Balchem Corp (BCPC) 2014 Q3 法說會逐字稿

Greetings and welcome to the Balchem Corporation third-quarter 2014 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Backus, Chief Financial Officer of Balchem. Thank you, sir, you may begin.

Ladies and gentlemen, thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending September 30, 2014. My name is Bill Backus, 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-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 these cautionary statements. The financial information that is referenced in this meeting was disclosed this morning in our quarterly press release at 9:30 AM Eastern time. I will now turn the call over to Dino Rossi, our Chairman, President, and CEO.

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

This morning we reported record consolidated net sales of $160.5 million, which resulted in record net income for the quarter of $15.2 million, or $0.49 a share. As disclosed in this morning's press release, these third-quarter results include items relating to the acquisition of SensoryEffects that impacted our results.

As a reminder, on May 7, Balchem acquired SensoryEffects, a privately held supplier of customized food and beverage ingredient systems. We're happy to provide additional details for you on these items as we proceed through the call.

As mentioned, for the third quarter, we reported earnings of $0.49 per share on a GAAP basis. This result includes certain non-operational items that I would like to highlight.

Amortization expenses of $7.2 million for acquisition-related intangible assets are expensed in these third-quarter GAAP financial statements. These charges are a direct result of the valuation and purchase accounting rules of the noted acquisition. Consequently, our non-GAAP adjustments exclude these expenses to facilitate an evaluation of our current operating performance and reflect equal comparisons to our operating performance of the prior-year period.

We also incurred integration costs related to the acquisition totaling $494,000, which were expensed in our GAAP financial statements. I'm happy to report that we believe the transaction-related expenses are substantially behind us.

Our third-quarter sales of $160.5 million were 83.2% greater than the $87.6 million result of the prior-year comparable quarter. Excluding the impact of SensoryEffects acquisition, net sales were up 16% compared with third quarter 2013.

In the quarter, ARC specialty products segment generated third-quarter sales of $13.7 million, and grew 9.9% over the prior-year quarter. Animal nutrition and health sales of $75 million were up 19.4% over the comparable quarter. Sales in the ANH ruminant ingredients sector were very strong, increasing approximately 63% from the comparable prior-year quarter, primarily due to higher volumes sold.

Monogastric-grade choline product sales were up 1% primarily due to increased volumes sold of choline products sourced from our Italian operations in the European and other international poultry markets. Also, lower feed prices, egg sets, and chicks placed for grow-out have increased, resulting in the broiler meat production forecast for 2015 being revised upward to indicate a 2.9% increase over the 2014 forecast.

Sales of industrial grade products were up approximately 27% from the prior-year comparable quarter, as volumes sold at various choline and choline derivatives for industrial applications, notably for shale fracking, increased appreciably. SensoryEffects, formerly our food, pharma, and nutrition segment net sales were $71.8 million, an increase of $59.5 million from the prior comparable year quarter.

Net sales from the newly acquired SensoryEffects business contributed $58.9 million to the overall increase. We also realized double-digit growth in sales of end cap ingredients for baking and food preservation, where certain end markets remain strong.

US GAAP reported earnings from operations of $25.3 million increased $8.3 million, or 48.9%, from the prior-year comparable quarter. On a non-GAAP basis, as detailed in our Earnings Release this morning, earnings from operations of $32.7 million increased $14.8 million, or 82.4%, from the prior-year comparable quarter.

As previously noted, consolidated net income closed the quarter at $15.2 million, up from $11.7 million in the prior-year quarter. This quarterly net income translated into diluted net earnings per share of $0.49, as compared to the $0.38 we posted in the comparable quarter of 2013.

On a non-GAAP basis, and as detailed in our Earnings Release, our diluted net earnings per share was $0.65 as compared to $0.40 in the prior-year quarter, or a 62.5% increase. Our consolidated gross profits were $44.5 million, or 27.7% of sales in the quarter, down slightly from 28% in Q3 of 2013.

Gross margin for the combined SensoryEffects segment was reduced, primarily due to product mix more heavily weighted towards the powder and flavor systems of SensoryEffects, which generates a lower gross margin. Gross margin percentage increased for the animal nutrition and health segment by 1.3%, primarily due to a favorable product mix and efficiencies resulting from higher volumes.

