What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-31 compared with 2025-04-24 · 124 added, 46 removed, 140 unchanged (55% of the section changed)

43 unchanged sentences

We are very proud of our significant progress relating to the Company's corporate social responsibilities and will continue to foster these fundamental principles broadly along our entire value chain, develop new ideas and technologies that help us work smarter, and help build a world that is a better place to live.

As of March 31, 2025, we employed approximately 1,379 ful l time employees worldwide.

As of June 30, 2025, we employed approximately 1,364 full time employees worldwide.

We are seeing some improvement in the labor markets and we feel that our team has been successful in attracting and retaining skilled and experienced employees in a competitive landscape.

Additionally, we continue to enhance and leverage our existing technology capabilities to further optimize productivity and performance, and explore new solutions to drive efficiencies.

Recent Developments

Anti-Dumping Investigation in the European Union

In late June 2025, the European Commission announced that it would impose provisional duties between 95.4% and 120.8% on imports into the European Union of choline chloride originating in the People’s Republic of China, effective July 1, 2025.

The investigation was initiated by the European Commission in late October 2024 (following a complaint lodged by Balchem Italia Srl and Taminco BV) and final measures will be determined by the end of 2025.

Segment Results

We sell products for all three segments through our own sales force, independent distributors, and sales agents.

The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three months ended March 31, 2025 and 2024:

The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three and six months ended June 30, 2025 and 2024:

Business Segment Net Sales Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Human Nutrition & Health $ 160,773 $ 147,928 $ 319,230 $ 300,672

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Other and Unallocated (1)

1,481 1,502 2,991 2,883

Total $ 255,467 $ 234,081 $ 505,986 $ 473,740

Business Segment Earnings From Operations Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Human Nutrition & Health $ 38,342 $ 33,367 $ 76,316 $ 66,624

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(1) Other and Unallocated consists of a few minor businesses which individually do not meet the quantitative thresholds for separate presentation and corporate expenses that have not been allocated to a segment.

Unallocated corporate expenses consist of transaction and integration costs of $489 and $440 for the three months ended March 31, 2025 and 2024, respectively.

Results of Operations - Three Months Ended March 31, 2025 and 2024

Three Months Ended March 31, Increase

Unallocated corporate expenses consist of transaction and integration costs of $405 and $894 for the three and six months ended June 30, 2025, respectively, and $132 and $572 for the three and six months ended June 30, 2024, respectively.

Results of Operations - Three Months Ended June 30, 2025 and 2024

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

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Net earnings $ 38,278 $ 32,069 $ 6,209 19.4 %

Three Months Ended March 31, Increase

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

4 unchanged sentences

Total $ 255,467 $ 234,081 $ 21,386 9.1 %

• The increase in net sales within the Human Nutrition & Health segment for the first quarter of 2025 as compared to the first quarter of 2024 was driven by higher sales within both the food ingredients and solutions businesses and the nutrients business.

Total sales for this segment grew 3.7%, with average selling prices contributing 3.6%, volume and mix contributing 0.6%, and the change in foreign currency exchange rates contributing -0.4%.

• The increase in net sales within the Animal Nutrition & Health segment for the first quarter of 2025 compared to the first quarter of 2024 was driven by higher sales in the ruminant species markets, partially offset by lower sales in the monogastric species markets.

• The increase in net sales within the Human Nutrition & Health segment for the second quarter of 2025 as compared to the second quarter of 2024 was driven by higher sales within both the food ingredients and solutions businesses and the nutrients business.

Total sales for this segment grew 8.7%, with volume and mix contributing 8.4%, the change in foreign currency exchange rates contributing 0.5%, and average selling prices contributing -0.2%.

• The increase in net sales within the Animal Nutrition & Health segment for the second quarter of 2025 compared to the second quarter of 2024 was driven by higher sales in both the ruminant and monogastric species markets.

Total sales for this segment increased by 13.1%, with volume and mix contributing 7.7%, average selling prices contributing 4.1%, and the change in foreign currency exchange rates contributing 1.2%.

• The increase in net sales within the Specialty Products segment for the first quarter of 2025 compared to the first quarter of 2024 was due to higher sales in both the performance gases and plant nutrition businesses.

