What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-16 compared with 2023-02-24 · 223 added, 257 removed, 1067 unchanged (31% of the section changed)

12 unchanged sentences

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Balchem Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and schedule listed at Item 8 (collectively, the financial statements).

We have audited the accompanying consolidated balance sheets of Balchem Corporation and its subsidiaries (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and schedule listed at Item 8 (collectively, the financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Kechu BidCo AS and its subsidiaries (Kappa) and Cardinal Associates, Inc.

(Bergstrom) from its assessment of internal control over financial reporting as of December 31, 2022, because they were acquired by the Company in purchase business combinations in the second and third quarters, respectively, of 2022.

We have also excluded Kappa and Bergstrom from our audit of internal control over financial reporting.

Kappa and Bergstrom are wholly owned subsidiaries whose total assets and net sales collectively represent approximately 24.5 percent and 2.4 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

Basis for Opinions

4 unchanged sentences

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

8 unchanged sentences

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of customer relationships, technology and contingent consideration related to acquisitions

As described in Note 2 to the financial statements, the Company completed two acquisitions during the year, acquiring Kechu BidCo AS and its subsidiaries (collectively, Kappa) in June 2022 and Cardinal Associates Inc.

and its Bergstrom Nutrition business (collectively, Bergstrom) in August 2022.

The total consideration on acquisition date for Kappa amounted to $307 million, which included an estimated acquisition-date fair value contingent consideration of $4 million.

The total consideration on acquisition date for Bergstrom amounted to $78 million, which included an estimated acquisition-date fair value contingent consideration of $8 million.

The respective contingent consideration may be paid if certain targets are achieved in 2023.

The acquisition-date fair values of the contingent consideration liabilities were estimated using a scenario-based approach, estimating the expected payments based on the likelihood of achieving the respective targets.

In connection with the acquisitions of Kappa and Bergstrom, the Company acquired customer relationships with acquisition-date fair values of $89 million and $30 million, respectively, and technology with acquisition-date fair values of $16 million and $5 million, respectively.

For both acquisitions, management used the multi-period excess earnings method, a form of the income valuation approach, to determine the respective fair values of the customer relationships acquired and the relief from royalty method to determine the respective fair values of the technology acquired.

In estimating the acquisition-date fair values of the contingent consideration, customer relationships and technology, management was required to make significant judgments in formulating the significant estimates and assumptions about future sales and operating expenses, probability of certain financial forecast scenarios, attrition rates, obsolescence curves, growth rates, royalty rates, and discount rates when utilizing the aforementioned valuation methods.

We identified the Company’s valuation of the contingent consideration, customer relationships, and technology related to the acquisitions of Kappa and Bergstrom as a critical audit matter due to the high degree of auditor judgment, subjectivity, and audit effort, including the use of our fair value specialists, involved in performing procedures and evaluating audit evidence related to significant estimates and assumptions utilized by management, including sales, operating expenses, attrition rates, obsolescence curves, growth rates, royalty rates, and discount rates, when calculating the fair values of the contingent consideration, customer relationships, and technology.

Our audit procedures related to the Company’s valuation of the contingent consideration, customer relationships, and technology in connection with the aforementioned acquisitions included the following, among others:

• We obtained an understanding of the relevant controls related to the valuation of the contingent consideration, customer relationships, and technology and tested such controls for design and operating effectiveness, including management review controls related to the development of significant assumptions including future sales and operating expenses, attrition rates, obsolescence curves, growth rates, royalty rates and discount rates.

• We evaluated the reasonableness of management’s forecasts of sales and operating expense growth rates and attrition rates by comparing the forecasts to (1) the historical results (2) internal communications to management and the Board of Directors, and (3) external communications made by management to analysts and investors, as applicable.

• We evaluated the reasonableness of management’s determination of useful lives.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates, royalty rates, and the probability of certain financial forecast scenarios, and tested the relevance and reliability of source information underlying the determination of the discount rates and royalty rates, and developed a range of independent estimates, which we compared to the discount rates, royalty rates and the contingent consideration fair value arrived at by management.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Reporting Units for Goodwill Impairment Testing

As described in Note 1 and 6 to the financial statements, the Company’s goodwill balance was $770 million as of December 31, 2022.

As described in Notes 1 and 6 to the financial statements, the Company’s goodwill balance was $779 million as of December 31, 2023.

The Company performed an annual goodwill impairment test as of October 1, 2023 using a quantitative evaluation for each of its reporting units.

8 unchanged sentences

• We obtained an understanding of the relevant controls related to the valuation of the Company’s reporting units and tested such controls for design and operating effectiveness, including management review controls related to sales and expense growth rates and the selection of appropriate discount rates.

• We evaluated the reasonableness of management’s forecasted sales and expense growth rates by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts of sales and expense growth rates by comparing the forecasts to (1) the historical results, (2) internal communications to management and the Board of Directors, and (3) external communications made by management to analysts and investors, as applicable.

1 unchanged sentence

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates and tested the relevance and reliability of source information underlying the determination of the discount rates, tested the mathematical accuracy of the calculation, and developed a range of independent estimates and compared those to the discount rates selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness and tested the mathematical accuracy of the terminal value calculation.

• With the assistance of our fair value specialists, we evaluated the reasonableness and tested the mathematical accuracy of the terminal value calculations.

