Thank you. Ladies and gentlemen thank you for joining our conference call this morning to discuss the results for Balchem Corporation for the period ending March 31, 2012.

My name is Frank Fitzpatrick, Chief Financial Officer and hosting this call with me is Dino Rossi our Chairman, President and CEO. Following the advice of our counsel, auditors and the SEC at this time, I would like to read our forward-looking statements.

This release does contain, or likely will contain, forward-looking statements, which reflects Balchem’s expectations or beliefs concerning future events that involve risks and uncertainties.

30 AM Eastern Time.

I will now turn the call over to Dino Rossi our, Chairman, President and CEO.

Thanks Frank. Good morning ladies and gentlemen and welcome to our conference call.

We are pleased to report first quarter net earnings of $9.3 million on record consolidated sales of $76.2 million for the quarter ended March 31, 2012. These first quarter sales of $76.2 million were approximately 4.4% greater than the $73 million result of the prior year comparable quarter, and a 9.3% increase sequential from Q4 2011.

In the quarter our Specialty Products segment generated quarterly sales of $12.3 million an 8.5% improvement over the prior year quarter. Principally a result of increased sales volumes of packaged ethylene oxide and propane oxide in the quarter and in the Nutrition & Health at $53.2 million new quarterly record up 5% over the prior year comparable quarter as we realized another very strong quarter for our ANH ruminant sales which were up 30%.

This strong performance was partially offset by lower sales of our basic choline and industrial products which were down approximately 1% in the quarter but up 10% sequentially.

Food, Pharma & Nutrition at $10.7 million closed off approximately 2.7% our strength in the human grade Choline product which was up 26.5% was offset by lower quality sales of encapsulated products sold into the food market.

This revenue result also reflects a $215,000 decline in the calcium product line or 2% of the 2.7% decline which was sold late in 2010.

As previously noted consolidated net income closed the quarter at $9.3 million up from approximately $8.9 million in the prior year quarter for an increase of approximately 4%. This quarterly net income translated into diluted earnings per share of $0.31 a new first quarter record as compared to the $0.30 we posted in the comparable quarter of 2011.

Looking between the top and bottom line you will see there are consolidated gross profits of $21.2 million were equal 27.8% of sales in the quarter. This level although a modest decline as a percent of sales from the prior year quarter, does reflect gross margin improvement in the Food, Pharma and Nutrition segments.

These improvements were however offset by lower gross margins in our special ARC products and Animal Nutrition and Health segments, principally a result of higher cost of certain key raw materials. These raw material increases larger petroleum derivatives particularly affected unfavorably our ANH choline sales.

As mentioned in the last conference call, certain raw material costs continue to rise in the quarter with few leveling out, and while some increases were passed on to the customers, additional cost increase have been realized and our current view is that our businesses are likely to remain affected by the entire cost in 2012. We continue to work on operational efficiencies however they were more than offset by the noted raw material cost increases and hence the slight decline in gross margins noted.

At the consolidated operating expenses level, you will notice expenses totaling $7.5 million for the quarter which equal 9.8% of sales versus the same spend in the prior year, but at the 10.2% level. This spending level reflects normalized levels as we continue to leverage half of our existing SG&A infrastructure and exercise tight control over all controllable operating expenses.

Overall with solid bottom-line quarter especially considering the escalation of raw material costs, consolidated earnings from operations, percentages remain strong and finished at 17.9% of the sales or $13.7 million for the quarter.

Our effective income tax rate for the first quarter is up 2012 and ‘11 with 32.3% and 33.4%, respectively. This decrease in our effective rate for the quarter was principally a result of favorable adjustments related to changes in state income tax proportion.

Our annualized effected income tax rate for all of 2012 is currently estimated to be approximately 32.5%. Net income of $9.3 million translated to $0.31 per diluted common share, which is 3.3% ahead of the competitive prior year quarter.

These results generated approximately $16.1 million of EBITDA in the quarter which translates into $0.53 per diluted share and when including our non-cash stock based compensation charge, we generated $17 million of EBITDA in the quarter equaling approximately 22% of sales.

At March 31, 2012 our outstanding borrowings were approximately $1.2 million but 0 net of our cash balance of approximately $121 million. We continue to aggressively manage all areas of working capital driving strong cash flow, improving cash earnings and generating quality organic results from our core businesses.

In an effort to detail our consolidated results better for our shareholders, I am now going to have Frank Fitzpatrick discuss the ARC Specialty Products and the Food, Pharma and Nutrition segment.

Thank you, Dino. The ARC Specialty Product segment posted sales of approximately $12.3 million or an 8.5% increase over the prior year comparable quarter.

This increase was principally the result of strong sales of ethylene oxide from medical devices old aging and increased volumes of propylene oxide and nutmeat fumigation.

