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Item 7. Management’s Discussion and Analysis

2024-11-06 compared with 2023-11-08 · 90 added, 84 removed, 333 unchanged (34% of the section changed)

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We operate in the following three reportable segments:

Produces and provides primarily for the wholesale distribution and transportation of petroleum products.

Purchases and further processes or resells grain and oilseed originated by our country operations and global grain and processing businesses, by our member cooperatives and by third parties.

Produces and provides primarily for wholesale distribution and transportation of petroleum products.

Purchases and further processes or resells grain and oilseed originated by our ag retail and global grain and processing businesses, by our member cooperatives and by third parties.

It also includes our renewable fuels business and serves as a wholesaler and retailer of agronomy products.

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Our revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter.

For example, in our Ag segment, our 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.

For example, in our Ag segment, our ag retail 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.

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Fiscal 2024 Highlights

• Robust global demand and market volatility continued to result in higher commodity prices that are elevated from historical averages.

• Our Energy segment delivered strong earnings as a result of favorable market conditions in our refined fuels business, including sustained high global demand for energy products, as consumption outpaced supply.

• In our Ag segment, strong meal and oil demand resulted in improved crush margins that contributed to higher earnings in our oilseed processing business, which was partially offset by decreased prices for agronomy products.

• Equity method investments performed well, with our CF Nitrogen and Ventura Foods investments being the largest contributors.

• Financial performance remained solid across our segments, although down from historically strong results in the prior year.

• Our Energy segment results declined from the prior year due to evolving market conditions, including the impact of less favorable refining margins.

• In our Ag segment, earnings declined compared to the prior year as a result of softening oilseed crush margins and global market conditions that drove down margins for U.S.

grain and oilseed exports.

• Equity method investments continued to perform well, with our CF Nitrogen investment being the largest contributor.

Fiscal 2025 Outlook

Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results.

We anticipate that various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could have a significant impact on each of our segments during fiscal 2024.

These factors include the ongoing war between Russia and Ukraine and escalation of conflict in the Middle East, shifts in global trade flows for commodities, a higher interest rate environment, and inflationary pressures increasing costs of labor, freight and materials.

In addition to these broad macroeconomic factors, other factors could impact the demand and pricing for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable.

These include the cost of renewable energy credits, the prices of which remains volatile and could continue to negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change.

We currently expect the imbalance between global supply and strong global demand for energy and agricultural commodities to continue to moderate in fiscal 2024.

We are unable to predict how long the current environment will last or the severity of the financial and operational impacts in fiscal 2024.

We anticipate various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could have a significant impact on each of our segments during fiscal 2025.

These factors include, among others, the ongoing war between Russia and Ukraine and further escalation of conflict in the Middle East, shifts in global trade flows for commodities, including global competitiveness giving rise to a weak export market for U.S.

sourced agricultural products, potential changes in U.S.

trade policy following the U.S.

general election in November, a changing interest rate environment, and continued pricing pressures impacting costs of labor, freight and materials.

These factors, or any form of them, could cause significant margin pressure and lower profitability.

In addition to these broad macroeconomic factors, other factors could impact demand and pricing for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable.

These include regional factors, such as unpredictable weather conditions, including those due to climate change.

We currently expect global supply and demand factors impacting energy and agricultural commodities to be less favorable for us in fiscal 2025.

Further, in light of increasing uncertainty in the markets we serve, we are unable to predict how long the current environment will last or the significance of the financial and operational impacts to us;

however, we currently expect the trend of reduced margins for energy and agricultural commodities to persist in fiscal 2025.

Refer to Item 1A of this Annual Report on Form 10-K for additional consideration these risks may have on our business operations and financial performance.

We will continue to execute our enterprise priorities for fiscal 2024, including empowering and investing in our people, accelerating our operating model to better serve owners and customers, leveraging our financial strength to navigate dynamic and changing market conditions, and elevating sustainable growth through empowered teams, an integrated operating model and a solid financial foundation.

We will continue to execute our enterprise priorities for fiscal 2025, including pursuing growth through strategic investments and cooperative connections and leveraging our financial strength and resilience as we navigate less favorable market conditions for energy and agricultural commodities.

Operating Metrics

Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products.