Consolidated operating expenses for the three months ended September 30, 2014 were $19.2 million, or 12% of net sales, as compared to $7.5 million, or 8.6% of net sales, for the three months ended September 30, 2013. The increase was primarily due to the inclusion of SensoryEffects' operating expenses, increased amortization expense of $5.8 million related to the acquired intangible SensoryEffects access, as well as integration expenses of $494,000.

Looking forward, we expect to leverage off of our existing SG&A infrastructure and exercise tight control over all controllable operating expenses. Interest expense for the three months ended September 30 was $2.1 million, and is primarily related to the senior secured term loan which has a remaining balance of $341.3 million at September 30.

During the third quarter, we paid $8.8 million of principal payments on the senior secured term loan and we also paid the full revolving loan balance of $50 million. The initial term loan amount of $350 million, and $50 million is the available $100 million revolver, in combination with cash on hand were used to fund the acquisition of SensoryEffects.

The Company's effective tax rate for the three months ended September 30, 2014 and 2013 was 34.6% and 31.7%, respectively. This increase in the effective tax rate was primarily attributable to the impact of the SensoryEffects acquisition, a change in apportionment relating to state income taxes, income generation in jurisdictions with higher tax rates, and the timing of certain tax credits and deductions.

As outlined in our Earnings Release, our third-quarter results generated approximately $37 million of adjusted EBITDA in the quarter, which translates into approximately $1.18 per diluted share, or 23% of sales. And is an 81% increase over the comparable prior-quarter adjusted EBITDA.

Our balance sheet continued to strengthen and our cash flow remains strong as we closed out the quarter with approximately $25 million of cash. I've mentioned a lot of moving parts and will be happy to answer questions in a few moments, but first, in an effort to detail our consolidated results even better for our shareholders, I'm now going to have Bill Backus discuss the ARC specialty products and animal nutrition and health segment.

Thanks, Dino The ARC specialty products segment posted quarterly sales of approximately $13.7 million for the three months ended September 30, 2014, as compared with $12.4 million for the three months ended September 30, 2013, an increase of $1.2 million, or 9.9%.

Higher sales of ethylene oxide products used for medical device sterilization and propylene oxide for industrial applications resulted from increased volumes sold and higher average selling prices, which were implemented in response to cost increases of certain key petrochemical raw materials. All quarterly earnings from operations were $5.3 million, an increase of $458,000, or 9.5%. This increase is principally due to the noted increase in sales.

During the quarter, we did realize increases in the cost of certain petrochemical commodities, and we continued to incur additional expenses pursuing other new end market applications. In the animal nutrition and health segment, we realized sales of $75 million, as compared to $62.8 million for the three months ended September 30, 2013, an increase of $12.2 million, or 19.4%.

Sales of product lines targeted for ruminant animal feed markets increased by $5.9 million, or 63.1%, from the prior-year comparable period, resulting from increased sales volumes of our products, particularly ReaShure, NitroShure and AminoShure.

Favorable dairy economics continue to support strong demand for our products as lower feed prices, along with continued strong demand for milk in Q3, were key drivers that should maintain producer profitability for the balance of 2014 and into 2015. These positive indicators provide support for greater expected utilization of our products, which will maximize results of production animals.

Global feed grade choline product sales increased $285,000, or 1%, primarily due to increased volumes of choline products sourced from our Italian operation and sold into the European and other international poultry markets. Sales of feed-grade choline sold into US markets were effectively flat in the quarter. Volumes sold in these markets are strongly influenced by the various dynamics of our customer base, predominantly the poultry production industry, but also swine and aquaculture markets.

North American choline volumes sold typically track closely with broiler chick placements and egg sets. Lower feed prices, eggs sets, and an increase in chicks placed for growout have resulted in USDA broiler meat production forecast for 2015 being revised upward to indicate a 2.9% increase over the 2014 forecast.

Sales for industrial applications comprised approximately 38.9% of sales in the segment, as compared to 36.7% for the comparable three months ended September 30, 2013. Industrial sales grew $6.1 million, or 26.6%, over the prior-year period, principally due to volume increases of various choline and choline derivatives for industrial applications, most notably for shale fracking.

