CHS 2013 Annual Report Download - page 51

8NOV201319001499
56 CHS 2013
Segment Reporting
We have aligned our segments based on an assessment and profitability during the winter heating and crop
of how our businesses are operated and the products drying seasons.
and services they sell.
Our revenues, assets and cash flows can be significantly
Our Energy segment produces and provides primarily affected by global market prices for commodities such
for the wholesale distribution of petroleum products as petroleum products, natural gas, grains, oilseeds,
and transportation of those products. Our Ag segment crop nutrients and flour. Changes in market prices for
purchases and further processes or resells grains and commodities that we purchase without a corresponding
oilseeds originated by our country operations business, change in the selling prices of those products can affect
by our member cooperatives and by third parties, and revenues and operating earnings. Commodity prices are
also serves as a wholesaler and retailer of crop inputs. affected by a wide range of factors beyond our control,
Corporate and Other primarily represents our non-con- including the weather, crop damage due to disease or
solidated wheat milling and packaged food joint ven- insects, drought, the availability and adequacy of
tures, as well as our business solutions operations, which supply, government regulations and policies, world
consists of commodities hedging, insurance and finan- events, and general political and economic conditions.
cial services related to crop production.
While our revenues and operating results are derived
Corporate administrative expenses are allocated to each from businesses and operations which are wholly-
business segment, and Corporate and Other, based on owned and majority-owned, a portion of our business
direct usage for services that can be tracked, such as operations are conducted through companies in which
information technology and legal, and other factors or we hold ownership interests of 50% or less and do not
considerations relevant to the costs incurred. control the operations. We account for these invest-
ments primarily using the equity method of accounting,
Many of our business activities are highly seasonal and wherein we record our proportionate share of income or
operating results will vary throughout the year. Histori- loss reported by the entity as equity income from invest-
cally, our income is generally lowest during the second ments, without consolidating the revenues and
fiscal quarter and highest during the third fiscal quarter. expenses of the entity in our Consolidated Statements
For example, in our Ag segment, our agronomy and of Operations. In our Ag segment, this principally
country operations businesses experience higher includes our 50% ownership in TEMCO. In Corporate
volumes and income during the spring planting season and Other, these investments principally include our
and in the fall, which corresponds to harvest. Also in our 50% ownership in Ventura Foods and our 24% owner-
Ag segment, our grain marketing operations are subject ship in Horizon Milling and Horizon Milling, ULC.
to fluctuations in volumes and earnings based on pro-
ducer harvests, world grain prices and demand. Our Reconciling Amounts represent the elimination of reve-
Energy segment generally experiences higher volumes nues between segments. Such transactions are exe-
and profitability in certain operating areas, such as cuted at market prices to more accurately evaluate the
refined products, in the summer and early fall when gaso- profitability of the individual business segments.
line and diesel fuel usage is highest and is subject to
global supply and demand forces. Other energy prod-
ucts, such as propane, may experience higher volumes