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What changed in BALCHEM CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BALCHEM CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+180 added−185 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-24)

Top changes in BALCHEM CORP's 2023 10-K

180 paragraphs added · 185 removed · 152 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+9 added−7 removed38 unchanged
Biggest changeIn 2013, the EPA initiated a new registration review of propylene oxide, in line with and as part of the registration review scheduled for a large number of other pesticides. A Final Work Plan was issued in March 2014, and the EPA anticipated that this review process would take approximately seven years.
Biggest changeA Final Work Plan was issued in March 2014, and the EPA anticipated that this review process would take approximately seven years. In October 2020, the EPA issued both the Proposed Interim 4 Table of Contents Decision and Draft Risk Assessment for propylene oxide. In July 2021, the EPA issued the Interim Decision.
Propylene oxide is marketed and sold as a fumigant to aid in the control of insects and microbiological spoilage; and to reduce bacterial and mold contamination in certain shelled and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes, and for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings.
Propylene oxide is marketed and sold as a fumigant to aid in the control of insects and microbiological spoilage, to reduce bacterial and mold contamination in certain shelled and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes, and for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings.
("Albion") entered into a Stock Purchase Agreement, and closed on such transaction with Cardinal Associates Inc. ("Cardinal"), a corporation organized under the laws of the State of Washington, pursuant to which Albion acquired Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom"). Bergstrom is a leading science-based manufacturer of methylsulfonylmethane ("MSM"), based in Vancouver, Washington.
("Albion") entered into a Stock Purchase Agreement, and closed on such transaction with Cardinal Associates Inc. ("Cardinal"), a corporation organized under the laws of the State of Washington, pursuant to which Albion acquired Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom"). Bergstrom is a leading science-based manufacturer of MSM, based in Vancouver, Washington.
Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder packaging approved for use in the countries these products are shipped to.
Ammonia is used primarily as a refrigerant, for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder packaging approved for use in the countries these products are shipped to.
Competition in the animal feed and industrial markets we serve are based primarily on product performance, customer support, quality, service and price. The markets for our products are subject to competitive risks because these markets are highly price competitive.
Competition in the animal feed and industrial markets we serve is based primarily on product performance, customer support, quality, service and price. The markets for our products are subject to competitive risks because these markets are highly price competitive.
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. Acquisitions On August 30, 2022, our wholly-owned subsidiary Albion Laboratories, Inc.
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. Acquisitions On August 30, 2022, the Company's wholly-owned subsidiary Albion Laboratories, Inc.
In addition, we are committed to reducing our global water use by reducing and recycling water usage and investing new technologies to improve water efficiency. For more information on our approach to sustainability management, refer to our 2021 Sustainability Report, which is available on our website at https://balchem.com/our-company/corporate-social-responsibility/sustainability.
In addition, we are committed to reducing our global water use by reducing and recycling water usage and investing new technologies to improve water efficiency. For more information on our approach to sustainability management, refer to our 2022 Sustainability Report, which is available on our website at https://balchem.com/our-company/corporate-social-responsibility/sustainability.
On June 21, 2022, we and our wholly-owned subsidiary, Balchem B.V., completed the acquisition of Kechu BidCo AS and its subsidiary companies, including Kappa Bioscience AS, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway (all acquired companies collectively referred to as “Kappa”).
On June 21, 2022, the Company and its wholly-owned subsidiary, Balchem B.V., completed the acquisition of Kechu BidCo AS and its subsidiary companies, including Kappa Bioscience AS, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway (all acquired companies collectively referred to as “Kappa”).
In the Specialty Products segment, competition within Performance Gases is based primarily on service, reliability, quality, and price. Our competition in this market varies globally, many of which are regional privately-held companies. We also face competition from alternate technologies or substitute products. In our plant nutrition business, competition is based primarily on product performance, customer support, quality, and price.
In the Specialty Products segment, competition within Performance Gases is based primarily on service, reliability, quality, and price. Our competitors in this market vary globally, many of which are regional privately-held companies. We also face competition from alternate technologies or substitute products. In our plant nutrition business, competition is based primarily on product performance, customer support, quality, and price.
We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to such reports, as soon as reasonably practicable after they have been electronically filed with the Securities and Exchange Commission (the "SEC").
We make available through our website, free of charge, our Annual Reports on Form 10- 6 Table of Contents K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to such reports, as soon as reasonably practicable after they have been electronically filed with the Securities and Exchange Commission (the "SEC").
We have historically funded our research and development programs with funds available from current operations with the intent of recovering those costs from profits derived from future sales of products resulting from, or enhanced by, the research and development effort.
We have historically funded our research and development programs with 3 Table of Contents funds available from current operations with the intent of recovering those costs from profits derived from future sales of products resulting from, or enhanced by, the research and development effort.
Environmental and Regulatory Matters The Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), a health and safety statute, requires that certain products within our Specialty Products segment must be registered with the EPA because they are considered pesticides.
Environmental and Regulatory Matters The Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), a health and safety statute, requires that certain products within our Specialty Products segment must be registered with the U.S. Environmental Protection Agency ("EPA") because they are considered pesticides.
Capital expenditures are projected to range from $40,000 to $50,000 for 2023, including our continued efforts to invest in energy and water saving projects, while exploring additional renewable energy opportunities in support of the company's sustainability efforts.
Capital expenditures are projected to range from $35,000 to $40,000 for 2024, including our continued efforts to invest in energy and water saving projects, while exploring additional renewable energy opportunities in support of the company's sustainability efforts.
However, we do not believe we are materially dependent on any particular patent or any particular group of patents. We believe that our sales and competitive position are dependent primarily upon the quality of our products, technical sales efforts and market conditions, rather than on patent protection.
We believe that our patents, in the aggregate, are advantageous to our business. However, we do not believe we are materially dependent on any particular patent or any particular group of patents. We believe that our sales and competitive position are dependent primarily upon the quality of our products, technical sales efforts and market conditions, rather than on patent protection.
In this Draft HHRA, the EPA presented multiple perspectives on risk extrapolation, including the IRIS Assessment. While acknowledging the necessity of maintaining the critical uses of ethylene oxide, based on the range of unit risk provided in this qualitative assessment, the EPA stated that there should be further mitigation measures implemented which will likely require some label changes.
In this Draft HHRA, the EPA presented multiple perspectives on risk extrapolation, including the IRIS Assessment. While acknowledging the necessity of maintaining the critical uses of ethylene oxide, based on the range of unit risk provided in this qualitative assessment, the EPA stated that there should be further mitigation measures implemented.
In 2021, our total workforce consisted of 76% male and 24% female among all employees and 50% male and 50% female when excluding supply chain and operations functions. With the support of our Board of Directors, we continue to explore additional diversity and inclusion initiatives.
In 2022, our total workforce consisted of 75% male and 25% female among all employees and 50% male and 50% female when excluding supply chain and operations functions. With the support of our Board of Directors, we continue to explore additional diversity and inclusion initiatives.
Environmental, Social and Governance We operate as strong stewards of our shareholders, customers, suppliers, employees, and the communities in which we operate. We are working to make our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance (“ESG”) practices.
Sustainability We operate as strong stewards of our shareholders, customers, suppliers, employees, and the communities in which we operate. We are working to make our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance practices. In 2023, we published our 2022 Sustainability Report.
Through the Bergstrom acquisition, this segment recently began manufacturing methylsulfonylmethane ("MSM"), which is a widely used nutritional ingredient that provides benefits for pet health. 1 Table of Contents 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.
This segment also manufactures MSM, which is a widely used nutritional ingredient that provides benefits for pet health. 1 Table of Contents 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.
Health and Safety Protecting the workplace environment and the health and safety of our employees, contractors, visitors, and neighbors is our top priority. Our recordable injury rate, which was defined by recordable injuries per 200,000 hours worked, was 1.17 and 0.99 in 2022 and 2021, respectively.
Health and Safety Protecting the workplace environment and the health and safety of our employees, contractors, visitors, and neighbors is our top priority. Our recordable injury rate, which is defined as recordable injuries per 200,000 hours worked, was 1.39 and 1.17 in 2023 and 2022, respectively.
Food and Drug Administration in a public statement said, "Although medical devices can be sterilized by several methods, ethylene oxide is the most common method of sterilization of medical devices in the U.S. and is a well-established and scientifically-proven method of preventing harmful microorganisms from reproducing and causing infections." Management believes the lack of availability of this product could not be easily tolerated by various medical device manufacturers or the health care industry due to the resultant infection potential. 4 Table of Contents Similarly, the EPA issued a RED for propylene oxide in August 2006.
Food and Drug Administration in a public statement said, "Although medical devices can be sterilized by several methods, ethylene oxide is the most common method of sterilization of medical devices in the U.S. and is a well-established and scientifically-proven method of preventing harmful microorganisms from reproducing and causing infections." Management believes the lack of availability of this product could not be reasonably tolerated by various medical device manufacturers or the health care industry due to the resultant infection potential.
Capital Projects We continue to invest in projects across all production facilities and capital expenditures were approximately $49,086, $36,142, and $32,080 for 2022, 2021 and 2020, respectively. In 2022, we invested $29,759 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment.
Capital Projects We continue to invest in projects across all production facilities and capital expenditures were approximately $37,274, $49,086, and $36,142 for 2023, 2022 and 2021, respectively. In 2023, we invested $20,720 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment.
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.
We are seeing some modest improvement in most relevant labor markets and 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 to further optimize productivity and performance.
We strive to promote inclusion through the implementation of inclusive leadership training across the Company and are committed to increasing representation of minorities throughout the organization. In 2022, our total workforce consisted of 75% male and 25% female among all employees and 50% male and 50% female when excluding supply chain and operations functions.
We strive to promote inclusion through the implementation of inclusive leadership training across the Company and are committed to increasing representation of minorities throughout the organization. In 2023, our total workforce consisted of 74% male and 26% female among all employees and 47% male and 53% 5 Table of Contents female when excluding supply chain and operations functions.
Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customers' appreciation of brand value. Consequently, the Company makes investments in such activities for long-term value differentiation. This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers.
Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customers' appreciation of brand value. Consequently, the Company makes investments in such activities for long-term value differentiation.
We are indemnified by the sellers under our May 2001 asset purchase agreement covering our acquisition of the Verona, Missouri facility for potential liabilities associated with the Superfund site, and one of the sellers, in turn, has the benefit of certain contractual indemnification by the prior owner that executed the above-described Superfund remedy. In February 2022, BCP Ingredients, Inc.
We are indemnified by the sellers under our May 2001 asset purchase agreement covering our acquisition of the Verona, Missouri facility for potential liabilities associated with the Superfund site, and one of the sellers, in turn, has the benefit of certain contractual indemnification by Syntex in relation to the implementation of the above-described Superfund remedy.
