# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NASDAQ_BCPC_2021/NASDAQ_BCPC_2021.mmd` · pages 2-8_

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Letter to Shareholders

## Dear Fellow Shareholders:

Overall, 2021 was another very strong year for Balchem. We were faced with a very challenging macroeconomic environment, including the ongoing pandemic, global supply chain disruptions, significant input cost inflation, as well as a tight labor market. I am extremely proud of how the company has responded to these challenges and proven its resilience and ability to execute in this environment. Balchem delivered record financial results, improved year over year safety performance, excellent progress on our key strategic growth platforms, and solid improvements with our Environmental, Social, and Governance (ESG) initiatives. None of these accomplishments would have been possible without the incredible team of employees we have at Balchem. I would like to thank all of our employees for their contributions in 2021, as well as our board of directors who could not have been more helpful and assuring throughout this challenging year, and our customers, suppliers, partners and shareholders, for their continued commitment and support. Thank you all very much!

We delivered record financial results in 2021. We achieved record sales of just under \(800 million, up 14% over the prior year, with record sales in all three of our business segments; Human Nutrition and Health, Animal Nutrition and Health, and Specialty Products. We also delivered record Adjusted Net Earnings of \)117 million compared to \(108 million for the prior year, an increase of 8 percent, resulting in Adjusted Earnings Per Share of \)3.57. Adjusted EBITDA of $190 million, an increase of \(16 million or 9 percent from the prior year, was also a record. In addition, we generated strong Free Cash Flow of \)124 million in 2021, while investing \(36 million in capital projects to support our continued growth. We are particularly proud of the fact that 2021 was our 12th consecutive year of sales and Adjusted EPS growth!

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In 2021, we improved our safety performance. Balchem achieved a new safety milestone with a full year Total Recordable Injury Rate of 0.99, a 5% improvement over the prior year. We were proud to finish the year with 150 straight days of injury-free performance. We have embraced a Zero Incident Culture and will not be satisfied until we become injury free. In 2021, we developed and implemented standards for mobile equipment and hot work to reduce Serious Injury and Fatality (SIF) risks. We increased participation and engagement in our behavior-based safety programs; Stop Taking Avoidable Risks (STAR) and GEMBA Walks. Also in 2021, we continued to shift our focus to injury prevention by increasingly looking proactively at near misses, while emphasizing leadership and management accountability for employee safety.

In 2021, we also continued to make good progress on our key strategic growth initiatives. Our Human Nutrition and Health business segment continued to advance the science around the nutritional and health benefits of our existing and future products. In December 2021, Cornell University researchers published a paper in the FASEB Journal, confirming the critical role choline plays in infant cognitive development. This groundbreaking new research shows that pregnant women who took more than twice the recommended dose of choline during pregnancy had children that demonstrated significant cognitive benefits which were sustained through early childhood. This study was a follow up to the original Cornell findings published in 2018 that established that higher doses of choline during pregnancy led to improved cognitive performance in infant offspring. This new paper now highlights that cognitive improvements were both significant and enduring in those same children at the age of seven. VitaCholine® from Balchem was the choline source used in the study at Cornell University.

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As a leader in animal feed technologies, Balchem's Animal Nutrition and Health business segment continued to innovate new products and launched ReaShure \( ^{\circledR} \) -XC Precision Release Choline into the European, Middle Eastern, and African markets. With a new proprietary and concentrated core, ReaShure \( ^{\circledR} \) -XC reduces our carbon footprint through lowered transportation costs and reduced emissions while delivering proven production benefits to the cow. The updated NRC publication Nutrient Requirements of Dairy Cattle was published in late 2021 and validated previous studies showing that an effective source of rumen-protected Choline fed to dairy cows, before and after calving, will increase milk production and efficiency in the subsequent lactation cycle, while also reducing the incidence of several metabolic health disorders. This new NRC release clearly validates the importance of an efficacious encapsulated product such as Balchem's ReaShure \( ^{\circledR} \) . Also, our Animal Nutrition and Health team has taken a lead role in educating nutritionists and producers by developing the "Real Science Lecture Series" and "Real Science Exchange" podcast series. Providing the industry with access to the top scientists and researchers around animal nutrition and wellness, as well as a more sustainable production for the future, has been an important goal for both programs.

Within the Specialty Products segment, we started-up a new manufacturing line for our Metalosate \( ^{®} \)  foliar applied plant nutrition products at Balchem's existing complex in Marano, Italy. This new production capability in Europe will augment our existing North American production and will enhance our ability to serve the growing needs of our international customer base and strengthen the robustness of our supply chain capabilities.

In 2021, we also completed our project to consolidate seven enterprise resource planning (ERP) systems into one: Microsoft Dynamics 365, with the final go-live successfully executed in the fourth quarter. We are extremely pleased with the completion of this project that was delivered on budget and on time, and believe that being on one single ERP system will facilitate efficient organic and inorganic growth going forward for our company.

Over the last year, we significantly progressed our Environmental, Social, and Governance (ESG) initiatives as well. Balchem's ESG initiatives are fully integrated into our business strategy, which remains unchanged as we continue to focus on our two main objectives: providing innovative solutions for the health and nutritional needs of the world and operating with excellence as strong stewards of our stakeholders. In 2021, Balchem celebrated the one-year anniversary of our commitment to the United Nations (UN) Global Compact, confirming our alignment with the Ten Principles on human rights, labor, the environment, and anti-corruption. We made good progress towards our 2030 goals for both energy and water usage reduction. In 2021, we also took steps to accelerate our progress on diversity and inclusion by establishing a strategic plan to help guide our short-, mid-, and long-term goals in an effort to foster a culture of belonging in which everyone at Balchem feels welcomed, valued, and appreciated while also inspiring our external stakeholders to share our vision. Additionally, we made good advancements with our Balchem Helping Hands initiative to expand our philanthropic partnerships, matching donations program, and employee volunteer efforts.

In 2021, Balchem was named one of "America's Most Responsible Companies" by Newsweek for the second consecutive year. This list, compiled by Newsweek in partnership with Statista Inc., recognizes the most responsible companies in the U.S. across a variety of industries. We are proud of our efforts as we strive to constantly improve our corporate social responsibilities and are pleased with this recognition by Newsweek.

The year 2021 was a great year for Balchem! We continue to see healthy overall demand for our product offerings. Balchem is well positioned within the markets we serve and we look forward to another growth year for the company in 2022. Thank you again to all of our employees for your incredible contributions over the last year and to all of our stakeholders for your continued support of Balchem. I wish everyone good health in the year ahead.

Sincerely,

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Theodore L. "Ted" Harris

Chairman, Chief Executive Officer and President