Greetings, and welcome to the Balchem Corporation First Quarter 2015 Earnings 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. I would now like to turn the conference over to Bill Backus, CFO for Balchem Corporation.
Thank you. Please go ahead.
Ladies and gentlemen, thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending March 31, 2015. My name is Bill Backus, Chief Financial Officer and hosting this call with me is Dino Rossi, our Chairman and Ted Harris, our 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 ks.
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 am Eastern Time. Will now turn the call over to Dino Rossi, our Chairman.
Thanks, Bill. Good morning, ladies and gentlemen, and welcome to our conference call. Before we begin the formal portion of the conference call, I'd like to take this opportunity to telephonically introduce Ted Harris, who will be making a brief introduction.
Thanks, Dino. Good morning. Let me begin by saying that it is a real privilege to be here as the new leader of the Balchem team. I've spent my first few days meeting with the team and conducting detailed strategy and business plan reviews with the Board of Directors. Based on what I learned during those reviews, I believe Balchem's current strategies are good ones and ones that I fully support.
As the Board meeting progressed, it was also clear to me that there is strong alignment between our Chairman, the Board of Directors and management around the priorities for 2015 and the strategies for the current planning horizon. My goal is to sustain and where appropriate and possible accelerate and expand on these strategies so as to maintain Balchem's strong performance. In the coming months, I will continue reviewing the various Dalchem businesses and operations with a focus on achieving strategic organic growth initiatives and pursuing acquisitive growth opportunities to deliver quality returns to shareholders over the long term. I am very excited to be with Balchem and look forward to meeting with many of you in person at conferences or roadshows. I will now turn the call back over to Dino.
Thanks, Ted.
This morning, we reported record 1st quarter consolidated net sales of 144 $900,000 which resulted in record 1st quarter net income of $15,200,000 or $0.48 a share. As disclosed in this morning's press release, these first quarter results include business relating to the acquisition of Sensory FX that we initially acquired on May 7, 2014. SensorFX, a privately held supplier of customized food and beverage ingredient systems, is now reported in consolidation with the legacy FPN sector. We're happy to provide additional details for you on these items as we proceed through the call. As mentioned for the Q1, we reported earnings of $0.48 per share on a GAAP basis.
This result includes a significant non cash item that I would like to highlight. Amortization expenses of 6.6 $1,000,000 for acquisition related intangible assets were recorded in these 1st quarter GAAP financial statements. This charge is a direct result of acquisition valuation and purchase accounting rules. Consequently, our non GAAP earnings reported in our press release earlier this morning exclude this expense to facilitate comparative evaluation of this current period operating performance versus the prior year period. Our first quarter sales of $144,900,000 were 68.5 percent greater than the $86,000,000 result of the prior year comparable quarter.
Excluding the impact of the SensoryFX acquisition, net sales were up 5% compared with the Q1 2014 or up 8.7% currency adjusted. In the quarter, 1st quarter sales of $13,600,000 and grew 6.2% over the prior year quarter. Animal Nutrition and Health sales at $42,700,000 were up 4.5% over the comparable quarter. However, sales in the A and H ruminant ingredient sector were particularly strong, increasing approximately 38% from the comparable prior year quarter, primarily due to higher volumes sold and a changing product mix with particular strength in rumen protected choline and amino acids. Monogastric product sales decreased 6.7%, primarily due to slightly lower volumes of choline sold in international poultry markets and unfavorable foreign currency translation.
Products for the companion animal and aquaculture species were slightly softer than the prior year quarter as well. Industrial product sales were up 3.1% from the prior year comparable quarter as volumes sold of various coaling and coaling derivatives for industrial applications notably for shell fracking increased particularly early in the quarter. However, the volume increase was offset by lower average selling prices resulting from pressures related to recent trends to curb hydrocarbon production costs and the industry activity downturn. In the Sensory effects segment, which includes the former Food Farm and Nutrition, net sales were 67 $800,000 an increase of $55,600,000 from the comparable prior year quarter. Net sales from the acquisition of the SensoryFX business contributed $54,500,000 of this overall increase and we also realized 8.8% growth in the sales of legacy FBN with particular strength in encapsulated ingredients for baking and food preservation in both the domestic and international markets, even with the negative impact of the strength in U.
