CHS INC

Previous wording

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

Current wording

•Energy. Produces and provides petroleum products primarily for wholesale distribution and transportation.

Previous wording

Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results. 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, changes and uncertainty of potential changes in U.S. trade policy, including tariffs and resulting retaliatory actions from other countries on products we purchase or sell, resulting in U.S. commodity exports being less competitive in global markets; 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; an uncertain interest rate environment; and continued pricing pressures impacting costs of labor, freight and materials. These factors, or any form or combination 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 the cost of renewable energy credits, the prices of which have experienced volatility in recent years and could positively or negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect global economic factors impacting energy and agricultural commodities to continue to be less favorable during the remainder of fiscal 2025, as compared to fiscal 2024. 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 significantly reduced margins for energy and agricultural commodities to persist or accelerate through the remainder of fiscal 2025. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2024, for additional impacts these and other risks may have on our business operations and financial performance.

Current wording

Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results. 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, changes and uncertainty of potential changes in U.S. trade policy, including tariffs and resulting retaliatory actions from other countries on products we purchase or sell, resulting in U.S. commodity exports being less competitive in global markets; the ongoing war between Russia and Ukraine and further escalation of conflict in the Middle East with associated impacts on energy markets; shifts in global trade flows for commodities, including global competitiveness giving rise to a weak export market for U.S.-sourced agricultural products; an uncertain interest rate environment; and continued pricing pressures impacting costs of labor, freight and materials. These factors, or any form or combination 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 the cost of renewable energy credits, the prices of which have experienced volatility in recent years and could positively or negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect global economic factors impacting energy and agricultural commodities to continue to be less favorable during the remainder of fiscal 2025, as compared to fiscal 2024. In light of 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 significantly reduced margins for energy and agricultural commodities to persist through at least the remainder of fiscal 2025. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2024, for additional impacts these and other risks may have on our business operations and financial performance.

Previous wording

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. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In June 2023, the EPA issued a final renewable volume obligation ("RVO") for calendar years 2020 through 2025. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity; therefore, RINs must be purchased on the open market. The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 biodiesel RINs increased by 5% and 8%, respectively, during the three months ended February 28, 2025, compared to the same period during the prior fiscal year. Estimates of our RIN expenses are calculated using an average RIN price each month.

Current wording

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. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In June 2023, the EPA issued a final renewable volume obligation ("RVO") for calendar years 2020 through 2025. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity; therefore, RINs must be purchased on the open market. The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 biodiesel RINs increasing by 85% and 97%, respectively, during the three months ended May 31, 2025, compared to the same period during the prior fiscal year. Estimates of our RIN expenses are calculated using an average RIN price each month.

Previous wording

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 during the three and six months ended February 28, 2025, compared to the same period during the prior fiscal year, contributing to significantly lower IBIT for the Energy segment. The table below provides information about average market reference prices and differentials that impacted our Energy segment:

Current wording

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. Supply and demand in the global and North American refined product markets resulted in increased crack spreads during the three months ended May 31, 2025, compared to the same period of the prior year; however, these same factors also drove a decrease to the WCS differential. Both remain below the prior period for the nine months ended May 31, 2025, contributing to significantly lower IBIT for the Energy segment. The table below provides information about average market reference prices and differentials that impacted our Energy segment:

Previous wording

•The IBIT decrease was partially offset by lower costs for RINs in our refined fuels business, which contributed to a $23.4 million cost reduction.

Current wording

•Higher costs for RINs in our refined fuels business resulted in $32.6 million of decreased IBIT.

Previous wording

•Decreased margins for our grain and oilseed product category, primarily the result of the timing impact of mark-to-market adjustments and market conditions in South America, contributed to a $101.4 million decrease in IBIT; and

Current wording

•Decreased margins for our grain and oilseed and oilseed processing product categories, primarily the result of the timing impact of mark-to-market adjustments and market conditions, contributed to a $45.2 million decrease in IBIT.

Previous wording

◦$135.2 million decrease for oilseed processing; and

Current wording

◦$93.2 million decrease for oilseed processing; and

Previous wording

•Decreased costs across most of our Ag segment product categories due to global market conditions experienced during the second quarter of fiscal 2025, including:

Current wording

•Decreased costs across most of our Ag segment product categories due to global market conditions and decreased commodity prices were experienced during the third quarter of fiscal 2025, including:

Previous wording

Marketing, general and administrative expenses decreased during the three months ended February 28, 2025, primarily due to lower expenses for performance-based incentive compensation with the lower profitability of the company during the current fiscal year quarter.

Current wording

Marketing, general and administrative expenses decreased during the three months ended May 31, 2025, primarily due to lower expenses for performance-based incentive compensation with the lower profitability of the company during the current fiscal year.

Previous wording

Other income decreased during the three months ended February 28, 2025, primarily due to decreased interest income as a result of a smaller cash balance and lower interest rates compared to the same period in the prior fiscal year.

Current wording

Other income decreased during the three months ended May 31, 2025, primarily due to decreased interest income as a result of a smaller cash balance compared to the same period in the prior fiscal year.

Previous wording

Decreased income tax expense during the three months ended February 28, 2025, resulted primarily from lower year-to-date earnings. Effective tax rates for the three months ended February 28, 2025, and February 29, 2024, were 10.3% and 8.3%, respectively. A federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the three months ended February 28, 2025, and February 29, 2024. Income tax (benefit) expense and effective tax rates vary each year based on profitability, income tax credits, nonpatronage business activity and current equity management assumptions.

Current wording

Increased income tax expense during the three months ended May 31, 2025, resulted primarily from a change in state law that reduces future utilization of state income tax credits. Effective tax rates for the three months ended May 31, 2025 and 2024, were 10.5% and 4.1%, respectively. A federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the three months ended May 31, 2025 and 2024. Income tax (benefit) expense and effective tax rates vary each year based on profitability, income tax credits, nonpatronage business activity and current equity management assumptions.

Previous wording

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the six months ended February 28, 2025. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

Current wording

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the nine months ended May 31, 2025. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

Previous wording

•Lower margins for propane and refined fuels, mostly attributable to the timing of hedging-related impacts associated with global market conditions affecting the price of these products, contributed $15.7 million and $11.1 million of decreased IBIT, respectively.

Current wording

•Lower margins for refined fuels and propane, mostly attributable to the timing of hedging-related impacts associated with global market conditions affecting the price of these products, contributed to $37.5 million and $10.9 million of decreased IBIT, respectively.

Previous wording

•Decreased margins for our oilseed processing product category, due to higher global supply of canola and soybean meal and oil, resulting in lower crush margins compared to the prior fiscal year, contributed to a $73.0 million decrease in IBIT.

Current wording

•Decreased margins for our oilseed processing product category, due to higher global supply of soybean and canola meal and oil, resulting in lower crush margins compared to the prior fiscal year, contributed to a $87.6 million decrease in IBIT.

Previous wording

•Decreased margins for our grain and oilseed product category, primarily the result of market conditions in South America, contributed to a $51.6 million decrease in IBIT; and

Current wording

•Decreased margins for our grain and oilseed product category, primarily the result of unfavorable market conditions in Europe and South America, contributed to a $82.3 million decrease in IBIT.

Previous wording

Our Nitrogen Production segment IBIT decreased from the prior fiscal year primarily due to lower equity income attributed to decreased selling prices of urea and UAN, as well as higher natural gas costs, all due to global supply and demand factors. Corporate and Other IBIT decreased primarily as a result of lower income from our equity investment in Ventura Foods from less favorable market conditions for oil-based food products, during the six months ended February 28, 2025, compared to the same period during the prior fiscal year.

Current wording

Our Nitrogen Production segment IBIT decreased from the prior fiscal year primarily due to lower equity income attributed to higher natural gas input costs, which was partially offset by favorable market conditions associated with urea. Corporate and Other IBIT increased largely as a result of a gain on the sale of a business recognized by our equity investment Ventura Foods during the nine months ended May 31, 2025, which did not occur in the same period of the prior fiscal year.

Previous wording

•Global market conditions contributed to decreased selling prices for refined fuels that resulted in a $650.2 million decrease in revenues.

Current wording

•Global market conditions contributed to decreased selling prices for refined fuels that resulted in a $929.4 million decrease in revenues.

Previous wording

•Global market conditions contributed to decreased selling prices for refined fuels that resulted in a $101.4 million decrease in revenues, which was partially offset by increased selling prices for propane resulting from colder weather that drove a $21.4 million increase in revenues.

Current wording

•The decrease was partially offset by increased selling prices for propane that drove a $28.9 million increase in revenues and increased refined fuels volumes that contributed to a $32.1 million increase in revenues, both of which were driven by more favorable weather conditions compared to the same period of the prior year.

Previous wording

•Decreased selling prices across most of our Ag segment product categories due to global market conditions experienced during the first half of fiscal 2025, including:

Current wording

•Decreased selling prices across most of our Ag segment product categories due to global market conditions were experienced during the first nine months of fiscal 2025, including:

Previous wording

◦$2.0 billion decrease for grain and oilseed;

Current wording

◦$2.3 billion decrease for grain and oilseed;

Previous wording

◦$87.2 million decrease associated with renewable fuels; and

Current wording

◦$86.0 million decrease associated with renewable fuels.

Previous wording

There were no significant changes on a dollar basis to Corporate and Other revenues during the six months ended February 28, 2025, compared to the same period during the prior fiscal year.

Current wording

There were no significant changes to Corporate and Other revenues during the nine months ended May 31, 2025, compared to the same period during the prior fiscal year.

Previous wording

•Decreased costs resulting from global market conditions contributed to a $274.3 million decrease in COGS for refined fuels.

Current wording

•Decreased costs resulting from global market conditions contributed to a $391.5 million decrease in COGS for refined fuels.

Previous wording

•Decreased costs across most of our Ag segment product categories due to global market conditions experienced during the first half of fiscal 2025, including:

Current wording

•Decreased costs across most of our Ag segment product categories due to global market conditions were experienced during the first nine months of fiscal 2025, including:

Previous wording

There were no significant changes on a dollar basis to COGS in our Nitrogen Production segment or Corporate and Other during the six months ended February 28, 2025, compared to the same period during the prior fiscal year.

Current wording

There were no significant changes on a dollar basis to COGS in our Nitrogen Production segment or Corporate and Other during the nine months ended May 31, 2025, compared to the same period during the prior fiscal year.

Previous wording

Marketing, general and administrative expenses decreased during the six months ended February 28, 2025, primarily due to lower expenses for performance-based incentive compensation with the lower profitability of the company during the current fiscal year.

Current wording

Marketing, general and administrative expenses decreased during the nine months ended May 31, 2025, primarily due to lower expenses for performance-based incentive compensation with the lower profitability of the company during the current fiscal year.

Previous wording

Other income decreased during the six months ended February 28, 2025, primarily due to decreased interest income as a result of a smaller cash balance and lower interest rates compared to the same period in the prior fiscal year.

Current wording

Other income decreased during the nine months ended May 31, 2025, primarily due to decreased interest income as a result of a smaller cash balance compared to the same period in the prior fiscal year.

Previous wording

Decreased income tax expense during the six months ended February 28, 2025, resulted primarily from lower earnings during the current fiscal year, which was partially offset by the recognition of fewer research and development tax credits and the impact of equity management assumptions compared to the same period of the prior year. Effective tax rates for the six months ended February 28, 2025, and February 29, 2024, were 2.6% and 1.3%, respectively. A federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the three months ended February 28, 2025, and February 29, 2024. Income taxes and effective tax rates vary each year based on profitability, income tax credits, nonpatronage business activity and current equity management assumptions.

Current wording

Increased income tax expense during the nine months ended May 31, 2025, resulted primarily from a reduction in research and development tax credits, a change in state law and the impact of equity management assumptions. Effective tax rates for the nine months ended May 31, 2025 and 2024, were 7.3% and 2.1%, respectively. A federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the three months ended May 31, 2025 and 2024. Income taxes and effective tax rates vary each year based on profitability, income tax credits, nonpatronage business activity and current equity management assumptions.

Previous wording

•Capital expenditures. We expect total capital expenditures for fiscal 2025 to be approximately $764.3 million, compared to capital expenditures of $808.8 million in fiscal 2024, as we continue to invest in capital projects to meet the evolving needs of our owners and customers, enhance value for the cooperative system and focus on targeted growth during fiscal 2025. During the six months ended February 28, 2025, we acquired $357.6 million of property, plant and equipment. In addition, we acquired WCAS for $321.6 million. This acquisition expands our grain and agronomy platforms in west-central Minnesota and eastern North Dakota. and adds value for our owners. See Note 15, Acquisition, of the notes to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Current wording

•Capital expenditures. We expect total capital expenditures for fiscal 2025 to be approximately $735.4 million, compared to capital expenditures of $808.8 million in fiscal 2024, as we continue to invest in capital projects to meet the evolving needs of our owners and customers, enhance value for the cooperative system and focus on targeted growth during fiscal 2025. During the nine months ended May 31, 2025, we acquired $533.5 million of property, plant and equipment.

Previous wording

•Major maintenance. We expect total major maintenance for fiscal 2025 to be approximately $247.5 million, compared to major maintenance of $22.7 million in fiscal 2024. Increased major maintenance expectations for fiscal 2025 is due to a scheduled turnaround at our McPherson refinery. During the six months ended February 28, 2025, we paid $45.7 million in major maintenance.

Current wording

•Major maintenance. During the nine months ended May 31, 2025, we had $274.1 million in major maintenance, compared to major maintenance of $22.7 million in fiscal 2024. Increased major maintenance for fiscal 2025 is due to the previously planned turnaround at our McPherson refinery completed during the third quarter of fiscal 2025.

Previous wording

•Debt and interest. We expect to repay approximately $339.6 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $101.7 million during fiscal 2025. During the six months ended February 28, 2025, we repaid $155.7 million of scheduled long-term debt maturities and finance lease obligations.

Current wording

•Debt and interest. We expect to repay approximately $339.6 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $101.7 million during fiscal 2025. During the nine months ended May 31, 2025, we repaid $158.5 million of scheduled long-term debt maturities and finance lease obligations.

Previous wording

•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of February 28, 2025. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2025. Dividends paid on our preferred stock during the six months ended February 28, 2025, were $84.3 million.

Current wording

•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of May 31, 2025. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2025. Dividends paid on our preferred stock during the nine months ended May 31, 2025, were $126.5 million.

Previous wording

•Patronage. Our Board of Directors authorized approximately $300.0 million of our fiscal 2024 patronage-sourced earnings to be paid to our member-owners during fiscal 2025. During the six months ended February 28, 2025, we distributed $229.5 million of cash patronage related to the year ended August 31, 2024, with the remaining amount expected to be distributed in the third quarter of fiscal 2025.

Current wording

•Patronage. Our Board of Directors authorized approximately $300.0 million of our fiscal 2024 patronage-sourced earnings to be paid to our member-owners during fiscal 2025. During the nine months ended May 31, 2025, we distributed $300.3 million of cash patronage related to the year ended August 31, 2024.

Previous wording

•Equity redemptions. 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. During the six months ended February 28, 2025, we redeemed $16.3 million of member equity.

Current wording

•Equity redemptions. 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. During the nine months ended May 31, 2025, we redeemed $271.0 million of member equity.

Previous wording

As of February 28, 2025, working capital decreased by $394.0 million compared to August 31, 2024. Current asset balance changes increased working capital by $988.0 million, primarily due to an increase in inventories, which were driven by seasonality in our business. Current liability balance changes decreased working capital by $1.4 billion, primarily due to increases in notes payable, which were also driven by seasonality in our business as well as decreased profitability.

Current wording

As of May 31, 2025, working capital decreased by $741.2 million compared to August 31, 2024. Current asset balance changes increased working capital by $218.4 million, primarily due to increases in receivables and inventories, which were driven by seasonality in our business. Current liability balance changes decreased working capital by $959.6 million, primarily due to increases in notes payable, which were also driven by seasonality in our business, as well as decreased profitability.

Previous wording

For information regarding our estimated contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended August 31, 2024. No material changes occurred during the six months ended February 28, 2025.

Current wording

For information regarding our estimated contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended August 31, 2024. No material changes occurred during the nine months ended May 31, 2025.

Previous wording

The following table presents summarized cash flow data for the six months ended February 28, 2025, and February 29, 2024:

Current wording

The following table presents summarized cash flow data for the nine months ended May 31, 2025 and 2024:

Previous wording

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 $934.6 million increase in cash used in operating activities primarily reflects increased inventories, decreased accounts payable and decreased net income, which were partially offset by decreased receivables, during the first six months of fiscal 2025 compared to the same period during fiscal 2024.

Current wording

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 $795.0 million year-over-year increase in cash used in operating activities primarily reflects decreased net income, decreased accounts payable and increased inventories, which were partially offset by decreased receivables, during the first nine months of fiscal 2025 compared to the same period during fiscal 2024.

Previous wording

The $139.5 million decrease in cash used in investing activities primarily reflects increased proceeds from the sale and maturity of investments, which were partially offset by cash used for the acquisition of WCAS.

Current wording

The $32.7 million increase in cash used in investing activities primarily reflects the major maintenance at our McPherson refinery during the third quarter and cash used for the acquisition of WCAS, offset by increased proceeds from the sale and maturity of investments.

Previous wording

The $1.6 billion decrease in cash used in financing activities primarily reflects increased net cash inflows associated with our notes payable due to increased short-term funding needs for working capital.

Current wording

The $1.8 billion increase in cash provided by financing activities primarily reflects increased net cash inflows associated with our notes payable due to increased short-term funding needs for working capital.