CHS Inc. Annual Report 2023

Plain-text annual report

B:16.406" T:16.156" 5500 Cenex Drive Inver Grove Heights, MN 55077 651-355-6000 chsinc.com NASDAQ: CHSCP, CHSCO, CHSCN, CHSCM, CHSCL 2 023 C H S AN N UAL R E P ORT T : 1 0 " B : 1 0 . 2 5 " © 2023 CHS Inc. DOCUMENT NAME: 69889_CHS_2023_Annual_Report_Cover_v2.indd FILE PATH: Macintosh HD:Users:kjelland:Desktop:_WorkingFiles:_Keyline:69899_CHS_2023_AnnualReport:69889_CHS_2023_Annual_Report_Cover_v2.indd JOB #: 69889 CLIENT: CHS PUB(S): None Bleed: 16.406" x 10.25" CLIENT CODE: CHST05 Trim: 16.156" x 10" Live: None Cyan Magenta Yellow Black PMS 286 C DATE: 11-17-2023 11:41 AM USER NAME: Kjelland, Phil NOTES: None GCD: None M A E T AD: G.Hatzung CW: Client AE: S.Hendricks PM: C.LeDell PA: P.Kjelland PP: S.Chute F:0.156" F:8" F:8" F O O R P E G A P 2 1 B:16.406" T:16.156" Our purpose Creating connections to empower agriculture Our values Integrity We set high standards and hold ourselves accountable. Safety We put the well-being of our people, customers and communities ﬁrst every day. Inclusion We believe excellence and growth stem from diverse thinking. Cooperative spirit We work together for shared success and to strengthen our communities. T : 1 0 " B : 1 0 . 2 5 " DOCUMENT NAME: 69889_CHS_2023_Annual_Report_Cover_v2.indd FILE PATH: Macintosh HD:Users:kjelland:Desktop:_WorkingFiles:_Keyline:69899_CHS_2023_AnnualReport:69889_CHS_2023_Annual_Report_Cover_v2.indd JOB #: 69889 CLIENT: CHS PUB(S): None Bleed: 16.406" x 10.25" CLIENT CODE: CHST05 Trim: 16.156" x 10" Live: None Cyan Magenta Yellow Black PMS 286 C DATE: 11-17-2023 11:41 AM USER NAME: Kjelland, Phil NOTES: None GCD: None M A E T AD: G.Hatzung CW: Client AE: S.Hendricks PM: C.LeDell PA: P.Kjelland PP: S.Chute F:0.156" F:8" F:8" F O O R P E G A P 2 2 Working together elevates us all And we completed a major turnaround at our Laurel, Mont., reﬁnery to enhance its ability to produce the diesel fuel, gasoline and propane our owners need for years to come. We also continued to gain signiﬁcant ﬁnancial and supply chain strength from strategic equity method investments, including Ventura Foods, LLC; CF Nitrogen and Ardent Mills, LLC. The favorable market conditions we enjoyed in our energy and oilseed processing businesses will eventually moderate, just as they did in ﬁscal year 2023 in our agronomy wholesale and retail businesses. Our diversiﬁed portfolio will continue to help us weather those shifts while our supply chain capabilities and global market access allow us to identify and leverage new market opportunities. We are working every day to make CHS a better company as we strive to deliver exceptional results and maximize value for our owners and customers. Our priorities for ﬁscal year 2024 are focused on maintaining our current momentum while achieving continuous improvement. • We will empower our people by investing in their well-being and career growth. Our employees are the foundation of our success. • We will accelerate as one CHS, fostering a values- based culture that connects and collaborates to better serve our owners and customers. • We will leverage our ﬁnancial strength to navigate dynamic and evolving market conditions. • We will elevate sustainable growth, capitalizing on growth opportunities through empowered teams, a more integrated CHS and our solid ﬁnancial foundation. Thank you for your business and for your support of the cooperative system. Finding new ways to collaborate, building on our combined strength and maintaining our focus on the future will elevate all of us as we continue creating connections to empower agriculture. Jay Debertin President and Chief Executive Officer Dan Schurr Chair, Board of Directors 2023 CHS Annual Report 1 From left, Debertin, Schurr We are proud to share our ﬁscal year 2023 results, made possible by collaborating as a cooperative system and leveraging our combined strength to deliver true value. Your commitment as owners, the dedication of CHS employees, excellent operational performance and favorable market conditions combined to produce the strongest earnings in our 92-year history. That same strength is enabling CHS to return more than $1.7 billion in cash to our owners over two years — the largest returns in our company’s history. This shared success also reﬂects added capabilities driven by strategic investments throughout our global supply chain that are focused on meeting the needs of our owners today and for the future to help them meet their business obectives. We have completed or are underway with expansions and improvements in our soy processing facilities to help meet the global demand for soy oil and soybean meal. We expanded our TEMCO grain export joint venture to include a key asset at the Port of Houston to help owners in the Southern Plains reach new global markets. 328789_1-13.indd 1 11/28/23 2:02 PM Expanded grain export options for Southern Plains growers 2 2023 CHS Annual Report 328789_1-13.indd 2 11/20/23 3:11 PM Year in review Additional signiﬁcant grain and byproduct exporting capabilities were achieved in early calendar year 2023 when a Port of Houston terminal was added to the TEMCO global grain joint venture. The facility augments three other TEMCO terminals located in the Paciﬁc Northwest and will draw grain from the Southern Plains for export to Mexico, Latin America, South America, North Africa and Asia. In addition, expansion of a grain marketing joint venture with Mid-Kansas Cooperative will assist in originating grain for export through the TEMCO terminal at Houston. Increasing opportunities to deliver high- quality grain to customers around the world through the extensive network of domestic markets available to CHS will deliver added value and opportunities for CHS owners as they meet the growing global demand for food. Expansion of the CHS grain export terminal at Myrtle Grove, La., progressed in ﬁscal year 2023 with completion expected in early calendar year 2024. The investment will increase capacity by 30% and include energy-saving improvements. The facility loads shipments of grain and byproducts destined for customers in Europe, Latin America and the Asia Paciﬁc region. Fiscal year 2023 marked the ﬁrst full year of grain origination in South America through the Marialva transshipment facility situated in the key Paraná corridor of Brazil. A second grain transshipment site is being developed at Alvorada in Tocantins, another state in interior Brazil. Together, these facilities enhance the company’s ability to deliver grain to our global customers year-round by strengthening the supply chain to ports at Paranaguá and Santos. A new 1.25 million bushel grain-handling facility at Erskine, Minn., is set to go online just after the close of the ﬁscal year to add speed and capacity to serve CHS owners. The high-volume shuttle-loading site will send grain from the Midwest to the Paciﬁc Northwest for export to customers in Asia and the Middle East. Additional investments were made in grain-handling facilities in other upper Midwest CHS retail locations to drive growth by improving efficiency for owners delivering grain and enhancing safety for CHS employees and communities. Strong global demand for soy oil and soybean meal for food, feed, renewable fuels and manufacturing applications continued in ﬁscal year 2023 and enabled full utilization of expanded CHS soybean processing facilities as they process soybeans into crude and reﬁned soy oil, soybean meal, soy ﬂour, soy hulls and other byproducts. The Fairmont, Minn., plant recently increased crush capacity by 30% and work is underway to increase reﬁning capacity in Mankato, Minn., with planned completion in ﬁscal year 2024. 2023 CHS Annual Report 3 328789_1-13.indd 3 11/28/23 2:04 PM Across the CHS enterprise, major strides were made in collaboration and efficiency in 2023 as teams established more effective lines of communications and processes that enabled improvements such as a standardized purchasing network with preferred suppliers, a coordinated approach for serving key accounts and software-enabled transportation and logistics planning across product lines. These efforts and ongoing transition to a single technology platform enabled by SAP are helping to reduce administrative and operational costs and provide better service to owners and customers. CHS Hedging delivered strong results for the year while undergoing signiﬁcant transformation to become a more nimble, responsive partner to meet the evolving needs of its commercial agribusiness customers. The business also continued to make signiﬁcant investments to further enhance its risk management and compliance capabilities. While the two CHS reﬁneries in McPherson, Kan., and Laurel, Mont., exceeded production goals for all reﬁned fuels and maximized output for diesel fuel used by CHS owners and customers, overall reﬁned fuels production was slightly lower than ﬁscal 2022 levels due to the planned major turnaround at the Laurel reﬁnery in mid-2023. The turnaround provided efficiency and sustainability improvements that will beneﬁt CHS and owners over the next several years. The CHS liquid fuels advocacy group continued efforts to advocate for support of liquid fuels to meet the needs of customers and cooperative owners amid carbon-reducing policy adoption. As a versatile energy supplier, CHS continued to support favorable E15 regulations so that higher ethanol-blended fuels can be available to Cenex® retailers and customers year-round. At the close of the year, 33 CHS terminals were distributing E15 blended fuels. The four-year initiative to update exterior branding and lighting at all Cenex® reﬁned fuels retail locations to enhance the customer experience continued in ﬁscal year 2023 with more than 80% of location updates complete or in process. This support helped add another 24 retail stores to the Cenex brand family, representing more than 17 million gallons in gasoline volume. Continued partnership with CHS Capital helped retailers access ﬁnancing to support new Cenex brand retail store construction and store upgrades. Over the past three years, more than $50 million has been invested and an additional $33 million is planned to help retailers build customer prefence and store revenues in the competitive retail landscape. The CHS-owned Cenex Zip Trip® convenience store chain built momentum in South Dakota and other northern-tier states, adding strength to the CHS energy supply chain through strategic investments and by leveraging the strength of the Cenex brand. 4 2023 CHS Annual Report 328789_1-13.indd 4 11/20/23 3:12 PM 24 Cenex® brand retail stores joined the network 328789_1-13.indd 5 11/28/23 2:05 PM 2023 CHS Annual Report 5 30% growth in soy crush and reﬁning capacity 6 2023 CHS Annual Report 328789_1-13.indd 6 11/20/23 3:12 PM Efforts to increase market share in new geographic areas and nontraditional markets, including in production of foodgrade products, brought added opportunities to the lubricants business and increased margins on non-Cenex branded products by 38% compared to the previous ﬁscal year. The company’s three lubricants blending plants completed a remarkable ﬁfth consecutive year with no lost-time injuries; we are proud of this result, which aligns with our value of safety. Signiﬁcant cost savings and volume growth were achieved in the propane business through continued focus on supply chain efficiency, despite reduced demand due to limited crop-drying needs during the 2022 fall harvest season and warm winter weather. Opened at the start of ﬁscal year 2024, a new propane rail terminal near Yuma, Colo., with 360,000 gallons of storage will help CHS meet shifting wholesale and retail customer demand in the region. Strong gasoline demand during the year also enhanced revenue from butane blending operations. Strategic alignment with businesses across the CHS enterprise helped the energy equipment team overcome supply chain disruptions to deliver continued superior customer service and signiﬁcant growth in ﬁscal year 2023, including a fourth consecutive year of record sales. With a focus on aligning transportation and logistics with CHS distribution assets, a new transportation organizational structure, including appointment of a new leader, has started to bring improved efficiency and alignment to support product line growth across our evolving business. Market volatility for crop nutrients continued in early ﬁscal year 2023 with an overall reduction in product values from historical highs the previous year. The CHS global and domestic supply chain provided reliable supply of nitrogen, phosphorus and potassium fertilizers, including stable access to domestic supply through the company’s investment CF Nitrogen. Investment in the CHS deep-water port at Galveston, Texas, will extend the facility’s ability to accept large-scale shipments from global suppliers to meet CHS owner needs. Enabling a center-led end- to-end supply chain approach for crop nutrients from manufacturer to the farmgate is providing superior risk management, supply chain resilience, inventory control and owner value. CHS and CF Industries began plans to distribute low- carbon nitrogen fertilizer to help reduce greenhouse gas emissions related to agriculture and food production. The new initiative will employ carbon capture and sequestration technologies in production of ammonia, a key component in nitrogen fertilizers, to reduce carbon dioxide emissions. Collaboration between CHS Capital and the CHS agronomy team led to strong growth in the Accolade Producer ﬁnancing program, which helps farmer-owners manage operating costs and reduce risks related to cash ﬂow variability inherent with crop production. 2023 CHS Annual Report 7 328789_1-13.indd 7 11/28/23 2:05 PM CHS innovation in strategic crop nutrient use, including variable-rate application techniques, starter fertilizers and micronutrients help farmer-owners increase return on their seed and other crop input investments. XLR-rate® liquid starter fertilizers saw record sales and CHS Lumen®, an advanced starter fertilizer, was tested in multiple locations during the 2023 growing season with expanded use anticipated in 2024. N-Edge® Pro, one of the enhanced efficiency fertilizers available from CHS, gained increased adoption from growers looking to protect above- and below-ground nitrogen fertilizer applications while navigating increasingly variable weather conditions. The ongoing collaboration between the CHS agronomy supply teams and CHS reﬁning operations in McPherson, Kan., and Laurel, Mont., provided added-value ammonium thiosulfate (ATS) fertilizer to cooperative owners in targeted U.S. crop production regions. An example of the power of combining efforts across the CHS enterprise, these efforts reduced transportation costs, enhanced product availability and helped optimize reﬁnery operations through more effective byproduct utilization. Broad variability in growing conditions across the company’s trade area, including severe drought in many areas, and overall softening of crop protection prices during ﬁscal year 2023 reduced revenues in the CHS crop protection business. Deep relationships with suppliers, agronomic expertise and extensive local presence helped ensure cooperatives and growers had access to the adjuvants, herbicides and other crop protection products needed to optimize crops despite challenging market conditions. A 12% increase in year-over-year revenues for Allegiant® corn and soybean seed resulted from stronger adoption and customer satisfaction in the genetics offerings provided by CHS to rapidly meet farmer-owners’ evolving crop production needs. Aligning sales and marketing strategies and continuing to provide localized expertise through CHS agronomy experts helped make Allegiant seed the ﬁrst choice for more customers. The CHS animal nutrition business recorded earnings just short of expectations, despite reduced margins related to signiﬁcant increases in operating costs including inputs and freight charges. Capital investments in automation and facility upgrades will help the business deliver efficiency as it offers high- quality products for ag, lifestyle and commercial customers feeding beef, dairy, horses, swine, sheep, poultry and other livestock through its Payback® and Equis® brands. Ventura Foods, LLC, a joint venture between CHS and Mitsui, Inc., provides foodservice customers in more than 60 countries with dressings, sauces, mayonnaises, shortenings and other oil-based ingredients. In 2023, Ventura Foods completed strategic divestment of its Marie’s salad dressing and Dean’s Dip consumer brands businesses to maintain focus on its business-to-business strength and better leverage company capabilities for future growth. Ardent Mills, LLC, a CHS joint venture with Cargill Incorporated and Conagra Brands, continued its long-term growth strategy across its traditional ﬂour and alternative grain portfolios through its strong focus on purpose-powered innovation and food safety. As the company evolves its Emerging Nutrition platform, it anticipates and responds to changing consumer demand, while gaining efficiency advantages. CHS remains the largest wheat supplier to Ardent Mills, providing more than 46 million bushels in ﬁscal year 2023. 8 2023 CHS Annual Report 328789_1-13.indd 8 11/20/23 3:13 PM 12% growth in Allegiant® seed revenues 328789_1-13.indd 9 11/28/23 2:06 PM 2023 CHS Annual Report 9 $4.3 million grant to National FFA to develop future leaders 10 2023 CHS Annual Report 328789_1-13.indd 10 11/20/23 3:14 PM Acting on a long-held commitment to sustainability, CHS enhanced its sustainability strategy in ﬁscal year 2023 to focus on climate, deforestation, stakeholder engagement and communication, and people and communities. Additional rigor was applied to assessing greenhouse gas emissions from the company’s reﬁneries and engaging governance with oversight provided by the CHS Board of Directors Corporate Risk Committee and the CHS Sustainability and Innovation Council, a cross-functional group of company leaders. Cooperative Ventures, a $50 million corporate venture capital fund created by CHS and Growmark to identify and foster ag tech innovation, funded its ﬁrst two startups in ﬁscal year 2023: Sabanto, which is developing autonomous capabilities for tractors and other farm equipment, and EarthOptics, which has developed proprietary sensor technology to precisely measure soil health and structure. Both initiatives hold promise for improving farm efficiency and productivity and beneﬁting CHS owners across rural America. Cybersecurity and data protection remained a focus for the company amid the ongoing threat of cyberattacks. Risk was managed through stringent technical requirements, employee training and awareness and continued attention to policies and procedures. With safety as a core value at CHS, several business units developed safe work plans to further address signiﬁcant safety risks through stronger controls and processes for notiﬁcation and escalation. The CHS commercial ﬂeet held its position in the top tier of U.S. carriers with the lowest crash rates, supported by in-cab cameras encouraging safe driving behaviors. Advocating for agriculture and cooperatives among federal, state and local policymakers, the CHS government affairs team addressed key issues such as climate-smart practices, liquid fuels industry collaboration, transportation and infrastructure policies, international trade relations and the 2023 Farm Bill. Combined with targeted advocacy and strategic political giving, the team builds relationships with key inﬂuencers to ensure CHS owners have a recognized and respected voice at all levels of government. Our unwavering commitment to compliance and integrity stems from being a values-driven company, including practicing integrity in everything we do. The compliance and integrity team focused on risk areas including security and commodity trading and promoted an ethical culture while providing tools, education and communications to support operating with integrity. A new learning management system with online and in-person components delivered training to the right employees at the right time in transition to a center-led learning and development strategy. Engaging learning experiences coupled with videos, job aids and support from integrity champions across the company helped employees follow the CHS code of conduct and built trust among stakeholders. CHS stewardship efforts, driven by the CHS Foundation and CHS community giving, combined in ﬁscal year 2023 to contribute $6 million to promote ag safety, develop future leaders and build strong communities. At the close of the year, the CHS Foundation made a three-year $4.3 million grant to National FFA to support multiple initiatives from ag teacher recruitment and retention and cooperative business model education to efforts to enhance access to FFA learning opportunities. In partnership with member cooperatives, the CHS Seeds for Stewardship matching grants program invested more than $365,000 in projects to beneﬁt more than 160 communities. The CHS Employee Giving Campaign was expanded in ﬁscal year 2023 to make a difference for more than 740 organizations by matching employee contributions to reach a combined commitment of $1.3 million in charitable donations. More than 650 employees participated in the CHS Spirit of Service Days companywide volunteer event, making an impact in 35 communities. Exceeding the program reach goal by more than 50%, current and future leaders at 65 member cooperatives built personal and team leadership skills in ﬁscal year 2023 through CHS Cooperative Leadership Academy programs. Strategic talent and business planning resources were provided to cooperatives across the CHS trade area, giving them tools to help them reach their business goals and strengthening the cooperative system. High-visibility sports sponsorships in the upper Midwest, including programs with the Minnesota Twins, St. Paul Saints and Minnesota Wild, raised awareness of the CHS brand to reach potential employees and business partners. CHS presence also supports CHS owners by demonstrating agriculture’s value to communities and the world. 328789_1-13.indd 11 11/28/23 2:06 PM 2023 CHS Annual Report 11 Fiscal 2023 financial highlights Revenues ($ in billions) Cash Returns ($ in millions) 50 45 40 35 30 25 20 15 10 5 0 1,200 1,000 800 600 400 200 0 cash patronage equity redemption preferred stock 2019 31.9 2020 28.4 2021 38.4 2022 47.8 2023 45.6 2019 330.0 2020 355.2 2021 278.1 2022 331.5 2023 1,167.5 Net Income ($ in millions) Cash patronage is distributed in the ﬁscal year shown and based on amounts using ﬁnancial statements earnings from the prior ﬁscal year. 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2019 829.9 2020 422.4 2021 554.0 2022 1,678.8 2023 1,900.4 12 2023 CHS Annual Report 328789_1-13.indd 12 11/20/23 3:14 PM Net income of $1.9 billion exceeds previous high; CHS intends to return $730 million in cash to owners in ﬁscal year 2024 Consolidated net income increased in ﬁscal 2023 compared with ﬁscal 2022, reﬂecting strong Energy segment earnings due to favorable market conditions in our reﬁned fuels business. Robust demand for oilseed meal and oil also contributed to higher earnings in our soybean and canola processing business. Our equity method investment in CF Nitrogen continued to perform well, despite decreased market prices for urea and urea ammonium nitrate (UAN), and our equity method investment in Ventura Foods, LLC, delivered increased income in response to favorable market conditions for edible oils. CHS reported net income of $1.9 billion for ﬁscal year 2023 (Sept. 1, 2022, through Aug. 31, 2023) compared with $1.7 billion in net income in ﬁscal year 2022 (Sept. 1, 2021, through Aug. 31, 2022). Consolidated revenues for ﬁscal year 2023 were $45.6 billion, compared with $47.8 billion in ﬁscal year 2022. The company reported income before income taxes of $2.0 billion for ﬁscal 2023, compared with $1.8 billion in pretax income in ﬁscal 2022. Energy Energy segment income before income taxes for ﬁscal year 2023 was $1.1 billion, a $458.9 million increase over ﬁscal 2022. This signiﬁcant income increase was attributed to higher reﬁning margins and favorable pricing on the heavy Canadian crude oil processed at our reﬁneries, although it was partially offset by major planned maintenance at our Laurel, Mont., reﬁnery. Higher margins in our propane business due to favorable market conditions also contributed to the year’s results. Ag The Ag segment, which includes our global grain marketing, processing, country operations and wholesale agronomy businesses, recorded pretax earnings of $411.8 million in ﬁscal year 2023, a decrease of $245.8 million from ﬁscal year 2022. While strong oilseed meal and oil demand drove increased margins in processing, the overall segment year-over-year decline reﬂected decreased margins for wholesale and retail agronomy products, which resulted from market-driven price reductions compared to historically high prices recorded in the previous ﬁscal year. Lower margins for ethanol due to declining market prices and a negative impact from grain and oilseed mark-to-market adjustments also contributed to results. Nitrogen Production The Nitrogen Production segment, which consists of our investment in CF Nitrogen, reported pretax earnings of $260.8 million in ﬁscal year 2023, a decrease of $217.2 million from ﬁscal year 2022. The decrease reﬂects reduced equity income from our CF Nitrogen investment, which was attributed to lower market prices for urea and UAN. The Corporate and Other category recorded $259.8 million in income before income taxes in ﬁscal year 2023. This $201.9 million increase over the prior year reﬂected increased equity income from our Ventura Foods joint venture, which experienced more favorable market conditions for edible oils. Increased interest income contributed to results in this category, which also includes our investment in the Ardent Mills, LLC, wheat-milling joint venture; CHS Capital, LLC, our wholly-owned ﬁnancing subsidiary; and CHS Hedging, LLC, our wholly-owned brokerage subsidiary. Based on ﬁscal year 2023 earnings, CHS intends to distribute $730 million in cash returns to owners in ﬁscal year 2024, including $365 million in cash patronage and $365 million in equity redemptions to member cooperatives and individual owners. 328789_1-13.indd 13 11/28/23 2:06 PM 2023 CHS Annual Report 13 The principal considerations for our determination that performing procedures relating to the valuation of grain The principal considerations for our determination that performing procedures relating to the valuation of grain inventories and grain forward commodity purchase and sales contracts is a critical audit matter are (i) the significant inventories and grain forward commodity purchase and sales contracts is a critical audit matter are (i) the significant judgment by management to determine the net realizable value of grain inventories and the fair value of grain judgment by management to determine the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts and (ii) a high degree of auditor judgment, subjectivity and effort forward commodity purchase and sales contracts and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s inputs related to exchange traded prices and/or recent in performing procedures and evaluating management’s inputs related to exchange traded prices and/or recent market bids and offers, including location-specific adjustments. market bids and offers, including location-specific adjustments. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the net realizable value of grain inventories and the fair value of grain forward management’s process for determining the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts; (ii) evaluating the appropriateness of the valuation models; (iii) testing the commodity purchase and sales contracts; (ii) evaluating the appropriateness of the valuation models; (iii) testing the accuracy of the underlying data used in the valuations; and (iv) evaluating the reasonableness of inputs used by accuracy of the underlying data used in the valuations; and (iv) evaluating the reasonableness of inputs used by management related to the exchange traded prices and/or recent market bids and offers, including location-specific management related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Evaluating management’s inputs related to the exchange traded prices and/or recent market bids and adjustments. Evaluating management’s inputs related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments involved (i) comparing the exchange traded prices and/or recent offers, including location-specific adjustments involved (i) comparing the exchange traded prices and/or recent market bids and location-specific inputs to third-party information; and (ii) comparing the location-specific market bids and location-specific inputs to third-party information; and (ii) comparing the location-specific adjustments to broker or dealer quotations or market transactions in either listed or over-the- counter markets. adjustments to broker or dealer quotations or market transactions in either listed or over-the- counter markets. Minneapolis, Minnesota Minneapolis, Minnesota November 8, 2023 November 8, 2023 We have served as the Company’s auditor since 1998. We have served as the Company’s auditor since 1998. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CHS Inc. To the Board of Directors and Shareholders of CHS Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of CHS Inc. and its subsidiaries (the “Company”) as of August 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in equities and of cash flows for each of the three years in the period ended August 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of CHS Inc. and its subsidiaries (the “Company”) as of August 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in equities and of cash flows for each of the three years in the period ended August 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Grain Inventories and Grain Forward Commodity Purchase and Sales Contracts As described in Notes 4, 15, and 16 to the consolidated financial statements, the Company’s grain and oilseed inventories were $1,100.0 million as of August 31, 2023, and commodity derivatives in an asset and liability position were $280.4 million and $349.1 million, respectively, as of August 31, 2023, of which grain and oilseed make up the majority of forward commodity purchase and sales contracts. Management enters into various derivative instruments to manage the Company’s exposure to movements primarily associated with agricultural and energy commodity prices. The net realizable value of grain inventories and fair value of grain forward commodity purchase and sales contracts are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either listed or over-the- counter markets. Valuation of Grain Inventories and Grain Forward Commodity Purchase and Sales Contracts As described in Notes 4, 15, and 16 to the consolidated financial statements, the Company’s grain and oilseed inventories were $1,100.0 million as of August 31, 2023, and commodity derivatives in an asset and liability position were $280.4 million and $349.1 million, respectively, as of August 31, 2023, of which grain and oilseed make up the majority of forward commodity purchase and sales contracts. Management enters into various derivative instruments to manage the Company’s exposure to movements primarily associated with agricultural and energy commodity prices. The net realizable value of grain inventories and fair value of grain forward commodity purchase and sales contracts are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either listed or over-the- counter markets. 14 2023 CHS Annual Report 14 2023 CHS Annual Report 2023 CHS Annual Report 15 2023 CHS Annual Report 15 328789_14-57.indd 14 11/28/23 3:21 PM The principal considerations for our determination that performing procedures relating to the valuation of grain inventories and grain forward commodity purchase and sales contracts is a critical audit matter are (i) the significant judgment by management to determine the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s inputs related to exchange traded prices and/or recent market bids and offers, including location-specific adjustments. The principal considerations for our determination that performing procedures relating to the valuation of grain inventories and grain forward commodity purchase and sales contracts is a critical audit matter are (i) the significant judgment by management to determine the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s inputs related to exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts; (ii) evaluating the appropriateness of the valuation models; (iii) testing the accuracy of the underlying data used in the valuations; and (iv) evaluating the reasonableness of inputs used by management related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Evaluating management’s inputs related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments involved (i) comparing the exchange traded prices and/or recent market bids and location-specific inputs to third-party information; and (ii) comparing the location-specific adjustments to broker or dealer quotations or market transactions in either listed or over-the- counter markets. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the net realizable value of grain inventories and the fair value of grain forward commodity purchase and sales contracts; (ii) evaluating the appropriateness of the valuation models; (iii) testing the accuracy of the underlying data used in the valuations; and (iv) evaluating the reasonableness of inputs used by management related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Evaluating management’s inputs related to the exchange traded prices and/or recent market bids and offers, including location-specific adjustments involved (i) comparing the exchange traded prices and/or recent market bids and location-specific inputs to third-party information; and (ii) comparing the location-specific adjustments to broker or dealer quotations or market transactions in either listed or over-the- counter markets. Minneapolis, Minnesota November 8, 2023 Minneapolis, Minnesota November 8, 2023 We have served as the Company’s auditor since 1998. We have served as the Company’s auditor since 1998. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CHS Inc. To the Board of Directors and Shareholders of CHS Inc. Opinion on the Financial Statements Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of CHS Inc. and its subsidiaries (the “Company”) as We have audited the accompanying consolidated balance sheets of CHS Inc. and its subsidiaries (the “Company”) as of August 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of of August 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in equities and of cash flows for each of the three years in the period ended August 31, 2023, including the changes in equities and of cash flows for each of the three years in the period ended August 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023 in conformity with accounting principles generally accepted in the United States of America. August 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. disclosures to which it relates. Valuation of Grain Inventories and Grain Forward Commodity Purchase and Sales Contracts Valuation of Grain Inventories and Grain Forward Commodity Purchase and Sales Contracts As described in Notes 4, 15, and 16 to the consolidated financial statements, the Company’s grain and oilseed As described in Notes 4, 15, and 16 to the consolidated financial statements, the Company’s grain and oilseed inventories were $1,100.0 million as of August 31, 2023, and commodity derivatives in an asset and liability position inventories were $1,100.0 million as of August 31, 2023, and commodity derivatives in an asset and liability position were $280.4 million and $349.1 million, respectively, as of August 31, 2023, of which grain and oilseed make up the were $280.4 million and $349.1 million, respectively, as of August 31, 2023, of which grain and oilseed make up the majority of forward commodity purchase and sales contracts. Management enters into various derivative instruments majority of forward commodity purchase and sales contracts. Management enters into various derivative instruments to manage the Company’s exposure to movements primarily associated with agricultural and energy commodity to manage the Company’s exposure to movements primarily associated with agricultural and energy commodity prices. The net realizable value of grain inventories and fair value of grain forward commodity purchase and sales prices. The net realizable value of grain inventories and fair value of grain forward commodity purchase and sales contracts are determined using inputs that are generally based on exchange traded prices and/or recent market bids contracts are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments. Location-specific inputs are driven by local market supply and and offers, including location-specific adjustments. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either listed or over-the- demand and are generally based on broker or dealer quotations or market transactions in either listed or over-the- counter markets. counter markets. 14 2023 CHS Annual Report 14 2023 CHS Annual Report 2023 CHS Annual Report 15 2023 CHS Annual Report 15 328789_14-57.indd 15 11/28/23 3:21 PM CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED STATEMENTS OF OPERATIONS AUGUST 31, (DOLLARS IN THOUSANDS) AUGUST 31, (DOLLARS IN THOUSANDS) ASSETS ASSETS Current assets: Current assets: Cash and cash equivalents Cash and cash equivalents Receivables Receivables Inventories Inventories Other current assets Other current assets Total current assets Total current assets Investments Investments Property, plant and equipment Property, plant and equipment Other assets Other assets Total assets Total assets LIABILITIES AND EQUITIES LIABILITIES AND EQUITIES Current liabilities: Current liabilities: Notes payable Notes payable Current portion of long-term debt Current portion of long-term debt Accounts payable Accounts payable Accrued expenses Accrued expenses Other current liabilities Other current liabilities Total current liabilities Total current liabilities Long-term debt Long-term debt Other liabilities Other liabilities Commitments and contingencies (Note 17) Commitments and contingencies (Note 17) Equities: Equities: Preferred stock Preferred stock Equity certificates Equity certificates Accumulated other comprehensive loss Accumulated other comprehensive loss Capital reserves Capital reserves Total CHS Inc. equities Total CHS Inc. equities Noncontrolling interests Noncontrolling interests Total equities Total equities Total liabilities and equities Total liabilities and equities The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries 2023 2023 2022 2022 $ $ 1,765,286 1,765,286 3,105,811 3,105,811 3,215,179 3,215,179 1,042,373 1,042,373 9,128,649 9,128,649 3,828,872 3,828,872 4,869,373 4,869,373 1,130,524 1,130,524 $ 18,957,418 $ 18,957,418 $ $ 793,957 793,957 3,548,315 3,548,315 3,652,871 3,652,871 1,382,704 1,382,704 9,377,847 9,377,847 3,728,006 3,728,006 4,744,959 4,744,959 973,995 973,995 $ 18,824,807 $ 18,824,807 $ $ 547,923 547,923 $ $ 606,719 606,719 7,839 7,839 2,930,607 2,930,607 773,054 773,054 1,639,771 1,639,771 5,899,194 5,899,194 1,819,819 1,819,819 786,016 786,016 2,264,038 2,264,038 5,911,649 5,911,649 (265,395) (265,395) 2,537,486 2,537,486 10,447,778 10,447,778 4,611 4,611 10,452,389 10,452,389 $ 18,957,418 $ 18,957,418 290,605 290,605 3,063,310 3,063,310 784,317 784,317 2,207,018 2,207,018 6,951,969 6,951,969 1,668,209 1,668,209 743,363 743,363 2,264,038 2,264,038 5,391,236 5,391,236 (255,335) (255,335) 2,055,682 2,055,682 9,455,621 9,455,621 5,645 5,645 9,461,266 9,461,266 $ 18,824,807 $ 18,824,807 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS 2023 2023 2022 2022 2021 2021 $ 45,590,004 $ 45,590,004 $ 47,791,666 $ 47,791,666 $ 38,448,033 $ 38,448,033 43,213,739 43,213,739 45,664,745 45,664,745 37,496,634 37,496,634 2,376,265 2,376,265 1,032,765 1,032,765 1,343,500 1,343,500 137,442 137,442 (112,131) (112,131) (689,590) (689,590) 2,007,779 2,007,779 107,655 107,655 1,900,124 1,900,124 (314) (314) 2,126,921 2,126,921 997,835 997,835 1,129,086 1,129,086 114,156 114,156 (23,760) (23,760) (771,327) (771,327) 1,810,017 1,810,017 132,116 132,116 1,677,901 1,677,901 (861) (861) 951,399 951,399 745,602 745,602 205,797 205,797 104,565 104,565 (59,559) (59,559) (354,529) (354,529) 515,320 515,320 (38,249) (38,249) 553,569 553,569 (383) (383) $ 1,900,438 1,900,438 $ $ 1,678,762 1,678,762 $ $ $ 553,952 553,952 Marketing, general and administrative expenses Marketing, general and administrative expenses YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Revenues Revenues Cost of goods sold Cost of goods sold Gross profit Gross profit Operating earnings Operating earnings Interest expense Interest expense Other income Other income Equity income from investments Equity income from investments Income before income taxes Income before income taxes Income tax expense (benefit) Income tax expense (benefit) Net income Net income Net loss attributable to noncontrolling interests Net loss attributable to noncontrolling interests Net income attributable to CHS Inc. Net income attributable to CHS Inc. The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CHS Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Net income Net income Other comprehensive (loss) income, net of tax: Other comprehensive (loss) income, net of tax: Pension and other postretirement benefits Pension and other postretirement benefits Cash flow hedges Cash flow hedges Foreign currency translation adjustment Foreign currency translation adjustment Other comprehensive (loss) income, net of tax Other comprehensive (loss) income, net of tax Comprehensive income Comprehensive income Comprehensive loss attributable to noncontrolling interests Comprehensive loss attributable to noncontrolling interests Comprehensive income attributable to CHS Inc. Comprehensive income attributable to CHS Inc. The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CHS Inc. and Subsidiaries 2023 2023 2022 2022 2021 2021 $ 1,900,124 $ 1,900,124 $ 1,677,901 $ 1,677,901 $ 553,569 $ 553,569 (5,285) (5,285) (6,811) (6,811) 2,036 2,036 (10,060) (10,060) 1,890,064 1,890,064 (314) (314) (27,255) (27,255) 4,019 4,019 (15,708) (15,708) (38,944) (38,944) 1,638,957 1,638,957 (861) (861) 18,295 18,295 (6,062) (6,062) 5,300 5,300 17,533 17,533 571,102 571,102 (383) (383) $ 1,890,378 $ 1,890,378 $ 1,639,818 $ 1,639,818 $ 571,485 $ 571,485 16 2023 CHS Annual Report 16 2023 CHS Annual Report 2023 CHS Annual Report 17 2023 CHS Annual Report 17 328789_14-57.indd 16 11/28/23 3:21 PM CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ASSETS ASSETS Current assets: Current assets: Cash and cash equivalents Cash and cash equivalents Receivables Receivables Inventories Inventories Other current assets Other current assets Total current assets Total current assets Investments Investments Property, plant and equipment Property, plant and equipment Other assets Other assets Total assets Total assets LIABILITIES AND EQUITIES LIABILITIES AND EQUITIES Current liabilities: Current liabilities: Notes payable Notes payable Current portion of long-term debt Current portion of long-term debt Accounts payable Accounts payable Accrued expenses Accrued expenses Other current liabilities Other current liabilities Total current liabilities Total current liabilities Long-term debt Long-term debt Other liabilities Other liabilities Equities: Equities: Preferred stock Preferred stock Equity certificates Equity certificates Capital reserves Capital reserves Total CHS Inc. equities Total CHS Inc. equities Noncontrolling interests Noncontrolling interests Total equities Total equities Total liabilities and equities Total liabilities and equities Commitments and contingencies (Note 17) Commitments and contingencies (Note 17) Accumulated other comprehensive loss Accumulated other comprehensive loss The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CHS Inc. and Subsidiaries 2023 2023 2022 2022 $ $ $ $ $ 18,957,418 $ 18,957,418 $ 18,824,807 $ 18,824,807 1,765,286 1,765,286 3,105,811 3,105,811 3,215,179 3,215,179 1,042,373 1,042,373 9,128,649 9,128,649 3,828,872 3,828,872 4,869,373 4,869,373 1,130,524 1,130,524 547,923 547,923 7,839 7,839 2,930,607 2,930,607 773,054 773,054 1,639,771 1,639,771 5,899,194 5,899,194 1,819,819 1,819,819 786,016 786,016 2,264,038 2,264,038 5,911,649 5,911,649 (265,395) (265,395) 2,537,486 2,537,486 10,447,778 10,447,778 4,611 4,611 10,452,389 10,452,389 $ 18,957,418 $ 18,957,418 793,957 793,957 3,548,315 3,548,315 3,652,871 3,652,871 1,382,704 1,382,704 9,377,847 9,377,847 3,728,006 3,728,006 4,744,959 4,744,959 973,995 973,995 606,719 606,719 290,605 290,605 3,063,310 3,063,310 784,317 784,317 2,207,018 2,207,018 6,951,969 6,951,969 1,668,209 1,668,209 743,363 743,363 2,264,038 2,264,038 5,391,236 5,391,236 (255,335) (255,335) 2,055,682 2,055,682 9,455,621 9,455,621 5,645 5,645 9,461,266 9,461,266 $ 18,824,807 $ 18,824,807 YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) Revenues Revenues Cost of goods sold Cost of goods sold Gross profit Gross profit Marketing, general and administrative expenses Marketing, general and administrative expenses Operating earnings Operating earnings Interest expense Interest expense Other income Other income Equity income from investments Equity income from investments Income before income taxes Income before income taxes Income tax expense (benefit) Income tax expense (benefit) Net income Net income Net loss attributable to noncontrolling interests Net loss attributable to noncontrolling interests Net income attributable to CHS Inc. Net income attributable to CHS Inc. 2023 2023 2022 2022 2021 2021 $ 45,590,004 $ 45,590,004 43,213,739 43,213,739 2,376,265 2,376,265 1,032,765 1,032,765 1,343,500 1,343,500 137,442 137,442 $ 47,791,666 $ 47,791,666 45,664,745 45,664,745 2,126,921 2,126,921 997,835 997,835 1,129,086 1,129,086 114,156 114,156 (112,131) (112,131) (689,590) (689,590) (23,760) (23,760) (771,327) (771,327) 2,007,779 2,007,779 107,655 107,655 1,810,017 1,810,017 132,116 132,116 1,900,124 1,900,124 (314) (314) 1,677,901 1,677,901 (861) (861) $ 38,448,033 $ 38,448,033 37,496,634 37,496,634 951,399 951,399 745,602 745,602 205,797 205,797 104,565 104,565 (59,559) (59,559) (354,529) (354,529) 515,320 515,320 (38,249) (38,249) 553,569 553,569 (383) (383) $ 1,900,438 1,900,438 $ $ 1,678,762 1,678,762 $ $ $ 553,952 553,952 $ $ $ $ The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) Net income Net income 2023 2023 2022 2022 2021 2021 $ 1,900,124 $ 1,900,124 $ 1,677,901 $ 1,677,901 $ 553,569 $ 553,569 Other comprehensive (loss) income, net of tax: Other comprehensive (loss) income, net of tax: Pension and other postretirement benefits Pension and other postretirement benefits Cash flow hedges Cash flow hedges Foreign currency translation adjustment Foreign currency translation adjustment Other comprehensive (loss) income, net of tax Other comprehensive (loss) income, net of tax Comprehensive income Comprehensive income Comprehensive loss attributable to noncontrolling interests Comprehensive loss attributable to noncontrolling interests (5,285) (5,285) (6,811) (6,811) 2,036 2,036 (10,060) (10,060) (27,255) (27,255) 4,019 4,019 (15,708) (15,708) (38,944) (38,944) 1,890,064 1,890,064 (314) (314) 1,638,957 1,638,957 (861) (861) 18,295 18,295 (6,062) (6,062) 5,300 5,300 17,533 17,533 571,102 571,102 (383) (383) Comprehensive income attributable to CHS Inc. Comprehensive income attributable to CHS Inc. $ 1,890,378 $ 1,890,378 $ 1,639,818 $ 1,639,818 $ 571,485 $ 571,485 The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries 16 2023 CHS Annual Report 16 2023 CHS Annual Report 2023 CHS Annual Report 17 2023 CHS Annual Report 17 328789_14-57.indd 17 11/28/23 3:21 PM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITIES YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 EQUITY CERTIFICATES CAPITAL EQUITY CERTIFICATES CAPITAL EQUITY CERTIFICATES NONQUALIFIED EQUITY CERTIFICATES NONQUALIFIED EQUITY CERTIFICATES EQUITY CERTIFICATES NONPATRONAGE EQUITY CERTIFICATES NONPATRONAGE EQUITY CERTIFICATES CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS PREFERRED PREFERRED STOCK STOCK ACCUMULATED OTHER ACCUMULATED OTHER COMPREHENSIVE COMPREHENSIVE INCOME (LOSS) INCOME (LOSS) CAPITAL CAPITAL RESERVES RESERVES NONCONTROLLING NONCONTROLLING INTERESTS INTERESTS TOTAL TOTAL EQUITIES EQUITIES $ 2,264,038 $ 2,264,038 $ (233,924) $ (233,924) $ 1,618,147 $ 1,618,147 $ 9,302 $ 9,302 $ $ 8,819,173 8,819,173 2,264,038 2,264,038 (216,391) (216,391) 1,713,976 1,713,976 8,465 8,465 9,017,326 9,017,326 585 585 (1,959) (1,959) (13,505) (13,505) 1,678,762 1,678,762 (861) (861) 1,677,901 1,677,901 (38,944) (38,944) 2,264,038 2,264,038 (255,335) (255,335) 2,055,682 2,055,682 5,645 5,645 9,461,266 9,461,266 17,533 17,533 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — (10,060) (10,060) 241,970 241,970 (244,775) (244,775) — — (168,668) (168,668) (6,360) (6,360) 553,952 553,952 (280,290) (280,290) — — — — 280,290 280,290 (286,602) (286,602) — — (168,668) (168,668) (1,162,661) (1,162,661) — — — — 1,162,661 1,162,661 (1,174,020) (1,174,020) — — (168,668) (168,668) 1,677 1,677 1,900,438 1,900,438 (1,240,284) (1,240,284) — — — — (454) (454) (383) (383) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — (720) (720) (314) (314) 63,000 63,000 (30,042) (30,042) (79,381) (79,381) (168,668) (168,668) (7,858) (7,858) 553,569 553,569 17,533 17,533 (50,000) (50,000) (100,000) (100,000) 150,000 150,000 (51,026) (51,026) (111,818) (111,818) (168,668) (168,668) (38,944) (38,944) (500,000) (500,000) (500,000) (500,000) 1,000,000 1,000,000 (503,057) (503,057) (495,790) (495,790) (168,668) (168,668) (1,426) (1,426) 1,900,124 1,900,124 (10,060) (10,060) (365,000) (365,000) (365,000) (365,000) — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — $ 3,724,187 $ 3,724,187 $ 28,727 $ 28,727 $ 1,408,696 $ 1,408,696 28,000 28,000 — — (67,403) (67,403) — — (873) (873) — — — — — — (100,000) (100,000) 3,583,911 3,583,911 100,000 100,000 — — (101,420) (101,420) — — (4,163) (4,163) — — — — 508,803 508,803 (500,000) (500,000) 3,587,131 3,587,131 (8,803) (8,803) 516,415 516,415 (482,662) (482,662) — — (1,821) (1,821) — — — — 706,125 706,125 (365,000) (365,000) — — (206,970) (206,970) — — (290) (290) — — (6) (6) — — — — — — — — 28,431 28,431 — — — — (501) (501) — — 3 3 — — — — — — — — 27,933 27,933 — — — — (331) (331) — — (44) (44) 214,733 214,733 (11,688) (11,688) — — (165) (165) — — — — 230,290 230,290 — — 1,634,896 1,634,896 (230,290) (230,290) 235,576 235,576 (9,897) (9,897) — — (7,971) (7,971) — — — — 153,858 153,858 — — 1,776,172 1,776,172 (153,858) (153,858) 154,548 154,548 (12,797) (12,797) — — (518) (518) — — — — — — — — — — — — 169,159 169,159 — — $ 3,951,385 $ 3,951,385 $ 27,558 $ 27,558 $ 1,932,706 $ 1,932,706 $ 2,264,038 $ 2,264,038 $ (265,395) $ (265,395) $ 2,537,486 $ 2,537,486 $ 4,611 $ 4,611 $ 10,452,389 $ 10,452,389 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) BALANCES, AUGUST 31, 2020 BALANCES, AUGUST 31, 2020 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2020 patronage refunds Distribution of 2020 patronage refunds Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive income, net of tax Other comprehensive income, net of tax Estimated 2021 patronage refunds Estimated 2021 patronage refunds Estimated 2021 equity redemptions Estimated 2021 equity redemptions BALANCES, AUGUST 31, 2021 BALANCES, AUGUST 31, 2021 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2021 patronage refunds Distribution of 2021 patronage refunds Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive loss, net of tax Other comprehensive loss, net of tax Estimated 2022 patronage refunds Estimated 2022 patronage refunds Estimated 2022 equity redemptions Estimated 2022 equity redemptions BALANCES, AUGUST 31, 2022 BALANCES, AUGUST 31, 2022 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2022 patronage refunds Distribution of 2022 patronage refunds Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive loss, net of tax Other comprehensive loss, net of tax Estimated 2023 patronage refunds Estimated 2023 patronage refunds Estimated 2023 equity redemptions Estimated 2023 equity redemptions BALANCES, AUGUST 31, 2023 BALANCES, AUGUST 31, 2023 The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries 18 2023 CHS Annual Report 18 2023 CHS Annual Report 2023 CHS Annual Report 19 2023 CHS Annual Report 19 328789_14-57.indd 18 11/28/23 3:21 PM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITIES (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) BALANCES, AUGUST 31, 2020 BALANCES, AUGUST 31, 2020 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2020 patronage refunds Distribution of 2020 patronage refunds Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive income, net of tax Other comprehensive income, net of tax Estimated 2021 patronage refunds Estimated 2021 patronage refunds Estimated 2021 equity redemptions Estimated 2021 equity redemptions BALANCES, AUGUST 31, 2021 BALANCES, AUGUST 31, 2021 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2021 patronage refunds Distribution of 2021 patronage refunds BALANCES, AUGUST 31, 2022 BALANCES, AUGUST 31, 2022 Reversal of prior year patronage and redemption estimates Reversal of prior year patronage and redemption estimates Distribution of 2022 patronage refunds Distribution of 2022 patronage refunds Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive loss, net of tax Other comprehensive loss, net of tax Estimated 2022 patronage refunds Estimated 2022 patronage refunds Estimated 2022 equity redemptions Estimated 2022 equity redemptions Redemptions of equities Redemptions of equities Preferred stock dividends Preferred stock dividends Other, net Other, net Net income (loss) Net income (loss) Other comprehensive loss, net of tax Other comprehensive loss, net of tax Estimated 2023 patronage refunds Estimated 2023 patronage refunds Estimated 2023 equity redemptions Estimated 2023 equity redemptions BALANCES, AUGUST 31, 2023 BALANCES, AUGUST 31, 2023 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 EQUITY CERTIFICATES EQUITY CERTIFICATES CAPITAL CAPITAL EQUITY CERTIFICATES EQUITY CERTIFICATES NONPATRONAGE NONPATRONAGE EQUITY CERTIFICATES EQUITY CERTIFICATES