UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~June 30, 2022

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

For the transition period from ____ to ____

Commission file number: 1-13648

Balchem Corporation

(Exact name of Registrant as specified in its charter)


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

52 Sunrise Park Road, New Hampton, NY 10958

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (845) 326-5600

Securities registered pursuant to Section 12(b) of the Act:


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

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 ~~April~~July 21, 2022, the registrant had ~~32,116,459~~32,120,593 shares of its Common Stock, $.06 2/3 par value, outstanding.

Table of Contents

BALCHEM CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Page No.

PART I

FINAN CIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 202 2 and December 31, 202 1

Condensed Consolidated Statements of Earnings for the Three and Six Months Ended ~~March 31,~~June 30, 202 2 and 202 1

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended ~~March 31,~~June 30, 202 2 and 202 1

Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended ~~March 31,~~June 30, 202 2 and 202 1

Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 202 2 and 202 1

Notes to Condensed Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

2427

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2936

Item 4.

Controls and Procedures

Issuer Purchase of Equity Securities

Part I. Financial Information

Item 1. Financial Statements

BALCHEM CORPORATION

Condensed Consolidated Balance Sheets

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


Assets	Assets	March 31, 2022 (unaudited)		December 31, 2021		Assets	June 30, 2022 (unaudited)		December 31, 2021
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	64,466	$	103,239	Cash and cash equivalents	$	76,183	$	103,239
Accounts receivable, net of allowance for doubtful accounts of $1,164 and $928 at March 31, 2022 and December 31, 2021 respectively		136,974		117,408
Inventories, net		108,411		91,058
Accounts receivable, net of allowance for doubtful accounts of $1,203 and $928 at June 30, 2022 and December 31, 2021 respectively						Accounts receivable, net of allowance for doubtful accounts of $1,203 and $928 at June 30, 2022 and December 31, 2021 respectively	138,579		117,408
Inventories						Inventories	140,840		91,058
Prepaid expenses	Prepaid expenses	5,383		6,116		Prepaid expenses	8,467		6,116
Derivative assets						Derivative assets	7,276		—
Other current assets	Other current assets	4,570		4,411		Other current assets	5,796		4,411
Total current assets	Total current assets	319,804		322,232		Total current assets	377,141		322,232

Property, plant and equipment, net	Property, plant and equipment, net	240,419		237,517		Property, plant and equipment, net	252,145		237,517

Goodwill	Goodwill	522,587		523,949		Goodwill	731,772		523,949
Intangible assets with finite lives, net	Intangible assets with finite lives, net	88,525		94,665		Intangible assets with finite lives, net	218,802		94,665
Right of use assets - operating leases	Right of use assets - operating leases	6,901		6,929		Right of use assets - operating leases	10,718		6,929
Right of use assets - finance lease	Right of use assets - finance lease	2,308		2,359		Right of use assets - finance lease	2,255		2,359
Derivative assets		882		—
Other assets	Other assets	13,482		11,674		Other assets	13,841		11,674
Total assets	Total assets	$	1,194,908	$	1,199,325	Total assets	$	1,606,674	$	1,199,325

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Trade accounts payable	Trade accounts payable	$	46,819	$	56,243	Trade accounts payable	$	66,363	$	56,243
Accrued expenses	Accrued expenses	53,957		43,411		Accrued expenses	58,649		43,411
Accrued compensation and other benefits	Accrued compensation and other benefits	10,325		19,567		Accrued compensation and other benefits	14,973		19,567
Dividends payable	Dividends payable	129		20,886		Dividends payable	127		20,886
Income taxes payable	Income taxes payable	9,936		1,334		Income taxes payable	863		1,334
Operating lease liabilities - current	Operating lease liabilities - current	2,194		2,194		Operating lease liabilities - current	2,997		2,194
Finance lease liabilities - current	Finance lease liabilities - current	169		167		Finance lease liabilities - current	171		167
Total current liabilities	Total current liabilities	123,529		143,802		Total current liabilities	144,143		143,802

Revolving loan	Revolving loan	128,569		108,569		Revolving loan	433,569		108,569
Deferred income taxes	Deferred income taxes	47,033		46,455		Deferred income taxes	77,574		46,455
Operating lease liabilities - non-current	Operating lease liabilities - non-current	4,730		4,811		Operating lease liabilities - non-current	7,725		4,811
Finance lease liabilities - non-current	Finance lease liabilities - non-current	2,260		2,303		Finance lease liabilities - non-current	2,216		2,303
Derivative liabilities	Derivative liabilities	—		2,658		Derivative liabilities	—		2,658
Contingent consideration liability						Contingent consideration liability	24,793		—
Other long-term obligations	Other long-term obligations	15,105		13,712		Other long-term obligations	15,284		13,712
Total liabilities	Total liabilities	321,226		322,310		Total liabilities	705,304		322,310
Commitments and contingencies (Note 15)		0		0
Commitments and contingencies (Note 16)						Commitments and contingencies (Note 16)	0		0
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding	Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding	—		—		Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding	—		—
Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,116,069 shares issued and outstanding at March 31, 2022 and 32,287,150 shares issued and outstanding at December 31, 2021, respectively		2,142		2,154
Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,120,593 and 32,287,150 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,120,593 and 32,287,150 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	2,143		2,154
Additional paid-in capital	Additional paid-in capital	116,771		147,716		Additional paid-in capital	120,811		147,716
Retained earnings	Retained earnings	761,058		732,138		Retained earnings	790,840		732,138
Accumulated other comprehensive loss		(6,289)		(4,993)
Accumulated other comprehensive income						Accumulated other comprehensive income	(12,424)		(4,993)
Total stockholders' equity	Total stockholders' equity	873,682		877,015		Total stockholders' equity	901,370		877,015

Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,194,908	$	1,199,325	Total liabilities and stockholders' equity	$	1,606,674	$	1,199,325

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BALCHEM CORPORATION

Condensed Consolidated Statements of Earnings

(Dollars in thousands, except per share data)

(unaudited)
Three Months Ended
March 31,
2022 2021
Net sales $ 228,867 $ 185,656
Cost of sales 157,361 126,929
Gross margin 71,506 58,727
Operating expenses:
Selling expenses 16,985 14,924
Research and development expenses 3,231 2,749
General and administrative expenses 12,954 10,479
33,170 28,152
Earnings from operations 38,336 30,575
Other expenses:
Interest expense, net 545 725
Other expense (income), net 161 (133)
706 592
Earnings before income tax expense 37,630 29,983
Income tax expense 8,700 6,572
Net earnings $ 28,930 $ 23,411
Net earnings per common share - basic $ 0.90 $ 0.73
Net earnings per common share - diluted $ 0.89 $ 0.72


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

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

Cost of sales	164,817		142,918		322,178		269,847

Gross margin	71,876		59,447		143,382		118,174

Operating expenses:
Selling expenses	15,991		14,846		32,976		29,770
Research and development expenses	2,922		2,899		6,153		5,648
General and administrative expenses	13,043		11,109		25,997		21,588
	31,956		28,854		65,126		57,006

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

Other expenses, net:
Interest expense, net	960		608		1,505		1,333
Other (income) expense, net	(298)		(34)		(137)		(167)
	662		574		1,368		1,166

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

Income tax expense	9,476		7,288		18,176		13,860

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

Net earnings per common share - basic	$	0.93	$	0.71	$	1.83	$	1.43

Net earnings per common share - diluted	$	0.92	$	0.70	$	1.81	$	1.41

See accompanying notes to condensed consolidated financial statements.

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BALCHEM CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(unaudited)

Three Months Ended
March 31,
2022 2021
Net earnings $ 28,930 $ 23,411
Other comprehensive loss, net of tax:
Foreign currency translation adjustment (2,842) (6,143)
Unrealized gain on cash flow hedge 1,573 512
Change in postretirement benefit plans (27) 7
Other comprehensive loss (1,296) (5,624)
Comprehensive income $ 27,634 $ 17,787


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

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

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(6,951)		1,524		(9,793)		(4,619)
Unrealized gain on cash flow hedge	850		351		2,423		863
Change in postretirement benefit plans	(34)		8		(61)		15
Other comprehensive income (loss)	(6,135)		1,883		(7,431)		(3,741)

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

See accompanying notes to condensed consolidated financial statements.

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BALCHEM CORPORATION

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and six months ended ~~March 31,~~June 30, 2022 and 2021

(Dollars in thousands, except share and per share data)
Total
Stockholders'
Equity Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Common Stock Additional
Paid-in
Capital
Shares Amount
Balance - December 31, 2021 $ 877,015 $ 732,138 $ (4,993) 32,287,150 $ 2,154 $ 147,716
Net earnings 28,930 28,930 — — — —
Other comprehensive loss (1,296) — (1,296) — — —
Repurchases of common stock (34,599) — — (245,685) (16) (34,583)
Dividends (10) (10) — — — —
Shares and options issued under stock plans 3,642 — — 74,604 4 3,638
Balance - March 31, 2022 $ 873,682 $ 761,058 $ (6,289) 32,116,069 $ 2,142 $ 116,771
Balance - December 31, 2020 $ 828,233 $ 656,740 $ 4,173 32,372,621 $ 2,160 $ 165,160
Net earnings 23,411 23,411 — — — —
Other comprehensive loss (5,624) — (5,624) — — —
Repurchases of common stock (1,596) — — (13,475) (1) (1,595)
Shares and options issued under stock plans 5,068 — — 92,784 6 5,062
Balance - March 31, 2021 $ 849,492 $ 680,151 $ (1,451) 32,451,930 $ 2,165 $ 168,627


	Total Stockholders' Equity		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Common Stock			Additional Paid-in Capital
							Shares	Amount
Balance - December 31, 2021	$	877,015	$	732,138	$	(4,993)	32,287,150	$	2,154	$	147,716
Net earnings	28,930		28,930		—		—	—		—
Other comprehensive (loss)	(1,296)		—		(1,296)		—	—		—
Repurchases of common stock	(34,599)		—		—		(245,685)	(16)		(34,583)
Dividends	(10)		(10)		—		—	—		—
Shares and options issued under stock plans	3,642		—		—		74,604	4		3,638
Balance - March 31, 2022	873,682		761,058		(6,289)		32,116,069	2,142		116,771
Net earnings	29,782		29,782		—		—	—		—
Other comprehensive (loss)	(6,135)		—		(6,135)		—	—		—
Repurchases of common stock	(600)		—		—		(4,976)	—		(600)
Shares and options issued under stock plans	4,641		—		—		9,500	1		4,640
Balance - June 30, 2022	$	901,370	$	790,840	$	(12,424)	32,120,593	$	2,143	$	120,811

Balance - December 31, 2020	$	828,233	$	656,740	$	4,173	32,372,621	$	2,160	$	165,160
Net earnings	23,411		23,411		—		—	—		—
Other comprehensive (loss)	(5,624)		—		(5,624)		—	—		—
Repurchases of common stock	(1,596)		—		—		(13,475)	(1)		(1,595)
Shares and options issued under stock plans	5,068		—		—		92,784	6		5,062
Balance - March 31, 2021	849,492		680,151		(1,451)		32,451,930	2,165		168,627
Net earnings	22,731		22,731		—		—	—		—
Other comprehensive income	1,883		—		1,883		—	—		—
Repurchases of common stock	(9,240)		—		—		(72,649)	(5)		(9,235)
Shares and options issued under stock plans	4,776		—		—		25,493	2		4,774
Balance - June 30, 2021	$	869,642	$	702,882	$	432	32,404,774	$	2,162	$	164,166

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BALCHEM CORPORATION

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	28,930	$	23,411	Net earnings	$	58,712	$	46,142

Adjustments to reconcile net earnings to net cash provided by operating activities:	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	Depreciation and amortization	11,928		12,364		Depreciation and amortization	23,861		24,463
Stock compensation expense	Stock compensation expense	3,077		2,622		Stock compensation expense	6,889		5,914
Deferred income taxes						Deferred income taxes	1,778		54
Provision for doubtful accounts	Provision for doubtful accounts	328		69		Provision for doubtful accounts	380		(25)
Unrealized loss (gain) on foreign currency transactions and deferred compensation		37		(229)
Gain on disposal of assets		(29)		(1)
Unrealized loss/(gain) on foreign currency transaction and deferred compensation						Unrealized loss/(gain) on foreign currency transaction and deferred compensation	188		(401)
Asset impairment charge						Asset impairment charge	23		—
Loss/(gain) on disposal of assets						Loss/(gain) on disposal of assets	203		(19)
Changes in assets and liabilities	Changes in assets and liabilities					Changes in assets and liabilities
Accounts receivable	Accounts receivable	(20,405)		(9,610)		Accounts receivable	(15,506)		(16,361)
Inventories	Inventories	(17,598)		(6,702)		Inventories	(33,141)		(7,949)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	487		1,000		Prepaid expenses and other current assets	(1,733)		(2,859)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(7,708)		10,344		Accounts payable and accrued expenses	15,075		25,873
Income taxes	Income taxes	8,522		7,043		Income taxes	(779)		898
Other	Other	(548)		296		Other	(689)		659
Net cash provided by operating activities	Net cash provided by operating activities	7,021		40,607		Net cash provided by operating activities	55,261		76,389

