UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15[d] OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from __________ to ___________
Commission file number 1-13648
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Balchem Corporation 401(k)/Profit Sharing Plan
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Balchem Corporation
52 Sunrise Park Road
PO Box 600
New Hampton, NY 10958
REQUIRED INFORMATION
Financial Statements:
4. In lieu of requirements of Items 1-3, audited statements and schedules
prepared in accordance with the requirements of ERISA for the plan's fiscal year
ended December 31, 2003 are presented herein.
Exhibits:
Consent of KPMG, LLP, independent auditors
EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
23 Consent of KPMG LLP
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Financial Statements
and Supplemental Schedules
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Table of Contents
Page
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Plan Benefits -
December 31, 2003 and 2002 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 2003 and 2002 3
Notes to Financial Statements 4
Supplemental Schedules
Schedule H, Part IV, Line 4(i) - Schedule of Assets Held at End of Year 10
Schedule H, Line 4(j) - Schedule of Reportable Transactions 11
Report of Independent Registered Public Accounting Firm
Plan Administrator
Balchem Corporation 401(k)/Profit Sharing Plan:
We have audited the accompanying statements of net assets available for plan
benefits of Balchem Corporation 401(k)/Profit Sharing Plan (the Plan) as of
December 31, 2003 and 2002, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2003 and 2002, and the changes in net assets available for plan
benefits for the years then ended in conformity with U.S. generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
at end of year as of December 31, 2003 and reportable transactions for the year
ended December 31, 2003 are presented for the purpose of additional analysis and
are not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audit of the 2003 basic financial statements and, in
our opinion, are fairly stated in all material respects in relation to the 2003
basic financial statements taken as a whole.
/s/ KPMG
------------
KPMG LLP
Short Hills, New Jersey
June 21, 2004
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2003 and 2002
2003 2002
---------- ----------
Assets:
Investments (note 3) $8,258,111 6,619,535
Participant loans 149,285 140,716
Receivables:
Employer contribution 316,958 333,882
Participant contributions 43,063 38,247
Interest 924 1,055
---------- ----------
Total assets $8,768,341 7,133,435
========== ==========
See accompanying notes to financial statements
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2003 and 2002
2003 2002
----------- -----------
Addition to net assets attributed to:
Investment income (loss):
Interest $ 72,090 75,455
Dividends 5,976 4,427
Net appreciation (depreciation) in fair value of investments
(note 3) 762,249 (490,904)
----------- -----------
840,315 (411,022)
----------- -----------
Contributions:
Participant 881,259 894,705
Employer 577,237 563,354
----------- -----------
1,458,496 1,458,059
----------- -----------
Total additions 2,298,811 1,047,037
----------- -----------
Deductions from net assets attributed to:
Benefits paid to participants (620,906) (193,604)
Fees (4,183) (3,344)
Other, net (38,816) (19,508)
----------- -----------
Total deductions (663,905) (216,456)
----------- -----------
Net increase in net assets available for plan benefits 1,634,906 830,581
Net assets available for plan benefits at beginning of year 7,133,435 6,302,854
----------- -----------
Net assets available for plan benefits at end of year $ 8,768,341 7,133,435
=========== ===========
See accompanying notes to financial statements
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Description of the Plan
The following description of the Balchem Corporation 401(k)/Profit Sharing
Plan (the Plan) provides only general information. Participants should
refer to the Plan agreement for a more complete description of the Plan's
provisions.
General
The Plan is principally a participant-directed, defined contribution plan
covering all active employees of Balchem Corporation (the Company), except
those that are currently covered by a collective bargaining agreement, who
have 60 days of service, as defined, and are 18 years of age or older. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
The Company pays administrative and record-keeping fees for the Plan. Plan
participants are required to pay fees for participant loans and certain
brokerage fees for transactions pertaining to investments in Balchem
Corporation Common Stock.
Contributions
Each year, participants may contribute up to 75% of pretax annual
compensation, as defined in the Plan. Such amounts may be limited by the
maximum amounts allowed under Internal Revenue Service regulations.
