Balchem Corp (NASDAQ:BCPC) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 11:00 am ET


Balchem Corp (NASDAQ:BCPC) Q2 2020 Earnings Conference Call - Final Transcript


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Greetings, and welcome to the Balchem Corporation Financial Results Conference call. [Operator Instructions]

It is now my pleasure to introduce your host, Martin Bengtsson, Chief Financial Officer. Thank you. You may begin.

Martin Bengtsson

Good morning, everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending June 30, 2020. My name is Martin Bengtsson, Chief Financial Officer. And hosting this call with me is Ted Harris, our Chairman, CEO and President.

Following the advice of our counsel, auditors and the SEC, at this time, I would like to read our forward-looking statements. This release does contain or likely will contain forward-looking statements, which reflect Balchem's expectation or belief concerning future events that involve risks and uncertainties. We 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 our expectations, including risks and factors identified in Balchem's Form 10-K. Forward-looking statements are qualified in their entirety by this cautionary statement.

I will now turn the call over to Ted Harris, our Chairman, CEO and President.

Ted Harris

Thanks, Martin. Good morning, and welcome to our conference call. This morning, we reported record second quarter consolidated net sales of $173.4 million, which resulted in record second quarter net income of $21.1 million or $0.65 per share on a GAAP basis. On an adjusted basis, our record second quarter adjusted non-GAAP net earnings were $27.6 million or $0.85 per share. Cash flows from operations were $44.6 million for the second quarter of 2020, with quarterly free cash flow of $37 million. Our second quarter net sales of $173.4 million were 7.3% higher than the prior year comparable quarter. We achieved sales growth in all three of our segments as compared to Q2 2019, with all-time record sales in Human Nutrition & Health and Specialty Products and record second quarter sales in Animal Nutrition & Health. The impact of foreign exchange to our sales was a negative $0.5 million, primarily due to a weaker euro, driving a negative 31 basis point impact to our year-over-year sales growth.

Our Q2 consolidated gross margin dollars of $55.4 million were up $1.5 million or 2.7% compared with $53.9 million for the same period in the prior year. Our consolidated gross margin percent was 31.9% of sales in the quarter, down 143 basis points compared to 33.4% in Q2 of 2019. The 143 basis point decrease was primarily due to mix and certain COVID-19-related expenses partially offset by certain lower raw material costs. Consolidated operating expenses for the second quarter of 2020 were $28.5 million as compared to $27.5 million in the prior year. The increase was principally due to incremental operating expenses related to the Chemogas and Zumbro acquisitions and a goodwill impairment charge related to business formerly included in the Industrial Products segment, partially offset by lower selling expenses, primarily due to reduced travel and lower bad debt expense. Excluding noncash operating expense associated with amortization