To ensure the reliability of our refineries, we perform major maintenance activities every two to five years, which require a temporary shutdown of operations.

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Distillates 84,739 76,613

*Lower refinery throughput volumes and refined fuel yields experienced during fiscal 2023 are primarily due to a planned shutdown to perform major

maintenance at our Laurel, Montana, refinery during the third quarter of fiscal 2023.

*Lower refinery throughput volumes and refined fuel yields experienced during fiscal 2023 were primarily due to a planned shutdown to perform major

maintenance at our Laurel, Montana, refinery.

We are subject to the Renewable Fuel Standard that requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as renewable identification numbers ("RINs"), in lieu of blending.

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therefore, RINs must be purchased on the open market.

The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 22% and 5%, respectively, during fiscal 2023 compared to the prior year, which negatively impacted our earnings.

The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 biodiesel RINs decreasing by 57% and 58%, respectively, during fiscal 2024 compared to the prior year, which positively impacted our earnings.

Estimates of our RIN expenses are calculated using an average RIN price each month.

In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by supply and demand of refined products.

Crack spreads and WCS crude oil discounts both increased in fiscal 2023, compared to the prior year, contributing to improved IBIT for the Energy segment.

In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and crude oil inputs) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by supply and demand of refined products.

Crack spreads and WCS crude oil discounts both decreased in fiscal 2024 , compared to the prior year, contributing to decreased IBIT for the Energy segment.

The table below provides information about average market reference prices and differentials that impacted our Energy segment:

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D6 ethanol RIN (dollars per RIN) $ 0.6801 $ 1.5725

D4 ethanol RIN (dollars per RIN) $ 1.6380 $ 1.5560

D4 biodiesel RIN (dollars per RIN) $ 0.6829 $ 1.6380

*Market source information represents the average month-end price during the period.

Group 3 refers to the oil refining and distribution system serving the Midwest markets from the Gulf Coast through the Plains states.

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however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices outside our control.

The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the years ended August 31, 2023 and 2022:

The table below provides information about average market prices for agricultural commodities, as well as sales and throughput volumes that impacted our Ag segment for the years ended August 31, 2024 and 2023:

Years Ended August 31,

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Ethanol (thousands of gallons) 711,451 968,516

*Market source information represents the average month-end price during the period.

*Market source information represents the average week-end or month-end price during the period.

Results of Operations

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Income before income taxes 1,097,787 2.8 2,007,779 4.4

Income tax expense 107,655 0.2 132,116 0.3

Income tax (benefit) expense ( 4,872 ) — 107,655 0.2

Net income 1,102,659 2.8 1,900,124 4.2

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The change in Energy segment IBIT for fiscal 2024 reflects the following:

• Higher crack spreads and increased WCS crude oil discounts reflect higher global demand and improved market conditions in our refined fuels business and contributed to a $533.2 million increase of IBIT.

• Higher margins for refined fuels and propane attributable to hedging-related impacts due to global market conditions affecting the price of these products contributed $135.0 million and $68.2 million of increased IBIT, respectively.

• Increased IBIT was partially offset by the impact of decreased refined fuels production volumes primarily due to planned major maintenance at our Laurel refinery that reduced the sales mix of higher-margin produced refined fuels products relative to lower-margin purchased refined fuels products and contributed to a $127.0 million decrease of IBIT.

• Increased costs in our refined fuels business also partially offset increased IBIT, the most significant of which included $84.0 million related to higher market-driven RIN prices and $77.0 million of higher refinery expenses, the largest of which was repairs and maintenance, in the current year.

• Lower crack spreads and decreased WCS crude oil discounts resulted from global market conditions, which contributed to an $803.8 million decrease of IBIT.

• Increased repairs and maintenance expense primarily due to unplanned maintenance at our Laurel, Montana, and McPherson, Kansas refineries contributed to $44.2 million of decreased IBIT.

• Lower margins from premiums on seasonal refined fuels products contributed $28.0 million of decreased IBIT.

• The overall IBIT decrease was partially offset by lower costs for RINs in our refined fuels business, which contributed to a $247.2 million cost reduction.

