Segment Information | 4. SEGMENT INFORMATION As a result of acquisitions during 2016, the company implemented organizational segment changes during the fourth quarter of 2016, whereby the company management now reports the financial and operating performance in the following four operating segments: (1) ethanol production, which includes the production of ethanol, distillers grains and corn oil, (2) agribusiness and energy services, which includes grain handling and storage and marketing and merchant trading for company-produced and third-party ethanol, distillers grains, corn oil, natural gas and other commodities, (3) food and ingredients, which includes cattle feedlots, vinegar production and food-grade corn oil operations and (4) partnership, which includes fuel storage and transportation services. Prior periods have been reclassified to conform to the revised segment presentation. T he company has re-evaluated the profitability measure of its reportable segments’ operating performance and has determined that segment EBITDA (earnings before interest, taxes, depreciation and amortization) is primarily used by the company’s management to evaluate segment operating activities, and therefore is a more meaningful profitability measure than the previously r eported segment operating income . In addition, EBITDA is a financial measure that is widely used by analysts and investors in the company’s industries. As a result, the company is now including segment EBITDA as a performance measure. Corporate activities include selling , general and administrative expenses, consisting primarily of compensation, professional fees and overhead costs not directly related to a specific operating segment. During the normal course of business, the operating segments conduct business with each other. For example, the agribusiness and energy services segment procures grain and natural gas and sells products, including ethanol, distillers grains and corn oil for the ethanol production segment. The partnership segment provides fuel storage and transportation services for the agribusiness and energy services segment. These intersegment activities are treated like third-party transactions with origination, marketing and storage fees charged at estimated market values. Consequently, these transactions affect segment performance; however, they do not impact the company’s consolidated results since the revenues and corresponding costs are eliminated. The following tables set forth certain financial data for the company’s operating segments (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Revenues: Ethanol production: Revenues from external customers $ 620,180 $ 586,988 $ 1,857,356 $ 1,710,484 Intersegment revenues 3,579 - 6,624 - Total segment revenues 623,759 586,988 1,863,980 1,710,484 Agribusiness and energy services: Revenues from external customers 164,604 168,143 483,670 531,445 Intersegment revenues 14,406 8,936 33,679 24,934 Total segment revenues 179,010 177,079 517,349 556,379 Food and ingredients: Revenues from external customers 114,750 84,655 329,432 230,812 Intersegment revenues 38 37 113 112 Total segment revenues 114,788 84,692 329,545 230,924 Partnership: Revenues from external customers 1,701 2,066 4,724 6,042 Intersegment revenues 24,748 24,139 74,019 69,445 Total segment revenues 26,449 26,205 78,743 75,487 Revenues including intersegment activity 944,006 874,964 2,789,617 2,573,274 Intersegment eliminations (42,771) (33,112) (114,435) (94,491) Revenues as reported $ 901,235 $ 841,852 $ 2,675,182 $ 2,478,783 Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Cost of goods sold: Ethanol production $ 590,904 $ 549,705 $ 1,802,688 $ 1,649,641 Agribusiness and energy services 168,735 163,643 487,239 518,135 Food and ingredients 98,854 78,792 281,898 219,087 Partnership - - - - Intersegment eliminations (42,706) (33,257) (114,123) (93,769) $ 815,787 $ 758,883 $ 2,457,702 $ 2,293,094 Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 EBITDA: Ethanol production $ 25,570 $ 30,155 $ 38,521 $ 39,164 Agribusiness and energy services 5,150 6,310 15,910 21,246 Food and ingredients 13,272 5,465 39,741 10,430 Partnership 17,589 16,620 51,549 47,241 Intersegment eliminations 8 (39) (147) (1,174) Corporate activities (11,212) (9,439) (27,275) (25,944) $ 50,377 $ 49,072 $ 118,299 $ 90,963 Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Depreciation and amortization: Ethanol production $ 20,959 $ 15,725 $ 61,443 $ 46,655 Agribusiness and energy services 1,457 628 2,776 1,882 Food and ingredients 3,139 257 9,259 802 Partnership 1,280 1,515 3,781 4,220 Corporate activities 999 1,161 2,846 2,573 $ 27,834 $ 19,286 $ 80,105 $ 56,132 The following tab le reconciles net income to EBITDA for the periods indicated (in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net income $ 39,429 $ 12,884 $ 29,284 $ 6,053 Interest expense 31,889 11,819 69,815 33,117 Income tax expense (benefit) (48,775) 5,083 (60,905) (4,339) Depreciation and amortization 27,834 19,286 80,105 56,132 EBITDA $ 50,377 $ 49,072 $ 118,299 $ 90,963 The following table sets forth third-party revenues by product line (in thousands ): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Revenues: Ethanol $ 625,787 $ 550,724 $ 1,830,887 $ 1,622,168 Distillers grains 97,136 129,345 303,527 357,070 Corn oil 33,678 49,844 121,166 111,727 Grain 19,338 30,003 73,860 145,800 Food and ingredients 112,697 70,012 305,211 201,423 Service revenues 1,701 2,066 4,724 6,042 Other 10,898 9,858 35,807 34,553 $ 901,235 $ 841,852 $ 2,675,182 $ 2,478,783 The following table sets forth total assets by operating segment (in thousands): September 30, 2017 December 31, 2016 Total assets (1) : Ethanol production $ 1,137,903 $ 1,206,155 Agribusiness and energy services 467,955 579,977 Food and ingredients 691,663 406,429 Partnership 72,965 74,999 Corporate assets 272,844 257,652 Intersegment eliminations (14,793) (18,720) $ 2,628,537 $ 2,506,492 (1) Asset balances by segment exclude intercompany receivable balances . |