FORM 10-Q |
(Mark One) | |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019 | |
OR | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____ | |
Maryland | 13-2578432 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
52 Sunrise Park Road, New Hampton, NY 10958 | ||
(Address of principal executive offices) (Zip Code) | ||
Registrant’s telephone number, including area code: (845) 326-5600 | ||
(Check one): | Large accelerated filer þ | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | |
Page No. | ||||
Assets | March 31, 2019 (unaudited) | December 31, 2018 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $583 and $610 at March 31, 2019 and December 31, 2018 respectively | ||||||||
Inventories | ||||||||
Prepaid expenses | ||||||||
Assets held for sale | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Property, plant and equipment, net | ||||||||
Goodwill | ||||||||
Intangible assets with finite lives, net | ||||||||
Right of use assets | ||||||||
Other assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Accrued compensation and other benefits | ||||||||
Dividends payable | ||||||||
Income tax payable | ||||||||
Lease liabilities - current | ||||||||
Liabilities held for sale | ||||||||
Total current liabilities | ||||||||
Revolving loan | ||||||||
Deferred income taxes | ||||||||
Lease liabilities - non-current | ||||||||
Other long-term obligations | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (note 16) | ||||||||
Stockholders' equity: | ||||||||
Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding | ||||||||
Common stock, $.0667 par value. Authorized 120,000,000 shares; 32,336,228 shares issued and 32,330,032 outstanding at March 31, 2019 and 32,256,915 shares issued and 32,256,209 outstanding at December 31, 2018, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Treasury stock, at cost: 6,196 and 706 shares at March 31, 2019 and December 31, 2018 | ( | ) | ( | ) | ||||
Total stockholders' equity | ||||||||
Total liabilities and stockholders' equity | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net sales | $ | $ | ||||||
Cost of sales | ||||||||
Gross margin | ||||||||
Operating expenses: | ||||||||
Selling expenses | ||||||||
Research and development expenses | ||||||||
General and administrative expenses | ||||||||
Earnings from operations | ||||||||
Other expenses: | ||||||||
Interest expense, net | ||||||||
Other, net | ||||||||
Earnings before income tax expense | ||||||||
Income tax expense | ||||||||
Net earnings | $ | $ | ||||||
Net earnings per common share - basic | $ | $ | ||||||
Net earnings per common share - diluted | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net earnings | $ | $ | ||||||
Other comprehensive (loss) income, net of tax: | ||||||||
Net foreign currency translation adjustment | ( | ) | ||||||
Net change in postretirement benefit plans, net of taxes of $(2) and $(4) for the three months ended March 31, 2019 and 2018 | ||||||||
Other comprehensive (loss) income | ( | ) | ||||||
Comprehensive income | $ | $ | ||||||
Total Stockholders' Equity | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Common Stock | Treasury Stock | Additional Paid-in Capital | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance - December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Net earnings | — | — | — | — | — | — | ||||||||||||||||||||||||
Other comprehensive (loss) | ( | ) | — | ( | ) | — | — | — | — | — | ||||||||||||||||||||
Treasury shares purchased | ( | ) | — | — | — | — | ( | ) | ( | ) | — | |||||||||||||||||||
Shares and options issued under stock plans | — | — | ||||||||||||||||||||||||||||
Balance - March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
Balance - December 31, 2017 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
Net earnings | — | — | — | — | — | — | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||||||
Dividends | — | — | — | — | — | — | ||||||||||||||||||||||||
Treasury shares purchased | ( | ) | — | — | — | — | ( | ) | ( | ) | — | |||||||||||||||||||
Shares and options issued under stock plans | — | — | ||||||||||||||||||||||||||||
Balance - March 31, 2018 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | $ | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Stock compensation expense | ||||||||
Deferred income taxes | ( | ) | ||||||
Provision for (recovery of) doubtful accounts | ( | ) | ||||||
Foreign currency transaction loss | ||||||||
Asset impairment charge | ||||||||
Gain on disposal of assets | ( | ) | ( | ) | ||||
Changes in assets and liabilities | ||||||||
Accounts receivable | ( | ) | ( | ) | ||||
Inventories | ( | ) | ( | ) | ||||
Prepaid expenses and other current assets | ||||||||
Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
Income taxes | ||||||||
Other | ( | ) | ||||||
Net cash provided by operating activities | ||||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | ( | ) | ( | ) | ||||
Proceeds from insurance | ||||||||
Intangible assets acquired | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on revolving loan | ( | ) | ||||||
Principal payments on long-term debt | ( | ) | ||||||
Proceeds from stock options exercised | ||||||||
Dividends paid | ( | ) | ( | ) | ||||
Purchase of treasury stock | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Effect of exchange rate changes on cash | ( | ) | ||||||
(Decrease) increase in cash and cash equivalents | ( | ) | ||||||
Cash and cash equivalents beginning of period | ||||||||
Cash and cash equivalents end of period | $ | $ | ||||||
March 31, 2019 | ||||
Accounts receivable | $ | |||
Inventory | ||||
Property, plant, and equipment, net | ||||
Right of use assets | ||||
Goodwill | ||||
Other current assets | ||||
Assets held for sale | $ | |||
Trade accounts payable | $ | |||
Accrued expenses | ||||
Accrued compensation and other benefits | ||||
Lease liabilities | ||||
Liabilities held for sale | $ | |||
Increase/(Decrease) for the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cost of sales | $ | $ | ||||||
Operating expenses | ||||||||
Net earnings | ( | ) | ( | ) | ||||
For the three months ended March 31, 2019 | Shares (000s) | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term | |||||||||
Outstanding as of December 31, 2018 | $ | $ | |||||||||||
Granted | |||||||||||||
Exercised | ( | ) | |||||||||||
Forfeited | |||||||||||||
Canceled | |||||||||||||
Outstanding as of March 31, 2019 | $ | $ | |||||||||||
Exercisable as of March 31, 2019 | $ | $ | |||||||||||
For the three months ended March 31, 2018 | Shares (000s) | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term | |||||||||
Outstanding as of December 31, 2017 | $ | $ | |||||||||||
Granted | |||||||||||||
Exercised | ( | ) | |||||||||||
Forfeited | ( | ) | |||||||||||
Canceled | ( | ) | |||||||||||
Outstanding as of March 31, 2018 | $ | $ | |||||||||||
Exercisable as of March 31, 2018 | $ | $ | |||||||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Weighted-average fair value of options granted | $ | $ | ||||||
Total intrinsic value of stock options exercised ($000s) | $ | $ | ||||||
Three months ended March 31, 2019 | Shares (000s) | Weighted Average Grant Date Fair Value | |||||
Non-vested balance as of December 31, 2018 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Forfeited | |||||||
Non-vested balance as of March 31, 2019 | $ | ||||||
Three months ended March 31, 2018 | Shares (000s) | Weighted Average Grant Date Fair Value | |||||
Non-vested balance as of December 31, 2017 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Forfeited | |||||||
Non-vested balance as of March 31, 2018 | $ | ||||||
Three months ended March 31, 2019 | Shares (000s) | Weighted Average Grant Date Fair Value | |||||
Non-vested balance as of December 31, 2018 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Forfeited | ( | ) | |||||
Non-vested balance as of March 31, 2019 | $ | ||||||
Three months ended March 31, 2018 | Shares (000s) | Weighted Average Grant Date Fair Value | |||||
Non-vested balance as of December 31, 2017 | $ | ||||||
Granted | |||||||
Vested | ( | ) | |||||
Forfeited | |||||||
Non-vested balance as of March 31, 2018 | $ | ||||||
March 31, 2019 | December 31, 2018 | |||||||
Raw materials | $ | $ | ||||||
Work in progress | ||||||||
Finished goods | ||||||||
Total inventories | $ | $ | ||||||
March 31, 2019 | December 31, 2018 | |||||||
Land | $ | $ | ||||||
Building | ||||||||
Equipment | ||||||||
Construction in progress | ||||||||
Less: accumulated depreciation | ||||||||
Property, plant and equipment, net | $ | $ | ||||||
Amortization Period (in years) | Gross Carrying Amount at 03/31/19 | Accumulated Amortization at 3/31/2019 | Gross Carrying Amount at 12/31/2018 | Accumulated Amortization at 12/31/2018 | ||||||||||||||
Customer relationships & lists | $ | $ | $ | $ | ||||||||||||||
Trademarks & trade names | 5-17 | |||||||||||||||||
Developed technology | ||||||||||||||||||
Other | 3-18 | |||||||||||||||||
$ | $ | $ | $ | |||||||||||||||
Three months ended March 31, 2019 | Net Earnings (Numerator) | Number of Shares (Denominator) | Per Share Amount | ||||||||
Basic EPS – Net earnings and weighted average common shares outstanding | $ | $ | |||||||||
Effect of dilutive securities – stock options, restricted stock, and performance shares | |||||||||||
Diluted EPS – Net earnings and weighted average common shares outstanding and effect of stock options, restricted stock, and performance shares | $ | $ | |||||||||
Three months ended March 31, 2018 | Net Earnings (Numerator) | Number of Shares (Denominator) | Per Share Amount | ||||||||
Basic EPS – Net earnings and weighted average common shares outstanding | $ | $ | |||||||||
Effect of dilutive securities – stock options, restricted stock, and performance shares | |||||||||||
Diluted EPS – Net earnings and weighted average common shares outstanding and effect of stock options, restricted stock, and performance shares | $ | $ | |||||||||
March 31, 2019 | December 31, 2018 | |||||||
Human Nutrition & Health | $ | $ | ||||||
Animal Nutrition & Health | ||||||||
Specialty Products | ||||||||
Industrial Products | ||||||||
Other Unallocated (1) | ||||||||
Total | $ | $ | ||||||
(1) Other unallocated assets consist of certain cash, receivables, prepaid expenses, equipment and leasehold improvements, net of accumulated depreciation, and deferred income taxes, which the Company does not allocate to its individual business segments. | ||||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | $ | ||||||
Animal Nutrition & Health | ||||||||
Specialty Products | ||||||||
Industrial Products | ||||||||
Total | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | $ | ||||||
Animal Nutrition & Health | ||||||||
Specialty Products | ||||||||
Industrial Products | ||||||||
Transaction costs, integration costs, and unallocated legal fees (2) | ( | ) | ( | ) | ||||
Unallocated amortization expense (3) | ( | ) | ||||||
Interest and other (expense) | ( | ) | ( | ) | ||||
Total | $ | $ | ||||||
(2) Transaction costs, integration costs and unallocated legal fees for three month ended March 31, 2019 and 2018, respectively, were primarily related to acquisitions. | ||||||||
(3) Unallocated amortization expense for three months ended March 31, 2019 was related to amortization of intangible assets in connection with a company-wide ERP system implementation. | ||||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | $ | ||||||
Animal Nutrition & Health | ||||||||
Specialty Products | ||||||||
Industrial Products | ||||||||
Total | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | $ | ||||||
Animal Nutrition & Health | ||||||||
Specialty Products | ||||||||
Industrial Products | ||||||||
Total | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Product Sales | $ | $ | ||||||
Co-manufacturing | ||||||||
Bill and Hold | ||||||||
Consignment | ||||||||
Product Sales Revenue | ||||||||
Royalty Revenue | ||||||||
Total Revenue | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
United States | $ | $ | ||||||
Foreign Countries | ||||||||
Total Revenue | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Income taxes | $ | $ | ||||||
Interest | $ | $ | ||||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net foreign currency translation adjustment | $ | ( | ) | $ | ||||
Net change in postretirement benefit plan (see Note 15 for further information) | ||||||||
Amortization of prior service cost | ||||||||
Amortization of gain | ( | ) | ( | ) | ||||
Total before tax | ||||||||
Tax | ( | ) | ( | ) | ||||
Net of tax | ||||||||
Total other comprehensive (loss)/income | $ | ( | ) | $ | ||||
Foreign currency translation adjustment | Postretirement benefit plan | Total | ||||||||||
Balance December 31, 2018 | $ | ( | ) | $ | $ | ( | ) | |||||
Other comprehensive (loss)/income | ( | ) | ( | ) | ||||||||
Balance March 31, 2019 | $ | ( | ) | $ | $ | ( | ) | |||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Service cost | $ | $ | ||||||
Interest cost | ||||||||
Amortization of prior service cost | ||||||||
Amortization of gain | ( | ) | ( | ) | ||||
Net periodic benefit cost | $ | $ | ||||||
Year | |||
April 1, 2019 to December 31, 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total minimum lease payments | $ | ||
Three Months Ended March 31, | |||
2019 | |||
Lease Cost | |||
Operating lease cost | |||
Other information | |||
(Gains) and losses on sale and leaseback transactions, net | |||
Cash paid for amounts included in the measurement of lease liabilities | |||
Operating cash flows from operating leases | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | |||
Weighted-average remaining lease term - operating leases | |||
Weighted-average discount rate - operating | % | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations (All amounts in thousands, except share and per share data) |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | 85,149 | $ | 83,063 | ||||
Animal Nutrition & Health | 43,361 | 46,141 | ||||||
Specialty Products | 18,424 | 17,740 | ||||||
Industrial Products | 10,095 | 14,466 | ||||||
Total | $ | 157,029 | $ | 161,410 | ||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Human Nutrition & Health | $ | 13,703 | $ | 12,932 | ||||
Animal Nutrition & Health | 5,256 | 7,484 | ||||||
Specialty Products | 6,697 | 5,034 | ||||||
Industrial Products | 1,637 | 2,479 | ||||||
Transaction costs, integration costs, and unallocated legal fees | (804 | ) | (689 | ) | ||||
Unallocated amortization expense | (9 | ) | — | |||||
Total | $ | 26,480 | $ | 27,240 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
(a) | Evaluation of Disclosure Controls and Procedures |
(b) | Changes in Internal Controls |
Part II. | Other Information |
Item 1A. | Risk Factors |
Item 2C. | Issuer Purchase of Equity Securities |
Total Number of Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||||
January 1-31, 2019 | — | $ | — | — | $ | 124,066,486 | ||||||||
February 1-28, 2019 | 8,496 | $ | 85.53 | 8,496 | $ | 136,548,396 | ||||||||
March 1-31, 2019 | — | $ | — | — | $ | 136,548,396 | ||||||||
8,496 | 8,496 | |||||||||||||
(1) We have an approved stock repurchase program. The total authorization under this program is 3,763,038 shares. Since the inception of the program in June 1999, a total of 2,199,268 shares have been purchased, of which 6,196 shares remained in treasury at March 31, 2019. There is no expiration for this program. | ||||||||||||||
(2) Average price paid per share includes costs associated with the repurchases | ||||||||||||||
Item 6. | Exhibits |
Exhibit Number | Description | |
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.1 | ||
Exhibit 32.2 | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
BALCHEM CORPORATION | |
By: /s/ Theodore L. Harris | |
Theodore L. Harris, Chairman, President and Chief Executive Officer | |
By: /s/ Martin Bengtsson | |
Martin Bengtsson, Chief Financial Officer and Treasurer | |
Date: May 3, 2019 | |
Exhibit 31.1 | |
1. | I have reviewed this quarterly report on Form 10-Q of Balchem Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 3, 2019 | |
/s/ Theodore L. Harris | |
Theodore L. Harris, Chairman, President and Chief Executive Officer (Principal Executive Officer) | |
Exhibit 31.2 | |
1. | I have reviewed this quarterly report on Form 10-Q of Balchem Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 3, 2019 | |
/s/ Martin Bengtsson | |
Martin Bengtsson, Chief Financial Officer and Treasurer (Principal Financial Officer) | |
Exhibit 32.1 | |
/s/ Theodore L. Harris |
Theodore L. Harris |
Chairman, President and Chief Executive Officer |
(Principal Executive Officer) |
May 3, 2019 |
Exhibit 32.2 | |
/s/ Martin Bengtsson | |
Martin Bengtsson | |
Chief Financial Officer and Treasurer | |
(Principal Financial Officer) | |
May 3, 2019 | |
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Apr. 25, 2019 |
|
| Document and Entity Information [Abstract] | ||
| Entity Registrant Name | BALCHEM CORP | |
| Entity Central Index Key | 0000009326 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Small Business | false | |
| Entity Emerging Growth Company | false | |
| Entity Common Stock, Shares Outstanding | 32,333,546 | |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Mar. 31, 2019 | |
| Document Fiscal Year Focus | 2019 | |
| Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Current assets: | ||
| Allowance for doubtful accounts | $ 583 | $ 610 |
| Stockholders' equity: | ||
| Preferred stock, par value (in dollars per share) | $ 25 | $ 25 |
| Preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.0667 | $ 0.0667 |
| Common stock, shares authorized (in shares) | 120,000,000 | 120,000,000 |
| Common stock, shares issued (in shares) | 32,336,228 | 32,256,915 |
| Common stock, shares outstanding (in shares) | 32,330,032 | 32,256,209 |
| Treasury stock (in shares) | 6,196 | 706 |
Condensed Consolidated Statements of Earnings - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Income Statement [Abstract] | ||
| Net sales | $ 157,029 | $ 161,410 |
| Cost of sales | 107,934 | 109,951 |
| Gross margin | 49,095 | 51,459 |
| Operating expenses: | ||
| Selling expenses | 14,126 | 14,059 |
| Research and development expenses | 2,895 | 2,569 |
| General and administrative expenses | 5,594 | 7,591 |
| Total operating expenses | 22,615 | 24,219 |
| Earnings from operations | 26,480 | 27,240 |
| Other expenses: | ||
| Interest expense, net | 1,589 | 1,874 |
| Other, net | 98 | 189 |
| Total other expenses (income) | 1,687 | 2,063 |
| Earnings before income tax expense | 24,793 | 25,177 |
| Income tax expense | 6,010 | 5,831 |
| Net earnings | $ 18,783 | $ 19,346 |
| Net earnings per common share - basic (in dollars per share) | $ 0.58 | $ 0.60 |
| Net earnings per common share - diluted (in dollars per share) | $ 0.58 | $ 0.60 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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| Statement of Comprehensive Income [Abstract] | ||
| Net earnings | $ 18,783 | $ 19,346 |
| Other comprehensive (loss) income, net of tax: | ||
| Net foreign currency translation adjustment | (1,089) | 1,363 |
| Net change in postretirement benefit plans, net of taxes of $(2) and $(4) for the three months ended March 31, 2019 and 2018 | 5 | 13 |
| Other comprehensive (loss) income | (1,084) | 1,376 |
| Comprehensive income | $ 17,699 | $ 20,722 |
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
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| Other comprehensive (loss) income, net of tax: | ||
| Net change in postretirement benefit plan, taxes | $ (2) | $ (4) |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
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Mar. 31, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated financial statements presented herein have been prepared by the Company in accordance with the accounting policies described in its December 31, 2018 consolidated financial statements, and should be read in conjunction with the consolidated financial statements and notes, which appear in the Annual Report on Form 10-K for the year ended December 31, 2018. References in this report to the “Company” mean either Balchem Corporation or Balchem Corporation and its subsidiaries, including SensoryEffects, Inc., SensoryEffects Cereal Systems, Inc., Albion Laboratories, Inc. (formerly known as Albion International, Inc.), BCP Ingredients, Inc., Aberco, Inc., Balchem BV, Balchem Italia Srl, Bioscreen Technologies Srl, Innovative Food Processors, Inc., and Balchem LTD, on a consolidated basis, as the context requires. In the opinion of management, the unaudited condensed consolidated financial statements furnished in this Form 10-Q include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”) governing interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934 (the "Exchange Act") and therefore do not include some information and notes necessary to conform to annual reporting requirements. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results expected for the full year or any interim period. Certain reclassifications have been made to prior period amounts to conform with the current period's presentation. Recent Accounting Pronouncements Recently Issued Accounting Standards In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements," which further clarifies the determination of fair value of leases and modifies transition disclosure requirements for changes in accounting principles. The effective date of the amendments is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact of this pronouncement on the Company’s consolidated financial statements and disclosures. As stated below, the Company adopted Accounting Standards Codification ("ASC") 842 ("ASU 2016-02), Leases, as of January 1, 2019. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted and the standard may be adopted either using the prospective or retrospective transition approach. The Company is currently evaluating the impact of this pronouncement on the Company’s consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. This update should be applied on a retrospective basis to all periods presented and is effective for fiscal years ending after December 31, 2020. Early adoption is permitted. The Company expects this new guidance will have minimal impact on its financial reporting. In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” (ASU 2017-04), which addresses changes to the testing for goodwill impairment by eliminating Step 2 of the process. The guidance is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted; however, the Company has elected not to adopt early as this ASU will not have a significant impact on the Company’s consolidated financial statements. Recently Adopted Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which was clarified by ASU 2018-11 and addresses the recognition of assets and liabilities that arise from all leases. The guidance requires lessees to recognize right-of-use assets ("ROU") and lease liabilities for most leases in the Consolidated Balance Sheets. The guidance is effective for annual and interim periods beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019 and has elected the optional transition method to account for the impact of the adoption with a cumulative-effect adjustment in the period of adoption. The new standard provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedients”, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify, which means for those leases that qualify, the Company will not recognize ROU assets or lease liabilities. The Company has also elected the practical expedient to not separate lease and non-lease components for all of its leases. Refer to Note 19 "Leases."
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SIGNIFICANT ACQUISITIONS AND DIVESTITURES |
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| SIGNIFICANT ACQUISITIONS AND DIVESTITURES | SIGNIFICANT ACQUISITIONS AND DIVESTITURES The Company did not complete any acquisitions during the three months ended March 31, 2019 or 2018. Total transaction and integration costs related to recent acquisitions, including the subsequent event identified below, are recorded in general and administrative expenses and amounted to $485 and $689 for the three months ended March 31, 2019 and 2018, respectively. Potential Divestiture As of March 31, 2019, the Company was in negotiations for the sale of an insignificant portion of the Company's business. The transaction is estimated to be completed during 2019 and no gain or loss has been recognized in the Company's condensed consolidated statements of earnings as of March 31, 2019. The related assets and liabilities have been reclassified as current assets held for sale and current liabilities held for sale within the Company's condensed consolidated balance sheets as of March 31, 2019 and include the following:
Subsequent Event On May 2, 2019, the Company entered into a securities purchase agreement for the acquisition of Chemogas Holding NV and its Subsidiaries ("Chemogas"), a privately held specialty gases company headquartered in Grimbergen, Belgium, for a purchase price of €95,000, subject to certain adjustments as provided in the definitive agreement. The transaction is subject to customary conditions to closing and will be financed through the Company's Credit Agreement (as defined below) and cash on hand. Chemogas has been a leader in the packaging and distribution of a wide variety of specialty gases, most notably ethylene oxide, primarily in the European and Asian markets, for medical device sterilization. Through its operational and logistical excellence, Chemogas supports its customers' needs across more than 70 countries. With this acquisition, Balchem significantly expands its geographic presence in the packaged ethylene oxide market, enabling the Company to offer worldwide service and support to its medical device sterilization customers within the Specialty Products segment. The Chemogas sites in Europe and Asia will form a global network of facilities when combined with Balchem's sites in the United States. In connection with this transaction, the Company incurred transaction costs of $307 for the three months ended March 31, 2019, which are included in general and administrative expenses.
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY STOCK-BASED COMPENSATION The Company’s results for the three months ended March 31, 2019 and 2018 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:
As allowed by ASC 718, the Company has made an estimate of expected forfeitures based on its historical experience and is recognizing compensation cost only for those stock-based compensation awards expected to vest. The Company’s stock incentive plans allow for the granting of stock awards and options to purchase common stock. Both incentive stock options and nonqualified stock options can be awarded under the plans. No option will be exercisable for longer than ten years after the date of grant. The Company has approved and reserved a number of shares to be issued upon exercise of the outstanding options that is adequate to cover all exercises. As of March 31, 2019, the plans had 1,096,274 shares available for future awards. Compensation expense for stock options and stock awards is recognized on a straight-line basis over the vesting period, generally three years for stock options, three to four years for employee restricted stock awards, three years for employee performance share awards, and three to four years for non-employee director restricted stock awards. Certain awards provide for accelerated vesting if there is a change in control (as defined in the plans) or other qualifying events. Option activity for the three months ended March 31, 2019 and 2018 is summarized below:
ASC 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yields of 0.6% and 0.6%; expected volatilities of 24% and 27%; risk-free interest rates of 2.5% and 2.6%; and expected lives of 4.0 years and 4.4 years, in each case for the three months ended March 31, 2019 and 2018, respectively. The Company used a projected expected life for each award granted based on historical experience of employees’ exercise behavior. Expected volatility is based on the Company’s historical volatility levels. Dividend yields are based on the Company’s historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury Zero coupon issues with a remaining term equal to the expected life. Other information pertaining to option activity during the three months ended March 31, 2019 and 2018 was as follows:
Non-vested restricted stock activity for the three months ended March 31, 2019 and 2018 is summarized below:
Non-vested performance share activity for the three months ended March 31, 2019 and 2018 is summarized below:
The performance share (“PS”) awards provide the recipients the right to receive a certain number of shares of the Company’s common stock in the future, subject to an EBITDA performance hurdle, where vesting is dependent upon the Company achieving a certain EBITDA percentage growth over the performance period, and relative total shareholder return (TSR) where vesting is dependent upon the Company’s TSR performance over the performance period relative to a comparator group consisting of the Russell 2000 index constituents. Expense is measured based on the fair value at the date of grant utilizing a Black-Scholes methodology to produce a Monte-Carlo simulation model which allows for the incorporation of the performance hurdles that must be met before the PS vests. The assumptions used in the fair value determination were risk free interest rates of 2.5% and 2.4%; dividend yields of 0.5% and 0.5%; volatilities of 24% and 27%; and initial TSR’s of -5.9% and -10.5%, in each case for the three months ended March 31, 2019 and 2018, respectively. Expense is estimated based on the number of shares expected to vest, assuming the requisite service period is rendered and the probable outcome of the performance condition is achieved. The estimate is revised if subsequent information indicates that the actual number of shares likely to vest differs from previous estimates. Expense is ultimately adjusted based on the actual achievement of service and performance targets. The PS will cliff vest 100% at the end of the third year following the grant in accordance with the performance metrics set forth. As of March 31, 2019 and 2018, there was $17,475 and $13,487, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. As of March 31, 2019, the unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2 years. The Company estimates that share-based compensation expense for the year ended December 31, 2019 will be approximately $7,700. REPURCHASE OF COMMON STOCK The Company has an approved stock repurchase program. The total authorization under this program is 3,763,083 shares. Since the inception of the program in June 1999, a total of 2,199,268 shares have been purchased, of which 6,196 shares remained in treasury at March 31, 2019. During the three months ended March 31, 2019 and 2018, a total of 8,496 and 10,454 shares, respectively, have been purchased at an average cost of $85.53 and $75.04 per share, respectively. The Company intends to acquire shares from time to time at prevailing market prices if and to the extent it deems it advisable to do so based on its assessment of corporate cash flow, market conditions and other factors.
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INVENTORIES |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| INVENTORIES | INVENTORIES Inventories at March 31, 2019 and December 31, 2018 consisted of the following:
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PROPERTY, PLANT AND EQUIPMENT |
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| PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at March 31, 2019 and December 31, 2018 are summarized as follows:
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INTANGIBLE ASSETS |
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| INTANGIBLE ASSETS | INTANGIBLE ASSETS The Company had goodwill in the amount of $446,453 and $447,995 as of March 31, 2019 and December 31, 2018, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The decrease in goodwill is primarily the result of the reclassification of a portion of the Company's goodwill to assets held for sale (See Note 2) of $1,380, with the remaining change due to foreign exchange translation adjustments. Refer to Note 2 "Significant Acquisitions and Divestitures" for more information. Identifiable intangible assets with finite lives at March 31, 2019 and December 31, 2018 are summarized as follows:
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EQUITY-METHOD INVESTMENT |
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Mar. 31, 2019 | |
| Equity Method Investments and Joint Ventures [Abstract] | |
| EQUITY-METHOD INVESTMENT | EQUITY-METHOD INVESTMENTIn 2013, the Company and Eastman Chemical Company (formerly Taminco Corporation) formed a joint venture (66.66% / 33.34% ownership), St. Gabriel CC Company, LLC, to design, develop, and construct an expansion of the Company’s St. Gabriel aqueous choline chloride plant. The Company contributed the St. Gabriel plant, at cost, and expansion will be funded by the owners. The joint venture became operational as of July 1, 2016. St. Gabriel CC Company, LLC is a Variable Interest Entity (VIE) because the total equity at risk is not sufficient to permit the joint venture to finance its own activities without additional subordinated financial support. Additionally, voting rights (2 votes each) are not proportionate to the owners’ obligation to absorb expected losses or receive the expected residual returns of the joint venture. The Company will receive up to 2/3 of the production offtake capacity and absorbs operating expenses approximately proportional to the actual percentage of offtake. The joint venture is accounted for under the equity method of accounting since the Company is not the primary beneficiary as the Company does not have the power to direct the activities of the joint venture that most significantly impact its economic performance. The Company recognized a loss of $101 and $139 for the three months ended March 31, 2019 and 2018, respectively, relating to its portion of the joint venture's expenses in other expense. The carrying value of the joint venture at March 31, 2019 and December 31, 2018 is $4,801 and $4,902, respectively, and is recorded in other assets. |
REVOLVING LOAN |
3 Months Ended |
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Mar. 31, 2019 | |
| Debt Disclosure [Abstract] | |
| REVOLVING LOAN | REVOLVING LOAN On June 27, 2018, the Company and a bank syndicate entered into a five year senior secured revolving credit agreement (“Credit Agreement”), which replaced the existing credit facility that had provided for a senior secured term loan A of $350,000 and a revolving loan of $100,000. The Credit Agreement, which expires on June 27, 2023, provides for revolving loans up to $500,000 (collectively referred to as the “loans”). The loans may be used for working capital, letters of credit, and other corporate purposes and may be drawn upon at the Company’s discretion. The initial proceeds from the Credit Agreement were used to repay the outstanding balance of $210,750 on its senior secured term loan A, which was due May 2019. There are no installment payments required on the revolving loans; they may be voluntarily prepaid in whole or in part without premium or penalty, and all outstanding amounts are due on the maturity date. As of March 31, 2019, the balance outstanding amounted to $140,000. Amounts outstanding under the Credit Agreement are subject to an interest rate equal to a fluctuating rate as defined by the Credit Agreement plus an applicable rate. The applicable rate is based upon the Company’s consolidated net leverage ratio, as defined in the Credit Agreement, and the interest rate was 3.496% at March 31, 2019. The Company is also required to pay a commitment fee on the unused portion of the revolving loan, which is based on the Company’s consolidated net leverage ratio as defined in the Credit Agreement and ranges from 0.15% to 0.275% (0.15% at March 31, 2019). The unused portion of the revolving loan amounted to $360,000 at March 31, 2019. The Company is also required to pay, as applicable, letter of credit fees, administrative agent fees, and other fees to the arrangers and lenders. Costs associated with the issuance of the revolving loans are capitalized and amortized on a straight-line basis over the term of the Credit Agreement. Costs associated with the issuance of the extinguished debt instrument were capitalized and amortized over the term of the respective financing arrangement using the effective interest method. Capitalized costs net of accumulated amortization totaled $1,197 and $1,268 at March 31, 2019 and December 31, 2018, respectively, and are included in other assets on the balance sheet. Amortization expense pertaining to these costs totaled $71 and $109 for the three months ended March 31, 2019 and 2018, respectively, and are included in interest expense in the accompanying condensed consolidated statements of earnings. The Credit Agreement contains quarterly covenants requiring the consolidated leverage ratio to be less than a certain maximum ratio and the consolidated interest coverage ratio to exceed a certain minimum ratio. At March 31, 2019, the Company was in compliance with these covenants. Indebtedness under the Company’s loan agreements are secured by assets of the Company.
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NET EARNINGS PER SHARE |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NET EARNINGS PER SHARE | NET EARNINGS PER SHARE The following presents a reconciliation of the net earnings and shares used in calculating basic and diluted net earnings per share:
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INCOME TAXES |
3 Months Ended |
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Mar. 31, 2019 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES The Company’s effective tax rate for the three months ended March 31, 2019 and 2018, was 24.2% and 23.2%, respectively. The increase in the effective tax rate for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was attributable to higher state taxes and lower excess tax benefits from stock-based compensation. Balchem will continue to evaluate and analyze the impact of the U.S. Tax Cuts and Jobs Act that was enacted on December 22, 2017 and the additional guidance that has been issued, and may be issued, by the U.S. Department of Treasury, the Securities and Exchange Commission, or the Financial Accounting Standards Board regarding this act. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews its deferred tax assets for recoverability and would establish a valuation allowance if it believed that such assets may not be recovered, taking into consideration historical operating results, expectations of future earnings, changes in its operations and the expected timing of the reversals of existing temporary differences. The Company accounts for uncertainty in income taxes utilizing ASC 740-10, "Income Taxes". ASC 740-10 clarifies whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosures. The application of ASC 740-10 requires judgment related to the uncertainty in income taxes and could impact our effective tax rate. The Company files income tax returns in the U.S. and in various states and foreign countries. As of March 31, 2019, in the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2014. As of March 31, 2019 and December 31, 2018, the Company had approximately $5,648 and $5,709, respectively, of unrecognized tax benefits, which are included in other long-term obligations on the Company’s consolidated balance sheets. The Company includes interest expense or income as well as potential penalties on unrecognized tax positions as a component of income tax expense in the consolidated statements of earnings. The total amount of accrued interest and penalties related to uncertain tax positions at March 31, 2019 and December 31, 2018 was approximately $1,854 and $1,839, respectively, and is included in other long-term obligations.
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SEGMENT INFORMATION |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT INFORMATION | SEGMENT INFORMATION Human Nutrition & Health The Company's Human Nutrition & Health ("HNH") segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for wellness applications. Choline is recognized to play a key role in the development and structural integrity of brain cell membranes in infants, processing dietary fat, reproductive development and neural functions, such as memory and muscle function. The Company's mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products. Proprietary technology has been combined to create an organic molecule in a form the body can readily assimilate. Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customer perceptions of brand value. Consequently, the Company makes investments in such activities for long-term value differentiation. This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers. The Company partners with our customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. The Company's expertise in trends analysis and product development, combined with manufacturing capabilities in customized spray dried and emulsified powders, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, as well as ice cream bases and variegates makes the Company a one-stop solutions provider for beverage and dairy product development needs. Additionally, this segment provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life. Major product applications are baked goods, refrigerated and frozen dough systems, processed meats, seasoning blends, confections, and nutritional supplements. The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients. Animal Nutrition & Health The Company’s Animal Nutrition & Health (“ANH”) segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride. For ruminant animals, the Company’s microencapsulated products boost health and milk production, delivering nutrient supplements that are biologically available, providing required nutritional levels. The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world. ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries. Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat. In poultry, choline deficiency can result in reduced growth rates and perosis in young birds, while in swine production choline is a necessary and required component of gestating and lactating sow diets for both liver health and prevention of leg deformity. Sales of value-added encapsulated products are highly dependent on overall industry economics as well as the Company's ability to leverage the results of university and field research on the animal health and production benefits of our products. Management believes that success in the commodity-oriented basic choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace. Specialty Products Ethylene oxide, at the 100% level, is sold as a sterilant gas, primarily for use in the health care industry. It is used to sterilize a wide range of medical devices because of its versatility and effectiveness in treating hard or soft surfaces, composites, metals, tubing and different types of plastics without negatively impacting the performance of the device being sterilized. The Company’s 100% ethylene oxide product is distributed in uniquely designed, recyclable, double-walled, stainless steel drums to assure compliance with safety, quality and environmental standards as outlined by the EPA and the DOT. The Company’s inventory of these specially built drums, along with its two filling facilities, represents a significant capital investment. Contract sterilizers and medical device manufacturers are principal customers for this product. The Company also sells single use canisters with 100% ethylene oxide for use in sterilizing re-usable devices typically processed in autoclave units in hospitals. As a fumigant, ethylene oxide blends are highly effective in killing bacteria, fungi, and insects in spices and other seasoning materials. Propylene oxide is marketed and sold as a fumigant to aid in the control of insects and microbiological spoilage; and to reduce bacterial and mold contamination in certain shell and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes. The Company distributes its propylene oxide product primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the EPA and the DOT. Its inventory of these cylinders also represents a significant capital investment. Propylene oxide is also sold to customers seeking smaller (as opposed to bulk) quantities and whose requirements include utilization in various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings. The Company’s micronutrient agricultural nutrition business sells chelated minerals primarily into high value crops. The Company has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life. First, the Company determines optimal mineral balance for plant health. The Company then has a foliar applied Metalosate product range, utilizing patented amino acid chelate technology. Its products quickly and efficiently deliver mineral nutrients. As a result, the farmer/grower gets healthier crops that are more resistant to disease and pests, larger yields and healthier food for the consumer with extended shelf life for produce being shipped long distances. Industrial Products Certain derivatives of choline chloride are manufactured and sold into industrial applications predominately as a component for hydraulic fracturing of shale natural gas wells. The Company’s products offer an attractive, effective and more environmentally responsible alternative than other clay stabilizers. Industrial grade choline bicarbonate is completely chloride free and the Company's choline chloride reduces the amount of chlorides released into the environment up to 75% when compared to potassium chloride. The Industrial Products segment also includes the manufacture and sale of methylamines. Methylamines are a primary building block for the manufacture of choline products and are produced at its Italian operation and sold for a wide range of industrial applications in Europe. The segment information is summarized as follows: Business Segment Assets:
Business Segment Net Sales:
Business Segment Earnings Before Income Taxes:
Depreciation/Amortization: Capital Expenditures:
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REVENUE |
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| REVENUE | REVENUE Revenue Recognition Revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration the Company expects to realize in exchange for those goods. The following table presents revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues.
The following table presents revenues disaggregated by geography, based on the billing addresses of customers:
Product Sales Revenues The Company’s primary operation is the manufacturing and sale of health and wellness ingredient products, in which the Company receives an order from a customer and fulfills that order. The Company’s product sales have four sub-streams of revenue: product sales, co-manufacturing, bill and hold, and consignment. Under the co-manufacturing agreements, the Company is responsible for the manufacture of a finished good where the customer provides some or all of the raw materials. The Company controls the manufacturing process and the ultimate end-product before it is shipped to the customer. Based on these factors, the Company has determined that it is the principal in these agreements and therefore revenue is recognized in the gross amount of consideration the Company expects to be entitled for the goods provided. Royalty Revenues Royalty revenue consists of agreements with customers to use the Company’s intellectual property in exchange for a sales-based royalty. Royalty revenue is recorded as part of the Human Nutrition & Health segment. Contract Liabilities The Company records contract liabilities when cash payments are received or due in advance of performance, including amounts which are refundable. The Company’s payment terms vary by the type and location of customers and the products offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products are delivered to the customer. Practical Expedients and Exemptions The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling and marketing expenses. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for products shipped.
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SUPPLEMENTAL CASH FLOW INFORMATION |
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| SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the three months ended March 31, 2019 and 2018 for income taxes and interest is as follows:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in accumulated other comprehensive (loss)/income were as follows:
Accumulated other comprehensive loss at March 31, 2019 and December 31, 2018 consisted of the following:
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EMPLOYEE BENEFIT PLANS |
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| Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS The Company provides postretirement benefits in the form of two unfunded postretirement medical plans; one that under a collective bargaining agreement covers eligible retired employees of the Verona facility and a plan for those named as executive officers in the Company’s proxy statement. Net periodic benefit costs for such retirement medical plans were as follows:
The amount recorded for these obligations on the Company’s balance sheet as of March 31, 2019 and December 31, 2018 is $1,200 and $1,174, respectively, and is included in other long-term obligations. These plans are unfunded and approved claims are paid from Company funds. Historical cash payments made under such plan have typically been less than $100 per year. On June 1, 2018, the Company established an unfunded, nonqualified deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees. Assets of the plan are held in a rabbi trust, which are subject to additional risk of loss in the event of bankruptcy or insolvency of the Company. The deferred compensation liability was $1,513 and $265 as of March 31, 2019 and December 31, 2018, respectively, and is included in other long-term obligations on the Company’s balance sheet. The related rabbi trust assets were $1,513 and $265 as of March 31, 2019 and December 31, 2018, respectively, and are included in other non-current assets on the Company's balance sheet.
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Rent expense charged to operations under lease agreements for the three months ended March 31, 2019 and 2018 aggregated approximately $813 and $786, respectively. Aggregate future minimum rental payments required under all non-cancelable operating leases at March 31, 2019 are as follows:
The Company’s Verona, Missouri facility, while held by a prior owner, was designated by the EPA as a Superfund site and placed on the National Priorities List in 1983, because of dioxin contamination on portions of the site. Remediation was conducted by the prior owner under the oversight of the EPA and the Missouri Department of Natural Resources (“MDNR”). While the Company must maintain the integrity of the capped areas in the remediation areas on the site, the prior owner is responsible for completion of any further Superfund remedy. The Company is indemnified by the sellers under its May 2001 asset purchase agreement covering its acquisition of the Verona, Missouri facility for potential liabilities associated with the Superfund site. From time to time, the Company is a party to various litigation, claims and assessments. Management believes that the ultimate outcome of such matters will not have a material effect on the Company’s consolidated financial position, results of operations, or liquidity.
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
3 Months Ended |
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Mar. 31, 2019 | |
| Fair Value Disclosures [Abstract] | |
| FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTSThe Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 2019 and December 31, 2018 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed consolidated balance sheets. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying value of debt approximates fair value as the interest rate is based on market and the Company’s consolidated leverage ratio. The Company’s financial instruments also include cash equivalents, accounts receivable, accounts payable, and accrued liabilities, which are carried at cost and approximate fair value due to the short-term maturity of these instruments. Cash and cash equivalents at March 31, 2019 and December 31, 2018 includes $797 and $793 in money market funds, respectively. Non-current assets at March 31, 2019 and December 31, 2018 includes $1,513 and $265, respectively, of rabbi trust funds related to the Company's deferred compensation plan. The money market and rabbi trust funds are valued using level one inputs, as defined by ASC 820, “Fair Value Measurement.” |
RELATED PARTY TRANSACTIONS |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS The Company provides services on a contractual agreement to St. Gabriel CC Company, LLC. These services include accounting, information technology, quality control, and purchasing services, as well as operation of the St. Gabriel CC Company, LLC plant. The Company also sells raw materials to St. Gabriel CC Company, LLC. These raw materials are used in the production of finished goods that are, in turn, sold by Saint Gabriel CC Company, LLC to the Company for resale to unrelated parties. As such, the sale of these raw materials to St. Gabriel CC Company, LLC in this scenario lacks economic substance and therefore the Company does not include them in net sales within the consolidated statement of earnings. The services the Company provided amounted to $868 and $927, respectively, for the three months ended March 31, 2019 and 2018. The raw materials sold amounted to $6,808 and $7,278, respectively, for the three months ended March 31, 2019 and 2018. These services and raw materials are primarily recorded in cost of goods sold net of the finished goods received from St. Gabriel CC Company, LLC of $5,312 and $6,036, respectively, for the three months ended March 31, 2019 and 2018. At March 31, 2019 and December 31, 2018, the Company had receivables of $4,897 and $3,210, respectively, recorded in accounts receivable from St. Gabriel CC Company, LLC for services rendered and raw materials sold and payables of $1,567 and $1,943, respectively, for finished goods received recorded in accrued expenses. In addition, the Company had payables in the amount of $310 and $314, respectively, related to non-contractual monies owed to St. Gabriel CC Company, LLC, recorded in accrued expenses as of March 31, 2019 and December 31, 2018, respectively.
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LEASES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | LEASES The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. All leases are categorized as operating leases. As a result of electing the practical expedient, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the ROU asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years beyond the implementation date, which is January 1, 2019. In addition, the Company has historically not been exercising purchase options with equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with a new lease. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions. The Company did not identify any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rate, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates upon implementation: (1) 1-2 years, 3.45% (2) 3-4 years, 4.04% (3) 5-9 years, 4.38% and (4) 10+ years, 5.10%. For the three months ended March 31, 2019, the Company's total lease cost is as follows, which includes both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Policies) |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Standards In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements," which further clarifies the determination of fair value of leases and modifies transition disclosure requirements for changes in accounting principles. The effective date of the amendments is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating the impact of this pronouncement on the Company’s consolidated financial statements and disclosures. As stated below, the Company adopted Accounting Standards Codification ("ASC") 842 ("ASU 2016-02), Leases, as of January 1, 2019. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” The guidance requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted and the standard may be adopted either using the prospective or retrospective transition approach. The Company is currently evaluating the impact of this pronouncement on the Company’s consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. This update should be applied on a retrospective basis to all periods presented and is effective for fiscal years ending after December 31, 2020. Early adoption is permitted. The Company expects this new guidance will have minimal impact on its financial reporting. In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” (ASU 2017-04), which addresses changes to the testing for goodwill impairment by eliminating Step 2 of the process. The guidance is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted; however, the Company has elected not to adopt early as this ASU will not have a significant impact on the Company’s consolidated financial statements. Recently Adopted Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which was clarified by ASU 2018-11 and addresses the recognition of assets and liabilities that arise from all leases. The guidance requires lessees to recognize right-of-use assets ("ROU") and lease liabilities for most leases in the Consolidated Balance Sheets. The guidance is effective for annual and interim periods beginning after December 15, 2018. The Company adopted the new standard on January 1, 2019 and has elected the optional transition method to account for the impact of the adoption with a cumulative-effect adjustment in the period of adoption. The new standard provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedients”, which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company has not elected the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify, which means for those leases that qualify, the Company will not recognize ROU assets or lease liabilities. The Company has also elected the practical expedient to not separate lease and non-lease components for all of its leases. Refer to Note 19 "Leases."
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SIGNIFICANT ACQUISITIONS AND DIVESTITURES (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets and Liabilities Held for Sale | The related assets and liabilities have been reclassified as current assets held for sale and current liabilities held for sale within the Company's condensed consolidated balance sheets as of March 31, 2019 and include the following:
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STOCKHOLDERS' EQUITY (Tables) |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Compensation Cost on Net Earnings | The Company’s results for the three months ended March 31, 2019 and 2018 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:
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| Schedule of Stock Option Activity | Option activity for the three months ended March 31, 2019 and 2018 is summarized below:
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| Schedule of Other Information Pertaining to Stock Option Activity | Other information pertaining to option activity during the three months ended March 31, 2019 and 2018 was as follows:
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| Schedule of Non-vested Restricted Stock Activity | Non-vested restricted stock activity for the three months ended March 31, 2019 and 2018 is summarized below:
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| Schedule of Non-vested Performance Share Activity | Non-vested performance share activity for the three months ended March 31, 2019 and 2018 is summarized below:
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INVENTORIES (Tables) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | Inventories at March 31, 2019 and December 31, 2018 consisted of the following:
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property, Plant and Equipment | Property, plant and equipment at March 31, 2019 and December 31, 2018 are summarized as follows:
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INTANGIBLE ASSETS (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Identifiable Intangible Assets | Identifiable intangible assets with finite lives at March 31, 2019 and December 31, 2018 are summarized as follows:
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NET EARNINGS PER SHARE (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of the Net Earnings and Shares Used in Calculating Basic and Diluted Net Earnings Per Share | The following presents a reconciliation of the net earnings and shares used in calculating basic and diluted net earnings per share:
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SEGMENT INFORMATION (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Reporting Information | The segment information is summarized as follows: Business Segment Assets:
Business Segment Net Sales:
Business Segment Earnings Before Income Taxes:
Depreciation/Amortization:
Capital Expenditures:
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REVENUE (Tables) |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregation of Revenues | The following table presents revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues.
The following table presents revenues disaggregated by geography, based on the billing addresses of customers:
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SUPPLEMENTAL CASH FLOW INFORMATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Supplemental Cash Flow Information | Cash paid during the three months ended March 31, 2019 and 2018 for income taxes and interest is as follows:
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Changes in Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive (loss)/income were as follows:
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| Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive loss at March 31, 2019 and December 31, 2018 consisted of the following:
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EMPLOYEE BENEFIT PLANS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Net Periodic Benefit Cost | Net periodic benefit costs for such retirement medical plans were as follows:
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COMMITMENTS AND CONTINGENCIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| Aggregate Future Minimum Rental Payments Required under Non-Cancelable Operating Leases | Aggregate future minimum rental payments required under all non-cancelable operating leases at March 31, 2019 are as follows:
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Lease Cost | For the three months ended March 31, 2019, the Company's total lease cost is as follows, which includes both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:
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SIGNIFICANT ACQUISITIONS AND DIVESTITURES - Narrative (Details) € in Thousands, $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
|
May 02, 2019
EUR (€)
Country
|
Mar. 31, 2019
USD ($)
|
Mar. 31, 2018
USD ($)
|
|
| Business Combinations [Abstract] | |||
| Transaction and integration costs related to acquisitions | $ 485 | $ 689 | |
| Chemogas | |||
| Business Acquisition [Line Items] | |||
| Transaction costs | $ 307 | ||
| Chemogas | Subsequent Event | |||
| Business Acquisition [Line Items] | |||
| Purchase price | € | € 95,000 | ||
| Chemogas | Subsequent Event | |||
| Business Acquisition [Line Items] | |||
| Number of Countries in which Entity Operates | Country | 70 | ||
SIGNIFICANT ACQUISITIONS AND DIVESTITURES - Assets and Liabilities Held for Sale (Details) - Discontinued Operations, Held-for-sale, Not Discontinued Operations - Human Nutrition & Health $ in Thousands |
Mar. 31, 2019
USD ($)
|
|---|---|
| Disposal Group, Including Discontinued Operation, Assets, Current [Abstract] | |
| Accounts receivable | $ 353 |
| Inventory | 376 |
| Property, plant, and equipment, net | 9,314 |
| Right of use assets | 317 |
| Goodwill | 1,380 |
| Other current assets | 8 |
| Assets held for sale | 11,748 |
| Disposal Group, Including Discontinued Operation, Liabilities [Abstract] | |
| Trade accounts payable | 126 |
| Accrued expenses | 260 |
| Accrued compensation and other benefits | 52 |
| Lease liabilities | 319 |
| Liabilities held for sale | $ 757 |
STOCKHOLDERS' EQUITY - Repurchase of Common Stock (Details) - $ / shares |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Stockholders' Equity Note [Abstract] | |||
| Number of shares authorized to be repurchased (in shares) | 3,763,083 | ||
| Aggregate number of shares repurchased since inception (in shares) | 2,199,268 | ||
| Number of shares remaining in treasury (in shares) | 6,196 | 706 | |
| Number of shares acquired under stock repurchase plan and subsequently reissued (in shares) | 8,496 | 10,454 | |
| Treasury stock acquired, average cost (in dollars per share) | $ 85.53 | $ 75.04 | |
INVENTORIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 21,398 | $ 23,661 |
| Work in progress | 5,102 | 4,649 |
| Finished goods | 40,264 | 38,877 |
| Total inventories | $ 66,764 | $ 67,187 |
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Property, plant and equipment [Abstract] | ||
| Gross property, plant and equipment | $ 300,585 | $ 307,746 |
| Less: accumulated depreciation | 112,549 | 113,407 |
| Property, plant and equipment, net | 188,036 | 194,339 |
| Land | ||
| Property, plant and equipment [Abstract] | ||
| Gross property, plant and equipment | 8,489 | 7,965 |
| Building | ||
| Property, plant and equipment [Abstract] | ||
| Gross property, plant and equipment | 68,844 | 67,702 |
| Equipment | ||
| Property, plant and equipment [Abstract] | ||
| Gross property, plant and equipment | 201,890 | 213,909 |
| Construction in progress | ||
| Property, plant and equipment [Abstract] | ||
| Gross property, plant and equipment | $ 21,362 | $ 18,170 |
INTANGIBLE ASSETS - Narrative (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | |||
| Goodwill | $ 446,453,000 | $ 447,995,000 | |
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
| Amortization of identifiable intangible assets | 5,842,000 | $ 6,193,000 | |
| Identifiable intangible assets with indefinite useful lives | 0 | $ 0 | |
| Discontinued Operations, Held-for-sale, Not Discontinued Operations | Human Nutrition & Health | |||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
| Goodwill | $ 1,380,000 | ||
EQUITY-METHOD INVESTMENT (Details) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2019
USD ($)
vote
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
| Equity Method Investment, Summarized Financial Information [Abstract] | |||
| Percentage of production offtake | 66.66% | ||
| Percentage of operating expenses to be absorbed | 66.66% | ||
| St. Gabriel CC Company, LLC | |||
| Equity Method Investment, Summarized Financial Information [Abstract] | |||
| Ownership percentage in joint venture | 66.66% | ||
| Loss relating to joint venture's expenses | $ 101 | $ 139 | |
| Carrying value of joint venture | $ 4,801 | $ 4,902 | |
| St. Gabriel CC Company, LLC | Eastman Chemical Company | |||
| Equity Method Investment, Summarized Financial Information [Abstract] | |||
| Ownership percentage in joint venture | 33.34% | ||
| Number of votes | vote | 2 | ||
INCOME TAXES (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Income Tax Disclosure [Abstract] | |||
| Effective tax rate | 24.20% | 23.20% | |
| Unrecognized tax benefits | $ 5,648 | $ 5,709 | |
| Accrued interest and penalties related to unrecognized tax benefits | $ 1,854 | $ 1,839 | |
SEGMENT INFORMATION - Narrative (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2019
filling_facility
| |
| Segment Reporting [Abstract] | |
| Number of filling facilities | 2 |
| Percentage decrease of chlorides released in environment | 75.00% |
SEGMENT INFORMATION - Business Segment Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Segment information [Abstract] | ||
| Assets | $ 971,888 | $ 981,355 |
| Other Unallocated | ||
| Segment information [Abstract] | ||
| Assets | 41,805 | 59,473 |
| Human Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Assets | 703,042 | 702,692 |
| Animal Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Assets | 135,738 | 136,810 |
| Specialty Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Assets | 65,715 | 59,558 |
| Industrial Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Assets | $ 25,588 | $ 22,822 |
SEGMENT INFORMATION - Business Segment Net Sales (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Segment information [Abstract] | ||
| Net sales | $ 157,029 | $ 161,410 |
| Human Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Net sales | 85,149 | 83,063 |
| Animal Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Net sales | 43,361 | 46,141 |
| Specialty Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Net sales | 18,424 | 17,740 |
| Industrial Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Net sales | $ 10,095 | $ 14,466 |
SEGMENT INFORMATION - Business Segment Earnings Before Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Segment information [Abstract] | ||
| Earnings before income taxes | $ 24,793 | $ 25,177 |
| Unallocated amortization expense | (5,842) | (6,193) |
| Interest and other (expense) | (1,687) | (2,063) |
| Other Unallocated | ||
| Segment information [Abstract] | ||
| Transaction costs, integration costs, and unallocated legal fees | (804) | (689) |
| Unallocated amortization expense | (9) | 0 |
| Human Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Earnings before income taxes | 13,703 | 12,932 |
| Animal Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Earnings before income taxes | 5,256 | 7,484 |
| Specialty Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Earnings before income taxes | 6,697 | 5,034 |
| Industrial Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Earnings before income taxes | $ 1,637 | $ 2,479 |
SEGMENT INFORMATION - Depreciation and Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Segment information [Abstract] | ||
| Depreciation/Amortization | $ 10,756 | $ 11,018 |
| Human Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Depreciation/Amortization | 7,986 | 8,532 |
| Animal Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Depreciation/Amortization | 1,578 | 1,305 |
| Specialty Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Depreciation/Amortization | 1,021 | 1,010 |
| Industrial Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Depreciation/Amortization | $ 171 | $ 171 |
SEGMENT INFORMATION - Capital Expenditures (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Segment information [Abstract] | ||
| Capital expenditures | $ 8,488 | $ 3,735 |
| Human Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Capital expenditures | 5,255 | 2,079 |
| Animal Nutrition & Health | Operating Segments | ||
| Segment information [Abstract] | ||
| Capital expenditures | 1,471 | 830 |
| Specialty Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Capital expenditures | 1,474 | 582 |
| Industrial Products | Operating Segments | ||
| Segment information [Abstract] | ||
| Capital expenditures | $ 288 | $ 244 |
REVENUE - Schedule of Disaggregation of Revenues (Details) $ in Thousands |
3 Months Ended | |
|---|---|---|
|
Mar. 31, 2019
USD ($)
revenue_sub-stream
|
Mar. 31, 2018
USD ($)
|
|
| Revenue [Abstract] | ||
| Net sales | $ 157,029 | $ 161,410 |
| United States | ||
| Revenue [Abstract] | ||
| Net sales | 118,111 | 120,668 |
| Foreign Countries | ||
| Revenue [Abstract] | ||
| Net sales | 38,918 | 40,742 |
| Product Sales Revenue | ||
| Revenue [Abstract] | ||
| Net sales | $ 155,950 | 159,955 |
| Number of sub-streams of revenue | revenue_sub-stream | 4 | |
| Product Sales | ||
| Revenue [Abstract] | ||
| Net sales | $ 143,874 | 146,914 |
| Co-manufacturing | ||
| Revenue [Abstract] | ||
| Net sales | 10,630 | 10,707 |
| Bill and Hold | ||
| Revenue [Abstract] | ||
| Net sales | 857 | 1,289 |
| Consignment | ||
| Revenue [Abstract] | ||
| Net sales | 589 | 1,045 |
| Royalty Revenue | ||
| Revenue [Abstract] | ||
| Net sales | $ 1,079 | $ 1,455 |
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Supplemental Cash Flow Information [Abstract] | ||
| Income taxes | $ 58 | $ 0 |
| Interest | $ 1,459 | $ 1,763 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Changes in accumulated other comprehensive income (loss) [Abstract] | ||
| Net foreign currency translation adjustment | $ (1,089) | $ 1,363 |
| Net change in postretirement benefit plan (see Note 15 for further information) | ||
| Amortization of prior service cost | 18 | 18 |
| Amortization of gain | (11) | (1) |
| Total before tax | 7 | 17 |
| Tax | (2) | (4) |
| Net of tax | 5 | 13 |
| Other comprehensive (loss) income | $ (1,084) | $ 1,376 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Components of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | $ 691,618 | $ 616,881 |
| Other comprehensive (loss)/income | (1,084) | 1,376 |
| Ending balance | 710,509 | 639,890 |
| Total | ||
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | (3,602) | (1,642) |
| Other comprehensive (loss)/income | (1,084) | 1,376 |
| Ending balance | (4,686) | $ (266) |
| Foreign currency translation adjustment | ||
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | (4,285) | |
| Other comprehensive (loss)/income | (1,089) | |
| Ending balance | (5,374) | |
| Postretirement benefit plan | ||
| AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
| Beginning balance | 683 | |
| Other comprehensive (loss)/income | 5 | |
| Ending balance | $ 688 | |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Rent expense charged to operations under lease agreements | $ 813 | $ 786 |
| Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
| April 1, 2019 to December 31, 2019 | 2,562 | |
| 2020 | 2,912 | |
| 2021 | 2,005 | |
| 2022 | 1,415 | |
| 2023 | 1,176 | |
| 2024 | 1,024 | |
| Thereafter | 3,594 | |
| Total minimum lease payments | $ 14,688 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) |
3 Months Ended | |
|---|---|---|
|
Mar. 31, 2019
USD ($)
financial_instrument
|
Dec. 31, 2018
USD ($)
|
|
| Fair value of financial instruments [Abstract] | ||
| Number of financial instruments held for trading purposes | financial_instrument | 0 | |
| Level 1 | ||
| Fair value of financial instruments [Abstract] | ||
| Related rabbi trust assets | $ 1,513,000 | $ 265,000 |
| Money Market Funds | Level 1 | ||
| Fair value of financial instruments [Abstract] | ||
| Cash and cash equivalents | $ 797,000 | $ 793,000 |
RELATED PARTY TRANSACTIONS (Details) - St. Gabriel CC Company, LLC - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Related party transactions [Abstract] | |||
| Finished goods received from related party recorded in cost of goods sold | $ 5,312 | $ 6,036 | |
| Receivable from related party | 4,897 | $ 3,210 | |
| Payable to related party | 1,567 | 1,943 | |
| Related party payable related to non-contractual monies | 310 | $ 314 | |
| Services Provided | |||
| Related party transactions [Abstract] | |||
| Revenue from related party | 868 | 927 | |
| Raw Materials Sold | |||
| Related party transactions [Abstract] | |||
| Revenue from related party | $ 6,808 | $ 7,278 | |
LEASES - Schedule of Lease Costs (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2019
USD ($)
| |
| Lease Cost | |
| Operating lease cost | $ 813 |
| Other information | |
| (Gains) and losses on sale and leaseback transactions, net | 0 |
| Cash paid for amounts included in the measurement of lease liabilities | |
| Operating cash flows from operating leases | 819 |
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ 12,874 |
| Weighted-average remaining lease term - operating leases | 4 years 10 months 17 days |
| Weighted-average discount rate - operating | 4.50% |
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