What changed in this filing

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Item 1. Financial Statements

2022-07-29 compared with 2022-04-29 · 321 added, 193 removed, 517 unchanged (50% of the section changed)

3 unchanged sentences

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

Assets March 31, 2022 (unaudited) December 31, 2021

Assets June 30, 2022 (unaudited) December 31, 2021

Current assets:

Cash and cash equivalents $ 76,183 $ 103,239

Accounts receivable, net of allowance for doubtful accounts of $ 1,164 and $ 928 at March 31, 2022 and December 31, 2021 respectively

Accounts receivable, net of allowance for doubtful accounts of $ 1,203 and $ 928 at June 30, 2022 and December 31, 2021 respectively

138,579 117,408

Inventories, net 108,411 91,058

Inventories 140,840 91,058

Prepaid expenses 8,467 6,116

Derivative assets 7,276 —

Other current assets 5,796 4,411

5 unchanged sentences

Right of use assets - finance lease 2,255 2,359

Derivative assets 882 —

Other assets 13,841 11,674

15 unchanged sentences

Derivative liabilities — 2,658

Contingent consideration liability 24,793 —

Other long-term obligations 15,284 13,712

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Authorized 120,000,000 shares;

32,116,069 shares issued and outstanding at March 31, 2022 and 32,287,150 shares issued and outstanding at December 31, 2021, respectively

32,120,593 and 32,287,150 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 120,811 147,716

Retained earnings 790,840 732,138

Accumulated other comprehensive loss ( 6,289 ) ( 4,993 )

Accumulated other comprehensive income ( 12,424 ) ( 4,993 )

Total stockholders' equity 901,370 877,015

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net sales $ 236,693 $ 202,365 $ 465,560 $ 388,021

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Earnings from operations 39,920 30,593 78,256 61,168

Other expenses:

Other expenses, net:

Interest expense, net 960 608 1,505 1,333

Other expense (income), net 161 ( 133 )

Other (income) expense, net ( 298 ) ( 34 ) ( 137 ) ( 167 )

662 574 1,368 1,166

Earnings before income tax expense 39,258 30,019 76,888 60,002

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net earnings $ 29,782 $ 22,731 $ 58,712 $ 46,142

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment ( 6,951 ) 1,524 ( 9,793 ) ( 4,619 )

1 unchanged sentence

Change in postretirement benefit plans ( 34 ) 8 ( 61 ) 15

Other comprehensive loss ( 1,296 ) ( 5,624 )

Other comprehensive income (loss) ( 6,135 ) 1,883 ( 7,431 ) ( 3,741 )

Comprehensive income $ 23,647 $ 24,614 $ 51,281 $ 42,401

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2022 and 2021

For the three and six months ended June 30, 2022 and 2021

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

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Balance - March 31, 2022 873,682 761,058 ( 6,289 ) 32,116,069 2,142 116,771

Net earnings 29,782 29,782 — — — —

Other comprehensive (loss) ( 6,135 ) — ( 6,135 ) — — —

Repurchases of common stock ( 600 ) — — ( 4,976 ) — ( 600 )

Shares and options issued under stock plans 4,641 — — 9,500 1 4,640

Balance - June 30, 2022 $ 901,370 $ 790,840 $ ( 12,424 ) 32,120,593 $ 2,143 $ 120,811

Balance - December 31, 2020 $ 828,233 $ 656,740 $ 4,173 32,372,621 $ 2,160 $ 165,160

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Balance - March 31, 2021 849,492 680,151 ( 1,451 ) 32,451,930 2,165 168,627

Net earnings 22,731 22,731 — — — —

Other comprehensive income 1,883 — 1,883 — — —

Repurchases of common stock ( 9,240 ) — — ( 72,649 ) ( 5 ) ( 9,235 )

Shares and options issued under stock plans 4,776 — — 25,493 2 4,774

Balance - June 30, 2021 $ 869,642 $ 702,882 $ 432 32,404,774 $ 2,162 $ 164,166

See accompanying notes to condensed consolidated financial statements.

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(Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

3 unchanged sentences

Stock compensation expense 6,889 5,914

Deferred income taxes 1,778 54

Provision for doubtful accounts 380 ( 25 )

Unrealized loss (gain) on foreign currency transactions and deferred compensation 37 ( 229 )

Gain on disposal of assets ( 29 ) ( 1 )

Unrealized loss/(gain) on foreign currency transaction and deferred compensation 188 ( 401 )

Asset impairment charge 23 —

Loss/(gain) on disposal of assets 203 ( 19 )

Changes in assets and liabilities

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Cash flows from investing activities:

Cash paid for acquisition, net of cash acquired ( 295,660 ) —

Capital expenditures and intangible assets acquired ( 20,799 ) ( 13,760 )

Proceeds from sale of assets 197 240

Investment in affiliates ( 150 ) —

Net cash used in investing activities ( 316,412 ) ( 13,520 )

2 unchanged sentences

Principal payments on revolving loan ( 40,000 ) ( 45,000 )

Principal payments on acquired debt ( 30,648 ) —

Principal payments on finance lease ( 83 ) ( 78 )

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Dividends paid ( 20,704 ) ( 18,700 )

Repurchase of common stock ( 34,599 ) ( 1,596 )

Net cash used in financing activities ( 34,845 ) ( 27,933 )

Purchase of common stock ( 35,199 ) ( 10,835 )

Net cash provided by (used in) financing activities 239,694 ( 65,727 )

Effect of exchange rate changes on cash ( 5,599 ) ( 1,811 )

(Decrease) increase in cash and cash equivalents ( 38,773 ) 3,964

Decrease in cash and cash equivalents ( 27,056 ) ( 4,669 )

Cash and cash equivalents beginning of period 103,239 84,571

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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 months ended March 31, 2022 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 six months ended June 30, 2022 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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Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

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

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The adoption of ASU 2019-12 did not have a significant impact on the Company's consolidated financial statements and disclosures.

NOTE 2 – SIGNIFICANT ACQUISITIONS

On June 21, 2022, Balchem and its wholly-owned subsidiary, Balchem B.V., completed the acquisition of Kechu BidCo AS and its subsidiary companies, including Kappa Bioscience AS, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway (all acquired companies being hereinafter collectively referred to as “Kappa”).

The Company made payments of approximately kr 3,301,341 ("kr" indicates the Norwegian krone) on the acquisition date, amounting to approximately kr 2,997,669 to the former shareholder and approximately kr 303,672 to Kappa's lenders to pay off all Kappa bank debt.

Net of cash acquired of kr 63,064 , total payments on the acquisition date were kr 3,238,277 .

