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Item 1. Financial Statements

2022-07-07 compared with 2022-04-06 · 131 added, 103 removed, 651 unchanged (26% of the section changed)

41 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended February 28, Six Months Ended February 28,

Three Months Ended May 31, Nine Months Ended May 31,

2022 2021 2022 2021

4 unchanged sentences

Marketing, general and administrative expenses 243,136 186,703 692,395 518,875

Operating earnings (loss) 24,673 ( 59,790 ) 339,647 ( 52,347 )

Operating earnings 401,121 127,925 740,768 75,577

Interest expense 32,099 28,992 80,705 82,897

1 unchanged sentence

Equity income from investments ( 263,079 ) ( 146,522 ) ( 644,347 ) ( 260,654 )

Income (loss) before income taxes 230,827 ( 6,690 ) 697,490 38,350

Income tax expense 11,931 31,668 26,651 7,339

Net income (loss) 218,896 ( 38,358 ) 670,839 31,011

Net loss attributable to noncontrolling interests ( 104 ) ( 129 ) ( 122 ) ( 431 )

Net income (loss) attributable to CHS Inc.

Income before income taxes 638,737 256,203 1,336,227 294,553

Income tax expense (benefit) 62,492 ( 17,469 ) 89,143 ( 10,130 )

Net income 576,245 273,672 1,247,084 304,683

Net (loss) income attributable to noncontrolling interests ( 329 ) 81 ( 451 ) ( 350 )

Net income attributable to CHS Inc.

$ 576,574 $ 273,591 $ 1,247,535 $ 305,033

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended February 28, Six Months Ended February 28,

Three Months Ended May 31, Nine Months Ended May 31,

2022 2021 2022 2021

(Dollars in thousands)

Net income (loss) $ 218,896 $ ( 38,358 ) $ 670,839 $ 31,011

Net income $ 576,245 $ 273,672 $ 1,247,084 $ 304,683

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Foreign currency translation adjustment 2,551 8,218 ( 1,568 ) 11,060

Other comprehensive income (loss), net of tax 9,954 2,549 ( 5,464 ) 11,466

Comprehensive income (loss) 228,850 ( 35,809 ) 665,375 42,477

Comprehensive loss attributable to noncontrolling interests ( 104 ) ( 129 ) ( 122 ) ( 431 )

Comprehensive income (loss) attributable to CHS Inc.

Other comprehensive (loss) income, net of tax ( 18,221 ) 7,115 ( 23,685 ) 18,581

Comprehensive income 558,024 280,787 1,223,399 323,264

Comprehensive (loss) income attributable to noncontrolling interests ( 329 ) 81 ( 451 ) ( 350 )

Comprehensive income attributable to CHS Inc.

$ 558,353 $ 280,706 $ 1,223,850 $ 323,614

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended February 28,

Nine Months Ended May 31,

(Dollars in thousands)

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Note 2 Revenues

The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three and six months ended February 28, 2022 and 2021.

Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470, Debt , and ASC Topic 842, Leases , that fall outside the scope of ASC Topic 606.

ASC Topic 606 ASC Topic 815 Other Guidance Total Revenues

Three Months Ended February 28, 2022 (Dollars in thousands)

Three Months Ended May 31, 2022 (Dollars in thousands)

Energy $ 2,529,311 $ 246,631 $ — $ 2,775,942

3 unchanged sentences

$ 5,993,906 $ 7,130,416 $ 13,402 $ 13,137,724

Three Months Ended February 28, 2021

Three Months Ended May 31, 2021

Energy $ 1,533,643 $ 171,155 $ — $ 1,704,798

4 unchanged sentences

ASC Topic 606 ASC Topic 815 Other Guidance Total Revenues

Six Months Ended February 28, 2022 (Dollars in thousands)

Nine Months Ended May 31, 2022 (Dollars in thousands)

Energy $ 6,426,092 $ 681,836 $ — $ 7,107,928

3 unchanged sentences

$ 14,494,553 $ 19,821,253 $ 35,263 $ 34,351,069

Six Months Ended February 28, 2021

Nine Months Ended May 31, 2021

Energy $ 3,841,678 $ 493,125 $ — $ 4,334,803

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This results in the recognition of an asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to customers.

Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were $ 21.6 million and $ 29.0 million as of February 28, 2022 , and August 31, 2021, respectively.

Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were $ 17.1 million and $ 29.0 million as of May 31, 2022 , and August 31, 2021, respectively.

Contract liabilities relate to advance payments from customers for goods and services that we have yet to provide.

Contract liabilities of $ 1.1 billion and $ 213.9 million as of February 28, 2022 , and August 31, 2021, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets.

For the three months ended February 28, 2022 and 2021, we recognized revenues of $ 58.7 million and $ 19.9 million related to contract liabilities, respectively.

For the six months ended February 28, 2022 and 2021, we recognized revenues of $ 165.8 million and $ 91.6 million related to contract liabilities, respectively.

Contract liabilities of $ 544.8 million and $ 213.9 million as of May 31, 2022 , and August 31, 2021, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets.

For the three months ended May 31, 2022 and 2021, we recognized revenues of $ 48.1 million and $ 34.2 million related to contract liabilities, respectively.

For the nine months ended May 31, 2022 and 2021, we recognized revenues of $ 213.9 million and $ 126.2 million related to contract liabilities, respectively.

These amounts were included in the other current liabilities balance at the beginning of the respective period.

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borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages and are originated in the same states as the commercial notes.

In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable, with durations of generally not more than 10 years, totaling $ 46.5 million and $ 55.4 million as of February 28, 2022 , and August 31, 2021, respectively.

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 $ 50.3 million and $ 55.4 million as of May 31, 2022 , and August 31, 2021, respectively.

Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets.

As of February 28, 2022 , and August 31, 2021, commercial notes represented 61 % and 28 %, respectively, and producer notes represented 39 % and 72 %, respectively, of total CHS Capital notes receivable.

As of May 31, 2022 , and August 31, 2021, commercial notes represented 49 % and 28 %, respectively, and producer notes represented 51 % and 72 %, respectively, of total CHS Capital notes receivable.

CHS Capital has commitments to extend credit to customers if there are no violations of contractually established conditions.

As of February 28, 2022, CHS Capital customers had additional available credit of $ 601.4 million.

No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of February 28, 2022 , or August 31, 2021.

As of May 31, 2022, CHS Capital customers had additional available credit of $ 645.9 million.

No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of May 31, 2022 , or August 31, 2021.

Note 4 Inventories

8 unchanged sentences

$ 4,451,695 $ 3,334,675

As of February 28, 2022 , and August 31, 2021, we valued approximately 11 % and 13 %, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the last in, first out ("LIFO") method, or net realizable value.

If the first in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $ 596.8 million and $ 359.2 million as of February 28, 2022 , and August 31, 2021, respectively.

As of May 31, 2022 , and August 31, 2021, we valued approximately 14 % and 13 %, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the last in, first out ("LIFO") method, or net realizable value.

If the first in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $ 895.7 million and $ 359.2 million as of May 31, 2022 , and August 31, 2021, respectively.

Actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time.

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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, requiring an adjustment.

We have approximately $ 549.2 million of cumulative undistributed earnings from our equity method investees included in the investments balance as of February 28, 2022 .

We have approximately $ 788.7 million of cumulative undistributed earnings from our equity method investees included in the investments balance as of May 31, 2022 .

We have a $ 2.9 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc.

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We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for semiannual cash distributions.

The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the six months ended February 28, 2022 and 2021:

Six Months Ended February 28,

The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the nine months ended May 31, 2022 and 2021:

Nine Months Ended May 31,

(Dollars in thousands)

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Our shares of the results of Ventura Foods and Ardent Mills are included in Corporate and Other and our share of the results of TEMCO is included in our Ag segment.

The following table provides aggregate summarized unaudited financial information for our equity method investments in Ventura Foods, Ardent Mills and TEMCO for the six months ended February 28, 2022 and 2021:

Six Months Ended February 28,

The following table provides aggregate summarized unaudited financial information for our equity method investments in Ventura Foods, Ardent Mills and TEMCO for the nine months ended May 31, 2022 and 2021:

Nine Months Ended May 31,

(Dollars in thousands)

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Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios.

We were in compliance with our debt covenants as of February 28, 2022 .

The table below summarizes our notes payable as of February 28, 2022 , and August 31, 2021:

We were in compliance with all debt covenants as of May 31, 2022 .

The table below summarizes our notes payable as of May 31, 2022 , and August 31, 2021:

2022 August 31,

4 unchanged sentences

$ 2,028,859 $ 1,740,859

As of February 28, 2022 , our primary line of credit was a five -year, unsecured revolving credit facility with a syndicate of domestic and international banks.

As of May 31, 2022 , our primary line of credit was a five -year, unsecured revolving credit facility with a syndicate of domestic and international banks.

The credit facility provides a committed amount of $ 2.75 billion that expires on July 16, 2024.

As of February 28, 2022 , there was $ 820.0 million outstanding under this facility, and no borrowings outstanding as of August 31, 2021.

There were no borrowings outstanding on this facility as of May 31, 2022 , and August 31, 2021.

We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers").

Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned bankruptcy-remote indirect subsidiary of CHS.

Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as a secured borrowing.

Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as a 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.

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The Securitization Facility consists of a committed portion with a maximum availability of $ 700.0 million and an uncommitted portion with a maximum availability of $ 250.0 million.

As of February 28, 2022 , total availability under the Securitization Facility was $ 873.0 million, of which $ 700.0 million had been utilized.

As of May 31, 2022 , total availability under the Securitization Facility was $ 950.0 million, all of which had been utilized.

We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility.

Under the Repurchase Facility, we can borrow up to $ 150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility.

As of February 28, 2022 , and August 31, 2021, the outstanding balance under the Repurchase Facility was $ 150.0 million.

Under the Repurchase Facility, we can obtain repurchase agreement financing in an amount up to $ 150.0 million for subordinated notes issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility.

As of May 31, 2022 , and August 31, 2021, the outstanding balance under the Repurchase Facility was $ 150.0 million.

On February 19, 2021, we amended our 10-year term loan facility to convert the entire $ 366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which could be paid down and readvanced in an amount up to the referenced $ 366.0 million until February 19, 2022.

On February 19, 2022, the total advanced loan balance of $ 366.0 million reverted to a nonrevolving term loan that is payable on September 4, 2025.

The following table presents summarized long-term debt (including current portion) as of February 28, 2022 , and August 31, 2021:

The following table presents summarized long-term debt (including current portion) as of May 31, 2022 , and August 31, 2021:

2022 August 31,

1 unchanged sentence

Private placement debt $ 1,550,229 $ 1,552,974

Bank financing 366,000 —

Term loan 366,000 —

Finance lease obligations 46,684 36,034

4 unchanged sentences

Long-term portion $ 1,800,779 $ 1,579,911

Interest expense for the three months ended February 28, 2022 and 2021, was $ 25.2 million and $ 28.9 million, respectively, net of capitalized interest of $ 1.5 million and $ 2.1 million, respectively.

Interest expense for the six months ended

February 28, 2022 and 2021, was $ 48.6 million and $ 53.9 million, respectively, net of capitalized interest of $ 3.8 million and $ 4.2 million, respectively.

Interest expense for the three months ended May 31, 2022 and 2021, was $ 32.1 million and $ 29.0 million, respectively, net of capitalized interest of $ 0.9 million and $ 3.9 million, respectively.

Interest expense for the nine months ended May 31, 2022 and 2021, was $ 80.7 million and $ 82.9 million, respectively, net of capitalized interest of $ 4.7 million and $ 6.0 million, respectively.

Note 7 Income Taxes

Our effective tax rate for the three months ended February 28, 2022, was 5.2 % compared to ( 473.4 )% for the three months ended February 28, 2021.

Our effective tax rate for the six months ended February 28, 2022, was 3.8 %, compared to 19.1 % for the six months ended February 28, 2021.

Our effective tax rate for the three months ended May 31, 2022, was 9.8 % compared to ( 6.8 )% for the three months ended May 31, 2021.

Our effective tax rate for the nine months ended May 31, 2022, was 6.7 %, compared to ( 3.4 )% for the nine months ended May 31, 2021.

Our income tax expense reflects the mix of full-year earnings projected across business units and current equity management assumptions.

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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, $ 114.6 million and $ 114.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of February 28, 2022 , and August 31, 2021, respectively.

It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.

