SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2019

HNH

The HNH segment provides human grade choline nutrients and mineral amino acid chelated products through this segment for nutrition and wellness applications. Choline is recognized to play a key role in the development and structural integrity of brain cell membranes in infants, processing dietary fat, reproductive development and neural functions, such as memory and muscle function. The Company's mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products. Proprietary technology has been combined to create an organic molecule in a form the body can readily assimilate. Sales growth for human nutrition applications is reliant on differentiation from lower-cost competitive products through scientific data, intellectual property and customers' appreciation of brand value. Consequently, the Company makes investments in such activities for long-term value differentiation. This segment also serves the food and beverage industry for beverage, bakery, dairy, confectionary, and savory manufacturers. The Company partners with its customers from ideation through commercialization to bring on-trend beverages, baked goods, confections, dairy and meat products to market. The Company has expertise in trends analysis and product development. When combined with its strong manufacturing capabilities in customized spray dried and emulsified powders, extrusion and agglomeration, blended lipid systems, liquid flavor delivery systems, juice and dairy bases, chocolate systems, as well as ice cream bases and variegates, the Company is a one-stop solutions provider for beverage and dairy product development needs. Additionally, this segment provides microencapsulation solutions to a variety of applications in food, pharmaceutical and nutritional ingredients to enhance performance of nutritional fortification, processing, mixing, and packaging applications and shelf-life. Major product applications are baked goods, refrigerated and frozen dough systems, processed meats, seasoning blends, confections, sports and protein bars, dietary plans, and nutritional supplements. The Company also creates cereal systems for ready-to-eat cereals, grain-based snacks, and cereal based ingredients.

ANH

The Company’s ANH segment provides nutritional products derived from its microencapsulation and chelation technologies in addition to basic choline chloride. For ruminant animals, the Company’s microencapsulated products boost health and milk production, delivering nutrient supplements that are biologically available, providing required nutritional levels. The Company’s proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals and is marketed for use in animal feed throughout the world. ANH also manufactures and supplies choline chloride, an essential nutrient for monogastric animal health, predominantly to the poultry, pet and swine industries. Choline, which is manufactured and sold in both dry and aqueous forms, plays a vital role in the metabolism of fat. In poultry, choline deficiency can result in reduced growth rates and perosis in young birds, while in swine production choline is a necessary and required component of gestating and lactating sow diets for both liver health and prevention of leg deformity.

Sales of value-added encapsulated products are highly dependent on overall industry economics as well as the Company's ability to leverage the results of university and field research on the animal health and production benefits of our products. Management believes that success in the commodity-oriented basic choline chloride marketplace is highly dependent on the Company’s ability to maintain its strong reputation for excellent product quality and customer service. The Company continues to drive production efficiencies in order to maintain its competitive-cost position to effectively compete in a competitive global marketplace.

Specialty Products

Ethylene oxide, at the 100% level and blended with carbon dioxide, is sold as a sterilant gas, primarily for use in the health care industry. It is used to sterilize a wide range of medical devices because of its versatility and effectiveness in treating hard or soft surfaces, composites, metals, tubing and different types of plastics without negatively impacting the performance of the device being sterilized. The Company’s 100% ethylene oxide product and blends are distributed worldwide in specially designed, reusable and recyclable drum and cylinder packaging, to assure compliance with safety, quality and environmental standards as outlined by the applicable regulatory agencies in the countries our products are shipped to. The Company’s inventory of these specially built drums and cylinders, along with its five filling facilities, represents a significant capital investment. Contract sterilizers and medical device manufacturers are principal customers for this product. The Company also sells single use canisters with 100% ethylene oxide for use in sterilizing re-usable devices typically processed in autoclave units in hospitals. As a fumigant, ethylene oxide blends are highly effective in killing bacteria, fungi, and insects in spices and other seasoning materials.

The Company also distributes a number of other gases for various uses, most notably propylene oxide and ammonia. Propylene oxide is marketed and sold in the U.S. as a fumigant to aid in the control of insects and microbiological spoilage; and to reduce bacterial and mold contamination in certain shell and processed nut meats, processed spices, cacao beans, cocoa powder, raisins, figs and prunes. The Company distributes its propylene oxide product in the U.S. primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the EPA and the DOT. Propylene oxide is also sold worldwide to customers in approved reusable and recyclable drum and cylinder packaging for various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings. Ammonia is used primarily as a refrigerant, and also for heat treatment of metals and various chemical synthesis applications, and is distributed in reusable and recyclable drum and cylinder drum and cylinder packaging approved for use in the countries these products are shipped to. The Company's inventory of cylinders for these products also represents a significant capital investment.

The Company’s micronutrient agricultural nutrition business sells chelated minerals primarily into high value crops. The Company has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life. First, the Company determines optimal mineral balance for plant health. The Company then has a foliar applied Metalosate product range, utilizing patented amino acid chelate technology. Its products quickly and efficiently deliver mineral nutrients. As a result, the farmer/grower gets healthier crops that are more resistant to disease and pests, larger yields and healthier food for the consumer with extended shelf life for produce being shipped long distances.

Industrial Products

Certain derivatives of choline chloride are manufactured and sold into industrial applications predominately as a component for hydraulic fracturing of shale natural gas wells. The Company’s products offer an attractive, effective and more environmentally responsible alternative than other clay stabilizers. Industrial grade choline bicarbonate is completely chloride free and the Company's choline chloride reduces the amount of chlorides released into the environment up to 75% when compared to potassium chloride. The Industrial Products segment also includes the manufacture and sale of methylamines. Methylamines are a primary building block for the manufacture of choline products and are produced at its Italian operation and sold for a wide range of industrial applications in Europe.

The segment information is summarized as follows:

Business Segment Assets


	2019		2018
HNH	$	739,030	$	702,692
ANH	142,247		136,810
Specialty Products	184,487		59,558
Industrial Products	16,176		22,822
Other Unallocated ⁽¹⁾	73,742		59,473
Total	$	1,155,682	$	981,355

Business Segment Net Sales


	2019		2018		2017
HNH	$	347,433	$	341,237	$	315,796
ANH	177,557		175,693		157,688
Specialty Products	92,257		75,808		73,355
Industrial Products	26,458		50,941		47,951
Total	$	643,705	$	643,679	$	594,790

Business Segment Earnings Before Income Taxes


	2019		2018		2017
HNH	$	48,429	$	48,037	$	43,747
ANH	25,868		26,607		22,255
Specialty Products	28,513		25,254		24,908
Industrial Products	3,730		8,988		6,402
Transaction and integration costs, ERP implementation costs, and unallocated legal fees ⁽²⁾	(3,436)		(1,786)		(2,496)
Unallocated amortization expense ⁽³⁾	(551)		—		—
Indemnification Settlement ⁽⁴⁾	—		—		2,087
Interest and other expense	(6,075)		(8,070)		(8,415)
Total	$	96,478	$	99,030	$	88,488

Depreciation/Amortization


	2019		2018		2017
HNH	$	30,558	$	33,594	$	33,384
ANH	6,552		5,606		5,618
Specialty Products	7,401		4,092		4,097
Industrial Products	518		694		806
Unallocated amortization expense ⁽³⁾	551		—		—
Amortization expense related to deferred financing cost ⁽⁵⁾	282		680		474
Total	$	45,862	$	44,666	$	44,379

Capital Expenditures


	2019		2018		2017
HNH	$	18,159	$	8,881	$	20,580
ANH	3,921		6,021		4,424
Specialty Products	3,003		2,356		1,306
Industrial Products	707		1,912		1,216
Total	$	25,790	$	19,170	$	27,526


⁽¹⁾Other unallocated assets consist of certain cash, capitalized loan issuance costs, other assets, investments, and deferred income taxes, which the Company does not allocate to its individual business segments.
⁽²⁾ Transaction and integration costs and unallocated legal fees for the years ended December 31, 2019, 2018, and 2017, were primarily related to acquisitions. ERP implementation costs for the years ended December 31, 2019 and 2018 were related to a project in connection with a company-wide ERP system implementation.
⁽³⁾ Unallocated amortization expense for year ended December 31, 2019 was related to amortization of an intangible asset in connection with a company-wide ERP system implementation.
⁽⁴⁾ Indemnification settlement was related to a favorable settlement the Company received relating to the SensoryEffects acquisition.
⁽⁵⁾Amortization expense related to capitalized loan issuance costs was included in interest and other (expense) in Company's consolidated statement of earnings.