−Removed: Management's Discussion and Analysis of Financial Condition and Results of Operations (All amounts in thousands, except share and per share data)
+Added: Management's Discussion and Analysis of Financial Condition and Results of Operations (In thousands, except share and per share data)
This report contains forward-looking statements, within the meaning of Section 21E of the Exchange Act, which reflect our expectation or belief concerning future events that involve risks and uncertainties.
6 unchanged sentences
Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated".
−Removed: In May, our Verona, Missouri plant experienced a flash flood event as a result of very localized storms in the southwest part of the state.
−Removed: The plant was shut down for several weeks as we repaired affected equipment, cleaned the site, and safely re-started activities.
−Removed: The negative direct financial impact to the quarter was approximately $3.8 million, primarily due to the write off of damaged inventory and the costs associated with external service providers used for the clean-up efforts.
−Removed: Customer requirements were largely satisfied through inventory on hand and by leveraging alternate and redundant manufacturing capabilities across our supply chain.
−Removed: The manufacturing site is now fully operational and we have filed a related insurance claim with the expectation to partially offset these expenses with future insurance recoveries.
−Removed: As of June 30, 2021, we had approximately 1,327 full time employees worldwide.
−Removed: We believe that we have been successful in attracting skilled and experienced personnel in a competitive environment.
−Removed: Management believes that our human capital resources are adequate to perform all business functions.
−Removed: COVID-19 Response
+Added: As of September 30, 2021, we had approximately 1,305 full time employees worldwide.
+Added: We believe that, over time, we have been successful in attracting skilled and experienced personnel in a competitive environment and management believes that our human capital resources have been adequate to perform all business functions.
+Added: Recent macro-economic challenges have created certain labor shortages which have impacted operations in select geographies.
+Added: Management believes these impacts are transitory and that, over time, our human capital resources will be adequate to perform needed business functions.
+Added: COVID-19 Pandemic Response
The COVID-19 response effort has been a primary focus for us since early last year.
Our focus has been on employee safety first, keeping our manufacturing sites operational, satisfying customer needs, preserving cash and ensuring strong liquidity, and responding to changes in this dynamic market environment as appropriate.
−Removed: To date, all of our manufacturing sites are operating at near normal conditions enabling us to supply our customers with the important products and services they need, our research and development teams are advancing our innovation efforts, and all of our other employees are effectively carrying on their responsibilities and functions remotely.
−Removed: While the impact on demand in aggregate does not appear to be material to our Company, we are continuing to watch the markets that we serve closely.
−Removed: We have stress tested our balance sheet under various significant downturn scenarios and, given our relatively low net debt position, cash on hand, access to our undrawn revolving loans under the Credit Agreement, and expected free cash flows, we are pleased with the strength of our balance sheet as we continue through this uncertain market environment.
+Added: As a result of our broad based risk mitigation efforts of the direct impacts of the Covid-19 pandemic, our manufacturing sites have been operating at near normal conditions, our research and development teams have continued to innovate in our laboratories, and all of our other employees have been effectively carrying on their responsibilities and functions remotely or in a reduced density hybrid setting.
+Added: We are increasingly focused on managing the extraordinary supply chain disruptions that are challenging the markets we operate within that are, at least in part, related to the pandemic and/or the global recovery from the pandemic.
+Added: We are experiencing severe input cost inflation, raw material shortages, logistics disruptions, and labor availability issues.
+Added: These indirect pandemic related challenges have accelerated as 2021 has progressed and are likely to continue for some time.
Segment Results
We sell products for all three segments through our own sales force, independent distributors, and sales agents.
−Removed: The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three and six months ended June 30, 2021 and 2020:
+Added: The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three and nine months ended September 30, 2021 and 2020:
Business Segment Net Sales Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2021 2020 2021 2020
6 unchanged sentences
Business Segment Earnings From Operations Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2021 2020 2021 2020
7 unchanged sentences
Unalloca ted corporate expenses consist of:
−Removed: (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 expens e of $604 and $1,208 for the three and six months ended June 30, 2021, respectively, and $405 and $806 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.
