☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~October 30, 2019,~~April 23, 2020, the registrant had ~~32,168,837~~32,316,842 shares of its Common Stock, $.06 2/3 par value, outstanding.

QUARTERLY REPORT ON FORM 10-Q

Part I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

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

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Earnings

(Dollars in thousands, except per share data)

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive Income

(Dollars in thousands)

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

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


	Total Stockholders' Equity		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Common Stock				Treasury Stock					Additional Paid-in Capital
															Shares		Amount	Shares	Amount
Balance - December 31, 2019	$	743,667	$	590,921	$	(5,564)	32,405,796	$	2,161	(203,879)	$	(18,069)	$	174,218
Net earnings	19,768		19,768		—		—	—		—	—		—
Other comprehensive (loss)	(2,905)		—		(2,905)		—	—		—	—		—
Treasury shares purchased	(891)		—		—		—	—		(8,224)	(891)		—
Shares and options issued under stock plans	6,632		—		—		41,619	3		81,530	7,266		(637)
Balance - March 31, 2020	$	766,271	$	610,689	$	(8,469)	32,447,415	$	2,164	(130,573)	$	(11,694)	$	173,581

Balance - December 31, 2018	$	691,618	$	528,027	$	(3,602)	32,256,209	$	2,151	(706)	$	(56)	$	165,098
Net earnings	18,783		18,783		—		—	—		—	—		—
Other comprehensive (loss)	(1,084)		—		(1,084)		—	—		—	—		—
Treasury shares purchased	(727)		—		—		—	—		(8,496)	(727)		—
Shares and options issued under stock plans	1,919		—		—		73,823	5		3,006	250		1,664
Balance - March 31, 2019	$	710,509	$	546,810	$	(4,686)	32,330,032	$	2,156	(6,196)	$	(533)	$	166,762

Total
Stockholders'
Equity

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income
Common Stock Treasury Stock
Additional
Paid-in
Capital
Shares Amount Shares Amount
Balance - December 31, 2018 $ 691,618
$ 528,027
$ (3,602 ) 32,256,915
$ 2,151
(706 ) $ (56 ) $ 165,098
Net earnings 18,783
18,783
—
—
—
—
—
—
Other comprehensive (loss) (1,084 ) —
(1,084 ) —
—
—
—
—
Treasury shares purchased (727 ) —
—
—
—
(8,496 ) (727 ) —
Shares and options issued under stock plans 1,919
—
—
79,313
5
3,006
250
1,664
Balance - March 31, 2019 710,509
546,810
(4,686 ) 32,336,228
2,156
(6,196 ) (533 ) 166,762
Net earnings 19,829
19,829
—
—
—
—
—
—
Other comprehensive (loss) (1,508 ) —
(1,508 ) —
—
—
—
—
Shares and options issued under stock plans 3,515
—
—
19,068
1
6,196
533
2,981
Balance - June 30, 2019 732,345
566,639
(6,194 ) 32,355,296
2,157
—
—
169,743
Net earnings 20,676
20,676
—
—
—
—
—
—
Other comprehensive (loss) (2,861 ) —
(2,861 ) —
—
—
—
—
Treasury shares purchased (20,594 ) —
—
—
—
(232,499 ) (20,594 ) —
Shares and options issued under stock plans 4,020
—
—
46,290
3
—
—
4,017
Balance - September 30, 2019 $ 733,586
$ 587,315
$ (9,055 ) 32,401,586
$ 2,160
(232,499 ) $ (20,594 ) $ 173,760

See accompanying notes to condensed consolidated financial statements.

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

~~For the three and nine months ended September 30, 2019 and 2018~~

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

Total
Stockholders'
Equity

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income
Common Stock Treasury Stock
Additional
Paid-in
Capital
Shares Amount Shares Amount
Balance - December 31, 2017 $ 616,881
$ 464,639
$ (1,642 ) 32,019,605
$ 2,135
—
$ —
$ 151,749
Net earnings 19,346
19,346
—
—
—
—
—
—
Other comprehensive income 1,376
—
1,376
—
—
—
—
—
Dividends 1
1
—
—
—
—
—
—
Treasury shares purchased (786 ) —
—
—
—
(10,454 ) (786 ) —
Shares and options issued under stock plans 3,072
—
—
80,505
5
10,454
786
2,281
Balance - March 31, 2018 639,890
483,986
(266 ) 32,100,110
2,140
—
—
154,030
Net earnings 19,679
19,679
—
—
—
—
—
—
Other comprehensive (loss) (2,895 ) —
(2,895 ) —
—
—
—
—
Treasury shares purchased (437 ) —
—
—
—
(4,408 ) (437 ) —
Shares and options issued under stock plans 6,983
—
—
112,984
8
—
—
6,975
Balance - June 30, 2018 663,220
503,665
(3,161 ) 32,213,094
2,148
(4,408 ) (437 ) 161,005
Net earnings 19,214
19,214
—
—
—
—
—
—
Other comprehensive (loss) (536 ) —
(536 ) —
—
—
—
—
Shares and options issued under stock plans 3,304
—
—
37,058
2
4,408
437
2,865
Balance - September 30, 2018 $ 685,202
$ 522,879
$ (3,697 ) 32,250,152
$ 2,150
—
$ —
$ 163,870

Table of Contents

BALCHEM CORPORATION

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)


	Nine Months Ended September 30,							Three Months Ended March 31,
	2019			2018				2020		2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	$	59,288		$	58,239		Net earnings	$	19,768	$	18,783

Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	33,485			33,460			Depreciation and amortization	12,549		10,836
Stock compensation expense	5,717			5,208			Stock compensation expense	2,181		1,631
Deferred income taxes	(198		)	(140		)	Deferred income taxes	135		35
Provision for (recovery of) doubtful accounts	896			(12		)
Foreign currency transaction loss	21			(134		)
Provision for doubtful accounts							Provision for doubtful accounts	522		88
Foreign currency transaction (gain)/loss							Foreign currency transaction (gain)/loss	(23)		50
Asset impairment charge	114			1,671			Asset impairment charge	—		114
Gain on disposal of assets	(3,220		)	(3,093		)	Gain on disposal of assets	—		(2,719)
Changes in assets and liabilities							Changes in assets and liabilities
Accounts receivable	8,340			(9,226		)	Accounts receivable	(13,516)		(912)
Inventories	(6,017		)	(10,538		)	Inventories	528		(139)
Prepaid expenses and other current assets	(784		)	1,315			Prepaid expenses and other current assets	(349)		972
Accounts payable and accrued expenses	(145		)	5,426			Accounts payable and accrued expenses	(3,098)		(12,389)
Income taxes	(5,955		)	(3,903		)	Income taxes	4,523		6,575
Other	(48		)	912			Other	(655)		(442)
Net cash provided by operating activities	91,494			79,185			Net cash provided by operating activities	22,565		22,483

Cash flows from investing activities:							Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired	(94,690		)	(17,399		)
Capital expenditures and intangible assets acquired	(21,669		)	(13,691		)	Capital expenditures and intangible assets acquired	(5,394)		(8,507)
Proceeds from insurance	2,727			4,165			Proceeds from insurance	—		2,727
Proceeds from sale of business and assets	11,523			576
Purchase of convertible note	(1,000		)	—
Net cash used in investing activities	(103,109		)	(26,349		)	Net cash used in investing activities	(5,394)		(5,780)

Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from revolving loan	123,569			210,750			Proceeds from revolving loan	10,000		—
Principal payments on revolving loan	(61,000		)	(32,750		)	Principal payments on revolving loan	(5,000)		(16,000)
Principal payments on long-term debt	—			(219,500		)
Principal payments on acquired debt	(12,222		)	(19		)
Cash paid for financing costs	—			(1,374		)
Proceeds from stock options exercised	3,734			8,133			Proceeds from stock options exercised	4,435		288
Dividends paid	(15,135		)	(13,428		)	Dividends paid	(16,704)		(15,135)
Purchase of treasury stock	(21,321		)	(1,223		)	Purchase of treasury stock	(891)		(727)
Net cash provided by (used in) financing activities	17,625			(49,411		)
Net cash used in financing activities							Net cash used in financing activities	(8,160)		(31,574)

Effect of exchange rate changes on cash	(874		)	(1,170		)	Effect of exchange rate changes on cash	(724)		(393)

Increase in cash and cash equivalents	5,136			2,255
Increase (decrease) in cash and cash equivalents							Increase (decrease) in cash and cash equivalents	8,287		(15,264)

Cash and cash equivalents beginning of period	54,268			40,416			Cash and cash equivalents beginning of period	65,672		54,268
Cash and cash equivalents end of period	$	59,404		$	42,671		Cash and cash equivalents end of period	$	73,959	$	39,004

See accompanying notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(All dollar amounts in thousands, except share and per share data)

NOTE 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements presented herein have been prepared in accordance with the accounting policies described in its December 31, ~~2018~~2019 consolidated financial statements, and should be read in conjunction with the consolidated financial statements and notes, which appear in the Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. The condensed consolidated financial statements reflect the operations of Balchem Corporation and its subsidiaries (the "Company"). All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the unaudited condensed consolidated financial statements furnished in this Form 10-Q include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”) governing interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934 (the "Exchange Act") and therefore do not include some information and notes necessary to conform to annual reporting requirements. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the operating results expected for the full year or any interim period.

Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.

Recent Accounting Pronouncements

Recently Issued Accounting Standards

In ~~July 2019,~~March 2020, the FASB issued Accounting Standards Update ("ASU") ~~2019-07, "Codification Updates~~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 ~~SEC Sections," which improved, updated,~~ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and ~~simplified regulations on financial reporting~~exceptions for applying generally accepted accounting principles to contract modifications and ~~disclosure.~~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 standards update is in effect from March 12, 2020 through December 31, 2022. The Company ~~does not expect~~is currently evaluating the impact of this ~~new guidance to have a significant impact~~pronouncement on ~~its~~the consolidated financial ~~reporting.~~statements and disclosures.

In ~~May and April~~December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting Standards Update ("ASU") 2019-05 and ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" which further clarifies the ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326). In June 2016, the FASB issued ASU No. 2016-13 which requires that credit losses be reported based on expected losses compared to the current incurred loss model. These updates made several consequentialfor Income Taxes." The amendments ~~to the Codification which requires~~in this update simplify the accounting for ~~available-for-sale debt securities~~income taxes by removing certain exceptions to ~~be individually assessed~~the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for ~~credit losses when fair value is less than the amortized cost basis. The standard is effective for interim~~other areas of Topic 740 by clarifying and ~~annual periods beginning after December 15, 2019 with early adoption permitted. The Company does not expect this new guidance to have a significant impact on its financial reporting.~~

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider.amending existing guidance. The effective date of this ~~pronouncement~~update is for fiscal years beginning after December 15, ~~2019,~~2020, and interim periods within those fiscal years. Early adoption is ~~permitted and the~~permitted. The standard may be adopted either using the prospective or retrospective transition ~~approach.~~approach and could also be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this pronouncement on the Company’s consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. This update should be applied on a retrospective basis to all periods presented and is effective for fiscal years ending after December 31, 2020. Early adoption is permitted. The Company expects this new guidance will not have a significant impact on its financial reporting.

Recently Adopted Accounting Standards

In ~~January 2017,~~August 2018, the FASB issued ASU ~~No. 2017-04, “Simplifying~~2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the ~~Test for Goodwill Impairment” (ASU 2017-04), which addresses changes to the testing for goodwill impairment by eliminating Step 2~~noncancelable term of the ~~process.~~cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The ~~guidance~~effective date of this pronouncement is ~~effective~~ for ~~annual and interim goodwill impairment tests in~~ fiscal years beginning after December 15, ~~2019. Early adoption is permitted; however,~~2019, and interim periods within those fiscal years. The standard may be adopted either using the prospective or retrospective transition approach. The Company ~~has elected not to adopt early as this ASU will~~adopted the new standard on January 1, 2020. The standard update did not have a significant impact on the Company’s consolidated financial ~~statements.~~statements and disclosures.

~~Recently Adopted Accounting Standards~~

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance was issued with the objective of improving the financial reporting of hedging relationships to better portray the economic results of companies' risk management activities in its financial statements, as well as simplifying the application of hedge accounting guidance especially in the area of assessment of effectiveness of the hedge. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 815, Derivative and Hedging", which further clarified ASU 2017-12. TheThe amendments are effective for fiscal years beginning after December 15, ~~2019,~~2018, and interim periods within those fiscal ~~years beginning after December 15, 2020. Early adoption is permitted and all transaction requirements and elections should be applied to hedging relationships existing on the date of adoption.~~years. The Company ~~has early~~ adopted the new standards in the second quarter of ~~2019.~~2019, upon entering into derivative transactions. Refer to Note 20, "Derivative Instruments and Hedging Activities."

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. The guidance is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted the new standard on January 1, 2020. This ASU did not have a significant impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires that credit losses be reported based on expected losses instead of the incurred loss model. The update made several consequential amendments to the codification which requires the accounting for available-for-sale debt securities to be individually assessed for credit losses when fair value is less than the amortized cost basis. The FASB subsequently issued ASU 2019-04, ASU 2019-05, and ASU 2019-11, all of which further clarified ASU 2016-13. The Company adopted the new standard and related updates on January 1, 2020. The adoption did not have a significant impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which was clarified by ASU 2018-11 and addresses the recognition of assets and liabilities that arise from all leases. The guidance requires lessees to recognize right-of-use ("ROU") assets and lease liabilities for most leases in the Consolidated Balance Sheets and is effective for annual and interim periods beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019 and has elected the optional transition method to account for the impact of the adoption with a cumulative-effect adjustment in the period of adoption. The new standard provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedients”, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify, which means for those leases that qualify, the Company will not recognize ROU assets or lease liabilities. The Company has also elected the practical expedient to not separate lease and non-lease components for all of its leases. In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements," which further clarifies the determination of fair value of leases and modifies transition disclosure requirements for changes in accounting principles. The effective date of the amendments is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.The ASU was adopted by the Company ~~expects this pronouncement will~~on January 1, 2020 and did not have a significant impact on its consolidated financial statements and disclosures. Refer to Note 19, "Leases."

NOTE 2 – SIGNIFICANT ACQUISITIONS ~~AND DIVESTITURES~~

On December 13, 2019, the Company completed the acquisition of Zumbro River Brand, Inc. ("Zumbro"). The Company made payments of $52,403 on the acquisition date, amounting to $47,058 to the former shareholders and $5,345 to Zumbro's lenders to pay Zumbro debt. Considering the cash acquired of $686, net payments made to the former shareholders were $46,372.

The estimated goodwill of $18,159 arising from the acquisition consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to Human Nutrition & Health ("HNH") and its tax deductibility for income taxes is still being assessed.

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


Cash and cash equivalents	$	686
Accounts receivable	3,314
Inventories	4,498
Prepaid & other current assets	521
Property, plant and equipment	15,245
Customer relationships	8,200
Developed technology	4,400
Trade name	2,300
Other non-current assets	10
Accounts payable & accrued expenses	(1,539)
Debt	(5,345)
Deferred income taxes	(3,391)
Goodwill	18,159
Amount paid to shareholders	47,058
Zumbro debt paid on purchase date	5,345
Total amount paid on acquisition date	$	52,403

The estimated valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions that are subject to change. 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 included cost and market approaches for property, plant and equipment, excess earnings method for customer relationships and the relief from royalty method for other intangible assets. The purchase price and related allocation to assets acquired and liabilities assumed is preliminary pending finalizing actual working capital acquired as of the acquisition date. Additionally, certain intangible assets are not tax deductible and the related deferred tax liabilities are preliminary pending management's final review.

Customer relationships are amortized over a 15-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trade name and developed technology are amortized over 10 years and 12 years, respectively, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.

The Company is indemnified for tax liabilities prior to the acquisition date. Indemnified tax liabilities will create an indemnification asset (receivable). An indemnification asset balance has not been established.

On May 27, 2019, the Company acquired 100 percent of the outstanding common shares of Chemogas ~~Holding~~Holdings, NV and its ~~subsidiaries ("Chemogas" or the "Acquisition"~~subsidiary companies (collectively, "Chemogas")~~, a privately held specialty gases company headquartered in Grimbergen, Belgium.~~. The Company made payments of approximately €99,503 (translated to $111,324) on the acquisition date, amounting to approximately €88,579 (translated to $99,102) to the former shareholders and approximately €10,924 (translated to $12,222) to Chemogas' lender to pay Chemogas bank debt. Considering the cash acquired of €3,943 (translated to $4,412), net payments made to the former shareholders were €84,636 (translated to $94,690). The acquisition was primarily financed through the Company's Credit Agreement (see Note 8, "Revolving Loan"). Chemogas is a leader in the packaging and distribution of a wide variety of specialty gases, most notably ethylene oxide, primarily in the European and Asian markets, for medical device sterilization. Through its operational and logistical excellence, Chemogas supports its customers' needs across more than 70 countries. With the acquisition, the Company significantly expands its geographic presence in the packaged ethylene oxide market, enabling the Company to offer worldwide service and support to its medical device sterilization customers within the Specialty Products segment. The Chemogas sites in Europe and Asia will form a global network of facilities when combined with the Company's sites in the United States.