For the year ended December 31, 2022 and 2021, our turnover rate was 15% and 13%, respectively, for salaried employees with an average length of service of over 9 years and 10 years, respectively. We are continuing to improve employee retention with effective employment engagement efforts, a productive performance review process, and competitive compensation.
For the years ended December 31, 2023 and 2022, our turnover rate was 29% and 36%, respectively, for hourly employees with an average length of service of about 7 years for both years. We are continuing to improve employee retention with effective employment engagement efforts, a productive performance review process, and competitive compensation.
The Company partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. The Company has expertise in trends analysis and product development.
This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers. The Company partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. The Company has expertise in trends analysis and product development.
Through the Kappa and Bergstrom acquisitions, respectively, this segment recently began manufacturing specialty vitamin K2, which is a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health and immunity, and methylsulfonylmethane ("MSM"), which is a widely used nutritional ingredient that provides benefits for joint health, sports nutrition, skin and beauty, and healthy aging.
This segment also manufactures specialty vitamin K2, which plays a crucial role in the human body for bone health, heart health and immunity, and methylsulfonylmethane ("MSM"), which is a widely used nutritional ingredient that helps provide benefits for joint health, sports nutrition, skin and beauty, and healthy aging.
It has generally been our policy and practice to maintain an inventory of finished products and/or component materials for our segments to enable us to ship products within two months after receipt of a product order.
It has generally been our policy and practice to maintain an inventory of finished products and/or component materials for our segments to enable us to ship products within two months after receipt of a product order. All orders in the current backlog are expected to be filled in the 2024 fiscal year.
To the extent any consent orders or other agreements are entered into as a result of findings from such inspections, the Company is committed to ensuring compliance with such orders or agreements.
From time to time, our manufacturing sites may be subject to inspections by the EPA and other agencies. To the extent any consent orders or other agreements are entered into as a result of findings from such inspections, the Company is committed to ensuring compliance with such orders or agreements.
As of December 31, 2022, we employed approximately 1,340 full-time employees worldwide, with approximately 17% covered by collective bargaining agreements. As of December 31, 2021, we employed approximately 1,317 full-time employees worldwide, with approximately 17% covered by collective bargaining agreements.
As of December 31, 2023, we employed approximately 1,302 full-time employees worldwide, with approximately 18% covered by collective bargaining agreements.
The acquisition provides a synergistic scientific advantage in the Company's key strategic therapeutic focus areas such as longevity and performance and is a strong fit with the Company's specialty, science-backed mineral products, which should ultimately lead to growth for the Company's portfolios within the Human Nutrition and Health and Animal Nutrition and Health segments.
The addition of OptiMSM ® , Bergstrom Nutrition's MSM brand, to the Company's portfolio within the Human Nutrition and Health and Animal Nutrition and Health segments provides a synergistic scientific advantage in Balchem's key strategic therapeutic focus areas such as longevity and performance and is a strong fit with Balchem's specialty, science-backed mineral products.
In addition, we invested $3,297 for environmental, health, safety, and security upgrades to our facilities as well as $3,252 in automation projects that improved safety and quality of our operations.
In addition, we invested $3,138 for environmental, health, safety, and security upgrades to our facilities, $2,330 in automation projects that improved quality and efficiency of our operations, and $2,222 in research and development projects.
We also use know-how, trade secrets, formulae, and manufacturing techniques that assist in maintaining competitive positions of certain of our products. Formulae and know-how are of particular importance in the manufacture of a number of our proprietary products. We believe that our patents, in the aggregate, are advantageous to our business.
Intellectual Property We currently hold over 130 patents and over 400 trademarks in the United States and overseas. We also use know-how, trade secrets, formulae, and manufacturing techniques that assist in maintaining competitive positions of certain of our products. Formulae and know-how are of particular importance in the manufacture of a number of our proprietary products.
We submitted those changes and expect the EPA to review and approve them in the coming months during 2023. Our facility in Verona, Missouri, 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.
Our facility in Verona, Missouri facility, while held by a prior owner, Syntex Agribusiness, Inc. (“Syntex”), 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.
This prestigious 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.
This prestigious 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 their assessment of publicly available corporate responsibility data. We are pleased to be recognized by Newsweek and Statista for our leadership in corporate responsibility.
In 2022, we published our 2021 Sustainability Report, prepared in accordance with the Global Reporting Initiative (“GRI”) Standards: Core option. This report provides detailed information regarding our ESG strategy, focus areas and governance structure. We are committed to reducing our greenhouse gas emissions by implementing new technologies, improving operational efficiencies, and expanding green energy usages.
This report provides detailed information regarding our Corporate Responsibility strategy, focus areas and governance structure. We are committed to reducing our greenhouse gas emissions by implementing new technologies, improving operational efficiencies, and expanding green energy usages.
Such raw materials include materials derived from petrochemicals, minerals, metals, agricultural commodities and other readily available commodities and are subject to price fluctuations due to market conditions.
Raw Materials The raw materials utilized by us in the manufacture of our products are sourced from suppliers both domestically and internationally. Such raw materials include materials derived from petrochemicals, minerals, metals, agricultural commodities and other readily available commodities and are subject to price fluctuations due to market conditions.
Backlog At December 31, 2022, we had a total backlog of $47,022 (comprised of $31,550 for the HNH segment; $11,983 for the ANH segment; $2,980 for the Specialty Products segment, and $509 for other), as compared to a total backlog of $65,661 at December 31, 2021 (comprised of $45,393 for the HNH segment; $14,483 for the ANH segment; $4,935 for the Specialty Products segment and $850 for other).
Backlog At December 31, 2023, we had a total backlog of $42,957 (comprised of $32,418 for the HNH segment; $7,639 for the ANH segment; $2,678 for the Specialty Products segment, and $222 for other), as compared to a total backlog of $47,022 at December 31, 2022 (comprised of $31,550 for the HNH segment; $11,983 for the ANH segment; $2,980 for the Specialty Products segment and $509 for other).
Our competition in this market is primarily regional privately-held companies. 3 Table of Contents Research and Development During the years ended December 31, 2022, 2021 and 2020, we incurred research and development expenses of approximately $12,191, $13,524, and $10,332, respectively, on Company-sponsored research and development for new products, improvements to existing products, and manufacturing processes.
Research and Development During the years ended December 31, 2023, 2022 and 2021, we incurred research and development expenses of approximately $15,049, $12,191, and $13,524, respectively, on Company-sponsored research and development for new products, improvements to existing products, and manufacturing processes.
The information contained on, or that may be accessed through, the Company’s website is not incorporated by reference into, and is not part of, this Annual Report on Form 10-K. In January 2023, Balchem was named one of America's Most Responsible Companies by Newsweek magazine for the third consecutive year.
The information contained on, or that may be accessed through, the Company’s website is not incorporated by reference into, and is not part of, this Annual Report on Form 10-K.
The development of new and improved products is also important to our ability to compete.
The development of new and improved products is also important to our ability to compete. Our competition in this market is primarily regional privately-held companies.
In connection with normal operations at our plant facilities, we are required to maintain environmental and other permits, including those relating to the use of ethylene oxide. From time to time, our manufacturing sites may be subject to inspections by the EPA and other agencies.
Activities under the ASAOC are underway and are expected to continue for some period of time. In connection with normal operations at our plant facilities, we are required to maintain environmental and other permits, including those relating to the use of ethylene oxide.
We are very proud of our ESG accomplishments to date and are pleased with the recognition by Newsweek. 6 Table of Contents Available Information Our headquarters is located at 5 Paragon Drive, Montvale, NJ 07645. Our telephone number is (845) 326-5600 and our Internet website address is www.balchem.com.
Available Information Our headquarters is located at 5 Paragon Drive, Montvale, NJ 07645. Our telephone number is (845) 326-5600 and our Internet website address is www.balchem.com.
In addition, we invested $3,138 for environmental, health, safety, and security upgrades to our facilities, $2,330 in automation projects that improved quality and efficiency of our operations, and $2,222 in research and development projects. In 2020, we invested $16,856 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment.
In addition, we invested $6,900 for environmental, health, safety, and security upgrades to our facilities. In 2022, we invested $29,759 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment.
The acquisition strengthens our 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 and Health segment. 2 Table of Contents Raw Materials The raw materials utilized by us in the manufacture of our products are sourced from suppliers both domestically and internationally.
Details related to the Kappa acquisition are disclosed in Note 2, Significant Acquisitions . 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 and Health segment.
We believe we are in compliance in all material respects with federal, state, local and international provisions that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.
For a further discussion of our potential environmental liabilities, see Note 16, Commitments and Contingencies , to our Consolidated Financial Statements. We believe we are in compliance in all material respects with applicable laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment.
Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat.
ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries. Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat.
Animal Nutrition and Health The Company’s Animal Nutrition and Health ("ANH") segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to the essential nutrient choline chloride. For ruminant animals, the Company’s microencapsulated products boost health and milk production by delivering nutrient supplements that are biologically available, providing required nutritional levels.
For ruminant animals, the Company’s microencapsulated products boost health and milk production by delivering nutrient supplements that are biologically available, providing required nutritional levels. The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world.
In October 2020, the EPA issued both the Proposed Interim Registration Review Decision and Draft Risk Assessment for propylene oxide. In July 2021, the EPA issued the Interim Registration Review Decision. Based on these documents, the use of propylene oxide to treat nuts and spices will continue to be permitted with minimal changes to the current approved level.
Based on these documents, the use of propylene oxide to treat nuts and spices will continue to be permitted with minimal changes to the current approved usage. We submitted those changes and expect the EPA to review and approve them in the coming months during 2024.
Several mitigation measures are under consideration and the EPA is expected to issue a Proposed Interim Decision in early 2023. We believe that the EPA intends to reregister ethylene oxide for the sterilization of medical or laboratory equipment, pharmaceuticals, and aseptic packaging, with the mitigation measures potentially impacting certain users, including Balchem and its customers.
We believe that the EPA intends to reregister ethylene oxide for the sterilization of medical or laboratory equipment, pharmaceuticals, aseptic packaging, and the reduction of microbes on spices/seasonings, with the proposed mitigation measures potentially impacting such users, including our customers. The product, when used as a sterilant for certain medical devices, has no known equally effective substitute.
We continually upgrade our facilities to reduce risks and establish procedures with appropriate personnel protection for the safety of our employees.
In addition, we continually upgrade our facilities to reduce health and safety risks and establish procedures with appropriate personnel protection for the safety of our employees. Diversity and Inclusion We recognize that our best performance is achieved when our teams are diverse, and accordingly, diversity and inclusion are important elements of Balchem's Human Resources strategy.