+Added: (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 expens e of $604 and $1,812 for the three and nine months ended September 30, 2021, respectively, and $399 and $1,205 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.
RESULTS OF OPERATIONS
−Removed: (All amounts in thousands, except share and per share data)
−Removed: Three months ended June 30, 2021 compared to three months ended June 30, 2020.
−Removed: Three Months Ended June 30, Increase
+Added: (In thousands, except share and per share data)
+Added: Three months ended September 30, 2021 compared to three months ended September 30, 2020.
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
6 unchanged sentences
Net earnings $ 25,013 $ 21,568 $ 3,445 16.0 %
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
4 unchanged sentences
Total $ 197,869 $ 175,140 $ 22,729 13.0 %
−Removed: • The increase in net sales within the HNH segment for the three months ended June 30, 2021 as compared to 2020 was driven both by strong sales growth within food and beverage markets as well as higher sales within the Minerals and Nutrients business.
−Removed: • The increase in net sales within the ANH segment for the three months ended June 30, 2021 compared to 2020 was primarily the result of higher sales in both Monogastric and Ruminant animal markets and a favorable impact related to changes in foreign currency exchange rates.
−Removed: • The increase in Specialty Products segment sales for the three months ended June 30, 2021 compared to 2020 was primarily due to higher sales for products in both the plant nutrition business and the medical device sterilization market.
+Added: • The increase in net sales within the HNH segment for the three months ended September 30, 2021 as compared to 2020 was driven by strong sales growth within the minerals and nutrients business.
+Added: • The increase in net sales within the ANH segment for the three months ended September 30, 2021 compared to 2020 was the result of higher sales in both monogastric and ruminant animal markets.
+Added: • The increase in Specialty Products segment sales for the three months ended September 30, 2021 compared to 2020 was due to higher sales of products in both the plant nutrition business and the medical device sterilization market.
• Sales relating to Other increased from the prior year due to higher demand.
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
% of net sales 30.8 % 32.2 %
−Removed: Gross margin as a percentage of sales decreased for the three months ended June 30, 2021 compared to 2020 primarily due to a significant increase in certain raw material and distribution costs and the costs associated with the recovery from the flash flood event, partially offset by favorable mix and overall manufacturing efficiencies.
+Added: Gross margin as a percentage of sales decreased for the three months ended September 30, 2021 compared to 2020 primarily due to a significant increase in certain manufacturing input costs and distribution costs, partially offset by higher average selling prices.
Operating Expenses
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
% of net sales 14.4 % 15.6 %
−Removed: The increase in operating expenses was primarily due to an increase in certain higher compensation-related costs, partially offset by the prior year being negatively impacted by a goodwill impairment charge related to business formerly included in the Industrial Products segment, and a decrease in transaction and integration costs.
+Added: The increase in operating expenses was primarily due to higher selling expenses, driven by an increase in compensation-related costs, and an increase in research and development, partially offset by the timing of an insurance recovery.
Earnings from Operations
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
5 unchanged sentences
% of net sales (operating margin) 16.4 % 16.6 %
−Removed: • Earnings from operations for the HNH segment increased primarily due to the aforementioned higher sales and overall manufacturing efficiencies, partially offset by higher raw material and distribution costs and the costs associated with the recovery from the flash flood event that we experienced at our Verona, Missouri manufacturing site.
−Removed: • ANH segment earnings from operations decreased primarily due to increases in raw material and distribution costs and the costs associated with the recovery from the flash flood event.
−Removed: • The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by increases in raw material and distribution costs.
−Removed: • The increase in Other and unallocated was primarily driven by the prior year being negatively impacted by a goodwill impairment charge related to business formerly included in the Industrial Products segment and a decrease in transaction and integration costs, partially offset by an increase in costs related to a company-wide ERP implementation.
+Added: • Earnings from operations for the HNH segment increased primarily due to the aforementioned higher sales, favorable mix, and the timing of an insurance recovery, partially offset by higher manufacturing input costs and distribution costs.
+Added: • ANH segment earnings from operations increased due to the aforementioned higher sales, partially offset by increases in manufacturing input costs and distribution costs.
+Added: • The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by increases in manufacturing input costs and distribution costs.
+Added: • The decrease in Other and unallocated was primarily driven by an increase in transaction and integration costs and an increase in costs related to a company-wide ERP implementation.
Other Expenses (Income)
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
2 unchanged sentences
$ 428 $ 1,121 $ (693) (61.8) %
−Removed: Interest expense for the three months ended June 30, 2021 and 2020 was primarily related to outstanding borrowings under the Credit Agreement.
+Added: Interest expense for the three months ended September 30, 2021 and 2020 was primarily related to outstanding borrowings under the Credit Agreement.
Income Tax Expense
−Removed: Three Months Ended June 30, Increase
+Added: Three Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
Effective tax rate 22.0 % 22.7 %
−Removed: The increase of effective tax rate was primarily due to a reduction in certain tax credits and lower tax benefits from stock-based compensation.
−Removed: Six months ended June 30, 2021 compared to six months ended June 30, 2020.
−Removed: Six Months Ended June 30, Increase
+Added: The decrease in the effective tax rate 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.
+Added: Nine months ended September 30, 2021 compared to nine months ended September 30, 2020.
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
6 unchanged sentences
Net earnings $ 71,155 $ 62,461 $ 8,694 13.9 %
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
4 unchanged sentences
Total $ 585,890 $ 522,931 $ 62,959 12.0 %
−Removed: • The increase in net sales within the HNH segment for the six months ended June 30, 2021 as compared to 2020 was primarily driven by both strong sales growth in the food and beverage markets, as well as higher sales of chelated minerals and choline nutrients.
−Removed: • The increase in net sales within the ANH segment for the six months ended June 30, 2021 compared to 2020 was primarily the result of higher sales in both Monogastric and Ruminant animal markets and a favorable impact related to changes in foreign currency exchange rates.
−Removed: • The increase in Specialty Products segment sales for the six months ended June 30, 2021 compared to 2020 was primarily due to higher sales of products in both the medical device sterilization market and plant nutrition business.
+Added: • The increase in net sales within the HNH segment for the nine months ended September 30, 2021 as compared to 2020 was primarily driven by strong sales growth in both the food and beverage markets and minerals and nutrients business.
+Added: • The increase in net sales within the ANH segment for the nine months ended September 30, 2021 compared to 2020 was primarily the result of higher sales in both monogastric and ruminant animal markets and a favorable impact related to changes in foreign currency exchange rates.
+Added: • The increase in Specialty Products segment sales for the nine months ended September 30, 2021 compared to 2020 was primarily due to higher sales of products in both the medical device sterilization market and plant nutrition business.
• Sales relating to Other increased from the prior year due to higher demand.
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
% of net sales 30.6 % 32.0 %
−Removed: Gross margin as a percentage of sales decreased for the six months ended June 30, 2021 compared to 2020 primarily due to a significant increase in certain raw material and distribution costs and the costs associated with the recovery from the flash flood event that we experienced at our Verona, Missouri manufacturing site, partially offset by favorable mix and overall plant efficiencies.
+Added: Gross margin as a percentage of sales decreased for the nine months ended September 30, 2021 compared to 2020 primarily due to a significant increase in certain manufacturing input costs and distribution costs and the costs associated with the recovery from the flash flood event that we experienced at our Verona, Missouri manufacturing site, partially offset by favorable mix, overall plant efficiencies, and increased average selling prices.
Operating Expenses
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
% of net sales 14.6 % 16.2 %
−Removed: The decrease in operating expenses was primarily due to lower transaction and integration costs and the prior year being unfavorably impacted by a goodwill impairment charge related to business formerly included in the Industrial Products segment, partially offset by certain higher compensation-related costs.
+Added: The increase in operating expenses was primarily due to certain higher compensation-related costs, partially offset by lower transaction and integration costs, the prior year being unfavorably impacted by a goodwill impairment charge related to business formerly included in the Industrial Products segment, and the timing of an insurance recovery.
Earnings from Operations
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
5 unchanged sentences
% of net sales (operating margin) 16.0 % 15.7 %
−Removed: • Earnings from operations for the HNH segment increased primarily due to the aforementioned higher sales and overall manufacturing efficiencies, partially offset by higher raw material and distribution costs, and the costs associated with the recovery from the flash flood event that we experienced at our Verona, Missouri manufacturing site.
−Removed: • ANH segment earnings from operations decreased primarily due to an increase in raw material costs and distribution costs along with the costs associated with the recovery from the flash flood event.
−Removed: • The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by higher raw material and distribution costs.
+Added: • Earnings from operations for the HNH segment increased primarily due to the aforementioned higher sales and overall manufacturing efficiencies, partially offset by higher manufacturing input costs and distribution costs, and the expenses associated with the recovery from the flash flood event that we experienced at our Verona, Missouri manufacturing site.
+Added: • ANH segment earnings from operations decreased primarily due to a significant increase in manufacturing input costs and distribution costs along with the expenses associated with the recovery from the flash flood event.
+Added: • The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by higher manufacturing input costs and distribution costs.
• The increase in Other and unallocated was primarily driven by the prior year being negatively impacted by a goodwill impairment charge related to business formerly included in the Industrial Products segment and a decrease in transaction and integration costs, partially offset by an increase in costs related to a company-wide ERP implementation.
Other Expenses (Income)
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
2 unchanged sentences
$ 1,594 $ 3,853 $ (2,259) (58.6) %
−Removed: Interest expense for the six months ended June 30, 2021 and 2020 was primarily related to outstanding borrowings under the Credit Agreement.
+Added: Interest expense for the nine months ended September 30, 2021 and 2020 was primarily related to outstanding borrowings under the Credit Agreement.
Income Tax Expense
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
1 unchanged sentence
Effective tax rate 22.7 % 20.3 %
−Removed: The increase of effective tax rate was primarily due to a reduction in certain tax credits, lower tax benefits from stock-based compensation, and higher enacted state tax rates.
+Added: The increase in the effective tax rate was primarily due to a reduction in certain tax credits, lower tax benefits from stock-based compensation, and higher enacted state tax rates.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
−Removed: (All amounts in thousands, except share and per share data)
−Removed: During the six months ended June 30, 2021, 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, 2020.
+Added: (In thousands, except share and per share data)
+Added: During the nine months ended September 30, 2021, 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, 2020.
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.
−Removed: Cash and cash equivalents decreased to $79,902 at June 30, 2021 from $84,571 at December 31, 2020.
−Removed: At June 30, 2021, the Company had $57,722 of cash and cash equivalents held by foreign subsidiaries.
+Added: Cash and cash equivalents increased to $90,013 at September 30, 2021 from $84,571 at December 31, 2020.
+Added: At September 30, 2021, the Company had $58,916 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;
3 unchanged sentences
operations, we could be required to pay additional withholding taxes to repatriate these funds.
−Removed: Working capital was $186,504 at June 30, 2021 as compared to $172,460 at December 31, 2020, an increase of $14,044.
+Added: Working capital was $195,349 at September 30, 2021 as compared to $172,460 at December 31, 2020, an increase of $22,889.
Working capital reflects the payment of the 2020 declared dividend in 2021 of $18,704, net payments on the revolving debt of $55,000, and capital expenditures and intangible assets acquired of $22,391.
−Removed: Six Months Ended June 30, Increase
+Added: Nine Months Ended September 30, Increase
(in thousands) 2021 2020 % Change
6 unchanged sentences
We continue to invest in corporate projects, improvements across all production facilities, and intangible assets.
−Removed: Total investments in property, plant and equipment and inta ngible assets were $13,760 and $13,265 f or the six months ended June 30, 2021 and 2020, respectively.
+Added: Total investments in property, plant and equipment and inta ngible assets were $22,391 and $20,552 f or the nine months ended September 30, 2021 and 2020, respectively.