S. Dollar, as we are an exporter into the international markets served. Our consolidated gross profits were $43,100,000 or 29.8 percent of sales in the quarter, an increase of $19,900,000 or 86 percent and up from a 27% of sales level in Q1 of 2014. The gross margin improvement was primarily due to the noted favorable product mix, particularly in the A and H segment, beneficial manufacturing efficiencies resulting from the noted higher sales volumes and certain lower raw material costs. Gross margin percentage for the Rx Specialty Products segment increased by 60 basis points, primarily due to manufacturing efficiencies and cost decreases of certain key petrochemical raw materials.
Gross margin percentage increased for the Animal Nutrition and Health segment by 9.50 basis points, primarily due to the favorable product mix, production and logistic efficiencies, as well as cost decreases of certain key petrochemical raw materials. Industrial Products gross margins declined slightly by 60 basis points highlighting the favorable change in volumes, products mix, efficiencies of manufacturing and favorable price purchase prices of certain raw materials, which were more than offset by lower average selling prices. As experienced since the acquisition, gross margin for the combined Sensory FX segment was lower, primarily due to the acquisition, resulting in our product mix now being more heavily weighted towards the powder and flavor systems of Sensory FX, which typically generates a lower gross margin. Consolidated operating expenses for the 3 months ended March 31, 2015 were $18,100,000 or 12.5 of net sales as compared to $9,900,000 or 11.5 percent of net sales for the 3 months ended March 31, 2014. The increase was primarily to the inclusion of SensoryFX operating expenses and increased amortization expense of $5,500,000 related to the acquired SensoryFX intangible assets.
Excluding the $5,500,000 of SensoryFX amortization, operating expenses were $12,600,000 or 8.7 percent of net sales. Looking forward, we expect to leverage off of our existing SG and A infrastructure and exercise tight control over all controllable operating expenses. Of $25,000,000 is an increase of $11,700,000 or 87.5 percent from the prior year comparable quarter. On a non GAAP basis, as detailed in our press release early this morning, earnings from operations of $31,700,000 increased 16,000,000 dollars or 101.7 percent from the prior year comparable quarter. As previously noted, consolidated net income closed the quarter at $15,200,000 up from $8,900,000 in the prior year quarter.
This quarterly net income translated into diluted net earnings per share of $0.48 as compared to the $0.29 we posted in the comparable quarter of 2014. On a non GAAP basis and as detailed in our earnings release, our diluted net earnings per share were $0.62 as compared to $0.34 in the prior year quarter or an 82.4% increase. Interest expense for the 3 months ended March 31, 2015 was $1,900,000 and is related to the term loan for the acquisition of Sensory FX. The term loan has a remaining balance of $323,800,000 at March 31. The company's effective effective tax rate for the 3 months ended March 31, 2015 2014 was 34.3% and 33.5% respectively.
This increase in the effective tax rate was primarily attributable to the impact of the SensoryFX acquisition, a change in apportionment relating to state income taxes and income generation in jurisdictions with higher tax rates. As outlined in our earnings release, our first quarter results generated approximately $36,100,000 of adjusted EBITDA in the quarter, which translates to 25% of sales and equals approximately $1.15 per diluted share. Our balance sheet continued to strengthen and our cash flow remains strong as we closed out the quarter with approximately $57,000,000 of cash. And this reflects $9,300,000 of dividend payments, principal payments on long term debt of $8,800,000 $6,400,000 of capital expenditure funding in the quarter. I'm now going to have Bill Backus discuss the ARC Specialty Products, Animal Nutrition and Health and Industrial Products segment.