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Cash paid for acquisition, net of cash acquired						Cash paid for acquisition, net of cash acquired	(295,660)		—
Capital expenditures and intangible assets acquired	Capital expenditures and intangible assets acquired	(10,256)		(6,312)		Capital expenditures and intangible assets acquired	(20,799)		(13,760)
Proceeds from sale of assets	Proceeds from sale of assets	184		86		Proceeds from sale of assets	197		240
Investment in affiliates						Investment in affiliates	(150)		—
Net cash used in investing activities	Net cash used in investing activities	(10,072)		(6,226)		Net cash used in investing activities	(316,412)		(13,520)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from revolving loan	Proceeds from revolving loan	20,000		5,000		Proceeds from revolving loan	365,000		5,000
Principal payments on revolving loan	Principal payments on revolving loan	—		(15,000)		Principal payments on revolving loan	(40,000)		(45,000)
Principal payments on acquired debt						Principal payments on acquired debt	(30,648)		—
Principal payments on finance lease	Principal payments on finance lease	(41)		(39)		Principal payments on finance lease	(83)		(78)
Proceeds from stock options exercised	Proceeds from stock options exercised	498		2,402		Proceeds from stock options exercised	1,328		3,886
Dividends paid	Dividends paid	(20,703)		(18,700)		Dividends paid	(20,704)		(18,700)
Repurchase of common stock		(34,599)		(1,596)
Net cash used in financing activities		(34,845)		(27,933)
Purchase of common stock						Purchase of common stock	(35,199)		(10,835)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	239,694		(65,727)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(877)		(2,484)		Effect of exchange rate changes on cash	(5,599)		(1,811)

(Decrease) increase in cash and cash equivalents		(38,773)		3,964
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	(27,056)		(4,669)

Cash and cash equivalents beginning of period	Cash and cash equivalents beginning of period	103,239		84,571		Cash and cash equivalents beginning of period	103,239		84,571
Cash and cash equivalents end of period	Cash and cash equivalents end of period	$	64,466	$	88,535	Cash and cash equivalents end of period	$	76,183	$	79,902

See accompanying notes to condensed consolidated financial statements.

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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 the December 31, 2021 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, 2021. 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 six months ended ~~March 31,~~June 30, 2022 are not necessarily indicative of the operating results expected for the full year or any interim period.

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

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying ~~generally accepted accounting principles~~GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, this Standard Update is in effect from March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. The Company adopted the Standard Update in 2021. The adoption of the Standard update did not have a significant impact on the Company's consolidated financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 became effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a significant impact on the Company's consolidated financial statements and disclosures.

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NOTE 2 – SIGNIFICANT ACQUISITIONS

On June 21, 2022, Balchem and its wholly-owned subsidiary, Balchem B.V., completed the acquisition of Kechu BidCo AS and its subsidiary companies, including Kappa Bioscience AS, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway (all acquired companies being hereinafter collectively referred to as “Kappa”). The Company made payments of approximately kr3,301,341 ("kr" indicates the Norwegian krone) on the acquisition date, amounting to approximately kr2,997,669 to the former shareholder and approximately kr303,672 to Kappa's lenders to pay off all Kappa bank debt. Net of cash acquired of kr63,064, total payments on the acquisition date were kr3,238,277. Considering net cash acquired of $6,365, these payments translated to approximately $326,820 paid on the acquisition date, amounting to $302,537 paid to the former shareholder and approximately $30,648 to Kappa's lenders. The acquisition was primarily financed through the 2018 Credit Agreement (see Note 8, "Revolving Loan"). In connection with this transaction, the seller has an opportunity to receive an additional payment in 2024 if certain financial performance targets and other metrics are met, and therefore we recorded contingent consideration of kr245,000 (translated to $24,793) as of June 30, 2022. Kappa manufactures specialty vitamin K2, a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health, immunity, and athletic performance. Primarily, vitamin K2 supports the transport and distribution of calcium in the body. Vitamin K2 is important at all life stages, from pregnancy and early life to healthy aging. Kappa's K2VITAL® branded vitamin K2 is the leading synthetic vitamin K2 and is backed by strong intellectual property and a deep clinical research portfolio. The acquisition strengthens the Company's scientific and technical expertise, geographic reach, and marketplace leadership, which should ultimately lead to accelerated growth for the Company's portfolios within the Human Nutrition & Health segment.

The goodwill of $212,591 that arose on the acquisition date consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to the Human Nutrition & Health business segment and is not deductible for income tax purposes.

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


Cash and cash equivalents	$	6,365
Accounts receivable	8,036
Inventories	17,701
Property, plant and equipment	9,854
Right of use assets	3,349
Customer relationships	113,545
Developed technology	18,166
Trademarks	6,055
Other assets	2,399
Accounts payable	(3,301)
Bank debt	(30,648)
Lease liabilities	(3,349)
Other liabilities	(4,373)
Deferred income taxes, net	(29,127)
Goodwill	212,591
Total consideration on acquisition date	327,263
Contingent consideration liability	(24,726)
Net gains on foreign currency exchange forward contracts	(512)
Amount paid to shareholders	302,025
Kappa bank debt paid on purchase date	30,648
Total amount paid on acquisition date	$	332,673

The estimated fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions, which are subject to change. In preparing our preliminary fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. Valuation methods utilized include net realizable value for inventory, multi-period excess earnings method for customer relationships, the relief from royalty method for other intangible assets, and a scenario-based approach for the contingent consideration. The purchase price and related allocation of assets acquired and liabilities assumed is preliminary pending management's final review of fair value calculations and deferred tax liabilities related to certain non-deductible assets.

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Customer relationships are amortized over a 15-year period utilizing a percentage of excess earnings over economic life method. The corporate trademark and product trademarks are amortized over 2 years and 10 years, respectively, and developed technology is amortized over 12 years, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.

Transaction and integration costs related to the Kappa acquisition are included in selling, general, and administrative expenses and were $451 for both the three and six months ended June 30, 2022. There were no such amounts related to this acquisition for the three and six months ended June 30, 2021.

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


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

	Net Sales		Net Earnings		Net Sales		Net Earnings

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

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

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

Kappa's net sales and net earnings from June 21, 2022 through June 30, 2022 were not material. As such, they were not included in the Company's condensed consolidated statements of earnings for the three and six months ended June 30, 2022. 2022 supplemental pro forma net earnings for the three and six months ended June 30, 2022, excluded $643 and $722, respectively, of acquisition-related costs incurred. The pro forma information presented does not purport to be indicative of the results that actually would have been attained if the Kappa acquisition had occurred at the beginning of the periods presented, and is not intended to be a projection of future results.

NOTE 23 – STOCKHOLDERS’ EQUITY

STOCK-BASED COMPENSATION

The Company’s results for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:

Increase/(Decrease) for the
Three Months Ended March 31,
2022 2021
Cost of sales $ 399 $ 299
Operating expenses 2,678 2,323
Net earnings (2,379) (2,022)

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	Increase/(Decrease) for the				Increase/(Decrease) for the
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Cost of sales	$	277	$	444	$	676	$	744
Operating expenses	3,535		2,849		6,213		5,170
Net earnings	(2,933)		(2,547)		(5,312)		(4,569)

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

The Company’s 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 ~~March 31,~~June 30, 2022, the plans had ~~526,760~~534,120 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

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performance share awards, and three years for non-employee director restricted stock awards. Certain awards provide for accelerated vesting if there is a change in control (as defined in the plans) or other qualifying events.

Option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 is summarized below:


For the three months ended March 31, 2022		Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
For the six months ended June 30, 2022								For the six months ended June 30, 2022	Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding as of December 31, 2021	Outstanding as of December 31, 2021	867	$	88.19	$	69,711		Outstanding as of December 31, 2021	867	$	88.19	$	69,711
Granted	Granted	109	138.07					Granted	109	138.07
Exercised	Exercised	(8)	63.52					Exercised	(18)	72.74
Forfeited	Forfeited	—	—					Forfeited	(6)	120.36
Canceled	Canceled	—	—					Canceled	—	—
Outstanding as of March 31, 2022		968	$	94.01	$	41,483	6.6
Outstanding as of June 30, 2022								Outstanding as of June 30, 2022	952	$	93.99	$	34,907	6.4

Exercisable as of March 31, 2022		676	$	81.06	$	37,594	5.6
Exercisable as of June 30, 2022								Exercisable as of June 30, 2022	666	$	81.11	$	32,409	5.4


For the three months ended March 31, 2021		Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
For the six months ended June 30, 2021								For the six months ended June 30, 2021	Shares (000s)	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding as of December 31, 2020	Outstanding as of December 31, 2020	858	$	80.58	$	29,735		Outstanding as of December 31, 2020	858	$	80.58	$	29,735
Granted	Granted	129	119.11					Granted	129	119.12
Exercised	Exercised	(34)	70.53					Exercised	(58)	65.95
Forfeited	Forfeited	(2)	101.38					Forfeited	(2)	101.38
Canceled	Canceled	(1)	74.57					Canceled	(1)	74.57
Outstanding as of March 31, 2021		950	$	86.11	$	37,322	7.0
Outstanding as of June 30, 2021								Outstanding as of June 30, 2021	926	$	86.85	$	41,107	6.8

Exercisable as of March 31, 2021		604	$	73.11	$	31,603	5.8
Exercisable as of June 30, 2021								Exercisable as of June 30, 2021	580	$	73.72	$	33,398	5.6

ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. 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 0.5% and 0.5%; expected volatilities of 31% and 33%; risk-free interest rates of 2.0% and 0.5%; and expected lives of 4.9 years and 4.9 years, in each case for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

The Company used a projected expected life for each award granted based on historical experience of employees’ exercise behavior. 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~~Zero coupon issues with a remaining term equal to the expected life.

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Other information pertaining to option activity during the three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~was~~is as follows:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Weighted-average fair value of options granted	Weighted-average fair value of options granted	$	40.26	$	33.10	Weighted-average fair value of options granted	$	—	$	34.42	$	40.26	$	33.11
Total intrinsic value of stock options exercised ($000s)	Total intrinsic value of stock options exercised ($000s)	$	654	$	1,917	Total intrinsic value of stock options exercised ($000s)	$	495	$	1,814	$	1,149	$	3,731

Non-vested restricted stock activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 is summarized below:


		Three Months Ended March 31,							Six Months Ended June 30,
		2022			2021				2022			2021
		Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value			Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value
Non-vested balance as of December 31	Non-vested balance as of December 31	166	$	99.70	159	$	90.71	Non-vested balance as of December 31	166	$	99.70	159	$	90.71
Granted	Granted	32	138.07		36��	119.11		Granted	34	137.74		37	119.30
Vested	Vested	(76)	80.65		(10)	85.37		Vested	(77)	80.84		(13)	87.33
Forfeited	Forfeited	—	—		(2)	86.69		Forfeited	(3)	116.73		(2)	85.60
Non-vested balance as of March 31		122	$	121.56	183	$	96.70
Non-vested balance as of June 30								Non-vested balance as of June 30	120	$	122.03	181	$	96.89

Non-vested performance share activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 is summarized below:


		Three Months Ended March 31,							Six Months Ended June 30,
		2022			2021				2022			2021
		Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value			Shares (000s)	Weighted Average Grant Date Fair Value		Shares (000s)	Weighted Average Grant Date Fair Value
Non-vested balance as of December 31	Non-vested balance as of December 31	69	$	110.72	71	$	91.99	Non-vested balance as of December 31	69	$	110.72	71	$	91.99
Granted	Granted	39	114.22		36	108.74		Granted	39	114.22		36	108.74
Vested	Vested	(35)	53.17		(24)	70.64		Vested	(35)	53.17		(24)	70.64
Forfeited	Forfeited	(3)	84.09		(11)	74.57		Forfeited	(3)	84.09		(11)	74.57
Non-vested balance as of March 31		70	$	127.69	72	$	110.22
Non-vested balance as of June 30								Non-vested balance as of June 30	70	$	127.69	72	$	110.22

The performance share (“PS”) awards provide the recipients the right to receive a certain number of shares of the Company’s common stock in the future, subject to an EBITDA performance hurdle, where vesting is dependent upon the Company achieving a certain EBITDA percentage growth over the performance period, and relative total shareholder return (TSR), where vesting is dependent upon the Company’s TSR performance over the performance period relative to a comparator group consisting of the Russell 2000 index constituents. 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 1.8% and 0.2%; dividend yields of 0.5% and 0.6%; volatilities of 32% and 33%; and initial TSR’s of -15.7% and 11.7%, in each case for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively. Expense is estimated based on the number of shares expected to vest, assuming the requisite service period is rendered and the probable outcome of the performance condition is achieved. 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 ~~March 31,~~June 30, 2022 and 2021, there ~~was $23,131~~were $19,988 and ~~$23,009,~~$19,796, respectively, of total unrecognized compensation ~~cost~~costs related to non-vested share-based compensation arrangements granted under the plans. As of ~~March 31,~~June 30, 2022, the unrecognized

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compensation cost is expected to be recognized over a weighted-average period of approximately ~~1.9~~1.7 years. The Company estimates that share-based compensation expense for the year ended December 31, 2022 will be approximately ~~$12,350.~~$13,000.

