CHS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS CHS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) May 31, 2022 August 31, 2021 (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 369,256 $ 413,159 Receivables 4,093,122 2,860,884 Inventories 4,451,695 3,334,675 Other current assets 2,061,475 1,390,233 Total current assets 10,975,548 7,998,951 Investments 4,023,095 3,669,111 Property, plant and equipment 4,685,638 4,810,005 Other assets 1,024,762 1,098,208 Total assets $ 20,709,043 $ 17,576,275 LIABILITIES AND EQUITIES Current liabilities: Notes payable $ 2,028,859 $ 1,740,859 Current portion of long-term debt 161,308 38,450 Accounts payable 3,373,338 2,616,052 Accrued expenses 796,338 622,723 Other current liabilities 2,194,482 1,307,929 Total current liabilities 8,554,325 6,326,013 Long-term debt 1,800,779 1,579,911 Other liabilities 612,761 653,025 Commitments and contingencies (Note 13) Equities: Preferred stock 2,264,038 2,264,038 Equity certificates 5,000,593 5,247,238 Accumulated other comprehensive loss ( 240,076 ) ( 216,391 ) Capital reserves 2,710,344 1,713,976 Total CHS Inc. equities 9,734,899 9,008,861 Noncontrolling interests 6,279 8,465 Total equities 9,741,178 9,017,326 Total liabilities and equities $ 20,709,043 $ 17,576,275 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) Three Months Ended May 31, Nine Months Ended May 31, 2022 2021 2022 2021 (Dollars in thousands) Revenues $ 13,137,724 $ 10,929,976 $ 34,351,069 $ 27,965,778 Cost of goods sold 12,493,467 10,615,348 32,917,906 27,371,326 Gross profit 644,257 314,628 1,433,163 594,452 Marketing, general and administrative expenses 243,136 186,703 692,395 518,875 Operating earnings 401,121 127,925 740,768 75,577 Interest expense 32,099 28,992 80,705 82,897 Other income ( 6,636 ) ( 10,748 ) ( 31,817 ) ( 41,219 ) Equity income from investments ( 263,079 ) ( 146,522 ) ( 644,347 ) ( 260,654 ) 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 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) Three Months Ended May 31, Nine Months Ended May 31, 2022 2021 2022 2021 (Dollars in thousands) Net income $ 576,245 $ 273,672 $ 1,247,084 $ 304,683 Other comprehensive income (loss), net of tax: Pension and other postretirement benefits 4,485 3,888 12,834 11,402 Cash flow hedges ( 25,257 ) ( 4,991 ) ( 34,951 ) ( 3,881 ) Foreign currency translation adjustment 2,551 8,218 ( 1,568 ) 11,060 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 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) Nine Months Ended May 31, 2022 2021 (Dollars in thousands) Cash flows from operating activities: Net income $ 1,247,084 $ 304,683 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization, including amortization of deferred major maintenance 399,562 401,657 Equity income from investments, net of distributions received ( 345,846 ) ( 128,635 ) Provision for current expected credit losses 18,641 3,353 Deferred taxes ( 51,522 ) 17,379 Other, net ( 6,643 ) ( 24,420 ) Changes in operating assets and liabilities: Receivables ( 1,074,111 ) ( 885,496 ) Inventories ( 1,117,020 ) ( 763,675 ) Accounts payable and accrued expenses 967,603 775,825 Other, net ( 44,886 ) ( 333,049 ) Net cash used in operating activities ( 7,138 ) ( 632,378 ) Cash flows from investing activities: Acquisition of property, plant and equipment ( 207,455 ) ( 238,774 ) Proceeds from disposition of property, plant and equipment 8,127 17,039 Expenditures for major maintenance ( 18,072 ) ( 42,466 ) Proceeds from sale of business 73,152 39,567 Changes in CHS Capital notes receivable, net ( 200,380 ) 31,543 Financing extended to customers ( 47,235 ) ( 1,890 ) Payments from customer financing 53,442 6,110 Other investing activities, net ( 1,467 ) 11,362 Net cash used in investing activities ( 339,888 ) ( 177,509 ) Cash flows from financing activities: Proceeds from notes payable and long-term debt 19,077,600 26,618,429 Payments on notes payable, long-term debt and finance lease obligations ( 18,401,162 ) ( 25,381,437 ) Preferred stock dividends paid ( 126,501 ) ( 126,501 ) Redemptions of equities ( 99,229 ) ( 37,809 ) Cash patronage dividends paid ( 51,026 ) ( 30,042 ) Other financing activities, net ( 43,736 ) ( 30,634 ) Net cash provided by financing activities 355,946 1,012,006 Effect of exchange rate changes on cash and cash equivalents ( 11,311 ) ( 451 ) (Decrease) increase in cash and cash equivalents and restricted cash ( 2,391 ) 201,668 Cash and cash equivalents and restricted cash at beginning of period 542,484 216,993 Cash and