What changed in this filing

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Item 1. Financial Statements

2023-10-27 compared with 2023-07-28 · 212 added, 255 removed, 628 unchanged (43% of the section changed)

3 unchanged sentences

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

Assets June 30, 2023 (unaudited) December 31, 2022

Assets September 30, 2023 (unaudited) December 31, 2022

Current assets:

1 unchanged sentence

Accounts receivable, net of allowance for doubtful accounts of $ 842 and $ 1,226 at

June 30, 2023 and December 31, 2022 respectively

September 30, 2023 and December 31, 2022 respectively

129,009 131,578

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32,240,144 and

32,152,787 shares issued and outstanding at June 30, 2023 and December 31, 2022,

32,152,787 shares issued and outstanding at September 30, 2023 and

December 31, 2022, respectively

Additional paid-in capital 140,966 128,806

Retained earnings 896,382 814,487

Accumulated other comprehensive income (loss) 191 ( 7,154 )

Accumulated other comprehensive loss ( 14,232 ) ( 7,154 )

Total stockholders' equity 1,025,267 938,284

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

10 unchanged sentences

Interest expense, net 6,594 3,642 17,322 5,147

Other income, net ( 727 ) ( 298 ) ( 1,003 ) ( 137 )

Other expense (income), net 545 ( 1,102 ) ( 458 ) ( 1,239 )

7,139 2,540 16,864 3,908

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net earnings $ 29,075 $ 25,249 $ 81,895 $ 83,961

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 14,425 ) ( 34,874 ) ( 6,117 ) ( 44,667 )

Unrealized (loss) gain on cash flow hedge ( 554 ) 850 ( 1,065 ) 2,423

Unrealized gain (loss) on cash flow hedge — 427 ( 1,065 ) 2,850

Change in postretirement benefit plans 2 2 104 ( 59 )

Other comprehensive income (loss) ( 1,668 ) ( 6,135 ) 7,345 ( 7,431 )

Comprehensive income $ 28,442 $ 23,647 $ 60,165 $ 51,281

Other comprehensive loss ( 14,423 ) ( 34,445 ) ( 7,078 ) ( 41,876 )

Comprehensive income (loss) $ 14,652 $ ( 9,196 ) $ 74,817 $ 42,085

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Six Months Ended June 30, 2023 and 2022

For the Three and Nine Months Ended September 30, 2023 and 2022

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

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Balance - June 30, 2023 1,006,903 867,307 191 32,239,202 2,151 137,254

Net earnings 29,075 29,075 — — — —

Other comprehensive loss ( 14,423 ) — ( 14,423 ) — — —

Repurchases of common stock ( 101 ) — — ( 775 ) — ( 101 )

Shares and options issued under stock plans 3,813 — — 1,717 — 3,813

Balance - September 30, 2023 $ 1,025,267 $ 896,382 $ ( 14,232 ) 32,240,144 $ 2,151 $ 140,966

See accompanying notes to condensed consolidated financial statements.

BALCHEM CORPORATION

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

For the Three and Nine Months Ended September 30, 2023 and 2022

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

See accompanying notes to condensed consolidated financial statements.

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

BALCHEM CORPORATION

1 unchanged sentence

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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Provision for doubtful accounts 1 379

Unrealized (gain) loss on foreign currency transactions and deferred compensation ( 1,010 ) 188

Unrealized gain on foreign currency transactions and deferred compensation ( 778 ) ( 1,262 )

Asset impairment and loss on disposal of assets 6,858 282

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Principal payments on acquired debt — ( 30,782 )

Cash paid for financing costs — ( 1,232 )

Principal payments on finance lease ( 166 ) ( 125 )

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

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results expected for the full year or any interim period.

The results of operations for the three and nine months ended September 30, 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 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.

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

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

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

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

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.

Due to the discontinuation of LIBOR and under the relief provided by Topic 848, during the third quarter of 2022, the Company modified its existing interest rate swap and replaced LIBOR with 1-month CME Term SOFR (see Note 20, Derivative Instruments and Hedging Activities ).

In August 2023, the FASB issued Accounting Standards Update ("ASU") 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement." The new guidance applies to the formation of a joint venture and requires a joint venture to initially measure all contributions received upon its formation at fair value.

The guidance is intended to reduce diversity in practice and is applicable to joint venture entities with a formation date on or after January 1, 2025 on a prospective basis.

While ASU 2023-05 is not currently applicable to Balchem, the Company will apply this guidance in future reporting periods after the guidance is effective to any future arrangements meeting the definition of a joint venture.

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting", and in December 2022 subsequently issued ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.” These ASU’s provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The Standards Updates provide optional expedients and exceptions for applying accounting principles generally accepted in the United States to contract modifications and hedging relationships that reference LIBOR or another reference rate that are expected to be discontinued.

The Standards Updates were effective upon issuance and can generally be applied through December 31, 2024.

Due to the discontinuation of LIBOR and under the relief provided by Topic 848, during the third quarter of 2022, the Company modified its interest rate swap and replaced LIBOR with 1-month CME Term SOFR.

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

The interest rate swap matured on June 27, 2023.

NOTE 2 – SIGNIFICANT ACQUISITIONS

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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 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 $ 5,000 as of June 30, 2023.

As a result, total payments related to the transaction are expected to be $ 76,233 , 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 $ 5,000 .

The Company also made an additional post-closing payment of $ 910 in the third quarter of 2023 that was negotiated as a deduction of the cash consideration at closing.

As a result, total payments related to the transaction are expected to be $ 73,643 , comprised of the cash consideration at closing of $ 70,892 , a working capital adjustment of $ 341 , an additional post-closing payment of $ 910 , and the fair value of the earn-out payment of $ 1,500 .

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.

17 unchanged sentences

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

Net decrease to contingent consideration liability ( 2,835 )

Net decrease to contingent consideration liability and other post-closing payments ( 5,425 )

Total expected consideration 73,437

1 unchanged sentence

Total expected payments $ 73,643

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.

The fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions.

In preparing our 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.

1 unchanged sentence

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 $( 7,769 ) and $( 5,880 ) for the three and six months ended June 30, 2023, respectively.

These amounts included favorable adjustments to transaction costs of $ 8,000 and $ 6,400 for the three and six months ended June 30, 2023, respectively.

Transaction and integration costs related to the Bergstrom acquisition were $ 75 for the three and six months ended June 30, 2022.

Transaction and integration costs related to the Bergstrom acquisition are included in general and administrative expenses and were $( 3,342 ) and $( 9,222 ) for the three and nine months ended September 30, 2023, respectively.

These amounts included favorable adjustments to transaction costs of $ 3,500 and $ 9,900 for the three and nine months ended September 30, 2023,

respectively.

Transaction and integration costs related to the Bergstrom acquisition were $ 593 and $ 668 for the three and nine months ended September 30, 2022.

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

10 unchanged sentences

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 June 30, 2023.

There was no contingent consideration liability recorded as of September 30, 2023.

The goodwill of $ 216,383 that arose on the acquisition date consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce.

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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.

The fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions.

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

2 unchanged sentences

Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $ 204 and $ 479 for the three and six months ended June 30, 2023, respectively, and $ 451 for both the three and six months ended June 30, 2022.

Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $ 46 and $ 525 for the three and nine months ended September 30, 2023, respectively, and $ 989 and $ 1,440 for the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

Net Sales Net Earnings Net Sales Net (Loss)/Earnings

Kappa & Bergstrom actual results included in the Company's consolidated income statement in three and six months ended June 30, 2023 $ 13,615 $ 1,094 $ 27,745 $ ( 1,215 )

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

Net Sales Net Earnings Net Sales Net Earnings

Kappa & Bergstrom actual results included in the Company's consolidated income statement in three and nine months ended September 30, 2023 $ 16,568 $ 4,732 $ 44,313 $ 3,517

2023 Supplemental pro forma combined financial $ 229,948 $ 30,937 $ 693,740 $ 88,155

6 unchanged sentences

Stock-Based Compensation

The Company’s results for the three and six months ended June 30, 2023 and 2022 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:

The Company’s results for the three and nine months ended September 30, 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 Increase/(Decrease) for the

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

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

2023 2022 2023 2022

7 unchanged sentences

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

As of June 30, 2023, the plan had 1,034,630 shares available for future awards, which included an additional 800,000 shares approved by the Company's shareholders during its annual meeting of shareholders held on June 22, 2023.

As of September 30, 2023, the plan had 1,035,010 shares available for future awards, which included an additional 800,000 shares approved by the Company's shareholders during its annual meeting of shareholders held on June 22, 2023.

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 six months ended June 30, 2023 and 2022 is summarized below:

For the Six Months Ended June 30, 2023 Shares (000s) Weighted

Option activity for the nine months ended September 30, 2023 and 2022 is summarized below:

For the Nine Months Ended September 30, 2023 Shares (000s) Weighted

Price Aggregate

5 unchanged sentences

Canceled ( 1 ) 138.07

Outstanding as of June 30, 2023 1,096 $ 103.96 $ 35,430 6.2

Exercisable as of June 30, 2023 728 $ 87.95 $ 34,170 4.8

For the Six Months Ended June 30, 2022 Shares (000s) Weighted

Outstanding as of September 30, 2023 1,095 $ 104.00 $ 26,825 5.9

Exercisable as of September 30, 2023 728 $ 88.01 $ 26,512 4.6

For the Nine Months Ended September 30, 2022 Shares (000s) Weighted

Price Aggregate

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Forfeited ( 12 ) 125.05

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

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

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 six months ended June 30, 2023, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions:

For the nine months ended September 30, 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 the six months ended June 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 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:

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 six months ended June 30, 2023 and 2022 is as follows:

Other information pertaining to option activity during the three and nine months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

1 unchanged sentence

Total intrinsic value of stock options exercised ($000s) $ 100 $ 815 $ 2,280 $ 1,964

Non-vested restricted stock activity for the six months ended June 30, 2023 and 2022 is summarized below:

Six Months Ended June 30,

Non-vested restricted stock activity for the nine months ended September 30, 2023 and 2022 is summarized below:

Nine Months Ended September 30,

Shares (000s) Weighted

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Forfeited ( 4 ) 128.06 ( 7 ) 116.72

Non-vested balance as of June 30 125 $ 131.76 120 $ 122.03

Non-vested performance share activity for the six months ended June 30, 2023 and 2022 is summarized below:

Six Months Ended June 30,

Non-vested balance as of September 30 123 $ 132.01 121 $ 122.96

Non-vested performance share activity for the nine months ended September 30, 2023 and 2022 is summarized below:

Nine Months Ended September 30,

Shares (000s) Weighted

6 unchanged sentences

Forfeited — — ( 3 ) 84.09

Non-vested balance as of June 30 76 $ 135.25 70 $ 127.69

Non-vested balance as of September 30 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 4.2 % and - 15.7 %, in each case for the six months ended June 30, 2023 and 2022, respectively.

and initial TSR’s of 4.2 % and - 15.7 %, in each case for the nine months ended September 30, 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 June 30, 2023 and 2022, there were $ 26,244 and $ 19,988 , respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans.

As of June 30, 2023, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.1 years.

As of September 30, 2023 and 2022, there were $ 22,470 and $ 23,665 , respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans.

As of September 30, 2023, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

The Company estimates that share-based compensation expense for the year ended December 31, 2023 will be approximately $ 16,000 .

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Such repurchases of shares from employees are funded with existing cash on hand.

During the six months ended June 30, 2023, the Company purchased 28,676 shares from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan.

During the six months ended June 30, 2022, the Company purchased 250,661 shares from open market purchases and from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan.

These shares were purchased at an average cost of $ 136.85 and $ 140.42 , respectively.

During the nine months ended September 30, 2023, the Company purchased 29,451 shares from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan at an average cost of $ 136.69 .

During the nine months ended September 30, 2022, the Company purchased 251,022 shares from open market purchases and from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan at an average cost of $ 140.41 .

NOTE 4 – INVENTORIES

Inventories, net of reserves at June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023 December 31, 2022

Inventories, net of reserves at September 30, 2023 and December 31, 2022 consisted of the following:

September 30, 2023 December 31, 2022

Raw materials $ 35,592 $ 44,477

3 unchanged sentences

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at June 30, 2023 and December 31, 2022 are summarized as follows:

June 30, 2023 December 31, 2022

Property, plant and equipment at September 30, 2023 and December 31, 2022 are summarized as follows:

September 30, 2023 December 31, 2022

Land $ 11,535 $ 11,415

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If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, which is generally based on discounted cash flows.

Included in “General and administrative expenses” were $ 6,146 of restructuring-related impairment and asset disposal charges for the three and six months ended June 30, 2023.

There were no such charges for the three and six months ended June 30, 2022.

Included in “General and administrative expenses” were $ 1,618 and $ 7,764 of restructuring-related impairment and asset disposal charges for the three and nine months ended September 30, 2023.

There were no such charges for the three and nine months ended September 30, 2022.

NOTE 6 - INTANGIBLE ASSETS

The Company had goodwill in the amount of $ 773,913 and $ 769,509 as of June 30, 2023 and December 31, 2022, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The increase in goodwill is primarily 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 June 30, 2023 and December 31, 2022 are summarized as follows:

(in years) Gross Carrying Amount at June 30, 2023 Accumulated Amortization at June 30, 2023 Gross Carrying Amount at December 31, 2022 Accumulated Amortization at December 31, 2022

The Company had goodwill in the amount of $ 766,545 and $ 769,509 as of September 30, 2023 and December 31, 2022, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The decrease in goodwill is primarily due to foreign currency translation adjustments.

Identifiable intangible assets with finite lives at September 30, 2023 and December 31, 2022 are summarized as follows:

(in years) Gross Carrying Amount at September 30, 2023 Accumulated Amortization at September 30, 2023 Gross Carrying Amount at December 31, 2022 Accumulated Amortization at December 31, 2022

Customer relationships & lists 10 - 20

6 unchanged sentences

$ 472,083 $ 279,915 $ 472,703 $ 259,408

Amortization of identifiable intangible assets was approximately $ 6,892 and $ 14,185 for the three and six months ended June 30, 2023, respectively, and $ 5,850 and $ 11,761 for the three and six months ended June 30, 2022, respectively.

Amortization of identifiable intangible assets was approximately $ 6,947 and $ 21,132 for the three and nine months ended September 30, 2023, respectively, and $ 7,922 and $ 19,683 for the three and nine months ended September 30, 2022, respectively.

Assuming no change in the gross carrying value of identifiable intangible assets, estimated amortization expense is $ 6,931 for the remainder of 2023, $ 18,967 for 2024, $ 15,513 for 2025, $ 15,342 for 2026, $ 14,852 for 2027 and $ 14,454 for 2028.

At June 30, 2023 and December 31, 2022, there were no identifiable intangible assets with indefinite useful lives as defined by ASC 350.

At September 30, 2023 and December 31, 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 six months ended June 30, 2023 and 2022.

There were no changes to the useful lives of intangible assets subject to amortization during the nine months ended September 30, 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 $ 139 and $ 278 for the three and six months ended June 30, 2023, respectively, and $ 140 and $ 280 for the three and six months ended June 30, 2022, respectively, relating to its portion of the joint venture's expenses in other expense.

The Company made capital contributions to the investment totaling $ 16 and $ 72 for the three and six months ended June 30, 2023, respectively, and $ 75 and $ 133 for the three and six months ended June 30, 2022.

The carrying value of the joint venture at June 30, 2023 and December 31, 2022 was $ 4,089 and $ 4,295 , respectively, and is recorded in "Other assets".

The Company recognized a loss of $ 118 and $ 396 for the three and nine months ended September 30, 2023, respectively, and $ 140 and $ 420 for the three and nine months ended September 30, 2022, respectively, relating to its portion of the joint venture's expenses in other expense.

The Company made capital contributions to the investment totaling $ 69 and $ 141 for the three and nine months ended September 30, 2023, respectively, and $ 89 and $ 222 for the three and nine months ended September 30, 2022.

The carrying value of the joint venture at September 30, 2023 and December 31, 2022 was $ 4,039 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 June 30, 2023 and December 31, 2022, the total balance outstanding on the 2022 Credit Agreement amounted to $ 405,569 and $ 440,569 .

As of September 30, 2023 and December 31, 2022, the total balance outstanding on the 2022 Credit Agreement amounted to $ 380,569 and $ 440,569 .

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.

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 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 6.330 % at June 30, 2023.

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 0.150 % to 0.225 % ( 0.175 % at June 30, 2023).

The unused portion of the revolving loan amounted to $ 144,431 at June 30, 2023.

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 6.545 % at September 30, 2023.

The unused portion of the revolving loan amounted to $ 169,431 at September 30, 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 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 $ 1,174 and $ 1,317 at June 30, 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 $ 73 and $ 144 for the three and six months ended June 30, 2023, respectively, and $ 70 and $ 141 for the three and six months ended June 30, 2022, respectively, and are included in "Interest expense, net" in the accompanying condensed consolidated statements of earnings.

Capitalized costs net of accumulated amortization were $ 1,102 and $ 1,317 at September 30, 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 and $ 215 for the three and nine months ended September 30, 2023, respectively, and $ 121 and $ 262 for the three and nine months ended September 30, 2022, respectively, 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 June 30, 2023, the Company was in compliance with these covenants.

At September 30, 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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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Net Earnings Per Share - Diluted $ 0.90 $ 0.78 $ 2.52 $ 2.59

The number of anti-dilutive shares were 352,759 and 391,269 for the three and six months ended June 30, 2023, respectively, and 294,568 and 237,453 for the three and six months ended June 30, 2022, respectively .

The number of anti-dilutive shares were 332,339 and 355,419 for the three and nine months ended September 30, 2023, respectively, and 362,203 and 369,183 for the three and nine months ended September 30, 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 June 30, 2023 and 2022, was 21.6 % and 24.1 %, respectively, and 21.8 % and 23.6 % for the six months ended June 30, 2023 and 2022, respectively.

The decrease was primarily due to certain lower state taxes and higher tax benefits from stock-based compensation.

The Company’s effective tax rate for the three months ended September 30, 2023 and 2022, was 20.3 % and 18.8 %, respectively, and 21.3 % and 22.2 % for the nine months ended September 30, 2023 and 2022, respectively.

The increase in the quarter to date rate was primarily due to certain higher state taxes and lower tax benefits from stock-based compensation.

The decrease in the year to date rate was primarily due to certain lower state taxes and higher tax benefits from stock-based compensation.

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

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and in various states and foreign countries.

As of June 30, 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 approxim ately $ 4,586 and $ 5,815 of unrecognized tax benefits, which are included in "Other long-term obligations" on the Company’s condensed consolidated balance sheets, as of June 30, 2023 and December 31, 2022, respectively.

As of September 30, 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 approx imately $ 4,572 and $ 5,815 of unrecognized tax benefits, which are included in "Other long-term obligations" on the Company’s condensed consolidated balance sheets, as of September 30, 2023 and December 31, 2022, respectively.

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.

Total accrued interest and penalties related to uncertain tax positions at June 30, 2023 and December 31, 2022 was approximately $ 1,636 and $ 1,735 , respectively, and are included in "Other long-term obligations".

Total accrued interest and penalties related to uncertain tax positions at September 30, 2023 and December 31, 2022 was approximately $ 1,622 and $ 1,735 , respectively, and are inclu ded in "Other long-term obligations".

NOTE 11 – SEGMENT INFORMATION

Balchem Corporation reports three reportable segments:

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

Human Nutrition and Health, 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 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.

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, 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.

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 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.

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.

Through the Bergstrom acquisition, this segment recently began manufacturing MSM, which is a widely used nutritional ingredient that provides benefits for pet health.

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 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

The Company re-packages and distributes a number of performance gases and chemicals for various uses by its customers, notably ethylene oxide, propylene oxide, and ammonia.

Ethylene oxide is sold as a sterilant gas, primarily for use in the health care industry.

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.

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

Propylene oxide is marketed and sold as a fumigant to aid in the control of insects and microbiological spoilage;

and to reduce bacterial and mold contamination in certain shelled and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes, and 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 approved for use in the countries these products are shipped to.

The Company’s performance gases and chemicals 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.

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

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 June 30,

Business Segment Assets September 30,

2023 December 31,

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Business Segment Net Sales Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Business Segment Earnings Before Income Taxes Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Depreciation/Amortization Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Total $ 13,804 $ 14,097 $ 40,878 $ 37,958

Capital Expenditures Six Months Ended June 30,

Capital Expenditures Nine Months Ended September 30,

Human Nutrition and Health $ 18,745 $ 22,513

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Unallocated corporate expenses consist of:

(i) Transaction and integration costs and unallocated legal fee s totaling $ 651 and $ 1,216 for th e three and six months ended June 30, 2023, respectively, and $ 872 and $ 1,176 for the three and six months ended June 30, 2022, respectively, and (ii) Unallocated amortization expense of $ 0 and $ 312 for the three and six months ended June 30, 2023, and $ 741 and $ 1,479 for the three and six months ended June 30, 2022, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.

(i) Transaction and integration costs and unallocated legal fees totaling $ 384 and $ 1,600 fo r th e three and nine months ended September 30, 2023, respectively, and $ 1,640 and $ 2,816 for the three and nine months ended September 30, 2022, respectively, and (ii) Unallocated amortization expense of $ 0 and $ 312 for the three and nine months ended September 30, 2023, and $ 734 and $ 2,213 for the three and nine months ended September 30, 2022, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.

NOTE 12 – REVENUE

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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NOTE 13 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the six months ended June 30, 2023 and 2022 for income taxes and interest is as follows:

Six Months Ended June 30,

Cash paid during the nine months ended September 30, 2023 and 2022 for income taxes and interest is as follows:

Nine Months Ended September 30,

Income taxes $ 30,899 $ 29,846

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NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

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

The changes in accumulated other comprehensive loss were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net foreign currency translation adjustment $ ( 14,425 ) $ ( 34,874 ) $ ( 6,117 ) $ ( 44,667 )

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

Unrealized (loss) gain on cash flow hedge ( 730 ) 1,122 ( 1,406 ) 3,206

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

Unrealized gain (loss) on cash flow hedge — 564 ( 1,406 ) 3,770

Tax — ( 137 ) 341 ( 920 )

Net of tax — 427 ( 1,065 ) 2,850

Net change in postretirement benefit plan (see Note 15 for further information)

Net change in postretirement benefit plan (see Note 15 for

further information)

Amortization of prior service cost — 2 — 6

Amortization of loss 2 — 6 —

Gain arising during the period and prior service credit — ( 9 ) 132 ( 41 )

Prior service credit and gain arising during the period — — 132 ( 41 )

Total before tax 2 2 138 ( 35 )

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Net of tax 2 2 104 ( 59 )

Total other comprehensive income (loss) $ ( 1,668 ) $ ( 6,135 ) $ 7,345 $ ( 7,431 )

Included in "Net foreign currency translation adjustment" were losses of $ 434 and $ 1,455 related to a net investment hedge, which were net of tax benefit of $ 782 and $ 1,114 for the three and six months ended June 30, 2023, respectively.

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 tax expense of $ 1,309 and $ 1,642 for the three and six months ended June 30, 2022, respectively.

Total other comprehensive loss $ ( 14,423 ) $ ( 34,445 ) $ ( 7,078 ) $ ( 41,876 )

Included in "Net foreign currency translation adjustment" were losses of $ 0 and $ 1,455 related to a net investment hedge, which were net of tax benefit of $ 0 and $ 1,114 for the three and nine months ended September 30, 2023, respectively.

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 tax expense of $ 1,635 and $ 3,277 for the three and nine months ended September 30, 2022, respectively.

The Company settled its derivative instruments on their maturity date of June 27, 2023.

See Note 20, Derivative Instruments and Hedging Activities .

Accumulated other comprehensive (loss) income at June 30, 2023 and December 31, 2022 consisted of the following:

Accumulated other comprehensive (loss) income at September 30, 2023 and December 31, 2022 consisted of the following:

Foreign currency

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Other comprehensive income (loss) ( 6,117 ) ( 1,065 ) 104 ( 7,078 )

Balance June 30, 2023 $ ( 93 ) $ — $ 284 $ 191

Balance September 30, 2023 $ ( 14,518 ) $ — $ 286 $ ( 14,232 )

NOTE 15 – EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsored two 401(k) savings plans for eligible employees, which were merged into one plan on January 1, 2021.

The remaining plan allows participants to make pretax contributions and the Company matches certain percentages of those pretax contributions.

The Company sponsors one 401(k) savings plan for eligible employees, which allows participants to make pretax contributions and the Company matches certain percentages of those pretax contributions.

The remaining plan also has a discretionary profit sharing portion and matches 401(k) contributions with shares of the Company’s Common Stock.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Service cost $ 81 $ 59

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Net periodic benefit cost $ 133 $ 85

T he amounts recorded for these obligations on the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 are $ 1,419 and $ 1,465 , 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 September 30, 2023 and December 31, 2022 are $ 1,462 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 June 30, 2023 and December 31, 2022 were $ 392 and $ 393 , 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 September 30, 2023 and December 31, 2022 were $ 379 and $ 393 , respectively, and were included in "Other long-term obligations".

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

Six Months Ended June 30,

Nine Months Ended September 30,

Service cost with interest to end of year $ 46 $ 30

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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 $ 9,634 as of June 30, 2023, of which $ 9,618 was included in "Other long-term obligations" and $ 16 was in cluded in "Accrued compensation and other benefits" on the Company's condensed consolidated balance sheets.

The deferred compensation liability was $ 9,611 as of September 30, 2023, of which $ 9,594 was included in "Other long-term obligations" and $ 17 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 $ 9,635 and $ 8,547 as of June 30, 2023 and December 31, 2022, respectively, and were included in "Other non-current assets" on the Company's condensed consolidated balance sheets.

The related rabbi trust assets were $ 9,613 and $ 8,547 as of September 30, 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

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 June 30, 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.

Aggregate future minimum rental payments required under these leases at September 30, 2023 are disclosed in Note 19, Leases.

The Company’s Verona, Missouri facility, while held by a prior owner, Syntex Agribusiness, Inc.

(“Syntex”), 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.

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.

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

One of the sellers, in turn, has the benefit of certain contractual indemnification by Syntex in relation to the implementation of the above-described Superfund remedy.

In February 2022, BCP Ingredients, Inc.

("BCP"), the Company's subsidiary that operates the site, received a 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.

("BCP"), the Company's subsidiary that operates the site, and Syntex received a Special Notice Letter from the EPA to initiate negotiations regarding 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 and chlorobenzene.

In June 2023, BCP, Syntex, EPA, and the State of Missouri entered into an Administrative Settlement Agreement and Order on Consent (“ASAOC”) for RI/FS under which (a) BCP will conduct a source investigation of potential source(s) of releases of 1,4-dioxane and chlorobenzene at a portion of the site and (b) BCP and Syntex will complete a RI/FS to determine a potential remedy, if any is required.

Activities under the ASAOC are underway and expected to continue for some period of time.

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.

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

BCP has timely completed all requirements under the Amended AOC as of June 30, 2023.

In connection with the EPA’s inspection from June 2022, the Company believes that a loss in this matter is probable and reasonably estimable and has recorded a loss contingency in an amount that is not material to its financial performance or operations.

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.

In connection with the EPA’s inspection from June 2022, the Company believes that a loss contingency in this matter is probable and reasonably estimable and has recorded a loss contingency in an amount that is not material to its financial performance or operations.

In addition to the above, from time to time, the Company is a party to various legal proceedings, litigation, claims and assessments.

While it is not possible to predict the ultimate disposition of each of these matters, 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, liquidity or cash flows.

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 June 30, 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 Company estimates that the fair value of all financial instruments at September 30, 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 June 30, 2023 and December 31, 2022 includes $ 31,421 and $ 934 in money market funds and other interest-bearing deposit accounts, respectively.

Non-current assets at June 30, 2023 and December 31, 2022 includes $ 9,635 and $ 8,547 , respectively, of rabbi trust funds related to the Company's deferred compensation plan.

Cash and cash equivalents at September 30, 2023 and December 31, 2022 includes $ 24,746 and $ 934 in money market funds and other interest-bearing deposit accounts, respectively.

Non-current assets at September 30, 2023 and December 31, 2022 includes $ 9,613 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 as of June 30, 2023 and December 31, 2022 amount to $ 5,000 and $ 11,400 , respectively, and were valued using level three inputs, as defined by ASC 820, "Fair Value Measurement".

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

The contingent consideration liabilities included on the balance sheet as of September 30, 2023 and December 31, 2022 amount to $ 1,500 and $ 11,400 , respectively, and were valued using level three inputs, as defined by ASC 820, "Fair Value Measurement".

The Company also had derivative financial instruments, consisting of a cross-currency swap and an interest rate swap, which were included in "Derivative assets" in the Company's condensed consolidated balance sheets.

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

The Company settled its cross-currency swap and interest rate swap on June 27, 2023 and had no other derivatives outstanding as of June 30, 2023.

The Company settled its cross-currency swap and interest rate swap on June 27, 2023 and had no other derivatives outstanding as of September 30, 2023.

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.

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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 $ 1,028 and $ 2,200 for the three and six months ended June 30, 2023, respectively and $ 1,022 and $ 1,997 for the three and six months ended June 30, 2022, respectively.

The raw materials purchased and subsequently sold amounted to $ 9,782 and $ 19,795 for the three and six months ended June 30, 2023, respectively, and $ 10,910 and $ 20,221 for the three and six months ended June 30, 2022, respectively.

Payments for the services the Company provided amounted to $ 1,094 and $ 3,294 for the three and nine months ended September 30, 2023, respectively and $ 1,188 and $ 3,185 for the three and nine months ended September 30, 2022, respectively.

The raw materials purchased and subsequently sold amounted to $ 7,274 and $ 27,069 for the three and nine months ended September 30, 2023, respectively, and $ 11,937 and $ 32,158 for the three and nine months ended September 30, 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 o f $ 8,223 and $ 16,295 during t he three and six months ended June 30, 2023, respectively, and $ 8,233 and $ 14,722 for the three and six months ended June 30, 2022, respectively.

At June 30, 2023 and December 31, 2022, the Company had receivables of $ 6,615 and $ 8,820 , respectively, recorded in accounts receivable from St.

Gabriel CC Company, LLC of $ 5,903 and $ 22,198 during the three and nine months ended September 30, 2023, respectively, and $ 9,249 and $ 23,971 for the three and nine months ended September 30, 2022, respectively.

At September 30, 2023 and December 31, 2022, the Company had receivables of $ 8,369 and $ 8,820 , respectively, recorded in accounts receivable from St.

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

At June 30, 2023 and December 31, 2022, the Company had payables of $ 4,907 and $ 5,224 , respectively, recorded in accounts payable for finished goods received from St.

At September 30, 2023 and December 31, 2022, the Company had payables of $ 5,972 and $ 5,224 , respectively, recorded in accounts payable for finished goods received from St.

Gabriel CC Company, LLC.

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 at both June 30, 2023 and December 31, 2022.

Gabriel CC Company, LLC, recorded in accounts payable at both September 30, 2023 and December 31, 2022.

NOTE 19 – LEASES

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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 June 30, 2023.

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.

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 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.

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.

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.

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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 the second quarter of 2023:

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

(1) 1 - 2 years, 6.50 % (2) 3 - 4 years, 7.09 % (3) 5 - 9 years, 7.43 % and (4) 10 + years, 8.15 %.

At June 30, 2023 and December 31, 2022, the Company had finance lease liabilities of $ 2,329 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 June 30, 2023 and December 31, 2022 are summarized as follows:

Right of use assets June 30, 2023 December 31, 2022

Right of use assets and lease liabilities at September 30, 2023 and December 31, 2022 are summarized as follows:

Right of use assets September 30, 2023 December 31, 2022

Operating leases $ 16,066 $ 17,094

1 unchanged sentence

Total $ 18,221 $ 19,432

Lease liabilities - current June 30, 2023 December 31, 2022

Lease liabilities - current September 30, 2023 December 31, 2022

Operating leases $ 3,584 $ 3,796

1 unchanged sentence

Total $ 3,858 $ 4,022

Lease liabilities - non-current June 30, 2023 December 31, 2022

Lease liabilities - non-current September 30, 2023 December 31, 2022

Operating leases $ 13,244 $ 13,806

1 unchanged sentence

Total $ 15,239 $ 16,019

For the three and six months ended June 30, 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:

For the three and nine months ended September 30, 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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

15 unchanged sentences

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

Rent expense charged to operations under operating lease agreements for the three and six months ended June 30, 2023 aggregated to approximately $ 1,376 and $ 2,646 , respectively, and $ 811 and $ 1,592 for the three and six months ended June 30, 2022, respectively.

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at June 30, 2023 are as follows:

July 1, 2023 to December 31, 2023 $ 3,016

Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2023 aggregated to approximately $ 1,326 and $ 3,972 , respectively, and $ 1,190 and $ 2,782 for the three and nine months ended September 30, 2022, respectively.

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at September 30, 2023 are as follows:

October 1, 2023 to December 31, 2023 $ 1,301

Thereafter 5,304

1 unchanged sentence

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 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 was to manage interest rate risk and foreign currency risk.

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

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

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 continued to qualify for hedge accounting.

The Company's risk management objective and strategy with respect to the interest rate swap was 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 met its objective since changes in the cash flows of the interest rate 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 $ 834 and $ 1,518 for the three and six months ended June 30, 2023, respectively, and 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, respectively.

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

The net interest income related to the interest rate swap contract was $ 0 and $ 1,518 for the three and nine months ended September 30, 2023, respectively, and $ 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.

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

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.

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, which was designated as net investment hedge.

The derivative had 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 $ 1,119 for the three and six months ended June 30, 2023, respectively, and $ 563 and $ 1,113 for the three and six months ended June 30, 2022, respectively.

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

The derivative instruments were with a single counterparty and were subject to a contractual agreement that provided 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 were categorized as a master netting arrangement and presented as a net "Derivative asset" or "Derivative liability" on the condensed consolidated balance sheets.

The Company settled its derivative instruments on their maturity date of June 27, 2023 and had no other derivatives outstanding as of June 30, 2023.

The interest income related to the cross-currency swap contract was $ 0 and $ 1,119 for the three and nine months ended September 30, 2023, respectively, and $ 569 and $ 1,682 for the three and nine months ended September 30, 2022, respectively.

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

The Company settled its derivative instruments on their maturity date of June 27, 2023 and had no other derivatives outstanding as of September 30, 2023.

The proceeds from the settlement of the cross-currency swap in the amount of $ 2,740 were classified as investing activities in the Consolidated Statements of Cash Flows.

4 unchanged sentences

Derivative assets $ 5,993

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

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

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

(1) the Company would 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 was probable that the Swap Counterparty would not default on its obligations under the swap, and (3) the Company performed a qualitative review each quarter to assess whether the relationship qualified for hedge accounting.

No mismatches arose for either the interest rate swap or cross-currency swap;

the hedged transactions were determined to be highly effective;

hedge accounting continued through the settlement date;

and all changes in fair values of the derivative instruments were recorded in accumulated other comprehensive income through June 30, 2023.

Losses and gains on our hedging instruments were recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and six months ended June 30, 2023 and 2022:

Gains and losses on our hedging instruments were recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and nine months ended September 30, 2023 and 2022:

Location within Statements of Comprehensive Income Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Cash flow hedge (interest rate swap), net of tax Unrealized (loss) gain on cash flow hedge, net $ ( 554 ) $ 850 $ ( 1,065 ) $ 2,423

Cash flow hedge (interest rate swap), net of tax Unrealized gain (loss) on cash flow hedge, net $ — $ 427 $ ( 1,065 ) $ 2,850

Net investment hedge (cross-currency swap), net of tax Net foreign currency translation adjustment — 5,065 ( 1,455 ) 10,151

Total $ — $ 5,492 $ ( 2,520 ) $ 13,001

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.

In connection with the Kappa acquisition (see Note 2, Significant Acquisitions ), the Company entered into four short-term foreign currency exchange forward contracts to manage fluctuations in foreign currency exchange rates.

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, 2023, 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

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, 2023, the Company did not maintain any open foreign currency exchange forward contracts as all four contracts expired during 2022.

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