Balchem Corp (BCPC) 2011 Q2 法說會逐字稿

Greetings and welcome to the Balchem Corporation second-quarter 2011 earnings call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Frank Fitzpatrick, CFO, for Balchem Corporation. Thank you. Mr. Fitzpatrick, you may begin.

Thank you. Ladies and gentlemen, thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the period ending June 30, 2011. My name is Frank Fitzpatrick, Chief Financial Officer, and hosting this call with me is Dino Rossi, our Chairman, President, and CEO.

Following the advice of our counsel, auditors, and the SEC, at this time, I would like to read our forward-looking statement. 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-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. The financial information that is referenced in this meeting was disclosed this morning in our quarterly press release at 9.30 a.m. Eastern Time.

I will now turn the call over to Dino Rossi, our Chairman, President, and CEO.

Thanks, Frank. Good morning, ladies and gentlemen, and welcome to our conference call.

We're pleased to report record second-quarter net earnings of $9.6 million on record consolidated sales of $74.7 million for the quarter ended June 30, 2011. These second-quarter sales of $74.7 million were approximately 22% greater than the $61.5 million result of the prior year comparable quarter.

Disciplined management of our businesses enabled us to improve operating margins on a sequential basis and deliver strong profitability and cash flow. Double-digit revenue growth was achieved this quarter with the Animal Nutrition & Health segment setting a record, up 27.3% due to growth from our basic choline and industrial products, which were up 27.8% and strong specialty AN&H sales, which were up 24.6%.

The ARC Specialty Products segment generated record quarterly sales of $12 million, a 17.6% improvement over the prior-year quarter, principally a result of increases in sales volumes of packaged ethylene oxide and propylene oxide in the quarter.

The Food, Pharma & Nutrition business posted 3% growth, resulting in quarterly sales of $10.9 million, with particular strength in the domestic food markets and human-grade choline markets.

As previously noted, consolidated net income closed the quarter at $9.6 million, up from approximately $8.3 million in the prior-year quarter, or an increase of approximately 15%. This record quarterly net income translated into diluted earnings per share of $0.32, a 14.3% increase from the $0.28 we posted in the comparable quarter of 2010.

Looking between the top and bottom line, you will see that our consolidated gross profit of $21.8 million were equal to 29% of the sales in the quarter. This level, although a modest decline in the percent of sales in the prior-year quarter, does reflect improved sales volumes, product mix, and plant efficiencies, and is an improvement on a sequential basis. We did, however, realize higher cost of certain key raw materials. These raw material increases, largely petroleum derivative, particularly affected unfavorably our ANH and ARC Specialty Products segments. As mentioned in the last conference call, these raw material costs continued to rise at a very swift pace in the quarter. And while some were passed on to customers, additional price increases have been, and will be, implemented in the third quarter as our businesses are likely to remain affected by these higher costs for the balance of 2011.

We continue to work on operational efficiencies and did achieve improvements in the second quarter. But they were more than offset by raw material cost increases; hence, the slight decline noted.

At the consolidated operating expense level you will note expenses totaling $7.7 million for the quarter, which equaled 10.3% of sales versus the prior year 10.9% level. As noted in our press release, this spending level reflects some increased expenses related to an increase of employee headcount, other payroll-related expenses, consultancy fees, and new amortization expense related to the Aberco acquisition. We do, however, continue to leverage off of our existing infrastructure and exercise tight control over all controllable operating expenses.

Overall, it was another strong quarter. We again are particularly pleased with the results of our ARC segment and choline product lines that generated strong margins, largely due to continued strong sales volumes, product mix, and production and logistic efficiencies. Operating margin percentages remained strong for both FPN and ARC Specialty Product segments.

Consolidated earnings from operations finished at 18.8%, or $14.1 million for the quarter.

Other income of $293,000 includes a net gain of approximately 188 related to the sale of noncore calcium carbonate product line and favorable fluctuations in foreign currency exchange rates between the US dollar, which is the reporting currency, and functional foreign currencies.

Net income of $9.6 million translated to $0.32 per diluted common share, or an increase of 14.3% over the comparative prior-year quarter, generating approximately $16.6 million of EBITDA in the quarter, which translates into $0.55 per diluted share. And, when including our noncash stock-based compensation charge, we generated $17.5 million of EBITDA in the quarter, equaling approximately 23% of sales.

At June 30, 2011 our outstanding borrowings were approximately $5 million, but $0 net of our cash balance of approximately $90 million. We continued to aggressively manage all areas of working capital, driving strong cash flow, which also results in improved earnings to generate even more accretive results from our core businesses.

