Chs Inc 10-Q for FY2020 Q2

Chs Inc (CHSCP)

10-Q 2020-04-08 For: 2020-02-29

Added on April 09, 2026

About this 10-Q

Chs Inc filed this 10-Q on April 8, 2020, covering the quarter ended February 29, 2020 (FY2020 Q2).

Headline figures

Quarter ended February 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.6B; up 1.8% from $6.48B a year earlier
Net income: $125.45M; down 49.6% from net income of $248.77M a year earlier

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þ		Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended February 29, 2020.
or
o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to



Minnesota (State or other jurisdiction of incorporation or organization)		41-0251095 (I.R.S. Employer Identification Number)

5500 Cenex Drive Inver Grove Heights, Minnesota 55077 (Address of principal executive offices, including zip code)		(651) 355-6000 (Registrant’s telephone number, including area code)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
8% Cumulative Redeemable Preferred Stock	CHSCP	The Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 1	CHSCO	The Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2	CHSCN	The Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3	CHSCM	The Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 4	CHSCL	The Nasdaq Stock Market LLC



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o	Emerging growth company o




	PART I. FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of February 29, 2020, and August 31, 2019	2
	Condensed Consolidated Statements of Operations for the three and six months ended February 29, 2020, and February 28, 2019	3
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended February 29, 2020, and February 28, 2019	4
	Condensed Consolidated Statements of Cash Flows for the six months ended February 29, 2020, and February 28, 2019	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
	PART II. OTHER INFORMATION	57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 6.	Exhibits	57

SIGNATURE PAGE		58



	February 29, 2020			August 31, 2019
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	239,799		$	211,179
Receivables	2,042,677			2,731,209
Inventories	3,668,606			2,854,288
Other current assets	1,216,885			865,919
Total current assets	7,167,967			6,662,595
Investments	3,630,840			3,683,996
Property, plant and equipment	5,035,540			5,088,708
Other assets	1,188,268			1,012,195
Total assets	$	17,022,615		$	16,447,494
LIABILITIES AND EQUITIES
Current liabilities:
Notes payable	$	2,102,325		$	2,156,108
Current portion of long-term debt	27,115			39,210
Accounts payable	1,952,677			1,931,415
Accrued expenses	502,839			555,323
Other current liabilities	1,464,238			901,651
Total current liabilities	6,049,194			5,583,707
Long-term debt	1,732,107			1,749,901
Other liabilities	617,358			496,356
Commitments and contingencies (Note 13)
Equities:
Preferred stock	2,264,038			2,264,038
Equity certificates	4,849,513			4,988,877
Accumulated other comprehensive loss	(239,156		)	(226,933		)
Capital reserves	1,740,983			1,584,158
Total CHS Inc. equities	8,615,378			8,610,140
Noncontrolling interests	8,578			7,390
Total equities	8,623,956			8,617,530
Total liabilities and equities	$	17,022,615		$	16,447,494



	Three Months Ended						Six Months Ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
	(Dollars in thousands)
Revenues	$	6,598,226		$	6,483,539		$	14,219,711		$	14,967,828
Cost of goods sold	6,283,171			6,056,126			13,579,113			14,069,774
Gross profit	315,055			427,413			640,598			898,054
Marketing, general and administrative expenses	199,570			177,768			367,901			333,911
Operating earnings	115,485			249,645			272,697			564,143
Interest expense	33,411			41,269			68,382			80,177
Other income	(11,352		)	(11,763		)	(24,850		)	(36,897		)
Equity income from investments	(34,398		)	(41,716		)	(84,060		)	(108,224		)
Income before income taxes	127,824			261,855			313,225			629,087
Income tax expense	2,130			13,551			8,794			33,668
Net income	125,694			248,304			304,431			595,419
Net income (loss) attributable to noncontrolling interests	247			(462		)	1,102			(851		)
Net income attributable to CHS Inc.	$	125,447		$	248,766		$	303,329		$	596,270