cash equivalents and restricted cash at end of period $ 540,093 $ 418,661 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 Basis of Presentation and Significant Accounting Policies Basis of Presentation These unaudited condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of the seasonal nature of our businesses, among other things. Our unaudited condensed consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2021, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"). Significant Accounting Policies No significant accounting policies were updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2021. Recent Accounting Pronouncements No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements. Note 2 Revenues The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three and nine months ended May 31, 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 May 31, 2022 (Dollars in thousands) Energy $ 2,529,311 $ 246,631 $ — $ 2,775,942 Ag 3,460,390 6,883,785 8,194 10,352,369 Corporate and Other 4,205 — 5,208 9,413 Total revenues $ 5,993,906 $ 7,130,416 $ 13,402 $ 13,137,724 Three Months Ended May 31, 2021 Energy $ 1,533,643 $ 171,155 $ — $ 1,704,798 Ag 2,810,389 6,389,677 16,138 9,216,204 Corporate and Other 3,929 — 5,045 8,974 Total revenues $ 4,347,961 $ 6,560,832 $ 21,183 $ 10,929,976 6 Table of Contents ASC Topic 606 ASC Topic 815 Other Guidance Total Revenues Nine Months Ended May 31, 2022 (Dollars in thousands) Energy $ 6,426,092 $ 681,836 $ — $ 7,107,928 Ag 8,056,676 19,139,417 21,466 27,217,559 Corporate and Other 11,785 — 13,797 25,582 Total revenues $ 14,494,553 $ 19,821,253 $ 35,263 $ 34,351,069 Nine Months Ended May 31, 2021 Energy $ 3,841,678 $ 493,125 $ — $ 4,334,803 Ag 5,324,396 18,232,235 43,187 23,599,818 Corporate and Other 14,925 — 16,232 31,157 Total revenues $ 9,180,999 $ 18,725,360 $ 59,419 $ 27,965,778 Less than 1% of revenues accounted for under ASC Topic 606 included within the tables above are recorded over time and relate primarily to service contracts. Contract Assets and Contract Liabilities Contract assets relate to unbilled amounts arising from goods that have already been transferred to customers where the right to payment is not conditional on the passage of time. This results in 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 $ 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 $ 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. Note 3 Receivables May 31, 2022 August 31, 2021 (Dollars in thousands) Trade accounts receivable $ 3,164,995 $ 2,047,198 CHS Capital short-term notes receivable 652,041 505,778 Other 404,352 451,630 Gross receivables 4,221,388 3,004,606 Less: allowances and reserves 128,266 143,722 Total receivables $ 4,093,122 $ 2,860,884 Receivables are composed of trade accounts receivable, short-term notes receivable in our wholly-owned subsidiary, CHS Capital, LLC ("CHS Capital"), and other receivables, less an allowance for expected credit losses. The allowance for expected credit losses is based on our best estimate of expected credit losses in existing receivable balances and is determined using historical write-off experience, adjusted for various industry and regional data and current expectations of future credit losses. Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives' capital stock. These loans are primarily originated in the states of Minnesota and North Dakota. CHS Capital also has loans receivable from producer 7 Table of Contents 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 $ 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 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 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 May 31, 2022 August 31, 2021 (Dollars in thousands) Grain and oilseed $ 2,044,585 $ 1,435,544 Energy 577,360 762,317 Agronomy 1,439,716 958,548 Processed grain and oilseed 140,752 140,975 Other 249,282 37,291 Total inventories $ 4,451,695 $ 3,334,675 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. Interim LIFO calculations are based on management's estimates of expected year-end inventory levels and values and are subject to final year-end LIFO inventory valuation. Note 5 Investments May 31, 2022 August 31, 2021 (Dollars in thousands) Equity method investments: CF Industries Nitrogen, LLC $ 2,916,993 $ 2,667,164 Ventura Foods, LLC 414,929 388,612 Ardent Mills, LLC 237,971 220,132 TEMCO, LLC 57,295 31,464 Other equity method investments 264,555 232,923 Other investments 131,352 128,816 Total investments $ 4,023,095 $ 3,669,111 8 Table of Contents Joint ventures and other investments, in which we have significant ownership and influence, but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen"), Ventura Foods, LLC ("Ventura Foods"), Ardent Mills, LLC ("Ardent Mills"), and TEMCO, LLC ("TEMCO"), which are summarized below. In addition to the recognition of our share of income from equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally recorded at cost, unless an impairment or other observable market price change occurs, requiring an adjustment. 