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Segment Information
12 Months Ended
Aug. 31, 2018
Segment Reporting [Abstract]  
Segment Information
Segment Information
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.
Prior to the fourth quarter of fiscal 2017, the Company’s internal organizational and reporting structure included two operating and reportable segments: AMR and the Steel Manufacturing Business (“SMB”). In the fourth quarter of fiscal 2017, in accordance with its plan announced in June 2017, the Company modified its internal organizational and reporting structure to combine its steel manufacturing operations, which had been reported as the SMB segment, with its Oregon metals recycling operations, which had been reported within the AMR segment, forming the CSS division. This resulted in a realignment of how the Chief Executive Officer, who is considered the Company’s chief operating decision maker, reviews performance and makes decisions on resource allocation. The Company began reporting under this new segment structure in the fourth quarter of fiscal 2017 as reflected in its Annual Report on Form 10-K for the year ended August 31, 2017. The segment data for the comparable periods presented prior to the segment change have been recast to conform to the current period presentation for all activities of the reorganized segments. Recasting this historical information did not have an impact on the Company’s consolidated financial performance for any of the periods presented.
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 ferrous recycled scrap metal and other raw materials. CSS’s steel mill obtains substantially all of its 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 Company’s allocable portion of the results of these joint ventures is reported within the segment results. 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. As of 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. During fiscal 2018, two of the Company’s 50% joint venture interests presented as part of AMR operations dissolved. During fiscal 2017, the Company sold one of its 50% joint venture interests presented as part of CSS operations.
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 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.
In the fourth quarter of fiscal 2018, the Company modified its measurement of segment operating income to classify all legacy environmental charges within Corporate in order to align the measures with how the Chief Executive Officer, who is considered the Company’s chief operating decision maker, reviews performance and makes decisions on resource allocation. The change has been applied prospectively beginning in the fourth quarter of fiscal 2018, and such legacy environmental charges incurred during the quarter are reported within the Corporate division. In the fourth quarter of fiscal 2018, the Company recorded $1 million of legacy environmental charges to the Corporate division that, prior to the change, would have been classified within AMR. Legacy environmental charges reflected in AMR’s operating results prior to the change are not material to the Consolidated Financial Statements either individually or in the aggregate. Environmental charges are reported within selling, general and administrative expense in the Consolidated Statements of Operations.
The following is a summary of the Company’s total assets as of August 31 (in thousands):
 
2018
 
2017
Total assets:
 
 
 
Auto and Metals Recycling(1)
$
1,485,626

 
$
1,298,757

Cascade Steel and Scrap
740,967

 
696,269

Total segment assets
2,226,593

 
1,995,026

Corporate and eliminations(2)
(1,121,776
)
 
(1,061,271
)
Total assets
$
1,104,817

 
$
933,755

Property, plant and equipment, net (3)
$
415,711

 
$
390,629

_____________________________
(1)
AMR total assets include $4 million and $5 million as of August 31, 2018 and 2017, respectively, for investments in joint ventures. CSS total assets include $8 million and $7 million as of August 31, 2018 and 2017, respectively, for investment in joint ventures.
(2)
The substantial majority of Corporate and eliminations total assets consist of Corporate intercompany payables to the Company’s operating segments and intercompany eliminations.
(3)
Property, plant and equipment, net includes $15 million and $17 million as of August 31, 2018 and 2017, respectively, at the Company’s Canadian locations.

The table below illustrates the Company’s results from continuing operations by reportable segment for the years ended August 31 (in thousands):
 
2018
 
2017
 
2016
AMR:
 
 
 
 
 
Revenues
$
1,908,966

 
$
1,363,618

 
$
1,060,592

Less: Intersegment revenues
(24,892
)
 
(15,647
)
 
(12,081
)
AMR external customer revenues
1,884,074

 
1,347,971

 
1,048,511

CSS:
 
 
 
 
 
Revenues
480,641

 
339,620

 
304,032

Total revenues
$
2,364,715

 
$
1,687,591

 
$
1,352,543

Depreciation and amortization:
 
 
 
 
 
AMR
$
35,564

 
$
34,853

 
$
39,033

CSS
11,724

 
12,525

 
13,052

Segment depreciation and amortization
47,288

 
47,378

 
52,085

Corporate
2,384

 
2,462

 
2,545

Total depreciation and amortization
$
49,672

 
$
49,840

 
$
54,630

Capital expenditures:
 
 
 
 
 
AMR
$
67,099

 
$
34,575

 
$
26,623

CSS
9,600

 
10,224

 
7,044

Segment capital expenditures
76,699

 
44,799

 
33,667

Corporate
927

 
141

 
904

Total capital expenditures
$
77,626

 
$
44,940

 
$
34,571

Reconciliation of the Company’s segment operating income to income (loss) from continuing operations before income taxes:
 
 
 
 
 
AMR(1)
$
169,120

 
$
91,405

 
$
23,168

CSS(2)
38,286

 
5,275

 
4,696

Segment operating income
207,406

 
96,680

 
27,864

Restructuring charges and other exit-related activities
661

 
109

 
(6,781
)
Corporate and eliminations
(59,079
)
 
(40,776
)
 
(28,925
)
Operating income (loss)
148,988

 
56,013

 
(7,842
)
Interest expense
(8,983
)
 
(8,081
)
 
(8,889
)
Other income, net
1,848

 
758

 
1,226

Income (loss) from continuing operations before income taxes
$
141,853

 
$
48,690

 
$
(15,505
)
_____________________________
(1)
AMR operating income includes less than $(1) million, $2 million and less than $1 million in income (loss) from joint ventures accounted for by the equity method in fiscal 2018, 2017 and 2016, respectively. AMR operating income includes a goodwill impairment charge of $9 million in fiscal 2016, and other asset impairment charges (recoveries), net of $(1) million, less than $(1) million, and $16 million in fiscal 2018, 2017 and 2016, respectively.
(2)
CSS operating income includes $2 million, $1 million and less than $1 million in income from joint ventures accounted for by the equity method in fiscal 2018, 2017 and 2016, respectively. CSS operating income includes asset impairment charges (recoveries), net of less than $(1) million, $(1) million and $4 million in fiscal 2018, 2017 and 2016, respectively.

The following revenues from external customers are presented based on the sales destination and by major product for the years ended August 31 (in thousands):
 
2018
 
2017
 
2016
Revenues based on sales destination:
 
 
 
 
 
Foreign
$
1,354,460

 
$
894,265

 
$
683,569

Domestic
1,010,255

 
793,326

 
668,974

Total revenues from external customers
$
2,364,715

 
$
1,687,591

 
$
1,352,543

 
 
 
 
 
 
Major product information:
 
 
 
 
 
Ferrous scrap metal
$
1,328,447

 
$
855,161

 
$
619,060

Nonferrous scrap metal
529,466

 
425,989

 
340,025

Retail and other
142,953

 
126,235

 
123,553

Finished steel products
363,849

 
280,206

 
269,355

Semi-finished steel products

 

 
550

Total revenues from external customers
$
2,364,715

 
$
1,687,591

 
$
1,352,543



In fiscal 2018, 2017 and 2016, there were no external customers that accounted for more than 10% of the Company’s consolidated revenues. Sales to customers in foreign countries are a significant part of the Company’s business. The schedule below identifies those foreign countries to which the Company’s sales exceeded 10% of consolidated revenues in any of the last three years ended August 31 (in thousands):
 
2018
 
% of
Revenue
 
2017
 
% of
Revenue
 
2016
 
% of
Revenue
Turkey(1)
$
262,835

 
11
%
 
N/A

 
N/A

 
$
163,696

 
12
%
China
$
255,097

 
11
%
 
$
216,231

 
13
%
 
$
150,570

 
11
%
_____________________________
(1)
N/A = Sales were less than the 10% threshold.