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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended September 30, 2022
    OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from ____ to ____
Commission file number: 1-13648
_______________________________________________________________________________________________________________
Balchem Corporation
(Exact name of Registrant as specified in its charter)
Maryland 13-2578432
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

5 Paragon Drive, Montvale, NJ 07645
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (845) 326-5600

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $.06-2/3 per shareBCPCThe Nasdaq Stock Market LLC
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):Large accelerated filerAccelerated filer 
 Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of October 27, 2022, the registrant had 32,135,122 shares of its Common Stock, $.06 2/3 par value, outstanding.


BALCHEM CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page No.



Part I.    Financial Information

Item 1.    Financial Statements
BALCHEM CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
AssetsSeptember 30, 2022 (unaudited)December 31, 2021
Current assets:(unaudited) 
Cash and cash equivalents$56,489 $103,239 
Accounts receivable, net of allowance for doubtful accounts of $1,186 and $928 at September 30, 2022 and December 31, 2021 respectively
140,812 117,408 
Inventories139,464 91,058 
Prepaid expenses6,944 6,116 
Prepaid income taxes3,954  
Derivative assets14,540  
Other current assets5,908 4,411 
Total current assets368,111 322,232 
Property, plant and equipment, net260,008 237,517 
Goodwill749,035 523,949 
Intangible assets with finite lives, net227,323 94,665 
Right of use assets - operating leases11,617 6,929 
Right of use assets - finance lease2,202 2,359 
Other assets14,712 11,674 
Total assets$1,633,008 $1,199,325 
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable$73,121 $56,243 
Accrued expenses49,980 43,411 
Accrued compensation and other benefits14,959 19,567 
Dividends payable125 20,886 
Income taxes payable 1,334 
Operating lease liabilities - current3,727 2,194 
Finance lease liabilities - current173 167 
Total current liabilities142,085 143,802 
Revolving loan462,569 108,569 
Deferred income taxes76,771 46,455 
Operating lease liabilities - non-current8,069 4,811 
Finance lease liabilities - non-current2,172 2,303 
Derivative liabilities 2,658 
Contingent consideration liabilities30,547  
Other long-term obligations14,873 13,712 
Total liabilities737,086 322,310 
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $25 par value. Authorized 2,000,000 shares; none issued and outstanding
  
Common stock, $0.0667 par value. Authorized 120,000,000 shares; 32,134,902 and 32,287,150 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
2,144 2,154 
Additional paid-in capital124,558 147,716 
Retained earnings816,089 732,138 
Accumulated other comprehensive loss(46,869)(4,993)
Total stockholders' equity895,922 877,015 
Total liabilities and stockholders' equity$1,633,008 $1,199,325 
See accompanying notes to condensed consolidated financial statements.
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BALCHEM CORPORATION
Condensed Consolidated Statements of Earnings
(Dollars in thousands, except per share data)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net sales$244,267 $197,869 $709,827 $585,890 
Cost of sales175,837 136,935 498,015 406,782 
Gross margin68,430 60,934 211,812 179,108 
Operating expenses:
Selling expenses16,590 15,478 49,566 45,248 
Research and development expenses2,996 3,156 9,149 8,804 
General and administrative expenses15,219 9,787 41,216 31,375 
 34,805 28,421 99,931 85,427 
Earnings from operations33,625 32,513 111,881 93,681 
Other expenses, net:
Interest expense, net3,642 556 5,147 1,889 
Other income, net(1,102)(128)(1,239)(295)
2,540 428 3,908 1,594 
Earnings before income tax expense31,085 32,085 107,973 92,087 
Income tax expense5,836 7,072 24,012 20,932 
Net earnings$25,249 $25,013 $83,961 $71,155 
Net earnings per common share - basic$0.79 $0.78 $2.62 $2.21 
Net earnings per common share - diluted$0.78 $0.77 $2.59 $2.18 
See accompanying notes to condensed consolidated financial statements.

4

BALCHEM CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Net earnings$25,249 $25,013 $83,961 $71,155 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(34,874)(3,362)(44,667)(7,981)
Unrealized gain on cash flow hedge427 341 2,850 1,204 
Change in postretirement benefit plans2 11 (59)26 
Other comprehensive income (loss)(34,445)(3,010)(41,876)(6,751)
Comprehensive (loss) income$(9,196)$22,003 $42,085 $64,404 
See accompanying notes to condensed consolidated financial statements.

5

BALCHEM CORPORATION
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three and nine months ended September 30, 2022 and 2021
(Dollars in thousands, except share and per share data)
Total
Stockholders'
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Common StockAdditional
Paid-in
Capital
SharesAmount
Balance - December 31, 2021$877,015 $732,138 $(4,993)32,287,150 $2,154 $147,716 
Net earnings28,930 28,930 — — — — 
Other comprehensive (loss)(1,296)— (1,296)— — — 
Repurchases of common stock(34,599)— — (245,685)(16)(34,583)
Dividends(10)(10)— — — — 
Shares and options issued under stock plans3,642 — — 74,604 4 3,638 
Balance - March 31, 2022873,682 761,058 (6,289)32,116,069 2,142 116,771 
Net earnings29,782 29,782 — — — — 
Other comprehensive (loss)(6,135)— (6,135)— — — 
Repurchases of common stock(600)— — (4,976)— (600)
Shares and options issued under stock plans4,641 — — 9,500 1 4,640 
Balance - June 30, 2022901,370 790,840 (12,424)32,120,593 2,143 120,811 
Net earnings25,249 25,249 — — — — 
Other comprehensive (loss)(34,445)— (34,445)— — — 
Repurchases of common stock(46)— — (361)— (46)
Shares and options issued under stock plans3,794 — — 14,670 1 3,793 
Balance - September 30, 2022$895,922 $816,089 $(46,869)32,134,902 $2,144 $124,558 
See accompanying notes to condensed consolidated financial statements.


6

Condensed Consolidated Statements of Changes in Stockholders’ Equity (continued)
For the three and nine months ended September 30, 2022 and 2021
(Dollars in thousands, except share and per share data)
Total
Stockholders'
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Common StockAdditional
Paid-in
Capital
SharesAmount
Balance - December 31, 2020$828,233 $656,740 $4,173 32,372,621 $2,160 $165,160 
Net earnings23,411 23,411 — — — — 
Other comprehensive (loss)(5,624)— (5,624)— — — 
Repurchases of common stock(1,596)— — (13,475)(1)(1,595)
Shares and options issued under stock plans5,068 — — 92,784 6 5,062 
Balance - March 31, 2021849,492 680,151 (1,451)32,451,930 2,165 168,627 
Net earnings22,731 22,731 — — — — 
Other comprehensive income1,883 — 1,883 — — — 
Repurchases of common stock(9,240)— — (72,649)(5)(9,235)
Shares and options issued under stock plans4,776 — — 25,493 2 4,774 
Balance - June 30, 2021869,642 702,882 432 32,404,774 2,162 164,166 
Net earnings25,013 25,013 — — — — 
Other comprehensive (loss)(3,010)— (3,010)— — — 
Repurchases of common stock(7,926)— (61,075)(4)(7,922)
Shares and options issued under stock plans5,359 — — 38,938 3 5,356 
Balance - September 30, 2021$889,078 $727,895 $(2,578)32,382,637 $2,161 $161,600 

See accompanying notes to condensed consolidated financial statements.
7

BALCHEM CORPORATION
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
 Nine Months Ended
September 30,
 20222021
Cash flows from operating activities:  
Net earnings$83,961 $71,155 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization37,958 36,622 
Stock compensation expense9,838 8,809 
Deferred income taxes1,513 (806)
Provision for doubtful accounts379 105 
Unrealized gain on foreign currency transaction and deferred compensation(1,262)(534)
Asset impairment charge23  
Loss/(gain) on disposal of assets259 (996)
Changes in assets and liabilities
Accounts receivable(14,678)(14,088)
Inventories(30,370)(11,736)
Prepaid expenses and other current assets(690)(3,793)
Accounts payable and accrued expenses14,358 30,467 
Income taxes(5,732)(681)
Other1,324 1,499 
Net cash provided by operating activities96,881 116,023 
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired(365,780) 
Capital expenditures and intangible assets acquired(35,793)(22,391)
Proceeds from insurance and sale of assets 198 1,272 
Investment in affiliates(150) 
Net cash used in investing activities(401,525)(21,119)
Cash flows from financing activities:
Proceeds from revolving loan435,000 5,000 
Principal payments on revolving loan(81,000)(60,000)
Principal payments on acquired debt(30,782) 
Cash paid for financing costs(1,232) 
Principal payments on finance lease(125)(118)
Proceeds from stock options exercised2,172 6,351 
Dividends paid(20,708)(18,704)
Purchase of common stock(35,245)(18,762)
Net cash provided by (used in) financing activities268,080 (86,233)
Effect of exchange rate changes on cash(10,186)(3,229)
(Decrease) increase in cash and cash equivalents(46,750)5,442 
Cash and cash equivalents beginning of period103,239 84,571 
Cash and cash equivalents end of period$56,489 $90,013 
See accompanying notes to condensed consolidated financial statements.
8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(All dollar amounts in thousands, except share and per share data)

NOTE 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements presented herein have been prepared in accordance with the accounting policies described in the December 31, 2021 consolidated financial statements, and should be read in conjunction with the consolidated financial statements and notes, which appear in the Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements reflect the operations of Balchem Corporation and its subsidiaries (the "Company" or "Balchem"). All intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, the unaudited condensed consolidated financial statements furnished in this Form 10-Q include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal, recurring nature. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”) governing interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934 (the "Exchange Act") and therefore do not include some information and notes necessary to conform to annual reporting requirements. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the operating results expected for the full year or any interim period.
Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, this Standard Update is in effect from March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. The Company adopted the Standard Update in 2021. Due to the discontinuation of LIBOR and under the relief provided by Topic 848, during the third quarter of 2022, the Company modified its existing interest rate swap and replaced LIBOR with 1-month CME Term SOFR (see Note 20, "Derivative Instruments and Hedging Activities "). The modification of the agreement did not have a significant impact on the Company's consolidated financial statements and disclosures.
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 became effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU 2019-12 did not have a significant impact on the Company's consolidated financial statements and disclosures.

9

NOTE 2 – SIGNIFICANT ACQUISITIONS
Cardinal Associates Inc. ("Bergstrom")
On August 30, 2022, the Company's wholly-owned subsidiary Albion Laboratories, Inc. ("Albion") entered into a Stock Purchase Agreement, and closed on such transaction with Cardinal Associates Inc. ("Cardinal"), a corporation organized under the laws of the State of Washington, pursuant to which Albion acquired Cardinal and its Bergstrom Nutrition business (collectively, "Bergstrom"). Bergstrom Nutrition is a leading science-based manufacturer of methylsulfonylmethane (MSM), based in Vancouver, Washington. MSM is a widely used nutritional ingredient with strong scientific evidence supporting its benefits for joint health, sports nutrition, skin and beauty, healthy aging, and pet health. Bergstrom Nutrition's MSM brand "OptiMSM®" delivers the highest quality and purity MSM on the market and is the only brand of MSM with a U.S. GRAS "generally regarded as safe" designation. The addition of OptiMSM® to the Company's portfolio within Human Nutrition & Health and Animal Nutrition & Health segments provides a synergistic scientific advantage in Balchem's key strategic therapeutic focus areas such as longevity and performance and is a strong fit with Balchem's specialty, science-backed mineral products.
The Company made payments of $70,892 for the acquisition, amounting to $69,740 to the former shareholders and $1,152 to pay off Bergstrom's bank debt and certain other obligations. Net of cash acquired of $773, total payments made to the former shareholders of Bergstrom on the acquisition date were $68,967. The acquisition was primarily financed through the 2022 Credit Agreement (see Note 8, "Revolving Loan"). In connection with this transaction, the former shareholders of Bergstrom have an opportunity to receive an additional payment if certain financial performance targets and other metrics are met, and therefore we recorded a contingent consideration liability of $7,835 as of September 30, 2022. The goodwill of $34,060 that arose on the acquisition date consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to both the Human Nutrition & Health and Animal Nutrition & Health business segments. For tax purposes, a joint election under 338(h)(10) was made to treat the stock acquisition as a deemed asset acquisition, therefore generating tax amortizable goodwill.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed:
Cash and cash equivalents$773 
Accounts receivable4,699 
Inventories3,922 
Property, plant and equipment2,700 
Right of use assets866 
Customer relationships26,500 
Developed technology4,700 
Trademarks2,300 
Other assets197 
Accounts payable(685)
Bank debt(206)
Lease liabilities(871)
Other liabilities(1,380)
Goodwill34,060 
Total consideration on acquisition date77,575 
Contingent consideration liability(7,835)
Amount paid to shareholders69,740 
To pay off bank debt and certain other obligations1,152 
Total amount paid$70,892 
The estimated fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions, which are subject to change. In preparing our preliminary fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. Valuation methods utilized include net realizable value for inventory, multi-period excess earnings method for customer relationships, the relief from royalty method for other intangible assets, and a scenario-based approach for the contingent consideration. The purchase price and related allocation of assets acquired and liabilities assumed is preliminary pending management's final review of fair value calculations.
10

Customer relationships are amortized over a 15-year period utilizing a percentage of excess earnings over economic life method. The corporate trademark and product trademarks are amortized over 2 years and 10 years, respectively, and developed technology is amortized over 12 years, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.
Transaction and integration costs related to the Bergstrom acquisition are included in general and administrative expenses and were $593 and $668 for the three and nine months ended September 30, 2022, respectively.
Kechu BidCo AS and Its Subsidiary Companies ("Kappa")
On June 21, 2022, Balchem Corporation and its wholly-owned subsidiary, Balchem B.V., completed the acquisition of Kechu BidCo AS and its subsidiary companies, including Kappa Bioscience AS, a leading science-based manufacturer of specialty vitamin K2 for the human nutrition industry, headquartered in Oslo, Norway (all acquired companies collectively referred to as “Kappa”). The Company made payments of approximately kr3,301,341 ("kr" indicates the Norwegian krone) on the acquisition date, amounting to approximately kr2,997,669 to the former shareholder and approximately kr303,672 to Kappa's lenders to pay off all Kappa bank debt. Net of cash acquired of kr63,064, total payments on the acquisition date were kr3,238,277. Considering net cash acquired of $6,365, these payments translated to approximately $326,820 paid on the acquisition date, amounting to $302,537 paid to the former shareholder and approximately $30,648 to Kappa's lenders. The acquisition was primarily financed through the 2018 Credit Agreement (see Note 8, "Revolving Loan"). In connection with this transaction, the seller has an opportunity to receive an additional payment in 2024 if certain financial performance targets and other metrics are met, and therefore we recorded contingent consideration of kr245,000 in the second quarter of 2022 (translated to $22,712 as of September 30, 2022). Kappa manufactures specialty vitamin K2, a fast-growing specialty vitamin that plays a crucial role in the human body for bone health, heart health, immunity, and athletic performance. Primarily, vitamin K2 supports the transport and distribution of calcium in the body. Vitamin K2 is important at all life stages, from pregnancy and early life to healthy aging. Kappa's K2VITAL® branded vitamin K2 is the leading synthetic vitamin K2 and is backed by strong intellectual property and a deep clinical research portfolio. The acquisition strengthens the Company's scientific and technical expertise, geographic reach, and marketplace leadership, which should ultimately lead to accelerated growth for the Company's portfolios within the Human Nutrition & Health segment.
The goodwill of $217,570 that arose on the acquisition date consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to the Human Nutrition & Health business segment and is not deductible for income tax purposes.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed. The transactions were completed in Norwegian kroner ("NOK") and the amounts were translated to U.S. dollars ("USD") using the foreign currency exchange rate as of June 21, 2022.
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Cash and cash equivalents$6,365 
Accounts receivable8,036 
Inventories17,701 
Property, plant and equipment9,854 
Right of use assets3,349 
Customer relationships110,012 
Developed technology17,662 
Trademarks6,055 
Other assets2,399 
Accounts payable(3,301)
Bank debt(30,648)
Lease liabilities(3,349)
Other liabilities(4,373)
Deferred income taxes, net(30,069)
Goodwill217,570 
Total consideration on acquisition date327,263 
Contingent consideration liability(24,726)
Net gain on foreign currency exchange forward contracts(512)
Amount paid to shareholders302,025 
Kappa bank debt paid on acquisition date30,648 
Total amount paid on acquisition date$332,673 
The estimated fair value of tangible and intangible assets acquired and liabilities assumed is based on management’s estimates and assumptions, which are subject to change. In preparing our preliminary fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. Valuation methods utilized include net realizable value for inventory, multi-period excess earnings method for customer relationships, the relief from royalty method for other intangible assets, and a scenario-based approach for the contingent consideration. The purchase price and related allocation of assets acquired and liabilities assumed is preliminary pending management's final review of fair value calculations and deferred tax liabilities related to certain non-deductible assets.
Customer relationships are amortized over a 15-year period utilizing a percentage of excess earnings over economic life method. The corporate trademark and product trademarks are amortized over 2 years and 10 years, respectively, and developed technology is amortized over 12 years, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.
Transaction and integration costs related to the Kappa acquisition are included in general and administrative expenses and were $989 and $1,440 for both the three and nine months ended September 30, 2022. There were no such amounts related to this acquisition for the three and nine months ended September 30, 2021.

NOTE 3 – STOCKHOLDERS’ EQUITY
STOCK-BASED COMPENSATION
The Company’s results for the three and nine months ended September 30, 2022 and 2021 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:
Increase/(Decrease) for theIncrease/(Decrease) for the
Three Months Ended September 30,Nine Months Ended
September 30,
2022202120222021
Cost of sales$386 $444 $1,062 $1,188 
Operating expenses2,563 2,451 8,776 7,621 
Net earnings(2,251)(2,232)(7,563)(6,801)
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As allowed by ASC 718, the Company has made an estimate of expected forfeitures based on its historical experience and is recognizing compensation cost only for those stock-based compensation awards expected to vest.
The Company’s stock incentive plans allow for the granting of stock awards and options to purchase common stock. Both incentive stock options and nonqualified stock options can be awarded under the plans. No option will be exercisable for longer than ten years after the date of grant. The Company has approved and reserved a number of shares to be issued upon exercise of the outstanding options that is adequate to cover all exercises. As of September 30, 2022, the plans had 407,630 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 to five years for stock options, three years for employee restricted stock awards, three years for employee performance share awards, and three years for non-employee director restricted stock awards. Certain awards provide for accelerated vesting if there is a change in control (as defined in the plans) or other qualifying events.
Option activity for the nine months ended September 30, 2022 and 2021 is summarized below:
For the nine months ended September 30, 2022Shares (000s)Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2021867 $88.19 $69,711 
Granted239 139.04 
Exercised(31)70.06 
Forfeited(12)125.05 
Canceled  
Outstanding as of September 30, 20221,063 $99.74 $27,308 6.6
Exercisable as of September 30, 2022656 $81.45 $26,312 5.2
For the nine months ended September 30, 2021 Shares (000s)Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2020858 $80.58 $29,735 
Granted129 119.12 
Exercised(100)63.49 
Forfeited(10)106.93 
Canceled(1)74.57 
Outstanding as of September 30, 2021876 $87.91 $50,090 6.6
Exercisable as of September 30, 2021540 $74.81 $37,961 5.5
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 weighted average fair values of the stock options granted under the Plans were calculated using either the Black-Scholes model or the Binomial model, whichever was deemed to be most appropriate. For the nine months ended September 30, 2022, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions: dividend yields of 0.5%; expected volatilities of 30%; risk-free interest rates of 2.8%; and expected lives of 7.3 years. For nine months ended September 30, 2021, the fair value of each option grant was estimated on the date of the grant using the following weighted average assumptions: dividend yields of 0.5%; expected volatilities of 33%; risk-free interest rates of 0.5%; and expected lives of 4.9 years.
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.
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Other information pertaining to option activity during the three and nine months ended September 30, 2022 and 2021 is as follows:
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Weighted-average fair value of options granted$48.55 $ $44.77 $33.11 
Total intrinsic value of stock options exercised ($000s)$815 $3,196 $1,964 $6,927 
Non-vested restricted stock activity for the nine months ended September 30, 2022 and 2021 is summarized below:
Nine Months Ended September 30,
20222021
Shares (000s)Weighted
Average Grant
Date Fair
Value
Shares (000s)Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31166 $99.70 159 $90.71 
Granted40 137.03 38 119.59 
Vested(78)81.11 (16)86.79 
Forfeited(7)116.72 (5)95.71 
Non-vested balance as of September 30121 $122.96 176 $97.17 

Non-vested performance share activity for the nine months ended September 30, 2022 and 2021 is summarized below:
Nine Months Ended September 30,
20222021
Shares (000s)Weighted
Average Grant
Date Fair
Value
Shares (000s)Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 3169 $110.72 71$91.99 
Granted39 114.22 36108.74
Vested(35)53.17 (24)70.64
Forfeited(3)84.09 (11)74.57
Non-vested balance as of September 3070 $127.69 72$110.22 

The performance share (“PS”) awards provide the recipients the right to receive a certain number of shares of the Company’s common stock in the future, subject to an EBITDA performance hurdle, where vesting is dependent upon the Company achieving a certain EBITDA percentage growth over the performance period, and relative total shareholder return (TSR) where vesting is dependent upon the Company’s TSR performance over the performance period relative to a comparator group consisting of the Russell 2000 index constituents. Expense is measured based on the fair value at the date of grant utilizing a Black-Scholes methodology to produce a Monte-Carlo simulation model which allows for the incorporation of the performance hurdles that must be met before the PS vests. The assumptions used in the fair value determination were risk free interest rates of 1.8% and 0.2%; dividend yields of 0.5% and 0.6%; volatilities of 32% and 33%; and initial TSR’s of -15.7% and 11.7%, in each case for the nine months ended September 30, 2022 and 2021, respectively. Expense is estimated based on the number of shares expected to vest, assuming the requisite service period is rendered and the probable outcome of the performance condition is achieved.  The estimate is revised if subsequent information indicates that the actual number of shares likely to vest differs from previous estimates. Expense is ultimately adjusted based on the actual achievement of service and performance targets. The PS will cliff vest 100% at the end of the third year following the grant in accordance with the performance metrics set forth.
As of September 30, 2022 and 2021, there were $23,665 and $16,498, respectively, of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the plans. As of September 30, 2022, the
14

unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.1 years. The Company estimates that share-based compensation expense for the year ended December 31, 2022 will be approximately $13,500.
REPURCHASE OF COMMON STOCK
The Company's Board of Directors has approved a stock repurchase program. The total authorization under this program is 3,763,038 shares. Since the inception of the program in June 1999, a total of 3,069,266 shares have been purchased. The Company’s prior presentation of reflecting treasury stock separately within stockholders’ equity has been adjusted to conform to the presentation prescribed by the State of Maryland, where the Company is incorporated. In connection therewith, adjustments to balances previously reflected as treasury stock of $11,080, $8,472, $2,210, and $7,873 as of September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, respectively, were made to the condensed consolidated statements of changes in stockholders’ equity and prior references to “Treasury shares purchased” were updated to “Repurchases of common stock”, accordingly. There was no impact to total stockholders’ equity in any of the years presented as a result of these updates. The Company intends to acquire shares from time to time at prevailing market prices if and to the extent it deems it is advisable to do so based on its assessment of corporate cash flow, market conditions and other factors. The Company also repurchases shares from employees in connection with settlement of transactions under the Company's equity incentive plans. During the nine months ended September 30, 2022 and 2021, the Company purchased 251,022 and 147,199 shares, respectively, from open market purchases and from employees on a net-settlement basis to provide cash to employees to cover the associated employee payroll taxes. These shares were purchased at an average cost of $140.41 and $127.46, respectively.

NOTE 4 – INVENTORIES
Inventories at September 30, 2022 and December 31, 2021 consisted of the following:
September 30, 2022December 31, 2021
Raw materials$41,371 $28,639 
Work in progress11,879 10,563 
Finished goods86,214 51,856 
Total inventories$139,464 $91,058 

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 2022 and December 31, 2021 are summarized as follows:
 September 30, 2022December 31, 2021
Land$10,993 $11,692 
Building90,239 89,602 
Equipment267,611 253,995 
Construction in progress73,163 52,930 
 442,006 408,219 
Less: accumulated depreciation181,998 170,702 
Property, plant and equipment, net$260,008 $237,517 

NOTE 6 – INTANGIBLE ASSETS
The Company had goodwill in the amount of $749,035 and $523,949 as of September 30, 2022 and December 31, 2021, respectively, subject to the provisions of ASC 350, “Intangibles-Goodwill and Other.” The increase in goodwill is the result o