In an effort to detail our consolidated results better for our shareholders, I am now going to have Frank Fitzpatrick discuss the ARC Specialty Products and Food, Pharma & Nutrition segments.

The ARC Specialty Products segment posted record sales of approximately $12 million, or 17.6% increase over the prior-year comparable quarter. This increase was principally the result of strong sales of ethylene oxide for medical device sterilization and increased volumes of propylene oxide in support of the June 2010 acquisition of Aberco, Inc. which targets nut meat and spice fumigation.

ARC quarterly business earnings increased 26% to $4.5 million versus the prior-year comparable quarter. This increase is largely a direct correlation to the improved sales results of propylene oxide, increased volumes sold of ethylene oxide products, and as previously recorded, higher average selling prices on certain products. These increased selling prices were implemented to help offset key raw material cost increases. However, our results were again adversely impacted by additional cost increases. We continue to monitor raw material price escalation and seek to implement price increases within contractual guidelines.

The Food, Pharma & Nutrition segment realized a 3% sales increase to $10.9 million versus the prior-year comparable quarter. Business segment earnings of $2.8 million were even with the prior-year quarter. As stated in this morning's press release, domestic and food sector sales volumes were up approximately 3% this quarter, as we again saw growth of encapsulated ingredients for baking, prepared food, preservation, and confection markets.

We also realized double-digit growth in sales of our human choline products for nutritional enhancement. We continue to focus on building consumer awareness of the benefits of choline, and we recently were awarded three claims by EFSA in Europe. We continue to position choline with nutritional and pharmaceutical companies as an essential ingredient with excellent therapeutic benefits for all ages.

Switching over to the calcium product line, as previously reported, late in the fourth quarter of 2010 we did successfully close on the sale of this business line. We exited our leased facility at the end of the second quarter in 2011. Exiting this business did have an unfavorable impact on our sales growth in this segment. However, exiting the business line will result in improved operating income for the FPN segment in 2011.

Our pharmaceutical drug delivery commercial development efforts continue. In the quarter we did generate a minor R&D milestone payment from a licensee of our technology that continues to conduct a Phase 3 clinical trial utilizing our technology. We are cautiously optimistic that these efforts will yield good end results, but in the near term this sector remains a net expense to the business segment.

I will now turn the call over to Mr. Rossi for him to discuss the Animal Nutrition & Health segment.

Thanks, Frank.

In the ANH segment we realized sales of $51.8 million, an increase of $11.1 million, or 27%, as compared to the prior-year comparable quarter.

Within the segment, Specialty ANH product sales realized 25% growth from the prior-year comparable quarter, as improvement in dairy economics created greater demand for our products. These increases are principally a result of improved sales volumes of Aminoshure-L, our rumen-protected lysine, and Reashure, our rumen-protected choline product. We continue to be pleased with the progress we have made with the Aminoshure-L launch, as more prospective customers trialing the product are realizing positive experiences. These overall increases clearly coincide with a dairy economy that has improved over the past several months. However, we are monitoring this very closely as higher feed prices pressure milk-producer economics.

In addition, improving output for cows expected to maintain or boost milk production in 2011. The increased output per cow is expected to more than offset the targeted reduction of herd size this year, resulting in more milk, which may act to keep prices from rising much in 2011.

As noted in our press release, our global feed-grade choline product sales were up 12.8% from the prior-year quarter, a very positive result considering feed grain prices. Data from USDA's Broiler Hatchery Report, which tracks the number of broiler chicks placed and eggs set, reported that broiler meat production over the first 5 months of 2011 was 4.8% higher than the previous year. However, recent forecasts have been decreased as poultry integrators have [slowed] the placement of chicks in an attempt to lower inventory levels and raise prices enough to cover the large increases that have occurred in both feed and energy costs.

As previously reported, we do continue to evaluate export sales opportunities in this market. Exports of liquid and dry choline from our North American plants did improve in the quarter as we saw greater volumes sold into Mexico and South America. And in the coming quarters we may elect to be more aggressive in seeking to win additional business, depending upon the then-current costs and market conditions.

Sales of industrial derivatives had another very strong quarter. Sales of methylamines and other industrial products, including a toll-produced methylamine derivative from our Italian operation specifically for Europe, continued strong despite the general poor economic climate in Europe. We again saw exceptionally strong sales of choline derivative products being sold for various industrial applications in North America, especially for the gas fracking opportunities.

