10-Q 1 chscp-20240229.htm 10-Q chscp-20240229
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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 endedFebruary 29, 2024
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)
Minnesota41-0251095
(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 telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
8% Cumulative Redeemable Preferred StockCHSCPThe Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 1CHSCOThe Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2CHSCNThe Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3CHSCMThe Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 4CHSCLThe 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 Accelerated filer 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
  
Page
No.



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 February 29, 2024.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, and our other CHS Inc. publicly available documents contain, and our officers, directors and 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 filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of CHS Annual Report on Form 10-K for the fiscal year ended August 31, 2023. These factors may 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 ongoing war between Russia and Ukraine; the escalation of conflict in the Middle East; the impact of inflation; the impact of epidemics, pandemics, outbreaks of disease and other adverse public health developments, including COVID-19; 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 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, casualty losses and supply chain issues; the impact of workforce factors; our funding needs and financing sources; financial institutions’ and other capital sources’ policies concerning energy-related businesses; 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-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices, including failures or delays in achieving our strategies or expectations related to climate change or other environmental matters; the impairment of long-lived assets; the impact of bank failures; and other factors affecting our businesses generally. Any forward-looking statements made by us in this document 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 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.
1

PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 February 29,
2024
August 31,
2023
 (Dollars in thousands)
ASSETS
Current assets: 
Cash and cash equivalents$633,292 $1,765,286 
Receivables3,369,864 3,105,811 
Inventories3,931,631 3,215,179 
Other current assets1,388,321 1,042,373 
Total current assets
9,323,108 9,128,649 
Investments3,780,129 3,828,872 
Property, plant and equipment4,961,507 4,869,373 
Other assets1,099,558 1,130,524 
Total assets
$19,164,302 $18,957,418 
LIABILITIES AND EQUITIES
Current liabilities:  
Notes payable$412,800 $547,923 
Current portion of long-term debt157,394 7,839 
Accounts payable2,767,797 2,930,607 
Accrued expenses644,982 773,054 
Other current liabilities1,924,365 1,639,771 
Total current liabilities
5,907,338 5,899,194 
Long-term debt1,671,241 1,819,819 
Other liabilities818,160 786,016 
Commitments and contingencies (Note 13)
Equities:  
Preferred stock2,264,038 2,264,038 
Equity certificates5,788,203 5,911,649 
Accumulated other comprehensive loss(267,269)(265,395)
Capital reserves2,976,811 2,537,486 
Total CHS Inc. equities
10,761,783 10,447,778 
Noncontrolling interests5,780 4,611 
Total equities
10,767,563 10,452,389 
Total liabilities and equities
$19,164,302 $18,957,418 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
2

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 Three Months EndedSix Months Ended
 February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
 (Dollars in thousands)
Revenues$9,087,480 $11,306,848 $20,478,138 $24,072,687 
Cost of goods sold8,721,588 10,922,581 19,467,296 22,809,285 
Gross profit365,892 384,267 1,010,842 1,263,402 
Marketing, general and administrative expenses298,230 241,925 550,286 476,591 
Operating earnings67,662 142,342 460,556 786,811 
Interest expense25,460 35,967 55,088 69,217 
Other income(31,339)(28,313)(75,868)(52,602)
Equity income from investments(112,117)(178,334)(221,168)(360,296)
Income before income taxes185,658 313,022 702,504 1,130,492 
Income tax expense15,325 20,974 8,803 55,528 
Net income170,333 292,048 693,701 1,074,964 
Net income (loss) attributable to noncontrolling interests26 (273)471 45 
Net income attributable to CHS Inc. $170,307 $292,321 $693,230 $1,074,919 
    
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

3

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
 (Dollars in thousands)
Net income$170,333 $292,048 $693,701 $1,074,964 
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefits51 (3,973)68 4,551 
Cash flow hedges6,303 15,143 2,142 (5,064)
Foreign currency translation adjustment(926)620 (4,084)(1,315)
Other comprehensive income (loss), net of tax5,428 11,790 (1,874)(1,828)
Comprehensive income175,761 303,838 691,827 1,073,136 
Comprehensive income (loss) attributable to noncontrolling interests26 (273)471 45 
Comprehensive income attributable to CHS Inc. $175,735 $304,111 $691,356 $1,073,091 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).


4

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 Six Months Ended
 February 29,
2024
February 28,
2023
 (Dollars in thousands)
Cash flows from operating activities:  
Net income$693,701 $1,074,964 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization, including amortization of deferred major maintenance278,239 265,873 
Equity income from investments, net of distributions received67,804 (51,267)
Provision for current expected credit losses2,820 (15,555)
Deferred taxes(67,345)(16,522)
Other, net(6,012)(496)
Changes in operating assets and liabilities:  
Receivables(484,287)(52,159)
Inventories(716,452)(1,205,388)
Accounts payable and accrued expenses(260,275)(97,026)
Other, net94,598 114,146 
Net cash (used in) provided by operating activities(397,209)16,570 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(346,092)(236,290)
Proceeds from disposition of property, plant and equipment7,708 12,642 
Expenditures for major maintenance(10,659)(39,400)
Changes in CHS Capital notes receivable, net174,858 (171,937)
Financing extended to customers(95,549)(76,142)
Payments from customer financing88,223 86,678 
Other investing activities, net(3,843)(9,038)
Net cash used in investing activities(185,354)(433,487)
Cash flows from financing activities:  
Proceeds from notes payable and long-term debt1,885,088 4,887,148 
Payments on notes payable, long-term debt and finance lease obligations(2,025,935)(4,288,434)
Preferred stock dividends paid(84,334)(84,334)
Redemptions of equities(16,458)(17,746)
Cash patronage dividends paid(300,750)(381,890)
Other financing activities, net(7,556)(11,242)
Net cash (used in) provided by financing activities(549,945)103,502 
Effect of exchange rate changes on cash and cash equivalents(2,780)(205)
Decrease in cash and cash equivalents and restricted cash(1,135,288)(313,620)
Cash and cash equivalents and restricted cash at beginning of period1,844,587 903,474 
Cash and cash equivalents and restricted cash at end of period$709,299 $589,854 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
5

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, 2023, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC").

Significant Accounting Policies

    No significant accounting policies were updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2023.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in our annual and interim consolidated financial statements. This ASU is effective on a retrospective basis for our annual reporting beginning in fiscal 2025 and for interim period reporting beginning in fiscal 2026. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides additional transparency for income tax disclosures. This ASU is effective for our annual reporting for fiscal 2026 on a prospective basis. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements.

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 six months ended February 29, 2024, and February 28, 2023. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470, Debt, and ASC Topic 842, Leases, that fall outside the scope of ASC Topic 606.
ASC Topic 606ASC Topic 815Other GuidanceTotal Revenues
Three Months Ended February 29, 2024(Dollars in thousands)
Energy$1,621,474 $135,248 $ $1,756,722 
Ag1,478,304 5,824,710 8,097 7,311,111 
Corporate and Other6,387  13,260 19,647 
Total revenues$3,106,165 $5,959,958 $21,357 $9,087,480 
Three Months Ended February 28, 2023
Energy$1,993,065 $175,836 $ $2,168,901 
Ag1,849,095 7,270,241 1,134 9,120,470 
Corporate and Other6,787  10,690 17,477 
Total revenues$3,848,947 $7,446,077 $11,824 $11,306,848 
6

ASC Topic 606ASC Topic 815Other GuidanceTotal Revenues
Six Months Ended February 29, 2024(Dollars in thousands)
Energy$4,021,026 $453,636 $ $4,474,662 
Ag3,704,727 12,239,342 19,207 15,963,276 
Corporate and Other13,163  27,037 40,200 
Total revenues$7,738,916 $12,692,978 $46,244 $20,478,138 
Six Months Ended February 28, 2023
Energy$4,795,220 $492,987 $ $5,288,207 
Ag4,462,555 14,279,594 11,565 18,753,714 
Corporate and Other12,486  18,280 30,766 
Total revenues$9,270,261 $14,772,581 $29,845 $24,072,687 

Less than 1% of revenues accounted for under ASC Topic 606 included within the tables above are recorded over time and relate primarily to service contracts.

Contract Assets and Contract Liabilities

    Contract assets relate to unbilled amounts arising from goods that have already been transferred to customers where the right to payment is not conditional on the passage of time. This results in recognition of an asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to customers. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were $21.0 million and $16.2 million as of February 29, 2024, and August 31, 2023, respectively.

Contract liabilities relate to advance payments received from customers for goods and services that we have yet to provide. Contract liabilities of $775.1 million and $240.0 million as of February 29, 2024, and August 31, 2023, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended February 29, 2024, and February 28, 2023, we recognized revenues of $79.2 million and $70.2 million related to contract liabilities, respectively. For the six months ended February 29, 2024, and February 28, 2023, we recognized revenues of $168.8 million and $192.2 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective period.

Note 3        Receivables
February 29,
2024
August 31,
2023
(Dollars in thousands)
Trade accounts receivable$2,441,723 $2,010,162 
CHS Capital short-term notes receivable615,824 845,192 
Other389,494 327,084 
Gross receivables3,447,041 3,182,438 
Less: allowances and reserves77,177 76,627 
Total receivables$3,369,864 $3,105,811 
    
    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 certain regional cooperatives' capital stock. These loans are primarily originated in the states of Minnesota and North 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 primarily originated in the same states as the commercial notes, as well as in South Dakota.

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    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 $118.1 million and $61.1 million as of February 29, 2024, and August 31, 2023, respectively. The long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of February 29, 2024, and August 31, 2023, commercial notes represented 32% and 15%, respectively, and producer notes represented 68% and 85%, 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 February 29, 2024, CHS Capital customers had additional available credit of $1.3 billion. 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 February 29, 2024, or August 31, 2023.

Note 4        Inventories        
February 29,
2024
August 31,
2023
(Dollars in thousands)
Grain and oilseed$1,194,084 $1,099,956 
Energy809,879 645,333 
Agronomy1,586,034 1,111,477 
Processed grain and oilseed132,847 141,360 
Other208,787 217,053 
Total inventories$3,931,631 $3,215,179 

    As of February 29, 2024, and August 31, 2023, we valued approximately 18% and 16%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the last in, first out ("LIFO") method, or net realizable value. If the first in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $432.4 million and $589.0 million as of February 29, 2024, and August 31, 2023, 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 29,
2024
August 31,
2023
 (Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC$2,565,318 $2,577,391 
Ventura Foods, LLC488,751 519,169 
Ardent Mills, LLC237,104 265,146 
Other equity method investments347,217 337,281 
Other investments141,739 129,885 
Total investments$3,780,129 $3,828,872 

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 only significant equity method investment during the six months ended February 29, 2024, and February 28, 2023, was CF Industries Nitrogen, LLC ("CF Nitrogen"), which is 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 recorded at cost, unless an impairment or other observable market price change occurs that requires an adjustment. We had approximately $601.6 million in cumulative undistributed earnings from our equity method investees included in the investments balance as of February 29, 2024.

CF Nitrogen

    We have a $2.6 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 9% membership interest (based on product tons) in CF Nitrogen. We
8

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 CF Nitrogen's Limited Liability Company Agreement, adjusted for semiannual cash distributions.

    The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the six months ended February 29, 2024, and February 28, 2023:
Six Months Ended
February 29,
2024
February 28,
2023
(Dollars in thousands)
Net sales$1,776,394 $3,124,839 
Gross profit525,846 1,435,598 
Net earnings507,848 1,428,713 
Earnings attributable to CHS Inc.131,592 242,580 
    
    Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in 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 all debt covenants as of February 29, 2024. Notes payable as of February 29, 2024, and August 31, 2023, consisted of the following:
February 29,
2024
August 31,
2023
(Dollars in thousands)
Notes payable$288,710 $375,932 
CHS Capital notes payable124,090 171,991 
Total notes payable$412,800 $547,923 
    
    Our primary line of credit is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of February 29, 2024, or August 31, 2023. We also maintain certain uncommitted bilateral facilities to support our working capital needs.

    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 secured financing. 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 $850.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of February 29, 2024, total availability under the Securitization Facility was $781.8 million, of which no amount was utilized.

    We also have a repurchase facility ("Repurchase Facility"). Under the Repurchase Facility, we can obtain repurchase agreement financing up to $200.0 million for certain eligible receivables and notes receivables of the Originators. No balance was outstanding under the Repurchase Facility as of February 29, 2024, or August 31, 2023.


9

The following table presents summarized long-term debt (including the current portion) as of February 29, 2024, and August 31, 2023:
February 29,
2024
August 31,
2023
 (Dollars in thousands)
Private placement debt$1,413,000 $1,413,000 
Term loan366,000 366,000 
Finance lease liabilities49,669 49,235 
Deferred financing costs(2,884)(3,127)
Other2,850 2,550 
Total long-term debt1,828,635 1,827,658 
Less current portion157,394 7,839 
Long-term portion$1,671,241 $1,819,819 

Interest expense for the three months ended February 29, 2024, and February 28, 2023, was $25.5 million and $36.0 million, respectively, net of capitalized interest of $6.5 million and $3.3 million, respectively. Interest expense for the six months ended February 29, 2024, and February 28, 2023, was $55.1 million and $69.2 million, respectively, net of capitalized interest of $11.5 million and $5.7 million, respectively.

Note 7        Income Taxes

    Our effective tax rate for the three months ended February 29, 2024, was 8.3%, compared to 6.7% for the three months ended February 28, 2023. Our effective tax rate for the six months ended February 29, 2024, was 1.3%, compared to 4.9% for the six months ended February 28, 2023. Decreased income tax expense during the six months ended February 29, 2024, resulted primarily from the recognition of research and development tax credits as well as lower nonpatronage income during the period. Our income tax expense reflects the mix of full-year earnings projected across business units and current equity management assumptions. Income taxes and effective tax rates vary each year based on profitability, income tax credits, nonpatronage business activity and current equity management assumptions.

    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, $130.4 million and $116.0 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of February 29, 2024, and August 31, 2023, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could change significantly in the next 12 months.























10

Note 8        Equities

Changes in Equities

Changes in equities for the three months ended February 29, 2024, and February 28, 2023, are as follows:
 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, November 30, 2023$3,861,170 $27,488 $1,929,868 $2,264,038 $(272,697)$2,881,596 $5,926 $10,697,389 
Reversal of prior year patronage and redemption estimates(700,904) (169,159)— — 1,175,367 — 305,304 
Distribution of 2023 patronage refunds707,394 — 169,051 — — (1,177,195)— (300,750)
Redemptions of equities
(3,858)(28)(1,336) — — — (5,222)
Preferred stock dividends
— — — — — (42,167)— (42,167)
Other, net
(56)— (28)— — 302 (172)46 
Net income— — — — — 170,307 26 170,333 
Other comprehensive income, net of tax— — — — 5,428 — — 5,428 
Estimated 2024 cash patronage refunds— — — — — (31,399)— (31,399)
Estimated 2024 equity redemptions(31,399)— — — — — — (31,399)
Balances, February 29, 2024$3,832,347 $27,460 $1,928,396 $2,264,038 $(267,269)$2,976,811 $5,780 $10,767,563 
 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, November 30, 2022$3,381,478 $27,875 $1,773,367 $2,264,038 $(268,953)$2,545,102 $5,938 $9,728,845 
Reversal of prior year patronage and redemption estimates(503,999) (153,858)— — 1,043,301 — 385,444 
Distribution of 2022 patronage refunds513,631 — 153,258 — — (1,048,779)— (381,890)
Redemptions of equities
(3,889)(14)(902) — — — (4,805)
Preferred stock dividends
— — — — — (42,167)— (42,167)
Other, net
(3)— (21)— — 807 (573)210 
Net income (loss)— — — — — 292,321 (273)292,048 
Other comprehensive income, net of tax— — — — 11,790 — — 11,790 
Estimated 2023 cash patronage refunds— — — — — (80,078)— (80,078)
Estimated 2023 equity redemptions(80,078)— — — — — — (80,078)
Balances, February 28, 2023$3,307,140 $27,861 $1,771,844 $2,264,038 $(257,163)$2,710,507 $5,092 $9,829,319 

Change in equities for the six months ended February 29, 2024, and February 28, 2023, are as follows:
 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, August 31, 2023$3,951,385 $27,558 $1,932,706 $2,264,038 $(265,395)$2,537,486 $4,611 $10,452,389 
Reversal of prior year patronage and redemption estimates(689,668) (169,159)— — 1,175,367 — 316,540 
Distribution of 2023 patronage refunds707,394 — 169,051 — — (1,177,195)— (300,750)
Redemptions of equities
(12,145)(95)(4,218) — — — (16,458)
Preferred stock dividends
— — — — — (126,501)— (126,501)
Other, net
(22)(3)16 — — (979)698 (290)
Net income— — — — — 693,230 471 693,701 
Other comprehensive loss, net of tax— — — — (1,874)— — (1,874)
Estimated 2024 cash patronage refunds— — — — — (124,597)— (124,597)
Estimated 2024 equity redemptions(124,597)— — — — — — (124,597)
Balances, February 29, 2024$3,832,347 $27,460 $1,928,396 $2,264,038 $(267,269)$2,976,811 $5,780 $10,767,563 
11

 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, August 31, 2022$3,587,131 $27,933 $1,776,172 $2,264,038 $(255,335)$2,055,682 $5,645 $9,461,266 
Reversal of prior year patronage and redemption estimates(491,058) (153,858)— — 1,043,301 — 398,385 
Distribution of 2022 patronage refunds513,631 — 153,258 — — (1,048,779)— (381,890)
Redemptions of equities
(13,910)(72)(3,764) — — — (17,746)
Preferred stock dividends
— — — — — (126,501)— (126,501)
Other, net
288 — 36 — — 827 (598)553 
Net income— — — — — 1,074,919 45 1,074,964 
Other comprehensive loss, net of tax— — — — (1,828)— — (1,828)
Estimated 2023 cash patronage refunds— — — — — (288,942)— (288,942)
Estimated 2023 equity redemptions(288,942)— — — — — — (288,942)
Balances, February 28, 2023$3,307,140 $27,861 $1,771,844 $2,264,038 $(257,163)$2,710,507 $5,092 $9,829,319 

Preferred Stock Dividends

    The following table presents a summary of dividends declared per share by series of preferred stock for the three and six months ended February 29, 2024, and February 28, 2023.
Three Months EndedSix Months Ended
Nasdaq symbolFebruary 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Series of preferred stock:(Dollars per share)
8% Cumulative RedeemableCHSCP$0.50 $0.50 $1.50 $1.50 
Class B Cumulative Redeemable, Series 1CHSCO$0.49 $0.49 $1.48 $1.48 
Class B Reset Rate Cumulative Redeemable, Series 2CHSCN$0.44 $0.44 $1.33 $1.33 
Class B Reset Rate Cumulative Redeemable, Series 3CHSCM$0.42 $0.42 $1.27 $1.27 
Class B Cumulative Redeemable, Series 4CHSCL$0.47 $0.47 $1.41 $1.41 

Accumulated Other Comprehensive Income (Loss)    

Changes in accumulated other comprehensive income (loss) by component for the three months ended February 29, 2024, and February 28, 2023, are as follows:
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of November 30, 2023, net of tax$(173,908)$(2,129)$(96,660)$(272,697)
Other comprehensive income (loss), before tax:
Amounts before reclassifications 10,641 (752)9,889 
Amounts reclassified67 (2,294) (2,227)
Total other comprehensive income (loss), before tax67 8,347 (752)7,662 
Tax effect(16)(2,044)(174)(2,234)
Other comprehensive income (loss), net of tax51 6,303 (926)5,428 
Balance as of February 29, 2024, net of tax$(173,857)$4,174 $(97,586)$(267,269)
12

Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of November 30, 2022, net of tax$(160,116)$(11,364)$(97,473)$(268,953)
Other comprehensive income (loss), before tax:
Amounts before reclassifications269 10,558 739 11,566 
Amounts reclassified(5,513)9,428  3,915 
Total other comprehensive income (loss), before tax(5,244)19,986 739 15,481 
Tax effect1,271 (4,843)(119)(3,691)
Other comprehensive income (loss), net of tax(3,973)15,143 620 11,790 
Balance as of February 28, 2023, net of tax$(164,089)$3,779 $(96,853)$(257,163)

Changes in accumulated other comprehensive income (loss) by component for the six months ended February 29, 2024, and February 28, 2023, are as follows:
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of August 31, 2023, net of tax$(173,925)$2,032 $(93,502)$(265,395)
Other comprehensive income (loss), before tax:
Amounts before reclassifications 12,921 (4,102)8,819 
Amounts reclassified90 (10,084) (9,994)
Total other comprehensive income (loss), before tax90 2,837 (4,102)(1,175)
Tax effect(22)(695)18 (699)
Other comprehensive income (loss), net of tax68 2,142 (4,084)(1,874)
Balance as of February 29, 2024, net of tax$(173,857)$4,174 $(97,586)$(267,269)
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of August 31, 2022, net of tax$(168,640)$8,843 $(95,538)$(255,335)
Other comprehensive income (loss), before tax:
Amounts before reclassifications203 (23,341)(1,488)(24,626)
Amounts reclassified47 16,657  16,704 
Total other comprehensive income (loss), before tax250 (6,684)(1,488)(7,922)
Tax effect4,301 1,620 173 6,094 
Other comprehensive income (loss), net of tax4,551 (5,064)(1,315)(1,828)
Balance as of February 28, 2023, net of tax$(164,089)$3,779 $(96,853)$(257,163)

    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 (see Note 9, Benefit Plans, for further information). As described in Note 11, Derivative Financial Instruments and Hedging Activities, amounts reclassified from accumulated other comprehensive loss for cash flow hedges are recorded in cost of goods sold. Gains or losses on foreign currency translation reclassifications are recorded in 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 of Directors retirement plans.

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    Components of net periodic benefit costs for the three and six months ended February 29, 2024, and February 28, 2023, are as follows:
Three Months Ended
Qualified
Pension Benefits
Nonqualified
Pension Benefits
Other Benefits
 February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Components of net periodic benefit costs: (Dollars in thousands)
Service cost$9,348 $9,645 $492 $460 $163 $168 
Interest cost8,982 7,647 261 185 286 259 
Expected return on assets(11,965)(10,782)    
Prior service cost (credit) amortization45 37 (29)(29)(111)(111)
Actuarial loss (gain) amortization449 468 95 61 (404)(404)
Net periodic benefit cost (benefit)$6,859 $7,015 $819 $677 $(66)$(88)
Six Months Ended
Qualified
Pension Benefits
Nonqualified
Pension Benefits
Other Benefits
 February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Components of net periodic benefit costs: (Dollars in thousands)
Service cost$18,696 $19,290 $984 $920 $325 $335 
Interest cost17,964 15,294 522 371 572 518 
Expected return on assets(23,930)(21,565)    
Prior service cost (credit) amortization89 75 (57)(57)(223)(223)
Actuarial loss (gain) amortization898 936 190 123 (808)(808)
Net periodic benefit cost (benefit)$13,717 $14,030 $1,639 $1,357 $(134)$(178)

Employer Contributions

    Contributions 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 six months ended February 29, 2024, and we do not anticipate being required to make contributions to our pension plans in fiscal 2024, although we may voluntarily elect to do so.

Note 10        Segment Reporting

    We are an integrated agricultural cooperative, providing grain, food, agronomy 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 grain and oilseed, processed grain and oilseed, renewable fuels and food 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, our Chief Executive Officer, evaluates performance and allocates resources in managing 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 wholesale distribution of petroleum products and transportation of those products. Our Ag segment purchases and further processes or resells grain and oilseed 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 of our equity method investment in CF Nitrogen that records earnings and allocated expenses but not revenues. Our supply agreement 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 consists of a U.S. Commodity Futures Trading Commission-regulated futures commission merchant ("FCM") for commodities hedging and financial services related to crop production. Our nonconsolidated investments in Ventura Foods, LLC ("Ventura Foods"), and Ardent Mills, LLC ("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.
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    Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues and income before income taxes ("IBIT") generally trend lower during the second fiscal quarter and increase in the third fiscal quarter. 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 and processing operations are subject to fluctuations in volume and revenues based on producer harvests, world grain prices, demand and international trade 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, grain, oilseed, 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 reliable rail and river transportation 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 consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Nitrogen Production segment, this consists of our approximate 9% 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 related to our equity method investments.

    Reconciling amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of the individual business segments.

Segment information for the three and six months ended February 29, 2024, and February 28, 2023, is presented in the tables below:
EnergyAgNitrogen ProductionCorporate
and Other
Reconciling
Amounts
Total
Three Months Ended February 29, 2024(Dollars in thousands)
Revenues, including intersegment revenues$1,874,077 $7,314,067 $ $22,233 $(122,897)$9,087,480 
Intersegment revenues(117,355)(2,956) (2,586)122,897 — 
Revenues, net of intersegment revenues
$1,756,722 $7,311,111 $ $19,647 $ $9,087,480 
Operating earnings (loss)45,432 36,231 (18,475)4,474  67,662 
Interest expense(1,370)14,904 15,814 658 (4,546)25,460 
Other income(4,629)(22,696)(2,969)(5,591)4,546 (31,339)
Equity income from investments(148)(12,828)(68,329)(30,812) (112,117)
Income before income taxes$51,579 $56,851 $37,009 $40,219 $ $185,658 
EnergyAgNitrogen ProductionCorporate
and Other
Reconciling
Amounts
Total
Three Months Ended February 28, 2023(Dollars in thousands)
Revenues, including intersegment revenues$2,314,601 $9,127,526