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Balchem's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Looking between the top and bottom line, you will see that our consolidated gross profits of $22.6 million were equal to 28.6% of sales in the quarter. This level although a modest decline as a percent of sales in the prior year quarter, does reflect slight gross margin improvement in the Food, Pharma & Nutrition and our Specialty Products segment. These improvements were however offset by approximately 800,000 in the Animal Nutrition and Health segment due to the aforementioned product sales suspension and related inventory reserves.

Gross margins in the Animal Nutrition and Health segment were also impacted again by higher costs for certain key raw materials. These raw material increases largely (inaudible) derivatives continue to affect unfavorably our ANH choline sales. Raw material price escalation did however begin to subside, but not until very late in the quarter. We continue to work on and achieve operational efficiencies, however they were again more than offset by the noted raw material cost increases.

At the consolidated operating expense level, you will note expenses totaling $7.8 million for the quarter, which equaled 9.8% of sales versus the same spend in the prior year, but at the 10.3% level. This spending level reflects expenses incurred due to the product expansion – suspension issue, but otherwise represents normalized levels as we continue to leverage up of our existing SG&A infrastructure and exercise, take control over all controllable operating expenses.

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