Years Ended August 31, Change

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The change in Ag segment IBIT for fiscal 2024 reflects the following:

• Decreased margins across most of our Ag segment product categories during the year, including:

◦ $232.6 million decrease for wholesale and retail agronomy products, which experienced market-driven price decreases throughout fiscal 2023 compared to historically high prices in the prior year;

◦ $51.5 million decrease for renewable fuels due to lower ethanol prices;

◦ $46.2 million decrease for grain and oilseed as a result of the timing of the impact of mark-to-market adjustments associated with our commodity derivatives.

• The margin decrease in our Ag segment was partially offset by $90.2 million of increased margins in our oilseed processing products due to strong meal and oil demand.

• Decreased margins of $120.2 million for oilseed processing due to a higher supply of canola and soybean meal and oil across global markets, resulting in lower crush margins and decreased margins of $34.1 million for grain and oilseed due to competitive global grain markets that compressed margins, compared to the prior year.

• The margin decrease was partially offset by increased margins for wholesale and retail agronomy products driven by improved market conditions, which contributed to a $61.3 million increase of IBIT.

• Higher volumes of wholesale and retail agronomy products contributed to a $27.2 million increase of IBIT due to increased demand as prices declined due to global market conditions.

• Higher volumes for grain and oilseed and oilseed processing products collectively contributed to $52.2 million of increased IBIT as a result of favorable weather conditions and logistical and operational efficiencies at the oilseed crush plants.

All Other Segments

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*See Note 6, Investments, of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.

Our Nitrogen Production segment IBIT decreased from the prior year as a result of lower equity income attributed to significantly decreased selling prices of urea and UAN due to global supply and demand factors.

Corporate and Other IBIT increased primarily due to a $144.3 million increase of equity income from our Ventura Foods investment as a result of more favorable market conditions for edible oils experienced during the current year compared to the prior year and a gain associated with the sale of certain assets.

The remaining increase was mostly due to a larger cash balance earning a higher interest rate compared to the prior year.

Our Nitrogen Production segment IBIT decreased from the prior year as a result of lower equity income attributed to decreased selling prices of urea and UAN, which was partially offset by decreased natural gas costs, all due to global supply and demand factors.

Corporate and Other IBIT decreased primarily due to lower equity income from our Ventura Foods investment as a result of less favorable market conditions for oil-based food products experienced during the current year compared to the prior year and a gain associated with the sale of certain assets in the prior year that did not recur in the current year.

Revenues by Segment

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The change in Energy segment revenues for fiscal 2024 reflects the following:

• Decreased selling prices resulting from global market conditions contributed to $222.0 million and $185.6 million

• Decreased selling prices resulting from global market conditions contributed to $1.0 billion and $121.3 million

decreases in revenues for refined fuels and propane, respectively.

• Higher refined fuels volumes driven by strong demand contributed to increased revenues of $215.4 million.

• Lower propane and refined fuels volumes contributed to $93.9 million and $64.0 million decreases in revenues, respectively, primarily driven by lower demand as a result of unfavorable weather conditions across much of our trade territory.

Years Ended August 31, Change

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The change in Ag segment revenues for fiscal 2024 reflects the following:

• Volumes decreased within our grain and oilseed products primarily as a result of lower global demand for U.S.

grain, which contributed to a $1.5 billion decrease in revenues.

• Wholesale and retail agronomy products experienced market-driven price decreases throughout fiscal 2023, resulting in decreased revenues of $844.6 million.

• Lower prices for renewable fuels due to global market conditions contributed to decreased revenues of $292.8 million.

• Higher pricing for grain and oilseed and oilseed processing products partially offset overall Ag segment price decreases, contributing $332.5 million and $80.0 million increases in revenues due to favorable global market conditions and strong meal and oil demand, respectively.

• Decreased selling prices across all of our Ag segment product categories due to global market conditions during fiscal 2024, including:

◦ $6.0 billion decrease for grain and oilseed;

◦ $1.2 billion decrease for wholesale and retail agronomy products;

◦ $484.1 million decrease for oilseed processing;

◦ $331.6 million decrease for renewable fuels.

• Increased volumes for grain and oilseed contributed to a $3.1 billion increase in revenues, primarily due to more favorable weather conditions in fiscal 2024.

All Other Segments*

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*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.

Corporate and Other revenues increased during fiscal 2023 compared to the prior year primarily as a result of increased interest income in our financing business due to higher interest rates and a larger notes receivable balance.