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Changes in Equities

Changes in equities for the six months ended February 28, 2022 and 2021, are as follows:

Changes in equities for the nine months ended May 31, 2022 and 2021, are as follows:

Equity Certificates Accumulated

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Balances, February 28, 2022 3,462,002 28,110 1,632,818 2,264,038 ( 221,855 ) 2,196,428 6,903 9,368,444

Reversal of prior year patronage and redemption estimates 81,731 — — — — 20,170 — 101,901

Distribution of 2021 patronage refunds — — 4,205 — — ( 25,188 ) — ( 20,983 )

Redemptions of equities ( 78,616 ) ( 90 ) ( 3,038 ) — — — — ( 81,744 )

Other, net ( 2,228 ) ( 1 ) ( 6,809 ) — — 1,105 ( 295 ) ( 8,228 )

Net income (loss) — — — — — 576,574 ( 329 ) 576,245

Other comprehensive loss, net of tax — — — — ( 18,221 ) — — ( 18,221 )

Estimated 2022 cash patronage refunds — — — — — ( 58,745 ) — ( 58,745 )

Estimated 2022 equity redemptions ( 117,491 ) — — — — — — ( 117,491 )

Balances, May 31, 2022 $ 3,345,398 $ 28,019 $ 1,627,176 $ 2,264,038 $ ( 240,076 ) $ 2,710,344 $ 6,279 $ 9,741,178

Equity Certificates Accumulated

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Balances, February 28, 2021 3,721,612 28,614 1,409,530 2,264,038 ( 222,458 ) 1,509,902 8,545 8,719,783

Reversal of prior year redemption estimates 15,514 — 5,000 — — 8,625 — 29,139

Distribution of 2020 patronage refunds — — 7 — — ( 8,632 ) — ( 8,625 )

Redemptions of equities ( 19,275 ) ( 35 ) ( 6,013 ) — — — — ( 25,323 )

Other, net ( 298 ) 43 58 — — ( 1,726 ) ( 61 ) ( 1,984 )

Net income — — — — — 273,591 81 273,672

Other comprehensive income, net of tax — — — — 7,115 — — 7,115

Estimated 2021 cash patronage refunds — — — — — ( 21,292 ) — ( 21,292 )

Estimated 2021 equity redemptions ( 21,292 ) — — — — — — ( 21,292 )

Balances, May 31, 2021 $ 3,696,261 $ 28,622 $ 1,408,582 $ 2,264,038 $ ( 215,343 ) $ 1,760,468 $ 8,565 $ 8,951,193

Preferred Stock Dividends

The following is a summary of dividends declared per share by series of preferred stock for the three and six months ended February 28, 2022 and 2021:

Three Months Ended February 28, Six Months Ended February 28,

The following is a summary of dividends declared per share by series of preferred stock for the nine months ended May 31, 2022 and 2021.

Due to the timing of dividend declarations during the fiscal year, no declarations were made during the three months ended May 31, 2022 and 2021.

Nine Months Ended May 31,

Nasdaq symbol 2022 2021

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Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and six months ended February 28, 2022 and 2021, are as follows:

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and nine months ended May 31, 2022 and 2021, are as follows:

Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total

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Balance as of February 28, 2022, net of tax ( 133,036 ) ( 4,870 ) ( 83,949 ) ( 221,855 )

Other comprehensive income (loss), before tax:

Amounts before reclassifications 369 ( 39,169 ) 2,497 ( 36,303 )

Amounts reclassified 5,560 5,782 — 11,342

Total other comprehensive income (loss), before tax 5,929 ( 33,387 ) 2,497 ( 24,961 )

Tax effect ( 1,444 ) 8,130 54 6,740

Other comprehensive income (loss), net of tax 4,485 ( 25,257 ) 2,551 ( 18,221 )

Balance as of May 31, 2022, net of tax $ ( 128,551 ) $ ( 30,127 ) $ ( 81,398 ) $ ( 240,076 )

Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total

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Balance as of February 28, 2021, net of tax ( 152,166 ) 11,996 ( 82,288 ) ( 222,458 )

Other comprehensive income (loss), before tax:

Amounts before reclassifications 112 ( 4,725 ) 8,398 3,785

Amounts reclassified 5,064 ( 1,919 ) — 3,145

Total other comprehensive income (loss), before tax 5,176 ( 6,644 ) 8,398 6,930

Tax effect ( 1,288 ) 1,653 ( 180 ) 185

Other comprehensive income (loss), net of tax 3,888 ( 4,991 ) 8,218 7,115

Balance as of May 31, 2021, net of tax $ ( 148,278 ) $ 7,005 $ ( 74,070 ) $ ( 215,343 )

Amounts reclassified from accumulated other comprehensive income (loss) were related to pension and other postretirement benefits, cash flow hedges and foreign currency translation adjustments.