	ASC Topic 606		ASC Topic 815		Other Guidance		Total Revenues
Three Months Ended February 29, 2020	(Dollars in thousands)
Energy	$	1,375,905	$	85,145	$	—	$	1,461,050
Ag	1,066,783		4,035,447		21,972		5,124,202
Corporate and Other	5,343		—		7,631		12,974
Total revenues	$	2,448,031	$	4,120,592	$	29,603	$	6,598,226

Three Months Ended February 28, 2019
Energy	$	1,310,529	$	164,248	$	—	$	1,474,777
Ag	984,000		3,976,765		33,780		4,994,545
Corporate and Other	4,744		—		9,473		14,217
Total revenues	$	2,299,273	$	4,141,013	$	43,253	$	6,483,539

Six Months Ended February 29, 2020
Energy	$	3,069,753	$	286,720	$	—	$	3,356,473
Ag	2,425,409		8,351,534		59,114		10,836,057
Corporate and Other	10,883		—		16,298		27,181
Total revenues	$	5,506,045	$	8,638,254	$	75,412	$	14,219,711

Six Months Ended February 28, 2019
Energy	$	3,173,056	$	463,009	$	—	$	3,636,065
Ag	2,339,825		8,890,193		69,924		11,299,942
Corporate and Other	9,978		—		21,843		31,821
Total revenues	$	5,522,859	$	9,353,202	$	91,767	$	14,967,828



	Equity Certificates											Accumulated Other Comprehensive Loss
	Capital Equity Certificates			Nonpatronage Equity Certificates			Nonqualified Equity Certificates			Preferred Stock		Accumulated Other Comprehensive Loss			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 estimates	3,387			—			(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



		Three Months Ended				Six Months Ended
	Nasdaq symbol	February 29, 2020		February 28, 2019		February 29, 2020		February 28, 2019
Class 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	0.42		0.42		1.27		1.27
Class B Cumulative Redeemable, Series 4	CHSCL	0.47		0.47		1.41		1.41



	Pension and Other Postretirement Benefits			Cash Flow Hedges			Foreign Currency Translation Adjustment			Total
	(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 out	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 tax	5,073			(5,872		)	(839		)	(1,638		)
Balance as of November 30, 2019, net of tax	$	(167,405	)	$	9,425		$	(70,591	)	$	(228,571	)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	—			(5,975		)	(8,540		)	(14,515		)
Amounts reclassified out	4,977			(1,747		)	—			3,230
Total other comprehensive income (loss), before tax	4,977			(7,722		)	(8,540		)	(11,285		)
Tax effect	(1,231		)	1,910			21			700
Other comprehensive income (loss), net of tax	3,746			(5,812		)	(8,519		)	(10,585		)
Balance as of February 29, 2020, net of tax	$	(163,659	)	$	3,613		$	(79,110	)	$	(239,156	)



	Pension and Other Postretirement Benefits			Unrealized Net Gain on Available for Sale Investments			Cash Flow Hedges			Foreign Currency Translation Adjustment			Total
	(Dollars in thousands)
Balance as of August 31, 2018, net of tax	$	(140,335	)	$	8,861		$	(5,882	)	$	(62,559	)	$	(199,915	)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	175			—			(317		)	(25		)	(167		)
Amounts reclassified out	2,565			—			(1,475		)	—			1,090
Total other comprehensive income (loss), before tax	2,740			—			(1,792		)	(25		)	923
Tax effect	(639		)	—			485			(380		)	(534		)
Other comprehensive income (loss), net of tax	2,101			—			(1,307		)	(405		)	389
Reclassifications	416			(8,861		)	983			2,756			(4,706		)
Balance as of November 30, 2018, net of tax	$	(137,818	)	$	—		$	(6,206	)	$	(60,208	)	$	(204,232	)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	102			—			18,954			3,176			22,232
Amounts reclassified out	2,564			—			(5,677		)	—			(3,113		)
Total other comprehensive income (loss), before tax	2,666			—			13,277			3,176			19,119
Tax effect	(664		)	—			(3,308		)	(263		)	(4,235		)
Other comprehensive income (loss), net of tax	2,002			—			9,969			2,913			14,884
Balance as of February 28, 2019, net of tax	$	(135,816	)	$	—		$	3,763		$	(57,295	)	$	(189,348	)



