Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-Q

þ☑Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
For the quarterly period endedNovember 30, 2017.2023
or
o☐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 registrantRegistrant as specified in its charter)
Minnesota
41-0251095
(State or other jurisdiction of

incorporation or organization)
41-0251095
(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
5500 Cenex Drive Inver Grove Heights, Minnesota 55077
(Address of principal executive offices,
including zip code)
8% Cumulative Redeemable Preferred Stock		CHSCP
(651) 355-6000
(Registrant’s telephone number,
including area code)
The 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 registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO oYes ☑ No ☐


Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
YES þ NO oYes ☑ 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"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "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 þ
Smaller reporting company o
Emerging growth company o
(Do not check if a smaller reporting company)
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.o☐


Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO þYes ☐ No ☑


Indicate the number of shares outstanding of each of the Registrant’sissuer's classes of common stock, as of the latest practicable date:
The Registrantissuer has no common stock outstanding.





INDEX
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page

No.
2
2
Condensed Consolidated Statements of Operations for the three months ended Three Months Ended November 30, 2017, 30, 2023 and 20162022
3
Condensed Consolidated Statements of Comprehensive Income for the three months ended Three Months Ended November 30, 2017, 30, 2023 and 20162022
4
Condensed Consolidated Statements of Cash Flows for the three months endedThree Months Ended November 30 2017,, 2023 and 20162022
5
6
2220
3935
3935
PART II. OTHER INFORMATION
4036
4036
4036
36
4036
4137





Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company”"CHS," "we," "us" and “CHS”"our" refer to CHS Inc., a Minnesota cooperative corporation, and its subsidiaries as of November 30, 2017.2023.


FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q contains, and our other CHS Inc. 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, ("SEC"), including in the "Risk Factors" discussion in Item 1A of ourCHS Annual Report on Form 10-K for the fiscal year ended August 31, 2017.2023. 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 Quarterly Report on Form 10-Qdocument 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.

1
Table of Contents



PART I. FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS


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

November 30,
2017		 August 31,
2017		 November 30,
2023		August 31,
2023
(Dollars in thousands) (Dollars in thousands)
ASSETS   ASSETS
Current assets: 
 

Current assets: 
Cash and cash equivalents$252,129
 $181,379
Cash and cash equivalents$1,349,757 $1,765,286 
Receivables2,059,623
 1,869,632
Receivables3,772,527 3,105,811 
Inventories3,046,101
 2,576,585
Inventories4,251,580 3,215,179 
Derivative assets283,256
 232,017
Margin deposits206,955
 206,062
Supplier advance payments542,139
 249,234
Other current assets289,250
 299,618
Other current assets1,213,331 1,042,373 
Total current assets6,679,453
 5,614,527
Total current assets10,587,195 9,128,649 
Investments3,777,000
 3,750,993
Investments3,831,854 3,828,872 
Property, plant and equipment5,266,408
 5,356,434
Property, plant and equipment4,877,071 4,869,373 
Other assets1,061,562
 1,251,802
Other assets1,136,765 1,130,524 
Total assets$16,784,423
 $15,973,756
Total assets$20,432,885 $18,957,418 
LIABILITIES AND EQUITIES   LIABILITIES AND EQUITIES
Current liabilities: 
  
Current liabilities:  
Notes payable$2,480,264
 $1,988,215
Notes payable$421,580 $547,923 
Current portion of long-term debt71,022
 156,345
Current portion of long-term debt7,795 7,839 
Customer margin deposits and credit balances139,868
 157,914
Customer advance payments414,441
 413,163
Accounts payable2,380,998
 1,951,292
Accounts payable4,331,301 2,930,607 
Derivative liabilities226,279
 316,018
Accrued expenses409,522
 437,527
Accrued expenses597,196 773,054 
Dividends and equities payable121,209
 12,121
Other current liabilitiesOther current liabilities1,608,546 1,639,771 
Total current liabilities6,243,603
 5,432,595
Total current liabilities6,966,418 5,899,194 
Long-term debt1,936,744
 2,023,448
Long-term debt1,817,770 1,819,819 
Long-term deferred tax liabilities350,841
 333,221
Other liabilities315,460
 278,667
Other liabilities951,308 786,016 
Commitments and contingencies (Note 12)

 

Commitments and contingencies (Note 13)Commitments and contingencies (Note 13)
Equities: 
  
Equities:  
Preferred stock2,264,038
 2,264,038
Preferred stock2,264,038 2,264,038 
Equity certificates4,319,840
 4,341,649
Equity certificates5,818,526 5,911,649 
Accumulated other comprehensive loss(178,445) (183,670)Accumulated other comprehensive loss(272,697)(265,395)
Capital reserves1,520,218
 1,471,217
Capital reserves2,881,596 2,537,486 
Total CHS Inc. equities7,925,651
 7,893,234
Total CHS Inc. equities10,691,463 10,447,778 
Noncontrolling interests12,124
 12,591
Noncontrolling interests5,926 4,611 
Total equities7,937,775
 7,905,825
Total equities10,697,389 10,452,389 
Total liabilities and equities$16,784,423
 $15,973,756
Total liabilities and equities$20,432,885 $18,957,418 


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

2
Table of Contents



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

 For the Three Months Ended
November 30,
 2017 2016
 (Dollars in thousands)
Revenues$8,048,889
 $8,048,250
Cost of goods sold7,735,627
 7,695,553
Gross profit313,262
 352,697
Marketing, general and administrative140,168
 147,849
Reserve and impairment charges (recoveries), net(3,787) 18,357
Operating earnings (loss)176,881
 186,491
(Gain) loss on investments(2,819) 7,401
Interest expense40,702
 38,265
Other (income) loss(22,195) (44,401)
Equity (income) loss from investments(38,362) (40,328)
Income (loss) before income taxes199,555
 225,554
Income tax expense (benefit)19,936
 16,612
Net income (loss)179,619
 208,942
Net income (loss) attributable to noncontrolling interests(464) (208)
Net income (loss) attributable to CHS Inc. $180,083
 $209,150
 Three Months Ended November 30,
 20232022
 (Dollars in thousands)
Revenues$11,390,658 $12,765,839 
Cost of goods sold10,745,708 11,886,704 
Gross profit644,950 879,135 
Marketing, general and administrative expenses252,056 234,666 
Operating earnings392,894 644,469 
Interest expense29,628 33,250 
Other income(44,529)(24,289)
Equity income from investments(109,051)(181,962)
Income before income taxes516,846 817,470 
Income tax (benefit) expense(6,522)34,554 
Net income523,368 782,916 
Net income attributable to noncontrolling interests445 318 
Net income attributable to CHS Inc. $522,923 $782,598 

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



3
Table of Contents




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

 For the Three Months Ended
November 30,
 2017 2016
 (Dollars in thousands)
Net income (loss)$179,619
 $208,942
Other comprehensive income (loss), net of tax:   
     Postretirement benefit plan activity, net of tax expense (benefit) of $2,620 and $2,011, respectively4,196
 3,239
     Unrealized net gain (loss) on available for sale investments, net of tax expense (benefit) of $404 and $482, respectively3,640
 777
     Cash flow hedges, net of tax expense (benefit) of $(2) and $406, respectively(4) 654
     Foreign currency translation adjustment, net of tax expense (benefit) of $(443) and $(209), respectively(2,607) (19,164)
Other comprehensive income (loss), net of tax5,225
 (14,494)
Comprehensive income (loss)184,844
 194,448
     Less: comprehensive income (loss) attributable to noncontrolling interests(464) (208)
Comprehensive income (loss) attributable to CHS Inc. $185,308
 $194,656
Three Months Ended November 30,
20232022
 (Dollars in thousands)
Net income$523,368 $782,916 
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefits17 8,524 
Cash flow hedges(4,161)(20,207)
Foreign currency translation adjustment(3,158)(1,935)
Other comprehensive loss, net of tax(7,302)(13,618)
Comprehensive income516,066 769,298 
Comprehensive income attributable to noncontrolling interests445 318 
Comprehensive income attributable to CHS Inc. $515,621 $768,980 


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





4
Table of Contents



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

 For the Three Months Ended November 30,
 2017 2016
 (Dollars in thousands)
Cash flows from operating activities: 
  
Net income (loss)$179,619
 $208,942
Adjustments to reconcile net income to net cash provided by (used in) operating activities: 
  
Depreciation and amortization120,148
 121,372
Amortization of deferred major repair costs16,418
 18,302
Equity (income) loss from investments(38,362) (40,328)
Distributions from equity investments12,514
 16,393
Provision for doubtful accounts(3,601) 27,812
Deferred taxes15,044
 6,199
Other, net2,976
 6,093
Changes in operating assets and liabilities, net of acquisitions: 
  
Receivables(80,637) (16,555)
Inventories(472,180) (754,253)
Derivative assets67,365
 110,306
Margin deposits(893) (2,623)
Supplier advance payments(292,905) (133,109)
Other current assets and other assets2,689
 12,082
Customer margin deposits and credit balances(18,045) (28,141)
Customer advance payments1,278
 131,444
Accounts payable and accrued expenses441,071
 743,427
Derivative liabilities(97,329) (195,545)
Other liabilities4,376
 6,599
Net cash provided by (used in) operating activities(140,454) 238,417
Cash flows from investing activities: 
  
Acquisition of property, plant and equipment(85,824) (116,986)
Proceeds from disposition of property, plant and equipment56,079
 2,574
Proceeds from sale of business29,457
 —
Expenditures for major repairs(1,039) (239)
Investments redeemed5,195
 —
Changes in CHS Capital notes receivable, net(69,227) (218,296)
Financing extended to customers(15,778) (14,353)
Payments from customer financing16,520
 21,523
Other investing activities, net1,847
 (1,245)
Net cash provided by (used in) investing activities(62,770) (327,022)
Cash flows from financing activities: 
  
Proceeds from lines of credit and long-term borrowings8,006,980
 10,300,476
Payments on lines of credit, long term-debt and capital lease obligations(7,657,713) (9,936,369)
Changes in checks and drafts outstanding(31,417) 14,334
Preferred stock dividends paid(42,167) (41,825)
Retirements of equities(3,682) (9,528)
Other financing activities, net(263) 384
Net cash provided by (used in) financing activities271,738
 327,472
Effect of exchange rate changes on cash and cash equivalents2,236
 (2,696)
Net increase (decrease) in cash and cash equivalents70,750
 236,171
Cash and cash equivalents at beginning of period181,379
 279,313
Cash and cash equivalents at end of period$252,129
 $515,484
 Three Months Ended November 30,
 20232022
 (Dollars in thousands)
Cash flows from operating activities:  
Net income$523,368 $782,916 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization, including amortization of deferred major maintenance138,037 131,388 
Equity income from investments, net of distributions received807 (164,930)
Provision for current expected credit losses5,009 2,961 
Deferred taxes(68,627)(1,733)
Other, net5,627 1,597 
Changes in operating assets and liabilities:  
Receivables(749,650)(779,455)
Inventories(1,036,401)(1,417,233)
Accounts payable and accrued expenses1,232,312 1,441,469 
Other, net(198,067)(177,172)
Net cash used in operating activities(147,585)(180,192)
Cash flows from investing activities:  
Acquisition of property, plant and equipment(142,449)(122,598)
Proceeds from disposition of property, plant and equipment2,330 5,034 
Expenditures for major maintenance(8,274)(27,398)
Changes in CHS Capital notes receivable, net83,580 32,098 
Financing extended to customers(50,229)(39,814)
Payments from customer financing39,697 42,121 
Other investing activities, net(24,271)(156)
Net cash used in investing activities(99,616)(110,713)
Cash flows from financing activities:  
Proceeds from notes payable and long-term debt975,374 2,054,507 
Payments on notes payable, long-term debt and finance lease obligations(1,106,904)(1,887,483)
Preferred stock dividends paid(42,167)(42,167)
Redemptions of equities(11,236)(12,941)
Other financing activities, net10,429 18,044 
Net cash (used in) provided by financing activities(174,504)129,960 
Effect of exchange rate changes on cash and cash equivalents(3,969)1,415 
Decrease in cash and cash equivalents and restricted cash(425,674)(159,530)
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$1,418,913 $743,944 


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

5
Table of Contents



CHS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1        Organization,        Basis of Presentation and Significant Accounting Policies


Basis of Presentation


The    These unaudited Consolidated Balance Sheet as of November 30, 2017, the Consolidated Statements of Operations for the three months ended November 30, 2017, and 2016, the Consolidated Statements of Comprehensive Income for the three months ended November 30, 2017, and 2016, and the Consolidated Statements of Cash Flows for the three months ended November 30, 2017, and 2016,condensed consolidated financial statements reflect, in the opinion of our management, all normal recurring adjustments necessary for a fair statement of theour financial position, results of operations and cash flows for the interim 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 among other things, the seasonal nature of our businesses.businesses, among other things. Our Consolidated Balance Sheet data as of August 31, 2017, has been derived from our auditedunaudited condensed consolidated financial statements but does not include all disclosures requiredand notes are presented as permitted by accounting principles generally accepted in the United States of America ("U.S. GAAP").

Over the course of fiscal year 2017, we incurred charges relating to a trading partner of ours in Brazil, which entered into bankruptcy-like proceedings under Brazilian law, intangiblerequirements for Quarterly Reports on Form 10-Q and fixed asset impairment charges associated with certain assets meeting the criteria to be classified as held for sale, fixed asset impairment charges due to the cancellation of a capital project at one of our refineries and bad debt and loan loss reserve charges relating to a single large producer borrower. Charges and impairments of this nature, as well as any recoveries related to amounts previously reserved, are included in the Consolidated Statements of Operations in the line item, "Reserve and impairment charges (recoveries), net" for the three months ended November 30, 2017, and 2016. The timing and amounts of these charges and impairments, and any recoveries were determined utilizing facts and circumstances that were present in the respective quarters in which the charge, impairments or recoveries were recorded. Prior year information has been revised to conform to the current year presentation.    

The notes to our consolidated financial statements reference our Energy, Ag, Nitrogen Production and Foods reportable segments, as well as our Corporate and Other category, which represents an aggregation of individually immaterial operating segments. The Nitrogen Production reportable segment resulted from our investment in CF Industries Nitrogen, LLC ("CF Nitrogen") in February 2016. The Foods segment resulted from our investment in Ventura Foods, LLC ("Ventura Foods") becoming a significant operating segment in fiscal 2016. See Note 9, Segment Reporting for more information.
Our consolidated financial statements include the accounts of CHS and all of our wholly owned and majority owned subsidiaries. The effects of all significant intercompany transactions have been eliminated.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2017,2023, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC"("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


Adopted

In October 2016,November 2023, the Financial Accounting Standards Board ("FASB"(the "FASB") issued Accounting Standards Update ("ASU") No. 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory2023-07, Segment Reporting (Topic 740). This ASU is intended280): Improvements to improveReportable Segment Disclosures, which enhances the accountingdisclosures required for the income tax consequences of intra-entity transfers of assets other than inventory by requiring an entity to recognize the income tax consequences when a transfer occurs, instead of when an asset is sold to an outside party.operating segments in our annual and interim consolidated financial statements. This ASU is effective for periods beginning after December 15, 2017; however, early adoption of this ASU is permitted during the first interim period if an entity issues interim financial statements and the amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We elected to early adopt ASU No. 2016-16 during the first quarter of fiscal 2018. The adoption did not have a material impact on our consolidated financial statements.


6
Table of Contents



Not Yet Adopted

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU is intended to improve the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities in its financial statements and make certain improvements to simplify the application of the hedge accounting guidance. The amendments in this ASU will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend the presentation and disclosure requirements and change how entities assess effectiveness. Entities are required to apply this ASU's provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This ASU is effective for us beginning September 1, 2019, for our annual reporting beginning in fiscal year 20202025 and for interim periods within thatperiod reporting beginning in fiscal year.2026. We are currently evaluating the impact the adoption will haveof adopting this ASU on our consolidated financial statements.