Continued strength in this market also resulted in sequential quarterly growth of approximately 12%. Our success in this space continues to attract competition from offshore producers. However, we remain confident that these products will continue to show strength in 2014, driving steady to increasing levels of sales as we believe the North American end market will continue to grow.

We also continue to evaluate industrial opportunities with existing technology and with other technology, to determine how we may drive more innovative solutions into this and other markets. Our earnings from operations for this entire segment were $11.7 million, an increase of 25.2%, primarily due to higher net sales.

We continue to see raw material price volatility and seek to implement price adjustments within our contractual guidelines. I will now turn the call over to Dino for him to discuss the SensoryEffects segment.

Thanks, Bill. For the quarter, sales of our consolidated SensoryEffects segment were $71.8 million, an increase of $59.5 million from the comparable prior year quarter. Net sales from the acquired SensoryEffects business contributed $58.9 million to the overall increase, as we saw strong volumes in both the powder and flavor systems sector.

We also realized double-digit growth from sales of encapsulated ingredients for baking and food preservation, where end markets remain strong. Earnings from operations for this segment were $8.7 million versus $2.8 million in the prior-year comparable quarter. Excluding the effect of non-cash expenses associated with amortization of intangible assets, non-GAAP earnings from operations for this segment was $14.7 million.

In addition to focusing on the integration of SensoryEffects, we continue to focus on building consumer awareness of the benefits of choline, positioning choline with food and nutritional supplement companies as an essential ingredient utilizing the structured function claims awarded to Balchem by EFSA in Europe, supporting additional external scientific research. And are excited with the recent FDA proposal that an RDI, a recommended daily intake, for choline be accepted, acknowledging that choline is a nutrient of public concern.

We're also working on a number of new projects targeting choline inclusion using SensoryEffects technology. Our pharmaceutical delivery development efforts continue. As previously reported, the licensing of our technology being used for treating autism as conducted in successful pre-new drug application meeting with the US Food and Drug Administration and is filing its new drug application. We continue to work closely with them in support of this filing.

In the near term, this sector remains a net expense through the business segment. We remain committed to organic growth as we are always looking to expand our product offering, end use applications, and move into new geographies. We expect to strengthen our global growth platform, particularly in the food and animal nutrition markets, and are confident that more business can be generated based on the unique portfolio of products that we offer.

Our business continues to create good balance, yielding profitable growth opportunities across the served value chain. We also remain focused on helping our customers generate reinvestment level returns, while maintaining our own operating discipline. We continue to build the financial strength of the Company, managing the working capital base aggressively and yielding solid financial results to be a quality supplier.

Near term, we remain focused on integrating SensoryEffects, which we are very excited about, while maintaining operational and logistic improvements, new product development, and new product introductions across all business segments. We will continue to explore alliances, acquisitions, and/or joint ventures to build and leverage on our strategic direction, technology, and strong human asset base, which has now more than doubled with the SensoryEffects acquisition.

These efforts can and will impact operating expense levels beyond the normal levels we have increased in the past, but is consistent with the noted strategy to complement our organic growth. This now concludes the formal portion of the conference. At this point, I will open the conference call for questions.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from the line of Mike Ritzenthaler with Piper Jaffray.

Yes, good morning. My first question is around the growth in the legacy FPN business, off of really difficult comparables from 3Q 2013. Is any of that attributable to cross-selling with sensory customers? Or are we still too early in the process to make any real conclusions about that?

I think as relates to the legacy part of FPN, it's still a bit early. When we talk about 16% growth in that legacy group, it really -- I would say is strictly that legacy. But certainly, with an expectation that the idea of cross-selling will bear some good fruit here near term.

Sure. And then, I guess, within ANH, the 63% growth in specialty, was there a continued effect of -- within Europe, that we started to see in 2Q, did that, this is the Chinese rice hull contamination issue, did we see some of that effect in 3Q?

Or are we just seeing strong fundamentals? Or a combination of both, I guess?

Yes, I think, we certainly, I would say, have maintained the position that we had in Q2 as it related to the Chinese rice hull issue. That situation seems to have corrected itself, i.e., the Chinese have corrected it. And they have returned to the marketplace.

But I would tell you through all of the issues and transitions, we have minimally held onto the business that we picked up there and expect to on a go-forward basis. And just as a note of importance, that really applies to the monogastric remnant in the ruminant part of the business.

