CHS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS CHS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) May 31, 2023 August 31, 2022 (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 997,323 $ 793,957 Receivables 3,839,097 3,548,315 Inventories 3,280,822 3,652,871 Other current assets 1,269,049 1,382,704 Total current assets 9,386,291 9,377,847 Investments 3,905,734 3,728,006 Property, plant and equipment 4,757,169 4,744,959 Other assets 1,145,257 973,995 Total assets $ 19,194,451 $ 18,824,807 LIABILITIES AND EQUITIES Current liabilities: Notes payable $ 605,955 $ 606,719 Current portion of long-term debt 137,402 290,605 Accounts payable 3,145,954 3,063,310 Accrued expenses 863,298 784,317 Other current liabilities 1,868,361 2,207,018 Total current liabilities 6,620,970 6,951,969 Long-term debt 1,814,854 1,668,209 Other liabilities 675,249 743,363 Commitments and contingencies (Note 13) Equities: Preferred stock 2,264,038 2,264,038 Equity certificates 4,965,745 5,391,236 Accumulated other comprehensive loss ( 260,271 ) ( 255,335 ) Capital reserves 3,108,946 2,055,682 Total CHS Inc. equities 10,078,458 9,455,621 Noncontrolling interests 4,920 5,645 Total equities 10,083,378 9,461,266 Total liabilities and equities $ 19,194,451 $ 18,824,807 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, 2023 2022 2023 2022 (Dollars in thousands) Revenues $ 12,026,051 $ 13,137,724 $ 36,098,738 $ 34,351,069 Cost of goods sold 11,351,711 12,493,467 34,160,996 32,917,906 Gross profit 674,340 644,257 1,937,742 1,433,163 Marketing, general and administrative expenses 273,238 243,136 749,829 692,395 Operating earnings 401,102 401,121 1,187,913 740,768 Interest expense 36,949 32,099 106,166 80,705 Other income ( 31,027 ) ( 6,636 ) ( 83,629 ) ( 31,817 ) Equity income from investments ( 162,940 ) ( 263,079 ) ( 523,236 ) ( 644,347 ) Income before income taxes 558,120 638,737 1,688,612 1,336,227 Income tax expense 10,777 62,492 66,305 89,143 Net income 547,343 576,245 1,622,307 1,247,084 Net loss attributable to noncontrolling interests ( 156 ) ( 329 ) ( 111 ) ( 451 ) Net income attributable to CHS Inc. $ 547,499 $ 576,574 $ 1,622,418 $ 1,247,535 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, 2023 2022 2023 2022 (Dollars in thousands) Net income $ 547,343 $ 576,245 $ 1,622,307 $ 1,247,084 Other comprehensive income (loss), net of tax: Pension and other postretirement benefits 130 4,485 4,681 12,834 Cash flow hedges ( 2,531 ) ( 25,257 ) ( 7,595 ) ( 34,951 ) Foreign currency translation adjustment ( 707 ) 2,551 ( 2,022 ) ( 1,568 ) Other comprehensive loss, net of tax ( 3,108 ) ( 18,221 ) ( 4,936 ) ( 23,685 ) Comprehensive income 544,235 558,024 1,617,371 1,223,399 Comprehensive loss attributable to noncontrolling interests ( 156 ) ( 329 ) ( 111 ) ( 451 ) Comprehensive income attributable to CHS Inc. $ 544,391 $ 558,353 $ 1,617,482 $ 1,223,850 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, 2023 2022 (Dollars in thousands) Cash flows from operating activities: Net income $ 1,622,307 $ 1,247,084 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, including amortization of deferred major maintenance 400,474 399,562 Equity income from investments, net of distributions received ( 167,940 ) ( 345,846 ) Provision for current expected credit losses ( 10,592 ) 18,641 Deferred taxes ( 65,839 ) ( 51,522 ) Other, net ( 3,853 ) ( 6,643 ) Changes in operating assets and liabilities: Receivables ( 206,328 ) ( 1,074,111 ) Inventories 372,049 ( 1,117,020 ) Accounts payable and accrued expenses 214,410 967,603 Other, net ( 184,963 ) ( 44,886 ) Net cash provided by (used in) operating activities 1,969,725 ( 7,138 ) Cash flows from investing activities: Acquisition of property, plant and equipment ( 374,230 ) ( 207,455 ) Proceeds from disposition of property, plant and equipment 22,823 8,127 Expenditures for major maintenance ( 184,435 ) ( 18,072 ) Proceeds from sale