What changed in this filing

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Item 1. Financial Statements

2021-10-29 compared with 2021-07-30 · 202 added, 161 removed, 618 unchanged (37% of the section changed)

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Condensed Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)

Assets June 30, 2021 (unaudited) December 31, 2020

(In thousands, except share and per share data)

Assets September 30, 2021 (unaudited) December 31, 2020

Current assets:

Cash and cash equivalents $ 90,013 $ 84,571

Accounts receivable, net of allowance for doubtful accounts of $ 1,074 and $ 2,092 at June 30, 2021 and December 31, 2020 respectively

Accounts receivable, net of allowance for doubtful accounts of $ 930 and $ 2,092 at September 30, 2021 and December 31, 2020 respectively

110,711 98,214

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Authorized 120,000,000 shares;

32,470,829 shares issued and 32,404,774 shares outstanding at June 30, 2021 and 32,448,705 shares issued and 32,372,621 outstanding at December 31, 2020, respectively

32,467,909 shares issued and 32,382,637 shares outstanding at September 30, 2021 and 32,448,705 shares issued and 32,372,621 outstanding at December 31, 2020, respectively

Additional paid-in capital 172,676 173,029

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Treasury stock, at cost:

66,055 and 76,084 shares at June 30, 2021 and December 31, 2020, respectively

85,272 and 76,084 shares at September 30, 2021 and December 31, 2020, respectively

( 11,080 ) ( 7,873 )

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Condensed Consolidated Statements of Earnings

(Dollars in thousands, except per share data)

(In thousands, except per share data)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Condensed Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(In thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Change in postretirement benefit plans 11 137 26 ( 434 )

Other comprehensive income (loss) 1,883 2,575 ( 3,741 ) ( 330 )

Other comprehensive (loss) income ( 3,010 ) 4,677 ( 6,751 ) 4,347

Comprehensive income $ 22,003 $ 26,245 $ 64,404 $ 66,808

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended June 30, 2021 and 2020

(Dollars in thousands, except share and per share data)

For the three and nine months ended September 30, 2021 and 2020

(In thousands, except share and per share data)

Stockholders'

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Treasury shares purchased ( 9,240 ) — — — — ( 72,649 ) ( 9,240 ) —

Shares and options (cancelled) issued under stock plans 4,776 — — ( 190 ) — 25,683 2,978 1,798

Shares and options (canceled) issued under stock plans 4,776 — — ( 190 ) — 25,683 2,978 1,798

Balance - June 30, 2021 869,642 702,882 432 32,470,829 2,165 ( 66,055 ) ( 8,472 ) 172,635

Net earnings 25,013 25,013 — — — — — —

Other comprehensive (loss) ( 3,010 ) — ( 3,010 ) — — — — —

Treasury shares purchased ( 7,926 ) — — — — ( 61,075 ) ( 7,926 ) —

Shares and options (canceled) issued under stock plans 5,359 — — ( 2,920 ) — 41,858 5,318 41

Balance - September 30, 2021 $ 889,078 $ 727,895 $ ( 2,578 ) 32,467,909 $ 2,165 ( 85,272 ) $ ( 11,080 ) $ 172,676

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (continued)

For the three and nine months ended September 30, 2021 and 2020

(In thousands, except share and per share data)

Stockholders'

Equity Retained

Earnings Accumulated

Comprehensive

(Loss) Income Common Stock Treasury Stock Additional

Shares Amount Shares Amount

Balance - December 31, 2019 $ 743,667 $ 590,921 $ ( 5,564 ) 32,405,796 $ 2,161 ( 203,879 ) $ ( 18,069 ) $ 174,218

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Balance - June 30, 2020 792,523 631,814 ( 5,894 ) 32,451,415 2,164 ( 109,919 ) ( 9,634 ) 174,073

Net earnings 21,568 21,568 — — — — — —

Other comprehensive income 4,677 — 4,677 — — — — —

Treasury shares purchased ( 2,957 ) — — — — ( 31,224 ) ( 2,957 ) —

Shares and options issued under stock plans 3,632 — — — — 32,330 2,545 1,087

Balance - September 30, 2020 $ 819,443 $ 653,382 $ ( 1,217 ) 32,451,415 $ 2,164 ( 108,813 ) $ ( 10,046 ) $ 175,160

See accompanying notes to condensed consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

Six Months Ended

(In thousands)

Nine Months Ended

September 30,

Cash flows from operating activities:

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Capital expenditures and intangible assets acquired ( 22,391 ) ( 20,552 )

Proceeds from sale of assets 240 22

Proceeds from insurance and sale of assets 1,272 22

Purchase of convertible note — ( 850 )

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Effect of exchange rate changes on cash ( 3,229 ) 1,754

(Decrease) increase in cash and cash equivalents ( 4,669 ) 10,735

Increase in cash and cash equivalents 5,442 13,295

Cash and cash equivalents beginning of period 84,571 65,672

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(All dollar amounts in thousands, except share and per share data)

(In thousands, except share and per share data)

NOTE 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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GAAP” or “GAAP”) governing interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934 (the "Exchange Act") and therefore do not include some information and notes necessary to conform to annual reporting requirements.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results expected for the full year or any interim period.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results expected for the full year or any interim period.

Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.

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The ASU is intended to help stakeholders during the global market-wide reference rate transition period.

Therefore, this standards update is in effect from March 12, 2020 through December 31, 2022.

In January 2021, the FASB issued Accounting Standards Update ("ASU") 2021-01, "Reference Rate Reform (Topic 848):

Scope." This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Therefore, this Standard Update is in effect from March 12, 2020 through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

Scope." ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

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Recently Adopted Accounting Standards

In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The effective date of this Update is for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The effective date of this Standard Update is for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Standard may be adopted either using the prospective or retrospective transition approach and could also be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The Standard Update may be adopted either using the prospective or retrospective transition approach and could also be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted the new Standard on January 1, 2021.

The Standard did not have a significant impact on the Company's consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider.

The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance contained in this ASU requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider.

This ASU became effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

The Standard may be adopted either using the prospective or retrospective transition approach.

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In January 2017, the FASB issued ASU No.

2017-04, “Simplifying the Test for Goodwill Impairment” (ASU 2017-04), which addresses changes to the testing for goodwill impairment by eliminating Step 2 of the process.

2017-04, “Simplifying the Test for Goodwill Impairment”, which addresses changes to the testing for goodwill impairment by eliminating Step 2 of the process.

The guidance is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

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STOCK-BASED COMPENSATION

The Company’s results for the three and six months ended June 30, 2021 and 2020 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:

The Company’s results for the three and nine months ended September 30, 2021 and 2020 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:

Increase/(Decrease) for the Increase/(Decrease) for the

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Both incentive stock options and nonqualified stock options can be awarded under the plans.

No option will be exercisable for longer than ten years after the date of grant.

No option is exercisable after ten years from the date of grant.

The Company has approved and reserved a number of shares to be issued upon exercise of the outstanding options that is adequate to cover all exercises.

As of June 30, 2021, the plans had 687,297 shares available for future awards.

As of September 30, 2021, the plans had 697,707 shares available for future awards.

Compensation expense for stock options and stock awards is recognized on a straight-line basis over the vesting period, generally three years for stock options, three to four years for employee restricted stock awards, three years for employee performance share awards, and three to four years for non-employee director restricted stock awards.

Certain awards provide for accelerated vesting if there is a change in control (as defined in the plans) or other qualifying events.

Option activity for the six months ended June 30, 2021 and 2020 is summarized below:

For the six months ended June 30, 2021 Shares (000s) Weighted

Option activity for the nine months ended September 30, 2021 and 2020 is summarized below:

For the nine months ended September 30, 2021 Shares (000s) Weighted

Price Aggregate

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Canceled ( 1 ) 74.57

Outstanding as of June 30, 2021 926 $ 86.85 $ 41,107 6.8

Exercisable as of June 30, 2021 580 $ 73.72 $ 33,398 5.6

For the six months ended June 30, 2020 Shares (000s) Weighted

Outstanding as of September 30, 2021 876 $ 87.91 $ 50,090 6.6

Exercisable as of September 30, 2021 540 $ 74.81 $ 37,961 5.5

For the nine months ended September 30, 2020 Shares (000s) Weighted

Price Aggregate

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Forfeited ( 10 ) 94.27

Outstanding as of June 30, 2020 962 $ 76.78 $ 19,915 6.5

Exercisable as of June 30, 2020 618 $ 66.68 $ 17,418 5.3

Outstanding as of September 30, 2020 932 $ 77.72 $ 20,638 6.5

Exercisable as of September 30, 2020 589 $ 67.66 $ 17,644 5.2

ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

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risk-free interest rates of 0.5 % and 1.4 %;

and expected lives of 4.9 years and 3.7 years, in each case for the six months ended June 30, 2021 and 2020, respectively.

and expected lives of 4.9 years and 3.8 years, in each case for the nine months ended September 30, 2021 and 2020, respectively.

The Company used a projected expected life for each award granted based on historical experience of employees’ exercise behavior.

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Treasury Zero coupon issues with a remaining term equal to the expected life.

Other information pertaining to option activity during the three and six months ended June 30, 2021 and 2020 was as follows:

Other information pertaining to option activity during the three and nine months ended September 30, 2021 and 2020 was as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Total intrinsic value of stock options exercised ($000s) $ 3,196 $ 1,517 $ 6,927 $ 7,888

Non-vested restricted stock activity for the six months ended June 30, 2021 and 2020 is summarized below:

Six Months Ended June 30,

Non-vested restricted stock activity for the nine months ended September 30, 2021 and 2020 is summarized below:

Nine Months Ended September 30,

Shares (000s) Weighted

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Forfeited ( 5 ) 95.71 ( 4 ) 93.35

Non-vested balance as of June 30 181 $ 96.89 152 $ 89.22

Non-vested performance share activity for the six months ended June 30, 2021 and 2020 is summarized below:

Six Months Ended June 30,

Non-vested balance as of September 30 176 $ 97.17 151 $ 89.45

Non-vested performance share activity for the nine months ended September 30, 2021 and 2020 is summarized below:

Nine Months Ended September 30,

Shares (000s) Weighted

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Forfeited ( 11 ) 74.57 ( 11 ) 82.71

Non-vested balance as of June 30 72 $ 110.22 71 $ 91.99

Non-vested balance as of September 30 72 $ 110.22 71 $ 91.99

The performance share (“PS”) awards provide the recipients the right to receive a certain number of shares of the Company’s common stock in the future, subject to an EBITDA performance hurdle, where vesting is dependent upon the Company achieving a certain EBITDA percentage growth over the performance period, and relative total shareholder return (TSR) where vesting is dependent upon the Company’s TSR performance over the performance period relative to a comparator group consisting of the Russell 2000 index constituents.

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volatilities of 33 % and 24 %;

and initial TSR’s of 11.7 % and 10.9 %, in each case for the six months ended June 30, 2021 and 2020, respectively.

and initial TSR’s of 11.7 % and 10.9 %, in each case for the nine months ended September 30, 2021 and 2020, respectively.

Expense is estimated based on the number of shares expected to vest, assuming the requisite service period is rendered and the probable outcome of the performance condition is achieved.

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The PS will cliff vest 100 % at the end of the third year following the grant in accordance with the performance metrics set forth.

As of June 30, 2021 and 2020, there was $ 19,796 and $ 17,034 , respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

As of June 30, 2021, the unrecognized

compensation cost is expected to be recognized over a weighted-average period of approximately 1.6 years.

As of September 30, 2021 and 2020, there was $ 16,498 and $ 14,876 , respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

As of September 30, 2021, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.4 years.

The Company estimates that share-based compensation expense for the year ended December 31, 2021 will be approximately $ 11,900 .

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The total authorization under this program is 3,763,038 shares.

Since the inception of the program in June 1999, a total of 2,654,520 shares have been purchased, of which 66,055 shares remained in treasury at June 30, 2021.

Since the inception of the program in June 1999, a total of 2,715,595 shares have been purchased, of which 85,272 shares remained in treasury at September 30, 2021.

The Company repurchases shares from employees in connection with settlement of transactions under the Company's equity incentive plans.

The Company also intends to acquire shares from time to time at prevailing market prices if and to the extent it deems it advisable to do so based on its assessment of corporate cash flow, market conditions and other factors.

During the six months ended June 30, 2021 and 2020, the Company purchased 86,124 and 32,505 shares, respectively, from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes and from open market purchases.

During the nine months ended September 30, 2021 and 2020, the Company purchased 147,199 and 63,729 shares, respectively, from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes and from open market purchases.

These shares were purchased at an average cost of $ 127.46 and $ 93.87 , respectively.

NOTE 3 – INVENTORIES

Inventories at June 30, 2021 and December 31, 2020 consisted of the following:

June 30, 2021 December 31, 2020

Inventories at September 30, 2021 and December 31, 2020 consisted of the following:

September 30, 2021 December 31, 2020

Raw materials $ 20,876 $ 24,536

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NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at June 30, 2021 and December 31, 2020 are summarized as follows:

June 30, 2021 December 31, 2020

Property, plant and equipment at September 30, 2021 and December 31, 2020 are summarized as follows:

September 30, 2021 December 31, 2020

Land $ 11,826 $ 12,215

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NOTE 5 – INTANGIBLE ASSETS

The Company had goodwill in the amount of $ 527,148 and $ 529,463 as of June 30, 2021 and December 31, 2020, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The decrease in goodwill is due to foreign exchange translation adjustments.

Identifiable intangible assets with finite lives at June 30, 2021 and December 31, 2020 are summarized as follows:

The Company had goodwill in the amount of $ 525,419 and $ 529,463 as of September 30, 2021 and December 31, 2020, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The decrease in goodwill is due to foreign exchange translation adjustments.

Identifiable intangible assets with finite lives at September 30, 2021 and December 31, 2020 are summarized as follows:

(in years) Gross Carrying Amount at

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$ 327,974 $ 226,691 $ 330,063 $ 208,403

Amortization of identifiable intangible assets was approximately $ 6,229 and $ 12,713 for the three and six months ended June 30, 2021, respectively, and $ 6,985 and $ 13,964 for the three and six months ended June 30, 2020, respectively.

Amortization of identifiable intangible assets was approximately $ 6,155 and $ 18,868 for the three and nine months ended September 30, 2021, respectively, and $ 6,911 and $ 20,875 for the three and nine months ended September 30, 2020, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets, estimated amortization expense is $ 6,134 for the remainder of 2021, $ 22,999 for 2022, $ 19,407 for 2023, $ 10,573 for 2024, $ 6,327 for 2025 and $ 4,986 for 2026.

At June 30, 2021 and 2020, there were no identifiable intangible assets with indefinite useful lives as defined by ASC 350.

At September 30, 2021 and 2020, there were no identifiable intangible assets with indefinite useful lives as defined by ASC 350.

Identifiable intangible assets are reflected in “Intangible assets with finite lives, net” in the Company’s condensed consolidated balance sheets.

There were no changes to the useful lives of intangible assets subject to amortization during the six months ended June 30, 2021 and 2020.

There were no changes to the useful lives of intangible assets subject to amortization during the nine months ended September 30, 2021 and 2020.

NOTE 6 – EQUITY-METHOD INVESTMENT

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The joint venture is accounted for under the equity method of accounting since the Company is not the primary beneficiary as the Company does not have the power to direct the activities of the joint venture that most significantly impact its economic performance.

The Company recognized a lo ss of $ 130 and $ 274 for the three and six months ended June 30, 2021, respectively, and $ 142 and $ 280 for the three and six months ended June 30, 2020, respectively, relating to its portion of the joint venture's expenses in other expense.

The Company received a net return of capital totaling $ 28 and $ 15 fo r the three and six months ended June 30, 2021, respectively, and made capital contributions to the investment totaling $ 131 and $ 798 for the three and six months ended June 30, 2020, respectively.

The carrying value of the joint venture at June 30, 2021 and December 31, 2020 is $ 4,682 and $ 4,971 , respectively, and is recorded in other assets.

The Company recognized a lo ss of $ 142 and $ 416 for the three and nine months ended September 30, 2021, respectively, and $ 143 and $ 423 for the three and nine months ended September 30, 2020, respectively, relating to its portion of the joint venture's expenses in other expense.

The Company made capital contributions to the investment, net of return of capital, totaling $ 46 and $ 31 fo r the three and nine months ended September 30, 2021, respectively, and $ 25 and $ 823 for the three and nine months ended September 30, 2020, respectively.

The carrying value of the joint venture at September 30, 2021 and December 31, 2020 is $ 4,586 and $ 4,971 , respectively, and is recorded in other assets.

NOTE 7 – REVOLVING LOAN

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The initial proceeds from the Credit Agreement were used to repay the outstanding balance of $ 210,750 on its senior secured term loan, which was due May 2019.

As of June 30, 2021 and December 31, 2020 , the total balance outstanding on the Credit Agreement amounted to $ 123,569 and $ 163,569 , respectively.

As of September 30, 2021 and December 31, 2020 , the total balance outstanding on the Credit Agreement amounted to $ 108,569 and $ 163,569 , respectively.

There are no installment payments required on the revolving loans;

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Amounts outstanding under the Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the Credit Agreement plus an applicable rate.

The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the Credit Agreement, and the interest rate was 1.095 % at June 30, 2021.

The Company is also required to pay a commitment fee on the unused portion of the revolving loan, which is based on the Company’s consolidated net leverage ratio as defined in the Credit Agreement and ranges from 0.15 % to 0.275 % ( 0.15 % at June 30, 2021).

The unused portion of the revolving loan amounted to $ 376,431 at June 30, 2021.

The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the Credit Agreement, and the interest rate was 1.086 % at September 30, 2021.

The unused portion of the revolving loan amounted to $ 391,431 at September 30, 2021.

The Company is also required to pay, as applicable, letter of credit fees, administrative agent fees, and other fees to the arrangers and lenders.

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Costs associated with the issuance of the extinguished debt instrument were capitalized and amortized over the term of the respective financing arrangement using the effective interest method.

Capitalized costs net of accumulated amortization totaled $ 562 and $ 703 at June 30, 2021 and December 31, 2020, respectively, and are included in other assets on the condensed consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 70 and $ 141 , for both the three and six months ended June 30, 2021 and 2020, and are included in interest expense in the accompanying condensed consolidated statements of earnings.

Capitalized costs net of accumulated amortization totaled $ 491 and $ 703 at September 30, 2021 and December 31, 2020, respectively, and are included in other assets on the condensed consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 71 and $ 212 , for both the three and nine months ended September 30, 2021 and 2020, and are included in interest expense in the accompanying condensed consolidated statements of earnings.

The Credit Agreement contains quarterly covenants requiring the consolidated leverage ratio to be less than a certain maximum ratio and the consolidated interest coverage ratio to exceed a certain minimum ratio.

At June 30, 2021, the Company was in compliance with these covenants.

Indebtedness under the Company’s loan agreements are secured by assets of the Company.

At September 30, 2021, the Company was in compliance with these covenants.

Indebtedness under the Company’s Credit Agreement is secured by assets of the Company.

NOTE 8 – NET EARNINGS PER SHARE

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Net Earnings Per Share - Diluted $ 0.77 $ 0.66 $ 2.18 $ 1.92

The number of anti-dilutive shares were 153,868 and 304,324 for the three and six months ended June 30, 2021, respectively, and 377,573 and 212,271 for the three and six months ended June 30, 2020 , respectively.

The number of anti-dilutive shares were 151,924 and 156,238 for the three and nine months ended September 30, 2021, respectively, and 172,122 and 215,271 for the three and nine months ended September 30, 2020 , respectively.

Anti-dilutive shares could potentially dilute basic earnings per share in future periods and therefore, were not included in diluted earnings per share.

NOTE 9 – INCOME TAXES

The Company’s effective tax rate for the three months ended June 30, 2021 and 2020, was 24.3 % and 18.7 %, respectively, and 23.1 % and 19.0 % for the six months ended June 30, 2021 and 2020.

The increase in the effective tax rate for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 was primarily due to a reduction in certain tax credits and lower tax benefits from stock-based compensation.

The increase in the effective tax rate for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to a reduction in certain tax credits, lower tax benefits from stock-based compensation, and higher enacted state tax rates.

The Company’s effective tax rate for the three months ended September 30, 2021 and 2020, was 22.0 % and 22.7 %, respectively, and 22.7 % and 20.3 % for the nine months ended September 30, 2021 and 2020.

The decrease in the effective tax rate for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily due to higher tax benefits from stock-based compensation and the prior year being negatively impacted by clarifying regulations related to tax reform.

The increase in the effective tax rate for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily due to a reduction in certain tax credits, lower tax benefits from stock-based compensation, and higher enacted state tax rates.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, and on December 27, 2020, Congress passed an additional round of COVID relief legislation as part of the Bipartisan-Bicameral Omnibus COVID Relief Deal.

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Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in

income in the period that includes the enactment date.

The Company regularly reviews its deferred tax assets for recoverability and would establish a valuation allowance if it believed that such assets may not be recovered, taking into consideration historical operating results, expectations of future earnings, changes in its operations and the expected timing of the reversals of existing temporary differences.

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and in various states and foreign countries.

As of June 30, 2021, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2016.

As of June 30, 2021 and December 31, 2020, the Company had approximately $ 5,465 and $ 5,335 , respectively, of

unrecognized tax benefits, which are included in other long-term obligations on the Company’s condensed consolidated balance sheets.

As of September 30, 2021, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2016.

As of September 30, 2021 and December 31, 2020, the Company had approximately $ 5,673 and $ 5,335 , respectively, of unrecognized tax benefits, which are included in other long-term obligations on the Company’s condensed consolidated balance sheets.

The Company includes interest expense or income as well as potential penalties on unrecognized tax positions as a component of income tax expense in the condensed consolidated statements of earnings.

The total amount of accrued interest and penalties related to uncertain tax positions at June 30, 2021 and December 31, 2020 was approximately $ 1,971 and $ 1,845 , respectively, and is included in other long-term obligations.

The total amount of accrued interest and penalties related to uncertain tax positions at September 30, 2021 and December 31, 2020 was approximately $ 2,039 and $ 1,845 , respectively, and is included in other long-term obligations.

NOTE 10 – SEGMENT INFORMATION

Balchem Corporation reports three business segments:

The Company reports three business segments:

Human Nutrition & Health, Animal Nutrition & Health, and Specialty Products.

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Choline is recognized to play a key role in the development and structural integrity of brain cell membranes in infants, processing dietary fat, reproductive development and neural functions, such as memory and muscle function.

The Company's mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products.

HNH's mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products.

Proprietary technology has been combined to create an organic molecule in a form the body can readily assimilate.

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The Company’s Animal Nutrition & Health ("ANH") segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride.

For ruminant animals, the Company’s microencapsulated products boost health and milk production, delivering nutrient supplements that are biologically available, providing required nutritional levels.

For ruminant animals, ANH’s microencapsulated products boost health and milk production, delivering nutrient supplements that are biologically available, providing required nutritional levels.

The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world.

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Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat.

In poultry, choline deficiency can result in reduced growth rates and perosis in young birds, while in swine production choline is a necessary and required component of gestating and lactating sow diets for both liver health and prevention of leg deformity.

In poultry, choline

deficiency can result in reduced growth rates and perosis in young birds, while in swine production choline is a necessary and required component of gestating and lactating sow diets for both liver health and prevention of leg deformity.

Sales of value-added encapsulated products are highly dependent on overall industry economics as well as the Company's ability to leverage the results of university and field research on the animal health and production benefits of our products.

Management believes that success in the commodity-oriented basic choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service.

The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace.

The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a global marketplace.

Specialty Products

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It is used to sterilize a wide range of medical devices because of its versatility and effectiveness in treating hard or soft surfaces, composites, metals, tubing and different types of plastics without negatively impacting the performance of the device being sterilized.

The Company’s 100% ethylene oxide product and blends are distributed worldwide in specially designed, reusable and recyclable drum and cylinder packaging, to assure compliance with safety, quality and environmental standards as outlined by the applicable regulatory agencies in the countries our products are shipped to.

Specialty Products' 100% ethylene oxide product and blends are distributed worldwide in specially designed, reusable and recyclable drum and cylinder packaging, to assure compliance with safety, quality and environmental standards as outlined by the applicable regulatory agencies in the countries our products are shipped to.

The Company’s inventory of these specially built drums and cylinders, along with its five filling facilities, represents a significant capital investment.

sterilizers and medical device manufacturers are principal customers for this product.

Contract sterilizers and medical device manufacturers are principal customers for this product.

The Company also sells single use canisters with 100% ethylene oxide for use in sterilizing re-usable devices typically processed in autoclave units in hospitals.

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Propylene oxide is also sold worldwide to customers in approved reusable and recyclable drum and cylinder packaging for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings.

Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder drum and cylinder packaging approved for use in the countries these products are shipped to.

Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder packaging, which are approved for use in the countries these products are shipped to.

The Company's inventory of cylinders for these products also represents a significant capital investment.

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The segment information is summarized as follows:

Business Segment Assets June 30,

Business Segment Assets September 30,

2021 December 31,

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Business Segment Net Sales Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Business Segment Earnings Before Income Taxes Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Depreciation/Amortization Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Total $ 12,159 $ 13,055 $ 36,622 $ 38,349

Capital Expenditures Six Months Ended

Capital Expenditures Nine Months Ended

September 30,

Human Nutrition & Health $ 14,492 $ 13,481

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Unallocated corporate expenses consist of:

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 466 and $ 700 for the three and six months ended June 30, 2021, respectively, and $ 746 and $ 2,018 for the three and six months ended June 30, 2020, respectively, and (ii) Unallocated amortization expense of $ 674 and $ 1,349 for the three and six months ended June 30, 2021, respectively, and $ 475 and $ 947 for the three and six months ended June 30, 2020, respectively, related to an intangible asset in connection with a company-wide ERP system implementation and capitalized loan issuance costs that was included in interest expense in the Company's consolidated statement of earnings.

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 305 and $ 1,005 for the three and nine months ended September 30, 2021, respectively, and $ 161 and $ 2,179 for the three and nine months ended September 30, 2020, respectively, and (ii) Unallocated amortization expense of $ 675 and $ 2,024 for the three and nine months ended September 30, 2021, respectively, and $ 470 and $ 1,417 for the three and nine months ended September 30, 2020, respectively, related to an intangible asset in connection with a company-wide ERP system implementation and capitalized loan issuance costs that were included in interest expense in the Company's consolidated statement of earnings.

NOTE 11 – REVENUE

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the six months ended June 30, 2021 and 2020 for income taxes and interest is as follows:

Six Months Ended

Cash paid during the nine months ended September 30, 2021 and 2020 for income taxes and interest is as follows:

Nine Months Ended

September 30,

Income taxes $ 19,563 $ 15,167

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Net of tax and adjustment 11 137 26 ( 434 )

Total other comprehensive income (loss) $ 1,883 $ 2,575 $ ( 3,741 ) $ ( 330 )

Total other comprehensive (loss) income $ ( 3,010 ) $ 4,677 $ ( 6,751 ) $ 4,347

(1) One time adjustment to the postretirement account.

Included in "Net foreign currency translation adjustment" was a loss of $ 1,024 and a gain of $ 2,173 , related to a net investment hedge, which were net of taxes of $ 336 and $ 690 for the three and six months ended June 30, 2021, respectively.

Included in "Net foreign currency translation adjustment" w as a loss of $ 1,514 and a gain of $ 2,905 , re lated to a net investment hedge, which were net of taxes of $ 260 and $ 914 for the three and six months ended June 30, 2020, respectively.

Included in "Net foreign currency translation adjustment" were gains of $ 1,715 and $ 3,888 , related to a net investment hedge, which were net of taxes of $ 553 and $ 1,243 for the three and nine months ended September 30, 2021, respectively.

Included in "Net foreign currency translation adjustment" were losses of $ 3,891 and $ 986 , re lated to a net investment hedge, which were net of taxes of $ 1,244 and $ 330 for the three and nine months ended September 30, 2020, respectively.

See Note 19, "Derivative Instruments and Hedging Activities."

Accumulated other comprehensive income/(loss) at June 30, 2021 and December 31, 2020 consisted of the following:

Accumulated other comprehensive income/(loss) at September 30, 2021 and December 31, 2020 consisted of the following:

Foreign currency

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Balance December 31, 2020 $ 7,653 $ ( 3,684 ) $ 204 $ 4,173

Other comprehensive income/(loss) ( 4,619 ) 863 15 ( 3,741 )

Balance June 30, 2021 $ 3,034 $ ( 2,821 ) $ 219 $ 432

Other comprehensive (loss) income ( 7,981 ) 1,204 26 ( 6,751 )

Balance September 30, 2021 $ ( 328 ) $ ( 2,480 ) $ 230 $ ( 2,578 )

NOTE 14 – EMPLOYEE BENEFIT PLANS

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Net periodic benefit costs for such retirement medical plans were as follows:

Six Months Ended

Nine Months Ended

September 30,

Service cost $ 65 $ 51

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Net periodic benefit cost $ 119 $ 88

T he amount recorded for these obligations on the Company’s balance sheets as of June 30, 2021 and December 31, 2020 is $ 1,429 and $ 1,374 , respectively, and are included in other long-term obligations.

T he amount recorded for these obligations on the Company’s balance sheets as of September 30, 2021 and December 31, 2020 is $ 1,456 and $ 1,374 , respectively, and are included in other long-term obligations.

These plans are unfunded and approved claims are paid from Company funds.

Historical cash payments made under such plans have typically been less than $ 100 per year.

Defined Benefit Pension Plans

On May 27, 2019, the Company acquired Chemogas, which has an unfunded defined benefit pension plan.

H istorical cash payments made under such plans have typically been less than $ 100 per year.

Defined Benefit Pension Plan

On May 27, 2019, the Company acquired Chemogas Holding NV, a privately held specialty gases company headquartered in Grimbergen, Belgium ("Chemogas"), which has an unfunded defined benefit pension plan.

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

The amount recorded for these obligations on the Company's consolidated balance sheet as of June 30, 2021 and December 31, 2020 were $ 945 and $ 950 , respectively, and were included in other long-term obligations.

Net periodic benefit costs for such benefit pensions plans were as follows:

Six Months Ended

The amount recorded for these obligations on the Company's consolidated balance sheets as of September 30, 2021 and December 31, 2020 w ere $ 934 and $ 950 , respectively, and were included in other long-term obligations.

Net periodic benefit costs for such benefit pensions plan were as follows:

Nine Months Ended

September 30,

Service cost with interest to end of year $ 52 $ 78

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Expected return on plan assets ( 26 ) ( 12 )

Amortization of gain 2 —

Amortization of loss 2 —

Total net periodic benefit cost $ 39 $ 81

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

The deferred compensation liability was $ 5,714 and $ 3,581 as of June 30, 2021 and December 31, 2020, respectively, and was included in other long-term obligations on the Company’s consolidated balance sheets.

The related rabbi trust assets were $ 5,714 and $ 3,581 as of June 30, 2021 and December 31, 2020, respectively, and were included in other non-current assets on the Company's consolidated balance sheets.

The de ferred compensation liability was $ 6,077 and $ 3,581 as of September 30, 2021 and December 31, 2020, respectively, and was included in other long-term obligations on the Company’s consolidated balance sheets.

The related rabbi trust assets were $ 6,076 and $ 3,581 as of September 30, 2021 and December 31, 2020, respectively, and were included in other non-current assets on the Company's consolidated balance sheets.

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at June 30, 2021 are as follows:

July 1, 2021 to December 31, 2021 $ 2,118

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at September 30, 2021 are as follows:

October 1, 2021 to December 31, 2021 $ 828

Thereafter 2,428

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Remediation was conducted by the prior owner under the oversight of the EPA and the Missouri Department of Natural Resources.

While the Company must maintain the integrity of the capped areas in the remediation areas on the site, the prior owner is responsible for completion of any further Superfund remedy.

While BCP Ingredients, Inc.

("BCP"), the Company's subsidiary that operates the site, must maintain the integrity of the capped areas in the remediation areas on the site, the prior owner is responsible for completion of any further Superfund remedy.

The Company is indemnified by the sellers under its May 2001 asset purchase agreement covering its acquisition of the facility for potential liabilities associated with the Superfund site.

In September 2020, BCP Ingredients, Inc.

("BCP"), the Company subsidiary that operates the site, received a General Notice Letter from the EPA regarding BCP's potential liability for 1,4 dioxane contamination at the site.

BCP currently believes that the 1,4 dioxane contamination is associated with the former owner’s operations and has engaged experts to study site conditions and hydrogeology in connection with preparing its response to the notice.

In September 2020, BCP received a General Notice Letter from the EPA regarding BCP's potential liability for 1,4 dioxane contamination at the site.

From time to time, the Company is a party to various litigation, claims and assessments.

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The Company has a number of financial instruments, none of which are held for trading purposes.

The Company estimates that the fair value of all financial instruments at June 30, 2021 and December 31, 2020 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheets.

The Company estimates that the fair value of all financial instruments at September 30, 2021 and December 31, 2020 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheets.

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies.

Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The carrying value of debt approximates fair value as the interest rate is based on market and the Company’s consolidated leverage ratio.

The carrying value of debt approximates fair value as the interest rate is based on market and the Company’s

consolidated leverage ratio.

The Company’s financial instruments also include cash equivalents, accounts receivable, accounts payable, and accrued liabilities, which are carried at cost and approximate fair value due to the short-term maturity of these instruments.

Cash and cash equivalents at June 30, 2021 and December 31, 2020 includes $ 814 and $ 817 in money market funds, respectively.

Non-current assets at June 30, 2021 and December 31, 2020 includes $ 5,714 and $ 3,581 , respectively, of rabbi trust funds related to the Company's deferred compensation plan.

Cash and cash equivalents at September 30, 2021 and December 31, 2020 includes $ 813 and $ 817 in money market funds, respectively.

Non-current assets at September 30, 2021 and December 31, 2020 includes $ 6,076 and $ 3,581 , respectively, of rabbi trust funds related to the Company's deferred compensation plan.

The money market and rabbi trust funds ar e valued using level one inputs, as defined by ASC 820, “Fair Value Measurement.”

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The fair values of these derivative instruments are determined based on Level 2 inputs, using significant inputs that are observable either directly or indirectly, including interest rate curves and implied volatilities.

The derivative liability related to the cross-currency swap was $ 3,930 and $ 6,793 at June 30, 2021 and December 31, 2020, respectively.

The derivative liability related to the interest rate swap was $ 3,732 and $ 4,865 at June 30, 2021 and December 31, 2020, respectively.

The derivative liability related to the cross-currency swap was $ 1,662 and $ 6,793 at September 30, 2021 and December 31, 2020, respectively.

The derivative liability related to the interest rate swap was $ 3,282 and $ 4,865 at September 30, 2021 and December 31, 2020, respectively.

NOTE 17 – RELATED PARTY TRANSACTIONS

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These services include accounting, information technology, quality control, and purchasing services, as well as operation of the St.

Gabriel CC Company,

Gabriel CC Company, LLC plant.

The Company also sells raw materials to St.

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Gabriel CC Company, LLC in this scenario lacks economic substance and therefore the Company does not include them in net sales within the consolidated statements of earnings.

Payments for the services the Company provided amounted to $ 920 and $ 1,747 for the three and six months ended June 30, 2021, respectively, and $ 857 and $ 1,710 for the three and six months ended June 30, 2020, respectively.

The raw materials purchased and subsequently sold amounted to $ 6,580 and $ 12,042 for the three and six months ended June 30, 2021, respectively, and $ 2,903 and $ 7,614 for the three and six months ended June 30, 2020, respectively.

Payments for the services the Company provided amounted to $ 901 and $ 2,648 for the three and nine months ended September 30, 2021, respectively, and $ 834 and $ 2,544 for the three and nine months ended September 30, 2020, respectively.

The raw materials purchased and subsequently sold amounted to $ 6,419 and $ 18,461 for the three and nine months ended September 30, 2021, respectively, and $ 2,716 and $ 10,330 for the three and nine months ended September 30, 2020, respectively.

These services and raw materials are primarily recorded in cost of goods sold net of the finished goods received from St.

Gabriel CC Company, LLC of $ 5,210 and $ 9,601 for the three and six months ended June 30, 2021, respectively, and $ 3,020 and $ 6,741 for the three and six months ended June 30, 2020, respectively.

At June 30, 2021 and December 31, 2020, the Company had receivables of $ 7,423 and $ 2,809 , respectively, recorded in accounts receivable from St.

Gabriel CC Company, LLC of $ 4,944 and $ 14,545 for the three and nine months ended September 30, 2021, respectively, and $ 2,382 and $ 9,123 for the three and nine months ended September 30, 2020, respectively.

At September 30, 2021 and December 31, 2020, the Company had receivables of $ 4,657 and $ 2,809 , respectively, recorded in accounts receivable from St.

Gabriel CC Company, LLC for services rendered and raw materials sold.

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Gabriel CC Company, LLC.

In addition, the Company had receivables in the amount of $ 72 related to non-contractual monies owed from St.

Gabriel CC Company, LLC, recorded in receivables as of December 31, 2020.

In addition, the Company had receivables in the amount of $ 4 and $ 72 related to non-contractual monies owed from St.

Gabriel CC Company, LLC, recorded in receivables as of September 30, 2021 and December 31, 2020, respectively.

The Company had payables in the amount of $ 296 related to non-contractual monies owed to St.

Gabriel CC Company, LLC, recorded in accounts payable as of June 30, 2021 and December 31, 2020, respectively.

Gabriel CC Company, LLC, recorded in accounts payable as of September 30, 2021 and December 31, 2020, respectively.

NOTE 18 – LEASES

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Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate.

Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from June 30, 2021.

In addition, the Company has historically not been exercising purchase options under the equipment leases as it does not make economic sense to buy the equipment.

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Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term.

As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations.

As such, the Company's management determined it is appropriate to utilize a

corporate based borrowing rate for all locations.

The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio.

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The warehouse can be purchased at a pre-determined price beginning in 2023.

At June 30, 2021 and December 31, 2020, the Company had finance lease liabilities of $ 2,553 and $ 2,631 , respectively, which were recorded under lease liabilities (current and non-current) in the consolidated balance sheet.

Right of use assets and lease liabilities at June 30, 2021 and December 31, 2020 are summarized as follows:

Right of use assets June 30, 2021 December 31, 2020

At September 30, 2021 and December 31, 2020, the Company had finance lease liabilities of $ 2,510 and $ 2,631 , respectively, which were recorded under lease liabilities (current and non-current) in the consolidated balance sheet.

Right of use assets and lease liabilities at September 30, 2021 and December 31, 2020 are summarized as follows:

Right of use assets September 30, 2021 December 31, 2020

Operating leases $ 6,868 $ 5,838

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Total $ 9,280 $ 8,410

Lease liabilities - current June 30, 2021 December 31, 2020

Lease liabilities - current September 30, 2021 December 31, 2020

Operating leases $ 2,278 $ 2,178

1 unchanged sentence

Total $ 2,443 $ 2,337

Lease liabilities - non-current June 30, 2021 December 31, 2020

Lease liabilities - non-current September 30, 2021 December 31, 2020

Operating leases $ 4,644 $ 3,607

1 unchanged sentence

Total $ 6,989 $ 6,079

For the three and six months ended June 30, 2021 and 2020, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:

For the three and nine months ended September 30, 2021 and 2020, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed $ 502 $ — $ 2,914 $ ( 98 )

Right-of-use assets obtained in exchange for new finance lease liabilities, net of right-of-use assets disposed $ — $ 2,782 $ — $ 2,782

Weighted-average remaining lease term - operating leases 4.32 years 5.11 years 4.32 years 5.11 years

Weighted-average remaining lease term - finance leases 11.75 years n/a 11.75 years n/a

Weighted-average remaining lease term - finance leases 11.67 years 12.50 years 11.67 years 12.50 years

Weighted-average discount rate - operating leases 3.7 % 4.7 % 3.7 % 4.7 %

Weighted-average discount rate - finance leases 5.1 % n/a 5.1 % n/a

Rent expense charged to operations under operating lease agreements for the three and six months ended June 30, 2021 aggregated to approximately $ 770 and $ 1,486 , respectively, and $ 736 and $ 1,477 for the three and six months ended June 30, 2020, respectively.

Weighted-average discount rate - finance leases 5.1 % 5.1 % 5.1 % 5.1 %

Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2021 aggregated to approximately $ 788 and $ 2,274 , respectively, and $ 702 and $ 2,179 for the three and nine months ended September 30, 2020, respectively.

NOTE 19 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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On May 28, 2019, the Company entered into a pay-fixed ( 2.05 %), receive-floating interest rate swap with a notional amount of $ 108,569 and a maturity date of June 27, 2023.

The Company's risk management objective and strategy with respect to the interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt.

The Company is meeting its objective since changes in the cash flows of the interest rate swap are expected to exactly offset the changes in the cash flows attributable to fluctuations in the contractually specified interest rate on the interest payments associated with the Credit Agreement.

The net interest expense related to the interest rate swap contract was $ 534 and $ 1,055 for the three and six months ended June 30, 2021, and $ 430 and $ 551 for the three and six months ended June 30, 2020, respectively, were recorded in the condensed consolidated statements of operations under interest expense, net.

The net interest expense related to the interest rate swap contract was $ 538 and $ 1,593 for the three and nine months ended September 30,

2021, and $ 515 and $ 1,066 for the three and nine months ended September 30, 2020, respectively, were recorded in the condensed consolidated statements of operations under interest expense, net.

At the same time, the Company also entered into a pay-fixed ( 0.00 %), receive-fixed ( 2.05 %) cross-currency swap to manage foreign exchange risk related to the Company's net investment in Chemogas.

The derivative has a notional amount of $ 108,569 , an effective date of May 28, 2019, and a maturity date of June 27, 2023.

The interest income related to the cross-currency swap contract was $ 563 and $ 1,119 for the three and six months ended June 30, 2021, and $ 581 and $ 1,144 for the three and six months ended June 30, 2020, respectively, which were recorded in the condensed consolidated statements of operations under interest expense, net.

The interest income related to the cross-currency swap contract was $ 563 and $ 1,682 for the three and nine months ended September 30, 2021, and $ 562 and $ 1,706 for the three and nine months ended September 30, 2020, respectively, which were recorded in the condensed consolidated statements of operations under interest expense, net.

The derivative instruments are with a single counterparty and are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract.

As such, the derivative instruments are categorized as a master netting arrangement and presented as a net derivative asset or derivative liability on the consolidated balance sheets.

As of June 30, 2021 and December 31, 2020, the fair value of the derivative instruments is presented as follows in the Company's condensed consolidated balance sheets:

Derivative liabilities June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, the fair value of the derivative instruments is presented as follows in the Company's condensed consolidated balance sheets:

Derivative liabilities September 30, 2021 December 31, 2020

Interest rate swap $ 3,282 $ 4,865

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If determined not to be highly effective, the Company will discontinue hedge accounting.

As of June 30, 2021, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective.

As of September 30, 2021, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective.

As such, the net change in fair values of the derivative instruments was recorded in accumulated other comprehensive income.

Losses and gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and six months ended June 30, 2021 and 2020:

Losses and gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and nine months ended September 30, 2021 and 2020:

Location within Statements of Comprehensive Income Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

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 1. Financial Statements