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We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate.

We also have nonqualified supplemental executive and Board retirement plans.

Components of net periodic benefit costs for the three and six months ended February 28, 2022 and 2021, are as follows:

Three Months Ended February 28,

We also have nonqualified supplemental executive and Board of Directors retirement plans.

Components of net periodic benefit costs for the three and nine months ended May 31, 2022 and 2021, are as follows:

Three Months Ended May 31,

Pension Benefits Nonqualified

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Net periodic benefit cost (benefit) $ 10,767 $ 10,030 $ 393 $ 201 $ ( 51 ) $ ( 32 )

Six Months Ended February 28,

Nine Months Ended May 31,

Pension Benefits Nonqualified

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Any contributions made during fiscal 2022 will depend primarily on market returns on the pension plan assets and minimum funding level requirements.

No contributions were made to the pension plans during the six months ended February 28, 2022, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2022.

No contributions were made to the pension plans during the nine months ended May 31, 2022, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2022.

Note 10 Segment Reporting

We are an integrated agricultural cooperative, providing grain, foods and energy resources to businesses and consumers on a global basis.

We provide a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food products.

We define our operating segments in accordance with ASC Topic 280,

Segment Reporting , to reflect the manner in which our chief operating decision maker, our Chief Executive Officer, evaluates performance and allocates resources in managing the business.

We provide a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs that include grain and oilseed, processed grain and oilseed, renewable fuels and food products.

We define our operating segments in accordance with ASC Topic 280, Segment Reporting , to reflect the manner in which our chief operating decision maker, our Chief Executive Officer, evaluates performance and allocates resources in managing the business.

We have aggregated those operating segments into three reportable segments:

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Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products.

Our Ag segment purchases and further processes or resells grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties;

Our Ag segment purchases and further processes or resells grain and oilseed originated by our country operations business, by our member cooperatives and by third parties;

serves as a wholesaler and retailer of crop inputs;

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Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons.

Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grains, oilseeds, crop nutrients and flour.

Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grain, oilseed, crop nutrients and flour.

Changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings.

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Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments.

Segment information for the three and six months ended February 28, 2022 and 2021, is presented in the tables below:

Segment information for the three and nine months ended May 31, 2022 and 2021, is presented in the tables below:

Energy Ag Nitrogen Production Corporate

1 unchanged sentence

Amounts Total

Three Months Ended February 28, 2022 (Dollars in thousands)

Three Months Ended May 31, 2022 (Dollars in thousands)

Revenues, including intersegment revenues $ 2,943,305 $ 10,359,992 $ — $ 11,215 $ ( 176,788 ) $ 13,137,724

10 unchanged sentences

Amounts Total

Three Months Ended February 28, 2021 (Dollars in thousands)

Three Months Ended May 31, 2021 (Dollars in thousands)

Revenues, including intersegment revenues $ 1,815,077 $ 9,222,597 $ — $ 10,842 $ ( 118,540 ) $ 10,929,976

2 unchanged sentences

$ 1,704,798 $ 9,216,204 $ — $ 8,974 $ — $ 10,929,976

Operating (loss) earnings ( 55,449 ) 2,093 ( 8,240 ) 1,806 — ( 59,790 )

Operating earnings (loss) 2,955 134,606 ( 8,799 ) ( 837 ) — 127,925

Interest expense ( 333 ) 17,661 10,318 390 956 28,992

1 unchanged sentence

Equity income from investments ( 1,035 ) ( 16,855 ) ( 65,444 ) ( 63,188 ) — ( 146,522 )

(Loss) income before income taxes $ ( 54,690 ) $ 14,044 $ 11,165 $ 22,791 $ — $ ( 6,690 )

Income before income taxes $ 4,959 $ 140,131 $ 46,635 $ 64,478 $ — $ 256,203

Energy Ag Nitrogen Production Corporate

1 unchanged sentence

Amounts Total

Six Months Ended February 28, 2022 (Dollars in thousands)

Nine Months Ended May 31, 2022 (Dollars in thousands)

Revenues, including intersegment revenues $ 7,574,881 $ 27,239,897 $ — $ 32,060 $ ( 495,769 ) $ 34,351,069