Participants may also contribute amounts representing distributions from
other qualified defined benefit or defined contribution plans. Participants
direct the investment of their contributions into various investment
options offered by the Plan. The employer matching contributions equal 35%
of each participant's elected contribution and the Company may make
discretionary company profit-sharing contributions at the option of the
Company's Board of Directors. Matching contributions are made in company
stock on a monthly basis based upon the closing price of the stock on the
last trading day of each month and are subject to the vesting schedule
described below. Included in employers' contribution receivable as of
December 31, 2003 and 2002 were discretionary company profit-sharing
contributions made in February 2004 and January 2003 for the 2003 and 2002
plan years totaling $305,294 and $322,106, respectively.
Participant Accounts
Each participant's account is credited with the participant's contribution
and allocations of the Company's matching contributions and plan earnings
or losses. Allocations are based on participant account balances, as
defined. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
Vesting
Participants are 100% vested in their contributions plus actual earnings or
losses thereon. Vesting in the Company contribution portion of their
accounts plus actual earnings or losses thereon is based on years of
continuous service, as defined. A participant becomes 100% vested after two
years of service, except for employees hired as part of the Company's June
1, 2001 acquisition of certain assets of DCV, Inc. and its affiliate, DuCoa
L.P., whose prior credited service is used in determining the vested
portion of such matching contributions.
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
Investment Options
Upon enrollment in the Plan, participants may direct employee contributions to
any of the following options, administered by Connecticut General Life Insurance
Company (CIGNA). Employer matching and discretionary contributions are made in
company stock and are directed to the Balchem Corporation Common Stock Fund:
Guaranteed Income Fund - A fixed income fund that seeks to provide
competitive yields relative to comparable guaranteed fixed income
investment funds. The account, which is backed by Connecticut General Life
Insurance Company's general assets, invests primarily in intermediate-term
bonds and commercial mortgages within Connecticut General Life Insurance
Company's general account. Investors are guaranteed preservation of
principal and interest regardless of economic events. Interest rates are
declared in advance and guaranteed for six month periods (January 1 through
June 30 and July 1 through December 31). The Guaranteed Income Fund is
stated at contract value which approximates fair value. The credited
interest rate under this contract was 3.15% and 4.40% at December 31, 2003
and 2002, respectively. The average yield of the contract was 3.15% and
4.675% for the years ended December 31, 2003 and 2002, respectively.
Janus Adviser Balanced Account - A mutual fund which seeks long-term
capital growth consistent with preservation of capital and balanced by
current income, by investing in a combination of equity and fixed income
securities.
CIGNA Lifetime Funds - Lifetime funds are a family of funds comprised of
five distinct, multi-manager investment portfolios, based on the lifecycle
approach to investing - that different bond/stock mixes are appropriate for
individuals at different stages of their life. The objective of the funds
varies in keeping with the investment timeline, which uses the
participant's age as indicator of time remaining to retirement.
Large Cap Growth/Morgan Stanley Fund - A mutual fund, managed by Morgan
Stanley Dean Witter, whose investment strategy seeks to provide capital
appreciation with minimal focus on income. The performance objective is to
outperform the S&P 500 Index over full market cycles.
S&P 500 Index Fund - This fund is constructed to reflect the composition of
the S&P 500 Index. It seeks to provide long-term growth of capital and
income.
Large Cap Value/John A. Levin & Co. Fund - This fund seeks to consistently
achieve capital appreciation, capture high rates of return and avoid major
losses while remaining fully invested in the market. To achieve this, the
investment style emphasizes the preservation of capital, avoidance of risk
and control of volatility.
Aim Value Account - A mutual fund that seeks to provide long-term growth of
capital by investing primarily in equity securities judged by the portfolio
managers to be undervalued. The generation of income is secondary.
INVESCO Dynamics - A mutual fund which seeks to provide capital
appreciation. To minimize risk, the portfolio managers invest in a
multitude of companies in a variety of industries.
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
Small Cap Growth/Times Square Fund - A mutual fund that seeks to achieve
long-term capital appreciation by investing primarily in the common and
preferred stock of growing US Companies involved in new product development
and technological breakthroughs.