Okay, all right. That makes sense. And I guess on raw materials, I wanted to ask, too, about maybe you could just update us on the state of supply for some key raws, I guess, TMA in particular? Are they a little looser than they were at, say, the beginning of this year or toward the end of 2013? And what's your outlook for raws as we wrap up 2014?

Yes, I think, certainly, there's a couple key raw materials are certainly TMA. As in terms of availability, I think that it is available. There have been issues on ammonia supply and some interruptions that have affected from a methanol standpoint the ability to -- production's not the issue, but just sourcing it at prices that, I'm going to say, consistent with what has been prior-quarter numbers.

We've, once again, seen some surcharges in the quarter because of interruptions on supply of methanol. So we've dealt with that. That's reflected in these numbers.

I wish I could sit here and say, I think it's gotten a whole lot better, and corrected, certainly work has been done. But I don't know that I'm comfortable to say that we're out of the woods yet there on that supply aspect.

As relates to ethylene oxide and hydrochloric acid, still definitely tightness in the market. Again, some longer turnarounds at some of the major producers of EO certainly have kept that market pretty snug.

And then, even over on the HCL market, some available supply because certain production that generate byproduct HCL has been a bit soft. So that market has gotten tight, let alone HCL going directly down hole for natural gas fracking has increased, as well.

Kind of an improvement in that end market for them directly. So, there's definitely snugness there.

Okay.

And so, we continue to work through, it is what I would say at this moment.

Okay. That's all helpful. I guess one last one from me, I'll turn it over. This is one that we get from time to time.

On the time line or execution of the JV with Taminco, given the pending acquisition of Taminco by Eastman, is there any effect on how those conversations have gone or on the time line of executing that JV?

Yes, I think, our view is that it's still on track, looking at probably Q3 next year. Certainly no indication, I mean, in terms of the project running the project itself is not being influenced by that sale of Taminco. So, we continue to push forward with the idea of having that capacity online in Q3.

Okay. Great. Thanks, Dino.

Thank you.

Our next question comes from the line of Tim Ramey with Pivotal Research Group.

Good morning. Congratulations on a great quarter.

Thank you.

Just a couple of things. As we think about SensoryEffects being fully reflected now, is that tax rate that we saw in the third quarter still a -- would that be a pretty good approximation for 4Q or 2015 going forward, somewhere in the 34%, 35% range?

Yes, it's somewhere around 35% approximately is what we'd expect to end the year at and be in that same effective tax rate next year, also for 2015.

Okay. And given that you paid off the revolver, do you have -- that probably didn't make a big change in the interest expense, but do you have any view to what the run rate in interest expense might look like right now?

Yes, so I mean, a couple things come into play obviously is what's going to happen with rates. We hear that mid next year, maybe into late next year there's going to be some rate increases. That certainly could impact us on the down side.

On the other hand, we continue to delever and we have some tiered pricing with our interest, so that's going to be helpful. And our EBITDA, right now where we're at with our fixed or our leverage ratio, has come down. We're going to see a natural drop in interest rates with the tiered pricing, so that's a little bit of a natural hedge for us.

And we'll continue to look as we generate free cash flow here of bringing the debt down to the extent we don't have a deal on the horizon, something we want to do, we'll probably pay down some more debt. Right now, it's really hard to see.

I'm sure you see every day interest rates and where they're at, unemployment versus inflation, and what's really going to happen. And certainly, we have no insight other than what we read. But our expectation is continuing to use at an approximate 2% rate for now is the right thing to do.

Okay. Terrific. And then, just relative to the monogastric business, you cited the USDA numbers.

Are we starting to see anything show up in your business in terms of forward purchases? Or do you see the anticipation of greater unit volume growth in that business or is that still just sort of out there?

Yes, I think it's just out there. I mean, them increasing egg sets, these projections that we talked about are actually relatively new over the last couple weeks that they're projecting that growth.

And I think, again, part of that is because beef is still tight and beef prices are up, and when they look at meat, meat protein, chicken is still the cheapest source, again, which I think will help to continue to see some uptick there. As far as people buying forward with us, I mean, customers are under contract and with certain volumes defined, actually a range of volumes, so I think based on those contracts that are in place we don't really see anything different right now.