of business 64 73,152 Changes in CHS Capital notes receivable, net ( 120,657 ) ( 200,380 ) Financing extended to customers ( 138,407 ) ( 47,235 ) Payments from customer financing 152,323 53,442 Other investing activities, net ( 8,569 ) ( 1,467 ) Net cash used in investing activities ( 651,088 ) ( 339,888 ) Cash flows from financing activities: Proceeds from notes payable and long-term debt 6,124,177 19,077,600 Payments on notes payable, long-term debt and finance lease obligations ( 6,104,543 ) ( 18,401,162 ) Preferred stock dividends paid ( 126,501 ) ( 126,501 ) Redemptions of equities ( 480,435 ) ( 99,229 ) Cash patronage dividends paid ( 502,938 ) ( 51,026 ) Other financing activities, net ( 56,924 ) ( 43,736 ) Net cash (used in) provided by financing activities ( 1,147,164 ) 355,946 Effect of exchange rate changes on cash and cash equivalents ( 16 ) ( 11,311 ) Increase (decrease) in cash and cash equivalents and restricted cash 171,457 ( 2,391 ) Cash and cash equivalents and restricted cash at beginning of period 903,474 542,484 Cash and cash equivalents and restricted cash at end of period $ 1,074,931 $ 540,093 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, 2022, 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, 2022. 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, 2023 and 2022. 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, 2023 (Dollars in thousands) Energy $ 1,980,243 $ 283,844 $ — $ 2,264,087 Ag 3,295,312 6,444,559 4,105 9,743,976 Corporate and Other 6,388 — 11,600 17,988 Total revenues $ 5,281,943 $ 6,728,403 $ 15,705 $ 12,026,051 Three Months Ended May 31, 2022 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 6 Table of Contents ASC Topic 606 ASC Topic 815 Other Guidance Total Revenues Nine Months Ended May 31, 2023 (Dollars in thousands) Energy $ 6,775,463 $ 776,831 $ — $ 7,552,294 Ag 7,757,867 20,724,153 15,670 28,497,690 Corporate and Other 18,874 — 29,880 48,754 Total revenues $ 14,552,204 $ 21,500,984 $ 45,550 $ 36,098,738 Nine Months Ended May 31, 2022 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 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 the customer where the right to payment is not conditional on the passage of time. This results in recognition of an asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to customers. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were $ 51.7 million and $ 17.2 million as of May 31, 2023 , and August 31, 2022, respectively. Contract liabilities relate to advance payments received from customers for goods and services that we have yet to provide. Contract liabilities of $ 318.0 million and $ 541.5 million as of May 31, 2023 , and August 31, 2022, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended May 31, 2023 and 2022, we recognized revenues of $ 93.1 million and $ 48.1 million related to contract liabilities, respectively. For the nine months ended May 31, 2023 and 2022, we recognized revenues of $ 285.3 million and $ 213.9 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, 2023 August 31, 2022 (Dollars in thousands) Trade accounts receivable $ 2,842,749 $ 2,626,623 CHS Capital short-term notes receivable 724,334 644,875 Other 376,571 404,734 Gross receivables 3,943,654 3,676,232 Less: allowances and reserves 104,557 127,917 Total receivables $ 3,839,097 $ 3,548,315 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, Montana and North Dakota. CHS Capital also has loans receivable from producer borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts 7 Table of Contents receivable, personal property and supplemental mortgages and are primarily originated in the same states as the commercial notes, as well as in South Dakota. In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable, with durations of generally not more than 10 years, totaling $ 65.6 million and $ 54.3 million as of May 31, 2023 , and August 31, 2022, respectively. The