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 “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 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 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 selling, and general and administrative expenses for the three months ended March 31, 2017 and 2016 are $(127) and $1,161, respectively.

The following unaudited pro forma information has been prepared as if the Acquisition had occurred on January 1, 2015.

	Three Months Ended March 31,

	Net Sales		Net Earnings
2017 Albion actual results included in the Company’s consolidated income statement	$	15,491	$	2,721

2017 Supplemental pro forma combined financial information	$	137,728	$	15,423

Basic earnings per share			$	0.49
Diluted earnings per share			$	0.48

2016 Albion actual results included in the Company’s consolidated income statement from February 1, 2016 through March 31, 2016	$	10,611	$	(520	)

2016 Supplemental pro forma combined financial information	$	139,721	$	14,532

Basic earnings per share			$	0.46
Diluted earnings per share			$	0.46

2017 supplemental pro forma earnings for the three months ended March 31, 2017 exclude a working capital adjustment refund of $162 and $35 of acquisition-related costs incurred. 2016 supplemental pro forma earnings for the three months ended March 31, 2016 exclude $25,873 of acquisition-related costs incurred and $2,411 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 the assets of Chol-Mix Kft, 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 March 31, 2017, approximately €1,090, translated to approximately $1,170, has been paid to Chol-Mix Kft with the remaining balance of approximately €410, translated to approximately $435, 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.

Due to the timing of the acquisition, management has not completed its initial accounting for the acquisition. As a result, the estimated fair values of the assets acquired have not been determined. The Company does not anticipate any goodwill from this acquisition.

Transaction related costs included in general and administrative expenses for the three months ended March 31, 2017 are $50.