We continue to evaluate these growing industrial opportunities with other core technology to determine how we can drive innovative solutions into this market and derive the most positive value. This strong performance has continued into the early part of the third quarter, and we remain fairly confident that this upward trend will continue throughout 2011, driving increases in sales and profitability.

As reported in our press release, during the quarter we successfully completed the expansion of the choline production capacity in our St. Gabriel, Louisiana and Verona, Missouri sites where we are currently producing product at the expected increased levels.

Earnings from operations for this entire segment improved to $6.7 million as compared to $6 million in the prior-year comparable quarter, largely due to improved volumes sold, product mix, and certain favorable production and logistic efficiencies. These earnings were, however, unfavorably impacted by increases in petrochemical commodities used to manufacture choline. These key raw materials rose at a very swift pace in the quarter. And while some were passed on to customers, our pricing initiatives in the quarter were not enough to offset all of the cost increases. Additional price increases have been, and will be implemented in the third quarter, as our businesses are likely to remain affected by these higher costs for the balance of 2011.

The profitability of the ANH segment was achieved with a constant reevaluation of global raw material costs, product reformulation, currency review, and our ultimate ability to meet market needs from our various global facilities and transload sites. The opportunity to capitalize in this fashion is a direct result of our effective integration of acquisitions, growth strategies, and the ability to drive costs out of our business model.

Last quarter we announced our plans to expand production capabilities with a new encapsulation technology targeted to the ruminant animal market. This investment is focused on supporting our targeted markets with new and novel products to enhance our ability to better serve these markets. I am pleased to report that we have successfully completed this new encapsulation technology expansion and are now producing commercial sellable product.

With the bulk of the feed-grade choline predominantly going to the poultry and swine markets, we are very sensitive to the continued economic pressures on the large production animal integrators. Feed ration costs have modestly corrected near term, but retail poultry and swine prices remain low, keeping significant downward pressure on profitability for this global end market. We continue to closely monitor raw material costs for all segments of our business, and implement cost pass-throughs as appropriate.

As noted in previous calls, we continue to see a revenue roller coaster effect quarter to quarter in the various products or market sectors, but we are very pleased with this overall quarterly consolidated earnings result. We continue to strength our global growth platform and are confident that more business will be generated based on the unique platform of products that we offer, or soon will offer, the markets we serve.

Our business portfolio continues to create good balance, yielding profitable growth opportunities through the various challenges of any single segment or product line. We continue to deliver solid revenue and operating income growth by staying focused on helping our customers save and make money in this tough economy, while maintaining our own operating discipline.

Overall, we continue to build the financial strength of the Company, managing the asset base aggressively, reducing debt and interest expense, which also assists in yielding improved financial results. Near term we will remain focused on implementing operational and logistic improvements, new product development, and new product marketing. We also continue to explore alliances, acquisitions, and/or joint ventures to continue building and leveraging our technology and strong human asset base.

This now concludes the formal portion of the conference. At this point I will ask the Operator to open the conference call for questions.

Thank you. (Operator Instructions.) Daniel Rizzo; Sidoti & Company.

With the capacity expansions you've done in Louisiana and Missouri, how much excess extra capacity do you have now?

Well, total volume has probably increased somewhere between 40 million and 50 million pounds.

And then that's what you're producing now? You don't have any -- like you can't ramp up any further beyond that?

Well, I would say that -- I wouldn't say that we're absolutely running at 100% of that right now. Actually, as we speak we're working through some issues of curtailment on some raw materials that's taken a little bit of edge off of that high-end run rate. So while we're running very strong and I would say that it's running as we expected it to run, we're still not running at 100% of capacity.

Okay. Are there any plans for additional expansion or do you think you're much better now?

Well, we're much better, but I would say we're certainly still studying what may be a next move.

Okay. And then you indicated that petrochemical raw materials were on the rise, which makes sense. But I was wondering if there's anything in particular that's kind of a problem?

Well, every one of our key raw materials -- key, and I'll categorize that to be in particular for coaling, are all petrochemical derivatives. So I think that with a barrel of oil gone up, even natural gas prices are moving up here lately, I think because of the hot summer in particular, there's kind of pressure broadly being applied from those major commodity chemical producers today.

So it's a function of what's going on in, I'm going to say, their cost drivers, and the fact that there's some tightness in the market. There's been some unscheduled, I'm going to say, maintenance turnaround that had to happen at those producers that have created market tightness that has rippled through as well, so working through some of those issues. But I would say some of those are a little bit of a surprise certainly. I think they'll work their way out. But the key is going to be more what happens with those -- their individual cost drivers.

