Annual report pursuant to Section 13 and 15(d)

5. SEGMENTS

v3.6.0.2
5. SEGMENTS
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
SEGMENTS

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 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 Pacific Ethanol to the segment. The production segment incurred $9,968,000, $5,957,000 and $8,776,000 in management fees for the years ended December 31, 2016, 2015 and 2014, respectively. The marketing and distribution segment incurred $3,000,000, $3,900,000 and $3,900,000 in management fees for the years ended December 31, 2016, 2015 and 2014, 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,  
    2016     2015     2014  
Net Sales                  
Ethanol Production:                        
Net sales to external customers   $ 1,045,807     $ 710,201     $ 562,388  
 Intersegment net sales     1,169       –       –  
Total production segment net sales     1,046,976       710,201       562,388  
                         
Marketing and distribution:                        
Net sales to external customers     578,951       480,975       545,024  
Intersegment net sales     8,029       5,262       3,986  
Total marketing and distribution net sales     586,980       486,237       549,010  
Intersegment eliminations     (9,198 )     (5,262 )     (3,986 )
Net sales as reported   $ 1,624,758     $ 1,191,176     $ 1,107,412  

 

Cost of goods sold:                  
Ethanol production   $ 1,018,181     $ 719,833     $ 473,598  
Marketing and distribution     575,921       476,410       537,010  
 Intersegment eliminations     (21,176 )     (12,477 )     (11,681 )
Cost of goods sold as reported   $ 1,572,926     $ 1,183,766     $ 998,927  

 

Income (loss) before provision for income taxes:                  
Ethanol production   $ (6,882 )   $ (32,723 )   $ 72,278  
Marketing and distribution     4,517       3,200       6,068  
Corporate activities     2,910       616       (37,207 )
    $ 545     $ (28,907 )   $ 41,139  
Depreciation and amortization:                        
Ethanol production   $ 34,528     $ 23,091     $ 12,509  
Marketing and distribution     3       151       551  
Corporate activities     910       390       126  
    $ 35,441     $ 23,632     $ 13,186  

 

Interest expense:                  
Ethanol production   $ 20,794     $ 11,969     $ 7,048  
Marketing and distribution     1,404       625       566  
Corporate activities     208       –       1,824  
    $ 22,406     $ 12,594     $ 9,438  

 

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

 

  December 31,  
    2016     2015  
Total assets:                
Ethanol production   $ 542,688     $ 535,583  
Marketing and distribution     146,356       107,499  
Corporate assets     19,194       31,598  
    $

708,238

     $

674,680