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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 endedFebruary 28, 2021
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 February 28, 2021.

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.
1

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PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 February 28,
2021
August 31,
2020
 (Dollars in thousands)
ASSETS
Current assets: 
Cash and cash equivalents$217,675 $140,874 
Receivables2,336,920 2,366,047 
Inventories4,246,051 2,742,138 
Other current assets2,150,250 1,017,488 
Total current assets
8,950,896 6,266,547 
Investments3,639,453 3,630,033 
Property, plant and equipment4,866,751 4,957,938 
Other assets1,109,043 1,139,429 
Total assets
$18,566,143 $15,993,947 
LIABILITIES AND EQUITIES
Current liabilities:  
Notes payable$2,952,392 $1,575,491 
Current portion of long-term debt167,792 189,287 
Accounts payable2,042,475 1,724,516 
Accrued expenses451,593 501,904 
Other current liabilities1,948,781 928,843 
Total current liabilities
7,563,033 4,920,041 
Long-term debt1,604,313 1,601,836 
Other liabilities679,014 652,897 
Commitments and contingencies (Note 13)
Equities:  
Preferred stock2,264,038 2,264,038 
Equity certificates5,159,756 5,161,610 
Accumulated other comprehensive loss(222,458)(233,924)
Capital reserves1,509,902 1,618,147 
Total CHS Inc. equities
8,711,238 8,809,871 
Noncontrolling interests8,545 9,302 
Total equities
8,719,783 8,819,173 
Total liabilities and equities
$18,566,143 $15,993,947 

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
2

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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedSix Months Ended
 February 28,
2021
February 29,
2020
February 28,
2021
February 29,
2020
 (Dollars in thousands)
Revenues$8,320,159 $6,598,226 $17,035,802 $14,219,711 
Cost of goods sold8,218,439 6,283,171 16,755,978 13,579,113 
Gross profit101,720 315,055 279,824 640,598 
Marketing, general and administrative expenses161,510 199,570 332,171 367,901 
Operating (loss) earnings(59,790)115,485 (52,347)272,697 
Interest expense28,855 33,411 53,905 68,382 
Other income(17,846)(11,352)(30,470)(24,850)
Equity income from investments(64,109)(34,398)(114,132)(84,060)
(Loss) income before income taxes(6,690)127,824 38,350 313,225 
Income tax expense31,668 2,130 7,339 8,794 
Net (loss) income(38,358)125,694 31,011 304,431 
Net (loss) income attributable to noncontrolling interests(129)247 (431)1,102 
Net (loss) income attributable to CHS Inc. $(38,229)$125,447 $31,442 $303,329 
    
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 EndedSix Months Ended
February 28,
2021
February 29,
2020
February 28,
2021
February 29,
2020
 (Dollars in thousands)
Net (loss) income$(38,358)$125,694 $31,011 $304,431 
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefits3,869 3,746 7,514 8,819 
Cash flow hedges(559)(5,812)1,110 (11,684)
Foreign currency translation adjustment(761)(8,519)2,842 (9,358)
Other comprehensive income (loss), net of tax2,549 (10,585)11,466 (12,223)
Comprehensive (loss) income(35,809)115,109 42,477 292,208 
Comprehensive (loss) income attributable to noncontrolling interests(129)247 (431)1,102 
Comprehensive (loss) income attributable to CHS Inc. $(35,680)$114,862 $42,908 $291,106 

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)
 Six Months Ended
 February 28,
2021
February 29,
2020
 (Dollars in thousands)
Cash flows from operating activities:  
Net income$31,011 $304,431 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
Depreciation and amortization, including amortization of deferred major maintenance267,726 272,652 
Equity income from investments, net of distributions received(3,687)40,109 
Provision for doubtful accounts(4,674)1,883 
Deferred taxes35,797 (5,763)
Other, net(18,495)4,181 
Changes in operating assets and liabilities:  
Receivables(100,398)507,844 
Inventories(1,495,856)(814,318)
Accounts payable and accrued expenses273,448 (54,786)
Other, net(119,417)45,365 
Net cash (used in) provided by operating activities(1,134,545)301,598 
Cash flows from investing activities:  
Acquisition of property, plant and equipment(164,565)(224,962)
Proceeds from disposition of property, plant and equipment7,741 6,959 
Expenditures for major maintenance(10,050)(8,809)
Proceeds from sale of business39,567 — 
Changes in CHS Capital notes receivable, net43,283 209,608 
Financing extended to customers(1,816)(4,475)
Payments from customer financing5,589 8,709 
Other investing activities, net10,633 12,805 
Net cash used in investing activities(69,618)(165)
Cash flows from financing activities:  
Proceeds from notes payable and long-term debt16,930,536 11,403,077 
Payments on notes payable, long-term debt and finance lease obligations(15,483,358)(11,486,347)
Preferred stock dividends paid(84,334)(84,334)
Redemptions of equities(12,486)(8,834)
Cash patronage dividends paid(21,416)(90,030)
Other financing activities, net(9,222)(13,079)
Net cash provided by (used in) financing activities1,319,720 (279,547)
Effect of exchange rate changes on cash and cash equivalents1,026 (5,613)
Increase in cash and cash equivalents and restricted cash116,583 16,273 
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$333,576 $315,948 

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 and six months ended February 28, 2021, and February 29, 2020. 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 February 28, 2021(Dollars in thousands)
Energy$1,243,072 $129,086 $ $1,372,158 
Ag1,169,411 5,753,333 15,468 6,938,212 
Corporate and Other4,535  5,254 9,789 
Total revenues
$2,417,018 $5,882,419 $20,722 $8,320,159 
Three Months Ended February 29, 2020
Energy$1,375,905 $85,145 $ $1,461,050 
Ag1,066,783 4,035,447 21,972 5,124,202 
Corporate and Other5,343  7,631 12,974 
Total revenues
$2,448,031 $4,120,592 $29,603 $6,598,226 
Six Months Ended February 28, 2021
Energy$2,308,036 $321,969 $ $2,630,005 
Ag2,513,910 11,840,572 29,132 14,383,614 
Corporate and Other10,995  11,188 22,183 
Total revenues
$4,832,941 $12,162,541 $40,320 $17,035,802 
Six Months Ended February 29, 2020
Energy$3,069,753 $286,720 $ $3,356,473 
Ag2,425,409 8,351,534 59,114 10,836,057 
Corporate and Other10,883  16,298 27,181 
Total revenues
$5,506,045 $8,638,254 $75,412 $14,219,711 

    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 February 28, 2021, 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 $783.2 million and $139.1 million as of February 28, 2021, and August 31, 2020, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended February 28, 2021, and February 29, 2020, we recognized revenues of $19.9 million and $39.6 million related to contract liabilities, respectively. For the six months ended February 28, 2021, and February 29, 2020, we recognized revenues of $91.6 million and $131.6 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective periods.

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Note 3        Receivables
February 28,
2021
August 31,
2020
(Dollars in thousands)
Trade accounts receivable$1,650,031 $1,476,585 
CHS Capital short-term notes receivable442,172 563,934 
Other392,769 491,068 
Gross receivables
2,484,972 2,531,587 
Less: allowances and reserves148,052 165,540 
Total receivables
$2,336,920 $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 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 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 $93.0 million and $101.5 million as of February 28, 2021, and August 31, 2020, respectively. Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of February 28, 2021, and August 31, 2020, the commercial notes represented 67% and 33%, respectively, and the producer notes represented 33% 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 February 28, 2021, CHS Capital customers had additional available credit of $618.0 million. No significant troubled debt restructuring activity occurred and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of February 28, 2021, or August 31, 2020.

Note 4        Inventories        
February 28,
2021
August 31,
2020
(Dollars in thousands)
Grain and oilseed$1,927,931 $1,064,079 
Energy714,798 696,858 
Agronomy1,403,480 822,535 
Processed grain and oilseed155,492 126,022 
Other44,350 32,644 
Total inventories
$4,246,051 $2,742,138 

    As of February 28, 2021, and August 31, 2020, we valued approximately 11% 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 $284.3 million and $93.5 million as of February 28, 2021, 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.

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Note 5        Investments
February 28,
2021
August 31,
2020
 (Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC
$2,651,652 $2,662,618 
Ventura Foods, LLC
374,895 381,351 
Ardent Mills, LLC
215,942 208,927 
Other equity method investments
265,588 253,182 
Other investments131,376 123,955 
Total investments
$3,639,453 $3,630,033 

    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 $394.0 million of cumulative undistributed earnings from our equity method investees are included in the investments balance as of February 28, 2021.

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 six months ended February 28, 2021, and February 29, 2020:
Six Months Ended
February 28,
2021
February 29,
2020
(Dollars in thousands)
Net sales$1,285,625 $1,297,018 
Gross profit321,565 297,630 
Net earnings297,297 280,599 
Earnings attributable to CHS Inc.53,033 62,757 
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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 six months ended February 28, 2021, and February 29, 2020:
Six Months Ended
February 28,
2021
February 29,
2020
(Dollars in thousands)
Net sales$1,107,024 $1,229,151 
Gross profit134,311 150,818 
Net earnings42,620 45,117 
Earnings attributable to CHS Inc.21,310 22,557 

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 export elevation, 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 our Ag segment, respectively.

The following table provides aggregate summarized unaudited financial information for our equity method investments in Ardent Mills and TEMCO for the six months ended February 28, 2021, and February 29, 2020:
Six Months Ended
February 28,
2021
February 29,
2020
(Dollars in thousands)
Net sales$4,395,607 $3,070,160 
Gross profit287,843 170,294 
Net earnings145,783 44,145 
Earnings attributable to CHS Inc.30,419 (3,879)
    
    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 February 28, 2021. The table below summarizes our notes payable as of February 28, 2021, and August 31, 2020.
February 28,
2021
August 31,
2020
(Dollars in thousands)
Notes payable$2,249,275 $763,215 
CHS Capital notes payable703,117 812,276 
Total notes payable
$2,952,392 $1,575,491 
    
    As of February 28, 2021, our primary line of credit was a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.75 billion that expires on July 16, 2024. As of February 28, 2021, and August 31, 2020, the outstanding balance on this facility was $1.3 billion and $345.0 million, respectively.
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    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 February 28, 2021, total availability under the Securitization Facility was $538.0 million, all of which had been utilized.

    We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. As of February 28, 2021, 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 February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which can be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total funded loan balance outstanding reverts to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of February 28, 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 is being used to pay debt maturities and manage liquidity.

    Interest expense for the three months ended February 28, 2021, and February 29, 2020, was $28.9 million and $33.4 million, respectively, net of capitalized interest of $2.1 million and $3.4 million, respectively. Interest expense for the six months ended February 28, 2021, and February 29, 2020, was $53.9 million and $68.4 million, respectively, net of capitalized interest of $4.2 million and $6.2 million, respectively.

Note 7        Income Taxes

    Our effective tax rate for the three months ended February 28, 2021, was (473.4)%, compared to 1.7% for the three months ended February 29, 2020. Our effective tax rate for the six months ended February 28, 2021, was 19.1%, compared to 2.8% for the six months ended February 29, 2020. Our income tax expense reflects the mix of full-year earnings projected across business units and equity management assumptions, which were partially offset by tax benefits related to an intercompany transfer of assets for tax planning. Income taxes and effective tax rate vary each year based on profitability and nonpatronage business activity during each of the comparable years.

    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, $129.8 million and $111.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of February 28, 2021, 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.

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Note 8        Equities

Changes in Equities

    Changes in equities for the three and six months ended February 28, 2021, and February 29, 2020, 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 
Reversal of prior year patronage and redemption estimates4,760  (211,970)— — 233,345 — 26,135 
Distribution of 2020 patronage refunds— — 214,720 — — (236,136)— (21,416)
Redemptions of equities(4,177)(35)(548) — — — (4,760)
Preferred stock dividends— — — — — (42,167)— (42,167)
Other, net(26)— (15)— — 1,068 (361)666 
Net loss— — — — — (38,229)(129)(38,358)
Other comprehensive income, net of tax— — — — 2,549 — — 2,549 
Estimated 2021 cash patronage refunds— — — — — 5,639 — 5,639 
Estimated 2021 equity redemptions5,639 — — — — — — 5,639 
Balances, February 28, 2021$3,721,612 $28,614 $1,409,530 $2,264,038 $(222,458)$1,509,902 $8,545 $8,719,783 
 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 
Reversal of prior year patronage and redemption estimates3,387  (472,398)— — 562,398 — 93,387 
Distribution of 2019 patronage refunds— — 474,066 — — (564,096)— (90,030)
Redemptions of equities(2,998)(20)(369) — — — (3,387)
Preferred stock dividends— — — — — (42,167)— (42,167)
Other, net(201)— 3 — — 10 (324)(512)
Net income— — — — — 125,447 247 125,694 
Other comprehensive loss, net of tax— — — — (10,585)— — (10,585)
Estimated 2020 cash patronage refunds— — — — — (22,206)— (22,206)
Estimated 2020 equity redemptions(49,154)— — — — — — (49,154)
Balances, February 29, 2020$3,613,612 $29,000 $1,206,901 $2,264,038 $(239,156)$1,740,983 $8,578 $8,623,956 

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Preferred Stock Dividends

    The following is a summary of dividends per share by series of preferred stock for the three and six months ended February 28, 2021, and February 29, 2020.
Three Months EndedSix Months Ended
Nasdaq symbolFebruary 28,
2021
February 29,
2020
February 28,
2021
February 29,
2020
Series of preferred stock:(Dollars per share)
8% Cumulative Redeemable
CHSCP$0.50 $0.50 $1.50 $1.50 
Class B Cumulative Redeemable, Series 1
CHSCO$0.49 $0.49 $1.48 $1.48 
Class B Reset Rate Cumulative Redeemable, Series 2
CHSCN$0.44 $0.44 $1.33 $1.33 
Class B Reset Rate Cumulative Redeemable, Series 3
CHSCM$