NONQUALIFIED NONQUALIFIED EQUITY CERTIFICATES EQUITY CERTIFICATES $ 3,724,187 $ 3,724,187 28,000 28,000 $ 28,727 $ 28,727 $ 1,408,696 $ 1,408,696 (67,403) (67,403) (290) (290) (873) (873) — — — — — — — — — — — — — — — — — — (100,000) (100,000) 3,583,911 3,583,911 100,000 100,000 (4,163) (4,163) 508,803 508,803 (500,000) (500,000) 3,587,131 3,587,131 (8,803) (8,803) 516,415 516,415 (482,662) (482,662) (1,821) (1,821) — — — — — — 706,125 706,125 (365,000) (365,000) 28,431 28,431 — — — — — — (6) (6) — — — — — — — — — — — — — — 3 3 — — — — — — — — — — — — — — — — — — — — 27,933 27,933 (331) (331) — — (44) (44) (206,970) (206,970) 214,733 214,733 (11,688) (11,688) (165) (165) — — — — — — — — 230,290 230,290 1,634,896 1,634,896 (230,290) (230,290) 235,576 235,576 (9,897) (9,897) (7,971) (7,971) 153,858 153,858 1,776,172 1,776,172 (153,858) (153,858) 154,548 154,548 (12,797) (12,797) (518) (518) — — — — — — — — 169,159 169,159 — — — — — — — — (101,420) (101,420) (501) (501) CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 YEARS ENDED AUGUST 31, 2023, 2022 AND 2021 PREFERRED PREFERRED STOCK STOCK ACCUMULATED OTHER ACCUMULATED OTHER COMPREHENSIVE COMPREHENSIVE INCOME (LOSS) INCOME (LOSS) CAPITAL CAPITAL RESERVES RESERVES NONCONTROLLING INTERESTS NONCONTROLLING INTERESTS TOTAL TOTAL EQUITIES EQUITIES $ 2,264,038 $ 2,264,038 $ (233,924) $ (233,924) $ 1,618,147 $ 1,618,147 $ 9,302 $ 9,302 $ $ 8,819,173 8,819,173 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 17,533 17,533 — — — — 241,970 241,970 (244,775) (244,775) — — (168,668) (168,668) (6,360) (6,360) 553,952 553,952 — — (280,290) (280,290) — — — — — — — — — — (454) (454) (383) (383) — — — — — — 63,000 63,000 (30,042) (30,042) (79,381) (79,381) (168,668) (168,668) (7,858) (7,858) 553,569 553,569 17,533 17,533 (50,000) (50,000) (100,000) (100,000) 2,264,038 2,264,038 (216,391) (216,391) 1,713,976 1,713,976 8,465 8,465 9,017,326 9,017,326 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 280,290 280,290 (286,602) (286,602) — — (168,668) (168,668) — — — — — — — — 150,000 150,000 (51,026) (51,026) (111,818) (111,818) (168,668) (168,668) 585 585 (1,959) (1,959) (13,505) (13,505) 1,678,762 1,678,762 (861) (861) 1,677,901 1,677,901 (38,944) (38,944) — — — — — — (1,162,661) (1,162,661) — — — — — — — — (38,944) (38,944) (500,000) (500,000) (500,000) (500,000) 2,264,038 2,264,038 (255,335) (255,335) 2,055,682 2,055,682 5,645 5,645 9,461,266 9,461,266 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,162,661 1,162,661 (1,174,020) (1,174,020) — — (168,668) (168,668) 1,677 1,677 1,900,438 1,900,438 (10,060) (10,060) — — — — — — (1,240,284) (1,240,284) — — — — — — — — — — (720) (720) (314) (314) — — — — — — 1,000,000 1,000,000 (503,057) (503,057) (495,790) (495,790) (168,668) (168,668) (1,426) (1,426) 1,900,124 1,900,124 (10,060) (10,060) (365,000) (365,000) (365,000) (365,000) The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CHS Inc. and Subsidiaries $ 3,951,385 $ 3,951,385 $ 27,558 $ 27,558 $ 1,932,706 $ 1,932,706 $ 2,264,038 $ 2,264,038 $ (265,395) $ (265,395) $ 2,537,486 $ 2,537,486 $ 4,611 $ 4,611 $ 10,452,389 $ 10,452,389 18 2023 CHS Annual Report 18 2023 CHS Annual Report 2023 CHS Annual Report 19 2023 CHS Annual Report 19 328789_14-57.indd 19 11/28/23 3:21 PM CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 1 NOTE 1 YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) Cash flows from operating activities: Cash flows from operating activities: Net income Net income activities: activities: Adjustments to reconcile net income to net cash provided by (used in) operating Adjustments to reconcile net income to net cash provided by (used in) operating Depreciation and amortization, including amortization of deferred major Depreciation and amortization, including amortization of deferred major maintenance maintenance Equity income from investments, net of distributions received Equity income from investments, net of distributions received Provision for current expected credit losses Provision for current expected credit losses Gain/recovery on sale of business Gain/recovery on sale of business LIFO liquidations LIFO liquidations Deferred taxes Deferred taxes Other, net Other, net Receivables Receivables Inventories Inventories Other, net Other, net Changes in operating assets and liabilities, net of acquisitions: Changes in operating assets and liabilities, net of acquisitions: Accounts payable and accrued expenses Accounts payable and accrued expenses Net cash provided by operating activities Net cash provided by operating activities Cash flows from investing activities: Cash flows from investing activities: Acquisition of property, plant and equipment Acquisition of property, plant and equipment Proceeds from disposition of property, plant and equipment Proceeds from disposition of property, plant and equipment Expenditures for major maintenance Expenditures for major maintenance Proceeds from sale of business Proceeds from sale of business Changes in CHS Capital notes receivable, net Changes in CHS Capital notes receivable, net Financing extended to customers Financing extended to customers Payments from customer financing Payments from customer financing Other investing activities, net Other investing activities, net Net cash used in investing activities Net cash used in investing activities Cash flows from financing activities: Cash flows from financing activities: Preferred stock dividends paid Preferred stock dividends paid Redemptions of equities Redemptions of equities Cash patronage dividends paid Cash patronage dividends paid Other financing activities, net Other financing activities, net Net cash used in financing activities Net cash used in financing activities Proceeds from notes payable and long-term debt Proceeds from notes payable and long-term debt Payments on notes payable, long-term debt and finance lease obligations Payments on notes payable, long-term debt and finance lease obligations Effect of exchange rate changes on cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents and restricted cash Increase in cash and cash equivalents and restricted cash Cash and cash equivalents and restricted cash at beginning of period Cash and cash equivalents and restricted cash at beginning of period Cash and cash equivalents and restricted cash at end of period Cash and cash equivalents and restricted cash at end of period Supplemental cash flow information: Supplemental cash flow information: Cash paid for interest Cash paid for interest Cash paid (received) for income taxes, net of refunds Cash paid (received) for income taxes, net of refunds Other significant noncash investing and financing transactions: Other significant noncash investing and financing transactions: Capital expenditures and major maintenance incurred but not yet paid Capital expenditures and major maintenance incurred but not yet paid Finance lease obligations incurred Finance lease obligations incurred Accrual of patronage dividends and equity redemptions Accrual of patronage dividends and equity redemptions 2023 2023 2022 2022 2021 2021 $ $ 1,900,124 1,900,124 $ $ 1,677,901 1,677,901 $ $ 553,569 553,569 539,521 539,521 (81,272) (81,272) (15,624) (15,624) 300 300 — — (6,429) (6,429) (44,546) (44,546) 645,781 645,781 437,692 437,692 (127,399) (127,399) 36,034 36,034 3,284,182 3,284,182 (564,522) (564,522) 29,645 29,645 (217,413) (217,413) 64 64 (203,843) (203,843) (137,091) (137,091) 148,690 148,690 (5,721) (5,721) (950,191) (950,191) 7,183,395 7,183,395 (7,385,813) (7,385,813) (168,668) (168,668) (495,790) (495,790) (503,057) (503,057) (25,535) (25,535) (1,395,468) (1,395,468) $ $ $ $ 2,590 2,590 941,113 941,113 903,474 903,474 1,844,587 1,844,587 139,424 139,424 184,444 184,444 66,492 66,492 16,505 16,505 730,000 730,000 536,493 536,493 (48,847) (48,847) 19,920 19,920 (13,083) (13,083) — — 39,548 39,548 (17,833) (17,833) (547,564) (547,564) (317,918) (317,918) 555,446 555,446 62,455 62,455 1,946,518 1,946,518 (354,444) (354,444) 14,318 14,318 (24,768) (24,768) 73,152 73,152 (161,340) (161,340) (83,514) (83,514) 94,388 94,388 (14,876) (14,876) (457,084) (457,084) 20,730,750 20,730,750 (21,515,920) (21,515,920) (168,668) (168,668) (111,818) (111,818) (51,026) (51,026) 2,994 2,994 (1,113,688) (1,113,688) (14,756) (14,756) 360,990 360,990 542,484 542,484 903,474 903,474 113,726 113,726 19,712 19,712 $ $ $ $ 55,214 55,214 18,875 18,875 1,000,000 1,000,000 535,498 535,498 (40,035) (40,035) 6,692 6,692 (19,034) (19,034) (35,258) (35,258) (11,957) (11,957) (41,218) (41,218) (568,752) (568,752) (549,221) (549,221) 1,007,229 1,007,229 (79,702) (79,702) 757,811 757,811 (317,794) (317,794) 20,742 20,742 (40,922) (40,922) 81,366 81,366 132,268 132,268 (1,926) (1,926) 6,892 6,892 17,702 17,702 (101,672) (101,672) 31,765,082 31,765,082 (31,806,918) (31,806,918) (168,668) (168,668) (79,381) (79,381) (30,042) (30,042) (6,658) (6,658) (326,585) (326,585) $ $ $ $ (4,063) (4,063) 325,491 325,491 216,993 216,993 542,484 542,484 102,093 102,093 (8,842) (8,842) 28,010 28,010 12,831 12,831 150,000 150,000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Organization, Basis of Presentation and Significant Accounting Policies Organization, Basis of Presentation and Significant Accounting Policies Organization Organization CHS Inc. (referred to herein as “CHS,” “company,” “we,” CHS Inc. (referred to herein as “CHS,” “company,” “we,” “us” or “us” or “our”) “our”) is the nation’s leading integrated is the nation’s leading integrated agricultural cooperative. As a cooperative, CHS is owned agricultural cooperative. As a cooperative, CHS is owned by farmers and ranchers and member cooperatives by farmers and ranchers and member cooperatives (“members”) across the United States. We also have (“members”) across the United States. We also have preferred shareholders who own shares of our five series preferred shareholders who own shares of our five series of preferred stock, all of which are listed and traded on of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market the Global Select Market of The Nasdaq Stock Market LLC (“The Nasdaq”). See Note 12, Equities, for more LLC (“The Nasdaq”). See Note 12, Equities, for more detailed information. detailed information. local local We buy commodities from and provide products and We buy commodities from and provide products and services to individual agricultural producers, services to individual agricultural producers, cooperatives and other companies (including member cooperatives and other companies (including member and other nonmember customers), both domestically and other nonmember customers), both domestically and internationally. Those products and services include and internationally. Those products and services include initial agricultural inputs such as fuels, farm supplies, initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, as well as crop nutrients and crop protection products, as well as agricultural outputs that include grains and oilseeds, agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food processed grains and oilseeds, renewable fuels and food products. A portion of our operations are conducted products. A portion of our operations are conducted through equity investments and joint ventures whose through equity investments and joint ventures whose operating results are not fully consolidated with our operating results are not fully consolidated with our results; rather, a proportionate share of the income or results; rather, a proportionate share of the income or loss from those entities is included as a component in loss from those entities is included as a component in our net income under the equity method of accounting. our net income under the equity method of accounting. Basis of Presentation Basis of Presentation The consolidated financial statements include the The consolidated financial statements include the accounts of CHS and all our subsidiaries and limited accounts of CHS and all our subsidiaries and limited liability companies in which we have control. The effects liability companies in which we have control. The effects of all significant intercompany transactions have been of all significant intercompany transactions have been eliminated. eliminated. The notes to our consolidated financial statements refer The notes to our consolidated financial statements refer to our Energy, Ag and Nitrogen Production reportable to our Energy, Ag and Nitrogen Production reportable segments, as well as our Corporate and Other category, segments, as well as our Corporate and Other category, which represents an aggregation of which represents an aggregation of individually individually immaterial immaterial operating operating segments. segments. The Nitrogen The Nitrogen Production reportable segment consists of our Production reportable segment consists of our investment investment in CF Industries Nitrogen, LLC (“CF in CF Industries Nitrogen, LLC (“CF Nitrogen”), and allocated expenses. See Note 14, Nitrogen”), and allocated expenses. See Note 14, Segment Reporting, for more information. Segment Reporting, for more information. Use of Estimates Use of Estimates The preparation of financial statements in conformity The preparation of financial statements in conformity with U.S. GAAP requires management with U.S. GAAP requires management to make to make estimates and assumptions that affect the reported estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the contingent assets and liabilities at the date of the financial statements and the reported amounts of financial statements and the reported amounts of revenues and expenses during the reporting period. We revenues and expenses during the reporting period. We base our estimates on assumptions that are believed to base our estimates on assumptions that are believed to be reasonable, the results of which form the basis for be reasonable, the results of which form the basis for making judgments about the carrying values of assets making judgments about the carrying values of assets and liabilities. Due to the inherent uncertainty involved and liabilities. Due to the inherent uncertainty involved in making estimates, actual results could differ from in making estimates, actual results could differ from those estimates. We evaluate our estimates and those estimates. We evaluate our estimates and assumptions on an ongoing basis. assumptions on an ongoing basis. Significant Accounting Policies Significant Accounting Policies Significant accounting policies are summarized below Significant accounting policies are summarized below or within the related notes to our consolidated financial or within the related notes to our consolidated financial statements. statements. Cash and Cash Equivalents and Restricted Cash Cash and Cash Equivalents and Restricted Cash Cash equivalents include short-term, highly liquid Cash equivalents include short-term, highly liquid investments with original maturities of three months or investments with original maturities of three months or less at the date of acquisition. The carrying value of cash less at the date of acquisition. The carrying value of cash and cash equivalents approximates the fair value due to and cash equivalents approximates the fair value due to the short-term nature of the instruments. the short-term nature of the instruments. Restricted cash is included in our Consolidated Balance Restricted cash is included in our Consolidated Balance Sheets within other current assets and primarily relates Sheets within other current assets and primarily relates to customer deposits for futures and option contracts to customer deposits for futures and option contracts associated with regulated commodities held in separate associated with regulated commodities held in separate accounts as accounts as required under required under federal and other federal and other regulations. Pursuant regulations. Pursuant to the requirements of to the requirements of Commodity Exchange Act, such funds must be carried Commodity Exchange Act, such funds must be carried in separate accounts that are designated as segregated in separate accounts that are designated as segregated customer accounts, as applicable. Restricted cash also customer accounts, as applicable. Restricted cash also includes funds held in escrow pursuant to applicable includes funds held in escrow pursuant to applicable the the regulations limiting their use. regulations limiting their use. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries 20 2023 CHS Annual Report 20 2023 CHS Annual Report 2023 CHS Annual Report 21 2023 CHS Annual Report 21 328789_14-57.indd 20 11/28/23 3:21 PM CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS NOTE 1 NOTE 1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Organization, Basis of Presentation and Significant Accounting Policies Organization, Basis of Presentation and Significant Accounting Policies “our”) “our”) Organization CHS Inc. (referred to herein as “CHS,” “company,” “we,” “us” or is the nation’s leading integrated agricultural cooperative. As a cooperative, CHS is owned by farmers and ranchers and member cooperatives (“members”) across the United States. We also have preferred shareholders who own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC (“The Nasdaq”). See Note 12, Equities, for more detailed information. Organization CHS Inc. (referred to herein as “CHS,” “company,” “we,” “us” or is the nation’s leading integrated agricultural cooperative. As a cooperative, CHS is owned by farmers and ranchers and member cooperatives (“members”) across the United States. We also have preferred shareholders who own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC (“The Nasdaq”). See Note 12, Equities, for more detailed information. We buy commodities from and provide products and local services to individual agricultural producers, cooperatives and other companies (including member and other nonmember customers), both domestically and internationally. Those products and services include initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, as well as agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food products. A portion of our operations are conducted through equity investments and joint ventures whose operating results are not fully consolidated with our results; rather, a proportionate share of the income or loss from those entities is included as a component in our net income under the equity method of accounting. We buy commodities from and provide products and local services to individual agricultural producers, cooperatives and other companies (including member and other nonmember customers), both domestically and internationally. Those products and services include initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products, as well as agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food products. A portion of our operations are conducted through equity investments and joint ventures whose operating results are not fully consolidated with our results; rather, a proportionate share of the income or loss from those entities is included as a component in our net income under the equity method of accounting. Basis of Presentation The consolidated financial statements include the accounts of CHS and all our subsidiaries and limited liability companies in which we have control. The effects of all significant intercompany transactions have been eliminated. Basis of Presentation The consolidated financial statements include the accounts of CHS and all our subsidiaries and limited liability companies in which we have control. The effects of all significant intercompany transactions have been eliminated. The notes to our consolidated financial statements refer to our Energy, Ag and Nitrogen Production reportable segments, as well as our Corporate and Other category, individually which represents an aggregation of immaterial The Nitrogen Production reportable segment consists of our in CF Industries Nitrogen, LLC (“CF investment Nitrogen”), and allocated expenses. See Note 14, Segment Reporting, for more information. The notes to our consolidated financial statements refer to our Energy, Ag and Nitrogen Production reportable segments, as well as our Corporate and Other category, which represents an aggregation of individually immaterial The Nitrogen Production reportable segment consists of our investment in CF Industries Nitrogen, LLC (“CF Nitrogen”), and allocated expenses. See Note 14, Segment Reporting, for more information. segments. segments. operating operating Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. We evaluate our estimates and assumptions on an ongoing basis. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. We evaluate our estimates and assumptions on an ongoing basis. Significant Accounting Policies Significant accounting policies are summarized below or within the related notes to our consolidated financial statements. Significant Accounting Policies Significant accounting policies are summarized below or within the related notes to our consolidated financial statements. Cash and Cash Equivalents and Restricted Cash Cash and Cash Equivalents and Restricted Cash Cash equivalents include short-term, highly liquid Cash equivalents include short-term, highly liquid investments with original maturities of three months or investments with original maturities of three months or less at the date of acquisition. The carrying value of cash less at the date of acquisition. The carrying value of cash and cash equivalents approximates the fair value due to and cash equivalents approximates the fair value due to the short-term nature of the instruments. the short-term nature of the instruments. required under Restricted cash is included in our Consolidated Balance Sheets within other current assets and primarily relates to customer deposits for futures and option contracts associated with regulated commodities held in separate federal and other accounts as regulations. Pursuant the Commodity Exchange Act, such funds must be carried in separate accounts that are designated as segregated customer accounts, as applicable. Restricted cash also includes funds held in escrow pursuant to applicable regulations limiting their use. Restricted cash is included in our Consolidated Balance Sheets within other current assets and primarily relates to customer deposits for futures and option contracts associated with regulated commodities held in separate federal and other accounts as regulations. Pursuant the Commodity Exchange Act, such funds must be carried in separate accounts that are designated as segregated customer accounts, as applicable. Restricted cash also includes funds held in escrow pursuant to applicable regulations limiting their use. to the requirements of to the requirements of required under YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash flows from operating activities: Cash flows from operating activities: Net income Net income activities: activities: maintenance maintenance Adjustments to reconcile net income to net cash provided by (used in) operating Adjustments to reconcile net income to net cash provided by (used in) operating Depreciation and amortization, including amortization of deferred major Depreciation and amortization, including amortization of deferred major Equity income from investments, net of distributions received Equity income from investments, net of distributions received Provision for current expected credit losses Provision for current expected credit losses Gain/recovery on sale of business Gain/recovery on sale of business LIFO liquidations LIFO liquidations Deferred taxes Deferred taxes Other, net Other, net Receivables Receivables Inventories Inventories Other, net Other, net Changes in operating assets and liabilities, net of acquisitions: Changes in operating assets and liabilities, net of acquisitions: Accounts payable and accrued expenses Accounts payable and accrued expenses Net cash provided by operating activities Net cash provided by operating activities Cash flows from investing activities: Cash flows from investing activities: Acquisition of property, plant and equipment Acquisition of property, plant and equipment Proceeds from disposition of property, plant and equipment Proceeds from disposition of property, plant and equipment Expenditures for major maintenance Expenditures for major maintenance Proceeds from sale of business Proceeds from sale of business Changes in CHS Capital notes receivable, net Changes in CHS Capital notes receivable, net Financing extended to customers Financing extended to customers Payments from customer financing Payments from customer financing Other investing activities, net Other investing activities, net Net cash used in investing activities Net cash used in investing activities Cash flows from financing activities: Cash flows from financing activities: Preferred stock dividends paid Preferred stock dividends paid Redemptions of equities Redemptions of equities Cash patronage dividends paid Cash patronage dividends paid Other financing activities, net Other financing activities, net Net cash used in financing activities Net cash used in financing activities Proceeds from notes payable and long-term debt Proceeds from notes payable and long-term debt Payments on notes payable, long-term debt and finance lease obligations Payments on notes payable, long-term debt and finance lease obligations Effect of exchange rate changes on cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Increase in cash and cash equivalents and restricted cash Increase in cash and cash equivalents and restricted cash Cash and cash equivalents and restricted cash at beginning of period Cash and cash equivalents and restricted cash at beginning of period Cash and cash equivalents and restricted cash at end of period Cash and cash equivalents and restricted cash at end of period Supplemental cash flow information: Supplemental cash flow information: Cash paid for interest Cash paid for interest Cash paid (received) for income taxes, net of refunds Cash paid (received) for income taxes, net of refunds Other significant noncash investing and financing transactions: Other significant noncash investing and financing transactions: Capital expenditures and major maintenance incurred but not yet paid Capital expenditures and major maintenance incurred but not yet paid Finance lease obligations incurred Finance lease obligations incurred Accrual of patronage dividends and equity redemptions Accrual of patronage dividends and equity redemptions 2023 2023 2022 2022 2021 2021 $ $ 1,900,124 1,900,124 $ $ 1,677,901 1,677,901 $ $ 553,569 553,569 539,521 539,521 (81,272) (81,272) (15,624) (15,624) 300 300 — — (6,429) (6,429) (44,546) (44,546) 645,781 645,781 437,692 437,692 (127,399) (127,399) 36,034 36,034 3,284,182 3,284,182 (564,522) (564,522) 29,645 29,645 (217,413) (217,413) 64 64 (203,843) (203,843) (137,091) (137,091) 148,690 148,690 (5,721) (5,721) (950,191) (950,191) 7,183,395 7,183,395 (7,385,813) (7,385,813) (168,668) (168,668) (495,790) (495,790) (503,057) (503,057) (25,535) (25,535) (1,395,468) (1,395,468) 2,590 2,590 941,113 941,113 903,474 903,474 139,424 139,424 184,444 184,444 66,492 66,492 16,505 16,505 730,000 730,000 536,493 536,493 (48,847) (48,847) 19,920 19,920 (13,083) (13,083) — — 39,548 39,548 (17,833) (17,833) (547,564) (547,564) (317,918) (317,918) 555,446 555,446 62,455 62,455 1,946,518 1,946,518 (354,444) (354,444) 14,318 14,318 (24,768) (24,768) 73,152 73,152 (161,340) (161,340) (83,514) (83,514) 94,388 94,388 (14,876) (14,876) (457,084) (457,084) 535,498 535,498 (40,035) (40,035) 6,692 6,692 (19,034) (19,034) (35,258) (35,258) (11,957) (11,957) (41,218) (41,218) (568,752) (568,752) (549,221) (549,221) 1,007,229 1,007,229 (79,702) (79,702) 757,811 757,811 (317,794) (317,794) 20,742 20,742 (40,922) (40,922) 81,366 81,366 132,268 132,268 (1,926) (1,926) 6,892 6,892 17,702 17,702 (101,672) (101,672) 20,730,750 20,730,750 (21,515,920) (21,515,920) (168,668) (168,668) (111,818) (111,818) (51,026) (51,026) 2,994 2,994 (1,113,688) (1,113,688) (14,756) (14,756) 360,990 360,990 542,484 542,484 903,474 903,474 113,726 113,726 19,712 19,712 55,214 55,214 18,875 18,875 1,000,000 1,000,000 31,765,082 31,765,082 (31,806,918) (31,806,918) (168,668) (168,668) (79,381) (79,381) (30,042) (30,042) (6,658) (6,658) (326,585) (326,585) (4,063) (4,063) 325,491 325,491 216,993 216,993 542,484 542,484 102,093 102,093 (8,842) (8,842) 28,010 28,010 12,831 12,831 150,000 150,000 $ $ $ $ $ $ 1,844,587 1,844,587 $ $ $ $ $ $ The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. CHS Inc. and Subsidiaries CHS Inc. and Subsidiaries 20 2023 CHS Annual Report 20 2023 CHS Annual Report 2023 CHS Annual Report 21 2023 CHS Annual Report 21 328789_14-57.indd 21 11/28/23 3:21 PM N OT E 1: Organization, B asis of Presentation and Significant Accounting Policies, continued N OT E 1: Organization, B asis of Presentation and Significant Accounting Policies, continued The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within our Consolidated Balance Sheets that aggregates to the amount presented in our Consolidated Statements of Cash Flows. The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within our Consolidated Balance Sheets that aggregates to the amount presented in our Consolidated Statements of Cash Flows. (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash and cash equivalents Cash and cash equivalents AUGUST 31, AUGUST 31, 2023 2023 2022 2022 2021 2021 $ 1,765,286 $ 793,957 $ 413,159 $ 1,765,286 $ 793,957 $ 413,159 Recent Accounting Pronouncements No recent accounting pronouncements are expected to have a material impact on our consolidated financial statements. Recent Accounting Pronouncements No recent accounting pronouncements are expected to have a material impact on our consolidated financial statements. Restricted cash Restricted cash included in other included in other current assets current assets Total cash and Total cash and cash equivalents cash equivalents and restricted and restricted cash cash 79,301 79,301 109,517 109,517 129,325 129,325 $ 1,844,587 $ 903,474 $ 542,484 $ 1,844,587 $ 903,474 $ 542,484 NOTE 2 NOTE 2 Revenues Revenues We provide a wide variety of products and services, from agricultural inputs such as fuels, farm supplies and agronomy products, to agricultural outputs that include grain and oilseed, processed grains and oilseeds and food products, and renewable fuels production and marketing. We primarily conduct our operations and derive revenues within our Energy and Ag segments. Our Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products. Our Ag segment derives its revenues through origination and marketing of grain, including service activities conducted at export through wholesale agronomy sales of crop nutrient and crop protection products; from sales of soybean meal, refined soy oil and soyflour products; through production and marketing of renewable fuels; and through retail sales of petroleum and agronomy products, processed sunflowers, and feed and farm supplies. Corporate and Other primarily consists of our financing and hedging businesses. We provide a wide variety of products and services, from agricultural inputs such as fuels, farm supplies and agronomy products, to agricultural outputs that include grain and oilseed, processed grains and oilseeds and food products, and renewable fuels production and marketing. We primarily conduct our operations and derive revenues within our Energy and Ag segments. Our Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products. Our Ag segment derives its revenues through origination and marketing of grain, including service activities conducted at export through wholesale agronomy sales of crop nutrient and crop protection products; from sales of soybean meal, refined soy oil and soyflour products; through production and marketing of renewable fuels; and through retail sales of petroleum and agronomy products, processed sunflowers, and feed and farm supplies. Corporate and Other primarily consists of our financing and hedging businesses. terminals; terminals; Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the goods has transferred to the customer in accordance Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the goods has transferred to the customer in accordance control control transfers transfers with the underlying contract. For the majority of our contracts with customers, to customers at a point in time when goods and/or services have been delivered, as that is generally when legal title, physical possession and risks and rewards of ownership of the goods and/or services transfer to the customer. In limited arrangements, control transfers over time as the customer simultaneously receives and consumes the benefits of the service as we complete our performance obligation(s). Revenue is recognized as the transaction price we expect to be entitled to in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. For physically settled derivative sales contracts that are outside the scope of the revenue guidance, we recognize revenue when control of the inventory is transferred. Revenues arising from our financing business are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 470, Debt (“ASC Topic 470”) and fall outside the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). with the underlying contract. For the majority of our contracts with customers, to customers at a point in time when goods and/or services have been delivered, as that is generally when legal title, physical possession and risks and rewards of ownership of the goods and/or services transfer to the customer. In limited arrangements, control transfers over time as the customer simultaneously receives and consumes the benefits of the service as we complete our performance obligation(s). Revenue is recognized as the transaction price we expect to be entitled to in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. For physically settled derivative sales contracts that are outside the scope of the revenue guidance, we recognize revenue when control of the inventory is transferred. Revenues arising from our financing business are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 470, Debt (“ASC Topic 470”) and fall outside the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). 22 2023 CHS Annual Report 22 2023 CHS Annual Report 2023 CHS Annual Report 23 2023 CHS Annual Report 23 328789_14-57.indd 22 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Shipping and Handling Costs Shipping and Handling Costs incremental costs of obtaining contracts as an expense incremental costs of obtaining contracts as an expense Shipping and handling amounts billed to a customer as Shipping and handling amounts billed to a customer as when incurred if the amortization period of the assets when incurred if the amortization period of the assets part of a sales transaction are included in revenues, and part of a sales transaction are included in revenues, and we otherwise would have recognized is one year or less. we otherwise would have recognized is one year or less. the related costs are included in cost of goods sold. the related costs are included in cost of goods sold. Shipping and handling is treated as a fulfillment activity, Shipping and handling is treated as a fulfillment activity, Disaggregation of Revenues Disaggregation of Revenues rather than a promised service, and therefore is not rather than a promised service, and therefore is not The following table presents revenues recognized under The following table presents revenues recognized under considered a separate performance obligation. considered a separate performance obligation. ASC Topic 606, disaggregated by reportable segment, ASC Topic 606, disaggregated by reportable segment, as well as the amount of revenues recognized under as well as the amount of revenues recognized under Taxes Collected from Customers and Remitted to Taxes Collected from Customers and Remitted to ASC Topic 815, Derivatives and Hedging (“ASC ASC Topic 815, Derivatives and Hedging (“ASC Governmental Authorities Governmental Authorities Topic 815”), and other applicable accounting guidance Topic 815”), and other applicable accounting guidance Revenues are recorded net of taxes collected from Revenues are recorded net of taxes collected from for the years ended August 31, 2023, 2022 and 2021. for the years ended August 31, 2023, 2022 and 2021. customers customers that that are are remitted to governmental remitted to governmental Other applicable accounting guidance primarily Other applicable accounting guidance primarily authorities, with the collected taxes recorded as current authorities, with the collected taxes recorded as current includes revenues recognized under ASC Topic 470 and includes revenues recognized under ASC Topic 470 and liabilities until remitted to the relevant governmental liabilities until remitted to the relevant governmental ASC Topic 842, Leases (“ASC Topic 842”), that fall ASC Topic 842, Leases (“ASC Topic 842”), that fall outside the scope of ASC Topic 606. outside the scope of ASC Topic 606. authority. authority. Contract Costs Contract Costs Commissions related to contracts with a duration of less Commissions related to contracts with a duration of less than one year are expensed as incurred. We recognize than one year are expensed as incurred. We recognize REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues YEAR ENDED AUGUST 31, 2023 YEAR ENDED AUGUST 31, 2023 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 GUIDANCE GUIDANCE REVENUES REVENUES OTHER OTHER TOTAL TOTAL $ $ 8,996,149 8,996,149 $ $ 1,100,764 1,100,764 $ $ — $ 10,096,913 — $ 10,096,913 9,808,664 9,808,664 25,606,485 25,606,485 10,055 10,055 35,425,204 35,425,204 26,001 26,001 — — 41,886 41,886 67,887 67,887 $ 18,830,814 $ 18,830,814 $ 26,707,249 $ 26,707,249 $ 51,941 $ 51,941 $ 45,590,004 $ 45,590,004 YEAR ENDED AUGUST 31, 2022 YEAR ENDED AUGUST 31, 2022 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 GUIDANCE GUIDANCE REVENUES REVENUES OTHER OTHER TOTAL TOTAL $ $ 9,302,400 9,302,400 $ $ 992,374 992,374 $ $ — $ 10,294,774 — $ 10,294,774 10,784,831 10,784,831 26,646,003 26,646,003 29,377 29,377 37,460,211 37,460,211 16,625 16,625 — — 20,056 20,056 36,681 36,681 $ 20,103,856 $ 20,103,856 $ 27,638,377 $ 27,638,377 $ 49,433 $ 49,433 $ 47,791,666 $ 47,791,666 YEAR ENDED AUGUST 31, 2021 YEAR ENDED AUGUST 31, 2021 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 GUIDANCE GUIDANCE REVENUES REVENUES OTHER OTHER TOTAL TOTAL $ $ 5,680,391 5,680,391 $ $ 694,870 694,870 $ $ — $ — $ 6,375,261 6,375,261 7,491,484 7,491,484 24,517,033 24,517,033 26,825 26,825 32,035,342 32,035,342 18,325 18,325 — — 19,105 19,105 37,430 37,430 $ 13,190,200 $ 13,190,200 $ 25,211,903 $ 25,211,903 $ 45,930 $ 45,930 $ 38,448,033 $ 38,448,033 * * Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues. expenses but not revenues. Less than 1% of revenues accounted for under ASC Less than 1% of revenues accounted for under ASC over time and relate primarily to service contracts. over time and relate primarily to service contracts. Topic 606 included within the table above are recorded Topic 606 included within the table above are recorded NOTE 1: Organization, B asis of Presentation and Significant Accounting Policies, continued The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within our Consolidated Balance Sheets that aggregates to the amount presented in our Consolidated Statements of Recent Accounting Pronouncements No recent accounting pronouncements are expected to have a material impact on our consolidated financial statements. Shipping and Handling Costs Shipping and handling amounts billed to a customer as part of a sales transaction are included in revenues, and the related costs are included in cost of goods sold. Shipping and handling is treated as a fulfillment activity, rather than a promised service, and therefore is not considered a separate performance obligation. Shipping and Handling Costs Shipping and handling amounts billed to a customer as part of a sales transaction are included in revenues, and the related costs are included in cost of goods sold. Shipping and handling is treated as a fulfillment activity, rather than a promised service, and therefore is not considered a separate performance obligation. Taxes Collected from Customers and Remitted to Governmental Authorities Revenues are recorded net of taxes collected from customers remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant governmental authority. Taxes Collected from Customers and Remitted to Governmental Authorities Revenues are recorded net of taxes collected from customers remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant governmental authority. that that are are Contract Costs Commissions related to contracts with a duration of less than one year are expensed as incurred. We recognize Contract Costs Commissions related to contracts with a duration of less than one year are expensed as incurred. We recognize REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues REPORTABLE SEGMENT* REPORTABLE SEGMENT* (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Energy Energy Ag Ag Corporate and Other Corporate and Other Total revenues Total revenues NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets we otherwise would have recognized is one year or less. incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets we otherwise would have recognized is one year or less. Disaggregation of Revenues The following table presents revenues recognized under 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 years ended August 31, 2023, 2022 and 2021. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470 and ASC Topic 842, Leases (“ASC Topic 842”), that fall outside the scope of ASC Topic 606. Disaggregation of Revenues The following table presents revenues recognized under 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 years ended August 31, 2023, 2022 and 2021. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470 and ASC Topic 842, Leases (“ASC Topic 842”), that fall outside the scope of ASC Topic 606. YEAR ENDED AUGUST 31, 2023 YEAR ENDED AUGUST 31, 2023 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 OTHER OTHER GUIDANCE GUIDANCE TOTAL TOTAL REVENUES REVENUES $ $ 8,996,149 8,996,149 $ $ 1,100,764 1,100,764 $ $ — $ 10,096,913 — $ 10,096,913 9,808,664 9,808,664 25,606,485 25,606,485 10,055 10,055 35,425,204 35,425,204 26,001 26,001 — — 41,886 41,886 67,887 67,887 $ 18,830,814 $ 18,830,814 $ 26,707,249 $ 26,707,249 $ 51,941 $ 51,941 $ 45,590,004 $ 45,590,004 YEAR ENDED AUGUST 31, 2022 YEAR ENDED AUGUST 31, 2022 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 OTHER OTHER GUIDANCE GUIDANCE TOTAL TOTAL REVENUES REVENUES $ $ 9,302,400 9,302,400 $ $ 992,374 992,374 $ $ — $ 10,294,774 — $ 10,294,774 10,784,831 10,784,831 26,646,003 26,646,003 29,377 29,377 37,460,211 37,460,211 16,625 16,625 — — 20,056 20,056 36,681 36,681 $ 20,103,856 $ 20,103,856 $ 27,638,377 $ 27,638,377 $ 49,433 $ 49,433 $ 47,791,666 $ 47,791,666 YEAR ENDED AUGUST 31, 2021 YEAR ENDED AUGUST 31, 2021 ASC TOPIC 606 ASC TOPIC 606 ASC TOPIC 815 ASC TOPIC 815 OTHER OTHER GUIDANCE GUIDANCE TOTAL TOTAL REVENUES REVENUES $ $ 5,680,391 5,680,391 $ $ 694,870 694,870 $ $ — $ — $ 6,375,261 6,375,261 7,491,484 7,491,484 24,517,033 24,517,033 26,825 26,825 32,035,342 32,035,342 18,325 18,325 — — 19,105 19,105 37,430 37,430 $ 13,190,200 $ 13,190,200 $ 25,211,903 $ 25,211,903 $ 45,930 $ 45,930 $ 38,448,033 $ 38,448,033 22 2023 CHS Annual Report 2023 CHS Annual Report 23 2023 CHS Annual Report 23 328789_14-57.indd 23 11/28/23 3:21 PM * * Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues. Less than 1% of revenues accounted for under ASC Topic 606 included within the table above are recorded Less than 1% of revenues accounted for under ASC Topic 606 included within the table above are recorded over time and relate primarily to service contracts. over time and relate primarily to service contracts. AUGUST 31, 2023 2022 2021 $ 1,765,286 $ 793,957 $ 413,159 79,301 109,517 129,325 cash $ 1,844,587 $ 903,474 $ 542,484 Cash Flows. (DOLLARS IN THOUSANDS) Cash and cash equivalents Restricted cash included in other current assets Total cash and cash equivalents and restricted NOTE 2 Revenues We provide a wide variety of products and services, with the underlying contract. For the majority of our from agricultural inputs such as fuels, farm supplies and contracts with customers, control transfers to agronomy products, to agricultural outputs that include customers at a point in time when goods and/or grain and oilseed, processed grains and oilseeds and services have been delivered, as that is generally when food products, and renewable fuels production and legal title, physical possession and risks and rewards of marketing. We primarily conduct our operations and ownership of the goods and/or services transfer to the derive revenues within our Energy and Ag segments. customer. In limited arrangements, control transfers Our Energy segment derives its revenues through over time as the customer simultaneously receives and refining, wholesaling and retailing of petroleum consumes the benefits of the service as we complete products. Our Ag segment derives its revenues through our performance obligation(s). Revenue is recognized origination and marketing of grain, including service as the transaction price we expect to be entitled to in activities conducted at export terminals; through exchange for transferring goods or services to a wholesale agronomy sales of crop nutrient and crop customer, excluding amounts collected on behalf of protection products; from sales of soybean meal, refined third parties. For physically settled derivative sales soy oil and soyflour products; through production and contracts that are outside the scope of the revenue marketing of renewable fuels; and through retail sales of guidance, we recognize revenue when control of the petroleum and agronomy products, processed inventory is transferred. Revenues arising from our sunflowers, and feed and farm supplies. Corporate and financing business are recognized in accordance with Other primarily consists of our financing and hedging Accounting Standards Codification (“ASC”) Topic 470, businesses. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied, which generally occurs when control of the goods has transferred to the customer in accordance Debt (“ASC Topic 470”) and fall outside the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). N OT E 2: R evenues, continued N OT E 2: R evenues, continued 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 customers. Contract assets are recorded in receivables within our Consolidated Balance Sheets and were $16.2 million and $17.2 million as of August 31, 2023 and 2022, respectively. 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 customers. Contract assets are recorded in receivables within our Consolidated Balance Sheets and were $16.2 million and $17.2 million as of August 31, 2023 and 2022, respectively. NOTE 3 NOTE 3 Receivables Receivables Receivables as of August 31, 2023 and 2022, are as follows: Receivables as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Trade accounts receivable Trade accounts receivable 2023 2023 2022 2022 $ 2,010,162 $ 2,010,162 $ 2,626,623 $ 2,626,623 CHS Capital short-term notes CHS Capital short-term notes receivable receivable Other Other Gross receivables Gross receivables Less allowances and reserves Less allowances and reserves Total receivables Total receivables 845,192 845,192 327,084 327,084 644,875 644,875 404,734 404,734 3,182,438 3,182,438 3,676,232 3,676,232 76,627 76,627 $ 3,105,811 $ 3,105,811 127,917 127,917 $ 3,548,315 $ 3,548,315 Trade Accounts Receivable Trade Accounts Receivable Trade accounts receivable are recorded at net realizable Trade accounts receivable are recorded at net realizable value, which includes an allowance for expected credit value, which includes an allowance for expected credit losses in accordance with ASC Topic 326, Financial losses in accordance with ASC Topic 326, Financial Instruments — Credit Losses (“ASC Topic 326”). The Instruments — Credit Losses (“ASC Topic 326”). The allowance for expected credit losses is based on our allowance for expected credit losses is based on our best estimate of expected credit losses in existing best estimate of expected credit losses in existing receivable balances and is determined using historical receivable balances and is determined using historical write-off experience, adjusted for various industry and write-off experience, adjusted for various industry and regional data and current expectations of future credit regional data and current expectations of future credit losses. Receivables from related parties are disclosed in losses. Receivables from related parties are disclosed in Note 18, Related Party Transactions. No third-party Note 18, Related Party Transactions. No third-party customer accounted for more than 10% of the total customer accounted for more than 10% of the total receivables balance as of August 31, 2023 or 2022. receivables balance as of August 31, 2023 or 2022. Contract liabilities relate to advance payments received Contract liabilities relate to advance payments received from customers for goods and services that we have from customers for goods and services that we have yet to provide. Contract liabilities of $240.0 million and yet to provide. Contract liabilities of $240.0 million and $541.5 million as of August 31, 2023 and 2022, $541.5 million as of August 31, 2023 and 2022, respectively, are recorded within other current liabilities respectively, are recorded within other current liabilities on our Consolidated Balance Sheets, and are recognized on our Consolidated Balance Sheets, and are recognized as revenues within the next respective fiscal year. as revenues within the next respective fiscal year. CHS Capital Notes Receivable Notes Receivable CHS Capital, LLC (“CHS Capital”), our wholly-owned subsidiary, has short-term notes receivable from commercial and producer borrowers. The short-term notes receivable have maturity terms of 12 months or less and are reported at their outstanding unpaid principal balances, less an allowance for expected credit losses, as CHS Capital has the intent and ability to hold the applicable loans for the foreseeable future or until maturity or payoff. The carrying value of CHS Capital short-term notes receivable approximates fair value given the notes’ short-term duration and use of market pricing adjusted for risk. CHS Capital Notes Receivable Notes Receivable CHS Capital, LLC (“CHS Capital”), our wholly-owned subsidiary, has short-term notes receivable from commercial and producer borrowers. The short-term notes receivable have maturity terms of 12 months or less and are reported at their outstanding unpaid principal balances, less an allowance for expected credit losses, as CHS Capital has the intent and ability to hold the applicable loans for the foreseeable future or until maturity or payoff. The carrying value of CHS Capital short-term notes receivable approximates fair value given the notes’ short-term duration and use of market pricing adjusted for risk. Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives’ capital stock. These loans are primarily originated in the states of Minnesota, Montana and North Dakota. 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 primarily originated in the same states as the commercial notes, as well as South Dakota. Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives’ capital stock. These loans are primarily originated in the states of Minnesota, Montana and North Dakota. 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 primarily originated in the same states as the commercial notes, as well as South Dakota. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In addition to the short-term balances included in the In addition to the short-term balances included in the Troubled Debt Restructurings Troubled Debt Restructurings table above, CHS Capital had long-term notes table above, CHS Capital had long-term notes receivable, with durations of generally not more than receivable, with durations of generally not more than 10 years, totaling $61.1 million and $54.3 million as of 10 years, totaling $61.1 million and $54.3 million as of August 31, 2023 and 2022, respectively. The long-term August 31, 2023 and 2022, respectively. The long-term notes receivable are included in other assets on our notes receivable are included in other assets on our Consolidated Balance Sheets. As of August 31, 2023 and Consolidated Balance Sheets. As of August 31, 2023 and 2022, commercial notes represented 15% and 25%, 2022, commercial notes represented 15% and 25%, respectively, and producer notes represented 85% and respectively, and producer notes represented 85% and 75%, respectively, of total CHS Capital notes receivable. 