Terrific. Thanks a lot.

Thank you.

Our next question comes from the line of Daniel Rizzo with Sidoti.

Good morning, guys. Do you have any update on the Caremark's agreement or where they're at with that?

No, I don't think any new news to report, Dan. The program is continuing. Additional information is being filed in this rolling NDA. Everything seems to be on track.

We certainly have conversations on and off with them to be sure. We have really given them everything they need as far as that filing is concerned. So continue to get assurances that it's on track for sometime next year.

Okay. And then, you mentioned you're always looking at alliances and joint ventures an things like that. I think in the past years you've mentioned potentially doing something like that in China with a choline production there.

Is that completely dead? Is that not even a question anymore?

No, I wouldn't say it's completely dead. We still view that market as a growth market, maybe the best growth market out there as it relates to choline consumption for poultry. I would never say that it's dead and maybe some casual conversations in the background, but certainly not on the front burner right now.

All right. Thank you, guys.

Thank you.

Our next question comes from the line of an Andrew O'Conor with Bank of Montreal.

Good morning, Dino, good morning, Bill, congratulations on your progress. Heard your comments previously regarding natural gas fracking, but has demand or pricing for choline chloride been impacted because of the decline in the price of oil since early September? Can you speak to that?

Yes, I think it's fair to say that it really has not had an impact, at least not yet. I think that your question and concern is a valid one and certainly one that we've had a lot of discussion about here.

But to date, we really have not seen any impact from that. And I know there's a lot of news out there about at what price you might see things change, but straight up as it is today, we continue to see it be a very strong market.

Okay. Or, Dino, is it possible to dissect where your demand originates from?

What parts of the United States where natural gas fracking is taking place would be the destination for your chemical? Does that make sense?

Yes. Sure, I think, Andrew, I think there's a lot of shale plays out there across the US and into Canada, as well. What we know is that our product is making it into many of those fields.

It's not a certain geography, and so I think we're pleased to see that it continues to be used and is effectively developing shale plays all across the country. So our view right now based on the flow that we know, and again, remember some of -- a fair bit of our material goes into the market through distribution, so we always don't know every end market that it goes to.

But certainly, all the intelligence that we're gathering along the way says it's moving into all of the major fields. And so, without issue, I don't know that there's any limitation in geography today.

Thanks, Dino. And then, lastly, Bill, is it possible to take a stab at what the balance sheet will be at the year end 2014? Just cash and total debt?

Well, so, at this point with the debt, we're just going to look to make our scheduled payment here of $8.8 million. I mean, to the degree we generate -- we are generating a little more cash flow, obviously. We could look to pay a little bit down.

I don't know that that's what we're going to look to do in the fourth quarter. In terms of the cash flow here, for Q4, I mean, we continue to do -- I hate to give you a number at this point, but we do continue to generate cash, positive cash flow on a weekly basis, including from Sensory, so our expectations are that the cash balance will continue to build here.

Got you. Thanks very much. Good luck, guys.

Thank you.

Our next question comes from the line of Jack Balsam, a private investor.

Yes. I notice that in 2013, insiders selling total 590,000 shares throughout the year with no buys. Has that continued this year?

I think that there certainly has been -- I would say sales for sure, but also purchases for sure. So, it's going a little bit of both ways.

There's definitely some announced defined plans to sale, including myself, Frank Fitzpatrick. They're just out there in the market, well in advance, to give public knowledge of that.

But is there an aggressive sell in any way going on? I would say no. While it maybe a little bit of a higher rate than last year, but certainly not any kind of mass exodus.

I see, all right. I noticed that the price of the stock today has gone down considerably with these announcements. I sort of get the feeling that the market is not happy with the results? It's down --

Well, I don't know, you know? I would say early on it went up quite dramatically, coming up --

It went up $10 to begin with. But now it's down to $63.11. It seems to be accelerating.

Yes, I think the volume level is still rather light, but I think --

Yes, 37,000 shares.

Yes. So, I can't necessarily speak to individual investors or what they're doing. But, I don't know, I personally thought it was pretty good numbers, so how other people will read that or react, I can't say yet.

Okay. Thank you.

Thank you.

(Operator Instructions)

Our next question comes from the line of Tony Polak with Aegis Capital.

