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ACQUISITIONS
6 Months Ended
Jun. 30, 2018
ACQUISITIONS [Abstract]  
ACQUISITIONS
NOTE 2—ACQUISITIONS

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 June 30, 2018, 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 $409, due at the end of a related manufacturing agreement. The acquisition of Chol-Mix’s assets provides 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.

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 2017 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 accounting for the acquisition. As a result, the fair values of the assets acquired and liabilities assumed have been determined and $1,340 of goodwill has been recorded.

The following table summarizes the 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
  
1,340
 
Trade accounts payable
  
(844
)
Accrued expenses
  
(1,416
)
Bank debt
  
(2,384
)
Deferred income taxes
  
(3,871
)
Amount paid to shareholders
  
21,226
 
IFP bank debt paid on purchase date
  
2,384
 
Total amount paid
 
$
23,610
 
 
The goodwill of $1,340 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 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. Trademark,  trade name, covenant not to compete, and developed technology are amortized over 10 years, 5 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 incurred 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 and integration related costs included in general and administrative expenses for the three and six months ended June 30, 2018 are $893 and $1,582, respectively.

The Company has elected not to show pro forma information as this acquisition was immaterial to the overall financial results of the Company.