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Income before income taxes $ 243,262 $ 615,294 $ 429,052 $ 48,619 $ — $ 1,336,227

Total assets as of February 28, 2022

Total assets as of May 31, 2022

$ 4,357,274 $ 9,556,610 $ 2,930,538 $ 3,864,621 $ — $ 20,709,043

2 unchanged sentences

Amounts Total

Six Months Ended February 28, 2021 (Dollars in thousands)

Nine Months Ended May 31, 2021 (Dollars in thousands)

Revenues, including intersegment revenues $ 4,643,387 $ 23,615,087 $ — $ 38,370 $ ( 331,066 ) $ 27,965,778

2 unchanged sentences

$ 4,334,803 $ 23,599,818 $ — $ 31,157 $ — $ 27,965,778

Operating (loss) earnings ( 123,834 ) 77,617 ( 15,862 ) 9,732 — ( 52,347 )

Operating earnings (loss) ( 120,879 ) 212,223 ( 24,661 ) 8,894 — 75,577

Interest expense 492 48,796 33,721 1,536 ( 1,648 ) 82,897

1 unchanged sentence

Equity income from investments ( 2,355 ) ( 43,974 ) ( 118,477 ) ( 95,848 ) — ( 260,654 )

(Loss) income before income taxes $ ( 121,867 ) $ 97,053 $ 15,635 $ 47,529 $ — $ 38,350

Income (loss) before income taxes $ ( 116,908 ) $ 237,185 $ 62,270 $ 112,006 $ — $ 294,553

Note 11 Derivative Financial Instruments and Hedging Activities

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Except for certain cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as cash flow hedges, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied.

Rather, the derivative instruments are recorded on our Condensed Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Condensed Consolidated

Statements of Operations.

See Note 12, Fair Value Measurements, for additional information.

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The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S.

February 28, 2022

Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting

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Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheets.

The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of February 28, 2022 , and August 31, 2021, was $ 43.1 million and $ 21.6 million, respectively.

The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of February 28, 2022 , and August 31, 2021, was $ 6.5 million and $ 4.8 million, respectively.

The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of May 31, 2022 , and August 31, 2021, was $ 29.3 million and $ 21.6 million, respectively.

The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of May 31, 2022 , and August 31, 2021, was $ 3.6 million and $ 4.8 million, respectively.

The majority of our derivative instruments have not been designated as hedging instruments.

The following table sets forth the pretax gains (losses) on derivatives not accounted for as hedging instruments that have been included in our Condensed Consolidated Statements of Operations for the three and six months ended February 28, 2022 and 2021:

Three Months Ended February 28, Six Months Ended February 28,

Three Months Ended May 31, Nine Months Ended May 31,

Location of Gain (Loss) 2022 2021 2022 2021

6 unchanged sentences

Commodity Contracts

As of February 28, 2022, and August 31, 2021, we had outstanding commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities.

As of May 31, 2022, and August 31, 2021, we had outstanding commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities.

The table below presents the notional volumes for all outstanding commodity contracts:

February 28, 2022 August 31, 2021

May 31, 2022 August 31, 2021

Long Short Long Short

12 unchanged sentences

agricultural products compared to the same products offered by alternative sources of world supply.

The notional amount of our foreign exchange derivative contracts was $ 1.5 billion and $ 1.2 billion as of February 28, 2022 , and August 31, 2021, respectively.

The notional amount of our foreign exchange derivative contracts was $ 1.9 billion and $ 1.2 billion as of May 31, 2022 , and August 31, 2021, respectively.

Embedded Derivative Asset

Under the terms of our strategic investment in CF Nitrogen, if the CF Industries credit rating is reduced below certain levels by two of three specified credit ratings agencies, we are entitled to receive a nonrefundable annual payment of $ 5.0 million from CF Industries.

These payments will continue on an annual basis until the date that the CF Industries credit rating is upgraded to above certain levels by two of the three specified credit ratings agencies or February 1, 2026, whichever is earlier.

Since the CF Industries credit rating was reduced below the specified levels during fiscal 2017, we have received an annual payment of $ 5.0 million from CF Industries.

Gains totaling $ 1.8 million and $ 1.9 million were recognized in other income in our Condensed Consolidated Statements of Operations for the six months ended February 28, 2022 and 2021, respectively.

