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, 2005
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, 2005 are presented herein.
Exhibits:
Exhibit No. 23 - Consent of MCGLADREY & PULLEN, LLP, Independent Registered
Public Accounting Firm
EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
23 Consent of MCGLADREY & PULLEN, LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 29, 2006 BALCHEM CORPORATION
401(k)/Profit Sharing Plan
By: Balchem Corporation,
Plan Administrator
By:/s/ Dino A. Rossi
-----------------------------------
Dino A. Rossi, President,
Chief Executive Officer
By:/s/ Francis J. Fitzpatrick
-----------------------------------
Francis J. Fitzpatrick,
Chief Financial Officer
BALCHEM CORPORATION
401(k)/ PROFIT SHARING PLAN
Financial Statements
and Supplemental Schedule
December 31, 2005
(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 Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4
Supplemental Information
Schedule H, Part IV, Line 4(i) - Schedule of Assets (Held at End of Year) 10
Report of Independent Registered Public Accounting Firm
To The Plan Administrator
Balchem Corporation 401(k)/Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of Balchem Corporation 401(k)/Profit Sharing Plan (the Plan) as of December 31,
2005 and 2004, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2005. 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 audit in accordance with the auditing 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 benefits of the Plan as of
December 31, 2005 and 2004, and the changes in net assets available for benefits
for the year ended December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets held at end of
year as of December 31, 2005 is presented for the purpose of additional analysis
and is not a required part of the basic financial statements, but is
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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audit of the 2005 basic financial statements and, in
our opinion, is fairly stated in all material respects in relation to the 2005
basic financial statements taken as a whole.
/s/ McGladrey & Pullen, LLP
New York, NY
June 2, 2006
1
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
2005 2004
----------- -----------
Assets:
Investments at fair value (note 3) $12,783,087 $10,604,777
Receivables:
Employer contribution 326,090 320,378
Participant contributions -- 72,191
Interest -- 2,207
----------- -----------
Total assets $13,109,177 $10,999,553
=========== ===========
See accompanying notes to financial statements.
2
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2005
Addition to net assets attributed to:
Investment income:
Interest $ 99,953
Dividends 9,752
Net appreciation in fair value of investments (note 3) 1,148,360
------------
1,258,065
------------
Contributions:
Participant 1,009,564
Employer 577,941
------------
1,587,505
------------
Total additions 2,845,570
------------
Deductions from net assets attributed to:
Benefits paid to participants (698,108)
Fees (2,892)
Other, net (34,946)
------------
Total deductions (735,946)
------------
Net increase in net assets available for benefits 2,109,624
Net assets available for benefits at beginning of year 10,999,553
------------
Net assets available for benefits at end of year $ 13,109,177
============
See accompanying notes to financial statements.
3
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
Note 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)
who have 60 days of service, as defined, and are 18 years of age or
older, except those that are currently covered by a collective
bargaining agreement. 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 profit-sharing contributions at the
option of the Company's Board of Directors. Matching contributions are
made in Balchem Corporation Common 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, 2005 and 2004
were discretionary company profit sharing contributions made in
February 2006 and 2005 for the 2005 and 2004 plan years totaling
$326,090 and $301,270, 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.
4
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
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.
Investment Options
Upon enrollment in the Plan, participants may direct employee
contributions to the various investment options administered by
Prudential Retirement Insurance and Annuity Company ("PRIAC") and a
maximum of 10% of a participant's contribution to Balchem Corporation
Common Stock Fund. Employer matching contributions are made in company
stock and are directed to the Balchem Corporation Common Stock Fund
(see Schedule 1). Discretionary contributions are made from the
Company's cash reserves.
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 a fixed rate based on the prime rate plus 2% at the time of loan
origination and range from 6% to 10% at December 31, 2005.
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.
Effective March 28, 2005, the threshold for involuntary distribution of
vested accrued benefits was reduced from $5,000 to $1,000.
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.
5
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
Forfeited Accounts
Forfeited balances of terminated participants' non-vested accounts are
allocated to all active participant accounts as of the last day of the
plan year. Forfeited non-vested accounts totaled $9,196 and $9,534 at
December 31, 2005 and 2004, respectively.
Note 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, 2005 and 2004 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.
The investments are subject to risk conditions of the individual
investments' objectives, the stock market, interest rates, economic
conditions, world affairs and, in the case of the Balchem Corporation
Common Stock Fund, the results of operations and other risks specific
to Balchem Corporation.
Investment Valuation and Income Recognition
Except for the Guaranteed Income Fund, which is stated at contract
value, 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 benefits during the reporting period. Actual results could differ
from those estimates.
6
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
New Accounting Pronouncement
FASB Staff Position ("FSP") AAG INV-1 and AICPA Statement of Position
("SOP") 94-4-1. SOP 94-4, Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined Contribution Pension Plans
("SOP 94-4"), is amended by FSP AAG INV-1 and SOP 94-4-1, Reporting of
Fully Benefit-Responsive Investment Contracts Held by Certain
Investment Companies Subject to the AICPA Investment Company Guide and
Defined Contribution Health and Welfare and Pension Plans ("FSP AAG
INV-1 and SOP 94-4-1"). The financial statement presentation and
disclosure guidance in paragraphs 8-11 of FSP AAG INV-1 and SOP 94-4-1
is effective for financial statements for plan years ending after
December 15, 2006. The revised definition of fully benefit-responsive
in paragraph 7 of FSP AAG INV-1 and SOP 94-4-1 shall be effective for
all investment contracts as of the last day of the annual period ending
after December 15, 2006. If comparative financial statements are
presented, the guidance in FSP AAG INV-1 and SOP 94-4-1 shall be
applied retroactively to all prior periods presented. If an investment
contract is considered fully benefit-responsive under the revised
definition as of the last day of the annual period ending after
December 15, 2006, that contract shall be considered fully
benefit-responsive for all periods presented, provided that contract
would have been considered fully benefit-responsive in accordance with
the then existing provisions of SOP 94-4. The Plan's management is in
the process of evaluating these recently issued pronouncements and has
not yet determined their impact on the Plan's financial statements.
Note 3 - Investments
Investments at December 31, 2005 and 2004 consisted of:
2005 2004
----------- -----------
Cash equivalents, Guaranteed Income Fund $ 2,509,546 $ 2,058,523
Mutual funds 6,500,407 5,729,216
Balchem Corporation Common Stock* 3,446,850 2,483,200
Participant loans 326,284 333,838
----------- -----------
$12,783,087 $10,604,777
=========== ===========
* A portion of the Balchem Corporation Common Stock is non-participant
directed.
The following represents investments that represent 5% or more of the
Plan's net assets:
2005 2004
---------- ----------
Balchem Corporation Common Stock* $3,446,850 $2,483,200
Guaranteed Income Fund 2,509,546 2,058,523
S&P 500 Index Fund 2,203,938 2,261,099
Janus Adviser Balanced Account 942,314 873,746
Prudential Lifetime 40 867,206 703,083
* A portion of the Balchem Corporation Common Stock is non-participant
directed.
7
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
During the year ended December 31, 2005, the Plan's investments
(including gains and losses on investments bought and sold, as well as
held during the year) appreciated in value as follows:
Mutual funds $ 388,145
Balchem Corporation Common Stock 760,215
----------
$1,148,360
==========
Note 4 - Non-participant directed investments
Information about the net assets and the significant components of the
changes in net assets relating to the non-participant directed
investments is as follows:
2005 2004
---------- ----------
Net assets - Balchem Corporation Common Stock* $3,446,850 $2,483,200
========== ==========
Year ended
December 31, 2005
----------------
Change in net assets:
Contributions $ 332,522
Dividends and interest 12,064
Net appreciation 760,215
Benefits paid to participants (102,825)
Fees (457)
Transfers to participant-directed investments (37,869)
-----------
Net increase 963,650
Net assets at beginning of year 2,483,200
-----------
Net assets at end of year $ 3,446,850
===========
* A portion of the Balchem Corporation Common Stock is participant
directed.
Note 5 - Related-Party Transactions
As of December 31, 2005 and 2004, the Plan held 173,442 and 161,063
shares of Balchem Corporation common stock, respectively, with a market
value of $3,446,850 and $2,483,200 at December 31, 2005 and 2004,
respectively. The aforementioned share information has been adjusted to
reflect the December 2005 and December 2004 three-for-two stock splits,
which were effected by means of stock dividends, initiated by the
Company. Certain Plan investments are shares of various funds managed
by Prudential Retirement Insurance & Annuity Company ("PRIAC"). PRIAC
is the trustee of the Plan and, therefore, these transactions are
considered related-party transactions.
8
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
Note 6 - Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event
of plan termination, participants will become 100% vested in their
accounts.