REPURCHASE OF COMMON STOCK

The Company's Board of Directors has approved a 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 ~~3,063,929~~3,068,905 shares have been purchased. The Company’s prior presentation of reflecting treasury stock separately within stockholders’ equity has been adjusted to conform to the presentation prescribed by the State of Maryland, where the Company is incorporated. In connection therewith, adjustments to balances previously reflected as treasury stock of $8,472, $2,210, and $7,873 as of June 30, 2021, March 31, 2021, and December 31, 2020, respectively, were made to the condensed consolidated statements of changes in stockholders’ equity and prior references to “Treasury shares purchased” were updated to “Repurchases of common stock”, accordingly. There was no impact to total stockholders’ equity in any of the years presented as a result of these updates. The Company intends to acquire shares from time to time at prevailing market prices if and to the extent it deems it is advisable to do so based on its assessment of corporate cash flow, market conditions and other factors. The Company also repurchases shares from employees in connection with settlement of transactions under the Company's equity incentive plans. During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, the Company purchased ~~245,685~~250,661 and ~~13,475~~86,124 shares, respectively, from open market purchases and from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes. These shares were purchased at an average cost of ~~$140.83~~$140.42 and ~~$118.41,~~$125.81, respectively.

NOTE 34 – INVENTORIES

Inventories ~~net of reserves~~ at ~~March 31,~~June 30, 2022 and December 31, 2021 consisted of the following:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Raw materials	Raw materials	$	24,128	$	28,639	Raw materials	$	43,342	$	28,639
Work in progress	Work in progress	21,964		10,563		Work in progress	20,249		10,563
Finished goods	Finished goods	62,319		51,856		Finished goods	77,249		51,856
Total inventories	Total inventories	$	108,411	$	91,058	Total inventories	$	140,840	$	91,058

NOTE 45 – PROPERTY, PLANT AND EQUIPMENT

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


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Land	Land	$	11,570	$	11,692	Land	$	11,273	$	11,692
Building	Building	90,015		89,602		Building	91,140		89,602
Equipment	Equipment	258,758		253,995		Equipment	263,929		253,995
Construction in progress	Construction in progress	55,897		52,930		Construction in progress	65,906		52,930
		416,240		408,219			432,248		408,219
Less: accumulated depreciation	Less: accumulated depreciation	175,821		170,702		Less: accumulated depreciation	180,103		170,702
Property, plant and equipment, net	Property, plant and equipment, net	$	240,419	$	237,517	Property, plant and equipment, net	$	252,145	$	237,517

NOTE 56 – INTANGIBLE ASSETS

The Company had goodwill in the amount of ~~$522,587~~$731,772 and $523,949 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The ~~decrease~~increase in goodwill is the result of the acquisition of Kappa, partially offset by the change due to foreign exchange translation adjustments. Refer to Note 2, "Significant Acquisitions", for more information.

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


		Amortization Period (in years)	Gross Carrying Amount at 3/31/2022		Accumulated Amortization at 3/31/2022		Gross Carrying Amount at 12/31/2021		Accumulated Amortization at 12/31/2021			Amortization Period (in years)	Gross Carrying Amount at 6/30/2022		Accumulated Amortization at 6/30/2022		Gross Carrying Amount at 12/31/2021		Accumulated Amortization at 12/31/2021
Customer relationships & lists	Customer relationships & lists	10-20	$	239,194	$	177,108	$	240,059	$	173,489	Customer relationships & lists	10-20	$	350,523	$	180,638	$	240,059	$	173,489
Trademarks & trade names	Trademarks & trade names	2-17	42,695		29,978		43,116		28,985		Trademarks & trade names	2-17	48,724		30,968		43,116		28,985
Developed technology	Developed technology	5-12	20,184		14,809		20,234		14,607		Developed technology	5-12	38,252		14,993		20,234		14,607
Other	Other	2-18	24,771		16,424		23,921		15,584		Other	2-18	24,687		16,785		23,921		15,584
			$	326,844	$	238,319	$	327,330	$	232,665			$	462,186	$	243,384	$	327,330	$	232,665

Amortization of identifiable intangible assets was ~~$5,911~~approximately $5,850 and ~~$6,484~~$11,761 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and $6,229 and $12,713 for the three and six months ended June 30, 2021, respectively. Assuming no change in the gross carrying value of identifiable intangible assets, ~~the~~ estimated amortization expense is ~~$17,594~~$14,485 for the remainder of 2022, ~~$19,393~~$27,923 for 2023, ~~$10,516~~$19,659 for 2024, ~~$6,260~~$16,117 for 2025, ~~$4,938~~$15,710 for 2026 and ~~$4,375~~$14,949 for 2027. At ~~March 31,~~June 30, 2022 and December 31, 2021, there were no identifiable intangible assets with indefinite useful lives as defined by ASC ~~350, "Intangibles-Goodwill and Other."~~350. Identifiable intangible assets are reflected in ~~the Company's consolidated balance sheets under Intangible~~“Intangible assets with finite lives, ~~net.~~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 ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

NOTE 67 – 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~~receives up to 2/3 of the production offtake capacity and absorbs operating expenses approximately proportional to the actual percentage of offtake. The joint venture is accounted for under the equity method of accounting since the Company is not the primary beneficiary as the Company does not have the power to direct the activities of the joint venture that most significantly impact its economic performance. The Company recognized a ~~loss~~loss of $140 and ~~$144~~$280 for the three and six months ended June 30, 2022, respectively, and $130 and $274 for the three and six months ended ~~March 31, 2022 and~~June 30, 2021, respectively, relating to its portion of the joint venture's expenses in other expense. ~~During the first quarter of 2022 and 2021, the~~The Company made capital contributions to the investment totaling ~~$58~~ $75 and $133 for the three and six months ended June 30, 2022, respectively, and received a net return of capital totaling $28 and $~~13, res~~15~~pectively.~~ for the three and six months ended June 30, 2021, respectively. The carrying value of the joint venture at ~~March 31,~~June 30, 2022 and December 31, 2021 ~~is $4,417~~was $4,352 and $4,499, respectively, and is recorded in ~~other~~"Other assets."

NOTE 78 – REVOLVING LOAN

On June 27, 2018, the Company and a bank syndicate entered into ~~the~~a credit agreement (the "2018 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 2018 Credit Agreement, which expires on June 27, 2023, provides for revolving loans up to $500,000 (collectively referred to as the “loans”). The loans may be used for working capital, letters of credit, and other corporate purposes and may be drawn upon at the Company’s discretion. The initial ~~borrowing under~~proceeds from the 2018 Credit Agreement ~~was~~were used to ~~pay~~repay the outstanding balance of $210,750 on ~~the Company's~~its senior secured term loan, ~~under its former credit facility,~~ which was due May 2019. During the second quarter of 2022, the Company borrowed an additional $345,000 to fund the Kappa acquisition (see Note 2, "Significant Acquisitions"). As of ~~March 31,~~June 30, 2022 aandnd December 31, 2021 the, the total balance outstanding on the 2018 Credit Agreement amounted to ~~$128,569~~$433,569 and $108,569, respectively. There are no installment payments required on the revolving loans; they may be voluntarily prepaid in whole or in part without premium or penalty, and all outstanding amounts are due on the maturity date. On July 27, 2022, the Company entered into an Amended and Restated Credit Agreement with lenders in the form of a senior secured revolving credit facility, due July 27, 2027. The Amended and Restated Credit Agreement allows for up to $550,000 of borrowing. The Company used initial proceeds from the Amended and Restated Credit Agreement to repay the outstanding balance of $433,569 on the previous revolving credit facility, due June 2023. In connection with the entering into the Amended and Restated Credit Agreement, the Company also modified its existing interest rate swap under the relief provided for in ASC 848, "Reference Rate Reform" (see Note 20 "Derivative Instruments and Hedging Activities").

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Amounts outstanding under the 2018 Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the 2018 Credit Agreement plus an applicable rate. The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the 2018 Credit Agreement, and the interest rate was ~~1.447%~~2.538% at ~~March 31,~~June 30, 2022. The Company is also required to pay a commitment fee on the unused portion of the revolving loan, which is based on the Company’s consolidated net leverage ratio as defined in the 2018 Credit Agreement and ranges from 0.15% to 0.275% ~~(0.150%~~(0.15% at ~~March 31,~~June 30, 2022). The unused portion of the revolving loan amounted to ~~$371,431~~$66,431 at ~~March 31,~~June 30, 2022. The Company is also required to pay, as applicable, letter of credit fees, administrative agent fees, and other fees to the arrangers and lenders.

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

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over the term of the respective financing arrangement using the effective interest method. Capitalized costs net of accumulated amortization totaled ~~$350~~$280 and $421 at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and are included in other assets on the condensed consolidated balance sheets. Amortization expense pertaining to these costs totaled ~~$71~~$70 and $141 for ~~both~~ the three and six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and are included in ~~interest expense~~"Interest expense" in the accompanying condensed consolidated statements of earnings.

The 2018 Credit Agreement contains quarterly covenants requiring the consolidated leverage ratio to be less than a certain maximum ratio and the consolidated interest coverage ratio to exceed a certain minimum ratio. At ~~March 31,~~June 30, 2022, the Company was in compliance with these covenants. Indebtedness under the Company’s loan agreements is secured by assets of the Company.

NOTE ~~8 –~~9– NET EARNINGS PER SHARE

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


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Net Earnings - Basic and Diluted	Net Earnings - Basic and Diluted	$	28,930	$	23,411	Net Earnings - Basic and Diluted	$	29,782	$	22,731	$	58,712	$	46,142

Share (000s)
Shares (000s)						Shares (000s)
Weighted Average Common Shares - Basic	Weighted Average Common Shares - Basic	32,041		32,255		Weighted Average Common Shares - Basic	31,999		32,232		32,020		32,243
Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares	Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares	434		402		Effect of Dilutive Securities – Stock Options, Restricted Stock, and Performance Shares	315		419		375		410
Weighted Average Common Shares - Diluted	Weighted Average Common Shares - Diluted	32,475		32,657		Weighted Average Common Shares - Diluted	32,314		32,651		32,395		32,653

Net Earnings Per Share - Basic	Net Earnings Per Share - Basic	$	0.90	$	0.73	Net Earnings Per Share - Basic	$	0.93	$	0.71	$	1.83	$	1.43
Net Earnings Per Share - Diluted	Net Earnings Per Share - Diluted	$	0.89	$	0.72	Net Earnings Per Share - Diluted	$	0.92	$	0.70	$	1.81	$	1.41

The number of anti-dilutive shares were ~~113,029~~294,568 and ~~311,030~~237,453 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and 153,868 and 304,324 for the three and six months ended June 30, 2021, respectively. Anti-dilutive shares could potentially dilute basic earnings per share in future periods and therefore, were not included in diluted earnings per share.

NOTE 910 – INCOME TAXES

The Company’s effective tax rate for the three months ended ~~March 31,~~June 30, 2022 and 2021, was 24.1% and 24.3%, respectively, and 23.6% and 23.1% for the six months ended June 30, 2022 and ~~21.9%, respectively.~~2021. The ~~increase~~decrease in the effective tax rate for the three months ended ~~March 31,~~June 30, 2022 compared to the three months ended ~~March 31,~~June 30, 2021 was primarily due to the prior year being negatively impacted by clarifying regulations related to tax reform, which was offset by lower tax benefits from stock-based compensation in the current quarter. The increase in the effective tax rate for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily due to lower tax benefits from stock-based compensation and a reduction in certain tax ~~credits and increased international income subject to higher foreign tax rates.~~credits.

Balchem will continue to evaluate and analyze the impact of the U.S. Tax Cuts and Jobs Act that was enacted on December 22, 2017 and the additional guidance that has been issued, and may be issued, by the U.S. Department of Treasury, the ~~SEC,~~Securities and Exchange Commission ("SEC"), and/or the Financial Accounting Standards Board ("FASB") regarding this act.

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

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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

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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 ~~March 31,~~June 30, 2022, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2017. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had approximately ~~$5,880~~$5,902 and $5,881, respectively, of unrecognized tax benefits, which are included in ~~other~~"Other long-term ~~obligations~~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~~"Income tax ~~expense~~expense" in the condensed consolidated statements of earnings. The total ~~amount~~amounts of accrued interest and penalties related to uncertain tax positions at ~~March 31,~~June 30, 2022 and December 31, 2021 ~~was~~were approximately ~~$2,148~~$2,214 and $2,106, respectively, and isare included in ~~other~~"Other long-term obligations."

NOTE 1011 – SEGMENT INFORMATION

Balchem Corporation reports 3 business segments: Human Nutrition & Health, Animal Nutrition & Health, and Specialty Products. Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated."

Human Nutrition & Health

The Human Nutrition & Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and health applications. Choline is recognized to play a key role in the development and structural integrity of brain cell membranes in infants, processing dietary fat, reproductive development and neural functions, such as memory and muscle function. ~~HNH's~~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~~technologies have been combined to create an organic molecule in a form the body can readily assimilate. Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customers' appreciation of brand value. Consequently, ~~HNH~~the Company makes investments in ~~the foregoing~~such activities for long-term value differentiation. ~~HNH~~This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers. ~~HNH~~The Company partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. ~~HNH~~The Company has expertise in trends analysis and product development. ~~When what is combined with~~With its strong manufacturing capabilities in customized spray dried and emulsified powders, extrusion and agglomeration, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, ~~as well as~~ ice cream bases and variegates, ~~HNH~~the Company is a one-stop solutions provider for beverage and dairy product development needs. Additionally, ~~HNH~~this segment provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life. Major product applications are baked goods, refrigerated and frozen dough systems, processed meats, seasoning blends, confections, sports and protein bars, dietary plans, and nutritional supplements. ~~HNH~~The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients. Through the Kappa acquisition, this segment recently began manufacturing specialty vitamin K2, which is a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health, immunity, and athletic performance.

