What changed in this filing

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Item 1. Financial Statements

2023-04-28 compared with 2022-11-04 · 226 added, 327 removed, 593 unchanged (48% of the section changed)

3 unchanged sentences

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

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

Assets March 31, 2023 (unaudited) December 31, 2022

Current assets:

Cash and cash equivalents $ 60,199 $ 66,560

Accounts receivable, net of allowance for doubtful accounts of $ 1,186 and $ 928 at September 30, 2022 and December 31, 2021 respectively

Accounts receivable, net of allowance for doubtful accounts of $ 1,260 and $ 1,226 at March 31, 2023 and December 31, 2022 respectively

131,369 131,578

Inventories 139,464 91,058

Inventories, net 124,768 119,668

Prepaid expenses 7,425 4,903

Prepaid income taxes 3,954 —

Derivative assets 3,964 5,993

22 unchanged sentences

Finance lease liabilities - non-current 2,156 2,213

Derivative liabilities — 2,658

Contingent consideration liabilities 30,547 —

Other long-term obligations 29,091 26,814

7 unchanged sentences

Authorized 120,000,000 shares;

32,134,902 and 32,287,150 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

32,225,627 and 32,152,787 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 132,210 128,806

Retained earnings 837,197 814,487

Accumulated other comprehensive loss ( 46,869 ) ( 4,993 )

Accumulated other comprehensive income (loss) 1,859 ( 7,154 )

Total stockholders' equity 973,416 938,284

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net sales $ 232,540 $ 228,867

9 unchanged sentences

Interest expense, net 5,565 545

Other income, net ( 1,102 ) ( 128 ) ( 1,239 ) ( 295 )

2,540 428 3,908 1,594

Other (income) expense, net ( 276 ) 161

Earnings before income tax expense 29,119 37,630

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net earnings $ 22,710 $ 28,930

1 unchanged sentence

Foreign currency translation adjustment 9,424 ( 2,842 )

Unrealized gain on cash flow hedge 427 341 2,850 1,204

Unrealized (loss) gain on cash flow hedge ( 511 ) 1,573

Change in postretirement benefit plans 100 ( 27 )

Other comprehensive income (loss) 9,013 ( 1,296 )

Comprehensive (loss) income $ ( 9,196 ) $ 22,003 $ 42,085 $ 64,404

Comprehensive income $ 31,723 $ 27,634

See accompanying notes to condensed consolidated financial statements.

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

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

7 unchanged sentences

Net earnings 22,710 22,710 — — — —

Other comprehensive (loss) ( 1,296 ) — ( 1,296 ) — — —

Other comprehensive income 9,013 — 9,013 — — —

Repurchases of common stock ( 3,849 ) — — ( 28,109 ) ( 2 ) ( 3,847 )

Dividends ( 10 ) ( 10 ) — — — —

Shares and options issued under stock plans 7,258 — — 100,949 7 7,251

Balance - March 31, 2023 $ 973,416 $ 837,197 $ 1,859 32,225,627 $ 2,150 $ 132,210

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

Net earnings 25,249 25,249 — — — —

Other comprehensive (loss) ( 34,445 ) — ( 34,445 ) — — —

Repurchases of common stock ( 46 ) — — ( 361 ) — ( 46 )

Shares and options issued under stock plans 3,794 — — 14,670 1 3,793

Balance - September 30, 2022 $ 895,922 $ 816,089 $ ( 46,869 ) 32,134,902 $ 2,144 $ 124,558

See accompanying notes to condensed consolidated financial statements.

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

For the three and nine months ended September 30, 2022 and 2021

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

Stockholders'

Equity Retained

Earnings Accumulated

Comprehensive

(Loss) Income Common Stock Additional

Shares Amount

Balance - December 31, 2021 $ 877,015 $ 732,138 $ ( 4,993 ) 32,287,150 $ 2,154 $ 147,716

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Repurchases of common stock ( 34,599 ) — — ( 245,685 ) ( 16 ) ( 34,583 )

Dividends ( 10 ) ( 10 ) — — — —

Shares and options issued under stock plans 3,642 — — 74,604 4 3,638

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

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

Net earnings 25,013 25,013 — — — —

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

Repurchases of common stock ( 7,926 ) — ( 61,075 ) ( 4 ) ( 7,922 )

Shares and options issued under stock plans 5,359 — — 38,938 3 5,356

Balance - September 30, 2021 $ 889,078 $ 727,895 $ ( 2,578 ) 32,382,637 $ 2,161 $ 161,600

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

5 unchanged sentences

Provision for doubtful accounts 31 328

Unrealized gain on foreign currency transaction and deferred compensation ( 1,262 ) ( 534 )

Asset impairment charge 23 —

Loss/(gain) on disposal of assets 259 ( 996 )

Unrealized (gains) loss on foreign currency transactions and deferred compensation ( 349 ) 37

Gain on disposal of assets ( 968 ) ( 29 )

Change in fair value of contingent consideration liability 1,600 —

Changes in assets and liabilities

9 unchanged sentences

Capital expenditures and intangible assets acquired ( 9,720 ) ( 10,256 )

Proceeds from insurance and sale of assets 198 1,272

Investment in affiliates ( 150 ) —

Proceeds from sale of assets — 184

Net cash used in investing activities ( 10,061 ) ( 10,072 )

2 unchanged sentences

Principal payments on revolving loan ( 22,000 ) —

Principal payments on acquired debt ( 30,782 ) —

Cash paid for financing costs ( 1,232 ) —

Principal payments on finance lease ( 55 ) ( 41 )

2 unchanged sentences

Purchase of common stock ( 3,849 ) ( 34,599 )

Net cash provided by (used in) financing activities 268,080 ( 86,233 )

Net cash used in financing activities ( 33,318 ) ( 34,845 )

Effect of exchange rate changes on cash 2,180 ( 877 )

(Decrease) increase in cash and cash equivalents ( 46,750 ) 5,442

Decrease in cash and cash equivalents ( 6,361 ) ( 38,773 )

Cash and cash equivalents beginning of period 66,560 103,239

1 unchanged sentence

See accompanying notes to condensed consolidated financial statements.

BALCHEM CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

The results of operations for the three and nine months ended September 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.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results expected for the full year or any interim period.

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848):

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 GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

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

In December 2022, the FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848." The amendments in this Update defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024 as the UK Financial Conduct Authority ("FCA") announced that the intended cessation date would be June 30, 2023, which is beyond the current sunset date of Topic 848.

The Company adopted the Standard Update in 2021.

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

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

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

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

ASU 2019-12 became effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The Company adopted ASU 2019-12 on January 1, 2021.

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

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("Albion") entered into a Stock Purchase Agreement, and closed on such transaction with Cardinal Associates Inc.

("Cardinal"), a corporation organized under the laws of the State of Washington, pursuant to which Albion acquired Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom").

Bergstrom Nutrition is a leading science-based manufacturer of methylsulfonylmethane (MSM), based in Vancouver, Washington.

("Cardinal"), a corporation organized under the laws of the State of Washington, pursuant to which Albion acquired 100 % of the voting equity interests of Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom").

Bergstrom Nutrition is a leading science-based manufacturer of MSM, based in Vancouver, Washington.

MSM is a widely used nutritional ingredient with strong scientific evidence supporting its benefits for joint health, sports nutrition, skin and beauty, healthy aging, and pet health.

Bergstrom Nutrition's MSM brand "OptiMSM ® " delivers the highest quality and purity MSM on the market and is the only brand of MSM with a U.S.

GRAS "generally regarded as safe" designation.

The addition of OptiMSM ® to the Company's portfolio within Human Nutrition & Health and Animal Nutrition & Health segments provides a synergistic scientific advantage in Balchem's key strategic therapeutic focus areas such as longevity and performance and is a strong fit with Balchem's specialty, science-backed mineral products.

The Company made payments of $ 70,892 for the acquisition, amounting to $ 69,740 to the former shareholders and $ 1,152 to pay off Bergstrom's bank debt and certain other obligations.

Net of cash acquired of $ 773 , total payments made to the former shareholders of Bergstrom on the acquisition date were $ 68,967 .

The addition of OptiMSM ® , Bergstrom Nutrition's MSM brand, to the Company's portfolio within the Human Nutrition and Health and Animal Nutrition and Health segments provides a synergistic scientific advantage in Balchem's key strategic therapeutic focus areas such as longevity and performance and is a strong fit with Balchem's specialty, science-backed mineral products.

The Company made payments of $ 71,233 for the acquisition, amounting to $ 71,027 to the former shareholders or on behalf of the former shareholders and $ 206 to pay off Bergstrom's bank debt.

Net of cash acquired of $ 773 , total payments made to the former shareholders or on behalf of the former shareholders of Bergstrom were $ 70,254 .

The acquisition was primarily financed through the 2022 Credit Agreement (see Note 8, Revolving Loan ).

In connection with this transaction, the former shareholders of Bergstrom have an opportunity to receive an additional payment if certain financial performance targets and other metrics are met, and therefore we recorded a contingent consideration liability of $ 7,835 as of September 30, 2022.

In connection with this transaction, the former shareholders of Bergstrom have an opportunity to receive an additional payment in the second quarter of 2024 if certain financial performance targets and other metrics are met, and therefore, the Company recorded a contingent consideration liability, which was valued at $ 13,000 as of March 31, 2023.

As a result, total payments related to the transaction are expected to be $ 84,233 , comprised of the upfront cash consideration of $ 70,892 , a working capital adjustment of $ 341 , and the fair value of the earn-out payment of $ 13,000 .

The goodwill of $ 31,550 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 both the Human Nutrition & Health and Animal Nutrition & Health business segments.

80 % of the goodwill is assigned to the Human Nutrition and Health business segment and 20 % of the goodwill is assigned to the Animal Nutrition and Health business segment.

For tax purposes, a joint election under 338(h)(10) was made to treat the stock acquisition as a deemed asset acquisition, therefore generating tax amortizable goodwill.

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

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

Cash and cash equivalents $ 773

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Goodwill 31,550

Total consideration on acquisition date 77,575

Contingent consideration liability ( 7,835 )

Amount paid to shareholders 69,740

To pay off bank debt and certain other obligations 1,152

Total amount paid $ 70,892

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.

Total consideration on acquisition date and working capital adjustment 78,862

Increase to contingent consideration liability 5,165

Total expected consideration 84,027

To pay off bank debt 206

Total expected payments $ 84,233

The 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.

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 Bergstrom acquisition are included in general and administrative expenses and were $ 593 and $ 668 for the three and nine months ended September 30, 2022, respectively.

Transaction and integration costs related to the Bergstrom acquisition are included in general and administrative expenses and were $ 290 for the three months ended March 31, 2023.

There was no such amount related to this acquisition for three months ended March 31, 2022.

Kechu BidCo AS and Its Subsidiary Companies ("Kappa")

On June 21, 2022, Balchem Corporation 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 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 in the second quarter of 2022 (translated to $ 22,712 as of September 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.

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

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 Company made payments of approximately kr 3,305,653 ("kr" indicates the Norwegian krone), amounting to approximately kr 3,001,981 to the former shareholders 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 to the former shareholders were kr 2,938,917 .

Net of gains on foreign currency forward contracts of $ 512 , these payments translated to approximately $ 333,112 , amounting to approximately $ 302,464 paid to the former shareholders and approximately $ 30,648 to Kappa's lenders.

Net of cash acquired of $ 6,365 , total payments made to the former shareholders of Kappa were approximately $ 296,099 .

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

In connection with this transaction, the former shareholders of Kappa have an opportunity to receive an additional payment in the second quarter of 2024 if certain financial performance targets and other metrics are met.

There was no contingent consideration liability recorded as of March 31, 2023.

The goodwill of $ 216,295 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 goodwill is assigned to the Human Nutrition and 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.

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Total consideration on acquisition date 307,013

Contingent consideration liability ( 24,726 )

Decrease to contingent consideration liability ( 4,037 )

Net gain on foreign currency exchange forward contracts ( 512 )

Amount paid to shareholders 302,025

Total expected consideration 302,464

Kappa bank debt paid on acquisition date 30,648

Total amount paid on acquisition date $ 332,673

Total expected payments $ 333,112

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.

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Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $ 989 and $ 1,440 for both the three and nine months ended September 30, 2022.

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

Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $ 275 for the three months ended March 31, 2023.

There was no such amount related to this acquisition for the three months ended March 31, 2022.

The following selected unaudited pro forma information presents the consolidated results of operations as if the business combinations in 2022 had occurred as of January 1, 2021.

Three Months Ended March 31,

Net Sales Net (Loss)/Earnings

Kappa & Bergstrom actual results included in the Company's consolidated income statement in three months ended March 31, 2023 $ 14,130 $ ( 3,909 )

2023 Supplemental pro forma combined financial $ 232,540 $ 25,570

2022 Supplemental pro forma combined financial $ 247,368 $ 29,439

The above selected unaudited pro forma information includes the following acquisition-related adjustments:

(1) additional amortization of intangible assets and depreciation of fixed assets;

(2) adjustments related to the fair value of the acquired inventory, (3) adjustments to interest expense on borrowings at rates in effect during the related period, factoring in estimated payments based on free cash flow, and (4) other one-time adjustments.

The pro forma information presented does not purport to be indicative of the results that actually would have been attained if these acquisitions 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 and nine months ended September 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 September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

The Company’s results for the three months ended March 31, 2023 and 2022 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,

Cost of sales $ 414 $ 399

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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 September 30, 2022, the plans had 407,630 shares available for future awards.

As of March 31, 2023, the plans had 224,755 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 to five years for stock options, three years for employee restricted stock awards, three years for employee 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 nine months ended September 30, 2022 and 2021 is summarized below:

For the nine months ended September 30, 2022 Shares (000s) Weighted

Option activity for the three months ended March 31, 2023 and 2022 is summarized below:

For the Three Months Ended March 31, 2023 Shares (000s) Weighted

Price Aggregate

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Forfeited ( 3 ) 128.27

Outstanding as of September 30, 2022 1,063 $ 99.74 $ 27,308 6.6

Exercisable as of September 30, 2022 656 $ 81.45 $ 26,312 5.2

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

Outstanding as of March 31, 2023 1,120 $ 104.04 $ 29,327 6.5

Exercisable as of March 31, 2023 743 $ 88.07 $ 28,781 5.2

For the Three Months Ended March 31, 2022 Shares (000s) Weighted

Price Aggregate

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Forfeited — —

Canceled ( 1 ) 74.57

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

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

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

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.

The weighted average fair values of the stock options granted under the Plans were calculated using either the Black-Scholes model or the Binomial model, whichever was deemed to be most appropriate.

For the nine months ended September 30, 2022, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions:

For the three months ended March 31, 2023, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions:

dividend yields of 0.5 %;

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and expected lives of 4.8 years.

For nine months ended September 30, 2021, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions:

For three months ended March 31, 2022, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions:

dividend yields of 0.5 %;

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

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

Other information pertaining to option activity during the three months ended March 31, 2023 and 2022 is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Weighted-average fair value of options granted $ 40.91 $ 40.26

Total intrinsic value of stock options exercised ($000s) $ 1,584 $ 654

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

Nine Months Ended September 30,

Non-vested restricted stock activity for the three months ended March 31, 2023 and 2022 is summarized below:

Three Months Ended March 31,

Shares (000s) Weighted

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Forfeited ( 1 ) 125.18 — —

Non-vested balance as of September 30 121 $ 122.96 176 $ 97.17

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

Nine Months Ended September 30,

Non-vested balance as of March 31 128 $ 131.41 122 $ 121.56

Non-vested performance share activity for the three months ended March 31, 2023 and 2022 is summarized below:

Three Months Ended March 31,

Shares (000s) Weighted

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Forfeited — — ( 3 ) 84.09

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

Non-vested balance as of March 31 76 $ 135.25 70 $ 127.69

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 32 %;

and initial TSR’s of - 15.7 % and 11.7 %, in each case for the nine months ended September 30, 2022 and 2021, respectively.

and initial TSR’s of 4.2 % and - 15.7 %, in each case for the three months ended March 31, 2023 and 2022, 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 September 30, 2022 and 2021, there were $ 23,665 and $ 16,498 , respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans.

As of September 30, 2022, the

unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.1 years.

As of March 31, 2023 and 2022, there were $ 30,507 and $ 23,131 , respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans.

As of March 31, 2023, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.3 years.

The Company estimates that share-based compensation expense for the year ended December 31, 2023 will be approximately $ 15,600 .

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Since the inception of the program in June 1999, a total of 3,098,657 shares have been purchased.

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 $ 11,080 , $ 8,472 , $ 2,210 , and $ 7,873 as of September 30, 2021, 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.

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

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

During the nine months ended September 30, 2022 and 2021, the Company purchased 251,022 and 147,199 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 three months ended March 31, 2023 and 2022, the Company purchased 28,109 and 245,685 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 $ 136.94 and $ 140.83 , respectively.

NOTE 4 – INVENTORIES

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

September 30, 2022 December 31, 2021

Inventories, net of reserves at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023 December 31, 2022

Raw materials $ 37,652 $ 44,477

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NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

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

September 30, 2022 December 31, 2021

Property, plant and equipment at March 31, 2023 and December 31, 2022 are summarized as follows:

March 31, 2023 December 31, 2022

Land $ 12,049 $ 11,415

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NOTE 6 - INTANGIBLE ASSETS

The Company had goodwill in the amount of $ 749,035 and $ 523,949 as of September 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 acquisitions of Kappa and Bergstrom, 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 September 30, 2022 and December 31, 2021 are summarized as follows:

(in years) Gross Carrying Amount at

9/30/2022 Accumulated Amortization at 9/30/2022 Gross Carrying Amount at 12/31/2021 Accumulated Amortization at 12/31/2021

The Company had goodwill in the amount of $ 774,361 and $ 769,509 as of March 31, 2023 and December 31, 2022, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The increase in goodwill is due to foreign currency translation adjustments and an insignificant amount of additional consideration paid related to finalization of the Bergstrom acquired working capital.

Identifiable intangible assets with finite lives at March 31, 2023 and December 31, 2022 are summarized as follows:

(in years) Gross Carrying Amount at March 31, 2023 Accumulated Amortization at March 31, 2023 Gross Carrying Amount at December 31, 2022 Accumulated Amortization at December 31, 2022

Customer relationships & lists 10 - 20

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$ 476,310 $ 266,840 $ 472,703 $ 259,408

Amortization of identifiable intangible assets was approximately $ 7,922 and $ 19,683 for the three and nine months ended September 30, 2022, respectively, and $ 6,155 and $ 18,868 for the three and nine months ended September 30, 2021, respectively.

Amortization of identifiable intangible assets was $ 7,293 and $ 5,911 for the three months ended March 31, 2023 and 2022, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets, estimated amortization expense is $ 20,858 for the remainder of 2023, $ 19,047 for 2024, $ 15,615 for 2025, $ 15,473 for 2026, $ 14,987 for 2027 and $ 14,591 for 2028.

At September 30, 2022 and December 31, 2021, there were no identifiable intangible assets with indefinite useful lives as defined by ASC 350.

At March 31, 2023 and 2022, 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 nine months ended September 30, 2022 and 2021.

There were no changes to the useful lives of intangible assets subject to amortization during the three months ended March 31, 2023 and 2022.

NOTE 7 - EQUITY METHOD INVESTMENT

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

The Company recognized a loss of $ 140 and $ 420 for the three and nine months ended September 30, 2022, respectively, and $ 142 and $ 416 for the three and nine months ended September 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 $ 89 and $ 222 for the three and nine months ended September 30, 2022, respectively, and $ 46 and $ 31 for the three and nine months ended September 30, 2021, respectively.

The carrying value of the joint venture at September 30, 2022 and December 31, 2021 was $ 4,301 and $ 4,499 , respectively, and is recorded in "Other assets."

The Company recognized a loss of $ 139 and $ 140 for the three months ended March 31, 2023 and 2022 , respectively, relating to its portion of the joint venture's expenses in other expense.

During the first quarter of 2023 and 2022, the Company made capital contributions to the investment totaling $ 56 and $ 58 , respectively.

The carrying value of the joint venture at March 31, 2023 and December 31, 2022 was $ 4,212 and $ 4,295 , respectively, and is recorded in "Other assets".

NOTE 8 – REVOLVING LOAN

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During the third quarter of 2022, the Company borrowed another $ 70,000 to fund the Bergstrom acquisition (see Note 2, Significant Acquisitions ).

As of September 30, 2022, the total balance outstanding on the 2022 Credit Agreement amounted to $ 462,569 .

As of December 31, 2021, the total balance outstanding on the 2018 Credit Agreement amounted to $ 108,569 .

As of March 31, 2023 and December 31, 2022, the total balance outstanding on the 2022 Credit Agreement amounted to $ 431,569 and $ 440,569 .

There are no installment payments required on the revolving loans;

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Amounts outstanding under the 2022 Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the 2022 Credit Agreement plus an applicable rate.

The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the 2022 Credit Agreement, and the interest rate was 4.214 % at September 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 2022 Credit Agreement and ranges from 0.15 % to 0.225 % ( 0.175 % at September 30, 2022).

The unused portion of the revolving loan amounted to $ 87,431 at September 30, 2022.

The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the 2022 Credit Agreement, and the interest rate was 6.066 % at March 31, 2023.

The unused portion of the revolving loan amounted to $ 118,431 at March 31, 2023.

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 and certain costs associated with the issuance of the extinguished debt instrument are capitalized and amortized on a straight-line basis over the term of the 2022 Credit Agreement, which is not materially different than the effective interest method.

Capitalized costs net of accumulated amortization totaled $ 1,389 and $ 421 at September 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 $ 121 and $ 262 for the three and nine months ended September 30, 2022 and $ 71 and $ 212 for the three and nine months ended September 30, 2021, respectively, and are included in "Interest expense" in the accompanying condensed 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 2022 Credit Agreement, which is not materially different than the effective interest method.

Capitalized costs net of accumulated amortization were $ 1,246 and $ 1,317 at March 31, 2023 and December 31, 2022, 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, 2023 and 2022, and are included in "Interest expense, net" in the accompanying condensed consolidated statements of earnings.

The 2022 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 September 30, 2022, the Company was in compliance with these covenants.

At March 31, 2023, the Company was in compliance with these covenants.

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net Earnings - Basic and Diluted $ 22,710 $ 28,930

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Weighted Average Common Shares - Basic 32,078 32,041

Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares 357 450 375 424

Effect of Dilutive Securities – Stock Options, Restricted Stock,

and Performance Shares 337 434

Weighted Average Common Shares - Diluted 32,415 32,475

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Net Earnings Per Share - Diluted $ 0.70 $ 0.89

The number of anti-dilutive shares were 362,203 and 369,183 for the three and nine months ended September 30, 2022, respectively, and 151,924 and 156,238 for the three and nine months ended September 30, 2021 , respectively.

The number of anti-dilutive shares were 509,785 and 113,029 for the three months ended March 31, 2023 and 2022, 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 September 30, 2022 and 2021, was 18.8 % and 22.0 %, respectively, and 22.2 % and 22.7 % for the nine months ended September 30, 2022 and 2021.

The decrease in the effective tax rate for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to a favorable provision to return adjustment related to an increase in certain tax credits and deductions.

The decrease in the effective tax rate for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily due to a favorable provision to return adjustment related to an increase in certain tax credits and deductions, which was offset by a change in mix of earnings in higher taxing jurisdictions.

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022, was 22.0 % and 23.1 %, respectively.

The decrease was primarily due to higher tax benefits from stock based compensation, an increase in certain tax credits and certain lower state taxes.

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

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

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

The Company regularly reviews its deferred tax assets for recoverability

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

The Company accounts for uncertainty in income taxes utilizing ASC 740-10, "Income Taxes".

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and in various states and foreign countries.

As of September 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 September 30, 2022 and December 31, 2021, the Company had approximately $ 5,690 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 March 31, 2023, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2018.

The Company had approximately $ 5,815 of unrecognized tax benefits, which are included in "Other long-term obligations" on the Company’s condensed consolidated balance sheets, as of both March 31, 2023 and December 31, 2022.

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 amounts of accrued interest and penalties related to uncertain tax positions at September 30, 2022 and December 31, 2021 were approximately $ 2,167 and $ 2,106 , respectively, and are included in "Other long-term obligations."

The total amounts of accrued interest and penalties related to uncertain tax positions at both March 31, 2023 and December 31, 2022 was approximately $ 1,735 and are included in "Other long-term obligations".

NOTE 11 – SEGMENT INFORMATION

Balchem Corporation reports three business segments:

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

Balchem Corporation reports three reportable segments:

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

Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated".

Human Nutrition & Health

The Human Nutrition & Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and health applications.

Human Nutrition and Health

The Human Nutrition and Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and health applications.

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.

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

Through the Kappa and Bergstrom acquisitions, respectively, 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, and MSM, which is a widely used nutritional ingredient that provides benefits for joint health, sports nutrition, skin and beauty, and healthy aging.

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, the Company’s microencapsulated

products boost health and milk production by delivering nutrient supplements that are biologically available, providing required nutritional levels.

Through the Kappa and Bergstrom acquisitions, respectively, 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 and immunity, and MSM, which is a widely used nutritional ingredient that helps provide benefits for joint health, sports nutrition, skin and beauty, and healthy aging.

Animal Nutrition and Health

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

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 industries.

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

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

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.

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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.

Management believes that success in the commodity-oriented 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.

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The segment information is summarized as follows:

Business Segment Assets September 30,

Business Segment Assets March 31,

2023 December 31,

Human Nutrition & Health $ 1,169,395 $ 727,131

Animal Nutrition & Health 189,652 158,971

Human Nutrition and Health $ 1,180,587 $ 1,170,238

Animal Nutrition and Health 175,485 175,972

Specialty Products 181,009 177,187

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Total $ 1,628,765 $ 1,624,512

Business Segment Net Sales Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Human Nutrition & Health $ 142,655 $ 111,200 $ 396,728 $ 327,187

Animal Nutrition & Health 65,604 56,192 197,546 161,821

Business Segment Net Sales Three Months Ended March 31,

Human Nutrition and Health $ 132,653 $ 122,445

Animal Nutrition and Health 64,889 69,342

Specialty Products 32,231 33,334

Other and Unallocated (2)

6,367 2,862 15,931 7,237

Total $ 232,540 $ 228,867

Business Segment Earnings Before Income Taxes Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Human Nutrition & Health $ 20,584 $ 19,801 $ 64,592 $ 58,512

Animal Nutrition & Health 8,036 7,442 26,943 16,059

Business Segment Earnings Before Income Taxes Three Months Ended March 31,

Human Nutrition and Health $ 18,435 $ 20,303

Animal Nutrition and Health 9,498 11,321

Specialty Products 7,946 7,761

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Total $ 29,119 $ 37,630

Depreciation/Amortization Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Human Nutrition & Health $ 9,569 $ 7,472 $ 24,316 $ 22,486

Animal Nutrition & Health 1,681 1,932 5,010 5,512

Depreciation/Amortization Three Months Ended March 31,

Human Nutrition and Health $ 9,662 $ 7,355

Animal Nutrition and Health 1,645 1,661

Specialty Products 1,798 1,932

Other and Unallocated (2)

1,008 758 2,962 2,273

Total $ 13,646 $ 11,928

Capital Expenditures Nine Months Ended

September 30,

Human Nutrition & Health $ 22,513 $ 14,492

Animal Nutrition & Health 8,748 4,557

Capital Expenditures Three Months Ended March 31,

Human Nutrition and Health $ 8,212 $ 4,760

Animal Nutrition and Health 441 3,688

Specialty Products 911 1,146

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Unallocated corporate expenses consist of:

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 1,640 and $ 2,816 for the three and nine months ended September 30, 2022, respectively, and $ 305 and $ 1,005 for the three and nine months ended September 30, 2021, respectively, and (ii) Unallocated amortization expense of $ 855 and $ 2,475 for the three and nine months ended September 30, 2022, respectively, and $ 675 and $ 2,024 for the three and nine months ended September 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.

(i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $ 565 and $ 304 for the three months ended March 31, 2023 and 2022, respectively, and (ii) Unallocated amortization expense of $ 312 and $ 738 for the three months ended March 31, 2023 and 2022, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.

NOTE 12 – REVENUE

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Product Sales $ 223,173 $ 218,053

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The following table presents revenues disaggregated by geography, based on the shipping addresses of customers:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

United States $ 166,884 $ 174,491

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The Company controls the manufacturing process and the ultimate end-product before it is shipped to the customer.

Based on these factors, the Company has determined that it is the principal in these agreements and therefore revenue is recognized in the gross amount of consideration the Company expects to be entitled for the goods provided.

Royalty Revenues

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NOTE 13 – SUPPLEMENTAL CASH FLOW INFORMATION

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

Nine Months Ended

September 30,

Cash paid during the three months ended March 31, 2023 and 2022 for income taxes and interest is as follows:

Three Months Ended March 31,

Income taxes $ 42 $ 2

Interest $ 6,691 $ 1,010

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net foreign currency translation adjustment $ 9,424 $ ( 2,842 )

Net change of cash flow hedge (see Note 20 for further information)

Unrealized gain on cash flow hedge 564 450 3,770 1,583

Unrealized (loss) gain on cash flow hedge ( 676 ) 2,084

Tax 165 ( 511 )

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Amortization of prior service cost 2 2

Amortization of gain — ( 4 ) — ( 16 )

Gain arising during the period and prior service credit — — ( 41 ) ( 4 )

Gain (loss) arising during the period and prior service credit 132 ( 32 )

Total before tax 134 ( 30 )

Tax — ( 3 ) ( 24 ) ( 9 )

Net of tax and adjustment 2 11 ( 59 ) 26

Total other comprehensive (loss)/income $ ( 34,445 ) $ ( 3,010 ) $ ( 41,876 ) $ ( 6,751 )

Included in "Net foreign currency translation adjustment" were gains of $ 5,065 and $ 10,151 , related to a net investment hedge, which were net of taxes of $ 1,635 and $ 3,277 for the three and nine months ended September 30, 2022, respectively.

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

Net of tax 100 ( 27 )

Total other comprehensive income (loss) $ 9,013 $ ( 1,296 )

Included in "Net foreign currency translation adjustment" was a loss of $ 1,021 related to a net investment hedge, which was net of tax benefit of $ 332 for the three months ended March 31, 2023.

Included in "Net foreign currency translation adjustment" was a gain of $ 1,123 related to a net investment hedge, which was net of tax expense of $ 333 for the three months ended March 31, 2022.

See Note 20, Derivative Instruments and Hedging Activities .

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

Accumulated other comprehensive (loss) income at March 31, 2023 and December 31, 2022 consisted of the following:

Foreign currency

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Balance December 31, 2022 $ ( 8,401 ) $ 1,065 $ 182 $ ( 7,154 )

Other comprehensive (loss)/income ( 44,667 ) 2,850 ( 59 ) ( 41,876 )

Balance September 30, 2022 $ ( 48,269 ) $ 1,219 $ 181 $ ( 46,869 )

Other comprehensive income (loss) 9,424 ( 511 ) 100 9,013

Balance March 31, 2023 $ 1,023 $ 554 $ 282 $ 1,859

NOTE 15 – EMPLOYEE BENEFIT PLANS

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In addition, on August 30, 2022, the Company completed the acquisition of Bergstrom, which sponsors one defined contribution plan for its employees.

The plan allows participants to make pretax and after tax contributions.

Bergstrom matches certain percentages of those contributions.

The plan was merged into the Company sponsored 401(k) savings plan on January 1st, 2023.

Postretirement Medical Plans

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

Nine Months Ended

September 30,

Three Months Ended March 31,

Service cost $ 27 $ 20

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Amortization of prior service cost 2 2

Amortization of gain ( 1 ) ( 18 )

Net periodic benefit cost $ 44 $ 28

T he amounts recorded for these obligations on the Company’s condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 are $ 1,247 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 March 31, 2023 and December 31, 2022 are $ 1,384 and $ 1,465 , 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 amounts recorded for these obligations on the Company's condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 were $ 607 and $ 684 , respectively, and were included in "Other long-term obligations."

The amounts recorded for these obligations on the Company's condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 were $ 395 and $ 393 , respectively, and were included in "Other long-term obligations".

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

Nine Months Ended

September 30,

Three Months Ended March 31,

Service cost with interest to end of year $ 16 $ 11

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Expected return on plan assets ( 10 ) ( 10 )

Amortization of gain — 2

Total net periodic benefit cost $ 22 $ 6

Deferred Compensation Plan

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.

The Company provides 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 $ 8,027 as of September 30, 2022, of which $ 8,011 was included in "Other long-term obligations" and $ 16 was included in "Accrued compensation and other benefits" on the Company's condensed consolidated balance sheets.

The deferred compensation liability was $ 9,336 as of March 31, 2023, of which $ 9,320 was included in "Other long-term obligations" and $ 16 was included in "Accrued compensation and other benefits" on the Company's condensed consolidated balance sheets.

The deferred compensation liability was $ 8,543 as of December 31, 2022, of which $ 8,527 was included in "Other long-term obligations" and $ 16 was included in "Accrued compensation and other benefits" on the Company’s condensed consolidated balance sheets.

The related rabbi trust assets were $ 8,032 and $ 6,267 as of September 30, 2022 and December 31, 2021, respectively, and were included in "Other non-current assets" on the Company's condensed consolidated balance sheets.

The related rabbi trust assets were $ 9,339 and $ 8,547 as of March 31, 2023 and December 31, 2022, 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 September 30, 2022 are as follows:

October 1, 2022 to December 31, 2022 $ 1,111

Thereafter 6,225

Total minimum lease payments $ 23,555

The Company’s Verona, Missouri facility, while held by a prior owner, was designated by the EPA as a Superfund site and placed on the National Priorities List in 1983 because of dioxin contamination on portions of the site.

The Company is obligated to make rental payments under non-cancelable operating and finance leases.

Aggregate future minimum rental payments required under these leases at March 31, 2023 are disclosed in Note 19, Leases .

The Company’s Verona, Missouri facility, while held by a prior owner, was designated by the U.S.

Environmental Protection Agency (the "EPA") as a Superfund site and placed on the National Priorities List in 1983 because of dioxin contamination on portions of the site.

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

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

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

The Company is indemnified by the sellers under its May 2001 asset purchase agreement covering its acquisition of the Verona, Missouri facility for potential liabilities associated with the Superfund site, and one of the sellers, in turn, has the benefit of certain contractual indemnification by the prior owner that executed the above-described Superfund remedy.

In February 2022, BCP Ingredients, Inc.

("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 involved in a variety of lawsuits, claims and proceedings, including those related to environmental matters.

Subject to the uncertainties inherent in estimating future costs for contingent liabilities, except as expressly set forth in this note, management believes that any liability which may result from such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, liquidity or cash flows.

("BCP"), the Company's subsidiary that operates the site, received Special Notice Letter from the EPA for the performance of a focused remedial investigation/feasibility study ("RI/FS") at the site with regard to the presence of certain contaminants, including 1,4 dioxane.

BCP, along with the prior owner of the Verona facility submitted a joint response to the notice in November 2022.

Separately, in June 2022, the EPA conducted an inspection of BCP’s Verona, Missouri facility which was followed by BCP entering into an Administrative Order for Compliance on Consent (“AOC”) with the EPA in relation to its risk management program at the Verona facility.

Further, on January 18, 2023, BCP entered into an Amended AOC with the EPA whereby the parties agreed to the extension of certain timelines.

BCP is committed to ensuring continued compliance with the Amended AOC.

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

Management believes that the ultimate outcome of such matters will not have a material effect on the Company's consolidated financial position, results of operations, or liquidity.

NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS

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 September 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 Company estimates that the fair value of all financial instruments at March 31, 2023 and December 31, 2022 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 September 30, 2022 and December 31, 2021 includes $ 921 and $ 933 in money market funds, respectively.

Non-current assets at September 30, 2022 and December 31, 2021 includes $ 8,032 and $ 6,267 , respectively, of rabbi trust funds related to the Company's deferred compensation plan.

Cash and cash equivalents at March 31, 2023 and December 31, 2022 includes $ 938 and $ 934 in money market funds, respectively.

Non-current assets at March 31, 2023 and December 31, 2022 includes $ 9,339 and $ 8,547 , 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 contingent consideration liabilities included on the balance sheet at of September 30, 2022 amount to $ 30,547 and were valued using level three inputs, as defined by ASC 820, "Fair Value Measurement".

The contingent consideration liabilities included on the balance sheet as of March 31, 2023 and December 31, 2022 amount to $ 13,000 and $ 11,400 , respectively, and were valued using level three 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 assets related to the cross-currency swap and the interest rate swap were $ 12,928 and $ 1,612 at September 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.

The derivative assets related to the cross-currency swap and the interest rate swap were $ 3,234 and $ 730 at March 31, 2023, respectively.

The derivative assets related to the cross-currency swap and the interest rate swap were $ 4,587 and $ 1,406 at December 31, 2022, respectively.

NOTE 18 – RELATED PARTY TRANSACTIONS

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

Payments for the services the Company provided amounted to $ 1,188 and $ 3,185 for the three and nine months ended September 30, 2022, respectively, and $ 901 and $ 2,648 for the three and nine months ended September 30, 2021, respectively.

The raw materials purchased and subsequently sold amounted to $ 11,937 and $ 32,158 for the three and nine months ended September 30, 2022, respectively, and $ 6,419 and $ 18,461 for the three and nine months ended September 30, 2021, respectively.

Payments for the services the Company provided amounted to $ 1,172 and $ 975 for the three months ended March 31, 2023 and 2022, respectively.

The raw materials purchased and subsequently sold amounted to $ 10,013 and $ 9,311 for the three months ended March 31, 2023 and 2022, 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 $ 9,249 and $ 23,971 for the three and nine months ended September 30, 2022, respectively, and $ 4,944 and $ 14,545 for the three and nine months ended September 30, 2021, respectively.

At September 30, 2022 and December 31, 2021, the Company had receivables of $ 13,126 and $ 10,504 , respectively, recorded in accounts receivable from St.

Gabriel CC Company, LLC of $ 8,072 and $ 6,489 during the three months ended March 31, 2023 and 2022, respectively.

At March 31, 2023 and December 31, 2022, the Company had receivables of $ 11,209 and $ 8,820 , respectively, recorded in accounts receivable from St.

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

The Company also had payables of $ 9,339 and $ 7,552 , respectively, recorded in accounts payable for finished goods received from St.

At March 31, 2023 and December 31, 2022, the Company had payables of $ 8,128 and $ 5,224 , 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 were no such receivables as of September 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 September 30, 2022 and December 31, 2021.

Gabriel CC Company, LLC, recorded in accounts payable at both March 31, 2023 and December 31, 2022.

NOTE 19 – LEASES

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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 September 30, 2022.

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.

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

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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 occur in the fourth quarter of 2022.

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 September 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 sublease commenced in the fourth quarter of 2022 and the Company recognized a right of use asset and lease liability as of the commencement date in accordance with ASC 842, Lease Accounting.

The Company has not identified any embedded leases.

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Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms.

Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2022:

Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during the first quarter of 2023:

(1) 1 - 2 years, 5.45 % (2) 3 - 4 years, 6.04 % (3) 5 - 9 years, 6.38 % and (4) 10 + years, 7.10 %.

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.

At September 30, 2022 and December 31, 2021, the Company had finance lease liabilities of $ 2,345 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 September 30, 2022 and December 31, 2021 are summarized as follows:

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

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 and an option to purchase at a pre-determined price.

At March 31, 2023 and December 31, 2022, the Company had finance lease liabilities of $ 2,385 and $ 2,439 , 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 March 31, 2023 and December 31, 2022 are summarized as follows:

Right of use assets March 31, 2023 December 31, 2022

Operating leases $ 15,232 $ 17,094

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Total $ 17,513 $ 19,432

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

Lease liabilities - current March 31, 2023 December 31, 2022

Operating leases $ 2,831 $ 3,796

1 unchanged sentence

Total $ 3,060 $ 4,022

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

Lease liabilities - non-current March 31, 2023 December 31, 2022

Operating leases $ 13,091 $ 13,806

1 unchanged sentence

Total $ 15,247 $ 16,019

For the three and nine months ended September 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:

For the three months ended March 31, 2023 and 2022, 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

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Operating lease cost $ 1,270 $ 781

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Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed $ 457 $ 662

Weighted-average remaining lease term - operating leases 3.83 years 4.32 years 3.83 years 4.32 years

Weighted-average remaining lease term - finance leases 10.65 years 11.67 years 10.65 years 11.67 years

Weighted-average remaining lease term - operating leases 5.42 years 4.03 years

Weighted-average remaining lease term - finance leases 9.73 years 11.16 years

Weighted-average discount rate - operating leases 3.7 % 3.3 %

Weighted-average discount rate - finance leases 5.0 % 5.1 %

Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2022 aggregated to approximately $ 1,190 and $ 2,782 , respectively, and $ 788 and $ 2,274 for the three and nine months ended September 30, 2021, respectively.

Rent expense charged to operations under operating lease agreements for the three months ended March 31, 2023 and 2022 aggregated to approximately $ 1,270 and $ 781 , respectively.

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at March 31, 2023 are as follows:

April 1, 2023 to December 31, 2023 $ 4,192

Thereafter 4,859

Total minimum lease payments $ 23,764

NOTE 20 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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The receive-floating interest rate was based on the London Interbank Offered Rate ("LIBOR") in the original trade agreement.

Due to the discontinuation of LIBOR, in the third quarter of 2022, the Company modified its existing interest rate swap to reference 1-month CME Term SOFR (CME Group Benchmark Administration Limited as administrator of the forward-looking term Secured Overnight Financing Rate) in the amended trade terms.

Due to the discontinuation of LIBOR, the Company modified its existing interest rate swap to reference 1-month CME Term SOFR (CME Group Benchmark Administration Limited as administrator of the forward-looking term Secured Overnight Financing Rate) in the amended trade terms in the third quarter of 2022.

This modification was made under the relief provided for in ASC 848, "Reference Rate Reform" and therefore the derivative continues to qualify for hedge accounting.

The Company's risk management objective and strategy with respect to the interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest

payments on a portion of its outstanding debt.

The Company is meeting its objective since changes in the cash flows of the interest rate swap are expected to exactly offset the changes in the cash flows attributable to fluctuations in the contractually specified interest rate on the interest payments associated with the 2022 Credit Agreement.

The net interest income related to the interest rate swap contract was $ 35 for the three months ended September 30, 2022.

The net interest expense related to the interest rate swap contract was $ 842 for the nine months ended September 30, 2022, and $ 538 and $ 1,593 for the three and nine months ended September 30, 2021, respectively.

The net interest income related to the interest rate swap contract was $ 684 for the three months ended March 31, 2023.

The net interest expense related to the interest rate swap contract was $ 513 for the three months ended March 31, 2022.

The net interest income and expense were recorded in the condensed consolidated statements of earnings under "Interest expense, net."

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

The interest income related to the cross-currency swap contract was $ 569 and $ 1,682 for the three and nine months ended September 30, 2022, and $ 563 and $ 1,682 for the three and nine months ended September 30, 2021, respectively, which were recorded in the condensed consolidated statements of earnings under "Interest expense, net."

The interest income related to the cross-currency swap contract was $ 550 for each of the three months ended March 31, 2023 and 2022, and was 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 condensed consolidated balance sheets.

As of September 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) September 30, 2022 December 31, 2021

As of March 31, 2023 and December 31, 2022, the fair value of the derivative instruments is presented as follows in the Company's condensed consolidated balance sheets:

Derivative assets March 31, 2023 December 31, 2022

Interest rate swap $ 730 $ 1,406

Cross-currency swap 3,234 4,587

Derivative assets (liabilities) $ 14,540 $ ( 2,658 )

Derivative assets $ 3,964 $ 5,993

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:

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

As of September 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 of March 31, 2023, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective.

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

Losses and gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and nine months ended September 30, 2022 and 2021:

Location within Statements of Comprehensive Income Three Months Ended September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Losses and gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three months ended March 31, 2023 and 2022:

Location within Statements of Comprehensive Income Three Months Ended

Cash flow hedge (interest rate swap), net of tax Unrealized gain (loss) on cash flow hedge, net $ ( 511 ) $ 1,573

1 unchanged sentence

Total $ ( 1,532 ) $ 2,696

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 nine months ended September 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 September 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