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 . CF Nitrogen We have a $ 2.9 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10 % membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for semiannual cash distributions. 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, 2022 2021 (Dollars in thousands) Net sales $ 4,972,383 $ 2,116,040 Gross profit 2,682,653 565,067 Net earnings 2,641,425 524,071 Earnings attributable to CHS Inc. 497,289 118,477 Ventura Foods, Ardent Mills and TEMCO We have a 50 % interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily edible oil-based products. We also have a 12 % interest in Ardent Mills, which is a joint venture with Cargill, Incorporated ("Cargill"), and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50 % interest in TEMCO, which is a joint venture with Cargill focused on export elevation, primarily to Asia. We account for Ventura Foods, Ardent Mills and TEMCO as equity method investments. 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 nine months ended May 31, 2022 and 2021: Nine Months Ended May 31, 2022 2021 (Dollars in thousands) Net sales $ 7,124,636 $ 7,471,759 Gross profit 850,417 741,461 Net earnings 439,502 363,988 Earnings attributable to CHS Inc. 105,869 116,436 Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in aggregate. 9 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 all debt covenants as of May 31, 2022 . The table below summarizes our notes payable as of May 31, 2022 , and August 31, 2021: May 31, 2022 August 31, 2021 (Dollars in thousands) Notes payable $ 966,258 $ 864,147 CHS Capital notes payable 1,062,601 876,712 Total notes payable $ 2,028,859 $ 1,740,859 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. 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 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 $ 700.0 million and an uncommitted portion with a maximum availability of $ 250.0 million. 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 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 May 31, 2022 , and August 31, 2021: May 31, 2022 August 31, 2021 (Dollars in thousands) Private placement debt $ 1,550,229 $ 1,552,974 Term loan 366,000 — Finance lease obligations 46,684 36,034 Other notes and contracts payable 2,845 33,443 Deferred financing costs ( 3,671 ) ( 4,090 ) Total long-term debt 1,962,087 1,618,361 Less current portion 161,308 38,450 Long-term portion $ 1,800,779 $ 1,579,911 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. 10 Table of Contents Note 7 Income Taxes 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. Income taxes and effective tax rates vary each year based on profitability and nonpatronage business activity during the year. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged, and we may not prevail. If we were to prevail on all positions taken in relation to uncertain tax positions, $ 114.6 million and $ 114.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of May 31, 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. Note 8 Equities Changes in Equities Changes in equities for the nine months ended May 31, 2022 and 2021, are as follows: Equity Certificates Accumulated Other Comprehensive Loss Capital Equity Certificates Nonpatronage Equity Certificates Nonqualified Equity Certificates Preferred Stock Capital Reserves Noncontrolling Interests Total Equities (Dollars in thousands) Balances, August 31, 2021 $ 3,583,911 $ 28,431 $ 1,634,896 $ 2,264,038 $ ( 216,391 ) $ 1,713,976 $ 8,465 $ 9,017,326 Reversal of prior year redemption estimates 12,221 — — — — — — 12,221 Redemptions of equities ( 9,824 ) ( 318 ) ( 2,079 ) — — — — ( 12,221 ) Preferred stock dividends — — — — — ( 84,334 ) — ( 84,334 ) Other, net ( 1,023 ) 17 ( 64 ) — — 1,393 ( 841 ) ( 518 ) Net income (loss) — — — — — 451,961 ( 18 ) 451,943 Other comprehensive loss, net of tax — — — — ( 15,418 ) — — ( 15,418 ) Estimated 2022 cash patronage refunds — — — — — ( 39,691 ) — ( 39,691 ) Estimated 2022 equity redemptions ( 