At that time, the EPA “determined that products containing the active ingredient propylene oxide ("PPO") are eligible for re-registration provided that…risk mitigation measures…are adopted.” Our product label was amended as required to reflect these mitigation measures and also to show that propylene oxide has been reclassified as a restricted use pesticide.
At that time, the EPA “determined that products containing the active ingredient propylene oxide ("PPO") are eligible for re-registration provided that…risk mitigation measures…are adopted.” In 2013, the EPA initiated a new registration review of propylene oxide, in line with and as part of the registration review scheduled for a large number of other pesticides.
In order to obtain a registration, an applicant typically must demonstrate, through extensive test data, that its product will not cause unreasonable adverse effects on human health or the environment. We hold EPA registrations permitting us to sell ethylene oxide as a medical device sterilant and spice fumigant and propylene oxide as a fumigant of nuts and spices.
We hold EPA registrations permitting us to sell ethylene oxide as a medical device sterilant and spice fumigant and propylene oxide as a fumigant of nuts and spices.
The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients.
The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients. Animal Nutrition and Health The Company’s Animal Nutrition and Health ("ANH") segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to the essential nutrient choline chloride.
However, we were able to secure most necessary materials from our suppliers and will strive to ensure a sustainable supply chain to support our growing business operations. Intellectual Property We currently hold over 150 patents in the United States and overseas and use certain trade-names and trademarks.
In a year of mixed inflationary and 2 Table of Contents deflationary trends across key categories we source, we were able to secure most necessary materials from our suppliers and continued to strive to ensure a sustainable supply chain to support our growing business operations.
Remediation was conducted by the prior owner under the oversight of the EPA and the Missouri Department of Natural Resources (“MDNR”). While we must maintain the integrity of the capped areas in the remediation areas on the site, the prior owner is responsible for completion of any further Superfund remedy.
Remediation was conducted by Syntex under the oversight of the EPA and the Missouri Department of Natural Resources.
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The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world. ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries.
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In 2023, supply reliability improved due to a weaker macroeconomic (demand) environment though we experienced some difficulties in procuring certain materials due to the challenging geopolitical environment impacting some supply lanes.
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Details related to the Kappa acquisition are disclosed in Note 2, Significant Acquisitions.
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As part of the registration review process, the EPA assesses a wide variety of studies to determine the likelihood of risk to human health and the environment from exposure associated with use of the product.
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In 2022, we continued to experience some difficulties in procuring certain materials due to the challenging macroeconomic environment with global supply chain disruptions because of the COVID-19 pandemic as well as significant inflation on raw materials.
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In April 2023, the EPA released a Proposed Interim Decision and Draft Human Health Risk Assessment addendum which included certain proposed mitigation measures.
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This was more difficult in 2021 given the macroeconomic and supply chain challenges we experienced, but those challenges eased in the second half of 2022 and all orders in the current backlog are expected to be filled in the 2023 fiscal year.
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Similarly, the EPA issued a RED for propylene oxide in August 2006.
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The product, when used as a sterilant for certain medical devices, has no known equally effective substitute. In October 2019, the U.S.
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In June 2023, in response to a Special Notice Letter received from the EPA in 2022, BCP Ingredients, Inc.
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(“BCP”), the Company subsidiary that operates the site, received Special Notice Letter from EPA for the performance of a focused remedial investigation/feasibility study (“RI/FS”) at the site with regard to the presence of certain contaminants, including 1,4 dioxane. BCP, along with the prior owner of the Verona facility submitted a joint response to the notice in November 2022.
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("BCP"), the Company's subsidiary that operates the site, Syntex, EPA, and the State of Missouri entered into an Administrative Settlement Agreement and Order on Consent (“ASAOC”) for a focused remedial investigation/feasibility study ("RI/FS") under which (a) BCP will conduct a source investigation of potential source(s) of releases of 1,4-dioxane and chlorobenzene at a portion of the site and (b) BCP and Syntex will complete a RI/FS to determine a potential remedy, if any is required.
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Our safety program is structured around five pillars: process safety, personal safety, industrial hygiene, transportation safety and environmental safety, and focuses on driving higher ownership and engagement from employees and contractors. 5 Table of Contents Diversity and Inclusion We recognize that our best performance is achieved when our teams are diverse, and accordingly, diversity and inclusion are important elements of Balchem's Human Resources strategy.
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The injuries were primarily the result of manual material handling and cultural/behavioral factors that influence outcome. We are adjusting our 2024 environmental, health, safety, and security management system to include an even greater emphasis on hazard identification/correction and cultural/behavioral aspects of personal safety.
Added
For the years ended December 31, 2023 and 2022, our turnover rate was 11% and 15%, respectively, for salaried employees with an average length of service of over 9 years for both years.
Added
In December 2023, Balchem was named on Newsweek's 2024 list of America's Most Responsible Companies and has earned a ranking amongst this prestigious list of companies for the fourth consecutive year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe face competition in our markets from a number of large and small companies, some of which have greater financial, research and development, production and other resources than we do. Our competitive position is based principally on performance, quality, customer support, service, breadth of product line, manufacturing or packaging technology and the selling prices of our products.
Biggest changeBusiness and Financial Risks Increased competition could adversely affect our business and financial results. We face competition in our markets from a number of large and small companies, some of which have greater financial, research and development, production and other resources than we do.
There have been periodic labor disputes impacting the U.S. ports that have caused us to make alternative arrangements to continue the flow of inventory, and if these types of disputes recur, worsen, or occur in other countries through which we source products, it may have a material impact on our costs or inventory supply.
There have been periodic labor disputes impacting the U.S. ports that have caused us to make alternative arrangements to continue the flow of 11 Table of Contents inventory, and if these types of disputes recur, worsen, or occur in other countries through which we source products, it may have a material impact on our costs or inventory supply.
Further, these events and disruptions could increase insurance and other operating costs, including impacting our decisions regarding construction of new facilities to select areas less 8 Table of Contents prone to climate change risks and natural disasters, which could result in indirect financial risks passed through the supply chain or other price modifications to our products and services.
Further, these events and disruptions could increase insurance and other operating costs, including impacting our decisions regarding construction of new facilities to select areas less prone to climate change risks and natural disasters, which could result in indirect financial risks passed through the supply chain or other price modifications to our products and services.
Adverse intellectual property litigation or claims of infringement against us may become extremely disruptive if the plaintiffs succeed in blocking the trade of our products and services and may have a material adverse effect on our business. We are subject to risks related to corporate social responsibility and reputational matters.
Adverse intellectual property 12 Table of Contents litigation or claims of infringement against us may become extremely disruptive if the plaintiffs succeed in blocking the trade of our products and services and may have a material adverse effect on our business. We are subject to risks related to corporate social responsibility and reputational matters.
Although we maintain product liability insurance coverage in amounts we believe are customary within the industry, there can be no assurance that this level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable 12 Table of Contents cost, if at all.
Although we maintain product liability insurance coverage in amounts we believe are customary within the industry, there can be no assurance that this level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all.
Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our operations or supply chain or increased commodity or supply chain costs could adversely affect our results of operations. 11 Table of Contents We are dependent on our vendors, including common carriers, to supply raw materials to our manufacturing facilities.
Changes in our relationships with our vendors, changes in tax or trade policy, interruptions in our operations or supply chain or increased commodity or supply chain costs could adversely affect our results of operations. We are dependent on our vendors, including common carriers, to supply raw materials to our manufacturing facilities.
This may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Without any such financing, we could be forced to sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances.
This may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Without any such 10 Table of Contents financing, we could be forced to sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances.
Our foreign sales and operations are subject to a number of risks, including: longer accounts receivable collection periods; the impact of recessions and other economic conditions in economies outside the United States; export duties and quotas; changes in tariffs, trade restrictions, and trade relations including but not limited to those associated with the North American Free Trade Agreement and the exit of the United Kingdom from the European Union; unexpected changes in regulatory requirements; certification requirements; environmental regulations; reduced protection for intellectual property rights in some countries; potentially adverse tax consequences; political and economic instability; and preference for locally produced products.
Our foreign sales and operations are subject to a number of risks, including: longer accounts receivable collection periods; the impact of recessions and other economic conditions in economies outside the United States; export duties and quotas; imposition of, or changes in, tariffs, sanctions, trade restrictions, and trade relations including but not limited to those associated with the United States-Mexico-Canada Agreement ("USMCA") which replaced the North American Free Trade Agreement ("NAFTA"), other free trade agreements, and the exit of the United Kingdom from the European Union; unexpected changes in regulatory requirements; certification requirements; environmental regulations; reduced protection for intellectual property rights in some countries; potentially adverse tax consequences; political and economic instability; and preference for locally produced products.
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.
National and international conflicts such as war, border closures, civil disturbances and terrorist acts, including Russia's invasion of Ukraine and the ongoing conflict between Israel and Hamas, 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.
If such service providers do not perform or do not perform effectively, we may not be able to achieve the expected efficiencies and may have to incur additional costs to address failures in providing service by the service providers.
If such service providers do not perform or do not perform effectively, we may not be able to achieve the expected efficiencies and may have to incur additional costs to address failures in providing service 8 Table of Contents by the service providers.
Despite our implementation of cybersecurity measures which have focused on prevention (including a robust cybersecurity employee education program to train our employees on email and password security, recognizing phishing and related topics on a regular basis), mitigation, resilience and recovery, our network and products, including access solutions, may be vulnerable to cybersecurity attacks, computer viruses, malicious codes, malware, ransomware, phishing, social engineering, denial of service, hacking, break-ins and similar disruptions.
Despite our implementation of cybersecurity measures which have focused on prevention (including a robust cybersecurity employee education program to train our employees on email and password security, recognizing phishing and related topics on a regular basis), mitigation, resilience and recovery, our network and products, including access solutions, may be vulnerable to cybersecurity attacks, computer viruses, malicious codes, malware, ransomware, phishing, social engineering, denial of service, hacking, break-ins and similar disruptions, including through use of new artificial intelligence tools or methods.
To the extent that such disruptions occur and our business continuity plans do not effectively address these disruptions in a timely manner, they may cause delays in the manufacture or shipment of our products and the cancellation of customer orders and, as a result, our business, operating results and financial condition could be materially and adversely affected, resulting in a possible loss of business or brand reputation. 9 Table of Contents Business and Financial Risks Increased competition could adversely affect our business and financial results.
To the extent that such disruptions occur and our business continuity plans do not effectively address these disruptions in a timely manner, they may cause delays in the manufacture or shipment of our products and the cancellation of customer orders and, as a result, our business, operating results and financial condition could be materially and adversely affected, resulting in a possible loss of business or brand reputation.