We are starting to see maybe some leveling off. That's the good news. But to be sure, there's always maintenance turnarounds that seem to happen at times that are not the best. But we continue to work through those. But those will always, if you will, take the edge off of that 100% capacity run rate.

All right. Thanks, Dino. Thanks guys.

Lawrence Goldstein; Santa Monica Partners.

I noticed you omitted a comment you typically make in these reports about anything beyond -- with reference to how you see things going forward and wonder if you care to comment.

Also, you did not, as I would have normally expected you to say when raw material costs are going up, that you have or are about to implement price increases to cover them. Any comment on that?

Well, I think in the discussion here, Larry, we've talked about the fact we did raise in Q2. We've also already raised in Q3. So we have pushed a number of those already on, given, I'll say, the pricing model that we have in place. So some of that's already been instituted here for Q3 already. So kind of following normal practice, normal pricing model design, if you will, we've dealt with that already. I forget what the first question was.

First question was normally in all your reports the last paragraph deals with what you see going forward. That's omitted this time. You're not wearing your glasses now or -- ?

(Laughter.) Very conveniently. No, I conveniently forgot that. No, no. I think our view is still the same. We expect to see continued growth from the business going forward.

[Normally] you say double digit. (Laughter.)

Normally I do and I would say that again. I mean, that's our view right now that we'll continue at that growth rate through the balance of this year.

So that was just -- that was not by design. You just overlooked making the statement?

That's true, yes.

Okay, thank you.

(Operator Instructions.) Greg Garner; Singular Research.

First of all, pretty nice quarter, given that with the price or the cost pressures and also you're expanding your capacity there. But my first question is about the industrial side of the Animal Health & Nutrition. I appreciate you breaking out the percentage contribution it was. Is there any way you could also break out what the fracking component was within that industrial side? Or is it safe to assume the majority of it is the fracking or -- relative to the methylamine?

I think that probably in the quarter -- Frank's running some real quick numbers here -- certainly the majority's going to be on the fracking side.

75%.

75% to 80% of that is going into the fracking space.

Okay. And can you tell us some more about how that has been growing, the growth rate with that alone or -- and are you seeing some more potential applications there or more geographies? Or anyway to characterize that?

Yes. We continue to see pretty good [pull] in that space. And I think --

It's kind of running consistent with how it grew.

Yes. Go ahead, Frank.

Yes. If you look at it kind of on a sequential perspective, our fracking business really grew about 27% (inaudible - multiple speakers.)

From the second quarter?

From the first quarter.

From the first quarter into the second quarter.

Oh, from the second quarter -- okay. Oh, that's quite strong. Yes.

Yes.

And based on opportunity set out there, you're still seeing that that would be a double-digit growth going forward? I mean, it's hard to keep that sequential growth growing, but --

Yes. I would agree with you. I think -- you know, all the intelligence, though, that we're picking up from the marketplace is continuing strong. We're getting -- I'm going to say we're getting projections as good as they are from the oil and gas marketplace which can be up and down based on rig counts and what not. But certainly we're getting very solid requests for more product on a go-forward basis here. So will it continue to grow at 27% sequentially at quarter? I don't know that I'd stick my neck out there. But certainly I do think -- and our view is, and kind of consistent with the expansion that we've recently done that we expect it to continue to grow. And as they continue to develop these various shell structures, we're seeing good opportunity and product being pulled into different ones, so.

Is this primarily just US-based sales, then, for the fracking?

Yes, I'd say primarily, but we do know that some of the product is being exported out of the country. I won't say that I necessarily know where that's going because it's going through one of our customers. But we do know they're shipping some offshore. I'd say that's a small percentage of the total, but there is still a little bit being developed offshore, for sure.

Yes, I've heard that there is some being developed in Europe and Asia, but mostly is in the US. I just wanted to see if that was also affecting your revenue growth there.

On Food, Pharma & Nutrition, even though revenues did not really grow very strongly, is this -- would it be safe to assume this is because of the calcium line drop? Is that the primary reason why -- because it had been growing at a double-digit rate here.

Yes. That's a major key reason for that, is because we did sell that business and certainly that took a little wind out of the top line, but not so bad out of the bottom line, as you know. So, yes, that's really kind of the major issue in reconciliation there.

So the strong operating margin is primarily as the result of the lack of the calcium line there?