	Three Months Ended
	Qualified Pension Benefits						Nonqualified Pension Benefits						Other Benefits
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
Components of net periodic benefit costs:	(Dollars in thousands)
Service cost	$	10,538		$	9,648		$	101		$	78		$	262		$	263
Interest cost	5,431			7,099			107			187			187			274
Expected return on assets	(11,671		)	(11,242		)	—			—			—			—
Prior service cost (credit) amortization	45			42			(28		)	(19		)	(111		)	(139		)
Actuarial loss (gain) amortization	5,396			3,087			25			1			(348		)	(407		)
Settlement loss	—			169			—			—			—			—
Net periodic benefit cost	$	9,739		$	8,803		$	205		$	247		$	(10	)	$	(9	)

	Six Months Ended
	Qualified Pension Benefits						Nonqualified Pension Benefits						Other Benefits
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
Components of net periodic benefit costs:	(Dollars in thousands)
Service cost	$	21,076		$	19,296		$	203		$	155		$	525		$	527
Interest cost	10,861			14,198			214			374			374			547
Expected return on assets	(23,342		)	(22,484		)	—			—			—			—
Prior service cost (credit) amortization	89			85			(57		)	(37		)	(223		)	(278		)
Actuarial loss (gain) amortization	10,791			6,174			49			1			(696		)	(814		)
Settlement loss	—			169			—			—			—			—
Net periodic benefit cost	$	19,475		$	17,438		$	409		$	493		$	(20	)	$	(18	)



	Energy			Ag			Nitrogen Production			Corporate and Other			Reconciling Amounts			Total
Three months ended February 29, 2020	(Dollars in thousands)
Revenues, including intersegment revenues	$	1,561,908		$	5,127,441		$	—		$	14,049		$	(105,172	)	$	6,598,226
Intersegment revenues	(100,858		)	(3,239		)	—			(1,075		)	105,172			—
Revenues, net of intersegment revenues	$	1,461,050		$	5,124,202		$	—		$	12,974		$	—		$	6,598,226
Operating earnings (loss)	137,187			(6,809		)	(10,559		)	(4,334		)	—			115,485
Interest expense	(187		)	20,759			11,971			3,032			(2,164		)	33,411
Other income	(938		)	(11,395		)	(348		)	(835		)	2,164			(11,352		)
Equity (income) loss from investments	(609		)	4,672			(27,923		)	(10,538		)	—			(34,398		)
Income (loss) before income taxes	$	138,921		$	(20,845	)	$	5,741		$	4,007		$	—		$	127,824

	Energy			Ag			Nitrogen Production			Corporate and Other			Reconciling Amounts			Total
Three months ended February 28, 2019	(Dollars in thousands)
Revenues, including intersegment revenues	$	1,570,968		$	4,998,137		$	—		$	16,694		$	(102,260	)	$	6,483,539
Intersegment revenues	(96,191		)	(3,592		)	—			(2,477		)	102,260			—
Revenues, net of intersegment revenues	$	1,474,777		$	4,994,545		$	—		$	14,217		$	—		$	6,483,539
Operating earnings (loss)	301,721			(47,129		)	(9,880		)	4,933			—			249,645
Interest expense	(1,652		)	25,398			15,342			3,299			(1,118		)	41,269
Other income	(2,217		)	(10,257		)	(392		)	(15		)	1,118			(11,763		)
Equity (income) loss from investments	(995		)	128			(35,542		)	(5,307		)	—			(41,716		)
Income (loss) before income taxes	$	306,585		$	(62,398	)	$	10,712		$	6,956		$	—		$	261,855