Additionally, some state and local regulators have drawn their own conclusions from the IRIS Assessment, which has resulted in certain state actions against our customers that have impacted or are impacting these customers’ ability to use the ethylene oxide process to sterilize medical devices.
Additionally, some state and local regulators have drawn their own conclusions from the IRIS Assessment, which has resulted in certain state actions against our customers that continue to impact these customers’ ability to use the ethylene oxide process to sterilize medical devices.
Further, while we maintain insurance coverage that may, subject to policy terms and exclusions, cover certain aspects of our cyber risks, such insurance coverage may be insufficient to cover our losses or all types of claims that may arise in the continually evolving area of cyber risk.
Further, while we maintain insurance coverage that may, subject to policy terms and exclusions, cover certain aspects of our cyber risks, such insurance coverage may be insufficient to cover our losses or all types of claims that may arise in the continually evolving area of cyber risk. We also face increasing and evolving disclosure obligations related to cybersecurity events.
These factors could have a material adverse impact on our ability to increase or maintain our international sales. 7 Table of Contents Our sales and operations may be adversely affected by supply chain disruptions due to political unrest, terrorist acts, and national and international conflicts, including Russia's invasion of Ukraine.
These factors could have a material adverse impact on our ability to increase or maintain our international sales. Our sales and operations may be adversely affected by supply chain disruptions due to political unrest, terrorist acts, and national and international conflicts.
Volatility in currency exchange rates could impact our business and financial results. 10 Table of Contents Although we utilize risk management tools, such as derivative instruments, to mitigate market fluctuations in foreign currencies, any changes in strategy in regard to risk management tools can also affect revenue, expenses and results of operations and there can be no assurance that such measures will result in cost savings or that all market fluctuation exposure will be eliminated.
Although we utilize risk management tools, such as derivative instruments, to mitigate market fluctuations in foreign currencies, any changes in strategy in regard to risk management tools can also affect revenue, expenses and results of operations and there can be no assurance that such measures will result in cost savings or that all market fluctuation exposure will be eliminated.
Given the volatility of exchange rates, we may not be able to effectively manage our currency transactions and/or translation risks.
Given the volatility of exchange rates, we may not be able to effectively manage our currency transactions and/or translation risks. Volatility in currency exchange rates could impact our business and financial results.
Our ability to successfully grow and expand our business is dependent upon our ability to recruit and retain a workforce with the skills necessary to develop, manufacture and deliver the products and services desired by our customers.
Our ability to successfully grow and expand our business depends on our ability to recruit and retain a highly qualified and diverse workforce. 7 Table of Contents Our ability to successfully grow and expand our business is dependent upon our ability to recruit and retain a workforce with the skills necessary to develop, manufacture and deliver the products and services desired by our customers.
These products are progressing through a multi-year FIFRA re-registration review process. Recent draft documents indicate that the EPA intends to continue the registrations for both ethylene oxide and propylene oxide with certain additional mitigation measures. The EPA may re-examine the registrations in the future in accordance with the provisions of FIFRA.
Recent draft documents indicate that the EPA intends to continue the registrations for both ethylene oxide and propylene oxide with certain additional mitigation measures. The EPA may re-examine the registrations in the future in accordance with the provisions of FIFRA.
Such increased regulation could require our 14 Table of Contents customers to temporarily suspend operations to install additional fugitive emissions control technology, limit the use of ethylene oxide or take other actions which, in turn, could impact our business, financial condition or results of operations. Item 1B. Unresolved Staff Comments None.
Such increased regulation could require our customers and/or the Company to temporarily suspend operations to install additional fugitive emissions control technology, limit the use of ethylene oxide or take other actions which could impact our business, financial condition or results of operations.
Further, pursuant to applicable environmental and safety laws and regulations, we are required to obtain and maintain certain governmental permits and approvals, including EPA registrations under FIFRA for some of our products. We maintain EPA FIFRA registrations for ethylene oxide as a medical device sterilant and spice fumigant and for propylene oxide as a fumigant of nuts and spices.
Further, pursuant to applicable environmental and safety laws and regulations, we are required to obtain and maintain certain governmental permits and approvals, including EPA registrations under FIFRA for some of our products.
Such damage to our reputation and the reputation of our brands may negatively impact our business, financial condition and results of operations. In addition, negative or inaccurate postings or comments on social media or networking websites about the Company or our brands could generate adverse publicity that could damage our reputation or the reputation of our brands.
In addition, negative or inaccurate postings or comments on social media or networking websites about the Company or our brands could generate adverse publicity that could damage our reputation or the reputation of our brands.
The majority of our foreign sales occur through our foreign subsidiaries and the remainder of our foreign sales result from exports to foreign distributors, resellers and customers.
In addition, we conduct a portion of our manufacturing outside the United States. The majority of our foreign sales occur through our foreign subsidiaries and the remainder of our foreign sales result from exports to foreign distributors, resellers and customers.
We may be unable to effectively compete on all these bases. Further, our competitors may improve the design and performance of their products and introduce new products with competitive price and performance characteristics.
Our competitive position is based principally on performance, quality, customer support, service, breadth of product line, manufacturing or packaging technology and the selling prices of our products. We may be unable to effectively compete on all these bases. Further, our competitors may improve the design and performance of their products and introduce new products with competitive price and performance characteristics.
Altering current products and services or developing new products and services to comply with changes in the applicable laws and regulations could require significant research and development investments, increase the cost of providing the products and services and adversely affect the demand for our products and services, including shifting demand to competitors in countries where laws and regulations may be less stringent. 13 Table of Contents In the event a regulatory authority concludes that we are not or have not at all times been in full compliance with these laws or regulations, we could be fined, criminally charged or otherwise sanctioned.
Altering current products and services or developing new products and services to comply with changes in the applicable laws and regulations could require significant research and development investments, increase the cost of providing the products and services and adversely affect the demand for our products and services, including shifting demand to competitors in countries where laws and regulations may be less stringent.
The occurrence of material operational problems, including, but not limited to, the above events, could adversely affect our profitability during the period of such operational difficulties. Our ability to successfully grow and expand our business depends on our ability to recruit and retain a highly qualified and diverse workforce.
The occurrence of material operational problems, including, but not limited to, the above events, could adversely affect our profitability during the period of such operational difficulties.
These conditions may make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our products which would reduce our revenues and profitability.
Unfavorable changes in economic conditions, including inflation, recession, changes in tariffs and trade relations amongst international trading partners, or other changes in economic conditions, may adversely impact the markets in which we operate. 9 Table of Contents These conditions may make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our products which would reduce our revenues and profitability.
The Company is working with various stakeholders to ensure the EPA considers all available assessments to appropriately quantify ethylene oxide's risks.
The Company remains confident that the sterilization industry will be able to install abatement equipment to satisfy the new forthcoming EPA requirements. The Company is working with various stakeholders to ensure the EPA considers all available assessments to appropriately quantify ethylene oxide's risks.
The EPA began using the IRIS Assessment in 2020 to regulate change to existing permissible emissions’ limits at certain non-sterilization ethylene oxide users and producers, and was initially expected to propose rules during 2022 that will regulate sterilization users. These rules have yet to be finalized.
The EPA began using the IRIS Assessment in 2020 to regulate change to existing permissible emissions limits at facilities that produce or use ethylene oxide in non-sterilization processes, and subsequently proposed rules for ethylene oxide sterilization facilities as well. These rules have yet to be finalized.
We face risks associated with our sales to customers and manufacturing operations outside the United States. Our net sales consist of sales both within and outside the United States. In addition, we conduct a portion of our manufacturing outside the United States.
We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Operational Risks We face risks associated with our sales to customers and manufacturing operations outside the United States. Our net sales consist of sales both within and outside the United States.
The installation of the new abatement equipment is being done ahead of what is expected to be changes in the EPA regulations. The Company remains confident that the sterilization industry will be able to install abatement equipment to satisfy the new forthcoming EPA requirements.
Due to these regulatory actions, many customers have taken or are expected to take some voluntary downtime to install new abatement equipment. The installation of the new abatement equipment is being done ahead of what is expected to be changes in the EPA regulations.
Global economic conditions may adversely affect our business, operating results and financial condition. Unfavorable changes in economic conditions, including inflation, recession, changes in tariffs and trade relations amongst international trading partners, or other changes in economic conditions, may adversely impact the markets in which we operate.
Global economic conditions may adversely affect our business, operating results and financial condition.
Removed
We assume no obligation to update any forward-looking statements as a result of new information, future events or other factors. Operational Risks Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.
Added
Despite rigorous processes, we may not adequately meet all our existing or future disclosure obligations and/or having our disclosures misinterpreted.
Removed
Our business, results of operations, financial condition, cash flows and stock price can be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.
Added
Determining whether a cybersecurity incident is notifiable or reportable may not be straightforward and any such mandatory disclosures could lead to negative publicity, loss of customer confidence in the effectiveness of our security measures, diversion of management's attention and governmental investigations.
Removed
The COVID-19 pandemic has resulted in governments around the world implementing certain measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, school closures, and other measures. Our businesses have been deemed "essential" under the orders issued by federal, state and local governments.
Added
Such damage to our reputation and the reputation of our brands may negatively impact our business, financial condition and results of operations. Further, there are an increasing number of anti-ESG legislative initiatives that may conflict with other regulatory requirements or our stakeholders' expectations.
Removed
Although we have continued to operate our facilities to date consistent with federal guidelines and state and local orders, COVID-19 or similar viruses and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers, and transportation networks, including business shutdowns or disruptions.
Added
In the event a regulatory authority concludes that we are not or have not at all times been in full compliance with these laws or regulations, we could be fined, criminally charged or otherwise sanctioned.
Removed
The extent to which viruses such as COVID-19 and their variants may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depending upon the severity and duration of any virus outbreak and the effectiveness of actions taken globally to contain or mitigate the effects thereof.
Added
We maintain EPA 13 Table of Contents FIFRA registrations for ethylene oxide as a medical device sterilant and spice fumigant and for propylene oxide as a fumigant of nuts and spices. These products are progressing through a multi-year FIFRA re-registration review process.
Removed
Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition and cash flows.
Removed
Additionally, concerns over the economic impact of COVID-19 and its variants have caused extreme volatility in financial and other capital markets which may adversely impact our stock price and may affect our ability to access capital markets.
Removed
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described within this report.
Removed
While we have implemented mitigation strategies as needed to protect the long-term sustainability of our company and will continue to respond as appropriate, the impact of the COVID-19 pandemic continues to evolve and its ultimate impact on our business is uncertain and difficult to predict.