long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of May 31, 2023 , and August 31, 2022, commercial notes represented 33 % and 25 %, respectively, and producer notes represented 67 % and 75 %, respectively, of total CHS Capital notes receivable. CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of May 31, 2023, CHS Capital customers had additional available credit of $ 1.2 billion. No significant troubled debt restructuring activity occurred, and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of May 31, 2023 , or August 31, 2022. Note 4 Inventories May 31, 2023 August 31, 2022 (Dollars in thousands) Grain and oilseed $ 1,011,947 $ 1,133,531 Energy 673,584 824,114 Agronomy 1,096,250 1,295,548 Processed grain and oilseed 292,254 292,992 Other 206,787 106,686 Total inventories $ 3,280,822 $ 3,652,871 As of May 31, 2023 , and August 31, 2022, we valued approximately 17 % and 14 %, 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 $ 477.8 million and $ 678.3 million as of May 31, 2023 , and August 31, 2022, 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, 2023 August 31, 2022 (Dollars in thousands) Equity method investments: CF Industries Nitrogen, LLC $ 2,717,704 $ 2,641,604 Ventura Foods, LLC 459,906 410,093 Ardent Mills, LLC 258,539 250,857 TEMCO, LLC 47,377 32,809 Other equity method investments 286,810 265,913 Other investments 135,398 126,730 Total investments $ 3,905,734 $ 3,728,006 Joint ventures and other investments in which we have significant ownership and influence, but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our only significant equity method investment during the nine months ended May 31, 2023 and 2022, was CF Industries Nitrogen, LLC ("CF Nitrogen"), which is summarized below. In addition to 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 $ 756.7 million in cumulative undistributed earnings from our equity method investees included in the investments balance as of May 31, 2023 . 8 Table of Contents CF Nitrogen We have a $ 2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 8 % 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 CF Nitrogen's Limited Liability Company Agreement, adjusted for semiannual cash distributions. The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the nine months ended May 31, 2023 and 2022: Nine Months Ended May 31, 2023 2022 (Dollars in thousands) Net sales $ 4,200,120 $ 4,972,383 Gross profit 1,898,265 2,682,653 Net earnings 1,884,666 2,641,425 Earnings attributable to CHS Inc. 330,855 497,289 Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in aggregate. Note 6 Notes Payable and Long-Term Debt Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants as of May 31, 2023 . Notes payable as of May 31, 2023 , and August 31, 2022, consisted of the following: May 31, 2023 August 31, 2022 (Dollars in thousands) Notes payable $ 504,376 $ 459,398 CHS Capital notes payable 101,579 147,321 Total notes payable $ 605,955 $ 606,719 On April 21, 2023, we amended and restated our primary line of credit, which is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $ 2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of May 31, 2023 , or August 31, 2022. We also maintain certain uncommitted bilateral facilities to support our working capital needs. We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned, bankruptcy-remote, indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as secured financing. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes, and settlements are made on a monthly basis. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business. The Securitization Facility consists of a committed portion with a maximum availability of $ 850.0 million and an uncommitted portion with a maximum availability of $ 250.0 million. As of May 31, 2023 , total availability under the Securitization Facility was $ 1.0 billion, of which no amount was 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. No balance was outstanding under the Repurchase Facility as of May 31, 2023 , or August 31, 2022. 9 Table of Contents On July 11, 2023, we amended the Securitization Facility and entered into an additional repurchase facility, under which we can obtain repurchase agreement financing up to $ 200.0 million for certain eligible receivables of the Originators. The amendments to the Securitization Facility were designed to remove from the securitization certain receivables and loans to permit them to be sold under the new repurchase facility. On January 24, 2023, we entered into a Note Purchase Agreement to borrow $ 150.0 million of debt in the form of a note. The note matures on January 24, 2030, and interest accrues at a rate of 5.68 %, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow. The following table presents summarized long-term debt (including the current portion) as of May 31, 2023 , and August 31, 2022: May 31, 2023 August 31, 2022 (Dollars in thousands) Private placement debt $ 1,543,000 $ 1,545,000 Term loan 366,000 366,000 Finance lease obligations 43,476 44,773 Deferred financing costs ( 3,259 ) ( 3,535 ) Other 3,039 6,576 Total long-term debt 1,952,256 1,958,814 Less current portion 137,402 290,605 Long-term portion $ 1,814,854 $ 1,668,209 Interest expense for the three months ended May 31, 2023 and 2022, was $ 36.9 million and $ 32.1 million, respectively, net of capitalized interest of $ 4.1 million and $ 0.9 million, respectively. Interest expense for the nine months ended May 31, 2023 and 2022, was $ 106.2 million and $ 80.7 million, respectively, net of capitalized interest of $ 9.8 million and $ 4.7 million, respectively. Note 7 Income Taxes Our effective tax rate for the three months ended May 31, 2023, was 1.9 %, compared to 9.8 % for the three months ended May 31, 2022. Our effective tax rate for the nine months ended May 31, 2023, was 3.9 %, compared to 6.7 % for the nine months ended May 31, 2022. 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, $ 115.7 million and $ 115.1 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of May 31, 2023 , and August 31, 2022, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months. 10 Table of Contents Note 8 Equities Changes in Equities Changes in equities for the three months ended May 31, 2023 and 2022, 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, February 28, 2023 $ 3,307,140 $ 27,861 $ 1,771,844 $ 2,264,038 $ ( 257,163 ) $ 2,710,507 $ 5,092 $ 9,829,319 Reversal of prior year patronage and redemption estimates 462,690 — — — — 119,360 — 582,050 Distribution of 2022 patronage refunds 2,615 — 1,226 — — ( 124,889 ) — ( 121,048 ) Redemptions of equities ( 457,679 ) ( 112 ) ( 4,898 ) — — — — ( 462,689 ) Other, net ( 678 ) ( 44 ) ( 115 ) — — 574 ( 16 ) ( 279 ) Net income (loss) — — — — — 547,499 ( 156 ) 547,343 Other comprehensive loss, net of tax — — — — ( 3,108 ) — — ( 3,108 ) Estimated 2023 cash patronage refunds — — — — — ( 144,105 ) — ( 144,105 ) Estimated 2023 equity redemptions ( 144,105 ) — — — — — — ( 144,105 ) Balances, May 31, 2023 $ 3,169,983 $ 27,705 $ 1,768,057 $ 2,264,038 $ ( 260,271 ) $ 3,108,946 $ 4,920 $ 10,083,378 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, 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 Changes in equities for the nine months ended May 31, 2023 and 2022, 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, 2022 $ 3,587,131 $ 27,933 $ 1,776,172 $ 2,264,038 $ ( 255,335 ) $ 2,055,682 $ 5,645 $ 9,461,266 Reversal of prior year patronage and redemption estimates ( 28,368 ) — ( 153,858 ) — — 1,162,661 — 980,435 Distribution of 2022 patronage refunds 516,246 — 154,484 — — ( 1,173,668 ) — ( 502,938 ) Redemptions of equities ( 471,589 ) ( 184 ) ( 8,662 ) — — — — ( 480,435 ) Preferred stock dividends — — — — — ( 126,501 ) — ( 126,501 ) Other, net ( 390 ) ( 44 ) ( 79 ) — — 1,401 ( 614 ) 274 Net income (loss) — — — — — 1,622,418 ( 111 ) 1,622,307 Other comprehensive loss, net of tax — — — — ( 4,936 ) — — ( 4,936 ) Estimated 2023 cash patronage refunds — — — — — ( 433,047 ) — ( 433,047 ) Estimated 2023 equity redemptions ( 433,047 ) — — — — — — ( 433,047 ) Balances, May 31, 2023 $ 3,169,983 $ 27,705 $ 1,768,057 $ 2,264,038 $ ( 260,271 ) $ 3,108,946 $ 4,920 $ 10,083,378 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, 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 patronage and redemption estimates 99,216 — ( 230,290 ) — — 280,290 — 149,216 Distribution of 2021 patronage refunds — — 235,576 — — ( 286,602 ) — ( 51,026 ) Redemptions of equities ( 92,668 ) ( 428 ) ( 6,133 ) — — — — ( 99,229 ) Preferred stock dividends — — — — — ( 126,501 ) — ( 126,501 ) Other, net ( 3,256 ) 16 ( 6,873 ) — — 2,548 ( 1,735 ) ( 9,300 ) Net income (loss) — — — — — 1,247,535 ( 451 ) 1,247,084 Other comprehensive loss, net of tax — — — — ( 23,685 ) — — ( 23,685 ) Estimated 2022 cash patronage refunds — — — — — ( 120,902 ) — ( 120,902 ) Estimated 2022 equity redemptions ( 241,805 ) — — — — — — ( 241,805 ) 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 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, 2023. Due to the timing of dividend declarations throughout the fiscal year, no declarations were made during the three months ended May 31, 2023 or 2022. Nine Months Ended May 31, Nasdaq symbol 2023 2022 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 Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) by component for the three months ended May 31, 2023 and 2022, are as follows: Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total (Dollars in thousands) Balance as of February 28, 2023, net of tax $ ( 164,089 ) $ 3,779 $ ( 96,853 ) $ ( 257,163 ) Other comprehensive income (loss), before tax: Amounts before reclassifications 148 ( 1,051 ) ( 800 ) ( 1,703 ) Amounts reclassified 23 ( 2,289 ) — ( 2,266 ) Total other comprehensive income (loss), before tax 171 ( 3,340 ) ( 800 ) ( 3,969 ) Tax effect ( 41 ) 809 93 861 Other comprehensive income (loss), net of tax 130 ( 2,531 ) ( 707 ) ( 3,108 ) Balance as of May 31, 2023, net of tax $ ( 163,959 ) $ 1,248 $ ( 97,560 ) $ ( 260,271 ) 12 Table of Contents Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total (Dollars in thousands) 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 ) Changes in accumulated other comprehensive income (loss) by component for the nine months ended May 31, 2023 and 2022, are as follows: Pension and Other Postretirement Benefits Cash Flow Hedges Foreign Currency Translation Adjustment Total (Dollars in thousands) Balance as of August 31, 2022, net of tax $ ( 168,640 ) $ 8,843 $ ( 95,538 ) $ ( 255,335 ) Other comprehensive income (loss), before tax: Amounts before reclassifications 351 ( 24,392 ) ( 2,288 ) ( 26,329 ) Amounts reclassified 70 14,368 — 14,438 Total other comprehensive income (loss), before tax 421 ( 10,024 ) ( 2,288 ) ( 11,891 ) Tax effect 4,260 2,429 266 6,955 Other comprehensive income (loss), net of tax 4,681 ( 7,595 ) ( 2,022 ) ( 4,936 ) Balance as of May 31, 2023, net of tax $ ( 163,959 ) $ 1,248 $ ( 97,560 ) $ ( 260,271 ) 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 286 ( 34,325 ) ( 1,679 ) ( 35,718 ) Amounts reclassified 16,680 ( 11,877 ) — 4,803 Total other comprehensive income (loss), before tax 16,966 ( 46,202 ) ( 1,679 ) ( 30,915 ) Tax effect ( 4,132 ) 11,251 111 7,230 Other comprehensive income (loss), net of tax 12,834 ( 34,951 ) ( 1,568 ) ( 23,685 ) Balance as of May 31, 2022, net of tax $ ( 128,551 ) $ ( 30,127 ) $ ( 81,398 ) $ ( 240,076 ) Amounts reclassified from accumulated other comprehensive income (loss) were related to pension and other postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of goods sold and marketing, general and administrative expenses (see Note 9, Benefit Plans , for further information). As described in Note 11, Derivative Financial Instruments and Hedging Activities , amounts reclassified from accumulated other comprehensive loss for cash flow hedges are recorded as cost of goods sold. Gains or losses on foreign currency translation reclassifications are recorded as other income. 