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Table of Contents

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

Form 10-Q
 
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedNovember 30, 2020
or
 
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission file number: 001-36079
CHS Inc.
(Exact name of Registrant as specified in its charter)
Minnesota41-0251095
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5500 Cenex Drive
Inver Grove Heights,Minnesota55077
(Address of principal executive offices, including zip code)
  (651)355-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
8% Cumulative Redeemable Preferred StockCHSCPThe Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 1CHSCOThe Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2CHSCNThe Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3CHSCMThe Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 4CHSCLThe Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer
Smaller reporting companyEmerging growth company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No

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



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No.



Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words "CHS," "we," "us" and "our" refer to CHS Inc., a Minnesota cooperative corporation, and its subsidiaries as of November 30, 2020.

FORWARD-LOOKING STATEMENTS

    This Quarterly Report on Form 10-Q contains and our other publicly available documents may contain, and our officers, directors and other representatives may from time to time make "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in our public filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2020. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date on which the statement is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law.
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PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 November 30,
2020
August 31,
2020
 (Dollars in thousands)
ASSETS
Current assets: 
Cash and cash equivalents$143,497 $140,874 
Receivables2,804,306 2,366,047 
Inventories3,717,833 2,742,138 
Other current assets1,678,327 1,017,488 
Total current assets
8,343,963 6,266,547 
Investments3,666,474 3,630,033 
Property, plant and equipment4,903,212 4,957,938 
Other assets1,117,301 1,139,429 
Total assets
$18,030,950 $15,993,947 
LIABILITIES AND EQUITIES
Current liabilities:  
Notes payable$2,039,083 $1,575,491 
Current portion of long-term debt168,376 189,287 
Accounts payable2,594,543 1,724,516 
Accrued expenses391,739 501,904 
Other current liabilities1,411,872 928,843 
Total current liabilities
6,605,613 4,920,041 
Long-term debt1,973,360 1,601,836 
Other liabilities666,121 652,897 
Commitments and contingencies (Note 13)
Equities:  
Preferred stock2,264,038 2,264,038 
Equity certificates5,151,408 5,161,610 
Accumulated other comprehensive loss(225,007)(233,924)
Capital reserves1,586,382 1,618,147 
Total CHS Inc. equities
8,776,821 8,809,871 
Noncontrolling interests9,035 9,302 
Total equities
8,785,856 8,819,173 
Total liabilities and equities
$18,030,950 $15,993,947 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended
November 30,
 20202019
 (Dollars in thousands)
Revenues$8,715,643 $7,621,485 
Cost of goods sold8,537,539 7,295,942 
Gross profit178,104 325,543 
Marketing, general and administrative expenses170,661 168,331 
Operating earnings7,443 157,212 
Interest expense25,050 34,971 
Other income(12,624)(13,498)
Equity income from investments(50,023)(49,662)
Income before income taxes45,040 185,401 
Income tax (benefit) expense(24,329)6,664 
Net income69,369 178,737 
Net (loss) income attributable to noncontrolling interests(302)855 
Net income attributable to CHS Inc. $69,671 $177,882 
    
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
November 30,
20202019
 (Dollars in thousands)
Net income$69,369 $178,737 
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefits3,645 5,073 
Cash flow hedges1,669 (5,872)
Foreign currency translation adjustment3,603 (839)
Other comprehensive income (loss), net of tax8,917 (1,638)
Comprehensive income78,286 177,099 
Comprehensive (loss) income attributable to noncontrolling interests(302)855 
Comprehensive income attributable to CHS Inc. $78,588 $176,244 