In March 2017,December 2023, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715)2023-09, Income Taxes (Topic 740): Improving the Presentation of Net Periodic Pension Costs and Net Postretirement Benefit Cost. This ASU changes the presentation of net periodic pension cost and net periodic postretirement benefit cost in theImprovements to Income Tax Disclosures, which provides additional transparency for income statement. This ASU requires that the service cost component should be included in the same income statement line item as other compensation costs arising from services rendered by the employees during the period. The other components of net periodic benefit cost should be presented in the income statement separately outside of operating income if that subtotal is presented. Additionally, only service cost may be capitalized in assets.tax disclosures. This ASU is effective for us beginning September 1, 2018,our annual reporting for our fiscal year 2019 and for interim periods within that fiscal year. The guidance2026 on the presentation of the components of net periodic benefit cost in the income statement should be applied retrospectively and the guidance regarding the capitalization of the service cost component in assets should be applied prospectively. The adoption of this amended guidance is not expected to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments within this ASU narrow the existing definition of a business and provide a more robust framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The definition of a business impacts various areas of accounting, including acquisitions, disposals and goodwill. Under the new guidance, fewer acquisitions are expected to be considered businesses. This ASU is effective for us beginning September 1, 2018, for our fiscal year 2019 and for interim periods within that fiscal year. Early adoption is permitted and the guidance should be applied prospectively to transactions following the adoption date. The adoption of this amended guidance is not expected to have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. This ASU is effective for us beginning September 1, 2018, for our fiscal year 2019 and for interim periods within that fiscal year. Early adoption is permitted, including in an interim period. The amendments in this ASU should be applied retrospectively to all periods presented. The adoption of this amended guidance is not expected to have a material impact on our consolidated statement of cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to reduce existing diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. This ASU is effective for us beginning September 1, 2018, for our fiscal year 2019 and for interim periods within that fiscal year. The adoption of this amended guidance is not expected to have a material impact on our consolidated statement of cash flows.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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 statementusers 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 this ASU’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This ASU is effective for us beginning September1, 2020, for our fiscal year 2021 and for interim periods within that fiscal year.prospective basis. We are currently evaluating the impact the adoption will haveof adopting this ASU on our consolidated financial statements.


In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which replaces the existing guidance in
Note 2        Revenues

    The following table presents revenues recognized under Accounting Standards Codification ("ASC") 840 - Leases. The amendments within this ASU introduce a lessee model requiring

7
Table of Contents


entities to recognize assets and liabilities for most leases, but continue recognizing the associated expenses in a manner similar to existing accounting guidance. This ASU does not make fundamental changes to existing lessor accounting; however, it does modify what constitutes a sales-type or direct financing lease and the related accounting, and aligns a number of the underlying principles with those of the new revenue standard, ASU No. 2014-09. The guidance also eliminates existing real estate-specific provisions and requires expanded qualitative and quantitative disclosures. This ASU is effective for us beginning September 1, 2019, for our fiscal year 2020 and for interim periods within that fiscal year, and the ASU’s provisions are required to be applied using a modified retrospective approach. We have initiated a preliminary assessment of the new lease standard, including the implementation of a new lease software that will improve the collection, maintenance, and aggregation of lease data necessary for the reporting and disclosure requirements under the new lease standard. One of the more significant changes arising from the new lease standard relates to a number of operating lease agreements not currently recognized on our Consolidated Balance Sheets. The new lease guidance will require these lease agreements to be recognized on the Consolidated Balance Sheets as a right-of-use asset along with a corresponding lease liability. As a result, our preliminary assessment indicates the provisions of ASU No. 2016-02 are expected to have a material impact on our Consolidated Balance Sheets. Although we expect the new lease guidance to have a material impact on our Consolidated Balance Sheets, we are continuing to evaluate the extent of potential impact the new lease guidance will have on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Topic 606, Revenue from Contracts with Customers. The amendments within this ASU, ("ASC Topic 606"), disaggregated by reportable segment, as well as within additional clarifying ASUs issued by the FASB, provide a single comprehensive model to be used in theamount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance including industry-specific guidance. The new revenue recognition guidance includes a five-step model for the recognition of revenue, including (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations,three months ended November 30, 2023 and (5) recognizing revenue when (or as) an entity satisfies a performance obligation. The new revenue recognition2022. Other applicable accounting guidance also specifies the accounting for certain costs to obtain or fulfill a contract with a customerprimarily includes revenues recognized under ASC Topic 470, Debt, and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We have completed an initial assessment of our revenue streams and do not believeASC Topic 842, Leases, that the new revenue recognition guidance will have a material impact on our consolidated financial statements. Certain revenue streams are expected to fall within the scope of the new revenue recognition guidance; however, a substantial portion of our revenue falls outside the scope of ASC Topic 606.
ASC Topic 606ASC Topic 815Other GuidanceTotal Revenues
Three Months Ended November 30, 2023(Dollars in thousands)
Energy$2,399,552 $318,388 $— $2,717,940 
Ag2,226,423 6,414,632 11,110 8,652,165 
Corporate and Other6,776 — 13,777 20,553 
Total revenues$4,632,751 $6,733,020 $24,887 $11,390,658 
Three Months Ended November 30, 2022
Energy$2,802,155 $317,151 $— $3,119,306 
Ag2,613,460 7,009,353 10,431 9,633,244 
Corporate and Other5,699 — 7,590 13,289 
Total revenues$5,421,314 $7,326,504 $18,021 $12,765,839 

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

6
Table of Contents

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 recognition guidancerecognized 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 will continuewere $41.3 million and $16.2 million as of November 30, 2023, and August 31, 2023, respectively.

Contract liabilities relate to follow existing guidance, primarily ASC 815, Derivativesadvance payments received from customers for goods and Hedging. Weservices that we have yet to provide. Contract liabilities of $268.4 million and $240.0 million as of November 30, 2023, and August 31, 2023, respectively, are continuingrecorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended November 30, 2023 and 2022, we recognized revenues of $89.6 million and $122.0 million related to evaluatecontract liabilities, respectively. These amounts were included in the impactother current liabilities balance at the beginning of the new revenue recognition guidance, including potential changes to business practices and/or contractual terms for in scope revenue streams, as well as the scope of expanded disclosures related to revenue. We expect to complete our final evaluation and implementation of the new revenue recognition guidance throughout fiscal 2018, which will allow us to adopt ASU No. 2014-09 and the related ASUs on September 1, 2018, in the first quarter of fiscal 2019, using the modified retrospective method.respective period.


Note 23        Receivables
November 30,
2023		August 31,
2023
(Dollars in thousands)
Trade accounts receivable$2,683,636 $2,010,162 
CHS Capital short-term notes receivable730,244 845,192 
Other439,747 327,084 
Gross receivables3,853,627 3,182,438 
Less: allowances and reserves81,100 76,627 
Total receivables$3,772,527 $3,105,811 
 November 30, 2017 August 31, 2017
 (Dollars in thousands)
Trade accounts receivable$1,329,887
 $1,234,500
CHS Capital notes receivable184,301
 164,807
Deferred purchase price receivable216,996
 202,947
Other556,275
 493,104
 2,287,459
 2,095,358
Less allowances and reserves227,836
 225,726
Total receivables$2,059,623
 $1,869,632

Trade Accounts

Trade accounts receivable    Receivables are initially recorded at a selling price, which approximates fair value, upon the salecomposed of goods or services to customers. Subsequently, trade accounts receivable, are carried at net realizable value, which includes an allowance for estimated uncollectible amounts. We calculate this allowance based onshort-term notes receivable in our history of write-offs, level of past due accounts, and our relationships with, and the economic status of, our customers.


8
Table of Contents


CHS Capital

Notes Receivable

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 wholly-owned subsidiary, has short-term notesbest estimate of expected credit losses in existing receivable from commercialbalances and producer borrowers. The short-term notes receivable have maturity terms of 12 months or less and are reported at their outstanding unpaid principal balances,is determined using historical write-off experience, adjusted for the allowancevarious industry and regional data and current expectations of loan losses, as CHS Capital has the intent and ability to hold the applicable loans for the foreseeable future or until maturity or pay-off. The carrying value of CHS Capital short-term notes receivable approximates fair value, given the notes' short duration and the use of market pricing adjusted for risk.credit losses.


The notesNotes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperative’scooperatives' capital stock. These loans are primarily originated in the states of Minnesota Wisconsin and North Dakota. CHS Capital also has loans receivable from producer borrowers whichthat 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, with the addition of Michigan.as well as in South Dakota.


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 $14.8$95.3 million and $17.0$61.1 million atas of November 30, 2017,2023, and August 31, 2017,2023, respectively. The long-term notes receivable are included in Otherother assets on our Condensed Consolidated Balance Sheets. As of November 30, 2017,2023, and August 31, 2017, the2023, commercial notes represented 32%26% and 17%15%, respectively, and the producer notes represented 68%74% and 83%85%, respectively, of the total CHS Capital notes receivable. As of November 30, 2017, and August 31, 2017, CHS Capital had no third-party borrowers that accounted for more than 10% of the total CHS Capital notes receivable outstanding.


CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of November 30, 2017,2023, CHS Capital'sCapital customers havehad additional available credit of $529.4 million.

Allowance$1.4 billion. No significant troubled debt restructuring activity occurred, and no third-party customer or borrower accounted for Loan Losses and Impairments

CHS Capital maintains an allowance for loan losses which is the estimate of potential incurred losses inherent in the loans receivable portfolio. In accordance with FASB ASC 450-20, Accounting for Loss Contingencies, and ASC 310-10, Accounting by Creditors for Impairment of a Loan, the allowance for loan losses consists of general and specific components. The general component is based on historical loss experience and qualitative factors addressing operational risks and industry trends. The specific component relates to loans receivable that are classified as impaired. Additions to the allowance for loan losses are reflected within reserve and impairment charges (recoveries), net in the Consolidated Statements of Operations. The portion of loans receivable deemed uncollectible is charged off against the allowance. Recoveries of previously charged off amounts increase the allowance for loan losses. The amount of CHS Capital notes that were past due was not significant at any reporting date presented.

Interest Income

Interest income is recognized on the accrual basis using a method that computes simple interest daily. The accrual of interest on commercial loans receivable is discontinued at the time the commercial loan receivable is 90 days past due unless the credit is well-collateralized and in process of collection. Past due status is based on contractual termsmore than 10% of the loan. Producer loans receivable are placed in non-accrual status based on estimates and analysis due to the annual debt service terms inherent to CHS Capital’s producer loans. In all cases, loans are placed in nonaccrual statustotal receivables balance as of November 30, 2023, or charged off at an earlier date if collection of principal or interest is considered doubtful.August 31, 2023.

Sale of Receivables

Receivables Securitization Facility

On July 18, 2017, we amended an existing receivables and loans securitization facility (“Securitization Facility”) with certain unaffiliated financial institutions (the "Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries sell trade accounts and notes receivable (the “Receivables”) to Cofina Funding, LLC (“Cofina”), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina in turn sells the purchased Receivables in their entirety to the Purchasers. Prior to amending the Securitization Facility in July 2017, the transfer of Receivables was accounted for as a secured borrowing. Under the terms of the amended Securitization Facility CHS accounts for Receivables sold under the Facility as a sale of financial


9
7
Table of Contents



Note 4        Inventories
assets pursuant to ASC 860, Transfers and Servicing and derecognizes the sold Receivables from its Consolidated Balance Sheets.
November 30,
2023		August 31,
2023
(Dollars in thousands)
Grain and oilseed$1,868,331 $1,099,956 
Energy814,028 645,333 
Agronomy1,179,326 1,111,477 
Processed grain and oilseed170,135 141,360 
Other219,760 217,053 
Total inventories$4,251,580 $3,215,179 


Sales of Receivables by Cofina occur continuously and are settled with the Purchasers on a monthly basis. The proceeds from the sale of these Receivables comprise a combination of cash and a deferred purchase price (“DPP”) receivable. The DPP receivable is ultimately realized by CHS following the collection of the underlying Receivables sold to the Purchasers. 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, with maximum availability of $700.0 million.    As of November 30, 2017, the total availability under the Securitization Facility was $700.0 million, of which all has been utilized. The Securitization Facility terminates on July 17, 2018, but may be extended. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes.

We have no retained interests in the transferred Receivables, other than our right to the DPP receivable2023, and collection and administrative services. The DPP receivable is recorded at fair value within the Consolidated Balance Sheets, including a current portion within receivables and a long-term portion within other assets. Subsequent cash receipts related to the DPP receivable have been reflected as investing activities and additional sales of Receivables under the Securitization Facility are reflected in operating or investing activities, based on the underlying Receivable, in our Consolidated Statements of Cash Flows. Losses incurred on the sale of Receivables are recorded in interest expense and fees received related to the servicing of the Receivables are recorded in other income (loss) in the Consolidated Statements of Operations. We consider the fees received adequate compensation for services rendered, and accordingly have recorded no servicing asset or liability.

The fair value of the DPP receivable is determined by discounting the expected cash flows to be received based on unobservable inputs consisting of the face amount of the Receivables adjusted for anticipated credit losses. The DPP receivable is being measured like an investment in debt securities classified as available for sale, with changes to the fair value being recorded in other comprehensive income in accordance with ASC 320 - Investments - debt and equity securities. Our risk of loss following the transfer of Receivables under the Securitization Facility is limited to the DPP receivable outstanding and any short-falls in collections for specified non-credit related reasons after sale. Payment of the DPP receivable is not subject to significant risks other than delinquencies and credit losses on accounts receivable sold under the Securitization Facility.

The following table is a reconciliation of the beginning and ending balances of the DPP receivable for the quarter ended November 30, 2017:
  (Dollars in thousands)
Balance - as of August 31, 2017 $548,602
Monthly settlements, net (27,100)
Balance - as of November 30, 2017 $521,502

There was no DPP receivable as of November 30, 2016, and therefore, no comparative period is included in the table above.

Other Receivables

Other receivables are comprised of certain other amounts recorded in the normal course of business, including receivables related to valued added taxes and pre-crop financing, primarily to Brazilian farmers, to finance a portion of supplier production costs. We do not bear any of the costs or operational risks associated with the related growing crops. The financing is largely collateralized by future crops and physical assets of the suppliers, carries a local market interest rate and settles when the farmer’s crop is harvested and sold.


10
Table of Contents


Note 3        Inventories
 November 30, 2017 August 31, 2017
 (Dollars in thousands)
Grain and oilseed$1,545,313
 $1,145,285
Energy720,938
 755,886
Crop nutrients222,053
 248,699
Feed and farm supplies483,805
 353,130
Processed grain and oilseed54,916
 49,723
Other19,076
 23,862
Total inventories$3,046,101
 $2,576,585

As of November 30, 2017,August 31, 2023, we valued approximately 15% and 16%, respectively, of inventories, primarily related tocrude 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 (19% as of August 31, 2017).value. If the FIFOfirst in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $99.0$436.9 million and $186.2$589.0 million as of November 30, 2017,2023, and August 31, 2017,2023, respectively. An actualActual valuation of inventory under the LIFO method can be made only at the end of each year based on the 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 the final year-end LIFO inventory valuation.


Note 45        Investments
November 30,
2023		August 31,
2023
 (Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC$2,640,655 $2,577,391 
Ventura Foods, LLC481,236 519,169 
Ardent Mills, LLC235,778 265,146 
Other equity method investments344,334 337,281 
Other investments129,851 129,885 
Total investments$3,831,854 $3,828,872 
 November 30, 2017 August 31, 2017
 (Dollars in thousands)
Equity method investments:   
CF Industries Nitrogen, LLC$2,776,412
 $2,756,076
Ventura Foods, LLC350,602
 347,016
Ardent Mills, LLC209,926
 206,529
TEMCO, LLC39,235
 41,323
Other equity method investments265,621
 268,444
Cost method investments135,204
 131,605
Total investments$3,777,000
 $3,750,993

Equity Method Investments


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 primaryonly significant equity method investment during the three months ended November 30, 2023 and 2022, 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 described below.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 $654.9 million in cumulative undistributed earnings from our equity method investees included in the investments balance as of November 30, 2023.


On February 1, 2016, we invested $2.8CF Nitrogen

    We have a $2.6 billion investment in CF Nitrogen, commencing oura strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an 11.4%approximate 9% 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 uponon our contractual claims on the entity's net assets pursuant to the liquidation provisions of CF Nitrogen's limited liability company agreement,Limited Liability Company Agreement, adjusted for the semi-annualsemiannual cash distributions we receive as a resultdistributions.







8
Table of our membership interest in CF Nitrogen. For the three months ended November 30, 2017, and 2016, this amount was $20.3 million and $14.7 million, respectively. These amounts are included as equity income from investments in our Nitrogen Production segment.Contents


We have a 50% interest in Ventura Foods, a joint venture which produces and distributes primarily vegetable oil-based products, and which constitutes    The following table provides summarized unaudited financial information for our Foods segment. We account for Ventura Foods as an equity method investment and as of November 30, 2017, our carrying value of Ventura Foods exceeded our share of its equity by $12.9 million, which represents equity method goodwill. The earnings are reported as equity income from investments in our Foods segment.


11
Table of Contents


We have a 12% interest in Ardent Mills, LLC ("Ardent Mills"), a joint venture with Cargill Incorporated ("Cargill") and ConAgra Foods, Inc., which combines the North American flour milling operations of the three parent companies. We account for Ardent Mills as an equity method investment included in Corporate and Other.

TEMCO, LLC ("TEMCO") is owned and governed by Cargill (50%) and CHS (50%). Both owners have committed to sell all of their feedgrains, wheat, oilseeds and by-product origination that are tributary to the Pacific Northwest, United States ("Pacific Northwest") to TEMCO and to use TEMCO as their exclusive export-marketing vehicle for such grains exported through the Pacific Northwest through January 2037. We account for TEMCO as an equity method investment included in our Ag segment.

Note 5        Goodwill and Other Intangible Assets

Goodwill of $153.7 million and $154.1 million as of November 30, 2017, and August 31, 2017, respectively, is included in other assets on our Consolidated Balance Sheets. Changes in the net carrying amount of goodwillCF Nitrogen for the three months ended November 30, 2017, by segment,2023 and 2022:
Three Months Ended November 30,
20232022
(Dollars in thousands)
Net sales$878,045 $1,623,268 
Gross profit272,024 770,478 
Net earnings263,315 764,179 
Earnings attributable to CHS Inc.63,263 127,566 
    Our investments in other equity method investees are as follows:
 Energy Ag Corporate
and Other		 Total
 (Dollars in thousands)
Balances, August 31, 2017$552
 $142,929
 $10,574
 $154,055
Effect of foreign currency translation adjustments—
 (389) —
 (389)
Balances, November 30, 2017$552
 $142,540
 $10,574
 $153,666

No goodwill has been allocatednot significant in relation to our Nitrogen Productioncondensed consolidated financial statements, either individually or Foods segments, which consist of investments accounted for under the equity method.in aggregate.

Intangible assets subject to amortization primarily include customer lists, trademarks and non-compete agreements, and are amortized over their respective useful lives (ranging from 2 to 30 years). Information regarding intangible assets that are included in other assets on our Consolidated Balance Sheets is as follows:
 November 30,
2017		 August 31,
2017
 Carrying Amount Accumulated Amortization Net Carrying Amount Accumulated Amortization Net
 (Dollars in thousands)
Customer lists$42,391
 $(11,695) $30,696
 $46,180
 $(14,695) $31,485
Trademarks and other intangible assets6,536
 (4,752) 1,784
 23,623
 (21,778) 1,845
Total intangible assets$48,927
 $(16,447) $32,480
 $69,803
 $(36,473) $33,330

Total amortization expense for intangible assets during the three months ended November 30, 2017, and 2016, was $0.9 million and $1.3 million, respectively. The estimated annual amortization expense related to intangible assets subject to amortization for the next five years is as follows:
 (Dollars in thousands)
Year 1$3,395
Year 23,373
Year 33,095
Year 43,037
Year 52,755



12
Table of Contents


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 ourall debt covenants as of November 30, 2017.


November 30, 2017
August 31, 2017

(Dollars in thousands)
Notes payable$2,182,243

$1,695,423
CHS Capital notes payable298,021

292,792
Total notes payable$2,480,264

$1,988,215

On2023. Notes payable as of November 30, 2017, our2023, and August 31, 2023, consisted of the following:
November 30,
2023		August 31,
2023
(Dollars in thousands)
Notes payable$258,944 $375,932 
CHS Capital notes payable162,636 171,991 
Total notes payable$421,580 $547,923 
    Our primary line of credit wasis a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $3.0$2.8 billion whichthat expires in September 2020. Theon April 21, 2028. There were no borrowings outstanding balance on this facility was $1.1 billion and $480.0 million as of November 30, 2017,2023, 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 November 30, 2023, total availability under the Securitization Facility was $974.2 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 November 30, 2023, or August 31, 2023.

9
Table of Contents

The following table presents summarized long-term debt (including the current portion) as of November 30, 2023, and August 31, 2017, respectively.2023:
November 30,
2023		August 31,
2023
 (Dollars in thousands)
Private placement debt$1,413,000 $1,413,000 
Term loan366,000 366,000 
Finance lease liabilities47,518 49,235 
Deferred financing costs(3,015)(3,127)
Other2,062 2,550 
Total long-term debt1,825,565 1,827,658 
Less current portion7,795 7,839 
Long-term portion$1,817,770 $1,819,819 

Interest expense for the three months ended November 30, 2017,2023 and 2016,2022, was $40.7$29.6 million and $38.3$33.3 million, respectively, net of capitalized interest of $1.8$5.0 million and $1.6$2.5 million, respectively.


Note 7        Income Taxes

    Our effective tax rate for the three months ended November 30, 2023, was (1.3)%, compared to 4.2% for the three months ended November 30, 2022. The income tax benefit during the three months ended November 30, 2023, resulted primarily from the recognition of research and development tax credits during the period. Our income tax (benefit) 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 November 30, 2023, and August 31, 2023, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.


























10
Table of Contents

Note 8        Equities


Changes in Equities


Changes in equities for the three months ended November 30, 2017,2023 and 2022, 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 redemption estimates11,236 — — — — — 11,236 
Redemptions of equities(8,287)(67)(2,882)— — — — (11,236)
Preferred stock dividends— — — — — (84,334)— (84,334)
Other, net34 (3)44 — — (1,281)870 (336)
Net income— — — — 522,923 445 523,368 
Other comprehensive loss, net of tax— — — — (7,302)— — (7,302)
Estimated 2024 cash patronage refunds— — — — — (93,198)— (93,198)
Estimated 2024 equity redemptions(93,198)— — — — — — (93,198)
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 
 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 redemption estimates12,941 — — — — — — 12,941 
Redemptions of equities(10,021)(58)(2,862)— — — — (12,941)
Preferred stock dividends— — — — — (84,334)— (84,334)
Other, net291 — 57 — — 20 (25)343 
Net income— — — — — 782,598 318 782,916 
Other comprehensive loss, net of tax— — — — (13,618)— — (13,618)
Estimated 2023 cash patronage refunds— — — — — (208,864)— (208,864)
Estimated 2023 equity redemptions(208,864)— — — — — — (208,864)
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 

Preferred Stock Dividends

The following is a summary of dividends declared per share by series of preferred stock for the three months ended November 30, 2023 and 2022.
Three Months Ended November 30,
Nasdaq symbol20232022
Series of preferred stock:(Dollars per share)
8% Cumulative RedeemableCHSCP$1.00 $1.00 
Class B Cumulative Redeemable, Series 1CHSCO$0.98 $0.98 
Class B Reset Rate Cumulative Redeemable, Series 2CHSCN$0.88 $0.88 
Class B Reset Rate Cumulative Redeemable, Series 3CHSCM$0.84 $0.84 
Class B Cumulative Redeemable, Series 4CHSCL$0.94 $0.94 

 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)
Balance, August 31, 2017$3,906,426
 $29,836
 $405,387
 $2,264,038
 $(183,670) $1,471,217
 $12,591
 $7,905,825
Reversal of prior year redemption estimates1,561
 —
 —
 —
 —
 —
 —
 1,561
Redemptions of equities(1,449) (53) (59) —
 —
 —
 —
 (1,561)
Preferred stock dividends—
 —
 —
 —
 —
 (84,334) —
 (84,334)
Other, net(1,498) (66) (344) —
 —
 3,954
 (3) 2,043
Net income (loss)—
 —
 —
 —
 —
 180,083
 (464) 179,619
Other comprehensive income (loss), net of tax—
 —
 —
 —
 5,225
 —
 —
 5,225
Estimated 2018 cash patronage refunds—
 —
 —
 —
 —
 (50,702) —
 (50,702)
Estimated 2018 equity redemptions(19,901) —
 —
 —
 —
 —
 —
 (19,901)
Balance, November 30, 2017$3,885,139
 $29,717
 $404,984
 $2,264,038
 $(178,445) $1,520,218
 $12,124
 $7,937,775
11

13
Table of Contents



Accumulated Other Comprehensive LossIncome (Loss)


Changes in accumulated other comprehensive income (loss) by component net of tax, are as follows for the three months ended November 30, 2017,2023 and 2016:2022, 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— 2,280 (3,350)(1,070)
Amounts reclassified23 (7,790)— (7,767)
Total other comprehensive income (loss), before tax23 (5,510)(3,350)(8,837)
Tax effect(6)1,349 192 1,535 
Other comprehensive income (loss), net of tax17 (4,161)(3,158)(7,302)
Balance as of November 30, 2023, net of tax$(173,908)$(2,129)$(96,660)$(272,697)
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
Pension and Other Postretirement Benefits Unrealized Net Gain on Available for Sale Investments Cash Flow Hedges Foreign Currency Translation Adjustment Total(Dollars in thousands)
(Dollars in thousands)
Balance as of August 31, 2017, net of tax$(135,046) $10,041
 $(6,954) $(51,711) $(183,670)
Balance as of August 31, 2022, net of taxBalance as of August 31, 2022, net of tax$(168,640)$8,843 $(95,538)$(255,335)
Other comprehensive income (loss), before tax:         Other comprehensive income (loss), before tax:
Amounts before reclassifications—
 4,044
 (435) (1,008) 2,601
Amounts before reclassifications(66)(33,899)(2,227)(36,192)
Amounts reclassified out6,816
 —
 429
 (2,042) 5,203
Amounts reclassifiedAmounts reclassified5,560 7,229 — 12,789 
Total other comprehensive income (loss), before tax6,816
 4,044
 (6) (3,050) 7,804
Total other comprehensive income (loss), before tax5,494 (26,670)(2,227)(23,403)
Tax effect(2,620) (404) 2
 443
 (2,579)Tax effect3,030 6,463 292 9,785 
Other comprehensive income (loss), net of tax4,196
 3,640
 (4) (2,607) 5,225
Other comprehensive income (loss), net of tax8,524 (20,207)(1,935)(13,618)
Balance as of November 30, 2017, net of tax$(130,850) $13,681
 $(6,958) $(54,318) $(178,445)
Balance as of November 30, 2022, net of taxBalance as of November 30, 2022, net of tax$(160,116)$(11,364)$(97,473)$(268,953)



 Pension and Other Postretirement Benefits Unrealized Net Gain on Available for Sale Investments Cash Flow Hedges Foreign Currency Translation Adjustment Total
 (Dollars in thousands)
Balance as of August 31, 2016, net of tax$(165,146) $5,656
 $(9,196) $(43,040) $(211,726)
Other comprehensive income (loss), before tax:         
Amounts before reclassifications—
 1,259
 620
 (18,940) (17,061)
Amounts reclassified out5,250
 —
 440
 (15) 5,675
Total other comprehensive income (loss), before tax5,250
 1,259
 1,060
 (18,955) (11,386)
Tax effect(2,011) (482) (406) (209) (3,108)
Other comprehensive income (loss), net of tax3,239
 777
 654
 (19,164) (14,494)
Balance as of November 30, 2016, net of tax$(161,907) $6,433
 $(8,542) $(62,204) $(226,220)
Amounts reclassified from accumulated other comprehensive income (loss) were primarily related to pension and other post-retirement benefits.postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and other post-retirementpostretirement 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 8, 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.



14
Table of Contents


Note 89        Benefit Plans


We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have non-qualifiednonqualified supplemental executive and Board of Directors retirement plans.


Components of net periodic benefit costs for the three months endedNovember 30, 2017,2023 and 2016,2022, are as follows:
Three Months Ended November 30,
Qualified
Pension Benefits		Nonqualified
Pension Benefits		Other Benefits
 202320222023202220232022
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)
12
 
Qualified
Pension Benefits
 
Non-Qualified
Pension Benefits
 Other Benefits
 2017 2016 2017 2016 2017 2016
Components of net periodic benefit costs for the three months ended November 30 are as follows: (Dollars in thousands)
  Service cost$9,919
 $9,383
 $137
 $259
 $236
 $353
  Interest cost6,002
 7,692
 178
 352
 227
 427
  Expected return on assets(12,040) (12,014) —
 —
 —
 —
  Prior service cost (credit) amortization359
 402
 8
 57
 (141) (30)
  Actuarial (gain) loss amortization6,888
 4,765
 15
 173
 (306) (116)
Net periodic benefit cost$11,128
 $10,228
 $338
 $841
 $16
 $634
Table of Contents


Employer Contributions


Total contributions to be made during fiscal 2018 will    Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. DuringNo contributions were made to the pension plans during the three months ended November 30, 2017, we made no contributions to the pension plans. At this time,2023, and we do not anticipate being required to make a contribution forcontributions to our benefitpension plans in fiscal 2018.2024, although we may voluntarily elect to do so.


Note 910        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 ourthe business. We have aggregated those operating segments into fourthree reportable segments: Energy, Ag and Nitrogen Production and Foods.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 grainsgrain and oilseedsoilseed 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 athat records earnings and allocated expenses but not revenues. Our supply agreement that we entered into with CF Nitrogen entitles us to purchase up to a specified annual quantity of granular urea and urea ammonium nitrate ("UAN") annually from CF Nitrogen. Our Foods segment consists solely of our equity method investment in Ventura Foods. Corporate and Other primarily represents our non-consolidated wheat milling operations, as well as 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 insurance operations.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 businessreportable segment and Corporate and Other, based on direct usage foruse 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 and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter. For example, in our Ag segment, our crop nutrients and country operations businessesbusiness generally experienceexperiences higher volumes and incomerevenues 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 seasonseason. Our global grain and in the fall, which corresponds to harvest. Our grain marketingprocessing operations are also subject to fluctuations in volume and earningsrevenues based on producer harvests, world grain prices, demand and demand.international trade relationships. Our Energy segment generally experiences higher volumes and profitabilityrevenues in certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel usageuse by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, maygenerally experience higher volumes and profitabilityrevenues during the winter heating and fall crop dryingcrop-drying seasons.


Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, ethanol, grains, oilseeds,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 the weather, crop damage

15
Table of Contents


due to plant disease or insects, drought, the availability and adequacy of supply, availability of reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, world events,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 are wholly owned and majority owned,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 andor 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 4, 5, Investments, for more information on these entities.related to our equity method investments.

13
Table of Contents

Reconciling Amountsamounts represent the elimination of revenues and interest 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 months ended November 30, 2017,2023 and 2016,2022, is presented in the tables below.below:
EnergyAgNitrogen ProductionCorporate
and Other		Reconciling
Amounts		Total
Three Months Ended November 30, 2023(Dollars in thousands)
Revenues, including intersegment revenues$2,919,123 $8,660,108 $— $25,367 $(213,940)$11,390,658 
Intersegment revenues(201,183)(7,943)— (4,814)213,940 — 
Revenues, net of intersegment revenues$2,717,940 $8,652,165 $— $20,553 $— $11,390,658 
Operating earnings (loss)258,847 140,341 (16,195)9,901 — 392,894 
Interest expense(8,542)15,957 10,609 16,989 (5,385)29,628 
Other income(1,279)(26,116)— (22,519)5,385 (44,529)
Equity (income) loss from investments1,833 (19,220)(63,263)(28,401)— (109,051)
Income before income taxes$266,835 $169,720 $36,459 $43,832 $— $516,846 
Total assets as of November 30, 2023$4,256,026 $9,088,813 $2,640,655 $4,447,391 $— $20,432,885 
EnergyAgNitrogen ProductionCorporate
and Other		Reconciling
Amounts		Total
Three Months Ended November 30, 2022(Dollars in thousands)
Revenues, including intersegment revenues$3,337,125 $9,640,559 $— $16,099 $(227,944)$12,765,839 
Intersegment revenues(217,819)(7,315)— (2,810)227,944 — 
Revenues, net of intersegment revenues$3,119,306 $9,633,244 $— $13,289 $— $12,765,839 
Operating earnings (loss)398,659 263,502 (16,272)(1,420)— 644,469 
Interest expense2,056 18,567 14,421 4,125 (5,919)33,250 
Other income(3,523)(19,302)— (7,383)5,919 (24,289)
Equity (income) loss from investments3,532 (23,062)(127,566)(34,866)— (181,962)
Income before income taxes$396,594 $287,299 $96,873 $36,704 $— $817,470 


Energy Ag Nitrogen Production Foods Corporate
and Other		 Reconciling
Amounts		 Total
For the Three Months Ended November 30, 2017:(Dollars in thousands)
Revenues$2,087,703

$6,086,680

$—
 $—
 $18,775

$(144,269)
$8,048,889
Operating earnings (loss)117,173

60,822

(3,135) (2,467) 4,488

—

176,881
(Gain) loss on investments—

(2,819)
—
 —
 —

—

(2,819)
Interest expense5,635

17,604

13,272
 —
 4,581

(390)
40,702
Other (income) loss(393) (20,228) (1,738) —
 (226) 390
 (22,195)
Equity (income) loss from investments(1,152)
(8,254)
(20,335) (3,440) (5,181)
—

(38,362)
Income (loss) before income taxes$113,083

$74,519

$5,666
 $973
 $5,314

$—

$199,555
Intersegment revenues$(137,204)
$(4,033)
$—
 $—
 $(3,032)
$144,269

$—
              
 Energy Ag Nitrogen Production Foods Corporate
and Other		 Reconciling
Amounts		 Total
For the Three Months Ended November 30, 2016:(Dollars in thousands)
Revenues$1,700,180
 $6,435,994
 $—
 $—
 $27,441
 $(115,365) $8,048,250
Operating earnings (loss)72,780
 109,597
 (4,029) (2,797) 10,940
 —
 186,491
(Gain) loss on investments—
 7,385
 —
 —
 16
 —
 7,401
Interest expense4,268
 16,339
 12,736
 —
 7,974
 (3,052) 38,265
Other (income) loss(309) (17,923) (29,106) —
 (115) 3,052
 (44,401)
Equity (income) loss from investments(1,162) (5,417) (14,696) (13,369) (5,684) —
 (40,328)
Income (loss) before income taxes$69,983
 $109,213
 $27,037
 $10,572
 $8,749
 $—
 $225,554
Intersegment revenues$(110,087) $(3,765) $—
 $—
 $(1,513) $115,365
 $—
              

Note 1011        Derivative Financial Instruments and Hedging Activities


Our    We enter into various derivative instruments to manage our exposure to movements primarily consist ofassociated with agricultural and energy commodity and freight futures and forward contractsprices and, to a lesser degree, may include foreign currency exchange rates and interest rate swap contracts. These contracts are economic hedges of price risk, but we do not apply hedge accounting under ASC Topic 815, Derivativesrates. Except for certain cash-settled swaps related to future crude oil purchases and Hedging, except with respect to certain interest rate swap contractsrefined product sales, which are accounted for as cash flow or fair value hedges. Derivativehedges, 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 as describedwith changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Condensed Consolidated Statements of Operations. See Note 11, 12, Fair Value Measurements,.for additional information. The majority of our exchange-traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned FCM.



16
14
Table of Contents



Derivatives Not Designated as Hedging Instruments

The following tables present the gross fair values of derivative assets, derivative liabilities and related margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with the related amounts permitted to be offset in accordance with U.S. GAAP. WeAlthough we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected not to offsetreport our derivative assets and liabilities when we have the right of offsetinstruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet - Offsetting; or when the instrumentsSheet-Offsetting.
November 30, 2023
Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting
Gross Amount RecognizedCash CollateralDerivative InstrumentsNet Amount
Derivative assets(Dollars in thousands)
Commodity derivatives$216,283 $— $3,005 $213,278 
Foreign exchange derivatives24,252 — 7,169 17,083 
Total$240,535 $— $10,174 $230,361 
Derivative liabilities
Commodity derivatives$275,972 $2,656 $3,905 $269,411 
Foreign exchange derivatives11,671 — 7,169 4,502 
Total$287,643 $2,656 $11,074 $273,913 

August 31, 2023
Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting
Gross Amount RecognizedCash CollateralDerivative InstrumentsNet Amount
Derivative assets(Dollars in thousands)
Commodity derivatives$280,440 $— $4,866 $275,574 
Foreign exchange derivatives32,402 — 12,330 20,072 
Total$312,842 $— $17,196 $295,646 
Derivative liabilities
Commodity derivatives$349,131 $1,505 $4,866 $342,760 
Foreign exchange derivatives13,799 — 12,330 1,469 
Total$362,930 $1,505 $17,196 $344,229 

    Derivative assets and liabilities with maturities of less than 12 months are subject to master netting arrangements under ASC Topic 815-10-45, Derivativesrecorded in other current assets and Hedging - Overall.
 November 30, 2017
   Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting  
 Gross Amounts Recognized Cash Collateral Derivative Instruments Net Amounts
 (Dollars in thousands)
Derivative Assets:       
Commodity and freight derivatives$324,867
 $—
 $36,052
 $288,815
Foreign exchange derivatives4,297
 —
 2,741
 1,556
Interest rate derivatives - hedge3,596
 —
 —
 3,596
Embedded derivative asset22,271
 —
 —
 22,271
Total$355,031
 $—
 $38,793
 $316,238
Derivative Liabilities:       
Commodity and freight derivatives$224,656
 $10,358
 $36,052
 $178,246
Foreign exchange derivatives7,556
 —
 2,741
 4,815
Interest rate derivatives - hedge2,641
 —
 —
 2,641
Total$234,853
 $10,358
 $38,793
 $185,702

 August 31, 2017
   Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting  
 Gross Amounts Recognized Cash Collateral Derivative Instruments Net Amounts
 (Dollars in thousands)
Derivative Assets:       
Commodity and freight derivatives$384,648
 $—
 $35,080
 $349,568
Foreign exchange derivatives8,771
 —
 3,636
 5,135
Interest rate derivatives - hedge9,978
 —
 —
 9,978
Embedded derivative asset25,533
 —
 —
 25,533
Total$428,930
 $—
 $38,716
 $390,214
Derivative Liabilities:       
Commodity and freight derivatives$309,762
 $3,898
 $35,080
 $270,784
Foreign exchange derivatives19,931
 —
 3,636
 16,295
Interest rate derivatives - hedge707
 —
 —
 707
Total$330,400
 $3,898
 $38,716
 $287,786

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 and liabilities recorded on theour Condensed Consolidated Balance Sheet atSheets as of November 30, 2017, were $71.82023, and August 31, 2023, was $1.4 million and $8.6$1.1 million, respectively. The amount of long-term derivative assets and liabilities recorded on theour Condensed Consolidated Balance Sheet atSheets as of November 30, 2023, and August 31, 2017, were $196.92023, was $14.2 million and $14.4$12.6 million, respectively.


17
Table of Contents



Derivatives Not Designated as Hedging Instruments

The majority of our derivative instruments have not been designated as hedging instruments for accounting purposes.    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 months endedNovember 30, 2017,2023 and 2016.2022:

Three Months Ended November 30,
Location of Gain (Loss)20232022
(Dollars in thousands)
Commodity derivativesCost of goods sold$8,184 $(135,686)
Foreign exchange derivativesCost of goods sold(4,607)(19,453)
Foreign exchange derivativesMarketing, general and administrative expenses820 237 
Total$4,397 $(154,902)

15
Table of Contents

   For the Three Months Ended November 30,
 
Location of
Gain (Loss)
 2017 2016
   (Dollars in thousands)
Commodity and freight derivativesCost of goods sold $27,752
 $18,410
Foreign exchange derivativesCost of goods sold 6,766
 6,024
Foreign exchange derivativesMarketing, general and administrative (495) 145
Interest rate derivativesInterest expense (1) 2
Embedded derivativeOther income 1,738
 29,106
Total $35,760
 $53,687

Commodity and Freight Contracts
    
As of November 30, 2017,2023, and August 31, 2017,2023, we had outstanding commodity futures options and freightoptions 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 and freight contracts accounted for as derivative instruments.contracts:
 November 30, 2023August 31, 2023
LongShortLongShort
 (Units in thousands)
Grain and oilseed (bushels)502,650 719,364 506,654630,803
Energy products (barrels)7,166 6,097 11,8398,085
Processed grain and oilseed (tons)6,594 12,252 7,3809,437
Crop nutrients (tons)61 — 7010
Ocean freight (metric tons)10 — 40—
Natural gas (metric million Btu)180 — 460—
 November 30, 2017 August 31, 2017
 Long Short Long Short
 (Units in thousands)
Grain and oilseed - bushels588,263
 805,041
 570,673
 768,540
Energy products - barrels16,254
 19,300
 15,072
 18,252
Processed grain and oilseed - tons196
 1,700
 299
 2,347
Crop nutrients - tons25
 4
 9
 15
Ocean and barge freight - metric tons4,785
 3,144
 2,777
 1,766
Rail freight - rail cars151
 68
 176
 75
Natural gas - MMBtu1,500
 —
 500
 —


Foreign Exchange Contracts


We conduct a substantial portion of our business in U.S. dollars, but we are exposed to risk regardingrisks relating to foreign currency fluctuations, even though a substantial amountprimarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe and purchases of international sales are denominated in U.S. dollars. In addition to specific transactional exposure,products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although CHS has some risk exposure relating to foreign currency transactions, a larger impact with exchange rate fluctuations can impactis 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. From time to time, we enter into foreign currency hedge contracts to minimize the impact of currency fluctuations on our transactional exposures. The notional amountsamount of our foreign exchange derivative contracts were $646.3 millionwas $1.4 billion and $776.7 million$1.9 billion as of November 30, 2017,2023, and August 31, 2017,2023, respectively.


Embedded Derivative AssetDerivatives Designated as Cash Flow Hedging Strategies


Under    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 termsrelated hedged items are exposed to significant market price risk and potential volatility. As part of our strategic investmentrisk 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 CF Nitrogen, if CF Industries' credit rating is reduced below certain levels by twoother 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 three specified credit ratings agencies, weNovember 30, 2023, and August 31, 2023, the aggregate notional amounts of cash flow hedges were 5.1 million and 4.1 million barrels, respectively.

    The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the locations on our Condensed Consolidated Balance Sheets in which they are entitledrecorded:
Derivative AssetsDerivative Liabilities
Balance Sheet LocationNovember 30,
2023		August 31,
2023		Balance Sheet LocationNovember 30,
2023		August 31,
2023
(Dollars in thousands)(Dollars in thousands)
Other current assets$2,093 $8,395 Other current liabilities$5,352 $5,345 

    The following table presents the pretax losses recorded in other comprehensive income relating to receive a non-refundable annual payment of $5.0 million from CF Industries in November of each year until the date that 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.
Duringcash flow hedges for the three months ended November 30, 2016, CF Industries' credit rating was reduced below the specified levels2023 and we received a $5.0 million payment from CF Industries, which was recorded as a gain in our Consolidated Statement2022:

Three Months Ended November 30,
20232022
 (Dollars in thousands)
Commodity derivatives$(6,310)$(29,589)

18
16
Table of Contents



of Operations. We also recorded an embedded derivative asset of $24.1 million on    The following table presents the pretax gains (losses) relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Balance Sheet and a corresponding gain in our Consolidated StatementStatements of Operations for the fair value of the embedded derivative asset during the three months ended November 30, 2016. During the three months ended November 30, 2017, we received a second $5.0 million payment from CF Industries. The fair value of the embedded derivative asset recorded on our Consolidated Balance Sheet as of November 30, 2017, was equal to $22.3 million. The current2023 and long-term portions of the embedded derivative asset are included in derivative assets and other assets on our Consolidated Balance Sheets, respectively. See Note 11, Fair Value Measurements for more information on the valuation of the embedded derivative asset.2022:

Three Months Ended November 30,
Location of Gain (Loss)20232022
  (Dollars in thousands)
Commodity derivativesCost of goods sold$8,082 $(6,929)
Derivatives Designated as Fair Value Hedging Strategies

As of November 30, 2017, and August 31, 2017, we have outstanding interest rate swaps with an aggregate notional amount of $495.0 million designated as fair value hedges of portions of our fixed-rate debt. Our objective in entering into these transactions is to offset changes in the fair value of the debt associated with the risk of variability in the three-month U.S. dollar LIBOR interest rate, in essence converting the fixed-rate debt to variable-rate debt. Offsetting changes in the fair values of both the swap instruments and the hedged debt are recorded contemporaneously each period and only create an impact to earnings to the extent that the hedge is ineffective. During the three months ended November 30, 2017, and 2016, we recorded offsetting fair value adjustments of $8.3 million and $13.3 million, respectively, with no ineffectiveness recorded in earnings.


Note 1112        Fair Value Measurements


ASC Topic 820, Fair Value Measurements and DisclosuresMeasurement, 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 betweenamong the market participants on the measurement date. The standard also establishes a

We determine fair values of derivative instruments and certain other assets based on the fair value hierarchy for inputs usedestablished in measuring fair value,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 or market data that a market participant would obtain from independent sources to value the asset or liability. Unobservable inputs are inputs that reflect ourthe assumptions about the factors market participants would use in valuingpricing the asset or liability developed based uponon the best information available in the circumstances. TheASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value hierarchy consists of three levels.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 uponon the lowest level of input that is significant to the fair value measurement.



19
Table of Contents


Recurring fair value measurements atas of November 30, 2017,2023, and August 31, 2017,2023, are as follows:
November 30, 2023
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Assets(Dollars in thousands)
Commodity derivatives$2,624 $215,752 $— $218,376 
Foreign exchange derivatives— 24,252 — 24,252 
Segregated investments and marketable securities172,665 — — 172,665 
Other assets51,941 — — 51,941 
Total$227,230 $240,004 $— $467,234 
Liabilities    
Commodity derivatives$2,320 $279,004 $— $281,324 
Foreign exchange derivatives— 11,671 — 11,671 
Total$2,320 $290,675 $— $292,995 
17
Table of Contents

 November 30, 2017
 
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)
Assets: 
  
  
  
Commodity and freight derivatives$29,637
 $295,230
 $—
 $324,867
Foreign currency derivatives—
 4,297
 —
 4,297
Interest rate swap derivatives—
 3,596
 —
 3,596
Deferred compensation assets53,348
 —
 —
 53,348
Deferred purchase price receivable—
 —
 521,502
 521,502
Embedded derivative asset—
 22,271
 —
 22,271
Other assets17,784
 —
 —
 17,784
Total$100,769
 $325,394
 $521,502
 $947,665
Liabilities: 
  
    
Commodity and freight derivatives$25,299
 $199,357
 $—
 $224,656
Foreign currency derivatives—
 7,556
 —
 7,556
Interest rate swap derivatives—
 2,641
 —
 2,641
Total$25,299
 $209,554
 $—
 $234,853
August 31, 2023
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Assets(Dollars in thousands)
Commodity derivatives$5,344 $283,491 $— $288,835 
Foreign exchange derivatives— 32,402 — 32,402 
Segregated investments and marketable securities225,715 — — 225,715 
Other assets89,592 — — 89,592 
Total$320,651 $315,893 $— $636,544 
Liabilities
Commodity derivatives$7,501 $346,975 $— $354,476 
Foreign exchange derivatives— 13,799 — 13,799 
Total$7,501 $360,774 $— $368,275 


 August 31, 2017
 
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)
Assets:       
Commodity and freight derivatives$48,491
 $336,157
 $—
 $384,648
Foreign currency derivatives—
 8,771
 —
 8,771
Interest rate swap derivatives—
 9,978
 —
 9,978
Deferred compensation assets52,414
 —
 —
 52,414
Deferred purchase price receivable—
 —
 548,602
 548,602
Embedded derivative asset—
 25,533
 —
 25,533
Other assets14,846
 —
 —
 14,846
Total$115,751
 $380,439
 $548,602
 $1,044,792
Liabilities:       
Commodity and freight derivatives$31,189
 $278,573
 $—
 $309,762
Foreign currency derivatives—
 19,931
 —
 19,931
Interest rate swap derivatives—
 707
 —
 707
Total$31,189
 $299,211
 $—
 $330,400

Commodity freight and foreign currencyexchange 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 over-the-counter ("OTC")OTC derivatives are determined using inputs that are generally based on exchange tradedexchange-traded prices and/or recent market bids and offers, adjusted for location specific inputs,including location-specific adjustments, and are classified within Level 2. The location specificLocation-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.


20
TableSegregated investments and marketable securities and other assets. Our segregated investments and marketable securities and other assets are comprised primarily of Contents



Interest rate swap derivatives — Fair values of our interest rate swap derivativesinvestments in various government agencies, U.S. Treasury securities, money market funds and rabbi trust assets, which are determined utilizing valuation models that are widely accepted in thevalued using quoted market to value these OTC derivative contracts. The specific terms of the contracts, as well as market observable inputs, such as interest ratesprices and credit risk assumptions, are factored into the models. As all significant inputs are market observable, all interest rate swaps are classified within Level 2. Changes in the fair values of contracts not designated as hedging instruments for accounting purposes are recognized in our Consolidated Statements of Operations as a component of interest expense. See Note 10, Derivative Financial Instruments and Hedging Activities for additional information about interest rates swaps designated as fair value and cash flow hedges.1.
    
Deferred compensation andother assets — Our deferred compensation investments, Rabbi Trust assets and available-for-sale investments in common stock of other companies 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 Consolidated Statements of Operations as a component of marketing, general and administrative expenses.

Deferred purchase price receivable — The fair value of the DPP receivable included in receivables, net and other assets, is determined by discounting the expected cash flows to be received. The expected cash flows are primarily based on unobservable inputs consisting of the face amount of the Receivables adjusted for anticipated credit losses. Significant changes in the anticipated credit losses could result in a significantly higher (or lower) fair value measurement. Due to the use of significant unobservable inputs in the pricing model, including management's assumptions related to anticipated credit losses, the DPP receivable is classified as a Level 3 fair value measurement. The reconciliation of the DPP receivable for the period ended November 30, 2017, is included in Note 2, Receivables.
Embedded derivative asset — The embedded derivative asset relates to contingent payments inherent in our investment in CF Nitrogen. The inputs into the fair value measurement include the probability of future upgrades and downgrades of CF Industries' credit rating based on historical credit rating movements of other public companies and the discount rates to be 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 10, Derivative Financial Instruments and Hedging Activities for additional information.

There were no material transfers between Level 1, Level 2 and Level 3 assets and liabilities during the three months ended November 30, 2017.

Note 1213        Commitments and Contingencies


Environmental


We are required to comply with various environmental laws and regulations incidental to our normal business operations. In order toTo meet our compliance requirements, we establish reserves for the probable future costs of remediation ofassociated with identified issues whichthat are probable and can be reasonably estimated. 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 laws 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 the aggregate, will not have a material effect on our consolidated financial position, 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 consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year.

21
Table of Contents




Guarantees


We are a guarantor for lines of credit and performance obligations of related, non-consolidatednonconsolidated companies. As of November 30, 2017, ourOur bank covenants allowedallow maximum guarantees of $1.0$1.1 billion, of which $101.4$158.6 million were outstanding.outstanding on November 30, 2023. 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 November 30, 2017.2023.


Lease Commitments
18

Table of Contents
On
Note 14        Other Current Assets and Liabilities

    Other current assets and liabilities as of November 30, 2017, we completed a sale-leaseback transaction for our primary corporate office building located in Inver Grove Heights, Minnesota. Simultaneous with the closing2023, and August 31, 2023, are as follows:
November 30,
2023		August 31,
2023
Other current assets(Dollars in thousands)
Derivative assets (Note 11)$241,237 $320,119 
Margin and related deposits262,298 342,872 
Prepaid expenses187,036 149,682 
Supplier advance payments446,142 136,304 
Restricted cash69,156 79,301 
Other7,462 14,095 
Total other current assets$1,213,331 $1,042,373 
Other current liabilities
Customer margin deposits and credit balances$126,620 $197,315 
Customer advance payments442,181 356,760 
Derivative liabilities (Note 11)278,815 355,696 
Dividends and equity payable760,930 730,000 
Total other current liabilities$1,608,546 $1,639,771 
19
Table of the sale, the Company entered into a 20-year operating lease arrangement with base annual rent of approximately $3.4 million during the first year, followed by annual increases of 2% through the remainder of the lease period.Contents


Note 13        Subsequent Events

United States Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The law includes significant changes to the U.S. corporate tax system, including a Federal corporate rate reduction from 35% to 21%, repeal of the Section 199 Domestic Production Activities Deduction and enactment of the Deduction for Qualified Business Income of Pass-Thru Entities. We are in the process of analyzing the legislation and determining an estimate of the financial impact. Currently, we expect to record a material tax benefit due to the revaluation of our net deferred tax liability position included in our Consolidated Balance Sheets.

ITEM 2.    MANAGEMENT’SMANAGEMENT'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 20182024 First Quarter Highlights
•Fiscal 2018 Priorities Update
Fiscal 20182024 Trends Update
•Operating Metrics
•Results of Operations
•Liquidity and Capital Resources
Off Balance Sheet Financing Arrangements
Contractual Obligations
•Critical Accounting Policies
Effect of Inflation and Foreign Currency Transactions
•Recent Accounting Pronouncements


Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended August 31, 20172023 (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 of this Quarterly Report on Form 10-Q.


22
Table of Contents



Overview


CHS Inc. is a diversified company that provides grain, foodsfood, 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 thatwho own our five series of preferred stock, all of which are listed and traded on the Nasdaq Global Select Market.Market of The Nasdaq Stock Market LLC. We operate in the following fourthree reportable segments:


Energy Segment - produces•Energy. Produces and provides primarily for the wholesale distribution of petroleum products and transportation of thosepetroleum products.
Ag Segment - purchases•Ag. Purchases and further processes or resells grainsgrain and oilseedsoilseed originated by our country operations business,and global grain and processing businesses, by our member cooperatives and by third partiesparties. It also includes our renewable fuels business and also serves as a wholesaler and retailer of crop inputs.
agronomy products.
•Nitrogen Production Segment -. Produces and distributes nitrogen fertilizer. It consists solely of our equity method investment in CF Industries Nitrogen, LLC ("CF Nitrogen"), and produces and distributes nitrogen fertilizer, a commodity chemical.
allocated expenses.
Foods Segment - consists solely of our equity method investment in Ventura Foods, LLC ("Ventura Foods") and is a processor and distributor of edible oils used in food preparation and a packager of food products.


In addition, other operating activities, primarily our non-consolidatedfinancing and hedging businesses, along with our nonconsolidated food production and distribution and wheat milling joint venture, as well as our financing, hedging and insurance operations,ventures, have been aggregated within our Corporate and Other.Other category.
    
The consolidated financial statements include the accounts of CHS and all of our wholly-owned and majority-owned subsidiaries and limited liability companies.companies in which we have control. The effects of all significant intercompany transactions have been eliminated.


Corporate administrative expenses and interest are allocated to each reportingreportable segment along withand Corporate and Other, based on direct usage foruse 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.taxes ("IBIT"). As a company that operates heavily in global commodities, there is significant unpredictability and volatility in pricing, costs and costs. As such,global trade volumes. Consequently, we focus on managing the margin we can earn and the resulting income before income taxes. ManagementIBIT. We also focusesfocus on ensuring the strength of the balance sheet strength through the appropriate management of financial liquidity, workingleverage, capital capital deployment, capital resourcesallocation and overall leverage.cash flow optimization.


Seasonality. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues and income areIBIT generally lowesttrend lower during the second fiscal quarter and fourth fiscal quarters and highest duringincrease in the first and third fiscal quarters.quarter. For example, in our Ag segment, our crop nutrients and country operations businessesbusiness generally experienceexperiences higher volumes and incomerevenues 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 seasonseason. Our global grain and in the fall, which corresponds to harvest. Our grain marketingprocessing operations are also subject to fluctuations in volumevolumes and earningsrevenues based on producer harvests, world grain prices, global demand and demand.international trade relationships. Our Energy segment generally experiences higher volumes and profitabilityrevenues in
20
Table of Contents

certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel usageuse by our agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, maygenerally experience higher volumes and profitabilityrevenues during the winter heating and crop dryingfall crop-drying seasons. The graphs below depict the seasonality inherent in our business.businesses.

4809
23
Table of Contents4811



revenuechartq1fy18.jpg

ibitchartq1fy18.jpg
* It should be noted the third quarter of fiscal 2017 was impacted by material charges that caused income (loss) before income taxes for that period to deviate from historical trends.

Pricing and Volumes. Our revenues, assets and cash flows can be significantly affected by global market prices forand sales volumes of commodities such as petroleum products, natural gas, grains,grain, oilseed products and crop nutrients.agronomy products. 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. 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 the weather, crop damage due to plant disease or insects, drought, availability/adequacy of supply of the relateda commodity, availability of reliable rail and river transportation networks, disease outbreaks, government regulations/regulations and policies, world eventsglobal trade disputes, wars and civil unrest, and general political/political and/or economic conditions.


Business Strategy


Our business strategy isstrategies focus on an enterprisewide effort to helpcreate an experience that empowers customers to make CHS their first choice, expand market access to add value for our owners grow by maximizing returns and optimizing our various operations to ensure thattransform and evolve our core businesses are strategically positioned today and for the future. We are focusingby capitalizing on improving efficiency and, when necessary, disposing of assets that thatchanging market dynamics. To execute these strategies, we are not strategic and/or do not meet our internal measurement expectations. We are also focused on implementing agile, efficient and sustainable technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-performing, diverse and passionate teams; achieving operational excellence and continuous improvement; and maintaining financial flexibility by optimizing debt levels and ensuring adequate financial liquidity so we can effectively operate throughout the agriculture and energy economic cycles.


a strong balance sheet.
24
21
Table of Contents





Fiscal 20182024 First Quarter Highlights


Margins were lower•Earnings remained strong across our segments, although down from the record first quarter of fiscal 2023.
•Our Energy segment experienced favorable market conditions in our refined fuels business, including sustained global demand for energy products, but refining margins have decreased from the highs in the prior year as a result of trade flows returning to more normal levels.
•In our Ag segment, compared to prior year results; however, we did see improvementscontinued robust meal and oil demand drove strong earnings in our Energyoilseed processing business comparedthat were offset by weak U.S. export demand for grain and oilseed.
•Equity method investments performed well, with our CF Nitrogen investment being the largest contributor.

Fiscal 2024 Trends Update

Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results. We anticipate that various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could have a significant impact on each of our segments during the prior year.
Long-term debt (includingremainder of fiscal 2024. These factors include the current portion) was reduced by $172.0 million by monetizing certain assetsongoing war between Russia and actively managing cash flow.
Continued our active managementUkraine and escalation of the balance sheet which resultedconflict in the decision that no cash patronage would be issuedMiddle East, shifts in fiscal 2018global trade flows for fiscal 2017 results,commodities, a higher interest rate environment, and equity retirements would be limitedinflationary pressures increasing costs of labor, freight and materials. In addition to $10 millionthese broad macroeconomic factors, other factors could impact the demand and pricing for estates.

Fiscal 2018 Priorities Update

Duringagricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable. These include the three months ended November 30, 2017, wecost of renewable energy credits, the prices of which remains volatile and could continue to make improvements innegatively impact our managementprofitability, and regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect the imbalance between global supply and strong global demand for energy and agricultural commodities to continue to moderate through the remainder of risk and the granting of credit through enhancements in the related policies, practices and operations. We finalized decisions to dispose of certain assets within our Ag segment that were determined to not be strategic and were not meeting our performance expectations. We also continued our focus on restoring financial flexibility by monetizing certain assets and paying down long-term debt.

Fiscal 2018 Trends Update

Our business is cyclical and the Ag and Energy industries are currently in a challenging environment characterized by reduced commodity prices, lower margins, reduced liquidity and increased leverage.fiscal 2024. We are unable to predict how long thisthe current environment will last or how severe itthe severity of the financial and operational impacts to us in fiscal 2024. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2023 for additional impacts that these and other risks may have on our business operations and financial performance.

We will ultimately be; however, at this time, although there was an increase in Energy margins in the first quarter of fiscal 2018, we do not foresee significant changes to the core economic environment during the remainder of fiscal 2018. During this period, we expect our revenues, margins and cash flows from our core operations to continue to be under pressure.execute our enterprise priorities for fiscal 2024, including empowering and investing in our people, accelerating our operating model to better serve owners and customers, navigating dynamic and changing market conditions, and elevating sustainable growth through empowered teams, an integrated operating model and a solid financial foundation.































25
22
Table of Contents



Operating Metrics
Results of Operations

Consolidated Statements of Operations
 For the Three Months Ended November 30
 2017 2016
 
(Dollars in thousands)

Revenues$8,048,889
 $8,048,250
Cost of goods sold7,735,627
 7,695,553
Gross profit313,262
 352,697
Marketing, general and administrative140,168
 147,849
Reserve and impairment charges (recoveries), net(3,787) 18,357
Operating earnings (loss)176,881
 186,491
(Gain) loss on investments(2,819) 7,401
Interest expense40,702
 38,265
Other (income) loss(22,195) (44,401)
Equity (income) loss from investments(38,362) (40,328)
Income (loss) before income taxes199,555
 225,554
Income tax expense (benefit)19,936
 16,612
Net income (loss)179,619
 208,942
Net income (loss) attributable to noncontrolling interests(464) (208)
Net income (loss) attributable to CHS Inc. $180,083
 $209,150

The charts below detail revenues and income (loss) before income taxes by reportable segment for the first quarter of fiscal 2018. Our Nitrogen Production and Foods reportable segments represent equity methods investments, and as such record earnings and allocated expenses but not revenue.
segmentrevenuechartq1fy18.jpg
segmentibitq1fy18.jpg

26
Table of Contents





Income (Loss) Before Income Taxes by Segment


Energy

 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Income (loss) before income taxes$113,083
 $69,983
 $43,100
 61.6%
    Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products. To ensure the reliability of our refineries, we perform major maintenance activities every two to five years, which require a temporary shutdown of operations. These planned shutdowns allow us to extend the life, increase the capacity and improve the safety and efficiency of our refinery processing assets. They also minimize unplanned business interruptions and are essential to the long-term reliability and profitability of our Energy segment.


During periods of maintenance, utilization rates, throughput volumes and refined fuel yields are lower, and we may purchase refined petroleum products from third parties to meet the needs of our customers. These third-party purchases may result in lower margins than for products produced by our refineries, which reduces our profitability. The following table and commentary present the primary reasons for the changes in income (loss) before income taxes ("IBIT") for the Energy segment for the three months ended November 30, 2017, compared to the prior year:provides information about our consolidated refinery operations:
Three Months Ended November 30,
20232022
Refinery throughput volumes(Barrels per day)
Heavy, high-sulfur crude oil105,172 89,415 
All other crude oil71,931 71,271 
Other feedstocks and blendstocks14,021 10,708 
Total refinery throughput volumes191,124 171,394 
Refined fuel yields
Gasolines85,760 76,014 
Distillates85,072 75,393 
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(1)
Price 37
Other* 2
Non-gross profit related activity+
 5
Total change in Energy IBIT $43
* Other includes retail and non-commodity type activities.
+ See commentary related to these changes in the marketing, general and administrative expenses, (gain) loss on investments, interest expense, other income (loss) and equity (income) loss from investments sections of this Results of Operations.

Comparison of Energy segment IBIT for the three months ended November 30, 2017, and 2016

The $43.1 million increase in the Energy segment IBIT reflects the following:
Primarily driven by improved margins within refined fuels, caused by lower market inventories in the energy industry due to an active hurricane season in the Gulf of Mexico which resulted in oil production and refining operations being temporarily suspended in major centers of production along a critical portion of the Gulf coast of the United States, driving prices higher.
This increase was partially offset by a 3% decrease in volumes in Refined Fuels.
We are subject to the Renewable FuelsFuel Standard program ("RFS"), whichthat 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. In June 2023, the EPA issued a final renewable volume obligation ("RVO") for calendar years 2020 through 2025. We generate RINs under the RFS in our renewable fuels operations and through our blending activities, at our terminals. However,but we cannot generate enough RINs to meet the needs of our refining capacity andcapacity; therefore, RINs must be purchased on the open market. The price of RINs can be volatile. Onvolatile, with prices for D6 ethanol RINs and D4 biodiesel RINs decreasing by 42% and 47%, respectively, during the three months ended November 30, 2017,2023, compared to the EPA releasedsame period during the final mandateprior year, which positively impacted our earnings. Estimates of our RIN expenses 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 crude oil inputs) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by supply and demand of refined products. Crack spreads and WCS crude oil discounts both decreased during the three months ended November 30, 2023, compared to the same period during the prior year, 2018.contributing to lower IBIT for the Energy segment. The table below provides information about average market reference prices and differentials that impacted our Energy segment:    

Three Months Ended November 30,
20232022
Market indicators
WTI crude oil (dollars per barrel)$84.09 $85.15 
WTI - WCS crude oil discount (dollars per barrel)$18.20 $25.16 
Group 3 2:1:1 crack spread (dollars per barrel)*$30.65 $44.76 
Group 3 5:3:2 crack spread (dollars per barrel)*$27.72 $40.40 
D6 ethanol RIN (dollars per RIN)$0.9687 $1.6733 
D4 biodiesel RIN (dollars per RIN)$0.9700 $1.8259 
Ag*Group 3 refers to the oil refining and distribution system serving Midwest markets from the Gulf Coast through the Plains states.


23
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Income (loss) before income taxes$74,519
 $109,213
 $(34,694) (31.8)%


27
Table of Contents



Ag

    Our Ag segment operations work together to facilitate the 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 outside our control. The following table below provides information about average market prices for agricultural commodities, as well as sales and commentary present the primary reasons for the changes in IBIT for thethroughput volumes that impacted our Ag segment for the three months ended November 30, 2017,2023 and 2022:
Three Months Ended November 30,
Market Source*20232022
Commodity prices
Corn (dollars per bushel)Chicago Board of Trade$4.72 $6.77 
Soybeans (dollars per bushel)Chicago Board of Trade$13.02 $14.14 
Wheat (dollars per bushel)Chicago Board of Trade$5.56 $8.58 
Urea (dollars per ton)Green Markets NOLA$368.62 $589.27 
Urea ammonium nitrate (dollars per ton)Green Markets NOLA$250.78 $540.16 
Ethanol (dollars per gallon)Chicago Platts$2.16 $2.50 
Volumes
Grain and oilseed (thousands of bushels)591,412 517,439 
North American grain and oilseed port throughput (thousands of bushels)178,700 161,715 
Wholesale crop nutrients (thousands of tons)1,870 1,612 
Ethanol (thousands of gallons)247,001 243,761 
*Market source information represents the average month-end price during the period.




24
Table of Contents

Results of Operations

Three Months Ended November 30, 2023 and 2022
Three Months Ended November 30,
2023% of Revenues*2022% of Revenues*
(Dollars in thousands)
Revenues$11,390,658 100.0 %$12,765,839 100.0 %
Cost of goods sold10,745,708 94.3 11,886,704 93.1 
Gross profit644,950 5.7 879,135 6.9 
Marketing, general and administrative expenses252,056 2.2 234,666 1.8 
Operating earnings392,894 3.4 644,469 5.0 
Interest expense29,628 0.3 33,250 0.3 
Other income(44,529)(0.4)(24,289)(0.2)
Equity income from investments(109,051)(1.0)(181,962)(1.4)
Income before income taxes516,846 4.5 817,470 6.4 
Income tax (benefit) expense(6,522)(0.1)34,554 0.3 
Net income523,368 4.6 782,916 6.1 
Net loss attributable to noncontrolling interests445 — 318 — 
Net income attributable to CHS Inc. $522,923 4.6 %$782,598 6.1 %
*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 November 30, 2023. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.
4625
4627




25
Table of Contents

Income Before Income Taxes by Segment

Energy
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Income before income taxes$266,835 $396,594 $(129,759)(32.7 %)

    The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the three months ended November 30, 2023, compared to the same period during the prior year:
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(7)
Price (41)
Other* (18)
Impairment+
 22
Non-gross profit related activity+
 9
Total change in Ag IBIT $(35)
4837
* Other includes retail and non-commodity type activities.
+ See commentary related to these changes in the marketing, general and administrative expenses, reserve and impairment charges (recoveries), net, (gain) loss on investments, interest expense, other income (loss) and equity (income) lossincome from investments sections of this Results of Operations.


ComparisonThe change in Energy segment IBIT reflects the following:
•Lower crack spreads and decreased WCS crude oil discounts resulted from global market conditions, which contributed to a $228.0 million decrease of IBIT.
•The overall decreased IBIT was partially offset by the following:
◦Decreased costs for RINs in our refined fuels business contributed to a $47.6 million cost reduction;
◦Higher margins for propane attributable to hedging-related impacts due to global market conditions affecting the price of propane contributed $40.9 million increased IBIT; and
◦Higher refined fuels production volumes during the current year increased the mix of higher-margin produced refined fuels compared to the prior year and contributed to a $32.4 million increase of IBIT.














26
Table of Contents

Ag
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Income before income taxes$169,720 $287,299 $(117,579)(40.9 %)

    The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the three months ended November 30, 2017,2023, compared to the same period during the prior year:
5900
*See commentary related to these changes in the marketing, general and 2016administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.


The $34.7 million decreasechange in Ag segment IBIT reflects the following:
Grain marketing•Decreased margins for our grain and oilseed and oilseed processing product categories, primarily as a result of the timing of the impact of mark-to-market adjustments associated with our commodity derivatives and weak U.S. export demand leading to compressed margins, contributed to $105.3 million and $34.8 million decreases of IBIT, decreased primarilyrespectively.
•Higher volumes of grain and oilseed resulted in a $20.5 million increase of IBIT due to lower grain volumes and associated margins.
Country operations IBIT increased due to improved margins along with a gainmore favorable weather conditions in parts of approximately $7.1 million dueour trade territory relative to the sale of a non-strategic North American location, a gain on the sale of a domestic investment of $2.2 million, and recognition of approximately $5.3 million associated with the recovery of a loan that was written off in the prior fiscal year.
Processing and food ingredients IBIT decreased primarily caused by lower margins along with one-time severance charges and other costs associated with held for sale assets.
Crop nutrients IBIT increased, driven by higher associated margins.
Renewable fuels marketing and production operations IBIT decreased primarily resulting from lower margins.


All Other Segments
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Nitrogen Production IBIT*$36,459 $96,873 $(60,414)(62.4 %)
Corporate and Other IBIT$43,832 $36,704 $7,128 19.4 %
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Nitrogen Production IBIT$5,666
 $27,037
 $(21,371) (79.0)%
Foods IBIT$973
 $10,572
 $(9,599) (90.8)%
Corporate and Other IBIT$5,314
 $8,749
 $(3,435) (39.3)%

Comparison of All Other Segments IBIT for the three months ended November 30, 2017, and 2016

Our Nitrogen Production segment IBIT decreased due to a gain in the prior year of $29.1 million associated with an embedded derivative asset inherent in the agreement relating to our investment in CF Nitrogen for which there was no comparable gain in the current fiscal year. This was partially offset by higher equity method income in the current year driven by improved prices on urea and urea ammonium nitrate, which are produced and sold by CF Nitrogen. See*For additional information, see Note 4, 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 FoodsNitrogen Production segment IBIT decreased infrom the first quarter of fiscal 2018prior year due to lower margins earnedequity income attributed to decreased selling prices of urea and UAN, which was partially offset by Ventura Foods, as its customers put significant pressure on pricingdecreased natural gas costs, all due to global supply and it experienced acquisition integration challenges.demand factors. Corporate and Other IBIT decreasedincreased primarily due to lower earnings from our wheat milling joint venture and reducedincreased interest revenue from our financing groupincome resulting from the sale of loans receivable.higher interest rates and a larger cash balance.



28
27
Table of Contents



Revenues by Segment


Energy
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Revenues$2,717,940 $3,119,306 $(401,366)(12.9 %)
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Revenue$1,950,499
 $1,590,093
 $360,406
 22.7%


The following tablewaterfall analysis and commentary present the primary reasons forpresents the changes in revenue for theour Energy segment revenues for the three months ended November 30, 2017,2023, compared to the same period during the prior year:
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(36)
Price 377
Other* 19
Total change in Energy revenue $360
7714
* Other includes retail and non-commodity type activities.

Comparison ofThe change in Energy segment revenuerevenues reflects the following:
•Decreased selling prices resulting from global market conditions contributed to $299.1 million and $50.9 million decreases in revenues for refined fuels and propane, respectively.
•Lower refined fuels and propane volumes contributed to $22.3 million and $17.3 million decreases in revenues, respectively, primarily driven by lower demand.



















28
Table of Contents

Ag
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Revenues$8,652,165 $9,633,244 $(981,079)(10.2 %)

    The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended November 30, 2017, and 20162023, compared to the same period during the prior year:

8247
The $360.4change in Ag segment revenues reflects the following:
•Decreased selling prices across all of our Ag segment product categories during the first quarter of fiscal 2024, including:
◦$1.5 billion decrease for grain and oilseed primarily as a result of less favorable global market conditions;
◦$498.7 million decrease for wholesale and retail agronomy products driven by lower urea and UAN prices; and
◦$76.1 million decrease for renewable fuels due to global market conditions.
•Increased volumes for grain and oilseed contributed to a $929.7 million increase in Energy revenue reflects the following:revenues due to a combination of factors, including more favorable weather conditions in parts of our trade territory and stronger global demand for grain.
Refined fuels revenues rose $257.7•Increased volumes of wholesale and retail agronomy products contributed to a $184.0 million (20%), of which approximately $298.0 million related to an increase in revenues, which experienced increased demand during the net average selling price, partially offset by $40.3 million relatedfirst quarter of fiscal 2024 as prices remained lower due to lower sales volumes, compared to the prior year. The selling price of refined fuels products increasedglobal market conditions.

All Other Segments
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Corporate and Other revenues*$20,553 $13,289 $7,264 54.7 %
*Our Nitrogen Production reportable segment represents an average of $0.36 (24%) per gallon,equity method investment that records earnings and sales volumes decreased 3%, compared to the previous year.allocated expenses but not revenues.
Propane
    Corporate and Other revenues increased $87.9 million (57%), of which $78.0 million was attributable to a rise in the net average selling price and $9.9 million was attributable to higher volumes. Propane sales volume increased 6% and the average selling price of propane increased $0.31 (47%) per gallon, when compared to the previous year.

Ag
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Revenue$6,082,647
 $6,432,229
 $(349,582) (5.4)%

The following table and commentary present the primary reasons for the changes in revenue for the Ag segment forduring the three months ended November 30, 2017, compared to the prior year:
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(360)
Price 4
Other* 6
Total change in Ag revenue $(350)
* Other includes retail and non-commodity type activities.



29
Table of Contents


Comparison of Ag segment revenue for the three months ended November 30, 2017 and 2016

The $349.6 million decrease in Ag segment revenue reflects the following:
Grain and oilseed revenues attributable to country operations and grain marketing totaled $4.4 billion and $4.7 billion for the three months ended November 30, 2017, and 2016, respectively. The grain and oilseed revenue decrease of $338.1 million (7%) was attributable to a decline in volumes of $368.6 million, partially offset by $30.5 million in higher average grain selling prices. The average sales price of all grain and oilseed commodities sold increased $0.04 per bushel. Wheat, corn and soybean volumes decreased by approximately 8% compared to the prior year. The decrease in volumes was due to lower export activity2023, compared to the same period induring the prior year, caused by increased global competition.
Our processing and food ingredients revenue decreased $26.8 million, primarily due to a $11.7 million decline resulting from the prior-year sale of an international location, along with a decline in volumes of $24.5 million (7%). These declines were partially offset by an average sales price increase of $0.39 (3%) per bushel or $9.4 million related to our oilseed commodities.
Wholesale crop nutrient revenues attributable to crop nutrients and grain marketing decreased $3.9 million due to lower average fertilizer selling prices of $21.2 million, partially offset by higher volumes of $17.3 million. Our wholesale crop nutrient volumes increased 4% and the average sales price of all fertilizers sold reflectedinterest income as a decrease of $12.72 (5%) per ton compared to the prior year. The increase in volumes was due to improved market conditions from the prior year as well as supply chain management improvements.
Our renewable fuels revenues from our marketing and production operations decreased $13.7 million primarily the result of a lower average sales pricelarger notes receivable balance and higher interest rates.


29
Table of $0.11 (7%) per gallon or $24.1 million, partially offset by 3% higher volumes or $10.3 million. Market supply and demand forces decreased average sales prices.Contents
The remaining Ag segment product revenues related primarily to feed and farm supplies increased $26.5 million mainly due to increases in diesel sold and a rise in propane sold for home heating due to colder temperatures.

All Other Segments
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Corporate and Other revenue$15,743
 $25,928
 $(10,185) (39.3)%

Comparison of All Other Segments revenue for the three months ended November 30, 2017, and 2016

Corporate and Other revenue decreased due to the sale of loans receivable upon which interest was previously being recognized. Our Nitrogen Production and Foods reportable segments represent equity method investments, and as such record earnings and allocated expenses but not revenue.

Cost of Goods Sold by Segment


Energy
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Cost of goods sold$1,800,404
 $1,478,610
 $321,794
 21.8%

Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Cost of goods sold$2,388,273 $2,654,729 $(266,456)(10.0 %)
    

30
Table of Contents


The following tablewaterfall analysis and commentary present the primary reasons forpresents the changes in cost of goods sold ("COGS") for the Energy segment for the three months ended November 30, 2017, compared to the prior year:
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(35)
Price 340
Other* 17
Total change in Energy cost of goods sold $322
* Other includes retail and non-commodity type activities.

Comparison ofour Energy segment COGS for the three months ended November 30, 2017, and 20162023, compared to the same period during the prior year:

9768
The $321.8 million increasechange in Energy segment COGS reflects the following:
Refined fuels cost of goods sold increased $196.1 million (16%), which reflects a $0.28 (19%) per gallon or $234.6 million rise in the average cost of•Global market conditions, including reduced RIN costs, contributed to decreased costs for refined fuels partially offset by a decrease of 3% in volume or $38.5 million.
The increase inand propane cost of goods sold of $112.1 million was attributable to a 6% rise in volumes or $7.8that drove $127.9 million and an increase$90.1 million decreases in average costCOGS, respectively.
•Lower volumes of $0.32 (62%) per gallon or $79.7 million. In addition, there were certain manufacturing changes that reduced costpropane and refined fuels resulting from decreased demand and global market conditions contributed to decreased COGS of goods sold by $24.6$20.2 million in fiscal 2017 that did not reoccur in fiscal 2018.and $18.4 million, respectively.
























30
Table of Contents

Ag
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Cost of goods sold$8,360,579 $9,232,728 $(872,149)(9.4 %)
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Cost of goods sold$5,936,062
 $6,220,190
 $(284,128) (4.6)%

The following tablewaterfall analysis and commentary present the primary reasons forpresents the changes in COGS for the Ag segment for the three months ended November 30, 2017, compared to the prior year:
  Change
  Three Months Ended November 30
  (Dollars in millions)
Volume $(353)
Price 45
Other* 24
Total change in Ag cost of goods sold $(284)
* Other includes retail and non-commodity type activities.

Comparison ofour Ag segment COGS for the three months ended November 30, 2017, and 20162023, compared to the same period during the prior year:

10284
The $284.1 million decreasechange in Ag segment COGS reflects the following:
Grain•Lower costs across all of our Ag segment product categories during the first quarter of fiscal 2024, including:
◦$1.4 billion decrease for grain and oilseed costprimarily driven by less favorable global market conditions;
◦$482.5 million decrease for wholesale and retail agronomy products driven by lower urea and UAN prices; and
◦$102.1 million decrease for renewable fuels primarily resulting from lower input costs.
•Increased volumes for grain and oilseed contributed to a $909.2 million increase in COGS due to a combination of goods sold attributablefactors, including more favorable weather conditions in parts of our trade territory and stronger global demand for grain.
•Increased volumes of wholesale and retail agronomy products contributed to country operationsa $176.4 million increase in COGS, which experienced increased demand during the first quarter of fiscal 2024 as prices remained lower due to global market conditions.

All Other Segments
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Nitrogen Production COGS$412 $428 $(16)(3.7 %)
Corporate and Other COGS$(3,557)$(1,181)$(2,376)(201.2 %)

    There were no significant changes on a dollar basis to COGS in our Nitrogen Production segment or Corporate and grain marketing totaled $4.3 billion and $4.6 billion forOther during the three months ended November 30, 2017,2023, compared to the same period during the prior year.







31
Table of Contents


Marketing, General and 2016, respectively. The costsAdministrative Expenses
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Marketing, general and administrative expenses$252,056 $234,666 $17,390 7.4 %
    Marketing, general and administrative expenses increased during the three months ended November 30, 2023, primarily due to higher salary expenses, as well as higher consulting expenses primarily associated with our enterprise resource planning system implementation and other technologies to advance our operating model.

Interest Expense
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Interest expense$29,628 $33,250 $(3,622)(10.9 %)

    Interest expense decreased during the three months ended November 30, 2023, as a result of grains and oilseed procured through our Ag segment decreased $299.2 million. The majority of the declinenotes payable balances, which was driven by an 8% decrease in volumes of $360.9 million, partially offset by a higher average cost per bushel of $0.08 (1%) or $61.7 million. The decrease in volumes was due to lower export activityinterest rates compared to the same period in the prior year.
Processing and food ingredients cost of goods sold
Other Income
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Other income$44,529 $24,289 $20,240 83.3 %

    Other income increased $5.5 million (2%) and is comprised of $47.4 million from a higher average cost of oilseeds purchased for further processing, partially offset by $22.2 million in lower volumes, plus a $19.7 million decline due to the sale of an international location in the prior year. Changes in cost are typically driven by the market price of soybeans purchased.

31
Table of Contents


Wholesale crop nutrients cost of goods sold attributable to crop nutrients and grain marketing increased by $1.2 million (less than 1%), caused primarily by an increase of 4%, or $16.5 million, in tons sold. The increase was partially offset by a decline of 4%, or $15.3 million, in average cost per ton of product. The increase in volumes and decrease in the prices paid for goods were due to better market conditions compared to the prior year, as well as beneficial changes in supply chain management.
Renewable fuels cost of goods sold decreased $3.6 million (1%) resulting from a decrease in the average cost per gallon of $0.06 (4%) or $13.2 million, which was mostly offset by an increase in volume of 3% or $9.7 million.
The remaining Ag segment product cost of goods sold, primarily feed and farm supplies, decreased $11.7 million due to lower costs incurred related to crop protection services and sunflower processing.
Total Ag cost of goods sold include "Other" cost of goods sold, which are generated from our country operations elevators and agri-service centers that incur costs from activities related to production agriculture. These cost of goods sold activities include grain storage, grain cleaning, fertilizer spreading, crop protection spraying and other associated services of this nature. In addition, our grain marketing operations incur "Other" costs at our export terminals from activities related to loading vessels.

All Other Segments
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Nitrogen Production COGS$219
 $(884) $1,103
 124.8%
Corporate and Other COGS$(1,058) $(2,363) $1,305
 55.2%

Comparison of All Other Segments COGS forduring the three months ended November 30, 2017, and 2016

The increase in COGS for our Nitrogen Production segment for fiscal 2018 was due to an unfavorable variance on our natural gas hedges. The increase in COGS for Corporate and Other for fiscal 2018 was due to increased commission expense2023, primarily as a result of higher volumes of transactions in our financing, hedging and insurance operations. Our Foods reportable segment represents an equity method investment, and as such records earnings and allocated expenses but not COGS.

Marketing, General and Administrative Expenses
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Marketing, general and administrative expenses$140,168
 $147,849
 $(7,681) (5.2)%

Comparison of marketing, general and administrative expenses for the three months ended November 30, 2017, and 2016

The $7.7 million decrease in marketing, general and administrative expenses is primarily due to lower compensation expenses and lower brokerage commissions.

Reserve and Impairment Charges (Recoveries), net
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Reserve and impairment charges (recoveries), net$(3,787) $18,357
 $(22,144) (120.6)%

Comparison of reserve and impairment charges (recoveries), net for the three months ended November 30, 2017, and 2016

The $22.1 million decrease in reserve and impairment charges (recoveries), net reflects the following:
During fiscal 2017, an allowance for doubtful accounts of $18.4 million was recorded, including loan loss reserves related to a single producer borrower.

32
Table of Contents


In fiscal 2018, we recovered approximately $5.3 million associated with a loan that was previously written off in the prior fiscal year, partially offset by increases in bad debt expense of approximately $1.5 million. As a result, the current fiscal year to date reflects a net recovery.

Gain (Loss) on Investments
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Gain (loss) on investments$2,819
 $(7,401) $10,220
 138.1%

Comparison of gain (loss) on investments for the three months ended November 30, 2017, and 2016

The increase in gain (loss) on investments is mainly attributable to a gain on the sale of a domestic investment of $2.2 million in fiscal 2018, compared to a $7.4 million loss on the sale of an international investment during fiscal 2017 which did not reoccur in fiscal 2018.

Interest Expense
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Interest expense$40,702
 $38,265
 $2,437
 6.4%

Comparison ofincreased interest expense for the three months ended November 30, 2017, and 2016

The $2.4 million increase in interest expense for fiscal 2018 was primarilyincome due to higher interest expense associated with higher interest rates.rates and a larger cash balance.


OtherEquity Income (Loss)from Investments
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Equity income from investments*$109,051 $181,962 $(72,911)(40.1 %)
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Other income (loss)$22,195
 $44,401
 $(22,206) (50.0)%

Comparison of other income (loss) for the three months ended November 30, 2017, and 2016

The $22.2 million decrease in other income (loss) reflects the following:
During fiscal 2017, we recorded a gain of $29.1 million associated with an embedded derivative within the contract relating to our strategic investment in CF Nitrogen that did not reoccur during fiscal 2018. See*For additional information, see Note 10, Derivative Financial Instruments and Hedging Activities,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.
In fiscal year 2018, we sold a non-strategic North American location in our Ag segment that resulted in a gain of approximately $7.1 million.


33
Table of Contents


Equity Income (Loss) from Investments
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Equity income (loss) from investments$38,362
 $40,328
 $(1,966) (4.9)%

Comparison of equity income (loss) from investments decreased during the three months ended November 30, 2023, compared to the same period during the prior year, primarily due to lower income associated with our equity method investment in CF Nitrogen as a result of lower prices of urea and UAN due to global supply and demand factors.

Income Tax (Benefit) Expense
Three Months Ended November 30,Change
20232022DollarsPercent
 (Dollars in thousands)
Income tax (benefit) expense$(6,522)$34,554 $(41,076)(118.9 %)

    The income tax benefit during the three months ended November 30, 2023, resulted primarily from the recognition of research and development tax credits during the period. Effective tax rates for the three months ended November 30, 2017,2023 and 2016

Equity income (loss) from investments primarily decreased due2022, were (1.3)% and 4.2%, respectively. Federal and state statutory rates of 24.5% and 24.4% were applied to lower equity income recognized from our equity method investments in Ventura Foods, TEMCO, LLC, and Ardent Mills, LLC caused by lower margins, which was partially offset by higher equity income recognized from our equity method investment in CF Nitrogen. See Note 4, Investments, of the notes to the consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information. We record equity income or loss from the 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 Consolidated Statements of Operations.

Income Taxes
 For the Three Months Ended November 30
 Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Income taxes$(19,936) $(16,612) $(3,324) (20.0)%

Comparison of income taxesnonpatronage business activity for the three months ended November 30, 2017,2023 and 2016

During the first quarter of fiscal 2018, we had an increase in income tax expense when compared to the first quarter of fiscal 2017, resulting in effective tax rates of 10.0% and 7.4%,2022, respectively. The federal and state statutory rate applied to nonpatronage business activity was 38.4% and 38.3% for the periods ended November 30, 2017, and 2016, respectively. The incomeIncome taxes and effective tax raterates vary each year based uponon profitability, andincome tax credits, nonpatronage business activity during eachand current equity management assumptions.


32
Table of the comparable years.Contents


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 operationsliquidity and revolving credit facilities. We fundcapital resources to meet our capital expenditures and growth primarily through cash, operating cash flow and long-term debt financing.
On November 30, 2017, we had working capital, defined as current assets less current liabilities, of $435.9 million and a current ratio, defined as current assets divided by current liabilities, of 1.1 compared to working capital of $181.9 million and a current ratio of 1.0 on August 31, 2017. On November 30, 2016, we had working capital of $378.6 million and a current ratio of 1.0 compared to working capital of $414.4 million and a current ratio of 1.1 on August 31, 2016.
As of November 30, 2017, we had cash and cash equivalents of $252.1 million, total equities of $7.9 billion, long-term debt of $2.0 billion and notes payable of $2.5 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 dividends, reducing funded debtmember-owners in the form of cash patronage and equity redemptions, and taking advantage of strategic opportunities that benefit our owners. We expect the down cycle in the Ag industry to continue and while we maintain appropriate levelsmember-owners:
November 30, 2023August 31, 2023
 (Dollars in thousands)
Cash and cash equivalents$1,349,757 $1,765,286 
Notes payable421,580 547,923 
Long-term debt including current maturities1,825,565 1,827,658 
Total equities10,697,389 10,452,389 
Working capital3,620,777 3,229,455 
Current ratio*1.5 1.5 
*Current ratio is defined as current assets divided by current liabilities.

Summary of liquidity, we will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity. These opportunities include reducing operating expenses, deploying and/or financing working capital more efficiently and identifying and disposing of nonstrategic or underperforming assets. We believe that cash generated by operating activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our operations for the foreseeable future and we expect to remain in compliance with our loan covenants.

34
Table of Contents


Fiscal 2018 and 2017 Activity
On July 18, 2017, we amended an existing receivables and loans securitization facility (“Securitization Facility” or the "Facility") with certain unaffiliated financial institutions (the "Purchasers"). Under the Securitization Facility, CHS Capital and CHS both sell eligible trade accounts and notes receivable (“Receivables”) they have originated to Cofina Funding, LLC (“Cofina Funding”), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina Funding in turn sells the purchased Receivables in their entirety to the Purchasers. Prior to amending the Securitization Facility in July 2017, the transfer of Receivables was accounted for as a secured borrowing. Under the terms of the amended Securitization Facility, CHS accounts for Receivables sold under the facility as a sale of financial assets and derecognizes the sold Receivables from its Consolidated Balance Sheets. The amount available under the Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business, with maximum availability of $700.0 million. As of November 30, 2017, the total availability under the Securitization Facility was $700.0 million, all of which had been utilized.
The Facility agreement contains certain customary representations and warranties and affirmative covenants, including as to the eligibility of the Receivables being sold, and contains customary program termination events and non-reinvestment events. We were in compliance with all covenants associated with our Securitization Facility as of November 30, 2017.

Cash Flows

The following table presents summarized cash flow data for the three months ended November 30, 2017, and 2016:
   Change
 2017 2016 Dollars Percent
 (Dollars in thousands)
Net cash provided by (used in) operating activities$(140,454) $238,417
 $(378,871) (158.9)%
Net cash provided by (used in) investing activities(62,770) (327,022) 264,252
 80.8 %
Net cash provided by (used in) financing activities271,738
 327,472
 (55,734) (17.0)%
Effect of exchange rate changes on cash and cash equivalents2,236
 (2,696) 4,932
 182.9 %
Net increase (decrease) in cash and cash equivalents$70,750
 $236,171
 $(165,421) (70.0)%

Comparison of cash flow for the three months ended November 30, 2017, and 2016

The $378.9 million decrease in cash from operating activities reflects the following:
Reduced seasonal purchases of inventory offset by decreased accounts payable and accrued expenses.
Increased supplier advances due to timing of payments made in the first quarter of fiscal 2018 compared to payments made in the second quarter of fiscal 2017.
Decreased customer advance payments in the Ag segment due to lower sales volumes and drought conditions in the upper midwest.

The $264.3 million increase in cash from investing activities reflects the following:
Decreased CHS Capital notes receivable activity of $149.1 million.
Proceeds of $54.7 million due to sale of our primary corporate office building in Inver Grove Heights, Minnesota which was subsequently leased back to us. The proceeds received were used to pay down long-term debt.
Reduced acquisitions of property, plant and equipment and other business acquisitions primarily related to our plan to reduce our capital investments to allow us to actively reduce our funded debt obligations.

Cash from financing activities decreased $55.7 million, primarily due to changes in checks and drafts outstanding compared to the three months ended November 30, 2016.

Future Uses of Cash

We expect to utilize cash and cash equivalents, along with cash generated by operating activities to fund capital expenditures and payments for debt, interest, dividends and guarantees. The following is a summary of our primary cash requirements for fiscal 2018:

Capital expenditures. We expect total capital expenditures for fiscal 2018 to be approximately $602.0 million, compared to capital expenditures of $446.7 million in fiscal 2017. Included in that amount for fiscal 2018 is

35
Table of Contents


approximately $221.0 million for the acquisition of property, plant and equipment at our Laurel, Montana and McPherson, Kansas refineries. During the three months ended November 30, 2017, we acquired plant, property and equipment of $85.8 million.
Major repairs. Refineries have planned major maintenance to overhaul, repair, inspect and replace process materials and equipment (referred to as a "turnaround") which typically occur for a five- to six-week period every 2-5 years. Our Laurel, Montana refinery has planned maintenance scheduled for fiscal 2018 for approximately $92.0 million.
Debt and interest. We expect to repay the remaining $25.0 million of current maturities of long term debt during fiscal 2018. During the three months ended November 30, 2017, we repaid $160.0 million of long term debt consisting of scheduled debt maturities and optional prepayments.
Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding at November 30, 2017. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2018.
Guarantees. We intend to fund a total of approximately $170.0 million in loan guarantees to our Brazilian operations in the first nine months of fiscal 2018 as a result of losses in the prior fiscal year caused by a trading partner of ours in Brazil entering into bankruptcy-like proceedings under Brazilian law. During the three months ended November 30, 2017, we funded $25.0 million in guarantees.

FutureMajor Sources of Cash and Cash Equivalents

We fund our current operations primarily through a combination ofour cash flows from operations and with short-term borrowings through our committed and uncommitted revolving credit facilities, including our Securitization Facility. We believe these sources will provide adequate liquidity to meetsecuritization facility with certain unaffiliated financial institutions and our working capital needs.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 privately placedlong-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 2024:

•Capital expenditures. We expect total capital expenditures for fiscal 2024 to be approximately $971.8 million compared to capital expenditures of $564.5 million in fiscal 2023. Increased capital expenditures for fiscal 2024 are for investments in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth. During the three months ended November 30, 2023, we acquired $142.4 million of property, plant and equipment.
•Major maintenance. We expect total major maintenance for fiscal 2024 to be approximately $22.0 million compared to major maintenance of $217.4 million in fiscal 2023. Decreased major maintenance for fiscal 2024 is due to significantly reduced turnaround activities at our refineries compared to the turnaround at our Laurel refinery during fiscal 2023. During the three months ended November 30, 2023, we paid $8.3 million in major maintenance.
•Debt and interest. We expect to repay approximately $9.6 million of long-term debt and term loans. In addition,finance lease obligations and incur interest payments related to long-term debt of approximately $88.3 million during fiscal 2024. During the three months ended November 30, 2023, we repaid $2.4 million of scheduled long-term debt maturities and finance lease obligations.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of November 30, 2023. We expect to pay dividends on our wholly-owned subsidiary, CHS Capital, makes loanspreferred stock of approximately $168.7 million during fiscal 2024. Dividends paid on our preferred stock during the three months ended November 30, 2023, were $42.2 million.
•Patronage. Our Board of Directors has authorized approximately $365.0 million of our fiscal 2023 patronage-sourced earnings to be paid to our member-owners during fiscal 2024.
•Equity redemptions. Our Board of Directors has authorized equity redemptions of up to $365.0 million to be distributed in fiscal 2024 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members. During the three months ended November 30, 2023 we redeemed $11.2 million of member cooperatives, businessesequity.

We believe cash generated by operating and individual producers of agricultural products included in our cash flows from investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our short- and has financing sourceslong-term operations. 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
33

were in compliance with all debt covenants and restrictions as detailed below in CHS Capital Financing.of November 30, 2023. Based on our current fiscal 2024 projections, we expect continued covenant compliance.


Working Capital Financing


We measure working capital as current assets less current liabilities as each amount appears on our condensed consolidated balance sheets. We believe this information is meaningful to investors as a measure of operational efficiency and short-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 other companies. Working capital as of November 30, 2023, and August 31, 2023, was as follows:
November 30, 2023August 31, 2023Change
 (Dollars in thousands)
Current assets$10,587,195 $9,128,649 $1,458,546 
Less current liabilities6,966,418 5,899,194 1,067,224 
Working capital$3,620,777 $3,229,455 $391,322 

As of November 30, 2023, working capital increased by $391.3 million compared with August 31, 2023. Current asset balance changes increased working capital by $1.5 billion, primarily driven by increases in inventories and receivables, which were driven by the fall harvest. Current liability balance changes decreased working capital by $1.1 billion, primarily due to increases in accounts payable, which were also driven by the fall harvest.

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 our available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs. The following table summarizes

Contractual Obligations

For information regarding our primary linesestimated contractual obligations, see the MD&A discussion included in Item 7 of credit as of November 30, 2017:
Revolving Credit Facilities Maturities Total Capacity Borrowings Outstanding Interest Rates
    November 30, 2017  
    (Dollars in thousands) 
Committed Five-Year Unsecured Facility 2020 $3,000,000
 $1,080,000
 LIBOR+0.00% to 1.45%
Uncommitted Bilateral Facilities 2018 250,000
 250,000
 LIBOR+0.00% to 1.05%
In addition to our primary revolving lines of credit, we have a three-year $325.0 million committed revolving pre-export credit facility for CHS Agronegocio Industria e Comercio Ltda ("CHS Agronegocio"), our wholly-owned subsidiary in Brazil. CHS Agronegocio uses the facility, which expires in April 2019, to finance its working capital needs related to its purchases and sales of grains, fertilizers and other agricultural products. As of November 30, 2017, the outstanding balance under the facility was $260.0 million.
In addition to our uncommitted bilateral facility above, as of November 30, 2017, our wholly-owned subsidiaries, CHS Europe S.a.r.l and CHS Agronegocio, had uncommitted lines of credit with $420.0 million outstanding. In addition, our other international subsidiaries had lines of credit with a total of $167.3 million outstanding as of November 30, 2017, of which $38.7 million was collateralized.

On November 30, 2017, and August 31, 2017, we had total short-term indebtedness outstanding on these various primary and other facilities, as well as other miscellaneous short-term notes payable, in the amount of $2.2 billion and $1.7 billion, respectively.

36
Table of Contents


Long-term Debt Financing
The following table presents summarized long-term debt data as of November 30, 2017, and August 31, 2017:
 November 30,
2017		 August 31,
2017
 (Dollars in thousands)
Private placement debt$1,530,955
 $1,643,886
Bank financing391,000
 445,000
Capital lease obligations28,917
 33,075
Other notes and contract payable61,542
 62,652
Deferred financing costs(4,648) (4,820)
 $2,007,766
 $2,179,793
CHS Capital Financing
For a description of the Securitization Facility, see above in Fiscal 2018 and 2017 activity.
CHS Capital has available credit under master participation agreements with numerous counterparties. Prior to the fourth quarter of fiscal 2017, all borrowings under these agreements were accounted for as secured borrowings. During the fourth quarter of fiscal 2017, certain of these agreements were amended resulting in the Company accounting for the participations as the sale of financial assets. As of November 30, 2017, the remaining participations accounted for as secured borrowings bear interest at variable rates ranging from 2.94% to 4.45%. As of November 30, 2017, the total funding commitment under these agreements was $93.6 million, of which $58.5 million was borrowed.

CHS Capital sells loan commitments it has originated to ProPartners Financial ("ProPartners") on a recourse basis. The total capacity for commitments under the ProPartners program is $265.0 million. The total outstanding commitments under the program totaled $192.1 million as of November 30, 2017, of which $135.2 million was borrowed under these commitments with an interest rate of 2.42%.

CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and bear interest at variable rates ranging from 0.10% to 0.90% as of November 30, 2017, and are due upon demand. Borrowings under these notes totaled $104.2 million as of November 30, 2017.

Covenants
Our long-term debt is unsecured; however, restrictive covenants under various debt agreements have requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of November 30, 2017. Based on our current 2018 projections, we expect continued covenant compliance in the near term.
In September 2015, we amended all outstanding notes to conform the financial covenants applicable thereto to thosePart II of our amended and restated five-year, unsecured, revolving credit facility. The amended notes provide that if our ratio of consolidated funded debt to consolidated cash flow is greater than a ratio of 3.0 to 1.0, the interest rateAnnual Report on all outstanding notes will be increased by 0.25% until the ratio becomes 3.0 or less. During the three months ended November 30, 2017, and 2016, our ratio of funded debt to consolidated cash flow remained below 3.0 to 1.0.
Patronage and Equity Redemptions
In accordance with our bylaws and upon approval of our Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year. ForForm 10-K for the year ended August 31, 2017, our Board of Directors authorized only non-qualified distributions, with no cash patronage.
As authorized by our Board of Directors in September 2017, we intend to redeem individual member owned equity in fiscal 2018, in an amount not to exceed $10 million. During the three months ended November 30, 2017, $1.6 million of that amount was redeemed in cash, compared to $9.5 million redeemed in cash during the three months ended November 31, 2016. In addition, $2.1 million of equities related to the Board of Director authorized fiscal 2017 redemption were redeemed2023. No material changes occurred during the three months ended November 30, 2017,2023.

Cash Flows

    The following table presents summarized cash flow data for the three months ended November 30, 2023:
Three Months Ended November 30,
20232022Change
 (Dollars in thousands)
Net cash used in operating activities$(147,585)$(180,192)$32,607 
Net cash used in investing activities(99,616)(110,713)11,097 
Net cash (used in) provided by financing activities(174,504)129,960 (304,464)
Effect of exchange rate changes on cash and cash equivalents(3,969)1,415 (5,384)
Decrease in cash and cash equivalents and restricted cash$(425,674)$(159,530)$(266,144)

    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 $32.6 million decrease in cash used in operating activities primarily reflects inventory decreases, which resulted from reduced prices during the first three months of fiscal 2024 compared to the same period during fiscal 2023.

    The $11.1 million decrease of cash used in investing activities reflects timing differences in borrowings and payments for CHS Capital notes receivable partially offset by higher acquisitions of property, plant and equipment during the first three months of fiscal 2024, compared to the same period during fiscal 2023.

    The $304.5 million decrease in cash provided by financing activities relative to the previous year primarily reflects decreased net cash inflows associated with our notes payable due to the administrative timing of the payments.


lower short-term funding needs resulting from our balance sheet and cash earnings.
37
34



Preferred Stock    
    
The following is a summary of our outstanding preferred stock as of November 30, 2017,2023, all shares of which are listed on the Global Select Market of Nasdaq:The Nasdaq Stock Market LLC:
Nasdaq SymbolIssuance DateShares OutstandingRedemption ValueNet Proceeds (a)Dividend Rate
 (b) (c)		Dividend Payment FrequencyRedeemable Beginning (d)
(Dollars in millions)
8% Cumulative RedeemableCHSCP(e)12,272,003 $306.8 $311.2 8.00 %Quarterly7/18/2023
Class B Cumulative Redeemable, Series 1CHSCO(f)21,459,066 $536.5 $569.3 7.875 %Quarterly9/26/2023
Class B Reset Rate Cumulative Redeemable, Series 2CHSCN3/11/201416,800,000 $420.0 $406.2 7.10 %Quarterly3/31/2024
Class B Reset Rate Cumulative Redeemable, Series 3CHSCM9/15/201419,700,000 $492.5 $476.7 6.75 %Quarterly9/30/2024
Class B Cumulative Redeemable, Series 4CHSCL1/21/201520,700,000 $517.5 $501.0 7.50 %Quarterly1/21/2025
  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.
(a)
Includes patrons' equities redeemed with preferred stock.
(b)
The 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)
The 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 2003 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.
Dividends paid(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 will fix at a rate of 7.10% based on ourthe terms of the contract and application of the Adjustable Rate (LIBOR) Act.
(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 will fix at a rate of 6.75% based on the terms of the contract and application of the Adjustable Rate (LIBOR) Act.
(d) All series of preferred stock during the three months ended November 30, 2017, and 2016, were $42.2 million and $41.8 million, respectively.

Off Balance Sheet Financing Arrangements

Operating Leases

Minimum future lease payments required under noncancelable operating leases as of November 30, 2017, were $317.1 million.

Guarantees

We are redeemable for cash at our option, in whole or in part, at a guarantor for lines of credit and performance obligations of related companies. As of November 30, 2017, our bank covenants allowed maximum guarantees of $1.0 billion, of which $101.4 million were outstanding. We have collateral for a portion of these contingent obligations. We have not recorded a liability relatedper share price equal to the contingent obligations as we do not expectper share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to pay out any cash related to them, and including the fair values are considered immaterial.date of redemption, beginning on the dates set forth in this column.
(e) The underlying loans to the counterparties for which we provide guarantees8% 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 current as of Novemberissued on September 26, 2013, August 25, 2014, March 31, 2016, and March 30, 2017.



38
Table of ContentsCritical Accounting Policies



Debt

We have no material off balance sheet debt.

Receivables Securitization Facility and Loan Participations

In fiscal 2017, we engaged in off-balance sheet arrangements through our Securitization Facility and certain loan participation agreements. Refer to further details about these arrangements in Note 2, Receivables, of the notes to the consolidated financial statements that are included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended August 31, 2017, for additional information.

Contractual Obligations

Our contractual obligationscritical accounting policies as presented in Management’s Discussion and Analysis of Financial Condition and Results of Operationsthe MD&A in our Annual Report on Form 10-K for the year ended August 31, 2017,2023, have not materially changed during the three months ended November 30, 2017.2023.


Critical Accounting Policies

Our critical accounting policies presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2017, have not materially changed during the three months ended November 30, 2017.

Effect of Inflation and Foreign Currency Transactions

We believe that inflation and foreign currency fluctuations have not had a material effect on our operations since we conduct an insignificant portion of our business in foreign currencies.

Recent Accounting Pronouncements
    
See    Refer to Note 1, Organization, Basis of Presentation and Significant Accounting Policies, to our unaudited consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for a descriptiondiscussion of the recent accounting pronouncements that are applicable to us.standards issued and not yet adopted.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We did not experience any material changes in market risk exposures for the period ended November 30, 2017,2023, that would affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2017.2023.


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 Officerchief executive officer and Chief Financial Officer,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 (the "Exchange Act")1934) as of November 30, 2017.2023. Based on that evaluation, our Chief Executive Officerchief executive officer and Chief Financial Officerchief financial officer concluded that, as of that date, our disclosure controls and procedures were effective.


On December 1, 2015, we began implementation
35

Changes in Rule 13a-15(f) under the Exchange Act), and our management has taken steps to ensure that appropriate controls are designed and implemented as each functional area of the new ERP system is enacted.Internal Control Over Financial Reporting

Other than as described above, there wereThere have been no changes in our internal control over financial reporting during the quarter ended November 30, 2017,2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.


39
Table of Contents


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 the aggregate, will not have a material effect on ournotes to the unaudited condensed consolidated financial position, results of operations or cash flows during any fiscal year.

Laurel

On May 17, 2016, and October 12, 2016, the Montana Department of Environmental Quality (“MDEQ”) issued violation letters to us, allegingstatements that certain specified air emissions at our Laurel, Montana refinery exceeded amounts allowable under the refinery’s permits and applicable law. On June 1, 2016, and November 3, 2016, we responded to MDEQ and described the actions that we had takenare included in connection with those allegations. On August 30, 2017, MDEQ sent us a letter requesting that we execute an administrative order on consent, and pay an administrative penalty of $184,550. On September 27, 2017, we sent MDEQ a letter providing additional information and requesting that MDEQ reconsider the alleged violations and reduce the proposed penalty with respect to four of the alleged violations described in the violation letters. We also requested changes to the administrative order on consent to remove references to the Administrative Rules of the State of Montana. We are currently awaiting MDEQ’s response to the September 2017 letter.

For information regarding our other reportable legal proceedings, see Item 3 of our Annualthis Quarterly Report on Form 10-K for the year ended August 31, 2017.10-Q.

ITEM 1A.     RISK FACTORS


There werehave been no material changes to ourfrom the risk factors during the period covered by this report. See the discussion of risk factorsdisclosed in Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2017.2023.


ITEM 5.     OTHER INFORMATION

On January 2, 2024, per the terms of our Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 and Series 3, and the Adjustable Interest Rate (LIBOR) Act, the stated rates of 7.10% and 6.75%, respectively, were fixed at 7.10% and 6.75% (the "Fixed Rates"), respectively. We will pay dividends on Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 after March 31, 2024, and on Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 after September 30, 2024, at the Fixed Rates until they are redeemed.
ITEM 6.     EXHIBITS
ExhibitDescription
Amendment No. 4 to Employment Agreement, dated as of November 7, 2023, between CHS Inc. and Jay D. Debertin (incorporated by reference to our Form 10-K for the year ended August 31, 2023, filed November 8, 2023).
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.
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 20022002.
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 20022002.
101
101.INS		The following financial information from CHS Inc.’s Quarterly Report on Form 10-Q forXBRL Instance Document (The Instance Document does not appear in the quarterly period ended November 30, 2017, formattedInteractive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Labels Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.Exhibit 101).






40
36
Table of Contents



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)

Date:January 10, 20182024By:/s/ Timothy SkidmoreOlivia Nelligan
Timothy SkidmoreOlivia Nelligan
Executive Vice President, and Chief Financial Officer and Chief Strategy Officer









41
37