/s/ RSM US LLP

8 unchanged sentences

Cash and cash equivalents $ 64,447 $ 66,560

Accounts receivable, net of allowance for doubtful accounts of $ 1,226 and $ 928 at December 31, 2022 and 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 908 and $ 1,226 at

December 31, 2023 and 2022, respectively

125,284 131,578

9 unchanged sentences

Right of use assets - finance lease 2,101 2,338

Other assets 15,118 11,674

Other non-current assets 16,947 15,118

Total assets $ 1,597,211 $ 1,624,512

13 unchanged sentences

Finance lease liabilities - non-current 1,943 2,213

Derivative liabilities — 2,658

Other long-term obligations 16,577 26,814

10 unchanged sentences

Retained earnings 897,488 814,487

Accumulated other comprehensive loss ( 7,154 ) ( 4,993 )

Accumulated other comprehensive income (loss) 8,691 ( 7,154 )

Total stockholders’ equity 1,053,984 938,284

17 unchanged sentences

Interest expense, net 22,613 10,268 2,456

Other, net 1,169 ( 187 ) 291

Other (income) expense, net ( 681 ) 1,169 ( 187 )

21,932 11,437 2,269

11 unchanged sentences

Net earnings $ 108,543 $ 105,367 $ 96,104

Other comprehensive (loss)/ income, net of tax:

Other comprehensive income (loss), net of tax:

Net foreign currency translation adjustment 16,809 ( 4,799 ) ( 11,255 )

Unrealized gain/(loss) on cash flow hedge, net of taxes of $ 868 , $ 654 , and $ 809 at December 31, 2022, 2021, and 2020, respectively

Unrealized (loss) gain on cash flow hedge, net of taxes of $ 341 , $ 868 , and $ 654 at December 31, 2023, 2022, and 2021, respectively

( 1,065 ) 2,696 2,053

1 unchanged sentence

101 ( 58 ) 36

Other comprehensive (loss)/ income, net of tax ( 2,161 ) ( 9,166 ) 9,737

Other comprehensive income (loss), net of tax 15,845 ( 2,161 ) ( 9,166 )

Comprehensive income $ 124,388 $ 103,206 $ 86,938

12 unchanged sentences

Net earnings 96,104 96,104 — — — —

Other comprehensive income 9,737 — 9,737 — — —

Other comprehensive loss ( 9,166 ) — ( 9,166 ) — — —

Dividends ($ .64 per share)

11 unchanged sentences

Net earnings 108,543 108,543 — — — —

Other comprehensive (loss) ( 2,161 ) — ( 2,161 ) — — —

Other comprehensive income 15,845 — 15,845 — — —

Dividends ($ .79 per share)

( 25,542 ) ( 25,542 ) — — — —

Repurchases of common stock ( 35,423 ) — — ( 252,304 ) ( 16 ) ( 35,407 )

Repurchases of common stock, including excise tax * ( 4,514 ) — — ( 32,558 ) ( 2 ) ( 4,512 )

Shares and options issued under stock plans 21,368 — — 134,499 9 21,359

Balance - December 31, 2023 $ 1,053,984 $ 897,488 $ 8,691 32,254,728 $ 2,152 $ 145,653

* On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (the "IRA") into law.

The IRA imposes a 1% excise tax on share repurchases, which is effective for repurchases completed after December 31, 2022.

The excise tax is recorded within equity as part of the repurchase of the common stock.

See accompanying notes to consolidated financial statements.

11 unchanged sentences

Provision for doubtful accounts 37 401 180

Unrealized loss/(gain) on foreign currency transactions and deferred compensation 914 ( 384 ) 173

Asset impairment charge 23 1,675 1,915

Loss/(gain) on disposal of assets 343 ( 1,728 ) 153

Unrealized (gain) loss on foreign currency transactions and deferred compensation ( 733 ) 914 ( 384 )

Asset impairment charge and (gain) loss on disposal of assets 7,031 366 ( 53 )

Change in fair value of contingent consideration liability ( 11,300 ) — —

Changes in assets and liabilities, net of acquired balances

10 unchanged sentences

Proceeds from sale of assets 1,881 206 318

Proceeds from settlement of net investment hedge 2,740 — —

Proceeds from insurance — — 1,831

Purchase of convertible notes ( 150 ) — ( 850 )

Investment in affiliates ( 290 ) ( 495 ) ( 86 )

Net cash used in investing activities ( 34,813 ) ( 416,014 ) ( 35,300 )

1 unchanged sentence

Proceeds from revolving loan 18,000 435,000 5,000

Principal payments on revolving loan ( 103,000 ) ( 60,000 ) ( 95,000 )

Principal payments on revolving debt ( 149,000 ) ( 103,000 ) ( 60,000 )

Principal payment on acquired debt — ( 30,988 ) —

4 unchanged sentences

Repurchases of common stock ( 4,469 ) ( 35,423 ) ( 35,239 )

Net cash provided by (used in) financing activities 246,679 ( 102,178 ) ( 101,164 )

Net cash (used in) provided by financing activities ( 153,321 ) 246,679 ( 102,178 )

Effect of exchange rate changes on cash 2,260 ( 5,880 ) ( 4,368 )

32 unchanged sentences

Credit terms are granted in the normal course of business to the Company’s customers and on-going credit evaluations are performed on the Company’s customers.

In June 2016, the FASB issued ASU No.

In June 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-13, "Financial Instruments - Credit Losses (Topic 326):

28 unchanged sentences

Goodwill represents the excess of purchase price over the fair value of net assets acquired in accordance with ASC 805, "Business Combinations".

Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are instead assessed for impairment annually and more frequently if events and circumstances indicate that the asset might be impaired, in accordance with the provisions of ASC 350, "Intangibles-Goodwill and Other".