Note 7 - Income Tax Status
The Plan has received a favorable determination letter dated March 22,
1999 from the Internal Revenue Service ruling that it is a qualified
plan pursuant to the appropriate section of the Internal Revenue Code
(IRC) and, accordingly, the earnings of the underlying trust of the
Plan are not subject to tax under present income tax law. Once
qualified, the Plan is required to operate in conformity with the IRC
to maintain its qualifications. Although the Plan has been amended
since receiving the determination letter, the Plan administrator and
the Plan's tax counsel believe that the Plan is designed and is
currently being operated in compliance with the applicable requirements
of the IRC.
Note 8 - Trust Services
Effective April 1, 2004, CIGNA Corporation signed an agreement to sell
its retirement business, including CIGNA Bank & Trust Company, FSB, to
Prudential Financial. As a result of the transaction, CIGNA Bank &
Trust Company, FSB merged with a Prudential owned institution to form
Prudential Bank & Trust, FSB.
With the completion of the merger, trust services previously provided
by CIGNA Bank & Trust Company, FSB are now provided by Prudential Bank
& Trust, FSB, and any investments held by CIGNA Bank & Trust Company,
FSB are now held by Prudential Bank & Trust, FSB.
Note 9 - Subsequent Event
In February 2006, the Company acquired Chelated Minerals Corporation
based in Salt Lake City with 13 employees who were grandfathered into
the Plan.
9
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, 2005
Identity of issue, Description of investments including maturity date, Current
borrower, lessor or similar party rate of interest, collateral, par or maturity value value
---------------------------------------------- ---------------------------------------------------------------- -----------
Guaranteed Income Fund(1) Units of participation in Guaranteed Income Fund -
78,266 units, $32.06 per unit $ 2,509,546
Small Cap Growth / Times Square Units of participation in Small Cap Growth / Times Square
15,906 units, $21.65 per unit 344,392
Oppenheimer Global Fund Units of participation in Oppenheimer Global Fund
5,806 units, $69.43 per unit 403,105
Mid-Cap Value / Well Management Units of participation in Mid-Cap Value / Well Management
1,440 units, $18.20 per unit 26,220
Mid-Cap Growth / Artisan Units of participation in Mid-Cap Growth / Artisan
35,090 units, $10.98 per unit 385,386
Prudential Lifetime 60(1) Units of participation in Prudential Lifetime 60 -
8,158 units, $15.06 per unit 122,871
Prudential Lifetime 50(1) Units of participation in Prudential Lifetime 50 -
5,893 units, $15.06 per unit 88,755
Prudential Lifetime 40(1) Units of participation in Prudential Lifetime 40 -
57,782 units, $15.00 per unit 867,206
Prudential Lifetime 30(1) Units of participation in Prudential Lifetime 30 -
18,729 units, $15.27 per unit 285,954
Prudential Lifetime 20(1) Units of participation in Prudential Lifetime 20 -
4,993 units, $15.23 per unit 76,030
Large Cap Growth/Turner Investment(1) Fund Units of participation in Large Cap Growth/Turner Investment
22,133 units, $12.13 per unit 268,513
Large Cap Value/AJOFund(1) Units of participation in Large Cap Value/AJO Fund -
24,199 units, $13.58 per unit 328,518
Janus Adviser Balanced Fund(1) Units of participation in Janus Adviser Balanced Fund -
29,454 units, $31.99 per unit 942,314
Intern Equity / Julius Baer Units of participation in Intern Equity / Julius Baer
5,699 units, $19.20 per unit 109,430
Goldman Sachs Small Cap Value Units of participation in Goldman Sachs Small Cap Value
1,020 units, $46.84 per unit 47,775
Dryden S&P Index Fund(1) Units of participation in Dryden S&P Index Fund -
30,414 units, $72.46 per unit 2,203,938
Balchem Corporation Common Stock(1)(2)(3) Shares of Balchem Common Stock -
173,442 shares, $19.87 per share 3,446,850
Participant loans(1) Interest rates range from 6.00% to 10.00% 326,284
-----------
Total $12,783,087
===========
(1) Parties-in-interest
(2) The cost basis of the Balchem Corporation Common Stock Fund at December
31, 2005 was $1,389,455.
(3) All per share information has been adjusted to reflect the December
2005 three-for-two stock split (effected by means of a stock dividend)
initiated by the Company.
See accompanying report of independent registered public accounting firm.
10