Greetings, and welcome to the Balchem Corporation Third Quarter Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.
Martin Bengtsson, CFO for Balchem Corporation. Thank you, sir. 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 quarter ending September 30, 2019. 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 will 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 ks. Forward looking statements are qualified in their entirety by this cautionary statement. I will now turn the call over to Ted Herrick, our Chairman, CEO and President.
Thanks, Martin. Good morning, ladies and gentlemen, and welcome to our conference call. This morning, we reported quarterly consolidated net sales of $158,600,000 which resulted in 3rd quarter net income of $20,700,000 or $0.64 per share on a GAAP basis. Our 3rd quarter non GAAP net earnings of 26 $300,000 or $0.81 per share exclude tax adjusted non cash amortization and other items as detailed in our earnings release this morning of $5,600,000 to facilitate comparative evaluation of operating performance versus the prior year period. These non GAAP net earnings of $26,300,000 or $0.81 per share represent an increase of $2,700,000 or $0.08 per share compared with the prior year quarter of $23,700,000 or $0.73 per share.
We also delivered quarterly cash flows from operations of $42,700,000 for the Q3 2019 with quarterly free cash flow of $35,800,000 Our quarterly net sales of $158,600,000 were 2.3% higher than the prior year comparable quarter. We achieved sales growth in 3 of our 4 segments with record third quarter sales in our Human Nutrition and Health and Specialty Products segments and healthy year over year growth in our Animal Nutrition and Health segment, which were partially offset by the decline in our Industrial Products segment, where volumes related to oil and gas fracking remained low compared to prior year. The impact of foreign exchange to our sales was negative $1,000,000 due to the weaker euro, driving a negative 64 basis point impact to our year over year sales growth. Our Q3 consolidated gross margin dollars of $54,000,000 were up $6,000,000 or 12.5 percent compared with $48,000,000 for the same period in the prior year. Our consolidated gross margin percent was 34.1 percent of sales in the quarter, up 3.10 basis points from 31% in Q3 of 2018.
The 3.10 basis point increase was primarily due to mix, certain lower raw material costs and manufacturing efficiencies, partly offset by lower margins in the European monogastric business within the Animal Nutrition and Health segment. Consolidated operating expenses for the Q3 2019 were $28,000,000 as compared to $22,500,000 in the prior year. The increase was principally due to incremental operating expenses related to the Chemogas acquisition and the prior year benefiting from the timing of an insurance recovery. Excluding non cash operating expense associated with amortization of intangible assets of $6,100,000 operating expenses were $21,800,000 or 13.8 percent of sales. Looking forward, we will continue to focus on tightly controlling our operating expenses and leveraging our existing SG and A infrastructure.
GAAP earnings from operations for the Q3 were $26,000,000 an increase of $500,000 or 2% compared to prior year. On an adjusted basis, as detailed in our earnings release this morning, earnings from operations of $33,500,000 were up $1,500,000 or 4.8% compared to $31,900,000 in the prior year. Adjusted EBITDA of $40,400,000 was $1,900,000 or 5% above the $38,400,000 posted in the Q3 of 2018. Interest expense for the Q3 2019 was $1,700,000 and our net debt was $159,200,000 with our overall leverage ratio on a net debt basis being reduced to 1.0. The company's effective tax rates for the Q3 2019 and 2018 were 15.4% and 18.3%, respectively.
The decrease in the effective tax rate was primarily attributable to discrete items, in particular related to European research and development activities. Consolidated net income closed the quarter at $20,700,000 up $1,500,000 or 7.6 percent from the prior year quarter. This quarterly net income translated into diluted net earnings per share of $0.64 for the current year, an increase over last year's comparable quarterly result of $0.59 On an adjusted basis and as detailed in our earnings release, our 3rd quarter adjusted net earnings were $26,300,000 or $0.81 per diluted share, up $2,700,000 or 11.2 percent compared with $23,700,000 or $0.73 per diluted share in the prior year quarter. We generated record quarterly free cash flow of $35,800,000 an increase of 32.7% compared to the prior year quarter. And we closed out the quarter with $59,400,000 of cash on the balance sheet, which reflects a reduction of revolving debt of $10,000,000 stock repurchases of $20,600,000 and capital expenditures and intangible assets acquired of $6,900,000 Before passing the call back to Martin to cover the detailed results by segment, I would like to update you on a few of our important strategic activities and growth initiatives.