Goodwill and intangible assets acquired in a business combination that have indefinite useful lives are not amortized but are instead assessed for impairment annually and more frequently if events and circumstances indicate that the assets might be impaired, in accordance with the provisions of ASC 350, "Intangibles-Goodwill and Other".

The Company performed its annual test as of October 1.

ASC 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment if events and circumstances indicate that the asset might be impaired.

In January 2017, the FASB issued ASU No.

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

A goodwill impairment test will now be performed by comparing the fair value of a reporting unit with its carrying amount.

In accordance with this update, a goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

As of October 1, 2023 and 2022, the Company opted to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test.

The Company assessed the fair values of its reporting units by utilizing the income

approach, based on a discounted cash flow valuation model as the basis for its conclusions.

The Company assessed the fair values of its reporting units by utilizing the income approach, based on a discounted cash flow valuation model as the basis for its conclusions.

The Company's estimates of future cash flows included significant management assumptions such as revenue growth rates, operating margins, discount rates, estimated terminal values and future economic and market conditions.

4 unchanged sentences

Goodwill at December 31, 2021 $ 523,949

Goodwill as a result of the Kappa acquisition 216,295

Goodwill as a result of the Bergstrom acquisition 31,209

Impact due to change in foreign exchange rates ( 1,944 )

Goodwill at December 31, 2022 769,509

Goodwill as a result of the Kappa acquisition 216,295

Goodwill as a result of the Bergstrom acquisition 341

45 unchanged sentences

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

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

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

These derivatives were settled on their maturity date on June 27, 2023 and there were no other derivatives outstanding as of December 31, 2023.

Cost of Sales

8 unchanged sentences

Net Earnings Per Common Share

Basic net earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period.

Basic net earnings per common share is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period.

Diluted net earnings per common share is calculated in a manner consistent with basic net earnings per common share except that the weighted average number of common shares outstanding also includes the dilutive effect of stock options outstanding, unvested restricted stock, and unvested performance shares (using the treasury stock method).

Stock-based Compensation

The Company has stock-based employee compensation plans, which are described more fully in Note 3.

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation,” which requires all share-based payments, including grants of stock options, to be recognized in the income statement as an operating expense, based on their fair values.

The Company has stock-based employee compensation plans, which are described more fully in Note 3, Stockholders' Equity .

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation,” which requires all share-based payments, including grants of stock options, to be recognized in the statement of earnings as an operating expense, based on their fair values.

The Company estimates the fair value of each option award on the date of grant using either the Black-Scholes model or the Binomial model, whichever is deemed to be most appropriate.

10 unchanged sentences

(the "Bank Counterparty").

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

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

The Company does not enter into derivative financial instruments for trading or speculative purposes.

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

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

On a quarterly basis, we assess the effectiveness of the hedging relationships for the interest rate swap and cross-currency swap by reviewing the critical terms indicated in the applicable agreement.

As of December 31, 2022, we assessed the hedging relationships and determined them to be highly effective.

As such, the net change in fair values of the interest rate swap, that qualifies as a cash flow hedge, was recorded in accumulated other comprehensive income/(loss) and is subsequently reclassified into interest expense as interest payments are made on our debt.

For the cross-currency swap, the amounts that have not yet been recognized in earnings remained in the cumulative translation adjustment section of accumulated other comprehensive income until the hedged net investment is sold or liquidated in accordance with paragraphs 815-35-35-5A, "Derivatives and Hedging - Net Investment Hedges", and 830-30-40-1 through 40-1A, "Foreign Currency Matters - Derecognition".

The derivative instruments were with the above 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 consolidated balance sheet as of December 31, 2022.

The Company settled its derivative instruments on their maturity date of June 27, 2023 and had no other derivatives outstanding as of December 31, 2023.

On a quarterly basis through their maturity, we assessed the effectiveness of the hedging relationships for the interest rate swap and cross-currency swap by reviewing the critical terms indicated in the applicable agreement.

The hedging relationships were determined to be highly effective.

As such, the net change in fair values of the interest rate swap, that qualified as a cash flow hedge, was recorded in accumulated other comprehensive income/(loss) and subsequently reclassified into interest expense as interest payments were made on our debt.

For the cross-currency swap, the amounts that have not yet been recognized in earnings remain in the cumulative translation adjustment section of accumulated other comprehensive income until the hedged net investment is sold or liquidated in accordance with paragraphs 815-35-35-5A, "Derivatives and Hedging - Net Investment Hedges", and 830-30-40-1 through 40-1A, "Foreign Currency Matters - Derecognition".

Refer to Note 20, Derivative Instruments and Hedging Activities , for detailed information about our derivative financial instruments.

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 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).

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures." The new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about a reporting entity's effective tax rate reconciliation and information on income taxes paid.

The amendment is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendment in this Update should be applied on a prospective basis, with retrospective application permitted.

The Company is in the process of evaluating the impact that the adoption of ASU 2023-09 will have to the financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures." The ASU expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources.

Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning December 15, 2024.

Early adoption is permitted and the amendments must be applied retrospectively to all prior periods presented.

The adoption of this guidance will not affect the Company's consolidated results of operations, financial position or cash flows.

The Company is currently evaluating the effect the guidance will have on its disclosures.

In August 2023, the FASB issued 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.

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.

The interest rate swap matured on June 27, 2023.

NOTE 2 – SIGNIFICANT ACQUISITIONS

3 unchanged sentences

("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 100 % of the voting equity interests of Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom").

("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 MSM, based in Vancouver, Washington.

4 unchanged sentences

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 2024 if certain financial performance targets and other metrics are met, and therefore the Company recorded a contingent consideration liability, which was valued at $ 11,400 as of December 31, 2022.

As a result, total payments related to the transaction are expected to be $ 82,292 , comprised of the upfront cash consideration of $ 70,892 and the fair value of the earn-out payment of $ 11,400 .

In connection with this transaction, the former shareholders of Bergstrom had an opportunity to receive an additional payment in 2024 if certain financial performance targets and other metrics were met.

As of December 31, 2023, the earn-out periods concluded and the Company recorded a contingent consideration liability of $ 100 which was included in "Accrued expenses" on the consolidated balance sheets.

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 $ 72,243 , comprised of the upfront cash

consideration 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 $ 100 .

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.

1 unchanged sentence

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

8 unchanged sentences

Accounts payable ( 699 )

Other current liabilities ( 462 )

Bank debt ( 206 )

Lease liabilities ( 871 )

Other liabilities ( 462 )

Goodwill 31,550

Total consideration on acquisition date 78,521

Increase to contingent consideration liability 3,565

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

Net decrease to contingent consideration liability and other post-closing payments ( 6,825 )

Total expected consideration 72,037

1 unchanged sentence

Total expected payments $ 72,243

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

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

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.

The Company made certain measurement period adjustments based on changes in facts and circumstances as of the acquisition date, which resulted in an increase in the value of intangible assets of $ 3,300 and a decrease in property, plant and equipment and goodwill of $ 457 and $ 2,851 , respectively.

The purchase price and related allocation of assets acquired and liabilities assumed is preliminary pending final working capital true-up negotiations with the sellers.

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 $ 1,039 for the year ended December 31, 2022.

There were no such amounts related to this acquisition for years ended December 31, 2021 and 2020.

Transaction and integration costs related to the Bergstrom acquisition are included in general and administrative expenses and were $( 10,614 ) and $ 4,604 for the years ended December 31, 2023 and 2022, respectively.

There were no such amounts related to this acquisition for the year ended December 31, 2021.

These amounts included favorable adjustments to transaction costs of $ 11,300 for the year ended December 31, 2023 and an unfavorable adjustment to transaction costs of $ 3,565 for the year ended December 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”).

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.

Kappa manufactures specialty vitamin K2, which 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.

6 unchanged sentences

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 2024 if certain financial performance targets and other metrics are met.

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

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

1 unchanged sentence

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.

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

The transactions were completed in Norwegian kroner ("NOK") and the amounts were translated to U.S.

21 unchanged sentences

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.

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.

The Company made certain measurement period adjustments based on changes in facts and circumstances as of the acquisition date, which resulted in a decrease in the value of intangible assets, contingent consideration, and deferred income tax liabilities of $ 28,264 , $ 20,250 , and $ 4,411 , respectively, and an increase in goodwill of $ 3,704 .

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

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

Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and was $ 1,731 for year ended December 31, 2022.

There were no such amounts related to this acquisition for year ended December 31, 2021 and 2020.

Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $ 533 and $( 2,306 ) for the years ended December 31, 2023 and 2022, respectively.

There were no such amounts related to this acquisition for the year ended December 31, 2021.

The amount included a favorable adjustment to transaction costs of $ 4,037 for the year ended December 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.

2 unchanged sentences

Kappa & Bergstrom actual results included in the Company's consolidated income statement in 2023

$ 59,532 $ 5,487

Kappa & Bergstrom actual results included in the Company's consolidated income statement in 2022

$ 22,158 $ ( 5,359 )

2023 Supplemental pro forma combined financial

$ 922,439 $ 116,317

2022 Supplemental pro forma combined financial

$ 982,021 $ 110,181

2021 Supplemental pro forma combined financial

$ 859,252 $ 90,672

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

14 unchanged sentences

On December 31, 2023, the Company had one share-based compensation plan under which awards may be granted, which is described below.

In June 2017, the Company adopted the Balchem Corporation 2017 Omnibus Incentive Plan (“2017 Plan”) for officers, employees and directors of the Company and its subsidiaries.

The 2017 Plan replaced the 1999 Stock Plan and amendments and restatements thereto (collectively to be referred to as the “1999 Plan"), which expired on April 9, 2018.

In June 2017, the Company’s shareholders approved the Balchem Corporation 2017 Omnibus Incentive Plan (“2017 Plan”) for officers, employees and directors of the Company and its subsidiaries.

The 2017 Plan replaced the 1999 Stock Plan and amendments and restatements thereto (collectively to be referred to as the “1999 Plan"), which expired in April 2018.

No further awards will be made under the 1999 Plan, and the shares that remained available for grant under the 1999 Plan will only be used to settle outstanding awards granted under the 1999 Plan and will not become available under the 2017 Plan.

The 2017 Plan is administered by the Compensation Committee of the Board of Directors of the Company.

The 2017 Plan provides as follows:

On June 22, 2023, the Company’s shareholders approved an amendment and restatement of the 2017 Plan (the “Amended 2017 Plan”).

The Amended 2017 Plan is administered by the Compensation Committee of the Board of Directors of the Company.

The Amended 2017 Plan provides as follows:

(i) for a termination date of June 22, 2033;

(ii) the authorization of 1,600,000 shares for future grants (which represents a reduction from the 6,000,000 shares authorized for grant under the 1999 Plan);

(ii) the authorization of 2,400,000 shares for future grants (which represents an increase of 800,000 shares from the amount approved under the 2017 Plan);

(iii) for the making of grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards, as well as for the making of cash performance awards;

(iv) except as provided in an employment agreement as in effect on the effective date of the 2017 Plan, no automatic acceleration of outstanding awards upon the occurrence of a change in control of the Company;

(iv) except as provided by the Compensation Committee or in an employment agreement as in effect on the effective date of the Amended 2017 Plan, no automatic acceleration of outstanding awards upon the occurrence of a change in control of the Company;

(v) certain annual limits on the number of shares and amount of cash that may be granted;

(vii) for dividends or dividend equivalents otherwise payable on an unvested award to accrue and be paid only at such time as the vesting conditions applicable to the underlying award have been

(vii) for certain discretionary compensation recovery if the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirements under the securities laws;

(vi) for dividends or dividend equivalents otherwise payable on an unvested award to accrue and be paid only at such time as the vesting conditions applicable to the underlying award have been satisfied;

(vii) for incentive compensation recovery if the Company is required to prepare an accounting restatement of its financial statements, in accordance with any compensation recovery policy adopted by the Company, applicable law, government regulations or national securities exchange requirements, or in the discretion of the Compensation Committee in the event of a restatement due to the Company’s material noncompliance with any financial reporting requirements under the securities laws;

and (viii) for compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or the “Code”).

1 unchanged sentence

The shares to be issued upon exercise of the outstanding options have been approved, reserved and are adequate to cover all exercises.

As of December 31, 2022, the 2017 Plan had 408,380 shares available for future awards.

As of December 31, 2023, the Amended 2017 Plan had 1,034,260 shares available for future awards.

The Company has Restricted Stock Grant Agreements with the Company's non–employee directors and certain employees.

95 unchanged sentences

Since the inception of the program in June 1999, a total of 3,103,106 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 adopted in 2021 as prescribed by the State of Maryland, where the Company is incorporated.

In connection therewith, adjustments to balances previously reflected as treasury stock of $ 7,873 and $ 18,069 for the years ended December 31, 2020 and 2019 were made to the consolidated statements of 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.

Open market repurchases of common stock could be made pursuant to trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that the Company might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.

The Company also repurchases (withholds) shares from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan.

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

During 2023, 2022, and 2021, the Company purchased 32,558 , 252,304 , and 249,848 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.

23 unchanged sentences

Depreciation expense was $ 26,373 , $ 24,033 and $ 23,295 for the years ended December 31, 2023, 2022 and 2021, respectively.

In accordance with Topic 360, the Company reviews long-lived assets for impairment on an annual basis and also whenever events indicate that the carrying amount of the assets may not be fully recoverable.

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 restructuring-related impairment and asset disposal charges of $ 7,764 related to building, equipment, and construction in progress mainly in the Human Nutrition and Health and the Animal Nutrition and Health segments, for the year ended December 31, 2023.

Such expenses for the year ended December 31, 2022 were not material.

NOTE 6 - INTANGIBLE ASSETS

The Company had goodwill in the amount of $ 769,509 and $ 523,949 as of December 31, 2022 and 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 foreign exchange translation adjustments.

The Company had goodwill in the amount of $ 778,907 and $ 769,509 as of December 31, 2023 and 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.

As of December 31, 2023 and 2022, the Company had identifiable intangible assets as follows:

18 unchanged sentences

NOTE 7 – EQUITY-METHOD INVESTMENT

In 2013, the Company and Eastman Chemical Company (formerly Taminco Corporation) formed a joint venture ( 66.66 % / 33.34 % ownership), St.

In 2013, the Company and Eastman Chemical Company formed a joint venture ( 66.66 % / 33.34 % ownership), St.

Gabriel CC Company, LLC, to design, develop, and construct an expansion of the Company’s St.

9 unchanged sentences

The Company made capital contributions to the investment totaling $ 290 , $ 355 , and $ 85 for the years ended December 31, 2023, 2022, and 2021 respectively.

The carrying value of the joint venture at December 31, 2022 and 2021 was $ 4,295 and $ 4,499 , respectively, and is recorded in other assets.

The carrying value of the joint venture at December 31, 2023 and 2022 was $ 4,076 and $ 4,295 , respectively, and is recorded in "Other non-current assets" on the consolidated balance sheets.

NOTE 8 – REVOLVING LOAN

6 unchanged sentences

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

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

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

As of December 31, 2023 and 2022, the total balance outstanding on the 2022 Credit Agreement amounted to $ 309,569 and $ 440,569 , respectively.

There are no installment payments required on the revolving loans;

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

In connection with 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.

4 unchanged sentences

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.

Capitalized costs net of accumulated amortization totaled $ 1,317 and $ 421 at December 31, 2022 and December 31, 2021, respectively, and are included in other assets on the condensed consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 335 , $ 282 , and $ 282 for the years ended December 31, 2022, 2021, and 2020, respectively, and are included in "Interest expense" in the accompanying condensed consolidated statements of earnings.

Capitalized costs net of accumulated amortization totaled $ 1,030 and $ 1,317 at December 31, 2023 and 2022, respectively, and are included in "Other non-current assets" on the consolidated balance sheets.

Amortization expense pertaining to these costs totaled $ 287 , $ 335 , and $ 282 for the years ended December 31, 2023, 2022, and 2021, respectively, and are included in "Interest expense" in the accompanying 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.

15 unchanged sentences

The Company’s effective tax rate for 2023, 2022 and 2021 was 20.9 %, 21.2 % , and 23.3 %, respectively.

The decrease from 2021 to 2022 is primarily due to an increase in certain tax credits and deductions and certain lower state taxes.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, and on December 31, 2020, Congress passed an additional round of COVID relief legislation as part of the Bipartisan-Bicameral Omnibus COVID Relief Deal.

The Company has reviewed the change in law and determined that it does not have a significant impact on the Company’s tax provision or financial statements.

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

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

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

The decrease from 2022 to 2023 is primarily due to an increase in certain tax credits.

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

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

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

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 considers the undistributed earnings of certain non-U.S.

subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings.

The Company projects that its foreign earnings will be utilized offshore for working capital and future foreign growth.

subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs.

However, due to prevailing economic conditions of increased interest rates and subsequent borrowing costs, the Company remitted approximately $ 18,000 from its Belgium subsidiary and has incurred an income tax expense of approximately $ 20 .

The remittance was used to pay down U.S.

The Company had unremitted foreign earnings of approximately $ 109,000 and $ 94,000 for the years ended December 31, 2023 and 2022, respectively.

The determination of the unrecognized deferred tax liability on those undistributed earnings is not practicable due to its legal entity structure and the complexity of U.S.

and local country tax laws.

If the Company decides to repatriate the undistributed foreign earnings, it will need to recognize the income tax effects in the period it changes its assertion on indefinite reinvestment.

If the Company decides to change its assertion on its remaining undistributed foreign earnings, it will need to recognize the income tax effects in the period it changes its assertion.

Income tax expense consists of the following:

12 unchanged sentences

Stock Options ( 1,004 ) ( 676 ) ( 924 )

FDII ( 1,778 ) ( 1,540 ) ( 1,400 )

Foreign-derived intangible income (FDII) ( 1,752 ) ( 1,778 ) ( 1,540 )

Foreign rate differential 946 2,066 1,188

6 unchanged sentences

Lease liabilities 4,812 5,439

Foreign currency and interest rate swaps — 649

Research and development 12,653 4,134

11 unchanged sentences

Net deferred tax liability $ ( 52,046 ) $ ( 62,784 )

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will not realize the benefits of these deductible differences.

The amount of deferred tax asset realizable, however, could change if management’s estimate of future taxable income should change.

As of December 31, 2023, the Company has state income tax net operating loss (NOL) carryforwards of $ 348 .

1 unchanged sentence

The Company believes that the benefit from the state NOL carryforwards will not be realized, therefore, a valuation allowance has been established in the amount of $ 22 .

The Company also acquired an insignificant amount of NOL carryforwards with the acquisition of Chemogas Holding NV, a privately held specialty gases company headquartered in Grimbergen, Belgium ("Chemogas").

Provisions of ASC 740-10 clarify whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority.

4 unchanged sentences

Decreases for tax positions of prior years ( 2,518 ) ( 2,260 ) ( 260 )

Increases for tax positions related to current year — — 697

Balance at end of period $ 4,650 $ 5,815 $ 5,881

1 unchanged sentence

The Company recognizes both interest and penalties as part of the income tax provision.

During the year ended December 31, 2022, these amounts were reduced by $ 371 .

During the years ended December 31, 2021 and 2020, total interest and penalties amounted to approximate ly $ 262 and $ 232 , respectively.

As of December 31, 2022 and 2021, accrued interest and penalties were $ 1,735 and $ 2,106 , respectivel y.

During the years ended December 31, 2023 and 2022, these amounts were reduced by $ 322 and $ 371 , respectively.

During the year ended December 31, 2021, this amounted to $ 262 .

As of December 31, 2023 and 2022, accrued interest and penalties were $ 1,413 and $ 1,735 , respectively.

Balchem files income tax returns in the U.S.

1 unchanged sentence

In the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2019 and management does not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

The European Union (“EU”) member states formally adopted the EU’s Pillar Two Directive, which was established by the Organization for Economic Co-operation and Development.

Pillar Two generally provides for a 15 percent minimum effective tax rate for the jurisdictions where multinational enterprises operate.

While the Company does not anticipate that this will have a

material impact on its tax provision or effective tax rate, the Company continues to monitor evolving tax legislation in the jurisdictions in which it operates.

NOTE 11 - SEGMENT INFORMATION

9 unchanged sentences

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

This segment also manufactures specialty vitamin K2, which plays a crucial role in the human body for bone health, heart health and immunity, and methylsulfonylmethane ("MSM"), which is a widely used nutritional ingredient that helps provide benefits for joint health, sports nutrition, skin and beauty, and healthy aging.

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

5 unchanged sentences

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 provides benefits for joint health, sports nutrition, skin and beauty, and healthy aging.

Animal Nutrition and Health

5 unchanged sentences

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.

This segment also manufactures 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.

3 unchanged sentences

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.

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.

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

58 unchanged sentences

2023 2022 2021

Product Sales $ 894,318 $ 762,085 $ 666,193

Co-manufacturing 40,621 27,994 29,063

Bill and Hold — — 1,158

Consignment 4,227 4,439 2,939

Product Sales Revenue $ 919,951 $ 939,166 $ 794,518

8 unchanged sentences

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

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

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

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

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.

The Company’s product sales are considered point-in-time revenue.

Royalty Revenues

25 unchanged sentences

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

Unrealized gain/(loss) on cash flow hedge 3,564 2,707 ( 3,094 )

Unrealized (loss) gain on cash flow hedge ( 1,406 ) 3,564 2,707

Tax 341 ( 868 ) ( 654 )

1 unchanged sentence

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

Prior service credit and gain arising during the period ( 41 ) ( 4 ) ( 503 )

Amortization of prior service credit 9 74 74

Amortization of loss ( 2 ) ( 21 ) ( 50 )

Prior service loss (gain) arising during the period 132 ( 41 ) ( 4 )

Amortization of prior service gain — 9 74

Amortization of loss (gain) 8 ( 2 ) ( 21 )

Total before tax 140 ( 34 ) 49

Tax ( 39 ) ( 24 ) ( 13 )

Adjustment (1)

Net of tax 101 ( 58 ) 36

Total other comprehensive (loss)/income $ ( 2,161 ) $ ( 9,166 ) $ 9,737

(1) One-time adjustment to the postretirement account.

Included in "Net foreign currency translation adjustment" were gains/(losses) of $ 3,851 , $ 4,766 , and $( 4,882 ), related to a net investment hedge, net of taxes of $( 1,236 ), $( 1,527 ), and $ 1,579 , for the years ended December 31, 2022, 2021, and 2020, respectively.

Total other comprehensive income/(loss) $ 15,845 $ ( 2,161 ) $ ( 9,166 )

Included in "Net foreign currency translation adjustment" was loss of $ 1,455 related to a net investment hedge, which was net of tax benefit of $ 471 for the year ended December 31, 2023, and gains of $ 3,851 , and $ 4,766 , related to a net investment hedge, net of tax expenses of $ 1,236 , and $ 1,527 , for the years ended December 31, 2022 and 2021, respectively.

See Note 20, Derivative Instruments and Hedging Activities .

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

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

Foreign currency

1 unchanged sentence

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

Other comprehensive (loss)/gain ( 4,799 ) 2,696 ( 58 ) ( 2,161 )

Other comprehensive income (loss) 16,809 ( 1,065 ) 101 15,845

Balance December 31, 2023 $ 8,408 $ — $ 283 $ 8,691

1 unchanged sentence

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

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

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

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

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

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 Company provided for profit sharing contributions and matching 401(k) savings plan contributions of $ 1,151 and $ 4,363 in 2022, $ 1,459 and $ 4,142 in 2021, and $ 1,022 and $ 3,751 in 2020, respectively.

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

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

The Company provided for matching 401(k) savings plan contributions of $ 4,381 , $ 4,363 , and $ 4,142 in 2023, 2022 and 2021, respectively.

Profit sharing contributions in 2023, 2022, and 2021 were not material.

Postretirement Medical Plans

The Company provides postretirement benefits in the form of two unfunded postretirement medical plans;

one that is under a collective bargaining agreement and covers eligible retired employees of the Verona, Missouri facility and a plan for those named as executive officers in the Company’s proxy statement.

one that is under a collective bargaining agreement and covers eligible retired employees of the Verona, Missouri facility and a plan for executive officers of the Company who meet eligibility requirements as set forth in the Company's Officer Retiree Program.

The Company uses a December 31 measurement date for its postretirement medical plans.

7 unchanged sentences

Benefits paid ( 30 ) ( 69 )

Actuarial loss 109 207

Actuarial (gain) loss ( 233 ) 109

Benefit obligation at end of year $ 1,395 $ 1,465

10 unchanged sentences

Unrecognized prior service cost 9 74

Unrecognized net gain ( 24 ) ( 50 )

Unrecognized net loss (gain) ( 2 ) ( 24 )

Net amount recognized in consolidated balance sheet (after ASC 715) (included in "Other long-term obligations") $ ( 1,395 ) $ ( 1,465 )

5 unchanged sentences

Amortization of prior service cost — 9 74

Amortization of gain ( 2 ) ( 24 ) ( 50 )

Amortization of loss (gain) 8 ( 2 ) ( 24 )

Total net periodic benefit cost $ 178 $ 112 $ 160

7 unchanged sentences

Defined Benefit Pension Plans

The Company contributes to one multiemployer defined benefit plan under the terms of a collective-bargaining agreement covering its union-represented employees of the Verona, Missouri facility.

The Company contributes to one multi-employer defined benefit plan under the terms of a collective-bargaining agreement covering its union-represented employees of the Verona, Missouri facility.

The risks of participation in this multiemployer plan are different from single-employer plans in the following aspects:

27 unchanged sentences

Benefits paid ( 188 ) ( 60 )

Actuarial gain ( 194 ) ( 127 )

Actuarial loss (gain) 80 ( 194 )

Exchange rate changes 49 ( 104 )

21 unchanged sentences

Expected return on plan assets ( 42 ) ( 37 ) ( 34 )

Amortization of prior service cost — — —

Amortization of net loss — — 3

16 unchanged sentences

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

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.

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.

In February 2022, BCP Ingredients, Inc.

(“BCP”), the Company subsidiary that operates the site, received 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, including 1,4 dioxane.

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

From time to time, the Company is a party to various 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.

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 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 June 2023, in response to a Special Notice Letter received from the EPA in 2022, BCP Ingredients, Inc.

("BCP"), the Company's subsidiary that operates the site, Syntex, EPA, and the State of Missouri entered into an Administrative Settlement Agreement and Order on Consent (“ASAOC”) for a focused remedial investigation/feasibility study ("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 are expected to continue for some period of time.

Separately, in June 2022, the EPA conducted an inspection of BCP’s Verona, Missouri facility (“2022 EPA Inspection”) 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, in January 2023, BCP entered into an Amended AOC with the EPA

whereby the parties agreed to the extension of certain timelines.

BCP timely completed all requirements under the Amended AOC.

In November 2023, BCP received a notice from the Environment and Natural Resources Division of the U.S Department of Justice (“DOJ”) primarily related to the 2022 EPA Inspection, which extended the opportunity to discuss alleged violations of Sections 112(r)(7) of the Clean Air Act and regulations in 40 C.F.R.

Part 68, commonly known as the Risk Management Plan Rule (“RMP Rule”).

BCP intends to participate in such discussions in 2024.

In connection with the 2022 EPA Inspection, 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

5 unchanged sentences

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 December 31, 2022 and 2021 included $ 934 and $ 933 in money market funds, respectively.

Cash and cash equivalents at December 31, 2023 and 2022 included $ 959 and $ 934 in money market funds and other interest-bearing deposit accounts, respectively.

Non-current assets at December 31, 2023 and 2022 included $ 10,188 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 December 31, 2022 amount to $ 11,400 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 consolidated balance sheets (see Note 20, Derivative Instruments and Hedging Activities).

The contingent consideration liabilities included on the balance sheet at of December 31, 2023 and 2022 amount to $ 100 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 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 December 31, 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.

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

NOTE 18 – RELATED PARTY TRANSACTIONS

7 unchanged sentences

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

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

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

Payments for the services the Company provided amounted to $ 4,363 , $ 4,213 , and $ 3,637 , respectively, for the years ended December 31, 2023, 2022, and 2021.

4 unchanged sentences

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

The Company also had payables of $ 5,224 and $ 7,552 , respectively, recorded in accounts payable for finished goods received from St.

At December 31, 2023 and 2022, the Company had payables of $ 6,050 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 December 31, 2022.

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

In addition, the Company had payables in the amount of $ 329 and $ 296 , respectively, related to non-contractual monies owed to St.

Gabriel CC Company, LLC, recorded in accounts payable as of December 31, 2023 and 2022.

10 unchanged sentences

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 serves as the Company's new corporate headquarters and will also serve as 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 did not identify any embedded leases.

7 unchanged sentences

(1) 1 - 2 years, 5.45 %- 6.72 % (2) 3 - 4 years, 6.04 %- 7.31 % (3) 5 - 9 years, 6.38 %- 7.65 % and (4) 10 + years, 7.10 %- 8.37 %.

In connection with an acquisition in 2019, the Company assumed a finance lease commitment for a warehouse, with an expiration date of March 31, 2033.

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

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

1 unchanged sentence

Operating leases $ 17,763 $ 17,094

Finance leases 2,338 2,359

Finance lease 2,101 2,338

Total $ 19,864 $ 19,432

1 unchanged sentence

Operating leases $ 3,949 $ 3,796

Finance leases 226 167

Finance lease 272 226

Total $ 4,221 $ 4,022

1 unchanged sentence

Operating leases $ 14,601 $ 13,806

Finance leases 2,213 2,303

Finance lease 1,943 2,213

Total $ 16,544 $ 16,019

14 unchanged sentences

ROU assets obtained in exchange for new operating lease liabilities, net of ROU asset disposals $ 6,365 $ 11,488 $ 3,804

ROU assets obtained in exchange for new finance lease liabilities, net of ROU asset disposals $ — $ — $ 2,782

Weighted-average remaining lease term - operating leases 9.33 years 5.63 years 4.21 years

7 unchanged sentences

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 is 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, 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.

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 $ 400 for the year ended December 31, 2022.

The net interest expense related to the interest rate swap contract were $ 2,144 and $ 1,593 for the years ended December 31, 2021 and 2020, respectively.

These amounts were recorded in the consolidated statements of operations under interest expense, net.

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

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 were $ 1,518 and $ 400 for the years ended December 31, 2023 and 2022, respectively.

The net interest expense related to the interest rate swap contract was $ 2,144 for the year ended December 31, 2021.

The net interest income and expense were recorded in the 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, which was designated as net investment hedge.

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 $ 2,250 , $ 2,257 , and $ 2,275 for the years ended December 31, 2022, 2021, and 2020, respectively, which were recorded in the consolidated statements of operations under interest expense, net.

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

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

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

Derivative assets (liabilities) 2022 2021

The interest income related to the cross-currency swap contract was $ 1,119 , $ 2,250 , and $ 2,257 for the years ended December 31, 2023, 2022, and 2021, respectively.

The interest income was recorded in the 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 December 31, 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.

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

Derivative assets December 31, 2022

Interest rate swap $ 1,406

Cross-currency swap 4,587

Derivative assets (liabilities) $ 5,993 $ ( 2,658 )

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

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

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

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

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

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

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

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

Gains and losses on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the year ended December 31, 2022, 2021, and 2020:

Derivative assets $ 5,993

Gains and losses on our hedging instruments were recognized in accumulated other comprehensive income (loss) and categorized as follows for the years ended December 31, 2023, 2022, and 2021:

Location within Statements of Comprehensive Income Year ended December 31,

2023 2022 2021

Cash flow hedge (interest rate swap), net of tax Unrealized gain (loss) on cash flow hedge, net $ 2,696 $ 2,053 $ ( 2,285 )

Cash flow hedge (interest rate swap), net of tax Unrealized (loss) gain on cash flow hedge, net $ ( 1,065 ) $ 2,696 $ 2,053

Net investment hedge (cross-currency swap), net of tax Net foreign currency translation adjustment ( 1,455 ) 3,851 4,766

$ ( 2,520 ) $ 6,547 $ 6,819

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 year ended December 31, 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 December 31, 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

For the year ended December 31, 2022, the net gains on these forward contracts of $ 512 were recorded in other income or loss in the consolidated statements of earnings.

As of December 31, 2023, the Company did no t maintain any open foreign currency exchange forward contracts as all four contracts expired during 2022.

NOTE 21 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

34 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data