Financing Activities
−Removed: We borrowed $5,000 against the revolving loan and made total debt payments of $45,000 during the six months ended June 30, 2021, resulting in $376,431 available under the Credit Agreement as of June 30, 2021.
+Added: We borrowed $5,000 against the revolving loan and made total debt payments of $60,000 during the nine months ended September 30, 2021, resulting in $391,431 available under the Credit Agreement as of September 30, 2021.
We have an approved stock repurchase program.
The total authorization under this program is 3,763,038 shares.
−Removed: Since the inception of the program in June 1999, a total of 2,654,520 shares have been purchased, and we had 66,055 shares remaining in treasury at June 30, 2021.
+Added: Since the inception of the program in June 1999, a total of 2,715,595 shares have been purchased, and we had 85,272 shares remaining 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.
We also intend to acquire shares from time to time at prevailing market prices if and to the extent we deem it is advisable to do so based on our assessment of corporate cash flow, market conditions and other factors.
−Removed: Proceeds from stock options exercis ed were $3,886 and $6,802 for the six months ended June 30, 2021 and 2020, respectively.
−Removed: Dividend payments were $18,700 and $16,704 for the six mont hs ended June 30, 2021 and 2020, respectively.
+Added: Proceeds from stock options exercis ed were $6,351 and $8,179 for the nine months ended September 30, 2021 and 2020, respectively.
+Added: Dividend payments were $18,704 and $16,704 for the nine mont hs ended September 30, 2021 and 2020, respectively.
Other Matters Impacting Liquidity
We currently provide postretirement benefits in the form of two retirement medical plans, as discussed in Note 14 – Employee Benefit Plans.
−Removed: The liabil ity recorded in other long-term liabilities on the consolidated balance sheets as of June 30, 2021 and December 31, 2020 was $1,429 and $1,374, respectively, an d the plans are not funded.
+Added: The liabil ity recorded in other long-term liabilities on the consolidated balance sheets as of September 30, 2021 and December 31, 2020 was $1,456 and $1,374, respectively, an d the plans are not funded.
Historical cash payments made under these plans have typically been less than $100 per year.
2 unchanged sentences
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.
−Removed: The deferred compensation liability as of June 30, 2021 and December 31, 2020 was $5,714 and $3,581, respectively, and was included in other long-term obligations on our balance sheet.
−Removed: The related rabbi trust assets were $5,714 a nd $3,581 as of June 30, 2021 and December 31, 2020, respectively, and were included in other non-current assets on the balance sheets.
+Added: The deferred compensation liability as of September 30, 2021 and December 31, 2020 was $6,077 and $3,581, respectively, and was included in other long-term obligations on our balance sheet.
+Added: The related rabbi trust assets were $6,076 a nd $3,581 as of September 30, 2021 and December 31, 2020, respectively, and were included in other non-current assets on the balance sheets.
Chemogas has an unfunded defined benefit plan.
The plan provides for the payment of a lump sum at retirement or payments in case of death of the covered employees.
−Removed: The amount recorded for these obligations on our balance sheets as of June 30, 2021 and December 31, 2020 were $945 and $950, respective ly, and were included in other long-term obligations.
+Added: The amounts recorded for these obligations on our balance sheets as of September 30, 2021 and December 31, 2020 were $934 and $950, respective ly, and were included in other long-term obligations.
Critical Accounting Policies
−Removed: There were no changes to the Company's Critical Accounting Policies, as described in its December 31, 2020 Annual Report on Form 10-K, during the six months ended June 30, 2021.
+Added: There were no changes to the Company's Critical Accounting Policies, as described in its December 31, 2020 Annual Report on Form 10-K, during the nine months ended September 30, 2021.
Related Party Transactions
We were engaged in related party transactions with St.
−Removed: Gabriel CC Company, LLC during the three and six months ended June 30, 2021.
+Added: Gabriel CC Company, LLC during the three and nine months ended September 30, 2021.
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.