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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2017
ACQUISITIONS [Abstract] |
ACQUISITIONS | NOTE 2—ACQUISITIONS Acquisition of Albion Laboratories, Inc. (formerly known as Albion International, Inc.), On February 1, 2016, the Company acquired 100 percent of the outstanding common shares of Albion Laboratories, Inc. (formerly known as Albion International, Inc.), (“Albion” or the “Albion Acquisition”), a privately held manufacturer of mineral amino acid chelates, specialized mineral salts and mineral complexes, headquartered in Clearfield, Utah. The Company made payments of approximately $116,400 on the acquisition date, amounting to approximately $110,600 to the former shareholders, adjustments for working capital acquired of $4,900, and approximately $900 to Albion’s lenders to pay off all Albion bank debt. Albion has been a world leader and innovator in the manufacture of superior organic mineral compounds for over sixty years and leverages scientific expertise in the areas of human and micronutrient agricultural nutrition. Albion’s products are renowned in the supplement industry for technologically advanced, unparalleled bioavailability. The acquisition of Albion continues to expand the Company’s science based human health and wellness solutions and immediately increased our product offerings in the nutritional ingredient market. Additionally, the Company benefits from a broader geographic footprint and a stronger position as a technological leader in spray-drying and ingredient delivery solutions. Albion’s human nutrition business has become a part of the Human Nutrition & Health reportable segment and the micronutrient agricultural business has become a part of the Specialty Products reportable segment. The following table summarizes the fair values of the assets acquired and liabilities assumed.
Cash and cash equivalents |  | $ | 4,949 |
Accounts receivable |  |  | 7,671 |
Inventories |  |  | 15,989 |
Property, plant and equipment |  |  | 7,217 |
Customer relationships |  |  | 18,443 |
Developed technology |  |  | 9,060 |
Trade name |  |  | 7,224 |
Licensing agreements |  |  | 6,658 |
Other assets |  |  | 1,200 |
Trade accounts payable |  |  | (1,104 | )
Accrued expenses |  |  | (2,788 | )
Bank debt |  |  | (884 | )
Deferred income taxes |  |  | (13,990 | )
Goodwill |  |  | 55,905 |
Amount paid to shareholders |  |  | 115,550 |
Albion bank debt paid on purchase date |  |  | 884 |
Total amount paid on acquisition date |  | $ | 116,434 |
The goodwill of $55,905 arising from the Albion Acquisition consists largely of expected synergies, including the combined entities’ experience and technical problem solving capabilities, and acquired workforce. Goodwill of $40,403 and $15,502 is assigned to the Human Nutrition & Health and Specialty Products segments, respectively, and approximately $2,020 is tax deductible for income tax purposes. The valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. In preparing our fair value of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. Customer relationships are amortized over a 10-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trade name, licensing agreements, and developed technology are amortized over 17 years, 8 years, and 5 years, respectively, utilizing the straight-line method, as the consumption pattern of the related economic benefits cannot be reliably determined. Transaction and integration related costs included in general and administrative expenses for the nine months ended September 30, 2017 and 2016 are $8 and $1,484, respectively. The following unaudited pro forma information has been prepared as if the Albion Acquisition had occurred on January 1, 2015.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | Net Sales |  |  | Net Earnings |  |  | Net Sales |  |  | Net Earnings |
2017 Albion actual results included in the Company’s consolidated income statement |  | $ | 13,143 |  |  | $ | 1,441 |  |  | $ | 45,376 |  |  | $ | 7,351 |
2017 Supplemental pro forma combined financial information |  | $ | 150,716 |  |  | $ | 16,148 |  |  | $ | 435,526 |  |  | $ | 48,105 |
Basic earnings per share |  |  |  |  |  | $ | 0.51 |  |  |  |  |  |  | $ | 1.51 |
Diluted earnings per share |  |  |  |  |  | $ | 0.50 |  |  |  |  |  |  | $ | 1.49 |
2016 Albion actual results included in the Company’s consolidated income statement from February 1, 2016 through September 30, 2016 |  | $ | 11,816 |  |  | $ | 639 |  |  | $ | 37,915 |  |  | $ | 801 |
2016 Supplemental pro forma combined financial information |  | $ | 138,509 |  |  | $ | 14,276 |  |  | $ | 417,024 |  |  | $ | 44,911 |
Basic earnings per share |  |  |  |  |  | $ | 0.45 |  |  |  |  |  |  | $ | 1.43 |
Diluted earnings per share |  |  |  |  |  | $ | 0.45 |  |  |  |  |  |  | $ | 1.41 |
2017 supplemental pro forma earnings for the nine months ended September 30, 2017 exclude a working capital adjustment refund of $162 and acquisition-related costs incurred of $170. 2016 supplemental pro forma earnings for the nine months ended September 30, 2016 exclude $26,203 of acquisition-related costs incurred and $5,363 of non-recurring expenses related to the fair value adjustment to acquisition-date inventory. The pro forma information presented does not purport to be indicative of the results that actually would have been attained if the Albion acquisition had occurred at the beginning of the periods presented and is not intended to be a projection of future results. Acquisition of Chol-Mix Kft On March 24, 2017, the Company, through its European subsidiary Balchem Italia SRL, entered into an agreement to purchase certain assets of Chol-Mix Kft (“Chol-Mix), a privately held manufacturer of dry choline chloride, with knowledge and technical know-how supporting the application of liquids on carriers, located in Hungary, for a purchase price of €1,500. As of September 30, 2017, approximately €1,150, translated to approximately $1,230, has been paid to Chol-Mix Kft with the remaining balance of approximately €350, translated to approximately $415, due at the end of a related manufacturing agreement. The acquisition of Chol-Mix’s assets will provide our Animal Nutrition & Health segment with additional dry choline chloride capacity in Europe, geographical expansion opportunities in Eastern Europe, and technical knowledge supporting the application of liquids on carriers. Management has completed its accounting for the acquisition. As a result, the fair values of the assets acquired have been determined and goodwill of $404 has been recorded. Transaction related costs included in general and administrative expenses for the nine months ended September 30, 2017 are $79. Acquisition of Innovative Food Processors, Inc. On June 1, 2017, the Company acquired 100 percent of the outstanding common shares of Innovative Food Processors, Inc. (“IFP”), a privately held manufacturer of agglomerated and microencapsulated food and nutrition ingredients, headquartered in Faribault, Minnesota. The Company made payments of approximately $22,975 on the acquisition date and $635 in September to true-up working capital, amounting to approximately $16,161 to the former shareholders, adjustments for working capital acquired of $5,065, and $2,384 to IFP’s lenders to pay off all IFP bank debt. The acquisition of IFP expands the Company’s Human Nutrition & Health segment’s processing technology and market reach, while bringing innovative and value-added systems to food, beverage, and nutrition customers. Management has completed its preliminary initial accounting for the acquisition. As a result, the estimated fair values of the assets acquired and liabilities assumed have been determined and $1,045 of estimated goodwill has been recorded. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed.
Cash and cash equivalents |  | $ | 5,065 |
Accounts receivable |  |  | 2,860 |
Inventories |  |  | 2,537 |
Prepaid expenses |  |  | 186 |
Property, plant and equipment |  |  | 12,219 |
Customer relationships |  |  | 2,942 |
Developed technology |  |  | 1,078 |
Trademark & trade name |  |  | 1,388 |
Covenant not to compete |  |  | 126 |
Goodwill |  |  | 1,045 |
Trade accounts payable |  |  | (844 | )
Accrued expenses |  |  | (1,416 | )
Bank debt |  |  | (2,384 | )
Deferred income taxes |  |  | (3,576 | )
Amount paid to shareholders |  |  | 21,226 |
IFP bank debt paid on purchase date |  |  | 2,384 |
Total amount paid on acquisition date |  | $ | 23,610 |
The goodwill of $1,045 arising from the IFP 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 Human Nutrition & Health segment, and is not tax deductible for income tax purposes. 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 finalizing of actual working capital acquired as of the acquisition date. Additionally, certain intangible assets are not tax deductible and the related deferred tax liabilities are preliminary pending management’s final review. Customer relationships are amortized over a 10-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trademark & trade name, covenant not to compete, and developed technology are amortized over 17 years, 3 years, and 5 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 (receivable) balance has not been established. Transaction related costs included in general and administrative expenses for the three and nine months ended Sepember 30, 2017 are $55 and $2,020, respectively. The Company has elected not to show pro forma information as this acquisition was immaterial to the overall financial results of the Company.

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