What changed in BALCHEM CORP's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of BALCHEM CORP's 2023 and 2024 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 2024 report.
+164 added−175 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-16)
Top changes in BALCHEM CORP's 2024 10-K
164 paragraphs added · 175 removed · 141 edited across 9 sections
- Item 1. Business+51 / −54 · 37 edited
- Item 1A. Risk Factors+45 / −48 · 39 edited
- Item 7. Management's Discussion & Analysis+36 / −41 · 35 edited
- Item 4. Mine Safety Disclosures+10 / −11 · 9 edited
- Item 5. Market for Registrant's Common Equity+8 / −8 · 8 edited
Item 1. Business
Business — how the company describes what it does
37 edited+14 added−17 removed50 unchanged
Item 1. Business
Business — how the company describes what it does
37 edited+14 added−17 removed50 unchanged
2023 filing
2024 filing
Biggest changeIn addition, we invested $6,020 for environmental, health, safety, and security upgrades to our facilities and $3,024 in automation projects that improved quality and efficiency of our operations. In 2021, we invested $20,544 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment.
Biggest changeIn 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. In addition, we invested $6,020 for environmental, health, safety, and security upgrades to our facilities and $3,024 in automation projects that improved the quality and efficiency of our operations.
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.
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. Significant Acquisitions On August 30, 2022, the Company's wholly-owned subsidiary Albion Laboratories, Inc.
Management believes that success in the commodity-oriented choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace.
Management believes that success in the commodity-oriented choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its cost position to effectively compete in a global marketplace.
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.
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 2025 fiscal year.
In April 2008, the EPA issued a RED (“Re-registration Eligibility Decision”) for ethylene oxide which permitted the continued use of ethylene oxide “to sterilize medical or laboratory equipment, pharmaceuticals, and aseptic packaging, or to reduce microbial load on musical instruments, cosmetics, whole and ground spices and other seasoning materials and artifacts, archival material or library objects”.
In April 2008, the EPA issued a RED (“Re-registration Eligibility Decision”) for EtO which permitted the continued use of EtO “to sterilize medical or laboratory equipment, pharmaceuticals, and aseptic packaging, or to reduce microbial load on musical instruments, cosmetics, whole and ground spices and other seasoning materials and artifacts, archival material or library objects”.
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.
Intellectual Property We currently hold over 150 patents and over 400 registered 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 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 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").
In 2013, the EPA initiated a new registration review of ethylene oxide, in line with and as part of the registration review scheduled for a large number of other pesticides. When the Final Work Plan was issued in March 2014, the EPA anticipated that this registration review process would take approximately seven years.
In 2013, the EPA initiated a new registration review of EtO, in line with and as part of the registration review scheduled for a large number of other pesticides. When the Final Work Plan was issued in March 2014, the EPA anticipated that this registration review process would take approximately seven years.
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.
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 0.57, 1.39, and 1.17 in 2024, 2023, and 2022, respectively.
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 (“EtO”) to others as a medical device sterilant and spice fumigant and propylene oxide as a fumigant of nuts and spices.
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.
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.
Human Nutrition and Health The Human Nutrition and Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and health applications.
Human Nutrition and Health The Human Nutrition and Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products for nutrition and health applications.
A 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.
A 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 Decision and Draft Risk Assessment for propylene oxide. In July 2021, the EPA issued the Interim Decision.
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.
For the years ended December 31, 2024 and 2023, our turnover rate was 9% and 11%, respectively, for salaried employees with an average length of service of over 9 years for both years.
Balchem also provides financial support for health and wellness programs such as online financial wellness content, sponsored weight loss programs and subsidized gym memberships. We also provide generous time off and leave benefits, which are important to help ensure employees can enjoy a healthy balance between work and family time.
Balchem also provides financial support for health and wellness programs such as online financial wellness content, sponsored weight loss programs and subsidized gym memberships. We also provide generous time off and leave benefits, which are important to help ensure employees can maintain a healthy work/life balance.
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.
Capital expenditures are projected to range from $40,000 to $45,000 for 2025, 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.
Such reports are available via a link from the Investor Relations page on our website to a list of our reports on the SEC’s EDGAR website. The address of the SEC's website is www.sec.gov.
Such reports are available via a link from the Investors page on our website to a list of our reports on the SEC’s EDGAR website. The address of the SEC's website is www.sec.gov.
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.
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. In addition, we invested $6,900 for environmental, health, safety, and security upgrades to our facilities.
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.
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 required changes to the product label, and expect the EPA to review and approve them during 2025.
In December 2016, the EPA issued its Integrated Risk Information System (“IRIS”) assessment of ethylene oxide (the "IRIS Assessment"), another aspect of the EPA’s safety review of ethylene oxide. In November 2020, the EPA issued a Draft Human Health Risk Assessment for Ethylene Oxide (“Draft HHRA”).
In December 2016, the EPA issued its Integrated Risk Information System (“IRIS”) assessment of EtO (the "IRIS Assessment"), another aspect of the EPA’s safety review of EtO. In November 2020, the EPA issued a Draft Human Health Risk Assessment for Ethylene Oxide (“Draft HHRA”). In this Draft HHRA, the EPA presented multiple perspectives on risk extrapolation, including the IRIS Assessment.
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.
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 EtO. From time to time, our manufacturing sites may be subject to inspections by the EPA and other agencies.
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).
Backlog At December 31, 2024, we had a total backlog of $50,415 (comprised of $39,959 for the HNH segment; $9,035 for the ANH segment; $1,284 for the Specialty Products segment, and $137 for other), as compared to a total backlog of $42,957 at December 31, 2023 (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).
We produce products which are required to be manufactured in conformity with current Good Manufacturing Practice (“cGMP”) regulations as interpreted and enforced by the FDA, through third party contract arrangement.
The cost of such compliance has not had a material effect upon the results of our operations or our financial condition. We produce products which are required to be manufactured in conformity with current Good Manufacturing Practice (“cGMP”) regulations as interpreted and enforced by the FDA, through third party contract arrangement.
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.
We are committed to reducing our greenhouse gas emissions by implementing new technologies, improving operational efficiencies, and expanding green energy usages. In addition, we are committed to reducing our global water use by recycling water and investing new technologies to improve water efficiency. For more information on our approach to sustainability management, refer to our website at https://balchem.com/responsibility/sustainability.
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.
Our competition in this market is primarily regional privately-held companies. 3 Table of Contents Research and Development During the years ended December 31, 2024, 2023 and 2022, we incurred research and development expenses of approximately $16,793, $15,049, and $12,191, respectively, on Company-sponsored research and development for new products, improvements to existing products, and manufacturing processes.
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.
The development of new and improved products is also important to our ability to compete.
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.
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. For a further discussion of our potential environmental liabilities, see Note 16, Commitments and Contingencies, to our Consolidated Financial Statements.
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.
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. 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.
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.
While acknowledging the necessity of maintaining the critical uses of EtO, based on the range of unit risk provided in this qualitative assessment, the EPA stated that there should be further mitigation measures implemented. In April 2023, the EPA released a Proposed Interim Decision and Draft Human Health Risk Assessment addendum which included certain proposed mitigation measures.
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.
For the years ended December 31, 2024 and 2023, our turnover rate was 21% and 29%, respectively, for hourly employees with an average length of service of about 7 years for both years.
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.
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 2024, we published our 2023 Sustainability Report. This report provides detailed information regarding our corporate responsibility strategy, focus areas and governance structure.
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 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. 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.
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.
Capital Projects We continue to invest in projects across all production facilities and capital expenditures were approximately $35,148, $37,274, and $49,086 for 2024, 2023 and 2022, respectively.
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.
Such raw materials are derived from petrochemicals, minerals, metals, agricultural goods and other readily available commodities and are subject to price fluctuations due to market conditions. In 2024, supply reliability stabilized, although procuring certain raw materials remained a challenge due to the ongoing geopolitical environment impacting some supply lanes.
Such compliance includes the maintenance of required permits under air pollution regulations and compliance with requirements of the Occupational Safety and Health Administration. The cost of such compliance has not had a material effect upon the results of our operations or our financial condition.
We believe we are in compliance in all material respects with applicable laws and regulations that have been enacted or adopted relating to human health, safety and the environment. Such compliance includes the maintenance of required permits under air pollution regulations and compliance with requirements of the Occupational Safety and Health Administration.
As of December 31, 2023, we employed approximately 1,302 full-time employees worldwide, with approximately 18% covered by collective bargaining agreements.
We believe that our global team of talented and dedicated employees embody our Core Values and align with our vision of making the world a healthier place. As of December 31, 2024, we employed approximately 1,361 full-time employees worldwide, with approximately 17% covered by collective bargaining agreements.
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.
In 2024, we further refined our environmental, health, safety, and security management system to place greater emphasis on hazard identification and correction.
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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 .
Removed
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.
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Early deflationary trends shifted to an inflationary pattern during the year in several categories that we source. We continue to put measures in place to ensure a sustainable supply chain capable of supporting current demands and the future growth of our business.
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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.
Added
In 2024, we invested $17,202 on projects expected to provide favorable returns on investment, including expanded capacity in key product lines in the HNH segment and equipment upgrades to improve process reliability and support our business growth. In addition, we invested $7,200 for environmental, health, safety, and security upgrades to our facilities.
Removed
In April 2023, the EPA released a Proposed Interim Decision and Draft Human Health Risk Assessment addendum which included certain proposed mitigation measures.
Added
In January 2025, the EPA issued its Interim Decision (“ID”) whereby EtO was re-registered for the sterilization of medical devices and the reduction of microbes on certain spices/seasonings. The ID provides for a phase-out period for the use of EtO on certain spices, and it discontinues minor applications, such as use on musical instruments, cosmetics, and archival and library materials.
Removed
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.
Added
The ID also includes mitigation and monitoring measures impacting product users, including our customers, with phased compliance deadlines ranging from several months to ten years. Further, the ID contemplates that EPA will gather annual worker exposure data from EtO users, including our customers.
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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.
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The ID may be subject to further review, including additional stakeholder input. 4 Table of Contents EtO, 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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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.
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We are seeing some improvement in the labor market and feel our team has been successful in attracting and retaining skilled and experienced employees in a competitive landscape.
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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.
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Additionally, we continue to enhance and leverage our existing technological capabilities to further optimize productivity and performance, and explore new solutions to drive efficiencies. 5 Table of Contents We believe that our best performance is achieved when our teams reflect a variety of diverse backgrounds, experiences and perspectives.
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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.
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Fostering a culture of belonging is an important element of Balchem's Human Resources strategy. We continue to explore strategies to help ensure we have a fully engaged workforce and that we are able to attract the best and brightest from the broad workforce landscape.
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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.
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We enhanced our emphasis on near-miss reporting and improved communication across various locations, enabling us to address the root causes of incidents, and we have reallocated Environmental, Health, and Safety (EHS) resources to enable a more rapid response to safety enhancements. We continue to improve our working conditions and our work practices where safety is impacted.
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Training and Well-Being Programs We strive to develop employee skills and knowledge, which includes training for job-specific technical knowledge, regulatory requirements, and company policies, through our internal learning and development platform. The topics of trainings include the Company's Code of Conduct, anti-harassment and discrimination, foreign corrupt practices, antitrust, cyber security, and various other compliance subjects.
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Training and Well-Being Programs Our vision is to create a culture of learning and development of our employees to foster an environment of continuous learning. We are committed to the professional development of our workforce, investing in training programs designed to enhance employee skills and create career paths for advancement.
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Our sponsored employee continuing learning program offers a broad base of assistance for employees, including learning and development courses. We also deployed unconscious bias and inclusive leadership training to our management team. Employees have access to healthy lifestyle discounts through our Wellness Center, as well as debt, legal, and financial counseling.
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All employees are expected to complete necessary compliance training and have access to numerous online trainings for both personal and professional development. We continue to have our existing and emerging leaders participate in formal leadership development training.
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Leadership programs, peak performance training and multiple online services and courses enable our employees to choose their own learning paths and work towards achieving their goals for education, finances, and overall well-being.
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Through our Employee Assistance Program and healthcare benefit provider, our employees have access to resources to help support positive mental health, emotional well-being, and healthy lifestyles. Additionally, employees have access to resources which can provide aid with financial and legal issues, as well as support in handling elder care challenges.
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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.
Added
We are continuing to improve employee retention with effective employment engagement efforts with frequent town hall meetings, a tool to promote peer to peer recognition, and various rewards and recognition programs. Sustainability We operate as strong stewards of our shareholders, customers, suppliers, employees, and the communities in which we operate.
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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.
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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.
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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.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
39 edited+6 added−9 removed95 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
39 edited+6 added−9 removed95 unchanged
2023 filing
2024 filing
Biggest changeIn addition, we cannot predict the extent to which any legislation or regulation may affect the market for our products or our cost of doing business.
Biggest changeIn addition, we cannot predict the extent to which any legislation or regulation may affect the market for our products or our cost of doing business. 14 Table of Contents Concerns about ethylene oxide emissions have resulted in regulatory requirements for ethylene oxide users that have impacted, and may continue to impact, such users' ability to use the ethylene oxide process to sterilize medical devices among other things, which may, in turn, affect sales to our customers and our operations.
We may from time to time become involved in legal proceedings and disputes incidental to the operation of our business. Our business may be adversely affected by the outcome of these proceedings and other contingencies (including, without limitation, product liability, tort, environmental, intellectual property, antitrust, data protection, privacy, and labor and employment matters) that cannot be predicted with certainty.
We may from time to time become involved in various legal proceedings and disputes incidental to the operation of our business. Our business may be adversely affected by the outcome of these proceedings and other contingencies (including, without limitation, product liability, tort, environmental, intellectual property, antitrust, data protection, privacy, and labor and employment matters) that cannot be predicted with certainty.
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.
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; geopolitical tensions; and preference for locally produced products.
Our business exposes us to potential product liability claims and recalls, which could adversely impact our financial condition and performance. Our development, manufacture and sales of food ingredient, pharmaceutical and nutritional supplement products involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity.
Our business exposes us to potential product liability claims and recalls, which could adversely impact our financial condition and performance. Our development, manufacture and sales of food ingredient, pharmaceutical, nutritional supplement and other products involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity.
Political or financial instability, currency fluctuations, the outbreak of pandemics or other illnesses (such as the COVID-19 pandemic), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could alter or suspend our operations, slow or disrupt port activities, or affect foreign trade are beyond our control and could materially disrupt our supply of raw materials, increase our costs, and/or adversely affect our results of operations.
Political or financial instability, geopolitical tensions, currency fluctuations, the outbreak of pandemics or other illnesses (such as the COVID-19 pandemic), labor unrest, transport capacity and costs, port security, weather conditions, natural disasters, or other events that could alter or suspend our operations, slow or disrupt port activities, or affect foreign trade are beyond our control and could materially disrupt our supply of raw materials, increase our costs, and/or adversely affect our results of operations.
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.
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.
As a result, such disruptions will put upward pressure on our costs and increase the risk that we may be unable to acquire the materials and services we need to continue to make certain products, in particular at our manufacturing facilities in Europe. Our financial success depends in part on the reliability and sufficiency of our manufacturing facilities.
As a result, such disruptions will put upward pressure on our costs and increase the risk that we may be unable to acquire the materials and services we need to continue to make certain products, in particular at our manufacturing facilities in Europe. 7 Table of Contents Our financial success depends in part on the reliability and sufficiency of our manufacturing facilities.
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.
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.
Our sales and operations are subject to a number of risks, including political and economic instability, which could have a material adverse impact on our ability to increase or maintain our international sales and operations.
Our sales and operations are subject to a number of risks, including political and economic instability and geopolitical tensions, which could have a material adverse impact on our ability to increase or maintain our international sales and operations.
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.
Although we maintain certain 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.
While we continue to diversify our product offerings, developing new products entails risks and we cannot be certain that demand for our products and products containing our products will continue at current levels or increase in the future. Legal, Regulatory and Compliance Risks Material adverse legal judgments, fines, penalties or settlements could adversely affect our business.
While we continue to diversify our product offerings, developing new products entails risks and we cannot be certain that demand for our products and products containing our products will continue at current levels or increase in the future. 12 Table of Contents Legal, Regulatory and Compliance Risks Material adverse legal judgments, fines, penalties or settlements could adversely affect our business.
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.
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.
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.
Additionally, some state and local regulators have drawn their own conclusions from the IRIS Assessment, which has resulted in some actions against our customers that continue to impact these customers’ ability to use the EtO process to sterilize medical devices.
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.
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.
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.
National and international conflicts such as war, border closures, civil disturbances and terrorist acts, including Russia's invasion of Ukraine and the ongoing conflict in the Middle East, 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.
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.
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 emerging technologies, such as artificial intelligence and machine learning.
There is an increased focus from our stakeholders on Environmental, Social and Governance (“ESG”) practices and disclosure – and if we fail, or are perceived to have failed, in any number of ESG matters, such as environmental stewardship, goals regarding our intended reduction of carbon emissions and water usage, inclusion and diversity, workplace conduct and support for local communities, or to effectively respond to changes in, or new, legal or regulatory requirements concerning climate change or other sustainability concerns, our reputation or the reputation of our brands may suffer.
With respect to interest from our stakeholders on Environmental, Social and Governance (“ESG”) practices and disclosure, if we fail, or are perceived to have failed, in any number of ESG matters, such as environmental stewardship, goals regarding our intended reduction of carbon emissions and water usage, workplace conduct and belonging, and support for local communities, or to effectively respond to changes in, or new, legal or regulatory requirements concerning climate change, climate risk reporting, or other sustainability concerns, our reputation or the reputation of our brands may suffer.
Despite our efforts to protect such data, the loss or breach of such data due to various causes including material security breaches, catastrophic events, extreme weather, natural disasters, power outages, system failures, computer viruses, improper data handling, programming errors, unauthorized access and employee error or malfeasance could result in wide reaching negative impacts to our business, and as such, the ongoing maintenance and security of this information is pertinent to the success of our business operations and our strategic goals.
Despite our efforts to protect such data, the loss or breach of such data due to various causes including material security breaches, catastrophic events, extreme weather, natural disasters, power outages, system failures, computer viruses, improper data handling, programming errors, unauthorized access and employee error or malfeasance could result in wide reaching negative impacts to our business, and as such, the ongoing maintenance and security of this information is pertinent to the success of our business operations and our strategic goals. 9 Table of Contents Our networking infrastructure and related assets may be subject to unauthorized access by hackers, employee error or malfeasance or other unforeseen activities.
This scrutiny is associated with the IRIS Assessment described in “Item 1. Business – Environmental and Regulatory Matters” of this report, which deemed exposure to ethylene oxide as unsafe at levels far below those found in the environment.
This scrutiny is associated with the IRIS Assessment described in “Item 1. Business – Environmental and Regulatory Matters” of this report, which deemed chronic exposure to EtO over many years as unsafe at levels below those found in the environment.
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.
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. 8 Table of Contents We may be subject to risks relating to our information technology and operational technology systems.
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.
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.
We may not be able to effectively manage and implement restructuring initiatives or other organizational changes. We may, from time to time, restructure or make other adjustments to our workforce and manufacturing footprint in response to market or product changes, performance issues, changes in strategy, acquisitions and/or other internal and external considerations.
We may, from time to time, restructure or make other adjustments to our workforce and manufacturing footprint in response to market or product changes, performance issues, changes in strategy, acquisitions and/or other internal and external considerations.
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.
The EPA began using the IRIS Assessment in 2020 to regulate change to existing permissible emissions limits at facilities that produce or use EtO in non-sterilization processes, and subsequently implemented rules for EtO sterilization facilities as well.
We believe we have reliable sources of supply for our raw materials under normal market conditions. We cannot, however, predict the likelihood or impact of any future raw material shortages. Any shortages or unforeseen price increases could have a material adverse impact on our results of operations.
We believe we have reliable sources of supply for our raw materials under normal market conditions. We cannot, however, predict the likelihood or impact of any future raw material shortages.
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.
These products are progressing through a multi-year FIFRA re-registration review process. Recent 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.
There is increased focus on the use and emissions of ethylene oxide by the EPA and state environmental agencies. Certain of the Company’s customers who use ethylene oxide in the U.S. for the sterilization of medical devices have received ongoing state and local scrutiny for environmental concerns at their facilities.
In recent years, there has been increased focus on the use and emissions of ethylene oxide (“EtO”) by the EPA and some state environmental agencies. Certain of the Company’s customers who use EtO in the U.S. mainly for the sterilization of medical devices have received ongoing federal, state, and local scrutiny related to potential emissions of EtO at their facilities.
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.
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.
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.
Such increased regulation could require users of EtO to temporarily suspend operations to install additional emissions control technology, limit the use of EtO or take other actions which could ultimately impact our business, financial condition or results of operations. Item 1B. Unresolved Staff Comments None.
If we are unable to effectively manage real or perceived issues, including concerns about product quality, safety, corporate social responsibility or other matters, sentiments toward the Company or our products could be negatively impacted, and our financial results could suffer.
If we are unable to effectively manage real or perceived issues, including concerns about product quality, safety, corporate social responsibility or other matters, sentiments toward the Company or our products could be negatively impacted, and our financial results could suffer. 13 Table of Contents Our reputation, ability to do business and results of operations could be impaired by adverse publicity or improper conduct by any of our employees, agents or business partners.
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.
Furthermore, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a currency different than the functional currency. 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.
We are subject to regulation under a variety of U.S. federal and state and non-U.S. laws, regulations and policies including laws related to anti-corruption, export and import compliance, anti-trust and money laundering due to our global operations. We cannot provide assurance that our internal controls will always protect us from the improper conduct of our employees, agents and business partners.
We are subject to regulation under a variety of U.S. federal and state and non-U.S. laws, regulations and policies, including laws related to environmental, health and safety, anti-corruption, export and import compliance, anti-trust and money laundering due to our global operations.
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.
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 motivated workforce.
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.
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.
If we are unable to consummate such transactions, or successfully integrate and grow acquisitions and achieve contemplated revenue synergies and cost savings, our financial results could be adversely affected. Additionally, joint ventures inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks.
If we are unable to consummate such transactions, or successfully integrate and grow acquisitions and achieve contemplated revenue synergies and cost savings, our financial results could be adversely affected.
Our international operations subject us to currency translation risk and currency transaction risk which could cause our results to fluctuate from period to period. The financial condition and results of operations of our foreign subsidiaries are reported in local currencies and then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements.
The financial condition and results of operations of our foreign subsidiaries are reported in local currencies and then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our consolidated financial statements. Exchange rates between these currencies in recent years have fluctuated and may do so in the future.
Further, additional regulatory requirements associated with the use and emission of ethylene oxide may be imposed in the future, both within and outside of the U.S.
If the ID and other requirements remain unchanged, such requirements will likely result in increased costs and regulatory burdens for EtO users. Further, additional regulatory requirements associated with the use and emission of EtO may be imposed in the future, both within and outside of the U.S.
The principal raw materials that we use in the manufacture of our products can be subject to price fluctuations due to market conditions and factors beyond our control, including the COVID-19 pandemic and inflationary pressures, both of which have impacted our business over the past several years and are likely to continue for some time.
Raw material shortages or price increases could adversely affect our business and financial results. The principal raw materials that we use in the manufacture of our products can be subject to price fluctuations due to market conditions and factors beyond our control, including severe hazards, global health crises and inflationary pressures.
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.
Due to these regulatory actions, many customers have taken or are expected to take some downtime to install new abatement equipment. In January 2025, the EPA issued its Interim Decision (“ID”) whereby EtO was re-registered for the sterilization of medical devices and the reduction of microbes on certain spices/seasonings.
Global economic conditions may adversely affect our business, operating results and financial condition.
Global economic conditions may adversely affect our business, operating results and financial condition. Unfavorable changes in economic conditions, including inflation, monetary policies, 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.
Removed
We may be subject to risks relating to our information technology and operational technology systems.
Added
Any shortages or unforeseen price increases could have a material adverse impact on our results of operations. 10 Table of Contents Our international operations subject us to currency translation risk and currency transaction risk which could cause our results to fluctuate from period to period.
Removed
Our networking infrastructure and related assets may be subject to unauthorized access by hackers, employee error or malfeasance or other unforeseen activities.
Added
Additionally, joint ventures inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks. 11 Table of Contents We may not be able to effectively manage and implement restructuring initiatives or other organizational changes.
Removed
Raw material shortages or price increases could adversely affect our business and financial results.
Added
We cannot provide assurance that our internal controls will always protect us from the improper conduct of our employees, agents and business partners.
Removed
Exchange rates between these currencies in recent years have fluctuated and may do so in the future. Furthermore, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a currency different than the functional currency.
Added
The ID provides for a phase-out period for the use of EtO on certain spices, discontinues certain minor applications, and includes mitigation and monitoring measures impacting product users, including our customers, with phased compliance deadlines ranging from several months to ten years. Further, the ID contemplates that EPA will gather annual worker exposure data from EtO users, including our customers.
Removed
Our reputation, ability to do business and results of operations could be impaired by adverse publicity or improper conduct by any of our employees, agents or business partners.
Added
EtO registrants may not continue to sell EtO products to customers who do not provide such data. While the Company remains confident that the sterilization industry as a whole will take appropriate measures to comply with the latest EPA requirements in a timely manner, there is no assurance that this will consistently be the case.
Removed
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.
Added
The ID and other requirements may be subject to further review, including additional stakeholder input, and the Company plans on continuing to work with various stakeholders to help ensure the EPA considers all available assessments to appropriately evaluate the risks of EtO.
Removed
Concerns about ethylene oxide emissions have resulted in certain state actions against certain of our customers that are currently impacting these customers’ ability to use the ethylene oxide process to sterilize medical devices, which may, in turn, affect sales to these customers.
Removed
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.
Removed
While the Company believes that EPA will, as it has in the past, ultimately regulate to lower emissions levels based on a combined consideration of the various assessments available and that industry will then adopt practices and procedures to ensure compliance with these new regulations, there is no assurance that this will be the case.
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
6 edited+1 added−0 removed9 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
6 edited+1 added−0 removed9 unchanged
2023 filing
2024 filing
Biggest changeThe global head of Information Security, possessing credentials in both information technology (“IT”) and cybersecurity, provides regular updates to senior management.
Biggest changeHe has degrees in both management information systems and cybersecurity - and has held a number of progressing roles, including management of global infrastructure, information security and technology operations at Balchem, in addition to managing a global team of information technology and cybersecurity experts. The IT department provides regular updates to senior management.
Item 1C. Cybersecurity Cybersecurity is a critical part of our enterprise risk management. The Board, through its Audit Committee, oversees enterprise risk management, including cybersecurity. To more effectively address cybersecurity threats, we have numerous security layers within our least privilege network approach which is managed by our Information Technology Department.
Item 1C. Cybersecurity Cybersecurity is a critical part of our enterprise risk management. The Board, through its Audit Committee, oversees enterprise risk management, including cybersecurity. To more effectively address cybersecurity threats, we have numerous security layers within our least privilege network approach which is managed by our Information Technology ("IT") department.
In the event of a possible cybersecurity incident, we would immediately implement our crisis management plan, which includes the following steps: (1) Internal reporting and review of the incident or development (2) Gathering and assessing information (3) Developing and implementing a communications strategy (4) Monitoring and evaluating a response 15 Table of Contents (5) Debrief and recovery As part of the gathering and assessment of information in step 2, we will consider various factors to make a materiality determination of the incident, including business impact, potential costs, impacted data, scope of the incident, possible litigation or regulatory implications, and reputational damage.
In the event of a possible cybersecurity incident, we would immediately implement our crisis management plan, which includes the following steps: (1) Internal reporting and review of the incident or development (2) Gathering and assessing information (3) Developing and implementing a communications strategy (4) Monitoring and evaluating a response (5) Debrief and recovery As part of the gathering and assessment of information in step 2, we will consider various factors to make a materiality determination of the incident, including business impact, potential costs, impacted data, scope of the incident, possible litigation or regulatory implications, and reputational damage.
Additionally, they provide at least an annual update, or more frequently if necessary, to both the Audit Committee and the full Board regarding the current threat landscape at Balchem, cybersecurity technologies, mitigation strategies, industry trends and best practices that we follow, major cybersecurity incidents (if any), and other areas of importance.
Additionally, he provides at least an annual update, or more frequently if necessary, to both the Audit Committee and the full Board regarding the current threat landscape at Balchem, cybersecurity technologies, mitigation strategies, industry trends and best practices that we follow, major cybersecurity incidents (if any), and other areas of importance.
We continue to make significant investments in industry-leading and advanced technologies as part of our strategy to strengthen our security posture, business continuity capabilities, and ability to protect and safeguard systems and stakeholder data.
We continue to make significant investments in industry-leading and advanced technologies as part of our strategy to strengthen our security 15 Table of Contents posture, business continuity capabilities, and ability to protect and safeguard systems and stakeholder data.
The global head of Information Security has responsibility over cybersecurity management globally and reports directly to the Chief Financial Officer. Additional activities to maintain and enhance information security are discussed below. • Reliable, Scalable Systems and Infrastructure Our information security systems, infrastructure, and processes are built on and follow the U.S.
Additional activities to maintain and enhance information security are discussed below. • Reliable, Scalable Systems and Infrastructure Our information security systems, infrastructure, and processes are built on and follow the U.S.
Added
The global head of our IT department has responsibility over cybersecurity management globally and reports directly to the Chief Financial Officer.
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed1 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+0 added−0 removed1 unchanged
2023 filing
2024 filing
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.
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 7 foreign countries 1 17 6 ANH 9 U.S. cities and 2 foreign countries — 9 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.
Item 2. Properties Our corporate headquarters is located in Montvale, New Jersey. Our operations are conducted at our owned and leased facilities throughout the U.S. and other foreign countries. These facilities house manufacturing and warehousing operations, as well as administrative offices.
Item 2. Properties Our corporate headquarters is located in Montvale, New Jersey. Our operations are conducted at our owned and leased facilities throughout the U.S. and other foreign countries. These facilities house manufacturing and warehousing operations, as well as 16 Table of Contents administrative offices.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−0 removed4 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
1 edited+0 added−0 removed4 unchanged
2023 filing
2024 filing
Biggest changeInformation 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.
Biggest changeInformation 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, 2024 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
9 edited+1 added−2 removed1 unchanged
Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
9 edited+1 added−2 removed1 unchanged
2023 filing
2024 filing
Biggest changeMartin 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.
Biggest changeBengtsson has also served as our General Manager, Animal Nutrition and Health since March 2024. Hatsuki Miyata , age 49, has served as our Executive Vice President, Chief Legal Officer and Secretary since February 2025 and prior to that, as our General Counsel 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. Frederic Boned , age 46, has served as our Senior Vice President and General Manager, Human Nutrition and Health, since November 2022.
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. Frederic Boned , age 47, has served as our Senior Vice President and General Manager, Human Nutrition and Health, since November 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. 17 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. 18 Table of Contents PART II
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.
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. Martin L.
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.
Sestrick , Ph.D., age 61, has served as our Senior Vice President and Chief Technology 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 47, 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 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.
Prior to that, he served as our Vice President and General Manager, Specialy 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 58, has served as our Vice President and Chief Accounting Officer since October 2017. All above-listed officers except for Ms.
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.
Reid , age 58, 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 served as Chief Supply Chain Officer at Godiva Chocolate from May 2019 to December 2020. Michael R.
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.
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.
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.
Item 4. Mine Safety Disclosures Not applicable. 17 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is a list of executive officers of the Company as of February 21, 2025. Theodore L.
Removed
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.
Added
Harris , age 59, has served as our Chairman, President and Chief Executive Officer since 2017, and prior to that, as Board Director, President and Chief Executive Officer since 2015. C. Martin Bengtsson , age 47, has served as our Executive Vice President and Chief Financial Officer since February 2019. Mr.
Removed
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.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
8 edited+0 added−0 removed1 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
8 edited+0 added−0 removed1 unchanged
2023 filing
2024 filing
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.
Biggest changeThe performance of the Common Stock shown on the graph below is historical only and not necessarily indicative of future performance. 20 Table of Contents Issuer Purchase of Equity Securities The following table summarizes the share repurchase activity for the year ended December 31, 2024: 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, 2024 504 $ 140.87 504 $ 92,895,219 February 1-29, 2024 35,618 $ 144.07 35,618 $ 89,872,019 March 1-31, 2024 — $ — — $ 89,872,019 First Quarter 36,122 36,122 April 1-30, 2024 72 $ 152.79 72 $ 95,300,929 May 1-31, 2024 — $ — — $ 95,300,929 June 1-30, 2024 — $ — — $ 95,300,929 Second Quarter 72 72 July 1-31, 2024 616 $ 180.78 616 $ 112,647,995 August 1-31, 2024 299 $ 173.19 299 $ 107,866,715 September 1-30, 2024 — $ — — $ 107,866,715 Third Quarter 915 915 October 1-31, 2024 272 $ 171.46 272 $ 106,742,594 November 1-30, 2024 241 $ 176.63 241 $ 109,918,615 December 1-31, 2024 1,300 $ 166.53 1,300 $ 103,418,864 Fourth Quarter 1,813 1,813 Total 38,922 38,922 (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.
(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
(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] 21 Table of Contents
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.
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, 2024. There is no expiration for this program.
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.
Such number does not include stockholders who hold their stock in street name. 19 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, 2024, 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, 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.
Specialty Chemicals Index, in each case assuming a comparable initial investment of $100 on December 31, 2019 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.
(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.
(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 3,142,028 shares have been repurchased.
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.
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 7, 2025, the closing price for the Common Stock on the Nasdaq Stock Market LLC was $160.28.
Record Holders As of February 2, 2024, the approximate number of holders of record of Common Stock was 64.
Record Holders As of February 7, 2025, the approximate number of holders of record of Common Stock was 59.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
35 edited+1 added−6 removed16 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
35 edited+1 added−6 removed16 unchanged
2023 filing
2024 filing
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.
Biggest changeResults of Operations - Fiscal Year 2024 compared to Fiscal Year 2023 Summary of Consolidated Statements of Earnings (in thousands) 2024 2023 Increase (Decrease) % Change Net sales $ 953,684 $ 922,439 $ 31,245 3.4 % Gross margin 336,206 302,056 34,150 11.3 % Operating expenses 153,297 142,863 10,434 7.3 % Earnings from operations 182,909 159,193 23,716 14.9 % Interest and other expenses 16,456 21,932 (5,476) (25.0) % Income tax expense 37,978 28,718 9,260 32.2 % Net earnings $ 128,475 $ 108,543 $ 19,932 18.4 % Management's discussion and analysis of the Consolidated Statements of Earnings is included below: Net Sales Increase (Decrease) (in thousands) 2024 2023 % Change Human Nutrition and Health $ 600,258 $ 550,751 $ 49,507 9.0 % Animal Nutrition and Health 214,710 238,326 (23,616) (9.9) % Specialty Products 132,749 125,965 6,784 5.4 % Other 5,967 7,397 (1,430) (19.3) % Total $ 953,684 $ 922,439 $ 31,245 3.4 % • The increase in net sales within the Human Nutrition and Health segment for 2024 compared to 2023 was driven by higher sales within both the nutrients business and the food ingredients and solutions businesses.
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.
However, if these funds are needed for U.S. operations, we could be required to pay additional withholding taxes to repatriate these funds. In 2023, 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.
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.
In addition, discussion of year-to-year comparisons between 2023 and 2022 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, 2023.
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.
Since the inception of the program in June 1999, a total of 3,142,028 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.
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.
Unallocated corporate expenses consist of: (i) Transaction and integration costs, ERP implementation costs, and unallocated legal fees totaling $1,484, $1,617 and $3,581 for years ended December 31, 2024, 2023 and 2022, respectively, and (ii) Unallocated amortization expense of $0, $312, and $2,951 for years ended December 31, 2024, 2023, and 2022, respectively, related to an intangible asset in connection with a company-wide ERP system implementation. 22 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.
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.
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, 2024 and December 31, 2023 was $1,522 and $1,395, respectively, and the plans are not funded.
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.
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, 2024 and December 31, 2023 was $613 and $420, respectively, and was included in other long-term obligations.
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.
Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (filed with the SEC on February 16, 2024) for additional discussion of our financial condition and results of operations for the year ended December 31, 2022.
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.
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 $17,228 and $5,242 for the years ended December 31, 2024 and 2023, 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.
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 $35,661 and $37,892 for the years ended December 31, 2024 and 2023, respectively. Capital expenditures are projected to be approximately $40,000 to $45,000 for 2025.
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
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.
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.
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, 2024, such purchase obligations were $103,255.
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.
For debt obligations, see Note 8, Revolving Loan , and for operating and finance lease obligations, see Note 19, Leases . We are not aware of any current or pending demands on, or commitments for, our liquid assets that will materially affect our liquidity.
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.
Dividend payments were $25,576 and $22,872 during 2024 and 2023, respectively. Other Matters Impacting Liquidity We have a liability of $6,720 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.
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.
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.
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.
Financing Activities In 2024, we borrowed $26,000 to fund the payment of the 2023 dividend and made total loan repayments of $145,569, resulting in $360,000 available under the 2022 Credit Agreement (see Note 8, Revolving Loan ) as of December 31, 2024. We have an approved stock repurchase program. The total authorization under this program is 3,763,038 shares.
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 increased by 5.4%, with average selling prices contributing 3.9% and volume and mix contributing 1.4%. • Sales relating to Other decreased from the prior year primarily due to lower average selling prices. • 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. 23 Table of Contents Gross Margin (in thousands) 2024 2023 Increase (Decrease) % Change Gross margin $ 336,206 $ 302,056 $ 34,150 11.3 % % of net sales 35.3 % 32.7 % Gross margin dollars increased for 2024 compared to 2023 due to higher sales, a favorable mix and a decrease in cost of goods sold of $2,905.
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.
The following tables summarize consolidated net sales by segment and business segment earnings from operations for the three years ended December 31, 2024, 2023 and 2022 (in thousands): Business Segment Net Sales 2024 2023 2022 Human Nutrition and Health $ 600,258 $ 550,751 $ 527,131 Animal Nutrition and Health 214,710 238,326 262,297 Specialty Products 132,749 125,965 131,438 Other and Unallocated (1) 5,967 7,397 21,492 Total $ 953,684 $ 922,439 $ 942,358 Business Segment Earnings From Operations 2024 2023 2022 Human Nutrition and Health $ 135,957 $ 102,419 $ 82,125 Animal Nutrition and Health 14,013 27,576 36,056 Specialty Products 39,906 34,579 32,789 Other and Unallocated (1) (6,967) (5,381) (5,784) Total $ 182,909 $ 159,193 $ 145,186 (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.
Gabriel CC Company, LLC for the years ended December 31, 2023 and December 31, 2022. Refer to Note 18, Related Party Transactions .
Related Party Transactions We were engaged in related party transactions with St. Gabriel CC Company, LLC for the years ended December 31, 2024 and December 31, 2023. Refer to Note 18, Related Party Transactions .
We expect our operations to continue generating sufficient cash flow to fund working capital requirements and necessary capital investments. We are actively pursuing additional acquisition candidates. We could seek additional bank loans or access to financial markets to fund such acquisitions, our operations, working capital, necessary capital investments or other cash requirements should we deem it necessary to do so.
We are actively pursuing additional acquisition candidates. We could seek additional bank loans or access to financial markets to fund such acquisitions, our operations, working capital, necessary capital investments or other cash requirements should we deem it necessary to do so. Cash Cash and cash equivalents decreased to $49,515 at December 31, 2024 from $64,447 at December 31, 2023.
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.
Total sales for this segment grew 9.0%, with volume and mix contributing 6.6% and average selling prices contributing 2.4%. • The decrease in net sales within the Animal Nutrition and Health segment for 2024 compared to 2023 was driven by lower sales in both the monogastric and ruminant species markets.
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.
They are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The deferred compensation liability was $11,470 as of December 31, 2024, of which $11,449 was included in "Other long-term obligations" and $21 was included in "Accrued compensation and other benefits" on our condensed consolidated 26 Table of Contents balance sheets.
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.
Total sales for this segment decreased by 9.9%, with average selling prices contributing -6.1% and volume and mix contributing -3.8%. • The increase in net sales within the Specialty Products segment for 2024 compared to 2023 was due to higher sales in the performance gases market, partially offset by lower sales in the plant nutrition business.
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.
There were no material changes during the year ended December 31, 2024 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, 2023. We expect our operations to continue generating sufficient cash flow to fund working capital requirements and necessary capital investments.
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.
Gross margin decreased $11,198 primarily due to the aforementioned lower sales, partially offset by certain lower manufacturing input costs. • Specialty Products segment earnings from operations increased $5,327 due to an increase in gross margin of $9,518. The increase in gross margin was primarily due to the aforementioned higher sales and certain lower manufacturing input costs.
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.
This was partially offset by an increase in operating expenses of $4,191, mainly due to higher compensation-related costs. • The decrease in Other and unallocated was primarily driven by the aforementioned lower sales, partially offset by lower unallocated corporate expenses. 24 Table of Contents Other Expenses (Income) (in thousands) 2024 2023 Increase (Decrease) % Change Interest expense, net $ 16,528 $ 22,613 $ (6,085) (26.9) % Other (income) expense, net (72) (681) 609 89.4 % $ 16,456 $ 21,932 $ (5,476) (25.0) % Interest expense for 2024 and 2023 was primarily related to outstanding borrowings under the 2022 Credit Agreement.
The 6.3% decrease in cost of goods sold was mainly driven by lower sales and certain lower manufacturing input costs.
Cost of goods sold decreased by 0.5%, mainly driven by certain lower manufacturing input costs.
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 decrease in net interest expense is mainly due to lower outstanding borrowings. Income Tax Expense (in thousands) 2024 2023 Increase (Decrease) % Change Income tax expense $ 37,978 $ 28,718 $ 9,260 32.2 % Effective tax rate 22.8 % 20.9 % The increase in the effective tax rate was primarily due to an increase in certain foreign taxes.
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.
Earnings From Operations (in thousands) 2024 2023 Increase (Decrease) % Change Human Nutrition and Health $ 135,957 $ 102,419 $ 33,538 32.7 % Animal Nutrition and Health 14,013 27,576 (13,563) (49.2) % Specialty Products 39,906 34,579 5,327 15.4 % Other and unallocated (6,967) (5,381) (1,586) (29.5) % Earnings from operations $ 182,909 $ 159,193 $ 23,716 14.9 % % of net sales (operating margin) 19.2 % 17.3 % • Human Nutrition & Health segment earnings from operations increased $33,538 primarily due to a gross margin contribution of $37,635.
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.
At December 31, 2024, we had $44,189 of cash and cash equivalents held by our foreign subsidiaries.
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.
Significant cash payments during the year included net payments on the revolving loan of $119,569, income taxes paid of $42,643, capital expenditures and intangible assets acquired of $35,661, the payment of the 2023 declared dividend in 2024 of $25,576, and cash paid for an acquisition of $24,164. 25 Table of Contents (in thousands) 2024 2023 Increase (Decrease) % Change Cash flows provided by operating activities $ 181,999 $ 183,761 $ (1,762) (1.0) % Cash flows used in investing activities (59,736) (34,813) (24,923) (71.6) % Cash flows used in financing activities (133,815) (153,321) 19,506 12.7 % Operating Activities The decrease in cash flows from operating activities was primarily driven by the impact from changes in working capital.
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 was $10,188 as of December 31, 2023 and was included in "Other long-term obligations" on our condensed consolidated balance sheets. The related rabbi trust assets were $11,465 and $10,188 as of December 31, 2024 and 2023, respectively, and were included in "Other non-current assets" on the Company's consolidated balance sheets.
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.
Working capital was $156,085 at December 31, 2024 as compared to $165,751 at December 31, 2023, a decrease of $9,666.
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.
Cash paid to acquire an existing toll manufacturer to add capacity amounted to $24,164 for the year ended December 31, 2024, net of cash acquired. Cash paid for acquisitions, net of cash acquired, amounted to $1,252 for year ended December 31, 2023.
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.
Operating Expenses (in thousands) 2024 2023 Increase (Decrease) % Change Operating expenses $ 153,297 $ 142,863 $ 10,434 7.3 % % of net sales 16.1 % 15.5 % The increase in operating expenses was primarily due to the impact of favorable adjustments to transaction costs in the prior year of $11,300, an increase in compensation-related expenses of $9,074, higher professional services of $1,950, and the impact of a gain on the sale of fixed assets of $1,338 in the prior year, partially offset by lower amortization expense of $8,867 and a decrease in restructuring-related impairment charges of $7,243.
Removed
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.
Added
The increase in gross margin was driven by the aforementioned higher sales, a favorable mix and certain lower manufacturing input costs. • Animal Nutrition & Health segment earnings from operations decreased $13,563.
Removed
The increase in interest expense is due to the additional borrowings in connection with the acquisitions and higher interest rates.
Removed
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.
Removed
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.
Removed
Income Taxes The valuation methods and assumptions used in calculating income taxes, deferred tax assets and liabilities, and valuation allowances involve a significant level of estimation uncertainty. Refer to the Income Taxes in Note 1, Business Description and Summary of Significant Accounting Policies , for details.
Removed
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+0 added−0 removed4 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+0 added−0 removed4 unchanged
2023 filing
2024 filing
Biggest changeThese 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.
Biggest changeThese 27 Table of Contents 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.
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
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. 28 Table of Contents
Refer 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 ).
Refer to details noted below (see Note 20, Derivative Instruments and Hedging Activities ). Additionally, as of December 31, 2024, 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 ).
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.
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, 2024, would result in an increase or decrease in annual interest expense and a corresponding reduction or increase in cash flow of approximately $1,900.