Well, I'd like to think -- yes, I guess you could say that. But I also think it's based on that core part of the business that's going to be there going forward. Yes, we eliminated the loss from, if you will, prior year and certainly prior sequential quarters. So it's kind of really stabilized through all of that. So it's really a reflection of that core business.

Okay. And then on a general basis for the petrochemical pricing affecting gross margin, with the decline in the price of oil in the last 2 months and coming down from, like, $110 to low $90s here, if this doesn't change [and] current prices put in place already beginning of the third quarter, I would assume that this would really be beneficial for gross margins.

I would certainly like to think so. That doesn't always happen.

Okay.

But you're connecting those dots is a very logical direction that we should see happen. And as I mentioned to you, we're starting to see a leveling off and there's some talk about some of these starting to come down. So hopefully that holds together and that does happen. And I think the only thing that might not cause that to happen, again, might be if there's some interruption in production levels, not so much a function of their cost drivers, but just available capacity in the market.

Okay. And this new technology for the Animal Nutrition & Health Specialty Products, how do you perceive this affecting revenues or margins or -- can you walk me through that?

Yes. Again, remember the Specialty Animal Health business is a smaller part of the entire Animal Nutrition & Health piece. But these, in particular the one new and improved product that we launched already, kind of a version 2 of Aminoshure-L, which is the lysine product, we've definitely achieved a lower cost/dosage point. Looking to pass that on to the market. Make the decision to adopt it a whole lot easier for the dairy industry. [File] availability level is higher. So early on seeing real good uptake.

I think you -- so part of this is going to be transitioning from, if you will, version 1 to version 2, so there might be some cannibalization, if you will, going on in the market. So I think until we kind of work through that to be able to project a growth projection on this is going to be a little bit difficult, at least for the first quarter, 2 quarters, if you will. But then we expect to see very good uptake of this product in the space. We definitely are the lowest cost lysine deliverable in the market today. And that gets into amino acid ration balancing.

So, again, there's some education that has to take place on that space. A lot of that education was not done in the past because there was not really a good deliverable of lysine. But we think with this we can have very good quality conversations about that and should help facilitate the growth of that.

So you're finding a lot of the dairy customers there are reluctant to order just because of pricing and this being a lower price point and most likely to turn them over to customers?

Yes. I think certainly early on there was no question, they viewed the product as being expensive. But I think this will definitely get us past that door with them. And then there's still the prove-it-to-me kind of scenario that's out there, which is understandable in this industry. But certainly I think we feel very good that this is going to get us through that the first door and well on our way here.

Okay. And just one last question, the Food, Pharma -- I believe there was a comment in the press release that mentioned some new products there. And I just wondered if you could comment some more on that -- some new product introductions in the next couple quarters, I believe? I'm trying to find where that was.

I don't know that we --

Did I --

I don't know that we mentioned on the Food, Pharma. I think it was more to the Specialty ANH.

Okay. All right. Thank you very much.

Tim Ramey; D.A. Davidson.

Frank, on the higher G&A expense, you cited some structural reasons, but you also cited some consulting costs. Was there anything kind of lumpy in that number that would have related to a specific initiative? Or should we just kind of think about those -- that $7.7 million level as kind of the new reality?

I think that it's probably going to run in that range. We continue to explore different opportunities and we have engaged different consultants through the various quarters here and looking forward. So I would say that that's probably a reasonable run rate for you to look at for now.

Okay. And do you happen to know what the percent of choline sales is for the entire company year to date or in the 2Q? Have you looked -- I don't think you put that in the release, but you've oftentimes got that in your K.

The percent of choline, meaning --

As a percent of total company sales.

About 49%.

Okay. So that's dropped a little bit, just due to mix growth in your other segments, ANH -- or I mean, ARC --

Yes.

-- in particular. Wondering if relative to ARC and to the Animal Health business, was there any buying activity ahead of price increases? The sales performance there was impressive in both. I'm just wondering if we should kind of think about some of that as being preemptory sales by customer -- or preemptory purchases by customers.

No. I would say that to our knowledge we did not see any of that. We absolutely did not.

Okay. Thank you.

Andrew Maddaloni; Friess Associates.

Can you guys just touch on what you're thinking in terms of your options here to expand capacity? I mean this fracking business has quickly gotten a 25% of so of your revenue. And it seems like there is still potentially a lot of opportunity out there. You guys have obviously expanded some capacity already but I think already seeing demand for what you've already brought on line. Longer term, I mean, how are you thinking about this?