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


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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended
November 30,
 20202019
 (Dollars in thousands)
Cash flows from operating activities:  
Net income$69,369 $178,737 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
Depreciation and amortization, including amortization of deferred major maintenance134,692 136,643 
Equity income from investments, net of distributions received(40,842)(30,468)
Provision for doubtful accounts1,564 1,775 
Deferred taxes477 (3,579)
Other, net(5,263)8,341 
Changes in operating assets and liabilities:  
Receivables(430,234)108,495 
Inventories(967,637)(514,580)
Accounts payable and accrued expenses773,776 386,021 
Other, net(209,355)(110,684)
Net cash (used in) provided by operating activities(673,453)160,701 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(85,680)(131,808)
Proceeds from disposition of property, plant and equipment3,350 3,015 
Expenditures for major maintenance(6,313)(7,691)
Proceeds from sale of business42,585 — 
Changes in CHS Capital notes receivable, net(79,045)15,195 
Financing extended to customers(617)(915)
Payments from customer financing3,875 4,209 
Other investing activities, net7,534 3,046 
Net cash used in investing activities(114,311)(114,949)
Cash flows from financing activities:  
Proceeds from notes payable and long-term debt6,620,876 5,414,395 
Payments on notes payable, long-term debt and finance lease obligations(5,752,925)(5,445,420)
Preferred stock dividends paid(42,167)(42,167)
Redemptions of equities(7,726)(5,447)
Other financing activities, net(9,167)6,757 
Net cash provided by (used in) financing activities808,891 (71,882)
Effect of exchange rate changes on cash and cash equivalents2,324 (1,153)
Increase (decrease) in cash and cash equivalents and restricted cash23,451 (27,283)
Cash and cash equivalents and restricted cash at beginning of period216,993 299,675 
Cash and cash equivalents and restricted cash at end of period$240,444 $272,392 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
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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, 2020, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC").

Significant Accounting Policies

    The following significant accounting policy was updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2020.

Receivables

    As described in the "Recent Accounting Pronouncements" section, we adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses ("ASC Topic 326"): Measurement of Credit Losses on Financial Instruments, on September 1, 2020, using the modified retrospective approach. Our accounting policies with respect to ASC Topic 326 are included in Note 3, Receivables.

Recent Accounting Pronouncements

    Except for the recent accounting pronouncement described below, other recent accounting pronouncements are not expected to have a material impact on our condensed consolidated financial statements.

Adopted

    In June 2016, the Financial Accounting Standards Board issued ASC Topic 326. The amendments in this ASU introduce a new approach, based on expected losses, to estimate credit losses on certain types of financial instruments. This ASU is intended to provide financial statement users with more decision-useful information about the expected credit losses associated with most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. Entities are required to apply the provisions of this ASU as a cumulative-effect adjustment to the opening balance of capital reserves as of the beginning of the first reporting period in which the guidance is adopted. As part of our adoption efforts, we performed various data-gathering activities, developed a credit losses model, performed data analyses and made accounting policy election determinations. The impact of adoption did not have a material impact on our condensed consolidated financial statements.

Not Yet Adopted

None.








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Note 2        Revenues

    The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three months ended November 30, 2020 and 2019. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 842, Leases, and ASC Topic 470, Debt, that fall outside the scope of ASC Topic 606.
ASC Topic 606ASC Topic 815Other GuidanceTotal Revenues
Three Months Ended November 30, 2020(Dollars in thousands)
Energy$1,064,963 $192,884 $ $1,257,847 
Ag1,344,508 6,087,241 13,653 7,445,402 
Corporate and Other6,460  5,934 12,394 
Total revenues
$2,415,931 $6,280,125 $19,587 $8,715,643 
Three Months Ended November 30, 2019
Energy$1,693,848 $201,575 $ $1,895,423 
Ag1,358,626 4,316,087 37,142 5,711,855 
Corporate and Other5,541  8,666 14,207 
Total revenues
$3,058,015 $4,517,662 $45,808 $7,621,485 

    Less than 1% of revenues accounted for under ASC Topic 606 included within the table above are recorded over time; these revenues are primarily related 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 the customer. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were not material as of November 30, 2020, or August 31, 2020.

    Contract liabilities relate to advance payments from customers for goods and services that we have yet to provide. Contract liabilities of $183.9 million and $139.1 million as of November 30, 2020, and August 31, 2020, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended November 30, 2020 and 2019, we recognized revenues of $60.7 million and $92.0 million, respectively, which were included in the other current liabilities balance at the beginning of the respective periods.