Our quarterly business earnings increased 8.1% to $4.7 million versus the prior year comparable quarter. This increase is largely a direct correlation to the improved sales result of propylene oxide.

Increased volumes sold to ethylene oxide product and as previously reported higher leverage selling prices on certain products. This increase selling prices were implemented to help offset key raw material cost increases.

However our results were again adversely impacted by additional cost increases. We continue to monitor raw material price escalations and seek to implement price increases within contractual guidelines.

For the quarter, the Food, Pharma and Nutrition segment realized a 2.7% sales decline to $10.7 million from the prior year comparable quarter. Business segment earnings of $2.7 million were however up approximately 7.8% over the prior year quarter.

As stated in this morning’s press release we realized double-digit growth in sales of our human choline products for nutritional enhancement. We continue to focus on building consumer awareness of the benefits of choline, positioning choline with nutritional and pharmaceutical companies as an essential ingredient with excellent therapeutic benefits for all ages and are now effectively utilizing the 3 structured function claims awarded to Balchem by EFSA in Europe.

Food sector sales did have a slower quarter as compared to a very strong 2010 first quarter. As in the past, results for this segment continue to reflect the roller coaster effect of pipeline sales, inventory level management and delayed marketing initiatives.

Our growth drivers do however remain intact for this sector and food did show modest growth on a sequential basis. Overall we expect continued revenue and earnings growth year-over-year in 2012.

Switching briefly over to the calcium product line, as previously reported late in the fourth quarter of 2010, we did successfully close on the sale of this business line. We exited our leased facility at the end of the second quarter in 2011.

Exiting this business line had an unfavorable impact on our sales level in this segment for the quarter however did as expected nicely contribute to improved operating income for the SBM segment in the quarter.

Our pharmaceutical delivery development efforts continue. In the quarter we did not generate any R&D milestone payments however with the license fee of our technology concluding a Phase III clinical trial we await the un-blinding of this trial and are working with them in support of their NDA fillings.

In the near term this sector remains a net expense to the business segments.

I’ll now turn the call over to Dino to for him to discuss the Animal, Nutrition and Health segment.

Thanks Frank. In the ANH segment we realized sales of $53.2 million, an increase of $2.5 million or 5% as compared to the prior year comparable quarter.

Within this segment ANH ruminant products sales realized 30% growth in the prior year comparable quarter as excellent product performance and their economics continue to support greater demand for our products.

This increase is a principally result of improved volumes as the medium short out NM are protected our ruminant protected amino acid. And we assure our ruminant protected choline.

We continue to be pleased with the progress we have made on the new AminoShure launches as more prospective customers from the products as experiencing positive results.

These overall increases clearly coincide with the diary economy that has remained stable, however we continue monitoring this very closely as potentially higher feed prices could pressure milk producer economics. Despite rising feed prices milk production continues to advance as milk up what is expected to rise again in 2012 now also in support of milk powder exports to China.

US dairy herds are also expected to decline slightly with most of the contraction coming in the second half of the year. But improved milk production and output per cow are expected to more than offset this decline in the herd count.

To support this growth plans for new manufacturing facility in Allegheny County, Virginia were recently announced. The plant expansion were more than double, output capacity for the AminoShure product leveraging off of our new innovative and encapsulation technology.

The Virginia plant expansion is scheduled to be commissioned later to this fall.

As noted in our press release, our global fee grade in choline product sales were down 4.9% from the prior year comparable quarter. Volumes sold in these markets are strongly influenced by the dynamics of our customer base predominantly the poultry production industry.

As previously reported data from USDA broiler statistics projected that broiler replacements and in excess would be lower for the first quarter, due to continued high grand prices, along with only minor improvement in the domestic economy. And we did anticipate lower volume as a result of this.

The current 2012 USDA forecast for broiler meat production is 1.7% lower than in 2011, representing a slight improvement from the prior forecast. We continue to evaluate expert sales opportunities for the poultry market, but found Q1 to present a very challenging export market combining raw material cost increases and foreign competitor activities.

Exports of liquid and dry choline from all of our plants declined slightly due to the heightened level global competition. In the coming quarters, we may elect to be more aggressive in seeking to win additional business, depending upon the current cost and market conditions.

Sales of industrial grade products and derivatives rebounded this quarter, improving 7.5% over the prior year comparable quarter, and on a sequential basis, improved 38%. The sequential improvement came from sales of methylamines, derivatives and choline for industrial applications, including gas frac-ing, where slightly lower average selling prices in this first quarter were more than offset by improved volumes sold.

We continue to see solid sales of choline derivative products for various industrial applications in North America, especially for the gas frac-ing opportunities here in the other part of the second quarter and we remain fairly confident that these products will continue to show strength in 2012 driving increases in sales and profitability.

We will continue to evaluate these industrial opportunities with other core technology to determine how we can drive innovative solutions into this market and derive the most positive value.