Good morning. You talked about some new end products on the ARC. Could you address that a little? Or did I hear that wrong?

Oh, I think it's not so much new products in terms of sales generation right now, Tony, as much as it is our spending money on some defined opportunities. Projects that we've been working on probably for two, maybe even some for three years, we continue because we think that there's progress being made.

We're not out publicly promoting what those products are yet, only because when we wandered into some of these we knew that there was probably a two-, three-, four-year cycle to effectively do a lot of field trials and whatnot to prove that the products work. So to that end, yes, that has continued for sure.

But has that translated into any of the additional revenue, if you will, supporting the 9.9% growth on the business, the answer would be, no. That's still coming from what we know is the core parts of that business today.

Okay. You talked about integrating the choline into some of SensoryEffects products. Could you address that a little?

Yes, I think a lot of the SensoryEffects product line are powder or flavor systems, whether those are drinks and shakes or other type of nutritional products. And so, in fact, at SupplySide West here a couple months ago, we were exhibiting, I think, three or four different drinks, if you will, that included choline on the backbone of SensoryEffects products.

And saw great interest from that and we're going to continue to promote that into the market, i.e, now choline being incorporated into that one-stop shop, if you will, where those customers can buy that product they're looking for, perhaps now enhanced with choline.

Okay. Could you tell us what the D&A was for the third quarter, depreciation and amortization?

Bill?

Sure. For the three months, it was $10.1 million.

Okay. And could you address whether China, and choline from China, is that affecting you at all?

You know, it's still there, Tony. I wouldn't say that it has materially changed quarter over quarter. We continue to track it.

It's a decent volume, if you will, but I would not say that we've really seen the number grow of any consequence here, either in a comparative to prior-year quarter and/or sequentially.

Okay. Is there a capacity number that you have on choline or are you operating at what kind of capacity there?

We're operating at a very, very strong capacity, probably around 90% or so.

Okay. And are you still looking at other acquisitions or are you just trying to integrate the Sensory acquisition more?

Well, certainly busy on the acquisition, I mean, the integration of the acquisition, but have looked at a couple other things here since even Sensory and expect to continue to be looking at a few here in Q4. So yes, I think the -- I mean, as we've always talked in the past about acquisitions being part of the strategic growth, that's still the plan even though we've clearly done the Sensory deal.

Great. Thanks.

Thank you.

Thank you.

Our next question comes from the line of Victor Bonilla with Lawton Park Capital Management.

Hey, guys. Just got a little detail question for you. I'm having trouble tying something together.

In the SensoryEffects segment, you guys talk about 13.3% growth in the legacy FPN part of the business. That was $12.9 million, right?

Yes.

And it looks like -- is that right, $12.9 million?

Legacy sales?

Yes.

Legacy FPN, that's correct, $12.9 million.

And so, wasn't the FPN number a year ago $12.3 million? I mean, I'm just looking back at the old numbers and it looks to me like the growth is more like 4% or 5%? I'm assuming it's my mistake, but I can't figure out what it is.

So, on the legacy FPN, sales for the quarter, year over year, you're right, it's about 5%. And the 16% legacy sales that we refer to is all-in Balchem, it's animal nutrition and health and ARC, also.

So, I was actually not the 16%, but the 13.3% in the section where you talk about sales of SensoryEffects segment, formerly the Balchem segment?

Yes, understood. That's a very specific sector of the legacy business. That's the end cap business, so baking and food preservation.

There are other items in the legacy Balchem FPN segment, former segment, so we're only referring to where we are with the end caps that are used in baking and food preservation there.

Okay, I get what you're saying now. I guess, I just, beyond the slope, it's not really worded that well because it says, we realize 13% growth in sales of legacy Balchem with particular strength in cap ingredients for baking and food prep.

I guess, if that's what you're saying, it's fine. I was just wondering what that was? But no big deal, I'll chalk it up to a language issue. Thanks, guys, appreciate it.

Fair point. Understood.

Mr. Rossi, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you. Well, thanks, everybody, for joining in on the call and your questions. All good questions.

And as I think I mentioned in the call and even on the press release itself, we continue to move forward with the integration process and expect to continue to be able to generate pretty good results here going forward. We look forward to hearing from you all again at the end of next quarter. Thanks, bye now.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.