Note 3        Receivables
November 30,
2020
August 31,
2020
(Dollars in thousands)
Trade accounts receivable$1,897,540 $1,476,585 
CHS Capital short-term notes receivable586,037 563,934 
Other474,510 491,068 
Gross receivables
2,958,087 2,531,587 
Less: allowances and reserves153,781 165,540 
Total receivables
$2,804,306 $2,366,047 
    
    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 accounts receivable balances and is determined using historical write-off experience, adjusted for various industry and regional data and current expectations of future credit losses.

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Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of capital stock from certain regional cooperatives. These loans are originated in various states, primarily in the Upper Midwest region of the United States, the most significant of which include North Dakota and Minnesota. CHS Capital also has loans receivable from producer borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages and are originated primarily in the same states as the commercial notes.

    In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable with durations of generally not more than 10 years, totaling $106.4 million and $101.5 million as of November 30, 2020, and August 31, 2020, respectively. Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of November 30, 2020, and August 31, 2020, the commercial notes represented 47% and 33%, respectively, and the producer notes represented 53% and 67%, respectively, of total CHS Capital notes receivable.

    CHS Capital has commitments to extend credit to customers if there are no violations of contractually established conditions. As of November 30, 2020, CHS Capital customers had additional available credit of $595.3 million. No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of November 30, 2020, or August 31, 2020.

Note 4        Inventories        
November 30,
2020
August 31,
2020
(Dollars in thousands)
Grain and oilseed$1,975,810 $1,064,079 
Energy715,199 696,858 
Agronomy851,127 822,535 
Processed grain and oilseed130,511 126,022 
Other45,186 32,644 
Total inventories
$3,717,833 $2,742,138 

    As of November 30, 2020, and August 31, 2020, we valued approximately 12% and 16%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the LIFO method, or net realizable value. If the FIFO method of accounting had been used, inventories would have been higher than the reported amount by $87.3 million and $93.5 million as of November 30, 2020, and August 31, 2020, 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
November 30,
2020
August 31,
2020
 (Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC
$2,684,306 $2,662,618 
Ventura Foods, LLC
388,869 381,351 
Ardent Mills, LLC
211,120 208,927 
Other equity method investments
258,049 253,182 
Other investments124,130 123,955 
Total investments
$3,666,474 $3,630,033 

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    Joint ventures and other investments, in which we have significant ownership and influence but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen"), Ventura Foods, LLC ("Ventura Foods"), Ardent Mills, LLC ("Ardent Mills") and TEMCO, LLC ("TEMCO"), which are summarized below. In addition to 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 measured at cost, unless an impairment or other observable market price change occurs, requiring an adjustment. Approximately $424.4 million of cumulative undistributed earnings from our equity method investees are included in the investments balance as of November 30, 2020.

CF Nitrogen

    We have an approximate $2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10% membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for the semi-annual cash distributions we receive as a result of our membership interest in CF Nitrogen.

    The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the three months ended November 30, 2020 and 2019:
Three Months Ended
November 30,
20202019
Net sales$606,340 $649,638 
Gross profit94,068 149,573 
Net earnings81,173 140,490 
Earnings attributable to CHS Inc.21,688 34,834 

Ventura Foods
    
    We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily vegetable-oil-based products. We account for Ventura Foods as an equity method investment, and our share of the results of this equity method investment are included in Corporate and Other.

The following table provides aggregate summarized unaudited financial information for our equity method investment in Ventura Foods for the three months ended November 30, 2020 and 2019:

Three Months Ended
November 30,
20202019
Net sales$579,074 $629,360 
Gross profit72,522 106,140 
Net earnings25,102 26,126 
Earnings attributable to CHS Inc.12,551 13,063 

Ardent Mills and TEMCO

    We have a 12% interest in Ardent Mills, which is a joint venture with Cargill Incorporated ("Cargill") and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50% interest in TEMCO, which is a joint venture with Cargill focused on exports, primarily to Asia. We account for Ardent Mills and TEMCO as equity method investments, and our shares of the results of these equity method investments are included in Corporate and Other and Ag segment, respectively.
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The following table provides aggregate summarized unaudited financial information for our equity method investments in Ardent Mills and TEMCO for the three months ended November 30, 2020 and 2019:
Three Months Ended
November 30,
20202019
Net sales$2,795,940 $1,587,493 
Gross profit131,904 97,570 
Net earnings64,554 35,451 
Earnings attributable to CHS Inc.12,627 (402)
    
    Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in the 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 our debt covenants as of November 30, 2020. The table below summarizes our notes payable as of November 30, 2020, and August 31, 2020.
November 30,
2020
August 31,
2020
(Dollars in thousands)
Notes payable$1,268,772 $763,215 
CHS Capital notes payable770,311 812,276 
Total notes payable
$2,039,083 $1,575,491 
    
    As of November 30, 2020, our primary line of credit was a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.75 billion that expires on July 16, 2024. As of November 30, 2020, and August 31, 2020, the outstanding balance on this facility was $527.0 million and $345.0 million, respectively.

    We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned bankruptcy-remote indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as a secured borrowing. 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. As of November 30, 2020, total availability under the Securitization Facility was $456.0 million, all of which had been utilized.

    We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. As of November 30, 2020, and August 31, 2020, the outstanding balance under the Repurchase Facility was $150.0 million.

On September 24, 2020, the Securitization Facility and Repurchase Facility were amended, increasing the maximum availability under the Securitization Facility to $600.0 million from $500.0 million and extending their respective termination dates to July 30, 2021.

On August 14, 2020, we entered into a Note Purchase Agreement to borrow $375.0 million of debt in the form of notes. The notes under this Note Purchase Agreement are structured in four series with maturities ranging from 7 to 15 years and interest accruing at rates ranging from 3.24% to 3.73%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow. The funding of these notes took place on November 2, 2020. This funding has and will be used to pay fiscal 2021 debt maturities, as well as manage liquidity.
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    Interest expense for the three months ended November 30, 2020 and 2019, was $25.1 million and $35.0 million, respectively, net of capitalized interest of $2.1 million and $2.8 million, respectively.

Note 7        Income Taxes

    Our effective tax rate for the three months ended November 30, 2020, was (54.0)%, compared to 3.6% for the three months ended November 30, 2019. The decreased effective tax rate reflects tax benefits resulting from changes in the mix of full-year projected earnings, including losses in business units and equity management assumptions allowing for a patronage deduction on profitable business units, as well as an anticipated intercompany transfer of assets resulting in a tax benefit.

    Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged and we may not prevail. If we were to prevail on all positions taken in relation to uncertain tax positions, $114.4 million and $111.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of November 30, 2020, and August 31, 2020, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.

Note 8        Equities

Changes in Equities

    Changes in equities for the three months ended November 30, 2020 and 2019, are as follows:
 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, August 31, 2020$3,724,187 $28,727 $1,408,696 $2,264,038 $(233,924)$1,618,147 $9,302 $8,819,173 
Reversal of prior year redemption estimates
7,726   — —  — 7,726 
Redemptions of equities
(6,539)(31)(1,156) — — — (7,726)
Preferred stock dividends
— — — — — (84,334)— (84,334)
Other, net
(654)(47)(197)— — (7,798)35 (8,661)
Net income (loss)— — — — — 69,671 (302)69,369 
Other comprehensive income, net of tax— — — — 8,917 — — 8,917 
Estimated 2021 cash patronage refunds— — — — — (9,304)— (9,304)
Estimated 2021 equity redemptions(9,304)— — — — — — (9,304)
Balances, November 30, 2020$3,715,416 $28,649 $1,407,343 $2,264,038 $(225,007)$1,586,382 $9,035 $8,785,856 
 Equity Certificates Accumulated
Other
Comprehensive
Loss
   