Thanks, Dino. The O'Harex Specialty Products segment posted quarterly sales of approximately $13,600,000 for the 3 months ended March 31, 2015 as compared with $12,800,000 for the 3 months ended March 31, 2014, an increase of 6.2%. These higher sales were derived from increased volumes of ethylene oxide products used for medical device sterilization and higher volumes of propylene oxide for industrial applications. Our quarterly earnings from operations were $5,700,000 an increase of $895,000 or 18.6 percent. This increase is due to the noted revenue growth, manufacturing efficiencies, cost decreases of certain key petrochemical raw materials and tight control of selling and administrative expenses.
During the quarter, we did continue to incur additional expenses pursuing other new end market applications. In the Animal Nutrition and Health segment, we realized sales of $42,700,000 as compared with $40,900,000 for the 3 months ended March 31, 2014, an increase of $1,900,000 or 4.5 percent. Sales of product lines targeted for ruminant animal feed markets increased by $3,900,000 or 38 percent from the prior year comparable period, most notably from increased sale volumes of ReAssure, AminoShore and chelated minerals. The health of the U. S.
Dairy industry continues to support strong demand for our products. Lower feed prices along with continued strong demand for milk in Q1 were key factors. These positive indicators provide support for greater expected utilization of our products, which are targeted to maximize results of production animals. The ruminant product line provides a significant growth platform for us as we look to continually penetrate the market, gain market share and develop new and novel products to satisfy global market demands. Global monogastric species sales including feed grade choline products decreased $2,000,000 or 7%, primarily due to slightly lower volumes of choline chloride sold in international poultry and aqua markets and a negative impact from foreign currency.
North American choline volumes sold increased and typically track closely with broiler chick placements and egg sets. As lower feed prices and favorable economic conditions provide incentive for broiler integrators to expand production, there has been an increase in excess and a higher number of chicks placed for grow out with the USDA reporting broiling production being up 2% to 3% in 2015. A and H quarterly earnings from operations were $8,500,000 an increase of $4,400,000 or 104.6 percent. This increase was a benefit of the favorable product mix, production and logistic efficiencies as well as cost decreases of certain key petrochemical raw materials. In the Industrial Products segment, sales grew 3% over the prior year period, principally due to volume increases of various choline and choline derivatives for industrial applications, most notably for shale fracking with particular strength early in the quarter.
However, as previously noted, the volume increase was offset by lower average selling prices resulting from pressures related to recent trends to curb hydrocarbon production costs and the industry activity downturn. There are headwinds in this industry as lower oil and gas prices have had an ultimately negative impact on fracking. However, we remain confident in the competitiveness and efficacy of our products and believe there is still opportunity to gain additional market share through both our existing product portfolio and the development and introduction of more cost effective alternatives. Our earnings from operations for the Industrial Products segment were $3,100,000 equivalent to the prior year comparable quarter and reflects the offsetting impacts of the favorable change in volumes, product mix, efficiencies of manufacturing, favorable purchase prices of certain raw materials and lower average selling prices. I will now turn over the call to Dino for him to discuss the Sensory Effect segment.
Thanks, Bill. As previously noted for the quarter, sales of our consolidated Sensory effects segment were $67,800,000 an increase of $55,600,000 from the comparable prior year quarter. Earnings from operations for this segment was $7,700,000 versus $2,600,000 in the prior year comparable quarter. Excluding the effect of non cash expenses associated with amortization of Sensory FX acquired intangible assets, non GAAP earnings from operations for this segment was $13,300,000 We experienced certain sales positives and negatives in this segment with higher sales in choline nutrients, flavors and inclusions, in particular strength in encapsulated ingredients for baking and food preservation in both the domestic and international market, but reduced sales in powders. The powder business was affected by order timing, certain customers working inventories and softness in specialty beverage product lines.
The profitability of this combined segment is strongly contributing as we continue to realize improved efficiencies and improve the value proposition and related margins of our product portfolio. Sequentially, earnings from operations from this segment increased 9.4% due to product mix, manufacturing efficiencies, cost decreases and certain key raw materials and tight control of selling and administrative expenses. In this segment, we continue to focus on integration activities of the combined sensory effects. We are building consumer awareness of the benefits of choline, positioning choline with food and nutritional supplement companies as an essential ingredient to be included in existing new and novel sensory solutions, which we expect to introduce to the market later in 2015. We are supporting additional external scientific research and are excited with the recent FDA proposal that an RDI recommended daily intake for choline be accepted.