	February 29, 2020
			Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting
	Gross Amount Recognized		Cash Collateral		Derivative Instruments		Net Amount
	(Dollars in thousands)
Derivative Assets
Commodity derivatives	$	253,320	$	—	$	39,276	$	214,044
Foreign exchange derivatives	6,274		—		5,635		639
Embedded derivative asset	18,281		—		—		18,281
Total	$	277,875	$	—	$	44,911	$	232,964
Derivative Liabilities
Commodity derivatives	$	207,978	$	4,300	$	72,867	$	130,811
Foreign exchange derivatives	52,817		—		5,635		47,182
Total	$	260,795	$	4,300	$	78,502	$	177,993



	Six Months Ended
	February 29, 2020			February 28, 2019
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	304,431		$	595,419
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of deferred major maintenance	272,652			271,911
Equity income from investments, net of distributions received	40,109			4,940
Provision for doubtful accounts	1,883			6,988
Deferred taxes	(5,763		)	33,439
Other, net	4,181			1,798
Changes in operating assets and liabilities, net of acquisitions:
Receivables	507,844			177,334
Inventories	(814,318		)	(786,527		)
Accounts payable and accrued expenses	(54,786		)	(291,812		)
Other, net	45,365			(138,741		)
Net cash provided by (used in) operating activities	301,598			(125,251		)
Cash flows from investing activities:
Acquisition of property, plant and equipment	(224,962		)	(177,991		)
Proceeds from disposition of property, plant and equipment	6,959			25,680
Expenditures for major maintenance	(8,809		)	(2,634		)
Changes in CHS Capital notes receivable, net	209,608			(30,508		)
Financing extended to customers	(4,475		)	(6,660		)
Payments from customer financing	8,709			79,809
Other investing activities, net	12,805			14,041
Net cash used in investing activities	(165		)	(98,263		)
Cash flows from financing activities:
Proceeds from notes payable and long-term debt	11,403,077			12,360,325
Payments on notes payable, long-term debt and capital lease obligations	(11,486,347		)	(12,000,939		)
Preferred stock dividends paid	(84,334		)	(84,334		)
Redemptions of equities	(8,834		)	(30,753		)
Cash patronage dividends paid	(90,030		)	(74,980		)
Other financing activities, net	(13,079		)	(30,332		)
Net cash (used in) provided by financing activities	(279,547		)	138,987
Effect of exchange rate changes on cash and cash equivalents	(5,613		)	(2,051		)
Increase (decrease) in cash and cash equivalents and restricted cash	16,273			(86,578		)
Cash and cash equivalents and restricted cash at beginning of period	299,675			543,940
Cash and cash equivalents and restricted cash at end of period	$	315,948		$	457,362



	February 29, 2020		August 31, 2019
	(Dollars in thousands)
Trade accounts receivable	$	1,373,701	$	1,803,284
CHS Capital short-term notes receivable	412,593		592,909
Other	439,624		511,821
Gross receivables	2,225,918		2,908,014
Less: allowances and reserves	183,241		176,805
Total receivables	$	2,042,677	$	2,731,209



	February 29, 2020		August 31, 2019
	(Dollars in thousands)
Grain and oilseed	$	1,305,372	$	1,024,645
Energy	783,807		717,378
Agronomy	1,423,429		954,037
Processed grain and oilseed	107,434		109,900
Other	48,564		48,328
Total inventories	$	3,668,606	$	2,854,288



	February 29, 2020		August 31, 2019
	Long	Short	Long	Short
	(Units in thousands)
Grain and oilseed (bushels)	525,334	730,285	547,096	717,522
Energy products (barrels)	13,197	8,940	13,895	4,663
Processed grain and oilseed (tons)	414	2,283	597	2,454
Crop nutrients (tons)	32	23	76	23
Ocean freight (metric tons)	90	90	295	85
Natural gas (MMBtu)	—	—	130	—



