UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| | | | | | | | | | | |
☑ | | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| | For the quarterly period ended | May 31, 2021February 28, 2022 |
or |
☐ | | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission file number: 001-36079
CHS Inc.
(Exact name of Registrant as specified in its charter)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Minnesota | | | | | | | | | 41-0251095 |
(State or other jurisdiction of incorporation or organization) | | | | | | | | | (I.R.S. Employer Identification Number) |
| | | | 5500 Cenex Drive | | | |
| | Inver Grove Heights, | Minnesota | 55077 | | |
| | (Address of principal executive offices, including zip code) | | |
| | (651) | 355-6000 | | | |
| | (Registrant’s |
5500 Cenex Drive
Inver Grove Heights, Minnesota 55077
(Address of principal executive offices, including zip code)
(651) 355-6000
(Registrant's telephone number, including area code)
| |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
8% Cumulative Redeemable Preferred Stock | CHSCP | The Nasdaq Stock Market LLC |
Class B Cumulative Redeemable Preferred Stock, Series 1 | CHSCO | The Nasdaq Stock Market LLC |
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 | CHSCN | The Nasdaq Stock Market LLC |
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 | CHSCM | The Nasdaq Stock Market LLC |
Class B Cumulative Redeemable Preferred Stock, Series 4 | CHSCL | The Nasdaq Stock Market LLC |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer | ☑ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
The issuer has no common stock outstanding.
TABLE OF CONTENTS
Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words "CHS," "we," "us" and "our" refer to CHS Inc., a Minnesota cooperative corporation, and its subsidiaries as of May 31, 2021.February 28, 2022.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains, and our other publicly available documents may contain, and our officers, directors and other representatives may from time to time make "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in our public filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2020,2021, and Item 1A of Part II of CHSthis Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2021.10-Q. These factors may include:include changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the impact of the ongoing COVID–19COVID-19 outbreak or other similar outbreaks; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities;liabilities and litigation; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions and casualty losses; the impact of workforce factors; our funding needs and financing sources; changes infinancial institutions' and other capital sources' policies concerning energy-related businesses; uncertainty regarding the method of determining, ortransition away from LIBOR and the replacement of LIBOR;LIBOR with an alternative reference rate; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course–of–businesscourse-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices; the impairment of long–livedlong-lived assets; and other factors affecting our businesses generally. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date on which the statement is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | |
| May 31, 2021 | | August 31, 2020 |
| (Dollars in thousands) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 301,230 | | | $ | 140,874 | |
Receivables | 3,191,478 | | | 2,366,047 | |
Inventories | 3,513,871 | | | 2,742,138 | |
Other current assets | 1,896,796 | | | 1,017,488 | |
Total current assets | 8,903,375 | | | 6,266,547 | |
Investments | 3,763,936 | | | 3,630,033 | |
Property, plant and equipment | 4,827,076 | | | 4,957,938 | |
Other assets | 1,106,239 | | | 1,139,429 | |
Total assets | $ | 18,600,626 | | | $ | 15,993,947 | |
LIABILITIES AND EQUITIES | | | |
Current liabilities: | | | |
Notes payable | $ | 2,776,812 | | | $ | 1,575,491 | |
Current portion of long-term debt | 198,147 | | | 189,287 | |
Accounts payable | 2,378,812 | | | 1,724,516 | |
Accrued expenses | 595,660 | | | 501,904 | |
Other current liabilities | 1,444,716 | | | 928,843 | |
Total current liabilities | 7,394,147 | | | 4,920,041 | |
Long-term debt | 1,571,644 | | | 1,601,836 | |
Other liabilities | 683,642 | | | 652,897 | |
Commitments and contingencies (Note 13) | 0 | | 0 |
Equities: | | | |
Preferred stock | 2,264,038 | | | 2,264,038 | |
Equity certificates | 5,133,465 | | | 5,161,610 | |
Accumulated other comprehensive loss | (215,343) | | | (233,924) | |
Capital reserves | 1,760,468 | | | 1,618,147 | |
Total CHS Inc. equities | 8,942,628 | | | 8,809,871 | |
Noncontrolling interests | 8,565 | | | 9,302 | |
Total equities | 8,951,193 | | | 8,819,173 | |
Total liabilities and equities | $ | 18,600,626 | | | $ | 15,993,947 | |
| | | | | | | | | | | |
| February 28, 2022 | | August 31, 2021 |
| (Dollars in thousands) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 211,936 | | | $ | 413,159 | |
Receivables | 3,494,888 | | | 2,860,884 | |
Inventories | 5,304,817 | | | 3,334,675 | |
Other current assets | 2,215,421 | | | 1,390,233 | |
Total current assets | 11,227,062 | | | 7,998,951 | |
Investments | 3,788,710 | | | 3,669,111 | |
Property, plant and equipment | 4,693,339 | | | 4,810,005 | |
Other assets | 1,038,190 | | | 1,098,208 | |
Total assets | $ | 20,747,301 | | | $ | 17,576,275 | |
LIABILITIES AND EQUITIES | | | |
Current liabilities: | | | |
Notes payable | $ | 2,688,004 | | | $ | 1,740,859 | |
Current portion of long-term debt | 9,522 | | | 38,450 | |
Accounts payable | 3,194,682 | | | 2,616,052 | |
Accrued expenses | 561,762 | | | 622,723 | |
Other current liabilities | 2,356,397 | | | 1,307,929 | |
Total current liabilities | 8,810,367 | | | 6,326,013 | |
Long-term debt | 1,955,205 | | | 1,579,911 | |
Other liabilities | 613,285 | | | 653,025 | |
Commitments and contingencies (Note 13) | 0 | | 0 |
Equities: | | | |
Preferred stock | 2,264,038 | | | 2,264,038 | |
Equity certificates | 5,122,930 | | | 5,247,238 | |
Accumulated other comprehensive loss | (221,855) | | | (216,391) | |
Capital reserves | 2,196,428 | | | 1,713,976 | |
Total CHS Inc. equities | 9,361,541 | | | 9,008,861 | |
Noncontrolling interests | 6,903 | | | 8,465 | |
Total equities | 9,368,444 | | | 9,017,326 | |
Total liabilities and equities | $ | 20,747,301 | | | $ | 17,576,275 | |
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Nine Months Ended May 31, | | |
| 2021 | | 2020 | | 2021 | | 2020 | | | | |
| (Dollars in thousands) |
Revenues | $ | 10,929,976 | | | $ | 7,241,031 | | | $ | 27,965,778 | | | $ | 21,460,742 | | | | | |
Cost of goods sold | 10,615,348 | | | 7,022,672 | | | 27,371,326 | | | 20,601,785 | | | | | |
Gross profit | 314,628 | | | 218,359 | | | 594,452 | | | 858,957 | | | | | |
Marketing, general and administrative expenses | 186,703 | | | 180,439 | | | 518,875 | | | 548,340 | | | | | |
Operating earnings | 127,925 | | | 37,920 | | | 75,577 | | | 310,617 | | | | | |
| | | | | | | | | | | |
Interest expense | 28,992 | | | 26,661 | | | 82,897 | | | 95,043 | | | | | |
Other income | (10,748) | | | (8,076) | | | (41,219) | | | (32,926) | | | | | |
Equity income from investments | (146,522) | | | (51,114) | | | (260,654) | | | (135,174) | | | | | |
Income before income taxes | 256,203 | | | 70,449 | | | 294,553 | | | 383,674 | | | | | |
Income tax benefit | (17,469) | | | (27,052) | | | (10,130) | | | (18,258) | | | | | |
Net income | 273,672 | | | 97,501 | | | 304,683 | | | 401,932 | | | | | |
Net income (loss) attributable to noncontrolling interests | 81 | | | (147) | | | (350) | | | 955 | | | | | |
Net income attributable to CHS Inc. | $ | 273,591 | | | $ | 97,648 | | | $ | 305,033 | | | $ | 400,977 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Six Months Ended February 28, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (Dollars in thousands) |
Revenues | $ | 10,332,588 | | | $ | 8,320,159 | | | $ | 21,213,345 | | | $ | 17,035,802 | |
Cost of goods sold | 10,063,590 | | | 8,218,439 | | | 20,424,439 | | | 16,755,978 | |
Gross profit | 268,998 | | | 101,720 | | | 788,906 | | | 279,824 | |
Marketing, general and administrative expenses | 244,325 | | | 161,510 | | | 449,259 | | | 332,171 | |
Operating earnings (loss) | 24,673 | | | (59,790) | | | 339,647 | | | (52,347) | |
| | | | | | | |
Interest expense | 25,174 | | | 28,855 | | | 48,606 | | | 53,905 | |
Other income | (1,405) | | | (17,846) | | | (25,181) | | | (30,470) | |
Equity income from investments | (229,923) | | | (64,109) | | | (381,268) | | | (114,132) | |
Income (loss) before income taxes | 230,827 | | | (6,690) | | | 697,490 | | | 38,350 | |
Income tax expense | 11,931 | | | 31,668 | | | 26,651 | | | 7,339 | |
Net income (loss) | 218,896 | | | (38,358) | | | 670,839 | | | 31,011 | |
Net loss attributable to noncontrolling interests | (104) | | | (129) | | | (122) | | | (431) | |
Net income (loss) attributable to CHS Inc. | $ | 219,000 | | | $ | (38,229) | | | $ | 670,961 | | | $ | 31,442 | |
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Nine Months Ended May 31, | | |
| 2021 | | 2020 | | 2021 | | 2020 | | | | |
| (Dollars in thousands) |
Net income | $ | 273,672 | | | $ | 97,501 | | | $ | 304,683 | | | $ | 401,932 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | | |
Pension and other postretirement benefits | 3,888 | | | 3,490 | | | 11,402 | | | 12,309 | | | | | |
| | | | | | | | | | | |
Cash flow hedges | (4,991) | | | 6,817 | | | (3,881) | | | (4,867) | | | | | |
Foreign currency translation adjustment | 8,218 | | | (12,316) | | | 11,060 | | | (21,674) | | | | | |
Other comprehensive income (loss), net of tax | 7,115 | | | (2,009) | | | 18,581 | | | (14,232) | | | | | |
Comprehensive income | 280,787 | | | 95,492 | | | 323,264 | | | 387,700 | | | | | |
Comprehensive income (loss) attributable to noncontrolling interests | 81 | | | (147) | | | (350) | | | 955 | | | | | |
Comprehensive income attributable to CHS Inc. | $ | 280,706 | | | $ | 95,639 | | | $ | 323,614 | | | $ | 386,745 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Six Months Ended February 28, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (Dollars in thousands) |
Net income (loss) | $ | 218,896 | | | $ | (38,358) | | | $ | 670,839 | | | $ | 31,011 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Pension and other postretirement benefits | 4,581 | | | 3,869 | | | 8,349 | | | 7,514 | |
| | | | | | | |
Cash flow hedges | (553) | | | (559) | | | (9,694) | | | 1,110 | |
Foreign currency translation adjustment | 5,926 | | | (761) | | | (4,119) | | | 2,842 | |
Other comprehensive income (loss), net of tax | 9,954 | | | 2,549 | | | (5,464) | | | 11,466 | |
Comprehensive income (loss) | 228,850 | | | (35,809) | | | 665,375 | | | 42,477 | |
Comprehensive loss attributable to noncontrolling interests | (104) | | | (129) | | | (122) | | | (431) | |
Comprehensive income (loss) attributable to CHS Inc. | $ | 228,954 | | | $ | (35,680) | | | $ | 665,497 | | | $ | 42,908 | |
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended May 31, |
| 2021 | | 2020 |
| (Dollars in thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 304,683 | | | $ | 401,932 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | |
Depreciation and amortization, including amortization of deferred major maintenance | 401,657 | | | 408,613 | |
Equity income from investments, net of distributions received | (128,635) | | | 1,339 | |
Provision for doubtful accounts | 3,353 | | | 7,692 | |
Deferred taxes | 17,379 | | | (11,811) | |
Other, net | (24,420) | | | 67,625 | |
Changes in operating assets and liabilities: | | | |
Receivables | (885,496) | | | 25,290 | |
Inventories | (763,675) | | | (5,602) | |
Accounts payable and accrued expenses | 775,825 | | | (185,503) | |
Other, net | (333,049) | | | (183,732) | |
Net cash (used in) provided by operating activities | (632,378) | | | 525,843 | |
Cash flows from investing activities: | | | |
Acquisition of property, plant and equipment | (238,774) | | | (316,506) | |
Proceeds from disposition of property, plant and equipment | 17,039 | | | 28,257 | |
Expenditures for major maintenance | (42,466) | | | (10,414) | |
Proceeds from sale of business | 39,567 | | | 694 | |
Changes in CHS Capital notes receivable, net | 31,543 | | | 219,173 | |
Financing extended to customers | (1,890) | | | (5,139) | |
Payments from customer financing | 6,110 | | | 21,341 | |
| | | |
Other investing activities, net | 11,362 | | | 14,061 | |
Net cash used in investing activities | (177,509) | | | (48,533) | |
Cash flows from financing activities: | | | |
Proceeds from notes payable and long-term debt | 26,618,429 | | | 19,841,762 | |
Payments on notes payable, long-term debt and finance lease obligations | (25,381,437) | | | (19,805,609) | |
Preferred stock dividends paid | (126,501) | | | (126,501) | |
Redemptions of equities | (37,809) | | | (86,272) | |
Cash patronage dividends paid | (30,042) | | | (90,112) | |
Other financing activities, net | (30,634) | | | (25,475) | |
Net cash provided by (used in) financing activities | 1,012,006 | | | (292,207) | |
Effect of exchange rate changes on cash and cash equivalents | (451) | | | (786) | |
Increase in cash and cash equivalents and restricted cash | 201,668 | | | 184,317 | |
Cash and cash equivalents and restricted cash at beginning of period | 216,993 | | | 299,675 | |
Cash and cash equivalents and restricted cash at end of period | $ | 418,661 | | | $ | 483,992 | |
| | | | | | | | | | | |
| Six Months Ended February 28, |
| 2022 | | 2021 |
| (Dollars in thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 670,839 | | | $ | 31,011 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | | |
Depreciation and amortization, including amortization of deferred major maintenance | 265,161 | | | 267,726 | |
Equity income from investments, net of distributions received | (112,641) | | | (3,687) | |
Provision for current expected credit losses | 11,562 | | | (4,674) | |
Deferred taxes | 4,301 | | | 35,797 | |
Other, net | (7,092) | | | (18,495) | |
Changes in operating assets and liabilities: | | | |
Receivables | (591,106) | | | (100,398) | |
Inventories | (1,970,142) | | | (1,495,856) | |
Accounts payable and accrued expenses | 511,223 | | | 273,448 | |
Other, net | (85,646) | | | (119,417) | |
Net cash used in operating activities | (1,303,541) | | | (1,134,545) | |
Cash flows from investing activities: | | | |
Acquisition of property, plant and equipment | (130,884) | | | (164,565) | |
Proceeds from disposition of property, plant and equipment | 6,140 | | | 7,741 | |
Expenditures for major maintenance | (8,318) | | | (10,050) | |
Proceeds from sale of business | 55,546 | | | 39,567 | |
Changes in CHS Capital notes receivable, net | (82,384) | | | 43,283 | |
Financing extended to customers | (30,474) | | | (1,816) | |
Payments from customer financing | 33,310 | | | 5,589 | |
| | | |
Other investing activities, net | 924 | | | 10,633 | |
Net cash used in investing activities | (156,140) | | | (69,618) | |
Cash flows from financing activities: | | | |
Proceeds from notes payable and long-term debt | 12,322,409 | | | 16,930,536 | |
Payments on notes payable, long-term debt and finance lease obligations | (11,008,138) | | | (15,483,358) | |
Preferred stock dividends paid | (84,334) | | | (84,334) | |
Redemptions of equities | (17,485) | | | (12,486) | |
Cash patronage dividends paid | (30,043) | | | (21,416) | |
Other financing activities, net | 9,257 | | | (9,222) | |
Net cash provided by financing activities | 1,191,666 | | | 1,319,720 | |
Effect of exchange rate changes on cash and cash equivalents | (3,717) | | | 1,026 | |
(Decrease) increase in cash and cash equivalents and restricted cash | (271,732) | | | 116,583 | |
Cash and cash equivalents and restricted cash at beginning of period | 542,484 | | | 216,993 | |
Cash and cash equivalents and restricted cash at end of period | $ | 270,752 | | | $ | 333,576 | |
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
CHS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Basis of Presentation and Significant Accounting Policies
Basis of Presentation
These unaudited condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of the seasonal nature of our businesses, among other things. Our unaudited condensed consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2020,2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC").
Significant Accounting Policies
The following No significant accounting policy waspolicies were updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2020.
Receivables
As described in the "Recent Accounting Pronouncements" section, we adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses ("ASC Topic 326"): Measurement of Credit Losses on Financial Instruments, on September 1, 2020, using the modified retrospective approach. Our accounting policies with respect to ASC Topic 326 are included in Note 3, Receivables.2021.
Recent Accounting Pronouncements
Except for the recent accounting pronouncement described below, otherNo recent accounting pronouncements are not expected to have a material impact on our condensed consolidated financial statements.
Adopted
In June 2016, the Financial Accounting Standards Board issued ASC Topic 326. The amendments in this ASU introduce a new approach, based on expected losses, to estimate credit losses on certain types of financial instruments. This ASU is intended to provide financial statement users with more decision-useful information about the expected credit losses associated with most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. Entities are required to apply the provisions of this ASU as a cumulative-effect adjustment to the opening balance of capital reserves as of the beginning of the first reporting period in which the guidance is adopted. As part of our adoption efforts, we performed various data-gathering activities, developed a credit losses model, performed data analyses and made accounting policy election determinations. The impact of adoption did not have a material impact on our condensed consolidated financial statements.
Not Yet Adopted
None.
Note 2 Revenues
The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three and ninesix months ended May 31, 2021February 28, 2022 and 2020.2021. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 842,470, LeasesDebt, and ASC Topic 470,842, DebtLeases, that fall outside the scope of ASC Topic 606.
| | | ASC Topic 606 | | ASC Topic 815 | | Other Guidance | | Total Revenues | | ASC Topic 606 | | ASC Topic 815 | | Other Guidance | | Total Revenues |
Three Months Ended May 31, 2021 | | (Dollars in thousands) | |
Three Months Ended February 28, 2022 | | Three Months Ended February 28, 2022 | | (Dollars in thousands) |
Energy | Energy | | $ | 1,533,643 | | | $ | 171,155 | | | $ | 0 | | | $ | 1,704,798 | | Energy | | $ | 1,849,505 | | | $ | 178,494 | | | $ | — | | | $ | 2,027,999 | |
Ag | Ag | | 2,810,389 | | | 6,389,677 | | | 16,138 | | | 9,216,204 | | Ag | | 2,066,065 | | | 6,224,661 | | | 5,205 | | | 8,295,931 | |
Corporate and Other | Corporate and Other | | 3,929 | | | 0 | | | 5,045 | | | 8,974 | | Corporate and Other | | 3,989 | | | — | | | 4,669 | | | 8,658 | |
Total revenues | Total revenues | | $ | 4,347,961 | | | $ | 6,560,832 | | | $ | 21,183 | | | $ | 10,929,976 | | Total revenues | | $ | 3,919,559 | | | $ | 6,403,155 | | | $ | 9,874 | | | $ | 10,332,588 | |
| Three Months Ended May 31, 2020 | | |
Three Months Ended February 28, 2021 | | Three Months Ended February 28, 2021 | |
Energy | Energy | | $ | 762,053 | | | $ | 128,866 | | | $ | 0 | | | $ | 890,919 | | Energy | | $ | 1,243,072 | | | $ | 129,086 | | | $ | — | | | $ | 1,372,158 | |
Ag | Ag | | 2,026,588 | | | 4,290,627 | | | 20,686 | | | 6,337,901 | | Ag | | 1,169,411 | | | 5,753,333 | | | 15,468 | | | 6,938,212 | |
Corporate and Other | Corporate and Other | | 6,027 | | | 0 | | | 6,184 | | | 12,211 | | Corporate and Other | | 4,535 | | | — | | | 5,254 | | | 9,789 | |
Total revenues | Total revenues | | $ | 2,794,668 | | | $ | 4,419,493 | | | $ | 26,870 | | | $ | 7,241,031 | | Total revenues | | $ | 2,417,018 | | | $ | 5,882,419 | | | $ | 20,722 | | | $ | 8,320,159 | |
| Nine Months Ended May 31, 2021 | | | |
Energy | | $ | 3,841,678 | | | $ | 493,125 | | | $ | 0 | | | $ | 4,334,803 | | |
Ag | | 5,324,396 | | | 18,232,235 | | | 43,187 | | | 23,599,818 | | |
Corporate and Other | | 14,925 | | | 0 | | | 16,232 | | | 31,157 | | |
Total revenues | | $ | 9,180,999 | | | $ | 18,725,360 | | | $ | 59,419 | | | $ | 27,965,778 | | |
| Nine Months Ended May 31, 2020 | | |
Energy | | $ | 3,831,806 | | | $ | 415,586 | | | $ | 0 | | | $ | 4,247,392 | | |
Ag | | 4,446,097 | | | 12,681,108 | | | 46,753 | | | 17,173,958 | | |
Corporate and Other | | 16,910 | | | 0 | | | 22,482 | | | 39,392 | | |
Total revenues | | $ | 8,294,813 | | | $ | 13,096,694 | | | $ | 69,235 | | | $ | 21,460,742 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ASC Topic 606 | | ASC Topic 815 | | Other Guidance | | Total Revenues |
Six Months Ended February 28, 2022 | | (Dollars in thousands) |
Energy | | $ | 3,896,781 | | | $ | 435,205 | | | $ | — | | | $ | 4,331,986 | |
Ag | | 4,597,682 | | | 12,254,260 | | | 13,248 | | | 16,865,190 | |
Corporate and Other | | 7,579 | | | — | | | 8,590 | | | 16,169 | |
Total revenues | | $ | 8,502,042 | | | $ | 12,689,465 | | | $ | 21,838 | | | $ | 21,213,345 | |
| | | | | | | | |
Six Months Ended February 28, 2021 | | | | | | | | |
Energy | | $ | 2,308,036 | | | $ | 321,969 | | | $ | — | | | $ | 2,630,005 | |
Ag | | 2,513,910 | | | 11,840,572 | | | 29,132 | | | 14,383,614 | |
Corporate and Other | | 10,995 | | | — | | | 11,188 | | | 22,183 | |
Total revenues | | $ | 4,832,941 | | | $ | 12,162,541 | | | $ | 40,320 | | | $ | 17,035,802 | |
Less than 1% of revenues accounted for under ASC Topic 606 included within the tabletables above are recorded over time; these revenues aretime and relate primarily related to service contracts.
Contract Assets and Contract Liabilities
Contract assets relate to unbilled amounts arising from goods that have already been transferred to the customercustomers where the right to payment is not conditional on the passage of time. This results in the recognition of an asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to the customer.customers. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were not material$21.6 million and $29.0 million as of MayFebruary 28, 2022, and August 31, 2021, or August 31, 2020.
respectively.
Contract liabilities relate to advance payments from customers for goods and services that we have yet to provide. Contract liabilities of $318.8 million$1.1 billion and $139.1$213.9 million as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended May 31,February 28, 2022 and 2021, and 2020, we recognized revenues of $34.2$58.7 million and $50.5$19.9 million related to contract liabilities, respectively. For the ninesix months ended May 31,February 28, 2022 and 2021, and 2020, we recognized revenues of $126.2$165.8 million and $182.0$91.6 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective periods.period.
Note 3 Receivables
| | | May 31, 2021 | | August 31, 2020 | | February 28, 2022 | | August 31, 2021 |
| | (Dollars in thousands) | | (Dollars in thousands) |
Trade accounts receivable | Trade accounts receivable | $ | 2,364,709 | | | $ | 1,476,585 | | Trade accounts receivable | $ | 2,705,414 | | | $ | 2,047,198 | |
CHS Capital short-term notes receivable | CHS Capital short-term notes receivable | 512,750 | | | 563,934 | | CHS Capital short-term notes receivable | 559,987 | | | 505,778 | |
Other | Other | 458,760 | | | 491,068 | | Other | 383,662 | | | 451,630 | |
Gross receivables | Gross receivables | 3,336,219 | | | 2,531,587 | | Gross receivables | 3,649,063 | | | 3,004,606 | |
Less: allowances and reserves | Less: allowances and reserves | 144,741 | | | 165,540 | | Less: allowances and reserves | 154,175 | | | 143,722 | |
Total receivables | Total receivables | $ | 3,191,478 | | | $ | 2,366,047 | | Total receivables | $ | 3,494,888 | | | $ | 2,860,884 | |
Receivables are composed of trade accounts receivable, short-term notes receivable in our wholly-owned subsidiary, CHS Capital, LLC ("CHS Capital"), and other receivables, less an allowance for expected credit losses. The allowance for expected credit losses is based on our best estimate of expected credit losses in existing receivable balances and is determined using historical write-off experience, adjusted for various industry and regional data and current expectations of future credit losses.
Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of capital stock from certain regional cooperatives.cooperatives' capital stock. These loans are primarily originated in variousthe states primarily in the Upper Midwest region of the United States, the most significant of which includeMinnesota and North Dakota and Minnesota.Dakota. CHS Capital also has loans receivable from producer
borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages and are originated primarily in the same states as the commercial notes.
In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable, with durations of generally not more than 10 years, totaling $68.3$46.5 million and $101.5$55.4 million as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, respectively. Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of May 31, 2021,February 28, 2022, and August 31, 2020, the2021, commercial notes represented 53%61% and 33%28%, respectively, and the producer notes represented 47%39% and 67%72%, respectively, of total CHS Capital notes receivable.
CHS Capital has commitments to extend credit to customers if there are no violations of contractually established conditions. As of May 31, 2021,February 28, 2022, CHS Capital customers had additional available credit of $684.2$601.4 million. No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of May 31, 2021,February 28, 2022, or August 31, 2020.2021.
Note 4 Inventories
| | | May 31, 2021 | | August 31, 2020 | | February 28, 2022 | | August 31, 2021 |
| | (Dollars in thousands) | | (Dollars in thousands) |
Grain and oilseed | Grain and oilseed | $ | 1,689,408 | | | $ | 1,064,079 | | Grain and oilseed | $ | 2,533,038 | | | $ | 1,435,544 | |
Energy | Energy | 758,765 | | | 696,858 | | Energy | 899,041 | | | 762,317 | |
Agronomy | Agronomy | 836,974 | | | 822,535 | | Agronomy | 1,648,670 | | | 958,548 | |
Processed grain and oilseed | Processed grain and oilseed | 187,132 | | | 126,022 | | Processed grain and oilseed | 162,323 | | | 140,975 | |
Other | Other | 41,592 | | | 32,644 | | Other | 61,745 | | | 37,291 | |
Total inventories | Total inventories | $ | 3,513,871 | | | $ | 2,742,138 | | Total inventories | $ | 5,304,817 | | | $ | 3,334,675 | |
As of May 31, 2021,February 28, 2022, and August 31, 2020,2021, we valued approximately 15%11% and 16%13%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the LIFOlast in, first out ("LIFO") method, or net realizable value. If the FIFOfirst in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $313.3$596.8 million and $93.5$359.2 million as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, respectively. Actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time. Interim LIFO calculations are based on management's estimates of expected year-end inventory levels and values and are subject to final year-end LIFO inventory valuation.
Note 5 Investments
| | | | | | | | | | | |
| February 28, 2022 | | August 31, 2021 |
| (Dollars in thousands) |
Equity method investments: | | | |
CF Industries Nitrogen, LLC | $ | 2,712,295 | | | $ | 2,667,164 | |
Ventura Foods, LLC | 411,176 | | | 388,612 | |
Ardent Mills, LLC | 233,898 | | | 220,132 | |
TEMCO, LLC | 51,580 | | | 31,464 | |
Other equity method investments | 245,537 | | | 232,923 | |
Other investments | 134,224 | | | 128,816 | |
Total investments | $ | 3,788,710 | | | $ | 3,669,111 | |
Note 5 Investments
| | | | | | | | | | | |
| May 31, 2021 | | August 31, 2020 |
| (Dollars in thousands) |
Equity method investments: | | | |
CF Industries Nitrogen, LLC | $ | 2,717,270 | | | $ | 2,662,618 | |
Ventura Foods, LLC | 418,571 | | | 381,351 | |
Ardent Mills, LLC | 218,822 | | | 208,927 | |
| | | |
Other equity method investments | 279,020 | | | 253,182 | |
Other investments | 130,253 | | | 123,955 | |
Total investments | $ | 3,763,936 | | | $ | 3,630,033 | |
Joint ventures and other investments, in which we have significant ownership and influence but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen");, Ventura Foods, LLC ("Ventura Foods");, Ardent Mills, LLC ("Ardent Mills");, and TEMCO, LLC ("TEMCO"), which are summarized below. In addition to the recognition of our share of income from equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally measuredrecorded at cost, unless an impairment or other observable market price change occurs requiring an adjustment. Approximately $552.6We have approximately $549.2 million of cumulative undistributed earnings from our equity method investees are included in the investments balance as of May 31, 2021.February 28, 2022.
CF Nitrogen
We have an approximatea $2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10% membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for the semi-annualsemiannual cash distributions we receive as a result of our membership interest in CF Nitrogen.distributions.
The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the ninesix months ended May 31, 2021February 28, 2022 and 2020:2021:
| | | | | | | | | | | |
| Nine Months Ended May 31, |
| 2021 | | 2020 |
| (Dollars in thousands) |
Net sales | $ | 2,116,040 | | | $ | 1,954,660 | |
Gross profit | 565,067 | | | 481,711 | |
Net earnings | 524,071 | | | 452,859 | |
Earnings attributable to CHS Inc. | 118,477 | | | 104,021 | |
Table of Contents | | | | | | | | | | | |
| Six Months Ended February 28, |
| 2022 | | 2021 |
| (Dollars in thousands) |
Net sales | $ | 3,018,167 | | | $ | 1,285,625 | |
Gross profit | 1,547,086 | | | 321,565 | |
Net earnings | 1,522,292 | | | 297,297 | |
Earnings attributable to CHS Inc. | 292,592 | | | 53,033 | |
Ventura Foods, Ardent Mills and TEMCO
We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily vegetable-oil-basededible oil-based products. We account for Ventura Foods as an equity method investment, and our share of the results of this equity method investment are included in Corporate and Other.
The following table provides aggregate summarized unaudited financial information for our equity method investment in Ventura Foods for the nine months ended May 31, 2021 and 2020:
| | | | | | | | | | | |
| Nine Months Ended May 31, |
| 2021 | | 2020 |
| (Dollars in thousands) |
Net sales | $ | 1,807,997 | | | $ | 1,693,097 | |
Gross profit | 304,720 | | | 450,510 | |
Net earnings | 154,384 | | | 39,175 | |
Earnings attributable to CHS Inc. | 77,192 | | | 19,588 | |
Ardent Mills and TEMCO
Wealso have a 12% interest in Ardent Mills, which is a joint venture with Cargill, Incorporated ("Cargill"), and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50% interest in TEMCO, which is a joint venture with Cargill focused on export elevation, primarily to Asia. We account for Ventura Foods, Ardent Mills and TEMCO as equity method investments, and ourinvestments. Our shares of the results of these equity method investmentsVentura Foods and Ardent Mills are included in Corporate and Other and our share of the results of TEMCO is included in our Ag segment, respectively.segment.
The following table provides aggregate summarized unaudited financial information for our equity method investments in Ventura Foods, Ardent Mills and TEMCO for the ninesix months ended May 31, 2021February 28, 2022 and 2020:2021:
| | | Nine Months Ended May 31, | | Six Months Ended February 28, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (Dollars in thousands) | | (Dollars in thousands) |
Net sales | Net sales | $ | 5,663,762 | | | $ | 4,524,569 | | Net sales | $ | 4,677,071 | | | $ | 5,502,631 | |
Gross profit | Gross profit | 436,741 | | | 269,901 | | Gross profit | 539,044 | | | 422,154 | |
Net earnings | Net earnings | 209,604 | | | 67,483 | | Net earnings | 268,319 | | | 188,403 | |
Earnings attributable to CHS Inc. | Earnings attributable to CHS Inc. | 39,244 | | | (3,875) | | Earnings attributable to CHS Inc. | 67,908 | | | 51,729 | |
Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in the aggregate.
Note 6 Notes Payable and Long-Term Debt
Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with our debt covenants as of May 31, 2021.February 28, 2022. The table below summarizes our notes payable as of May 31, 2021,February 28, 2022, and August 31, 2020.2021:
| | | May 31, 2021 | | August 31, 2020 | | February 28, 2022 | | August 31, 2021 |
| | (Dollars in thousands) | | (Dollars in thousands) |
Notes payable | Notes payable | $ | 2,019,880 | | | $ | 763,215 | | Notes payable | $ | 1,880,621 | | | $ | 864,147 | |
CHS Capital notes payable | CHS Capital notes payable | 756,932 | | | 812,276 | | CHS Capital notes payable | 807,383 | | | 876,712 | |
Total notes payable | Total notes payable | $ | 2,776,812 | | | $ | 1,575,491 | | Total notes payable | $ | 2,688,004 | | | $ | 1,740,859 | |
As of May 31, 2021,February 28, 2022, our primary line of credit was a five-year, unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.75 billion that expires on July 16, 2024. As of May 31, 2021,February 28, 2022, there was $820.0 million outstanding under this facility, and no borrowings outstanding as of August 31, 2020, the outstanding balance on this facility was $1.2 billion and $345.0 million, respectively.2021.
We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as a secured borrowing. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes and settlements are made on a monthly basis. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business. The Securitization Facility consists of a committed portion with a maximum availability of $700.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of May 31, 2021,February 28, 2022, total availability under the Securitization Facility was $600.0$873.0 million, all of which $700.0 million had been utilized.
We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. As of May 31, 2021,February 28, 2022, and August 31, 2020,2021, the outstanding balance under the Repurchase Facility was $150.0 million.
On August 14, 2020, we entered into a Note Purchase Agreement to borrow $375.0 million of debt in the form of notes. The notes under this Note Purchase Agreement are structured in four series with maturities ranging from 7 to 15 years and interest accruing at rates ranging from 3.24% to 3.73%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow and whether the notes have an investment grade rating from a nationally recognized statistical rating organization. The funding of these notes took place on November 2, 2020. This funding is being used to pay debt maturities and manage liquidity.
On September 24, 2020, the Securitization Facility and Repurchase Facility were amended, increasing the maximum availability under the Securitization Facility to $600.0 million from $500.0 million and extending their respective termination dates to July 30, 2021.
On February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which cancould be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total fundedadvanced loan balance outstanding revertsof $366.0 million reverted to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of May 31, 2021.
The following table presents summarized long-term debt (including current portion) as of February 28, 2022, and August 31, 2021:
| | | | | | | | | | | |
| February 28, 2022 | | August 31, 2021 |
| (Dollars in thousands) |
Private placement debt | $ | 1,551,144 | | | $ | 1,552,974 | |
Bank financing | 366,000 | | | — | |
Finance lease obligations | 48,494 | | | 36,034 | |
Other notes and contracts payable | 2,897 | | | 33,443 | |
Deferred financing costs | (3,808) | | | (4,090) | |
Total long-term debt | 1,964,727 | | | 1,618,361 | |
Less current portion | 9,522 | | | 38,450 | |
Long-term portion | $ | 1,955,205 | | | $ | 1,579,911 | |
Interest expense for the three months ended May 31,February 28, 2022 and 2021, and 2020, was $29.0$25.2 million and $26.7$28.9 million, respectively, net of capitalized interest of $3.9$1.5 million and $2.7$2.1 million, respectively. Interest expense for the ninesix months ended May 31,
February 28, 2022 and 2021, and 2020, was $82.9$48.6 million and $95.0$53.9 million, respectively, net of capitalized interest of $6.0$3.8 million and $8.9$4.2 million, respectively.
Note 7 Income Taxes
Our effective tax rate for the three months ended May 31, 2021,February 28, 2022, was (6.8)%,5.2% compared to (38.4)(473.4)% for the three months ended May 31, 2020.February 28, 2021. Our effective tax rate for the ninesix months ended May 31, 2021,February 28, 2022, was (3.4)%3.8%, compared to (4.8)%19.1% for the ninesix months ended May 31, 2020.February 28, 2021. Our income tax benefit for the nine months ended May 31, 2021,expense reflects the mix of full-year earnings projected across business units and current equity management assumptions, including tax benefits related to an intercompany transfer of assets for tax planning.assumptions. Income taxes and effective tax raterates vary each year based on profitability and nonpatronage business activity during each of the comparable years.year.
Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged, and we may not prevail. If we were to prevail on all positions taken in relation to uncertain tax positions, $136.1$114.6 million and $111.3$114.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.
Note 8 Equities
Changes in Equities
Changes in equities for the three and ninesix months ended May 31,February 28, 2022 and 2021, and 2020, are as follows:
| | | Equity Certificates | | | | Accumulated Other Comprehensive Loss | | | | | | | | Equity Certificates | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | Capital Equity Certificates | | Nonpatronage Equity Certificates | | Nonqualified Equity Certificates | | Preferred Stock | | Capital Reserves | | Noncontrolling Interests | | Total Equities | | Capital Equity Certificates | | Nonpatronage Equity Certificates | | Nonqualified Equity Certificates | | Preferred Stock | | Capital Reserves | | Noncontrolling Interests | | Total Equities |
| | (Dollars in thousands) | | (Dollars in thousands) |
Balances, August 31, 2020 | $ | 3,724,187 | | | $ | 28,727 | | | $ | 1,408,696 | | | $ | 2,264,038 | | | $ | (233,924) | | | $ | 1,618,147 | | | $ | 9,302 | | | $ | 8,819,173 | | |
Balances, August 31, 2021 | | Balances, August 31, 2021 | $ | 3,583,911 | | | $ | 28,431 | | | $ | 1,634,896 | | | $ | 2,264,038 | | | $ | (216,391) | | | $ | 1,713,976 | | | $ | 8,465 | | | $ | 9,017,326 | |
Reversal of prior year redemption estimates | Reversal of prior year redemption estimates | 7,726 | | | 0 | | | 0 | | | — | | | — | | | 0 | | | — | | | 7,726 | | Reversal of prior year redemption estimates | 12,221 | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,221 | |
| Redemptions of equities | Redemptions of equities | (6,539) | | | (31) | | | (1,156) | | | 0 | | | — | | | — | | | — | | | (7,726) | | Redemptions of equities | (9,824) | | | (318) | | | (2,079) | | | — | | | — | | | — | | | — | | | (12,221) | |
Preferred stock dividends | Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (84,334) | | | — | | | (84,334) | | Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (84,334) | | | — | | | (84,334) | |
Other, net | Other, net | (654) | | | (47) | | | (197) | | | — | | | — | | | (7,798) | | | 35 | | | (8,661) | | Other, net | (1,023) | | | 17 | | | (64) | | | — | | | — | | | 1,393 | | | (841) | | | (518) | |
Net income (loss) | Net income (loss) | — | | | — | | | — | | | — | | | — | | | 69,671 | | | (302) | | | 69,369 | | Net income (loss) | — | | | — | | | — | | | — | | | — | | | 451,961 | | | (18) | | | 451,943 | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 8,917 | | | — | | | — | | | 8,917 | | |
Estimated 2021 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (9,304) | | | — | | | (9,304) | | |
Estimated 2021 equity redemptions | (9,304) | | | — | | | — | | | — | | | — | | | — | | | — | | | (9,304) | | |
Balances, November 30, 2020 | $ | 3,715,416 | | | $ | 28,649 | | | $ | 1,407,343 | | | $ | 2,264,038 | | | $ | (225,007) | | | $ | 1,586,382 | | | $ | 9,035 | | | $ | 8,785,856 | | |
Other comprehensive loss, net of tax | | Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (15,418) | | | — | | | — | | | (15,418) | |
Estimated 2022 cash patronage refunds | | Estimated 2022 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (39,691) | | | — | | | (39,691) | |
Estimated 2022 equity redemptions | | Estimated 2022 equity redemptions | (79,382) | | | — | | | — | | | — | | | — | | | — | | | — | | | (79,382) | |
Balances, November 30, 2021 | | Balances, November 30, 2021 | 3,505,903 | | | 28,130 | | | 1,632,753 | | | 2,264,038 | | | (231,809) | | | 2,043,305 | | | 7,606 | | | 9,249,926 | |
Reversal of prior year patronage and redemption estimates | Reversal of prior year patronage and redemption estimates | 4,760 | | | 0 | | | (211,970) | | | — | | | — | | | 233,345 | | | — | | | 26,135 | | Reversal of prior year patronage and redemption estimates | 5,264 | | | — | | | (230,290) | | | — | | | — | | | 260,120 | | | — | | | 35,094 | |
Distribution of 2020 patronage refunds | — | | | — | | | 214,720 | | | — | | | — | | | (236,136) | | | — | | | (21,416) | | |
Distribution of 2021 patronage refunds | | Distribution of 2021 patronage refunds | — | | | — | | | 231,371 | | | — | | | — | | | (261,414) | | | — | | | (30,043) | |
Redemptions of equities | Redemptions of equities | (4,177) | | | (35) | | | (548) | | | 0 | | | — | | | — | | | — | | | (4,760) | | Redemptions of equities | (4,228) | | | (20) | | | (1,016) | | | — | | | — | | | — | | | — | | | (5,264) | |
Preferred stock dividends | Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (42,167) | | | — | | | (42,167) | | Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (42,167) | | | — | | | (42,167) | |
Other, net | Other, net | (26) | | | — | | | (15) | | | — | | | — | | | 1,068 | | | (361) | | | 666 | | Other, net | (5) | | | — | | | — | | | — | | | — | | | 50 | | | (599) | | | (554) | |
Net loss | — | | | — | | | — | | | — | | | — | | | (38,229) | | | (129) | | | (38,358) | | |
Net income (loss) | | Net income (loss) | — | | | — | | | — | | | — | | | — | | | 219,000 | | | (104) | | | 218,896 | |
Other comprehensive income, net of tax | Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 2,549 | | | — | | | — | | | 2,549 | | Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 9,954 | | | — | | | — | | | 9,954 | |
Estimated 2021 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | 5,639 | | | — | | | 5,639 | | |
Estimated 2021 equity redemptions | 5,639 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,639 | | |
Balances, February 28, 2021 | $ | 3,721,612 | | | $ | 28,614 | | | $ | 1,409,530 | | | $ | 2,264,038 | | | $ | (222,458) | | | $ | 1,509,902 | | | $ | 8,545 | | | $ | 8,719,783 | | |
Reversal of prior year redemption estimates | 15,514 | | | 0 | | | 5,000 | | | — | | | — | | | 8,625 | | | — | | | 29,139 | | |
Distribution of 2020 patronage refunds | — | | | — | | | 7 | | | — | | | — | | | (8,632) | | | — | | | (8,625) | | |
Redemptions of equities | (19,275) | | | (35) | | | (6,013) | | | 0 | | | — | | | — | | | — | | | (25,323) | | |
Estimated 2022 cash patronage refunds | | Estimated 2022 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (22,466) | | | — | | | (22,466) | |
Estimated 2022 equity redemptions | | Estimated 2022 equity redemptions | (44,932) | | | — | | | — | | | — | | | — | | | — | | | — | | | (44,932) | |
Balances, February 28, 2022 | | Balances, February 28, 2022 | $ | 3,462,002 | | | $ | 28,110 | | | $ | 1,632,818 | | | $ | 2,264,038 | | | $ | (221,855) | | | $ | 2,196,428 | | | $ | 6,903 | | | $ | 9,368,444 | |
| Other, net | (298) | | | 43 | | | 58 | | | — | | | — | | | (1,726) | | | (61) | | | (1,984) | | |
Net income | — | | | — | | | — | | | — | | | — | | | 273,591 | | | 81 | | | 273,672 | | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 7,115 | | | — | | | — | | | 7,115 | | |
Estimated 2021 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (21,292) | | | — | | | (21,292) | | |
Estimated 2021 equity redemptions | (21,292) | | | — | | | — | | | — | | | — | | | — | | | — | | | (21,292) | | |
Balances, May 31, 2021 | $ | 3,696,261 | | | $ | 28,622 | | | $ | 1,408,582 | | | $ | 2,264,038 | | | $ | (215,343) | | | $ | 1,760,468 | | | $ | 8,565 | | | $ | 8,951,193 | | |
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| Equity Certificates | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Capital Equity Certificates | | Nonpatronage Equity Certificates | | Nonqualified Equity Certificates | | Preferred Stock | | | Capital Reserves | | Noncontrolling Interests | | Total Equities |
| (Dollars in thousands) |
Balances, August 31, 2019 | $ | 3,753,493 | | | $ | 29,074 | | | $ | 1,206,310 | | | $ | 2,264,038 | | | $ | (226,933) | | | $ | 1,584,158 | | | $ | 7,390 | | | $ | 8,617,530 | |
Reversal of prior year redemption estimates | 5,447 | | | 0 | | | 0 | | | — | | | — | | | 0 | | | — | | | 5,447 | |
Redemptions of equities | (4,721) | | | (54) | | | (672) | | | 0 | | | — | | | — | | | — | | | (5,447) | |
Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (84,334) | | | — | | | (84,334) | |
ASC Topic 842 cumulative-effect adjustment | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 33,707 | | | 0 | | | 33,707 | |
Other, net | (8) | | | — | | | (39) | | | — | | | — | | | (1,312) | | | 410 | | | (949) | |
Net income | — | | | — | | | — | | | — | | | — | | | 177,882 | | | 855 | | | 178,737 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (1,638) | | | — | | | — | | | (1,638) | |
Estimated 2020 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (28,504) | | | — | | | (28,504) | |
Estimated 2020 equity redemptions | (91,633) | | | — | | | — | | | — | | | — | | | — | | | — | | | (91,633) | |
Balances, November 30, 2019 | $ | 3,662,578 | | | $ | 29,020 | | | $ | 1,205,599 | | | $ | 2,264,038 | | | $ | (228,571) | | | $ | 1,681,597 | | | $ | 8,655 | | | $ | 8,622,916 | |
Reversal of prior year patronage and redemption estimates | 3,387 | | | 0 | | | (472,398) | | | — | | | — | | | 562,398 | | | — | | | 93,387 | |
Distribution of 2019 patronage refunds | — | | | — | | | 474,066 | | | — | | | — | | | (564,096) | | | — | | | (90,030) | |
Redemptions of equities | (2,998) | | | (20) | | | (369) | | | 0 | | | — | | | — | | | — | | | (3,387) | |
Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (42,167) | | | — | | | (42,167) | |
Other, net | (201) | | | — | | | 3 | | | — | | | — | | | 10 | | | (324) | | | (512) | |
Net income | — | | | — | | | — | | | — | | | — | | | 125,447 | | | 247 | | | 125,694 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (10,585) | | | — | | | — | | | (10,585) | |
Estimated 2020 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (22,206) | | | — | | | (22,206) | |
Estimated 2020 equity redemptions | (49,154) | | | — | | | — | | | — | | | — | | | — | | | — | | | (49,154) | |
Balances, February 29, 2020 | $ | 3,613,612 | | | $ | 29,000 | | | $ | 1,206,901 | | | $ | 2,264,038 | | | $ | (239,156) | | | $ | 1,740,983 | | | $ | 8,578 | | | $ | 8,623,956 | |
Reversal of prior year redemption estimates | 67,438 | | | 0 | | | 10,000 | | | — | | | — | | | — | | | — | | | 77,438 | |
Distribution of 2019 patronage refunds | — | | | — | | | 327 | | | — | | | — | | | (409) | | | — | | | (82) | |
Redemptions of equities | (64,273) | | | (91) | | | (13,074) | | | 0 | | | — | | | — | | | — | | | (77,438) | |
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Other, net | (1,544) | | | (7) | | | (116) | | | — | | | — | | | 1,053 | | | 8 | | | (606) | |
Net income (loss) | — | | | — | | | — | | | — | | | — | | | 97,648 | | | (147) | | | 97,501 | |
Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (2,009) | | | — | | | — | | | (2,009) | |
Estimated 2020 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | 13,551 | | | — | | | 13,551 | |
Estimated 2020 equity redemptions | 47,975 | | | — | | | — | | | — | | | — | | | — | | | — | | | 47,975 | |
Balances, May 31, 2020 | $ | 3,663,208 | | | $ | 28,902 | | | $ | 1,204,038 | | | $ | 2,264,038 | | | $ | (241,165) | | | $ | 1,852,826 | | | $ | 8,439 | | | $ | 8,780,286 | |
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| Equity Certificates | | | | Accumulated Other Comprehensive Loss | | | | | | |
| Capital Equity Certificates | | Nonpatronage Equity Certificates | | Nonqualified Equity Certificates | | Preferred Stock | | | Capital Reserves | | Noncontrolling Interests | | Total Equities |
| (Dollars in thousands) |
Balances, August 31, 2020 | $ | 3,724,187 | | | $ | 28,727 | | | $ | 1,408,696 | | | $ | 2,264,038 | | | $ | (233,924) | | | $ | 1,618,147 | | | $ | 9,302 | | | $ | 8,819,173 | |
Reversal of prior year redemption estimates | 7,726 | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,726 | |
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Redemptions of equities | (6,539) | | | (31) | | | (1,156) | | | — | | | — | | | — | | | — | | | (7,726) | |
Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (84,334) | | | — | | | (84,334) | |
Other, net | (654) | | | (47) | | | (197) | | | — | | | — | | | (7,798) | | | 35 | | | (8,661) | |
Net income (loss) | — | | | — | | | — | | | — | | | — | | | 69,671 | | | (302) | | | 69,369 | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 8,917 | | | — | | | — | | | 8,917 | |
Estimated 2021 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | (9,304) | | | — | | | (9,304) | |
Estimated 2021 equity redemptions | (9,304) | | | — | | | — | | | — | | | — | | | — | | | — | | | (9,304) | |
Balances, November 30, 2020 | 3,715,416 | | | 28,649 | | | 1,407,343 | | | 2,264,038 | | | (225,007) | | | 1,586,382 | | | 9,035 | | | 8,785,856 | |
Reversal of prior year patronage and redemption estimates | 4,760 | | | — | | | (211,970) | | | — | | | — | | | 233,345 | | | — | | | 26,135 | |
Distribution of 2020 patronage refunds | — | | | — | | | 214,720 | | | — | | | — | | | (236,136) | | | — | | | (21,416) | |
Redemptions of equities | (4,177) | | | (35) | | | (548) | | | — | | | — | | | — | | | — | | | (4,760) | |
Preferred stock dividends | — | | | — | | | — | | | — | | | — | | | (42,167) | | | — | | | (42,167) | |
Other, net | (26) | | | — | | | (15) | | | — | | | — | | | 1,068 | | | (361) | | | 666 | |
Net loss | — | | | — | | | — | | | — | | | — | | | (38,229) | | | (129) | | | (38,358) | |
Other comprehensive income, net of tax | — | | | — | | | — | | | — | | | 2,549 | | | — | | | — | | | 2,549 | |
Estimated 2021 cash patronage refunds | — | | | — | | | — | | | — | | | — | | | 5,639 | | | — | | | 5,639 | |
Estimated 2021 equity redemptions | 5,639 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,639 | |
Balances, February 28, 2021 | $ | 3,721,612 | | | $ | 28,614 | | | $ | 1,409,530 | | | $ | 2,264,038 | | | $ | (222,458) | | | $ | 1,509,902 | | | $ | 8,545 | | | $ | 8,719,783 | |
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Preferred Stock Dividends
The following is a summary of dividends declared per share by series of preferred stock for the ninethree and six months ended May 31, 2021February 28, 2022 and 2020. Note that due to the timing of dividend declarations during the fiscal year, no declarations were made during the third quarter of fiscal 2021 or the third quarter of fiscal 2020.2021:
| | | | | Nine Months Ended May 31, | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | Nasdaq symbol | | | 2021 | | 2020 | | Nasdaq symbol | | 2022 | | 2021 | | 2022 | | 2021 |
Series of preferred stock: | Series of preferred stock: | | | (Dollars per share) | Series of preferred stock: | | | (Dollars per share) |
8% Cumulative Redeemable | 8% Cumulative Redeemable | CHSCP | | | $ | 1.50 | | | $ | 1.50 | | 8% Cumulative Redeemable | CHSCP | | $ | 0.50 | | | $ | 0.50 | | | $ | 1.50 | | | $ | 1.50 | |
Class B Cumulative Redeemable, Series 1 | Class B Cumulative Redeemable, Series 1 | CHSCO | | | $ | 1.48 | | | $ | 1.48 | | Class B Cumulative Redeemable, Series 1 | CHSCO | | $ | 0.49 | | | $ | 0.49 | | | $ | 1.48 | | | $ | 1.48 | |
Class B Reset Rate Cumulative Redeemable, Series 2 | Class B Reset Rate Cumulative Redeemable, Series 2 | CHSCN | | | $ | 1.33 | | | $ | 1.33 | | Class B Reset Rate Cumulative Redeemable, Series 2 | CHSCN | | $ | 0.44 | | | $ | 0.44 | | | $ | 1.33 | | | $ | 1.33 | |
Class B Reset Rate Cumulative Redeemable, Series 3 | Class B Reset Rate Cumulative Redeemable, Series 3 | CHSCM | | | $ | 1.27 | | | $ | 1.27 | | Class B Reset Rate Cumulative Redeemable, Series 3 | CHSCM | | $ | 0.42 | | | $ | 0.42 | | | $ | 1.27 | | | $ | 1.27 | |
Class B Cumulative Redeemable, Series 4 | Class B Cumulative Redeemable, Series 4 | CHSCL | | | $ | 1.41 | | | $ | 1.41 | | Class B Cumulative Redeemable, Series 4 | CHSCL | | $ | 0.47 | | | $ | 0.47 | | | $ | 1.41 | | | $ | 1.41 | |
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows for the three and nine months ended May 31, 2021 and 2020:
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| Pension and Other Postretirement Benefits | | Cash Flow Hedges | | Foreign Currency Translation Adjustment | | Total |
| (Dollars in thousands) |
Balance as of August 31, 2020, net of tax | $ | (159,680) | | | $ | 10,886 | | | $ | (85,130) | | | $ | (233,924) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | (125) | | | 14,506 | | | 3,629 | | | 18,010 | |
Amounts reclassified | 4,977 | | | (12,284) | | | 0 | | | (7,307) | |
Total other comprehensive income, before tax | 4,852 | | | 2,222 | | | 3,629 | | | 10,703 | |
Tax effect | (1,207) | | | (553) | | | (26) | | | (1,786) | |
Other comprehensive income, net of tax | 3,645 | | | 1,669 | | | 3,603 | | | 8,917 | |
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Balance as of November 30, 2020, net of tax | $ | (156,035) | | | $ | 12,555 | | | $ | (81,527) | | | $ | (225,007) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | 0 | | | 2,929 | | | (587) | | | 2,342 | |
Amounts reclassified | 5,151 | | | (3,673) | | | 0 | | | 1,478 | |
Total other comprehensive income (loss), before tax | 5,151 | | | (744) | | | (587) | | | 3,820 | |
Tax effect | (1,282) | | | 185 | | | (174) | | | (1,271) | |
Other comprehensive income (loss), net of tax | 3,869 | | | (559) | | | (761) | | | 2,549 | |
Balance as of February 28, 2021, net of tax | $ | (152,166) | | | $ | 11,996 | | | $ | (82,288) | | | $ | (222,458) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | 112 | | | (4,725) | | | 8,398 | | | 3,785 | |
Amounts reclassified | 5,064 | | | (1,919) | | | — | | | 3,145 | |
Total other comprehensive income (loss), before tax | 5,176 | | | (6,644) | | | 8,398 | | | 6,930 | |
Tax effect | (1,288) | | | 1,653 | | | (180) | | | 185 | |
Other comprehensive income (loss), net of tax | 3,888 | | | (4,991) | | | 8,218 | | | 7,115 | |
Balance as of May 31, 2021, net of tax | $ | (148,278) | | | $ | 7,005 | | | $ | (74,070) | | | $ | (215,343) | |
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| Pension and Other Postretirement Benefits | | Cash Flow Hedges | | Foreign Currency Translation Adjustment | | Total |
| (Dollars in thousands) |
Balance as of August 31, 2019, net of tax | $ | (172,478) | | | $ | 15,297 | | | $ | (69,752) | | | $ | (226,933) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | (85) | | | (3,331) | | | (2,411) | | | (5,827) | |
Amounts reclassified | 4,977 | | | (4,473) | | | 0 | | | 504 | |
Total other comprehensive income (loss), before tax | 4,892 | | | (7,804) | | | (2,411) | | | (5,323) | |
Tax effect | 181 | | | 1,932 | | | 1,572 | | | 3,685 | |
Other comprehensive income (loss), net of tax | 5,073 | | | (5,872) | | | (839) | | | (1,638) | |
Balance as of November 30, 2019, net of tax | $ | (167,405) | | | $ | 9,425 | | | $ | (70,591) | | | $ | (228,571) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | 0 | | | (5,975) | | | (8,540) | | | (14,515) | |
Amounts reclassified | 4,977 | | | (1,747) | | | 0 | | | 3,230 | |
Total other comprehensive income (loss), before tax | 4,977 | | | (7,722) | | | (8,540) | | | (11,285) | |
Tax effect | (1,231) | | | 1,910 | | | 21 | | | 700 | |
Other comprehensive income (loss), net of tax | 3,746 | | | (5,812) | | | (8,519) | | | (10,585) | |
Balance as of February 29, 2020, net of tax | $ | (163,659) | | | $ | 3,613 | | | $ | (79,110) | | | $ | (239,156) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | (340) | | | 7,795 | | | (12,515) | | | (5,060) | |
Amounts reclassified | 4,977 | | | 1,263 | | | 0 | | | 6,240 | |
Total other comprehensive income (loss), before tax | 4,637 | | | 9,058 | | | (12,515) | | | 1,180 | |
Tax effect | (1,147) | | | (2,241) | | | 199 | | | (3,189) | |
Other comprehensive income (loss), net of tax | 3,490 | | | 6,817 | | | (12,316) | | | (2,009) | |
Balance as of May 31, 2020, net of tax | $ | (160,169) | | | $ | 10,430 | | | $ | (91,426) | | | $ | (241,165) | |
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and six months ended February 28, 2022 and 2021, are as follows:
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| Pension and Other Postretirement Benefits | | Cash Flow Hedges | | Foreign Currency Translation Adjustment | | Total |
| (Dollars in thousands) |
Balance as of August 31, 2021, net of tax | $ | (141,385) | | | $ | 4,824 | | | $ | (79,830) | | | $ | (216,391) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | (83) | | | 870 | | | (9,983) | | | (9,196) | |
Amounts reclassified | 5,064 | | | (12,954) | | | — | | | (7,890) | |
Total other comprehensive income (loss), before tax | 4,981 | | | (12,084) | | | (9,983) | | | (17,086) | |
Tax effect | (1,213) | | | 2,943 | | | (62) | | | 1,668 | |
Other comprehensive income (loss), net of tax | 3,768 | | | (9,141) | | | (10,045) | | | (15,418) | |
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Balance as of November 30, 2021, net of tax | (137,617) | | | (4,317) | | | (89,875) | | | (231,809) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | — | | | 3,974 | | | 5,807 | | | 9,781 | |
Amounts reclassified | 6,056 | | | (4,705) | | | — | | | 1,351 | |
Total other comprehensive income (loss), before tax | 6,056 | | | (731) | | | 5,807 | | | 11,132 | |
Tax effect | (1,475) | | | 178 | | | 119 | | | (1,178) | |
Other comprehensive income (loss), net of tax | 4,581 | | | (553) | | | 5,926 | | | 9,954 | |
Balance as of February 28, 2022, net of tax | $ | (133,036) | | | $ | (4,870) | | | $ | (83,949) | | | $ | (221,855) | |
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| Pension and Other Postretirement Benefits | | Cash Flow Hedges | | Foreign Currency Translation Adjustment | | Total |
| (Dollars in thousands) |
Balance as of August 31, 2020, net of tax | $ | (159,680) | | | $ | 10,886 | | | $ | (85,130) | | | $ | (233,924) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | (125) | | | 14,506 | | | 3,629 | | | 18,010 | |
Amounts reclassified | 4,977 | | | (12,284) | | | — | | | (7,307) | |
Total other comprehensive income, before tax | 4,852 | | | 2,222 | | | 3,629 | | | 10,703 | |
Tax effect | (1,207) | | | (553) | | | (26) | | | (1,786) | |
Other comprehensive income, net of tax | 3,645 | | | 1,669 | | | 3,603 | | | 8,917 | |
Balance as of November 30, 2020, net of tax | (156,035) | | | 12,555 | | | (81,527) | | | (225,007) | |
Other comprehensive income (loss), before tax: | | | | | | | |
Amounts before reclassifications | — | | | 2,929 | | | (587) | | | 2,342 | |
Amounts reclassified | 5,151 | | | (3,673) | | | — | | | 1,478 | |
Total other comprehensive income (loss), before tax | 5,151 | | | (744) | | | (587) | | | 3,820 | |
Tax effect | (1,282) | | | 185 | | | (174) | | | (1,271) | |
Other comprehensive income (loss), net of tax | 3,869 | | | (559) | | | (761) | | | 2,549 | |
Balance as of February 28, 2021, net of tax | $ | (152,166) | | | $ | 11,996 | | | $ | (82,288) | | | $ | (222,458) | |
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Amounts reclassified from accumulated other comprehensive income (loss) were related to pension and other postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of goods sold and marketing, general and administrative expenses and other income (see Note 9, Benefit Plans, for further information). Gains or losses associated with cash flow hedges are recorded as cost of goods sold (see Note 11, Derivative Financial Instruments and Hedging Activities, for further information). Gains or losses on foreign currency translation reclassifications related to sales of businesses are recorded as other income.
Note 9 Benefit Plans
We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have nonqualified supplemental executive and Board retirement plans.
Components of net periodic benefit costs for the three and ninesix months ended May 31,February 28, 2022 and 2021, and 2020, are as follows:
| | | Three Months Ended May 31, | | Three Months Ended February 28, |
| | Qualified Pension Benefits | | Nonqualified Pension Benefits | | Other Benefits | | Qualified Pension Benefits | | Nonqualified Pension Benefits | | Other Benefits |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Components of net periodic benefit costs: | Components of net periodic benefit costs: | (Dollars in thousands) | Components of net periodic benefit costs: | (Dollars in thousands) |
Service cost | Service cost | $ | 11,307 | | | $ | 10,538 | | | $ | 108 | | | $ | 101 | | | $ | 297 | | | $ | 262 | | Service cost | $ | 11,569 | | | $ | 11,307 | | | $ | 232 | | | $ | 108 | | | $ | 249 | | | $ | 297 | |
Interest cost | Interest cost | 4,141 | | | 5,431 | | | 68 | | | 107 | | | 123 | | | 187 | | Interest cost | 4,292 | | | 4,141 | | | 70 | | | 68 | | | 126 | | | 123 | |
Expected return on assets | Expected return on assets | (10,910) | | | (11,671) | | | 0 | | | 0 | | | 0 | | | 0 | | Expected return on assets | (10,990) | | | (10,910) | | | — | | | — | | | — | | | — | |
Prior service cost (credit) amortization | Prior service cost (credit) amortization | 45 | | | 45 | | | (28) | | | (28) | | | (111) | | | (111) | | Prior service cost (credit) amortization | 44 | | | 45 | | | (29) | | | (28) | | | (111) | | | (111) | |
Actuarial loss (gain) amortization | Actuarial loss (gain) amortization | 5,447 | | | 5,396 | | | 53 | | | 25 | | | (341) | | | (348) | | Actuarial loss (gain) amortization | 5,852 | | | 5,447 | | | 120 | | | 53 | | | (315) | | | (341) | |
| Net periodic benefit cost (benefit) | Net periodic benefit cost (benefit) | $ | 10,030 | | | $ | 9,739 | | | $ | 201 | | | $ | 205 | | | $ | (32) | | | $ | (10) | | Net periodic benefit cost (benefit) | $ | 10,767 | | | $ | 10,030 | | | $ | 393 | | | $ | 201 | | | $ | (51) | | | $ | (32) | |
| | | Nine Months Ended May 31, | | Six Months Ended February 28, |
| | Qualified Pension Benefits | | Nonqualified Pension Benefits | | Other Benefits | | Qualified Pension Benefits | | Nonqualified Pension Benefits | | Other Benefits |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Components of net periodic benefit costs: | Components of net periodic benefit costs: | (Dollars in thousands) | Components of net periodic benefit costs: | (Dollars in thousands) |
Service cost | Service cost | $ | 33,921 | | | $ | 31,613 | | | $ | 325 | | | $ | 304 | | | $ | 890 | | | $ | 787 | | Service cost | $ | 23,138 | | | $ | 22,614 | | | $ | 463 | | | $ | 217 | | | $ | 498 | | | $ | 593 | |
Interest cost | Interest cost | 12,422 | | | 16,292 | | | 205 | | | 322 | | | 369 | | | 560 | | Interest cost | 8,584 | | | 8,281 | | | 141 | | | 136 | | | 252 | | | 246 | |
Expected return on assets | Expected return on assets | (32,731) | | | (35,013) | | | 0 | | | 0 | | | 0 | | | 0 | | Expected return on assets | (21,979) | | | (21,821) | | | — | | | — | | | — | | | — | |
Prior service cost (credit) amortization | Prior service cost (credit) amortization | 134 | | | 134 | | | (85) | | | (85) | | | (334) | | | (334) | | Prior service cost (credit) amortization | 87 | | | 89 | | | (57) | | | (57) | | | (223) | | | (223) | |
Actuarial loss (gain) amortization | Actuarial loss (gain) amortization | 16,342 | | | 16,187 | | | 159 | | | 74 | | | (1,024) | | | (1,044) | | Actuarial loss (gain) amortization | 11,703 | | | 10,895 | | | 239 | | | 106 | | | (630) | | | (682) | |
| Net periodic benefit cost (benefit) | Net periodic benefit cost (benefit) | $ | 30,088 | | | $ | 29,213 | | | $ | 604 | | | $ | 615 | | | $ | (99) | | | $ | (31) | | Net periodic benefit cost (benefit) | $ | 21,533 | | | $ | 20,058 | | | $ | 786 | | | $ | 402 | | | $ | (103) | | | $ | (66) | |
The service cost component of defined benefit net periodic benefit cost is recorded in cost of goods sold and marketing, general and administrative expenses. The other components of net periodic benefit cost are recorded in other income.
Employer Contributions
Any contributions made during fiscal 20212022 will depend primarily on market returns on the pension plan assets and minimum funding level requirements. No contributions were made to the pension plans during the ninesix months ended May 31, 2021,February 28, 2022, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2021.2022.
Note 10 Segment Reporting
We are an integrated agricultural enterprise,cooperative, providing grain, foods and energy resources to businesses and consumers on a global basis. We provide a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs that include grains and oilseeds, grainprocessed grains and oilseed processingoilseeds, renewable fuels and food products, and the production and marketing of ethanol.products. We define our operating segments in accordance with ASC Topic 280,
Segment Reporting, to reflect the manner in which our chief operating decision-maker,decision maker, our Chief Executive Officer, evaluates performance and allocates resources in managing our businesses.the business. We have aggregated those operating segments into three reportable segments: Energy, Ag and Nitrogen Production.
Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products. Our Ag segment purchases and further processes or resells grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment consists solely of our equity method investment in CF Nitrogen which entitles us, pursuant to aand allocated expenses. Our supply agreement that we entered into with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and urea ammonium nitrate ("UAN") annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily consist primarily of financial services related to crop production and a U.S. Commodity Futures Trading Commission-regulated futures commission merchant ("FCM") for commodities hedging.hedging and financial services related to crop production. Our nonconsolidated investments in Ventura Foods and Ardent Mills are also included in our Corporate and Other category.
Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred.
Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our income (loss) before income taxes does not necessarily follow the same trend due to weather and other events that can impact profitability. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain marketingand processing operations are subject to fluctuations in volume and incomerevenues based on producer harvests, world grain prices, demand and globalinternational trade volumes.relationships. Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons.
Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grains, oilseeds, crop nutrients and flour. Changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Commodity prices are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability and adequacy of supply, availability of a reliable rail and river transportation network,networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, and general political and economic conditions.
While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability companies in which we have a controlling interest, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less or do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidation ofconsolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO. In our Nitrogen Production segment, this consists of our approximate 10% membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50% ownership in Ventura Foods and our 12% ownership in Ardent Mills. See Note 5, Investments, for more information on these entities.
Reconciling amounts primarily represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments.
Segment information for the three and nine months ended May 31, 2021 and 2020, is presented in the tables below.
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| Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Three Months Ended May 31, 2021 | (Dollars in thousands) |
Revenues, including intersegment revenues | $ | 1,815,077 | | | $ | 9,222,597 | | | $ | 0 | | | $ | 10,842 | | | $ | (118,540) | | | $ | 10,929,976 | |
Intersegment revenues | (110,279) | | | (6,393) | | | 0 | | | (1,868) | | | 118,540 | | | — | |
Revenues, net of intersegment revenues | $ | 1,704,798 | | | $ | 9,216,204 | | | $ | 0 | | | $ | 8,974 | | | $ | 0 | | | $ | 10,929,976 | |
Operating earnings (loss) | 2,955 | | | 134,606 | | | (8,799) | | | (837) | | | 0 | | | 127,925 | |
Interest expense | (333) | | | 17,661 | | | 10,318 | | | 390 | | | 956 | | | 28,992 | |
Other income | (636) | | | (6,331) | | | (308) | | | (2,517) | | | (956) | | | (10,748) | |
Equity income from investments | (1,035) | | | (16,855) | | | (65,444) | | | (63,188) | | | 0 | | | (146,522) | |
Income before income taxes | $ | 4,959 | | | $ | 140,131 | | | $ | 46,635 | | | $ | 64,478 | | | $ | 0 | | | $ | 256,203 | |
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| Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Three Months Ended May 31, 2020 | (Dollars in thousands) |
Revenues, including intersegment revenues | $ | 960,352 | | | $ | 6,340,386 | | | $ | 0 | | | $ | 13,515 | | | $ | (73,222) | | | $ | 7,241,031 | |
Intersegment revenues | (69,433) | | | (2,485) | | | 0 | | | (1,304) | | | 73,222 | | | — | |
Revenues, net of intersegment revenues | $ | 890,919 | | | $ | 6,337,901 | | | $ | 0 | | | $ | 12,211 | | | $ | 0 | | | $ | 7,241,031 | |
Operating earnings (loss) | (56,792) | | | 95,328 | | | (7,936) | | | 7,320 | | | 0 | | | 37,920 | |
Interest expense | (145) | | | 16,261 | | | 10,176 | | | 1,810 | | | (1,441) | | | 26,661 | |
Other income | (614) | | | (8,294) | | | (355) | | | (254) | | | 1,441 | | | (8,076) | |
Equity income from investments | (1,269) | | | (7,999) | | | (41,264) | | | (582) | | | 0 | | | (51,114) | |
Income (loss) before income taxes | $ | (54,764) | | | $ | 95,360 | | | $ | 23,507 | | | $ | 6,346 | | | $ | 0 | | | $ | 70,449 | |
Segment information for the three and six months ended February 28, 2022 and 2021, is presented in the tables below: | | | Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total | | Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Nine Months Ended May 31, 2021 | (Dollars in thousands) | |
Three Months Ended February 28, 2022 | | Three Months Ended February 28, 2022 | (Dollars in thousands) |
Revenues, including intersegment revenues | Revenues, including intersegment revenues | $ | 4,643,387 | | | $ | 23,615,087 | | | $ | 0 | | | $ | 38,370 | | | $ | (331,066) | | | $ | 27,965,778 | | Revenues, including intersegment revenues | $ | 2,163,233 | | | $ | 8,302,502 | | | $ | — | | | $ | 10,641 | | | $ | (143,788) | | | $ | 10,332,588 | |
Intersegment revenues | Intersegment revenues | (308,584) | | | (15,269) | | | 0 | | | (7,213) | | | 331,066 | | | — | | Intersegment revenues | (135,234) | | | (6,571) | | | — | | | (1,983) | | | 143,788 | | | — | |
Revenues, net of intersegment revenues | Revenues, net of intersegment revenues | $ | 4,334,803 | | | $ | 23,599,818 | | | $ | — | | | $ | 31,157 | | | $ | — | | | $ | 27,965,778 | | Revenues, net of intersegment revenues | $ | 2,027,999 | | | $ | 8,295,931 | | | $ | — | | | $ | 8,658 | | | $ | — | | | $ | 10,332,588 | |
Operating earnings (loss) | Operating earnings (loss) | (120,879) | | | 212,223 | | | (24,661) | | | 8,894 | | | 0 | | | 75,577 | | Operating earnings (loss) | 11,145 | | | 43,610 | | | (10,862) | | | (19,220) | | | — | | | 24,673 | |
Interest expense | Interest expense | 492 | | | 48,796 | | | 33,721 | | | 1,536 | | | (1,648) | | | 82,897 | | Interest expense | 1,898 | | | 13,224 | | | 11,253 | | | (996) | | | (205) | | | 25,174 | |
Other income | Other income | (2,108) | | | (29,784) | | | (2,175) | | | (8,800) | | | 1,648 | | | (41,219) | | Other income | (3) | | | (6,520) | | | (253) | | | 5,166 | | | 205 | | | (1,405) | |
Equity income from investments | Equity income from investments | (2,355) | | | (43,974) | | | (118,477) | | | (95,848) | | | 0 | | | (260,654) | | Equity income from investments | (1,582) | | | (18,275) | | | (176,119) | | | (33,947) | | | — | | | (229,923) | |
Income (loss) before income taxes | $ | (116,908) | | | $ | 237,185 | | | $ | 62,270 | | | $ | 112,006 | | | $ | 0 | | | $ | 294,553 | | |
Total assets as of May 31, 2021 | $ | 4,451,203 | | | $ | 8,388,074 | | | $ | 2,733,443 | | | $ | 3,027,906 | | | $ | — | | | $ | 18,600,626 | | |
Income before income taxes | | Income before income taxes | $ | 10,832 | | | $ | 55,181 | | | $ | 154,257 | | | $ | 10,557 | | | $ | — | | | $ | 230,827 | |
| | | Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total | | Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Nine Months Ended May 31, 2020 | (Dollars in thousands) | |
Three Months Ended February 28, 2021 | | Three Months Ended February 28, 2021 | (Dollars in thousands) |
Revenues, including intersegment revenues | Revenues, including intersegment revenues | $ | 4,550,155 | | | $ | 17,183,820 | | | $ | 0 | | | $ | 43,514 | | | $ | (316,747) | | | $ | 21,460,742 | | Revenues, including intersegment revenues | $ | 1,470,465 | | | $ | 6,942,185 | | | $ | — | | | $ | 12,046 | | | $ | (104,537) | | | $ | 8,320,159 | |
Intersegment revenues | Intersegment revenues | (302,763) | | | (9,862) | | | 0 | | | (4,122) | | | 316,747 | | | — | | Intersegment revenues | (98,307) | | | (3,973) | | | — | | | (2,257) | | | 104,537 | | | — | |
Revenues, net of intersegment revenues | Revenues, net of intersegment revenues | $ | 4,247,392 | | | $ | 17,173,958 | | | $ | — | | | $ | 39,392 | | | $ | — | | | $ | 21,460,742 | | Revenues, net of intersegment revenues | $ | 1,372,158 | | | $ | 6,938,212 | | | $ | — | | | $ | 9,789 | | | $ | — | | | $ | 8,320,159 | |
Operating earnings (loss) | 241,594 | | | 88,102 | | | (26,318) | | | 7,239 | | | 0 | | | 310,617 | | |
Operating (loss) earnings | | Operating (loss) earnings | (55,449) | | | 2,093 | | | (8,240) | | | 1,806 | | | — | | | (59,790) | |
Interest expense | Interest expense | 43 | | | 57,761 | | | 34,277 | | | 8,680 | | | (5,718) | | | 95,043 | | Interest expense | 1,063 | | | 16,630 | | | 12,241 | | | 7 | | | (1,086) | | | 28,855 | |
Other income | Other income | (2,516) | | | (31,142) | | | (2,272) | | | (2,714) | | | 5,718 | | | (32,926) | | Other income | (990) | | | (11,636) | | | (302) | | | (6,004) | | | 1,086 | | | (17,846) | |
Equity (income) loss from investments | (2,242) | | | 830 | | | (104,021) | | | (29,741) | | | 0 | | | (135,174) | | |
Income before income taxes | $ | 246,309 | | | $ | 60,653 | | | $ | 45,698 | | | $ | 31,014 | | | $ | 0 | | | $ | 383,674 | | |
Equity income from investments | | Equity income from investments | (832) | | | (16,945) | | | (31,344) | | | (14,988) | | | — | | | (64,109) | |
(Loss) income before income taxes | | (Loss) income before income taxes | $ | (54,690) | | | $ | 14,044 | | | $ | 11,165 | | | $ | 22,791 | | | $ | — | | | $ | (6,690) | |
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| Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Six Months Ended February 28, 2022 | (Dollars in thousands) |
Revenues, including intersegment revenues | $ | 4,631,576 | | | $ | 16,879,905 | | | $ | — | | | $ | 20,845 | | | $ | (318,981) | | | $ | 21,213,345 | |
Intersegment revenues | (299,590) | | | (14,715) | | | — | | | (4,676) | | | 318,981 | | | — | |
Revenues, net of intersegment revenues | $ | 4,331,986 | | | $ | 16,865,190 | | | $ | — | | | $ | 16,169 | | | $ | — | | | $ | 21,213,345 | |
Operating earnings (loss) | 78,994 | | | 303,383 | | | (21,045) | | | (21,685) | | | — | | | 339,647 | |
Interest expense | 2,386 | | | 26,885 | | | 22,507 | | | (2,816) | | | (356) | | | 48,606 | |
Other income | (731) | | | (27,099) | | | (1,800) | | | 4,093 | | | 356 | | | (25,181) | |
Equity income from investments | (2,682) | | | (38,009) | | | (292,592) | | | (47,985) | | | — | | | (381,268) | |
Income before income taxes | $ | 80,021 | | | $ | 341,606 | | | $ | 250,840 | | | $ | 25,023 | | | $ | — | | | $ | 697,490 | |
Total assets as of February 28, 2022 | $ | 4,378,601 | | | $ | 10,338,907 | | | $ | 2,725,582 | | | $ | 3,304,211 | | | $ | — | | | $ | 20,747,301 | |
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| Energy | | Ag | | Nitrogen Production | | Corporate and Other | | Reconciling Amounts | | Total |
Six Months Ended February 28, 2021 | (Dollars in thousands) |
Revenues, including intersegment revenues | $ | 2,828,310 | | | $ | 14,392,490 | | | $ | — | | | $ | 27,528 | | | $ | (212,526) | | | $ | 17,035,802 | |
Intersegment revenues | (198,305) | | | (8,876) | | | — | | | (5,345) | | | 212,526 | | | — | |
Revenues, net of intersegment revenues | $ | 2,630,005 | | | $ | 14,383,614 | | | $ | — | | | $ | 22,183 | | | $ | — | | | $ | 17,035,802 | |
Operating (loss) earnings | (123,834) | | | 77,617 | | | (15,862) | | | 9,732 | | | — | | | (52,347) | |
Interest expense | 826 | | | 31,135 | | | 23,403 | | | 1,145 | | | (2,604) | | | 53,905 | |
Other income | (1,472) | | | (23,453) | | | (1,867) | | | (6,282) | | | 2,604 | | | (30,470) | |
Equity income from investments | (1,321) | | | (27,118) | | | (53,033) | | | (32,660) | | | — | | | (114,132) | |
(Loss) income before income taxes | $ | (121,867) | | | $ | 97,053 | | | $ | 15,635 | | | $ | 47,529 | | | $ | — | | | $ | 38,350 | |
Note 11 Derivative Financial Instruments and Hedging Activities
We enter into various derivative instruments to manage our exposure to movements primarily associated with agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain interest rate swaps and certain pay-fixed, receive-variable, cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as fair value hedges and cash flow hedges, respectively, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied. Rather, the derivative instruments are recorded on our Condensed Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Condensed Consolidated
Statements of Operations. See Note 12, Fair Value Measurements, for additional information. The majority of our exchange tradedexchange-traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned futures commission merchant.FCM.
Derivatives Not Designated as Hedging Instruments
The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected to report our derivative instruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet - Offsetting. The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP: | | | | | | | | | | | | | | | | | | | | | | | |
| February 28, 2022 |
| | | Amounts Not Offset on Condensed Consolidated Balance Sheet, but Eligible for Offsetting | | |
| Gross Amount Recognized | | Cash Collateral | | Derivative Instruments | | Net Amount |
| (Dollars in thousands) |
Derivative Assets | | | | | | | |
Commodity derivatives | $ | 804,483 | | | $ | — | | | $ | 11,232 | | | $ | 793,251 | |
Foreign exchange derivatives | 67,239 | | | — | | | 6,102 | | | 61,137 | |
Embedded derivative asset | 13,287 | | | — | | | — | | | 13,287 | |
Total | $ | 885,009 | | | $ | — | | | $ | 17,334 | | | $ | 867,675 | |
Derivative Liabilities | | | | | | | |
Commodity derivatives | $ | 566,818 | | | $ | 1,219 | | | $ | 11,691 | | | $ | 553,908 | |
Foreign exchange derivatives | 6,231 | | | — | | | 6,102 | | | 129 | |
| | | | | | | |
Total | $ | 573,049 | | | $ | 1,219 | | | $ | 17,793 | | | $ | 554,037 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| May 31, 2021 |
| | | Amounts Not Offset on Condensed Consolidated Balance Sheet But Eligible for Offsetting | | |
| Gross Amount Recognized | | Cash Collateral | | Derivative Instruments | | Net Amount |
| (Dollars in thousands) |
Derivative Assets | | | | | | | |
Commodity derivatives | $ | 843,728 | | | $ | — | | | $ | 8,226 | | | $ | 835,502 | |
Foreign exchange derivatives | 29,332 | | | — | | | 7,386 | | | 21,946 | |
Embedded derivative asset | 16,173 | | | — | | | 0 | | | 16,173 | |
Total | $ | 889,233 | | | $ | — | | | $ | 15,612 | | | $ | 873,621 | |
Derivative Liabilities | | | | | | | |
Commodity derivatives | $ | 585,658 | | | $ | 2,809 | | | $ | 8,226 | | | $ | 574,623 | |
Foreign exchange derivatives | 9,907 | | | 0 | | | 7,386 | | | 2,521 | |
| | | | | | | |
Total | $ | 595,565 | | | $ | 2,809 | | | $ | 15,612 | | | $ | 577,144 | |
| | | August 31, 2020 | | August 31, 2021 |
| | | Amounts Not Offset on Condensed Consolidated Balance Sheet But Eligible for Offsetting | | | | Amounts Not Offset on Condensed Consolidated Balance Sheet, but Eligible for Offsetting | |
| | Gross Amount Recognized | | Cash Collateral | | Derivative Instruments | | Net Amount | | Gross Amount Recognized | | Cash Collateral | | Derivative Instruments | | Net Amount |
| | (Dollars in thousands) | | (Dollars in thousands) |
Derivative Assets | Derivative Assets | | Derivative Assets | |
Commodity derivatives | Commodity derivatives | $ | 327,493 | | | $ | — | | | $ | 2,980 | | | $ | 324,513 | | Commodity derivatives | $ | 532,832 | | | $ | — | | | $ | 4,174 | | | $ | 528,658 | |
Foreign exchange derivatives | Foreign exchange derivatives | 11,809 | | | — | | | 9,385 | | | 2,424 | | Foreign exchange derivatives | 19,429 | | | — | | | 5,582 | | | 13,847 | |
Embedded derivative asset | Embedded derivative asset | 18,998 | | | — | | | 0 | | | 18,998 | | Embedded derivative asset | 16,488 | | | — | | | — | | | 16,488 | |
Total | Total | $ | 358,300 | | | $ | — | | | $ | 12,365 | | | $ | 345,935 | | Total | $ | 568,749 | | | $ | — | | | $ | 9,756 | | | $ | 558,993 | |
Derivative Liabilities | Derivative Liabilities | | | | | | | | Derivative Liabilities | | | | | | | |
Commodity derivatives | Commodity derivatives | $ | 343,343 | | | $ | 956 | | | $ | 5,578 | | | $ | 336,809 | | Commodity derivatives | $ | 444,861 | | | $ | 2,485 | | | $ | 4,174 | | | $ | 438,202 | |
Foreign exchange derivatives | Foreign exchange derivatives | 69,466 | | | 0 | | | 9,385 | | | 60,081 | | Foreign exchange derivatives | 8,506 | | | — | | | 5,582 | | | 2,924 | |
Total | Total | $ | 412,809 | | | $ | 956 | | | $ | 14,963 | | | $ | 396,890 | | Total | $ | 453,367 | | | $ | 2,485 | | | $ | 9,756 | | | $ | 441,126 | |
Derivative assets and liabilities with maturities of 12 months or less are recorded in other current assets and other current liabilities, respectively, on our Condensed Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, was $18.8$43.1 million and $21.2$21.6 million, respectively. The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, was $6.7$6.5 million and $5.4$4.8 million, respectively.
The majority of our derivative instruments have not been designated as hedging instruments. The following table sets forth the pretax gains (losses) on derivatives not accounted for as hedging instruments that have been included in our Condensed Consolidated Statements of Operations for the three and ninesix months ended May 31, 2021February 28, 2022 and 2020.2021:
| | | Three Months Ended May 31, | | Nine Months Ended May 31, | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | Location of Gain (Loss) | | 2021 | | 2020 | | 2021 | | 2020 | | Location of Gain (Loss) | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | (Dollars in thousands) | | | | (Dollars in thousands) |
Commodity derivatives | Commodity derivatives | Cost of goods sold | | $ | (552,985) | | | $ | 85,259 | | | $ | (945,631) | | | $ | 228,201 | | Commodity derivatives | Cost of goods sold | | $ | (612,033) | | | $ | (191,284) | | | $ | (580,435) | | | $ | (392,646) | |
Foreign exchange derivatives | Foreign exchange derivatives | Cost of goods sold | | 35,567 | | | (129,699) | | | 27,327 | | | (177,008) | | Foreign exchange derivatives | Cost of goods sold | | 72,785 | | | (30,881) | | | 40,291 | | | (8,240) | |
Foreign exchange derivatives | Foreign exchange derivatives | Marketing, general and administrative expenses | | 838 | | | (2,553) | | | 1,011 | | | (615) | | Foreign exchange derivatives | Marketing, general and administrative expenses | | 1,697 | | | (435) | | | 503 | | | 173 | |
Embedded derivative | Embedded derivative | Other income | | 308 | | | 355 | | | 2,174 | | | 2,272 | | Embedded derivative | Other income | | 253 | | | 302 | | | 1,799 | | | 1,866 | |
Total | Total | | $ | (516,272) | | | $ | (46,638) | | | $ | (915,119) | | | $ | 52,850 | | Total | | $ | (537,298) | | | $ | (222,298) | | | $ | (537,842) | | | $ | (398,847) | |
Commodity Contracts
As of May 31, 2021,February 28, 2022, and August 31, 2020,2021, we had outstanding commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities. The table below presents the notional volumes for all outstanding commodity contracts.contracts:
| | | May 31, 2021 | | August 31, 2020 | | February 28, 2022 | | August 31, 2021 |
| | Long | | Short | | Long | | Short | | Long | | Short | | Long | | Short |
| | (Units in thousands) | | (Units in thousands) |
Grain and oilseed (bushels) | Grain and oilseed (bushels) | 808,152 | | | 1,008,593 | | | 664,673 | | 892,303 | Grain and oilseed (bushels) | 758,887 | | | 1,128,403 | | | 666,726 | | 851,582 |
Energy products (barrels) | Energy products (barrels) | 10,346 | | | 9,211 | | | 10,028 | | 6,570 | Energy products (barrels) | 7,661 | | | 8,612 | | | 9,881 | | 7,656 |
Processed grain and oilseed (tons) | Processed grain and oilseed (tons) | 579 | | | 2,468 | | | 657 | | 3,304 | Processed grain and oilseed (tons) | 1,517 | | | 4,787 | | | 559 | | 3,418 |
Crop nutrients (tons) | Crop nutrients (tons) | 36 | | | 32 | | | 74 | | 127 | Crop nutrients (tons) | 53 | | | 27 | | | 66 | | 12 |
Ocean freight (metric tons) | Ocean freight (metric tons) | 225 | | | 0 | | | 1,140 | | 95 | Ocean freight (metric tons) | 60 | | | — | | | 210 | | — |
|
Foreign Exchange Contracts
We conduct a substantial portion of our business in U.S. dollars, but we are exposed to risks relating to foreign currency fluctuations primarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe, and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although we have some risk exposure related to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional amountsamount of our foreign exchange derivative contracts were $1.4was $1.5 billion and $1.2 billion as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, respectively.
Embedded Derivative Asset
Under the terms of our strategic investment in CF Nitrogen, if the CF Industries credit rating is reduced below certain levels by two of three specified credit ratings agencies, we are entitled to receive a nonrefundable annual payment of $5.0 million from CF Industries. These payments will continue on an annual basis until the date that the CF Industries credit rating is upgraded to or above certain levels by two of the three specified credit ratings agencies or February 1, 2026, whichever is earlier.
Since the CF Industries credit rating was reduced below the specified levels during fiscal 2017, we have received an annual payment of $5.0 million from CF Industries. Gains totaling $2.2$1.8 million and $2.3$1.9 million were recognized in other income in our Condensed Consolidated Statements of Operations for the ninesix months ended May 31,February 28, 2022 and 2021, and 2020, respectively. The fair value of the embedded derivative asset recorded on our Condensed Consolidated Balance SheetSheets as of May 31, 2021,February 28, 2022, was equal to $16.2$13.3 million. The current and long-term portions of the embedded derivative asset are included in other current assets and other assets on our Condensed Consolidated Balance Sheets, respectively. See Note 12, Fair Value Measurements, for additional information regarding valuation of the embedded derivative asset.
Derivatives Designated as Cash Flow Hedging Strategies
Certain pay-fixed, receive-variable, cash-settled swaps are designated as cash flow hedges of future crude oil purchases in our Energy segment. We also designate certain pay-variable, receive-fixed, cash-settled swaps as cash flow hedges of future refined energy product sales. These hedging instruments and the related hedged items are exposed to significant market price risk and potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product output based on prevailing futures prices, management's expectations about future commodity price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other comprehensive income for these dedesignated derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of May 31, 2021,February 28, 2022, and August 31, 2020,2021, the aggregate notional amount of cash flow hedges was 5.12.4 million and 9.72.7 million barrels, respectively.
The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Condensed Consolidated Balance Sheets in which they are recorded.recorded:
| | | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities |
Balance Sheet Location | Balance Sheet Location | | May 31, 2021 | | August 31, 2020 | | Balance Sheet Location | | May 31, 2021 | | August 31, 2020 | Balance Sheet Location | | February 28, 2022 | | August 31, 2021 | | Balance Sheet Location | | February 28, 2022 | | August 31, 2021 |
| | | (Dollars in thousands) | | | | (Dollars in thousands) | | | (Dollars in thousands) | | | | (Dollars in thousands) |
Other current assets | Other current assets | | $ | 11,243 | | | $ | 34,052 | | | Other current liabilities | | $ | 6,761 | | | $ | 8,821 | | Other current assets | | $ | 4,296 | | | $ | 11,874 | | | Other current liabilities | | $ | 2,162 | | | $ | 1,001 | |
The following table presents the pretax gains (losses)losses recorded in other comprehensive income relating to cash flow hedges for the three and ninesix months ended May 31, 2021February 28, 2022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended May 31, | | Nine Months Ended May 31, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| | (Dollars in thousands) |
Commodity derivatives | | $ | (7,590) | | | $ | 11,081 | | | $ | (7,700) | | | $ | (4,153) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28, | | Six Months Ended February 28, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (Dollars in thousands) |
Commodity derivatives | | $ | (1,977) | | | $ | (2,084) | | | $ | (15,273) | | | $ | (110) | |
The following table presents the pretax gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three and ninesix months ended May 31, 2021February 28, 2022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended May 31, | | Nine Months Ended May 31, |
| Location of Gain | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (Dollars in thousands) |
Commodity derivatives | Cost of goods sold | | $ | 2,329 | | | $ | 884 | | | $ | 19,084 | | | $ | 7,862 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended February 28, | | Six Months Ended February 28, |
| Location of Gain | | 2022 | | 2021 | | 2022 | | 2021 |
| | | (Dollars in thousands) |
Commodity derivatives | Cost of goods sold | | $ | 5,005 | | | $ | 4,082 | | | $ | 18,259 | | | $ | 16,755 | |
Note 12 Fair Value Measurements
ASC Topic 820, Fair Value Measurements,Measurement, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
We determine fair values of derivative instruments and certain other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available underin the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant instruments within those levels is as follows:value. Level 1 inputs are unadjusted, quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and other inputs (other than quoted prices) that are observable or can be corroborated by observable market data for substantially the assetfull term of the assets or liability, either directly or indirectly.liabilities. Level 3 inputs are unobservable inputs that are supported by little or no market activity for the assetassets or liability.liabilities. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Recurring fair value measurements as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, are as follows:
| | | May 31, 2021 | | February 28, 2022 |
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Assets | Assets | | | | | | | | Assets | | | | | | | |
Commodity derivatives | Commodity derivatives | $ | 2,349 | | | $ | 852,622 | | | $ | 0 | | | $ | 854,971 | | Commodity derivatives | $ | 2,162 | | | $ | 806,617 | | | $ | — | | | $ | 808,779 | |
Foreign exchange derivatives | Foreign exchange derivatives | 0 | | | 29,332 | | | 0 | | | 29,332 | | Foreign exchange derivatives | — | | | 67,239 | | | — | | | 67,239 | |
| Deferred compensation assets | Deferred compensation assets | 50,660 | | | 0 | | | 0 | | | 50,660 | | Deferred compensation assets | 49,594 | | | — | | | — | | | 49,594 | |
| Embedded derivative asset | Embedded derivative asset | 0 | | | 16,173 | | | 0 | | | 16,173 | | Embedded derivative asset | — | | | 13,287 | | | — | | | 13,287 | |
Segregated investments and marketable securities | Segregated investments and marketable securities | 195,197 | | | 0 | | | 0 | | | 195,197 | | Segregated investments and marketable securities | 124,928 | | | — | | | — | | | 124,928 | |
Other assets | Other assets | 6,563 | | | 0 | | | 0 | | | 6,563 | | Other assets | 7,096 | | | — | | | — | | | 7,096 | |
Total | Total | $ | 254,769 | | | $ | 898,127 | | | $ | 0 | | | $ | 1,152,896 | | Total | $ | 183,780 | | | $ | 887,143 | | | $ | — | | | $ | 1,070,923 | |
Liabilities | Liabilities | | | | | | | | Liabilities | | | | | | | |
Commodity derivatives | Commodity derivatives | $ | 1,037 | | | $ | 591,382 | | | $ | 0 | | | $ | 592,419 | | Commodity derivatives | $ | 4,592 | | | $ | 564,388 | | | $ | — | | | $ | 568,980 | |
Foreign exchange derivatives | Foreign exchange derivatives | 0 | | | 9,907 | | | 0 | | | 9,907 | | Foreign exchange derivatives | — | | | 6,231 | | | — | | | 6,231 | |
| Total | Total | $ | 1,037 | | | $ | 601,289 | | | $ | 0 | | | $ | 602,326 | | Total | $ | 4,592 | | | $ | 570,619 | | | $ | — | | | $ | 575,211 | |
| | | August 31, 2020 | | August 31, 2021 |
| | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Assets | Assets | | Assets | |
Commodity derivatives | Commodity derivatives | $ | 5,762 | | | $ | 355,783 | | | $ | 0 | | | $ | 361,545 | | Commodity derivatives | $ | 2,453 | | | $ | 542,253 | | | $ | — | | | $ | 544,706 | |
Foreign exchange derivatives | Foreign exchange derivatives | 0 | | | 11,523 | | | 0 | | | 11,523 | | Foreign exchange derivatives | — | | | 19,429 | | | — | | | 19,429 | |
| Deferred compensation assets | Deferred compensation assets | 47,669 | | | 0 | | | 0 | | | 47,669 | | Deferred compensation assets | 51,940 | | | — | | | — | | | 51,940 | |
| Embedded derivative asset | Embedded derivative asset | 0 | | | 18,998 | | | 0 | | | 18,998 | | Embedded derivative asset | — | | | 16,488 | | | — | | | 16,488 | |
Segregated investments and marketable securities | Segregated investments and marketable securities | 85,950 | | | 0 | | | 0 | | | 85,950 | | Segregated investments and marketable securities | 99,837 | | | — | | | — | | | 99,837 | |
Other assets | Other assets | 5,276 | | | 0 | | | 0 | | | 5,276 | | Other assets | 6,052 | | | — | | | — | | | 6,052 | |
Total | Total | $ | 144,657 | | | $ | 386,304 | | | $ | 0 | | | $ | 530,961 | | Total | $ | 160,282 | | | $ | 578,170 | | | $ | — | | | $ | 738,452 | |
Liabilities | Liabilities | | | | | | | | Liabilities | | | | | | | |
Commodity derivatives | Commodity derivatives | $ | 6,037 | | | $ | 346,126 | | | $ | 0 | | | $ | 352,163 | | Commodity derivatives | $ | 1,615 | | | $ | 444,247 | | | $ | — | | | $ | 445,862 | |
Foreign exchange derivatives | Foreign exchange derivatives | 0 | | | 69,467 | | | 0 | | | 69,467 | | Foreign exchange derivatives | — | | | 8,506 | | | — | | | 8,506 | |
| Total | Total | $ | 6,037 | | | $ | 415,593 | | | $ | 0 | | | $ | 421,630 | | Total | $ | 1,615 | | | $ | 452,753 | | | $ | — | | | $ | 454,368 | |
Commodity and foreign exchange derivatives. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange tradedexchange-traded prices and/or recent market bids and offers, adjusted forincluding location-specific inputs,adjustments, and are classified within Level 2. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either the listed or OTC markets. Changes in the fair values of these contracts are recognized in our Condensed Consolidated Statements of Operations as a component of cost of goods sold.
Deferred compensation and other assets. Our deferred compensation investments consist primarily of rabbi trust assets that are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Condensed Consolidated Statements of Operations as a component of marketing, general and administrative expenses.
Embedded derivative asset. The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen. The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the CF Industries credit rating based on historical credit rating movements of other public companies and the discount rates applied to potential annual payments based on applicable historical and current yield coupon rates. Based on these observable inputs, our fair value measurement is classified within Level 2. See Note 11, Derivative Financial Instruments and Hedging Activities, for additional information.
Segregated investments and marketable securities. Our segregated investments and marketable securities are comprised of investments in various government agencies and U.S. Treasury securities, which are valued using quoted market prices and classified within Level 1.
Note 13 Commitments and Contingencies
Environmental
We are required to comply with various environmental laws and regulations incidental to our normal business operations. To meet our compliance requirements, we establish reserves for the future costs of remediation ofassociated with identified issues that are both probable and can be reasonably estimated, whichestimated. Estimates of environmental costs are based on current available facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations and are included in cost of goods sold and marketing, general and administrative expenses in our Condensed Consolidated Statements of Operations. Recoveries, if any, are recorded in the period in which recovery is received. Liabilities are monitored and adjusted as new facts or changes in law or technology occur. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our condensed consolidated financial statementsposition, results of operations or cash flows during any fiscal year.
Other Litigation and Claims
We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of our business. The resolution of any such matters may affect net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our condensed consolidated financial statementsposition, results of operations or cash flows during any fiscal year.
Guarantees
We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our bank covenants allow maximum guarantees of $1.0 billion, of which $188.8$272.6 million were outstanding on May 31, 2021.February 28, 2022. We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide these guarantees were current as of May 31, 2021.February 28, 2022.
Note 14 Leases
We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (a) the right to obtain substantially all economic benefits associated with an identified asset and (b) the right to direct how and for what purpose the identified asset is used. Certain arrangements provide us with the right to use an identified asset; however, most of these arrangements are not considered to represent a lease, as we do not control how and for what purpose the identified asset is used. For example, our supply agreements, warehousing and distribution services agreements, and transportation services agreements generally do not contain leases.
We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our operating leases are primarily for railcars, equipment, vehicles and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options.
Operating lease right of use assets and liabilities for operating leases are recognized at the lease commencement date for leases in excess of 12 months based on the present value of lease payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our
collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants.
Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Condensed Consolidated Statements of Operations are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Nine Months Ended May 31, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (Dollars in thousands) |
Operating lease expense | $ | 18,534 | | | $ | 17,057 | | | $ | 54,508 | | | $ | 53,155 | |
Finance lease expense: | | | | | | | |
Amortization of assets | 1,974 | | | 1,908 | | | 5,919 | | | 5,170 | |
Interest on lease liabilities | 218 | | | 257 | | | 694 | | | 742 | |
Short-term lease expense | 3,970 | | | 3,108 | | | 12,394 | | | 12,768 | |
Variable lease expense | 668 | | | 1,176 | | | 2,209 | | | 2,089 | |
Total net lease expense* | $ | 25,364 | | | $ | 23,506 | | | $ | 75,724 | | | $ | 73,924 | |
*Income related to sub-lease activity is not material and has been excluded from the table above.
Supplemental balance sheet information related to operating and finance leases is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance Sheet Location | | May 31, 2021 | | August 31, 2020 | | | | | | |
| | | (Dollars in thousands) |
Operating leases | | | | | | | | | | | |
Assets | | | | | | | | | | | |
Operating lease right of use assets | Other assets | | $ | 262,737 | | | $ | 257,834 | | | | | | | |
Liabilities | | | | | | | | | | | |
Current operating lease liabilities | Accrued expenses | | 58,767 | | | 57,200 | | | | | | | |
Long-term operating lease liabilities | Other liabilities | | 207,513 | | | 203,691 | | | | | | | |
Total operating lease liabilities | | $ | 266,280 | | | $ | 260,891 | | | | | | | |
| | | | | | | | | | | |
Finance leases | | | | | | | | | | | |
Assets | | | | | | | | | | | |
Finance lease assets | Property, plant and equipment | | $ | 39,393 | | | $ | 44,860 | | | | | | | |
Liabilities | | | | | | | | | | | |
Current finance lease liabilities | Current portion of long-term debt | | 7,152 | | | 7,993 | | | | | | | |
Long-term finance lease liabilities | Long-term debt | | 19,307 | | | 23,467 | | | | | | | |
Total finance lease liabilities | | $ | 26,459 | | | $ | 31,460 | | | | | | | |
| | | | | | | | | | | |
Weighted average remaining lease term (in years) | | | | | | | | | | |
Operating leases | | 7.9 | | 8.3 | | | | | | |
Finance leases | | 5.7 | | 6.0 | | | | | | |
| | | | | | | | | | | |
Weighted average discount rate | | | | | | | | | | |
Operating leases | | 2.99 | % | | 3.11 | % | | | | | | |
Finance leases | | 3.34 | % | | 3.33 | % | | | | | | |
Supplemental cash flow and other information related to operating and finance leases are as follows:
| | | | | | | | | | | |
| Nine Months Ended May 31, |
| 2021 | | 2020 |
| (Dollars in thousands) |
Cash paid for amounts included in measurement of lease liabilities: | | | |
Operating cash flows from operating leases | $ | 56,448 | | | $ | 45,718 | |
Operating cash flows from finance leases | 694 | | | 742 | |
Financing cash flows from finance leases | 6,426 | | | 5,239 | |
Supplemental noncash information: | | | |
Right of use assets obtained in exchange for lease liabilities | 37,284 | | | 32,567 | |
Right of use asset modifications | 23,886 | | | 6,507 | |
Maturities of lease liabilities as of May 31, 2021, were as follows:
| | | | | | | | | | | |
| May 31, 2021 |
| Finance Leases | | Operating Leases |
| (Dollars in thousands) |
Remainder of fiscal 2021 | $ | 2,004 | | | $ | 18,002 | |
Fiscal 2022 | 7,787 | | | 65,469 | |
Fiscal 2023 | 6,206 | | | 51,946 | |
Fiscal 2024 | 3,487 | | | 41,945 | |
Fiscal 2025 | 2,078 | | | 31,211 | |
After fiscal 2025 | 8,071 | | | 108,601 | |
Total maturities of lease liabilities | 29,633 | | | 317,174 | |
Less amounts representing interest | 3,174 | | | 50,894 | |
Present value of future minimum lease payments | 26,459 | | | 266,280 | |
Less current lease liabilities | 7,152 | | | 58,767 | |
Long-term lease liabilities | $ | 19,307 | | | $ | 207,513 | |
Note 1514 Other Current Assets and Liabilities
Other current assets and liabilities as of May 31, 2021,February 28, 2022, and August 31, 2020,2021, are as follows:
| | | May 31, 2021 | | August 31, 2020 | | February 28, 2022 | | August 31, 2021 |
Other current assets | Other current assets | (Dollars in thousands) | Other current assets | (Dollars in thousands) |
Derivative assets (Note 11) | Derivative assets (Note 11) | $ | 881,636 | | | $ | 371,195 | | Derivative assets (Note 11) | $ | 846,216 | | | $ | 559,056 | |
Margin and related deposits | Margin and related deposits | 430,336 | | | 194,097 | | Margin and related deposits | 355,811 | | | 336,397 | |
Supplier advance payments | Supplier advance payments | 214,147 | | | 198,699 | | Supplier advance payments | 787,221 | | | 194,706 | |
Restricted cash | | Restricted cash | 58,816 | | | 129,325 | |
Other | Other | 370,677 | | | 253,497 | | Other | 167,357 | | | 170,749 | |
Total other current assets | Total other current assets | $ | 1,896,796 | | | $ | 1,017,488 | | Total other current assets | $ | 2,215,421 | | | $ | 1,390,233 | |
Other current liabilities | Other current liabilities | | | | Other current liabilities | | | |
Customer margin deposits and credit balances | Customer margin deposits and credit balances | $ | 276,344 | | | $ | 149,539 | | Customer margin deposits and credit balances | $ | 179,762 | | | $ | 269,114 | |
Customer advance payments | Customer advance payments | 522,804 | | | 300,100 | | Customer advance payments | 1,296,811 | | | 439,293 | |
Derivative liabilities (Note 11) | Derivative liabilities (Note 11) | 595,654 | | | 416,204 | | Derivative liabilities (Note 11) | 568,671 | | | 449,522 | |
Dividends and equity payable | Dividends and equity payable | 49,914 | | | 63,000 | | Dividends and equity payable | 311,153 | | | 150,000 | |
Total other current liabilities | Total other current liabilities | $ | 1,444,716 | | | $ | 928,843 | | Total other current liabilities | $ | 2,356,397 | | | $ | 1,307,929 | |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management onregarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
•Overview
•Business Strategy
•Fiscal 2021 Third2022 Second Quarter Highlights
•Fiscal 20212022 Trends Update
•Operating Metrics
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet Financing Arrangements
•Critical Accounting Policies
•Recent Accounting Pronouncements
Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended August 31, 20202021 (including the information presented therein under Risk Factors), as well as the condensed consolidated financial statements and the related notes included in Item 1 of Part I and the risk factors included in Item 1A of Part II of this Quarterly Report on Form 10-Q.
Overview
CHS Inc. is a diversified company that provides grain, food, agronomy and energy resources to businesses and consumers on a global scale. As a cooperative, we are owned by farmers, ranchers and member cooperatives across the United States. We also have preferred shareholders who own our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC. We operate in the following three reportable segments:
•Energy. Produces and provides primarily for the wholesale distribution and transportation of petroleum products.
•Ag. Purchases and further processes or resells grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties;parties, and also serves as a wholesaler and retailer of agronomy products.
•Nitrogen Production. Consists solelyProduces and distributes nitrogen fertilizer. It consists of our equity method investment in CF Industries Nitrogen, LLC ("CF Nitrogen"), and produces and distributes nitrogen fertilizer.allocated expenses.
In addition, our financing and hedging businesses, along with our nonconsolidated wheat milling and food production and distribution and wheat milling joint ventures, have been aggregated within Corporate and Other.
The condensed consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have a controlling interest. The effects of all significant intercompany transactions have been eliminated.
Corporate administrative expenses and interest are allocated to each reporting segment along withand Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred.
Management's Focus. When evaluating our operating performance, management focuses on gross profit and income before income taxes ("IBIT"). As a company that operates heavily in global commodities, there is significant unpredictability and volatility in pricing, costs and global trade volumes. Consequently, we focus on managing the margin we can earn and the resulting IBIT. Management also focuses on ensuring balance sheet strength through appropriate management of financial liquidity, leverage, capital allocation and cash flow optimization.
Seasonality. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our IBIT does not necessarily follow the same trend due to weather and other events that can impact profitability. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our
planting season. Our global grain marketingand processing operations are subject to fluctuations in volume and incomerevenues based on producer harvests, world grain prices, demand and globalinternational trade volumes.relationships. Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. The graphs below depict the seasonality inherent in our businesses.businesses:
*The COVID-19 pandemic started during the second quarter of fiscal 2020.
Pricing and Volumes. Our revenues, assets and cash flows can be significantly affected by global market prices and sales volumes of commodities such as petroleum products, natural gas, grains, oilseed products and agronomy products. Changes in market prices for commodities we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and selling prices of those products can affect revenues and operating earnings. Commodity prices and sales volumes are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability/adequacy of supply of a commodity, availability of reliable rail and river transportation network,networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, and general political/political and/or economic conditions.
Business Strategy
Our business strategies focus on an enterprisewide effort to create an experience that empowers customers to make CHS their first choice, expand market access to add value for our owners and transform and evolve our core businesses by capitalizing on changing market dynamics. To execute on these strategies, we are focused on implementing agile, efficient and
sustainable new technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-
performing,high-performing, diverse and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet.
Fiscal 2021 Third2022 Second Quarter Highlights
•StrongRobust global demand, drovecoupled with increased market volatility, resulted in higher commodity prices higher, and improved trade relations between the United Statesearnings.
•Our processing and foreign trade partners led to continued higher volumes for grain and oilseed, whichwholesale agronomy products drove significantly improved earnings in our Ag segment compared to the prior year.
•Improved crack spreads in our refined fuels business resulted in increased margins as the demand shocks that occurred during the COVID-19 pandemic began to subside.
•Improved margins in our refined fuels business were partially offset by exceptionally high costs for renewable energy credits.segment.
•Equity earnings frommethod investments were a significant source of pretax earnings during the fiscal 2021 third quarter.
•Althoughcontinue to perform well and represent a significant portion of our earnings with our CF Nitrogen investment being the largest contributor. The CF Nitrogen investment improved earnings are a result of market conditions driven by strong global employees continued with remote working arrangements throughdemand for urea and urea ammonium nitrate ("UAN").
•Refining margins were higher in our Energy segment due to improved crack spreads resulting from higher demand in the end of the third quarter, we began effortsenergy industry as volumes increased to bring employees back tomore normal levels and more favorable pricing for Canadian crude oil, which is processed by our offices in either full or hybrid capacities as COVID-19 restrictions were being lifted. The costs of these activities were not material during the third quarter of fiscal 2021 and are not expected to be material for the remainder of fiscal 2021.refineries.
Fiscal 20212022 Trends Update
Our Energy and Ag segments operate in cyclical environments in which unforeseen market conditions can have significant positive or negative impacts. For example, we have experienced and anticipate continued effects of inflation on costs such as labor, freight and materials. Additionally, the Russian invasion of Ukraine in February 2022 has resulted in significant uncertainty and instability in global commodities markets, including agricultural commodities and crude oil. Ukraine is a key international grain originating country in which we operate. Our operations in Ukraine have been dramatically disrupted because of the conflict and some of our Ukrainian employees have been forced to relocate to other countries and within Ukraine, with many unable to perform all or some work duties. The ongoing conflict could cause harm to our employees and otherwise impair their ability to work for extended periods of time, as well as disrupt telecommunications systems, banks and other critical infrastructure necessary to conduct business in Ukraine. Although we do not have significant fixed assets or infrastructure in Ukraine, we continue to have grain inventory in various facilities in Ukraine. As a result of the conflict and related export bans that were put in place by the Ukrainian government in March 2022, our ability to access grain inventories in Ukraine has been limited and could result in an impairment of all or a portion of those grain inventories, which amounted to approximately $30.0 million as of February 28, 2022. Refer to Item 1A of Part II of this Quarterly Report on Form 10-Q for additional considerations of the risks this conflict may continue to have on our business operations and financial performance.
We continue to navigate the lingering effects of the COVID-19 pandemic. Most of our operations are considered to be essential; however, periods of depressed demand and margins could result in decreased profitability and the need to assess for potential impairments. EasingMost of the measures taken to mitigate the spread of COVID-19 have been eased; however, additional variants, the rollouteffectiveness of vaccines and other efforts to respond to the pandemic in the United States and globally could alsocontinue to impact the profitability of our businesses. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2020,2021, for additional considerations of risks the COVID-19 pandemic may continue to have on our business, liquidity, capital resources and financial results.
Although improving fromThe energy industry continues to experience improved crack spreads and maintain higher volumes compared to the lows experienced during the prior fiscal year, the energy industry continued to experience volume and margin reductions compared to historical levels. These reductions are primarily the resultearly stages of the COVID-19 pandemic, which began in ourthe second quarter of fiscal 2020 and significantly reduced our profitability. In addition,profitability in fiscal 2021. At the same time, the cost of renewable energy credits has increasedremains significantly higher than historical levels, which continued to negatively impactedimpact our profitability during the second quarter of fiscal 2021.2022. Russia's invasion of Ukraine has also resulted in significant volatility in crude oil prices as sanctions have limited crude oil supply in global markets. We are unable to predict how long the current environment will last or the severity of the financial and operational impacts; however, we expect uncertainty and volatility to drive unfavorable market conditionscontinue in the energy industry that will negatively impact our profitability throughfor the remainder of fiscal 2021.2022, which could significantly impact our earnings.
Although challenges remain, the U.S. agricultural industry has experienced increasedcontinued, strong demand for grain and oilseed commodities, following the Phase One trade agreement with China, which has resulted in increased volumes and improved commodity prices. UnforeseenIn addition, due to decreased global supply and strong global demand for fertilizer and related products, the current improved profitability will likely continue in our Ag and Nitrogen Production segments until supply becomes more balanced with the current strong demand. However, unforeseen global market conditions can positively or negatively impact agricultural commodity prices and volumes sold. We are unable to predict these conditions or the severity of the impact such conditions could have on our pricing and volumes. In addition to global supply and demand impacts, regional factors such as unpredictable weather conditions, including those due to climate change, could impact our operations. AsFor example, unfavorable weather events and conditions experienced in fiscal 2021, including the effects of May 31, 2021, muchHurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, and drought conditions experienced in portions of our trade territory was experiencing drought conditions. If these conditions persist through the remainder of the summer, we would expecthave negatively impacted our fourth quarter Ag business to be impacted through lower volumes and margins on our Ag products. However, if timely rainfall were to occur, we would expect crops to mostly recover and the impact to our business to be minimal. Nonetheless, we expect revenues, margins and cash flows from core operations during fiscal 2022. As with
others in our Ag segmentindustry, we are seeing significantly higher freight costs that are the result of inflation and logistical challenges in the shipping industry, and we expect these challenges to potentially fluctuate throughcontinue for the remainder of fiscal 2021.2022. Additionally, unforeseen global market conditions with negative impacts remain a risk that could put pressure on asset valuations in our Ag segment.
In addition to navigating market conditions that impact our businesses, we will continue to take actions in an effort to protect our financial health during fiscal 2022, while continuing to deliver on our enterprise resource planning system implementation and advanceadvancing our target operating model, with actions that include implementing plans to substantially reduce budgeted costs and improving cash flow management with the objective of generating substantial additional operating cash flows.model.
Operating Metrics
Energy
Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, refineries, which process crude oil to produce refined products, including gasolines,gasoline, distillates and other products. The following table provides information about our consolidated refinery operations.operations:
| | | Three Months Ended May 31, | | Nine Months Ended May 31, | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Refinery throughput volumes | Refinery throughput volumes | (Barrels per day) | Refinery throughput volumes | (Barrels per day) |
Heavy, high-sulfur crude oil | Heavy, high-sulfur crude oil | 94,854 | | | 90,118 | | | 94,758 | | | 90,976 | | Heavy, high-sulfur crude oil | 103,233 | | | 96,847 | | | 102,784 | | | 94,709 | |
All other crude oil | All other crude oil | 69,156 | | | 61,328 | | | 61,893 | | | 71,730 | | All other crude oil | 73,845 | | | 56,302 | | | 72,076 | | | 58,202 | |
Other feedstocks and blendstocks | Other feedstocks and blendstocks | 12,917 | | | 6,657 | | | 13,496 | | | 12,184 | | Other feedstocks and blendstocks | 12,255 | | | 11,744 | | | 15,314 | | | 13,791 | |
Total refinery throughput volumes | Total refinery throughput volumes | 176,927 | | | 158,103 | | | 170,147 | | | 174,890 | | Total refinery throughput volumes | 189,333 | | | 164,893 | | | 190,174 | | | 166,702 | |
Refined fuel yields | Refined fuel yields | | | | | | | | Refined fuel yields | | | | | | | |
Gasolines | Gasolines | 89,297 | | | 73,196 | | | 83,723 | | | 84,837 | | Gasolines | 88,764 | | | 77,479 | | | 90,837 | | | 80,890 | |
Distillates | Distillates | 65,841 | | | 68,920 | | | 66,859 | | | 73,172 | | Distillates | 83,166 | | | 68,916 | | | 81,033 | | | 67,376 | |
We are subject to the Renewable FuelsFuel Standard, which requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as Renewable Identification Numbersrenewable identification numbers ("RINs"), in lieu of blending. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year, although standards have not yet been establishedyear. In December 2021, the EPA issued a proposal for the renewable volume obligation ("RVO") for calendar years 2020 through 2022. As proposed, the RVO for calendar year 2021.2020 is lower than previously issued, and calendar year 2021 is lower than anticipated as a result of lower demand for refined fuels due to the COVID-19 pandemic. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity, and RINs must be purchased on the open market. The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 295%25% and 180%39%, respectively, during the thirdsecond quarter of fiscal 20212022 compared to the same period of the prior year, which negatively impacted our profitability during the thirdsecond quarter of fiscal 2021.2022. Estimates of our RIN expense are based on past practicethe proposed RVO and are calculated using an average RIN price each month.
In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil differentials (i.e., the price differential between West Texas Intermediate ("WTI") crude oil and WCS crude oil), which are driven by the supply and demand of refined product markets.products. Crack spreads and WCS crude oil differentials both increased during the three and six months ended May 31,February 28, 2022 and 2021, compared to the same period during the prior year, contributing to improved IBIT for the Energy segment. However, WCS crude oil differentials decreased during the three months ended May 31, 2021, which partially offset the positive impact of improved crack spreads. The table below provides information about average market reference prices and differentials that impact our Energy segment.segment:
| | | Three Months Ended May 31, | | Nine Months Ended May 31, | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Market indicators | Market indicators | | | | | | | | Market indicators | | | | | | | |
WTI crude oil (dollars per barrel) | WTI crude oil (dollars per barrel) | $ | 63.07 | | | $ | 25.22 | | | $ | 52.00 | | | $ | 45.76 | | WTI crude oil (dollars per barrel) | $ | 82.10 | | | $ | 52.74 | | | $ | 79.62 | | | $ | 46.46 | |
WTI - WCS crude oil differential (dollars per barrel) | WTI - WCS crude oil differential (dollars per barrel) | $ | 11.00 | | | $ | 15.89 | | | $ | 10.90 | | | $ | 16.81 | | WTI - WCS crude oil differential (dollars per barrel) | $ | 16.17 | | | $ | 11.91 | | | $ | 14.56 | | | $ | 10.85 | |
Group 3 2:1:1 crack spread (dollars per barrel)* | Group 3 2:1:1 crack spread (dollars per barrel)* | $ | 20.27 | | | $ | 9.38 | | | $ | 13.49 | | | $ | 13.69 | | Group 3 2:1:1 crack spread (dollars per barrel)* | $ | 17.88 | | | $ | 12.55 | | | $ | 17.96 | | | $ | 10.10 | |
Group 3 5:3:2 crack spread (dollars per barrel)* | Group 3 5:3:2 crack spread (dollars per barrel)* | $ | 20.38 | | | $ | 8.26 | | | $ | 13.28 | | | $ | 12.69 | | Group 3 5:3:2 crack spread (dollars per barrel)* | $ | 17.24 | | | $ | 12.08 | | | $ | 17.40 | | | $ | 9.73 | |
D6 ethanol RIN (dollars per RIN) | D6 ethanol RIN (dollars per RIN) | $ | 1.3496 | | | $ | 0.3414 | | | $ | 0.9242 | | | $ | 0.2342 | | D6 ethanol RIN (dollars per RIN) | $ | 1.0968 | | | $ | 0.8745 | | | $ | 1.1404 | | | $ | 0.7115 | |
D4 ethanol RIN (dollars per RIN) | D4 ethanol RIN (dollars per RIN) | $ | 1.4342 | | | $ | 0.5131 | | | $ | 1.0928 | | | $ | 0.5112 | | D4 ethanol RIN (dollars per RIN) | $ | 1.4405 | | | $ | 1.0385 | | | $ | 1.4541 | | | $ | 0.9245 | |
*Group 3 refers to the oil refining and distribution system serving Midwest markets from the Gulf Coast through the Plains states.
Ag
Our Ag segment operations work together to facilitate production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally. Profitability in our Ag segment is largely driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices that are outside our control. The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the three and ninesix months ended May 31, 2021February 28, 2022 and 2020.2021:
| | | Three Months Ended May 31, | | Nine Months Ended May 31, | | Three Months Ended February 28, | | Six Months Ended February 28, |
| | Market Source* | | 2021 | | 2020 | | 2021 | | 2020 | | Market Source* | | 2022 | | 2021 | | 2022 | | 2021 |
Commodity prices | Commodity prices | | | | | | | | | | Commodity prices | | | | | | | | | |
Corn (dollars per bushel) | Corn (dollars per bushel) | Chicago Board of Trade | | $ | 6.54 | | | $ | 3.26 | | | $ | 5.27 | | | $ | 3.63 | | Corn (dollars per bushel) | Chicago Board of Trade | | $ | 6.39 | | | $ | 5.29 | | | $ | 5.98 | | | $ | 4.64 | |
Soybeans (dollars per bushel) | Soybeans (dollars per bushel) | Chicago Board of Trade | | $ | 15.13 | | | $ | 8.59 | | | $ | 13.20 | | | $ | 8.86 | | Soybeans (dollars per bushel) | Chicago Board of Trade | | $ | 14.88 | | | $ | 13.63 | | | $ | 13.62 | | | $ | 12.23 | |
Wheat (dollars per bushel) | Wheat (dollars per bushel) | Chicago Board of Trade | | $ | 6.75 | | | $ | 5.22 | | | $ | 6.38 | | | $ | 5.26 | | Wheat (dollars per bushel) | Chicago Board of Trade | | $ | 8.20 | | | $ | 6.21 | | | $ | 7.89 | | | $ | 5.82 | |
Urea (dollars per ton) | Urea (dollars per ton) | Green Markets NOLA | | $ | 376.00 | | | $ | 239.00 | | | $ | 298.00 | | | $ | 228.00 | | Urea (dollars per ton) | Green Markets NOLA | | $ | 644.00 | | | $ | 293.00 | | | $ | 657.00 | | | $ | 259.00 | |
Urea ammonium nitrate (dollars per ton) | Urea ammonium nitrate (dollars per ton) | Green Markets NOLA | | $ | 295.68 | | | $ | 145.00 | | | $ | 189.76 | | | $ | 145.00 | | Urea ammonium nitrate (dollars per ton) | Green Markets NOLA | | $ | 547.52 | | | $ | 154.88 | | | $ | 500.16 | | | $ | 137.10 | |
Ethanol (dollars per gallon) | Ethanol (dollars per gallon) | Chicago Platts | | $ | 2.16 | | | $ | 1.03 | | | $ | 1.72 | | | $ | 1.29 | | Ethanol (dollars per gallon) | Chicago Platts | | $ | 2.43 | | | $ | 1.54 | | | $ | 2.62 | | | $ | 1.50 | |
| Volumes | Volumes | | Volumes | |
Grain and oilseed (thousands of bushels) | Grain and oilseed (thousands of bushels) | | 685,761 | | | 621,775 | | | 2,099,623 | | | 1,825,064 | | Grain and oilseed (thousands of bushels) | | 534,955 | | | 665,030 | | | 1,099,067 | | | 1,411,613 | |
North American grain and oilseed port throughput (thousands of bushels) | North American grain and oilseed port throughput (thousands of bushels) | | 199,246 | | | 145,789 | | | 736,612 | | | 409,739 | | North American grain and oilseed port throughput (thousands of bushels) | | 186,935 | | | 218,616 | | | 359,922 | | | 438,322 | |
Crop nutrients (thousands of tons) | | 2,857 | | | 2,319 | | | 6,265 | | | 5,645 | | |
Wholesale crop nutrients (thousands of tons) | | Wholesale crop nutrients (thousands of tons) | | 1,375 | | | 1,534 | | | 3,199 | | | 3,409 | |
Ethanol (thousands of gallons) | Ethanol (thousands of gallons) | | 221,125 | | | 171,034 | | | 660,043 | | | 618,834 | | Ethanol (thousands of gallons) | | 228,355 | | | 218,147 | | | 452,601 | | | 438,918 | |
*Market source information represents the average month-end price during the period.
Results of Operations
Three months ended May 31,February 28, 2022 and 2021 and 2020
| | | Three Months Ended May 31, | | Three Months Ended February 28, |
| | 2021 | | % of Revenues | | 2020 | | % of Revenues | | | 2022 | | % of Revenues* | | 2021 | | % of Revenues* |
| | (Dollars in thousands) | | (Dollars in thousands) |
Revenues | Revenues | $ | 10,929,976 | | | 100.0 | % | | $ | 7,241,031 | | | 100.0 | % | | Revenues | $ | 10,332,588 | | | 100.0 | % | | $ | 8,320,159 | | | 100.0 | % |
Cost of goods sold | Cost of goods sold | 10,615,348 | | | 97.1 | | | 7,022,672 | | | 97.0 | | | Cost of goods sold | 10,063,590 | | | 97.4 | | | 8,218,439 | | | 98.8 | |
Gross profit | Gross profit | 314,628 | | | 2.9 | | | 218,359 | | | 3.0 | | | Gross profit | 268,998 | | | 2.6 | | | 101,720 | | | 1.2 | |
Marketing, general and administrative expenses | Marketing, general and administrative expenses | 186,703 | | | 1.7 | | | 180,439 | | | 2.5 | | | Marketing, general and administrative expenses | 244,325 | | | 2.4 | | | 161,510 | | | 1.9 | |
Operating earnings | 127,925 | | | 1.2 | | | 37,920 | | | 0.5 | | | |
Operating earnings (loss) | | Operating earnings (loss) | 24,673 | | | 0.2 | | | (59,790) | | | (0.7) | |
| Interest expense | Interest expense | 28,992 | | | 0.3 | | | 26,661 | | | 0.4 | | | Interest expense | 25,174 | | | 0.2 | | | 28,855 | | | 0.3 | |
Other income | Other income | (10,748) | | | (0.1) | | | (8,076) | | | (0.1) | | | Other income | (1,405) | | | — | | | (17,846) | | | (0.2) | |
Equity income from investments | Equity income from investments | (146,522) | | | (1.3) | | | (51,114) | | | (0.7) | | | Equity income from investments | (229,923) | | | (2.2) | | | (64,109) | | | (0.8) | |
Income before income taxes | 256,203 | | | 2.3 | | | 70,449 | | | 1.0 | | | |
Income tax benefit | (17,469) | | | (0.2) | | | (27,052) | | | (0.4) | | | |
Net income | 273,672 | | | 2.5 | | | 97,501 | | | 1.3 | | | |
Net income (loss) attributable to noncontrolling interests | 81 | | | — | | | (147) | | | — | | | |
Net income attributable to CHS Inc. | $ | 273,591 | | | 2.5 | % | | $ | 97,648 | | | 1.3 | % | | |
Income (loss) before income taxes | | Income (loss) before income taxes | 230,827 | | | 2.2 | | | (6,690) | | | (0.1) | |
Income tax expense | | Income tax expense | 11,931 | | | 0.1 | | | 31,668 | | | 0.4 | |
Net income (loss) | | Net income (loss) | 218,896 | | | 2.1 | | | (38,358) | | | (0.5) | |
Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | (104) | | | — | | | (129) | | | — | |
Net income (loss) attributable to CHS Inc. | | Net income (loss) attributable to CHS Inc. | $ | 219,000 | | | 2.1 | % | | $ | (38,229) | | | (0.5) | % |
*Amounts less than 0.1% are shown as zero percent. Percentage totals may differ due to rounding.
The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the three months ended May 31, 2021.February 28, 2022. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.
Income (Loss) Before Income Taxes by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income (loss) before income taxes | $ | 4,959 | | | $ | (54,764) | | | $ | 59,723 | | | 109.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income (loss) before income taxes | $ | 10,832 | | | $ | (54,690) | | | $ | 65,522 | | | 119.8 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Energy segment IBIT reflects the following:
•ImprovedHigher crack spreads and increased WCS crude oil differentials reflect improved market conditions in our refined fuels business resulted in increased margins as the demand shocks that occurred during the COVID-19 pandemic beganand contributed to subside and a $42.0$94.4 million noncash charge to reduce our refined fuels inventories to their market value during the third quarterincrease of fiscal 2020 that did not reoccur during the third quarter of fiscal 2021.IBIT.
•Improved margins in our refined fuels business were partially offset by significantly higher RIN prices that negatively impacted margins by approximately $82.0 million and decreased WCS crude oil differentials and lowerdue to market conditions.
•Lower propane margins due to the reversal of hedging gains recognizedresulting from unrealized hedging-related losses during the prior year.second quarter of fiscal 2022 also partially offset the improved earnings in our refined fuels business.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income (loss) before income taxes | $ | 140,131 | | | $ | 95,360 | | | $ | 44,771 | | | 46.9 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income before income taxes | $ | 55,181 | | | $ | 14,044 | | | $ | 41,137 | | | 292.9 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Ag segment IBIT reflects the following:
•Increased margins onacross most of our Ag segment product categories during the second quarter of fiscal 2022, including:
◦$51.0 million increase for oilseed processing as a result of strong meal and oil demand;
◦$44.6 million increase for feed and farm supplies graindue to favorable pricing resulting from strong demand and oilseed, renewable fuelsconstrained supply; and
◦$39.5 million increase for wholesale agronomy products, which resulted from improvedstrong global commodity market conditions during the third quarter of fiscal 2021. The increased margins were partially offset by mark-to-market losses for certain processingdemand and food ingredients products, which we expect to reverse over time.global supply disruptions.
•Decreased volumes ofdue to supply chain constraints, less crop-drying activity and timing differences associated with earlier spring demand during the prior year resulted in a $53.5 million decrease for feed and farm supplies were partially offset by increased volumes of agronomy products that resulted from strong demand due to favorable weather conditions for the spring planting and application season. Increased volumes of grain and oilseed resulted from improved trade relations between the United States and foreign trade partners.supplies.
All Other Segments
| | | Three Months Ended May 31, | | Change | | | Three Months Ended February 28, | | Change |
| | 2021 | | 2020 | | Dollars | | Percent | | | 2022 | | 2021 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | | | | (Dollars in thousands) | | |
Nitrogen Production IBIT* | Nitrogen Production IBIT* | $ | 46,635 | | | $ | 23,507 | | | $ | 23,128 | | | 98.4 | % | | Nitrogen Production IBIT* | $ | 154,257 | | | $ | 11,165 | | | $ | 143,092 | | | 1,281.6 | % |
Corporate and Other IBIT | Corporate and Other IBIT | $ | 64,478 | | | $ | 6,346 | | | $ | 58,132 | | | 916.0 | % | | Corporate and Other IBIT | $ | 10,557 | | | $ | 22,791 | | | $ | (12,234) | | | (53.7) | % |
*SeeFor additional information, see Note 5, Investments, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.10-Q.
Our Nitrogen Production segment IBIT increased as a result of higher equity method income attributed to increased sale prices of urea and urea ammonium nitrate ("UAN"),UAN, which are produced and soldwas partially offset by CF Nitrogen.increased natural gas costs. Corporate and Other IBIT increaseddecreased primarily due to our equity method investment in Ventura Foods, LLC ("Ventura Foods"), which had significantly increased income as a result of favorable market conditions for oils and a recovery of sales volumeshigher performance-based incentive compensation accruals associated with improved financial results compared withto the early stages of the COVID-19 pandemic.prior year.
Revenues by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Revenues | $ | 1,704,798 | | | $ | 890,919 | | | $ | 813,879 | | | 91.4 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Revenues | $ | 2,027,999 | | | $ | 1,372,158 | | | $ | 655,841 | | | 47.8 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
The change in Energy segment revenues reflects the following:
•Increased selling prices and volumes for refined fuels ascontributed to a result of$517.0 million increase in revenues and resulted from global market conditions, including improved demand following the initial demand shocks associated with the COVID-19 pandemic, contributed to $724.8 million and $33.8 million increases in revenues, respectively.conditions.
•Increased selling prices for propane as a result of global market conditions during the thirdsecond quarter of fiscal 20212022 positively impacted revenue by $53.2$136.4 million.
•IncreasedLower propane volumes contributed to a $33.7 million decrease in revenues were partially offset by lower volumes of propane driven by lower demand as a result of warmwarmer winter weather conditions during most of the thirdsecond quarter of fiscal 2021.2022 compared to the same period of the prior year, which was partially offset by increased volumes of refined fuels.
Ag
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Revenues | $ | 8,295,931 | | | $ | 6,938,212 | | | $ | 1,357,719 | | | 19.6 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended February 28, 2022, compared to the same period during the prior year:
The change in Ag segment revenues reflects the following:
•Higher pricing attributed to market-driven price increases across all of our Ag segment product categories during the second quarter of fiscal 2022, including:
◦$1.3 billion increase for grain and oilseed driven by increased global demand;
◦$688.7 million increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions;
◦$338.7 million increase for renewable fuels resulting from high demand;
◦$251.8 million increase for feed and farm supplies due to strong demand and constrained supply; and
◦$224.4 million increase for oilseed processing due to strong meal and oil demand.
•Decreased volumes of grain and oilseed contributed to a $1.1 billion decrease in revenues. The decreased volumes resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued, and lower crop yields due to drought conditions experienced in portions of our trade territory in North America.
•The remaining volume decrease related to lower volumes across most of our other Ag segment product categories, including a $175.8 million decrease for feed and farm supplies due to supply chain constraints, less crop-drying activity and timing differences associated with earlier spring demand during the prior year.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Corporate and Other revenues* | $ | 8,658 | | | $ | 9,789 | | | $ | (1,131) | | | (11.6) | % |
*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.
There were no significant changes to revenues in Corporate and Other during the three months ended February 28, 2022, compared to the same period during the prior year.
Cost of Goods Sold by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Cost of goods sold | $ | 1,952,852 | | | $ | 1,380,045 | | | $ | 572,807 | | | 41.5 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the three months ended February 28, 2022, compared to the same period during the prior year:
The change in Energy segment COGS reflects the following:
•Increased costs for refined fuels contributed to $430.2 million increase of COGS driven by global market conditions.
•Increased costs for propane as a result of global market conditions and unrealized hedging-related losses resulted in a $140.4 million increase of COGS.
•Lower volumes of propane contributed to a $32.4 million decrease of COGS driven by lower demand as a result of warmer winter weather conditions during most of the second quarter of fiscal 2022 compared to the same period of the prior year, which was partially offset by increased volumes of refined fuels.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Revenues | $ | 9,216,204 | | | $ | 6,337,901 | | | $ | 2,878,303 | | | 45.4 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment revenues reflects the following:
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $1.5 billion increase in revenues. The remaining price increase was attributed to a combination of price increases and product mix across our other Ag segment businesses, including feed and farm supplies, renewable fuels, agronomy, and processing and food ingredients.
•Improved trade relations between the United States and foreign trade partners drove increased grain and oilseed volumes that contributed to a $473.6 million increase in revenues. The increased grain and oilseed volumes were partially offset by the net impact of decreased volumes of feed and farm supplies and increased volumes of agronomy products and renewable fuels that were driven by global market conditions.
•Due to a planned business model change at our TEMCO LLC ("TEMCO") equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during the three months ended May 31, 2021.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Corporate and Other revenues* | $ | 8,974 | | | $ | 12,211 | | | $ | (3,237) | | | (26.5) | % | | | | | | | | |
*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Corporate and Other revenues decreased during the three months ended May 31, 2021, compared to the same period during the prior year as a result of lower revenues in our financing and hedging businesses due to market-driven interest rate reductions and decreased commissions from hedging activities, respectively.
Cost of Goods Sold by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Cost of goods sold | $ | 1,649,905 | | | $ | 893,922 | | | $ | 755,983 | | | 84.6 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment COGS reflects the following:
•Increased costs and volumes for refined fuels contributed to $631.4 million and $35.8 million increases of COGS, respectively. Increased refined fuels costs resulted from global market conditions, including the impact of significantly higher RIN prices, and increased volumes resulted from improved demand following the initial demand shocks associated with the COVID-19 pandemic.
•Increased costs for propane as a result of global market conditions and increased distribution costs resulted in an $80.8 million increase of COGS.
•Increased COGS was partially offset by lower volumes of propane driven by lower demand as a result of warm weather conditions during most of the third quarter of fiscal 2021.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Cost of goods sold | $ | 8,967,297 | | | $ | 6,129,293 | | | $ | 2,838,004 | | | 46.3 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Cost of goods sold | $ | 8,111,480 | | | $ | 6,841,093 | | | $ | 1,270,387 | | | 18.6 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
The change in Ag segment COGS reflects the following:
•Higher pricingcosts attributed to market-driven price increases across all of our Ag segment product categories during the second quarter of fiscal 2022, including:
◦$1.3 billion increase for grain and oilseed was driven by increased global demand;
◦$649.2 million increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions;
◦$305.3 million increase for renewable fuels resulting from high demand driving higher prices;
◦$207.2 million increase for feed and farm supplies due to strong demand and constrained supply; and
◦$173.4 million increase for oilseed processing due to strong meal and oil demand.
•Decreased volumes of grain and oilseed contributed to a $1.5$1.1 billion increasedecrease in COGS. The remaining price increase was attributed todecreased volumes resulted from a combination of price increasesfactors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued, and product mixlower crop yields due to drought conditions experienced in portions of our trade territory in North America.
•The remaining volume decrease related to lower volumes across most of our other Ag segment businesses,product categories, including a $122.3 million decrease for feed and farm supplies renewable fuels, agronomy,due to supply chain constraints, less crop-drying activity and processing and food ingredients.
•Improved trade relations between the United States and foreign trade partners drove increased grain and oilseed volumes that contributed to a $474.0 million increase in COGS. The increased grain and oilseed volumes were partially offset by the net impact of decreased volumes of feed and farm supplies and increased volumes of agronomy products and renewable fuels that were driven by global market conditions.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactionstiming differences associated with TEMCO, which partially offset strong volume growth in grain and oilseedearlier spring demand during the three months ended May 31, 2021.prior year.
All Other Segments
| | | Three Months Ended May 31, | | Change | | | Three Months Ended February 28, | | Change |
| | 2021 | | 2020 | | Dollars | | Percent | | | 2022 | | 2021 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | | | | (Dollars in thousands) | | |
Nitrogen Production COGS | Nitrogen Production COGS | $ | 425 | | | $ | 430 | | | $ | (5) | | | (1.2)% | | Nitrogen Production COGS | $ | 414 | | | $ | 422 | | | $ | (8) | | | (1.9)% |
Corporate and Other COGS | Corporate and Other COGS | $ | (2,279) | | | $ | (973) | | | $ | (1,306) | | | (134.2)% | | Corporate and Other COGS | $ | (1,156) | | | $ | (3,121) | | | $ | 1,965 | | | 63.0% |
There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.
Marketing, General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Marketing, general and administrative expenses | $ | 186,703 | | | $ | 180,439 | | | $ | 6,264 | | | 3.5 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Marketing, general and administrative expenses | $ | 244,325 | | | $ | 161,510 | | | $ | 82,815 | | | 51.3 | % |
Marketing, general and administrative expenses increased during the three months ended May 31, 2021, compared to the three months ended May 31, 2020,February 28, 2022, primarily due to increased variablehigher performance-based incentive compensation resulting fromaccruals driven by improved earnings acrossfinancial results in comparison to the prior year, as well as increased external consulting expenses for projects such as our Ag segment businesses, which was partially offset by various cost reduction initiatives launched during the current year.enterprise resource planning system implementation and advancing our operating model.
Interest Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Interest expense | $ | 28,992 | | | $ | 26,661 | | | $ | 2,331 | | | 8.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Interest expense | $ | 25,174 | | | $ | 28,855 | | | $ | (3,681) | | | (12.8) | % |
Interest expense increaseddecreased during the three months ended May 31, 2021,February 28, 2022, as a result of higherlower notes payable and long-term debt balances compared to the same period of the prior year.
Other Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Other income | $ | 10,748 | | | $ | 8,076 | | | $ | 2,672 | | | 33.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Other income | $ | 1,405 | | | $ | 17,846 | | | $ | (16,441) | | | (92.1) | % |
Other income increaseddecreased during the three months ended May 31, 2021,February 28, 2022, primarily due to an investment gainsgain during the second quarter of the prior year that did not occurreoccur during the same period of the priorcurrent year.
Equity Income from Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Equity income from investments* | $ | 146,522 | | | $ | 51,114 | | | $ | 95,408 | | | 186.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Equity income from investments* | $ | 229,923 | | | $ | 64,109 | | | $ | 165,814 | | | 258.6 | % |
*SeeFor additional information, see Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.10-Q.
We record equity income or loss for investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. Equity income from investments increased during the three months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year, primarily due to increased income associated with our equity method investmentsinvestment in Ventura Foods and CF Nitrogen. Ventura Foods experienced favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic, and CF Nitrogen experienced increased sale prices of urea and UAN.UAN due to strong global demand and decreased global supply.
Income Tax BenefitExpense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income tax benefit | $ | 17,469 | | | $ | 27,052 | | | $ | (9,583) | | | (35.4) | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income tax expense | $ | 11,931 | | | $ | 31,668 | | | $ | (19,737) | | | 62.3 | % |
The lowerDecreased income tax benefitexpense during the three months ended May 31, 2021,February 28, 2022, primarily reflected changesresulted from a significant change in the mix of full-year earnings projected across business units and equity management assumptions.during the second quarter of the prior year that did not reoccur during the current year. Effective tax rates for the three months ended May 31,February 28, 2022 and 2021, were 5.2% and 2020, were (6.8)% and (38.4)(473.4)%, respectively. Federal and state statutory rates applied to nonpatronage business activity were 24.9%24.4% and 24.7%24.9% for the three months ended May 31,February 28, 2022 and 2021, and 2020, respectively. Income taxes and effective tax raterates vary each year based on profitability and nonpatronage business activity during each of the comparable years.activity.
NineSix months ended May 31,February 28, 2022 and 2021 and 2020
| | | Nine Months Ended May 31, | | Six Months Ended February 28, |
| | 2021 | | % of Revenues | | 2020 | | % of Revenues | | | 2022 | | % of Revenues* | | 2021 | | % of Revenues* |
| | (Dollars in thousands) | | (Dollars in thousands) |
Revenues | Revenues | $ | 27,965,778 | | | 100.0 | % | | $ | 21,460,742 | | | 100.0 | % | | Revenues | $ | 21,213,345 | | | 100.0 | % | | $ | 17,035,802 | | | 100.0 | % |
Cost of goods sold | Cost of goods sold | 27,371,326 | | | 97.9 | | | 20,601,785 | | | 96.0 | | | Cost of goods sold | 20,424,439 | | | 96.3 | | | 16,755,978 | | | 98.4 | |
Gross profit | Gross profit | 594,452 | | | 2.1 | | | 858,957 | | | 4.0 | | | Gross profit | 788,906 | | | 3.7 | | | 279,824 | | | 1.6 | |
Marketing, general and administrative expenses | Marketing, general and administrative expenses | 518,875 | | | 1.9 | | | 548,340 | | | 2.6 | | | Marketing, general and administrative expenses | 449,259 | | | 2.1 | | | 332,171 | | | 1.9 | |
Operating earnings | 75,577 | | | 0.3 | | | 310,617 | | | 1.4 | | | |
Operating earnings (loss) | | Operating earnings (loss) | 339,647 | | | 1.6 | | | (52,347) | | | (0.3) | |
| Interest expense | Interest expense | 82,897 | | | 0.3 | | | 95,043 | | | 0.4 | | | Interest expense | 48,606 | | | 0.2 | | | 53,905 | | | 0.3 | |
Other income | Other income | (41,219) | | | (0.1) | | | (32,926) | | | (0.2) | | | Other income | (25,181) | | | (0.1) | | | (30,470) | | | (0.2) | |
Equity income from investments | Equity income from investments | (260,654) | | | (0.9) | | | (135,174) | | | (0.6) | | | Equity income from investments | (381,268) | | | (1.8) | | | (114,132) | | | (0.7) | |
Income before income taxes | Income before income taxes | 294,553 | | | 1.1 | | | 383,674 | | | 1.8 | | | Income before income taxes | 697,490 | | | 3.3 | | | 38,350 | | | 0.2 | |
Income tax benefit | (10,130) | | | — | | | (18,258) | | | (0.1) | | | |
Income tax expense | | Income tax expense | 26,651 | | | 0.1 | | | 7,339 | | | — | |
Net income | Net income | 304,683 | | | 1.1 | | | 401,932 | | | 1.9 | | | Net income | 670,839 | | | 3.2 | | | 31,011 | | | 0.2 | |
Net (loss) income attributable to noncontrolling interests | (350) | | | — | | | 955 | | | — | | | |
Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | (122) | | | — | | | (431) | | | — | |
Net income attributable to CHS Inc. | Net income attributable to CHS Inc. | $ | 305,033 | | | 1.1 | % | | $ | 400,977 | | | 1.9 | % | | Net income attributable to CHS Inc. | $ | 670,961 | | | 3.2 | % | | $ | 31,442 | | | 0.2 | % |
*Amounts less than 0.1% are shown as zero percent. Percentage totals may differ due to rounding.
The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the ninesix months ended May 31, 2021.February 28, 2022. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.
Income (Loss) Before Income Taxes by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income (loss) before income taxes | $ | (116,908) | | | $ | 246,309 | | | $ | (363,217) | | | (147.5) | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income (loss) before income taxes | $ | 80,021 | | | $ | (121,867) | | | $ | 201,888 | | | 165.7 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the ninesix months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Energy segment IBIT reflects the following:
•Less advantageousHigher crack spreads and increased WCS crude oil differentials reflect improved market conditions in our refined fuels business comparedand contributed to the same perioda $282.2 million increase of the prior year resulted in significantly lower margins and volumes. These market conditions were driven by continued impact of the demand shocks occurring during the COVID-19 pandemic during the first three quarters of fiscal 2021, which resulted in a combination of decreased WCS crude oil differentials experienced on heavy Canadian crude oil processed by our refineries and decreased crack spreads.IBIT.
•SignificantlyImproved margins in our refined fuels business were partially offset by higher RIN prices negatively impacted margins by approximately $145.0 million.due to market conditions.
•Lower propane margins resulting from unrealized hedging-related losses during fiscal 2022 also partially offset the improved earnings in our refined fuels business.
Ag
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income before income taxes | $ | 341,606 | | | $ | 97,053 | | | $ | 244,553 | | | 252.0 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the six months ended February 28, 2022, compared to the same period during the prior year:
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Ag segment IBIT reflects the following:
•Increased margins across all our Ag segment product categories, including:
◦$119.3 million increase for wholesale agronomy products, which resulted from strong global market demand and global supply disruptions;
◦$83.8 million increase for oilseed processing as a result of strong meal and oil demand;
◦$60.7 million increase for feed and farm supplies due to strong demand and global supply disruptions; and
◦$53.1 million increase for grain and oilseed that resulted primarily from mark-to-market changes associated with our commodity derivatives, including the reversal of hedging gains recognizedunrealized losses.
•Decreased volumes due to supply chain constraints, less crop-drying activity and timing differences associated with earlier spring demand during the prior year resulted in a $57.8 million decrease for feed and reducedfarm supplies.
•The remaining volume decrease related primarily to grain and oilseed, which resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued; lower crop yields due to drought conditions experienced in portions of our trade territory; and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Nitrogen Production IBIT* | $ | 250,840 | | | $ | 15,635 | | | $ | 235,205 | | | 1,504.3 | % |
Corporate and Other IBIT | $ | 25,023 | | | $ | 47,529 | | | $ | (22,506) | | | (47.4) | % |
*For additional information, see Note 5, Investments, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.
Our Nitrogen Production segment IBIT increased as a result of higher equity income attributed to increased sale prices of urea and UAN, which was partially offset by increased natural gas costs. Corporate and Other IBIT decreased primarily due to higher performance-based incentive compensation accruals associated with improved results in comparison to the prior year.
Revenues by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Revenues | $ | 4,331,986 | | | $ | 2,630,005 | | | $ | 1,701,981 | | | 64.7 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the six months ended February 28, 2022, compared to the same period during the prior year:
The change in Energy segment revenues reflects the following:
•Increased selling prices and volumes for refined fuels contributed to $1.4 billion and $58.8 million increases in revenues, respectively. Increased refined fuels selling prices resulted from global market conditions and increased volumes resulted from a return to more normal levels compared to the lower volumes experienced during the COVID-19 pandemic.
•Increased selling prices for propane as a result of global market conditions during the first half of fiscal 2022 positively impacted revenue by $271.6 million.
•Increased revenues were partially offset by lower volumes of propane driven by lower demand as a result of warmer and drier weather conditions during the first half of fiscal 2021 reduced income2022 compared to the same period of the prior year.
Ag
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Revenues | $ | 16,865,190 | | | $ | 14,383,614 | | | $ | 2,481,576 | | | 17.3 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the six months ended February 28, 2022, compared to the same period during the prior year:
The change in Ag segment revenues reflects the following:
•Higher pricing attributed to market-driven price increases across all of our Ag segment product categories, including:
◦$2.4 billion increase in revenues for grain and oilseed driven by increased global demand;
◦$1.3 billion increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions;
◦$626.5 million increase for feed and farm supplies due to strong demand and constrained supply;
◦$537.7 million increase for renewable fuels resulting from high demand driving higher prices; and
◦$295.1 million increase for oilseed processing due to strong meal and oil demand.
•Lower volumes of grain and oilseed contributed to a $2.5 billion decrease in revenues. The decreased volumes resulted from a combination of factors, including the comparable period of the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued; a business model change at our TEMCO, LLC ("TEMCO"), equity method investment during the second quarter of fiscal 2021 that resulted in reduced revenues and COGS during the current period on certain transactions associated with TEMCO; lower crop yields due to drought conditions experienced in portions of our North American trade territory; and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022.
•The remaining volume decrease was experienced across most of our other Ag segment product categories, including a $326.6 million decrease for feed and farm supplies due to supply chain constraints, less crop-drying activity and timing differences associated with earlier spring demand during the prior year.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Corporate and Other revenues* | $ | 16,169 | | | $ | 22,183 | | | $ | (6,014) | | | (27.1) | % |
*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.
Corporate and Other revenues decreased during the six months ended February 28, 2022, compared to the same period during the prior year primarily as a result of decreased revenues in our hedging business due to lower commissions from hedging activities.
Cost of Goods Sold by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Cost of goods sold | $ | 4,132,477 | | | $ | 2,661,087 | | | $ | 1,471,390 | | | 55.3 | % |
The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the six months ended February 28, 2022, compared to the same period during the prior year:
The change in Energy segment COGS reflects the following:
•Increased costs and volumes for refined fuels contributed to $1.1 billion and $60.9 million increases of COGS, respectively. Increased refined fuels costs resulted from global market conditions and increased volumes resulted from a return to more normal levels compared to the lower volumes experienced during the COVID-19 pandemic.
•Higher costs for propane as a result of global market conditions and unrealized hedging-related losses resulted in a $292.9 million increase of COGS.
•Increased COGS was partially offset by lower volumes of propane driven by lower demand as a result of warmer and drier weather conditions during most of the first half of fiscal 2022 compared to the same period of the prior year.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income (loss) before income taxes | $ | 237,185 | | | $ | 60,653 | | | $ | 176,532 | | | 291.1 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the nine months ended May 31, 2021, compared to the same period during the prior year.
*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
The change in Ag segment IBIT reflects the following:
•Favorable weather conditions for the fall harvest and spring planting seasons and improved trade relations between the United States and foreign trade partners during fiscal 2021 compared to the prior year contributed to increased volumes and margins across most of our Ag segment. These improved margins were partially offset by decreased grain and oilseed and processing and food ingredients margins, including mark-to-market losses that we expect to reverse over time.
•We experienced decreased marketing, general and administrative expenses associated with focused cost-reduction initiatives and increased equity income from our investment in TEMCO.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Nitrogen Production IBIT* | $ | 62,270 | | | $ | 45,698 | | | $ | 16,572 | | | 36.3 | % | | | | | | | | |
Corporate and Other IBIT | $ | 112,006 | | | $ | 31,014 | | | $ | 80,992 | | | 261.1 | % | | | | | | | | |
*See Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.
Our Nitrogen Production segment experienced increased IBIT due to increased equity method income attributed to higher sale prices of urea and UAN, which were partially offset by increased natural gas costs. Corporate and Other IBIT increased primarily due to increased income from our equity method investments in Ventura Foods and Ardent Mills as a result of favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic; decreased marketing, general and administrative expenses as a result of focused cost reduction efforts; and decreased interest expense due to lower interest rates.
Revenues by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Revenues | $ | 4,334,803 | | | $ | 4,247,392 | | | $ | 87,411 | | | 2.1 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment revenues reflects the following:
•Increased selling prices for propane and refined fuels as a result of global market conditions, including improved demand following the initial demand shocks associated with the COVID-19 pandemic, resulted in increased revenues of $126.7 million and $99.3 million, respectively.
•Decreased volumes of propane and refined fuels contributed to $89.9 million and $47.7 million decreases in revenues, respectively. Decreased propane volumes resulted from lower demand due to warmer and drier weather conditions during fiscal 2021 and the decreased volumes of refined fuels resulted from global market conditions, including the continued impact of the demand shocks occurring during the COVID-19 pandemic, as well as product mix.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Revenues | $ | 23,599,818 | | | $ | 17,173,958 | | | $ | 6,425,860 | | | 37.4 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment revenues reflects the following:
•Trade relations improved between the United States and foreign trade partners and weather conditions were more favorable compared to the same period of the prior year. Stronger grain and oilseed shipments contributed to a $2.1 billion increase in revenues with the remaining increase being composed primarily of improved sales volumes of feed and farm supplies and agronomy products.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during fiscal 2021.
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $3.2 billion increase in revenues. The remaining price increase was attributed to a combination of price increases and product mix across our other businesses, including feed and farm supplies, renewable fuels, agronomy and processing and food ingredients.
All Other Segments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Corporate and Other revenues* | $ | 31,157 | | | $ | 39,392 | | | $ | (8,235) | | | (20.9) | % | | | | | | | | |
*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Corporate and Other revenues decreased during the nine months ended May 31, 2021, compared to the same period during the prior year as a result of lower revenues in our financing business due to market-driven interest rate reductions.
Cost of Goods Sold by Segment
Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Cost of goods sold | $ | 4,310,992 | | | $ | 3,850,176 | | | $ | 460,816 | | | 12.0 | % | | | | | | | | |
The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment COGS reflects the following:
•Increased refined fuel prices resulted from global market conditions and contributed to a $375.2 million increase of COGS, including the impact of significantly higher costs for RINs of approximately $145.0 million.
•Global market conditions, the reversal of hedging gains recognized during the prior year and increased distribution costs contributed to a $201.7 million increase of COGS for propane.
•Lower volumes of propane and refined fuels contributed to $73.2 million and $44.2 million decreases of COGS, respectively. Decreased propane volumes were driven by lower demand that resulted from warmer and drier weather conditions during fiscal 2021, and lower volumes of refined fuels resulted from global market conditions, including the continued impact of demand shocks occurring during the COVID-19 pandemic.
Ag
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Cost of goods sold | $ | 23,068,732 | | | $ | 16,752,073 | | | $ | 6,316,659 | | | 37.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Cost of goods sold | $ | 16,295,473 | | | $ | 14,101,435 | | | $ | 2,194,038 | | | 15.6 | % |
The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the ninesix months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.year:
The change in Ag segment COGS reflects the following:
•Improved trade relations betweenHigher costs attributed to market-driven price increases across all of our Ag segment product categories, including:
◦$2.4 billion increase for grain and oilseed driven by increased global demand;
◦$1.2 billion increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions;
◦$565.7 million increase for feed and farm supplies due to strong demand and constrained supply;
◦$499.3 million increase for renewable fuels resulting from high demand driving higher prices; and
◦$211.3 million increase for oilseed processing due to strong meal and oil demand.
•Lower volumes of grain and oilseed contributed to a $2.4 billion decrease in COGS. The decreased volumes resulted from a combination of factors, including the United States and foreign trade partners and favorable weather conditions compared to the samecomparable period of the prior year droveexperiencing elevated volumes higher. Stronger grain and oilseed shipments contributed tofollowing the Phase One trade agreement with China, which has since plateaued; a $2.0 billion increase of COGS with the remaining increase being composed primarily of improved volumes of agronomy products and feed and farm supplies.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, weduring the second quarter of fiscal 2021 that resulted in reduced our revenues and COGS during the current period on certain transactions associated with TEMCO, which partially offset strong volume growthTEMCO; lower crop yields due to drought conditions experienced in portions of our North American trade territory; and the impact of Hurricane Ida on our grain and oilseedexport terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2021.2022.
•Higher prices for grain and oilseed resulted from increased global demand and contributed to a $3.3 billion increase of COGS. The remaining price increasevolume decrease was driven byexperienced across most of our other Ag segment product categories, including a combination of global market conditions and product mix, which increased costs for renewable fuels, agronomy products, and processing and food ingredients, as well as partially offsetting price decreases$268.9 million decrease for feed and farm supplies.supplies due to supply chain constraints, less crop-drying activity and timing differences associated with earlier spring demand during the prior year.
All Other Segments
| | | Nine Months Ended May 31, | | Change | | | Six Months Ended February 28, | | Change |
| | 2021 | | 2020 | | Dollars | | Percent | | | 2022 | | 2021 | | Dollars | | Percent |
| | (Dollars in thousands) | | | | | | | (Dollars in thousands) | | |
Nitrogen Production COGS | Nitrogen Production COGS | $ | 1,268 | | | $ | 1,964 | | | $ | (696) | | | (35.4)% | | Nitrogen Production COGS | $ | 828 | | | $ | 843 | | | $ | (15) | | | (1.8)% |
Corporate and Other COGS | Corporate and Other COGS | $ | (9,666) | | | $ | (2,428) | | | $ | (7,238) | | | (298.1)% | | Corporate and Other COGS | $ | (4,339) | | | $ | (7,387) | | | $ | 3,048 | | | 41.3% |
There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the ninesix months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year.
Marketing, General and Administrative Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Marketing, general and administrative expenses | $ | 518,875 | | | $ | 548,340 | | | $ | (29,465) | | | (5.4) | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Marketing, general and administrative expenses | $ | 449,259 | | | $ | 332,171 | | | $ | 117,088 | | | 35.2 | % |
Marketing, general and administrative expenses decreasedincreased during the ninesix months ended May 31, 2021, comparedFebruary 28, 2022, primarily due to higher performance-based incentive compensation accruals driven by improved financial results in comparison to the nine months ended May 31, 2020, due to lower employee-relatedprior year, as well as increased external consulting expenses lower bad debt expensesfor projects such as our enterprise resource planning system implementation and focused cost reduction initiatives launched during the current year.advancing our operating model.
Interest Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Interest expense | $ | 82,897 | | | $ | 95,043 | | | $ | (12,146) | | | (12.8) | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Interest expense | $ | 48,606 | | | $ | 53,905 | | | $ | (5,299) | | | (9.8) | % |
Interest expense decreased during the ninesix months ended May 31, 2021,February 28, 2022, as a result of lower interest ratesnotes payable and long-term debt balances compared to the same period of the prior year.
Other Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Other income | $ | 41,219 | | | $ | 32,926 | | | $ | 8,293 | | | 25.2 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Other income | $ | 25,181 | | | $ | 30,470 | | | $ | (5,289) | | | (17.4) | % |
Other income increaseddecreased during the ninesix months ended May 31, 2021,February 28, 2022, primarily due to an investment gainsgain during the second quarter of the prior year that did not reoccur during the current year. The decrease was partially offset by a gain on the sale of a business in our Ag segment during the first quarter of fiscal 2022 that did not occur during the same period of the prior year.
Equity Income from Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Equity income from investments* | $ | 260,654 | | | $ | 135,174 | | | $ | 125,480 | | | 92.8 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Equity income from investments* | $ | 381,268 | | | $ | 114,132 | | | $ | 267,136 | | | 234.1 | % |
*SeeFor additional information, see Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.10-Q.
We record equity income or loss for investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. Equity income from investments increased during the ninesix months ended May 31, 2021,February 28, 2022, compared to the same period during the prior year, primarily due to increased income associated with our equity method investmentsinvestment in Ventura Foods and TEMCO. Ventura FoodsCF Nitrogen. CF Nitrogen experienced increased volumessale prices of urea and profitability as a result of favorable market conditions for oilsUAN due to strong global demand and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic, and TEMCO experienced a significant increase in volumes and profitability with increased trade flows to China. In addition, TEMCO changed its business model during the nine months ended May 31, 2021, which has improved its operating efficiency.decreased global supply.
Income Tax Expense
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | Change |
| 2022 | | 2021 | | Dollars | | Percent |
| (Dollars in thousands) | | |
Income tax expense | $ | 26,651 | | | $ | 7,339 | | | $ | 19,312 | | | (263.1) | % |
Income Tax Benefit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change | | | | |
| 2021 | | 2020 | | Dollars | | Percent | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
Income tax benefit | $ | 10,130 | | | $ | 18,258 | | | $ | (8,128) | | | (44.5) | % | | | | | | | | |
The lower Increased income tax benefitexpense during the ninesix months ended May 31, 2021,February 28, 2022, primarily reflects changes inresulted from increased earnings during the mixfirst six months of full-year earnings projected across business units and equity management assumptions, which were partially offset by tax benefits related to an intercompany transfer of assets for tax planning.fiscal 2022. Effective tax rates for the ninesix months ended May 31,February 28, 2022 and 2021, were 3.8% and 2020, were (3.4)% and (4.8)%19.1%, respectively. Federal and state statutory rates applied to nonpatronage business activity were 24.9%24.4% and 24.7%24.9% for the ninesix months ended May 31,February 28, 2022 and 2021, and 2020, respectively. Income taxes and effective tax raterates vary each year based on profitability and nonpatronage business activity during eachactivity.
Liquidity and Capital Resources
Summary
In assessing our financial condition, we consider factors such as working capital, and internal benchmarking related to our applicable covenants and other financial criteria. We fundinformation. The following financial information is used when assessing our operations primarily through a combination of cash flows from operations supplemented with borrowings under our revolving credit facility. We fundliquidity and capital resources to meet our capital expenditures and growth primarily through cash, operating cash flow and long-term debt financing.
On May 31, 2021, we had working capital, defined as current assets less current liabilities, of $1.5 billion, and a current ratio, defined as current assets divided by current liabilities, of 1.2 compared to working capital of $1.3 billion and a current ratio of 1.3 on August 31, 2020. On May 31, 2020, we had working capital of $1.4 billion and a current ratio of 1.3 compared to working capital of $1.1 billion and a current ratio of 1.2 on August 31, 2019. Working capital and the current ratio may not be computed the same as similarly titled measures used by other companies. We believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health.
As of May 31, 2021, we had cash and cash equivalents of $301.2 million, total equities of $9.0 billion, long-term debt (including current maturities) of $1.8 billion and notes payable of $2.8 billion. Our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions, and taking advantage of strategic opportunities that benefit them:
| | | | | | | | | | | |
| February 28, 2022 | | August 31, 2021 |
| (Dollars in thousands) |
Cash and cash equivalents | $ | 211,936 | | | $ | 413,159 | |
Notes payable | 2,688,004 | | | 1,740,859 | |
Long-term debt including current maturities | 1,964,727 | | | 1,618,361 | |
Total equities | 9,368,444 | | | 9,017,326 | |
Working capital | 2,416,695 | | | 1,672,938 | |
Current ratio* | 1.3 | | | 1.3 | |
*Current ratio is defined as current assets divided by current liabilities.
Summary of Our Major Sources of Cash and Cash Equivalents
We fund our owners.current operations primarily through a combination of cash flows from operations supplemented with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility, with certain unaffiliated financial institutions ("Securitization Facility") and our repurchase facility relating thereto ("Repurchase Facility"). We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt. See Note 6, Notes Payable and Long-Term Debt, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information on our short-term borrowings and long-term debt. We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity.
Summary of Our Major Uses of Cash and Cash Equivalents
The following is a summary of our primary cash requirements for fiscal 2022:
•Capital expenditures. We expect total capital expenditures for fiscal 2022 to be approximately $561.4 million compared to capital expenditures of $317.8 million in fiscal 2021. During the six months ended February 28, 2022, we acquired $130.9 million of property, plant and equipment.
•Debt and interest. We expect to repay approximately $38.5 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $71.5 million during fiscal 2022. During the six months ended February 28, 2022, we repaid $30.5 million of scheduled long-term debt maturities.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of February 28, 2022. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2022. Dividends paid on our preferred stock during the six months ended February 28, 2022, were $84.3 million.
•Patronage. Our Board of Directors authorized approximately $50.0 million of our fiscal 2021 patronage-sourced earnings to be paid to our member-owners during fiscal 2022. During the six months ended February 28, 2022, we distributed $30.0 million of cash patronage related to the year ended August 31, 2021, with the remaining $20.0 million expected to be distributed in the third quarter of fiscal year 2022.
•Equity redemptions. Our Board of Directors has authorized equity redemptions of $100.0 million to be distributed in fiscal 2022 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members. During the six months ended February 28, 2022, we redeemed $17.5 million of member equity.
We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our operations for the foreseeable futurefuture. Our notes payable and we expectlong-term debt are subject to remainvarious restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all our loan covenants.
As we navigate the lingering impactdebt covenants and restrictions as of COVID-19February 28, 2022. Based on our business and operations,current fiscal 2022 projections, we continue to strengthen our liquidity through a variety of means, including curtailing certain spending and reprioritizing capital expenditures. We are also actively managing our short-term and long-term liquidity.
Fiscal 2021 and 2020 Activity
On February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which can be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total funded loan balance outstanding reverts to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of May 31, 2021.
On August 14, 2020, we entered into a Note Purchase Agreement to borrow $375.0 million of debt in the form of notes. The notes under this Note Purchase Agreement are structured in four series with maturities ranging from 7 to 15 years and interest accruing at rates ranging from 3.24% to 3.73%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow and whether the notes have an investment grade rating from a nationally recognized statistical rating organization. The funding of these notes took place on November 2, 2020. This funding is being used to pay debt maturities and manage liquidity.expect continued covenant compliance.
We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers and this arrangement is accounted for as a secured borrowing. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes and settlements are made on a monthly basis. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business. As of May 31, 2021, and August 31, 2020, total availability under the Securitization Facility was $600.0 million and $423.0 million, respectively, all of which had been utilized.
We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. As of May 31, 2021, and August 31, 2020, the outstanding balance under the Repurchase Facility was $150.0 million.
On September 24, 2020, the Securitization Facility and Repurchase Facility were amended, increasing the maximum availability under the Securitization Facility to $600.0 million from $500.0 million and extending their respective termination dates to July 30, 2021.
Cash Flows
The following table presents summarized cash flow data for the nine months ended May 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended May 31, | | Change |
| 2021 | | 2020 | | Dollars |
| (Dollars in thousands) | | |
Net cash (used in) provided by operating activities | $ | (632,378) | | | $ | 525,843 | | | $ | (1,158,221) | |
Net cash used in investing activities | (177,509) | | | (48,533) | | | (128,976) | |
Net cash provided by (used in) financing activities | 1,012,006 | | | (292,207) | | | 1,304,213 | |
Effect of exchange rate changes on cash and cash equivalents | (451) | | | (786) | | | 335 | |
Increase in cash and cash equivalents and restricted cash | $ | 201,668 | | | $ | 184,317 | | | $ | 17,351 | |
Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions. The $1.2 billion decrease in cash provided by operating activities reflects decreased net income during fiscal 2021 compared to the same period of the prior fiscal year and working capital increases, primarily associated with increased receivables and inventories.
The $129.0 million increase in cash used in investing activities primarily reflects timing differences associated with borrowings and payments for CHSWorking Capital notes receivable balances during fiscal 2021 compared to the same period during fiscal 2020.
The $1.3 billion increase in cash provided by financing activities primarily reflects increased net cash inflows associated with our notes payable and long-term debt facilities, including the $375.0 million Note Purchase Agreement funding during the first quarter of fiscal 2021.
Future Uses of Cash
We expectmeasure working capital as current assets less current liabilities and believe this information is meaningful to utilize cashinvestors as a measure of operational efficiency and cash equivalents, cash generatedshort-term financial health. Working capital is not defined under U.S. generally accepted accounting principles ("U.S. GAAP") and may not be computed the same as similarly titled measures used by operating activitiesother companies. Working capital as of February 28, 2022, and cash raised through the Note Purchase Agreement to fund capital expenditures, major maintenance, debt and interest payments, preferred stock dividends, patronage and equity redemptions. The following is a summary of our primary cash requirements for fiscal 2021:August 31, 2021, was as follows:
| | | | | | | | | | | | | | | | | |
| February 28, 2022 | | August 31, 2021 | | Change |
| (Dollars in thousands) |
Current assets | $ | 11,227,062 | | | $ | 7,998,951 | | | $ | 3,228,111 | |
Less current liabilities | 8,810,367 | | | 6,326,013 | | | 2,484,354 | |
Working capital | $ | 2,416,695 | | | $ | 1,672,938 | | | $ | 743,757 | |
•Capital expenditures. We expect totalAs of February 28, 2022, working capital expenditures for fiscal 2021 to be approximately $415.1increased by $743.8 million compared to capital expenditures of $418.4 million in fiscal 2020. During the nine months ended May 31, 2021, we acquired property, plant and equipment of $238.8 million.
•Debt and interest. We expect to repay approximately $555.3 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $73.7 million during fiscal 2021. During the
nine months ended May 31, 2021, we repaid $20.0 million of scheduled long-term debt maturities and an additional $366.0 million of long-term debt maturities.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding on Maywith August 31, 2021. We expectCurrent asset balance changes increased working capital by $3.2 billion, primarily driven by increases in inventories, receivables and supplier advances, which were driven by higher commodity prices and seasonality in our business. Current liability balance changes decreased working capital by $2.5 billion, primarily due to pay dividends onincreases in notes payable, customer advances and accounts payable, which were also driven by higher commodity prices and seasonality in our preferred stock of approximately $168.7 million during fiscal 2021.
•Patronage. Our Board of Directors authorized approximately $30.0 million of our fiscal 2020 patronage-sourced earnings to be paid to our member-owners during fiscal 2021.
•Equity redemptions. Our Board of Directors has authorized equity redemptions of $83.0 million to be distributed in fiscal 2021 in the form of redemptions of qualified and nonqualified equity owned by individual producer members and association members. During the nine months ended May 31, 2021, we redeemed $37.8 million of member equity.business.
Future Sources of Cash
We fund our current operations primarily through a combination of cash flows from operations and committed and uncommitted revolving credit facilities, including our Securitization Facility and Repurchase Facility. We believe these sources will provide adequate liquidity to meet our working capital needs. We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt and term loans. In addition, our wholly-owned subsidiary, CHS Capital, makes loans to member cooperatives, businesses and individual producers of agricultural products included in our cash flows from investing activities and has financing sources as detailed below in "CHS Capital Financing."
Working Capital Financing
We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks. We believe our current cash balances and available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs.
Our primary lineContractual Obligations
For information regarding our estimated contractual obligations, see the MD&A discussion included in Item 7 of credit is a five-year unsecured revolving credit facility with a syndicatePart II of domestic and international banks that expiresour Annual Report on July 16, 2024. The credit facility provides a committed amount of $2.75 billion of which $1.2 billion was outstanding as of May 31, 2021. We also maintain certain uncommitted bilateral facilities to support our working capital needs with borrowings outstanding of $330.0 million as of MayForm 10-K for the year ended August 31, 2021.
In addition to our facilities above, our wholly-owned subsidiaries CHS Europe S.a.r.l. and CHS Agronegocio Industria e Comercio Ltda have lines of credit with $325.5 million outstanding as of May 31, 2021, and our other international subsidiaries have lines of credit with $119.2 million outstanding as of May 31, 2021.
Long-term Debt FinancingCash Flows
The following table presents summarized long-term debtcash flow data (including current maturities) as of May 31, 2021,for the six months ended February 28, 2022 and August 31, 2020:2021:
| | | | | | | | | | | |
| May 31, 2021 | | August 31, 2020 |
| (Dollars in thousands) |
Private placement debt | $ | 1,713,949 | | | $ | 1,363,725 | |
Bank financing | — | | | 366,000 | |
Finance lease obligations | 26,459 | | | 31,460 | |
Other notes and contract payable | 33,661 | | | 34,709 | |
Deferred financing costs | (4,278) | | | (4,771) | |
| $ | 1,769,791 | | | $ | 1,791,123 | |
CHS Capital Financing
For a description of the Securitization Facility and the Repurchase Facility, see above in "Fiscal 2021 and 2020 Activity." | | | | | | | | | | | | | | | | | |
| Six Months Ended February 28, | | |
| 2022 | | 2021 | | Change |
| (Dollars in thousands) |
Net cash used in operating activities | $ | (1,303,541) | | | $ | (1,134,545) | | | $ | (168,996) | |
Net cash used in investing activities | (156,140) | | | (69,618) | | | (86,522) | |
Net cash provided by financing activities | 1,191,666 | | | 1,319,720 | | | (128,054) | |
Effect of exchange rate changes on cash and cash equivalents | (3,717) | | | 1,026 | | | (4,743) | |
(Decrease) increase in cash and cash equivalents and restricted cash | $ | (271,732) | | | $ | 116,583 | | | $ | (388,315) | |
CHS Capital sells loan commitments it has originatedCash flows from operating activities can fluctuate significantly from period to Compeer Financial, PCA, d/b/period as a ProPartners Financial on a recourse basis. Total outstanding commitments underresult of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions. The $169.0 million increase in cash used in operating activities reflects working capital increases, primarily associated with increased inventories and receivables, partially offset by increased net income during the program were $150.0 million asfirst half of May 31, 2021,fiscal 2022 compared to the same period of which $11.3 million was borrowed.the prior year.
The $86.5 million increase in cash used in investing activities primarily reflects timing differences associated with borrowings and payments for CHS Capital borrows funds under short-term notes issued as partreceivable balances during the first half of a surplus funds program. Borrowings under this program are unsecured and are due upon demand. Borrowings under these notes totaled $64.4 million as of May 31,fiscal 2022 compared to the same period during fiscal 2021.
Covenants
Our The $128.1 million decrease in cash provided by financing activities primarily reflects decreased net cash inflows associated with our notes payable and long-term debt is mostly unsecured; however, restrictive covenants under various debt agreements require maintenancefacilities as the funding of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of May 31, 2021. Based on our current fiscal 2021 projections, we expect continued covenant compliance.
All outstanding private placement notes conform to financial covenants applicable to those of our amended and restated five-year unsecured revolving credit facility. The notes provide that if our ratio of consolidated funded debt to consolidated cash flows is greater than 3.0 to 1.0, the interest rate on outstanding notes will be increased between 0.25% and 1.00%, depending on the related note series, the actual ratio and/or whether the notes have an investment grade rating from a nationally recognized statistical rating organization, until the ratio becomes 3.0 to 1.0, or less. During the three months ended May 31, 2021 and 2020, our ratio of consolidated funded debt to consolidated cash flows remained below 3.0 to 1.0.
Patronage and Equity Redemptions
In accordance with our bylaws and by action of our Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year and are based on financial performance. During the nine months ended May 31, 2021, we distributed $30.0$375.0 million of cash patronage related to the year ended August 31, 2020. During the nine months ended May 31, 2020, we distributed cash patronage of $90.1 million.
In accordance with authorization from our Board of Directors, we expect total cash redemptions related to the year ended August 31, 2020, which will be distributed in fiscal 2021, to be approximately $83.0 million and to include redemptions of qualified and nonqualified equity owned by individual producer members and association members. During the nine months ended May 31, 2021, $37.8 million of that amount was redeemed in cash, compared to $86.3 million redeemed in cashNote Purchase Agreement occurred during the nine months ended May 31, 2020.
first half of fiscal 2021.
Preferred Stock
Dividends paid on our preferred stock during the nine months ended May 31, 2021 and 2020, were $126.5 million. The following is a summary of our outstanding preferred stock as of May 31, 2021,February 28, 2022, all shares of which are listed on the Global Select Market of The Nasdaq Stock Market LLC:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nasdaq Symbol | | Issuance Date | | Shares Outstanding | | Redemption Value | | Net Proceeds (a) | | Dividend Rate (b) (c) | | Dividend Payment Frequency | | Redeemable Beginning (d) |
| | | | | | | | (Dollars in millions) | | | | | | |
8% Cumulative Redeemable | | CHSCP | | (e) | | 12,272,003 | | | $ | 306.8 | | | $ | 311.2 | | | 8.00 | % | | Quarterly | | 7/18/2023 |
Class B Cumulative Redeemable, Series 1 | | CHSCO | | (f) | | 21,459,066 | | | $ | 536.5 | | | $ | 569.3 | | | 7.875 | % | | Quarterly | | 9/26/2023 |
Class B Reset Rate Cumulative Redeemable, Series 2 | | CHSCN | | 3/11/2014 | | 16,800,000 | | | $ | 420.0 | | | $ | 406.2 | | | 7.10 | % | | Quarterly | | 3/31/2024 |
Class B Reset Rate Cumulative Redeemable, Series 3 | | CHSCM | | 9/15/2014 | | 19,700,000 | | | $ | 492.5 | | | $ | 476.7 | | | 6.75 | % | | Quarterly | | 9/30/2024 |
Class B Cumulative Redeemable, Series 4 | | CHSCL | | 1/21/2015 | | 20,700,000 | | | $ | 517.5 | | | $ | 501.0 | | | 7.50 | % | | Quarterly | | 1/21/2025 |
(a) Includes patron equities redeemed with preferred stock.
(b) Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2, accumulates dividends at a rate of 7.10% per year until March 31, 2024, and then at a rate equal to the three-month LIBOR plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024.
(c) Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3, accumulates dividends at a rate of 6.75% per year until September 30, 2024, and then at a rate equal to the three-month LIBOR plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024.
(d) Preferred stock is redeemable for cash at our option, in whole or in part, at a per-share price equal to the per-share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to and including the date of redemption, beginning on the dates set forth in this column.
(e) The 8% Cumulative Redeemable Preferred Stock was issued at various times from 2002 through 2010.
(f) Shares of Class B Cumulative Redeemable Preferred Stock, Series 1, were issued on September 26, 2013; August 25, 2014; March 31, 2016; and March 30, 2017.
Off-Balance Sheet Financing Arrangements
Guarantees
We are a guarantor for lines of credit and performance obligations of related companies. As of May 31, 2021, our bank covenants allowed maximum guarantees of $1.0 billion, of which $188.8 million were outstanding. We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide guarantees were current as of May 31, 2021.
Debt
We have no material off-balance sheet debt.
Loan Participations
We engaged in off-balance sheet arrangements through certain loan participation agreements. Refer to further details about these arrangements in Note 3, Receivables, of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended August 31, 2020.
Critical Accounting Policies
Other than as described within the Significant Accounting Policies section of Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, our critical accounting policies as presented in Management's Discussion and Analysis of Financial Condition and Results of OperationsMD&A in our Annual Report on Form 10-K for the year ended August 31, 2020,2021, have not materially changed during the ninesix months ended May 31, 2021.February 28, 2022.
Recent Accounting Pronouncements
See Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that apply to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We did not experience material changes in market risk exposures for the period ended May 31, 2021,February 28, 2022, that would affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2020.2021.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934), as of May 31, 2021.February 28, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the quarter ended May 31, 2021,February 28, 2022, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved as For a defendant in various lawsuits, claims and disputes, which are in the normal coursedescription of our business. The resolutionmaterial pending legal proceedings, please see Note 13, Commitments and Contingencies, of any such matters may affect consolidated net income for any fiscal period; however, our management believes any resulting liabilities, individually or in aggregate, will not have a material effect on ourthe notes to the unaudited condensed consolidated financial position, results of operations or cash flows during any fiscal year.
As previously reportedstatements that are included in ourthis Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2021, between January 8, 2021, and March 16, 2021, a total of 21 putative class action lawsuits were filed in the United States District Courts for the District of Idaho, the Southern District of Illinois, the District of Kansas, the District of Minnesota and the Eastern District of Pennsylvania naming us and several other crop protection manufacturers, wholesalers and retailers as defendants and alleging that the defendants violated various federal and state laws, including antitrust, unfair competition, consumer protection and unjust enrichment laws by conspiring to maintain supracompetitive prices in seeds and crop protection chemicals, such as fungicides, herbicides and insecticides ("Crop Inputs"), and to engage in a group boycott intended to prevent companies utilizing electronic sales platforms from competing in the Crop Inputs retail sales market, thereby harming farmers. As of May 31, 2021, an additional six putative class action lawsuits, asserting the same allegations against the same defendants, were filed in the United States District Courts listed above. On June 8, 2021, the Judicial Panel on Multidistrict Litigation ordered that all of the pending lawsuits be consolidated in the United States District Court for the Eastern District of Missouri. It remains too early in the litigation to evaluate the likelihood of any particular outcome or of any estimate of the amount or range of potential loss.10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10–K10-K for the year ended August 31, 2020,2021, except for the risk factorfactors set forth below, which updates theupdate certain risk factor with the same titlefactors included in suchour Annual Report on Form 10–K.10-K.
We utilize information technology systemsare subject to support our business. The ongoing multiyear implementationpolitical, economic, legal and other risks of an enterprise wide resource planning system, reliance upon multiple legacydoing business systems, security breachesglobally.
We are a global business and are exposed to risks associated with having global operations. These risks include, but are not limited to, risks relating to terrorism, war or other disruptions to our information technologycivil unrest; changes in a country’s or region’s social, economic or political conditions; changes in local labor conditions and regulations; changes in safety and environmental regulations; changes in regulatory or legal environments; restrictions on currency exchange activities and currency exchange fluctuations; price and export controls or bans on commodities; taxes; doing business in countries or regions with inadequate infrastructure; and logistics challenges. In addition, some countries where we operate lack well-developed legal systems or assets could interfere withhave not adopted clear legal and regulatory frameworks. This lack of legal certainty exposes our operations compromise securityto increased risks, including increased difficulty in enforcing our agreements in those jurisdictions and increased risk of adverse actions by local government authorities, such as unilateral or forced renegotiation, modification or nullification of existing agreements or expropriations.
In February 2022, Russia invaded Ukraine. The conflict has resulted in significant uncertainty and instability in the global commodities markets, including agricultural commodities and crude oil. In response to the conflict, the United States and other North Atlantic Treaty Organization ("NATO") member states, as well as nonmember states, have announced targeted economic sanctions on Russia and certain Russian citizens and enterprises, including several large banks. The continuation of the conflict may trigger a series of additional economic and other sanctions enacted by the United States, other NATO member states and other countries. In response, Russia announced export bans on various products, including agricultural commodities, through the end of calendar year 2022. Although we do not maintain operations in Russia, it is a significant source of fertilizer for global markets, including us. Such sanctions are expected to make it generally more expensive and difficult to do business in or with Russia, cause delays with respect to, or prevent, shipments of fertilizer to us, cause inflationary pressures on and impact our customers' or suppliers' informationability to purchase fertilizer, disrupt the execution of banking transactions with certain Russian financial institutions and expose us to liability thatresult in volatility in foreign exchange rates and interest rates, all of which could adversely impacthave a material adverse effect on our business and reputation.operations.
We maintain operations in Ukraine, which is a key international grain originating region. Our operations rely on certain key information technology ("IT")in Ukraine have been dramatically disrupted because of the conflict. Some of our Ukrainian employees have been forced to relocate to other countries and within Ukraine, with many unable to perform all or some work duties. The ongoing conflict could cause harm to our employees and otherwise impair their ability to work for extended periods of time, as well as disrupt telecommunications systems, manybanks and other critical infrastructure necessary to conduct business in Ukraine. Although we do not have significant fixed assets or infrastructure in Ukraine, we continue to have grain inventory in various facilities in Ukraine. Our ability to access or otherwise use these grain inventories in our export business could be limited with the ongoing conflict and following Ukraine’s announcement to ban the export of which are legacy in nature or may depend on third–party services to provide critical connections of data, informationwheat, oats and services for internal and external users.other staples.
OverIn addition, the past several years, we haverisk of cybersecurity incidents has increased in connection with the ongoing conflict between Russia and Ukraine. For example, the conflict has been implementing a new enterprise resource planning system ("ERP"),accompanied by cyberattacks against the Ukrainian government and we expect this ERP implementation to continue for the next several years. This ERP implementation has and will continue to require significant capital and human resources to deploy. Changes we have experiencedother countries in the implementation timelineregion. It is possible that these attacks could have collateral effects on additional critical infrastructure and the scope of the implementation likely have impacted the capital and operating expense amounts required to complete the implementation and there can be no assurance that the actual costs for completing the ERP implementation will not exceed our current estimates or that the ERP will not take longer to implement than we currently expect. In addition, potential flaws in implementing the ERP or in the failure of any portion/module of the ERP to meet our needs or provide appropriate controls may pose risks to our ability to operate successfully and efficiently and with an effective system of internal controls.
There may be other challenges and risks to both our aging and current IT systems over time due to any number of causes, such as catastrophic events, availability of resources, power outages, security breaches or cyber–based attacks. These challenges and risks could result in legal claims or proceedings, liability or penalties, disruption in operations, loss of valuable data, increased costs and damage to our reputation, all offinancial institutions globally, which could adversely affect our business. Our ongoing IT investments include those relatingoperations. The proliferation of malware from the conflict into systems unrelated to cybersecurity, including technology, hired expertise and cybersecurity risk mitigation actions. However,the conflict, or cyberattacks against U.S. companies in connection with the COVID-19 pandemic, a numberretaliation for U.S. sanctions against Russia or U.S. support of Ukraine, could also adversely affect our employees have transitioned to working remotely. As a result, more of our employees are working from locations where our cybersecurity programs may be less effective and robust.
Like many companies, we continue to experience an increase in the number of sophisticated attempts by external parties to access and/or disrupt our networks without authorization. For example, we recently learned of a credible cybersecurity threat to our IT systems. Upon learning of the cybersecurity threat, we launched an investigation and undertook immediate action, including employing protocols to mitigate the impact of the threat, and engaging internal and third–party information technology security and forensics experts to assess any impact on our IT systems. We also utilized additionaloperations.
security measures to help safeguard the integrity of our IT systems’ infrastructure and the data contained therein. Although our systems were not breached, no data was lost or exposed, and our operations were not significantly interrupted from this incident, thereThere is also no guarantee that the current conflict between Russia and Ukraine will not draw military or other intervention from additional countries, which could lead to a future incidentmuch larger conflict and/or additional sanctions imposed by the United States government and other governments that restrict business with specific persons, organizations or countries or with respect to certain products or services. If such escalation should occur or such sanctions are imposed, supply chain, trade routes and markets currently served by us could be adversely affected, which, in turn, could materially adversely affect our business operations and financial performance.
The consequences of any U.S. Securities and Exchange Commission ("SEC") or other governmental authority's investigation with respect to certain rail freight contracts purchased in connection with our North American grain marketing operations could have an adverse effect on our business.
We expect to provide an Offer of Settlement to the Staff of the SEC Division of Enforcement relating to an investigation principally involving intentional misconduct by a former employee in our rail freight trading operations who manipulated the quantity and mark-to-market valuation of railcars that were the subject of rail freight purchase contracts. The proposed settlement would be entered into by the Company pursuant to a proposed Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order (the "Proposed Order") without admitting or denying the SEC's findings and would resolve alleged violations of certain of the reporting, books and records and internal accounting controls provisions of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. Under the terms of the proposed settlement, we would not havepay a greatercivil penalty and would agree to not commit or cause any future violations of those federal securities laws and related rules and regulations. The Proposed Order also provides that in determining to accept the Offer of Settlement, the SEC considered our cooperation during the investigation and the remedial acts promptly undertaken by us. The proposed settlement is contingent upon approval by the Commissioners of the SEC, which cannot be assured. If the Commissioners of the SEC do not approve the settlement, we may need to enter into further discussions with the SEC regarding a disposition of this matter. As a result, there can be no assurance as to the specific type of disposition, including its impact on our business, prospects, reputation, financial condition, results of operations our data or our reputation.
cash flows. In addition, we are subject to lawsthe expenses incurred in connection with any ongoing investigation by the SEC or any other governmental authority, and regulations in the United States and other jurisdictions regarding privacy, data protection and data security, including those related todiversion of the collection, storage, handling, use, disclosure, transfer and securityattention of personal data. These laws and regulations pose increasingly complex compliance challenges and will require us to incur costs to achieve and maintain compliance; some of those costs may be significant. Any violation of such laws and regulations, includingour management that could occur as a result thereof, could adversely affect our business, financial condition, results of a security operations and/or privacy breach, could subject us to legal claims, regulatory penalties and damage to our reputation.cash flows.
ITEM 6. EXHIBITS
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Exhibit | Description |
| Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (Formatted(formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHS Inc.
(Registrant)
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Date: | July 8, 2021April 6, 2022 | | By: | | /s/ Olivia Nelligan |
| | | | | Olivia Nelligan |
| | | | | Executive Vice President and Chief Financial Officer |