Removed
Due to these regulatory actions, one customer facility has been shut down permanently, another was shut down for a period of months and has since restarted, and other customers have taken or are expected to take voluntary downtime to install new abatement equipment.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a summary of our principal properties: Segment Location Administrative Manufacturing Warehousing Corporate 5 U.S. cities 5 - - HNH 15 U.S. cities and 5 foreign countries 1 15 4 ANH 6 U.S. cities and 4 foreign countries - 9 1 Specialty Products 5 U.S. cities and 7 foreign countries 2 9 1 Other 2 U.S. cities and 1 foreign country - 3 - We believe that our production facilities and related machinery and equipment are well maintained, suitable for their purpose, and adequate to support our businesses.
Biggest changeThe following is a summary of our principal properties: Segment Location Administrative Manufacturing Warehousing Corporate 5 U.S. cities 5 — — HNH 17 U.S. cities and 6 foreign countries 1 16 6 ANH 9 U.S. cities and 3 foreign countries — 10 2 Specialty Products 6 U.S. cities and 6 foreign countries 2 8 2 Other 2 U.S. cities and 1 foreign country — 3 — We believe that our production facilities and related machinery and equipment are well maintained, suitable for their purpose, and adequate to support our businesses.
We have a total of 37 locations across the world and some of these manufacturing and warehousing locations serve multiple segments.
We have a total of 38 locations across the world and some of these manufacturing and warehousing locations serve multiple segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn our opinion, pending legal matters are not expected to have a material adverse effect on our consolidated financial position, results of operations, liquidity or cash flows.
Biggest changeIn our opinion, we do not expect pending legal matters to have a material adverse effect on our consolidated financial position, results of operations, liquidity or cash flows.
Added
Further, in connection with normal operations at our plant facilities, our manufacturing sites may, from time to time, be subject to inspections or inquiries by the EPA and other agencies.
Added
To the extent any consent orders or other agreements are entered into as a result of findings from such inspections or inquiries, the Company is committed to ensuring compliance with such orders or agreements.
Added
Information with respect to certain legal proceedings is included in Note 16, Commitments and Contingencies , to our Consolidated Financial Statements for the year ended December 31, 2023 contained in this Annual Report on Form 10-K, and is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHatsuki Miyata , age 47, has served as our Executive Vice President, General Counsel and Secretary since July 2022. Ms. Miyata previously served as Deputy General Counsel and Corporate Secretary at Allegion plc, a global manufacturing company in seamless access and security products, from October 2018 to July 2022.
Biggest changeMiyata previously served as Deputy General Counsel and Corporate Secretary at Allegion plc, a global manufacturing company in seamless access and security products, from October 2018 to July 2022. Frederic Boned , age 46, has served as our Senior Vice President and General Manager, Human Nutrition and Health, since November 2022.
Reid served as Chief Supply Chain Officer at Godiva Chocolate from May 2019 to December 2020, and as Vice President, Supply Chain – North America Manufacturing at The Estee Lauder Companies, Inc., a multinational cosmetics company, prior to that. Michael R. Sestrick , Ph.D., age 59, has served as our Senior Vice President and Chief Technology Officer since September 2022.
Reid served as Chief Supply Chain Officer at Godiva Chocolate from May 2019 to December 2020, and as Vice President, Supply Chain – North America Manufacturing at The Estee Lauder Companies, Inc., a multinational cosmetics company, prior to that. Michael R. Sestrick , Ph.D., age 60, has served as our Senior Vice President and Chief Technology Officer since September 2022.
Prior to that, he led the Human Resources department as our Vice President and Chief Human Resources Officer from February 2022 to September 2022 and as our Vice President, Human Resources from 2016 to February 2022. Job L. van Gunsteren , age 47, has served as our Senior Vice President and General Manager, Specialty Products, since September 2022.
Prior to that, he led the Human Resources department as our Vice President and Chief Human Resources Officer from February 2022 to September 2022 and as our Vice President, Human Resources from 2016 to February 2022. Job L. van Gunsteren , age 48, has served as our Senior Vice President and General Manager, Specialty Products, since September 2022.
All officers are elected to hold office for one year or until their successors are elected and qualified or their earlier death, resignation or removal from office by the Board of Directors of the Company. 16 Table of Contents PART II
All officers are elected to hold office for one year or until their successors are elected and qualified or their earlier death, resignation or removal from office by the Board of Directors of the Company. 17 Table of Contents PART II
Prior to that he served as our Vice President and Chief Technology officer from April 2017 to September 2022. M. Brent Tignor , age 45, has served as our Senior Vice President and Chief Human Resources Officer since September 2022.
Prior to that he served as our Vice President and Chief Technology officer from April 2017 to September 2022. M. Brent Tignor , age 46, has served as our Senior Vice President and Chief Human Resources Officer since September 2022.
Reid , age 56, has served as our Senior Vice President and Chief Supply Chain Officer since September 2022. Prior to that, he served as Vice President and Chief Supply Chain Officer from January 2021 to September 2022. Mr.
Reid , age 57, has served as our Senior Vice President and Chief Supply Chain Officer since September 2022. Prior to that, he served as Vice President and Chief Supply Chain Officer from January 2021 to September 2022. Mr.
Prior to that, he served as Regional Vice President, Health Nutrition and Care – North America from January 2022 to November 2022, Vice President, Human Nutrition and Health – North America from September 2018 to January 2022, and Vice President, Human Nutrition and Health – EMEA from January 2018 to September 2018, each at DSM, a multinational corporation in the fields of health and nutrition.
Prior to that, he served as Regional Vice President, Health Nutrition and Care – North America from January 2022 to November 2022, and Vice President, Human Nutrition and Health – North America from September 2018 to January 2022, each at DSM, a Dutch multinational corporation in the fields of health and nutrition. Jonathan H.
Jonathan H. Griffin , age 47, has served as our Senior Vice President and General Manager, Animal Nutrition and Health, since September 2022. Prior to that, he led that business segment as our Vice President and General Manager, Animal Nutrition and Health from 2016 to September 2022. Martin L.
Griffin , age 48, has served as our Senior Vice President and General Manager, Animal Nutrition and Health, since September 2022. Prior to that, he led that business segment as our Vice President and General Manager, Animal Nutrition and Health from 2016 to September 2022. Martin L.
Item 4. Mine Safety Disclosures Not applicable. 15 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a list of executive officers of the Company as of February 24, 2023. Theodore L. Harris , age 57, has served as our Chairman, President and Chief Executive Officer since 2017. C.
Item 4. Mine Safety Disclosures Not applicable. 16 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a list of executive officers of the Company as of February 16, 2024. Theodore L. Harris , age 58, has served as our Chairman, President and Chief Executive Officer since 2017. C.
Martin Bengtsson , age 46, has served as our Executive Vice President and Chief Financial Officer since February 2019.
Martin Bengtsson , age 46, has served as our Executive Vice President and Chief Financial Officer since February 2019. Hatsuki Miyata , age 48, has served as our Executive Vice President, General Counsel and Secretary since July 2022. Ms.
Reid have been employed by the Company for more than the past five years. No family relationship exists between any of the above-listed executive officers of the Company.
He also served as interim Chief Financial Officer from October 2018 to February 2019. All above-listed officers except for Ms. Miyata, Mr. Boned, and Mr. Reid have been employed by the Company for more than the past five years. No family relationship exists between any of the above-listed executive officers of the Company.
Prior to that, he served as our Vice President and General Manager, Specialty Products from August 2020 to September 2022 and as our Director for Animal Nutrition and Health – EMEA from 2013 to 2020. All above-listed officers except for Mr. Bengtsson, Ms. Miyata, Mr. Boned, and Mr.
Prior to that, he served as our Vice President and General Manager, Special Products from August 2019 to September 2022 and as our Director for Animal Nutrition and Health – EMEA from 2013 to 2019. William A. Backus , age 57, has served as our Vice President and Chief Accounting Officer since October 2017.
Removed
Prior to that, he served as Vice President and Chief Financial Officer for the Performance Materials and Technologies business unit of Honeywell International, a diversified technology and manufacturing company, from April 2018 to January 2019, and Vice President and Chief Financial Officer for the Advanced Materials unit of Honeywell International from August 2016 to April 2018.
Removed
Prior to that, she held various responsibilities in the Corporate & Securities Group at The Procter & Gamble Company, a global consumer products company, from October 2016 to September 2018. Frederic Boned , age 45, has served as our Senior Vice President and General Manager, Human Nutrition and Health, since November 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe performance of the Common Stock shown on the graph below is historical only and not necessarily indicative of future performance. 18 Table of Contents Issuer Purchase of Equity Securities The following table summarizes the share repurchase activity for the year ended December 31, 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, 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 July 1-31, 2022 — $ — — $ 83,370,521 August 1-31, 2022 361 $ 127.77 361 $ 88,643,248 September 1-30, 2022 — $ — — $ 88,643,248 Third Quarter 361 361 October 1-31, 2022 831 $ 139.80 831 $ 96,873,152 November 1-30, 2022 399 $ 140.03 399 $ 96,978,739 December 1-31, 2022 52 $ 121.77 52 $ 84,324,507 Fourth Quarter 1,282 1,282 Total 252,304 252,304 (1) Our Board of Directors has approved a stock repurchase program.
Biggest changeThe performance of the Common Stock shown on the graph below is historical only and not necessarily indicative of future performance. 19 Table of Contents Issuer Purchase of Equity Securities The following table summarizes the share repurchase activity for the year ended December 31, 2023: Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3) January 1-31, 2023 1,343 $ 130.96 1,343 $ 90,512,611 February 1-28, 2023 26,766 $ 137.24 26,766 $ 91,178,224 March 1-31, 2023 — $ — — $ 91,178,224 First Quarter 28,109 28,109 April 1-30, 2023 — $ — — $ 91,178,224 May 1-31, 2023 504 $ 132.26 504 $ 87,807,402 June 1-30, 2023 63 $ 134.81 63 $ 89,488,765 Second Quarter 567 567 July 1-31, 2023 482 $ 128.54 482 $ 85,264,695 August 1-31, 2023 — $ — — $ 85,264,695 September 1-30, 2023 293 $ 134.00 293 $ 88,847,226 Third Quarter 775 775 October 1-31, 2023 — $ — — $ 88,847,226 November 1-30, 2023 241 $ 119.51 241 $ 79,211,236 December 1-31, 2023 2,866 $ 144.94 2,866 $ 95,651,484 Fourth Quarter 3,107 3,107 Total 32,558 32,558 (1) The Company repurchased (withheld) shares from employees solely in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan.
Such number does not include stockholders who hold their stock in street name. 17 Table of Contents Performance Graph The graph below sets forth the cumulative total stockholder return on the Common Stock (referred to in the table as “BCPC”) for the five years ended December 31, 2022, the overall stock market return during such period for shares comprising the Russell 2000® Index (which we believe includes companies with market capitalization similar to that of us), and the overall stock market return during such period for shares comprising the Dow Jones U.S.
Such number does not include stockholders who hold their stock in street name. 18 Table of Contents Performance Graph The graph below sets forth the cumulative total stockholder return on the Common Stock (referred to in the table as “BCPC”) for the five years ended December 31, 2023, the overall stock market return during such period for shares comprising the Russell 2000® Index (which we believe includes companies with market capitalization similar to that of us), and the overall stock market return during such period for shares comprising the Dow Jones U.S.
Specialty Chemicals Index, in each case assuming a comparable initial investment of $100 on December 31, 2017 and the subsequent reinvestment of dividends. The Russell 2000® Index measures the performance of the shares of the 2000 smallest companies included in the Russell 3000® Index.
Specialty Chemicals Index, in each case assuming a comparable initial investment of $100 on December 31, 2018 and the subsequent reinvestment of dividends. The Russell 2000® Index measures the performance of the shares of the 2000 smallest companies included in the Russell 3000® Index.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Common Stock is listed on the Nasdaq Stock Market LLC under the symbol “BCPC.” On February 10, 2023, the closing price for the Common Stock on the Nasdaq Stock Market LLC was $133.75.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Common Stock is listed on the Nasdaq Stock Market LLC under the symbol “BCPC.” On February 2, 2024, the closing price for the Common Stock on the Nasdaq Stock Market LLC was $143.14.
Record Holders As of February 10, 2023, the approximate number of holders of record of Common Stock was 64.
Record Holders As of February 2, 2024, the approximate number of holders of record of Common Stock was 64.
The total authorization under this program is 3,763,038 shares. Since the inception of the program in June 1999, a total of 3,070,548 shares have been repurchased. There is no expiration for this program. Item 6. [Reserved]
(2) 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 3,103,106 shares have been repurchased.
Added
Other than shares withheld for tax purposes, as described in footnote 1 above, no share repurchases were made under the Company's stock repurchase program during the year ended December 31, 2023. There is no expiration for this program.
Added
(3) Dollar amounts in this column equal the number of shares remaining available for repurchase under the stock repurchase program as of the last date of the applicable month multiplied by the monthly average price paid per share. Item 6. [Reserved] 20 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

35 edited+9 added−14 removed13 unchanged
Biggest changeResults of Operations - Fiscal Year 2022 compared to Fiscal Year 2021 Summary of Consolidated Statements of Earnings (in thousands) 2022 2021 Increase (Decrease) % Change Net sales $ 942,358 $ 799,023 $ 143,335 17.9 % Gross margin 280,451 243,174 37,277 15.3 % Operating expenses 135,265 115,672 19,593 16.9 % Earnings from operations 145,186 127,502 17,684 13.9 % Other expenses 11,437 2,269 9,168 404.1 % Income tax expense 28,382 29,129 (747) (2.6) % Net earnings $ 105,367 $ 96,104 $ 9,263 9.6 % Management's discussion and analysis of the Consolidated Statements of Earnings is included below: Net Sales Increase (Decrease) (in thousands) 2022 2021 % Change Human Nutrition and Health $ 527,131 $ 442,733 $ 84,398 19.1 % Animal Nutrition and Health 262,297 226,776 35,521 15.7 % Specialty Products 131,438 117,020 14,418 12.3 % Other 21,492 12,494 8,998 72.0 % Total $ 942,358 $ 799,023 $ 143,335 17.9 % • The increase in net sales within the Human Nutrition and Health segment for 2022 compared to 2021 was primarily attributed to sales growth within food and beverage markets, the contribution from recent acquisitions, as well as higher sales within the minerals and nutrients business, partially offset by an unfavorable impact related to change in foreign currency exchange rates.
Biggest changeResults of Operations - Fiscal Year 2023 compared to Fiscal Year 2022 Summary of Consolidated Statements of Earnings (in thousands) 2023 2022 Increase (Decrease) % Change Net sales $ 922,439 $ 942,358 $ (19,919) (2.1) % Gross margin 302,056 280,451 21,605 7.7 % Operating expenses 142,863 135,265 7,598 5.6 % Earnings from operations 159,193 145,186 14,007 9.6 % Interest and other expenses 21,932 11,437 10,495 91.8 % Income tax expense 28,718 28,382 336 1.2 % Net earnings $ 108,543 $ 105,367 $ 3,176 3.0 % Management's discussion and analysis of the Consolidated Statements of Earnings is included below: Net Sales Increase (Decrease) (in thousands) 2023 2022 % Change Human Nutrition and Health $ 550,751 $ 527,131 $ 23,620 4.5 % Animal Nutrition and Health 238,326 262,297 (23,971) (9.1) % Specialty Products 125,965 131,438 (5,473) (4.2) % Other 7,397 21,492 (14,095) (65.6) % Total $ 922,439 $ 942,358 $ (19,919) (2.1) % • The increase in net sales within the Human Nutrition and Health segment for 2023 compared to 2022 was primarily driven by the contribution from recent acquisitions, higher sales within the minerals and nutrients business, and a favorable impact related to changes in foreign currency rates, partially offset by lower sales within food and beverage markets.
In addition, discussion of year-to-year comparisons between 2021 and 2020 are not included in this Annual Report on Form 10-K, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
In addition, discussion of year-to-year comparisons between 2022 and 2021 are not included in this Annual Report on Form 10-K, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (filed with the SEC on February 24, 2022) for additional discussion of our financial condition and results of operations for the year ended December 31, 2020.
Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (filed with the SEC on February 24, 2023) for additional discussion of our financial condition and results of operations for the year ended December 31, 2021.
Those statements in the following discussion that are not historical in nature should be considered to be forward-looking statements that are inherently uncertain. See “Cautionary Statement Regarding Forward-Looking Statements.” 19 Table of Contents 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.
Those statements in the following discussion that are not historical in nature should be considered to be forward-looking statements that are inherently uncertain. See “Cautionary Statement Regarding Forward-Looking 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.
Contingent Consideration Liabilities In connection with recent acquisitions (see Note 2, Significant Acquisitions), the sellers of each of the acquired entities have an opportunity to receive an additional payment if certain financial performance targets and other metrics are met, thereby requiring us to record contingent consideration liabilities on our balance sheet.
Contingent Consideration Liabilities In connection with recent acquisitions (see Note 2, Significant Acquisitions ), the sellers of each of the acquired entities had an opportunity to receive an additional payment if certain financial performance targets and other metrics were met, thereby requiring us to record contingent consideration liabilities on our balance sheet.
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 sheet as of December 31, 2022 and December 31, 2021 was $393 and $684, respectively, and was included in other long-term obligations.
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 sheet as of December 31, 2023 and December 31, 2022 was $420 and $393, respectively, and was included in other long-term obligations.
Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $3,581, $1,264 and $2,410 for years ended December 31, 2022, 2021 and 2020, respectively, and (ii) Unallocated amortization expense of $2,951, $2,510, and $1,606 for years ended December 31, 2022, 2021, and 2020, respectively, related to an intangible asset in connection with a company-wide ERP system implementation. 20 Table of Contents Acquisitions On August 30, 2022, we completed the acquisition of Bergstrom, a leading science-based manufacturer of methylsulfonylmethane ("MSM"), based in Vancouver, Washington, and 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.
Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $1,617, $3,581 and $1,264 for years ended December 31, 2023, 2022 and 2021, respectively, and (ii) Unallocated amortization expense of $312, $2,951, and $2,510 for years ended December 31, 2023, 2022, and 2021, respectively, related to an intangible asset in connection with a company-wide ERP system implementation. 21 Table of Contents Acquisitions On August 30, 2022, we completed the acquisition of Bergstrom, a leading science-based manufacturer of MSM, based in Vancouver, Washington, and 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.
The increase in interest expense is due to the additional borrowings in connection with the acquisitions and rising interest rates.
The increase in interest expense is due to the additional borrowings in connection with the acquisitions and higher interest rates.
Liquidity and Capital Resources (All amounts in thousands, except share and per share data) Contractual Obligations Our short-term purchase obligations primarily include contractual arrangements in the form of purchase orders with suppliers. As of December 31, 2022, such purchase obligations were $69,269.
Liquidity and Capital Resources (All amounts in thousands, except share and per share data) Contractual Obligations Our short-term purchase obligations primarily include contractual arrangements in the form of purchase orders with suppliers. As of December 31, 2023, such purchase obligations were $72,958.
The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three years ended December 31, 2022, 2021 and 2020 (in thousands): Business Segment Net Sales 2022 2021 2020 Human Nutrition and Health $ 527,131 $ 442,733 $ 400,330 Animal Nutrition and Health 262,297 226,776 192,191 Specialty Products 131,438 117,020 103,566 Other and Unallocated (1) 21,492 12,494 7,557 Total $ 942,358 $ 799,023 $ 703,644 Business Segment Earnings From Operations 2022 2021 2020 Human Nutrition and Health $ 82,125 $ 76,031 $ 61,397 Animal Nutrition and Health 36,056 26,179 29,979 Specialty Products 32,789 30,020 26,801 Other and Unallocated (1) (5,784) (4,728) (7,030) Total $ 145,186 $ 127,502 $ 111,147 (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.
The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three years ended December 31, 2023, 2022 and 2021 (in thousands): Business Segment Net Sales 2023 2022 2021 Human Nutrition and Health $ 550,751 $ 527,131 $ 442,733 Animal Nutrition and Health 238,326 262,297 226,776 Specialty Products 125,965 131,438 117,020 Other and Unallocated (1) 7,397 21,492 12,494 Total $ 922,439 $ 942,358 $ 799,023 Business Segment Earnings From Operations 2023 2022 2021 Human Nutrition and Health $ 102,419 $ 82,125 $ 76,031 Animal Nutrition and Health 27,576 36,056 26,179 Specialty Products 34,579 32,789 30,020 Other and Unallocated (1) (5,381) (5,784) (4,728) Total $ 159,193 $ 145,186 $ 127,502 (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.
Excluding the events previously mentioned, there were no other material changes during the year ended December 31, 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.
There were no material changes during the year ended December 31, 2023 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, 2022 other than the reduction of the contingent consideration liabilities to $100.
Related Party Transactions We were engaged in related party transactions with St. Gabriel CC Company, LLC for the years ended December 31, 2022 and December 31, 2021. Refer to Note 18, Related Party Transactions.
Gabriel CC Company, LLC for the years ended December 31, 2023 and December 31, 2022. Refer to Note 18, Related Party Transactions .