13 Table of Contents 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. Components of net periodic benefit costs for the three and nine months ended May 31, 2023 and 2022, are as follows: Three Months Ended May 31, Qualified Pension Benefits Nonqualified Pension Benefits Other Benefits 2023 2022 2023 2022 2023 2022 Components of net periodic benefit costs: (Dollars in thousands) Service cost $ 9,645 $ 11,569 $ 460 $ 232 $ 168 $ 249 Interest cost 7,647 4,292 185 70 259 126 Expected return on assets ( 10,782 ) ( 10,990 ) — — — — Prior service cost (credit) amortization 37 44 ( 29 ) ( 29 ) ( 111 ) ( 111 ) Actuarial loss (gain) amortization 468 5,852 61 120 ( 404 ) ( 315 ) Net periodic benefit cost (benefit) $ 7,015 $ 10,767 $ 677 $ 393 $ ( 88 ) $ ( 51 ) Nine Months Ended May 31, Qualified Pension Benefits Nonqualified Pension Benefits Other Benefits 2023 2022 2023 2022 2023 2022 Components of net periodic benefit costs: (Dollars in thousands) Service cost $ 28,934 $ 34,706 $ 1,380 $ 695 $ 503 $ 747 Interest cost 22,941 12,875 556 211 776 377 Expected return on assets ( 32,347 ) ( 32,969 ) — — — — Prior service cost (credit) amortization 112 131 ( 86 ) ( 86 ) ( 334 ) ( 334 ) Actuarial loss (gain) amortization 1,404 17,555 184 359 ( 1,211 ) ( 944 ) Net periodic benefit cost (benefit) $ 21,044 $ 32,298 $ 2,034 $ 1,179 $ ( 266 ) $ ( 154 ) Employer Contributions Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. No contributions were made to the pension plans during the nine months ended May 31, 2023, and we do not anticipate being required to make contributions for our pension plans in fiscal 2023, although we may voluntarily elect to do so. 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 financial services related to crop production and a U.S. Commodity Futures Trading Commission-regulated futures commission merchant ("FCM") for commodities hedging. Our nonconsolidated 14 Table of Contents investments in Ventura Foods, LLC ("Ventura Foods"), and Ardent Mills, LLC ("Ardent Mills"), are also included in our Corporate and Other category. Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second fiscal quarter and increase in the third quarter; 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, global 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 and oilseed products, 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, bank failures, 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 is conducted through companies in which we hold ownership interests of 50% or less or otherwise 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, LLC. In our Nitrogen Production segment, this consists of our approximate 8 % membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50 % ownership in Ventura Foods and our 12 % ownership in Ardent Mills. See Note 5, Investments, for more information related to our equity method investments. Reconciling amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of the individual business segments. Segment information for the three and nine months ended May 31, 2023 and 2022, is presented in the tables below: Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total Three Months Ended May 31, 2023 (Dollars in thousands) Revenues, including intersegment revenues $ 2,433,108 $ 9,752,861 $ — $ 21,996 $ ( 181,914 ) $ 12,026,051 Intersegment revenues ( 169,021 ) ( 8,885 ) — ( 4,008 ) 181,914 — Revenues, net of intersegment revenues $ 2,264,087 $ 9,743,976 $ — $ 17,988 $ — $ 12,026,051 Operating earnings (loss) 198,015 219,333 ( 17,393 ) 1,147 — 401,102 Interest expense 2,662 20,677 14,619 8,410 ( 9,419 ) 36,949 Other income ( 4,922 ) ( 25,001 ) — ( 