Earnings from operations for this entire segment were $6.2 million as compared to $6.4 million in the prior year comparable quarter. These earnings were unfavorably impacted by increases in petrochemical commodities used to manufacture choline.

These key raw materials rose again in the quarter, and while some were passed on to customers, our pricing initiatives in the quarter were not enough to offset all of the cost increases.

Additional price increases have been and will be implemented in the second quarter as our businesses are likely to remain affected by these higher costs for the balance of 2012. The profitability of the ANH segment continues to be achieved with a constant reevaluation of global raw material costs, product re-formulation, currency review and the ultimate ability to meet market needs from our various global facilities and transload sites.

The opportunity to capitalize in this fashion is a direct result of our effective integration of acquisitions, growth strategies and the ability to drive cost out of our business model.

In July last year we announced the beginning of commercial production of a new encapsulation technology targeted to growth opportunities in the ruminant animal market. I am extremely pleased with the uptake, the rate of uptick these products have had in the marketplace and I am confident they will continue to drive incremental sales growth for us.

Our investment in a new plant facility announced earlier this week, will provide Balchem with world class manufacturing capabilities that will allow us to match the rapidly growing demands for these products and the technology in the animal nutrition and health industry.

With a bulk of feed grade choline predominately going to the poultry and swine markets, we are very sensitive to continued economic pressures on the large production animal integrators. Feed rash and costs have modestly corrected near-term and retail poultry prices have stabilized keeping pressure on profitability for this global end market.

As noted in previous calls, we had time to see a revenue roller coaster affect quarter to quarter in the various products or market sectors. We remain committed to growth as we look to continually expand our product offerings and move into new geographies.

We will continue to strengthen our global growth platform and are confident that more business will be generated based on the unique portfolio of products that we offer to markets we serve. Our business continues to create good balance yielding profitable growth opportunities to the various market challenges of any single segment or product line.

We remain focused on helping our customers generate reinvestment level returns making money in this tough economy while maintaining our own operating discipline.

Overall, we continue to build the financial strength of the company managing the working capital base aggressively and yielding improved financial results. In near-term we remain focused on implementing operational and logistic improvements, new product development and new product introductions.

We also continue to explore alliances, acquisitions and/or joint ventures to continue building and leveraging our technology and strong human asset base.

This now concludes the formal portion of the conference. At this point I will open the conference call for questions.

I think what you said and forgive me I missed it. But I think what you said last quarter was there was an increase in the foreign competition in the choline industry has that gone away?

It has not gone away I think and I did reference that in the last quarter. I think if you recall correctly till we talked about reducing some pricing and we did do that.

And with that we’ve clearly seen some return of the volume that had been displaced into some of that foreign competition.

Do you think - I’m sorry - now would you think with the reduction in pricing that I mean is it going to be - will it be I assume the industry soon and do you think or do you not know?

Again could you repeat that point?

Well you’ve reduced prices and that’s increased your volumes but now with the lower prices does it make it that less profitable for the foreign competitors to the extent that they’ll leave.

Well I don’t know about leave but I think it makes us certainly a lot more tighter. I talked before about pricing philosophies and business models and at the moment I said not sustainable.

And I think I was right and I don’t know that they will ever go away to be honest with you, but I do think that all things being equal for very competitive with and I think you are going to find North American market that we just assumed do business with us.

Okay. And then just switching gears a little bit with everything that is going well with very end market is there any affect at all by report of mad cow disease in California having like we can demand or just having negative effect on demand for your products?

No. I mean we saw in that report I think it was really quite a narrow incident if you will, but certainly no impact at all.

What if - if it were to spread would be having an impact was it just I mean is that a concern mad cow disease?

I think it’s - mad cow disease has been out there for number of years, but honestly and I won’t say that it is ramping up there at all, don’t let me mislead, but - clearly if you were to take off in a large area, whether that have an impacted absolutely. But I don’t think that’s going to happen either.

Couple of question on the industrial choline, how it’s bounced back to so strongly, can you give us any flavors to why is your new region, new application, new formulations or just new customer is there any inside into what’s driving that - well sequentially - as I recall the fourth quarter had some issues with it, but separate from that it just seems like it’s a very strong rebound.

Yes. I think that in fact as it is just in the questioning here before.

The price reduction I think is played through and we’ve eluded to the fact that the volumes really rebounded very nicely getting right back into what we saw happening in Q4 and perhaps even levels that were pretty consistent throughout the balance of last year.

So, I think the price correction was the right move, I think it’s kind of – we’ve managed to leverage that and reestablish our position in this North American market and I think that’s what you’re seeing playing through here in Q1.

I think it is also in terms of if you follow on gas frac-ing, you know that there is going to be some curtailing on the gas side of things, natural gas side of things because a lot of reasons are there including cheap natural gas which interestingly enough is not rippling through to petrochemical industry yet but that clearly is causing shift in - whether drilling from gas to oil because of the oil price. So, clearly we’ve worked our way back into that space pretty quickly and feel good about that.

What I’d like to sit here and think is we’re going to see some reductions in some of these key raw materials leveraging after that cheap gases out there hopefully that’s going to triple into the - I’m going to say upstream products in the industry.

Okay. Yes, because with the decline in the dry natural gas drilling and frac-ing that’s why it came as a bit of surprise, it seems if there might be some other dynamics might be occurring in the industry, another geography or perhaps different - maybe it’s more useful in some of the oil frac-ing are you seeing anything along?

Well, yes, I can’t point to any new shale play if you will that is accounting for that, clearly I think the same issues are out there in certain of these shale plays and the actual play that’s there that’s being dealt with that has an impact on whether or not choline is used and or at what rate its used all of those things can vary, but we can’t really point to any one shale play that’s being developed I should say more aggressively than what we’ve seen over the past year.

And so it’s safe to assume that it’s still primarily for shale plays for the choline chloride for frac-ing not so much for other plays or oil?

I would say that’s correct.

Okay. And for the animal choline I mean that being such a huge volume part of the revenues for the whole company and with pricing changing there, I know in the last couple of years there’s been as I recall some shifting in the manufacturing to improve the cost structures or anything on those sides, I know that you’ve made some big strides there but is there anything else that you can see as a possibility there or are we really at the lowest production price we could be?

Well if you knew me, I’d say we are never as low as we can be. So I think - we continue to try and take cost out everywhere we can and with that said I’ll say there is always opportunity, but I think the key issue here is really that the demand in the marketplace which our focus is solely North America and that not to say there is no export opportunity but the North American market in and of itself I think is one where there - there’s still soft with poultry production.

And we mentioned that egg sets are projected now to be off for the year 1.7% year-over-year above the USDA. That for me is really the key driver here.

And quite honestly if they could nudge that up a little bit and personally I think that’s probably going to have to come through exports more than anything. Then all of a sudden I think the demand would go up more volumes through the facility, drive cost down and leverage all of those - all of the other positions that we have.

I think that’s going to have to be the key requirement there to see significant upside from there.

Okay. And the rumen that’s doing so well is there - there really is no competition there.

So I mean so it’s sort of hard to talk market share but so it seems like you’re really dominating in that carrier but in the U.S. Well I’m wondering is the - are these products also sold in Europe?

Well let’s be clear. There is some competition for sure for these products - and if probably I think with each passing quarter we see one or 2 new players looking to get into the space whether the product is as good as is always a question mark.

Bur we’re seeing some competition there. I think if you look at the percentage of market penetration even just North American alone we’re still under 10% market penetration.

So it’s a developing market if you will, so we feel good about the upside opportunity from that standpoint.

We are starting to move some product into Europe some over into Asia and other areas of the Far East. So definitely there are markets over there.

And I think that those are going to continue to be burgeoning markets as well. Because I would say that 9 times out of 10 you’re going to find that there are not as sophisticated as the US dairy industry is with technology into our number of the other factors that play through in decision to adopt the product likes these.

Okay. And just 2 more items on the Food, Pharma and Nutrition there is been softness in the food encapsulated products into the food line.

Is there anything to driving that or it just certainly seems like that would be more stable and perhaps increasing as new food products are reduced? Is there been growth of new food products or?

Well, yes, I think that I mentioned the last time that the lifecycle and new food products that are out there, I think get shorter and shorter there is a lot of new products coming onto the market and with that usually means product went-off the market.

And so the key for us to keep the very rigid pipeline we talked about this before and trying to get some of the conversion. The good news is on the food side, sequentially, we did see some growth little over 2% from Q4 to Q1.

So we’re seeing some new products moving into the space, but clearly on the comparative with prior year quarter. We’re still lagging there, because of some products that have been discontinued in the space.

But we still sold pretty good I can tell you I mean we studied this pipeline of opportunity that we have here regularly.

And so pretty comfortable that there still is definitely really good upside opportunity here, we’re doing very well on Europe now. We put on a new few new distributors over there added another person on the ground over there and really.

So that’s going to be a good move for us as well, where we probably have less than 10% of what we have in the North America, in Europe and it is a much larger market. So look to develop that more - I’m going to say quickly as we move forward as well.

And on the human choline, what kind of reception are you getting from the food companies and beverage companies, are they still wanting to test whether or not choline is beneficial ingredient or they just trying to decide which products to put it in. Can you give us any flavor for where those discussions are?

Sure. Yes, there is a lot of things going on, on that front and clearly the numbers are up quarter-over-quarter both on a comparative as well as sequential.

So, we’re seeing the product be adopted but in included to this it’s being trialed in a lot of different applications as well. I think that there is - it’s being looked at in beverages, different foods, supplements and the good news is that I think that the structure function claims that we are awarded are good news so it tells you there is a value there.

A lot of the challenges revolve around getting the product included in that finished product if you will. I think anytime you can change the formula whether it’s in a functional beverage and/or functional food or straight up food, the product is being used even for as a sodium replacement type product today.

So, there is a lot of new opportunities bubbling up here and clearly more and more information coming out about the benefit of it.

It’s more question of getting the products worked into that final food forum if you will and that it just takes time. And sometimes we are not only selling choline as is but an encapsulated version of choline too so that you don’t get preliminary interactions if you will in some of these foodstuffs.

Okay. So it’s safe to say that we should probably see or expect to see some products with choline as an additive or as an ingredient?

Well hopefully you mean on the package itself?

Yes on the package itself yes.

Yes hopefully I mean, we always try to position to get them to if you will in some fashion declare that we’d like to be on the front label rather than on the back, but certainly yes we certainly expect and are trying to continue to position for that.

Okay. And just one last question on general margins with the way raw material price increases in prior times you’ve been able to pass that on, is this still the situation but there is just a lag factor occurring?

Yes absolutely and I think - so there’s definitely that and I think that we are also looking at the end markets that we are playing into and perhaps some of the challenges that might be there because I mean if we just simply try to push it through in its entirety, I know, I mean we hear the cries of the industry if you will about cost increases continuing including grains and what not. So we are certainly sensitive to that but still have, I think a pricing model in place.

It’s very valid where we are simply trying to preserve our position, but I think along with that the incentive gets to the end market as well.

I am a little confused at the opening you mentioned that reduced prices increased volume. And then also at the - you said you have been raising prices as you did as you said the last call.

And constantly playing catch up, those 2 things seem to be at odds. And notwithstanding any of that is it not correct that there will come a time when prices - when expenses, the costs are not rising.

And you’re against due to these increases such that your margins will then rise dramatically.

Well so I think your observations are correct and depending on the certain end markets where we talk about price decreases as well as price increases was all valid in the period. So while it may be a little confusing I think based on the product mix is and whatnot exactly what happened.

And when you talk about the impact on margins certainly volume play through very, very keenly especially when you start talking about more of the commodity choline and leverage points that you get off that.

So we’ve taken all of that into consideration as we’ve made those adjustments. I think the other point there about rising cost.

Yes, we’re always playing catch up typically at a certain moment that will flip. And we would look to see if some margin improvement happen in that window.

But typically our margin too margin model I would say also at probably - the following quarter or the following quarter after that too. Some of that will start to triple back into the marketplace.

So but you’re right at a certain moment there margins should increase.

And I’m kind of chuckling because we’ve seen raw material cost fall every quarter now. For I think 8 quarters, which is quite unusual, but it’s real.

And so that’s been - I’m not saying difficult to accept, but especially when it’s petrochemicals and most of those are natural gas drivers, while we talk about $2 to $3 natural gas. We’re not seeing a triple into the market very much, but hopefully that will happen that should happen, but your observation is right, margins should improve however at a certain moment, I think it will stabilize and but again that stabilization will be based on the raw material cost coming down at that momentum then to passed that on to the market.

So implied there is when you raise prices they stick regardless of costs declining?

Well, I think within reason they do, but there is also better to get back on given the model.

Shift gears CureMark now has a whole array of products in the works - in the works and diseases they’re focusing on for example the CMAT has led to their line CMPK, it’s just that I think it’s the same stuff it’s just aimed at Parkinson’s disease. Are you making the, doing the encapsulation of all their sprinkles for all their separate so called pharmaceuticals or are you just on the Autism one?

Yes. I mean right now our focus is on the Autism.

It depends on the substrate that they are looking to use on these other - I’m going to say diseases work that they are doing. I’m not going to sit here and pretend that I know all of its products they are working with but our focus is, including work with them on the products that’s out there for Autism.

And clearly we have a good relationship with them and from time-to-time we are quizzed about other products if you will from a encapsulation standpoint.

So, we continue to work with them and we will continue to work with them likely even outside of the Autism product that’s been developed today. So, I’d like to think that, if there is a requirement for some of these products and I can even sit here and say that there is for microencapsulation that we would get a favorable loss given I think the experience to date.

By the way, why is it - I think Frank said that it’s costing you something at the moment. Why would that be since they reimbursed you for cost for the contract?

Well, I think there is different moments of timing on the reimbursement but we continue to do work as they do their NDA filing right now and so a lot of that was just timing issues.

Have they filed their NDA?

I think they are working on the file...

I don’t think they have right...

And I think it’s going to be involving NDA as well.

So what does that mean in practical terms when do you - will see a product?

Larry, I wish I could answer I don’t as I said before we are not the marketing arm here.

I understand.

So, I mean, I honestly can’t say - and I am not sure if they could tell you and that’s really for sure right now giving everything else going on. Hopefully, it won’t be too far off.

Okay. One other point, your - the sales that you are making outside the U.S.

are they in choline, are they being shipped from Italy and/or are you shipping from the U.S. and because the question in my mind is currency exchange becoming foreign exchange becoming a material factor?

We are shipping export from both countries for sure and certainly currency is examined regularly in terms of bidding on the business and who is going to happen to better cost position given currency fluctuations for sure.

What about currency’s effect on our financial statements?

It was very minimal.

Right. It’s been that to date that’s what I am asking is it - is it going to become material?

Well I think that would likely - it will be a function, Larry, ultimately our ability to just compete in the export space from a raw material perspective here in the United States. Italy basically is in a near volume capacity state right now; their business is still most drove denominated business which we translate over on a quarterly basis.

So I think that the dynamics of currency are kind of what they are right now, I don’t anticipate that out of North America, we would be looking to push a lot of product into Europe base in euro denominated countries. So if anything we’ll sell down opportunities exist in South America.

Excuse me which are typically U.S. dollar denominated sales.

And how - what’s the thinking or, if you’re at the point of a plan production in the Far East?

Well we continue to explore that opportunity is what I’d say. I think it’s we definitely view it as a developing and growing market would like to be there.

And we’ll continue to try and get something down there.

Do you know I guess I was a little confused by some of the answers to some of the questions. So maybe I’d just take another cut at it.

It sounded from your prepared remarks that you had been a little bit sharp around price. And by that I guess I am probably interpreting that to mean you are taking prices up less.

You are still - prices I assume are still going up but maybe going up less.

To answer that Tim, they are going up less than the raw material costs are going up. So if that adds any clarity to it.

Yes it’s not going up as much I think on the flipside there are 2. We had taken prices down in Q3 and Q4 but we had especially on the industrial side where we had implemented a pretty significant price increase.

And so you’re seeing the benefit of that coming through here in Q1.

Got you. So what I’m trying to understand and I think I understand the question based on what you just said that.

But let me just ask it anyway. Is sometimes it takes a while for you to get to the economics that you want to get to in a rising price environment those price increases - don’t come through as fast as the cost increases.

Right.

Is the P&L that we saw for the first quarter pretty close to a steady state P&L or does it - is it a P&L on its way to a different place?

Well, I mean certainly, if you run percentages you’ll see that it’s off, maybe from where we were in Q2 or even Q3 of last year. And I think part of that clearly has to do with the levels of raw material cost increases that you just mentioned.

And I still sit here and believe that as a certain moments the benefit that everybody talks about and we believe in that will keep our natural gas is going to start to triple through this economy. I would say at this moment it certainly has not and at least in petrochemical, petrochemical derivatives.

So hopefully that will start to happen here at which moment we’ll see some improvement in those margins. But I think that’s going to be the - that needs to be the major contributing factor.

And with that said, I think it has positioned North America to be one of the lowest cost producers of chemicals on a go forward basis.

But so hopefully that’s going to happen and the other part is improved volumes certainly deliver higher levels of efficiencies to our plant operations. So that should help a bit it’s well, but I would say at this moment I’m a bit yet optimistic that there is more margin in there and we’re going to do everything from a production efficiency standpoint and drive that.

And then I think the balance is really going to have to come out of some raw material cost reductions.

But at the same time I think you did say earlier in your prepared remarks that you expect these impacts to be with us through most of 2012, i.e. slight margin pressure?

Yes, I think that, I think that, that’s very real. I mentioned I think too that there has been some leveling off, maybe even are some that are backing off a little bit but order magnitude nowhere near what they have ramped up.

So, and perhaps that’s me being pessimistic because I would have expected to have already seen some of these costs declined and haven’t seen that. So, at this moment, I am not sure I can point to any drivers in the - in those supply chain positions that are going to really push decreases through in any significant way.

So, that’s me hedging a little bit rather than trying to predict significant declines even though I could probably argue that it should start to happen. But, maybe given where we are today, I’m reluctant to promote that too aggressively.

Cash flows, I think they are very good and we have a better cash balance than we had previous quarter despite giving out the annual dividend. Okay, a couple of things, want to comment the natural gas prices of course will come down it’s not a question of if it just went and when will be this year just a question when.

The other question I have is about the new plant, what would you anticipate when this is up and running which you apparently scheduled for the fall, what is that going to do for the margins?

Well I think that with any new plant like that, you got to get up to certain volume levels to really achieve kind of your efficient operating rate, but I would say right now is that we need the new capacity. It’s not as if we are going to displace capacity and move it there, our expectation is that this isn’t going to be net additive capacity and volume produced sold into the marketplace.

So where clearly the ruminant animals’ products carry a higher margin level than that the basic choline does. So overall that too should help improve overall margins of the business.

And we think we have a good value proposition out there with the price points that we have in the states today and with the higher end of technology associated with those products, our expectation is that we should be able to maintain that, those kinds of price points.

So I think overall it should lead to improved margins whether that will happen in a particular quarter or not, again I think you are going to get into ramp up issues before you meet those true efficient levels but definitely with the idea that, that’s how it should ramp up and develop.

We are long term investors and I would I guess you may be misinterpreted my question. I wasn’t asking you can we expect a large increase in the fall quarter.

I was asking you what’s your answer which is that after things are up and running you get all those things out of it ask you to improve margins.

Yes. That’s right absolutely.

Okay. And we’re still have a pretty a lot of cash which is good on the balance sheet are you looking to either make a bolt-on acquisitions or perhaps you continue to expand capacity in other ways other than the Virginia plant or?

Yes I think we’re clearly - we’re always looking at acquisition opportunities or joint venture opportunities. And as I said some appear close to the moment then drift away but they tend to come back.

So we’re still optimistic that some of those that we targeted in particular that would be -- maybe even more than bolt-ons -- bolt-ons all the time we’ll look at with the ideas incorporating those.

Some maybe a little bit more strategic either because of additional product, products into the portfolio geography of where those products are being produced and the sales organizations all play through. But with that said too we talked about the Virginia plant where last year we debottlenecked probably in the deep bottlenecked human grade calling both in United States and Italy as well.

So we continue to put money into those existing operations that we have and leverage off of those positions so it’s a little bit of all of those things to be honest.

Okay. Well you’ve answered my questions.

And glad we just had that one operation in the last quarter. And it doesn’t seem to be continuing.

Couple of my answer - questions have been answered, but just a few more on the dairy product obviously you guys fairly optimistic there with the doubling your capacity I’m just curious on 2 things. Number one, kind of where is that product as a percentage of revenues seems to me like it might be getting close to that 10% of total revenues currently, and so if you could maybe elaborate on that, that’d be great?

And then also in terms of how penetrated do you think you are in the total addressable market there it seems to me also that you are still very, very low in the penetration standpoint there?

Yes. I think with the new products that we’re talking about as it relates to a plant where it - we’re not really at 10% with those new products for sure.

But obviously our expectation is to move up to the 10% to 15% here within so much of time. Our market penetration is still we believe - and again you know it’s a little bit difficult to answer, I think some products maybe a close to 10% and then others may be closer to 5%.

So on the blended average base I think we’re still definitely under double-digit penetration levels which gives you really reason to believe that there is a lot of upside opportunity there. And again part of the reason to make that investment.

So I - Frank just ran some numbers here and I think on the new products we’re talking about maybe 6% market penetration today and that’s only in the North America market. So again, I think lot of real good upside opportunity there and clearly part of our confidence to make that investment decision.

Okay. My next question - go ahead.

That was it.

My next question is, do you guys see any seasonality in your operating margins because when I look at your operating margins in 2009, 2010 and 2011, the first quarter that you just reported at least in those last 3 years did represent kind of a low margins for the full year, so I don’t if that is seasonality you have seen that and that maybe you expect at least maybe a little bit upwards biased on margins for the rest of the year or do you think the raw material inflation just kind of eats into that?

Well, I think the raw material inflation is certainly is eating into that. I would honestly tell you that, I haven’t viewed it as kind of a seasonal issue for us in terms of how the margins would run.

At any given moment you could have product mix given one the strength of one segment versus another or even a certain product line in there that may cause, a bit of a distortion but net-net we don’t really see our businesses being seasonal. So, I would not suggest even remotely that, that’s how we do this business.

Okay. I mean that’s fair, I just noticed that in each of the last 3 years the March quarter was the low point in margins.

I just didn’t know if that was spurious or not?

Well it’s a great observation though, I’ll go back and take a look little bit harder certainly it’s a great observation.

All right and then just last thing. This is just a comment not a question.

I would maybe be a little cautious on trying to get choline put on the front part of the consumer package just because the general consumer might be a little bit uncertain as to what choline is and it sounds a little bit like chlorine and it might spook some of the general consumers, so maybe not get it on the front of the package.

We appreciate that. I think the dilemma is to build consumer awareness for sure wanting them to buy products that have choline in it.

Your comment about chlorine being confused with choline is one we’ve heard before.

Right.

Okay.

I assume your net cash provided by operations was up about $3 million and the major number that changed was the other category of $2.4 million. I was wondering if you could comment on that.

I am going to give to Frank.

Hang on a second Tony. I am going to have to look that up for you.

Any other questions Tony while he is looking that up?

Just wanted to know if you could give us a little more detail on what you hope to get on return on investments on your $10 million Virginia plant?

Well I think we are always looking to drive our allies solidly into I’m going to say the 20 plus percent kind of numbers. To some degree it depends on how quickly it ramps up, but certainly it could exceed that very quickly.

If you look at a $10 million investment there given the possible revenue generation hence and the margins it would be quite significant and it could lead to a pretty quick payback. But again it’s going to all hedge here and say depending on how quick they have ramped up.

But if we think it certainly could be much better than norm if you will.

What is the capacity in terms of dollars at the Virginia plant?

It’s going to be built kind of in tranches if you will - are actually cellular if you follow manufacturing buzz words. So that we will build our first tranche of manufacturing capacity that effectively will double what we have today but it could very quickly be followed up with at least 2 if not 3 more cellular expansions within the existing site.

So I think to a large degree it really depends so the investment decisions too will it depend on how quickly it ramps up. And probably in a window of 6 to 9 months we could easily add that next sale.

So that’s a big answer but I think our view of the investment here is going to be based on how quick that ramps up I mean I would say at this moment we’re having this discussion. And it’s ramped up quicker than we thought it would when we made the investment in Verona last year so our expectation is that it’s going to continue to go pretty quickly but I’ll hedge saying how quickly.

Could you give us an idea of the capacity on the first tranche in other words let’s say 9 months from now you complete on the first tranche what would be in annual volume rate capacity?

Probably in the neighborhood of GBP 18 million or ballpark $35 million, $40 million.

Great.

Tony, you have nearly all of the change in that other category is a result of working capital changes. Just the timing of inventory there is the value of inventory at the end of the quarter compared to the other and the amount of receivable change.

I would like to address the balance sheet. I think the balance sheet is a little misleading in the brief summary you give, because most of long-term obligations clearly deferred taxes.

And I don’t call that debt, I don’t know whether you want to call it debt, I guess you do. I don’t.

So you real debt you must be done – close. You must be out of debt by now, aren’t you?

In terms of long term debt and in terms of the bigger right arm that made up longer debt that you end was other long-term obligations, I don’t remember what the heck that was. It was $0.8 million so would you address that?

Secondly, can you say something, are you willing to say something about the substantial cash position which now I’m suggesting is probably all net cash. Are we going to see it used - would you like to see - would you hope - would you expect to see it used in a major amount this year or not doesn’t really matter but as long as it keeps building?

So, to answer the first question I think our net long term drew-long term acquisitions of $1.5 million today not even...

So, $1.1 million, Larry. And that’s all sitting in the current portion of the balance sheet, so it will be gone this year.

Yes. And so, I think your view is correct there’s really not much debt on the book so I think the other long term obligation.

It’s, mostly having to do with post-retirement benefits to $2.8 million Larry.

And then coming to the cash position certainly our expectation is we are going to give the share. I would gladly say, we would have used a fair chunk of it already some other things that we were working on in terms of true acquisition and to our joint venture but that clearly hasn’t happened but we are still working towards that end for sure because I think that we’ve identified prices where we would like to be stronger if you will with growth opportunity and it’s going to take cash, maybe cash and debt so currently we’ll look to deploy that here with the right transaction.

Could you see positioning the company at some point where it has some, as it did when you - where you had material net debt?

Depending on...

When you become - when you really leveraged the balance sheet?

Yes. The answer is yes, I think for a right transaction the answer is yes.

I mean we are very comfortable in basically a debt-free position that’s for sure but we also understand that there is kind of assets sitting on the sideline here that could be leveraged and we’d like to do that. But I think it’s finding that right one or 2 or 3 maybe, but certainly would not be adverse to leveraging up for the right transactions.

Can you guys remind me what your key raw materials are?

Yes. The key raw material, far and away the key raw materials that we have are Ethylene oxide, trimethylene and probably hydrochloric acid.

Okay. And then just one other question, you guys mentioned that the export market feed choline was test to a more global competition, can you elaborate on that a little bit?

Yes I think a lot of the export businesses is bid business, if you will which means every quarter comes up for bid and those integrated producers in those parts of the country or pre-mixed guys who look to secure a position minimally for a quarter. And so what we sense is very aggressive pricing in many cases by the Chinese into some of those markets and maybe even some European producers into some of those markets.

So it’s really mostly a question of what price point they are going to take there and whether or not we are comfortable competing at that price point. I can probably sit here and say we could but I am not sure we’d really make any money so why bother and so that’s really what we mean there.

Okay. Well I’d say thanks again to everybody for participating on the call.

Thanks for your support along the way. Feel pretty good about how we’re starting out the New Year.

And while it’s had its challenges but we feel pretty good with our position. And I think the upside opportunity is on - certainly certain parts of the business.

So thanks again for the support. Look forward to talking to you next quarter.

Thanks. Bye.