Total sales for this segment grew 12.3%, with average selling prices contributing 16.9%, volume and mix contributing -1.5%, and the change in foreign currency exchange rates contributing -3.1%. • 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. 21 Table of Contents Gross Margin (in thousands) 2022 2021 Increase (Decrease) % Change Gross margin $ 280,451 $ 243,174 $ 37,277 15.3 % % of net sales 29.8 % 30.4 % Gross margin dollars increased for 2022 compared to 2021 due to the aforementioned higher sales of $143,335, partially offset by an increase in cost of goods sold of $106,058.
Total sales for this segment decreased by 4.2%, with volume and mix contributing -9.4%, the change in foreign currency exchange rates contributing 0.7%, and average selling prices contributing 4.5%. • Sales relating to Other decreased from the prior year primarily due to lower 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. 22 Table of Contents Gross Margin (in thousands) 2023 2022 Increase (Decrease) % Change Gross margin $ 302,056 $ 280,451 $ 21,605 7.7 % % of net sales 32.7 % 29.8 % Gross margin dollars increased for 2023 compared to 2022 due to a decrease in cost of goods sold of $41,524.
Total sales for this segment grew 15.7%, with average selling prices contributing 25.5%, the change in foreign currency exchange rates contributing -3.3%, and volume and mix contributing -6.5%. • The increase in Specialty Products segment sales for 2022 compared to 2021 was primarily due to higher sales of performance gases and plant nutrition sales, partially offset by an unfavorable impact related to changes in foreign currency exchange rates.
Total sales for this segment decreased by 9.1%, with volume and mix contributing -6.3%, average selling prices contributing -3.5%, and the change in foreign currency exchange rates contributing 0.7%. • The decrease in Specialty Products segment sales for 2023 compared to 2022 was primarily due to lower sales in both the plant nutrition and performance gases businesses, partially offset by a favorable impact related to changes in foreign currency exchange rates.
As of December 31, 2022, capital expenditures are projected to be approximately $40,000 to $50,000 for 2023. As mentioned above, we expect that our operations will continue to generate sufficient cash flow to fund the commitments for capital expenditures. These capital expenditures are part of our continuous efforts to support our growing businesses.
As mentioned above, we expect that our operations will continue to generate sufficient cash flow to fund the commitments for capital expenditures. These capital expenditures are part of our continuous efforts to support our growing businesses. In 2022, we completed the acquisitions of Kappa and Bergstrom.
Changes in the assumptions such as our forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies could result in income taxes adjustments, and in turn could have a material impact on our financial condition or results of operations in subsequent periods. 25 Table of Contents Significant Accounting Policies and Recent Accounting Pronouncements See Note 1, Business Description and Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements regarding significant accounting policies and recent accounting pronouncements.
Changes in the assumptions such as our forecast of future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies could result in income taxes adjustments, and in turn could have a material impact on our financial condition or results of operations in subsequent periods.
Total sales for this segment grew 19.1%, with average selling prices contributing 17.2%, volume and mix contributing 2.2%, and the change in foreign currency exchange rates contributing -0.3%. • The increase in net sales within the Animal Nutrition and Health segment for 2022 compared to 2021 was primarily the result of higher sales in monogastric and ruminant species markets, partially offset by an unfavorable impact related to changes in foreign currency exchange rates.
Total sales for this segment grew 4.5%, with average selling prices contributing 2.6%, volume and mix contributing 1.6%, and the change in foreign currency exchange rates contributing 0.3%. • The decrease in net sales within the Animal Nutrition and Health segment for 2023 compared to 2022 was primarily driven by lower sales in both the monogastric and ruminant species markets, partially offset by incremental sales related to the Bergstrom acquisition, and a favorable impact related to changes in foreign currency exchange rates.
Cash Cash and cash equivalents decreased to $66,560 at December 31, 2022 from $103,239 at December 31, 2021. At December 31, 2022, we had $47,526 of cash and cash equivalents held by our foreign subsidiaries.
Cash Cash and cash equivalents decreased to $64,447 at December 31, 2023 from $66,560 at December 31, 2022. At December 31, 2023, we had $53,152 of cash and cash equivalents held by our foreign subsidiaries.
Segment Results We sell products for all three segments through our own sales force, independent distributors, and sales agents.
Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated". Segment Results We sell products for all three segments through our own sales force, independent distributors, and sales agents.
The valuation methods and assumptions used in assessing the contingent consideration liabilities involve a significant level of estimation uncertainty.
The valuation methods and assumptions used in assessing the contingent consideration liabilities involve a significant level of estimation uncertainty, however, as of December 31, 2023, the earn-out periods concluded and the Company recorded a contingent consideration liability of $100.
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 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.
Since the inception of the program in June 1999, a total of 3,103,106 shares have been repurchased. We intend to acquire shares from time to time at 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.
Income Tax Expense (in thousands) 2022 2021 Increase (Decrease) % Change Income tax expense $ 28,382 $ 29,129 $ (747) (2.6) % Effective tax rate 21.2 % 23.3 % The decrease in the effective tax rate was primarily due to an increase in certain tax credits and deductions and certain lower state taxes.
Income Tax Expense (in thousands) 2023 2022 Increase (Decrease) % Change Income tax expense $ 28,718 $ 28,382 $ 336 1.2 % Effective tax rate 20.9 % 21.2 % The decrease in the effective tax rate was primarily due to an increase in certain tax credits.
The related rabbi trust assets were $8,547 and 24 Table of Contents $6,267 as of December 31, 2022 and December 31, 2021, respectively, and were included in "other non-current assets" on the condensed consolidated balance sheets. Chemogas has an unfunded defined benefit plan.
The related rabbi trust assets 25 Table of Contents were $10,188 and $8,547 as of December 31, 2023 and December 31, 2022, respectively, and were included in "Other non-current assets" on the consolidated balance sheets. Related Party Transactions We were engaged in related party transactions with St.
The deferred compensation liability as of December 31, 2022 and December 31, 2021 was $8,543 and $6,270, respectively, and is included in other long-term obligations on our balance sheet.
They are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The deferred compensation liability as of December 31, 2023 and December 31, 2022 was $10,188 and $8,543, respectively, and is included in "Other long-term obligations" on the consolidated balance sheets.
Cash paid for these acquisitions, net of cash acquired, amounted to $365,780. We continue to invest in corporate projects, improvements across all production facilities, and intangible assets. Total investments in property, plant and equipment and intangible assets were $50,290 and $37,449 for the years ended December 31, 2022 and 2021, respectively.
Investing Activities We continue to invest in corporate projects, improvements across all production facilities, and intangible assets. Total investments in property, plant and equipment and intangible assets were $37,892 and $49,945 for the years ended December 31, 2023 and 2022, respectively. Capital expenditures are projected to be approximately $35,000 to $40,000 for 2024.
Additionally, operating expenses for this segment increased by $1,596, primarily related to higher outside services of $1,084. • The increase in earnings from operations for the Specialty Products segment was primarily due to the aforementioned higher sales, partially offset by a 140 basis point decrease in gross margin as a percentage of sales, primarily due to a significant increase in certain manufacturing input costs, largely related to raw materials.
Gross margin decreased $7,547 primarily due to aforementioned lower sales. • Specialty Products segment earnings from operations increased $1,790, which was primarily driven by a 410 basis point increase in gross margin as a percent of sales. The increase in gross margin was due to higher average selling prices and decreases in certain manufacturing input costs.
Additionally, operating expenses for this segment increased by $2,276, primarily related to higher compensation-related costs of $1,586 and higher outside services of $1,264, partially offset by lower amortization of $697. • Earnings from operations relating to Other and unallocated decreased from the prior year primarily due to an increase in transaction costs, mainly related to the acquisitions, partially offset by the aforementioned higher sales. 22 Table of Contents Other Expenses (Income) (in thousands) 2022 2021 Increase (Decrease) % Change Interest expense, net $ 10,268 $ 2,456 $ 7,812 318.1 % Other, net 1,169 (187) 1,356 (725.1) % $ 11,437 $ 2,269 $ 9,168 404.1 % Interest expense for 2022 and 2021 was primarily related to outstanding borrowings under the 2022 Credit Agreement and the 2018 Credit Agreement, respectively.
The increase was partially offset by an increase in operating expenses of $897, primarily driven by higher compensation-related expenses of $1,586. • The increase in Other and unallocated was primarily driven by decreases of unallocated corporate expenses, partially offset by the aforementioned lower sales. 23 Table of Contents Other Expenses (Income) (in thousands) 2023 2022 Increase (Decrease) % Change Interest expense, net $ 22,613 $ 10,268 $ 12,345 120.2 % Other, net (681) 1,169 (1,850) (158.3) % $ 21,932 $ 11,437 $ 10,495 91.8 % Interest expense for 2023 and 2022 was primarily related to outstanding borrowings under the 2022 Credit Agreement.
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 employees.
We provide an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees. Assets of the plan are held in a rabbi trust, which are included in "Other non-current assets" on the consolidated balance sheet.
Operating Expenses (in thousands) 2022 2021 Increase (Decrease) % Change Operating expenses $ 135,265 $ 115,672 $ 19,593 16.9 % % of net sales 14.4 % 14.5 % The increase in operating expenses was primarily due to incremental operating expenses related to the acquisitions of $6,804, an increase in outside services of $6,265, and higher compensation-related costs of $2,931.
Operating Expenses (in thousands) 2023 2022 Increase (Decrease) % Change Operating expenses $ 142,863 $ 135,265 $ 7,598 5.6 % % of net sales 15.5 % 14.4 % The increase in operating expenses was primarily due to restructuring-related impairment and asset disposal charges of $7,764, incremental operating expenses related to the Kappa and Bergstrom acquisitions of $7,699, and higher compensation-related expenses of $2,323, partially offset by favorable adjustments to transaction costs of $10,828.
For debt obligations, see Note 8, Revolving Loan, and for operating and finance lease obligations, see Note 19, Leases. The contractual obligations exclude a $5,815 liability for uncertain tax positions, including the related interest and penalties, recorded in accordance with ASC 740-10, as we are unable to reasonably estimate the timing of settlement, if any.
Dividend payments were $22,872 and $20,713 during 2023 and 2022, respectively. Other Matters Impacting Liquidity We have a liability of $4,650 for uncertain tax positions, including the related interest and penalties, recorded in accordance with ASC 740-10, for which we are unable to reasonably estimate the timing of settlement, if any.
The liability recorded in other long-term liabilities on the consolidated balance sheets as of December 31, 2022 and December 31, 2021 was $1,465 and $1,293, respectively, and the plans are not funded. Historical cash payments made under these plans have typically been less than $200 per year.
We currently provide postretirement benefits in the form of two retirement medical plans, as discussed in Note 15, Employee Benefit Plans . The liability recorded in other long-term liabilities on the consolidated balance sheets as of December 31, 2023 and December 31, 2022 was $1,395 and $1,465, respectively, and the plans are not funded.