Last quarter, we announced the closing of the acquisition of Chemogas NV, a privately held specialty gases company headquartered in Grimberg in Belgium. The integration of Chemogas is progressing nicely with synergies starting to be realized and is on track to meet our expectations. As previously noted, we are focused on leveraging this acquisition to create a global specialty gases business that services our customers' needs for ethylene oxide and other products worldwide, which we will call Balchem Performance Gases. We are excited about the opportunities this acquisition creates for Balchem and are pleased with the integration to date. On September 6, we divested our Reading, Pennsylvania manufacturing plant and the associated business dealings with that site, resulting in no gain or loss on the sale of this non core asset.
We continuously evaluate our portfolio to assess strategic positioning, fit and value of each of our assets and businesses. The Reading facility primarily toll manufactured toddler formula for various companies. The tolling nature of this business coupled with the lack of strong differentiated position and modest financial contribution made it an obvious candidate for divestiture. An emerging infant nutrition company ultimately acquired the site to become a fully integrated manufacturer and marketer of infant nutrition products. We believe that our Reading site is better off in their hands as they will undoubtedly continue to invest in the site to fully develop their strategic intentions.
This divestiture has improved our balance sheet and financial strength and enhanced our ability to focus on progressing our strategic organic growth initiatives. As indicated on our Q4 2018 earnings call, we were considering a modest stock repurchase program to both offset the dilution associated with our equity incentive plan and provide a return of capital to our shareholders. We started executing this plan in a disciplined manner in August and completed it in early September, largely offsetting the dilution by repurchasing approximately 230,000 shares at an average cost of $88.58 per share. This stock repurchase program is one component of our overall capital deployment strategy. As a reminder, our capital allocation strategy is to invest in organic growth opportunities that provide an attractive return to augment our organic growth through strategic M and A where appropriate to pay down debt and maintain a strong balance sheet to retain and grow our dividend to our shareholders and lastly, we will consider stock buybacks for anti dilution purposes as long as it does not compete with our other aforementioned capital allocation priorities.
Within Specialty Products and specifically in Balchem Performance Gases, several users of ethylene oxide for the critical sterilization of medical devices have received ongoing state and local scrutiny for environmental concerns at their facilities, which has received some media attention. Ethylene oxide enables more than half of all medical devices used annually in the United States, over 20,000,000,000 pieces to be sterilized and made safe for use. Some devices can only be treated with ethylene oxide as other technologies are insufficient or damaging the devices themselves. The situation centers around a new mathematical assessment that was performed by an office of the EPA, which resulted in a more conservative view of the inherent risk of ethylene oxide. This new assessment has been quite controversial and is a subject of much to date as no new science has been used, just simply a change in the approach to the mathematics and statistics.
The EPA has not yet used this new assessment to regulate change to existing permissible emissions limits, but is contemplating this and in some cases in the absence of a definitive EPA regulation change, state and local regulators are drawing their own conclusions from the new assessment. We are actively working with EPA, the American Chemistry Council, Advomed, which is the Advanced Medical Technology Association that represents the medical device industry and all of the appropriate stakeholders to ensure that EPA carefully considers this new mathematical assessment in conjunction with other assessments available from the Texas Commission on Environmental Quality and the ACC as the EPA contemplates changes to regulated permissible emissions levels. There will likely be continued news reports and uncertainty among state and local authorities as to how to practically respond to the new mathematical assessment. In the meantime, we will continue to work with all of the appropriate stakeholders to ensure the EPA considers all available assessments to appropriately quantitate ethylene oxide's inherent risk. We continue to believe that EPA will ultimately regulate to lower emissions levels based on a combined consideration of the various assessments available as they have in the past and that industry will then be able to adopt practices and procedures to ensure compliance with these new regulations.
