Segment Information

3 Months Ended

Nov. 30, 2018

The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s internal organizational and reporting structure includes two operating and reportable segments: the Auto and Metals Recycling (“AMR”) business and the Cascade Steel and Scrap (“CSS”) business.

AMR acquires and recycles ferrous and nonferrous scrap metal for sale to foreign and domestic metal producers, processors and brokers, and procures salvaged vehicles and sells serviceable used auto parts from these vehicles through a network of self-service auto parts stores. These auto parts stores also supply the Company’s shredding facilities with autobodies that are processed into saleable recycled scrap metal.

CSS operates a steel mini-mill that produces a range of finished steel long products using recycled scrap metal and other raw materials. CSS’s steel mill obtains substantially all of its recycled scrap metal raw material requirements from its integrated metals recycling and joint venture operations. CSS’s metals recycling operations also sell recycled metal to external customers primarily in export markets.

The Company holds noncontrolling ownership interests in joint ventures, which are either in the metals recycling business or are suppliers of unprocessed metal. The joint ventures sell recycled scrap metal to AMR and to CSS at prices that approximate local market rates, which produces intercompany profit. This intercompany profit is eliminated while the products remain in inventory and is not recognized until the finished products are sold to third parties. The Company’s allocable portion of the results of these joint ventures is reported within the segment results. As of November 30, 2018 and August 31, 2018, the Company had two 50%-owned joint venture interests, one presented as part of AMR operations, and one presented as part of CSS operations. Income from joint ventures for the three months ended November 30, 2017 includes the results of two additional 50% joint venture interests presented as part of AMR operations which dissolved in the fourth quarter of fiscal 2018.

Intersegment sales from AMR to CSS are made at prices that approximate local market rates. These intercompany sales tend to produce intercompany profit which is not recognized until the finished products are ultimately sold to third parties.

The information provided below is obtained from internal information that is provided to the Company’s chief operating decision maker for the purpose of corporate management. The Company uses segment operating income to measure segment performance. The Company does not allocate corporate interest income and expense, income taxes and other income and expense to its reportable segments. Certain expenses related to shared services that support operational activities and transactions are allocated from Corporate to the segments. Unallocated Corporate expense consists primarily of expense for management and certain administrative services that benefit both reportable segments. In addition, the Company does not allocate certain items to segment operating income because management does not include the information in its measurement of the performance of the operating segments. Such unallocated items include restructuring charges and other exit-related activities, charges related to legacy environmental liabilities, and provisions for certain legal matters. Because of the unallocated income and expense, the operating income of each reportable segment does not reflect the operating income the reportable segment would report as a stand-alone business. The results of discontinued operations are excluded from segment operating income and are presented separately, net of tax, from the results of ongoing operations for all periods presented.

The table below illustrates the Company’s revenues from continuing operations by reportable segment (in thousands):



	Three Months Ended November 30,
	2018			2017
Revenues:
AMR:
Revenues	$	436,412		$	398,054
Less: Intersegment revenues	(2,778		)	(4,759		)
AMR external customer revenues	433,634			393,295
CSS:
Revenues	130,386			89,984
Total revenues	$	564,020		$	483,279

The table below illustrates the reconciliation of the Company’s segment operating income to income from continuing operations before income taxes (in thousands):



	Three Months Ended November 30,
	2018			2017
AMR	$	23,017		$	35,172
CSS	11,918			8,476
Segment operating income	34,935			43,648
Restructuring charges and other exit-related activities	(202		)	(100		)
Corporate and eliminations	(12,044		)	(17,125		)
Operating income	22,689			26,423
Interest expense	(1,906		)	(2,059		)
Other income, net	23			849
Income from continuing operations before income taxes	$	20,806		$	25,213

The following is a summary of the Company’s total assets by reportable segment (in thousands):



	November 30, 2018			August 31, 2018
AMR⁽¹⁾	$	1,485,182		$	1,485,626
CSS⁽¹⁾	750,163			740,967
Total segment assets	2,235,345			2,226,593
Corporate and eliminations⁽²⁾	(1,126,141		)	(1,121,776		)
Total assets	$	1,109,204		$	1,104,817

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(1)	AMR total assets include $4 million for an investment in a joint venture as of November 30, 2018 and August 31, 2018. CSS total assets include $8 million for an investment in a joint venture as of November 30, 2018 and August 31, 2018.

(2)

The substantial majority of Corporate and eliminations total assets consist of Corporate intercompany payables to the Company’s operating segments and intercompany eliminations.