Company Quick10K Filing
Quick10K
Balchem
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$99.90 32 $3,230
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-02 Officers
8-K 2019-08-01 Earnings, Exhibits
8-K 2019-06-20 Shareholder Vote
8-K 2019-05-27 M&A, Regulation FD, Exhibits
8-K 2019-05-03 Earnings, Exhibits
8-K 2019-05-02 Enter Agreement, Regulation FD, Exhibits
8-K 2019-02-28 Earnings, Exhibits
8-K 2019-02-04 Officers, Exhibits
8-K 2018-12-13 Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-09-26 Officers, Exhibits
8-K 2018-08-03 Earnings, Exhibits
8-K 2018-06-27 Enter Agreement, Leave Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-06-20 Shareholder Vote
8-K 2018-02-27 Earnings, Exhibits
PCG Pg&E 10,240
ASND Ascendis Pharma 5,690
MORN Morningstar 5,650
WH Wyndham Hotels & Resorts 5,440
NVCR Novocure 4,710
PZZA Papa John's 1,690
SFDL Security Federal 0
OVAS Ovascience 0
SN Sanchez Energy 0
DUG Dutch Oven Gold Group 0
BCPC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Condensed Consolidated Financial Statements
Note 2 - Significant Acquisitions and Divestitures
Note 3 - Stockholders' Equity
Note 4 - Inventories
Note 5 - Property, Plant and Equipment
Note 6 - Intangible Assets
Note 7 - Equity-Method Investment
Note 8 - Revolving Loan
Note 9 - Net Earnings per Share
Note 10 - Income Taxes
Note 11 - Segment Information
Note 12 - Revenue
Note 13 - Supplemental Cash Flow Information
Note 14 - Accumulated Other Comprehensive Income (Loss)
Note 15 - Employee Benefit Plans
Note 16 - Commitments and Contingencies
Note 17 - Fair Value of Financial Instruments
Note 18 - Related Party Transactions
Note 19 - Leases
Note 20 - Derivative Instruments and Hedging Activities
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (All Amounts in Thousands, Except Share and per Share Data)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 bcpc-20190630xexx311.htm
EX-31.2 bcpc-20190630xexx312.htm
EX-32.1 bcpc-20190630xexx321.htm
EX-32.2 bcpc-20190630xexx322.htm

Balchem Earnings 2019-06-30

BCPC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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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 June 30, 2019
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)

52 Sunrise Park Road, New Hampton, NY 10958
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (845) 326-5600

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
Accelerated filer
 
 
 
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of July 25, 2019, the registrant had 32,356,796 shares of its Common Stock, $.06 2/3 par value, outstanding.
 
 



Table of Contents

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



Table of Contents

Part I.    Financial Information

Item 1.    Financial Statements

BALCHEM CORPORATION
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share data)
Assets
 
June 30, 2019
(unaudited)
 
December 31, 2018
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
41,674

 
$
54,268

Accounts receivable, net of allowance for doubtful accounts of $1,159 and $610 at June 30, 2019 and December 31, 2018 respectively
 
101,595

 
99,545

Inventories
 
68,430

 
67,187

Prepaid expenses
 
5,344

 
3,830

Prepaid income taxes
 
977

 

Assets held for sale
 
12,313

 

Other current assets
 
1,552

 
1,484

Total current assets
 
231,885

 
226,314

 
 
 
 
 
Property, plant and equipment, net
 
204,019

 
194,339

Goodwill
 
506,852

 
447,995

Intangible assets with finite lives, net
 
139,769

 
105,985

Right of use assets
 
7,203

 

Other assets
 
8,592

 
6,722

Total assets
 
$
1,098,320

 
$
981,355

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities:
 
 
 
 
Trade accounts payable
 
$
29,439

 
$
33,345

Accrued expenses
 
22,979

 
22,025

Accrued compensation and other benefits
 
6,749

 
11,022

Dividends payable
 
78

 
15,220

Income tax payable
 

 
444

Lease liabilities - current
 
2,316

 

Liabilities held for sale
 
530

 

Total current liabilities
 
62,091

 
82,056

 
 
 
 
 
Revolving loan
 
228,569

 
156,000

Deferred income taxes
 
57,386

 
44,309

Lease liabilities - non-current
 
4,873

 

Derivative liabilities
 
4,617

 

Other long-term obligations
 
8,439

 
7,372

Total liabilities
 
365,975

 
289,737

 
 
 
 
 
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; 32,355,296 shares issued and outstanding at June 30, 2019 and 32,256,915 shares issued and 32,256,209 outstanding at December 31, 2018, respectively
 
2,157

 
2,151

Additional paid-in capital
 
169,743

 
165,098

Retained earnings
 
566,639

 
528,027

Accumulated other comprehensive loss
 
(6,194
)
 
(3,602
)
Treasury stock, at cost: 0 and 706 shares at June 30, 2019 and December 31, 2018, respectively
 

 
(56
)
Total stockholders' equity
 
732,345

 
691,618

 
 
 
 
 
Total liabilities and stockholders' equity
 
$
1,098,320

 
$
981,355

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

BALCHEM CORPORATION
Condensed Consolidated Statements of Earnings
(Dollars in thousands, except per share data)
(unaudited)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net sales
 
$
161,554

 
$
163,687

 
$
318,583

 
$
325,097

 
 
 
 
 
 
 
 
 
Cost of sales
 
107,636

 
110,221

 
215,570

 
220,172

 
 
 
 
 
 
 
 
 
Gross margin
 
53,918

 
53,466

 
103,013

 
104,925

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling expenses
 
15,494

 
14,495

 
29,620

 
28,554

Research and development expenses
 
2,852

 
3,230

 
5,747

 
5,799

General and administrative expenses
 
9,170

 
8,638

 
14,764

 
16,229

 
 
27,516

 
26,363

 
50,131

 
50,582

 
 
 
 
 
 
 
 
 
Earnings from operations
 
26,402

 
27,103

 
52,882

 
54,343

 
 
 
 
 
 
 
 
 
Other expenses:
 
 
 
 
 
 
 
 
Interest expense, net
 
1,488

 
2,265

 
3,077

 
4,139

Other, net
 
33

 
(223
)
 
131

 
(34
)
 
 
1,521

 
2,042

 
3,208

 
4,105

 
 
 
 
 
 
 
 
 
Earnings before income tax expense
 
24,881

 
25,061

 
49,674

 
50,238

 
 
 
 
 
 
 
 
 
Income tax expense
 
5,052

 
5,382

 
11,062

 
11,213

 
 
 
 
 
 
 
 
 
Net earnings
 
$
19,829

 
$
19,679

 
$
38,612

 
$
39,025

 
 
 
 
 
 
 
 
 
Net earnings per common share - basic
 
$
0.62

 
$
0.61

 
$
1.20

 
$
1.22

 
 
 
 
 
 
 
 
 
Net earnings per common share - diluted
 
$
0.61

 
$
0.61

 
$
1.19

 
$
1.21

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

BALCHEM CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(unaudited)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net earnings
 
$
19,829

 
$
19,679

 
$
38,612

 
$
39,025

 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
Net foreign currency translation adjustment
 
(215
)
 
(2,911
)
 
(1,304
)
 
(1,548
)
Unrealized loss on cash flow hedge
 
(1,299
)
 

 
(1,299
)
 

Net change in postretirement benefit plans
 
6

 
16

 
11

 
29

Other comprehensive loss
 
(1,508
)
 
(2,895
)
 
(2,592
)
 
(1,519
)
 
 
 
 
 
 
 
 
 
Comprehensive income
 
$
18,321

 
$
16,784

 
$
36,020

 
$
37,506

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

BALCHEM CORPORATION
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2019 and 2018
(Dollars in thousands, except share and per share data)
 
 
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
 
$
691,618

 
$
528,027

 
$
(3,602
)
 
32,256,209

 
$
2,151

 
(706
)
 
$
(56
)
 
$
165,098

Net earnings
 
18,783

 
18,783

 

 

 

 

 

 

Other comprehensive (loss)
 
(1,084
)
 

 
(1,084
)
 

 

 

 

 

Treasury shares purchased
 
(727
)
 

 

 

 

 
(8,496
)
 
(727
)
 

Shares and options issued under stock plans
 
1,919

 

 

 
73,823

 
5

 
3,006

 
250

 
1,664

Balance - March 31, 2019
 
710,509

 
546,810

 
(4,686
)
 
32,330,032

 
2,156

 
(6,196
)
 
(533
)
 
166,762

Net earnings
 
19,829

 
19,829

 

 

 

 

 

 

Other comprehensive (loss)
 
(1,508
)
 

 
(1,508
)
 

 

 

 

 

Shares and options issued under stock plans
 
3,515

 

 

 
25,264

 
1

 
6,196

 
533

 
2,981

Balance - June 30, 2019
 
$
732,345

 
$
566,639

 
$
(6,194
)
 
32,355,296

 
$
2,157

 

 
$

 
$
169,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2017
 
$
616,881

 
$
464,639

 
$
(1,642
)
 
32,019,605

 
$
2,135

 

 
$

 
$
151,749

Net earnings
 
19,346

 
19,346

 

 

 

 

 

 

Other comprehensive income
 
1,376

 

 
1,376

 

 

 

 

 

Dividends
 
1

 
1

 

 

 

 

 

 

Treasury shares purchased
 
(786
)
 

 

 

 

 
(10,454
)
 
(786
)
 

Shares and options issued under stock plans
 
3,072

 

 

 
80,505

 
5

 
10,454

 
786

 
2,281

Balance - March 31, 2018
 
639,890

 
483,986

 
(266
)
 
32,100,110

 
2,140

 

 

 
154,030

Net earnings
 
19,679

 
19,679

 

 

 

 

 

 

Other comprehensive (loss)
 
(2,895
)
 

 
(2,895
)
 

 

 

 

 

Treasury shares purchased
 
(437
)
 

 

 

 

 
(4,408
)
 
(437
)
 

Shares and options issued under stock plans
 
6,983

 

 

 
112,984

 
8

 

 

 
6,975

Balance - June 30, 2018
 
$
663,220

 
$
503,665

 
$
(3,161
)
 
32,213,094

 
$
2,148

 
(4,408
)
 
$
(437
)
 
$
161,005

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

BALCHEM CORPORATION
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
 
 
Six Months Ended
June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net earnings
 
$
38,612

 
$
39,025

 
 
 
 
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
21,732

 
22,426

Stock compensation expense
 
3,622

 
3,459

Deferred income taxes
 
(324
)
 
(179
)
Provision for (recovery of) doubtful accounts
 
666

 
(50
)
Foreign currency transaction loss
 
74

 
(137
)
Asset impairment charge
 
114

 
979

Gain on disposal of assets
 
(2,717
)
 
(551
)
Changes in assets and liabilities
 
 
 
 
Accounts receivable
 
563

 
(7,560
)
Inventories
 
(681
)
 
(9,565
)
Prepaid expenses and other current assets
 
(1,062
)
 
(724
)
Accounts payable and accrued expenses
 
(11,039
)
 
754

Income taxes
 
(609
)
 
(1,958
)
Other
 
(139
)
 
777

Net cash provided by operating activities
 
48,812

 
46,696

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Cash paid for acquisition, net of cash acquired
 
(94,690
)
 

Capital expenditures
 
(14,688
)
 
(7,700
)
Proceeds from insurance
 
2,727

 
1,590

Proceeds from sale of assets
 
2

 
576

Intangible assets acquired
 
(26
)
 
(296
)
Purchase of convertible note
 
(1,000
)
 

Net cash used in investing activities
 
(107,675
)
 
(5,830
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from revolving loan
 
108,569

 
210,750

Principal payments on revolving loan
 
(36,000
)
 

Principal payments on long-term debt
 

 
(219,500
)
Principal payments on acquired debt
 
(12,222
)
 

Cash paid for financing costs
 

 
(1,123
)
Proceeds from stock options exercised
 
1,809

 
6,578

Dividends paid
 
(15,135
)
 
(13,428
)
Purchase of treasury stock
 
(727
)
 
(1,223
)
Net cash provided by (used in) financing activities
 
46,294

 
(17,946
)
 
 
 
 
 
Effect of exchange rate changes on cash
 
(25
)
 
(860
)
 
 
 
 
 
(Decrease) increase in cash and cash equivalents
 
(12,594
)
 
22,060

 
 
 
 
 
Cash and cash equivalents beginning of period
 
54,268

 
40,416

Cash and cash equivalents end of period
 
$
41,674

 
$
62,476

See accompanying notes to condensed consolidated financial statements.


7

Table of Contents

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 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. The condensed consolidated financial statements reflect the operations of Balchem Corporation and its subsidiaries (the "Company"). All intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, the unaudited condensed consolidated financial statements furnished in this Form 10-Q include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”) governing interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934 (the "Exchange Act") and therefore do not include some information and notes necessary to conform to annual reporting requirements. The results of operations for the three and six months ended June 30, 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 May and April 2019, the FASB issued Accounting Standards Update ("ASU") 2019-05 and ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" which further clarifies the ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326). In June 2016, the FASB issued ASU No. 2016-13 which requires that credit losses be reported based on expected losses compared to the current incurred loss model. These updates made several consequential amendments to the Codification which requires the accounting for available-for-sale debt securities to be individually assessed for credit losses when fair value is less than the amortized cost basis. The standard is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted. The Company does not expect this new guidance to have a significant impact on its financial reporting.
In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 815, Derivative and Hedging". The guidance further clarified ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. As stated below, the Company early adopted ASU 2017-12 in the second quarter of 2019.
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

8

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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 August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance was issued with the objective of improving the financial reporting of hedging relationships to better portray the economic results of companies' risk management activities in its financial statements, as well as simplifying the application of hedge accounting guidance especially in the area of assessment of effectiveness of the hedge. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted and all transaction requirements and elections should be applied to hedging relationships existing on the date of adoption. The Company has early adopted the new standard in the second quarter of 2019. Refer to Note 20, "Derivative Instruments and Hedging Activities."
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."

NOTE 2 – SIGNIFICANT ACQUISITIONS AND DIVESTITURES
On May 27, 2019, the Company acquired 100 percent of the outstanding common shares of Chemogas Holding NV and its subsidiaries ("Chemogas" or the "Acquisition"), a privately held specialty gases company headquartered in Grimbergen, Belgium. The Company made payments of approximately 99,503 (translated to $111,324) on the acquisition date, amounting to approximately 88,579 (translated to $99,102) to the former shareholders and approximately 10,924 (translated to $12,222) to Chemogas' lender to pay Chemogas bank debt. Considering the cash acquired of 3,943 (translated to $4,412), net payments made to the former shareholders were 84,636 (translated to $94,690). The acquisition was primarily financed through the Company's Credit Agreement (see Note 8, "Revolving Loan"). Chemogas is 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 the acquisition, the Company 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 the Company's sites in the United States.
The goodwill of $59,296 arising from the Acquisition consists largely of expected synergies, including the combined entities' experience and technical problem-solving capabilities, and acquired workforce. The goodwill is assigned to the Specialty Products segment and is not tax deductible for income tax purposes.

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The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed:
Cash and cash equivalents
 
$
4,412

Accounts receivable
 
4,176

Inventories
 
957

Property, plant and equipment
 
13,972

Customer relationships
 
41,396

Developed technology
 
2,461

Trade name
 
1,119

Other assets
 
1,518

Accounts payable
 
(3,261
)
Bank debt
 
(12,222
)
Other liabilities
 
(937
)
Pension obligations (net)
 
(594
)
Deferred income taxes
 
(13,191
)
Goodwill
 
59,296

Amount paid to shareholders
 
99,102

Chemogas bank debt paid on purchase date
 
12,222

Total amount paid on acquisition date
 
$
111,324


The estimated valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions that 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. The purchase price and related allocation to 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 20-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trade name and developed technology are amortized over 2 years and 10 years, respectively, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined.
The Company is indemnified for tax liabilities prior to the Acquisition date. Indemnified tax liabilities will create an indemnification asset (receivable). At this time, an indemnification asset balance has not been established.
In connection with this transaction, the Company incurred transaction and integration costs of $556 and $862 for the three and six months ended June 30, 2019, respectively.
Total transaction and integration costs related to recent acquisitions, including the Chemogas acquisition described above, are recorded in general and administrative expenses. These costs amounted to $612 and $1,097 for the three and six months ended June 30, 2019, respectively, and $893 and $1,582 for the three and six months ended June 30, 2018, respectively.
Potential Divestiture
As of June 30, 2019, the Company was in negotiations for the sale of an insignificant portion of the Company's business and subsequently entered into an Asset Purchase Agreement for the sale of this portion of the business, which includes conditions to closing that must be fulfilled. The closing date of this transaction is still uncertain and no gain or loss has been recognized in the Company's condensed consolidated statements of earnings for the three or six months ending June 30, 2019. The anticipated gain or loss related to the transaction will not have a significant impact on the Company’s consolidated financial statements.

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In connection with the potential divestiture, the following 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 June 30, 2019:
 
 
June 30, 2019
Accounts receivable
 
$
996

Inventory
 
292

Property, plant, and equipment, net
 
9,354

Right of use assets
 
291

Goodwill
 
1,380

Assets held for sale
 
$
12,313

 
 
 
Trade accounts payable
 
$
236

Lease liabilities
 
294

Liabilities held for sale
 
$
530



NOTE 3 – STOCKHOLDERS’ EQUITY
STOCK-BASED COMPENSATION
The Company’s results for the three and six months ended June 30, 2019 and 2018 reflected the following stock-based compensation cost, and such compensation cost had the following effects on net earnings:
 
 
Increase/(Decrease) for the
Three Months Ended June 30,
 
Increase/(Decrease) for the
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Cost of sales
 
$
288

 
$
242

 
$
576

 
$
487

Operating expenses
 
1,703

 
1,424

 
3,046

 
2,972

Net earnings
 
(1,533
)
 
(1,280
)
 
(2,791
)
 
(2,657
)
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 June 30, 2019, the plans had 1,098,484 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.

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Table of Contents

Option activity for the six months ended June 30, 2019 and 2018 is summarized below:

For the six months ended
June 30, 2019
 
Shares (000s)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
 
Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2018
 
887

 
$
61.59

 
$
16,192

 
 
Granted
 
187

 
84.29

 
 
 
 
Exercised
 
(33
)
 
55.88

 
 
 
 
Forfeited
 
(7
)
 
80.59

 
 
 
 
Canceled
 
(4
)
 
70.90

 
 
 
 
Outstanding as of June 30, 2019
 
1,030

 
$
65.74

 
$
35,242

 
6.5
 
 
 
 
 
 
 
 
 
Exercisable as of June 30, 2019
 
658

 
$
56.77

 
$
28,413

 
5.2

For the six months ended
June 30, 2018
 
Shares (000s)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
 
Weighted
Average
Remaining
Contractual
Term
Outstanding as of December 31, 2017
 
946

 
$
55.44

 
$
24,714

 
 
Granted
 
148

 
74.57

 
 
 
 
Exercised
 
(152
)
 
43.32

 
 
 
 
Forfeited
 
(2
)
 
75.44

 
 
 
 
Canceled
 
(1
)
 
25.39

 
 
 
 
Outstanding as of June 30, 2018
 
939

 
$
60.42

 
$
35,409

 
6.6
 
 
 
 
 
 
 
 
 
Exercisable as of June 30, 2018
 
534

 
$
49.19

 
$
26,142

 
5.3

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 six months ended June 30, 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 and six months ended June 30, 2019 and 2018 was as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Weighted-average fair value of options granted
 
$
19.18

 
$

 
$
18.27

 
$
18.62

Total intrinsic value of stock options exercised ($000s)
 
$
997

 
$
5,375

 
$
1,299

 
$
7,200



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Non-vested restricted stock activity for the six months ended June 30, 2019 and 2018 is summarized below:
Six Months ended June 30, 2019
 
Shares (000s)
 
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2018
 
79

 
$
72.75

Granted
 
67

 
84.44

Vested
 
(8
)
 
58.52

Forfeited
 
(1
)
 
76.73

Non-vested balance as of June 30, 2019
 
137

 
$
79.31

Six months ended June 30, 2018
 
Shares (000s)
 
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2017
 
66

 
$
65.66

Granted
 
37

 
75.19

Vested
 
(17
)
 
57.65

Forfeited
 

 

Non-vested balance as of June 30, 2018
 
86

 
$
71.40


Non-vested performance share activity for the six months ended June 30, 2019 and 2018 is summarized below:
Six Months ended June 30, 2019
 
Shares (000s)
 
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2018
 
53

 
$
75.61

Granted
 
33

 
81.79

Vested
 
(9
)
 
65.64

Forfeited
 
(7
)
 
60.85

Non-vested balance as of June 30, 2019
 
70

 
$
81.26

Six months ended June 30, 2018
 
Shares (000s)
 
Weighted
Average Grant
Date Fair
Value
Non-vested balance as of December 31, 2017
 
39

 
$
72.62

Granted
 
32

 
71.27

Vested
 
(15
)
 
58.78

Forfeited
 

 

Non-vested balance as of June 30, 2018
 
56

 
$
75.47

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

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0.5%; volatilities of 24% and 27%; and initial TSR’s of -5.9% and -10.5%, in each case for the six months ended June 30, 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 June 30, 2019 and 2018, there was $15,475 and