Considering net cash acquired of $ 6,365 , these payments translated to approximately $ 326,820 paid on the acquisition date, amounting to $ 302,537 paid to the former shareholder and approximately $ 30,648 to Kappa's lenders.

The acquisition was primarily financed through the 2018 Credit Agreement (see Note 8, "Revolving Loan").

In connection with this transaction, the seller has an opportunity to receive an additional payment in 2024 if certain financial performance targets and other metrics are met, and therefore we recorded contingent consideration of kr 245,000 (translated to $ 24,793 ) as of June 30, 2022.

Kappa manufactures specialty vitamin K2, a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health, immunity, and athletic performance.

Primarily, vitamin K2 supports the transport and distribution of calcium in the body.

Vitamin K2 is important at all life stages, from pregnancy and early life to healthy aging.

Kappa's K2VITAL ® branded vitamin K2 is the leading synthetic vitamin K2 and is backed by strong intellectual property and a deep clinical research portfolio.

The acquisition strengthens the Company's scientific and technical expertise, geographic reach, and marketplace leadership, which should ultimately lead to accelerated growth for the Company's portfolios within the Human Nutrition & Health segment.

The goodwill of $ 212,591 that arose on the acquisition date consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce.

The goodwill is assigned to the Human Nutrition & Health business segment and is not deductible for income tax purposes.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:

Cash and cash equivalents $ 6,365

Accounts receivable 8,036

Inventories 17,701

Property, plant and equipment 9,854

Right of use assets 3,349

Customer relationships 113,545

Developed technology 18,166

Trademarks 6,055

Other assets 2,399

Accounts payable ( 3,301 )

Bank debt ( 30,648 )

Lease liabilities ( 3,349 )

Other liabilities ( 4,373 )

Deferred income taxes, net ( 29,127 )

Goodwill 212,591

Total consideration on acquisition date 327,263

Contingent consideration liability ( 24,726 )

Net gains on foreign currency exchange forward contracts ( 512 )

Amount paid to shareholders 302,025

Kappa bank debt paid on purchase date 30,648

Total amount paid on acquisition date $ 332,673

The estimated fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions, which are subject to change.

In preparing our preliminary fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor.

Valuation methods utilized include net realizable value for inventory, multi-period excess earnings method for customer relationships, the relief from royalty method for other intangible assets, and a scenario-based approach for the contingent consideration.

The purchase price and related allocation of assets acquired and liabilities assumed is preliminary pending management's final review of fair value calculations and deferred tax liabilities related to certain non-deductible assets.

Customer relationships are amortized over a 15-year period utilizing a percentage of excess earnings over economic life method.

The corporate trademark and product trademarks are amortized over 2 years and 10 years, respectively, and developed technology is amortized over 12 years, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.

Transaction and integration costs related to the Kappa acquisition are included in selling, general, and administrative expenses and were $ 451 for both the three and six months ended June 30, 2022.

There were no such amounts related to this acquisition for the three and six months ended June 30, 2021.

The following preliminary unaudited pro forma information has been prepared as if the acquisition had occurred on January 1, 2021.

Three Months Ended

June 30, Six Months Ended

Net Sales Net Earnings Net Sales Net Earnings

Kappa actual results included in the Company's consolidated income statement from June 21, 2022 through June 30, 2022 $ — $ — $ — $ —

2022 Supplemental pro forma combined financial information $ 247,430 $ 30,172 $ 489,170 $ 58,648

2021 Supplemental pro forma combined financial information $ 213,032 $ 26,344 $ 410,649 $ 50,379

Kappa's net sales and net earnings from June 21, 2022 through June 30, 2022 were not material.

As such, they were not included in the Company's condensed consolidated statements of earnings for the three and six months ended June 30, 2022.

2022 supplemental pro forma net earnings for the three and six months ended June 30, 2022, excluded $ 643 and $ 722 , respectively, of acquisition-related costs incurred.

The pro forma information presented does not purport to be indicative of the results that actually would have been attained if the Kappa acquisition had occurred at the beginning of the periods presented, and is not intended to be a projection of future results.

NOTE 3 – STOCKHOLDERS’ EQUITY

STOCK-BASED COMPENSATION

The Company’s results for the three months ended March 31, 2022 and 2021 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:

Increase/(Decrease) for the

Three Months Ended March 31,

The Company’s results for the three and six months ended June 30, 2022 and 2021 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,

2022 2021 2022 2021

Cost of sales $ 277 $ 444 $ 676 $ 744

1 unchanged sentence

Net earnings ( 2,933 ) ( 2,547 ) ( 5,312 ) ( 4,569 )

As allowed by ASC 718, "Compensation-Stock Compensation", the Company has made an estimate of expected forfeitures based on its historical experience and is recognizing compensation cost only for those stock-based compensation awards expected to vest.

The Company’s incentive plans allow for the granting of stock awards and options to purchase common stock.

As allowed by ASC 718, the Company has made an estimate of expected forfeitures based on its historical experience and is recognizing compensation cost only for those stock-based compensation awards expected to vest.

The Company’s stock incentive plans allow for the granting of stock awards and options to purchase common stock.

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

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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 March 31, 2022, the plans had 526,760 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 years for non-employee director restricted stock awards.

As of June 30, 2022, the plans had 534,120 shares available for future awards.

performance share awards, and three 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 three months ended March 31, 2022 and 2021 is summarized below:

For the three months ended

March 31, 2022 Shares (000s) Weighted

Option activity for the six months ended June 30, 2022 and 2021 is summarized below:

For the six months ended June 30, 2022 Shares (000s) Weighted

Price Aggregate

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Forfeited ( 6 ) 120.36

Outstanding as of March 31, 2022 968 $ 94.01 $ 41,483 6.6

Exercisable as of March 31, 2022 676 $ 81.06 $ 37,594 5.6

For the three months ended

March 31, 2021 Shares (000s) Weighted

Outstanding as of June 30, 2022 952 $ 93.99 $ 34,907 6.4

Exercisable as of June 30, 2022 666 $ 81.11 $ 32,409 5.4

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

Price Aggregate

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Canceled ( 1 ) 74.57

Outstanding as of March 31, 2021 950 $ 86.11 $ 37,322 7.0

Exercisable as of March 31, 2021 604 $ 73.11 $ 31,603 5.8

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

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 2.0 % and 0.5 %;

and expected lives of 4.9 years and 4.9 years, in each case for the three months ended March 31, 2022 and 2021, respectively.

and expected lives of 4.9 years and 4.9 years, in each case for the six months ended June 30, 2022 and 2021, 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 months ended March 31, 2022 and 2021 was as follows:

Other information pertaining to option activity during the three and six months ended June 30, 2022 and 2021 is as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Weighted-average fair value of options granted $ — $ 34.42 $ 40.26 $ 33.11

Total intrinsic value of stock options exercised ($000s) $ 495 $ 1,814 $ 1,149 $ 3,731

Non-vested restricted stock activity for the three months ended March 31, 2022 and 2021 is summarized below:

Three Months Ended March 31,

Non-vested restricted stock activity for the six months ended June 30, 2022 and 2021 is summarized below:

Six Months Ended June 30,

Shares (000s) Weighted

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Forfeited ( 3 ) 116.73 ( 2 ) 85.60

Non-vested balance as of March 31 122 $ 121.56 183 $ 96.70

Non-vested performance share activity for the three months ended March 31, 2022 and 2021 is summarized below:

Three Months Ended March 31,

Non-vested balance as of June 30 120 $ 122.03 181 $ 96.89

Non-vested performance share activity for the six months ended June 30, 2022 and 2021 is summarized below:

Six Months Ended June 30,

Shares (000s) Weighted

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Forfeited ( 3 ) 84.09 ( 11 ) 74.57

Non-vested balance as of March 31 70 $ 127.69 72 $ 110.22

Non-vested balance as of June 30 70 $ 127.69 72 $ 110.22

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 32 % and 33 %;

and initial TSR’s of - 15.7 % and 11.7 %, in each case for the three months ended March 31, 2022 and 2021, respectively.

and initial TSR’s of - 15.7 % and 11.7 %, in each case for the six months ended June 30, 2022 and 2021, 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 March 31, 2022 and 2021, there was $ 23,131 and $ 23,009 , respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans.

As of March 31, 2022, the unrecognized

As of June 30, 2022 and 2021, there were $ 19,988 and $ 19,796 , respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans.

As of June 30, 2022, the unrecognized

compensation cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

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The Company’s prior presentation of reflecting treasury stock separately within stockholders’ equity has been adjusted to conform to the presentation prescribed by the State of Maryland, where the Company is incorporated.

In connection therewith, adjustments to balances previously reflected as treasury stock of $ 2,210 and $ 7,873 as of March 31, 2021 and December 31, 2020, respectively, were made to the condensed consolidated statements of stockholders’ equity and prior references to “Treasury shares purchased” were updated to “Repurchases of common stock”, accordingly.

In connection therewith, adjustments to balances previously reflected as treasury stock of $ 8,472 , $ 2,210 , and $ 7,873 as of June 30, 2021, March 31, 2021, and December 31, 2020, respectively, were made to the condensed consolidated statements of changes in stockholders’ equity and prior references to “Treasury shares purchased” were updated to “Repurchases of common stock”, accordingly.

There was no impact to total stockholders’ equity in any of the years presented as a result of these updates.

1 unchanged sentence

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

During the three months ended March 31, 2022 and 2021, the Company purchased 245,685 and 13,475 shares, respectively, from open market purchases and from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes.

During the six months ended June 30, 2022 and 2021, the Company purchased 250,661 and 86,124 shares, respectively, from open market purchases and from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes.

These shares were purchased at an average cost of $ 140.42 and $ 125.81 , respectively.

NOTE 4 – INVENTORIES

Inventories, net of reserves at March 31, 2022 and December 31, 2021 consisted of the following:

March 31, 2022 December 31, 2021

Inventories at June 30, 2022 and December 31, 2021 consisted of the following:

June 30, 2022 December 31, 2021

Raw materials $ 43,342 $ 28,639

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NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at March 31, 2022 and December 31, 2021 are summarized as follows:

March 31, 2022 December 31, 2021

Property, plant and equipment at June 30, 2022 and December 31, 2021 are summarized as follows:

June 30, 2022 December 31, 2021

Land $ 11,273 $ 11,692

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NOTE 6 – INTANGIBLE ASSETS

The Company had goodwill in the amount of $ 522,587 and $ 523,949 as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021 are summarized as follows:

The Company had goodwill in the amount of $ 731,772 and $ 523,949 as of June 30, 2022 and December 31, 2021, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The increase in goodwill is the result of the acquisition of Kappa, partially offset by the change due to foreign exchange translation adjustments.

Refer to Note 2, "Significant Acquisitions", for more information.

Identifiable intangible assets with finite lives at June 30, 2022 and December 31, 2021 are summarized as follows:

(in years) Gross Carrying Amount at

3/31/2022 Accumulated Amortization at

3/31/2022 Gross Carrying Amount at

12/31/2021 Accumulated Amortization at

6/30/2022 Accumulated Amortization at 6/30/2022 Gross Carrying Amount at 12/31/2021 Accumulated Amortization at 12/31/2021

Customer relationships & lists 10 - 20

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$ 462,186 $ 243,384 $ 327,330 $ 232,665

Amortization of identifiable intangible assets was $ 5,911 and $ 6,484 for the three months ended March 31, 2022 and 2021, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets, the estimated amortization expense is $ 17,594 for the remainder of 2022, $ 19,393 for 2023, $ 10,516 for 2024, $ 6,260 for 2025, $ 4,938 for 2026 and $ 4,375 for 2027.

At March 31, 2022 and 2021, there were no identifiable intangible assets with indefinite useful lives as defined by ASC 350, "Intangibles-Goodwill and Other." Identifiable intangible assets are reflected in the Company's consolidated balance sheets under Intangible assets with finite lives, net.

There were no changes to the useful lives of intangible assets subject to amortization during the three months ended March 31, 2022 and 2021.

Amortization of identifiable intangible assets was approximately $ 5,850 and $ 11,761 for the three and six months ended June 30, 2022, respectively, and $ 6,229 and $ 12,713 for the three and six months ended June 30, 2021, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets, estimated amortization expense is $ 14,485 for the remainder of 2022, $ 27,923 for 2023, $ 19,659 for 2024, $ 16,117 for 2025, $ 15,710 for 2026 and $ 14,949 for 2027.

At June 30, 2022 and December 31, 2021, 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, 2022 and 2021.

NOTE 7 – EQUITY-METHOD INVESTMENT

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Additionally, voting rights ( 2 votes each) are not proportionate to the owners’ obligation to absorb expected losses or receive the expected residual returns of the joint venture.

The Company will receive up to 2/3 of the production offtake capacity and absorbs operating expenses approximately proportional to the actual percentage of offtake.

The Company receives up to 2/3 of the production offtake capacity and absorbs operating expenses approximately proportional to the actual percentage of offtake.