Animal Nutrition & Health

The Company’s Animal Nutrition & Health ("ANH") segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride. For ruminant animals, ~~ANH's~~the Company’s microencapsulated products boost health and milk production by delivering nutrient supplements that are biologically available, providing required nutritional levels. ~~ANH’s~~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

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

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to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace.

Specialty Products

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. ~~Specialty Products'~~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. ~~Specialty Products’s~~The Company’s inventory of these specially built drums and cylinders, along with its 5 filling facilities, represents a significant capital investment. Contract sterilizers and medical device manufacturers are principal customers for this product. ~~Specialty Products~~The Company also sells single use canisters with 100% ethylene oxide for use in sterilizing re-usable devices typically processed in autoclave units in hospitals. As a fumigant, ethylene oxide blends are highly effective in killing bacteria, fungi, and insects in spices and other seasoning materials.

~~Specialty Products~~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~~shelled and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes. ~~Specialty Products~~The Company distributes its propylene oxide product in the U.S. primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the Environmental Protection Agency ("EPA") and the Department of Transportation ("DOT"). Propylene oxide is also sold worldwide to customers in approved reusable and recyclable drum and cylinder packaging for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings. Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder packaging ~~which are~~ approved for use in the countries these products are shipped to. ~~Specialty Products'~~The Company's inventory of cylinders for these products also represents a significant capital investment.

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

The segment information is summarized as follows:

Business Segment Assets March 31,
2022 December 31,
2021
Human Nutrition & Health $ 752,120 $ 727,131
Animal Nutrition & Health 165,627 158,971
Specialty Products 181,635 184,628
Other and Unallocated (1)
95,526 128,595
Total $ 1,194,908 $ 1,199,325

Business Segment Net Sales Three Months Ended
March 31,
2022 2021
Human Nutrition & Health $ 122,445 $ 104,516
Animal Nutrition & Health 69,342 51,148
Specialty Products 33,334 28,008
Other and Unallocated (2)
3,746 1,984
Total $ 228,867 $ 185,656


Business Segment Assets	June 30, 2022		December 31, 2021
Human Nutrition & Health	$	1,146,749	$	727,131
Animal Nutrition & Health	171,605		158,971
Specialty Products	179,573		184,628
Other and Unallocated (1)	108,747		128,595
Total	$	1,606,674	$	1,199,325

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Business Segment Earnings Before Income Taxes		Three Months Ended March 31,
Business Segment Net Sales						Business Segment Net Sales	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Human Nutrition & Health	Human Nutrition & Health	$	20,303	$	19,690	Human Nutrition & Health	$	131,628	$	111,471	$	254,073	$	215,987
Animal Nutrition & Health	Animal Nutrition & Health	11,321		5,056		Animal Nutrition & Health	62,600		54,481		131,942		105,629
Specialty Products	Specialty Products	7,761		7,189		Specialty Products	36,647		34,022		69,981		62,030
Other and Unallocated (2)	Other and Unallocated (2)	(1,049)		(1,360)		Other and Unallocated (2)	5,818		2,391		9,564		4,375
Interest and other expense		(706)		(592)
Total	Total	$	37,630	$	29,983	Total	$	236,693	$	202,365	$	465,560	$	388,021


Depreciation/Amortization		Three Months Ended March 31,
Business Segment Earnings Before Income Taxes						Business Segment Earnings Before Income Taxes	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Human Nutrition & Health	Human Nutrition & Health	$	7,355	$	7,573	Human Nutrition & Health	$	23,705	$	19,021	$	44,008	$	38,711
Animal Nutrition & Health	Animal Nutrition & Health	1,661		1,764		Animal Nutrition & Health	7,586		3,561		18,907		8,617
Specialty Products	Specialty Products	1,932		2,269		Specialty Products	9,919		9,729		17,680		16,918
Other and Unallocated (2)	Other and Unallocated (2)	980		758		Other and Unallocated (2)	(1,290)		(1,718)		(2,339)		(3,078)
Interest and other expense						Interest and other expense	(662)		(574)		(1,368)		(1,166)
Total	Total	$	11,928	$	12,364	Total	$	39,258	$	30,019	$	76,888	$	60,002


Capital Expenditures		Three Months Ended March 31,
Depreciation/Amortization						Depreciation/Amortization	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Human Nutrition & Health	Human Nutrition & Health	$	4,760	$	3,967	Human Nutrition & Health	$	7,392	$	7,441	$	14,747	$	15,014
Animal Nutrition & Health	Animal Nutrition & Health	3,688		1,631		Animal Nutrition & Health	1,668		1,816		3,329		3,580
Specialty Products	Specialty Products	1,146		330		Specialty Products	1,899		2,085		3,831		4,354
Other and Unallocated (2)	Other and Unallocated (2)	115		23		Other and Unallocated (2)	974		757		1,954		1,515
Total	Total	$	9,709	$	5,951	Total	$	11,933	$	12,099	$	23,861	$	24,463


Capital Expenditures	Six Months Ended June 30,
	2022		2021
Human Nutrition & Health	$	11,006	$	8,883
Animal Nutrition & Health	6,559		2,729
Specialty Products	2,206		1,448
Other and Unallocated (2)	338		66
Total	$	20,109	$	13,126


(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 ~~$304~~$872 and ~~$234~~$1,176 for the ~~first quarter of~~three and six months ended June 30, 2022, respectively, and $466 and $700 for the three and six months ended June 30, 2021, respectively, and (ii) Unallocated amortization expense of ~~$809~~$811 and ~~$675~~$1,620 for the ~~first quarter of~~three and six months ended June 30, 2022, respectively, and $674 and $1,349 for the three and six months ended June 30, 2021, respectively, related to an intangible asset in connection with a company-wide ERP system implementation and capitalized loan issuance costs that ~~was~~were included in interest expense in the Company's condensed consolidated ~~statement~~statements of earnings.

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NOTE 1112 – REVENUE

Revenue Recognition

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.

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


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Product Sales	Product Sales	$	218,053	$	175,988	Product Sales	$	225,260	$	193,122	$	443,313	$	369,110
Co-manufacturing	Co-manufacturing	8,307		7,278		Co-manufacturing	9,819		6,878		18,126		14,156

Consignment	Consignment	1,591		1,051		Consignment	989		1,380		2,580		2,431
Product Sales Revenue	Product Sales Revenue	227,951		184,317		Product Sales Revenue	236,068		201,380		464,019		385,697
Royalty Revenue	Royalty Revenue	916		1,339		Royalty Revenue	625		985		1,541		2,324
Total Revenue	Total Revenue	$	228,867	$	185,656	Total Revenue	$	236,693	$	202,365	$	465,560	$	388,021

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

Three Months Ended
March 31,
2022 2021
United States $ 174,491 $ 137,851
Foreign Countries 54,376 47,805
Total Revenue $ 228,867 $ 185,656


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
United States	$	169,076	$	147,188	$	343,567	$	285,039
Foreign Countries	67,617		55,177		121,993		102,982
Total Revenue	$	236,693	$	202,365	$	465,560	$	388,021

Product Sales Revenues

The Company’s primary operation is the manufacturing and sale of health and ~~wellness~~nutrition ingredient products, in which the Company receives an order from a customer and fulfills that order. The Company’s product sales are considered point-in-time revenue and consist of 43 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 Revenues

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 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.

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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.

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NOTE 1213 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 for income taxes and interest is as follows:


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Income taxes	Income taxes	$	2	$	2	Income taxes	$	15,562	$	12,493
Interest	Interest	$	1,010	$	1,363	Interest	$	1,960	$	2,452

NOTE 1314 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Net foreign currency translation adjustment	Net foreign currency translation adjustment	$	(2,842)	$	(6,143)	Net foreign currency translation adjustment	$	(6,951)	$	1,524	$	(9,793)	$	(4,619)

Net change of cash flow hedge (see Note 19 for further information)
Net change of cash flow hedge (see Note 20 for further information)						Net change of cash flow hedge (see Note 20 for further information)
Unrealized gain on cash flow hedge	Unrealized gain on cash flow hedge	2,084		677		Unrealized gain on cash flow hedge	1,122		456		3,206		1,133
Tax	Tax	(511)		(165)		Tax	(272)		(105)		(783)		(270)
Net of tax	Net of tax	1,573		512		Net of tax	850		351		2,423		863

Net change in postretirement benefit plan (see Note 14 for further information)
Net change in postretirement benefit plan (see Note 15 for further information)						Net change in postretirement benefit plan (see Note 15 for further information)
Amortization of prior service cost	Amortization of prior service cost	2		18		Amortization of prior service cost	2		19		4		37
Amortization of gain	Amortization of gain	—		(5)		Amortization of gain	—		(7)		—		(12)
Gain arising during the period and prior service credit	Gain arising during the period and prior service credit	(32)		(4)		Gain arising during the period and prior service credit	(9)		—		(41)		(4)
Total before tax	Total before tax	(30)		9		Total before tax	(7)		12		(37)		21
Tax	Tax	3		(2)		Tax	(27)		(4)		(24)		(6)
Net of tax and adjustment	Net of tax and adjustment	(27)		7		Net of tax and adjustment	(34)		8		(61)		15

Total other comprehensive loss		$	(1,296)	$	(5,624)
Total other comprehensive (loss)/income						Total other comprehensive (loss)/income	$	(6,135)	$	1,883	$	(7,431)	$	(3,741)

Included in "Net foreign currency translation adjustment" were gains of ~~$1,123~~$3,963 and ~~$3,197,~~$5,086, related to a net investment hedge, which were net of taxes of ~~$333~~$1,309 and ~~$1,026~~$1,642 for the three and six months ended ~~March 31,~~June 30, 2022, respectively. Included in "Net foreign currency translation adjustment" was a loss of $1,024 and a gain of $2,173, related to a net investment hedge, which were net of taxes of $336 and $690 for the three and six months ended June 30, 2021, respectively. See Note ~~19,~~20, "Derivative Instruments and Hedging Activities."

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

Foreign currency
translation
adjustment Cash flow hedge Postretirement
benefit plan Total
Balance December 31, 2021 $ (3,602) $ (1,631) $ 240 $ (4,993)
Other comprehensive (loss) income (2,842) 1,573 (27) (1,296)
Balance March 31, 2022 $ (6,444) $ (58) $ 213 $ (6,289)


	Foreign currency translation adjustment		Cash flow hedge		Postretirement benefit plan		Total
Balance December 31, 2021	$	(3,602)	$	(1,631)	$	240	$	(4,993)
Other comprehensive (loss)/income	(9,793)		2,423		(61)		(7,431)
Balance June 30, 2022	$	(13,395)	$	792	$	179	$	(12,424)

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NOTE 1415 – EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company sponsored 2 401(k) savings plans for eligible employees, which were merged into 1 plan on January 1st, 2021. The remaining plan allows participants to make pretax contributions and the Company matches certain percentages of those pretax contributions. The remaining plan also has a discretionary profit sharing portion and matches 401(k) contributions with shares of the Company’s Common Stock. All amounts contributed to the plan are deposited into a trust fund administered by independent trustees. On June 21, 2022, the Company completed the acquisition of Kappa, which sponsors 1 defined contribution plan for its employees.

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.

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


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Service cost	Service cost	$	20	$	22	Service cost	$	39	$	43
Interest cost	Interest cost	6		6		Interest cost	13		12
Amortization of prior service cost	Amortization of prior service cost	2		18		Amortization of prior service cost	4		37
Amortization of gain	Amortization of gain	—		(6)		Amortization of gain	—		(12)
Net periodic benefit cost	Net periodic benefit cost	$	28	$	40	Net periodic benefit cost	$	56	$	80

~~The amount~~The amounts recorded for these obligations on the Company’s condensed consolidated balance sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021 ~~were $1,197~~are $1,221 and $1,293, respectively, and are included in ~~other~~"Other long-term obligations." These plans are unfunded and approved claims are paid from Company funds. Historical cash payments made under such plans have typically been less than $200 per year.

Defined Benefit Pension Plans

On May 27, 2019, the Company acquired Chemogas, which has an unfunded defined benefit pension plan. The plan provides for the payment of a lump sum at retirement or payments in case of death of the covered employees. The ~~amount~~amounts recorded for these obligations on the Company's condensed consolidated balance ~~sheet~~sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021 were ~~$676~~$641 and $684, respectively, and were included in ~~other~~"Other long-term obligations."