The fair value of the embedded derivative asset recorded on our Condensed Consolidated Balance Sheets as of February 28, 2022 , was equal to $ 13.3 million.

Under the terms of our strategic investment in CF Nitrogen, if the credit rating of CF Industries is reduced below certain levels by two of three specified credit ratings agencies, we are entitled to receive a nonrefundable annual payment of $ 5.0 million from CF Industries.

These payments will continue on an annual basis until the date that the credit rating of CF Industries is upgraded to above certain levels by two of the three specified credit ratings agencies or February 1, 2026, whichever is earlier.

Since the credit rating of CF Industries was reduced below the specified levels during fiscal 2017, we have received an annual payment of $ 5.0 million from CF Industries.

Gains totaling $ 2.1 million and $ 2.2 million were recognized in other income in our Condensed Consolidated Statements of Operations for the nine months ended May 31, 2022 and 2021, respectively.

The fair value of the embedded derivative asset recorded on our Condensed Consolidated Balance Sheets as of May 31, 2022 , was equal to $ 13.5 million.

The current and long-term portions of the embedded derivative asset are included in other current assets and other assets on our Condensed Consolidated Balance Sheets, respectively.

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Amounts recorded in other comprehensive income for these dedesignated derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings.

As of February 28, 2022 , and August 31, 2021, the aggregate notional amount of cash flow hedges was 2.4 million and 2.7 million barrels, respectively.

As of May 31, 2022 , and August 31, 2021, the aggregate notional amounts of cash flow hedges were 6.1 million and 2.7 million barrels, respectively.

The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Condensed Consolidated Balance Sheets in which they are recorded:

Derivative Assets Derivative Liabilities

Balance Sheet Location February 28,

Balance Sheet Location May 31,

2022 August 31,

2021 Balance Sheet Location February 28,

2021 Balance Sheet Location May 31,

2022 August 31,

1 unchanged sentence

Other current assets $ 19,596 $ 11,874 Other current liabilities $ 54,150 $ 1,001

The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the three and six months ended February 28, 2022 and 2021:

Three Months Ended February 28, Six Months Ended February 28,

The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the three and nine months ended May 31, 2022 and 2021:

Three Months Ended May 31, Nine Months Ended May 31,

2022 2021 2022 2021

1 unchanged sentence

Commodity derivatives $ ( 36,688 ) $ ( 7,590 ) $ ( 51,961 ) $ ( 7,700 )

The following table presents the pretax gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three and six months ended February 28, 2022 and 2021:

Three Months Ended February 28, Six Months Ended February 28,

The following table presents the pretax (losses) gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2022 and 2021:

Three Months Ended May 31, Nine Months Ended May 31,

Location of Gain 2022 2021 2022 2021

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Level 3 inputs are unobservable inputs that are supported by little or no market activity for the assets or liabilities.

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Recurring fair value measurements as of February 28, 2022 , and August 31, 2021, are as follows:

February 28, 2022

Categorization within the valuation hierarchy is based on the lowest level of input significant to the fair value measurement.

Recurring fair value measurements as of May 31, 2022 , and August 31, 2021, are as follows:

Quoted Prices in

43 unchanged sentences

The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen.

The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the CF Industries credit rating based on historical credit rating movements of other public companies and the discount rates applied to potential annual payments based on applicable historical and current yield coupon rates.

The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the credit rating of CF Industries based on historical credit rating movements of other public companies and the discount rates applied to potential annual payments based on applicable historical and current yield coupon rates.

Based on these observable inputs, our fair value measurement is classified within Level 2.

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We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies.

Our bank covenants allow maximum guarantees of $ 1.0 billion, of which $ 272.6 million were outstanding on February 28, 2022 .

Our bank covenants allow maximum guarantees of $ 1.0 billion, of which $ 213.0 million were outstanding on May 31, 2022 .

We have collateral for a portion of these contingent obligations.

We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial.

The underlying loans to the counterparties for which we provide these guarantees were current as of February 28, 2022 .

The underlying loans to the counterparties for which we provide these guarantees were current as of May 31, 2022 .

Note 14 Other Current Assets and Liabilities

Other current assets and liabilities as of February 28, 2022 , and August 31, 2021, are as follows:

Other current assets and liabilities as of May 31, 2022 , and August 31, 2021, are as follows:

2022 August 31,

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements