Segment Reporting

12 Months Ended

Aug. 31, 2013

Segment Reporting [Abstract]

Segment Reporting

Note 19 — Segment Reporting

Financial information for the Company’s two segments, Industrial Ingredients and Food Ingredients, is presented below. Industrial Ingredients and Food Ingredients are broad categories of end-market users served by the Company’s U.S. operations. Penford manages its business in two segments: Industrial Ingredients and Food Ingredients. These segments are based on broad categories of end-market users. The Food Ingredients segment produces specialty starches for food applications. The Industrial Ingredients segment is a supplier of specialty starches to the paper, packaging and other industries, and is a producer of fuel grade ethanol. The Industrial Ingredients segment also sells the by-products from its corn wet milling manufacturing operations, primarily germ, fiber and gluten to customers who use these by-products as animal feed or to produce corn oil.

A third item for “corporate and other” activity has been presented to provide reconciliation to amounts reported in the consolidated financial statements. Corporate and other represents the activities related to the corporate headquarters such as public company reporting, personnel costs of the executive management team, corporate-wide professional services and consolidation entries. The accounting policies of the reportable segments are the same as those described in Note 2. The Company’s assets and manufacturing operations are located in the United States.

	Year Ended August 31,
	2013			2012			2011
	(Dollars in thousands)
Sales
Industrial ingredients
Industrial Starch	$	177,382		$	156,945		$	127,471
Ethanol		96,852			101,874			105,730
By-products		81,782			71,788			58,322
	$	356,016		$	330,607		$	291,523
Food ingredients		111,234			102,544			82,240
	$	467,250		$	433,151		$	373,763
Depreciation and amortization
Industrial ingredients	$	10,933		$	10,879		$	10,812
Food ingredients		2,061			1,989			2,110
Corporate and other		332			1,259			1,493
	$	13,326		$	14,127		$	14,415
Income (loss) from operations
Industrial ingredients	$	(3,238	)	$	(928	)	$	(4,718	)
Food ingredients		23,265			21,591			18,037
Corporate and other		(10,623	)		(10,604	)		(8,874	)
	$	9,404		$	10,059		$	4,445
Capital expenditures, net
Industrial ingredients	$	8,997		$	8,700		$	6,625
Food ingredients		5,202			5,446			1,663
Corporate and other		-			-			7
	$	14,199		$	14,146		$	8,295

	August 31,
	2013		2012
	(Dollars in thousands)
Total assets
Industrial ingredients	$	133,120	$	143,039
Food ingredients		68,550		63,949
Corporate and other		22,948		29,191
	$	224,618	$	236,179

In January 2012, the Company acquired the net assets and operations of the business generally known as Carolina Starches, which manufactures and markets industrial potato starch based products and blends for the paper and packaging industries. See Note 18. The net assets and results of operations since acquisition have been integrated into the Company’s existing business segments. The acquired net assets, consisting primarily of property, plant and equipment and working capital, are being managed by and included in the reported balance sheet amounts of the Company’s Food Ingredients business, which has experience, expertise and technologies related to the manufacture of potato starch products.

Since the primary end markets for Carolina Starches’ products are the paper and packaging industries, the Carolina Starches sales and marketing functions of the acquired operations are being managed by the Industrial Ingredients business; therefore, the sales, cost of sales and a majority of the operating expenses are included in the Industrial Ingredients segment’s results of operations in the Consolidated Financial Statements. Sales of $26.9 million related to the acquired Carolina Starches businesses were included in the Industrial Ingredients results of operations. Due to the integration of Carolina Starches into the Company’s two business segments, it is not practicable to determine the net earnings of Carolina Starches included in the consolidated statements of operations since the acquisition.

Reconciliation of income (loss) from operations for the Company’s segments to income (loss) before income taxes as reported in the consolidated financial statements follows:

	Year Ended August 31,
	2013			2012			2011
	(Dollars in thousands)
Income from operations	$	9,404		$	10,059		$	4,445
Interest expense		(3,989	)		(8,633	)		(9,364	)
Other non-operating income (expense)		75			(6,186	)		115
Income (loss) before income taxes	$	5,490		$	(4,760	)	$	(4,804	)

Sales, attributed to the area to which the product was shipped, are as follows:

	Year Ended August 31,
	2013		2012		2011
	(Dollars in thousands)
United States	$	429,957	$	400,070	$	346,893
Canada		8,662		5,653		4,027
Mexico		11,419		12,761		9,221
Columbia		7,379		6,678		6,802
Japan		5,112		4,380		3,434
Other		4,721		3,609		3,386
Non-United States		37,293		33,081		26,870
Total	$	467,250	$	433,151	$	373,763