Corporate and Other revenues increased during fiscal 2024 compared to the prior year primarily as a result of increased interest income in our financing business due to higher interest rates and a larger average notes receivable balance.

Cost of Goods Sold by Segment

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The change in Energy segment COGS for fiscal 2024 reflects the following:

• Global market conditions contributed to decreased costs for refined fuels and propane that drove $584.3 million and

$254.2 million decreases in COGS, respectively.

• Higher volumes of refined fuels resulting from higher demand partially offset the overall COGS decrease and contributed to increased COGS of $193.5 million.

• Global market conditions, including reduced RIN costs, contributed to decreased costs for refined fuels and propane that drove $368.1 million and $124.7 million decreases in COGS, respectively.

• Lower propane and refined fuels volumes contributed to $90.5 million and $54.7 million decreases in COGS, respectively, primarily driven by lower demand as a result of unfavorable weather conditions across much of our trade territory.

Years Ended August 31, Change

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The change in Ag segment COGS for fiscal 2024 reflects the following:

• Volumes decreased within our grain and oilseed products primarily as a result of lower global demand for U.S.

grain, which contributed to a $1.5 billion decrease in COGS.

• Wholesale and retail agronomy products experienced market-driven cost decreases throughout fiscal 2023, resulting in decreased COGS of $612.0 million.

• Lower costs for renewable fuels resulted from decreased corn input costs, which contributed to decreased COGS of $241.3 million.

• Higher costs for grain and oilseed products due to global market conditions partially offset the overall Ag segment COGS decrease, contributing to a $378.7 million increase in COGS.

• Lower costs across all of our Ag segment product categories due to global market conditions during fiscal 2024, including:

◦ $5.9 billion decrease for grain and oilseed;

◦ $1.3 billion decrease for wholesale and retail agronomy products;

◦ $376.1 million decrease for renewable fuels;

◦ $363.8 million decrease for oilseed processing.

• Increased volumes for grain and oilseed contributed to a $3.1 billion increase in COGS, primarily due to more favorable weather conditions in fiscal 2024.

All Other Segments

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Corporate and Other COGS $ (10,055) $ (7,341) $ (2,714) (37.0)%

There were no significant changes to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2023 compared to the prior year.

There were no significant changes on a dollar basis to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2024 compared to the prior year.

Marketing, General and Administrative Expenses

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Marketing, general and administrative expenses $ 1,166,969 $ 1,032,765 $ 134,204 13.0 %

Marketing, general and administrative expenses increased during fiscal 2023 primarily due to increased compensation expenses and, to a lesser degree, higher consulting expenses primarily associated with our enterprise resource planning system implementation and other technologies to advance our operating model.

Marketing, general and administrative expenses increased during fiscal 2024 primarily due to higher compensation and benefit expenses, as well as higher consulting expenses primarily associated with our enterprise resource planning system implementation and other technologies to advance our operating model.

Interest Expense

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Interest expense $ 104,064 $ 137,442 $ (33,378) (24.3) %

Interest expense increased during fiscal 2023 as a result of higher interest rates compared to the prior year, which was partially offset by decreased notes payable balances compared to the prior year.

Interest expense decreased during fiscal 2024 as a result of decreased notes payable balances compared to the prior year, which was partially offset by higher interest rates compared to the prior year.

Years Ended August 31, Change

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Other income $ 137,630 $ 112,131 $ 25,499 22.7 %

Other income increased during fiscal 2023 primarily a result of increased interest income due to higher interest rates and a larger cash balance earning interest compared to the prior year.

Other income increased during fiscal 2024 primarily as a result of increased interest income due to a larger average cash balance and higher interest rates.

Equity Income from Investments

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*See Note 6, Investments, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information.

Equity income from investments decreased during fiscal 2023 compared to the prior year, primarily due to lower income associated with our equity method investment in CF Nitrogen, which was partially offset by higher income associated with our equity investment in Ventura Foods.

Equity income from investments decreased during fiscal 2024 compared to the prior year, primarily due to lower income associated with our equity method investments in CF Nitrogen and Ventura Foods.

Equity income decreased for CF Nitrogen as a result of lower selling prices for urea and UAN due to global supply and demand factors.