As previously discussed, our pharmaceutical delivery development efforts continue. We continue to work closely with the licensee of our technology who has completed Phase 3 clinicals for their drug to be utilized in the treatment of autism. The new drug application is being filed with the U. S. FDA we are collaborating as required.
In the near term, this sector remains a net expense to the business segment. We're always looking to expand our product offerings, particularly via new end use applications and moving globally, particularly in the human and animal nutrition market. Our business continues to provide good balance yielding profitable growth opportunities across the served value chain. We remain focused on helping our customers generate reinvestment level returns, while maintaining our own operating discipline. As we continue to build the financial strength of the company, we continue to explore possible alliances, acquisitions and or joint ventures to build and leverage on our strategic platforms, technology and strong human asset base.
I'm now going to turn the call back over to Ted for some closing remarks.
Thanks again, Dino. We are very pleased with the Q1 record sales and earnings and these results underscore the value of our diversified portfolio, particularly in light of the headwinds we have been facing in the shale fracking market, the strength of the U. S. Dollar and certain global economic weakness. We realized improved operating margins due largely to a shift in product mix, manufacturing efficiencies and a focus on management of base cost.
Cash flow remains strong. And during the quarter, we generated $27,000,000 in cash flows from operating activities. Looking ahead for 2015, we expect to capitalize on the strength of our diversified portfolio in the end markets we serve, while continuing to manage our business in an uncertain geopolitical and economic environment. This now concludes the formal portion of the conference. At this point, we would like to open the conference call for questions.
Thank you. And our first question comes from the line of Tim Ramey with Pivotal Research Group. Please go ahead with your questions.
Good morning. First, let me say welcome to Ted and congratulations Dino on what has been truly a remarkable record at Balchem. What a great growth company you've developed and your legacy is strong, so congrats on that. Thanks. Just a nuts and bolts question, The amortization of intangibles sounds like it was mostly in sensory effects, but some in another segment.
Can you give us a breakdown on that as well as the breakdown of the $995,000 for last year as well Bill?
Yes. So you're right most of the amortization is absolutely sensory effects. There's total amortization of about $6,600,000 in the quarter of which $5,600,000 is related to Sensory from the acquisition. The other $1,000,000 is legacy Balchem amortization from prior deals. We've done, as you know, in the past, we acquired Virgo.
We had the Chinook customer list that we acquired and we're still amortizing some of those intangibles from those deals.
So just for modeling purposes, should I try that in ARC or?
No, most of it's going to be A and H.
A and H, okay. So $1,000,000 in A and H. And then just if you recall, the $995,000 from last year, was that in sensory effects or where did that relate to?
The $995,000 from last year? Yes. Yes. So again, the biggest piece is probably customer lists that we acquired and that not sensory, definitely not sensory. So you had you would add small pieces in FPN, you would add small pieces in ARC like I said with the VIRGO.
But predominantly the amortization there that $9.95 is absolutely going to be related in particular to the Chinook customer list that we acquired back in 2007. So there is still going to be a full year of that amortization this year rolling out.
Okay. So I mean there is some in what is now called sensory effects even though it was before the acquisition, but mostly in
That's correct. And a little bit of VIRCO there I'm sorry, a little bit in ARC. There's not too much in legacy FPN, but there is some. Most of it though by far is absolutely the Sensory FX acquisition that's in that Sensory FX segment at this point.
That's helpful for the model. And thanks too for the further disclosure on industrial products. And it's notable that I think you fessed up to headwinds or you agreed that there are real headwinds there, which is a change from what you experienced in the Q4. Do you have a sense of how that business evolves? I mean, it looked like there was some margin pressure or at least pricing pressure on decent volume.
Is this still a decent volume story or do you think it flattens?