Relative to Animal Nutrition and Health, in the Q1 of this year, we discussed the launch of several new products, most notably AminoSure XM, our next generation rumen protected methionine. This next generation product offers enhanced bioavailability and superior feed stability that allow it to deliver industry leading value for dairy farmers around the world. We are encouraged by the early and strong interest from the nutritionists and dairy farmers for this new product, which is being further boosted by healthier Our sales of this important nutrient were up 70% in the quarter over the prior year quarter. So we are pleased with the progress to date and the positive response from our customers. We continue to work hard to progress awareness around choline and wanted to update you on the progress of several important studies.
Last quarter, we were pleased to report that the preliminary results were presented for the follow on study to the Cornell University choline supplementation study during pregnancy to evaluate if the cognitive benefits seen in the 1st year of life during the initial study persisted into later childhood. If you would like to access the abstract of this study as well as other choline studies that have been conducted by Cornell University, please go to the cornell.edu website, use the search function to search for choline cognition research group and under publications select Conference Abstracts. We continue to be excited about the results from the Cornell studies and look forward to more publications. Additionally, in the Q4 of 2017, we informed you that after Balchem funded a pilot study, Doctor. Steven Zizel, Director for the University of North Carolina's Nutrition Research Institute, received a $2,600,000 grant from a unit of the National Institutes of Health to develop a test or biomarker to help determine the proper levels of choline in humans.
The NIH funded choline biomarker study has enrolled about half the target number of subjects and based on the current enrollment rate, it is expected to be fully enrolled in approximately 18 months. While this is a lengthy study, good progress is being made and we believe that if a biomarker were to be developed, it would significantly progress the ultimate supplementation of identified choline deficiency in humans. Regarding Curemark and their work to develop a unique treatment for autism, we are pleased with the results of their recently completed Stage 3 clinical trial, also known as the BLOOM trial. As we discussed on the last call, these results were presented on May 3 at the International Society of Autism Research or INSAAR meeting in Montreal. For those of you interested, the abstract can be easily accessed on the INSAR website under the INSAR 2019 Annual Meeting Abstracts.
The title of the abstract is pancreatic replacement therapy with cMAT is associated with reduction in maladaptive behaviors schoolers with autism. Despite the protracted timeline of this initiative, we are encouraged by the progress made over the past few months towards critical milestones. And in the meantime, Valjean remains focused on our manufacturing and supply chain preparedness for the ultimate launch of the product in the manufacture of additional trial quantities of the encapsulated enzyme for rollover participants from the various trials. And lastly, as we have discussed in previous quarters, we have embarked on an important project to consolidate our 5 ERP systems into 1, Microsoft Dynamics 365. This $12,000,000 initiative is critical for the continued growth and operational efficiency of the company.
After a year or so of planning, implementation started in April of last year, first with financial consolidation and then with a staged ERP implementation across our businesses and network of manufacturing sites. On the last call, we informed you that we had about onethree of our users and revenue on the new system. I am pleased to inform you that we now have approximately half of our users and revenue on the new system and believe we are on schedule to have 100% of our company on a new system by the middle of next year. We are pleased with the progress of this important infrastructure project. I'm now going to turn the call back over to Martin to go through the detailed results for each of our segments.
Thank you, Ted.
For the quarter, our Human Nutrition and Health segment achieved record 3rd quarter sales of $86,100,000 an increase of $300,000 or 0.3 percent from the prior year. The sales increase was primarily driven by higher sales in our human nutrition and pharma business and double digit growth in chelated minerals, partially offset by lower cereal systems volumes. Our Human Nutrition and Health segment also delivered record third quarter earnings from operations of $13,200,000 an increase of $100,000 or 0.7% compared to prior year, primarily due to the aforementioned higher sales and mix, partially offset by higher operating expenses resulting from the prior year benefiting from the timing of an insurance recovery. Excluding the effect of non cash expense associated with amortization of acquired intangible assets of $4,800,000 Adjusted earnings from operations for this segment were $18,000,000 a decrease of $500,000 or 2.7 percent compared to $18,500,000 in the prior quarter. Sales for our Animal Nutrition and Health segment were $42,300,000 an increase of 4.6 percent or $1,900,000 compared to the prior year.