		Three Months Ended						Six Months Ended
	Location of Gain (Loss)	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
		(Dollars in thousands)
Commodity derivatives	Cost of goods sold	$	100,268		$	72,010		$	142,942		$	65,563
Foreign exchange derivatives	Cost of goods sold	(37,148		)	8,284			(47,309		)	27,981
Foreign exchange derivatives	Marketing, general and administrative expenses	195			(583		)	1,938			(1,414		)
Embedded derivative	Other income	348			392			1,917			1,963
Total		$	63,663		$	80,103		$	99,488		$	94,093



Balance Sheet Location	February 29, 2020		August 31, 2019
	(Dollars in thousands)
Other assets	$	12,649	$	9,841



		Three Months Ended						Six Months Ended
Gain (Loss) on Fair Value Hedging Relationships	Location of Gain (Loss)	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
		(Dollars in thousands)
Interest rate swaps	Interest expense	$	5,763		$	(6,052	)	$	2,808		$	(7,007	)
Hedged item	Interest expense	(5,763		)	6,052			(2,808		)	7,007
Total		$	—		$	—		$	—		$	—



		Three Months Ended				Six Months Ended
	Location of Gain	February 29, 2020		February 28, 2019		February 29, 2020		February 28, 2019
		(Dollars in thousands)
Commodity derivatives	Cost of goods sold	$	2,126	$	6,102	$	6,978	$	8,002



	February 29, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Dollars in thousands)
Assets
Commodity derivatives	$	28,321	$	250,860	$	—	$	279,181
Foreign exchange derivatives	—		6,426		—		6,426
Interest rate swap derivatives	—		12,649		—		12,649
Deferred compensation assets	45,579		—		—		45,579
Embedded derivative asset	—		18,281		—		18,281
Segregated investments	78,816		—		—		78,816
Other assets	5,965		—		—		5,965
Total	$	158,681	$	288,216	$	—	$	446,897
Liabilities
Commodity derivatives	$	61,080	$	160,165	$	—	$	221,245
Foreign exchange derivatives	—		52,817		—		52,817
Total	$	61,080	$	212,982	$	—	$	274,062



	Six Months Ended February 29, 2020
	(Dollars in thousands)
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	28,368
Operating cash flows from finance leases	485
Financing cash flows from finance leases	3,285
Supplemental noncash information:
Right of use assets obtained in exchange for lease liabilities	18,162
Right of use asset modifications	3,967



	February 29, 2020
	Finance Leases		Operating Leases
	(Dollars in thousands)
Remainder of fiscal 2020	$	3,262	$	31,933
Fiscal 2021	6,501		56,299
Fiscal 2022	5,356		43,066
Fiscal 2023	4,763		33,849
Fiscal 2024	2,800		26,747
After fiscal 2024	7,368		106,739
Total maturities of lease liabilities	30,050		298,633
Less amounts representing interest	1,706		41,551
Present value of future minimum lease payments	28,344		257,082
Less current obligations	6,136		55,436
Long-term obligations	$	22,208	$	201,646



	August 31, 2019
	Capital Leases		Operating Leases
	(Dollars in thousands)
Fiscal 2020	$	6,761	$	87,168
Fiscal 2021	6,199		57,381
Fiscal 2022	5,021		43,665
Fiscal 2023	4,548		34,328
Fiscal 2024	2,638		26,793
Thereafter	6,517		92,653
Total minimum future lease payments	31,684		$	341,988
Less amount representing interest	3,445
Present value of net minimum lease payments	$	28,239



	(Dollars in thousands)
Cash	$	8,033
Current assets	708,764
Property, plant and equipment	44,064
Goodwill	61,358
Intangible assets	47,200
Other assets	55
Liabilities	(718,262		)
Total net assets acquired	$	151,212


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


•	Ag. Purchases and further processes or resells grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; also serves as a wholesaler and retailer of agronomy products.


