6. Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Segment Information

The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments – United States, European and Asian.

United States – This segment represents products manufactured at our facility located in Corpus Christi, Texas. The segment manufactures HITOX, BARTEX, HALTEX, OPTILOAD and TIOPREM which is sold primarily in North, Central and South America. Sales of this segment, which includes intercompany purchases of ALUPREM from our European operation, represented approximately 62% and 69% of our consolidated sales for the years ended December 31, 2017 and 2016, respectively.

European – This segment represents products manufactured at the Company’s wholly-owned operation, TPT, located in the Netherlands. TPT manufactures ALUPREM and BARYPREM which is sold primarily in Europe. Sales of this segment, which include intercompany purchases HITOX and TIOPREM from our Asian operation, represented approximately 29% and 24% of our consolidated sales for the years ended December 31, 2017 and 2016, respectively.  Intercompany sales of ALUPREM between the TPT and the U.S. operation, which are eliminated in consolidation, represented 25% and 44% of this segments total sales for the years ended December 31, 2017 and 2016, respectively.

Asian – This segment represents products manufactured at the Company’s wholly-owned operation, TMM, located in Malaysia. TMM manufactures HITOX and TIOPREM which is sold primarily in Asia. Sales of this segment represented approximately 10% and 6% of our consolidated sales for the years ended December 31, 2017 and 2016, respectively. Intercompany sales of HITOX, TIOPREM and SR between the TMM and the U.S. and European operations are eliminated in consolidation represented 46% and 65% of this segments total sales for the years ended December 31, 2017 and 2016, respectively.

The accounting policies of the segments are the same as those described in the Summary of Significant Policies (See Note 1). Product sales of inventory between the U.S., European and Asian operations are based on inter-company pricing, which includes an inter-company profit margin. The segment profit (loss), included in the table below, from each location is reflective of these inter-company prices, as is inventory at the Corpus Christi location prior to elimination adjustments. The elimination entries include an adjustment to the cost of sales resulting from the adjustment to ending inventory to eliminate inter-company profit, and the reversal of a similar adjustment from a prior period. To the extent there are net increases/declines period over period in segment inventories that include an inter-company component, the net effect of these adjustments can decrease/increase location profit.

Such presentation is consistent with the internal reporting reviewed by the Company’s chief operating decision maker (“CODM”). Our CODM regularly reviews financial information about our segments in order to allocate resources and evaluate performance. Our CODM assesses segment performance based on segment sales and segment net income (loss) before depreciation and amortization, interest expense, income taxes, and other items which management does not believe reflect the underlying performance of the segment.

For the year ended December 31, 2017 and 2016, the U.S. operations received approximately 23% and 35%, respectively, of its total third party sales revenue from BASF; the European operations received approximately 16% and 17%, respectively, from Hemmelrath; and, the Asian operations received approximately 25% and 22%, respectively, of its total third party sales revenue from Connell Brothers.

Sales from the subsidiary to the parent company are based upon profit margins which represent competitive pricing of similar products.  Intercompany sales consist of ALUPREM, SR, HITOX and TIOPREM.

The Company's principal products, ALUPREM and HITOX, accounted for approximately 38% and 24%, respectively, of net consolidated sales in 2017 and approximately 44% and 21%, respectively in 2016.

The Company sells its products to customers located in more than 60 countries. Sales to external customers are attributed to geographic area based on country of distribution.  Sales to customers located in the U.S. represented approximately 53% and 62% for the years ended December 31, 2017 and 2016, respectively.

For the year ended December 31, 2017 and 2016, sales to customers in Germany represented approximately 19% and 22%, respectively, of our total foreign sales and sales to customers in Italy represented 10% of our 2016 total foreign sales.

Approximately 7% of the Company's employees are represented by an in-house collective bargaining agreement during 2017 and 2016.

A summary of the Company’s manufacturing operations by geographic segment is presented below:

(In thousands)	United States (Corpus Christi)			European (TPT)			Asian (TMM)			Inter- Company Eliminations			Consolidated
As of and for the years ended:
December 31, 2017
Net Sales:
Customer sales	$	23,998		$	11,125		$	3,843		$	–		$	38,966
Intercompany sales		38			3,817			3,233			(7,088	)		–
Total Net Sales	$	24,036		$	14,942		$	7,076		$	(7,088	)	$	38,966
Share based compensation	$	131		$	–		$	–		$	–		$	131
Depreciation	$	1,119		$	1,521		$	134		$	–		$	2,774
Interest (income) expense	$	(2	)	$	96		$	18		$	–		$	112
Income tax (benefit) expense	$	(104	)	$	(218	)	$	(2	)	$	10		$	(314	)
Location profit (loss)	$	(604	)	$	(882	)	$	331		$	19		$	(1,136	)
Capital expenditures	$	1,062		$	1,975		$	62		$	–		$	3,099
Location long-lived assets	$	5,437		$	12,181		$	771		$	–		$	18,389
Location assets	$	16,822		$	15,608		$	6,407		$	(2,508	)	$	36,329
December 31, 2016
Net Sales:
Customer sales	$	26,678		$	9,313		$	2,465		$	–		$	38,456
Intercompany sales		98			7,357			4,535			(11,990	)		–
Total Net Sales	$	26,776		$	16,670		$	7,000		$	(11,990	)	$	38,456
Share based compensation	$	170		$	–		$	–		$	–		$	170
Depreciation	$	1,076		$	1,343		$	142		$	–		$	2,561
Interest (income) expense	$	(2	)	$	107		$	72		$	–		$	177
Income tax (benefit) expense	$	(131	)	$	247		$	–		$	(9	)	$	107
Location profit (loss)	$	(406	)	$	826		$	34		$	(10	)	$	444
Capital expenditures	$	463		$	735		$	5		$	–		$	1,203
Location long-lived assets	$	5,291		$	9,832		$	784		$	–		$	15,907
Location assets	$	17,013		$	13,417		$	6,013		$	(714	)	$	35,729