CHS 2014 Annual Report Download - page 54

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52 CHS 2014
Segment Reporting
We have aligned our segments based on an assessment global supply and demand forces. Other energy prod-
of how our businesses are operated and the products ucts, such as propane, may experience higher volumes
and services they sell. and profitability during the winter heating and crop
drying seasons.
Our Energy segment produces and provides primarily
for the wholesale distribution of petroleum products Our revenues, assets and cash flows can be significantly
and transportation of those products. Our Ag segment affected by global market prices for commodities such
purchases and further processes or resells grains and as petroleum products, natural gas, grains, oilseeds,
oilseeds originated by our country operations business, crop nutrients and flour. Changes in market prices for
by our member cooperatives and by third parties, and commodities that we purchase without a corresponding
also serves as a wholesaler and retailer of crop inputs. change in the selling prices of those products can affect
Corporate and Other primarily represents our non-con- revenues and operating earnings. Commodity prices are
solidated wheat milling and packaged food joint ven- affected by a wide range of factors beyond our control,
tures, as well as our business solutions operations, which including the weather, crop damage due to disease or
consists of commodities hedging, insurance and finan- insects, drought, the availability and adequacy of
cial services related to crop production. supply, government regulations and policies, world
events, and general political and economic conditions.
Corporate administrative expenses and interest are allo-
cated to each business segment, and Corporate and While our revenues and operating results are derived
Other, based on direct usage for services that can be from businesses and operations which are wholly-
tracked, such as information technology and legal, and owned and majority-owned, a portion of our business
other factors or considerations relevant to the costs operations are conducted through companies in which
incurred. we hold ownership interests of 50% or less and do not
control the operations. We account for these invest-
Many of our business activities are highly seasonal and ments primarily using the equity method of accounting,
operating results will vary throughout the year. Histori- wherein we record our proportionate share of income or
cally, our income is generally lowest during the second loss reported by the entity as equity income from invest-
fiscal quarter and highest during the third fiscal quarter. ments, without consolidating the revenues and
For example, in our Ag segment, our agronomy and expenses of the entity in our Consolidated Statements
country operations businesses experience higher of Operations. In our Ag segment, this principally
volumes and income during the spring planting season includes our 50% ownership in TEMCO. In Corporate
and in the fall, which corresponds to harvest. Also in our and Other, these investments principally include our
Ag segment, our grain marketing operations are subject 50% ownership in Ventura Foods and our 12% ownership
to fluctuations in volumes and earnings based on pro- in Ardent Mills.
ducer harvests, world grain prices and demand. Our
Energy segment generally experiences higher volumes Reconciling Amounts represent the elimination of reve-
and profitability in certain operating areas, such as nues between segments. Such transactions are exe-
refined products, in the summer and early fall when gas- cuted at market prices to more accurately evaluate the
oline and diesel fuel usage is highest and is subject to profitability of the individual business segments.