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, 2001
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
PO Box 175
Slate Hill, NY 10973
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, 2001 are presented herein.
Exhibits:
23. Consent of KPMG LLP, independent auditors
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits -
December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 2001 and 2000 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 G, Part III - Non-Exempt Transactions 11
Independent Auditors' Report
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, 2001 and 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the changes in net assets available for plan
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
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, 2001 and non-exempt transactions for the year
ended December 31, 2001 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 basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
------------
KPMG LLP
June 6, 2002
Short Hills, New Jersey
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
---------- ---------
Assets:
Investments $5,886,820 4,815,052
Participant loans 104,691 137,970
Receivables:
Employer's contribution 274,806 217,731
Participants' contributions 35,880 32,786
Interest 657 1,012
---------- ---------
Total assets $6,302,854 5,204,551
========== =========
See accompanying notes to financial statements.
2
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2001 and 2000
2001 2000
----------- -----------
Additions:
Investment income (loss):
Interest $ 57,412 39,785
Dividends 3,512 48,999
Net appreciation (depreciation) in fair value of investments 107,259 (267,656)
----------- -----------
168,183 (178,872)
----------- -----------
Contributions:
Participants 863,038 533,311
Employer 464,298 350,275
----------- -----------
1,327,336 883,586
----------- -----------
Total additions 1,495,519 704,714
----------- -----------
Deductions:
Benefits paid to participants (365,943) (400,433)
Fees (2,345) (2,105)
Other, net (28,928) 9,559
----------- -----------
Total deductions (397,216) (392,979)
----------- -----------
Net increase in net assets available for plan benefits 1,098,303 311,735
Net assets available for plan benefits at beginning of year 5,204,551 4,892,816
----------- -----------
Net assets available for plan benefits at end of year $ 6,302,854 5,204,551
=========== ===========
See accompanying notes to financial statements.
3
BALCHEM CORPORATION 401(k)/PROFIT SHARING PLAN
Notes to Financial Statements December 31, 2001 and 2000
(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. 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 15% of pretax annual
compensation, as defined. 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. The employer matching
contributions equal 35% of each participant's elected contribution up to
$3,500, and the Company may make discretionary company profit-sharing
contributions. 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, 2001 and
2000 were discretionary company profit-sharing contributions made in
January 2002 and 2001 for the 2001 and 2000 plan years totaling $263,202
and $207,994, 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.
4 (Continued)
BALCHEM CORPORATION 401(k)/PROFIT SHARING PLAN
Notes to Financial Statements December 31, 2001 and 2000
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 fund offers predictability of investment return. The
fund invests primarily in intermediate-term bonds and commercial mortgages
within Connecticut General Life Insurance Company's general account.
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 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.
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.
5 (Continued)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2001 and 2000
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 the prime rate plus 2%.
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.
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 $10,786 and $8,245 at December 31, 2001 and
2000, 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, 2001 and 2000 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 and world
affairs.
6 (Continued)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements December 31, 2001 and 2000
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.
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.
Recent Accounting Pronouncements
On January 1, 2001, the Plan adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
as amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of SFAS No. 133," and in
June 2000 by SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities" (collectively, SFAS No. 133). The adoption of the
above statements did not have a significant impact on the financial statements
of the Plan.
(3) Investments
Investments at December 31, 2001 and 2000 consisted of:
2001 2000
---------- ---------
Cash equivalents $1,048,856 704,065
Mutual funds 3,383,997 3,338,410
Common stock 1,453,967 775,577
Participant loans 104,691 134,970
---------- ---------
$5,991,511 4,953,022
========== =========
The following investments individually represent 5% or more of the Plan's
net assets:
2001 2000
---------- ----------
Balchem Corporation Common Stock $1,453,967 775,557
Guaranteed Income Fund 1,048,856 702,085
Janus Adviser Balanced Account 642,395 556,902
S&P 500 Index Fund 1,655,841 1,849,213
Janus Adviser Worldwide Growth Account 324,734 408,189
Cigna Lifetime 40 420,468 428,452
========== ==========
7 (Continued)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2001 and 2000
During the years ended December 31, 2001 and 2000, 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:
2001 2000
----------- -----------
Mutual funds $ (422,541) (541,726)
Common stock 529,800 274,070
----------- -----------
$ 107,259 (267,656)
=========== ===========
(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
--------------------------
2001 2000
---------- ----------
Net assets - Balchem Corporation
Common Stock $1,453,967 775,577
========== ==========
Year ended December 31
--------------------------
2001 2000
---------- ----------
Change in net assets:
Contributions $ 241,747 199,829
Dividends 4,076 2,184
Net appreciation 529,800 274,070
Benefits paid to participants (79,012) (32,400)
Fees (825) (199)
Transfers to participant-directed
investments (17,396) (17,046)
---------- ----------
Net increase 678,390 426,438
Net assets at beginning of year 775,577 349,139
---------- ----------
Net assets at end of year $1,453,967 775,577
========== ==========
A portion of the Balchem Corporation Common Stock Fund is participant-
directed.
8 (Continued)
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) 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.
(6) 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. The Plan's administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
(7) Withdrawn Participants
Amounts allocated to participants who are no longer employed with the
Company but have not elected to withdraw from the Plan were $768,944 and
$826,393 at December 31, 2001 and 2000, respectively.
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, 2001
Market
value
--------------
Guaranteed Income Fund $1,048,856
Janus Adviser Balanced Account 642,395
Cigna Lifetime 60 9,445
Cigna Lifetime 50 3,536
Cigna Lifetime 40 420,468
Cigna Lifetime 30 38,711
Cigna Lifetime 20 1,071
Large Cap Growth/Morgan Stanley Fund 26,801
S&P 500 Index Fund 1,655,841
Aim Value Account 44,798
Large Cap Value/John A. Levin & Co. Fund 60,332
INVESCO Dynamics 87,763
Small Cap Growth/Times Square Fund 68,102
Janus Adviser Worldwide Growth Account 324,734
Balchem Corporation Common Stock* 1,453,967
Participant loans (interest rates range from 9.25% to 11.50%) 104,691
----------
Total $5,991,511
==========
* The cost basis of the Balchem Corporation Common Stock Fund at December 31,
2001 was $886,840.
10
Schedule 2
BALCHEM CORPORATION
401(k)/PROFIT SHARING PLAN
Schedule G, Part III - Non-Exempt Transactions
Year ended December 31, 2001
(a) Identity of party involved: Balchem Corporation
(b) Relationship to plan, employer, or other party-
in-interest: Plan Sponsor
(c) Description of transaction including maturity
date, rate of interest, collateral, par or maturity
value: The Plan Sponsor inadvertently held
employee contributions from the June 1,
2001 and July 31, 2001 payroll cycles. The
June 1, 2001 contributions were not de-
posited into the Plan until June 28, 2001 and
the July 31, 2001 contributions were not de-
posited into the Plan until August 27, 2001.
Total contributions amounted to $89,066.
The Plan Sponsor will file the Form 5330
and pay the excise taxes on the prohibited
transactions. The Plan Sponsor will also
pay the estimated lost earnings on these
employee contributions as a contribution in
2002.
(d) Purchase price: N/A
(e) Selling price: N/A
(f) Lease rental: N/A
(g) Expenses incurred in connection with
transaction: --
(h) Cost of asset: N/A
(i) Current value of asset: Unknown
(j) Net gain (loss) on each transaction N/A
11
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 28, 2002 BALCHEM CORPORATION
401(k)/Profit Sharing Plan
By: Balchem Corporation,
Plan Administrator
By: /s/ Dino A. Rossi
-------------------------
Dino A. Rossi, President,
Chief Executive Officer
Exhibit 23
EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
23 Consent of KPMG LLP