Well, certainly I think with the expansion that we just did we've got certainly a bit more head space right now, near term. But to answer your question, I think looking longer term, we're studying that real hard and I think I mentioned at the last call availability of certain raw materials could take the edge off of more production in this North American market. So we've actually been studying kind of more of a global view here and looking at other geographical opportunities to expand choline production where some of those raw materials are more readily available. And quite honestly, maybe targeted more to growth markets in maybe the next wave of growth for choline, if you will, which then would cause us, if we're successful in getting something in place, probably to kind of reshuffle the deck of which plants we have in existence today are servicing which markets, and how that all might change and then once again free up capacity here in the North American market.

So we're looking -- I won't say we're not looking in North America maybe at an expansion. But we're certainly looking to broaden our footprint on a global note and then reshuffle the deck based on, I'm going to say, the assets that we have in place in these various geographies today.

Okay, great. And then can you also -- any update on the banana ripening opportunity, or the fruit ripening opportunity?

Yes. I think it's basically the same it was. I'm going to say, at this moment disappointing that it hasn't really ramped up. We have run a few more trials. We have actually more trials scheduled now. I mentioned at the last conference call that there was some shortage of bananas that kind of even slowed down some of the trial work that we had done in the past or were scheduled to do, actually, in Q1. That kind of continued a little bit into Q2. We do have other trials queued up here right now in Q3. So we'll see how that develops. But certainly it's been, I'm going to say, a bit disappointing in terms of the fact that it hasn't already ramped up. But we're continuing down that path.

Okay. That's all I had. Thanks, guys.

Tony Polak; Maxim Group.

On the autism drug, is there -- have they finished the Phase 3 trials? And is there any more timing?

My understanding is the trials have been completed. I think all of the information is being studied, analyzed to determine what the results were. And that's really as much as we know at this moment. There was some conjecture that we may know something here, again, from the party that we're producing the product for, perhaps by the end of August. But, you know, it's kind of -- everything is pretty quiet right now.

Okay. What is the company say in terms of timing, when they expect to get an answer from the FDA?

Yes, that's where -- they had speculated that they would hear something by the end of August. Could that drift a little bit? Perhaps. But so when I say end of August, that was kind of the info that we got from them.

Okay. The increased G&A in terms of consulting fees, could you give us an approximate number on that?

I think in the quarter it was probably $200,000, $250,000.

Okay. And I assume that will continue until we say, yes, we may make an acquisition or we may not?

Well, at least some of it will. I think we're going to continue to look at transactions, so some of that will probably be part of us on an ongoing basis. But certainly at that run rate, yes, you're right. I think until we make a decision yea or nay, we're probably looking at that kind of number [for four] quarters now.

Could you give us an idea of what the D&A was for last quarter? And I assume it will increase somewhat this quarter. Is that a bad assumption?

D&A -- depreciation was about $1.3 million and amortization about $1 million.

And should that increase a little because everything's finalized in terms of your expansion?

Yes. I've got to check to see exactly. Most -- that's close to an all-in number now.

Okay. Could you give us an idea of how much volume you did in fracking last quarter and what kind of volume growth with the expansion you would expect in this quarter or the next quarter?

We're just looking at some numbers here, Tony.

We're probably looking somewhere between 25 million and 30 million pounds per quarter.

What is that in dollars?

Somewhere between $15 million and $18 million.

So that was last quarter. So I assume we should expect that to go up this quarter, since your expansion wasn't full last quarter?

I'd say that's a fair expectation.

Okay, good. Could you give us a little idea about the new enhanced products for the Animal Health Specialty, what that is or what type of market that is?

Yes. It's predominantly what I mentioned before, was the Aminoshure-L, the lysine product, the new and improved that I mentioned. I mean, that right now is the one that we've launched. Hopefully we'll launch another one here yet in Q3. But right now the real focus is on that lysine product, which I previously talked about.

What kind of market is there for that?

If you just look at the North American market and you run kind of the dosage levels that could be out there, this could easily be a $200 million, $250 million market, so a lot of upside opportunity there. So that's the market size. Would we ever get it all? I doubt it. But so there's a nice opportunity here to make some inroads into that space.

Do you still have a buyback in place?

We do.

Okay. Thanks a lot. Great quarter.

There are no further questions at this time. I would like to turn the floor back to Management for closing comments.

Okay. Thanks. I just -- again, thanks for all the questions. I think they were good questions. And appreciate everybody listening in and the support over this past quarter. So we look forward to talking to you all again at the end of Q3. Thanks again. Bye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.