75%, respectively, of total CHS Capital notes receivable. CHS Capital has commitments to extend credit to CHS Capital has commitments to extend credit to customers if there are no violations of any contractually customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of Capital customers had additional available credit of $1.1 billion. $1.1 billion. Allowance for Loan Losses Allowance for Loan Losses CHS Capital maintains an allowance for loan losses that CHS Capital maintains an allowance for loan losses that is an estimate of current expected losses inherent in the is an estimate of current expected losses inherent in the loans receivable portfolio. loans receivable portfolio. In accordance with ASC In accordance with ASC Topic 326, the allowance for loan losses is based on our Topic 326, the allowance for loan losses is based on our current expectation for future losses, which takes into current expectation for future losses, which takes into consideration historical consideration historical loss experience, third-party loss experience, third-party industry forecasts, as well as other quantitative and industry forecasts, as well as other quantitative and qualitative factors addressing operational risks and qualitative factors addressing operational risks and industry trends. Additions to the allowance for loan industry trends. Additions to the allowance for loan losses are reflected within marketing, general and losses are reflected within marketing, general and administrative expenses in the Consolidated Statements administrative expenses in the Consolidated Statements of Operations. The portion of loans receivable deemed of Operations. The portion of loans receivable deemed uncollectible is charged off against the allowance for uncollectible is charged off against the allowance for loan losses. Recoveries of previously charged off loan losses. Recoveries of previously charged off amounts increase the allowance for loan losses. No amounts increase the allowance for loan losses. No significant amounts of CHS Capital notes were past due significant amounts of CHS Capital notes were past due as of August 31, 2023 or 2022, and the allowance for as of August 31, 2023 or 2022, and the allowance for loan losses related to CHS Capital notes were not loan losses related to CHS Capital notes were not material as of either date. material as of either date. Restructuring of a loan constitutes a troubled debt Restructuring of a loan constitutes a troubled debt restructuring, or restructured loan, if the creditor, for restructuring, or restructured loan, if the creditor, for economic reasons related to the debtor’s financial economic reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it difficulties, grants a concession to the debtor that it would otherwise not consider. Concessions vary by would otherwise not consider. Concessions vary by program and borrower. Concessions may include program and borrower. Concessions may include interest rate reductions, term extensions, payment interest rate reductions, term extensions, payment deferrals or the acceptance of additional collateral in lieu deferrals or the acceptance of additional collateral in lieu of payments. In limited circumstances, principal may be of payments. In limited circumstances, principal may be forgiven. When a restructured loan constitutes a forgiven. When a restructured loan constitutes a troubled debt restructuring, CHS includes these loans troubled debt restructuring, CHS includes these loans within its impaired loans. CHS Capital had no significant within its impaired loans. CHS Capital had no significant troubled debt restructurings during the years ended troubled debt restructurings during the years ended August 31, 2023, 2022 and 2021, and no third-party August 31, 2023, 2022 and 2021, and no third-party borrowers that accounted for more than 10% of the total borrowers that accounted for more than 10% of the total CHS Capital notes receivable or total receivables as of CHS Capital notes receivable or total receivables as of August 31, 2023 or 2022. August 31, 2023 or 2022. Loan Participations Loan Participations For the years ended August 31, 2023 and 2022, CHS For the years ended August 31, 2023 and 2022, CHS Capital sold $60.8 million and $64.2 million of notes Capital sold $60.8 million and $64.2 million of notes receivable, respectively, to various counterparties under receivable, respectively, to various counterparties under a master participation agreement. The sales resulted in a master participation agreement. The sales resulted in the removal of notes receivable from the Consolidated the removal of notes receivable from the Consolidated Balance Sheets. CHS Capital has no retained interests in Balance Sheets. CHS Capital has no retained interests in the transferred notes receivable, other than collection the transferred notes receivable, other than collection and administrative services. Proceeds from sales of and administrative services. Proceeds from sales of notes receivable have been included in investing notes receivable have been included in investing activities in the Consolidated Statements of Cash Flows. activities in the Consolidated Statements of Cash Flows. Fees received related to the servicing of notes Fees received related to the servicing of notes receivable are recorded in other receivable are recorded in other income in the income in the Consolidated Statements of Operations. We consider Consolidated Statements of Operations. We consider the fees received adequate compensation for services the fees received adequate compensation for services rendered and, accordingly, have recorded no servicing rendered and, accordingly, have recorded no servicing asset or liability. asset or liability. Other Receivables Other Receivables Interest Income Interest Income Interest income is recognized on the accrual basis using Interest income is recognized on the accrual basis using Other receivables are comprised of certain other Other receivables are comprised of certain other a method that computes simple interest on a daily basis. a method that computes simple interest on a daily basis. amounts recorded in the normal course of business, amounts recorded in the normal course of business, Accrual of interest on commercial loans receivable is Accrual of interest on commercial loans receivable is including receivables including receivables related to vendor related to vendor rebates, rebates, discontinued at the time the receivable is 90 days past discontinued at the time the receivable is 90 days past value-added taxes, certain financing receivables and value-added taxes, certain financing receivables and due unless the loan is well-collateralized and in process due unless the loan is well-collateralized and in process pre-crop financing, primarily to Brazilian farmers, to pre-crop financing, primarily to Brazilian farmers, to of collection. Past due status is based on contractual of collection. Past due status is based on contractual finance a portion of supplier production costs. We finance a portion of supplier production costs. We terms of the loan. Producer loans receivable are placed terms of the loan. Producer loans receivable are placed receive volume-based rebates from certain vendors receive volume-based rebates from certain vendors in nonaccrual status based on estimates and analysis in nonaccrual status based on estimates and analysis during the year. These vendor rebates are accounted for during the year. These vendor rebates are accounted for due to the annual debt service terms inherent to CHS due to the annual debt service terms inherent to CHS in accordance with ASC 705, Cost of Sales and Services, in accordance with ASC 705, Cost of Sales and Services, Capital’s producer loans. In all cases, loans are placed in Capital’s producer loans. In all cases, loans are placed in based on the terms of the volume rebate program. For based on the terms of the volume rebate program. For nonaccrual status or charged off at an earlier date if nonaccrual status or charged off at an earlier date if rebates rebates that meet that meet the definition of a binding the definition of a binding collection of principal or interest is considered doubtful. collection of principal or interest is considered doubtful. arrangement and are both probable and estimable, we arrangement and are both probable and estimable, we 24 2023 CHS Annual Report 24 2023 CHS Annual Report 2023 CHS Annual Report 25 2023 CHS Annual Report 25 328789_14-57.indd 24 11/28/23 3:21 PM NOTE 2: Revenues, continued Contract Assets and Contract Liabilities Contract liabilities relate to advance payments received Contract assets relate to unbilled amounts arising from from customers for goods and services that we have goods that have already been transferred to the yet to provide. Contract liabilities of $240.0 million and customer where the right to payment is not conditional $541.5 million as of August 31, 2023 and 2022, on the passage of time. This results in recognition of an respectively, are recorded within other current liabilities on our Consolidated Balance Sheets, and are recognized as revenues within the next respective fiscal year. asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to customers. Contract assets are recorded in receivables within our Consolidated Balance Sheets and were $16.2 million and $17.2 million as of August 31, 2023 and 2022, respectively. NOTE 3 Receivables follows: Receivables as of August 31, 2023 and 2022, are as CHS Capital Notes Receivable (DOLLARS IN THOUSANDS) 2023 2022 Trade accounts receivable $ 2,010,162 $ 2,626,623 CHS Capital short-term notes receivable Other 845,192 327,084 644,875 404,734 Less allowances and reserves 76,627 127,917 Total receivables $ 3,105,811 $ 3,548,315 Notes Receivable CHS Capital, LLC (“CHS Capital”), our wholly-owned subsidiary, has short-term notes receivable from commercial and producer borrowers. The short-term notes receivable have maturity terms of 12 months or less and are reported at their outstanding unpaid principal balances, less an allowance for expected credit the applicable loans for the foreseeable future or until maturity or payoff. The carrying value of CHS Capital short-term notes receivable approximates fair value given the notes’ short-term duration and use of market Gross receivables 3,182,438 3,676,232 losses, as CHS Capital has the intent and ability to hold Trade Accounts Receivable pricing adjusted for risk. Trade accounts receivable are recorded at net realizable value, which includes an allowance for expected credit losses in accordance with ASC Topic 326, Financial Instruments — Credit Losses (“ASC Topic 326”). 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. Receivables from related parties are disclosed in Note 18, Related Party Transactions. No third-party Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives’ capital stock. These loans are primarily originated in the states of Minnesota, Montana and North Dakota. 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 primarily originated in customer accounted for more than 10% of the total the same states as the commercial notes, as well as receivables balance as of August 31, 2023 or 2022. South Dakota. 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 $61.1 million and $54.3 million as of August 31, 2023 and 2022, respectively. The long-term notes receivable are included in other assets on our Consolidated Balance Sheets. As of August 31, 2023 and 2022, commercial notes represented 15% and 25%, respectively, and producer notes represented 85% and 75%, respectively, of total CHS Capital notes receivable. 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 $61.1 million and $54.3 million as of August 31, 2023 and 2022, respectively. The long-term notes receivable are included in other assets on our Consolidated Balance Sheets. As of August 31, 2023 and 2022, commercial notes represented 15% and 25%, respectively, and producer notes represented 85% and 75%, respectively, of total CHS Capital notes receivable. CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of $1.1 billion. CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of $1.1 billion. Allowance for Loan Losses CHS Capital maintains an allowance for loan losses that is an estimate of current expected losses inherent in the loans receivable portfolio. In accordance with ASC Topic 326, the allowance for loan losses is based on our current expectation for future losses, which takes into consideration historical loss experience, third-party industry forecasts, as well as other quantitative and qualitative factors addressing operational risks and industry trends. Additions to the allowance for loan losses are reflected within marketing, general and administrative expenses in the Consolidated Statements of Operations. The portion of loans receivable deemed uncollectible is charged off against the allowance for loan losses. Recoveries of previously charged off amounts increase the allowance for loan losses. No significant amounts of CHS Capital notes were past due as of August 31, 2023 or 2022, and the allowance for loan losses related to CHS Capital notes were not material as of either date. Allowance for Loan Losses CHS Capital maintains an allowance for loan losses that is an estimate of current expected losses inherent in the loans receivable portfolio. In accordance with ASC Topic 326, the allowance for loan losses is based on our current expectation for future losses, which takes into consideration historical loss experience, third-party industry forecasts, as well as other quantitative and qualitative factors addressing operational risks and industry trends. Additions to the allowance for loan losses are reflected within marketing, general and administrative expenses in the Consolidated Statements of Operations. The portion of loans receivable deemed uncollectible is charged off against the allowance for loan losses. Recoveries of previously charged off amounts increase the allowance for loan losses. No significant amounts of CHS Capital notes were past due as of August 31, 2023 or 2022, and the allowance for loan losses related to CHS Capital notes were not material as of either date. Interest Income Interest income is recognized on the accrual basis using a method that computes simple interest on a daily basis. Accrual of interest on commercial loans receivable is discontinued at the time the receivable is 90 days past due unless the loan is well-collateralized and in process of collection. Past due status is based on contractual terms of the loan. Producer loans receivable are placed in nonaccrual status based on estimates and analysis due to the annual debt service terms inherent to CHS Capital’s producer loans. In all cases, loans are placed in nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. Interest Income Interest income is recognized on the accrual basis using a method that computes simple interest on a daily basis. Accrual of interest on commercial loans receivable is discontinued at the time the receivable is 90 days past due unless the loan is well-collateralized and in process of collection. Past due status is based on contractual terms of the loan. Producer loans receivable are placed in nonaccrual status based on estimates and analysis due to the annual debt service terms inherent to CHS Capital’s producer loans. In all cases, loans are placed in nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Troubled Debt Restructurings Restructuring of a loan constitutes a troubled debt restructuring, or restructured loan, if the creditor, for economic reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would otherwise not consider. Concessions vary by program and borrower. Concessions may include interest rate reductions, term extensions, payment deferrals or the acceptance of additional collateral in lieu of payments. In limited circumstances, principal may be forgiven. When a restructured loan constitutes a troubled debt restructuring, CHS includes these loans within its impaired loans. CHS Capital had no significant troubled debt restructurings during the years ended August 31, 2023, 2022 and 2021, and no third-party borrowers that accounted for more than 10% of the total CHS Capital notes receivable or total receivables as of August 31, 2023 or 2022. Troubled Debt Restructurings Restructuring of a loan constitutes a troubled debt restructuring, or restructured loan, if the creditor, for economic reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would otherwise not consider. Concessions vary by program and borrower. Concessions may include interest rate reductions, term extensions, payment deferrals or the acceptance of additional collateral in lieu of payments. In limited circumstances, principal may be forgiven. When a restructured loan constitutes a troubled debt restructuring, CHS includes these loans within its impaired loans. CHS Capital had no significant troubled debt restructurings during the years ended August 31, 2023, 2022 and 2021, and no third-party borrowers that accounted for more than 10% of the total CHS Capital notes receivable or total receivables as of August 31, 2023 or 2022. Loan Participations For the years ended August 31, 2023 and 2022, CHS Capital sold $60.8 million and $64.2 million of notes receivable, respectively, to various counterparties under a master participation agreement. The sales resulted in the removal of notes receivable from the Consolidated Balance Sheets. CHS Capital has no retained interests in the transferred notes receivable, other than collection and administrative services. Proceeds from sales of notes receivable have been included in investing activities in the Consolidated Statements of Cash Flows. Fees received related to the servicing of notes receivable are recorded in other income in the Consolidated Statements of Operations. We consider the fees received adequate compensation for services rendered and, accordingly, have recorded no servicing asset or liability. Loan Participations For the years ended August 31, 2023 and 2022, CHS Capital sold $60.8 million and $64.2 million of notes receivable, respectively, to various counterparties under a master participation agreement. The sales resulted in the removal of notes receivable from the Consolidated Balance Sheets. CHS Capital has no retained interests in the transferred notes receivable, other than collection and administrative services. Proceeds from sales of notes receivable have been included in investing activities in the Consolidated Statements of Cash Flows. Fees received related to the servicing of notes receivable are recorded in other income in the Consolidated Statements of Operations. We consider the fees received adequate compensation for services rendered and, accordingly, have recorded no servicing asset or liability. related to vendor related to vendor Other Receivables Other receivables are comprised of certain other amounts recorded in the normal course of business, including receivables rebates, value-added taxes, certain financing receivables and pre-crop financing, primarily to Brazilian farmers, to finance a portion of supplier production costs. We receive volume-based rebates from certain vendors during the year. These vendor rebates are accounted for in accordance with ASC 705, Cost of Sales and Services, based on the terms of the volume rebate program. For rebates the definition of a binding arrangement and are both probable and estimable, we Other Receivables Other receivables are comprised of certain other amounts recorded in the normal course of business, including receivables rebates, value-added taxes, certain financing receivables and pre-crop financing, primarily to Brazilian farmers, to finance a portion of supplier production costs. We receive volume-based rebates from certain vendors during the year. These vendor rebates are accounted for in accordance with ASC 705, Cost of Sales and Services, based on the terms of the volume rebate program. For rebates the definition of a binding arrangement and are both probable and estimable, we that meet that meet 24 2023 CHS Annual Report 2023 CHS Annual Report 25 2023 CHS Annual Report 25 328789_14-57.indd 25 11/28/23 3:21 PM N OT E 3: R eceiva ble s, continued N OT E 3: R eceivabl es, continue d estimate the amount of the rebate we will receive and accrue it as a reduction of the cost of inventory and cost of goods sold over the period in which the rebate is earned. For pre-crop financing arrangements we do not bear costs or operational risks associated with the related growing crops, although our ability to be paid depends on the crops actually being produced. The land and financing is collateralized by future crops, estimate the amount of the rebate we will receive and accrue it as a reduction of the cost of inventory and cost of goods sold over the period in which the rebate is earned. For pre-crop financing arrangements we do not bear costs or operational risks associated with the related growing crops, although our ability to be paid depends on the crops actually being produced. The land and financing is collateralized by future crops, physical assets of the farmers, carries a local market interest rate and settles when the farmer’s crop is harvested and sold. No significant troubled debt restructurings occurred during the years ended August 31, 2023, 2022 and 2021, and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of August 31, 2023 or 2022. physical assets of the farmers, carries a local market interest rate and settles when the farmer’s crop is harvested and sold. No significant troubled debt restructurings occurred during the years ended August 31, 2023, 2022 and 2021, and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of August 31, 2023 or 2022. NOTE 4 NOTE 4 Inventories Inventories Inventories as of August 31, 2023 and 2022, are as follows: Inventories as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Grain and oilseed Grain and oilseed Energy Energy Agronomy Agronomy Processed grain and oilseed Processed grain and oilseed Other Other Total inventories Total inventories 2023 2023 2022 2022 $ 1,099,956 $ 1,099,956 $ 1,133,531 $ 1,133,531 645,333 645,333 1,111,477 1,111,477 141,360 141,360 824,114 824,114 1,295,548 1,295,548 292,992 292,992 217,053 217,053 $ 3,215,179 $ 3,215,179 106,686 106,686 $ 3,652,871 $ 3,652,871 Grain, processed grain, oilseed, processed oilseed and Grain, processed grain, oilseed, processed oilseed and other minimally processed soy-based inventories are other minimally processed soy-based inventories are accounted for in accordance with ASC Topic 330, accounted for in accordance with ASC Topic 330, Inventory, and are stated at net realizable value. These Inventory, and are stated at net realizable value. These inventories are agricultural commodity inventories that inventories are agricultural commodity inventories that are readily convertible to cash because of their are readily convertible to cash because of their commodity characteristics, widely available markets commodity characteristics, widely available markets and international pricing mechanisms. The net realizable and international pricing mechanisms. The net realizable value of is value of is determined using inputs that are generally based on determined using inputs that are generally based on exchange traded prices and/or recent market bids and exchange traded prices and/or recent market bids and offers, adjustments. offers, adjustments. location-specific Location-specific inputs are driven by local market Location-specific inputs are driven by local market supply and demand and are generally based on broker supply and demand and are generally based on broker or dealer quotations or market transactions in either or dealer quotations or market transactions in either listed or over-the-counter (“OTC”) markets. Changes in listed or over-the-counter (“OTC”) markets. Changes in location-specific commodity commodity agricultural agricultural inventories inventories including including the net realizable value of agricultural commodity inventories are recognized in earnings as a component of cost of goods sold. the net realizable value of agricultural commodity inventories are recognized in earnings as a component of cost of goods sold. All other inventories are stated at the lower of cost or net realizable value. Costs for inventories produced or modified by us through a manufacturing process include fixed and variable production and raw material costs, and inbound freight costs for raw materials. Costs for inventories purchased for resale include the cost of products and freight incurred to place the products at our points of sale. The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out (“LIFO”) method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out (“FIFO”) and average cost methods. All other inventories are stated at the lower of cost or net realizable value. Costs for inventories produced or modified by us through a manufacturing process include fixed and variable production and raw material costs, and inbound freight costs for raw materials. Costs for inventories purchased for resale include the cost of products and freight incurred to place the products at our points of sale. The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out (“LIFO”) method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out (“FIFO”) and average cost methods. As of August 31, 2023 and 2022, we valued approximately 16% and 14%, 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 $589.0 million and $678.3 million as of August 31, 2023 and 2022, respectively. There were no liquidations of LIFO inventories during fiscal 2023 or fiscal 2022. As of August 31, 2023 and 2022, we valued approximately 16% and 14%, 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 $589.0 million and $678.3 million as of August 31, 2023 and 2022, respectively. There were no liquidations of LIFO inventories during fiscal 2023 or fiscal 2022. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 NOTE 5 Other Current Assets Other Current Assets Other current assets as of August 31, 2023 and 2022, Other current assets as of August 31, 2023 and 2022, result in a loss on the contract value to comply with result in a loss on the contract value to comply with are as follows: are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Derivative assets (Note 15) Derivative assets (Note 15) $ $ 320,119 320,119 $ $ 535,698 535,698 Margin and related deposits Margin and related deposits Prepaid expenses Prepaid expenses Supplier advance payments Supplier advance payments Restricted cash (Note 1) Restricted cash (Note 1) Other Other 342,872 342,872 149,682 149,682 136,304 136,304 79,301 79,301 14,095 14,095 390,782 390,782 127,286 127,286 198,753 198,753 109,517 109,517 20,668 20,668 Total other current assets Total other current assets $ 1,042,373 $ 1,042,373 $ 1,382,704 $ 1,382,704 applicable regulations. Our margin and related deposit applicable regulations. Our margin and related deposit assets are generally held in separate accounts to assets are generally held in separate accounts to support the associated derivative contracts and may be support the associated derivative contracts and may be used to fund or partially fund the settlement of those used to fund or partially fund the settlement of those contracts as they expire. Similar to our derivative contracts as they expire. Similar to our derivative financial instruments, margin and related deposits are financial instruments, margin and related deposits are reported on a gross basis. reported on a gross basis. Prepaid Expenses and Supplier Advance Payments Prepaid Expenses and Supplier Advance Payments Prepaid expenses and supplier advance payments are Prepaid expenses and supplier advance payments are typically for periods less than 12 months and include typically for periods less than 12 months and include amounts paid in advance for products and services. amounts paid in advance for products and services. Margin and Related Deposits Margin and Related Deposits Many of our derivative contracts with futures and Many of our derivative contracts with futures and Supplier advance payments are primarily for grain Supplier advance payments are primarily for grain options brokers require us to make margin deposits of options brokers require us to make margin deposits of purchases from suppliers and amounts paid to crop purchases from suppliers and amounts paid to crop cash or other assets. Subsequent margin deposits may cash or other assets. Subsequent margin deposits may nutrient and crop protection product suppliers to lock nutrient and crop protection product suppliers to lock also be necessary when changes in commodity prices also be necessary when changes in commodity prices in future supply, pricing and discounts. in future supply, pricing and discounts. NOTE 6 NOTE 6 Investments Investments follows: follows: Investments as of August 31, 2023 and 2022, are as Investments as of August 31, 2023 and 2022, are as Ventura Foods, LLC (“Ventura Foods”), which are Ventura Foods, LLC (“Ventura Foods”), which are (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Equity method investments Equity method investments CF Industries Nitrogen, LLC CF Industries Nitrogen, LLC $ 2,577,391 $ 2,577,391 $ 2,641,604 $ 2,641,604 Ventura Foods, LLC Ventura Foods, LLC 519,169 519,169 410,093 410,093 summarized below. In addition to the recognition of our summarized below. In addition to the recognition of our share of income from our equity method investments, share of income from our equity method investments, our equity method investments are evaluated for our equity method investments are evaluated for indicators of other-than-temporary impairment on an indicators of other-than-temporary impairment on an ongoing basis in accordance with U.S. GAAP. We had ongoing basis in accordance with U.S. GAAP. We had approximately approximately $636.1 million $636.1 million of of cumulative cumulative Ardent Mills, LLC Ardent Mills, LLC Other equity method Other equity method investments investments 265,146 265,146 250,857 250,857 undistributed earnings undistributed earnings from our equity method from our equity method investees included in the investments balance as of investees included in the investments balance as of 337,281 337,281 298,722 298,722 August 31, 2023. August 31, 2023. Other investments Other investments 129,885 129,885 126,730 126,730 Total investments Total investments $ 3,828,872 $ 3,828,872 $ 3,728,006 $ 3,728,006 Joint ventures and other investments in which we have Joint ventures and other investments in which we have significant ownership and influence but not control, are significant ownership and influence but not control, are All equity securities that do not result in consolidation All equity securities that do not result in consolidation and are not accounted for under the equity method are and are not accounted for under the equity method are measured at fair value with changes therein reflected in measured at fair value with changes therein reflected in net income. We have elected to use the measurement net income. We have elected to use the measurement accounted for in our consolidated financial statements accounted for in our consolidated financial statements alternative for equity investments that do not have alternative for equity investments that do not have using the equity method of accounting. Our significant using the equity method of accounting. Our significant readily determinable fair values and measure these readily determinable fair values and measure these equity method investments consist of CF Nitrogen and equity method investments consist of CF Nitrogen and investments at cost less impairment plus or minus investments at cost less impairment plus or minus 26 2023 CHS Annual Report 26 2023 CHS Annual Report 2023 CHS Annual Report 27 2023 CHS Annual Report 27 328789_14-57.indd 26 11/28/23 3:21 PM NOTE 3: Receivables, continued estimate the amount of the rebate we will receive and physical assets of the farmers, carries a local market accrue it as a reduction of the cost of inventory and cost interest rate and settles when the farmer’s crop is of goods sold over the period in which the rebate is harvested and sold. No significant troubled debt earned. For pre-crop financing arrangements we do not restructurings occurred during the years ended bear costs or operational risks associated with the August 31, 2023, 2022 and 2021, and no third-party related growing crops, although our ability to be paid customer or borrower accounted for more than 10% of depends on the crops actually being produced. The the total receivables balance as of August 31, 2023 or financing is collateralized by future crops, land and 2022. Inventories as of August 31, 2023 and 2022, are as the net realizable value of agricultural commodity NOTE 4 Inventories follows: Energy Agronomy Other Processed grain and oilseed (DOLLARS IN THOUSANDS) 2023 2022 Grain and oilseed $ 1,099,956 $ 1,133,531 645,333 824,114 1,111,477 1,295,548 141,360 217,053 292,992 106,686 Total inventories $ 3,215,179 $ 3,652,871 Grain, processed grain, oilseed, processed oilseed and other minimally processed soy-based inventories are accounted for in accordance with ASC Topic 330, Inventory, and are stated at net realizable value. These are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. The net realizable value of agricultural commodity inventories is determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments. inventories are recognized in earnings as a component of cost of goods sold. All other inventories are stated at the lower of cost or net realizable value. Costs for inventories produced or modified by us through a manufacturing process include fixed and variable production and raw material costs, and inbound freight costs for raw materials. Costs for inventories purchased for resale include the cost of products and freight incurred to place the products at our points of sale. The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out (“LIFO”) method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out As of August 31, 2023 and 2022, we valued approximately 16% and 14%, 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 inventories are agricultural commodity inventories that (“FIFO”) and average cost methods. Location-specific inputs are driven by local market been higher than the reported amount by $589.0 million supply and demand and are generally based on broker and $678.3 million as of August 31, 2023 and 2022, or dealer quotations or market transactions in either respectively. There were no liquidations of LIFO listed or over-the-counter (“OTC”) markets. Changes in inventories during fiscal 2023 or fiscal 2022. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 NOTE 5 Other Current Assets Other Current Assets Other current assets as of August 31, 2023 and 2022, are as follows: Other current assets as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Derivative assets (Note 15) Derivative assets (Note 15) $ $ 320,119 320,119 $ $ 535,698 535,698 Margin and related deposits Margin and related deposits Prepaid expenses Prepaid expenses Supplier advance payments Supplier advance payments Restricted cash (Note 1) Restricted cash (Note 1) Other Other 342,872 342,872 149,682 149,682 136,304 136,304 79,301 79,301 14,095 14,095 390,782 390,782 127,286 127,286 198,753 198,753 109,517 109,517 20,668 20,668 Total other current assets Total other current assets $ 1,042,373 $ 1,042,373 $ 1,382,704 $ 1,382,704 Margin and Related Deposits Many of our derivative contracts with futures and options brokers require us to make margin deposits of cash or other assets. Subsequent margin deposits may also be necessary when changes in commodity prices Margin and Related Deposits Many of our derivative contracts with futures and options brokers require us to make margin deposits of cash or other assets. Subsequent margin deposits may also be necessary when changes in commodity prices result in a loss on the contract value to comply with applicable regulations. Our margin and related deposit assets are generally held in separate accounts to support the associated derivative contracts and may be used to fund or partially fund the settlement of those contracts as they expire. Similar to our derivative financial instruments, margin and related deposits are reported on a gross basis. result in a loss on the contract value to comply with applicable regulations. Our margin and related deposit assets are generally held in separate accounts to support the associated derivative contracts and may be used to fund or partially fund the settlement of those contracts as they expire. Similar to our derivative financial instruments, margin and related deposits are reported on a gross basis. Prepaid Expenses and Supplier Advance Payments Prepaid Expenses and Supplier Advance Payments Prepaid expenses and supplier advance payments are Prepaid expenses and supplier advance payments are typically for periods less than 12 months and include typically for periods less than 12 months and include amounts paid in advance for products and services. amounts paid in advance for products and services. Supplier advance payments are primarily for grain Supplier advance payments are primarily for grain purchases from suppliers and amounts paid to crop purchases from suppliers and amounts paid to crop nutrient and crop protection product suppliers to lock nutrient and crop protection product suppliers to lock in future supply, pricing and discounts. in future supply, pricing and discounts. NOTE 6 NOTE 6 Investments Investments Investments as of August 31, 2023 and 2022, are as follows: Investments as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Equity method investments Equity method investments CF Industries Nitrogen, LLC CF Industries Nitrogen, LLC $ 2,577,391 $ 2,577,391 $ 2,641,604 $ 2,641,604 Ventura Foods, LLC Ventura Foods, LLC 519,169 519,169 410,093 410,093 Ardent Mills, LLC Ardent Mills, LLC 265,146 265,146 250,857 250,857 Other equity method investments Other equity method investments 337,281 337,281 298,722 298,722 Other investments Other investments 129,885 129,885 126,730 126,730 Total investments Total investments $ 3,828,872 $ 3,828,872 $ 3,728,006 $ 3,728,006 Joint ventures and other investments in which we have significant ownership and influence but not control, are accounted for in our consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Nitrogen and Joint ventures and other investments in which we have significant ownership and influence but not control, are accounted for in our consolidated financial statements using the equity method of accounting. Our significant equity method investments consist of CF Nitrogen and Ventura Foods, LLC (“Ventura Foods”), which are summarized below. In addition to the recognition of our share of income from our equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with U.S. GAAP. We had of $636.1 million approximately cumulative from our equity method undistributed earnings investees included in the investments balance as of August 31, 2023. Ventura Foods, LLC (“Ventura Foods”), which are summarized below. In addition to the recognition of our share of income from our equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with U.S. GAAP. We had approximately cumulative undistributed earnings from our equity method investees included in the investments balance as of August 31, 2023. $636.1 million of All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. We have elected to use the measurement alternative for equity investments that do not have readily determinable fair values and measure these investments at cost less impairment plus or minus All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. We have elected to use the measurement alternative for equity investments that do not have readily determinable fair values and measure these investments at cost less impairment plus or minus 26 2023 CHS Annual Report 2023 CHS Annual Report 27 2023 CHS Annual Report 27 328789_14-57.indd 27 11/28/23 3:21 PM N OT E 6: N OT E 6: Investments, continued I nvestments, continued in in change occurs cooperatives without cooperatives without observable price changes in orderly transactions. Our share in the income or loss of these equity method investments is recorded within equity income from investments in the Consolidated Statements of Operations. Other investments consist primarily of readily investments determinable fair values and are generally recorded at cost, unless an impairment or other observable market price requiring an adjustment. Investments in other cooperatives are recorded in a manner similar to equity investments without readily determinable fair values, plus patronage dividends received in the form of capital stock and other equities. Patronage dividends are recorded as a reduction to cost of goods sold at the time qualified written notices of allocation are received. Investments in debt and equity instruments are carried at amounts that approximate fair values. observable price changes in orderly transactions. Our share in the income or loss of these equity method investments is recorded within equity income from investments in the Consolidated Statements of Operations. Other investments consist primarily of investments readily determinable fair values and are generally recorded at cost, unless an impairment or other observable market price requiring an adjustment. Investments in other cooperatives are recorded in a manner similar to equity investments without readily determinable fair values, plus patronage dividends received in the form of capital stock and other equities. Patronage dividends are recorded as a reduction to cost of goods sold at the time qualified written notices of allocation are received. Investments in debt and equity instruments are carried at amounts that approximate fair values. change occurs CF Nitrogen CF Nitrogen We have a $2.6 billion investment in CF Nitrogen, a We have a $2.6 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. The strategic venture with CF Industries Holdings, Inc. The investment consists of an approximate 9% membership investment consists of an approximate 9% membership interest (based on product tons) in CF Nitrogen. At the interest (based on product tons) in CF Nitrogen. At the time we entered into the strategic venture, we also time we entered into the strategic venture, we also entered into a supply agreement that entitles us to entered into a supply agreement that entitles us to purchase up to 1.1 million tons of granular urea and purchase up to 1.1 million tons of granular urea and 580,000 tons of urea ammonium nitrate (“UAN”) 580,000 tons of urea ammonium nitrate (“UAN”) annually from CF Nitrogen for ratable delivery through annually from CF Nitrogen for ratable delivery through fiscal 2096. Our purchases under the supply agreement fiscal 2096. Our purchases under the supply agreement are based on prevailing market prices and we receive are based on prevailing market prices and we receive semiannual cash distributions (in January and July of semiannual cash distributions (in January and July of each year) from CF Nitrogen via our membership each year) from CF Nitrogen via our membership interest. These distributions are based on actual interest. These distributions are based on actual volumes purchased from CF Nitrogen under the volumes purchased from CF Nitrogen under the strategic venture and will have the effect of reducing strategic venture and will have the effect of reducing our investment to zero over 80 years on a straight-line our investment to zero over 80 years on a straight-line basis. We account this investment using the basis. We account this investment using the hypothetical liquidation at book value method, hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual Nitrogen Production segment based on our contractual claims on the entity’s net assets pursuant to the claims on the entity’s net assets pursuant to the liquidation provisions of the CF Nitrogen Limited liquidation provisions of the CF Nitrogen Limited Liability Company Agreement, adjusted for the the Liability Company Agreement, adjusted for semiannual cash distributions. Cash distributions semiannual cash distributions. Cash distributions received from CF Nitrogen for the years ended received from CF Nitrogen for the years ended August 31, 2023, 2022 and 2021, were $458.9 million, August 31, 2023, 2022 and 2021, were $458.9 million, $618.7 million and $193.9 million, respectively. $618.7 million and $193.9 million, respectively. for for The following tables provide aggregate summarized financial information for CF Nitrogen for balance sheets as of August 31, 2023 and 2022, and statements of operations for the 12 months ended August 31, 2023, 2022 and 2021: The following tables provide aggregate summarized financial information for CF Nitrogen for balance sheets as of August 31, 2023 and 2022, and statements of operations for the 12 months ended August 31, 2023, 2022 and 2021: NOTE 7 NOTE 7 Property, Plant and Equipment Property, Plant and Equipment (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Current assets Current assets Noncurrent assets Noncurrent assets Current liabilities Current liabilities Noncurrent liabilities Noncurrent liabilities $ $ 2023 2023 899,246 899,246 5,355,732 5,355,732 281,153 281,153 1,128 1,128 2022 2022 $ 1,333,170 $ 1,333,170 5,787,921 5,787,921 391,470 391,470 1,895 1,895 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Net sales Net sales Gross profit Gross profit Net earnings Net earnings Earnings Earnings attributable to attributable to CHS Inc. CHS Inc. 2023 2023 2022 2022 2021 2021 $ 5,070,489 $ 6,609,758 $ 2,975,983 $ 5,070,489 $ 6,609,758 $ 2,975,983 2,194,363 2,194,363 2,173,715 2,173,715 3,318,189 3,318,189 3,249,005 3,249,005 866,880 866,880 809,536 809,536 394,678 394,678 593,182 593,182 198,439 198,439 Ventura Foods We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes edible oil-based products. We account for Ventura Foods as an equity method investment and our share of the results of Ventura Foods is included in Corporate and Other. Ventura Foods We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes edible oil-based products. We account for Ventura Foods as an equity method investment and our share of the results of Ventura Foods is included in Corporate and Other. The following tables provide aggregate summarized The following tables provide aggregate summarized financial information for our equity method investment financial information for our equity method investment in Ventura Foods for balance sheets as of August 31, in Ventura Foods for balance sheets as of August 31, 2023 and 2022, and statements of operations for the 2023 and 2022, and statements of operations for the 12 months ended August 31, 2023, 2022 and 2021: 12 months ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Current assets Current assets Noncurrent assets Noncurrent assets Current liabilities Current liabilities Noncurrent liabilities Noncurrent liabilities 2023 2023 $ 1,041,799 $ 1,041,799 609,021 609,021 335,000 335,000 303,209 303,209 $ 801,568 2022 2022 $ 801,568 618,310 618,310 313,438 313,438 311,982 311,982 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Net sales Net sales Gross profit Gross profit Net earnings Net earnings Earnings Earnings attributable to attributable to CHS Inc. CHS Inc. 2023 2023 2022 2022 2021 2021 $ 3,552,194 $ 3,386,998 $ 2,584,532 $ 3,552,194 $ 3,386,998 $ 2,584,532 547,107 547,107 406,271 406,271 333,368 333,368 117,666 117,666 350,708 350,708 151,196 151,196 203,136 203,136 58,833 58,833 78,519 78,519 Our investments in other equity method investees are Our investments in other equity method investees are not significant in relation to our consolidated financial not significant in relation to our consolidated financial statements, either individually or in the aggregate. statements, either individually or in the aggregate. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Major classes of property, plant and equipment, Major classes of property, plant and equipment, changes in circumstances indicate that the carrying changes in circumstances indicate that the carrying including finance lease assets, are summarized in the including finance lease assets, are summarized in the amounts may not be recoverable in accordance with amounts may not be recoverable in accordance with table below as of August 31, 2023 and 2022. table below as of August 31, 2023 and 2022. U.S. GAAP. This evaluation of recoverability is based on U.S. GAAP. This evaluation of recoverability is based on (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 various indicators, including the nature, future economic various indicators, including the nature, future economic benefits and geographic locations of benefits and geographic locations of the assets, the assets, Land and land improvements Land and land improvements $ $ 350,703 350,703 $ $ 334,085 334,085 historical or future profitability measures and other historical or future profitability measures and other Buildings Buildings 1,242,913 1,242,913 1,192,571 1,192,571 external market conditions. If these indicators suggest external market conditions. If these indicators suggest Machinery and equipment Machinery and equipment 7,979,164 7,979,164 7,819,152 7,819,152 Office equipment and other Office equipment and other 498,430 498,430 496,121 496,121 Construction in progress Construction in progress 630,542 630,542 339,043 339,043 Gross property, plant and Gross property, plant and equipment equipment 10,701,752 10,701,752 10,180,972 10,180,972 Less accumulated Less accumulated depreciation and depreciation and amortization amortization 5,832,379 5,832,379 5,436,013 5,436,013 the carrying amounts of an asset or asset group may the carrying amounts of an asset or asset group may not be recoverable, potential impairment is evaluated not be recoverable, potential impairment is evaluated using undiscounted, estimated future cash flows. Should using undiscounted, estimated future cash flows. Should the sum of the expected future net cash flows be less the sum of the expected future net cash flows be less than the carrying value, an impairment loss would be than the carrying value, an impairment loss would be recognized. An impairment loss would be measured as recognized. An impairment loss would be measured as the amount by which the carrying value of the asset or the amount by which the carrying value of the asset or asset group exceeds its fair value. No significant asset group exceeds its fair value. No significant impairments were identified during fiscal 2023, fiscal impairments were identified during fiscal 2023, fiscal Total property, plant and Total property, plant and equipment equipment $ 4,869,373 $ 4,869,373 $ 4,744,959 $ 4,744,959 2022 or fiscal 2021. 2022 or fiscal 2021. We have asset retirement obligations with respect to We have asset retirement obligations with respect to Property, plant and equipment are stated at cost less Property, plant and equipment are stated at cost less certain of our refineries and other assets due to various certain of our refineries and other assets due to various accumulated accumulated depreciation depreciation and and amortization. amortization. legal obligations to clean and/or dispose of legal obligations to clean and/or dispose of the the Depreciation and amortization are provided on the Depreciation and amortization are provided on the component parts at the time they are retired. In most component parts at the time they are retired. In most straight-line method by charges to operations at rates straight-line method by charges to operations at rates cases, these assets can be used for extended and cases, these assets can be used for extended and based on the expected useful based on the expected useful lives of individual or lives of individual or indeterminate periods of time if they are properly indeterminate periods of time if they are properly groups of assets (generally 15 to 20 years for land groups of assets (generally 15 to 20 years for land maintained and/or upgraded. maintained and/or upgraded. It is our practice and It is our practice and improvements, 20 to 40 years for buildings, five to improvements, 20 to 40 years for buildings, five to current intent to maintain refineries and related assets current intent to maintain refineries and related assets 20 years for machinery and equipment, and three to 20 years for machinery and equipment, and three to and to continue making improvements to those assets and to continue making improvements to those assets 10 years for office equipment and other). Expenditures 10 years for office equipment and other). Expenditures based on technological advances. As a result, we believe based on technological advances. As a result, we believe for maintenance and minor repairs and renewals are for maintenance and minor repairs and renewals are our refineries and related assets have indeterminate lives our refineries and related assets have indeterminate lives expensed. We also capitalize and amortize eligible costs expensed. We also capitalize and amortize eligible costs for purposes of estimating asset retirement obligations for purposes of estimating asset retirement obligations to acquire or develop internal-use software that are to acquire or develop internal-use software that are because dates or ranges of dates upon which we would because dates or ranges of dates upon which we would incurred during the application development stage. incurred during the application development stage. When assets are sold or otherwise disposed of, the cost When assets are sold or otherwise disposed of, the cost and related accumulated depreciation and amortization and related accumulated depreciation and amortization are removed from the related accounts and resulting are removed from the related accounts and resulting gains or losses are reflected in operations. gains or losses are reflected in operations. Depreciation expense, including amortization of finance Depreciation expense, including amortization of finance lease assets, for the years ended August 31, 2023, 2022 lease assets, for the years ended August 31, 2023, 2022 and 2021, was $457.9 million, $458.2 million and and 2021, was $457.9 million, $458.2 million and $455.9 million, respectively. $455.9 million, respectively. retire a refinery and related assets cannot reasonably be retire a refinery and related assets cannot reasonably be estimated at this time. When a date or range of dates estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of any can reasonably be estimated for the retirement of any component part of a refinery or other asset, we estimate component part of a refinery or other asset, we estimate the cost of performing the retirement activities and the cost of performing the retirement activities and record a liability for the fair value of that future cost. record a liability for the fair value of that future cost. We have other assets that we may be obligated to We have other assets that we may be obligated to dismantle at the end of corresponding lease terms dismantle at the end of corresponding lease terms subject to the lessor’s discretion for which we have subject to the lessor’s discretion for which we have recorded asset retirement obligations. Based on our recorded asset retirement obligations. Based on our Property, plant and equipment and other long-lived Property, plant and equipment and other long-lived estimates of timing, cost and probability of removal, estimates of timing, cost and probability of removal, assets are reviewed for impairment when events or assets are reviewed for impairment when events or these obligations are not material. these obligations are not material. 28 2023 CHS Annual Report 28 2023 CHS Annual Report 2023 CHS Annual Report 29 2023 CHS Annual Report 29 328789_14-57.indd 28 11/28/23 3:21 PM NOTE 6: Investments, continued observable price changes in orderly transactions. Our The following tables provide aggregate summarized share in the income or loss of these equity method financial information for CF Nitrogen for balance sheets investments is recorded within equity income from as of August 31, 2023 and 2022, and statements of operations for the 12 months ended August 31, 2023, investments in the Consolidated Statements of Operations. Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally recorded at cost, unless an impairment or other observable market price change occurs requiring an adjustment. Investments in other cooperatives are recorded in a manner similar to equity investments without readily determinable fair values, plus patronage dividends received in the form of capital stock and other equities. Patronage dividends are recorded as a reduction to cost of goods sold at the time qualified written notices of allocation are received. Investments in debt and equity instruments are carried at amounts that approximate fair values. CF Nitrogen We have a $2.6 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. The investment consists of an approximate 9% membership interest (based on product tons) in CF Nitrogen. At the time we entered into the strategic venture, we also entered into a supply agreement that entitles us to purchase up to 1.1 million tons of granular urea and 580,000 tons of urea ammonium nitrate (“UAN”) annually from CF Nitrogen for ratable delivery through fiscal 2096. Our purchases under the supply agreement are based on prevailing market prices and we receive semiannual cash distributions (in January and July of each year) from CF Nitrogen via our membership interest. These distributions are based on actual volumes purchased from CF Nitrogen under the strategic venture and will have the effect of reducing our investment to zero over 80 years on a straight-line basis. 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 semiannual cash distributions. Cash distributions (DOLLARS IN THOUSANDS) 2023 2022 2022 and 2021: Current assets Noncurrent assets Current liabilities Noncurrent liabilities (DOLLARS IN THOUSANDS) Net sales Gross profit Net earnings Earnings attributable to CHS Inc. Ventura Foods $ 899,246 $ 1,333,170 5,355,732 5,787,921 281,153 1,128 391,470 1,895 2023 2022 2021 $ 5,070,489 $ 6,609,758 $ 2,975,983 2,194,363 3,318,189 2,173,715 3,249,005 866,880 809,536 394,678 593,182 198,439 We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes edible oil-based products. We account for Ventura Foods as an equity method investment and our share of the results of Ventura Foods is included in Corporate and Other. The following tables provide aggregate summarized financial information for our equity method investment in Ventura Foods for balance sheets as of August 31, 2023 and 2022, and statements of operations for the 12 months ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) 2023 2022 Current assets Noncurrent assets Current liabilities Noncurrent liabilities (DOLLARS IN THOUSANDS) Net sales Gross profit Net earnings Earnings attributable to CHS Inc. $ 1,041,799 $ 801,568 609,021 335,000 303,209 618,310 313,438 311,982 2023 2022 2021 $ 3,552,194 $ 3,386,998 $ 2,584,532 547,107 406,271 333,368 117,666 350,708 151,196 203,136 58,833 78,519 received from CF Nitrogen for the years ended Our investments in other equity method investees are August 31, 2023, 2022 and 2021, were $458.9 million, not significant in relation to our consolidated financial $618.7 million and $193.9 million, respectively. statements, either individually or in the aggregate. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS changes in circumstances indicate that the carrying amounts may not be recoverable in accordance with U.S. GAAP. This evaluation of recoverability is based on various indicators, including the nature, future economic benefits and geographic locations of the assets, historical or future profitability measures and other external market conditions. If these indicators suggest the carrying amounts of an asset or asset group may not be recoverable, potential impairment is evaluated using undiscounted, estimated future cash flows. Should the sum of the expected future net cash flows be less than the carrying value, an impairment loss would be recognized. An impairment loss would be measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. No significant impairments were identified during fiscal 2023, fiscal 2022 or fiscal 2021. changes in circumstances indicate that the carrying amounts may not be recoverable in accordance with U.S. GAAP. This evaluation of recoverability is based on various indicators, including the nature, future economic benefits and geographic locations of the assets, historical or future profitability measures and other external market conditions. If these indicators suggest the carrying amounts of an asset or asset group may not be recoverable, potential impairment is evaluated using undiscounted, estimated future cash flows. Should the sum of the expected future net cash flows be less than the carrying value, an impairment loss would be recognized. An impairment loss would be measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. No significant impairments were identified during fiscal 2023, fiscal 2022 or fiscal 2021. We have asset retirement obligations with respect to We have asset retirement obligations with respect to certain of our refineries and other assets due to various certain of our refineries and other assets due to various legal obligations to clean and/or dispose of the legal obligations to clean and/or dispose of the component parts at the time they are retired. In most component parts at the time they are retired. In most cases, these assets can be used for extended and cases, these assets can be used for extended and indeterminate periods of time if they are properly indeterminate periods of time if they are properly maintained and/or upgraded. It is our practice and maintained and/or upgraded. It is our practice and current intent to maintain refineries and related assets current intent to maintain refineries and related assets and to continue making improvements to those assets and to continue making improvements to those assets based on technological advances. As a result, we believe based on technological advances. As a result, we believe our refineries and related assets have indeterminate lives our refineries and related assets have indeterminate lives for purposes of estimating asset retirement obligations for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would because dates or ranges of dates upon which we would retire a refinery and related assets cannot reasonably be retire a refinery and related assets cannot reasonably be estimated at this time. When a date or range of dates estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of any can reasonably be estimated for the retirement of any component part of a refinery or other asset, we estimate component part of a refinery or other asset, we estimate the cost of performing the retirement activities and the cost of performing the retirement activities and record a liability for the fair value of that future cost. record a liability for the fair value of that future cost. We have other assets that we may be obligated to dismantle at the end of corresponding lease terms subject to the lessor’s discretion for which we have recorded asset retirement obligations. Based on our estimates of timing, cost and probability of removal, these obligations are not material. We have other assets that we may be obligated to dismantle at the end of corresponding lease terms subject to the lessor’s discretion for which we have recorded asset retirement obligations. Based on our estimates of timing, cost and probability of removal, these obligations are not material. NOTE 7 NOTE 7 Property, Plant and Equipment Property, Plant and Equipment Major classes of property, plant and equipment, including finance lease assets, are summarized in the table below as of August 31, 2023 and 2022. Major classes of property, plant and equipment, including finance lease assets, are summarized in the table below as of August 31, 2023 and 2022. (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Land and land improvements Land and land improvements $ $ 350,703 350,703 $ $ 334,085 334,085 Buildings Buildings 1,242,913 1,242,913 1,192,571 1,192,571 Machinery and equipment Machinery and equipment 7,979,164 7,979,164 7,819,152 7,819,152 Office equipment and other Office equipment and other 498,430 498,430 496,121 496,121 Construction in progress Construction in progress 630,542 630,542 339,043 339,043 Gross property, plant and Gross property, plant and equipment equipment Less accumulated Less accumulated depreciation and depreciation and amortization amortization Total property, plant and Total property, plant and equipment equipment 10,701,752 10,701,752 10,180,972 10,180,972 5,832,379 5,832,379 5,436,013 5,436,013 $ 4,869,373 $ 4,869,373 $ 4,744,959 $ 4,744,959 and and depreciation depreciation Property, plant and equipment are stated at cost less accumulated amortization. Depreciation and amortization are provided on the straight-line method by charges to operations at rates based on the expected useful lives of individual or groups of assets (generally 15 to 20 years for land improvements, 20 to 40 years for buildings, five to 20 years for machinery and equipment, and three to 10 years for office equipment and other). Expenditures for maintenance and minor repairs and renewals are expensed. We also capitalize and amortize eligible costs to acquire or develop internal-use software that are incurred during the application development stage. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the related accounts and resulting gains or losses are reflected in operations. Property, plant and equipment are stated at cost less accumulated amortization. Depreciation and amortization are provided on the straight-line method by charges to operations at rates based on the expected useful lives of individual or groups of assets (generally 15 to 20 years for land improvements, 20 to 40 years for buildings, five to 20 years for machinery and equipment, and three to 10 years for office equipment and other). Expenditures for maintenance and minor repairs and renewals are expensed. We also capitalize and amortize eligible costs to acquire or develop internal-use software that are incurred during the application development stage. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the related accounts and resulting gains or losses are reflected in operations. Depreciation expense, including amortization of finance lease assets, for the years ended August 31, 2023, 2022 and 2021, was $457.9 million, $458.2 million and $455.9 million, respectively. Depreciation expense, including amortization of finance lease assets, for the years ended August 31, 2023, 2022 and 2021, was $457.9 million, $458.2 million and $455.9 million, respectively. Property, plant and equipment and other long-lived assets are reviewed for impairment when events or Property, plant and equipment and other long-lived assets are reviewed for impairment when events or 28 2023 CHS Annual Report 2023 CHS Annual Report 29 2023 CHS Annual Report 29 328789_14-57.indd 29 11/28/23 3:21 PM Other Other Goodwill Goodwill 92,230 $ 973,995 $ 973,995 2022 2022 $ 179,976 $ 179,976 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Notes receivable (Note 3) Notes receivable (Note 3) Operating lease right of use assets (Note 19) Operating lease right of use assets (Note 19) Customer lists, trademarks and other intangible assets Customer lists, trademarks and other intangible assets Capitalized major maintenance Capitalized major maintenance Cash value life insurance Cash value life insurance 53,165 53,165 46,012 46,012 8,546 8,546 74,810 74,810 147,521 147,521 128,876 128,876 242,859 242,859 92,230 Long-term derivative assets (Note 15) Long-term derivative assets (Note 15) Prepaid pension and other benefits (Note 13) Prepaid pension and other benefits (Note 13) Total other assets Total other assets $ 1,130,524 $ 1,130,524 $ $ 2023 2023 179,976 179,976 46,980 46,980 76,919 76,919 1,119 1,119 78,819 78,819 289,377 289,377 134,126 134,126 254,844 254,844 68,364 68,364 NOTE 8 NOTE 8 Other Assets Other Assets Other assets as of August 31, 2023 and 2022, are as follows: Other assets as of August 31, 2023 and 2022, are as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS circumstances indicate the carrying amount of an asset group or reporting unit may not be recoverable. Information circumstances indicate the carrying amount of an asset group or reporting unit may not be recoverable. Information regarding intangible assets is as follows: regarding intangible assets is as follows: AUGUST 31, 2023 AUGUST 31, 2023 AUGUST 31, 2022 AUGUST 31, 2022 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) CARRYING CARRYING ACCUMULATED ACCUMULATED AMOUNT AMOUNT AMORTIZATION AMORTIZATION CARRYING CARRYING ACCUMULATED ACCUMULATED NET NET AMOUNT AMOUNT AMORTIZATION AMORTIZATION NET NET Customer lists Customer lists $ 85,341 $ 85,341 $ (41,374) $ (41,374) $ 43,967 $ 43,967 $ 84,565 $ 84,565 $ (35,280) $ (35,280) $ 49,285 $ 49,285 Trademarks and other intangible assets Trademarks and other intangible assets 11,332 11,332 (8,319) (8,319) 3,013 3,013 11,902 11,902 (8,022) (8,022) 3,880 3,880 Total intangible assets Total intangible assets $ 96,673 $ 96,673 $ (49,693) $ (49,693) $ 46,980 $ 46,980 $ 96,467 $ 96,467 $ (43,302) $ (43,302) $ 53,165 $ 53,165 Intangible asset amortization expense for the years ended August 31, 2023, 2022 and 2021, was $6.7 million, Intangible asset amortization expense for the years ended August 31, 2023, 2022 and 2021, was $6.7 million, $6.8 million and $6.9 million, respectively. The estimated annual amortization expense related to intangible assets $6.8 million and $6.9 million, respectively. The estimated annual amortization expense related to intangible assets subject to amortization for future years is as follows: subject to amortization for future years is as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) $ $ 6,631 6,631 6,415 6,415 6,233 6,233 6,178 6,178 6,178 6,178 15,345 15,345 $ 46,980 $ 46,980 Capitalized Major Maintenance Capitalized Major Maintenance and 2021, is summarized below: and 2021, is summarized below: Activity related to capitalized major maintenance costs at our refineries for the years ended August 31, 2023, 2022 Activity related to capitalized major maintenance costs at our refineries for the years ended August 31, 2023, 2022 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) BEGINNING OF YEAR BEGINNING OF YEAR COST DEFERRED COST DEFERRED AMORTIZATION AMORTIZATION END OF YEAR END OF YEAR BALANCE AT BALANCE AT BALANCE AT BALANCE AT $ $ 147,521 147,521 $ $ 216,762 216,762 $ $ (74,906) (74,906) $ $ 289,377 289,377 196,641 196,641 228,511 228,511 25,401 25,401 (74,521) (74,521) 147,521 147,521 41,899 41,899 (73,769) (73,769) 196,641 196,641 Within our Energy segment, major maintenance activities are regularly performed at our Laurel, Montana, and Within our Energy segment, major maintenance activities are regularly performed at our Laurel, Montana, and McPherson, Kansas, refineries. Major maintenance activities are the planned and required shutdowns of refinery McPherson, Kansas, refineries. Major maintenance activities are the planned and required shutdowns of refinery processing units, which include replacement or overhaul of equipment that has experienced decreased efficiency in processing units, which include replacement or overhaul of equipment that has experienced decreased efficiency in resource conversion. Because major maintenance activities are performed to extend the life, increase the capacity resource conversion. Because major maintenance activities are performed to extend the life, increase the capacity and/or improve the safety or efficiency of refinery processing assets, we follow the deferral method of accounting and/or improve the safety or efficiency of refinery processing assets, we follow the deferral method of accounting for major maintenance activities. Expenditures for major maintenance activities are capitalized (deferred) when for major maintenance activities. Expenditures for major maintenance activities are capitalized (deferred) when incurred and amortized on a straight-line basis over a period of two to five years, which is the estimated time lapse incurred and amortized on a straight-line basis over a period of two to five years, which is the estimated time lapse between major maintenance activities. Should the estimated time between major maintenance activities change, we between major maintenance activities. Should the estimated time between major maintenance activities change, we may be required to amortize the remaining cost of the major maintenance activities over a shorter period, which may be required to amortize the remaining cost of the major maintenance activities over a shorter period, which would result in higher depreciation and amortization costs. Amortization expense related to the capitalized major would result in higher depreciation and amortization costs. Amortization expense related to the capitalized major maintenance costs is included in cost of goods sold in our Consolidated Statements of Operations. maintenance costs is included in cost of goods sold in our Consolidated Statements of Operations. Selection of the deferral method, as opposed to expensing major maintenance activity costs when incurred, results Selection of the deferral method, as opposed to expensing major maintenance activity costs when incurred, results in deferring recognition of major maintenance activity expenditures. The deferral method also results in classification in deferring recognition of major maintenance activity expenditures. The deferral method also results in classification of related cash outflows as investing activities in our Consolidated Statements of Cash Flows, whereas expensing of related cash outflows as investing activities in our Consolidated Statements of Cash Flows, whereas expensing 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 Thereafter Thereafter Total Total 2023 2023 2022 2022 2021 2021 Goodwill and Other Intangible Assets Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is assessed for impairment on an annual basis as of July 31, either by first assessing qualitative factors to determine whether a quantitative goodwill impairment test is necessary or by proceeding directly to the quantitative test. The quantitative test may be required more frequently if triggering events or other circumstances occur that could indicate impairment. Goodwill is assessed for impairment at the reporting unit level, which has been determined to be our operating segments or one level below our operating segments in certain instances. Goodwill and Other Intangible Assets Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is assessed for impairment on an annual basis as of July 31, either by first assessing qualitative factors to determine whether a quantitative goodwill impairment test is necessary or by proceeding directly to the quantitative test. The quantitative test may be required more frequently if triggering events or other circumstances occur that could indicate impairment. Goodwill is assessed for impairment at the reporting unit level, which has been determined to be our operating segments or one level below our operating segments in certain instances. There were no changes in the net carrying amount of goodwill for the year ended August 31, 2023. Changes in the net carrying amount of goodwill for the year ended August 31, 2022, by segment, are as follows: There were no changes in the net carrying amount of goodwill for the year ended August 31, 2023. Changes in the net carrying amount of goodwill for the year ended August 31, 2022, by segment, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Balances, August 31, 2021 Balances, August 31, 2021 Goodwill acquired during the period Goodwill acquired during the period Goodwill disposed of during the period Goodwill disposed of during the period Balances, August 31, 2022 Balances, August 31, 2022 ENERGY ENERGY $ 552 552 8,906 8,906 $ — — AG AG $ 160,475 $ 160,475 — — (531) (531) CORPORATE AND OTHER CORPORATE AND OTHER $ 10,574 $ 10,574 — — — — TOTAL TOTAL $ 171,601 $ 171,601 8,906 8,906 (531) (531) $ 9,458 $ 9,458 $ 159,944 $ 159,944 $ 10,574 $ 10,574 $ 179,976 $ 179,976 No goodwill has been allocated to our Nitrogen Production segment, which consists of a single investment accounted for under the equity method of accounting, and allocated expenses. No goodwill has been allocated to our Nitrogen Production segment, which consists of a single investment accounted for under the equity method of accounting, and allocated expenses. No goodwill impairments were identified as a result of our annual goodwill analyses performed as of July 31, 2023, 2022 or 2021. Management will continue to monitor the results and projected cash flows for each of our businesses to assess whether any reserves or impairments may be necessary in the future. No goodwill impairments were identified as a result of our annual goodwill analyses performed as of July 31, 2023, 2022 or 2021. Management will continue to monitor the results and projected cash flows for each of our businesses to assess whether any reserves or impairments may be necessary in the future. Intangible assets subject to amortization primarily include customer lists, trademarks and noncompete agreements, and are amortized over their respective useful lives (ranging from two to 30 years). We have no material intangible assets with indefinite useful lives. All long-lived assets, including other identifiable intangible assets, are also assessed for impairment in accordance with U.S. GAAP and evaluated for impairment whenever triggering events or other Intangible assets subject to amortization primarily include customer lists, trademarks and noncompete agreements, and are amortized over their respective useful lives (ranging from two to 30 years). We have no material intangible assets with indefinite useful lives. All long-lived assets, including other identifiable intangible assets, are also assessed for impairment in accordance with U.S. GAAP and evaluated for impairment whenever triggering events or other 30 2023 CHS Annual Report 30 2023 CHS Annual Report 2023 CHS Annual Report 31 2023 CHS Annual Report 31 328789_14-57.indd 30 11/28/23 3:21 PM NOTE 8 NOTE 8 Other Assets Other Assets Other assets as of August 31, 2023 and 2022, are as follows: Other assets as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Goodwill Goodwill Customer lists, trademarks and other intangible assets Customer lists, trademarks and other intangible assets Notes receivable (Note 3) Notes receivable (Note 3) Long-term derivative assets (Note 15) Long-term derivative assets (Note 15) Prepaid pension and other benefits (Note 13) Prepaid pension and other benefits (Note 13) Capitalized major maintenance Capitalized major maintenance Cash value life insurance Cash value life insurance Operating lease right of use assets (Note 19) Operating lease right of use assets (Note 19) Other Other Total other assets Total other assets Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is assessed for Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is assessed for impairment on an annual basis as of July 31, either by first assessing qualitative factors to determine whether a impairment on an annual basis as of July 31, either by first assessing qualitative factors to determine whether a quantitative goodwill impairment test is necessary or by proceeding directly to the quantitative test. The quantitative quantitative goodwill impairment test is necessary or by proceeding directly to the quantitative test. The quantitative test may be required more frequently if triggering events or other circumstances occur that could indicate test may be required more frequently if triggering events or other circumstances occur that could indicate impairment. Goodwill is assessed for impairment at the reporting unit level, which has been determined to be our impairment. Goodwill is assessed for impairment at the reporting unit level, which has been determined to be our operating segments or one level below our operating segments in certain instances. operating segments or one level below our operating segments in certain instances. There were no changes in the net carrying amount of goodwill for the year ended August 31, 2023. Changes in the There were no changes in the net carrying amount of goodwill for the year ended August 31, 2023. Changes in the net carrying amount of goodwill for the year ended August 31, 2022, by segment, are as follows: net carrying amount of goodwill for the year ended August 31, 2022, by segment, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Balances, August 31, 2021 Balances, August 31, 2021 Goodwill acquired during the period Goodwill acquired during the period Goodwill disposed of during the period Goodwill disposed of during the period Balances, August 31, 2022 Balances, August 31, 2022 $ $ ENERGY ENERGY 552 552 8,906 8,906 — — AG AG $ 160,475 $ 160,475 — — (531) (531) CORPORATE CORPORATE AND OTHER AND OTHER $ 10,574 $ 10,574 TOTAL TOTAL $ 171,601 $ 171,601 8,906 8,906 (531) (531) — — — — $ 9,458 $ 9,458 $ 159,944 $ 159,944 $ 10,574 $ 10,574 $ 179,976 $ 179,976 No goodwill has been allocated to our Nitrogen Production segment, which consists of a single investment accounted No goodwill has been allocated to our Nitrogen Production segment, which consists of a single investment accounted for under the equity method of accounting, and allocated expenses. for under the equity method of accounting, and allocated expenses. No goodwill impairments were identified as a result of our annual goodwill analyses performed as of July 31, 2023, No goodwill impairments were identified as a result of our annual goodwill analyses performed as of July 31, 2023, 2022 or 2021. Management will continue to monitor the results and projected cash flows for each of our businesses 2022 or 2021. Management will continue to monitor the results and projected cash flows for each of our businesses to assess whether any reserves or impairments may be necessary in the future. to assess whether any reserves or impairments may be necessary in the future. Intangible assets subject to amortization primarily include customer lists, trademarks and noncompete agreements, Intangible assets subject to amortization primarily include customer lists, trademarks and noncompete agreements, and are amortized over their respective useful lives (ranging from two to 30 years). We have no material intangible and are amortized over their respective useful lives (ranging from two to 30 years). We have no material intangible assets with indefinite useful lives. All long-lived assets, including other identifiable intangible assets, are also assessed assets with indefinite useful lives. All long-lived assets, including other identifiable intangible assets, are also assessed for impairment in accordance with U.S. GAAP and evaluated for impairment whenever triggering events or other for impairment in accordance with U.S. GAAP and evaluated for impairment whenever triggering events or other NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2023 2023 2022 2022 $ $ 179,976 179,976 $ 179,976 $ 179,976 46,980 46,980 76,919 76,919 1,119 1,119 78,819 78,819 289,377 289,377 134,126 134,126 254,844 254,844 68,364 68,364 53,165 53,165 46,012 46,012 8,546 8,546 74,810 74,810 147,521 147,521 128,876 128,876 242,859 242,859 92,230 92,230 $ 1,130,524 $ 1,130,524 $ 973,995 $ 973,995 circumstances indicate the carrying amount of an asset group or reporting unit may not be recoverable. Information regarding intangible assets is as follows: circumstances indicate the carrying amount of an asset group or reporting unit may not be recoverable. Information regarding intangible assets is as follows: AUGUST 31, 2023 AUGUST 31, 2023 AUGUST 31, 2022 AUGUST 31, 2022 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) CARRYING AMOUNT CARRYING AMOUNT ACCUMULATED AMORTIZATION ACCUMULATED AMORTIZATION NET NET CARRYING AMOUNT CARRYING AMOUNT ACCUMULATED AMORTIZATION ACCUMULATED AMORTIZATION NET NET Customer lists Customer lists $ 85,341 $ 85,341 $ (41,374) $ (41,374) $ 43,967 $ 43,967 $ 84,565 $ 84,565 $ (35,280) $ (35,280) $ 49,285 $ 49,285 Trademarks and other intangible assets Trademarks and other intangible assets 11,332 11,332 (8,319) (8,319) 3,013 3,013 11,902 11,902 (8,022) (8,022) 3,880 3,880 Total intangible assets Total intangible assets $ 96,673 $ 96,673 $ (49,693) $ (49,693) $ 46,980 $ 46,980 $ 96,467 $ 96,467 $ (43,302) $ (43,302) $ 53,165 $ 53,165 Intangible asset amortization expense for the years ended August 31, 2023, 2022 and 2021, was $6.7 million, $6.8 million and $6.9 million, respectively. The estimated annual amortization expense related to intangible assets subject to amortization for future years is as follows: Intangible asset amortization expense for the years ended August 31, 2023, 2022 and 2021, was $6.7 million, $6.8 million and $6.9 million, respectively. The estimated annual amortization expense related to intangible assets subject to amortization for future years is as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 Thereafter Thereafter Total Total $ $ 6,631 6,631 6,415 6,415 6,233 6,233 6,178 6,178 6,178 6,178 15,345 15,345 $ 46,980 $ 46,980 Capitalized Major Maintenance Activity related to capitalized major maintenance costs at our refineries for the years ended August 31, 2023, 2022 and 2021, is summarized below: Capitalized Major Maintenance Activity related to capitalized major maintenance costs at our refineries for the years ended August 31, 2023, 2022 and 2021, is summarized below: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) BALANCE AT BEGINNING OF YEAR BALANCE AT BEGINNING OF YEAR COST DEFERRED COST DEFERRED AMORTIZATION AMORTIZATION BALANCE AT END OF YEAR BALANCE AT END OF YEAR 2023 2023 2022 2022 2021 2021 $ $ 147,521 147,521 $ $ 216,762 216,762 $ $ (74,906) (74,906) $ $ 289,377 289,377 196,641 196,641 228,511 228,511 25,401 25,401 (74,521) (74,521) 147,521 147,521 41,899 41,899 (73,769) (73,769) 196,641 196,641 Within our Energy segment, major maintenance activities are regularly performed at our Laurel, Montana, and McPherson, Kansas, refineries. Major maintenance activities are the planned and required shutdowns of refinery processing units, which include replacement or overhaul of equipment that has experienced decreased efficiency in resource conversion. Because major maintenance activities are performed to extend the life, increase the capacity and/or improve the safety or efficiency of refinery processing assets, we follow the deferral method of accounting for major maintenance activities. Expenditures for major maintenance activities are capitalized (deferred) when incurred and amortized on a straight-line basis over a period of two to five years, which is the estimated time lapse between major maintenance activities. Should the estimated time between major maintenance activities change, we may be required to amortize the remaining cost of the major maintenance activities over a shorter period, which would result in higher depreciation and amortization costs. Amortization expense related to the capitalized major maintenance costs is included in cost of goods sold in our Consolidated Statements of Operations. Within our Energy segment, major maintenance activities are regularly performed at our Laurel, Montana, and McPherson, Kansas, refineries. Major maintenance activities are the planned and required shutdowns of refinery processing units, which include replacement or overhaul of equipment that has experienced decreased efficiency in resource conversion. Because major maintenance activities are performed to extend the life, increase the capacity and/or improve the safety or efficiency of refinery processing assets, we follow the deferral method of accounting for major maintenance activities. Expenditures for major maintenance activities are capitalized (deferred) when incurred and amortized on a straight-line basis over a period of two to five years, which is the estimated time lapse between major maintenance activities. Should the estimated time between major maintenance activities change, we may be required to amortize the remaining cost of the major maintenance activities over a shorter period, which would result in higher depreciation and amortization costs. Amortization expense related to the capitalized major maintenance costs is included in cost of goods sold in our Consolidated Statements of Operations. Selection of the deferral method, as opposed to expensing major maintenance activity costs when incurred, results in deferring recognition of major maintenance activity expenditures. The deferral method also results in classification of related cash outflows as investing activities in our Consolidated Statements of Cash Flows, whereas expensing Selection of the deferral method, as opposed to expensing major maintenance activity costs when incurred, results in deferring recognition of major maintenance activity expenditures. The deferral method also results in classification of related cash outflows as investing activities in our Consolidated Statements of Cash Flows, whereas expensing 30 2023 CHS Annual Report 30 2023 CHS Annual Report 2023 CHS Annual Report 31 2023 CHS Annual Report 31 328789_14-57.indd 31 11/28/23 3:21 PM N OT E 8: Other Asse ts, continued N OT E 8: Other Ass ets, continued these costs as incurred would result in classifying the cash outflows as operating activities. Repair, maintenance and related labor costs are expensed as incurred and are included in operating cash flows. these costs as incurred would result in classifying the cash outflows as operating activities. Repair, maintenance and related labor costs are expensed as incurred and are included in operating cash flows. NOTE 9 NOTE 9 Notes Payable and Long-Term Debt 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 August 31, 2023. 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 August 31, 2023. Notes Payable Notes payable as of August 31, 2023 and 2022, consisted of the following: Notes Payable Notes payable as of August 31, 2023 and 2022, consisted of the following: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Notes payable Notes payable CHS Capital notes payable CHS Capital notes payable Total notes payable Total notes payable WEIGHTED- WEIGHTED- AVERAGE AVERAGE INTEREST RATE INTEREST RATE 2023 2022 2023 2022 2023 2023 2022 2022 5.37% 4.41% $ 375,932 $ 459,398 5.37% 4.41% $ 375,932 $ 459,398 4.24% 1.34% 4.24% 1.34% 171,991 147,321 171,991 $ 547,923 $ 606,719 147,321 $ 547,923 $ 606,719 On April 21, 2023, we amended and restated our primary line of credit, which is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of August 31, 2023. We also maintain certain uncommitted bilateral facilities to support our working capital needs. On April 21, 2023, we amended and restated our primary line of credit, which is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of August 31, 2023. We also maintain certain uncommitted bilateral facilities to support our working capital needs. In addition to our facilities referenced above, our wholly-owned subsidiaries, CHS Europe S.a.r.l. and CHS Agronegocio Industria e Comercio Ltda have lines of credit with $185.9 million outstanding as of August 31, 2023, and our other international subsidiaries have lines of credit with $188.5 million outstanding as of August 31, 2023. In addition to our facilities referenced above, our wholly-owned subsidiaries, CHS Europe S.a.r.l. and CHS Agronegocio Industria e Comercio Ltda have lines of credit with $185.9 million outstanding as of August 31, 2023, and our other international subsidiaries have lines of credit with $188.5 million outstanding as of August 31, 2023. CHS Capital Notes Payable 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 secured financing. 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. The Securitization Facility consists of a committed portion with a maximum availability of $850.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of August 31, 2023, total availability under the Securitization Facility was $950.2 million, of which no amount was utilized. CHS Capital Notes Payable 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 secured financing. 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. The Securitization Facility consists of a committed portion with a maximum availability of $850.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of August 31, 2023, total availability under the Securitization Facility was $950.2 million, of which no amount was utilized. On July 11, 2023, we amended the Securitization Facility and entered into a repurchase facility (“Repurchase Facility”), under which we can obtain repurchase agreement financing up to $200.0 million for certain eligible receivables and notes receivables of the Originators. The amendments to the Securitization Facility were designed to remove from the securitization certain receivables and notes receivables to permit them to be sold under the Repurchase Facility. On August 29, 2023 the Securitization Facility was further amended to extend the term of the agreement and update pricing. No balance was outstanding under this Repurchase Facility as of August 31, 2023. On July 11, 2023, we amended the Securitization Facility and entered into a repurchase facility (“Repurchase Facility”), under which we can obtain repurchase agreement financing up to $200.0 million for certain eligible receivables and notes receivables of the Originators. The amendments to the Securitization Facility were designed to remove from the securitization certain receivables and notes receivables to permit them to be sold under the Repurchase Facility. On August 29, 2023 the Securitization Facility was further amended to extend the term of the agreement and update pricing. No balance was outstanding under this Repurchase Facility as of August 31, 2023. 32 2023 CHS Annual Report 32 2023 CHS Annual Report 2023 CHS Annual Report 33 2023 CHS Annual Report 33 328789_14-57.indd 32 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHS Capital sells loan commitments it has originated to Compeer Financial, PCA, d/b/a ProPartners Financial on a CHS Capital sells loan commitments it has originated to Compeer Financial, PCA, d/b/a ProPartners Financial on a recourse basis. The total commitments under the program were $100.0 million; however, no amounts were borrowed recourse basis. The total commitments under the program were $100.0 million; however, no amounts were borrowed under these commitments as of August 31, 2023. under these commitments as of August 31, 2023. CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and are due upon demand. Borrowings under these notes totaled $172.0 million as of program are unsecured and are due upon demand. Borrowings under these notes totaled $172.0 million as of During the year ended August 31, 2023, we repaid approximately $283.0 million of long-term debt. On January 24, During the year ended August 31, 2023, we repaid approximately $283.0 million of long-term debt. On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of long-term debt in the form of a note. 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of long-term debt in the form of a note. Amounts included in long-term debt on our Consolidated Balance Sheets as of August 31, 2023 and 2022, are Amounts included in long-term debt on our Consolidated Balance Sheets as of August 31, 2023 and 2022, are 4.67% unsecured notes $130 million face amount, due in fiscal 2023 4.67% unsecured notes $130 million face amount, due in fiscal 2023 $ $ — $ — $ 130,000 130,000 August 31, 2023. August 31, 2023. Long-Term Debt Long-Term Debt presented in the table below: presented in the table below: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 4.39% unsecured notes $152 million face amount, due in fiscal 2023 4.39% unsecured notes $152 million face amount, due in fiscal 2023 3.85% unsecured notes $80 million face amount, due in fiscal 2025 3.85% unsecured notes $80 million face amount, due in fiscal 2025 3.80% unsecured notes $100 million face amount, due in fiscal 2025 3.80% unsecured notes $100 million face amount, due in fiscal 2025 4.58% unsecured notes $150 million face amount, due in fiscal 2025 4.58% unsecured notes $150 million face amount, due in fiscal 2025 4.82% unsecured notes $80 million face amount, due in fiscal 2026 4.82% unsecured notes $80 million face amount, due in fiscal 2026 4.69% unsecured notes $58 million face amount, due in fiscal 2027 4.69% unsecured notes $58 million face amount, due in fiscal 2027 3.24% unsecured notes $95 million face amount, due in fiscal 2028 3.24% unsecured notes $95 million face amount, due in fiscal 2028 4.74% unsecured notes $95 million face amount, due in fiscal 2028 4.74% unsecured notes $95 million face amount, due in fiscal 2028 5.68% unsecured notes $150 million face amount, due in fiscal 2030 5.68% unsecured notes $150 million face amount, due in fiscal 2030 3.48% unsecured notes $100 million face amount, due in fiscal 2031 3.48% unsecured notes $100 million face amount, due in fiscal 2031 4.89% unsecured notes $100 million face amount, due in fiscal 2031 4.89% unsecured notes $100 million face amount, due in fiscal 2031 3.58% unsecured notes $65 million face amount, due in fiscal 2033 3.58% unsecured notes $65 million face amount, due in fiscal 2033 4.71% unsecured notes $100 million face amount, due in fiscal 2033 4.71% unsecured notes $100 million face amount, due in fiscal 2033 3.73% unsecured notes $115 million face amount, due in fiscal 2036 3.73% unsecured notes $115 million face amount, due in fiscal 2036 5.40% unsecured notes $125 million face amount, due in fiscal 2036 5.40% unsecured notes $125 million face amount, due in fiscal 2036 Private placement debt Private placement debt Term loan Term loan Finance lease liabilities Finance lease liabilities Deferred financing costs Deferred financing costs Total long-term debt Total long-term debt Less current portion Less current portion Long-term portion Long-term portion Other, including notes and contracts with interest rates from 4.0% to 9.0% Other, including notes and contracts with interest rates from 4.0% to 9.0% 2023 2023 2022 2022 — — 152,000 152,000 80,000 80,000 80,000 80,000 100,000 100,000 100,000 100,000 150,000 150,000 150,000 150,000 80,000 80,000 80,000 80,000 58,000 58,000 58,000 58,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 150,000 150,000 — — 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 65,000 65,000 65,000 65,000 100,000 100,000 100,000 100,000 115,000 115,000 115,000 115,000 125,000 125,000 125,000 125,000 1,413,000 1,413,000 1,545,000 1,545,000 366,000 366,000 366,000 366,000 49,235 49,235 44,773 44,773 (3,127) (3,127) (3,535) (3,535) 2,550 2,550 6,576 6,576 1,827,658 1,827,658 1,958,814 1,958,814 7,839 7,839 290,605 290,605 $ 1,819,819 $ 1,819,819 $ 1,668,209 $ 1,668,209 6.93% unsecured term loan from cooperative and other banks, due in fiscal 2026(a) 6.93% unsecured term loan from cooperative and other banks, due in fiscal 2026(a) 366,000 366,000 366,000 366,000 (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin. (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin. NOTE 8: Other A ssets, continued these costs as incurred would result in classifying the cash outflows as operating activities. Repair, maintenance and related labor costs are expensed as incurred and are included in operating cash flows. NOTE 9 2023. Notes Payable (DOLLARS IN THOUSANDS) Notes payable CHS Capital notes payable Total notes payable 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 August 31, Notes payable as of August 31, 2023 and 2022, consisted of the following: WEIGHTED- AVERAGE INTEREST RATE 2023 2022 2023 2022 5.37% 4.41% $ 375,932 $ 459,398 4.24% 1.34% 171,991 147,321 $ 547,923 $ 606,719 On April 21, 2023, we amended and restated our primary line of credit, which is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of August 31, 2023. We also maintain certain uncommitted bilateral facilities to support our working capital needs. In addition to our facilities referenced above, our wholly-owned subsidiaries, CHS Europe S.a.r.l. and CHS Agronegocio Industria e Comercio Ltda have lines of credit with $185.9 million outstanding as of August 31, 2023, and our other international subsidiaries have lines of credit with $188.5 million outstanding as of August 31, 2023. CHS Capital Notes Payable 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 secured financing. 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. The Securitization Facility consists of a committed portion with a maximum availability of $850.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of August 31, 2023, total availability under the Securitization Facility was $950.2 million, of which no amount was utilized. On July 11, 2023, we amended the Securitization Facility and entered into a repurchase facility (“Repurchase Facility”), under which we can obtain repurchase agreement financing up to $200.0 million for certain eligible receivables and notes receivables of the Originators. The amendments to the Securitization Facility were designed to remove from the securitization certain receivables and notes receivables to permit them to be sold under the Repurchase Facility. On August 29, 2023 the Securitization Facility was further amended to extend the term of the agreement and update pricing. No balance was outstanding under this Repurchase Facility as of August 31, 2023. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHS Capital sells loan commitments it has originated to Compeer Financial, PCA, d/b/a ProPartners Financial on a recourse basis. The total commitments under the program were $100.0 million; however, no amounts were borrowed under these commitments as of August 31, 2023. CHS Capital sells loan commitments it has originated to Compeer Financial, PCA, d/b/a ProPartners Financial on a recourse basis. The total commitments under the program were $100.0 million; however, no amounts were borrowed under these commitments as of August 31, 2023. CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and are due upon demand. Borrowings under these notes totaled $172.0 million as of August 31, 2023. CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and are due upon demand. Borrowings under these notes totaled $172.0 million as of August 31, 2023. Long-Term Debt During the year ended August 31, 2023, we repaid approximately $283.0 million of long-term debt. On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of long-term debt in the form of a note. Amounts included in long-term debt on our Consolidated Balance Sheets as of August 31, 2023 and 2022, are presented in the table below: Long-Term Debt During the year ended August 31, 2023, we repaid approximately $283.0 million of long-term debt. On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of long-term debt in the form of a note. Amounts included in long-term debt on our Consolidated Balance Sheets as of August 31, 2023 and 2022, are presented in the table below: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 4.67% unsecured notes $130 million face amount, due in fiscal 2023 4.67% unsecured notes $130 million face amount, due in fiscal 2023 $ $ — $ — $ 130,000 130,000 4.39% unsecured notes $152 million face amount, due in fiscal 2023 4.39% unsecured notes $152 million face amount, due in fiscal 2023 3.85% unsecured notes $80 million face amount, due in fiscal 2025 3.85% unsecured notes $80 million face amount, due in fiscal 2025 3.80% unsecured notes $100 million face amount, due in fiscal 2025 3.80% unsecured notes $100 million face amount, due in fiscal 2025 4.58% unsecured notes $150 million face amount, due in fiscal 2025 4.58% unsecured notes $150 million face amount, due in fiscal 2025 4.82% unsecured notes $80 million face amount, due in fiscal 2026 4.82% unsecured notes $80 million face amount, due in fiscal 2026 4.69% unsecured notes $58 million face amount, due in fiscal 2027 4.69% unsecured notes $58 million face amount, due in fiscal 2027 3.24% unsecured notes $95 million face amount, due in fiscal 2028 3.24% unsecured notes $95 million face amount, due in fiscal 2028 4.74% unsecured notes $95 million face amount, due in fiscal 2028 4.74% unsecured notes $95 million face amount, due in fiscal 2028 5.68% unsecured notes $150 million face amount, due in fiscal 2030 5.68% unsecured notes $150 million face amount, due in fiscal 2030 3.48% unsecured notes $100 million face amount, due in fiscal 2031 3.48% unsecured notes $100 million face amount, due in fiscal 2031 4.89% unsecured notes $100 million face amount, due in fiscal 2031 4.89% unsecured notes $100 million face amount, due in fiscal 2031 3.58% unsecured notes $65 million face amount, due in fiscal 2033 3.58% unsecured notes $65 million face amount, due in fiscal 2033 4.71% unsecured notes $100 million face amount, due in fiscal 2033 4.71% unsecured notes $100 million face amount, due in fiscal 2033 3.73% unsecured notes $115 million face amount, due in fiscal 2036 3.73% unsecured notes $115 million face amount, due in fiscal 2036 5.40% unsecured notes $125 million face amount, due in fiscal 2036 5.40% unsecured notes $125 million face amount, due in fiscal 2036 Private placement debt Private placement debt — — 152,000 152,000 80,000 80,000 80,000 80,000 100,000 100,000 100,000 100,000 150,000 150,000 150,000 150,000 80,000 80,000 80,000 80,000 58,000 58,000 58,000 58,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 150,000 150,000 — — 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 65,000 65,000 65,000 65,000 100,000 100,000 100,000 100,000 115,000 115,000 115,000 115,000 125,000 125,000 125,000 125,000 1,413,000 1,413,000 1,545,000 1,545,000 6.93% unsecured term loan from cooperative and other banks, due in fiscal 2026(a) 6.93% unsecured term loan from cooperative and other banks, due in fiscal 2026(a) 366,000 366,000 366,000 366,000 Term loan Term loan Finance lease liabilities Finance lease liabilities Deferred financing costs Deferred financing costs Other, including notes and contracts with interest rates from 4.0% to 9.0% Other, including notes and contracts with interest rates from 4.0% to 9.0% Total long-term debt Total long-term debt Less current portion Less current portion Long-term portion Long-term portion 366,000 366,000 366,000 366,000 49,235 49,235 44,773 44,773 (3,127) (3,127) (3,535) (3,535) 2,550 2,550 6,576 6,576 1,827,658 1,827,658 1,958,814 1,958,814 7,839 7,839 290,605 290,605 $ 1,819,819 $ 1,819,819 $ 1,668,209 $ 1,668,209 (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin. (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin. 32 2023 CHS Annual Report 2023 CHS Annual Report 33 2023 CHS Annual Report 33 328789_14-57.indd 33 11/28/23 3:21 PM N OT E 9: No tes Payable and Long-Term D ebt, continued N OT E 9: No tes Payable and Long-Term D ebt, continued As of August 31, 2023, the fair value of our long-term debt is estimated to be $1.6 billion based on quoted market prices of similar debt (a Level 2 fair value measurement based on the classification hierarchy of ASC Topic 820, Fair Value Measurement). As of August 31, 2023, the fair value of our long-term debt is estimated to be $1.6 billion based on quoted market prices of similar debt (a Level 2 fair value measurement based on the classification hierarchy of ASC Topic 820, Fair Value Measurement). Long-term debt outstanding as of August 31, 2023, has aggregate maturities, excluding fair value adjustments and finance leases (see Note 19, Leases, for a schedule of minimum future lease payments under finance leases), as follows: Long-term debt outstanding as of August 31, 2023, has aggregate maturities, excluding fair value adjustments and finance leases (see Note 19, Leases, for a schedule of minimum future lease payments under finance leases), as follows: Interest expense for the years ended August 31, 2023, 2022 and 2021, was $137.4 million, $114.2 million and $104.6 million, respectively, net of capitalized interest of $14.0 million, $6.1 million and $8.0 million, respectively. Interest expense for the years ended August 31, 2023, 2022 and 2021, was $137.4 million, $114.2 million and $104.6 million, respectively, net of capitalized interest of $14.0 million, $6.1 million and $8.0 million, respectively. (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2024 2024 2025 2026 2027 2028 2025 2026 2027 2028 Thereafter Thereafter Total Total $ $ 1,060 1,060 330,187 330,187 446,020 446,020 58,021 58,021 190,000 190,000 755,000 755,000 $ 1,780,288 $ 1,780,288 NOTE 10 NOTE 10 Other Current Liabilities Other Current Liabilities Other current liabilities as of August 31, 2023 and 2022, are as follows: Other current liabilities as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Customer margin deposits and credit balances Customer margin deposits and credit balances Customer advance payments Customer advance payments Derivative liabilities (Note 15) Derivative liabilities (Note 15) Dividends and equity payable (Note 12) Dividends and equity payable (Note 12) Total other current liabilities Total other current liabilities $ $ $ $ 2023 2023 197,315 197,315 356,760 356,760 355,696 355,696 730,000 730,000 $ 1,639,771 2022 2022 283,234 283,234 525,003 525,003 398,781 398,781 1,000,000 1,000,000 $ 2,207,018 $ 1,639,771 $ 2,207,018 NOTE 11 NOTE 11 Income Taxes Income Taxes CHS is a nonexempt agricultural cooperative and files a consolidated federal income tax return within our tax return period. We are subject to tax on income from nonpatronage patronage distributions and undistributed patronage-sourced income. Income tax expense (benefit) is primarily the CHS is a nonexempt agricultural cooperative and files a consolidated federal income tax return within our tax return period. We are subject to tax on income from nonpatronage patronage distributions and undistributed patronage-sourced income. Income tax expense (benefit) is primarily the nonqualified nonqualified sources, sources, current tax payable for the period and the change during the period in certain deferred tax assets and liabilities. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized under U.S. GAAP and such amounts recognized for federal and state income tax current tax payable for the period and the change during the period in certain deferred tax assets and liabilities. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized under U.S. GAAP and such amounts recognized for federal and state income tax 34 2023 CHS Annual Report 34 2023 CHS Annual Report 2023 CHS Annual Report 35 2023 CHS Annual Report 35 328789_14-57.indd 34 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS purposes, based on enacted tax laws and statutory tax purposes, based on enacted tax laws and statutory tax Deferred tax assets and liabilities as of August 31, 2023 Deferred tax assets and liabilities as of August 31, 2023 rates applicable to the periods in which the differences rates applicable to the periods in which the differences and 2022, are as follows: and 2022, are as follows: are expected to affect taxable income. are expected to affect taxable income. The provision for (benefit from) income taxes for The provision for (benefit from) income taxes for Deferred tax assets: Deferred tax assets: the years ended August 31, 2023, 2022 and 2021 is as the years ended August 31, 2023, 2022 and 2021 is as Accrued expenses Accrued expenses $ $ 51,960 51,960 $ $ 61,843 61,843 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 follows: follows: (DOLLARS IN (DOLLARS IN THOUSANDS) THOUSANDS) Current: Current: Federal Federal State State Foreign Foreign Total current Total current Deferred: Deferred: Federal Federal State State Foreign Foreign Total deferred Total deferred 2023 2023 2022 2022 2021 2021 Tax credit carryforwards Tax credit carryforwards 97,730 97,730 101,457 101,457 Postretirement health care and Postretirement health care and deferred compensation deferred compensation 51,635 51,635 46,008 46,008 $ $ 66,672 66,672 $ $ 56,582 56,582 $ $ 24,224 24,224 9,833 9,833 90,639 90,639 41,710 41,710 491 491 (724) (724) (533) (533) 2,943 2,943 56 56 2,466 2,466 (24,676) (24,676) (15,666) (15,666) (373) (373) Loss carryforwards Loss carryforwards Nonqualified equity Nonqualified equity Lease obligations Lease obligations Other Other 111,963 111,963 110,018 110,018 467,519 467,519 424,869 424,869 62,225 62,225 60,329 60,329 43,164 43,164 95,027 95,027 Deferred tax assets valuation Deferred tax assets valuation allowance allowance (182,466) (182,466) (189,685) (189,685) Total deferred tax assets Total deferred tax assets 703,730 703,730 709,866 709,866 36,925 36,925 3,735 3,735 107,332 107,332 7,799 7,799 (7,661) (7,661) 185 185 323 323 Total Total $ 107,655 $ 107,655 $ 132,116 $ 132,116 $ (38,249) $ (38,249) 41,477 41,477 (40,715) (40,715) Deferred tax liabilities: Deferred tax liabilities: Domestic income before income taxes was $2.0 billion, Domestic income before income taxes was $2.0 billion, $1.8 billion and $497.5 million for the years ended $1.8 billion and $497.5 million for the years ended August 31, 2023, 2022 and 2021, respectively. Foreign August 31, 2023, 2022 and 2021, respectively. Foreign income (loss) before income taxes was $55.4 million, income (loss) before income taxes was $55.4 million, ($4.9) million and $17.8 million for the years ended ($4.9) million and $17.8 million for the years ended August 31, 2023, 2022 and 2021, respectively. August 31, 2023, 2022 and 2021, respectively. Pension costs Pension costs Investments Investments 10,596 10,596 14,600 14,600 129,683 129,683 169,970 169,970 Property, plant and equipment Property, plant and equipment 625,403 625,403 605,463 605,463 Lease right of use assets Lease right of use assets 60,501 60,501 58,852 58,852 Total deferred tax liabilities Total deferred tax liabilities 826,183 826,183 848,885 848,885 Net deferred tax liabilities Net deferred tax liabilities $ 122,453 $ 122,453 $ 139,019 $ 139,019 We had total gross loss carryforwards of $587.3 million, We had total gross loss carryforwards of $587.3 million, as of August 31, 2023, of which $344.4 million will expire as of August 31, 2023, of which $344.4 million will expire over periods ranging from fiscal 2023 to fiscal 2043. The over periods ranging from fiscal 2023 to fiscal 2043. The remainder will carry forward indefinitely. Based on remainder will carry forward indefinitely. Based on estimates of future taxable profits and losses in certain estimates of future taxable profits and losses in certain foreign tax jurisdictions, as well as consideration of other foreign tax jurisdictions, as well as consideration of other factors, we assessed whether a valuation allowance was factors, we assessed whether a valuation allowance was necessary to reduce specific foreign loss carryforwards necessary to reduce specific foreign loss carryforwards to amounts we believe are more likely than not to be to amounts we believe are more likely than not to be realized as of August 31, 2023. If our estimates prove realized as of August 31, 2023. If our estimates prove inaccurate, adjustments to the valuation allowances may inaccurate, adjustments to the valuation allowances may be required in the future with gains or losses being be required in the future with gains or losses being charged to income in the period such determination is charged to income in the period such determination is made. Our McPherson refinery’s gross state tax credit made. Our McPherson refinery’s gross state tax credit carryforwards for income tax were approximately carryforwards for income tax were approximately $116.6 million and $122.8 million as of August 31, 2023 $116.6 million and $122.8 million as of August 31, 2023 and 2022, and 2022, respectively. The refinery’s valuation respectively. The refinery’s valuation allowance on Kansas state credits is necessary due to allowance on Kansas state credits is necessary due to the limited amount of taxable income generated in the limited amount of taxable income generated in Kansas by the combined group on an annual basis. Our Kansas by the combined group on an annual basis. Our state tax credits of $116.6 million will begin to expire state tax credits of $116.6 million will begin to expire during fiscal 2024. during fiscal 2024. NOTE 9: Notes Payable and Long-Term D ebt, continued As of August 31, 2023, the fair value of our long-term Interest expense for the years ended August 31, 2023, 2022 and 2021, was $137.4 million, $114.2 million and $104.6 million, respectively, net of capitalized interest of $14.0 million, $6.1 million and $8.0 million, respectively. debt is estimated to be $1.6 billion based on quoted market prices of similar debt (a Level 2 fair value measurement based on the classification hierarchy of ASC Topic 820, Fair Value Measurement). Long-term debt outstanding as of August 31, 2023, has aggregate maturities, excluding fair value adjustments and finance leases (see Note 19, Leases, for a schedule of minimum future lease payments under finance leases), as follows: (DOLLARS IN THOUSANDS) 2024 2025 2026 2027 2028 Thereafter Total NOTE 10 $ 1,060 330,187 446,020 58,021 190,000 755,000 $ 1,780,288 Other Current Liabilities Other current liabilities as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) Customer margin deposits and credit balances Customer advance payments Derivative liabilities (Note 15) Dividends and equity payable (Note 12) Total other current liabilities NOTE 11 Income Taxes 2023 2022 $ 197,315 $ 283,234 356,760 355,696 730,000 525,003 398,781 1,000,000 $ 1,639,771 $ 2,207,018 CHS is a nonexempt agricultural cooperative and files a current tax payable for the period and the change consolidated federal income tax return within our tax during the period in certain deferred tax assets and return period. We are subject to tax on income from liabilities. Deferred income taxes reflect the impact of nonpatronage sources, nonqualified patronage temporary differences between the amounts of assets distributions and undistributed patronage-sourced and liabilities recognized under U.S. GAAP and such income. Income tax expense (benefit) is primarily the amounts recognized for federal and state income tax NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS purposes, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. purposes, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The provision for (benefit from) income taxes for the years ended August 31, 2023, 2022 and 2021 is as follows: The provision for (benefit from) income taxes for the years ended August 31, 2023, 2022 and 2021 is as follows: Deferred tax assets and liabilities as of August 31, 2023 and 2022, are as follows: Deferred tax assets and liabilities as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Deferred tax assets: Deferred tax assets: Accrued expenses Accrued expenses $ $ 51,960 51,960 $ $ 61,843 61,843 Postretirement health care and deferred compensation Postretirement health care and deferred compensation 51,635 51,635 46,008 46,008 2023 2023 2022 2022 2021 2021 Tax credit carryforwards Tax credit carryforwards 97,730 97,730 101,457 101,457 (DOLLARS IN (DOLLARS IN THOUSANDS) THOUSANDS) Current: Current: Federal Federal State State Foreign Foreign Total current Total current Deferred: Deferred: Federal Federal State State Foreign Foreign Total deferred Total Total deferred Total $ $ 66,672 66,672 36,925 36,925 3,735 3,735 107,332 107,332 $ $ 56,582 24,224 9,833 90,639 56,582 24,224 9,833 90,639 $ $ (533) (533) 2,943 2,943 56 56 2,466 2,466 7,799 7,799 (7,661) (7,661) 185 185 323 323 $ 107,655 $ 107,655 41,710 41,710 491 491 (724) (724) 41,477 41,477 $ 132,116 $ 132,116 (24,676) (24,676) (15,666) (15,666) (373) (373) (40,715) (40,715) $ (38,249) $ (38,249) Domestic income before income taxes was $2.0 billion, $1.8 billion and $497.5 million for the years ended August 31, 2023, 2022 and 2021, respectively. Foreign income (loss) before income taxes was $55.4 million, ($4.9) million and $17.8 million for the years ended August 31, 2023, 2022 and 2021, respectively. Domestic income before income taxes was $2.0 billion, $1.8 billion and $497.5 million for the years ended August 31, 2023, 2022 and 2021, respectively. Foreign income (loss) before income taxes was $55.4 million, ($4.9) million and $17.8 million for the years ended August 31, 2023, 2022 and 2021, respectively. Loss carryforwards Loss carryforwards Nonqualified equity Nonqualified equity Lease obligations Lease obligations Other Other Deferred tax assets valuation Deferred tax assets valuation allowance allowance 111,963 111,963 110,018 110,018 467,519 467,519 424,869 424,869 62,225 62,225 60,329 60,329 43,164 43,164 95,027 95,027 (182,466) (182,466) (189,685) (189,685) Total deferred tax assets Total deferred tax assets 703,730 703,730 709,866 709,866 Deferred tax liabilities: Deferred tax liabilities: Pension costs Pension costs Investments Investments 10,596 10,596 14,600 14,600 129,683 129,683 169,970 169,970 Property, plant and equipment Property, plant and equipment 625,403 625,403 605,463 605,463 Lease right of use assets Lease right of use assets 60,501 60,501 58,852 58,852 Total deferred tax liabilities Total deferred tax liabilities 826,183 826,183 848,885 848,885 Net deferred tax liabilities Net deferred tax liabilities $ 122,453 $ 122,453 $ 139,019 $ 139,019 We had total gross loss carryforwards of $587.3 million, as of August 31, 2023, of which $344.4 million will expire over periods ranging from fiscal 2023 to fiscal 2043. The remainder will carry forward indefinitely. Based on estimates of future taxable profits and losses in certain foreign tax jurisdictions, as well as consideration of other factors, we assessed whether a valuation allowance was necessary to reduce specific foreign loss carryforwards to amounts we believe are more likely than not to be realized as of August 31, 2023. If our estimates prove inaccurate, adjustments to the valuation allowances may be required in the future with gains or losses being charged to income in the period such determination is made. Our McPherson refinery’s gross state tax credit carryforwards for income tax were approximately $116.6 million and $122.8 million as of August 31, 2023 respectively. The refinery’s valuation and 2022, allowance on Kansas state credits is necessary due to the limited amount of taxable income generated in Kansas by the combined group on an annual basis. Our state tax credits of $116.6 million will begin to expire during fiscal 2024. We had total gross loss carryforwards of $587.3 million, as of August 31, 2023, of which $344.4 million will expire over periods ranging from fiscal 2023 to fiscal 2043. The remainder will carry forward indefinitely. Based on estimates of future taxable profits and losses in certain foreign tax jurisdictions, as well as consideration of other factors, we assessed whether a valuation allowance was necessary to reduce specific foreign loss carryforwards to amounts we believe are more likely than not to be realized as of August 31, 2023. If our estimates prove inaccurate, adjustments to the valuation allowances may be required in the future with gains or losses being charged to income in the period such determination is made. Our McPherson refinery’s gross state tax credit carryforwards for income tax were approximately $116.6 million and $122.8 million as of August 31, 2023 respectively. The refinery’s valuation and 2022, allowance on Kansas state credits is necessary due to the limited amount of taxable income generated in Kansas by the combined group on an annual basis. Our state tax credits of $116.6 million will begin to expire during fiscal 2024. 34 2023 CHS Annual Report 2023 CHS Annual Report 35 2023 CHS Annual Report 35 328789_14-57.indd 35 11/28/23 3:21 PM N OT E 11: N OT E 11: Incom e Taxes, continued I nco me Taxes, continue d The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2023, 2022 and 2021 is as follows: The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2023, 2022 and 2021 is as follows: Statutory federal income tax rate Statutory federal income tax rate 2023 2023 2022 2022 2021 2021 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% State and local income taxes, net of State and local income taxes, net of federal income tax benefit federal income tax benefit Patronage earnings Patronage earnings 1.1 1.1 (13.0) (13.0) 1.1 1.1 (13.6) (13.6) (2.6) (2.6) (11.4) (11.4) Domestic production activities Domestic production activities deduction deduction Export activities at rates other than the Export activities at rates other than the U.S. statutory rate U.S. statutory rate (3.2) (3.2) (3.2) (3.2) (8.2) (8.2) (0.2) (0.2) 0.4 0.4 0.5 0.5 Intercompany transfer of business assets Intercompany transfer of business assets Increase in unrecognized tax benefits Increase in unrecognized tax benefits — — — — (0.1) (0.1) (4.7) (4.7) — 0.2 1.5 — 0.2 1.5 0.8 0.8 (0.2) (0.2) (2.6) (2.6) — — (0.3) (0.3) 5.4% 5.4% 7.3% 7.3% (7.4)% (7.4)% Valuation allowance Valuation allowance Other Other Effective tax rate Effective tax rate Primary drivers of fiscal 2023 and 2022 income tax expense were increased nonpatronage earnings and other nondeductible items, which were partially offset by the current Domestic Production Activities Deduction (“DPAD”) benefit. Primary drivers of the fiscal 2021 income tax benefit were retaining the current DPAD benefit and from tax planning associated with certain assets. Primary drivers of fiscal 2023 and 2022 income tax expense were increased nonpatronage earnings and other nondeductible items, which were partially offset by the current Domestic Production Activities Deduction (“DPAD”) benefit. Primary drivers of the fiscal 2021 income tax benefit were retaining the current DPAD benefit and from tax planning associated with certain assets. We file income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Fiscal years 2007 through 2019 remain subject to examination for certain issues. We file income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Fiscal years 2007 through 2019 remain subject to examination for certain issues. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged and we may or may not prevail. If we determine that a tax position is more likely than not to be sustained upon audit, based on the technical merits of the position, we recognize the benefit by measuring the amount that is greater than Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged and we may or may not prevail. If we determine that a tax position is more likely than not to be sustained upon audit, based on the technical merits of the position, we recognize the benefit by measuring the amount that is greater than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 NOTE 12 Equities Equities Patronage and Equity Redemptions Patronage and Equity Redemptions Annual net earnings from patronage or other sources Annual net earnings from patronage or other sources In accordance with our bylaws and by action of the In accordance with our bylaws and by action of the may be added to the unallocated capital reserve or, may be added to the unallocated capital reserve or, Board of Directors, annual net earnings from patronage Board of Directors, annual net earnings from patronage upon action by the Board of Directors, may be allocated upon action by the Board of Directors, may be allocated sources are distributed to consenting patrons following sources are distributed to consenting patrons following to members in the form of nonpatronage equity to members in the form of nonpatronage equity the close of each fiscal year and are based on amounts the close of each fiscal year and are based on amounts certificates. The Board of Directors authorized, certificates. The Board of Directors authorized, in in using financial statement earnings. The cash portion of using financial statement earnings. The cash portion of the qualified patronage distribution, if any, is determined the qualified patronage distribution, if any, is determined annually by the Board of Directors, with the balance annually by the Board of Directors, with the balance issued in the form of qualified and/or nonqualified issued in the form of qualified and/or nonqualified accordance with our bylaws, that 10% of the earnings accordance with our bylaws, that 10% of the earnings from patronage business for fiscal 2023, 2022 and 2021 from patronage business for fiscal 2023, 2022 and 2021 be added to our capital reserves. be added to our capital reserves. capital equity certificates. Total patronage distributions capital equity certificates. Total patronage distributions Redemptions of outstanding equity are at the discretion Redemptions of outstanding equity are at the discretion for fiscal 2023 are estimated to be $1.2 billion, with the for fiscal 2023 are estimated to be $1.2 billion, with the of the Board of Directors. Redemptions of capital equity of the Board of Directors. Redemptions of capital equity qualified cash portion estimated to be $365.0 million, qualified cash portion estimated to be $365.0 million, estimated qualified equity distributions of $706.1 million estimated qualified equity distributions of $706.1 million and estimated nonqualified equity distributions of and estimated nonqualified equity distributions of $169.2 million. $169.2 million. The following table presents estimated patronage The following table presents estimated patronage distributions for the year ending August 31, 2023, and distributions for the year ending August 31, 2023, and actual patronage distributions for the years ended actual patronage distributions for the years ended August 31, 2022, 2021 and 2020: August 31, 2022, 2021 and 2020: 2024 2024 2023 2023 2022 2022 2021 2021 cash cash $ $ 365.0 365.0 $ $ 503.1 503.1 $ $ 51.0 51.0 $ $ 30.0 30.0 (DOLLARS IN (DOLLARS IN MILLIONS) MILLIONS) Patronage Patronage distributed in distributed in Patronage Patronage distributed in distributed in equity equity Total patronage Total patronage certificates approved by the Board of Directors are certificates approved by the Board of Directors are divided into two pools, one for nonindividuals (primarily divided into two pools, one for nonindividuals (primarily member cooperatives) who may participate in an annual member cooperatives) who may participate in an annual redemption program for qualified equities held by them redemption program for qualified equities held by them and another for individual members who are eligible for and another for individual members who are eligible for equity redemptions at age 70 or upon death. equity redemptions at age 70 or upon death. In In accordance with authorization from the Board of accordance with authorization from the Board of Directors, we expect total redemptions related to the Directors, we expect total redemptions related to the year ended August 31, 2023, which will be distributed in year ended August 31, 2023, which will be distributed in fiscal 2024, to be approximately $365.0 million. This fiscal 2024, to be approximately $365.0 million. This amount is classified as a current liability on our amount is classified as a current liability on our August 31, 2023, Consolidated Balance Sheet. During August 31, 2023, Consolidated Balance Sheet. During the years ended August 31, 2023, 2022 and 2021, we the years ended August 31, 2023, 2022 and 2021, we redeemed in cash, outstanding owners’ equities in redeemed in cash, outstanding owners’ equities in 875.3 875.3 670.9 670.9 235.6 235.6 214.8 214.8 accordance with authorization from the Board of accordance with authorization from the Board of Directors, Directors, in in the the amounts of amounts of $495.8 million, $495.8 million, distributed distributed $ 1,240.3 $ 1,240.3 $ 1,174.0 $ 1,174.0 $ 286.6 $ 286.6 $ 244.8 $ 244.8 $111.8 million and $79.4 million, respectively. $111.8 million and $79.4 million, respectively. 50% likely of being realized. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) expiration of the applicable statute of limitations. Significant required in judgment accounting for tax reserves. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods is presented as follows: 50% likely of being realized. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) expiration of the applicable statute of limitations. Significant required in accounting for tax reserves. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods is presented as follows: judgment is is (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Balance at beginning of Balance at beginning of period period Additions attributable to Additions attributable to current year tax current year tax positions positions Additions attributable to prior year tax positions Additions attributable to prior year tax positions Reductions attributable Reductions attributable to prior year tax to prior year tax positions positions Balance at end of period Balance at end of period 2023 2023 2022 2022 2021 2021 $ 124,959 $ 124,959 $ 122,149 $ 122,149 $ 119,150 $ 119,150 — — — — 2,000 2,000 894 894 2,810 2,810 15,974 15,974 — — $ 125,853 — $ 124,959 — (14,975) (14,975) $ 122,149 $ 122,149 $ 125,853 $ 124,959 If we were to prevail on all positions taken in relation to If we were to prevail on all positions taken in relation to uncertain tax positions, $116.0 million of the uncertain tax positions, $116.0 million of the unrecognized tax benefits would ultimately benefit our unrecognized tax benefits would ultimately benefit our effective tax rate. It is reasonably possible that the total effective tax rate. It is reasonably possible that the total amount of unrecognized tax benefits could significantly amount of unrecognized tax benefits could significantly change in the next 12 months. change in the next 12 months. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized benefits of $0.8 million, $0.7 million and $1.4 million for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations the years ended August 31, 2023, 2022 and 2021, respectively, and a related $3.7 million and $3.3 million interest payable on our Consolidated Balance Sheets as of August 31, 2023 and 2022, respectively. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized benefits of $0.8 million, $0.7 million and $1.4 million for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations the years ended August 31, 2023, 2022 and 2021, respectively, and a related $3.7 million and $3.3 million interest payable on our Consolidated Balance Sheets as of August 31, 2023 and 2022, respectively. for for 36 2023 CHS Annual Report 36 2023 CHS Annual Report 2023 CHS Annual Report 37 2023 CHS Annual Report 37 328789_14-57.indd 36 11/28/23 3:21 PM NOTE 11: Income Taxes, continued The reconciliation of the statutory federal income tax 50% likely of being realized. We reevaluate the technical rates to the effective tax rates for the years ended merits of our tax positions and recognize an uncertain August 31, 2023, 2022 and 2021 is as follows: 2023 2022 2021 Statutory federal income tax rate 21.0% 21.0% 21.0% State and local income taxes, net of federal income tax benefit 1.1 1.1 (2.6) Patronage earnings (13.0) (13.6) (11.4) Domestic production activities deduction (3.2) (3.2) (8.2) Export activities at rates other than the U.S. statutory rate (0.2) 0.4 0.5 Intercompany transfer of business assets (0.1) (4.7) Increase in unrecognized tax benefits — — — (0.3) 5.4% — 0.2 1.5 0.8 (0.2) (2.6) 7.3% (7.4)% Valuation allowance Other Effective tax rate Primary drivers of fiscal 2023 and 2022 income tax expense were increased nonpatronage earnings and other nondeductible items, which were partially offset by the current Domestic Production Activities Deduction (“DPAD”) benefit. Primary drivers of the fiscal 2021 income tax benefit were retaining the current DPAD benefit and from tax planning associated with certain assets. tax benefit, or derecognize a previously recorded tax benefit, when there is (i) completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) expiration of the applicable statute of limitations. Significant judgment is required in accounting for tax reserves. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods is presented as follows: (DOLLARS IN THOUSANDS) Balance at beginning of period Additions attributable to current year tax positions Additions attributable to prior year tax positions Reductions attributable to prior year tax positions 2023 2022 2021 $ 124,959 $ 122,149 $ 119,150 — 2,000 894 2,810 15,974 — (14,975) — — Balance at end of period $ 125,853 $ 124,959 $ 122,149 If we were to prevail on all positions taken in relation to uncertain tax positions, $116.0 million of the unrecognized tax benefits would ultimately benefit our We file income tax returns in the U.S. federal jurisdiction, effective tax rate. It is reasonably possible that the total as well as various state and foreign jurisdictions. Our amount of unrecognized tax benefits could significantly uncertain tax positions are affected by the tax years that change in the next 12 months. are under audit or remain subject to examination by the relevant taxing authorities. Fiscal years 2007 through 2019 remain subject to examination for certain issues. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized benefits of $0.8 million, Reserves are recorded against unrecognized tax $0.7 million and $1.4 million for interest and penalties benefits when we believe certain fully supportable tax related to unrecognized tax benefits in our Consolidated return positions are likely to be challenged and we may Statements of Operations for the years ended or may not prevail. If we determine that a tax position is August 31, 2023, 2022 and 2021, respectively, and a more likely than not to be sustained upon audit, based related $3.7 million and $3.3 million interest payable on on the technical merits of the position, we recognize the our Consolidated Balance Sheets as of August 31, 2023 benefit by measuring the amount that is greater than and 2022, respectively. NOTE 12 NOTE 12 Equities Equities Patronage and Equity Redemptions In accordance with our bylaws and by action of the Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year and are based on amounts using financial statement earnings. The cash portion of the qualified patronage distribution, if any, is determined annually by the Board of Directors, with the balance issued in the form of qualified and/or nonqualified capital equity certificates. Total patronage distributions for fiscal 2023 are estimated to be $1.2 billion, with the qualified cash portion estimated to be $365.0 million, estimated qualified equity distributions of $706.1 million and estimated nonqualified equity distributions of $169.2 million. Patronage and Equity Redemptions In accordance with our bylaws and by action of the Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year and are based on amounts using financial statement earnings. The cash portion of the qualified patronage distribution, if any, is determined annually by the Board of Directors, with the balance issued in the form of qualified and/or nonqualified capital equity certificates. Total patronage distributions for fiscal 2023 are estimated to be $1.2 billion, with the qualified cash portion estimated to be $365.0 million, estimated qualified equity distributions of $706.1 million and estimated nonqualified equity distributions of $169.2 million. The following table presents estimated patronage distributions for the year ending August 31, 2023, and actual patronage distributions for the years ended August 31, 2022, 2021 and 2020: The following table presents estimated patronage distributions for the year ending August 31, 2023, and actual patronage distributions for the years ended August 31, 2022, 2021 and 2020: (DOLLARS IN (DOLLARS IN MILLIONS) MILLIONS) 2024 2024 2023 2023 2022 2022 2021 2021 Patronage Patronage distributed in cash distributed in cash $ $ 365.0 365.0 $ $ 503.1 503.1 $ $ 51.0 51.0 $ $ 30.0 30.0 Patronage Patronage distributed in distributed in equity equity Total patronage Total patronage distributed distributed 875.3 875.3 670.9 670.9 235.6 235.6 214.8 214.8 $ 1,240.3 $ 1,240.3 $ 1,174.0 $ 1,174.0 $ 286.6 $ 286.6 $ 244.8 $ 244.8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Annual net earnings from patronage or other sources Annual net earnings from patronage or other sources may be added to the unallocated capital reserve or, may be added to the unallocated capital reserve or, upon action by the Board of Directors, may be allocated upon action by the Board of Directors, may be allocated to members in the form of nonpatronage equity to members in the form of nonpatronage equity certificates. The Board of Directors authorized, in certificates. The Board of Directors authorized, in accordance with our bylaws, that 10% of the earnings accordance with our bylaws, that 10% of the earnings from patronage business for fiscal 2023, 2022 and 2021 from patronage business for fiscal 2023, 2022 and 2021 be added to our capital reserves. be added to our capital reserves. Redemptions of outstanding equity are at the discretion Redemptions of outstanding equity are at the discretion of the Board of Directors. Redemptions of capital equity of the Board of Directors. Redemptions of capital equity certificates approved by the Board of Directors are certificates approved by the Board of Directors are divided into two pools, one for nonindividuals (primarily divided into two pools, one for nonindividuals (primarily member cooperatives) who may participate in an annual member cooperatives) who may participate in an annual redemption program for qualified equities held by them redemption program for qualified equities held by them and another for individual members who are eligible for and another for individual members who are eligible for In equity redemptions at age 70 or upon death. In equity redemptions at age 70 or upon death. accordance with authorization from the Board of accordance with authorization from the Board of Directors, we expect total redemptions related to the Directors, we expect total redemptions related to the year ended August 31, 2023, which will be distributed in year ended August 31, 2023, which will be distributed in fiscal 2024, to be approximately $365.0 million. This fiscal 2024, to be approximately $365.0 million. This amount is classified as a current liability on our amount is classified as a current liability on our August 31, 2023, Consolidated Balance Sheet. During August 31, 2023, Consolidated Balance Sheet. During the years ended August 31, 2023, 2022 and 2021, we the years ended August 31, 2023, 2022 and 2021, we redeemed in cash, outstanding owners’ equities in redeemed in cash, outstanding owners’ equities in accordance with authorization from the Board of accordance with authorization from the Board of Directors, $495.8 million, Directors, $495.8 million, amounts of $111.8 million and $79.4 million, respectively. $111.8 million and $79.4 million, respectively. amounts of the the in in 36 2023 CHS Annual Report 2023 CHS Annual Report 37 2023 CHS Annual Report 37 328789_14-57.indd 37 11/28/23 3:21 PM N OT E 12: Equ ities, continued N OT E 12: Equ ities, continued Preferred Stock The following is a summary of our outstanding preferred stock as of August 31, 2023, all shares of which are listed and traded on the Global Select Market of The Nasdaq: Preferred Stock The following is a summary of our outstanding preferred stock as of August 31, 2023, all shares of which are listed and traded on the Global Select Market of The Nasdaq: Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss 2022 and 2021 are as follows: 2022 and 2021 are as follows: Changes in accumulated other comprehensive income (loss) by component, for the years ended August 31, 2023, Changes in accumulated other comprehensive income (loss) by component, for the years ended August 31, 2023, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (e) ISSUANCE DATE ISSUANCE DATE (e) 8% Cumulative Redeemable (DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS) Redeemable, Series 1 Class B Reset Rate NASDAQ SYMBOL NASDAQ SYMBOL CHSCP CHSCP 8% Cumulative Redeemable Class B Cumulative Class B Cumulative Redeemable, Series 1 Class B Reset Rate Cumulative Redeemable, Series 2 Cumulative Redeemable, Series 2 Class B Reset Rate Class B Reset Rate Cumulative Redeemable, Series 3 Cumulative Redeemable, Series 3 Class B Cumulative Class B Cumulative Redeemable, Series 4 Redeemable, Series 4 SHARES SHARES OUTSTANDING OUTSTANDING REDEMPTION VALUE REDEMPTION VALUE NET NET PROCEEDS (a) PROCEEDS (a) DIVIDEND RATE (b) (c) DIVIDEND RATE (b) (c) DIVIDEND PAYMENT FREQUENCY DIVIDEND PAYMENT FREQUENCY REDEEMABLE BEGINNING (d) REDEEMABLE BEGINNING (d) 12,272,003 12,272,003 $ 306.8 $ 306.8 $ 311.2 $ 311.2 8.00% 8.00% Quarterly Quarterly 7/18/2023 7/18/2023 Balance as of August 31, 2020, net of tax Balance as of August 31, 2020, net of tax $ (159,680) $ (159,680) $ 10,886 $ 10,886 $ (85,130) $ (85,130) $ (233,924) $ (233,924) PENSION AND PENSION AND OTHER OTHER FOREIGN FOREIGN CURRENCY CURRENCY POSTRETIREMENT POSTRETIREMENT CASH FLOW CASH FLOW TRANSLATION TRANSLATION BENEFITS BENEFITS HEDGES HEDGES ADJUSTMENT ADJUSTMENT TOTAL TOTAL CHSCO CHSCO (f) (f) 21,459,066 21,459,066 536.5 536.5 569.3 569.3 7.875% 7.875% Quarterly Quarterly 9/26/2023 9/26/2023 CHSCN CHSCN 3/11/2014 3/11/2014 16,800,000 16,800,000 420.0 420.0 406.2 406.2 7.10% 7.10% Quarterly Quarterly 3/31/2024 3/31/2024 CHSCM CHSCM 9/15/2014 9/15/2014 19,700,000 19,700,000 492.5 492.5 476.7 476.7 6.75% 6.75% Quarterly Quarterly 9/30/2024 9/30/2024 CHSCL CHSCL 1/21/2015 1/21/2015 20,700,000 20,700,000 517.5 517.5 501.0 501.0 7.50% 7.50% Quarterly Quarterly 1/21/2025 1/21/2025 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax Tax effect Tax effect Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax Balance as of August 31, 2021, net of tax Balance as of August 31, 2021, net of tax Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax Tax effect Tax effect Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax Balance as of August 31, 2022, net of tax Balance as of August 31, 2022, net of tax Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out 4,048 4,048 11,700 11,700 5,573 5,573 21,321 21,321 20,256 20,256 (19,753) (19,753) 24,304 24,304 (8,053) (8,053) (6,009) (6,009) 1,991 1,991 18,295 18,295 (6,062) (6,062) — — 5,573 5,573 (273) (273) 5,300 5,300 503 503 21,824 21,824 (4,291) (4,291) 17,533 17,533 (141,385) (141,385) 4,824 4,824 (79,830) (79,830) (216,391) (216,391) (52,163) (52,163) (2,161) (2,161) (15,809) (15,809) (70,133) (70,133) 22,240 22,240 (29,923) (29,923) (27,255) (27,255) (168,640) (168,640) 7,455 7,455 5,294 5,294 4,019 4,019 8,843 8,843 — — 29,695 29,695 (15,809) (15,809) (40,438) (40,438) (15,708) (15,708) (38,944) (38,944) (95,538) (95,538) (255,335) (255,335) 2,668 2,668 (1,275) (1,275) 101 101 1,494 1,494 (13,596) (13,596) (25,024) (25,024) 1,829 1,829 (36,791) (36,791) 93 93 16,044 16,044 — — 16,137 16,137 Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax (13,503) (13,503) (8,980) (8,980) 1,829 1,829 (20,654) (20,654) Tax effect Tax effect 8,218 8,218 2,169 2,169 207 207 10,594 10,594 Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax (5,285) (5,285) (6,811) (6,811) 2,036 2,036 (10,060) (10,060) Balance as of August 31, 2023, net of tax Balance as of August 31, 2023, net of tax $ (173,925) $ (173,925) $ $ 2,032 2,032 $ (93,502) $ (93,502) $ (265,395) $ (265,395) Amounts Amounts reclassified reclassified from accumulated from accumulated other other expenses (see Note 13, Benefit Plans, expenses (see Note 13, Benefit Plans, for further for further comprehensive income (loss) were related to pension comprehensive income (loss) were related to pension information). As described in Note 15, Derivative information). As described in Note 15, Derivative and other postretirement benefits, cash flow hedges and other postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and foreign currency translation adjustments. Pension and other postretirement and other postretirement reclassifications include reclassifications include amortization of net actuarial loss, prior service credit amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of and transition amounts and are recorded as cost of goods sold and marketing, general and administrative goods sold and marketing, general and administrative Financial Instruments and Hedging Activities, amounts Financial Instruments and Hedging Activities, amounts reclassified from accumulated other comprehensive loss reclassified from accumulated other comprehensive loss for cash flow hedges are recorded in cost of goods sold. for cash flow hedges are recorded in cost of goods sold. Gains or Gains or losses on foreign currency translation losses on foreign currency translation reclassifications are recorded in other income. reclassifications are recorded in other income. NOTE 13 NOTE 13 Benefit Plans Benefit Plans We have various pension and other defined benefits as We have various pension and other defined benefits as health care benefits for certain retired employees and health care benefits for certain retired employees and well as defined contribution plans in which substantially well as defined contribution plans in which substantially Board of Directors participants. The plan is contributory Board of Directors participants. The plan is contributory all employees may participate. We also have all employees may participate. We also have based on years of service and family status, with retiree based on years of service and family status, with retiree nonqualified supplemental executive and Board nonqualified supplemental executive and Board contributions adjusted annually. contributions adjusted annually. retirement plans. We provide defined life insurance and retirement plans. We provide defined life insurance and (a) Includes patron equities redeemed with preferred stock. (a) Includes patron equities redeemed with preferred stock. (b) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 accumulates dividends at a rate of 7.10% per year until March 31, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024. (b) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 accumulates dividends at a rate of 7.10% per year until March 31, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024. (c) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 accumulates dividends at a rate of 6.75% per year until September 30, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024. (c) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 accumulates dividends at a rate of 6.75% per year until September 30, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024. (d) Preferred stock is redeemable for cash at our option, in whole or in part, at a per share price equal to the per share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to and including the date of redemption, beginning on the dates set forth in this column. (d) Preferred stock is redeemable for cash at our option, in whole or in part, at a per share price equal to the per share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to and including the date of redemption, beginning on the dates set forth in this column. (e) The 8% Cumulative Redeemable Preferred Stock was issued at various times from 2003 through 2010. (e) The 8% Cumulative Redeemable Preferred Stock was issued at various times from 2003 through 2010. (f) Shares of Class B Cumulative Redeemable Preferred Stock, Series 1 were issued on September 26, 2013; August 25, 2014; (f) Shares of Class B Cumulative Redeemable Preferred Stock, Series 1 were issued on September 26, 2013; August 25, 2014; March 31, 2016; and March 30, 2017. March 31, 2016; and March 30, 2017. Preferred Stock Dividends We made dividend payments on our preferred stock of $168.7 million during each of the years ended August 31, 2023, 2022 and 2021. As of August 31, 2023, the Board of Directors had not authorized the issuance of any preferred shares that were not outstanding. Preferred Stock Dividends We made dividend payments on our preferred stock of $168.7 million during each of the years ended August 31, 2023, 2022 and 2021. As of August 31, 2023, the Board of Directors had not authorized the issuance of any preferred shares that were not outstanding. The following is a summary of dividends per share by series of preferred stock for the years ended August 31, 2023 and 2022: The following is a summary of dividends per share by series of preferred stock for the years ended August 31, 2023 and 2022: YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS PER SHARE) (DOLLARS PER SHARE) 8% Cumulative Redeemable 8% Cumulative Redeemable Class B Cumulative Redeemable, Series 1 Class B Cumulative Redeemable, Series 1 Class B Reset Rate Cumulative Redeemable, Series 2 Class B Reset Rate Cumulative Redeemable, Series 2 Class B Reset Rate Cumulative Redeemable, Series 3 Class B Reset Rate Cumulative Redeemable, Series 3 Class B Cumulative Redeemable, Series 4 Class B Cumulative Redeemable, Series 4 NASDAQ SYMBOL NASDAQ SYMBOL CHSCP CHSCP CHSCO CHSCO CHSCN CHSCN CHSCM CHSCM CHSCL CHSCL 2023 2023 $ 2.00 $ 2.00 2022 2022 $ 2.00 $ 2.00 1.97 1.97 1.78 1.78 1.69 1.69 1.88 1.88 1.97 1.97 1.78 1.78 1.69 1.69 1.88 1.88 38 2023 CHS Annual Report 38 2023 CHS Annual Report 2023 CHS Annual Report 39 2023 CHS Annual Report 39 328789_14-57.indd 38 11/28/23 3:21 PM 8% Cumulative Redeemable CHSCP 12,272,003 $ 306.8 $ 311.2 8.00% Quarterly 7/18/2023 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) PENSION AND OTHER POSTRETIREMENT BENEFITS PENSION AND OTHER POSTRETIREMENT BENEFITS CASH FLOW CASH FLOW HEDGES HEDGES FOREIGN FOREIGN CURRENCY CURRENCY TRANSLATION TRANSLATION ADJUSTMENT ADJUSTMENT TOTAL TOTAL Balance as of August 31, 2020, net of tax Balance as of August 31, 2020, net of tax $ (159,680) $ (159,680) $ 10,886 $ 10,886 $ (85,130) $ (85,130) $ (233,924) $ (233,924) Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive income (loss) by component, for the years ended August 31, 2023, 2022 and 2021 are as follows: Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive income (loss) by component, for the years ended August 31, 2023, 2022 and 2021 are as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax Tax effect Tax effect Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax Balance as of August 31, 2021, net of tax Balance as of August 31, 2021, net of tax Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax Tax effect Tax effect Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax Balance as of August 31, 2022, net of tax Balance as of August 31, 2022, net of tax Other comprehensive income (loss), before tax: Other comprehensive income (loss), before tax: Amounts before reclassifications Amounts before reclassifications Amounts reclassified out Amounts reclassified out 4,048 4,048 11,700 11,700 5,573 5,573 21,321 21,321 20,256 20,256 (19,753) (19,753) 24,304 24,304 (8,053) (8,053) (6,009) (6,009) 1,991 1,991 18,295 18,295 (6,062) (6,062) — — 5,573 5,573 (273) (273) 5,300 5,300 503 503 21,824 21,824 (4,291) (4,291) 17,533 17,533 (141,385) (141,385) 4,824 4,824 (79,830) (79,830) (216,391) (216,391) (52,163) (52,163) (2,161) (2,161) (15,809) (15,809) (70,133) (70,133) 22,240 22,240 (29,923) (29,923) 7,455 7,455 5,294 5,294 — — 29,695 29,695 (15,809) (15,809) (40,438) (40,438) 2,668 2,668 (1,275) (1,275) 101 101 1,494 1,494 (27,255) (27,255) (168,640) (168,640) 4,019 4,019 8,843 8,843 (15,708) (15,708) (38,944) (38,944) (95,538) (95,538) (255,335) (255,335) (13,596) (13,596) (25,024) (25,024) 1,829 1,829 (36,791) (36,791) 93 93 16,044 16,044 — — 16,137 16,137 Total other comprehensive income (loss), before tax Total other comprehensive income (loss), before tax (13,503) (13,503) (8,980) (8,980) 1,829 1,829 (20,654) (20,654) Tax effect Tax effect 8,218 8,218 2,169 2,169 207 207 10,594 10,594 Other comprehensive income (loss), net of tax Other comprehensive income (loss), net of tax (5,285) (5,285) (6,811) (6,811) 2,036 2,036 (10,060) (10,060) (f) Shares of Class B Cumulative Redeemable Preferred Stock, Series 1 were issued on September 26, 2013; August 25, 2014; Balance as of August 31, 2023, net of tax Balance as of August 31, 2023, net of tax $ (173,925) $ (173,925) $ $ 2,032 2,032 $ (93,502) $ (93,502) $ (265,395) $ (265,395) NOTE 12: Equities, continued Preferred Stock (e) (f) Class B Cumulative Class B Reset Rate Cumulative Redeemable, Class B Reset Rate Cumulative Redeemable, Class B Cumulative The following is a summary of our outstanding preferred stock as of August 31, 2023, all shares of which are listed and traded on the Global Select Market of The Nasdaq: (DOLLARS IN MILLIONS) NASDAQ SYMBOL ISSUANCE SHARES REDEMPTION DATE OUTSTANDING VALUE PROCEEDS (a) NET DIVIDEND RATE (b) (c) DIVIDEND PAYMENT FREQUENCY REDEEMABLE BEGINNING (d) Redeemable, Series 1 CHSCO 21,459,066 536.5 569.3 7.875% Quarterly 9/26/2023 Series 2 CHSCN 3/11/2014 16,800,000 420.0 406.2 7.10% Quarterly 3/31/2024 Series 3 CHSCM 9/15/2014 19,700,000 492.5 476.7 6.75% Quarterly 9/30/2024 Redeemable, Series 4 CHSCL 1/21/2015 20,700,000 517.5 501.0 7.50% Quarterly 1/21/2025 (a) Includes patron equities redeemed with preferred stock. (b) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 accumulates dividends at a rate of 7.10% per year until March 31, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024. (c) The Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 accumulates dividends at a rate of 6.75% per year until September 30, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024. (d) Preferred stock is redeemable for cash at our option, in whole or in part, at a per share price equal to the per share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to and including the date of redemption, beginning on the dates set forth in this column. (e) The 8% Cumulative Redeemable Preferred Stock was issued at various times from 2003 through 2010. We made dividend payments on our preferred stock of $168.7 million during each of the years ended August 31, 2023, 2022 and 2021. As of August 31, 2023, the Board of Directors had not authorized the issuance of any preferred The following is a summary of dividends per share by series of preferred stock for the years ended August 31, 2023 March 31, 2016; and March 30, 2017. Preferred Stock Dividends shares that were not outstanding. and 2022: (DOLLARS PER SHARE) 8% Cumulative Redeemable Class B Cumulative Redeemable, Series 1 Class B Reset Rate Cumulative Redeemable, Series 2 Class B Reset Rate Cumulative Redeemable, Series 3 Class B Cumulative Redeemable, Series 4 YEARS ENDED AUGUST 31, 2023 2022 CHSCP $ 2.00 $ 2.00 1.97 1.78 1.69 1.88 1.97 1.78 1.69 1.88 NASDAQ SYMBOL CHSCO CHSCN CHSCM CHSCL NOTE 13 NOTE 13 Benefit Plans Benefit Plans We have various pension and other defined benefits as well as defined contribution plans in which substantially all employees may participate. We also have nonqualified supplemental executive and Board retirement plans. We provide defined life insurance and We have various pension and other defined benefits as well as defined contribution plans in which substantially all employees may participate. We also have nonqualified supplemental executive and Board retirement plans. We provide defined life insurance and health care benefits for certain retired employees and Board of Directors participants. The plan is contributory based on years of service and family status, with retiree contributions adjusted annually. health care benefits for certain retired employees and Board of Directors participants. The plan is contributory based on years of service and family status, with retiree contributions adjusted annually. 