• The increase in net sales within the Specialty Products segment for the second quarter of 2025 compared to the second quarter of 2024 was due to higher sales in both the performance gases and plant nutrition businesses.

Total sales for this segment increased by 6.0%, with average selling prices contributing 3.8%, the change in foreign currency exchange rates contributing 1.6%, and volume and mix contributing 0.6%.

• Sales may fluctuate in future periods based on macroeconomic conditions, competitive dynamics, changes in customer preferences, and our ability to successfully introduce new products to the market.

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Gross margin $ 93,113 $ 82,994 $ 10,119 12.2 %

% of net sales 36.4 % 35.5 %

Gross margin dollars increased in the second quarter of 2025 compared to the second quarter of 2024 due to higher sales and a favorable mix, partially offset by certain higher manufacturing input costs.

Operating Expenses

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Operating expenses $ 41,671 $ 37,197 $ 4,474 12.0 %

% of net sales 16.3 % 15.9 %

The increase in operating expenses in the second quarter of 2025 compared to the second quarter of 2024 was primarily due to higher compensation-related costs of $4,788 and higher professional services of $1,206, partially offset by lower amortization of $1,016.

Earnings from Operations

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Human Nutrition & Health $ 38,342 $ 33,367 $ 4,975 14.9 %

Animal Nutrition & Health 3,514 2,693 821 30.5 %

Specialty Products 11,269 11,228 41 0.4 %

Other and unallocated (1,683) (1,491) (192) (12.9) %

Earnings from operations $ 51,442 $ 45,797 $ 5,645 12.3 %

% of net sales (operating margin) 20.1 % 19.6 %

• Human Nutrition & Health segment earnings from operations increased $4,975 primarily due to a gross margin contribution of $6,593.

The increase in gross margin was primarily due to the aforementioned higher sales and a favorable mix, partially offset by an increase in certain higher manufacturing input costs.

The increase in gross margin was partially offset by an increase in operating expenses of $1,618, primarily due to higher compensation-related costs of $2,742 which were partially offset by lower amortization of $1,006.

• Animal Nutrition & Health segment earnings from operations increased $821.

Gross margin contribution was $1,759, which was driven by the aforementioned higher sales and a favorable mix, partially offset by an increase in certain higher manufacturing input costs.

The increase in gross margin was partially offset by an increase in operating expenses of $938, primarily due to higher compensation-related costs of $735.

• Specialty Products segment earnings from operations increased $41.

Gross margin contribution was $1,485 due to the aforementioned higher sales.

The increase in gross margin was partially offset by an increase in operating expenses of $1,444, primarily driven by higher compensation-related costs of $1,162.

Other Expenses (Income)

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Interest expense, net $ 2,766 $ 4,240 $ (1,474) (34.8) %

Other (income) expense, net (335) 331 (666) (201.2) %

$ 2,431 $ 4,571 $ (2,140) (46.8) %

Interest expense for the three months ended June 30, 2025 and 2024 was primarily related to outstanding borrowings under the 2022 Credit Agreement.

The decrease in net interest expense is primarily due to lower outstanding borrowings.

Income Tax Expense

Three Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Income tax expense $ 10,733 $ 9,157 $ 1,576 17.2 %

Effective tax rate 21.9 % 22.2 %

The lower effective tax rate was primarily due to higher tax benefits from stock-based compensation.

Results of Operations - Six Months Ended June 30, 2025 and 2024

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Net sales $ 505,986 $ 473,740 $ 32,246 6.8 %

Gross margin 181,281 164,508 16,773 10.2 %

Operating expenses 78,824 77,035 1,789 2.3 %

Earnings from operations 102,457 87,473 14,984 17.1 %

Interest and other expenses 5,506 9,397 (3,891) (41.4) %

Income tax expense 21,620 17,021 4,599 27.0 %

Net earnings $ 75,331 $ 61,055 $ 14,276 23.4 %

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Human Nutrition & Health $ 319,230 $ 300,672 $ 18,558 6.2 %

Animal Nutrition & Health 113,305 103,478 9,827 9.5 %

Specialty Products 70,460 66,707 3,753 5.6 %

Other 2,991 2,883 108 3.7 %

Total $ 505,986 $ 473,740 $ 32,246 6.8 %

• The increase in net sales within the Human Nutrition & Health segment for the six months ended June 30, 2025 as compared to 2024 was driven by higher sales within both the food ingredients and solutions businesses and the nutrients business.

Total sales for this segment grew 6.2%, with volume and mix contributing 4.4%, average selling prices contributing 1.7%, and the change in foreign currency exchange rates contributing 0.1%.

• The increase in net sales within the Animal Nutrition & Health segment for the six months ended June 30, 2025 as compared to 2024 was driven by higher sales in both the ruminant and monogastric species markets.

Total sales for this segment increased by 9.5%, with volume and mix contributing 6.1%, average selling prices contributing 3.2%, and the change in foreign currency exchange rates contributing 0.3%.

• Sales relating to Other increased slightly from the prior year primarily due to higher average selling prices, partially offset by lower volumes and mix.

• The increase in net sales within the Specialty Products segment for the six months ended June 30, 2025 as compared to 2024 was due to higher sales in both the performance gases and plant nutrition businesses.

Total sales for this segment increased by 5.6%, with average selling prices contributing 3.0%, volume and mix contributing 2.1%, and the change in foreign currency exchange rates contributing 0.5%.

Three Months Ended March 31, Increase

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

1 unchanged sentence

% of net sales 35.8 % 34.7 %

Gross margin dollars increased in the first quarter of 2025 compared to the first quarter of 2024 due to higher sales and a favorable mix.

Gross margin dollars increased in the six months ended June 30, 2025 as compared to 2024 due to higher sales and a favorable mix, partially offset by certain higher manufacturing input costs.

Operating Expenses

Three Months Ended March 31, Increase

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

1 unchanged sentence

% of net sales 15.6 % 16.3 %

The decrease in operating expenses in the first quarter of 2025 compared to the first quarter of 2024 was primarily due to lower amortization expense of $2,287 and a decrease in compensation-related costs of $1,197, partially offset by higher professional services of $1,237.

The increase in operating expenses in the six months ended June 30, 2025 as compared to 2024 was primarily due to an increase in compensation-related costs of $3,589 and higher professional services of $2,442, partially offset by lower amortization expense of $3,303 and lower agent and broker commissions of $718.

Earnings from Operations

Three Months Ended March 31, Increase

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

5 unchanged sentences

% of net sales (operating margin) 20.2 % 18.5 %

• Human Nutrition & Health segment earnings from operations increased $4,717 primarily due to the gross margin contribution of $3,712.

The increase in gross margin was primarily due to the aforementioned higher sales and a favorable mix.

• Animal Nutrition & Health segment earnings from operations increased $3,176 primarily due to the gross margin contribution of $2,674.

The increase in gross margin was primarily due to the aforementioned higher sales and a favorable mix.

• Specialty Products segment earnings from operations increased $1,386 primarily due to lower operating expenses, driven by a decrease in compensation-related costs, and the aforementioned higher sales.

• The increase in Other and unallocated was primarily driven by a decrease in operating expenses.

• Human Nutrition & Health segment earnings from operations increased $9,692 primarily due to a gross margin contribution of $10,305.

The increase in gross margin was primarily due to the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs.

The increase in gross margin was partially offset by an increase in operating expenses of $613.

• Animal Nutrition & Health segment earnings from operations increased $3,997 primarily due to a gross margin contribution of $4,433, which was driven by the aforementioned higher sales and a favorable mix, partially offset by certain higher manufacturing input costs.

The increase in gross margin was partially offset by an increase in operating expenses of $436.

• Specialty Products segment earnings from operations increased $1,427 primarily due to a gross margin contribution of $1,787, which was driven by the aforementioned higher sales.

This was partially offset by an increase in operating expenses of $360, mainly due to higher professional services.

Other Expenses (Income)

Three Months Ended March 31, Increase

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

Interest expense, net $ 5,690 $ 9,638 $ (3,948) (41.0) %

Other expense (income), net 151 (572) 723 126.4 %

Other (income) expense, net (184) (241) 57 23.7 %

$ 5,506 $ 9,397 $ (3,891) (41.4) %

Interest expense for the three months ended March 31, 2025 and 2024 was primarily related to outstanding borrowings under the 2022 Credit Agreement.

Interest expense for the six months ended June 30, 2025 and 2024 was primarily related to outstanding borrowings under the 2022 Credit Agreement.

The decrease in net interest expense is due to lower outstanding borrowings.

Income Tax Expense

Three Months Ended March 31, Increase

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

1 unchanged sentence

Effective tax rate 22.3 % 21.8 %

The higher effective tax rate was primarily due to lower tax benefits from stock-based compensation.

The higher effective tax rate was primarily due to lower tax benefits from stock-based compensation and an unfavorable impact from foreign tax rates.

Liquidity and Capital Resources

During the three months ended March 31, 2025, there were no material changes outside the ordinary course of business in the specified contractual obligations set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

During the six months ended June 30, 2025, there were no material changes outside the ordinary course of business in the specified contractual obligations set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

We expect our operations to continue generating sufficient cash flow to fund working capital requirements and necessary capital investments.

1 unchanged sentence

We could seek additional bank loans or access to financial markets to fund such acquisitions, our operations, working capital, necessary capital investments or other cash requirements should we deem it necessary to do so.

Cash and cash equivalents increased to $49,901 at March 31, 2025 from $49,515 at December 31, 2024.

At March 31, 2025, the Company had $44,380 of cash and cash equivalents held by foreign subsidiaries.

Cash and cash equivalents increased to $65,427 at June 30, 2025 from $49,515 at December 31, 2024.

At June 30, 2025, the Company had $53,040 of cash and cash equivalents held by foreign subsidiaries.

We presently intend to permanently reinvest these funds in foreign operations by continuing to make additional plant related investments, and potentially invest in partnerships or acquisitions;

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operations, we could be required to pay additional withholding taxes to repatriate these funds.

Working capital was $200,684 at March 31, 2025 as compared to $156,085 at December 31, 2024, an increase of $44,599.

Significant cash payments during the three months ended March 31, 2025 included the payment of the 2024 declared dividend in 2025 of $28,263, capital expenditures and intangible assets acquired of $5,559, and repurchases of common stock of $5,325.

Three Months Ended March 31, Increase

Working capital was $226,718 at June 30, 2025 as compared to $156,085 at December 31, 2024, an increase of $70,633.

Significant cash payments during the six months ended June 30, 2025 included repurchases of common stock of $38,589, the payment of the 2024 declared dividend in 2025 of $28,265, income taxes paid of $26,263, and capital expenditures and intangible assets acquired of $12,372.

Six Months Ended June 30, Increase

(in thousands) 2025 2024 % Change

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Operating Activities

The increase in cash flows from operating activities was primarily driven by the increase in net earnings, partially offset by the decrease of depreciation and amortization and the impact from changes in working capital.

The increase in cash flows from operating activities was primarily driven by the increase in net earnings, partially offset by lower depreciation and amortization and the impact from changes in working capital.

Investing Activities

We continue to invest in corporate projects, improvements across all production facilities, and intangible assets.

Total investments in property, plant and equipment and intangible assets were $5,559 and $6,910 for the three months ended March 31, 2025 and 2024, respectively.

Total investments in property, plant and equipment and intangible assets were $12,372 and $13,788 for the six months ended June 30, 2025 and 2024, respectively.

Financing Activities

During 2025, we borrowed $29,000 to fund the 2024 dividend and bonus payments and made total loan payments of $29,000, resulting in $360,000 available under the 2022 Credit Agreement (see Note 7, Revolving Loan ) as of March 31, 2025.

During 2025, we borrowed $63,000 to fund the 2024 dividend, bonus payments and share repurchases.

We made total loan payments of $63,000, resulting in $360,000 available under the 2022 Credit Agreement (see Note 7, Revolving Loan ) as of June 30, 2025.

We have an approved stock repurchase program.

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We also purchase (withhold) shares from employees in connection with the tax settlement of vested shares and/or exercised stock options, as applicable, under the Company's omnibus incentive plan.

Share repurchases are funded with existing cash on hand.

Proceeds from stock options exercised were $1,668 and $8,791 for the three months ended March 31, 2025 and 2024, respectively.

Dividend payments were $28,263 and $25,555 for the three months ended March 31, 2025 and 2024, respectively.

Share repurchases are funded with existing cash on hand or borrowings against our 2022 credit agreement.

Repurchases of common stock were $38,589 and $5,213 for the six months ended June 30, 2025 and 2024, respectively.

Proceeds from stock options exercised were $6,222 and $9,682 for the six months ended June 30, 2025 and 2024, respectively.

Dividend payments were $28,265 and $25,568 for the six months ended June 30, 2025 and 2024, respectively.

Other Matters Impacting Liquidity

As of March 31, 2025 and December 31, 2024, w e have a liability of $6,786 and $6,720, respectively, for uncertain tax positions, including the related interest and penalties, recorded in accordance with ASC 740-10, for which we are unable to reasonably estimate the timing of settlement, if any.

As of June 30, 2025 and December 31, 2024, w e have a liability of $6,852 and $6,720, respectively, for uncertain tax positions, including the related interest and penalties, recorded in accordance with ASC 740-10, for which we are unable to reasonably estimate the timing of settlement, if any.

We currently provide postretirement benefits in the form of two retirement medical plans, as discussed in Note 14, Employee Benefit Plans .

The liabilities recorded in "Other long-term obligations" on the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 were $1,446 and $1,522, respectively, and the plans are not funded.

The liabilities recorded in "Other long-term obligations" on the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024 were $1,493 and $1,522, respectively, and the plans are not funded.

Historical cash payments made under these plans have typically been less than $200 per year.

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The plan provides for the payment of a lump sum at retirement or payments in case of death of the covered employees.

The amounts recorded for this obligation on our balance sheets as of March 31, 2025 and December 31, 2024 was $690 and $613, respectively, and was included in "Other long-term obligations" on the condensed consolidated balance sheets.

The amounts recorded for this obligation on our balance sheets as of June 30, 2025 and December 31, 2024 was $773 and $613, respectively, and was included in "Other long-term obligations" on the condensed consolidated balance sheets.

We provide an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees.

Assets of the plan are held in a rabbi trust and are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company.

The deferred compensation liability was $11,653 as of March 31, 2025, of which $11,633 was included in "Other long-term obligations" and $20 was included in "Accrued compensation and other benefits" on our consolidated balance sheets.

The deferred compensation liability was $12,107 as of June 30, 2025, of which $12,086 was included in "Other long-term obligations" and $21 was included in "Accrued compensation and other benefits" on our consolidated balance sheets.

The deferred compensation liability was $11,470 as of December 31, 2024, of which $11,449 was included in "Other long-term obligations" and $21 was included in "Accrued compensation and other benefits" on our consolidated balance sheets.

The related rabbi trust assets were $11,642 as of March 31, 2025, of which $11,622 was included in "Other non-current assets" and $20 was included in "Other current assets" on the condensed consolidated balance sheets.

The related rabbi trust assets were $12,101 as of June 30, 2025, of which $12,080 was included in "Other non-current assets" and $21 was included in "Other current assets" on the condensed consolidated balance sheets.

The rabbi trust assets were $11,465 as of December 31, 2024 and were included in "Other non-current assets" on the condensed consolidated balance sheets.

Significant Accounting Policies

There were no changes to our Significant Accounting Policies, as described in our December 31, 2024 Annual Report on Form 10 - K, during the three months ended March 31, 2025.

There were no changes to our Significant Accounting Policies, as described in our December 31, 2024 Annual Report on Form 10 - K, during the six months ended June 30, 2025.

Related Party Transactions

We were engaged in related party transactions with St.

Gabriel CC Company, LLC during the three months ended March 31, 2025.

Gabriel CC Company, LLC during the three and six months ended June 30, 2025.

Refer to Note 17, Related Party Transactions .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis