Annual report pursuant to Section 13 and 15(d)

5. SEGMENTS

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5. SEGMENTS
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
SEGMENTS

 

The Company previously reported as a single segment, however, as a result of changes in the Company’s business in 2015, after a reassessment, the Company changed the number of its operating and reportable segments as determined under ASC 280.

 

The Company reports its financial and operating performance in two segments: (1) ethanol production, which includes the production and sale of ethanol and co-products, with all eight of the Company’s production facilities aggregated, and (2) marketing and distribution, which includes marketing and merchant trading for Company-produced ethanol and co-products and third-party ethanol.

 

Income before provision for income taxes includes management fees charged by the Parent to the segment. The production segment incurred $6.0 million, $8.8 million and $5.6 million in management fees for the years ended December 31, 2015, 2014 and 2013, respectively. The marketing and distribution segment incurred $3.9 million, $3.9 million and $3.6 million in management fees for the years ended December 31, 2015, 2014 and 2013, respectively. Corporate activities include selling, general and administrative expenses, consisting primarily of corporate employee compensation, professional fees and overhead costs not directly related to a specific operating segment.

 

During the normal course of business, the segments do business with each other. The preponderance of this activity occurs when the Company’s marketing segment markets ethanol produced by the production segment for a marketing fee, as discussed in Note 4. These intersegment activities are considered arms’-length transactions. Consequently, although these transactions impact segment performance, they do not impact the Company’s consolidated results since all revenues and corresponding costs are eliminated in consolidation.

 

Capital expenditures are substantially all incurred at the Company’s production segment.

 

The following tables set forth certain financial data for the Company’s operating segments (in thousands):

 

    Years Ended December 31,  
    2015     2014     2013  
Net Sales:                        
Ethanol production:                        
Net sales from external customers   $ 710,201     $ 562,388     $ 507,162  
Intersegment net sales     –       –       –  
Total segment revenues     710,201       562,388       507,162  
Marketing and distribution:                        
Net sales from external customers     480,975       545,024       401,275  
Intersegment net sales     5,262       3,986       3,351  
Total segment net sales     486,237       549,010       404,626  
Net sales including intersegment activity     1,196,438       1,111,398       911,788  
Intersegment eliminations     (5,262 )     (3,986 )     (3,351 )
Net sales as reported   $ 1,191,176     $ 1,107,412     $ 908,437  
                         
Cost of goods sold:                        
Ethanol production   $ 719,833     $ 473,598     $ 492,186  
Marketing and distribution     476,411       537,010       393,366  
Intersegment eliminations     (12,477 )     (11,681 )     (10,045 )
    $ 1,183,767     $ 998,927     $ 875,507  
Income (loss) before provision for income taxes:                        
Ethanol production   $ (32,723 )   $ 72,278     $ 3,776  
Marketing and distribution     3,200       6,068       5,217  
Corporate activities     616       (37,207 )     (10,155 )
    $ (28,907 )   $ 41,139     $ (1,162 )
Depreciation and amortization:                        
Ethanol production   $ 23,091     $ 12,509     $ 11,533  
Marketing and distribution     151       551       499  
Corporate activities     390       126       104  
    $ 23,632     $ 13,186     $ 12,136  
                         
Interest expense:                        
Ethanol production   $ (11,969 )   $ (7,048 )   $ (11,248 )
Marketing and distribution     (625 )     (566 )     (527 )
Corporate activities     –       (1,824 )     (3,896 )
    $ (12,594 )   $ (9,438 )   $ (15,671 )

 

The following table sets forth the Company’s total assets by operating segment (in thousands):

 

    Years Ended December 31,  
    2015     2014  
Total assets:                
Ethanol production   $ 536,013     $ 190,630  
Marketing and distribution     107,532       70,068  
Corporate assets     31,598       37,198  
    $ 675,143     $ 297,896