•	Nitrogen Production. Consists solely of our equity method investment in CF Nitrogen and produces and distributes nitrogen fertilizer.


•	We experienced lower margins in our Energy segment due to less advantageous market conditions in our refined fuels business, which were driven by lower crack spreads and decreased Western Canadian Select ("WCS") crude oil differentials experienced on heavy Canadian crude oil compared to the same period of the prior year.


•	While Ag margins have improved from the prior year, we continued to experience pressure on grain volumes and associated margins due to slow movement of grain, which primarily reflected uncertainty in the grain markets related to trade issues between the United States and its trading partners.


•	We continued to devote considerable resources toward the design, development and implementation of our new enterprise resource planning ("ERP") platform, which will provide an improved platform to execute upon our business strategies.


•	As more fully described in Item 4 of Part I of this Quarterly Report on Form 10-Q, we continued dedicating significant internal and external resources, as well as executive and board focus, to improving our control environment.



		Three Months Ended				Six Months Ended
	Market Source*	February 29, 2020		February 28, 2019		February 29, 2020		February 28, 2019
Commodity prices
Corn (dollars per bushel)	Chicago Board of Trade	$	3.79	$	3.71	$	3.81	$	3.67
Soybeans (dollars per bushel)	Chicago Board of Trade	$	9.00	$	8.98	$	9.00	$	8.79
Wheat (dollars per bushel)	Chicago Board of Trade	$	5.47	$	4.91	$	5.32	$	5.00
Urea (dollars per ton)	Green Markets NOLA	$	221.00	$	255.00	$	223.00	$	275.00
UAN (dollars per ton)	Green Markets NOLA	$	130.00	$	200.00	$	141.00	$	206.00
Ethanol (dollars per gallon)	Chicago Platts	$	1.35	$	1.27	$	1.42	$	1.28

Volumes
Grain and oilseed (thousands of bushels)		583,749		616,668		1,203,288		1,315,598
North American grain and oilseed port throughput (thousands of bushels)		127,093		136,999		263,949		314,405
Crop nutrients (thousands of tons)		1,476		1,288		3,327		2,949
Ethanol (thousands of gallons)		225,524		225,992		447,800		472,082



	Three Months Ended
	February 29, 2020			% of Revenues		February 28, 2019			% of Revenues
	(Dollars in thousands)
Revenues	$	6,598,226		100.0	%	$	6,483,539		100.0	%
Cost of goods sold	6,283,171			95.2		6,056,126			93.4
Gross profit	315,055			4.8		427,413			6.6
Marketing, general and administrative expenses	199,570			3.0		177,768			2.7
Operating earnings	115,485			1.8		249,645			3.9
Interest expense	33,411			0.5		41,269			0.6
Other income	(11,352		)	(0.2	)	(11,763		)	(0.2	)
Equity income from investments	(34,398		)	(0.5	)	(41,716		)	(0.6	)
Income before income taxes	127,824			1.9		261,855			4.0
Income tax expense	2,130			—		13,551			0.2
Net income	125,694			1.9		248,304			3.8
Net income (loss) attributable to noncontrolling interests	247			—		(462		)	—
Net income attributable to CHS Inc.	$	125,447		1.9	%	$	248,766		3.8	%



	Three Months Ended				Change
	February 29, 2020		February 28, 2019		Dollars			Percent
	(Dollars in thousands)
Income before income taxes	$	138,921	$	306,585	$	(167,664	)	(54.7	)%


•	Lower margins due to less advantageous market conditions in our refined fuels business compared to the same period of the prior year, driven by a combination of decreased crack spreads and decreased WCS crude oil differentials experienced on heavy Canadian crude oil, which is processed by our refineries.