79,382 ) — — — — — — ( 79,382 ) Balances, November 30, 2021 3,505,903 28,130 1,632,753 2,264,038 ( 231,809 ) 2,043,305 7,606 9,249,926 Reversal of prior year patronage and redemption estimates 5,264 — ( 230,290 ) — — 260,120 — 35,094 Distribution of 2021 patronage refunds — — 231,371 — — ( 261,414 ) — ( 30,043 ) Redemptions of equities ( 4,228 ) ( 20 ) ( 1,016 ) — — — — ( 5,264 ) Preferred stock dividends — — — — — ( 42,167 ) — ( 42,167 ) Other, net ( 5 ) — — — — 50 ( 599 ) ( 554 ) Net income (loss) — — — — — 219,000 ( 104 ) 218,896 Other comprehensive income, net of tax — — — — 9,954 — — 9,954 Estimated 2022 cash patronage refunds — — — — — ( 22,466 ) — ( 22,466 ) Estimated 2022 equity redemptions ( 44,932 ) — — — — — — ( 44,932 ) 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 11 Table of Contents Equity Certificates Accumulated Other Comprehensive Loss Capital Equity Certificates Nonpatronage Equity Certificates Nonqualified Equity Certificates Preferred Stock Capital Reserves Noncontrolling Interests Total Equities (Dollars in thousands) Balances, August 31, 2020 $ 3,724,187 $ 28,727 $ 1,408,696 $ 2,264,038 $ ( 233,924 ) $ 1,618,147 $ 9,302 $ 8,819,173 Reversal of prior year redemption estimates 7,726 — — — — — — 7,726 Redemptions of equities ( 6,539 ) ( 31 ) ( 1,156 ) — — — — ( 7,726 ) Preferred stock dividends — — — — — ( 84,334 ) — ( 84,334 ) Other, net ( 654 ) ( 47 ) ( 197 ) — — ( 7,798 ) 35 ( 8,661 ) Net income (loss) — — — — — 69,671 ( 302 ) 69,369 Other comprehensive income, net of tax — — — — 8,917 — — 8,917 Estimated 2021 cash patronage refunds — — — — — ( 9,304 ) — ( 9,304 ) Estimated 2021 equity redemptions ( 9,304 ) — — — — — — ( 9,304 ) Balances, November 30, 2020 3,715,416 28,649 1,407,343 2,264,038 ( 225,007 ) 1,586,382 9,035 8,785,856 Reversal of prior year patronage and redemption estimates 4,760 — ( 211,970 ) — — 233,345 — 26,135 Distribution of 2020 patronage refunds — — 214,720 — — ( 236,136 ) — ( 21,416 ) Redemptions of equities ( 4,177 ) ( 35 ) ( 548 ) — — — — ( 4,760 ) Preferred stock dividends — — — — — ( 42,167 ) — ( 42,167 ) Other, net ( 26 ) — ( 15 ) — — 1,068 ( 361 ) 666 Net loss — — — — — ( 38,229 ) ( 129 ) ( 38,358 ) Other comprehensive income, net of tax — — — — 2,549 — — 2,549 Estimated 2021 cash patronage refunds — — — — — 5,639 — 5,639 Estimated 2021 equity redemptions 5,639 — — — — — — 5,639 Balances, February 28, 2021 3,721,612 28,614 1,409,530 2,264,038 ( 222,458 ) 1,509,902 8,545 8,719,783 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 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 Series of preferred stock: (Dollars per share) 8% Cumulative Redeemable CHSCP $ 1.50 $ 1.50 Class B Cumulative Redeemable, Series 1 CHSCO $ 1.48 $ 1.48 Class B Reset Rate Cumulative Redeemable, Series 2 CHSCN $ 1.33 $ 1.33 Class B Reset Rate Cumulative Redeemable, Series 3 CHSCM $ 1.27 $ 1.27 Class B Cumulative Redeemable, Series 4 CHSCL $ 1.41 $ 1.41 12 Table of Contents Accumulated Other Comprehensive Income (Loss) 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 (Dollars in thousands) Balance as of August 31, 2021, net of tax $ ( 141,385 ) $ 4,824 $ ( 79,830 ) $ ( 216,391 ) Other comprehensive income (loss), before tax: Amounts before reclassifications ( 83 ) 870 ( 9,983 ) ( 9,196 ) Amounts reclassified 5,064 ( 12,954 ) — ( 7,890 ) Total other comprehensive income (loss), before tax 4,981 ( 12,084 ) ( 9,983 ) ( 17,086 ) Tax effect ( 1,213 ) 2,943 ( 62 ) 1,668 Other comprehensive income (loss), net of tax 3,768 ( 9,141 ) ( 10,045 ) ( 15,418 ) Balance as of November 30, 2021, net of tax ( 137,617 ) ( 4,317 ) ( 89,875 ) ( 231,809 ) Other comprehensive income (loss), before tax: Amounts before reclassifications — 3,974 5,807 9,781 Amounts reclassified 6,056 ( 4,705 ) — 1,351 Total other comprehensive income (loss), before tax 6,056 ( 731 ) 5,807 11,132 Tax effect ( 1,475 ) 178 119 ( 1,178 ) Other comprehensive income (loss), net of tax 4,581 ( 553 ) 5,926 9,954 Balance as of February 28, 2022, net of tax ( 133,036 ) ( 4,870 ) ( 83,949 ) ( 221,855 ) 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 ) 13 Table of Contents Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total (Dollars in thousands) Balance as of August 31, 2020, net of tax $ ( 159,680 ) $ 10,886 $ ( 85,130 ) $ ( 233,924 ) Other comprehensive income (loss), before tax: Amounts before reclassifications ( 125 ) 14,506 3,629 18,010 Amounts reclassified 4,977 ( 12,284 ) — ( 7,307 ) Total other comprehensive income, before tax 4,852 2,222 3,629 10,703 Tax effect ( 1,207 ) ( 553 ) ( 26 ) ( 1,786 ) Other comprehensive income, net of tax 3,645 1,669 3,603 8,917 Balance as of November 30, 2020, net of tax ( 156,035 ) 12,555 ( 81,527 ) ( 225,007 ) Other comprehensive income (loss), before tax: Amounts before reclassifications — 2,929 ( 587 ) 2,342 Amounts reclassified 5,151 ( 3,673 ) — 1,478 Total other comprehensive income (loss), before tax 5,151 ( 744 ) ( 587 ) 3,820 Tax effect ( 1,282 ) 185 ( 174 ) ( 1,271 ) Other comprehensive income (loss), net of tax 3,869 ( 559 ) ( 761 ) 2,549 Balance as of February 28, 2021, net of tax ( 152,166 ) 11,996 ( 82,288 ) ( 222,458 ) 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. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of goods sold and marketing, general and administrative expenses (see Note 9, Benefit Plans , for further information). Gains or losses associated with cash flow hedges are recorded as cost of goods sold (see Note 11, Derivative Financial Instruments and Hedging Activities , for further information). Gains or losses on foreign currency translation reclassifications related to sales of businesses are recorded as other income. Note 9 Benefit Plans We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have nonqualified supplemental executive and Board of Directors retirement plans. 14 Table of Contents 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, Qualified Pension Benefits Nonqualified Pension Benefits Other Benefits 2022 2021 2022 2021 2022 2021 Components of net periodic benefit costs: (Dollars in thousands) Service cost $ 11,569 $ 11,307 $ 232 $ 108 $ 249 $ 297 Interest cost 4,292 4,141 70 68 126 123 Expected return on assets ( 10,990 ) ( 10,910 ) — — — — Prior service cost (credit) amortization 44 45 ( 29 ) ( 28 ) ( 111 ) ( 111 ) Actuarial loss (gain) amortization 5,852 5,447 120 53 ( 315 ) ( 341 ) Net periodic benefit cost (benefit) $ 10,767 $ 10,030 $ 393 $ 201 $ ( 51 ) $ ( 32 ) Nine Months Ended May 31, Qualified Pension Benefits Nonqualified Pension Benefits Other Benefits 2022 2021 2022 2021 2022 2021 Components of net periodic benefit costs: (Dollars in thousands) Service cost $ 34,706 $ 33,921 $ 695 $ 325 $ 747 $ 890 Interest cost 12,875 12,422 211 205 377 369 Expected return on assets ( 32,969 ) ( 32,731 ) — — — — Prior service cost (credit) amortization 131 134 ( 86 ) ( 85 ) ( 334 ) ( 334 ) Actuarial loss (gain) amortization 17,555 16,342 359 159 ( 944 ) ( 1,024 ) Net periodic benefit cost (benefit) $ 32,298 $ 30,088 $ 1,179 $ 604 $ ( 154 ) $ ( 99 ) The service cost component of defined benefit net periodic benefit cost is recorded in cost of goods sold and marketing, general and administrative expenses. The other components of net periodic benefit cost are recorded in other income. Employer Contributions Any contributions made during fiscal 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 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 grain and oilseed, processed grain and oilseed, renewable fuels and food products. We define our operating segments in accordance with ASC Topic 280, Segment Reporting , to reflect the manner in which our chief operating decision maker, our Chief Executive Officer, evaluates performance and allocates resources in managing the business. We have aggregated those operating segments into three reportable segments: Energy, Ag and Nitrogen Production. Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products. Our Ag segment purchases and further processes or resells grain and oilseed originated by our country operations business, by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment consists of our equity method investment in CF Nitrogen and allocated expenses. Our supply agreement with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and urea ammonium nitrate ("UAN") annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily consist of a U.S. Commodity Futures Trading Commission-regulated futures commission merchant ("FCM") for commodities hedging and financial services related to crop production. Our nonconsolidated investments in Ventura Foods and Ardent Mills are also included in our Corporate and Other category. 15 Table of Contents Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our income before income taxes does not necessarily follow the same trend, due to weather and other events that can impact profitability. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing operations are subject to fluctuations in volume and revenues based on producer harvests, world grain prices, demand and international trade relationships. Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grain, oilseed, crop nutrients and flour. Changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Commodity prices are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability and adequacy of supply, availability of reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, and general political and economic conditions. While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability companies in which we have a controlling interest, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less or do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Ag segment, this includes our 50 % interest in TEMCO. In our Nitrogen Production segment, this consists of our approximate 10 % membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50 % ownership in Ventura Foods and our 12 % ownership in Ardent Mills. See Note 5, Investments, for more information on these entities. Reconciling amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments. Segment information for the three and nine months ended May 31, 2022 and 2021, is presented in the tables below: Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total 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 Intersegment revenues ( 167,363 ) ( 7,623 ) — ( 1,802 ) 176,788 — Revenues, net of intersegment revenues $ 2,775,942 $ 10,352,369 $ — $ 9,413 $ — $ 13,137,724 Operating earnings (loss) 164,016 256,817 ( 14,480 ) ( 5,232 ) — 401,121 Interest expense 2,182 18,581 12,263 ( 257 ) ( 670 ) 32,099 Other income ( 485 ) ( 10,221 ) ( 258 ) 3,658 670 ( 6,636 ) Equity income from investments ( 922 ) ( 25,231 ) ( 204,697 ) ( 32,229 ) — ( 263,079 ) Income before income taxes $ 163,241 $ 273,688 $ 178,212 $ 23,596 $ — $ 638,737 16 Table of Contents Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total Three Months Ended May 31, 2021 (Dollars in thousands) Revenues, including intersegment revenues $ 1,815,077 $ 9,222,597 $ — $ 10,842 $ ( 118,540 ) $ 10,929,976 Intersegment revenues ( 110,279 ) ( 6,393 ) — ( 1,868 ) 118,540 — Revenues, net of intersegment revenues $ 1,704,798 $ 9,216,204 $ — $ 8,974 $ — $ 10,929,976 Operating earnings (loss) 2,955 134,606 ( 8,799 ) ( 837 ) — 127,925 Interest expense ( 333 ) 17,661 10,318 390 956 28,992 Other income ( 636 ) ( 6,331 ) ( 308 ) ( 2,517 ) ( 956 ) ( 10,748 ) Equity income from investments ( 1,035 ) ( 16,855 ) ( 65,444 ) ( 63,188 ) — ( 146,522 ) Income before income taxes $ 4,959 $ 140,131 $ 46,635 $ 64,478 $ — $ 256,203 Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total 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 Intersegment revenues ( 466,953 ) ( 22,338 ) — ( 6,478 ) 495,769 — Revenues, net of intersegment revenues $ 7,107,928 $ 27,217,559 $ — $ 25,582 $ — $ 34,351,069 Operating earnings (loss) 243,009 560,200 ( 35,525 ) ( 26,916 ) — 740,768 Interest expense 4,568 45,466 34,770 ( 3,073 ) ( 1,026 ) 80,705 Other income ( 1,217 ) ( 37,320 ) ( 2,058 ) 7,752 1,026 ( 31,817 ) Equity income from investments ( 3,604 ) ( 63,240 ) ( 497,289 ) ( 80,214 ) — ( 644,347 ) Income before income taxes $ 243,262 $ 615,294 $ 429,052 $ 48,619 $ — $ 1,336,227 Total assets as of May 31, 2022 $ 4,357,274 $ 9,556,610 $ 2,930,538 $ 3,864,621 $ — $ 20,709,043 Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total 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 Intersegment revenues ( 308,584 ) ( 15,269 ) — ( 7,213 ) 331,066 — Revenues, net of intersegment revenues $ 4,334,803 $ 23,599,818 $ — $ 31,157 $ — $ 27,965,778 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 Other income ( 2,108 ) ( 29,784 ) ( 2,175 ) ( 8,800 ) 1,648 ( 41,219 ) Equity income from investments ( 2,355 ) ( 43,974 ) ( 118,477 ) ( 95,848 ) — ( 260,654 ) Income (loss) before income taxes $ ( 116,908 ) $ 237,185 $ 62,270 $ 112,006 $ — $ 294,553 Note 11 Derivative Financial Instruments and Hedging Activities We enter into various derivative instruments to manage our exposure to movements primarily associated with agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain 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. The majority of our exchange-traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned FCM. 17 Table of Contents Derivatives Not Designated as Hedging Instruments Although we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected to report our derivative instruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet-Offsetting . The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP: May 31, 2022 Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting Gross Amount Recognized Cash Collateral Derivative Instruments Net Amount (Dollars in thousands) Derivative Assets Commodity derivatives $ 762,167 $ — $ 21,015 $ 741,152 Foreign exchange derivatives 114,804 — 15,410 99,394 Embedded derivative asset 13,545 — — 13,545 Total $ 890,516 $ — $ 36,425 $ 854,091 Derivative Liabilities Commodity derivatives $ 609,663 $ 239 $ 22,590 $ 586,834 Foreign exchange derivatives 15,454 — 15,410 44 Total $ 625,117 $ 239 $ 38,000 $ 586,878 August 31, 2021 Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting Gross Amount Recognized Cash Collateral Derivative Instruments Net Amount (Dollars in thousands) Derivative Assets Commodity derivatives $ 532,832 $ — $ 4,174 $ 528,658 Foreign exchange derivatives 19,429 — 5,582 13,847 Embedded derivative asset 16,488 — — 16,488 Total $ 568,749 $ — $ 9,756 $ 558,993 Derivative Liabilities Commodity derivatives $ 444,861 $ 2,485 $ 4,174 $ 438,202 Foreign exchange derivatives 8,506 — 5,582 2,924 Total $ 453,367 $ 2,485 $ 9,756 $ 441,126 Derivative assets and liabilities with maturities of 12 months or less are recorded in other current assets and other current liabilities, respectively, on our Condensed Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of May 31, 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. 18 Table of Contents 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 nine months ended May 31, 2022 and 2021: Three Months Ended May 31, Nine Months Ended May 31, Location of Gain (Loss) 2022 2021 2022 2021 (Dollars in thousands) Commodity derivatives Cost of goods sold $ ( 324,965 ) $ ( 552,985 ) $ ( 905,400 ) $ ( 945,631 ) Foreign exchange derivatives Cost of goods sold 18,147 35,567 58,438 27,327 Foreign exchange derivatives Marketing, general and administrative expenses 1,097 838 1,600 1,011 Embedded derivative Other income 258 308 2,057 2,174 Total $ ( 305,463 ) $ ( 516,272 ) $ ( 843,305 ) $ ( 915,119 ) Commodity Contracts 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: May 31, 2022 August 31, 2021 Long Short Long Short (Units in thousands) Grain and oilseed (bushels) 754,573 1,279,773 666,726 851,582 Energy products (barrels) 13,138 8,778 9,881 7,656 Processed grain and oilseed (tons) 1,050 4,475 559 3,418 Crop nutrients (tons) 74 3 66 12 Ocean freight (metric tons) 45 — 210 — Foreign Exchange Contracts We conduct a substantial portion of our business in U.S. dollars, but we are exposed to risks relating to foreign currency fluctuations, primarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe, and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although we have some risk exposure related to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional 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 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. See Note 12, Fair Value Measurements , for additional information regarding valuation of the embedded derivative asset. 19 Table of Contents Derivatives Designated as Cash Flow Hedging Strategies Certain pay-fixed, receive-variable, cash-settled swaps are designated as cash flow hedges of future crude oil purchases in our Energy segment. We also designate certain pay-variable, receive-fixed, cash-settled swaps as cash flow hedges of future refined energy product sales. These hedging instruments and the related hedged items are exposed to significant market price risk and potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product output based on prevailing futures prices, management's expectations about future commodity price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other comprehensive income for these dedesignated derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of May 31, 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 May 31, 2022 August 31, 2021 Balance Sheet Location May 31, 2022 August 31, 2021 (Dollars in thousands) (Dollars in thousands) 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 nine months ended May 31, 2022 and 2021: Three Months Ended May 31, Nine Months Ended May 31, 2022 2021 2022 2021 (Dollars in thousands) Commodity derivatives $ ( 36,688 ) $ ( 7,590 ) $ ( 51,961 ) $ ( 7,700 ) 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 (Dollars in thousands) Commodity derivatives Cost of goods sold $ ( 5,482 ) $ 2,329 $ 12,777 $ 19,084 Note 12 Fair Value Measurements ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine fair values of derivative instruments and certain other assets based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value. Level 1 inputs are unadjusted quoted prices 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 that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 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 on the lowest level of input significant to the fair value measurement. 20 Table of Contents Recurring fair value measurements as of May 31, 2022 , and August 31, 2021, are as follows: May 31, 2022 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 derivatives $ 1,790 $ 779,973 $ — $ 781,763 Foreign exchange derivatives — 114,804 — 114,804 Deferred compensation assets 47,435 — — 47,435 Embedded derivative asset — 13,545 — 13,545 Segregated investments and marketable securities 319,551 — — 319,551 Other assets 5,965 — — 5,965 Total $ 374,741 $ 908,322 $ — $ 1,283,063 Liabilities Commodity derivatives $ 3,678 $ 660,134 $ — $ 663,812 Foreign exchange derivatives — 15,454 — 15,454 Total $ 3,678 $ 675,588 $ — $ 679,266 August 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (Dollars in thousands) Assets Commodity derivatives $ 2,453 $ 542,253 $ — $ 544,706 Foreign exchange derivatives — 19,429 — 19,429 Deferred compensation assets 51,940 — — 51,940 Embedded derivative asset — 16,488 — 16,488 Segregated investments and marketable securities 99,837 — — 99,837 Other assets 6,052 — — 6,052 Total $ 160,282 $ 578,170 $ — $ 738,452 Liabilities Commodity derivatives $ 1,615 $ 444,247 $ — $ 445,862 Foreign exchange derivatives — 8,506 — 8,506 Total $ 1,615 $ 452,753 $ — $ 454,368 Commodity and foreign exchange derivatives . Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange-traded prices and/or recent market bids and offers, including location-specific adjustments, and are classified within Level 2. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either listed or OTC markets. Changes in the fair values of these contracts are recognized in our Condensed Consolidated Statements of Operations as a component of cost of goods sold. Deferred compensation and other assets . Our deferred compensation investments consist primarily of rabbi trust assets that are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Condensed Consolidated Statements of Operations as a component of marketing, general and administrative expenses. 21 Table of Contents Embedded derivative asset . The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen. The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the 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. See Note 11, Derivative Financial Instruments and Hedging Activities, for additional information. Segregated investments and marketable securities. Our segregated investments and marketable securities are comprised of investments in various government agencies and U.S. Treasury securities, which are valued using quoted market prices and classified within Level 1. Note 13 Commitments and Contingencies Environmental We are required to comply with various environmental laws and regulations incidental to our normal business operations. To meet our compliance requirements, we establish reserves for future costs of remediation associated with identified issues that are both 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 law or technology occur. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our 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, in the normal course of our business. The resolution of any such matters may affect net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year. Guarantees We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our bank covenants allow maximum guarantees of $ 1.0 billion, of which $ 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 May 31, 2022 . 22 Table of Contents Note 14 Other Current Assets and Liabilities Other current assets and liabilities as of May 31, 2022 , and August 31, 2021, are as follows: May 31, 2022 August 31, 2021 Other current assets (Dollars in thousands) Derivative assets (Note 11) $ 880,836 $ 559,056 Margin and related deposits 425,943 336,397 Supplier advance payments 386,174 194,706 Restricted cash 170,837 129,325 Other 197,685 170,749 Total other current assets $ 2,061,475 $ 1,390,233 Other current liabilities Customer margin deposits and credit balances $ 383,743 $ 269,114 Customer advance payments 771,540 439,293 Derivative liabilities (Note 11) 675,708 449,522 Dividends and equity payable 363,491 150,000 Total other current liabilities $ 2,194,482 $ 1,307,929 23 Table of Contents