Yes. I think to your note in our previous call we talked about Stoyette having seen strength in the industry. I'd say midstream in Q1 is where we saw it start to fall off. And even the language that we talked about, it was still strong in Q1 and then drifting off towards the end of Q1. And I think we'd like to think we're at the bottom of that right now, but I don't know that anybody has a crystal ball and can say so for sure.
But our view here going forward, I mean, we're still shipping products into the space and expect them to continue to frac. But certainly, I think to think it's going to be at the level that it was volume wise anyway like in Q4 which was very strong Q3 very strong. We're certainly not of that near term view. And I think it probably won't turn until we see the price of the barrel recovery a fair bit.
Okay. And then just a question on the NH comments relative to Choline Chloride. I was surprised sales weren't slightly better in North America. You indicated they were up, but it was FX and Europe was weak enough to drag the whole basket down. Is there anything in particular going on in Europe?
Did you lose a meaningful customer or little color there?
Yes. Not really. I mean, so we sell not only into the poultry industry, but also in the aqua industry over there and we saw a little bit of softness. We haven't lost any accounts. But I think that certainly the FX is planned through that international piece and that's been there all along.
I mean we do have pretty good performance out of that European operation. And so with the euro drifting that certainly didn't help. Volume wise, like I said, it was a little soft, but I'm not going to pretend to not be concerned. But I think from our view, we expect it to continue to pick up here through the balance of the year and continue to see a strong year out of that market. So there's some things going on over there in terms of their raw material positions versus what's going on here in the States and some competitive environment there as well.
I think you might remember that in early last year, Q1 is when that there was the Chinese issue and the contaminated product rolling into Europe that got shut down. So clearly that kind of changed the volume of movement then perhaps they clearly clawed back. I said they'd be back. So they've clawed back. They've corrected their issues.
And so we're seeing that reflected in these numbers a little bit, but not too very dramatic. I think accounts that we picked up at that point in time have pretty much stayed with us. And certainly with an expectation that that market is going to continue to be pretty decent through the balance of the year.
And one more quick one. Bill, did you happen to calculate the FX impact on EPS?
No, I can give you the number. So it's going to be about let me give you the pre tax number here on sales, just the sales number is $3,100,000 So but in terms of I can follow-up with you Tim if you want to go through some of the other stuff though for your model.
Thanks so much.
Our next question comes from the line of Mike Rysenstahl with Piper Jaffray. Please go ahead with your question.
Yeah, good morning. Just want to kick it off with a question on sensory effects revenues. To what extent is top line still showing some of the effects of pruning lower margin business? And I know that you don't provide specific guidance, but can you just walk us through how you're thinking about top line growth expectations in 2015? And maybe just how much natural seasonality did you see in the Q1 versus Q4 numbers?
Yes. I think certainly there was there's some seasonality that we realized with that business. And it's probably more in line with the flavors part of the absolute flavors versus if you will powders. And so we noted here that the flavor part of the business actually we saw an increase year over year. So some recovery going on there in frozen desserts and ice creams and things like that that have played through pretty neatly.
I would tell you that there's always an ongoing program here in terms of pruning if you will to improve the margins of that business. And I mean you'll note overall that the margin improvement did happen. And I think that that's always going to continue to be there. But with that said, I don't know that I would sit here and say we're looking to really cut away from much more business that we picked up through the acquisition that really wasn't meeting the guidelines of what we thought would be acceptable. I think a lot of that's behind us now.
So on a go forward basis, it's really more about just continuing to grow the business. I think overall our view of the growth this year given the start that we've had is probably going to be a little bit less than close to 10% mark that we talked about. Specialty beverages has started out a little slower than certainly we expected. We expect some recovery there. So I think overall we're probably looking at maybe a 7% kind of growth in that business organically.
But I don't know that I can give any more guidance than that right now.
No, that's very helpful. So another question on the international coin sales, I was just curious about what that was excluding currency.
I don't
I can't remember if you specifically pointed that out. And then secondly on choline, domestically, I guess is the impact of avian flu. How that has flown through the P and L in past like international instances where we've seen more widespread culling. So just choline sales internationally excluding currency and then the avian flu piece?
Yes. So I think that we mentioned that on the international side it's mostly related to I would say sales coming out of the Italian operation and which our sales that go into a number of different countries not only the EU. And so and when I say a little bit of softness, I think of no real alarm here if you will. And so I don't think that that's going to have a lasting impact for sure. Switching over to the avian flu impact, historically we've not really been impacted by that.
And while there's pockets today here in the States, I really wouldn't even say that that's impacted our numbers here in Q1. So I think our view of that is that poultry is going to be continued to be consumed from around the world wherever. I think in the past probably the U. S. Has stepped up and exported, which you might argue would be better for us knowing that we're predominantly North American based with that calling short of what we do out of the Italian operation.
But right now, I would tell you that we're not looking at the avian flu issues that are at least currently out there unless they really do pick up and run-in a big way as being a note to be too very problematic about.
Okay. Fair enough. On raw materials, is there a way to quantify year over year the change in raw materials in the gross margin? That seemed to be a pretty material needle mover this quarter.
Yes. Well, certainly I think a lot of it revolves, but not entirely around petrochemicals. And I think everybody knows that when the barrel price coming down that's certainly rippled through. If you read a lot of the other special chemical announcements that are out there, they're talking about prices of key raw materials coming down. And I think up through last year, there was a lot of questions even on calls too about why our cost really wasn't drifting off a little bit here given what was happening with the barrel of oil and natural gas prices.
But that has started to ripple through. So we're starting to pick up the benefit of that here at least in the quarter. I think that the key here is that as quick as we say that, I can also tell you that in certain parts of Europe and other parts of the world, some of these petrochemical prices are starting to move back up, whether it's because of turnarounds in plants or an explosion in China or things like that that and a lot of this has become very global in their pricing schemes, if you will. So I don't think that there's any one particular area that's going to dictate what happens here with these prices. But certainly there has been relief and you're seeing some of that reflected in these numbers.
I think the difficulty as it relates to us is also that our product portfolio has changed. And where choline in and of itself used to be a significant impact here. But in Q1, we talk about flatness in the shelf fracking. That's altering, if you will, what choline is as a percentage of our business and accordingly margins that go with choline versus specialty ruminant products for that matter. So I mean these numbers reflect a significant change in that product portfolio.
We've talked about, hey, we really like the fact that the ruminant business is growing. I think these numbers reflect that more and more. And yes, I'd like to not see any of the businesses be trailing off that would be ideal. But I think these percentage shifts that you're seeing play through here are reflecting a lot of that that's also reflecting the change in our portfolio. That makes sense.
One, I'll wrap it up here with
a question for Ted maybe. With the strong cash generation within the business that's just sort of inherent in the business, how do you think about allocation just philosophically capital allocation between the debt pay downs that's kind of been historically Vulcan's outlet for some free cash versus dividends and the other pockets of allocation?
Thanks Mike for the question. Obviously, I'm new to the company, been here a few days and it's been a great few days. And as we've gone through our strategic plans with the Board over those last few days, we clearly have significant investments that we want to make organically in the businesses, both capital investment as well as R and D investment. We have a lot of good projects both on the capital side as well as the R and D side. But we also have what I would call a very healthy pipeline of acquisitions that we're reviewing.
I think we're committed to the dividend and Balchem has had a long history of providing a dividend and we're committed to that. And at this point in time, I think it's balancing between organic growth and acquisitive growth and where really we can create the best returns for the company and balancing investments in both of those areas.
Fair enough. Thank you very much.
Our next question comes from the line of Deborah Fakas with Crystal Equity Research. Please go ahead with your question.
Thank you for taking my question. First, I was hoping to maybe put Ted on the spot just a little bit by asking what in your prior experience, you have lots of experience with Ashland and FMC. What in your prior experience do you think will be of most value to you in your new position with Ball Chem? And by the way, congratulations.
