|
|
|
|
|
|
(a)See “Non-GAAP Financial Information” for a reconciliation of GAAP and non-GAAP financial
measures.
(b)Beginning in fiscal year 2016, the Company has renamed its SensoryEffects segment as Human
Nutrition & Health, as this segment now includes encapsulates, choline, mineral amino acid chelates, specialized mineral salts,
mineral complexes, and customized food and beverage solutions (the aforementioned three mineral product lines are contributions
from the Albion International, Inc. acquisition). The Company believes that this segment name change provides more clarity as to
the segment’s core businesses and strategies.
(c)Beginning in fiscal year 2016, the Specialty Products segment now also includes chelated minerals
for the micronutrient agricultural market (this plant nutrition product line is a contribution from the Albion International, Inc.
acquisition).
Segment Financial Results for the Second Quarter of
2016:
The Human Nutrition & Health segment generated record quarterly sales of $74.8 million, an
increase of $7.6 million or 11.3% compared to the prior year quarter. Net sales increased due to the acquisition of the Albion
business, along with volume increases in Flavor Systems, Choline Nutrients, and Encapsulated products of 9%, 7% and 5%,
respectively, and was partially offset by overall legacy sales being negatively impacted by mix, particularly in Cereal Systems and
Powder Systems. Sequentially from the first quarter 2016, without the positive impact of Albion, volumes in HNH increased 4.5%,
with particular strength in Flavor Systems, Cereal Systems and Encapsulated products. Second quarter earnings from operations for
this segment were $9.0 million, versus $9.1 million in the prior year comparable quarter, a decrease of $0.1 million or 0.7%.
Excluding the effect of non-cash expense associated with amortization of acquired intangible assets of $5.9 million and inventory
valuation adjustments of $1.7 million relating to acquisition accounting, adjusted earnings from operations(a) for this
segment were $16.7 million compared to $14.7 million in the prior year quarter, an increase of $2.0 million or 13.3%. Earnings from
operations for the quarter were favorably impacted by the addition of Albion, along with an improved product mix and lower raw
material costs.
The Animal Nutrition & Health segment sales of $38.4 million decreased 7.8% or $3.2 million on
a 3.8% increase in volumes compared to the prior year quarter. The reduced sales were primarily due to lower average selling prices
for products in the monogastric markets, as well as an unfavorable product mix, particularly for ruminant products. The lower
monogastric average selling prices were primarily a function of reduced formula pricing resulting from lower raw material costs.
Global monogastric species volumes continued to be strong, while ruminant species volumes continued to be challenged by lower milk
and milk protein prices. Earnings from operations for the ANH segment decreased 2.2% to $7.3 million as compared to $7.5 million in
the prior year comparable quarter, an impact of the aforementioned lower sales and unfavorable product mix, partially offset by
cost decreases of key raw materials. Earnings from operations for the ANH segment increased $0.8 million, or 11.8%, sequentially
from the first quarter 2016.
The Specialty Products segment generated all-time record quarterly sales of $20.3 million, a
$6.5 million or 47.2% increase from the comparable prior year quarter, due to the Albion plant nutrition contribution and a 5.0%
increase in sales of legacy Specialty Products. All-time record quarterly earnings from operations for this segment were $7.0
million, versus $6.1 million in the prior year comparable quarter, an increase of $0.9 million or 15.2%. Excluding the effect of
non-cash expense associated with amortization of acquired intangible assets of $0.7 million and inventory valuation adjustments of
$0.9 million relating to acquisition accounting, adjusted earnings from operations for this segment were $8.7 million compared to
$6.2 million in the prior year quarter, an increase of $2.5 million or 39.8%.
The Industrial Products segment sales declined $6.8 million or 56.5% from the prior year
comparable quarter, primarily due to significantly reduced volumes sold of choline and choline derivatives for oil and natural gas
fracking in North America. Additionally, average selling prices were lower as a result of pressures related to the industry
activity downturn. Earnings from operations for the Industrial Products segment were $0.3 million, a reduction of $0.9 million
compared with the prior year comparable quarter which was primarily a reflection of the aforementioned reduced volume and the lower
average selling prices. Earnings from operations for the Industrial Products segment was essentially flat on a sequential
basis.
Consolidated gross margin for the quarter ended June 30, 2016 increased 10.9% to $46.4 million, as compared to
$41.9 million for the prior year comparable period. Gross margin as a percentage of sales increased to 33.5% as compared to 31.1%
in the prior year comparative period. Adjusted gross margin(a) for the quarter ended June 30, 2016 increased 18.2% to
$49.7 million, as compared to $42.1 million for the prior year comparable period. For the three months ended June 30, 2016,
adjusted gross margin as a percentage of sales was 35.8% compared to 31.2% in the prior year comparative period. The improvement
was primarily due to a favorable product mix and lower raw material costs. Operating (Selling, Research & Development, General &
Administrative) expenses of $23.1 million for the second quarter were higher than the prior year comparable quarter principally due
to the inclusion of Albion operating expenses, transaction and integration costs and amortization expense related to the
aforementioned acquisition. Excluding transaction and integration costs of $0.3 million and non-cash operating expense associated
with amortization of intangible assets of $6.8 million, operating expenses were $16.0 million, or 11.6% of sales.
Interest expense was $1.9 million in the second quarter of 2016, all of which related to the debt financing of
the SensoryEffects and Albion acquisitions. Our effective tax rates for the three months ended June 30, 2016 and 2015 were 33.8%
and 32.7%, respectively. The increase in the effective tax rate is primarily attributable to the impact of new jurisdictions, and a
change in the income proportion towards jurisdictions with higher tax rates.
The Company continues to build a solid financial structure. Record second quarter cash flows provided by
operating activities were $26.6 million for the quarter ended June 30, 2016, and diligent working capital controls continue to
contribute strongly to the business performance. The $94.0 million of net working capital on June 30, 2016 included a cash balance
of $33.4 million, which reflects scheduled and accelerated principal payments on long-term debt and the revolving loan of $28.8
million and capital expenditures of $4.1 million in the second quarter of 2016. The Company continues to invest in projects across
all facilities to improve capabilities and operating efficiencies.
Ted Harris said, “Strong margins, the accretive benefits of the Albion acquisition, and modest volume growth in
three of our four segments more than offset the negative impact from lower fracking-related sales and reduced average selling
prices, allowing us to deliver all-time record quarterly adjusted net earnings.”
Mr. Harris went on to add, “The long-awaited RDI for choline has now been established and we are working with supplement and food
manufacturers to leverage the recognition of this essential nutrient, both in the domestic and international marketplaces, as
choline visibility continues to gain traction. It is clear that regulatory agencies across the globe now recognize the importance
of this essential nutrient, and Balchem stands ready to help fill the dietary gap with VitaCholine®, the premier brand
of choline for supplementation. Through this period of macroeconomic challenges, we will continue to focus on driving our strategic
growth initiatives, particularly in Human Nutrition & Health and Animal Nutrition & Health, via
organic investments in new manufacturing capabilities and new product development, as well as value creating acquisitions.”
Quarterly Conference Call
A quarterly conference call will be held on Friday, August 5, 2016, at 11:00 AM Eastern Time (ET) to review Second Quarter 2016
results. Ted Harris, President & Chief Executive Officer, and Bill Backus, 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 replay two hours after the conclusion of the
call through end of day Friday, August 19, 2016. To access the replay of the conference call, dial 1-877-660-6853 (local dial-in
1-201-612-7415), and use conference ID #13642322.
Segment Information
Balchem Corporation reports four business segments: Human Nutrition & Health (formerly SensoryEffects); Animal Nutrition & Health;
Specialty Products; and Industrial 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. The Industrial Products segment manufactures and supplies 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, 2015. 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 |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
2015 |
Human Nutrition & Health |
|
$ |
74,800 |
$ |
67,230 |
$ |
146,355 |
$ |
134,987 |
Animal Nutrition & Health |
|
|
38,412 |
|
41,642 |
|
77,644 |
|
84,348 |
Specialty Products |
|
|
20,325 |
|
13,805 |
|
37,442 |
|
27,384 |
Industrial Products |
|
|
5,257 |
|
12,096 |
|
12,494 |
|
32,916 |
Total |
|
$ |
138,794 |
$ |
134,773 |
$ |
273,935 |
$ |
279,635 |
Business Segment Earnings Before Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Human Nutrition & Health |
|
$ |
|
9,024 |
|
$ |
|
9,087 |
|
$ |
|
17,396 |
|
$ |
|
16,793 |
|
Animal Nutrition & Health |
|
|
|
7,304 |
|
|
|
7,468 |
|
|
|
13,839 |
|
|
|
15,978 |
|
Specialty Products |
|
|
|
7,016 |
|
|
|
6,093 |
|
|
|
12,304 |
|
|
|
11,794 |
|
Industrial Products |
|
|
|
258 |
|
|
|
1,126 |
|
|
|
492 |
|
|
|
4,247 |
|
Transaction costs, integration costs and legal settlement |
|
|
|
(269 |
) |
|
|
- |
|
|
|
(730 |
) |
|
|
- |
|
Interest and other expense |
|
|
|
(1,950 |
) |
|
|
(1,607 |
) |
|
|
(3,937 |
) |
|
|
(3,560 |
) |
Total |
|
$ |
|
21,383 |
|
$ |
|
22,167 |
|
$ |
|
39,364 |
|
$ |
|
45,252 |
|
|
|
|
|
|
|
|
Selected Balance Sheet Items |
|
|
June
30, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
Cash and Cash Equivalents |
|
$ |
33,421 |
|
$ |
84,795 |
Accounts Receivable, net |
|
|
67,072 |
|
|
60,485 |
Inventories |
|
|
57,839 |
|
|
46,085 |
Other Current Assets |
|
|
10,673 |
|
|
6,927 |
Total Current Assets |
|
|
169,005 |
|
|
198,292 |
|
|
|
|
|
|
|
Property, Plant & Equipment, net |
|
|
172,793 |
|
|
158,515 |
Goodwill |
|
|
445,390 |
|
|
383,906 |
Intangible Assets With Finite Lives, net |
|
|
162,752 |
|
|
134,911 |
Other Assets |
|
|
4,352 |
|
|
4,062 |
Total Assets |
|
$ |
954,292 |
|
$ |
879,686 |
|
|
|
|
|
|
|
Current Liabilities |
|
$ |
39,969 |
|
$ |
46,120 |
Current Portion of Long Term-Debt |
|
|
35,000 |
|
|
35,000 |
Long-Term Debt |
|
|
243,732 |
|
|
260,963 |
Revolving Loan – Long-Term |
|
|
45,000 |
|
|
- |
Deferred Income Taxes |
|
|
87,259 |
|
|
67,215 |
Long-Term Obligations |
|
|
7,178 |
|
|
6,683 |
Total Liabilities |
|
|
458,138 |
|
|
415,981 |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
496,154 |
|
|
463,705 |
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
954,292 |
|
$ |
879,686 |
|
Balchem Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited) |
|
|
Six Months Ended
June 30, |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
Cash flows from operating activities: |
|
|
Net Earnings |
|
$ |
26,036 |
|
$ |
30,088 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
|
22,666 |
|
|
19,891 |
|
Stock compensation expense |
|
|
3,949 |
|
|
2,684 |
|
Other adjustments |
|
|
443 |
|
|
115 |
|
Changes in assets and liabilities |
|
|
2,864 |
|
|
(2,912 |
) |
Net cash provided by operating activities |
|
|
55,958 |
|
|
49,866 |
|
|
|
|
|
Cash flow from investing activities: |
|
|
|
Cash paid in acquisition, net of cash acquired |
|
|
(110,601 |
) |
|
- |
|
Capital expenditures and intangible assets acquired |
|
|
(15,322 |
) |
|
(15,916 |
) |
Net cash used in investing activities |
|
|
(125,923 |
) |
|
(15,916 |
) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from long-term and revolving debt |
|
|
65,000 |
|
|
- |
|
Principal payments on long-term and revolving debt |
|
|
(38,384 |
) |
|
(17,500 |
) |
Proceeds from stock options exercised |
|
|
3,032 |
|
|
9,920 |
|
Excess tax benefits from stock compensation |
|
|
792 |
|
|
5,785 |
|
Dividends paid |
|
|
(10,727 |
) |
|
(9,251 |
) |
Other |
|
|
(1,478 |
) |
|
(21 |
) |
Net cash provided by (used in) financing activities |
|
|
18,235 |
|
|
(11,067 |
) |
|
|
|
|
Effect of exchange rate changes on cash |
|
|
356 |
|
|
(927 |
) |
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(51,374 |
) |
|
21,956 |
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
84,795 |
|
|
50,287 |
|
Cash and cash equivalents, end of period |
|
$ |
33,421 |
|
$ |
72,243 |
|
|
|
|
|
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 disclosed by the
company exclude certain business combination accounting adjustments and certain other items related to acquisitions, and certain
unallocated equity compensation. 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 adjusted gross margin, adjusted earnings from operations, adjusted net earnings and the related adjusted per diluted share
amounts, EBITDA, and adjusted EBITDA. EBITDA is defined as earnings before interest, other expense/income, taxes, depreciation and
amortization. Adjusted EBITDA is defined as earnings before interest, other expense/income, taxes, depreciation, amortization,
stock-based compensation, acquisition-related expenses and legal settlements, and the fair valuation of acquired inventory.
Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP
financial measures.
|
Reconciliation of Non-GAAP Measures to
GAAP
(Dollars in thousands, except per share data)
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of adjusted gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross margin |
|
$ |
|
46,449 |
|
$ |
|
41,867 |
|
$ |
|
89,273 |
|
$ |
|
84,997 |
|
Inventory valuation adjustment (1) |
|
|
|
2,635 |
|
|
|
- |
|
|
|
5,046 |
|
|
|
- |
|
Amortization of intangible assets (2) |
|
|
|
640 |
|
|
|
187 |
|
|
|
1,129 |
|
|
|
372 |
|
Adjusted gross margin |
|
$ |
|
49,724 |
|
$ |
|
42,054 |
|
$ |
|
95,448 |
|
$ |
|
85,369 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of adjusted earnings from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings from operations |
|
|
|
23,333 |
|
|
|
23,774 |
|
|
|
43,301 |
|
|
|
48,812 |
|
Inventory valuation adjustment (1) |
|
|
|
2,635 |
|
|
|
- |
|
|
|
5,046 |
|
|
|
- |
|
Amortization of intangible assets (2) |
|
|
|
7,456 |
|
|
|
6,619 |
|
|
|
14,697 |
|
|
|
13,233 |
|
Transaction costs, integration costs and legal settlement (3) |
|
|
|
269 |
|
|
|
- |
|
|
|
730 |
|
|
|
- |
|
Adjusted earnings from operations |
|
|
|
33,693 |
|
|
|
30,393 |
|
|
|
63,774 |
|
|
|
62,045 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of adjusted net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net earnings |
|
|
|
14,150 |
|
|
|
14,916 |
|
|
|
26,036 |
|
|
|
30,088 |
|
Inventory valuation adjustment (1) |
|
|
|
2,635 |
|
|
|
- |
|
|
|
5,046 |
|
|
|
- |
|
Amortization of intangible assets (2) |
|
|
|
7,587 |
|
|
|
6,776 |
|
|
|
14,965 |
|
|
|
13,547 |
|
Transaction costs, integration costs and legal settlement (3) |
|
|
|
269 |
|
|
|
- |
|
|
|
730 |
|
|
|
- |
|
Income tax adjustment (4) |
|
|
|
(3,548 |
) |
|
|
(2,216 |
) |
|
|
(7,260 |
) |
|
|
(4,540 |
) |
Adjusted net earnings |
|
$ |
|
21,093 |
|
$ |
|
19,476 |
|
$ |
|
39,517 |
|
$ |
|
39,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings per common share – diluted |
|
$ |
|
0.66 |
|
$ |
|
0.62 |
|
$ |
|
1.24 |
|
$ |
|
1.24 |
|
|
|
|
|
|
|
|
|
|
|
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.
3 Transaction costs, integration costs
and legal settlement: Transaction and integration costs related to acquisitions are expensed in our GAAP financial
statements. Legal settlements related to acquisitions are included as expense offset in our GAAP financial statements. Management
excludes these items for the purposes of calculating Adjusted EBITDA and other non-GAAP financial measures. We believe that
excluding these items from our non-GAAP financial measures is useful to investors because these are items associated with each
transaction, and are inconsistent in amount and frequency causing comparison of current and historical financial results to be
difficult.
4 Income tax adjustment: For
purposes of calculating adjusted net earnings and adjusted 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 six months ended June 30, 2016 and 2015.
|
|
|
|
|
|
|
Three Months
Ended
June 30, |
|
Six Months
Ended
June 30, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net income - as reported |
|
$ |
14,150 |
$ |
14,916 |
$ |
26,036 |
$ |
30,088 |
Add back: |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
7,233 |
|
7,251 |
|
13,328 |
|
15,164 |
Other expense |
|
|
1,950 |
|
1,607 |
|
3,937 |
|
3,560 |
Depreciation and amortization |
|
|
11,522 |
|
9,712 |
|
22,402 |
|
19,581 |
EBITDA |
|
|
34,855 |
|
33,486 |
|
65,703 |
|
68,393 |
Add back certain items: |
|
|
|
|
|
|
|
|
|
Non-cash compensation expense related to equity awards |
|
|
1,753 |
|
1,512 |
|
3,496 |
|
2,686 |
Transaction costs, integration costs and legal settlement |
|
|
269 |
|
- |
|
730 |
|
- |
Inventory fair value |
|
|
2,635 |
|
- |
|
5,046 |
|
- |
Adjusted EBITDA |
|
$ |
39,512 |
$ |
34,998 |
$ |
74,975 |
$ |
71,079 |
|
Contact: Suzanne Hart, Balchem Corporation Telephone: 845-326-5600