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


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Service cost with interest to end of year	Service cost with interest to end of year	$	11	$	17	Service cost with interest to end of year	$	29	$	35
Interest cost	Interest cost	5		4		Interest cost	12		7
Expected return on plan assets	Expected return on plan assets	(10)		(9)		Expected return on plan assets	(25)		(18)

Amortization of gain	Amortization of gain	—		1		Amortization of gain	—		2
Total net periodic benefit cost	Total net periodic benefit cost	$	6	$	13	Total net periodic benefit cost	$	16	$	26

Deferred Compensation Plan

On June 1, 2018, the Company established an unfunded, ~~nonqualified~~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~~and are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The deferred compensation liability was ~~$8,206~~$8,252 as of June 30, 2022, of which $8,220 was included in "Other long-term obligations" and $32 was included in "Accrued compensation and other benefits" on the Company's condensed consolidated balance sheets. The deferred compensation liability was $6,270 as of ~~March 31, 2022 and~~ December 31, 2021, ~~respectively, and~~of which $6,251 was included in "Other long-term obligations" and $19 was included in "Accrued compensation and other ~~long-term obligations~~benefits" on the Company’s condensed consolidated balance sheets. The related rabbi trust assets were ~~$8,208~~$8,255 and $6,267 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and were included in ~~other~~"Other non-current ~~assets~~assets" on the Company's condensed consolidated balance sheets.

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NOTE 1516 – COMMITMENTS AND CONTINGENCIES

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at ~~March 31,~~June 30, 2022 are as follows:


Year	Year			Year
April 1, 2022 to December 31, 2022		$	2,097
July 1, 2022 to December 31, 2022				July 1, 2022 to December 31, 2022	$	1,896
2023	2023	2,212		2023	3,551
2024	2024	1,964		2024	3,754
2025	2025	1,132		2025	2,824
2026	2026	743		2026	2,451
2027	2027	549		2027	2,093
Thereafter	Thereafter	1,930		Thereafter	6,225
Total minimum lease payments	Total minimum lease payments	$	10,627	Total minimum lease payments	$	22,794

The Company’s Verona, Missouri facility, while held by a prior owner, was designated by the EPA as a Superfund site and placed on the National Priorities List in 1983 because of dioxin contamination on portions of the site. Remediation was conducted by the prior owner under the oversight of the EPA and the Missouri Department of Natural Resources. The Company is indemnified by the sellers under its May 2001 asset purchase agreement covering its acquisition of the Verona, Missouri facility for certain potential liabilities associated with the Superfund site. In February 2022, BCP Ingredients, Inc. ("BCP"), the Company subsidiary that operates the site, along with the ~~former~~prior owner of the site received a Special Notice Letter from EPA for the performance of a focused remedial investigation/feasibility study ("RI/FS") at the site with regard to the presence of certain contaminants at the site, focusing primarily on the presence of 1,4 ~~dioxane.~~dioxane and chlorobenzene. BCP ~~has,~~and the site's prior owner are currently negotiating with the ~~assistance~~EPA and the State of ~~experts, studied site conditions~~Missouri with respect to a proposed Administrative Settlement Agreement and ~~hydrogeology~~Order on Consent that defines the scope and ~~responded to~~performance of the ~~Special Notice Letter. BCP anticipates that the EPA will respond to its response in the coming months.~~focused RI/FS.

From time to time, the Company is a party to various litigation, claims and assessments. Management believes that the ultimate outcome of such matters will not have a material effect on the Company’s consolidated financial position, results of operations, or liquidity.

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NOTE 1617 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at ~~March 31,~~June 30, 2022 and December 31, 2021 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying value of debt approximates fair value as the interest rate is based on market and the Company’s consolidated leverage ratio. The Company’s financial instruments also include cash equivalents, accounts receivable, accounts payable, and accrued liabilities, which are carried at cost and approximate fair value due to the short-term maturity of these instruments. Cash and cash equivalents at ~~March 31,~~June 30, 2022 and December 31, 2021 includes ~~$937~~$927 and $933 in money market funds, respectively.

Non-current assets at ~~March 31,~~June 30, 2022 and December 31, 2021 includes ~~$8,208~~$8,255 and $6,267, respectively, of rabbi trust funds related to the Company's deferred compensation plan. The money market and rabbi trust funds ~~are~~are valued using level one inputs, as defined by ASC 820, “Fair Value Measurement.”

The Company also has derivative financial instruments, consisting of a cross-currency swap and an interest rate swap, which are included in ~~derivative assets~~"Derivative assets" or ~~derivative liabilities,~~"Derivative liabilities" in the Company's condensed consolidated balance sheets (see Note ~~19,~~20, "Derivative Instruments and Hedging Activities"). The fair values of these derivative instruments are determined based on Level 2 inputs, using significant inputs that are observable either directly or indirectly, including interest rate curves and implied volatilities. The derivative ~~asset~~assets related to the cross-currency swap ~~was $956~~and the interest rate swap were $6,228 and $1,048 at ~~March 31,~~June 30, 2022, ~~and the~~respectively. The derivative liability related to the cross-currency swap ~~was $500 at December 31, 2021. The derivative liability related to~~and the interest rate swap was ~~$74~~$500 and $2,158 at ~~March 31, 2022 and~~ December 31, 2021, respectively.

NOTE 1718 – RELATED PARTY TRANSACTIONS

The Company provides services onunder a contractual agreement to St. Gabriel CC Company, LLC. These services include accounting, information technology, quality control, and purchasing services, as well as operation of the St. Gabriel CC Company, LLC plant.

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The Company also sells raw materials to St. Gabriel CC Company, LLC. These raw materials are used in the production of finished goods that are, in turn, sold by Saint Gabriel CC Company, LLC to the Company for resale to unrelated parties. As such, the sale of these raw materials to St. Gabriel CC Company, LLC in this scenario lacks economic substance and therefore the Company does not include them in net sales within the condensed consolidated statements of earnings.

~~The~~Payments for the services the Company provided amounted to ~~$975~~$1,022 and ~~$827~~$1,997 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and $920 and $1,747 for the three and six months ended June 30, 2021, respectively. The raw materials purchased and subsequently sold amounted to ~~$9,311~~$10,910 and ~~$5,462~~$20,221 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and $6,580 and $12,042 for the three and six months ended June 30, 2021, respectively. These services and raw materials are primarily recorded in cost of goods sold net of the finished goods received from St. Gabriel CC Company, LLC of ~~$6,489~~$8,233 and ~~$4,391~~$14,722 for the three and six months ended ~~March 31,~~June 30, 2022, respectively, and $5,210 and $9,601 for the three and six months ended June 30, 2021, respectively. At ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had receivables of ~~$13,651~~$8,224 and $10,504, respectively, recorded in accounts receivable from St. Gabriel CC Company, LLC for services rendered and raw materials ~~sold and~~sold. The Company also had payables of ~~$8,673~~$5,829 and $7,552, respectively, recorded in accounts payable for finished goods received ~~recorded in accounts payable.~~from St. Gabriel CC Company, LLC. In addition, the Company had receivables in the amount of $164 related to non-contractual monies owed from St. Gabriel CC Company, LLC, recorded in receivables as of December 31, 2021. There ~~was~~were no such receivables as of ~~March 31,~~June 30, 2022. The Company had payables in the amount of ~~$318 and~~ $296 related to non-contractual monies owed to St. Gabriel CC Company, LLC, recorded in accounts payable as of ~~March 31,~~both June 30, 2022 and December 31, ~~2021, respectively.~~2021.

NOTE 1819 – LEASES

The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as ~~either~~both operating leases orand finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from ~~March 31,~~June 30, 2022. In addition, the Company has historically not been exercising purchase options ~~with~~under the equipment leases as it

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does not make economic sense to buy the ~~leased~~ equipment. Instead, the Company has historically replaced the ~~leased~~ equipment with ~~a newly leased equipment.~~new leases. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.

On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility. The sublease will not commence until the sublandlord substantially completes its work per the sublease agreement, which will most likely occur in the third quarter of 2022. This new sublease will replace the current lease for the Company's corporate headquarters, however the Company anticipates that it will continue to lease the laboratory space in the previous corporate headquarters. The Company will recognize a right of use asset and a lease liability at the commencement date based on ASC 842, Lease Accounting. As of June 30, 2022 the Company did not ~~identify~~record a right of use asset or lease liability on the balance sheet in connection with this lease.

The Company has not identified any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed 4 tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2022: (1) 1-2 years, 1.45% (2) 3-4 years, 2.04% (3) 5-9 years, 2.38% and (4) 10+ years, 3.10%.

In connection with ~~the~~its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed athe finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023. At June 30, 2022 and December 31, 2021, the Company had finance lease liabilities of $2,387 and $2,470, respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.

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


Right of use assets	Right of use assets	March 31, 2022		December 31, 2021		Right of use assets	June 30, 2022		December 31, 2021
Operating leases	Operating leases	$	6,901	$	6,929	Operating leases	$	10,718	$	6,929
Finance leases	Finance leases	2,308		2,359		Finance leases	2,255		2,359
Total	Total	$	9,209	$	9,288	Total	$	12,973	$	9,288


Lease liabilities - current	June 30, 2022		December 31, 2021
Operating leases	$	2,997	$	2,194
Finance leases	171		167
Total	$	3,168	$	2,361


Lease liabilities - non-current	June 30, 2022		December 31, 2021
Operating leases	$	7,725	$	4,811
Finance leases	2,216		2,303
Total	$	9,941	$	7,114

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Lease liabilities - current March 31, 2022 December 31, 2021
Operating leases $ 2,194 $ 2,194
Finance leases 169 167
Total $ 2,363 $ 2,361

Lease liabilities - non-current March 31, 2022 December 31, 2021
Operating leases $ 4,730 $ 4,811
Finance leases 2,260 2,303
Total $ 6,990 $ 7,114

For the three and six months ended ~~March 31,~~June 30, 2022 and 2021, the Company's total lease costs were as follows, which included ~~both~~ amounts recognized in ~~profits or losses during the period and~~earnings, amounts capitalized on the balance ~~sheet,~~sheets, and the cash flows arising from lease transactions:


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
		2022			2021				2022			2021			2022			2021
Lease Cost	Lease Cost							Lease Cost
Operating lease cost	Operating lease cost	$	781		$	716		Operating lease cost	$	811		$	770		$	1,592		$	1,486

Finance Lease cost	Finance Lease cost							Finance Lease cost
Amortization of ROU asset	Amortization of ROU asset	52			52			Amortization of ROU asset	52			53			104			105
Interest on lease liabilities	Interest on lease liabilities	31			33			Interest on lease liabilities	30			33			61			66
Total finance lease cost		$	83		$	85
Total finance lease								Total finance lease	82			86			165			171

Total lease cost	Total lease cost	$	864		$	801		Total lease cost	$	893		$	856		$	1,757		$	1,657

Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities							Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	Operating cash flows from operating leases	$	801		$	739		Operating cash flows from operating leases	$	807		$	749		$	1,608		$	1,488
Operating cash flows from finance leases	Operating cash flows from finance leases	31			33			Operating cash flows from finance leases	30			33			61			66
Financing cash flows from finance leases	Financing cash flows from finance leases	41			39			Financing cash flows from finance leases	42			39			83			78
		$	873		$	811			$	879		$	821		$	1,752		$	1,632

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

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

Weighted-average remaining lease term - operating leases	Weighted-average remaining lease term - operating leases	4.03 years			4.14 years			Weighted-average remaining lease term - operating leases	4.10 years			4.43 years			4.10 years			4.43 years
Weighted-average remaining lease term - finance leases	Weighted-average remaining lease term - finance leases	11.16 years			12.00 years			Weighted-average remaining lease term - finance leases	10.91 years			11.75 years			10.91 years			11.75 years

Weighted-average discount rate - operating leases	Weighted-average discount rate - operating leases	3.3		%	4.2		%	Weighted-average discount rate - operating leases	3.2		%	3.9		%	3.2		%	3.9		%
Weighted-average discount rate - finance leases	Weighted-average discount rate - finance leases	5.1		%	5.1		%	Weighted-average discount rate - finance leases	5.1		%	5.1		%	5.1		%	5.1		%

Rent expense charged to operations under operating lease agreements for the three and six months ended ~~March 31,~~June 30, 2022 aggregated to approximately $811 and ~~2021 aggregated approximately $781~~$1,592, respectively, and ~~$716,~~$770 and $1,486 for the three and six months ended June 30, 2021, respectively.

NOTE 1920 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. In May 2019, the Company entered into an interest rate swap (cash flow hedge) with ~~the~~ JP Morgan Chase, N.A. (the "Swap Counterparty") and a

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cross-currency swap (net investment hedge) with ~~the~~ JP Morgan Chase, N.A. (the ~~"the Bank~~"Bank Counterparty"). The Company's primary objective for holding derivative financial instruments is to manage interest rate risk and foreign currency risk.