38 2023 CHS Annual Report 2023 CHS Annual Report 39 2023 CHS Annual Report 39 328789_14-57.indd 39 11/28/23 3:21 PM Amounts 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 and marketing, general and administrative Amounts 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 and marketing, general and administrative expenses (see Note 13, Benefit Plans, for further information). As described in Note 15, Derivative Financial Instruments and Hedging Activities, amounts reclassified from accumulated other comprehensive loss for cash flow hedges are recorded in cost of goods sold. Gains or losses on foreign currency translation reclassifications are recorded in other income. expenses (see Note 13, Benefit Plans, for further information). As described in Note 15, Derivative Financial Instruments and Hedging Activities, amounts reclassified from accumulated other comprehensive loss for cash flow hedges are recorded in cost of goods sold. Gains or losses on foreign currency translation reclassifications are recorded in other income. from accumulated from accumulated reclassified reclassified N OT E 13 Benefit Plans, continued N OT E 13 Benefit P lans, continued Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status as of August 31, 2023 and 2022, is as follows: Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status as of August 31, 2023 and 2022, is as follows: The accumulated benefit obligation of the qualified The accumulated benefit obligation of the qualified Information for the pension plans with an accumulated Information for the pension plans with an accumulated pension plans was $678.4 million and $728.9 million as pension plans was $678.4 million and $728.9 million as benefit obligation in excess of plan assets is set forth benefit obligation in excess of plan assets is set forth (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Change in benefit obligation: Change in benefit obligation: Projected benefit obligation at Projected benefit obligation at beginning of period beginning of period QUALIFIED QUALIFIED PENSION BENEFITS PENSION BENEFITS 2023 2023 2022 2022 NONQUALIFIED PENSION BENEFITS NONQUALIFIED PENSION BENEFITS 2023 2023 2022 2022 OTHER BENEFITS OTHER BENEFITS 2023 2023 2022 2022 $ 759,173 $ 759,173 $ 925,239 $ 925,239 $ $ 18,257 18,257 $ $ 20,604 20,604 $ $ 24,524 24,524 $ $ 29,069 29,069 Service cost Service cost Interest cost Interest cost Actuarial loss (gain): Actuarial loss (gain): 38,579 38,579 30,588 30,588 46,275 46,275 17,167 17,167 1,840 1,840 741 741 926 926 281 281 670 670 1,035 1,035 2,573 2,573 5,181 5,181 (45,216) (45,216) 490 490 2,941 2,941 9,875 9,875 (164,543) (164,543) 132 132 159 159 1,999 1,999 (876) (876) — — — — (82,857) (82,857) — — (77,913) (77,913) — — (1,140) (1,140) 43 43 1,313 1,313 — — (553) (553) (2,892) (2,892) (1,312) (1,312) — — (1,327) (1,327) (691) (691) — — — — — — (1,792) (1,792) — — (1,801) (1,801) 996 996 503 503 19 19 717 717 (4,979) (4,979) Experience study and mortality Experience study and mortality updates updates Other demographic experience* Other demographic experience* Discount rate change Discount rate change Plan amendments Plan amendments Settlements Settlements Benefits paid Benefits paid Projected benefit obligation at end of Projected benefit obligation at end of period period $ 708,511 $ 708,511 $ 759,173 $ 759,173 $ $ 20,980 20,980 $ $ 18,257 18,257 $ $ 22,572 22,572 $ $ 24,524 24,524 Change in plan assets: Change in plan assets: Fair value of plan assets at beginning Fair value of plan assets at beginning of period of period Actual (loss) gain on plan assets Actual (loss) gain on plan assets Company contributions Company contributions Benefits paid Benefits paid $ 787,422 $ 787,422 $ 993,124 $ 993,124 $ $ (8,415) (8,415) (166,789) (166,789) 40,000 40,000 (82,857) (82,857) 39,000 39,000 (77,913) (77,913) — $ — $ — $ — $ — — 1,140 — $ — — 2,018 — $ — — 1,792 — — — — 1,801 1,801 1,140 2,018 1,792 (1,140) (1,140) (2,018) (2,018) (1,792) (1,792) (1,801) (1,801) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS of August 31, 2023 and 2022, of August 31, 2023 and 2022, respectively. The respectively. The below: below: accumulated benefit obligation of the nonqualified accumulated benefit obligation of the nonqualified pension plans was $20.9 million and $18.3 million as of pension plans was $20.9 million and $18.3 million as of August 31, 2023 and 2022, respectively. August 31, 2023 and 2022, respectively. YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Projected benefit obligation Projected benefit obligation $ 20,980 $ 20,980 $ 18,257 $ 18,257 Accumulated benefit obligation Accumulated benefit obligation 20,908 20,908 18,257 18,257 Components of net periodic benefit costs for the years ended August 31, 2023, 2022 and 2021, are as follows: Components of net periodic benefit costs for the years ended August 31, 2023, 2022 and 2021, are as follows: QUALIFIED QUALIFIED PENSION BENEFITS PENSION BENEFITS NONQUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS OTHER BENEFITS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 Components of net periodic benefit costs: Components of net periodic benefit costs: Service cost Service cost Interest cost Interest cost $ $ 38,579 $ 38,579 $ 46,275 $ 46,275 $ 45,229 $1,840 $ 926 $ 433 $ 45,229 $1,840 $ 926 $ 433 $ 670 $ 670 $ 996 $ 1,186 996 $ 1,186 30,588 30,588 17,167 17,167 16,563 16,563 741 741 281 281 273 273 1,035 1,035 503 503 493 493 Expected return on assets Expected return on assets (43,129) (43,129) (43,958) (43,958) (43,641) (43,641) — — — — — — — — — — — — Prior service cost (credit) Prior service cost (credit) amortization amortization 149 149 174 174 178 178 (114) (114) (114) (114) (114) (114) (445) (445) (445) (445) (445) (445) Actuarial loss (gain) amortization Actuarial loss (gain) amortization 1,872 1,872 23,406 23,406 21,790 21,790 245 245 478 478 212 212 (1,615) (1,615) (1,259) (1,259) (1,365) (1,365) Net periodic benefit cost (benefit) Net periodic benefit cost (benefit) $ $ 28,059 $ 28,059 $ 43,064 $ 43,064 $ 40,119 $2,712 $1,571 $ 804 $ (355) $ (205) $ (131) 40,119 $2,712 $1,571 $ 804 $ (355) $ (205) $ (131) Components of net periodic benefit costs and amounts recognized in other comprehensive loss (income) for Components of net periodic benefit costs and amounts recognized in other comprehensive loss (income) for the years ended August 31, 2023, 2022 and 2021, are as follows: the years ended August 31, 2023, 2022 and 2021, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 QUALIFIED QUALIFIED PENSION BENEFITS PENSION BENEFITS NONQUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS OTHER BENEFITS Prior service cost Prior service cost $ $ 490 $ 490 $ 132 $ 132 $ 113 $ 113 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — — Net actuarial loss (gain) Net actuarial loss (gain) 14,082 14,082 59,020 59,020 (4,408) (4,408) 1,282 1,282 (1,537) (1,537) 1,978 1,978 (1,865) (1,865) (4,243) (4,243) (1,163) (1,163) (gain) loss (gain) loss (1,872) (1,872) (23,406) (23,406) (21,790) (21,790) (245) (245) (478) (478) (212) (212) 1,615 1,615 1,259 1,259 1,365 1,365 service (credit) costs service (credit) costs (149) (149) (174) (174) (178) (178) 114 114 114 114 114 114 445 445 445 445 445 445 Other comprehensive loss Other comprehensive loss (income): (income): Amortization of actuarial Amortization of actuarial Amortization of prior Amortization of prior Settlement of retiree Settlement of retiree obligations(a) obligations(a) Total recognized in other Total recognized in other comprehensive loss comprehensive loss (income) (income) $ 12,551 $ 35,572 $ (26,263) $ 1,151 $ (2,208) $ 1,880 $ $ 12,551 $ 35,572 $ (26,263) $ 1,151 $ (2,208) $ 1,880 $ 195 $(2,539) $ 195 $(2,539) $ 647 647 (a) Reflects amounts reclassified from accumulated other comprehensive loss (income) to net earnings. (a) Reflects amounts reclassified from accumulated other comprehensive loss (income) to net earnings. — — 28,249 28,249 (18,100) (18,100) $ (20,980) $ (20,980) (15,957) (15,957) $ (18,257) $ (18,257) (20,402) (20,402) $ (22,572) $ (22,572) (22,234) (22,234) $ (24,524) $ (24,524) $ $ (160) (160) 4,294 4,294 4,134 4,134 $ $ $ $ $ $ (274) (274) $ $ (1,380) (1,380) $ $ (1,825) (1,825) — — — — — — — — (307) (307) — — — — — — — — 3,257 3,257 2,983 2,983 (18,096) (18,096) $ (19,476) $ (19,476) (17,846) (17,846) $ (19,671) $ (19,671) 1,172 1,172 247,609 247,609 $ 248,781 831 831 235,399 235,399 $ 236,230 $ 248,781 $ 236,230 Fair value of plan assets at end of Fair value of plan assets at end of period period Funded status at end of period Funded status at end of period Amounts recognized on balance sheet: Amounts recognized on balance sheet: Noncurrent assets Noncurrent assets Accrued benefit cost: Accrued benefit cost: Current liabilities Current liabilities Noncurrent liabilities Noncurrent liabilities Ending balance Ending balance Amounts recognized in accumulated other comprehensive loss (pretax): Amounts recognized in accumulated other comprehensive loss (pretax): Prior service cost (credit) Prior service cost (credit) Net loss (gain) Net loss (gain) Ending balance Ending balance 27,639 27,639 27,639 27,639 — — — — 27,639 27,639 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 736,150 $ 736,150 $ 787,422 $ 787,422 $ $ — $ — $ — $ — $ — $ — $ — — 28,249 28,249 $ (20,980) $ (20,980) $ (18,257) $ (18,257) $ (22,572) $ (22,572) $ (24,524) $ (24,524) 28,249 28,249 $ $ — $ — $ — $ — $ — $ — $ — — — — (2,880) (2,880) (2,300) (2,300) (2,170) (2,170) (2,290) (2,290) * * Other demographic experience is comprised of all demographic experience different than anticipated, including terminations, retirements, deaths, pay, etc. Other demographic experience is comprised of all demographic experience different than anticipated, including terminations, retirements, deaths, pay, etc. 40 2023 CHS Annual Report 40 2023 CHS Annual Report 2023 CHS Annual Report 41 2023 CHS Annual Report 41 328789_14-57.indd 40 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accumulated benefit obligation of the qualified pension plans was $678.4 million and $728.9 million as of August 31, 2023 and 2022, respectively. The accumulated benefit obligation of the nonqualified pension plans was $20.9 million and $18.3 million as of August 31, 2023 and 2022, respectively. The accumulated benefit obligation of the qualified pension plans was $678.4 million and $728.9 million as of August 31, 2023 and 2022, respectively. The accumulated benefit obligation of the nonqualified pension plans was $20.9 million and $18.3 million as of August 31, 2023 and 2022, respectively. Information for the pension plans with an accumulated benefit obligation in excess of plan assets is set forth below: Information for the pension plans with an accumulated benefit obligation in excess of plan assets is set forth below: YEARS ENDED AUGUST 31, YEARS ENDED AUGUST 31, (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Projected benefit obligation Projected benefit obligation $ 20,980 $ 20,980 $ 18,257 $ 18,257 Accumulated benefit obligation Accumulated benefit obligation 20,908 20,908 18,257 18,257 Components of net periodic benefit costs for the years ended August 31, 2023, 2022 and 2021, are as follows: Components of net periodic benefit costs for the years ended August 31, 2023, 2022 and 2021, are as follows: QUALIFIED PENSION BENEFITS QUALIFIED PENSION BENEFITS NONQUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS OTHER BENEFITS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 Components of net periodic benefit costs: Components of net periodic benefit costs: Service cost Service cost Interest cost Interest cost $ $ 38,579 $ 38,579 $ 46,275 $ 46,275 $ 45,229 $1,840 $ 926 $ 433 $ 45,229 $1,840 $ 926 $ 433 $ 670 $ 670 $ 996 $ 1,186 996 $ 1,186 30,588 30,588 17,167 17,167 16,563 16,563 741 741 281 281 273 273 1,035 1,035 503 503 493 493 Expected return on assets Expected return on assets (43,129) (43,129) (43,958) (43,958) (43,641) (43,641) — — — — — — — — — — — — Prior service cost (credit) Prior service cost (credit) amortization amortization 149 149 174 174 178 178 (114) (114) (114) (114) (114) (114) (445) (445) (445) (445) (445) (445) of period $ 787,422 $ 993,124 $ — $ — $ — $ Net periodic benefit cost (benefit) Net periodic benefit cost (benefit) $ $ 28,059 $ 28,059 $ 43,064 $ 43,064 $ 40,119 $2,712 $1,571 $ 804 $ (355) $ (205) $ (131) 40,119 $2,712 $1,571 $ 804 $ (355) $ (205) $ (131) Actuarial loss (gain) amortization Actuarial loss (gain) amortization 1,872 1,872 23,406 23,406 21,790 21,790 245 245 478 478 212 212 (1,615) (1,615) (1,259) (1,259) (1,365) (1,365) Funded status at end of period $ 27,639 $ 28,249 $ (20,980) $ (18,257) $ (22,572) $ (24,524) (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 Components of net periodic benefit costs and amounts recognized in other comprehensive loss (income) for the years ended August 31, 2023, 2022 and 2021, are as follows: Components of net periodic benefit costs and amounts recognized in other comprehensive loss (income) for the years ended August 31, 2023, 2022 and 2021, are as follows: QUALIFIED PENSION BENEFITS QUALIFIED PENSION BENEFITS NONQUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS OTHER BENEFITS Other comprehensive loss Other comprehensive loss (income): (income): Prior service cost Prior service cost $ $ 490 $ 490 $ 132 $ 132 $ 113 $ 113 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — — Net actuarial loss (gain) Net actuarial loss (gain) 14,082 14,082 59,020 59,020 (4,408) (4,408) 1,282 1,282 (1,537) (1,537) 1,978 1,978 (1,865) (1,865) (4,243) (4,243) (1,163) (1,163) NOTE 13 Benefit Plans, continued August 31, 2023 and 2022, is as follows: Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status as of (DOLLARS IN THOUSANDS) 2023 2022 2023 2022 2023 2022 QUALIFIED PENSION BENEFITS NONQUALIFIED PENSION BENEFITS OTHER BENEFITS Change in benefit obligation: Projected benefit obligation at beginning of period Service cost Interest cost Actuarial loss (gain): Experience study and mortality updates Other demographic experience* Discount rate change Plan amendments Settlements Benefits paid period Projected benefit obligation at end of Change in plan assets: Fair value of plan assets at beginning $ 759,173 $ 925,239 $ 18,257 $ 20,604 $ 24,524 $ 29,069 38,579 30,588 46,275 17,167 926 281 670 1,035 (45,216) (164,543) 2,573 5,181 490 — 2,941 9,875 132 — 43 1,313 (2,892) — (1,327) (691) (553) (1,312) — — — (82,857) (77,913) (1,140) (1,792) (1,801) $ 708,511 $ 759,173 $ 20,980 $ 18,257 $ 22,572 $ 24,524 1,840 741 159 1,999 (876) — — 996 503 19 717 — — (4,979) — — 1,801 (1,801) Actual (loss) gain on plan assets (8,415) (166,789) 40,000 39,000 (82,857) (77,913) — 1,140 (1,140) — 2,018 (2,018) — 1,792 (1,792) Company contributions Benefits paid Fair value of plan assets at end of period $ 736,150 $ 787,422 $ — $ — $ — $ — $ 27,639 $ 28,249 $ — $ — $ — $ — — — — — (2,880) (2,300) (2,170) (2,290) (18,100) (15,957) (20,402) (22,234) Ending balance $ 27,639 $ 28,249 $ (20,980) $ (18,257) $ (22,572) $ (24,524) Amounts recognized on balance sheet: Noncurrent assets Accrued benefit cost: Current liabilities Noncurrent liabilities Amounts recognized in accumulated other comprehensive loss (pretax): Prior service cost (credit) $ 1,172 $ 831 (274) $ (1,380) $ (1,825) 247,609 235,399 $ 248,781 $ 236,230 $ $ (160) 4,294 4,134 $ $ 3,257 (18,096) (17,846) 2,983 $ (19,476) $ (19,671) Net loss (gain) Ending balance (1,872) (1,872) (23,406) (23,406) (21,790) (21,790) (245) (245) (478) (478) (212) (212) 1,615 1,615 1,259 1,259 1,365 1,365 (149) (149) (174) (174) (178) (178) 114 114 114 114 114 114 445 445 445 445 445 445 — — — — — — — — (307) (307) — — — — — — — — $ 12,551 $ 35,572 $ (26,263) $ 1,151 $ (2,208) $ 1,880 $ $ 12,551 $ 35,572 $ (26,263) $ 1,151 $ (2,208) $ 1,880 $ 195 $(2,539) $ 195 $(2,539) $ 647 647 Settlement of retiree obligations(a) Settlement of retiree obligations(a) Total recognized in other Total recognized in other comprehensive loss comprehensive loss (income) (income) Amortization of actuarial (gain) loss Amortization of prior service (credit) costs Amortization of actuarial Amortization of prior service (credit) costs (gain) loss * Other demographic experience is comprised of all demographic experience different than anticipated, including terminations, retirements, deaths, pay, etc. (a) Reflects amounts reclassified from accumulated other comprehensive loss (income) to net earnings. (a) Reflects amounts reclassified from accumulated other comprehensive loss (income) to net earnings. 40 2023 CHS Annual Report 2023 CHS Annual Report 41 2023 CHS Annual Report 41 328789_14-57.indd 41 11/28/23 3:21 PM $ 380 178 $ (114) $ 1,796 1,796 (445) (445) (1,616) (1,616) $ (114) $ 380 OTHER OTHER BENEFITS BENEFITS NONQUALIFIED PENSION BENEFITS NONQUALIFIED PENSION BENEFITS QUALIFIED PENSION BENEFITS QUALIFIED PENSION BENEFITS $ 178 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Amortization of prior service costs (credit) Amortization of prior service costs (credit) Amortization of actuarial loss (gain) Amortization of actuarial loss (gain) N OT E 13 Benefit Plans, continued N OT E 13 Benefit P lans, continued Estimated amortization in fiscal 2024 from accumulated other comprehensive loss into net periodic benefit cost is as follows: Estimated amortization in fiscal 2024 from accumulated other comprehensive loss into net periodic benefit cost is as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 elect to do so. We expect to pay $5.1 million to elect to do so. We expect to pay $5.1 million to • Maintain broad diversification across asset classes • Maintain broad diversification across asset classes participants participants of of the the nonqualified pension nonqualified pension and and and among investment managers; and and among investment managers; and postretirement benefit plans during fiscal 2024. postretirement benefit plans during fiscal 2024. • Focus on long-term return objectives. • Focus on long-term return objectives. Our retiree benefit payments, which reflect expected Our retiree benefit payments, which reflect expected Asset allocation targets promote optimal expected Asset allocation targets promote optimal expected future service, are anticipated to be paid as follows: future service, are anticipated to be paid as follows: return and volatility characteristics given the long-term return and volatility characteristics given the long-term (DOLLARS IN (DOLLARS IN THOUSANDS) THOUSANDS) QUALIFIED QUALIFIED NONQUALIFIED NONQUALIFIED PENSION PENSION BENEFITS BENEFITS PENSION PENSION OTHER OTHER BENEFITS BENEFITS BENEFITS BENEFITS time horizon for fulfilling the obligations of the pension time horizon for fulfilling the obligations of the pension plans. The investment portfolio contains a diversified plans. The investment portfolio contains a diversified portfolio of investment categories, including equities, portfolio of investment categories, including equities, $ 69,100 $ 69,100 $ 2,880 $ 2,880 $ 2,170 $ 2,170 fixed-income securities and real estate. Securities are fixed-income securities and real estate. Securities are 69,600 69,600 69,800 69,800 71,200 71,200 74,200 74,200 3,020 3,020 2,800 2,800 2,480 2,480 2,160 2,160 8,380 8,380 2,280 2,280 2,220 2,220 2,180 2,180 2,060 2,060 8,570 8,570 also diversified in terms of domestic and international also diversified in terms of domestic and international securities, short- and long-term securities, growth and securities, short- and long-term securities, growth and value equities, large and small cap stocks, as well as value equities, large and small cap stocks, as well as active and passive management styles. Our pension active and passive management styles. Our pension plans’ investment policy strategy is such that liabilities plans’ investment policy strategy is such that liabilities match assets. This is being accomplished through the match assets. This is being accomplished through the 2029-2033 2029-2033 339,800 339,800 We have trusts that hold the assets for the defined We have trusts that hold the assets for the defined asset portfolio mix by reducing volatility and de-risking asset portfolio mix by reducing volatility and de-risking benefit plans. CHS has a qualified plan committee that benefit plans. CHS has a qualified plan committee that the plans. The plans’ target allocation percentages range the plans. The plans’ target allocation percentages range sets investment guidelines with the assistance of sets investment guidelines with the assistance of between 45% and 80% for fixed income securities and between 45% and 80% for fixed income securities and external consultants. external consultants. Investment objectives for the Investment objectives for the range between 20% and 55% for equity securities. range between 20% and 55% for equity securities. plans’ assets are as follows: plans’ assets are as follows: • Optimize the long-term returns on plan assets at an • Optimize the long-term returns on plan assets at an risk tolerance and asset diversification, the plans should risk tolerance and asset diversification, the plans should acceptable level of risk; acceptable level of risk; be able to meet pension obligations in the future. be able to meet pension obligations in the future. The qualified plan committee believes that with prudent The qualified plan committee believes that with prudent Our pension plans’ recurring fair value measurements by asset category as of August 31, 2023 and 2022, are Our pension plans’ recurring fair value measurements by asset category as of August 31, 2023 and 2022, are presented in the tables below: presented in the tables below: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash and cash equivalents Cash and cash equivalents Equities: Equities: Fixed income securities: Fixed income securities: Other investments Other investments (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash and cash equivalents Cash and cash equivalents Equities: Equities: Total Total Total Total Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) — — — — — — 127,225 127,225 Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Partnership and joint venture interests measured at net asset value(1) 2023 2023 LEVEL 1 LEVEL 1 LEVEL 2 LEVEL 2 LEVEL 3 LEVEL 3 TOTAL TOTAL $ 12,505 $ 12,505 $ $ — — $ — $ $ — $ 12,505 12,505 25,143 25,143 86,315 86,315 — — — — — — — — — — — — — — 111,458 111,458 425,180 425,180 59,782 59,782 $ 37,648 $ 37,648 $ 86,315 $ 86,315 $ — $ 736,150 $ — $ 736,150 2022 2022 LEVEL 1 LEVEL 1 LEVEL 2 LEVEL 2 LEVEL 3 LEVEL 3 TOTAL TOTAL $ 7,472 $ 7,472 $ — $ — $ — $ $ — $ 7,472 7,472 Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) — — — — — — 142,730 142,730 Fixed income securities: Fixed income securities: Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Partnership and joint venture interests measured at net asset value(1) — — — — — — — — — — — — 550,046 550,046 87,174 87,174 $ 7,472 $ 7,472 $ — $ — $ — $ 787,422 $ — $ 787,422 (1) In accordance with ASC Topic 820-10, Fair Value Measurement, certain assets that are measured at fair value using the net asset (1) In accordance with ASC Topic 820-10, Fair Value Measurement, certain assets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the “Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status” table above. “Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status” table above. Plan assumptions for the years ended August 31, 2023, 2022 and 2021, are as follows: Plan assumptions for the years ended August 31, 2023, 2022 and 2021, are as follows: QUALIFIED QUALIFIED PENSION BENEFITS PENSION BENEFITS NONQUALIFIED PENSION BENEFITS NONQUALIFIED PENSION BENEFITS OTHER BENEFITS OTHER BENEFITS 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 2023 2023 2022 2022 2021 2021 Weighted-average assumptions to determine the net periodic Weighted-average assumptions to determine the net periodic benefit cost: benefit cost: Interest credit rate Interest credit rate Discount rate Discount rate Expected return on plan assets Expected return on plan assets Rate of compensation increase Rate of compensation increase Weighted-average assumptions to determine the benefit Weighted-average assumptions to determine the benefit obligations: obligations: Interest credit rate Interest credit rate Discount rate Discount rate Rate of compensation increase Rate of compensation increase 4.65% 4.65% 4.65% 4.65% 4.65% 4.65% N/A 4.65% 4.65% 4.65% 4.65% 4.65% 4.65% N/A N/A N/A N/A N/A 4.69% 2.80% 2.65% 4.48% 2.04% 2.07% 4.64% 2.57% 2.43% 4.69% 2.80% 2.65% 4.48% 2.04% 2.07% 4.64% 2.57% 2.43% 4.88% 4.88% 4.90% N/A 4.88% 4.88% 4.90% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 4.93% 4.79% 4.99% 4.93% 4.79% 4.99% N/A 4.93% 4.79% 4.99% 4.93% 4.79% 4.99% N/A N/A N/A N/A N/A 4.80% 4.65% 4.65% 4.80% 4.65% 4.65% N/A 4.80% 4.65% 4.65% 4.80% 4.65% 4.65% N/A N/A N/A N/A N/A 5.38% 4.69% 2.78% 5.23% 4.49% 2.08% 5.33% 4.64% 2.57% 5.38% 4.69% 2.78% 5.23% 4.49% 2.08% 5.33% 4.64% 2.57% 4.98% 4.93% 4.79% 4.98% 4.93% 4.79% N/A 4.98% 4.93% 4.79% 4.98% 4.93% 4.79% N/A N/A N/A N/A N/A A significant assumption for pension costs and A significant assumption for pension costs and obligations is the discount rate. We use a full-yield curve obligations is the discount rate. We use a full-yield curve approach by applying the specific spot rates along the approach by applying the specific spot rates along the yield curve used in the determination of the benefit yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The obligation to the relevant projected cash flows. The discount rate reflects the rate at which the associated discount rate reflects the rate at which the associated benefits could be effectively settled as of the benefits could be effectively settled as of the measurement date. In estimating this rate, we look at measurement date. In estimating this rate, we look at rates of return on fixed-income investments of similar rates of return on fixed-income investments of similar duration to the liabilities in the plans that receive high duration to the liabilities in the plans that receive high investment-grade ratings by recognized ratings investment-grade ratings by recognized ratings agencies. agencies. An annual analysis of the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption. We generally use long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption when deemed necessary, based upon revised expectations of future investment performance of the overall investment markets. An annual analysis of the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption. We generally use long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption when deemed necessary, based upon revised expectations of future investment performance of the overall investment markets. For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended August 31, 2023. The rate was assumed to decrease gradually to 4.5% by 2031 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects: For measurement purposes, a 7.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended August 31, 2023. The rate was assumed to decrease gradually to 4.5% by 2031 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects: (Dollars in thousands) (Dollars in thousands) 1% Increase 1% Decrease 1% Increase 1% Decrease Effect on total of service and interest Effect on total of service and interest cost components cost components Effect on postretirement benefit Effect on postretirement benefit obligation obligation $ 170 170 $ $ $ 140 140 1,400 1,400 1,300 1,300 Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. During fiscal 2023, we made a discretionary contribution of $40.0 million to the pension plans. Based on the funded status of the qualified pension plans as of August 31, 2023, we do not currently believe we will be required to contribute to these plans in fiscal 2024, although we may voluntarily Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. During fiscal 2023, we made a discretionary contribution of $40.0 million to the pension plans. Based on the funded status of the qualified pension plans as of August 31, 2023, we do not currently believe we will be required to contribute to these plans in fiscal 2024, although we may voluntarily 42 2023 CHS Annual Report 42 2023 CHS Annual Report 2023 CHS Annual Report 43 2023 CHS Annual Report 43 328789_14-57.indd 42 11/28/23 3:21 PM Estimated amortization in fiscal 2024 from accumulated other comprehensive loss into net periodic benefit cost is as NOTE 13 Benefit Plans, continued follows: (DOLLARS IN THOUSANDS) Amortization of prior service costs (credit) Amortization of actuarial loss (gain) QUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS $ 178 $ (114) $ (445) 1,796 380 (1,616) Plan assumptions for the years ended August 31, 2023, 2022 and 2021, are as follows: Weighted-average assumptions to determine the net periodic benefit cost: Interest credit rate Discount rate Expected return on plan assets Rate of compensation increase obligations: Interest credit rate Discount rate Weighted-average assumptions to determine the benefit QUALIFIED NONQUALIFIED PENSION BENEFITS PENSION BENEFITS OTHER BENEFITS 2023 2022 2021 2023 2022 2021 2023 2022 2021 4.65% 4.65% 4.65% 4.65% 4.65% 4.65% N/A N/A N/A 4.69% 2.80% 2.65% 4.48% 2.04% 2.07% 4.64% 2.57% 2.43% 4.88% 4.88% 4.90% N/A N/A N/A N/A N/A N/A 4.93% 4.79% 4.99% 4.93% 4.79% 4.99% N/A N/A N/A 4.80% 4.65% 4.65% 4.80% 4.65% 4.65% N/A N/A N/A 5.38% 4.69% 2.78% 5.23% 4.49% 2.08% 5.33% 4.64% 2.57% Rate of compensation increase 4.98% 4.93% 4.79% 4.98% 4.93% 4.79% N/A N/A N/A A significant assumption for pension costs and For measurement purposes, a 7.5% annual rate of obligations is the discount rate. We use a full-yield curve increase in the per capita cost of covered health care approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The discount rate reflects the rate at which the associated benefits could be effectively settled as of the measurement date. In estimating this rate, we look at rates of return on fixed-income investments of similar duration to the liabilities in the plans that receive high investment-grade ratings by recognized ratings agencies. An annual analysis of the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption. We generally use long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption when deemed benefits was assumed for the year ended August 31, 2023. The rate was assumed to decrease gradually to 4.5% by 2031 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rates would have the following effects: (Dollars in thousands) 1% Increase 1% Decrease Effect on total of service and interest cost components $ 170 $ 140 Effect on postretirement benefit obligation 1,400 1,300 Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. During fiscal 2023, we made a discretionary contribution of $40.0 million to the pension plans. Based on the funded status of the necessary, based upon revised expectations of future qualified pension plans as of August 31, 2023, we do not investment performance of the overall investment currently believe we will be required to contribute to markets. these plans in fiscal 2024, although we may voluntarily NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Maintain broad diversification across asset classes • Maintain broad diversification across asset classes and among investment managers; and and among investment managers; and • Focus on long-term return objectives. • Focus on long-term return objectives. Asset allocation targets promote optimal expected Asset allocation targets promote optimal expected return and volatility characteristics given the long-term return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension time horizon for fulfilling the obligations of the pension plans. The investment portfolio contains a diversified plans. The investment portfolio contains a diversified portfolio of investment categories, including equities, portfolio of investment categories, including equities, fixed-income securities and real estate. Securities are fixed-income securities and real estate. Securities are also diversified in terms of domestic and international also diversified in terms of domestic and international securities, short- and long-term securities, growth and securities, short- and long-term securities, growth and value equities, large and small cap stocks, as well as value equities, large and small cap stocks, as well as active and passive management styles. Our pension active and passive management styles. Our pension plans’ investment policy strategy is such that liabilities plans’ investment policy strategy is such that liabilities match assets. This is being accomplished through the match assets. This is being accomplished through the asset portfolio mix by reducing volatility and de-risking asset portfolio mix by reducing volatility and de-risking the plans. The plans’ target allocation percentages range the plans. The plans’ target allocation percentages range between 45% and 80% for fixed income securities and between 45% and 80% for fixed income securities and range between 20% and 55% for equity securities. range between 20% and 55% for equity securities. The qualified plan committee believes that with prudent The qualified plan committee believes that with prudent risk tolerance and asset diversification, the plans should risk tolerance and asset diversification, the plans should be able to meet pension obligations in the future. be able to meet pension obligations in the future. elect to do so. We expect to pay $5.1 million to the participants and postretirement benefit plans during fiscal 2024. elect to do so. We expect to pay $5.1 million to participants and nonqualified pension postretirement benefit plans during fiscal 2024. nonqualified pension the of of Our retiree benefit payments, which reflect expected Our retiree benefit payments, which reflect expected future service, are anticipated to be paid as follows: future service, are anticipated to be paid as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 QUALIFIED QUALIFIED PENSION PENSION BENEFITS BENEFITS NONQUALIFIED NONQUALIFIED PENSION PENSION BENEFITS BENEFITS OTHER OTHER BENEFITS BENEFITS $ 69,100 $ 69,100 $ 2,880 $ 2,880 $ 2,170 $ 2,170 69,600 69,600 69,800 69,800 71,200 71,200 74,200 74,200 3,020 3,020 2,800 2,800 2,480 2,480 2,160 2,160 8,380 8,380 2,280 2,280 2,220 2,220 2,180 2,180 2,060 2,060 8,570 8,570 2029-2033 2029-2033 339,800 339,800 We have trusts that hold the assets for the defined We have trusts that hold the assets for the defined benefit plans. CHS has a qualified plan committee that benefit plans. CHS has a qualified plan committee that sets investment guidelines with the assistance of sets investment guidelines with the assistance of Investment objectives for the external consultants. Investment objectives for the external consultants. plans’ assets are as follows: plans’ assets are as follows: • Optimize the long-term returns on plan assets at an • Optimize the long-term returns on plan assets at an acceptable level of risk; acceptable level of risk; Our pension plans’ recurring fair value measurements by asset category as of August 31, 2023 and 2022, are presented in the tables below: Our pension plans’ recurring fair value measurements by asset category as of August 31, 2023 and 2022, are presented in the tables below: 2023 2023 Common/collective trust at net asset value(1) (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash and cash equivalents Cash and cash equivalents Equities: Equities: Common/collective trust at net asset value(1) Fixed income securities: Fixed income securities: Other investments Other investments Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Total Total (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash and cash equivalents Cash and cash equivalents Equities: Equities: Common/collective trust at net asset value(1) Fixed income securities: Common/collective trust at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Partnership and joint venture interests measured at net asset value(1) Common/collective trust at net asset value(1) Common/collective trust at net asset value(1) Fixed income securities: Total Total LEVEL 1 LEVEL 1 $ 12,505 $ 12,505 LEVEL 2 LEVEL 2 — $ — $ LEVEL 3 LEVEL 3 $ — $ $ — $ TOTAL 12,505 TOTAL 12,505 — — — — — — 127,225 127,225 25,143 25,143 — — — — 86,315 86,315 — — — — — — — — — — 111,458 425,180 59,782 111,458 425,180 59,782 $ 37,648 $ 37,648 $ 86,315 $ 86,315 $ — $ 736,150 $ — $ 736,150 2022 2022 LEVEL 1 $ 7,472 LEVEL 1 $ 7,472 LEVEL 2 LEVEL 2 $ — $ — LEVEL 3 LEVEL 3 $ — $ $ — $ TOTAL 7,472 TOTAL 7,472 — — — — — — 142,730 142,730 — — — — — — — — — — — — 550,046 87,174 550,046 87,174 $ 7,472 $ 7,472 $ — $ — $ — $ 787,422 $ — $ 787,422 42 2023 CHS Annual Report 2023 CHS Annual Report 43 2023 CHS Annual Report 43 328789_14-57.indd 43 11/28/23 3:21 PM (1) In accordance with ASC Topic 820-10, Fair Value Measurement, certain assets that are measured at fair value using the net asset (1) In accordance with ASC Topic 820-10, Fair Value Measurement, certain assets that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the “Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status” table above. “Financial information on changes in projected benefit obligation, plan assets funded and balance sheet status” table above. N OT E 13 Benefit Plans, continued N OT E 13 Benefit Pl ans, continued Definitions for valuation levels are found in Note 16, Fair Definitions for valuation levels are found in Note 16, Fair Value Measurements. We use the following valuation Value Measurements. We use the following valuation methodologies for assets measured at fair value: methodologies for assets measured at fair value: Common/collective trusts. Common/collective trusts Common/collective trusts. Common/collective trusts primarily consist of equity and fixed income funds and primarily consist of equity and fixed income funds and are valued using other significant observable inputs, are valued using other significant observable inputs, including quoted prices for similar investments, interest including quoted prices for similar investments, interest rates, prepayment speeds, credit risks, referenced rates, prepayment speeds, credit risks, referenced indices, quoted prices in inactive markets, adjusted indices, quoted prices in inactive markets, adjusted quoted prices in active markets, adjusted quoted prices quoted prices in active markets, adjusted quoted prices on foreign equity securities that were adjusted in on foreign equity securities that were adjusted in accordance with pricing procedures approved by the accordance with pricing procedures approved by the trust, etc. Common/collective trust investments can be trust, etc. Common/collective trust investments can be redeemed daily and without restriction. Redemption of redeemed daily and without restriction. Redemption of the entire investment balance generally requires a 45- the entire investment balance generally requires a 45- to 60-day notice period. The equity funds provide to 60-day notice period. The equity funds provide exposure to large-, mid- and small-cap U.S. equities, exposure to large-, mid- and small-cap U.S. equities, international large- and small-cap equities and emerging international large- and small-cap equities and emerging market equities. The fixed income funds provide market equities. The fixed income funds provide exposure to U.S., international and emerging market exposure to U.S., international and emerging market debt securities. debt securities. Other investments. Other investments are comprised primarily of investments in various government agency obligations and U.S. Treasury securities which are valued using quoted market prices and classified within Level 1, as well as corporate, foreign government, and municipal issue fixed income marketable securities which are valued using institutional bond or broker quotes along with various other market and industry inputs and classified within Level 2. Other investments. Other investments are comprised primarily of investments in various government agency obligations and U.S. Treasury securities which are valued using quoted market prices and classified within Level 1, as well as corporate, foreign government, and municipal issue fixed income marketable securities which are valued using institutional bond or broker quotes along with various other market and industry inputs and classified within Level 2. Partnership and joint venture interests. The net asset value of shares held by the plan at year-end is used to value these assets as a practical expedient for fair value. The net asset value is based on the fair value of the underlying assets owned by the trust, minus its liabilities, then divided by the number of units outstanding. Redemptions of these interests generally require a 45- to 60-day notice period. Partnership and joint venture interests. The net asset value of shares held by the plan at year-end is used to value these assets as a practical expedient for fair value. The net asset value is based on the fair value of the underlying assets owned by the trust, minus its liabilities, then divided by the number of units outstanding. Redemptions of these interests generally require a 45- to 60-day notice period. We are one of approximately 400 employers contributing to the Co-op Retirement Plan (“Co-op Plan”), which is a defined benefit plan constituting a multiple employer plan under the Internal Revenue Code of 1986, as amended, and a multiemployer plan under the accounting standards. The risks of participating in these multiemployer plans are different from single- employer plans in the following aspects: We are one of approximately 400 employers contributing to the Co-op Retirement Plan (“Co-op Plan”), which is a defined benefit plan constituting a multiple employer plan under the Internal Revenue Code of 1986, as amended, and a multiemployer plan under the accounting standards. The risks of participating in these multiemployer plans are different from single- employer plans in the following aspects: • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If we choose to stop participating in the multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The withdrawal liability associated with the multiemployer plan was approximately $22.7 million as of August 31, 2023. • If we choose to stop participating in the multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of liability. The the plan, referred to as a withdrawal withdrawal liability associated with the multiemployer plan was approximately $22.7 million as of August 31, 2023. Our participation in the Co-op Plan for the years ended August 31, 2023, 2022 and 2021, is outlined in the table below: Our participation in the Co-op Plan for the years ended August 31, 2023, 2022 and 2021, is outlined in the table below: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) PLAN NAME PLAN NAME Co-op Retirement Plan Co-op Retirement Plan EIN/PLAN NUMBER EIN/PLAN NUMBER 01-0689331/001 01-0689331/001 CONTRIBUTIONS OF CHS CONTRIBUTIONS OF CHS 2023 2023 $ 1,017 $ 1,017 2022 2022 $ 955 $ 955 2021 2021 $ 1,172 $ 1,172 SURCHARGE IMPOSED SURCHARGE IMPOSED EXPIRATION DATE OF COLLECTIVE BARGAINING AGREEMENT EXPIRATION DATE OF COLLECTIVE BARGAINING AGREEMENT N/A N/A N/A N/A Our contributions for the years stated above did not represent more than 5% of total contributions to the Co-op Plan as indicated in the Co-op Plan’s most recently available annual report (Form 5500). Our contributions for the years stated above did not represent more than 5% of total contributions to the Co-op Plan as indicated in the Co-op Plan’s most recently available annual report (Form 5500). Provisions of the Pension Protection Act of 2006 (“PPA”) do not apply to the Co-op Plan because there is a special exemption for cooperative plans if the plan is maintained by more than one employer and at least 85% of the employers are rural cooperatives or cooperative Provisions of the Pension Protection Act of 2006 (“PPA”) do not apply to the Co-op Plan because there is a special exemption for cooperative plans if the plan is maintained by more than one employer and at least 85% of the employers are rural cooperatives or cooperative organizations owned by agricultural producers. In the Co-op Plan, a zone status determination is not required, and therefore not determined. the accumulated benefit obligations and plan assets are not determined or allocated separately by individual financial statements recent employers. The most available in 2023 and 2022 are for the Co-op Plan’s year-end at March 31, 2023 and 2022, respectively. In total, the Co-op Plan was at least 80% funded on those organizations owned by agricultural producers. In the Co-op Plan, a zone status determination is not required, and therefore not determined. the accumulated benefit obligations and plan assets are not determined or allocated separately by individual financial statements recent employers. The most available in 2023 and 2022 are for the Co-op Plan’s year-end at March 31, 2023 and 2022, respectively. In total, the Co-op Plan was at least 80% funded on those In addition, In addition, 44 2023 CHS Annual Report 44 2023 CHS Annual Report 2023 CHS Annual Report 45 2023 CHS Annual Report 45 328789_14-57.indd 44 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS dates based on the total plan assets and accumulated dates based on the total plan assets and accumulated multiemployer pension plans were immaterial in fiscal multiemployer pension plans were immaterial in fiscal benefit obligations. benefit obligations. 2023, 2022 and 2021. 2023, 2022 and 2021. Because the provisions of the PPA do not apply to the Because the provisions of the PPA do not apply to the Co-op Plan, funding improvement plans and surcharges Co-op Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation determined each year as part of the actuarial valuation of the plan and may change as a result of plan of the plan and may change as a result of plan experience. experience. In addition to the contributions to the Co-op Plan listed In addition to the contributions to the Co-op Plan listed above, total contributions to individually insignificant above, total contributions to individually insignificant We have other contributory defined contribution plans We have other contributory defined contribution plans covering substantially all employees. Total contributions covering substantially all employees. Total contributions by us to these plans were $38.7 million, $35.0 million and by us to these plans were $38.7 million, $35.0 million and $30.1 million, for the years ended August 31, 2023, 2022 $30.1 million, for the years ended August 31, 2023, 2022 and 2021, respectively. and 2021, respectively. NOTE 14 NOTE 14 Segment Reporting Segment Reporting We are an integrated agricultural cooperative, providing We are an integrated agricultural cooperative, providing consists of a U.S. Commodity Futures Trading consists of a U.S. Commodity Futures Trading grain, grain, food, agronomy and energy resources to food, agronomy and energy resources to Commission-regulated futures commission merchant Commission-regulated futures commission merchant businesses and consumers on a global basis. We provide businesses and consumers on a global basis. We provide (“FCM”) for commodities hedging and financial services (“FCM”) for commodities hedging and financial services a wide variety of products and services, from initial a wide variety of products and services, from initial related to crop production. Our nonconsolidated related to crop production. Our nonconsolidated agricultural inputs such as fuels, farm supplies, crop agricultural inputs such as fuels, farm supplies, crop investments in Ventura Foods and Ardent Mills, LLC investments in Ventura Foods and Ardent Mills, LLC nutrients and crop protection products, to agricultural nutrients and crop protection products, to agricultural (“Ardent Mills”) are also included in our Corporate and (“Ardent Mills”) are also included in our Corporate and outputs that include grain and oilseed, processed grain outputs that include grain and oilseed, processed grain Other category. Other category. and oilseed, renewable fuels and food products. We and oilseed, renewable fuels and food products. We define our operating segments in accordance with ASC define our operating segments in accordance with ASC Topic 280, Segment Reporting, to reflect the manner in Topic 280, Segment Reporting, to reflect the manner in which our chief operating decision maker, our Chief which our chief operating decision maker, our Chief Executive Officer, evaluates performance and allocates Executive Officer, evaluates performance and allocates resources resources in managing the business. We have in managing the business. We have aggregated those operating segments into three aggregated those operating segments into three reportable segments: Energy, Ag and Nitrogen reportable segments: Energy, Ag and Nitrogen Production. Production. Our Energy segment produces and provides primarily Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products for the wholesale distribution of petroleum products and transportation of those products. Our Ag segment and transportation of those products. Our Ag segment purchases and further processes or resells grain and purchases and further processes or resells grain and oilseed originated by our country operations business, oilseed originated by our country operations business, by our member cooperatives and by third parties; serves by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment and markets ethanol. Our Nitrogen Production segment consists of our equity method investment in CF consists of our equity method investment in CF Nitrogen and allocated expenses. Our supply agreement Nitrogen and allocated expenses. Our supply agreement with CF Nitrogen entitles us to purchase up to a with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and UAN annually specified quantity of granular urea and UAN annually from CF Nitrogen. Corporate and Other represents our from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily financing and hedging businesses, which primarily Corporate administrative expenses and interest are Corporate administrative expenses and interest are allocated to each reportable segment and Corporate allocated to each reportable segment and Corporate and Other, based on direct use of services, such as and Other, based on direct use of services, such as information technology and legal, and other factors or information technology and legal, and other factors or considerations relevant to the costs incurred. considerations relevant to the costs incurred. Many of our business activities are highly seasonal and Many of our business activities are highly seasonal and our operating results vary throughout the year. Our our operating results vary throughout the year. Our revenues and IBIT generally trend lower during the revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal second fiscal quarter and increase in the third fiscal quarter. For example, in our Ag segment, our country quarter. For example, in our Ag segment, our country operations business generally experiences higher operations business generally experiences higher volumes and revenues during the fall harvest and spring volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher our agronomy business generally experiences higher volumes and revenues during the spring planting volumes and revenues during the spring planting season. Our global grain and processing operations are season. Our global grain and processing operations are subject to fluctuations in volume and revenues based subject to fluctuations in volume and revenues based on producer harvests, world grain prices, demand and on producer harvests, world grain prices, demand and international trade relationships. Our Energy segment international trade relationships. Our Energy segment generally experiences higher volumes and revenues in generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the certain operating areas, such as refined products, in the Definitions for valuation levels are found in Note 16, Fair Partnership and joint venture interests. The net asset Value Measurements. We use the following valuation value of shares held by the plan at year-end is used to dates based on the total plan assets and accumulated benefit obligations. dates based on the total plan assets and accumulated benefit obligations. multiemployer pension plans were immaterial in fiscal 2023, 2022 and 2021. multiemployer pension plans were immaterial in fiscal 2023, 2022 and 2021. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Because the provisions of the PPA do not apply to the Co-op Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience. Because the provisions of the PPA do not apply to the Co-op Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience. In addition to the contributions to the Co-op Plan listed above, total contributions to individually insignificant In addition to the contributions to the Co-op Plan listed above, total contributions to individually insignificant We have other contributory defined contribution plans covering substantially all employees. Total contributions by us to these plans were $38.7 million, $35.0 million and $30.1 million, for the years ended August 31, 2023, 2022 and 2021, respectively. We have other contributory defined contribution plans covering substantially all employees. Total contributions by us to these plans were $38.7 million, $35.0 million and $30.1 million, for the years ended August 31, 2023, 2022 and 2021, respectively. NOTE 14 NOTE 14 Segment Reporting Segment Reporting We are an integrated agricultural cooperative, providing grain, food, agronomy 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 grain and oilseed, processed grain and oilseed, renewable fuels and food products. 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 the business. We have aggregated those operating segments into three reportable segments: Energy, Ag and Nitrogen Production. We are an integrated agricultural cooperative, providing grain, food, agronomy 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 grain and oilseed, processed grain and oilseed, renewable fuels and food products. 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 the business. 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 grain and oilseed 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 of our equity method investment in CF Nitrogen and allocated expenses. Our supply agreement with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and UAN annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily 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 grain and oilseed 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 of our equity method investment in CF Nitrogen and allocated expenses. Our supply agreement with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and UAN annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily consists of a U.S. Commodity Futures Trading Commission-regulated futures commission merchant (“FCM”) for commodities hedging and financial services related to crop production. Our nonconsolidated investments in Ventura Foods and Ardent Mills, LLC (“Ardent Mills”) are also included in our Corporate and Other category. consists of a U.S. Commodity Futures Trading Commission-regulated futures commission merchant (“FCM”) for commodities hedging and financial services related to crop production. Our nonconsolidated investments in Ventura Foods and Ardent Mills, LLC (“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. 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 our operating results vary throughout the year. Our revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing operations are subject to fluctuations in volume and revenues based on producer harvests, world grain prices, demand and international trade relationships. Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing operations are subject to fluctuations in volume and revenues based on producer harvests, world grain prices, demand and international trade relationships. Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the NOTE 13 Benefit Plans, continued methodologies for assets measured at fair value: Common/collective trusts. Common/collective trusts primarily consist of equity and fixed income funds and are valued using other significant observable inputs, including quoted prices for similar investments, interest rates, prepayment speeds, credit risks, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets, adjusted quoted prices on foreign equity securities that were adjusted in accordance with pricing procedures approved by the trust, etc. Common/collective trust investments can be redeemed daily and without restriction. Redemption of the entire investment balance generally requires a 45- to 60-day notice period. The equity funds provide exposure to large-, mid- and small-cap U.S. equities, international large- and small-cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Other investments. Other investments are comprised primarily of investments in various government agency obligations and U.S. Treasury securities which are valued using quoted market prices and classified within Level 1, as well as corporate, foreign government, and municipal issue fixed income marketable securities which are valued using institutional bond or broker quotes along with various other market and industry inputs and value these assets as a practical expedient for fair value. The net asset value is based on the fair value of the underlying assets owned by the trust, minus its liabilities, then divided by the number of units outstanding. Redemptions of these interests generally require a 45- to 60-day notice period. We are one of approximately 400 employers contributing to the Co-op Retirement Plan (“Co-op Plan”), which is a defined benefit plan constituting a multiple employer plan under the Internal Revenue Code of 1986, as amended, and a multiemployer plan under the accounting standards. The risks of participating in these multiemployer plans are different from single- employer plans in the following aspects: • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If we choose to stop participating in the multiemployer plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The withdrawal liability associated with the multiemployer plan was approximately $22.7 million as of August 31, classified within Level 2. 2023. Our participation in the Co-op Plan for the years ended August 31, 2023, 2022 and 2021, is outlined in the table below: (DOLLARS IN THOUSANDS) CONTRIBUTIONS OF CHS PLAN NAME EIN/PLAN NUMBER 2023 2022 2021 IMPOSED BARGAINING AGREEMENT SURCHARGE EXPIRATION DATE OF COLLECTIVE Co-op Retirement Plan 01-0689331/001 $ 1,017 $ 955 $ 1,172 N/A N/A Our contributions for the years stated above did not organizations owned by agricultural producers. In the represent more than 5% of total contributions to the Co-op Plan as indicated in the Co-op Plan’s most recently available annual report (Form 5500). Provisions of the Pension Protection Act of 2006 (“PPA”) do not apply to the Co-op Plan because there is a special exemption for cooperative plans if the plan is Co-op Plan, a zone status determination is not required, and therefore not determined. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employers. The most recent financial statements available in 2023 and 2022 are for the Co-op Plan’s maintained by more than one employer and at least 85% year-end at March 31, 2023 and 2022, respectively. In of the employers are rural cooperatives or cooperative total, the Co-op Plan was at least 80% funded on those 44 2023 CHS Annual Report 2023 CHS Annual Report 45 2023 CHS Annual Report 45 328789_14-57.indd 45 11/28/23 3:21 PM N OT E 14: Seg ment Reporting, continue d N OT E 14: Seg ment Reporting, continu ed spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall 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, grain, oilseed, 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 reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, and general political and economic conditions. Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grain, oilseed, 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 reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, 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 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 consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO, LLC (“TEMCO”). In our Nitrogen Production segment, this consists of our approximate 9% 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 6, Investments, for more information related to our equity method investments. 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 consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO, LLC (“TEMCO”). In our Nitrogen Production segment, this consists of our approximate 9% 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 6, Investments, for more information related to our equity method investments. the elimination of Reconciling amounts represent Reconciling amounts represent the elimination of revenues between segments. Such transactions are revenues between segments. Such transactions are executed at market prices to more accurately evaluate executed at market prices to more accurately evaluate the profitability of the individual business segments. the profitability of the individual business segments. Segment information for the years ended August 31, 2023, 2022 and 2021, is presented in the tables below. Segment information for the years ended August 31, 2023, 2022 and 2021, is presented in the tables below. (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Year ended August 31, 2023 Year ended August 31, 2023 ENERGY ENERGY AG AG NITROGEN NITROGEN PRODUCTION PRODUCTION CORPORATE AND OTHER CORPORATE AND OTHER RECONCILING AMOUNTS RECONCILING AMOUNTS TOTAL TOTAL Revenues, including intersegment Revenues, including intersegment revenues revenues Intersegment revenues Intersegment revenues Revenues, net of intersegment Revenues, net of intersegment revenues revenues $ 10,761,503 $ 10,761,503 $ 35,456,969 $ 35,456,969 $ $ (664,590) (664,590) (31,765) (31,765) $ — — — — $ 82,107 82,107 (14,220) (14,220) $(710,575) $(710,575) $ 45,590,004 $ 45,590,004 710,575 710,575 — — $ 10,096,913 $ 10,096,913 $ 35,425,204 $ 35,425,204 $ $ — $ — $ 67,887 67,887 $ $ — $ 45,590,004 $ 45,590,004 — Operating earnings (loss) Operating earnings (loss) 1,071,492 1,071,492 Interest expense Interest expense Other income Other income 7,672 7,672 (19,456) (19,456) Equity (income) losses from Equity (income) losses from investments investments Income before income taxes Income before income taxes Capital expenditures Capital expenditures Depreciation and amortization Depreciation and amortization Total assets as of August 31, 2023 Total assets as of August 31, 2023 7,833 7,833 $ 1,075,443 $ 1,075,443 $ $ $ 204,003 204,003 $ 254,115 254,115 $ 4,313,240 $ $ $ 346,137 346,137 71,115 71,115 (88,061) (88,061) (48,725) (48,725) $ $ 411,808 411,808 308,690 308,690 $ 166,982 166,982 $ 7,095,283 (73,828) (73,828) 60,090 60,090 (301) (301) 31,487 31,487 — — (32,922) (32,922) — — (37,536) (37,536) 32,922 32,922 (394,678) (394,678) $ 260,760 260,760 $ $ — — — — $ $ $ $ $ $ $ 2,577,391 $ 2,577,391 (254,020) (254,020) $ 259,768 259,768 $ 51,829 51,829 $ 43,518 43,518 $ 4,971,504 — — — — — — — — — — $ $ $ $ $ $ $ $ $ $ $ 1,343,500 1,343,500 137,442 137,442 (112,131) (112,131) (689,590) (689,590) $ 2,007,779 2,007,779 $ 564,522 564,522 $ 464,615 464,615 $ 18,957,418 $ 4,313,240 $ 7,095,283 $ 4,971,504 $ 18,957,418 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ENERGY ENERGY AG AG PRODUCTION PRODUCTION AND OTHER AND OTHER AMOUNTS AMOUNTS TOTAL TOTAL NITROGEN NITROGEN CORPORATE CORPORATE RECONCILING RECONCILING Year ended August 31, 2022 Year ended August 31, 2022 Revenues, including intersegment Revenues, including intersegment revenues revenues $ 10,964,304 $ 10,964,304 $ 37,489,203 $ 37,489,203 $ $ — — $ $ 45,278 45,278 $ (707,119) $ (707,119) $ 47,791,666 $ 47,791,666 Intersegment revenues Intersegment revenues (669,530) (669,530) (28,992) (28,992) — — (8,597) (8,597) 707,119 707,119 — — Revenues, net of intersegment Revenues, net of intersegment revenues revenues $ 10,294,774 $ 10,294,774 $ 37,460,211 $ 37,460,211 $ $ — — $ $ 36,681 36,681 $ $ — — $ 47,791,666 $ 47,791,666 Operating earnings (loss) Operating earnings (loss) 633,832 633,832 588,070 588,070 (55,600) (55,600) (37,216) (37,216) — — 1,129,086 1,129,086 Interest expense Interest expense 6,768 6,768 59,118 59,118 48,110 48,110 (4,945) (4,945) 114,156 114,156 Other (income) expense Other (income) expense (3,474) (3,474) (46,277) (46,277) 11,487 11,487 4,945 4,945 (23,760) (23,760) 5,105 5,105 9,559 9,559 Equity (income) losses from Equity (income) losses from investments investments 13,987 13,987 (82,357) (82,357) (593,182) (593,182) (109,775) (109,775) — — (771,327) (771,327) Income before income taxes Income before income taxes $ $ 616,551 616,551 $ $ 657,586 657,586 $ $ 477,985 477,985 $ $ 57,895 57,895 $ $ — — $ $ 1,810,017 1,810,017 Capital expenditures Capital expenditures 116,136 116,136 203,851 203,851 Depreciation and amortization Depreciation and amortization 250,972 250,972 173,488 173,488 $ $ $ $ — — — — $ $ $ $ 34,457 34,457 37,512 37,512 — — — — $ $ $ $ 354,444 354,444 461,972 461,972 Total assets as of August 31, 2022 Total assets as of August 31, 2022 $ 4,325,121 4,325,121 $ 8,159,191 8,159,191 $ 2,641,604 $ 2,641,604 $ 3,698,891 $ 3,698,891 — — $ 18,824,807 $ 18,824,807 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ENERGY ENERGY AG AG PRODUCTION PRODUCTION AND OTHER AND OTHER AMOUNTS AMOUNTS TOTAL TOTAL NITROGEN NITROGEN CORPORATE CORPORATE RECONCILING RECONCILING Year ended August 31, 2021 Year ended August 31, 2021 Revenues, including intersegment Revenues, including intersegment revenues revenues $ 6,812,478 $ 6,812,478 $ 32,058,064 $ 32,058,064 $ $ — — $ $ 46,476 46,476 $ (468,985) $ (468,985) $ 38,448,033 $ 38,448,033 Intersegment revenues Intersegment revenues (437,217) (437,217) (22,722) (22,722) — — (9,046) (9,046) 468,985 468,985 — — Revenues, net of intersegment Revenues, net of intersegment revenues revenues $ 6,375,261 $ 6,375,261 $ 32,035,342 $ 32,035,342 $ $ — — $ $ 37,430 37,430 $ $ — — $ 38,448,033 $ 38,448,033 Operating earnings (loss) Operating earnings (loss) (15,775) (15,775) 265,362 265,362 (35,432) (35,432) (8,358) (8,358) — — 205,797 205,797 Interest expense Interest expense Other income Other income 1,113 1,113 65,099 65,099 44,461 44,461 1,804 1,804 (7,912) (7,912) 104,565 104,565 (2,819) (2,819) (47,452) (47,452) (2,489) (2,489) (14,711) (14,711) 7,912 7,912 (59,559) (59,559) Equity income from investments Equity income from investments (3,473) (3,473) (50,381) (50,381) (198,439) (198,439) (102,236) (102,236) — — (354,529) (354,529) Income (loss) before income taxes Income (loss) before income taxes $ $ (10,596) (10,596) $ $ 298,096 298,096 $ 121,035 $ 121,035 $ 106,785 $ 106,785 $ $ — — $ $ 515,320 515,320 Capital expenditures Capital expenditures 112,160 112,160 148,770 148,770 Depreciation and amortization Depreciation and amortization 245,273 245,273 182,210 182,210 $ $ $ $ $ $ $ $ $ $ $ $ — — — — $ $ $ 56,864 56,864 $ 34,247 34,247 $ $ $ $ — — — — $ $ $ $ 317,794 317,794 461,730 461,730 We have international sales, which are predominantly in our Ag segment. The following table presents our sales, We have international sales, which are predominantly in our Ag segment. The following table presents our sales, based on the geographic location of the subsidiary making the sale, for the years ended August 31, 2023, 2022 and based on the geographic location of the subsidiary making the sale, for the years ended August 31, 2023, 2022 and 2021: 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) North America(a) North America(a) South America South America Europe, Middle East and Africa (EMEA) Europe, Middle East and Africa (EMEA) Asia Pacific (APAC) Asia Pacific (APAC) Total Total 2023 2023 2022 2022 2021 2021 $ 43,376,177 $ 43,376,177 $ 45,039,981 $ 45,039,981 $ 36,540,178 $ 36,540,178 378,021 378,021 371,493 371,493 242,848 242,848 930,052 930,052 1,093,974 1,093,974 955,605 955,605 905,754 905,754 1,286,218 1,286,218 709,402 709,402 $ 45,590,004 $ 45,590,004 $ 47,791,666 $ 47,791,666 $ 38,448,033 $ 38,448,033 (a) Revenues in North America are substantially all attributed to revenues from the United States. (a) Revenues in North America are substantially all attributed to revenues from the United States. 46 2023 CHS Annual Report 46 2023 CHS Annual Report 2023 CHS Annual Report 47 2023 CHS Annual Report 47 328789_14-57.indd 46 11/28/23 3:21 PM NOTE 14: Segment Reporting, continu ed spring, summer and early fall when gasoline and diesel companies in which we have a controlling interest, a fuel use by agricultural producers is highest and is portion of our business operations are conducted subject to global supply and demand forces. Other through companies in which we hold ownership energy products, such as propane, generally experience interests of 50% or less or do not control the operations. higher volumes and revenues during the winter heating We account for these investments primarily using the and fall 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, grain, oilseed, 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 reliable rail and river transportation networks, outbreaks of disease, government regulations equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidating the revenues and expenses of the entity in our Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO, LLC (“TEMCO”). In our Nitrogen Production segment, this consists of our approximate 9% 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 6, Investments, for more information related to our equity method investments. and policies, global trade disputes, wars and civil unrest, Reconciling amounts represent the elimination of and general political and economic conditions. revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of the individual business segments. While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability Segment information for the years ended August 31, 2023, 2022 and 2021, is presented in the tables below. (DOLLARS IN THOUSANDS) ENERGY NITROGEN AG PRODUCTION CORPORATE AND OTHER RECONCILING AMOUNTS TOTAL Intersegment revenues (664,590) (31,765) (14,220) 710,575 — $ 10,761,503 $ 35,456,969 $ $ 82,107 $(710,575) $ 45,590,004 — — $ 10,096,913 $ 35,425,204 $ — $ 67,887 $ $ 45,590,004 1,071,492 7,672 346,137 71,115 (73,828) 60,090 (301) 31,487 1,343,500 (32,922) 137,442 (19,456) (88,061) — (37,536) 32,922 (112,131) — — — — — — — (689,590) 2,007,779 564,522 464,615 $ $ $ $ $ $ $ 7,833 (48,725) (394,678) (254,020) Income before income taxes $ 1,075,443 411,808 260,760 259,768 Capital expenditures Depreciation and amortization $ $ 204,003 254,115 308,690 166,982 $ $ $ $ $ $ $ $ $ — — 51,829 43,518 Total assets as of August 31, 2023 $ 4,313,240 $ 7,095,283 $ 2,577,391 $ 4,971,504 $ 18,957,418 Year ended August 31, 2023 Revenues, including intersegment revenues Revenues, net of intersegment revenues Operating earnings (loss) Interest expense Other income Equity (income) losses from investments NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ENERGY ENERGY AG AG NITROGEN NITROGEN PRODUCTION PRODUCTION CORPORATE AND OTHER CORPORATE AND OTHER RECONCILING RECONCILING AMOUNTS AMOUNTS TOTAL TOTAL Year ended August 31, 2022 Year ended August 31, 2022 Revenues, including intersegment Revenues, including intersegment revenues revenues $ 10,964,304 $ 10,964,304 $ 37,489,203 $ 37,489,203 $ $ — — $ $ 45,278 45,278 $ (707,119) $ (707,119) $ 47,791,666 $ 47,791,666 Intersegment revenues Intersegment revenues (669,530) (669,530) (28,992) (28,992) — — (8,597) (8,597) 707,119 707,119 — — Revenues, net of intersegment Revenues, net of intersegment revenues revenues $ 10,294,774 $ 10,294,774 $ 37,460,211 $ 37,460,211 $ $ — — $ $ 36,681 36,681 $ $ — — $ 47,791,666 $ 47,791,666 Operating earnings (loss) Operating earnings (loss) 633,832 633,832 588,070 588,070 (55,600) (55,600) (37,216) (37,216) — — 1,129,086 1,129,086 Interest expense Interest expense 6,768 6,768 59,118 59,118 48,110 48,110 Other (income) expense Other (income) expense (3,474) (3,474) (46,277) (46,277) 11,487 11,487 5,105 5,105 9,559 9,559 (4,945) (4,945) 114,156 114,156 4,945 4,945 (23,760) (23,760) Equity (income) losses from Equity (income) losses from investments investments 13,987 13,987 (82,357) (82,357) (593,182) (593,182) (109,775) (109,775) — — (771,327) (771,327) Income before income taxes Income before income taxes $ $ 616,551 616,551 $ $ 657,586 657,586 $ $ 477,985 477,985 $ $ 57,895 57,895 $ $ — — $ $ 1,810,017 1,810,017 Capital expenditures Capital expenditures Depreciation and amortization Depreciation and amortization Total assets as of August 31, 2022 Total assets as of August 31, 2022 $ $ $ $ $ 116,136 116,136 250,972 250,972 $ 4,325,121 4,325,121 $ $ $ $ $ 203,851 203,851 173,488 173,488 $ $ $ $ — — — — $ $ $ $ 34,457 34,457 37,512 37,512 $ 8,159,191 8,159,191 $ 2,641,604 $ 2,641,604 $ 3,698,891 $ 3,698,891 $ $ $ $ $ $ — — — — $ $ $ $ 354,444 354,444 461,972 461,972 — — $ 18,824,807 $ 18,824,807 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) ENERGY ENERGY AG AG NITROGEN NITROGEN PRODUCTION PRODUCTION CORPORATE AND OTHER CORPORATE AND OTHER RECONCILING RECONCILING AMOUNTS AMOUNTS TOTAL TOTAL Year ended August 31, 2021 Year ended August 31, 2021 Revenues, including intersegment Revenues, including intersegment revenues revenues $ 6,812,478 $ 6,812,478 $ 32,058,064 $ 32,058,064 $ $ — — $ $ 46,476 46,476 $ (468,985) $ (468,985) $ 38,448,033 $ 38,448,033 Intersegment revenues Intersegment revenues (437,217) (437,217) (22,722) (22,722) — — (9,046) (9,046) 468,985 468,985 — — Revenues, net of intersegment Revenues, net of intersegment revenues revenues $ 6,375,261 $ 6,375,261 $ 32,035,342 $ 32,035,342 $ $ — — $ $ 37,430 37,430 $ $ — — $ 38,448,033 $ 38,448,033 Operating earnings (loss) Operating earnings (loss) (15,775) (15,775) 265,362 265,362 (35,432) (35,432) (8,358) (8,358) — — 205,797 205,797 Interest expense Interest expense Other income Other income 1,113 1,113 65,099 65,099 44,461 44,461 1,804 1,804 (7,912) (7,912) 104,565 104,565 (2,819) (2,819) (47,452) (47,452) (2,489) (2,489) (14,711) (14,711) 7,912 7,912 (59,559) (59,559) Equity income from investments Equity income from investments (3,473) (3,473) (50,381) (50,381) (198,439) (198,439) (102,236) (102,236) — — (354,529) (354,529) Income (loss) before income taxes Income (loss) before income taxes $ $ (10,596) (10,596) $ $ 298,096 298,096 $ 121,035 $ 121,035 $ 106,785 $ 106,785 $ $ — — $ $ 515,320 515,320 Capital expenditures Capital expenditures Depreciation and amortization Depreciation and amortization $ $ $ $ 112,160 112,160 245,273 245,273 $ $ $ $ 148,770 148,770 182,210 182,210 $ $ $ $ — — — — $ $ $ 56,864 56,864 $ 34,247 34,247 $ $ $ $ — — — — $ $ $ $ 317,794 317,794 461,730 461,730 We have international sales, which are predominantly in our Ag segment. The following table presents our sales, based on the geographic location of the subsidiary making the sale, for the years ended August 31, 2023, 2022 and 2021: We have international sales, which are predominantly in our Ag segment. The following table presents our sales, based on the geographic location of the subsidiary making the sale, for the years ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) North America(a) North America(a) South America South America Europe, Middle East and Africa (EMEA) Europe, Middle East and Africa (EMEA) Asia Pacific (APAC) Asia Pacific (APAC) Total Total 2023 2023 2022 2022 2021 2021 $ 43,376,177 $ 43,376,177 $ 45,039,981 $ 45,039,981 $ 36,540,178 $ 36,540,178 378,021 378,021 371,493 371,493 242,848 242,848 930,052 930,052 1,093,974 1,093,974 955,605 955,605 905,754 905,754 1,286,218 1,286,218 709,402 709,402 $ 45,590,004 $ 45,590,004 $ 47,791,666 $ 47,791,666 $ 38,448,033 $ 38,448,033 (a) Revenues in North America are substantially all attributed to revenues from the United States. (a) Revenues in North America are substantially all attributed to revenues from the United States. 46 2023 CHS Annual Report 2023 CHS Annual Report 47 2023 CHS Annual Report 47 328789_14-57.indd 47 11/28/23 3:21 PM N OT E 14: Seg ment Reporting, continue d N OT E 14: Seg ment Reporting, continu ed Tangible long-lived assets include our property, plant and equipment, finance lease assets and capitalized major maintenance costs. The following table presents tangible long-lived assets by geographical region based on physical location: Tangible long-lived assets include our property, plant and equipment, finance lease assets and capitalized major maintenance costs. The following table presents tangible long-lived assets by geographical region based on physical location: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) United States United States International International Total Total NOTE 15 NOTE 15 2023 2023 2022 2022 $ 5,088,366 $ 5,088,366 $ 4,821,483 $ 4,821,483 70,384 70,384 $ 5,158,750 $ 5,158,750 70,997 70,997 $ 4,892,480 $ 4,892,480 Derivative Financial Instruments and Hedging Activities Derivative Financial Instruments and Hedging Activities We enter into various derivative instruments to manage our exposure to movements primarily associated with agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as cash flow hedges, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied. Rather, the derivative instruments are recorded on our Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Consolidated Statements of Operations. See Note 16, Fair Value Measurements, for additional information. The majority of our exchange We enter into various derivative instruments to manage our exposure to movements primarily associated with agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as cash flow hedges, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied. Rather, the derivative instruments are recorded on our Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Consolidated Statements of Operations. See Note 16, Fair Value Measurements, for additional information. The majority of our exchange traded agricultural commodity futures are settled daily traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned FCM. through CHS Hedging, LLC, our wholly-owned FCM. Derivatives Not Designated as Hedging Instruments The following tables present the gross fair values of derivative assets, derivative liabilities and related margin deposits (cash collateral) recorded on our Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange- traded futures and options contracts and certain OTC contracts, we have elected to report our derivative instruments on a gross basis on our Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet — Offsetting. Derivatives Not Designated as Hedging Instruments The following tables present the gross fair values of derivative assets, derivative liabilities and related margin deposits (cash collateral) recorded on our Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange- traded futures and options contracts and certain OTC contracts, we have elected to report our derivative instruments on a gross basis on our Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet — Offsetting. AUGUST 31, 2023 AUGUST 31, 2023 AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING GROSS AMOUNTS RECOGNIZED GROSS AMOUNTS RECOGNIZED CASH COLLATERAL CASH COLLATERAL DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS NET AMOUNTS NET AMOUNTS $ 280,440 $ 280,440 32,402 32,402 $ 312,842 $ 312,842 $ $ $ $ — — — — — — $ 4,866 4,866 $ $ 275,574 $ 275,574 12,330 12,330 $ 17,196 $ 17,196 20,072 20,072 $ 295,646 $ 295,646 $ 349,131 $ 349,131 $ 1,505 $ 1,505 $ 4,866 4,866 $ $ 342,760 $ 342,760 13,799 13,799 $ 362,930 $ 362,930 — — $ 1,505 $ 1,505 12,330 12,330 $ 17,196 $ 17,196 1,469 1,469 $ 344,229 $ 344,229 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Derivative assets Derivative assets Commodity derivatives Commodity derivatives Foreign exchange derivatives Foreign exchange derivatives Total Total Derivative liabilities Derivative liabilities Commodity derivatives Commodity derivatives Foreign exchange derivatives Foreign exchange derivatives Total Total 48 2023 CHS Annual Report 48 2023 CHS Annual Report 328789_14-57.indd 48 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2022 AUGUST 31, 2022 AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING SHEET BUT ELIGIBLE FOR OFFSETTING GROSS AMOUNTS GROSS AMOUNTS DERIVATIVE DERIVATIVE RECOGNIZED RECOGNIZED CASH COLLATERAL CASH COLLATERAL INSTRUMENTS INSTRUMENTS NET AMOUNTS NET AMOUNTS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Derivative assets Derivative assets Commodity derivatives Commodity derivatives Derivative liabilities Derivative liabilities Commodity derivatives Commodity derivatives Total Total Total Total Foreign exchange derivatives Foreign exchange derivatives 52,923 52,923 — — 8,901 8,901 44,022 44,022 $ 464,167 $ 464,167 $ $ — — $ $ 3,834 3,834 $ 460,333 $ 460,333 $ 517,090 $ 517,090 $ $ — — $ 12,735 $ 12,735 $ 504,355 $ 504,355 Foreign exchange derivatives Foreign exchange derivatives 12,649 12,649 — — 8,901 8,901 3,748 3,748 $ 378,291 $ 378,291 $ 1,424 $ 1,424 $ 12,574 $ 12,574 $ 364,293 $ 364,293 $ 390,940 $ 390,940 $ 1,424 $ 1,424 $ 21,475 $ 21,475 $ 368,041 $ 368,041 Derivative assets and liabilities with maturities of less Derivative assets and liabilities with maturities of less amount of long-term derivative assets recorded on our amount of long-term derivative assets recorded on our than 12 months are recorded in other current assets and than 12 months are recorded in other current assets and Consolidated Balance Sheets as of August 31, 2023 and Consolidated Balance Sheets as of August 31, 2023 and other other current current liabilities, liabilities, respectively, respectively, on on our our 2022, was $1.1 million and $8.5 million, respectively. The 2022, was $1.1 million and $8.5 million, respectively. The Consolidated Balance Sheets. Derivative assets and Consolidated Balance Sheets. Derivative assets and amount of long-term derivative liabilities recorded on amount of long-term derivative liabilities recorded on liabilities with maturities greater than 12 months are liabilities with maturities greater than 12 months are our Consolidated Balance Sheets as of August 31, 2023 our Consolidated Balance Sheets as of August 31, 2023 recorded in other assets and other recorded in other assets and other liabilities, liabilities, and 2022, was $12.6 million and $4.0 million, and 2022, was $12.6 million and $4.0 million, respectively, on our Consolidated Balance Sheets. The respectively, on our Consolidated Balance Sheets. The respectively. respectively. The following table sets forth the pretax (losses) gains on derivatives not accounted for as hedging instruments that The following table sets forth the pretax (losses) gains on derivatives not accounted for as hedging instruments that have been included in our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and have been included in our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and 2021: 2021: DERIVATIVE TYPE DERIVATIVE TYPE (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) LOCATION OF (LOSS) GAIN LOCATION OF (LOSS) GAIN 2023 2023 2022 2022 2021 2021 Commodity derivatives Commodity derivatives Cost of goods sold Cost of goods sold $ (360,937) $ (360,937) $ (568,877) $ (568,877) $ (971,581) $ (971,581) Foreign exchange derivatives Foreign exchange derivatives Cost of goods sold Cost of goods sold (30,898) (30,898) 9,587 9,587 25,277 25,277 Foreign exchange derivatives Foreign exchange derivatives Marketing, general and administrative expenses Marketing, general and administrative expenses (530) (530) Other derivatives Other derivatives Other income Other income — — 577 577 2,057 2,057 1,105 1,105 2,489 2,489 Total Total $ (392,365) $ (392,365) $ (556,656) $ (556,656) $ (942,710) $ (942,710) Commodity Contracts Commodity Contracts When we enter into a commodity purchase or sales When we enter into a commodity purchase or sales commitment, we incur risks related to price changes and commitment, we incur risks related to price changes and performance, including delivery, quality, quantity and performance, including delivery, quality, quantity and shipment period. shipment period. In the event that market prices In the event that market prices decrease, we are exposed to risk of loss for the market decrease, we are exposed to risk of loss for the market value of inventory and purchase contracts with fixed or value of inventory and purchase contracts with fixed or partially fixed prices. Conversely, we are exposed to risk partially fixed prices. Conversely, we are exposed to risk of loss on our fixed- or partially fixed-price sales of loss on our fixed- or partially fixed-price sales Our use of hedging reduces exposure to price volatility Our use of hedging reduces exposure to price volatility by protecting against adverse short-term price by protecting against adverse short-term price movements but also limits the benefits of favorable movements but also limits the benefits of favorable short-term price movements. To reduce the price risk short-term price movements. To reduce the price risk associated with fixed-price commitments, we generally associated with fixed-price commitments, we generally enter into commodity derivative contracts, to the extent enter into commodity derivative contracts, to the extent practical, to achieve a net commodity position within practical, to achieve a net commodity position within the formal position limits we have established and the formal position limits we have established and deemed prudent for each commodity. These contracts deemed prudent for each commodity. These contracts are primarily transacted through our FCM on regulated are primarily transacted through our FCM on regulated contracts in the event that market prices increase. contracts in the event that market prices increase. commodity futures exchanges, but may include OTC commodity futures exchanges, but may include OTC derivative instruments when deemed appropriate. derivative instruments when deemed appropriate. 2023 CHS Annual Report 49 2023 CHS Annual Report 49 NOTE 14: Segment Reporting, continu ed Tangible long-lived assets include our property, plant and equipment, finance lease assets and capitalized major maintenance costs. The following table presents tangible long-lived assets by geographical region based on physical 2023 2022 $ 5,088,366 $ 4,821,483 70,384 70,997 $ 5,158,750 $ 4,892,480 (DOLLARS IN THOUSANDS) location: United States International Total NOTE 15 Derivative Financial Instruments and Hedging Activities We enter into various derivative instruments to manage traded agricultural commodity futures are settled daily our exposure to movements primarily associated with through CHS Hedging, LLC, our wholly-owned FCM. agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as cash flow hedges, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied. Rather, the derivative instruments are recorded on our Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Consolidated Statements of Operations. See Note 16, Fair Value Measurements, for additional information. The majority of our exchange Derivatives Not Designated as Hedging Instruments The following tables present the gross fair values of derivative assets, derivative liabilities and related margin deposits (cash collateral) recorded on our Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange- traded futures and options contracts and certain OTC contracts, we have elected to report our derivative instruments on a gross basis on our Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet — Offsetting. AUGUST 31, 2023 AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING GROSS AMOUNTS DERIVATIVE RECOGNIZED CASH COLLATERAL INSTRUMENTS NET AMOUNTS $ 280,440 32,402 $ 312,842 $ $ $ 4,866 $ 275,574 12,330 20,072 $ 17,196 $ 295,646 — — — — Foreign exchange derivatives 13,799 12,330 1,469 $ 349,131 $ 1,505 $ 4,866 $ 342,760 $ 362,930 $ 1,505 $ 17,196 $ 344,229 (DOLLARS IN THOUSANDS) Derivative assets Commodity derivatives Foreign exchange derivatives Derivative liabilities Commodity derivatives Total Total 48 2023 CHS Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Derivative assets Derivative assets Commodity derivatives Commodity derivatives AUGUST 31, 2022 AUGUST 31, 2022 AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING AMOUNTS NOT OFFSET ON THE CONSOLIDATED BALANCE SHEET BUT ELIGIBLE FOR OFFSETTING GROSS AMOUNTS GROSS AMOUNTS RECOGNIZED RECOGNIZED CASH COLLATERAL CASH COLLATERAL DERIVATIVE DERIVATIVE INSTRUMENTS INSTRUMENTS NET AMOUNTS NET AMOUNTS $ 464,167 $ 464,167 $ $ — — $ $ 3,834 3,834 $ 460,333 $ 460,333 Foreign exchange derivatives Foreign exchange derivatives 52,923 52,923 — — 8,901 8,901 44,022 44,022 Total Total Derivative liabilities Derivative liabilities Commodity derivatives Commodity derivatives $ 517,090 $ 517,090 $ $ — — $ 12,735 $ 12,735 $ 504,355 $ 504,355 $ 378,291 $ 378,291 $ 1,424 $ 1,424 $ 12,574 $ 12,574 $ 364,293 $ 364,293 Foreign exchange derivatives Foreign exchange derivatives 12,649 12,649 — — 8,901 8,901 3,748 3,748 Total Total $ 390,940 $ 390,940 $ 1,424 $ 1,424 $ 21,475 $ 21,475 $ 368,041 $ 368,041 current current Derivative assets and liabilities with maturities of less than 12 months are recorded in other current assets and our other Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Consolidated Balance Sheets. The Derivative assets and liabilities with maturities of less than 12 months are recorded in other current assets and our other Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Consolidated Balance Sheets. The respectively, respectively, liabilities, liabilities, on on amount of long-term derivative assets recorded on our Consolidated Balance Sheets as of August 31, 2023 and 2022, was $1.1 million and $8.5 million, respectively. The amount of long-term derivative liabilities recorded on our Consolidated Balance Sheets as of August 31, 2023 and 2022, was $12.6 million and $4.0 million, respectively. amount of long-term derivative assets recorded on our Consolidated Balance Sheets as of August 31, 2023 and 2022, was $1.1 million and $8.5 million, respectively. The amount of long-term derivative liabilities recorded on our Consolidated Balance Sheets as of August 31, 2023 and 2022, was $12.6 million and $4.0 million, respectively. The following table sets forth the pretax (losses) gains on derivatives not accounted for as hedging instruments that have been included in our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and 2021: The following table sets forth the pretax (losses) gains on derivatives not accounted for as hedging instruments that have been included in our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and 2021: DERIVATIVE TYPE (DOLLARS IN THOUSANDS) DERIVATIVE TYPE (DOLLARS IN THOUSANDS) LOCATION OF (LOSS) GAIN LOCATION OF (LOSS) GAIN 2023 2023 2022 2022 2021 2021 Commodity derivatives Commodity derivatives Cost of goods sold Cost of goods sold $ (360,937) $ (360,937) $ (568,877) $ (568,877) $ (971,581) $ (971,581) Foreign exchange derivatives Foreign exchange derivatives Cost of goods sold Cost of goods sold (30,898) (30,898) 9,587 9,587 25,277 25,277 Foreign exchange derivatives Foreign exchange derivatives Marketing, general and administrative expenses Marketing, general and administrative expenses (530) (530) Other derivatives Other derivatives Other income Other income — — 577 577 2,057 2,057 1,105 1,105 2,489 2,489 Total Total $ (392,365) $ (392,365) $ (556,656) $ (556,656) $ (942,710) $ (942,710) Commodity Contracts Commodity Contracts When we enter into a commodity purchase or sales When we enter into a commodity purchase or sales commitment, we incur risks related to price changes and commitment, we incur risks related to price changes and performance, including delivery, quality, quantity and performance, including delivery, quality, quantity and shipment period. In the event that market prices shipment period. In the event that market prices decrease, we are exposed to risk of loss for the market decrease, we are exposed to risk of loss for the market value of inventory and purchase contracts with fixed or value of inventory and purchase contracts with fixed or partially fixed prices. Conversely, we are exposed to risk partially fixed prices. Conversely, we are exposed to risk of loss on our fixed- or partially fixed-price sales of loss on our fixed- or partially fixed-price sales contracts in the event that market prices increase. contracts in the event that market prices increase. Our use of hedging reduces exposure to price volatility by protecting against adverse short-term price movements but also limits the benefits of favorable short-term price movements. To reduce the price risk associated with fixed-price commitments, we generally enter into commodity derivative contracts, to the extent practical, to achieve a net commodity position within the formal position limits we have established and deemed prudent for each commodity. These contracts are primarily transacted through our FCM on regulated commodity futures exchanges, but may include OTC derivative instruments when deemed appropriate. Our use of hedging reduces exposure to price volatility by protecting against adverse short-term price movements but also limits the benefits of favorable short-term price movements. To reduce the price risk associated with fixed-price commitments, we generally enter into commodity derivative contracts, to the extent practical, to achieve a net commodity position within the formal position limits we have established and deemed prudent for each commodity. These contracts are primarily transacted through our FCM on regulated commodity futures exchanges, but may include OTC derivative instruments when deemed appropriate. 328789_14-57.indd 49 11/28/23 3:21 PM 2023 CHS Annual Report 49 2023 CHS Annual Report 49 N OT E 15: Derivative Financial Instruments and Hedging Act ivit ies, continue d N OT E 15: Derivative Financial Instruments and Hedging Act ivit ies, continue d These contracts are recorded at fair values based on quotes listed on regulated commodity exchanges or the market prices of the underlying products listed on the exchanges, except that certain contracts are accounted for as normal purchase and normal sales transactions. For commodities where there is no liquid derivative contract, risk is managed through the use of forward sales contracts, other pricing arrangements and, to some extent, futures contracts in highly correlated commodities. These contracts are economic hedges of price risk, but are not designated as hedging instruments for accounting purposes. Unrealized gains and losses on these contracts are recognized in cost of goods sold in our Consolidated Statements of Operations. These contracts are recorded at fair values based on quotes listed on regulated commodity exchanges or the market prices of the underlying products listed on the exchanges, except that certain contracts are accounted for as normal purchase and normal sales transactions. For commodities where there is no liquid derivative contract, risk is managed through the use of forward sales contracts, other pricing arrangements and, to some extent, futures contracts in highly correlated commodities. These contracts are economic hedges of price risk, but are not designated as hedging instruments for accounting purposes. Unrealized gains and losses on these contracts are recognized in cost of sold in our Consolidated Statements of goods Operations. When a futures position is established, initial margin When a futures position is established, initial margin must be deposited with the applicable exchange or must be deposited with the applicable exchange or broker. The amount of margin required varies by broker. The amount of margin required varies by commodity and is set by the applicable exchange at its commodity and is set by the applicable exchange at its sole discretion. If the market price relative to a short sole discretion. If the market price relative to a short futures position increases, an additional margin deposit futures position increases, an additional margin deposit would be required. Similarly, a margin deposit would be would be required. Similarly, a margin deposit would be required if the market price relative to a long futures required if the market price relative to a long futures position decreases. Conversely, if the market price position decreases. Conversely, if the market price increases relative to a long futures position or decreases increases relative to a long futures position or decreases relative to a short futures position, margin deposits may relative to a short futures position, margin deposits may be returned by the applicable exchange or broker. be returned by the applicable exchange or broker. Our policy is to manage our commodity price risk exposure according to internal policies and in alignment with our tolerance for risk. It is our policy that our profitability should come from operations, primarily derived from margins on products sold and grain merchandised, not from hedging transactions. At any one time, inventory and purchase contracts for delivery to us may be substantial. We have risk management policies and procedures that include established net physical position limits. These limits are defined for each commodity and business unit, and business units may include both trader and management limits as appropriate. The limits policy is overseen at a high level by our corporate middle office and compliance team, with being implemented within each individual business unit to ensure any limits overage is explained and exposures reduced, or a temporary limit increase is established if needed. The position limits are reviewed at least annually with our senior leadership and Board of Directors. We monitor current market conditions and Our policy is to manage our commodity price risk exposure according to internal policies and in alignment with our tolerance for risk. It is our policy that our profitability should come from operations, primarily derived from margins on products sold and grain merchandised, not from hedging transactions. At any one time, inventory and purchase contracts for delivery to us may be substantial. We have risk management policies and procedures that include established net physical position limits. These limits are defined for each commodity and business unit, and business units may include both trader and management limits as appropriate. The limits policy is overseen at a high level by our corporate middle office and compliance team, with being implemented within each individual business unit to ensure any limits overage is explained and exposures reduced, or a temporary limit increase is established if needed. The position limits are reviewed at least annually with our senior leadership and Board of Directors. We monitor current market conditions and day-to-day monitoring day-to-day monitoring procedures procedures may expand or reduce our net position limits or procedures in response to changes in those conditions. may expand or reduce our net position limits or procedures in response to changes in those conditions. The use of hedging instruments does not protect against nonperformance by counterparties to cash contracts. We evaluate counterparty exposure by reviewing contracts and adjusting the values to reflect potential nonperformance. Risk of nonperformance by counterparties includes the inability to perform because of a counterparty’s financial condition and the risk that the counterparty will refuse to perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices. We manage these risks by entering into fixed- price purchase and sales contracts with preapproved producers and by establishing appropriate limits for individual suppliers. Fixed-price contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. Regarding our use of derivatives, we transact in exchange traded instruments or enter into over-the-counter derivatives that primarily clear through our FCM, which limits our counterparty exposure relative to hedging activities. Historically, we have of nonperformance on open contracts. Accordingly, we only adjust the estimated fair values of specifically identified contracts for nonperformance. Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. The use of hedging instruments does not protect against nonperformance by counterparties to cash contracts. We evaluate counterparty exposure by reviewing contracts and adjusting the values to reflect potential nonperformance. Risk of nonperformance by counterparties includes the inability to perform because of a counterparty’s financial condition and the risk that the counterparty will refuse to perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices. We manage these risks by entering into fixed- price purchase and sales contracts with preapproved producers and by establishing appropriate limits for individual suppliers. Fixed-price contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. Regarding our use of derivatives, we transact in exchange traded instruments or enter into over-the-counter derivatives that primarily clear through our FCM, which limits our counterparty exposure relative to hedging activities. Historically, we have of nonperformance on open contracts. Accordingly, we only adjust the estimated fair values of specifically identified contracts for nonperformance. Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. experienced experienced significant significant events events not not As of August 31, 2023 and 2022, we had outstanding As of August 31, 2023 and 2022, we had outstanding commodity futures and options contracts that were commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of contracts related to physical purchases and sales of commodities. The table below presents the notional commodities. The table below presents the notional volumes for all outstanding commodity contracts: volumes for all outstanding commodity contracts: DERIVATIVE TYPE DERIVATIVE TYPE (UNITS IN (UNITS IN THOUSANDS) THOUSANDS) Grain and oilseed Grain and oilseed (bushels) (bushels) Energy products Energy products (barrels) (barrels) Processed grain Processed grain and oilseed and oilseed (tons) (tons) Crop nutrients Crop nutrients (tons) (tons) Ocean freight Ocean freight (metric tons) (metric tons) Natural gas (MMBtu) Natural gas (MMBtu) 2023 2023 LONG LONG SHORT SHORT 2022 2022 LONG LONG SHORT SHORT The following table presents the pretax (losses) gains relating to our existing cash flow hedges that were reclassified The following table presents the pretax (losses) gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Consolidated Statements of Operations for the years ended from accumulated other comprehensive loss into our Consolidated Statements of Operations for the years ended 506,654 506,654 630,803 630,803 609,300 609,300 773,239 773,239 11,839 11,839 8,085 8,085 10,541 10,541 5,706 5,706 7,380 7,380 9,437 9,437 1,191 1,191 4,182 4,182 70 40 70 40 460 460 10 10 — — — — 23 60 23 60 420 420 22 22 — — — — NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Foreign Exchange Contracts Foreign Exchange Contracts purchases in our Energy segment. We also designate purchases in our Energy segment. We also designate We conduct a substantial portion of our business in U.S. We conduct a substantial portion of our business in U.S. certain pay-variable, receive-fixed, cash-settled swaps certain pay-variable, receive-fixed, cash-settled swaps dollars, but we are exposed to risks relating to foreign dollars, but we are exposed to risks relating to foreign as cash flow hedges of future refined product sales. as cash flow hedges of future refined product sales. currency fluctuations primarily due to global grain currency fluctuations primarily due to global grain These hedging instruments and the related hedged These hedging instruments and the related hedged marketing transactions in South America, the Asia marketing transactions in South America, the Asia Pacific region and Europe, and purchases of products Pacific region and Europe, and purchases of products from Canada. We use foreign currency derivative from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate instruments to mitigate the impact of exchange rate fluctuations. Although CHS has some risk exposure fluctuations. Although CHS has some risk exposure relating to foreign currency transactions, a larger impact relating to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of to the same products offered by alternative sources of world supply. The notional amount of our foreign world supply. The notional amount of our foreign exchange derivative contracts was $1.9 billion as of exchange derivative contracts was $1.9 billion as of August 31, 2023 and 2022. August 31, 2023 and 2022. Derivatives Designated as Cash Flow Hedging Derivatives Designated as Cash Flow Hedging Strategies Strategies items are exposed to significant market price risk and items are exposed to significant market price risk and potential volatility. As part of our risk management potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product future crude oil needs and the resulting refined product output output based based on on prevailing prevailing futures futures prices, prices, management’s expectations about future commodity management’s expectations about future commodity price changes and our risk appetite. We may also elect price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other management strategy. Amounts recorded in other comprehensive comprehensive income income for for these dedesignated these dedesignated derivative instruments remain in other comprehensive derivative instruments remain in other comprehensive income and are recognized in earnings in the period in income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of which the underlying transactions affect earnings. As of August 31, 2023 and 2022, the aggregate notional August 31, 2023 and 2022, the aggregate notional Certain pay-fixed, receive-variable, cash-settled swaps Certain pay-fixed, receive-variable, cash-settled swaps amount of cash flow hedges was 4.1 million and amount of cash flow hedges was 4.1 million and are designated as cash flow hedges of future crude oil are designated as cash flow hedges of future crude oil 3.8 million barrels, respectively. 3.8 million barrels, respectively. The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Consolidated Balance Sheets in which they are recorded as of August 31, 2023 and 2022: and the line items on our Consolidated Balance Sheets in which they are recorded as of August 31, 2023 and 2022: BALANCE SHEET LOCATION BALANCE SHEET LOCATION (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) DERIVATIVE ASSETS DERIVATIVE ASSETS DERIVATIVE LIABILITIES DERIVATIVE LIABILITIES BALANCE SHEET LOCATION BALANCE SHEET LOCATION 2023 2023 2022 2022 (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 Other current assets Other current assets $ 8,395 $ 8,395 $ 27,154 $ 27,154 Other current liabilities Other current liabilities $ 5,345 $ 5,345 $ 11,818 $ 11,818 The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the years ended August 31, 2023, 2022 and 2021: for the years ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Commodity derivatives Commodity derivatives 2023 2023 2022 2022 2021 2021 $ (12,285) $ (12,285) $ (2,071) $ (2,071) $ (7,824) $ (7,824) August 31, 2023, 2022 and 2021: August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Commodity derivatives Commodity derivatives LOCATION OF (LOSS) GAIN LOCATION OF (LOSS) GAIN 2023 2023 2022 2022 2021 2021 Cost of goods sold Cost of goods sold $ (14,853) $ (14,853) $ (6,254) $ (6,254) $ 21,262 $ 21,262 50 2023 CHS Annual Report 50 2023 CHS Annual Report 2023 CHS Annual Report 51 2023 CHS Annual Report 51 328789_14-57.indd 50 11/28/23 3:21 PM NOTE 15: Derivative Financial Instruments a nd H edging Activities, co ntinue d These contracts are recorded at fair values based on may expand or reduce our net position limits or quotes listed on regulated commodity exchanges or the procedures in response to changes in those conditions. market prices of the underlying products listed on the exchanges, except that certain contracts are accounted for as normal purchase and normal sales transactions. For commodities where there is no liquid derivative contract, risk is managed through the use of forward The use of hedging instruments does not protect against nonperformance by counterparties to cash contracts. We evaluate counterparty exposure by reviewing contracts and adjusting the values to reflect potential nonperformance. Risk of nonperformance by sales contracts, other pricing arrangements and, to counterparties includes the inability to perform because some extent, futures contracts in highly correlated of a counterparty’s financial condition and the risk that commodities. These contracts are economic hedges of the counterparty will refuse to perform on a contract price risk, but are not designated as hedging instruments for accounting purposes. Unrealized gains and losses on these contracts are recognized in cost of goods sold in our Consolidated Statements of Operations. When a futures position is established, initial margin must be deposited with the applicable exchange or broker. The amount of margin required varies by commodity and is set by the applicable exchange at its sole discretion. If the market price relative to a short futures position increases, an additional margin deposit would be required. Similarly, a margin deposit would be required if the market price relative to a long futures position decreases. Conversely, if the market price increases relative to a long futures position or decreases relative to a short futures position, margin deposits may be returned by the applicable exchange or broker. Our policy is to manage our commodity price risk exposure according to internal policies and in alignment with our tolerance for risk. It is our policy that our profitability should come from operations, primarily derived from margins on products sold and grain merchandised, not from hedging transactions. At any one time, inventory and purchase contracts for delivery to us may be substantial. We have risk management policies and procedures that include established net physical position limits. These limits are defined for each commodity and business unit, and business units may include both trader and management limits as appropriate. The limits policy is overseen at a high level by our corporate middle office and compliance team, with day-to-day monitoring procedures being implemented within each individual business unit to ensure any limits overage is explained and exposures reduced, or a temporary limit increase is established if needed. The position limits are reviewed at least annually with our senior leadership and Board of Directors. We monitor current market conditions and during periods of price fluctuations where contract prices are significantly different from the current market prices. We manage these risks by entering into fixed- price purchase and sales contracts with preapproved producers and by establishing appropriate limits for individual suppliers. Fixed-price contracts are entered into with customers of acceptable creditworthiness, as internally evaluated. Regarding our use of derivatives, we transact in exchange traded instruments or enter into over-the-counter derivatives that primarily clear through our FCM, which limits our counterparty exposure relative to hedging activities. Historically, we have not experienced significant events of nonperformance on open contracts. Accordingly, we only adjust the estimated fair values of specifically identified contracts for nonperformance. Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. As of August 31, 2023 and 2022, we had outstanding commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities. The table below presents the notional volumes for all outstanding commodity contracts: 2023 2022 LONG SHORT LONG SHORT (bushels) 506,654 630,803 609,300 773,239 11,839 8,085 10,541 5,706 7,380 9,437 1,191 4,182 70 40 460 10 — — 23 60 420 22 — — DERIVATIVE TYPE (UNITS IN THOUSANDS) Grain and oilseed Energy products (barrels) Processed grain and oilseed (tons) Crop nutrients (tons) Ocean freight (metric tons) Natural gas (MMBtu) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Foreign Exchange Contracts We conduct a substantial portion of our business in U.S. dollars, but we are exposed to risks relating to foreign currency fluctuations primarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe, and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although CHS has some risk exposure relating to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional amount of our foreign exchange derivative contracts was $1.9 billion as of August 31, 2023 and 2022. Foreign Exchange Contracts We conduct a substantial portion of our business in U.S. dollars, but we are exposed to risks relating to foreign currency fluctuations primarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe, and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although CHS has some risk exposure relating to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional amount of our foreign exchange derivative contracts was $1.9 billion as of August 31, 2023 and 2022. Derivatives Designated as Cash Flow Hedging Strategies Certain pay-fixed, receive-variable, cash-settled swaps are designated as cash flow hedges of future crude oil Derivatives Designated as Cash Flow Hedging Strategies Certain pay-fixed, receive-variable, cash-settled swaps are designated as cash flow hedges of future crude oil on on based based prevailing purchases in our Energy segment. We also designate certain pay-variable, receive-fixed, cash-settled swaps as cash flow hedges of future refined product sales. These hedging instruments and the related hedged items are exposed to significant market price risk and potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product output prices, management’s expectations about future commodity price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other comprehensive these dedesignated derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of August 31, 2023 and 2022, the aggregate notional amount of cash flow hedges was 4.1 million and 3.8 million barrels, respectively. purchases in our Energy segment. We also designate certain pay-variable, receive-fixed, cash-settled swaps as cash flow hedges of future refined product sales. These hedging instruments and the related hedged items are exposed to significant market price risk and potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product output prices, prevailing management’s expectations about future commodity price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other comprehensive these dedesignated for derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of August 31, 2023 and 2022, the aggregate notional amount of cash flow hedges was 4.1 million and 3.8 million barrels, respectively. income income futures futures for The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Consolidated Balance Sheets in which they are recorded as of August 31, 2023 and 2022: The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Consolidated Balance Sheets in which they are recorded as of August 31, 2023 and 2022: BALANCE SHEET LOCATION (DOLLARS IN THOUSANDS) BALANCE SHEET LOCATION (DOLLARS IN THOUSANDS) DERIVATIVE ASSETS DERIVATIVE ASSETS 2023 2023 2022 2022 BALANCE SHEET LOCATION (DOLLARS IN THOUSANDS) BALANCE SHEET LOCATION (DOLLARS IN THOUSANDS) DERIVATIVE LIABILITIES DERIVATIVE LIABILITIES 2023 2023 2022 2022 Other current assets Other current assets $ 8,395 $ 8,395 $ 27,154 $ 27,154 Other current liabilities Other current liabilities $ 5,345 $ 5,345 $ 11,818 $ 11,818 The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the years ended August 31, 2023, 2022 and 2021: The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the years ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Commodity derivatives Commodity derivatives 2023 2023 2022 2022 2021 2021 $ (12,285) $ (12,285) $ (2,071) $ (2,071) $ (7,824) $ (7,824) The following table presents the pretax (losses) gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and 2021: The following table presents the pretax (losses) gains relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Consolidated Statements of Operations for the years ended August 31, 2023, 2022 and 2021: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Commodity derivatives Commodity derivatives LOCATION OF (LOSS) GAIN LOCATION OF (LOSS) GAIN 2023 2023 2022 2022 2021 2021 Cost of goods sold Cost of goods sold $ (14,853) $ (14,853) $ (6,254) $ (6,254) $ 21,262 $ 21,262 50 2023 CHS Annual Report 2023 CHS Annual Report 51 2023 CHS Annual Report 51 328789_14-57.indd 51 11/28/23 3:21 PM NOTE 16 NOTE 16 Fair Value Measurements Fair Value Measurements ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We determine fair values of derivative instruments and certain other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant instruments within those levels is as follows: We determine fair values of derivative instruments and certain other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant instruments within those levels is as follows: Level 1. Values are based on unadjusted quoted prices in active markets for identical assets or liabilities. These assets and liabilities may include exchange-traded investments, derivative segregated investments and marketable securities. Level 1. Values are based on unadjusted quoted prices in active markets for identical assets or liabilities. These assets and liabilities may include exchange-traded investments, derivative segregated investments and marketable securities. instruments, instruments, rabbi rabbi trust trust by by observable market observable market Level 2. Values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated for substantially the full term of the assets or liabilities. These assets and liabilities include interest rate, foreign exchange and commodity swaps; forward commodity contracts with a fixed price component; and other OTC derivatives whose values are determined with inputs that are based on exchange traded prices, adjusted for location-specific inputs that are primarily observable in the market or can be derived principally from, or corroborated by, observable market data. Level 2. Values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated for substantially the full term of the assets or liabilities. These assets and liabilities include interest rate, foreign exchange and commodity swaps; forward commodity contracts with a fixed price component; and other OTC derivatives whose values are determined with inputs that are based on exchange traded prices, adjusted for location-specific inputs that are primarily observable in the market or can be derived principally from, or corroborated by, observable market data. data data Level 3. Values are generated from unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. These unobservable inputs would reflect our own estimates of assumptions that market participants would use in pricing related assets or liabilities. Valuation techniques might include the use of pricing models, discounted cash flow models or similar techniques. Level 3. Values are generated from unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. These unobservable inputs would reflect our own estimates of assumptions that market participants would use in pricing related assets or liabilities. Valuation techniques might include the use of pricing models, discounted cash flow models or similar techniques. The following tables present assets and liabilities, included on our Consolidated Balance Sheets, that are recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine these fair values. Assets and liabilities are classified in their entirety based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. The following tables present assets and liabilities, included on our Consolidated Balance Sheets, that are recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine these fair values. Assets and liabilities are classified in their entirety based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recurring fair value measurements as of August 31, 2023 and 2022, are as follows: Recurring fair value measurements as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Assets Assets Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Segregated investments and marketable Segregated investments and marketable securities securities Other assets Other assets Total Total Liabilities Liabilities Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Total Total (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Assets Assets Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Segregated investments and marketable Segregated investments and marketable securities securities Other assets Other assets Total Total Liabilities Liabilities Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Total Total 2023 2023 QUOTED PRICES IN QUOTED PRICES IN SIGNIFICANT OTHER SIGNIFICANT OTHER SIGNIFICANT SIGNIFICANT ACTIVE MARKETS ACTIVE MARKETS OBSERVABLE OBSERVABLE UNOBSERVABLE UNOBSERVABLE FOR IDENTICAL ASSETS FOR IDENTICAL ASSETS (LEVEL 1) (LEVEL 1) INPUTS INPUTS (LEVEL 2) (LEVEL 2) INPUTS INPUTS (LEVEL 3) (LEVEL 3) TOTAL TOTAL $ $ 5,344 5,344 $ 283,491 $ 283,491 $ — $ 288,835 $ — $ 288,835 — — 32,402 32,402 — — 32,402 32,402 225,715 225,715 89,592 89,592 — — — — — — — — 225,715 225,715 89,592 89,592 $ 320,651 $ 320,651 $ 315,893 $ 315,893 $ — $ 636,544 $ — $ 636,544 $ $ 7,501 7,501 $ 346,975 $ 346,975 $ — $ 354,476 $ — $ 354,476 — — 13,799 13,799 — — 13,799 13,799 $ $ 7,501 7,501 $ 360,774 $ 360,774 $ — $ 368,275 $ — $ 368,275 2022 2022 QUOTED PRICES IN QUOTED PRICES IN SIGNIFICANT OTHER SIGNIFICANT OTHER SIGNIFICANT SIGNIFICANT ACTIVE MARKETS ACTIVE MARKETS OBSERVABLE OBSERVABLE UNOBSERVABLE UNOBSERVABLE FOR IDENTICAL ASSETS FOR IDENTICAL ASSETS (LEVEL 1) (LEVEL 1) INPUTS INPUTS (LEVEL 2) (LEVEL 2) INPUTS INPUTS (LEVEL 3) (LEVEL 3) TOTAL TOTAL $ $ 1,161 1,161 $ 490,160 $ 490,160 $ — $ 491,321 $ — $ 491,321 — — 52,923 52,923 — — 52,923 52,923 238,124 238,124 58,280 58,280 — — — — — — — — 238,124 238,124 58,280 58,280 $ 297,565 $ 297,565 $ 543,083 $ 543,083 $ — $ 840,648 $ — $ 840,648 $ 10,256 $ 10,256 $ 379,883 $ 379,883 $ — $ 390,139 $ — $ 390,139 — — 12,649 12,649 — — 12,649 12,649 $ 10,256 $ 10,256 $ 392,532 $ 392,532 $ — $ 402,788 $ — $ 402,788 Commodity and foreign currency derivatives. Exchange- Commodity and foreign currency derivatives. Exchange- transactions in either listed or OTC markets. Changes in the transactions in either listed or OTC markets. Changes in the traded futures and options contracts are valued based on traded futures and options contracts are valued based on fair values of these contracts are recognized in our fair values of these contracts are recognized in our unadjusted quoted prices in active markets and are unadjusted quoted prices in active markets and are Consolidated Statements of Operations as a component of Consolidated Statements of Operations as a component of classified within Level 1. Our forward commodity purchase classified within Level 1. Our forward commodity purchase cost of goods sold. cost of goods sold. and sales contracts with fixed-price components, select and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are ocean freight contracts and other OTC derivatives are Segregated investments and marketable securities and Segregated investments and marketable securities and determined using inputs that are generally based on determined using inputs that are generally based on other other assets. Our assets. Our segregated investments segregated investments and and exchange traded prices and/or recent market bids and exchange traded prices and/or recent market bids and marketable securities and other assets are comprised marketable securities and other assets are comprised offers, offers, including location-specific adjustments, and are including location-specific adjustments, and are primarily of primarily of investments investments in various government in various government classified within Level 2. Location-specific inputs are driven classified within Level 2. Location-specific inputs are driven agencies, U.S. Treasury securities, money market funds agencies, U.S. Treasury securities, money market funds by local market supply and demand and are generally by local market supply and demand and are generally and rabbi trust assets, which are valued using quoted and rabbi trust assets, which are valued using quoted based on broker or dealer quotations or market based on broker or dealer quotations or market market prices and classified within Level 1. market prices and classified within Level 1. 52 2023 CHS Annual Report 52 2023 CHS Annual Report 2023 CHS Annual Report 53 2023 CHS Annual Report 53 328789_14-57.indd 52 11/28/23 3:21 PM Level 3. Values are generated from unobservable Level 3. Values are generated from unobservable inputs that are supported by little or no market activity inputs that are supported by little or no market activity and that are a significant component of the fair value of and that are a significant component of the fair value of the assets or liabilities. These unobservable inputs would the assets or liabilities. These unobservable inputs would reflect our own estimates of assumptions that market reflect our own estimates of assumptions that market participants would use in pricing related assets or participants would use in pricing related assets or liabilities. Valuation techniques might include the use of liabilities. Valuation techniques might include the use of pricing models, discounted cash flow models or similar pricing models, discounted cash flow models or similar techniques. techniques. The following tables present assets and liabilities, The following tables present assets and liabilities, included on our Consolidated Balance Sheets, that are included on our Consolidated Balance Sheets, that are recognized at fair value on a recurring basis and indicate recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine these fair the fair value hierarchy utilized to determine these fair values. Assets and liabilities are classified in their values. Assets and liabilities are classified in their entirety based on the lowest level of input that is a entirety based on the lowest level of input that is a significant component of the fair value measurement. significant component of the fair value measurement. The lowest level of input is considered Level 3. Our The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to assessment of the significance of a particular input to the fair value measurement requires judgment and may the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities affect the classification of fair value assets and liabilities within the fair value hierarchy levels. within the fair value hierarchy levels. NOTE 16 NOTE 16 Fair Value Measurements Fair Value Measurements ASC Topic 820, Fair Value Measurement, defines fair ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received for an asset or value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in or most advantageous market for the asset or liability in an orderly transaction between market participants on an orderly transaction between market participants on the measurement date. the measurement date. We determine fair values of derivative instruments and We determine fair values of derivative instruments and certain other assets, based on the fair value hierarchy certain other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing assumptions market participants would use in pricing the asset or liability based on the best information the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant measure fair value, and our assessment of relevant instruments within those levels is as follows: instruments within those levels is as follows: Level 1. Values are based on unadjusted quoted prices Level 1. Values are based on unadjusted quoted prices in active markets for identical assets or liabilities. These in active markets for identical assets or liabilities. These assets and liabilities may include exchange-traded assets and liabilities may include exchange-traded derivative derivative instruments, instruments, rabbi rabbi trust trust investments, investments, segregated investments and marketable securities. segregated investments and marketable securities. Level 2. Values are based on quoted prices for similar Level 2. Values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be not active, or other inputs that are observable or can be corroborated corroborated by by observable market observable market data data for for substantially the full term of the assets or liabilities. substantially the full term of the assets or liabilities. These assets and liabilities include interest rate, foreign These assets and liabilities include interest rate, foreign exchange and commodity swaps; forward commodity exchange and commodity swaps; forward commodity contracts with a fixed price component; and other OTC contracts with a fixed price component; and other OTC derivatives whose values are determined with inputs derivatives whose values are determined with inputs that are based on exchange traded prices, adjusted for that are based on exchange traded prices, adjusted for location-specific inputs that are primarily observable in location-specific inputs that are primarily observable in the market or can be derived principally from, or the market or can be derived principally from, or corroborated by, observable market data. corroborated by, observable market data. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recurring fair value measurements as of August 31, 2023 and 2022, are as follows: Recurring fair value measurements as of August 31, 2023 and 2022, are as follows: 2023 2023 QUOTED PRICES IN QUOTED PRICES IN ACTIVE MARKETS ACTIVE MARKETS FOR IDENTICAL ASSETS FOR IDENTICAL ASSETS (LEVEL 1) (LEVEL 1) SIGNIFICANT OTHER SIGNIFICANT OTHER OBSERVABLE OBSERVABLE INPUTS INPUTS (LEVEL 2) (LEVEL 2) SIGNIFICANT SIGNIFICANT UNOBSERVABLE UNOBSERVABLE INPUTS INPUTS (LEVEL 3) (LEVEL 3) TOTAL TOTAL $ $ 5,344 5,344 $ 283,491 $ 283,491 $ — $ 288,835 $ — $ 288,835 — — 32,402 32,402 — — 32,402 32,402 225,715 225,715 89,592 89,592 — — — — — — — — 225,715 225,715 89,592 89,592 $ 320,651 $ 320,651 $ 315,893 $ 315,893 $ — $ 636,544 $ — $ 636,544 $ $ 7,501 7,501 $ 346,975 $ 346,975 $ — $ 354,476 $ — $ 354,476 — — 13,799 13,799 — — 13,799 13,799 $ $ 7,501 7,501 $ 360,774 $ 360,774 $ — $ 368,275 $ — $ 368,275 2022 2022 QUOTED PRICES IN QUOTED PRICES IN ACTIVE MARKETS ACTIVE MARKETS FOR IDENTICAL ASSETS FOR IDENTICAL ASSETS (LEVEL 1) (LEVEL 1) SIGNIFICANT OTHER SIGNIFICANT OTHER OBSERVABLE OBSERVABLE INPUTS INPUTS (LEVEL 2) (LEVEL 2) SIGNIFICANT SIGNIFICANT UNOBSERVABLE UNOBSERVABLE INPUTS INPUTS (LEVEL 3) (LEVEL 3) TOTAL TOTAL (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Assets Assets Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Segregated investments and marketable Segregated investments and marketable securities securities Other assets Other assets Total Total Liabilities Liabilities Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Total Total (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Assets Assets Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Segregated investments and marketable Segregated investments and marketable securities securities Other assets Other assets Total Total Liabilities Liabilities Commodity derivatives Commodity derivatives Foreign currency derivatives Foreign currency derivatives Total Total Commodity and foreign currency derivatives. Exchange- traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments, and are classified within Level 2. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market Commodity and foreign currency derivatives. Exchange- traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments, and are classified within Level 2. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market $ $ 1,161 1,161 $ 490,160 $ 490,160 $ — $ 491,321 $ — $ 491,321 — — 52,923 52,923 — — 52,923 52,923 238,124 238,124 58,280 58,280 — — — — — — — — 238,124 238,124 58,280 58,280 $ 297,565 $ 297,565 $ 543,083 $ 543,083 $ — $ 840,648 $ — $ 840,648 $ 10,256 $ 10,256 $ 379,883 $ 379,883 $ — $ 390,139 $ — $ 390,139 — — 12,649 12,649 — — 12,649 12,649 $ 10,256 $ 10,256 $ 392,532 $ 392,532 $ — $ 402,788 $ — $ 402,788 transactions in either listed or OTC markets. Changes in the fair values of these contracts are recognized in our Consolidated Statements of Operations as a component of cost of goods sold. transactions in either listed or OTC markets. Changes in the fair values of these contracts are recognized in our Consolidated Statements of Operations as a component of cost of goods sold. assets. Our assets. Our segregated investments segregated investments Segregated investments and marketable securities and and other marketable securities and other assets are comprised primarily of in various government agencies, U.S. Treasury securities, money market funds and rabbi trust assets, which are valued using quoted market prices and classified within Level 1. Segregated investments and marketable securities and and other marketable securities and other assets are comprised primarily of in various government agencies, U.S. Treasury securities, money market funds and rabbi trust assets, which are valued using quoted market prices and classified within Level 1. investments investments 52 2023 CHS Annual Report 52 2023 CHS Annual Report 2023 CHS Annual Report 53 2023 CHS Annual Report 53 328789_14-57.indd 53 11/28/23 3:21 PM NOTE 17 NOTE 17 Commitments and Contingencies Commitments and Contingencies Environmental We are required to comply with various environmental laws and regulations incidental to our normal business operations. To meet our compliance requirements, we establish reserves for future costs of remediation associated with identified issues that are both probable and can be reasonably estimated. Estimates of environmental costs are based on current available facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations and are included in cost of goods sold and marketing, general our Consolidated Statements of Operations. Recoveries, if any, are recorded in the period in which recovery is received. Liabilities are monitored and adjusted as new facts or changes in law or technology occur. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently individually or in the believe any resulting liabilities, aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year. Environmental We are required to comply with various environmental laws and regulations incidental to our normal business operations. To meet our compliance requirements, we establish reserves for future costs of remediation associated with identified issues that are both probable and can be reasonably estimated. Estimates of environmental costs are based on current available facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations and are included in cost of goods sold and marketing, general our Consolidated Statements of Operations. Recoveries, if any, are recorded in the period in which recovery is received. Liabilities are monitored and adjusted as new facts or changes in law or technology occur. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently individually or in the believe any resulting liabilities, aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year. administrative administrative expenses expenses and and in in Other Litigation and Claims We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of our business. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year. Other Litigation and Claims We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of our business. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year. Guarantees We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our Guarantees We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) TOTAL TOTAL 2024 2024 bank covenants allow maximum guarantees of $1.1 billion, of which $75.9 million were outstanding as of August 31, 2023. We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide these guarantees are current as of August 31, 2023. bank covenants allow maximum guarantees of $1.1 billion, of which $75.9 million were outstanding as of August 31, 2023. We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide these guarantees are current as of August 31, 2023. Credit Commitments CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of $1.1 billion. Credit Commitments CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of $1.1 billion. Unconditional Purchase Obligations Unconditional purchase obligations are commitments to transfer funds in the future for fixed or minimum amounts or quantities of goods or services at fixed or minimum prices. Our long-term unconditional purchase obligations primarily relate to pipeline and grain handling take-or-pay and throughput agreements and are not recorded on our Consolidated Balance Sheets. As of August 31, 2023, minimum future payments required under long-term commitments that are noncancelable and that third parties have used to secure financing for facilities that will provide contracted goods, are as follows: Unconditional Purchase Obligations Unconditional purchase obligations are commitments to transfer funds in the future for fixed or minimum amounts or quantities of goods or services at fixed or minimum prices. Our long-term unconditional purchase obligations primarily relate to pipeline and grain handling take-or-pay and throughput agreements and are not recorded on our Consolidated Balance Sheets. As of August 31, 2023, minimum future payments required under long-term commitments that are noncancelable and that third parties have used to secure financing for facilities that will provide contracted goods, are as follows: PAYMENTS DUE BY PERIOD PAYMENTS DUE BY PERIOD 2025 2026 2025 2026 2027 2027 2028 2028 THEREAFTER THEREAFTER Long-term unconditional purchase Long-term unconditional purchase obligations obligations $ 451,943 $ 451,943 $ 86,073 $ 86,073 $ 64,134 $ 64,134 $ 61,738 $ 61,738 $ 47,795 $ 47,795 $ 40,775 $ 40,775 $ 151,428 $ 151,428 Total payments under these arrangements were $77.8 million, $75.2 million and $81.0 million for the years ended August 31, 2023, 2022 and 2021, respectively. Total payments under these arrangements were $77.8 million, $75.2 million and $81.0 million for the years ended August 31, 2023, 2022 and 2021, respectively. 54 2023 CHS Annual Report 54 2023 CHS Annual Report 2023 CHS Annual Report 55 2023 CHS Annual Report 55 328789_14-57.indd 54 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18 NOTE 18 Related Party Transactions Related Party Transactions We purchase and sell grain and other agricultural commodity products from certain equity investees, primarily CF We purchase and sell grain and other agricultural commodity products from certain equity investees, primarily CF Nitrogen, Ventura Foods, Ardent Mills and TEMCO. Sales to and purchases from related parties for the years ended Nitrogen, Ventura Foods, Ardent Mills and TEMCO. Sales to and purchases from related parties for the years ended August 31, 2023, 2022 and 2021, are as follows: August 31, 2023, 2022 and 2021, are as follows: Receivables due from and payables due to related parties as of August 31, 2023 and 2022, are as follows: Receivables due from and payables due to related parties as of August 31, 2023 and 2022, are as follows: 2023 2023 2022 2022 2021 2021 $ 1,653,125 $ 1,653,125 $ 1,511,532 $ 1,511,532 $ 2,744,482 $ 2,744,482 1,697,780 1,697,780 2,040,357 2,040,357 2,682,165 2,682,165 2023 2023 2022 2022 $ 80,510 $ 80,510 $ 78,600 $ 78,600 90,267 90,267 140,174 140,174 As a cooperative, we are owned by farmers and ranchers and member cooperatives, which are referred to as As a cooperative, we are owned by farmers and ranchers and member cooperatives, which are referred to as members. We buy commodities from and provide products and services to our members. Individually, our members members. We buy commodities from and provide products and services to our members. Individually, our members do not have a significant ownership in CHS. do not have a significant ownership in CHS. (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Sales Sales Purchases Purchases (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Due from related parties Due from related parties Due to related parties Due to related parties NOTE 19 NOTE 19 Leases Leases We assess arrangements at inception to determine We assess arrangements at inception to determine and office space, many of which contain renewal options and office space, many of which contain renewal options whether they contain a lease. An arrangement is whether they contain a lease. An arrangement is and escalation clauses. Renewal options are included as and escalation clauses. Renewal options are included as considered to contain a lease if it conveys the right to considered to contain a lease if it conveys the right to part of the right of use asset and liability when it is part of the right of use asset and liability when it is control the use of an asset for a period of time in control the use of an asset for a period of time in reasonably certain that we will exercise the renewal reasonably certain that we will exercise the renewal exchange for consideration. The right to control the use exchange for consideration. The right to control the use option; however, renewal options are generally not option; however, renewal options are generally not of an asset must include both (i) the right to obtain of an asset must include both (i) the right to obtain included as we are not reasonably certain to exercise included as we are not reasonably certain to exercise substantially all economic benefits associated with an substantially all economic benefits associated with an such options. such options. identified asset and (ii) the right to direct how and for identified asset and (ii) the right to direct how and for what purpose the identified asset is used. Certain what purpose the identified asset is used. Certain service agreements may provide us with the right to use service agreements may provide us with the right to use an an identified asset; identified asset; however, most however, most of of these these arrangements are not considered to represent a lease arrangements are not considered to represent a lease as we do not control how and for what purpose the as we do not control how and for what purpose the identified asset is used. identified asset is used. Right of use assets and liabilities for operating and Right of use assets and liabilities for operating and finance leases are recognized under ASC Topic 842 at finance leases are recognized under ASC Topic 842 at the lease commencement date for leases in excess of the lease commencement date for leases in excess of 12 months based on the present value of 12 months based on the present value of lease lease payments over the lease term. For measurement and payments over the lease term. For measurement and classification of lease agreements, lease and nonlease classification of lease agreements, lease and nonlease components are grouped into a single lease component components are grouped into a single lease component We lease property, plant and equipment used in our We lease property, plant and equipment used in our for all asset classes. Variable lease payments are for all asset classes. Variable lease payments are operations primarily under operating lease agreements operations primarily under operating lease agreements excluded from measurement of right of use assets and excluded from measurement of right of use assets and and, to a lesser extent, under finance lease agreements. and, to a lesser extent, under finance lease agreements. liabilities and generally include payments for nonlease liabilities and generally include payments for nonlease Our leases are primarily for railcars, equipment, vehicles Our leases are primarily for railcars, equipment, vehicles components such as maintenance costs, payments for components such as maintenance costs, payments for NOTE 17 NOTE 17 Commitments and Contingencies Commitments and Contingencies Environmental Environmental We are required to comply with various environmental We are required to comply with various environmental laws and regulations incidental to our normal business laws and regulations incidental to our normal business operations. To meet our compliance requirements, we operations. To meet our compliance requirements, we establish reserves for future costs of remediation establish reserves for future costs of remediation associated with identified issues that are both probable associated with identified issues that are both probable and can be reasonably estimated. Estimates of and can be reasonably estimated. Estimates of environmental costs are based on current available environmental costs are based on current available facts, existing technology, undiscounted site-specific facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations and costs and currently enacted laws and regulations and are included in cost of goods sold and marketing, are included in cost of goods sold and marketing, general general and and administrative administrative expenses expenses in in Consolidated Statements of Operations. Recoveries, if Consolidated Statements of Operations. Recoveries, if any, are recorded in the period in which recovery is any, are recorded in the period in which recovery is received. Liabilities are monitored and adjusted as new received. Liabilities are monitored and adjusted as new facts or changes in law or technology occur. The facts or changes in law or technology occur. The resolution of any such matters may affect consolidated resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently net income for any fiscal period; however, we currently believe any resulting liabilities, believe any resulting liabilities, individually or in the individually or in the aggregate, will not have a material effect on our aggregate, will not have a material effect on our consolidated financial position, results of operations or consolidated financial position, results of operations or our our cash flows during any fiscal year. cash flows during any fiscal year. Other Litigation and Claims Other Litigation and Claims We are involved as a defendant in various lawsuits, We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of claims and disputes, which are in the normal course of our business. The resolution of any such matters may our business. The resolution of any such matters may affect consolidated net income for any fiscal period; affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, however, we currently believe any resulting liabilities, individually or in the aggregate, will not have a material individually or in the aggregate, will not have a material effect on our consolidated financial position, results of effect on our consolidated financial position, results of operations or cash flows during any fiscal year. operations or cash flows during any fiscal year. Guarantees Guarantees We are a guarantor for lines of credit and performance We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our obligations of related, nonconsolidated companies. Our bank covenants allow maximum guarantees of bank covenants allow maximum guarantees of $1.1 billion, of which $75.9 million were outstanding as $1.1 billion, of which $75.9 million were outstanding as of August 31, 2023. We have collateral for a portion of of August 31, 2023. We have collateral for a portion of these contingent obligations. We have not recorded a these contingent obligations. We have not recorded a liability related to the contingent obligations as we do liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying fair values are considered immaterial. The underlying loans to the counterparties for which we provide these loans to the counterparties for which we provide these guarantees are current as of August 31, 2023. guarantees are current as of August 31, 2023. Credit Commitments Credit Commitments CHS Capital has commitments to extend credit to CHS Capital has commitments to extend credit to customers if there are no violations of any contractually customers if there are no violations of any contractually established conditions. As of August 31, 2023, CHS established conditions. As of August 31, 2023, CHS Capital customers had additional available credit of Capital customers had additional available credit of $1.1 billion. $1.1 billion. Unconditional Purchase Obligations Unconditional Purchase Obligations Unconditional purchase obligations are commitments to Unconditional purchase obligations are commitments to transfer funds in the future for fixed or minimum transfer funds in the future for fixed or minimum amounts or quantities of goods or services at fixed or amounts or quantities of goods or services at fixed or minimum prices. Our long-term unconditional purchase minimum prices. Our long-term unconditional purchase obligations primarily relate to pipeline and grain obligations primarily relate to pipeline and grain handling take-or-pay and throughput agreements and handling take-or-pay and throughput agreements and are not recorded on our Consolidated Balance Sheets. are not recorded on our Consolidated Balance Sheets. As of August 31, 2023, minimum future payments As of August 31, 2023, minimum future payments required under required under long-term commitments that are long-term commitments that are noncancelable and that third parties have used to secure noncancelable and that third parties have used to secure financing for facilities that will provide contracted financing for facilities that will provide contracted goods, are as follows: goods, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Long-term unconditional purchase Long-term unconditional purchase obligations obligations TOTAL TOTAL 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 THEREAFTER THEREAFTER PAYMENTS DUE BY PERIOD PAYMENTS DUE BY PERIOD $ 451,943 $ 451,943 $ 86,073 $ 86,073 $ 64,134 $ 64,134 $ 61,738 $ 61,738 $ 47,795 $ 47,795 $ 40,775 $ 40,775 $ 151,428 $ 151,428 Total payments under these arrangements were $77.8 million, $75.2 million and $81.0 million for the years ended Total payments under these arrangements were $77.8 million, $75.2 million and $81.0 million for the years ended August 31, 2023, 2022 and 2021, respectively. August 31, 2023, 2022 and 2021, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18 NOTE 18 Related Party Transactions Related Party Transactions We purchase and sell grain and other agricultural commodity products from certain equity investees, primarily CF Nitrogen, Ventura Foods, Ardent Mills and TEMCO. Sales to and purchases from related parties for the years ended August 31, 2023, 2022 and 2021, are as follows: We purchase and sell grain and other agricultural commodity products from certain equity investees, primarily CF Nitrogen, Ventura Foods, Ardent Mills and TEMCO. Sales to and purchases from related parties for the years ended August 31, 2023, 2022 and 2021, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Sales Sales Purchases Purchases 2023 2023 2022 2022 2021 2021 $ 1,653,125 $ 1,653,125 $ 1,511,532 $ 1,511,532 $ 2,744,482 $ 2,744,482 1,697,780 1,697,780 2,040,357 2,040,357 2,682,165 2,682,165 Receivables due from and payables due to related parties as of August 31, 2023 and 2022, are as follows: Receivables due from and payables due to related parties as of August 31, 2023 and 2022, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Due from related parties Due from related parties Due to related parties Due to related parties 2023 2023 2022 2022 $ 80,510 $ 80,510 $ 78,600 $ 78,600 90,267 90,267 140,174 140,174 As a cooperative, we are owned by farmers and ranchers and member cooperatives, which are referred to as members. We buy commodities from and provide products and services to our members. Individually, our members do not have a significant ownership in CHS. As a cooperative, we are owned by farmers and ranchers and member cooperatives, which are referred to as members. We buy commodities from and provide products and services to our members. Individually, our members do not have a significant ownership in CHS. NOTE 19 NOTE 19 Leases Leases We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (i) the right to obtain substantially all economic benefits associated with an identified asset and (ii) the right to direct how and for what purpose the identified asset is used. Certain service agreements may provide us with the right to use an these arrangements are not considered to represent a lease as we do not control how and for what purpose the identified asset is used. We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (i) the right to obtain substantially all economic benefits associated with an identified asset and (ii) the right to direct how and for what purpose the identified asset is used. Certain service agreements may provide us with the right to use an these arrangements are not considered to represent a lease as we do not control how and for what purpose the identified asset is used. identified asset; identified asset; however, most however, most of of We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our leases are primarily for railcars, equipment, vehicles We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our leases are primarily for railcars, equipment, vehicles and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options. and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options. Right of use assets and liabilities for operating and finance leases are recognized under ASC Topic 842 at the lease commencement date for leases in excess of lease 12 months based on the present value of payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for Right of use assets and liabilities for operating and finance leases are recognized under ASC Topic 842 at the lease commencement date for leases in excess of lease 12 months based on the present value of payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for 54 2023 CHS Annual Report 54 2023 CHS Annual Report 2023 CHS Annual Report 55 2023 CHS Annual Report 55 328789_14-57.indd 55 11/28/23 3:21 PM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information related to the lease term and discount rate for operating and finance leases as of August 31, 2023 and Information related to the lease term and discount rate for operating and finance leases as of August 31, 2023 and 2022, is as follows: 2022, is as follows: Supplemental cash flow and other information related to operating and finance leases as of August 31, 2023, 2022 Supplemental cash flow and other information related to operating and finance leases as of August 31, 2023, 2022 Weighted average remaining lease term (in years) Weighted average remaining lease term (in years) Operating leases Operating leases Finance leases Finance leases Operating leases Operating leases Finance leases Finance leases Weighted average discount rate Weighted average discount rate and 2021, is as follows: and 2021, is as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Cash paid for amounts included in measurement of lease liabilities: Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from operating leases Operating cash flows from finance leases Operating cash flows from finance leases Financing cash flows from finance leases Financing cash flows from finance leases Supplemental noncash information: Supplemental noncash information: 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 Thereafter Thereafter Total maturities of lease liabilities Total maturities of lease liabilities Less amounts representing interest Less amounts representing interest Present value of future minimum lease payments Present value of future minimum lease payments Less current obligations Less current obligations Long-term obligations Long-term obligations 2023 2023 2022 2022 7.0 7.0 7.6 7.6 9.6 9.6 10.4 10.4 3.50% 3.50% 3.00% 3.00% 3.78% 3.78% 3.42% 3.42% 2023 2023 2022 2022 2021 2021 $ 71,798 $ 71,798 $ 61,750 $ 61,750 $ 71,702 $ 71,702 1,646 1,646 1,469 1,469 938 938 8,571 8,571 9,171 9,171 8,235 8,235 AUGUST 31, 2023 AUGUST 31, 2023 FINANCE LEASES FINANCE LEASES OPERATING LEASES OPERATING LEASES $ $ 8,548 8,548 $ $ 70,414 70,414 6,885 6,885 6,316 6,316 5,943 5,943 5,767 5,767 25,738 25,738 59,197 59,197 9,962 9,962 49,235 49,235 6,797 6,797 57,904 57,904 46,733 46,733 31,407 31,407 18,246 18,246 74,075 74,075 298,779 298,779 36,927 36,927 261,852 261,852 61,094 61,094 $ 42,438 $ 42,438 $ 200,758 $ 200,758 N ote 19 Le as es , continued N ote 19 Le as es , continued leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants. leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Consolidated Statements of Operations as of August 31, 2023, 2022 and 2021, are as follows: Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Consolidated Statements of Operations as of August 31, 2023, 2022 and 2021, are as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Operating lease Operating lease expense expense Finance lease expense: Finance lease expense: Amortization of Amortization of assets assets Interest on lease Interest on lease liabilities liabilities Short-term lease Short-term lease expense expense 2023 2023 2022 2022 2021 2021 $ 77,588 $ 77,588 $ 71,209 $ 71,209 $ 73,489 73,489 $ 8,966 8,966 8,967 8,967 8,065 8,065 1,646 1,646 1,469 1,469 938 938 20,068 20,068 16,915 16,915 16,955 16,955 Variable lease expense 650 1,699 2,300 Variable lease expense 650 Total net lease expense* $ 108,918 $ 100,259 $ 101,747 Total net lease expense* $ 108,918 $ 100,259 $ 101,747 2,300 1,699 * * Income related to sublease activity is not material and has been excluded from the table above. Income related to sublease activity is not material and has been excluded from the table above. Supplemental balance sheet information related to operating and finance leases as of August 31, 2023 and 2022, is as follows: Supplemental balance sheet information related to operating and finance leases as of August 31, 2023 and 2022, is as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Operating leases Operating leases Assets Assets Operating lease right of use assets Operating lease right of use assets Liabilities Liabilities Current operating lease liabilities Current operating lease liabilities Long-term operating lease liabilities Long-term operating lease liabilities Total operating lease liabilities Total operating lease liabilities Finance leases Finance leases Assets Assets Finance lease assets Finance lease assets Liabilities Liabilities Current finance lease liabilities Current finance lease liabilities Long-term finance lease liabilities Long-term finance lease liabilities Total finance lease liabilities Total finance lease liabilities BALANCE SHEET LOCATION BALANCE SHEET LOCATION 2023 2023 2022 2022 Right of use assets obtained in exchange for lease liabilities Right of use assets obtained in exchange for lease liabilities $ 69,837 $ 69,837 $ 54,199 $ 54,199 $ 43,991 $ 43,991 Right of use asset modifications Right of use asset modifications 28,614 28,614 12,887 12,887 27,664 27,664 Other assets Other assets $ 254,844 $ 254,844 $ 242,859 $ 242,859 Maturities of lease liabilities by fiscal year as of August 31, 2023, were as follows: Maturities of lease liabilities by fiscal year as of August 31, 2023, were as follows: Accrued expenses Accrued expenses Other liabilities Other liabilities $ 61,094 61,094 $ $ 54,702 54,702 $ (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 200,758 200,758 $ 261,852 $ 261,852 194,250 194,250 $ 248,952 $ 248,952 Property, plant and equipment Property, plant and equipment $ Current portion of long-term debt Current portion of long-term debt $ Long-term debt Long-term debt $ $ $ $ 64,381 64,381 6,797 6,797 42,438 42,438 49,235 49,235 $ $ $ 57,932 57,932 7,609 7,609 37,164 37,164 44,773 44,773 $ $ $ 56 2023 CHS Annual Report 56 2023 CHS Annual Report 2023 CHS Annual Report 57 2023 CHS Annual Report 57 328789_14-57.indd 56 11/28/23 3:21 PM Note 1 9 Leases, continued leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Consolidated Statements of Operations as of August 31, 2023, 2022 and 2021, are as (DOLLARS IN THOUSANDS) Operating lease expense Finance lease expense: Amortization of assets Interest on lease liabilities Short-term lease expense 2023 2022 2021 $ 77,588 $ 71,209 $ 73,489 8,966 8,967 8,065 1,646 1,469 938 20,068 16,915 16,955 Variable lease expense 650 1,699 2,300 Total net lease expense* $ 108,918 $ 100,259 $ 101,747 * Income related to sublease activity is not material and has been excluded from the table above. Supplemental balance sheet information related to operating and finance leases as of August 31, 2023 and 2022, is (DOLLARS IN THOUSANDS) BALANCE SHEET LOCATION 2023 2022 Current operating lease liabilities Accrued expenses $ 61,094 $ 54,702 Long-term operating lease liabilities Other liabilities 200,758 194,250 Total operating lease liabilities $ 261,852 $ 248,952 follows: as follows: Operating leases Assets Liabilities Finance leases Assets Finance lease assets Liabilities Current finance lease liabilities Long-term finance lease liabilities Total finance lease liabilities Property, plant and equipment $ 64,381 $ 57,932 Current portion of long-term debt $ 6,797 $ 7,609 Long-term debt 42,438 37,164 $ 49,235 $ 44,773 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information related to the lease term and discount rate for operating and finance leases as of August 31, 2023 and 2022, is as follows: Information related to the lease term and discount rate for operating and finance leases as of August 31, 2023 and 2022, is as follows: Weighted average remaining lease term (in years) Weighted average remaining lease term (in years) Operating leases Operating leases Finance leases Finance leases Weighted average discount rate Weighted average discount rate Operating leases Operating leases Finance leases Finance leases 2023 2023 2022 2022 7.0 7.0 7.6 7.6 9.6 9.6 10.4 10.4 3.50% 3.50% 3.00% 3.00% 3.78% 3.78% 3.42% 3.42% Supplemental cash flow and other information related to operating and finance leases as of August 31, 2023, 2022 and 2021, is as follows: Supplemental cash flow and other information related to operating and finance leases as of August 31, 2023, 2022 and 2021, is as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2023 2023 2022 2022 2021 2021 Cash paid for amounts included in measurement of lease liabilities: Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from operating leases Operating cash flows from finance leases Operating cash flows from finance leases Financing cash flows from finance leases Financing cash flows from finance leases Supplemental noncash information: Supplemental noncash information: $ 71,798 $ 71,798 $ 61,750 $ 61,750 $ 71,702 $ 71,702 1,646 1,646 1,469 1,469 938 938 8,571 8,571 9,171 9,171 8,235 8,235 Right of use assets obtained in exchange for lease liabilities Right of use assets obtained in exchange for lease liabilities $ 69,837 $ 69,837 $ 54,199 $ 54,199 $ 43,991 $ 43,991 Right of use asset modifications Right of use asset modifications 28,614 28,614 12,887 12,887 27,664 27,664 Operating lease right of use assets Other assets $ 254,844 $ 242,859 Maturities of lease liabilities by fiscal year as of August 31, 2023, were as follows: Maturities of lease liabilities by fiscal year as of August 31, 2023, were as follows: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 Thereafter Thereafter Total maturities of lease liabilities Total maturities of lease liabilities Less amounts representing interest Less amounts representing interest Present value of future minimum lease payments Present value of future minimum lease payments Less current obligations Less current obligations Long-term obligations Long-term obligations AUGUST 31, 2023 AUGUST 31, 2023 FINANCE LEASES FINANCE LEASES OPERATING LEASES OPERATING LEASES $ $ 8,548 8,548 $ $ 70,414 70,414 6,885 6,885 6,316 6,316 5,943 5,943 5,767 5,767 25,738 25,738 59,197 59,197 9,962 9,962 49,235 49,235 6,797 6,797 57,904 57,904 46,733 46,733 31,407 31,407 18,246 18,246 74,075 74,075 298,779 298,779 36,927 36,927 261,852 261,852 61,094 61,094 $ 42,438 $ 42,438 $ 200,758 $ 200,758 56 2023 CHS Annual Report 2023 CHS Annual Report 57 2023 CHS Annual Report 57 328789_14-57.indd 57 11/28/23 3:21 PM This page intentionally left blank 58 2023 CHS Annual Report 328789_58-62.indd 58 11/20/23 2:41 PM Board of Directors From left, front row, Holm, Kehl, Schurr, Cordes, Blew; second row, Wagner, Farrell, Fritel, Kayser; third row, Throener, Johnsrud, Erickson, Beckman; fourth row, Meyer, Stroh, Jones, Clemensen Dan Schurr Chair LeClaire, Iowa Scott Cordes First vice chair Wanamingo, Minnesota Russ Kehl Secretary-treasurer Quincy, Washington C.J. Blew Second vice chair Castleton, Kansas Alan Holm Assistant secretary-treasurer Sleepy Eye, Minnesota David Beckman Elgin, Nebraska Tracy Jones Kirkland, Illinois Hal Clemensen Aberdeen, South Dakota David Kayser Alexandria, South Dakota Jon Erickson Minot, North Dakota Perry Meyer New Ulm, Minnesota Mark Farrell Cross Plains, Wisconsin Jerrad Stroh Juniata, Nebraska Steve Fritel Barton, North Dakota David Johnsrud Starbuck, Minnesota Kevin Throener Cogswell, North Dakota Cortney Wagner Hardin, Montana Detailed biographical information on the CHS Board of Directors is available at chsinc.com. 328789_58-62.indd 59 11/28/23 2:14 PM 2023 CHS Annual Report 59 Executive Team From left, Black, Halvorson, Nelligan, Griffith, Debertin, Smith, Kaul-Hottinger, Dusek, Hunhoff Jay Debertin President and chief executive officer John Griffith Executive vice president, ag business and CHS Hedging Mary Kaul-Hottinger Executive vice president, chief human resources officer David Black Executive vice president, enterprise transformation, chief information officer Gary Halvorson Executive vice president, enterprise customer development Olivia Nelligan Executive vice president, chief ﬁnancial officer, chief strategy officer Rick Dusek Executive vice president, country operations, distribution and transportation Darin Hunhoff Executive vice president, energy Brandon Smith Executive vice president and general counsel Detailed biographical information on the CHS leadership team is available at chsinc.com. Acknowledgements To create this report, we worked with cooperative teams, farmer-owners and their families and CHS business partners. We celebrate and thank them for their cooperative spirit. • Arkansas: Jake Westmoreland and the team at the Jonesboro • Montana: Brandon Udelhoven, Winifred; Jim Irwin and agronomy warehouse the team at the CHS reﬁnery, Laurel • Illinois: Kyle Meece and the United Prairie, LLC, team, Tolono • Texas: Michael Bates, Karly Akin and the TEMCO team, • Minnesota: Hilpert family, Browns Valley; Reese Benike, Chokio; Houston Godward family, Aitkin; Cheri Reese and Michael Swanson, Hallock; Muir family, Hallock; Richard Stadheim and family, Albert Lea • Washington: Ashleigh and Quinn Jones, Wilbur • Wisconsin: Rachel Sauvola and students at New Richmond High School, New Richmond; Carl Opelt and the G&S Trucking team, Neillsville; Joe Ebben 60 2023 CHS Annual Report 328789_58-62.indd 60 11/28/23 2:20 PM B:16.406" T:16.156" Creating connections to empower agriculture T : 1 0 " B : 1 0 . 2 5 " Our purpose Our values Integrity We set high standards and hold ourselves accountable. We believe excellence and growth stem from diverse thinking. Inclusion Safety We put the well-being of our people, customers and communities ﬁrst every day. Cooperative spirit We work together for shared success and to strengthen our communities. 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DOCUMENT NAME: 69889_CHS_2023_Annual_Report_Cover_v2.indd FILE PATH: Macintosh HD:Users:kjelland:Desktop:_WorkingFiles:_Keyline:69899_CHS_2023_AnnualReport:69889_CHS_2023_Annual_Report_Cover_v2.indd JOB #: 69889 CLIENT: CHS PUB(S): None Bleed: 16.406" x 10.25" CLIENT CODE: CHST05 Trim: 16.156" x 10" Live: None Cyan Magenta Yellow Black PMS 286 C DATE: 11-17-2023 11:41 AM USER NAME: Kjelland, Phil NOTES: None GCD: None M A E T AD: G.Hatzung CW: Client AE: S.Hendricks PM: C.LeDell PA: P.Kjelland PP: S.Chute F:0.156" F:8" F:8" F O O R P E G A P 2 1

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