10,523 ) 9,419 ( 31,027 ) Equity (income) loss from investments 1,280 ( 9,858 ) ( 88,275 ) ( 66,087 ) — ( 162,940 ) Income before income taxes $ 198,995 $ 233,515 $ 56,263 $ 69,347 $ — $ 558,120 15 Table of Contents 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 Energy Ag Nitrogen Production Corporate and Other Reconciling Amounts Total Nine Months Ended May 31, 2023 (Dollars in thousands) Revenues, including intersegment revenues $ 8,084,834 $ 28,520,946 $ — $ 58,574 $ ( 565,616 ) $ 36,098,738 Intersegment revenues ( 532,540 ) ( 23,256 ) — ( 9,820 ) 565,616 — Revenues, net of intersegment revenues $ 7,552,294 $ 28,497,690 $ — $ 48,754 $ — $ 36,098,738 Operating earnings (loss) 857,018 383,946 ( 51,762 ) ( 1,289 ) — 1,187,913 Interest expense 7,203 57,678 44,224 19,740 ( 22,679 ) 106,166 Other income ( 13,934 ) ( 64,588 ) — ( 27,786 ) 22,679 ( 83,629 ) Equity (income) loss from investments 3,338 ( 48,392 ) ( 330,855 ) ( 147,327 ) — ( 523,236 ) Income before income taxes $ 860,411 $ 439,248 $ 234,869 $ 154,084 $ — $ 1,688,612 Total assets as of May 31, 2023 $ 4,435,618 $ 7,938,831 $ 2,717,704 $ 4,102,298 $ — $ 19,194,451 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 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. 16 Table of Contents Derivatives Not Designated as Hedging Instruments The majority of our derivative instruments have not been designated as hedging instruments. The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected to report our derivative instruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet-Offsetting . May 31, 2023 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 $ 443,518 $ — $ 6,794 $ 436,724 Foreign exchange derivatives 39,623 — 10,815 28,808 Total $ 483,141 $ — $ 17,609 $ 465,532 Derivative liabilities Commodity derivatives $ 352,978 $ 1,905 $ 14,301 $ 336,772 Foreign exchange derivatives 13,261 — 10,815 2,446 Total $ 366,239 $ 1,905 $ 25,116 $ 339,218 August 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 $ 464,167 $ — $ 3,834 $ 460,333 Foreign exchange derivatives 52,923 — 8,901 44,022 Total $ 517,090 $ — $ 12,735 $ 504,355 Derivative liabilities Commodity derivatives $ 378,291 $ 1,424 $ 12,574 $ 364,293 Foreign exchange derivatives 12,649 — 8,901 3,748 Total $ 390,940 $ 1,424 $ 21,475 $ 368,041 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, 2023 , and August 31, 2022, was $ 4.4 million and $ 8.5 million, respectively. The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of May 31, 2023 , and August 31, 2022, was $ 3.5 million and $ 4.0 million, respectively. 17 Table of Contents 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, 2023 and 2022: Three Months Ended May 31, Nine Months Ended May 31, Location of Gain (Loss) 2023 2022 2023 2022 (Dollars in thousands) Commodity derivatives Cost of goods sold $ ( 59,177 ) $ ( 324,965 ) $ ( 194,832 ) $ ( 905,400 ) Foreign exchange derivatives Cost of goods sold ( 21,753 ) 18,147 ( 23,792 ) 58,438 Foreign exchange derivatives Marketing, general and administrative expenses 556 1,097 804 1,600 Other derivatives Other income — 258 — 2,057 Total $ ( 80,374 ) $ ( 305,463 ) $ ( 217,820 ) $ ( 843,305 ) Commodity Contracts As of May 31, 2023, and August 31, 2022, 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, 2023 August 31, 2022 Long Short Long Short (Units in thousands) Grain and oilseed (bushels) 418,318 559,715 609,300 773,239 Energy products (barrels) 15,119 9,157 10,541 5,706 Processed grain and oilseed (tons) 5,672 11,324 1,191 4,182 Crop nutrients (tons) 76 15 23 22 Ocean freight (metric tons) 60 — 60 — Natural gas (metric million Btu) 940 — 420 — Foreign Exchange Contracts We conduct a substantial portion of our business in U.S. dollars, but 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 relating 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 as of May 31, 2023 , and August 31, 2022, respectively. 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, 2023 , and August 31, 2022, the aggregate notional amounts of cash flow hedges were 1.1 million and 3.8 million barrels, respectively. 18 Table of Contents The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the locations on our Condensed Consolidated Balance Sheets in which they are recorded: Derivative Assets Derivative Liabilities Balance Sheet Location May 31, 2023 August 31, 2022 Balance Sheet Location May 31, 2023 August 31, 2022 (Dollars in thousands) (Dollars in thousands) Other current assets $ 4,698 $ 27,154 Other current liabilities $ 1,551 $ 11,818 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, 2023 and 2022: Three Months Ended May 31, Nine Months Ended May 31, 2023 2022 2023 2022 (Dollars in thousands) Commodity derivatives $ ( 3,430 ) $ ( 36,688 ) $ ( 12,189 ) $ ( 51,961 ) The following table presents the pretax gains (losses) relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2023 and 2022: Three Months Ended May 31, Nine Months Ended May 31, Location of Gain (Loss) 2023 2022 2023 2022 (Dollars in thousands) Commodity derivatives Cost of goods sold $ 2,590 $ ( 5,482 ) $ ( 13,468 ) $ 12,777 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 among the 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 use of observable inputs and minimize 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. 19 Table of Contents Recurring fair value measurements as of May 31, 2023 , and August 31, 2022, are as follows: May 31, 2023 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 $ 2,118 $ 446,098 $ — $ 448,216 Foreign exchange derivatives — 39,623 — 39,623 Segregated investments and marketable securities 221,295 — — 221,295 Other assets 49,066 — — 49,066 Total $ 272,479 $ 485,721 $ — $ 758,200 Liabilities Commodity derivatives $ 8,372 $ 346,157 $ — $ 354,529 Foreign exchange derivatives — 13,261 — 13,261 Total $ 8,372 $ 359,418 $ — $ 367,790 August 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 $ 1,161 $ 490,160 $ — $ 491,321 Foreign exchange derivatives — 52,923 — 52,923 Segregated investments and marketable securities 238,124 — — 238,124 Other assets 58,280 — — 58,280 Total $ 297,565 $ 543,083 $ — $ 840,648 Liabilities Commodity derivatives $ 10,256 $ 379,883 $ — $ 390,139 Foreign exchange derivatives — 12,649 — 12,649 Total $ 10,256 $ 392,532 $ — $ 402,788 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. Segregated investments and marketable securities and other assets. Our segregated investments and marketable securities and other assets are comprised primarily of investments in various government agencies, U.S. Treasury securities, money market funds and rabbi trust assets, 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 20 Table of Contents 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, which are in the normal course of our business. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in 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 $ 1.1 billion, of which $ 74.3 million were outstanding on May 31, 2023 . We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide these guarantees were current as of May 31, 2023 . Note 14 Other Current Assets and Liabilities Other current assets and liabilities as of May 31, 2023 , and August 31, 2022, are as follows: May 31, 2023 August 31, 2022 Other current assets (Dollars in thousands) Derivative assets (Note 11) $ 483,436 $ 535,698 Margin and related deposits 275,457 390,782 Supplier advance payments 223,419 198,753 Restricted cash 77,608 109,517 Other 209,129 147,954 Total other current assets $ 1,269,049 $ 1,382,704 Other current liabilities Customer margin deposits and credit balances $ 148,658 $ 283,234 Customer advance payments 469,753 525,003 Derivative liabilities (Note 11) 364,291 398,781 Dividends and equity payable 885,659 1,000,000 Total other current liabilities $ 1,868,361 $ 2,207,018 21 Table of Contents