NOTE 11 – SEGMENT INFORMATION

Human Nutrition & Health

Our Human Nutrition & Health segment supplies ingredients in the food and beverage industry, providing customized solutions in powder, solid and liquid flavor delivery systems, spray dried emulsified powder systems, and cereal systems. Our products include creamer systems, dairy replacers, powdered fats, nutritional beverage bases, beverages, juice & dairy bases, chocolate systems, ice cream bases & variegates, ready-to-eat cereals, grain based snacks, and cereal based ingredients. Additionally, Human Nutrition & Health 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, and nutritional supplements. We also produce and market human grade choline nutrients and mineral amino acid chelated products through this segment for 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. Human Nutrition & Health’s mineral amino acid chelates, specialized mineral salts, and mineral complexes are used as raw materials for inclusion in premier human nutrition products. Science and patented technology have been combined to create an organic molecule in a form the body can readily assimilate.

Animal Nutrition & Health

The Animal Nutrition & Health (“ANH”) segment provides nutritional products derived from microencapsulation and chelation technologies in addition to basic choline chloride. For ruminant animals, 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. Choline deficiency can result in reduced growth and perosis in poultry, and fatty liver, kidney necrosis and general poor health condition in swine.

Sales of specialty products for the animal nutrition and health industry are highly dependent on dairy industry economics as well as the ability of the Company to leverage the results of university and field research on the animal health benefits of the Company’s 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.

Specialty Products

Ethylene oxide, at the 100% level, 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 is distributed in uniquely designed, recyclable, double-walled, stainless steel drums to assure compliance with safety, quality and environmental standards as outlined by the EPA and the DOT. The inventory of these specially built drums, along with two filling facilities, represents a significant capital investment. Contract sterilizers and medical device manufacturers are principal customers for this product. We also sell 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.

Propylene oxide is marketed and sold 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. We distribute propylene oxide product primarily in recyclable, single-walled, carbon steel cylinders according to standards outlined by the EPA and the DOT. The inventory of these cylinders also represents a significant capital investment. Propylene oxide is also sold to customers seeking smaller (as opposed to bulk) quantities and whose requirements include utilization in various chemical synthesis applications, such as increasing paint durability and manufacturing specialty starches and textile coatings.

The micronutrient agricultural nutrition business sells chelated minerals primarily into high value crops. Specialty Products has a unique and patented two-step approach to solving mineral deficiency in plants to optimize health, yield and shelf-life. First, optimal mineral balance for plant health is determined. Foliar is then applied Metalosate product range, utilizing patented amino acid chelate technology. This results in these 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 our 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 the Company’s Italian operation and sold for a wide range of industrial applications in Europe.

Business Segment Assets:

	September 30, 2018		December 31, 2017
Human Nutrition & Health	$	713,858	$	719,010
Animal Nutrition & Health		127,809		118,418
Specialty Products		58,884		63,141
Industrial Products		26,905		18,471
Other Unallocated		58,620		44,596
Total	$	986,076	$	963,636

Depreciation/Amortization:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Human Nutrition & Health	$	8,372	$	8,462	$	25,288	$	24,773
Animal Nutrition & Health		1,397		1,296		3,996		4,330
Specialty Products		1,019		1,028		3,039		3,067
Industrial Products		176		187		527		640
Total	$	10,964	$	10,973	$	32,850	$	32,810

Capital Expenditures:

	Nine Months Ended September 30,
	2018		2017
Human Nutrition & Health	$	6,523	$	13,290
Animal Nutrition & Health		3,483		2,585
Specialty Products		1,857		852
Industrial Products		1,390		949
Total	$	13,253	$	17,676

Business Segment Net Sales:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Human Nutrition & Health	$	85,890	$	81,365	$	253,966	$	232,523
Animal Nutrition & Health		40,410		38,010		128,587		113,136
Specialty Products		17,629		17,264		58,233		56,813
Industrial Products		11,114		14,077		39,354		33,054
Total	$	155,043	$	150,716	$	480,140	$	435,526

Business Segment Earnings Before Income Taxes:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Human Nutrition & Health	$	13,106		$	10,426		$	36,175		$	31,942
Animal Nutrition & Health		5,064			5,154			19,661			14,219
Specialty Products		5,769			5,607			19,583			20,125
Industrial Products		1,728			2,096			6,861			4,397
Transaction and integration costs		(202	)		(228	)		(1,784	)		(2,181	)
Indemnification settlement		-			-			-			2,087
Interest and other (expense)		(1,936	)		(2,358	)		(6,729	)		(6,623	)
Total	$	23,529		$	20,697		$	73,767		$	63,966

Transaction and integration costs were primarily related to the aforementioned definitive agreement (see Note 2) and one immaterial acquisition completed in each of 2017 and 2018.