The increase in sales was driven primarily by higher volumes in both the ruminant species and monogastric species markets. Ruminant volumes were up approximately 10%, and we're encouraged by the rise in Class III milk prices to levels not seen since 2014, which is a welcome respite from a long period of poor dairy economics, creating a healthier environment for us to market our unique line of products for the health and nutrition of dairy cows. Monogastric volumes were up approximately 5%, but we continue to experience competitive price pressure in Europe, and we expect this to continue in the near term. The impact of foreign exchange is most notable in our A and H segment with a negative $500,000 impact in the 3rd quarter, driving a negative 1.2% impact to year over year growth. Animal Nutrition and Health quarterly earnings from operations of $6,100,000 were up from the prior year quarter of $5,100,000 primarily due to the aforementioned higher volumes, mix and certain lower raw material costs, partially offset by lower margins in the European monogastric business as a result of increased competitive activity and increased operating expenses driven by investments in sales, marketing and research and development in our ruminant business.
The Specialty Products segment delivered record third quarter sales of $24,900,000 as compared with $17,600,000 for the prior year quarter. The increase of 41.2% was driven by higher sales of ethylene oxide for the medical device sterilization market due to both the contribution of Chemogas and higher legacy product sales, partially offset by lower volumes in the plant nutrition business. The Specialty Products segment also achieved record 3rd quarter earnings from operations of $6,700,000 versus $5,800,000 in the prior year quarter, an increase of $900,000 Excluding the effect of non cash expense associated with amortization of intangible assets of $1,700,000 3rd quarter adjusted earnings from operations for this segment were $8,400,000 compared to $6,500,000 in the prior year. The increase was primarily driven by the aforementioned higher sales, partially offset by mix and higher operating expenses due to the Chemogas acquisition. In the Industrial Products segment, sales of $5,300,000 decreased $5,800,000 or 52.5 percent from the prior year quarter, primarily due to reduced sales of choline and choline derivatives used in shale fracking applications.
We continue to experience significantly lower demand within the Industrial Products segment, not only due to slower fracking activity, but also due to operators starting to recycle more fracking fluids as well as eliminating additives where possible in order to reduce costs and preserve cash. As logistical solutions for oil and gas transportation are being added around the Permian Basin, we believe that fracking activity will improve as logistical costs are reduced. However, we've not seen any indication of that yet, and we do believe that continued cost focus among the well operators will remain in place even as fracking activities increase. As such, we remain cautious about this historically cyclical market, and it's hard to accurately forecast the ups and downs. Our earnings from operations for the Industrial Products segment were $800,000 a decrease of $900,000 compared with the prior year quarter due to the lower sales volumes.
I'm now going to turn the call back over to Ted for some closing remarks.
Thanks, Martin. In the Q3, we delivered year over year revenue growth across 3 of our 4 segments with record 3rd quarter consolidated GAAP net earnings and all time record quarterly non GAAP net earnings and record cash flows from operations, while facing the previously noted comparative headwinds within our monogastric business and challenging market conditions within oil and gas. We have strong positions within the markets we serve, and we believe we are well positioned to generate healthy growth over the years to come. We are pleased with the progress made on our key strategic growth initiatives in Q3, and we'll continue to work on strengthening our company by focusing on our core strategies, exercising disciplined cost management and seeking value creating acquisition opportunities. I would now like to hand the call back over to Martin, who will open up the call for questions.
Martin?
Thanks, Ted. This now concludes the formal portion of the conference. At this point, we will open up the conference call for questions.
Thank you. We'll now be conducting a question and answer Our first question comes from the line of Brett Hundley with Seaport Global. Please proceed with your question.
Hey, good morning, gentlemen.
Good morning, Brett.
Guys, I just have a couple of questions on your Animal business and then I just want to circle back with a question on Specialty. So within animal, your results during the quarter were solid relative to what we were looking for. And it really feels like there is some good potential momentum in that business. So one of my first questions on animal relates to the ruminant side. So U.
S. Dairy protein prices have moved meaningfully higher in recent months. Are you guys now starting to see better demand for AminoShore and some of your other encapsulated ruminant nutrients? And if so, are you starting to see a mix benefit within your Animal segment as well?
Brett, yes, this is Ted. We were really pleased with the Animal Nutrition results for the quarter with both ruminant volumes up and monogastric volumes up. It really was a strong quarter for us. And the margin improvement that we saw in that business was primarily driven by what you just noted, the fact that ruminant growth was significantly higher than monogastric. The ruminant margins are higher than the mono margins.