Great. Thank you very much. I think that I've been in the specialty chemical industry for 28 years, managing a series of businesses, both smaller than Balchem and actually much larger than Balchem. And I think that specific experience around investments in R and D, new product development, I think will be a benefit here as we continue to try to differentiate ourselves through new products. And secondly, I have spent a lot of time in my life both living and working abroad and managing global businesses.
And as Balchem continues to grow internationally, I think that, that will come to good use. And I think thirdly, my experience in making acquisitions and integrating acquisitions, That's been an important part of my career over those 28 years. And I think the acquisitive history of Balchem and the interest in continuing that in my experience fit well. So I point to those three areas specifically that I can draw and to help continue the strong performance of Balchem going forward.
Excellent. Thank you. And then for Mr. Rossi, you've had what, 4 days off now. I was wondering if you had had some thoughts about how you want to craft your role as Chairman of the Board?
What will change in the coming months quarters in your role as Chairman?
Well, I think, yes, it's been all the 4 days, but I don't know that there's been a whole lot of change in net net. I think as was mentioned before, it's all about transitioning here with Ted near term. And but I think on a go forward basis as the Chair position, I was the Chair before. And certainly, I believe it's going to be a lot the same as what was in terms of that particular role, if you will. But I also think that it will take into consideration with Ted on board now, if there's any modest changes in direction or anything like that, does it impact who we should have on the board, bringing any other kind of experience any other kind of experiences on to the board to help facilitate those things.
So we'll study that real close. But for the next near term, I think it's really going to be business as usual and continue to support, if you will, management with whatever needs to be done to help facilitate the growth.
Excellent. Thank you. And then just one housekeeping question. I wanted to return to the topic of amortizing the intangibles. I just didn't quite hear everything that was said when the previous caller asked about the amortization.
Is what portion, if any, of the 5 I think it was 5.6 for Sensory related to the Sensory acquisition. Was there any portion of that that's non reoccurring?
No. No, it's all recurring amortization. It will run out through its useful life. Whatever in
the end.
Okay. And what time period what was the time period?
Well, it depends on the intangible. But for example, the customer relationships, which is a big one typically is 10 years and that's where we're at this point.
Okay. Excellent. Thank you.
Thank you.
Our next question comes from the line of George Leitner who is a private investor. Please go ahead with your questions.
It's just a word of kudos for Dino for all his accomplishments and the growth and the foresight he gave to the company. I just wanted to wish him luck and thank you on behalf of the investors and also wish Ted success in his new role. Thanks, George, and thanks for all the support over the years. Really appreciate it. All right.
My bet.
Thank you. Our next
our stock at 18% per annum for the next
10 years. That's a far high for me. Thanks.
My first question about the avian flu was already answered and asked. So I only have one question, which was where's the competition on price coming from for oil services? And that's number 1. Number 2, I was pleasantly surprised to hear that volumes were okay, despite the fact that the rig count fell off so much. So, if you could tell us how you're achieving such great customer wins or market share wins or whatever that is?
Thanks.
Yes. Well, I think on the price pressures are coming from oilfield service players out there in the market today. And I'm sure you read about what's going on with Schlumberger, Halliburton, BJ. There's a lot of pressure there. They're laying off hundreds of thousands of people now.
And so it's not a pretty picture. A lot of that clearly is I think being generated because of the decline in the drilling activity itself. So kind of the front end of the process if you will. But it's rippling through. I mean we're starting to see that.
As I said, we reported I'm going to say a decent Q1 here. Towards the end of Q1. It certainly started to drift off a little more in terms of volume. But there's a lot of ongoing conversation with that customer base to understand what is going on out there. There are certain fields that are continuing actually to do quite well.
Certainly, I won't say at the expense of others because the overall market is down. But there are certain ones that are doing better than others for sure. And we continue to push product into those particular markets. But it's about continuing to be a quality supplier into the space giving them good service. They've tightened up the supply chain for sure.
It's a lot about just in time and having inventory in the right places to service that. So we're going to continue to stay as close as we can. But I will tell you it's when I say just in time, it's just in time. I think many of these guys don't know for sure if they're going to be fracking a well on Monday on the Friday before. It's that tight out there.
So but just the idea of staying as close as we can to them and working with them to help facilitate the pressures that they're feeling as well.
Okay, great. It's not some new supply or something like that?
Not really. We've talked before about some Chinese material coming in a little bit from Europe, but no new supplier outside of that.
Cool. Thanks. Have a great day.
Thank you.
Our next question comes from the line of Gary Noren with Palisade Capital Management. Please go ahead with your
questions. Hi, guys. I was just wondering if you could give
an update on the joint venture, which now with Eastman, I guess? Yes. Certainly, the plans are in place and continuing to move forward. Engineering work is going So I think our opinion and I think this is a shared opinion with Eastman, although maybe if you want a separate answer, you should get it from them. But the view is that this JV was being done in light of what was going on in the fracking industry.
Our view is that the fracking industry is going to continue to be here going forward. Certainly, there's a little speed bump here right now that we've hit. How long or broad that's going to be, I think still yet to be determined. But I think the consensus view is this technology is here to stay. With that said, our view is that the market will require more product.
You might argue exactly when right now and I wouldn't disagree with that. So I think we're having discussions about the prudent way to proceed here jointly. But as of right now, it's still moving forward and maybe not as hastily as we were 6 months ago, but certainly still moving forward.
I guess just on timing, is it still expected later this year?
I think that that might slip a little bit by design, if you will, probably into 2016. 16 and I think we'll see yet here how things are playing out and always keeping an eye on what's happening from the in in that market that might be all good reasons to slow it down a little bit. But I won't project that too hard other than I think it's now probably going to be in 2016 rather than 2015.
Good to hear. Thanks.
Thank you. Our next question comes from the line of Tim Ramey with Pivotal Research Group. Please go ahead with your questions.
Yes. Maybe just a follow-up for Ted. I know you went through this couple of day strategic reviews session. And is there anything that kind of jumps off the table as particularly interesting from your new perspective with the company that you would care to highlight?
Yes. As I reflect on those couple of days and again, they were great days, but only 2 days. So let's put it into context. But I would say 3 things come to mind. 1 is just around, I think the great work that is being done, both from an R and D and a marketing perspective around differentiating choline in food, in feed and even in industrial applications, I think that the Balchem has a good pipeline of differentiation enhancing efforts that I think are exciting and that will continue to allow us to grow in those areas.
I also think the agglomeration investment is a very positive investment that really kind of gives us turnkey specialty powder capabilities that we haven't had in the past. And I think the team is excited about what that can do for our powder business. And that really caught my eye as an exciting opportunity to continue to grow sensory effects. And then as I mentioned earlier, I think the robust acquisition pipeline that to me is exciting. I think there is a good mix of small acquisitions and larger ones that enhance technology, geographic span as well as new market penetration.
So those three areas come to mind as I'm not sure surprises, but particular highlights of the 3 days.
And maybe ask a question in other color in a different way. But coming from your background, which I believe is more kind of industrial rather than food, although I know you've had food assignments. Opportunities that you bring to the table that might be kind of plug and play for the company?
Yes, I do as I reflect again back on those couple of days and really getting in to the different businesses. My 6 years or so managing FMC's Food Ingredients business really kind of have that experience and the talk of the competitors and opportunities really has all kind of come back to life again. And so I think that I certainly can draw off of those experiences as we try to grow in the food space here at Balchem. I think that the international experience that I've had comes to mind as well. I've experienced building plants in China and managing plants and businesses in Europe and South America and across Asia.
And as we went through the strategic plans, I would say each of the businesses is contemplating opportunities in those regions of the world. And I think that some of my experience in starting new businesses there, managing old ones and growing them, I think, will come to particularly use in trying to accelerate those efforts.
Thanks so much.
Thank you. This concludes today's teleconference question and answer session. I'd like to turn the floor back to management for closing remarks.
Yes. So I'll just say this is Dino. I'll say thanks everybody for participating on the call and thanks for your support. And we look forward to talking to you again at the end of the next quarter. Thanks.
Thank you. This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.