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 loss of $ 140 and $ 144 for the three months ended March 31, 2022 and 2021, respectively, relating to its portion of the joint venture's expenses in other expense.

During the first quarter of 2022 and 2021, the Company made capital contributions to the investment totaling $ 58 and $ 13 , res pectively.

The carrying value of the joint venture at March 31, 2022 and December 31, 2021 is $ 4,417 and $ 4,499 , respectively, and is recorded in other assets.

The Company recognized a lo ss of $ 140 and $ 280 for the three and six months ended June 30, 2022, respectively, and $ 130 and $ 274 for the three and six months ended June 30, 2021, respectively, relating to its portion of the joint venture's expenses in other expense.

The Company made capital contributions to the investment totaling $ 75 and $ 133 fo r the three and six months ended June 30, 2022, respectively, and received a net return of capital totaling $ 28 and $ 15 for the three and six months ended June 30, 2021, respectively.

The carrying value of the joint venture at June 30, 2022 and December 31, 2021 was $ 4,352 and $ 4,499 , respectively, and is recorded in "Other assets."

NOTE 8 – REVOLVING LOAN

On June 27, 2018, the Company and a bank syndicate entered into the Credit Agreement, which replaced the credit facility that had provided for a senior secured term loan of $ 350,000 and a revolving loan of $ 100,000 .

On June 27, 2018, the Company and a bank syndicate entered into a credit agreement (the "2018 Credit Agreement"), which replaced the existing credit facility that had provided for a senior secured term loan of $ 350,000 and a revolving loan of $ 100,000 .

The 2018 Credit Agreement, which expires on June 27, 2023, provides for revolving loans up to $ 500,000 (collectively referred to as the “loans”).

The loans may be used for working capital, letters of credit, and other corporate purposes and may be drawn upon at the Company’s discretion.

The initial borrowing under the Credit Agreement was used to pay the outstanding balance of $ 210,750 on the Company's senior secured term loan under its former credit facility, which was due May 2019.

As of March 31, 2022 a nd December 31, 2021, t he total balance outstanding on the Credit Agreement amounted to $ 128,569 and $ 108,569 , respectively.

The initial proceeds from the 2018 Credit Agreement were used to repay the outstanding balance of $ 210,750 on its senior secured term loan, which was due May 2019.

During the second quarter of 2022, the Company borrowed an additional $ 345,000 to fund the Kappa acquisition (see Note 2, "Significant Acquisitions").

As of June 30, 2022 and December 31, 2021 , the total balance outstanding on the 2018 Credit Agreement amounted to $ 433,569 and $ 108,569 , respectively.

There are no installment payments required on the revolving loans;

they may be voluntarily prepaid in whole or in part without premium or penalty, and all outstanding amounts are due on the maturity date.

On July 27, 2022, the Company entered into an Amended and Restated Credit Agreement with lenders in the form of a senior secured revolving credit facility, due July 27, 2027.

The Amended and Restated Credit Agreement allows for up to $ 550,000 of borrowing.

The Company used initial proceeds from the Amended and Restated Credit Agreement to repay the outstanding balance of $ 433,569 on the previous revolving credit facility, due June 2023.

In connection with the entering into the Amended and Restated Credit Agreement, the Company also modified its existing interest rate swap under the relief provided for in ASC 848, "Reference Rate Reform" (see Note 20 "Derivative Instruments and Hedging Activities").

Amounts outstanding under the 2018 Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the 2018 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 1.447 % at March 31, 2022.

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 % ( 0.150 % at March 31, 2022).

The unused portion of the revolving loan amounted to $ 371,431 at March 31, 2022.

The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the 2018 Credit Agreement, and the interest rate was 2.538 % at June 30, 2022.

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 2018 Credit Agreement and ranges from 0.15 % to 0.275 % ( 0.15 % at June 30, 2022).

The unused portion of the revolving loan amounted to $ 66,431 at June 30, 2022.

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

Costs associated with the issuance of the revolving loans are capitalized and amortized on a straight-line basis over the term of the Credit Agreement.

Costs associated with the issuance of the extinguished senior secured loan were capitalized and amortized

over the term of the respective financing arrangement using the effective interest method.

Capitalized costs net of accumulated amortization totaled $ 350 and $ 421 at March 31, 2022 and December 31, 2021, respectively, and are included in other assets on the condensed consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 71 for both the three months ended March 31, 2022 and 2021, and are included in interest expense in the accompanying consolidated statements of earnings.

Costs associated with the issuance of the revolving loans are capitalized and amortized on a straight-line basis over the term of the 2018 Credit Agreement, which is not materially different than the effective interest method.

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 $ 280 and $ 421 at June 30, 2022 and December 31, 2021, respectively, and are included in other assets on the condensed consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 70 and $ 141 for the three and six months ended June 30, 2022 and 2021, respectively, and are included in "Interest expense" in the accompanying condensed consolidated statements of earnings.

The 2018 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 March 31, 2022, the Company was in compliance with these covenants.

At June 30, 2022, the Company was in compliance with these covenants.

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

NOTE 9– NET EARNINGS PER SHARE

The following presents a reconciliation of the net earnings and shares used in calculating basic and diluted net earnings per common share:

The following presents a reconciliation of the net earnings and shares used in calculating basic and diluted net earnings per share:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net Earnings - Basic and Diluted $ 29,782 $ 22,731 $ 58,712 $ 46,142

Shares (000s)

Weighted Average Common Shares - Basic 31,999 32,232 32,020 32,243

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Net Earnings Per Share - Diluted $ 0.92 $ 0.70 $ 1.81 $ 1.41

The number of anti-dilutive shares were 113,029 and 311,030 for the three months ended March 31, 2022 and 2021, respectively.

The number of anti-dilutive shares were 294,568 and 237,453 for the three and six months ended June 30, 2022, respectively, and 153,868 and 304,324 for the three and six months ended June 30, 2021 , 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 10 – INCOME TAXES

The Company’s effective tax rate for the three months ended March 31, 2022 and 2021, was 23.1 % and 21.9 %, respectively.

The increase in the effective tax rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a reduction in certain tax credits and increased international income subject to higher foreign tax rates.

The Company’s effective tax rate for the three months ended June 30, 2022 and 2021, was 24.1 % and 24.3 %, respectively, and 23.6 % and 23.1 % for the six months ended June 30, 2022 and 2021.

The decrease in the effective tax rate for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily due to the prior year being negatively impacted by clarifying regulations related to tax reform, which was offset by lower tax benefits from stock-based compensation in the current quarter.

The increase in the effective tax rate for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to lower tax benefits from stock-based compensation and a reduction in certain tax credits.

Balchem will continue to evaluate and analyze the impact of the U.S.

Tax Cuts and Jobs Act that was enacted on December 22, 2017 and the additional guidance that has been issued, and may be issued, by the U.S.

Department of Treasury, the SEC, and/or the Financial Accounting Standards Board ("FASB") regarding this act.

Department of Treasury, the Securities and Exchange Commission ("SEC"), and/or the Financial Accounting Standards Board ("FASB") regarding this act.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

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.

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.

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It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken.

This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and

This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosures.

The application of ASC 740-10 requires judgment related to the uncertainty in income taxes and could impact our effective tax rate.

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and in various states and foreign countries.

As of March 31, 2022, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2017.

As of March 31, 2022 and December 31, 2021, the Company had approximately $ 5,880 and $ 5,881 , respectively, of unrecognized tax benefits, which are included in other long-term obligations on the Company’s condensed consolidated balance sheets.

As of June 30, 2022, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2017.

As of June 30, 2022 and December 31, 2021, the Company had approximately $ 5,902 and $ 5,881 , 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 March 31, 2022 and December 31, 2021 was approximately $ 2,148 and $ 2,106 , respectively, and is included in other long-term obligations.

The total amounts of accrued interest and penalties related to uncertain tax positions at June 30, 2022 and December 31, 2021 were approximately $ 2,214 and $ 2,106 , respectively, and are included in "Other long-term obligations."

NOTE 11 – SEGMENT INFORMATION

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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.

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.

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.

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

Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customers' appreciation of brand value.

Consequently, HNH makes investments in the foregoing for long-term value differentiation.

HNH also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers.

HNH partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market.

HNH has expertise in trends analysis and product development.

When what is combined with its strong manufacturing capabilities in customized spray dried and emulsified powders, extrusion and agglomeration, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, as well as ice cream bases and variegates, HNH is a one-stop solutions provider for beverage and dairy product development needs.

Additionally, HNH provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life.

Consequently, the Company makes investments in such activities for long-term value differentiation.

This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers.

The Company partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market.

The Company has expertise in trends analysis and product development.

With its strong manufacturing capabilities in customized spray dried and emulsified powders, extrusion and agglomeration, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, ice cream bases and variegates, the Company is a one-stop solutions provider for beverage and dairy product development needs.

Additionally, this segment provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life.

Major product applications are baked goods, refrigerated and frozen dough systems, processed meats, seasoning blends, confections, sports and protein bars, dietary plans, and nutritional supplements.

HNH also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients.

The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients.

Through the Kappa acquisition, this segment recently began manufacturing specialty vitamin K2, which is a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health, immunity, and athletic performance.

Animal Nutrition & Health

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

ANH’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.

ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries.

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

For ruminant animals, the Company’s microencapsulated products boost health and milk production by 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.

ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine

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.

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 global marketplace.

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.

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.

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.

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

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.

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

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

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

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.

As a fumigant, ethylene oxide blends are highly effective in killing bacteria, fungi, and insects in spices and other seasoning materials.

Specialty Products also distributes a number of other gases for various uses, most notably propylene oxide and ammonia.

The Company also distributes a number of other gases for various uses, most notably propylene oxide and ammonia.

Propylene oxide is marketed and sold in the U.S.

as a fumigant to aid in the control of insects and microbiological spoilage;

and to reduce bacterial and mold contamination in certain shell and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes.

Specialty Products distributes its propylene oxide product in the U.S.

and to reduce bacterial and mold contamination in certain shelled and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes.

The Company distributes its propylene oxide product in the U.S.

primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the Environmental Protection Agency ("EPA") and the Department of Transportation ("DOT").

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 packaging, which are approved for use in the countries these products are shipped to.

Specialty Products' inventory of cylinders for these products also represents a significant capital investment.

Specialty Products’ micronutrient agricultural nutrition business sells chelated minerals primarily into high value crops.

Specialty Products has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life.

First, Specialty Products determines optimal mineral balance for plant health.

Specialty Products then supplies a foliar applied Metalosate ® product range, utilizing patented amino acid chelate technology in order to optimize mineral balance.

These products quickly and efficiently deliver mineral nutrients.

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 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.

The Company’s micronutrient agricultural nutrition business sells chelated minerals primarily to producers of high value crops.

The Company has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life.

First, the Company determines optimal mineral balance for plant health.

The Company then has a foliar applied Metalosate ® product range, utilizing patented amino acid chelate technology.

Its products quickly and efficiently deliver mineral nutrients.

As a result, the farmer/grower gets healthier crops that are more resistant to disease and pests, larger yields and healthier food for the consumer with extended shelf life for produce being shipped long distances.

The segment information is summarized as follows:

Business Segment Assets March 31,

Business Segment Assets June 30,

2022 December 31,

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Business Segment Net Sales Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Human Nutrition & Health $ 131,628 $ 111,471 $ 254,073 $ 215,987

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Other and Unallocated (2)

5,818 2,391 9,564 4,375

Total $ 236,693 $ 202,365 $ 465,560 $ 388,021

Business Segment Earnings Before Income Taxes Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Human Nutrition & Health $ 23,705 $ 19,021 $ 44,008 $ 38,711

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Depreciation/Amortization Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Human Nutrition & Health $ 7,392 $ 7,441 $ 14,747 $ 15,014

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Other and Unallocated (2)

974 757 1,954 1,515

Total $ 11,933 $ 12,099 $ 23,861 $ 24,463

Capital Expenditures Three Months Ended

Capital Expenditures Six Months Ended

Human Nutrition & Health $ 11,006 $ 8,883

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Unallocated corporate expenses consist of:

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 304 and $ 234 for the first quarter of 2022 and 2021, respectively, and (ii) Unallocated amortization expense of $ 809 and $ 675 for the first quarter of 2022 and 2021, 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 Company's consolidated statement of earnings.

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 872 and $ 1,176 for the three and six months ended June 30, 2022, respectively, and $ 466 and $ 700 for the three and six months ended June 30, 2021, respectively, and (ii) Unallocated amortization expense of $ 811 and $ 1,620 for the three and six months ended June 30, 2022, respectively, and $ 674 and $ 1,349 for the three and six months ended June 30, 2021, 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 condensed consolidated statements of earnings.

NOTE 12 – REVENUE

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Product Sales $ 225,260 $ 193,122 $ 443,313 $ 369,110

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

United States $ 169,076 $ 147,188 $ 343,567 $ 285,039

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Product Sales Revenues

The Company’s primary operation is the manufacturing and sale of health and wellness ingredient products, in which the Company receives an order from a customer and fulfills that order.

The Company’s product sales are considered point-in-time revenue and consist of four sub-streams:

product sales, co-manufacturing, bill and hold, and consignment.

The Company’s primary operation is the manufacturing and sale of health and nutrition ingredient products, in which the Company receives an order from a customer and fulfills that order.

The Company’s product sales are considered point-in-time revenue and consist of three sub-streams:

product sales, co-manufacturing, and consignment.

Under the co-manufacturing agreements, the Company is responsible for the manufacture of a finished good where the customer provides the majority of the raw materials.

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NOTE 13 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the three months ended March 31, 2022 and 2021 for income taxes and interest is as follows:

Three Months Ended

Cash paid during the six months ended June 30, 2022 and 2021 for income taxes and interest is as follows:

Six Months Ended

Income taxes $ 15,562 $ 12,493

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NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income/(loss) were as follows:

The changes in accumulated other comprehensive (loss)/income were as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net foreign currency translation adjustment $ ( 6,951 ) $ 1,524 $ ( 9,793 ) $ ( 4,619 )

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Total before tax ( 7 ) 12 ( 37 ) 21

Tax ( 27 ) ( 4 ) ( 24 ) ( 6 )

Net of tax and adjustment ( 34 ) 8 ( 61 ) 15

Total other comprehensive loss $ ( 1,296 ) $ ( 5,624 )

Included in "Net foreign currency translation adjustment" were gains of $ 1,123 and $ 3,197 , related to a net investment hedge, which were net of taxes of $ 333 and $ 1,026 for the three months ended March 31, 2022 and 2021, respectively.

Total other comprehensive (loss)/income $ ( 6,135 ) $ 1,883 $ ( 7,431 ) $ ( 3,741 )

Included in "Net foreign currency translation adjustment" were gains of $ 3,963 and $ 5,086 , related to a net investment hedge, which were net of taxes of $ 1,309 and $ 1,642 for the three and six months ended June 30, 2022, respectively.

Included in "Net foreign currency translation adjustment" w as a loss of $ 1,024 and a gain of $ 2,173 , re lated 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.

See Note 20, "Derivative Instruments and Hedging Activities."

Accumulated other comprehensive income (loss) at March 31, 2022 and December 31, 2021 consisted of the following:

Accumulated other comprehensive (loss)/income at June 30, 2022 and December 31, 2021 consisted of the following:

Foreign currency

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Other comprehensive (loss)/income ( 9,793 ) 2,423 ( 61 ) ( 7,431 )

Balance March 31, 2022 $ ( 6,444 ) $ ( 58 ) $ 213 $ ( 6,289 )

Balance June 30, 2022 $ ( 13,395 ) $ 792 $ 179 $ ( 12,424 )

NOTE 15 – EMPLOYEE BENEFIT PLANS

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All amounts contributed to the plan are deposited into a trust fund administered by independent trustees.

On June 21, 2022, the Company completed the acquisition of Kappa, which sponsors one defined contribution plan for its employees.

Postretirement Medical Plans

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

Three Months Ended

Six Months Ended

Service cost $ 39 $ 43

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Net periodic benefit cost $ 56 $ 80

The amount recorded for these obligations on the Company’s balance sheets as of March 31, 2022 and December 31, 2021 were $ 1,197 and $ 1,293 , respectively, and are included in other long-term obligations.

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

T he amounts recorded for these obligations on the Company’s condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 are $ 1,221 and $ 1,293 , 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 $ 200 per year.

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

The amount recorded for these obligations on the Company's consolidated balance sheet as of March 31, 2022 and December 31, 2021 were $ 676 and $ 684 , respectively, and were included in other long-term obligations.

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

Three Months Ended

The amounts recorded for these obligations on the Company's condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 were $ 641 and $ 684 , respectively, and were included in "Other long-term obligations."

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

Six Months Ended

Service cost with interest to end of year $ 29 $ 35

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Deferred Compensation Plan

On June 1, 2018, the Company established an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees.

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

The deferred compensation liability was $ 8,206 and $ 6,270 as of March 31, 2022 and December 31, 2021, respectively, and was included in other long-term obligations on the Company’s consolidated balance sheets.

The related rabbi trust assets were $ 8,208 and $ 6,267 as of March 31, 2022 and December 31, 2021, respectively, and were included in other non-current assets on the Company's consolidated balance sheets.

On June 1, 2018, the Company established an unfunded, nonquali fied deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees.

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

The deferred compensation liability was $ 8,252 as of June 30, 2022, of which $ 8,220 was included in "Other long-term obligations" and $ 32 was included in "Accrued compensation and other benefits" on the Company's condensed consolidated balance sheets.

The deferred compensation liability was $ 6,270 as of December 31, 2021, of which $ 6,251 was included in "Other long-term obligations" and $ 19 was included in "Accrued compensation and other benefits" on the Company’s condensed consolidated balance sheets.

The related rabbi trust assets were $ 8,255 and $ 6,267 as of June 30, 2022 and December 31, 2021, respectively, and were included in "Other non-current assets" on the Company's condensed consolidated balance sheets.

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at March 31, 2022 are as follows:

April 1, 2022 to December 31, 2022 $ 2,097

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at June 30, 2022 are as follows:

July 1, 2022 to December 31, 2022 $ 1,896

Thereafter 6,225

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In February 2022, BCP Ingredients, Inc.

("BCP"), the Company subsidiary that operates the site, along with the former owner of the site received a Special Notice Letter from EPA for the performance of a focused remedial investigation/feasibility study at the site with regard to the presence of certain contaminants, focusing primarily on 1,4 dioxane.

BCP has, with the assistance of experts, studied site conditions and hydrogeology and responded to the Special Notice Letter.

BCP anticipates that the EPA will respond to its response in the coming months.

("BCP"), the Company subsidiary that operates the site, along with the prior owner of the site received a Special Notice Letter from EPA for the performance of a focused remedial investigation/feasibility study ("RI/FS") at the site with regard to the presence of certain contaminants at the site, focusing primarily on the presence of 1,4 dioxane and chlorobenzene.

BCP and the site's prior owner are currently negotiating with the EPA and the State of Missouri with respect to a proposed Administrative Settlement Agreement and Order on Consent that defines the scope and performance of the focused RI/FS.

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 March 31, 2022 and December 31, 2021 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 June 30, 2022 and December 31, 2021 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed consolidated balance sheets.

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

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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 March 31, 2022 and December 31, 2021 includes $ 937 and $ 933 in money market funds, respectively.

Non-current assets at March 31, 2022 and December 31, 2021 includes $ 8,208 and $ 6,267 , respectively, of rabbi trust funds related to the Company's deferred compensation plan.

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

The Company also has derivative financial instruments, consisting of a cross-currency swap and an interest rate swap, which are included in derivative assets or derivative liabilities, in the consolidated balance sheets (see Note 19, "Derivative Instruments and Hedging Activities").

Cash and cash equivalents at June 30, 2022 and December 31, 2021 includes $ 927 and $ 933 in money market funds, respectively.

Non-current assets at June 30, 2022 and December 31, 2021 includes $ 8,255 and $ 6,267 , 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.”

The Company also has derivative financial instruments, consisting of a cross-currency swap and an interest rate swap, which are included in "Derivative assets" or "Derivative liabilities" in the Company's condensed consolidated balance sheets (see Note 20, "Derivative Instruments and Hedging Activities").

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 asset related to the cross-currency swap was $ 956 at March 31, 2022 and the derivative liability related to the cross-currency swap was $ 500 at December 31, 2021.

The derivative liability related to the interest rate swap was $ 74 and $ 2,158 at March 31, 2022 and December 31, 2021, respectively.

The derivative assets related to the cross-currency swap and the interest rate swap were $ 6,228 and $ 1,048 at June 30, 2022, respectively.

The derivative liability related to the cross-currency swap and the interest rate swap was $ 500 and $ 2,158 at December 31, 2021, respectively.

NOTE 18 – RELATED PARTY TRANSACTIONS

The Company provides services on a contractual agreement to St.

The Company provides services under a contractual agreement to St.

Gabriel CC Company, LLC.

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As such, the sale of these raw materials to St.

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.

The services the Company provided amounted to $ 975 and $ 827 for the three months ended March 31, 2022 and 2021, respectively.

The raw materials purchased and subsequently sold amounted to $ 9,311 and $ 5,462 for the three months ended March 31, 2022 and 2021, respectively.

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

Payments for the services the Company provided amounted to $ 1,022 and $ 1,997 for the three and six months ended June 30, 2022, respectively, and $ 920 and $ 1,747 for the three and six months ended June 30, 2021, respectively.

The raw materials purchased and subsequently sold amounted to $ 10,910 and $ 20,221 for the three and six months ended June 30, 2022, respectively, and $ 6,580 and $ 12,042 for the three and six months ended June 30, 2021, 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 $ 6,489 and $ 4,391 for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022 and December 31, 2021, the Company had receivables of $ 13,651 and $ 10,504 , respectively, recorded in accounts receivable from St.

Gabriel CC Company, LLC for services rendered and raw materials sold and payables of $ 8,673 and $ 7,552 , respectively, for finished goods received recorded in accounts payable.

Gabriel CC Company, LLC of $ 8,233 and $ 14,722 for the three and six months ended June 30, 2022, respectively, and $ 5,210 and $ 9,601 for the three and six months ended June 30, 2021, respectively.

At June 30, 2022 and December 31, 2021, the Company had receivables of $ 8,224 and $ 10,504 , respectively, recorded in accounts receivable from St.

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

The Company also had payables of $ 5,829 and $ 7,552 , respectively, recorded in accounts payable for finished goods received from St.

Gabriel CC Company, LLC.

In addition, the Company had receivables in the amount of $ 164 related to non-contractual monies owed from St.

Gabriel CC Company, LLC, recorded in receivables as of December 31, 2021.

There was no such receivables as of March 31, 2022.

The Company had payables in the amount of $ 318 and $ 296 related to non-contractual monies owed to St.

Gabriel CC Company, LLC, recorded in accounts payable as of March 31, 2022 and December 31, 2021, respectively.

There were no such receivables as of June 30, 2022.

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 both June 30, 2022 and December 31, 2021.

NOTE 19 – LEASES

1 unchanged sentence

The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks.

Leases are categorized as either operating leases or finance leases.

Leases are categorized as both operating leases and finance leases.

As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease.

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 March 31, 2022.

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

Instead, the Company has historically replaced the leased equipment with a newly leased equipment.

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.

Instead, the Company has historically replaced the equipment with new leases.

Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options.

The Company has no residual value guarantees in lease transactions.

The Company did not identify any embedded leases.

As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet.

On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility.

The sublease will not commence until the sublandlord substantially completes its work per the sublease agreement, which will most likely occur in the third quarter of 2022.

This new sublease will replace the current lease for the Company's corporate headquarters, however the Company anticipates that it will continue to lease the laboratory space in the previous corporate headquarters.

The Company will recognize a right of use asset and a lease liability at the commencement date based on ASC 842, Lease Accounting.

As of June 30, 2022 the Company did not record a right of use asset or lease liability on the balance sheet in connection with this lease.

The Company has not identified any embedded leases.

As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet.

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.

5 unchanged sentences

(1) 1 - 2 years, 1.45 % (2) 3 - 4 years, 2.04 % (3) 5 - 9 years, 2.38 % and (4) 10 + years, 3.10 %.

In connection with the acquisition of Zumbro, the Company assumed a finance lease commitment for a warehouse, with an expiration date of March 31, 2033.

In connection with its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033.

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

Right of use assets and lease liabilities at March 31, 2022 and December 31, 2021 are summarized as follows:

Right of use assets March 31, 2022 December 31, 2021

At June 30, 2022 and December 31, 2021, the Company had finance lease liabilities of $ 2,387 and $ 2,470 , respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.

Right of use assets and lease liabilities at June 30, 2022 and December 31, 2021 are summarized as follows:

Right of use assets June 30, 2022 December 31, 2021

Operating leases $ 10,718 $ 6,929

1 unchanged sentence

Total $ 12,973 $ 9,288

Lease liabilities - current March 31, 2022 December 31, 2021

Lease liabilities - current June 30, 2022 December 31, 2021

Operating leases $ 2,997 $ 2,194

1 unchanged sentence

Total $ 3,168 $ 2,361

Lease liabilities - non-current March 31, 2022 December 31, 2021

Lease liabilities - non-current June 30, 2022 December 31, 2021

Operating leases $ 7,725 $ 4,811

1 unchanged sentence

Total $ 9,941 $ 7,114

For the three months ended March 31, 2022 and 2021, the Company's total lease costs were as follows, which included both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:

For the three and six months ended June 30, 2022 and 2021, 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

2022 2021 2022 2021

Operating lease cost $ 811 $ 770 $ 1,592 $ 1,486

2 unchanged sentences

Interest on lease liabilities 30 33 61 66

Total finance lease cost $ 83 $ 85

Total finance lease 82 86 165 171

Total lease cost $ 893 $ 856 $ 1,757 $ 1,657

3 unchanged sentences

Financing cash flows from finance leases 42 39 83 78

ROU assets obtained in exchange for new operating lease liabilities, net of ROU assets disposals $ 662 $ 1,036

Weighted-average remaining lease term - operating leases 4.03 years 4.14 years

Weighted-average remaining lease term - finance leases 11.16 years 12.00 years

$ 879 $ 821 $ 1,752 $ 1,632

Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed $ 4,615 $ 1,376 $ 5,277 $ 2,412

Weighted-average remaining lease term - operating leases 4.10 years 4.43 years 4.10 years 4.43 years

Weighted-average remaining lease term - finance leases 10.91 years 11.75 years 10.91 years 11.75 years

Weighted-average discount rate - operating leases 3.2 % 3.9 % 3.2 % 3.9 %

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 months ended March 31, 2022 and 2021 aggregated approximately $ 781 and $ 716 , respectively.

Rent expense charged to operations under operating lease agreements for the three and six months ended June 30, 2022 aggregated to approximately $ 811 and $ 1,592 , respectively, and $ 770 and $ 1,486 for the three and six months ended June 30, 2021, respectively.

NOTE 20 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates.

In May 2019, the Company entered into an interest rate swap (cash flow hedge) with the JP Morgan Chase, N.A.

(the "Swap Counterparty") and a

cross-currency swap (net investment hedge) with the JP Morgan Chase, N.A.

(the "the Bank Counterparty").

In May 2019, the Company entered into an interest rate swap (cash flow hedge) with JP Morgan Chase, N.A.

(the "Swap Counterparty") and a cross-currency swap (net investment hedge) with JP Morgan Chase, N.A.

(the "Bank Counterparty").

The Company's primary objective for holding derivative financial instruments is to manage interest rate risk and foreign currency risk.

2 unchanged sentences

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 2018 Credit Agreement.

The net interest expense related to the interest rate swap contract were $ 513 and $ 521 for the three months ended March 31, 2022 and 2021, which were recorded in the 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 net interest expense related to the interest rate swap contract was $ 364 and $ 877 for the three and six months ended June 30, 2022, and $ 534 and $ 1,055 for the three and six months ended June 30, 2021, respectively, and was recorded in the condensed consolidated statements of earnings under "Interest expense, net." In addition, in connection with the Company's entering into the Amended

and Restated Credit Agreement on July 27, 2022 (see Note 8 "Revolving Loan"), the Company also modified its existing interest rate swap under the relief provided for in ASC 848, "Reference Rate Reform".

On May 28, 2019, 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.

Interest income related to the cross-currency swap contract was $ 550 and $ 556 , respectively, for the three months ended March 31, 2022 and 2021, which was 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 $ 1,113 for the three and six months ended June 30, 2022, and $ 563 and $ 1,119 for the three and six months ended June 30, 2021, respectively, which were recorded in the condensed consolidated statements of earnings 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 March 31, 2022 and December 31, 2021, the fair value of the derivative instruments is presented as follows in the Company's consolidated balance sheets:

Derivative assets (liabilities) March 31, 2022 December 31, 2021

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

As of June 30, 2022 and December 31, 2021, the fair value of the derivative instruments is presented as follows in the Company's condensed consolidated balance sheets:

Derivative assets (liabilities) June 30, 2022 December 31, 2021

Interest rate swap $ 1,048 $ ( 2,158 )

2 unchanged sentences

On a quarterly basis, the Company assesses whether the hedging relationship related to the interest rate swap is highly effective at achieving offsetting changes in cash flow attributable to the risk being hedged based on the following factors:

(1) whether the key features and terms as enumerated above for the interest rate swap and hedged transactions match during the period (2) whether it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) whether the relationship qualifies for hedge accounting based on the Company's quarterly qualitative review.

(1) the key features and terms as enumerated above for the interest rate swap and hedged transactions match during the period (2) it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) the Company performs a qualitative review each quarter to assess whether the relationship qualifies for hedge accounting.

In addition, on a quarterly basis the Company assesses whether the hedging relationship related to the cross-currency swap is highly effective based on the following evaluations:

(1) whether the Company will always have a sufficient amount of non-functional currency (EUR) net investment balance to at least meet the cross-currency notional amount until the maturity date of the hedge (2) whether it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) whether the relationship qualifies for hedge accounting based on the Company's quarterly qualitative review.

(1) the Company will always have a sufficient amount of non-functional currency (EUR) net investment balance to at least meet the cross-currency notional amount until the maturity date of the hedge (2) it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) the Company performs a qualitative review each quarter to assess whether the relationship qualifies for hedge accounting.

If any mismatches arise for either the interest rate swap or cross-currency swap, the Company will perform a regression analysis to determine if the hedged transaction is highly effective.

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

As of March 31, 2022, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective.

As of June 30, 2022, 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.

Gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three months ended March 31, 2022 and 2021:

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, 2022 and 2021:

Location within Statements of Comprehensive Income Three Months Ended

Cash flow hedge (interest rate swap), net of tax Unrealized gain on cash flow hedge, net $ 1,573 $ 512

June 30, Six Months Ended

2022 2021 2022 2021

Cash flow hedge (interest rate swap), net of tax Unrealized gain/(loss) on cash flow hedge, net $ 850 $ 351 $ 2,423 $ 863

Net investment hedge (cross-currency swap), net of tax Net foreign currency translation adjustment 3,963 ( 1,024 ) 5,086 2,173

Total $ 4,813 $ ( 673 ) $ 7,509 $ 3,036

On June 21, 2022, the Company completed the acquisition of Kappa (as defined in Note 2 "Significant Acquisitions").

In the process of acquiring Kappa, the Company entered into four short-term foreign currency exchange forward contracts with JP Morgan Chase, N.A to manage fluctuations in foreign currency exchange rates related to the acquisition.

The Company did not designate these contracts as hedged transactions under the applicable sections of ASC Topic 815, "Derivatives and Hedging".

For the six months ended June 30, 2022, the net gains on these forward contracts of $ 512 were recorded in other income or loss in the condensed consolidated statements of earnings.

As of June 30, 2022, the Company did not maintain any open foreign currency exchange forward contracts as all four contracts expired before June 30, 2022.

The following table summarizes the key terms of the four forward exchange contracts:.

Date entered into Date expired on Balchem to sell Balchem to buy

June 15, 2022 June 21, 2022 USD 294,555 NOK 2,924,553

June 15, 2022 June 17, 2022 USD 6,436 EUR 6,180

June 15, 2022 June 21, 2022 USD 16,640 EUR 15,972

June 15, 2022 June 21, 2022 EUR 15,972 NOK 165,210

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