Capital
Equity
Certificates
Nonpatronage
Equity
Certificates
Nonqualified Equity CertificatesPreferred
Stock
Capital
Reserves
Noncontrolling
Interests
Total
Equities
 (Dollars in thousands)
Balances, August 31, 2019$3,753,493 $29,074 $1,206,310 $2,264,038 $(226,933)$1,584,158 $7,390 $8,617,530 
Reversal of prior year redemption estimates
5,447   — —  — 5,447 
Redemptions of equities
(4,721)(54)(672) — — — (5,447)
Preferred stock dividends
— — — — — (84,334)— (84,334)
ASC Topic 842 cumulative-effect adjustment
     33,707  33,707 
Other, net
(8)— (39)— — (1,312)410 (949)
Net income — — — — — 177,882 855 178,737 
Other comprehensive loss, net of tax— — — — (1,638)— — (1,638)
Estimated 2020 cash patronage refunds
— — — — — (28,504)— (28,504)
Estimated 2020 equity redemptions
(91,633)— — — — — — (91,633)
Balances, November 30, 2019$3,662,578 $29,020 $1,205,599 $2,264,038 $(228,571)$1,681,597 $8,655 $8,622,916 

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Preferred Stock Dividends

    The following is a summary of dividends per share by series of preferred stock for the three months ended November 30, 2020 and 2019. Due to the timing of dividend declarations during the first quarter of each fiscal year, the per share amount of dividends is comprised of two quarterly dividend declarations for each period.
Three Months Ended
November 30,
Nasdaq symbol20202019
Series of preferred stock:(Dollars per share)
8% Cumulative Redeemable
CHSCP$1.00 $1.00 
Class B Cumulative Redeemable, Series 1
CHSCO0.98 0.98 
Class B Reset Rate Cumulative Redeemable, Series 2
CHSCN0.88 0.88 
Class B Reset Rate Cumulative Redeemable, Series 3
CHSCM0.84 0.84 
Class B Cumulative Redeemable, Series 4
CHSCL0.94 0.94 

Accumulated Other Comprehensive Income (Loss)        

    Changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows for the three months ended November 30, 2020 and 2019:
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of August 31, 2020, net of tax$(159,680)$10,886 $(85,130)$(233,924)
Other comprehensive income (loss), before tax:
Amounts before reclassifications
(125)14,506 3,629 18,010 
Amounts reclassified
4,977 (12,284) (7,307)
Total other comprehensive income, before tax4,852 2,222 3,629 10,703 
Tax effect
(1,207)(553)(26)(1,786)
Other comprehensive income, net of tax3,645 1,669 3,603 8,917 
Balance as of November 30, 2020, net of tax$(156,035)$12,555 $(81,527)$(225,007)
Pension and Other Postretirement BenefitsCash Flow HedgesForeign Currency Translation AdjustmentTotal
(Dollars in thousands)
Balance as of August 31, 2019, net of tax$(172,478)$15,297 $(69,752)$(226,933)
Other comprehensive income (loss), before tax:
Amounts before reclassifications
(85)(3,331)(2,411)(5,827)
Amounts reclassified
4,977 (4,473) 504 
Total other comprehensive income (loss), before tax
4,892 (7,804)(2,411)(5,323)
Tax effect
181 1,932 1,572 3,685 
Other comprehensive income (loss), net of tax5,073 (5,872)(839)(1,638)
Balance as of November 30, 2019, net of tax$(167,405)$9,425 $(70,591)$(228,571)

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    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, marketing, general and administrative expenses, and other income (see Note 9, Benefit Plans, for further information). Gains or losses associated with cash flow hedges are recorded as cost of goods sold (see Note 11, Derivative Financial Instruments and Hedging Activities, for further information). Gains or losses on foreign currency translation reclassifications related to sales of businesses are recorded as other income.

Note 9        Benefit Plans

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

    Components of net periodic benefit costs for the three months ended November 30, 2020 and 2019, are as follows:
Three Months Ended
November 30,
Qualified
Pension Benefits
Nonqualified
Pension Benefits
Other Benefits
 202020192020201920202019
Components of net periodic benefit costs:
 (Dollars in thousands)
Service cost$11,307 $10,538 $108 $101 $297 $262 
Interest cost4,141 5,431 68 107 123 187 
Expected return on assets(10,910)(11,671)    
Prior service cost (credit) amortization45 45 (28)(28)(111)(111)
Actuarial loss (gain) amortization5,447 5,396 53 25 (341)(348)
Net periodic benefit cost (benefit)$10,030 $9,739 $201 $205 $(32)$(10)

    The service cost component of defined benefit net periodic benefit cost is recorded in cost of goods sold and marketing, general and administrative expenses. The other components of net periodic benefit cost are recorded in other income.