So when we get that growth differential, we are going to see a margin improvement benefit based on mix. So absolutely, that was part of the story this quarter relative to earnings. But the overall volume growth was part of it as well. And yes, there's no question the dairy economic environment is much healthier today than it was a year ago or even I want to say 6 months ago. And protein prices, as you noted, I think the last I saw protein prices were over $3 maybe $3.20 and that's up $1.50 or so from the prior year, so up meaningfully.
And then Class III milk prices are up in the $18, dollars 19 range, which is up probably $3 or so from prior year. So we're starting to see that result in higher volumes. I talked about the AminoSure XM launch and our business up 70%. The business would have been up something just because of protein prices, but certainly we think our new next generation methionine product is an important part of that story. But we're having healthier discussions with nutritionists and dairies.
We're starting to see it in demand and feel like it really does bode well for 2020 in particular as we expect this improved dairy economy to last for at least the next few quarters and into 2020.
And maybe I can give you a chance to talk about your mono business too because I know a lot of investors that I speak to are focused on ASF in China and across Asia broadly.
Are you do you think we're
at a point now where you guys are starting to see noticeable demand improvement here in the States within the hog and broiler sectors. I mean, when we think about the potential for China to open back up for U. S. Broiler producers, when we think about some of the data that we're seeing from hog and pig inventories here in the U. S.
Where market hog inventories have started to accelerate into the September data. Are we at that place now where you are starting to see better incremental demand on the mono side? And a question that we get a lot is, when do we reach that point in time where some of those benefits start to offset or dramatically offset some of the challenges that you're seeing in Europe right now that are directly related to what's been happening in China?
Yes. So I think that the way we would answer that question is, obviously, it's complicated. We really don't feel like our Q3 results were materially impacted specifically by African swine fever outbreaks in China. But there's again, we are very pleased with the 5% growth in our mono business. Part of that, honestly, is driven a bit by our we talked a few quarters ago about the launch of our new PetShure line of products.
Those products are up meaningfully year over year. But our volumes are up in both the U. S. U. S.
And Europe, and that's a positive sign. We don't think placement of more hogs in response to the prices in China has driven significant business to date, but we do believe that, that is coming and should be a benefit to us in coming quarters, both on the hog side as well as the poultry side. And as poultry and swine tariffs are eliminated in China that will only fuel further opportunity for growth. So our perspective is we really haven't seen it yet, but we do see it at our customers and the placement of new birds and hogs and think that that will play a role going forward.
Okay. Thanks for that comment. And then just one last question for me is on Specialty. Thank you for your comments on EO. In late October, the FDA released a statement regarding some of those medical device sterilization facilities and some of their closures, including a temporary closure in Georgia and then the potential for, I guess, a second closure at a BD facility in Georgia.
If I can ask you two questions on this issue. Number 1, are you guys able to manage your supply chain such that additional customer closures, if they happen, won't have material impacts on your margins, if that question makes sense? And then secondly, what are you seeing on the sales side right now? Are you seeing customers pull any EO orders forward because their customers are starting to pull orders forward? Was that a benefit in the quarter?
Can you just describe what you're seeing on the sales side right now? Thank you.
Sure.
Yes, it
was very important for us to talk about the evolving ethylene oxide regulatory environment on the call. And relative to those specific questions that you asked, we really haven't seen any negative impact relative to our volumes. I don't really feel as though we've seen orders being moved up. And what we have seen is that sterilization business at those few sites that have been affected by these activities has typically moved to other sites. So we've seen volume pickups at other sites as they've picked up this sterilization business.
And so our business, I think, is staying relatively whole at this point. If for some reason, we saw a significant amount of additional sites being impacted, that would ultimately negatively impact our business because it's just only so much excess capacity out there. And I think at this point in time, it's largely been tapped. And the industry as a whole is running at really close to 100% capacity. We don't expect that, but if that were to happen, it could start to impact the business.
We were very pleased to see the FDA letter come out that really specifically talked about their concern of the safety of patients and the potential lack of availability of certain medical devices that could result from the current shutdown of the couple of facilities or if there were more in the future. And I think that that was a very welcome letter from the FDA recognition of the seriousness of the situation. And so we were pleased to see that come out. And I think that it will help drive ultimately what needs to happen, and that is the EPA making a decision relative to the various assessments out there as to how they're going to regulate EO going forward. So no real impact on the business today.
We're pleased with the FDA letter. And as far as margins go, again, I don't think there's really been any major impact on margins relative to this situation at this point. Thank you, Ted.
Thank you. Our next question comes from the line of Ram Selvaraju with H. C. Wainwright. Please proceed with your question.
Hi. Thanks very much for taking my question. Can you hear me?
Yes. Yes. Yes. Yes.
Yes. Hi, Ram.
Okay. So just wanted to go over a couple of quick things. In particular, I don't know to what extent you have thoughts on this bill that people are talking about with respect to ethylene oxide, where it seems as though the politicians appear to think that they can significantly restrict, if not completely turn off, ethylene oxide related emissions by 2022. Just wanted to know if you had any commentary specifically on that. I know you talked about the current political landscape, but just wanted to know if you had any detailed thoughts on that specific bill right now?
So what Ram is talking about is the bill and the kind of Illinois legislature that did pass the House and has not yet been voted on in the Senate. And obviously, Ram, we're disappointed to see that as we really feel like it's based on poor data and poor assessment of the iris assessment. And it really speaks to what I've said before in the absence of the federal EPA deciding how they're going to regulate going forward, EO, local authorities are coming to their own conclusions, and has driven this activity in Illinois. So yet to be seen ultimately whether it's passed and it would have an impact on the use of EO really for all applications. And of course, medical device sterilization is a very, very, very small part of the overall ethylene oxide market.
So it would have an impact on the use of ethylene oxide for many different applications in Illinois. So we're watching that closely. We, again, believe ultimately that EPA will come out with their conclusion, which will ultimately reduce emission levels to a point that industry can manage to and work toward. And a lot of this reaction from localities and states will go away as the federal EPA comes in and makes a decision.
Okay. And also, I wanted to ask about regional questions regarding ethylene oxide. Obviously, we've talked before about the situation in Illinois. It looks as though the situation in Louisiana is very, very different. In particular, we're seeing new plants coming online in places like St.
Charles Parish. And I was wondering whether you think that there's likely to be any shift in Louisiana in any way similar or comparable to what we've been seeing happen in Illinois? And also, if you could maybe talk to how your business might potentially be well positioned to withstand some of these changes that may or may not occur, of course, because of the ChemoGAP acquisition?
So I guess I want to say, I really hope this does not become kind of a region by region, state by state, community by community regulated product. I really do think that the EPA, the federal EPA ultimately needs to decide how they're going to regulate and that we all then abide by that and work towards that. It would be disappointing if all of the ethylene oxide activities were to move to states like you mentioned, Louisiana or Texas or Mexico or one country over another. I think that ethylene oxide is something that has been regulated for many years and can be regulated at appropriate levels going forward. So that's our expectation and we hope that that is how it turns out.
But you're correct in that the Chemogas acquisition really does make us a global player and our ability to service customers around the world, whether it's Central America, South America, the Middle East, Europe, Asia. We now have a network of sites in a supply chain that really can satisfy our customers. I almost want to say no matter where they move, if that were to be the case, There have always been different regulatory perspectives and environments by country around the world. But the current activities in Illinois and I want to also say Georgia are a bit unique to this country at this point and those areas. So I hope it doesn't come that way.
But yes, I think that we are relatively well positioned to manage that with our supply chain if it were to occur and move from one part of the country or state or region to another.
Okay, great. And then a couple of questions regarding the fracking situation because we're seeing kind of conflicting stories emerging. On the one hand, there appears to be a slowdown within the United States on the fracking front. But on the other hand, I think there's plenty of incentives for the frackers to maybe step things up, especially considering what OPEC is doing. So just wondered if you could provide us with sort of an updated picture on that and when we might be seeing sort of pressures abating on the fracking front with respect to the products that you sell?
Yes. So obviously, it's complicated. And I think why Martin in the prepared remarks talked about we remain cautious about this business given the difficulties that we have in forecasting it. I mean there's no arguing with the fact that rig counts are down 20% year over year and the fact that our volume is down 50% year over year and that DUCs, the drilled uncompleted are up about 10%. And also that the pipelines are being built and some have actually been completed and others who will continue to take time.
There's no question in my mind that if oil prices were to spike up, we would see more fracking activity and we would see more demand for choline because choline is still being used in the market just to a lesser extent. But our bigger concern, I would have to say, is just around the learnings that the industry has had around cost reduction through this difficult period and the recycling of process, water and the fluids that are used in fracking, the reduction in additives that seems to be impacting us. And that's probably our bigger question is if oil prices did pick back up, if OPEC curtailed production and pick back up, would our volume pick back up commensurately and would that shift toward maximizing cash and reducing costs, would that go away? And that's very unclear to us. And I think that we believe that at least to some extent that's going to continue and to negatively impact our business.
But it's so hard for us to tell if OPEC does the opposite and produces more, that should obviously have an impact overall on prices and could negatively impact the business as well. But again, we just are cautious about this market. Our business has been very significantly impacted as you can see in the results. But we still have a healthy share in the market. It's still an important market to us and we're continuing to try to find ways to sell the value of choline in the market.
Okay. And in that vein, I just wanted to ask about the kinetics of adoption in the Human Nutrition and Health business driven by the findings of the Cornell study data? And in particular, whether you're already starting to see the impact of that in the business as well as whether you think there's the possibility of that data, that information being included in some kind of formal guideline recommendation from a body with influence in this segment that could potentially drive the sales trajectory even further? And then 2 other very quick questions. One is maybe you could give us some more visibility into how you expect stock repurchases to evolve and occur in the future?
And also, just wanted to ask whether you have any clarity at all on when the INSAR meeting data is likely to appear in a peer reviewed publication? Thank you.
So maybe I'll go from the last question. We do not know when the INSAR data will be in a peer publication. We are pleased that it was presented in at the INSAR meeting in Montreal and at least we can see the abstract on the INSAR website, but we are not aware of any intention to put it in a peer reviewed journal. Relative to stock buybacks, obviously, we had talked about the consideration of a modest stock buyback program, primarily focused on anti dilution, but also to provide a return of capital to our shareholders. And we will continue to do that as we've done it really on an annual basis, look at the dilution of our equity programs and seek opportunities to offset the dilution of those programs.
But our primary focus really is on the deployment of capital towards our organic and M and A activities well as maintaining and continuing to grow our dividend and paying down debt. Relative to the choline studies at Cornell where some people had asked how can they get their hands on them and that's why we shared that information on the call. But again, we're really pleased with past. And we do think that it is starting to impact the business. And also as I've talked about in the past, the world of prenatal vitamins, I think, really is evolving to include choline.
And several years ago, there were very few prenatal vitamin regimens that included choline. Today, that's different. There are quite a few prenatal vitamins out there that include choline, and I think that going forward there will even be more and that's really where we're seeing the immediate benefit and that part of our business is up nicely as a result of the inclusion of choline and prenatal vitamins. Now what we're not seeing is enough choline included in these prenatal vitamins and partly it's just because of real estate issue within the tablet. But firstly, let's get it included and if it's included at 55 milligrams, but we think it should be in there at 450 milligrams or even more.
We'll focus on that secondarily, but the American Association of Pediatrics came out to your point around will you get any support and they did come out recently and say that prenatal vitamins should include choline. We don't see any additional besides FDA already coming out with labeling changes and a recommended daily intake on choline and that's still doing that in Europe. We're not necessarily expecting any other body to come out with those kinds of mandates or positions. But the fact that they came out with support of choline being included in prenatal vitamins was very positive and we're starting to see that along with the Cornell studies and the reporting out of those studies changing the discussions that we're having with those prenatal vitamin companies and starting to impact our volumes.
Thank
you. We have reached the end of our question and answer Thank you. We have reached the end of our question and answer session. I'd like to turn the
call back over to Mr. Harris for any closing remarks.
Yes. Thank you very much. And really just once again, I'd like to thank everybody for joining our call today and maybe more importantly for your continued interest in our company. We're really pleased with the Q3 results and the progress that we're making on our key growth initiatives and look forward to reporting out Q4 and full year results early next year. So thank you again.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.