Janus Adviser Worldwide Growth Account - A fund which seeks long-term
growth of capital in a manner consistent with the preservation by investing
in foreign as well as domestic securities.
Balchem Corporation Common Stock - Contributions may be invested in common
stock of Balchem Corporation. Investments in this fund are limited to 10%
of a participant's contribution.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balances.
Loan terms extend up to five years or in excess of five years for the purchase
of a primary residence. The loans are secured by the balance in the
participants' accounts and bear interest at 10%.
Payment of Benefits
On termination of service, a participant may receive a lump-sum amount equal to
the vested value of his or her account, or upon death, disability or retirement,
the participant may elect to receive annual installments over a period not to
exceed the participant's lifetime, or the joint lifetime of the participant and
the participant's spouse, or an annuity contract.
Income (Loss) Allocations
Investment income (loss) for an accounting period shall be allocated to
participants' accounts in proportion to the total of their respective account
balances at the beginning of such accounting period plus any contributions or
loan repayments credited to the account during the period.
Forfeited Accounts
Forfeited balances of terminated participants' nonvested accounts are allocated
to all active participant accounts as of the last day of the plan year.
Forfeited nonvested accounts totaled $3,235 and $2,793 at December 31, 2003 and
2002, respectively.
(2) Summary of Accounting Policies
Basis of Accounting
The financial statements of the Plan are presented on the accrual basis of
accounting.
Risks and Uncertainties
The assets of the Plan at December 31, 2003 and 2002 are primarily
financial instruments which are monetary in nature. Accordingly, interest
rates and market fluctuations have a more significant impact on the Plan's
performance than the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services as measured by the consumer price index.
(continued)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
The investments are subject to risk conditions of the individual
investments' objectives, the stock market, interest rates, economic
conditions and world affairs.
Investment Valuation and Income Recognition
Investment securities held in the Plan's funds are stated at fair value
determined from publicly quoted market prices. Participant loans are valued
at cost, which approximates fair value. Purchases and sales of securities
are recorded on a trade-date basis. Interest income is recorded on the
accrual basis. Dividends are recorded on the ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
plan administrator to make estimates and assumptions that could affect the
reported amounts of net assets at the date of the financial statements and
the reported amounts of changes in net assets available for plan benefits
during the reporting period. Actual results could differ from those
estimates.
(3) Investments
2003 2002
---------- ---------
Cash equivalents $2,059,656 1,683,800
Mutual funds 4,645,566 3,120,520
Common stock* 1,552,889 1,815,215
---------- ----------
$8,258,111 6,619,535
========== ==========
* A portion of the common stock is nonparticipant-directed
The following represents investments that represent 5% or more of the
Plan's net assets:
2003 2002
---------- ---------
Balchem Corporation Common Stock* $1,552,889 1,815,215
Guaranteed Income Fund 2,059,656 1,683,800
Janus Adviser Balanced Account 784,864 719,265
S&P 500 Index Fund 1,757,602 1,238,971
Cigna Lifetime 40 587,499 407,015
========== ==========
* A portion of the Balchem Corporation Common Stock is
nonparticipant-directed.
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2003 and 2002
During the years ended December 31, 2003 and 2002, the Plan's investments
(including gains and losses on investments bought and sold, as well as held
during the year) appreciated (depreciated) in value as follows:
2003 2002
---------- ---------
Mutual funds $ 880,305 (706,757)
Common stock (118,056) 215,853
--------- ---------
$ 762,249 (490,904)
========= =========
(4) Nonparticipant-directed Investments
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments
is as follows:
December 31
--------------------------
2003 2002
---------- ---------
Net assets - Balchem Corporation Common Stock $1,552,889 1,815,215
========== ==========
Year ended December 31
--------------------------
2003 2002
---------- ---------
Change in net assets:
Contributions $ 336,375 298,611
Dividends and interest 7,659 5,575
Net appreciation (118,056) 215,853
Benefits paid to participants (72,932) (27,742)
Fees (1,420) (941)
Transfers to participant-directed investments (413,952) (130,108)
----------- -----------
Net (decrease) increase (262,326) 361,248
Net assets at beginning of year 1,815,215 1,453,967
----------- -----------
Net assets at end of year $ 1,552,889 1,815,215
=========== ===========
A portion of the Balchem Corporation Common Stock is participant-directed.
Schedule 1
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Schedule H, Part IV, Line 4(i) - Schedule of Assets
Held at End of Year
December 31, 2003
Identity of issue, Description of investments including maturity date, Current
borrower, lessor or similar party rate of interest, collateral, par or maturity value value
------------------------------------- ------------------------------------------------------------------- ---------------
Cigna Guaranteed Income Fund(1) Units of participation in Guaranteed Income Fund -
68,148 units, $30.22 per unit $ 2,059,656
Janus Adviser Balanced Account(1) Units of participation in Janus Adviser Balanced Account -
28,493 units, $27.55 per unit 784,864
Cigna Lifetime 60(1) Units of participation in CIGNA Lifetime 60 -
4,065 units, $13.52 per unit 54,968
Cigna Lifetime 50(1) Units of participation in CIGNA Lifetime 50 -
3,447 units, $13.10 per unit 45,163
Cigna Lifetime 40(1) Units of participation in CIGNA Lifetime 40 -
45,643 units, $12.87 per unit 587,499
Cigna Lifetime 30(1) Units of participation in CIGNA Lifetime 30 -
18,155 units, $13.00 per unit 236,068
Cigna Lifetime 20(1) Units of participation in CIGNA Lifetime 20
1,760 units, $12.80 per unit 22,524
John A. Levin & Co., Inc. Large Cap
Value/John A. Levin & Co. Fund(1) Units of participation in Large Cap Value/John A. Levin & Co. Fund-
18,203 units, $11.69 per unit 212,849
TimesSquare Capital Management, Inc.
S&P 500 Index Fund(1) Units of participation in S&P 500 Index Fund -
27,887 units, $63.03 per unit 1,757,602
Aim Value Account(1) Units of participation in AIM Value Account -
2,082 units, $41.12 per unit 85,626
Morgan Stanley Investment Management, Inc.
Large Cap Growth/Morgan Stanley Fund(1) Units of participation in Large Cap Growth/Morgan Stanley Fund -
11,436 units, $9.88 per unit 113,019
INVESCO Dynamics(1) Units of participation in INVESCO Dynamics -
9,009 units, $21.04 per unit 189,536
TimesSquare Capital Management, Inc.
Small Cap Growth/Times Square Fund(1) Units of participation in Small Cap Growth/Times Square Fund -
14,036 units, $17.64 per unit 247,555
Janus Adviser Worldwide Growth Account(1) Units of participation in Janus Adviser Worldwide Growth Account -
10,709 units, $28.79 per unit 308,293
Balchem Corporation Common Stock(1)(2) Units of participation in Balchem Common Stock -
68,109 units, $22.80 per unit 1,552,889
Participant loans(1) Interest rates range from 6.00% to 11.50% 149,285
------------
Total $ 8,407,396
============
(1) Parties-in-interest
(2) The cost basis of the Balchem Corporation Common Stock Fund at December 31,
2003 was $1,081,974.
See accompanying report of independent registered public accounting firm.
Schedule 2
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Schedule H, Line 4(j) -
Schedule of Reportable Transactions
Year ended December 31, 2003
Current
value of asset
Identity of Purchase Selling Cost of on transaction Net gain
party involved Description of asset price price asset date (loss)
----------------------------- ------------------------------- --------- -------- -------- -------------- --------------
Cigna Financial Services, Inc. Balchem Corporation Common Stock $ 284,784 -- 284,784 284,784 --
Cigna Financial Services, Inc. Balchem Corporation Common Stock -- 424,427 307,324 424,427 117,103
--------- -------- -------- -------------- --------------
$ 284,784 424,427 592,108 709,211 117,103
========= ======== ======== ============== ==============
Reportable transactions include those purchases and sales of the same securities
which, individually or in the aggregate (net of individual reportable
transactions) exceed 5% of the market value of plan assets as of the beginning
of the year. See accompanying report of independent registered public accounting
firm.