Equity income increased for Ventura Foods as a result of more favorable market conditions for edible oils and a gain associated with the sale of certain assets.

Income Tax Expense

Equity income decreased for Ventura Foods as a result of less favorable market conditions for oil-based food products and a gain associated with the sale of certain assets in the prior year that did not reoccur in the current year.

Income Tax (Benefit) Expense

Years Ended August 31, Change

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(Dollars in thousands)

Income tax expense $ 107,655 $ 132,116 $ (24,461) (18.5) %

Decreased income tax expense resulted from additional Domestic Production Activities Deduction ("DPAD") benefit during fiscal 2023 and fewer nondeductible items compared to fiscal 2022.

Income tax (benefit) expense $ (4,872) $ 107,655 $ (112,527) (104.5) %

Lower income tax expense during fiscal 2024 resulted primarily from lower nonpatronage income compared to fiscal 2023, recognition of research and development tax credits during fiscal 2024 and increased Domestic Production Activities Deduction ("DPAD") benefit.

Effective tax rates for the years ended August 31, 2024 and 2023, were (0.4)% and 5.4%, respectively.

Federal and state statutory rates of 24.5% and 24.4% were applied to nonpatronage business activity for the years ended August 31, 2023 and 2022, respectively.

Federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the years ended August 31, 2024 and 2023.

Income taxes and effective tax rates vary each year based upon profitability and nonpatronage business activity.

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We fund our current operations primarily through our cash flows from operations and with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility with certain unaffiliated financial institutions ("Securitization Facility").

On April 21, 2023, we amended and restated our five-year unsecured revolving credit facility, which provides a committed amount of $2.8 billion.

That facility now expires on April 21, 2028.

We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt.

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, and the proceeds were used to retire maturing debt.

On April 18, 2024, we entered into a Note Purchase Agreement to borrow $700.0 million of debt in the form of notes;

the funding of these notes took place on July 16, 2024.

On October 29, 2024, we amended our 10-year term loan facility reducing the size to $300.0 million and adding a converting revolver feature.

See Note 9, Notes Payable and Long-Term Debt , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information on our short-term borrowings and long-term debt, including tables with summarized long-term debt outstanding.

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Our refining business requires continued investment in our refining process to maintain its safety, operational reliability and profitability.

In addition, our Board of Directors annually approves our cash patronage and equity redemptions to be paid in fiscal 2024, based on fiscal 2023 financial performance.

The following is a summary of our primary cash requirements for fiscal 2024:

In addition, our Board of Directors approved our cash patronage and equity redemptions to be paid in fiscal 2025, based on fiscal 2024 financial performance.

The following is a summary of our primary expected cash requirements for fiscal 2025:

• Capital expenditures.

We expect total capital expenditures for fiscal 2024 to be approximately $945.2 million, compared to capital expenditures of $564.5 million in fiscal 2023.

Increased capital expenditures for fiscal 2024 are for investments in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth.

We expect total capital expenditures for fiscal 2025 to be approximately $837.3 million, compared to capital expenditures of $808.8 million in fiscal 2024 , as we continue to invest in capital expenditures projects to meet the evolving needs of our owners and customers, enhance value for the cooperative system and unlock growth during fiscal 2025.

In addition, we expect over $200.0 million of incremental expenditures for potential business acquisitions during fiscal 2025.

• Major maintenance .

We expect total major maintenance for fiscal 2025 to be approximately $256.9 million, compared to major maintenance of $22.7 million in fiscal 2024.

Decreased major maintenance for fiscal 2024 is due to significantly reduced turnaround activities at our refineries compared to the turnaround at our Laurel refinery during fiscal 2023.

Increased major maintenance expectation for fiscal 2025 is due to a scheduled turnaround at our McPherson refinery during fiscal 2025 compared to minimal turnaround activities at our refineries during fiscal 2024.

• Preferred stock dividends.

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• Equity redemptions .

Our Board of Directors has authorized equity redemptions of up to $365.0 million to be distributed in fiscal 2024 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members.

Our Board of Directors authorized approximately $300.0 million of equity redemptions to be distributed in fiscal 2025 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members.

The Board of Directors will continue to periodically evaluate the level of equity redemption activity throughout fiscal 2025 with respect to the amounts it has authorized for redemption during the fiscal year.

We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our short-term and long-term operations.

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

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As of August 31, 2024, working capital increased by $78.5 million compared with August 31, 2023.

Current asset balance changes decreased working capital by $249.2 million, primarily due to decreases in receivables and inventories, which were driven by lower commodity prices and volumes.

Current liabilities balance changes increased working capital by $1.1 billion, primarily due to a decrease in the current portion of long-term debt due to lower scheduled debt maturities in fiscal 2024, as well as decreases in customer advance payments and accounts payable due to lower commodity prices and volumes.

Current asset balance changes decreased working capital by $419.9 million, primarily driven by a decrease in our cash balance due to a decline in cash provided by operations from year end 2023, which was partially offset by increases in receivables.

Current liabilities balance changes increased working capital by $498.4 million, primarily due to a decrease in accounts and notes payable, which were driven by changes in working capital needs and lower commodity prices.

We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks.

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Contractual Obligations

Our estimated future obligations as of August 31, 2023, include both current and long-term obligations.

Our estimated future contractual obligations as of August 31, 2024, include both current and long-term obligations.

During fiscal 2025, we have a current obligation to repay $330.6 million of long-term debt, as well as $101.7 million of interest related to long-term debt.

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See Note 9, Notes Payable and Long-Term Debt, and Note 19 , Leases , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information on our long-term debt and leases, respectively.

We enter into purchase obligations that are legally binding and into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement.

We enter into purchase obligations that are legally binding and enter into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement.

Our current and long-term obligation for such arrangements is $4.8 billion and $569.8 million, respectively.

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Effect of exchange rate changes on cash and cash equivalents 2,236 2,590 (354)

Net increase in cash and cash equivalents and restricted cash $ 941,113 $ 360,990 $ 580,123

Net (decrease) increase in cash and cash equivalents and restricted cash $ (970,725) $ 941,113 $ (1,911,838)

Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions.

The $1.3 billion increase in cash provided by operating activities in fiscal 2023 primarily reflects decreases in receivables and inventories, which resulted from a combination of reduced prices and volumes, as well as increased net income during fiscal 2023 compared to fiscal 2022.

The $493.1 million increase in cash used in investing activities in fiscal 2023 reflects larger expenditures for property, plant and equipment and major maintenance during fiscal 2023 compared to fiscal 2022.

The $281.8 million increase in cash used in financing activities in fiscal 2023 primarily reflects increased cash outflows for patronage paid and equity redemptions during fiscal 2023 compared to fiscal 2022.

The $2.0 billion decrease in cash provided by operating activities in fiscal 2024 primarily reflects decreased net income, as well as decreased cash provided by receivables and inventories during fiscal 2024.

The $481.4 million increase in cash used in investing activities in fiscal 2024 reflects increased investments and higher expenditures for property, plant and equipment during fiscal 2024 compared to fiscal 2023.

The $581.2 million decrease in cash used in financing activities in fiscal 2024 primarily reflects increased net proceeds from long-term debt and decreased cash outflows for patronage paid and equity redemptions during fiscal 2024 compared to fiscal 2023.

Critical Accounting Policies

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We are exposed to loss in the event of nonperformance by the counterparties to the contracts and, therefore, contract values are reviewed and adjusted to reflect potential nonperformance.

Risk of nonperformance by counterparties includes the inability to perform because of a counterparty's financial condition and a risk that the counterparty will refuse to perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices.

Risk of nonperformance by counterparties includes the inability to perform because of a counterparty's financial condition and a risk that the counterparty will refuse to

perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices.

Pension and Other Postretirement Benefits

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An impaired asset is written down to its estimated fair value based on the best information available.

Fair value is generally measured by discounting estimated future

Fair value is generally measured by discounting estimated future cash flows.

Considerable management judgment is necessary to estimate discounted future cash flows and our estimates may differ from actual results.

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Recent Accounting Pronouncements

No recent accounting pronouncements are expected to have a material impact on our consolidated financial statements.

See Note 1, Organization, Basis of Presentation and Significant Accounting Policies , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for information concerning new accounting standards and the impact of implementation of those standards on our financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis