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Balchem Corporation Announces Fourth Quarter 2012 Results

Earnings from operations for the entire ANH segment increased approximately 19% to a new quarterly record of $7.2 million as compared to $6.0 million in the prior year comparable quarter. This quarterly earnings result particularly reflects favorable operating efficiencies due to an overall 23% volume improvement in sales. These earnings were, however, unfavorably impacted by price increases in petro-chemical commodities used to manufacture choline and start-up costs relating to the aforementioned new manufacturing facility in Virginia. Key raw materials rose at a very swift pace in the quarter, and while some increases 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 first quarter, where we are contractually able to do so, as our businesses are likely to remain affected by these higher costs for the balance of 2013.

The ARC Specialty Products ("ARC") segment generated record quarterly sales of $13.0 million, an increase of 5.1% from the comparable prior year quarter. This increase was principally the result of strong sales of ethylene oxide for medical device sterilization and propylene oxide for nutmeat fumigation, where volumes improved 30% sequentially from Q3 in coordination with the delay in almond harvest reported in Q3. Earnings from operations for this segment, at $5.5 million, improved 9.3% from the prior year comparable quarter due to efficiencies from increased volumes and a favorable product mix, which were partially offset by price increases in key petro-chemical commodities. We continue to monitor raw material prices and seek to adjust prices timely within contractual guidelines.

Sales of the Food, Pharma & Nutrition ("FPN") segment were $10.7 million, an increase of 11.0% from the comparable prior year quarter. The domestic and international food sector sales were up approximately 8% this quarter, as we saw growth of encapsulated ingredients for baking, prepared food, preservation and confection markets, especially in the European markets. We also realized strong double-digit growth in sales of our VitaShure® products for nutritional enhancement, including sustained release amino acid products for sports performance products. Earnings from operations for this segment, however, declined to $2.3 million, versus $2.6 million in the prior year comparable quarter, largely due to an unfavorable product mix and increases in costs of certain key raw materials for our human choline products.

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