Financing Activities The acquisitions of Kappa and Bergstrom were funded through our credit agreements (see Note 8, Revolving Loan). We borrowed $435,000 under our credit agreements and made total loan payments of $103,000 during the year ended December 31, 2022, resulting in $109,431 available under the 2022 Credit Agreement as of December 31, 2022.
Financing Activities In 2023, we borrowed $18,000 to fund the payment of the 2022 dividend and made total loan payments of $149,000, resulting in $240,431 available under the 2022 Credit Agreement (see Note 8, Revolving Loan ) as of December 31, 2023. We have an approved stock repurchase program. The total authorization under this program is 3,763,038 shares.
Earnings From Operations (in thousands) 2022 2021 Increase (Decrease) % Change Human Nutrition and Health $ 82,125 $ 76,031 $ 6,094 8.0 % Animal Nutrition and Health 36,056 26,179 9,877 37.7 % Specialty Products 32,789 30,020 2,769 9.2 % Other and unallocated (5,784) (4,728) (1,056) (22.3) % Earnings from operations $ 145,186 $ 127,502 $ 17,684 13.9 % % of net sales (operating margin) 15.4 % 16.0 % • Earnings from operations for the Human Nutrition and Health segment increased primarily due to the aforementioned higher sales, partially offset by a 140 basis point decrease in gross margin as a percentage of sales, primarily due to a significant increase in certain manufacturing input costs, largely related to raw materials.
Earnings From Operations (in thousands) 2023 2022 Increase (Decrease) % Change Human Nutrition and Health $ 102,419 $ 82,125 $ 20,294 24.7 % Animal Nutrition and Health 27,576 36,056 (8,480) (23.5) % Specialty Products 34,579 32,789 1,790 5.5 % Other and unallocated (5,381) (5,784) 403 7.0 % Earnings from operations $ 159,193 $ 145,186 $ 14,007 9.6 % % of net sales (operating margin) 17.3 % 15.4 % • Human Nutrition & Health segment earnings from operations increased $20,294 and the gross margin contribution was $30,144.
We know of no current or pending demands on, or commitments for, our liquid assets that will materially affect our liquidity. During the twelve months ending December 31, 2022, we drew down $345,000 and $70,000 from our revolving credit facility to fund the acquisitions of Kappa and Bergstrom, respectively.
For debt obligations, see Note 8, Revolving Loan , and for operating and finance lease obligations, see Note 19, Leases . We know of no current or pending demands on, or commitments for, our liquid assets that will materially affect our liquidity.
The 19.1% increase in cost of goods sold was mainly driven by the higher sales and significant inflation of manufacturing input costs, primarily related to raw materials. Price increases lagged this inflation, leading to a 60 basis point decrease in gross margin as a percentage of sales.
The 6.3% decrease in cost of goods sold was mainly driven by lower sales and certain lower manufacturing input costs.
Removed
Sales and production of products outside of our reportable segments and other minor business activities are included in "Other and Unallocated". COVID-19 Our COVID-19 response has focused 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.
Added
This was partially offset by an increase in operating expenses of $9,850, primarily due to the incremental operating expenses related to the Kappa and Bergstrom acquisitions of $7,502, restructuring-related impairment and asset disposal charges of $6,031, and an increase in amortization of $2,435, partially offset by favorable adjustments to transaction costs of $7,855. • Animal Nutrition & Health segment earnings from operations decreased $8,480.
Removed
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 in a hybrid setting. The COVID-19 pandemic continued to negatively affect the global economy and the markets we operate in during 2022.
Added
However, if these funds are needed for U.S. operations, we could be required to pay additional withholding taxes to repatriate these funds. Due to prevailing economic conditions of increased interest rates and subsequent borrowing costs, we remitted approximately $18,000 from our Belgium subsidiary to pay down U.S. debt, resulting in income tax expense of $20.
Removed
We experienced severe input cost inflation, raw material shortages, logistics disruptions, and labor availability issues throughout the year. Some of these indirect pandemic-related challenges eased slightly during the second half of 2022, however these challenges are likely to continue for some time.
Added
The remittance was used to pay down U.S. debt. Working capital was $165,751 at December 31, 2023 as compared to $195,761 at December 31, 2022, a decrease of $30,010.
Removed
Additionally, operating expenses for this segment increased by $12,629, primarily due to incremental operating expenses related to the acquisitions of $6,654 and outside services of $3,831. • Animal Nutrition and Health segment earnings from operations increased primarily due to the aforementioned higher sales and a 130 basis point increase in gross margin as a percentage of sales primarily related to higher average selling prices, partially offset by a significant increase in certain manufacturing input costs, largely related to raw materials.
Added
Significant cash payments during the year included net payments on the revolving loan of $131,000, capital expenditures and intangible assets acquired of $37,892, and the payment of the 2022 declared dividend in 2023 of $22,872. 24 Table of Contents (in thousands) 2023 2022 Increase (Decrease) % Change Cash flows provided by operating activities $ 183,761 $ 138,536 $ 45,225 32.6 % Cash flows used in investing activities (34,813) (416,014) 381,201 91.6 % Cash flows (used in) provided by financing activities (153,321) 246,679 (400,000) (162.2) % Operating Activities The increase in cash flows from operating activities was primarily driven by the impact from changes in working capital.
Removed
Depending on whether financial and other targets are met, we may be required to pay contingent consideration liabilities in connection with the recent acquisitions in 2024. These liabilities are valued at $11,400 as of December 31, 2022 (see Note 2, Significant Acquisitions).
Added
Cash paid for these acquisitions, net of cash acquired, amounted to $1,252 and $365,780, for years ended December 31, 2023 and 2022, respectively.
Removed
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.
Added
Open market repurchases of common stock could be made pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.
Removed
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 $195,761 at December 31, 2022 as compared to $178,430 at December 31, 2021, an increase of 23 Table of Contents $17,331.
Added
We also purchase (withhold) shares from employees in connection with the tax settlement of vested shares and/or exercised stock options under the Company's omnibus incentive plan. Share repurchases are funded with existing cash on hand. Proceeds from stock options exercised were $5,242 and $3,212 for the years ended December 31, 2023 and 2022, respectively.
Removed
Cash at December 31, 2022 reflects the payment of the 2021 declared dividend in 2022 of $20,713, payments on the revolving loan and acquired debt of $133,988, capital expenditures and intangible assets acquired of $50,290, and common stock repurchases of $35,423.
Added
Historical cash payments made under these plans have typically been less than $200 per year. We do not anticipate any changes to the payments made in the current year for the plans. Balchem NV ("Chemogas") has an unfunded defined benefit plan.
Removed
(in thousands) 2022 2021 Increase (Decrease) % Change Cash flows provided by operating activities $ 138,536 $ 160,514 $ (21,978) (13.7) % Cash flows used in investing activities (416,014) (35,300) (380,714) 1078.5 % Cash flows provided by (used in) financing activities 246,679 (102,178) 348,857 (341.4) % Operating Activities The decrease in cash flows from operating activities was primarily driven by changes in working capital.
Added
Significant Accounting Policies and Recent Accounting Pronouncements See Note 1, Business Description and Summary of Significant Accounting Policies , in Notes to Consolidated Financial Statements regarding significant accounting policies and recent accounting pronouncements. 26 Table of Contents
Removed
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, and on August 30, 2022, we completed the acquisition of Bergstrom, a leading science-based manufacturer of MSM, based in Vancouver, Washington.
Removed
We also made payments of $30,988 on the acquired debt related to the acquisitions. 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 3,070,548 shares have been repurchased.
Removed
Proceeds from stock options exercised were $3,212 and $6,943 for the years ended December 31, 2022 and 2021, respectively. Dividend payments were $20,713 and $18,723 during 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 15, Employee Benefit Plans.
Removed
Assets of the plan are held in a rabbi trust, which are included in non-current assets on our balance sheet. They are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company.
Removed
The value of the contingent consideration liability could change depending on the performance results of the acquired entities, resulting in additional expenses or income, and in turn could have a material impact on our financial condition or results of operations in subsequent periods.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed1 unchanged
Biggest changeAdditionally, as of December 31, 2022, our borrowings were under a revolving loan bearing interest at a fluctuating rate as defined by the Credit Agreement plus an applicable rate (see Note 8, Revolving Loan). The applicable rate is based upon our consolidated net leverage ratio, as defined in the Credit Agreement.
Biggest changeRefer to details noted below (see Note 20, Derivative Instruments and Hedging Activities ). Additionally, as of December 31, 2023, our borrowings were under a revolving loan bearing interest at a fluctuating rate as defined by the 2022 Credit Agreement plus an applicable rate (see Note 8, Revolving Loan ).
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.
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.
In 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 (see Note 20, Derivative Instruments and Hedging Activities). 26 Table of Contents
In 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 (see Note 20, Derivative Instruments and Hedging Activities ). This derivative settled on its maturity date of June 27, 2023. 27 Table of Contents
Interest Rate Risk We have exposure to market risk for changes in interest rates, including the interest rate relating to our credit agreement dated July 27, 2022 (see Note 8, Revolving Loan). In 2019, we began to manage our interest rate exposure through the use of derivative instruments.
Interest Rate Risk We have exposure to market risk for changes in interest rates, including the interest rate relating to the 2022 Credit Agreement. In the second quarter of 2019, we began to manage our interest rate exposure through the use of derivative instruments.
Item 7A. 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 2019, we entered into an interest rate swap and cross-currency swap for hedging purposes. Refer to details noted below (see Note 20, Derivative Instruments and Hedging Activities).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our cash and cash equivalents are held primarily in checking accounts, certificates of deposit, and money market investment funds. In 2019, we entered into an interest rate swap and cross-currency swap for hedging purposes. These derivatives settled on their maturity date of June 27, 2023.
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 20, Derivative Instruments and Hedging Activities). As of December 31, 2022, the notional amount of our outstanding interest rate swap was $108,569.
These derivatives were utilized for risk management purposes, and were not used for trading or speculative purposes. We hedged a portion of our floating interest rate exposure using an interest rate swap (see Note 20, Derivative Instruments and Hedging Activities ). This derivative settled on its maturity date of June 27, 2023.
A 100 basis point increase or decrease in interest rates, applied to our borrowings at December 31, 2022, would result in an increase or decrease in annual interest expense and a corresponding reduction or increase in cash flow of approximately $4,406. We are exposed to commodity price risks, including prices of our primary raw materials.
The applicable rate is based upon our consolidated net leverage ratio, as defined in the 2022 Credit Agreement. A 100 basis point increase or decrease in interest rates, applied to our borrowings at December 31, 2023, would result in an increase or decrease in annual interest expense and a corresponding reduction or increase in cash flow of approximately $3,096.

Other BCPC 10-K year-over-year comparisons