On May 28, 2019, the Company entered into a pay-fixed (2.05%), receive-floating interest rate swap with a notional amount of $108,569 and a maturity date of June 27, 2023. The Company's risk management objective and strategy with respect to the interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. The Company is meeting its objective since changes in the cash flows of the interest rate swap are expected to exactly offset the changes in the cash flows attributable to fluctuations in the contractually specified interest rate on the interest payments associated with the 2018 Credit Agreement. The net interest expense related to the interest rate swap contract ~~were $513~~was $364 and ~~$521~~$877 for the three and six months ended ~~March 31,~~June 30, 2022, and $534 and $1,055 for the three and six months ended June 30, 2021, ~~which were~~respectively, and was recorded in the condensed consolidated statements of ~~operations~~earnings under ~~interest~~"Interest expense, net." In addition, in connection with the Company's entering into the Amended

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

On May 28, 2019, the Company also entered into a pay-fixed (0.00%), receive-fixed (2.05%) cross-currency swap to manage foreign exchange risk related to the Company's net investment in Chemogas. The derivative has a notional amount of $108,569, an effective date of May 28, 2019, and a maturity date of June 27, 2023. ~~Interest~~The interest income related to the cross-currency swap contract was ~~$550~~$563 and ~~$556, respectively,~~$1,113 for the three and six months ended ~~March 31,~~June 30, 2022, and $563 and $1,119 for the three and six months ended June 30, 2021, respectively, which ~~was~~were recorded in the condensed consolidated statements of ~~operations~~earnings under ~~interest~~"Interest expense, net."

The derivative instruments are with a single counterparty and are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract. As such, the derivative instruments are categorized as a master netting arrangement and presented as a net ~~derivative asset~~"Derivative asset" or ~~derivative liability~~"Derivative liability" on the condensed consolidated balance sheets.

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


Derivative assets (liabilities)	Derivative assets (liabilities)	March 31, 2022		December 31, 2021		Derivative assets (liabilities)	June 30, 2022		December 31, 2021
Interest rate swap	Interest rate swap	$	(74)	$	(2,158)	Interest rate swap	$	1,048	$	(2,158)
Cross-currency swap	Cross-currency swap	956		(500)		Cross-currency swap	6,228		(500)
Derivative assets (liabilities)	Derivative assets (liabilities)	$	882	$	(2,658)	Derivative assets (liabilities)	$	7,276	$	(2,658)

On a quarterly basis, the Company assesses whether the hedging relationship related to the interest rate swap is highly effective at achieving offsetting changes in cash flow attributable to the risk being hedged based on the following factors: (1) ~~whether~~ the key features and terms as enumerated above for the interest rate swap and hedged transactions match during the period (2) ~~whether~~ it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) the Company performs a qualitative review each quarter to assess whether the relationship qualifies for hedge ~~accounting based on the Company's quarterly qualitative review.~~accounting.

In addition, on a quarterly basis the Company assesses whether the hedging relationship related to the cross-currency swap is highly effective based on the following evaluations: (1) ~~whether~~ the Company will always have a sufficient amount of non-functional currency (EUR) net investment balance to at least meet the cross-currency notional amount until the maturity date of the hedge (2) ~~whether~~ it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) the Company performs a qualitative review each quarter to assess whether the relationship qualifies for hedge ~~accounting based on the Company's quarterly qualitative review.~~accounting.

If any mismatches arise for either the interest rate swap or cross-currency swap, the Company will perform a regression analysis to determine if the hedged transaction is highly effective. If determined not to be highly effective, the Company will discontinue hedge accounting.

As of ~~March 31,~~June 30, 2022, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective. As such, the net change in fair values of the derivative instruments was recorded in accumulated other comprehensive income.

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~~Gains~~Losses and gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Location within Statements of Comprehensive Income		Three Months Ended March 31,									Location within Statements of Comprehensive Income		Three Months Ended June 30,								Six Months Ended June 30,
			2022			2021								2022			2021				2022				2021
Cash flow hedge (interest rate swap), net of tax	Cash flow hedge (interest rate swap), net of tax		Unrealized gain on cash flow hedge, net			$	1,573			$	512	Cash flow hedge (interest rate swap), net of tax		Unrealized gain/(loss) on cash flow hedge, net			$	850			$	351			$	2,423			$	863
Net investment hedge (cross-currency swap), net of tax	Net investment hedge (cross-currency swap), net of tax	Net foreign currency translation adjustment		1,123				3,197		Net investment hedge (cross-currency swap), net of tax			Net foreign currency translation adjustment		3,963				(1,024)				5,086				2,173
Total	Total			$	2,696			$	3,709	Total					$	4,813			$	(673)			$	7,509			$	3,036

On June 21, 2022, the Company completed the acquisition of Kappa (as defined in Note 2 "Significant Acquisitions"). In the process of acquiring Kappa, the Company entered into 4 short-term foreign currency exchange forward contracts with JP Morgan Chase, N.A to manage fluctuations in foreign currency exchange rates related to the acquisition. The Company did not designate these contracts as hedged transactions under the applicable sections of ASC Topic 815, "Derivatives and Hedging". For the six months ended June 30, 2022, the net gains on these forward contracts of $512 were recorded in other income or loss in the condensed consolidated statements of earnings. As of June 30, 2022, the Company did not maintain any open foreign currency exchange forward contracts as all four contracts expired before June 30, 2022.

The following table summarizes the key terms of the 4 forward exchange contracts:.

Date entered into

Date expired on

Balchem to sell

Balchem to buy

June 15, 2022

June 21, 2022

USD

294,555

NOK

2,924,553

June 15, 2022

June 17, 2022

USD

6,436

EUR

6,180

June 15, 2022

June 21, 2022

USD

16,640

EUR

15,972

June 15, 2022

June 21, 2022

EUR

15,972

NOK

165,210

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (All amounts in thousands, except share and per share data)

This report contains forward-looking statements, within the meaning of Section 21E of the Exchange Act, which reflect our expectation or belief concerning future events that involve risks and uncertainties. Actions and performance could differ materially from what is contemplated by the forward-looking statements contained in this report. Factors that might cause differences from the forward-looking statements include those referred to or identified in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2021 and other factors that may be identified elsewhere in this report. Reference should be made to such factors and all forward-looking statements are qualified in their entirety by the above cautionary statements.

Overview

We develop, manufacture, distribute and market specialty performance ingredients and products for the nutritional, food, pharmaceutical, animal health, medical device sterilization, plant nutrition and industrial markets. Our three reportable segments are strategic businesses that offer products and services to different markets: Human Nutrition & Health, Animal Nutrition & Health, and Specialty Products, as more fully described in Note 1011 of the condensed consolidated financial statements. Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated".

Balchem is committed to solving today's challenges to shape a healthier tomorrow by operating responsibly and providing innovative solutions for the health and nutritional needs of the world. Sustainability is at the heart of our company's vision to make the world a healthier place, and we proudly support the Ten Principles of the United Nations Global Compact on human rights, labor, environment and anti-corruption. In January 2022, Balchem was named one of America’s Most Responsible Companies by Newsweek magazine for the second consecutive year. This list, compiled by Newsweek in partnership with Statista Inc., recognizes the most responsible companies in the U.S. across a variety of industries, and is based on publicly available environmental, social and governance (ESG) data. Our Sustainability Framework focuses on the most critical ESG topics relevant to our business and stakeholders. We are very proud of our ESG accomplishments to date and are pleased with the recognition by

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Newsweek. Balchem will continue to foster these fundamental principles broadly along our entire value chain, develop new ideas and technologies that help us work smarter, and help build a world that is a better place to live.

As of ~~March 31,~~June 30, 2022, we employed approximately ~~1,327 full~~1,359 full time employees worldwide. Although we are facing challenging labor markets, we believe that we have been successful in attracting skilled and experienced personnel in a competitive environment and that our human capital resources are adequate to perform all business functions. In addition, we continue to enhance technology in order to optimize productivity and performance.

Acquisition of Kappa

On June 21, 2022, we completed the acquisition of Kappa (as defined in Note 2 "Significant Acquisitions"), a leading science-based manufacturer of specialty Vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway. Details related to the Kappa acquisition are disclosed in Note 2, "Significant Acquisitions". The acquisition strengthens our scientific and technical expertise, geographic reach, and marketplace leadership, which should ultimately lead to accelerated growth for Balchem's portfolios within the Human Nutrition & Health segment.

COVID-19 Response

The COVID-19 response effort has been a ~~primary~~significant focus for us since early 2020. Our focus has been on employee safety first, keeping our manufacturing sites operational, satisfying customer needs, preserving cash and ensuring strong liquidity, and responding to changes in this dynamic market environment as appropriate.

As a result of our broad based risk mitigation efforts ofagainst the direct impacts of the Covid-19 pandemic, our manufacturing sites have been operating at near normal conditions, our research and development teams have continued to innovate in our laboratories, and all of our other employees have been effectively carrying on their responsibilities and functions remotely or in a reduced density hybrid setting.

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We are increasingly focused on managing the extraordinary supply chain disruptions that are challenging the markets we operate within that are, at least in part, related to the pandemic and/or the global recovery from the pandemic. We are experiencing severe input cost inflation, raw material shortages, logistics disruptions, and labor availability issues. These indirect pandemic related challenges accelerated as 2021 progressed, continued into the first ~~quarter~~and second quarters of 2022, and are likely to continue for some time.

Segment Results

We sell products for all three segments through our own sales force, independent distributors, and sales agents.

The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


Business Segment Net Sales	Business Segment Net Sales	Three Months Ended March 31,				Business Segment Net Sales	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021			2022		2021		2022		2021
Human Nutrition & Health	Human Nutrition & Health	$	122,445	$	104,516	Human Nutrition & Health	$	131,628	$	111,471	$	254,073	$	215,987
Animal Nutrition & Health	Animal Nutrition & Health	69,342		51,148		Animal Nutrition & Health	62,600		54,481		131,942		105,629
Specialty Products	Specialty Products	33,334		28,008		Specialty Products	36,647		34,022		69,981		62,030
Other and Unallocated (1)	Other and Unallocated (1)	3,746		1,984		Other and Unallocated (1)	5,818		2,391		9,564		4,375
Total	Total	$	228,867	$	185,656	Total	$	236,693	$	202,365	$	465,560	$	388,021

Business Segment Earnings From Operations Three Months Ended
March 31,
2022 2021
Human Nutrition & Health $ 20,303 $ 19,690
Animal Nutrition & Health 11,321 5,056
Specialty Products 7,761 7,189
Other and Unallocated (1)
(1,049) (1,360)
Total $ 38,336 $ 30,575

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Business Segment Earnings From Operations	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Human Nutrition & Health	$	23,705	$	19,021	$	44,008	$	38,711
Animal Nutrition & Health	7,586		3,561		18,907		8,617
Specialty Products	9,919		9,729		17,680		16,918
Other and Unallocated (1)	(1,290)		(1,718)		(2,339)		(3,078)
Total	$	39,920	$	30,593	$	78,256	$	61,168


(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~~Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling ~~$304~~$872 and ~~$234~~$1,176 for the three and six months ended June 30, 2022, respectively, and $466 and $700 for the ~~first quarter of 2022~~three and six months ended June 30, 2021, respectively, and (ii) Unallocated amortization ~~expense~~expense of ~~$738~~$741 and $1,479 for the three and six months ended June 30, 2022, respectively, and $604 and $1,208 for the ~~first quarter of 2022~~three and six months ended June 30, 2021, respectively, related to an intangible asset in connection with a company-wide ERP system implementation.

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RESULTS OF OPERATIONS

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

Three months ended ~~March 31,~~June 30, 2022 compared to three months ended ~~March 31,~~June 30, 2021.

Net Earnings


		Three Months Ended March 31,				Increase (Decrease)									Three Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022		2021				% Change		(in thousands)			2022				2021								% Change
Net sales	Net sales	$	228,867	$	185,656			$	43,211			23.3	%	Net sales			$	236,693			$	202,365			$	34,328			17.0	%
Gross margin	Gross margin	71,506		58,727		12,779				21.8	%	Gross margin			71,876				59,447				12,429				20.9	%
Operating expenses	Operating expenses	33,170		28,152		5,018				17.8	%	Operating expenses			31,956				28,854				3,102				10.8	%
Earnings from operations	Earnings from operations	38,336		30,575		7,761				25.4	%	Earnings from operations			39,920				30,593				9,327				30.5	%
Other expenses		706		592		114				19.3	%
Other (income) expense, net												Other (income) expense, net			662				574				88				15.3	%
Income tax expense	Income tax expense	8,700		6,572		2,128				32.4	%	Income tax expense			9,476				7,288				2,188				30.0	%
Net earnings	Net earnings	$	28,930	$	23,411	$	5,519			23.6	%	Net earnings			$	29,782			$	22,731			$	7,051			31.0	%

Net Sales


		Three Months Ended March 31,				Increase (Decrease)									Three Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022		2021				% Change		(in thousands)			2022				2021								% Change
Human Nutrition & Health	Human Nutrition & Health	$	122,445	$	104,516			$	17,929			17.2	%	Human Nutrition & Health			$	131,628			$	111,471			$	20,157			18.1	%
Animal Nutrition & Health	Animal Nutrition & Health	69,342		51,148		18,194				35.6	%	Animal Nutrition & Health			62,600				54,481				8,119				14.9	%
Specialty Products	Specialty Products	33,334		28,008		5,326				19.0	%	Specialty Products			36,647				34,022				2,625				7.7	%
Other	Other	3,746		1,984		1,762				88.8	%	Other			5,818				2,391				3,427				143.3	%
Total	Total	$	228,867	$	185,656	$	43,211			23.3	%	Total			$	236,693			$	202,365			$	34,328			17.0	%

•The increase in net sales within the Human Nutrition & Health segment for the ~~first~~second quarter of 2022 as compared to the ~~first~~second quarter of 2021 was ~~primarily attributed to~~driven both by sales growth within ~~the~~ food and beverage ~~markets.~~markets as well as higher sales within the minerals and nutrients business. Total sales for this segment grew ~~17.2%~~18.1%, with average selling prices contributing 16.2%, volume and mix contributing ~~1.1%~~2.2%, and the change in foreign currency exchange rates contributing ~~-0.2%~~-0.3%.

•The increase in net sales within the Animal Nutrition & Health segment for the ~~first~~second quarter of 2022 compared to the ~~first~~second quarter of 2021 was~~primarily~~ the result of higher sales in ~~both~~ monogastric and companion animal markets, partially offset by lower

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sales in ruminant animal ~~markets.~~markets and an unfavorable impact related to changes in foreign currency exchange rates. Total sales for this segment grew ~~35.6%~~14.9%, with average selling prices contributing ~~32.1%~~28.1%, ~~volume and mix contributing 5.6%, and~~ the change in foreign currency exchange rates contributing ~~-2.2%~~-3.4%, and volume and mix contributing -9.9%.

•The increase in Specialty Products segment sales for the ~~first~~second quarter of 2022 compared to ~~the~~ ~~first~~ ~~quarter of~~ 2021 was ~~primarily~~ due to ~~year over year~~higher sales ~~growth~~of products in ~~both~~ the medical device sterilization market, ~~and~~partially offset by lower plant nutrition ~~business.~~sales, and an unfavorable impact related to changes in foreign currency exchange rates. Total sales for this segment ~~increased 19.0%,~~grew 7.7% with average selling prices contributing ~~15.8%~~17.4%, volume and mix contributing ~~5.1%~~-7.0%, and the change in foreign currency exchange rates contributing ~~-1.8%~~-2.7%.

•Sales relating to Other increased from the prior year ~~primarily~~ due to higher demand.

•Sales may fluctuate in future periods based on macroeconomic conditions, competitive dynamics, changes in customer preferences, and our ability to successfully introduce new products to the market.

Gross Margin


		Three Months Ended March 31,						Increase (Decrease)							Three Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022			2021				% Change		(in thousands)		2022				2021							% Change
Gross margin	Gross margin	$	71,506		$	58,727			$	12,779		21.8	%	Gross margin			$	71,876			$	59,447		$	12,429	20.9	%
% of net sales	% of net sales	31.2		%	31.6		%					% of net sales			30.4	%			29.4	%

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Gross margin dollars increased in the ~~first~~second quarter of 2022 compared to the ~~first~~second quarter of 2021 due to the aforementioned higher sales of ~~$43,211,~~$34,328, partially offset by an increase in cost of goods sold of ~~$30,432.~~$21,899. The ~~24.0%~~15.3% increase in cost of goods sold was ~~primarily~~ driven mainly by the higher sales as well as the significant inflation of manufacturing input costs, primarily related to raw ~~materials.~~materials, partially offset by the timing of costs associated with the recovery from a flash flood event at our Verona manufacturing facility in the prior year.

Operating Expenses


		Three Months Ended March 31,						Increase (Decrease)							Three Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022			2021				% Change		(in thousands)		2022				2021							% Change
Operating expenses	Operating expenses	$	33,170		$	28,152			$	5,018		17.8	%	Operating expenses			$	31,956			$	28,854		$	3,102	10.8	%
% of net sales	% of net sales	14.5		%	15.2		%					% of net sales			13.5	%			14.3	%

The increase in operating expenses was primarily due to certain higher compensation-related costs of ~~$2,658, an increase in consulting costs and outside services of $978,~~$1,544 and higher advertising and marketing expenses of ~~$484,~~$555.

Earnings from Operations


	Three Months Ended June 30,						Increase (Decrease)
(in thousands)	2022			2021					% Change
Human Nutrition & Health	$	23,705		$	19,021		$	4,684	24.6	%
Animal Nutrition & Health	7,586			3,561			4,025		113.0	%
Specialty Products	9,919			9,729			190		2.0	%
Other and unallocated	(1,290)			(1,718)			428		24.9	%
Earnings from operations	$	39,920		$	30,593		$	9,327	30.5	%

% of net sales (operating margin)	16.9		%	15.1		%

•Earnings from operations for the Human Nutrition & Health segment increased primarily due to the aforementioned higher sales. Gross margin as a percentage of sales remained relatively flat as a significant increase in certain manufacturing input

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costs, largely related to raw materials, was offset by the timing of costs associated with the recovery of a flash flood event at our Verona facility in the prior year. Additionally, total operating expenses for this segment increased by $1,453, primarily due to higher compensation-related costs of $785.

•Animal Nutrition & Health segment earnings from operations increased primarily due to the aforementioned higher sales and a 500 basis point increase in gross margin as a percentage of sales, due to the timing of costs associated with the recovery of a flash flood event at our Verona facility in the prior year, partially offset by a significant increase in certain manufacturing input costs, largely related to raw materials. Additionally, operating expenses for this segment increased by $550, primarily due to higher advertising and marketing expenses of $317 and higher compensation-related costs of $250.

•The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by a 160 basis point decrease in ~~amortization~~gross margin as a percentage of sales, due to a significant increase in certain manufacturing input costs, largely related to raw materials. Additionally, total operating expenses for this segment increased by $502, primarily related to higher compensation-related costs of $458.

•The increase in Other and unallocated was primarily driven by the aforementioned higher sales, partially offset by an increase in transaction costs, primarily related to the Kappa acquisition.

Other Expenses (Income)


	Three Months Ended June 30,				Increase (Decrease)
(in thousands)	2022		2021				% Change
Interest expense	$	960	$	608	$	352	57.9	%
Other, net	(298)		(34)		(264)		776.5	%
	$	662	$	574	$	88	15.3	%

Interest expense for the three months ended June 30, 2022 and 2021 was primarily related to outstanding borrowings under the 2018 Credit Agreement.

Income Tax Expense


	Three Months Ended June 30,						Increase (Decrease)
(in thousands)	2022			2021					% Change
Income tax expense	$	9,476		$	7,288		$	2,188	30.0	%
Effective tax rate	24.1		%	24.3		%

The decrease in the effective tax rate was primarily due to the prior year being negatively impacted by clarifying regulations related to tax reform, which was offset by lower tax benefits from stock-based compensation in the current quarter.

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Six months ended June 30, 2022 compared to six months ended June 30, 2021.

Net Earnings


	Six Months Ended June 30,				Increase (Decrease)
(in thousands)	2022		2021				% Change
Net sales	$	465,560	$	388,021	$	77,539	20.0	%
Gross margin	143,382		118,174		25,208		21.3	%
Operating expenses	65,126		57,006		8,120		14.2	%
Earnings from operations	78,256		61,168		17,088		27.9	%
Other expense, net	1,368		1,166		202		17.3	%
Income tax expense	18,176		13,860		4,316		31.1	%
Net earnings	$	58,712	$	46,142	$	12,570	27.2	%

Net Sales


	Six Months Ended June 30,				Increase (Decrease)
(in thousands)	2022		2021				% Change
Human Nutrition & Health	$	254,073	$	215,987	$	38,086	17.6	%
Animal Nutrition & Health	131,942		105,629		26,313		24.9	%
Specialty Products	69,981		62,030		7,951		12.8	%
Other	9,564		4,375		5,189		118.6	%
Total	$	465,560	$	388,021	$	77,539	20.0	%

•The increase in net sales within the Human Nutrition & Health segment for the six months ended June 30, 2022 as compared to 2021 was primarily attributed to sales growth within food and beverage markets. Total sales for this segment grew 17.6%, with average selling prices contributing 16.2%, volume and mix contributing 1.7%, and the change in foreign currency exchange rates contributing -0.3%.

•The increase in net sales within the Animal Nutrition & Health segment for the six months ended June 30, 2022 compared to 2021 was primarily the result of higher sales in monogastric markets. Total sales for this segment grew 24.9%, with average selling prices contributing 30.1%, volume and mix contributing -2.4%, and the change in foreign currency exchange rates contributing -2.8%.

•The increase in Specialty Products segment sales for the six months ended June 30, 2022 compared to 2021 was primarily due to higher sales of products in the medical device sterilization market. Total sales for this segment grew 12.8%, with average selling prices contributing 16.7%, volume and mix contributing -1.6%, and the change in foreign currency exchange rates contributing -2.3%.

•Sales relating to Other increased from the prior year due to higher demand.

Gross Margin


	Six Months Ended June 30,						Increase (Decrease)
(in thousands)	2022			2021					% Change
Gross margin	$	143,382		$	118,174		$	25,208	21.3	%
% of net sales	30.8		%	30.5		%

Gross margin dollars increased for the six months ended June 30, 2022 compared to 2021 due to the aforementioned higher sales of $77,539, partially offset by an increase in cost of goods sold of $52,331. The 19.4% increase in cost of goods sold was mainly driven by the significant inflation of manufacturing input costs, primarily related to raw materials, partially offset by the timing of costs associated with a flash flood event at our Verona manufacturing facility in the prior year.

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Operating Expenses


	Six Months Ended June 30,						Increase (Decrease)
(in thousands)	2022			2021					% Change
Operating expenses	$	65,126		$	57,006		$	8,120	14.2	%
% of net sales	14.0		%	14.7		%

The increase in operating expenses was primarily due to higher compensation-related costs of $4,201, an increase in advertising and marketing of $1,043, and higher travel expenses of ~~$415.~~$735.

Earnings from Operations


		Three Months Ended March 31,						Increase (Decrease)									Six Months Ended June 30,										Increase (Decrease)
(in thousands)	(in thousands)	2022			2021					% Change		(in thousands)			2022					2021									% Change
Human Nutrition & Health	Human Nutrition & Health	$	20,303		$	19,690				$	613			3.1	%	Human Nutrition & Health				$	44,008				$	38,711			$	5,297			13.7	%
Animal Nutrition & Health	Animal Nutrition & Health	11,321			5,056			6,265				123.9	%	Animal Nutrition & Health			18,907					8,617					10,290				119.4	%
Specialty Products	Specialty Products	7,761			7,189			572				8.0	%	Specialty Products			17,680					16,918					762				4.5	%
Other and unallocated	Other and unallocated	(1,049)			(1,360)			311				22.9	%	Other and unallocated			(2,339)					(3,078)					739				24.0	%
Earnings from operations	Earnings from operations	$	38,336		$	30,575		$	7,761			25.4	%	Earnings from operations			$	78,256				$	61,168				$	17,088			27.9	%

% of net sales (operating margin)	% of net sales (operating margin)	16.8		%	16.5		%							% of net sales (operating margin)			16.8		%			15.8		%

•Earnings from operations for the Human Nutrition & Health segment increased primarily due to the aforementioned higher sales ~~partially offset by~~and a ~~210~~100 basis point ~~decrease~~increase in gross margin ~~mainly driven~~as a percentage of sales, primarily related to the timing of costs associated with the recovery of a flash flood event at our Verona manufacturing facility in the prior year, partially offset by a significant increase in certain manufacturing input costs, largely related to raw materials. Additionally, ~~total~~ operating expenses for this segment increased by ~~$2,657,~~$4,110, primarily due to higher compensation-related costs of ~~$1,301, an increase in consulting costs and outside services of $519, and higher research and development expenses of $256.~~$2,086.

•Animal Nutrition & Health segment earnings from operations increased primarily due to the aforementioned higher sales and a ~~200~~530 basis point increase in gross margin as a percentage of ~~sales. Total~~sales primarily related to the timing of costs associated with the recovery of a flash flood event at our Verona manufacturing facility in the prior year, partially offset by a significant increase in certain manufacturing input costs, largely related to raw materials. Additionally, operating ~~expense~~expenses for this segment increased by ~~$1,210, driven by~~$1,759, primarily related to higher compensation-related costs of ~~$683.~~$932 and an increase in advertising and marketing of $505.

•The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by a ~~370~~250 basis point decrease in gross margin as a percentage of sales, ~~driven by~~primarily due to a significant increase in certain manufacturing input costs, ~~primarily~~largely related to raw materials. ~~Additionally, total operating expenses for this segment increased by $831, driven by higher compensation-related costs of $619.~~

•~~The increase in~~Earnings from operations relating to Other ~~and unallocated was~~increased from the prior year primarily ~~driven by~~due to the aforementioned higher ~~sales.~~sales, partially offset by an increase in transaction costs, mainly related to the Kappa acquisition.

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Other Expenses (Income)


		Three Months Ended March 31,				Increase (Decrease)									Six Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022		2021				% Change		(in thousands)			2022				2021								% Change
Interest expense	Interest expense	$	545	$	725			$	(180)			(24.8)	%	Interest expense			$	1,505			$	1,333			$	172			12.9	%
Other (income) expense, net		161		(133)		294				(221.1)	%
Other, net												Other, net			(137)				(167)				30				(18.0)	%
		$	706	$	592	$	114			19.3	%				$	1,368			$	1,166			$	202			17.3	%

Interest expense for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 was primarily related to outstanding borrowings under the 2018 Credit Agreement.

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Income Tax Expense


		Three Months Ended March 31,						Increase (Decrease)							Six Months Ended June 30,								Increase (Decrease)
(in thousands)	(in thousands)	2022			2021				% Change		(in thousands)		2022				2021							% Change
Income tax expense	Income tax expense	$	8,700		$	6,572			$	2,128		32.4	%	Income tax expense			$	18,176			$	13,860		$	4,316	31.1	%
Effective tax rate	Effective tax rate	23.1		%	21.9		%					Effective tax rate			23.6	%			23.1	%

The increase in the effective tax rate ~~increase~~ was primarily due to lower tax benefits from stock-based compensation and a reduction in certain tax ~~credits and increased international income subject to higher foreign tax rates.~~credits.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

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

~~During~~In June 2022 we drew down an additional $345,000 from our revolving credit facility to fund the ~~three months ended March 31, 2022,~~acquisition of Kappa. In connection with this transaction, the seller has an opportunity to receive an additional payment in 2024 if certain financial performance targets and other metrics are met, and therefore we recorded a contingent consideration liability of kr245,000 (translated to $24,793) as of June 30, 2022. Excluding the events previously mentioned, there were no other material changes during the six months ended June 30, 2022 outside the ordinary course of business in the specified contractual obligations set forth in our Annual Report on Form 10-K for the year ended December 31, 2021. We expect our operations to continue generating sufficient cash flow to fund working capital requirements and necessary capital investments. We are actively pursuing additional acquisition candidates. On July 27, 2022, we entered into an Amended and Restated Credit Agreement with a bank syndicate providing for a revolving loan of $550,000, due July 27, 2027. The revolving loan proceeds were used to pay down the existing debt under the 2018 Credit Agreement and may be used for working capital, letters of credit, and other corporate purposes. We could seek additional bank loans or access to financial markets to fund such acquisitions, our operations, working capital, necessary capital investments or other cash requirements should we deem it necessary to do so.

Cash

Cash and cash equivalents decreased to ~~$64,466~~$76,183 at ~~March 31,~~June 30, 2022 from $103,239 at December 31, 2021. At ~~March 31,~~June 30, 2022, the Company had ~~$56,788~~$61,390 of cash and cash equivalents held by foreign subsidiaries. ~~It is our intention~~We presently intend to permanently reinvest these funds in foreign operations by continuing to make additional plant related investments, and potentially invest in partnerships or acquisitions; therefore, we do not currently expect to repatriate these funds in order to fund U.S. operations or obligations. However, if these funds are needed for U.S. operations, we could be required to pay additional withholding taxes to repatriate these funds. Working capital was ~~$196,275~~$232,998 at ~~March 31,~~June 30, 2022 as compared to $178,430 at December 31, 2021, an increase of ~~$17,845.~~$54,568. Working capital reflects the payment of the 2021 declared dividend in 2022 of ~~$20,703, proceeds from~~$20,704, payments on the revolving loan and acquired debt of ~~$20,000,~~$70,648, and capital expenditures and intangible assets acquired of ~~$10,256.~~$20,799.

Three Months Ended March 31, Increase
(Decrease)
(in thousands) 2022 2021 % Change
Cash flows provided by operating activities $ 7,021 $ 40,607 $ (33,586) (82.7) %
Cash flows used in investing activities (10,072) (6,226) (3,846) (61.8) %
Cash flows used in financing activities (34,845) (27,933) (6,912) (24.7) %

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	Six Months Ended June 30,				Increase (Decrease)
(in thousands)	2022		2021				% Change
Cash flows provided by operating activities	$	55,261	$	76,389	$	(21,128)	(27.7)	%
Cash flows used in investing activities	(316,412)		(13,520)		(302,892)		(2240.3)	%
Cash flows provided by (used in) financing activities	239,694		(65,727)		305,421		464.7	%

Operating Activities

The decrease in cash flows from operating activities was primarily driven by changes in working capital and the timing of increased sales, restocking of inventory, and payments to suppliers.

Investing Activities

As previously noted, on June 21, 2022, we completed the acquisition of Kappa, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway. Cash paid for the acquisition, net of cash acquired, amounted to $295,660.

We continue to invest in corporate projects, improvements across all production facilities, and intangible assets. Total investments in property, plant and equipment and ~~intangible~~intangible assets were ~~$10,256~~$20,799 and ~~$6,312 for~~$13,760 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Financing Activities

As previously noted, the acquisition of Kappa was primarily funded through the 2018 Credit Agreement. We borrowed ~~$20,000~~$365,000 against the revolving loan and made total loan payments of $40,000 during the ~~first quarter of~~six months ended June 30, 2022, resulting in ~~$371,431~~$66,431 available under the 2018 Credit Agreement as of ~~March 31,~~June 30, 2022. In addition, we also made payments of $30,648 on the acquired debt related to the acquisition of Kappa.

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 ~~3,063,929~~3,068,905 shares have been purchased. We repurchase shares from employees in connection with settlement of transactions under our equity incentive plans. We also intend to acquire shares from time to time at

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prevailing market prices if and to the extent we deem it is advisable to do so based on our assessment of corporate cash flow, market conditions and other factors.

Proceeds from stock options ~~exercised~~exercised were ~~$498~~$1,328 and ~~$2,402~~$3,886 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively. Dividend payments were ~~$20,703~~$20,704 and $18,700 for the ~~three months~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Other Matters Impacting Liquidity

We currently provide postretirement benefits in the form of two retirement medical plans, as discussed in Note 1415 – Employee Benefit Plans. The ~~liability~~liability recorded in ~~other~~"Other long-term ~~liabilities~~liabilities" on the condensed consolidated balance sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021 was ~~$1,197~~$1,221 and $1,293, respectively, ~~and~~and the plans are not funded. Historical cash payments made under these plans have typically been less than ~~$200~~$100 per year. We do not anticipate any changes to the payments made in the current year for the plans.

On June 1, 2018, we established an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly ~~compensated~~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 as of ~~March 31,~~June 30, 2022 and December 31, 2021 was ~~$8,206~~$8,220 and ~~$6,270,~~$6,251, respectively, and was included in ~~other~~"other long-term ~~obligations~~obligations" on our balance ~~sheets.~~sheet. The related rabbi trust assets were ~~$8,208 and~~$8,255 and $6,267 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and were included in ~~other~~"other non-current ~~assets~~assets" on ~~our~~the condensed consolidated balance sheets.

Chemogas has an unfunded defined benefit plan. The plan provides for the payment of a lump sum at retirement or payments in case of death of the covered employees. The amount recorded for these obligations on our balance sheets as of ~~March 31,~~June 30, 2022 and December 31, 2021 were ~~$676~~$641 and $684, ~~respectively,~~respectively, and were included in ~~other~~"other long-term obligations."

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Critical Accounting ~~Estimates~~Policies

There were no changes to the Company's Critical Accounting ~~Estimates,~~Policies, as described in its December 31, 2021 Annual Report on Form 10-K, during the ~~three~~six months ended ~~March 31,~~June 30, 2022.

Related Party Transactions

We were engaged in related party transactions with St. Gabriel CC Company, LLC during the three and six months ended ~~March 31,~~June 30, 2022. Refer to Note ~~17,~~18, "Related Party Transactions".

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our cash and cash equivalents are held primarily in certificates of deposit and money market investment funds. In the second quarter of 2019, we entered into an interest rate swap and cross-currency swap for hedging purposes. Refer to details noted above (see Note 1920, "Derivative Instruments and Hedging Activities"). Additionally, as of ~~March 31,~~June 30, 2022, our borrowings were under a revolving loan bearing interest at a fluctuating rate as defined by the 2018 Credit Agreement plus an applicable rate. The applicable rate is based upon our consolidated net leverage ratio, as defined in the 2018 Credit Agreement. A 100 basis point increase or decrease in interest rates, applied to our borrowings at ~~March 31,~~June 30, 2022, would result in an increase or decrease in annual interest expense and a corresponding reduction or increase in cash flow of ~~approxi~~approximate~~mately $1,286.~~ly $4,336. We are exposed to commodity price risks, including prices of our primary raw materials. Our objective is to seek a reduction in the potential negative earnings impact of raw material pricing arising in our business activities. We manage these financial exposures, where possible, through pricing and operational means. Our practices may change as economic conditions change. Additionally, as disclosed below in Part II, Item 1A, we are monitoring market risks related to the current COVID-19 pandemic very closely.

Interest Rate Risk

We have exposure to market risk for changes in interest rates, including the interest rate relating to the 2018 Credit ~~Agreement dated.~~Agreement. In the second quarter of 2019, we began to manage our interest rate exposure through the use of derivative instruments. All of our derivative instruments are utilized for risk management purposes, and are not used for trading or speculative purposes. We have hedged a portion of our floating interest rate exposure using an interest rate swap (see Note 19~~to our condensed consolidated financial statements)~~20, "Derivative Instruments and Hedging Activities"). As of ~~March 31,~~June 30, 2022, the notional amount of our outstanding interest rate swap was $108,569.

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Foreign Currency Exchange Risk

The financial condition and results of operations of our foreign subsidiaries are reported in Euros, Canadian Dollars, Malaysian Ringgits, Singapore Dollars, Australian Dollars, ~~and~~ Philippine Pesos, and Norwegian Kroner, and then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements. Therefore, we are exposed to foreign currency exchange risk related to these currencies. In the second quarter of 2019, we entered into a cross-currency swap, with a notional amount of $108,569, which we designated as a hedge of our net investment in ~~Chemogas.~~Chemogas (see Note 20, "Derivative Instruments and Hedging Activities").

On June 21, 2022, the Company completed the acquisition of Kappa. In the process of acquiring Kappa, the Company entered into four short-term foreign currency exchange forward contracts with JP Morgan Chase, N.A to manage our exposure related to changes in foreign currency exchange rates in connection with the Kappa acquisition. These contracts did not qualify for hedge accounting under the applicable sections of ASC Topic 815. For the six months ended June 30, 2022, the net gains on these forward contracts amounted to $512 and were recorded in "other (income) expense, net" on the condensed consolidated statements of earnings. As of June 30, 2022, the Company did not maintain any open foreign currency exchange forward contracts as all four contracts were settled as of June 30, 2022.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

Prior to filing this report, we completed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Exchange Act as of ~~March 31,~~June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~March 31,~~June 30, 2022.

(b)Changes in Internal Controls

~~There~~

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Except with respect to the acquisition of Kappa described below, there have been no changes in the internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the fiscal quarter ended ~~March 31,~~June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

On June 21, 2022, we completed the acquisition of Kappa (See Note 2, "Significant Acquisitions"). We are integrating Kappa into our overall internal control over financial reporting process and expect to exclude the business from our assessment of internal control over financial reporting as of December 31, 2022. Total assets of the Kappa business represented approximately 24.8 % of our consolidated total assets as of June 30, 2022.

Part II. Other Information

Item 1A. Risk Factors

There have been no material changes in the Risk Factors identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except as follows:

Operational Risks

Our foreign sales and operations ~~can~~may be adversely affected by supply chain disruptions due to ~~the military~~political unrest, terrorist acts, and national and international conflict, ~~between Russia and~~including Russia's invasion of Ukraine. .

We conduct a portion of our sales and manufacturing outside the United States. Our foreign sales and operations are subject to a number of risks, including political and economic instability, which could have a material adverse impact on our ability to increase or maintain our international sales and operations. ~~The military conflict between Russia~~National and international conflicts such as war, border closures, civil disturbances and terrorist acts, including Russia's invasion of Ukraine, may increase the likelihood of already strained supply interruptions and further hinder our ability to access the materials and energy we need to manufacture our products. Additional supply chain disruptions will make it harder for us to find favorable pricing and reliable sources for the materials we need. As a result, such disruptions will put upward pressure on our costs and increase the risk that we may be unable to acquire the materials and services we need to continue to make certain products, in particular at our manufacturing facilities in Europe.

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Item 2C. Issuer Purchase of Equity Securities

The following table summarizes the share repurchase activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022:

Total Number of Shares
Purchased (1)
Average Price Paid Per Share
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, 2021 88,154 $ 147.03 88,154 $ 125,951,395
February 1-28, 2021 57,531 $ 139.75 57,531 $ 111,675,367
March 1-31, 2021 100,000 $ 135.98 100,000 $ 95,065,135
245,685 245,685
(1) Our Board of Directors has approved a 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 3,063,929 shares have been purchased. There is no expiration for this program.


	Total Number of Shares Purchased (1)	Average Price Paid Per Share		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, 2022	88,154	$	147.03	88,154	$	125,951,395
February 1-28, 2022	57,531	$	139.75	57,531	$	111,675,367
March 1-31, 2022	100,000	$	135.98	100,000	$	95,065,135
First Quarter	245,685			245,685

April 1-30, 2022	245	$	125.36	245	$	87,609,591
May 1-31, 2022	4,550	$	120.01	4,550	$	83,324,693
June 1-30, 2022	181	$	125.87	181	$	83,370,521
Second Quarter	4,976			4,976

Total	250,661			250,661

(1) Our Board of Directors has approved a 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 3,068,905 shares have been purchased. There is no expiration for this program.

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Item 6. Exhibits


Exhibit Number						Description
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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

3138

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			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: ~~April~~July 29, 2022

3239


Business Segment Assets	March 31, 2022		December 31, 2021
Human Nutrition & Health	$	752,120	$	727,131
Animal Nutrition & Health	165,627		158,971
Specialty Products	181,635		184,628
Other and Unallocated (1)	95,526		128,595
Total	$	1,194,908	$	1,199,325