Employer Contributions

    Any contributions made during fiscal 2021 will depend primarily on market returns on the pension plan assets and minimum funding level requirements. No contributions were made to the pension plans during the three months ended November 30, 2020, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2021.

Note 10        Segment Reporting

    We are an integrated agricultural enterprise, providing grain, foods and energy resources to businesses and consumers on a global basis. We provide a wide variety of products and services, from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs that include grains and oilseeds, grain and oilseed processing and food products, and the production and marketing of ethanol. 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 our businesses. 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 grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment consists solely of our equity method investment in CF Nitrogen, which entitles us, pursuant to a supply agreement that we entered into with CF Nitrogen, to purchase up to a specified quantity of granular urea and urea ammonium nitrate annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which consists primarily of financial services related to crop production and a U.S.
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Commodity Futures Trading Commission-regulated futures commission merchant for commodities hedging. Our nonconsolidated investments in Ventura Foods and 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 operating results vary throughout the year. For example, in our Ag segment, our country operations business generally experiences higher volumes and income during the spring planting season and the fall harvest season, and our agronomy business generally experiences higher volumes and income during the spring planting season. Our global grain marketing operations are subject to fluctuations in volume and earnings based on producer harvests, world grain prices and demand. Our Energy segment generally experiences higher volumes and profitability in certain operating areas, such as refined products, in the summer and early fall when gasoline and diesel fuel usage is highest and is subject to global supply and demand forces. Other energy products, such as propane, may experience higher volumes and profitability during the winter heating and crop-drying seasons.

    Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grains, oilseeds, crop nutrients and flour. 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 a reliable rail and river transportation network, outbreaks of disease, government regulations and policies, global trade disputes, and general political and economic conditions.

    While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability companies in which we have a controlling interest, a portion of our business operations are conducted through companies in which we hold ownership interests of 50% or less or do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidation of the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Nitrogen Production segment, this consists of our approximate 10% membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50% ownership in Ventura Foods and our 12% ownership in Ardent Mills. See Note 5, Investments, for more information on these entities.

    Reconciling amounts primarily represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments.

    Segment information for the three months ended November 30, 2020 and 2019, is presented in the tables below.
EnergyAgNitrogen ProductionCorporate
and Other
Reconciling
Amounts
Total
Three Months Ended November 30, 2020(Dollars in thousands)
Revenues, including intersegment revenues$1,357,845 $7,450,305 $ $15,481 $(107,988)$8,715,643 
Intersegment revenues(99,998)(4,903) (3,087)107,988 — 
Revenues, net of intersegment revenues
$1,257,847 $7,445,402 $ $12,394 $ $8,715,643 
Operating earnings (loss)(68,385)75,524 (7,623)7,927  7,443 
Interest expense(238)14,505 11,163 1,138 (1,518)25,050 
Other income(482)(11,817)(1,566)(277)1,518 (12,624)
Equity income from investments(489)(10,174)(21,688)(17,672) (50,023)
Income (loss) before income taxes
$(67,176)$83,010 $4,468 $24,738 $ $45,040 
Total assets as of November 30, 2020$4,318,529 $8,299,580 $2,699,869 $2,712,972 $ $18,030,950 
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EnergyAgNitrogen ProductionCorporate
and Other
Reconciling
Amounts
Total
Three Months Ended November 30, 2019(Dollars in thousands)
Revenues, including intersegment revenues$2,027,895 $5,715,994 $ $15,950 $(138,354)$7,621,485 
Intersegment revenues(132,472)(4,139) (1,743)138,354 — 
Revenues, net of intersegment revenues
$1,895,423 $5,711,855 $ $14,207 $ $7,621,485 
Operating earnings (loss)161,199 (417)(7,823)4,253  157,212 
Interest expense374 20,741 12,130 3,838 (2,112)34,971 
Other income(964)