The goodwill of ~~$59,288~~$59,319 arising from the ~~Acquisition~~acquisition consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to the Specialty Products segment and is not tax deductible for income tax purposes.

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


Cash and cash equivalents	$	4,412
Accounts receivable	4,176
Inventories	957
Property, plant and equipment	15,972
Customer relationships	39,158
Developed technology	2,461
Trade name	1,119
Other assets	1,491
Accounts payable	(3,261)
Bank debt	(12,222)
Other liabilities	(1,030)
Pension obligations (net)	(594)
Deferred income taxes	(12,856)
Goodwill	59,319
Amount paid to shareholders	99,102
Chemogas bank debt paid on purchase date	12,222
Total amount paid on acquisition date	$	111,324

Cash and cash equivalents $ 4,412
Accounts receivable 4,176
Inventories 957
Property, plant and equipment 15,972
Customer relationships 39,158
Developed technology 2,461
Trade name 1,119
Other assets 1,491
Accounts payable (3,261 )
Bank debt (12,222 )
Other liabilities (937 )
Pension obligations (net) (594 )
Deferred income taxes (12,918 )
Goodwill 59,288
Amount paid to shareholders 99,102
Chemogas bank debt paid on purchase date 12,222
Total amount paid on acquisition date $ 111,324

The estimated valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions that are subject to change. In preparing our ~~preliminary~~ fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. Valuation methods utilized included cost and market approaches for property, plant and equipment, excess earnings method for customer relationships and the relief from royalty method for other intangible assets. The purchase price and related allocation to assets acquired and liabilities assumed is preliminary pending management's final review of fair value calculations and deferred tax liabilities related to certain non-deductible assets.

Customer relationships are amortized over a 20-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trade name and developed technology are amortized over 2 years and 10 years, respectively, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.

The Company is indemnified for tax liabilities prior to the ~~Acquisition~~acquisition date. Indemnified tax liabilities will create an indemnification asset (receivable). ~~At this time, an~~An indemnification asset balance has not been established.

In connection with ~~this transaction,~~the Chemogas and Zumbro acquisitions, the Company incurred transaction and integration costs of ~~$201~~$1,068 and ~~$1,063~~$307 for the ~~three and nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, respectively.

Total transaction and integration costs related to recent acquisitions, ~~and potential future transactions,~~ including the Chemogas ~~acquisition~~and Zumbro acquisitions described above, are recorded in general and administrative expenses. These costs amounted to ~~$688~~$1,097 and ~~$2,253~~$485 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $202 and $1,784 for the~~ respectively.

~~three and nine~~ ~~months ended September 30, 2018, respectively.~~

On September 6, 2019, the Company sold an insignificant portion of its business. As a result of the transaction, the Company recorded a gain on sale, which was immaterial to the consolidated financial statements and included in general and administrative expenses. Operating results for the portion of the business sold were insignificant relative to the Company’s consolidated financial results for the three and nine months ended September 30, 2019.

NOTE 3 – STOCKHOLDERS’ EQUITY

STOCK-BASED COMPENSATION

The Company’s results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:


	Increase/(Decrease) for the
	Three Months Ended March 31,
	2020		2019
Cost of sales	$	266	$	288
Operating expenses	1,915		1,343
Net earnings	(1,663)		(1,258)

Increase/(Decrease) for the
Three Months Ended September 30, Increase/(Decrease) for the
Nine Months Ended September 30,
2019 2018 2019 2018
Cost of sales $ 288
$ 242
$ 864
$ 729
Operating expenses 1,807
1,507
4,853
4,479
Net earnings (1,610 ) (1,339 ) (4,401 ) (3,996 )

Table of Contents

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

The Company’s stock incentive plans allow for the granting of stock awards and options to purchase common stock. Both incentive stock options and nonqualified stock options can be awarded under the plans. No option will be exercisable for longer than ten years after the date of grant. The Company has approved and reserved a number of shares to be issued upon exercise of the outstanding options that is adequate to cover all exercises. As of ~~September 30, 2019,~~March 31, 2020, the plans had ~~1,104,124~~905,996 shares available for future awards. Compensation expense for stock options and stock awards is recognized on a straight-line basis over the vesting period, generally three years for stock options, three to four years for employee restricted stock awards, three years for employee performance share awards, and three to four years for non-employee director restricted stock awards. Certain awards provide for accelerated vesting if there is a change in control (as defined in the plans) or other qualifying events.

Option activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is summarized below:


For the three months ended March 31, 2020	Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding as of December 31, 2019	951	$	68.18	$	31,814
Granted	145	111.94
Exercised	(82)	54.39
Forfeited	(4)	89.90
Canceled	—	—
Outstanding as of March 31, 2020	1,010	$	75.48	$	25,399	6.7

Exercisable as of March 31, 2020	664	$	65.39	$	22,131	5.4

For the nine months ended
September 30, 2019 Shares (000s)
Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2018 887
$ 61.59
$ 16,192

Granted 187
84.29

Exercised (82 ) 45.44

Forfeited (11 ) 80.38

Canceled (4 ) 70.90

Outstanding as of September 30, 2019 977
$ 67.06
$ 31,356
6.5

Exercisable as of September 30, 2019 608
$ 58.25
$ 24,904
5.1

For the nine months ended
September 30, 2018 Shares (000s)
Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2017 946
$ 55.44
$ 24,714

Granted 148
74.57

Exercised (191 ) 42.74

Forfeited (2 ) 75.44

Canceled (1 ) 28.63

Outstanding as of September 30, 2018 900
$ 61.27
$ 45,745
6.5

Exercisable as of September 30, 2018 496
$ 49.88
$ 30,875
5.1


For the three months ended March 31, 2019	Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding as of December 31, 2018	887	$	61.59	$	16,192
Granted	185	84.19
Exercised	(7)	40.85
Forfeited	—	—
Canceled	—	—
Outstanding as of March 31, 2019	1,065	$	65.64	$	28,924	6.7

Exercisable as of March 31, 2019	685	$	56.91	$	24,588	5.4

ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yields of ~~0.6%~~0.5% and 0.6%; expected volatilities of ~~24%~~26% and ~~27%~~24%; risk-free interest rates of ~~2.5%~~1.4% and ~~2.6%~~2.5%; and expected lives of ~~4.0~~3.7 years and ~~4.4~~4.0 years, in each case for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

The Company used a projected expected life for each award granted based on historical experience of employees’ exercise behavior. Expected volatility is based on the Company’s historical volatility levels. Dividend yields are based on the Company’s historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury Zero coupon issues with a remaining term equal to the expected life.

Other information pertaining to option activity during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,
2019 2018 2019 2018
Weighted-average fair value of options granted $ —
$ —
$ 18.27
$ 18.62
Total intrinsic value of stock options exercised ($000s) $ 3,021
$ 2,743
$ 4,320
$ 9,943


	Three Months Ended March 31,
	2020		2019
Weighted-average fair value of options granted	$	23.05	$	18.26
Total intrinsic value of stock options exercised ($000s)	$	4,019	$	302

Non-vested restricted stock activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is summarized below:


	Three Months Ended March 31,
	2020				2019
	Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value
Non-vested balance as of December 31	138	$	80.03	79	$	72.75
Granted	34	111.44		66	84.27
Vested	(20)	67.43		(8)	58.52
Forfeited	(1)	86.82		—	—
Non-vested balance as of March 31	151	$	89.21	137	$	79.16

Nine Months ended September 30, 2019 Shares (000s)
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2018 79
$ 72.75
Granted 67
84.44
Vested (8 ) 58.52
Forfeited (5 ) 85.49
Non-vested balance as of September 30, 2019 133
$ 79.07

Nine months ended September 30, 2018 Shares (000s)
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2017 66
$ 65.66
Granted 40
77.17
Vested (17 ) 57.65
Forfeited —
—
Non-vested balance as of September 30, 2018 89
$ 72.44

Non-vested performance share activity for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ is summarized below:


	Three Months Ended March 31,
	2020				2019
	Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value
Non-vested balance as of December 31	70	$	81.26	53	$	75.61
Granted	20	126.46		33	81.79
Vested	(8)	104.15		(9)	65.64
Forfeited	(11)	82.71		(7)	60.85
Non-vested balance as of March 31	71	$	91.99	70	$	81.26

Nine Months ended September 30, 2019 Shares (000s)
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2018 53
$ 75.61
Granted 33
81.79
Vested (9 ) 65.64
Forfeited (7 ) 60.85
Non-vested balance as of September 30, 2019 70
$ 81.26

Nine months ended September 30, 2018 Shares (000s)
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2017 39
$ 72.62
Granted 32
71.27
Vested (15 ) 58.78
Forfeited —
—
Non-vested balance as of September 30, 2018 56
$ 75.47

The performance share (“PS”) awards provide the recipients the right to receive a certain number of shares of the Company’s common stock in the future, subject to an EBITDA performance hurdle, where vesting is dependent upon the Company achieving a certain EBITDA percentage growth over the performance period, and relative total shareholder return (TSR) where vesting is dependent upon the Company’s TSR performance over the performance period relative to a comparator group consisting of the Russell 2000 index constituents. Expense is measured based on the fair value at the date of grant utilizing a Black-Scholes methodology to produce a Monte-Carlo simulation model which allows for the incorporation of the performance hurdles that must be met before the PS vests. The assumptions used in the fair value determination were risk free interest rates of ~~2.5%~~1.4% and ~~2.4%~~2.5%; dividend yields of 0.5% and 0.5%; volatilities of 24% and ~~27%~~24%; and initial TSR’s of ~~-5.9%~~10.9% and ~~-10.5%~~-5.9%, in each case for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Expense is estimated based on the number of shares expected to vest, assuming the requisite service period is rendered and the probable outcome of the performance condition is achieved. The estimate is revised if subsequent information indicates that the actual number of shares likely to vest differs from previous estimates. Expense is ultimately adjusted based on the actual achievement of service and performance targets. The PS will cliff vest 100% at the end of the third year following the grant in accordance with the performance metrics set forth.

As of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ there was ~~$13,001~~$19,308 and ~~$10,090,~~$17,475, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. As of ~~September 30, 2019,~~March 31, 2020, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately ~~1.5~~2.0 years. The Company estimates that share-based compensation expense for the year ended December 31, ~~2019~~2020 will be approximately ~~$7,600.~~$9,200.

REPURCHASE OF COMMON STOCK

The Company has an approved stock repurchase program. The total authorization under this program is 3,763,038 shares. Since the inception of the program in June 1999, a total of ~~2,431,767~~2,439,991 shares have been purchased, of which ~~232,499~~130,573 shares remained in treasury at ~~September 30, 2019.~~March 31, 2020. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, the Company purchased 8,224 and ~~2018, a total of 240,995 and 14,862~~8,496 shares, respectively, ~~have been~~from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes. These shares were purchased at an average cost of ~~$88.47~~$108.40 and ~~$82.22 per share,~~$85.53, respectively. The Company intends to acquire shares from time to time at prevailing market prices if and to the extent it deems it 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.

NOTE 4 – INVENTORIES

Inventories at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 consisted of the following:


	March 31, 2020		December 31, 2019
Raw materials	$	27,872	$	27,439
Work in progress	4,097		2,102
Finished goods	51,227		54,352
Total inventories	$	83,196	$	83,893

September 30,
2019
December 31, 2018
Raw materials $ 27,521
$ 23,661
Work in progress 4,751
4,649
Finished goods 41,558
38,877
Total inventories $ 73,830
$ 67,187

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are summarized as follows:


	March 31, 2020		December 31, 2019
Land	$	11,701	$	11,588
Building	79,048		79,261
Equipment	238,389		237,898
Construction in progress	17,796		14,594
	346,934		343,341
Less: accumulated depreciation	131,655		126,482
Property, plant and equipment, net	$	215,279	$	216,859

September 30,
2019
December 31, 2018
Land $ 11,427
$ 7,965
Building 73,948
67,702
Equipment 219,680
213,909
Construction in progress 17,504
14,750
322,559
304,326
Less: accumulated depreciation 121,754
113,407
Property, plant and equipment, net $ 200,805
$ 190,919

NOTE 6 – INTANGIBLE ASSETS

The Company had goodwill in the amount of ~~$504,094~~$522,785 and ~~$447,995~~$523,998 as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The ~~increase~~decrease in goodwill is ~~primarily the result of the acquisition of Chemogas, partially offset by a reduction ofgoodwill related to an insignificant sale of a portion of the Company's business,~~ ~~with the remaining change~~ due to foreign exchange translation ~~adjustments. Refer~~adjustments, partially offset by an insignificant adjustment related to ~~Note 2, "Significant Acquisitions and Divestitures," for more information.~~the Zumbro acquisition.

Identifiable intangible assets with finite lives at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are summarized as follows:

Amortization
Period
(in years)

Gross Carrying Amount at
9/30/2019
Accumulated
Amortization
at 9/30/2019 Gross
Carrying
Amount at
12/31/2018 Accumulated
Amortization
at 12/31/2018
Customer relationships & lists 10-20 $ 230,243
$ 135,158
$ 192,185
$ 122,545
Trademarks & trade names 2-17 40,773
19,408
39,934
16,755
Developed technology 5-10 15,740
10,429
13,338
8,604
Other 3-18 20,420
7,784
18,333
6,481
$ 307,176
$ 172,779
$ 263,790
$ 154,385


	Amortization Period (in years)	Gross Carrying Amount at 3/31/2020		AccumulatedAmortizationat 3/31/2020		Gross Carrying Amount at 12/31/2019		AccumulatedAmortizationat 12/31/2019
Customer relationships & lists	10-20	$	238,762	$	144,258	$	239,578	$	139,863
Trademarks & trade names	2-17	43,082		21,561		43,102		20,477
Developed technology	5-12	20,158		11,664		20,206		11,008
Other	3-18	21,343		9,347		20,962		8,576
		$	323,345	$	186,830	$	323,848	$	179,924

Amortization of identifiable intangible assets was approximately ~~$6,753~~$6,979 and ~~$18,723~~$5,842 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~respectively, and $6,208 and $18,680 for the three and nine months ended September 30, 2018,~~ respectively. Assuming no change in the gross carrying value of identifiable intangible assets, estimated amortization expense is ~~$7,069~~$20,624 for the remainder of ~~2019, $26,112 for~~ 2020, ~~$22,405~~$23,936 for 2021, ~~$20,546~~$22,021 for 2022, ~~$17,979~~$19,128 for 2023, $10,448 for 2024 and ~~$9,076~~$6,198 for ~~2024.~~2025. At ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ there were 0 identifiable intangible assets with indefinite useful lives as defined

by ASC 350. Identifiable intangible assets are reflected in “Intangible assets with finite lives, net” in the Company’s condensed consolidated balance sheets. There were no changes to the useful lives of intangible assets subject to amortization during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

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. Gabriel CC Company, LLC, to design, develop, and construct an expansion of the Company’s St. Gabriel aqueous choline chloride plant. The Company contributed the St. Gabriel plant, at cost, and all continued expansion and improvements are funded by the owners. The joint venture became operational as of July 1, 2016. St. Gabriel CC Company, LLC is a Variable Interest Entity (VIE) because the total equity at risk is not sufficient to permit the joint venture to finance its own activities without additional subordinated financial support. Additionally, voting rights (2 votes each) are not proportionate to the owners’ obligation to absorb expected losses or receive the expected residual returns of the joint venture. The Company will receive up to 2/3 of the production offtake capacity and absorbs operating expenses approximately proportional to the actual percentage of offtake. The joint venture is accounted for under the equity method of accounting since the Company is not the primary beneficiary as the Company does not have the power to direct the activities of the joint venture that most significantly impact its economic performance. The Company recognized a loss of ~~$84~~$138 and ~~$144~~$101 for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and a loss of $266 and $424 for the~~ ~~nine~~ ~~months ended September 30, 2019 and 2018,~~ respectively, relating to its portion of the joint venture's expenses in

other expense. The carrying value of the joint venture at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 is ~~$4,636~~$5,042 and ~~$4,902,~~$4,513, respectively, and is recorded in other ~~assets~~assets.

NOTE 8 – REVOLVING LOAN

On June 27, 2018, the Company and a bank syndicate entered into ~~a five year senior secured revolving credit agreement (“~~the Credit ~~Agreement”),~~Agreement, which replaced the existing credit facility that had provided for a senior secured term loan of $350,000 and a revolving loan of $100,000. The Credit Agreement, which expires on June 27, 2023, provides for revolving loans up to $500,000 (collectively referred to as the “loans”). The loans may be used for working capital, letters of credit, and other corporate purposes and may be drawn upon at the Company’s discretion. The initial proceeds from the Credit Agreement were used to repay the outstanding balance of $210,750 on its senior secured term loan, which was due May 2019. On May 23, 2019, the Company drew down an additional $108,569 to fund the Chemogas acquisition (see Note 2, "Significant Acquisitions and Divestitures"). In connection with these additional borrowings, the Company entered into an interest rate swap to protect against adverse fluctuations in interest rates (see Note 20, "Derivative Instruments and Hedging Activities"). As of ~~September 30,~~March 31, 2020 and December 31, 2019, the total balance outstanding on the Credit Agreement amounted to ~~$218,569.~~$253,569 and $248,569, respectively. There are 0 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.

Amounts outstanding under the Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the Credit Agreement plus an applicable rate. The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the Credit Agreement, and the interest rate was ~~3.179%~~2.084% at ~~September 30, 2019.~~March 31, 2020. The Company is also required to pay a commitment fee on the unused portion of the revolving loan, which is based on the Company’s consolidated net leverage ratio as defined in the Credit Agreement and ranges from 0.15% to 0.275% (0.175% at ~~September 30, 2019)~~March 31, 2020). The unused portion of the revolving loan amounted to ~~$281,431~~$246,431 at ~~September 30, 2019.~~March 31, 2020. The Company is also required to pay, as applicable, letter of credit fees, administrative agent fees, and other fees to the arrangers and lenders.

Costs associated with the issuance of the revolving loans are capitalized and amortized on a straight-line basis over the term of the Credit ~~Agreement.~~Agreement, which is not materially different than the effective interest method. Costs associated with the issuance of the extinguished debt instrument were capitalized and amortized over the term of the respective financing arrangement using the effective interest method. Capitalized costs net of accumulated amortization totaled ~~$1,056~~$915 and ~~$1,268~~$986 at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and are included in other assets on the condensed consolidated balance sheets. Amortization expense pertaining to these costs totaled ~~$70~~$71 for both the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, and $212 and $610 for the nine months ended September 30, 2019 and 2018, respectively,~~ and is included in interest expense in the accompanying condensed consolidated statements of earnings.

The Credit Agreement contains quarterly covenants requiring the consolidated leverage ratio to be less than a certain maximum ratio and the consolidated interest coverage ratio to exceed a certain minimum ratio. At ~~September 30, 2019,~~March 31, 2020, the Company was in compliance with these covenants. Indebtedness under the Company’s loan agreements are secured by assets of the Company.

NOTE 9 – NET EARNINGS PER SHARE

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

The Company had ~~183,822~~212,551 and 0515,573 stock options outstanding at ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, that could potentially dilute basic earnings per share in future periods that were not included in diluted earnings per share because their effect on the period presented was anti-dilutive.

NOTE 10 – INCOME TAXES

The Company’s effective tax rate for the three months ended ~~September 30,~~March 31, 2020 and 2019, was 19.3% and ~~2018, was 15.4% and 18.3%~~24.2%, ~~respectively, and 20.0% and 21.1% for the~~ ~~nine~~ ~~months ended September 30, 2019 and 2018,~~ respectively. The decreases in the effective tax rate for thethree ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the three ~~and nine~~ months ended ~~September 30, 2018 were~~March 31, 2019 was mainly attributable to ~~discrete items.~~lower enacted tax rates from several states.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several significant changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible interest expense, allowing companies to carry-back certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. Some of the tax law changes included in the Act are retroactive, however, the Company has reviewed the change in law and determined that the law change has no 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 Securities and Exchange Commission, or the Financial Accounting Standards Board regarding this act.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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 accounts for uncertainty in income taxes utilizing ASC 740-10, "Income Taxes". ASC 740-10 clarifies whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosures. The application of ASC 740-10 requires judgment related to the uncertainty in income taxes and could impact our effective tax rate.

The Company files income tax returns in the U.S. and in various states and foreign countries. As of ~~September 30, 2019,~~March 31, 2020, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2015. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had approximately ~~$5,525~~$4,831 and ~~$5,709,~~$4,762, respectively, of unrecognized tax benefits, which are included in other long-term obligations on the Company’s condensed consolidated balance

sheets. The Company includes interest expense or income as well as potential penalties on unrecognized tax positions as a component of income tax expense in the condensed consolidated statements of earnings. The total amount of accrued interest and penalties related to uncertain tax positions at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 was approximately ~~$1,883~~$1,682 and ~~$1,839,~~$1,612, respectively, and is included in other long-term obligations.

NOTE 11 – SEGMENT INFORMATION

Previously, the Company's 4 reportable segments were: Human Nutrition and Health, Animal Nutrition and Health, Specialty Products, and Industrial Products. However, effective in the first quarter of 2020, in order to align with the Company's strategic focus on health and nutrition, allocation of resources, and evaluation of operating performance, and given the previously noted 2019 reduction in portfolio scale of Industrial Products, the Company has revised its reporting segment structure to 3 reportable segments: Human Nutrition and Health, Animal Nutrition and Health, and Specialty Products. These reportable segments are strategic businesses that offer products and services to different markets. This realignment has been retrospectively applied. Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated" and applied retroactively to 2019. There was no change to the Consolidated Financial Statements as a result of the change to the reportable segments. The Company expects that the new reportable segment structure will provide investors greater understanding of and alignment with the Company’s strategic focus. In order to ensure appropriate transparency and visibility into the financial performance of the Company, sufficient detail will continue to be provided relative to Other and Unallocated, including material contributions from oil and gas and other industrial market activities.

Human Nutrition & Health

The ~~Company's~~ Human Nutrition & Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and wellness applications. Choline is recognized to play a key role in the development and structural integrity of brain cell membranes in infants, processing dietary fat, reproductive development and neural functions, such as memory and muscle function. The Company's mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products. Proprietary technology has been combined to create an organic molecule in a form the body can readily assimilate. Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and ~~customer perceptions~~customers' appreciation of brand value. Consequently, the Company makes investments in such activities for long-term value differentiation. This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers. The Company partners with ~~our~~its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. The ~~Company's~~Company has expertise in trends analysis and product ~~development,~~development. When combined with its strong manufacturing capabilities in customized spray dried and emulsified powders, extrusion and agglomeration, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, as well as ice cream bases and variegates, ~~makes~~ the Company is a one-stop solutions provider for beverage and dairy product development needs. Additionally, this segment provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life. Major product applications are baked goods, refrigerated and frozen dough systems, processed meats,

seasoning blends, confections, sports and protein bars, dietary plans, and nutritional supplements. The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients.

Animal Nutrition & Health

The Company’s Animal Nutrition & Health ~~(“ANH”~~("ANH") segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride. For ruminant animals, the Company’s microencapsulated products boost health and milk production, delivering nutrient supplements that are biologically available, providing required nutritional levels. The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world. ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries. Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat. In poultry, choline deficiency can result in reduced growth rates and perosis in young birds, while in swine production choline is a necessary and required component of gestating and lactating sow diets for both liver health and prevention of leg deformity.

Sales of value-added encapsulated products are highly dependent on overall industry economics as well as the Company's ability to leverage the results of university and field research on the animal health and production benefits of our products. Management believes that success in the commodity-oriented basic choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace.

Ethylene oxide, at the 100% level and blended with carbon dioxide, 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. The Company’s 100% ethylene oxide product and blends are distributed worldwide in specially designed, reusable and recyclable drum and cylinder packaging, to assure compliance with safety, quality and environmental standards as outlined by the applicable regulatory agencies in the countries our products are shipped to. The Company’s inventory of these specially built drums and cylinders, along with its 45 filling facilities, represents a significant capital investment. Contract sterilizers and medical device manufacturers are principal customers for this product. The Company also sells single use canisters with 100% ethylene oxide for use in sterilizing re-usable devices typically processed in autoclave units in hospitals. As a fumigant, ethylene oxide blends are highly effective in killing bacteria, fungi, and insects in spices and other seasoning materials.

The Company also distributes a number of other gases for various uses, most notably propylene oxide and ammonia. Propylene oxide is marketed and sold in the U.S. as a fumigant to aid in the control of insects and microbiological spoilage; and to reduce bacterial and mold contamination in certain shell and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes. The Company distributes its propylene oxide product in the U.S. primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the EPA and the DOT. Propylene oxide is also sold worldwide to customers in approved reusable and recyclable drum and cylinder packaging for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings. Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder drum and cylinder packaging approved for use in the countries these products are shipped to. The Company's inventory of cylinders for these products also represents a significant capital investment.

The Company’s micronutrient agricultural nutrition business sells chelated minerals primarily into high value crops. The Company has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life. First, the Company determines optimal mineral balance for plant health. The Company then has a foliar applied Metalosate product range, utilizing patented amino acid chelate technology. Its products quickly and efficiently deliver mineral nutrients. As a result, the farmer/grower gets healthier crops that are more resistant to disease and pests, larger yields and healthier food for the consumer with extended shelf life for produce being shipped long distances.

~~Industrial Products~~

Certain derivatives of choline chloride are manufactured and sold into industrial applications predominately as a component for hydraulic fracturing of shale natural gas wells. The Company’s products offer an attractive, effective and more environmentally responsible alternative than other clay stabilizers. Industrial grade choline bicarbonate is completely chloride free and the Company's choline chloride reduces the amount of chlorides released into the environment up to 75% when compared to potassium chloride. The Industrial Products segment also includes the manufacture and sale of methylamines. Methylamines are a primary building block for the manufacture of choline products and are produced at its Italian operation and sold for a wide range of industrial applications in Europe.

The segment information is summarized as follows:

~~Business Segment Assets~~


Business Segment Assets	March 31, 2020		December 31, 2019
Human Nutrition & Health	$	741,742	$	739,030
Animal Nutrition & Health	150,766		142,247
Specialty Products	182,461		184,487
Other and Unallocated ⁽¹⁾	87,143		89,918
Total	$	1,162,112	$	1,155,682

September 30,
2019 December 31,
2018
Human Nutrition & Health $ 692,558
$ 702,692
Animal Nutrition & Health 136,680
136,810
Specialty Products 182,002
59,558
Industrial Products 15,590
22,822
Other Unallocated ⁽¹⁾
69,798
59,473
Total $ 1,096,628
$ 981,355

⁽¹⁾ Other unallocated assets consist of certain cash, capitalized loan issuance costs, other assets, investments, and deferred income taxes, which the Company does not allocate to its individual business segments.

~~Business Segment Net Sales~~

Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Human Nutrition & Health $ 86,142
$ 85,890
$ 257,163
$ 253,966
Animal Nutrition & Health 42,286
40,410
129,127
128,587
Specialty Products 24,888
17,629
68,219
58,233
Industrial Products 5,279
11,114
22,669
39,354
Total $ 158,595
$ 155,043
$ 477,178
$ 480,140

~~Business Segment Earnings Before Income Taxes~~

Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Human Nutrition & Health $ 13,193
$ 13,107
$ 39,234
$ 35,724
Animal Nutrition & Health 6,122
5,100
16,423
19,607
Specialty Products 6,699
5,767
22,275
19,476
Industrial Products 842
1,751
3,390
6,843
Transaction and integration costs, ERP implementation costs, and unallocated legal fees ⁽²⁾
(688 ) (202 ) (2,253 ) (1,784 )
Unallocated amortization expense ⁽³⁾
(138 ) —
(157 ) —
Interest and other (expense) ⁽⁴⁾
(1,594 ) (1,994 ) (4,802 ) (6,099 )
Total $ 24,436
$ 23,529
$ 74,110
$ 73,767

⁽²⁾ Transaction and integration costs and unallocated legal fees for the three and nine month ended September 30, 2019 and 2018, respectively, were primarily related to acquisitions. ERP implementation costs for the three and nine months ended September 30, 2019 and 2018 were related to a project in connection with a company-wide ERP system implementation.
⁽³⁾ Unallocated amortization expense for the three and nine months ended September 30, 2019 was related to amortization of an intangible asset in connection with a company-wide ERP system implementation.
⁽⁴⁾ Interest and other (expense) for the three and nine months ended September 30, 2019 and 2018 included amortization expense related to capitalized loan issuance costs.

~~Depreciation/Amortization~~

Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
Human Nutrition & Health $ 7,411
$ 8,372
$ 22,880
$ 25,288
Animal Nutrition & Health 1,646
1,397
4,847
3,996
Specialty Products 2,372
1,019
4,983
3,039
Industrial Products 116
176
406
527
Unallocated amortization expense ⁽⁵⁾
$ 138
$ —
$ 157
$ —
Amortization expense related to deferred financing cost ⁽⁶⁾
$ 70
$ 70
$ 212
$ 610
Total $ 11,753
$ 11,034
$ 33,485
$ 33,460

⁽⁵⁾ Unallocated amortization expense for the three and nine months ended September 30, 2019 was related to amortization of an intangible asset in connection with a company-wide ERP system implementation.
⁽⁶⁾ Amortization expense related to capitalized loan issuance costs was included in interest and other (expense) in Company's condensed consolidated statement of earnings.

~~Capital Expenditures~~

Nine Months Ended
September 30,
2019 2018
Human Nutrition & Health $ 14,136
$ 6,041
Animal Nutrition & Health 2,788
3,002
Specialty Products 2,050
1,376
Industrial Products 583
909
Total $ 19,557
$ 11,328


Business Segment Net Sales	Three Months Ended March 31,
	2020		2019
Human Nutrition & Health	$	95,508	$	85,149
Animal Nutrition & Health	48,641		43,361
Specialty Products	27,996		18,424
Other and Unallocated ⁽²⁾	2,291		10,095
Total	$	174,436	$	157,029


Business Segment Earnings Before Income Taxes	Three Months Ended March 31,
	2020		2019
Human Nutrition & Health	$	12,135	$	13,703
Animal Nutrition & Health	8,044		5,256
Specialty Products	7,986		6,697
Other and Unallocated ⁽²⁾	(1,887)		824
Interest and other expense	(1,788)		(1,687)
Total	$	24,490	$	24,793


Depreciation/Amortization	Three Months Ended March 31,
	2020		2019
Human Nutrition & Health	$	7,844	$	7,986
Animal Nutrition & Health	1,755		1,578
Specialty Products	2,392		1,021
Other and Unallocated ⁽²⁾	558		251
Total	$	12,549	$	10,836


Capital Expenditures	Three Months Ended March 31,
	2020		2019
Human Nutrition & Health	$	3,507	$	5,255
Animal Nutrition & Health	1,092		1,471
Specialty Products	382		1,474
Other and Unallocated ⁽²⁾	8		288
Total	$	4,989	$	8,488


⁽¹⁾ Other and Unallocated assets consist of certain cash, capitalized loan issuance costs, other assets, investments, and income taxes, which the Company does not allocate to its individual business segments. It also includes assets associated with a few minor businesses which individually do not meet the quantitative thresholds for separate presentation.

⁽²⁾ Other and Unallocated consists of a few minor businesses which individually do not meet the quantitative thresholds for separate presentation and corporate expenses that have not been allocated to a segment. Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $1,272 and $804 for the first quarter of 2020, and 2019, respectively, and (ii) Unallocated amortization expense of $401 and $9 for the first quarter of 2020 and 2019, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.

Revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to realize in exchange for those goods.

The following table presents revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues.

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

Three Months Ended
September 30,
Nine Months Ended
September 30,
2019 2018 2019 2018
United States $ 112,811
$ 115,155
$ 353,111
$ 360,842
Foreign Countries 45,784
39,888
124,067
119,298
Total Revenue $ 158,595
$ 155,043
$ 477,178
$ 480,140


	Three Months Ended March 31,
			2020			2019
United States	$	126,909		$	118,111
Foreign Countries	47,527			38,918
Total Revenue	$	174,436		$	157,029

Product Sales Revenues

The Company’s primary operation is the manufacturing and sale of health and wellness ingredient products, in which the Company receives an order from a customer and fulfills that order. The Company’s product sales are considered point-in-time revenue and consist of 4 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.

Royalty revenue consists of agreements with customers to use the Company’s intellectual property in exchange for a sales-based royalty. Royalties are considered over time revenue and are recorded in the ~~Human Nutrition & Health~~HNH segment.

Contract Liabilities

The Company records contract liabilities when cash payments are received or due in advance of performance, including amounts which are refundable.

The Company’s payment terms vary by the type and location of customers and the products offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products are delivered to the customer.

Practical Expedients and Exemptions

The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling and marketing expenses.

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for products shipped.

NOTE 13 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ for income taxes and interest is as follows:


	Three Months Ended March 31,
	2020		2019
Income taxes	$	8,441	$	58
Interest	$	1,619	$	1,459

Nine Months Ended
September 30,
2019 2018
Income taxes $ 18,226
$ 17,781
Interest $ 4,567
$ 5,345

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

⁽¹⁾ One time adjustment to the postretirement account.

Included in "Net foreign currency translation adjustment" ~~were $4,626 and $1,715~~was a gain of ~~gain~~$4,419 related to a net investment hedge, ~~respectively,~~ which ~~included~~was net of taxes of ~~$456~~$1,174 for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2019.~~March 31, 2020. There were 0no such activities for the three ~~and nine~~ months ended ~~September 30, 2018.~~March 31, 2019. See Note 20, "Derivative Instruments and Hedging Activities."

Accumulated other comprehensive income/(loss)~~/income~~ at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 consisted of the following:


	Foreign currency translation adjustment		Cash flow hedges		Postretirement benefit plan		Total
Balance December 31, 2019	$	(5,176)	$	(1,399)	$	1,011	$	(5,564)
Other comprehensive income/(loss)	781		(3,107)		(579)		(2,905)
Balance March 31, 2020	$	(4,395)	$	(4,506)	$	432	$	(8,469)

Foreign currency
translation
adjustment
Cash flow hedges
Postretirement
benefit plan
Total
Balance December 31, 2018 $ (4,285 ) $ —
$ 683
$ (3,602 )
Other comprehensive (loss)/income (3,513 ) (1,956 ) 16
(5,453 )
Balance September 30, 2019 $ (7,798 ) $ (1,956 ) $ 699
$ (9,055 )

NOTE 15 – EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsored 2 401(k) savings plans for eligible employees. The plans allow participants to make pretax contributions and the Company matches certain percentages of those pretax contributions. One of the plans has a discretionary profit sharing portion and matches 401(k) contributions with shares of the Company’s Common Stock. All amounts contributed to the plans are deposited into a trust fund administered by independent trustees.

Postretirement Medical Plans

The Company provides postretirement benefits in the form of 2 unfunded postretirement medical plans; one that is under a collective bargaining agreement and covers eligible retired employees of the Verona facility and a plan for those named as executive officers in the Company’s proxy ~~statement~~.statement.

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

Nine Months Ended
September 30,
2019 2018
Service cost $ 47
$ 58
Interest cost 29
33
Amortization of prior service cost 55
52
Amortization of gain (34 ) (2 )
Net periodic benefit cost $ 97
$ 141


	Three Months Ended March 31,
	2020		2019
Service cost	$	17	$	16
Interest cost	6		10
Amortization of prior service cost	19		18
Amortization of gain	(13)		(11)
Net periodic benefit cost	$	29	$	33

The amount recorded for these obligations on the Company’s balance sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 is ~~$1,250~~$1,100 and ~~$1,174,~~$1,076, respectively, and is included in other long-term obligations. These plans are unfunded and approved claims are paid from Company funds. Historical cash payments made under such plans have typically been less than $100 per year.

Deferred Compensation Plan

On June 1, 2018, the Company established an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees. Assets of the plan are held in a rabbi trust, which are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The deferred compensation liability was ~~$1,803~~$2,830 and ~~$265~~$1,982 as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and iswas included in other long-term obligations on the Company’s consolidated balance sheets. The related rabbi trust assets were ~~$1,803~~$2,832 and ~~$265~~$1,982 as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and ~~are~~were included in other non-current assets on the Company's consolidated balance sheets.

Defined Benefit Pension Plans

On May 27, 2019, the Company acquired Chemogas, which ~~had 2~~has an unfunded defined benefit pension ~~plans (DB plans), 1 of which was closed on December 31, 2018 and replaced by 4 individual defined contribution plans.~~plan. The ~~active pension~~ plan ~~is funded by means of employee and Company contributions and~~ provides for the payment of a lump sum at retirement or payments in case of death of the covered employees. The ~~DB plan is considered a post-employment benefit. The~~ amount recorded for these obligations on the Company's consolidated balance sheet as of ~~September 30,~~March 31, 2020 and December 31, 2019 ~~is $580~~was $584 and is$596, respectively, and was included in other long-term obligations.

NOTE 16 – COMMITMENTS AND CONTINGENCIES



Maryland						13-2578432
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)



Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $.06-2/3 per share	BCPC	Nasdaq Global Market


Assets	September 30, 2019 (unaudited)			December 31, 2018			Assets	March 31, 2020 (unaudited)		December 31, 2019
Current assets:							Current assets:
Cash and cash equivalents	$	59,404		$	54,268		Cash and cash equivalents	$	73,959	$	65,672
Accounts receivable, net of allowance for doubtful accounts of $1,354 and $610 at September 30, 2019 and December 31, 2018 respectively	93,995			99,545
Accounts receivable, net of allowance for doubtful accounts of $2,511 and $2,080 at March 31, 2020 and December 31, 2019 respectively							Accounts receivable, net of allowance for doubtful accounts of $2,511 and $2,080 at March 31, 2020 and December 31, 2019 respectively	105,867		93,444
Inventories	73,830			67,187			Inventories	83,196		83,893
Prepaid expenses	4,107			3,830			Prepaid expenses	4,134		4,385
Prepaid income taxes	5,448			—			Prepaid income taxes	527		5,098
Other current assets	3,165			1,484			Other current assets	2,998		2,454
Total current assets	239,949			226,314			Total current assets	270,681		254,946

Property, plant and equipment, net	200,805			190,919			Property, plant and equipment, net	215,279		216,859
Goodwill	504,094			447,995			Goodwill	522,785		523,998
Intangible assets with finite lives, net	134,397			109,405			Intangible assets with finite lives, net	136,515		143,924
Right of use assets	6,601			—			Right of use assets	6,912		7,338
Derivative assets	2,171			—
Other assets	8,611			6,722			Other assets	9,940		8,617
Total assets	$	1,096,628		$	981,355		Total assets	$	1,162,112	$	1,155,682

Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Trade accounts payable	$	36,739		$	33,345		Trade accounts payable	$	23,630	$	37,267
Accrued expenses	22,693			22,025			Accrued expenses	35,848		24,604
Accrued compensation and other benefits	10,295			11,022			Accrued compensation and other benefits	9,826		11,057
Dividends payable	78			15,220			Dividends payable	137		16,855
Income tax payable	—			444
Lease liabilities - current	2,218			—			Lease liabilities - current	2,279		2,475
Total current liabilities	72,023			82,056			Total current liabilities	71,720		92,258

Revolving loan	218,569			156,000			Revolving loan	253,569		248,569
Deferred income taxes	57,008			44,309			Deferred income taxes	57,095		56,431
Lease liabilities - non-current	4,367			—			Lease liabilities - non-current	4,336		4,827
Derivative liabilities	2,475			—			Derivative liabilities	443		2,103
Other long-term obligations	8,600			7,372			Other long-term obligations	8,678		7,827
Total liabilities	363,042			289,737			Total liabilities	395,841		412,015

Commitments and contingencies (Note 16)							Commitments and contingencies (Note 16)

Stockholders' equity:							Stockholders' equity:
Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding	—			—
Common stock, $.0667 par value. Authorized 120,000,000 shares; 32,401,586 shares issued and 32,169,087 shares outstanding at September 30, 2019 and 32,256,915 shares issued and 32,256,209 outstanding at December 31, 2018, respectively	2,160			2,151
Preferred stock, $25 par value. Authorized 2,000,000 shares; 0ne issued and outstanding							Preferred stock, $25 par value. Authorized 2,000,000 shares; 0ne issued and outstanding	—		—
Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,447,415 shares issued and 32,316,842 shares outstanding at March 31, 2020 and 32,405,796 shares issued and 32,201,917 outstanding at December 31, 2019, respectively							Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,447,415 shares issued and 32,316,842 shares outstanding at March 31, 2020 and 32,405,796 shares issued and 32,201,917 outstanding at December 31, 2019, respectively	2,164		2,161
Additional paid-in capital	173,760			165,098			Additional paid-in capital	173,581		174,218
Retained earnings	587,315			528,027			Retained earnings	610,689		590,921
Accumulated other comprehensive loss	(9,055		)	(3,602		)	Accumulated other comprehensive loss	(8,469)		(5,564)
Treasury stock, at cost: 232,499 and 706 shares at September 30, 2019 and December 31, 2018, respectively	(20,594		)	(56		)
Treasury stock, at cost: 130,573 and 203,879 shares at March 31, 2020 and December 31, 2019, respectively							Treasury stock, at cost: 130,573 and 203,879 shares at March 31, 2020 and December 31, 2019, respectively	(11,694)		(18,069)
Total stockholders' equity	733,586			691,618			Total stockholders' equity	766,271		743,667

Total liabilities and stockholders' equity	$	1,096,628		$	981,355		Total liabilities and stockholders' equity	$	1,162,112	$	1,155,682


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended March 31,
	2019			2018		2019		2018			2020		2019

Net sales	$	158,595		$	155,043	$	477,178	$	480,140	Net sales	$	174,436	$	157,029

Cost of sales	104,587			107,041		320,157		327,213		Cost of sales	119,105		107,934

Gross margin	54,008			48,002		157,021		152,927		Gross margin	55,331		49,095

Operating expenses:										Operating expenses:
Selling expenses	15,227			14,229		44,847		42,783		Selling expenses	15,430		14,126
Research and development expenses	2,699			2,540		8,446		8,339		Research and development expenses	2,700		2,895
General and administrative expenses	10,052			5,710		24,816		21,939		General and administrative expenses	10,923		5,594
	27,978			22,479		78,109		73,061			29,053		22,615

Earnings from operations	26,030			25,523		78,912		79,866		Earnings from operations	26,278		26,480

Other expenses:										Other expenses:
Interest expense, net	1,672			1,797		4,749		5,936		Interest expense, net	1,696		1,589
Other, net	(78		)	197		53		163		Other, net	92		98
	1,594			1,994		4,802		6,099			1,788		1,687

Earnings before income tax expense	24,436			23,529		74,110		73,767		Earnings before income tax expense	24,490		24,793

Income tax expense	3,760			4,315		14,822		15,528		Income tax expense	4,722		6,010

Net earnings	$	20,676		$	19,214	$	59,288	$	58,239	Net earnings	$	19,768	$	18,783

Net earnings per common share - basic	$	0.64		$	0.60	$	1.84	$	1.82	Net earnings per common share - basic	$	0.62	$	0.58

Net earnings per common share - diluted	$	0.64		$	0.59	$	1.82	$	1.79	Net earnings per common share - diluted	$	0.61	$	0.58


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
	2019		2018		2019		2018					2020			2019
Net Earnings - Basic and Diluted	$	20,676	$	19,214	59,288		$	58,239	Net Earnings - Basic and Diluted	$	19,768		$	18,783

Share (000s)
Shares (000s)									Shares (000s)
Weighted Average Common Shares - Basic	32,094		32,141		32,164		32,068		Weighted Average Common Shares - Basic	32,135			32,188
Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares	361		424		350		384		Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares	382			321
Weighted Average Common Shares - Diluted	32,455		32,565		32,514		32,452		Weighted Average Common Shares - Diluted	32,517			32,509

Net Earnings Per Share - Basic	$	0.64	$	0.60	$	1.84	$	1.82	Net Earnings Per Share - Basic	$	0.62		$	0.58
Net Earnings Per Share - Diluted	$	0.64	$	0.59	$	1.82	$	1.79	Net Earnings Per Share - Diluted	$	0.61		$	0.58



	Increase/(Decrease) for the Three Months Ended September 30,						Increase/(Decrease) for the Nine Months Ended September 30,
	2019			2018			2019			2018
Cost of sales	$	288		$	242		$	864		$	729
Operating expenses	1,807			1,507			4,853			4,479
Net earnings	(1,610		)	(1,339		)	(4,401		)	(3,996		)



Nine Months ended September 30, 2019	Shares (000s)		Weighted Average Grant Date Fair Value
Non-vested balance as of December 31, 2018	79		$	72.75
Granted	67		84.44
Vested	(8	)	58.52
Forfeited	(5	)	85.49
Non-vested balance as of September 30, 2019	133		$	79.07



Nine months ended September 30, 2018	Shares (000s)		Weighted Average Grant Date Fair Value
Non-vested balance as of December 31, 2017	66		$	65.66
Granted	40		77.17
Vested	(17	)	57.65
Forfeited	—		—
Non-vested balance as of September 30, 2018	89		$	72.44



	September 30, 2019		December 31, 2018
Raw materials	$	27,521	$	23,661
Work in progress	4,751		4,649
Finished goods	41,558		38,877
Total inventories	$	73,830	$	67,187



	Amortization Period (in years)	Gross Carrying Amount at 9/30/2019		Accumulated Amortization at 9/30/2019		Gross Carrying Amount at 12/31/2018		Accumulated Amortization at 12/31/2018
Customer relationships & lists	10-20	$	230,243	$	135,158	$	192,185	$	122,545
Trademarks & trade names	2-17	40,773		19,408		39,934		16,755
Developed technology	5-10	15,740		10,429		13,338		8,604
Other	3-18	20,420		7,784		18,333		6,481
		$	307,176	$	172,779	$	263,790	$	154,385



	September 30, 2019		December 31, 2018
Human Nutrition & Health	$	692,558	$	702,692
Animal Nutrition & Health	136,680		136,810
Specialty Products	182,002		59,558
Industrial Products	15,590		22,822
Other Unallocated ⁽¹⁾	69,798		59,473
Total	$	1,096,628	$	981,355

⁽¹⁾ Other unallocated assets consist of certain cash, capitalized loan issuance costs, other assets, investments, and deferred income taxes, which the Company does not allocate to its individual business segments.



Year
October 1, 2019 to December 31, 2019	$	900
2020	3,109
2021	2,207
2022	1,749
2023	1,365
2024	1,190
Thereafter	3,750
Total minimum lease payments	$	14,270


Year
April 1, 2020 to December 31, 2020	$	2,430
2021	2,318
2022	1,768
2023	1,385
2024	629
2025	234
Thereafter	599
Total minimum lease payments	$	9,363



	Balance Sheet Location	September 30, 2019
Derivative assets:
Cross-currency swap	Derivative assets	$	2,171
Derivative liabilities:
Interest rate swap	Derivative liabilities	$	2,475


Derivative assets (liabilities)	March 31, 2020		December 31, 2019
Cross-currency swap	$	5,261	$	(332)
Interest rate swap	(5,704)		(1,771)
Derivative liabilities	$	(443)	$	(2,103)



	Location within Statements of Comprehensive Income	Three Months Ended September 30,			Nine Months Ended September 30,
	Location within Statements of Comprehensive Income	2019			2019
Cash flow hedge (interest rate swap), net of tax	Unrealized loss on cash flow hedge, net	$	(657	)	$	(1,956	)
Net investment hedge (cross-currency swap), net of tax	Net foreign currency translation adjustment	4,626			1,715
		$	3,969		$	(241	)


Business Segment Earnings From Operations	Three Months Ended March 31,
	2020		2019
Human Nutrition & Health	$	12,135	$	13,703
Animal Nutrition & Health	8,044		5,256
Specialty Products	7,986		6,697
Other and Unallocated ⁽¹⁾	(1,887)		824
Total	$	26,278	$	26,480


⁽¹⁾ Other and Unallocated consists of a few minor businesses which individually do not meet the quantitative thresholds for separate presentation and corporate expenses that have not been allocated to a segment. Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $1,272 and $804 for the first quarter of 2020, and 2019, respectively, and (ii) Unallocated amortization expense of $401 and $9 for the first quarter of 2020 and 2019, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.


	Three Months Ended March 31,						Increase (Decrease)
(in thousands)	2020		2019						% Change
Net sales	$	174,436	$	157,029	$	17,407	11.1	%
Gross margin	55,331		49,095		6,236		12.7	%
Operating expenses	29,053		22,615		6,438		28.5	%
Earnings from operations	26,278		26,480		(202)		(0.8)	%
Other expenses	1,788		1,687		101		6.0	%
Income tax expense/(benefit)	4,722		6,010		(1,288)		(21.4)	%
Net earnings	$	19,768	$	18,783	$	985	5.2	%


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~


	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Programs⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2020	578	$	106.82	578	$	142,144,718
February 1-29, 2020	7,646	$	108.52	7,646	$	143,573,440
March 1-31, 2020	—	$	—	—	$	143,573,440
	8,224			8,224

⁽¹⁾We have an approved stock repurchase program. The total authorization under this program is 3,763,038 shares. Since the inception of the program in June 1999, a total of 2,439,991 shares have been purchased, of which 130,573 shares remained in treasury at March 31, 2020. There is no expiration for this program.
⁽²⁾ Average price paid per share includes costs associated with the repurchases



Exhibit Number		Description
Exhibit ~~3.2~~31.1		~~Balchem Corporation By-Laws as Amended and Restated as of September 12, 2019.~~
~~Exhibit 31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
Exhibit 31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
Exhibit 32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Exhibit 32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		BALCHEM CORPORATION

		~~BALCHEM CORPORATION~~

	By: /s/ Theodore L. Harris
		Theodore L. Harris, Chairman, President and Chief Executive Officer

		By: /s/ Martin Bengtsson
		Martin Bengtsson, Chief Financial Officer and Treasurer

Date: ~~November 5, 2019~~May 1, 2020